Bank lending, liquidity both up in February

MANILA, Philippines – The pool of credit flowing around the economy continued to expand in February as production and commercial loans made up for a slight reduction in household loans, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data released by the BSP on Wednesday, March 28, showed that outstanding loans of commercial banks, net of reverse repurchase (RRP) placements with the BSP, expanded at a slightly faster rate of 19.5% in February compared to January’s revised figure of 19%.

Bank lending inclusive of RRPs, meanwhile, slowed to 17.6% in February from the revised 18.4 % in January. On a month-on-month seasonally-adjusted basis, commercial bank loans net of RRPs and loans inclusive of RRPs increased by 1.8% and 1.1%, respectively.

Loans for production activities comprised the bulk of this at 88.4% of banks’ loan portfolio, net of RRPs, and grew by 18.6% in February from 18% in January.

The growth in production loans was driven primarily by increased lending to the following sectors:

• information and communication at 28.8%
• electricity, gas, steam, and airconditioning supply at 28.5%
• wholesale and retail trade and vehicle repair at 18.5%
• real estate activities at 18.1%
• financial and insurance activities at 15.3%

Lending to other sectors also increased except for forestry and fishing which fell by 11.4%, and administrative and support services activities which fell by 40%.

Growth in loans for household consumption, meanwhile, slowed to 19.9% in February from 20.2% in January.

The BSP noted that the slower increase in motor vehicle loans and the contraction in other types of household loans offset the faster expansion in credit card loans and salary-based general purpose loans in February. (READ: Tax reform law seen to put brakes on PH’s auto sales growth in 2018)

More liquidity

Consequently, data showed that domestic liquidity grew by 13.5% year-on-year to about P10.7 trillion in February compared to the 12.8% growth in January. On a month-on-month seasonally-adjusted basis, domestic liquidity increased by 1.5%.

“The growth in liquidity remains consistent with the BSP’s prevailing outlook for inflation and economic activity,” the central bank noted. 

The BSP had announced in mid-February that it would cut the reserve requirement ratio of banks by one percentage point starting in March, in a move seen to free up liquidity for a growing economy.

Domestic claims grew by 13.8% in February, slightly higher than the 13.6% increase in January, due to sustained growth in bank lending.

Net claims on the government, on the other hand, remained generally steady at 3.7% from 3.6%, which the BSP attributed to continued borrowings by the national government. 

Net foreign assets (NFA) in peso terms, meanwhile, grew at a slower rate of 4.6% compared to the 4.9% in the previous month, driven by foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts.

The central bank also noted that the NFA of banks expanded as their foreign assets increased on account of higher loans and investments in marketable debt securities. – Rappler.com