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PICHINCHA

COLOMBIA - Finance

Germán Rodríguez Perdomo

President, Banco Pichincha Colombia

Bio

Germán Rodríguez Perdomo holds a degree in Finance and International Relations from the Externado University of Colombia, a Master’s degree in Administration from the University of Los Andes and has completed additional studies in mathematics, leadership, administration and innovation at prestigious educational institutions worldwide such as IESE – University of Navarra, Babson College, Center for Creative Leadership, TEC de Monterrey and the University of Los Andes, among others. He has extensive experience in the financial sector, with notable roles at Banco BBVA Colombia, where he served as CFO, Director of Strategy & Portfolio Management, Director of Commercial Development and Director of Financial Management and Planning. Since June 2022, he has taken on the challenge of leading Banco Pichincha in Colombia and aims to position it as one of the most reliable and solid financial options in the country, providing the best experience for its clients.

"Our bank took proactive measures in 2022, allocating substantial funds for loan payment provisions and reorienting our loan activities toward higher-quality customers, fostering healthy growth despite the industry’s difficulties."
TBY talks to Germán Rodríguez Perdomo, President of Banco Pichincha Colombia, about economic resilience, financial solutions for consumers, and investment opportunities in the country.
In the context of Colombian economic resilience, can you elaborate on the actions the bank has taken in 2023?

2023 posed significant challenges for the banking sector, with nearly 40% of banks experiencing financial difficulties. This is attributed to two main factors. The first is the drastic reduction in the interest margin due to high inflation and the central bank’s policy to curb inflation, leading to elevated interest rates. Consequently, industry-wide funding costs surged, causing a sharp decline in the interest margin. Second, the economic environment slowed down post-COVID-19, following an initial rapid recovery that saw Colombia’s economy grow by 8-10%. The current deceleration and high inflation are impacting household disposable incomes, resulting in a rise in delinquent payments. Over the past few months, there has been a notable increase in customers failing to meet their debt obligations on time, leading to a significant spike in provisions set aside by banks. This challenging banking landscape is expected to persist into 2024 as these trends are challenging to reverse. In anticipation of these impacts, our bank took proactive measures in 2022, allocating substantial funds for loan payment provisions and reorienting our loan activities toward higher-quality customers, fostering healthy growth despite the industry’s difficulties.

What financial solutions and services does Banco Pichincha provide to customers with particular preferences?

We decided to focus on specific credit lines with a primary focus on the payroll loan, known as Libranza in Colombia. This unique loan is directly tied to an individual’s payroll, with monthly payments automatically deducted by the employer. This setup ensures a high credit quality: as long as the individual remains employed, they continue to meet their loan obligations seamlessly. Our second major focus is on commercial loans for medium to large enterprises, targeting businesses with sales exceeding USD7-8 million. To thrive in the competitive Colombian corporate loan market, we have implemented a three-pronged approach: rapid customer response, close engagement with our relationship managers, and competitive pricing. This strategy has proven highly successful, allowing us to sustain growth with minimal defaults in this competitive industry.

Banco Pichincha launched Pibank in 2022. Can you offer more details about Pibank’s business model and how it has been received by the market?

Pibank is a new direct banking channel, similar to successful models like ING Direct or EVO Bank in Spain. Our approach integrates the best of the digital realm to enhance service and prioritize customer guidance on investments, deposits, and loans. We refrain from labeling it solely as digital banking, as we aim to preserve the strengths of both traditional and digital banking. Our primary objective is to transform the bank’s funding model significantly. In Colombia, more than 60% of banking industry deposits come from institutional sources, indicating a low level of individual savings in the economy. To address this, Pibank aims to democratize savings by providing a platform that enables everyone to save. In contrast to the prevalent practice where 99% of savings accounts in Colombia offer minimal to zero interest, Pibank seeks to stand out by fairly compensating individuals, empowering them to build meaningful savings. In less than a year since Pibank’s establishment in November, we have experienced a remarkable shift in our customer base, now almost 40% of our high value customer base comes from Pibank. This change is primarily due to our focus on customers with substantial relationships, excluding those with minimal balances. The impact of our new product has been substantial, evidenced by the fact that other institutions, including fintechs, have emulated our approach. This imitation is a positive indicator, showcasing that other entities are embracing our mission to provide customers with a secure and profitable means of saving, enabling them to grow their equity without resorting to loans. We provide a competitive interest rate of 12%, and unlike other banks with minimum thresholds like COP10,000 or COP20,000, our rate applies from the first peso. This inclusive approach has contributed to the product’s significant success, and we anticipate even greater success in the future. We aim to triple the bank’s size within three years, elevating us from our current 18th position to around 12th or 13th. Pibank serves as a strategic funding tool, focusing on enterprise growth and expanding payroll loans. This approach mitigates threat exposure and ensures a secure customer base for funding. Concentrating funding in a few customers poses risks, and our strategy prioritizes stability to avoid liquidity problems, a lesson learned from past financial crises. We prioritize customer freedom and transparency and want our customers to stay because we deliver on our promises. Customer satisfaction is paramount, and we ensure high levels by consistently meeting expectations. Our commitment is to align precisely with customer expectations, ensuring what we promise is precisely what we deliver.

Can you elaborate on CD Pibank?

In Colombia, we pioneered the remunerated savings account market, which was non-existent previously. Following its success, we introduced the CD four months later, currently offering the best interest rates in the country for six-month and one-year terms. The CD market is growing rapidly, benefiting customers who seek to see their savings grow with limited or zero risk, a distinct advantage over the stock market where losses can occur. Unlike stock investments, our CD offerings provide a safe and steady path for individuals to incrementally build and grow their equity. This approach proves to be not only secure, but also beneficial for a developing country like Colombia.

What investment opportunities is the company currently considering in Colombia with potential?

Initially, investing in our bank has been a significant commitment. Despite being a smaller bank with assets around USD500-600 million, we have allocated substantial resources, investing USD15-20 million annually in technology since 2022. While this investment may seem modest compared to larger banks, it is sizable relative to our bank’s size. We are actively exploring growth opportunities in Colombia, although not necessarily within the banking sector. Acquiring a bank at a discount with a perfect match to our operations proves challenging. The risk of inorganic growth lies in potential distraction from our current strategic plan. Careful consideration is crucial when choosing acquisition targets, ensuring alignment with our strategy. Finding a suitable target in Colombia is challenging, but possibilities may emerge in other sectors, for other entities within the Pichincha Group.

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