Real estate loans topped P3T in Q2

Loans extended to the property sector breached the P3-trillion mark in the second quarter, with Philippine banks cautiously increasing their exposure to the volatile sector as bad real estate loans also inched up during the period.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that real estate loans of local banks and their trust units amounted to P3.03 trillion as of end-June, cornering 19.61 percent of the industry’s total lending portfolio.

The ratio was slightly higher than the 19.41 percent recorded at the end of the preceding quarter, when credit extended to the property sector reached P2.97 trillion.

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 home loans rose by 2.3 percent quarter-on-quarter to P1.16 trillion. Meanwhile, commercial loans went up by almost 2 percent to P1.87 trillion.

The increase 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 P114.5 billion as of end-June, accounting for 3.78 percent of the total outstanding credit to the industry.

This ratio of bad loans was higher than the 3.75 percent recorded in the previous quarter.

Figures showed nonperforming home loans cornered 6.44 percent of banks’ real estate lending portfolio, the highest in three quarters.

The proportion of soured commercial real estate loans was steady at 2.13 percent.

That happened even as the BSP entered the final phase of its interest rate-cutting run––a campaign that reduced the benchmark rate that banks use as a guide when pricing loans to a “Goldilocks” level of 5 percent.

Reaching the neutral level took a total of 1.5 percentage points cuts to the policy rate during the current easing cycle. Governor Eli Remolona Jr. had said the central bank could keep its policy rate unchanged through the end of the year if inflation remains subdued and demand holds up. INQ