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MANILA – Banks’ lending standards for businesses are projected to tighten in the third quarter of 2023 due to the declining profitability of their portfolios. However, lending standards for households are expected to ease as financial institutions demonstrate an increased tolerance for risk in that segment.
The latest quarterly Senior Bank Loan Officers’ Survey conducted by the Bangko Sentral ng Pilipinas (BSP) revealed these trends. The survey collected data from 48 universal and commercial banks as well as thrift banks between June 5 and July 12.
‘Net tightening’ of credit standards
A positive diffusion index (DI) number for credit standards indicates that more respondent banks have tightened their credit standards compared to those that eased. On the other hand, a negative DI for credit standards suggests that more respondent banks have eased their credit standards compared to those that tightened.
The survey results indicate that banks anticipate a net tightening of overall loan standards for businesses. This is attributed to the weakening profitability and liquidity of their loan portfolios, deterioration of borrowers’ profiles, and reduced tolerance for risk.
Increase in credit demand
Meanwhile, respondent banks expect a net increase in overall credit demand from enterprises, driven by firms’ increasing inventory and accounts receivables financing requirements, as well as an improvement in customers’ economic outlook.
For households or consumer borrowers, respondents foresee a net easing in loan standards. This is primarily due to increased risk tolerance and improving profitability of banks’ portfolios in this market segment, as well as more desirable borrowers’ profiles.
The BSP also found that banks anticipate a net rise in overall demand for consumer loans, largely due to expectations of higher household consumption and investment in housing. INQ
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
Denial of responsibility! Samachar Central is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
