Non-performing loan ratio rises to two-year high in July

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PHILIPPINE banks’ bad loan ratio hit a two-year high in July, data from the Bangko Sentral ng Pilipinas (BSP) showed, edging up to 3.58 percent from 3.51 percent in June and 3.43 percent a year earlier.

It is the highest recorded since June 2022’s 3.60 percent.

The central bank defines non-performing loans (NPL) as past-due loans where the principal or interest is unpaid for 90 days or more after the due date, including the outstanding balance of loans payable in monthly installments when three or more installments are in arrears.

Rizal Commercial Banking Corp. chief economist Michael Ricafort. TMT file photo

Rizal Commercial Banking Corp. chief economist Michael Ricafort attributed the increase to high interest rates that had affected the borrowers’ ability to pay.

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“The latest pick up in banks’ NPL ratio may also be a function of faster loan growth in recent months, meaning the faster expansion in banks’ loan portfolio also partly corresponds to some pick in NPLs as well,” he added.

“So it is very important to have tight and uncompromising credit/lending standards to curb NPLs to as minimal as possible,” he added.

Past-due loans rose to P625.71 billion from P614.17 billion in June. These accounted for 4.40 percent of total loans, higher than the previous month’s 4.29 percent.

Year on year, past-due loans were 4.12 percent of the total at P528.62 billion.

Restructured loans, meanwhile, declined to P291.08 billion in July from P293.62 billion in the previous month. This brought it to 2.05 percent of the banks’ gross loan portfolio.

A year earlier, restructured loans were higher at P304.71 billion, or 2.38 percent.

Lenders’ loan loss reserves edged up to P479.24 billion, equivalent to 3.37 percent of total loans. This is, however, lower than the 3.51 percent seen in the same month last year.

The NPL coverage ratio — which indicates banks’ allowance for potential losses due to bad loans — was also lower at 94.32 percent from 102.31 percent a year earlier.

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