Philippine bank lending growth accelerates to 10.4% in July, driven by business loans

Philippine banks' outstanding loans rose 10.4% year on year in July to P14.98 trillion, accelerating from 9.8% in June. Business lending expanded 9.8%, led by electricity, trade and manufacturing, while consumer credit growth softened amid weak confidence.

Philippine banks' lending to businesses and consumers grew faster in July, mainly driven by loans to residents, preliminary Bangko Sentral ng Pilipinas (BSP) data showed. Universal and commercial banks' total outstanding loans, net of reverse repurchase agreements, rose by 10.4% year on year to P14.98 trillion at end-July from P13.574 trillion. This picked up from the 9.8% expansion in June, and was the quickest lending growth seen since the 12.1% in May.

The central bank said the growth reflected sustained lending to businesses and consumers. Big banks' outstanding loans to residents climbed by 10.8% to P14.686 trillion as of July from P13.259 trillion a year ago, faster than June's 10.3% growth. This accounted for bulk of total loans in the period.

Loans for residents' production activities went up by 9.8% year on year to P12.624 trillion from P11.497 trillion, faster than the 9.2% climb the month prior. "Loans for business activities expanded faster by 9.8% in July, led by increased lending to the following key sectors: electricity, gas, steam and air-conditioning supply; wholesale and retail trade, and repair of motor vehicles and motorcycles; manufacturing; financial and insurance activities; and information and communication," the BSP said.

Meanwhile, outstanding consumer loans to residents, excluding residential real estate loans, rose by 17.1% to P2.062 trillion in July from P1.761 trillion a year ago, slowing from the 17.8% expansion in June. Broken down, credit card loans jumped 24.5% to P1.304 trillion, while loans for motor vehicles rose by 7% to P542.849 billion. These were slower than the respective 24.9% and 8.6% increases recorded in June. "Growth in credit card and motor vehicle loans softened as consumer confidence remained weak," the central bank said. Salary loans amounted to P179.661 billion in July from P163.469 billion last year, with the annual growth unchanged from June at 9.9%.

For nonresidents, bank lending dropped by 6.8% to P294.331 billion in July from P315.804 billion last year, slower than the 10.2% decline in June. The central bank monitors banks' lending activities to track the transmission of monetary policy.

Separately, growth in the country's money supply slowed to a six-month low in July. Domestic liquidity (M3) rose by 10.3% to P20.52 trillion in July from P18.604 trillion a year earlier, slower than the revised 10.7% uptick in June and the weakest M3 growth since the 8.6% in January. The BSP said increased liquidity continued to support economic activity.