By Luisa Maria Jacinta C. Jocson, A reporter
BANKING LOAN GROWTH hit a 20-month high in August, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Outstanding loans of international and commercial banks increased 10.7% year-on-year to P12.25 trillion in August from P11.07 trillion a year ago.
This was also the fastest growth rate since 13.7% in December 2022.
Seasonally adjusted, outstanding loans from central banks increased by 0.8% in the month. Bank lending grew by 10.4% in July.
Central bank data showed loans to residents increased by 10.9% in August from 10.4% in the previous month. On the other hand, growth in loans to non-residents slowed sharply to 1.5% from 9.2% in July.
Loans to manufacturing operations rose 9.4% year-on-year to P10.47 trillion in August from P9.58 trillion a year ago. It was also faster than July’s 8.8% clip.
“This growth was mainly driven by lending to key industries such as real estate (13.2%); wholesale and retail trade, repair of cars and motorcycles (10.7%); manufacturing (9.8%); transportation and storage (23.4%); electricity, gas, steam and air-conditioning (7%), BSP said.
Double-digit increases were also seen in loans for water supply, sanitation, waste management and repair works (44.9%); technical, scientific and technological services (22%); and mining and quarrying (21.7%).
Meanwhile, growth in consumer loans slowed to 23.7% in August from 24.3% last month.
This as a slight increase in loans was recorded in credit cards (27.4% in August from 28.2% in July), cars (19.3% from 19.9%), and loans based on income for general purpose use (16.4% from 16.5%).
Chief Economist Rizal Commercial Banking Corp. Michael L. Ricafort said the loan growth was caused by the BSP’s rate cut in August, its first policy cut in almost four years.
The central bank in August cut the target repo rate (RRP) by 25 basis points (bps) to 6.25% from a 17-year high of 6.5%.
The Board of Finance has two meetings left this year, on Oct. 16 and Dec. 19. BSP Governor Eli M. Remolona, ​​Jr. noted the possibility of a 25 bps reduction in the next two meetings.
Easy entryfThe tax cuts and reductions in value added will also “help encourage greater demand for loans or credit due to lower borrowing costs,” said Mr. Ricafort.
The subject is enteredfit fell to 1.9% in September from 3.3% in August and 6.1% last year. This was also its slowest print in four years or since it was printed by 1.6% in May 2020.
CASH OFFERING
Meanwhile, separate BSP data showed that domestic money (M3) increased by 5.5% in August, slower than the 7.3% posted last month.
M3 — considered the broadest measure of income in the economy — rose to P17.4 trillion in August from P16.5 trillion a year ago. Month-on-month, M3 decreased by 0.1%.
Home claims jumped 10% in August, slower than the 11.4% increase in July.
“Private sector applications grew by 11.9% in August from 12% in July (revised), due to continued growth in bank lending to the poor.fprivate companies and households,” said BSP.
“Total claims to central government increased by 8.5% from 14.1% last month (revised), due to continued borrowing by the National Government,” it added.
Central bank data showed that net foreign assets (NFA) in peso terms rose 2.4% year-on-year in August, much slower than 11.2% the previous month.
“The BSP’s NFA grew by 7.7%, while the banks’ NFA contracted, mainly due to higher debt and bond repayments.”
Mr. Ricafort said domestic capital growth may pick up after the recent reduction in the bank’s reference requirements (RRR).
The central bank last month said it would cut the RRR for central banks to 7% from 9.5% infeffective October 25.
Mr. Remolona said they are looking to reduce the rate to zero during his term, which ends in 2029.
“Any further reduction in the RRR, which adds more peso liquidity to the financial system, will be gradual in the coming years,” said Mr. Ricafort.
BAD LOANS
Meanwhile, separate BSP data showed the banking sector’s non-performing loan (NPL) ratio continued to rise in August, hitting a two-year high.
Preliminary data from the BSP showed that the total NPL of the banking sector increased to 3.59% in August from 3.58% in July and 3.41% last year.
This is also the highest bad loan rate in 26 months or since 3.6% in June 2022.
Bad loans increased by 0.9% to P512.7 billion in August from P508.1 billion in July. Year-on-year, it increased by 15.8% from P442.6 billion.
A loan is considered non-performing if it remains unpaid for at least 90 days after the due date. These are considered risky assets as borrowers are less likely to repay.
In August, past loans increased by 0.9% to P631.4 billion from P625.7 billion in July and by 19.6% from P527.9 billion last year.
This brought the previous fixed rate to 4.42% in August, up from 4.4% in July and 4.15% last year.
Adjusted loans increased by 0.7% to P293.2 billion in August from P291.1 billion in the previous month. Year-on-year, it decreased by 4.2% from P306 billion.
Restructured loans accounted for 2.05% of total industry loans, steady from last month but down from 2.36% last year.
Bank loans increased by 0.7% to P482.5 billion from P479.2 billion last month. It also increased by 5.8% from P456 billion in the year.
This brought the loan loss ratio to 3.37%, stable from July but down from 3.52% in August 2023.
Lenders’ NPL coverage ratio, which measures the potential allowance for bad loans, fell to 94.11% in August from 94.32% in July and 103.02% last year.
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