Domestic banking fundamental strong, economist

Looking ahead, the BSP will ensure that liquidity and lending dynamics remain consistent with its primary mandate of promoting price and financial stability

An economist on Wednesday said the demand for bank loans and credit remains "fundamentally strong" as the economy has already reopened further towards greater normalcy.

Rizal Commercial Banking Corp. chief economist Michael Ricafort made this statement in an emailed report: The outstanding loans of universal and commercial banks in the country grew by 13.7 percent in November 2022 from 13.9 percent in October 2022.

Several banks have earlier reported an uptick in loans and credit card loans as the economy continues to recover from the impact of the Covid-19 pandemic.

"Possible easing of inflation for the coming months would, in turn, also help fundamentally ease interest rates/borrowing costs/financing costs, thereby would also help spur loan demand/growth," Ricafort said.

For its part, Bangko Sentral ng Pilipinas said the sustained growth in credit and domestic liquidity would continue to support economic activity and demand.

"Looking ahead, the BSP will ensure that liquidity and lending dynamics remain consistent with its primary mandate of promoting price and financial stability," BSP said.

Bank lending data

Data from BSP showed that outstanding loans to residents, net of RRPs, went up by 13.4 percent in November after increasing by 13.3 percent (revised) in the previous month.

Outstanding loans for production activities grew by 12.4 percent in November from the same pace as in October due mainly to the sustained expansion in loans to critical sectors, including real estate activities (12.2 percent), manufacturing (15.6 percent); financial and insurance activities (13.1 percent); and information and communication (24.3 percent).

Likewise, consumer loans to residents rose by 24.1 percent in November from 22.6 percent in the previous month, driven by the year-on-year increase in credit card, motor vehicle, and salary-based general-purpose consumption loans.

Outstanding loans to non-residents also grew by 24.8 percent in November after expanding by 33.0 percent in the previous month.

Bank loans already posted a faster year-on-year growth of +13.7 percent, the fastest in nearly four years, since January 2019, compared to the latest third-quarter 2022 GDP growth of +7.6 percent.

However, Ricafort said it is important to note that the growth in bank loans has always been much faster, by about 7-10 percentage points, vis-a-vis GDP growth for many years, especially before the Covid-19 pandemic.