By Luisa Maria Jacinta C. Jocson, Reporter

BANK LENDING continued to grow in September, hitting its fastest pace in nearly two years, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).

Outstanding loans of universal and commercial banks jumped by 11% year on year to P12.4 trillion in September from P11.17 trillion a year ago.

This was also the fastest growth since the 13.7% posted in December 2022.

Month on month, big banks’ outstanding loans picked up by 0.8% on a seasonally adjusted basis.

BSP data showed outstanding loans to residents rose by 11.3% in September, faster than the 10.9% a month ago.

On the other hand, loans to nonresidents dipped by 0.3% during the month, a reversal from the 1.5% growth logged in August.

Outstanding loans for production activities, which accounted for the majority (85.5%) of overall lending, grew by 9.8% to P10.6 trillion. This was faster than 9.4% in the previous month.

“This growth was largely driven by bank lending to key industries such as real estate activities (14.2%); wholesale and retail trade, repair of motor vehicles and motorcycles (12%); manufacturing (10.6%); and electricity, gas, steam & air-conditioning supply (7.5%).”

Meanwhile, the expansion in consumer loans to residents slowed to 23.4% in September from 23.7% a month prior, though the central bank noted the “sustained growth in credit card loans.”

Data from the BSP showed credit card loan growth quickened to 27.7% in September from 27.4% in August.

However, slower loan growth was seen in motor vehicles (18.6% from 19.3%) and salary-based general purpose consumption loans (15.2% from 16.4%).

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the quicker loan growth can be attributed to the start of the central bank’s rate-cutting cycle.

The BSP began its easing cycle in August with a 25-basis-point (bp) rate cut, its first reduction since November 2020. Since then, the central bank has cut borrowing costs by a total of 50 bps, bringing the key rate to 6%.

The Monetary Board’s last meeting this year is scheduled for Dec. 19. BSP Governor Eli M. Remolona, Jr. has signaled the possibility of another 25-bp cut before the year ends.

For the coming months, Mr. Ricafort said easing inflation “could justify further local policy rates that would lead to lower financing costs, but with some lag effects, going forward.”

Headline inflation quickened to 2.3% in October from 1.9% in September but slowed from 4.9% a year ago.

Inflation averaged 3.3% in the 10-month period, still within the BSP’s 2-4% target but above the 3.1% full-year forecast.

MONEY SUPPLYMeanwhile, domestic liquidity (M3) rose by 5.4% in September. This was lightly slower than 5.5% in August.

M3 — which is considered as the broadest measure of liquidity in an economy — jumped to P17.6 trillion as of September from P16.7 trillion a year earlier.

On a seasonally adjusted basis, M3 inched up by about 0.7% month on month.

Data from the BSP showed domestic claims increased by 9.6% in September, easing from 10% a month ago.

“Claims on the private sector grew by 12.4% in September from 11.9% in August with the sustained expansion in bank lending to nonfinancial private corporations and households,” the BSP said.

Meanwhile, the annual growth in net claims on the central government slowed to 6.6% in September from 8.5% in the previous month.

The central bank said this was amid the “increase in the National Government’s (NG) deposits with the BSP tempered the increase in NG borrowings.”

Meanwhile, net foreign assets (NFA) in peso terms jumped by 8.6% during the month from 2.4% in the month earlier.

“The BSP’s NFA grew by 14.2%, reflecting the increase in gross international reserves. Meanwhile, the NFA of banks contracted, largely on account of higher bills payable,” it added.

Mr. Ricafort said the slower M3 growth was due to “peso liquidity siphoning measures through the main liquidity management tools as part of the consistent monetary policy efforts to better manage inflation and ensure the central bank’s price stability mandate.”

Moving forward, he said that domestic liquidity could pick up following the cut in banks’ reserve requirement ratios (RRR).

Effective Oct. 25, the BSP reduced the RRR for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 250 bps to 7% from 9.5%.

Mr. Remolona has also said the BSP is eyeing to slash big lenders’ reserve requirements to as low as zero before his term ends in 2029.