THE Bangko Sentral ng Pilipinas (BSP) reported that banks are more averse in lending for commercial real estate purposes in the first quarter of the year.
In its quarterly report on the senior loan officers survey (SLOS), the central bank said it has recorded a net tightening of loan standards for commercial real estate loans (CRELs) In January to March this year.
This is the 25th consecutive quarter of net tightening of loan standards for CRELs. It is also consistent with the net tightening credit standards for enterprises during the period under the diffusion index (DI) approach.
In the DI approach, a positive DI for credit standards indicates that the proportion of respondent banks that have tightened their credit standards exceeds those that eased which results in a so-called “net tightening” of lending standards.
The BSP said respondents identified the following key factors in the tightening of overall credit standards for CRELs: banks’ reduced tolerance for risk, a deterioration of borrowers’ profile, a less favorable economic outlook and stricter financial regulations.
In terms of specific credit standards, the net tightening of overall loan standards for CRELs was associated with wider loan margins, reduced credit line sizes, stricter collateral requirements and loan covenants, rise in use of interest rate floors and shortened loan maturities.
For the second quarter of 2022, the BSP said while the majority of banks expect unchanged standards for CRELs based on the modal approach, the DI method reflected banks’ expectations of net tighter credit standards for CRELs.
DI-based results also revealed a net increase in demand mainly due to customers’ optimistic outlook on the economy and bank’s more attractive financing terms.
In its earlier report, the BSP said overall Outstanding loans of universal and commercial banks grew at a faster rate of 8.8 percent in February from the 8.4 percent revised rate in January.
Broken down, outstanding loans for production activities went up by 9.7 percent in February from 9.5 percent (revised) in January driven by the increase in credit for real estate activities (16 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (5.7 percent); information and communication (33.3 percent); financial and insurance activities (13.2 percent); manufacturing (11 percent) and electricity, gas, steam and air-conditioning supply (0.4 percent).