PROBLEM DEBTS held by thrift banks grew in May to log faster than the pickup in retail lending, latest central bank data showed.
Non-performing loans (NPLs) reached P46.067 billion as of end-May, inching higher from the P44.768 billion logged in April and up 12.8% from the P40.85 billion tallied a year ago, according to the Bangko Sentral ng Pilipinas (BSP).
NPLs pertain to unpaid debts for at least 30 days past due date and are considered as risky assets due to a high risk of default, which would spell losses for the bank. Having a low share of bad debts meant a bank is on solid financial footing.
The growth in bad loans even outstripped the 9.7% rise in total credit. Thrift lenders handed out P879.415 billion worth of loans as of May, compared to the P801.554 billion granted as of May 2017.
The NPL stash accounted for 5.24% of the total loan portfolio, a bigger share compared to the 5.1% ratio posted during the same period last year.
In contrast, the bigger universal and commercial banks posted a lower NPL ratio at just 1.34% of total lending as they cater to more stable clients like big businesses.
Thrift banks mainly target retail clients and small-scale firms, which are deemed riskier segments due to bigger chances of default. Consumer lending grew by 18.4% in May, according to BSP data.
NPLs also grew faster than the banks’ deposit-taking activities, with the sum growing by just 4.3% year-on-year to P954.07 billion.
Despite the bigger amount of soured loans, thrift banks scaled down the allowance set aside to cover possible credit losses. Loan loss reserves were slashed to P27.91 billion from P28.44 billion the previous year. This will cover just 60.6% of the NPLs, a lower ratio compared to 69.6% the prior year.
On the other hand, non-performing assets held by banks in the form of seized properties stood at P22.6 billion, down from the P23.07 billion a year ago.
There are 53 thrift banks doing business in the Philippines as of March. These lenders made a cumulative P4.05 billion net income during the first quarter, 7.2% higher than the P3.777 billion raked in during the same period in 2017.
The BSP monitors the NPL ratios of banks and financial firms in order to keep asset quality in check and maintain the soundness of the local financial system. — Melissa Luz T. Lopez