Banks tighten Q3 real estate lending – BSP

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BANKS have tightened credit standards on loans extended to real estate developers and housing loans for individuals, the Bangko Sentral ng Pilipinas reported.

Results of the Third Quarter 2016 Senior Bank Loan Officers’ Survey released Friday showed a net tightening of overall credit standards for real estate loans during the quarter using the diffusion index (DI) approach.

A positive DI indicates that the number of banks that tightened their credit standards is greater than those that did otherwise (“net tightening”), while a negative DI indicates more banks eased than those that tightened (“net easing”).

The tighter credit standards for commercial real estate loans reflected respondent banks’ wider loan margins, reduced credit line sizes, stricter collateral requirements and loan covenants, shorter loan maturity, and increased use of interest rate floors.


Demand for commercial real estate loans indicated a net increase last quarter “on the back of increased working capital and inventory financing needs of borrowers and clients’ improved economic outlook.”

“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 continue to increase,” the central bank said.

Credit rules for housing loans extended to individual borrowers also showed a slight tightening in July-September, the BSP said. “The net tightening of credit standards for housing loans was attributed by respondent banks largely to perceived stricter financial system regulations and as well as clients’ less favorable economic outlook.”

In the next quarter, results indicated that some banks foresee a net easing of credit standards for housing loans on expectations of an improvement in the profitability of banks’ portfolio, more aggressive competition from banks and non-bank lenders, and increased tolerance for risk.

At the same time, results continued to show increased demand for housing loans in third quarter as well as expectations of a continued increase in demand for real estate loans in the next quarter.

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