LOAN by the big banks in April contracted by its fastest pace since 2004, reflthe impact of tighter lockdowns on lenders and borrowers.
Large banks’ outstanding loans fell 5% to 8.998 billion pesos in April from 9.474 billion pesos a year ago, based on preliminary data released by the Bangko Sentral ng Pilipinas (BSP) Monday.
The decline in bank loans in April was faster than the 4.5% drop in March, and the fifth consecutive month of decline.
Before April, the largest contraction in lending was observed in May 2004, when bank lending fell 4.6%.
Including reverse repurchase agreements, outstanding loans granted by major banks fell 2.9% in April after falling 4.3% a month earlier. Check more in Payday website.
“Bank lending has remained weak as measures to contain the resurgence of COVID-19 (2019 coronavirus disease) cases limited domestic economic activity and continued to dampen market sentiment,” the bank said. central in a press release.
Metro Manila and the adjacent provinces Bulacan, Cavite, Laguna and Rizal were placed under tighter lockdown from late March to April due to a spike in coronavirus infections.
Bank loans are expected to continue to decline as the coming months, as some lockdown restrictions remain in place, Rizal Commercial Banking Corp’s chief economist said. Michael L. Ricafort.
“This would lead to a significant reduction in economic / business activities which could also lead to lower demand for bank loans / credits in response to the reduction in business conditions,” he said in a text message.
Loans to productive activities fell 3.9%, faster than the 3.2% contraction in March. This, while loans to key industries such as wholesale and retail trade and repair of motor vehicles and motorcycles (-10.2%), manufacturing (-9.8%), and financial and business activities insurance (-6.8%) fell during the month.
On the other hand, bank loans to certain sectors increased, in particular those intended for professional, scientific and technical activities (106.9%), real estate activities (2.4%) and human health and social work activities (8 , 5%).
Consumer loans also fell 10.2% in April, more than the 9.9% drop recorded in March. Auto loans (-12.9%) experienced the largest decline, followed by credit cards (-9.6%) and interest-bearing loans (-1%).
Mr Ricafort said the Strategic Transfer of Financial Institutions (FIST) law could help improve banks’ appetite for more credit in the coming months.
“The FIST law would be an option available to banks to offload / sell some of their (bad debt) and other non-performing assets from their balance sheets, thus freeing up more funds and helping to increase their lending activities,” he said. -he declares.
Banks have been risk-averse to guard against a further build-up of bad loans. In March, the industry’s non-performing loan (NPL) ratio stood at 4.21%.
SLOWING LIQUIDITY GROWTH
Meanwhile, money supply growth slowed in April. M3 – the broadest measure of circulating liquidity in an economy – rose 5.1%, following growth of 8.3% in March, the central bank said in a separate statement.
“This largely reflects the slowdown in demand for loans,” Ricafort said.
Domestic claims in April rose 1.8%, much slower than the 5.6% in March. Net claims on the central government also slowed to a growth of 23.6% from 47.4% in March.
Meanwhile, net foreign assets grew slightly faster by 18.3 percent from 18.1 percent in the previous month, supported by the rise in the country’s gross international reserves.
“Going forward, the BSP will remain vigilant to ensure that the overall stance of monetary policy is in line with the BSP’s price and financial stability objectives, while continuing to maintain political support for the efforts of the national government to fight againstffthe effects of the COVID-19 health crisis, ”the central bank said. – LWTNoble