Foreign currency loans down in Q3

MANILA, Philippines — Foreign currency loans granted by banks slipped anew by 3.9 percent to $17.27 billion in end-September from $17.97 billion in end-June due to uncertainties brought about by the pandemic, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Benjamin Diokno said outstanding loans granted by foreign currency deposit units (FCDU) of banks declined by $702 million as principal repayments exceeded disbursements.

“The decline in FCDU lending may be due to borrowing firms’ lower working capital requirements and lending banks’ tightening of credit standards attributed largely to less favorable economic outlook as the ongoing health crisis brought about by the COVID-19 pandemic continued to constrain domestic economic activity,” Diokno said.

According to the BSP, FCDU loans decreased by 3.1 percent from the $17.82 billion booked in end-September last year.

As of end-September, Diokno said the maturity profile of the FCDU loan portfolio remained predominantly medium- to long-term debt or those payable over a term of more than one year that accounted for 79.6 percent of the total.

FCDUs are units of local bank or local branches of a foreign banks authorized by the central bank to process transactions involving foreign currencies, mainly by accepting deposits and handing out loans.

By source, local commercial banks extended the most loans, amounting to $15.09 billion or 87.4 percent of total, while thrift banks granted $41 million or 0.24 percent.

On the other hand, foreign banks operating in the Philippines also provided $2.13 billion in credit.

The BSP chief said $11.22 billion of the total loans were extended to Philippine residents, $10.72 of which went to industries led by power generation companies with 18.9 percent, merchandise and service exporters with 14.8 percent, and public utility firms with 6.7 percent.

On the other hand, he said gross disbursements went up by 8.6 percent to $12.2 billion in the third quarter due to the increase in funding requirements of an affiliate of a branch of a foreign bank.

“Similarly, loan repayments were higher by 11.9 percent, thus, resulting in overall net repayments,” Diokno said.

Diokno said FCDU deposit liabilities stood at $46 billion, higher by 5.5 percent than the end-June level of $43.6 billion and by 11.7 percent from the end- September 2019 level of $41.1 billion.

The bulk or 97.6 percent of the deposits continue to be owned by residents, essentially constituting an additional buffer to the country’s gross international reserves.

Last year, loans granted by FCDUs increased by 8.7 percent to $18.03 billion from 16.6 billion in 2018, with bigger credit lines extended to power and export companies.