PNB comes down from ivory tower

The Philippine National Bank was established in 1916 as a bank of the people. It was for some years.

After the Second World War, PNB slowly became the bank of the then powerful sugar block, fired by Parity Rights for American citizens and preferential sugar price under the Laurel Langley Agreement.

Under private ownership headed by the group of Lucio Tan, the PNB seems to have come down from the ivory tower and has its feet firmly planted in the ground. The bank sees no pie in the sky.

Eugene Acevedo, president and chief executive officer, told Malaya Business Insight that the bank is now the third-largest facility for remittance of funds of Filipino overseas workers.

It improved on that service by accepting payments for condominium also from OFWs. It struck a deal with a large number of property developers which now use the bank as payment facility.

The bank makes very little spread but helps a lot of Filipinos still working abroad but planning to retire to make easy the installment payments of the apartments they are buying in the Philippines, mostly in Metro Manila.

On top of the two services, Acevedo says PNB is getting aggressive on lending to small and medium-scale industries. So far, it has disbursed P8 billion on small and medium enterprises (SMEs), but Acevedo says he hopes to expand SME lending until it eats up a good portion of its P101 billion loan portfolio.

Acevedo also revealed that the bank grants as much as P100,000 scholarships every year to deserving students whose parents are either clients of the bank or use the PNB as remittance agent and for other services. PNB, according to Acevedo, is one of very few banks that guarantees a one-year fixed-term 5.5 per cent interest on housing loans.

The PNB has a distinct advantage over its many competitors. It has 105 overseas offices, five of which are full commercial, deposit-taking banks. The foreign branches are operating in New York, Los Angeles, Singapore, Hong Kong and Japan. It opened its 325th branch in Calamba, Laguna, last week.

But like all state-controlled institutions, the PNB was not professionally managed until the group of Lucio Tan took over in 1996.

The first order of the day after the takeover was hiring 70 management trainees from its competitors. There were more applications than the bank needed, Acevedo explained.

Since they already occupied junior positions in their old banks, the management trainees started at the rank of assistant vice president, Acevedo said.

What the new management and owners saw was the necessity of training people, especially those in the branches, on how to deal with clients.

“They seemed to be a bit arrogant when the bank was owned by the government,” Acevedo said.

The rents on the branches were relatively higher because they were a bit too big for the number of clients and accounts each of them handle. Many were cut down to size.

Seminars on how to deal with clients is a continuing concern, Acevedo said.

The bank is no longer a monopoly of the so-called “sugar block” which has disappeared anyway, Acevedo said.

So far, corporate loans stood at P60 billion and growing slowly but steadily. The new owners learned too many lessons from the previous lending recklessness of the bank, Acevedo said.

In fact, he said, the PNB has around P20 billion in foreclosed assets which it is slowly disposing off. He pointed out that there seems to be a particular preference for large tracts of foreclosed agricultural land.

The rest of the foreclosed assets are little establishments many of which went belly up probably because no due diligence was exercised before the loans were granted.

Efforts at rebuilding the bank, both physically and professionally, seem to be paying off.

In 2010, the bank recorded profits of P3.54 billion from P2.2 billion the previous year. Still small but the trend towards safe lending and fee-based operations such as remittances, payment facility for home buyers, and expanding demand for corporate loans should leave the bank in an extremely viable position, in the estimate of Acevedo.

The brighter prospects come from the impending merger of PNB with Allied Bank, which is also controlled by the group of Lucio Tan.

The Monetary Board has not approved the merger pending resolution of a minor problem involving the ownership of 28 per cent by Allied Bank of Oceanic Bank of California.

The investment in that US bank has to be unloaded, according to US banking rules, Acevedo said.

He said Lucio Tan is in the thick of negotiating the sale with a buyer who has long expressed interest in the investment.

Via Malaya Business Insight


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