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Business activities perk up as bank loans improve 3.5%

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Bank lending continued to recover in October amid the easing of COVID-19 quarantine restrictions and faster vaccination that trigger more economic activity, the Bangko Sentral ng Pilipinas said Tuesday.

Preliminary data show outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the BSP, increased at a faster rate of 3.5 percent year-on-year in October from 2.7 percent in September.

“The continued recovery in outstanding loans of U/KBs reflects the expansion in business activity amid easing quarantine restrictions, declining COVID-19 cases, and increasing vaccinations,” the BSP said.

Outstanding universal and commercial bank loans, net of RRPs, rose 0.6 percent on a month-on-month seasonally-adjusted basis, .

Outstanding loans to residents, net of RRPs, grew 3.7 percent in October from 3.2 percent in September due mainly to the increase in loans for production activities.

Outstanding loans for production activities rose 4.9 percent in October from 4.4 percent in September, supported by the growth in loans for real estate activities (7.6 percent); information and communication (27.7 percent); financial and insurance activities (11.5 percent); and manufacturing (5.0 percent).

Meanwhile, the decline in outstanding loans to other industries such as agriculture, forestry and fishing (-6.8 percent) tempered the overall increase in outstanding loans for production.

Consumer loans to residents also fell at a slower rate of 7.2 percent in October following a 7.8-percent decrease in the previous month due to the slight year-on-year increase in credit card loans and the slower contraction in salary-based general purpose loans.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said bank loans could pick up further in the coming months as the country shifts towards granular lockdowns away from large scale lockdowns in the city or provincial levels in the past.

Ricafort said the looser restrictions could lead to more business activities and more demand for credit as well, “especially in preparation for the seasonal increase in demand during the Christmas season, which accounts for the biggest chunk of sales for many businesses/industries in a typical year.”

Likewise, domestic liquidity or the money supply circulating in the financial system, expanded 8.2 percent year-on-year to about  â‚±14.6 trillion in October 2021, slightly slower than the 8.3-percent growth posted in September.

M3 increased 0.7 percent on a month-on-month seasonally-adjusted basis.

Domestic claims rose 7.5 percent year-on-year in October from 7.7 percent (revised) in the previous month due to the expansion in net claims on the central government as well as the improvement in bank lending to the private sector.

Net claims on the central government rose climbed 21.5 percent in October from 24.4 percent in September on the back of sustained borrowings by the national government.

Claims on the private sector, driven by bank lending to non-financial private corporations, increased 2.6 percent in October from 3.1 percent in September.

Net foreign assets (NFA) in peso terms expanded 8.8 percent in October from 11.3 percent in September. The pace of expansion of the BSP’s NFA position moderated during the month, reflecting a slower increase in the country’s gross international reserves relative to the same period a year ago.

Meanwhile, the NFA of banks grew at a broadly steady pace, with banks’ foreign assets rising on account of higher deposits maintained overseas by local branches of foreign banks.

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