BANKS effectively maintained stable credit standards throughout the last quarter of last year, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
The Senior Bank Loan Officers' Survey results indicate that a larger percentage of bank respondents kept their overall credit requirements steady for lending to both firms and households.
A greater majority of surveyed banks had unchanged lending standards for business loans, as per the modal-based results for the fourth quarter of 2023 (Q4 2023).
However, the diffusion index (DI) approach indicated a net tightening of overall credit standards across all borrower firm sizes.
Bank participants attributed the overall tightening of lending requirements to reduced risk tolerance, deterioration of borrowers' profiles and the profitability of banks' portfolios, as well as more stringent financial system regulations.
"Over the next quarter, both the modal and DI methods indicated respondents' expectations of generally unchanged credit standards for enterprises amid banks' sustained tolerance for risk and stable outlook for the overall economy as well as for industries and firms, along with the steady profiles of borrowers," the central bank said in a statement.
On the other hand, DI-based statistics showed that most respondent banks (70.6 percent) maintained their credit standards for loans to households.
It pointed to a net easing credit standards for consumer loans owing mainly to the "improvement in profitability of banks' portfolios, higher risk tolerance and less uncertain economic outlook."
In the upcoming quarter, the modal approach indicates that the majority of banks expect generally unchanged credit standards for household loans.
Conversely, the DI approach reveals banks' anticipation of a sustained net easing of credit standards, propelled by expectations of improved portfolio profitability, increased risk tolerance and a more favorable economic outlook.
Moreover, loan demand from both enterprises and consumers indicated substantially stable, based on the survey findings using a modal approach.
Meanwhile, DI-based statistics revealed a net rise in overall loan demand across all company classifications.
The BSP noted that the overall net increase in demand for business loans was propelled by an enhanced economic outlook among customers, a rise in customer inventory financing and accounts receivable needs, and a lack of alternative sources of funds.
"In the next quarter, most of the respondent banks expect broadly steady loan demand from businesses," the central bank said.
"Meanwhile, the DI method indicated that participating banks anticipate a net rise in credit demand from businesses for the first quarter of 2024 driven by customers' more positive economic prospects along with higher customer inventory financing and accounts receivable needs," it added.
A majority of participating banks (56.3 percent) reported generally steady loan demand from consumers in the fourth quarter of 2023, according to the modal approach.
However, the DI method indicated a net increase in consumer loan demand across all major categories, attributed to higher household consumption and more attractive financing terms offered by banks.
Looking ahead to the first quarter of this year, around half of the bank respondents (50.0 percent) expect higher demand for credit from households using the modal approach.
The DI approach also indicated a net increase in consumer loan demand, driven by expectations of higher household consumption and housing investment, more attractive financing terms from banks and lower-income prospects.
On the other hand, the survey pointed to broadly steady lending standards and overall credit standards for commercial real estate loans (CRELs) recorded at 82.9 percent.
Findings indicated a net tightening of lending requirements for CRELs largely due to a deterioration in borrowers' profiles and banks' reduced tolerance for risk.
"In the next quarter, a larger number of participating banks anticipate to keep their loan standards for CRELs unchanged based on the modal approach, while the DI-based results show expectations of net tightening credit standards for CRELs," the BSP said.
In terms of loan demands, CRELs are broadly steady in the fourth quarter of 2023 and are also expected to be maintained in the first quarter of this year, based on the modal approach.
The DI method also showed a net increase in demand for CRELs in both Q4 2023 and the following quarter.
This increase is attributed to improvements in customers' economic prospects, heightened needs for customer inventory and accounts receivable financing, more appealing financing terms offered by banks and manageable interest rates.
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