By Luisa Maria Jacinta C. Jocson, Senior Reporter
THE PHILIPPINE banking system’s nonperforming loan (NPL) ratio hit a five-month high in April, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.
Banks’ bad loan ratio rose to three.39% in April from 3.3% in March. Nevertheless, it eased from 3.45% a yr ago.
This was the very best bad loan ratio in five months or for the reason that 3.54% logged in November 2024.
Data from the BSP showed that soured loans inched up by 0.6% to P519.23 billion as of April from P516.12 billion a month prior.
12 months on yr, bad loans jumped by 8% from P480.65 billion in the identical month in 2024.
Loans are considered nonperforming once they continue to be unpaid for at the very least 90 days after the due date. These are deemed risk assets since borrowers are unlikely to pay.
BSP data also showed the whole loan portfolio of the banking system stood at P15.34 trillion as of end-April, down by 1.9% from P15.63 trillion as of end-March. However, it rose by 10% from P13.94 trillion a yr ago.
Overdue loans went up by 1.1% to P653.26 billion in April from P646.37 billion in March. It likewise increased by 5.7% from P618.04 billion a yr earlier.
This brought the overdue loan ratio to 4.26%, higher than 4.14% in March but lower than 4.43% in the identical period in 2024.
Restructured loans edged higher by 0.1% to P311.66 billion in April from P311.48 billion month on month. 12 months on yr, it rose by 7.3% from P290.37 billion.
Restructured loans accounted for two.03% of the industry’s total loan portfolio in April, higher than 1.99% within the month prior but lower than 2.08% in April 2024.
Banks’ loan loss reserves stood at P493.79 billion, up by 0.7% from P490.56 billion a month ago and better by 4.8% from P471.35 billion a yr earlier.
This brought the loan loss reserve ratio to three.22% in April, higher than 3.14% last month but lower than 3.38% a yr ago.
Lenders’ NPL coverage ratio, which gauges the allowance for potential losses as a consequence of bad loans, stood at 95.1% in April from 95.05% in March and 98.07% a yr prior.
“The uptick in NPL ratio likely reflects a lagged response to tighter financial conditions, elevated rates of interest, and protracted cost of living pressures on each households and businesses,” John Paolo R. Rivera, a senior research fellow on the Philippine Institute for Development Studies, said.
“While still relatively low and manageable, the rise signals early signs of stress, especially amongst more vulnerable borrowers, comparable to MSMEs (micro, small and medium enterprises) and lower-income consumers. For my part, it just isn’t yet a cause for alarm, however it is a signal for banks to stay vigilant of their credit risk management.”
Rizal Business Banking Corp. Chief Economist Michael L. Ricafort said the slight uptick in NPLs is seen amid slowing growth in bank loans.
Bank lending rose by 11.8% yr on yr to P13.19 trillion in March, its slowest pace in 4 months, as loan growth for production activities and consumers eased.
Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said the rise in unemployment may be an element behind the rise in NPLs.
“On the consumers’ side, higher unemployment these past few months may indicate slower earnings growth, making it harder to pay their loans. As well as, slow demand and business growth may additionally impact business money flows through the period,” he said.
The jobless rate rose to 4.1% in April from 3.9% in March and 4% a yr ago, the newest data from the local statistics authority showed.
This was corresponding to 2.06 million unemployed Filipinos in April, higher than 1.93 million a month ago and a couple of.04 million the yr prior.
“If the trend continues over the subsequent few months, it could indicate that some sectors of the economy are experiencing difficulty servicing debt, possibly as a consequence of slower-than-expected income recovery or tightening liquidity,” Mr. Rivera said.
“Monetary authorities and banks will likely monitor this closely. If credit quality deteriorates further, it could prompt more cautious lending behavior and affect the general pace of credit growth, which in turn could have broader implications for economic recovery and domestic consumption.”