Big banks’ outstanding loans continue to decline by 2.7 percent year-on-year in February, worse than 2.5 percent in January as both banks and borrowers shy away from releasing and availing of loans while COVID-19 cases are still on the high side and delaying economic recovery.

 “Credit activity eased further as demand for loans remained soft,” said the Bangko Sentral ng Pilipinas (BSP) in a statement.

 Liquidity and credit is “ample” by BSP standards. In February, domestic liquidity or money supply (M3) expanded by 9.4 percent year-on-year to P14 trillion. This was more than the growth recorded in January of 8.9 percent.

 On a month-on-month seasonally-adjusted basis, M3 was up by 0.1 percent. Bank lending, also on a month-on-month seasonally-adjusted basis net of reverse repurchase placements or RRPs, also increased by 0.2 percent.

 Total bank lending net of RRPs amounted to P8.936 trillion in February, and with RRPs, totaled P9.206 trillion.

 Outstanding loans to residents, net of RRPs, declined by 2.1 percent to P8.68 trillion while loans to non-residents fell by 20.7 percent to P256.092 billion.

 Data showed that lending to productive sectors went down by 1.3 percent to P7.827 trillion. Consumer loans had a bigger drop of 8.3 percent to P852.495 billion compared to January’s 7.3 percent contraction.

 The BSP said the continued decline in credit card and motor vehicle loans as well as the slowdown in salary-based consumption loans contributed to the decline. Credit card loans fell by 9.6 percent while car loans decreased by 8.8 percent.

Of the productive sectors, lending to wholesale and retail trade and repair of motor vehicles and motorcycles contracted by 6.3 percent in February while financial and insurance activities decreased by 7.5 percent and manufacturing by 5.7 percent.

The BSP however noted the growth in loans real estate activities which rose by 5.1 percent in February. Lending to electricity, gas, steam, and airconditioning supply also increased by 3.6 percent while transportation and storage improved by 7.1 percent.

The central bank said it is prepared to implement “immediate measures as appropriate” to maintain ample liquidity and credit in the financial system.

As for money supply, the BSP said it will “ensure that the overall stance of monetary policy continues to be in line with the BSP’s price and financial stability objectives while remaining supportive of the government’s ongoing initiatives to combat the effects of the pandemic on the economy.”

In February, domestic claims – part of M3 reporting – increased by 5.6 percent year-on-year because of the faster growth in net claims on the central government “even as bank lending to the private sector remained tepid,” said the BSP.

Net claims on the central government grew by 47.1 percent in February partly because sustained borrowings by the National Government.

The BSP also reported that net foreign assets (NFA) in peso terms increased by 21.8 percent year-on-year in February.

The BSP’s NFA position is still hefty with a gross international reserves exceeding $100 billion while the NFA of banks also increased during the month with lower foreign liabilities because of lower bills payables, said the BSP.

Source: Manila Bulletin (