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Thrift Banks' NPL Ratio Improved Anew in February


The thrift banking industry’s NPL (non-performing loan) ratio as of end-February 2006 ratio further eased to 8.91 percent from the previous month’s 8.96 percent, or a difference of 0.05 percentage point from the previous month’s ratio. On a year-on-year basis, this NPL ratio is an improvement over the 10.25 percent NPL ratio posted at end-February 2005, a difference of 1.34 percentage points.

  This improvement is the combined effect of slower expansion in NPLs and the sustained growth of the industry’s loan portfolio. NPLs’ growth slowed downed to 2.3 percent from 4.1 percent while the expansion of total loan portfolio (TLP) was maintained at 2.8 percent. Consequently, this enabled the industry to sustain a single-digit NPL ratio for 11 consecutive months now.
Exclusive of interbank loans (IBL), the industry’s NPL ratio followed the same trend. It improved to 9.56 percent from the previous month’s 9.70 percent, as regular loans expanded by 3.8 percent.  By the same token, it was lower than year ago’s 10.70 percent.

 The proportion of restructured loans (RLs) to TLP was also tamed at 2.87 percent from 3.06 percent the previous month. This was attributed to the 3.7 percent shrinkage in RLs. However, RL share to TLP was slightly higher than the 2.51 percent ratio posted last year.

Foreclosure of assets was reined in as evidenced by the minute 0.2 percent increase in real and other properties owned or acquired (ROPOA). Driven by the faster 0.8 percent increment in gross assets (GA), the ROPOAs’ share to GA at 8.78 percent remained lower than the previous month’s 8.83 percent.

The ratio of non-performing assets (NPA) to GA at 12.52 percent was more or less equal to the previous month’s 12.51 percent.  This transpired as NPAs and GA grew at about the same pace, by 0.9 percent and 0.8 percent, respectively. Conversely, this ratio is 2.53 percentage points better than year ago’s 15.05 percent ratio.

The industry reinforced its loss provisioning to amply cover for the increase in NPAs. NPA reserves rose by 1.5 percent to P10.75 billion from P10.59 billion the previous month. These included the 1.9 percent additional loan loss reserves (LLRs) allocated during the month.

The NPL coverage ratio was trimmed to 46.77 percent (vs. 46.97 percent last month). This was brought about by the faster accumulation of NPLs as against the 1.9 percent build-up in LLRs to P8.52 billion. Nonetheless, the NPL coverage ratio showed marked improvement from the 35.39 percent ratio posted a year ago.

Consequently, the NPA coverage ratio advanced to 23.59 percent (vs. 23.45 percent in January). NPA reserves grew by 1.5 percent during the month and by a hefty 35.7 percent year-on-year. The coverage ratio was also comparatively higher than the 16.22 percent ratio posted a year ago.

On the whole, the month of February saw the improvement of the industry’s loan and asset quality indicators.

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