But, in recent years, the bank's revolutionary transformation of property assessment methods and policies, and its active promotion of a campaign to "open new loans and liquidate old ones" have ignited active competition with the historically lower-cost services of the Bank of Taiwan. This brand new image for the Land Bank is its dynamic response to pending business challenges.
Sublimely accented by eight 35-foot-high columns, the grey, slightly weatherbeaten facade has witnessed the transformations of nearly half a century, from the Japanese occupation into the present. In semblance, the building reflects the nearby Provincial Museum, on the opposite side of the bustling street.
The six Chinese characters signifying "Land Bank of Taiwan," inscribed on the facade, have proclaimed that name for over forty years.
Across those four seminal decades, the Land Bank of Taiwan, transforming from the Japanese original, very gradually strode into modernism. Shaking off an inherited yoke of conventionality, it proceeded to expand its rudimentary five-branch network to today's 61, and it mans them now with a 20-fold increase in staff.
The Chinese characters signify "Land Bank of Taiwan"; its venerable facade belies a spirited heart.
Last year alone, the Land Bank underlined an overall sterling performance with a total business volume of NT$470 billions (US$11.7 billions), a majestic climb from its 1946 achievement—160 millions in (weakening) Old Taiwan dollars.
Hardly unexpected, then, as, perched on the yellow-upholstery of his office sofa, Sheu Yuap-dong, Land Bank chairman for one and a half years now, predicted with evident, if suppressed, joy: "This year, our Land Bank's performance will be the most profitable of all local banks."
For the second half of 1985, the Land Bank counted record profits of about NT$1 billion—300 million over the benchmark projection calculated by the Taiwan Provincial Council for the seven-member provincial bank family. Even the Bank of Taiwan—which has historically enjoyed the advantages of being a depositary for national revenues, with comparatively lower costs—failed to match the benchmark projection and fell back in the shadows of the outstanding Land Bank performance.
Until just four years ago, the Land Bank was an obscure institution among the seven provincial public banks. That year (1982), the bank's profits fell NT$1.2 billion short of the calculated benchmark, and at merely 16.6 percent of that figure, ranked the bank at sixth place among the seven.
No wonder, then, that for the last three years, the Land Bank's performance has been labeled "outstanding" in the Provincial Council's annual evaluations of provincial banks. It has been sharply superior to its brother institutions in the growth of profits, deposits, and loans. "And the Land Bank has also managed to maintain the lowest rate of bad loans," a financial official adds.
Underlining that fact, the bank's bad-loan ratio over the past three years has been below 2 percent, as compared with the average 3-4 percent of other local banks. As a matter of fact, it is the envy of those financial experts who have been loudly proclaiming their operational pessimism: that this is "not the time" to be engaging in banking, which has increasingly manifested itself as a "difficult" industry.
Obviously, in the short span of just four years, via an upbeat attitude and flexibility in response to market requirements, the Land Bank has overcome an array of obstacles to its development as a vigorous public financial organization and has proven itself second to none in the province-wide picture.
An economist with a penchant for anonymity sketches out the lessons of recent years: The Land Bank has been moving forward with great initiative, confidence, and aggressiveness, in sharp contrast to the utter conservatism and conventionality of its long past. And during recent years, there has seemed to be almost direct arterial linkage between Land Bank activity and the social-economic ambience: When capital is tight, middle and long-term loans put the Land Bank at a disadvantage in interest procurement, as compared to the commercial banks with their stake in shorter-term industrial and business clients. This situation may be reversed, of course, when economic activity turns sluggish. "The advantage now is clearly in favor of middle and long-term loans, which are a comparatively stable and secure means towards interest procurement, " he added.
Bank President Li Chang-chin—For forty years, presiding over adaptive transformations.
The Land Bank's "special loan program for the construction industry," new in 1981, is now viewed as a significant turning point. It was, incidentally, shaped up by Land Bank president Li Chang-chin, who has been with the bank forty years—most of his life.
Chen Tang, Land Bank financial manager, who participated at the inception of the special loan program, noted that it not only resulted in great improvements to the capital structure of the bank, but also provided the circumstances for enhanced training of bank employees—the bank was able to sharply elevate its service quality.
Chen recalled that Land Bank executives, led by president Li Chang-chin, initially began an in-depth research probe to draw up the new program's payment stipulations. They worked for three successive days, in the office from early morning till nine each night, and at the end, came up with a full executive draft for the loan program. This was immediately sent on to the Ministry of Finance for its screening and concurrence. And only five days following the Ministry's approval, the Land Bank's branch offices, islandwide, began publicity for the program.
Due to such resolve and to active Central Bank financial support, in less than a year the bank issued loans of over NT$56 billion—more than its cumulative NT$50 billion in bank loans over the previous 25 years. Notably, since March 1982, the ROC Post Office has been transferring 25 percent of its public savings to back up Land Bank middle and long-term loans for purchases of public housing.
The Land Bank's original purpose was to finance farming and forestry enterprises and to assist the government in implementing its massive land reform program. Then in 1980, the bank was selected by the Ministry of Finance as one of four mandated to administer real estate and farming loans. Thus, the Land Bank's start and history has been closely connected with its name.
Currently, the Land Bank takes the biggest share of the public housing loan market-60 percent, with bank clients now occupying 530,000 of a reported one million units purchased with loans nationwide. Chairman Sheu Yuan-dong, a six-foot-one-inch commanding presence, likes to say that the Land Bank is ever ready to adjust its role and functions to varied economic developments, "But the Land Bank only adjusts to a specialty, not a whole grocery." Real estate and farming loans constitute 85 percent of the bank's total business volume, far over the required 60 percent mandated for a specialty bank.
