Bank loans rise in November as businesses turn bullish

BANK LOANS increased for a fourth consecutive month in November as businesses became more optimistic about the recovery of the Philippine economy.

The outstanding loans issued by major banks rose 4% year-on-year to 9,349 billion pesos in November, based on preliminary data released Friday evening by the Bangko Sentral ng Pilipinas (BSP).

The pace of growth is faster than the 3.5% expansion in October and marked the fourth consecutive month of annual loan growth. It was also the fastest rate since 4.7% in August 2020.

Including reverse repurchase agreements, credit growth was 3.9%. The outstanding loans of the big banks increased by 0.3% month on month.

“The BSP sees enough room to continue providing appropriate political support to support the resumption of credit activity,” BSP Governor Benjamin E. Diokno said in a statement.

The central bank has kept rates at record highs for all of 2021, after cutting rates by 200 basis points altogether in 2020 to support the economy amid the coronavirus pandemic.

Despite low interest rates, bank lending declined on an annual basis from December 2020 to July 2021 as borrowers and banks became risk averse during the crisis. It also reflected the lag in the impact of monetary easing.

Borrowings for production activities jumped 5.3% in November, after 4.9% in October. This is mainly due to the expansion of loans to real estate activities (8%), information and communication (27.2%), financial and insurance activities (9%), industry ( 6.7%) and transport and storage (11.4%).

“Outstanding loans from universal and commercial banks continue to gain ground against the backdrop of upbeat corporate economic prospects due to the easing of restrictions related to coronavirus disease 2019 (COVID-19) and continued vaccine rollout “said Mr. Diokno.

For the Chief Economist of Rizal Commercial Banking Corp. Michael L. Ricafort, some likely benefited from borrowing conditions prior to the tightening of monetary policy in the United States.

“The faster growth in loans is also due to the fact that some borrowers have rushed their financing needs in anticipation of the widely anticipated move by the US Federal Reserve to accelerate the stall,” Ricafort said.

On the other hand, we note a drop in outstanding loans to other sectors such as agriculture, forestry and fishing (-8.3%), mines and quarries (-16%), and household production activities for their own use (-23.8%).

At the same time, data from the BSP showed that outstanding loans for retail borrowers continued to decline by 7.1% in November, although it eased from the contraction of 7.4. % of the previous month.

Auto loans (-17.5%) and payday credit (-9.5%) both declined, while credit card loans increased 2.6%.

The continued decline in household loans reflects banks’ mistrust of lending to retail borrowers amid the crisis, according to Asian Institute of Management economist John Paolo R. Rivera.

“Business loans are more likely to be approved because the loan will be used to generate income to pay off the loan. Consumer credit remains risky for banks due to lingering uncertainties about employment and household income, ”Rivera said in a Viber message.

He said banks might be more willing to take consumer loan risks once the employment situation becomes more stable “than being constantly threatened by rising alert levels due to pandemic ”.

Metro Manila will be subject to a stricter Alert Level 3 from today (January 3) through January 15 amid the increase in 2019 coronavirus disease cases.

“For the future, the BSP aims to keep a patient hand on its monetary tools to allow the economic recovery to gain ground, in line with its price and its financial situation. stability mandates, ”Mr. Diokno said.

During its last policy review in 2021, which took place on December 16, the Monetary Council kept its policy rates stable to support the economy’s nascent recovery.

The PASB will have its first policy review this year on February 17th.

As credit growth continued to improve, domestic liquidity rose 8.3 percent annually to reach 14.8 trillion pesos in November, the BSP said in a separate statement.

M3 – which is the broadest measure of money supply in an economy – grew 0.5% month on month.

In November, national claims grew faster by 8.1% after growing 7.5% in October.

Net claims on the central government also grew more rapidly by 23.9% from 21.7% revised in October due to sustained borrowing from the national government.

Growth in claims on the private sector also accelerated to 3% from 2.6% in October.

Net foreign assets grew a little faster by 8.8% in November compared to 8.7% the previous month.

“Going forward, the BSP will ensure that domestic liquidity conditions continue to provide the necessary support for domestic economic activity amid downside risks to economic recovery, in line with its price and market targets. financial stability, ”the central bank said. – Luz Wendy T. Noble

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