Bank lending grows for 5th straight month

MANILA, Philippines — Loan growth accelerated for the fifth straight month in March amid the enhanced community quarantine, which forced many businesses to reduce operations or shut down, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data released by the BSP showed that loans extended by universal and commercial banks increased by 12.9 percent to P9.35 trillion in March from P8.27 trillion in the same month last year.

The latest growth figure was faster than the revised 12 percent expansion recorded in February. Loans disbursed by big banks have been picking up at a faster clip since the single digit 9.3 percent expansion recorded in October.

Michael Ricafort, chief economist at Yuchengco-led Rizal Commercial Banking Corp. (RCBC), said the surprisingly strong credit growth in March partly reflects the positive effects of the BSP rate and RRR cuts since the latter part of 2019 as well as the increased infrastructure spending that had positive effects on related industries in the supply chain.

Ricafort said the pandemic issues started to emerge especially in April as the lockdown in Luzon and other parts of Visayas and Mindanao resulted in business shutdowns.

“Bank loans could start to slow down in April and could even potentially contract in the second quarter together with the broader economy, depending on how the lockdown would last, which is also a dilemma faced by many countries around the world with some risks of economic contraction, with the risks of recession lurking locally and worldwide,” Ricafort said.

The BSP has slashed interest rates by 200 basis points between May and April last year and lowered the reserve requirement ratio by 600 basis points since last year amid the benign inflation environment and slower-than-expected gross domestic product (GDP) growth.

Loans for production activities grew by a double-digit rate of 12 percent to P8.18 trillion in March from P7.31 trillion in the same month last year. The sector accounted for 87.6 percent of the total loans disbursed by big banks.

Loan disbursements to the real estate sector jumped by nearly 22 percent to P1.71 trillion in March or about 18.4 percent of the total loan disbursements, while releases to the wholesale and retail trade as well as repair of motor vehicles and motorcycles went up by 6.8 percent to P1.2 trillion for a share of 12.8 percent.

However, the BSP data showed loan releases for the manufacturing sector still contracted by 0.4 percent to P1.06 trillion in March.

Households picked up by 22.9 percent to P837.66 billion in March from P681.44 billion in the same month last year, for a share of nine percent of total loan releases even if Luzon was placed under quarantine last March 17.

The increase in credit card loans slowed to 19 percent to P357.68 billion from P300.67 billion, while auto loans also grew slower at 29.8 percent to P384.08 billion from P295.89 billion.

The BSP noted a sharp 11.8 percent rise in salary-based general-purpose consumption loans to P79.07 billion, while other loans grew by 19 percent to P16.83 billion as there was a lull in economic activity as Filipinos were forced to stay at home to prevent further spread of the contagion.