The Exportbank story: A tale of transformation

An internal transformation is quietly taking place in a relatively modest mid-sized commercial bank even as businesses continue to come into grips with a prolonged market slump and the added challenge of meeting new global standards.

After having taken over Urban Bank Inc. (UBI) and its affiliate Urbancorp Investments Inc. (UII) in 2001, and after giving priority attention to meeting all its commitments including the completion of scheduled payments to trapped depositors and creditors, Export and Industry Bank, better known as Exportbank, takes a breather. The reason–it now looks forward to better times after having virtually emerged out of the woods from the daunting challenge of rehabilitating the failed institutions.

"It’s now a new beginning, it’s a new life, and it certainly had been an 18-month transformation of the institution," Exportbank president Benjamin P. Castillo said.

The task of rehabilitating a bank during very trying times for banks, big and small, tested the mettle of the best of corporate managers. "The first 18 months of rehabilitation was certainly very successful, but we had difficulty liquefying the assets of Urban Bank and its affiliate UII so we had to quickly build up our own liquidity," Castillo said.

Management quickly pooled together existing and new stockholders to inject P3 billion to recapitalize the bank. Existing major stockholders of the bank led by the Lippo and Yao groups and new stockholders AO Capital Partners Limited of Hong Kong and Extra Year Investments Limited, a designated investment vehicle of the Raiffeisen Zentralbank Osterreich AG (RZB) Group of Austria, infused the fresh capital.

The bank then undertook discussions with regulators and private entities leading to the clearance of P10 billion of non-performing assets formerly owned by Urban Bank and UII.

As a result, the recapitalization and the sale of non-performing assets had brought Exportbank into a strong position of high liquidity and a clean asset base with which to chart its revitalized vision and directions.

"Now we expect a positive turnaround in six to seven months to end the year on a positive note and then to chart an even more significant growth in 2007," Castillo said. "We are geared, we are positioned and we are reaching this state in a favorable external environment," he added.

The formula behind the success of the Exportbank transformation can perhaps be summoned into three virtues or positive traits: trustworthiness, reliability and flexibility.

"Before anything else, we made sure we fulfilled our commitments to the trapped depositors and creditors of the institutions we have taken over, then we explored all the alternatives that would get ourselves out of difficulty. That done, we next made sure we had all the systems and people in place that would ensure the path to our success," Castillo explained. The last nine months were spent reviewing and refining the organization and processes to make sure they support the newly defined vision that would include focus on emerging corporate clients and a growing consumer market.

"We hired new executives to key positions, strengthened the risk management processes, adopted enabling technologies so that will make us more efficient and customer-focused," said Castillo.

Exportbank also rationalized task functions to reinforce a customer-orientated thrust. As most major banks have done, Exportbank branch managers re-focused their primary role on the task of building meaningful customer relationships as sales and marketing officers, from one oriented to back-office functions. The task of operational effectiveness and administrative efficiency is now placed with service specialists to ensure better supervision.

Before the Asian economic crisis broke in 1997, the Philippines was all psyched up to claw into the export market as an up and coming tiger economy. Exporters had tied up with trade-savvy partners– Lippo Ltd of Hongkong and China Resources Inc. of China to establish a bank that would specialize in trade financing.

Exportbank opened its doors in January of 1997 to participate in the vision of creating an export-led economic recovery.

Much later in the same year, the Asian financial crisis wreaked havoc on economies in the region, virtually halting most activities covered by Exportbank’s core business of export financing.

Approaching its 10th year as a commercial bank and leading provider of trade financing and support services, it can be said that Exportbank is not only a survivor, it is an emerging winner and an up and coming Philippine success story in more ways than one.