Banks' bad loan ratio improves in December

Banks' bad loan ratio improves in December

Saturday, 14 March, 2009

Universal and commercial banks’ bad loans as percentage of total loans further declined in December, central bank data showed.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said banks’ non-performing loan (NPL) ratio dipped to 3.52% of their total loan portfolio, or 0.23 percentage point lower than in the previous month. This ratio was also better than the 4.45% recorded in December 2007. "This NPL ratio was the lowest recorded figure since the ratio peaked at 18.81% in end-October 2001," the central bank said.

Non-performing loans are debts whose principal or interest has remained unpaid a month after they fell due. Excluding interbank loans, banks’ NPL ratio also improved to 3.87% in December from 4.15% in November and from 5.27% in December the year before. The central bank said the improvement in the NPL ratio was due to a decline in soured loans as well as an expansion in loans, whether including or excluding interbank loans.

Foreclosed assets also dipped, with real and other properties acquired (ROPA) falling to 2.73% of commercial banks’ gross assets, from 2.76% in November and 3.33% in December the year before. Non-performing assets, which include non-performing loans and ROPA, likewise dropped to 4.45% in December from 4.61% in November and 5.22% in December 2007.

"The industry provided adequate provisioning against potential credit losses," the central bank added. "The NPL coverage ratio strengthened to 100.1% from 94.94% [in November]. Likewise, the NPA coverage ratio widened to 49.45% from 48.35% [in the previous month]."

Source: http://www.bworldonline.com/