Bank loans grew for 2nd straight month in Sept

Loans activity at the country’s largest banks grew for the second straight month in September, lending credence to the central bank’s assertion that the financial system has turned a corner after being ravaged by the coronavirus pandemic.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said preliminary data showed that outstanding loans of universal and commercial banks, net of their short term loans to the regulator, rose by 2.7 percent year-on-year in September.

This was faster than the 1.3-percent expansion in August, and marked the second month of growth since the eight straight months of loan contraction that began in December 2020 as both borrowers and lenders shied away from credit due to pandemic-related uncertainties.

The central bank said the observed increase in outstanding loans of universal and commercial banks “reflects the modest recovery in banks’ overall lending attitudes along with improved economic prospects owing to the gradual lifting of pandemic containment measures.”

Outstanding loans to residents, net of banks’ short term placements with the BSP, grew by 3.2 percent in September from 2 percent in the previous month, driven by a recovery in loans for production activities.

Outstanding loans for production activities grew by 4.4 percent in September from 3.1 percent in August, driven mainly by the expansion in loans for real estate activities (7.2 percent); information and communication (26.6 percent); financial and insurance activities (6.0 percent); and manufacturing (4.4 percent).

However, the decline in outstanding loans to other sectors such as agriculture, forestry and fishing (-11.9 percent); activities of households as employers, undifferentiated goods and services (-23.3 percent); and wholesale and retail trade and repair of motor vehicles and motorcycles (-1.7 percent) muted the overall increase in outstanding loans for production.

Meanwhile, consumer loans to residents fell at a slower rate of 7.8 percent in September from an 8.4-percent decline in August due to the lower contraction year-on-year in credit card, motor vehicle and salary-based general purpose loans.

At the same time, outstanding loans to non-residents declined at a slower rate of 12 percent from a decrease of 16.6 percent in August.

“Together with the national government’s fiscal and health measures, keeping a steady hand on the BSP’s monetary policy levers should continue to help boost domestic demand and market confidence,” the agency said.

“Looking ahead, the BSP will continue to provide the appropriate monetary policy support to allow economic recovery to gain more traction, in line with the BSP’s price and financial stability mandates,” it added.