Banks’ real estate loans climb to 19.8% in 2024

The exposure of Philippine banks and trust entities to the volatile property segment inched up to 19.8 percent of total loans in end-December 2024 amid the sustained expansion of property-related lending despite economic uncertainties.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that banks’ real estate exposure went up from 19.6 percent in end-September last year. It marked the highest level in two months or since the 19.9 percent as of end-June 2024.

Investments and loans extended by the banking industry to the property sector stood at P3.31 trillion in end-2024, 5.1 percent higher than the P3.15 trillion seen a year ago.

Lending rose by 7.7 percent to P2.95 trillion in 2024 from P2.74 trillion in 2023. Commercial real estate loans rose by 6.9 percent to P1.85 trillion, while residential real estate loans grew by 10 percent to P1.1 trillion.

Past due real estate loans inched up by four percent to P140.65 billion. This came after past due commercial real estate loans edged higher by 2.3 percent to P40.92 billion, while past due residential real estate loans increased by 4.7 percent to P99.73 billion.

The gross non-performing loans (NPLs) of banks from the real estate sector stood at P108.81 billion as of end-December last year, 0.4 percent higher than the P108.39 billion in the comparable year-ago period.

Despite the increase in NPLs, the gross non-performing loan real estate ratio went down to 3.68 percent in end-2024 from 3.96 percent a year ago.

Meanwhile, real estate investments in debt and equity securities fell by 13.8 percent to P353.81 billion from P410.65 billion the previous year.

To ensure that banks’ exposure to the property sector remains manageable, the BSP continues to maintain prudential measures, including the real estate limit.

These measures also include the heightened surveillance of banks’ real estate and project finance exposures, and the real estate stress test thresholds for universal and commercial banks as well as thrift banks.

At the height of the global health crisis, the BSP raised the real estate loan limit of big banks to 25 percent from 20 percent in August 2020 to free up P1.2 trillion in additional liquidity for lending amid the uncertainties brought about by the pandemic.

BSP data showed that the Residential Real Estate Price Index slipped by 2.3 percent to 163.9 in the third quarter from 167.7 in the same quarter last year. This was the first time the index contracted since the 9.4 percent decline in the second quarter of 2021.

Source: Philstar

Bank lending growth hits 2-year high

Bank lending in December expanded at its fastest pace in two years, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Outstanding loans of universal and commercial banks jumped by 12.2% year on year to P13.1 trillion in December from P11.7 trillion in the same period in 2023.

This was the fastest lending growth in two years or since the 13.7% recorded in December 2022.

On a seasonally adjusted basis, big banks’ outstanding loans rose by 1.4% month on month.

Central bank data showed outstanding loans to residents climbed by 12.4% to P12.8 trillion in December, faster than the 11.4% growth in November.

Meanwhile, loans to nonresidents rose by 5.7% to P330 billion during the month, faster than the 3.9% posted in November.

Outstanding loans to residents for production activities expanded by 10.8% to P11.2 trillion in December, faster than 9.8% in the previous month. Loans for production accounted for the bulk (85.4%) of overall lending.

The BSP said the growth was driven by sustained lending in wholesale and retail trade, repair of motor vehicles and motorcycles (10.1%); electricity, gas, steam and air-conditioning supply (14.2%); manufacturing (7.4%); financial and insurance activities (7.4%); and construction (12.6%).

Meanwhile, consumer loans jumped by 25% in December from 23.3% in the previous month. Consumer loan data excluded residential real estate loans.

This was due to the “increase in credit card loans; salary-based general purpose consumption loans and motor vehicle loans,” the central bank said.

BSP data showed credit card loans rose by 29.4% in December from 26.5% a month earlier. Salary-based general purpose consumption loans also picked up by 16.5% in December from 15% in the previous month.

However, growth in loans for motor vehicles eased slightly to 19.5% in December from 19.6% in the previous month.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said loan growth picked up as the BSP began its easing cycle.

