The Philippines: Bank lending drops for the first time in 14 years in Dec 20

• Philippine bank lending fell for the first time in more than 14 years in Dec 20, reflecting weak consumer and business activity, with the trend expected to persist as coronavirus restrictions remain in place in many parts of the country.
• Outstanding loans of universal and commercial banks, net of reverse repurchase placements, dropped by 0.7% y/y in Dec 20, despite a series of interest rate cuts by the central bank to boost lending.
• This marks the first contraction in bank ending since Sep 06 when it shrank 1.9% y/y, preliminary data from the central bank showed, and some economists expect lending to remain weak given subdued consumer and corporate demand.
• Production loans, comprising 87.4% of the combined loan portfolio of universal and commercial banks, fell 0.4% y/y in Dec 20, while consumer loans rose at a much slower pace of 4.4% y/y compared with Nov 20’s 7.1%.
• On the other hand, loan releases to the wholesale and retail trade, as well as repair of motor vehicles and motorcycles, contracted further by 6.8% to PHP1.11tr for a share of 12.1%, while lending to the manufacturing sector shrank by 5.2% to PHP993.75bn for a share of 10.8%.
• On the other hand, loans for electricity, gas, steam and air-conditioning supply increased by 3.8% to PHP1.04tr and cornered a share of 11.4%.
• Businesses and consumers remain wary despite the partial reopening of the economy in Jun 20.
• Likewise, banks are also wary of extending more loans despite the aggressive rate cuts by the BSP as the industry’s gross non-performing loan (NPL) ratio hit the highest level in more than seven years at 3.81% in end-Nov 20 from 3.72% in Oct 20.

External Link : https://www.reuters.com/article/idUSL4N2K92PB

External Link : https://www.philstar.com/business/2021/02/04/2075145/bank-lending-drops-december