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KB NPLs as of September 2002 Fall Anew

11.25.2002

The Non-Performing Loans (NPL) ratio as of month-end September 2002 fell anew to 16.47 percent from last month’s ratio of 17.58 percent, and by 1.45 percentage points from a year ago’s ratio of 17.92 percent, on the back of the exclusion of the 100 percent loan provisioning for “Loss” classification as embodied in the BSP Circular No. 351 which took effect on September 19, 2002. More than half of the improvement may be attributed to the re-definition of NPLs. Without the re-definition, the NPL ratio would be 17.02 percent, still a substantial improvement from last month.

NPL level fell by 4.71 percent or by P13.21 billion to P267.41 billion from P280.62 billion last month. About 81.20 percent, or P10.72 billion, of the NPL volume reduction was due to the re-definition.

Apart from the impact of BSP Circular No. 351, the reduction in NPL level was achieved through foreclosures and collections. Real and Other Properties Owned or Acquired (ROPOA) gross went up by P1.68 billion to P177.35 billion, while Restructured Loans (RL) declined by P1.23 billion to P124.64 billion.

There was renewed regular lending activity as Total Loan Portfolio (TLP) rose from last month by P27.77 billion to P1,623.88 billion. The Interbank Loans (IBL) component grew from last month by only P0.27 billion to P206.30 billion.

The NPL coverage ratio (Loan Loss Reserves to NPLs) declined to 48.19 percent as against last month’s ratio of 49.29 percent mainly due to the decline in LLR by 6.84 percent, or P9.46 billion, from P138.33 billion to P128.87 billion this month. This reflected the paralled downward adjustment in loan loss reserves as a result of re-definition.

Gross RLs went down to 7.68 percent of TLP from 7.89 percent last month, as gross RLs shrank by 0.98 percent or P1.23 billion coupled by the 1.74 percent or P27.77 billion increase in TLP. Past due ratio of RLs improved to 39.80 percent from the previous month’s 40.18 percent and from last year’s 44.19 percent.

The Non-Performing Assets (NPA) ratio also went down to 13.97 percent from 14.56 percent last month. This ratio would have been 14.26 percent or higher by 0.29 percentage point without the new definition of NPL. Both cases nevertheless showed improvement in overall asset quality.

NPA coverage ratio (NPA valuation reserves to NPAs) declined from 32.27 percent last month to 31.02 percent this month due to the decrease in the NPA reserves (LLRs plus provision for ROPOA) by 6.30 percent to P137.95 billion from P147.24 billion last month.

Total past due (past due plus items in litigation) of the industry declined by 4.99 percent, or by P14.06 billion from last month’s level of P281.91 billion to P267.85 billion. With the increase in TLP by 1.74 percent, past due ratio (total past due over TLP) improved by 1.17 percentage point to 16.49 percent against last month’s 17.66 percent.

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