Philippine banks are facing a growing challenge as the ratio of non-performing loans (NPL) climbed to 3.45 percent in April, marking a rise from the previous month’s 3.39 percent and the same period last year’s 3.41 percent, according to data released by the Bangko Sentral ng Pilipinas (BSP).
This surge represents the highest gross NPL ratio recorded so far this year, surpassing the 3.44 percent figures seen in both January and February.
Defined as the percentage of NPLs to total loans, gross of allowance for credit losses but inclusive of interbank loans, the NPL ratio serves as a critical indicator of asset quality and financial health within the banking sector.
April witnessed a 12.33 increase in total NPLs, totaling P480.648 billion compared to P427.881 billion in the same period last year.
Meanwhile, the total loan portfolio increased by 10.98 percent to reach P13.94 trillion.
Amid this concerning trend, banks observed a rise in the past due ratio or delinquency rate, climbing to 4.43 percent from 4.30 percent in March and 4.13 percent in the same period last year.
In an effort to mitigate potential losses, banks set aside P471.352 billion as loan loss provisioning, a 6.64 percent increase from the previous year’s P441.983 billion.
The NPL coverage ratio, representing loan loss reserves, stood at 98.07 percent in April, showing a decline from 100.66 percent in March and 103.30 percent in April 2023.
