PHILIPPINE banks’ loan and asset quality have remarkably improved as non-performing loans (NPL) and non-performing assets (NPA) ratios were better than their pre-crisis levels of around four percent.
As of end-April 2011, the NPL ratio of universal and commercial banks (U/KBs) stood at 2.95 percent, an improvement by 0.04 percentage point from 2.99 percent at end-March 2011 and by 0.39 percentage point from year ago’s 3.34 percent ratio.
Bangko Sentral ng Pilipinas (BSP) said that this is the third consecutive month that the NPL ratio has been below three percent.
BSP said that the month-on-month improvement was due to the 2.57 percent expansion in total loan portfolio (TLP), which outpaced the 1.25 percent increase in NPLs.
U/KBs’ NPLs rose to P83.44 billion as of end-April 2011 from last month’s P82.41 billion while TLP reached P2,830.50 billion from P2,759.61 billion.
Net of interbank loans, the NPL ratio eased to 3.16 percent from last month’s 3.21 percent and year ago’s 3.79 percent ratio.
The ratio declined from last month as the growth in NPLs was offset by the 2.93 percent increase in regular loans to P2,642.91 billion from P2,567.67 billion last month.
The restructured loans (RLs) to TLP ratio fell to 1.48 percent from last month’s 1.54 percent and year ago’s 1.74 percent ratio. The month-on-month decline in the ratio was mainly due to the 1.45 percent decrease in gross RLs to P42.21 billion.
Meantime, the real and other properties acquired (ROPA) to gross assets (GA) ratio remained at 1.98 percent from last month and improved from year ago’s 2.35 percent ratio. This developed as the 0.65 percent reduction in ROPA to P121.93 billion outpaced the 0.59 percent cut in GAs to P6,139.23 billion.
The non-performing assets (NPA) to GAs ratio slightly went up to 3.35 percent from last month’s 3.32 percent but improved from year ago’s 3.89 percent ratio. The increase in the ratio from last month was due to the 0.11 percent expansion in NPAs to P205.37 billion from last month’s P205.14 billion, which was accompanied by the reduction in GAs.
BSP stressed that the industry provided adequate provisioning against potential credit losses.
The NPL coverage ratio strengthened to 121.06 percent from last month’s 120.37 percent and year ago’s 108.90 percent. Likewise, the NPA coverage ratio (NPA reserves to NPAs) widened to 62.88 percent from last month’s 62.07 percent and year ago’s 55.93 percent ratio.
Meanwhile, the central bank earlier reported that total outstanding loans of commercial banks, net of banks’ reverse repurchase (RRP) placements with the BSP, continued to expand in April by 14.2 percent, broadly similar to the previous month’s expansion of 14.1 percent.
Bank lending including RRPs grew at a faster rate of 18.0 percent from an expansion of 16.8 percent in March, to reach P2.7 trillion.
On a month-on-month seasonally-adjusted basis, commercial banks’ lending in April rose by 1.7 percent for loans net of RRPs and by 2.7 percent for loans inclusive of RRPs.
The growth in loans for production activities-which comprised about four-fifths of commercial banks’ total loan portfolio-was broadly steady at 15.7 percent in April from 15.6 percent a month earlier. Meanwhile, the growth in consumer loans (which include credit card receivables and auto loans) was unchanged at 12.9 percent.
The expansion of production loans was driven by lending to electricity, gas and water (which grew by 47.3 percent); manufacturing (19.5 percent); real estate, renting and business services (17.2 percent); agriculture, hunting and forestry (11.0 percent); and wholesale and retail trade (13.8 percent).
Meanwhile, the growth in lending to construction activities decelerated to 0.1 percent from 8.5 percent in the previous month. Contractions were posted in lending to four production sectors, namely, health and social work (-9.0 percent); fishing (-24.1 percent); education (-22.9 percent); and public administration and defense (-5.5 percent).
This developed as domestic liquidity or M3 reached P4.2 trillion in April 2011, higher by 7.3 percent relative to a year earlier.
On a monthly basis, seasonally-adjusted M3 contracted slightly by 0.6 percent from a growth of 1.4 percent in the previous month.
BSP said the steady expansion in net foreign assets (NFA)-at 20.2 percent in April-fueled the growth of domestic liquidity.
The BSP’s NFA position grew by 41.3 percent due in part to sustained foreign exchange inflows from overseas remittances as well as portfolio and direct investments.
Meanwhile, the NFA of banks contracted further by 92.4 percent from a decline of 85.7 percent in the previous month as their foreign liabilities rose while their foreign assets declined.
Banks’ foreign liabilities increased with the rise in bills payable as well as higher placements and time deposits made by the head offices/other branches of foreign banks with their Philippine branches.
Meanwhile, the contraction of banks’ foreign assets was due in part to the decline in loan receivables from foreign banks.
Net domestic assets (NDA), meanwhile, decreased anew by 9.3 percent in April following a decline of 3.5 percent in March.
This was due largely to the continued expansion of the net other items account (which includes revaluation and capital and reserve accounts as well as SDA placements of trust entities).
By contrast, net domestic credits rose by 7.2 percent, due to a further increase in credits extended to the private sector at 11.9 percent.
This trend is consistent with the broadly steady growth of bank lending to the productive sectors of the economy.
Meanwhile, the growth in credits extended to the public sector declined due mainly to the contraction in credits extended to the National Government (NG) indicating ample liquidity as reflected in the increase in NG deposits with the BSP and other banks during the month.
