MANILA – Most banks maintained their credit standards in the fourth quarter of 2024, the Bangko Sentral ng Pilipinas (BSP) said.
Results of the Senior Bank Loan Officers' Survey (SLOS) released on Friday showed most respondent banks kept their lending standards steady for loans to businesses and consumers based on the modal approach.
For the diffusion index (DI) method, the BSP said there was a net tightening of credit standards for business loans, while loans for households were unchanged.
The SLOS consists of questions on loan officers’ perceptions relating to the overall credit standards of their respective banks, as well as to factors affecting the supply of and demand for loans to both enterprises and households.
In the modal approach, the results of the survey are analyzed by looking at the option with the highest share of responses. The three options are tightening, easing, or unchanged credit standards for loans to enterprises and for loans to households.
In the DI approach, a positive DI for credit standards indicates that the proportion of respondent banks that have tightened their credit standards exceeds those that eased, whereas a negative DI for credit standards indicates that more respondent banks have eased their credit standards compared to those that tightened.
An unchanged credit standard in the DI approach indicates that the proportion of the respondent banks that have tightened their credit standards is equal to those that eased their credit standards.
Loans to enterprises
The BSP said fourth quarter 2024 survey results showed that 83.3 percent of respondent banks maintained their credit standards for businesses using the modal approach, up from the 80.4 percent during the previous quarter.
The DI approach, on the other hand, showed a net tightening of credit standards due to the deterioration in borrowers’ profiles and the profitability of the bank's portfolio.
Over the next quarter, the BSP said the modal approach showed that 85.2 percent of banks expect lending standards for enterprises to remain generally unchanged, while the DI results suggest that loan standards are anticipated to remain steady due to stable economic outlook and unchanged risk tolerance and borrower profiles.
Loans to households
According to the BSP, modal results showed that 89.5 percent of banks maintained their credit standards during the period, up from the 80 percent seen in the third quarter of 2024.
The DI method also showed generally unchanged credit standards.
"The broadly steady loan standards for households were mainly due to the unchanged profile of borrowers, tolerance for risk, and the profitability of the bank's portfolio," the BSP said.
Over the following quarter, the modal results showed that 84.2 percent of banks anticipate unchanged loan standards, while the DI approach revealed a possible net tightening standards amid expectations of a deterioration in the profitability of their portfolios and lower risk tolerance.
Loan demand
The BSP said 74.1 percent of participating banks indicated unchanged overall demand for enterprise loans based on the modal approach, up from the 72.5 percent in the third quarter of 2024.
The DI method showed a net increase in loan demand from firms driven by higher customer inventory financing needs, clients' more optimistic economic expectations, and an increase in borrowers' short-term financing needs.
Over the following quarter, the modal method indicated that a majority of respondents expect steady overall loan demand.
The DI results, however, indicated that surveyed banks anticipate a net rise in loan demand from businesses.
For loans to households, the BSP said 73.7 percent of respondent banks indicated unchanged loan demand based on the modal approach.
The DI approach, however, showed a lower rise in demand compared to the previous quarter.
Over the next quarter, results from the modal approach showed that 60.5 percent expect steady demand for household credit.
The BSP said the DI results showed banks' expectations of a net increase in household loan demand amid the rising consumption and banks’ more favorable credit terms. (PNA)
