PHILIPPINE banks could see slower loan growth next year as elevated interest rates discourage households and corporations from borrowing, potentially tempering credit expansion, a key official of a major credit rating agency on Wednesday said.
“The view we have for next year is a bit cautious one,” Moody’s Ratings Financial Institutions Senior Vice President Eugene Tarzimanov said during a panel discussion.
“So, what’s driving that cautiousness? Obviously, we have much higher interest rates, and that’s the story for this year and probably will remain the story for next year as well,” he added.
Tarzimanov said persistently high borrowing costs would likely make consumers and corporations more cautious about taking out loans, prompting banks to adopt a more conservative approach to credit expansion.
The Bangko Sentral ng Pilipinas (BSP) has been raising interest rates since the Middle East war fuelled inflationary pressures early this year, pushing inflation to a three-year high of 7.2 percent in April.
In response, the Monetary Board began tightening monetary policy, delivering rate hikes totalling 125 basis points since April.
As inflation is expected to remain elevated until next year, the central bank delivered a 50-bps increase in its key policy rate last month, bringing it to 5.5 percent.
More cautious
Tarzimanov said banks could become more cautious in extending credit under the prevailing interest rate environment, with lending growth expected to moderate next year.
“So, from a credit growth perspective, I would expect a bit of a slowdown next year,” Tarzimanov said.
Tarzimanov argued that higher borrowing costs could discourage households from financing big-ticket purchases.
“Households are less eager to borrow when rates are high,” Tarzimanov said.
“I would expect a bit more credit or loan losses in the retail portfolio, and not so much in the large corporate groups,” he added.
He added that rising oil prices could eventually affect household purchasing power as higher production and operating costs feed into prices across the economy.
For banks, weaker borrowing appetite could translate into slower expansion of their loan portfolios, while financial pressure on borrowers could increase the risk of loan defaults.
Large corporate borrowers, meanwhile, are expected to remain relatively resilient, supported by their financial standing and access to funding.
Tarzimanov noted that Philippine banks have substantial exposure to large corporate groups but expected these accounts to remain generally sound.
Banks remain resilient
BSP Assistant Governor Rogelio Mercado Jr., however, said banks remain resilient despite global uncertainties.
He argued that banks remain the “principal source of financing for many Philippine households and businesses.”
“Capital markets, meanwhile, can provide long-term and more diversified funding for companies and infrastructure projects,” Mercado said.
“Having both strengthens the economy’s capacity to finance productive activity and withstand shocks,” he added.
Stable lending conditions
Results of the latest Senior Bank Loan Officers’ Survey of the central bank showed that for the October-to-December period, 80.8 percent of respondent banks expect credit standards for enterprise loans to remain unchanged.
Similarly, 85.7 percent foresee steady standards for household loans.
Both figures are higher than the Q3 2026 results of 71.2 percent for enterprises and 77.1 percent for households, pointing to a greater proportion of banks expecting lending conditions to remain stable.
Among banks anticipating adjustments, the bias toward credit tightening has moderated across both enterprise and household loans. A small share of banks also expects to ease their credit standards.
Respondents cited uncertainty over the economic outlook, deterioration in borrower profiles and lower risk tolerance as key factors that could lead to tighter standards.
