BDO Unibank, headquartered in Makati, Philippines, is a full-service, universal bank, providing a complete suite of industry-leading products and services to its consumer and corporate clients. In terms of total assets and market capitalization, it is the country’s largest bank. Through its subsidiaries, BDO also provides products and services in areas such as investment and private banking, insurance and stockbroking. BDO boasts of the country’s largest bank distribution network, with more than 1,300 branches and over 4,400 automated teller machines, along with 23 international offices. It has significantly expanded its reach through a combination of organic growth and mergers and acquisitions. The bank is a member of the SM Group, the country’s largest and one of the most respected conglomerates. BDO has received numerous awards from domestic and international bodies, making it the country’s most-awarded bank. Sustainability is integral to the bank’s strategy, as indicated in its sustainability philosophy: “We seek to achieve resilience by incorporating sustainability in the way we do business.”
International Banker is pleased to have BDO President and CEO Nestor Tan with us today to talk about BDO Unibank’s remarkable success.
Mr. Tan, welcome and thank you for speaking with us today….
We saw in 2018 that BDO Unibank’s retail lending business performed very well, despite challenging conditions. On an annual basis, total loans across all segments grew 18%, while provincial lending surged by 22%. To what main factors do you attribute such strong growth?
Our growth is primarily due to our sustained expansion and coverage of our target markets. We have made a conscious effort a few years back to build the consumer and middle market segments, particularly in the provincial areas. This strategy is now yielding dividends for us. It is also a good complement to our portfolio of corporate clients, resulting in a well-balanced lending platform.
Currently what is the most significant way in which BDO differentiates its retail banking offering from that of its competitors?
We believe it’s our service philosophy as captured in our tagline “We find ways”. Everything we do is focused on addressing the needs of our customers. From extended banking hours to weekend banking to multi-channel digital offerings, we offer banking services geared towards the customer’s convenience and preference.
How important is the MSME sector to BDO Unibank? And what specific initiatives, if any, has the bank recently launched to boost its presence in this sector?
We believe the MSME sector will be the future growth market for banks. Close to a third of Philippine cities and municipalities do not have a formal banking presence. Close to 70% of adult Filipinos do not have bank accounts. There is a lot of ground to cover in giving emerging business and communities access to the formal banking sector. It is therefore very important that we develop the right model in tapping that market.
We have established our rural banking subsidiary as the vehicle for our expansion in the under-served areas and leveraging that with agents and partners. From its roots in Mindanao (southern Philippines), we have gradually expanded our presence to the north expanding coverage one community at a time.
What are some of the most important ways in which the bank is utilizing technology to better serve its customers? And what do you consider to be the bank’s most innovative of all its offerings at present?
Technology for us is an enabler. We focus on building a strong, secure, reliable and flexible infrastructure, rather than building leading edge applications. Having said that, we deliver mainstream products using more convenient technology such as the use of biometrics for authentication or QR codes for payment transactions.
Do you see collaboration (rather than competition) as being preferable for BDO Unibank (as well as the banking industry as a whole) to address the growing threat from the FinTech sector?
FinTechs should be seen as enablers and collaborators. We should embrace and take advantage of what they have to offer. The challenge is how we build the right infrastructure that allows us to use the FinTech tools in the most efficient way. That is where having the right infrastructure or platform is key.
Given the rapid evolution that the banking industry has recently experienced with regards to technology and changing customer preferences, what would you say has been your biggest challenge as a banking leader?
The biggest challenge is how to stay nimble and flexible to take advantage of these changing technologies. You move too fast, the market may not be ready. You commit too soon, the technology may change. You wait, you may get left behind. You do not prepare, you may be caught unaware. How do you balance those things?
In light of the dramatic technological changes experienced by the banking industry in recent years, how has your approach to the management of the bank changed during this time, compared with say, 5 years ago? Have your management/leadership philosophies changed at all during this time?
The biggest adjustment for our organization is the appreciation of the role of new knowledge in banking. We accept that change is constant, but historically the change has been around banking products, regulations and the economic environment. Now we need to add new dimensions to the equation – technology, changing lifestyles, new forms of competition and freer flow of information.
It has been over 20 years since you were first elected to the board at BDO Unibank. What is the most significant way in which your management of the bank is now different from back then?
Twenty years ago, I spent more time on operational matters as we were just starting to grow the Bank. Over the years, we have been able to form a strong management team with a shared vision, a shared business philosophy and a common set of values. This now gives us the luxury of having more time to focus on strategic issues and planning for business sustainability.
What do you consider to be your greatest accomplishment during your time as President/CEO of BDO Unibank?
I would have to share this accomplishment with our Chair, our Board and the rest of the Bank’s key executive officers. We went from being a niche player ranked 20th in 1997 to become a full-service bank, ranked number one in key measures of resources, loans, deposits and assets under management in 2018. Performance-wise, BDO is now ranked number one in profits, profitability measures and market capitalization.
You were also elected president of the Bankers Association of the Philippines in 2016. How has this position helped you perform your leadership responsibilities at BDO Unibank, if at all?
The BAP gave us a forum to share and discuss BDO’s views on issues, paving the way for shared industry position where we have a common ground. Where it made sense, we had shared industry representation with the policy making bodies, and we built shared utilities.
I understand that you are also a trustee of the BDO Foundation. In which specific activities is this foundation involved?
The BDO Foundation is the Bank’s social responsibility arm that develops and implements programs to address the needs of the under-served and under-privileged sectors of our society. It’s primarily focused on healthcare, education, livelihood and shelter. Healthcare involves rehabilitation and construction of rural health centers. Education is involved with the construction of school buildings and classrooms as well as the conduct of financial literacy programs. Livelihood programs cover education programs for entrepreneurs. Shelter entails the construction of houses in resettlement areas for people displaced by natural disasters.
In BDO Unibank’s 2018 Annual Report, you stressed the importance of “building a portfolio of strong businesses that can diversify our income sources.” Would you say that the bank’s current portfolio is sufficiently diversified at the moment? If not, what types of businesses need to be added in the near future?
The Bank’s optimal business mix is a constant work in progress. It is sufficiently diversified now but it could always use some improvement. We are cognizant too that products, markets and businesses tend to have lifecycles. Some become commoditized, too competitive or less attractive, while others emerge and offer new opportunities. The challenge is to find these new opportunities.
Which one single factor, above all others, do you consider has been the most important in helping propel BDO Unibank to the number 1 position within the Philippine banking sector?
It is probably our “underdog” mentality forcing us to strive harder and try new things. We started out as a very small institution, largely irrelevant in the industry. We had to do better in a lot of things with limited resources.
This year has unfortunately seen the passing of Henry Sy, Sr. In your opinion, what was the single most significant influence Mr. Sy had on the development of BDO Unibank?
Mr. Sy was our guiding light, our conscience and our ambition personified. He believed in the Bank when nobody else did. He knew we will become number one and he made it a point to let us know that he believed in it and that he believed in us.
The bank’s stated corporate mission is “To be the preferred bank in every market we serve.” How far off would you say BDO Unibank is from accomplishing this mission?
Judging from our growth and profitability performance, we can say that we are on the right track but we’re probably not yet there.
What are the most important targets that you/BDO Unibank hope to achieve during 2020?
Profit and growth, profit and growth, and more profit and growth.
Profit and growth definitely seem achievable for BDO. Thank you for your time today, Mr. Tan.