PH banks’ exposure to the real estate sector climbs at end-March

The exposure of Philippine banks and trust entities to the property sector increased to 21.08% as of March from 20.98% as of December last year, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

The banking industry extended PHP 3 trillion worth of investments and loans to the real estate sector in the January-to-March period, the data showed. This is 5.3% higher than the PHP 2.85 trillion in the same period in 2022.

Lending rose by 4.5% to PHP 2.57 trillion in the first quarter from PHP 2.46 trillion in the comparable year-ago period.

Broken down, commercial real estate loans went up by 4.5% to PHP 1.62 trillion from PHP 1.55 trillion, while residential real estate loans increased by 4.6% to PHP 950 billion from PHP 908 billion in the first quarter of 2022.

Meanwhile, past due commercial real estate loans fell by 13.7% to PHP 38.18 billion from PHP 44.28 billion, while past due residential real estate loans decreased by 11.6% to PHP 95.52 billion from PHP 108.12 billion.

This brought past due real estate loans to PHP 133.7 billion in the first quarter, decreasing by 12.2% from PHP 152.39 billion in the same period last year.

The gross nonperforming real estate loans of Philippine banks also dropped by 11.6% to PHP 105.25 billion from PHP 124.03 billion, bringing the gross nonperforming real estate loan ratio of 4.09% in end-March from 5.04% a year earlier.

BSP data also showed real estate investments in debt and equity securities increased by 8.1% to PHP 425.46 billion from PHP 393.55 billion in 2022.

Amidst the coronavirus pandemic, the Philippine central bank raised the real estate loan limit of big banks to 25% from 20% to free up PHP 1.2 trillion in additional liquidity for lending during the health crisis.

The BSP has set a limit to ensure that lenders’ exposure to the property sector remains manageable. Other measures to help manage the banking system’s exposure to the sector include heightened surveillance of their real estate and project finance exposures and real estate stress test thresholds for universal, commercial and thrift banks.

The central bank earlier said property prices grew at a faster annual pace in the fourth quarter. The Residential Real Estate Price Index rose 7.7% year on year in the fourth quarter, quicker than the 6.5% growth in the previous quarter and the 4.9% in the same period in 2021. — Keisha B. Ta-asan