By Katherine K. Chan, Reporter

Philippine banks' lending to businesses and consumers accelerated in August to its fastest pace in three months, according to data released by the Bangko Sentral ng Pilipinas (BSP).

Outstanding loans of universal and commercial banks, net of reverse repurchase agreements, rose by 11% year on year to P15.121 trillion at end-August from P13.618 trillion a year earlier. The expansion outpaced July's 10.4% growth and marked the quickest lending pace in three months, since the 12.1% recorded in May. Universal and commercial banks sit at the top tier of the Philippine banking system and account for the bulk of its lending, which makes these monthly figures the widest regularly published window on formal credit flowing to Philippine firms and households.

"Loans by universal and commercial banks (U/KBs) expanded in August, reflecting sustained demand for bank credit, particularly from businesses," the BSP said in a statement issued late on Wednesday.

Lending to residents accounted for the bulk of the sector's total outstanding loans during the period. Big banks extended a total of P14.816 trillion to residents as of August, an 11.3% increase from P13.308 trillion a year prior, outpacing the 10.8% growth posted in July.

Loans to residents for business activities climbed by 10.6% year on year to P12.731 trillion, faster than July's 9.8% expansion. The central bank said the growth came amid increased lending to key sectors including real estate; electricity, gas, steam, and air-conditioning supply; wholesale and retail trade, and repair of motor vehicles and motorcycles; financial and insurance activities; manufacturing; information and communication; and transportation and storage.

Consumer loans, meanwhile, jumped by 16.2% year on year to P2.084 trillion at end-August, though growth eased from the 17.1% increase in July amid slower lending activity in the credit card and motor vehicle segments.

Credit card loans rose by an annual 23.3% to P1.323 trillion in August, slowing from 24.5% a year ago. Motor vehicle loans went up by 5.8% to P542.981 billion, easing from 7% a year ago. Salary-based general purpose consumption loans, on the other hand, increased by 11.6% to P183.587 billion, outpacing July's 9.9% rise.

Outstanding loans to nonresidents slipped by 1.5% to P305.186 billion as of August, improving from the 6.8% decline logged in July.

"The 11% year-on-year growth in bank lending in August suggests that credit demand remains supportive of economic activity, driven by continued borrowing for business expansion and working capital requirements alongside resilient household lending," Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

"Corporate loan demand appears to have been supported by investment-related sectors such as power and manufacturing, while consumer credit continued to benefit from steady spending activity," he added.

Mr. Asuncion noted that in the coming months, economic uncertainty and cautious business sentiment may dampen banks' lending activities, although lending should still expand on the back of continued investments, lower borrowing costs, and sustained demand.

"Nevertheless, credit activity should continue to provide support to overall economic growth in the months ahead," he added.

The central bank monitors banks' lending activities to track the transmission of monetary policy. Because the policy rates the BSP sets eventually feed into what banks charge borrowers, the monthly loan figures are among the most direct indicators of how monetary policy reaches businesses and households.

Money Supply

Sustained borrowing by the private and public sectors, together with the government's financing activities, pushed the country's money supply in August, the BSP said.

Separate preliminary central bank data showed domestic liquidity (M3) rose by 11.2% to P20.671 trillion in August from P18.597 trillion in the same month last year. This was likewise the fastest liquidity growth in three months, since the 12.8% posted in May. Month on month, the money supply inched up by 0.7% on a seasonally adjusted basis.

"Borrowing by the private and public sectors continued to support the expansion in M3. Banks sustained lending to businesses and households," the central bank said in a separate statement.

"National Government financing activities, including debt issuances and withdrawal of deposits from the BSP and banks, also contributed to liquidity growth," it added.

M3 is a measure of the amount of money in the economy that includes currencies in circulation, bank deposits, and other financial assets that are easily convertible to cash. Monitoring liquidity matters because the pace of money growth shapes how much funding is available for spending and investment, and how it squares with the BSP's mandate to keep prices and financial conditions stable.

Domestic claims, which cover both the private and government sectors, stood at P23.789 trillion in August, up by 12.8% and faster than the revised 11.2% growth in July. Claims on the private sector grew by 12.6% year on year to P15.444 trillion, improving from the 12.1% rise a month earlier, while net claims on the central government jumped by 16.6% to P6.345 trillion, accelerating from 12.4% in July.

Claims on a sector refer to that sector's liabilities to depository corporations such as banks and the central bank.

BSP data likewise showed that net foreign assets in peso terms steadied year on year at P7.043 trillion in August, an improvement from the 1% dip to P6.917 trillion in July.

"Meanwhile, growth in net foreign assets (NFAs) was broadly unchanged, as the increase in the BSP's NFA was offset by a decline in banks' NFA due to higher foreign currency-denominated liabilities, particularly bills payable," the central bank said.

Broken down, the central bank's NFAs went up by 6% to P6.504 trillion from P6.138 trillion a year ago. Banks' NFAs, however, plunged by 40.5% to P538.46 billion from P905.365 billion in the same month in 2025, a steeper decline than the 24.7% logged in July. NFAs reflect the difference between depository corporations' claims and liabilities to nonresidents.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the sustained expansion in bank lending and domestic liquidity is a positive signal for an economy grappling with inflation woes and weak growth.

"The pickup in both money supply and bank lending suggests that financial conditions remain supportive despite lingering inflation concerns and a still-challenging economic environment," he said via Viber.

"This is a positive signal because credit is the lifeblood of economic activity, supporting growth, employment, and spending in the months ahead," he added.

Mr. Ravelas cautioned, however, that persistent price pressures, especially as the Middle East war drags on, could weigh on lending and liquidity growth for the remainder of the year.

"Higher energy costs could reignite inflation pressures, squeeze household budgets, and make businesses more cautious about expansion plans," he said. "As a result, while we expect bank lending and domestic liquidity to remain on a growth trajectory, the pace could become more measured if inflationary pressures persist."

"The key going forward will be balancing credit growth with price stability to ensure that liquidity continues to support sustainable economic expansion rather than fuel another round of inflation," Mr. Ravelas added.

Attention now turns to the BSP's next monthly money and banking statistics, which will show whether August's three-month highs in lending and liquidity carry into the closing months of the year, and whether business borrowing keeps its edge over the cooling segments of household credit.

The BSP said it will continue to ensure that bank lending and domestic liquidity conditions are consistent with its price and financial stability mandate.