Banks see stronger loan demand in Q4

MANILA, Philippines — Banks expect stronger demand for loans this quarter while keeping lending standards largely unchanged despite lingering economic uncertainty, according to the Bangko Sentral ng Pilipinas (BSP).

Results of the BSP’s latest Senior Bank Loan Officers’ Survey (SLOS) showed that 80.8 percent of respondent banks expect to maintain their credit standards for business loans in the fourth quarter, higher than 71.2 percent in the previous quarter.

For household loans, 85.7 percent of banks expect lending standards to remain unchanged, up from 77.1 percent in the third quarter.

Credit standards refer to the rules banks use in approving loans, including interest rates, collateral requirements, loan amounts and repayment terms. The results suggest that banks are becoming less inclined to tighten lending requirements.

For business loans, the share of banks expecting to tighten credit standards declined to 17.3 percent from 28.8 percent. Meanwhile, 1.9 percent intends to ease lending rules, compared with none previously.

For household loans, the share of banks expecting tighter standards fell to 11.4 percent from 17.1 percent, while those expecting easier requirements declined to 2.9 percent from 5.7 percent.

Despite the softer tightening bias, banks cited uncertainty over the economic outlook, deteriorating borrower profiles and reduced willingness to take risks as factors that could prompt stricter lending requirements.

Meanwhile, banks anticipate stronger borrowing appetite from both businesses and consumers in the October to December period.

For enterprise loans, 69.2 percent of banks expect demand to remain unchanged, down from 75 percent in the previous quarter.

However, the share of banks expecting higher business loan demand rose to 26.9 percent from 19.2 percent, while those anticipating weaker demand declined to 3.8 percent from 5.8 percent.

The BSP attributed the expected pickup to higher financing requirements for inventories and accounts receivable, or money owed to businesses by their customers, as well as limited access to alternative funding sources.

A similar trend emerged in household lending, where 37.1 percent of banks expect demand to increase in the fourth quarter, nearly double the 20 percent recorded in the previous survey.

Meanwhile, 60 percent expect household loan demand to remain unchanged, down from 71.4 percent, while only 2.9 percent anticipate a decline, compared with 8.6 percent previously.

Banks expecting higher household loan demand cited stronger consumer spending, more attractive bank financing terms and increased housing investment as major drivers.

The BSP survey gathered responses from 55 out of 60 banks between Sept. 2 and Oct. 6.

The quarterly survey covers universal and commercial banks, thrift banks and rural banks. It tracks changes in banks’ lending policies and their assessment of borrowing demand, providing an indication of future credit conditions in the economy.