Credit growth eases as car lending slows

Credit growth eased in May amid slower increase in motor vehicle loans and salary-based general purpose consumption loans, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Nestor Espenilla Jr. said preliminary data showed the expansion in bank lending slowed down to 19.4 percent in May from 19.9 percent in April.

Espenilla said loans extended by banks amounted to P7.54 trillion in end May, P1.22 trillion higher than end-May 2017.

Data showed the growth in loans released for production activities declined 19.3 percent to P6.68 trillion in end-May and accounted for 88.5 percent of the loans disbursed by the banking sector.

The growth in loans extended to the real estate sector was steady at 15.7 percent with P1.27 trillion for a 16.8 percent share in the total loan portfolio.

Loans released by banks to the wholesale and retail trade as well as repair of motor vehicles and motorcycles picked up 23.4 percent to P1.04 trillion for a 13.7 percent share.

The increase in loans extended to the manufacturing sector accelerated to 17.7 percent to P995.6 billion for a 13.2 percent share, while loan releases to the electricity, gas, steam and airconditioning supply slowed down further to 11.6 percent to P841.16 billion for an 11.2 percent share.

Espenilla said the loan growth for household consumption further slowed down to 18.4 percent in May as disbursements reached to P606.62 billion from the previous year.

Data showed the increase in motor vehicle loans also slowed down to 22 percent at P275.55 billion as consumers bought ahead of the impending imposition of higher excise tax under the comprehensive tax reform program last Jan. 1.

On the other hand, credit card loans went up 21.1 percent to P248.97 billion.

Moody’s Investors Service said it expects credit growth slowing

down to mid to high single digit levels due to the tightening being undertaken by the BSP to curb rising inflationary pressures.

The BSP’s Monetary Board so far raised benchmark rates by a cumulative 50 basis points via a back-to-back rate hikes on May 10 and June 20 as inflation is expected to remain elevated this year due to higher global oil prices and the impact of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Meanwhile, the BSP re- ported liquidity in the financial system grew faster at 14.3 percent to P11.03 trillion in May and remains broadly in line with the central bank’s prevailing outlook for inflation and economic activity.

As part of its shift toward a more market-based implementation of monetary policy, the BSP’s Monetary Board first reduced the reserve requirement ratio to 19 percent from 20 percent last March 2 releasing P90 billion worth of liquidity into the financial system providing banks with additional funds for lending.