Non-performing loan ratio continues to improve

Banks’ gross non-performing loans (NPLs) or non-performing loan ratio improved to 3.43% in September from 3.53% in August as borrowers repaid their debts on time.

Based on the latest Bangko Sentral ng Pilipinas (BSP) data, the last time the NPL ratio was close to the 3.43% level was 3.51% in September 2020.

The non-performing loan ratio remained high at 4.44% in the same period last year. The highest bad debt ratio recorded during the pandemic was 4.51% in July 2021 and he in August.

Bank teller counting 1,000 pesos bills/Bloomberg photo

Total NPLs, loans outstanding over 90 days, reached Ps.415.225 billion at the end of September, down 14.63 percent from Ps.486.362 billion in the same period last year.

The banking industry’s total loan portfolio increased by 10.27% to PHP12.09 trillion from PHP10.964 trillion in 2021.

Meanwhile, banks’ NPL coverage ratio rose to 102.27% from 84.42% in the same period last year. Loan loss reserves or banks’ loan loss reserves also increased by 3.42% to Ps.424.643 billion from Ps.410.605 billion.

The BSP reported that the delinquency rate, the delinquency rate, fell to 4.04% in September, compared to 5.21% for the same period in 2021.

Total delinquent loans totaled P488,714 million, down 14.50% from P571,597 million in 2021. A loan account is considered overdue if it is not paid on the due date, but the bank may offer a healing period of up to 30 days for the borrower to catch up.

Based on the latest Banking Sector Outlook Survey (BSOS) for the second half of 2021, the BSP expects most banks to have adequate capital, liquidity buffers and adequate loan loss reserves over the next two years said.

About 57.3% of the banks surveyed said the industry’s non-performing loan ratio is likely to exceed 5% in the next two years. The survey results are down from 63.5% for the same period in 2020.

Meanwhile, 42.7% of the banks surveyed expect their NPL coverage to range from 51% to 100% or more over the next two years.

“Amid the long tail of the Covid-19 pandemic, the Philippine banking system will withstand the legacy risks and challenges of the pandemic within the next two years, with stable and sound capital and liquidity buffers, and adequate loan loss reserves. “We are forecasting a strong earnings performance and prudent risk governance,” said BSP.

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