Union Bank of the Philippines (UnionBank) is on track to becoming one of the Top 3 banks in the Philippines, due in large part to its dedication to be at the forefront of its industry’s digital revolution. Its motto “Make da diff” is being realized repeatedly through its innovative products and services provided to a diverse range of clients, from retail to fintech.
Today, UnionBank’s president and COO Edwin Bautista joined us to explain where the bank is now and where it plans to go in the future.
Mr Bautista, thank you for joining us.
UnionBank’s stock price has surged since late 2015 by a staggering 60 percent. Do you expect similar gains going forward, and do you have any price targets in mind for the coming years?
No hard price targets. First, let me tell you that we feel it is still very much undervalued at 1.2 times book. It’s still below the average of 1.7 times book for the other banks. And we think the reason is because we came from a business model that was heavily dependent on treasury trading. And the analysts would discount treasury trading. Now that we are moving into recurring income, there’s still a little bit of “wait-and-see” by the analysts, whether we can actually sustain it or not. So far these last few months, the share prices have already moved up, again just last week. Significantly after we published our first-quarter results. So we think that as we are able to convince the market that this is sustainable, and they understand our digital-transformation strategy more, our share prices should not just move up, but significantly move up.
So that’s a buy recommendation from you, then?
It’s a “buy” recommendation not just from me but from nearly all the analysts who have covered us. Just this morning, our Corporate Planning folks gave me the latest report by five different analysts over the last three days. And out of these five, all had a “buy” recommendation.
UnionBank was recently recognised as the “Best Company to Work For” at the Asia Corporate Excellence & Sustainability Awards (ACES). In your opinion, what is the one factor that most elevates the bank above its peers as a desirable employer?
I think it’s our obsession with employee engagement. We really take our program seriously. It’s a program that we started about five years ago. And I think there are three components that are key to that. The first is that we are able to communicate together, agree on our higher purpose as individuals. Second, we are fostering a collaborative-management style across the organization. And third, we’re encouraging this “inside-out”, “middle-out” strategy where middle executives are asked to lead certain areas of our cultural transformation across the organization.
Could you give me an example of the second one, the collaboration.
We have volunteer teams that are cross-functional and that work on specific projects. For example, a team could volunteer to…well, this is a real one that created a chatbot that answers frequently asked questions regarding employee benefits. So instead of having to call HR, the chatbot allows our UnionBankers to get the answer quickly. And that was designed by an internal team of volunteers. I asked this team this question: “Are you willing to work on this on your own free time?” And they said, “Yes, we are.”
Excellent. And they put together the chatbot.
Yes, they put together this chatbot. And there are many examples like this. It’s actually a form of recognition that we value their talent. At their end, it’s their own contribution to the company that they are proud to be part of. And the fact that they are willing to do this on their own spare time is a testament that UnionBank is a special place to them; this is their home.
In your opinion, what is the biggest concern or challenge that the bank has had (or should have) regarding the digital transformation?
The biggest challenge with the digital transformation is we are going to see some jobs eliminated. At the same time, there will be new jobs that will emerge. So the challenge is, how do you get those who will lose jobs to fill up the new emerging jobs? We call it “future-proofing” our people. Now we promised them last year that no one gets left behind in this digital-transformation journey. This was a promise that my chairman and I reiterated just last week. So it’s so important to us. This is the challenge, how do we transform our organization into an “agile” organization? How do we retrain the existing employees so that they will be able to move seamlessly from a job that is disappearing into a new job that is emerging?
So the next question is really a follow-on from that. A significant component of the digital transformation relates to instilling change in the internal UnionBank culture. What has been the most challenging aspect of achieving this change? Has it been easy to get UnionBankers—from junior employees to senior managers—to buy into the bank’s digital-transformation vision?
Actually, it’s surprising that this “buy-in” has been the easiest portion thus far. I think because one, we are a young organization. We’ve seen how we’ve moved up from the “Number 23” bank a few years back to being one of the Top 10 banks today. And we’ve also seen major organizational changes happen over the past 15 years. And we have been leaders in innovation, not just from an operations perspective but innovation in management structures. You know, we were one of the first banks in the Philippines to separate sales and operations at the branch level. We were the first one to centralize operations; and so on, and so forth. So this is nothing new. It was just a question of convincing the organization that first of all, it is good for all of us. Second, we really have no choice. The whole world is changing. As they say, “digitize or perish”. And the third and most important thing is the promise that “no one gets left behind”.
One of the most remarkable features of the digital transformation is the opening up of the bank’s application program interface (the API), which as I understand will allow any fintech to connect its app to UnionBank’s backroom services. In terms of delivering this service effectively, does it matter in any way what type of business the fintech client is conducting at the frontend? Or will you be able to effectively cater to all types of business?
From a technical perspective, it doesn’t really matter what type of business is delivered by the fintech. Our open API can support it and thus be “agnostic”. But having said that, we need to ensure, though, that the businesses we support from a “ramp-on, ramp-off” perspective are—number one, legitimate; and secondly, do not create reputation risks at our end. And this is going to be the challenge moving forward—though, we’re already working on the protocol for the risk-management guidelines, to make sure of this. With possibly all fintechs “knocking on our door”, what we really need to do is due diligence. So while we can say that we can hook up with everyone—we have to ensure that we only hook up with those that WE want.
If you could name just three things that, in your opinion, are required to build a great retail bank, what would they be?
One of the first things would be having a superb operating platform that can be scaled-up fast. A platform that is available 24/7 and has six-sigma reliability. That’s the basic foundation. If you don’t have that, forget about being a “great retail bank”. The second one is a highly engaged workforce that delivers great service and great customer experience. And that’s the reason why we feel we have a competitive advantage with our highly engaged UnionBankers. The third one—which to me is still a work in progress, though we’ve already fixed the first part of this two-part issue—is having great digital marketing skills that are based on big data or data analytics. We have formed a data-analytics team, the first part of this issue. They’re already doing a lot of predictive analytics, big-data harvesting, “360 (degree)”, “720” and “1080” views of the customer. We need to get much better in the area of digital marketing. So these three things are in my opinion what are required to build a great retail bank.
And the final question I have is during your time as COO of UnionBank, what is the one achievement of the bank of which you are most proud, and the one area that you’d most like to see improve going forward?
As of today, the achievement of which I am proudest is “The Best Company to Work For” award. Banking is a “people business”; and an engaged employee, an engaged workforce delivering such great service, which in turn translates into an engaged and loyal customer group, this is what we really aspire for. I’m very proud of that.
In terms of what I’d like to see improve going forward, there’s really one thing that I’d like to be able to do, which is also related to this “Best Company to Work For” award. I want to complete the bank’s digital-transformation journey without anyone being “left behind”. And this is something that, because you asked this question I got to think, and I am more determined to drive this message home to our people—that we commit to completing our digital-transformation journey without anyone being “left behind”. I think this resonates well with our people. It’s a promise that we will have to back up. It’s going to be a very tough promise, because there will be problems along the way. But to the extent that we can, we really want to deliver on this promise.
Thank you again for speaking with us today, and much success with your ambitious efforts to make the best difference for your customers while keeping your promises to your employees.