Bank lending in PH on ‘declining’ trend

MANILA, Philippines  — Credit growth in the Philippines is on a “declining” trend amid the high-interest rate environment that tempered demand for loans, all while the rest of the Association of Southeast Asia (Asean) is seeing a “stable” expansion of bank lending, Bank of America (BofA) said.

In a report sent to journalists on Monday, BofA said the directional trend of loan growth in the Philippines remained on a decline versus six months ago “led by external factors.”

BofA explained that its findings could help gauge how banks’ loan growth in the region is likely to shape up over the next one to two quarters. That said, the results for the Philippines—where bank lending quickly recovered from pandemic lows—suggest that credit expansion in the country would likely stay on a declining trend for the next few months.

READ: Bank lending to stay resilient despite high rates

“Directional trend remains on a declining trend, unchanged due to decrease in import growth, auto sales and number of visitors,” BofA said.

Minimal growth

Meanwhile, credit growth in Thailand, Malaysia, Indonesia, and Singapore is “trending flat,” BofA said, suggesting that bank lending in these countries is likely to remain stable around current levels after seeing some recovery after the pandemic.

However, the Bank said actual credit growth in the Philippines had been recovering, as demand for business loans picks up.

READ: Banks kept tight lending standards to businesses in Q1

Data from the Bangko Sentral ng Pilipinas (BSP) showed outstanding loans by big banks, excluding funds lent among themselves, amounted to P11.8 trillion in March, up by 9.4 percent year-on-year.

The expansion was faster than the 8.6-percent annualized growth in February. At the same time, it was the briskest pace of increase since April 2023.

Data showed the overall credit expansion in March was driven by a strong appetite for consumer loans, which picked up by 25.4 percent to P1.3 trillion, quicker than February’s growth of 25.2 percent.

‘Tepid’ outlook

Loans for businesses to fund their production activities expanded by 7.7 percent to P10.1 trillion, better than the preceding month’s 6.8 percent growth.

That bank lending to companies stayed in the single-digit territory indicated that businesses are possibly constrained by the high interest rate environment, analysts said.

Overall, BofA said the outlook for credit growth remains “tepid” in Southeast Asia.

“Our economists expect a bumpy road ahead in 2024,” the Bank said, adding that the region is forecast to grow its economy at a “below trend pace in 2024 on account of a patchy near-term exports outlook and uneven recovery in tourism.” INQ