Entering bank system to reduce Falabella's funding costs, increase margins - Celfin

Tuesday, January 18, 2011

Chile's second largest retailer, Falabella, plans to enter the Colombian banking system in 1H11, which will reduce its cost of funding, as well as increase margins from the financial business in Colombia given that the current ceiling interest rate is less than half of what it is in Chile, financial services firm Celfin said in a report.

Banco Falabella CEO Alejandro Cuevas told Santiago-based daily Diario Financiero that the bank will open locations this year in its parent company's 30 department and home improvement stores in Colombia.

"While this represents a fairly minor portion of its operations there, it's not a negligible figure to kick off its financial business, as the Colombian financial market is much less developed than the Chilean one," Maria Jesus Bofill, analyst at the studies department of Chile' fourth largest bank, BCI, told BNamericas.

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Falabella is currently Colombia's fifth-largest credit card issuer. According to Bofill, the company's plans to grow its market share in that segment to 3% are achievable.

As of September 2010, Falabella had 637,000 of its CMR accounts in Colombia. Card purchase growth has surpassed the 20% mark over the last few quarters, according to the company's financial statements.

"Considering the similarities between the Chilean and Colombian consumer, coupled with the success Falabella has had in all the businesses it has entered, I don't see why it cannot replicate its banking business model in Colombia successfully," said Juan Pablo Correa, research analyst at financial services firm IM Trust.

Banco Falabella started operating in Chile in 1998 and currently is the seventh largest bank in consumer loans with a 4.4% market share and the 10th largest in mortgages. It also operates in Peru.