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Exposure to Real Estate of U/KBs & TBs Continues to Rise in 2011


As of end-December 2011, the combined exposure to the real estate sector of universal and commercial banks (U/KBs) and thrift banks (TBs)  breached the half trillion mark and reached the highest level at P518.6 billion.  This was up by 6.8 percent from previous quarter’s P485.6 billion and by 19.6 percent from last year’s P433.6 billion.

Additional exposure during the quarter came exclusively from real estate loans (RELs), which grew by 7.2 percent to P505.9 billion. In contrast, investments in securities issued by real estate companies contracted by 7.8 percent to P12.7 billion.

Majority of the real estate exposure were RELs capturing 97.5 percent share while the remaining 2.5 percent were in the form of investments in securities issued by real estate companies.

By industry, a significant portion of the exposure was held by U/KBs at 76.7 percent (P397.6 billion) share while the remaining 23.3 percent (P121.0 billion) was accounted for by TBs.

The P34.1 billion additional RELs in the fourth quarter of 2011 came from the P13.4 billion expansion in residential RELs and the P20.7 billion growth in commercial RELs. In terms of share, commercial RELs held the bulk at 56.3 percent (P285.0 billion) of total RELs while the remaining 43.7 percent (P220.8 billion) were residential RELs. As to specific purposes, loans to land developers and construction companies accounted for the biggest share of RELs at 47.5 percent (P240.4 billion).

Further breakdown of RELs by industry showed that the RELs of U/KBs were concentrated for commercial purposes at 67.8 percent (P261.0 billion) while the remaining 32.2 percent (P123.9 billion) were for residential purposes. In contrast, RELs of TBs were largely granted to residential borrowers (80.1 percent or P97.0 billion of total RELs) while the balance (19.9 percent or P24.0 billion) were released to commercial borrowers.

Despite the increasing level of RELs, the ratio of RELs to total loan portfolio, exclusive of interbank loans (TLP) slightly declined to 14.5 percent from last quarter’s 14.6 percent as the 7.8 percent expansion in TLP outmatched the 7.2 percent rise in RELs. Nonetheless, this quarter’s ratio was still higher than last year’s 14.3 percent.

Non-performing RELs declined by 2.4 percent to P25.4 billion from previous quarter’s P26.0 billion. Consequently, the non-performing RELs ratio improved to 5.0 percent from previous quarter’s 5.5 percent. This was likewise better than last year’s 6.8 percent ratio. As a percentage of TLP, delinquent RELs slightly eased to 0.7 percent from last quarter’s 0.8 percent.

Meantime, non-performing residential RELs ratio at 4.3 percent (from 4.7 percent last quarter) was still better vis-à-vis the non-performing commercial RELs ratio at 5.5 percent (from 6.1 percent).

By industry, TBs have a better quality of RELs with non-performing RELs ratio at 4.7 percent compared to the 5.1 percent ratio posted by U/KBs.

Investments in debt securities issued by and in equity securities of real estate companies contracted by 7.8 percent to P12.7 billion from last quarter’s P13.8 billion. Nonetheless, this was still higher by 7.2 percent from last year’s P11.9 billion. Debt securities held the lion’s share of the total real estate investments at 76.3 percent (P9.7 billion) while the remaining 23.7 percent (P3.0 billion) were equity securities. . Only U/KBs have exposure to real estate investments.

The ratio of combined RELs and investments to the real estate industry to TLP plus total debt and equity investments rose to 9.9 percent from last quarter’s 9.8 percent and last year’s 9.2 percent.

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