Bank lending up 13.4% in 2022, money supply at P16.3 T

Big banks’ outstanding loans as of end-December 2022 grew by 13.4 percent year-on-year, a slower pace of expansion compared to November’s 13.9 percent, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday, Jan. 31.

The BSP also announced that at the end of 2022, domestic liquidity was up by 6.4 percent year-on-year to P16.3 trillion, which was a faster growth compared to end-November’s 5.5 percent.

The 2022 outstanding loan numbers are higher than 2021’s 4.6 percent since a portion of 2021 was still under strict lockdown measures due to Covid-19. In 2020, bank lending declined by 0.7 percent amid a recession.

Meanwhile, the 2022 outstanding loans are higher than the pre-pandemic 10.9 percent in 2019 with the so-called revenge spending also encouraging loan growth.

The BSP said the “sustained growth in credit activity and ample liquidity will continue to support the recovery of economic activity and domestic demand” and it it will “ensure that liquidity and credit conditions are in line with its primary mandate of promoting price and financial stability.

Based on preliminary data, the outstanding loans of universal and commercial banks net of reverse repurchase (RRP) placements with the BSP totalled P10.90 trillion as of end-2022.

Loans for production activities grew by 12.1 percent year-on-year in December to P9.55 trillion. This was a slower growth compared to 12.6 percent in November.

Credit to the real estate sector was up 13.1 percent to P2.18 trillion while manufacturing sector loans increased by 14.9 percent to P1.25 trillion. Loans to these sectors were also up: the electricity, gas, steam and airconditioning supply by 14.4 percent to P1.19 trillion; wholesale and retail trade, repair of motor vehicles and motorcycles by 12.7 percent to P1.26 trillion; and information and communication by 21.6 percent to P586 billion.

Meanwhile, consumer loans increased by 24.8 percent in December from 24.2 percent in November, or to P1.02 trillion. Credit card loans rose by 26.3 percent to P554.31 billion while motor vehicle loans went up by 11.5 percent to P325.37 billion. The salary-based general purpose consumption loan also increased by 63.8 percent to P120.72 billion.

The BSP said domestic liquidity conditions “remain appropriate to support the prevailing stance of monetary policy” and is also consistent with its objectives of price and financial stability.

As of end-December, the BSP said domestic claims rose by 12.5 percent year-on-year, higher than 11 percent in November. This was attributed to the “broadly steady pace of bank lending to the private sector.”

Claims on the private sector, on the other hand, grew by 10.5 percent in December from 10.6 percent in November due to the sustained expansion in bank lending to non-financial private corporations and households, noted the BSP. The net claims on the central government was up 21 percent from 13.8 percent in the previous month due to National Government borrowings.

The BSP said the net foreign assets (NFA) in peso terms declined by 3.5 percent in December from the 1.5-percent contraction in November. “The NFA of banks fell mainly on account of higher bills payable. Similarly, the BSP’s NFA position contracted by 3.4 percent in December,” it added.

BSP Governor Felipe M. Medalla said last week that owing to the BSP’s “very straightforward” banking regulation and rules, the domestic banking sector is well-capitalized all throughtout the duration of the pandemic.

“We make sure that banks that carry more risks will have more capital. That policy has been very rewarding because as the crisis came, our banks remained healthy and up to the pandemic, the banks’ lending recovered very strongly. Banks, now, have growing balance sheets, which, at the moment, do not show any form of weakness,” said Medalla.

“Of course, it also helped that some of the current bankers still remember the 1997 crisis,” he added.

The BSP said the “impact of the pandemic on the overall condition and performance of the banking system, which remains the core of the domestic financial system, has been manageable.”

The BSP noted that this was largely due to the implementation of targeted and time-bound regulatory relief packages that facilitated the uninterrupted flow of financial services in the country. One of the most helpful was the enactment of the Financial Institutions Strategic Transfer (FIST) Act that should “help keep the banking industry’s NPLs (non-performing loans) in check.”

As of end-2022, the banking sector is still largely considered as stable with sound capital, leverage and liquidity buffers, ample loan loss reserves, good earnings performance and prudent risk governance.