The banking industry’s outstanding loans expanded by 5.9 percent year-on-year to P1.941 trillion as of end-August, the Bangko Sentral ng Pilipinas (BSP) said in a report last Friday.

This is lower compared to the loan growth recorded in July of 8.7 percent. BSP said in a statement that the slower pace of lending growth is associated with the shifting of bank funds away from RRP (reverse repurchase agreements) to SDA (special deposit accounts) placements given the higher yields and safe-haven appeal of the latter.”

But, BSP Governor-in-Charge Nestor A. Espenilla Jr. said that “monetary authorities will continue to monitor and assess credit activity to ensure that monetary conditions remain conducive to growth, while keeping a watchful eye on any upside risks to inflation.”

Including RRPs, bank lending expanded by 3.1 percent year-on-year to P2.103 trillion in August.

BSP said the big banks non-performing loans (NPL) ratio was 3.5 percent, also in August, hardly improving from July’s 3.49 percent ratio. The central bank said the slight month-on-month increase in the NPL ratio was the result of NPLs rising to P83.84 billion from last month’s P82.88 billion.

Preliminary data showed that loans for production activities expanded year-on-year by 5.7 percent in August to P1.738 trillion, lower than the 8.1 percent growth reported in the previous month, as the expansion of lending to some productive sectors was pulled down by the contraction in other sectors led by manufacturing.

In the meantime growth in consumption loans also slowed down to 5.3 percent in August to P160.49 billion from 8.2 percent in the previous month because of the slower growth in auto loans and credit card lending, and the steeper contraction in other types of consumption loans, said the BSP. Auto loans reached P105.21 billion while credit card loans totaled P40.14 billion.

In the meantime, BSP said the industry’s total loan portfolio expanded to P2.397 trillion in the same period.

The real and other properties acquired dropped by 1.04 percent to P138.3 billion in August which translated to a lower level of non-performing assets of P222.14 billion.

The restructured loans to total loan portfolio ratio fell to 1.93 percent from July’s two percent and the same period last year of 2.51 percent ratio. The month-on-month decline in the ratio was fueled by the 2.36 percent reduction in gross restructured loans of P46.80 billion.

In terms of provisioning for bad loans, the BSP said NPL coverage ratio strengthened to 105.31 percent from July’s 104.98 percent.