PH banks’ bad loans ratio eases to 9-mo low

The share of bad loans on Philippine banks’ books declined to a nine-month low in September, as both lenders and borrowers stayed resilient amid a difficult economic landscape.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed nonperforming loans (NPLs), or debts that remain unpaid 90 days past the due date and at risk of default, accounted for 3.27 percent of lenders’ total loan portfolio.

That figure, also known as the gross NPL ratio, was the lowest since December 2025, back when soured debts had cornered 3.07 percent of banks’ loan book.

In peso terms, P593 billion of the local banking industry’s P18.1-trillion loan book turned sour in September. That amount of NPLs was 10-percent higher than a year earlier.

Banks also maintained a sizable buffer against potential losses. They had set aside nearly P558 billion in provisions for credit losses, leaving the industry with a NPL coverage ratio of 94.05 percent, the highest in eight months.

Within consumer lending, the NPL ratio eased to a five-month low of 5.33 percent. The ratio for credit card receivables edged down to 5.39 percent from 5.44 percent, while that for motor vehicle loans increased to 5.82 percent from 5.62 percent. The ratio for salary-based loans, meanwhile, fell to 4.62 percent from 5.01 percent.

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The NPL ratio for business loans dipped to 3.25 percent, its lowest level in nine months.

The figures come as the central bank keeps monetary policy relatively tight to contain inflation. The BSP has raised its benchmark interest rate to 5.5 percent and has signaled that it will tighten policy further if needed to bring inflation back to its target.