DOMESTIC banks see sustained lending standards and steady credit demand for the second quarter (Q2) of the year, according to the Bangko Sentral ng Pilipinas’ (BSP) Senior Bank Loan Officers’ Survey.
Lending standards are the rules banks use when granting loans, including interest rates, loan sizes, collateral requirements, loan terms and repayment terms.
Data from the survey are interpreted in two ways. The modal method identifies the direction of credit standards or demand — whether it will remain the same, ease or tighten — based on the choice made by the highest percentage of respondents.
The diffusion index is the difference between the percentage of respondents who expect an easing and those who want tightening, and disregarding those who see standards unchanged.
Some 61.5 percent of respondent banks foresee constant standards for business loans, while 30.8 percent see tightening, and 7.7 percent anticipate easing compared to the first quarter (Q1).
Banks looking at maintained credit standards were lower than last quarter’s 71.2 percent, while anticipations of tightening and easing were lower than last quarter’s 26.9 percent and 1.9 percent, respectively.
Using the diffusion index method, tightening and easing expectations would result in a 23.1-percent net tightening for business loans.
As for household loans, 65.7 percent of banks assume to maintain current lending standards unchanged. On the other hand, 28.6 percent predict a tightening and 5.7 percent see an easing compared to Q1.
Also in Q1, 77.8 percent projected unchanged credit standards; 16.7 percent, tightening; and 5.6 percent, easing.
Using the diffusion index resulted in a 22.9 percent net tightening, given that 28.6 percent of banks projected tightening compared to 5.7 percent for easing.
Banks were also asked about their expectations for business and consumer loan demand for Q2.
About 53.8 percent foresee business loan demand to be constant, while 34.6 percent and 11.5 percent anticipate increased and decreased demand, respectively. This means a 23.1-percent net increase, based on the diffusion index.
Meanwhile, 52.9 percent assume household loan demand to remain unchanged. This was higher than the 23.5 percent expecting an increase and 23.5 percent seeing a decrease, which also leads to a neutral outlook with the diffusion index at zero.
Continued credit expansion will likely support economic growth despite the effects of the war in the Middle East, the BSP said.
