Rise in consumer loans no cause for concern, says BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas  said yesterday the rising level of consumer credit is of no concern as these loans only make up a “small chunk” of banks’ total credit portfolios.

“Right now, we don’t see any risks on consumer loans… (because) to sum it up and relate that to the total loan portfolio of the banking system is still a very small amount,” BSP Deputy Governor Diwa C. Guinigundo said during the Philippines Investment Conference in Makati.

“Another point is this is something that we should expect when the economy is growing. The economy is expanding job opportunities,” Guinigundo said.

Consumer loans rose 18 percent to P803.26 billion as of June from P680.38 billion in the same period last year, data from the BSP showed. The latest figure only made up 16.46 percent of the banks’ total loan portfolio as of June.

The Philippine economy expanded by 6.4 percent in the second quarter, faster than the 5.6 percent growth in the first three months of the year. First semester growth settled at six percent, still below the government’s 6.5 to 7.5 percent target for the year.

Guinigundo said the central bank is monitoring the growth of household loans as this continues to increase.

“This is something we are monitoring very carefully because in some other countries, credit card receivables became a very big issue to the extent of posing a virtually systemic impact to the economy,” Guinigundo said.

“Our ears are on the ground to make sure consumer loans do not get out of hand,” he said.

The rise in consumer loans as of June was driven by an 18 percent growth in housing loans to P348.17 billion, and a 17 percent expansion in auto loans to P206.78 billion

Credit card receivables also climbed five percent to P157.22 billion, while salary loans amounted to P44.605 billion. Other consumer loans fell 22 percent to P46.48 billion as of June.

A central bank survey earlier this month showed banks continued to employ stricter lending standards for consumers in the third quarter due to less competition and decreased access of financial institutions to money or bond market financing.

This is the fourth consecutive quarter in which a net tightening in credit standards for household debt was observed.

Moody’s Investors Service this week has expressed concern over the high level of household loans in some Southeast Asian countries as this may have a significant impact on private consumption, a driver of economic growth, and the asset quality of banks.

The Philippines, however, has been found to have low indebtedness level as compared to Malaysia, Thailand, and Singapore.