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Business

Banks see spike in loan demand

Lawrence Agcaoili - The Philippine Star
Banks see spike in loan demand
The results of the BSP’s first quarter Senior Loan Officers’ Survey (SLOS) showed that banks are expecting a net increase in overall loan demand from companies from April to June based on the diffusion index (DI).
STAR / File

MANILA, Philippines — Philippine banks are projecting a higher loan demand from both corporate and household borrowers in the second quarter  as the Bangko Sentral ng Pilipinas (BSP) is expected to step on the brakes of its tightening cycle.

The results of the BSP’s first quarter Senior Loan Officers’ Survey (SLOS) showed that banks are expecting a net increase in overall loan demand from companies from April to June based on the diffusion index (DI).

“Based on the DI method, however, banks indicated expectations of a net increase in overall demand for loans from businesses in the second quarter driven by firms’ increasing financing requirements along with an improved economic outlook,” the central bank said.

The method reflected a lower net increase in overall credit demand from across all firm classifications for the first quarter, driven largely by increased customer inventory and accounts receivable financing along with improvement in customers’ economic prospects.

The results of the 1st Quarter 2023 Business Expectations Survey (BES) released in March showed that business sentiment turned more optimistic for the second quarter, with the overall confidence index rising to 49 percent from the previous quarter’s 31.3 percent.

This was the highest since the 59.7 percent recorded in the first quarter of last year.

The more optimistic outlook of the respondents for the second quarter was attributed to expectations of higher volume of sales, particularly of food and beverages, electronic parts, computers and laptops, paint, garments, airline tickets and loan products.

The survey respondents of the latest BES also cited the improved business activities and operations as well as the seasonal uptick in demand during the summer months.

The BSP said  the results of the latest SLOS showed that bank respondents are also expecting a net increase in overall consumer loan demand for the second quarter of the year.

“The DI method, however, indicated that banks foresee a net increase in overall consumer loan demand in the next quarter (second quarter) mainly due to expectations of a rise in household spending,” the BSP said.

The method showed a slower increase in overall household loan demand across all consumer loan categories in the first quarter, but is expected to improve amid the general rise in consumer loan demand to higher household consumption and housing investment along with banks’ more attractive financing terms.

Based on the quarter Consumer Expectations Survey (CES), Filipino consumers turned less upbeat with the overall confidence index for the second quarter declining to 7.5 percent from 9.5 percent in the previous quarter’s survey.

The respondents’ less upbeat sentiment resulted from their concerns over faster increase in the prices of goods, higher household expenses, lower income, and high unemployment rate. They also cited the effectiveness of government policies and programs on targeted social support as well as importation of major food items.

The responses from 47 banks for the survey conducted between March 2 and April 12 indicated a general steady loan standards for firms on the back of stable economic outlook, broadly steady risk tolerance, and stable profile of borrowers.

The approach, according to the BSP, showed a net tightening of overall credit standards across all borrower firm sizes amid the deterioration in the profitability and liquidity of banks’ portfolios, less desirable borrowers’ profiles, uncertain economic outlook, and lower risk tolerance.

On the other hand, respondent banks see a net easing in household loan standards, driven by improvements in the profitability of banks’ portfolios and banks’ higher tolerance for risk.

The downtrend in credit growth continued for the third straight month to 10 percent in February from 10.4 percent in January as the aggressive interest rate hikes continued to bite.

Data showed loans released by universal and commercial banks amounted to P10.69 trillion in end-February or P970.9 billion higher than the P9.72 trillion disbursed in the same month last year.

BSP

MONEY

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