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U/KBs' Exposures to Real Estate Industry Rise Anew

01.11.2008

As of end-September 2007, the combined real estate exposures of U/KBs (bank proper and trust department) stood at P220.0 billion, higher by 0.9 percent from P218.0 billion last quarter and by 2.4 percent from P214.8 billion a year ago. The quarter-on-quarter increment primarily came from the P2.6 billion growth in residential RELs which completely diluted the P2.3 billion decline in commercial RELs 1. Likewise, investments in equities of real estate companies contributed P1.7 billion.

Total loan portfolio (TLP), exclusive of interbank loans (IBL) expanded by 1.7 percent outpacing the 0.2 percent increase in RELs. This resulted to a lower ratio of RELs to TLP at 11.3 percent from the previous quarter’s 11.5 percent. Likewise, this ratio was also 0.4 percentage point lower than last year’s 11.7 percent ratio.

The growth in the combined RELs of U/KBs was due primarily to the P5.0 billion worth of new RELs extended by several U/KBs. This completely offset the P4.7 billion combined decline (mostly due to payments made by corporate borrowers) in the RELs of other U/KBs.

The majority or 96.8 percent of total RELs was held by U/KBs’ bank proper while the remaining 3.2 percent was accounted for by U/KBs’ trust department.

RELs extended for the construction and development of real estate properties for commercial purposes including infrastructure projects held the bulk at 79.9 percent (or P154.0 billion) of total RELs while the remaining 20.1 percent (or  P38.6 billion) was granted for the acquisition of residential units by individual homeowners/borrowers.

Past due RELs fell by 17.0 percent to P15.0 billion from previous quarter’s P18.1 billion. The improvement was mainly due to banks’ rigorous collection, settlement, restructuring and foreclosure efforts.  Consequently, the ratio of past due RELs to total RELs continued to improve to 7.8 percent from previous quarter’s 9.4 percent and year ago’s 13.9 percent ratio. Meantime, the proportion of past due RELs to TLP eased to 0.9 percent from last quarter’s 1.1 percent and year ago’s 1.6 percent ratio.

Investments in commercial papers (CPs) issued by and in equities of real estate companies reached P27.4 billion, higher than last quarter’s P25.7 and year ago’s P19.2 billion. The ratio of combined RELs and investments to the real estate industry to TLP plus total debt and equity investments stood at 6.2 percent. This was slightly lower than last quarter’s 6.3 percent but unchanged from year ago’s ratio.

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1 Resulting to a net increment in RELs by P0.3 billion

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