PH banks cut property exposure to lowest in 6 years
Philippine banks cut their exposure to the volatile property sector to its lowest level in over six years, as bad real estate loans picked up in the first quarter.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that real estate loans of local banks and their trust units amounted to P3 trillion as of end-March, cornering 19.41 percent of the industry’s total lending portfolio.
The ratio was lower than the 19.75 percent recorded at the end of the preceding quarter, when credit extended to the property sector reached P2.95 trillion.
Zooming out, this was the smallest exposure of banks and trust entities to the real estate sector since the first quarter of 2019. Back then, loans extended to borrowers who want to acquire residential and commercial spaces accounted for 19.20 percent of banks’ lending portfolio.
Data showed home loans rose by 3 percent quarter-on-quarter to P1.13 trillion. Meanwhile, commercial loans inched down by almost 1 percent to P1.83 trillion.
As it is, the broad decline in bank lending to the property sector coincided with the uptick in soured loans.
The BSP reported that real estate loans deemed nonperforming—or 90 days late on a payment and at risk of default—amounted to P111.3 billion as of end-March, accounting for 3.75 percent of the total outstanding credit to the industry. This ratio of bad loans was higher than the 3.68 percent recorded in the previous quarter.
Figures showed nonperforming home loans cornered 6.37 percent of banks’ entire lending portfolio, up from 6.35 percent previously. Likewise, the proportion of soured commercial real estate loans rose to 2.13 percent, from 2.09 percent before.
But the ongoing easing cycle of the BSP could eventually convince banks to lend more money to the property sector.
Last week, the powerful Monetary Board (MB) trimmed the policy rate that banks use as a guide when pricing loans by a quarter point to 5.25 percent. It was a widely expected decision that brought the cumulative reductions under the current easing cycle to 1.25 percentage points.
BSP Governor Eli Remolona Jr. said that the central bank may cut once more, which could happen at any of the last three meetings of the MB this year. The board will meet again in August, October and December to decide on the monetary policy stance.
