Austerity banks have said they increase bumpers while the NPL climbs

By Melissa Luz T. Lopez, Senior reporter

BANGKO SENTRAL ng Pilipinas (BSP) warned bankers about the rising problem of debt arrears in their loans, and the regulator asked players to increase the deduction of potential losses.

Deputy Governor of BSP Chuchi G. Fonacier told members of the Savings Bank of the Bank to raise a credit loss compensation at a time when jumping low-quality loans (NPLs) is climbing, although the industry continues to watch exciting lending activity.

"Industry should, however, remain cautious in monitoring the quality of its loan portfolio," Fonacier said on Tuesday to bank-managed banks.

NPL, which covers loans remains unpaid for at least 30 days from the date of the deadline, has increased to 47.05 billion thresholds at the end of September. This grew by 16.8 percent compared to last year's increased loans worth 40.32 billion euros, according to the Central Bank data.

These are considered risky, given the small chance for the borrower to actually pay their outstanding obligations. In return, this would mean losses for lenders.

The growth of bad debts exceeded the growth of 9.9% in total savings banks' savings, and the total credit lines since September amounted to P907.083 billion.

NPLs share in the total loan portfolio of banks of 5.19%, which is more than 4.89% in September 2017. Despite this, lenders reduced their credit loss reserves to 27.114 billion dollars from the level of P28.179 billion compared to the previous year.

Banks with savings accounts mostly serve individual borrowers and small businesses, which are considered risky segments compared to legal clients.

Consumer receivables in September rose by 17.9%, leading to higher credit lines for cars, credit cards and salaries, compared to a year earlier.

"Although this is far from worrying, we are encouraging the industry to continue its efforts to strengthen the quality of credit risk management systems in line with the expansion of credit activity," Fonacier said.

Nevertheless, the banking sector in the savings sector continues to show a "promising" growth, the BSP official said, given that the industry grew at 6.8% at the end of September. Lending also supported business segments with small and medium-sized enterprises.

Savings loans also remained well funded with a capital adequacy ratio based on the risk of 15.79% in June, well above the 10% of the BSP standard. Savings banks also ranged in a collective amount of 12.4 billion net revenues during the third quarter, data showed.