BSP: Big bank loans grow at slowest pace in 5 months

MANILA, Philippines — Big banks have started to feel the pinch from higher interest rates, with consumers availment of loans in August slowing down to their weakest pace in five months.

According to the Bangko Sentral ng Pilipinas, outstanding loans granted by commercial lenders hit P7.84 trillion last month, up 18.9 percent year-on-year, the slowest since March's 18.5 percent.

The growth rate was also the slowest since BSP first hike interest rates this year by 25 basis points in May. Since then, it increased rate by another 25 bps in June, and a hefty 50 bps in August and last Thursday.

Policy rates now stand at 4.5 percent from 3 percent before the first increase. Since BSP's rates serve as benchmark for banks, interest rates on their loans have risen, discouraging consumers to borrow.

BSP data show average bank lending rate rose to 6.02 percent in August, the first time it crossed the 6-percent mark in seven years.

From January to August, data show most loans amounting to P6.95 trillion were channeled to production activities. They rose 19.1 percent year-on-year last month, down from 19.7 percent in July.

Among types of production loans, credit to financial and insurance activities rose the fastest at 37.2 percent, followed by construction segment that increased 36.9 percent, and repair of motor vehicles at 24.5 percent.

On the flip side, reflecting the farm sector's dismal performance this year, credit extended to the agriculture sector dropped more than a quarter from same period a year ago.

Meanwhile, credit used for household consumption hit P620.17 billion, up 15.8 percent from same period a year ago.

The expansion also slowed from 16.9 percent the previous month, figures showed, led by a decline in personal salary loans (-1.1 percent) and those use for other purposes (-9.6 percent).

On Thursday, BSP Assistant Governor Francisco Dakila said out of the total 150 bps hike implemented this year, only 84.2 bps had been reflected by banks so far, indicating bank credit may become more expensive in the coming months.

Monetary officials, however, assured that the economy is resilient enough to absorb higher cost of bank credit used primarily for consumption or investment that drive economic growth.

As a result of higher BSP rates, money supply also expanded slower at 10.4 percent in August to P11.4 trillion, data show.