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Growth in KB Lending Slows Down in August

10.16.2006

Outstanding commercial bank (KB) loans increased by 2.5 percent year-on-year to P1.597 trillion in August 2006, a deceleration from the 4.3 percent growth posted in the previous month.  On a month-on-month basis, KB loans declined by 0.9 percent compared to a 1.8 percent growth in the previous month.

The growth in KB lending was driven mainly by loans to the financial institutions, real estate and business services (FIREBS) sector (17.3 percent) and the community, social and personal services sector (6.3 percent). Other sectors which also contributed to the growth in KB loans were mining and quarrying; electricity, gas and water; and agriculture.   However,  the increase in lending to these sectors were partly offset by the declines in construction (13.8 percent); transportation, storage and communication (8.9 percent); manufacturing (8.3 percent); and wholesale and retail trade (2.6 percent).

Commercial bank lending activity continues to be moderate, given the changing corporate financing structure in the country and the still significant level of non-performing assets (NPAs) of banks.  The BSP, meanwhile, remains committed to the strengthening of the banking sector by helping banks reduce their stock of NPAs and improve overall asset quality.  The BSP also continues to provide the appropriate macroeconomic conditions to encourage credit activity, including stable interest rates and support to legislative measures that promote adequate credit  information.

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