Philippine Banks Report Improved Loan Payments Amid Easing Rates

Bad loans ratio drops to 3.3% in November MANILA, Philippines — The quality of loans held by Philippine banks showed improvement in November last year as fewer borrowers fell behind on their payments, helped by lower interest rates and continued growth in lending. Preliminary data from the Bangko Sentral ng Pilipinas showed the banking system’s non-performing loan (NPL) ratio eased to 3.32 percent in November from 3.33 percent in October. This marked the lowest level in two months or since the 3.31 percent recorded in September. RCBC chief economist Michael Ricafort said the gradual easing of bad loans reflects the impact of lower borrowing costs and stronger loan growth, which helped improve borrowers’ ability to repay. “The improvement was largely due to lower policy rates by a total of 200 basis points since August 2024,” Ricafort said, referring to the Philippine central bank’s easing cycle. He also said the continued double-digit growth in bank lending helped mathematically reduce the NPL ratio by widening the loan base, especially as banks strengthened credit risk management in line with global best practices. Non-performing loans refer to credit obligations that remain unpaid for at least 90 days past their due date. These are considered high risk assets and are closely monitored as they can weigh on banks’ profitability and liquidity. Based on central bank data, total loans disbursed by banks grew by 11.5 percent to P16.41 trillion in the January to November period last year from P14.72 trillion in the same period in 2024. During the 11-month period, the value of bad loans rose by 4.7 percent to P544.86 billion from P520.48 billion a year earlier, a slower pace than overall loan growth. As of end-November last year, banks’ past due loans increased by 9.5 percent to P695.98 billion from P635.48 billion a year ago, bringing the past due ratio to 4.24 percent. The sector’s restructured loans amounted to P331.28 billion in end-November last year, 12.8 percent higher than the P293.7 billion booked in the same month in 2024, translating to a restructured loan ratio of two percent.