Business & Investment

Bad debts will pick up again in January


Bad debt (NPL) Held by a major bank January after the end of the financial moratorium at the end of 2020.

According to central bank data, the non-performing loan ratio was 3.7% in January, up from 3.61% in December to 2.16%, which was recorded a year ago.

Total non-performing loans increased by 0.15% from peso 39,165,700 million in December to peso 39,225,600, up 67% from peso 23,489,700 million recorded in January 2020.

A loan is considered non-performing if left unpaid at least 30 days after its due date. These are considered risky to the quality of the lender’s assets because of the high risk of default.

As sour loans piled up, the bank’s total loan portfolio fell 2.34% in January to 10.608 trillion pesos, down 2.57% from 10.888 trillion pesos the previous year.

Michael L. Rikafort, Chief Economist at Rizal Commercial Banking, said in a Viber message, “A slight increase in the non-performing loan ratio is partial at the end of the 60-day extension of loan / debt payments under Bayanihan II. It may be due to. “

The restoration of Republic Act No. 11494 or Bayanihan as one law provided for a one-time 60-day loan moratorium that expires on 31 December 2020. From January, the borrower had to resume debt repayment or impose a fine.

Delinquent loans in January reached 505,837 million pesos, up 4.9% from 482,115 million pesos last month and 58% from 319,634 million pesos in January last year. As a result, it increased from 2.94% in January 2020 to 4.77%.

On the other hand, restructuring loans decreased by 6.17% from 20.727 billion pesos to 19.4743 billion pesos, but increased by 335% from 44.679 billion pesos a year ago.

As the quality of assets deteriorated, lenders increased their allowance for doubtful accounts by 1.09% from 376,094 million pesos last month to 37,110,200 million pesos and 72% from last year’s 215,204 million pesos.

Banks’ non-performing loan coverage, which measures the provision for potential losses from non-performing loans, increased from 91.58% in January 2020 to 94.61%.

Rikafort said banks’ non-performing loan ratios could rise in the coming months.

He said the enactment of Republic Act No. 11523 or the Financial Institution Strategy (FIST) Act could be a offsetting factor as it would allow banks to sell their bad assets to FIST companies with tax incentives. Said there is.

However, Fitch Ratings on Friday said FIST could help banks unload sour loans, but “the pace of disposal is likely to depend on execution and economic recovery.”

Rikafort said the relaxation of restrictions would provide “some sustainable solutions” to the negative effects of the pandemic. It allows sales, employment and livelihoods to recover in both the formal and informal economies.

“All of this helps improve the ability to pay to many businesses, consumers and other institutions, thereby helping banks maintain a reduction / improvement in their non-performing loan ratios,” said Ricafort. I will.

The non-performing loan ratio peaked at 17.6% in 2002 after the Asian financial crisis. Fitch Ratings expects this to reach 4.5% to 5% by the end of 2021, and more bad debts could build up in the first half of 2021. — — Rus Wendy T. Noble

Bad debts will pick up again in January Bad debts will pick up again in January

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