MANILA—The ratio of non-performing loans (NPLs) among Philippine banks increased slightly to 3.58% in July, up from 3.51% in June and 3.43% in the same month last year, according to the Bangko Sentral ng Pilipinas (BSP).
According to the Philippines News Agency, the gross non-performing loans reached PHP 508.10 billion, marking an increase from PHP 440.07 billion in July of the previous year. Rizal Commercial Banking Corporation chief economist Michael Ricafort attributed the rise in the NPL ratio to the relatively high interest rates prevailing before the BSP’s policy rate cut on August 15. He noted that adverse weather events such as Typhoon Carina and the habagat season also contributed to the rise by causing significant flood damage and disrupting the financial stability of borrowers in the affected regions.
Ricafort expressed optimism for the coming months, suggesting that potential rate cuts by the U.S. Federal Reserve, which might be mirrored by the BSP between 2024 and 2026, could help reduce borrowing costs. This reduction in costs is expected to boost economic growth and business activities, thereby improving borrowers’ ability to repay loans and potentially easing the NPL ratio further.