PH banks hike exposure to property sector as bad home loans eased
MANILA, Philippines — Banks increased their exposure to the volatile property sector in the final quarter of 2024, as soured home loans eased to their lowest level in over four years.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed real estate loans of local banks and trust entities amounted to P2.95 trillion as of end-December, cornering 19.75 percent of the industry’s total lending portfolio.
That ratio was higher than the 19.55 percent recorded in the third quarter, when the amount of bank credit extended to the property sector was at P2.84 trillion.
Broken down, housing loans had gone up by 3.56 percent quarter-on-quarter to P1.1 trillion, while credit used to acquire commercial spaces had jumped by 4.1 percent to P1.8 trillion.
READ: PH banks cut exposure to property sector in Q3
But despite such an increase in banks’ exposure to the property sector, Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said high borrowing costs would put a lid on real estate lending.
“Still on elevated interest rates and inflation. This lowered purchasing power consumers,” Ravelas said.
At its first policy meeting for this year, the central bank decided to keep the benchmark rate that banks typically use as a guide when pricing loans untouched at 5.75 percent.
The move defied market expectations, with BSP Governor Eli Remolona Jr. admitting that it was a complicated decision for monetary authorities.
Remolona had explained that the pause would help the central bank better assess the impact of back-to-back tariff actions in the US on inflation and the domestic economy. Once the clouds of uncertainties clear, the central bank boss said the BSP may resume easing.Meanwhile, some analysts believed that the BSP might have to resume cutting rates soon, arguing that the still tight financial conditions could weigh on the economy at a time of increasing global uncertainties.
Lower bad loans
Figures showed the higher lending to the real estate sector coincided with a decline in soured home loans.
The BSP reported that residential real estate loans that are deemed nonperforming—or 90 days late on a payment and at risk of default—amounted to P70.1 billion, cornering 6.35 percent of total home lending portfolio in the third quarter.
That ratio of bad housing loans was smaller than the 6.82 percent recorded in the preceding three months and was the softest reading since June 2020.
Meanwhile, 2.09 percent of banks’ commercial real estate loan book had turned sour by the end of December, easing from the 2.18 percent ratio before.
