By Katherine K. Chan, Reporter
PHILIPPINE BANKS’ LENDING to businesses and consumers accelerated in August to its fastest pace in three months, Bangko Sentral ng Pilipinas (BSP) data showed.
Universal and commercial banks’ total outstanding loans, net of reverse repurchase agreements, increased by 11% to P15.121 trillion at end-August from P13.618 trillion a year earlier.
This was faster than the 10.4% expansion in July, and the quickest lending growth seen in three months or since 12.1% in May.
“Loans by universal and commercial banks (U/KBs) expanded in August, reflecting sustained demand for bank credit, particularly from businesses,” the BSP said in a statement late on Wednesday.
Lending to residents accounted for the bulk of the sector’s total outstanding loans during the period.
Big banks lent out a total of P14.816 trillion to residents as of August, increasing by 11.3% from P13.308 trillion a year prior. This outpaced the 10.8% growth in July.
Broken down, loans granted for residents’ business activities climbed by 10.6% year on year to P12.731 trillion, faster than July’s 9.8% expansion.
This came amid banks increased lending to key sectors including real estate; electricity, gas, steam, and air-conditioning supply; wholesale and retail trade, and repair of motor vehicles and motorcycles; financial and insurance activities; manufacturing; information and communication; and transportation and storage, according to the central bank.
Meanwhile, consumer loans jumped by 16.2% year on year to P2.084 trillion at end-August. Consumer loan growth eased from the 17.1% increase in July amid slower lending activity in the credit card and motor vehicle segments.
Credit card loans jumped by an annual 23.3% to P1.323 trillion in August, slowing from 24.5% a year ago.
Loans for motor vehicles went up by 5.8% to P542.981 billion, easing from 7% a year ago.
On the other hand, salary-based general purpose consumption loans went up by 11.6% to P183.587 billion, outpacing July’s 9.9% increase.
Meanwhile, outstanding loans to nonresidents slipped by 1.5% to P305.186 billion as of August, improving from the 6.8% decline in July.
“The 11% year-on-year growth in bank lending in August suggests that credit demand remains supportive of economic activity, driven by continued borrowing for business expansion and working capital requirements alongside resilient household lending,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in a Viber message.
“Corporate loan demand appears to have been supported by investment-related sectors such as power and manufacturing, while consumer credit continued to benefit from steady spending activity,” he added.
In the coming months, economic uncertainty and cautious business sentiment may dampen banks’ lending activities but still expand on the back of continued investments, lower borrowing costs, and sustained demand, Mr. Asuncion noted.
“Nevertheless, credit activity should continue to provide support to overall economic growth in the months ahead,” he added.
The central bank monitors banks’ lending activities to track the transmission of monetary policy.
MONEY SUPPLY
Meanwhile, sustained private and public sector borrowing as well as the government’s financing activities drove the country’s money supply higher in August, the BSP said.
Separate preliminary central bank data showed domestic liquidity (M3) rose by 11.2% to P20.671 trillion in August from P18.597 trillion in the same month last year.
This was likewise the fastest liquidity growth in three months or since the 12.8% in May.
Month on month, the country’s money supply inched up by 0.7% on a seasonally adjusted basis.
“Borrowing by the private and public sectors continued to support the expansion in M3. Banks sustained lending to businesses and households,” the central bank said in a separate statement.
“National Government financing activities, including debt issuances and withdrawal of deposits from the BSP and banks, also contributed to liquidity growth,” it added.
M3 is a measure of the amount of money in the economy that includes currencies in circulation, bank deposits, and other financial assets that are easily convertible to cash.
Domestic claims, which include those from private and government sectors, stood at P23.789 trillion in August, up 12.8%. This was faster than the revised 11.2% growth in July.
Claims on the private sector grew by 12.6% year on year to P15.444 trillion, improving from the 12.1% rise a month ago.
Meanwhile, net claims on the central government also jumped by 16.6% to P6.345 trillion, accelerating from 12.4% in July.
Claims on a sector refer to that sector’s liabilities to depository corporations such as banks and the central bank.
BSP data likewise showed that net foreign assets in peso terms steadied year on year at P7.043 trillion in August. This was an improvement from the 1% dip to P6.917 trillion in July.
“Meanwhile, growth in net foreign assets (NFAs) was broadly unchanged, as the increase in the BSP’s NFA was offset by a decline in banks’ NFA due to higher foreign currency-denominated liabilities, particularly bills payable,” the central bank said.
Broken down, the central bank’s NFAs went up by 6% to P6.504 trillion from P6.138 trillion a year ago.
However, banks’ NFAs plunged by 40.5% to P538.46 billion from P905.365 billion in the same month in 2025. This was a steeper decline than the 24.7% logged in July.
NFAs reflect the difference between depository corporations’ claims and liabilities to nonresidents.
Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the sustained expansion in bank lending and domestic liquidity is a positive signal for the economy grappling with inflation woes and weak growth.
“The pickup in both money supply and bank lending suggests that financial conditions remain supportive despite lingering inflation concerns and a still-challenging economic environment,” he said via Viber.
“This is a positive signal because credit is the lifeblood of economic activity, supporting growth, employment, and spending in the months ahead,” he added.
However, persistent price pressures, especially as the Middle East war drags on, could weigh on lending and liquidity growth for the remainder of the year, according to Mr. Ravelas.
“Higher energy costs could reignite inflation pressures, squeeze household budgets, and make businesses more cautious about expansion plans,” he said. “As a result, while we expect bank lending and domestic liquidity to remain on a growth trajectory, the pace could become more measured if inflationary pressures persist.”
“The key going forward will be balancing credit growth with price stability to ensure that liquidity continues to support sustainable economic expansion rather than fuel another round of inflation,” Mr. Ravelas added.
The BSP said it will continue to ensure that bank lending and domestic liquidity conditions are consistent with its price and financial stability mandate.