Bank lending growth hit a 20-month high in August

Bank lending growth hit a 20-month high in August, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Outstanding loans of universal and commercial banks rose by 10.7% year on year to P12.25 trillion in August from P11.07 trillion a year ago.

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

On a seasonally adjusted basis, big banks’ outstanding loans inched up by 0.8% month on month. Bank lending grew by 10.4% in July.

Central bank data showed outstanding loans to residents picked up by 10.9% in August from 10.4% a month earlier. On the other hand, the growth of loans to nonresidents sharply slowed to 1.5% from 9.2% in July.

Loans for production activities climbed by 9.4% year on year to P10.47 trillion in August from P9.58 trillion a year ago. It was also faster than the 8.8% clip in July.

“This growth was largely driven by loans to key industries such as real estate activities (13.2%); wholesale and retail trade, repair of motor vehicles and motorcycles (10.7%); manufacturing (9.8%); transportation and storage (23.4%); electricity, gas, steam & air-conditioning supply (7%),” the BSP said.

Double-digit increases were also seen in loans for water supply, sewerage, waste management and remediation activities (44.9%); professional, scientific and technical services (22%); and mining and quarrying (21.7%).

Meanwhile, the growth in consumer loans to residents eased to 23.7% in August from 24.3% a month prior.

This as slower loan growth was recorded in credit cards (27.4% in August from 28.2% in July), motor vehicles (19.3% from 19.9%), and salary-based general purpose consumption loans (16.4% from 16.5%).

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the jump in lending growth was due to the BSP’s rate cut in August, its first policy reduction in close to four years.

The central bank in August reduced the target reverse repurchase (RRP) rate by 25 basis points (bps) to 6.25% from the over 17-year high of 6.5%.

The Monetary Board has two remaining meetings this year, on Oct. 16 and Dec. 19. BSP Governor Eli M. Remolona, Jr. has signaled the possibility of cutting by 25 bps at the next two meetings.

Easing inflation and further rate cuts would also “help spur greater demand for loans or credit due to lower borrowing costs,” Mr. Ricafort added.

Headline inflation eased to 1.9% in September from 3.3% in August and 6.1% a year ago. This was also its slowest print in over four years or since the 1.6% print in May 2020.

MONEY SUPPLY

Meanwhile, separate BSP data showed that domestic liquidity (M3) rose by 5.5% in August, slower than the 7.3% posted a month ago.

M3 — which is considered as the broadest measure of liquidity in an economy — increased to P17.4 trillion in August from P16.5 trillion a year earlier. Month on month, M3 slipped by 0.1%.

Domestic claims jumped by 10% in August, slower than the 11.4% expansion in July.

“Claims on the private sector grew by 11.9% in August from 12% in July (revised), driven by sustained expansion in bank lending to nonfinancial private corporations and households,” the BSP said.

“Net claims on the central government increased by 8.5% from 14.1% in the previous month (revised), due to continued borrowings by the National Government,” it added.

Central bank data showed net foreign assets (NFA) in peso terms went up by 2.4% year on year in August, much slower than 11.2% in the previous month.

“The BSP’s NFA grew by 7.7%, while the NFA of banks contracted, largely due to higher bills and bonds payable.”

Mr. Ricafort said that domestic liquidity growth could pick up after the latest cut in banks’ reserve requirement ratio (RRR).

The central bank last month said it will cut big banks’ RRR to 7% from 9.5% effective on Oct. 25.

Mr. Remolona has said that they are looking to reduce the ratio to zero within his term, which ends in 2029.

“Any further RRR cuts, which add more peso liquidity in the financial system, would be gradual in the coming years,” Mr. Ricafort added.

BAD LOANS

Meanwhile, separate BSP data showed the banking industry’s gross nonperforming loan (NPL) ratio continued to rise in August, hitting a fresh two-year high.

Preliminary data from the BSP showed the banking industry’s gross NPL ratio went up to 3.59% in August from 3.58% in July and 3.41% a year ago.

This was also the highest bad loan ratio in 26 months or since 3.6% in June 2022.

