Banks’ bad loan ratio rises to 8-month high in April

MANILA, Philippines — The non-performing loan (NPL) ratio of Philippine banks rose to an eight-month high in April as bad loans increased at a faster pace than lending growth, reflecting the lingering effects of elevated borrowing costs on some households and businesses.

Data from the Bangko Sentral ng Pilipinas (BSP) showed the banking industry’s gross NPL ratio climbed to 3.37 percent in April from 3.29 percent in March, but remained slightly lower than the 3.39 percent recorded in the same month a year ago.

The latest reading marked the highest since the 3.5 percent recorded in August 2025, although it remained well below the pandemic-era peak of 4.51 percent seen in July and August 2021.

NPLs refer to loans whose principal or interest payments remain unpaid for at least 90 days after falling due. These are considered risky assets because they indicate a borrower’s reduced capacity or willingness to repay debt.

In peso terms, gross bad loans increased by 11.7 percent to P579.89 billion in April from P519.23 billion a year ago.

The rise in soured loans came even as bank lending continued to expand. The industry’s gross loan portfolio grew by 12.1 percent to P17.2 trillion in April from P15.34 trillion in the same month last year.

UnionBank chief economist Ruben Carlo Asuncion said the increase in the NPL ratio likely reflected the delayed effects of higher interest rates on borrowers.

“The uptick in the NPL ratio to 3.37 percent in April likely reflects the lagged impact of elevated interest rates on borrowers, alongside normalization in asset quality after the post-pandemic recovery,” Asuncion said.

“We expect NPLs to remain broadly stable with a slight upward bias in the near term, before easing as monetary conditions improve,” he added.

Other indicators also pointed to some pressure on borrowers.

Past due loans, or obligations that have missed payments but have yet to be classified as non-performing, grew by 16.9 percent to P763.59 billion in April from P653.26 billion a year earlier. This translated to a past due ratio of 4.44 percent.

Restructured loans also increased by 10 percent to P342.92 billion in April from P311.66 billion a year earlier, translating to a restructured loan ratio of 1.99 percent. These loans typically involve borrowers who have renegotiated repayment terms to avoid default.