Banks expect stronger loan demand this quarter, BSP survey shows

Despite expectations of rising interest rates over the medium term, the cheap borrowing costs at present are set to encourage more Filipino companies and consumers to take out more loans in the fourth quarter of this year.

This was the key finding of a recent Bangko Sentral ng Pilipinas (BSP) survey conducted on senior officers of local banks which indicated that overall appetite for credit in the local financial system remained “stable” in the third quarter of 2017.

“A larger proportion of respondents expect overall demand for corporate and household loans to increase further in the next quarter relative to those who indicated the opposite,” BSP said in a statement on Friday, explaining that.

The monetary regulator said banks it surveyed cited expectations of higher working capital and accounts receivable financing needs of borrower firms as the key factors behind the expected increase in demand for business loans.

“Meanwhile, the anticipated net increase in household loan demand was attributed by respondent banks to expectations of more attractive financing terms offered to clients and continued low interest rates along with higher household consumption,” the central bank said.

The survey showed that a majority of banks continued to see stable overall demand for loans from both enterprises and households. The same survey also revealed, however, that there was a net increase in loan demand across all firm sizes and all types of household loans, except personal or salary loans.

“The net increase in loan demand of firms was largely attributed by banks to higher requirements of borrower firms for working capital and accounts receivable financing,” BSP said. “Meanwhile, banks attributed the net increase in demand for household loans largely to low interest rates and banks’ more attractive financing terms.”

Along with these expectations of higher loan demand in the final months of the year, BSP said banks had also indicated

At the same time, the results of the latest Senior Bank Loan Officers’ Survey showed that a majority of banks continued to maintain their credit standards for loans to both enterprises and households during the quarter, representing the 34th consecutive quarter since mid-2009 that the majority of respondents reported broadly unchanged credit standards.

At the same time, the survey showed a slight tightening of credit standards being applied to corporate borrowers.

The BSP has been conducting the survey 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 also helps the BSP assess the robustness of credit demand conditions as well as conditions in asset markets, and the overall strength of bank lending as a transmission channel of monetary policy. The survey 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. Survey questions were sent to 35 commercial banks, 29 of which sent their responses to the latest survey, representing a response rate of 82.9 percent. /jpv