THE nonperforming loan (NPL) ratio of Philippine banks climbed to 3.35 percent in July as borrowers struggle with debt repayments amid high inflation and interest rates, data from the Bangko Sentral ng Pilipinas showed.
NPL or bad loan ratio — which covers past-due debts whose principal or interest is unpaid for 90 days or more — rose from June’s six-month low of 3.29 percent but slightly lower than year earlier’s 3.4 percent.
Reyes Tacandong & Co. senior adviser Jonathan Ravelas said the rise in nonperforming loans shows that some households and businesses are still facing financial stress after a prolonged period of high borrowing costs and inflation.
He argued that while the economy continues to grow, some sectors and borrowers are recovering more slowly, making it harder for them to repay their loans.
“As bank lending expands, a modest rise in NPLs is a normal part of the credit cycle,” Ravelas said.
“The good news is that this does not point to a systemic banking issue,” he added.
Soured loans rose to P585.08 billion in July from month earlier’s P584.97 billion. It is also markedly higher than July 2025’s P535.45 billion.
Past-due loans, meanwhile, declined to P738.77 billion in July from P753.4 billion and P687.59 billion a month and year earlier, respectively. These accounted for 4.23 percent of total loans, down from 4.24 percent in June but higher than the 4.36 percent in July 2025.
Restructured loans, however, rose to P341.95 billion from P337.98 billion in June and P329.64 billion in July 2025.
This accounts for 1.96 percent of banks’ gross loan portfolio, up from 1.90 percent a month earlier but lower than 2.09 percent a year earlier.
Lenders’ loan loss reserves recorded a downtick of P540.89 billion in July or 3.1 percent of total loans. This was, however, lower than the 3.25 percent a year earlier.
The NPL coverage ratio — a measure of banks’ allowance for potential losses — was lower at 92.35 percent from 95.63 percent in 2025.
Despite the increase, Ravelas said banks remain financially strong, with enough capital and provisions to cover potential losses, while the NPL ratio remains manageable by historical standards.
“Moving forward, the key will be continued economic growth, easing inflation, lower interest rates and prudent credit risk management to help improve borrowers’ debt-servicing capacity,” Ravelas said.
