Banks’ foreign currency loans up in 2019 — BSP

MANILA, Philippines — Foreign currency loans granted by banks went up in 2019, with bigger credit lines extended to power and export companies, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.

Banks lent out $18.03 billion under the foreign currency deposit units (FCDUs) as of end-December last year, up 8.7% year-on-year from $16.6 billion the previous year. Compared to the third quarter tally, the figure went up 1.2% or $212 million from $17.8 billion worth of loans as of end-September.

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

“The growth in loans may be attributed to borrowing firms’ higher working capital requirements,” the central bank said in a statement.

According to BSP, the bulk of the outstanding FCDU loans went to companies engaged in power generation which accounted for 17.8% of total loans, followed by merchandise and service exports (14%) and public utility (8.1%). A total of 5.9% of FCDU loans went to firms in the towing, tanker, trucking and forwarding business, while 5.2% were extended to manufacturers, including oil companies.

By source, local commercial banks extended the most loans amounting to $15.9 billion, while thrift banks granted $57 million. Foreign banks operating in the Philippines also provided $2 billion in credit, according to central bank data.

In terms of borrowers, 63.6% of the FCDU loans were granted to Filipino companies to $11.5 billion. Foreigners borrowed $6.6 billion, accounting for 36.4% of the total credit.

“The growth in loans may be attributed to borrowing firms’ higher working capital requirements,” the central bank said.

In the same report, the BSP said a big chunk of FCDU loans came with medium to long-term maturities, with 79.4% of the foreign currency loans due in more than one year. Only $3.7 billion are payable in less than a year.

Gross disbursement stood at $13.3 billion in the final three months of 2019, down 23.5% from the preceding quarter “due to the decrease in funding requirements of an affiliate of a branch of a foreign bank.”

Similarly, loan repayments were lower by 22.9%, resulting in overall net disbursements.

Meanwhile, total foreign currency deposits reached $41.1 billion, up from P39.9 billion in 2018. A hefty amount of foreign currency deposits serves as extra buffers versus external shocks, and stands to support the BSP’s gross international reserves. — Ian Nicolas Cigaral