Bank lending posted best growth in over 2 years in January

Loan growth quickened in January to hit its fastest pace of expansion in over two years, as businesses continued to regain their appetite for bank credit amid the ongoing interest rate-cutting cycle of the Bangko Sentral ng Pilipinas (BSP).

Latest data from the BSP showed outstanding loans of big banks—excluding their lending with each other—expanded by 12.8 percent year-on-year to P13.02 trillion in the first month of 2025, a tad quicker than the 12.2-percent growth in December.

That was the briskest pace of loan growth recorded since December 2022, when bank lending had grown by 13.7 percent. As it is, the over two-year high credit growth coincided with the ongoing easing cycle of the BSP, which has so far cut the benchmark rate that banks use as a guide when pricing loans to 5.75 percent.

READ: In surprise move, BSP keeps key rate steady

Strong demand

Dissecting the BSP’s report, lending to businesses—which accounted for about 85 percent of big bank’s outstanding loans —expanded at a quicker pace of 11.8 percent in January, from 10.8 percent in the preceding month.

That was the strongest demand for business loans that large banks had seen in over two years, when credit for companies grew by 12.4 percent in December 2022.

The BSP said the robust growth in loans for production activities was due to more lending to companies engaged in real estate, electricity, retail trade, transportation and storage and manufacturing.

Inventory buildup

“Firms may be ramping up borrowing for inventory buildup, expansion and capital investments, anticipating stronger demand,” said John Paolo Rivera, senior research fellow at state-run think tank Philippine Institute of Development Studies (PIDS).

“Government infrastructure projects and PPPs (public-private partnerships) could also be fueling demand for corporate credit,” Rivera added.

Meanwhile, bank lending to consumers eased to 24.4 percent in January from 25 percent before due to slower uptake in credit card borrowings, motor vehicle loans and salary-based loans.

Moving forward, PIDS’ Rivera said continued loan expansion was likely driven by “stronger business confidence, easing inflation and sustained economic growth.”

“The BSP’s monetary policy stance will be key. If rates remain high, loan growth may moderate slightly in the latter half of the year,” he said. INQ