LUIS M. CHUA President

BANK OF MAKATI, INC.

There has been robust demand for motorcycles in the country and there is no other bank or financing company that makes this niche market its own, but Bank of Makati.

LUIS M. CHUA, president of Bank of Makati, would like to distinguish the savings bank’s role in making ownership of motorcycle easier and affordable to all, whether in the province or in the metropolis, as ordinary Filipinos struggle to cope for the most practical mobility and convenience offered by this two-wheeled vehicle.

Bank of Makati

Bank of Makati (A Savings Bank), Inc. (BMI) has been in operation since 1956 under the Sixto Silva group until it was acquired by the Ongtenco group in 2001. Since then, BMI has made motorcycle financing a cornerstone of its lending business.

The Ongtencos own Motortrade, the largest multi-brand motorcycle distributor in the country, while BMI provides the financing to its motorcycle buyers. This business model has worked best for both in what could be the most symbiotic relationship ever.

BMI has found a niche in the motorcycle market and in fact the only savings bank that focuses on motorcycle financing. It enjoys a unique opportunity to rapidly scale its network via sales (loans) and cash (deposits) agency arrangement subject to Bangko Sentral ng Pilipinas regulations with the 703 Motortrade outlets. BMI has since grown its capital to about 17.2 billion and expanded its network to 62 branches.

“The bulk of our loan portfolio is motorcycle,” says Chua noting that 72 percent of its business is motorcycle financing and the remaining 28 percent for other products.

In 2006, it reached the elite list of the Top 1,000 Corporations in the Philippines, the first rural bank to do so. With total assets of 15.2 billion and net worth of over P800 million, the bank was recognized in the same year as the biggest rural bank in the Philippines – bigger, in fact, than most savings banks.

BMI officially became a savings bank in 2015, when it was granted a license by the BSP to operate as a savings bank. Even before it joined the league of bigger banks, however, BMI has already made a name in the Philippine banking industry.

BMI ended 2017 with a total loan portfolio of 122.36 billion. Motorcycle loans increased 20 percent to 115.67 billion from the 112.98 billion recorded in 2016.

Latest comparable data from the BSP showed that BMI cornered 96 percent of total outstanding motorcycle loans issued by Philippine banks as of end September 2017. The total stood at 115.396 billion, of which BMI accounted for 114.772 billion.

“Our phenomenal growth over the last 17 years is a product of the synergy between the country’s largest community lender and Motortrade, the country’s leading multi-brand motorcycle dealership,” says Chua. “BMI is now the third largest stand-alone thrift bank in the Philippines.”

It is also in an expansion mode. The bank has applied for a total of 40 new branches up to end of 2019 for a total of 102 branches by then. The basic investment per branch is 11.2 million.

Chua said they have already mapped out the locations for these new branches. These sites are rich with motorcycle borrowers, mostly in developing municipalities and cities like Calamba and Tanauan.

“We need to expand to build our presence,” says Chua.

With traffic getting worse, public transport breaking down, and the food and quick delivery business growing, BMI could only expect the demand for motorcycles to increase further.

Motorcycle The Philippines has been witnessing a boom in motorcycles. The two-wheeled vehicle has become a common sight, from the narrowest and most idle roads in the countryside to the widest and busiest thoroughfares of the metro.

The popularity of motorcycles has been fueled by the rising need for a convenient and flexible mode of transportation among commuters and entrepreneurs along with a bank that made buying motorcycles easier on their pocket.

“Demand for motorcycle is not only growing, our Chairman calls it the ‘golden years’ of the motorcycle industry,” says Chua noting that based on their previous study the Philippines is still behind in the region as to motorcycle ownership. The ratio in Indonesia is one motorcycle per three persons, but the Philippines is one motorcycle per 10 people only.

With the horrendous traffic in Metro Manila, motorcycle provides the most practical mode of transportation. Together with the improving purchasing power of Filipinos, sales of motorcycles in the country has been skyrocketing.

“The trend now is those with motorcycle are upgrading to cars, but they do not dispose their motorbikes because that is still additional mobility, it complements each other not compete,” he adds.

On a monthly basis, Motortrade averaged an increase of 4,000 units or about 28 percent higher than the same month last year.

The easy financing being extended to Motortrade customers and the good economics made it even more attractive for borrowers.

