Bank NPL ratio eases to 3.38% in May

The share of non-performing loans (NPLs) in the Philippine banking system slightly declined in May 2025, signaling early signs of improving credit conditions, according to data released Friday by the Bangko Sentral ng Pilipinas (BSP).

The NPL ratio eased to 3.38% in May, down from 3.39% in April and notably lower than the 3.57% recorded in the same month last year.

Gross non-performing loans stood at P527.45 billion, based on the BSP’s latest report.

According to Jonathan Ravelas, Senior Adviser at Reyes Tacandong & Co., the marginal improvement in the NPL ratio suggests that recent policy rate cuts by the BSP are starting to bear fruit by reducing borrowing costs and easing debt servicing burdens.

“The slight easing in the NPL ratio reflects early signs of relief from the BSP’s recent rate cuts, which have lowered borrowing costs and helped ease debt servicing pressures,” Ravelas said.

He added that the continued decline in inflation, which settled at 1.4% in June, also supported household and business cash flows, strengthening their ability to repay loans.

“While risks remain—particularly in the consumer lending segment—the overall outlook for NPLs is cautiously optimistic as monetary easing and price stability continue to support credit quality,” Ravelas noted.

The BSP has cut key interest rates in recent months to support economic recovery amid easing inflation, and analysts expect further improvements in the banking sector’s loan performance if these trends hold.