Amid an ocean of cash, bank lending falls for 7th straight month

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

MANILA, Philippines—Confidence among the country’s creditors and debtors—which has been shaken by the prolonged coronavirus pandemic— remained weak with bank lending declining for the seventh consecutive month in June, according to the central bank.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said its preliminary data showed that outstanding loans of universal and commercial banks, net of short term deposits with the regulator, decreased by 2 percent year-on-year in June after declining by 4 percent in May.

This occurred even as the amount of cash and near-cash items in the domestic financial system continued to expand, amid the monetary authority’s prevailing low interest rate regime meant to aid in the restart of the economy.

Preliminary data from the BSP showed that domestic liquidity expanded by 6.4 percent year-on-year to about P14.4 trillion in June 2021. This was faster than the 4.7-percent growth recorded in May.

On a month-on-month seasonally-adjusted basis, outstanding universal and commercial bank loans went up by 1.1 percent.

According to the BSP, outstanding loans to residents fell by 1.4 percent from a 3.5 percent contraction in May, while outstanding loans to non-residents decreased by 19.7 percent from an 18.8 percent decline in May.

The weakness was attributed to “concerns over the spread of new coronavirus variants that continued to temper market sentiment and the outlook for economic recovery.”

Consumer loans to residents went down by 8.6 percent in June from a 9.2-percent decrease in May as motor vehicle loans and salary-based consumption loans declined further.

Likewise, outstanding loans to major industries continued to fall but at a slower rate, attributed mainly to wholesale and retail trade and repair of motor vehicles and motorcycles (-6.2 percent) and manufacturing (-5.8 percent).

The contraction in outstanding loans to these key sectors was partly moderated by the growth in loans to real estate activities (4.8 percent), information and communication (9.1 percent), electricity, gas, steam, and air conditioning supply (2.2 percent), and transportation and storage (6.8 percent).

On balance, total outstanding loans for production activities posted a lower contraction by 0.6 percent in June from a 2.9-percent fall in May.

“Looking ahead, the BSP shall continue to provide monetary policy support in order for the economic recovery to gain further traction,” the central bank said. “At the same time, the national government’s targeted fiscal initiatives and accelerated vaccination program remain critical in helping to restore market confidence and strengthening the recovery process.”

TSB