THE non-performing loan (NPL) ratio of Philippine banks hit a nine-month high of 3.44 percent in May, data from the Bangko Sentral ng Pilipinas (BSP) showed.
The credit risk indicator, which accounts for loans where the principal or interest is unpaid for 90 days or more after the due date, rose from 3.37 percent in April and was the highest since August 2025’s 3.5 percent.
Bad loans increased to almost P601.41 billion in May from P579.89 billion a month earlier and also rose from the yearago P527.45 billion.
Past due loans, meanwhile, fell to P761.87 billion from P763.59 in April but rose from P659 billion a year earlier.
The BSP defines NPLs as “loans, investments, receivables, or any financial asset even without any missed contractual payments, which are considered impaired under existing accounting standards, classified as doubtful or loss, in litigation, and/or there is evidence that full repayment of principal and interest is unlikely without foreclosure of collateral, if any.”
Past due loans “refer to loans, investments, receivables, or any financial asset, including restructured loans, wherein any principal and/or interest or installment due, or portions thereof, are not paid at their contractual due date.”
Restructured loans, meanwhile, grew to P348.02 billion from P342.92 billion a month earlier.
Loan loss reserves went up to P534.76 billion, equivalent to 3.06 percent of total loans. This was lower than the 3.19 percent seen a year earlier.
The NPL coverage ratio, which gauges banks’ allowances for potential losses, fell to 88.92 percent from 94.57 percent in May 2025. This was also the lowest since the 88.38 percent recorded in March 2022.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the higher NPL was mostly due to the impact of the war in the Middle East.
The conflict, he said, “led to higher prices/inflation, higher interest rates that led to higher financing costs, slower global and local economic/GDP (gross domestic product) growth that reduced sales, incomes/earnings; all of which reduced the ability to pay by some borrowers.”
Union Bank Philippines chief economist Ruben Carlo Asuncion, meanwhile, said the higher NPL and lower coverage ratios showed that bad loans had increased faster than the banks’ buffers.
“However, this may reflect a normalization in provisioning behavior rather than heightened credit stress, as banks continue to benefit from strong capital and profitability,” he added.
“While the trend warrants monitoring, current conditions do not yet point to a material deterioration in the banking sector’s overall asset quality.”
