FCDU loans up 33.3% to $9.653 B in Q1

Foreign-denominated loans granted by banks rose by a third in the first quarter from last year as borrowers took advantage of the low interest rate and firm peso, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

Money extended by banks’ foreign currency deposit units (FCD ) hit £9.653 billion for the first three months, 33.3 percent up from £7.240 billion a year ago, data released yesterday showed.

Compared to the previous quarter, FCD loans rose by a slower 11.4 percent from £8.665 billion.

“This development may be attributed to the low interest rate environment, stable exchange rate and positive business and consumer sentiment due to strong macro- economic fundamentals,” BSP deputy governor Diwa 1uinigundo said in a statement.

FCD s are bank departments or subsidiaries of offshore banks which collect foreign deposits and grant foreign loans.

2ith the BSP keeping policy rates at record-lows since October, lenders have been encouraged to lend more to boost profits while helping consumers finance investments and purchases.

The peso, meanwhile, appreciated by 0.6 percent in the first quarter against the greenback, far from its 6.8-percent uptick the whole year, as BSP tried to contain its strength.

According to the central bank, local residents availed of the bulk of foreign loans, accounting for 81.8 percent of the total. By value, Philippine-based borrowers secured a total of £7.889 billion, 34.7 percent up year-on-year.

Non-residents, on the other hand, were granted $1.754 billion, 18.2 percent of the total, and marking an improvement of 26.6 percent from a year ago.

By banks, local lenders extended most of the loans totaling $6.976 billion, while the remaining $2.677 billion were cornered by foreign bank subsidiaries and branches.

Most FCDU credit were payable for more than one year at 61.6 percent of the total, while the rest, at 38.4 percent, were qualified as short-term loans that can be settled only within 12 months.

BSP data showed the increase in foreign loans was backed by a rise in deposits. FCDU deposits went up 1.64 percent to $25.517 billion.

The faster increase in loans translated to a loan-to-deposit ratio of 37.8 percent, up from 28.8 percent a year ago.

This indicates more bank resources are being utilized for lending, which in turn bodes well for more economic activity.