Dynamic financial sector breaks with tradition
THE PHILIPPINE BANKING SECTOR HAS SEEN A SERIES OF MERGERS IN RECENT YEARS AS TECHNOLOGICALLY ADVANCED AND CUSTOMER-FRIENDLY SERVICES BECOME THE ORDER OF THE DAY

Isidro C. Alcantara President and CEO of Philippine Bank of Communications

Founded in 1939, the Philippine Bank of Communications (PBCom) is one of these venerable seen on the street these days flaunting a brand-new management style. “I’ve only been here a few months,” says Isidro C. Alcantara, the president and CEO, who is first to admit that, “they hired me to shake things up and transform the place a little.” That brief could equally apply to a number of other long-established Philippine banks that are unwilling to act the part of dozing dinosaurs.
Throughout its history, the family-owned PBCom has been a pillar of the Chinese-Filipino community and a major conduit for trade and investment between the Philippines and China–and the ethnic Chinese interests that are prominent in business, manufacturing and trade all over the Pacific Rim.

The fact that Mr. Alcantara is the first Filipino to take charge at the bank marks a break with the tradition symbolized by the abacus that has served as PBCom’s corporate trademark: reliable, slow, and Chinese. But being anchored in a given market and depending on it for 85% of your business has both its good and bad points, he points out. “The Chinese-Filipino community runs a big part of the economy. It can be seen as a weakness if the bank restricts itself to a single market or a strength in that it gives you a solid base from which to diversify.” Clearly he has opted for the second alternative, hoping to achieve an equal balance between the bank’s core clientele and a new segment in which it feels it can be competitive, defined as “the second tier of the top-end corporate market”.

GLOBAL PLAYER Located in Manila, the Philippines’ stock exchange is a bustling and growing market.

To that end, PBCom last year acquired the Consumer Savings Bank in merger deal about the same time that it doubled its paid-up capital with an infusion of fresh equity. Mr. Alcantara has just finished drafting an IT plan for the bank, and hopes to have all systems fully automated by the end of 2002. That will help in achieving a 20-30% personnel reduction while PBCom builds up its customer base.
Over at the Philippine National Bank (PNB) the situation is definitely looking better. Majority stakeholder Lucio Tan and the Arroyo administration appear to have agreed on terms that would allow the bank to convert the $500 million outstanding debt the bank has racked up with the Philippine government into equity. Once the bank is safely on the road to recovery and the shares rise in value, the government plans to unload its stake in a few years’ time.

Feliciano L. Miranda President and CEO of Philippine National Bank

What went wrong at PNB? After all, we’re talking about the nation’s sixth largest bank, anchored against stormy weather by 34 branch offices servicing two million customers, 79 overseas offices, 148 ATMs and its profit-spinning subsidiaries operating in the fields of insurance, investment banking, forex currency trading and stock brokerage. A bank with 85 years of history behind it that, up until 1949, issued its own currency and acted as the country’s de facto central bank. A surfeit of misfortunes, briefly summarized as exposure to the Asian currencies that got clobbered in the 1997 crisis and a rotten core of non-performing loans in its portfolio, up to 40% of the total, some of which were granted after a few arms were twisted by the previous administration. In 1999, the government took a 16% stake in the bank while the Tan interests took control and both pumped in capital to avert a meltdown. Former central bank official Feliciano L. Miranda was brought in to get it back on course. “A comprehensive plan is not yet ready but we have implanted certain turnaround policies,” he says. “First of all, we have improved our credit decision-making process. Second, we have encouraged our branch managers to go out in the field and campaign aggressively for new deposits. Third, we have been expanding our remittance business, opening new outlets in Canada, Australia and the United States.”

Aurelio R. Montinola Senior Executive Vice-President of Bank of the Philippine Islands

If age is any sign of steadiness, it would be hard to beat the Bank of the Philippine Islands, over 150 years old and still going strong enough to rank second in terms of assets. BPI is a thriving, lively concern thanks to a policy of aggressive acquisitions and business building, that has seen it absorb 14 competitors in 25 years, a trend that it capped with the country’s largest-ever bank takeover in 2000 that brought the Far East Bank into the fold. “As we merge and acquire, we take the best of the breed, pick them up, put it all together and rationalize,” says Senior Executive Vice-President Aurelio R. Montinola. “We have a tradition of being the first or second to come in with innovations. We have been extremely successful with our pre-paid cash cards because that allowed us to reach people who are not regular bank users. The other area is electronic banking. Up to 40% of our transactions take place outside the bank.” Mr. Montinola will not be put out, however, if you accuse him of taking a conservative approach to risk, since the bottom line shows operating profits of $60 million for 2000 that are expected to grow by at least another 20% by the end of the current year.