Lending by universal and commercial banks (U/KBs) posted its fastest growth in 15 months in May, as lenders continued to see steady credit demand from businesses and households in the second quarter of 2026.

The latest preliminary Bangko Sentral ng Pilipinas (BSP) data showed bank lending growth rose to 12.1 percent in May from 11.4 percent in April. This performance was the fastest in 15 months since February 2025’s 12.2 percent and matched the growth rate recorded in June 2025.

This expansion reflects “banks’ expectations of steady loan demand from businesses and households in the second quarter of 2026,” the BSP said in a statement on Tuesday night, July 7.

Broken down, growth in outstanding loans to residents increased to 12.6 percent in May from 11.8 percent in April. Meanwhile, the contraction in lending to non-residents widened to 8.3 percent from the 7.9-percent decrease seen in the previous month.

Loans meant to fund business activities expanded by 11.7 percent during the month, up from 10.7 percent in April. Growth was propelled by the electricity, gas, steam, and air-conditioning supply sector, which surged to 32.9 percent from 25.8 percent in April.

Other major drivers included transportation and storage, which grew by 21.4 percent, and mining and quarrying, which jumped by nearly half.

Conversely, growth in wholesale and retail trade, including motor vehicle repair, moderated to 10.1 percent from 11.8 percent in April. Financial and insurance activities also eased significantly to 2.1 percent from 6.7 percent. Real estate activities likewise moderated to 7.3 percent from 8.1 percent.

Consumer loans to residents expanded at a slower rate of 19 percent in May, down from 19.6 percent in April. This trend reflects “softer expansion in credit card and motor vehicle loans,” which grew by 26.3 percent and 10.2 percent, respectively.

Meanwhile, domestic liquidity (M3) grew by 12.8 percent in May to reach ₱20.6 trillion, accelerating from the 12.2-percent growth seen in April. Per the BSP, this growth was driven mainly by the “sustained expansion in borrowings by both the private and public sectors.”

Claims on the domestic sector remained a primary engine of money supply, rising by 13.3 percent in May from 12.7 percent in April. Specifically, claims on the private sector grew by 13.2 percent, up from 12.6 percent, driven by continued lending to households and non-financial private firms.

Also, net claims on the central government increased by 16.2 percent during the month, up from 15.1 percent in April. This was fueled by the national government’s (NG) “issuance of debt securities and withdrawal of deposits from the BSP and banks to finance its spending.”

Higher net foreign assets (NFAs), which grew by 9.1 percent from 8.9 percent a month ago, also contributed to the overall M3 growth. NFAs measure the difference between the foreign assets and foreign liabilities of depository corporations, including the BSP and banks.

Looking ahead, the BSP said it “will continue to ensure that domestic liquidity and bank lending conditions remain aligned with its price and financial stability objectives.”

Reyes Tacandong & Co. senior adviser Jonathan Ravelas said robust bank lending and money supply growth were driven by the economy beginning to benefit from the BSP’s recent interest rate easing. Prior to the tightening cycle, the BSP had delivered successive rate cuts from late 2024 through 2025.

“Lower borrowing costs, improving business confidence, steady consumer spending, and continued government expenditures have encouraged more credit demand and increased liquidity in the financial system,” Ravelas said.

“What’s encouraging is that lending growth is broad-based, from businesses expanding operations to households spending and investing, which points to a strengthening domestic demand environment,” he added.

While stronger lending growth is a positive signal for the economy, Ravelas said the BSP must still weigh inflation and global risks to ensure sustainable growth.