GoTyme ready to ease credit expansion if repayment weakens

MANILA, Philippines — GoTyme Bank may slow the expansion of its lending business if borrower repayment trends begin to weaken, as the digital bank takes a cautious stance amid a more challenging macroeconomic environment.

In an interview with Money Talks, GoTyme president and CEO Nathaniel Clarke said the bank is closely watching repayment behavior across its loan portfolio, particularly as higher borrowing costs, slower growth and external shocks raise concerns over asset quality.

“The credit book growth will be impacted if this significantly worsened,” Clarke said. “But right now in our deposit customers, we’re not seeing them dip into savings. We’re not seeing their behavior significantly change.”

Clarke said GoTyme has not observed any deterioration in the vintages of its universal credit line product, referring to the performance of loan cohorts over time.

However, he said the bank is prepared to become more selective if repayment indicators begin to weaken.

He said the bank tracks each monthly cohort of new borrowers, focusing on days past due and repayment rates. These indicators will determine whether GoTyme needs to tighten its lending standards or slow credit expansion.

“As (the metrics) start to deteriorate, then we would start to essentially be stricter and throttle back growth,” he said.

Digital banks and other financial technology players have come under closer watch as regulators monitor the sector for signs of excessive risk-taking, particularly amid intense competition and a tougher operating environment.

Clarke said GoTyme has been relatively conservative in growing its credit products over the past year, which could help shield the bank from a potential deterioration in asset quality.

GoTyme’s approach to lending is data-driven and based on a “test and learn” strategy, allowing the bank to move gradually into specific customer segments while monitoring risks closely.

For now, Clarke said GoTyme has limited exposure to credit risk because its lending book remains short-dated and the bank is still heavier on the liability side. Most of its balance sheet is invested in low-risk treasuries, which could also support earnings in a higher interest rate environment.

The digital bank’s funding profile also gives it more room to lend at lower rates than non-bank lenders while maintaining margins, Clarke said. He noted that non-bank lenders typically have funding costs of about 15 percent, while GoTyme’s cost of funds is only around 2.4 to 2.5 percent.

Aside from lower funding costs, Clarke said GoTyme has access to customer transaction data, which helps the bank assess borrower behavior more effectively than non-bank lenders.

“That would enable us to actually still sustainably offer lower interest rates than non-bank lenders and maintain a healthy margin,” he added.

Clarke said GoTyme is not under pressure to aggressively expand lending because its revenue base is diversified, with about half of its gross profit and net operating income coming from transactions and savings.

Customer growth, however, is expected to remain strong despite the tougher environment.

GoTyme has reached 10 million customers as of June after reporting nine million users in March.

Clarke said the bank is still on track to hit 12 million customers by the end of the year, supported by monthly additions of at least 300,000 users.

“This macro environment won’t impact our customer growth,” he said. “We’re going to comfortably grow 300,000 customers or more per month at a very low cost of acquisition.”

The bank’s customer growth is supported by its partnership with the Gokongwei Group, kiosk distribution network and digital banking platform.