RETAIL BANKING | Roxanne Uy, Philippines

Find out why Bank of the Philippine Islands' CEO Cezar Consing is bullish on Asian growth

The bank's earnings hit a record high of USD267.5mn in the first half of 2016.

More than three years into his term as president and CEO of Bank of the Philippine Islands, Cezar Consing was able to lead the bank to achieve a 60% growth in size. The bank recorded its strongest first semester this year with PHP12.7bn (USD267.5mn) in earnings and almost 7.5mn clients. As BPI celebrates its 165th year, Consing talks of goals to reach PHP1.65tr (USD34.7bn) in assets.

In an exclusive interview with Asian Banking and Finance, Consing revealed his philosophies, milestones, and goals. He also shared his take on issues around financial inclusion in the country as well as the opportunities that stem from regional integration and Asia's strong growth.

ABF: What are your key business philosophies?

I started in banking in 1980. What you learn very quickly is in large public enterprises, you serve many masters. You don’t survive unless you serve those masters well. In a nutshell, our business philosophy is all about serving our constituencies well.

Firstly, we have to be very relevant to our clients. For us, that means they have to look to us for their most important financial transactions. If they can do that, then we know that we have a good relationship.

Second is our shareholders. We have to make sure that they are well-served, or else they will take their investments elsewhere. We have to make sure that over the economic cycles, we can produce the best risk-adjusted returns for them.

The other constituency we have is our employees. We have to make sure that they want to work for us, that we present them with a future here, that they are well-compensated. They have to know that we value professionalism, loyalty, and mutual respect.

Our last constituency is the country. We have to be relevant in the Philippines and to Filipinos, which means we have to contribute to national growth.

ABF: What three goals are you focused on?

In general, the goal is growth, stability, and relevance. You’ve got to make sure that there is a reasonably good interplay among the three. For example, you can achieve growth but create an unstable institution. You could focus on stability but everything remains the same so there will be no growth. Or you can have both growth and stability and still be irrelevant.

As a bank, we’ve shown that we can balance those three. In the last 3-4 years, we’ve grown this bank more than 60% in terms of the size and we’ve shown that we are able to do it in a stable way. So if you look at our financial metrics, we have among the better ones around the region.

In the last 10-12 years, we have tripled our client base. Most of those clients are middle class or lower middle class because we want to be more inclusive.

We’re seeing growth in a manner that doesn’t threaten in any way our financial strength and makes us more relevant to the Philippines.

ABF: What key milestones were done towards these goals as you celebrate your 165th year as a bank?

I’d like to think 165 years and we are coming in on almost PHP1.65tr (USD34.7bn) in assets towards the end of 2016. Give or take PHP100mn (USD2.1mn) here and there, that’s a nice number to remember. And just in the first half of this year, we have registered our strongest ever semester profit-wise. We made PHP12.7bn (USD267.5mn) in the first half of 2016, and it’s the best semester that we’ve had in 165 years. We ended the first semester with almost 7.5mn clients and customers. It’s a significant growth from 3 years ago.

We’ve been working on this milestone for some time now. We’ve made investments in people, processes, technology, so this number did not just happen. It started from my predecessors. We’re here because the people who’ve worked before us brought the bank to a certain level. We’ll bring it to the next level, and the people after us will bring it to the next level still. I call it a relay.

ABF: How can banks increase financial inclusion in order to better serve the underbanked and the unbanked?

Our economy is getting to the point that we are seeing enough growth. If you look at the debt-to-GDP in this country, it’s pretty low at 35-40% and that’s a fraction of what you see in other countries in the region. Our growth rates in the past 6-7 years have been very good. The government announced that the country registered a 7% growth year-on-year in Q2 2016.

When you have that kind of growth and it begins to translate to higher per capita income, then the whole economy becomes a lot more financed. The banks are seeing that but the question is how do they respond to it? The banks must do more with the sectors that are up and coming.

For instance, the SMEs will begin to do more and banks will have to do more with them. It’s a growing economy that’s presenting these opportunities and what banks have to do is to simply address them.

ABF: How will regional integration play a role in the country’s banking industry moving forward?

The whole ASEAN financial integration is supposed to make it easier for a Filipino bank to be treated like a local bank in another ASEAN country. So the goal of this integration is to create what is called Qualified ASEAN Banks (QABs). If you’re a Philippine bank and you’re a QAB, you can set up a branch in another country in the region and vice versa.

All of a sudden, the market becomes bigger for everybody, particularly for the QABs. So one immediate objective is to make sure that BPI is a QAB so we have the same flexibility that other banks will have. And that will be true for every bank in the region.

Now whether you are a QAB or not, ASEAN integration will increase both the size of the market and the competition for that market. So you’re going to have a much more vibrant financial sector.

ABF: What are the new banking opportunities and challenges under the Philippines’ new administration?

I very much like the economic program of this new administration. If the government succeeds in its 10-point plan, what they will do is to make life easier for everybody. The plan is focused on uplifting the lower sectors of society and leveling the playing field.

As a banker, that’s exciting because it will help grow SMEs and it will help nourish micro entrepreneurs. That’s the kind of environment in which we can be more inclusive. It can help us grow our business in segments that historically, this country has tended to ignore.

ABF: What is your outlook for the regional economy and how does this play a role in BPI’s operations and country’s banking industry in general?

In the medium- to long-term, what we are going to see is that Asia will account for more of the global growth. Around 10-20 years ago, it was already acknowledged that Asia was growing faster than the rest of the world but the base was still small. Then China and India entered the global labor market, then all of a sudden the base is not so small anymore. So now you have Asia as a bigger base growing at a faster rate than the rest of the world. So I’m very bullish on Asian growth.

In a year like this, the Philippines has led the growth. Our growth has been less commodity-driven so we’ve done well even as commodity prices have come down. I suspect the Asian countries will all take turns. These cycles come and go but I think the overall trend favours Asia.

ABF: What can the market expect from BPI this year?

We do a lot of new things everyday and every week. We have a lot of new products, we attack new client segments. But if you look at BPI’s approach as an institution, it’s really more of the same - and that’s good for a bank. As a bank, we want to be perceived the way we have always been perceived; we are strong, we are stable, we are trusted.

ABF: Is there anything else that you’d like to add?

165 years is a long time for any institution to have been around. And I think that speaks volumes of the philosophy and culture of this bank, its management and shareholders. That should give comfort to clients and regulators and to all our other constituencies. While we occasionally keep an eye on the rear view mirror, more often than not we are looking ahead. We’re focused on the next 165 years.

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