BSP seeks to amend rules on forwards, swaps

The Bangko Sentral ng Pilipinas (BSP) is proposing amendments to regulations on non-deliverable exchange forward and swap contracts involving the peso, which will allow the pre-termination or cancellation of contracts before maturity date, among others.

In a draft circular, the central bank released proposed amendments to the Manual of Regulations for Banks (MORB) on non-deliverable foreign exchange forward (NDF), non-deliverable swap (NDS) and non-deliverable cross currency swap (NDCCS) contracts involving the peso.

“The BSP is cognizant that NDFs, including its variants NDS and NDCCS may, directly or indirectly, create system-wide risks even if there is no delivery of principal amounts and even when such non-deliverable FX (foreign exchange) derivatives are used as a hedge.”

“To mitigate the buildup of systemic risks and protect against undue concentration in market usage, the following prudential guidelines are set in place,” it added.

The draft circular seeks to define NDCCS as “a variation of a cross-currency swap wherein the differences between the exchange rates and interest rates are settled on a cash basis, without necessitating the delivery of either of the cash flows on the two currencies involved in the swap.”

The proposed rules also remove the definitions of peso NDF, peso NDF sale to nonresidents, and onshore non-deliverable forwards. It instead includes definitions for peso NDS and peso NDCCS.

“All NDF, NDS and NDCCS contracts with residents shall be settled in Philippine pesos,” it added.

The BSP also removed the provision that states that NDF contracts cannot be pre-terminated before their fixing date.

“Pre-termination or cancellation of an NDF, NDS or NDCCS contract before its maturity date shall be allowed, subject to mutual agreement between the counterparties and appropriate disclosure of the terms and conditions on the pre-termination or cancellation, including the settlement amount (e.g., market-to-market value of the contract) and the responsible party that will assume the cost of pre-termination or cancellation, among others,” it said.

“Furthermore, if an NDF, NDS or NDCCS contract is pre-terminated or canceled, contracting parties may only enter into another NDF, NDS or NDCCS contract for the same underlying transaction if there is a change in the original financial terms of the underlying transaction.”

The draft circular proposes guidelines on limits for banks’ peso NDF, peso NDS and peso NDCCS exposures.

“To mitigate any potential buildup of systemic risks, a bank’s total gross exposures to all forms of Peso NDF, Peso NDS and Peso NDCCS transactions, i.e., the sum of the notional amount of the sale and purchases for both onshore and offshore transactions shall be limited to a fixed percentage of the bank’s capital base.”

Under the draft rules, the exposure is capped at 20% of qualifying capital for domestic banks while foreign bank branches shall have a limit equal to 100% of their qualifying capital.

However, this limit does not apply to peso NDF transactions with the BSP, it added.

“A bank with purchases and sell position against a counterparty with the same fixing date may consolidate said positions for the purpose of bilateral net settlement.”

The draft rules also include NDS and NDCCs in the higher capital charge applicable to NDFs.

They also detail the reportorial requirements for NDF, NDS and NDCC transactions, which shall be covered by the report on non-deliverable forward and swap transactions.

“Pre-terminated and canceled NDF, NDS and NDCCS transactions that were used by a bank as end-user, as defined in Section 613 of the MORB, shall be submitted under the new report namely Report on Pre-termination and Cancellation of Non-Deliverable Forward and Swap Transactions.”

“The pre-terminations and cancellations shall be subject to an assessment of reasonableness and frequency tests to determine its validity. All outstanding NDF, NDS and NDCCS transactions shall likewise be included in the calculation of the capital adequacy ratio (CAR) and reflected in the CAR report.” — Luisa Maria Jacinta C. Jocson

Stocks rise on bargain hunting, US inflation data

Philippine stocks recovered on Thursday on bargain hunting following their two-day drop and with data showing slower US consumer inflation in February.

The bellwether Philippine Stock Exchange index (PSEi) rose by 0.75% or 46.81 points to 6,242.07, while the broader all shares index climbed by 0.53% or 19.6 points to 3,701.4.

“The local market bounced back this Thursday as investors hunted for bargains following two straight days of decline,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message. “Helping in today’s rebound are the lower-than-expected February inflation in the US and the robust fourth quarter and full-year 2024 corporate results onshore.”

“Philippine investors resumed their bargain hunting after investors calmed down after the latest US consumer price index (CPI) came out. Wall Street was able to even close mixed after a rough start,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

US consumer prices increased moderately in February as higher shelter costs were partially offset by cheaper airline fares, giving the Federal Reserve room to keep interest rates unchanged next week while monitoring the economic impact of a trade war, Reuters reported.

