Philippine banks’ NPL ratio eases in November

The Philippine banking system’s gross nonperforming loan (NPL) ratio eased at end-November, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Philippine banks’ gross NPL ratio dipped to 3.32% as of November 2025 from 3.33% the prior month and from the 3.54% seen in the same month in 2024.

This was the lowest bad loan ratio since end-September or when it settled at 3.31%.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said recent rate cuts helped encourage loan repayments, easing banks’ NPL ratio at end-November.

The key policy rate now stands at a three-year low of 4.5% as the central bank has delivered a total of 200 basis points (bps) in cuts since August 2024.

The BSP also lowered large banks’ reserve requirement ratio (RRR) to 5%, which Mr. Ricafort said increased the banking system’s liquidity and lenders’ loanable funds.

“All of these reduced borrowing costs and improved the ability to pay by various borrowers, thereby leading to (a) slightly lower (and) better NPL ratio,” he said in a Viber message.

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

The amount of banks’ soured loans edged up by 1.46% month on month to PHP 544.863 billion at end-November from PHP 537.028 billion at end-October. Nonperforming loans climbed by 4.69% from the PHP 520.477 billion in November 2024.

In the first 11 months, the total loan portfolio of the banking system reached PHP 16.411 trillion, rising by 1.91% from the PHP 16.104 trillion at end-October and by 11.49% from PHP 14.719 trillion in the same period in 2024.

Past due loans inched up by 1.18% to PHP 695.982 billion as of November from PHP 687.836 billion in the previous month and by 9.52% from PHP 635.478 billion at end-November 2024.

Still, banks’ past due loan ratio fell to 4.24% from 4.27% in October and 4.32% a year ago.   

Meanwhile, restructured loans dipped by 0.47% to PHP 331.276 billion in November from PHP 332.823 billion in October. Year on year, it grew by 12.79% from PHP 293.702 billion as of November 2024.

This made up 2.02% of the industry’s total loan portfolio, below the 2.07% in October but slightly higher than the 2% recorded a year prior.

On the other hand, banks’ loan loss reserves stood at PHP 517.185 billion in the 11-month period, up 1.75% from PHP 508.273 billion a month ago. It likewise rose by 6.6% year on year from PHP 485.158 billion.

This brought the past due loan ratio to 3.15%, easing from 3.16% as of October and 3.3% at end-November 2024.

Lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, climbed to 94.92% in the 11 months to November from 94.65% in the previous month and 93.21% as of November 2024.

“The continued double-digit growth in banks’ loans mathematically broadens the loan base that fundamentally reduces the NPL ratio, especially if NPLs are tempered through credit risk management that is better aligned with global best practices,” Mr. Ricafort said.

Based on separate BSP data, bank lending posted a steady growth in November. It expanded by 10.3% year on year, matching October’s pace, to PHP 13.988 trillion from PHP 12.676 trillion. — Katherine K. Chan, Reporter