Bank exposure to real estate manageable

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Bank’s real estate exposure (REE) remains manageable as it stood at P824.6 billion in March this year, up by 2.5 percent compared to the bank’s REE in December 2012, data from the Bangko Sentral ng Pilipinas (BSP) showed on Wednesday.

The REE of universal, commercial and thrift banks refers to the sum of real estate loans and investments in real estate securities.

The BSP data noted that the slight increase in REE was brought by the 1.7-percent increase in bank’s real estate loans (RELs).

RELs extended by banks in March grew to P715.5 billion from P703.2 billion at end-2012. RELs constitute 85 percent of bank’s REE.


The data added that about 78 percent of RELs are residential in nature and are used to finance the acquisition, construction and improvement of housing units.

“The exposure of banks to such residential RELs [RRELs] remains manageable as the nonperforming portion was only 4 percent of RRELs in March,” the BSP stated.

The data also showed a 7-percent rise in banks’ investments in securities sold by real estate firms to P127. 1 billion in March from P118.5 billion in December last year. Real estate investments represent the remaining 15 percent of the banks REE.

“Internal simulations on credit impairment using March 2013 data indicated that the industry’s capital adequacy ratio will remain well above the 10-percent minimum even with a simulated 50-percent write down in REEs,” it said.

REE covers loans to developers of socialized and low-cost housing, loans to individuals, loans supported by nonrisk collaterals or the Home Guarantee Corp. guarantee, as well as investments in securities to finance real estate activities and exposures by bank trust departments.

“The comprehensive monitoring of bank’s REE is in line with the financial stability initiatives of the Bangko Sentral ng Pilipinas. In particular, the BSP is continuously evaluating credit condition in the banking industry to avoid the potential impairment of intermediation,” the central bank said.

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