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FCDU loans inch down as of Sept. due to tighter lending standards

OUTSTANDING LOANS granted by the foreign currency deposit units (FCDU) of banks inched down at end-September from the quarter prior amid eased credit parameters and tightening of lending standards, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.

Loans granted by the FCDU of banks went down by 0.29% to $15.665 billion as of September from $15.71 billion at end-June, the central bank said in a statement.

Year on year, outstanding FCDU loans fell by 1.04% from $15.829 billion.

“The decrease in FCDU loans may be attributed to: (a) gradual move in easing credit parameters and net tightening of overall credit standards of lender banks resulting in an unchanged or deliberate lending operations and credit activity amid uncertainty in the economic outlook,” the BSP said.

Results of the central bank’s Senior Bank Loan Officers’ Survey for the third quarter showed a majority of respondents had broadly unchanged credit standards for loans to enterprises, based on the modal approach. However, based on the diffusion index method, banks reported a net tightening of overall credit standards for companies due to the deterioration of borrowers’ profiles, reduced risk tolerance, a more uncertain economic outlook, and stricter financial system regulations.

The same survey showed businesses’ demand for loans was broadly steady in the quarter based on the modal method, while the DI approach showed a rise in overall demand amid an improvement in customers’ economic outlook and increase in inventory and accounts receivable financing needs.

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

Outstanding FCDU loans seen at end-September were mostly medium- to long-term debt, or those payable in more than a year, amounting to $12.291 billion and making up 78.5% of the total.

BSP data showed $9.976 billion (63.7%) of FCDU loans at end-September were extended to residents, with $9.65 billion of this or 61.6% going to private firms.

Most of these loans went to power generation companies ($2.7 billion or 27.4%); merchandise and service exporters ($2.4 billion or 24.4%); and management/holding and stock brokerage ($1.2 billion or 12.3%).

Meanwhile, FCDU loans to non-residents totaled $5.689 billion.

Gross disbursements decreased by 6.6% to $14.6 billion as of September from the end-June level due to lower funding requirements of an affiliate of a branch of a foreign bank.

Loan repayments also dropped 8% from the previous quarter to $14.6 billion.

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

Meanwhile, FCDU deposit liabilities decreased by 1.8% to $45.775 billion as of September from $46.61 billion at end-June.

“The bulk of these deposits (97.3%) continue 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 inched down by 0.23% from $45.88 billion.

The overall FCDU loans-to-deposit ratio stood at 34.2% for September, up from the 33.7% recorded at end-June but slightly lower than the 34.5% seen a year prior. — A.M.C. Sy

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