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April 12, 2024

Loan growth surges, bad debts tick up: A mixed bag for Philippine banks

The Philippine banking sector saw a slight uptick in bad loans in January.

Non-performing loan (NPL) ratio increased to 3.44% from 3.28% in January 2023.

Total NPLs grew by 13.72% to ₱460.76 billion, reflecting an increase in overdue loan payments.

NPLs refer to loans where borrowers haven’t made principal or interest payments for at least 30 days past due.

While the NPL ratio has risen slightly, it remains well below pre-pandemic levels (between 1.7% and 2.5% from 2015 to 2019). This indicates the banking sector is managing potential economic challenges.

The total loan portfolio reached ₱13.38 trillion in January, a positive sign of continued lending activity (up 8.36% year-on-year).

Banks are well-positioned to handle potential losses, with a loan loss reserve ratio of 100.29%.

Past Due Ratio, which tracks loans past their due date (with a 30-day grace period), also saw a slight increase to 4.27% in January 2024 (compared to 4.01% a year prior).

Banks continue to offer relief measures. Gross restructured loans decreased to ₱302 billion in January 2024 (down from ₱322 billion in Jan 2023), suggesting some borrowers are catching up.