Banks’ gross non-performing loan (NPL) ratio fell in November 2021 to 4.35% from 4.42% in October, according to data from Bangko Sentral ng Pilipinas (BSP).

It was the third month in a row that the NPL ratio had declined. The last time the NPL ratio was 4.35% was in April 2021. The NPL ratio for November is higher compared to the same period in 2020 of 3.81%.

The total of NPLs which are over 30 days past due and doubtful loan accounts reached 481.88 billion pesos in November, up from 483.98 billion pesos in October but higher than 404.69 billion pesos in October. previous year, based on BSP data.

The total loan portfolio stood at 11.08 trillion pesos for the first 11 months of last year, compared to 10.62 trillion pesos in the same period in 2020.

The delinquency rate or delinquency rate in November also fell to 5.12% from 5.16% in October. Compared with November 2020, the current arrears rate is above 4.78%.

Defaulted Loans (PDLs) are loans where principal / interest / payment is unpaid after the due date. The PDL in November was P567.51 billion, which was higher than October’s P565.77 billion. It was, however, lower than the 507.69 billion pesos of November 2020.

The latest central bank figures showed that banks’ non-performing loan coverage ratio improved to 87.13% in November from 85.41% in October, as banks raised their allowance for credit losses to 419.86 billion pesos against 413.37 billion pesos.

The high level of NPLs and NPLs remains supported by larger loan loss provisions which have shown that despite a downturn in economic activity, banks are sufficiently capitalized and liquid to provide adequate amounts for banks. provisions for loan losses.

Last October, when the ratio of non-performing loans peaked at 4.51%, BSP Governor Benjamin E. Diokno said bad loans could peak at 8.2% in 2022 before falling. gradually improving to reach levels of around 2% before the pandemic.

If the NPL ratio peaks at 8.2% this year, it will still be below Asian financial crisis levels when the ratio hit 18%.

Diokno is confident that the NPL ratio will continue to be manageable and will remain at single digit level due to the prudent credit risk management standards of local banks and the operationalization of the Law on Strategic Transfer of Financial Institutions ( FIST) which will help banks get rid of their non-performing assets and also reduce the NPL ratio.

The FIST law could reduce the NPL ratio by 0.6 to 5.8 percentage points from 2021 to 2025.

Based on BSP data, the NPL ratio reached the level of four percent in February last year when it rose to 4.08 percent from 3.72 percent in January. It continued to increase until it reached its peak of 4.51% in July and August, before falling back to 4.44% and then to 4.42% in September and October.