Growth in bank lending continues to drop in November

The growth in bank lending continued to slow down in November 2008 as borrowing decelerated across all sector, particularly consumer and personal loans.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that the outstanding loans of commercial banks rose by 21.3 percent in November 2008, slower than the 21.9-percent growth in the previous month.

Including placements with the BSP under reverse repurchase agreements or RRPs, commercial bank lending rose by 22.9 percent year-on-year in November, also slightly lower than the 24.8-percent growth recorded in October.

The BSP said the preliminary bank lending data for November were obtained from the new system of bank reporting under the Financial Reporting Package (FRP).

This system replaced the Consolidated Statement of Condition (CSOC) reports and adapted the detailed classification of the amended 1994 Philippine Standard Industrial Classification (PSIC) for international comparability.

The BSP explained that the FRP also classified lending by production activities (covering 16 economic sectors) and by household consumption purposes (with three economic categories). Bank reports previously classified loans into only nine economic sectors.

BSP Governor Amando M. Tetangco Jr. said the loans for production activities drove the expansion in bank lending, increasing by 18.4 percent in November from 19.2 percent in October.

The increase, according to Tetangco, came from the 32.6-percent growth in lending to real estate, renting, and business services; followed by agriculture, hunting, and forestry (33.1 percent); transportation, storage and communication (91.4 percent); wholesale and retail trade (29.3 percent); and manufacturing (4.7 percent).

The growth in lending to these sectors, however, showed early signs of strains and have begun to slow down, particularly manufacturing where the growth in lending dropped from seven percent in October.

The BSP reported that consumption loans grew by 20.6 percent in November last year but slower when compared with the 21.5-percent growth in October.

The growth came mostly from credit card receivables which expanded by 23.3 percent, down slightly from 24.9 percent in the previous month. Auto loans rose by 12.6 percent from 11.6 percent in the previous month.

This year, the BSP said there was enough consumer demand to support growth in bank lending but the expansion would be slower because of tighter credit conditions.

Tetangco said lending growth would be weaker in 2009 as a result of the combined effects of the global economic slowdown and the risk-aversion of banks.

“There may be some easing from the current levels as banks implement

tighter credit standards and as base effects kick in,” Tetangco said.

Even with easing monetary policies, Tetangco said there would still be some drag on lending growth in 2009.