Chart of the Week: Philippine banks' loan growth to slow to 11% in 2019

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. 

Also read: Bad loans threaten Philippine banks amidst steep interest rates

"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.