BAD LOANS held by big banks grew in January to outpace lending growth, the latest central bank data showed.
Non-performing loans (NPLs) of universal and commercial banks rose to P131.356 billion, picking up from just P113.518 billion in December and jumping 29.6% from the P101.391 billion problem debts as of January 2018, according to the latest data from the Bangko Sentral ng Pilipinas (BSP).
NPLs are loans left unpaid for at least 30 days beyond due date. These are considered risky assets given the slim chance for borrowers to settle these liabilities, in turn spelling losses for lenders.
January’s increase outpaced the 13.1% increase in banks’ total loan portfolio to P8.852 trillion from P7.827 trillion a year ago.
As a result, the share of NPLs rose to 1.48% of total loans as of January, compared to 1.3% a year ago.
Past due loans, which cover all types of overdue payments, also went up by a third to some P182.82 billion. Meanwhile, debts enrolled for restructuring — or longer repayment periods — dropped by 16.5% to P31.506 billion.
Despite the rising NPLs, big banks added a mere three percent to their allowance for loan losses. The figure went up to P152.457 billion from P148.978 billion previously. This is enough to fully cover bad debts if they were completely written off, although the coverage ratio is down to 116.06% from 146.93%.
Meanwhile, bank deposits continued to grow in January to P11.389 trillion, 7.1% more than P10.635 trillion a year ago.
The central bank monitors the NPL ratios of banks and other monitored financial businesses in order to keep track of asset quality and safeguard the soundness of the financial system.
The latest NPL tally sustains a trend seen in 2018, when the share of NPLs in total debts rose to break a decline seen since 2013.
The bigger stash of problem loans came after the BSP raised benchmark borrowing rates by 175 basis points last year, with the five successive rate hikes meant to rein in inflation expectations. The key rate rose to 4.75% from three percent — a nine-year high — which in turn pushed market yields higher.
BSP Deputy Governor Chuchi G. Fonacier has said that the higher NPL tally may be attributed to a “stricter definition” of past-due and non-performing loans as provided under a recent circular.
S&P Global Ratings said in a recent webcast that it expects the rising share of soured debts to persist this year, although the ratio is expected to “remain very low.”
Big banks saw NPLs reach 1.26% of total loans last year, while the industry-wide ratio stood at 1.77% of all loan books. — Melissa Luz T. Lopez