What lessons learnt from LBC bank bankruptcy? When I’d seen it on TV, I remember a good professor in the graduate school who once said: “if a bank offers higher interest rate for deposits, it is risky.” That’s what exactly the case of LBC bank. They offered high interest rate to attract depositors. Why they needed more depositors? Because they were in dire need of cash to support, of course, their business activities.
Lesson 1: Choose your bank well. Hard-earned money should be deposited in a safe place. Choose universal banks that have good reputation and tested standing in many years.
Lesson 2: Don’t be attracted with high interest rate. The higher the return, the higher the risk. If the bank offers higher deposit interest rate than other big banks, start wondering.
Lesson 3. Make an investment portfolio. Do not put all your eggs in one basket as the saying goes. Other than depositing money in the bank, you can invest your money to real assets which are safer because of low volatility. Or deposit only in a bank up to the maximum coverage of insurance. In the Philippines, PDIC covers up to 500,000 pesos.
LBC might be the king of freight. Having a bank is another story. The creation of LBC bank was a part of its market development strategy. Strategies do not always succeed. Most often they fail when inside-out assessment were not carefully undertaken.
There are ways to predict which bank could be next. It just takes some rudimentary financial analysis. The basic idea is that if a bank has a lot of money parked in bad loans, acquired real estate, or even hidden losses, any deterioration in the value of these distressed assets will eat into the bank’s profits and capital. Check out my blog at:
http://bancofilipinofailure.blogspot.com/2011/09/lbc-bank-bites-dust-are-there-other.html
I agree with what you just said. Great blog! I’d like to add that I read in a seperate article that LBC Bank is different from LBC Express. So people shouldn’t be afraid to send their packages through their courier service because it isn’t affected at all.
yes. I still pay my bills thru LBC courier…
Here’s an updated version (as of June 30, 2011) of my potential problem bank list (for large commercial banks). http://bancofilipinofailure.blogspot.com/2011/10/lbc-development-bank-bites-dust-are.html
I will be posting an updated list (as of March 31, 2011) for the smaller thrift banks on my blog (www.bancofilipinofailure.blogspot.com) soon.
The Worst Philippine Thrift Banks continue to deteriorate as of June 30, 2011.
http://bancofilipinofailure.blogspot.com/2012/01/worst-philippine-thrift-banks-get-worse.html