The level of non-performing loans (NPLs) in the banking system as of November 2006 was at P171 billion, an almost 50 percent reduction from its peak of P306 billion in December 2001. Consequently, NPL ratio of the banking system further improved to 7.3 percent. Meanwhile, non-performing assets (NPAs) have dropped to 7.8 percent after peaking at 14.6 percent in December 2001.
This improvement in asset quality was complemented by a steady increase in provisioning for probable losses, demonstrating banks’ resolve to strengthen their balance sheets. We also saw an expansion in lending activity in 2006, with total loan portfolio increasing by 8.4 percent year-on-year to P2.0 trillion as of end-November 2006.