Non-performing loan (NPL) ratio of Philippine banks posted an improvement to 3.08 percent in December 2025 from month-ago’s 3.32 percent, which an economist traced partly to the sustained reduction in central bank’s key rates.
The latest NPL ratio of domestic banks, based on Bangko Sentral ng Pilipinas (BSP) data, is the lowest since August 2020.
Rizal Commercial Banking Corporation chief economist Michael Ricafort attributed lower NPLs amid the continued rise of bank loans partly to the total of 200 basis points reduction in the BSP’s key rates.
The reduction in the central bank’s key rates, done since August 2024, aims to encourage more economic activity and bolster domestic economic growth.
“(This might likely be) in view of the Christmas holiday spending, in terms of higher sales, incomes, bonuses, livelihood, all of which improved the ability of borrowers to pay their loans/debts,” Ricafort said in a report.
He said the improvement in credit risk management, which “are better aligned with global best practices, also led to slower growth in bad loans/NPLs, thereby also mathematically contributing to the lower/better NPL ratio.”
“Lower banks’ gross NPL ratio could signal improving asset quality, thereby could lead to higher net incomes/profitability, capital, total assets/resources, since banks are among the most profitable businesses/industries in the country for many years,” he added.
PNA PHOTO