Banks’ soured loans up at end-Feb

BAD loans incurred by the Philippine banking system inched up to more than P431 billion as of February this year, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary central bank data showed on Tuesday that lenders’ gross nonperforming loans (NPL) ballooned to P431.26 billion at end-February, climbing by 79.76 percent from P239.27 billion a year earlier.

NPLs are past due loans where the principal or interest is unpaid for 30 days or more after the due date. This includes the outstanding balance of loans payable in monthly installments when three or more installments are in arrears.

The data also showed that banks’ total loan portfolio shrank by 3.03 percent to P10.57 trillion at end-February from P10.91 trillion a year ago.

This is equivalent to a gross NPL ratio of 4.08 percent, higher than the 3.72 percent at end-January and from 2.20 percent a year before.

This ratio is the share of bad loans to total loans, inclusive of interbank loans. The latest NPL ratio is the highest in 10 years, or since January 2011’s 3.74 percent.

The BSP said earlier the Financial Institutions Strategic Transfer (FIST) Act could cut the

NPL ratio of banks by as much as 7 percentage points.

“FIST is expected to reduce the NPL ratio by about 0.63 to 7 percentage points,” BSP Governor Benjamin Diokno has said.

According to him, the new law will allow lenders to easily dispose bad assets through asset management companies, and help keep the banking system stable despite the impact of the coronavirus pandemic.

Signed by President Rodrigo Duterte last February 16, FIST provides a legal framework and tax incentives for banks and other financial institutions to transfer their nonperforming assets to special-purpose firms, called FISTCs.

It covers assets that have become nonperforming on or before Dec. 31, 2022.