The CPI rose 0.2% last month, the smallest gain since October, after accelerating 0.5% in January, the Labor Department’s Bureau of Labor Statistics said.

In the 12 months through February, the CPI increased 2.8% after climbing 3% in January. Economists polled by Reuters had forecast the CPI would gain 0.3% and advance 2.9% on a year-on-year basis.

With the economic outlook deteriorating because of tariffs, financial markets expect the Fed to resume cutting rates in June after it paused its easing cycle in January. The central bank’s benchmark overnight interest rate is currently in the 4.25%-4.5% range, having been reduced by 100 basis points since September.

Majority of sectoral indices posted gains on Thursday. Mining and oil surged by 2.97% or 257.66 points to 8,926.71; financials rose by 2.4% or 56.47 points to 2,401.53; services went up by 1.71% or 34.41 points to 2,040.47; and holding firms increased by 0.4% or 20.87 points to 5,223.56.

Meanwhile, property dropped by 1.54% or 34.56 points to 2,196.74 and industrials went down by 0.72% or 63.31 points to 8,667.55.

“BDO Unibank, Inc. was the day’s index leader, climbing 3.95% to PHP 158. Alliance Global Group, Inc. was at the bottom, falling 3.23% to PHP 6.30,” Mr. Tantiangco said.

Value turnover went down to P5.65 billion on Thursday with 1.04 billion shares exchanged from the PHP 5.98 billion with 741.54 million issues traded on Wednesday.

Decliners narrowly beat advancers, 93 versus 90, while 45 names were unchanged.

Net foreign buying increased to PHP 436.10 million on Thursday from PHP 2.62 million on Wednesday. — Revin Mikhael D. Ochave with Reuters

BSP to ensure nation will stay out of ‘gray list’

The Bangko Sentral ng Pilipinas (BSP) said it is working to ensure that the country will not return to the Financial Action Task Force’s (FATF) “gray list,” citing the need to crack down on digital technology threats.

“Just because we are off the gray list does not mean that we are done. We have to make sure we do not get back into the gray list,” BSP Governor Eli M. Remolona, Jr. said at a forum on Tuesday.

“In the past, we go in, we go out. This time, we are determined to stay out of the gray list,” he added.

The FATF last month removed the Philippines from its list of jurisdictions under increased monitoring for “dirty money” following a successful on-site visit and completion of the recommended action plan.

The country was on the FATF’s gray list for over three years or since June 2021.

The dirty money watchdog noted the Philippines’ progress in addressing the strategic anti-money laundering and countering the financing of terrorism and proliferation financing deficiencies.

The BSP chief said they are undergoing a national risk assessment after the country’s exit from the gray list.

“Part of that means looking at our risks again. We look at the whole economy to figure out what else can lead to risks of money laundering, what else can lead to terrorism financing and so on.”

The FATF’s next assessment of the country is slated for 2027. “We want to make sure that we pass that evaluation,” Mr. Remolona said.

The assessment will have the FATF verify that the measures are sustained and still in place.

In 2002, the FATF blacklisted the Philippines for having no legal anti-money laundering framework. It was removed from the blacklist a year later after the passage of the Anti-Money Laundering Act.

Mr. Remolona said they are closely monitoring innovations in technology amid the numerous threats in the digital space.

“Digital technology is evolving, and digital technology is the preferred means for money laundering actors to take money in,” he said.

“We have to look at digital technology and what it’s doing. These guys are very innovative as you know, right? It’s essentially an arms race between us and them so we have to keep up with the arms race. That’s why we’re doing risk assessment.”

Earlier data from Moody’s Investors Service showed that from 2018 to 2023, the Philippines was among the top five countries in Southeast Asia with money laundering activity events added over the five-year period.

The number of money laundering events added in the Philippines jumped by 45% from 2022 to 2023.

The Anti-Financial Account Scamming Act was signed into law last year. It aims to protect consumers from financial cybercrimes by penalizing violations.

Malacañang also last year issued an executive order mandating all government offices to adopt the National Anti-Money Laundering, Counter-Terrorism Financing, and Counter-Proliferation Financing Strategy 2023-2027.

“In the meantime, we can reap the benefits of our delisting from the FATF gray list. That delisting renews investor confidence,” Mr. Remolona said.

