Philippine banks real estate exposure up in Q1

The exposure of Philippine banks to the real estate sector increased in the first quarter on back of the rapid expansion of property companies, the local central bank said Wednesday.

The real estate exposure (REE), either in form of debt or equity, of commercial and thrift banks increased to 842.6 billion pesos (19.18 billion US dollars) at the end of March, or up 2.5 percent on year.

The central bank said around 78 percent of the REE was in the form of loans to finance the acquisition, construction, and improvement of residential properties.

The central bank said local banks' real estate exposure remained at safe levels.

"Internal simulations on credit impairment using March 2013 data indicated that the industry's capital adequacy ratio will remain above the 10 percent minimum even with a simulated 50 percent write-down in real estate exposure," the central bank said in a statement.

The central bank mandates that banks report the loans that are extended to developers of socialized and low-cost housing, loans to individuals, loans supported by non-risk collaterals or Home Guarantee Corp. guarantees, as well as investments in securities to finance real estate activities.

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