Lending growth slows to five-month low in April

Bank lendingincreased to its slowest pace in five months in April as the growth in loans to key industries eased, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Outstanding loans of universal and commercial banks grew by 11.12% year on year to PHP 13.25 trillion in April from PHP 11.91 trillion in the same period in 2024.

This was the slowest growth in bank lending in five months or since the 11.1% posted in November 2024.

It also eased from the 11.8% year-on-year increase seen in March.

BSP data showed outstanding loans to residents rose by 11.9% year on year to PHP 12.93 trillion in April, slower than the 12.4% growth posted in the previous month.

Meanwhile, loans to nonresidents declined by 10% year on year to PHP 318.37 billion during the month following the 5.6% drop posted in March.

Outstanding loans to residents for production activities expanded by 10.3% to PHP 11.26 trillion in April, slower than the 10.8% growth a month prior.

The BSP said this was due to the slower expansion in lending to real estate activities (8.9%); wholesale and retail trade, repair of motor vehicles and motorcycles (9.9%); manufacturing (0.6%); financial and insurance activities (7.5%); information and communication (7.7%); and transportation and storage (14.9%)

Meanwhile, consumer loans jumped by 24% to PHP 1.67 trillion in April, a tad faster than the 23.9% increase recorded a month prior.

The BSP said this was driven by an increase in credit card loans, which rose by 29.3% in April, faster than 29% in March.

On the other hand, the growth in motor vehicle loans was steady at 19%, while the year-on-year increase in salary-based general purpose consumption loans eased to 9.3% from 9.9%.

Despite the slower loan growth in April, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said this was still better than the 7.6% average expansion since 2020 or the coronavirus disease 2019 (COVID-19) pandemic.

“Loan growth was also sustained at double-digit growth levels as more businesses recovered further, especially those hit hard by the COVID pandemic, towards or even exceeding pre-pandemic levels,” he added.

Future policy rate cuts will help support lending growth moving forward, Mr. Ricafort said.

“Possible future Federal Reserve and BSP rate cuts would also further reduce borrowing costs, which would help further increase demand for loans that, in turn, would continue to be a bright spot for the economy and would lead to faster overall GDP (gross domestic product) growth,” he added.

BSP Governor Eli M. Remolona, Jr. has signaled the possibility of two more 25-basis-point (bp) rate cuts this year, with the next reduction on the table as early as next month’s meeting on June 19.

The Monetary Board resumed its easing cycle in April, lowering benchmark interest rates by 25 bps to bring the policy rate to 5.5%.

The central bank has now cut borrowing costs by 100 bps since it began its easing cycle in August last year.

Money supply

Meanwhile, domestic liquidity (M3) grew by 5.8% in April, slower than the revised 6.2% in March.

M3 — which is considered the broadest measure of liquidity in an economy — increased to PHP 18.2 trillion as of April from PHP 17.2 trillion a year earlier.

Month on month, M3 inched up by 0.1% on a seasonally adjusted basis.

Central bank data showed that domestic claims rose by 10.9% year on year in April, faster than the revised 10.5% in March.

“Claims on the private sector grew by 11.4% in April from 11.6% (revised) 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 increased by 9.4% from 8.1% (revised) due to higher borrowings by the National Government,” it added.

Meanwhile, net foreign assets (NFA) in peso terms slipped by 0.2% in April versus the 2.6% expansion in March. “The BSP’s NFA increased by 0.1%. Meanwhile, the NFA of banks declined largely on account of higher foreign currency-denominated bills payable.”

“Looking ahead, the BSP will ensure that domestic liquidity and bank lending conditions remain aligned with its price and financial stability mandates,” the central bank said. — Luisa Maria Jacinta C. Jocson