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Thrift Banks' NPL Ratio Further Improves in May

07.31.2006

The thrift banking industry’s non-performing loan (NPL) ratio as of end-May 2006 further eased to 8.62 percent from the previous month’s 8.78 percent, or a month-on-month difference of 0.16 percentage point. On a year-on-year basis, the current NPL ratio is an improvement from the 9.51 percent ratio posted at end-May 2005, a variance of 0.89 percentage point.

  The monthly improvement was driven by the sustained growth of the industry’s loan portfolio. Total loan portfolio (TLP) expanded by 3.42 percent, outpacing the 1.51 percent increase in NPLs. On the whole, the industry posted a single-digit NPL ratio for 14 consecutive months now.
 
Following the same trend, the industry’s NPL ratio exclusive of interbank loans got better to 9.38 percent from the previous month’s 9.51 percent, as regular loans grew by 2.92 percent.  Similarly, this month’s ratio was a relief from year ago’s 10.03 percent ratio.

Restructuring activities slowed down in May. Thus, the proportion of restructured loans (RLs) to TLP dropped to 2.80 percent from 2.93 percent the previous month. Conversely, RLs share to TLP was higher than the 2.50 percent ratio posted a year ago.

Meantime, the ratio of real and other properties owned or acquired (ROPOA) over gross assets (GA) was pared to 8.50 percent from the previous month’s 8.68 percent. This was driven by the quicker expansion of GAs versus the rate of foreclosure of assets.

The non-performing assets (NPA) ratio also improved to 12.21 percent from the previous month’s 12.37 percent.  This transpired as the expansion in GAs at 2.73 percent outrun the 1.36 percent increment in NPAs. Year-on-year, this ratio is 2.47 percentage points better than the base figure of 14.68 percent.

Amidst the generally improving indicators, the industry still bolstered reserves against probable losses. NPA reserves rose by 2.91 percent to P11.63 billion. These included the 2.31 percent additional loan loss reserves (LLRs) allocated during the month. Hence, LLRs went up to P9.24 billion from the previous month’s P9.04 billion.

Consequently, the NPL coverage ratio strengthened to 49.89 percent (vs. 49.51 percent last month). The NPL coverage ratio also showed marked improvement from the 40.38 percent ratio posted a year ago.

By the same token, the NPA coverage ratio advanced to 25.20 percent (vs. 24.82 percent in April). Likewise, this month’s ratio was comparatively stronger than the 18.18 percent ratio posted a year ago.

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