Borrowing costs cited as FCDU loans dip 0.4%

Philippine Tribune
Philippine Tribune

LOANS extended by banks’ foreign currency deposit units (FCDU) slipped in the second quarter of 2023 as principal repayments exceeded disbursements, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

In a statement, the central bank said FCDU loans as of end-June stood at $15.4 billion, down by 0.4 percent from the $15.5 billion recorded at the end of March this year.

The BSP attributed the decline to the rising borrowing costs, lender banks’ tightened credit standards due to reduced tolerance for risk and less desirable borrowers’ profiles, foreign exchange volatility and availability of other sources of funding.

Year on year, outstanding FCDU loans plunged by 2.0 percent, or $317 million, from June 2022’s $15.7 billion.

Meanwhile, as of end-June, the maturity profile of the FCDU loan portfolio remained predominantly medium to long term, which comprised the bulk of 78.3 percent, slightly lower than 78.4 percent from the previous quarter.

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Loans granted to residents reached $9.4 billion comprising 61.3 percent of the total FCDU loans, which mostly went to power generation companies ($2.4 billion, or 25.9 percent), merchandise and service exporters ($2.3 billion, or 24.4 percent), and towing, tanker, trucking, forwarding, personal and other industries ($1.3 billion, or 13.7 percent).

In the second quarter of this year, gross disbursements reached $14.4 billion, 15.6 percent lower than the $17.0 billion recorded in the previous quarter, owing to the decrease in funding requirements of a foreign bank branch affiliate.

Loan repayments, likewise, slumped to $14.4 billion, a 16.8-percent decline from the $17.4 billion in the first quarter of this year, resulting in an overall net principal repayment.

FCDU deposit liabilities hit a record high of $49.0 billion as of end-June 2023, up $260 million or by 0.5 percent from the end-March 2023 level of $48.7 billion.

“The bulk of these deposits ($47.7 billion, or 97.4 percent) continued to be owned by residents, essentially constituting an additional buffer to the country’s gross international reserves,” the central bank said in a statement.

FCDU deposit liabilities climbed by $2.4 billion, or 5.1 percent, year on year from $46.6 billion at the end of June 2022.

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