Philippine Banks See Improved Bad Loan Ratio in November

THE nonperforming loan (NPL) ratio of Philippine banks hit a two-month low of 3.32 percent in November, Bangko Sentral ng Pilipinas (BSP) data showed. The credit risk indicator — which covers past-due loans where the principal or interest is unpaid for 90 days or more after the due date — narrowed slightly from October’s 3.33 percent and was also lower than the year-earlier 3.54 percent. It was the lowest bad-loan ratio since the 3.31 percent seen in September 2025. Soured loans rose to P544.86 billion in November from P537.02 billion a month earlier and were markedly higher than the year-ago P520.47 billion. Past due loans, meanwhile, picked up to P695.98 billion from P687.84 billion and P635.48 billion, respectively, a month and a year ago. These accounted for 4.24 percent of total loans, down from 4.27 percent in October and 4.32 percent last year. Restructured loans slid to P331.28 billion from P332.82 billion, comprising 2.02 percent — down from October’s 2.07 percent — of banks’ gross loan portfolio. A year earlier, restructured loans were lower at P293.7 billion. Lenders’ loan loss reserves went up to P517.18 billion, equivalent to 3.15 percent of total loans. This was, however, lower than the 3.3 percent a year earlier. The NPL coverage ratio — a measure of banks’ allowance for potential losses — was slightly higher at 94.92 percent from 93.21 percent a year earlier. Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the improvement was largely driven by easier monetary conditions, including a total 200-bps cut in BSP policy rates since August 2024 and a 4.50-percentage-point reduction in reserve requirement ratios since October 2024. These moves, he added, injected more than P700 billion into the financial system, lowering intermediation costs and increasing banks’ loanable funds. “All of these reduced borrowing costs and improved the ability to pay by various borrowers, thereby leading to [a] slightly lower NPL ratio,” Ricafort said.