Bank lending picks up for 2nd straight month

MANILA, Philippines — The growth in loans disbursed by big banks accelerated for a second straight month to 10.9 percent in August, from 10.4 percent in July, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Based on preliminary data, loans released by universal and big banks amounted to P12.25 trillion in end-August, P1.18 trillion higher than the P11.07 trillion recorded in the same period last year.

Credit growth marked the fastest in 20 months or since the 13.7-percent expansion in December 2022, despite the high interest rate environment.

“Looking ahead, the BSP will continue to ensure that domestic liquidity and lending conditions are aligned with its price and financial stability objectives,” the BSP said.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the pickup in lending growth was after the BSP’s first rate cut in nearly four years at its August meeting.

Loan growth could also be attributed to improved business and economic conditions such as better employment data in recent months, easing inflation, and the continued recovery of tourism and other industries that were hit hard during the pandemic, he said.

This increased the confidence of consumers and firms to take out more loans, Ricafort said.

BSP data showed that loans extended to production activities went up by 9.4 percent to P10.47 trillion in August from P9.58 trillion in the same period last year and accounted for 85.5 percent of total loans disbursement.

The real estate sector grew by 13.2 percent to P2.5 trillion and accounted for 20.4 percent of total disbursements, followed by the manufacturing sector with a 9.8-percent increase to P1.28 trillion for a share of 10.4 percent.

Loans disbursed to the wholesale and retail trade, repair of motor vehicles and motorcycles sector went up by 10.7 percent to P1.4 trillion, while loans released to the electricity, gas, steam and air-conditioning supply sector increased by seven percent to P1.31 trillion.

According to the BSP, disbursements to households through consumer loans grew at a slower rate of 23.7 percent to P1.45 trillion as of end-August.

Credit card loans jumped by 27.4 percent to P827.43 billion, while auto loans increased by 19.3 percent to P429.93 billion. Salary-based general-purpose consumption loans rose by 16.4 percent to P154.57 billion.

In the coming months, Ricafort said lower interest rates would help spur greater demand for loans as the BSP could cut by at least another 25 basis points in the fourth quarter.

The recent reduction in banks’ reserve requirements could also infuse about P400 billion into the financial system, which could fundamentally increase the loanable funds of banks, he said.

However, this would be mitigated by the BSP’s term deposit facility and securities auctions every week as these are the central bank’s main tools to mop up excess liquidity.

In a separate data, the BSP reported a 5.5-percent increase in domestic liquidity to about P17.4 trillion in end-August, slower than the revised 7.3-percent expansion in end-July.