For the second month in a row, banks’ non-performing loan (NPL) ratio increased to 3.31 percent from 3.28 percent in January, based on Bangko Sentral ng Pilipinas (BSP) data. The latest bad loans ratio is however lower compared to same period in 2022 of 4.24 percent. Before January when the NPL ratio rose to 3.28 percent from 3.16 percent in December 2022, it has been continuously declining since March 2022. Total NPLs, which are unpaid loans for more than 90 days, as of February fell by 13 percent year-on-year to P411.19 billion from same time in 2022 of P472.66 billion. The total loan portfolio was at P12.42 trillion during the period, up by 11.33 percent from same time time last year of P11.15 trillion. Meanwhile, banks’ past due ratio or the delinquency rate as of February dipped to 4.04 percent compared to five percent in 2022. Loan accounts are considered past due if unpaid on due dates but banks may provide a cure period within 30 days to allow borrowers to catch up. At the current P502.11 billion past due loans, this was 10 percent lower than P557.96 billion last tear. As for banks’ NPL coverage ratio which are loan loss reserves, this was higher at 104.95 versus 86.12 in 2022. Loan loss reserves to NPL ratio is the proportion of loan provisions against probable losses to the total NPLs. The banking sector allotted P431.52 billion as allowance for credit losses during the period, up by 5.67 percent compared to same time last year of P407.03 billion. The BSP said that in the last three years of the pandemic, the industry always had adequate allowance for credit losses to match the increase in NPLs. Based on the latest BSP Banking Sector Outlook Survey (BSOS), which was released earlier this month, banks remain resilient with adequate liquidity and capital buffers. All banks surveyed have indicated intentions to maintain risk-based capital levels higher than 10 percent based on the BSP minimum, and eight percent according to the Bank for International Settlements standards. When it comes to loan quality, the BSP said 52.4 percent of surveyed banks expect an NPL ratio of above five percent in the next two years. This is considered “low and manageable expectations” on soured loans, based on the BSOS. Big banks’ NPL ratio projection is about two percent to three percent in the next two years while most of the large lenders estimate their NPL coverage ratio to be at least 75 percent to more than 100 percent.