Pandemic continues to weaken demand for dollar loans

MANILA, Philippines – The total amount of dollar loans granted by local banks continued to decline in the second quarter of 2021, from both the same period in 2020 and the three months before, as the pandemic weakened borrowers’ demand for working capital.

According to the Bangko Sentral ng Pilipinas (BSP), outstanding loans on foreign currency deposits from banks amounted to $ 16.2 billion.

“The decline in dollar lending can be attributed to the tightening of lending banks’ credit standards, which led to a slowdown in their lending business and lending activities; reduced working capital and funding needs of borrowers compared to pre-pandemic levels amid the economic slowdown; and the availability of other sources of funding, ”the central bank said.

Year-over-year, dollar loans outstanding decreased $ 1.8 billion, or 10 percent, compared to $ 18.0 billion at the end of June 2020.

At the end of June 2021, the maturity profile of banks’ dollar loan portfolios remained largely medium to long-term debt [or those payable over a term of more than one year], which accounted for 78.9 percent of the total, slightly below the 79.9 percent level at the end of June 2020.

Of the total of 67.1 percent outstanding loans to residents, 40.2 percent went to power generation companies (17.7 percent); Goods and services exporters (14.6 percent); and municipal utilities (7.9 percent).

Gross disbursements in the second quarter of 2021 reached $ 14.1 billion, down 11 percent from the previous quarter, largely due to the decline in funding needs of a subsidiary of a branch of a foreign bank. Loan repayments were also 11.6 percent lower.

This resulted in total net repayments.

Banks’ dollar deposit liabilities were $ 45.6 billion at the end of June 2021, up $ 1.1 billion, or 2.6 percent, from $ 44.5 billion at the end of March 2021.

The central bank said a total of 97.5 percent of these deposits are still held by residents and “essentially provide an additional buffer for the country’s gross foreign reserves”.

Year-over-year, US dollar deposit liabilities increased $ 2.1 billion, or 4.8 percent, compared to $ 43.6 billion at the end of June 2020.


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About Natalee Broderick

Natalee Broderick

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