PHILIPPINE banks expect more businesses and households to borrow in the third quarter (Q3), according to the Bangko Sentral ng Pilipinas’ (BSP) latest survey of bank lending officers.
The Senior Bank Loan Officers’ Survey found that while most financial institutions retain their lending rules from July to September, a growing number are seeing stronger demand for loans from companies and consumers compared with the second quarter.
Using a diffusion index method, the survey showed that 24.5 percent of respondent banks project demand for business loans to rise Q3, up sharply from 7.5 percent in the previous quarter.
Using a separate modal approach, 64.2 percent of banks forecast business loan demand to stay unchanged, 30.2 percent see it rising and 5.7 percent predicting it to fall.
The BSP said banks are seeing stronger demand from businesses mainly because companies need more money to stock up on inventory and cover receivables, on top of a brighter outlook for the economy.
Household borrowing is also expected to pick up. Banks pointed to several reasons: consumers are spending more, have fewer other ways to raise funds, are investing more in housing and are finding bank loan terms more attractive.
Under the diffusion index method, 20 percent of banks see household loan demand to increase — a turnaround from Q2, when banks had expected demand to fall.
Under the modal approach, 57.1 percent of banks see no change in household loan demand, while 31.4 percent project an increase.
Even with an expected growth in loan demand, banks said they would remain careful about who they lend to. The survey showed 75.5 percent of banks foresee their standards for business loans to continue in Q3, up from 71.1 percent in the previous survey, while 80.0 percent anticipate no change in standards for household loans.
The BSP said this points to credit conditions that remain broadly stable, with banks continuing to assess borrowers carefully even as economic conditions shift.
Fewer banks than before said they plan to tighten their lending standards, suggesting they are becoming less inclined to pull back on credit.
Still, the BSP noted that the index for business and household loans remains in positive territory, meaning banks on the whole are still leaning toward tightening, rather than loosening, their standards.
Banks that plan to tighten standards said this would likely be driven by a less certain economic outlook, lower appetite for risk and concerns about worsening borrower quality.
The BSP conducted the survey from June 3 to July 7, covering 56 of the 60 banks it polled, or a 93.3-percent response rate. Participants included universal and commercial banks, thrift banks and rural banks.
