The non-performing loan (NPL) ratio of Philippine banks decreased to 3.29% in June from 3.44% in May, reaching its lowest point since December 2025 (3.07%). This improvement was attributed to the robust expansion of the banking system's gross loan portfolio, which grew by 11.9% to P17.78 trillion from P15.88 trillion a year ago. Despite this, gross bad loans in peso terms still increased by 10.3% to P584.94 billion in June, up from P530.29 billion in the same period last year. Past due loans, which are credit obligations with missed payments but not yet classified as non-performing, also rose by 12.4% to P753.4 billion from P670.5 billion a year prior.
Banks continued to bolster their provisions for potential losses, with allowance for credit losses climbing by 7% to P541.24 billion from P505.91 billion in June last year. However, the NPL coverage ratio, which measures loan loss reserves against bad loans, slightly slipped to 92.53% from 95.42% a year ago, though it improved from 88.92% in May. Jonathan Ravelas, a senior adviser at Reyes Tacandong & Co., commented that the easing NPL ratio in June reflects the Philippine economy's resilience, supported by moderating inflation.
Looking ahead, analysts suggest that while bad loans should remain manageable, banks must stay vigilant regarding risks stemming from global uncertainties and weather-related disruptions. Overall, the banking sector is considered fundamentally sound and well-positioned to manage potential credit risks. This recent data indicates a positive trend for the banking industry's loan quality, contrasting with earlier concerns about rising NPLs due to global events like the Middle East conflict which had pushed the NPL ratio to 3.37% in April, an eight-month high at the time bworldonline.com.
