What ever you do, make it a point to visit your bank - even when you do not need anything from your bank

Every generation needs a revolution - an entrepreneurial revolution

I have come across this advice when I took up my MBA.  Visit your bank when ever you have time.  Even if you have dont need anything.

And further reenforced by reading on networking.   Network when everything is fine;  not when the well is dry.

So in visit to Calamba, I again visited the bank.  We did not discuss any business. Just how do you do.

Its their task to visit top accounts.  But we are in Angono.  They cant visit us there.   Although, one of their managers made it a point to make presentation in Angono, although he heads Calamba

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Thank you sir

Advising a no go - is it a wise move in business consulting? Or should you not get paid for advising so?

Every generation needs a revolution - an entrepreneurial revolution

I had a boss, the head of finance company in the govt, who requested me to do a consultancy work for a friend.  The friend was a former local top exec in an lgu in the Visayas, now a head of a regulatory unit in the govt.   He wanted to invest 8 numbers in an ailing development bank in Southern Luzon

I accepted the engagement and requested for the financial statement

There were certain anomalies noticed:

     1.  There was a negative carry for earning assets, and expense bearing liabilities.   (The time deposits were paid + 10% more than there were earning assets.   It was therefore on continuing loss with its

asset liability structure.

    2.  Large officer expenses.  This is expected considering it had extensive branch network

   3.  There was one asset item that caught my attention:   P40 million repoa.  This I should see.

I went on a trip to the head office in Southern Luzon and met its executive who looked nonchalant and undisturbed over the situation of the bank,  I guessed, after looking at the relationship between quick assets and level of liability that they must be experiencing liquidity problems and in two months time

unless PDIC or BSP steps in a bank run is there in two months time.

This post asked to be accompanied to the 8 number repoa (it was just one item)  And found out that it was supposed to be memorial park, not even 2% developed and valued at  that such huge amount, equivalent to the proposed purchase price.  It was supposed to be an asset of the owner that was booked in the bank's books.  (The owner lived in a plush MM gated subdivision)

This post advised his boss, not to go ahead with the purchase because on day one, they would have negative, or loss with a huge non earning asset in its book.  My boss was aghast since we wouldl not be paid consultancy fee.  I said it was OK

I asked what was the purpose of the fmr mayor in the buy - out.  I learned he wanted to be given the title of the banker.   It was not to earn PHP.   What was the point of being called a banker but managing or owning a losing one

Is it ok not to be paid, if you advise so that the buyer do not get burned.?   Or should you proceed with consultancy no matter how bad the subject is so that you get paidddddddddd?

Marketing and sales experiences are important for starting a business

Every generation needs a revolution - an entrepreneurial revolution

I was a pharma promotion rep (a detailman) for 5 years before venturing on new businesses.  I was assigned to two specialty hospitals  One was a teaching hospital operated by the religious which I covered 4x a month.  And they were difficult to cover with odd hours available for visit:   after  1 pm, or 6 pm.  The other was a govt run orthopedic hospital

The experience gave you persistence, self initiative, self discipline, and being goal oriented.  There were sales targets and lot of planning and itinerary.   

Many detailmen I knew went into business, and many were successful 

I too knew that I would be successful if I went on my own. 

The first venture we had was starting a savings and loan association   I did not have much banking experience but I used my pharma experience:   1.  to recruit and organize my team   2.  to set goals and plan   3   market the bank to the public,   4.  expand the offerings to the public:    new loan products 

and thinking of how to make the residents wealthy by saving more and giving them more income 

opportunities:   like going abroad, the govt agri projects 

It hurts when politicians slam bank managers for the bank failures

Every generation needs a revolution - an entrepreneurial revolution

Some politicians (senators) probably slam the bank execs for the failure closure of the banks

But the outbursts which probably get more  votes are unfair.  No super manager can beat the situation

or would have figured out way of squeeze between low yield treasures, (as assets) and high cost 

deposits due to Fed action to increase interest rates.   Time is not on the  side of the bankers.

That is why the regulators cant do a thing.   

Take note that PDIC is undercapitalized to handle further stresses of the banking system.   JP Morgan is the only entity that can even probably save the FED.  

Will bank faiure contagion spread in US and elsewhere in the world

Every generation needs a revolution - an entrepreneurial revolution

In March alone there at least 2 bank failures with at least $100 billion in assets:  Silicon Valley  ($300b) and Signature Bank ($100B)

What is interesting to note is that SVB failed despite being liquid.   The trouble was with investment decisions.   Since it could not lend out its huge liquidty on hand, it invested in long term bonds (govt and private)  at 1.5%  The culprit was the high interest rate imposed by Fed whose recent rate was up to 4.75%.  It is possible that the  rates can go up further

Now there is inverse relationship between bond prices and interest rates.   High interest rates depresses long term bond prices   Investopedia - inverse relationship between bond prices and interest rates

Now the prices of bonds held by SVB declined in prices and therefore the bank incurred losses, depressing its stock prices.  This worried the  depositors who went into a bank run  SVB had to sell its bonds at fire sale further worsening its PNL

"Bonds have an inverse relationship to interest rates. When the cost of borrowing money rises (when interest rates rise), bond prices usually fall, and vice-versa.

At first glance, the negative correlation between interest rates and bond prices seems somewhat illogical. However, upon closer examination, it actually begins to make good sense.

KEY TAKEAWAYS

• Most bonds pay a fixed interest rate that becomes more attractive if interest rates fall, driving up demand and the price of the bond.
• Conversely, if interest rates rise, investors will no longer prefer the lower fixed interest rate paid by a bond, resulting in a decline in its price.
• Zero-coupon bonds provide a clear example of how this mechanism works in practice

It is possible in the country financia institutions like banks insurance companies, pre need companies and other banks have this dire situation.   And may have incurred paper losses further exacerbated by low investment rates and inflation

There is no substitute for good decision and wise management 

Computing for bond prices

Bank	City	State	Year	Assets at time of failure (nominal)	Assets at time of failure (inflation-adjusted, 2021)	Ref.
Washington Mutual	Seattle	Washington	2008	$307 billion	$386 billion	[3]
Silicon Valley Bank	Santa Clara	California	2023	$209 billion	$209 billion	[4]
Signature Bank	New York	New York	2023	$118 billion	$118 billion	[5]
Continental Illinois National Bank and Trust	Chicago	Illinois	1984	$40.0 billion	$104 billion	[3][6]
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