Banks’ exposure in property hits P224B
Doris Dumlao
Philippine Daily Inquirer
The exposure of Philippine commercial banks to the real estate sector expanded in the third quarter despite the worsening US property downturn that triggered a global financial turmoil, the central bank reported.
It reached P223.9 billion at end-September, up 5.1 percent from a quarter earlier and 16.4 percent from a year earlier, said the central bank, Bangko Sentral ng Pilipinas (BSP).
The additional exposure came in the form of P7.7 billion worth of new loans and P3.2 billion in investments in securities issued by real estate companies, the BSP report said.
Real estate loans increased 3.7 percent as of end-September from the end-June level. Loans extended for the construction and development of real estate properties for commercial purposes accounted for 71 percent while the remainder was granted for the acquisition, construction and improvement of residential units that will be occupied by the borrowing household.
In terms of asset quality, nonperforming real estate loans rose 5.2 percent to P16 billion from the previous quarter. This brought the ratio of non-performing real estate loans to total real estate loans to 7.4 percent from the previous quarter’s 7.3 percent.
Investments in debt securities issued by and in equity securities of real estate companies amounted to P8.9 billion as of end-September, up from P5.7 billion a quarter ago and P6 billion a year ago.
Earlier this year, the BSP approved a liberalization of regulations on real estate for the first time since the Asian crisis to pump in more money into two of the government’s priority sectors—infrastructure and housing.
The BSP agreed to adopt a single-industry limit of 20 percent on real estate loans as a share of total loans. The 20-percent cap was slapped on the banking sector’s exposure to the volatile property sector by the BSP shortly before the Asian currency crisis erupted, but a leeway to increase the exposure to 30 percent was incorporated, including loans not exceeding P3.5 million to finance the purchase or improvement of residential units.
Under the new rules, the 20 percent cap was kept but the BSP redefined real estate loans to carve out certain items such as those lent for infrastructure. Likewise excluded from the computation of real estate loan exposure was residential lending.
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