Philippine National Bank (PNB) is aiming to more than double its retail loan portfolio over the next three years, capitalizing on its strong capital ratios.

During the Philippine Stock Exchange's investor day, PNB Chief Finance Officer Francis Albalate stated that these high capital ratios place the bank in an ideal position to expand its consumer lending.

"This will drive our ROE (return on equity)," Albalate said. "We believe that in the next three years, this will drive our profitability and bring our ROE to be at par with the top three banks."

He added that PNB intends to increase its lending to retail customers to more than double its current level, reaching approximately 20 percent of the bank's total loan portfolio within the next three years.

To support this goal, PNB created a dedicated consumer finance sector in November 2023. This new sector consolidated the Cards and Payment Solutions Group and the retail lending group, which handles housing, auto, and personal loans. Albalate explained that the business has initiated several changes in policies and procedures to mitigate risk as the portfolio grows.

"We have adopted a credit score for all products that allows for behavioral benchmarking versus a pure demographic application scoring," he said. "We have also adopted a competitive loan-to-value consideration for housing loans and CTS (contract-to-sell home loans), so that we will be at par with the industry.”

Furthermore, PNB has automated the loan origination process for all consumer products, streamlining the execution of risk acceptance criteria with an end-to-end solution.

Albalate expressed confidence in PNB's ability to maintain a net interest margin above four percent, thanks to its low-cost funding sources.

With 84 percent of deposits consisting of current and savings accounts (CASA), the bank's net interest margin currently stands at 4.6 percent for the first nine months of 2024, up from 4.3 percent last year.

He expects margins to remain at this level as PNB continues to focus on generating low-cost CASA funding, coupled with the anticipated increase in loan yield rates resulting from the strategy to accelerate consumer lending.

PNB posted a consolidated net income of P15.1 billion for the first nine months of 2024, a 12 percent increase compared to the same period last year. This strong performance was driven by robust growth in net interest income, which increased by 10 percent year-on-year to P36.5 billion.