The quality of local banks’ real estate loans improved in the first semester, indicating that these financial institutions maintained prudent lending standards despite the temptation to ramp up their exposure to the historically volatile property sector.
Data released by the Bangko Sentral ng Pilipinas (BSP) showed that non-performing real estate loans held by the Philippine banking system eased to 3.2 percent at the end of June, better than the 3.48 percent in March.
The improvement in loan quality was observed across the board, with soured real estate loans decreasing to 3.12 percent from 3.5 percent for the residential segment, and to 3.25 percent from 3.47 percent in the commercial segment.
This came despite the increase in total real estate loans to P752.17 billion in June from P704.36 billion in March.
Sixty one percent of these loans were used for commercial purposes, while the balance went to residential clients, BSP data showed.
Real estate loans of banks increased to 18.40 percent of the industry’s total loan portfolio in June, higher than the 17.92 percent recorded in March. This was still lower than the BSP’s 20-percent ceiling for property sector lending.
Last May, the BSP tightened its watch on lending for real estate by ordering banks to disclose their investments in property firms.
“Taking this holistic view of the market is an effective way to ensure that we preserve and build upon the gains that we have already achieved thus far,” BSP Governor Amando M. Tetangco Jr. said.
The new standard extends the previously released data series by including loans to developers of socialized and low-cost housing, loans to individuals, loans supported by non-risk collaterals or Home Guarantee Corp. guarantees, as well as exposures of bank trust departments and thrift banks.
This expanded coverage of banks’ exposure toward the real estate sector is in line with the BSP’s pursuit of financial stability.