Philippine banks are on the path to recovery, with Fitch Ratings projecting a significant decline in non-performing loans in 2025.
The ratings agency expects NPL ratio improvements in five out of 14 larger Asia-Pacific (APAC) markets in 2025, with the Philippines, India, and Vietnam seeing the most significant gains. These improvements are driven by robust economic expansion, rising loan growth, and favorable interest rate conditions.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that the NPL ratio for Philippine banks stood at 3.6% of total loans at the end of October 2023, a figure expected to decrease further in 2025.
Fitch Ratings also forecasts double-digit loan growth for the Philippines, India, and Vietnam, in contrast to the single-digit growth anticipated for most other APAC markets. The strong loan growth is attributed to heightened competition, financial inclusion, and a robust economic recovery in these countries.
In the Philippines, banks have shown a growing interest in unsecured retail loans and loans for small and medium enterprises.
Data from the BSP showed a 10.6% year-on-year increase in bank lending in October 2023, further indicating strong demand for credit.
