Thrift banks in sweet spot
THE THRIFT banking industry has the momentum to grow rapidly in 2013,
especially if it can take advantage of opportunities in the consumer
lending business, officials said.
"We have entered 2013 from a position of strength, and with some
momentum. The onus is on you, on us, to make the most of this advantage,
to bring you forward in your chosen objective," Bangko Sentral ng
Pilipinas (BSP) Governor Amando M. Tetangco, Jr. said at the Chamber of
Thrift Banks national convention yesterday.
The industry saw its total assets grow by a tenth last year to P666.17
billion from P607.43 billion in 2011, he pointed out. It amassed P529.80
billion in deposits and issued P449.27 billion in loans.
At this starting point, thrift banks can readily "broaden their
horizons," he added.
This is even more important this year given the low interest rate
environment, Bank of the Philippine Islands President and Chief
Executive Officer Aurelio R. Montinola III said at the same event.
"The already low interest rates are becoming even lower. We have to
accept that this is the long-term scenario, the new normal," he explained.
With interest rates down, it will be harder for banks to raise deposits
and costlier to maintain branch networks, he noted. On the upside, lower
interest rates mean less non-performing loans.
NICHE LENDING
To grow consumer lending -- which accounts for bulk of the thrift
business -- Mr. Montinola urged banks to find a niche in the industry.
"Focus on a few good areas or else you run the risk of being too similar
to major commercial banks, which offer everything," he said.
"Of the big three -- auto, housing and SME (small and medium enterprise)
loans -- be great in one or two areas for a better chance of standing
out and getting good and good-paying customers."
This specialization should be translated into the product design, the
customer experience and the sales strategies of the bank, he said.
Consumers are less brand-loyal now, so the performance of the bank must
stick.
Moreover, Mr. Tetangco said, thrift banks must ensure that consumers are
always protected.
"The BSP is in the early stages of formalizing specific standards for
consumer protection, including how banks should handle consumer
complaints," he revealed.
The regulator will issue standards on consumer protection, and banks
will be assessed on their implementation of the rules.
Consumer protection will be considered a core banking function, and the
bank's given score will be factored into the CAMELS framework (capital,
asset quality, management, earnings, liquidity and sensitivity to market
risk) -- the broad criteria used by the BSP to check financial health.
CROSS-SELLING
Another driver for the growth of the thrift banking industry will be the
cross-selling of products.
Mr. Montinola said, "Banking is becoming a business of scale. For thrift
banks, bigger banks can be value-added product providers."
It will be difficult, costly and time-consuming for a thrift bank to
establish a bancassurance or asset management arm, he stressed. Instead,
it can offer the products of larger banks in its branches, in exchange
for a fee.
BSP Deputy Governor Nestor A. Espenilla, Jr., for his part, assured that
the rules for cross-selling have already been drafted. They will be
released once they clear a final legal review.
The BSP aims to let banks sell each other's simple savings and insurance
products within the year, in order to provide more appropriate offerings
for consumers.
Mr. Montinola said, "Others say this is cannibalization, but isn't this
a risk we face every day anyway?"
SME LENDING
Lastly, thrift banks should consider lending more to the small businesses.
According to the BSP chief: "SMEs provide great employment
opportunities. A healthier SME sector will help ensure our economic
growth is broad-based and inclusive."
The industry is "well-equipped" to support the SME sector, he noted,
which presents a large, untapped market for banks.
"For the thrift banking industry, the growth trajectory that many are
anticipating suggests even better times ahead. It is therefore in our
collective interest... to agree on a common vision where thrift banks
have a definitive role to play," Mr. Tetangco said.
- See more at:
http://www.bworldonline.com/content.php?section=Finance&title=Thrift-banks-in-sweet-spot&id=67548#sthash.RVltDlvZ.dpuf
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