Philippine banks’ July bad loan ratio rises to 3.35%

PHILIPPINE BANKS’ nonperforming loan (NPL) ratio worsened in July as soured debt rose, preliminary Bangko Sentral ng Pilipinas (BSP) data showed.

Banks’ gross NPL ratio rose to 3.35% in July from 3.29% a month earlier, but eased from 3.4% in the same month last year.

This was the highest bad loan ratio in two months or since 3.44% in May.

Banks saw P585.081 billion in nonperforming loans at end-July, 9.27% higher than the P535.448 billion recorded a year ago. Month on month, soured loans inched up by 0.02% from P584.971 billion as of June.

Loans are considered nonperforming once they are 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 book of Philippine banks stood at P17.448 trillion as of July, down by 1.88% from P17.781 trillion in the previous month. However, it went up by 10.63% from the P15.771-trillion portfolio it had in July 2025.

BSP data also showed banks’ loan loss reserves edged down by 0.06% to P540.895 billion from P541.238 billion in June but grew by 5.63% from P512.061 billion a year earlier.

Loan loss reserves accounted for 3.1% of the system’s total loan portfolio as of end-July, higher than the 3.04% in June but lower than 3.25% the prior year.

Banks’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, slipped to 92.45% in July from 92.52% the previous month. This was also down from 95.63% a year ago. — Katherine K. Chan