LENDERS are unlikely to see double-digit bad debt ratios despite the coronavirus pandemic, a bank executive said. — FREEPIK

BANKS WILL NOT see a repeat of the double-digit nonperforming loan ratios (NPL) seen during the Asian financial crisis (AFC), with their experiences to differ depending on their credit exposures, UnionBank of the Philippines, Inc. President and Chief Executive Officer Edwin R. Bautista said on Wednesday.

“We’re not expecting the kind of credit problems that we had during the AFC where the NPLs are in the double digits. I don’t think that’s going to happen this time around,” Mr. Bautista said in a briefing.

The NPL ratio of the banking industry hit 17.6% in the aftermath of the AFC in 2002. The Bangko Sentral ng Pilipinas (BSP) expects banks’ NPL ratio to reach 4.6% this year due to the coronavirus pandemic’s impact on both households and businesses.

Latest central bank data showed the bad loans ratio of the banking system stood at 3.4% as of end-September, the highest since the 3.42% logged in May 2013. This, as soured debt — or credit unpaid for at least 30 days following their due date — surged 60% year on year to P364.672 billion.

Mr. Bautista said December will be a crucial period for lenders as the 60-day mandatory loan moratorium under Republic Act No. 11494 or the Bayanihan to Recover as One Act lapses.

He said banks now have to make sure their clients clearly understood what will happen after the moratorium, which may include restructuring of loans.

UnionBank’s loan loss provisions hit P7.5 billion in the first nine months of the year. However, Mr. Bautista said heightened credit provisioning does not necessarily mean they expect bad loans to go up by too much.

“In our particular case, a large part of our consumer portfolio is teacher loans. Public school teachers did not get laid off. So this sector of the economy will not mirror the experience of the entire economy,” Mr. Bautista said.

Another significant part of UnionBank’s credit book is mortgage loans, where collateral will be high. In this case, Mr. Bautista said borrowers may consider selling the property or asking help from other parties instead of losing their collateral and defaulting on the loan.

The UnionBank chief executive said their portfolio mix did not change that much amid the pandemic.

“Maybe tilted a little bit more on the consumer side and the reason is because some of the big corporates prepaid their long-term loans, taking advantage of the interest rates… As a result, our corporate loan book has been flat,” he said.

Since March, UnionBank has disbursed loans for teachers, motorcycle financing, and small businesses worth 26.1 billion, P3.2 billion, and P2.9 billion, respectively, the official said.

UnionBank’s net earnings in the third quarter jumped 11% year on year to P4.2 billion.

This brought its nine-month net income to P8.5 billion, down 0.9% year on year due to higher loan loss reserves amounting to P7.5 billion in the period amid impact of the coronavirus pandemic on the economy.

The Aboitiz-led lender’s shares increased by 0.45% or 30 centavos to close at P67 apiece on Wednesday. — L.W.T. Noble