Banks’ FCDU loans down 3.7% in Q1

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LOANS extended by banks’ foreign currency deposit units (FCDUs) dropped in the first quarter from a year earlier as principal repayments exceeded disbursements, the central bank said.

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Data released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed that FCDU loans during the quarter fell 3.7 percent to $11.99 billion from the $12.46 billion recorded last year.

Despite the drop, an analyst said the country’s economic prospects remain bright, whatever sources of funding corporates choose to tap.

On a quarterly basis, FCDU loans also fell 1.7 percent, or by $203 million from $12.19 billion recorded at the end of December 2015.

“The FCDU loan portfolio slightly contracted for the first quarter, which may be attributed to attractive peso borrowing rates, encouraging a shift from foreign exchange (FX) to peso financing,” it said.

A private bank analyst observed that at the start of the year, expectations were for a stronger US dollar and a series of interest rate hikes by the United States Federal Reserve.

“That, of course has changed as the dollar has softened and the Fed looks to be on hold for
the time being,” Nicholas Antonio Mapa, Bank of the Philippine Islands associate economist said.

However, in the first quarter, market players were wary of a stronger dollar and rising global rates, which helped entice corporates to book peso funding for their expansionary requirements, he explained.

Mapa noted that peso loans were up roughly 15 percent in the first quarter of 2016, showing that some corporates are shifting to peso borrowings.

“Whether it’s through peso or dollar funding, the prospects for the economy remain bright,” he said.

Meanwhile, the loans-to-deposit ratio decreased to 34.6 percent at end-March from 38.4 percent in 2015, the BSP said.

Compared to the previous quarter, the ratio also eased from 37.6 percent as a consequence of the lower expansion in loans (1.7 percent) and higher growth in deposits (6.8 percent).

Deposit liabilities stood at $34.66 billion by end March, up by 6.6 percent from $32.49 billion in 2015. Compared to end-December 2015, liabilities increased by $2.2 billion or 6.8 percent from $32.44 billion, with the bulk (97.2 percent) still held by residents, “thereby essentially constituting additional buffer to the country’s gross international reserves.”

The BSP said the loans mostly consisted of medium- to long-term loans—or those payable over a term of more than one year—representing 70 percent of total FCDU loans. The balance consisted of short-term accounts, or those with original maturities of up to one year.

Resident borrowers represented 70.4 percent or $8.4 billion of the total FCDU loans extended during the quarter, while 7.6 percent or $900 million went to other borrowers, including government agencies/enterprises.

Loans to resident borrowers benefited public utility firms; producers/manufacturers, including oil companies; merchandise and service exporters; management/holding and stock brokerage; and towing, tanker, trucking, forwarding, personal and other individuals, the BSP said.

It said gross disbursements during the period decreased by 40.6 percent to $6.4 billion from the previous quarter’s $15.8 billion.

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