When Lorenzo Tan was appointed president and chief executive officer of Rizal Commercial Banking Corp. (RCBC) on February 1 last year, the institution was under-capitalised and its asset quality was poor. In short, it was viewed by bank analysts as ripe for a takeover.
Just one year later, following some hefty structural, operational and capital changes, in February this year RCBC was able to report a 56% jump in unaudited net income to P3.21 billion (US$77.2 million) – the steepest profit growth among the country's top 10 banks. It marks some turnaround, one that Tan and his management team can take all the credit for instigating.
But Tan certainly seems to have a talent for reinvigorating troubled financial institutions. Before taking charge at RCBC, he was at the helm of Sun Life of Canada (Philippines) for 18 months, during which time he took the company to higher levels in insurance, the pre-need industry and mutual funds. Prior to that, he pulled off a spectacular turnaround at the formerly state-owned Philippine National Bank (PNB). Under Tan's watch, PNB reversed five straight years of losses to enter the black in 2003. It then doubled net income in 2004 and was ready for privatisation the following year, two years ahead of schedule. Plus, Tan was the president of United Coconut Planters Bank between 1998 and 2002, when he greatly increased its income and cut costs.
He tells Asiamoney what his eventful career has taught him about the Philippines' banking sector, and his plans.
Asiamoney [AM]: Before taking over RCBC last year, you interrupted a banking career to head an insurance company. What was that like?
Lorenzo Tan [LT]: Those 18 months with Sun Life were a blessing because it reinforced the value of marketing. Banking is a pull industry, whereas insurance is a push industry. In banking, you advertise and hope that customers walk in. In insurance, your agents go out and push products.
In 2005, we tried a banking strategy in the pre-need industry which was suffering from a 55% drop in sales. We offered televisions and cell phones with financial products and we couldn't believe the consumer response. We went from 3% market share to 53% in our first month of the promotion. I realised that if I can convert a housewife or a former clerk to a million peso cross-selling machine in insurance, I can do the same in banking. I also realised that my heart was still in banking and when Helen Yuchengco Dee offered me the job with RCBC, I accepted.
AM: How are you applying the lessons at RCBC?
LT: A traditional banker takes deposits and lends money. We don't operate that way. We convert a branch into a financial supermarket – we sell investments, insurance, mutual funds, credit cards, loans, or other financial products that were not sold in branches before. We ask the client, 'Why don't you buy risk management products or wealth management products or what we call opportunity products?' For opportunity, we sell you investments. If you are a businessman, we provide capital, whether debt or equity. For risk management, we sell you personal insurance, corporate insurance, derivatives. We had close to 400% growth in bank assurance last year.