BAD DEBTS held by big banks stood somewhat steady in June even as loans surged by a fifth, latest central bank data showed, which helped support a slight rise in profits during the first semester.

Non-performing loans (NPLs) held by universal and commercial banks inched up to P101.006 billion at end-June, just 2.9% higher than the P98.198 billion a year ago and up by a tad from the P100.318 billion tallied in May, according to data from 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. Relative to total loans, its share even slipped to 1.42% from 1.65% recorded in June 2016.

The lower share of soured debts came even as the banks grew more aggressive with its lending activities, with the cumulative loan portfolio jumping by 19.3% to reach P7.09 trillion.

Non-performing assets held by the banks — which represent seized property from non-paying clients — dropped to P76.333 billion, or 4.6% lower than the P80.043 billion posted a year prior.

As a rule, banks have the option to foreclose assets of value which were used as collateral by borrowers should they fail to pay their loans on time.

Despite the minimal rise in the NPL stash, banks still opted to raise their reserves versus potential losses to reach P139.28 billion in June, up 6.6% from P130.708 billion during the same period last year.

The amount is more than enough to cover the entire value of the bad loans held by the big banks at 137.89%, versus the 133.11% coverage ratio logged a year ago.

Bank credit also remained wholly funded by deposits as of end-June, which climbed by 14.3% to P9.923 trillion from P8.681 trillion the prior year.

With the improving asset quality, the big banks also enjoyed bigger profits during the first semester, with net incomes inching up to P71.842 billion from P70.524 billion booked during the same period in 2016.

Bottom lines also improved across the entire Philippine banking system as cumulative profits reached P81.803 billion, rising by 3.3% from P79.192 billion the previous year. The share of problem loans also declined to 1.94% from 2.19%, according to central bank data.

The central bank monitors the NPL ratios of banks and financial entities in order to keep track of asset quality and maintain the soundness of the financial system.

Several economists have flagged rapid credit growth as a potential concern for the BSP, although the regulator has said that steady increase in bank lending simply reflects upbeat economic activity, quelling fears of an overheat. — Melissa Luz T. Lopez

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