Credit growth picked up to 8.3 percent in July, ending three straight months of slowdown, from the 7.6 percent expansion in June as the Bangko Sentral ng Pilipinas (BSP) kept interest rates unchanged amid the inflation downtrend.

Preliminary data from the central bank showed that loans disbursed by universal and commercial banks amounted to P11.04 trillion in end-July, P792.26 billion higher than the P10.19 trillion recorded in the same period last year.

Despite the series of aggressive rate hikes delivered by the BSP, loan disbursements by big banks increased by double-digit levels since April 2022 until they reached a high of 13.9 percent in October and November 2022 as the economy further reopened with the lifting of strict COVID quarantine and lockdown protocols.

The BSP emerged as the most aggressive central bank in the region after raising key policy rates by 425 basis points between May last year and March this year. This brought the benchmark interest rate to a 16-year high of 6.25 percent, discouraging borrowers from taking out loans.

Amid inflation downtrend and stable local currency, the BSP extended its hawkish pause as it kept interest rates untouched in three rate-setting meetings since May this year but has not discounted the possibility of resuming rate hikes if upside risks to inflation materialize.

From a double-digit credit growth of 10.2 percent in March, the increase in bank lending slowed to 9.7 percent in April, 9.4 percent in May and 7.6 percent in June due to the lagged impact of the aggressive rate hikes delivered by monetary authorities.

For July, the rise in loan releases to production activities slowed slightly to 6.2 percent from 6.3 percent in June to reach P9.54 trillion from P8.98 trillion a year ago and accounted 84 percent of the total disbursements.

The rise in disbursements to the volatile real estate sector quickenedto five percent in July from 3.8 percent with P2.19 trillion that accounted for 19.3 percent of the total, followed by the wholesale and retail trade, repair of motor vehicles and motorcycles with a slower increase of 9.4 percent to P1.27 trillion for an 11.2 percent share.

The growth in loans extended to the electricity, gas, steam and air-conditioning supply sector also slowed to 10.6 percent with P1.23 trillion or 10.8 percent of the total.

On the other hand, the loans to the manufacturing sector slipped slightly to P1.16 trillion for a share of 10.2 percent.

Likewise, consumer lending also booked a slower growth of 22.7 percent to P1.16 trillion in end-July from P934.71 billion a year ago, cornering 9.6 percent of the total loan disbursements.

Credit card loans soared by 29.8 percent to P618.61 billion from P487 billion even if the BSP decided to maintain the cap on interest rate charges to three percent per month or 36 percent per year.

Likewise, auto loans went up by 8.7 percent to P354.4 billion from P325.89 billion, while salary-based general-purpose consumption loans grew by 24.5 percent to P131.83 billion from P105.91 billion.

Meanwhile, the non-performing loan (NPL) ratio of the domestic banking system was unchanged at 3.43 percent in July despite the slight 4.5 percent uptick in the amount of soured loans to P439.33 billion from P420.25 billion

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