Philippine banks expect loan demand from Filipino entrepreneurs and households to remain steady in the second quarter of the year, according to the central bank, which said banks face a balancing act on lending rules amid the domestic spillover of the Middle East war.

Results of the latest quarterly Bangko Sentral ng Pilipinas (BSP) Senior Bank Loan Officers’ Survey (SLOS) showed that more than half of respondent banks anticipate loan demand from businesses to remain unchanged.

This dominated expectations that loan demand would shift for better or worse. One-third of banks had an assumption that demand would increase, while a tenth had a somber anticipation that businesses would scale back on borrowing.

Results also showed that more than half of banks expect unchanged loan demand from households, higher than the 23.5 percent that expect it to improve and the 23.5 percent that expect it to decline.

In the same survey, banks signaled that lending conditions are also likely to stay largely steady, reinforcing expectations that credit activity will continue to support economic growth despite global uncertainties.

“Most banks in the Philippines expect to maintain their existing lending standards in the second quarter of 2026,” the survey read, indicating that lenders are not inclined to significantly loosen or tighten credit rules.

For business loans, three-fifths of respondent banks said they expect credit standards to remain unchanged during the quarter, compared to 30.8 percent that foresee tighter rules and 7.7 percent that anticipate easing.

This suggests that while a majority are holding steady, a notable share of banks are still cautious. “Most banks are likely to apply the same standards they have been using in assessing loan applications for both businesses and households,” the BSP noted.

A similar trend was observed in household lending. Two-thirds of banks expect unchanged credit standards, outpacing the 28.6 percent that see tighter conditions and the 5.7 percent that expect easing.

This reflects a broadly stable consumer lending environment, even as some banks remain wary of potential risks.

These expectations, the BSP explained, are measured using the modal method, which determines the prevailing outlook based on the largest share of responses. By this measure, both business and household lending standards point to stability in the near term.

However, using a different gauge—the diffusion index—banks appear slightly more conservative.

Using this measure, more banks expect to tighten than ease lending standards for businesses, with 30.8 percent anticipating stricter rules compared to 7.7 percent expecting relaxation, resulting in a 23.1 percent net tightening.

For household lending, more banks expect to tighten than ease credit standards, with 28.6 percent anticipating stricter rules versus 5.7 percent expecting relaxation, resulting in a 22.9 percent net tightening.

On the demand side, the diffusion index presents a more upbeat picture for businesses. Banks see a 23.1-percent net increase in demand for business loans, pointing to optimism among lenders despite the modal view that demand will remain steady.

In contrast, expectations for household loan demand were neutral, with zero percent for demand for loans from households. (Derco Rosal)