PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
Gen. Luna cor. Muralla St., Intramuros, Manila, Philippines
PLM Business School – Undergraduate Program
A Strategic Management Paper presented for
BDO Unibank, Inc.
Submitted by:
Afable, Lynel Arvey V.
Averia, Melquisidec S.
Asuncion, Bernadeth S.
Banta, Bastin
Bacho, Ria Niña A
Submitted to:
Prof. Benito Roger De Joya
ACKNOWLEDGEMENT
The researchers are delighted and thankful to Banco de Oro (BDO) Unibank, Inc.
for being a subject matter in this Strategic Management Study.
The researchers would like to take this opportunity to express gratitude to Prof.
Benito Roger L. De Joya, a professor in Strategic Management, for his constant
encouragement, for believing in our capabilities, and for giving advice and insights
whenever the researcher encounters difficulty. We are thankful for exchanging
discussions about the topic and, without thinking twice, lending a hand during the
study's completion.
The researcher would also like to thank their family for the unceasing
encouragement, support, and attention they have given. Lastly, to God for guiding and
giving strength and knowledge throughout creating this study. To God be the Glory!
Table of Contents
EXECUTIVE SUMMARY ................................................................................................ 6
CHAPTER I ..................................................................................................................... 8
INTRODUCTION ...................................................................................................... 8
History and Nature of Business ................................................................................ 8
Current Revenue Size and Profit ............................................................................ 13
Major Market Served .............................................................................................. 42
Market Size............................................................................................................. 43
Organizational Chart ............................................................................................... 45
Products and Services ............................................................................................ 51
CHAPTER II .................................................................................................................. 54
RESEARCH DESIGN AND METHODOLOGY ........................................................... 54
Sources of Information............................................................................................ 54
Methodology ........................................................................................................... 54
Limitations .............................................................................................................. 56
CHAPTER III ................................................................................................................. 57
VISION AND MISSION .............................................................................................. 57
Current Vision ......................................................................................................... 57
Current Mission ...................................................................................................... 57
Vision Recommendation and Analysis ................................................................... 59
Mission Recommendation and Analysis ................................................................. 59
CHAPTER IV ................................................................................................................ 62
EXTERNAL ASSESSMENT....................................................................................... 62
Political and Legal .................................................................................................. 62
Economic ................................................................................................................ 63
Socio-cultural, Demographic, and Lifestyle............................................................. 65
Technological ......................................................................................................... 65
Environmental......................................................................................................... 66
Opportunities and BDO's Responsiveness ............................................................. 66
Threats and BDO's Responsiveness ...................................................................... 69
External Factor Evaluation (EFE) Matrix................................................................. 71
CHAPTER V ................................................................................................................. 73
INDUSTRY AND COMPETITIVE ANALYSIS ............................................................ 73
Banking Industry ..................................................................................................... 73
Industry Structure ................................................................................................... 73
Banking Industry Sub-Sectors ................................................................................ 79
Porter’s Five Forces Model ..................................................................................... 80
Major Competitors .................................................................................................. 83
DuPont Model of Universal Banking Industry ......................................................... 89
Competitive Profile Matrix (CPM) ........................................................................... 91
CHAPTER VI ................................................................................................................ 93
INTERNAL ASSESSMENT ........................................................................................ 93
Major Strengths ...................................................................................................... 93
Major Weaknesses ................................................................................................. 95
Internal Factor Evaluation (IFE) Matrix ................................................................... 96
CHAPTER VII ............................................................................................................... 98
STRATEGY FORMULATION ..................................................................................... 98
Strengths, Weaknesses, Opportunities, and Threats (SWOT) Matrix ..................... 98
SWOTS Recommended Strategies ........................................................................ 99
Internal-External (IE) Matrix .................................................................................. 103
Strategic Position and Action Evaluation (SPACE) Matrix .................................... 105
CHAPTER VIII ............................................................................................................ 107
SUMMARY OF MATRICES ..................................................................................... 107
Boston Consulting Group (BCG) Matrix ................................................................ 107
Grand Strategy Matrix (GSM) ............................................................................... 109
Summary of Strategies ......................................................................................... 110
Quantitative Strategic Planning Matrix (QSPM) .................................................... 111
CHAPTER IX .............................................................................................................. 112
PROPOSED STRATEGIES ..................................................................................... 112
Generic Strategy ................................................................................................... 112
Specific Strategy ................................................................................................... 115
CHAPTER X ............................................................................................................... 123
ACTION PLANS AND PROGRAM ........................................................................... 123
Strategy Implementation ....................................................................................... 123
Departmental Action Plans .................................................................................. 127
CHAPTER XI .............................................................................................................. 130
STRATEGY EVALUATION AND CONTROL ........................................................... 130
Measuring and Monitoring of Organization Performance .................................... 130
Action Plan ........................................................................................................... 130
Balanced Scorecard ............................................................................................. 135
Strategy Map ........................................................................................................ 140
CHAPTER XII ............................................................................................................. 141
PROJECTED FINANCIAL STATEMENTS............................................................... 141
Projected Statements of Financial Position .......................................................... 141
Projected Income Statement ................................................................................ 142
Projected Financial Ratios .................................................................................... 143
CONCLUSION ............................................................................................................ 147
LIST OF FIGURES...................................................................................................... 148
LIST OF TABLES ....................................................................................................... 151
LIST OF ANNEXES .................................................................................................... 153
REFERENCES ............................................................................................................ 211
EXECUTIVE SUMMARY
Banco de Oro Unibank, Inc. or BDO Unibank is a Philippine universal banking
company specializing in deposit-taking, lending (corporate, middle sector, SME, and
consumer), Foreign Exchange, brokering, trust and investments, including credit cards,
corporate cash management, and remittances. BDO is the largest bank in the country
owned by the SM Group of Companies, belonging to the country’s largest
conglomerates in terms of market capitalization.
Based on the external analysis of BDO and its competitor analysis, it is indicated
that BDO Unibank Inc. is capable of taking efficient advantage of opportunities and
mitigating threats. The study shows that there are opportunities present for BDO to take,
such that of the high demand of mobile banking applications, mergers and acquisitions,
increase in demands of loans during pandemic, push towards sustainable energy
products, and increase in profits from remittances which pose as challenges that BDO
should overcome. As for the internal analysis and financial analysis, it is shown that
BDO is in a position that is proactively upgrading and striving to cater to its clients and
providing quality services. It indicates the strengths of BDO as a business, which should
be utilized more in answer to opportunities. Meanwhile, such analysis showed BDO’s
weaknesses that should be mitigated. It was also found that BDO is able to take on the
challenges posed by the opportunities stated aggressively. In doing so, the objectives
for BDO formulated were to increase in net income while maintaining expense, increase
in market share, and invest more in technological advancements. For BDO to achieve
its goals, it was recommended that the financial institution perform intensive strategies
6
to be more efficient, improve the data and security protection in online banking, and
expand its market to continue being in a good position in the financial industry.
7
CHAPTER I
INTRODUCTION
History and Nature of Business
Banco de Oro Unibank, Inc. or commonly known as BDO, is a full-service
universal bank located in the Philippines with the largest total asset in the Philippines
and ranked fifteen in Southeast Asia and a member of the SM Group. It offers products
and services to retail and corporate markets, including borrowing (corporate, middle
sector, SME, and consumer), deposit-taking, foreign exchange, brokering, trust and
investment, credit cards, corporate cash management, and remittances. Via its
subsidiaries, BDO provides Leasing and Lending, Investment Finance, Private Banking,
Bancassurance, Insurance brokerage, and equity brokerage services. BDO has the
largest distribution network of more than 1,300 operational branches and more than
4,000 ATMs across the nation.
Banco de Oro started on 2 January 1968, called Acme Savings Bank, known as
a Thrift bank with only two branches located in Metro Manila. Later, Sy Group obtains a
group of companies owned by Henry Sy and gives its new name: Banco de Oro
Savings and Mortgage Bank.
In December 1994, it was set to a commercial bank and renamed Banco de Oro
Commercial Bank. In the time of September 1996, it became a universal bank. These
led to a change of the bank's name to the new Banco de Oro Universal Bank (BDO
Unibank). It is one of several Chinese-Filipino-owned banks in the Philippines. In its
8
search to explore and affirm by vision, creativity, and price, BDO engaged in an
insurance service in 1997 by creating a BDO Insurance Broker subsidiary, making it a
corporation of "bancassurance." It extended its insurance in 1999 by Partnership with
Assicurazioni Generali s.p.a, one of the world's major insurance agencies, and Jerneh
Asia Berhad, Kuok Community from Malaysia. In March 2000, BDO became a partner.
With its insurance affiliates, Generali Pilipinas Life Assurance Company and Generali
Life Assurance Company, Insurance Company of Pilipinas.
On 15 June 2001, BDO started merging with Dao Heng Bank's Philippine
subsidiary. The merger raised the number of BDO Unibank branches from 108 before
the merger, 129 to 120 after the merger. Its merging contributes to global
competitiveness by expanding its branches to become available to other people
increasing the number of depositors. It further extended when United Overseas Bank
sold 66 out of its Philippine subsidiary's 67 branches to BDO Unibank after UOB's
Philippine subsidiary is set to optimize its operations from retail to wholesale banking.
On 22 March 2006, after completing the United Overseas Bank integrated into the BDO
network, the number of BDO branches rose to 220. On 5 August 2005, 24.76% of the
shares of Equitable PCI bank hold the record of being the third-largest bank in the
Philippines and largest credit card issuers, founded by Go Family. The share was
bought by Banco de Oro and an SM subsidiary, SM investments, and 10% Equitable
Card Network.
On 6 January 2006, BDO along with the SM Group of Companies submitted a
proposal to Equitable PCI to swap a 1.6 of its share for every 1 Equitable PCI share or
to base swap ratio on the book values of same banks to evaluate by a firm accountants
9
base on International Accounting Standards (IAS). For this proposal to take effect,
Banco de Oro needs the Equitable PCI shareholders' permission to portray 67% of
Equitable PCI. These comprise 29% Social Security System (SSS), 14% Government
Service Insurance System (GSIS), and 8% to the family of Equitable PCI chairman
Ferdinand Martin Romualdez.
On 27 December 2006, the said proposal was settled, putting together the Banco
de Oro-Equitable PCI bank, which became Banco de Oro Unibank Incorporation as of
February 2007. Before the two companies' union, BDO is the second biggest bank with
an asset of about P608 billion. Now BDO has 703 combined branches nationwide and
commercial centers in Metro Manila, Northern and South Luzon, Metro Cebu, IloiloBacolod, and Mindanao.
In 2009, BDO completed its acquisition of GE Money Bank with an agreement to
obtain a minority stake of 1.5 in BDO Unibank through a share-swap deal, increasing its
holdings to 10%. On 14 November 2013, Banco de Oro's objective is to acquire 99.99%
of Citibank Savings Inc., which has ten branches and famous for being an Insular
Savings Bank. In February 2014, obtain the trust business of Deutsche Bank's Manila
branch. In July 2014, BDO bought The Real Bank Inc., wherein it adds 24 branches to
its network. Before the end of December 2014, gain the name of One Network Bank as
it has 105 rural 105 branches, and on 6 August 2019, it was renamed BDO Network
Bank. Until now, Banco de Oro continues improving their services by providing Cash
Accepting Machine (CAM), which allows people to deposit money anytime to any BDO
Account with an ATM without transacting over the counter. Since BDO has Cash
10
Deposit Machine, providing security to its customers is a competitive advantage to other
banks with an EMC chip in Debit/Credit Card implanted in it.
Figure 1 Milestones of BDO Unibank, Inc.
11
Business Model Canvas
Figure 2 Business Model Canvass of Banking Companies
Key Partners
Key Activities
Value
Propositions
Relationship
Customer
Segments
Branch
Operations
Personal
Call center
Operations
Investment
s Partners
IT
Operations
Technology
Deposits
Products
(Lower
Interest
Rates)
Key
Resources
Vendors
Physical and
IT
Infrastructur
e
Regulatory
Agencies
Loan
Assets
Cost Structure
Internet
Expenses
Channel
Costs
Assistance
Automation
where
possible
Retail and
Corporate
Customers
(Depositors)
Channels
Loan
Products
(Higher
Interest
Rates)
Bank
Branches,
ATMs, Call
Centers,
Internet,
Mobile
Devices
Retail and
Corporate
Customers
(Borrowers)
Revenue Streams
Interest
Income
Fee
Income
12
Current Revenue Size and Profit
Interest
Income
515,548
Income
Statement
Interest
Expense
112,962
Impairment
Loss
(22,920)
(Other
operating
income)
170,124
Other
operating
expense
351,788
Tax expense
41,671
Net Interest
Income
402,586
Net Profit
Margin BDO
31%
Net Profit
615,548
1.30%
Net Profit
615,548
Total Asset
Turn Over BDO
4.80%
Current Asset
11,858,943
Net Fixed
Asset
739,788
Balance
Sheet
ROA BDO
Total Asset
ROE
BDO
12,598,631
13%
Current
Liability
10,626,975
Long Term
Debt
Total Liability
10,963,674
Total Liability
and Equity
336,699
Shareholders’
Equity
12,598,631
1,634,957
Figure 3 Dupont Analysis of BDO Unibank, Inc.
