Manila: The ratio of non-performing loans (NPLs) to total loans at Philippine banks rose in July this year. Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that the NPL ratio increased to 3.35 percent in July from 3.29 percent in June. However, this was slightly lower than the 3.40 percent NPL ratio recorded in July 2025. The gross non-performing loans during the month amounted to PHP585.08 billion.
According to Philippines News Agency, the rise in non-performing loans in July indicates pockets of financial stress among some households and businesses. This stress has emerged after an extended period of high borrowing costs and elevated inflation, as explained by Reyes Tacandong and Co. Senior Adviser Jonathan Ravelas. He noted that while economic growth persists, not all sectors and borrowers are recovering at the same pace, which affects repayment capacity in certain segments.
Ravelas further elaborated that a modest rise in NPLs is a normal part of the credit cycle as bank lending expands. He emphasized that this does not suggest a systemic banking issue, as banks remain well-capitalized and adequately provisioned. The NPL ratio, according to him, remains manageable by historical standards.
Looking ahead, Ravelas highlighted the importance of continued economic growth, easing inflation, lower interest rates, and prudent credit risk management. These factors, he said, will be crucial in improving borrowers' debt-servicing capacity.
