FCDU loans up 22.6%

MANILA, Philippines - Foreign-denominated loans granted by banks posted double-digit growth last year on the back of a low interest environment that encouraged investors and consumer to borrow money, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

Credit granted by foreign currency deposit units (FCDU) hit $8.665 billion in 2012, up 22.6 percent from the previous year’s $7.066 billion, the BSP said.

FCDUs are branches or subsidiaries of foreign banks based in the country.

“This development was attributed to the favorable interest rate environment and positive business sentiment arising from strong macro-economic fundamentals,” BSP Governor Amando Tetangco Jr. said.

The central bank has kept its key rates at record-lows during its first two policy meetings for the year. They currently stand at 3.5 percent for overnight borrowing and 5.5 percent for overnight lending.

Lower interest rates should bode well for more lending as consumers and investors are encouraged to borrow money to fund investments and consumption activities.

According to the BSP, the bulk of loans extended had long payment terms. A total of 61.8 percent of the total FCDU credit is payable for more than a year, while those that should be settled within 12 months account for 38.2 percent.

By kind of borrower, Philippine residents continue to outnumber non-residents, BSP data showed. About 85 percent of borrowers live in the country, while the balance of 15.3 percent resides abroad.

Higher loans were backed by more deposits. FCDU deposits rose 3.9 percent year-on-year to $25.1 billion. This put the loan-to-deposit ratio at 34.5 percent, up from 29.2 percent a year ago.