Credit growth accelerates as producer easy loans increase

BANK LOANS grew faster in October, fueled by an increase in producer credit thanks to the gradual reopening of the economy and abundant liquidity.

The outstanding easy loans issued by major banks rose 3.5% year-on-year to 9,268 billion pesos in November from 8,956 billion pesos, according to preliminary data released Monday evening by the Bangko Sentral ng Pilipinas ( BSP).

This is faster than the 2.7% year-on-year expansion seen in September and marked the third consecutive month of bank lending growth.

October’s growth rate is also the fastest since the 4.7% posted in August 2020.

Including repurchase agreements, bank loans increased by 3.6%. At the same time, the outstanding loans of the big banks increased by 0.6% month on month easy loans

“The continued recovery of outstanding loans from universal / commercial banks reflect the expansion of commercial activity in a context of relaxation of quarantine restrictions, decline in COVID-19 cases and increase in vaccinations, ”said BSP Governor Benjamin E. Diokno in a statement. communicated.

“In collaboration with the national government Fiscale and health interventions, PASB will keep a patient hand in providing political support to enable a sustainable recovery in domestic demand, ”Mr. Diokno said.

Loans to productive activities increased 4.9% in October, faster than the 4.4% observed in September.

Growth was observed in loans for real estate activities (7.6%), information and communication (27.7%), financial and insurance activities (11.5%) and industry ( 5%).

On the other hand, loans to the agricultural, forestry and Fifishing industries fell 6.8%.

At the same time, consumer credit fell 7.2% in October, easing slightly from the 7.8% contraction seen in September. Declines were seen for auto loans (16.1%) and salary-based credit (7.2%), while credit card loans increased 0.9%.

“Bank lending continued to expand in October, with the delayed impact of BSP’s 2020 rate cuts continuing to support bank lending activity,” said Nicholas Antonio T. Mapa, senior economist at ING Bank NV Manila , in an email.

Last year, the central bank cut rates by a total of 200 basis points to support the economy amid the pandemic crisis. Bank credit contracted from December to July but has increased since August.

Mr Mapa said the growth in production loans could stimulate capital formation.

“Consumer loans remain sluggish, reflecting the still nascent recovery, with households forced to allocate limited budgets to daily spending while investments are postponed for the time being as they replenish their savings, ”he said.

Meanwhile, the growth of liquidity fell to 8.2% in October from 8.3% the previous month, based on preliminary data from the BSP.

Month after month, M3 – the broadest measure of liquidity in an economy – grew 0.7%.

Domestic claims rose 7.5% in October, slower than the 7.7% growth seen in September.

At the same time, net claims on the central government rose 21.5% in October, slower than the 24.4% increase recorded the month before.

Growth in claims on the private sector also slowed to 2.6% from 3.1% a month earlier.

Net foreign assets in pesos increased by 8.8% in October against 11.3% in September.

The chief economist of Rizal Commercial Banking Corp. Michael L. Ricafort said in a note that the slowdown in M3 expansion in October could be due to the base thfffollowing the liquidity released last year as part of the crisis.

Mr Diokno said earlier that BSP’s easing measures released some 2.23 trillion pesos in cash into the Financial system, which is equivalent to 12.5% ​​of the country’s gross domestic product in 2020.

“Looking ahead, the BSP will ensure appropriate liquidity conditions in order to preserve continued political support for national economic activity, in line with its pricing and financial stability objectives,” Diokno said in a statement. – LWT Noble

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