“It paves the way for the restoration of correspondent bank relationships. It helps our overseas Filipino workers (OFWs), but it is more than that. It helps to convince foreign investors to come in. Makes it easier for foreign banks to deal with our banks.”

The central bank earlier said exiting the gray list will help support OFWs by making remittances and cross-border payments faster and more affordable. — Luisa Maria Jacinta C. Jocson

Energy dep’t readies large-scale renewable energy auction

The Department of Energy (DoE) is set to offer a total of 10,478 megawatts (MW) of renewable energy (RE) capacity, which includes some that will be paired with battery energy storage systems (BESS), under the fourth round of the green energy auction (GEA-4) program.

The DoE is planning to auction off 3,940 MW of ground-mounted solar capacity, 48 MW of roof-mounted solar capacity, 3,000 MW of floating solar capacity, and 2,390 MW of onshore wind capacity, based on the notice of auction posted on its website.

The government will also offer integrated RE and energy storage system (IRESS) totaling 1,100 MW in solar generation capacity, along with undisclosed storage capacity.

A BESS is a type of energy storage system that uses batteries to store electrical energy from the grid and releases it when needed to augment supply or improve power quality.

The GEA program (GEAP) aims to promote RE as one of the country’s primary sources of energy through competitive selection. RE developers compete for incentivized fixed power rates by offering their lowest price for a certain capacity.

The DoE is targeting to install 7,523 MW in RE capacity in Luzon, 2,143 MW in Visayas, and 812 MW in Mindanao.

The projects resulting from the auction are scheduled to come online between 2026 and 2029. The supply contract for winning RE projects will be for 20 years, starting from the commercial operation date of the plant.

“The release of the TOR (terms of reference) for GEA-4 underscores the Philippines’ commitment to transitioning to clean energy while ensuring energy security. By ensuring a transparent and competitive selection process for renewable energy projects, we are accelerating the shift toward a more sustainable, secure, and resilient energy system,” Energy Undersecretary Rowena Cristina L. Guevara said in a statement.

The TOR sets out the technical, financial, and commercial requirements that will govern project selection, ensuring a transparent and competitive bidding process.

The DoE said that it will release updated GEAP guidelines to clarify the qualifications of eligible suppliers and ensure fair pricing mechanisms for projects under the program.

Under the new guidelines, qualified suppliers must either hold an RE service contract or possess a certificate of authority issued under the Revised Omnibus RE Guidelines.

“GEA-4 is expected to drive substantial investment in renewable energy, reinforcing its role as a key pillar of the Philippines’ energy transition,” the DoE said.

As a flagship government initiative, the program is seen to contribute to the country’s goal of achieving a 35% share in the power generation mix by 2030.

Asked to comment, Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said that offering such a large capacity in a single auction “sends a clear and strong message to investors about the Philippine government’s dedication to renewable energy development.”

“This large-scale opportunity could attract both local and international investments, showcasing the RE sector as a lucrative and stable avenue for growth,” Mr. Arce said in a Viber message.

“It further positions the country as a regional leader in green energy, potentially fostering long-term partnerships and technology transfer,” he added.

Last month, the DoE announced that GEA-3 attracted 7,500 MW worth of bids, exceeding the auction goal of 4,650 MW. The auction round covered pumped-storage hydro, impounding hydro, and geothermal.

An auction round dedicated to offshore wind projects is also set to launch in the third quarter of 2025, stepping up towards the Philippines’ goal to attain offshore wind power generation by 2028. – Sheldeen Joy Talavera, Reporter

Philippine shares slip as Trump tariff concerns weigh

PHilippine shares slipped further on Wednesday as losses on Wall Street due to the Trump administration’s trade policies spilled over to the domestic market.

The benchmark Philippine Stock Exchange index (PSEi) shed 0.18% or 11.29 points to end at 6,195.26 on Wednesday, while the broader all shares index inched down by 0.07% or 2.79 points to 3,681.80.

“The market fell further as investors took cues from Wall Street’s fall, driven by recession fears and cautious trading ahead of the release of the US inflation report,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“The market slipped anew on continued concerns about Trump’s erratic trade policy and a potential slowdown in the US economy,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

Wall Street closed lower on Tuesday. The Dow Jones Industrial Average index fell by 1.14% or 478.23 points to 41,433.48; the S&P 500 index sank by 0.76% or 42.49 points to 5,572.07; and the Nasdaq Composite index lost 0.18% or 32.22 points to end at 17,436.10.

