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Preference for Peso Loans Continues as FCDU Loans Drops Anew

01.17.2003

Bangko Sentral figures show that as of September 30, 2002, the total outstanding loans granted by Foreign Currency Deposit Units (FCDUs) of commercial banks and thrift banks amounted to US$4,898.9 million, down by US$252.5 million (or about 5 percent) from the previous quarter and by US$893.8 or 15.4 percent from end-September 2001.

In contrast, peso loans of commercial banks (commercial banks accounted for 99.4 percent of total FCDU loans outstanding) stood at PHP1,159.4 billion as of the same date, up by 3.9 percent and 4.7 percent from the previous quarter and the previous year, respectively. The figures suggest that borrowers continued to prefer peso borrowings to foreign currency borrowings principally to avoid exposure to foreign exchange risk, particularly from a depreciation of the peso. Moreover, interest rates on peso loans have remained low which ranged from a low average of 8.0 percent to a high average of 9.8 percent during the quarter, albeit higher than the 3.6 percent weighted average interest rate on FCDU loans disbursed during the same period.

The decline in FCDU loans outstanding during the quarter resulted from (1) net repayments with principal repayments again outpacing disbursements by US$104.8 million even as disbursements grew by US$274.9 million (about 37.6%) during the third quarter compared to only US$9.6 million in the second quarter; and (2) negative adjustments due to reclassification of accounts and revaluation of third-currency denominated loans into US dollar which continued to appreciate during the period.

Loans to resident borrowers represented 96.6 percent of the outstanding portfolio while about the same percentage (96.1 percent) of FCDU deposits were held by residents. Exporters remained the top beneficiaries of FCDU loans accounting for 27.3 percent of total, followed by public utilities with a 24.6 percent share.

The overall FCDU loans-to-deposits ratio slightly dropped to 38.2 percent from the second quarter’s 38.3 percent. Foreign bank branches posted the highest loans-to-deposits ratios which reached 444.0 percent for the International Commercial Bank of China and 309.6 percent for Mizuho Corporate Bank. Two-thirds of these branches posted ratios exceeding the industry average for the period. Among the local banks, Export and Industry Bank had the highest ratio at 129.5 percent.

In terms of absolute amounts, the top five lenders since 2001 were the following: Rizal Commercial Banking Corporation, Bank of the Philippine Islands, Philippine National Bank, Citibank, N.A. and Metropolitan Bank and Trust Company. The combined exposures of these banks represented 40.4 percent of total outstanding FCDU credits as of end-September 2002.

By maturity, the share of medium and long-term accounts continued to increase to reach 66.5 percent or US$3,257.6 million of the total loan portfolio.

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