BSP sees bank lending growth at 9%-10% in second half

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) believes that bank lending would grow at a steady pace of between nine percent and 10 percent in the second half of the year on the back of the stronger-than-expected gross domestic product (GDP) growth in the first half of the year.

BSP Governor Amando M. Tetancgo Jr. said bank lending would continue to post strong growth in the second semester as more companies borrow more to bankroll their expansion programs after the country’s domestic output as measured by the GDP posted a surprising growth of 7.9 percent in the first half of the year from 1.2 percent in the same period last year.

Tetangco pointed out that bank lending would likely grow between nine percent and 10 percent after expanding by 9.6 percent in the first half of the year.

“It is hard to say if it will grow in double digit levels but maybe at about the same pace of about nine to 10 percent,” the BSP chief stressed.

Latest data showed that bank lending continued to grow at a faster pace in June as corporate and individual clients borrowed more due to increased economic activity as the country’s domestic output expanded stronger-than-expected in the first quarter of the year.

Bank lending grew at a faster pace of 9.6 percent in June from 8.1 percent in May after the country’s gross domestic product (GDP) growth surged to 7.3 percent in the first quarter of the year from 0.5 percent in the same quarter last year. Total outstanding loans of banks excluding reverse repurchase placements with the BSP amounted to P2.18 trillion as of end-June this year or P191 billion more than the P1.989 trillion registered in end-June last year.

The BSP traced the increase to the growth of loans for production activities that comprise around four-fifths of the total loan portfolio of commercial banks as well as the expansion of the loans for individuals such as credit card and auto loans. Loans for production activities accelerated by 9.3 percent to P1.956 trillion in end-June from P1.788 trillion as of end-June last year. 

On the other hand, loans for household consumption increased by 13 percent to P180.94 billion as of end-June this year from P159.79 billion as of end-June last year. Auto loans surged 33.8 percent to P49.81 billion while credit card loans went up by 8.4 percent to P113.7 billion.

Tetangco pointed out that bank lending would continue to be strong for corporate and household users in the second half of the year.

However, he explained that corporate borrowers are also taking advantage of better yields and are tapping both the equities and bond markets as alternative sources of much needed funds.

“Companies are not only looking at bank loans that they are tapping they also tap the bond and equities market to raise funds. You have better indication that there is quality improvement in the financial markets there are more options now open to corporates and other borrowers,” he added. 

The BSP’s Senior Bank Loan Officers’ Survey in the second quarter of 2010 revealed that there was a net tightening of credit standards for loans to households due mainly to a decline in the risk tolerance of banks for all types of loans such as credit card loans, auto loans, and personal or salary loans to consumers.

Data showed that 23.1 percent of the total respondent banks have tightened their credit standards for loans to households. About 40 percent tightened their credit standards for credit card loans, 30.8 percent imposed stricter standards for personal or salary loans, 20 percent tigthened their housing loans, and 15.4 percent tightened on auto loans.

Furthermore, about 6.7 percent of the total bank respondents said they have tightened their collateral requirements and loan convenants for housing loans.

Overall, the survey showed that overall credit standards for enterprises and households remained basically unchanged in the second quarter from the first quarter this year. This was the fifth consecutive quarter that the overall credit standards remained unchanged.