Auto loans seen to decline further in next few months

CEBU, Philippines — Financial institutions expect a lingering decline of auto loans in the next few months, as the Coronavirus (COVID-19) continues to fuel uncertainties.

Results of the second quarter 2020 survey conducted by the Bangko Sentral Ng Pilipinas (BSP) on Senior Bank Loan Officers’ Survey (SLOS) showed that most of the respondent banks tightened their overall credit standards for loans to both enterprises and households during the quarter based on the modal approach.

This is the first time that the majority of respondent banks reported tighter credit standards following 44 consecutive quarters of broadly unchanged credit standards.

Diffusion Index (DI-based) results indicated expectations of a net decline in demand for housing and auto loans. While demand for credit card and personal/salary loans pointed to a net increase.

Respondent banks cited lower housing investment and household consumption as major reasons for the anticipated net decrease in demand for housing and auto loans for the next quarter.

The overall net decrease in loan demand from firms was associated by respondent banks mainly to the deterioration in clients’ business prospects amid the lockdown, decline in customer inventory financing needs and working capital requirements, attributed in turn to delay in investment plans in plant or equipment.

Meanwhile, respondent banks cited lower household consumption and housing investment as major reasons for the overall net decrease in household loan demand for the quarter.

It should be noted that the period covered in the latest survey (Q2 2020) coincided with the period when strict lockdown measures implemented in response to the COVID-19 pandemic were still in effect, particularly the implementation of the Luzon-wide enhanced community quarantine (ECQ) from 17 March - 30 April 2020, prior to the start of the gradual easing of quarantine measures in some areas by May 2020.

On the other hand, the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) expects vehicle sales recovery by fourth quarter this year, as some markets in the Philippines have eased quarantine measures.

“We hope to see some gradual recovery perhaps by fourth quarter of the year,” said CAMPI president Rommel Gutierrez in a report.