FCDU loans rise at end-March as economy recovers

Foreign currency loans extended by local banks rose at end-March from the quarter prior as demand for credit increased, with businesses having higher financing requirements and becoming more bullish as the economy continues to recover from the downturn caused by the pandemic.

Outstanding loans granted by the foreign currency deposit units (FCDU) of banks went up by 1.6% to $16 billion as of March from $15.7 billion at end-December 2021, a report from the Bangko Sentral ng Pilipinas (BSP) said Thursday.

The increase seen as of March is a reversal of seven consecutive quarters of decline since the onset of the coronavirus pandemic.

However, year on year, outstanding FCDU loans fell by 2.3% from the $16.3 billion seen as of March 2021.

FCDUs are BSP-approved bank units that perform transactions involving foreign currencies, such as accepting deposits and handing out loans.

The higher FCDU loans as of March may be attributed to “[a] net increase in demand for business loans attributed to the improvement in firms’ economic growth outlook; and firms’ higher financing requirements for inventory and accounts receivable,” the BSP said.

FCDU loans seen at end-March 2022 were mostly medium- to long-term debt, or those payable in more than a year, amounting to $12.627 billion and representing 79.1% of the total.

Central bank data showed $10.573 billion or about two-thirds (66.2%) of FCDU loans as of March were extended to Philippine residents, with $10.124 billion of this going to private entities.

Among industries, the biggest chunk of loans went to power generation companies (17.4%), followed by merchandise and service exporters (14.9%), management/holding and stock brokerage (8.5%), public utility firms (6.6%), and producers and manufacturers/oil companies (6.4%).

Meanwhile, FCDU loans to non-residents totaled $5.392 billion.

At end-March, gross disbursements decreased by 6.6% to $14.7 billion from the end-December 2021 level due to the decrease in the funding requirements of an affiliate of a branch of a foreign bank.

Likewise, loan repayments dropped 8.5% from the preceding quarter to $14.4 billion as of March.

“These resulted in overall net disbursements,” the central bank said.

Meanwhile, FCDU deposit liabilities rose by 0.5% to $46.3 billion at end-March.

“The bulk of these deposits (97.2%) continued to be owned by residents, essentially constituting an additional buffer to the country’s gross international reserves,” the central bank said.

Year-on-year, FCDU deposit liabilities increased by 4% from $44.5 billion.

The overall FCDU loans-to-deposit ratio stood at 34.5% as of March, slightly up from the 34.1% logged as of December 2021 but lower than the 36.7% seen a year earlier. — D.G.C. Robles