Banks’ exposure in real estate down to 5-year low

Investments and loans extended by the banking industry to the property sector rose by 4.2 percent to P3.22 trillion in end-September from P3.09 trillion in the same period a year ago.

MANILA, Philippines — The exposure of Philippine banks and trust entities to the volatile property segment eased to 19.55 percent of total as of end-September, marking its lowest in five years, according to the Bangko Sentral ng Pilipinas (BSP).

The latest figure was lower compared to end-June’s 19.92 percent and last year’s 20.55 percent.

This marked the lowest ratio in five years or since the 19.50 percent seen in September 2019.

Based on the data, investments and loans extended by the banking industry to the property sector rose by 4.2 percent to P3.22 trillion in end-September from P3.09 trillion in the same period a year ago.

Broken down, lending rose by 7.6 percent to P2.84 trillion during the nine-month period from P2.64 trillion a year ago.

Commercial real estate loans rose by 7.9 percent to P1.78 trillion, while residential real estate loans grew by 8.4 percent to P1.07 trillion as of end-September.

Past due real estate loans, however, increased by 9.9 percent to P148.2 billion. This came after past due commercial real estate loans grew by 9.3 percent to P43.19 billion, while past due residential real estate loans inched up 10 percent to P104.97 billion.

The gross non-performing loans (NPLs) of Philippine banks from the real estate sector stood at P111.55 billion from January to September, 7.1 percent higher than the P104.14 billion in the comparable year-ago period.

Despite the pickup in soured loans, the gross NPL ratio went down to 3.92 percent in end-September from 3.98 percent in end-June and 3.95 percent a year ago.

Meanwhile, real estate investments in debt and equity securities fell by 15.5 percent to P376.41 billion from P445.67 billion in the previous year.

At the height of the global health crisis, the BSP raised the real estate loan limit of big banks to 25 percent from 20 percent in August 2020 to unleash P1.2 trillion in additional liquidity for lending amid the uncertainties brought about by the pandemic.

To ensure that banks’ exposure to the property sector remains manageable, the BSP continues to maintain prudential measures, including the real estate limit.

These measures also include the heightened surveillance of banks’ real estate and project finance exposures, and the real estate stress test thresholds for universal and commercial banks as well as thrift banks.