PHL’s Dec. loan growth steady amid high rates

CONSUMER LOANS to residents went up by 23.6% to P1.27 trillion from a year ago — UNSPLASH

By Keisha B. Ta-asan, Reporter

BANK LENDING GROWTH was steady in December amid elevated borrowing costs, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Outstanding loans issued by universal and commercial banks rose by 7% to P11.701 trillion from P10.931 trillion a year ago. The December growth rate was unchanged from November, the slowest in three months.

Big banks’ outstanding loans increased by 2.6% month on month.

“While the 7% growth in bank lending for December 2023 suggests stability, the slowdown compared with previous months hints at potential influences like elevated interest rates and seasonality,” Robert Dan J. Roces, chief economist at Security Bank Corp., said in a Viber message.

Credit growth slowed for the most part last year amid the central bank’s aggressive rate hikes.

The BSP kept its benchmark interest rate unchanged at a 16-year high of 6.5% at its December meeting. This was after it hiked borrowing costs by 450 basis points from May 2022 to October 2023 to tame inflation.

BSP data showed outstanding loans to residents expanded by 7.3% to P11.389 trillion from a year earlier, slower than 7.4% in November.

Borrowings for productive activities rose by 5.5% to P10.12 trillion, fueled by a 10.8% rise in loans for real estate activities to P2.42 trillion. Loans to the manufacturing sector increased by 1.2% to P1.27 trillion.

Meanwhile, consumer loans to residents went up by 23.6% to P1.27 trillion from a year ago, driven by increases in credit card loans (30%), motor vehicle loans (16.6%) and salary loans for general consumption (9.4%). Outstanding loans to nonresidents grew by 2.9% to P312.106 billion.

“Looking ahead of 2024, a rebound is likely if sentiment improves on the back of policy rate cuts, but cautious lending and targeted approaches are also likely,” Mr. Roces said.

In January, BSP Governor Eli M. Remolona, Jr. said they might cut borrowing costs this year, but this is unlikely to happen in the first half due to lingering risks to inflation.

Inflation slowed to 2.8% in January from 3.9% in December and 8.7% a year ago, the slowest in more than three years. It was also the second straight month that inflation was within the BSP’s 2-4% target.

The central bank expects inflation to ease to 3.7% this year and to 3.2% in 2025.