Bank lending jumps to four&month high in June

BANK LENDING rose to a four-month high in June amid a jump in consumer loans, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Outstanding loans of universal and commercial banks climbed by 12.1% year on year to P13.55 trillion in June from P12.1 trillion in the same period in 2024.

The lending growth was faster than the 11.3% expansion in May and was the highest in four months or since the 12.2% in February.

On a seasonally adjusted basis, big banks’ outstanding loans went up 1.2% month on month.

BSP data showed outstanding loans to residents jumped by 12.6% to P13.23 trillion in June, faster than the 11.8% growth a month prior.

On the other hand, loans to nonresidents declined by 6.4% during the month, although this eased from the 6.6% contraction in May.

Outstanding loans to residents for production activities expanded by an annual 11.1% to P11.49 trillion, faster than the 10.2% growth in May.

Loans for production accounted for the bulk (84.8%) of overall lending.

“Loan growth expanded faster as lending increased for the following key industries: real estate activities (9.9%); electricity, gas, steam and air-conditioning supply (29.2%); financial and insurance activities (12%); and transportation and storage (15.9%).”

Meanwhile, consumer loans climbed by 24% in June, picking up from 23.7% a month ago. Consumer loan data excluded residential real estate loans.

This as credit card loans rose by 29.9%, while loans for motor vehicles jumped by 18.4%. Salary-based general purpose consumption loans increased by 8.3%.

“The BSP monitors bank loans because they are a key transmission channel of monetary policy,” it said.

“Looking ahead, the BSP will ensure that domestic liquidity and bank lending conditions remain consistent with its price and financial stability mandates.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the continued growth in bank lending was supported by the central bank’s rate-cutting cycle.

The BSP has lowered borrowing costs by a total of 125 basis points since it began its rate-cutting cycle in August last year.

Further rate cuts this year could continue to spur loan growth, Mr. Ricafort said.

This would “increase banks’ loanable funds and could also reduce intermediation costs and overall lending rates, thereby further leading to faster loan growth in the coming months.”

Mr. Ricafort said the latest cut in banks’ reserve requirement ratio  also likely increased the loanable funds of banks as it could have infused about P330 billion into the financial system.

“The jump in bank lending reflects sustained demand for credit, likely driven by stronger business sentiment, pre-election spending, and the ongoing rebound in investment activity,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.

MONEY SUPPLY
Meanwhile, domestic liquidity (M3) grew by 6.3% in June, faster than the 5.5% posted in May.

M3 — which is considered as the broadest measure of liquidity in an economy — increased to P18.6 trillion from P17.5 trillion a year earlier. M3 includes currencies in circulation, bank deposits, and other easily liquidated financial assets.

Month on month, M3 went up by 1.2% on a seasonally adjusted basis.

Central bank data showed domestic claims rose by 10.7% during the month, steady from May.

“Claims on the private sector alone grew by 11.3% in June from 10.9% in the previous month, driven by the continued expansion in bank lending to nonfinancial private corporations and households.”

“Net claims on the central government increased by 7.5% from 9.1%, driven by its higher borrowings,” it added.

Meanwhile, growth in net foreign assets (NFA) in peso terms dropped by 1.7% in June, easing from the 4.6% decline a month prior.

“The BSP’s NFA fell by 2.7% primarily due to the peso’s appreciation against the US dollar. Meanwhile, banks’ NFA rose largely on account of larger holdings of foreign currency-denominated debt instruments.”

The central bank said it 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.” — Luisa Maria Jacinta C. Jocson