Bank lending slows down in June – BSP

PRELIMINARY data showed that outstanding loans of universal and commercial banks, net of  reverse repurchase (RRP) placements with the Bangko Sentral ng Pilipinas (BSP), grew at a slightly slower rate of  10.5 percent in June from 11.9 percent in May.

Similarly, the growth in bank lending inclusive of RRPs decelerated to 10.5 percent in June from 10.6 percent in the previous month.

On a month-on-month seasonally-adjusted basis, commercial bank loans net of RRPs grew by 0.2 percent while commercial bank loans inclusive of RRPs also increased by 0.3 percent.

Loans for production activities—which comprised 88.0 percent of banks’ aggregate loan portfolio, net of RRPs—increased at a slower pace of 9.8 percent in June from 11.5 percent in the previous month.

The growth in production loans was driven primarily by lending to the following sectors: real estate activities (13.5 percent); financial and insurance activities (22.0 percent); electricity, gas, steam and air conditioning supply (13.5 percent), construction (42.5 percent); wholesale & retail trade, repair of motor vehicles and motorcycle (6.5 percent); and manufacturing (4.1 percent).

Bank lending to other sectors also increased during the month except those in other community, social and personal activities (-51.9 percent) and professional, scientific and technical activities (-30.5 percent).

Meanwhile, loans for household consumption grew by 15.3 percent in June from 14.6 percent in May, due to faster growth in credit card, motor vehicle, and salary-based general purpose consumption loans during the month.

Going forward, the BSP will continue to ensure that the expansion in domestic credit and liquidity remains consistent with the BSP’s price and financial stability objectives.

 

DOMESTIC LIQUIDITY EXPANDS

BSP data also showed that domestic liquidity (M3) grew by 6.4 percent year-on-year to about P11.8 trillion in June 2019, unchanged from the rate of expansion in May 2019. On a month-on-month seasonally-adjusted basis, M3 increased by 0.1 percent.

Demand for credit eased slightly but remained the principal driver of money supply growth. Domestic claims grew by 6.2 percent in June from 6.8 percent in the previous month. This is due mainly to the sustained growth in credit to the private sector.

Loans for production activities continued to be driven by lending to key sectors such as real estate activities; financial and insurance activities; electricity, gas, steam and airconditioning supply; construction; wholesale and retail trade, repair of motor vehicles and motorcycles; and manufacturing.

Loans for household consumption increased due to the growth in credit card loans and other types of household loans during the month. Meanwhile, net claims on the central government contracted by 3.9 percent in June following a 6.4-percent decline in May, due in part to the increase in deposits by the National Government with the BSP.

Net foreign assets (NFA) in peso term s grew by 5.3 percent in June from 4.4 percent in May. The BSP’s NFA position expanded during the month, supported by foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts.

By contrast, the NFA of banks decreased as their foreign liabilities rose due to increased placements and deposits made by foreign banks with their local branches and other banks.

The BSP will continue to closely monitor domestic liquidity dynamics to ensure that overall monetary conditions remain in line with the BSP’s price and financial stability objectives. (BSP)