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REVERSED (Doubtful) Loans held by the big banks rose again in January, after a debt moratorium expired in late 2020.
Central bank data showed that the bad loan ratio stood at 3.7% in January, gradually advancing from 3.61% in December and 2.16% a year ago.
Gross delinquency rose 0.15% to P392.256 billion from P391.657 billion in December, but 67% more than the P234.987 billion recorded in January 2020.
Loans are considered delinquent once they are not paid at least 30 days after the due date. They are considered risky for the asset quality of the lenders, as they have a high risk of default.
As impaired loans began to accumulate, banks’ total loan portfolios declined by 2.34% to P10,608 trillion in January from the P10,862 trillion level in December and by 2.57% from P10,888 billion from the previous year.
“The slight spike in the delinquency rate can be attributed in part 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 message. by Viber.
The Republic Law No. 11494 or the Bayanihan Law to Recover as One stipulated a 60-day single loan moratorium that expired on December 31, 2020. As of January, borrowers had to resume debt service or incur fines.
In January, the past due portfolio reached $ 505,837 million, jumping 4.9% from the $ 482,115 million the previous month and 58% from the $ 319,643 million 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 increased 335% from P44,697 billion a year ago.
As asset quality deteriorated, lenders increased 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 P215. 204 billion last year.
The bank delinquency coverage ratio, which measures the provision for possible losses on bad loans, stood at 94.61% from 91.58% in January 2020.
Ricafort said that the bank’s delinquency rate could still pick up in the coming months.
He said that the approval of the Republic Law No. 11523 or the Law of Strategic Financial Institutions (FIST) could be a compensating factor, since it will allow banks to sell their delinquent assets to FIST corporations with tax benefits.
Fitch Ratings on Friday, however, said that while FIST could help banks get rid of their bad loans, “the pace of disposition will likely depend on implementation and economic recovery.”
Mr. Ricafort said that easing the restriction measures would provide “some sustainable solutions” to the adverse impact of the pandemic, as it will allow sales, employment and livelihoods to recover in both the formal and economic economies. informal.
“All this improves the ability to liquidate many companies, consumers and other institutions, so it would help to maintain the reduction / improvement in the delinquency rate of banks,” said Ricafort.
The delinquency rate peaked at 17.6% in 2002 as a result of the Asian financial crisis. Fitch Ratings expects this to reach 4.5% to 5% by the end of 2021 and more bad loans are likely to accumulate in the first half of 2021. – Luz Wendy T. Noble
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