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Tighter credit standards for comm’l real estate loans

By Mary Grace Padin (The Philippine Star) | Updated April 24, 2017 - 12:00am


The results of the BSP’s Senior Bank Loan Officers’ Survey showed that credit standards for commercial real estate loans registered a net tightening for the fifth consecutive quarter using the diffusion index approach. File

MANILA, Philippines -  Banks continued to tighten their credit standards for real estate loans to companies, while maintained those for housing loans of individuals during the first quarter, the Bangko Sentral ng Pilipinas (BSP) reported.

The results of the BSP’s Senior Bank Loan Officers’ Survey showed that credit standards for commercial real estate loans registered a net tightening for the fifth consecutive quarter using the diffusion index approach.

“The tighter overall credit standards for commercial real estate loans reflected respondent bank’s wider loan margins, reduced credit line sizes, and increased use of interest rate floors,” the BSP said in a statement.

Results of the survey also indicated that some banks saw increased demand for real estate loan from enterprises in the first quarter on the back of increased working capital and accounts receivable financing needs, higher investment in plant and equipment of borrowers, and clients’ improved economic outlook.

Some banks anticipate this demand for commercial real estate loans to continue to increase over the next quarter.

On the other hand, results based on the diffusion index approach also showed that credit requirements for housing loans of individuals remained unchanged during the first three months.

“The unchanged credit standards for housing loans was attributed by respondent banks largely to their sustained tolerance for risk and steady profile of borrowers, as well as stable economic outlook,” the BSP said.

For the second quarter, credit standards for individual housing loans are expected to register a net easing as banks anticipate an improvement in the profitability and liquidity in their portfolio, an increase in their tolerance for risk, and less strict financial system regulations.

Banks said they experienced an increased demand for housing loans in the first quarter, and expects this momentum to persist over the next three months.


Meanwhile, results of the survey using the modal approach showed that credit standards both for commercial and individual real estate loans were maintained during the first quarter. Demand was also unchanged, and is seen to continue being at the same level over the next quarter.
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