THE SHARE of soured loans held by big banks declined further in May, latest central bank data showed, even as bank lending posted a double-digit climb from a year ago.

Non-performing loans (NPLs) held by universal and commercial banks dropped to a 1.44% share that month, lower than the 1.5% share seen in April and the 1.68% posted in May 2016, according to the Bangko Sentral ng Pilipinas (BSP).

NPLs refer to loans left unpaid for at least 30 days beyond due date, and are considered as risky assets due to a higher risk of default.

Bad debts held by the big lenders posted a modest 1.5% increase to P100.318 billion from a year prior, and even slipped from the P101.189 billion tallied in April. This came despite an 18.4% surge in total loans granted that period, which soared to P6.947 trillion from P5.866 trillion previously.

The improving asset quality came alongside a drop in the amount of non-performing assets held by the bank, which represent seized properties and items of value from defaulting borrowers. The value of real property repossessed by banks stood at P72.373 billion in May, down 2.9% from P74.545 billion a year ago.

Despite the minimal uptick in the amount of NPLs, the big banks decided to raise the allowance that they set aside for potential credit losses to P138.755 billion, up 6.6% from the P130.193 billion that stood as reserves for potential defaults in May 2016.

The amount is more than enough to cover the current NPL stash, which provides a degree of comfort for the lenders even if the entire stash of problem loans are defaulted.

Bank loans also remain largely funded by deposits, which grew 12.5% to hit P9.632 billion, central bank data bared.

Across the entire banking system, the share of bad debts also dropped to P155.567 billion or 1.98% of total loans as of end-May, versus a 2.23% share the previous year.

The central bank keeps track of the NPL ratios of banks and financial entities to keep track asset quality and maintain the soundness of the financial system. — Melissa Luz T. Lopez