Loans outstanding of commercial banks (KBs) grew by 6.9 percent year-on-year to P1.590 trillion as of end-May 2005. This was an acceleration from the 4.3 percent year-on-year growth in bank lending registered in April.
KB lending continued to be fueled by loans to financial institutions, real estate and business services sector (FIREBS), and manufacturing. The combined loans to these two sectors comprised more than half of total KB lending. The 17 percent and 9.6 percent year-on-year growth of loans to FIREBS and manufacturing contributed 4.4 percentage points and 2.5 percentage points to growth, respectively. Other sectors that saw growth in KB lending were community, social and personal services (5.4 percent year-on-year); electricity, gas and water (4.0 percent year-on-year); agriculture, fisheries and forestry (3.7 percent year-on-year); and construction (0.7 percent year-on-year). However, lending to the other sectors declined from year-ago levels, but the overall impact on total KB loans was minimal.
In the coming months, KB lending is expected to improve further as banks continue their efforts to improve their asset quality. For its part, the BSP remains focused on helping clean up banks’ balance sheets as well as addressing weaknesses in managing risks and ensuring that supervision standards are elevated to international standards. These measures can help sustain the growth in bank credits. In turn, this would help provide resources to finance productive activities, supportive of the economy’s growth objectives.