Banks’ soured loans climb in October

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December 9, 2025 | 12:00am

MANILA, Philippines — The share of soured loans to the banking sector’s total loan book inched up to 3.33 percent in October from 3.31 in September as some borrowers continued to face tighter repayment conditions amid subdued business activity.

Preliminary data released by the Bangko Sentral ng Pilipinas (BSP) showed that the non-performing loan (NPL) ratio of Philippine banks was the highest in two months or since the 3.5 percent clip in August.

Still, it remained below the 3.6 percent ratio seen a year earlier, indicating that overall loan quality is holding steady despite pockets of strain.

In terms of value, soured loans went up by 2.4 percent to P537.03 billion in October from P524.31 billion in the same month last year.

Despite the uptick in NPLs, the industry’s loan portfolio continued to grow at a double-digit pace. Total loan disbursements reached P16.1 trillion in October, up by 10.7 percent from P14.55 trillion a year earlier, reflecting steady credit demand from businesses and households.

Past due loans, which include all loans not paid on time whether restructured or not, climbed by 7.3 percent to P687.84 billion from P640.88 billion a year earlier.

Within this segment, restructured loans grew by 13.7 percent to P332.82 billion from P292.75 billion as banks continued to work with borrowers facing repayment challenges.

With more loans showing signs of strain, banks increased their loan loss reserves by 4.3 percent to P508.27 billion in October from P487.52 billion a year earlier.

This brought the industry’s loan loss reserve level to 3.16 percent and its NPL coverage ratio to 94.65 percent, indicating that banks remain adequately provisioned against potential defaults.

NPLs refer to credit obligations that have not been repaid for at least 90 days past their due date. These loans are considered high-risk assets, signaling a borrower’s weakened capacity or willingness to repay.

Mild increases in NPLs are commonly attributed to the lagged impact of earlier rate hikes, slower income recovery for some households and cautious business activity. These factors can temporarily pressure borrowers’ repayment capacity even in a growing loan environment.

Still, the BSP earlier said that the slower growth in NPLs reflects sustained prudent credit risk management and governance, reinforced by banks’ robust NPL management framework and proactive provisioning.

“Improving market conditions and the accommodative monetary policy of the BSP are expected to further strengthen loan quality,” it said.

The Monetary Board delivered a 25-basis-point cut last October, bringing the total cuts to 175 basis points since it began its easing cycle in August 2024.