The banking industry’s gross non-performing loans (NPL) ratio or soured loans remained at 3.44 percent in February, unchanged from January this year, but total NPL increased by 13.4 percent to P466.393 billion versus P411.186 billion last year.
Compared to February 2023, the NPL ratio was higher from 3.31 percent, based on the latest Bangko Sentral ng Pilipinas (BSP) data.
The NPL ratio is the percentage of NPLs to total loans, gross of allowance for credit losses but inclusive of interbank loans. NPLs refer to loan accounts whose principal or interest is unpaid for 30 days or more after they have become past due.
In February, the total loan portfolio amounted to P13.54 trillion, up by nine percent from P12.414 trillion same time in 2023.
Meanwhile, banks’ past due ratio or the delinquency rate rose to 4.31 percent from 4.04 percent in 2023, and from 4.23 percent in January. The total past due loans grew by 16.35 percent to P584.226 billion from P502.112 billion.
Loan accounts are considered past due if unpaid on due dates but banks may provide a cure period within 30 days to allow borrowers to catch up.
Under BSP rules, loans and other credit accommodations with unpaid principal and interest will be provided with allowance for credit losses based on the number of days of missed payments, which was anywhere from 31 to 90 days, up to 181 days and over.
Banks’ NPL coverage ratio which are loan loss reserves, stood at 100.06 percent in February compared to 104.95 percent in 2023 and 100.29 percent in January.
Loan loss reserves to NPL ratio is the proportion of loan provisions against probable losses to the total NPLs. To cover for these potential losses, banks set aside P466.393 billion as loan loss provisioning, up by eight percent from P431.523 billion last year.
Banks’ gross restructured loans which are relief measures given to problematic borrowers totaled P292.084 billion in February, down by 8.87 percent from P320.541 billion in 2023.
Restructured loans to total gross loan portfolio was at 2.16 percent, lower than 2.58 percent in 2023. These are loans and other credit accommodations that a bank – upon agreement with the borrower – has modified the contractual terms and conditions and revised the schedule of payments to lessen the financial difficulty of the borrower.
From 2015 until 2019 or the years before the Covid crisis, the NPL ratio ranged between 1.7 percent and 2.5 percent. When the pandemic hit in March 2020, the NPL ratio increased and ranged from 2.2 percent to a high of 4.5 percent between 2020 and 2022.