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January 27, 2009

Philippines: NPLs seen rising in 2009

Non-performing loans (NPL) in the Philippines are expected to rise this year – inevitable with the generally cautious business sentiments – but bad loans’ growth will remain in the single-digit level, Manila Bulletin quoted a central bank official as saying Tuesday

"We’re still hoping that (the numbers) will stay where it is, but there’s a chance it will (increase)," said Nestor A. Espenilla Jr, deputy governor of Bangko Sentral ng Pilipinas (BSP), the country’s central bank. "It will go up a little but not anywhere near (the 1997) Asian crisis peaks."

Espenilla is confident NPL growth will keep to single-digit rates since unlike in 1997 when Philippine banks were unprepared for the financial crisis the banks are more resilient 10 years later with lessons learned.

"Banks are more cautious now and the big difference now and in 1997 was that the banks were lending flat out so the (hits were real bad). So the adjustments will not be that large today. If the situation worsens, (we sill think) it will definitely stay within single digit levels," he explained.

For 2008, Espenilla maintains an NPL ratio projection of four percent. A loan is considered non-performing when payments of interest and principal have remained unpaid for more than 90 days from due date.

As of end-October, NPL ratio is at 3.97 percent, lower than September’s level, according to BSP figures. Compared to the same period in 2007, NPL ratio is also lower by 1.33 percentage points.

BSP said total NPLs as of October amounted to 93.58 billion peso from 105.12 billion peso a year ago.

The industry’s non-performing assets in the meantime totaled 236.07 billion peso from 250.93 billion peso the same period in 2007. Total real and other properties acquired or ROPA amounted to 142.49 billion peso in October, lower than October 2007’s 156.3 billion peso.

For the January-October period, the central bank also reported that the industry’s total loan portfolio is bigger at 2.357 trillion peso from 1.982 trillion peso in 2007 and 2.327 trillion peso in September 2008.

BSP said loans for production activities continued to post growth although at slower rate of 19.2 percent from 22.4 percent in September as lending to all sectors increased, except in three sectors.

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