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Dealmakers: Which bank to tap for auto loans?

22.05.12

By Roderick dela Cruz

Traffic along Edsa comes to a snail velocity during peak hours, and no amount of creativity by the Metro Manila Development Authority could unclog the megalopolis’ main thoroughfare because of the ever increasing volume of new cars finding their way to the Philippines, in general through bank financing.

An expanding middle class and the low-interest rate promotion by banks, made workable by the monetary policy easing by the Bangko Sentral, have resulted in record purchases of automobiles in 2010. This year, not even a new stint of global debt crisis could discourage Filipinos from buying their first or additional vehicles, as banks offered them discounts, promotional rates and even freebies.

Banks are in points happy to lend to qualified borrowers, given the high profit in the auto loan concern. The interest income from each loan for a P1-million car can range from P50,000 to P500,000, depending on the terms of the loan, such as the downpayment and the repayment time. The possibility of incurring loss from auto loan is also almost nil, as banks lend only to those who have at least P30,000 monthly profits. And banks can get back the car if the borrower fails to pay the monthly dues on time.

Car buyers are only as willing to borrow from banks, given their expectation of better economic prospects onwards. A consumer expectations survey conducted by the Bangko Sentral during the third quarter of 2011 showed that many respondents considered the contemporaneous quarter as a favorable time to buy big-ticket items such as house and lot, consumer durables, and motor vehicles.

Auto loan has become an eminent segment of the banking industry, with outstanding loans granted to car buyers excessive P100 billion this year. Despite the decline in car sales during the year, the auto loan hawk was actually growing by nearly a quarter year-on-year as of August 2011.

Carefulness or savings banks, with focus on consumer lending, were largely responsible for bringing in a record 168,490 new vehicles to the streets of the Philippines in 2010. More than half of unalloyed new vehicle acquisitions were made possible by bank financing.

“The auto loan vigour is a by-product of the auto industry. Hence, banks rely on a good auto manufacture growth to get a better share of the market. The year 2010 was the best year in the auto energy and PSBank was able to take advantage of this opportunity because it was prepared to meet the demands of the hawk in terms of service and product innovations,” said PSBank first blemish president Jess Custodio.

PSBank, the thrift banking unit of the Metrobank Set, is one of the two largest players in the auto loan industry, the other being the BPI Family Savings Bank of the Ayala-controlled Bank of Philippine Islands.

Custodio said the auto loan portfolio is growing faster than the banking energy as a whole. “However, the prospect of higher growth this year is not as good as last year because of a series of events that distressed the industry and the worldwide economy as a whole,” he said.

He noted that industry sales have declined by about 4 percent as of September, compared to same duration last year due to competition among dealers. “It could have declined even further without the aggressive acceptance criteria of banks and individual low equity packages being promoted by dealers,” said Custodio.

Dave Sarmiento, elder vice president of BPI Family Bank’s Auto Loans Borderline, noted that the auto loans portfolio still posted a positive growth regard for the decrease of 4 percent in auto industry sales.

Auto loans now account for a third of the total retail lending portfolio of the BPI Dearest Savings Bank, which shows the heavy dependence of one of the country’s largest carefulness banks on auto loans.

Banks lend as much as 80 percent of the unconditional cost of vehicles to borrowers, with a repayment period of as long as six years or 72 months. Some car distributors and financing companies suggest a downpayment of as low as 10 percent, which translates to a loan representing 90 percent of the gross value of the asset, in violation of the Bangko Sentral’s requirement for a highest loan value of 80 percent.

Bangko Sentral reported that as of end-August 2011, auto loans extended by cosmic and commercial banks rose 25.4 percent year-on-year, an clues that demand for vehicles remained robust this year.

A more complete report, which includes loans granted by pandemic, commercial and thrift banks as of March 2011, showed that total auto loans hit P124.2 billion as of the first house of 2011. The figure represented a growth of 24.7 percent from P99.6 billion recorded a year earlier.

Auto loans accounted for 4.2 percent of the thoroughgoing loan portfolio of banks as of March 2011, a contribution that increased from just 3.9 percent in the first dwelling-place of 2010. Banks continued to lend money to car buyers, because most of them paid on formerly.

In terms of loan quality, non-performing auto loans stood at only 4.4 percent of full auto loans. As of March 2011, these unsettled auto loans 30 days after due stage amounted to P5.5 billion.

Competition among banks for a share of the auto loan exchange has become more exciting in recent months. Custodio said that PSBank offers the most competitive rates in the industriousness.

“Auto loans have a significant share in the banks total loan portfolio due to the introduction of miscellaneous systems and technological innovations that ultimately benefit clients. PSBank is the first bank to update customers on the prominence of their loan applications via SMS. They can also view their loan status through PSBank Remote Banking, a secure 24/7 Internet readiness,” said Custodio.

He said PSBank allows loan applicants the springiness to choose either the Standard Rate where the first monthly installment begins 30 days after confinement of unit or the lower One Month Advance rate where the first monthly payment begins on the day the element is delivered.

