BSP bank survey shows loan demand picking up

MANILA, Philippines — Banks expect higher demand for loans from corporate and individual borrowers to spike in the first quarter amid the optimistic economic outlook as the country continues to recover from the pandemic. 

According to the Bangko Sentral ng Pilipinas (BSP), results of the Q4 2021 Senior Bank Loan Officers’ Survey (SLOS)  showed a net rise in loan demand from businesses and households.

The BSP said results from the diffusion index method reflected expectations of a net rise in overall loan demand from businesses, mainly associated with clients’ improvement in economic outlook as well as increased inventory and accounts receivable financing needs.

Likewise, the diffusion index approach manifested banks’ anticipation of net increase in overall consumer loan demand due to more attractive financing terms and higher household consumption.

The country rebounded strongly from the pandemic-induced recession that stretched through five quarters with a gross domestic product (GDP) growth of 5.6 percent  in 2021, a reversal of the 9.6 percent contraction in 2020.

In the fourth quarter of last year, the BSP reported an increase in overall demand for business loans across all major loan categories, particularly for top corporations, large middle-market firms, as well as micro, small and medium enterprises.

The central bank added that demand for consumer loans, including those for housing, credit card and autos also increased from October to December last year.

 “Based on the survey responses, the net increase in businesses’ demand for credit was influenced by the improvement in customers’ economic outlook and the rise in customers’ financing requirements for inventory and accounts receivable,” it said.

On the other hand, the BSP said the net increase in loan demand for households was reportedly due to higher household consumption, banks’ more attractive financing terms and lower interest rates.

The BSP has maintained an expansionary monetary policy stance by keeping interest rates at record lows to allow economic recovery to gain more traction.

After slumping for eight straight months between December 2020 and July 2021, lending by big banks increased for four straight months from August to November last year as the economy finally absorbed the aggressive 200-basis-point interest rate cuts in 2020.

The COVID response measures of the BSP, including the reduction of the reserve requirement ratio, have unleashed P2.3 trillion or 13 percent of GDP into the financial system to boost economic activity.

The survey, covering 50 banks and conducted from Nov. 29 last year to Jan. 11 this year, showed banks are expected to tighten lending standards in the first quarter of 2022 mainly due to less favorable economic outlook and deterioration of borrowers’ profile.

BSP Governor Benjamin Diokno said bank lending appears to have bottomed out, and sees credit growth accelerating further this year.

“We are slowly seeing signs of economic normalization as a result of our concerted efforts. Bank lending appears to have bottomed out, with loans by universal and commercial banks expanding by four percent in November from 3.5 percent in October,” he said.