Most banks upheld their existing credit standards in the fourth quarter of 2024, according to the Bangko Sentral ng Pilipinas (BSP).
Findings from the Senior Bank Loan Officers’ Survey (SLOS), released on Friday, revealed that the majority of surveyed banks kept their lending policies unchanged for both business and consumer loans, based on the modal approach.
However, using the diffusion index (DI) method, the BSP noted a net tightening of credit standards for business loans, while lending standards for households remained stable.
The SLOS gathers insights from bank loan officers regarding their institutions’ overall credit policies, along with the factors influencing loan supply and demand for businesses and consumers.
In the modal approach, responses are categorized based on the most common answer—whether banks tightened, eased, or maintained credit standards. The DI approach, on the other hand, measures the net tightening or easing of credit policies, where a positive DI indicates tighter standards and a negative DI reflects easing. If the DI is neutral, it means an equal number of banks reported tightening and easing.
The BSP reported that 83.3 percent of banks upheld their lending standards for enterprises in the fourth quarter of 2024, an increase from 80.4 percent in the prior quarter, based on the modal approach.
Meanwhile, the DI method pointed to a net tightening of credit policies due to weaker borrower profiles and a decline in bank portfolio profitability.
Looking ahead to the next quarter, 85.2 percent of banks expect credit standards for businesses to remain steady under the modal approach, while DI results suggest that lending policies will remain stable amid a stable economic outlook and unchanged borrower risk profiles.
For household loans, 89.5 percent of surveyed banks reported maintaining credit standards in the fourth quarter of 2024, up from 80 percent in the preceding quarter, based on the modal approach.
Similarly, the DI method showed no significant changes in credit standards for consumers.
“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 stated.
In the upcoming quarter, 84.2 percent of banks anticipate keeping their consumer lending standards unchanged, according to the modal approach. Meanwhile, DI results suggest a potential tightening due to concerns over portfolio profitability and lower risk tolerance.
The BSP also reported that 74.1 percent of banks observed stable demand for business loans in the fourth quarter, up from 72.5 percent in the previous quarter, based on the modal approach.
The DI method, however, indicated a net increase in loan demand from businesses, fueled by higher working capital needs, improved economic sentiment, and increased short-term financing requirements.
For the next quarter, most banks expect business loan demand to remain steady under the modal approach, while DI results suggest a net rise in demand.
Meanwhile, 73.7 percent of banks reported unchanged demand for household loans, based on the modal approach. However, DI findings showed a slower increase in demand compared to the previous quarter.
Looking ahead, 60.5 percent of surveyed banks expect stable household loan demand under the modal approach, while DI results indicate a likely increase in demand, driven by rising consumer spending and more favorable lending terms.