The percentage of bad loans or non-performing loans (NPLs) among Philippine banks dropped slightly in June, according to data from the Bangko Sentral ng Pilipinas (BSP).
The NPL ratio -which shows the share of loans that borrowers are struggling to pay back – fell to 3.34% in June from 3.38% in May. The total amount of these problem loans stood at about P530.3 billion.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp , said the drop in the NPL ratio was partly due to banks giving out more loans. Bank loans grew by over 12% in June, which helped improve the overall loan portfolio.
He also pointed to lower interest rates set by both the U.S. Federal Reserve and the BSP since late 2024. These lower rates made borrowing cheaper and helped some borrowers pay their debts more easily.
Ricafort added that banks have also been improving how they manage risks when lending money, adopting global best practices.
