Banks’ dollar loans rise, mostly driven by exporters
Foreign currency loans extended by banks edged higher in the second quarter despite a weakening peso and market volatility fueled by the Middle East war, as exporters—emerging as a bright spot in the economy—drove demand for dollar-denominated borrowing.
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 $16.31 billion in the three months ending in June, up 5.6 percent from the preceding quarter.
From a year earlier, FCDU loans rose 2.4 percent.
FCDUs are units of local banks and Philippine branches of foreign banks authorized to accept foreign currency deposits and extend loans denominated in dollars and other foreign currencies. Such lending is typically used to finance imports and other transactions that require foreign exchange.
The BSP said the quarterly increase was driven primarily by greater borrowing by export-oriented companies and other industries, despite the usual caution surrounding foreign-currency borrowing when the peso is under pressure. The local currency has come under intense pressure since the conflict between the United States and Iran began.
Meanwhile, foreign currency deposits declined despite the peso’s weakness, which can make dollar savings more attractive to depositors. Deposits stood at $60.11 billion at the end of June, down 0.9 percent from $60.67 billion a year earlier.
The BSP data suggested that for every $1 of FCDU deposits, banks lent out about 27 cents.
Philippine exports proved relatively resilient in the first half despite the economic uncertainty caused by the Middle East conflict, reaching record levels as global demand for semiconductors and other electronics strengthened amid the artificial intelligence boom.
Onshore borrowers accounted for $11.65 billion, or 71.5 percent, of total outstanding FCDU loans in the second quarter. The remainder went to nonresident borrowers.
Among Philippine-based borrowers, the largest share went to companies in towing, tanker, trucking, forwarding, personal and other industries, which accounted for $3.07 billion, or 26.3 percent, of total loans to residents.
Merchandise and service exporters accounted for $2.85 billion, or 24.5 percent, while power-generation companies accounted for $1.86 billion, or 16 percent.
Most loans had maturities of more than one year. These medium- to long-term loans made up 73.3 percent of the total, down from 77.1 percent in the previous quarter.
