Bank lending slows down, domestic liquidity rises in December

MANILA, Philippines – Growth of outstanding loans of commercial banks or net of reverse repurchase (RRP) slowed down to 16.8% in December 2014, from the previous month’s 20.1%, the Bangko Sentral ng Pilipinas (BSP) reported Friday, January 30.

Domestic liquidity or M3 grew by 9.6% year-on-year in December to reach P7.6 trillion ($172.30 billion), slightly faster than the 9.2% expansion recorded in November, BSP reported.

RRP is the interest rate on the RP transaction, which is typically contracted between the BSP and banks. RRPs may also have overnight or term maturities.

M3, meanwhile is the amount of cash and cash-equivalent securities circulating within a country’s economy, which may include time and demand deposits, plus currency circulating outside of the banks.

Loans for production activities expand

BSP reported that the growth of bank lending inclusive of RRPs went down to 15.3% in December from 19% in November 2014. 

Commercial bank lending was stable for loans net of RRPs while loans inclusive of RRPs grew by 0.1% on a month-on-month, seasonally-adjusted basis.

Loans for production activities, which comprised about four-fifths of banks’ aggregate loan portfolio, expanded by 15.4% in December from 18.7 percent in November.

Increased lending to real estate, renting, and business services (11.8%); electricity, gas, and water (21.7%); wholesale and retail trade (14.2%); financial intermediation (19.1%); manufacturing  (8.2 %); and, transportation, storage, and communication (20.7%), contributed to the continuous rise in production loans.

Bank lending to other sectors also rose in December, except for public administration and defense, which declined by 3.4%.

Sustained growth in auto loans, along with other types like salary and personal loans contributed to the expansion of loans for household consumption by 19.9% in December, though slightly down from November’s 21.5%.

Credit card loans also slowed down in December.

Growth at a moderate pace

Domestic liquidity continued to grow at a moderate pace in December, partly due to the increase in placements of trust entities in the BSP’s special deposit account (SDA) facility relative to a year ago, BSP said.

Money supply continued to increase due largely to the sustained demand for credit.

Domestic claims grew by 16.2% in December from 18% (revised) in the previous month, largely due to the continued expansion in credits to the private sector.

The bulk of bank loans during the month was channeled to key production sectors such as real estate, renting, and business services; utilities; wholesale and retail trade; financial intermediation; manufacturing and transportation; storage; and communication.

Public sector credit also rose by 22.1% in December from 19.6% in November, as the deposits of the national government with the BSP increased at a slower pace. This is due to the withdrawal of funds by the national government for the redemption of maturing government securities.

Net foreign assets (NFA), meanwhile, grew in peso terms at a faster pace of 4.8% in December from 3.8% in the previous month.

The NFA of banks increased as banks’ foreign assets expanded at a faster pace relative to that of their foreign liabilities, BSP said.

Banks’ foreign assets continued to expand, thanks to growth in their foreign loans and receivables, investments in marketable debt securities, and deposits with other banks.

The banks’ foreign liabilities also increased on account of higher deposits of foreign residents.

Moving forward, BSP will continue to monitor monetary developments and ensure that credit and liquidity conditions remain supportive of overall economic growth. – Rappler.com