The bulk of the country’s banks, when extending loans to households or businesses, have kept their lending standards unchanged in the third quarter, the Bangko Sentral ng Pilipinas said.
According to the BSP, a little over 80 percent of banks surveyed under the modal method kept their business loan standards steady during the quarter although the lenders showed a net tightening of the same standards under the diffusion method, indicating lower tolerance for risks, a deterioration in their profitability and a decline in the quality of borrower profiles.
“For Q4 2023, the modal approach reflected respondents’ anticipations of generally maintained credit standards for firms. Meanwhile the DI method indicated surveyed banks’ outlook of net tightening of lending standards for the next quarter amid expectations of a deterioration in borrowers’ profiles and decline in the profitability of banks’ portfolios along with banks’ reduced tolerance for risk,” the BSP said.
Third quarter results showed that a majority of the respondent banks (84.4 percent) pointed to broadly steady lending standards for commercial real estate loans (CREL). DI-based results indicated a net tightening of credit standards for CRELs during the quarter largely due to a decrease in risk tolerance; deterioration of borrowers’ profiles; and less favorable economic outlook. Over the following quarter, a higher proportion of banks expect to retain their loan standards for CRELS based on the modal approach, while the DI method showed a net tightening of credit standards for CRELs, the BSP said.
In Q3 2023, most respondent banks (68.8 percent) maintained their credit standards for loans to households. The DI approach likewise pointed to a net unchanged credit standards for household loans[6] which was attributed by banks to steady economic outlook; sustained profitability of banks’ portfolios; unchanged risk tolerance; and steady profile of borrowers, the BSP said.
Over the following quarter, the modal approach indicated a larger proportion of respondent banks anticipating generally unchanged credit standards for household loans. Meanwhile, the DI approach showed bank respondents’ expectations of a net easing in household credit standards in Q4 2023 mainly due to improvement in the profitability of banks’ portfolios and borrowers’ profiles along with banks’ higher tolerance for risk.
Q3 2023 SLOS results indicated that a higher number of bank respondents (69 percent) maintained credit standards for housing loans. On the other hand, the DI approach revealed a net easing of credit standards for housing loans which was attributed by banks mainly with less uncertain economic outlook along with improvement in profitability of banks’ portfolios and borrowers’ profiles. While most respondent banks expect to maintain credit standards for housing loans in Q4 2023, the DI method shows a net easing of housing loan standards for the following quarter the BSP said.
A large majority of respondent banks (72.3 percent) indicated steady overall loan demand from firms in Q3 2023 based on the modal approach. Meanwhile, the DI method continued to show a net increase in credit demand from across all firm classifications, due to customers’ improved economic prospects as well as increased inventory and accounts receivable financing needs, the BSP said.
Over the next quarter, a higher number of bank participants anticipate generally unchanged credit demand from enterprises. On one hand, DI results showed that surveyed banks expect a net increase in overall loan demand from firms in Q4 2023 due to higher inventory and accounts receivables financing requirements along with customers’ more optimistic economic outlook, the BSP said.
Loan demand for CRELs proved broadly steady in Q3 2023 and Q4 2023 based on the modal approach. Meanwhile, the DI method indicated a net increase in demand for CRELs in Q3 2023 as well as for Q4 2023 due to increased customer inventory and accounts receivable financing needs, a decline in customers’ internally-generated funds, improvement in customers’ economic outlook, among others, the BSP said.
More than half (53.3 percent) of the respondent banks reported generally unchanged household loan demand while about a third (36.7 percent) of respondents indicated increased demand for credit from households in Q3 2023 based on the modal approach. DI-based results indicated a net rise in household loan demand across all key categories such as housing, credit card, auto, and personal/salary loans mainly due to higher household consumption and housing investment including banks’ more attractive financing terms, the BSP said.
For Q4 2023, the banks anticipate an increase in loan demand from households based on both the modal and DI methods driven by expectations of higher household consumption and housing investment, limited availability of other sources of funds and banks’ more attractive financing terms, the BSP said.
The banks observed a generally unchanged demand for housing loans in Q3 2023 and anticipate a similar scenario in Q4 2023. However, DI results revealed a net rise in residential real estate loan demand for both the current and next quarter due to increasing household consumption and housing investment, the BSP said.
