Bank lending growth reaches 3-month high

Businesses borrowed more in August

MANILA, Philippines —  Bank lending growth accelerated to a three-month high in August as businesses continued to tap credit, offsetting a further slowdown in household borrowing.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that loans extended by universal and commercial banks grew by 11 percent year-on-year in August, faster than the 10.4-percent expansion in July.

The latest pace was the fastest since May, when bank lending grew by 12.1 percent. Outstanding loans reached P15.12 trillion in August, up from P14.98 trillion in July and P13.62 trillion a year earlier.

Bank lending is closely watched because it shows how much credit is flowing to businesses and households. Faster loan growth can support spending and investment, and the composition of lending also offers clues about where demand in the economy is strongest.

The acceleration in overall credit was supported by stronger business borrowing.

Credit used by companies to finance operations and investment grew by 10.6 percent in August, faster than the 9.8-percent expansion in July. Outstanding production loans reached P12.73 trillion, accounting for about 84.2 percent of total bank credit.

The BSP said growth was supported by increased lending to real estate, utilities, wholesale and retail trade, financial and insurance activities, manufacturing, information and communication and transportation and storage.

Loans to the electricity, gas, steam and air-conditioning supply sector rose by 27 percent to P2.13 trillion, while credit to wholesale and retail trade, including repair of motor vehicles and motorcycles, increased by 10.5 percent to P1.67 trillion.

Manufacturing loans grew by 6.1 percent to P1.28 trillion, while lending to financial and insurance activities accelerated to nine percent to P1.18 trillion.

Credit to the information and communication sector rose by 8.6 percent to P768.32 billion, while transportation and storage loans climbed by 26.1 percent to P673.07 billion.

Real estate remained the largest borrowing sector, with outstanding loans of P2.9 trillion, although growth moderated further to 4.5 percent from 5.5 percent in July.

Meanwhile, construction loans remained weak, declining by 11.7 percent to P450.17 billion, while agriculture, forestry and fishing loans slipped by one percent to P238.87 billion.

Household borrowing continued to increase, but at a slower pace.

Consumer loans to residents grew by 16.2 percent year-on-year in August, easing from 17.1 percent in July, as growth in credit card and motor vehicle loans softened. Outstanding consumer loans reached P2.08 trillion.

Credit card loans, the largest component of consumer lending, rose by 23.3 percent to P1.32 trillion, slower than the 24.5-percent growth recorded a month earlier.

Motor vehicle loans rose 5.8 percent to P542.98 billion, while salary-based general purpose consumption loans grew 11.6 percent to P183.59 billion.

The divergence between business and household credit suggests that the August pickup in overall lending was driven mainly by corporate demand, while consumers remained more measured in taking on new debt.

Separately, domestic liquidity, or M3, grew by 11.2 percent year-on-year to P20.7 trillion in August. M3 is the broadest measure of the economy’s money supply and includes currency in circulation, demand deposits, savings and time deposits, as well as deposit substitutes.

Looking ahead, the BSP said it would continue to ensure that bank lending and domestic liquidity conditions remain consistent with its price and financial stability mandate.