Philippine banks remain resilient despite NPL uptick 

The Philippine banking sector maintained its overall resilience in April despite a slight increase in the gross non-performing loan (NPL) ratio to 3.39 percent, according to data from the Bangko Sentral ng Pilipinas (BSP).

The figure remains below the 3.45 percent recorded in the same month last year, reflecting sustained efforts by banks to manage credit risk and support borrowers amid a dynamic economic environment. While the NPL ratio rose modestly from March’s three-month low of 3.3 percent, it remains within a manageable range and far below pandemic-era highs.

The BSP data showed that bad loans stood at %u20B1519.2 billion as of end-April, a modest 0.6 percent increase from the previous month. Despite this, the banking industry’s total loan portfolio remains strong, posting a 10 percent year-on-year growth to %u20B115.34 trillion.

“Banks continue to demonstrate prudent risk management and remain adequately capitalized to navigate short-term headwinds,” said Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort.

Past due loans, which include all loans with delayed payments, inched up to %u20B1653.3 billion—an increase of 1.1 percent month-on-month. However, the past due ratio remains lower compared to the 4.43 percent registered in April 2024, reflecting gradual improvements in collection efforts and borrower behavior.

Ricafort noted that while global uncertainties may have slightly impacted borrower capacity, monetary easing efforts from both the US Federal Reserve and the BSP—such as rate cuts and other supportive measures—are expected to ease financial pressure and improve borrowers’ ability to repay over the coming months.

“With inflation continuing to stabilize and borrowing costs potentially declining further, we expect these favorable conditions to support loan repayment and temper further increases in NPLs,” Ricafort added.

The Philippine banking sector continues to play a key role in supporting economic activity, offering credit to businesses and households, while remaining vigilant in managing risks. Authorities and financial institutions alike remain focused on maintaining stability and supporting recovery, especially in lending-intensive sectors.