Car and home loans in the Philippines are jumping while credit cards are being swiped relentlessly to pay for travel and dining in signs that 16-year-high borrowing costs aren’t deterring Filipinos from spending.
Bank of the Philippine Islands saw a 40% increase in housing loans and 30% rise in auto loans in the first quarter from a year ago, said Ginbee Go, head of BPI’s consumer banking. “You’d think that people would hold off borrowing, but the releases of our housing and auto loans show it’s the contrary,” she said at a briefing on Thursday.
Robust spending is evident across the industry as credit card base rose 14% while credit card loans rose nearly 30% in the first quarter, according to Jojo Ocampo, head of BPI’s mass retail segment responsible for unsecured lending.
That’s good news for the Philippines’ consumption-driven economy, which the government expects to grow as much as 7% in 2023 — slower than last year’s 7.6% but still among Asia’s bright spots. Economic managers see retail spending withstanding elevated inflation, which cooled to a six-month low in March, but is still well above the central bank’s 2%-4% target for the year.
Consumer credit is growing amid the Philippine central bank’s most aggressive monetary tightening in two decades that has boosted the benchmark interest rate to 6.25%, the highest since May 2007. The monetary authority will next decide on rate on May 18, a week after the government reports first-quarter economic performance.
“It’s a very exciting time. We continue to be bullish about the economy,” BPI Chief Executive Officer TG Limcaoco said at the same briefing, after the bank’s annual shareholders meeting. “The consumer sector remains very resilient,” he said, adding that nonperforming loans are muted.
The favorable outlook will likely continue for as long as there’s no major disruption in the supply chain, Mr. Limcaoco added. “Our pivot to the US has opened up interest from a lot of companies,” he said.
Although corporate lending comprises the bulk of its portfolio, consumer loans have been fueling the growth of BPI, the country’s oldest lender. — Bloomberg