The central bank started its rate-cutting cycle in August last year. It reduced borrowing costs by a total of 75 basis points (bps), bringing the key rate to 5.75% by end-2024.

For the coming months, easing inflation well could justify further rate cuts this year and “spur greater demand for loans due to lower financing costs,” Mr. Ricafort said.

BSP Governor Eli M. Remolona, Jr. has said a rate cut is still “on the table.”

For 2025, he signaled the possibility of cutting by a total of 50 bps, noting that 75 bps or 100 bps may be a bit “too much.”

Mr. Ricafort also noted the cut in the reserve requirement ratio (RRR) “could have fundamentally increased the loanable funds of banks.”

The BSP reduced the RRR for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 250 bps to 7% from 9.5%, which took effect last October.

Mr. Remolona has said that the Monetary Board is eyeing to again reduce reserve requirements by 200 bps to 5% this year, sometime in the middle of the year.

“The pickup in bank loan growth in recent months could be attributed to improved business and economic conditions, especially in terms of improved data on employment in recent months,” Mr. Ricafort added.

MONEY SUPPLY

Meanwhile, domestic liquidity (M3) grew by 7.7% in December, the same as November.

M3 — which is considered as the broadest measure of liquidity in an economy — increased to P18.8 trillion as of December from P17.4 trillion a year earlier.

Month on month, M3 inched up by 0.2% on a seasonally adjusted basis.

Data from the BSP showed domestic claims rose by 10.4% during the month, though slower than the 10.8% in November.

“Claims on the private sector grew by 12.2% in December from 11.7% in the previous month with the continued expansion in bank lending to nonfinancial private corporations and households,” the BSP said.

The growth in net claims on the central government eased to 7.2% in December from 9.2% in the previous month due to higher National Government borrowings.

Meanwhile, growth in net foreign assets (NFA) in peso terms also eased to 6% from 9.8% in November.

“The BSP’s NFA expanded by 6.8%, reflecting the increase in gross international reserves relative to a year ago. Meanwhile, the NFA of banks declined on account of higher bills and bonds payable,” it added.

Source: Business World

Banks see higher loan demand in Q1

Banks expect higher loan demand from companies and households this quarter after a series of interest rate cuts done by the Bangko Sentral ng Pilipinas (BSP) last year. 

Based on the results of the BSP’s fourth quarter 2024 Senior Bank Loan Officers’ Survey (SLOS), most respondent banks projected a net increase in overall demand for loans from businesses in the first quarter.

The increase was due to higher customer inventory financing needs, clients’ more optimistic economic expectations and an increase in borrowers’ short-term financing needs.

Likewise, there was also a net increase in overall credit demand from consumers as anticipated by surveyed banks in the current quarter amid rising consumption and banks’ more favorable credit terms.

The SLOS consists of questions on loan officers’ perceptions relating to the overall credit standards of their respective banks, as well as to factors affecting the supply of and demand for loans to both enterprises and households.  

For the fourth quarter alone, the survey indicated a net rise in overall loan demand from firms, but slightly lower than the previous quarter. The increase was also driven by inventory financing needs, optimistic economic outlook and rise in borrowers’ short-term financing needs.

Meanwhile, the diffusion index approach indicated a lower net rise in demand for household loans in the fourth quarter last year compared to the previous quarter.

“The overall increase in household loan demand was mainly due to banks’ more attractive financing terms and higher consumption,” the BSP said.  

This is despite the tighter lending standards for enterprises from October to December and unchanged standards for consumer loans.

“The diffusion index approach indicated a net tightening of credit standards in the fourth quarter of 2024, due to the deterioration in borrowers’ profiles and the profitability of the bank’s portfolio,” the BSP said. 

On the other hand, the broadly steady loan standards for households were mainly due to the unchanged profile of borrowers, tolerance for risk and the profitability of the bank’s portfolio.

Source: Philstar