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China Bank sees loan growth easing slightly

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By Karl Angelo N. Vidal, Reporter

CHINA BANKING Corp. (China Bank) expects its loan growth to ease slightly this year due to base effects following inflation’s surge in 2018.

China Bank Chief Financial Officer Patrick D. Cheng said on Wednesday that the Sy-led lender expects its loan book to grow “in the lower teens” this year, coming from “higher teens” reported in the previous years.

“Obviously, it has come down a little bit. I think in the last couple of years, we were doing 17-18%,” Mr. Cheng told reporters following the bank’s peso bond listing ceremony yesterday.

“[W]ith what happened last year with the macroeconomic (fundamentals)… Inflation climbed. In general, the banking industry has tapered down a bit. I think we’re in the lower teens. Whereas before, we were in the higher teens.”

Headline inflation surged to 5.2% last year against the 2-4% full-year target of the Bangko Sentral ng Pilipinas (BSP), climbing to a nine-year high of 6.7% in September and October due to soaring rice and fuel costs.




To quell prices and inflation expectations, the central bank raised interest rates by 175 basis points (bp) though five consecutive adjustments.

Still, Mr. Cheng is optimistic about the bank’s lending growth — describing it as “good” — as well as economic developments.

“[D]efinitely, the macroeconomic environment now is a little bit better than last year. Inflation is going down, the BSP reduced interest rates by 25 bps. They also cut reserve requirements, and the peso is also on the stronger side of the BSP’s levels,” Mr. Cheng said in a mix of Filipino and English.

In 2018, China Bank’s loan book reached P513 billion, up 13% from the P454 billion logged in 2017, driven by the 20% expansion in the consumer lending segment as well as the 18% growth in corporate loans.

The official added that China Bank intends to grow its retail loans a little bit faster than corporate and commercial accounts, although he noted that it will not “change the mix dramatically.”

“We’re obviously targeting faster growth in retail but we’re coming from a small base. We will also not forget our core, which is our loyal clients — the businessmen and entrepreneurs. That continues to be the major portion,” he said.

Alexander C. Escucha, China Bank’s head of investor and consumer relations, said its retail loan book has been growing at a fast pace.

“Even if you say you slowed down to 12-14%, that masks the fact that our consumer loans, housing and auto (loans) for both the parent and savings bank, are growing in the high 20s,” Mr. Escucha said. “That has been continuing in the last five years. There’s no slowdown.”

Yesterday, China Bank listed on the Philippine Dealing & Exchange Corp. P30-billion worth of bonds raised via its maiden offering out of its fund-raising program.

The one-and-a-half year debt papers carry an interest rate of 5.7% per annum to be paid on a monthly basis until January 2021.

The raised amount was upsized from the initial target of P5 billion to accommodate strong investor demand.

The bonds offered from June 10-28 marked the first tranche of China Bank’s P75-billion fund-raising program for the next three years intended to support expansion and strategic initiatives.

“We are very grateful for the overwhelming market response which reflects our clients’ confidence in China Bank’s fundamental strength and future prospects,” said China Bank President William C. Whang.

The bank booked a P1.9-billion net income in the first quarter, up 24% year-on-year, driven by robust expansion of its core businesses.

Shares in China Bank closed at P27.05 each on Wednesday, up 15 centavos or 0.56%.