Dollar loans secured from local banks grew by 16.5% in 2014

DOLLAR loans secured from local banks rose by more than a tenth last year as demand for cash remained strong due to the continued expansion of businesses in the country.

Central bank data released this week showed demand for foreign currency financing was strongest from public utilities, manufacturers and exporters.

“The expansion may be attributed to the continuing low interest environment, growth of the service and export sector, and positive business sentiment arising from strong macroeconomic fundamentals,” the Bangko Sentral ng Pilipinas (BSP) said Tuesday.

At the end of 2014, loans extended by banks’ foreign currency deposit units (FCDU) rose to $12.2 billion, up from $10.5 billion in December of 2013. This 16.5-percent growth closely tracked the increase in all types of loans extended by major banks, which rose 16.8 percent at the end of last year.

FCDUs refer to bank subsidiaries or affiliates that deal in foreign exchange, both in taking deposits and extending loans to clients. Foreign currency financing is needed by companies that import goods, or have dollar-denominated expenses such as payments for overseas loans or services subcontracted to foreign firms.

Seven of every $10 in outstanding loans secured from local banks, or $8.6 billion, went to Philippine companies. Major beneficiaries were public utilities, manufacturers, exporters and firms in the service industry.

The balance of $3.2 billion went to IT, real estate, and power generation firms, among others, the BSP said.

Regulators track the movement and usage of foreign currencies in the Philippines as part of efforts to ensure the steady supply of dollars in the economy, allowing local firms to smoothly conduct business with the rest of the world.

The bulk of the outstanding loans at the end of December or 63.1 percent were long-term obligations that would mature in over a year. The rest were short-term loans maturing in less than a year.

The rise in dollar loans was accompanied by higher foreign currency deposits in local banks. At the end of 2014, FCDU deposit liabilities were up 22.7 percent to $31.8 billion.

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