PH Banks bad debts reach P461B

The amount of bad loans in the Philippine banking sector reached 461 billion pesos at the end of January this year, according to data released Tuesday by Bangko Sentral ng Pilipinas (BSP).

Gross non-performing loans (NPLs) from lenders increased by 16.73% to 461.66 billion pesos from 395.46 billion pesos a year ago.

PNPs are delinquent loans with an outstanding balance of principal or interest 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 overdue.

The banks’ overall loan portfolio increased by 4.94 percent to 11.14 trillion pesos at the end of January this year, from 10.61 trillion pesos a year earlier.

This equates to a gross non-performing loan ratio of 4.14%, compared to 3.97% in December 2021 and 3.72% a year ago.

BSP Governor Benjamin Diokno has previously said that the central bank expects the NPL ratio for banks to remain between 5 and 6 percent.

“That’s a far cry from the double digits recorded during the 1997 Asian financial crisis,” he said.

For his part, Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said that additional measures to further reopen the economy, such as lowering the alert level to 1 for Metro Manila and d other areas with lower healthcare utilization rates, as well as the recovery of outbound tourism, would allow more businesses to expand capacity, improve their ability to repay loans and reduce effectively the NPL ratio.

“The FIST Act would also give banks the ability to offload some of their bad debts/assets, which could also lower the banks’ NPL ratio,” he added.

The FIST or Financial Institutions Strategic Transfer Act, which was signed into law on February 16, provides banks and other financial institutions with a legal framework, as well as tax incentives, to transfer non-performing assets to special purpose corporations called FISTCs. It applies to non-performing assets on or before December 31, 2022.

The Bangko Sentral has already published the rules and regulations for the application of the law via Circular 1117, which Diokno signed on May 27, 2021.

The Ministry of Finance said there are now five FISTCs established in the country since the enactment of the law authorizing these companies. Two of the five FISTCs are wholly Filipino-owned while the others are made up of Japanese and Swiss investors.