Thrift banks facing tougher competition
MANILA, Philippines—The country’s thrift banks are bracing for cutthroat competition brought about by the entry of more commercial banks into their turf, particularly in lending to consumers for their home and vehicle purchases.
Another big challenge seen is the continued decline in interest rates that, in turn, depresses asset yields, said the top officers of the Chamber of Thrift Banks, the umbrella organization of more than 50 thrift banks in the country.
CTB president Patrick Cheng, who is also president of HSBC Savings, said in an interview at the sidelines of the CTB national convention last week that the thrift banking industry would likely grow its loan book by a “high single-digit” level this year.
Cheng said growing the loan book by 8 percent or double the pace if the domestic economy were to grow by 4 percent, for instance, would be prudent enough.
The commercial banking sector grew its loan book by 19 percent last year and it is expected to grow by 10-20 percent this year.
Cheng said increasing competition from the bigger banks would also temper the growth of thrift banks’ loan books as more commercial banks foray into their territory.
RCBC Savings Bank president Rommel Latinazo, who chaired this year’s 2012 convention, agreed that with competition getting stiffer in the consumer lending business, the big challenge for thrift banks would be to “protect market share and keep costs down.”
“Consumer has been a segment served by the thrift banks but more players are now coming in. The opportunity is growing because the market is growing, so there might be enough for all players. At the end of the day, increased competition means more benefits for consumers,” Latinazo said.
For banks, consumer lending is a higher-margin business compared to top-tier corporate lending.
Cheng also noted that for consumers who wanted to avail themselves of personal loans or mortgage financing to buy their homes, this would be the best time to do so.
“It’s true that savers don’t get something as favorable as before but on the other side, borrowers are much, much better off and there’s a lot, lot more for them,” he said.
“We haven’t seen interest rates this low and we don’t know how much lower they can get,” he said.
For the banks, such low interest-rate environment is also seen as a challenge because it makes it harder for them to make money out of financial intermediation.
But having a very liquid financial system is still one big opportunity for thrift banks, Cheng said. “Also, it’s still better to be here than in the US and Europe where economies are not growing.”
