Soured loans ratio of banks ease to 3.37% in July

The Bangko Sentral ng Pilipinas (BSP) said the ratio of soured loans of universal and commercial banks to the industry's total loan portfolio eased further in July. The BSP said this positive development came after the surprising economic growth in the first half of the year. The BSP added that the strong corporate earnings enabled borrowers to pay their outstanding financial obligations on time. According to the data released by the BSP on Friday, the industry's total loan portfolio went up at a faster rate of 7.11 percent to P2.545 trillion as of end-July this year. The loan portfolio was only P2.376 trillion as of end-July last year. On the other hand, the non-performing loans (NPLs) of universal and commercial banks only grew by 3.44 percent to P85.73 billion from P82.88 billion. This brought in a 0.12 percentage point decline in NPL ratio to 3.37 percent in end-July. The NPL was at 3.49 percent in end-July last year. However, the July2010 NPL ratio was still 0.10 percentage point higher than the 3.27 percent in end-June. The BSP said July was the twenty-second consecutive month that the NPL ratio has been below four percent. BSP officials believe that the NPL ratio of banks would continue to brighten. The stronger-than-expected gross domestic product (GDP) growth in the first half of the year would translate to better corporate earnings and lower interest rates, the BSP said. The country's GDP posted a surprising growth in the first half of the year, expanding by 7.9 percent from 1.2 percent in the same period last year. The GDP grew by 7.9 percent in the second quarter, from 7.8 percent in the first quarter of the year. In July, economic managers, through the Cabinet-level Development Budget Coordination Committee (DBCC), adjusted the GDP growth target this year. The managers raised the GDP to a range of 5.0 to 6.0 percent, instead of 2.6 to 3.6 percent this year, due to the unexpected growth in the first quarter of the year. For 2011, the DBCC set a GDP growth target of between 7.0 and 8.0 percent. Stronger domestic output, the officials explained, would help corporate and individual borrowers settle their financial obligations on time. Despite the full impact of the global economic meltdown, the Philippines avoided recession last year. The country's domestic output, measured by the GDP, eased to 1.1 percent last year from 3.8 percent in 2008. The gross assets of universal and commercial banks rose by 8.6 percent to P5.56 trillion as of end-July this year. Gross assets as of end-July last year were at P5.121 trillion. Meanwhile, the industry’s non-performing assets (NPA) retreated by 3.6 percent to P214.66 billion from P222.63 billion. The BSP likewise said the growth of loan loss reserve (LLR) of banks climbed by double-digits. The LLR went up by 10.6 percent to P96.29 billion as of end-July this year, from only P87.01 billion as of end-July last year. –VVP, GMANews.TV