THE PHILIPPINE banking system’s gross nonperforming loan (NPL) ratio eased in November, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.
The industry’s gross NPL ratio slipped to 3.54% in November from the over two-year high of 3.6% in October.
However, it rose from 3.41% in the same month a year ago.
Data from the BSP showed the amount of soured loans dipped by 0.7% to P520.53 billion as of end-November from P524.31 billion a month earlier. Year on year, bad loans rose by 14.6% from P454.28 billion.
Loans are considered nonperforming once they remain unpaid for at least 90 days after the due date. These are deemed as risk assets since borrowers are unlikely to pay.
The loan portfolio of Philippine banks increased by 1.2% to P14.72 trillion as of end-November from P14.55 trillion at end-October. Year on year, it jumped by 10.4% from P13.34 trillion in the same period in 2023.
Past due loans inched lower by 0.8% to P635.62 billion as of November from P640.88 billion a month earlier. Year on year, it climbed by 12.8% from P563.38 billion.
This brought the past due ratio to 4.32% in November, lower than 4.4% in October but higher than 4.22% a year ago.
On the other hand, restructured loans stood at P293.7 billion at end-November, up by 0.3% from P292.75 billion in the previous month. However, it declined by 4% from P305.81 billion in November 2023.
Restructured loans accounted for 2% of the industry’s total loan portfolio, lower than 2% in October and 2.29% in the same month in 2023.
Banks’ loan loss reserves edged lower by 0.5% to P485.13 billion in November from P487.52 billion in the previous month but rose by 5.2% from P460.95 billion a year prior.
This brought the loan loss reserve ratio to 3.3% as of end-November from 3.35% at end-October and 3.46% in November 2023.
Lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, rose to 93.2% in November from 92.28% in October but was lower than 101.47% a year ago.
“The slight easing of the NPL ratio in November could be attributed to improved loan quality and better debt management by banks,” Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.
Separate data from the BSP showed outstanding loans of universal and commercial banks rose by 11.1% year on year to P12.68 trillion in November.
This was the fastest loan growth in nearly two years or since the 13.7% logged in December 2022.
“However, the year-on-year increase (in NPL ratio) suggests that economic challenges and higher interest rates might have impacted borrowers’ ability to repay loans,” Mr. Ravelas added.
Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said the month-on-month easing of the NPL ratio is “fundamentally a market correction from the exceedingly high NPL rates (in October).”
“Furthermore, the BSP has signaled its easing policy on the interest rate may be tempered as inflationary pressures have gone up,” he said.
BSP Governor Eli M. Remolona, Jr. last week said there is still room to continue easing interest rates, but noted cutting rates by 100 basis points (bps) this year may be a bit “too much.”
The central bank slashed borrowing costs by a total of 75 bps last year, bringing the target reverse repurchase rate to 5.75%.
The Monetary Board is set to have its first rate-setting meeting this year on Feb. 20.
“Also, housing prices have declined, resulting in lower investment in real estate. Because of these, the banks and investors have been more prudent,” Mr. Lanzona added.
Latest BSP data showed the Residential Real Estate Price Index (RREPI) fell by 2.3% year on year in the July-to-September period.
This was also the first time the RREPI posted a decline since the 9.4% drop recorded in the second quarter of 2021. — Luisa Maria Jacinta C. Jocson