BBVA Continental, Peru¹s second-largest bank, has positioned itself well to capitalize on Peru¹s booming growth.
A surge in output in the Andean economy has seen banking services extend far and wide a trend that has also meant consumer loans growth at twice the rate as that of corporate loans over the past year.
Loans are growing at roughly 2.5-3.5 times GDP, driven by mortgages, consumer and credit card loans.
BBVA Continental¹s CEO Eduardo Torres-Llosa tells LatinFinance it¹s a trend he expects to continue. ³The number of debtors in the system is pretty low, and we see a lot of opportunities in this segment of the population.² He expects the bank to double in size over the next five years.
Like its other large and successful domestic competitor Banco de Crédito del Perú, the well-capitalized Continental enjoys ready access to funds. In August, it issued a 10-year, $500 million senior bond, which came in around 16 times oversubscribed, Torres-Llosa says.
Challenges ahead for Peru¹s banks include making sure credit doesn¹t expand too rapidly if the economy shows signs of overheating. Equally, banking authorities are also expected to double up efforts to find skilled professionals to staff the burgeoning sector.
With $12 billion in loans and another $12 billion in deposits, BBVA Continental is the most profitable bank in Peru, Torres-Llosa says, with ROE around 35%. Its efficiency ratio is 36%, and the bank says its past-due loans ratio, at 1.2% is the best in the system; it also has the highest coverage ratio of non-performing loans in the system at 350%.
Torres-Llosa points to mortgage lending as one of the bank¹s core strengths.
The mortgage sector is growing more than 20% annually an expansion that¹s likely to continue as more of the population gains access to the financial system. Meanwhile, the bank has been aggressively expanding its distribution network, increasing the number of branches and ATMs by some 40%-50% in the last three years.
BBVA Continential has pushed for an increased presence in the payroll segment, where it has continued to grow its market share with new products and services, jumping from 22% to 29% in recent years. It is also number one in the medium enterprise sector, where it has reinforced its market share, while it looks to beef up its small enterprise expertise.
³That¹s a very attractive segment,² Torres-Llosa says. ³But you have to know how to manage that segment, because there is a lot of risk.² Though Colombia has been the focus of internationally-driven M&A activity this year, foreigners beyond BBVA and Scotia may be eyeing Peru more closely. Continental expects to see more international competitors enter the country, drawn by its growth prospects and relatively appealing regulatory environment.
³We have to work with a sense of urgency in terms of getting the loyalty of our clients and increasing our presence in Peru,² Torres-Llosa says. LF