Bank lending to grow as more firms borrow – BSP

Bank lending would grow by 9 percent and 10 percent in the second half of the year fueled by an expanding gross domestic product, the Bangko Sentral said, noting that the GDP numbers in the first half were encouraging companies to finance expansion programs. More companies would borrow more for expansion programs after the country's domestic output posted a surprising growth of 7.9 percent in the second quarter of the year from 1.2 percent in the same period last year, BSP Gov. Amando Tetancgo Jr. said over the weekend. "It is hard to say if it will grow in double digit levels but maybe at about the same pace of about 9 to 10 percent," the BSP chief said. Bank lending grew at a faster pace of 9.6 percent in June from 8.1 percent in May after the GDP surged by 7.3 percent in the first quarter of the year from 0.5 percent from a year earlier, central bank data showed. Total outstanding loans of banks, excluding reverse repurchase placements with the BSP, amounted to P2.18 trillion as of end-June or P191 billion more than the P1.989 trillion registered at the end of June 2009. Production activities accounted for about four-fifths of the total loan portfolio of commercial banks, and loans by individuals increased on credit card purchases and auto loans, the BSP data also showed. Loans for production activities accelerated by 9.3 percent to P1.956 trillion as of June 30, P1.788 trillion as the end of June last year. Loans for household consumption increased by 13 percent to P180.94 billion from P159.79 billion in the same comparable period. Auto loans surged 33.8 percent to P49.81 billion and credit card loans went up by 8.4 percent to P113.7 billion. Tetangco said that bank lending would remain strong for both corporate and household clients in the second half of the year, with corporate borrowers taking advantage of better yields. "Companies are not only looking at bank loans that they are tapping, they [are also tapping] the bond and equities market to raise funds. You have better indication that there is quality improvement in the financial markets, [as] there are more options now open to corporates and other borrowers," he said. The BSP's Senior Bank Loan Officers' Survey in the second quarter of 2010 showed that there was a tightening of credit standards for households loans as the risk tolerance of banks for individual borrowers – credit card, auto, and personal or salary – grew thinner. Data showed that 23.1 percent of the respondent banks have tightened their credit standards for loans to households. About 40 percent tightened credit standards for credit card loans, 30.8 percent imposed stricter standards for personal or salary loans, 20 percent tightened on housing loans, and 15.4 percent on auto loans. About 6.7 percent of the respondents said they have tightened collateral requirements and loan covenants for housing loans. The survey showed that overall credit standards for enterprises and households remained unchanged in the second quarter from the first quarter of the year, the fifth consecutive quarter that credit standards were unchanged. —VS, GMANews.TV