Town Luz Wendy T. Noble, Reporter
PHILIPPINE BANKS saw an uptick in bad loans in February, reflecting the challenges that many borrowers still face in repaying their debt despite the gradual reopening of the economy.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the gross nonperforming loan (NPL) ratio of the Philippine banking industry increased to 4.24% in February from 4.14% in January.
The NPL ratio also picked up from the 4.08% a year earlier and is the highest since the 4.35% seen in November.
Bad loans in February increased by 2.38% to P472.664 billion from P461.66 billion in January. This was also 9.6% higher than the P431.266 billion worth of bad loans a year earlier.
In February, banks’ gross loan portfolio rose by 5.4% to P11.15 trillion from P10.579 trillion in the same month a year ago. It inched up by 0.07% from the P11.142 trillion in January.
“The recent pickup in NPL ratio underscores the challenges faced by the economy despite the progressive reopening of the economy,” ING Bank NV Manila Senior Economist Nicholas Antonio T. Mapa said in an email.
Metro Manila and some provinces were placed under Alert Level 3 in January due to the Omicron-driven surge in coronavirus disease 2019 (COVID-19) infections. Restrictions have since been relaxed to the most lenient Alert Level 1 as the number of COVID-19 cases dropped.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message said corporate borrowers as well as consumers are likely already feeling the pinch as borrowing costs rose in recent months.
“[This] further impaired the ability to pay of some borrowers, ”he said.
Past due loans held by lenders rose by 1.17% to P557,964 billion from P551,472 billion in the same month last year. These made up 5% of borrowings, down from 5.21% a year earlier.
Meanwhile, restructured loans amounted to P344.081 billion, climbing by 71.2% year on year from P200.986 billion. This brought its ratio higher to 3.09% from 1.9%.
As bad loans piled up, banks’ allowance for credit losses expanded by 8.9% to P407,035 billion from P373,631 billion a year earlier. This is equivalent to 3.65% of the total loan portfolio, up from 3.53%.
The industry’s NPL coverage ratio stood at 86.12%, down from 86.64% in February 2021.
In the coming months, asset quality will likely be affected by borrowing costs and faster inflation, Mr. Mapa said.
“We can expect NPL ratios to remain at current levels as borrowing faces headwinds of faster inflation and rising borrowing costs, two developments that could slow overall economic activity and constrain cash flow in the near term,” he said.
Inflation in March quickened to a six-month high of 4%, already matching the upper end of the central bank’s 2-4% target. This was mainly driven by the surge in pump prices.
For his part, Mr. Ricafort said continued economic reopening and the improvement in the employment market could help to improve banks’ asset quality.
Fitch Ratings on Tuesday said higher business costs and rising inflation caused by the war in Ukraine could affect growth opportunities for businesses and consumers, but is unlikely to drive a sharp increase in loan delinquencies.