Double-digit loan growth seen; banks refocus on retail lending

MANILA, Philippines - Credit conditions remain favorable, with bank loan growth expected to hit double digits this year, despite the tougher operating environment faced by lenders, the central bank said. This is despite a recent survey by the Bangko Sentral ng Pilipinas (BSP), which showed that businesses perceive access to lending facilities to be tighter this quarter and the next. The credit access index fell to 3%, the lowest since the first quarter of 2007, according to results of the central bank’s quarterly Business Expectations Survey released last Thursday. Deputy Governor Nestor A. Espenilla said banks’ return to the consumer lending business as a main source of profit should boost credit activity. The banking industry reported generally lower income in the first quarter as the prevailing volatility in the global financial market and rising domestic inflation depressed treasury gains. "Credit growth is actually strong. The numbers tend to show that it’s more than 11% year-on-year," Mr. Espenilla told reporters. "The double-digit growth can be sustained, especially if banks are not making as much money in treasury as they used to," he added. Soaring domestic prices have resulted in higher interest rates, which Mr. Espenilla said "may actually be positive for the profitability of banks." He pointed out, however, that if the interest rates go "too high, it may lead down the road to deterioration in credit quality." In February, outstanding loans of commercial banks, thrift banks and rural banks expanded by 9.3% year-on-year. - M.E.I Calderon, BusinessWorld