Banks’ property exposure rises to 22% in H1

MANILA, Philippines — The exposure of Philippine banks and trust entities to the volatile property segment further increased to a record 22.2 percent in the first half, while the industry’s non-performing real estate loan ratio topped five percent.

Data from the Bangko Sentral ng Pilipinas (BSP) showed the real estate exposure of Philippine banks and their trust departments in end-June topped the previous peak of 22.01 percent in March.

However, the level was still well within the 25 percent ceiling set by the BSP.

The BSP raised the real estate loan limit of big banks from 20 to 25 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 from P2.2 trillion in the same period last year. Commercial real estate loans rose 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.

Past due real estate loans soared by nearly 60 percent to P149.88 billion in the first half from P93.94 billion a year ago. This came 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 pandemic, the gross non-performing real estate loans of Philippine banks soared to 5.15 percent in end-June from 2.77 percent in the same period last year, and from 4.79 percent in end-March.

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