On the other side of the coin, the Land Bank is still, essentially, a government-owned-and-limited bank; it can do nothing without the approval of the Provincial Council. Currently, apart from the pressure of the provincial budget surplus, provincial banks have to deal with a rise in complicated bad loans. Complained one senior provincial bank executive in this respect: "More often than not, we cannot even decide our own staff viewpoint. "
But confronted with complaints about such government obstructions, Chairman Sheu stressed to bank executives, "We aren't concerned about such difficulties; we are concerned about our staffs performance." And it was this "doer" outlook that finally led the Land Bank to new horizons.
The Land Bank's transformation of property assessment practices for housing loans was a daring innovation. Understated Sheu: "We simply follow current consumer trends and home in on their needs." But this change at the Land Bank was actually the single operational event that caused the greatest stir in national financial circles last year.
Housing loans have long been the Land Bank specialty. But when capital became tight in the past, it and the other banks did not bother to seek clients for housing loans. And the Land Bank then engaged itself in a stereotyped pattern of property assessment based on a Taiwan bank consensus.
Loan solicitors frequently criticized the bank in those years for acting "helpless," devoting "too little money." The bank, they said, was blind to major price fluctuations in the wake of urbanizatioh; unreal bank assessments served to fix offered real estate loans at official (not market) prices—and preshrunk them by age depreciation.
Inside, the modern, luminous decor asserts the institution's "state-of-the-art" business spirit.
To eliminate its defective posture, on the one hand, and to thrust forward in an increasingly competitive housing loan market, on the other, last year the Land Bank launched a realistic property assessment system based on a price structure linked to urban sections and, also, faithfully reflecting current market prices by bank consensus. And lately, the Land Bank's attitude has become more open-minded toward its housing loans—any qualified borrower can get as high as 70 percent of market price, so long as he can provide hard documentation.
The Land Bank has sustained its lead in housing loans, though the comparatively lower costs of the Bank of Taiwan and the Taipei City Bank (both national revenue depositories) make them sharp competitors; both have recently entered the housing loan market in order to balance off their huge volumes of consumer loans. The present competitive banking battle is the result.
Confronting the new competitive pressures, the Land Bank dropped its annual loan rate from 9.25 percent to 8.75 percent, then, to 8.25 percent, to narrow the interest gap with the Bank of Taiwan. This new rate has provoked follow-up price cuts by the other banks and, "automatically," enabled consumers to acquire their own "castles" via relatively smaller investments.
One recent Land Bank move in this new competitive context is a direct mail loan promotion campaign—"open new loans and liquidate old ones" —indeed a new dance step for such a venerable institution.
Sheu Yuan-dong, the 60-year-old chairman, who came to the Land Bank from the Finance Ministry, is keynoter for the youthful tempo of recent Land Bank operations.
The top echelons of bank personnel take part in special advanced-training projects.
Chi Ning-yuan, vice president of the Chung Hsing Bills Finance Corp., cogently remarked, following Sheu's appointment, "Wherever Sheu goes, there follows a full-fledged training project."
And, indeed, first thing, Sheu designated a group to draft service guidelines for the bank's employees, and then to begin an island wide tour of the bank's branch offices to promote their implementation. The bank's three vice presidents were scheduled for rotating branch office visits, to pick up suggestions, help resolve problems, and enhance internal communications.
The curriculum of the new training school operation covers a wide range of materials, from basic banking lore to advanced finance. A special one-month management seminar is viewed by many local financiers as a cradle for executive succession.
Notwithstanding, Provincial Council regulations for "organizational simplification" mandate that staff of the two-year-old training school remain part-time employees. "It doesn't really matter, since the training must be continued," shrugs Sheu.
And, indeed, a notable one-third of the 50 participants in the past two seminars have been promoted to branch office managers-a very rapid circulation of new personnel "blood."
To avoid cronyism in personnel practices, Sheu instituted the following rule: No employee may be promoted who has not first operated in a position for at least three years. A Land Bank employee, queried about the rule, supported it as an effective deterrent to undue personnel manipulations, though he acknowledged it could obstruct some solidly-earned promotions. But, truly, "the name of anyone who did a really fine job would come to the chairman's ear in any case," he added.
Bank customers are quick to note its active new look. Hsu Cheng-hsiung, assistant manager of China Rebar Co., Ltd., which maintains a long-standing relationship with the Land Bank, praised the bank's radical initiative to give customers active banking advice—a reversal of its past insistence that "such things are solely our customers' business."
Hsu also spoke of the bank's recent record performance in handling check issuance requests- two thousand in one business day. "Years ago, the same number would have taken a week or two."
In order to diversify its business focus, the Land Bank recently set up a task force to pursue investment in foreign bonds, dedicating a total of US$100 million to be invested via the International Commercial Bank of China, the Bank of Taiwan, and the Central Trust of China (all designated foreign exchange banks). "This is helping to relieve the pain of low domestic interest rates," explained Cheng Shih-yang, the Land Bank vice president who ramrods the task force. Specialists can also receive on-the-job training in this way in international finance, he added. The Land Bank is the first non-foreign exchange bank to participate in this field.
Still, looking ahead, a shrinking farm loan market and increasing competition for real estate loans demand that the Land Bank stay on its toes if it is to stay on top.
"It is our dogged determination that will see to that," insists Chairman Sheu.