PH banks’ bad-loan ratio steady at 3.35%
The share of bad loans on Philippine banks’ books held steady in August, as soured consumer loans stabilized despite a difficult environment for both lenders and borrowers.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed nonperforming loans (NPLs), or debts that remain unpaid 90 days past the due date and at risk of default, accounted for 3.35 percent of lenders’ total loan portfolio.
That figure, also known as the gross NPL ratio, was unchanged from the June result.
In peso terms, P596 billion of the local banking industry’s P17.8-trillion loan book turned sour in August. That amount of NPLs was 8.4-percent higher than a year earlier.
Banks also maintained a sizable buffer against potential losses. They had set aside nearly P555.6 billion in provisions for credit losses, leaving the industry with a NPL coverage ratio of 93.17 percent, also unchanged from the previous month.
Within consumer lending, the NPL ratio was steady at 5.41 percent. The ratio for credit card receivables rose to 5.44 percent from 5.33 percent, while that for motor vehicle loans increased to 5.62 percent from 5.51 percent. The ratio for salary-based loans, by contrast, fell to 5.01 percent from 5.30 percent.
Tight conditions
The NPL ratio for business loans edged up to 3.30 percent, its highest level in three months.
The figures come as the central bank keeps monetary policy relatively tight to contain inflation. The BSP has raised its benchmark interest rate to 5 percent and has signaled that it will tighten policy further if needed to bring inflation back to its target.
Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said the stable NPL ratio suggested that banks’ asset quality remained broadly intact despite a challenging operating environment.
For now, he said, bad loans were likely to remain manageable, supported by banks’ strong capital and provisioning buffers.
“However, the outlook warrants caution as persistent inflation, the possibility of higher-for-longer interest rates, and signs of moderating economic activity could weigh on borrowers’ repayment capacity and lead to some deterioration in asset quality,” he said.
“While current indicators suggest that the banking system remains resilient, risks to the NPL outlook appear tilted slightly to the upside,” he added.
