Thrift banks’ real estate loans up 11% in 2007

Lured by the recovery and expansion of the property sector, thrift banks expanded their exposures in real estate lending by 11 percent in 2007, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The BSP said that as of end-December 2007, the exposure of thrift banks in the real estate sector stood at P84.4 billion compared with P76 billion at the end of 2006.

The BSP said in the fourth quarter alone, the industry’s total exposure rose three percent solely from real estate loans that amounted to P2.5 billion, sustaining the increase in real estate loans or REL for 19 quarters in a row.

However, the BSP said that the industry’s total loan portfolio had expanded faster in 2007 than RELs, so that in terms of proportion to total loans, RELs accounted for only 33.5 percent.

The BSP said nearly all of total RELs were granted by thrift banks proper while their trust departments accounted for only 0.1 percent of the total.

The BSP reported that the RELs of thrift banks were concentrated in home financing which indicated that the industry extended loans that financed the acquisition of houses by individual borrowers or homeowners.

The central bank said these loans accounted for 79.6 percent of total RELs, amounting to a total of P66.8 billion for the whole year.

The remaining 20.4 percent, on the other hand, were used for the construction and development of real estate properties for commercial purposes. This amounted to P17.1 billion.

On close examination, the BSP said the ratio of past due RELs to total RELs stood at 9.4 percent, a slight improvement from 10.2 percent the previous year.

The BSP said the improvement was due to the combined effect of the seven percent decline in past-due RELs and the modest growth in total RELs during the period.

The decline in past-due RELs resulted in a corresponding decline in the proportion of these bad loans to total bad loans of the thrift banking industry. In 2007, the ratio stood at 3.1 percent, down from 3.5 percent the previous year.

The BSP said RELs comprised 99.4 percent of the P84.4-billion total exposure to the real estate industry.

The remaining portion, according to the BSP, was in the form of equity investments.

Altogether, the BSP said the ratio of RELs and investments in real estate companies to the total loan portfolio of the industry plus total investments in securities narrowed to 23.5 percent from 23.6 percent in 2006.