Bad loans pick up anew in January


NONPERFORMING loans (NPLs) held by big banks rose again in January, after a debt moratorium expired at the end of 2020.

Data from the central bank showed the bad loan ratio stood at 3.7% in January, inching up from the 3.61% in December and the 2.16% recorded a year ago.

Gross NPLs edged 0.15% higher to P392.256 billion from P391.657 billion in December, but 67% up from the P234.987 billion logged in January 2020.

Loans are considered nonperforming once they are left unpaid at least 30 days beyond the due date. They are deemed risky to lenders’ asset quality as these have a high risk of default.

As soured loans started to pile up, banks’ total loan portfolios declined 2.34% to P10.608 trillion in January from the P10.862-trillion level in December and by 2.57% from the P10.888 trillion a year earlier.


“The slight pick up in the NPL ratio may be partly attributed to the end of the 60-day extension of loan/debt payments under Bayanihan II,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Republic Act No. 11494 or the Bayanihan to Recover as One Act provided for a one-time 60-day loan moratorium which expired on Dec. 31, 2020. Starting January, borrowers had to resume debt-servicing or incur penalties.

In January, past due loans reached P505.837 billion, jumping by 4.9% from the P482.115 billion the prior month and by 58% from the P319.643 billion in January last year. This brought its ratio to 4.77% from 2.94% in January 2020.

Meanwhile, restructured loans fell 6.17% to P194.473 billion from P207.278 billion but surged 335% from the P44.697 billion seen a year ago.

As asset quality deteriorated, lenders boosted their allowance for credit losses by 1.09% to P371.102 billion from the prior month’s P367.094-billion level and by 72% from the P215.204 billion last year.

Banks’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, stood at 94.61% from the 91.58% in January 2020.

Mr. Ricafort said banks’ NPL ratio could still pick up in the coming months.

He said the passage of Republic Act No. 11523 or the Financial Institutions Strategic (FIST) Law could be an offsetting factor as it will allow banks to sell their nonperforming assets to FIST corporations with tax perks.

Fitch Ratings on Friday, however, said that while the FIST could help banks unload their soured loans, “the pace of disposal will likely hinge on implementation and economic recovery.”

Mr. Ricafort said easing of restriction measures would provide “some sustainable solutions” to the adverse impact of the pandemic as it will allow sales, employment and livelihood to pick up in both the formal and informal economy.

“All of these improve the ability to pay off many businesses, consumers, and other institutions, thereby would help sustain reduction/improvement in banks’ NPL ratio,” Mr. Ricafort said.

The NPL ratio peaked at 17.6% in 2002 in the aftermath of the Asian Financial Crisis. Fitch Ratings expects this to reach 4.5% to 5% by end-2021 with more bad loans likely to pile up in the first half of 2021. — Luz Wendy T. Noble


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