Banks see higher loan demand in Q2

MANILA, Philippines — Philippine banks are projecting a higher loan demand from both corporate and household borrowers in the second quarter amid a rosier economic outlook and more attractive financing terms from lenders.

Based on the Bangko Sentral ng Pilipinas (BSP)’s first quarter Senior Loan Officers’ Survey (SLOS), banks are expecting a net increase in overall loan demand from companies from April to June based on the diffusion index (DI).

“The DI method indicated that participating banks expect a net increase in credit demand from businesses in the second quarter as firms finance their accounts receivable and operational requirements, such as increasing inventory levels to meet expected demand amid a more optimistic economic outlook,” BSP Governor Eli Remolona Jr. said. 

For the first quarter, the DI method reflected an overall rise in loan demand from across all firm classifications. This was mainly driven by banks’ more attractive financing terms, customers’ lack of alternative sources of funds as well as the improvement in clients’ economic prospects.

The demand for commercial real estate loans is expected to pick up as well in the second quarter amid higher customer inventory and accounts receivable financing needs along with customer’s more optimistic economic outlook.

The results of the latest SLOS also showed that respondents are expecting a net increase in overall consumer loan demand for the second quarter of the year.

“The DI method showed an anticipated net increase in consumer loan demand due mainly to higher household consumption and banks’ favorable financing terms,” Remolona said.

The same method showed a net increase in overall household loan demand across all consumer loan categories in the first quarter.

Banks also expect housing loans to increase in the second quarter amid higher household investment for housing.

The SLOS consists of questions on loan officers’ perceptions relating to the overall credit standards of their respective banks and to factors affecting the supply of and demand for loans to both enterprises and households.

The responses from 53 banks for the survey conducted between Feb. 28 and April 8 indicated that the DI method reflected a net tightening of lending standards for loans to businesses and an unchanged credit standard for loans to households.

Credit growth further accelerated for the third straight month in February, growing by 8.6 percent from 7.8 percent in January despite the high interest rate environment due to the BSP’s aggressive rate hikes from May 2022 to October 2023.

Data showed loans released by universal and commercial banks amounted to P11.6 trillion in end-February or P921 billion higher than the P10.7 trillion disbursed in the same month in 2023.