Banks see higher loan demand in Q1

Banks expect higher loan demand from companies and households this quarter after a series of interest rate cuts done by the Bangko Sentral ng Pilipinas (BSP) last year. 

Based on the results of the BSP’s fourth quarter 2024 Senior Bank Loan Officers’ Survey (SLOS), most respondent banks projected a net increase in overall demand for loans from businesses in the first quarter.

The increase was due to higher customer inventory financing needs, clients’ more optimistic economic expectations and an increase in borrowers’ short-term financing needs.

Likewise, there was also a net increase in overall credit demand from consumers as anticipated by surveyed banks in the current quarter amid rising consumption and banks’ more favorable credit terms.

The SLOS consists of questions on loan officers’ perceptions relating to the overall credit standards of their respective banks, as well as to factors affecting the supply of and demand for loans to both enterprises and households.  

For the fourth quarter alone, the survey indicated a net rise in overall loan demand from firms, but slightly lower than the previous quarter. The increase was also driven by inventory financing needs, optimistic economic outlook and rise in borrowers’ short-term financing needs.

Meanwhile, the diffusion index approach indicated a lower net rise in demand for household loans in the fourth quarter last year compared to the previous quarter.

“The overall increase in household loan demand was mainly due to banks’ more attractive financing terms and higher consumption,” the BSP said.  

This is despite the tighter lending standards for enterprises from October to December and unchanged standards for consumer loans.

“The diffusion index approach indicated a net tightening of credit standards in the fourth quarter of 2024, due to the deterioration in borrowers’ profiles and the profitability of the bank’s portfolio,” the BSP said. 

On the other hand, the broadly steady loan standards for households were mainly due to the unchanged profile of borrowers, tolerance for risk and the profitability of the bank’s portfolio.

Source: Philstar

Percentage of Filipinos with savings dips to over 3-year low

The proportion of Filipino households with savings dipped to its lowest level in over three years in the fourth quarter, with pessimistic consumers yet to regain their pre-pandemic confidence level as they continue to brace for higher inflation and borrowing costs.

A nationwide survey of 5,350 families showed 25.6 percent of families in the Philippines have money to save in the October-December period, lower than the 29-percent recorded in the third quarter, the Bangko Sentral ng Pilipinas (BSP) reported.

The top reasons for setting aside cash were emergencies; health and medical expenses; education; retirement; business capital and investment; and house purchase. But data showed the latest result was the lowest reading since the third quarter of 2021, when the percentage of families that can save stood at 25.2 percent amid harsh pandemic lockdowns.

As it is, some analysts believe that the need to rebuild household savings could delay the benefits of the ongoing easing cycle of the BSP, which has so far cut the policy rate by a total of 75 basis points to 5.75 percent. This is because families might defer any big-ticket purchases until they can fix their inflation-battered balance sheets.

The central bank said households expect inflation to increase, which can hurt their ability to save money. Specifically, consumers expect price growth to average 6.2 percent for the next 12 months, running above the 2 to 4 percent target range of the BSP.

Survey results also showed consumers anticipate interest rates to spike and the peso to weaken against the US dollar in the fourth quarter. Respondents were also worried that joblessness may worsen.

This, in turn, brought the overall confidence index (CI) for households at -11.1 percent in the fourth quarter, staying in the negative territory as pessimists continued to outnumber the optimists during the period.

But while the latest CI for consumers was less pessimistic than the -15.6 percent in the third quarter, the BSP noted that the confidence level of households has yet to return to the positive territory seen before the pandemic.

That was a stark contrast to the overall CI for businesses, which climbed to 44.5 percent from 32.9 percent in the preceding quarter as firms gear up for the typical surge in demand during the Christmas shopping season.

For now, respondents attributed their less downbeat sentiment on expectations of higher and additional sources of income; more working family members; and an increase in available jobs and permanent employment.

Source: Inquirer and BSP

More Filipinos adapting to ‘hustle culture’

Majority of Filipinos juggle multiple jobs to boost their income sources in what market research firm Kantar called an emergent “hustle culture” in the Philippine workforce.

“We’ve observed that this behavior has resulted [in] a ‘hustle culture’ among Filipinos, as they try to earn more but at the expense of time for chores, personal interests and other activities,” Laurice Obama, consumer and shopper insight director at Kantar Philippines, said in a statement.

Obama cited Kantar’s survey of 2,000 households from February to April showing that seven out of 10 Filipinos manage their family’s finances by moonlighting or starting a business on the side.

Apart from the majority of the surveyed households, 19 percent said they were “struggling to keep afloat” because of retrenchment or working less hours, which reduce their take-home pay.

Only around 8 percent said they were comfortable with their economic situation.

Household spending

According to recent data from the Philippine Statistics Authority (PSA), household spending dropped to 4.6 percent in the second quarter from 5.5 percent in the same period last year.

Filipino consumers, according to the study, usually buy soft drinks, coffee, water, milk, instant noodles, biscuits and crackers when they visit the grocery stores.

But those struggling with their finances remain “mindful” of their purchases, as they cut expenses by making their grocery list shorter to make ends meet.

“In their buying decision, [the study shows] that those who are managing are stretching their funds to get more value for their money,” Kantar said.

“This group does grocery shopping less often and are buying even less than what they intended to when they visit stores,” its study noted further.

These cash-strapped consumers not only trim their grocery expenses but also look for discounts.

According to PSA’s data, consumers spend less on clothing and footwear. The primary contributors to consumption are transportation, housing, water, electricity and gas, among other priorities.

Assets growing

Kantar’s survey showed that 52 percent of respondents believe this will be their status quo in the next 12 months, 7 percent expect things to get worse and 41 percent believe their situation will get better.

On the other hand, a recent study by Allianz Global said net financial assets per capita in the Philippines grew by 13.2 percent year-on-year to 1,940 euros (P121,000 based on current foreign exchange rates) in 2023, placing the country in the 49th spot out of 60 economies covered by its latest “Global Wealth Report.”

While that figure still kept the Philippines among the poorer countries in Asia, the growth of its financial assets increased by 13.2 percent, the fastest clip in six years and well ahead of China or India, Global Allianz said.

Allianz Global said the 16 percent jump in asset class securities was the “main driver” of growth.

Other financial assets like bank deposits grew “strongly” at 9.1 percent, while insurance and pensions rose 9.8 percent.

But Allianz said insurance and pensions remained “underweighted” in Filipino households’ portfolios with a share of 7 percent, way lower compared to the 57 percent share of bank deposits.

But while wealth rose, the growth in liabilities of Filipinos also continued at 12.9 percent. As a result, Allianz Global said the debt ratio climbed to 27.1 percent last year, which was “still at a rather low level.”

“2023 was marked by sharp monetary tightening. But economies proved resilient and markets even boomed,” the report said.

Overall, Allianz Global said financial assets of private households worldwide recorded strong growth of 7.6 percent last year, making up for the 3.5 percent losses in 2022. Total financial assets amounted to 239 trillion euros at the end of 2023.

By region, financial assets of Asian households increased by 7.5 percent in 2023 to 63.8 trillion euros, a quarter above the level in Europe. All asset classes contributed to this increase, with bank deposits being the main driver after rising by 9.3 percent.

Source: Inquirer