Credit transmission hits confidence wall

From AB Capital's The Opening Bell: Three Moves

Event

BSP data showed bank lending growth slowed to 9.2% YoY in December, the weakest in nearly two years, despite cumulative 200bp rate cuts. Business credit softened sharply as governance issues delayed public spending.

View

We think this underscores limits of monetary easing when confidence is impaired. Loan weakness is concentrated in manufacturing and construction, reflecting stalled projects, while retail lending remains supportive but decelerating.

Catalyst

Key catalysts include resolution of governance issues and clearer fiscal catch-up signals. If public spending normalizes, business lending could re-accelerate modestly by mid-2026. Downside risks include prolonged project delays.

Action

We stay selective on banks, preferring consumer-heavy lenders with strong risk controls such as BPI and BDO. We believe credit growth recovery hinges more on fiscal execution than further rate cuts at this stage.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.