PH bank NPL ratio hits 8-month high in July

The Philippine banking sector's nonperforming loan (NPL) ratio reached an eight-month high in July, rising to 3.40% from 3.34% in June, although it remains lower than the 3.58% recorded in July of the previous year.

Gross NPLs increased to PHP535.45 billion in July, a slight rise from PHP530.29 billion in June and a 5.38% increase year-on-year.

The total loan portfolio of the banking system saw a slight decrease to P15.77 trillion in the first seven months from P15.88 trillion at the end of June, but is up 11% from the previous year.

An expert suggests the uptick in NPLs reflects lingering stress in sectors like SMEs and consumer loans, as households and businesses adjust to post-pandemic conditions and global uncertainties.

This situation may be exacerbated by factors such as delayed impacts of previous tighter credit conditions and a potential increase in riskier lending as interest rates decrease, particularly in consumer segments like BNPL and online lending.

To mitigate systemic risks, robust provisioning and enhanced credit risk management tools are recommended.