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Commercial Banks' Exposure to the Real Estate Sector

03.11.2003

As of end-31 December 2002, the system’s loans to the real estate industry (both bank proper and trust department), amounted to P179.2 billion. It dropped by P2.1 billion or 1.1 percent from P181.3 billion last quarter, and by P7.8 billion or 4.2 percent from year-ago level. This quarter’s real estate loans (RELs) accounted for 10.4 percent of total outstanding loans (TOL) inclusive of Interbank Loans (IBL), down by 0.3 and 0.6 percentage points from last quarter’s ratio of 10.7 percent and from last year’s ratio of 11.0 percent, respectively.

There was a continued improvement in the quality of REL, as past due level declined to P43.1 billion from P45.9 billion last quarter and from P47.2 billion a year ago. Past due ratio at 24.1 percent was also down from both last quarter and a year ago of 25.3 percent.  Past due REL to TOL at 2.5 percent  was better than the previous quarter and a year ago of 2.7 percent and 2.8 percent, respectively.

Aside from loans, KB’s exposure to the real estate industry included investments in commercial papers (CPs) and in the equities of real estate companies. While investments in CPs were on a declining trend (P2.3 billion from P2.5 billion last quarter and P3.1 billion a year ago), the rising trend noted last quarter in equity investments tapered off to P8.3 billion in the fourth quarter of 2002 from P9.3 billion last quarter. The overall credit and equity exposures of KBs to the real estate industry aggregated P189.9 billion or 11.1 percent of TOL, and were on a declining trend in levels (from P193.1 billion last quarter and P198.1 billion a year ago) as well as in ratio to TOL (from 11.4 percent last quarter and 11.7 percent a year ago).

As to the purpose of loans, acquisition of commercial property recorded the highest REL exposure at 19.2 percent for bank proper and development of commercial property at 40.1 percent for trust department.

There was no significant change in the regional distribution of REL. The REL of both bank proper and trust department continued to be concentrated in the National Capital Region (NCR) at 83.9 percent and 96.8 percent, respectively.

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