Bank lending slows down in May

Published July 7, 2020, 10:00 PM

by Lee C. Chipongian

Money supply (M3) at P13.7 trillion

Big banks’ lending growth is lower in May at 11.3 percent compared to April’s 12.7-percent, the Bangko Sentral ng Pilipinas (BSP) said yesterday, citing the community lockdown as reason for the decline.

 “The deceleration reflects in part constrained economic activity following the imposition of quarantine measures to contain the COVID-19 outbreak,” said the BSP.

 The central bank also reported Tuesday that initial domestic liquidity or M3 expanded by 16.6 percent year-on-year to P13.7 trillion, faster than April’s 16.2 percent.

 To support credit and liquidity, the BSP has several liquidity-enhancing measures deployed since March.

“Amid the challenge of keeping credit flowing to affected businesses and households, the BSP has adopted a range of measures to support bank lending, including a further reduction of the policy rate to complement the various liquidity-enhancing and regulatory measures by the BSP.  The BSP expects credit activity to pick up in the coming months, as economic activity resumes with the gradual reopening of the economy,” it said yesterday.

 It added that it will “remain vigilant in monitoring liquidity and credit dynamics amid significant disruptions to economic activity (and that the BSP) reassures the public of its commitment to deploy its full range of instruments to ensure that domestic liquidity and credit remain adequate amid the ongoing coronavirus pandemic.”

 In May, big banks’ lending for production activities net of reverse repurchase placements with the BSP, was up by 99.8 percent to P8.176 trillion, but lower compared to 11.1 percent in April.

 Loans granted to real estate activities increased by 19.6 percent to P1.735 trillion in May, while financial and insurance activities loans were up by 13.9 percent to P908.30 billion. In the meantime, loans for electricity, gas, steam and air conditioning supply went up by 8.6 percent to P1.033 trillion, while loans for information and communication, and transportation and storage, rose by 24.9 percent and 20.4 percent, respectively, to P395.42 billion and P319.21 billion.

 “Growth in loans for household consumption likewise grew at a slower pace of 30.2 percent in May compared to 33.3 percent in April due to the slowdown in credit card and motor vehicle loans during the period,” said the BSP.

In May, total household consumption loans reached P904.93 billion, of which P418.88 billion are credit card loans, P389.27 billion are motor vehicle loans, and P79.48 billion are salary-based general purpose consumption loan.

The BSP said demand for credit “remained the principal driver of money supply growth” in May, with domestic claims up by 16.2 percent from 15 percent in April supported by continued growth in credit to the private sector. With government borrowings, the net claims on the central government rose by 59.6 percent compared to 45.5 percent growth previously.

 “The continued stabilization of domestic liquidity conditions has given the BSP some room to gradually rescale its monetary operations while maintaining the accommodative stance of monetary policy. This will help the BSP’s earlier liquidity measures gain further traction by providing better guidance to short-term market interest rates,” said the BSP.

As for net foreign assets (NFA), the BSP said this went up by 12.1 percent year-on-year in May while in April, it was up by 11.9 percent. The BSP’s NFA position continued to expand, it added, as gross international reserves was boosted by National Government proceeds of its foreign exchange borrowings. The NFA of banks however declined in May as banks’ foreign assets also declined because of lower investments in marketable securities, according to the BSP.