Real estate loans of big banks up 5%

Lawrence Agcaoili (The Philippine Star) - September 26, 2016 - 12:00am

MANILA, Philippines – Real estate loans extended by big banks remained manageable after a five percent increase in the second quarter, data from the Bangko Sentral ng Pilipinas showed.

Real estate loans of universal and commercial banks reached P1.14 trillion in end-June, P54.17 billion higher than the P1.08 trillion recorded in end-March.

The BSP said the share of real estate exposures from the banks’ total loan portfolio remained steady at 19.2 percent in end-June. The total loan books of big banks rose 4.9 percent to P5.94 trillion in end-June from P5.66 trillion in end-March.

Data showed residential real estate loans including socialized and low cost housing increased 5.02 percent to P279.46 billion in end-June from P266.1 billion in end-March and accounted for 24.6 percent of the total banking industry’s total real estate loan portfolio.

On the other hand, loans extended to commercial real estate loans grew five percent to P858.59 billion in end-June from P817.78 billion in end-March.

The BSP monitors the real estate exposures of universal, commercial, and thrift banks as part of its broader role of assessing the quality of bank exposures to the different sectors of the economy.

The BSP stepped up its monitoring of the real estate sector as early as 2012 by ordering banks to disclose more comprehensive reports on their exposures to property industry. It has set the cap on real estate loans at 20 percent of the bank’s total loan portfolio.

The BSP’s first residential residential real estate price index (RREPI) showed the country’s property sector remained vibrant in the first quarter but there are no signs of an asset bubble in the real estate industry

The RREPI increase 9.2 percent in the first quarter from 5.1 percent in the fourth quarter of last year. The index in the National Capital Region (NCR) went up 9.7 percent from 6.3 percent, while that of areas outside NCR (AONCR) increased to 9.4 percent from 5.9 percent.

The RREPI would help the central bank in addressing concerns of a “bubble” in the country’s booming residential real estate sector brought about by the improving purchasing power of Filipinos.

Gareth Leather, senior economist for Asia at Capital Economics, has expressed concern over the strong credit growth particularly to the property sector.

“One area for concern is that credit growth has started to accelerate again, which if sustained, could put the health of the financial sector at risk. We are particularly concerned about an increase in lending to the property sector,” Leather said.

However, the economist is confident the Bangko Sentral ng Pilipinas (BSP) would be able to utilize macroprudential measures to check excessive growth without tweaking its policy stance.

“That said, the central bank has traditionally preferred to manage these risks through the use of macroprudential measures, and we doubt stronger credit growth will be the trigger for the BSP to raise rates,” he said.

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