PH firms flocked to cheap dollar loans in Q2 to fund growth

MANILA, Philippines — Cheaper cost of funds coupled with the rather need for more funds for business operations prompted local firms to take out more foreign currency loans in the second quarter of the year, the latest data from the Bangko Sentral ng Pilipinas revealed on Tuesday.

In a statement, BSP Governor Benjamin Diokno said that as of end-June 2019, outstanding loans granted by the Foreign Currency Deposit Units of banks stood at $17.5 billion, representing a 4 percent increase — of higher by $676 million — from the end-March 2019 level of $16.8 billion.

During this period, loan disbursements by banks to Philippine borrowers exceeded principal reflecting the healthy appetite for dollar funding, the central bank said.

“The growth in loans may be attributed to borrowing firms’ higher working capital requirements as well as banks’ lower interest rates,” it added.

Year-on-year, dollar loans granted by banks grew by 11.6 percent or $1.8 billion, from the end-June 2018 level of $15.7 billion.

As of end-June 2019, the maturity profile of the banks’ dollar loan portfolios remained predominantly medium- to long-term debt — meaning those payable over a term of more than one year — which represented 78.1 percent of total. This was higher than the 75.6 percent level as of end-June 2018.

According to the central bank, the bulk of outstanding loans went to the following local industries: towing, tanker, trucking and forwarding (23.7 percent); merchandise and service exporters (16.4 percent); public utility firms (8.3 percent); and producers/manufacturers, including oil companies (4.3 percent).

Gross disbursements in the second quarter of 2019 reached $16.7 billion and were 6.5 percent higher than the first quarter of 2019’s figure due to borrowing firms’ higher working capital requirements and availment of loan by a government corporation in the power sector.

Similarly, loan repayments were higher by 3.5 percent, thus, resulting in overall net disbursements.

FCDU deposit liabilities for the period stood at $41.3 billion, which was higher by US$1.4 billion (3.4 percent) from $40 billion as of end-March 2019, with the bulk (97 percent) continuing to be held by residents — a situation that the central bank said “essentially constitutes an additional buffer to the country’s gross international reserves.”

Meanwhile, dollar deposits held by local banks increased by $3.4 billion, representing a 9 percent hike from the previous year’s $37.9 billion level, the data showed.  /muf