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CENTRAL BANK of the Philippines (BSP) Governor Benjamin E. Diokno awaits credit growth will pick up at the end of the year, as consumers and businessesbedencia is restored with measures to facilitate locking over the next few months.
In an interview with the ABS-CBN news channel on Monday, Diokno said the slower loan growth seen in July is “understandable” considering the economy is still facing a health crisis.
“We are slowly opening up and I think we arebeHowever, consumers will start shopping in the coming months. Also producers, as they increase their production capacity, may need more money for this capital or perhaps expand their plans ”, said the head of BSP.
Preliminary data released by the BSP showed that bank loan growth stood at 6.7% year-on-year in July, the slowest pace of expansion since May 2010, when it rose 5%.
“If you like manufacturing and have excess capacity, you don’t need to go to the bank to borrow, right? So due to the pandemic and the shutdown, there is not much production, but it is increasing…. The same with consumers…. Consumers now prefer things that are really essential. They have no demand for luxury items. And therefore they may not need to use their credit card, for example, which is an unsecured consumer loan, “Diokno said.
Diokno said banks are also still in the process of reviewing their loan portfolio.
“There are some winners and losers in this pandemic. And so, (the lenders) right now are trying to allocate funds. Some of them are providing provisioning. Maybe some bad loans in the future and things like that. Everyone is now in adjustment mode. The slowdown in lending is understandable, ”he said.
The NPL for the banking industry stood at 2.53% at the end of June, higher than the 2.43% in May and the 2.1% registered a year ago, BSP data showed. With this, lenders have increased loan loss provisions by 48.5% YoY to P300.3 billion in June.
The BSP expects the banking sector delinquency rate to rise to around 4.6% by the end of December 2020 due to the crisis.
Amid historically low interest rates, analysts said consumer and business confidence has been affected by the pandemic, which will continue to affect bank loan growth.
“Despite the relatively low cost of loans, it is quite difficult to attract investors due to the unstable business environment. Investors, like consumers, lose confidence in the economy, ”Emmanuel J. López, dean of the Graduate School of the Colegio de San Juan de Letran, said in a text message.
Banks are thinking twice before issuing loans, which have affcash ected Floridaconsumer and business flows, according to economist Alvin P. Ang of the Ateneo de Manila University.
“Banks need to make money. If they don’t have withbeGiven that borrowers can pay, they will not lend, ”he said in a text message.
The central bank has already cut key rates by 175 basis points this year to support the economy amid the impact of the pandemic. This has reduced overnight reverse repurchase, loan and deposit facilities to historic lows of 2.25%, 2.75% and 1.75%, respectively. – Luz Wendy T. Noble
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