Solid ground: Philippine banking system keeps NPL ratio unchanged at 3.43% in July

The banking system’s gross non-performing loan (NPL) ratio for July held steady at 3.43 percent, reflecting the responsible payment behavior of borrowers in meeting their financial obligations promptly.

According to data released by the Bangko Sentral ng Pilipinas (BSP), the NPL ratio, which represents the percentage of non-performing loans in relation to the total loans portfolio, reflects a notable improvement compared to the same period in the previous year when it stood at 3.57 percent.

The total NPL, comprising loans unpaid for more than 90 days, saw an increase of 4.54 percent as of July. This amounted to a total of P439.327 billion versus the P420.254 billion recorded a year ago.

The overall loan portfolio demonstrated robust growth, expanding by 8.82 percent to P12.81 trillion.

Meanwhile, the past due ratio within the banking sector, often referred to as the delinquency rate, experienced a slight uptick to 4.12.

The aggregate sum of past due loans increased by 7.55 percent to P528.4 billion. Loan accounts are categorized as past due when payments remain unpaid beyond their due dates. However, banks may provide a grace period of up to 30 days to allow borrowers to catch up on their payments.

NPL coverage ratio for banks, which signifies loan loss reserves, jumped to 102.37 percent in July. The ratio of loan loss reserves to NPL is a critical indicator of the adequacy of provisions against potential losses relative to the total NPLs.

According to BSP data, the banking industry allocated P449.748 billion for loan loss provisioning in July, reflecting a 7.92 percent increase.

In terms of financial relief extended to borrowers facing challenges, restructured loans emerged as a significant component. In July, the aggregate value of these restructured loans amounted to P304.175 billion, constituting 2.37 percent of the total loans portfolio.

While this percentage was slightly lower than the 2.46 percent recorded in June, it reflects banks’ concerted efforts to assist borrowers facing difficulties.