Philippine Banks' Bad Loan Ratio Steady at 3.35% in August
The Bangko Sentral ng Pilipinas reported a stable non-performing loan ratio for August 2026, as the banking sector's overall lending growth outpaced new problem accounts.
NPL Ratio Holds Steady
The Bangko Sentral ng Pilipinas (BSP) reported that the non-performing loan (NPL) ratio for Philippine banks held steady at 3.35 percent in August 2026. This figure remained virtually unchanged from July 2026. Compared to a year earlier, the NPL ratio showed an improvement, dropping from 3.5 percent in August 2025.
This stability comes as the banking industry's overall lending expanded at a faster pace than the increase in problem loans.
Lending Growth Outpaces Bad Loans
While gross bad loans grew by 8.4 percent year-on-year to P596.3 billion in August, the total loan portfolio expanded by a stronger 13.2 percent, reaching P17.78 trillion. Other indicators reveal some borrower stress: past due loans, those with missed payments, climbed 11.1 percent to P769.89 billion.
However, the past due loan ratio eased to 4.33 percent from 4.41 percent in August 2025, indicating a smaller share of the overall loan book.
Provisions and Outlook
Banks also adjusted payment terms for P340.58 billion in restructured loans, a 3.5 percent rise from a year ago. The ratio for these modified accounts decreased to 1.92 percent. To mitigate potential credit losses, banks increased their allowance for such losses by seven percent, reaching P555.6 billion.
The NPL coverage ratio, which measures reserves against bad loans, stood at 93.17 percent, slightly below the 94.40 percent recorded in August last year.
UnionBank chief economist Ruben Carlo Asuncion suggests NPLs will remain manageable in the near term, supported by banks' strong capital and provisioning buffers. However, he advises caution. Persistent inflation, the prospect of higher-for-longer interest rates, and signs of moderating economic activity could pressure borrowers' repayment capacity.
For businesses in the Philippines, monitoring forthcoming inflation data and central bank policy decisions will be key, as these factors may influence future lending terms and financial institution asset quality.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
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