How to love a bank
Long lagging behind in commercial banking, as other banks have grown in both size and reach in the past 25 years, the once mighty UCPB is looking up once again.
That is the United Coconut Planters Bank, which in the 1980s was among the four biggest banks in the country, although its ranking through the years has gone down to a mere niche bank. The good news is that the bank is projecting profit this year to hit P3.6 billion to P4 billion, a far cry from the P2.7 billion in losses it incurred four years ago in 2008.
As its name indicates, UCPB is the financial arm for everything that has anything to do with the coconut industry. I thought that its return to profitability should be good news to the coconut industry.
Some groups took a swipe at the Aquino (Part II) administration for appointing veteran banker Jeronimo Kilayko, who has been a finance man all his working life, as president and CEO of UCPB.
It seemed that the attacks against Kilayko were meant more to put our leader Benigno Simeon (aka BS) on the spot, rather than as an affront to the qualifications of Kilayko as a banker. Well, the bank is profitable again, and Kilayko as its CEO could only be expected to have played a big role in its return to profitability.
But therein lies the biggest problem of UCPB as a business proposition—as a commercial bank that must compete head-on against other banks devoid of politics in their business affairs. For so long now, UCPB has been embroiled in politics due perhaps to its ownership structure. It is still controlled by the government although its ownership is shared by the government (through the PCGG) and a number of coconut farmers.
For the past 25 years or so, therefore, the management and the board of the bank changed with the entry of a new administration in the Palace. Not only that, they even changed in the middle of an administration—several times.
Frequent changes in the board and management of the bank meant it could hardly be consistent in its policies.
Worst of all was the absence of accountability among the previous top management and board members. The bank, for instance, was said to have thrown billions of pesos in loans to shaky real estate companies several years ago. By the time the damage was evident, the ones responsible for those loans were no longer with the bank.
It is no way to run a bank. Nobody thus would want to invest in it. UCPB could not raise capital through the financial markets. Other commercial banks—all competitors of UCPB—had issued instruments as third- or even fourth-tier capital. UCPB just stayed in the sidelines.
* * *
Now, UCPB has a new CEO in Kilayko. Some groups accuse him of having connections with Eduardo “Danding” Cojuangco Jr., chair of San Miguel Corp., the majority owner of another bank, Bank of Commerce. Kilayko used to be vice chair of BOC. Therefore, he is a Danding boy.
From what I gathered, Kilayko became an executive of BOC much later in his career as a banker. He actually did the round of banks and financial institutions, both local and foreign, such as the now defunct PCIBank, investment house Merrill Lynch, US-based Bank of America and a leasing firm of the Ayala group. He was connected with financial institutions in Hong Kong and Singapore.
He started to be noticed in the banking business when he became the EVP of government-owned Land Bank of the Philippines. It was during the high growth years of the bank, when its president was former Education Secretary Jesli Lapuz. Land Bank is now the fourth-largest bank in the Philippines.
Let us say that the man has been around in financial circles here and abroad. Kilayko even worked for a finance company based in the Visayas, which was partly owned by the Catholic Church, extending salary loans to seamen.
He became vice chair of BOC only when the bank, under its new owner San Miguel, which acquired it from the group of Antonio “Tonyboy” Cojuangco, started to pirate executives from other banks.
In BOC, Kilayco was head of the executive committee, which weighed all the risks that the banks took in its lending and investments. As far as I know, BOC is doing well. In fact, the second biggest financial conglomerate in Malaysia, which is 10 times the size of our biggest bank here, recently bought into BOC.
To me, with Kilayco’s sterling record as a banker, our leader BS chose well in making him the head of UCPB. The bank simply must try to become profitable. Under him, UCPB is looking up once again.
* * *
Methinks the financial health of UCPB must be isolated from the politics over the multibillion peso coconut levy funds, or the CIIF, the Coconut Industry Investment Fund. Why? Because a well-run UCPB is good for the coconut industry, including the farmers for whose sake some groups are claiming to make a lot of political noise.
UCPB manages the money that is used for programs and projects for coconut farmers, including income and dividends from investments that were made out of the fund.
Perhaps it may take more than our lifetime to sort out the politics revolving around the CIIF. Just exactly how we can make those billions of pesos to benefit coconut farmers, may take a billion gallons of saliva before we could arrive at any semblance of agreement.
For now, one thing is clear on what should be done with the fund—it should be invested well.
Even the loans given by the UCPB-CIIF Foundation to coconut farmers must be managed carefully. And we all know that giving out loans is the expertise of banks like UCPB.
Before all the issues around the CIIF can be resolved, we better pray for a healthy UCPB. If the bank collapses, it takes down with it the interest of the coconut farmers.
I thought our leader BS made a good decision in manning UCPB with a professional respected banker, given the limitation that he faced in filling up positions in the government. The pay in UCPB is not even that great. Well not as lucrative as those in other banks, believe me!
