By Jenina P. Ibañez, Reporter  

Bank lending rose 2.7% in September to mark the second straight month of growth, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed. 

Outstanding loans issued by big banks increased 2.7% to P9.25 trillion in September, after growing 1.3% year on year in August. It had previously declined for eight straight months. 

The growth in September is the fastest in 11 months, or since the 1.8% expansion in October 2020. 

Including reverse repurchase agreements, outstanding loans went up 2.7% to P9.54 billion year on year in September.   

Outstanding loans went up 0.6% month on month on a seasonally adjusted basis. 

“The observed increase in outstanding loans of U/KBs reflects the modest recovery in banks’ overall lending attitudes along with improved economic prospects owing to the gradual lifting of pandemic containment measures,” BSP Governor Benjamin E. Diokno said in the report released Friday. 

The government gradually loosened mobility curbs in Metro Manila in September, although the number of coronavirus disease 2019 (COVID-19 infections remained elevated.  

Loans for production activities rose by 4.4% in September from the 3.1% a month before. 

This was supported by expansions in credit disbursed for professional, scientific and technical services (92.7%), information and communications (26.6%), transportation and storage (9.5%), and human health and social work activities (9.2%). 

But loans for production activities was tempered by the decline other sectors, including those for administrative and support services (-23.1%), mining and quarrying (-19.8%), education (-17%), and agriculture, forestry and fishing (-11.9%). 

Consumer loans declined by 7.8% year on year in September compared to the 8.4% contraction in July. Credit to all retail segments fell, led by motor vehicle loans (-15.6%). 

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the quicker pace of COVID-19 vaccinations somewhat improved business sentiment, which led to some uptick in loan or credit demand. 

“For the coming months, bank loans growth could continue to pick up as the country shifts towards smaller scale/granular lockdowns,” he said in an email, referring to the government’s move to implement targeted lockdowns in areas showing a spike in COVID-19 cases.  

Meanwhile, domestic liquidity continued to go up, according to BSP data released on Friday. M3, or the broadest measure of cash in an economy, expanded by 8.2% in September after a 6.9% increase in August. 

On a seasonally adjusted basis, M3 went up 1.1% month on month. 

Domestic claims increased 7.6% in September, faster than the 6.7% seen the previous month. 

Net claims on the central government expanded by 35.4% in September from the 23.5% in August. 

Claims on the private sector, driven by lending to nonfinancial private firms, went up 3.1% from 2.3% in the previous month. 

Net foreign assets (NFA) in peso terms grew 11.3% in September from 9.7% in August. 

“The expansion in the BSP’s NFA position reflected the increase in the country’s gross international reserves relative to the same period a year ago. Meanwhile, the NFA of banks grew as banks’ foreign assets rose on account of higher loans and deposits with nonresident banks,” Mr. Diokno said. 

According to Mr. Ricafort, M3 growth could improve further in the coming months due to increased investment banking transactions in the pipeline in November. 

“All of which could entail some foreign investment inflows and some local banks to invest/deploy some of their excess peso funds/liquidity from the central bank’s deposit facilities as they mature,” he said.