Philippine Banks’ Bad Loan Ratio Drops to 3.08% in December 2025

Business | BANKING Posted on 2026-02-14 01:58:25

MANILA – The non-performing loan (NPL) ratio of Philippine banks improved to 3.08 percent in December 2025, down from 3.32 percent in November, according to data released by the Bangko Sentral ng Pilipinas (BSP).

The latest figure marks the lowest NPL ratio recorded since August 2020, signaling continued strengthening in the banking sector’s asset quality.

Rizal Commercial Banking Corporation chief economist Michael Ricafort attributed the decline in bad loans, even as overall lending continued to expand, partly to the cumulative 200-basis-point reduction in the BSP’s key policy rates since August 2024.

The central bank’s rate cuts were aimed at stimulating economic activity and supporting domestic growth by easing borrowing costs.

Ricafort said seasonal factors also played a role, particularly increased consumer spending during the Christmas holidays.

Higher sales, improved incomes, bonuses, and livelihood opportunities during the holiday season enhanced borrowers’ capacity to meet their debt obligations, he noted in a report.

He also pointed to improvements in banks’ credit risk management systems, which are increasingly aligned with global best practices. These enhancements helped slow the growth of bad loans, contributing to the decline in the overall NPL ratio.

According to Ricafort, the lower gross NPL ratio indicates improving asset quality across the banking system. This trend could translate into stronger net income, higher profitability, and expanded capital and resources for banks, which have consistently ranked among the country’s most profitable industries in recent years.

NPO News Team | PNA- PR

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