AN economist warned that while the bad loans ratio eased in September, the threat of a super El Niño could reduce the ability to pay by some borrowers.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that the gross non-performing loans (NPLs) ratio eased to 3.27 percent in September-the lowest in nine months or since December 2025.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), explained that the easing of bad loans ratio could be partly attributed to ‘higher base’ or ‘denominator effects.’
However, Ricafort warns that ‘the risk of [a] super El Niño drought could also reduce the ability to pay by some borrowers especially in the agriculture sector and related/allied businesses/industries.’
He said that the most vulnerable sectors are businesses or industries that ‘do not have pricing power or ability to pass on higher prices that could lead to lower profit margins or even losses absorbed amid increased competition locally, from imports and other substitute.’
Ricafort also noted that elevated inflation could reduce the purchasing power and ability to pay for lower-income households.
Resiliency signalled
DATA from the BSP showed that the peso value of bad loans fell at end-September to P593.275 billion, 0.51-percent lower than the P596.299 billion as of end-August.
However, the amount of bad loans as of the first nine months of 2026 is 10.09-percent higher than the P538.924 billion as of end-September 2025.
Meanwhile, total loan portfolio amounted to P18.13 trillion as of end-September 2026, up 1.97 percent from the P17.783 trillion at end-August 2026. The end-September 2026 figure was also higher, by 11.41 percent than the P16.276 billion at end-September 2025.
This decline in banks’ NPL ratio to signals ‘improving asset quality and highlights the resilience of both borrowers and lenders,’ Jonathan L. Ravelas, senior adviser at Reyes Tacandong and Co., said. the
‘Steady loan growth, and stable economic activity have helped contain credit stress,’ added Ravelas.
For the fourth quarter, however, he said that while NPLs could remain ‘manageable or even improve further,’ inflation, borrowing costs, and the pace of economic growth will remain ‘key factors’ influencing loan repayment behavior.
Eased, climbed
BROKEN down, the NPL ratio of universal and commercial bank group eased to 3.02 percent with the peso value of bad loans amounting to P504.19 billion, as of end-September 2026. The figure is lower than the 3.09 percent in August but the same as the 3.02 percent in September last year.
For thrift or savings banks, the NPL ratio fell to 5.90 percent, or P64.396 billion, as of end-September from 6.07 percent in August, and the 6.42 percent level in September 2025.
For rural and cooperative banks, the bad loans ratio climbed to 9.18 percent in September or P18.347 billion at end-September 2026. The figure is higher than the 7.79 percent in June and the 8.89 percent in September 2025.
According to the BSP, the movement of accounts as of September 2026 ‘largely reflects the reclassification of one rural bank to digital bank effective July 18,2026.’
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The asset quality of digital banks also worsened with their NPL ratio climbing to 4.63 percent, or P6.34 billion, as of end-September 2026 from 4.51 percent at end-August. This was however lower compared to the 7.32 percent NPL ratio in September last year.
Meanwhile, past due loans reached P771.75 billion as of end-September 2026, up by 0.24 percent from P769.89 billion a month ago; and higher by 13.86 percent from P677.82 billion at end-September 2025.
The past due loans ratio settled at 4.26 percent of banks’ total loan portfolio, lower than the 4.33 percent as of end-August 2026 and higher than the 4.16 percent at end-September 2025.