1 month ago
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The banking sector’s gross non-performing loans (NPL) or bad loans ratio improved to 3.27 percent in December 2024, the lowest NPL ratio recorded last year, based on Bangko Sentral ng Pilipinas (BSP) data.
It is also the lowest in 12 months or since December 2023 of 3.24 percent.
The NPL ratio is the percentage of NPLs to total loans, gross of allowance for credit losses but inclusive of interbank loans. Meanwhile, NPLs are loan accounts whose principal or interest is unpaid for 30 days or more after they have become past due.
At the end of 2024, NPLs totaled P500.319 billion, up by 11.41 percent compared to December 2023 of P449.06 billion.
NPLs are also investments, receivables, or any financial asset considered impaired under existing accounting standards. As loans, NPLs are classified as doubtful or loss, in litigation, or there is evidence that full repayment of principal and interest is unlikely without foreclosure of collateral, if any.
Banks’ total loan portfolio increased by 10.56 percent year-on-year to P15.323 trillion from P13.859 trillion.
Of this amount, past due loans totaled P604.95 billion, up by 10.19 percent from P548.948 billion in December 2023. Loan accounts are considered past due if unpaid on due dates but banks may provide a cure period within 30 days to allow borrowers to catch up.
The past due ratio or the delinquency rate was also lower at 3.95 percent, the lowest since December 2022 of 3.79 percent and close to the same period in 2023 of 3.96 percent.
Loan loss reserves or banks’ NPL coverage ratio stood at 96.08 percent in December, down from same time in 2023 of 101.74 percent.
To cover for these potential losses, banks have set aside P480.693 billion for loan loss provisioning, up 5.22 percent from P456.853 billion in 2023.
Loans and other credit accommodations with unpaid principal and interest are provided with allowance for credit losses under BSP rules. This will be based on the number of days of missed payments, which was anywhere from 31 to 90 days, up to 181 days and over.
BSP data showed that banks’ gross restructured loans which are relief measures given to problematic borrowers, reached P310.438 billion in December, 2.62 percent higher than the previous year’s P302.515 billion.
The ratio of restructured loans to total gross loan portfolio was at 2.03 percent, lower than 2.18 percent in December 2023.
The BSP defines restructured loans as loans and other credit accommodations that a bank – upon agreement with the borrower – has modified the contractual terms and conditions and revised the schedule of payments to lessen the financial difficulty of the borrower.
From 2015 until 2019 or the years before the Covid crisis, the NPL ratio ranged between 1.7 percent and 2.5 percent. When the pandemic hit in March 2020, the NPL ratio increased and ranged from 2.2 percent to a high of 4.51 percent between 2020 and 2022.
The highest NPL ratio, based on BSP data, was recorded in March 2008 at 4.99 percent.
