Philippine Bank Lending Slows to Four-Month Low as Borrowers Turn Cautious

Credit Appetite Weakens Across Sectors

Outstanding loans from Philippine universal and commercial banks expanded 9.8% year-on-year in June, the slowest pace since February's 9.6% growth, according to preliminary data from the Bangko Sentral ng Pilipinas. The figure marks a sharp deceleration from May's 12.1% expansion, reflecting growing caution among both corporate and retail borrowers.

In absolute terms, total outstanding loans stood at 14.88 trillion pesos in June, up from 13.55 trillion pesos a year earlier but down from May's 14.99 trillion pesos. The central bank attributed the moderation to subdued consumer demand and more deliberate borrowing behavior among companies navigating persistent economic uncertainties.

Business Lending Loses Momentum

Loans for production activities rose 9.2% year-on-year to 12.54 trillion pesos in June, down from 11.7% growth in May. Business credit accounted for 84.3% of total outstanding loans, underscoring the sector's dominance in Philippine banking portfolios.

Real estate, the largest borrowing category, saw growth slow to 6.1%, with outstanding credit reaching 2.9 trillion pesos. Lending to electricity, gas, steam and air-conditioning supply increased 22.6% to 2.05 trillion pesos, a notable deceleration from May's 32.9% surge. Wholesale and retail trade loans grew 7.6% to 1.64 trillion pesos, while manufacturing credit advanced 7% to 1.3 trillion pesos.

The construction sector faced headwinds, with loans contracting 13.9% to 441.77 billion pesos, a sharper decline than May's 4.7% drop. Other service activities saw lending fall 7.6%, and education loans edged down 0.6%.

Consumer Credit Cools

Consumer lending expanded 17.8% to 2.05 trillion pesos in June, down from 19% in May. The central bank pointed to softer growth in credit card and motor vehicle loans as key drivers of the slowdown.

Credit card loans, which represent the bulk of consumer borrowing, rose 24.9% to 1.29 trillion pesos, compared with 26.3% previously. Motor vehicle loans increased 8.6% to 540.12 billion pesos. Salary-based general-purpose consumption loans accelerated 9.9% to 177.99 billion pesos, one of the few categories showing stronger momentum.

A Shift Toward Prudence

The deceleration suggests businesses are prioritizing cash flow management and operational efficiency over aggressive expansion, according to Jonathan Ravelas, senior adviser at Reyes Tacandong & Co. Companies appear to be adopting wait-and-see postures as they assess global uncertainties and domestic conditions.

For households, easing inflation has not translated into greater borrowing appetite. Many consumers remain focused on essential spending and are approaching new debt with caution. The trend reflects prudent decision-making rather than restricted credit availability, Ravelas noted.

What Comes Next

The June figures arrive as the Philippine economy navigates a complex environment of moderating inflation, shifting monetary policy expectations, and uneven sectoral recovery. While credit growth remains positive across most categories, the pace of expansion has clearly downshifted.

Banks face the dual challenge of supporting economic activity while maintaining asset quality in an environment where borrowers are increasingly selective. The trajectory of lending in the second half of 2026 will likely hinge on whether business confidence stabilizes and household income growth strengthens enough to revive demand for credit.

For now, the data underscores a market in recalibration mode, with both lenders and borrowers taking a more measured approach to balance sheet expansion.