Loans outstanding of commercial banks (KBs) continued their steady rise, growing by 3.3 percent year-on-year to about P1.557 trillion as of end-August 2005. However, this was a slowdown from the 4.0 percent year-on-year increase in bank lending registered in the previous month (Table 1). Compared to last month’s level, however, KB loans grew by 0.8 percent, a reversal from the –3.0 percent month-on-month deceleration registered in July (Table 2).
Loans to financial institutions, real estate and business services sector or FIREBS remained the main driver of the growth in commercial bank lending, contributing more than half (2.52 percentage points) of the 3.3 percent growth of total lending. Sectors that also saw growth in lending were the community, social & personal services sector (1.0 percentage point), transportation, storage & communication (0.49 percentage point), agriculture, fisheries & forestry (0.45 percentage point) and manufacturing activities (0.33 percentage point).
The strong lending to the FIREBS sector may be attributed to the growth in loans to the Financial Intermediation sector, as only minimal growth was registered in loans classified as Real Estate Renting and Business Services. Meanwhile, loans classified as Private Households with Employed Persons fueled the growth in Community, Social & Personal Services.
On the other hand, loans to the following sectors contracted from year-ago levels: wholesale & retail trade (0.68 percentage point); construction (0.17 percentage point); electricity, gas & water and mining and quarrying (both 0.13 percentage point).
The moderate expansion in bank lending for the months of July and August could be indicative of moderate growth in real sector activity for the third quarter. As BSP pursues its commitment to help banks offload their non-performing loans and clean up their balance sheets, bank lending should pick up as asset quality improves, leading to more robust domestic savings mobilization and sustainable economic growth.