Loans growth hit 4-month high in September

Bank loans grew at their fastest pace in four months in September, driven by stronger lending to businesses despite rising interest rates and inflation.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed outstanding loans from big banks went up 11.4 percent from a year earlier to P15.3 trillion. That marked the quickest pace of expansion since the 12.1-percent clip recorded in May.

Credit expanded despite slower liquidity growth. M3, the broadest measure of money supply in the economy, increased 9.3 percent to P20.7 trillion in September, easing from 10.8 percent growth seen in August.

Business loans, which made up the bulk of banks’ lending portfolio, grew 11 percent to P12.8 trillion, also the quickest expansion in four months.

Last month, a “strong majority” of the BSP’s Monetary Board decided to raise the policy rate by half a percentage point to 5.5 percent, citing the need for a stronger response to stubbornly high inflation.

The move marked the fourth rate hike this year, bringing the cumulative increases since April to 125 basis points.

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“Bank lending likely continues to benefit from corporate working-capital and household financing needs, including financing higher operating costs, while slower M3 growth may increasingly reflect tighter monetary conditions and softer domestic activity,” said Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines.

“We expect lending to remain in double digits in the near term, but high inflation, elevated borrowing costs and weaker growth should eventually temper credit demand, while liquidity growth is likely to remain adequate but moderate further,” he added.