Outstanding loans of commercial banks, thrift banks and rural banks (net of reverse repurchase or RRP placements) expanded by 6.9 percent year-on-year in July compared to the 4.7 percent growth posted in the previous month. This was a substantial improvement from the 0.5 percent expansion registered in the same month a year ago.
Gross of banks’ RRP placements with the BSP, bank lending grew by 3.4 percent year-on-year in July from 4.9 percent in June, as banks shifted their placements with the BSP from RRPs to SDAs. This was lower than the 5.6 percent growth in the same month last year. On a month-on-month basis, seasonally adjusted lending also slowed down to 0.2 percent from the 1.0 percent expansion registered a month ago.
Lending to all sectors of the economy registered expansions, except in the mining, manufacturing and utilities sectors which registered declines. In the case of the latter two, however, their declines were less than those recorded in the previous month. The transportation, storage and communications and construction sectors led the expansion at 11.0 percent and 9.9 percent, respectively. While the financial institutions, real estate and business services (FIREBS) sector grew only by 4.6 percent during the period, net of RRP placements it posted the highest growth at 21.1 percent.
Meanwhile, the slower growth observed in most of the sectors may be attributed partly to the fact that companies are increasingly sourcing their funding requirements from outside the banking system, as preliminary data indicate that corporate borrowings from non-bank sources continued to grow during the first eight months of 2007.
Bank lending is a key driver of domestic liquidity and at the same time a major indicator of economic activity. The BSP will continue to closely watch developments in bank lending, with a view to ensuring stable prices while providing for the liquidity needs of the economy.