US President Donald J. Trump’s increased tariffs on all US steel and aluminum imports took effect on Wednesday, stepping up a campaign to reorder global trade in favor of the US and drawing swift retaliation from Europe, Reuters reported.

Mr. Trump’s action to bulk up protections for American steel and aluminum producers restores effective global tariffs of 25% on all imports of the metals.

Mr. Trump’s hyper-focus on tariffs since taking office in January has rattled investor, consumer and business confidence in ways that economists worry could cause a US recession and further lag on the global economy.

Mr. Trump initially threatened Canada with doubling the duty to 50% on its steel and aluminum exports to the US but backed off after Ontario province suspended a move to impose a 25% surcharge on electricity exports to the states of Minnesota, Michigan and New York.

Meanwhile, February US consumer price index data were set to be released overnight.

Sectoral indices ended mixed on Wednesday. Services declined by 1.26% or 25.62 points to 2,006.06; mining and oil retreated by 0.8% or 70.36 points to 8,669.05; and financials went down by 0.63% or 15.04 points to 2,345.06.

Meanwhile, property increased by 1.24% or 27.41 points to 2,231.3; industrials climbed by 0.44% or 38.73 points to 8,730.86; and holding firms rose by 0.07% or 3.7 points to 5,202.69.

Value turnover declined to P5.98 billion on Wednesday with 741.54 million issues traded from the PHP 7.71 billion with 753.65 million shares exchanged on Tuesday.

Decliners outnumbered advancers, 127 versus 77, while 40 names were unchanged.

Net foreign buying stood at P2.62 million on Wednesday versus the PHP 350.28 million in net selling recorded on Tuesday. — R.M.D. Ochave with Reuters

Philippine banks to stay resilient, Moody’s says

The Philippine banking system is seen to remain resilient amid support from a strong macroeconomic environment, Moody’s Ratings said, with profits expected to be stable amid robust credit growth.

“We maintain a stable outlook for the Philippines’ (Baa2 stable) banking system. Strong economic growth underpinned by further rate cuts and stabilized inflation in 2025 will drive credit demand and support loan quality,” the debt watcher said in a report.

“Banks’ profitability will remain broadly stable as net interest margin compression will be modest because of the weak monetary policy transmission to banks’ lending rates in the Philippines.”

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the net profit of the country’s banking industry rose by 9.76% year on year to PHP 391.28 billion in 2024.

Moody’s said Philippine banks’ capitalization is expected to remain strong.

“Capital levels will remain high, as strong shareholder support and internal capital generation keep pace with high credit growth,” it said.

It expects bank’ credit growth to accelerate to an estimated 12% this year amid declining interest rates and surge in business activity and consumer sentiment.

Bank lending jumped by 12.8% to PHP 13.02 trillion in January, its fastest pace in over two years, central bank data showed.

“Reserve ratio requirement cuts by the central bank will also drive credit growth, by releasing more liquidity for banks to channel into lending,” Moody’s added.

The RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions will be reduced by 200 bps to 5% from 7% later this month. BSP Governor Eli M. Remolona, Jr. has said big banks’ RRR can be brought down to zero eventually.

“Strong credit growth and the increasing share of higher-yielding retail and small and medium enterprise (SME) loans will also support yields,” it said.

However, Moody’s noted that retail loans have been growing by 35% over the past two years, “posing loan seasoning risks.”

“Policy rate cuts will support borrowers’ debt repayment capacities, which will mitigate potential loan quality deterioration from the seasoning of newer retail and SME loans.”

The BSP began its easing cycle in August last year, slashing borrowing costs by a total of 75 basis points (bps) to bring the policy rate to 5.75%.

“Meanwhile, the quality of loans to large conglomerates will remain solid, notwithstanding the concentration risks they pose to banks,” Moody’s said.

“Loan loss reserves will decrease, but the larger Philippine banks will continue to have stronger buffers against any loan losses, compared to the smaller banks.”

Banks’ loan loss reserves amounted to P488.48 billion, up by 1.6% from P480.64 billion in December and by 5.7% from PHP 462.12 billion a year ago. This brought the January loan loss reserve ratio to 3.22% from 3.14% in December and 3.45% in the same month in 2024.

“Banks continue to reduce their real estate exposure and we expect stable operating conditions in the sector in 2025,” Moody’s added.

Banks’ real estate exposure ratio dropped to 19.55% at end-September from 19.92% at end-June and from 20.55% at the end of September in 2023. This was the lowest real estate exposure ratio recorded in five years or since the 19.5% as of September 2019.

