By Des Ferriols Updated December 03, 2008 12:00 AM
[ philstar.com ]
The Bangko Sentral ng Pilipinas (BSP) expects a slight uptick in the bad assets of banks, given the turmoil hounding the global banking system.
BSP Governor Amando M. Tetangco Jr. told reporters that a slight increase in non-performing loans and non-performing assets was to be expected but said the asset quality of the banking system would remain sturdy.
“We will have to keep a close watch on the asset quality of banks to watch out for signs of stress,” Tetangco said. “But if there is an increase in bad assets, that’s only to be expected under the circumstances.”
As early as September, the BSP earlier reported that the accumulated bad loans of universal and commercial banks have started to go up, raising the bad loans ratio to 4.04 percent of their total loan portfolio compared with only 3.9 percent in August.
The banking sector is expected to hit some difficult times as the country plowed deeper into the global financial crisis and the resulting widespread recession in the major trading economies around the world.
Total NPLs of U/KBs, according to the BSP, now stood at P94 billion compared with P91.67 billion in August.
The BSP said earlier that it saw no evidence that Philippine banks were hitting the same credit freeze in Europe and the US but based on the September NPL data, bank lending had softened slightly from P2.35 trillion in August to P2.32 trillion in September.
“The decline in loans stemmed from lower interbank loans and reverse repurchase transactions during the month,” the BSP reported.
Even excluding interbank lending, the BSP reported that the NPL ratio still rose to 4.56 percent from 4.49 percent in the previous month because the growth in bad loans outpaced the growth in regular loans from P2.043 trillion to P2.061 trillion.
But Tetangco said the rise in the September bad loans did not necessarily indicate an alarming trend that the bad assets of the banking sector would explode as it did after the 1997 financial crisis in Asia.
“Given what is happening abroad you cannot discount that there can be a slight uptick in NPL in the near term,” Tetangco said, “This is especially true when the effects of the recession in major economies really and truly starts to affect us.”
But Tetangco said the BSP considered this to be temporary and if it results in an increase in bad assets, the increase would be “slight and manageable.”
“We don’t foresee a substantial increase in bad assets,” Tetangco said.
More importantly, Tetangco said Philippine banks have already tightened their credit standards precisely to ensure that they would not end up accumulating bad loans.
“They are much more careful now and this is just the prudent thing to do when things are this uncertain,” Tetangco said.
