Outstanding loans at the Philippines' largest banks expanded at their slowest annual pace in four months during June, as corporate borrowing turned cautious and consumer demand softened amid challenging macroeconomic conditions, according to the Bangko Sentral ng Pilipinas (BSP).

The slowdown in credit growth comes even as the central bank has been easing monetary policy, having begun its rate-cutting cycle in August 2024 to support Southeast Asia's fastest-growing major economy amid moderating inflation within the BSP's 3% ± 1 percentage point target band.

Central bank data released on Friday showed that universal and commercial banks' outstanding loans, net of reverse repurchase agreements, rose by 9.8% to P14.882 trillion at end-June, up from P13.553 trillion a year earlier. The growth rate decelerated from the 12.1% increase recorded in May and marked the slowest annual expansion since February's 9.6%.

"Growth in loans from universal and commercial banks (U/KBs) eased in June, reflecting cautious borrowing by firms and subdued consumer demand," the BSP said in a statement.

Lending to residents climbed 10.3% year on year to P14.593 trillion, compared with P13.231 trillion previously. This eased from the 12.6% rise to P14.692 trillion posted in May and represented the bulk of total outstanding loans.

Of the resident lending total, banks directed P12.545 trillion toward production activities, a 9.2% increase from P11.493 trillion a year ago. The growth rate, however, slowed from the 11.7% jump seen in May. The BSP attributed this moderation to subdued lending across major borrowing sectors, including construction, education, and other service activities.

Loans for residents' business activities continued to be supported by sustained demand from real estate; electricity, gas, steam, and air-conditioning supply; wholesale and retail trade and repair of motor vehicles and motorcycles; manufacturing; transportation and storage; and agriculture, forestry, and fishing, the BSP added.

On the consumer side, big banks disbursed P2.048 trillion in retail loans, 17.8% more than the P1.738 trillion recorded as of June 2025. That increase decelerated from the 19% growth posted in the prior month.

"This was due to slower growth in credit card and motor vehicle loans, suggesting a more measured pace of household borrowing," the central bank said.

Credit card loans rose 24.9% year on year to P1.294 trillion in June, easing from the 26.3% growth logged a month earlier. Motor vehicle loans increased 8.6% to P540.118 billion, down from the 10.2% pace recorded in May. Salary loans, by contrast, stood at P177.994 billion as of June, up 9.9% from a year earlier and accelerating from the 6.4% growth seen in May.

Outstanding loans to nonresidents, meanwhile, fell to P288.935 billion at end-June, a 10.2% decline from P321.66 billion a year earlier. The contraction was steeper than the 8.3% decrease recorded in the prior month.

The BSP monitors bank lending activity to assess the transmission of monetary policy through the financial system. The latest figures suggest that policy rate reductions have yet to fully translate into stronger credit demand, a lag that central banks routinely watch when calibrating future moves.

Liquidity Growth Also Moderates

The country's money supply growth also eased in June, posting its slowest expansion in four months amid weaker credit activity, the central bank said.

Domestic liquidity, or M3, stood at P20.51 trillion as of June — 10.6% higher than the P18.547 trillion recorded a year earlier but down from P20.604 trillion in May, according to preliminary data. The year-on-year growth rate was the slowest since February, when M3 expanded by an annual 10.3%. On a seasonally adjusted basis, domestic liquidity declined 0.7% month on month.

"The latest expansion in M3 eased from 12.8% in the previous month amid slower growth in credit activity," the BSP said.

M3 measures the total amount of money circulating in the economy, encompassing currencies in circulation, bank deposits, and other financial assets that are easily convertible to cash.

"Borrowings by both the private and public sectors remained the main drivers of M3 growth," the central bank said. "Bank lending continued to channel funds to production sectors and households."

Domestic claims — which include those from the private and government sectors — rose 10.9% to P23.464 trillion in June from P21.157 trillion a year earlier, though this decelerated from the 13.3% growth posted in May. Claims on the private sector increased 11.7% year on year to P15.192 trillion.

"The National Government's issuance of debt securities and withdrawal of deposits from the BSP and banks to finance spending also supported domestic liquidity growth," the BSP said.

The central government's net claims, which reflect its issuance of securities and withdrawal of deposits, amounted to P6.326 trillion in June, up 12.9% year on year from P5.602 trillion. Claims on a given sector refer to that sector's liabilities to depository corporations such as banks and the central bank.

Net foreign assets (NFA) in peso terms edged up 4.1% to P7.028 trillion in June from P6.748 trillion a year earlier. The increase was slower than the 9.1% rise posted in May, partly because banks' NFA position contracted by 12.1% to P631.76 billion from P718.879 billion a year prior. BSP data showed its own NFA position rose 6.1% to P6.396 trillion from P6.029 trillion in June 2025. NFAs reflect the difference between depository corporations' claims and liabilities to nonresidents.

The BSP said it will ensure that domestic bank lending and liquidity conditions "remain consistent with its price and financial stability objectives."

— Katherine K. Chan