Most banks kept their lending standards for corporate and household borrowers generally steady in the fourth quarter of 2024, according to the Bangko Sentral ng Pilpinas (BSP).
The results of the BSP’s Q4 2024 Senior Bank Loan Officers’ Survey (SLOS) showed that majority of respondent banks, or 83.3 percent, maintained their credit standards for businesses using the modal approach.
This marked an increase from the previous quarter, where 80.4 percent of respondents reported unchanged loan standards.
Meanwhile, the diffusion index (DI) approach indicated a net tightening of credit standards in Q4 2024, due to the deterioration in borrowers’ profiles and the profitability of the bank’s portfolio.
Over the next quarter, the modal approach showed that 85.2 percent of participating banks expect lending standards for enterprises to remain generally unchanged.
The DI results, on the other hand, suggest that loan standards for Q1 2025 are anticipated to remain steady due to stable economic outlook and unchanged risk tolerance and borrower profiles.
Most participating banks in the survey, or 74.1 percent, indicated unchanged overall demand for enterprise loans in the fourth quarter based on the modal approach.
“This proportion was slightly higher than in the previous quarter (72.5 percent). The DI method showed a net increase in loan demand from firms in Q4 2024, though slightly lower than the previous quarter,” the BSP said.
“This increase was driven by higher customer inventory financing needs, clients’ more optimistic economic expectations, and an increase in borrowers’ short-term financing needs,” it said.
Over the following quarter, the modal method indicated that a majority of respondents (61.1 percent) expect steady overall loan demand from enterprises.
The DI results, however, indicated that surveyed banks anticipate a net rise in loan demand from businesses in Q1 2025, driven by similar factors associated with the increase in credit demand for the current quarter.
The BSP said the modal-based results showed a larger percentage of banks indicating unchanged consumer loan demand in Q4 2024 (73.7 percent) compared to Q3 2024 (57.1 percent).
Meanwhile, the DI approach indicated a lower net rise in demand for household loans in Q4 2024 compared to the previous quarter. The overall increase in household loan demand was mainly due to banks’ more attractive financing terms and higher consumption.
Over the next quarter, results from the modal approach showed that more than half of surveyed banks (60.5 percent) expect steady demand for household credit.
Meanwhile, DI results showed banks’ expectations of a net increase in household loan demand amid the rising consumption and banks’ more favorable credit terms.