Most banks kept credit standards in 2nd quarter

Most banks kept credit standards unchanged in the second quarter of 2024, according to the latest senior bank loan officers’ survey.

The Bangko Sentral ng Pilipinas (BSP) said 87 percent of banks kept their business credit standards steady, up slightly from 86.3 percent in the first quarter, based on the modal approach. This method focuses on the most common response.

Meanwhile, the diffusion index (DI) showed credit standards tightened overall in the second quarter from the previous quarter due to worsening borrower profiles and bank profitability. A positive DI means more banks tightened standards than eased, while a negative DI indicates the opposite.

For the next quarter, most banks expect unchanged lending standards for businesses, but the DI suggests tightening due to continued concerns about borrowers and bank finances.

The BSP said that in terms of household loans, 84.2 percent of banks kept standards unchanged in the second quarter, up from 77.1 percent in the first. The DI also showed no change. For the next quarter, most banks expect unchanged standards, but the DI suggests easing due to improved bank conditions and economic outlook.

Most banks (72.2 percent) reported unchanged overall demand for business loans in the second quarter. However, the DI showed a net increase in demand due to higher inventory and accounts receivable financing needs and an improved economic outlook.

Most of the surveyed banks (66 percent) expect loan demand from businesses to remain largely steady in the next quarter, according to a modal approach. However, results from a diffusion index showed banks anticipate a net increase in business credit demand in the third quarter, fueled by higher inventory and accounts receivable financing needs.

Modal results showed fewer banks reported unchanged household loan demand in the second quarter (57.9 percent) compared with the first (68.6 percent). Meanwhile, the diffusion index showed a larger net increase in household loan demand in the second quarter than in the previous one, driven by banks’ more attractive financing terms, higher household consumption and housing investment.

The BSP said most respondent banks (60.5 percent) expect steady demand for household loans in the next quarter, according to modal results. Diffusion index results showed an expected net increase in household loan demand, driven by rising household consumption and banks’ more attractive lending terms.