Slowdown in bank lending extended for 5th straight month in Aug

MANILA  -Lending activities among large banks in the Philippines grew slower yet again, for the fifth month in a row at 7.2 percent in August as the Bangko Sentral ng Pilipinas (BSP) recorded total outstanding loans of P11.09 trillion.

Preliminary data at the BSP show that the growth in total lending, net of short-term loans to the central bank, was much weaker than the 12.2 percent observed in the same month of 2022 and slower than the 7.7 percent recorded last July.

Over the past several months, the BSP has been observing a continued easing of bank lending as the prevailing tight monetary policy stance reflects on demand for loans.

READ: BSP key rate remains at 6.25%

The central bank’s benchmark policy has been at 6.25 percent since March 2023. This means a cumulative increase of 4.25 percentage points from a record low of 2 percent that prevailed during the pandemic.

Compared to July data when the amount of loans outstanding amounted to P111 trillion, bank lending increased by 0.6 percent.

Slowest in nearly 2 years

In August, lending to Philippine residents also grew by 7.2 percent to a net of P10.75 trillion. Similarly, this was slower than the growth rate of 7.7 percent in July when residents owed banks a total of P10.69 trillion.

Of the amount lent to residents as of July, loans granted to businesses grew by 5.5 percent to P9.58 trillion.

READ: Banks seen more cautious when lending in Q3

This was also a slower growth rate compared to the 6.2-percent growth in July when outstanding obligations loans for production activities were pegged at P9.54 trillion.

The biggest borrowers were companies engaged in real estate activities at P2.2 trillion and wholesale and retail trade at P1.27 trillion.

Meanwhile, the growth of consumer loans to residents—for credit card transactions, motor vehicle purchases, salary-based general purpose and other purposes—inched up to 22.7 percent at P1.67 trillion in August. In July, lending to consumers grew by 22.6 percent to reach P1.15 trillion.

Further, the growth of outstanding loans to nonresidents revved up to 7.8 percent at P322.3 billion from 6.2 percent at P314.66 billion in July.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the growth rate in bank lending in August was the slowest in almost two years or since the 4.8 percent recorded in December 2021.