Banks’ non-performing loans edge higher to ₱568.55B as lending growth keeps ratio in check

Credit expansion outpaces bad loans, but economists warn external risks could pressure borrowers ahead.

Banks’ non-performing loans (NPL) rose to ₱568.55 billion in March, up 2.68% from ₱553.68 billion a year earlier, according to Bangko Sentral ng Pilipinas (BSP) data.

Despite the increase, the industry’s NPL ratio eased to 3.29% from 3.33%, as loan growth outpaced the rise in bad debts. Total outstanding loans expanded 3.98% to ₱17.26 trillion, from ₱16.6 trillion previously, helping dilute the impact of rising delinquencies.

BSP data also showed past due loans increased 2.87% to ₱736.18 billion, indicating a gradual uptick in missed payments even as headline asset quality indicators slightly improved.

UnionBank chief economist Ruben Carlo Asuncion said the decline in the NPL ratio was driven by robust loan growth and resilient borrower repayment capacity. He cited stronger business and consumer lending, alongside earlier improvements in employment conditions and easing inflation, which helped borrowers stay current on obligations.

However, he cautioned that the improvement may not last. Elevated energy prices and geopolitical tensions could gradually weigh on repayment capacity, particularly for vulnerable borrowers such as MSMEs and retail clients if cost pressures persist.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., added that global uncertainty, including US–Iran tensions, may also indirectly affect credit quality through weaker remittances, slower employment prospects for OFWs, and more cautious lending by banks anticipating inflationary pressures, higher interest rates, and softer economic growth.

He also noted that some loan growth may reflect “frontloading” of borrowing ahead of potential price increases and tighter financial conditions.

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