Real estate exposure of Ph banks rise hit 22.2% in H1

The exposure of Philippine banks and their trust departments to the volatile real estate sector further increased to a record 22.2 percent in the first half of the year, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The exposure as of end-June topped the previous peak of 22.01 percent recorded last March, but was still well within the 25 percent ceiling set by the regulator.

The BSP Monetary Board raised the real estate loan limit of big banks to 25 from 20 percent in August last year to free up P1.2 trillion in additional liquidity for lending amid the uncertainties brought about by the COVID-19 pandemic.

Preliminary data released by the central bank over the weekend showed investments and loans extended by the banking industry to the property sector went up by 9.6 percent to P2.74 trillion in 2020 from January to June compared to a year-ago level of P2.5 trillion.

Lending increased by 6.4 percent to P2.34 trillion in the first half of the year from P2.2 trillion in the same period last year. Commercial real estate loans inched up by 5.6 percent to P1.49 trillion from P1.41 trillion, while residential real estate loans grew by 7.9 percent to P850.34 billion from P787.9 billion.

Statistics showed past due real estate loans soared 59.5 percent to P149.88 billion from P93.94 billion. This after past due commercial real estate loans surged by 51.3 percent to P43.21 billion from P28.56 billion, while past due residential real estate loans zoomed by 63.1 percent to P106.67 billion from P65.38 billion.

Due to uncertainties brought about by the global health crisis, the gross non-performing real estate loans of Philippine banks soared to 5.15 percent as of end-June this year from 2.77 percent as of end-June last year and from 4.79 percent as of end-March this year.

On the other hand, data from the BSP showed real estate investments in debt and equity securities declined by 9.9 percent to P400.17 billion from P300.3 billion.

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 included the heightened surveillance of banks’ real estate and project finance exposures, and the real estate stress test (REST) thresholds for universal and commercial banks as well as thrift banks.

Property prices slumped for the second straight quarter amid tepid demand caused by the impact of the COVID-19 pandemic.