MOST Philippine banks expect loan demand to remain steady in the third quarter, according to a survey by the Bangko Sentral ng Pilipinas (BSP).
In the latest edition of the Senior Bank Loan Officers’ Survey (SLOS), the BSP said the banking sector anticipates demand for both business and household loans to remain unchanged.
“In the (third) quarter, 71.4% of banks said they expect loan demand from businesses to stay the same, 1.8% expect a decline, and 26.8% expect an increase.”
Meanwhile, 72.5% of respondents also see demand for household loans to stay the same during the quarter while 27.5% expect demand to rise.
“No bank expects to see a decline in households’ credit demand in the third quarter,” it added.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the BSP’s rate-cutting cycle increased banks’ loanable funds and reduced intermediation costs. This helps spur demand for loans that boost business activities, he added.
Bank lending rose by 11.3% year on year to P13.37 trillion as of May from P12.02 trillion, faster than the 11.2% expansion a month earlier, latest data from BSP showed.
The Monetary Board began its easing cycle in August last year, lowering interest rates by a total of 125 basis points so far. This brought the benchmark to 5.25%.
“Possible BSP rate cuts for the rest of 2025 and possible RRR cut in 2026 would further help reduce financing costs that would help sustain loan demand,” he added.
BSP Governor Eli M. Remolona, Jr. has signaled the possibility of two more rate cuts amid benign inflation.
The survey showed that businesses’ demand for credit was mostly unchanged (75%) in the second quarter compared to the quarter prior. On the other hand, 19.6% of banks recorded higher loan demand while 5.4% registered a decline.
Meanwhile, 77.5% of respondents said demand for household loans were likewise steady in the second quarter versus the first quarter.
“10% reported lower loan demand, and 12.5% indicated an increase in loan demand,” it added.
CREDIT STANDARDSMeanwhile, the survey also showed that Philippine banks expect to maintain lending standards for businesses and households in the July-September period.
“Among respondent banks, 91.1% said they will likely keep their lending standards for enterprises the same in the third quarter, compared with 82.1% in the second quarter.”
“Similarly, about 85% of banks are expected to maintain their lending standards for households from 82.5% in the same review period,” it said.
Credit standards cover credit scores, income requirements, collateral, loan size, interest rate, and repayment period.
Based on the diffusion index (DI), the survey showed there is an expectation of net tightening of credit standards for businesses (5.4%) and for households (5%) in the third quarter.
“This indicates that any future change is more likely to be a tightening than a loosening. In the second quarter, there was a net tightening of 14.3% for loans to enterprises and 12.5% for loans to households.”
The central bank uses a modal approach for the SLOS, which means the results of the survey are analyzed by looking at the option (tightening, easing, or unchanged) with the highest share of responses.
Under the DI approach, a positive DI for credit standards indicates that the number of banks that have tightened their credit standards exceeds those that eased (net tightening), while a negative DI indicates the opposite (net easing).
Meanwhile, unchanged means the number of banks that have tightened is equal to those that eased their credit standards. — Luisa Maria Jacinta C. Jocson
