CorpBanca betting on strength as local player to grow in corporate segment

Wednesday, July 6, 2011

Chile's fifth largest bank, CorpBanca (NYSE: BCA), is betting on its strengths as a local player and ability to make faster decisions to provide it with an edge in the corporate segment, Óscar Cerda, head of the bank's corporate and private divisions, told BNamericas.

"Being a locally owned bank means that we know our customers better than our peers. And we're also implementing a series of measures that will enable us to react faster to their needs," he said.

Cerda also said CorpBanca's ongoing capital increase, which will lift its capital by 15%, will allow the bank to better compete with bigger players in going after large customers.

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Earlier this week, CorpBanca completed its options subscription period, ending with 91.24% subscribed and raising US$370mn of its ongoing 327bn-peso (US$674mn) capital increase.

The full increase will allow the bank to lend US$250mn - or 10% of its new equity base - to a single company without any collateral, compared to the US$150mn it can lend today.

Corporate lending is the Chilean banking system's largest segment. About 75% of CorpBanca's loans come from the corporate side, compared to the financial system's average of 60-65%.

Cerda said CorpBanca is aiming at increasing its market share on the corporate side at the same pace as the bank as a whole - that is, 20-30 basis points a year.

"There is no magic bullet in this business. The only way to grow is by providing better services to your customers and becoming a better bank," he said.

CorpBanca commands a roughly 7% loan market share in Chile's banking system.


Given that the bank is overweight in corporate lending compared to its peers, CorpBanca has over the last few years focused on increasing its presence in the more profitable retail lending market.

CorpBanca grew loans 9.1% to 5.47tn pesos last year, mostly fueled by mortgages, which more than doubled the system's growth at 28%.

"Margins in the mortgage lending segment are very narrow, but they allow you to establish long-term bonds with your customers and to offer them other banking products for a span of, say, 20 years," Cerda said.

The bank is also working on synergies with supermarket chain SMU to grow in the consumer loan segment, Cerda said. Both companies are controlled by local businessman Álvaro Saieh.

Saieh already owns several supermarkets and a home improvement chain, and had lacked an investment in a department store to have the same business model that other Chilean retailers have successfully implemented. But over the weekend Saieh announced that he had purchased a 10% stake in troubled department store La Polar.

CorpBanca's net income for 2010 reached 119bn pesos, a 40% increase compared to 2009 and 10% higher than the industry, thanks to increased revenues and fees, as well as lower provisions.