BANK lending picked up in January but money supply growth continued to moderate due to the impact of higher interest rates.

The outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the Bangko Sentral ng Pilipinas (BSP), grew by 7.8 percent from a revised 7.1 percent in December, preliminary central bank data showed.

It was the highest recorded since May last year when outstanding loans hit 9.4 percent.

Month on month and seasonally adjusted, the expansion was 0.8 percent.

Growth in outstanding loans to residents net of RRPs picked up to 7.8 percent in January from 7.4 percent a month earlier.

Loans for production activities grew by 5.9 percent from 5.6 percent, largely due to higher lending to key industries such as real estate (11.4 percent); wholesale and retail trade and repair of motor vehicles and motorcycles (7.4 percent); electricity, gas, steam, and airconditioning supply (7.3 percent); transportation and storage (18.2 percent); and construction (13.6 percent).

Consumer loans to residents saw growth rise to 25.2 percent from 23.9 percent, supported by a sustained increase in credit card and motor vehicle loans as well as salary-based general purpose loans.

Outstanding loans to nonresidents, meanwhile, were higher by 9.8 percent after contracting by 2.9 percent in December.

Domestic liquidity or M3, meanwhile, expanded by a slower 6.0 percent to about P17 trillion at the start of the year compared to December's revised 6.2 percent.

Month on month and seasonally adjusted, M3 contracted by 0.4 percent.

Domestic claims saw growth increase to 9.8 percent from the previous month's 9.0 percent.

Claims on the private sector grew by 8.8 percent, unchanged from December, due to the "sustained expansion in bank lending to nonfinancial private corporations and households."

Net claims on the central government, meanwhile, picked up to 15.9 percent from 14.3 percent, partly due to a decline in the national government deposits with the BSP.

Net foreign assets (NFA) in peso terms rose by 4.4 percent, slowing from December's 4.6 percent.

The BSP's NFA position grew by 5.4 percent while that of banks was said to have "contracted on account of higher bills payable."

The central bank said it would continue "to ensure that domestic liquidity conditions remain consistent with the prevailing stance of monetary policy, in line with the BSP's price and financial stability objectives."

"Looking ahead, the BSP will ensure that liquidity and bank lending conditions remain in line with its price and financial stability objectives," it added.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said bank lending growth could be attributed to an ongoing economic upturn.

"Long-term interest rates have already eased since November 2023, thereby leading to some increase in demand for longer-term loans at lower borrowing financing costs," he added.

"For the coming months, an easing inflation trend that could support future interest rate cuts by the Fed and locally could lower borrowing costs and help spur greater demand for loans."