Bank lending picks up pace in Jan

Despite elevated interest rates, bank lending growth climbed to an eight-month high of 7.8 percent in January, amid the continued recovery of the economy.

Preliminary data released by the Bangko Sentral ng Pilipinas (BSP) showed loans disbursed by universal and commercial banks reached P11.54 trillion in January, 7.8 percent higher compared to the P10.71 trillion recorded a year ago.

The January growth rate was faster than the revised 7.1 percent expansion seen in December 2023, and marked the second straight month that credit growth accelerated. It was also the highest since the 9.4 percent growth rate recorded in May last year.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the improvement in banks loans may have to do with the further pickup and recovery of the economy.

The Philippine economy expanded by 5.6 percent in 2023, slower than the 7.6 percent in 2022. Even if the country missed its growth target of six to seven percent last year, the Philippines was one of the fastest-growing economies in the region.

Bank lending growth in the Philippines has remained steady and robust, even amid the aggressive interest rate hikes by the Monetary Board, as businesses and consumers continue to borrow to cope with high prices.

Latest data showed loans to production activities increased by 5.9 percent to P9.92 trillion in January from P9.37 trillion a year ago. It was faster than the 5.6 percent growth rate in December, and accounted for 85.9 percent of the total disbursements.

The growth in loans for production activities was driven by the increase in credit to industries such as real estate activities (11.4 percent); wholesale and retail trade, and repair of motor vehicles and motorcycles (7.4 percent); electricity, gas, steam and air conditioning supply (7.3 percent); transportation and storage (18.2 percent) and construction (13.6 percent).

The BSP reported that consumer loans jumped by 25.2 percent to P1.29 trillion in January, or about 11 percent of the total loans disbursed by big banks. It also quickened from the 23.9 percent expansion in the previous month.

Credit card loans surged by 30 percent to P728.97 billion from P560.38 billion a year ago. Auto loans were also higher by 19.7 percent to P387.99 billion, while salary-based general-purpose consumption loans rose by 14.6 percent to P138.42 billion.

“Looking ahead, the BSP will ensure that liquidity and bank lending conditions remain in line with its price and financial stability objectives,” BSP Governor Eli Remolona Jr. said in a statement.

Meanwhile, separate BSP data showed that domestic liquidity (M3), or the amount of money in circulation, grew slower by six percent to P17 trillion in January.

Domestic claims quickened to 9.8 percent while claims on the private sector grew by 8.8 percent with the sustained expansion in bank lending to non-financial private corporations and households.

Net claims on the government also climbed by 15.9 percent, due mainly to the decrease in deposits by the state with the BSP.