LOCAL banks reported slightly tighter overall credit standards in giving out commercial real-estate loans in the third quarter of the year, a Bangko Sentral ng Pilipinas (BSP) survey showed.
In its quarterly Senior Bank Loan Officers’ Survey (SLOS), the Central Bank said respondent banks continued to indicate a net tightening of overall credit standards for commercial real-estate loans for the 11th consecutive quarter based on the diffusion index (DI) approach.
In particular, the BSP said the tighter overall credit standards for commercial real-estate loans reflected respondent banks’ wider loan margins, reduced credit line sizes, stricter collateral requirements and loan covenants, shortened loan maturities, and increased use of interest rate floors.
“Meanwhile, over the next quarter, while the majority of the respondent banks foresee maintaining their credit standards for commercial real-estate loans, DI-based results point to expectations of continued net tightening of credit standards for the said type of loan,” the BSP said.
Results of the same survey approach from the BSP also indicated a net decrease in demand for the commercial real-estate loans.
The Central Bank said this is on the back of lower working capital needs of corporate customers, as well as an increase in corporate customers’ internally generated funds.
“Over the next quarter, although most of the respondent banks anticipate generally steady loan demand, a number of banks expect demand for commercial real-estate loans to increase,” the BSP said.
For housing loans, meanwhile, credit standards remain unchanged. The BSP said this reflected unchanged profitability in asset portfolios of respondent banks, as well as banks’ unchanged tolerance for risk and steady profile of borrowers for the said type of loan.
The BSP also said that for the next quarter, survey results point to expectations of net easing of credit standards for housing loans, as respondent banks anticipate an improvement in the profitability and liquidity of their portfolios, increased tolerance for risk and expectations of more aggressive competition from other lenders.
A net increase in demand for housing loans during the quarter is also expected for the fourth quarter of the year, according to the BSP.