Banks’ real estate exposure rises

MANILA, Philippines - Local banks’ exposure to the property sector continued to grow in end-June from the previous quarter, but the Bangko Sentral ng Pilipinas assured these remain manageable.

Universal, commercial and thrift banks’ real estate exposure (REE) summed up to P900.1 billion as of June, up seven percent from end-March.

“The increase in REE was mainly driven by real estate loans which accounted for 84.7 percent of their total exposure to the real estate sector,” the central bank said.

Real estate loans went up seven percent to P762.5 billion in the second quarter from P715.5 bililon in the previous three months.

At the same time, investments in the property market, which make up 15.3 percent of the total REE, also climbed during the period.

Investments in real estate securities jumped eight percent to P137.7 billion in end-June from P127.1 billion in the first quarter.

The central bank stressed the total REE only made up 21.7 percent of the banking system’s total loan portfolio of P4.2 trillion in June.

“In line with its financial stability objectives, the BSP is keeping an eye on measuring the whole landscape under the new coverage of banks’ exposure to the real estate industry,” the central bank said.

“The BSP is keen on monitoring the credit conditions that support the heightened activity in property development to prevent potential impairment of intermediation.”

The BSP last year introduced stricter regulations in monitoring banks’ exposure to the real estate sector.

The expanded reporting system now covers loans to developers of socialized and low-cost housing, and to individuals, and credit supported by non-risk collaterals or Home Guarantee Corporation guarantee.

Moreover, banks are also required to report investments in debt and equity securities that finance real estate activities.

A tightened watch on banks’ real estate exposure has been put in place in order to ensure no asset bubbles arise given the continued robust growth of the property sector.