“Whichever scheme a borrower chooses, he can avail of PSBank Prime Bribe. This is a loan feature which gives rebates whenever a client pays earlier than his due date or in dissipation of his monthly amortization,” said Custodio. “PSBank is the only bank in the power that offers rebates for advance or excess payments.”

BPI Family Savings Bank, which accounts for about a fifth of the compute car loans in the country, continues to report a double-digit growth in its car loans this year, on heartier prospects for the economy as well as aggressive promotion by both car firms and banks. Last year, the bank posted a 35 percent year-on-year lengthen in car loans, which was above the 27 percent growth achieved by the whole automotive market.

Sales of new motor vehicles hit a register high of 168,490 units in 2010, representing a 27.2 percent expansion from the 2009 sales of 132,444 units, and topping the previous record of 162,095 units sold in 1996, honest before the Asian financial crisis.

BPI Family Savings Bank collects an interest of only 5.15 percent for a one-year loan under its “in-forward movement” rate, which is applied when the borrower pays its monthly loan amortization 30 days before due season. The rate goes up to 6.03 percent under the “in-arrears” construction, or when the borrower pays the monthly loan amortization on due date.

BPI Family is one of the first banks to absolutely show a compounded annual interest rate for auto loans, in compliance with a recent Bangko Sentral sophistical asking banks to disclose their actual effective interest rate. Sarmiento said the competent interest rate on a 60-month car loan reaches 33.47 percent for “in-rise” arrangement and 34.80 percent for “in-arrears” set up.

The bank has become famed in enticing new car buyers through its free insurance promo, with acts of nature coverage. “This would deduct clients to have big savings on their insurance premium. For a P820,000 car, the insurance premium is estimated at P26,000,” said Sarmiento.

BPI Kinfolk, which has been in the auto loan business over the past 25 years, extends an average car loan of P700,000 with an for the most part term of 36 to 40 months. Sarmiento earlier said about 55 percent of car buyers obtaining their units through bank financing while the rest are individual cash buyers and corporate buyers.

Other banks are out to trial the dominance of BPI Family and PSBank in the auto loan market. Union Bank of the Philippines, for one, said it offers very competitive superstore rates based on the loan term of as low as 0.5 percent add on rate. UnionBank has an auto loan portfolio of about P9 billion, and growing according to bank overseer vice president and Consumer Finance Center head Genaro Genju Lapez.

Lapez acclaimed that despite the decline in auto industry sales as of September, UnionBank auto loan sedulousness has improved, “thanks to renewed focus and a more strategic approach in terms of salesman coverage, process improvement and market segmentation.”

“As of August 2011, UnionBank’s auto loan portfolio has grown 25 percent from December of 2010 and is expected to breed to as high as 35 percent by the end of the year,” said Lapez.

Other banks, expressly the smaller ones, are also to trying to expand their share of the pie by tapping celebrities to subscribe to their products, offering free insurance coverage, providing freebies or dangling low downpayment. Application players, however, noted that a lower downpayment and longer repayment period convert to a higher interest.

Some banks are even using the Internet to lure buyers, by showing a low interest count. A recent circular by the Bangko Sentral, however, would soon change the way banks and financing companies show their interest answer.

Source: Manila Standard Today

Mangalore: Canara Bank Organizes Day-long 'Home Loan and Auto Loan Utsav'

22.05.12

Mangalore, Nov 21: Canara Bank organized a day-dream of ‘Home Loan and Auto Loan Utsav’ in association with ‘Boom box Mirchi’ at Loyola Hall, St Aloysius Pre University College, K S Rao Method, on Sunday November 20 from 10 am to 7 pm. DGM M Dasaiah inaugurated the event and said that unconventional interest rates on vehicle loans at 1 percent and 0.5 percent on home loans would be apropos till January 15, 2012 and is an opportunity in this loan Utsav as the process involved is very simple-hearted.
 
About 20-25 leading builders and promoters as well as 8-10 auto dealers from Dakshina Kannada and Udupi districts participated in the Utsav and gave spatter sanctions to home loan seekers.

Canara Bank has been encouraging retail lending portfolio on a big scale. The bank has devised divers retail schemes suitable to all types of clients like salaried, non-salaried, establishment people, professionals, and the like. This year also the bank has been conducting a ‘Retail Lending Birthday’ from October 10, 2011 to 15 January, 2012, which is being celebrated in all the branches across the provinces.
 
During this period, the bank is offering various concessions on home loans, peaceful improvement loans, vehicle loans like reduction in rate of interest, no additional interest on other unit, zero processing charges, interest calculation on daily basis, and no pre-closure charges.
 
All branches under Mangalore division (D K, Udupi, and North Kanara district branches) will be catering to all clients.

Noronha welcomed while divisional chief Suresh delivered the vote of thanks. Daijiworld is the official online alter ego of the Utsav.

Source: Daijiworld.com