Results of the Bangko Sentral ng Pilipinas Q2 2023 Senior Bank Loan Officers’ Survey (SLOS) indicated that a higher number of surveyed banks retained their overall lending standards for business and household loans based on the modal approach.
Modal-based results for the second quarter revealed that a larger proportion of respondents (89.1 percent) kept credit standards for businesses unchanged.
Meanwhile, the diffusion index approach pointed to a net tightening of overall lending standards across all borrower firm sizes due to the following factors cited by respondents: deterioration in the profitability of banks’ portfolios, less desirable borrowers’ profiles, and reduced tolerance for risk.
Over the next quarter, the modal approach showed expectations of generally unchanged credit standards for businesses while the DI method pointed to bank respondents’ anticipations of net tightening of loan standards.
Banks foresee an overall net tightening in loan standards for enterprises in Q3 2023 given the following considerations: weakening profitability and liquidity of banks’ portfolios, deterioration of borrowers’ profiles, and reduced tolerance for risk.
Results of the Q2 2023 SLOS reflected that most respondent banks pointed to broadly steady lending standards for commercial real estate loans (CRELs). On one hand, results from the DI method indicated a net tightening of loan standards for CRELs in Q2 2023 for the 30th consecutive quarter mainly due to weakening of borrowers’ profiles and lower risk tolerance. In the next quarter, banks anticipate maintaining their credit standards for CRELS based on both the DI-based method and the modal approach.
Majority of the surveyed banks broadly retained their loan standards for loans extended to households in Q2 2023. On one hand, the DI approach indicated a net easing of credit standards for household loans, particularly for housing, credit card, and personal/salary loans.
Bank respondents associated the easing of lending standards for consumer loans mainly with an improvement in the profitability of banks’ portfolios, an increase in risk tolerance, less uncertain economic outlook, and more aggressive competition from banks and non-bank lenders.
In the succeeding quarter, the modal approach indicated a higher percentage of surveyed banks expecting generally unchanged credit standards for household loans. The DI approach showed bank respondents’ expectations of a net easing in household loan standards in Q3 2023 mainly due to increased risk tolerance, and improving profitability of banks’ portfolios for this market segment, and more desirable borrowers’ profiles.
In Q2 2023, a higher percentage of bank respondents reported maintained overall credit standards for residential real estate or housing loans. Meanwhile, the DI-based method indicated a net easing of credit standards for housing loans which was attributed by bank respondents mainly to improving borrowers’ profiles and less uncertain economic outlook.
While most respondent banks expect to maintain credit standards for housing loans in Q3 2023, the DI method shows a net easing of housing loan standards for the following quarter.
The modal-based approach for the Q2 2023 results revealed broadly unchanged loan demand from businesses. However, the DI method continued to reflect a net increase in overall lending demand from across all firm classifications, largely due to increased customer inventory financing and accounts receivable financing along with improvement in customers’ economic prospects.
For Q3 2023, a larger proportion of respondents indicated expectations of broadly retained loan demand from firms. However, the DI method indicated that respondent banks expect a net increase in overall credit demand from firms in the next quarter given businesses’ increasing inventory and accounts receivables financing requirements and improvement in customers’ economic outlook.
Demand for CRELs in Q2 2023 was broadly steady based on both the modal and DI approaches due to borrowers’ stable economic prospects. Based on the modal approach, most banks anticipate demand for CRELs to be maintained in the next quarter. Meanwhile, DI-based results showed banks’ outlook of higher loan demand for CRELs in Q3 2023 on expectations of higher customer inventory and accounts receivable financing needs and improvement in customers’ economic outlook.
Results for the Q2 2023 survey showed generally unchanged lending demand from households based on the modal method. Meanwhile, DI-based results revealed a net increase in overall household loan demand across all key categories such as housing, credit card, auto, and personal/salary loans. Banks associated the overall increase in household loan demand with higher household consumption and housing investment as well as banks’ more attractive financing terms.
