Soured debt outpaces growth of Philippine bank loans in 2018

Bad loans grew 16.17% even as total loans rose 13.6%.

The growth of soured assets at the Philippine banking system outpaced the expansion of overall loans in 2018, signalling a intensified risks to asset quality, reports BusinessWorld which cited central bank data. 

System-wide loans grew 13.6% YoY to $190.89b (PHP10.08t) in 2018 which fell short of the 16.7% growth in non-performing loans (NPLs) over the same period. NPLs hit $3.38b (PHP178.53b) from $2.89b (PHP153b) the previous year.

Industry bad loans accounted for 1.77% of total loans in 2018 from 1.73% in the previous year. 

Also read: Philippine banks' bad loan ratio to hold steady at 3.5% in 2019

Troubled loans held by universal and commercial banks grew 16.4% YoY to $2.15b (PHP113.52b) in 2018 from $1.85b (PHP97.53b) in the previous year which pushed up their bad loan ratio to 1.26% from 1.24%.

Central bank deputy governor Chuchi Fonacier attributed the uptick in bad loans to a stricter definition of past-due and NPLs as stated in a recent circular. The Philippines was identified along with Turkey, Argentina, Pakistan and Indonesia as amongst the several emerging markets facing heightened risk of growing bad debts amidst steep interest rates, according to an earlier report from Oxford Economics.