Bank loans weaken in August

Outstanding loans from large banks in August grew by just 4.7 percent year-on-year, a significantly low number compared to 6.7 percent in July, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

“Bank loan growth continued to moderate as a result of weaker corporate sector performance, declining demand for loans and risk aversion among banks,” according to the BSP.

Meanwhile, the financial system’s money supply continues to expand with an infusion of P1.5 trillion from the central bank since the COVID-19 health crisis began in February and March.

In August, internal liquidity or M3 increased 14.2 percent year-on-year to P13.6 trillion compared to 14.7 percent growth in July. On an adjusted monthly basis, M3 increased only 0.1 percent.

The BSP said that loan growth of 4.7 percent to P9.08 trillion in August is net of reverse repurchase placements (RRP) with the BSP. On a seasonally adjusted month-over-month basis, bank loans minus RRP fell 1.1 percent.

“Looking ahead, sustained efforts by the monetary and fiscal authorities to shore up market confidence will be critical to support the lending activity of banks,” said the BSP. However, the central bank “assures the public of its commitment to roll out its full range of instruments as needed to ensure that domestic liquidity and credit remain adequate amid major economic disruptions due to the current health crisis.”

Loans for production activities, net of RRP, rose 4.2 percent in August to P7.89 trillion. “With the exception of education, human health and social work activities, loans in all types of production activities slowed down,” the BSP noted.

Lending to manufacturing activities was negative 1.6 percent to P1.01 trillion, while wholesale and retail trade and repair of motor vehicles and motorcycles also declined 2.1 percent to P1.10 trillion.

Sectors such as real estate activities and information and communications had a total credit growth of 9.8 percent and 15.1 percent, respectively, to P1.70 billion and P369.40 billion. Loans for financial and insurance activities grew 3.6 percent to P886.38 billion, while electricity, gas, steam and air

conditioning supply increased 3.2 percent to P1 trillion.

Loans for human health and social work activities, which before the pandemic rarely stood out, grew 45.9 percent to P83.58 billion.

The BSP said domestic consumer loans also grew at a slower pace of 12.9 percent in August from 17.2 percent in July due to the “continued slowdown in credit cards, motor vehicles and consumer loans from general purpose based on wages during the month. ” Household consumer loans amounted to P877.42 billion.

Regarding the M3 data, the BSP said it is prepared to “implement the necessary measures to ensure adequate liquidity and credit” to support economic activity and recovery amid the pandemic.

“Credit demand continued to be the main driver of money supply growth, as domestic claims increased 10.6 percent year-on-year in August from 12.3 percent in July,” said the BSP. He said that assets vis-à-vis the private sector, which were “mainly driven by bank loans to non-financial private companies and households, grew at a weaker pace due to restricted economic activity and the weak performance of the corporate sector.”

Although slower, central government net lending expanded by 49.8 percent in August from 51.9 percent (July) due in part to the government’s continued funding requirement for its efforts against the COVID pandemic. -19, ”said the BSP.