MANILA, Philippines — Amid the changing landscape of the country’s banking sector, thrift banks are emerging as key players poised for significant growth. They capitalize on market opportunities and cater to the credit demand of households and small and medium businesses.
Chamber of Thrift Banks (CTB) president Cecilio “Paul” San Pedro said these thrift banks are adapting swiftly to capitalize on new trends and technological advancements amid changing consumer behaviors.
“Our member-banks can look forward to a future full of growth opportunities,” San Pedro said. “By remaining adaptable to evolving customer needs and market trends, member-banks can position themselves for success in an increasingly dynamic and competitive banking landscape.”
A bright future for thrift banks
According to the CTB chief, thrift banks can anticipate a range of growth opportunities that will shape their future prospects and ambitions.
First and foremost, the ongoing digital transformation within the banking sector presents significant avenues for expansion. Member-banks can improve their digital platforms, develop user-friendly mobile apps, and implement innovative digital solutions to cater to customers’ changing preferences.
Collaboration with fintech companies also emerges as a strategic pathway to growth. By partnering with fintech startups, member-banks can harness advanced technologies to enhance service delivery, streamline internal operations, and introduce innovative financial solutions that meet the diverse needs of their customer base.
Another key opportunity is focusing on supporting small and medium-sized enterprises (SMEs). Member-banks can focus on offering specialized financial services such as tailored lending products, advisory services, and digital tools aimed at fostering the growth and success of SMEs, a crucial segment in the economy.
The rising emphasis on sustainability also provides member-banks with opportunities to develop green financing options, socially responsible investment products as well as initiatives aligned with environmental and ethical considerations, catering to an increasingly eco-conscious customer base.
Exploring cross-border banking opportunities is also on the horizon for member-banks. Thrift banks can expand their services internationally by tapping into international markets. This would allow the banks to cater to the needs of customers with cross-border financial activities, remittances and international business ventures, thereby broadening their market reach.
Moreover, focusing on financial inclusion by serving unbanked and underbanked populations through inclusive banking initiatives can drive growth. Member-banks can design accessible products and services tailored to meet the financial needs of marginalized communities.
Adapting to regulatory changes is another avenue for growth as favorable regulatory changes can create opportunities. Member-banks can benefit from supportive regulatory environments that encourage innovation, simplify compliance processes, and enable the introduction of new financial products and services.
Given the increasing importance of data security and privacy, member-banks that prioritize robust cybersecurity measures and safeguard customer data will not only enhance trust and confidence but also gain a competitive edge in the market.
Finally, forging strategic partnerships with other financial institutions, technology providers or non-banking entities can create new growth opportunities and expand member-banks’ service offerings, fostering a collaborative ecosystem that drives innovation and customer-centric solutions.
50 years of reliable service
The CTB, the umbrella organization of the country’s thrift banks, marked its 50 years of dedicated service as it reported the solid growth of its member-banks in terms of assets, deposits, and lending activities.
San Pedro said that under CTB’s leadership, the thrift banking sector demonstrated strong performance in 2023.
Total assets of the thrift bank sector rose by 7.3% to P1.04 trillion as of end-December last year from P968.28 billion a year ago.
The industry sustained its credit growth as core lending rose by 16.3% to P677.6 billion from P582.9 billion in 2022, reflecting sustained lending activity of the sector to its avowed niches of operation.
Confidence in the industry also remained high as deposit liabilities grew by 6.5% year-on-year to P789.3 billion from P740.8 billion a year prior.
Total capital stood at P157 billion, 10% higher from P142.8 billion. The sector also posted a strong capital adequacy ratio (CAR) of 16.98%, well above the 10% minimum required CAR.
San Pedro noted that the non-performing loan ratio remained manageable at 6.46%, underscoring the sector’s prudent risk management practices.
In terms of profitability, data from the Bangko Sentral ng Pilipinas (BSP) showed the net income of the thrift bank group jump by 13.4% to P18.47 billion in 2023 from P16.29 billion in 2022.
The thrift banking sector also saw its net earnings inch up to P4.66 billion in the first three months of the year from P4.65 billion in the same period a year ago.
