Banks expect higher consumer, corporate loan demand in Q1
Despite the higher for longer interest rate scenario, Philippine banks still expect a stronger loan demand from companies and households in the first quarter of the year, according to the Bangko Sentral ng Pilipinas (BSP).
The results of the central bank’s Senior Loan Officers’ Survey for the fourth quarter of 2023 showed that banks are expecting a net increase in overall loan demand both from corporate and household borrowers.
Despite the aggressive rate hikes delivered by the BSP, participating banks anticipate a net rise in credit demand from businesses in the first quarter using the diffusion index.
The higher demand, the BSP explained, was driven by customers’ more positive economic prospects along with higher customer inventory financing and accounts receivable needs.
Using the same approach, the central bank said respondents noted a net increase in loan demand in the fourth quarter of 2023 from across all firm classifications, driven by bank clients’ more optimistic economic outlook, increased customer inventory financing and accounts receivable needs, including lack of other sources of funds.
For the first quarter of the year, banks are expecting generally unchanged credit standards for enterprises amid the sustained tolerance for risk and stable outlook for the overall economy as well as industries and firms, along with the steady profiles of borrowers.
According to the BSP, the results of the latest Business Expectations Survey indicated that business sentiment was upbeat in the fourth quarter of 2023 due to firms’ expectations of an increase in demand for goods and services during the Christmas season; sustained economic recovery to prepandemic levels as well as business expansions in the utilities, trade, financial, and hotels and restaurant sub-sectors.
Likewise, companies cited the development and launch of new products and services, and brisker consumer spending on the back of higher remittances and inbound holiday travelers, including overseas Filipino workers.
The survey also showed a net increase in consumer loan demand for the first three months of the year, driven by expectations of higher household consumption and housing investment, as well as banks’ more attractive financing terms and lower income prospects using the diffusion index.
Using the modal approach, about half of the bank respondents expect higher demand for credit from households.
On the other hand, banks indicated a continued net easing of credit standards in the first quarter amid the banks’ expectations of improved profitability of their portfolios, higher risk tolerance and more favorable economic outlook.