NPL ratio rises to 9-month high in August

Philippine banks' gross nonperforming loan (NPL) ratio rose to a nine-month high in August, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

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The local banking sector's gross NPL ratio worsened to 3.5% in August from 3.4% in the previous month. However, it eased from the 3.59% recorded a year earlier.

August’s bad loan ratio was the highest in nine months or since 3.54% in November 2024.

Loans are considered nonperforming once they are unpaid for at least 90 days after the due date. These are deemed as risk assets since borrowers are unlikely to pay.

Preliminary BSP data showed that soured loans edged up by 2.7% to P550.095 billion in August from P535.448 billion in July.

Year on year, nonperforming loans went up by 7.3% from P512.704 billion.

The total loan portfolio of Philippine banks stood at P15.709 trillion in August, down by 0.4% from P15.771 trillion in July. However, it climbed by 9.9% from P14.299 trillion a year ago.

"The slight uptick in banks' NPL ratio to 3.5% in August reflects softer economic momentum and early stress in consumer and MSME (micro, small, and medium enterprises) segments amid cost pressures," Union Bank of the Philippines (UnionBank) Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

Meanwhile, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said bad weather affected many businesses, affecting borrowers' ability to repay debts.