BANK LENDING in December surged at its quickest rate in two years, initial figures from the Bangko Sentral ng Pilipinas (BSP) indicated.
Outstanding loans from universal and commercial banks soared by 12.2% year over year to P13.1 trillion in December compared to P11.7 trillion in the same timeframe in 2023.
This marked the most rapid lending increase in two years or since the 13.7% noted in December 2022.
On a seasonally adjusted basis, the outstanding loans of major banks increased by 1.4% month over month.
Data from the central bank revealed that outstanding loans to residents grew by 12.4% to P12.8 trillion in December, which was quicker than the 11.4% increase in November.
In contrast, loans to nonresidents expanded by 5.7% to P330 billion during the month, exceeding the 3.9% reported in November.
Loans to residents for production purposes climbed by 10.8% to P11.2 trillion in December, surpassing the 9.8% recorded in the preceding month. Loans for production represented the majority (85.4%) of overall lending.
The BSP noted that the growth was fueled by ongoing lending in wholesale and retail trade, repair of automobiles and motorcycles (10.1%); electricity, gas, steam, and air-conditioning supply (14.2%); manufacturing (7.4%); financial and insurance ventures (7.4%); and construction (12.6%).
Conversely, consumer loans soared by 25% in December, compared to 23.3% in the previous month. Consumer loan figures excluded loans for residential real estate.
This was attributed to the “rise in credit card loans; salary-based general purpose consumption loans; and motor vehicle loans,” as stated by the central bank.
BSP data indicated that credit card loans increased by 29.4% in December, rising from 26.5% a month prior. Salary-based general purpose consumption loans also grew by 16.5% in December from 15% in the preceding month.
However, the growth in loans for motor vehicles slightly decreased to 19.5% in December down from 19.6% the month before.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that loan growth accelerated as the BSP commenced its easing cycle.
The central bank initiated its rate reduction cycle in August of the previous year. It cut borrowing costs by a total of 75 basis points (bps), bringing the key rate to 5.75% by the end of 2024.
Looking ahead, easing inflation could potentially justify additional rate cuts this year and “stimulate increased demand for loans due to reduced financing costs,” said Mr. Ricafort.
A BusinessWorld survey conducted last week revealed that 19 out of 20 analysts foresee the Monetary Board reducing the target reverse repurchase rate by 25 bps on Thursday.
BSP Governor Eli M. Remolona, Jr. mentioned that a rate reduction remains “on the table.”
For 2025, he indicated a possible total cut of 50 bps, noting that 75 bps or 100 bps may be somewhat “too much.”
Mr. Ricafort also pointed out that a reduction in the reserve requirement ratio (RRR) “could have fundamentally enhanced the loanable funds of banks.”
The BSP lowered the RRR for universal and commercial banks, along with nonbank financial institutions with quasi-banking functions, by 250 bps to 7% from 9.5%, which took effect last October.
Mr. Remolona has stated that the Monetary Board is considering another reduction of reserve requirements by 200 bps to 5% this year, likely in the middle of the year.
“The increase in bank loan growth in recent months can be linked to improved business and economic conditions, particularly regarding better employment data in recent months,” Mr. Ricafort added.
MONEY SUPPLY
Meanwhile, domestic liquidity (M3) experienced a growth of 7.7% in December, mirroring November’s figure.
M3 — which is recognized as the broadest indicator of liquidity within an economy — rose to P18.8 trillion by December from P17.4 trillion the previous year.
Month over month, M3 slightly increased by 0.2% on a seasonally adjusted basis.
BSP data illustrated that domestic claims ascended by 10.4% during the month, though this was slower than the 10.8% in November.
“Claims on the private sector grew by 12.2% in December compared to 11.7% in the prior month, supported by the consistent expansion in bank lending to nonfinancial private companies and households,” the BSP reported.
The growth in net claims on the central government slowed to 7.2% in December, down from 9.2% in the earlier month due to increased borrowings by the National Government.
Meanwhile, the increase in net foreign assets (NFA) in peso terms also softened to 6% from 9.8% in November.
“The BSP’s NFA rose by 6.8%, highlighting the growth in gross international reserves compared to a year ago. Meanwhile, the NFA of banks declined due to elevated bills and bonds payable,” it added. — Luisa Maria Jacinta C. Jocson
