Demand for loans still strong - BSP

MANILA, Philippines - Strong demand for loans from enterprises and households has been sustained amid the low interest rate regime despite the economic slowdown last year, brought about by the weak global trade as well as the cautious spending by the Aquino administration, the Bangko Sentral ng Pilipinas (BSP) reported over the weekend.

Dennis Lapid of the BSP’s Department of Economic Research (DER) told reporters that the Q3 2011 Senior Bank Loan Officers’ Survey pointed to a sustained increase in demand for loans from enterprises except for micro-enterprises and households, except auto loans.

Lapid said the net increase in demand for loans for business was attributed by banks to increased customers’ inventory and accounts receivable financing needs as well as the relatively low interest rates.       On the other hand, he pointed out that the increase in demand for household loans could be traced to the attractive terms of financing offered by banks, the relatively low interest rates, as well as higher housing investment of households.                  

The survey showed that overall change in demand for loans by enterprises increased to 33.3 percent in the fourth quarter last year from 21.4 percent in the third quarter as demand from top corporations jumped to 44.4 percent from 28.6 percent while that of small and medium enterprises increased to 33.3 percent from 30 percent.

“The overall unchanged credit standards for loans to enterprises reflected the banks’ steady outlook on the general economy and certain industries amid more uncertain global economic prospects, stable asset portfolio, and unchanged tolerance for risk,” Lapid said.

On the other hand, the change in demand for loans eased to 14.3 percent in the fourth quarter last year from 33.3 percent in the third quarter.                                  

“The survey results indicated unchanged credit standards across all types of loans to households, following an overall net easing observed in the past two quarters.

The unchanged view of respondent banks on the economy, stable asset portfolio of banks and unchanged tolerance for risk and profile of borrowers contributed to the unchanged credit standards for loans to households during the quarter,” he added.

He explained that the overall positive net change in demand for corporate and household loans was consistent with the strong bank lending growth.                        

 BSP data showed that loans extended by universal and commercial banks jumped 22.5 percent to P2.75 trillion as of end-November last year from the end-November 2010 level of P2.244 trillion, as companies and individuals borrowed more despite the weaker-than-expected economic growth.

The BSP said the amount of money circulating in the domestic economy, known as M3, grew at 7.2 percent to P4.442 trillion as of end-November last year from the year-ago level of P4.143 trillion.                 The country’s gross domestic product growth slackened to 3.7 percent last year from 7.6 percent in 2010 due to weak global trade and slower spending by the Aquino government.

The survey consists of questions related to the general credit standards of commercial banks in the Philippines, as well as factors affecting the supply of and demand for loans by both enterprises and households.