Overcoming obstacles
San Pedro said that the thrift banking industry has encountered numerous challenges in the past year, including digital transformation, cybersecurity, competition, regulatory changes and economic uncertainties.
“While embracing digital technology is essential, it also poses challenges in terms of infrastructure readiness, customer education, and ensuring the security of online transactions,” he said.
The risks of cyberattacks and data breaches become more significant, as well, with the rising number of digital transactions. Thus, according to San Pedro, protecting customer information and maintaining system security are crucial in bank operations and should be prioritized.
Additionally, the industry faces intense competition not only from traditional banks but also from fintech startups and digital banks that offer innovative services and convenience to customers.
Regulatory changes become challenges, too, San Pedro said. This underscores the importance of discussions, clarity, and understanding between the banks and the BSP.
“Evolving regulatory requirements pose some challenges for thrift banks, especially if they lack the resources to adapt quickly to new rules and regulations,” he said.
Economic fluctuations and the impact of external factors have also affected thrift banks in the previous years, as these could adversely impact loan quality, repayment rates and overall stability of the sector.
Strategic measures
Amid these challenges, San Pedro said thrift banks were prompted to strategize and prepare to mitigate risks.
First, thrift banks have been investing in upgrading their digital infrastructure and enhancing user-friendly platforms. Banks are also providing training and educational resources to customers to ensure smooth digital adoption.
“Banks are ramping up their cybersecurity measures by implementing advanced security protocols, conducting regular security audits, and investing in employee training to prevent and respond to cyber threats effectively,” he said.
On top of these strategies, banks are also offering customer education programs to address challenges related to digital literacy and cybersecurity awareness. These programs help customers understand digital banking features, security best practices, and how to identify potential scams.
Thrift banks are also proactively staying updated on regulatory changes and collaborating with industry associations to ensure timely compliance. Thrift banks are allocating resources to adapt to new rules while maintaining transparency and governance.
“In response to economic uncertainty, thrift banks are strengthening their risk management practices. This includes refining their credit assessment processes, diversifying loan portfolios, and stress-testing their financial models,” San Pedro said.
Partnerships and collaborations are also crucial. Some thrift banks have forged strategic partnerships with fintech companies to leverage their expertise and technology solutions. This enables banks to offer new services quickly and efficiently.
“By embracing these strategies, thrift banks aim to navigate the complex landscape and position themselves for sustainable growth in the face of ongoing challenges,” San Pedro said.
For the past five decades, CTB has faced several challenges and seized numerous opportunities. It also played a significant role in shaping regulatory reforms for the thrift banking sector such as the Thrift Banks Act of 1995.
“We have expanded our mission to promote economic development through savings mobilization and credit extension, particularly to SMEs and the housing sector,” San Pedro said.
CTB over the years
The umbrella organization of the country’s thrift banks was organized in 1974 as the Chamber of Savings and Development Banks. It was then composed of 10 savings banks, 28 private development banks, and 44 savings and loan associations.
CTB was primarily established “to provide an institutional medium through which the members can collectively assist and cooperate with one another, with other members of the banking sector, and with the National Government and its instrumentalities, more particularly the Central Bank of the Philippines (now known as the BSP) to promote, develop, expand and strengthen the role of savings and loan associations, private development banks and savings and mortgage banks (otherwise known as thrift institutions) in the accumulation of savings, enhancement of trade, commerce, industry and agriculture, and in the economic development
of the county.”
Over the years, the CTB went through changes, difficulties and successes. Through their struggle, amendments to the statutes governing the thrift banks were enacted, broadening their powers and further enhancing their role in the mobilization of small-scale deposits and extension of credit resources to individuals and SMEs as well as providing housing and consumer loans.
On Nov. 20,1996, the organization was officially registered with the Securities and Exchange Commission as the Chamber of Thrift Banks.
Amendments to the CTB’s By-Laws and Articles of Incorporation were filed with the SEC on Dec. 3, 1998, reflecting the agreements reached by the general membership on the integration.
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