By Katherine K. Chan, Reporter
THE PHILIPPINE BANKING sector’s lending activity expanded at its slowest pace in nearly two years at the top of 2025 as loans for each consumers and business activities eased as a corruption scandal dampened sentiment, the Bangko Sentral ng Pilipinas (BSP) reported.
Based on preliminary BSP data released late on Monday, the entire outstanding loans of universal and business banks, net of reverse repurchase agreements, grew by 9.2% yr on yr at end-December to P14.349 trillion from P13.138 trillion.
This was the slowest loan growth seen in 22 months or since 8.6% in February 2024.
It was also the primary time since April 2024 that bank lending grew at a single-digit pace.
Month on month, the pace of lending eased from the ten.3% growth posted at end-November.
On a seasonally adjusted basis, bank lending fell by 2% month on month.
Outstanding loans to residents stood at P14.046 trillion by yearend, up by 9.7% yr on yr from P12.808 trillion. This was slower than the ten.7% expansion seen in November.
Lending for residents’ production activities accounted for the majority or 84.4% of banks’ outstanding loans at the top of December. The remainder were consumer loans (13.5%) and loans to nonresidents (2.1%).
BSP data showed that loans for production activities grew by 8% annually to P12.114 trillion last yr from P11.216 trillion in 2024. This eased from the 9% growth seen within the 11 months to November.
This was driven by the 26.8% jump in lending for the electricity, gas, steam, and air-conditioning supply sector. Loans prolonged for wholesale and retail trade, repair of motorcars and motorcycles also grew by 10.8%, followed by real estate activities (8.3%) and financial and insurance activities (3.9%).
Meanwhile, consumer loans to residents reached P1.932 trillion at end-December, up 21.4% from P1.592 trillion a yr ago. Nevertheless, consumer loan growth eased from the 22.9% at end-November.
Bank card loans jumped by 27.7% to P1.193 trillion at end-December, softening from the 29.5% growth the prior month.
Loans for motorcars also rose by 15.5% to P524.86 billion, slower than the 16.3% growth as of November.
Loans for general-purpose salaries rose by 5.6% to P166.807 billion at end-December, easing from 6.4% at end-November.
However, lending to nonresidents contracted by 8.1% to P303.208 billion, marking a steeper decline from the -4.5% logged at end-November. These include loans disbursed by big banks’ foreign currency deposit units.
Michael L. Ricafort, chief economist at Rizal Business Banking Corp., said the slower growth in bank lending and domestic liquidity could have stemmed from infrastructure underspending that dampened activity in key sectors, corresponding to construction.
“Slower bank loans growth and M3 (domestic liquidity) growth are largely consistent with the economic slowdown within the latter a part of 2025 largely as a result of government underspending especially on infrastructure that reduced sales, earnings, profits, employment and other business activities,” he said via Viber.
Union Bank of the Philippines (UnionBank) Chief Economist Ruben Carlo O. Asuncion also attributed banks’ subdued loan growth to the country’s recent economic slowdown.
“Business loans softened as manufacturing, construction, and trade‑related sectors remained weighed down by weak demand, while consumer loan growth also eased as each households and banks turned more cautious,” he said in a Viber message.
Weak sentiment amid the graft scandal also prompted investors to adopt a cautious approach “thereby reducing the demand for loans amid the decline in investments which might be financed by loans,” Mr. Ricafort added.
Multiple public officials and personal contractors had faced corruption allegations linked to government flood control projects, which sparked public outrage and later weighed on consumer and business confidence.
Loan demand could improve this yr with the assistance of the federal government’s spending catch-up plan and the central bank’s further easing, Mr. Ricafort noted.
“Lower rates of interest by the BSP and by the Fed, in addition to possible further reduction in large banks’ RRR (reserve requirement ratio) that also increase further banks’ loanable or investible funds would further reduce borrowing costs and that will increase demand and growth in bank loans,” he said.
The benchmark rate of interest currently stands at an over three-year low of 4.5%. Since August 2024, the Monetary Board has to this point lowered borrowing costs by a cumulative 200 basis points (bps).
BSP Governor Eli M. Remolona, Jr. earlier said that they might ease for a sixth straight meeting on Feb. 19 if the fourth-quarter growth slowdown proves to be demand-driven.
He also left the door open for a possible RRR cut, though noted that they’re still in search of the fitting timing to accomplish that.
“BSP’s rate cuts proceed to support credit conditions, however the impact is being tempered by soft domestic demand and tighter risk management by banks,” UnionBank’s Mr. Asuncion said. “Monetary easing helps prevent a sharper deceleration, though it cannot fully offset the broader economic slowdown.”
He also noted that bank lending may get some lift from the loan demand within the energy sector, particularly for renewable energy projects.
LIQUIDITY GROWTH SLOWS
Meanwhile, separate BSP data showed that liquidity growth fell to its weakest in 4 months at 7% as of December. This was also slower than the 7.6% increase within the previous month.
M3 — a measure of the sum of money within the economy that features currencies in circulation, bank deposits, and other financial assets easily convertible to money — stood at P20.108 trillion by yearend.
“After adjusting for seasonal fluctuations, M3 remained broadly stable from November,” the central bank said in a press release.
Domestic claims, which include claims from private and government entities, climbed by 10.1% yr on yr to P22.588 trillion, slowing from the ten.6% growth as of November.
This got here as subdued bank lending to nonfinancial private corporations, and households dragged growth of claims on the private sector all the way down to 10.1% from 11.1% a month ago. Private sector claims reached P14.512 trillion through the period.
Meanwhile, the BSP said higher borrowings lifted net claims on the central government by 10.8% to P6.135 trillion. Nevertheless, this was slower than the 11% growth seen at end-November.
Central bank data also showed that net foreign assets (NFA) in peso terms climbed by 6.1% as of December from 4.4% a month prior.
Broken down, the BSP’s NFAs edged up by 5.3%, picking up from 1.9% within the previous month.
However, banks’ NFAs went up by 13% annually driven by larger holdings of foreign currency-denominated debt securities. Nevertheless, this marked a pointy slowdown from the 26.9% pace as of November.
NFAs reflect the difference between depository corporations’ claims and liabilities to nonresidents.
“The BSP monitors bank loans because they’re a key transmission channel of monetary policy,” the central bank said. “Looking ahead, the BSP will make sure that domestic liquidity and bank lending conditions remain consistent with its price and financial stability mandates.”