Double-digit bank lending growth to continue

The Bangko Sentral ng Pilipinas expects bank lending to sustain a double-digit growth this year on the back of low interest rates that are seen to drive appetite for credit.

The BSP said banks would remain keen on extending more loans both to individual and corporate borrowers given their significant liquidity.

A robust increase in bank lending this year, in turn, is seen to aid efforts to boost growth of the economy following a sharp slowdown last year.

“Steady growth and adequate liquidity are seen to support the domestic economy in the midst of uncertain global economic prospects,” BSP Governor Amando Tetangco Jr. said in a statement.

He made the statement as the BSP released a report saying that outstanding loans from universal and commercial banks as of end-February grew 18 percent to P2.76 trillion from P2.34 trillion as of the same period last year.

The increase was seen both in terms of loans to individual and corporate borrowers, the BSP said.

Those that benefited the most from the increase in loans to corporate borrowers were wholesale and retail trade, manufacturing, real estate, utilities and financial sectors, the BSP added.

Aided by the increase in bank loans, the central bank said the economy’s overall liquidity grew 7.2 percent in end-February to P4.52 trillion from P4.21 trillion in the same period last year. Liquidity is measured by M3, a broad measure of money that includes currencies in circulation, bank deposits and some highly liquid assets.

In 2011, growth in credit from universal and commercial banks rose 19 percent. Monetary officials said the healthy pace of lending growth last year helped boost domestic consumption and investments, which countered the adverse effects of anemic exports on the economy.

Officials said bank lending was expected to post yet another double-digit increase this year and this would help the economy accelerate. They said export revenues were likely to be better this year than last year’s and a sustained growth in bank lending would help the economy grow at a faster rate.

Last year, the economy expanded by 3.7 percent, a sharp slowdown from 7.6 percent in 2010. The government has set a target of a faster economic growth rate of between 5 and 6 percent for 2012.

Officials said there was room for banks to extend more loans even as credit growth was already robust last year. According to BSP estimates, total outstanding loans from banks and other financial institutions in the country stood at a little more than 40 percent of the country’s gross domestic product (GDP). The credit-to-GDP ratio is small as the ratios in some neighboring countries are at least twice as much.