Bank lending up 10.7% in May, money supply at P15.3 T

Big banks’ outstanding loans grew faster in May at 10.7 percent than April’s 10.1 percent as economic activities continued to reopen with less mobility restrictions, the Bangko Sentral ng Pilipinas (BSP) said on Thursday, June 30.

Based on preliminary data, universal and commercial banks’ lending amounted to P9.97 trillion, net of reverse repurchase (RRP) placements with the BSP. With RRPs, total lending reached P10.26 trillion.

Bank teller counting P1,000 bills/Bloomberg photo

“With the ongoing normalization of its monetary policy settings, the BSP will continue to ensure that the expansion in credit and liquidity proceeds in line with the outlook for inflation and economic growth,” according to the BSP.

The Monetary Board, BSP’s policy-making arm, has started to increase benchmark rates by 50 basis points (bps) in the last two policy meetings in a row, to contain the inflation from rising any further. For 2022, the BSP has an average inflation projection of five percent, way above the two percent to four percent target. At the moment, the key rate is at 2.5 percent.

Notably, the country’s domestic liquidity (M3) or money supply also grew by 6.9 percent year-on-year to about P15.3 trillion. It is a slower growth compared to 7.2 percent in April.

On a month-on-month seasonally-adjusted basis, M3 was broadly unchanged. As for bank lending, on a month-on-month seasonally-adjusted basis and net of RRPs, it was up by one percent.

In May, outstanding loans for production activities increased by 10.8 percent year-on-year to P8.8 trillion, backed by loans for the real estate activities and manufacturing sector which rose by 16.4 percent and 16 percent respectively, to P2.07 trillion and P1.14 trillion.

Meanwhile, consumer loans increased by 8.5 percent year-on-year to P890.59 billion. The growth in consumer loans expanded due to credit card loans and salary-based general purpose consumption loans.

As for M3, the BSP said the “dynamics remain broadly in line with the BSP’s prevailing outlook for inflation and economic activity (and that it) will continue to ensure that overall monetary conditions are conducive to maintaining price and financial stability.”

Domestic claims rose by 8.9 percent year-on-year in May due to the improvement in bank lending to the private sector, said the BSP. It cited claims on the private sector which grew by 7.5 percent in May with increased bank lending to non-financial private corporations and households.

The central government’s net claims also increased by 15.3 percent on the back of sustained National Government borrowings.

The net foreign assets (NFA) in peso terms likewise went up by 3.4 percent in May, it is a slower expansion in the BSP’s NFA position which “reflected the decline in gross international reserves relative to the same period a year ago.”

As for the NFA of banks, this also went up on account of higher investments in marketable debt securities, said the BSP.