Banking industry sees slower growth

MANILA, Philippines – The country’s banking industry is forecasting lending activities to slow down this year as borrowers cut back on loans.

Bankers Association of the Philippines (BAP) president Aurelio R. Montinola III said the second semester will likely reflect single digit growth in lending as against double-digit growth in the first half.

“Our worry is that it will slip to single digit in the second half. What is definite is that the percentage increase will be lower because the demand is down,” Montinola, who is also the chief executive of the Bank of the Philippine Islands (BPI), said.

Lending by the commercial bank grew by 18.9 percent as of end-March this year.

But the 0.4-percent growth in the country’s gross domestic product (GDP) reflected weak demand and weak consumption.

Initial reports from the banks indicate slower mortgage loans in April and May while auto loans were down. Corporate lending also remains relatively anemic as the top-tier corporations continue to tap the capital markets aside from bank loans.

Montinola explained that corporations were content on using earnings to pay back loans and fund its corporate expenses. Government infrastructure spending had already been reported as below targets.

“There are no major borrowing for expansion. They are holding back,” he added.

Remittances, which had been fueling the domestic economy, remained in the positive territory in the first four months of the year. However, there are strong indications that it had been finding its way to savings and investments rather than consumption.

The banks’ special deposit accounts (SDAs) reportedly ballooned to over P500 billion and other investment instruments have also been in demand.

“The market has become cautious, preferring to park their money rather than spend it,” bankers told The STAR.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said banks should reflect positive earnings in the first semester of the year, coming off a poor performance in the second half period last year due to the global crisis.

Tetangco said that lending would remain steady with the lowering of interest rates. Fee-based earnings is expected increase while earnings from securities would reflect better earnings over the previous year. –Ted P. Torres, Philippine Star