Banks keep credit standards steady

MANILA, Philippines — Philippine banks largely kept their credit standards unchanged in the first quarter, according to the Bangko Sentral ng Pilipinas (BSP)’s latest senior bank loan officers’ survey (SLOS).

“Majority of the participating banks maintained their credit standards for loans to businesses and consumers based on the modal approach. Meanwhile, the diffusion index (DI) method indicated a net tightening of credit standards for business loans and households,” the BSP said.

Using the modal approach, which captures the most common response among banks, the BSP reported that 81.8 percent of banks maintained their lending standards for enterprises, a slight dip from 83.3 percent a quarter ago.

Similarly, 86.8 percent of banks kept their household loan standards unchanged in the first quarter compared to 89.5 percent in the previous quarter.

However, the DI approach, which is an alternative method that considers the net difference between banks tightening versus easing credit, showed a net tightening for both business and household loans.

Banks cited deteriorating borrower profiles and reduced profitability of loan portfolios as key reasons for the more cautious stance.

Looking ahead to the second quarter, most banks expect lending standards to remain stable, with 85.5 percent predicting no change for enterprise loans and 82.1 percent for consumer loans.

Still, the DI method suggests that some tightening may continue due to concerns over borrower risk and portfolio performance.

On the demand side, the survey showed steadier loan appetite from businesses, although with some softening compared to the previous quarter.

Around 67.3 percent of banks reported no change in enterprise loan demand, down from 74.1 percent in the fourth quarter of 2024. The DI approach, however, indicated a net increase in business loan demand, driven by higher inventory financing needs and improved economic optimism.

Consumer loan demand also remained stable for most banks (71.8 percent), but DI results again revealed a net rise, fueled by higher household consumption and more attractive lending terms offered by banks. This trend is expected to continue, with banks forecasting rising demand amid positive consumer and business sentiment, spurred in part by the upcoming elections and seasonal economic activities.

The first quarter of 2025 SLOS included responses from 56 of 60 surveyed banks, reflecting a 93.3-percent response rate, up from 91.7 percent in the previous quarter. — (Philstar.com) (FREEMAN)