LENDERS generally kept strict lending standards in the third quarter, but fewer banks tightened their lending rules, based on a survey conducted by the Bangko Sentral ng Pilipinas (BSP).
The latest Senior Bank Loan Officers’ Survey (SLOS) released on Thursday showed a majority of banks kept their overall standards for loans to both enterprises and households based on the modal approach.
Based on the diffusion index, the study showed a net tightening of credit standards imposed for both businesses and retail borrowers in the July to September period.
“However, we also know note that a fewer number of banks reported tightened lending standards in the third quarter compared to the second quarter,” Lara Romina E. Ganapin, Bank Officer VI at the BSP’s Monetary Policy Research Group, said at an online briefing.
“There has also been a modest recovery in overall lending attitudes since the pandemic,” she added.
Credit standards that were particularly tightened for businesses include reduced credit line sizes; stricter collateral requirements and loan covenants; and increased use of interest rate floors.
On the other hand, banks reported some form of easing by extending longer loan maturities to firms.
Meanwhile, lending standards for households were tightened through lower credit line sizes, stricter loan agreements and collateral requirements. Banks eased credit standards for households by narrowing loan margins and lengthening loan maturities.
For the last three months of the year, the diffusion index approach showed lenders are expecting to implement stricter loan standards for businesses as they expect economic uncertainty to continue and a deterioration of borrowers’ profiles and in the liquidity of banks’ portfolio.
Meanwhile, bank respondents expect to relax lending standards for households on the back of better borrowers’ profiles and positive economic prospects.
“They [banks] expected strong growth in remittances, particularly during the Christmas holidays that provided support to the outlook for lending to households,” Ms. Ganapin said.
Loan demand is seen growing in the fourth quarter, based on the diffusion index approach.
Increased borrowings from businesses will be likely due to corporate clients’ higher inventory financing requirements and accounts receivable financing needs, as well as improvement in customers’ economic outlook, the survey showed.
Meanwhile, loan demand from the retail borrowers is expected to be driven by higher consumption, lower income prospects, and more attractive financing terms offered by banks.
Bank lending in August rose 1.3%, ending eight straight months of decline.
For the third quarter SLOS round, the BSP sent questions to 64 banks, 51 of whom responded. This represents a response rate of 79.7%. — Luz Wendy T. Noble