Consumer push to drive rise in Philippine banks’ nonperforming loans

S&P GLOBAL RATINGS expects Philippine banks’ nonperforming loans (NPL) to increase over the next two years amid their aggressive expansion into the consumer segment.

- Aaron Michael C. Sy

“We are observing an uptick in the NPL ratios in these unsecured loan segments. We believe this trend is likely to continue over the next two years. As this portfolio matures, the NPLs should inch up further,” S&P Financial Institutions Ratings Director for South and Southeast Asia Nikita Anand said in a webinar on Thursday. “Our forecast is that the sector-level NPLs could rise to 3.4% to 3.5% of total loans over the next two years.”

As of June, Philippine banks’ NPL ratio stood at 3.4%, which was the lowest level in three months or since the 3.3% in March, data from the Bangko Sentral ng Pilipinas showed.

S&P also expects credit losses to stay elevated at around 0.8% to 0.9% of total loans — higher than the pre-pandemic average of 0.5% — due to banks’ expansion into riskier segments, she said.