Banks ease exposure in real estate in 2023

MANILA, Philippines — The exposure of Philippine banks and trust entities to the volatile property segment eased slightly to 20.17 percent of total loans in end-December 2023 from 20.55 percent in end-September last year, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Investments and loans extended by the banking industry to the property sector, however, rose by 4.3 percent to P3.15 trillion in end-2023 from P3.02 trillion in end-2022.

Broken down, lending went up by 5.4 percent to P2.73 trillion in 2023 from P2.59 trillion a year ago. Commercial real estate loans rose by 5.5 percent to P1.73 trillion, while residential real estate loans grew by 6.6 percent to P1.01 trillion.

Past due real estate loans, however, inched up by 2.4 percent to P135.26 billion. This came after past due commercial real estate loans increased by 4.4 percent to P39.99 billion, while past due residential real estate loans went up by 1.5 percent to P95.27 billion.

The gross non-performing loans (NPLs) of Philippine banks from the real estate sector stood at P108.39 billion as of end-December 2023, 0.5 percent higher from P107.86 billion in the comparable year-ago period.

Despite the increase in NPLs, the gross non-performing loan real estate ratio went down to 3.96 percent in end-2023 from 4.17 percent a year ago.

Meanwhile, real estate investments in debt and equity securities grew by 5.9 percent to P410.65 billion from P436.3 billion the previous year.

At the height of the global health crisis, the BSP raised the real estate loan limit of big banks to 25 percent from 20 percent in August 2020 to free up P1.2 trillion in additional liquidity for lending amid the uncertainties brought about by the pandemic.

To ensure that banks’ exposure to the property sector remains manageable, the BSP continues to maintain prudential measures, including the real estate limit.

These measures also include the heightened surveillance of banks’ real estate and project finance exposures, and the real estate stress test thresholds for universal and commercial banks as well as thrift banks.

Housing prices continued to recover in the Philippines as the latest Residential Real Estate Price Index of the BSP showed an increase of 6.5 percent to 161.17 in the last quarter of 2023 from 151.9 in the same quarter in 2022.