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Commercial Banks' Exposure to the Real Estate Sector


As of end-March 2003, the system’s loans to the real estate industry (both bank proper and trust department) amounted to P180.2 billion an increase of 0.5 percent from last quarter, but a decrease of 4.1 percent from year-ago. This quarter’s real estate loans (RELs) accounted for 10.5 percent of total outstanding loans (TOL), up by 0.1 percentage point from last quarter’s ratio of 10.4 percent but down by 0.6 percentage point from last year’s ratio of 11.1 percent.

There was no change in the quality of REL, as past due level increased to P46.5 billion from P43.1 billion last quarter. However, this was still lower than last year’s P51.4 billion. Thus, past due ratio rose to 25.8 percent from last quarter’s 24.1 percent but down from last year’s 27.3 percent. Past due REL to TOL at 2.7 percent was lower than a year ago of 3.0 percent.

Aside from loans, industry exposure to the real estate industry included investments in commercial papers (CPs) and in the equities of real estate companies. Investments in CPs slightly increased to P2.4 billion from P2.3 billion last quarter but still lower than last year’s P4.1 billion, while equity investments continued to rise to P9.1 billion from P8.3 billion last quarter and P7.9 billion a year ago. The overall credit and equity exposures to the real estate industry aggregated P191.7 billion or 11.2 percent of TOL, breaking the declining trend (from P189.9 billion last quarter and P199.8 billion a year ago) as well as in ratio to TOL (from 11.1 percent last quarter and 11.8 percent a year ago).

As to the purpose of loans, acquisition of residential property recorded the highest REL exposure at 18.8 percent for bank proper and development of commercial property at 48.8 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 84.5 percent and 96.7 percent, respectively.

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