Philippines: Bank’s real-estate exposures decline by 4.6%

Jun. 05, 2007

MANILA — As of end-March 2007, real estate exposures of universal and commercial banks (U/KBs) declined by 4.6 percent to P210.0 billion. The reduced exposure came from real estate loans (RELs) at P14.4 billion, partly offset by the P4.4 billion expansion of investments in securities issued by real estate companies.

After three consecutive quarters of growth, the industrys combined (bank proper and trust department) RELs dropped by 7.2 percent to P184.5 billion from P198.9 billion last quarter. As a result, the 10.7 percent ratio of RELs to total outstanding loans (TOL), exclusive of interbank loans (IBL), was lower than the previous quarters 11.5 percent and year agos 11.6 percent ratio.

The decline was influenced mainly by the bank proper, where several banks posted reductions in their RELs during the quarter, mostly due to payments made by borrowers and disposal of delinquent RELs under the Phase II of the Special Purpose Vehicle (SPV) Law.

The majority or 97.4 percent of total RELs was held by U/KBs bank proper while the remaining 2.6 percent was accounted for by U/KBs trust department.

RELs granted for the construction and development of real estate properties for commercial purposes including infrastructure projects held a vast share of 80.4 percent (or P148.3 billion) of total RELs while the remaining 19.6 percent (or P36.2 billion) was extended for the acquisition of residential units by individual homeowners/borrowers.

Past due RELs dropped by 4.6 percent to P20.0 billion from previous quarters P21.0 billion. The improvement was mainly due to the sale of delinquent loans to SPV as well as rigorous collection, settlement, restructuring and foreclosure efforts. However, due to the faster decline in RELs, the ratio of past due RELs to total RELs went up to 10.8 percent from previous quarters 10.5 percent. Nevertheless, this ratio was better than year agos ratio of 14.1 percent. As a percentage of TOL, exclusive of IBL, delinquent RELs remained unchanged from last quarters 1.2 percent but still better than year agos 1.6 percent ratio.

Meantime, investments in commercial papers (CPs) issued by and in equities of real estate companies amounted to P25.5 billion, higher by 20.7 percent and 50.1 percent from P21.1 billion last quarter and P17.0 billion a year ago, respectively. The ratio of combined RELs and investments to the real estate industry to TOL (exclusive of IBL) plus total debt and equity investments stood at 6.0 percent. This was lower than the 6.3 percent last quarter but slightly higher than the 5.9 percent ratio a year ago.

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