Bank lending expansion picks up to 11.3% — BSP

Bank lending growth picked up anew in May, driven by loans to businesses and consumers, the Bangko Sentral ng Pilipinas (BSP) said.

Preliminary BSP data released late on Monday showed that outstanding loans of universal and commercial banks increased by 11.3% year on year to PHP 13.37 trillion as of May from PHP 12.02 trillion in the same period in 2024.

This was faster than the 11.2% expansion in April. This comes as lending growth has slowed month on month since February.

“After adjusting for seasonal fluctuations, the outstanding loans increased by 0.9% in May compared with the previous month,” the BSP added.

Outstanding loans to residents rose by 11.8% year on year to PHP 13.05 trillion in May, a tad slower than the 11.9% growth posted in the previous month.

Meanwhile, loans to nonresidents declined by 6.6% year on year to PHP 323.83 billion that month following a 10% drop posted in April.

BSP data showed that outstanding loans to residents to fund business activities expanded by 10.2% to PHP 11.35 trillion in May, easing from the 10.3% growth a month prior.

“Loan growth eased slightly due to the slower expansion in lending to key industries such as: real estate activities (8.7%); wholesale and retail trade, and repair of motor vehicles and motorcycles (9.8%); and transportation and storage (14%),” the central bank said.

Loans for manufacturing activities fell by 3% year on year, it added.

Consumer loans to residents grew 23.7% to PHP 1.699 trillion in May, slowing from the 24% increase recorded a month prior.

These include credit card loans, which rose by 29.4%; motor vehicle loans, which went up by 18.2%; and salary-based general purpose consumption loans, which expanded by 8.7%.

“The BSP monitors bank loans because they are a key transmission channel of monetary policy. Looking ahead, the BSP will ensure that domestic liquidity and bank lending conditions remain aligned with its price and financial stability objectives,” the central bank said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the faster lending growth in May was likely a result of the lagged impact of the BSP’s rate cut cycle.

The Monetary Board has brought down benchmark interest rates by a cumulative 125 basis points (bps) since it started its easing cycle in August last year, with its latest move being a 25-bp reduction last month that brought the policy rate to 5.25%.

Money supply

Meanwhile, domestic liquidity (M3) grew 5.5% in May, slower than April’s 5.8% expansion.

M3 — which is considered the broadest measure of liquidity in an economy and include currencies in circulation, bank deposits, and other financial assets that are easily convertible to cash — increased to P18.35 trillion as of May from P17.4 trillion a year earlier.

Month on month, M3 inched up by 0.7% on a seasonally adjusted basis.

Central bank data showed that domestic claims grew by a slower 10.7% in May to PHP 20.88 trillion from 10.9% in April.

Claims on the private sector alone grew by 10.9% in May to PHP 13.43 trillion, easing from the revised 11.5% in the previous month.

This was “driven by the continued expansion in bank lending to nonfinancial private corporations and households,” the BSP said.

“Net claims on the central government increased by 9.1% from 9.3% (revised), driven by its higher borrowings,” it added.

Meanwhile, net foreign assets (NFA) in peso terms decreased by 4.6% in May from the 0.2% drop in April.

“The BSP’s NFA fell by 4.4% primarily due to the peso’s appreciation against the US dollar. Meanwhile, banks’ NFA declined largely on account of higher foreign currency-denominated bills payable,” the central bank said.

Mr. Ricafort said the slower money supply growth seen in May was likely partly due the BSP’s liquidity management efforts through its weekly auctions of term deposits and short-term securities, which are part of the tools it uses to better manage inflation and price expectations.

Still, these could have been offset by cuts to banks’ reserve requirement ratios, with the latest round implemented in April infusing some P300 billion in cash into the financial system. — Aaron Michael C. Sy