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Following a string of interest rate cuts last year, bank lending accelerated further in January 2025, posting its fastest growth in over two years, according to the Bangko Sentral ng Pilipinas (BSP).
The latest central bank data showed that lending by big banks expanded by 12.8 percent year-on-year in January.
This is the highest growth rate since December 2022, when universal and commercial banks’ lending to individuals and businesses grew by 13.7 percent.
The January growth rate was also higher than the 12.2 percent growth seen in December 2024.
Loans by Filipinos grew by 13.3 percent in January, rising from 12.4 percent in December.
In contrast, loans to foreign borrowers dropped by 3.5 percent in January, reversing the 5.7 percent growth recorded in December.
Consumer loans to residents expanded by 24.4 percent in January from 25 percent in December, driven by the increase in credit card and motor vehicle loans, the BSP said.
Loans for production grew 11.8 percent, while notable increases were seen in real estate (9.8 percent), energy (23.6 percent), trade (13.9 percent), transport (21.4 percent), and manufacturing (4.6 percent).
According to Michael Ricafort, chief economist at Rizal Commercial Banking Corporation (RCBC), the strong bank lending growth was driven by a 25-percent jump in consumer loans, led by credit card loans (29.4 percent increase) and auto loans (19.5 percent increase), reflecting the Philippines’ robust consumer demand.
“Faster loan growth was also supported by lower interest rates that reduced borrowing costs of businesses, consumers, government, and other institutions,” Ricafort said, adding that this followed the BSP’s three quarter-point rate cuts in 2024.
He noted that bank loans grew faster after the reserve requirement ratio (RRR) cuts implemented in October last year. The move injected ₱400 billion into the banking system, increasing banks’ loanable funds and investment capacity.
Lower RRR also reduced borrowing costs, boosting demand for loans and supporting economic growth, he further said.
He added that loan growth accelerated as more businesses and industries, especially those hit hardest by the pandemic, rebounded to pre-pandemic levels.
He expects the most recent RRR cut, effective March 28, 2025, to inject ₱330 billion into the banking system, boosting loanable funds. This could lower borrowing costs and drive faster loan growth in the coming months.
Expected rate cuts by the BSP this year could further lower borrowing costs, boosting loan demand and supporting economic growth, he said.
However, this may be offset by US President Donald Trump’s protectionist policies, which could slow global trade, investments, and overall economic activity.
Money supply growth slows to 3-month low
Money supply or M3 growth slowed to 6.8 percent year-on-year in January 2025, the weakest in three months. Ricafort noted this was among the slowest in five years.
It moved at a slower rate from 7.7 percent in December last year, but it was higher than the 6.1 percent in January last year.
Domestic liquidity measured by M3 reached ₱18.1 trillion in January.
Local claims grew 10.9 percent in January, increasing slightly from December. Private sector claims rose 13.1 percent, which, according to the BSP, was supported by higher loans to non-financial businesses and households.
Meanwhile, net claims on the central government climbed 7.4 percent, reflecting increased borrowings of the national government.
Net foreign assets (NFA) in peso terms grew 2.6 percent in January, slower than the six percent in December. The central bank’s NFA expanded 4.2 percent, while banks’ NFA declined due to higher dollar-denominated debt.
Ricafort said the slowdown was partly due to the BSP’s liquidity management tools, including weekly securities and term deposit facility (TDF) auctions.
These measures help regulate financial system liquidity, stabilize inflation within the two- to four-percent target, and support potential rate cuts in the coming months.
For the BSP’s part, it said it will maintain lending conditions and money supply in line with its monetary policy stance, ensuring stability in prices and the financial system.
