Philippine banks held credit standards for both business and household loans in the first quarter of 2025, although a diffusion index pointed to a modest net tightening, according to the Bangko Sentral ng Pilipinas (BSP)’s Senior Bank Loan Officers’ Survey (SLOS).
Eighty-one point eight percent of respondents maintained enterprise lending standards in Q1, down slightly from 83.3% in Q4, while the diffusion index reflected a net tightening as banks cited weaker borrower profiles and reduced portfolio profitability.
Looking ahead to Q2, 85.5% of banks expect standards for business loans to remain unchanged, with the diffusion index signalling stability on account of a steady economic outlook and unchanged risk tolerance.
On household lending, 86.8% of banks left consumer credit standards unchanged in Q1, compared with 89.5% in the prior quarter, yet the diffusion index recorded net tightening due to lower risk appetite and deteriorating borrower profiles.
For the next quarter, 82.1% of banks anticipate no change to household loan criteria, although the diffusion index forecasts a slight tightening driven by concerns over portfolio profitability and borrower quality.
Demand for business loans was steady for 67.3% of banks in Q1, down from 74.1% in Q4, even as the diffusion index showed net growth driven by higher inventory financing needs and more optimistic client outlooks.
In Q2, 61.8% of lenders expect demand to be unchanged, while the diffusion index again projects a net rise, citing similar factors.
Household loan demand remained flat for 71.8% of banks in Q1, versus 73.7% previously, but the diffusion index indicated net growth as clients responded to more attractive financing terms and increased consumption.
Over the coming quarter, 66.7% of banks foresee steady consumer loan demand, though the diffusion index predicts a net increase supported by rising household spending and favourable credit conditions.
Business News Asia