PHL banks’ real estate exposure up at end-June

Posted on October 12, 2016

PHILIPPINE BANKS hiked their exposure to the volatile real estate sector during the second quarter, marked by double-digit increases in both property loans and capital investments, initial central bank data bared.

The total real estate exposure of universal, commercial, and thrift banks reached P1.623 trillion at end-June, rising from P1.554 trillion during the first quarter and surging by a fifth from the P1.359 trillion tallied in the same period in 2015, according to data from the Bangko Sentral ng Pilipinas (BSP).

The increase was led by an 18.1% jump in property loans for prospective homeowners and developers, rising to P1.389 trillion as of June from P1.176 trillion during the comparable year-ago period.

Broken down, commercial lending saw an 18.7% climb to P907.972 billion from P765.242 billion in June 2015 as property developers sought bigger credits to finance their building projects.

Meanwhile, residential borrowers took P481.315 billion in housing loans, up by 17.1% from last year’s P411.181 billion.

The total loans accounted for 20.76% of banks’ total loan portfolio, coming from a 20.79% share at end-March and from a 20.42% ratio seen a year ago.

BSP Governor Amando M. Tetangco, Jr. earlier said that the Philippines is far from an asset bubble, with strong demand fueling robust construction activity for homes and office space and as developers practice more “prudence” in its activities.

Experts at a recent forum organized by the National Housing Mortgage Finance Corp. said the Philippines is facing an estimated 5.7 million backlog in socialized and low-cost homes, which must be met with a yearly production at 350,000 units versus the 15-year average at 180,000.

Despite an increase in property debts, banks trimmed the share of non-performing loans to 2.03% of the total, improving from the 2.31% ratio posted during the same period last year.

Banks’ non-performing loans represent balances left unpaid at least 30 days past their due date.

Banks also increased their exposure to the property sector through a 27.8% rise in investments in securities covering real estate, data showed.

Total property investments reached P233.328 billion by the end of the first semester, up from P182.627 billion last year. Funds poured in debt papers issued by property firms rose by 26.1% to P142.261 billion, while those placed in housing-related equities grew by nearly a third to P91.067 billion.

The central bank has been closely monitoring on the property market since the 1997 Asian financial and the 2008 global economic crises, which was triggered by mortgage delinquencies following a correction in housing prices abroad.

An asset bubble forms due to a perceived rising demand in housing units that drive developers to build more, and is said to “burst” as demand stagnates, which will lead to an abrupt drop in property prices.

Housing prices rose by 9.2% during the first quarter of the year, a rate deemed not alarming thus far by the central bank, authorities earlier said. -- Melissa Luz T. Lopez