Banks keep lending standards steady

PHILIPPINE BANKS expect to keep their lending standards largely unchanged this quarter as they expect steady credit demand from both businesses and households, a survey by the Bangko Sentral ng Pilipinas (BSP) showed.

According to the BSP’s latest Senior Bank Loans Officers’ Survey (SLOS) published on Monday, 86% of banks expect to keep their standards for business loans this quarter, higher than the 78.9% seen in the July-September period, based on the modal approach.

“The rest of the respondents are split between easing (3.5%) and tightening (10.5%),” the BSP added.

For households, 87.5% of banks also expect to keep the same lending standards, up from 77.5% last quarter.

“Around 10% expect to tighten standards, while 2.5% may ease them.”

Lending standards are used by banks when approving loans. These include interest rates, loan size, collateral, loan conditions, and repayment terms.

Through the SLOS, the BSP analyzes the quarter-on-quarter changes in banks’ loan officers’ perceptions of their overall credit standards and the factors affecting loan supply and demand. It uses both the modal approach, which requires a categorical response, and the diffusion index (DI) method, which reflects the net difference between the respondents’ answers.

The BSP surveyed 58 banks in the country for the latest SLOS from Sept. 11 to Oct. 21, translating to a 96.7% response rate.

Meanwhile, under the DI method, the survey showed that a net 7% and 7.5% of banks said they expect to tighten rather than loosen standards for business loans and household credit, respectively, in the period.

“This indicates that any future change in credit standards is more likely to reflect tightening than easing,” the BSP said.

LOAN DEMAND
This comes as 73.7% of banks surveyed said they see steady demand for business loans this quarter, based on the modal approach, slightly lower than the 75.4% in the third quarter.

“Meanwhile, 1.8% of banks anticipate a decline in loan demand, compared to 5.3% in the previous quarter. About 24.6% of banks expect loan demand to increase, up from 19.3% in the third quarter,” the central bank said.

For household loans, 65% of the respondent banks said they see stable demand for credit, lower than the 75% recorded in the third quarter.

Meanwhile, some 25% said they anticipate higher demand, up from 17.5% previously, and 10% expect a decline, up from 7.5% last quarter.

Bank lending increased by 11.2% year on year to P13.62 trillion at end-August, slower than the 11.8% growth in July, latest BSP data showed. — K.K. Chan