Credit stance steady, demand turns supportive
From AB Capital's The Opening Bell: Three Moves
Event
BSP survey shows banks keeping lending standards largely unchanged in 1Q26, with 88% steady for enterprises and 80% for households. While a tightening bias persists, net tightening expectations eased versus 4Q25.
View
We think this signals cautious normalization rather than credit stress. Stable standards alongside improving loan demand point to early-cycle recovery dynamics. In our view, this is earnings-supportive for banks as volume growth can resume without aggressive repricing or underwriting slippage.
Catalyst
Key catalysts include actual loan growth prints in 1H26 and further BSP rate cuts. Upside comes from faster household and SME borrowing. Downside risks include weaker capex sentiment. We estimate that for every 1pp loan growth improvement moves bank earnings by 3-4%.
Action
We prefer large banks with balance sheet flexibility i.e. BDO (O/P, TP P175.6) and BPI (O/P, TP P138.4). Steady credit standards with rising demand support a gradual banking earnings re-acceleration.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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