PH bank lending snaps 8-month decline with slight increase in August

MANILA, Philippines—The volume of loans emanating from the country’s largest banks rose for the first time last August after contracting for eight consecutive months due to economic uncertainty caused by the pandemic, the Bangko Sentral ng Pilipinas (BSP) said on Thursday (Sept. 30).

In a statement, the BSP said initial data showed that outstanding loans of universal and commercial banks, net excluding their short term deposits with the regulator, increased by 1.3 percent year-on-year in August following a 0.7-percent decline in July.

BSP Governor Benjamin Diokno said the reversal in the trajectory of outstanding loans of universal and commercial banks after the downtrend that started in December 2020 was also due to “improvements in sentiment brought about by the continued rollout of COVID-19 vaccines and the gradual easing of quarantine restrictions.”

The central bank also said data showed that domestic liquidity expanded by 6.9 percent year-on-year to about P14.4 trillion in August 2021.

This was faster than the 5.9-percent growth posted in July, as the regulator kept its key interest rates at historic lows to help the economy recover from the pandemic.

Contributing to the improvement in the total bank credit was the increase in outstanding loans for production activities which grew by 3.1 percent in August from 0.8 percent in July.

The expansion was driven by the growth in loans for real estate activities (7.2 percent); information and communication (20.3 percent); manufacturing (3.0 percent); professional, scientific and technical activities (89.8 percent); and transportation and storage (9.5 percent).

However, the decrease in outstanding loans to other industries like agriculture, forestry and fishing (-6.8 percent); wholesale and retail trade and repair of motor vehicles and motorcycles (-2.0 percent); and activities of households as employers, undifferentiated goods and services (-25.5 percent) tempered the overall expansion in outstanding loans for production activities.

By contrast, consumer loans to residents remained subdued, contracting by 8.1 percent in August from an 8.2-percent decrease in July largely due to the continued decline in motor vehicle and credit card loans.

As a result, outstanding loans to residents rose by 2.0 percent in August after decreasing by 0.1 percent in July.

Outstanding loans to non-residents fell by 16.6 percent after falling by 17.4 percent in the previous month.

“Together with the national government’s fiscal and health interventions, the BSP’s prevailing accommodative monetary policy stance should help boost domestic demand and market confidence in support of economic activity,” Diokno said.

“Moving forward, the BSP will continue to provide the appropriate monetary policy support to allow the momentum of economic recovery to gain more traction, in line with the BSP’s price and financial stability mandates,” he added.

TSB