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October 06, 2022

Soured loans of banks post 2-digit decline

Philippine banks booked a 10.5 percent decline in soured loans to P429.11 billion in May from P479.48 billion in the same month last year as the economy further reopens from the strict COVID-19 lockdowns, according to the Bangko Sentral ng Pilipinas (BSP).

This translated to a lower non-performing loan (NPL) ratio of 3.75 percent in May, the lowest since the 3.72 percent booked in January last year, from 3.93 percent in April.

The loan portfolio of banks operating in the country increased by 6.9 percent to P11.44 trillion from P10.67 trillion amid the further reopening of the economy.

This translated to a stronger-than-expected gross domestic product (GDP) growth of 8.3 percent in the first quarter of the year.

The industry’s past due loans declined by 14.3 percent to P508.51 billion from P593.35 billion as banks restructured more loans to help borrowers recover from the impact of the global health crisis.

The restructure loans of banks surged by 27.8 percent to P336.72 billion in May from P263.51 billion in the same month last year, prompting banks to increase the allowance for potential loan losses by six percent to P406.62 billion from P383.39 billion.

The BSP has delivered back-to-back rate hikes in May and June as part of its tightening cycle to curb rising inflationary pressures. This brought the benchmark interest rate to 2.50 percent from an all-time low of two percent.

Last Tuesday, BSP Governor Felipe Medalla signaled that the overnight reverse repurchase rate could end the year at 3.50 percent.

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