BANK LENDING grew for a fourth straight month in November, as firms became more bullish on the Philippine economy’s recovery.

Outstanding loans issued by big banks increased by 4% year on year to P9.349 trillion in November, based on preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Friday evening.

The pace of growth is quicker than the 3.5% expansion in October and marked the fourth straight month of annual growth in lending. It was also the fastest rate since the 4.7% in August 2020.

Inclusive of reverse repurchase agreements, credit growth stood at 3.9%. Outstanding loans by big banks rose by 0.3% month on month.

“The BSP sees enough scope to continue providing appropriate policy support in order to sustain the recovery in credit activity,” BSP Governor Benjamin E. Diokno said in a statement.

The central bank has kept rates at record lows for the whole of 2021, after slashing rates by a total of 200 basis points in 2020 to support the economy amid the coronavirus pandemic.

Despite the low interest rates, bank lending declined on an annual basis from December 2020 to July 2021 as borrowers and banks became risk averse during the crisis. This also reflected the impact lag of monetary easing.

Borrowings for production activities jumped by 5.3% in November, from 4.9% in October. This was mainly driven by expansion in loans for real estate activities (8%), information and communication (27.2%), financial and insurance activities (9%), manufacturing (6.7%), and transportation and storage (11.4%).

“Outstanding loans of universal and commercial banks continue to gain traction amid businesses’ optimistic economic outlook due to the easing of coronavirus disease 2019 (COVID-19) restrictions and the continued rollout of vaccines,” Mr. Diokno.

For Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, some  likely took advantage of the borrowing conditions ahead of the monetary policy tightening in the United States.

“Faster loan growth was also due to the fact that some borrowers rushed financing requirements in preparation for the widely expected US Federal Reserve decision to accelerate tapering,” Mr. Ricafort said.

On the other hand, there was decline in outstanding loans to other sectors such as agriculture, forestry and fishing (-8.3%), mining and quarrying (-16%), and producing activities of households for own use (-23.8%).

Meanwhile, BSP data showed that outstanding loans for retail borrowers continued to fall by 7.1% in November, although easing from the 7.4% contraction in the prior month.

Both motor vehicle loans (-17.5%) and salary-based credit (-9.5%) declined, while credit card borrowings grew by 2.6%.

The continued decline in household loans reflect banks’ wariness in lending to retail borrowers amid the crisis, according to Asian Institute of Management economist John Paolo R. Rivera said.    

“Business loans are more likely to be approved because the loan will be used to generate income to pay for the loan. Consumer loan is still risky for banks because of the persistent uncertainties in employment and household income,” Mr. Rivera said in a Viber message.

He said banks may be more ready to take on risk from consumption loans once the employment situation becomes more stable “than constantly being threatened by rising alert levels due to the pandemic.”

Metro Manila will be under a tighter Alert Level 3 starting today (Jan. 3) to Jan. 15 amid the rising cases of coronavirus disease 2019.

“Looking ahead, the BSP aims to keep a patient hand on its monetary tools to allow the economic recovery to gain stronger traction, in line with its price and financial stability mandates,” Mr. Diokno said.

In its last policy review in 2021 held on Dec. 16, the Monetary Board kept policy rates steady to support the economy’s nascent recovery.

The BSP will have its first policy review this year on Feb. 17.

As credit growth continued to improve, the domestic liquidity rose by an annual 8.3% to P14.8 trillion in November, the BSP said in a separate statement.

M3 — which is the broadest measure of money supply in an economy — rose 0.5% month on month.

In November, domestic claims rose quicker by 8.1% from a 7.5% growth in October.

Net claims on the central government also increased faster by 23.9% from a revised 21.7% in October due to sustained borrowings by the National Government.

Growth in claims on the private sector likewise quickened to 3% from 2.6% in October.

Net foreign assets expanded a tad quicker by 8.8% in November from 8.7% in the previous month.

“Looking ahead, the BSP will ensure that domestic liquidity conditions continue to provide the necessary support to domestic economic activity amid downside risks to the economic recovery, in line with its price and financial stability objectives,” the central bank said. — Luz Wendy T. Noble