The decline in bank lending has slowed down in July, dropping by only 0.7 percent year-on-year for the said month, compared to 2 percent in June, the Bangko Sentral ng Pilipinas (BSP) reported.
Lending for production activities in July broke an eight-month straight decline but consumer loans continued to contract.
BSP data showed that for the first time since November 2020, lending for production activities grew by 0.8 percent year-on-year to P8.045 trillion in July after a 0.6 percent contraction in June.
Loans extended to real estate activities which amounted to P1.823 trillion grew by 5.9 percent year-on-year, while the BSP recorded a 14 percent growth for loans to the information and communication sector for a total of P433.561 billion. Transportation and storage loans registered a seven percent growth to P319.326 billion.
While lending for production activities reversed its decline in July, consumer loan was down by 8.2 percent year-on-year, slowing down from an 8.7-percent decline in June. Consumer loans amounted to P814.695 billion in July.
In particular, motor vehicle loans contributed the most to the decline in consumer loans. This segment dropped by 15.4 percent year-on-year to P322.620 billion. Credit card loans posted bigger amount of outstanding loans of P402.353 billion, but registered only 1.6 percent decline in July.
Even as a new wave of COVID-19 infections continued to subdue market sentiment resulting in low credit demand, the financial system’s money supply or domestic liquidity (M3) still grew by 5.9 percent year-on-year to P14.374 trillion although it was a slower pace of growth versus the 6.5-percent expansion in June.
The BSP said on a month-on-month seasonally-adjusted basis, M3 was up by 0.1 percent while banks’ outstanding loans, net of reverse repurchase agreements (RRPs) actually increased by 0.5 percent. The year-on-year rate of decline is slower while the month-on-month change is positive for bank lending.
Total outstanding loans net of RRPs amounted to P9.118 trillion in July from P9.179 trillion same time last year.
The bank lending data, which tracks big banks or the universal and commercial banks’ loans, is showing some improvement with loans to residents net of RRPs decreasing by 0.1 percent in July compared to 1.4 percent in June. Outstanding loans to residents net of RRPs totaled P8.860 trillion in July.
Outstanding loans to non-residents which include loans from its foreign currency deposit units, declined by 17.4 percent year-on-year in July, lower compared to 19.7 percent in June.
Preliminary data show that M3 domestic claims grew by 4.5 percent year-on-year in July from 5.3 percent in June due to the expansion in net claims on the central government as well as the slight improvement in bank lending to the private sector, said the BSP.
With government borrowings, net claims on the central government was up by 18.5 percent in July versus 27.8-percent in June. In the meantime, claims on the private sector went up by 0.4 percent in July due to bank lending to non-financial private corporations.
BSP Governor Benjamin E. Diokno said last week that bank lending activity was showing some indications of improvement. “However, credit activity has remained weak due to risk aversion and weak economic sentiment. Bank credit continues to decline as the necessary measures to address the still elevated number of COVID-19 cases constrained domestic economic activity and dampened market sentiment,” said Diokno.