Shareholders’
Equity
1,634,957
Final
Leverage
(FLM)
7.70
13
DuPont analysis:
The DuPont analysis yielded the return on assets or ROA of the company to be
at 1.30% and return on equity of 13% which are the average in 5 years.
With a net interest income of average of 31% in 5 years indicates that the
company has a high chance to improve aspects in the operations such as spreading
cost for the fixed assets like building-up more local and foreign branches.
14
BDO UNIBANK, INC.
Statements of Financial Position
FOR THE YEARS ENDED DECEMBER 31, 2015, 2016, 2017, 2018 AND 2019
(Amounts in Millions of Philippine Pesos)
% change
RESOURCES
CASH AND OTHER CASH ITEMS
DUE FROM BANGKO SENTRAL NG
PILIPINAS
DUE FROM OTHER BANKS
TRADING AND INVESTMENT
SECURITIES
LOANS AND OTHER RECEIVABLES Net
PREMISES, FURNITURE, FIXTURES
AND EQUIPMENT - Net
INVESTMENT PROPERTIES - Net
OTHER RESOURCES - Net
TOTAL RESOURCES
2015
2016
2017
2018
P 41,767
P 39,813
P 43,882
P 52,492
P 62,726
260,841
20,944
304,285
33,463
340,596
41,088
349,017
48,780
306,938
35,820
196,500
207,886
258,214
304,281
345,278
1,323,311 1,511,981 1,730,732
21,152
11,403
22,430
11,784
24,917
14,496
2019 in 5 yrs.
50%
18%
71%
76%
64%
2,019,153 2,175,655
29,272
15,426
101%
42,494
12,595
10%
51%
54,085
57,449
70,700
73,391
81,594
P
P
P
P
1,930,003 2,189,091 2,524,625 P2891812 3,063,100
59%
LIABILITIES AND EQUITY
DEPOSIT LIABILITIES
BILLS PAYABLE
SUBORDINATED NOTES PAYABLE
INSURANCE CONTRACT LIABILITIES
1
OTHER LIABILITIES
Total Liabilities
EQUITY
Attributable to:
Shareholders of the Parent Bank
Non-controlling Interests
Total Equity
TOTAL LIABILITIES AND EQUITY
P
P
P
1,603,047 1,833,013 2,045,321
76,867
75,800
105,623
10,030
10,030
10,030
P
P
2,362,302 2,438,737
117,693
147,321
10,030
10,030
52%
92%
0%
-
-
-
-
-
49,370
49,371
65,990
74,166
97,802
98%
2,564,191 2,693,890
55%
1,739,314 1,739,315 2,226,964
369,210
369,210
P
3,063,100
199,263
-
369,210
94%
369,210
P
2,891,812 3,063,100
94%
297,661
-
327,621
-
199,263
297,661
P
P
1,938,57 2,524,625
327,621
59%
Figure 4 BDO Unibank, Inc. Five (5) Year Financial Statement for years 2015-2019
15
BDO UNIBANK, INC,
Statements of Income
FOR THE YEARS ENDED DECEMBER 31, 2015, 2016, 2017, 2018 AND 2019
(Amounts in Millions of Philippine Peso Except Per Share Data)
% change in 5
INTEREST INCOME
2015
P
68,519
2016
P
76,647
2017
P
93,786
2018
P
122,615
INTEREST EXPENSE
14,238
14,989
16,434
28,720
38,581
171%
NET INTEREST INCOME
54,281
61,658
77,352
93,895
114,500
111%
2,709
3,003
5,809
5,700
5,699
110%
51,572
58,655
71,543
88,195
108,801
30,170
27,353
33,633
35,823
43,145
50,394
56,379
68,929
81,794
94,337
36,247
-
IMPAIRMENT LOSSES - Net
NET INTEREST INCOME
AFTER IMPAIRMENT
LOSSES
OTHER OPERATING
INCOME
OTHER OPERATING
EXPENSES
2019 yrs.
P
153,981
125%
111%
43%
87%
PROFIT BEFORE
PRE-ACQUISITION INCOME
PROFIT BEFORE TAX
31,348
29,629
36,247
42,224
57,609
84%
TAX EXPENSE
4,829
P
26,519
5,713
P
23,916
8,241
P
28,006
9,512
P
37,712
13,376
P
44,233
177%
Attributable to
Shareholders of the Parent
Bank
-
-
-
-
-
-
-
-
-
-
-
Non-controlling Interests
-
-
-
-
-
-
Basic
P 7.25
P 6.47
P 6.40
P 7.40
-
-
Diluted
P 7.25
P 6.47
P 6.40
P 7.40
-
-
NET PROFIT
67%
-
Earnings Per Share:
Figure 5 BDO Unibank, Inc. Five (5) Year Income Statement for years 2015-2019
16
BDO UNIBANK, INC.
Statements of Cash Flows
FOR THE YEAR ENDED DECEMBER 31, 2015, 2016, 2017, 2018 AND 2019
(Amounts in Millions of Philippine Pesos)
% change in 5
yrs.
2015
2016
2017
2018
2019
P 31,348
P 29,629
P 36,247
P 42,224
P 57,690
Interest income
-68,519
-76,647
-93,786
-122,615
-153,081
123%
Interest received
67,778
75,720
91,455
119,115
151,900
124%
-14,344
-14,969
-16,085
-21,948
-43,136
201%
14,238
14,989
16,434
28,720
38,581
171%
Depreciation and amortization
3,085
3,668
3,958
4,555
7,564
145%
Impairment losses
2,709
3,003
5,809
5,700
5,699
110%
-
-3,516
-4,312
-2,740
-6,046
-
-167
45
67
-476
1,093
-754%
36,128
31,922
39,653
52,535
60,183
67%
66
1,076
32
487
-1,040
-1676%
-231,297
-241,321
-255,626
-266,500
-194,417
-16%
1,374
-624
-3,389
-2,107
-1,014
-174%
Decrease (increase) in other resources
-11,319
2,722
-16,848
-8,121
-13,265
17%
Increase in deposit liabilities
139,112
229,972
212,278
315,718
77,148
-45%
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Interest paid
Interest expense
Share in net profit of subsidiaries and associates
Fair value losses (gains)
Operating profit before changes in operating resources and liabilities
Decrease (increase) in financial assets at fair value through profit or loss
Increase in loans and other receivables
Decrease (increase) in investment properties
Increase (decrease) in other liabilities
-13,863
10,423
17,244
13,935
22,703
-264%
Cash generated from (used in) operations
-79,799
34,170
-6,720
105,947
-49,702
-38%
-3,211
-5,342
-7,552
-9,087
-11,861
269%
-83,010
28,828
-14,272
96,860
-61,563
-26%
-437,205
-40,953
-26,052
-
-
-
493,842
P 63,539
17,816
-
-
-
Acquisitions of investment securities at amortized cost
-
-
-
60,406
-78,983
-
Acquisitions of securities at fair value through other comprehensive income (FVOCI)
-
-
-
-17,629
-39,656
-
Maturities of investment securities at amortized cost
-
-
-
26,514
48,746
-
Proceeds from disposals of securities at FVOCI
-
-
-
8,387
25,820
-
-4,439
-3,811
-4,989
-6,920
-3,446
-22%
Cash paid for income tax
Net Cash From (Used in) Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of available-for-sale securities
Proceeds from disposals of available-for-sale securities
Acquisitions of premises, furniture, fixtures and equipment
17
-211
30
17
125
165
-178%
Acquisitions of held-to-maturity (HTM) investments
-
-48,139
-74,111
-
-
-
Acquisition of a subsidiary
-
-2,298
-
-
-
-
Acquisitions of available-for-sale (AFS) securities
-
-
-
-
-
-
Proceeds from disposals of AFS securities
-
-
-
-
-
-
Maturities of HTM investments
-
11,938
33,013
Proceeds from disposals of premises, furniture, fixtures and equipment
-
-
51,987
-19,694
-54,306
-50,289
-47,354
-191%
Proceeds from bills payable
-
-
172,575
116,744
132,467
-
Payments of bills payable
-
-
-143,971
-110,166
-99,044
-
-7,898
-4,716
-5,582
-5,585
-5,593
-29%
Payments of lease liabilities
-
-
-
-
-3,076
-
Proceeds from issuance of common stock
-
238
203
461
746
-
-8,250
-1,093
-
-
-
-
-
-
59,826
-
-
-
-16,148
-5,571
83,951
1,454
25,500
-258%
P -47,171
P 3,563
P 15,373
P 48,025
-83,417
77%
41,237
41,767
39,813
43,882
52,492
27%
258,416
260,841
304,285
340,596
349,017
35%
43,165
20,944
33,463
41,088
48,780
13%
Investment securities at amortized cost
-
-
-
2,097
6,490
-
HTM securities
-
-
894
-
-
-74%
Net Cash Used in Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid
Net proceeds from (payments of) bills payable
Net proceeds from issuance of stock rights
Net Cash From Financing Activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Carried Forward)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
Cash and other cash items
Due from Bangko Sentral ng Pilipinas (BSP)
Due from other banks
Securities purchased under reverse repurchase agreement (SPURRA)
Interbank loans receivables
Foreign currency notes and coins (FCNC)
86,173
58,431
7,891
14,872
22,009
-
-
72,749
31,576
42,214
-
3,406
3,243
3,337
3,694
4,828
42%
432,397
385,226
462,432
477,805
525,830
22%
41,767
39,813
43,882
52,492
62,726
50%
260,841
304,285
340,596
340,017
306,938
18%
20,944
33,463
41,088
48,780
35,820
71%
CASH AND CASH EQUIVALENTS AT END OF YEAR
Cash and other cash items
Due from BSP
Due from other banks
Investment securities at amortized cost
-
-
6,490
308
-
HTM securities
-
2,097
-
-
-
14,872
22,099
-
-
31,576
42,214
31,277
-
SPURRA
Interbank loans receivables
58,431
-
7,891
18
FCNC
3,243
P
385,226
3,337
P
388,789
3,694
P
477,805
4,828
P
525,830
5,344
P
442,413
65%
15%
Figure 6 Statement of Cashflow of BDO Unibank, Inc. 2015 to 2019
19
Analysis of Financial Statements:
Based on the percentage change in 5 years, the total assets of BDO increased
by 50%. It may indicate a good position for the company. The high percentage changes
of premises, furniture, fixtures and equipment (101%) and due from the other banks
(71%) give rise to the total assets. The bills payable (92%) and other liabilities (98%) is
the highest percentage change that resulted into 59% increase in the total liabilities and
equity.
In the income statement, the interest expense is much faster to increase the
interest income, but it doesn’t affect that much because the net interest income was
increased by 111%. Overall, BDO has a good performance in its operation due to an
increase of 67% in its net profit for 5 years.
A. LIQUIDITY RATIOS
1. Current Ratio
Ratio/Year
2015
2016
2017
2018
2019
Current Ratio
0.95
1.20
1.08
1.08
1.09
Industry Average
1.08
1.16
1.09
1.15
1.15
INTERPRETATION Unfavorable
Favorable
Unfavorable Unfavorable Unfavorable
Table 1 Current Five (5) Year Current Ratios of BDO Unibank, Inc.
Trend Analysis:
Current Ratio
1.5
1
0.5
0
2015
2016
2017
2018
2019
Figure 7 Trendline of Current Ratios of BDO Unibank, Inc.
20
Analysis:
The current ratio measures the ability of the firm to meet its current liabilities with
the current assets. Based on the graph from 2015 to 2016, the trendline increased and
decline from 2017 to 2019. As you can see on the industry average, BDO is unfavorable
to meet its short-term obligation using its current assets except in 2016.
Cash Ratio
Ratio/Year
2015
2016
2017
2018
2019
Cash Ratio
0.02
0.02
0.02
0.02
0.02
Industry Average
0.12
0.12
0.9
0.9
0.9
Unfavorable
Unfavorable
Unfavorable
Unfavorable
INTERPRETATION Unfavorable
Table 2 Current Five (5) Year Cash Ratios of BDO Unibank, Inc.
Trend Analysis:
Cash Ratio
0.025
0.02
0.015
0.01
0.005
0
2015
2016
2017
2018
2019
Figure 8 Trendline of Cash Ratios of BDO Unibank, Inc.
Analysis:
The cash ratio measures the ability of the firm to finance its current liabilities
through the use of cash and cash equivalents. Based on the graph, the trendline for
BDO’s cash ratio is a straight horizontal line and there’s no further movement. In the
21
industry average, from 2015 to 2019, it is unfavorable to meet its short-term obligation
using its cash and cash equivalents.
Summary
Ratio/Year
2019
2018
2017
2016
2015
Current Ratio
0.95
1.20
1.08
1.08
1.09
Cash Ratio
0.02
0.02
0.02
0.02
0.02
Table 3 Current Five (5) Year Liquidity Ratios of BDO Unibank, Inc.
