Banks’ foreign currency loans inch higher at end-December 2022

FOREIGN CURRENCY loans extended by Philippine banks rose at end-December 2022 from the quarter prior as disbursements exceeded repayments, the central bank said on Friday.

Outstanding loans granted by the foreign currency deposit units (FCDU) of banks went up by 0.7% to USD 15.78 billion as of December 2022 from USD 15.67 billion at end-September 2022, the Bangko Sentral ng Pilipinas (BSP) said in a statement.

Meanwhile, year on year, outstanding FCDU loans inched down by 0.44% from USD 15.713 billion at end-December 2021.

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

“Despite the net tightening of overall credit standards of lender banks as a result of uncertainty in the economic outlook, outstanding FCDU loans slightly increased due to higher net transactions of non-residents. Residents’ transactions dropped amid uncertain global environment, rising borrowing cost and FX (foreign exchange) volatility,” the BSP said.

Gross disbursements in the fourth quarter decreased by 3.3% to USD 14.2 billion from the previous quarter on lower funding requirements of a foreign bank branch affiliate.

Loan repayments also decreased 3.9% to USD 14.1 billion from end-September.

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

Majority of banks’ FCDU loan portfolio was made up of medium- to long-term debt, or those payable in more than a year, comprising 78.3% or USD 12.354 billion of the total. This was lower than the previous quarter’s 78.5% share.

Loans extended to Philippine residents stood at USD 9.806 billion, making up 62.1% of the total.

Of this total, USD 9.52 billion went to private entities. Loans went to power generation companies (USD 2.7 billion or 27%); merchandise and service exporters (USD 2.5 billion or 25.5%); and management/holding and stock brokerage (USD 1.2 billion or 12.3%).

FCDU loans to non-residents totaled USD 5.977 billion.

Meanwhile, FCDU deposit liabilities increased by 4.5% to record high of USD 47.8 billion as of end-December 2022 from USD 45.8 billion in the previous quarter.

“The bulk of these deposits (USD 46.5 billion or 97.2%) continued to be owned by residents, essentially constituting an additional buffer to the country’s gross international reserves,” the BSP said.

Year on year, FCDU deposit liabilities increased by 3.8% from USD 46.1 billion at end-December 2021.

The overall FCDU loans-to-deposit ratio stood at 33% as of December 2022, down from the 34.2% recorded at end-September 2022 and the 34.1% seen a year prior. — A.M.C. Sy