Philippine banks’ nonperforming loan (NPL) ratio fell to a nine-month low in September, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP). The ratio dropped to 3.27%, down from 3.35% in August and 3.31% a year earlier.
This decline came as soured loans decreased by 0.51% to P593.275 billion in September, compared to P596.299 billion in August. However, on a year-on-year basis, soured loans climbed by 10.09% from P538.924 billion.
Loan Portfolio Growth and Past Due Loans
The banking industry’s total loan portfolio reached P18.133 trillion at the end of September, marking a 1.97% increase from P17.783 trillion in August and an 11.42% rise from P16.276 trillion a year earlier.
Past due loans rose by 0.24% to P771.748 billion in September, up from P769.891 billion in August. This figure also represents a 13.86% increase from P677.822 billion at the end of September 2025.
The Philippine banking sector has shown resilience in managing credit stress, with steady lending activity playing a key role in maintaining asset quality.
Despite the rise in past due loans, the past due loan ratio fell to 4.26% in September, down from 4.33% in August, although it worsened from 4.16% a year prior.
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Restructured Loans and Loan Loss Reserves
Restructured loans increased by 0.65% to P342.783 billion in September, up from P340.581 billion in August. This accounts for 1.89% of the sector’s total loan book, lower than the 1.92% seen a month earlier and the 2.04% from last year.
Loan loss reserves rose by 0.43% to P557.979 billion in September, compared to P555.596 billion in August. This also represents a 10.32% growth from P505.768 billion in September 2025.
The NPL coverage ratio, which measures the allowance for potential losses due to bad loans, climbed to 94.05% at the end of September, up from 93.17% in August and 93.85% a year ago.
Expert Analysis and Future Outlook
The BSP’s recent 50-basis-point hike in its key policy rate, bringing it to a nearly two-year high of 5.5%, shows the central bank‘s commitment to managing inflationary pressures. Governor Eli M. Remolona, Jr. has indicated that further tightening may be necessary, as inflation is expected to remain raised until next year.
As the Monetary Board prepares for its final meeting of the year on December 17, the Philippine banking sector’s ability to maintain its NPL ratio at a nine-month low reflects a combination of robust risk management practices and a resilient economic environment.
Loan Growth and Economic Outlook
Total outstanding loans from major banks, excluding reverse repurchase agreements, increased by 11% annually to P15.121 trillion by the end of August. This growth outpaced the 10.4% expansion recorded in July, marking the fastest lending growth in three months.
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