Philippines banks see stronger loan demand from companies and households in the first quarter despite the series of rate hikes delivered by the Bangko Sentral ng Pilipinas (BSP) to fight inflation last year.
Based on the results of the central bank’s Q4 2022 Senior Loan Officers’ Survey (SLOS), banks expect a net increase in overall loan demand both from corporate and household borrowers
“Based on the diffusion index (DI) method, banks indicated expectations of a net increase in overall demand for loans from businesses in the first quarter of 2023, driven by customers’ more optimistic economic outlook, as well as increased customer inventory and accounts receivable financing needs,” the BSP said.
Likewise, the central bank said that bank respondents are also expecting a net increase in overall consumer loan demand in the first quarter mainly due to higher household consumption and housing investment.
The economy accelerated by 7.6 percent last year, the fastest since the 8.8 percent growth recorded in 1976, from 5.7 percent in 2021, with the further reopening of the economy as strict COVID-19 quarantine and lockdown protocols were lifted.
For the fourth quarter of last year, the SLOS, covering 63 banks from Dec. 14 to Jan. 13 this year, showed a net increase in overall loan demand from across all firm classifications and categories of household loans.
The results of the survey also showed that banks expect a steady rise in commercial real estate and residential real estate loans from January to March.
According to the BSP, the DI-based approach pointed to anticipations of net rise in credit demand for commercial real estate loans amid banks’ more attractive financing terms and lower interest rates, as well as customers’ lack of alternative sources of funds.
Likewise, the central bank added that the DI approach also indicated a net increase in residential real estate loan demand for the first quarter, driven mainly by higher household consumption and housing investment.
Preliminary data from the BSP showed that rate hikes delivered by the Monetary Board has started eating into credit growth, as the rise in loans extended by big banks slowed to 13.7 percent in November from 13.9 percent in October.
As of end-November last year, universal and commercial banks disbursed P10.64 trillion in loans versus the P9.35 trillion released in end-November 2021.