PH banks pare real estate exposure
Philippine banks trimmed their exposure to the volatile real estate sector in the third quarter, even as bad housing loans edged down amid the central bank’s interest rate cuts.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that real estate loans of local banks and their trust units had amounted to P3.1 trillion as of end-September, cornering 19.54 percent of the industry’s total lending portfolio.
The ratio was slightly lower than the 19.61 percent recorded at the end of the preceding quarter, when credit extended to the property sector reached P3 trillion. On an annual basis, bank lending to the property sector grew by nearly 9 percent.
Zooming out, the latest ratio was still below the 25 percent mandated exposure limit set by the BSP.
In 2020, the central bank raised the cap that financial institutions are allowed to lend to the real estate sector from 20 percent to support growth in productive sectors during the pandemic.
But regulators also tightened the screws with stress tests. Lenders are required to show they could still meet capital standards if a quarter of property loans went bad.
Data showed that home loans had risen by 11 percent year-on-year to P1.2 trillion. Meanwhile, commercial loans went up by 7.4 percent to P1.9 trillion.
The BSP also reported that real estate loans deemed nonperforming—or 90 days late on a payment and at risk of default—had amounted to P116 billion as of end-September, accounting for 3.75 percent of the total outstanding credit to the industry. This ratio of bad loans was lower than the 3.78 percent recorded in the previous quarter.
Figures showed that nonperforming home loans cornered 6.39 percent of banks’ real estate lending portfolio, easing from 6.44 percent recorded in the second quarter.
The proportion of soured commercial real estate loans inched down to 2.11 percent, from 2.13 percent before.
This developed amid the ongoing easing cycle of the BSP. At its final policy meeting for the year, the Monetary Board slashed the overnight borrowing rate, guiding bank lending costs by a quarter point to 4.5 percent, the lowest in more than three years. This brought the cumulative reductions since the easing cycle started in August last year to 2 percentage points.
BSP Governor Eli Remolona Jr. had said the central bank may be nearing the end of its interest rate-cutting campaign. He added that any further rate easing next year—if they come at all—were likely to be limited to a single quarter-point cut.
The BSP chief also said the central bank would still avoid outsized cuts and off-cycle decisions that may stir market concerns about the economy.
