Bank lending growth hit a 20-month high in August, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Outstanding loans of universal and commercial banks rose by 10.7% year on year to P12.25 trillion in August from P11.07 trillion a year ago.
This was also the fastest growth rate since the 13.7% logged in December 2022.
On a seasonally adjusted basis, big banks’ outstanding loans inched up by 0.8% month on month. Bank lending grew by 10.4% in July.
Central bank data showed outstanding loans to residents picked up by 10.9% in August from 10.4% a month earlier. On the other hand, the growth of loans to nonresidents sharply slowed to 1.5% from 9.2% in July.
Loans for production activities climbed by 9.4% year on year to P10.47 trillion in August from P9.58 trillion a year ago. It was also faster than the 8.8% clip in July.
“This growth was largely driven by loans to key industries such as real estate activities (13.2%); wholesale and retail trade, repair of motor vehicles and motorcycles (10.7%); manufacturing (9.8%); transportation and storage (23.4%); electricity, gas, steam & air-conditioning supply (7%),” the BSP said.
Double-digit increases were also seen in loans for water supply, sewerage, waste management and remediation activities (44.9%); professional, scientific and technical services (22%); and mining and quarrying (21.7%).
Meanwhile, the growth in consumer loans to residents eased to 23.7% in August from 24.3% a month prior.
This as slower loan growth was recorded in credit cards (27.4% in August from 28.2% in July), motor vehicles (19.3% from 19.9%), and salary-based general purpose consumption loans (16.4% from 16.5%).
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the jump in lending growth was due to the BSP’s rate cut in August, its first policy reduction in close to four years.
The central bank in August reduced the target reverse repurchase (RRP) rate by 25 basis points (bps) to 6.25% from the over 17-year high of 6.5%.
The Monetary Board has two remaining meetings this year, on Oct. 16 and Dec. 19. BSP Governor Eli M. Remolona, Jr. has signaled the possibility of cutting by 25 bps at the next two meetings.
Easing inflation and further rate cuts would also “help spur greater demand for loans or credit due to lower borrowing costs,” Mr. Ricafort added.
Headline inflation eased to 1.9% in September from 3.3% in August and 6.1% a year ago. This was also its slowest print in over four years or since the 1.6% print in May 2020.
MONEY SUPPLY
Meanwhile, separate BSP data showed that domestic liquidity (M3) rose by 5.5% in August, slower than the 7.3% posted a month ago.
M3 — which is considered as the broadest measure of liquidity in an economy — increased to P17.4 trillion in August from P16.5 trillion a year earlier. Month on month, M3 slipped by 0.1%.
Domestic claims jumped by 10% in August, slower than the 11.4% expansion in July.
“Claims on the private sector grew by 11.9% in August from 12% in July (revised), driven by sustained expansion in bank lending to nonfinancial private corporations and households,” the BSP said.
“Net claims on the central government increased by 8.5% from 14.1% in the previous month (revised), due to continued borrowings by the National Government,” it added.
Central bank data showed net foreign assets (NFA) in peso terms went up by 2.4% year on year in August, much slower than 11.2% in the previous month.
“The BSP’s NFA grew by 7.7%, while the NFA of banks contracted, largely due to higher bills and bonds payable.”
Mr. Ricafort said that domestic liquidity growth could pick up after the latest cut in banks’ reserve requirement ratio (RRR).
The central bank last month said it will cut big banks’ RRR to 7% from 9.5% effective on Oct. 25.
Mr. Remolona has said that they are looking to reduce the ratio to zero within his term, which ends in 2029.
“Any further RRR cuts, which add more peso liquidity in the financial system, would be gradual in the coming years,” Mr. Ricafort added.
BAD LOANS
Meanwhile, separate BSP data showed the banking industry’s gross nonperforming loan (NPL) ratio continued to rise in August, hitting a fresh two-year high.
Preliminary data from the BSP showed the banking industry’s gross NPL ratio went up to 3.59% in August from 3.58% in July and 3.41% a year ago.
This was also the highest bad loan ratio in 26 months or since 3.6% in June 2022.
Bad loans inched up by 0.9% to P512.7 billion in August from P508.1 billion in July. Year on year, it rose by 15.8% from P442.6 billion.
Loans are considered nonperforming once they remain unpaid for at least 90 days after the due date. These are deemed as risk assets since borrowers are unlikely to pay.
In August, past due loans were up by 0.9% to P631.4 billion from P625.7 billion in July and by 19.6% from P527.9 billion a year ago.
This brought the past due ratio to 4.42% in August, higher than 4.4% in July and 4.15% a year earlier.
Restructured loans went up by 0.7% to P293.2 billion in August from P291.1 billion a month prior. Year on year, it declined by 4.2% from P306 billion.
Restructured loans accounted for 2.05% of the industry’s total loan portfolio, steady from a month ago but lower than 2.36% last year.
Banks’ loan loss reserves increased by 0.7% to P482.5 billion from P479.2 billion a month ago. It also rose by 5.8% from P456 billion year on year.
This brought the loan loss reserve ratio to 3.37%, steady from July but lower than 3.52% in August 2023.
Lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, slipped to 94.11% in August from 94.32% in July and 103.02% a year ago.
Source: Business World
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