MANILA, Philippines – Corporate and individual borrowers continued to enjoy lower rates as the Bangko Sentral ng

Bank borrowers enjoy lower loan rates

Pilipinas (BSP) continued to disengage from crisis intervention measures as economic conditions steadily show signs of improvement and as financial markets remain stable.

The BSP reported yesterday that actual bank lending rates declined by 2.24 percentage points to 7.032 percent as of April this year from 9.272 percent during the start of the easing cycle in December of 2008.

Monetary authorities said banks have been more accommodating to both corporate and household borrowers as their pass-through rates have exceeded by more than 100 percent the policy rate cut implemented by the central bank body.

Pass through rate is defined as the ratio between the change in the lending rate and the change in the policy rate since the beginning of the easing cycle.

The central bank’s Monetary Board has slashed key policy rates by 200 basis points from December 2008 to July last year as part of easing measures to boost the country’s slackening domestic economy.

This brought the overnight borrowing rate to a record low of four percent from six percent and the overnight lending rate to six-percent from eight percent.

The BSP’s Monetary Board has kept its rates at record lows for seven straight policy setting meetings since July last year but has continued to unwind crisis-related measures adopted in November of 2008 to release liquidity into the financial system to support domestic economic activity to survive the global economic meltdown.

Crisis-related measures adopted way back in November of 2008 that were tweaked included the increase in the rate on a short-term lending facility to four percent from 3.5 percent last January 28 as well as the reduction of the peso rediscounting budget to P40 billion from P60 billion, the restoration of the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument, and the restoration the non-performing loan (NPL) ratio requirement of two percentage points from 10 percentage points last March 11.

Last April 22, the central bank continued unwinding of crisis intervention measures that were adopted since November of 2008 by further reducing the budget for peso rediscounting facility to to pre-crisis level of P20 billion from P40 billion.

Latest data from the central bank showed that the total outstanding loans of banks excluding reverse repurchase placements with the central bank expanded by five percent to P2.078 trillion as of end-March or P99 billion more than the P1.979 trillion registered in end-March last year despite lower loans extended to the manufacturing as well as the financial intermediation sectors.

Data showed that lending for production grew at a slowed pace of 5.8 percent to P1.859 trillion in March from P1.773 trillion in the same month last year. The growth, however, was slower than the 5.8 percent increase registered in February.

The growth, according to the BSP, was driven mainly by lending to the real estate, renting and business services that expanded by 18.1 percent to P321.09 billion; transportation, storage, and communication with 25.8 percent to P152.4 billion; and wholesale and retail trade with 12.7 percent to P227.22 billion.

However, loans to the manufacturing sector contracted at a faster rate of 9.9 percent in March from 6.4 percent in February. Loans to manufacturers reached P326.61 billion in March from P362.47 billion in the same month last year.

Furthermore, loans to the financial intermediation sector retreated by 5.8 percent to P161.46 billion in March from P171.33 billion in the same month last year.

The BSP also reported that loans for household consumption continued to post a double-digit growth at 11.2 percent in to P172.53 billion in March from P155.11 billion in the same month last year.

Auto loans jumped 27.1 percent to P47.6 billion in March from P37.44 billion in the same month last year while credit card loans went up by 7.6 percent to P109.64 billion from P101.88 billion.

Monetary authorities see bank lending picking up this year as the Cabinet-level Development Budget Coordination Committee (DBCC) see the country’s domestic output as measured by the gross domestic product (GDP) expanding between 2.6 percent and 3.6 percent this year after slackening to 0.9 percent last year from 3.8 percent in 2008 due to the global economic meltdown. –Lawrence Agcaoili (The Philippine Star)