Bank lending up 18.5% in July

The outstanding loans of universal and commercial banks continued to expand in July, rising by 18.5 percent from 18.1 percent in June this year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Including reverse repurchase agreements (RRPs), lending went up even faster, growing by 23.9 percent although this was slightly slower than the previous month’s growth of 24.2 percent.

BSP Governor Amando M. Tetangco Jr. noted that the rise in bank lending indicated that liquidity in the financial system remained ample.

The BSP said preliminary data for July was obtained from the new system of bank reporting under the Financial Reporting Package (FRP) which adopted the detailed classification of the 1994 Philippine Standard Industrial Classification (PSIC) for international comparability. 

Tetangco explained that the FRP classified lending by production activities (covering 16 economic sectors) and by household consumption purposes (with three economic categories).

Lending to production sectors, which has been accelerating since May, grew by 16.4 percent in July, the BSP reported.

All sectors recorded expansions in lending, with the exception of fishing, mining and quarrying, and financial intermediation which posted contractions.

According to the BSP report, the expansion in bank lending was led by the agriculture sector where lending grew by 25.8 percent. It was followed by electricity, gas, and water where the central bank recorded a 58.9-percent growth in lending.

On the other hand, wholesale and retail trade lending grew by 21.7 percent, transport, communication, and storage (70.1 percent), and real estate, renting and business services (14.4 percent). 

Meanwhile, lending for household consumption grew by a slower 18 percent from the previous month’s 22 percent as auto loans registered a decline, in contrast to the previous month’s double-digit growth following the continued rise in fuel prices. 

The BSP said the decline in auto loans was partially offset by the growth in credit card receivables which continued to grow strongly at 27.9 percent.

“Bank lending is an important economic indicator because credit conditions reflect confidence in the economy, which in turn, is a key ingredient for the effective functioning of the markets,” Tetangco said.

Data in the succeeding months, therefore, would show whether bank lending has started to react to the monetary tightening of the BSP which started early this year in reaction to the rapid increase in inflation rate.

Moreover, bank lending was also expected to be ultimately affected by the on-going financial crisis which was already causing tightening credit conditions in developed economies where consumers were already holding bank spending in the wake of surging oil prices.