Bank Lending Hits 2-Year High BSP Reports Growth in December

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Bank Lending Hits 2-Year High BSP Reports Growth in December

The Bangko Sentral ng Pilipinas (BSP) has announced a significant surge in bank lending, with outstanding loans growing by 12.2% year-on-year and 1.4% month-over-month in December. This marks the highest growth rate since December 2022's 13.7%.

Bank Lending on the Rise A Closer Look

According to the BSP, the growth in bank lending can be attributed to sustained expansion in loans for production activities, particularly in wholesale and retail trade, electricity, gas, steam, and air-conditioning supply, manufacturing, financial and insurance activities, and construction. Additionally, consumer loans to residents saw a notable increase, driven by an uptick in credit card loans, salary-based general purpose consumption loans, and motor vehicle loans.

M3 Growth Remains Steady

Meanwhile, domestic liquidity (M3) grew by 7.7% year-on-year and 0.2% month-over-month to P18.8 trillion. This growth was largely driven by an increase in bank lending to non-financial private corporations and households.

Breaking Down the Numbers A Deeper Dive

Outstanding loans to residents net of reverse repurchase (RRP) placements with the BSP grew by 12.4% year-on-year, while those granted to non-residents rose by 5.7%. Loans for production activities expanded by 10.8%, driven largely by growth in wholesale and retail trade, electricity, gas, steam, and air-conditioning supply, manufacturing, financial and insurance activities, and construction.

Expert Insights What's Behind the Growth

According to Rizal Commercial Banking Corp.'s chief economist Michael Ricafort, the continued growth in bank lending can be attributed to the easing of the policy rate and an improving inflation outlook. He notes that improved business and economic conditions, particularly with regards to employment data, have also contributed to the pickup in loan growth.

Looking Ahead A Forecast

For the coming months, Ricafort predicts an easing trend in headline inflation, which could justify more local policy rate cuts later on. This, he believes, would help spur greater demand for loans due to lower borrowing costs.

Conclusion The Bottom Line

The BSP's report highlights a significant uptick in bank lending and M3 growth in December. As the economy continues to recover, it will be interesting to see how these trends unfold in the coming months. With experts predicting an easing trend in inflation and lower borrowing costs on the horizon, it's possible that we may see even greater demand for loans.

Keyword Highlights

Bank lending
BSP
M3 growth
Loan growth
Inflation outlook
Policy rate
Economic recovery

Edward Lance Arellano Lorilla

CEO / Co-Founder

Enjoy the little things in life. For one day, you may look back and realize they were the big things. Many of life's failures are people who did not realize how close they were to success when they gave up.