Pichincha to expand into China to exploit Quito's growing links with Beijing

- Friday, August 5, 2011

Pichincha to expand into China to exploit Quito's growing links with Beijing

Ecuador's largest private bank, Banco Pichincha, will continue its global expansion by opening a representative office in the Chinese city of Shanghai later this year, CEO Fernando Pozo told BNamericas.

Earlier this year Pichincha moved into retail banking in Colombia and Spain, to exploit large bilateral trade relations between these two countries and Ecuador. Pichincha also has representative offices in Panama and the US.

"The mission of Banco Pichincha España is to offer our compatriots residing in that country an efficient alternative to finance their projects and meet their banking needs both in Spain and Ecuador," Pozo said. By the end of 2011, Pichincha hopes to open 10 new branches in Spain.

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The deterioration of Ecuador's business environment under leftist President Rafael Correa has forced Pichincha to expand its geographical reach and enter new business areas at home to maintain its growth rates.

NO BLISS IN BIESS

The bank's mortgage business has been particularly affected by the entry of new state institution Banco del Instituto Ecuatoriano de Seguridad Social (BIESS) into the market last year.

BIESS's mandate is to expand access to housing finance for lower income segments of the population.

Since starting its operations in October 2010, BIESS has already issued US$435mn in housing loans, according to Pozo. "BIESS's portfolio is driven not by the rules and conditions of the market but rather by the role given to this entity."

This has forced Pichincha to look for other areas of growth. At the end of June, mortgages represented only 12.3% of Pichincha's US$3.72bn lending portfolio. Commercial lending accounted for 39.4%, consumer loans for 35.1% and microcredit for 13.2%.

Pichincha's choice of China as the new growth frontier is not surprising. Following Correa's decision to voluntarily default on international loans in 2008, Ecuador has been frozen out from Western financial markets.

Chinese state banks have since emerged as the largest international lenders to the country, providing credit for flagship infrastructure and oil projects, often in return for oil supplies.