Forex lending climbs to $18.3 billion

MANILA, Philippines — Foreign currency loans granted by banks increased by 8.7 percent to $18.3 billion in end-March this year from $16.8 billion in the same period last year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Benjamin Diokno said the growth in loans extended by foreign currency deposit units (FCDUs) could be attributed to borrowing firms’ higher working capital requirements, lower interest rates as well as increased investment in plant or equipment.

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

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, accounting for 79.5 percent of the total.

By source, local commercial banks extended the most loans amounting to $14.85 billion or 86.8 percent of total, while thrift banks granted $61 million or 0.4 percent.

On the other hand, foreign banks operating in the Philippines also provided $2.16 billion in credit for a share of 12.8 percent.

Of the total 64.8 percent outstanding loans to residents, the central bank said 51.8 percent went to the power generation companies with 18 percent, merchandise and service exporters with 13.9 percent, public utility firms with 7.8 percent, towing, tanker, trucking, forwarding, personal and other industries with 6.9 percent as well as producers and manufacturers, including oil companies with 5.2 percent.

According to the BSP, gross disbursements in the first quarter reached $14.3 billion and were 7.8 percent higher than the previous quarter’s figure due to the increase in funding requirements of an affiliate of a branch of a foreign bank.

Similarly, loan repayments were higher by 7.2 percent, thus, resulting in overall net disbursements.

Diokno said FCDU deposit liabilities stood at $43.1 billion, 4.9 percent higher than the end-December level of $41.1 billion.

The bulk or 98 percent of the deposits continue to be owned by residents, essentially constituting an additional buffer to the country’s gross international reserves.

Year-on-year, FCDU deposit liabilities increased by 7.8 percent from the end-March 2019 level of $40 billion.

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.