Philippine Banks See NPL Ratio Ease to 6-Month Low

MANILA, Philippines — The non-performing loan (NPL) ratio of Philippine banks eased to a six-month low in June as lending continued to grow faster than bad loans, helping cushion the impact of still-rising soured accounts. Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the banking industry’s gross NPL ratio declined to 3.29 percent in June from 3.44 percent in May. It was also slightly lower than the 3.34 percent recorded in June last year. The latest ratio was the lowest since December 2025, when it stood at 3.07 percent. NPLs refer to loans whose principal or interest payments have remained unpaid for at least 90 days after their due date. These are considered risky assets because they signal a borrower’s weakened capacity or willingness to repay. In peso terms, however, gross bad loans still increased by 10.3 percent to P584.94 billion in June from P530.29 billion in the same month last year. The banking system’s gross loan portfolio expanded at a faster pace of 11.9 percent to P17.78 trillion from P15.88 trillion a year ago, helping bring down the NPL ratio despite the increase in the absolute amount of soured loans. “The easing of banks’ NPL ratio in June reflects the resilience of the Philippine economy, supported by easing inflation,” Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said. Other indicators, however, showed that some borrowers continued to face repayment pressures. Past due loans, or credit obligations with missed payments that have not necessarily been classified as non-performing, rose by 12.4 percent to P753.4 billion in June from P670.5 billion a year earlier. The past due loan ratio stood at 4.24 percent, slightly higher than 4.22 percent in June 2025 but lower than 4.36 percent in May. Meanwhile, restructured loans climbed by 8.3 percent to P337.98 billion from P312.03 billion a year ago. These accounts generally involve borrowers whose payment terms have been modified to help them avoid default. The restructured loan ratio improved to 1.90 percent from 1.96 percent a year earlier and 1.99 percent in May. Banks also continued to build provisions against potential losses, with allowance for credit losses rising by seven percent to P541.24 billion from P505.91 billion in June last year. Still, the NPL coverage ratio slipped to 92.53 percent from 95.42 percent a year ago, although it improved from 88.92 percent in May. The ratio measures the amount of loan loss reserves available to cover bad loans. “Looking ahead, bad loans should remain manageable although banks must continue to watch risks from global uncertainties and weather-related disruptions,” Ravelas said. “Overall, the banking sector remains fundamentally sound and well-positioned to manage credit risks,” he added.