Philippine banks are treading carefully in the real estate sector, even as lending and investments in property continue to rise.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that banks’ exposure to real estate slipped to 19.54 percent of total assets at the end of September, the lowest in two quarters.
Analysts say the pullback reflects caution over rising non-performing loans (NPLs) and persistently high borrowing costs.
“While the third quarter showed restraint, the fourth quarter could see a measured rebound in real estate lending, supported by BSP’s rate cuts and improving residential and leasing demand,” said UnionBank chief economist Ruben Carlo Asuncion, adding that exposure ratios are expected to remain broadly stable.
Despite the lower relative exposure, total investments and loans in the property sector climbed 7.1 percent year-on-year to P3.45 trillion.
Real estate loans rose 9.2 percent to P3.1 trillion, with commercial lending up 7.3 percent and residential loans surging 11.2 percent, driven by stronger homebuyer demand and commercial leasing activity.
But asset quality pressures are mounting. Past due loans increased 7.1 percent to P158.62 billion, while gross NPLs rose 4.1 percent to P116.09 billion. Even so, the sector’s NPL ratio eased slightly to 3.75 percent, reflecting disciplined risk management.
“Banks are rationalizing exposure as developers slow project launches and sour loans rise,” said Jonathan Ravelas, senior adviser at Reyes Tacandong & Co. “Lower interest rates may boost lending, but recovery will be gradual until confidence returns.”
Meanwhile, banks’ investments in real estate securities fell 15.5 percent, tempering overall sector exposure.
The BSP maintains a 25 percent loan limit for large banks and continues stress tests and enhanced monitoring to keep risks manageable.
