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By Luisa Maria Jacinta C. Jocson, Senior Reporter
THE PHILIPPINE banking system’s nonperforming loan (NPL) ratio reached a five-month peak in April, initial data from the Bangko Sentral ng Pilipinas (BSP) revealed.
The proportion of bad loans among banks climbed to 3.39% in April from 3.3% in March. Nevertheless, it declined from 3.45% year-on-year.
This marked the highest bad loan ratio in five months or since the 3.54% recorded in November 2024.
BSP data indicated that problematic loans rose by 0.6% to P519.23 billion as of April from P516.12 billion a month earlier.
On a yearly basis, bad loans surged by 8% from P480.65 billion in the same month in 2024.
Loans are classified as nonperforming when they remain unpaid for at least 90 days past the due date. Such loans are considered risk assets, as borrowers are less likely to repay.
BSP statistics also revealed that the entire loan portfolio of the banking system amounted to P15.34 trillion as of the end of April, a decrease of 1.9% from P15.63 trillion at the end of March. Conversely, it experienced a 10% increase from P13.94 trillion a year prior.
Delinquent loans increased by 1.1% to P653.26 billion in April from P646.37 billion in March. It also rose by 5.7% from P618.04 billion a year earlier.
This elevation brought the ratio of past due loans to 4.26%, surpassing 4.14% in March, yet lower than 4.43% during the same timeframe in 2024.
Restructured loans saw a slight increase of 0.1% to P311.66 billion in April from P311.48 billion month-on-month. Annually, it rose by 7.3% from P290.37 billion.
Restructured loans represented 2.03% of the total loan portfolio in April, up from 1.99% in the previous month but lower than 2.08% in April 2024.
The loan loss reserves of banks amounted to P493.79 billion, rising by 0.7% from P490.56 billion a month ago and by 4.8% from P471.35 billion a year earlier.
This brought the loan loss reserve ratio to 3.22% in April, higher than 3.14% in the previous month but lower than 3.38% a year ago.
The NPL coverage ratio of lenders, which measures the provision for potential losses from bad loans, was at 95.1% in April, slightly down from 95.05% in March and 98.07% a year prior.
“The increase in the NPL ratio may reflect a delayed response to stricter financial conditions, high-interest rates, and ongoing cost of living challenges for both households and businesses,” stated John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies.
“While still relatively modest and manageable, the uptick signifies early indicators of stress, particularly among vulnerable borrowers such as MSMEs (micro, small, and medium enterprises) and lower-income consumers. In my view, it is not yet a cause for concern, but it does serve as a prompt for banks to stay aware in their credit risk management.”
The Chief Economist of Rizal Commercial Banking Corp., Michael L. Ricafort, noted that the minor rise in NPLs is noticeable amidst decelerating growth in bank loans.
Bank lending advanced by 11.8% year-on-year to P13.19 trillion in March, marking its slowest growth in four months, as loan growth for production and consumer activities diminished.
Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., mentioned that the rise in unemployment could also contribute to the increase in NPLs.
“From the consumer perspective, rising unemployment in recent months may indicate slower earnings growth, making it more challenging to repay loans. Additionally, sluggish demand and business growth may also affect business cash flows during this period,” he remarked.
The unemployment rate increased to 4.1% in April from 3.9% in March and 4% a year earlier, as per the latest data from the local statistics authority.
This corresponds to approximately 2.06 million unemployed Filipinos in April, an increase from 1.93 million the previous month and 2.04 million a year earlier.
“If the trend persists over the upcoming months, it could signal that certain sectors of the economy are encountering challenges in servicing debt, possibly due to slower-than-anticipated income recovery or tightening liquidity,” Mr. Rivera commented.
“Monetary authorities and banks will likely keep a close eye on this situation. If credit quality deteriorates further, it could lead to more cautious lending practices and affect the overall pace of credit growth, potentially impacting economic recovery and domestic consumption.”
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