Meanwhile, Moody’s expects credit costs to rise “modestly” as banks grow their retail and SME loan portfolios, but this can be offset by their loan loss reserves.

“Funding and liquidity in the banking system will remain robust,” it added.

Growth outlook

Moody’s Ratings expects the Philippine economy to grow by 6% this year and next, which will benefit banks.

The credit rater’s forecast is at the low end of the government’s 6-8% growth target for 2025 and 2026.

Philippine gross domestic product grew by 5.6% in 2024, well below the government’s 6-6.5% goal for the year.

“Although global uncertainties pose upside risks to inflation, we expect it to remain between 2% and 4%, which will support further policy rate cuts in 2025,” it said.

“As a result, domestic consumption and investments will improve, giving further stimulus to the economy,” it said. “Given the country’s consumption-led economic model, we expect the impact of higher tariffs on the Philippines under the Trump administration to be muted compared to its regional peers.”

On Tuesday, Mr. Remolona said a rate cut is “on the table” at the Monetary Board’s policy meeting next month, which has been rescheduled to April 10 from April 3 previously.

He added that the BSP is still on easing mode and expects to slash benchmark borrowing costs by “a few more times” this year.

The Monetary Board in February unexpectedly paused its rate-cut cycle, which Mr. Remolona said was a “prudent” move amid uncertainty over the trade policies of US President Donald J. Trump and their potential impact on the Philippines. – Luisa Maria Jacinta C. Jocson, Reporter

BSP says April rate cut still ‘on the table’

The Bangko Sentral ng Pilipinas (BSP) could resume its easing cycle as early as its next meeting on April 10, its top official said.

BSP Governor Eli M. Remolona, Jr. said a rate cut is still “on the table” at the Monetary Board’s meeting next month, signaling “a few more” rate cuts for the rest of the year.

“Let me say that we see ourselves still on the easing cycle. We are expecting to cut a few more times this year. But how much, we haven’t determined,” he said at a forum.

Mr. Remolona also confirmed that the Monetary Board’s next meeting would be moved to April 10 from April 3.

“When we think we’re on track, more or less on track, we stay with baby steps, which means 25 basis points (bps) at a time,” he said.

The central bank unexpectedly kept rates steady at its February policy review, opting to keep the benchmark at 5.75%.

This after it delivered three straight 25-bp cuts at each of its meetings in August, October and December.

“If things look much worse than we thought — that’s what we call a hard landing — it can be up to 50 bps of a cut, even more, but as long as we’re more or less on track, it will be 25 bps at a time,” Mr. Remolona said.

However, a hard landing or a recession scenario is “highly unlikely,” he added.

The Philippine economy grew by a slower-than-expected 5.2% in the fourth quarter, bringing 2024 growth to 5.6%. The full-year growth was well below the 6-6.5% target.

This year, the government is targeting 6-8% growth.

Mr. Remolona said the central bank considers several scenarios in its policy decisions.

“There’s the baseline scenario, which is kind of saying we’ll cut by this many times the rest of the year. Then we have a hawkish scenario, which means fewer cuts. And then there’s the dovish scenario, which means more cuts than the baseline,” he said.

“We compare those three scenarios and how we see inflation evolving, how we see growth evolving. It’s a balancing act between inflation and growth and so we have to weigh the different factors.”

The BSP chief also noted they are still reworking the current models to account for risks.

At their February meeting, Mr. Remolona said “global trade uncertainties” were the primary reason behind the policy hold.

“There are still a lot of numbers to look at. Of course, we’re recalibrating our models to take account of uncertainty,” he said.

Headline inflation sharply eased to 2.1% in February from 2.9% in January and 3.4% a year ago.

The February print was also below the 2.2%-3% forecast from the central bank.

“We did miss the inflation number on the low side, lower than the bottom of our range. If we’re going to miss it, that’s the way to miss it, right? So, we’re happy about that miss,” Mr. Remolona said.

“Then we’ll look at all the other numbers, and then we’ll decide on April 10 whether to ease further or not to ease.”

Further RRR cuts

Mr. Remolona also cited the possibility of another reserve requirement ratio (RRR) cut, possibly within the year.

Asked if the BSP could slash reserve requirements again before the year ends, he said this was “possible.”

“For me, 5% is still high. But I’m just one vote. We’re seven on the Monetary Board. But it can’t be sudden because we need to control the liquidity that’s coming out,” he added.

The RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions will be reduced by 200 bps to 5% from 7% later this month.

