Rising borrowing costs and tightened credit standards caused the loans granted by Foreign Currency Deposit Units (FCDU) of banks to decline in June 2023, according to the Bangko Sentral ng Pilipinas (BSP).
Based on the latest data, FCDU loans of banks stood at $15.4 billion as of the end of June 2023, a decrease of $66 million or 0.4 percent from the end of March 2023 level of $15.5 billion as principal repayments exceeded disbursements.
The BSP also said outstanding FCDU loans decreased by about $317 million or 2 percent from the June 2022 level of $15.7 billion.
“The decline in FCDU loans may be attributed to rising borrowing costs; lender banks’ tightened credit standards due to reduced tolerance for risk and less desirable borrowers’ profile; foreign exchange volatility; and availability of other funding sources,” BSP said.
As of June 2023, the maturity profile of the FCDU loan portfolio remained predominantly medium- to long term (or those payable over a term of more than one year), which comprised 78.3 percent of the total, slightly lower than 78.4 percent from the previous quarter.
FCDU loans granted to residents comprised 61.3 percent or $9.4 billion of total outstanding FCDU loans, of which, the majority went to certain sectors/industries.
The data showed loans to power generation companies accounted for $2.4 billion or 25.9 percent of the total; 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.
Gross disbursements in the second quarter of 2023 reached $14.4 billion. Still, they were 15.6 percent lower than the previous quarter’s $17 billion. This was mainly due to the decrease in funding requirements of a foreign bank branch affiliate.
Similarly, loan repayments in the reference quarter of $14.4 billion were 16.8 percent lower than the previous quarter’s $17.4 billion. These resulted in overall net principal repayment.
Meanwhile, FCDU deposit liabilities reached an all-time high of $49 billion as of June 2023, higher by about $260 million or by 0.5 percent from the end-March 2023 level of $48.7 billion.
BSP said the bulk of these deposits worth $47.7 billion or 97.4 percent of the total continued to be owned by residents, constituting an additional buffer to the country’s gross international reserves.
Year-on-year, FCDU deposit liabilities increased by $2.4 billion or by 5.1 percent from the end-June 2022 level of $46.6 billion.