Banco Itau Chile SA, a unit of Latin America’s biggest bank by market value, plans to cut the pace of loan growth to individuals in half as the country’s economic expansion slows.
Itau Chile will boost lending to retail clients by about 12 percent this year, compared with 27 percent in 2013, Chief Executive Officer Boris Buvinic Guerovich said in an interview at the company’s headquarters in Santiago.
Chile’s economy is growing at the slowest pace in four years as an investment boom in the mining industry comes to an end, threatening retail sales growth that reached 9.7 percent last year. Gross domestic product will probably expand about 3.5 percent this year, Deputy Finance Minister Alejandro Micco said this month, compared with 5.4 percent in 2013.
“We will reduce the pace of credit growth” in response to the slower GDP expansion, Buvinic said.
Itau Chile had 2.16 billion pesos ($3.9 billion) in loans outstanding to individuals as of March, according to Buvinic. Loan growth last year was triple the industry average of 8 percentage points above the inflation rate, according to the nation’s banking regulator. Consumer loans rose 12 percent, while mortgages increased 9 percent.
The bank’s loan figures and forecast for growth don’t include Corpbanca SA, the Santiago-based lender Itau Chile’s parent agreed to acquire this year. It remains a separate entity until the nation’s banking regulator approves the merger, Buvinic said.
Itau Unibanco Holding SA (ITUB4) plans to merge its Colombian and Chilean operations with Corpbanca. That would create the third-largest bank in Chile by total loans, with a market share of 16 percent, according to data from the nation’s banking regulator as of September. Itau Chile is the nation’s eighth-largest bank not counting Corpbanca.
“There is a lot of complementarity between Itau and Corpbanca,” Buvinic, who will be CEO of the merged bank, said in the March 20 interview.
“Corpbanca has a retail bank focused on middle to low-income individuals, and we have a bigger exposure to the segments of high-to-middle income,” he said, adding that Corpbanca also has more large and mid-sized companies as clients. The merger will generate pretax annual cost savings of $100 million, according to Buvinic.
Even with the reduction in credit growth, Itau’s focus on wealthier individuals means lending will continue to increase, Buvinic said.
“Itau’s focus on retail customers has been to high- and medium-income individuals, and we don’t believe the reduction in GDP growth will affect this segment of clients very much,” he said, adding that “we have a large portion of our retail customers with mortgages.”
On corporate lending, the new capital base of the merged bank will allow Itau to participate in bigger transactions with large corporations, he said, because Chile requires credit exposure including guarantees be limited to 30 percent of total equity.
Itau Chile’s corporate loans totaled 3.26 billion Chilean pesos as of March, up from 3.09 billion Chilean pesos in December, and Buvinic expects that to grow 15 percent this year. The figure also excludes Corpbanca.
“The potential of the new bank for major organic growth is enormous, a strategy both banks have been developing in past years with success,” Buvinic said.
To contact the editors responsible for this story: Peter Eichenbaum at email@example.com Steve Dickson, Dan Reichl