CIMB sees improved demand for loans by next year

MORE CONSUMERS may return to the credit market by 2022 for their nonessential needs after suppressing such activities for nearly two years due to the crisis, CIMB Bank Philippines, Inc. Chief Executive Officer Vijay Manoharan said.

“People want to start to travel, people want to start to shop, they want to start a new home renovation, buy a new car. So there’s going to be an enormous amount of new activity that’s been suppressed for so long,” Mr. Manoharan said in an online interview.

CIMB, which only started operating in the country in 2019, saw its credit portfolio increase 300% so far in 2021 compared with the same period of 2020, Mr. Manoharan said.

He said people tried to tap CIMB for credit amid tighter underwriting processes seen in other financial service providers during the pandemic.

“In 2020 and 2021, people are trying to get access to credit because they’re in a difficult position — they lost their job or they saw less income,” he said.

If restriction measures continue to be eased, Mr. Manoharan is hopeful that people will borrow not because they are negatively affected by the pandemic but because they want to spend.

“By 2022, if things continue to improve, the demand will change more to spur activity, as opposed to trying to recover,” he said.

Mr. Manoharan is optimistic that the progress made by the government’s national ID initiative alongside a more comprehensive credit bureau will also be key to boost credit growth by 2022.

Bank lending rose 2.7% in September to mark the second straight month of growth, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Outstanding loans issued by big banks increased 2.7% to P9.25 trillion in September after growing 1.3% year on year in August. It had previously declined for eight straight months.

The growth in September is the fastest in 11 months, or since the 1.8% expansion in October 2020.

Including reverse repurchase agreements, outstanding loans went up 2.7% to P9.54 billion year on year in September.   

Outstanding loans went up 0.6% month on month on a seasonally adjusted basis.

Meanwhile, Mr. Manoharan said they welcome the policy of the Bangko Sentral ng Pilipinas (BSP) to limit the digital bank licenses to six, saying it was prudent to regulate the industry.

The central bank also told lenders with a different license type to avoid branding themselves as “digital banks” and instead say they offer online banking products and services.

Mr. Manoharan said they evaluated if they should apply for a license conversion but did not pursue it in the end.

“What we have (commercial bank license) is more than sufficient. Not only can we operate as fully digital, we can also do other segments that have broader services and solutions down the road with our current license,” he said.

Commercial banks have a higher minimum capitalization requirement of P2 billion for those with only a head office, compared with the P1 billion for digital banks, which are not required to have physical branches.

Mr. Manoharan said they are set to launch new products related to investments and insurance soon.

“We have two more partners that we have signed. We’ve done very well with GCash so we hope to replicate the model,” he said.

BSP data showed CIMB’s total assets stood at P17.843 billion as of end-June. — Luz Wendy T. Noble