Banks see stronger loan demand in Q4

Manila, Philippines — The Bangko Sentral ng Pilipinas (BSP) reports that Philippine banks anticipate stronger loan demand in the fourth quarter, while maintaining lending standards largely unchanged due to ongoing economic uncertainty. According to the Senior Bank Loan Officers' Survey (SLOS), 80.8% of respondent banks expect to keep credit standards for business loans in Q4, up from 71.2% in the previous quarter.

For household loans, 85.7% of banks intend to keep lending standards steady, compared to 77.1% in Q3. Credit standards encompass interest rates, collateral requirements, loan amounts, and repayment terms. The survey indicates that banks are less inclined to tighten lending requirements. For business loans, the proportion of banks expecting stricter standards dropped to 17.3% from 28.8%, while only 1.9% plan to ease rules, as opposed to none previously.

For household loans, the share of banks anticipating tighter standards decreased to 11.4% from 17.1%, and those favoring less stringent requirements dropped to 2.9% from 5.7%. Despite this softer tightening bias, banks cite economic outlook uncertainty, deteriorating borrower profiles, and reduced risk-taking willingness as factors that could lead to stricter lending conditions.

However, banks expect higher borrowing appetite from businesses and consumers during the October to December period. For enterprise loans, 69.2% of banks anticipate unchanged demand, down from 75% in the prior quarter. But the share of banks anticipating higher business loan demand rose to 26.9% from 19.2%, while those expecting weaker demand declined to 3.8% from 5.8%.

BSP attributes this expected increase to higher financing needs for inventories and accounts receivable, as well as limited access to alternative funding sources. A similar pattern is observed in household lending, where 37.1% of banks expect demand to rise in Q4, nearly double the 20% recorded in the previous survey. Meanwhile, 60% expect household loan demand to remain unchanged, down from 71.4%, and only 2.9% anticipate a decline, compared with 8.6% previously.

Banks expecting higher household loan demand point to stronger consumer spending, more attractive bank financing terms, and increased housing investment as key drivers. The BSP survey gathered responses from 55 of 60 banks between September 2 and October 6, tracking changes in banks' lending policies and borrowing demand assessments, offering insight into future credit conditions in the economy.