Digital banks’ RRR will also be cut by 150 bps to 2.5%, while the ratio for thrift lenders will be lowered by 100 bps to 0%.

Rural and cooperative banks’ RRR has been zero since October, the last time the BSP cut reserve requirements.

Big banks’ RRR can be brought down to zero eventually, Mr. Remolona said. “It can be zero. In the US, the RRR is zero.”

The BSP chief said there is a “subtle difference” between the policy rate and reserve requirement. Reducing either one stimulates the economy, he said.

“But the policy rate, there’s a kind of cycle, you don’t want to lower it and then raise it the next time. You want to just keep going in baby steps.”

“The reserve requirement, you can just stop. You lower it, that’s it, and then there’s no kind of cycle that you have to worry about. The markets are disrupted when you change the cycle, especially with the policy rate.”

Eye on peso

Meanwhile, Mr. Remolona said they are closely monitoring the movements of the peso.

“We always worry about the exchange rate. But not for the reasons other people worry about the exchange rate. We worry about the exchange rate because if it moves too much, especially when it weakens, it can be inflationary.”

The peso closed at PHP 57.225 per dollar on Tuesday, strengthening by 18.5 centavos from its PHP 57.41 finish on Monday.

The peso had been under pressure late last year, falling to the record-low PHP 59-per-dollar level thrice.

“We monitor the exchange rate. But not because we want the peso to stay low or to stay high. We monitor it because of the possible inflation consequences,” he added.

Mr. Remolona also clarified how the central bank manages its gold reserves.

“Gold as an asset, it’s a very poor investment. The return is negative because it has custody fees. Our gold is in the Bank of England, we pay there so they can store our gold. That’s where the market is,” he said in mixed English and Filipino.

“But it’s very volatile. So, by itself, it’s a very poor investment. It’s risky and the average return is negative.”

Latest BSP data showed the value of the central bank’s gold holdings went up by 2.5% to $12.5 billion at end-February from $11.75 billion a month ago. It likewise jumped by 16.6% from $10.34 billion in the same period in 2024.

“But if you hold it as a part of a large portfolio, and our portfolio is mainly dollar assets, it’s a good hedge… especially when there are geopolitical (uncertainties),” he said.

Mr. Remolona said the central bank sold gold reserves as prices of the precious metal increased, so the gold in the BSP’s reserves breached the “ideal ratio of between 8% and 10%.”

Most of the BSP’s gold reserves are in the Bank of England, with a small amount kept by the New York Federal Reserve. – Luisa Maria Jacinta C. Jocson, Reporter

Banks’ bad loan ratio up in January

Philippine banks’ asset quality worsened as the industry’s gross nonperforming loan (NPL) ratio rose in January, according to data from the Bangko Sentral ng Pilipinas (BSP).

Preliminary data from the central bank showed the bad loan ratio rose to 3.38% in January from 3.27% in December. This was the highest in two months or since the 3.54% in November.

However, this was lower than 3.44% in the same month in 2024.

Data from the central bank showed the amount of soured loans went up by 2.5% to PHP 512.83 billion in January from PHP 500.43 billion a month earlier.

Year on year, bad loans rose by 11.3% from PHP 460.76 billion.

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

The total loan portfolio of the banking system stood at PHP 15.18 trillion as of end-January, down by 1% from PHP 15.32 trillion at end-December. Year on year, it jumped by 13.4% from PHP 13.38 trillion a year ago.

Past due loans increased by 4.6% month on month to PHP 633.07 billion from PHP 605.22 billion. It likewise climbed by 10.8% from PHP 571.56 billion a year earlier.

This brought the past due ratio to 4.17%, higher than 3.95% in December but lower than 4.27% a year ago.

Meanwhile, restructured loans inched up by 0.3% to PHP 311.22 billion in January from PHP 310.44 billion in December. It rose by 3.1% from PHP 302 billion in January 2024.

Restructured loans accounted for 2.05% of the industry’s total loan portfolio, a tad above the 2.03% in the month prior but lower than 2.26% in January 2024.

Banks’ loan loss reserves amounted to PHP 488.48 billion, up by 1.6% from PHP 480.64 billion in December and by 5.7% from PHP 462.12 billion a year ago.

This brought the January loan loss reserve ratio to 3.22% from 3.14% in December and 3.45% in the same month in 2024.

Lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, slipped to 95.25% in January from 96.04% in December and 100.29% in 2023.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the uptick in the NPL ratio reflects the continued growth in bank loans.

