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DatabankOctober 18 2021

Philippine banks ramp up impairment provisions

Leading banks significantly increased loan impairment provisions last year, ahead of a projected rise in bad loans this year. 
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Leading Philippine banks set aside generous loan impairment provisions last year, which should hold them in good stead as bad loans begin to rise amid the ongoing fallout from the Covid-19 pandemic.

BDO Unibank, the largest bank in the country by assets and Tier 1 capital, set aside $629.5m in 2020, a year-on-year rise of 418% on the $121.5m in loan impairment provisions it set aside in 2019.

Metropolitan Bank & Trust Company, the second-largest bank, set $844.7m loan impairment provisions in 2020, a year-on-year rise of 345% on the $190m it set aside in 2019, according to The Banker Database.

Meanwhile, Bank of the Philippine Islands, the third-largest lender, set aside provisions of $582.9m in 2020, a year-on-year rise of 408% in 2020, while Philippine National Bank set aside provisions of $351.4m in 2020, a year-on-year rise of 619%.

The country has endured one of the worst Covid-19 outbreaks in Asia and lockdowns have been imposed in the capital region, Metro Manila, as cases have soared.

The banking sector’s non-performing loan (NPL) ratio increased to 4.5% year-on-year at end July, according to central bank, Bangko Sentral ng Pilipinas (BSP), which expects the NPL ratio to peak at 8.2% in 2022.

Despite the pressure on asset quality, the Philippine banking system remains stable, said BSP governor Benjamin Diokno, on September 22, citing sustained growth in its assets, deposits, and capital, as well as ample capital and liquidity buffers and loan-loss reserves.

Trends identified using The Banker Database, an online database providing comprehensive financial data and insight for 4000 of the world's leading banks in 190 countries. Contact us.

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