Bank loans grow faster despite MidEast shock
Philippine bank lending rose at its fastest pace in seven months in March as the impact of the Middle East war had yet to significantly spill over into domestic loan activity.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that outstanding loans from large banks climbed by 10.7 percent from a year earlier to P14.6 trillion in March, faster than February’s revised 9.6-percent pace.
This marks the fastest loan growth since the 11.2 percent recorded in August last year, with the central bank saying the rate reflects “stronger support for production activities of businesses and consumption of households.”
Meanwhile, separate data showed that domestic liquidity or M3, the broadest measure of money supply, also grew at a faster pace of 12 percent during the month to P20.4 trillion, up from 10.3 percent in February.
“The faster expansion in bank lending and domestic liquidity in March reflects firm domestic demand and ample system liquidity, rather than spillovers from external developments,” Carlo Asuncion, chief economist at UnionBank of the Philippines, said.
“Importantly, the data suggest that credit and liquidity conditions remain largely domestically driven, with the Middle East conflict having limited and indirect impact on local financial intermediation so far,” he added.
Growth in lending to consumers softened to 20.5 percent, from 20.8 percent in the previous month, though still considered strong.
Motor vehicle loan growth dipped to 12.5 percent from 13.9 percent, while salary-based general purpose consumption loans grew at a slower pace of 4.2 percent from 5.6 percent. But this was partly offset by credit card lending, which edged up to 27.9 percent from 27.3 percent.
“Consumer lending remained strong, with growth still above 20 percent, indicating that household spending continues to be supported by steady income conditions and easing inflation,” Asuncion said.
“This is consistent with the pickup in M3 growth, which was underpinned by private sector credit expansion and increased government borrowings, alongside stable net foreign asset positions,” he added.
Household spending, however, has come under pressure as inflation reached 4.1 percent in March and further soared to 7.2 percent in April. This prompted the BSP to raise its benchmark interest rate by 25 basis points to 4.5 percent, with further measured tightening expected.
Meanwhile, business loans, which make up the bulk of big banks’ loan portfolios, rose by 9.7 percent, faster than the 8.6-percent growth in February.
This was driven largely by increased lending to electricity, gas, steam and air conditioning supply (26.7 percent), transportation and storage (19.4 percent) and wholesale and retail trade, repair of motor vehicles and motorcycles (9.3 percent).
“Looking ahead, loan growth should remain broadly supportive but may moderate slightly due to base effects, global uncertainties and still-elevated interest rates,” Asuncion said.
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