Banks’ NPL ratio in 2022 hits fresh two-year low

PHILIPPINE BANKS ended 2022 with their nonperforming loan (NPL) ratio at its lowest in 28 months as the economy’s reopening helped increased the capacity of Filipinos to repay their loans.

The banking industry’s NPL ratio fell to 3.17% as of end-December from 3.35% as of end-November, based on preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Tuesday. This is also lower than the NPL ratio of 3.97% at the end of 2021.

The latest bad loan ratio is the lowest in 28 months or since the 2.84% in August 2020. This is also better than BSP’s 8.2% projection for end-2022.

“This is still due to the further reopening of the economy towards greater normalcy that improved the ability of borrowers to pay with more jobs/employment/livelihood, sales, net income,” Rizal Commercial Banking Corp. Chief Economist Michael L Ricafort said in a Viber message.

Outstanding loans issued by universal and commercial banks increased by 13.4% year on year to PHP 10.9 trillion in December, slower than the revised 13.9% growth in November, preliminary data from the BSP showed.

Credit for production activities jumped by 12.1% to PHP 9.56 trillion, easing from the revised 12.6% growth in November.

Banks extended more loans for real estate activities (13.1%); manufacturing (14.9%); electricity, gas, steam and air-conditioning supply (14.4%); motor vehicles (12.7%); and information and communication (21.6%).

In the same month, domestic liquidity rose by 6.4% year on year to P16.3 trillion in December.

Mr. Ricafort noted the NPL ratio further eased in December as loan demand grew amid better economic and business prospects.

Central bank data showed bad loans declined by 11.7% to PHP 399.538 billion as of end-December from PHP 452.453 billion a year earlier. It was also 2.1% lower from the PHP 408.097 billion in the previous month.

The loan portfolio of Philippine banks expanded by 10.7% to PHP 12.61 trillion as of end-2022 from PHP 11.39 trillion as of end-2021 and by 3.4% from the PHP 12.20 trillion a month prior.

Past due loans held by Philippine banks declined 9.4% year on year to PHP 478.791 billion as of end-December from PHP 528.276 billion. This brought its share to total credit to 3.80% from 4.64% a year earlier.

Meanwhile, restructured loans eased by 7.4% to PHP 330.107 billion from PHP 356.657 billion the previous year. These borrowings made up 2.62% of banks’ portfolio from 3.13% previously.

The industry’s loan loss reserves reached PHP 426.857 billion, growing by 7.6% year on year from PHP 396.823 billion. This is equivalent to 3.38% of banks’ loans, as compared with the 3.48% a year earlier.

The NPL coverage ratio at the end of 2022 stood at 106.84%, up from the 87.7% in 2021.

“Lower NPL is due to increased capacity of people to pay during the holidays — a season where consumers are quite liquid,” Asian Institute of Management economist John Paolo R. Rivera said in a Viber message. — Keisha B. Ta-asan