Bad loan rate up to 4.14% in January – Manila Bulletin

According to data from Bangko Sentral ng Pilipinas (BSP), the ratio of degraded loans or non-performing loans (NPL) of banks increased to 4.14% in January compared to the same period in 2021 of 3.72%.

The latest gross NPL ratio was also higher compared to December 2021 by 3.97%.

At the end of January, the banking sector’s total loan portfolio stood at 11.14 trillion pesos, up nearly 5% year-on-year from 10.62 trillion pesos.

NPLs, which are loan accounts past due and impaired for more than 30 days, rose 16.74 percent in January to 461.66 billion pesos from 395.46 billion pesos in the same period of 2021.

Bad debts in the banking sector continue to be supported by adequate loan loss provisioning. Based on BSP data, the sector’s provision for credit losses rose 8.54 percent to 402.89 billion pesos in January from 371.17 billion pesos in the same period last year.

The NPL coverage ratio, meanwhile, fell to 87.27 from 93.86 in January 2021. In December 2021, the NPL coverage ratio was 87.37.

The bank delinquency rate or delinquency rate in January stood at 4.84%, higher than 4.79% in January 2021 and 4.66% in December 2021.

Delinquent loans totaled 539.42 billion pesos, an increase of 5.98% from 508.96 billion pesos in the same period of 2021.

Credit rating agency S&P Global said in a February report that the NPL ratio had peaked and “is likely to decline gradually, supported by collections and write-offs (and) most distressed loans have been either recognized or restructured”.

The last time the NPL ratio was around the 4.14% level was in December 2008 at 4.11%, July 2009 at 4.20% and March last year at 4.21% .

In 2021, the second year of the COVID-19 pandemic, the NPL ratio peaked at 4.51% in July and August.

BSP’s simulations earlier indicated a possible 8.2% peak in the NPL ratio this year. However, the central bank said the NPL ratio will continue to be manageable due to the prudent credit risk management standards of local banks and the operationalization of the Financial Institutions Strategic Transfer (FIST) law which will help banks to get rid of their non-performing assets. The FIST Act is expected to further reduce the NPL ratio by approximately 0.6 to 5.8 percentage points over the next three to four years.