By Katherine K. Chan, Reporter
The Philippine banking sector’s nonperforming loan (NPL) ratio rose to an eight-month high in July, Bangko Sentral ng Pilipinas (BSP) data showed.
Data from the BSP showed banks’ gross NPL ratio stood at 3.4% in July, up from 3.34% in June but lower than the 3.58% in the same month last year.
This was the highest bad loan ratio in eight months or since the 3.54% in November 2024.
Loans are considered nonperforming once they are unpaid for at least 90 days after the due date. These are deemed as risk assets since borrowers are unlikely to pay.
The amount of nonperforming loans inched up by 0.97% to P535.45 billion in July from P530.29 billion in June. Bad loans also climbed by 5.38% year on year.
The total loan portfolio of the banking system fell to P15.77 trillion in the first seven months, 0.71% down from the P15.88 trillion at end-June but up 11% from the P14.21 trillion a year earlier.
“The uptick in the gross NPL ratio to 3.40% reflects lingering stress in certain sectors — especially SMEs and consumer loans — as households and businesses continue to adjust post-pandemic/global uncertainty arising from tariff uncertainty which slowed growth globally,” Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said in a Viber message.
“Lower interest rates may be encouraging borrowing, but not all borrowers are equally resilient,” he added.
Meanwhile, past due loans grew by 2.5% to P687.6 billion in July from P670.5 billion in June. It likewise rose by 9.9% year on year.
Past due loans as of July made up 4.36% of the system’s total loan portfolio, higher than the 4.22% in the previous month but lower than the 4.4% last year.
On the other hand, restructured loans went up by 5.6% to P329.64 billion in July from P312.03 billion in June and by 13.2% from P291.08 billion in the same month 2024.
It had a higher share in the industry’s total loan portfolio at 2.09% from 1.96% at end-June and 2.05% a year earlier.
Banks’ loan loss reserves increased by 1.2% to P512.06 billion in July from P505.91 billion the previous month and by 6.8% from P479.24 billion in the comparable year-ago period.
Loan loss reserve ratio in July stood at 3.25%, higher than 3.19% in June but below the 3.37% in the same month in 2024.
Meanwhile, lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, expanded to 95.63% in July, from 95.4% in June and 94.32% last year.
Mr. Ravelas said banks’ bad loans are projected to remain high in the near term as the effects of the central bank’s rate cuts take time to materialize.
“But if consumer confidence and job creation pick up, we could see stabilization by year-end,” he added.
The Monetary Board has so far slashed borrowing costs by 150 basis points (bps) since August 2024. The central bank’s target reverse repurchase rate is currently at 5%, the lowest in nearly three years or since November 2022.