Credit activity throughout the economy remained robust based on latest data from the Bangko Sentral ng Pilipinas (BSP) showing basically unchanged bank-lending standards in the final three months of 2015.
According to the BSP, the various banks reported broadly unchanged credit standards when extending real-estate loans to businesses and households as borrowers took an optimistic view of the country’s economic prospects in the fourth quarter.
“Responses to the survey question on loan demand indicated that the majority of the respondent banks continued to see unchanged overall
demand for loans from both enterprises and households. Using the diffusion index, or DI, approach, however, results showed a net increase in overall loan demand from both enterprises and households. “The net increase in loan demand of firms was attributed by the banks to increased accounts receivable financing needs of borrower firms and clients’ improved economic outlook. Meanwhile, the net increase in overall demand for household loans reflected higher household consumption and banks’ more attractive financing terms.
“Looking ahead, most of the respondent banks expect unchanged loan demand from both firms and households. However, a larger proportion of respondents expect overall demand for corporate loans to increase further in the next quarter relative to those who indicated the opposite. Improved economic outlook of clients along with expectations of higher working
capital and accounts receivable financing needs of borrower firms were cited by respondent banks as key factors behind the anticipated increase in demand for business loans.
“Meanwhile, the expected net increase in household loan demand was attributed by respondent banks to more attractive financing terms, higher household consumption and lower interest rates,” the BSP said.
In the quarterly survey, the BSP cited data showing unchanged lending standards for commercial real-estate loans in the final quarter of 2015.
“The unchanged overall credit standards for commercial real-estate loans reflected respondent banks’ stable economic outlook and unchanged tolerance for risk, as well as unchanged profile of borrowers, among others,” the central bank said.
In terms of credit standards for commercial real-estate loans, institutional real-estate borrowings showed unchanged loan covenants, but with wider loan margins, stricter collateral requirements and increased use of interest rate floors.
For individual borrowers who borrowed for their personal real-estate needs, however, a slight net easing of credit standards by banks who were more risk tolerant was reported. The overall profile of borrowers during the period also improved. For the next quarter, commercial real-estate borrowers were likely to experience tighter credit standards, while residential real-estate borrowers were to see an easing in lending standards.
While the tighter credit standards on the commercial side was brought about by an increase in demand, the easing of standards for the individual side for the first quarter of 2016, meanwhile, was brought about by the banks’ higher tolerance for risk.