Based on documents obtained by Vantage Point from reliable sources, DBP’s ₱36.21 billion in non-performing loans (NPLs) is no longer a peripheral banking issue but a material strain on financial viability — silently eroding capital, compressing future lending, and transforming development finance into a deferred fiscal risk the country may eventually be forced to absorb. 

Development banks do not fail loudly. They erode quietly — through balance sheets that still look compliant, profits that still appear respectable, and capital ratios that technically pass regulatory tests. The danger is not collapse, but complacency. And that is precisely the risk now facing the Development Bank of the Philippines (DBP).

On paper, DBP appears stable. It reported 2024 profits of roughly ₱7.1 billion, maintains capital adequacy ratios above Bangko Sentral thresholds, and continues to post strong liquidity buffers. Deposits remain ample. There is no run on the bank, no solvency panic, no regulatory intervention in sight. Beneath this surface calm, however, lies a set of structural signals that point to something more troubling: a development institution drifting away from its mandate, while quietly accumulating credit risk that the public ultimately shoulders.

But numbers rarely alarm on their own. It is only when they are placed in context — against capital, earnings, and mandate — that their meaning becomes unavoidable. The discovery that the DBP is carrying approximately ₱36.21 billion in non-performing loans (NPL) redraws the bank’s entire risk map.

Documents show that most of DBP’s NPLs were granted during the Duterte administration to 442 borrowers — spanning both businesses and individuals — with loan exposures ranging from one peso to as much as ₱3.4 billion.

Records further show that the largest non-performing exposure in DBP’s loan book is Premium Megastructures Inc., with outstanding loans totaling approximately ₱3.4 billion, followed closely by Chua Manuel & Theresa with about ₱3.31 billion. 

Phoenix Petroleum Philippines Inc., controlled by businessman Dennis Uy, ranks third, with NPLs amounting to roughly ₱2.93 billion. Together, these top accounts highlight the concentration risk embedded within DBP’s impaired portfolio, underscoring how a handful of large borrowers now account for a substantial share of the bank’s ₱36.21 billion in bad loans. See list below:

If we first strip away the illusion created by accounting stability, DBP remains profitable. Its liquidity ratios exceed regulatory minimums. Its capital adequacy remains technically compliant. None of these facts are false — and none of them negate the significance of a ₱36-billion impaired loan book.

NPLs do not represent losses yet. They represent probability that capital will eventually be consumed.

Measured against DBP’s gross loan portfolio of roughly ₱560 billion, the NPL stock implies a ratio of about 6.4%.That figure alone places the bank well above the system average and beyond the comfort zone for an institution whose funding and survival ultimately rest on public confidence. But ratios only tell part of the story. What matters more is how such NPLs interact with earnings.

Narrow cushion

DBP’s annual net income of roughly ₱7 billion provides a narrow cushion. Credit provisions are not optional; they rise as loans deteriorate. Even modest increases in provisioning can absorb most of the bank’s annual profit. A ₱5-billion additional reserve requirement — easily triggered by reclassification or regulatory review — would effectively wipe out a year’s earnings. A deeper deterioration cycle would push the bank into losses without a single peso leaving the vault.

This is the first hard reality: DBP’s earnings capacity is insufficient to comfortably absorb its current level of impaired assets.

The second reality lies in capital sensitivity. DBP’s equity base, estimated at just under ₱100 billion, appears robust — until loss severity is introduced. If even 15% of NPLs ultimately prove unrecoverable, the bank would absorb a capital hit exceeding ₱5 billion. At 25% loss severity, the impact approaches ₱9 billion. These are not catastrophic numbers — but they materially weaken buffers meant to protect against future shocks.

Capital erosion rarely announces itself. It emerges gradually, through declining return on equity, constrained lending capacity, and rising dependence on retained earnings. Over time, growth slows not because the bank lacks liquidity, but because it lacks risk appetite.

This is how development banks become conservative not by design, but by damage.

Vantage Point prepared this Stress-Test Scenarios table to see how DBP’s current financials handle stress

How to read this table:

10% loss scenario: This is the optimistic case — assumes strong recoveries, cooperative borrowers, and no macro shock. Even here, DBP loses half a year of profits instantly.

20% loss scenario: This is where the issue becomes structural.
One full year of earnings disappears, compressing lending capacity and weakening future capital generation.

30% loss scenario This is not extreme — this is what happens when: retail-heavy NPLs linger; legal recoveries stall andcollateral values disappoint.

At this level:

• over ₱10 billion in capital evaporates
• CET1 buffers visibly thin
• recapitalization risk quietly enters the picture.

Loans to individuals

Yet the most unsettling discovery is not merely the size of DBP’s problem loans. It is who the bank has been lending to.

A growing portion of DBP’s loan book is extended not to corporations, infrastructure project vehicles, or institutional borrowers — but to individuals. That shift should immediately raise alarms.

