BANKS effectively upheld stable credit standards during the second quarter of this year, the Bangko Sentral ng Pilipinas (BSP) reported late Friday.
The Senior Bank Loan Officers' Survey results showed that a larger percentage of banks maintained overall credit requirements for both firms (87.0 percent) and households (84.2 percent).
The survey's modal-based results showed that a greater majority of surveyed banks kept lending standards for business loans unchanged.
The diffusion index (DI) approach, on the other hand, indicated a continued net tightening of credit standards due to the deterioration of borrowers' profiles and the profitability of banks' portfolios.
For the next quarter, banks' expectations on lending standards for firms were unchanged, but DI results revealed that they still anticipated a net tightening in credit standards, again due to the "deterioration in borrowers' profiles and in the profitability and liquidity of banks' portfolios."
The DI method also indicated that credit standards remained unchanged in the second quarter, similar to the previous quarter. This was attributed to the stable profiles of borrowers and banks' unchanged tolerance for risk.
For the next quarter, based on the modal approach, more banks anticipate keeping loan standards unchanged for households.
Based on the DI approach, banks anticipate a net easing of lending standards due to higher risk tolerance, improved loan portfolio profitability, and a less uncertain economic outlook.
Loan demand from both enterprises and consumers indicated this was substantially stable, based on the survey findings using a modal approach.
DI-based statistics revealed a net rise in overall loan demand across all company classifications.
The BSP said the overall net increase in demand for business loans was propelled by increased inventory and accounts receivable financing needs as well as improvement in economic outlook.
"In the next quarter, most of the surveyed banks (66.0 percent) expect broadly steady loan demand from firms," it added.
However, DI results showed that bank participants expect a net increase in credit demand from businesses in the next quarter due to firms' higher inventory and accounts receivable financing needs.
A majority of participating banks reported generally steady loan demand from consumers in the second quarter based on the modal approach.
However, the DI method indicated a net increase in consumer loan demand across all key household loan categories, driven by banks' more attractive financing terms as well as higher household consumption and housing investment.
Looking ahead to the third quarter of this year, most of the bank respondents expect steady demand for loans to households.
The DI approach also indicated a net increase in household loan demand driven by rising household consumption and banks' more attractive lending terms.
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