Banks’ bad loans soar to P391B at end-Oct

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Soured loans incurred by the Philippine banking system surged to more than P391 billion in the first 10 months of the year, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary central bank data showed on Thursday that lenders’ gross nonperforming loans (NPL) reached to P391.42 billion in January to October, up 69.89 percent from P230.39 billion in the first 10 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 inched up by 1.14 percent to P10.60 trillion at end-October from P10.48 trillion a year ago.

This translated to a gross NPL ratio of 3.69 percent, higher than the 3.47 percent a month earlier and from 2.20 percent a year ago.

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.

The latest data is consistent with the views of Moody’s Investors Service in its latest report.

On Thursday, the New York-based credit rating agency said the Philippines, as well as India and Thailand, “will see the largest increases in NPLs due to the greater impact of the [coronavirus disease 2019 (Covid-19)] pandemic on [these] countries’ economies and the historically poorer performance of certain loans, such as [small and medium enterprise (SME)] loans in Thailand.”

It added that the new NPLs arose mostly from the retail and SME segments, which were hit hard by the global public health crisis.

“A break between the first and second rounds of loan moratoria also contributed to the jump in NPLs,” Moody’s said.

Under the now-expired Republic Act (RA) 11469, or the “Bayanihan to Heal as One Act” (Bayanihan 1), a grace period for the payment of loans falling due during the enhanced community quarantine imposed by the government from March 17 to April 30 was provided.

A 60-day grace period for all loans falling due on or before December 31 was also required by the central bank under RA 11494, or the “Bayanihan to Recover as One Act” (Bayanihan 2).

Earlier, the central bank said the NPL ratio was estimated 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.