Bank lending, liquidity growth slow in June

By Francis Allan L. Angelo

MANILA — Philippine bank lending and domestic liquidity continued to expand in June, although both grew more slowly as businesses borrowed cautiously, household demand remained subdued, and overall credit activity lost momentum.

Loans extended by universal and commercial banks grew 9.8 percent from a year earlier, down from 12.1 percent in May, according to preliminary data released by the Bangko Sentral ng Pilipinas on July 31.

Domestic liquidity, or M3, increased 10.6 percent year-on-year to PHP 20.5 trillion, easing from the previous month’s 12.8-percent expansion.

The slowdown matters because bank credit and the money supply help determine whether businesses can finance expansion, households can make major purchases, and the economy can generate employment without creating excessive inflationary pressure.

The figures suggest financing remained available to productive industries and consumers, but firms and households were becoming more selective about taking on debt.

Business loans increased 9.2 percent in June, slower than the 11.7-percent growth recorded in May.

Lending continued to expand in real estate; electricity, gas, steam, and air-conditioning supply; wholesale and retail trade; motor vehicle and motorcycle repair; manufacturing; transportation and storage; and agriculture, forestry, and fishing.

The overall moderation reflected weaker lending growth in construction, education, and other service activities.

Outstanding production loans amounted to PHP 12.544650 trillion in June, down from PHP 12.670379 trillion in May but higher than PHP 11.492827 trillion in June 2025.

Construction lending fell 13.9 percent year-on-year to PHP 441.772 billion, following a 4.7-percent contraction in May.

Loans to education declined 0.6 percent to PHP 30.207 billion, while financing for other service activities dropped 7.6 percent to PHP 87.075 billion.

In contrast, loans to transportation and storage grew 24.2 percent to PHP 662.613 billion.

Agriculture, forestry, and fishing loans rose 15.1 percent to PHP 267.650 billion.

Electricity, gas, steam, and air-conditioning supply remained one of the largest growth contributors, with lending increasing 22.6 percent to PHP 2.051933 trillion.

Real estate loans, the largest production-loan category, grew 6.1 percent to PHP 2.896621 trillion and represented 19.5 percent of total loans outstanding, excluding reverse repurchase agreements.

Consumer lending to residents rose 17.8 percent in June, slower than its 19-percent expansion in May.

The consumer-loan balance reached PHP 2.048318 trillion, compared with PHP 2.021936 trillion in May and PHP 1.738281 trillion a year earlier.

Credit card loans increased 24.9 percent to PHP 1.293808 trillion, easing from 26.3-percent growth in May.

Motor vehicle loans rose 8.6 percent to PHP 540.118 billion, slowing from 10.2 percent.

Salary-based general-purpose consumption loans accelerated to 9.9 percent from 6.4 percent, reaching PHP 177.994 billion.

Other consumer loans contracted 15.8 percent to PHP 36.398 billion.

The consumer-loan figures exclude residential real estate loans.

Outstanding loans to Philippine residents, covering corporate entities and individuals, rose 10.3 percent to PHP 14.592968 trillion, net of BSP reverse repurchase agreements.

Loans to nonresidents fell 10.2 percent to PHP 288.935 billion.

Total loans to residents and nonresidents, excluding BSP reverse repurchase agreements, stood at PHP 14.881903 trillion in June, compared with PHP 14.989203 trillion in May and PHP 13.552767 trillion in June 2025.

Including BSP reverse repurchase agreements, total resident and nonresident loans amounted to PHP 15.528677 trillion.

The BSP said it monitors bank lending because credit is a key channel through which monetary policy decisions affect economic activity, consumer demand, and inflation.

The central bank said it would continue to keep lending conditions consistent with its price and financial stability mandate.

Money supply supports economic activity

M3 totaled an exact PHP 20.510471 trillion in June, up from PHP 18.547481 trillion a year earlier but lower than PHP 20.603818 trillion in May.

The unadjusted total declined 0.5 percent month-on-month, while the BSP said seasonally adjusted M3 decreased 0.7 percent.

M3 is a broad measure of money supply covering currency in circulation, bank deposits, and other financial assets that can readily be converted into cash.

Borrowing by the private and public sectors remained the principal driver of liquidity growth.

Domestic claims rose 10.9 percent year-on-year to PHP 23.463790 trillion, easing from 13.3 percent in May.

Claims on the private sector expanded 11.7 percent to PHP 15.191713 trillion, down from 13.2-percent growth in May.

Loans to production sectors and households accounted for 98 percent of claims on the private sector.

Net claims on the central government grew 12.9 percent to PHP 6.326369 trillion, slowing from 16.2 percent in May.

The BSP attributed the increase partly to the National Government’s issuance of debt securities and withdrawal of deposits from the central bank and commercial banks to finance spending.

Net foreign assets also supported money-supply growth, increasing 4.1 percent year-on-year to PHP 7.027974 trillion.

The BSP’s net foreign assets increased 6.1 percent to PHP 6.396215 trillion.

Net foreign assets held by other depository corporations contracted 12.1 percent to PHP 631.760 billion as foreign-exchange-denominated bills payable increased from a year earlier.

Net foreign assets measure the difference between depository corporations’ claims on nonresidents and their liabilities to nonresidents.

The BSP said it would continue to align domestic liquidity conditions with its price and financial stability objectives.