The Bangko Sentral ng Pilipinas (BSP) Senior Bank Loan Officers' Survey (SLOS) reveals that Philippine banks anticipate stable loan demand from both businesses and individuals in the first quarter of 2025. Despite a slight tightening of credit standards for enterprises in the last quarter of 2024, the BSP projects stable credit standards for Q1 2025 due to a stable economic outlook and unchanged risk tolerance.
Philippine banks anticipate steady loan demand from both businesses and individuals in the first quarter of 2025, according to the Bangko Sentral ng Pilipinas (BSP)'s fourth quarter Senior Bank Loan Officers' Survey (SLOS). The SLOS, conducted between November 25, 2024, and January 16, 2025, aimed to gauge banks' overall credit standards and factors influencing loan supply.
Credit standards are guidelines banks utilize to assess a potential borrower's ability to meet their financial obligations. The survey, which collected responses from 55 banks, employed two approaches: the modal approach, analyzing the option with the highest number of responses, and the diffusion index (DI) approach, where a positive DI indicates more banks tightening credit standards, while a negative DI suggests more banks easing standards. The DI results for the last quarter of 2024 revealed a slight tightening of credit standards for enterprises due to concerns about borrowers' profiles and the profitability of banks' loan portfolios. However, the BSP anticipates credit standards for Q1 2025 to remain stable, driven by a stable economic outlook, unchanged risk tolerance, and consistent borrower profiles. Banks also project a continued surge in loan demand from corporations this quarter, attributed to higher customer inventory needs, more optimistic economic expectations from clients, and an increase in short-term financing requirements. Similarly, banks maintained their credit standards towards households as applicant profiles, risk tolerance, and portfolio profitability remained unchanged compared to the third quarter of 2024. Nevertheless, a slight tightening of consumer loan standards is expected in the first quarter of 2025, according to the BSP, primarily due to anticipated portfolio profitability deterioration and lower risk tolerance. Approximately 60.5% of surveyed banks also foresee steady demand for household credit this quarter, fueled by rising consumption and more favorable credit terms. This optimism comes despite the Philippine Statistics Authority's announcement on January 30 that the country's gross domestic product grew by only 5.6% in 2024, falling short of the government's targets. Although government spending rebounded in the final quarter, growth in household spending slowed down
Philippine Banks Loan Demand Credit Standards Bangko Sentral Ng Pilipinas (BSP) Senior Bank Loan Officers' Survey (SLOS) Economic Outlook
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