BSP: Bank lending at P3T still below full potential
WEDNESDAY, 29 AUGUST 2012 21:15 JUN VALLECERA / REPORTER
BANK loans as a percent of local output or the gross domestic product
(GDP) is a mere fraction of its potential totaling only an estimated P3
trillion for now but has much room to expand, the Bangko Sentral ng
Pilipinas (BSP) said on Wednesday.
Deputy BSP Gov. Nestor A. Espenilla Jr. said this was not even half the
volume of lending activities in peer countries whose so-called
loans-to-GDP ratios are significantly higher.
In acknowledging the low level of bank lending in a country which does
not want for liquidity, Espenilla said the more relevant yardstick was
not lending volumes but the quality of loans disbursed.
"What's important is the quality of lending being done. The BSP monitors
this closely and we are still comfortable at this point," he said.
Espenilla's unease arose from recent developments showing loan
activities consistently falling in recent months to just 14 percent of
the banks' loan portfolio as of latest, sharply down from peak growth of
more than 23 percent in November last year.
According to Expenilla, this much lending growth should still be "quite
reasonable" in an economy that confounded its critics by growing at a
fast clip of 6.4 percent in the first quarter and seen to persist on
this growth path in the second quarter.
"Lending can actually grow faster [and] safely given our banks' modest
leverage and improving risk management. Our credit-to-GDP ratio at less
than 50 percent is still relatively low in relation to comparator
countries," he said.
Espenilla cannot be more right given the nominal 2011 GDP of P10
trillion and bank loans aggregating more or less P3 trillion as of latest.
He found an ally in Aurelio R. Montinola III, President and Chief
Executive Officer at the Bank of the Philippine Islands, who told
reporters neither borrower nor lender should worry too much.
Montinola said bank lending as percent of GDP has grown significantly
higher.
He brushed aside concerns that banks have been reluctant to extend loans
even as the borrowing public has likewise been wary of taking out new
loans given the global economic slowdown and its adverse impact on the
local economy.
"I don't think either of that is true because lending growth is
significantly higher relative to GDP. As mentioned earlier, we don't see
borrowers unable to access the banks and unable to borrow. I think in
the end, the market will find its medium," Montinola said.
So-called production loan growth have fallen from 19.7 percent in
January to 18.4 percent in February, 19.3 percent in March, 19.7 percent
in April and finally to just 14.7 percent in May, the BSP said earlier.
This despite more recent policy adjustments that allowed lending rates
to fall to all-time lows and the availability of peso funds worth P1.7
trillion sitting idle in the vaults of the BSP generating interest
income from the regulator and not much else.
"I don't think we should complain too much. Of course everybody hopes
that gets channeled to lending and other [productive] activities,"
Montinola said.
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