Home, car loans surged in 2nd quarter

MANILA, Philippines–Strong home and car sales fueled a healthy surge in consumer loans in the second quarter of the year despite reports by banks that credit standards have been tightened to avoid excess risks.

Documents released by the Bangko Sentral ng Pilipinas (BSP) showed that consumer loans rose by nearly a fifth. As a proportion to the total loan portfolio of universal, commercial and thrift banks, credits to households still remained one of the lowest in the region.

“As part of efforts to promote high credit standards, the BSP monitors the quality of consumer and other types of bank lending,” the BSP said in a statement.

Consumer loans by universal, commercial and thrift banks reached P803.3 billion at the end of the second quarter this year, an increase of 18.1 percent from P680.4 billion during the same period last year.

Quarter on quarter, loans were up 9.3 percent from the P735.1 billion posted in the previous quarter.

The increase was a result of the continued growth in investments of households in residential real estate and auto loans. Credit card loans also rose, although at a slower pace during the period.

Real estate loans made up the biggest portion of consumer credits, reaching a total of P348.16 billion at the end of June, rising 18.34 percent year on year. Auto loans were the second-largest chunk, reaching P206.74 billion. This represented a growth of 17.34 percent from June of last year.

Credit card loans, the third-largest component, rose by just 4.53 percent to P157.22 billion.

While consumer lending expanded, the ratio of the banks’ non-performing consumer loans to total loans to this sector slightly decreased to 5 percent in end-June from 5.2 percent a quarter earlier. Commercial banks and thrift banks also set aside loan-loss reserves of 67 percent of their non-performing consumer loans as a safety net against consumer credit risks.

As a percentage of total lending, the 16.5-percent consumer loan exposure of Philippine banks remained low compared to its peers in Southeast Asia. In end-June this year, the consumer credit exposure in Malaysia stood at 62.2 percent, 28.4 percent in Indonesia, 27.5 percent in Thailand and 25.5 percent in Singapore.