Bank lending contracts for 5th straight month as COVID-19 dampens sentiment

Loans extended by big banks contracted for the fifth consecutive month in April as the COVID-19 pandemic continued to dampen the economic outlook, the central bank reported Monday.

Preliminary data show that outstanding loans of universal and commercial banks, net of reverse repurchase placements (RRPs), declined by 5.0% year-on-year.

This is the fifth straight month that the lending posted a contraction, after March's -4.5%, February's -2.7%, January's -2.4%, and December 2020's -0.7%.

Net of RRPs, bank lending decreased by 4.5% in April while outstanding loans to non-residents fell by 20.2%.

"Bank lending remained weak as measures to contain the resurgence in COVID-19 cases constrained domestic economic activity and continued to dampen market sentiment," the Bangko Sentral ng Pilipinas (BSP) said in an accompanying statement.

Consumer loans for the month fell by 10.2%, mainly due to the continued drop in credit card and motor vehicle loans.

Declines were also noted in the outstanding loans to key industries such as repair of motor vehicles and motorcycles (-10.2%), manufacturing (-9.8%), and financial and insurance activities (-6.8%).

These were partly offset by the growth in loans to professional, scientific, and technical activities (+106.9%), real estate activities (+2.4%), and human health and social work activities (+8.5%).

"Going forward, the BSP's key priority is to preserve policy support to facilitate the recovery of the domestic economy," it said.

"The BSP thus stands prepared to take appropriate measures as necessary to ensure favorable financing conditions in support of domestic economic activity and market sentiment, consistent with its price and financial stability mandate," it added.

The Monetary Board of the BSP earlier this month kept policy rates unchanged at record lows — the overnight reverse repurchase (RRP) facility at 2.00%, the overnight deposit at 1.5%, and the overnight lending facility at 2.5%.—LDF, GMA News