Banks’ NPL ratio eases to six-month low in September

The Philippine banking sector’s gross nonperforming loan (NPL) ratio eased to a six-month low in September, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

The banking industry’s gross NPL ratio slid to 3.31% in September from 3.5% in August and 3.47% in the same month last year.

This was the lowest bad loan ratio in six months or since the 3.3% logged in March.

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

Based on preliminary BSP data, banks’ soured loans slipped by 2.1% to PHP 538.661 billion in September from PHP 550.095 billion in August.

Year on year, it increased by 4.1% from PHP 517.453 billion.

The total loan portfolio of Philippine banks reached PHP 16.263 trillion in September, climbing by 3.5% from PHP 15.709 trillion in August and by 9.1% from PHP 14.904 trillion last year.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said Philippine banks’ bad loans declined as September had less weather disruptions.

“This is largely due to better weather conditions in September 2025 versus in August 2025, when storms and flooding reduced the number of business days that also disrupted loan collection activities,” he said in a Viber message.

He noted that individuals and businesses had more capacity to settle their debts due for payment considering they had more working days during the month.

BSP data also showed that past due loans fell by 2.4% to PHP 676.778 billion in September from PHP 693.085 billion a month ago. Year on year, it grew by 6.9% from PHP 632.868 billion.

This brought the past due loan ratio to 4.16% in September, easing from 4.41% in August and 4.25% a year prior.

Restructured loans increased by nearly 1% to PHP 332.084 billion in September from PHP 328.917 billion the previous month. It likewise went up by 12.8% from PHP 294.526 billion in September 2024.

This accounted for 2.04% of the industry’s total loan portfolio, down from 2.09% in August but up from 1.98% seen last year.

Meanwhile, banks’ loan loss reserves dropped by 2.8% to PHP 504.927 billion in September from PHP 519.293 billion in August.

Year on year, it edged up by 4.6% from PHP 482.837 billion previously.

The loan loss reserve ratio inched down to 3.1% in September from 3.31% in August and 3.24% a year ago.

On the other hand, lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, stood at 93.74%, slipping from 94.4% in August but climbing from 93.31% in September 2024.

Mr. Ricafort said increased economic activity during the holiday season may lead to a further easing of lenders’ NPL ratio. However, he noted that natural calamities such as typhoons and earthquakes could affect borrowers’ repayment capacity.

“For the coming months, better weather (and) business or economic conditions in some parts of the country towards the Christmas holiday season would help more borrowers to improve their ability to service their loans as they fell due, but offset by the strong typhoon or storms, earthquakes, and other natural calamities in some parts of the country,” he said.

Super Typhoon Fung-Wong approached the Philippines on Sunday, just a few days after Typhoon Kalmaegi battered the country.

The Philippine Atmospheric, Geophysical and Astronomical Services Administration in its 8 a.m. bulletin, placed Polillo Islands, the northern portion of Camarines Norte and eastern portion of Camarines Sur under Signal No. 5.

Albay, Quezon, and parts of Bicol were under Signal No. 4, while Metro Manila, Central Luzon, and large swaths of Northern Luzon are under Signal No. 3. — Katherine K. Chan