SOURED DEBTS held by thrift banks rose in June to outpace the growth in total loans, latest central bank data showed, even as the lenders saw profits surge by a fifth from a year ago.

Non-performing loans (NPLs) held by the thrift banks grew by 11% as of end-June to reach P40.153 billion, picking up from the P36.158 billion tallied during the same period in 2016, according to the Bangko Sentral ng Pilipinas (BSP).

NPLs refer to debts left unsettled at least 30 days beyond due date, and are considered as risky assets as these have high risk of default.

Thrift banks are focused on individual borrowers and lending for consumer-related activities such as car and home loans — a riskier segment compared to corporate clients.

The higher NPLs outpaced a 9.6% climb in total loans, which reached P802.118 billion from P731.832 billion previously.

Relative to total credit, the share of NPLs also climbed to 5.01%, inching higher from 4.94% logged in July 2016 but down from June’s 5.1% share.

Loans remained largely funded by deposits, which posted a 13.5% increase to P934.209 billion as of end-June. The loans-to-deposits ratio declined to 85.86% from P88.93% the previous year.

Meanwhile, non-performing assets held by banks which come in the form of foreclosed properties from defaulting borrowers dropped to P20.864 billion, 5.9% lower than the P22.166 billion which the thrift lenders held a year ago.

Banks have the option to seize assets of value such as homes and cars from defaulting clients should they fail to pay their mortgages if these properties were used as collateral for the loan.

With the bigger share of problem loans, the banks chose to raise allowances for potential credit losses to P27.751 billion, which is 8.3% higher than the P25.617 billion reserves allotted a year prior.

However, such reserves were not enough to fully cover the NPLs, as it only provided for 69.1% of the bad debts. Coverage even slipped from the 70.9% share tallied a year ago, data showed.

With the sustained growth in total loans, thrift banks saw cumulative profits jump to P8.174 billion for the first semester, spelling a 20.9% increase from P6.759 billion during the comparable year-ago period.

There are 57 thrift banks operating in the Philippines as of end-March.

Incomes generally went higher across the entire Philippine banking system to a cumulative bottom line of P81.924 billion, up 3.5% from P79.192 billion the previous year. The share of NPLs likewise declined to 1.94% from 2.19% of total loans, according to latest BSP data. The central bank monitors the NPL ratios of banks in order to keep track of asset quality and maintain the soundness of the financial system. — Melissa Luz T. Lopez

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