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Philippines: Banks tighten standards for commercial real estate loans
MANILA, Philippines — Local banks continued to tighten their credit standards for real estate loans to corporations in the fourth quarter of 2017, results of a Bangko Sentral ng Pilipinas (BSP) survey showed.
Based on the central bank’s Senior Bank Loan Officers’ Survey (SLOS) for December 2017, banks saw a net tightening of their overall lending standards for commercial real estate loans from October to December using the diffusion index approach.
This is the eighth consecutive quarter that more banks have tightened their real estate loan standards.
“The tighter overall credit standards for commercial real estate loans reflected respondent banks’ wider loan margins, reduced credit line sizes, stricter collateral requirements and loan covenants, shorter loan maturities, and increase in use of interest rate floors,” the BSP said.
Over the next quarter, the BSP said more banks expect a continued net tightening of credit standards.
In terms of demand, the diffusion index approach showed a number of banks indicated increased demand for commercial real estate loans during the period.
The strong demand was driven by the increased investment in plants and equipment, improvement in borrower firms’ economic outlook, and attractive financing terms and lower interest rates, the BSP said.
The central bank said a number of banks also anticipate demand to continue to increase in the next quarter.
Meanwhile, lending standards for real estate loans to households remained unchanged in the last three months of 2017.
“The unchanged credit standards for housing loans was attributed by respondent banks largely to unchanged profile of household borrowers, their stable economic outlook as well as unchanged tolerance for risk for the said type of loan,” the BSP said.
Over the next quarter, banks also foresee unchanged credit standards for housing loans.
“At the same time, results continued to show increased demand for housing loans in the fourth quarter of 2017 as well as expectations of a sustained increase in demand for the said type of loan in the next quarter,” the BSP said.
The BSP started conducting the SLOS in 2009 with the goal of gaining a better understanding of banks’ lending behavior, which it described as an important indicator of the strength of credit activity in the country.
Source: http://www.philstar.com/business/2018/01/22/1779982/banks-tighten-standards-commercial-real-estate-loans