Liquidity up 14.5% to P10 trillion; bank lending rose 21.1% in Sept.

Posted on Nov 03, 2017

The money supply expanded by 14.5 percent year-on-year in September to P10.1 trillion compared to 15.4 percent in August, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP noted that the pace of M3 growth is consistent with their inflation path projection and assures that domestic liquidity expansion will not be inflationary.  On a monthly, seasonally-adjusted growth, domestic liquidity or M3 went up by 0.7 percent.

Banks’ outstanding loans in September rose by 21.1 percent year-on-year to P6.76 trillion compared to 20.4 percent in August. On a monthly basis, it increased by 1.8 percent.

Including reverse repurchase placements (RRP) with the BSP, bank lending went up by 20.1 percent to P7 trillion, which was a faster pace of growth than the previous month’s 17.9 percent. Month-on-month, lending gross of RRPs increased by 2.9 percent.

BSP Governor Nestor A. Espenilla Jr. said they continue to see stability and sustained growth in the financial sector. “Domestic liquidity conditions remains ample to finance the requirements of a growing economy. Bank lending is upbeat and loans continue to flow into the country’s productive sectors,” he said.

Espenilla also said that the banking system “has a robust ability” to supply credit support to the economy which he said was “the result of a long and systematic reform process, boldly implemented since the Asian Financial Crisis.”

“These reforms include asset cleanup, industry consolidation, continuing enhancements of corporate governance and risk management standards, and strengthening of compliance and enforcement frameworks,” he told members of the European Chamber of Commerce of the Philippines last week. “We likewise pursued liberalization of foreign bank entry and rationalization of branching guidelines in order to promote healthy competition, resulting in greater market penetration and more efficient delivery of financial services.”

Under M3 data, domestic claims grew by 16.1 percent in September, lower than the 16.9-percent increase in August. The BSP said this was because net claims on the government slowed to 10 percent during the period. However, credit to the private sector continued to expand at a robust pace due to sustained demand for credit, even as lending to households appears to have slowed, said the BSP.

The BSP’s net foreign assets (NFA) decreased in September with a lower gross international reserves but banks’ NFA rose on account of the growth in banks’ foreign assets “as a result of higher loans and investments in marketable debt securities.”

As for bank lending, 88.8 percent of the total are loans for production activities net of RRP.

Loans for production by economic activity went up by 20.7 percent year-on-year to P6 trillion in September. The big borrowers were these sectors: real estate activities with loans which grew by 16.8 percent; electricity, gas, steam and air conditioning supply (24.1 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (16.7 percent); financial and insurance activities (20.4 percent); other community, social and personal activities (174.9 percent); manufacturing (10.3 percent); and, information and communication (38.8 percent).

Lee Chipongian | Business for Manila Bulletin