Bad loans inched up by 0.9% to P512.7 billion in August from P508.1 billion in July. Year on year, it rose by 15.8% from P442.6 billion.

Loans are considered nonperforming once they remain unpaid for at least 90 days after the due date. These are deemed as risk assets since borrowers are unlikely to pay.

In August, past due loans were up by 0.9% to P631.4 billion from P625.7 billion in July and by 19.6% from P527.9 billion a year ago.

This brought the past due ratio to 4.42% in August, higher than 4.4% in July and 4.15% a year earlier.

Restructured loans went up by 0.7% to P293.2 billion in August from P291.1 billion a month prior. Year on year, it declined by 4.2% from P306 billion.

Restructured loans accounted for 2.05% of the industry’s total loan portfolio, steady from a month ago but lower than 2.36% last year.

Banks’ loan loss reserves increased by 0.7% to P482.5 billion from P479.2 billion a month ago. It also rose by 5.8% from P456 billion year on year.

This brought the loan loss reserve ratio to 3.37%, steady from July but lower than 3.52% in August 2023.

Lenders’ NPL coverage ratio, which gauges the allowance for potential losses due to bad loans, slipped to 94.11% in August from 94.32% in July and 103.02% a year ago.

Source: Business World

The Philippines' business environment needs improvements

The Philippines' business improvement has scope for improvements based on the results of the World Bank's inaugural Business Ready (B-Ready) report.

The country's scores across the three pillars and 10 topics covered by the report ranged as high as the first, or top, quintile and as low as the fifth.

Overall, the B-Ready report assesses a country's "business environment by focusing on the regulatory framework and the provision of related public services directed at firms and markets, as well as the efficiency with which firms can comply with regulations and access public services," the World Bank said.

The 10 topics, meanwhile, "correspond to various stages of the life cycle of a firm and its participation in the market while opening, operating (or expanding) and closing (or reorganizing) a business."

Economies in the top quintile "demonstrate the highest performance," the World Bank said, while those in the second "have above-average scores ... but also show potential for improvements."

Third quintile members, meanwhile, "exhibit a mix of strengths and weaknesses," those in the fourth "grapple with a challenging business environment," and the bottom quintile comprise economies that "face significant challenges."

The Anti-Red Tape Authority (ARTA) said it welcomed the Philippines' "inclusion in the top 40 percent." The report, however, did not present an overall ranking of the 50 economies studied.

The World Bank instead divided countries into five equal groupings, or quintiles, based on their scores in terms of the three pillars and topics.

The Philippines posted its highest score of 70.68, in a scale of zero to 100, in the regulatory framework pillar, enough to put it in the second quintile or 16th out of the 50 economies.

It was in the middle of the pack, or the third quintile, in the public services pillar with a score of 50.80 for 24th.

The country was 36th in terms of operational efficiency, scoring 57.95, which placed it in the fourth quintile.

"Economies of varying income levels can adopt strong regulatory frameworks," the World Bank said, noting that while high-income countries dominated this pillar (Hungary was 1st), it also included a lower-middle-income economy such as the Philippines.

As for public services, "high-income economies tend to provide higher quality public services to support businesses, but all income levels are represented across top quintiles," it added.

Estonia topped this category.

With regard to the third pillar, where Singapore came first, "economies across all income levels can facilitate operational efficiency for firms."

By topic, meanwhile, the Philippines was in the first quintile (6th) in terms of labor, in the second with regard to international trade (17th); and in the bottom fifth in terms of business entry (42nd).

It was in the third quintile for the remaining seven topics: business location (30th), utility services (23rd), financial services (29th), taxation (22nd), dispute resolution (21st), market competition (28th) and business insolvency (29th).

The ARTA said that the Philippines' 16th place in the regulatory framework pillar underscored progress in improving the country's business environment.

This, it added, showed the government's success in "establishing clear and effective rules and regulations that support business operations from startup to closure."

As for the public services and operational showings, the ARTA said that it acknowledged the "need for further improvement."

