Philippine banks' NPL ratio climbs to 3.40% in July

The Philippine banking sector's gross nonperforming loan (NPL) ratio reached an eight-month high of 3.40% in July, an increase from 3.34% in June.

This figure is still lower than the 3.58% recorded in July of the previous year, and well below the pandemic high of 4.51%.

In peso terms, gross NPLs amounted to P535.45 billion in July, an increase from P508.11 billion a year ago.

The banking system's total loan portfolio grew to P15.77 trillion, up from P14.21 trillion in July 2024, but slightly below June's P15.88 trillion.

Past due loans also climbed to P687.59 billion compared to P625.71 billion in the same month last year.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., attributes the uptick to slower local economic growth prospects, indirectly weighed down by a weaker world economic outlook caused by protectionist measures and trade wars.

He added that external shocks dampen exports, trade, and supply chains, squeezing repayment capacity for businesses and households.

The exit of Philippine Offshore Gaming Operators (POGOs) since end-2024 also weighed on related industries' loan servicing ability.