Real estate exposure of banks declines in Q3

MANILA, Philippines — The exposure of Philippine banks in the volatile real estate sector slipped in the third quarter and continued to remain below the 20 percent threshold, according to the Bangko Sentral ng Pilipinas (BSP).

The central bank said the share of real estate loans to the industry’s total loan book increased to 18.42 percent of total loans as of end-September from 19.47 percent as of end-June.

The real estate exposure of Philippine banks peaked at 21.09 percent as of end March 2017.

As part of risk management, the BSP requires banks to keep their real estate exposure to a maximum of 20 percent of their loan portfolio.

According to BSP data, lending to property developers recorded a double-digit increase of 10.9 percent to hit P2.03 trillion as of end-September from P1.83 trillion a year ago.

Residential real estate loans recorded a double-digit growth of 13.1 percent to P734.22 billion from P649.25 billion, while commercial real estate loans went up by 9.7 percent to P1.29 trillion from P1.18 trillion.

Despite the increase, the ratio of gross non-performing real estate loans of Philippine banks stood at 1.82 percent as of end-September, slightly lower than the 1.80 percent a year ago.

On the other hand, real estate investments in debt and equity securities grew by 9.5 percent to P333.5 billion from P304.56 billion.

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 central bank placed the real estate and project finance exposures of Philippine banks under tight watch as debt watchers and multilateral lending agencies have raised the red flag over the possible overheating in the economy,

The regulator approved enhancements to the prudential reporting requirements in order to strengthen oversight of banks’ real estate and project finance exposures.

The reportorial enhancements form part of BSP’s macroprudential toolkit and are being deployed to sharpen the central bank’s assessment of banking system exposures to the property sector.

As early as 2012, the BSP stepped up its monitoring of the real estate sector by ordering banks to disclose more comprehensive reports on their exposures to property industry.

Authorities have time and again reiterated that concerns of overheating are unfounded as the country has enough buffers to fund imports and pay off maturing financial obligations.