Bank lending declines by 4.0 percent

Preliminary data show that outstanding loans of universal and commercial banks (U/KBs), net of reverse repurchase (RRP) placements with the Bangko Sentral ng Pilipinas (BSP), fell by 4.0 percent year-on-year in May following a 5.0-percent decline in April.

On a month-on-month seasonally-adjusted basis, outstanding universal and commercial bank loans, net of RRPs, increased by 0.4 percent.

Outstanding loans to residents, net of RRPs, declined by 3.5 percent while outstanding loans to non-residents^[1] went down by 18.8 percent. Credit activity has remained muted as the emergence of new coronavirus variants and the continued risk of infection dampen prospects for economic recovery.

Consumer loans to residents fell by 9.2 percent in May following a 10.2-percent decrease in April as motor vehicle loans and salary-based consumption loans continued to decline.

At the same time, outstanding loans to major industries fell anew, particularly to manufacturing (-7.9 percent), wholesale and retail trade and repair of motor vehicles and motorcycles (-7.1 percent), and professional, scientific and technical activities (-56.9 percent).

The decrease in outstanding loans to these industries was partially offset by the increase in loans to real estate activities (3.9 percent), information and communication (3.4 percent), human health and social work activities (13.7 percent), and construction (2.8 percent).

Overall, total outstanding loans for production activities, net of RRPs, decreased by 2.9 percent in May after contracting by 3.9 percent in April.

Looking ahead, the BSP shall sustain monetary policy support in order for the economic recovery to gain more traction.

In ensuring a favorable financing environment, the BSP will remain vigilant against emerging risks to inflation and economic growth, consistent with its price and financial stability mandates.

^[1]  Outstanding loans to non-residents include loans by UKB’s foreign currency deposit units (FCDUs) to
non-residents.