Ever wondered what goes in the mind of a banker? What about a banker who is also a CEO? Here are the thoughts of East West Bank’s Tony Moncupa, Jr.

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‘A banker is someone who offers you an umbrella when the weather is fine and snaps it back at the first sign of rains.  They offer all sorts of loans to the moneyed and those who don’t really need it but snub those who need their assistance badly.  They are nothing but fair weather friends’.  We’ve heard this line many times.  What those who are saying this don’t realize is that banks are lending money entrusted by depositors.  If the loan is not paid, the banks will not be able to pay back its depositors.  When a bank fails, too many innocent depositors are dislocated. Their financial lives are ruined. That is why bankers have to exercise great care in lending. Bankers are pro-depositors, not anti-borrowers.  Its first duty is to protect those who put their trust in them.

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We got this query.  ‘I am starting a business. I need capital.  I went to several banks to borrow but the banks would not lend me?  How could our economy progress and create more jobs if banks will not support budding entrepreneurs like me?’  All those starting a business believe they will succeed.  Just like candidates in elections.  They all think they will win.  The data though do not bear this out.  In the US, only 3 in 10 succeed.  Most likely, our numbers will not be far from this.  Banks know this and most likely had sad experiences with start-ups. And being pro-depositors, they will scrutinize more thoroughly those with unproven track record.

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When we don’t feel well, we go see our doctor.  When our tooth aches, we go to the dentist.  If we want to learn more orderly, we go enroll in a university or take some special classes.  Sometimes, by ourselves, we simply burn the midnight oil in serious study. In other words, when we want something important enough, we consult experts or train ourselves.  But when we invest our money, we could be less careful and even get hoodwinked by sweet talking pyramiding scammers.

Consider going to investment professionals. The true professionals will help you understand investment alternatives, explain the balance of risks and rewards, and even gauge your readiness to withstand the euphoria of winning and the frustrations of losing.  They are trained to assess what investment is suitable for you.  If you still don’t understand and remain unconvinced, be patient and study a bit more.  Stay in simple time deposits in the meantime. Know your financial emotional quotient.  No additional returns are worth a possible heart attack.

Which expert should you go to?  You can follow the same principles you use when in choosing your dermatologist or lawyer.  Choose those with solid reputation and track record.

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Occasionally, we are asked where to invest.  Always, we qualify our response.  There is no ‘one size fits all’ answer to the question.  It really depends on a person’s risk appetite, sophistication and personal circumstances.  It will be helpful though to consider some basic concepts. For instance, generally, higher returns carry with it higher risks.  And if it is too good to be true, it must be false.  For example, we see a proliferation of ads of supposedly success stories of people who engaged in Foreign Exchange trading on margins.  We think this is very risky.  Our unsolicited advise – don’t even think of it.

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There are good fund managers around who are able to generate consistent high returns.  We know of an excellent mutual fund that invest in stocks that has made a P100,000.00 investment 10 years ago grow to more than P850,000.00 today.  That is a compounded annual growth of  around 24%.  But there are no guarantees and returns could fluctuate.  In 2008, the fund lost 40.7%, while lower than the PSE index decline of 48.3%, it is still a huge loss.  And if you are risk averse, it could cause you some sleepless nights.  Risk could be managed though by following the concept of not putting all your eggs in one basket.  In investing, it is called portfolio management.  Banks have trained investment advisers who can assist in designing the right portfolio for you.  Next week, will touch on the hottest financial fashion – the stock market.

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Tony Moncupa, Jr. is the President and CEO of EastWest Banking Corp.  Please e-mail your questions, comments, suggestions to easttowest.inquirer@gmail.com.

 
Feature originally posted in Inquirer

There is every reason why we should be celebrating Fitch’s recent credit upgrade of the Philippines. With the upgrade, we are now officially “investment-grade” which really means many things. An investment-grade status is a confirmation that the Philippines is a sound nation financially and that it has the capacity to pay off its debts.

President Aquino is obviously ecstatic with the upgrade; he said “this is an institutional affirmation of our sound good governance agenda” in a statement.

In a nutshell, the new status will effectively reduce the cost of our borrowings which when managed properly, can be used for key investments and infrastructure that will further spur economic growth. The upgrade will also usher the inflow of more institutional investments such as investment funds of other countries that usually require investment destinations to be ‘investment grade’. This move will even grow the local investment market which has been bullish in the last 3 years. The Philippine Stock Market already reflected a positive sentiment upon the news of the upgrade. It is more likely that the stock market will continue to ride on this upgrade, as well as other investment instruments like bonds.

It is important to note that while Fitch is a very reputable rating organization, the other two rating organizations namely Standard & Poor’s and Moody’s must also upgrade the status of Philippines to confirm our being truly ‘investment-grade’.

I believe that the upgrades merely affirmed what the market has already known as showed by how the Philippine investments have been faring, particularly our sovereign debt. For some time now, the Philippine sovereign issues (ROPs) have been trading with yields much lower than other nations with the same credit rating; in fact, the Yield-to-Maturity (YTM) of our ROPs are even lower than the debts of other nations who are rated as ‘investment-grade.’ Returns are always an indication of the risks involved so when the market makes our debts trade with lower yields, it also means that the market views us as low risk as well.

