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Bank lending growth drops

Big banks’ lending growth further weakened to just 2.8 percent in September from an already low of 4.7 percent in August, the Bangko Sentral ng Pilipinas (BSP) reported late Tuesday.

Domestic liquidity or M3, in the meantime, expanded by 12.3 percent year-on-year to P13.5 trillion in September, a slower pace of growth from 13.7-percent in August.

The BSP said the “general decline in bank growth partly reflects banks’ reduced tolerance for risk, decline in loan demand due in turn, to weak business and income prospects and observed shift by non-financial corporates to alternative sources of funds.”

On a month-on-month seasonally-adjusted basis, the outstanding loans of the universal and commercial banks — net of net of reverse repurchase (RRP) placements with the BSP – fell by one percent. As for M3, based on the the month-on-month seasonally-adjusted number, it increased by 0.2 percent.

The BSP said its accommodative monetary policy stance, and so far it has reduced polic rate by a cumulative 175 basis points since February, along with government actions to deal with COVID-19 pandemic, continue to be “crucial in supporting market sentiment and credit activity”.

“(The) BSP reassures the public of its commitment to deploy its full range of instruments as necessary to ensure that domestic liquidity and credit remain adequate amid significant economic disruptions due to the ongoing health crisis,” it said in statement.

The total outstanding loans amounted to P9.025 trillion in September.

Lending for production activities net of RRPs increased by 2.4 percent to P7.861 trillion, lower than the 4.1 percent increase in August as loans across most sectors slowed down. Lending to households also grew at a lower rate of 10.2 percent to P872.126 billion from 12.9 percent in August, and the BSP said this was due to the continued slowdown in credit card and motor vehicle loans.

As for M3, the central bank said domestic claims were up by 8.2 percent year-on-year in September compared to August’s 10.0 percent. It said the claims on the private sector which was “driven mainly by bank lending to non-financial private corporations and households” moved at a weaker pace due to “constrained economic activity and weak corporate sector performance.”

The BSP said the net foreign assets (NFA) in peso terms increased by 20.6 percent year-on-year in September, more than the 18 percent recorded in August. The growth in the BSP’s NFA position was on account of the increase in gross international reserves while the growth in the NFA of banks was because banks’ foreign liabilities have declined due to lower bills and bonds payables, said the BSP.

BSP Governor Benjamin E. Diokno has said that he continue to see demand for loans and that banks’ appetite to lend is still on the healthy side.

The BSP, in terms of providing liquidity, an accommodative policy stance and assisting banks to cope with the health crisis, has “done a lot” but Diokno said the BSP’s “toolkit is far from exhausted (we) are prepared to do more, if and when necessary” and this includes further easing monetary policy “in case needed.”

Diokno also said that after several sets of regulatory reliefs to banks, the BSP stress tests continue to show favorable banking numbers and “prospects” amid the pandemic-related risks.

Source: Manila Bulletin (

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