The Philippine banking industry’s bad loan ratio eased to 3.29 percent in March 2026 as borrowers turned more cautious amid economic uncertainties arising from the Middle East conflict, Bangko Sentral ng Pilipinas (BSP) data showed.
The gross non-performing loan (NPL) ratio was lower than the 3.30 percent recorded a year earlier and the 3.33 percent posted in February, according to the BSP.
The banking system’s total loan portfolio grew to P17.26 trillion in March from P16.60 trillion in February and P15.63 trillion in March 2025.
The robust loan growth helped dilute the ratio but actual bad loans climbed to P568.55 billion in March from P516.12 billion a year earlier and P553.68 billion in the previous month.
Past due loans also increased to P736.18 billion from P646.37 billion in March 2025.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said cautious lending amid the impact of ongoing tensions in the Middle East caused the decline in the NPL ratio.
These tensions include higher inflation, increased interest rates, central bank rate hikes, slower demand and slower overall economic growth.
“NPLs could go up amid [the] reduced ability of some borrowers such as households [and] businesses to pay their debt,” Ricafort said.
Union Bank of the Philippines chief economist Ruben Carlo Asuncion attributed the decline to a combination of robust loan growth and still-resilient borrower repayment capacity.
“That said, the improvement in asset quality may be partly temporary, as external headwinds, particularly the impact of elevated energy prices and inflation linked to the Middle East conflict, could gradually weigh on borrowers’ repayment capacity,” Asuncion said.
