Most banks keep credit standards for businesses, consumers steady

Most Philippine banks maintained their credit standards for loans to businesses and consumers in the third quarter of 2024, the Bangko Sentral ng Pilipinas (BSP) said Friday.

Results of the Senior Bank Loan Officers’ Survey (SLOS) show that 80.4 percent of respondent banks maintained their credit standards for firms steady based on the modal approach. This represented a decrease from the second quarter of 2024 when 87 percent of banks reported unchanged credit standards.

Meanwhile, the DI (diffusion index) approach showed a continued net tightening of credit standards in the third quarter, attributed to the deterioration in borrowers’ profiles and the profitability of banks’ portfolios.

The BSP said that in the modal approach, the results of the survey are analyzed by looking at the option with the highest share of responses, while in the DI approach, a positive DI for credit standards indicates that the proportion of respondent banks that have tightened their credit standards exceeds those that eased.

Over the next quarter, the modal approach suggests that 90.2 percent of respondent banks anticipate maintaining their loan standards for businesses. DI results show a net tightening of credit standards for the fourth quarter.

“This expectation is due to the deterioration in borrowers’ profiles and in the profitability and liquidity of banks’ portfolios, perception of stricter financial system regulations, and reduced tolerance for risk,” the BSP said.

The BSP said a large proportion of banks maintained their lending standards for household loans in the third quarter with 80 percent, slightly lower than 84.2 percent in the second quarter. The DI method reflected a net tightening of overall credit standards in the third quarter, following unchanged loan standards in the previous quarter.

“This net tightening is mainly attributed to the deterioration in borrowers’ profiles and in the profitability of banks’ portfolios, as well as banks’ lower risk tolerance,” the BSP said.

For the fourth quarter, the modal results show that 82.9 percent of respondent banks expect unchanged household loan standards. The DI method indicates banks’ outlook of maintained lending standards amid expectations of unchanged tolerance for risk and stable profiles of borrowers.

The survey also shows that 72.5 percent of banks indicated unchanged overall demand for business loans in the third quarter as revealed by the modal results. The share of banks that reported steady demand for business loans during the quarter was marginally higher than in the second quarter at 72.2 percent.