BANK LENDING growth was at a two-year high in May as economic activity continued to recover and as borrowers secured financing amid rising interest rates, with liquidity also sustaining its expansion.

Data from the Bangko Sentral ng Pilipinas (BSP) released on Thursday showed outstanding loans by big banks, net of reverse repurchase (RRP) placements with the central bank, rose by 10.7% in May to P9.97 trillion in the same month last year.

This was the fastest growth in lending seen in 24 months or since the 11.2% expansion logged in May 2020.

On a month-on-month seasonally adjusted basis, lending net of RRP placements with the BSP inched up by 1%.

Meanwhile, including RRPs, bank lending grew by 10.4% in May, faster than the previous month’s 9.8%.

Outstanding loans to residents net of RRPs grew by 10.6% in May from 10% in April.

Specifically, borrowings for production activities jumped by 10.8% to P8.79 trillion in May, fueled by an expansion in loans for information and communication (27.1%); real estate activities (16.4%); manufacturing (16%); construction (12.3%) and wholesale and retail trade, repair of motor vehicles and motorcycles (6.2%).

Consumer loans to residents also rose by 8.5% to P890.59 billion, faster than the 6.7% growth seen in April, amid an annual increase in credit card loans (17.7%) and salary-based general purpose consumption loans (6.3%). Meanwhile,  motor vehicle loans dropped by 1.9%.

On the other hand, outstanding loans to non-residents expanded at a slower rate of 12.5% in May from 13.5% in the previous month.

“With the ongoing normalization of its monetary policy settings, the BSP will continue to ensure that the expansion in credit and liquidity proceeds in line with the outlook for inflation and economic growth while remaining consistent with the BSP’s price and financial stability objectives,” the central bank said.

“Loan growth again posted a positive year-on-year growth for the 10th consecutive month and picked up for the 13th straight month as the economy reopened further towards greater normalcy,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail.

“Faster loan growth also due to the fact that some borrowers rushed financing activities/requirements in view of the increase in long-term interest rates/borrowing costs locally and globally amid elevated inflation,” Mr. Ricafort added.

The BSP last week raised benchmark interest rates by 25 basis points for a second straight meeting to cool rising prices. At that meeting, it raised its average inflation forecast for this year to 5% from 4.6% previously, well above its 2-4% target.

The central bank sees headline inflation picking up further and settling within the 5.7-6.5% range in June. Inflation stood at 5.4% in May, the fastest in three and a half years.

As lending growth continued to pick up, M3 — the broadest measure of liquidity in an economy — expanded by 6.9% to P15.3 trillion in May, the BSP said in a separate statement on Thursday. This was slower than the revised 7.2% growth in March.

On a month-on-month seasonally-adjusted basis, M3 was broadly unchanged, the BSP said.

“Domestic liquidity dynamics remain broadly in line with the BSP’s prevailing outlook for inflation and economic activity,” the central bank said.

Domestic claims rose by 8.9% in May, slower than the revised 9.1% in April. Claims on the private sector grew by 7.5% in May from 6.5% in April with increased bank lending to nonfinancial private corporations and households, while net claims on the central government rose by 15.3% in May from 18.3% in April on the sustained borrowings by the National Government.

Net foreign assets (NFA) in peso terms rose by 3.4% in May from 5.2% the prior month.

“The slower expansion in the BSP’s NFA position reflected the decline in gross international reserves relative to the same period a year ago. Meanwhile, the NFA of banks continued to expand, albeit at a slower pace, on account of higher investments in marketable debt securities,” the central bank said. — K.B. Ta-asan