Newcomer targets ‘middle retail’ niche

In banking as in any other business, it helps if at all times you know where you are and where you want to be. For the family-owned Banco de Oro (BDO) the answer to both is clearly the ‘middle retail’ market because the niche it has chosen is a deep and fertile one with plenty of room for growth.

NESTOR V. TAN President of Banco de Oro

“Trying to be all things to all people is a surefire recipe for sub-scale business,” says Nestor V. Tan, the bank’s president. “We are limited in terms of geography to four major urban centers and in market presence to the middle segment, but we try to maintain a strong position wherever we are.”
Banco de Oro is a relative newcomer on the scene, its initial capitalization anchored in the SM chain of upmarket shopping malls founded by entrepreneur Henry Sy. It was not very active until the banking liberalization laws of 1997 opened a window of opportunity for SM’s commercial properties to become the bank’s interface with the consumer market, particularly with the 1.2 million upscale shoppers who frequent its malls and department stores.
“Our strength in the middle segment is what allows us to branch out to large corporate sectors as well as the small and medium-size enterprises,” says Mr. Tan. They also benefit from the kind of expertise BDO can supply in areas such as retail distribution and cash-flow management, and its long-established working relationship with the mid-market distribution sector.

The bank’s chairperson, Teresita Sy, has accepted the task of seeing that SM and BDO’s interlocking orbits generate the proper synergies that allow both to achieve their respective goals. But she emphasizes that would be misleading to imagine BDO exists to serve SM’s interests or to be a handy source of financing. “We look at the companies as separate businesses,” she says and notes that, while at first, much of BDO’s activity was focused on SM’s retail tenants and suppliers, now that it has the distribution channels and network, it is in a position to extend its reach.
The commitment to offer innovative products and solutions led BDO to develop a strategic alliance with Assicurazioni Generali of Italy for its insurance business as well as moving into foreign exchange and investment banking. Last year, BDO was chosen as a lead underwriter for a major government bond float, and launched its Internet and phone banking facilities, along with two new tax-free investment outlets. Net income rose to $9 million on a 34% increase in total resources. Deposits soared by 42% to $920 million, and its net worth grew by 8%. The loan portfolio was up 24% to total nearly $600 million, with the non-performing percentage only half of the industry average. At the same time, it finalized a share swap deal that allowed the Dao Heng bank, rated one of the best-managed regional institutions, to take a 20% stake.

Although that allowed BDO to benefit from the Hong Kong-based bank’s experience and technical know-how in the consumer field, Dao Heng recently announced that it will be unloading its stake in the near future and five other banks have expressed an interest in bidding. “We haven’t yet got to where we want to be but we’ve made it to the upper tier,” says Ms. Sy. “We would certainly like to grow on a more significant level, though, We either get out now or build up the bank with a view to the future. We choose the second option.”