Banks’ exposures to property sector up 15%

Banks’ lending to the real estate sector went up by 14.67 percent year-on-year to R1.915 trillion as of end-March 2018 from R1.670 trillion in the same period in 2017, data from the central bank show.

Including the real estate exposures of banks’ trust units, the amount is 13.35 percent higher year-on-year to R2.114 trillion from R1.865 trillion same time in 2017.

Real estate exposures are both real estate loans (REL) and real estate investments (REI), which are debt and equity securities.

Based on Bangko Sentral ng Pilipinas (BSP) data, REL increased by 14.41 percent to R1.818 trillion end-March from R1.589 trillion, while REI was up 20.27 percent higher to R96.575 billion from the previous R80.297 billion.

With banks’ trust departments, the total REL rose by 14.35 percent to R1.824 trillion from R1.595 trillion while REI went up by 7.52 percent to R290.85 billion from R270.47 billion.

The banking system – these includes both banks and trusts’ exposures – reported total residential REL of R623.55 billion as of end-March, up from same period last year of R542.13 billion, while commercial REL reached R1.2 trillion this year versus R1.053 trillion in 2017.

In a report released last week, the BSP said the “sustained household investments in residential properties, the increase in the number of projects unveiled by real estate developers and the intensified promotional campaigns by banks, supported the growth in real estate purchases during the review period.”

The total residential RELs to total loan portfolio continue to be manageable, the BSP noted, and in terms of loan quality the non-performing residential RELs remained unchanged.

At present, regulatory measures governing real estate exposures of banks include a loan limit of 20 percent of total loan portfolio, net of interbank loans, as well as the real estate stress test limits which were adopted in pursuit of the BSP’s objective of fostering financial stability.