Bank lending up 18.8%

Growth in bank lending accelerated further in May to hit the fastest pace in more than two years, as the rising resources of the banking sector allowed it to lend more to individual and corporate borrowers.

The Bangko Sentral ng Pilipinas on Monday said the outstanding loans extended by banks as of end-May reached P2.54 trillion, up by 18.8 percent from P2.14 trillion in the same period last year.

The BSP said the growth rate in May was the fastest since April 2009.

“The steady pace of domestic economic activity and stable financial conditions supported the credit expansion in May,” BSP Governor Amando Tetangco Jr. said in a statement.

Data from the central bank showed that growth in lending as of May was driven by the increase in credit to individuals and enterprises.

Outstanding loans to individual borrowers amounted to P201.69 billion as of end-May, up by 14.9 percent from P172.53 billion as of the same period last year.

In the meantime, outstanding loans to enterprises as of the end of the first quarter were valued at P2.31 trillion, up by 20.5 percent from P1.92 trillion.

Higher loans to businesses benefited mostly those from the following sectors: manufacturing, real estate, agriculture, financial intermediation, wholesale and retail trade, and transportation and communications.

The BSP also reported that the increase in bank lending placed the annual growth in domestic liquidity, measured in terms of M3, at 8 percent in May, faster than the 7.3 percent registered in April.

Officials said the rise in bank lending indicated that banks were awash in cash and have sufficient liquidity to support consumption and investment needs of the economy.

The faster rise in bank lending is one of the factors cited for accelerating growth in demand for goods and services, which in turn was attributed partly for rising inflation. The latest annual inflation rate stood at 4.6 percent in June, coming from an average of 3.8 percent in 2010.

Rising inflation was the reason the BSP had to raise its key policy rates, which influence commercial interest rates, by a total of 50 basis points. The overnight borrowing and lending rates of the BSP now stand at 4.5 and 6.5 percent, respectively.

Last month, the BSP also increased the reserve requirement for banks from 19 to 20 percent. Reserve requirement is the percentage of deposits that banks must place at the BSP as reserves.

Estimates showed that about P36 billion was siphoned off from the banking system with the one-percentage-point hike in the reserve requirement.