Philippine banks’ FCDU loans dip in fourth quarter

By Francis Allan L. Angelo

The Foreign Currency Deposit Units (FCDU) of Philippine banks have reported a decline in outstanding loans at the close of the fourth quarter of 2023.

Loans totaled US$15.2 billion, falling by 2.2 percent from the US$15.5 billion seen at the end of September 2023.

The reduction has been primarily attributed to the increase in principal repayments, which have outpaced new loan disbursements amid rising interest rates affecting both short-term and medium-to-long-term loans.

The trend year-on-year also reflected a decrease, with FCDU loans contracting by about US$621 million or 3.9 percent from the US$15.8 billion figure recorded at the end of December 2022.

Despite the overall reduction in loans, the maturity profile of the FCDU portfolio remained predominantly medium-to-long-term, comprising 78.6 percent of the total, a marginal increase from the previous quarter.

The majority of these loans were distributed among power generation companies, merchandise and service exporters, and an assortment of industries including towing, tanker, trucking, and forwarding.

The quarter saw gross disbursements amounting to US$18.0 billion, which was offset by even higher loan repayments of US$18.4 billion, leading to a net repayment in the sector.

Interestingly, FCDU deposit liabilities reached a record high of US$54.4 billion by year-end, up 5.1 percent from US$51.8 billion in the previous quarter.

A significant driver of this increase was the rise in time certificate of deposits held by local residents, fueled in part by a surge in remittances from overseas Filipinos.

Such growth in deposits contributes to bolstering the country’s gross international reserves.

When viewed year-on-year, the deposit liabilities show a substantial increase of US$6.6 billion or 13.7 percent from the end of December 2022, highlighting a strengthening buffer for the nation’s finances.