Banks kept tight lending standards to businesses in Q1

Banks kept tight lending standards to businesses in Q1

/ 02:26 AM April 27, 2024

MANILA, Philippines — Banks are staying cautious when lending to businesses amid weakening profitability of some companies, the Bangko Sentral ng Pilipinas (BSP) said in a new report that also showed steady risk tolerance of banks for households.

A survey of senior loan officers from 53 banks showed a “net tightening” of lending standards for enterprises in the first quarter based on the diffusion index method, the BSP said on Friday.

A net tightening means the proportion of banks that turned more conservative during the period exceeded those that relaxed their credit standards.


READ: PH banks still wary about lending to businesses in Q4 2023


Explaining the latest results, the BSP said lenders were wary of a “deterioration of borrowers’ profiles and profitability of bank portfolios and banks’ lower risk tolerance.”

Staying cautious

For the next quarter, the central bank said lenders polled indicated they would likely stay cautious when granting loans to companies of all sizes “given the deterioration in the profitability and liquidity of banks’ portfolios and borrowers’ profiles.”

Such was the case last quarter for commercial real estate loans that banks extend to businesses that plan to purchase or develop properties, the BSP reported.

READ: Credit growth picked up pace in Feb, fastest in nine months – BSP

This, while 70.6 percent of banks surveyed indicated “a steady overall demand” for business loans in the first three months of the year, which would likely carry on the following quarter as firms look to finance operational requirements.

In the first quarter, the BSP reported that surveyed banks maintained lending standards to household loans due to “banks’ unchanged risk tolerance, steady profitability of banks’ asset portfolios, as well as stable economic outlook and profile of borrowers.”


The central bank also said most respondents (75 percent) maintained credit standards for housing loans. Similarly, data showed unchanged housing loan standards due to banks’ steady risk tolerance and stable economic outlook. —Ian Nicolas P. Cigaral

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TAGS: banks, lending

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