Philippine banks’ loan growth in January slowest in nearly two years

By Katherine K. Chan, Reporter

PHILIPPINE BANKS’ lending growth slowed to a near two-year low in January as outstanding loans continued to expand at a single-digit pace, preliminary central bank data showed.

Based on data released by the Bangko Sentral ng Pilipinas (BSP) late on Monday, universal and commercial banks’ total outstanding loans, net of reverse repurchase agreements, grew by 9.3% to P14.236 trillion in January from P13.02 trillion a year earlier.

This was the slowest pace seen in 23 months or since 8.7% in February 2024.

January’s loan growth was likewise slower than the revised 9.6% in December.

On a seasonally adjusted basis, bank lending grew by 1% month on month.

“The slowest bank loan growth in nearly two years is consistent with the slower economy largely brought about by government underspending especially on infrastructure amid the political noise or anomalous flood control projects since the latter part of 2025 that also weighed down on investments, many of which are financed by loans,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the slowdown in lending was mainly because both banks and borrowers have turned more cautious.

“High interest rates and global uncertainty are making banks more selective, while businesses are delaying expansion and focusing on cash flow,” he said via Viber.

In January, big banks lent out a total of P13.939 trillion to residents, up 9.9% from the P12.689 trillion disbursed in the same month last year. Growth of loans for residents was slower than December’s 10.06%.

Loans for residents’ production activities amounted to nearly P12 trillion in January, up 8.2% from the P11.089 trillion logged a year ago. This accounted for the bulk or 84.3% of outstanding loans during the month.

Lending for electricity, gas, steam and air-conditioning supply rose by 20.3%, followed by transportation and storage (19.1%), real estate activities (9.1%), wholesale and retail trade, repair of motor vehicles and motorcycles (8.3%), financial and insurance activities (5.5%), and information and communication (4.9%).

At the same time, consumer loans to residents, which was 13.6% of the total loans, grew by 21.3% year on year to P1.94 trillion in the first month of 2026 from nearly P1.6 trillion in 2025.

Credit card loans jumped by an annual 27.7% to P1.2 trillion in January from P940.073 billion a year ago. Loans for motor vehicles also rose by 14.9% to P530.285 billion in January from P461.658 billion, while salary-based general purpose consumption loans went up by 5% to P165.724 billion from P157.893 billion a year ago.

Meanwhile, lending for nonresidents reached P296.391 billion in January, down by an annual 10.4% — steeper than the revised 8% decline in December.

“The BSP monitors bank loans because they are a key transmission channel of monetary policy,” the central bank said in a statement.

“Looking ahead, the BSP will ensure that domestic liquidity and bank lending conditions remain consistent with its price and financial stability mandates,” it added.

In the coming months, demand for loans may ease as uncertainty surrounding the ongoing Middle East war could hurt businesses’ profit margins and consumers’ disposable income, Mr. Ricafort said.

Mr. Ravelas also said that risks emerging from costlier oil and market volatility amid the war could push lenders and consumers to be even more wary.

Oil shocks arising from the supply disruption caused by the war in the Middle East have raised inflationary risks for most oil importing countries, including the Philippines. This has fueled talk of central banks tightening monetary policy.

BSP Governor Eli M. Remolona, Jr. has said that an over $100-per-barrel oil price could bring Philippine inflation past 4%, which could prompt them to end their easing cycle and hike rates for the first time in over two years.

“In the near term, lending may stay soft, but if inflation stabilizes and rates ease later on, we could see a gradual pickup — likely starting with working-capital loans rather than aggressive expansion,” Mr. Ravelas said.

MONEY SUPPLY CLIMBS
Separate preliminary BSP data also showed that the economy had P19.711 trillion in liquidity in January, expanding by 8.6% from P18.149 trillion in the same month in 2025.

This was the fastest domestic liquidity (M3) growth seen in about five years or since the 9.5% in February 2021.

Month on month, M3 edged up by 0.8% on a seasonally adjusted basis.

M3 is a measure of the amount of money in the economy that includes currencies in circulation, bank deposits, and other financial assets easily convertible to cash.

Domestic claims, which include those from private and government sectors, stood at P22.297 trillion, up 10% year on year from P20.275 trillion.

This, as increasing loans to nonfinancial private corporations and households boosted claims on the private sector by 10.6% to P14.466 trillion in January from P13.083 trillion last year.

Meanwhile, net claims on the central government climbed by 8.9% to P5.888 trillion in January from P5.406 trillion a year prior due to higher borrowings.

Claims on a sector refer to that sector’s liabilities to depository corporations such as banks and the central bank.

Central bank data also showed that net foreign assets (NFAs) in peso terms amounted to P7.545 trillion in January, climbing by 10.2% from P6.844 trillion a year ago.

Broken down, the central bank’s NFAs were 9.2% higher year on year to P6.623 trillion, while banks’ NFAs jumped by 18.1% to P922.863 billion.

NFAs reflect the difference between depository corporations’ claims and liabilities to nonresidents.