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Commercial Banks' Exposure to the Real Estate Sector

03.05.2003

As of end-September 2002, the system’s lendings to the real estate industry (both bank proper and trust department), amounted to P181.3 billion.  This was lower by P2.3 billion or 1.2 percent from P183.6 billion last quarter, and by P8.7 billion or 4.6 percent from year-ago level.  This quarter’s real estate loans (RELs) accounted for 10.7 percent of total outstanding loans (TOL) inclusive of Interbank Loans (IBL), lower by 0.4  and 0.8 percentage points from last quarter’s ratio of 11.1 percent and from last year’s ratio of 11.5 percent, respectively.

There was improvement noted in past due REL whose level was down to P45.9 billion from P50.5 billion last quarter and from P50.2 billion a year ago.  Past due ratio at 25.3 percent was also down from 27.5 percent last quarter and from 26.4 percent a year ago.  Past due REL represented 2.7 percent of TOL, which was slightly lower than the previous quarter and a year ago of 3.0 percent and 3.1 percent, respectively.

 Aside from loans, KB’s exposure included investments in commercial papers (CPs) and in equities of real estate companies.  While investments in CPs were on a declining trend (P2.5 billion from P3.3 billion last quarter and  P4.3 billion a year ago), equity investments were on a rising trend (P9.3 billion from P8.7 billion last quarter and P6.0 billion a year ago).  The overall credit and equity exposures of KBs to the real estate industry stood at P193.1 billion or 11.4 percent  of TOL, and were on a declining trend in levels (from P195.5 billion last quarter and P200.2 billion a year ago) as well as in ratio to TOL (from 11.8 percent last quarter and 12.2 percent a year ago).

 As to  purpose of loans, the highest REL exposure went to development of commercial property at 19.5  percent for bank proper and acquisition of commercial property at 33.6 percent for trust department.

 In terms of regional distribution of REL, majority of the loans for both bank proper and trust department remained concentrated in NCR-Metro Manila at 83.7 percent and 98.0 percent, respectively.

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