For instance, it will take between 140 to 160 a day or others even 1100 in daily transportation expenses, but one can amortize a motorcycle unit at 12,000 a month over a period of three years. After that the unit is yours. A one-liter gasoline can last for two days and you are able to beat 4 hours of traffic on the road. This is not to mention, parking problem if you are driving a car.

BMI is also liberal in the grant of financing to borrowers as long as they passed the criteria. Loan approvals are also done within a few hours because its credit investigation firm BMI Finance Corp. is equipped with manpower nationwide to check on the credit worthiness of a borrower. BMI does not discriminate. It accepts motorcycle loans even if the units are not from Motortrade.

Chua, however, noted that there have been new competitors in the motorcycle financing being offered online but at higher interest rate. BMI offers an interest rate that is lower than competitors’ 2.5 to 2.6 percent while online offers are at higher 4-6 percent.

BMI is also proud of a low default rate of about 11 percent, which is actually past due rate or delayed payments only because the actual unpaid loan is just 3 percent. The current default rate is also an improvement from 14 percent last year.

“Most of our borrowers are common folks and employees, who sometimes also encounter problems causing delays in their payments, but would eventually update their accounts after a month or two,” he adds.

Efficiency Even as interest rate is also starting to move up 1-2 percent following the BSP order to tighten liquidity, Chua said this is not heavy on the part of their borrowers.

Instead of passing on to customers the interest rate hike, Chua said they just have to make up for higher volume, collection efficiency and improvement in the quality of loans to avoid past due payments.

Chua also emphasized that while they dominate motorcycle financing in the country, BMI also offers other products consumer loan products.

“It just so happened that our focus is motorcycle financing, but we have other products and one focus is enterprise loans which cater to small business enterprises and micro financing,” he adds.

The enterprise loan is branded under “Power Negosyo” as it provides financing to SMEs payable over a 2-year period while the micro loan is payable over a few months.

All these have made BMI one of the most profitable banks posting 73 percent compounded annual growth rate in the past four years. In 2017, the bank posted 11.4 billion in net income from 1600 million in 2016. This year, Chua said, they expect a net increase of 12.1 billion.

In terms of return on equity, Chua said they have 29 percent rate as against industry’s 12 percent making them third highest in the industry.

Diversify

“Our goal is to slowly diversify our portfolio and eventually reallocates for more micro financing and perhaps general loans such as vehicles and cars,” he adds.

They have car loans already but very small yet because there are several others offering the same product.

Despite its growth, Chua said they are not in a hurry to convert into a commercial bank status because they have a pretty comfortable niche market. Besides, consumer loans are more profitable than corporate loans.

“So, there is no need or urgency to convert because we have the golden egg,” he adds noting that business loans or corporate loans are not that profitable that commercial banks are shifting to consumer loans to strengthen and shield them from any downturn.

“The profitability of savings banks is largely driven by consumer loans as the Philippine economy is consumer driven. Even the compounded growth in consumer loans are higher than the corporate loans and that is true with all banks, industry-wide,” says Chua.

For instance, the motorcycle sector has not been affected by the higher excise tax under the TRAIN Law, but the cars are. That is why sales of cars have dropped. So even with additional 14-15a day increase in fuel, the amortization of buying a motorcycle is still very affordable compared to cars.

BMI has also the distinction of a high efficiency as it maintains a lean manpower complement with 3-5 percent people in each branch depending on the volume of transaction.

While profitability could be a challenge being faced by the banking industry, Chua is confident of sustained growth as they focus on strengthening operations within its comfort zone.

It has a growing portfolio and is just ensuring it has enough funds to cope with the growing business. With that, Chua said one of the sources of funds is deposits.

To commemorate its 62nd anniversary, BMI has launched a 6.2 percent interest rate for a minimum of 11-million in time deposit over a five-year period. Regular banks are giving only 3.6 percent while others 2.6 percent. The offer is limited up to September 25 this year only. The aim is to generate 12.5 billion from this campaign.

Highest standards BMI has observed prudence in their operations. Deposits are safely invested in triple A government securities and corporate papers.

“We comply with what the regulators require,” says Chua, an accountant who previously worked at SGV, Citibank, Security Bank, among others, starting out as compliance and chief audit, for 13 years.

