Lending growth fell to an eight-year low in May.
Philippine banks can expect a subdued expansion of their loan books as year-end loan growth is expected to slow to 11.0% from 15.7% in 2018, according to Maybank Kim Eng.
In May, industry-wide loan growth fell to an eight-year low of 11.9%, which implies a growth of only 1.3% YTD.
Borrowings slowed down in major sectors like wholesale/retail trade at 9.3% in the first five months of the year whilst financial and insurance activities posted a one-year low of 21.2%. On the other hand, manufacturing, utilities and real estate activities have started to show a slight pick-up in demand for two consecutive months, albeit low at less than 2% growth MoM.
"With high cost of funds, banks tend to be more selective with their lending activities so as to protect their interest margin," analyst Katherine Tan said in a report.
However, a recovery may be in the works especially after the resolution of the national budget impasse may spur borowing for large-scale infrastructure projects. "Additional catalysts could come from approval of unsolicited infrastructure projects of the top infra conglomerates (i.e. San Miguel, MPI); increase in mortgage loan demand as rates ease; and a recovery in auto loan market (sales volume improved 8.7% YoY in Jun)," she added.
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