Millennials to fuel consumer loan growth

CEBU, Philippines - A bank official believes the millennials will continue to drive consumer loan growth.

Maximo Eleccion, president of Cebu Bankers Club, said the working millennials or those born between 1980s and 2000s, have the capability to borrow from banks to buy cars, get cash or fulfill their dream house.

Eleccion described this generation as bullish and ambitious.

Increasing consumer loans, Eleccion explained, is making financial intermediation of banks easier. Intermediation is a process done by banks of taking in funds from depositors and then lending them out to borrowers.

“We see consumer lending to continue to increase,” he said, noting the Philippine economy is mainly consumer-driven.

On Monday, the Bangko Sentral ng Pilipinas reported that consumer loans granted by universal, commercial and thrift banks reached P959.2 billion as of end-June this year. That is 2.8% than the P932.8 billion in consumer loans (CLs) as of end-March 2015.

"This sustains the quarter-on-quarter growth in the said loans that started in 2008," the BSP said in a statement.

The central bank attributed the quarterly growth to the rise in auto loans, credit card receivables and salary loans. Residential real estate loans, however, dropped marginally during the period.

BSP also said the quality of consumer loans improved amid the rise in consumer lending. BSP noted that non-performing consumer loans or those that are in default stood at 4.5% of total CLs as of end-June, down from 4.9% posted a quarter earlier.

The central bank further said the Philippines' consumer credit exposure of 16.7% remained the lowest among the five economies in ASEAN. At end-June 2015, the CL exposure in Malaysia was at 57.1%, followed by Indonesia at 28.3%, Thailand at 27.9% and Singapore at 25.9%.

BSP monitors the level and quality of consumer and other bank loans to ensure banks' adherence to high credit standards. (FREEMAN)