Philippine banks’ loan growth slows to near 2-year low

By Katherine K. Chan, Reporter

The Philippine banking sector’s lending activity expanded to its slowest pace in nearly two years at the end of 2025 as loans for both consumers and business activities eased, the Bangko Sentral ng Pilipinas (BSP) reported.

Based on preliminary BSP data released late Monday, the total outstanding loans of universal and commercial banks, net of reverse repurchase agreements, grew by 9.2% year on year at end-December to P14.349 trillion from P13.138 trillion.

This was the slowest loan growth seen in 22 months or since the 8.6% seen in February 2024.

It was also the first time since April 2024 that bank lending grew at a single-digit pace.

Month on month, the pace of lending eased from the 10.3% 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 an annual 9.7% year on year from P12.808 trillion. This was slower than the 10.7% expansion seen in November.

Lending for residents’ production activities accounted for the bulk or 84.4% of banks’ outstanding loans at end-December. The rest were loans to consumer loans (13.5%) and nonresidents (2.1%).

BSP data showed that loans for production activities grew by 8% annually to P12.114 trillion last year from P11.216 trillion in 2024. This eased from the 9% growth seen in 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 extended for wholesale and retail trade, repair of motor vehicles 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 year ago. Consumer loan growth eased from the 22.9% at end-November.

This, as credit card loans jumped by 27.7% to P1.193 trillion at end-December, softening from the 29.5% growth the prior month.

Loans for motor vehicles also rose by 15.5% to P524.86 billion, slower than the 16.3% growth as of November.

Loans for general-purpose salaries amounted to P166.807 billion at end-December, translating to a slower 5.6% expansion from 6.4% at end-November.

On the other hand, 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.

LIQUIDITY GROWTH SLOWS
Meanwhile, separate BSP data showed that liquidity growth fell to its weakest in four months at 7% as of December. This was also slower than the 7.6% increase in the previous month.

Domestic liquidity (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 — stood at P20.108 trillion by yearend.

“After adjusting for seasonal fluctuations, M3 remained broadly stable from November,” the central bank said in a statement.

Domestic claims, which include claims from private and government entities, climbed by 10.1% year on year to P22.588 trillion, slowing from the 10.6% growth as of November.

This came as subdued bank lending to non-financial private corporations and households dragged growth of claims on the private sector down to 10.1% from 11.1% a month ago. Private sector claims reached P14.512 trillion during the period.

Meanwhile, the BSP said higher borrowings lifted net claims on the central government by 10.8% to P6.135 trillion. However, 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% the previous month.

On the other hand, banks’ NFAs went up by 13% annually driven by larger holdings of foreign currency-denominated debt securities. However, this marked a sharp 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 are a key transmission channel of monetary policy,” the central bank said. “Looking ahead, the BSP will ensure that domestic liquidity and bank lending conditions remain consistent with its price and financial stability mandates.”