Q: In your last Friday’s column, you talked about banks extending their marketing to life insurance. We have also noticed that banks like the two largest banks—BPI and BDO—are also expanding into owning and operating real estate development and shopping malls. Why are banks going into these businesses?
We want to ask the question you raised about banks extending into life insurance but from the bank customers’ perspective. Do bank customers want to do their banking where they bought their house and lot, and where they do their shopping? Do you have market research supporting this assumed bank customer behavior?
A: It’s probably historically incorrect to say that banks like BPI and BDO started as banks and then decided later to extend to real property and shopping mall development. In the case of BPI, all three businesses were there or almost all there from the start. There was the bank, BPI. There was also real property development both horizontal and vertical, Ayala Land, and the exclusive high-end villages and condos. Then there was the commercial shopping district, Greenbelt and Glorietta (then called QUAD).
Banco de Oro is a slightly or perhaps an entirely different case. BDO is part of a group that had the humblest of beginning as a small shoe store in Carriedo, Manila. The shoe store became a department store and then went into the supermarket business. Its supermarket got big and became the largest supermarket and retailer in the country. Then came banking together with shopping malls and vertical property development—SM.
So what appears to the casual observers as banks extending their services to much longer-term service lines like real estate and shopping malls is actually a more complex process. Relatively independent and separate businesses grew and today their common corporate owner has begun to feel the need and pressure to integrate their different business brands under a single brand architecture.
The BPI group of companies and the BDO’s represent two opposite types of brand architecturing strategies insofar as their nonbank real property and shopping mall businesses and brands are concerned. For example, Ayala Land basically follows what’s known as the “House-of-Brands” architecturing. This is the brand architecturing that Unilever, for example, does with its different shampoo brands like Sunsilk and Clear. Thus, Ayala Land has Avida and Serendra for its condo development. For its shopping centers, it has Greenbelt and Glorietta, for example.
SM or Shoe Mart, in contrast, brand architectures along the so-called “Branded House” strategy. That’s like Nestle with its Nescafe, Nestea and Nesvita for the branding of its coffee, tea and nondairy drink line. And so you’ll find SM branding its shopping centers as SM Mega Mall, SM City and the like. All of its condo developments carry the SMDC brand.
How come SM does not follow its Branded-House architecturing strategy for its banking business? That’s unlike Citibank which has Citibank N.A. for its commercial bank and CitiSavings for its savings bank. BDO is BDO as a universal bank. If it ever establishes or acquires a savings bank, one wonders if it brands it as BDO Savings.
All this may look like they’re taking us away from your question. But the foregoing actually relates to your question. They specifically challenge the direction of your question. The trend seems to be less that banks will tend to expand into becoming real property companies or shopping mall owners. It seems more likely that real property companies and in particular shopping malls will become major banks. Already, most if not all real estate companies and shopping mall developers cannot do without a bank or a consortium of banks to support their heavy and long-term investment requirements for every new real estate or shopping mall project or every renovation of an existing real estate or mall. This need is less true of banks that cannot do without real property or shopping mall client accounts.
So if you are to engage in trend spotting, place your bet more in favor of seeing real property and especially shopping malls graduating from just partnering with banks to becoming themselves major banks. That means you will soon see an SM Bank and Trust Co. as well as an SM Savings Bank. It’s less likely to see BDO Real Property Development Corp. or BDO Shopping Center.