Bank lending picks up anew

Loans disbursed 2.7% higher in September

MANILA, Philippines — Credit growth improved for the second straight month, rising by 2.7 percent in September, amid the modest recovery in the overall lending attitude of Philippine banks along with improved economic prospects, data released by the Bangko Sentral ng Pilipinas (BSP) showed.

The outstanding loans of universal and commercial banks amounted to P9.25 trillion in end-September, P241 billion higher than the P9.01 trillion disbursed in the same  period  last year.

BSP Governor Benjamin Diokno said the 2.7 percent year-on-year increase in September was faster than the 1.3 percent expansion in August.

“The observed increase in outstanding loans of universal and commercial banks reflects the modest recovery in banks’ overall lending attitudes along with improved economic prospects owing to the gradual lifting of pandemic containment measures,” Diokno said.

Loans disbursed by big banks have been declining since December last year as banks remained risk-averse, while demand from borrowers remained tepid due to uncertainties brought about by the pandemic.

As the aggressive easing including the 200-basis-point cuts in interest rates and lowering of the reserve requirement ratio undertaken by the BSP to cushion the impact of the global health crisis on the economy, bank lending finally started recovering in August or nine months after the benchmark rate was tweaked by the BSP.

“The lower policy rates were meant to influence banks to reduce their own lending rates, thereby promoting credit-taking activities. Meanwhile, lower reserve requirement levels is intended to increase the volume of loanable funds,” Diokno said in his closing remarks at the 32nd National Statistics Month celebration.

Data showed outstanding loans for production activities grew faster at 4.4 percent to P8.19 trillion,  accounting for 88.6 percent of the total lending in end-September.

Loans released to the real estate sector went up by 7.2 percent to P1.82 trillion and accounted for 19.7 percent of the total disbursements, while lending to the manufacturing sector increased by 4.4 percent to P1.05 trillion for a share of 11.3 percent.  Loans to the electricity, gas, steam and air-conditioning supply sector rose by 3.2 percent to P1.04 trillion for an 11.3 percent share.

On the other hand, loans to the wholesale and retail trade as well as repair of motor vehicles and motorcycles contracted at a slower pace of 1.7 percent to P1.08 trillion for a share of 11.7 percent.

Likewise, the BSP data showed that consumer loans remained subdued, contracting by 7.8 percent to P801.4 billion in end- September for a share of 8.7 percent of total loans.

Despite the improving default rate of borrowers as the economy recovers from the impact of COVID, credit card loans slipped anew by 0.3 percent to P402.4 billion from P403.34 billion.

Likewise, motor vehicle loans shrank by 15.6 percent to P310.77 billion from P368.03 billion.

The BSP has committed to maintain an accommodative monetary policy stance to help the economy fully recover from the pandemic-induced recession.

Diokno said the BSP would continue to provide the appropriate monetary policy support to allow economic recovery to gain more traction, in line with the regulator’s price and financial stability mandates.

“Together with the national government’s fiscal and health measures, keeping a steady hand on the BSP’s monetary policy levers should continue to help boost domestic demand and market confidence,” Diokno said.