November 21, 2017 | MANILA, PHILIPPINES

Thrift lenders post higher NPLs as of May

BAD DEBTS held by thrift banks increased in May to match the rise in total lending, latest central bank data showed, driven by upbeat consumer demand.

Non-performing loans (NPLs) held by thrift banks rose to P40.85 billion that month, picking up by 13.4% from the P36.033 billion in soured loans tallied in May 2016, according to the Bangko Sentral ng Pilipinas (BSP).

NPLs refer to unsettled debts at least 30 days past due date, which are considered at risk of default.

The rise in soured loans matched the 13.8% increase in total credit lines extended by the financial firms, which rose to P801.554 billion from P704.471 billion a year ago.

Relative to the banks’ total loan portfolio, the share of NPLs steadied at 5.10% in May, coming from 5.09% in April and 5.11% a year prior.

Past due loans grew by 13.2% to hit P43.666 billion, while restructured loans -- or debts with extended payment schedules -- jumped 27.3% to P5.277 billion, according to central bank data.

Thrift banks are focused on retail borrowers and lending for consumer-related activities such as car and home loans, deemed more riskier compared to dealing with corporate borrowings.

On the other hand, the value of non-performing assets held by the lenders inched up by 5.8% to P23.07 billion from P21.811 billion. These represent seized real property and assets of value from defaulting clients which were used as collateral in securing loans.

With the higher NPL stash, thrift lenders hiked their reserves for potential credit losses to P28.44 billion from the P25.81 billion set aside in May 2016. However, the amount could not fully cover the entire value of bad debts with the NPL coverage ratio at 69.62%, even lower than the previous year’s 71.63% ratio.

The central bank monitors the NPL ratios of banks and financial firms to keep track of asset quality and maintain the soundness of the local financial system.

In a recent interview with BusinessWorld, the Chamber of Thrift Banks (CTB) said the lenders have maintained stability as it rides on rapid economic growth.

“Thrift banks remain committed to their niche markets and continue to help develop the various sectors considered to be part of the growth drivers of the economy,” CTB president Gregorio B. Anonas III said. “The thrift banking sector sustained its growth momentum with a solid performance amid lingering uncertainties in the global financial markets. Thrift banks remained stable as manifested by expansion in assets, loan portfolio, deposits and sufficient capitalization.”

Moody’s Investors Service previously flagged a possible increase in the amount of bad loans held by local banks as they “refocus” lending activities to retail clients and small-scale firms, but noted that it was unlikely to disturb the overall footing of the banking system.

The international debt watcher has kept its “stable” outlook for the Philippine banking system earlier this month, coupled with the “Baa2” credit rating or the country. -- Melissa Luz T. Lopez