As of end-December 2005, the non-performing loan (NPL) ratio of rural and cooperative banks (R/CBs) declined to 10.93 percent from 11.50 percent of the previous quarter and of the same period last year. This quarter’s NPL ratio is the lowest recorded since the 1997 Asian Crisis. The NPL ratio, at its peak, reached 20.41 percent in the quarter ending June 1999.
The improvement of the NPL ratio can be attributed to the simultaneous 2.9 percent decline in NPLs and 2.1 percent expansion in total loan portfolio (TLP). Total NPLs went down to P7.78 billion from P8.02 billion at end-September 2005 as a result of the banks’ efforts to reduce problem loans. TLP, on the other hand, was higher at P71.18 billion from P69.72 billion of the previous quarter.
A review of the NPL ratio in the three major geographical regions showed that R/CBs located in Mindanao continued to post better NPL ratio at 10.68 percent (up from 10.20 percent last quarter) compared to those in Luzon and Visayas, which posted 10.83 percent (down from 11.62 percent) and 11.88 percent (down from 12.90 percent), respectively.
The decline in RLs, gross (by 5.2 percent) accompanied by an expansion in TLP brought the ratio of restructured loans (RLs), gross to TLP, gross to 1.19 percent from 1.28 percent of the previous quarter.
The ratio of real and other properties owned or acquired (ROPOA), gross to gross assets likewise fell to 7.08 percent from 7.23 percent of the previous quarter due to the 2.64 percent growth in gross assets, which completely diluted the 0.7 percent increase in ROPOA, gross.
The non-performing asset (NPA) ratio further declined to 13.77 percent from previous quarter’s 14.29 percent and last year’s 14.89 percent ratio. The continuous improvement was due to the constant increase in gross assets (15.29 percent for the past year) and enhanced by the contraction in NPAs from last quarter.
Notwithstanding lower loan reserves, the NPL coverage ratio strengthened to 38.83 percent from 38.68 percent of last quarter. This was due to decline of NPLs by 2.9 percent.
The NPA coverage ratio settled at 20.55 percent from 20.75 percent last quarter. This developed as the 2.0 percent decline in NPA reserves outpaced the 1.1 percent reduction in NPAs.