Banks keep tight rein on realty loans

Over the next quarter, most of the respondent banks expect overall loan demand from both businesses and households to be broadly steady signifying improved economic prospects from enterprises and households as vaccination drives speed up

Local banks remained tight in terms of real estate loans, similar with its behavior towards households and enterprises, the latest Bangko Sentral ng Pilipinas (BSP) survey showed.

“Results from the second quarter 2021 survey also showed majority of respondent banks (71.1 percent) reported broadly unchanged overall credit standards for commercial real estate loans (CREL),” the BSP said.

“Meanwhile, the diffusion index-based method pointed to a net tightening of overall credit standards for CREL for the 22nd consecutive quarter,” it added.

According to the BSP, respondent banks cited a more uncertain economic outlook, a lower tolerance for risk, and deterioration in borrowers’ profile as the key contributors to the tightening of overall credit standards for CREL for the quarter.

Wider margins for loans

In terms of specific lending standards, the net tightening of overall credit standards for CREL continue to indicate wider loan margins, reduced credit line sizes and stricter collateral requirements among others.

Banks also reported an uptick in loan demand from enterprises owing primarily to improved economic outlook and increased accounts receivable and inventory financing needs of clients.

Diffusion index-based method pointed to a net tightening of overall credit standards for CREL for the 22nd consecutive quarter.

“Over the next quarter, most of the respondent banks expect overall loan demand from both businesses and households to be broadly steady signifying improved economic prospects from enterprises and households as vaccination drives speed up,” the central bank explained.