PH Monday Macro: It looks like banks are making credit more available
Last week, we talked about how looking at consumer loans can give us an understanding of the Philippine economy’s overall health. We discussed that by looking at consumers’ appetite for additional risk by taking out loans, it can indicate how much they are willing to spend.
Today, we will look at its counterpart, the lender, to validate what consumer loans are telling us.
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Depending on the economic cycle, monetary and fiscal policy would adjust their approach to either grow or constrict the economy. One indicator that the central bank and the government would use is the Senior Bank Loan Officers’ Survey (SLOS).
The SLOS is a quarterly survey that is sent out to bank officers. It aims to evaluate the resilience of credit demand, prevalent conditions within asset markets, and the general effectiveness of bank lending as a conduit for monetary policy and maybe fiscal policy.
The survey encompasses inquiries regarding loan officers’ perspectives on their banks’ overall credit standards and factors influencing loan supply and demand for both businesses and individuals.
Since 2009, the Bangko Sentral ng Pilipinas (BSP) has been carrying out the SLOS to enhance its understanding of lending patterns among banks. This information is a crucial gauge of credit activity’s vitality within the nation.
The survey is divided into three categories: bank loans and credit lines to enterprises (businesses), households (consumers), and commercial real estate loans, where each group has its questions.
For Q1 2023, the survey showed that “a larger percentage of bank respondents maintained their overall credit standards for business and household loans.”
For all three categories, the lending standards remained unchanged. This suggests a steady and consistent approach to lending by banks, which can contribute to a stable credit environment, support economic growth, enhance monetary policy transmission, and promote financial stability.
The chart above shows the responses of bank officers regarding loans and credit lines to businesses. Although overall standards remained unchanged, we can see in the chart that the total number of respondents who reported “tightened somewhat” has decreased since Q2 2020. This means that credit availability has risen.
Such cases suggest that the support of banks for borrowing and spending will spur economic activity and expansion. In addition, with improved access to credit, businesses may be more inclined to invest and grow, which will improve Philippine infrastructure and propel consumer spending.
The SLOS and consumer loans show that credit is becoming more available, and bank standards have eased. Both indicators propose that the Philippines is far from a recession and likely to continue the strong rebound from the pandemic.
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“The Monday Macro Report”
When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available.
Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data.
Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms.
Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are will make investing a less monumental task than finding a needle in a haystack.
Hope you’ve found this week’s macro chart interesting and insightful.
Stay tuned for next week’s Monday Macro report!
Regards,
Angelica Lim
Research Director
Philippine Markets Newsletter
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