Banks NPL ratio hits three-month high
Business

Banks NPL ratio hits three-month high

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Through Luz Wendy T Noble, News reporter

PHILIPPINES BANKS saw a rise in bad loans in February, reflecting the challenges many borrowers still face in paying back their debts, despite the gradual reopening of the economy.

The latest data from the Bangko Sentral ng Pilipinas (BSP) shows that the Philippine banking gross non-performing loan (NPL) ratio rose in February from 4.14% in January to 4.24% in February.

The NPL ratio also rose from 4.08% a year earlier and is the highest since November’s 4.35%.

Bad loans rose 2.38% in February to P472.664 billion, from P461.66 billion in January. This was also 9.6% higher than the P431.266 billion in bad loans a year earlier.

In February, the gross loan portfolio of banks rose 5.4% to P11.15 trillion, from P10.579 trillion in the same month a year ago. It rose 0.07% from the P11.142 trillion in January.

“The recent rise in the NPL ratio underlines the challenges the economy is facing despite the gradual reopening of the economy,” said ING Bank NV Manila Senior Economist Nicholas Antonio T. Mapa in an email.

Metro Manila and some provinces were placed under Alert Level 3 in January due to the Omicron-induced increase in infections with 2019 coronavirus disease (COVID-19). Since then, restrictions have been relaxed to the mildest alert level 1 as the number of COVID-19 cases fell.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber release that both corporate borrowers and consumers are likely already feeling that borrowing costs have risen in recent months.

†[This] further affected the ability to pay of some borrowers,” he said.

Delinquent loans held by lenders rose 1.17% to P557.964 billion, from P551.472 billion in the same month last year. These accounted for 5% of the loans, compared to 5.21% a year earlier.

Meanwhile, restructured loans totaled P344.081 billion, up 71.2% year-on-year from P200.986 billion. As a result, the ratio rose from 1.9% to 3.09%.

As bad loans piled up, banks’ loan loss provisions expanded 8.9% to P407,035 billion, from P373,631 billion a year earlier. This corresponds to 3.65% of the total loan portfolio, compared to 3.53%.

The sector’s NPL coverage was 86.12%, down from 86.64% in February 2021.

In the coming months, asset quality is likely toffinfluenced by borrowing costs and faster inflation, said Mr Mapa.

“We can expect NPL ratios to remain at current levels as borrowing faces headwinds from faster inflation and rising borrowing costs, two developments that could slow overall economic activity and limit cash flow in the near term.” he said.

InflGrowth accelerated in March to a six-month high of 4%, already reaching the upper end of the central bank’s target of 2-4%. This was mainly caused by the increase in pump prices.

For his part, Mr. Ricafort that the continuation of the economic reopening and the improvement of the labor market could help to improve the asset quality of banks.

Fitch Ratings said higher operating expenses and rising inflThe war caused by the war in Ukraine may affect growth opportunities for businesses and consumers, but is unlikely to lead to a sharp increase in loan delinquency.