Bank credit is getting back on its feet

Lawrence Agcaoili – The Filipino Star

October 30, 2021 | 00h00

Loans disbursed increased 2.7% in September

MANILA, Philippines – Credit growth improved for the second consecutive month, increasing 2.7% in September, amid a modest recovery in the overall attitude of Philippine banks to credit and an improved economic outlook , according to data published by the Bangko Sentral ng Pilipinas (BSP).

Universal and commercial banks’ outstanding loans stood at 9.25 trillion pesos at the end of September, 241 billion pesos more than the 9,011 billion pesos disbursed during the same period last year.

BSP Governor Benjamin Diokno said the 2.7% year-on-year increase in September was faster than the 1.3% expansion in August.

“The observed increase in the outstanding loans of universal and commercial banks reflects the modest recovery in global attitudes of banks on lending as well as the improvement in the economic outlook due to the gradual lifting of the pandemic containment measures. “said Diokno.

Loans disbursed by major banks have been declining since December last year as banks remained risk averse, while borrower demand remained lukewarm amid uncertainties caused by the pandemic.

As aggressive easing, including the 200 basis point cuts in interest rates and the lowering of the reserve requirement ratio undertaken by the BSP to cushion the impact of the global health crisis on the economy, credit Banking finally started to recover in August or nine months after the benchmark rate was changed by the BSP.

“The cut in key rates was intended to encourage banks to reduce their own lending rates, thus promoting lending activities. Meanwhile, lower reserve requirement levels are meant to increase the volume of loanable funds, ”Diokno said in his closing remarks during the celebration of the 32nd National Statistics Month.

Data showed that outstanding loans for production activities grew faster at 4.4 percent to 8.19 trillion pesos, accounting for 88.6 percent of total loans at the end of September.

Loans to the real estate sector increased 7.2% to 1.82 trillion pesos and accounted for 19.7% of total disbursements, while loans to the manufacturing sector increased 4.4% to 1 050 billion pesos for a share of 11.3%. Loans to the electricity, gas, steam and air conditioning sector increased 3.2 percent to 1,040 billion pesos for a share of 11.3 percent.

On the other hand, loans to wholesale and retail trade as well as repair of motor vehicles and motorcycles contracted at a slower pace of 1.7% to 1,080 billion pesos for a share of 11 , 7%.

Likewise, BSP data showed that consumer lending remained subdued, contracting 7.8% to 801.4 billion pesos at the end of September for an 8.7% share of total loans.

Despite improving borrower default rate as the economy recovers from the impact of COVID, credit card loans again fell 0.3 percent to 402.4 billion pesos from 403.34 billion pesos.

Likewise, auto loans declined 15.6% to 310.77 billion pesos from 368.03 billion pesos.

The BSP is committed to maintaining an accommodative monetary policy to help the economy fully recover from the pandemic-induced recession.

Diokno said the BSP will continue to provide the appropriate monetary policy support to allow the economic recovery to gain more ground, in line with the regulator’s price stability and financial stability mandates.

“Along with the national government’s fiscal and health measures, keeping a firm hand on the BSP’s monetary policy levers should continue to help boost domestic demand and market confidence,” Diokno said.

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