Big banks’ lending grew by seven percent year-on-year in December 2023, the same growth reported in November of the same year on sustained loan demand despite high borrowing rates, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP on Friday, Feb. 9 also reported that domestic liquidity (M3) which serves as the money supply, grew by 5.9 percent year-on-year in December 2023, much slower than the seven percent M3 growth in November.

“Looking ahead, the BSP will ensure that liquidity and bank lending conditions remain in line with its price and financial stability objectives,” said the BSP.

As for money supply, it said that “domestic liquidity conditions remain consistent with the prevailing stance of monetary policy.”

At the moment, the hawkish BSP is keeping the benchmark rate high at 6.5 percent. With a higher interest rate, there is usually less lending and borrowing, and the assumption is there will be more savings since there will be less spending.

Based on preliminary data, the lending of universal and commercial banks net of reverse repurchase (RRP) placements with the BSP, on a month-on-month seasonally-adjusted basis increased by 0.3 percent in December.

In peso terms, big banks’ outstanding loans totaled P11.693 trillion net of RRPs in December. M3, meantime, totaled P17.365 trillion.

Outstanding loans for production activities rose by 5.5 percent year-on-year in December to P10.111 trillion from 5.7 percent in November.

Lending to key industries such as real estate activities grew by 10.9 percent to P2.426 trillion; wholesale and retail trade, and repair of motor vehicles and motorcycles up by 7.2 percent to P1.36 trillion; and electricity, gas, steam, and airconditioning supply grew by 6.2 percent to P1.272 trillion.

Consumer loans, on the other hand, increased by 23.5 percent year-on-year in December to P1.269 trillion, from 23.6 percent in November.

Consumer loans include credit card loans, motor vehicle loans and salary-based general purpose consumption loans.

The BSP also reported on Feb. 9 the December M3 data which on a month-on-month seasonally-adjusted basis, increased by about 0.4 percent.

Domestic claims, part of M3, in December grew by nine percent year-on-year from 9.7 percent in November. Domestic claims are the sum of net claims on the central government and claims on other sectors.

The BSP said claims on the private sector grew by 8.5 percent from 8.3 percent “with the sustained expansion in bank lending to non-financial private corporations and households.”

In December, net claims on the central government increased by 14.2 percent from 17.3 percent with the decline in the deposits of the National Government with the BSP.

Net foreign assets (NFA) in peso terms rose by 4.3 percent year-on-year in December from 3.2 percent in November.

NFAs as distinguished from domestic accounts, represents the difference between claims on non-residents and liabilities to non-residents of other depository corporations and the BSP.

The BSP’s NFA grew by 7.4 percent while the NFA of banks declined due to lower interbank loans receivable.

Based on the fourth quarter 2023 Senior Bank Loan Officers’ Survey (SLOS), banks’ credit standards were not changed last year for lending to businesses and consumers.

The survey showed that about 88 percent of the 61 surveyed banks did not amend or change their lending standards for loans to enterprises for most of last year, mainly due to banks' lower risk tolerance, deterioration of borrowers' profiles and profitability of banks’ portfolios, along with stricter financial system regulations.

For the first quarter this year, the central bank said banks expect a generally unchanged credit standards for enterprises.

Demand for loans for enterprises remained stable, meanwhile, with 66 percent of surveyed banks saying they expect the same trends in lending. The sentiment is based on bank clients’ more optimistic economic outlook, increased customer inventory financing and accounts receivable needs.