Industry-wide growth in bank lending seen

SINGAPORE—Bank of the Philippine Islands said industry-wide lending could grow robustly this year and in 2014, noting that gradually rising interest rates are forcing financial services firms to lend more in order to maintain healthy incomes.

“In a way, the gradual increase in interest rates is good for the economy because banks are expected to lend more,” BPI president Cezar Consing said in an interview with the Inquirer at the sidelines of an Asean forum here.

Consing said banks had been relying significantly on trading of securities for profits over the past few years, although lending also had been a good source of income.

He said the low-interest rate environment, influenced by the historic-low key policy rates set by the Bangko Sentral ng Pilipinas, has allowed banks to profit substantially from securities trading.

However, now that interest rates are slowly rising after hitting record lows, Consing said banks were likely to lend more. Income from higher lending volumes should compensate for the drag in profits caused by the rise in interest rates.

Outstanding bank loans as of the end of 2012 amounted to P3.24 trillion, according to an earlier report by the BSP. This represented a 16.2-percent growth from the level in the previous year.

Consing said bank lending growth would likely remain in the double-digit territory, probably surpassing last year’s, due to efforts of banks to increase lending activities.

The record-low interest rates seen previously were largely influenced by historic-low policy rates of the BSP. The low interest-rate environment was aimed at boosting demand for loans, thereby boost consumption and the growth of the economy.

Interest rates, however, have started to rise as the regime of extremely low rates was deemed unsustainable.

The BSP has encouraged banks to use more of their resources to lend more, especially to support job-generating investments.

Consing said banks in the Philippines were expected to stay generally healthy despite external shocks.

He said banks were projected to remain profitable, keep sufficient capital and maintain low exposure to bad debts.

“Banks in the Philippines are generally in good shape,” he said. As such, he added that banks were able to continue the trend of robustly growing loan portfolios.