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Manila Bulletin devider Business devider Banking & Finance devider Philippine banks' bad loan ratio worsens, hitting nine-month peak

Philippine banks' bad loan ratio worsens, hitting nine-month peak

Published Oct 13, 2025 12:01 am  |  Updated Oct 11, 2025 01:38 pm
Philippine banks’ bad loan ratio climbed further to 3.5 percent in the first nine months as borrowers’ ability to repay debts weakened due to muted business activities, mainly from climate disruptions and trade setbacks.
According to the latest data from the Bangko Sentral ng Pilipinas (BSP), the banking industry’s non-performing loan (NPL) ratio worsened further to a nine-month high in August.
The industry’s bad loan ratio first rose in July, reaching its highest level in eight months at 3.4 percent. Its continued increase in August, however, remains below the 3.59 percent seen in the same month last year.
The bad loan ratio is the percentage of banks’ total loans that are considered non-performing—meaning the principal or interest is unpaid for at least 90 days after the due date, and are thus deemed at risk of default.
BSP data showed bad loans rose by 2.7 percent to ₱550.1 billion at end-August from ₱535.4 billion a month ago. Year-on-year, soured loans rose by 7.3 percent from ₱512.7 billion in August last year.
Loans become non-performing if unpaid for at least 90 days past the due date, posing a credit risk as borrowers are less likely to repay.
Philippine banks’ total loan book dropped by 0.4 percent to ₱15.71 trillion as of end-August from ₱15.77 trillion in the previous month. Year-on-year, the end-August figure rose by 9.9 percent from ₱14.3 trillion a year ago.
Past-due loans increased by 0.8 percent to ₱693.1 billion as of August from ₱687.6 billion a month ago. They also rose by 9.8 percent from ₱631.4 billion in the previous year.
This brought the past-due ratio to 4.41 percent, marking the highest record in a year, or since the 4.42 percent in August last year.
Past-due loans are those where the borrower has failed to pay principal, interest, or any installment on time, including restructured loans and other financial assets.
Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort attributed the nine-month high in bad loans to successive typhoons and flooding since July, which disrupted business operations, lowered sales and profits, and weakened some borrowers’ ability to repay.
“This is on top of the slower global and local economy due to US President Donald Trump’s higher tariffs, protectionist measures, and the resulting trade wars that reduced exports, investments, jobs, and other business activities,” Ricafort added.

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Bangko Sentral ng Pilipinas (BSP)
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