Banks see loan demand picking up

MANILA, Philippines — Philippine banks see higher loan demand from businesses and households in the last quarter despite tighter credit standards on the back of the industry’s decreased tolerance for risks amid the pandemic, according to a survey conducted by the Bangko Sentral ng PIlipinas (BSP).

In a virtual press conference, Lara Romina Ganapin, bank officer IV at the Monetary Policy Research Group of the BSP, said  the diffusion-index approach of the Senior Loan Officers’ Survey (SLOS) for the third quarter indicated  a net increase in overall load demand from businesses and households.

“For the following quarter, a majority of respondent banks anticipate generally steady loan demand from firms and consumers, signaling the improvement in market sentiment brought about by the continued rollout of COVID-19 vaccines and the gradual easing of quarantine restrictions,” Ganapin said.

She said the expected net increase in overall loan demand from businesses could be attributed largely to corporate clients’ higher inventory financing requirements and accounts receivable financing needs as well as improvement in customers’ economic outlook.

Ganapin said the banks’ outlook of a net increase in overall loan demand from consumers is driven by higher household consumption, lower income prospects and banks’ more attractive financing terms.

In the third quarter, a majority of the respondent banks reported a net increase in overall demand for business loans across all major loan categories.

“As identified by the respondent banks, the slight net increase in loan demand from enterprises was induced by the increased inventory financing needs of clients and accounts receivable as well as the improvement in customers’ economic outlook,” Ganapin said.

On the other hand, net decline in demand for all key categories of household loans was observed in the third quarter, particularly credit card loans, auto loans and personal or salary loans.

Ganapin said respondent banks pointed to lower household consumption, banks’ less attractive financing terms, and higher interest rates as the main elements that influenced the reported fall in overall consumer loan demand.

Based on the survey conducted from Sept. 1 to Oct. 4, majority of the 51 respondent banks expects a net tightening of credit standards amid the uncertain economic outlook due to the   pandemic, a deterioration of borrowers’ profiles and in the liquidity of banks’ portfolio as well as the banks’ decreased tolerance for risk.