Bank lending sustains double-digit growth amid interest rate cuts

MANILA, Philippines — Bank lending continued its hot growth streak in May as the ongoing interest rate-cutting cycle of the Bangko Sentral ng Pilipinas (BSP) boosted demand for retail and business loans.

Outstanding loans from big banks amounted to P13.4 trillion, increasing by 11.3 percent year-on-year.

That pace of credit growth was slightly stronger than the 11.2 percent annual expansion rate seen in April. On a month-on-month basis, outstanding loans inched up by 0.9 percent.

READ: More BSP rate cuts on tap as April inflation hits 1.4%

The BSP monitors bank loans because they are a key transmission channel of monetary policy. Last month, the powerful Monetary Board (MB) trimmed the policy rate, which banks use as a guide when pricing loans, by a quarter point to 5.25 percent.

It was a widely expected decision that brought the cumulative rate reductions under the current easing cycle to 1.25 percentage points. BSP Governor Eli Remolona Jr. had said the central bank may cut the policy rate twice more before the end of 2025.

The MB has three more policy meetings scheduled this year—in August, October and December.

Dissecting the BSP’s report, loans extended to businesses to fund their various production activities expanded by 10.2 percent to P11.3 trillion in May.

But this was a milder jump compared with the 10.3 percent growth in business loans in the preceding month. The BSP attributed this to slower bank lending to companies engaged in real estate; wholesale and retail trade; and transportation and storage.

Excluding housing loans, credit to household borrowers grew by 23.7 percent to P1.7 trillion in May. This marked a slight deceleration from the previous month’s rate of 24 percent.

The BSP said growth in credit card debts—which accounted for the bulk of total retail loans—picked up at a slightly faster rate of 29.4 percent to P1 trillion. On the flip side, growth in motor vehicle loans and general-purpose salary loans softened to 18.2 percent and 8.7 percent, respectively.

“Looking ahead, the BSP will ensure that domestic liquidity and bank lending conditions remain aligned with its price and financial stability objectives,” the central bank said.