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The NPL ratio drops in November

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The NPL ratio drops in November

THE PHILIPPINE BANKING SYSTEM The system’s gross non-performing loans (NPL) ratio declined in November, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

The sector’s gross NPL ratio fell to 3.54% in November from 3.6% in October.

However, it rose from 3.41% in the same month a year ago.

BSP data showed that the amount of soured loans fell 0.7% to P520.53 billion at the end of November, from P524.31 billion a month earlier. Year-on-year, bad loans rose 14.6% to P454.28 billion.

Loans are considered non-performing once they remain unpaid for at least 90 days after the due date. These are considered risky assets because borrowers are unlikely to pay.

Philippine banks’ loan portfolio rose 1.2% to P14.72 trillion at end-November from P14.55 trillion at end-October. Year on year, it rose 10.4% from P13.34 trillion in the same period in 2023.

Delinquent loans fell 0.8% to P635.62 billion as of November, compared to P640.88 billion a month earlier. Year on year, it rose 12.8% from P563.38 billion.

This brought the delinquency ratio to 4.32% in November, down from 4.4% in October but up from 4.22% a year ago.

On the other hand, restructured loans amounted to P293.7 billion at the end of November, up 0.3% from P292.75 billion in the previous month. However, it declined 4% from P305.81 billion in November 2023.

Restructured loans accounted for 2% of the sector’s total loan portfolio, down from 2% in October and 2.29% in the same month in 2023.

Banks’ loan loss reserves fell 0.5% to P485.13 billion in November from P487.52 billion in the previous month, but rose 5.2% from P460.95 billion a year earlier.

This brought the credit loss reserve ratio to 3.3% at the end of November, compared to 3.35% at the end of October and 3.46% in November 2023.

Lenders’ NPL coverage ratio, which measures the provision for potential losses from bad loans, rose to 93.2% in November from 92.28% in October, but was down from 101.47% a year ago.

“The slight decline in the NPL ratio in November can be attributed to improved credit quality and better debt management by banks,” Reyes Tacandong & Co said. Senior Advisor Jonathan L. Ravelas said in a Viber message.

Separate data from the BSP showed that outstanding loans from universal and commercial banks rose 11.1% year-on-year to $12.68 trillion in November.

This was the fastest loan growth in almost two years or since 13.7% in December 2022.

“However, the year-on-year increase (in the NPL ratio) indicates that economic challenges and higher interest rates may have impacted borrowers’ ability to repay loans,” Mr Ravelas added.

Leonardo A. Lanzona, professor of economics at Ateneo de Manila University, said the monthly easing of the NPL ratio “is essentially a market correction due to the extraordinarily high NPL rates (in October).”

“In addition, the BSP has indicated that its easing policy on interest rates may be tempered as inflationary pressures have increased,” he said.

BSP Governor Eli M. Remolona Jr. said last week that there is still room to continue cutting rates, but noted that a 100 basis points (bps) rate cut this year may be a bit “too much.”

The central bank cut financing costs by a total of 75 basis points last year, bringing the target reverse repurchase rate to 5.75%.

The Monetary Board will hold its first interest rate meeting this year on February 20.

“Housing prices have also fallen, which has led to lower real estate investments. This has made banks and investors more cautious,” Mr Lanzona added.

The latest BSP data shows the Residential Real Estate Price Index (RREPI) fell 2.3% year-on-year from July to September.

This was also the first time the RREPI recorded a decline since the 9.4% decline in the second quarter of 2021. Luisa Maria Jacinta C. Jocson

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