Latest data from the BSP showed bank lending jumped by 12.8% to P13.02 trillion in January, its fastest pace in over two years.

“The higher NPL in January may be reflective of higher loan demand during the holiday season up until the start of 2025 but I don’t think this is a cause for concern on liquidity,” Reinielle Matt M. Erece, economist at Oikonomia Advisory and Research, Inc., said.

“Slow economic growth that we saw in the last quarter may also be a cause of struggle in the repayment of these loans due to slow earnings growth,” he added.

The central bank’s rate-cutting cycle in the latter half of the year also bolstered demand for loans, Mr. Ricafort said.

The BSP began its easing cycle in August last year and slashed borrowing costs for three straight meetings, reducing the key rate by a total of 75 basis points (bps) by end-2024.

“The slight monthly pickup on NPL ratio may have to do with the seasonal slowdown in sales, earnings, and other business activities upon crossing the new year from the Christmas holiday season that is considered one of highest in sales for many businesses,” he added.

For the coming months, Mr. Ricafort said the recent cut in banks’ reserve requirement ratio (RRR) could infuse liquidity into the financial system and boost banks’ loans and investments.

Effective March 28, the BSP will cut the RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions by 200 bps to 5% from 7%.

It will also reduce the RRR for digital banks by 150 bps to 2.5%, while the ratio for thrift lenders will be lowered by 100 bps to 0%.

Rural and cooperative banks’ RRR has been zero since October, the last time the BSP cut the reserve requirements.

“We expect NPLs to improve in the remaining months of the year as interest rates go down and as faster economic growth supports higher incomes for consumers and businesses alike, helping them meet their obligations,” Mr. Erece added. — Luisa Maria Jacinta C. Jocson

Meralco hikes rates for households this March

Typical households in areas served by Manila Electric Co. (Meralco) can expect higher electricity bills this month as the power distributor is set to hike rates by PHP 0.2639 per kilowatt-hour (kWh) due to higher transmission charge and feed-in tariff allowance (FIT-All).

The upward adjustment pushed the overall rate to PHP 12.2901 per kWh in March from PHP 12.0262 per kWh in February, the company said in a statement on Tuesday.

Households consuming 200 kWh will see their monthly electricity bills go up by around PHP 53. Those consuming 300 kWh, 400 kWh, and 500 kWh will have to pay an additional PHP 79, PHP 106, and PHP 132, respectively.

Meralco attributed the rate increase to the conclusion of the one-time refund on regulatory reset fee, equivalent to PHP 0.2264 per kWh for its customers. The refund was implemented last month as ordered by the Energy Regulatory Commission (ERC).

Also contributing to higher rates was the PHP 0.1294 per kWh increase in transmission charge due to higher ancillary service charges incurred by the National Grid Corp. of the Philippines. The transmission charge for March also covered the second of three monthly collections for the recovery of costs of reserve market suppliers.

The ERC directed the recovery of the remaining 70% of the reserve market settlement fees incurred in March last year. This will be reflected in customers’ bills until April.

Adding to the upward adjustment was the implementation of the new FIT-All rate of PHP 0.1189 per kWh, which was higher than the previous rate of PHP 0.0838 per kWh.

The FIT-All is a uniform charge billed to all on-grid electricity consumers to support the development and promotion of renewable energy.

Other charges, which included taxes, increased by PHP 0.0416 per kWh.

“Such increases were mitigated by the lower generation charge for February supply month that impacted the March billings of Meralco customers. The reduction is almost 17 centavos per kWh in generation charge,” Joe R. Zaldarriaga, Meralco vice-president and head of corporate communications, said in Filipino during a briefing.

The generation charge fell by PHP 0.1686 per kWh to PHP 7.0517 from PHP 7.2203 per kWh last month due to lower costs from Meralco’s supply sources.

The peso appreciation against the US dollar pushed down the charges from independent power producers (IPP) and power supply agreements (PSA) to PHP 1.0143 per kWh and P0.2934 per kWh, respectively. Around 98% of IPP costs and 61% of PSA costs were dollar-denominated.

The peso closed at PHP 57.995 on Feb. 28, strengthening by 37 centavos from its PHP 58.365 finish on Jan. 31.

Charges in the Wholesale Electricity Spot Market (WESM), the trading floor of electricity, decreased by PHP 0.2247 per kWh due to the improved supply situation in Luzon.

IPPs, PSAs, and WESM accounted for 31%, 47%, and 22% respectively of the company’s total energy requirement for the period.

