Aboitiz thrift unit banks on loan-hungry teachers

INQUIRER FILE PHOTO

SINGAPORE—Lending to teachers is a booming business in the Philippines, said industry leader City Savings Bank (CSB), which is now raising as much as P10 billion to boost its credit firepower.

Lorenzo Ocampo, president of CSB, said the thrift bank arm of Union Bank of the Philippines had seen its loan portfolio expand by a hefty 50 percent this year to reach about P85 billion to date. This is nearly four times the pace of loan growth recorded by the Philippine banking system, whose portfolio had expanded by 13.4 percent in September from last year.

The lion’s share of CSB’s loans went to teachers, amounting to about P55 to P60 billion worth of salary loans, Ocampo told reporters on the sidelines of the Singapore Fintech Summit.

“The teacher loans were not affected by the pandemic,” Ocampo said, noting that the teachers have kept their jobs during the long lockdowns and thus remained a viable consumer segment.

With a market share of nearly 30 percent in a highly competitive consumer segment, CSB is the largest player in this segment, said Edwin Bautista, president of UnionBank.

CSB also has about P10 billion worth of motorcycle lending portfolio, a new growth driver for the bank, alongside other loan products. CSB forayed into motorcycle lending three years ago and has since then become of the leading players in this segment.

On teachers’ loans, the bank has an existing agreement with the Department of Education to offer its salary loans to teachers. As the agreement facilitates automatic deduction of loan payments from payroll, CSB is very comfortable with this portfolio.

Ocampo said teachers typically borrow about P300,000 to support the education of their children and other family members, finish home construction and other projects.

Salary loans to teachers are offered by CSB at 9.66 percent a year, much lower than the 24 percent interest rate charged by credit card issuers.

“We’ve been able to take our expertise in lending to teachers and roll that out to local governments, so that business is growing so quickly,” Ocampo said.

Another new growth driver for the thrift bank is lending to national government agencies. Recently, it signed a new facility for the Department of Agrarian Reform.

“The goal is also to grow this side of the business and make it as big as our teacher loan business,” he said.