Philippine banks’ bad loan ratio climbed to 3.33 percent in February, marking its highest level in six months—a level that remains manageable but still warrants closer monitoring if higher interest rates persist.

According to the latest Bangko Sentral ng Pilipinas (BSP) data, the banking industry’s non-performing loan (NPL) ratio in February was the worst level since August 2025’s 3.5-percent ratio.

Soured loans in February worsened from 3.31 percent in January and were also significantly higher than the 3.07 percent recorded at end-December 2025.

As of end-February 2026, gross NPLs increased to ₱553.7 billion from ₱550.8 billion in January. Loans become non-performing if they remain 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 decreased slightly to ₱16.6 trillion in February from ₱16.64 trillion in January. This followed a larger contraction from the ₱17.12-trillion total loan portfolio recorded at the end of 2025.

Past-due loans climbed to ₱715.7 billion in February from ₱711.6 billion the previous month. This brought the past-due ratio to 4.31 percent, up from 4.28 percent in January and significantly higher than the 3.94 percent seen in December 2025.

Past-due loans are those for which the borrower has failed to pay principal, interest, or any amount due.

Reyes Tacandong & Co. senior adviser Jonathan Ravelas said the share of soured loans in the industry’s total loan book remains “very manageable and well below stress levels, with banks still well-capitalized and properly provisioned.”

Ravelas argued that the development reflects “normalization” or adjustment to elevated borrowing costs, not a credit problem.

“The slight uptick in NPLs reflects the lagged impact of last year’s high interest rates, some seasonal cash-flow pressure early in the year, and faster loan growth, where a bit of slippage is normal at the margins,” Ravelas said.

While the February print is considered a “mild bump,” or something not overly concerning, it still reinforces the need for closer monitoring if lending rates stay elevated.