I asked some of my friends about what the benefits of the upgrade means to them and to the nation as a whole. I’m also proud to say that these friends of mine are experts in their own fields as well – I am blessed with awesome friends right? This is what they say:

“We deserve the upgrade, but remember that a credit rating is just a confirmation of what is already present in a debt issue, the debt security issuer and the economy as a whole. In other words, we and not the rating agency made ourselves investment grade. So upgrade or not, the country is indeed on its way to becoming an economic force in the world arena. We just need to learn how to spread wealth better.”

— Efren Ll. Cruz, RFP- President of Personal Finance Advisers Corp., best-selling finance author, columnist, investments expert

“This is definitely the seal and proof that Philippines is a good country to invest in and supports my bullishness in the Philippines. This will open up our markets to more investors who were not allowed to participate before. Increased Investments will surely open up better opportunities for the ordinary Filipino. I definitely recommend that Filipinos participate in this growth opportunity by investing as well.”

— Marvin Fausto – Chief Investment Officer of Banco de Oro Universal Bank

“The investment upgrade will propel our stock market even further as it will allow more foreign funds to invest in the Philippines. It will also help our economy as it will allow our government to borrow cheap, build more infrastructures, and allow businessmen to expand their businesses further. To the common Filipino, it would give them an opportunity to take housing and car loans cheaper. This upgrade has triggered a signal to the world that – ‘Hey! The Philippines exists and is now a safe haven for your money!’ This is such a great time to be a Filipino.

— Marvin Germo, RFP – Stock Market expert and investments speaker

“Investment Grade is not an end objective. It is a recognition that a country has graduated from a condition of doubt to a reasonable level of investment risk. The Philippines graduating to that is an expectation this year – the only thing uncertain was when. Fitch’s ratings upgrade to the Philippines is a validation of the core improvement in the country’s international credit and investment status. This upgrade means that the Philippines has to do its homework. It has leveled up in the eyes of the investment community globally. The upgrade actually does not necessarily translate to immediate economic betterment as being investment grade simply means that one can borrow at cheaper rates in the international market. Borrowing is something we do not need to do now as the country is very liquid – both the government and the private sector. Local interest rates are in their historic lows already. What the investment grade is telling us is that ‘we believe in your country to be able to institute the needed structural reforms to translate our trust into productive pursuits.’ Finally, it is important that the two other larger ratings agencies – S&P and Moody’s should affirm the same soon to consolidate and cement this trust.”

— Dr. Alvin P. Ang – Economist and President of the Philippine Economic Society

“Companies that would not otherwise invest in the Philippines as they require investment grade status would now do so. Our borrowing costs would also go down. This means more jobs and a stronger economy as money goes towards industries, infrastructure, etc. In the near term the peso is likely to appreciate though, which could pose problems for OFW families.”

— Rizalina Mantaring – President & CEO, Sun Life Philippines

The above views are from the experts; I will post another blog about the views of ordinary Filipinos (who are experts in their own rights) which I solicited through social media.

We are very excited with the nation as a whole and while there is much work to be done, I believe we are in the right path. We must also never forget where all these blessings are coming from and knowing our responsibilities for such blessings, lest all these gains will be for nothing.

Blessed is the nation whose God is the LORD, the people he chose for his inheritance. – Psalm 33:12, NIV

In all my talks, I always tell people that the first step to achieving financial peace is to increase cash flow. We do that by making more money and spending less money. In some cases, cash problems arise not because of too much spending — there are many cases that cash flow is restricted because of limited income.

Let me talk on how to increase income for this blog. I have a 2 point attack on how to earn more money — investing on yourself (building competency) and being entrepreneurial and the later will be the focus of this blog.

Have you considered being an entrepreneur? Many people think that entrepreneurship is not for everyone and I do agree. I subscribe to the belief that not everyone is cut out to be an entrepreneur. It is unfortunate whenever someone goes into business and end up losing money, I guess that’s par for the course. Here’s my big ‘however’… I think many of us think that those of us who can’t go into business is way too over-stated. I’d like to believe that many more Filipinos can go into enterprise. My many runs with Go Negosyo and the Association of Filipino Franchisers (AFFI) made me realize that many of us have to potential to be in business and actually make it big. If we have an open mind, we can try and become an entrepreneur – with God’s grace, you just might make it.

I need to note however, that we must go into business prepared and not blindly. Learn about the business you want to get into, read about it, research, talk to people, observe the market, prepare a written business plan, check on your finance and all that. There are many books on being an entrepreneur – Go Negosyo published many books that are easy to understand and yet detailed enough for you to start with. My friend Paulo Tibig also wrote a very helpful book entitled “Strategies of a Champion Entrepreneur” – a highly recommendable book for those who would to venture into business.

Being entrepreneurial doesn’t mean you need to start a big corporation at once – try some basic buy and sell first or do some commission selling. I am sure there are many opportunities abound for those earnestly seeking. The stories of the many successful entrepreneurs in the country are very encouraging because nearly all of them started very small and have very humble beginnings. Any form of additional income from being entrepreneurial will do wonders to augment your cash flow and that’s when the fun begins.

I once heard Francis Kong say in a seminar, “If you can’t be an entrepreneur, have an entrepreneurial mindset” — wise words to live by indeed.