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Thrift Banks' NPL Ratio Improves to 8.85%

02.27.2006

As of end-December 2005, the thrift banking (TB) industry posted an 8.85 percent non-performing loan (NPL) ratio.  Year-end review revealed that December 2005 posted the second lowest figure in a 9-month series of single-digit NPL ratios. The lowest (8.84 percent) was recorded at end-August 2005. 

This month’s NPL ratio is better than the previous month’s 9.03 percent and year ago’s 10.96 percent ratio.  The month-on-month improvement is attributed mainly to the 2.8 percent increase in total loan portfolio (TLP), surpassing the meager 0.7 percent build-up in NPLs 

Exclusive of interbank loans (IBL), the NPL ratio is contained at 9.30 percent.  This is favorably lower than the 9.47 percent ratio in November 2005 and the 11.37 percent ratio a year ago. 

The proportion of restructured loans (RLs) to TLP climbed up to 3.19 percent from 2.77 percent last month due mainly to the 18.4 percent surge in RLs. Year-on-year, the ratio is also higher than year ago’s 2.51 percent. 

Meanwhile, the disposal of acquired assets continues.  Real and other properties owned or acquired (ROPOA) declined by 3.6 percent. ROPOAs’ share to gross assets subsequently improved to 8.93 percent from 9.30 percent the previous month and from 10.99 percent last year. 

These developments consequently led to the improvement of non-performing assets (NPA) ratio to 12.53 percent from 12.89 percent last month and from 15.85 percent a year ago.  The lower NPA ratio was fueled by the 2.4 percent decrement in NPAs for the month. 

NPL coverage ratio stood at 47.92 percent (vs. 45.59 percent last month), while NPA coverage ratio was posted at 23.41 percent (vs. 21.44 percent in November 2005).  These significant developments are attributed to the continuous build-up of provisions for losses.  NPA reserves grew by 6.7 percent to P10.46 billion during the month, and by a hefty 22.3 percent year-on-year. These coverage ratios are much better than those posted a year ago, i.e., 37.04 percent NPL coverage ratio and 17.18 percent NPA coverage.  

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