MANILA, Philippines–Local banking giant Metropolitan Bank and Trust Co. is beefing up its consumer lending business to take advantage of the country’s growing middle class, which is in the market for a car and housing loan.
In a press briefing on Tuesday, Metrobank head of retail banking Mark Perez said that as corporate clients grow, there would likely be greater demand for housing and car loans among their employees.
To entice the market, Metrobank launched a promotion under which retail clients who will secure a housing loan from Metrobank through Dec. 8 this year will have a chance to win P1 million in cash.
Five winners will be picked under this promotion.
To qualify, the loan size must be at least P2 million while tenor is at least five years.
Metrobank vice president and head of investor relations Juan Placido Mapa III said that on a consolidated basis, the consumer business accounted for about 27 percent of group-wide loan portfolio, including those contracted by thrift bank arm Philippine Savings Bank.
Three years ago, the ratio was 25 percent.
Mapa said the banking group would like to grow the share of the consumer lending business to at least 30 percent.
In the last three years, Mapa said the compounded growth rate of group-wide consumer lending business was at 16 percent.
In the coming years, he said the growth rate would likely pick up to the “higher teen” level, faster than the likely low double-digit growth rate of the commercial segment.
Going after better-yielding consumers, Mapa said, likewise made sense based on the Basel 3 framework.
For instance, he said housing loans carried lower risk weights compared to unsecured lending to the corporate sector.
The Basel 3 framework requires a complex package of reforms designed to improve the ability of banks to absorb losses. It also extends the coverage of financial risks and requires stronger firewalls to protect banks, especially during periods of stress.
The average tenor for housing loans in Metrobank’s book is about 10 years.
Its interest rates average at 9 percent a year, seen as a very competitive level versus industry rates of 10 to 11 percent.
By market segmentation, while both Metrobank and its thrift bank subsidiary PSBank offer consumer loans for housing and car purchases, PSBank caters to the broader mass market.
Further breaking down Metrobank group’s consumer lending business, the housing portfolio takes up around 39 percent and an equal share is accounted for by car loans.
The remainder represents credit card lending.
Perez advised consumers to first secure a pre-approved loan from a bank before going to the dealer for a new house or car for them to get a better deal.
“When buying a house, your best friend is your bank. We tell customers: you get a better deal if you go to a bank first then ask how much can I borrow?” Perez said, adding that getting such pre-approval eliminates layers of cost incurred when “passing through middlemen.”