The share of soured loans to the banking sector's total loan book increased to an 11-month high of 3.45 percent as of end-April, ending two straight months of decline, amid a high interest rate environment, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data released by the BSP showed that the non-performing loan (NPL) ratio of Philippine banks was the highest in 11 months or since the 3.46 percent recorded in May 2023.

This was also higher than the 3.41 percent recorded in the same month a year ago.

Commercial loans are considered non performing if the borrower has not made the scheduled payments for 90 days after the due date. They are deemed as risk assets because borrowers are unlikely to pay these loans.

Based on BSP data, soured loans went up by 12.3 percent to P480.65 billion as of end-April from P427.88 billion in the same period last year.

Philippine banks recorded an 11-percent rise in loan disbursements to P13.94 trillion as of end-April from P12.56 trillion in the same month last year.

The banking sector's past due loans increased by 19 percent to P618.04 billion from P518.55 billion, while restructured loans fell by 10.5 percent to P290.37 billion from P324.38 billion.

Amid the rising soured loans and past due loans, banks beefed up their loan loss reserves by 6.6 percent to P471.35 billion as of end-April from P441.98 billion in the same period a year ago.

This translated to a loan loss reserve level of 3.38 percent and an NPL coverage ratio of 98.07 percent.

To tame inflation and stabilize the peso, the BSP raised key policy rates by 450 basis points from May 2022. The tightening cycle ended with a surprise 25-basis-point hike delivered in October 2023.

At its latest policy review in May, the BSP decided to keep its benchmark interest rate at 6.5 percent, the highest in 17 years. The central bank's next policy review is scheduled on June 27.

The industry's NPL ratio stood at 3.24 percent at end-2023, slightly higher than 3.16 percent as of end-2022.

The ratio peaked at 4.51 percent in July and August 2021, at the height of the pandemic.

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