Pandemic tempers PH firms’ appetite for local dollar loans in second quarter

MANILA, Philippines — Borrowers took out less foreign currency loans from local bank at the end of the second quarter as the ongoing coronavirus pandemic forced companies to cut down on their dollar-denominated funding needs, according to the central bank.

In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said that, as of end-June 2020, outstanding loans granted by foreign currency deposit units of banks stood at $18 billion.

This was lower by $303 million or by 1.7 percent from the end-March 2020 level of $18.3 billion as principal repayments exceeded disbursements.

“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 central bank chief said.

Year-on-year, dollar-denominated loans from local banks increased by $486 million or by 2.8 percent from the end-June 2019 level of $17.5 billion.

As of end-June 2020, the maturity profile of the banking system’s dollar loan portfolio remained predominantly medium- to long-term debt or those payable over a term of more than one year, which represented 79.9 percent of the total, higher than the 78.1 percent level as of end-June 2019.

Of the total 64.3 percent outstanding loans to residents, 52.2 percent went to the following resident industries: power generation companies (18.4 percent); merchandise and service exporters (15.1 percent); public utility firms (7.3 percent); management/holding and stock brokerage (5.8 percent); and towing, tanker, trucking, forwarding, personal and other industries (5.6 percent).

Gross disbursements in the second quarter of 2020 reached $11.2 billion and were 21.3 percent lower than the previous quarter’s figure due to the decrease in funding requirements of an affiliate of a branch of a foreign bank. Similarly, loan repayments were lower by 17.4 percent, thus, resulting in overall net repayments.

Banks’ dollar deposit levels stood at $43.6 billion as of end-June 2020, higher by $439 million or by 1 percent from the end-March 2020 level of $43.1 billion.

The bulk of these deposits — some 98.2 percent — continue to be owned by residents, essentially constituting an additional buffer to the country’s gross international reserves. Year-on-year, dollar deposits increased by $2.2 billion or by 5.3 percent from the end-June 2019 level of $41.3 billion.