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Economic Contribution March 01, 2018

Bank lending grows 19.1%; M3 expands to P10.6 trillion

The central bank yesterday reported that the outstanding loans of commercial banks were up 19.1 percent year-on-year in January to R7.13 trillion, a slower pace of growth than 19.4 percent end-2017.

Domestic liquidity, on the other hand, grew faster in the same period or by 12.8 percent compared to December 2017’s 11.9 percent growth. Money supply as measured by M3, amounted to R10.58 trillion.

The Bangko Sentral ng Pilipinas (BSP) in a statement said it will “continue to ensure that the expansion in domestic credit and liquidity proceeds in line with overall economic growth.”

As for managing M3 growth, the central bank maintained that current levels are still “consistent with the BSP’s prevailing outlook for inflation and economic activity.”

“Nevertheless, the BSP will continue to monitor monetary conditions closely to ensure that domestic liquidity conditions remain in line with the BSP’s price and financial stability objectives,” it added.

Gross bank lending inclusive of reverse repurchase placements with the BSP, it increased by 18.3 percent in January from 18.4 percent in December. In peso value, this amounts to R7.39 trillion.

“On a month-on-month seasonally-adjusted basis, commercial bank loans net of RRPs and loans inclusive of RRPs both increased by 1.3 percent,” said the BSP.

Total loans to production activities which accounted for 88.4 percent of overall portfolio went up by 18.1 percent to R6.3 trillion in January. This was lower growth than December’s 18.6 percent.

Real estate activities’ loans were up 18 percent to R1.25 trillion while loans to electricity, gas, steam and airconditioning supply sector increased by 24.8 percent to R829.16 billion.

Loans to wholesale and retail trade, repair of motor vehicles and motorcycles also grew by 13.2 percent to R972 billion, while manufacturing, information and community, and financial and insurance activities’ sector rose by 11.9 percent, 52.6 percent and 15 percent, respectively, to R932.63 billion, R281.17 billion and R590.13 billion.

Household consumption lending however slowed down to 20.3 percent in January from 20.8 percent in December, said the BSP. The total was at R583.18 billion, of which R238.51 billion were credit card receivables, R261.82 billion were motor vehicle loans and R69.97 billion were salary-based general purpose consumption loans. A small portion of “other” loans amounted to R12.87 billion.

“The slower increase in motor vehicle loans, salary-based general purpose loans and other types of household loans offset the faster expansion in credit card loans in January,” noted the BSP.

The central bank in its M3 report said domestic claims went up by 13.5 percent in January compared to 13.7 percent in December, citing lower bank lending expansion.

Net claims on the central government, on the other hand, increased by 3.1 percent from two percent “partly as a result of increased borrowings by the national government.”

The BSP reported that net foreign assets (NFA) in peso terms grew by 4.1 percent year-on-year in January from 2.2 percent in December. “Foreign exchange inflows coming mainly from overseas Filipinos’ remittances, business process outsourcing receipts, and foreign portfolio investments drove the increase in the BSP’s NFA position.” It added that the NFA of banks likewise increased due to higher loans and investments in marketable debt securities.