I was reading news with regards to our economy. And this is a frightening one.
Issue
Bad loans held by the Philippines’ largest banks rose slightly in September to 4.04 percent from a month earlier as lending activity slowed, the central bank said Tuesday.
The non-performing loans (NPL) ratio of universal and commercial banks was up 0.14 percent from the previous month’s 3.90 percent ratio but was 1.15 percent below the level of 12 months ago, a central bank statement said.
Non-performing loans rose 2.54 percent from the previous month to 94 billion pesos (1.9 billion dollars) while their total loan portfolio fell 0.96 percent to 2.33 trillion pesos owing to lower interbank loans (IBL) and reverse repurchase transactions, it added.
Universal and commercial banks are licensed by the Philippine central bank to engage in related financial services including insurance and investment banking.
Analysis
This is bad news for us. Before, I was under the Marketing Department of Bank of the Philippine Islands and based on my experience this will affect the interest rates offered by banks. How? Because of bad loans, banks are forced to increase the interest rates to shoulder these losses.
In the part of consumers, this will be a burden. This means that you will need to pay a higher monthly amortization for your loan.
In the part of the bank employees, it will be difficult to reach target sales/ quota since higher interest means fewer clients.
In any case, this is a lose-lose situation.