With regard to the topic results, it said that the Philippines posted a "strong performance" in the areas of labor, international trade and utility services.

"It highlights significant advancements made in improving labor conditions, digitalizing trade processes and providing transparent utility services, it added.

The key areas for improvement, meanwhile, were said to be business entry, business location, market competition and business insolvency.

"ARTA is confident that the country's ranking will continue to improve with the full implementation of the government's efforts that are designed to enhance the delivery of government services," the Office of the President-attached agency said.

"We recognize the need for a whole-of-nation approach that underscores the significance of coordinated and harmonized alignment of relevant service delivery from the government to the stakeholders."

The B-Ready report, it also said, "may not yet fully capture the impact of the government's recent initiatives, [but] we are optimistic about the continued improvements in the country's business environment moving forward."

The World Bank said that the B-Ready report was still being refined in terms of process and methodology. Next year will see coverage expand to 112 economies, while the 2026 list will grow to 184.

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Source: Manila Times

August unemployment rate drops to 4%

An influx of women workers led to a drop in the jobless rate in August, the chief of the Philippine Statistics Authority (PSA) said.

Unemployment fell to 4.0 percent from 4.7 percent and 4.4 percent, respectively, a month and year earlier, the PSA reported on Tuesday.

This was equivalent to 2.07 million Filipinos without jobs, 310,000 less than July's 2.38 million and August 2023's 2.22 million.

"One major factor was that a lot of women entered the labor force ... and a substantial number of them were absorbed," National Statistician Claire Dennis Mapa said.

"We have more female workers joining the labor force," he noted.

Mapa said that about 1.04 million female workers joined the labor force and about 1.03 million had found jobs.

The underemployment rate, which counts those looking for more work or an extra job, also improved to 11.2 percent in August from July's 12.1 percent. It was also lower than the year-earlier 11.7 percent.

The number of the underemployed was estimated to be 5.48 million.

The labor force participation rate (LFPR) — a measure of the number of working-age Filipinos who are actively engaged in the labor market — improved to 64.8 percent from 63.5 percent in July and August 2023's 64.7 percent.

This was equivalent to 50.29 million individuals ages15 years old and over who were in the labor force.

Employment rose to 96.0 percent, higher than the 95.3 percent recorded in the previous month and the year-earlier 95.6 percent.

The number of individuals with jobs reached 49.15 million, up from July's 47.70 million and August 2023's 48.07 million.

The services sector continued to account for the bulk of employment with a share of 63.3 percent, followed by agriculture and industry with 19.3 percent and 17.4 percent, respectively.

Wage and salary workers comprised 62.4 percent of the employed, followed by the self-employed (28.3 percent), unpaid family workers (6.9 percent) and those in family-operated farms or businesses (2.5 percent).

The private sector was said to account for 76.4 percent of wage and salary workers, or 47.7 percent of all Filipinos with jobs, while state-owned firms employed 16.2 percent of wage and salary workers, or 10.1 percent of the total employed.

The youth LFPR fell to 33.2 percent from 34.9 percent in August and 34.2 percent a year ago, but youth employment rose to 88.0 percent from 87.7 percent and 85.2 percent a month and a year earlier, the PSA said.

Socioeconomic Planning Secretary Arsenio Balisacan welcomed the latest job market data and said that these were an indication of "a more vibrant holiday season."

He noted the need for adequate investments in human capital and priority sectors, and also pointed to the expected finalization of the Trabaho Para Sa Bayan (Jobs for the Nation) plan by the end of the year.

Balisacan also called for the swift passage of the Konektadong Pinoy (Connected Filipino) bill, highlighting its potential to improve the information and communications technology, education, health and agriculture sectors.

Fast-tracking key infrastructure projects in energy, logistics and connectivity will also help boost job-creating investments, he added.

"With the government's continued focus on attracting strategic investments and the timely passage of key reforms, the Philippines is well-positioned to translate its promising macroeconomic fundamentals into long-term prosperity for its workforce and economy," Balisacan claimed.

Source: Manila Times