Trend Analysis:
Liquidity Ratios
1.5
1
0.5
0
2015
2016
2017
Current Ratio
2018
2019
Cash Ratio
Figure 9 Trendline of Liquidity Ratios of BDO Unibank, Inc.
Analysis:
The liquidity of the banks' measures different compares to the other types of
service businesses. The unfavorable result of its ratio can still be classified as good
since the banks have a higher liability due to deposits, premiums collected and other
financial services it offers to its customers.
22
Liquidity Ratio Analysis:
The current Ratio was low compare to the Industry Average during the period of
2015 to 2019. The year 2016 is the lowest having a current ratio of 1.22 and an Industry
Average of 1.76.
The Quick Ratio for 2015 to 2019 is not good and not sufficient to pay off its
current liabilities because the Current Ratios are unfavorable. The company is having
financial difficulty. It begins to pay the short-term liabilities slowly and borrow more from
the other institution, which increases its current liabilities.
B. PROFITABILITY RATIOS
1. Net Interest Margin
Ratio/Year
2015
2016
2017
2018
2019
Net Profit Margin
4%
4%
4%
5%
6%
Industry Average
3.51%
3.54%
3.72%
3.99%
4.66%
Favorable
Favorable
Favorable
Favorable
Favorable
INTERPRETATION
Table 4 Current Five (5) Year Net Interest Margin of BDO Unibank, Inc.
Trend Analysis:
Net Interest Margin
4.00%
3.00%
2.00%
1.00%
0.00%
2015
2016
2017
2018
2019
Figure 10 Trendline of Net Interest Margin of BDO Unibank, Inc.
23
Analysis:
The net profit margin measures the company’s overall net income to revenues.
Based on the graph, BDO has an upward trendline, which indicates that the company
has an increasing interest percentage for the past 5 years. In the cutoffs and standard,
BDO’s net interest margin is favorable.
2. Gross Profit Margin
Ratio/Year
2015
2016
2017
2018
2019
2.04%
2.58%
2.76%
2.49%
2.59%
3%
3%
3%
3%
3%
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Gross Profit Margin
Industry Average
INTERPRETATION
Table 5 Current Five (5) Year Gross Profit Margin of BDO Unibank, Inc.
Trend Analysis:
Gross Profit Margin
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
2015
2016
2017
2018
2019
Figure 11 Trendline of Gross Profit Margin of BDO Unibank, Inc.
Analysis:
The gross profit margin measures the profitability of the firm that indicates the
percentage of revenue that exceeds the cost of sales. Based on the graph, BDO’s gross
profit margin is in the uptrend movement, which means that the net interest income of
24
BDO is increasing. But in the industry average, from 2015 to 2019, BDO’s gross profit
margin is unfavorable and needs to increase a bit to meet the desired percentage.
3. Return on Assets
Ratio/Year
2015
2016
2017
2018
2019
1%
1%
1%
1%
1%
1.31%
1.40%
1.24%
1.07%
1.36%
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Return on Assets (ROA)
Industry Average
INTERPRETATION
Table 6 Current Five (5) Year Return on Assets of BDO Unibank, Inc.
Trend Analysis:
Return on Assets
1%
1%
1%
1%
0%
0%
0%
2015
2016
2017
2018
2019
Figure 12 Trendline of ROA of BDO Unibank, Inc.
Analysis:
The return on assets measures how profitable a company is using its total
assets. The graph shows a straight horizontal line; it indicates that BDO’s ROA is not
changing or there is no trend. Based on the industry average, from 2015 to 2019, it is
unfavorable and shows that the company is not utilizing its assets to generate more
income. Since it is a bank, it relies more on the liabilities due to the deposits, premiums,
and other financial services it offers.
25
4. Return on Equity
Ratio/Year
2015
2016
2017
2018
2019
Return on Equity
7%
12%
9%
12%
12%
11.13%
13.23%
11.18%
10.82%
13.55%
Unfavorable
Unfavorable
Unfavorable
Favorable
Unfavorable
Industry Average
INTERPRETATION
Table 7 Current Five (5) Year Return on Equity of BDO Unibank, Inc.
Trend Analysis:
Return on Equity
15%
10%
5%
0%
2015
2016
2017
2018
2019
Figure 13 Trendline of ROE of BDO Unibank, Inc.
Analysis:
The Return on Equity provides insight into how the company’s shareholders
contributed to generate profit. The graph shows a sideways movement. Based on the
industry average, it is unfavorable and shows that the company is not utilizing its
shareholder’s equity to generate more income. Since it is a bank, it relies more on the
liabilities due to the deposits, premiums, and other financial services it offers.
5. Times Interest Earned (TIE)
Ratio/ Year
2015
2016
2017
2018
2019
Times Interest
2.20
1.98 times
2.21
1.47
1.49
Earned
times
times
times
times
2.5
2.5
2.5
Industry Average
2.5
2.5
26
INTERPRETATION
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Table 8 Current Five (5) Year Time Interest Earned of BDO Unibank, Inc.
Trend Analysis:
Times Interest Earned
2.5
2
1.5
1
0.5
0
2015
2016
2017
2018
2019
Figure 14 Trendline of TIE of BDO Unibank, Inc.
Analysis:
Times interest earned ratio measures the capacity of the entity to meet its debt
obligation through its current income. The graph shows a downtrend movement and
below in the industry average, which means that if BDO cannot pay all of its debt
obligations through its current income. Due to financial services offered by banks, it has
high liabilities and can still be favorable that the company is in a good position.
5. Earnings Per Share
Ratio/ Year
Earnings Per
Share
Industry
Average
2015
P7.25
2016
P6.47
It depends, no It depends,
general rule of no general
thumb
rule of
thumb
2017
P6.47
It depends,
no general
rule of thumb
2018
P6.40
It depends,
no general
rule of thumb
2018
P7.40
It depends,
no general
rule of thumb
Table 9 Current Five (5) Year Earnings Per Share of BDO Unibank, Inc.
27
Trend Analysis:
Earnings Per Share
7.5
7
6.5
6
5.5
2015
2016
2017
2018
2019
Figure 15 Trendline of EPS of BDO Unibank, Inc.
Analysis:
Earnings per share show how much the company generates for each stock
share. The graph shows a reversal movement, it declined from 2016 to 2018 and make
a bounce back in 2019. It means during 2016 to 2018, BDO deceased EPS by almost
P6.40, even though it generates more income in the given years. In 2019, it gives P7.40
earnings per share, the highest in the past 5 years. It will give its investors a higher
return on each share of stock.
Summary
Ratio/Year
2015
2016
2017
2018
2019
2.58%
3.20%
3.25%
3.25%
3.48%
2.04%
2.58%
2.76%
2.49%
2.59%
1%
1%
1%
1%
1%
Equity (ROE)
7%
12%
9%
12%
12%
Time Interest
2.20
1.98 times
2.21
1.47
1.49
times
times
times
P6.47
6.40
7.40
Net Profit
Margin
Gross Profit
Margin
Return on
Assets (ROA)
Return on
Earned
times
Earnings Per
P7.25
P6.47
Share
28
Table 10 Current Five (5) Year Profitability Ratios of BDO Unibank, Inc.
Trend Analysis:
Profitability Ratios
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2015
2016
NPM
2017
GPM
2018
ROA
2019
ROE
Figure 16 Trendline of Profitability Ratios of BDO Unibank, Inc.
Analysis:
If the investor will rely on industry average of service type of business and not on
the nature of banks, the overall result will be unfavorable. But then, BDO must still need
to improve its profitability by generating more net interest income.
C. EFFICIENCY RATIOS
1. Receivable Turnover
Ratio/Year
2015
2016
2017
2018
2019
Receivable
0.05x
0.05x
0.05x
0.06x
0.07x
Industry Average
6 to 12 times
6 to 12 times
6 to 12 times
6 to 12 times
6 to 12 times
INTERPRETATION
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Turnover Ratio
Table 11 Current Five (5) Year Receivable Turnover Ratios of BDO Unibank, Inc.
29
Trend Analysis:
Receivable Turnover
0.08
0.06
0.04
0.02
0
2015
2016
2017
2018
2019
Figure 17 Trendline of Receivable Turnover Ratios of BDO Unibank, Inc.
Analysis:
The accounts receivable turnover measures how the company’s receivables
have been turned into cash in the given year. The graph shows an uptrend, which
means that the conversion of loans and other receivables of BDO into cash is
increasing. But, based on the industry average, BDO’s accounts receivable turnover are
unfavorable, which may indicate that the loan and other receivables of BDO take time to
convert into cash. One of the reasons for this is the failure of payment of its debtor.
2. Asset Turnover Ratio
Ratio/Year
2015
2016
2017
2018
2019
Asset Turnover
0.04x
0.04x
0.04x
0.04x
0.05x
Ratio
Industry Average
INTERPRETATION
3
Unfavorable
3
Unfavorable
3
Unfavorable
3
Unfavorable
3
Unfavorable
Table 12 Current Five (5) Year Asset Turnover Ratios of BDO Unibank, Inc.
30
Trend Analysis:
Asset Turnover
0.06
0.05
0.04
0.03
0.02
0.01
0
2015
2016
2017
2018
2019
Figure 18 Trendline of Asset Turnover Ratios of BDO Unibank, Inc.
Analysis:
The asset turnover ratio measures how efficient the management to use assets
to generate sales and earn profit for the company. The graph shows an increased in
2019, it means that this year BDO increased its use on its assets to have more net
interest income but even it increased, the industry average are unfavorable to BDO, it
may indicate that it does not rely heavily on its assets to generate more new interest
income.
3. Fixed Asset Turnover Ratio
Ratio/Year
2015
2016
2017
2018
2019
Fixed Asset Turnover 2.10x
2.24x
2.38x
2.74x
2.80x
Ratio
Industry Average
0.65 to 1
0.65 to 1
0.65 to 1
0.65 to 1
0.65 to 1
INTERPRETATION
Favorable
Favorable
Favorable
Favorable
Favorable
Table 13 Current Five (5) Year Fixed Asset Turnover Ratios of BDO Unibank, Inc.
31
Trend Analysis:
Fixed Asset Turnover
3
2.5
2
1.5
1
0.5
0
2015
2016
2017
2018
2019
Figure 19 Trendline of Fixed Asset Turnover Ratios of BDO Unibank, Inc.
Analysis:
The fixed asset turnover measures how effectively a company generates sales
through its fixed assets. The graph shows an uptrend movement; it may indicate that
BDO is using more fixed assets in generating income. The high increase in the
branches of BDO across the rural areas affects the fixed assets to increase. `
4. Equity Turnover Ratio
Ratio/Year
Equity
2015
2016
2017
2018
2019
Turnover 0.19x
0.38x
0.32x
0.37x
0.42x
Ratio
Industry Average
INTERPRETATION
3
3
3
3
3
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Table 14 Current Five (5) Year Equity Turnover Ratios of BDO Unibank, Inc.
Trend Analysis:
32
Equity Turnover
0.5
0.4
0.3
0.2
0.1
0
2015
2016
2017
2018
2019
Figure 20 Trendline of Equity Turnover Ratios of BDO Unibank, Inc.
Analysis:
The equity turnover measures the proportion of the sales to its stockholders’
equity. The graph shows an uptrend movement which may indicate an increase in the
efficiency of the management in using the equity to generate more revenue but based
on the industry average, it is unfavorable and needs to increase further to meet the
desired ratio.
Summary
Ratio/Year
2015
2016
2017
2018
2019
Receivable
0.05x
0.05x
0.05x
0.06x
0.07x
0.04x
0.04x
0.04x
0.04x
0.05x
2.10x
2.24
2.38x
2.74x
2.80x
0.19x
0.38x
0.32x
0.37x
0.42x
Turnover Ratio
Asset Turnover
Ratio
Fixed Asset
Turnover Ratio
Equity Turnover
Ratio
Table 15 Current Five (5) Year Efficiency Ratios of BDO Unibank, Inc.
33
Trend Analysis:
Efficiency Ratios
3
2.5
2
1.5
1
0.5
0
2015
2016
2017
2018
Receivable Turnover
Asset Turnover
Fixed Asset Turnover
Equity Turnover
2019
Figure 21 Trendline of Efficiency Ratios of BDO Unibank, Inc.
Analysis:
BDO’s efficiency ratios may still be favorable since it is a bank industry that relies
heavily on the liabilities due to its financial services. The significant increase in the fixed
asset turnover is due to the increased of the rural branches across the country which
may generate more financial services to customers.
D. STABILITY RATIOS
1. Debt Equity Ratio
Ratio/Year
2015
2016
2017
2018
2019
Debt Equity Ratio
0.31
0.59
1.94
0.51
0.56
Industry Average
0.30
0.30
0.30
0.30
0.30
INTERPRETATION
Favorable
Favorable
Favorable
Favorable
Favorable
Table 16 Current Five (5) Year Debt Equity Ratios of BDO Unibank, Inc.
