BSP reports flat growth in September bank lending, surge in consumer debt

Bank lending remained relatively sluggish in September, growing by the same 10.5 percent as that recorded in the previous month, but slower than the 11.1 percent measured in July, data from the Bangko Sentral ng Pilipinas (BSP) revealed.

However, lending by financial institutions to households jumped substantially in the same period, with the data showing a 26.2-percent spike in September due to combined demand for both consumer durables and consumer debt.

In a statement, the BSP said preliminary data showed that outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the BSP, grew at a steady rate of 10.5 percent in September, similar to the rate previously recorded in August. On a month-on-month seasonally adjusted basis, commercial bank loans net of RRPs grew by 0.8 percent.

Loans for production activities—which comprised 87.4 percent of banks’ aggregate loan portfolio, net of banks’ short-term deposits to the regulator—expanded at a steady rate of 9 percent in September, unchanged from the reported growth in August.

“The sustained increase in production loans was driven primarily by lending to real estate activities (18.3 percent), financial and insurance activities (17.6 percent), construction (36.2 percent), electricity, gas, steam and air conditioning supply (9.2 percent) and wholesale and retail trade, repair of motor vehicles and motorcycle (4.8 percent),” it said.

Bank lending to other sectors also increased during the month, except those in professional, scientific and technical activities (-35.7 percent) and other community, social and personal activities (-39.8 percent).

“Meanwhile, loans for household consumption grew by 26.2 percent in September from 25.4 percent in August, due to faster growth in motor vehicle, credit card and salary-based general purpose consumption loans during the month,” the BSP said.

Meanwhile, preliminary data showed that domestic liquidity—the amount of cash and “near-cash items circulating in the economy—grew by 7.7 percent year-on-year to about P12 trillion in September 2019, faster than the revised 6.3-percent growth in August.

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

“Going forward, the BSP will continue to ensure that the expansion in domestic credit and liquidity remains consistent with the BSP’s price and financial stability objectives,” it added.