Banks continue disposal of soured loans
10/07/2008 | 04:19 AM
MANILA, Philippines - Universal and commercial banks’ soured loans in relation to total loans continued to dip in July, while those of thrift banks rose in June.
Central bank data released Monday showed that the non-performing loans (NPL) ratio of universal and commercial had fallen to 3.98% in July from 3.99% in June as these banks continued to dispose their soured assets.
This NPL figure is the lowest since the 1997 Asian financial crisis.
The central bank, however, pointed out that the decline in soured loans was offset by a contraction in banks’ total loans to P2.33 billion from P2.36 billion, as lending to each other and their placements in the central bank’s reverse repurchase or overnight borrowing facility declined.
In peso terms, bad loans — or loans left unpaid for 90 days after maturity — declined to P92.53 billion in July, down from the previous month’s P93.98 billion.
On the other hand, thrift banks’ NPL ratio rose to 6.59% in June from 6.39% in May.
The central bank explained that a contraction in thrift banks’ total loan portfolio had offset the drop in their NPL ratio.
Despite the slight increase, the central bank noted that the thrift banking sector has sustained a single-digit NPL ratio for the past 39 months and has maintained it to below the pre-crisis ratio of 7.74% for the past 12 months.
Banks are under pressure to trim their dud loans especially after the stricter capital rules of the Basel 2 accord were implemented in July last year. These called for an increase banks’ capital cover for bad loans to 150% from 100%, making it costlier for banks to hold on to their soured loans. — Gerard S. dela Peña, BusinessWorld
Central bank data released Monday showed that the non-performing loans (NPL) ratio of universal and commercial had fallen to 3.98% in July from 3.99% in June as these banks continued to dispose their soured assets.
This NPL figure is the lowest since the 1997 Asian financial crisis.
The central bank, however, pointed out that the decline in soured loans was offset by a contraction in banks’ total loans to P2.33 billion from P2.36 billion, as lending to each other and their placements in the central bank’s reverse repurchase or overnight borrowing facility declined.
In peso terms, bad loans — or loans left unpaid for 90 days after maturity — declined to P92.53 billion in July, down from the previous month’s P93.98 billion.
On the other hand, thrift banks’ NPL ratio rose to 6.59% in June from 6.39% in May.
The central bank explained that a contraction in thrift banks’ total loan portfolio had offset the drop in their NPL ratio.
Despite the slight increase, the central bank noted that the thrift banking sector has sustained a single-digit NPL ratio for the past 39 months and has maintained it to below the pre-crisis ratio of 7.74% for the past 12 months.
Banks are under pressure to trim their dud loans especially after the stricter capital rules of the Basel 2 accord were implemented in July last year. These called for an increase banks’ capital cover for bad loans to 150% from 100%, making it costlier for banks to hold on to their soured loans. — Gerard S. dela Peña, BusinessWorld