“Pass-through charges for generation and transmission are paid by Meralco to the power suppliers and the grid operator, respectively; while taxes, universal charges, and FIT-All are all remitted to the government,” Meralco said.

The company’s distribution charge has not moved at PHP 0.0360 per kWh since August 2022.

Lawrence S. Fernandez, Meralco vice-president and head of utility economics, said prices at the spot market might shoot up after the declaration of a yellow alert over the Luzon grid last week.

“Let’s see what will happen for the rest of the month. Demand has moderated a bit after that one time of yellow alert. So, we’ll have to see what the situation will be for the rest of the month,” he said.

Meanwhile, Mr. Zaldarriaga said Meralco’s energy requirements are fully covered by its suppliers as the summer season approaches.

“We entered into an emergency power supply agreement to cover our requirements, especially during peak load come the summer months. Although it has not been officially declared, we already feel the impact of the temperature levels on our demand,” he said.

“So, as long as there will be no unplanned and forced outages from the plants and as long as transmission will be able to supply the load coming from the power plants, we don’t see any problems come the summer months,” he added.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Sheldeen Joy Talavera

Treasury fully awards reissued bonds

The government made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday as the papers attracted strong demand amid better risk sentiment and after Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. signaled a possible rate cut next month.

The Bureau of the Treasury (BTr) raised PHP 30 billion as planned via the reissued 10-year bonds it auctioned off on Tuesday as total bids reached PHP 81.761 billion or almost thrice as much as the amount on offer.

The bonds, which have a remaining life of seven years and six months, were awarded at an average rate of 6.143%. Accepted bid yields ranged from 6.12% to 6.15%.

“With its decision, the Committee initially raised the full program of PHP 30 billion while accepting further subscription through the tap facility. The total outstanding volume for the series is currently at PHP 358.6 billion,” the Treasury said in a statement.

The average rate of the reissued papers was 17.5 basis points (bps) higher than the 5.968% fetched for the series’ last award on Feb. 11, but 60.7 bps lower than the 6.75% coupon for the issue.

This was also 4.7 bps above the 6.096% quoted for the seven-year bond — the benchmark tenor closest to the remaining life of the papers on offer — but 3 bps lower than the 6.173% seen for the same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

“Strong demand was seen following the drop in US Treasury yields overnight. This morning, BSP Governor Remolona also said a cut is on the table for the April 10 Monetary Board meeting, adding to improvement in risk sentiment,” a trader said in a text message.

Stocks slumped globally on Monday, while US bond yields dropped as investor worries about the potential economic slowdown were exacerbated after President Donald J. Trump did not rule out a recession resulting from his tariffs, Reuters reported.

MSCI’s global stock index fell more than 2% for its biggest one-day drop since August while Nasdaq led Wall Street losses, ending down 4% for its steepest percentage loss since Sept 2022.

Investors had started seeking safety as early as Sunday when Mr. Trump in a Fox News interview talked about a “period of transition” while declining to predict whether his tariffs on China, Canada and Mexico would result in a US recession.

MSCI’s gauge of stocks across the globe fell 19.37 points or 2.27% to 832.73 after touching its lowest level since Jan. 13.

In fixed income, yields fell with US government bonds in demand after the Trump interview cut into investor confidence.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 10.4 bps to 3.898% from 4.002% late on Friday, on track for their largest daily drop since September.

The yield on benchmark US 10-year notes fell 9.3 bps to 4.225%, while the 30-year bond yield fell 6.9 bps to 4.548%.

Meanwhile, Mr. Remolona on Tuesday said a rate cut is “on the table” at the Monetary Board’s policy meeting next month, which has been rescheduled to April 10 from April 3 previously.

He added that the BSP is still on easing mode and expects to slash benchmark borrowing costs by “a few more times” this year.

In a move that surprised the market, the Monetary Board in February paused its nascent rate-cut cycle, which Mr. Remolona said was a “prudent” move amid uncertainty over the trade policies of US President Donald J. Trump and their potential impact on the Philippines.

He earlier said that the central bank will likely continue reducing interest rates by 25 bps at a time, with 50 bps in cuts still on the table this year.

The BSP last year cut benchmark rates by a total of 75 bps via three consecutive 25-bp reductions since it began its easing cycle in August, bringing the policy rate to 5.75%.

The BTr is looking to raise PHP 147 billion from the domestic market this month, or PHP 22 billion from Treasury bills and PHP 125 billion from T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy with Reuters

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