Banks’ real estate exposure slips

Philippine banks and trust entities’ exposure to the property sector slipped at the end of September, amid a decline in real estate investments, Bangko Sentral ng Pilipinas (BSP) data showed.

The industry’s real estate exposure ratio stood at 19.54% as of end-September, falling from 19.61% at end-June and 19.55% in the same period a year ago.

The BSP monitors lenders’ exposure to the real estate industry as part of its mandate to maintain financial stability.

Philippine banks and trust departments have extended P3.451 trillion in total investments and loans to the real estate sector as of the third quarter, up by 7.19% from P3.22 trillion in the previous year.

Based on central bank data, real estate loans climbed by an annual 8.9% to P3.096 trillion as of September from P2.843 trillion a year ago.

Broken down, residential real estate loans rose by 11.4% to P1.188 trillion, while commercial real estate loans grew by 7.41% to P1.909 trillion.

Past due real estate loans reached P158.619 billion at end-September, 7.06% higher than the P148.157 billion seen a year earlier.

Past due residential real estate loans edged up by 5.16% to P110.379 billion, while past due commercial real estate loans increased by 11.7% to P48.24 billion.

Meanwhile, gross nonperforming real estate loans amounted to P116.086 billion in the nine-month period, up 4.06% from P111.554 billion a year ago.

This brought the gross nonperforming real estate loan ratio down to 3.75% as of September from 3.92% in the comparable year-ago period.

BSP data also showed that the banking sector’s real estate investments stood at P354.749 billion at end-September, 5.75% lower than the P376.406 billion recorded last year.

This, as debt securities slipped by 5.51% year on year to P232.496 billion, while equity securities went down by 6.22% to P122.253 billion.

“Banks’ real estate exposure eased to 19.54% at end-September from 19.61% in June, reflecting lower investments in property-linked securities, muted project launches, and cautious lending amid elevated NPLs (nonperforming loans) and high borrowing costs,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said weak property demand may have weigned on the industry’s real estate exposure ratio last quarter. 

“Banks are rationalizing their real estate exposure because non-performing loans are rising and developers are slowing launches amid weak demand,” he said via Viber. “The BSP’s tighter oversight adds to the caution.”

However, Joey Roi H. Bondoc, director and head of research at Colliers Philippines, noted that bank lending to the real estate sector typically slows in the third quarter. He noted the recent drop in lending was “not significant.”

“We have yet to see a substantial take-up in (the) Metro Manila condominium market, especially in the pre-selling sector,” he told BusinessWorld in a phone interview. “And it only means that banks are still wary to lend to the real estate sector, to the condominium sector at this point. So that’s why, if you look at the exposure of banks to real estate, it’s not a significant increase or decrease. It’s almost (flat), almost the same.”

A recent Colliers Philippines report showed that residential take-up soared by 108% in the third quarter, equivalent to 5,900 units from 2,800 units in the previous quarter. This was the highest take-up since the second quarter of 2023.

For the fourth quarter, Mr. Asuncion said the banking industry will likely grant more loans to the real estate sector following the central bank’s recent rate cuts and increasing demand for residential properties and leasing.

“Exposure ratios should remain broadly stable, with banks balancing growth opportunities against regulatory limits,” he added.

The BSP last week reduced borrowing costs by another 25 basis points (bps), bringing the key rate to its lowest in over three years at 4.5%. It has so far delivered 200 bps in cuts since August last year.

However, Mr. Bondoc said that still-high mortgage rates are offsetting the supposed boost from lower benchmark interest rates.

“But the problem is… the central bank has been cutting interest rates but there is no corresponding decline in mortgage rates by the banks, which again indicates that banks are still a little hesitant to lend to this market,” he said.

Still, Mr. Bondoc noted that holiday bonuses, higher remittances and the peso depreciation will likely spur demand in the domestic residential market.

“Q4 is a strong quarter for condominium take-up because of bonuses for local employees and remittances from the Philippines. And then peso’s depreciating, so it might be a good opportunity for OFWs (overseas Filipino workers) to send home more money and then finally, for example, reserve a condominium unit or buy a house and lot unit in their home provinces,” Mr. Bondoc said.

The peso hit the P59-a-dollar level several times in November and slumped to a fresh low of P59.22 against the greenback on Dec. 4.

Source: Business World

Sticky Philippine loan rates blunt impact of central bank cuts

The Philippine central bank has slashed its key policy rate by almost two percentage points to 4.75% since last year, but the price of a home loan from the nation’s top banks has barely budged.

BDO Unibank Inc. charges a 6% fixed rate on new housing loans for the first year, with the debt then subject to repricing, or else 6.5% fixed for five years. That’s roughly the same as the minimum offered in 2024, and rates at Bank of the Philippine Islands and Metropolitan Bank & Trust Co. show a similar trend.

Examples of home loan rates November 2025

Across Asia, as policymakers have reduced benchmark rates to support economic growth in the face of US tariffs, there’s evidence that banks aren’t fully passing on the cuts to consumers, according to Australia and New Zealand Banking Group. In the Philippines’ case, the stickiness of borrowing costs may prolong a slump that’s left its economy trailing Indonesia and China in growth.

Philippine commercial banks’ average lending rate, after dipping earlier in the year, hit 8.132% in August, up from 8.097% at the end of last year, Bangko Sentral ng Pilipinas data show. That’s as the benchmark has been cut 175 basis points since August last year.

