(CNN Philippines) — Bank lending standards — the guidelines which banks use to determine potential borrowers’ credit worthiness — remained broadly unchanged during the first three months of the year for enterprise and household loans, according to a modal analysis of the Bangko Sentral ng Pilipinas (BSP) Q1 2015 Senior Bank Loan Officer’s Survey.
Under a modal approach, the bank interprets the results by looking at the survey option with the highest share of responses.
In a statement, the BSP pointed out that the results mark the 23rd consecutive quarter since Q2 2009 that majority of banks reported broadly unchanged lending standards.
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However, another statistical analysis yielded slightly different results.
Under a diffusion index (DI) approach, the BSP found that a greater proportion of banks tightened their overall lending standards in household and enterprise loans compared to those that eased such guidelines.
The tightening was attributed to perceptions of stricter financial system regulations.
In the previous quarter, the DI approach found that standards where only tightened in household loans.
Most of the surveyed banks expect credit standard for enterprise and household loans to remain unchanged for the next quarter. However, the BSP said that “[T]he percentage of banks foreseeing a slight easing of overall credit standards for loans to businesses was higher compared to those expecting the opposite.”
“Respondent banks cited more aggressive competition from banks and non-bank lenders, increased tolerance for risk, and improvement in the profitability of banks’ portfolio as among the reasons behind the expected net easing of credit standards.”
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The case is inverse for households. Most banks foresee “overall credit standards tightening slightly for credit card, auto, and personal/salary loans due largely to expectations of continued strict financial system regulations and banks’ reduced tolerance for risk.”
Looking ahead, the BSP said the most banks expect an unchanged demand in loans for firms:
“However, a larger proportion of respondents expect overall demand for loans to increase further in the next quarter relative to those who indicated the opposite.”
“The expected net increase in loan demand by firms was attributed by respondent banks to the higher inventory and working capital financing needs of borrower firms along with the improved economic outlook of clients.”
Demand in household loans on the other hand is expected to increase.
“Expectations of higher household consumption, banks’ more attractive financing terms, and lower interest rates were cited by respondent banks as key factors behind the anticipated increase in demand for household loans.”
