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Lower IBL, reverse-repo deals slow down lending to P2.2T

by Jun Vallecera /BMirror/11.206.08

THE big boys of the banking system, or the so-called regular and the expanded license or universal banks, reported a diminution of their total loan portfolio in September to only P2.237 trillion from P2.35 trillion in August, the first reported for the year. The decline in loans “stemmed from lower interbank loans [IBL] and reverse-repurchase transactions during the month,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said in a statement. This is the market that permits banks to obtain from each other the short-term liquidity they need to meet such commitments as depositor withdrawals or deposit-reserve levels, and this, therefore, reflects the regard they hold counterparty banks of their creditworthiness. Since the subprime-credit problems in the US transformed into a financial crisis of global proportions, Tetangco and the rest of the policymaking Monetary Board have been on the lookout for signs of stresses in the domestic financial landscape. Privately owned banks like the Bank of the Philippine Islands and the Metropolitan Bank and Trust Co. have been quick to point out they continue to lend to regular clients, and this is being validated by BSP data showing sustained bank-lending growth just a shade below 24 percent in August. But some of the more candid private bank officials acknowledge that while banks seem to continue lending as before, a de facto “tightening” has, in fact, started in the form of more stringent documentation requirements. In any case, the decline in aggregate loans in September by an almost imperceptible rate of 0.1 percent could ultimately prove significant given that loan data at the BSP is at least three months old. In August the banks’ total loan portfolio grew by 1.5 percent, according to BSP data. Because the BSP is forced to deal with bank data at least one quarter old, it is often forced to be preemptive. Tetangco said this was the reason the BSP flooded the banking system with tens of billions of pesos worth of extra liquidity when it doubled the budget for rediscounting purposes to P40 billion and lowered the reserve requirement by two percentage points, which effectively freed another P60 billion from the vaults of the central bank and into the private banks for lending. In the same report, Tetangco said the banks also reported a slightly higher incidence of soured or nonperforming loans (NPLs) of 4.04 percent in September, from 3.90 percent in August. “The month-on-month increase in the NPL ratio took place as the 2.54-percent hike in NPLs was accompanied by the 0.96-percent contraction in total loan portfolio,” Tetangco said. The banks’ NPLs rose to P94 billion in September from only P91.67 billion in August even as the total loan portfolio retreated to just P2.327 trillion from P2.350 trillion, he said.