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Banks’ bad debts grow further

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Bank Vault

BAD DEBTS held by big banks kept growing in August but at a slower pace compared to the pickup in total lending, latest central bank data showed.

Universal and commercial banks saw cumulative non-performing loans (NPLs) reach P112.936 billion that month, inching up from July’s P112.297 billion and rising 8.4% from P104.213 billion in August 2017.

NPLs refer to loans left unpaid at least 30 days past due date. These are considered risky assets given a slim chance that borrowers would pay their outstanding balances, in turn spelling losses for lenders.

The increase in bad loans is slightly faster than the eight percent logged in July but slower than the 9.5% climb in June, according to latest available data from the Bangko Sentral ng Pilipinas (BSP).

Still, NPLs grew slower than the 17.9% increase in loans by the big lenders, with the total rising to P8.406 trillion from P7.131 trillion in August last year.

As a result, the share of soured debts to total loans dropped to 1.34% from 1.46% a year ago, which is a more manageable level for the lenders.




Past due loans, referring to loans that missed the payment deadline, grew by a faster 29.8% to P159.744 billion in August.

On the other hand, restructured debts — loans given a longer repayment period — slipped by a tenth to P31.729 billion, data showed.

Mounting problem loans prompted lenders to raise provisions they set for possible credit losses. Reserves went up 13.1% year-on-year to P161.301 billion, enough to cover nearly 1.5 times the total stash of bad debts.

Non-performing assets held by big lenders steadied from last year at P69.896 billion.

This represents the value of real property and other items seized from clients who failed to pay their obligations.

Strong loan growth came alongside a steadily increasing deposit base. Total deposits held by big banks went up by 9.7% to P11.144 trillion in August from P10.158 trillion a year ago. These funded bank loans, with outstanding credit equivalent to 75.43% of the deposit base.

The BSP monitors NPL ratios of banks and financial firms in order to check asset quality and maintain the soundness of the financial system.

Bad loans amounted to P177.388 billion across the entire Philippine banking system, up 11.4% from a year ago.

Their share to total debts declined to 1.88% from 1.97% previously, sustaining a trend observed over the past few years. — Melissa Luz T. Lopez

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