By Katherine K. Chan, Reporter
PHILIPPINE LENDERS’ nonperforming loan (NPL) ratio worsened to its highest level in eight months in April as borrowers faced tighter economic conditions amid the Middle East war, latest Bangko Sentral ng Pilipinas (BSP) data showed.
The banking industry’s gross NPL ratio rose to 3.37% from 3.29% in March but slightly eased from 3.39% a year earlier, based on data posted on the central bank’s website.
April had the highest bad loan ratio since the 3.5% in August last year.
This came as soured loans reached P579.885 billion during the month, climbing by 11.68% year on year from P519.234 billion. It likewise edged about 2% higher from P568.554 billion in March.
Loans are considered nonperforming once they are unpaid for at least 90 days after the due date and deemed to be risky assets since borrowers are unlikely to pay.
Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said the increase in nonperforming loans is “not a crisis,” but likely an early sign that the Middle East war is tightening financial conditions for households and businesses in the country.
“The uptick in NPLs to 3.37% tells us that higher inflation and global uncertainties — especially elevated oil prices linked to Middle East tensions — are starting to strain households and businesses,” he said in a Viber message. “It’s an early warning sign of tighter cash flows, not a crisis.”
The higher NPL ratio also means borrowers’ repayment capacity is now challenged by faster inflation, higher operating costs and a weakening economy, Philippine Institute for Development Studies senior research fellow John Paolo R. Rivera said.
“The Middle East conflict may not be the sole driver but it has contributed through higher fuel prices, transport costs, and broader economic uncertainty,” he added.
In April, inflation heated up to an over three-year high of 7.2% as elevated oil costs amid the Middle East war continued to spill over to prices of food and utilities. This was faster than 4.1% in March and 1.4% in the same month last year.
Meanwhile, BSP data showed that the industry’s total loan portfolio stood at P17.198 trillion at end-April, slipping by 0.38% from P17.263 trillion a month ago but up 12.12% from P15.339 trillion last year.
Banks’ past due loans rose by 3.72% to P763.591 billion in April from P736.181 billion in March. Year on year, it jumped by 16.89% from P653.259 billion.
This brought the latest past due loan ratio to 4.44% from 4.26% in the prior month and April 2025.
Restructured loans likewise edged up by 1.34% month on month to P342.924 billion from P338.39 billion. It also grew by 10.03% from P311.665 billion in April last year.
These loans accounted for 1.99% of the sector’s total loan book in April, exceeding the 1.96% ratio in March but below the 2.03% in the same month last year.
Meanwhile, lenders’ loan loss reserves reached P526.849 billion during the month, inching up by 1.42% from P519.46 billion a month earlier and by 6.69% annually from P493.793 billion.
With this, domestic banks’ loan loss reserve ratio stood at 3.06%, higher than 3.01% in March but eased from 3.22% in the same year-ago period.
On the other hand, lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, fell to 90.85% in April from 91.37% the previous month and 95.1% a year prior.
Mr. Rivera said a prolonged conflict in the Middle East could translate to continued pressure for banks and borrowers.
“If the conflict drags on and keeps oil prices elevated, NPL ratios could remain under pressure in the coming months,” he said. “Higher inflation reduces household purchasing power, while businesses face tighter margins and weaker demand, making debt servicing more difficult.”
Meanwhile, Mr. Ravelas said banks’ bad loan ratio could range from 3.3%-3.8% in the coming months, though noted banks can likely weather such elevated NPL levels given their strong capital and buffers.
“At current levels, NPLs are above the ideal 2%-3% range but still manageable,” he said. “The key is to watch the trend — gradual increases are tolerable, but any sharp spike would be a bigger concern.”
