MANILA, Philippines – Philippine banks expect loan demand from enterprises and households to remain steady in the first quarter of 2025, a survey by the Bangko Sentral ng Pilipinas (BSP) showed.
These were among the insights found in the central bank’s fourth quarter Senior Bank Loan Officers’ Survey (SLOS), which aims to understand banks’ overall credit standards and factors affecting the supply of loans.
Credit standards are guidelines banks use to determine a potential borrower’s ability to pay their obligations.
Fifty-five responses from surveyed banks were collected between November 25, 2024 and January 16, 2025.
The survey uses two approaches. The modal approach analyzes survey results based on the option with the highest share of responses.
But in the diffusion index (DI) approach, a positive DI for credit standards shows more respondent banks tightened credit standards, while a negative DI indicates more respondents eased credit standards.
Loans to businesses
In the last quarter of 2024, the survey’s DI results showed that banks slightly tightened their credit standards for enterprises due to the deterioration in borrowers’ profiles and the profitability of the bank’s loan portfolio.
However, banks expect to keep their loan standards steady in the first quarter of 2025.
“The DI results suggest that loan standards for Q1 2025 are anticipated to remain steady due to stable economic outlook and unchanged risk tolerance and borrower profiles,” the BSP said in a statement.
Banks also expect to see a continued increase in loan demand from companies this quarter thanks to higher customer inventory needs, more optimistic economic expectations from clients and an increase in short-term financing needs.
Loans to households
More Philippine banks also maintained their credit standards towards households as the loan applicants’ profiles, tolerance for risk and bank’s portfolio profitability remained unchanged compared to the third quarter of 2024.
However, banks are expected to slightly tighten their consumer loan standards in the first quarter of 2025.
“The DI approach revealed an outlook of net tightening standards, driven by banks’ expectations of a deterioration in the profitability of their portfolios, as well as lower risk tolerance,” the BSP said.
Around 60.5% of surveyed banks also expect steady demand for household credit this quarter amid rising consumption and more favorable credit terms.
The Philippine Statistics Authority reported on January 30 that the country’s gross domestic product grew just 5.6% in 2024, below the government’s targets. While government spending rebounded in the final quarter of the year, growth in household spending slowed down. – Rappler.com