Philippine real estate loans increase but sector remains healthy: central bank

PROPERTY REPORT - Real estate loans in the Philippines were worth PHP561.6 billion (US$13.5 billion) in June, up 18.9 percent year-on-year and 4.4 percent higher than the previous quarter ending in March 2012. The numbers are a strong indication of the boom in the country real estate industry, reported the Manila Bulletin.

According to The Bangko Sentral ng Pilipinas (BSP) in a monthly report, 38 universal and commercial banks accounted for 77.3 percent of the exposures, or PHP434 billion, while the rest are from the 72 thrift banks. BSP also said the majority of the loans were real estate loans with just 2.7 percent being in securities issued by real estate corporations.

In value terms, real estate loans increased by PHP22.3 billion with PHP11.9 billion coming from residential real estate loans.

Despite the increase in real estate loans, the central bank said that the level of real estate loans ratio to total loan portfolio remained stable at 15 percent, slightly lower than March’s total loan portfolio of 15.2 percent.
Another signs that the property sector is faring well is that the number of non-performing loans for the end of June decreased by 9.6 percent to PHP24.2 billion from PHP26.8 billion in March. The NPL ratio was also lower at four percent from 4.8 percent in the previous quarter, according to the Manila Bulletin.


Manila Bulletin - The country’s large-capitalized banks and some big thrift banks reported real estate exposures worth P561.6 billion as of June, up 18.9 percent year-on-year and 4.4 percent higher from the previous quarter ending in March, a strong indication of a continuing boom in the real estate sector.

The Bangko Sentral ng Pilipinas (BSP) in a monthly report said the 38 universal/commercial banks accounted for 77.3 percent of total exposure or P434 billion while 22.7 percent or P127.6 billion are from the 71 thrift banks.

Majority of the industry’s real estate exposures are real estate loans, about 97.3 percent of total while the remaining 2.7 percent are investments in securities issued by real estate corporations.
Real estate loans as of end-June amounted to P546.5 billion, which was 4.3 percent higher from March, while banks’ real estate securities totaled P1.2 billion, up 8.4 percent from the previous quarter.

In value terms, real estate loans increased by P22.3 billion which came from P11.9-billion residential real estate loans and P10.4 billion from commercial real estate loans.

During the period, real estate loans for commercial purposes accounted for 55.3 percent or P302 billion of total real estate loans while 44.7 percent or P244.4 billion are residential real estate loans.

The central bank said that despite the increasing level of real estate loans, the level of real estate loans ratio to total loan portfolio remained stable at 15 percent, lower compared to 15.2 percent in March total loan portfolio.

The universal/commercial and thrift banks’ non-performing real estate loans for the end of June decreased by 9.6 percent to P24.2 billion from P26.8 billion in March. The NPL ratio in the same period was also lower at four percent from 4.8 percent in the previous quarter.

Thrift banks have better quality real estate loans compared to the big banks. The thrift banks’ real estate NPLs stood at 4.1 percent while big banks at 4.5 percent.

The BSP has recently amended the way it captures real estate exposure data, by including investments in debt and equity securities and by expanding the scope of activities that are real estate-financing related.
As of end-June, the banks’ investments in debt securities issued by real estate companies rose 8.4 percent to P15.2 billion from p12.4 billion in the previous quarter.

Debt securities accounted for majority of the total real estate investments or about 80 percent or P12.1 billion while 20 percent or P3 billion are equity investments.

BSP said only universal/commercial banks have exposure in real estate investments.
 The central bank said with the inclusion of all loans, investments in debt and equity securities, all loans are now counted as a bank’s real estate exposure.

Banks’ real estate exposures will also be referenced against its adjusted capital and the single borrower’s loan limit. This will be consistent with the “sound risk management practices which espouse the maintenance by a bank of adequate capital that is commensurate to its risks,” said the BSP.

By BSP definition, real estate activities are activities that include construction and development of real estate projects as well as other ancillary services like buying and selling, rental and management of real estate properties.  This is a wider definition from the original circular which limits real estate activities to the acquisition, construction and improvement of real estate property.