Lending growth at the country’s big banks slowed to a four-month low in June as corporate borrowers and households took a more cautious approach, dampening overall demand for credit.

Outstanding loans issued by universal and commercial banks (U/KBs) expanded 9.8 percent from a year earlier to mark the softest expansion since February’s 9.6 percent rate, according to Bangko Sentral ng Pilipinas (BSP) data released on Friday, July 31. The growth rate pulled back sharply from this year’s peak of 12.1 percent set in May.

“Growth in loans from U/KBs eased in June, reflecting cautious borrowing by firms and subdued consumer demand,” the central bank said.

Domestic loans rose 10.3 percent year-on-year, down from May's performance and the slowest rate of growth since February. Lending to non-residents shrank 10.2 percent, extending the contractionary trend in cross-border credit activity.

Meanwhile, corporate borrowing, which accounts for the vast bulk of total bank portfolios, grew 9.2 percent in June compared with 11.7 percent in May.

While resource-intensive industries such as mining and quarrying jumped 35.9 percent and transportation and storage advanced 24.2 percent, weakness in structural sectors dragged on overall performance. Construction loans contracted by 13.9 percent, while expansion in wholesale and retail trade moderated to 7.6 percent from 10.1 percent a month earlier. Real estate lending growth also eased to 6.1 percent from 7.3 percent.

Consumer lending decelerated to 17.8 percent from 19 percent in May, recording its slowest pace since July 2022.

The BSP attributed the slowdown to cooler demand for credit cards and auto loans.

Economists frame the moderation as a natural stabilization rather than systemic stress. Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said corporate clients opted to defer major capital expenditures, while household borrowers became more selective.

He noted the trend reflects credit normalization and prudent risk management rather than banking sector distress.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said businesses have shifted focus from aggressive expansion toward cash-flow preservation.

On the retail front, while inflation pressures have moderated, households remain cautious about taking on new leverage.

The credit deceleration filtered through to broader liquidity measures. Domestic money supply, measured as M3, grew 10.6 percent year-on-year to ₱20.5 trillion in June, slowing from a 12.8 percent expansion in May.

Net foreign assets rose 4.1 percent, down from 9.1 percent in May, weighed down by higher foreign-exchange-denominated liabilities at commercial lenders.

The central bank reiterated that it will keep monetary conditions aligned with its inflation and financial stability targets.