Real estate Q1 loans swell 21% to P1.3T


Banks seen well capitalized, facing moderate risk

LENDING by big banks to the real estate sector rose by double-digit rates in the first quarter of 2017 from a year earlier, mostly to fund commercial land development projects, central bank data showed over the weekend.

Total loans released by universal and commercial banks to the real estate sector stood at P1.31 trillion as of end-March 2017, up 21.5 percent from P1.08 trillion as of end-March 2016, data issued by the Bangko Sentral ng Pilipinas (BSP) showed.

In the assessment made by an IHS Markit analyst, the Philippine banking sector is well capitalized and faces only moderate credit risk, backed by stable economic fundamentals.

“The overall level of credit risk in the banking sector is assessed by IHS Markit to be moderate, with non-performing loans low and liquidity conditions strong,” Rajiv Biswas, Asia-Pacific chief economist, said.

Loans to the real estate sector accounted for 19.5 percent of the big banks’ P6.75-trillion loan portfolio (TLP), which included interbank loan receivables (IBL). Minus the IBL, loans to the sector accounted for 20.1 percent of P6.55 trillion of the TLP.

Almost 25 percent of the real estate loans (REL), or P322.90 billion, consisted of residential loans, while more than 75 percent, or P994.85 billion, were loans extended to land developers, construction companies and other commercial borrowers.

‘Well capitalized, moderate risk’

Rajiv Biswas of IHS Markit said lending by large banks to the real estate sector continued to grow rapidly in the first quarter of 2017.

In particular, he noted that lending to land developers and construction companies alone rose 23.3 percent to P528.87 billion from P429.14 billion a year earlier. The new amount accounts for about 40 percent of the total real estate lending exposure by the large banks.

In addition to such loans, other commercial loans were released to borrowers such as for office buildings, residential condominiums, retail/wholesale, and manufacturing, reaching P465.98 billion.

They bring the total commercial real estate lending to P994.85 billion, comprising 75 percent of the total loan portfolio of the large banks for the period.

Residential lending, meanwhile, also grew at a rapid pace, up 21.4 percent at P322.90 billion from P266.10 billion in the comparative period, he added.

“Overall, IHS Markit assesses that the Philippines banking sector remains well capitalized with moderate overall credit risk, helped by sustained strong GDP [gross domestic product]growth over the past six years,” Biswas said.

However, Biswas pointed out that there are some concerns over the medium term about the rapid pace of growth of real estate-related lending, with a potential build-up of credit risks, particularly in relation to lending to land developers and construction companies.

Citing the results of the BSP’s Senior Bank Loan Officers Survey for the first quarter of 2017, he said it indicated that increased demand for commercial and residential loans was likely to continue in the second quarter, reflecting a strong economic growth outlook.

“Some easing in credit standards for housing loans is expected in the near term, as banks expect improved profitability and liquidity and some increase in their tolerance for risk. The very conservative loan-to-value cap of 60 percent also has helped to reduce risks related to residential real estate lending,” he explained.


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