Banks’ exposure to real estate rises, driven by loans

MANILA, Philippines – The real estate exposures (REEs) of universal, commercial (U/KBs), thrift banks (TBs) and trust departments increased by 5.4% this quarter, buoyed by an increase in real estate loans (RELS) while non-performing real estate loans have continued to decrease, the Bangko Sentral ng Pilipinas (BSP) said.

The end-2014 figure was 1.221 trillion ($27.4 billion), an increase from P 1.159 trillion ($26 billion) in REEs recorded a quarter earlier.

The rise was attributed to the banks’ real estate loans (RELs), which increased by 6.8 % to P 1.043 trillion ($23.4 billion) quarter-on-quarter.

These loans represented 85.4 % of REEs during the period, with 60% of the RELs extended to land developers, construction firms and other corporate entities. The remaining 40 % went to individual households for occupancy.

The banks’ investments in real estate (RE) securities, such as bonds for specific projects or stocks in real estate firms, decreased by 2.1 % quarter-on-quarter to P 178 billion ($ 4 billion) at the end of last year. Investments in RE securities comprised 14.6 % of the banks’ REEs during the period.

Despite the increase in overall exposure, the ratio of non-performing RELs of U/KBs and TBs continued to decrease.

At end-2014, the banks’ non-performing RELs represented 2.47 % of total RELs. This follows a figure of 2.80 % at end-2013.

This is the lowest posted for the quarterly indicator since December 2012. It is also another positive indicator for the locate real estate industry.

The BSP mandated preemptive stress tests as a policy last year to ensure bank’s healthy exposure to the real estate sector. – Rappler.com

 US1$ =  P 44.5