Outstanding bank loans rose 1.9 percent in October from a year ago, the smallest growth in years, despite the record-low interest rates set by the Bangko Sentral ng Pilipinas to encourage lending amid the pandemic.
Data from the BSP showed outstanding loans actually dropped on a monthly basis to P8.69 trillion in October from P8.72 trillion in September. “On a month-on-month seasonally-adjusted basis, outstanding universal and commercial bank loans, net of RRPs [reverse repurchase], declined by 0.4 percent,” it said.
Loans were expanding more than 10 percent at the outset of the pandemic.
“The overall slowdown in bank lending growth reflects the combined effects of muted business confidence and banks’ stricter loan standards attributed mainly to continued disruptions in business operations,” the BSP said.
Loans for production activities, net of RRPs, grew 2.0 percent in October, slower than the revised 2.3 percent in September amid the continued contraction in outstanding loans to key sectors, including manufacturing (-3.6 percent), wholesale and retail trade and repair of motor vehicles and motorcycles (-4.3 percent).
Loans to households expanded at a slower pace of 8.0 percent in October from the revised 9.8 percent in September, driven by the slowdown in credit card and motor vehicle loans and salary-based general purpose consumption loans during the month.
Meanwhile, domestic liquidity growth also decelerate to 11.8 percent in October, slower than the revised 12.2-percent growth in September. On a month-on-month seasonally-adjusted basis, M3 increased by 0.7 percent.
“Domestic claims grew by 7.9 percent year-on-year in October from 8.1 percent [revised] in the previous month as bank lending remained tepid. Growth in loans for production activities eased amid the contraction in lending to key sectors such as manufacturing as well as wholesale and retail trade and repair of motor vehicles and motorcycles,” the BSP said.