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Philippines: Strong loan demand seen
MANILA, Philippines — Philippine banks are expecting increased loan demand from companies and households in the current quarter amid easing COVID restrictions and increasing economic activity, according to the results of a survey conducted by the Bangko Sentral ng Pilipinas (BSP).
Based on the Senior Bank Loan Officers’ Survey (SLOS) for the first quarter, the BSP said there is a net rise in overall demand for credit from across all firm types, particularly for top corporations, large middle-market firms, small and medium enterprises (SMEs) and micro-enterprises using the diffusion index (DI) approach.
The central bank said the survey indicated expectations of a net increase in overall demand for credit from firms, which were largely attributed to the improvement in customers’ economic outlook, as well as increased inventory and accounts receivable financing needs for borrowers.
Furthermore, the BSP said the results of the survey also showed a net increase in overall demand for all categories of household loans, including housing loans, credit card loans, auto loans, and personal or salary loans.
“Likewise, DI-based results also pointed to anticipations of a net rise in loan demand from consumers driven by higher household consumption, banks’ more attractive financing terms, lower interest rates and higher housing investment,” the BSP said.
A majority of the respondent banks reported an increased overall demand for credit for both companies and households from January to March this year.
“Bank respondents stated that the net increase in demand for business loans was attributed to the improvement in firms’ economic growth outlook as well as firms’ higher financing requirements for inventory and accounts receivable. Similarly, the net increase in credit from consumers was associated with higher household consumption, bank’s more attractive financing firms, and higher housing investment,” it said.
The BSP said banks expect a net tightening of loan standards in the second quarter given increased uncertainty in economic growth outlook, reduced risk tolerance and a deterioration in borrower’s profile and bank’s portfolio.
In terms of specific credit standards, the net tightening of overall lending standards was manifested through stricter collateral requirements and loan covenants, reduced size of credit lines, and increased use of interest rate floors.
However, the central bank said the results of the survey pointed to a net easing of overall lending standards for households in the current quarter due to the improvement in borrower’s profile, less uncertain economic outlook and increased tolerance for risk.
The general net easing of lending standards to households was reflected in eased collateral requirements, longer loan maturities and decreased use of interest rate floors.
Survey responses for the first quarter SLOS were gathered between March 1 and April 7. The BSP has been conducting the SLOS since 2009 to gain a better understanding of banks’ lending behavior, which is an important indicator of the strength of credit activity in the country.
Latest data from the BSP showed that bank lending further accelerated for the seventh straight month, rising by 8.8 percent in February to P9.72 trillion from P8.94 trillion in the same month last year as credit activity continues to gain momentum on the back of improved mobility and market demand due to easing COVID restrictions.
Source: https://www.philstar.com/business/2022/04/25/2176463/strong-loan-demand-seen