Bank lending rises 10.4% in July amid robust demand

By Francis Allan L. Angelo

Bank lending in the Philippines continued its upward trajectory in July 2024, with outstanding loans of universal and commercial banks (U/KBs), excluding reverse repurchase (RRP) placements, growing by 10.4% year-on-year, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).

This marks a slight acceleration from the 10.1% increase recorded in June, reflecting sustained demand for credit in the country.

On a month-on-month seasonally adjusted basis, U/KB loans, net of RRPs, increased by 0.8%, demonstrating continued momentum in credit expansion.

Loans to residents, which form the bulk of the lending portfolio, also expanded by 10.4% in July, matching the overall growth rate. Meanwhile, loans to non-residents increased by 9.2%, slightly slower than the 9.8% growth seen in June.

The growth in bank lending was largely driven by production activities, which saw an 8.8% increase in July, up from 8.3% in the previous month.

Significant contributions came from key sectors including real estate activities (12.0%), professional, scientific, and technical activities (438.3%), manufacturing (7.9%), transportation and storage (20.6%), and wholesale and retail trade (6.0%).

Consumer loans to residents, however, grew at a slower pace of 24.3% in July compared to 25.0% in June, primarily due to a deceleration in credit card lending.

The BSP emphasized its commitment to ensuring that domestic liquidity and credit conditions remain aligned with its objectives for price and financial stability. This is critical as the central bank continues to navigate the complex economic environment, balancing the need for economic growth with the goal of maintaining stable prices.

In terms of overall liquidity, domestic liquidity (M3) grew by 7.2% year-on-year in July, reaching approximately ₱17.5 trillion. This was a slight increase from the 6.6% growth observed in June. On a month-on-month basis, M3 increased by 0.7%, indicating steady growth in the money supply.

Domestic claims also expanded by 11.3% year-on-year in July, up from 10.5% in June, driven by continued lending to private corporations and households. Additionally, net claims on the central government rose by 14.0%, reflecting sustained government borrowings.

The BSP’s net foreign assets (NFA) in peso terms grew by 11.2% in July, up from 8.3% in June. The increase was primarily driven by a 13.8% growth in the BSP’s NFA, while the NFA of banks contracted due to higher bills and bonds payable.

As the BSP monitors these developments, it remains focused on ensuring that liquidity conditions are consistent with its monetary policy stance, aimed at achieving both price and financial stability in the economy.