The Philippines: Bank lending shrinks by 4.5% in Mar 21, the most in 17 years

  • Bank lending shrank for the fourth straight month in Mar 21 amid heightened risk aversion in the banking sector and tepid demand from borrowers as the pandemic continued to wreak havoc on the economy, the Bangko Sentral ng Pilipinas said.
  • Data released by the BSP on 10 May 21 showed outstanding loans granted by universal and commercial banks further contracted by 4.5% in Mar 21 from 2.7% in Feb 21, the steepest slump in nearly 17 years or since the 4.6% drop in May 04.
  • “Credit activity remained tepid on banks’ tighter lending standards as a resurgence in coronavirus cases dampened the domestic economic outlook,” the BSP said.
  • The central bank said loans released by big banks amounted to PHP8.98tr in end-Mar 21, PHP251bn lower than the PHP9.4tr recorded in end-Mar 20.
  • Lending for production activities, which make up 87.8% of total loans, shrank by 3.2% y/y.
  • Disbursements to the real estate sector inched up by 1.5% y/y and accounted for 19.5% of total loan disbursements.
  • Likewise, loans disbursed to electricity, gas, steam and air-conditioning supply went up by 2.9% y/y and cornered a share of 11.7%.
  • However, loan releases to the wholesale and retail trade, as well as repair of motor vehicles and motorcycles slumped anew by 9.3% for a share of 11.6%, while lending to the manufacturing sector shrank by 5.5% or 11% of total.
  • The mining and quarrying sector also booked a double-digit 18.6% contraction y/y to, while lending to the agriculture, forestry, and fishing sector fell 9.8%.
  • Furthermore, consumer loans fell by 9.9% y/y in Mar 21 for a share of 9.3% of total loan releases.
  • Credit card loans booked a double-digit 10.4% drop amid the rising default by borrowers affected by the COVID-19 pandemic. The central bank’s Monetary Board has imposed a 24% ceiling on credit card charges since 3 Nov 20 to ease the burden on borrowers.
  • The BSP also noted a 10.7% y/y decline in motor vehicle loans.

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