BANKS expect both business and consumer loans to expand in the April to June period backed by the economy’s gradual recovery as mobility restrictions are relaxed.

The latest Senior Bank Loan Officers’ Survey released by the Bangko Sentral ng Pilipinas (BSP) late Thursday showed half of respondent banks see growing demand for business loans, based on the modal approach.

“Banks’ expectations of an increase in loan demand from both businesses and households is consistent with optimistic business and consumer sentiment for the next quarter as easing coronavirus disease 2019 (COVID-19) restrictions drove the recovery in mobility and production activities,” the BSP said.

Based on the diffusion index approach, lenders expect business loans to expand as firms’ economic outlook improved, as well as the rising inventory and accounts receivable financing needs for borrowers.

Respondent banks said there was a net rise in credit demand from top corporations, large middle-market firms, as well as small businesses in the January to March period.

Meanwhile, the anticipated rise in retail borrowings in the second quarter is attributed to higher consumption, more attractive financing offerings by banks, lower interest rates, and higher housing investments.

Higher loan demand from households was also observed by banks in the January to March period, specifically in housing loans, credit card, auto loans, and salary loans.

In terms of commercial real estate loans, lenders expect demand to grow in the second quarter on customers’ positive economic prospects, increased inventory financing requirements, and lower customers’ internally generated funds.

Meanwhile, the respondent banks expect to tighten their credit standards for commercial real estate loans in the April to June period.

In the previous quarter, credit standards for commercial real estate saw net tightening, based on the diffusion index. This was reflected through wider loan margins, reduced credit line sizes, stricter collateral requirements and loan covenants, increase in use of interest rate floors, and shortened loan maturities.

For the April to June period, bank respondents said they also anticipate an increase in housing loan demand. Banks expect demand to be fueled by higher housing investment and household consumption as well as financial firms’ more attractive conditions for borrowers.

Based on the diffusion index approach, banks expect net easing in credit standards for housing loans. This will be backed by the improvement in borrowers’ profile, more optimistic economic growth outlook, and increased risk tolerance, lenders said.

In the previous quarter, banks reported a net easing for housing loan standards.

The latest central bank data showed bank lending expanded by 8.8% in February, faster than the 8.4% growth in January. This was backed by the expansion in both business and consumer credit. — Luz Wendy T. Noble