Lending growth in October fastest in nearly 4 years

DESPITE RISING interest rates, bank lending expanded in October at the fastest pace in nearly four years, the Bangko Sentral ng Pilipinas (BSP) said.

Outstanding loans by big banks, net of reverse repurchase (RRP) placements with the central bank, jumped by 13.9% year on year in October to P10.56 trillion. This was slightly faster than the 13.4% loan growth in September.

October credit growth was the fastest in nearly four years or since the 15.3% expansion posted in January 2019.

On a month-on-month seasonally adjusted basis, lending net of RRP placements with the BSP inched up by 1.1%.

Inclusive of reverse repurchase agreements, outstanding loans rose by 12.9% year on year in October, a tad faster than the previous month’s 12.6%. 

Outstanding loans to residents net of RRPs grew by 13.4% to P10.22 trillion in October, from 13.1% in September.

Loans for production activities jumped by 12.5% to P9.23 trillion in October, as more loans were extended for real estate activities (14%); manufacturing (17.7%); wholesale and retail trade, repair of motor vehicles and motorcycles (11.5%); financial and insurance activities (12.8%); information and communication (25%); and electricity, gas, steam, and air-conditioning supply (10.9%).

Consumer loans to residents also went up by 22.6% to P987.11 billion, faster than the 20.6% growth seen in September. This was attributed to double-digit growth in credit card loans (26.8%) and salary-based general purpose consumption loans (62.8%). Motor vehicle loans grew by 6.6% during the month.

Meanwhile, outstanding loans to non-residents net of RRPs expanded by 33% to P338.68 billion in October, faster than the 26.6% growth seen the previous month.

“The sustained growth in credit activity and ample liquidity will continue to support the recovery of economic activity and domestic demand,” BSP Governor Felipe M. Medalla said in a statement on Tuesday evening.

Mr. Medalla said the BSP will continue to take necessary action “to ensure that liquidity and bank lending conditions remain consistent with promoting price and financial stability.”

“Loan growth again posted a positive year-on-year growth for the 15^th consecutive month and grew consistently month on month since May 2021, as the economy reopened further towards greater normalcy,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail note.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the lending data reflected “revenge spending” “with firms and households looking past elevated borrowing costs to partake in the reopening story.”

“Pent-up demand for expansion activity after two years of delay are compelling borrowers to take on loans despite high rates,” Mr. Mapa said.

At its Sept. 22 meeting, the Monetary Board hiked interest rates by 50 basis points (bps), bringing the benchmark rate to 4.25%.

“Ironically, higher inflation and interest rates would also lead to higher borrowings by some sectors to make up for higher prices on investments, operating costs, and other inputs, as well as to deal with higher debt servicing costs/interest expense for some borrowers,” Mr. Ricafort said.

M3 GROWTH PICKS UP
Meanwhile, domestic liquidity grew at a quicker pace in October, supported by the expansion in bank lending.

M3 — which is considered as the broadest measure of cash in an economy — expanded 5.4% year on year in October to P15.4 trillion, from the revised 5.2% in September, BSP data showed.

On a seasonally adjusted basis, it inched up by 0.7% month on month.

“Domestic claims rose by 11% year on year in October from 11.2% (revised) in the previous month, due to the continued improvement in bank lending to the private sector,” Mr. Medalla said in a separate statement.   

Net claims on the central government went up by 14.7% in October from a 16.5% expansion in September on the back of sustained borrowings by the National Government.

Driven by lending to nonfinancial private firms, claims on the private sector rose by 10.4% in October from 10.3% in September.

Meanwhile, net foreign assets (NFA) in peso terms declined by 1.4% in October from 11.6% in September.

“The NFA of banks fell mainly on account of higher bills payable. Similarly, the BSP’s NFA position contracted by 0.5% in October,” Mr. Medalla said. — Keisha B. Ta-asan