Tuesday, November 28, 2023


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The bad loan ratio for lenders in PHL has decreased to its lowest point in 4 months.

By Keisha B. Ta-asan, Reporter

The amount of problem loans held by Philippine banks decreased compared to the previous year as of the end of August, resulting in a decrease in the nonperforming loan ratio to the lowest level in four months, despite the high cost of borrowing.

According to the most recent data from the Bangko Sentral ng Pilipinas (BSP), the gross non-performing loan (NPL) ratio of the banking sector decreased to 3.42% from 3.43% at the end of July, and from 3.53% in the same month last year.

The NPL ratio for August was the lowest it has been in four months, or since April when it was at 3.41%.     

The amount of bad loans decreased by 5.9% compared to the previous year, reaching P442.9 billion by the end of August. However, this was still 0.6% higher than the P440.1 billion recorded at the end of July.

Loans become nonperforming after 90 days of being overdue. This classification indicates that the borrowers are unlikely to repay the loans, making them a risky asset.

According to ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa, the NPL ratio has decreased due to better income sources which allow borrowers to meet their debt obligations. This was stated in an email on Tuesday.

According to BSP data, the gross loan portfolio of banks increased by 9.4% to P12.96 trillion in August compared to P11.84 trillion a year earlier. It also rose by 1.09% from P12.82 trillion in July.       

In August, the amount of overdue loans increased by 8.4% compared to the previous year, reaching P538.19 billion. However, the percentage of overdue loans decreased from 4.19% to 4.15%.

The amount of restructured loans decreased by 4.3%, reaching P306.05 billion by the end of August. This made up 2.36% of banks’ total loans, which was slightly lower than the 2.7% recorded in August 2022.

The amount of money set aside by banks to cover potential loan losses increased by 9.14% to P456.27 billion as of August from P418.05 billion last year. As a result, the loan loss reserves ratio decreased slightly from 3.53% to 3.52%.   

The NPL coverage ratio for the industry saw an increase from 83.65% to 85.98% in 2022.

According to Michael L. Ricafort, Chief Economist of Rizal Commercial Banking Corp., the decrease in the NPL ratio in August can be attributed to the ongoing expansion of loans, which has widened the foundation.

According to data from the BSP, loans given by major banks increased by 7.2% compared to the previous year, reaching P11.06 trillion in August. However, this growth was slower than the 7.7% recorded in July and was the lowest in the past 20 months since it was only 4.8% in December 2021.

Mr. Ricafort stated that the reopening of the economy led to an increase in the earnings and well-being of borrowers, resulting in a better capacity to repay loans.

On the other hand, the increased prices and interest rates may weigh heavily on consumers, according to his statement.

In the future, continuous economic growth should contribute to reducing the NPL ratio. However, the burden of high borrowing costs may potentially cause a steady rise in NPLs in the upcoming months, according to Mr. Mapa.


The Monetary Board has maintained the benchmark interest rate at 6.25% since March, following a 425 basis point increase in borrowing costs from May 2022 to March 2023 in an effort to control inflation.flation.

At the end of December 2022, the NPL ratio was 3.16%, which is lower than the 3.99% reported at the end of 2021.