By Kathleen
A. Martin (The Philippine Star) | Updated July 1, 2015 - 12:00am
MANILA,
Philippines - Banks’ exposure to the property sector rose 23 percent in the
first quarter on sustained demand, the Bangko Sentral ng Pilipinas (BSP)
reported yesterday.
The real
estate exposure of banks climbed to P1.27 trillion in end-March from P1.03
trillion in the same period last year, the central bank said. The latest figure
is also four percent higher than the P1.22 trillion recorded in end-2014.
The BSP’s
latest Senior Loan Officers Survey showed an increase in the demand for real
estate loans in the first quarter.
Real estate
loans, which made up 86 percent of the exposure, jumped 26 percent to P1.09
trillion in the first quarter from P866.62 billion in end-March of last year.
The loans
accounted for 19.54 percent of the banks’ total loan portfolio for the period,
close to the mandated 20-percent cap on borrowings extended to the property
sector.
Borrowings
made by land developers, construction companies, and other corporate entities
went up 26 percent to P679.742 billion from P538.536 billion, while residential
property loans also increased 26 percent to P413.212 billion from P328.088
billion.
Gross non-performing real estate loans, however, remained low at 2.57 percent or P28.1 billion of the total borrowings extended to the sector.
Gross non-performing real estate loans, however, remained low at 2.57 percent or P28.1 billion of the total borrowings extended to the sector.
The rest of
the banks’ real estate exposure is made up of investments in the property
sector which grew seven percent to P180.111 billion in the first quarter from
P168.639 billion in the same period last year.
The BSP
monitors banks’ REE to keep any possible property bubbles in check in line with
its mandate to maintain a stable financial system.
Last year,
the central bank required banks to undergo a separate stress test to assess the
impact of their exposure to the housing sector once borrowers fail to pay their
loans.
BSP Circular
839 mandated banks 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 their exposure has been written off.
BSP Governor
Amando M. Tetangco, Jr. earlier this year said local banks have passed the real
estate stress tests in end-June and in end-September last year.
He noted that
the lenders even had capital ratios above the minimum despite the simulated
write-off of loans to the real estate sector.
Banks are
required to submit a quarterly report on the real estate stress test and those
found non-compliant with the limits will be asked to present an action plan to
address their shortcomings.
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