Bank lending posts best growth in nearly 2 years

MANILA, Philippines — Credit growth marked its ninth straight month of expansion in April to post its best finish in nearly two years, as easing pandemic curbs give banks more impetus to lend while borrowers took out more loans.  

What’s new

Excluding interbank lending, outstanding loans issued by big banks rose 10.1% year-on-year in April to P9.9 trillion, the Bangko Sentral ng Pilipinas reported Tuesday. The last time bank lending experienced a double-digit expansion was back in May 2020, when growth slowed to 11.3% back then.

The increase was a better finish than the 8.9% expansion in March. Month-on-month, credit inched up 0.9%.

In turn, more money circulated in the domestic economy. A separate BSP report showed M3, a measure of money supply, expanded 7.3% year-on-year in April to P15.3 trillion, albeit slower than the 7.7% annual growth in the previous month.

Why this matters

Credit growth is crucial for any economy that depends on consumption. When bank lending sank in 2020 after lenders feared bad loans would skyrocket amid the pandemic, the BSP slashed interest rates to spur loan growth within the consumption-starved domestic economy.

The ultra-loose monetary policy started to pay off in August last year, when bank lending returned to growth after eight straight months of contraction. As the economy continues to recover, the BSP began its tightening cycle in May to cool down quickening inflation.

What an analyst says

Sought for comment, Nicholas Antonio Mapa, senior economist for ING Bank in Manila, noted bank lending is still experiencing delayed effects of the BSP's easy monetary policy.

"Bank lending continues to improve as lagged effects of BSP rate cuts feed through to lending activity," he said in a Viber message.

"Improving economic outlook also helping boost demand and supply of credit. Unfortunately, a projected rate hike cycles and faster inflation are likely to stunt some bank lending momentum," Mapa added.

Other figures

• Data from the BSP showed most of the growth came from loans extended to production activities, which expanded 10.3% year-on-year in April. Under this segment, lending to businesses engaged in real estate, manufacturing, and information and communication all rose by double digits.
• Consumer loans continued their climb, growing 6.7% year-on-year in April which was its best finish since December 2020.