Outstanding commercial bank (KB) loans increased by 4.3 percent year-on-year to P1.612 trillion in July 2006, an improvement from the 0.6 percent contraction posted in the previous month. On a month-on-month basis, KB loans increased by 1.8 percent following a 1.5 percent contraction in the previous month.
The improvement in KB lending was driven mainly by loans to the financial institutions, real estate and business services (FIREBS) sector (20.6 percent) and the community, social and personal services sector (10.4 percent). Other sectors which likewise received more lending were wholesale and retail trade (1.0 percent) and mining and quarrying (0.1 percent). However, lending declined in other key sectors such as construction (14.9 percent); manufacturing (7.8 percent); electricity, gas and water (7.2 percent); and transportation, storage and communication (4.4 percent).
The stronger growth in bank lending may be attributed in part to the improving trend in commercial banks’ NPL ratio, which fell to 7.17 percent in July 2006 from 7.22 percent in the previous month and 9.54 percent in the same period last year.
Monetary authorities are closely monitoring developments in bank lending activities and will continue to ensure that liquidity and credit conditions remain consistent with the stance of monetary policy.