Banks’ soured loans trekked to 2-mo high in Jan
Soured loans held by local banks rose to a two-month high in January, opening the year on a negative note as the lingering impact of the last pandemic and the slow interest rate-cutting cycle weighed on borrowers’ ability to settle their obligations on time.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the gross amount of nonperforming loans (NPLs)—or borrowings that remain unpaid 90 days past the due date and at risk of default—accounted for 3.38 percent of the industry’s total lending portfolio.
That figure, known as the gross NPL ratio, was higher than the 3.27 percent recorded in December. Data showed this was the highest ratio of bad loans to total credit since November 2024’s 3.54 percent.
In peso terms, this means P512.83 billion of the domestic banking sector’s P15.18-trillion loan portfolio had turned sour in January. That amount of NPLs was 11.3 percent bigger compared with a year ago.
Pandemic effect
Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said the latest results just showed how borrowers continued to feel the economic impact of the pandemic, which was worsened by the recent bout of high inflation.
“Additionally, the recent economic uncertainties and inflationary pressures have strained household and business finances, leading to higher default rates,” he added.
Separately, John Paolo Rivera, senior research fellow at state-run think tank Philippine Institute of Development Studies, said the gradual easing cycle of the BSP had slowed the decline in interest rates, which could make debt servicing difficult for some borrowers.
“While the BSP has signaled an easing cycle, borrowing costs remained elevated, making it harder for some businesses and consumers to service their debts,” Rivera explained, while also attributing the increase in NPLs to seasonality.
“January often sees a seasonal uptick in delinquencies, particularly in consumer loans, as borrowers reprioritize spending after the holiday season,” he added.
That said, there are efforts from banks to help their clients pay their debts.
BSP data showed restructured loans—or credit subjected to negotiations with struggling borrowers—accounted for 2.05 percent of lenders’ total loan book in January, slightly up from 2.03 percent in the preceding month.
