Banks’ real estate exposure climbs

Philippine banks’ exposure to the real estate industry as of the end of June this year had climbed by 9.2 percent year-on-ear, with loans accounting for the bulk.

According to the latest Bangko Sentral ng Pilipinas (BSP) data, real estate exposure (REE) of banks and trust departments increased to P2.73 trillion in June 2020, up from P2.50 trillion a year ago.

Of the total, 85.37 percent was made up of real estate loans, with the remaining 14.62 percent made up of financial assets.

The loan component of the total exposure expanded 5.90 percent to P2.33 trillion from P2.20 trillion a year before.

Borrowers acquiring residential properties received 36.39 percent of the total loans, while commercial real estate loans accounted for 63.60 percent.

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Non-performing loans grew by 97.84 percent to P120.44 billion by the end of June 2020, picking up from P60.88 billion.

As a result, the ratio of overall non-performing real estate loans to total real estate loans inched up to 5.15 percent, rising from 2.77 percent a year before.

On the other hand, real estate securities investments jumped by 33.25 percent to P400.17 billion at the end of June this year, up from P300.30 billion a year prior.

The central bank said in an annual report that the latest real estate stress test (REST) results showed that the stressed capital adequacy ratio (CAR) and common equity tier 1 (CET1) ratios of universal and commercial banks or U/KB industry remained above the BSP’s minimal criteria on both a solo and consolidated basis.

“The U/KB industry’s REST results for end-March 2020 showed average post-stress test CARs, gross of allowance, of 11.3 percent and 11.7 percent for solo and consolidated bases, respectively. Meanwhile, the average post-stress test CET1 ratios, gross of allowance, were at 10.1 percent and 10.5 percent for solo and consolidated bases, respectively,” it underscored.

Article and Photo originally posted by Manila Times last October 4, 2021 and written by Mayvelin U. Caraballo.