Banco Continental SA, the Peruvian unit of Banco Bilbao Vizcaya Argentaria SA, expects loan growth to slow in 2013 as corporate clients turn more to the bond market and after policy makers took steps to cool credit demand.
The lender, the Andean nation’s second largest, sees total bank lending in Peru expanding 14 percent this year and 12 percent next year after growing 17 percent in 2011, Chief Executive Officer Eduardo Torres-Llosa said in an interview in Lima today.
Banco Continental’s lending business is slowing as demand for Peruvian corporate bonds spurs customers to raise financing overseas. The bank is focusing on personal loans amid a consumer boom in Peru that’s fueling the fastest economic growth in South America. The bank’s consumer loan and credit card portfolio has grown about 23 percent in the past year versus 18 percent for the banking system as a whole, Torres-Llosa said.
“Peru is a very, very attractive market so it doesn’t make sense for banks to lend $100 million to a big client when we can connect our clients to the capital markets,” he said. Banco Continental is seeking to take advantage of a wave of small customers entering the banking system for the first time rather than focus on increasing its market share of corporate loans, he said.
The Lima-based lender had 33 billion soles ($12.7 billion) of loans and 32 billion of deposits as of Sept. 30, according to data from the Superintendency of Banking, Insurance and Pension Fund Administrators. Its share of total corporate loans slipped to 21.6 percent from 22.6 percent a year earlier. Its share of revolving credit rose to 8.78 percent from 7.93 percent while its home loans were steady at 30.7 percent.
Lenders are increasing provisions and will become more prudent next year as the ratio of non-performing loans rises and amid signs that some lower-earning Peruvians are becoming over-indebted, Torres-Llosa said.
The central bank increased reserve requirements for a third straight month yesterday to cool credit demand. Interest rates on dollar loans will rise as new regulations require higher provisions when banks lend in U.S. currency, Oscar Rivera, the president of the country’s banking association, Asbanc, said in an interview in Lima yesterday.
“Slowing the pace of credit doesn’t hurt anyone,” Torres-Llosa said. “It’s better to grow at 15 percent for many years rather than grow only two years and then suddenly stop.”
Banco Continental’s loan delinquency rate rose to 1.19 percent from 1.05 percent a year ago, though remained the lowest among the country’s four biggest banks, according to the regulator. The industry average rose to 1.72 percent from 1.54 percent.
Torres-Llosa, 44, said he’s readying the bank for increased competition in the local market during the next five years. As the global market stabilizes and Peru’s banking system doubles in size, there will be an influx of foreign banks, he said.
The bank has invested $250 million to $300 million in the last three years on new and existing branches and a new data processing center, and will invest a similar amount in the next three years. Annual capital expenditures have increased 10-fold from what they were seven years ago, he said.
“When the storm passes, the big players are going to come to Peru,” he said. “Those banks that have treated their customers well, who have done their homework, and have been efficient in the long term, they’re the ones who are going to survive.”