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NPL growth rises 8% in July after banks’ loan book expands over 18%

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By Melissa Luz T. Lopez, Senior Reporter

BAD debt held by big banks grew further in July but remained subdued relative to the over 18% pace of loan growth, the central bank said.

Non-performing loans (NPLs) held by universal and commercial banks totaled P112.297 billion in July, up from P110.606 billion in June and up 8% from a year earlier.

NPLs are loans left unsettled at least 30 days past due date. These are considered risky assets with a reduced chance of being repaid, which would mean losses for lenders.

The rise in problem debt was well below the 18.2% rise in total lending. According to the Bangko Sentral ng Pilipinas (BSP), big banks lent out P8.353 trillion in July, up from P7.065 trillion a year earlier.

The share of NPLs to total loans dropped to 1.34%, compared to a 1.47% ratio in July 2017 — a level considered by lenders to be manageable.

Banks have opted to raise their provisioning levels for potential credit losses as they increase lending at a rate also under the pace of loan growth.

Loan loss reserves rose to P160.699 billion, up 14% from a year earlier and more than sufficient to cover the bad debt assuming they are completely written off.

Non-performing assets held by the lenders were steady at P75.791 billion, representing the value of real property and other items seized from borrowers failing to pay their obligations.

The robust growth in loans was also accompanied by a bigger deposit base, which grew by 10.7% to P11.077 trillion. The loan-to-deposit ratio was 75.41%.

The BSP monitors the NPL ratios of banks and other institutions in order to monitor asset quality and maintain the soundness of the financial system.

Overall bank lending rose 19.6% in July, with most of the loans channelled to production activities, according to central bank data. Consumer credit also posted a 16.9% increase year-on-year.