PH swimming in cheap funds but appetite for loans slow for 5th straight month in August

Bangko Sentral ng Pilipinas. (File photo / Philippine Daily Inquirer)

MANILA, Philippines — Bank lending growth eased for the fifth consecutive month as fewer companies and individuals were able to maintain their appetite for borrowing due to the uncertainties brought about by the ongoing coronavirus pandemic.

Data from the Bangko Sentral ng Pilipinas (BSP) show that outstanding loans of universal and commercial banks, net of their short term deposits with the regulator, grew by only 4.7 percent in August, slower than the 6.7-percent expansion recorded in the previous month.

On a month-on-month seasonally-adjusted basis, commercial bank loans net of short term placements, decreased by 1.1 percent.

“Bank lending growth continued to moderate as a result of weaker corporate sector performance, declining loan demand, and risk aversion among banks,” the BSP said.

The latest data marks the fifth straight month of decline in the pace of lending since the 13.6-percent growth recorded in March, just as the country entered into a broad lockdown to fight the spread of the COVID-19 virus.

Loans for production activities, net of banks’ short term deposits with the regulator, grew by 4.2 percent in August from 5.9 percent in July.

Except for education, and human health and social work activities,  loans across all types of production activities slowed down.

Loans to key sectors, including manufacturing activities (-1.6 percent) as well as wholesale and retail trade and repair of motor vehicles and motorcycles (-2.1 percent) declined further in August.

Meanwhile, real estate activities (9.8 percent); information and communication (15.1 percent); financial and insurance activities (3.6 percent); electricity, gas, steam, and air conditioning supply  (3.2 percent); and human health and social work activities (45.9 percent) all contributed to the overall growth in production loans.

Similarly, loans to households expanded at a slower pace of 12.9 percent in August from 17.2 percent in July following the continued slowdown in credit card, motor vehicle, and salary-based general purpose consumption loans during the month.

“Looking ahead, sustained efforts from monetary and fiscal authorities to shore up market confidence will be critical in supporting bank lending activity,” the central bank said.

Meanwhile, preliminary data showed that overall money supply in the financial system grew by 14.2 percent to about ₱13.6 trillion in August, on account of the central banks aggressive monetary easing.

This was broadly steady from the 14.7-percent expansion in July. On a month-on-month seasonally-adjusted basis, money supply increased by 0.1 percent.

“The BSP reassures the public of its commitment to deploy its full range of instruments as necessary to ensure that domestic liquidity and credit remain adequate amid significant economic disruptions due to the ongoing health crisis,” the central bank said.

JPV