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Updates on Universal and Commercial Banks' Exposure to the Real Estate Sector as of End-March 2004

07.15.2004

The exposure of universal and commercial banks (U/KBs) to the real estate sector as of end-March 2004 amounted to P197.6 billion, consisting of P185.9 billion (or 94.1 percent) loans and P11.7 billion (or 5.9 percent) investments. These exposures accounted for 6.5 percent of the combined loan and investment portfolio of U/KBs and reflected a 3.1 percent year-on-year growth.

The combined real estate loans (RELs) of U/KBs increased by 1.0 percent from last quarter and by 3.2 percent over the same period last year. This quarter’s RELs were 12.1 percent of total outstanding loans (TOL), exclusive of interbank loans (IBL), up by 0.3 percentage point from the previous quarter’s and a year ago’s 11.8 percent ratio.

Residential RELs held P34.4 billion or 18.5 percent of total RELs. This expanded by P2.5 billion or 7.7 percent from last quarter and by P1.1 billion or 3.3 percent from year ago’s level of P33.3 billion. The growth was attributed to the rise in loan availments particularly by middle income households of Overseas Filipino Workers. Banks are shifting to consumer banking as a result of a sluggish corporate market. This benefits both banks and the construction industry. Banks found an alternative outlet of funds, meantime parked in government securities. Likewise, the construction industry is kept afloat through a refocus to shelter programs.

Commercial RELs, however, still accounted for the bulk of total RELs at P151.5 billion (or 81.5 percent of total RELs). This is higher by P4.7 billion or 3.2 percent from P146.8 billion last year.

The ratio of past due RELs to total RELs slightly rose to 21.9 percent from 21.8 percent last quarter. This developed as the 1.5 percent increment in past due RELs to P40.7 billion outpaced the 1.0 percent rise in total RELs. Nonetheless, this quarter’s past due REL ratio is still an improvement from year ago’s 25.8 percent ratio. Further breakdown showed a subdued 12.9 percent past due ratio of residential RELs compared with the 23.9 percent past due ratio of commercial RELs. Meanwhile, the ratio of past due RELs to TOL (exclusive of IBL) remained manageable at 2.7 percent, an improvement from year ago’s ratio of 3.0 percent.

The other exposure of U/KBs to the real estate industry was in the form of investments in commercial papers (CPs) issued by and in the equities of real estate companies. The combined investments in CPs and in the equities of real estate companies amounted to P11.7 billion, up by 1.8 percent from P11.4 billion last quarter and by 0.9 percent from P11.5 billion a year ago. The ratio of combined RELs and investments to the real estate industry to TOL (exclusive of IBL) plus total debt and equity investments moderately declined to 6.5 percent from last quarter’s ratio of 6.6 percent and year ago’s ratio of 6.9 percent.

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