Commercial banks’ (KB’s) loans outstanding rose further by 3.9 percent year-on-year to P1.47 trillion as of end-September 2003. This rate of growth is slightly faster than the 3.8 percent annual increase recorded in the previous month. The September increase in bank lending marked the 13th month of steady expansion.
The rise in total outstanding KB loans in September can be attributed largely to the significant upturn in the growth of KB loans to the manufacturing sector by 7.3 percent year-on-year in September after declining by 2.0 percent in the previous month. Bank lending to the manufacturing sector accounted for 24.6 percent of total KB loans in September. The expansion in KB loans to the following sectors contributed to the steady growth in bank credits: the agriculture, fisheries and forestry sector and community, social and personal services sector by 9.6 percent each; the financial institutions, real estate and business services sector, by 2.8 percent; and transportation, storage and communication sector, by 1.1 percent. Altogether, these sectors accounted for more than three-fourths of total outstanding KB loans in September.
Improved bank lending activities have been accompanied by the observed pick-up in the manufacturing sector, as reflected in the continued expansion in the sector’s volume of production index (VOPI), which accelerated by 7.0 percent year-on-year in August from 4.5 percent in the previous month. Sustained utilization of plant capacity at 78.4 percent in September 2003 as against 74.3 percent in the previous year, helped boost bank financing in manufacturing.
The steady improvement in banks’ asset quality provided fresh incentives for banks to reinvigorate their lending windows. The ratio of non-performing loans to total loans of KBs fell further to 14.96 percent in August 2003 from 15.38 percent in the previous month and 17.58 percent in August 2002.
Going forward, the anticipated growth of consumption and business activities towards the end of the year for the holiday season, coupled with the prospects for recovery in external market conditions are expected to underpin a stronger credit demand. Given this outlook, the monetary policy stance of the BSP shall continue to provide an appropriately supportive environment to help ensure a sustainable economic growth. At the same time, the BSP will continue to watch carefully the evolving financial and economic conditions so as to guard against any potential risk to price stability.