Real estate loans climb 23% in Q1

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.
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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