Bank lending shrinks the most in 14 years

Loans disbursed by banks contracted for the second straight month as they remain risk-averse amid the continuing pandemic, the Bangko Sentral ng Pilipinas said.

BSP Governor Benjamin Diokno said preliminary data showed loans extended by universal and commercial banks shrank 2.4 percent to 8.95 trillion pesos in January, following a 0.7 percent decline in December.

Diokno said, “Credit activity remained soft due to weak demand as banks continued to be risk-averse on concerns over asset quality and profitability.”

This was the worst slump for bank lending in over 14 years or since the 2.9 percent decline in August 2006.

Credit growth is slowing as the economy stalled during the government-imposed lockdown since March 2020 in a bid to slow the spread of the disease.

However, businesses and consumers remained wary despite the partial reopening of the economy in June when NCR shifted to a more relaxed quarantine status.

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