Loan growth slows anew as borrowing costs rise

Large banks in the Philippines saw the loans they extended to clients grow at a slower pace for the second month in a row, by 10.4 percent to a total of P10.7 trillion in January 2023, as lending activities normalized from the disruptions of the pandemic and amid rising interest rates.

In comparison, bank lending grew by 13.7 percent to P10.9 trillion in December and by 8.4 percent to P9.7 trillion in January 2022.

The aggregate value of outstanding loans that universal and commercial banks granted to businesses and consumers has been growing year-on-year every month for 18 months straight, since August 2021 at 1.3 percent and peaking at 13.9 percent in October and November 2022.

Over the nine months up to January, the Monetary Board has raised its key policy rate by a total of 3.5 percentage points to 5.5 percent from a record low of 2 percent.

Preliminary data at the Bangko Sentral ng Pilipinas (BSP) also show that in January, outstanding loans net of short-term loans to the BSP was “broadly unchanged,” having decreased by 0.2 percent or P226 billion compared to December.

Philippine residents borrowed 10.2 percent more at P10.4 trillion, net of short-term loans to the BSP, slower than the growth rate of 13.5 percent in December when they borrowed P10.6 trillion.Of this, loans granted to businesses grew by 9.2 percent at P9.4 trillion, also slower compared to 12.6 percent (P9.6 trillion) in December.

Growth of consumer loans, including credit card transactions, also eased

The biggest amounts were lent to companies engaged in real estate activities at P2.12 trillion (growing by 3.5 percent); wholesale and retail trade, repair of motor vehicles and motorcycles at P1.22 trillion (10.4 percent); manufacturing at P1.19 trillion (10.3 percent); electricity, gas, steam and air-conditioning supply at P1.18 trillion (12.7 percent); and financial and insurance activities at P1 trillion (5.6 percent).

Also, the growth of consumer loans to residents—for credit card transactions, motor vehicle purchases, salary-based general purpose and other purposes—slowed to 20.3 percent at P1.03 trillion in January from 25.1 percent in December.

Similarly, the growth of outstanding loans to nonresidents slowed to 16.8 percent at P312 billion after expanding by 19.9 percent in the previous month.

“Brisk credit growth and adequate liquidity will continue to sustain the momentum of economic growth,” the BSP said. INQ