Banks see higher loan demand in Q3

MANILA, Philippines — Banks still expect stronger loan demand from corporates and households for the third quarter despite the prevailing high interest rates, although the lenders see tighter credit standards for enterprises over the next quarter.

Based on the Senior Loan Officers’ Survey of the Bangko Sentral ng Pilipinas (BSP)  for the second quarter, banks are expecting a net increase in overall loan demand both from corporate and household borrowers.

Despite the aggressive rate hikes delivered by the BSP, participating banks anticipate a net rise in credit demand from businesses in the third quarter using the diffusion index (DI).

“Bank participants anticipate a net rise in credit demand from businesses in the third quarter of 2024 given firms’ higher inventory and accounts receivable financing needs,” the central bank said.

Using the same approach, the BSP said banks saw a net increase in loan demand from businesses in the second quarter compared to the previous quarter due to clients’ more optimistic economic outlook and increased inventory and accounts receivable financing needs.

For the first quarter of the year, banks are expecting generally unchanged credit standards for enterprises. But DI results showed banks’ anticipation of tighter credit standards given the deterioration in borrowers’ profiles and in the profitability and liquidity of banks’ portfolios.

Meanwhile, the DI results showed a net increase in household loan demand in July to September, mainly due to rising household consumption and banks’ more attractive lending terms.

Using the modal approach, more than half or 60.5 percent of bank respondents anticipate higher demand for credit from households.

Banks also indicated a continued net easing of credit standards in the third quarter amid expectations of improved profitability of their loan portfolios, higher risk tolerance and more favorable economic outlook.

The SLOS includes questions regarding loan officers’ perceptions of the overall credit standards of their respective banks, as well as the factors affecting the supply of and demand for loans to both enterprises and households.

The analysis focuses on the quarter-on-quarter changes in the perception of respondent banks.

The responses for the second quarter SLOS were gathered from May 29 to July 10, with a total of 55 respondent banks out of 60 surveyed banks. This lead to a higher response rate of 91.7 percent compared to the previous quarter.