The Philippine banking system continued to expand in early 2026, with total assets rising 8.3 percent year-on-year to P29.19 trillion in February, according to data from the Bangko Sentral ng Pilipinas (BSP).

The central bank said the increase – higher than the P26.95 billion posted in the same period last year – reflects sustained growth in lending and investment activities, supported by improving economic conditions and steady demand for credit across sectors.

Banks’ asset expansion was driven largely by higher loans and receivables, alongside gains in investment portfolios, indicating continued financial intermediation despite global uncertainties.

Industry observers said the growth underscores the resilience of the Philippine banking sector, which remains well-capitalized and liquid even as it navigates risks from elevated interest rates and external headwinds.

The BSP has consistently highlighted the sector’s strong fundamentals, with banks maintaining adequate buffers to support lending while managing risks.

However, S&P Global Ratings said the BSP’s recent decision to extend regulatory relief—such as allowing grace periods of up to six months on loan payments and up to one year for agricultural loans—could weigh on profitability. 

The central bank introduced these measures in response to the Middle East conflict’s impact on the domestic economy, with rising fuel costs potentially spilling over into other goods and services if tensions persist.

“The move may undermine bank profitability as net interest margins peak and credit losses remain elevated,” said S&P credit analyst Nikita Anand.

The central bank also allowed lenders to temporarily exclude restructured loans from nonperforming classifications, giving borrowers breathing room while helping stabilize banks’ balance sheets.

While these measures may dampen earnings, they are expected to prevent a sharper rise in bad loans, particularly among sectors affected by higher fuel prices and supply disruptions. S&P noted that Philippine banks remain in a strong position to absorb potential shocks, backed by solid profitability in recent years and ample capital buffers.

S&P warned that prolonged disruptions tied to geopolitical tensions – such as the recently announced ceasefire extension by President Trump – may lead to financial strain among small businesses, mid-sized firms, and lower-income borrowers, potentially pushing up credit costs.