“I always believe that growth is based on people and the tone that comes from the top for directions. The board gives us clear direction and sets the values for the achievement of our objectives. Definitely, no one person can lead a company alone and I am not good enough without the dedication and integrity of everybody,” he adds.

“The value excellence and integrity are foremost among employees and customers. Of course, loyalty to the company is important. With that, I think we will achieve our objective,” adds Chua, who comes to office at 7 in the morning and ends at 7 pm.

In fact, BMI is a good training ground for bank employees. Many of their younger staff are easy target by big banks, which are also suffering from higher attrition as Filipinos get pirated abroad, making this phenomenon an industry-wide concern, if not a national concern.

“We have a lean labor force, but attrition is hard to prevent. As you train people they get pirated but that is also a recognition and a consequence of having a good name,” adds Chua as he revealed of 15 percent attrition rate in their first level management staff.

Chua is a stickler to the highest ethical standards and good governance in the banking profession. He ensures that strict adherence to company ethics and values is the lasting legacy at BMI.

Perhaps, his strong bond with the academe may have somehow helped shape what he is today as a professional bank manager.

The 40-year old educator has never stopped learning. He has been teaching at UST for the past 27 years and there was a time when he was a full-time faculty member. On Saturdays, he teaches finance to graduate students at UST.

He is currently taking up his doctorate degree at the UST not because of the recognition that it will bring, but because he learns something new every time he is in school.

“Even if I don’t graduate, I don’t care, but I continue to attend classes because you learn from your professors and students. It is value adding as a person,” says Chua.

Good bank

Since they are in the finance industry, it is incumbent for the bank to undertake CSR projects closer to their hearts. BMI has partnered with the Department of Education to promote financial education.

“We focus on certain projects like the Alternative Learning System because that is also one source of new manpower. These are mostly security guards, who did not finish school but of age already,” says Chua, who has been in the banking industry for more than 20 years already.

What makes a good bank then? Aside from capital adequacy, Chua said, a good bank is when its depositors and the public put their thrust in the bank, that it is stable, and as far as service is concerned the welfare of customers comes first.

In addition, he said, a good bank must have a high profitability, but it must also be bold enough to take risks because one cannot grow if it avoids risks.

He enjoys the sense of integrity and prestige that comes as a banker. These values are attached to a banker by the public, a trust level that recognizes one’s specialized knowledge. But most of all, it is the public’s trust that makes a good bank.

He looks up to local businessman Henry Sy Sr. for his discipline. He cited how Sy started from visioning the future, the landscape on which he would like to see his business and the Philippine economy in the future. From the international arena, he looks up to investment banker Warren Buffet.

Unlike other CEOs, who sets their sights to actually becoming one, Chua said he did not set himself to attain this position believing that was too ambitious. He is not the one that is attracted to titles, too.

“I think the most critical appointment is the trust that the Board has put on my capability and integrity,” says Chua, father to three kids.

“My concern is to do my best and God will lead the way,” says Chua adding this is what inspires him on a daily basis. To some people success is what they have for themselves, but Chua said, “It is how they will impact on others, it is not about ourselves.”

He also learned that the principles he adhered to are what make a person significant. His series of appointments leading to where he is today only makes him more grounded.

Vision

BMI has a five-year vision set by the Board as it sees no let-up in its bid to make a significant contribution to nationbuilding, staying true to its commitment to serve and to make better banking options available to every Filipino.

“We are now entering the next phase of our growth with a vision of becoming the micro, small and medium enterprises’ (MSME) bank of choice,” says Chua. “We will create more value through innovative and responsive financial products and services to help our clients attain better financial security.”

The plan is to grow 20 percent up to 2020 and hit 13 billion in net asset from the current 12.1 billion. That will make BMI the MSME bank of choice among small businesses.

They will always go back to their core motorcycle financing. Sales of motorcycles for business use increased 18 percent to 202,098 units last year, compared to 170,979 units sold in 2016, according to the Motorcycle Development Program Participants Association (MDPPA).

This has driven the demand for online shopping and grocery delivery, which subsequently fuels demand for motorcycles as a delivery transport option. Including purchases for personal use, MDPPA sees motorcycle sales reaching 2 million units by 2022.

As the motorcycle industry continues to radiate good prospects, it will remain a cornerstone of the BMI business. Motorcycle financing will remain a platform for BMI to help Filipino entrepreneurs grow and succeed.