MANILA - The non-performing loan (NPL) ratio of Philippine commercial and universal banks dropped to 3.25% in September, the lowest since its peak during the Asian financial crisis, according to the Bangko Sentral ng Pilipinas (BSP).

NPL ratio represents the share of past due loans to the total loans extended by banks.

September's NPL ratio was lower than the 4.03% recorded in the same month last year, and the 3.5% recorded in August.

The BSP said the decline showed how banks were able to maintain prudent lending standards. Since hitting a peak of 18.8% in October 2001 as a result of the Asian financial crisis, the BSP said Philippine banks' NPL ratio consistently improved as stricter rules for lending were adopted.

Banks were likewise able to provide adequate provisioning against potential credit losses.

Reserves of commercial and universal banks intended to cover for such losses increased to P90.59 billion in September from P88.3 billion in August, and P89 billion in September last year.

The amount of reserves led to an NPL coverage ratio of 3.74%. NPL coverage ratio is the proportion of loan loss reserves to the amount of non-performing loans.

Meantime, the central bank reported that the ratio of banks' real and other properties acquired (ROPA) to gross assets dropped due to the disposal of more bad assets.

The ratio stood at 2.59% as of end-September, down from 2.96% as of the same month last year, and 2.66% as of August.