Bank lending shrinks by 4.5% in March, the most in 17 years

MANILA, Philippines — Bank lending shrank for the fourth straight month in March amid heightened risk aversion in the banking sector and tepid demand from borrowers as the pandemic continued to wreak havoc on the economy, the Bangko Sentral ng Pilipinas said.

Data released by the BSP Monday showed outstanding loans granted by universal and commercial banks further contracted by 4.5 percent in March from 2.7 percent in February, the steepest slump in nearly 17 years or since the 4.6 percent drop in May 2004.

“Credit activity remained tepid on banks’ tighter lending standards as a resurgence in coronavirus cases dampened the domestic economic outlook,” the BSP said.

The central bank said loans released by big banks amounted to P8.98 trillion in end-March or P251 billion lower than the P9.4 trillion recorded in end-March last year.

Lending for production activities, which make up 87.8 percent of total loans, shrank by 3.2 percent to P7.89 trillion in March from a year-ago level of P8.15 trillion.

Disbursements to the real estate sector inched up by 1.5 percent to P1.75 trillion and accounted for 19.5 percent of total loan disbursements.

Likewise, loans disbursed to electricity, gas, steam and airconditioning supply went up by 2.9 percent to P1.05 trillion and cornered a share of 11.7 percent.

However, loan releases to the wholesale and retail trade, as well as repair of motor vehicles and motorcycles slumped anew by 9.3 percent to P1.04 trillion for a share of 11.6 percent, while lending to the manufacturing sector shrank by 5.5 percent to P985.1 billion or 11 percent of total.

The mining and quarrying sector also booked a double-digit 18.6 percent contraction to P40.82 billion, while lending to the agriculture, forestry, and fishing sector fell 9.8 percent to P196.08 billion.

Furthermore, consumer loans fell by 9.9 percent to P837.48 billion in March from P929.88 billion in the same month last year, for a share of 9.3 percent of total loan releases.

Credit card loans booked a double-digit 10.4 percent drop to P398.05 billion amid the rising default by borrowers affected by the COVID-19 pandemic. The central bank’s Monetary Board has imposed a 24 percent ceiling on credit card charges since Nov. 3, 2020 to ease the burden on borrowers.

The BSP also noted a 10.7 percent decline in motor vehicle loans to P347.68 billion from P389.54 billion.