Loans of universal and commercial banks (U/KBs) in April increased by 9.7 percent year-on-year, data from Bangko Sentral ng Pilipinas (BSP) showed on Wednesday.
Based on the central bank’s data, it shows that on a month-on-month seasonally-adjusted basis, outstanding U/KBs loans, net of reverse repurchase (RRPs), went up marginally by 0.6 percent.
Meanwhile, outstanding loans to residents, net of RRPs, increased by 9.6 percent in April from 10.2 percent (revised) in March.
Data also shows that outstanding loans for production activities grew by 8.3 percent in April from 9.0 percent (revised) in the previous month, largely driven by the continued rise (about 12.4 percent) in lending to key sectors, particularly electricity, gas, steam and air-conditioning supply. Loans for wholesale and retail trade and repair of motor vehicles and motorcycles also rose 10.3 percent, for manufacturing 9.3 percent, for information and communication, 19.0 percent, and real estate activities, 4.5 percent.
“Consumer loans to residents expanded at a faster rate of 22.3 percent in April from 21.8 percent [revised] in March, driven by the increase in credit card and motor vehicle loans,” the BSP said.
Outstanding loans to non-residents also rose by 12.2 percent in April, albeit slower than the 13.1-percent (revised) increase in the previous month, it added.
The sustained expansion in bank lending activity suggests that domestic liquidity remains sufficient to support economic activity.
Looking ahead, the BSP said it will continue to ensure that domestic liquidity and credit dynamics are consistent with the prevailing stance of monetary policy, in keeping with its price and financial stability mandates.
For her part, Domini Velasquez, chief economist at China Banking Corp., said that the slowdown in bank lending points to the BSP’s monetary policy adjustments becoming more pronounced in the economy.
As expected, we are now realizing the full effects of the policy tightening last year, she said.
“However, we are seeing diverging growth trends between production and consumer loans. High interest rates likely put off companies’ expansion plans, hence the lower growth rate for production activities in April,” Velasquez added.
The economist also said that on the other hand, consumer loans continued to post higher growth which suggests robust consumer spending despite high inflation and borrowing costs.
“Moving forward, we expect loan growth to soften as borrowers may avoid locking in high interest rates, especially for long-term loans,” Velasquez said.
Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael Ricafort said that higher local interest rates partly slowed down the demand for loans, as well as higher inflation and risk of recession in the US, which is the world’s largest economy that could slow down global trade and other economic activities worldwide.
“April U/KBs loans the slowest in more than a year [since March 2022]; slower against 10.2 percent a month ago [March 2023] and 10.1 percent a year ago [April 2022]; but still among the fastest in nearly three years or since May 2020,” he added.