Bank lending slower, domestic liquidity eases in January

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Bank lending slower, domestic liquidity eases in January

AFP

Loans for production activities expand while domestic claims grow, the Bangko Sentral ng Pilipinas reports

MANILA, Philippines – Outstanding loans of commercial banks or net of reverse repurchase (RRP) placements with the Bangko Sentral ng Pilipinas (BSP), grew at a slower pace of 17.3% in January from 19.9% (revised) in December.

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.

Domestic liquidity or M3, meanwhile, grew by 7.7% year-on-year in January to reach P7.5 trillion ($170.03 billion), slower than the 11.3% (revised) expansion recorded in December 2014, BSP added.

M3 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

The growth of bank lending inclusive of RRPs slowed down to 16.6% in January from 19.1% (revised) in the previous month. On a month-on-month seasonally-adjusted basis, commercial bank lending decreased by 0.3% for both loans net of RRPs and loans inclusive of RRPs.

Loans for production activities, which comprised about four-fifths of banks’ aggregate loan portfolio, expanded by 16% in January from 18.7% (revised) in December.

Transportation, storage, and communication (19%); financial intermediation (18.8%); electricity, gas, and water (18.5%); wholesale and retail trade (17.7%); real estate, renting, and business services (15.4%); and manufacturing (12.8 %); contributed to the continued rise in production loans, BSP noted.

Loans for household consumption continued to expand by 20.5% in January from 21.1 percent (revised) in December due to the sustained growth in credit card and auto loans which offset the slowdown in salary and personal loans.

Demand for credit sustained

Money supply continued to increase due largely to sustained demand for credit, as domestic claims grew by 10.8% in January from 17.8% (revised) in December.

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

But public sector credit declined by 2.2% in January after growing by 19.4% (revised) a month earlier, as the deposits of the national government increased significantly due to auction of government debt papers and revenue collections of various agencies.

Meanwhile, net foreign assets (NFA) in peso terms rose at 5.6% in January from 5% (revised) in the previous month, as the NFA of banks increased as banks’ foreign assets expanded, while their foreign liabilities contracted.

Domestic liquidity also continued to grow at a moderate pace during the month due in part to the increase in placements of trust entities in the BSP’s special deposit account (SDA).

M3’s growth in January 2015 also reflects statistical base effects associated with the significant increase in domestic liquidity a year ago of 38.

SDAs are fixed-term deposits by banks and trust entities of BSP-supervised financial institutions with the BSP. BSP expanded the access to the SDA facility to allow trust entities of financial institutions under BSP supervision to deposit in the facility.

The sustained expansion in bank lending amid adequate liquidity continues to provide a meaningful boost to domestic economic activity, BSP said. Rappler.com

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