More Filipinos can’t pay their utangs

Remember when you could get a credit card at the mall faster than you could finish admiring a mannequin’s outfit in a store window?

Hawkish credit card agents will woo you with all sorts of freebies and get you to sign up for the latest card.

Those days may soon be over, if they aren’t already.

I heard that banks are growing increasingly worried about the rise in bad loans, as the latest data show.

The boss of a major bank has instructed bank staff to go slow on card issuance and lending because the latest bad loan data may already be a portent of things to come.

Here are the numbers:

In peso terms, gross bad loans rose by 8.4 percent to P596.3 billion in August from P550.1 billion a year ago.

This means the amount of problem loans in the country is growing.

These so-called bad loans are loans whose principal or interest payments have remained unpaid for at least three months.

These include consumer loans, which may be in the form of credit card debt, an auto loan or a loan for a house. Problem loans also include business loans.

At nearly P600 billion, bad loans increased by P46.2 billion from a year ago, according to preliminary data from the Bangko Sentral ng Pilipinas. That’s not a small number.

The banking industry’s non-performing loan (NPL) ratio stood at 3.35 percent in August, virtually unchanged from 3.35 percent in July but lower than 3.5 percent in August 2025.

The ratio appears relatively steady not because bad debt has fallen, but because banks’ total loan portfolio has increased.

The banking industry’s gross loan portfolio expanded at a faster pace of 13.2 percent to P17.78 trillion during the month from P15.71 trillion a year earlier.

This faster growth in overall lending helped keep the NPL ratio below its year-ago level despite the increase in the absolute amount of problem loans.

While the banking industry remains strong and banks still have enough cushion against soured loans, the rising bad debt level is another red flag for our already very challenging economy.

Unfortunately, if repayment problems worsen in the next couple of months – a possibility if inflation, which sizzled to 7.2 in September from 6.1 in August, continues to erode household purchasing power – banks have no choice but to tighten credit.

It will no longer be easy to get a loan. The approval criteria will be stricter, for sure, and banks may approve smaller loans or impose more requirements.

That era when everyone could buy a condo unit or a car because of easy monthly payments may be over.

As a result, the condominium glut will worsen and vehicle sales will go down as people find it harder to purchase such assets.

Other indicators

There are other indicators showing that some borrowers continue to face repayment pressure.

Past-due loans, or obligations with missed payments that have not necessarily been classified as non-performing, climbed by 11.1 percent to P769.89 billion from P693.08 billion a year ago. (The STAR, Oct. 5, 2026).

Similarly, as The STAR reported, restructured loans rose by 3.5 percent to P340.58 billion in August from P328.92 billion a year earlier. These are loans whose repayment terms have been modified, typically to make the debt more manageable for borrowers experiencing financial difficulty.

Businesses, too

You know the problem is serious when even businesses are having a difficult time meeting their loan payment deadlines.

For instance, there’s this businessman – or young tycoon, as many in the business community call him – who aggressively expanded his business, at least last year. Now, we hear that some of the loans he took out from major banks remain unpaid.

Perhaps it’s because the industry his business belongs to has been sluggish, no thanks to the fallout of the flood-control scandal.

Or could it also be because former House speaker Martin Romualdez, who is said to have put this young businessman under his wing, is detained for his alleged involvement in the flood-control scam? The ombudsman has tagged Romualdez as the mastermind.

We’re not sure how far behind the young businessman is on his payments, but banks are surely watching the situation with bated breath.

Isn’t it alarming that even big businessmen are now finding it difficult to pay off their loans?

Unfortunately, when this happens, lending across other sectors will be affected.

Borrowers won’t be able to take out loans to start a business or expand existing ones.

Even the micro businesses will be affected.

Some may turn to the neighborhood loan shark or “5-6” lenders, many of whom are Indian nationals, who charge interest of 20 percent per month. Under the traditional arrangement, a borrower gets five pesos and pays back six, although the actual cost depends on the terms and repayment period.

And if our streak of bad luck doesn’t end soon, the consequences could reach far beyond bank balance sheets.

Because when more Filipinos can no longer pay their utangs, it isn’t just the banks that have a problem.

Households will have less money to spend, businesses will struggle to grow and our economy will slide further downhill – faster than President Marcos’ F1 sojourn in Singapore.

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Email: [email protected]. Follow her on X @eyesgonzales. Column archives at EyesWideOpen on FB.