NPL ratio eases to three-month low

SOURED LOANS held by Philippine banks declined in March, bringing the nonperforming loan (NPL) ratio to its lowest in three months amid the further reopening of the economy.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday showed the banking industry’s gross NPL ratio slipped to 4.08% in March from 4.21% a year ago. It is also lower than the 4.24% NPL ratio seen in February.

The March NPL ratio is the lowest since the 4.1% logged in December.

Bad loans rose 2.7% to P460.458 billion in March from P448.44 billion a year ago. However, it declined 2.6% from the P472.664 billion in February.

The asset quality of Philippine banks improved amid the expansion in banks’ outstanding loans, Asian Institute of Management economist John Paolo R. Rivera said.

“This [decline in NPL ratio] is due to increased economic and business activities that allow for more demand for loans coupled by a relatively more stable income flows given a more sustained economic reopening,” Mr. Rivera said in a Viber message.

The government placed Metro Manila and some provinces under the most lenient alert level in March as the number of coronavirus disease 2019 (COVID-19) infections plunged.

In March, outstanding loans by big banks expanded by 8.9%, the quickest rise since the 9.6% in June 2020.

As NPLs declined, the lenders’ gross loan portfolio continued to expand by 5.8% to P11.28 trillion in March from P10.66 trillion a year ago. It also edged up 1.2% from the P11.15 trillion in February.

Meanwhile, past due loans fell 4.4% to P544.593 billion in March from P569.639 billion a year ago. This brought the ratio to 4.83% from 5.34% a year ago.

On the other hand, restructured loans climbed 46.7% to P341.771 billion from P232.925 billion a year ago. These borrowings accounted for 3.03% of banks’ loan portfolio from 2.18% previously.

Even as asset quality improved, the loan loss reserves grew 9% to P406.975 billion from P373.281 billion last year. This is equivalent to 3.61% of lenders’ loan portfolio, inching up from 3.5% a year ago.

The industry’s NPL coverage ratio improved to 88.38% from 83.24% a year ago.

Mr. Rivera said the incoming administration should make sure there are no disruptions to economic activity to allow borrowers to recover.

“[The] new administration must ensure that the economy remains to be uninterrupted so that jobs are generated and secured,” he said.

The jobless rate slowed to 5.8% in March from 6.4% in February, based on data from the Philippine Statistics Authority. This is equivalent to 2.875 million Filipinos from 3.126 million a month earlier.

However, the underemployment rate worsened to 15.8% from 14% in February. This translated to 7.422 million Filipinos that are still looking for an additional job or longer hours, up from the 6.382 million in February. — Luz Wendy T. Noble