Banks increase exposure to real property sector

By Melissa Luz T. Lopez, Senior Reporter
BANKS lent out more funds to the real property sector as of June, although growth slowed from the previous quarter as interest rates climbed.
Banks’ overall exposure to the real estate sector reached P2.139 trillion as of end-June, 11.2% more than the P1.924 trillion recorded in the same period last year, according to the Bangko Sentral ng Pilipinas (BSP). The latest growth pace compared to a 13.3% year-on-year increase recorded as of end-March.
Broken down, credit extended by banks for property acquisition and development reached P1.837 trillion, up 11.7% from the P1.644-trillion loans as of June 2017, data showed. This credit segment accounted for bulk of banks’ total exposure to this industry.
Bank investments in real estate-related securities grew 8.1% to P302.518 billion from P279.832 billion in the same comparative periods. Lenders placed P195.836 billion in real property-related debt papers and P106.682 billion in property-related equities.
Bulk of the approved property loans went to commercial real estate projects, growing by a tenth to P1.192 trillion as of the first semester. Home loans increased by 15% to P645.247 billion from the P561.311 billion.
Despite the increase, property loans actually saw a smaller share in total bank lending. Such credit took a 19.92% share of banks’ total loan portfolio, down from 20.48% as of end-March and 20.79% as of end-June 2017.
The BSP has been tightening rules on banks’ real estate exposure as it sought to temper rapid credit growth, which some credit raters have flagged as a possible sign of an overheating economy.
BSP Circular 976 issued last year requires banks to report details of real estate loans covering mid- and high-end housing units, as well as socialized and low-cost housing within a month after the end of every quarter starting this year. Reporting deadlines were pushed back to the second half of this year to give lenders more time to comply.
Back in April, the BSP also relaxed lending ceilings on banks and allowed construction firms implementing major infrastructure projects to have a separate borrowing limit from their parent companies. In effect, this move lets such projects secure bigger loans from banks and quasi-banks and serves as the BSP’s way to support the “Build, Build, Build” program of the Duterte administration.
At the same time, soured property loans increased by 11.9% to P33.087 billion, accounting for 1.8% of total borrowings, a steady share from the previous year.
The slower rise in property lending came after the BSP introduced back-to-back rate hikes in its May and June meetings, which drove benchmark interest rates 50 basis points higher. Total bank lending growth eased to 19.1% in June from 19.3% in May, according to central bank data.