34
Trend Analysis:
Debt Equity Ratio
2.5
2
1.5
1
0.5
0
2015
2016
2017
2018
2019
Figure 22 Trendline of Debt Equity Ratios of BDO Unibank, Inc.
Analysis:
The debt equity ratio compares the total liabilities to shareholder’s equity to
determine how much leverage a company is using. The graph shows a high increase in
2017 and a decline in 2018 and 2019. BDO has a high equity ratio which means that the
company relies more on liabilities than equity.
2. Debt Ratio
Ratio/Year
2015
2016
2017
2018
2019
Debt Ratio
0.60
0.50
0.60
0.60
0.60
Industry Average
0.82
0.79
0.83
0.80
0.80
INTERPRETATION
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Table 17 Current Five (5) Year Debt Ratios of BDO Unibank, Inc.
Trend Analysis
Debt Ratio
0.065
0.06
0.055
0.05
0.045
2015
2016
2017
2018
2019
35
Figure 23 Trendline of Debt Ratios of BDO Unibank, Inc.
Analysis:
The debt ratio measures how much leverage is used by a company in terms of
total debt to total assets. The graphs show a decline in 2016 because of the high
increase in debts over its total assets but it makes a bounce back in 2017 to 2019. But it
is unfavorable to industry average which may indicate that the company has more debt
than assets.
Summary
Ratio/Year
2015
2016
2017
2018
2019
Debt Equity
0.31
0.59
1.94
0.51
0.56
0.06
0.05
0.06
0.06
0.06
Ratio
Debt Ratio
Table 18 Current Five (5) Year Stability Ratios of BDO Unibank, Inc.
Trend Analysis:
Stability Ratios
2.5
2
1.5
1
0.5
0
2015
2016
Debt Equity
2017
2018
2019
Debt Ratio
Figure 24 Trendline of Stability Ratios of BDO Unibank, Inc.
Analysis:
BDO’s stability ratios are in a good position wherein banks more rely on liabilities
and it also has higher total assets over debt which will be good for the eyes of the
customers and investors.
36
E. LEVERAGE RATIOS
1. Debt to Asset Ratio
Ratio/Year
2015
2016
2017
2018
2019
Debt to asset ratio
0.90
0.79
0.88
0.89
0.88
Industry Average
0.60- 1
0.60- 1
0.60- 1
0.60- 1
0.60- 1
INTERPRETATION
Favorable
Favorable
Favorable
Favorable
Favorable
Table 19 Current Five (5) Year Debt to Asset Ratios of BDO Unibank, Inc.
Trend Analysis:
Debt to Asset Ratio
0.95
0.9
0.85
0.8
0.75
0.7
2015
2016
2017
2018
2019
Figure 25 Trendline of Debt to Asset Ratios of BDO Unibank, Inc.
Analysis:
The debt to asset ratio indicates the percentage of assets that are being financed
through debt. The graph shows a sideways movement after the decline in 2016. It may
indicate that in 2016, BDO has a high portion of the debt in its assets. Based on industry
average, BDO relies more on debt to finance its assets.
2. Debt to Equity Ratio
Ratio/Year
2015
2016
2017
2018
2019
Debt to equity ratio 4.71
8.73
7.48
7.83
8.30
Industry Average
6.56
6.72
5.73
6.01
6.86
37
INTERPRETATION
Unfavorable
Favorable
Favorable
Favorable
Favorable
Table 20 Current Five (5) Year Debt to Equity Ratios of BDO Unibank, Inc.
Trend Analysis:
Debt to Equity Ratio
10
8
6
4
2
0
2015
2016
2017
2018
2019
Figure 26 Trendline of Debt-to-Equity Ratios of BDO Unibank, Inc.
Analysis:
The debt-to-equity ratio shows the proportion of equity and debt to finance the
company’s assets. The graph shows an uptrend movement which may indicate an
increase in the liabilities of the company. It may still be favorable since it is a bank, the
higher the liabilities may indicate a higher amount came from the financial service it
offers.
3. Equity Ratio
Ratio/Year
2015
2016
2017
2018
2019
Equity Ratio
0.19
0.09
0.11
0.11
0.12
Industry Average
0.50 to 1
0.50 to 1
0.50 to 1
0.50 to 1
0.50 to 1
INTERPRETATION
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Unfavorable
Table 21 Current Five (5) Year Equity Ratios of BDO Unibank, Inc.
38
Trend Analysis:
Equity Ratio
0.2
0.15
0.1
0.05
0
2015
2016
2017
2018
2019
Figure 27 Trendline of Equity Ratios of BDO Unibank, Inc.
Analysis:
The equity ratio measures how much leverage that the company uses to finance
its investment in assets. The graph shows a downtrend movement which may indicate
that BDO relies primarily on debt to acquire assets.
Summary
Ratio/Year
2015
2016
2017
2018
2019
Debt to asset
0.90
0.79
0.88
0.89
0.88
4.71
8.73
7.48
7.83
8.30
0.19
0.09
0.11
0.11
0.12
ratio
Debt to equity
ratio
Equity Ratio
Table 22 Current Five (5) Year Leverage Ratios of BDO Unibank, Inc.
39
Trend Analysis:
LEVERAGE RATIOS
10
8
6
4
2
0
1
2
Debt to Asset
3
Debt to Equity
4
5
Equity Ratio
Figure 28 Trendline of Leverage Ratios of BDO Unibank, Inc.
Analysis:
BDO’s Leverage ratios is in a good position wherein it relies heavily on its
liabilities than equity which is expected to a bank type of business.
Weighted Average Cost of Capital (WACC)
Bases on Investopedia, the weighted average cost of capital (WACC) is a
calculation of a firm's cost of capital in which each category of capital is
proportionately weighted. All sources of capital, including common stock, preferred
stock, bonds, and any other long-term debt, are included in a WACC calculation.
Year
2015
2016
2017
2018
2019
Average
WACC
41%
40%
48%
48%
53%
46%
Table 23 Current Five (5) Year WACC of BDO Unibank, Inc.
40
Trend Analysis:
WACC
60%
50%
40%
30%
20%
10%
0%
2015
2016
2017
2018
2019
AVERAGE
WACC
Figure 29 Trendline of WACC of BDO Unibank, Inc.
Analysis:
BDO’s WACC average in 5 years is 46% and taking weighted average in
this way, it stated that 46% of BDO interest owes for each peso it finances.
41
Major Market Served
Before becoming one of the largest banks in the Philippines, BDO Unibank, Inc.
was known as the thrift bank Acme Savings Bank in the late 1960s, which was later
acquired by the Sy group in 1976 and since then has been providing their clients with
wide range of prominent goods and services as universal bank in the financial industry.
Having over than 1,300 branches nationwide and a growing number of
international offices, BDO aims to give quality service, customer-focused strategies, and
service-oriented company to maintain successful relationships with their customers that
make use of their financial services such as lending, deposit-taking, trusts and
investments, credit cards, etc.
BDO Unibank is a member of SM Group of Companies wherein consumers of
the corporation can easily manage their finances as SM Malls owns more than 8.5
million square meters of mall space that have a BDO physical branches or ATMs
available. Due to community quarantines that is implemented in the country, BDO
Online Banking is available for clients to make transactions as an alternative to branch
banking because of limited open branches and shortened banking hours.
42
Market Size
The banking industry in the Philippines consists of 43 universal banks, 57 thrift
banks (savings and mortgage banks, microfinance institutions, stock savings and loan
associations, and private development banks), and 495 cooperative and rural banks
(Outlook of the Philippine Banking Sector, 2019).
An archipelago with more than 109 million inhabitants, the Philippines being a
member of the tiger cub economies in Southeast Asia with the ability to take advantage
of the rising economy led to the increase of investments from neighboring countries and
other investors. Based on the data from Bangko Sentral ng Pilipinas (BSP), the total
assets of the country’s banks accumulated for 81.4% of the total assets of the financial
sector. With banks being the primary source of credit for the local economy and the
most essential asset in the financial market, the GDP in the first half of 2017 accounted
at 8.6%.
The performance and condition of the banking system in the Philippines is
negatively affected due to the COVID-19 pandemic and has forced banks to adjust daily
operations in accordance with the Enhanced Community Quarantine (ECQ) last March
2020 which also affected their borrowers’ ability to pay their dues. Regardless, the
financial soundness indicators (FSIs) confirmed that the banking system were able to
adapt with the new normal during the first half of 2020. The demand for digital banking
spiked up in which more than 4.1 million digital accounts registered online in both banks
and non-bank electronic money issuers (EMIs) and the number of transactions using
Insta Pay and PesoNet also increased.
Market Segment
Bank’s Business Segments include the following:
•
Retail Banking Segment
•
Wholesale Banking Segment
43
•
Wealth Management Segment
It is stated that in terms of income, retail banking is the number one contributor
and is also known as personal banking, in which most individuals are acquainted with
as it includes activities that happen in branch banking. Cash deposits, credit cards, and
mortgages are the services that retail banking offers that targets new business clients.
Retail banking income is divided into streams of interest and non-interest. Around 70
percent of retail sales are paid for by net interest income. In determining the interest
earned on both credit cards and mortgages, subtract the interest charged on deposits
and in total the percentage of non-interest income is at 30%. By taking the difference
between both non-interest profits and operating costs, it is determined. Account costs,
processing fees, credit card fees, and foreign exchange sales produce the revenues.
The payments are mostly small sums and the consumers are relatively ignored.
Compensation costs and maintenance costs are expenditures included in this section
with the gross revenue of a bank adding up to more than 50%.
Apart from retail banking, the second contributor in earnings is wholesale
banking, also known as capital markets. It deals with clients in the corporation and
institution that is associated with banking investment which includes trading, lending,
sales, mergers, and acquisitions. Usually, in the wholesale banking segment its is
normal to have a 15% to 40% total revenue. Determining the revenue in wholesale
banking is difficult due to the complexity in estimating sales that stems from the lack of
trade disclosures.
For banks, wealth management is a fast growing market with its revenue
stemming from retail brokerage services and from funds of the management. Wealth
management is commonly priced for many reasons at a higher multiple than other
segments. Due to lower credit standards, it is more lucrative, there is lower uncertainty,
and there is greater growth. The sudden change in demographics of the population is
because of the older generation that chooses to save for retirement instead of getting
loans. This results to this segment to grow faster than the other two. As a majority of the
44
funds handled are held in equities in terms of revenue, trading commissions add to
revenue. In recent years, there has been more trade action, which raises commissions.
However, because of its focus on the stock markets, the short-term growth in trading
income is a significant source of volatility. Contrastingly, because management-related
payments do not rely on market success, there is no rise in volatility.
Organizational Chart
Figure 30 Table of Organization BDO Unibank, Inc.
Our Board of Directors
The variety in aptitudes, experience, sex, sexual direction or inclination, age,
training, race, business, and other related encounters is one of the vital supporters of
our effective Board oversight. We see this broad scope of encounters and foundations
45
as a fundamental component in keeping up vital direction and perspective for our
developing business.
Board Structure
The Board is made of 11 individuals helped by three guides. The individuals from
the Board are generally experts with ability in banking, bookkeeping, and account, law,
stock showcasing, procedure plan, bank guidelines, data innovation, supportability, and
danger the executives. A Non-Executive Chairperson drives it with 6 Independent
Directors, 2 Non-Executive Directors, and 2 Executive Directors who are the Vice
Chairman and the President and CEO. Autonomous Directors involve the greater part
(54.50%) individuals from the Board, along these lines surpassing the prerequisite of
the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas
(BSP). Non-Executive Directors, including Independent Directors, presently contain
82% of the Board, more than the necessity of the BSP of at any rate greater part of the
Board. This gives autonomous and target judgment on huge corporate issues and
guarantees that central points of contention and techniques are equitably explored,
valuably tested, wholly talked about, and thoroughly analyzed.
Board Committees
The Board has set up nine (9) advisory groups to help release its obligations and
duties. These panels get their power from and report straightforwardly to the Board.
Their orders and extents of obligation are gone ahead in their separate Terms of
Reference, which are exposed to yearly audit and might be refreshed or changed to
address the Board's issues or for administrative consistence. The number and
participation organization of advisory groups might be expanded or diminished by the
Board as it considers proper, predictable with appropriate laws or guidelines explicitly
on the lion's share enrollment and chairmanship of autonomous chiefs in different
councils. As of December 31, 2019, eight of the nine board-level councils are led by
autonomous chiefs. These cover Risk Management, Board Audit, Corporate
46
Governance, Trust, Related Party Transactions, Information Technology Steering,
Nominations, and Compensation.
The Board of Directors
•
Responsibility for good administration lies with the Board.
•
It is liable for giving viable initiative and generally heading to cultivate the drawnout accomplishment of the Bank.
•
It administers the Bank's business undertakings, audits the key plans and
execution targets, monetary plans and financial plans, key operational activities,
capital uses, acquisitions, and divestments, yearly and break fiscal summaries,
and corporate administration rehearses.
