Banks’ bad loan ratio steady at 3.38% in Feb
The ratio of bad debts to total loans held by Philippine banks was steady in February, as the local financial system slowly started to feel the impact of the previous easing actions of the Bangko Sentral ng Pilipinas (BSP).
Preliminary data from the BSP showed the gross amount of nonperforming loans (NPL)—or credit that is 90 days late on a payment and at risk of default—had accounted for 3.38 percent of the local banking industry’s total lending portfolio in February.
That figure, known as the gross NPL ratio, was unchanged from the outturn in January.
In peso terms, it means P513.3 billion of the domestic banking sector’s P15.2 trillion loan portfolio had turned sour in the second month of the year. That amount of NPLs was 10.1 percent bigger compared with year-ago level.
The steady ratio of bad debts to total bank credit coincided with the ongoing easing cycle of the BSP.
An Inquirer poll of 13 analysts last week predicted a 25-basis point (bp) cut to the key rate at the April 10 meeting of the Monetary Board led by Governor Eli Remolona.
If realized, that move would trim the overnight borrowing rate that banks typically use as a guide when pricing loans to 5.5 percent. This would also bring the cumulative cuts under the current cycle to 100 bps.
Such an outcome would mark the resumption of a “calibrated” easing cycle that was held off last February. At the time, the central bank had to pause as it flagged the “unusual” kind of uncertainty coming from global trade developments.
And now that Trump unveiled a milder 17-percent tariff on Filipino goods compared with other Southeast Asian countries, some economists believe that such a development will unlikely prompt the BSP to delay another rate cut.
But others have pointed out that the BSP must remain cautious when it comes to easing—which could mean a slow interest rate-cutting cycle that might prevent the NPL ratio from posting bigger declines.
That said, banks were not letting their guard down. Data showed lenders had set aside P489.6 billion as allowance against potential losses from unpaid loans in February.
This brought the NPL coverage ratio, a measure of sufficiency of the buffer funds, to 95.36 percent, up from the preceding month’s level of 95.25 percent.
