MANILA - Bank lending, particularly on the consumer side, has shown signs of weakening in recent weeks, prompting the head of the Bankers Association of the Philippines (BAP) to express fears that overall loan growth may slip into the single-digit level in the second quarter.

While banks are still keeping their lending windows open despite the economic downturn, many people seem reluctant to borrow at this time, according to BAP president Aurelio Montinola III. BAP is the organization of local bank chief executives.

The issue is not about the prevailing commercial loan rates, he said.

The Bangko Sentral ng Pilipinas (BSP) has said that lending rates have gone down about a third since it began easing its monetary policy late last year mainly through cuts in the overnight interest rates. It did not expect a 100-percent pass-through of policy rate reductions, suggesting that it might be more aggressive in rate easing in the coming months to help bring down the cost of borrowed funds significantly.

But Montinola said: “Lending rates are fine where they are right now. I think it’s more a question of demand.”

Montinola, president of Ayala-led Bank of the Philippine Islands, spoke to reporters on Tuesday night on the sidelines of the awarding ceremony for the best managed companies in the Philippines, an annual event organized by ATR KimEng Financial Corp. and FinanceAsia magazine.

Latest BSP data showed the double-digit growth of outstanding loans of commercial banks including their reverse repurchase placements with the central bank was sustained at 13.4 percent in April. But it was slower compared with the 18.9-percent growth recorded in the previous month.

Excluding RRP placements with the BSP, bank lending grew at a faster pace of 19.0 percent in April from 17.8 percent in the previous month.

“My worry is that it’s going to fall to single digits in the second quarter, but what we need to check is what the numbers were last year,” Montinola said.

If the lending growth rate slows, he said it could also be due to the base effect, meaning a big increase in the previous year would likely dampen growth in percentage term in current year.

BSP data also showed growth in consumption loans accelerating to 13.5 percent in April from 9 percent in the previous month, supported by the strong growth in auto loans and the sustained increase in credit-card lending.

But in recent weeks, Montinola said some slowing down was noticeable particularly in the auto and mortgage segments.

Corporate loans, he said, were likely to have picked up but mainly because of the capital-raising exercises through domestic bond issues in the past six months of many big companies, including San Miguel Corp., Philippine Long Distance Telephone Co., Ayala Corp. and Manila Electric Co.

The BSP has seen a moderate decline in consumer confidence in the second quarter, based on its quarterly survey, saying the impact of the global economic slowdown continued to weigh down on consumer sentiment.

Following a much weaker-than-expected economic growth of 0.4 percent in the first quarter, the government and many local and foreign analysts as well as international financial institutions have decided to scale back their growth estimates for the Philippines to closer to zero.

But painting a more downbeat outlook, both the International Monetary Fund and the World Bank now see the domestic economy contracting this year.

Total consumer loans of the country’s universal, commercial and thrift banks reached P385.8 billion at the end of March, up by just 1.5 percent from P380.0 billion as of end-2008.

Consumer loans accounted for 15.2 percent of the industry’s total loan portfolio, excluding interbank loans, as of end-March.

Mortgage loans represented the bulk of total consumer loans at 41.6 percent or P160.4 billion, followed by credit-card loans with a share of 27.7 percent or P106.8 billion. Auto loans and other consumer loans followed with shares of 21.1 percent or P81.6 billion and 9.6 percent or P37.0 billion, respectively.

Other consumer loans refer to those granted to individuals to finance other personal and household needs such as purchase of household appliances, furniture and fixtures and/or to pay taxes, hospital and educational bills.

Credit-card receivables of the banks totaled P125.7 billion as of end-March, down 3.9 percent from the previous quarter but up by 8.8 percent from a year ago.