RESULTS of the Q1 2020 Senior Bank Loan Officers’ Survey (SLOS) showed that most of the respondent banks continued to maintain their overall credit standards for loans to both enterprises and households during the quarter based on the modal approach.
The Bangko Sentral ng Pilipinas said this is the 44th consecutive quarter since the second quarter of 2009 that the majority of respondent banks reported broadly unchanged credit standards.
The central banks, however, stressed the survey was conducted during the period 28 February – 7 April 2020 and may not yet reflect the measures undertaken by the BSP, starting in the latter part of the reference quarter, to alleviate the effects of COVID-19 pandemic.
The BSP has been conducting the SLOS since 2009 to gain a better understanding of banks’ lending behavior, which is an important indicator of the strength of credit activity in the country.
The survey showed 66.7 percent of banks that responded indicated that they maintained their credit standards for loans to enterprises during the quarter using the modal approach.
Banks’ responses likewise pointed to a net tightening of credit standards across all borrower firm sizes, namely, top corporations, large middle-market enterprises, small and medium enterprises (SMEs), and micro-enterprises based on the DI approach.
Over the next quarter, results based on the modal approach showed that most of the respondent banks expect credit standards to remain basically unchanged.
The results of the survey likewise showed that most respondent banks or 69.6 percent, kept their overall credit standards unchanged for loans extended to households during the quarter based on the modal approach.
Banks’ responses pointed to a net tightening of credit standards across all types of consumer loans, including housing loans, credit card loans, auto loans, and personal/salary loans.
In terms of respondent banks’ outlook for the next quarter, results reflected unchanged overall credit standards.
Responses to the survey question on loan demand indicated that the majority of respondent banks continued to see stable overall demand for loans from both enterprises and households during the quarter.
Over the next quarter, most of respondent banks expect steady overall loan demand from firms and households.
For business loans, the expected net increase in demand was associated largely with corporate clients’ higher working capital requirements, a decline in internally-generated funds, and increased inventory financing needs of clients.
Meanwhile, the anticipated net decrease in household loan demand in Q2 2020 largely reflected expectations of less attractive financing terms offered by banks and availability of other sources of funds.
Most of the respondent banks reported that overall credit standards for commercial real estate loans were maintained in Q1 2020.
Respondent banks cited less favorable economic outlook, deterioration in the liquidity of banks’ portfolios and borrowers’ profiles, and a reduced tolerance for risk as reasons for the tightening of overall credit standards for the said type of loan.
Over the next quarter, while most of the respondent banks anticipate maintaining their credit standards for commercial real estate loans, results point to expectations of continued net tightening of overall credit standards for the said type of loan.
