BSP says PH banks not overly exposed to real estate

Posted at 05/10/13 6:56 PM

MANILA, Philippines - The Bangko Sentral ng Pilipinas has brushed aside concerns the Philippine banking sector may be getting overly exposed to the real estate sector, citing favorable results of its latest study on vulnerability of banks to potential problems in the property market.

The BSP has reported that “real estate exposure” of banks in the country totaled P821.7 billion as of the end of 2012.

The amount is equivalent to 20.9% of total loan portfolio of universal/commercial and thrift banks in the country.

The term "real estate exposure" now has a wider coverage after the BSP decided to include the following: housing loans extended to individual borrowers; loans to developers of socialized and low-cost housing; and real-estate loans extended by thrift banks and trust departments of universal/commercial banks.

Previously, the term only covered commercial real estate loans extended by universal/commercial banks as well as investments by banks in securities issued by real-estate companies.

Under existing regulations, which the BSP considers adjusting to take into account the wider definition of "real estate exposure," banks must maintain said exposure to a maximum of 20 percent of their total loan portfolio.

BSP Governor Amando Tetangco Jr. said the fact that real estate exposure under the new definition is just slightly above 20% meant that banks have maintained their exposure at prudent levels.

“We are happy about the figure [real estate exposure at 20.9% of loan portfolio]. This is something that is manageable and is not a cause for concern,” Tetangco said late Thursday.

Of the P821.7 billion worth of real estate exposure, P703.2 billion are composed of all real-estate loans. The rest are investments in securities issued by real estate firms.

According to the BSP, the P703.2 billion worth of real estate loans was equivalent to about 17% of total loan portfolio of banks.

Tetangco said that a 17% real estate loans-to-total loan portfolio ratio is "comfortable."  

The BSP also said that of the P703.2 billion, 3.7%  were non-performing. The BSP governor said a 3.7% non-performing real estate loans ratio is within prudent limits.