Lending growth slows in March

Bank lending expanded at its slowest pace in four months in March as loan growth for both production activities and consumers eased, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the central bank, rose by 11.8% year on year to PHP 13.19 trillion from PHP 11.795 trillion.

This eased from the 12.2% expansion in February and was the slowest since the 11.1% growth seen in November 2024. Still, this was faster than the 9.44% annual increase logged in March 2024.

On a seasonally adjusted basis, big banks’ outstanding loans inched up by 0.9% month on month.

Outstanding loans to residents increased by 12.3% year on year to PHP 12.87 trillion in March, slower than the 12.6% growth in February. Meanwhile, loans to nonresidents decreased by 5.6% to PHP 324.82 billion in March from the 3.2% decline seen in the previous month.

Loans for production activities expanded by 10.9% to PHP 11.23 trillion in March, slower than the 11.2% growth in February.

“Loan growth eased due to the slower expansion in lending to key industries such as real estate activities (9.6 %); wholesale and retail trade, repair of motor vehicles and motorcycles (11.6%); information and communication (8.9%); construction (1.8%); arts, entertainment and recreation (12.6%); water supply, sewerage, waste management and remediation activities (12.9%); and accommodation and food service activities (19.3%),” the central bank said.

Consumer loans to residents rose by 23.6% in March to PHP 1.64 trillion, also slower than the 24.1% increase seen in the previous month.

Credit card loans rose by 28.8% year on year to PHP 959.43 billion, BSP data showed, while loans for motor vehicles grew by 18.8% to PHP 477.79 billion in March. Salary-based general purpose consumption loans also increased by 8.9% to P158.71 billion.

“Lending remains robust but could benefit from additional rounds of easing. First-quarter GDP (gross domestic product) showed capital formation up a modest 4%,” Metropolitan Bank & Trust Co. Chief Economist Nicholas Antonio T. Mapa said in a Viber message.

“Further BSP cuts could support lending activity and overall GDP amidst the Trump tariffs,” Mr. Mapa added.

The Philippine economy expanded by 5.4% year on year in the first quarter, faster than the 5.3% growth seen in the fourth quarter but below the government’s 6-8% target for the year.

This was also well below the 5.8% median forecast of 15 economists in a BusinessWorld poll and the revised 5.9% GDP growth recorded in the same quarter last year.

On Wednesday, BSP Governor Eli M. Remolona, Jr. told Bloomberg that the central bank is open to cutting key rates by 75 basis points (bps) more this year following as inflation continues to ease.

The Monetary Board last month resumed its easing cycle after an unexpected pause in February, cutting benchmark rates by 25 bps to bring the policy rate to 5.5%. Its next meeting is on June 19.

Money supply

Meanwhile, domestic liquidity grew by 6.1% year on year in March, slightly slower than the 6.3% expansion in February, the BSP reported separately.

M3 — which is considered as the broadest measure of liquidity in an economy — increased to P18.24 trillion in March from P17.199 trillion a year earlier. Month on month on a seasonally adjusted basis, M3 inched up by 0.7%.

“Liquidity growth remained positive as economic growth stayed robust. The slowdown may be traced to the moderating in bank lending activity, but we expect a rebound in the coming months as BSP is likely to provide monetary support,” Mr. Mapa said.

Domestic claims increased by 10.4% in March, slightly faster than the 10.1% increase in February, the central bank said.

“Claims on the private sector grew by 11.5% in March from 12.3% in the previous month with the sustained expansion in bank lending to nonfinancial private corporations and households,” the BSP said.

Net claims on the central government grew by a faster 8% in March from 5.9% in the previous month amid higher National Government borrowings.

Meanwhile, the growth in net foreign assets (NFA) in peso terms slowed to 2.5% in March from 5.8% in February.

“The BSP’s NFA expanded by 4.5%, reflecting the increase in gross international reserves relative to a year ago. Meanwhile, the NFA of banks declined largely on account of higher foreign currency-denominated bills payable,” the central bank said.

“The BSP will continue to ensure that domestic liquidity conditions remain consistent with the prevailing stance of monetary policy, in line with its price and financial stability objectives.” — A.M.C. Sy