BANKS kept their lending criteria largely steady during the third quarter, according to a central bank survey.

Results of the Senior Bank Loan Officers’ Survey conducted by the Bangko Sentral ng Pilipinas (BSP) show that universal and commercial banks continued to maintain their credit standards for loans to both enterprises and households during the three month period.

This marks the 34th straight quarter that borrowing standards were kept “broadly steady,” according to the report.

The central bank uses the quarterly survey to understand the lending decisions made by banks and monitor bank credit. The BSP said 29 out of 35 big banks responded to the poll.

Some 88.9% of lenders surveyed said they used the same standards for granting loans to businesses, slightly lower than the 90% that said so during the second quarter.

Through the diffusion index (DI) however, it showed that there was a net tightening of credit standards for business loans due the respective banks’ less favorable economic outlook, as well as perceptions of stricter financial system regulations, reduced tolerance for risk, and a decline in borrowers’ profiles.

This was due to stricter loan agreements, increased interest rate floor use – especially in loans to large middle-market enterprises and small- and medium-sized enterprises.

Moreover, the survey said that most of the respondent banks anticipate unchanged credit standards in the fourth quarter, while the DI approach showed that some respondent banks expect their overall credit standards for business loans to tighten, largely due to banks’ less favorable economic outlook and a decrease in the profitability of banks’ portfolio.

Loans to households on the other hand also saw 90% of its respondents to keep its lending standards in both the modal and the DI approach.

“The maintained overall credit standards were attributed by respondent banks to their unchanged tolerance for risk and stable profile of their household borrowers, among others. In terms of specific credit standards, results based on the DI approach indicated overall unchanged collateral requirements, loan covenants and use of interest rate floors,” the report read.

Coming into the fourth quarter, banks still expect to keep credit standards through the modal approach, but the DI showed a net easing on housing, credit card and auto loans, over increased tolerance for risk, anticipated improvement in profitability, as well as a favorable economic outlook.

Overall, the banks also reported stable loan demand from both businesses and households.

Some lenders even said that they expect an increased demand this quarter largely due to to low interest rates and banks’ more attractive financing terms.

“Respondent banks cited expectations of higher working capital and accounts receivable financing needs of borrower firms as the key factors behind the expected increase in demand for business loans,” the report read.

“Meanwhile, the anticipated net increase in household loan demand was attributed by respondent banks to expectations of more attractive financing terms offered to clients and continued low interest rates along with higher household consumption,” it added.

Moreover, 84.2% of the respondents also indicated unchanged credit standards for both commercial and household real estate loans in the third quarter, but the DI approach show a sustained net tightening of real estate commercial credit standards for the seventh consecutive quarter.

The banks see unchanged credit standards for housing loans this quarter in the modal approach, but the DI however pointed to a net easing.

The banks also expect loan demand for both housing and commercial property to keep rising during the fourth quarter due to increased working capital needs, banks’ more attractive financing terms and lower interest rate. – Elijah Joseph C. Tubayan

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