gma 7- Credit card and auto loans continue to expand – BSP

MANILA, Philippines – The banking industry’s automotive and credit card loans continue to expand last year with banks’ perceived easing of credit standards to encourage more loan applicants.

The Bangko Sentral ng Pilipinas (BSP) Thursday reported that automotive loans grew by 24.5 percent year-on-year to P117.8 billion at the end of 2010 while credit card receivables or CCRs went up by 4.2 percent to P120.3 billion in the same period, exclusive of credit card subsidiaries.

According to the BSP, the big banks and their subsidiary thrift banks and non-bank financial institutions continue to have the lion’s share of car loans with 96.5 percent or P113.6 billion of total automotive loans. Mid-sized thrift banks that were not affiliated with universal or commercial banks accounted for P4.2 billion or 3.5 percent of total.

Last year, based on a report by the Chamber of Automotive Manufacturers of the Philippines, car sales expanded by 27.2 percent year-on-year at 168,492 units, however this figure did not include assemblers such as Hyundai and luxury car importer, Scandinavian motors.

BSP said the non-performing automotive loans to total ratio of the industry went up to 4.6 percent from previous quarter's 4.5 percent, but was lower compared from 2009’s 5.2 percent.

Banks’ provisioning against bad loans and loan loss reserves of automotive loans to non-performing ratio however slid to 59 percent from 63.4 percent the third quarter 2010 but it was higher than end-2009’s 49.9 percent ratio.

As for CCRs, the central bank said the big banks accounted for 99.5 percent of total credit card loans while the remaining 0.5 percent was held by thrift banks.

BSP said that inclusive of credit card subsidiaries, CCRs reached P143 billion, up by 6.8 percent or by P9.1 billion from P133.9 billion in the third quarter and by 4.7 percent or P6.4 billion from last year. The growth, said the BSP, was spurred by increased consumer spending during the Christmas season.

Of the total, 99.8 percent or P142.7 billion came from universal and commercial banks and subsidiaries while 0.2 percent or P300 million was generated by unaffiliated thrift banks and subsidiaries. In terms of loan quality, non-performing CCRs to total CCRs ratio slid to 12.6 percent from 13.5 percent last quarter and 12.7 percent last year.

Last December, the BSP in a move to further protect credit card holders has prohibited the issuance of pre-approved credit cards by banks and their subsidiary and/or affiliate credit card companies.

Circular No. 702, signed last December 15, effectively disallowed the issuance of pre-approved credit cards. In the media release, the BSP said that in ‘enhancing consumer protection and fostering better transparency’ banks are now disallowed from issuing pre-approved cards since these cards are exposing the public to cases of fraud via unauthorized use of said cards.

The BSP likewise approved new guidelines for collection practices, which were tightened. The regulation will now require that all cardholders be notified in writing seven days before any account is endorsed to a collection agency.