•
It administers the executive's execution, endeavors to hazard the executive's
structure, inner control frameworks, monetary revealing and consistence, related
gathering exchanges, proceeding with chief instruction, and progression plans for
the Board and CEO.
•
It considers supportability issues identified with the climate and social
components as a feature of its maintainable financial practices.
Executive Committee
•
Exercises intensity of the Board in the administration and heading of the issues
of the Bank.
•
Acts as a principal favoring body for advances, credits, advances or
responsibilities, and property-related proposition.
•
Reviews and suggests for Board endorsement significant credit arrangements.
Trust Committee
•
Reviews and supports exchanges among trust and additionally guardian
accounts, acknowledges, and closes trust and other trustee accounts, and favors
the venture, reinvestment, and manner of assets or property.
•
Evaluates trust and other trustee accounts at any rate once per year.
47
•
Reviews Trust and Investment Group's general presentation, the profile of assets
and resources under its administration, industry position, and the board reports'
danger.
•
Approves offering new items and administrations, foundation and recharging of
lines and cutoff points with monetary establishments, speculation sources, and
counterparties.
Risk Management Committee
•
Responsible for improvement and oversight of danger the executive's program of
the Bank.
•
Responsible for favoring hazard hunger levels, approaches, hazard resistance
limits. Characterizes fitting procedures for recognizing, evaluating, overseeing,
and controlling danger introductions, including forestalling or potentially limiting
the effect of misfortunes.
•
Oversees usage and audit of the danger the executives plan on an undertaking
wide premise including the arrangement of cutoff points of optional authority
assigned by the Board of Directors to the Board and guarantees quick restorative
activities when cutoff points are penetrated.
•
Responsible for assessing the proceeded with pertinence, exhaustiveness, and
viability of danger the executive's structure.
•
Works with Audit Committee in ensuring in the Annual Report the sufficiency of
the Bank's inward control and danger the board frameworks.
Compensation Committee
•
Provides oversight on chiefs' pay and compensation of senior administration and
other key staff, guaranteeing that remuneration conspire is reliable with the
Bank's way of life and methodology, successfully lined up with reasonable
danger taking and comparable with corporate and singular execution.
•
Ensures consistency of remuneration approaches and practices over the Group.
Board Audit Committee
48
•
Oversees monetary announcing the measure, the arrangement of inward control
and danger the board frameworks, interior and outside review capacities, in
addition to consistency with administration approaches, relevant laws, and
guidelines.
•
Reviews the detailing cycle's uprightness to guarantee exactness and
unwavering quality of budget summaries and consistency with monetary
revealing norms.
•
Monitors and assesses ampleness, adequacy, and viability of the Bank's set up
inside control and danger the board frameworks, approaches, and methodology.
Nominations Committee
•
Leads method of characteristic candidates for election and appointment of
administrators
and
everyone
different
position
requiring
the
Board
of
administrators' appointment, giving full thought to succession coming up with
and, therefore, the cluster's leadership wants. Above all, this method includes the
identification of the abilities and competencies of the presently serving
administrators, the gaps in skills and competencies known. Therefore, they look
for World Health Organization candidates aligned with the Bank's directions to fill
the gaps. It then makes applicable recommendations to the Board.
•
Makes recommendations to the Board on the composition and position of the
assorted committees.
•
Reviews structure, size, and composition of the Board, together with the balance
of
skills,
information,
and
knowledge.
Therefore,
the
non-executive
administrators' independence and makes recommendations to the Board with
relevancy to any changes.
Corporate Governance Committee
•
Assists the Board in process administration approaches and regulation the usage
of administration practices of the Bank even as its auxiliaries and associates.
49
•
▪ Conducts yearly execution assessment of Board of administrators, its councils,
chief administration, peer assessment of chiefs, and behaviors a self-assessment
of its presentation.
•
Oversees continuing instruction program for chiefs and key officers and proposes
applicable getting ready. Designations Committee
•
Leads cycle of identifying risk for political race and arrangement of chiefs and
everyone completely different positions requiring the Board of administrators'
arrangement, giving full thought to progression composition and, therefore, the
cluster's authority wants. Specifically, this cycle incorporates the identification of
the presently serving chiefs' aptitudes and capabilities, the holes in skills and
skills distinguished, and therefore the pursue candidates World Health
Organization ar lined up with the Bank's bearings to fill the holes. IT at that time
makes correct proposals to the Board.
•
Makes suggestions to the Board on the synthesis and position of the various
informatory teams.
•
Reviews structure, size, and organization of the Board, together with the
equilibrium of skills, info, and knowledge and therefore the freedom of the nonleader administrators and makes suggestions to Board with relevancy any
changes.
Information Technology committee
•
Provides oversight and administration over the Bank's IT capacities, together with
endorsements of information innovation-related approaches and practices of the
Bank and material rules.
•
Informs the Board of each inner and out of doors, IT-related turns of events and
exercises, expected difficulties and dangers, progress versus key destinations.
•
Approves and underwrites to the Board IT-related accepted procedures, key
plans, approaches, and methodology.
50
•
Accountable
for
comprehension,
overseeing,
and
assuaging
innovation
probabilities that defy the Bank and its auxiliaries, guaranteeing that the hazards
are suitably overseen and mitigated, and checking IT execution together with the
standing of great IT tasks and problems.
Related Party Transactions Committee
•
Assists the Board in its oversight of the lead of all connected Party Transactions
(RPTs) to secure the interests of the Bank and its partners
•
Ensures legitimate exposure of all endorsed RPTs as per material lawful and
administrative prerequisites and affirmation by the lion's share vote at the Annual
Stockholders' gathering the Bank's critical exchanges with related gatherings.
Products and Services
BDO may be a full-service general/universal bank. A full-administration general
keeps cash with one among the amplest circulation organizations comprising of over
one,300 operating branches and quite four,400 ATMs across the country. It offers a
complete cluster of trade driving things and administrations to the retail and company
business sectors as well as loaning (corporate, focus market, SME, and purchaser),
Deposit-taking, interchange, Facilitating, Trust and Investments, Credit Cards, company
money Management, and Remittances.
BDO discovers approaches to satisfy BDO vendors' wants by giving the
accompanying:
•
Straight Payment - Over the counter or face-to-face transactions
•
Installment Payment arrange - Regular, zero % or obtain currently, Pay
Later Cardholders would currently be ready to have the ability to alter over a
traditional obtain, in staggered installment, while not interest! The customer
approach to life and searching propensities are quickly evolving. Banks and
stores have to be compelled to acknowledge this by cooperating to grant
51
swollen disbursal power and filmable installment alternatives. The Installment
workplace typically used clearly for the acquisition of high-priced things, as an
example, machines, furniture, contraptions, and then on, has advanced.
Clothes and different essential wants are presently likewise offered in parts to
show resolute be a lot of moderate to the consumers. This workplace is
accessible to all or any BDO cardholders, the largest card base within the
nation. This program will not merely support your store's deals, but in like
manner profit by the market, we tend to each serve.
•
Delivery/Events - Utilizations so much off/remote terminals ideal for
conveyance administrations, occasions, and shows. Alludes to BDO's
workplace of card acknowledgment utilizing the location Wireless Technology,
which can be introduced at your web site to be used for conveyances,
occasions, or roadshows while not the necessity for phone access.
•
E-commerce - Internet/On-line transactions The BDO web Payment Entree
Facility offers a customary internet association together with your organization
to securely and reliably send and find installment approvals allowing your
shoppers to shop for merchandise and ventures from your internet web site.
•
Mail Order / Telephone Order (MOTO) - Cardholder Not gift exchanges This
workplace permits your organization the advantage of tolerating exchanges
that are brought in, sent, or faxed by your shoppers. Consequently, your
organization can have the choice to oblige exchanges while not the presence
of the cardholders at your foundation.
•
Recurring Payment System (RPS) - Shippers with perpetual charging
exchanges like protection expenses, membership installments, and club
enrollment contribution. The continual Payment System (RPS) Facility is
employed routinely by organizations for "auto-charge game plans" with
customers. This installment workplace permits the organization to trot out
exchanges
that
are
continuance
in
nature,
such
as
occasional
expenses/charges.
52
BDO likewise offers obtained shippers the attendant Services:
•
Point of Sale (POS) terminal installation.
•
Card acceptance and POS terminal usage orientation
•
Supplies
•
Terminal maintenance, servicing, and repair
•
Merchant Services call center (with PLDT and Digital fee number)
•
Merchant on-line access - dealings reports for payment reconciliation on the
market via the net
53
CHAPTER II
RESEARCH DESIGN AND METHODOLOGY
Sources of Information
Collecting various information and data from other financial institutions were
gathered to use as a source to establish superior strategic management. A data
requirement includes financial statements, financial forecasts, financial highlights,
surveys, ownership, board, and management to accomplish this paper. It also needs
information on recent developments in the sector under review. Some of the industry's
significant competitors' history is required for comparative purposes in the financial and
organizational aspects. It is also essential to provide adequate internal knowledge of
Banco De Oro, the purpose of this study.
Methodology
The information required in this paper was gathered primarily through the recent
Financial Report of Banco De Oro and the website. Registered employees were
required to supply a copy of the financial highlights and all related material. Information
on rivals was collected using the internet. Certain internal information on the business
understudy was collected through the data gathered from investors' presentation 2019
on the internet. Extensive analysis has been carried out using the internet to scan for
specific data, statistics, and forecasts.
54
Table 24 Summary of Frameworks, Tools, Activities and Outputs For this Strategic Management Paper
Framework
Tools
Activities
Output
Ten Essential
Mission Statement
Mission and Vision
Components of
Evaluation/Formulation
Statements
Mission Statement
External Factor
General Environment
Evaluation (EFE
Analysis
Matrix)
Poster’s Five
Competitive Profile
Forces Model
Matrix (CPM)
David’s Functional
Internal Factor
Tools
Evaluation (IFE)
David’s Matching
SWOT Matrix
Tools
SPACE Matrix
Opportunities and
Industry Analysis
Threats
Company Analysis
Strength and
Weaknesses
Strategy Formulation
Objectives and
Strategies
IE Matrix Grand
Strategy Matrix
David’s Matching
Quantitative
Prioritization of
Recommended
Tools
Strategic Planning
Strategies
Strategies
Implementing
Market Penetration
Action Plans
Strategies
Product Development
Proforma Financial
Matrix
Statements
Norton’s and
Strategy Evaluation
Performance
Kaplan’s Balanced
and Control
Measures
Scorecard
55
Limitations
This paper is confined only to Banco de Oro, which exists exclusively in the
Philippines, compared to its competitors such as Metrobank, Bank of the Philippine
Islands (BPI), Philippine National Bank. Among the various fields of this business, this
paper focuses on banking institutions. This paper emphasizes the company's success
and role in the banking and finance industry vis-à-vis its competitors.
The most recent year (2019) annual report was available as an analysis to be
used, which is the most current financial statement available. The analyst made this
prediction, taking into account the global financial crisis, but conservative enough for the
undesirable events that influenced its financial status this year. This annual report was
used as a basis for comparison and forecast. Therefore, it is believed that no dividend
distributions will be made within the timeframe of the years' forecasts. The forecasts
also suggest that no tax holidays or preferential tax treatments and improvements in tax
rates will take effect in the future.
56
CHAPTER III
VISION AND MISSION
Current Vision
We shall be at the forefront of the leasing and financing industry in the Philippines and
in the Asia Pacific Region. We shall have the most extensive market reach and shall be
composed of highly trained, technically competent and upright professionals working as
a team and contributing to the growth of the nation and the communities we serve.
Recognizing that the customer is the focus of our activities, we shall lead the industry by
providing modern and relevant financial services which exceed their expectations.
Analysis:
Parameter
Does it clearly answer the
Yes/No
YES
question “What do we want to
Evaluation
It is indicated in the first
sentence.
become?”
Is it concise enough yet
NO
inspirational?
Not concise enough and
lacks in being inspirational
Is it aspirational?
YES
Does it give a clear indication
NO
There is no clear indication
as to when it should be
attained?
Table 25 Current Vision Analysis
Current Mission
We are in business for our customers, shareholders, and employees. We shall deliver
creatively innovative products and cross-sell the BDO Unibank Group’s services
supported by procedures, systems and processes which will ensure utmost customer
satisfaction. We shall recognize and reward excellence in our employees and shall
57
provide an environment conducive to maximizing their potentials as we work cohesively
as a team. We shall generate consistently high returns for our shareholders.
Component
Customers
Yes/No
Evaluation
YES
It is stated that BDO are in
business for their customers,
shareholders, and employees.
Products and Services
YES
“deliver creatively innovative
products and cross-sell the
BDO
Unibank
Group’s
services” – It is very concise,
but the whole thought is seen.
Markets
NO
None stated
Technology
NO
Technology
was
not
mentioned
Concern for survival, growth
YES
and profitability
“generate
consistently
high
returns for our shareholders” –
They have clearly stated their
intentions
to
their
shareholders.
Philosophy
NO
Self-Concept
NO
None stated
Concern for public image
NO
They have not stated their
response to social, community
and environmental concerns.
