Commercial bank lending up 1.3% to P1.556T in April

Commercial bank (KB) lending rose by 1.3 percent in April, reaching P1.556 trillion and reversing a decline recorded in March, the Bangko Sentral ng Pilipinas (BIP) reported yesterday..

The BSP said bank lending appeared to have recovered in April, turning around from the 0.5 percent decline in March.

The BSP said loan growth in April came from lending to financial institutions, real estate and business services (14 percent); agriculture, fisheries and forestry, (eight percent); and community, social and personal services sector, (3.3 percent).

The BSP said the increase in lending to these sectors offset the decline in construction, wholesale and retail trade, transportation, storage, and communication and manufacturing.

The BSP said the overall commercial bank lending activity remained subdued given the sluggish demand for credit by firms and the continued cautious lending stance of banks aimed at reducing their non-performing assets.

In March, the BSP noted a marked decline in bank lending to construction, wholesale and retail trade, manufacturing, transportation, storage and communications.

In the last two years, these two sectors have been steadily powering the slow but steady recovery of bank lending.

The BSP said lending to construction dropped by 28.5 percent in March, while lending to wholesale and retail trade dropped by 10.5 percent. Lending to the manufacturing sector also fell by 5.8 percent, followed by the 5.5 percent decline in lending to transportation, storage and communications.

After a month, however, the BSP said lending had recovered although officials noted there was still weak demand for bank loans and very little appetite for banks to lend.

According to the BSP, lending has been sluggish because overall corporate demand was moderate and banks are still cautious about lending to corporate borrowers despite the decline in their non-performing loans in the past few months.

The BSP said only the FIREBS sector was showing some appetite for bank loans, possibly due to the surging growth in business process outsourcing (BPO) which required both financing and very specialized locations which then spurred property development activities.

BSP Acting Governor Nestor A. Espenilla Jr. said the recent extension of the effectivity of the Special Purpose Vehicle Act should facilitate the banks’ thrust to dispose of their NPLs.

"Hopefully this will result in a further improved lending climate as the industry NPL ratio continues to decline," Espenilla said. "For its part, the BSP remains focused on its efforts to strengthen overall asset quality in the banking sector as a means of encouraging lending activity to the real sector."

On the demand side, Espenilla said loan demand is expected to benefit from favorable domestic interest rates and improved business expectations as a result of steady progress in fiscal consolidation and other key economic reforms.