Banks’ exposure in real estate down 2% to P203.3B in 1st quarter

The exposure of banks in the real estate sector declined by two percent to P203.3 billion compared to P207.5 billion in the first quarter of the year at the end of 2005, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Latest available data from the BSP indicated that as of end-March 2006, real estate exposures of universal and commercial banks (U/KBs) and their trust departments also declined by 2.6 percent to P186.3 billion from P191.2 billion in the previous quarter.

As a result, the BSP said the proportion of real estate loans or RELs to the total loan portfolio of banks dropped to 11.6 percent from 11.9 percent quarter-on-quarter although this was still slightly higher than the 11.5-percent ratio over the same period last year.

The BSP said the decline in RELs came mainly from reductions in real estate lending by the banks themselves as well as payments made by borrowers who settled their RELs

The BSP said the bank proper accounted for the bulk of RELs or 97.3 percent while the remaining 2.7 percent was accounted for by U/KB’s trust departments.

The BSP said most RELs were granted for the construction and development of real estate properties for commercial purposes including infrastructure projects. These accounted for 82.1 percent of total RELs, or P153 billion. The rest went to the acquisition of residential unites by individual homeowners or borrowers which amounted to P33.3 billion of total RELs.

On the other hand, the decline in RELs was also marked by a drop in past-due loans to 10 percent of total loans to P26.3 billion compared to P29.2 billion in the previous quarter.

BSP Governor Amando Tetangco Jr. said banks have been rigorously collecting RELs and they have also been intent on settlement, restructuring and foreclosure of past-due RELs.

Consequently, the proportion of past-due RELs to total RELs declined to 14.1 percent from 15.3 percent. Last year, the ratio was even worse at 20.9 percent.

As a percentage of total loans, the BSP said past-due RELs accounted for only 1.6 percent compared to 1.8 percent in the last quarter and 2.4 percent over the same period last year.

RELs, according to Tetangco, comprised mainly of the P203.3- billion exposure of the U/KB industry to the real estate industry. The remaining 8.4 percent was in the form of investments in securities issued by real estate companies.