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Universal and Commercial Banks' NPL Ratio Continues to Improve


The universal and commercial banks’ (U/KBs) non-performing loan (NPL) ratio continued to improve, settling at 8.27 percent by end-February 2006 from 8.43 percent of the previous month.  Compared against the previous year’s 11.79 percent, this month’s ratio was lower by 3.52 percentage points.

The improvement in said ratio was on account of the 1.5 percent drop in NPLs and the 0.4 percent expansion in total loan portfolio (TLP).  Over the month, U/KBs’ NPLs declined to P158.68 billion from P161.12 billion.  On the other hand, TLP climbed to P1,918.16 billion from P1,910.11 billion during the same period.
Net of interbank loans, the NPL ratio also eased to 10.19 percent from previous month’s 10.35 percent ratio as the decline in NPLs was complemented by a 0.1 percent hike in regular loans.  Year-on-year, this month’s ratio was also better by 3.89 percentage points from the previous 14.08 percent ratio. 

The ratio of restructured loans (RLs) to TLP also slid down to 5.16 percent from month ago’s 5.26 percent as the total RLs fell by 1.6 percent.  Meanwhile, non-performing RLs increased by 1.4 percent, leading to 1.48 percentage point hike in the non-performing RLs to total RLs ratio to 50.90 percent.  As of 28 February 2006, total RLs was reported at P99.33 billion while non-performing RLs were at P50.56 billion.

The real and other properties owned or acquired (ROPOA) to gross assets (GAs) ratio was higher by 0.09 percentage point at 4.97 percent from previous month’s 4.88 percent, following a 1.6 percent rise in ROPOA and 0.3 drop in GAs.

Similarly, the industry’s non-performing asset (NPA) ratio slightly rose to 8.74 percent from 8.71 percent last month.  This developed after the 0.2 percent increase in NPAs was compounded by a 0.3 percent contraction in the industry’s GAs.  Nonetheless, this month’s ratio remained favorably lower by 1.71 percentage points than last year’s 10.45 percent ratio.  As of end February 2006, total NPAs stood at P346.06 billion from P345.50 billion at end-January 2006 and P409.86 billion at end-February 2005. 

Banks’ increased provisioning levels led to stronger NPL and NPA coverage ratios of 79.27 percent (from 77.84 percent at end-January 2006) and 42.54 percent (from 42.10 percent), respectively.  The stronger NPL coverage ratio can be attributed to the 0.3 percent growth of Loan Loss Reserves (LLRs) together with the 1.5 percent cut in NPLs.  On the other hand, NPA coverage ratio increased, despite the 0.2 percent increment in NPAs, due to the 1.2 percent increase in reserves.  Year-on-year, these ratios were also significantly better than the previously reported 64.15 percent NPL coverage ratio and 37.53 percent NPA coverage ratio.  As of end-February 2006, LLRs were at P125.79 billion while NPA reserves were reported at P147.22 billion.

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