Bank lending hits 3-year high

Published July 31, 2022, 8:10 PM

by Lee C. Chipongian

Big banks’ outstanding loans expanded to a three-year high of 12 percent year-on-year in June as borrowers took out more loans for real estate activities, information and communication sector, and manufacturing, indicating support for economic recovery.

Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla said the universal and commercial banks’ net of reverse repurchase (RRP) placements with the BSP, registered faster lending growth compared to 10.7 percent in May.

Bank teller counting P1,000 bills/Bloomberg photo

The 12 percent increase in bank lending was a significant reversal of the 0.6 percent contraction same time in 2021. Bank lending was in negative territory from December 2020 until June 2021. It started to recover in July last year and only reported double-digit growth in April of this year. The last time bank lending was at the 12-percent level was April 2019 at 12.4 percent, about three years and three months ago.

“The sustained growth in credit will support the momentum of economic recovery amid the ongoing withdrawal of monetary accommodation,” said Medalla in a statement over the weekend.

Medalla also assured the banking public that liquidity and credit dynamics will remain consistent with the BSP’s price and financial stability objectives as they closely monitor credit growth.

On a month-on-month seasonally-adjusted basis, bank landing net of RRPs expanded by 2.3 percent.

In June, total outstanding loans for both residents and non-residents amounted to P10.19 trillion net of RRPs. Gross of RRPs, it is P10.47 trillion.

Total loans for production activities amounted to P8.99 trillion, up by 12 percent from 10.8 percent in May. Credit for real estate activities grew by 18.1 percent year-on-year to P2.13 trillion while loans to the manufacturing sector increased by 17.5 percent to P1.17 trillion.

Loans for the information and communication also grew by 29.7 percent to P555.61 billion in June. Borrowings for the wholesale and retail trade, repair of motor vehicles and motorcycles likewise increased by eight percent to P1.15 trillion.

Based on data, consumer loans increased by 10.6 percent in June to P903.81 billion compared to 8.5 percent in May. It is boosted by credit card loans and salary-based general purpose consumption loans.

In June, credit card loans went up by 18.9 percent year-on-year to P475.94 billion while salary-based general purpose consumption loans rose by 12.9 percent to P85.45 billion.

The latest Second Quarter 2022 Senior Bank Loan Officers’ Survey (SLOS) which the BSP released last week, indicated that most banks have maintained the same

lending standards during the months of April to June this year and is expected to keep steady until September. However, the SLOS was conducted June 16 until July 11 before the BSP’s off-cycle 75 basis points increase to the key overnight borrowing rate. The 40 surveyed banks have not yet accounted the surprise rate hike last July 14.

Generally, the SLOS pointed to a steady loan demand in the second quarter. About 56.3 percent of the surveyed banks said loan demand was stable based on the modal results while 67.6 percent diffusion index-based results said the same thing.

For the third quarter, the BSP said more than half of 40 surveyed banks said they expect stable loan demand for businesses and households.

The SLOS helps the BSP to assess and understand banks’ lending behavior. The survey of banks’ lending standards is also an important credit activity indicator.