March loan growth at 7-month high

By Katherine K. Chan, Reporter

PHILIPPINE BANKS’ lending to businesses and consumers marked its fastest expansion in seven months in March, supported by robust liquidity in the financial system despite the Middle East conflict, preliminary Bangko Sentral ng Pilipinas (BSP) data showed.

Outstanding loans of universal and commercial banks, net of reverse repurchase agreements, grew by 10.7% to P14.603 trillion as of March from P13.192 trillion in the same month last year.

This was faster than the revised 9.6% climb in February and was the quickest growth in loans since the 11.2% in August last year.

On a seasonally adjusted basis, big banks’ lending activities rose by 1.7% month on month.

“Loans from universal and commercial banks grew at a faster pace in March 2026, providing even stronger support for production activities of businesses and consumption of households,” the central bank said in a statement late on Monday.

Outstanding loans to residents went up by 11.1% year on year to P14.299 trillion as of March from P12.869 trillion. This was an improvement from the revised 10.2% increase in February.

Most of the loans were those meant for production activities, which climbed by 9.7% to P12.322 trillion from P11.228 trillion.

This expansion in production loans was driven by the 26.7% increase in lending to the electricity, gas, steam, and air-conditioning supply industry. Other segments that showed growth were transportation and storage (19.4%); wholesale and retail trade, repair of motor vehicles and motorcycles (9.3%); and real estate activities (8.8%).

Meanwhile, outstanding consumer loans to residents rose by 20.5% to P1.977 trillion as of March from P1.641 trillion a year ago, slightly easing from the 20.8% expansion in February. These include credit cards, motor vehicles, and general-purpose salary loans but exclude residential real estate loans.

BSP data showed that credit card loans jumped 27.9% to P1.229 trillion from P960.55 billion in the prior year, while loans for motor vehicles grew by 12.5% to P538.286 billion from P478.67 billion.

Outstanding salary loans were at P166.934 billion as of March, up 4.2% from P160.273 billion a year prior.

On the other hand, outstanding loans to nonresidents, including those disbursed by big banks’ foreign currency deposit units, declined by 5.9% to P303.993 billion in March from P323.028 billion a year earlier. This was smaller than the 13.9% drop logged in the same month in 2025.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., attributed the faster lending growth in March to demand for financing from businesses as they wanted to make their payments ahead of time in anticipation that prices and interest rates would go up further amid the Middle East conflict.

“The continued double-digit growth in bank loans… was partly due to some hedging, stockpiling, and investment activities that need to be financed before interest rates and prices go up further due to the war in the Middle East,” he said in an e-mail.

The Monetary Board last month hiked benchmark rates for the first time in over two years to rein in surging inflation due to the global oil price shock brought by the war between the United States and Iran, bringing the policy rate to 4.5%.

BSP Governor Eli M. Remolona, Jr. has also signaled more modest increases ahead as the conflict drives up price expectations. The central bank now sees headline inflation averaging 6.3% this year, well above its 2%-4% tolerance band, as the oil crisis stokes domestic costs.

Meanwhile, the pickup in both bank lending and liquidity in March reflects robust domestic demand and ample money supply despite the conflict, Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said.

“Bank lending growth accelerated to 10.7%, driven largely by business borrowing in key sectors such as energy, transport, trade, and real estate — pointing to ongoing capacity expansion, working capital buildup, and project implementation,” he said via Viber. “Meanwhile, consumer lending remained strong, with growth still above 20%, indicating that household spending continues to be supported by steady income conditions and easing inflation.”

“Importantly, the data suggest that credit and liquidity conditions remain largely domestically driven, with the Middle East conflict having limited and indirect impact on local financial intermediation so far.”

In the coming months, banks will likely maintain their lending activities, but growth may slow slightly due to base effects, global uncertainties and high borrowing costs, Mr. Asuncion said.

“The main drivers will continue to be corporate borrowing tied to infrastructure and trade activity, resilient household credit demand, and public sector financing, all of which should keep liquidity conditions adequate and sustain near-term economic momentum.”

Several banks have signaled that they could tighten their lending standards and become more prudent when granting credit due to the high level of uncertainty surrounding the Middle East conflict. Lenders have also ramped up their provisioning to protect themselves from possible asset quality risks.

The central bank monitors banks’ lending activities to track the transmission of monetary policy.

“Looking ahead, the BSP will ensure that domestic liquidity and bank lending conditions remain aligned with its price and financial stability objectives,” the BSP said.

FASTER MONEY SUPPLY GROWTH
Liquidity growth also picked up in March to 12% from 10.3% in February, according to separate central bank data.

This was the fastest expansion in five-and-a-half years or since September 2020, when it rose by 12.2%.

Domestic liquidity or M3 — a measure of the amount of money in the economy that includes currencies in circulation, bank deposits, and other financial assets easily convertible to cash — rose to P20.365 trillion as of March from P18.181 trillion in the previous year.

Month on month, M3 inched up by 1.7% on a seasonally adjusted basis.

“Domestic liquidity growth was driven primarily by the continued expansion in borrowings by nonfinancial private corporations and households,” the BSP said.

Mr. Asuncion said credit growth in the private sector, stable net foreign asset (NFA) positions, and increased government borrowings supported the growth in domestic liquidity.

Domestic claims, which include those from private and government sectors, came in higher by 11.5% to P23.068 trillion in March from P20.685 trillion in the previous year.

This as claims on the private sector stood at P14.804 trillion during the month, with growth quickening to 11.8% from 10.6% in February.

Meanwhile, the central government’s increased issuances of government securities boosted its net claims to P6.258 trillion, up 12.1% year on year from P5.581 trillion.

Claims on a sector refer to that sector’s liabilities to depository corporations such as banks and the central bank.

Preliminary BSP data also showed that NFAs in peso terms grew by 8.6% to P7.391 trillion from P6.808 trillion a year prior.

The central bank’s NFAs edged up by 4.9% to P6.445 trillion, while banks’ NFA position climbed by 4.2% to P946.141 billion amid lower foreign currency-denominated bills.

NFAs reflect the difference between depository corporations’ claims and liabilities to nonresidents.

Meanwhile, the narrower measure of money supply or M1, which is made up of currency in circulation and current account deposit liabilities, rose by 9.4% year on year in March, picking up from the 8.5% increase in February.