Banks have maintained credit standards with regard to loans extended to real estate developers but eased their rules with regard to housing loans for individuals, the Bangko Sentral ng Pilipinas (BSP) reported.
The central bank said all 34 respondent banks in a recent survey indicated basically unchanged overall credit standards for commercial real estate loans during the fourth quarter of 2015.
The unchanged standards stemmed from the respondents’ stable economic outlook and unchanged tolerance for risk and borrower profiles, among others.
“In terms of specific credit standards for commercial real estate loans, banks’ responses showed unchanged loan covenants but with wider loan margins, stricter collateral requirements and increased use of interest rate floors,” the central bank said.
Meanwhile, using the diffusion index (DI) approach, a slight net tightening of overall credit standards for commercial real estate loans is expected in the first quarter of 2016.
A positive DI indicates that the proportion 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”).
Demand for commercial real estate loans was said to be unchanged during the fourth quarter, but a number of banks indicated increased demand “on the back of clients’ improved economic outlook and increased customer inventory financing needs.”
“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 further,” the central bank said.
Credit rules for housing loans extended to borrowers, meanwhile, showed a net easing in the fourth quarter of 2015.
“The net easing of credit standards for housing loans was attributed by respondent banks to their increased tolerance for risk and the improvement in the overall profile of borrowers,” the central bank said.
Moving forward, although most respondent banks expect to maintain credit standards for housing loans, a number see a slight easing for this type of loan largely on expectations of higher risk tolerance.
Demand for housing loans increased during the fourth quarter and the outlook is that this would continue rising during the first quarter of 2016.