Philippine Banks’ Non-Performing Loan Ratio Hits One-Year Low

In Manila, the non-performing loan (NPL) ratio for Philippine banks dropped to its lowest point in a year, reaching 3.27 percent in December of the previous year. According to the Bangko Sentral ng Pilipinas (BSP), this figure marks the lowest NPL ratio since it was at 3.24 percent in December 2023. The ratio had been at 3.54 percent in November 2024. Despite the decrease in the NPL ratio, the gross non-performing loans increased to PHP500.32 billion from PHP449.06 billion in December 2023, though it was less than the PHP520.48 billion recorded in November of the previous year. Michael Ricafort, chief economist at Rizal Commercial Banking Corporation, suggested via a Viber message that the decline in the NPL ratio could be linked to the ongoing recovery of businesses. He also noted that the BSP’s decision to lower rates to a two-year low of 5.75 percent in 2024, along with reduced Federal Reserve rates, contributed to this improvement. Last year, the BSP cut policy rates by 75 basis points in total. Ricafort further stated that future monetary easing, including local rate cuts and reductions in the reserve requirement ratio, could continue to lower the NPL ratio.