Concern for employees
YES
recognize
and
reward
excellence in our employees
Table 26 Current Mission Analysis
58
Vision Recommendation and Analysis
Proposed Revision for Current Vision:
➢ To be the leading bank and financial services firm in the Philippines,
empowering individuals to meet their goals and aspirations. We shall
have the most vital economic presence made up of highly trained and
competent professionals who work as a team and contribute to the
advancement of the country and communities the company represents.
With the customers as the focus of our activities, BDO Unibank shall
lead the industry in the next 5 years by providing and adapting to new
technological advancements relevant to financial services above their
standards.
Parameter
Yes/No
Does it clearly answer the
YES
question “What do we want to
Evaluation
It is indicated in the first
sentence.
become?”
Is it concise enough yet
YES
inspirational?
Is it aspirational?
YES
The vision statement is
optimistic
Does it give a clear indication
YES
5 years
as to when it should be
attained?
Table 27 Current Vision Analysis
Mission Recommendation and Analysis
Proposed Revision for Current Vision:
With our clients, shareholders, and staff at our core, we are committed to:
59
Deliver innovative goods dynamically and cross-sell the services of the BDO
Unibank Group, backed by policies, programs, and processes, ensuring
customer satisfaction;
Recognize and maximize our employees' full potential by providing a positive and
productive work environment while working as a team.;
Generate consistently high returns for our shareholders;
Live by adhering to the highest ethical principles based on honesty;
Advancing by technological innovation into the future of banking;
Reinventing ourselves pro-actively to fulfill market demands.
Component
Customers
Yes/No
Evaluation
YES
It is stated that BDO are in
business for their customers,
shareholders, and employees.
Products and Services
YES
“Deliver
innovative
goods
dynamically and cross -sell
the
services
of
the
BDO
Unibank Group” – It is very
concise, but the whole thought
is seen.
Markets
YES
Able to address the demands
of the market and very clear
that they will re-invent to be
competitive
for
its
global
success and growth.
Technology
YES
Technological innovation
Concern for survival, growth
YES
“generate
and profitability
consistently
high
returns for our shareholders” –
They have clearly stated their
60
intentions
to
their
shareholders
Philosophy
YES
It is stated that the company
Is living by adhering to the
highest
ethical
principles
based on honesty
Self-Concept
NO
None stated
Concern for public image
NO
They have not stated their
response to social, community
and environmental concerns.
Concern for employees
YES
It is clearly stated that they will
recognize and maximize the
full
potential
of
their
employees
Table 28 Current Vision Analysis
61
CHAPTER IV
EXTERNAL ASSESSMENT
Political and Legal
Company organizations and how they work is profoundly influenced by political
and
legal
powers.
New
financial
reforms,
regulations,
tax
laws,
political
decisions/influence, etc., contain these powers. It affects the banking industry's
competitiveness and potential limits on how a firm can function.
Bangko Sentral ng Pilipinas (BSP) regulates the Philippines' financial services,
with laws expressed in the Manual of Regulations for Banks (MORB) and its Monetary
Board. The Republic Act 8791 or the General Banking Law of 2000 acknowledges
banks' contractual essence, quasi-banks, trust entities, etc., which demands the utmost
quality of performance and professionalism. It is the government's responsibility to
foster and sustain a productive financial environment by developing and implementing
laws established to monitor banking transactions and protect clients of the financial
institutions. Aside from this, the Philippine Deposit Insurance secured additional
protection for the banking industry. It mostly engages with money and specifications for
capitalization, including functional criteria for commercial and universal banks.
In 2017, after repealing the 17-year moratorium on issuing licenses to new
domestic banks, they approved a new package of new rules for the granting of rights to
banks and other financial institutions. The 1999 moratorium on foreign license approvals
was in direct response to the Asian financial crisis. Which only allowed banks to set up
in microfinance-focused unbanked areas. Competition in the banking sector will be
affected knowing that the ban is lifted.
Due to lockdowns caused by the coronavirus (COVID-19) pandemic, state-run
Credit Information Corp. (CIC) advises financial institutions to restrain from marking as
default or overdue missing or partial loan payments during enhanced community
quarantine. In the midst of this epidemic triggered by the 2019 coronavirus disease or
62
COVID-19 pandemic, CIC President and Chief Executive Officer Jaime Casto Jose
Garchitorena stated there is a need to ensure protection of consumer rights. Under
Republic Act No. 11469 or Bayanihan to Heal as One Act enacted in 2020, all
borrowers under the regulation of the BSP, Securities and Exchange Commission
(SEC), and Cooperative Development Authority, which include GSIS and Pag-IBIG, are
mandated, with principal on interest, fines, fees and other charges, to impose a 30-day
grace period on all loans with principal and/or interest falling due during the ECQ period.
Economic
According to the National Statistics Commission, the Philippines obtained
approximately P 11.5 trillion in 2013 as its Gross Domestic Product. Since 2000, the
country's GDP has been steadily rising. The Philippine economy increase by 7.2
percent in 2013. A variety of sectors, especially in the service sector, have been
boosted. However, slowdowns are also experienced in some markets, such as imports
and manufacturing. The effect of typhoons hitting the nation, which may have reduced
GDP growth, contributes to these slowdowns.
As investors responded to the tapering of the United States stimulus program,
stock and bond prices dropped dramatically, the Philippine financial markets witnessed
great uncertainty. However, development was accompanied by monetary and fiscal
policy. Along with tax improvements and effective expenditures, government finances
also continue to increase. In the other hand, the sluggish growth in emerging economies
has been more or less untouched by remittances and the export of services. Cash
remittances increased by 6.4% in the previous year, along with increasing demand for
Filipino workers.
In 2014, BDO Unibank acquired the leading rural bank in Panay and Mindanao
having over 10o branches and micro-banking offices, One Network Bank, Inc (ONB).
According to a statement released, the inclusion of ONB to the BDO Group is aimed to
extend its reach in the southern part of the Philippines’ fast-developing industries. BDO
63
also noted that the movement also supports the initiative of the Bangko Sentral ng
Pilipinas (BSP) to expand inclusive banking by branching and lending in the
countryside. It indicated that it intends to extend its product portfolio to these
underserved segments of the economy of the Philippines.
A partnership with Rural Bank of Pandi Inc. (RBPI) to buy the banking company
in Bulacan has been signed in February 2019 by BDO's subsidiary, One Network Bank
Inc. (ONB). The acquisition is intended to provide ONB with a wider reach in the
province and to progressively monitor its growth in Central Luzon, one of the country's
most radical regions.
Bangko Sentral ng Pilipinas (BSP) raised the benchmark interest rates five times
to tame inflation in 2018. The facility for overnight reverse repurchase (RRP) of the
BSP was increased by 25 basis points. In the five times they increased their benchmark
interest rates, BSP produced a cumulative rise of 175 basis points. These inflation rate
changes trigger changes in interest rates. Rates which have an enormous impact on the
banking industry and its financial stability. It allows banks to offer cheap loans to
customers when the interest rates are lower, and it entices them to apply for loans to
buy the things they need and want. It boosts the economy and banks' profits. But
individuals will try not to use credit cards or apply for a loan when the interest rates are
higher. Shifts in inflation rates pose challenges for the Philippine economy and the
banking industry's stability.
Customer loans increased in July 2020 by 11 percent to P2.3 trillion as
individuals around the world remain solely trapped in the middle of the coronavirus
(COVID 19) pandemic. The BSP has reacted quickly to the looming crisis, specifically
when it comes to allowing affordable new loans. In weak markets, though, banks are
also left with large exposures. According to BSP and the Philippine Institute for
Development Studies (PIDS), that as of December 2019 banks have substantial loans
outstanding in the retail & wholesale (PHP1.3 trillion or 15% of total outstanding loans)
64
and manufacturing (PHP1.0 trillion or 12% of total outstanding loans) markets. Such
industries are among the ones most affected by the pandemic.
Socio-cultural, Demographic, and Lifestyle
The lifestyles, customs, patterns, behaviors, and beliefs of humans are sociocultural influences. For all firms, these powers are relevant because they control
customer purchasing behavior. Overtime influences the habits of customers. Sociocultural forces influence the way people use financial services concerning the banking
sector.
Approximately 51.2 million Filipino adults do not have bank accounts against the
roughly 72 million Filipino adult population, according to a 2019 survey by Bangko
Sentral ng Pilipinas (BSP). It provided that the lack of sufficient money, as reported by
about half (45 percent) of the unbanked, persists the top excuse for not having an
account. This is a huge number of new target customers for the banking sector. They
ought to know how to attract these Filipinos to banks to save, invest and make loans.
Technological
Technological advances have an immense effect on how organizations work
around the globe. Banking for people means getting out of the door, standing in line for
hours, and a lot of paperwork before technology changed the banking sector. With the
relentless advancement of technology, however, new prospects are opening up for the
banking sector. They now have services for clients that are more accessible and
convenient with the transition of banking activities from paper to digital and networked
systems. The banking sector has delivered benefits such as ATMs, telephone banking,
automatic fund transfer, mobile and online banking through technical developments.
However, behind this benefit, the problem of hidden defection arises. These
minor hidden faults lead to decreased customer loyalty, which can lead to the switching
of banks. Banks that do not react to these vulnerabilities are risking earnings. In addition
65
to defection, which is an inherently internal problem, there is also a possibility of data
breaches and threats.
Environmental
The environmental element refers to any environmental aspect that influences
the survival of one or more species. Banking and financial services play a significant
role in trying to bring environmental sustainability. BDO's capacity to guarantee financial
access to the majority of the population is crucial to building a more equitable system.
The organization aims to be the ally of the country for social change by exploiting its
capital.
BDO released a sustainability study in 2018 outlining its intentions to help the
Sustainable Development Goals of the United Nations. BDO leverages its capital in
support of the government's "Build, Build, Build" strategy to fund strategic infrastructure
initiatives that stimulate economic production and encourage domestic and foreign
investment to foster the country's sustainable growth.
The devastating effect of climate change has taken center stage in the global
arena in recent years. International agencies have campaigned to prioritize the
mitigation of the environmental effects of industrialization. In the sense of sustainable
growth and initiatives to resolve environmental issues, BDO, in collaboration with the
International Finance Organization, serves as one of the leaders in developing
Sustainable Energy Finance as an important solution to harnessing renewable energy
sources.
Opportunities and BDO's Responsiveness
1. Harnessing mergers and acquisition to have talents needed.
Response Rate: 3
66
In accordance with the Basel Accords and universal best practices, the Bangko Sentral
ng Pilipinas (BSP) has implemented an increase in financial requirements for industry
participants. In order to improve the financial sector, the BSP promotes mergers and
acquisitions. BDO's merging and acquisitions contribute to its global competitiveness by
extending its divisions through this and become open to other entities through growing
the number of depositors. It has enhanced partnerships with their respective customer
bases that have been developed and nurtured by the different market segments.
2. Increase in strength and profits from remittances from OFWs
Response Rate: 4
The Philippine economic situation has presented the banking sector with probable
prospects. As the service market continues to be strong, banks and their services are
still strong. In addition, the rise in demand for eligible Filipino overseas workers, in turn,
leads to an increase in remittances.
3. High demand for mobile banking applications
Response Rate: 2
The need for accessibility for clients has been resolved with the use of online and
mobile banking. On average, banking customers are now handling more of their
banking experiences through smartphones and tablets than via any other platform, and,
as stated by Bain and Company, Inc., the mobile channel has become a key element in
the bid to win customer loyalty.
4. Drive towards sustainable energy projects
Response Rate: 4
The move towards sustainable energy initiatives acknowledges the use of the
production of alternative and green energy options. Growing demand for renewable
energy projects would support the financial sector, resulting in large-scale investments.
67
5. Increase in the demands of loans during pandemic
Response Rate: 3
Due to community quarantines, staff layoffs, and interrupted company processes, the
cash flow of companies and retailers could be affected by decreased customer
demands. The non-performing loans will easily escalate without adequate intervention
by the regulators and the banks as borrowers fail to pay their principal and interests.
68
Threats and BDO's Responsiveness
1. Continuous development of bank competitors
Response Rate: 2
Increased access to the internet and mobile banking has made it easier for consumers
to receive more information on specific items from various financial institutions.
2. Decline in the usage of ATMs and physical branches due to demand in mobile
applications
Response Rate: 3
Due to dependency on mobile banking it decreases customer and bank managers'
contact and partnerships. As the rise in mobile banking persists, the use of ATMs will
also be at risk of declining.
3. Mobile scam and malware in mobile banking
Response Rate: 3
Mobile banking is often vulnerable to risks. Apart from hidden defections, which are an
entirely internal issue, data breaches and attacks are also likely.
4. Rise of inflation rate and interest rates
Response Rate: 2
In the following years, the country's inflation rate would slow down growth in the
financial services sector as BSP is committed to sustaining low and steady rates. The
rise in interest rates, which in turn decreases the banks' tendency to lend their funds to
the public, is one of the BSP's monetary instruments to combat inflation.
