T&S Asset Management

Philippine banks' NPL ratio holds at 3.35% in August as loan growth outpaces bad loans

Published Data as of PhilippinesCredit

Key points

Facts

Asset quality: preliminary Bangko Sentral ng Pilipinas (BSP) data reported on 5 October put the banking system's gross non-performing loan (NPL) ratio at 3.35% at end-August (unchanged from July; down from 3.50% in August 2025). 1 Gross NPLs reached PHP 596.3 bn (up from PHP 550.1 bn in August 2025), a rise of 8.4% year on year. 2

Loan book: banks' total loan portfolio was PHP 17.78 trn (up from PHP 15.71 trn in August 2025), up 13.2% year on year. 3

Other indicators: the past-due loan ratio was 4.33% (down from 4.41% in August 2025) 4 and the restructured loan ratio 1.92% (down from 2.09% in August 2025). 5 Loan loss reserves covered 93.17% of NPLs (down from 94.40% in August 2025), compared with 92.45% in July. 6 UnionBank chief economist Ruben Carlo Asuncion said "credit growth continues to outpace the buildup in problem loans."

Analysis

Time series: the ratio has moved in a narrow band this year, from 3.35% in July 7 to an unchanged reading in August (chart). The year-on-year improvement comes from the denominator: the loan book grew 13.2% while gross NPLs grew 8.4%. Bad loans are still rising in peso terms, and fast loan growth tends to flatter NPL ratios until new loans season.

Consumer segment: the system ratio sits well below the consumer-loan NPL ratio of 5.49% in July 8, while consumer loan growth slowed to 16.2% in August. 9 With BSP projecting September inflation at 6.4%–7.4% after 6.1% in August, household repayment capacity is the variable to watch rather than the system-wide average.

Cross-country: the Philippine ratio is above Indonesia's bank gross NPL ratio of 2.11% 10 and Malaysia's gross impaired loans ratio of 1.4% for the same month. 11 Regulators define and compile these ratios differently, so the levels are indicative rather than strictly comparable.

Gross NPL ratio, banking industry (%)
012343.332026-023.292026-033.372026-043.442026-053.292026-063.352026-073.352026-08
Gross NPL ratio, banking industry (%)
2026-023.33
2026-033.29
2026-043.37
2026-053.44
2026-063.29
2026-073.35
2026-083.35

Gross NPL ratio of the Philippine banking industry, month-end, BSP preliminary data as reported in the press · Source: Philstar reports of BSP banking-industry NPL data (2026-02, 2026-03, 2026-04, 2026-05, 2026-06, 2026-07, 2026-08) Preliminary figures; BSP may revise them.

Implications

ExecutivesRead the flat system ratio as a product of strong loan growth, and track NPL formation in pesos and by segment, especially consumer and card books.
InvestorsCoverage at 93.17% is below a year earlier; a rise in consumer NPLs as inflation peaks would feed through to provisioning costs.
OperatorsTighten early-arrears monitoring and collections capacity now, before high inflation shows up in roll rates on recent consumer vintages.

Counterpoints and uncertainties

The figures are preliminary BSP data and may be revised. The reported August figures give no breakdown by loan type, so the system ratio may mask diverging trends between corporate and household books. A slowdown in loan growth would remove the denominator effect and could lift the ratio even if NPL formation is unchanged; conversely, if inflation eases after September, household stress may stay contained.

Figures: see definitions

  1. Banking system NPL ratio: 3.35% (unchanged from July; down from 3.50% in August 2025)
    Preliminary BSP data as reported in the press; BSP may revise them.
    . Gross non-performing loans as a share of total loans (BSP data). Philippine banking system. Basis date: 31 Aug 2026. Source: Philstar: Banks' bad loan ratio steady at 3.35% in August (2026-10-05)
  2. Banking system gross NPLs: PHP 596.3 bn (up from PHP 550.1 bn in August 2025)
    Preliminary BSP data as reported in the press; BSP may revise them.
    . Gross non-performing loans of the banking system (BSP data). Philippine banking system. Basis date: 31 Aug 2026. Source: Philstar: Banks' bad loan ratio steady at 3.35% in August (2026-10-05)
  3. Banks' total loan portfolio: PHP 17.78 trn (up from PHP 15.71 trn in August 2025)
    Preliminary BSP data as reported in the press; BSP may revise them.
    . Total loan portfolio of the banking system (BSP data). Philippine banking system. Basis date: 31 Aug 2026. Source: Philstar: Banks' bad loan ratio steady at 3.35% in August (2026-10-05)
  4. Past-due loan ratio: 4.33% (down from 4.41% in August 2025)
    Preliminary BSP data as reported in the press; BSP may revise them.
    . Past-due loans as a share of total loans (BSP data). Philippine banking system. Basis date: 31 Aug 2026. Source: Philstar: Banks' bad loan ratio steady at 3.35% in August (2026-10-05)
  5. Restructured loan ratio: 1.92% (down from 2.09% in August 2025)
    Preliminary BSP data as reported in the press; BSP may revise them.
    . Restructured loans as a share of total loans (BSP data). Philippine banking system. Basis date: 31 Aug 2026. Source: Philstar: Banks' bad loan ratio steady at 3.35% in August (2026-10-05)
  6. NPL coverage ratio: 93.17% (down from 94.40% in August 2025)
    Preliminary BSP data as reported in the press; BSP may revise them.
    . Loan loss reserves as a share of NPLs. Philippine banking system. Basis date: 31 Aug 2026. Source: Philstar: Banks' bad loan ratio steady at 3.35% in August (2026-10-05)
  7. Banking system NPL ratio: 3.35% (up from 3.29% in June). Non-performing loans as a share of total loans (BSP data). Philippine banking system. Basis date: 31 Jul 2026. Source: Inquirer: Bad loans up amid continuing consumer strain (2026-09-09)
  8. Consumer loan NPL ratio: 5.49% (up from 5.44% in June). Non-performing consumer loans as a share of consumer loans (BSP data). Philippine banking system. Basis date: 31 Jul 2026. Source: Inquirer: Bad loans up amid continuing consumer strain (2026-09-09)
  9. Consumer loan growth: 16.2% (down from 17.1% in July). Year-on-year growth of outstanding consumer loans to residents. Universal and commercial banks. Basis date: 31 Aug 2026. Source: Philstar: Bank lending growth reaches 3-month high (2026-10-02)
  10. Gross NPL ratio, banks (OJK): 2.11% (up from 2.10% in July). Gross non-performing loans / total loans, Indonesian commercial banks, as announced by OJK. Indonesian banking industry. Basis date: 31 Aug 2026. Source: Asbisindo (republishing OJK press release): OJK luncurkan RP3I 2026-2030 (2026-10-02)
  11. Gross impaired loans ratio (BNM): 1.4% (broadly unchanged from July). Gross impaired loans / total loans, banking system. Malaysia, banking system. Basis date: 31 Aug 2026. Source: Bank Negara Malaysia: Monthly Highlights & Statistics, August 2026 (released 2026-09-30)

Sources

  1. Philstar: Banks' bad loan ratio steady at 3.35% in August (2026-10-05)
  2. BusinessWorld: Philippine banks' bad loan ratio steadies in August (2026-10-04)

Reports are for information only and are not investment advice.

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