lend me your ear

11.17.2008

Outstanding loans of commercial banks including reverse repurchase agreements or RRPs increased in September by 24.1 percent year-on-year, growing at the same pace as in August. Bank lending net of banks’ RRP placements with the BSP accelerated to 24.8 percent in September from 22.1 percent in August.

Preliminary data for September were obtained from the new system of bank reporting under the Financial Reporting Package (FRP), which replaced the Consolidated Statement of Condition (CSOC) reports. The FRP adopts the detailed classification of the amended 1994 Philippine Standard Industrial

Classification (PSIC) for international comparability. The FRP also classifies lending by production activities (which covers 16 economic sectors) and by household consumption purposes (with three economic categories). Previously, bank reports classified loans into only nine economic sectors.

Loans for production activities drove the expansion, as these grew by 22.4 percent in September compared to 19.8 percent in August. The following production sectors contributed significantly to lending growth: wholesale and retail trade (which grew by 49.4 percent); agriculture, hunting, and forestry (37.8 percent); transportation, storage and communication (82.1 percent); electricity, gas and water (54.4 percent); real estate, renting, and business services (15.4 percent); and manufacturing (8.5 percent).

The growth of consumption loans also accelerated in September, rising by23.4 percent from 20.2 percent in August. Consumption loan growth came mostly from credit card receivables which expanded by 26.3 percent, down slightly from 27.0 percent in August. Auto loans rose by 12.2 percent in September from 10.6 percent in the previous month. The growth of other household loans accelerated to 29.6 percent from 4.6 percent over the same period.

BSP Governor Amando M. Tetangco, Jr. said that the BSP monitors bank lending trends in order to generate an advance indicator on the direction of future economic activity. He noted that data on lending indicate that there is sufficient liquidity in the economy that could support growth despite current tight conditions in global financial markets.