By Luisa Maria Jacinta C. Jocson, Reporter
The asset quality of PHILIPPINE BANKS worsened further as the gross nonperforming loan (NPL) ratio for the industry climbed to a high not seen in over two years this October.
Preliminary figures from the Bangko Sentral ng Pilipinas (BSP) revealed that the ratio increased to 3.6% from 3.47% in September and 3.44% a year prior.
This marked the highest bad loan ratio since it reached 3.75% in May 2022, matching the 3.6% NPL ratio recorded in June 2022.
According to data from the BSP, the amount of troubled loans rose by 1.3%, reaching P524.31 billion in October from P517.45 billion the previous month.
In comparison to last year, bad loans surged by 16.7% from P449.45 billion.
Loans are classified as nonperforming when they remain unpaid for a minimum of 90 days post-due date. Such loans are considered risky assets as the likelihood of repayment is low.
The banking sector’s total loan portfolio amounted to P14.55 trillion, decreasing by 2.4% from P14.9 trillion at the end of September. However, it increased by 11.3% compared to P13.07 trillion a year ago.
Delinquent loans rose by 1.3%, totaling P640.88 billion in October, up from P632.87 billion the previous month. It also experienced a 15% increase from P557.27 billion a year earlier.
This resulted in a past due ratio of 4.4%, above the 4.25% recorded in September and the 4.26% from a year ago.
Conversely, restructured loans decreased by 0.6% month-over-month, totaling P292.75 billion compared to P294.53 billion in September, and saw a decline of 5.3% from P309.16 billion the previous year.
Restructured loans comprised 2.01% of the industry’s overall loan portfolio, an increase from the 1.98% in the prior month but lower than 2.36% in October 2023.
Loan loss reserves for banks reached P487.52 billion, representing a rise of 1% from P482.84 billion in September, and increasing by 5.7% from P461.41 billion a year prior.
This contributed to the loan loss reserve ratio increasing to 3.35%, up from 3.24% the previous month and 3.53% a year ago.
The coverage ratio for lenders’ NPL, reflecting the reserves for expected losses from bad loans, fell to 92.28% in October from 93.31% in September and 102.66% in 2023.
Michael L. Ricafort, Chief Economist at Rizal Commercial Banking Corp., indicated that the rise in NPLs may be linked to the onset of the BSP’s cycle of monetary easing.
The central bank initiated its policy easing cycle in August, implementing a 25-basis-point (bp) rate cut, followed by another reduction of the same magnitude in October, resulting in a key rate of 6%.
Earlier, BSP Governor Eli M. Remolona, Jr. mentioned the possibility of lowering or maintaining rates during the Monetary Board’s final policy review of the year scheduled for December 19.
“The series of storm damages may have resulted in disruptions to businesses leading to tangible and opportunity losses, contributing to a heightened gross NPL ratio,” commented Mr. Ricafort.
In October, the nation experienced the impact of Severe Tropical Storm Kristine and Super Typhoon Leon.
Mr. Ricafort also pointed to geopolitical risks and tensions in the Middle East which have “impacted global investments, trade, and various business operations.”