Bank loan growth still slowing down

The growth of loans from the banking sector continued to slow in October despite the aggressive moves by monetary regulators to spur more lending by cutting interest rates to historic lows, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Preliminary data showed that growth of outstanding loans of universal and commercial banks, net of short-term deposits with the BSP, eased to 1.9 percent in October from 2.6 percent in September.

On a month-on-month seasonally adjusted basis, outstanding universal and commercial bank loans, net of deposits with the central bank, declined by 0.4 percent.

“The overall slowdown in bank lending growth reflects the combined effects of muted business confidence and banks’ stricter loan standards attributed mainly to continued disruptions in business operations,” the agency said in a statement.

Loans for production activities grew by 2 percent in October from 2.3 percent in September amid the continued contraction in outstanding loans to key sectors, including manufacturing (-3.6 percent) as well as wholesale and retail trade and repair of motor vehicles and motorcycles (-4.3 percent).

Meanwhile, the following sectors contributed to the overall increase in production loans: real estate activities (6.8 percent); electricity, gas, steam and air-conditioning supply (4 percent); human health and social work activities (45.6 percent); information and communication (7.5 percent), and transportation and storage (8.9 percent).

Loans to households also expanded at a slower pace of 8 percent in October from 9.8 percent (revised) in September, driven by the slowdown in credit card and motor vehicle loans as well as salary-based general purpose consumption loans during the month.

“The stance of monetary policy of the BSP remains accommodative given the benign inflation outlook and stable inflation expectations,” the central bank said. “The recent additional easing will serve to complement fiscal measures in supporting domestic demand, with targeted fiscal spending and government health initiatives in place to counteract risk aversion and weak credit demand.”

“At the same time, the BSP will remain vigilant in monitoring domestic liquidity and credit dynamics and reassures the public of its readiness to deploy necessary measures to ensure that liquidity and credit remain adequate amid the ongoing COVID-19 health crisis,” it added.

Last week, BSP Governor Benjamin Diokno called for accelerated government spending to boost growth as the private sector remained gun shy on taking out loans that would generate economic activity.

Since the start of the pandemic, the regulator has released more than P1.9 trillion in liquidity into the local financial system, equivalent to 9.9 percent of the country’s gross domestic product.