Dollar loans flat but deposits surged ahead of US polls

PNA FILE PHOTO

MANILA, Philippines — Foreign currency-denominated loans granted by banks were almost flat in the third quarter while dollar deposits went up amid expectations of peso volatility ahead of the November US elections, as markets started to price in a second Trump presidency.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that outstanding loans handed out by foreign currency deposit units (FCDU) of banks had amounted to $15.75 billion in the three months ending in September, up by just 0.7 percent quarter-on-quarter. On an annual basis, FCDU loans inched up by 1.6 percent.

As it is, the flattish growth in FCDU loans came amid fears of the continued weakness of the local currency, which can bloat the peso value of foreign debts.

READ: Peso hits record-low 59 as Trump 2.0 boosts dollar

Dollar savings

In the same report, the BSP also said that FCDU deposits had reached $57.46 billion in the three months through September, up by 4.2 percent on a quarter-on-quarter basis.

Year-on-year, these dollar deposits grew by 10.9 percent, suggesting that people beefed up their dollar savings, with the greenback widely expected to continue its supremacy after opinion polls had predicted a second Trump win.

The central bank said 97.7 percent of these FCDU deposits were owned by residents, boosting the Philippines’ buffer funds against external shocks.

The bearish outlook on the peso was fueled by expectations of a possible Donald Trump victory, which then stoked safe-haven demand for the greenback.

And that fear materialized in November when Trump defeated his Democrat rival in the race to the White House. The dollar has since continued its rampage across other currencies, with the peso revisiting the record-low 59:$1 level thrice late last year.

Funding requirements

The BSP data suggested that for every $1 of FCDU deposits, banks only lent out about 27 cents—much lower than around 70 centavos disbursed for every peso of deposits accepted.

Gross disbursements of FCDU loans expanded by 9.4 percent to $21.77 billion in the third quarter. The central bank attributed the increase to higher funding requirements of a foreign bank branch affiliate.

Loan repayments, meanwhile, climbed by 6.6 percent to $21.68 billion. Overall, the BSP said there was a net disbursement of FCDU credit in the third quarter.

Of the total FCDU loans granted during the period, residents cornered $9.68 billion or a 61.5-percent share. The majority of these borrowings were obtained by companies engaged in merchandise and service export, as well as in power generation.