By Luisa Maria Jacinta C. Jocson, Reporter
Assets of PHILIPPINE BANKS quality continued to deteriorate as the industry’s gross non-performing loan (NPL) rate rose to its highest level in greater than two years in October.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the rate rose to three.6% from 3.47% in September and three.44% a 12 months earlier.
This was the highest bad loan rate since May 2022, at 3.75%. It matched the NPL ratio of three.6% in June 2022.
BSP data showed outstanding loans rose 1.3% to P524.31 billion in October from P517.45 billion a month earlier.
Year-on-year, bad loans increased by 16.7% from £449.45 billion.
Loans are considered non-performing if they continue to be outstanding for no less than 90 days after the due date. They are considered dangerous assets since it is unlikely that borrowers can pay.
The banking system’s total loan portfolio was P14.55 trillion, down 2.4% from P14.9 trillion at the end of September. However, it increased by 11.3% from PLN 13.07 trillion a 12 months earlier.
Delinquent loans increased 1.3% in October to P640.88 billion from P632.87 billion in the previous month. It also increased by 15% from P557.27 billion a 12 months earlier.
As a result, the delinquency rate was 4.4%, higher than 4.25% in September and 4.26% a 12 months earlier.
Meanwhile, restructured loans decreased by 0.6% month-on-month to P292.75 billion from P294.53 billion in September and by 5.3% from P309.16 billion in the previous 12 months.
Restructured loans accounted for two.01% of the industry’s total loan portfolio, up from 1.98% a month earlier but down from 2.36% in October 2023.
Banks’ loan loss provisions were P487.52 billion, up 1% from P482.84 billion in September and 5.7% from P461.41 billion a 12 months earlier.
This resulted in a rise in the loan loss allowance ratio to three.35% from 3.24%. last month and three.53% a 12 months ago.
Lenders’ NPL coverage ratio, which measures the provision for potential losses on bad loans, fell to 92.28% in October from 93.31% in September and 102.66% in 2023.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the surge in non-performing loans could also be attributable to the start of the BSP’s monetary easing cycle.
The central bank began its monetary easing cycle in August with a 25 basis point (bp) cut in rates of interest. In October, it made one other cut of 25 basis points, raising the key interest rate to six%.
BSP Governor Eli M. Remolona Jr. previously said they may cut or hold rates of interest regular during the Monetary Board’s last monetary policy review of the 12 months on December 19.
“The series of damage caused by the storm may have led to business disruptions, which may have resulted in some losses, both actual and potential, which partially led to the higher gross NPL ratio,” Ricafort said.
In October, the country was hit by severe tropical storm Kristine and super typhoon Leon.
Ricafort also cited geopolitical risks and tensions in the Middle East which have “impacted global investment, trade and other business activities.”
