PH bank lending further slowed in July

MANILA  – The growth in monthly lending by the Philippines’ large banks further slowed, for the fourth month straight, at 7.7 percent in July due to waning pent-up demand for loans and the impact of the most aggressive monetary tightening in the region on borrowing appetite.

Preliminary data at the Bangko Sentral ng Pilipinas (BSP) placed total outstanding loans, net of short-term loans to the central bank, at about P11 trillion at the end of July.

The 7-percent lending growth in July was weaker than the 12 percent observed in the same month last year and the 7.8 percent recorded last June.

“The growth in bank lending has continued to ease in line with the prevailing tight monetary policy stance of the BSP,” the regulator said in a statement.

“Looking ahead, the BSP will continue to ensure that domestic liquidity and credit dynamics remain consistent with its price and financial stability objectives,” it added.

Compared to June data when the amount of loans outstanding amounted to P10.99 trillion, bank lending increased by 0.6 percent.

Last July, lending to Philippine residents grew by 7.7 percent to a net of P10.69 trillion.

Likewise, this was slower than the growth rate of 7.9 percent in June when residents owed banks a total of P10.67 trillion.

Of the amount lent to residents as of July, loans granted to businesses rose by 6.2 percent to P9.55 trillion. This was slightly lower than the 6.3-percent growth in June when outstanding loans for production activities were at P9.55 trillion.

The biggest borrowers were companies engaged in real estate activities at P2.19 trillion; wholesale and retail trade, P1.27 trillion; electricity, gas, steam and air-conditioning supply, P1.23 trillion; manufacturing, P1.16 trillion, and financial and insurance activities at P992.87 billion.

Meanwhile, the growth of consumer loans of residents — for credit card transactions, motor vehicle purchases, salary-based general purpose, and other purposes — eased to 22.6 percent at P1.15 trillion in July. In June, lending to consumers grew by 23.7 percent to reach P1.12 trillion.

Meanwhile, the growth of outstanding loans to non-residents picked up to 6.2 percent at P314.66 billion from 4.8 percent at P312.99 billion in June.

On Friday, BSP Governor Eli Remolona Jr. said in an interview with BloombergTV that monetary policymakers think that the effects of tightening will continue for about three quarters or up to the first half of 2024.

“We’ll still see the rates, the previous hikes, weighing on the economic activity in the Philippines” because the lag between the policy decisions and their impact are long,” Remolona said.

From May 2022 to March 2023, the Monetary Board raised the BSP’s policy rate by a total of 4.25 percentage points to 6.25 percent from a historic low of 2 percent.