Bank lending continues to decline

The pandemic-induced contraction in Philippine bank lending is now officially a trend after the central bank released data showing a decline for the third consecutive month of loans underwritten by financial institutions in February.

According to the Bangko Sentral ng Pilipinas, outstanding loans of universal and commercial banks, net of short-term deposits with the regulator, fell by 2.7 percent year-on-year in February after declining by 2.5 percent in January. On a month-on-month seasonally adjusted basis, outstanding universal and commercial bank loans increased by 0.2 percent.

Outstanding loans to residents declined by 2.1 percent while outstanding loans to nonresidents contracted by 20.7 percent.

“Credit activity eased further as demand for loans remained soft,” the central bank said in a statement.

Meanwhile, preliminary data from the central bank showed that domestic liquidity rose by 9.4 percent year-on-year to P14 trillion in February 2021.

This was faster than the 8.9-percent growth in January. On a month-on-month seasonally adjusted basis, money supply increased by 0.1 percent.

Despite this, the central bank explained that under loans to residents, consumer loans went down by 8.3 percent in February following a 7.3-percent decrease in the previous month due to the continued decline in credit card and motor vehicle loans as well as the slowdown in salary-based consumption loans.

Likewise, outstanding loans to major industries continued to decline, particularly to wholesale and retail trade and repair of motor vehicles and motorcycles (-6.3 percent), financial and insurance activities (-7.5 percent) and manufacturing (-5.7 percent).

Sectoral growth

Meanwhile, the contraction was partially moderated by the expansion in loans to some key production sectors such as real estate activities (5.1 percent), electricity, gas, steam and air conditioning supply (3.6 percent) as well as transportation and storage (7.1 percent).

In general, outstanding loans for production activities fell by 1.3 percent in February after a 1.1-percent decline in the previous month.

“Going forward, the BSP looks to keep its monetary policy stance supportive of the government’s measures to address the pandemic,” the central bank said, adding that it was prepared to take immediate measures as appropriate to ensure ample liquidity and credit in the financial system, consistent with its price and financial stability objectives.

Central bank data showed that domestic claims expanded by 5.6 percent year-on-year in February from 4.9 percent in the previous month due mainly to the faster growth in net claims on the central government, even as bank lending to the private sector remained tepid.

Net claims on the central government grew by 47.1 percent in February from 39 percent in January owing partly to the sustained borrowings by the national government. INQ