5. Failure of payments and decrease in the ability to pay of debtors during
pandemic.
Response Rate: 2
69
As the nation struggles with the effects of the COVID-19 pandemic, the Philippine
government has ordered all lenders to extend a 30-day extension for all loan payments,
including credit card dues and pawnshop loans. Considering the immediate steps taken
by BSP to ensure liquidity in the economy through lower lending rates and reserve
thresholds, banks are under pressure to operationalize these steps.
70
External Factor Evaluation (EFE) Matrix
Figure 31 External Factors Evaluation Matrix BDO Unibank, Inc.
Weighted
Opportunities
Weight Rating
Score
1. Harnessing mergers and acquisition to have talents needed
0.11
3
0.33
2. Increase in strength and profits from remittances from OFWs
0.08
4
0.32
3. High demand of mobile banking applications
0.13
2
0.26
4. Drive towards sustainable energy projects
0.09
4
0.36
5. Increase in the demands of loans during pandemic
0.10
3
0.30
Weighted
Threats
1. Continuous development of bank competitors
Weight Rating
Score
0.09
2
0.18
0.1
3
0.3
3. Mobile scam and malware in mobile banking
0.13
3
0.39
4. Rise of inflation rate and interest rates
0.09
2
0.18
debtors during pandemic
0.08
2
0.16
TOTAL
1.00
2. Decline in the usage of ATMs and physical branches due to
demand in mobile applications
5. Failure of payments and decrease in the ability to pay of
2.78
Ratings: 4=Superior, 3 = Above Average, 2 = Average, 1 = Below Average
71
EFE Analysis:
The External Factor Evaluation (EFE) Matrix above lists the eleven key external
factors. Six of these elements are considered as opportunities for BDO, while the
remaining are considered as threats. The rate suggests which external factors are
BDO’s opportunities or threats and how effective the strategy the company currently
has. The ratings in the EFE matrix are subjective depending on the effectiveness of
BDO’s strategy wherein a rating of ours is superior, three is above average, two as
average and one as below average. In evaluating the performance of BDO in the
industry, the weights are used to determine the importance of every external factor
identified. The greater the weight, the more significant a factor it is.
The company's leading opportunity is the rising demand of mobile banking
applications due to the continuous advancement of technology and the convenience it
gives to BDO’s clients, having the highest weight amongst five opportunities identified.
As for the threats to the company, the chances of potential clients to shift to other banks
increases as mobile banking is accessible to most BDO’s customers and opt for another
financial institution looking for additional services/products. The usage of ATMs and
physical branches of BDO are susceptible to dwindle as the demand for mobile banking
rises. Mobile scam and malware have the highest weight caused by the rise of demand
in mobile banking the vulnerability of the bank and customer’s information to security
breaches also increases. In addition, because of the COVID-19 pandemic and with the
government's aim to provide funding, banks will need to boost their activities quickly to
handle current borrowers' weakening credit positions and absorb potential rises in new
credit due to reduced interest rates.
72
CHAPTER V
INDUSTRY AND COMPETITIVE ANALYSIS
Banking Industry
Bank is a licensed financial institution which provides financial services to receive
deposits and make loans. It also provides currency exchange, wealth management,
and safe deposit boxes. There are different types of banks such as retail banks,
commercial banks, and investment bank. Most of the countries, the national government
regulates the banks in the financial system.
Banks are significant part of a economy because its provides financial services
for both businesses and consumers. It is one of the safest that offers place to store your
cash which give corresponding interest as time goes by. In its banking system, there are
variety of account types such as savings accounts, checks, and certificate of deposits. It
can also make faster transaction in deposits, withdrawals, payment of bills, check
writing and etc.
Banks is one of the financial institutions that provide credit opportunities for
individuals, business and government. The money deposited at the bank is used to lend
to others in a form of cash, mortgages, credit cards, auto loan and etc. This process can
help to create liquidity in the market which can keeps the money circulate and supply
going.
Industry Structure
The Philippines’ banks are classified into three types: rural and cooperative
banking, thrift banks, commercial banks, and universal banks. Of these segments,
commercial and universal banks offered checking account series and domestic deposits
that had dominated the Philippines’ banking industry, with its total deposit of amount at
approximately 12 trillion Philippine pesos.
73
The commercial banks main services in the Philippines are to accept deposits
and offer a checking account services, while universal banks on the other hand provides
all kinds of services of the commercial banks and exercise the powers of an investment
house and in non-allied enterprises. In the Philippines, these types of banks are the
largest group of financial institution and the most popular among customers with
different financial needs.
In October 2020, the universal and commercial banks value of loans in the
Philippines amounted nearly 9.7 trillion pesos. Of these loans, there is an approximately
364 billion pesos for vehicle loans granted for household use and approximately 1.6
trillion pesos’ worth of loans granted for the production of real estate business in the
country.
The granting of loans for business venture or for household consumption
provides a significant financial help for customers. It is rapidly increasing that a healthy
banking sector can be essential to sustain the growth. Bank loans can be resulted to
bad debts when there is a lack of payment and it affects the bank’s cash flow. A low
ratio of nonperforming loans to total gross loans indicates a healthy banking sector. As
of 2020, the ratio of nonperforming loans of banks to total gross loans in the Philippines
was almost 2 percent and it declined over the past years.
Minimum Capitalization Requirement regulated by the Banko Sentral ng Pilipinas
1. Banks should comply with the required minimum capital enumerated below or as
may be prescribed by the Monetary Board.
2. At least 25% of the total authorized capital stock should be subscribed by the
subscribers of the proposed bank.
3. The stockholdings of an individual, family, corporate or business group in any bank
should be subject to the following limits:
a. Foreign individuals and non-bank corporations can own or control up to 40% of
the voting
74
stock of a domestic bank
b. A Filipino individual and a domestic non-bank corporation can each own up to
40% of the voting stock of a domestic bank.
c. The citizenship of the corporation which is a stockholder of a bank should follow
the citizenship of the controlling stockholders of the corporation, irrespective of
the place of incorporation.
4. At least 60% of voting stock of any commercial bank should be owned by Filipino
citizens.
Revised
Type of Bank
Amounts
(P billion)
a. Universal Banks
4.95
b. Commercial Banks
2.40
With head office
Metro Manila
c. Thrift Banks
in
1.00
With head office in
cities
of Cebu and
Davao
.50
Other Areas
0.25
In Metro-Manila
0.10
d. Rural Banks Cities of Cebu and
Davao
In all other cities
e. Cooperative Banks
Additional Major
Statutes aside from the
General Banking Law
0.05
Thrift Banks Act
(R.A. 7906)
Rural Banks Act
(R.A. 7353)
0.025
0.010
Cooperative Code
(R.A. 6938)
Figure 32 Type of Banks Amount in the Philippines
75
General Banking Law of 2000
RA 8791 – General Banking Law of 2000 is an act Providing for the Regulation of
and Organization and Operations of Banks, Quasi-banks, Trust Entities and for other
purposes.
The General Banking Law of 2000 (GBL) is the law that generally governs the
regulation, organization and operation of banks, quasi-banks, and other quasi-entities. It
primarily governs Universal Banks (UB) and Commercial Banks (KB), and has
suppletory application to Thrift Banks which is primarily governed by RA 7906, the Thrift
Banks Act, Rural Banks which is primarily governed by RA 7353, the Rural Banks Act,
and Cooperative Banks which is primarily governed by RA 6938, the Cooperative Code.
Section 2 of GBL provides that “the State recognizes the vital role of banks in
providing an environment conducive to the sustained development of the national
economy and the fiduciary nature of banking that requires high standards of integrity
and performance.” This consequently means that a bank shall be subject to heavy and
close supervision and/or regulation by the Bangko Sentral ng Pilipinas, and that it must
exercise utmost diligence in the handling of deposits.
76
Market Share
Philippines’ Banking Institutions Statistics
Philippines Number of Commercial Banks
(ceic.com, 2018)
Figure 33 Number of Commercial Banks in the Philippines
Philippines’s No of Banks: Commercial Banks data was reported at 5, 946.000
Unit in July 2015 and increased in Jan 2018 by 6, 526.000. Philippines’s No of Banks:
Commercial Banks data is updated quarterly, averaging 4,199.000 Unit from Mar 1979
to Jan 2018, with 159 observations. The data reached an all-time high of 6,605.000 Unit
in Sep 2018 and a record low of 644.000 Unit in Mar 1979. Philippines’s No of Banks:
Commercial Banks data remains active status in CEIC and is reported by Bangko
Sentral ng Pilipinas. The data is categorized under Global Database’s Philippines.
77
Philippines Number of Thrift Banks
(ceic.com, 2018)
Figure 34 Number of Thrift Banks in the Philippines
Philippines’s No of Banks: Thrift Banks (TB) data was reported at 2,013.000 Unit
in Jul 2015 and increased in 2018 by 2, 452.000. This Philippines’s No of Banks: Thrift
Banks (TB) data is updated quarterly, averaging 1,268.000 Unit from Mar 1979 to Sep
2018, with 159 observations. The data reached an all-time high of 2,550.000 Unit in Sep
2018 and a record low of 138.000 Unit in Mar 1979. Philippines’s No of Banks: Thrift
Banks (TB) data remains active status in CEIC and is reported by Bangko Sentral ng
Pilipinas.
Philippines Number of Rural Banks
(ceic.com, 2018)
Figure 35 Number of Rural Banks in the Philippines
78
Philippines’s No of Banks: Rural Banks: Head Office data was reported at
565.000 Unit in Jan 2014 and decreased in July 2018 by 478. Philippines’s No of
Banks: Rural Banks: Head Office data is updated quarterly, averaging 785.000 Unit
from Mar 1979 to Sep 2018, with 159 observations. The data reached an all-time high of
1,040.000 Unit in Dec 1981 and a record low of 476.000 Unit in Sep 2018. Philippines’s
No of Banks: Rural Banks: Head Office data remains active status in CEIC and is
reported by Bangko Sentral ng Pilipinas. The data is categorized under Global
Database’s Philippines
Banking Industry Sub-Sectors
Banking is made up of several segments—retail banking, commercial banking,
and investment banking. Also known as consumer or personal banking, retail banking
serves consumers rather than corporations. These banks offer financial services tailored
to individuals including checking and savings accounts, mortgages, loans, and credit
cards, as well as certain investment services.
Corporate, commercial, or business banking, on the other hand, deals with small
businesses and large corporations. Like retail banking, it provides account services and
credit products that are tailored to the specific needs of businesses.
An investment bank typically only works with deal makers and high-net-worth
individuals (HNWIs)—not the general public. These banks underwrite deals, secure
access to capital markets, offer wealth management and tax advice, advise companies
on mergers and acquisitions (M&A), and facilitate the buying and selling of stocks and
bonds. Financial advisors and discount brokerages also occupy this niche.
79
Porter’s Five Forces Model
Figure 36 Porter’s Five Forces Model for BDO Unibank, Inc.
Competitive Rivalry within the Industry (HIGH)
The banking industry in the Philippines is difficult to penetrate as the national
government regulates the establishment of banks in the country. This implies that there
are few banks operating in the country. The banking competition is very tight.
BDO has been very competitive and aggressive in the banking industry as it provides
the best quality to its depositors, bringing in customers who patronize their financial
services, as it also expands to its quest to explore and give strength through the vision,
innovation and value. In every industry, it has always been a challenge to every
business, what their competitors has to offer. These factors such as extending
warranties,
enhance
quality,
add
features,
provide
services,
and
boosting
advertisements, are one of the primary reason why BDO has been very aggressive, a
threat to all banking companies especially its competitors such as Security bank, Bank
of the Philippine Island, and Union Bank of the Philippines.
80
As for rivalry among competitors, the threat is intense because all banking institutions
offer the same financial services: leasing, loans, savings, certificate of deposits, checks
and etc. With respect to their strategies, every banks have their own perks and
advantages to have more customers. Whether BDO has long banking hours or BPI’s
Tele-Banking features. The low market growth rate of the banking institution affects the
BDO which can only truly grow with the loss or assimilation of other banks as was the
case for BDO which has been compromised of Banco and Equitable-PCI Bank.
Threat of Substitutes (MEDIUM)
In banking institution, the competitive pressure rises from substitute financial
services increase as the price of services declines and as consumers’ switch cost
decrease. Some of the BDO’s threats are not from its competitors but the failure of
payment of the borrowers, market crash, loss in trade and securities, mutual funds and
etc. which can also be offered by the non-banking sector. The difficulty of entering the
banking industry and the competitive rates and changes, there is still a possibility of
cater clients who are not able to transact with banks, like pawnshops and lending
houses, which can become a substitute. Pawnshop have now remittances service.
Threats of New Entrants (LOW)
New potential competitors are always become a threat in every field of business.
Possible threats may include; emergence of cheaper technologies, government
regulatory requirements, changes in demographics. As of now, there is now new
commercial bank entering in the Philippine banking industry.
Bargaining Power of Suppliers (LOW)
The financial services provided by the banks cannot be easily substituted. There
is also a limitation in the differentiation of services provided ad possibility forward
integration.
