Bad-loan ratio dips as interest rates drop

Stronger loan growth and improved borrower capacity drove the improvement in June’s bad loans or nonperforming loan (NPL) ratio, which dropped to 3.34 percent in June, its lowest in three months.

- By DERCO ROSAL

According to the latest data from the Bangko Sentral ng Pilipinas (BSP), the banking industry’s NPL ratio improved from 3.38 percent in May and 3.39 percent in April. The second quarter’s best was also lower by 17 basis points (bps) from 3.51 percent in June last year.

BSP data showed bad loans increased by 0.6 percent to P530.3 billion as of end-June from P527.4 billion in May. Year-on-year, soured loans hiked by 5.5 percent from P502.4 billion in June last year.

Loans become nonperforming if unpaid for at least 90 days past due date, posing a credit risk as borrowers are less likely to repay.

Philippine banks’ total loan portfolio increased by 1.7 percent to P15.88 trillion as of end-June from P15.62 trillion in the previous month. Year-on-year, the end-June figure jumped by 10.9 percent from the P14.32 trillion recorded a year ago.