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Bank lending growth steady at 12% in July

BANK LENDING GROWTH remained steady in July, as borrowing costs remained low, according to the Bangko Sentral ng Pilipinas (BSP).

Data from the BSP showed outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the central bank, rose by 12% to P10.21 trillion in July, from P9.12 trillion a year earlier.

The July growth rate was unchanged from June. July also marked the 11th straight month of expansion in lending activities.

Lending, net of RRP placements with the BSP, inched up by 0.6% month on month.

Outstanding loans, inclusive of reverse repurchase agreements, grew by 11.6% in July, a tad slower than the previous month’s 11.7%.

Amid the rise in lending, the BSP said domestic liquidity (M3) expanded by 7% to P15.4 trillion in July. The expansion was slower than the revised 7.2% annual growth in June.

M3 — considered as the broadest measure of liquidity in an economy — edged up by 0.3% month on month.

“The sustained growth in bank lending and liquidity will support the recovery of economic activity and domestic demand,” BSP Governor Felipe M. Medalla said in a statement on Tuesday.

“Looking ahead, the BSP will continue to ensure that liquidity and credit dynamics remain in line with the BSP’s price and financial stability objectives.”

BSP data showed outstanding loans to residents net of RRPs expanded by 11.9% to P9.92 trillion in July, from P8.86 trillion in the same month last year. The pace of annual expansion was unchanged from June.

Borrowings for productive activities jumped by 11.6% to P8.98 trillion in July, fueled by a 14% rise in loans for real estate activities to P2.9 trillion; and a 16.2% jump in loans for manufacturing to P1.17 trillion.

Consumer loans to residents also went up by 14.7% to P934.71 billion, faster than 10.9% growth in June. This was driven by a 21% increase in credit card loans and a 39.2% jump in salary-based general purpose consumption loans. Motor vehicle loans inched up by 1% in July.

Meanwhile, outstanding loans to nonresidents grew by 14.6% in July, slowing from the 16.4% in June.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa in a Viber message said bank lending continues to benefit from the previous easing of monetary policy.

“Growth momentum has solidified and ensures expansion over the next few quarters. Bank lending is expected to remain in expansion as the economy reopens and demand for credit stays healthy,” he said.

The BSP slashed interest rates by 200 basis points (bps) in 2020 to help the economy amid the coronavirus pandemic.

“Gains, however, will be capped by recent tightening carried out by the BSP. Rate hikes are, by design, carried out to slow economic growth to ensure demand falls to match limited supply,” Mr. Mapa added.

The BSP has raised rates by 175 bps so far this year as it battles inflation.

M3 GROWTH“As the BSP proceeds with the withdrawal of monetary accommodation, it will continue to ensure that domestic liquidity conditions remain conducive to sustaining the economic recovery, in line with the BSP’s price and financial stability objectives,” Mr. Medalla said in a separate statement.

Domestic claims rose by 11.5% in July, higher than the revised 9.9% in June, due to improved bank lending to the private sector.

“Claims on the private sector grew by 8.9% in July from 8.8% in June with the sustained expansion in bank lending to nonfinancial private corporations and households,” the BSP said.

Net claims on the central government jumped by 22.2% from 15.3% in June, as the National Government sustained its borrowings.

Net foreign assets (NFA) in peso terms fell by 5.2% after expanding by 5.6% in the prior month. The BSP attributed the decline in the NFA position to the year-on-year drop in gross international reserves (GIR).

Latest data from the BSP showed GIR stood at $98.83 billion as of end-July, 2% lower than the $100.85-billion level as of end-June.

GIR also fell by 7.8% from its $107-billion level in July last year. The GIR level has been decreasing since February this year. — Keisha B. Ta-asan

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