Bank lending growth slows in October

Bank lending grew by a slower 21.9 percent in October as consumer loans and loans to financial services weakened due to growing wariness over an impending economic crunch.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that excluding placements with the central bank, lending grew by only 21.9 percent in October, slower than the 24.8-percent growth in the previous month.

The BSP said lending to production activities are still growing—albeit slower—but the significant deceleration was seen in consumption loans such as credit card loans and automotive loans.

Including bank placements with the BSP’s reverse repurchase facility, the central bank said the outstanding loans of commercial banks grew by 24.8 percent, slightly higher than the 24.1-percent growth in September.

This indicated that banks are more comfortable putting their funds with the BSP and the combined nervousness of both banks and borrowers are starting to affect overall lending.

The BSP said preliminary data for October was obtained from the new system of bank reporting under the Financial Reporting Package (FRP), which replaced the Consolidated Statement of Condition (CSOC) reports.

The BSP explained that the FRP adopted the detailed classification of the amended 1994 Philippine Standard Industrial Classification (PSIC) for international comparability.

The FRP also classified lending by production activities covering 16 economic sectors and by household consumption purposes with three economic categories.

Previously, bank reports classified loans into only nine economic sectors.

The BSP said loans for production activities slowed down to 19.2 percent from 22.4 percent in September because there was a decline in lending for financial intermediation services, mining and quarrying as well as fishing.

But the BSP reported a steady growth in lending to agriculture, hunting and forestry which went up by 44.2 percent; wholesale and retail trade (28.9 percent); real estate, renting and business services (25.1 percent) and transportation, storage and communications (81.6 percent).

The growth to lending to these sectors, however, was offset by the slowdown in all types of consumer loans which grew by 21.5 percent in October compared with the 23.4 percent growth in September.

Credit card receivables, according to the BSP, slowed down to a 24.9-percent growth from 26.3 percent in the previous month while auto loans rose by 11.6 percent compared with 12.2 percent increase in the previous month.

Other types of consumer loans rose by 23.6 percent compared with 29.6 percent.

According to BSP Governor Amando M. Tetangco Jr., the September data indicated that there was enough liquidity in the economy despite the onset of the global financial crisis that triggered a credit freeze in developed markets.

Despite the slowdown, Tetangco said that despite the global financial crisis, lending activity in the country could still be considered “robust”, providing financing for growth requirements.