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Rising household incomes fueled strong growth in deposits at the end of the third quarter this year, supporting banks’ aggressive lending in the country despite tightening funding conditions.
Data released by the Bangko Sentral ng Pilipinas (BSP) showed bank deposits rose to a new record high, boosted by, among others, strong growth of the country’s consumption-driven economy and rising corporate profits.
“Savings and time deposits remained the primary sources of funds for the banking system,” the BSP said in a report released this month.
As of the end of September, total deposits reached a high of P6.4 trillion, 16.3 percent up over the year-ago level of P5.5 trillion.
Despite slowing in the third quarter, the Philippines still had one of Southeast Asia’s best-performing economies, growing by 5.8 percent at the end of September of this year. This was a reflection of strong consumer spending that partly offset the steep reduction in public disbursements during the nine-month period.
Supported by strong growth in deposits, outstanding loans held by universal and commercial banks rose by 20.5 percent in September, accelerating from 20.1 percent the month before.
Apart from faster growth, the increase in deposits was also fueled by cash shifting from the central bank’s special deposit accounts (SDA) to regular accounts in banks. This followed “refinements” that banned non-pooled investments from being parked in SDAs, one of the BSP’s main sterilization tools for excess liquidity.
These SDA changes were implemented in their entirety in November of last year. From a peak of P2 trillion in February of 2013, cash in SDAs has fallen by half, latest data from the BSP showed.
This comes despite hikes in SDA rates—meant to encourage banks to put more money in the facility—implemented earlier this year to rein in money supply growth.
Growth in the amount of money circulating in the economy rose by 16.2 percent year-on-year in September to reach P7.2 trillion, slower than the 18.3-percent expansion recorded in August.
This reflected the continued expansion in credits to the private sector—a result of loan expansion.