Banks modestly grow property lending
MANILA, Philippines – Banks modestly increased their exposure to the property sector in the first quarter, providing support to an industry grappling with volatility and the economic fallout from the conflict in the Middle East.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that real estate loans of local banks and their trust units had amounted to P3.2 trillion as of end-March, cornering 19.07 percent of the industry’s total lending portfolio.
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The ratio was slightly higher than the 18.93 percent recorded at the end of the preceding quarter, when credit extended to the property sector reached P3.1 trillion.
On an annual basis, bank lending to the property sector grew by nearly 8 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.
The latest data indicated that lenders are offering support to landlords as the industry navigated turbulence linked to the conflict in the Middle East. The oil shock tied to the war has squeezed household budgets, while many listed developers have focused on propping up their battered stock prices and strengthening balance sheets rather than borrowing to finance new projects.
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“Banks are supporting the sector—but cautiously, and mostly to sustain, not expand it,” Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said. “Until rates ease more and demand broadens, real estate lending will grow—but in a controlled, risk-aware manner.”
Carlo Asuncion, chief economist at UnionBank of the Philippines, said the slightly bigger real estate exposure of banks likely reflected a modest pickup in loan drawdowns and project activity at the start of the year, following the typical year-end slowdown.
“This increase appears to be driven more by ongoing construction financing and scheduled project rollouts rather than a broad-based surge in new demand,” Asuncion said.
“External geopolitical developments, including the Middle East conflict, have had limited direct impact on domestic real estate lending so far, although they may be contributing to a more cautious sentiment environment at the margin,” he added.
Data showed that home loans had risen by 8 percent year-on-year to P1.2 trillion. Meanwhile, commercial loans went up by 7.7 percent to P1.97 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 nearly P120 billion as of end-March, accounting for 3.74 percent of the total outstanding credit to the industry. This ratio of bad loans was higher than the 3.53 percent recorded in the previous quarter.
“Overall, the rise in exposure suggests steady but measured credit support for the sector, with banks remaining selective and mindful of regulatory limits rather than significantly expanding risk,” Asuncion said. INQ
