Philippine banks' NPL ratio eases to 3.27% in September as the loan book outgrows bad loans
A one-minute summary read by an AI voice.
Key points
- The banking system's gross NPL ratio was 3.27% in September, down from 3.35% in August and 3.31% in September 2025, according to preliminary BSP data.
- Gross NPLs still rose about 10.1% from a year earlier (T&S calculation), faster than the 8.4% recorded for August.
- The data predate the BSP's 50 basis points rate increase of 22 October, so they do not yet show its effect on borrowers.
Implications for lenders
Gross NPLs rose about 10.1% over the year even as the ratio fell, so lenders may want to judge portfolio health on the stock and on roll rates rather than the headline ratio. With the policy rate at 5.50%, affordability checks for floating-rate and newly priced loans, and early-stage collections capacity, may need review before the next data show the effect.
Implications
Facts
Asset quality: preliminary Bangko Sentral ng Pilipinas (BSP) data reported on 29 October put the banking system's gross non-performing loan (NPL) ratio at 3.27% at end-September, down from 3.35% in August and 3.31% in September 2025. 1 Gross NPLs were PHP 593.3 bn, down from PHP 596.3 bn in August; up from PHP 538.9 bn in September 2025. 2 That is a year-on-year increase of about 10.1% (T&S calculation from the reported figures). 3
Denominator: the total loan portfolio reached PHP 18.13 trn, up from PHP 17.78 trn in August and PHP 16.28 trn in September 2025, 4 or about 11.4% more than a year earlier (T&S calculation). 5
Buffers: loan loss reserves covered 94.05% of NPLs, up from 93.17% in August and 93.85% in September 2025. 6
Analysis
Ratio versus stock: the ratio fell because loans grew faster than bad loans, not because bad loans shrank over the year. Year-on-year growth in gross NPLs picked up from 8.4% in August 7 to about 10.1% in September, while the loan book grew about 11.4%. The monthly ratio has moved in a narrow band this year, so a single month's decline says little about the trend.
Household segments: the consumer-loan NPL ratio was 5.49% in July, 8 well above the system ratio, so a stable headline can hide pressure in household credit.
Cross-country: Indonesia's gross bank NPL ratio was 2.11% in August. 9 Definitions and loan mixes differ, so the gap is indicative only, but Philippine banks carry a higher share of bad loans.
Rates: the BSP raised its policy rate to 5.50% on 22 October. 10 Floating-rate and newly repriced loans may show the effect in later months.
| 2026-02 | 3.33 |
|---|---|
| 2026-03 | 3.29 |
| 2026-04 | 3.37 |
| 2026-05 | 3.44 |
| 2026-06 | 3.29 |
| 2026-07 | 3.35 |
| 2026-08 | 3.35 |
| 2026-09 | 3.27 |
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, 2026-09) Preliminary figures; BSP may revise them.
Counterpoints and uncertainties
The figures are preliminary and BSP can revise them. If loan growth slows after the 50 basis points rate increase, the denominator effect that lowered the ratio would weaken and the ratio could rise even without faster NPL growth. The September figures reported so far give no aggregate consumer-loan NPL ratio, so pressure in household credit is visible only in earlier data.
Key figures
- Banking system NPL ratio: 3.27% (down from 3.35% in August and 3.31% in September 2025). Gross non-performing loans as a share of total loans (BSP data). Philippine banking system. Basis date: 30 Sep 2026. Source: The Chronicle: Philippine banks' bad loan ratio eases to 3.27% in September (2026-10-29)
Preliminary BSP data as reported in the press; BSP may revise them.
- Banking system gross NPLs: PHP 593.3 bn (down from PHP 596.3 bn in August; up from PHP 538.9 bn in September 2025). Gross non-performing loans of the banking system (BSP data). Philippine banking system. Basis date: 30 Sep 2026. Source: Astig.ph: Bad loans eased to 3.27 percent, but borrowers still owe more than a year ago (2026-10-29, BSP preliminary data)
Preliminary BSP data as reported in the press; BSP may revise them.
- Gross NPLs, year-on-year growth (T&S calculation): 10.1% (year on year vs September 2025; compared with 8.4% in August). Year-on-year change in banking-system gross NPLs, T&S calculation from reported BSP figures. Philippine banking system. Basis date: 30 Sep 2026. Source: Astig.ph: Bad loans eased to 3.27 percent, but borrowers still owe more than a year ago (2026-10-29, BSP preliminary data)
Preliminary BSP data as reported in the press; BSP may revise them.
- Banking system total loan portfolio: PHP 18.13 trn (up from PHP 17.78 trn in August and PHP 16.28 trn in September 2025). Total loan portfolio of the banking system used as the NPL-ratio denominator (BSP data). Philippine banking system. Basis date: 30 Sep 2026. Source: Astig.ph: Bad loans eased to 3.27 percent, but borrowers still owe more than a year ago (2026-10-29, BSP preliminary data)
Preliminary BSP data as reported in the press; BSP may revise them.
- Total loan portfolio, year-on-year growth (T&S calculation): 11.4% (year on year vs September 2025). Year-on-year change in the banking system's total loan portfolio, T&S calculation from reported BSP figures. Philippine banking system. Basis date: 30 Sep 2026. Source: Astig.ph: Bad loans eased to 3.27 percent, but borrowers still owe more than a year ago (2026-10-29, BSP preliminary data)
Preliminary BSP data as reported in the press; BSP may revise them.
- NPL coverage ratio: 94.05% (up from 93.17% in August and 93.85% in September 2025). Loan loss reserves as a share of NPLs. Philippine banking system. Basis date: 30 Sep 2026. Source: Astig.ph: Bad loans eased to 3.27 percent, but borrowers still owe more than a year ago (2026-10-29, BSP preliminary data)
Preliminary BSP data as reported in the press; BSP may revise them.
- Gross NPLs, year-on-year growth: 8.4% (year on year vs August 2025). Year-on-year change in banking-system gross NPLs. Philippine banking system. Basis date: 31 Aug 2026. Source: Philstar: Banks' bad loan ratio steady at 3.35% in August (2026-10-05)
Preliminary BSP data as reported in the press; BSP may revise them.
- 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)
- 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)
- BSP policy rate after the 22 October 2026 meeting: 5.50% (up from 5.0%). BSP target reverse repurchase (RRP) rate. Philippines, national. Basis date: 22 Oct 2026. Source: Philstar: Inflation risks prompt BSP to hike rates anew (2026-10-22)
Sources
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