THE LENDING portfolio of nonbank financial institutions with quasi-banking functions (NBQBs) dropped in the first half of the year as players merged or gave up their licenses, an official from the Bangko Sentral ng Pilipinas (BSP) said.

“As of end-June 2020, the NBQBs’ total loan portfolio (TLP) dropped by 33.6% year on year to P133.4 billion following merger and/or surrender of QB license of certain entities resulting from a review of strategic direction and business operations,” BSP Managing Director for Policy and Specialized Supervision Lyn I. Javier said in an e-mail.

Quasi-banks include financing companies and investment houses.

This also affected total operating income of NBQBs, which plummeted 70.8% to P3.9 billion.

“The decline is also partly influenced by the drop in non-interest income, particularly trading income,” Ms. Javier said.

Like their bank counterparts, quasi-lenders also saw a higher nonperforming loan (NPL) ratio amid the impact of the pandemic. The industry’s NPL ratio picked up to 5.8% as of end-June from 4.4% a year ago.

“The current NPL ratio is higher than the Philippine banking system’s estimated NPL ratio of 4.6% by end-December 2020.  Nevertheless, we expect that the NBQB’s NPL ratio will remain manageable in the next two years,” Ms. Javier said.

The Philippine banking system’s bad loan ratio stood at 3.4% as of end-September, already the highest since the 3.42% NPL ratio logged in May 2013.

The BSP will remain watchful of the NPL ratio of quasi-lenders amid the current crisis, said Ms. Javier.

“The NBQB industry is expected to remain stable as most of the financing companies and investment houses with QB license are linked with universal and commercial banks hence, governed by the same set of risk management standards,” she said. — L.W.T. Noble