Friday, December 16, 2005

Scotiabank Move May Have Rate Impact in Peru

Reuters, Teresa Cespedes, 16 December 2005

Lima, Peru -- Moves by Canada's Bank of Nova Scotia and Britain's HSBC Holdings PLC to set up shop in Peru's already crowded banking sector could spark a fall in interest rates and heat up the competition in the promising low-income loans segment, the country's banking superintendency said.

Last week, Scotiabank, Canada's No. 3 bank by assets, agreed to spend almost $600-million (U.S.) to buy Peru's Banco Wiese Sudameris and take a controlling stake in Banco Sudamericano as part of a growth plan in Latin America.

Peru's Banking Superintendent Juan Jose Marthans told Reuters in a recent interview that HSBC Holdings, one of the world's biggest banks, aims to move into Peru at the start of 2006. HSBC was not immediately available for comment.

Mexico's Banco Azteca, owned by retailer Elektra, has said it aims to move into Peru next year and extend its focus on low-income borrowers such as policemen, farmers and taxi drivers, who generally do not make enough money to qualify for loans at traditional banks.

"In retail banking, with the entrance of these active international banks, we expect an additional, aggressive fall in the cost of credit," Mr. Marthans said.

Interest rates, at a year-average of 23.9 per cent in Peruvian soles and 10.4 per cent in U.S. dollars, would fall for loans in the retail, credit card and mortgage segments, he said.

In impoverished Peru, where only 20 per cent of economically active Peruvians use bank accounts, Banco de Credito dominates the 12-bank retail market.

But it is being challenged by BBVA Banco Continental, an affiliate of Spain's BBVA, which last year cut its bad debt ratio and has begun moving into the riskier but growing low-income loans market.

"Assuming they don't have another strategy, which could be buying a bank here, I hope they organize their permit request and start operating in the first quarter," Mr. Marthans said. "We're already in conversations with them."