By Katherine K. Chan, A reporter
PHILIPPINE BANKS' lending for businesses and consumers marked its fastest expansion in seven months in March, supported by a strong liquidity deficit in the financial system despite Middle East conflicts, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.
Outstanding loans of international and commercial banks, net of repurchase agreements, grew 10.7% to P14.603 trillion as of March from P13.192 trillion in the same month last year.
This is faster than the revised increase of 9.6% in February and was the fastest growth in loans since 11.2% in August last year.
Seasonally adjusted, central banks' lending activity rose 1.7% in the month.
“Loans from international banks and businesses grew at a rapid pace in March 2026, providing strong support to business productive activity and household consumption,” the central bank said in a statement late Monday.
Outstanding loans to residents increased 11.1% year-on-year to P14.299 trillion as of March from P12.869 trillion. This has been an improvement since the review It was up 10.2% in February.
Most of the loans were for manufacturing activities, which increased by 9.7% to P12.322 trillion from P11.228 trillion.
This increase in manufacturing loans was driven by a 26.7% increase in loans to the electricity, gas, steam, and air conditioning industries. Other categories that showed growth were transportation and storage (19.4%); wholesale and retail trade, repair of cars and motorcycles (9.3%); and housing activities (8.8%).
Meanwhile, outstanding consumer loans rose 20.5% to P1.977 trillion as of March from P1.641 trillion a year ago, down slightly from the 20.8% increase in February. This includes credit cards, auto, and general purpose loans but does not include home equity loans.
BSP data showed that credit card loans jumped 27.9% to P1.229 trillion from P960.55 billion a year ago, while car loans grew 12.5% to P538.286 billion from R478.67 billion.
Outstanding salary loans reached P166.934 billion as of March, up 4.2% from P160.273 billion a year ago.
On the other hand, outstanding loans to non-residents, including those issued by major foreign-currency banks, decreased by 5.9% to P303.993 billion in March from P323.028 billion last year. This was less than the 13.9% decline recorded in the same month in 2025.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the rapid growth in loans in March was due to the demand for financing from businesses as they wanted to make early payments in anticipation that prices and interest rates would increase significantly amid the Middle East conflict.
“Continued double-digit growth in bank loans … is in part due to hedging, stockpiling, and investment activities that need to be funded before interest rates and prices rise due to the war in the Middle East,” he said in an email.
The Monetary Board last month raised benchmark rates for the first time in two years to bolster inflation in the wake of a shock to global oil prices brought on by the war between the United States and Iran, bringing the policy rate to 4.5%.
BSP Governor Eli M. Remolona, Jr. also hinted at more modest hikes to come as tensions raise price expectations. The central bank now sees inflation averaging 6.3% this year, above its 2%-4% tolerance, as the oil crisis raises domestic costs.
Meanwhile, the accumulation of bank loans and bank deficits in March shows strong domestic demand and sufficient liquidity despite the conflict, said Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion.
“The growth of bank lending accelerated to 10.7%, driven mainly by business lending in key sectors such as energy, transportation, trade, and real estate – pointing to continued capacity expansion, construction of working capital, and project implementation,” he said via Viber. “Currently, consumer lending has remained strong, with growth still above 20%, indicating that housing consumption continues to be supported by stable income conditions and reduced inflation.”
“Importantly, the data suggest that credit and debt conditions remain largely domestically driven, while the Middle East conflict has had a limited and indirect impact on local financial relations so far.”
In the coming months, banks will likely maintain their lending activities, but growth may slow due to fundamental effects, global uncertainty and high borrowing costs, Mr Asuncion said.
“The main drivers will continue to be corporate borrowing coupled with infrastructure and trade activities, strong domestic credit demand, and public sector financing, all of which should keep fiscal deficit conditions adequate and sustainable. economic momentum in the near future.”
Several banks have said they may tighten their lending standards and become more cautious when extending credit because of the high level of uncertainty surrounding the Middle East conflicts. Lenders have also strengthened their provision to protect themselves from potential asset quality risks.
The central bank monitors the lending activities of banks to track the transmission of monetary policy.
“Looking forward, the BSP will ensure that domestic credit and bank lending conditions remain consistent with its rates and financial stability objectives,” said the BSP.
RAPID MONEY SUPPLY GROWTH
Liquidity growth increased in March to 12% from 10.3% in February, according to central bank data.
This was the fastest growth in five and a half years or since September 2020, when it increased by 12.2%.
Internal funds or M3 – a measure of the amount of money in the economy that includes currency, bank deposits, and other financial assets that are easily converted into cash – rose to P20.365 trillion as of March from P18.181 trillion last year.
Month-on-month, M3 increased by 1.7% on a seasonally adjusted basis.
“The increase in domestic capital was mainly driven by the increase in borrowing by non-financial private companies and households,” said the BSP.
Mr. Asuncion said the increase in credit to private companies, stable net foreign asset (NFA) positions, and the increase in government borrowing are supporting domestic currency growth.
Domestic claims, which include those from the private and public sectors, increased 11.5% to P23.068 trillion in March from P20.685 trillion a year ago.
This as private sector claims stood at P14.804 trillion for the month, growth increased to 11.8% from 10.6% in February.
Meanwhile, the central government's increase in public debt raised its claims to P6.258 trillion, up 12.1% year-on-year from P5.581 trillion.
Industry claims refer to the industry's debts to depository institutions such as banks and the central bank.
Preliminary BSP data also showed that NFAs in peso terms grew by 8.6% to P7.391 trillion from P6.808 trillion last year.
Central bank NFAs increased by 4.9% to P6.445 trillion, while the banks' NFA position increased by 4.2% to P946.141 billion amid lower foreign currency liabilities.
NFAs show the difference between corporate claims and liabilities to non-residents.
Meanwhile, the minimum measure of money supply or M1, which is made up of spending money and current account deposit liabilities, rose 9.4% year-on-year in March, up from an 8.5% increase in February.
