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FCDU loans decline on reduced need for capital

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FOREIGN CURRENCY loans disbursed by local banks fell in the second quarter as capital needs dropped due to slower economic activity due to the coronavirus pandemic.

Outstanding loans disbursed by foreign currency deposit units (FCDU) of banks stood at $17.968 billion as of June, down 1.7% from the $18.271-billion level seen at end-March, the Bangko Sentral ng Pilipinas (BSP) said in a statement on Wednesday.

“The slowdown in FCDU lending may be due to lower customer inventory financing needs and working capital requirements as the ongoing health crisis continued to constrain domestic economic activity,” the BSP said.

On the other hand, loans granted by these banking units rose 2.8% year on year from the $17.482 billion seen as of June 2019.

FCDUs are central bank-approved bank units which perform transactions involving foreign currencies, mainly by accepting deposits and handing out loans.

BSP data showed 64.3% or $11.55 billion of FCDU loans went to Philippine residents, with 61.3% or $11.023 billion going to private entities.

Power generation firms (18.4%) cornered the largest chunk of the borrowings, followed by merchandise and service exporters (15.1%); public utility (7.3%); management/holding and stock brokerage (5.8%); and towing, tanker, trucking, forwarding, personal and other industries (5.6%).

On the other hand, more than a third (35.7%) or $6.418 billion were disbursed to non-residents.

By source, local banks disbursed 87.4% or $15.719 billion of the credit line. The remaining 12.5 or $2.249 billion were sourced from foreign lenders.

For the April to June period, gross credit disbursed by FCDUs declined 21.3% to $11.2 billion on the back of lower funding requirements for units of foreign lenders.

Meanwhile, deposit liabilities of FCDUs inched up 1% to $43.6 billion as of end-June from the $43.1 billion seen as of end-March. It also rose 5.3% from the $41.3 billion seen a year ago.

“The bulk of these deposits (98.2%) continue to be owned by residents, essentially constituting an additional buffer to the country’s gross international reserves,” the BSP said.

The overall loans-to-deposits ratio stood at 41.3% in the second quarter, down from the 42.4% seen as of the first quarter and the 42.3% seen at end-June 2019. — L.W.T. Noble

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