PH bank lending accelerates as business loans pick up

MANILA, Philippines — Bank lending in the Philippines accelerated in July, with stronger growth in business loans more than offsetting a slight slowdown in consumer credit, according to the latest data from the Bangko Sentral ng Pilipinas (BSP). Loans from big banks grew 10.4 percent from a year earlier to nearly P15 trillion. This marks a faster pace of credit expansion compared to the 9.8 percent annual growth rate recorded in June, even as growth in M3, the broadest measure of money supply, slightly eased to 10.3 percent from 10.7 percent a month earlier. Business loans, which constitute the majority of banks’ lending portfolio, saw a 9.8 percent increase, reaching P12.6 trillion, up from 9.2 percent in June. The central bank noted that lending expanded among companies in sectors such as electricity, gas, steam and air-conditioning; wholesale and retail trade and the repair of motor vehicles and motorcycles; manufacturing; financial and insurance services; and information and communications. Meanwhile, consumer lending grew 17.1 percent to P2 trillion, a slight deceleration from the 17.8 percent pace observed in the previous month. The BSP attributed the weakening growth in credit card and motor vehicle loans in July to subdued consumer confidence. The BSP closely monitors bank lending as credit serves as a key channel through which monetary policy influences the economy. In August, the central bank raised its benchmark interest rate by a quarter of a percentage point to 5 percent, its third increase in the current tightening cycle, as it aims to contain inflation pressures, particularly those linked to the war in the Middle East. BSP Governor Eli Remolona Jr. expressed hope that the August increase would be the last in the current tightening cycle, while reiterating the central bank's readiness to "tighten as much as we need to bring the inflation rate down to its target." Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, commented, "Overall, the latest figures indicate that credit demand from both businesses and households remains healthy and continues to support domestic economic activity." He added, "Looking ahead, lending growth is likely to remain firm, supported by continued demand for financing from businesses and consumers, although external uncertainties could influence the pace of credit expansion." The BSP stated it will continue to ensure that bank lending conditions remain consistent with its mandate to maintain price and financial stability.