Bank credit growth up for 6th straight month

Despite high interest rates

MANILA, Philippines — Philippine big banks posted a double-digit growth in loan disbursements, rising for the sixth straight month to 10.1 percent in May from 9.6 percent in April, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Bank lending growth marked the fastest in 14 months or since the 10.2 percent expansion in March 2023 despite the current high interest rate environment.

Outstanding loans of big banks stood at P12.02 billion as of end-May, P1.11 trillion higher than the P10.91 trillion recorded in the same period last year.

Security Bank chief economist Robert Dan Roces said the higher credit growth could reflect rising loan demand.

“Despite high interest rates, consumer loans remained strong on pent-up demand for essential spending needs. This continued growth suggests some optimism in the outlook for Philippine consumer spending,” he said.

Bank lending has been increasing since December last year, reflecting robust credit demand despite the 450-basis-point hike in interest rates delivered by the BSP to tame inflation and stabilize the peso.

Based on central bank data, outstanding loans of big banks for production activities increased by 8.4 percent to P10.3 trillion in May from P9.5 trillion in the same month last year.

The real estate sector posted a strong 13.2-percent jump to P2.48 trillion and accounted for 20.6 percent of the total disbursements, while lending to the wholesale and retail trade sector as well as repair of motor vehicles and motorcycles went up by 11.1 percent to P1.37 trillion for a share of 11.4 percent.

Loan disbursements to the manufacturing sector grew at a faster rate of 10.1 percent to P1.27 trillion, with a share of 10.5 percent.

Credit for the electricity, gas, steam and air-conditioning supply sector grew by 7.7 percent to P1.3 trillion while loans disbursed for transportation and storage jumped by 26.7 percent to P456 billion.

On the other hand, consumer loans recorded a faster growth of 25.6 percent to P1.37 trillion.

Credit card loans grew by 29.4 percent to P776 billion while motor vehicle loans expanded by 21.3 percent to P415.3 billion.

Salary-based general purpose consumption loan climbed by 19 percent to P148.6 billion while other consumer loans increased by 27.5 percent to P33.1 billion.

“Looking ahead, the BSP will ensure that domestic liquidity and credit conditions remain in line with its price and financial stability objectives,” the central bank said.

Meanwhile, data from the BSP also showed that domestic liquidity or M3 expanded by 6.5 percent to about P17.4 trillion in end-May.

“The BSP will continue to ensure that domestic liquidity conditions remain consistent with the prevailing stance of monetary policy, in line with its price and financial stability objectives,” the central bank said.

The BSP has been keeping the country’s benchmark borrowing costs at its current 17-year-high level and has yet to embark on its monetary policy easing cycle.

BSP Governor Eli Remolona Jr. earlier hinted at the possibility of a 25-basis-point cut at its next meeting on Aug. 15. The last time the central bank made a similar move was when it brought down the key rate to the record low of two percent in November 2020.