Big banks’ outstanding loans in August grew by only by 4.7 percent year-on-year, a significant low number compared to 6.7 percent in July, the Bangko Sentral ng Pilipinas (BSP) said Friday.
“Bank lending growth continued to moderate as a result of weaker corporate sector performance, declining loan demand, and risk aversion among banks,” according to the BSP.
In the meantime, the financial system’s money supply continue to expand with some P1.5 trillion infusion from the central bank since the COVID-19 health crisis began in February and March.
In August, domestic liquidity or M3 increased by 14.2 percent year-on-year to P13.6 trillion compared to 14.7 percent growth in July. Monthly basis as adjusted, M3 rose by just 0.1 percent.
The BSP said the 4.7 percent loan growth to P9.08 trillion in August is net of reverse repurchase (RRP) placements with the BSP. On a month-on-month seasonally-adjusted basis, bank lending minus RRPs dropped by 1.1 percent.
“Looking ahead, sustained efforts from monetary and fiscal authorities to shore up market confidence will be critical in supporting bank lending activity,” said the BSP. The central bank however “reassures the public of its commitment to deploy its full range of instruments as necessary to ensure that domestic liquidity and credit remain adequate amid significant economic disruptions due to the ongoing health crisis.”
Lending for production activities, net of RRPs, went up by 4.2 percent in August to P7.89 trillion. “Except for education, and human health and social work activities, loans across all types of production activities slowed down,” noted the BSP.
Loans for manufacturing activities registered a negative 1.6 percent to P1.01 trillion while wholesale and retail trade and repair of motor vehicles and motorcycles also declined by 2.1 percent to P1.10 trillion.
Sectors such as real estate activities and information and communication had total lending growth of 9.8 percent and 15.1 percent respectively, to P1.70 trillion and P369.40 billion. Lending for financial and insurance activities grew by 3.6 percent to P886.38 billion while electricity, gas, steam, and air
conditioning supply rose by 3.2 percent to P1 trillion.
Lending for human health and social work activities which before the pandemic was rarely highlighted, grew by 45.9 percent to P83.58 billion.
The BSP said loans for household consumption likewise grew at a slower pace of 12.9 percent in August from 17.2 percent in July because of the “continued slowdown in credit card, motor vehicle, and salary-based general purpose consumption loans during the month.” Loans for household consumption amounted to P877.42 billion.
As for the M3 data, the BSP said it is prepared to “deploy necessary measures to ensure adequate liquidity and credit” supportive of economic activity and recovery amid the pandemic.
“Demand for credit remained the principal driver of money supply growth, as domestic claims rose by 10.6 percent year-on-year in August from 12.3 percent in July,” said the BSP. It said that claims on the private sector which was “driven mainly by bank lending to non-financial private corporations and households, grew at a weaker pace due to constrained economic activity and soft corporate sector performance.”
“Albeit slower, net borrowings by the central government expanded by 49.8 percent in August from 51.9 percent (July) due partly to the government’s continued funding requirement for its efforts against the COVID-19 pandemic,” said the BSP.