For Philippine lenders, there’s little incentive to cut interest rates when a scandal over government graft has rocked confidence, threatening more bad loans. Demand is also weak: growth in household consumption, which accounts for more than 70% of the nation’s output, hit a four-year low in the three months through September as consumers held off spending.

“There’s this corruption scandal. Liken it to a toothache – the rest of the body feels it because everything is connected,” said Jonathan Ravelas, managing director at eManagement for Business and Marketing Services, a Manila-based consultancy. “Banks are cautious because of the economic outlook. It challenges jobs.”

“Banks are exercising prudent credit underwriting, particularly in consumer segments, to mitigate non-performing loan risks,” the Bangko Sentral ng Pilipinas said in response to questions.

It noted that a survey of bank loan officers showed most expect tighter lending standards for households in the current quarter, “citing a deterioration in portfolio profitability, a less favorable economic outlook, reduced risk tolerance, and weakening borrower profile.”

To be sure, total loans are still gaining, rising 10.5% in September from a year earlier, down from 12.2% at end-2024. And banks have eased up in some ways, with mortgage incentives including lower downpayments; waivers of application, registration and appraisal fees; or free insurance for the first year.

“We’re cautiously optimistic about where lending rates are headed. In the near term, we expect them to hold steady or dip slightly,” said Maria Cristina Go, head of consumer banking at BPI, one of the biggest in the country. “This will depend not only on the policy rates that will impact funding costs but will also consider inflation trends and asset quality.”

BDO Unibank said it expects lending rates for this year and the next two years to be “generally in the same range given current economic conditions.” And BSP data shows the rate at which banks lend to each other is declining.

The BSP says data shows lending rates “generally moved in line” with policy rate cuts, though the range and degree differed across loan types. It added that not all lenders engage in rate competition.

“I’m actually in the camp transmission is getting better,” said Euben Paracuelles, chief ASEAN economist at Nomura Holdings Inc. “It’s certainly not the lowest in the region and I would say compared to past cutting cycles, policy transmission of BSP’s latest rate cuts is improving.”

In the meantime, banks and consumers are cautious amid worsening political uncertainty. In July, President Ferdinand Marcos Jr. unveiled a major campaign against corruption, especially in flood control projects. Massive protests erupted in anger at the scale of the graft, and the government slowed public works spending to allow more scrutiny, with stocks sliding to a three-year low.

Sentiment had already been hit by a year of fierce feuding between Marcos and Vice President Sara Duterte.

The Philippines isn’t alone in seeing banks refrain from rate cuts. Bank Indonesia’s governor last month criticized banks for only cutting lending rates by 15 basis points, even as the benchmark has been reduced by ten times that. In other countries such as Malaysia, however, lending rates are required to be calibrated with policy rates. In Communist Vietnam, the government is driving state-owned lenders to extend credit as it pushes to achieve economic growth to 10% a year.

“Household credit demand has responded uncharacteristically weakly to the recent monetary policy easing cycle in Asia,” ANZ analysts led by Sanjay Mathur and Dhiraj Nim wrote in a Nov. 6 report.

Source: Business World

Overseas Filipinos’ access to retirement funds expanded

The Bangko Sentral ng Pilipinas (BSP) has amended its regulations to expand investment opportunities for overseas Filipinos by allowing their retirement funds to freely invest in central bank securities.

Personal Equity and Retirement Account-Unit Investment Trust Funds (PERA-UITFs) will no longer be subject to a 10-percent foreign ownership cap. The policy change recognizes that PERA-UITFs may include overseas Filipinos who are considered non-residents under existing regulations.

“The move reflects the BSP’s continued effort to promote financial health. It helps Filipinos, both at home or abroad, build secure and sustainable retirement savings,” the central bank said. “It also helps develop the country’s private pension system and strengthens domestic capital markets.”

PERA contributions climbed to P491.4 million in 2024, up 24 percent from P396.3 million a year earlier, as more Filipinos joined the voluntary savings program. The number of contributors also increased by 6.4 percent to 5,912 from 5,555.

Employed workers accounted for the largest share, contributing P341.7 million from about 4,211 participants. Overseas Filipinos followed with P82.25 million from 789 contributors, while 912 self-employed individuals invested a combined P67.39 million.

The central bank noted that nine out of 13 PERA-UITFs currently exceeded the 10-percent non-resident ownership limit, preventing them from investing in BSP securities. The updated policy will now allow these funds to diversify their portfolios and enhance potential returns for investors.

Under the revised Section 601-Q of the Manual of Regulations for Banks and the Manual of Regulations for Non-Bank Financial Institutions, trust entities are still required to report the participation of non-residents in their UITFs and maintain proper internal controls, monitoring systems, and assurance mechanisms.

Trust entities must continue submitting timely, accurate, and comprehensive reports on non-resident funds to the BSP. They must also make available all relevant documents and information for verification of compliance with the terms and conditions governing access to the BSP Securities Facility.

UITFs are investment vehicles managed by banks and trust companies under BSP supervision. They pool funds from various investors, including those with small contributions, to form a diversified portfolio.

These are comparable to mutual funds, which are regulated by the Securities and Exchange Commission and managed by investment companies.

Source: Manila Times