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Banks' Exposures to Real Estate Expand in June

11.21.2014

The real estate exposures of (REEs) universal, commercial (U/KBs) and thrift banks (TBs) reached Php 1.097 trillion at the end of the second quarter this year. The figure is six percent higher quarter-on-quarter.

The REEs of U/KBs and TBs represented 21.8 percent of their total loan portfolio in June, marginally higher than the 21.3 percent recorded a quarter earlier.

The banks’ REEs expanded amid a rise in real estate loans (RELs), which comprised 84 percent of their REEs. The banks’ RELs increased by 6.7 percent to Php 924.3 billion in June this year. Land developers, construction companies and other corporate entities obtained 60 percent of the RELs, while borrowers acquiring residential properties received the remaining 40 percent.

Meanwhile, investments in real estate securities increased by 2.6 percent to Php 172.9 billion in June 2014. Said investments represented the remaining 16 percent of the REEs during the period.

The Bangko Sentral ng Pilipinas (BSP) noted that while REEs rose steadily since 2012, non-performing RELs have followed a decreasing trend. At end-June this year, the non-performing RELs of U/KBs and TBs comprised 2.64 percent of their RELs, lower than the 2.77 percent posted a quarter earlier.

The BSP monitors the REE of U/KBs and TBs as part of its broader role of assessing the quality of the banks’ exposures to the different sectors of the economy. Maintaining high loan quality is essential to the promotion of financial stability, which is a key policy objective of the BSP.

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