‘Why are banks expanding into real estate and shopping mall businesses?’


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.

Keep your questions coming. Send them to us at or God bless!

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  • kate_203

    A conglomerate with a real estate and a banking arm makes sense. Banks attract depositors, whose funds are in turn used to lend to other borrowers of the same bank  so that they can fund their own dreams of owning houses, among other things.Your banking arm generates incomes from the interest they charge you on your loan, and the real estate firm generates income from you because of the purchase price of the property, which includes a profit margin.

    In a way, when you make a loan from a bank that is affiliated with real estate firm, its like the bank transferred money from other depositors to the real estate firm. The bank in turn, recovers the depositors’ money from the interest that they charge you on your monthly loan amortization.

    Real estate developers are expanding because there is a lot of liquidity now in the financial system and they feel that the demand is there. Rates are also low–and so now is a good time to undertake projects while rates are low and loans are affordable for these developers and their customers.

    But banks need to be regulated because lax lending and too much investment in “one egg” such as real estate transfer higher risks in the financial system. Also, regulation is needed because if the BSP doesn’t, left to their own devices, banks might take risks that will be detrimental to its depositors.

    The banks’ money is locked in long term mortgages but they have obligations deposits which can be widthrawn on demand at any time. If the bank runs out of cash to fund deposits, the bank will fail and this will cause panics. 

    That being said, I think if the real estate market is not carefully monitoring their own industry in terms of supply and demand–and we are only left if non-performing loans as an indication to test the market, I would think that conglomerates that have both banking with real estate arms will be affected on two fronts. That is their trade-off: bigger risk in exchange for the synergies of their complimentary business units.

  • Kenji

    Banco de Oro WAS a savings bank that became a commercial bank and eventually a universal bank!

    You gave your analysis on the Marketing point of view.  Allow me to expound on the Economics viewpoint.  Capitalism is characterized and enhanced by the merging of financial institutions  Take insurance for example, because of the Law of Large Numbers, if properly managed…, could really mean a windfall of profits.  With too much cash in its hands, bank tie-ups follow eventually, making the owners one.  Yuchengco of Malayan Group of Companies has RCBC and China Banking Corp. tie-up.

    SM group also benefited from the Law of Large Numbers, because no matter how poor Filipinos are conceived to be, the sheer numbers would make any retailer happy!  Awash with cash, they bought Home Savings Bank and named it BDO.  And because BDO was “imaged” as a peoples’bank (pang-masa) like the Banco Filipino of the 80’s, the more money waved-in, hence they got bigger and bigger (they have a piggy-bank to dip in when they need loan capital)!  Not content, now, they have listed their shares with the stock exchange to get more money to finance their multi-billion projects using other people’s money!

    This shows how capital evolve…and why it is so concentrated to a select few.  While in the economic point of view we see progress, this could also be subject to abuse, manipulation and sabotage.  A good example would be the “failed” banks like LBC Bank which funneled funds into their companies despite warnings from the CB.  A series of provincial branches being robbed simultaneously would really raise an eyebrow, wouldn’t it?  I see syndicated estafa!!

  • tower_of_power

    Wala namasyadong umuutang sa mga banko kasi naman saan mo dadalhin ang pera? Karamihan sa may pera may bahay na, may condo pa, may mga sasakyan pa … so ano pa ang paggagastosan? Sa business … the climate is still not right for that for those wanting to venture. The atmosphere is still very volatile … the playing field has not changed much … hindi pa level. Pero yan ang napromise ni Pnoy … kailan kaya yan mangyari?

    So saan dadalhin ng mga banko ang kaperahan nila kung hindi sila mismo ang maginvest … ayaw nila pahuli sa paglikum ng mga dolyares ng OFW … condo and bottomless shopping lang ang maibigay ng kawawang OFW sa mga spoiled nilang mga anak!!!

  • murtson

    History points to the fact that this business has the government as “willing victim” of huge swindling scheme just like what Globe Asiatique did – and got away with it! There is no worry for this kind of arrangement since the authorities are ready to “cooperate.” Who losses are the taxpayers.

  • mawalanggalangpo

    anong diskarte ang gagawin ng mga mambabatas para sa ganoon hindi mahulog ang “middle class” sa “poverty level” ?  nagtataka kayo kung bakit maraming mahirap, sasabiin nila tamad and pinoy, e nasaan ang “equal opportunities and access ?

  • Joseph

    You can’t use SM as an example because they already have BDO!
    Think of AGI (with Megaworld/ELI) and CPG which both don’t have a bank yet.

    The real reason why it is profitable to have a bank is because given the cash from the real-estate business, you can course it through your bank. The bank can then use the float to make more money.

  • Taiko_Kauna


    • lawakanangpagiisip

      Madiskarte at masipag lang si Henry Sy. :-)

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