MANILA, Philippines — Big banks posted a double-digit growth in loan disbursements in April on the back of improving credit conditions as the economic recovery continues to gain more traction and as companies and households borrowed ahead of the interest rate liftoff, according to the Bangko Sentral ng Pilipinas (BSP).
Data released by the BSP showed the outstanding loans of universal and commercial banks grew at a faster pace of 10.1 percent in April from 8.9 percent in March. This was the fastest in nearly two years or since May 2020.
“Credit conditions continue to improve as economic activity rebounds amid a manageable domestic COVID caseload,” the BSP said in a statement.
Loan disbursements by big banks amounted to P9.62 trillion in April from P8.75 trillion in the same month last year.
The National Capital Region (NCR) and nearby provinces gradually shifted to Alert Level 1 in March after being elevated to Alert Level 3 in January with the resurgence of COVID infections due to the more contagious Omicron variant.
Bank lending has been increasing since August last year as the economy finally absorbed the 200-basis-point cuts in interest rates and lowering of reserve requirement ratio delivered by the BSP as part of its pandemic response measures.
Loan disbursements slumped for eight straight months between December 2020 and July 2021 as banks remained risk averse, while demand from borrowers remained tepid due to uncertainties brought about by the global health crisis.
The Monetary Board started its interest rate liftoff by hiking policy rates by 25 basis points on May 19, the first in more than three years or since November 2019.
“A steady improvement in overall credit activity and stable financial market conditions have allowed the BSP to continue rolling back its pandemic induced liquidity interventions,” the central bank said.
After emerging from the pandemic-induced recession with a gross domestic product (GDP) growth of 5.7 percent last year after a 9.6 percent contraction in 2020, the Philippines posted a stronger-than-expected GDP expansion of 8.3 percent in the first quarter.
The central bank reported that the outstanding loans of big banks for production activities increased by 10.3 percent to P8.74 trillion in April from P7.92 trillion in the same month last year.
The real estate sector posted a strong 18.7 percent jump to P2.1 trillion and accounted for 21.3 percent of the total disbursements, while lending to the wholesale and retail trade as well as repair of motor vehicles and motorcycles went up by 7.5 percent to P1.13 trillion for a share of 11.5 percent.
Furthermore, loan disbursements to the manufacturing sector grew at a faster rate of 12.4 percent to P1.1 trillion.
On the other hand, loans disbursed to the electricity, gas, steam and air-conditioning supply sector inched up by 0.6 percent growth to P1.06 trillion.
The central bank said that consumer loans recorded a faster growth of 6.7 percent to P879.4 billion.
Credit card loans booked a stronger 16 percent growth to P453.98 billion, offsetting the 3.1 percent decline in auto loans to P331.04 billion.
Likewise, salary-based general purpose consumption loan inched up by 2.2 percent to P79.4 billion and other consumer loans increased by 10.1 percent to P14.97 billion.
“Looking ahead, the BSP will continue to watch closely evolving credit and liquidity conditions to ensure that appropriate level of liquidity is available to nurture the momentum of economic recovery, while containing inflation pressures,” the BSP said.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said that companies and households borrowed in anticipation of rate hikes by the central bank.
“Faster loan growth also due to the fact that some borrowers rushed financing requirements in view of the increase in long-term interest rates or borrowing costs locally and globally amid elevated inflation and, as a matter of prudence, after the 25 basis points hike in local policy rates on May 19,” Ricafort said.
Ricafort said some borrowers also hedged funding requirements in preparation for better economic/business conditions ahead and also in view of the May 2022 presidential elections.
Meanwhile, data from the central bank also showed that domestic liquidity or M3 expanded by 7.6 percent to P15.2 trillion in end April.
“The continued expansion in domestic liquidity indicates that liquidity remains sufficient to sustain the economy on a firm recovery path. A strong rebound in economic activity has also allowed the BSP to gradually withdraw its extraordinary liquidity intervention,” the central bank said.