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Thrift Banks' NPL Ratio Sustained at Single-Digit


As of end-January 2006, the thrift banking (TB) industry posted an 8.96 percent non-performing loan (NPL) ratio.  This is the tenth month in a row that the industry has posted a single-digit NPL ratio. However, this month’s NPL ratio is slightly higher than the previous month’s 8.86 percent ratio, as the 4.1 percent build-up in NPLs outpaced the 2.9 percent expansion in total loan portfolio (TLP). Nonetheless, this is better than the 10.81 percent ratio recorded during the same period in 2005. 

Exclusive of interbank loans (IBL), the industry’s NPL ratio followed the same trend. It rose to 9.69 percent from the previous month’s 9.30 percent, as regular loans contracted by 0.2 percent.  Still, it is favorably lower than year ago’s 11.30 percent.

 Likewise, the proportion of restructured loans (RLs) to TLP decreased to 3.06 percent from 3.20 percent the previous month. This is due mainly to the 1.5 percent decline in RLs. On a year-on-year basis, this month’s RL share to TLP is higher than the 2.56 percent ratio last year.

Foreclosures during the month have been a bit tempered as manifested by the negligible 0.2 percent increase in real and other properties owned or acquired (ROPOA). The ROPOAs’ share to gross assets at 8.83 percent remains favorably lower than the previous month’s 8.93 percent and year ago’s 10.78 percent. This is attributed mainly to the 1.3 percent expansion in gross assets.
The combined effect of these development is the slight improvement of non-performing assets (NPA) ratio to 12.51 percent from 12.53 percent last month and from 15.60 percent a year ago.  This is driven by the almost parallel growth of NPAs and gross assets, i.e., 1.1 percent and 1.3 percent, respectively.

The build-up of provisioning for these NPAs have been sustained but at a relatively moderate pace. NPA reserves rose by 1.3 percent to P10.59 billion from P10.46 billion a month ago. The increment consists of the 2.0 percent additional loan loss reserves (LLRs) put up during the month.

The NPL coverage ratio was trimmed to 46.97 percent (vs. 47.92 percent in the previous month). This stemmed from the greater accumulation of NPLs as against the 2.0 percent reinforcement in LLRs to P8.37 billion. Nonetheless, the January NPL coverage ratio is significantly higher than the 35.64 ratio posted a year ago.

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