Credit growth slows to single-digit level in April

MANILA, Philippines — Philippine banks booked a single-digit credit growth for the first time in 12 months as the increase in loan disbursements slowed to 9.7 percent in April from 10.2 percent in March, according to the Bangko Sentral ng Pilipinas (BSP).

Loans disbursed by big banks have been increasing by double-digit levels since April last year despite the series of aggressive rate hikes delivered by the central bank to tame inflation and stabilize the peso.

Since the interest rate liftoff in May last year, credit growth reached a high of 13.9 percent in October and November as the economy further reopened with the lifting of strict COVID  quarantine and lockdown protocols.

As part of its year long tightening cycle, the BSP delivered a cumulative 425-basis point hike that saw the overnight reverse repurchase rate hit a 16-year high of 6.25 percent from an all-time low of two percent.

“The sustained expansion in bank lending activity suggests that domestic liquidity remains sufficient to support economic activity,” the BSP said.

Preliminary data from the central bank showed than loans released by universal and commercial banks reached P10.68 trillion in April from P9.9 trillion in the same month last year.

Credit growth in April was the slowest since the 8.9 percent expansion recorded in April last year.

For April, the rise in loan releases to production activities slowed to 8.3 percent from nine percent in March to P9.47 trillion from P8.74 trillion in the same month last year and accounted for 87 percent of the total disbursements.

Disbursements to the volatile real estate sector accelerated to 4.5 percent with P2.2 trillion that accounted for 20.3 percent of the total, followed by the wholesale and retail trade, repair of motor vehicles and motorcycles with a slower increase of 10.3 percent to P1.25 trillion for an 11.5 percent share.

The growth in loans extended to the manufacturing sector slightly eased to 9.3 percent with P1.2 trillion for a share of 11.1 percent, while the rise in funding to the electricity, gas, steam and air-conditioning supply sector also slowed to 12.4 percent with P1.19 trillion or 11 percent of the total.

Likewise, the increase in loans released to the financial and insurance sector also registered a slower increase of 7.7 percent with P1 trillion and accounted for 9.2 percent of the total loan disbursements.

On the other hand, consumer loans booked a faster increase of 22.3 percent in April from 21.8 percent in March driven by credit card receivables and salary loans.

Household lending reached P1.07 trillion in April and accounted for 9.9 percent of the total disbursements. Credit card loans jumped by 29.9 percent to P589.52 billion from P453.98 billion even if the BSP decided to raise the cap on interest rate charges to three percent per month from two percent.

Auto loans inched up by 1.9 percent to P337.26 billion from P331.04 billion, while salary-based general-purpose consumption loans surged by 56.2 percent to P124.03 billion from P79.4 billion.

“Looking ahead, the BSP will continue to ensure that domestic liquidity and credit dynamics are consistent with the prevailing stance of monetary policy, in keeping with its price and financial stability mandates,” the central bank said.

Both S&P Global Ratings and Fitch Ratings see credit growth in the Philippines slowing to around seven to nine percent this year from double-digit level last year due to tighter monetary conditions.