Big banks’ NPLs inch up in Q3 as total loans surge

November 22, 2017 - 12:41 PM
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Bangko Sentral ng Pilipinas headquarters in Manila. The central bank’s first quarter Consumer Expectations Survey (CES) for 2018 showed an index of 1.7 percent, down from the previous quarter’s 9.5 percent and year-ago’s 8.7 percent. (Reuters file photo)

MANILA – Soured debts held by big banks inched slightly higher in the third quarter as total loans surged by a fifth, latest central bank data showed, which allowed lenders to post a modest increase in net profits.

Non-performing loans (NPLs) held by universal and commercial banks reached P105.36 billion as of September, up by 7.1% from the P98.398 billion in bad debts posted a year ago and slightly higher than the P104.213 billion logged as of end-August.

NPLs refer to debts left unpaid at least 30 days beyond due date, which are considered as risky assets as these have high risk of default.

The slight rise in bad loans is outpaced by a 21% surge in bank lending, which reached P7.436 trillion as of end-September. Relative to the banks’ total loan portfolio, NPLs took a measly 1.42% share, improving from 1.6% a year ago.

Increased lending activities propelled a modest 4.5% increase in the banks’ cumulative net income, which totalled P106.26 billion for the first nine months. This compares to the P101.72- billion net profit posted during the comparable period in 2016, supported by an 8.7% increase in the lenders’ operating income to P356.007 billion.

The banks also took in more deposits, with the stash growing by 15.9% to P10.241 trillion from last year’s P8.834 trillion.

With the improving asset quality, banks also reduced their holdings of non-performing assets. The value of real property held by lenders stood at P76.734 billion, down 4.5% from a year ago.

Lenders can choose to seize assets of value such as homes and cars from defaulting clients which have been posted as loan collateral in order to recover losses from non-paying borrowers.

The banks decided to hike their reserves for credit losses to P143.486 billion, which is more than enough to cover the P105.36 billion in potential defaults.