DBP’s charter allows lending to individuals only as an incidental function — typically when the borrower is a sole proprietor or project proponent directly engaged in a development-oriented activity. 

The intent is narrow: development banks exist to finance enterprises, infrastructure, and productive capacity, not personal credit. Individual lending is meant to be an exception tied to specific projects, not a substitute for corporate or project-based financing. When individual accounts begin to rank among a bank’s largest exposures, it signals a departure from that framework and raises questions about whether credit decisions remain anchored on developmental purpose rather than structural convenience.

This becomes dangerous because large individual loans are far harder to monitor, restructure, and recover. Unlike corporations, individuals do not produce audited financial statements, cannot be reorganized, and rely largely on collateral enforcement when loans sour — a process that is slow, legally complex, and politically sensitive for a government-owned bank. Documents reviewed by Vantage Point showing billion-peso non-performing exposures booked under individual names therefore point to a deeper risk: capital becoming trapped in prolonged recovery, lending capacity quietly shrinking, and financial exposure gradually shifting from private borrowers to the public purse.

A multi-billion-peso exposure booked under individual names suggests:

• lending outside core development mandate, or
• corporate borrowing structured through personal accounts, or
• credit granted with heavy reliance on collateral rather than cash-flow viability.

None of these align cleanly with development banking.

DBP is not a retail bank. It was never designed to be one. Its mandate is to finance development — power plants, transport systems, logistics corridors, water systems, and productive enterprises — where long-term capital is scarce and private banks are reluctant to tread. Retail lending, by contrast, belongs to institutions built for consumer credit scoring, behavioral risk analytics, and aggressive collections — systems that government banks are structurally ill-equipped to operate.

Individual borrowers carry inherently higher default volatility. They lose jobs, fall ill, migrate, or simply disappear from the formal economy. Unlike corporations, they cannot be restructured meaningfully. Unlike LGUs, they cannot offer assignment of revenues. And unlike private banks, state-owned lenders face political and reputational constraints in enforcing collections. The result is predictable: thousands of small problematic loans that are difficult to recover, expensive to litigate, and politically sensitive to pursue.

Retail credit does not fail spectacularly. It lingers.

This lending shift represents mission drift — the most dangerous pathology of development banks. When institutions created to finance nation-building begin operating like consumer lenders, it usually reflects deeper pressures: the difficulty of booking large, high-quality corporate loans; political imperatives to expand “inclusive” credit; or the quiet repurposing of balance sheets to absorb social policy objectives without explicit fiscal budgeting.

Hidden risk

Unlike budgetary subsidies, credit losses do not appear in appropriations bills. They accumulate invisibly until provisioning expenses rise, capital buffers thin, and the inevitable question emerges: who absorbs the loss?

In DBP’s case, the answer is not shareholders. There are none in the private sense. The bank is wholly owned by the state. Any significant erosion of capital ultimately becomes a contingent liability of the national government — a fiscal exposure that never passes through Congress but still lands on taxpayers.

This is why the current configuration matters. DBP today remains operationally viable. It is liquid. It is solvent. It is compliant. But viability is not the same as strength. The bank’s financial profile increasingly reflects a narrowing margin for error: modest profitability, rising asset-quality pressure, and a loan mix that structurally elevates default risk.

What makes this moment critical is not crisis, but timing. Credit stress is easiest to address before it metastasizes — before provisioning accelerates, before capital adequacy trends downward, and before public funds are quietly required to stabilize what once appeared healthy.

The danger is not that DBP will fail tomorrow. The danger is that its balance sheet is slowly being repurposed away from development finance and toward risk absorption — without transparency, without explicit policy debate, and without clear accountability.

A development bank should build bridges, power grids, and productive capacity. It should not become a warehouse for fragmented retail risk disguised as inclusive finance.

The question policymakers must now confront is not whether DBP remains standing — it does — but whether it is still being used for what it was created to do. Because when development banks drift, they do not simply weaken themselves. They blur the line between public finance and hidden subsidy, turning credit into an off-balance-sheet fiscal instrument that escapes scrutiny until the bill finally arrives. 

And when it does, the public is rarely told that the warning signs were already there.

In that sense, ₱36.21 billion in NPLs is not merely a backward-looking problem. It is a forward-looking constraint. It defines what DBP will not be able to do tomorrow — long before any crisis appears today.

The lesson is not alarmist, but structural. Development finance depends on balance-sheet credibility. Once impaired assets begin to dominate strategic attention, the institution’s role quietly changes. Management becomes focused on containment rather than expansion. Prudence replaces ambition. Development gives way to defense.

This is the real meaning of the number.

The cost of past mistakes is not ₱36.21 billion. It is the price of diminished future capacity — and a reminder that for state-owned banks, credit risk is never merely a banking issue. It is an economic one, a fiscal one, and ultimately a governance one.

When development banks carry too much of yesterday’s risk, they lose the ability to finance tomorrow’s growth. – Rappler.com

Other Rappler articles on the DBP and its subsidiaries:

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