BAD LOANS held by big banks climbed further in October but remained modest compared to growth of total lending, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Non-performing loans (NPLs) of universal and commercial banks reached P114.472 billion that month, up from the P112.762 billion in September and rising by 6.3% from the P107.691 billion recorded in October 2017.
NPLs — loans left unpaid for at least 30 days past due date — are considered risky assets given the slim chance that borrowers would settle them, leaving lenders holding the bag.
Still, the increase in soured debts was slower than the 18.5% rise of total credit, which amounted to P8.721 trillion in October.
The share of problem loans to total borrowings declined to 1.31% from 1.46% in October 2017.
Past due loans, which cover all types of debts that missed payment deadlines, surged by 29.3% to P165.049 billion.
Restructured loans — those that bagged longer repayment periods — dropped 15% to P30.469 billion.
Big banks raised the allowance they set aside for potential loan losses to P157.608 billion, 8.7% more than the year-ago level. This is enough to cover nearly 1.4 times total NPL, ensuring that lenders can stay afloat even if these debts were written off.
On the other hand, the value of non-performing assets — consisting of items of value which were forfeited by non-paying borrowers — steadied at P70.332 billion.
Overall, bank assets continued to grow as deposits increased by a tenth to P11.31 trillion in October from P10.306 trillion a year ago.
The central bank monitors the NPL ratios of banks and other financial businesses in order to keep track of asset quality and safeguard the soundness of the financial system.
Bank lending has remained buoyant despite higher interest rates this year, as the BSP raised benchmark yields by a total of 175 basis points this year to arrest inflation.
S&P Global Ratings projects credit growth to ease to around 14-15% in 2019 due to rising borrowing costs, versus a 19% increase posted in December 2017.
Bank lending picked up by 18.1% in October, according to latest available BSP data.
Market players have cited “tight” liquidity conditions over the past few months amid rising interest rates, although central bank officials have said that bank lending will continue to be “healthy” and supportive of economic activity. — Melissa Luz T. Lopez