Bank Lending Grows 12.8% in January 2025

 Outstanding loans of universal and commercial banks in the Philippines expanded by 12.8% year-on-year in January 2025, higher than the 12.2% growth recorded in December 2024, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).

On a month-on-month seasonally adjusted basis, loans grew by 1.4%.

Loans to residents, excluding reverse repurchase (RRP) placements, increased by 13.3% in January, compared to 12.4% in December.

However, loans to non-residents declined by 3.5% in January after a 5.7% increase in the previous month. Non-resident loans refer to credit extended to foreign entities through foreign currency deposit units (FCDUs) of local banks.

Lending for production activities, which supports various industries, rose by 11.8% in January from 10.8% in December.

Key industries that saw notable loan growth include real estate (9.8%), electricity, gas, steam, and air-conditioning supply (23.6%), wholesale and retail trade (13.9%), transportation and storage (21.4%), and manufacturing (4.6%).

Consumer loans to residents grew by 24.4% in January, slightly lower than the 25% recorded in December. This was driven by increased credit card usage and motor vehicle loans, reflecting sustained consumer demand and spending.

BSP assured that it will maintain domestic liquidity and lending conditions aligned with its price and financial stability mandates.

Domestic Liquidity Expands by 6.8%

Domestic liquidity, also known as M3—the broadest measure of money supply—expanded by 6.8% year-on-year to PHP18.1 trillion in January 2025, slightly lower than the 7.7% growth in December. On a month-on-month seasonally adjusted basis, M3 declined by 0.5%.

Domestic claims, which reflect total credit extended by the financial system, grew by 10.9% in January, up from 10.4% in December. This increase was driven by higher loans to private corporations and households.

Net claims on the central government also rose by 7.4% from 7.2% due to increased borrowings by the National Government.

Meanwhile, net foreign assets (NFA) in peso terms increased by 2.6% in January, compared to a 6% rise in December. The BSP’s NFA expanded by 4.2%, while banks’ NFA declined due to higher foreign currency-denominated bills and bond payables.

The BSP reaffirmed its commitment to ensuring that liquidity conditions remain aligned with its monetary policy stance to support financial stability.

Gross International Reserves Reach US$106.7 Billion

The country’s gross international reserves (GIR) increased to US$106.7 billion as of February 2025, up from US$103.3 billion in January, based on preliminary data from the BSP. GIR serves as a buffer against external shocks, ensuring the country’s ability to meet its international obligations. The latest reserves are sufficient to cover 7.5 months’ worth of imports and are 3.8 times the country’s short-term external debt based on residual maturity.

The month-on-month increase in reserves was attributed to the National Government’s foreign currency deposits with the BSP, proceeds from the issuance of Republic of the Philippines (ROP) Global Bonds, an upward revaluation of the BSP’s gold holdings due to higher gold prices, and net income from the BSP’s investments abroad.

Additionally, net international reserves (NIR)—which represent the difference between the BSP’s total foreign assets and total foreign liabilities—rose by US$3.4 billion to US$106.6 billion in February, up from US$103.2 billion in January.

Understanding Key Financial Terms:

• Reverse Repurchase (RRP) Placements: Short-term lending agreements where banks place excess funds with the BSP in exchange for government securities, helping control liquidity in the financial system.
• Money Supply (M3): The total amount of money circulating in the economy, including cash, deposits, and other liquid assets. An increase in M3 supports economic growth, while excessive growth can lead to inflation.
• Gross International Reserves (GIR): The country’s stockpile of foreign currency assets, which helps stabilize the peso, manage inflation, and ensure sufficient funds for external debt payments and imports.
• Net Foreign Assets (NFA): The difference between a country’s external financial assets and liabilities. A positive NFA indicates a net creditor position, supporting economic stability.
• Residual Maturity: The remaining time before a debt obligation is due. It helps assess short-term external debt risks and financial stability.

The BSP continues to monitor economic indicators and implement policies to maintain stability in lending, liquidity, and external reserves, ensuring a resilient financial system amid global uncertainties.