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Taiwan Business Bank Chairman Peter Lo

A 'Down-to-Earth' Comeback


A 'Down-to-Earth' Comeback


Two years ago Taiwan Business Bank stood out mostly for its lackluster performance. But since veteran banker Peter Lo took the helm, the industry laggard has moved to the front of the class. The secret? A sincere, down-to-earth management style.



A 'Down-to-Earth' Comeback

By Hsiang-yi Chang
From CommonWealth Magazine (vol. 475 )

Throughout history, many generals staked their claim to fame by defeating forces much bigger than theirs, as David defeated Goliath. In the highly competitive financial industry, and given the current low interest rate spread, it seems even more unlikely for a small bank with little capital and no big customers to outdo the big banks. Yet Chairman Peter T.C. Lo, has made the impossible possible.

Two years ago, state-controlled Taiwan Business Bank (TBB) was a little-appreciated, under-performing bank with minimal assets that served the smallest customers and therefore was very vulnerable to economic ups and downs. For four consecutive years the bank's earnings per share stood at a meager NT$0.30 compared to NT$1.5 posted by the bigger players in the industry.

Moreover, TBB employees were notorious for their "unruliness" and their unwillingness to accept a government-brokered merger with one of the financial behemoths. Year after year they took to the streets to protest the government's matchmaking plans and were highly suspicious of any government-appointed chairman.

"Whoever takes over is doomed," is how the CEO of another state-invested bank describes the state of affairs at the time.

Profits Hit 10-year Record

But Lo, then president of Taiwan's largest financial group Taiwan Financial Holding Company and of the state-run Bank of Taiwan, did not shy away from the financial hot potato. Although he had moved up the ladder from president to chairman, the bank he headed now was a hundred times smaller in terms of assets than his previous employer. While people congratulated Lo on his new position, no one saw his "promotion" in a positive light.

Much less did anyone expect Lo to turn the also-ran TBB into a winning bank within less than a year.

Last year the bank's profits jumped 30 percent, posting a ten-year high. All asset quality indicators, including the bank's non-performing loan ratio, loan loss coverage ratio, and capital adequacy ratio, hit a 17-year high. From January to April this year, the bank's unaudited profits soared further, posting growth of 100 percent and leaving all other state-owned banks in the dust.

Lo had no secret weapon for turning the class slacker into a top student. Instead, he relied on a sincere and down-to-earth management style.

The Workhorse Touches a Chord with Employees

Lo does not have the imposing bearing of a big banker, nor does he have much in common with the chairmen of other state-owned banks, many of whom are former high-ranking officials or businessmen with cozy ties to the government. Hailing from Jiayi in southern Taiwan and speaking Mandarin with a distinct local accent, he effuses an affable, avuncular personality, and has climbed his way up from the bottom rungs through hard work and solid achievements.

During his 30-year-career at the Bank of Taiwan, Lo was often the first to set foot in the office and the last to go home. Former Bank of Taiwan chairmen Chen Mu-chai and Joseph Lyu and many of his former colleagues refer to him admiringly as a workhorse.

Having worked his way up from the very bottom, Lo knew how to deal with TBB employees' distrust and reservations. Many let down their inner guard when they realized that Lo showed empathy and could relate to their concerns.

"Since I started out as a small bank clerk myself, I can understand the inner frustrations of my coworkers," Lo says with an ingenuous smile. "If I was a TBB employee, I'd be miffed too. They got high scores on the exam to work at a state-owned bank, just like everyone else. They work as hard as everyone else. But still they're looked down upon. Their salaries and year-end bonuses are smaller than others, and they have to worry the bank will be bought out at any time."

The first thing Lo did after assuming his TBB post was to summon the labor union representatives and the entire staff, vowing, "I'll make sure that when everyone goes out and produces a TBB business card, they'll feel as proud as anyone who works for Bank of Taiwan." Following the example of private sector financial holding companies, Lo set performance benchmarks to encourage outstanding employees.

"He is quite sincere and always tells us that it's beyond his control whether we will be merged in the future. But he gave us guarantees that he would do his best to sign an agreement with us during his term in office so that no matter who will become our boss in the future our right to work is protected," explains a TBB labor union official.

Lo did not break his promise. After May 1 Labor Day this year, TBB signed a collective bargaining agreement with the labor union which clearly regulates the rights of labor and management. The agreement is the first of its kind in the financial industry since amendments to three major labor laws went into effect on Labor Day.

At the Frontline

Lo dealt with inhouse problems first before addressing new customer acquisition and other external issues. After gaining unity among his staff, he positioned TBB as "Taiwan's sole dedicated SME bank" and personally made frontline sales efforts.

Inside a banquet room at a Taichung hotel packed with SME owners from central and southern Taiwan, Lo is the only one standing upright in front, briefing the attentive audience about TBB's latest cross-strait financing services. During the dinner that follows, Lo is clinking glasses and exchanging a few words with every single participant. He comes across not as a top bank executive, but a seasoned salesman.

"Banking is a service industry," Lo points out. "You will only be able to win customers' trust and grow with them if you truly understand your customers' businesses and needs and sincerely help them solve their problems."

Lo not only tries hard to connect with people, but has also developed a business expansion model specifically geared toward Taiwan's myriad SMEs, which usually involve a somewhat higher credit risk. TBB targets other enterprises along the supply chains of its existing customers, which makes it easier to identify trustworthy businesses.

"We start out with existing customers whose business has been stable over a longer period and then contact the manufacturers upstream and downstream from them on their supply chain," Lo explains. "That way, we don't need to look for a needle in a haystack to find new customers and don't need to worry too much that the customer's (asset) quality may not be good."

While this seems to be a simple strategy, its implementation depends on a long-term understanding of a customer's business and familiarity with changes in the respective industry. Recently, private financial holding companies and foreign banks have begun to zero in on SME business, becoming new rivals in a hard-fought marketplace. Nonetheless, Lo, as an old hand, is brimming with confidence.

"TBB has gained a good understanding of SME customers and developed mutual trust over all these years. That's not something that is affected by short-term price-cutting competition," he says.

With the odds stacked firmly against TBB, the staid state-controlled bank came from behind to clinch victory in less than a year. Thanks to Lo, the signboard of the 96-year-old bank, a familiar sight in the streets of old Taipei, shines brightly again.

Translated from the Chinese by Susanne Ganz