The Philippine banking sector recorded its lowest gross nonperforming loan (NPL) ratio in six months during June, falling to 3.29% from 3.44% in May. This decline reflects a modest improvement over the 3.34% ratio observed a year earlier.
In monetary terms, soured loans decreased by 2.74% to ₱584.943 billion, down from ₱601.41 billion the previous month, yet they remain 10.31% higher year‑on‑year compared to ₱530.292 billion. A loan is classified as nonperforming after 90 days of non‑payment, marking it as a risky asset for banks.
The easing of inflation, driven by lower oil prices, contributed to the improved NPL ratio. Consumer price growth dropped to a four‑month low of 6.4% in June, down from 6.8% in May.
Banking officials highlighted that stronger credit risk management practices and the decline in energy costs have helped reduce bad loans. These measures align with global best practices amid external pressures such as geopolitical tensions.
The total loan book reached ₱17.781 trillion, up 11.94% from a year ago and 1.71% from the previous month. Past‑due loans stood at ₱753.398 billion, representing 4.24% of the portfolio, a slight increase from the same period last year but a decline from May.
Restructured loans rose by 8.32% year‑on‑year to ₱337.982 billion, although they fell 2.88% from the prior month. The restructured loan ratio improved to 1.9% compared with 1.96% a year earlier.
Loan loss reserves grew to ₱541.237 billion, up 6.98% from a year ago and 1.21% from the previous month, bringing the reserve ratio to 3.04%. This is lower than the 3.19% recorded a year earlier and 3.06% in May.
NPL coverage, which measures allowances for potential losses, edged up to 92.53% in June from 88.92% in May, though it slipped from 95.4% a year earlier.
Analysts expect bad loans to remain manageable for the rest of the year, provided banks continue to monitor risks from global uncertainties and weather disruptions. The sector is considered fundamentally sound and well‑positioned to handle credit risks.
However, rising oil prices amid renewed Middle East tensions, a weaker peso, recent wage hikes, and an upcoming El Niño season could strain borrowers’ repayment capacity.
The Philippine peso fell to a new historic low, closing at ₱61.847 against the dollar, surpassing the previous record of ₱61.75.
A first tranche of a record ₱85 minimum wage increase took effect, raising wages in the National Capital Region to ₱755 for non‑agricultural workers and ₱718 for agricultural and service sector employees. A second tranche of ₱25 is scheduled for January 20 next year.
Inflationary pressures remain strong despite the recent slowdown, with the central bank projecting a 6.4% rate for the year and anticipating that it will stay above the 3% target until 2028.
