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Bank Lending Continues to Grow in October

12.11.2009

Bank lending net of banks’ reverse repurchase (RRP) placements with the BSP grew by 4.7 percent in October, slower compared to the 5.9 percent expansion in the previous month. Outstanding loans of commercial banks, including RRPs, also grew more modestly at 2.6 percent compared to 6.1 percent in the previous month, to reach P2.2 trillion at end-October 2009. On a month-on-month seasonally-adjusted basis, commercial banks’ lending in October declined by 1.7 percent for loans inclusive of RRPs, and by 0.2 percent for loans net of RRPs. The modest expansion in bank lending reflects reduced demand due to the still weak economic activity.

The growth in consumption loans moderated to 3.9 percent this month from 6.9 percent in the previous month, following the slower growth in auto loans and credit card lending, and further contraction in other types of consumer loans. Meanwhile, loans for production activities expanded year-on-year by 4.2 percent in October, lower than the 5.2 percent growth reported in the previous month, as the expansion of lending to some productive sectors was pulled down by the contraction in other sectors, led by manufacturing.

Loans extended to the following productive sectors, which comprised about 55 percent of total loans, were the major contributors to lending growth in the period: real estate, renting and business services (which grew by 14.0 percent); electricity, gas and water (26.8 percent); transportation, storage & communication (26.7 percent); agriculture, hunting, and forestry (8.8 percent); financial intermediation (19.9 percent); public administration and defense (32.4 percent); other community, social and personal services (8.6 percent); and hotels and restaurants (31.5 percent). Manufacturing loans—which accounted for about 15 percent of total loans—contracted by 19.0 percent, mainly due to the still weak global demand for exports with the sluggish global economic recovery. Nonetheless, the decline in manufacturing loans in October was lower compared to the previous month’s contraction of 20.5 percent. Meanwhile, the contraction in construction loans slightly accelerated to 19.0 percent from 18.3 percent in September. Other sectors which registered declines in lending activity during the month were wholesale and retail trade; mining and quarrying; education; health and social work; and fishing.

BSP Governor Amando M. Tetangco, Jr. affirmed the BSP’s commitment to ensure that liquidity conditions remain supportive of the spending and investment needs of firms and households with a view to promoting economic growth and preserving price stability.

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