Consumer Loans are still rising

Money lent to households grew by nearly 20% for the second quarter of the year with more consumers borrowing from banks to buy cars and obtain instant cash, the Bangko Sentral ng Pilipinas (BSP) said. The demand for loans to finance their personal needs continued to expand in the first half of the year and that consumer loans of universal, commercial and thrift banks stood at Php959.2 billion at the end of June this year.

This was a 19.29-percent rise from the Php959.2-billion total consumer loans seen a year earlier. Compared, meanwhile to the previous quarter, the end-June consumer loan figure is 2.8 percent higher than the Php932.8 billion seen in end-March this year.

“This sustains the quarter-on-quarter growth in consumer loans that started in 2008,” the BSP said.

Consumer loans are typically extended to individual clients of banks looking to purchase cars and underwrite home mortgage payments, among other purposes.

“Consumer loans increased quarter-on-quarter in June due to an increase in auto loans, credit card receivables and salary loans,” the BSP said. “Residential estate loans, on the other hand, declined marginally during the period.”

Salary loans, or advance payroll credits taken out by employees, saw an increase of 89.6% to P84.6 billion for the second quarter compared to the Php44.6 billion in the comparable period last year, and up by 11.1% from end-March.

Loans for housing lots, meanwhile, stood at Php409.2 billion for the period, higher by 17.3% from last year’s Php348.7 billion. However, this was lower by 0.6% from the Php411.4 billion recorded in the first quarter.

Car loans also reached Php259.4 billion for the second quarter, higher by 25.3% from the same period last year, and up by 6% from the Php207 billion given out by the banks in from January to March. Debts incurred via credit cards stood at Php166.5 billion, up by 5.9% from June 2014.

Other consumer loans saw a 14.8% decline for the quarter to Php39.6 billion from a year ago.

Despite the increase in consumer credit, banks were also able to trim the share of bad debts to their total loan portfolio while increasing their security cover from credit losses, the BSP said.

Non-performing loans - obligations left unpaid for at least 30 days past due date - stood at 4.5% of the banks’ total consumer loans, lower than the 4.9% in the first quarter. This comes alongside a 61.2% allocation for loan loss reserves on bad debts.

The central bank added that the 16.7% share of consumer loans in the commercial and thrift banks’ total loan portfolio stood the lowest among the ASEAN 5 economies, namely Malaysia’s 57.1%, Indonesia’s 28.3%, Thailand’s 27.9%, and Singapore’s 25.9%.

The BSP monitors the quality of all types of bank loans to ensure a high credit system for financial stability.