Filipinos took out more car loans, mortgages and credit cards, among others, in the first quarter of 2015, with demand fueled by the country’s growing economy.
The expansion of consumer loans, which outpaced the expansion of all other types of bank financing, also came as local banks focused more on expanding in the industry’s retail segment to prop up earnings.
Outstanding consumer loans extended by universal, commercial and thrift banks rose to a record high at the end of March, keeping the Bangko Sentral ng Pilipinas (BSP) on guard against potential froth.
“The BSP monitors the quality of all types of bank loans to ensure the banks’ adherence to high credit standards,” the regulator said in a statement Tuesday. “This is essential to fostering financial stability, which is a key policy objective to the BSP.”
At the end of March, consumer loans reached P932.8 billion, up 3.36 percent quarter on quarter and 26 percent year on year. Consumer loans have been rising every quarter since 2008, the BSP said.
Banks are aggressively expanding in the retail segment to boost profits, following the collapse of trading gains that helped lift their bottom line to record levels in 2013. At the end of March, all outstanding loans extended by universal and commercial banks were up 13.7 percent.
Consumer lending during the first quarter was lifted by an increase in residential real estate loans and continued growth in auto loans. Salary loans and credit cards are also considered consumer loans.
While consumer lending expanded, banks kept the level of their nonperforming loans manageable. At end-March 2015, the banks’ nonperforming consumer loans represented 4.9 percent of the total, unchanged from the 4.8 percent recorded a quarter earlier.
The banks likewise set aside provisions for 62.2 percent of their nonperforming consumer loans as a cushion for potential credit losses.
Moreover, the banks’ consumer credit exposure of 16.7 percent of total loan portfolio remained lower than banks in other major Southeast Asian economies. At end-March 2015, the consumer loan exposure in Malaysia was at 53.8 percent followed by Indonesia at 28.6 percent; Thailand, 27.7 percent; and Singapore, 25.8 percent.–Paolo G. Montecillo