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Scotiabank Peru, the country's third largest bank, is expecting loans in the Peruvian banking system to grow 16-18% in 2013, down from around 20% this year, as GDP growth should cool to around 5-6% from above 6% in 2012.
Scotiabank Peru has been growing lending at above 20% this year, ending October with US$7.94bn in loans for a 13.9% market share, and profits at around that same pace, the lender's COO Hubert de la Feld told BNamericas.
The bank's profits totaled US$258mn in the first 10 months of the year.
Scotiabank Peru expects to increase loans slightly above the system in 2013, but profit growth will likely slow down given higher capital and mandatory reserve requirements imposed by the local regulator and the central bank as well as a clampdown on fees, de la Feld said.
"This has been a good year for Peruvian banks, with loans rising significantly but with an only moderate increase in the system's delinquencies," de la Feld said.
According to local banking association Asbanc, the nonperforming loan (NPL) ratio among Peruvian private banks hit 1.79% as of end-November, up 0.27 percentage points compared to the same month a year ago.
While the system's NPL ratio is still low compared to other emerging markets, the recent increase is mainly explained by higher delinquencies among individuals and small companies, de la Feld said.
And while Scotiabank Peru has also seen its NPL ratio rise over the last few months, it still is below the system's average, he said.
GROWTH, FUNDING PLANS FOR 2013
Scotiabank Peru is a unit of Canadian lender Scotiabank (NYSE: BNS).
In 2013, Scotiabank will focus on growing its branch network in Peru both at its banking unit as well as its consumer and small business finance subsidiary CrediScotia and develop new sales channels, such as mobile banking, de la Feld said.
Peru's congress has recently approved a bill to create a regulatory framework for mobile banking in Peru, which is seen as a possible remedy to the low penetration of financial services in the country.
In terms of funding, de la Feld said Scotiabank Peru may consider issuing a senior bond in 2013 after successfully placing a US$400mn, 15-year subordinated bond with a record-low 4.5% coupon last week.
The bank was originally planning to sell US$300mn in bonds, but decided to increase the size of the issue due to strong investor demand, as the offer was almost nine times oversubscribed.
Scotiabank Peru decided to issue the bonds to improve its capital structure as it was one of the few banks in Peru that did not have Tier II capital, the executive said.
And while the bank does not rule out growing through an acquisition, it believes its investments in the country have been "substantial" over the last few years.
"And we think we can keep on growing organically just like we have been doing after 2008, when we bought Banco del Trabajo," which was renamed CrediScotia after that, de la Feld said.