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Banks’ exposure to real estate tops P1t, breaches 20% limit

By Julito G. Rada | May. 21, 2014 at 12:01am [ manilastandardtoday.com ]

Banks’ exposure to the real estate sector topped P1 trillion for the first time last year and breached the 20-percent limit set by the Bangko Sentral, as more property developers took out loans to start new residential and commercial projects.

The Bangko Sentral said real estate exposure of universal, commercial and thrift banks hit P1.006 trillion as of the fourth quarter of 2013, up 7.1 percent from P939.8 billion in the third quarter.

The figure represented 21.8 percent of the banks’ total loan portfolio, exceeding the 20-percent limit set by the Bangko Sentral.   The regulator requires banks to observe an aggregate limit on real estate loans to not more than 20 percent of their respective total loan portfolio in a bid to reduce risks.

The Bangko Sentral said it “monitors various segments of the credit market in its continuing effort to assess and address potential concerns that may undermine the stability of the financial system.”

Data from the Bangko Sentral, however, showed that real estate loans represented only 83.8 percent of the banks’ real estate exposure in the fourth quarter.  These loans grew 7 percent only a quarterly basis to P843 billion from P788 billion in the third quarter.

“Sixty percent of the RELs was granted to commercial entities such as land developers and construction companies while the rest of the RELs was extended to borrowers acquiring residential properties,” the Bangko Sentral said.

Investments in real estate securities increased 7.8 percent to P163.6 billion as of end-2013 from P151.8 billion in the third quarter.  Investments in RE securities comprised the remaining 16.2 percent of the real estate exposure.

Bangko Sentral said  non-performing real estate loans remained manageable amid the increase in real estate credit. Non-performing real estate loans accounted for 2.8 percent of the total real estate loans.
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