Credit growth picks up after BSP rate cut

MANILA, Philippines — Credit growth improved for the third straight month to 11 percent in September as the Bangko Sentral ng Pilipinas (BSP) lowered borrowing costs and hinted at additional rate cuts, fueling optimism for continued economic expansion.

The outstanding loans of universal and commercial banks amounted to P12.4 trillion in end-September, P1.23 trillion higher than the P11.17 trillion in the same period last year.

The increase in September was faster than the 10.7 percent expansion in August. It marked the fastest in 21 months or since the 13.7-percent expansion in December 2022.

“Looking ahead, the BSP will continue to ensure that domestic liquidity and lending conditions are aligned with its price and financial stability objectives,” the central bank said in a statement.

BSP data showed outstanding loans for production activities grew faster at 9.8 percent to P10.6 trillion, accounting for 85.5 percent of the total lending in end-September.

Loans released to the real estate sector went up by 14.2 percent to P2.55 trillion and accounted for 20.5 percent of the total disbursements, while lending to the manufacturing sector increased by 10.6 percent to P1.3 trillion for a share of 10.4 percent.

Loans to the wholesale and retail trade as well as repair of motor vehicles and motorcycles rose by 12 percent to P1.43 trillion, making up 11.6 percent of total loans in September. Credit to the electricity, gas, steam and air-conditioning supply sector grew by 7.5 percent to P1.33 trillion for a 10.7-percent share.

Meanwhile, the data showed that consumer loans grew at a slower pace of 23.4 percent to P1.47 trillion in end-September for a share of 11.9 percent of total loans.

Credit card loans jumped by 27.7 percent, slightly higher than the 27.4 percent a month ago, to P845.3 billion. However, motor vehicle loans increased by 18.6 percent to P433.6 billion, slower than the 19.3 percent in August.

Salary-based general purpose consumption loans also went up by 15.2 percent to P155.2 billion. The growth rate was lower than the 16.4 percent a month ago.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the pick-up in lending growth was after the BSP’s first interest rate cut of 25 basis points in August and the US Federal Reserve’s jumbo rate cut of 50 basis points in September.

In the coming months, Ricafort said lower interest rates would help spur greater demand for loans as the BSP could cut by at least another 25 basis points in December.

The recent reduction in banks’ reserve requirements could also infuse about P400 billion into the financial system, which could increase the loanable funds of banks, he said.

However, this will be mitigated by the BSP’s term deposit facility and securities auctions every week as these are the central bank’s main tools to mop up excess liquidity.

In a separate data, the BSP reported a 5.4-percent increase in domestic liquidity to about P17.6 trillion in end-September, slower than the 5.5 percent expansion in end-August.