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Manila Bulletin devider Business devider Banking & Finance devider Banks post lowest bad-loan ratio since December as inflation eases

Banks post lowest bad-loan ratio since December as inflation eases

Published Jul 27, 2026 12:00 am  |  Updated Jul 25, 2026 01:35 pm
Philippine banks’ bad-loan ratio fell to 3.29 percent at the end of June 2026, dropping to its lowest level in six months and rebounding from a peak recorded in May, supported by resilient economic activity and cooling inflationary pressures.
Data released by the Bangko Sentral ng Pilipinas (BSP) showed the gross nonperforming loan ratio across the domestic banking industry narrowed from 3.44 percent in the previous month. The June figure matched the level recorded in March and represents the lowest reading since December 2025.
In absolute terms, the value of gross nonperforming loans shrank 2.7 percent month-on-month to ₱584.9 billion from ₱601.4 billion in May.
Under central bank guidelines, loans are classified as nonperforming when payments remain past due for at least 90 days, signaling heightened credit risk as the likelihood of full recovery diminishes.
The asset quality improvement coincided with the broad expansion in overall lending. Total gross loans in the local banking system grew 1.7 percent to ₱17.78 trillion at the end of June from ₱17.48 trillion in May, providing a larger overall loan base that helped absorb the volume of troubled debts.
Broader asset quality indicators also signaled easing distress across financial institutions. Past-due loans—accounts where borrowers failed to meet scheduled principal or interest payments—dropped to ₱753.4 billion in June from ₱761.9 billion a month earlier. That pushed the past-due loan ratio down to 4.24 percent from 4.36 percent in May.
Jonathan Ravelas, senior adviser at consultancy firm Reyes Tacandong & Co., said the improvement reflects fundamental economic momentum reinforced by moderating inflation.
Ravelas expects nonperforming loans to stay manageable over the near term, though he cautioned that lenders must remain watchful of potential headwinds. Risks include persistent global geopolitical and economic uncertainties, alongside domestic weather-related disruptions such as El Niño.
Despite potential headwinds, the Philippine banking sector remains fundamentally sound, well-capitalized, and fully capable of managing credit risks moving forward, Ravelas said.

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Bangko Sentral ng Pilipinas (BSP) bad loans Jonathan Ravelas
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