November bank lending growth slows

BANK LENDING GROWTH slowed in November amid higher borrowing costs, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.
Outstanding loans extended by universal and commercial banks climbed by 13.7% year on year to P10.64 trillion, slightly slower than the 13.9% expansion  in October.
Big banks’ outstanding loans — lending net of reverse repurchase (RRP) placements with the BSP — inched up by 0.3% from a month earlier.
Including RRPs, bank lending rose by 13.4% in November, unchanged from the previous month.
BSP data showed outstanding loans to residents net of RRPs grew by 13.4% to P10.31 trillion from 13.3% in October.
Credit for production activities jumped by 12.4% to P9.302 trillion as more loans were extended for real estate activities (12.2%), manufacturing (15.6%), financial and insurance activities (13.1%), and information and communication (24.3%).
Consumer loans to residents increased by 24.1% to P1.01 trillion, faster than 22.6% in October. This was attributed to year-on-year rise in credit card loans (26.8%), motor vehicle loans (8.7%) and salary-based general purpose consumption loans (67.2%).
Meanwhile, outstanding loans to nonresidents net of RRPs expanded by 24.8% to P326.512 billion, slower than 33% growth in the previous month.
“Sustained growth in credit and domestic liquidity will continue to support economic activity and domestic demand,” central bank Governor Felipe M. Medalla said in a statement.
“Looking ahead, the BSP will ensure that liquidity and lending dynamics remain consistent with its primary mandate of promoting price and financial stability,” he added.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said loan growth slowed in November partly due to rising interest rates in the country and the United States, as well as faster inflation.
“That led to higher borrowing costs for consumers, businesses, and other institutions that, in turn, partly dragged demand for loans,” he said in a Viber message.
At its Nov. 17 meeting, the Monetary Board increased the overnight reverse repurchase rate by 75 basis points (bps) to 5%. The move followed the 75-bp hike by the US Federal Reserve at its Nov. 1-2 meeting, which brought its own policy rate to 3.75-4%.
“Bank lending continues to be driven by robust domestic demand. If we look at the details, lending for productive activities is holding up well despite increasing interest rates, with most sectors expanding,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.
She noted that lending for education, as well as accommodation and food service activities remained sluggish.
“Both segments are expected to return to positive territory eventually as face-to-face schooling and tourism and travel activities normalize,” she added.
Loans for education contracted by 2.1% in November, while accommodation and food service activities declined by 2.7%.
“Consumer loans also increased at a faster pace, despite a high inflation environment. Better employment prospects and the guarantee of continuous income on the back of economic resurgence possibly offset the negative impact of high inflation,” Ms. Velasquez said.
In the next few months, she said lending activity would continue to grow, although slower.  
M3 GROWTH STEADYAs credit growth continued to improve, domestic liquidity rose by an annual 5.4% to P15.6 trillion in November, the BSP said in a separate statement. The growth in domestic liquidity was unchanged from October.
M3, which is the broadest measure of money supply in an economy, rose by 0.6% month on month.
Domestic claims rose by 10.8%, slower than 11% in October.
Net claims on the central government grew by 13.8%, a tad slower than the 14.7% in October due to the borrowings by the National Government.
Expansion in claims on the private sector likewise rose by 10.4% in November.
Meanwhile, net foreign assets (NFA) in peso terms declined by 1.8% in November.
“The NFA of banks fell mainly on account of higher bills payable. Similarly, the BSP’s NFA position contracted by 1% in November,” the BSP said. — Keisha B. Ta-asan