Enrique Ramírez, CEO of the Dominican Republic’s BanReservas, denies that the overhaul of the state-owned bank is intended to compete head-on with banks in the private sector. Analysts have questioned, whether or not the newly invigorated public bank – Ramírez joined in July 2013 from Citi – will be used as a policy instrument to put pressure on the big margins at privately held banks. For example, last year Banco Popular enjoyed a 32.4% return on equity and 2.5% return on assets, while the consolidation that followed the country’s banking crisis in 2004 has minimized competition in the sector.
"We are not trying to compete to force down the interest rate or the margin, we are just taking a new approach and [focusing on] good service to help develop those sectors of the economy that the government has defined as key to the development of the market and the economic policies of president [Danib] Medina," says Ramírez. "We are not here to distort the market and take advantage of our low cost of funds."
Ramírez points to investments in the development of export sectors, such as the bank’s pilot project to develop the country’s private-sector producers of bananas. The industry’s exports are currently worth about $350 million a year and the bank has recently signed an agreement with the largest association of producers that aims to boost exports to $500 million within three years. "We will provide the resources to accelerate production, increase the speed of imports of raw materials they need and even help them with the refrigeration system they need to use before shipping." As well as supply finance, the bank has shown its commitment by opening branches in the northwest of the island to provide personnel to partner in the project. Similar projects are planned for producers of Chinese vegetables, pineapples and greenhouses. The bank also hopes to increase its participation in the tourist industry, one of the country’s biggest generators of income.
At the same time, the bank is also revolutionizing its retail operations. Ramírez is using his private-sector experience to focus on customer service to the bank’s consumer and corporate client base. "When I arrived I found a bank with a very old structure, with silos that didn’t communicate to each other," he says. "We changed the structure to one that is much more flexible and efficient and it is much easier to go through the approval process."
Ramírez began by visiting branches – often at weekends – to get a sense of the customers’ experience. "I know we have to change in order to change the experiences in the branches," he says. He is also focused on leveraging the bank’s network by cross-selling products and focusing on share of wallet. The bank is planning a completely new IT system for all its retail and corporate businesses that will help capture these internal opportunities and increase operational efficiencies. Meanwhile, the bank has drafted in specialists to work on its loan portfolio, stripping out and selling bad debts and improving credit procedures. The early results have bought a rapid improvement in the bank’s financial results: return on equity rose 15 percentage points to 29.6% in 2013, up from 14.2% in 2012. Return on assets increased 36% (1.9% from 1.5%). Retail activity has jumped – for example, credit card revenues went up 38% in 2013 (market share grew 4.3 percentage points to 34.8%). The corporate loan portfolio has improved: non-performing loans have fallen from 5.6% to 1.9%.
However, one of the bank’s private-sector competitors is sanguine. José Manuel Cuervo, division manager of the institutional banking division at Banco Popular Dominicano, says the bank’s huge deposit base (the 2004 banking crisis led to a flight to quality that benefited the largest banks in the country) also provides it with a low-cost base: "BanReservas is very professionally led and should be a competitor [in the future], but we think BDP will still have the opportunities to grow," says Cuervo, who believes the country’s economy will perform well over the next couple of years. "We have RoE of 30% and RoA of nearly 3% and we could leverage up if we wanted to, but I am not sure that we do."
