Preliminary data from the Bangko Sentral ng Pilipinas (BSP) reveals that the outstanding loans of universal and commercial banks (U/KBs) in the Philippines, excluding reverse repurchase (RRP) placements with the BSP, grew by 10.4% year-on-year in July.
This marks a slight acceleration from the 10.1% growth recorded in June.
IMAGE CREDIT: https://www.landbank.com/news
On a month-on-month seasonally-adjusted basis, U/KB loans, net of RRPs, saw an increase of 0.8%, reflecting the continued credit expansion in the country’s financial sector. One example is the Land Bank of the Philippines (LANDBANK). In July last year, LANDBANK reportedly released PhP 49.5 billion in loan financing to local businesses in a bid to help advance economic development in the country.
BSP sees robust growth in resident and non-resident lending
In a media advisory, BSP data showed that outstanding loans to residents, net of RRPs, also expanded by 10.4% in July, matching the growth rate in June. This indicates a steady demand for credit among Philippine residents, driven by a combination of consumer spending and business investments.
However, loans to non-residents, which include loans from foreign currency deposit units (FCDUs) of U/KBs, experienced a slightly slower growth rate. Outstanding loans to non-residents grew by 9.2% in July, down from 9.8% in June. The deceleration could be attributed to global economic uncertainties and currency fluctuations, which may have influenced borrowing decisions by non-resident entities.
Real estate, professional services, and manufacturing leading the way
The overall growth in bank lending was underpinned by significant increases in loans for production activities, which rose by 8.8% in July from 8.3% in the previous month. The uptick in production loans was largely driven by key sectors, reflecting the diverse needs of the Philippine economy.
Wholesale and Retail Trade: Loans to this sector, including the repair of motor vehicles and motorcycles, grew by 6.0%. This growth reflects the sustained consumer demand and the recovery of retail businesses as economic activities gradually normalize.
Real Estate Activities: Lending to the real estate sector surged by 12.0%, highlighting the continued demand for property development and investment across the country. This growth is a positive indicator of the ongoing recovery in the real estate market, which has been buoyed by both residential and commercial developments.
Professional, Scientific, and Technical Activities: This sector saw an extraordinary increase in lending, with loans growing by an astounding 438.3% in July. The surge likely reflects heightened investment in technology and innovation, as businesses seek to enhance their competitive edge through scientific and technical advancements.
Manufacturing: Loans to the manufacturing sector grew by 7.9%, underscoring the sector’s resilience and critical role in the Philippine economy. Manufacturing remains a key driver of economic growth, providing employment and contributing significantly to the country’s GDP.
Transportation and Storage: This sector experienced a robust 20.6% growth in lending, indicating increased activity in logistics and transportation, possibly driven by the expansion of e-commerce and the need for efficient supply chain solutions.
Consumer loans see slight deceleration
Consumer loans to residents grew at a slightly slower pace of 24.3% in July, compared to 25.0% in June. The deceleration was primarily due to a slight moderation in credit card lending, which has been a significant driver of consumer credit growth in recent months.
Despite the slowdown, the consumer lending sector remains robust, supported by strong household spending and the gradual recovery of the Philippine economy.
BSP’s commitment to stability
Looking ahead, the BSP remains committed to ensuring that domestic liquidity and credit activity are aligned with its broader price and financial stability objectives. The central bank continues to monitor the evolving economic landscape, ready to implement necessary measures to support sustainable economic growth while maintaining financial stability.
The BSP’s data underscores the resilience of the Philippine banking sector amid global and domestic challenges. As the economy continues to recover, the steady growth in bank lending reflects the confidence of businesses and consumers alike in the country’s financial system.