Banks see stronger loan demand in Q4

Despite expectations of rising interest rates over the medium term, the cheap borrowing costs at present are seen 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 survey covering senior officers of local banks that indicated that the overall appetite for credit in the 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,” the BSP said in a statement yesterday.

The monetary regulator said the banks it surveyed had cited expectations of higher working capital and accounts receivable financing needs of borrower firms as the key factors behind the projected 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 BSP 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 the banks’ more attractive financing terms.”

In the meantime, 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 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.