September 03, 2015

Consumer loans grow 27% in 1Q15

According to an article from The Philippine Star, the consumer lending portfolio of universal and commercial banks grew 27% YoY and 3.4% QoQ to P933b in 1Q15. Citing central bank data, the article noted that real estate loans went up 26% to P411.4b while auto loans increased 26% to P244.6b.

These offset the relatively slow growth of credit cards, which grew 4% to P159.8b. The article also noted that consumer credit exposure was at 16.7% of the total loan portfolio of banks, still lower compared to our Asean peers, such as Malaysia (53.8%), Indonesia (28.6%), Thailand (27.7%) and Singapore (25.8%).

Our take: The faster growth of consumer lending should bode well for local banks. Given the moderation of growth in the corporate segment, banks have been forced to focus more on growing higher yielding segments, such as consumer and middle market lending. The faster growth of consumer loans may also help the sector improve and manage their margins better, in light of the prolonged margin pressure that most banks are experiencing right now.

It remains to be seen whether this trend will be sustained over the long-term, but the low penetration rate of consumer loans in the country, along with our country’s sustained economic growth, should provide banks with a growing market for consumer lending. – WealthSec