MANILA, Philippines — Philippine banks expect a higher loan demand from companies and households this quarter despite the series of interest rate hikes as the economy further reopens from strict COVID quarantine and lockdown protocols, according to the results of a survey conducted by the Bangko Sentral ng Pilipinas (BSP). Based on the third quarter 2022 Senior Bank Loan Officers’ Survey (SLOS), BSP Governor Felipe Medalla said banks expect a net increase in overall demand for loans from businesses in the fourth quarter due to the anticipated improvement in customers’ economic prospects as well as increased customer inventory and accounts receivable financing needs.
Likewise, Medalla said there was also a net increase in overall credit demand from consumers as anticipated by surveyed banks in the current quarter, largely due to higher household consumption and more attractive financing terms offered by banks.
“While the diffusion index approach generally showed sustained expectations of a net increase in loan demand from enterprises and consumers, it should be noted that diffusion index indicators reflected a slowdown in loan demand compared to the previous quarter amid weakened business and consumer confidence,” the BSP chief said.
For the third quarter alone, Medalla said the survey indicated a net rise in overall loan demand from across all firm classifications and main categories of household loans, including housing loans, credit card loans, and personal or salary loans.
“The general net increase in credit demand from enterprises were reportedly due to improvement in customers’ economic outlook and increase in customer inventory and accounts receivable financing needs. Similarly, the overall net rise in consumer loan demand was associated with higher household consumption, lower income prospects, and banks’ more attractive financing terms,” he said.
This despite the tighter lending standards for enterprises from July to September as well as a more relaxed standards for consumer loans.
The BSP chief pointed out that banks expect a net tightening of lending standards for enterprises in the current quarter due to the decline in tolerance for risk, deterioration in borrowers’ profiles, and less optimistic economic outlook.
On the other hand, the central bank governor said the survey showed banks are expecting a net easing in overall credit standards for households driven by the improvement in borrowers’ profiles and profitability of banks’ portfolios as well as increased risk tolerance.
Survey responses were gathered between Sept. 1 and Oct 11. 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 big banks sustained a double-digit credit growth amid the aggressive rate hikes by the Monetary Board to tame inflation and stabilize the peso.
Preliminary data released by the central bank showed that the increase in loans extended by universal and commercial banks remained steady at 12 percent in July. This was the fastest since the 12.7 percent recorded in April 2020.
Loans disbursed by universal and big banks amounted to P10.21 trillion in end-July this year, P1.09 trillion higher than the P9.12 trillion recorded in end-July last year.
“The sustained growth in bank lending and liquidity will support the recovery of economic activity and domestic demand. Looking ahead, the BSP will continue to ensure that liquidity and credit dynamics remain in line with the BSP’s price and financial stability objectives,” the central bank said .
Data from the BSP showed loans to production activities increased by 11.6 percent to P8.96 trillion in July from P8.04 trillion in the same period last year, while consumer loans also grew at a faster rate of 14.7 percent to P934.71 billion