The inefficiency of the mass transport system in Metro Manila, unprecedented decline in loan interest rates as well as the availability of a multitude of car models to choose from have all combined to make the auto loan sector a very bright spot in the country’s banking industry.
EAST West Bank CEO Tony Moncupa
According to the latest data from the Bangko Sentral ng Pilipinas, auto loans were at their highest at P128.2 billion in the quarter ending June this year, up by 3.2 percent from the previous quarter’s P124.2 billion and by 21.5 percent from P105.6 billion in the same period of 2010.
Universal/commercial banks were the main drivers of growth, the BSP said, posting quarter-on-quarter expansion of 5.3 percent and year-on-year growth of 25.8 percent. Thrift banks, on the other hand, posted over the same periods a 1.3 percent and 17.4 percent expansion in auto loans.
With demand expected to continue to surge next year given expectations of a modest economic growth in the Philippines despite the debt crisis in Europe and the financial difficulties in the United States – the two traditional engines of global economic growth – the country’s leading consumer banks have many reasons to be bullish.
East West Bank CEO Tony Moncupa said that the bank is bullish about the growth prospects of auto loans in 2012 because the bank is confident that the Philippines will perform well next year as all macroeconomic indicators such as foreign exchange reserves, balance of payments and investments are looking good.
“This is in spite of the challenges in Europe and the United States. Also, the pent up demand from the supply bottlenecks in Japan and Thailand will be resolved and third, the prevailing low interest rate environment is conducive to auto loans,” Moncupa explained.
“In East West, we are looking at another banner year for auto. We are confident that all our preparations in the past to take advantage of the macro environment will bear fruit in 2012. Auto is a sunshine sector for us,” he added.
Its figures are already encouraging with the November 2011 auto loan bookings growing by a hefty 41.4 percent versus the same month last year. The target is to increase total loan bookings next year by as much as 70 percent.
United Coconut Planters Bank is likewise riding high on the auto loan wave, booking P3.1 billion in auto loans so far this year, up from P2.1 billion last year. The usual term loan is five years although most opt for three to four-year terms. Minimum loan amount is P100,000 with a 20 percent equity requirement.
UCPB president and CEO Jerry Kilayko is confident that the demand will continue to increase in 2012.
“Our target in 2012 is to expand our consumer loan portfolio, particularly auto loans by 27 percent. UCPB net income in 2011 should reach P3 billion, 20 percent increase versus 2010,” Kilayko said.
Philippine Savings Bank also said that the auto loan portfolio this year has grown faster than the industry, but was tempered by the series of events that affected the automotive industry and the worldwide economy as a whole.
“Industry sales have declined by about 4 percent compared to same period last year due to competition among dealers. It could have declined even further without the aggressive acceptance criteria of banks and various low equity packages being promoted by dealers,” PSBank said in a statement.
Nevertheless, PSBank said that auto loans cornered a significant share in the bank’s total loan portfolio due to the introduction of various system and technological innovations that ultimately benefit clients.
These include PSBank’s Online Dealer System (ODS) where car dealers are provided a link to the bank’s application and booking system to give them direct access, allowing for an even faster and more convenient service to clients.
“This is also a first in the industry and one of PSBank’s way of making our Auto Loan “Simple Lang, Maaasahan”. These and other features provide great convenience for customers, making them re-avail and refer friends and relatives for their car loan needs,” PSBank said.
With the banks expected to continue to raise the level of competition and services next year, one can only expect more cars to crowd the already filled up lanes in 2012.