By Luisa Maria Jacinta C. Jocson, Reporter
THE PHILIPPINE banking system’s gross nonperforming loan (NPL) ratio eased in September, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.
The banking industry’s gross NPL ratio slipped to three.47% in September from the over two-year high of three.59% in August. Nonetheless, it was still higher than 3.4% in the identical period in 2023.
This was also the bottom NPL ratio in five months or because the 3.45% posted in April.
Loans are considered nonperforming once they continue to be unpaid for at the least 90 days after the due date. These are deemed as risk assets since borrowers are unlikely to pay.
BSP data showed that bad loans inched up by 0.9% to P517.45 billion in September from P512.7 billion within the previous month.
12 months on 12 months, soured loans jumped by 16.5% from P444.3 billion.
The whole loan portfolio of Philippine banks stood at P14.9 trillion in September, up by 4.2% from P14.3 trillion in August. It also climbed by 14.1% from P13.06 trillion a 12 months earlier.
Late loans inched up by 0.2% to P632.9 billion in September from P631.4 billion within the prior month. 12 months on 12 months, late loans increased by 15% from P549.9 billion.
This brought the late loan ratio to 4.25% in September, lower than 4.42% in August but above 4.21% a 12 months prior.
Restructured loans went up by 0.5% to P294.5 billion in September from P293.2 billion a month ago. Nonetheless, it declined by 4.1% from P307.2 billion a 12 months earlier.
Restructured loans accounted for 1.98% of the industry’s total loan portfolio in September, lower than 2.05% within the previous month and a pair of.35% a 12 months ago.
In September, banks’ loan loss reserves were almost flat (0.07%) at P482.8 billion from P482.5 billion a month prior. Meanwhile, it rose by 4.8% from P460.8 billion 12 months on 12 months.
This brought the loan loss reserve ratio to three.24%, lower than 3.37% last month and three.53% in the identical month in 2023.
Lenders’ NPL coverage ratio, which gauges the allowance for potential losses as a result of bad loans, slipped to 93.31% in September from 94.11% in August and 103.71% a 12 months prior.
“Banks’ NPL ratio improved amid faster loan growth in recent months that effectively expanded the denominator and helped ease the NPL ratio mathematically,” Rizal Industrial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The newest data from the BSP showed bank lending grew by 11% 12 months on 12 months to P12.4 trillion in September, its fastest pace in nearly two years or since 13.7% in December 2022.
The NPL ratio could also proceed to enhance further in the approaching months, Mr. Ricafort said.
“The newest RRR (reserve requirement ratio) cuts that effectively infused about P400 billion into the economic system would allow banks to extend their loanable funds that could lead on to faster loan growth and would mathematically result in lower NPL ratio,” he said.
The BSP reduced the RRR for universal and business banks and nonbank financial institutions with quasi-banking functions by 250 basis points (bps) to 7% from 9.5%, effective on Oct. 25.
Further rate cuts by the US Federal Reserve and Philippine central bank would also result in more demand for loans, Mr. Ricafort said.
“Thus, banks’ asset quality would still improve when it comes to further easing of banks’ NPL ratio, in an environment made more conducive by expected Fed and native policy rate cuts for the approaching months,” he added.
Last week, the US central bank reduced its policy rate by 1 / 4 of a percentage point to the 4.5-4.75% range.
Meanwhile, the Bangko Sentral ng Pilipinas (BSP) has to date reduced borrowing costs by 50 bps this 12 months because it began its easing cycle in August.
The Monetary Board delivered 25-bp rate cuts at each of its August and October meetings, bringing the important thing rate to six%. Its final policy review for the 12 months is scheduled for Dec. 19.
