| BUSINESSWEEK ONLINE : JUNE 14, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN COVER STORY
Paul C. Lo: Bulletproof Banker (int'l edition) Paul C. Lo, president of Taipei-based Bank SinoPac, is a rarity. While bankers from Seoul to Bangkok are digging out from under crushing piles of bad debts, he's sitting pretty. Bad loans at many banks soared to 40% of total lending, but Lo's prudent practices kept SinoPac's ratio down to a minuscule 0.85%. That makes SinoPac a standout in Taiwan--where bad loans probably far exceed the official figure of 5%--and in the rest of the region as well. Lo, 54, got his exacting standards from experience abroad. A graduate of Taiwan's National Chengchi University, he earned an MBA from Indiana State University in 1970. He then spent 17 years at Citibank, working in New York and Hong Kong, then running Citibank's merchant-banking business in Taiwan until 1986. He has made the values he picked up there part of the culture at SinoPac. Indeed, Lo aims to build an Asian miniversion of Citibank. ''Very few Chinese bankers have the kind of experience I have,'' he says. ''At Citibank, I learned banking techniques and philosophies to get our bank ready for the 21st century.'' By that he means spending on new products, including Chinese-language software, and being the first to offer services such as credit cards. Lo first started his own finance company in Hong Kong in 1986, investing in businesses in China ranging from shoes to petrochemicals. When Taiwan opened the island's government-dominated banking industry to 15 new private banks, Lo saw an opportunity and created SinoPac in 1992, staffing it with managers from Citibank's Taiwan branch. BREAKS THE MOLD. A stickler for asset quality, Lo insists on a far more sophisticated credit analysis than is common at Asian banks. SinoPac is selective, targeting large corporations that are leaders in their industries. It also breaks the mold of most Taiwanese banks by making loans based on corporate cash flow rather than collateral. Where other banks commit a third or more of their portfolio to the property market and 20% or more to loans to companies using stocks as collateral, Lo caps SinoPac's construction loans at just 6% and share-backed financing at 3%. He lends just 36% to commercial clients, keeping the rest of his loan book for consumers, focusing on mortgage lending. Tough standards apply here, too, with loans going mostly to people who live in the homes they buy. ''When you live in that house, you won't give up and not pay,'' he says. Lo's rules probably would seem too stringent to most Asian bankers. But they protected SinoPac during the Asia crisis, when other banks were hit by overlending to the property sector. Losing no time as the economy worsened, Lo overprovisioned against bad loans with $18 million, just to be safe. FAST START. As cautious as Lo is, SinoPac has grown quickly in the eight years since it was founded, building its assets to $6 billion. Lo expects to step up the lending pace again as the crisis subsides. Analysts forecast that, with an extra lift from a tax break for banks granted this year, pretax earnings will grow 50%, to $60 million. Lo's ambition derives partly from his turbulent past--his family fled to Hong Kong to escape the Chinese Communists when he was a boy. He's determined to prove that quality banking can work in Asia. ''We in Taiwan have a refugee mentality,'' he says. ''We keep running away to have a better future,'' he says. His current goal is to create a Pacific Rim banking business that would stand scrutiny in New York, Hong Kong, and London. In 1997, he purchased Far East National Bank, a California bank that was targeted as part of a U.S. investigation into illegal campaign contributions by China. But Lo is in the clear. The alleged deposits were made before SinoPac acquired it, and the U.S. Justice Department has dismissed them as not worth pursuing. Lo hopes to turn the bank around and use it as the base for his planned regional bank. ''[The scandal] might slow down our strategy for a while, but we will get it going again,'' says Lo. Lo disdains the fast-buck culture that dominates Asian banking. ''Other banks in the region have no focus and no strategy,'' he says. ''It's easy to book loans and make money, but when financial crisis hits, they're in big trouble.'' If all bankers thought like Lo, the Asia crisis might never have happened. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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