By Kathleen A. Martin (The Philippine
Star) | Updated August 9, 2014 - 12:00am
MANILA, Philippines - Banks’ exposure
to the real estate sector continued to rise in the first quarter, the Bangko
Sentral ng Pilipinas said yesterday.
The real estate exposure (REE) of
universal, commercial, and thrift banks climbed 2.9 percent to P1.035 trillion
in the first quarter from P1.006 trillion in end-2013.
“The increase was mainly due to the
banks’ real estate loans, which expanded 2.8 percent to P866.6 billion in March
this year from P843 billion in December last year,” the BSP said. Loans to the
property sector made up 83.7 percent of banks’ REE in the first quarter.
Credit extended to land developers,
construction companies and other corporate entities accounted for 60 percent of
the total loans for the sector, while the remaining 40 percent were borrowed
for residential properties.
Apart from loans, the REE is made up
of investments in real estate securities, which increased 3.1 percent to P168.6
billion in end-March from P163.6 billion in end-2013. These investments made up
16.3 percent of the total REE in the first quarter.
“The Bangko Sentral ng Pilipinas
assesses banks’ exposure to the different sectors of the economy as part of its
continuing efforts to maintain the stability of the Philippine financial
system,” the central bank stressed.
In the first quarter, the REE
accounted for 21.3 percent of the banks’ total loan portfolio during the
period.
But the BSP stressed that the
exposures of universal and commercial banks to real estate loans, which is
subject to a 20 percent cap, only reached 10.7 percent during the period.
The central bank further noted the
non-performing real estate loans of universal, commercial, and thrift banks
represented 2.77 percent of the total borrowings extended for the property
sector in the first quarter. This is slightly lower than the 2.8 percent seen
in end-2013.
“The banks’ non-performing real estate
loans have been on a downward trend since 2012,” the BSP recounted.
The BSP last month required banks to
undergo a separate stress test in order to assess the impact of their exposure
to the real estate sector once borrowers fail to service their loans.
Under BSP Circular No. 839, banks
should be able to maintain a common equity tier 1 capital ratio of at least six
percent and a minimum risk-based capital adequacy ratio of 10 percent even if
25 percent of a lender’s exposure to the property sector has been written off.
There would be a quarterly report
submitted before the Monetary Board regarding the new stress test for banks.
Those found non-compliance will be given the chance to explain and submit an
action plan to address their shortcomings.
______________________________________________________________
