November loan growth takes a hit from BSP’s anti-inflation rate hikes

The pace of bank lending slowed to its lowest level in over two years in November 2018 after regulators imposed an aggressive string of interest rate increases in a bid to tame last year’s high inflation rate, data from the Bangko Sentral ng Pilipinas (BSP) showed.

In a statement, the central bank said outstanding loans of commercial banks, excluding short term bank placements with it, grew at a slower rate of 16.8 percent in November, from 18.1 percent in October.

Similarly, growth in bank lending inclusive of placements with the regulator decelerated to 15.4 percent in November from 17.9 percent in previous month.

On a month-on-month seasonally-adjusted basis, commercial bank loans net of short term central bank placements increased by 0.3 percent, while loans inclusive of these placements declined by 0.1 percent.

Loans for production activities—which comprised 88.7 percent of banks’ aggregate loan portfolio, net of RRP—increased at a slower pace of 17.2 percent in November from 18.7 percent in the previous month.

Growth in production loans was driven primarily by increased lending to the following sectors: wholesale and retail trade, repair of motor vehicles and motorcycles (19.7 percent); financial and insurance activities (29.4 percent); real estate activities (12.5 percent); manufacturing (16 percent); electricity, gas, steam and airconditioning supply (11 percent); and construction (38.1 percent). Bank lending to other sectors also increased during the month.

Meanwhile, growth of loans for household consumption slowed down to 13.8 percent in November from 14.6 percent in October due to weaker expansion in credit card loans and motor vehicle loans, as well as contraction in salary-based general purpose consumption loans and other types of household loans.

As this developed, BSP said it will “continue to ensure that the expansion in domestic credit and liquidity proceeds in line with overall economic growth while remaining consistent with the BSP’s price and financial stability objectives.”

Meanwhile, preliminary data showed domestic liquidity grew by 8.4 percent year-on-year to about ₱11.3 trillion in November 2018. This was slightly faster than the 8.3-percent expansion in previous month. On a month-on-month seasonally-adjusted basis, money supply increased by 0.5 percent.

“Demand for credit remained the principal driver of money supply growth,” BSP said.

Loans for production activities continued to be driven by lending to key sectors such as wholesale and retail trade, repair of motor vehicles and motorcycles; financial and insurance activities; real estate activities; manufacturing; electricity, gas, steam and airconditioning supply; and construction. /kga