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U/KBs' Real Estate Exposures Widen by 3.8 Percent in Second Quarter

09.14.2007

For the second quarter of 2007, real estate exposures of universal and commercial banks (U/KBs) widened by 3.8 percent to P218.0 billion. Additional exposure mainly came from real estate loans (RELs) at P7.7 billion. Meanwhile, investments in securities issued by real estate companies chalked a marginal contribution of P0.2 billion in the expansion.

The industry’s combined (bank proper and trust department) RELs grew by 4.2 percent to P192.2 billion from P184.5 billion last quarter. As a result, the ratio of RELs to total loan portfolio (TLP), exclusive of interbank loans (IBL), advanced to 11.5 percent from last quarter’s 10.6 percent.

The expansion was driven mainly by the bank proper, where several banks posted net increases in their RELs during the quarter, mostly due to new loan releases to property developers.

The majority or 96.5 percent of total RELs was held by U/KBs’ bank proper while the remaining 3.5 percent was accounted for by U/KBs’ trust department.

RELs granted for the construction and development of real estate properties for commercial purposes including infrastructure projects held a vast share of 81.2 percent (or P156.2 billion) of total RELs while the remaining 18.8 percent (or  P36.0 billion) was granted for the acquisition of residential units by individual homeowners/borrowers.

Past due RELs fell by 9.6 percent to P18.1 billion from previous quarter’s P20.0 billion. The improvement was mainly due to the sale of delinquent loans to SPV as well as rigorous collection, settlement, restructuring and foreclosure efforts. Thus, the ratio of past due RELs to total RELs eased to 9.4 percent from previous quarter’s 10.8 percent. This ratio was likewise an improvement from year ago’s ratio of 13.3 percent. Meantime, the proportion of past due RELs to TLP got better to 1.1 percent from last quarter’s 1.2 percent and year ago’s 1.6 percent ratio.

Investments in commercial papers (CPs) issued by and in equities of real estate companies reached P25.7 billion, a bit higher than last quarter’s P25.5 billion yet about one and a half more than year ago’s P16.8 billion. The ratio of combined RELs and investments to the real estate industry to TLP plus total debt and equity investments stood at 6.3 percent. This was higher than the 6.0 percent last quarter and the 5.9 percent ratio recorded a year ago.

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