Bank lending growth cools in April as demand from key sectors softens

Bank lending in the Philippines expanded at a slower pace in April amid tempered demand across major production sectors, according to data released by the Bangko Sentral ng Pilipinas (BSP).

Outstanding loans issued by universal and commercial banks, excluding investments in the BSP’s reverse repurchase (RRP) facility, grew by 11.2% in April. This marks a slight deceleration from the 11.8% recorded in March, signaling a moderation in credit appetite.

Lending to residents, which also excludes RRP placements, rose by 11.9%, easing from the 12.4% growth seen the previous month. Meanwhile, loans to non-residents dropped more sharply, contracting by 10%, compared to a 5.6% decline in March. The BSP noted that these non-resident loans primarily stem from banks’ foreign currency deposit units (FCDUs).

Credit extended for production activities increased by 10.3%, slightly below the 10.8% recorded in March. Several key industries posted softer lending growth, including real estate (8.9%), wholesale and retail trade (9.9%), manufacturing (0.6%), financial and insurance activities (7.5%), information and communication (7.7%), and transportation and storage (14.9%).

In contrast, consumer lending maintained its upward momentum, growing 24% in April from 23.9% in the previous month, largely driven by higher credit card usage.

Domestic liquidity, measured by M3, also reflected signs of cooling, expanding by 5.8% year-on-year in April to %u20B118.2 trillion. This was slower than the 6.2% growth seen in March.

Growth in domestic claims edged up to 10.9% in April from 10.5% a month earlier, with private sector claims easing slightly to 11.4% from a revised 11.6%. Despite the moderation, lending to non-financial firms and households remained on the rise.

Net claims on the central government climbed to 9.4% from 8.1%, attributed to increased national government borrowings.

Meanwhile, the BSP reported a slight contraction in net foreign assets (NFA), which slipped by 0.2% in April from a 2.6% expansion in March. The central bank’s NFA registered a marginal uptick of 0.1%, while banks’ NFA fell due to rising dollar-denominated payables.

In a statement, the BSP reiterated its commitment to maintaining liquidity conditions that align with its monetary policy stance, ensuring both price and financial stability.