Bank’s bad loans incurred by the Philippine banking system already breached the P400-billion mark in the first 11 months of 2020, according to the Bangko Sentral ng Pilipinas (BSP).
Preliminary central bank data showed over the weekend that lenders’ gross nonperforming loans (NPL) picked up to P404.68 billion in January to November last year, rising by 73.63 percent from P233.06 billion in the first 11 months of 2019.
NPLs are past due loans where the principal or interest is unpaid for 30 days or more after the due date. This includes the outstanding balance of loans payable in monthly installments when three or more installments are in arrears.
The data also showed that banks’ total loan portfolio slid by 0.09 percent to P10.62 trillion at end-November 2020 from P10.63 trillion a year ago.
This translated to a gross NPL ratio of 3.81 percent, higher than the 3.72 percent a month ago and from 2.04 percent a year earlier.
This ratio is the share of bad loans to total loans, inclusive of interbank loans. The latest NPL ratio is the highest in seven years, or since January 2013’s 3.48 percent.
Earlier, the BSP said the NPL ratio was projected to double from 2.4 percent at end-March to 4.6 percent by end-2020.
This is based on a baseline survey of banks and the impact of the pandemic on their operations.
In a related development, the Bangko Sentral said the results of its latest Banking Sector Outlook Survey (BSOS) revealed that, “the slowdown in economic activities may have exerted pressure on the quality of bank loan portfolio.”
It said this could be seen in the surge of bank respondents seeing the ratio of NPL to total loans to surpass 3 percent in the next two years to 81.3 percent during the second semester of 2020 from the 67.4 percent in the earlier survey.
“The extent and path of the Covid-19 (coromavirus disease 2019) pandemic is hampering the full reopening of the different economic sectors, especially the highly retail or contact-intensive segments. This, in turn, may have led banks to downgrade the quality of their loan exposures to these sectors, resulting in an uptick in their NPL forecasts,” the central bank emphasized.
The BSP further said the survey also looked into the lenders’ baseline outlook of the NPL coverage ratio, which is “important because the projected NPL coverage ratio will indicate the banks’ (perceived) ability to absorb future losses.”
In the survey, it said 48.9 percent of the respondent banks estimated an NPL coverage ratio in the range of less than or equal to 25 percent to 50 percent, while 44.3 percent of the respondents forecasted an NPL coverage ratio of between 51 percent and 100 percent.
According to the Bangko Sentral, the BSOS serves as a measure of proactive and forward-looking approach to surveillance and financial supervision.
The latest BSOS covered universal and commercial banks, thrift banks, and 80 rural and cooperative banks (RCBs) to include the top 20 RCBs in terms of total loan portfolio, plus 60 randomly selected RCBs.
MAYVELIN U. CARABALLO