81
The BDO’s continuous relationship building with another organization expanded
its networks through branches expansion. Other than that, the fast service availability of
next generation components are widely denomination of initiatives focusing on the
compensation and benefits of its employees, officers, and staffs. The issues between
unions resolution and program developments program supports the changes in
services, structure, an system.
The competitive pressure scales derived from the development of other financial
services from the competitors is generally an evidenced by rivals’ plan from its
expanding its capacity, as well as their sales and growth profit numbers.
Bargaining Power of Customers (HIGH)
One of the major force that affects the intensity of competition in the banking
industry is the bargaining power. With BDO’s strategies and mindset, they view the
banking process as a continuous creative cycle that challenge them to always find ways
to provide better service for its customers.
The use of online platforms through internets helps BDO to increased its power of
the consumer in the industry. The BDO’S mobile banking or so called digital banking
helps to have faster transactions of deposits, withdrawals, transfer of money and bills
payment has greatly increased the ease to its customers.
Despite the challenges appear on the horizon, particularly during
pandemic and the forecast of a US recession and the new SEC implemented rules on
over-the-counter market securities trading, BDO still remains upbeat on its prospects.
Increased in widened spread scan lead to have more opportunities.
The internet also has greatly increased the power of the consumer in the banking
industry.
The internet has greatly increased the ease and reduced the cost for
consumers to compare the prices of opening/holding accounts as well as the rates
offered at various banks. Thus, Union Bank is pursuing a three-point strategy to digitize
82
its operations. The first plan is to digitize the whole Bank. The idea is that it must be fully
digital as fast as possible in terms of operations and processes.
Major Competitors
Selection for the major competitors were based on the market share of the Banco
de Oro in banking industry.
•
Bank of the Philippine Islands (BPI)
Bank of the Philippine Islands is the Philippines’ oldest bank and one of the
oldest of all Asian banks. BPI offers a full range of commercial and retail financial
services, including corporate finance services, asset management, and brokerage and
other financial consulting services. BPI’s retail network includes more than 700
branches throughout the Philippines, as well as branches in New York, Hong Kong, and
Tokyo. The bank also operates a network of more than 1,200 automated teller
machines and more than 8,500 retailer-based point-of-sale machines. In 1999, BPI
pioneered online banking in the Philippines with the launch of online bank BPI Direct in
1999.
In addition to its banking products and services, BPI has also developed a strong
non-life insurance operation, chiefly under subsidiary BPI/MS Insurance Corporation.
Listed on the Philippines Stock Exchange, BPI has long been majority controlled by
Philippines conglomerate Ayala Corporation. (bpi.com)
•
Union Bank of the Philippines (UBP)
Union Bank embraces the future of banking and is committed to be the
Philippines’ leading digital bank to best serve the growing needs of Filipinos
everywhere.
The Bank has always been among the first to embrace technological innovations
to empower its customers. With this, it has consistently been recognized as of one of
83
Asia’s leading companies, ranking among the country’s top universal banks in terms of
profitability and efficiency.
UnionBank’s Digital Transformation Strategy reinforced its commitment to deliver
superior customer experiences and promote inclusive prosperity in the country. For
several years, the Bank was renowned “Best Digital Bank” by prestigious institutions,
and also recognized in areas of transformation, people, and culture. With its drive to
“Tech Up Pilipinas” and be an enabler of the Philippines’ push to be a G20 country by
2050, UnionBank stands firm in its promise to power the future of banking by cocreating innovations for its customers and for a better world. (unionbankph.com)
•
Security Bank Corporation (SECB)
Security Bank Corporation is one of the Philippines’ leading universal banks
serving retail, commercial, corporate, and institutional clients. Established on June 18,
1951, Security Bank was publicly listed with the Philippine Stock Exchange (PSE:
SECB) in 1995. Over the years, the Bank prudently managed to remain one of the most
stable in the banking industry and is steadfast in its commitment to serve its clients and
stakeholders. (secb.com)
Comparison of Competitors’ Financial Statements Vs Banco de Oro Unibank
Figure 37 Comparison of Competitors’ Financial Statements Vs Banco de Oro Unibank
2015
2016
2017
2018
2019
Average
Current Assets (in Millions Php)
BDO
1,646
2,097
2,414
7,773
2,926
3,371.20
BPI
1,473
1,664
1,837
2,012
2,128
1,822.80
UBP
402.7
486
583
626.8
724.8
564.66
SECB
528.2
690.3
694.1
760.8
779.7
690.62
84
2015
2016
2017
2018
2019
Average
Current Liabilities (in Millions Php)
BDO
BPI
UBP
SECB
1,689
1,270
382.2
472.2
1,689
1,434
456.8
592.6
2,160
1,566
548.1
645.3
2,490
1,589
582.8
648.4
2,596
1,698
672.8
657.5
2,124.80
1,511.40
528.54
603.20
2015
2016
2017
2018
2019
Average
Inventories (in Millions Php)
BDO
-
-
-
-
-
-
BPI
-
-
-
-
-
-
UBP
73.9
-
-
-
-
14.70
SECB
-
-
-
-
-
-
2015
2016
2017
2018
2019
Average
Total Assets (in Millions of Php)
BDO
1,930
1,938
2,524
2,891
3,063
2,469.20
BPI
1,516
1,725
1,903
2,085
2,205
1,886.80
UBP
441.7
524.4
622.1
669.5
770.8
605.70
SECB
532.6
695.8
700
766.8
788
696.64
2015
2016
2017
2018
2019
Average
Total Liabilities (in Millions Php)
BDO
1,739
1,739
20,145
2,362
2,438
5,684.60
BPI
1,363
1,558
1,720
1,833
1,931
1,681.00
UBP
382.2
456.8
548.1
582.8
672.8
528.54
SECB
479.3
598.6
651.4
657.3
669.6
611.24
2015
2016
2017
2018
2019
Average
Total Equity (in Millions of Php)
BDO
190
199
297
327
369
276.40
BPI
152
167
183
251
273
205.20
UBP
59.5
67.6
74
86.7
98
77.16
SECB
53.3
97.2
105.1
109.6
118.4
96.72
85
2015
2016
2017
2018
2019
Average
Net Loans Receivables (in Millions Php)
BDO
2,854
2,898
2,781
2,761
2,358
2,730.40
BPI
1, 456
1,828
1,982
2,231
2,345
2,096.50
UBP
179.6
234.5
280.2
326.2
393.4
282.78
SECB
10.5
13.4
17.4
23.6
32.7
19.52
2015
2016
2017
2018
2019
Average
Interest Income (in Millions Php)
BDO
68
76
93
122
153
102.40
BPI
38
42
48
55
65
49.60
UBP
20.2
25.5
25.1
25.5
36.7
26.60
SECB
12.1
15.8
19.3
20.3
25.8
18.66
2015
2016
2017
2018
2019
Average
Earnings Before Tax (in Millions Php)
BDO
31
29
36
42
57
39.00
BPI
23
26
28
29
38
28.80
UBP
8.1
12
10.7
8.5
14.5
10.76
SECB
8.3
9.3
11.9
11
12.5
10.60
Comparison of Competitors’ Financial Ratios Vs Banco de Oro Unibank
Figure 38 Comparison of Competitors’ Financial Ratios Vs Banco de Oro Unibank
LQUIDITY RATIOS
Measure
Current Ratio
Formulas
Current
Asset/Current
Liability
Company 2015 2016 2017 2018 2019 Average
BDO
0.95 1.20 1.08 1.08 1.09
1.08
BPI
1.20 1.21 1.13 1.25 1.24
1.21
UBP
1.05 1.06 1.06 1.08 1.08
1.07
SECB
1.12 1.16 1.08 1.17 1.19
1.14
Industry 1.08 1.16 1.09 1.15 1.15
1.12
BDO
Cash Ratio
Cash and cash
equivalents
/Current Liability
BPI
UBP
SECB
Industry
0.02
0.22
0.02
0.2
0.12
0.02
0.22
0.01
0.23
0.12
0.02
0.21
0.01
0.12
0.09
0.02
0.2
0.02
0.13
0.09
0.02
0.18
0.01
0.11
0.08
0.02
0.21
0.01
0.16
0.10
86
LEVERAGE RATIOS
Measure
Formulas
Debt Ratio
Debt-to-Equity
Ratio
Total
Liability/Total
Asset
Company 2015 2016 2017 2018 2019 Average
BDO
0.60 0.50 0.60 0.60 0.60
0.58
BPI
0.93 0.94 0.89 0.86 0.86
0.90
UBP
0.87 0.87 0.88 0.87 0.87
0.87
SECB
0.89 0.86 0.93 0.86 0.85
0.88
Industry 0.82 0.79 0.83 0.80 0.80
0.81
Total
Liability/Total
Equity
BDO
5.10
5.26
4.78
4.31
5.24
4.94
BPI
UBP
7.00
6.42
8.00
6.76
8.50
7.41
6.00
6.72
6.33
6.87
7.17
6.84
SECB
Industry
8.90
6.86
6.20
6.56
6.20
6.72
5.90
5.73
5.60
6.01
6.56
6.38
ACTIVITY
EFFICIENCY
RATIOS
Measure
Formulas
Company 2015 2016 2017 2018 2019
Fixed Asset
Turnover
Revenue/Fixed
Assets
Asset
Turnover
Revenue/Total
Asset
BDO
BPI
UBP
2.1
4.75
5.64
2.24
5.11
7.37
2.38
5.02
6.75
2.74
5.02
5.74
2.8
4.72
6.16
Average
2.45
4.92
6.33
SECB
Industry
BDO
BPI
UBP
SECB
Industry
7.05
4.89
0.04
0.04
0.04
0.04
0.04
6.61
5.33
0.04
0.04
0.05
0.03
0.04
6.53
5.17
0.04
0.04
0.04
0.03
0.04
6.12
4.91
0.04
0.04
0.04
0.03
0.04
6.72
5.10
0.05
0.04
0.05
0.04
0.05
6.61
5.08
0.04
0.04
0.04
0.03
0.04
Profitability Ratios
Measure
Net
Interest
Margin
Return
on
Assets
Formulas
(Interest ReceivedInterest
Paid)/Average
Assets
Net Income/ Total
Assets
Company
2015
2016
2017
2018
2019
Average
BDO
4.00%
4.00%
4.00%
5.00%
6.00%
4.60%
BPI
4.60%
4.72%
4.73%
5.15%
6.41%
5.12%
UBP
2.82%
2.86%
3.38%
3.02%
2.92%
3.00%
SECB
2.57%
3.54%
2.77%
3.72%
2.77%
3.99%
3.31%
4.66%
2.80%
Industry
2.60%
3.51%
BDO
1.00%
1.00%
1.00%
1.00%
1.00%
1.00%
BPI
1.21%
1.29%
1.29%
1.12%
1.32%
1.25%
UBP
1.93%
1.39%
1.27%
1.41%
1.03%
1.13%
1.82%
1.29%
1.48%
SECB
1.35%
1.66%
Industry
1.31%
1.40%
1.24%
1.07%
1.36%
1.28%
3.88%
1.38%
87
Return
on
Equity
Net Income/ Total
Equity
BDO
7.00%
12.00% 12.00%
10.40%
BPI
12.03% 14.58% 14.89% 15.27% 19.04%
15.16%
UBP
10.08% 14.94% 10.68%
14.29%
11.59%
SBC
15.40% 11.39% 10.16% 8.03% 8.87%
11.13% 13.23% 11.18% 10.82% 13.55%
10.77%
Industry
Financial
Ratios
Measure
Formulas
WACC
EVAROA
EVAROE
ROA-WACC
ROE-WACC
12.00%
9.00%
7.96%
11.98%
Company
2015
2016
2017
2018
2019
Average
BDO
0.41%
0.40%
0.48%
0.48%
0.53%
0.46%
BPI
0.47%
0.53%
0.64%
0.64%
0.66%
0.59%
UBP
1.25%
1.53%
0.40%
0.22%
0.22%
0.72%
SECB
0.49%
0.74%
0.47%
0.50%
0.62%
0.49%
0.63%
0.51%
0.53%
Industry
0.44%
0.64%
BDO
0.59%
0.60%
0.52%
0.52%
0.47%
0.54%
BPI
0.74%
0.76%
0.65%
0.48%
0.66%
0.66%
UBP
0.10%
0.40%
0.87%
0.81%
1.60%
0.76%
SECB
1.22%
0.90%
0.94%
0.51%
0.66%
0.85%
Industry
0.66%
0.67%
0.75%
0.58%
0.85%
0.70%
BDO
6.59%
11.60%
8.52%
11.52% 11.47%
9.94%
BPI
11.56% 14.05% 14.25% 14.63% 18.38%
14.57%
UBP
8.83%
SECB
Industry
13.41% 10.28%
0.58%
7.74%
14.07%
10.87%
7.41%
8.24%
10.24%
10.49% 12.49% 10.69% 10.33% 13.04%
11.41%
14.96% 10.90%
9.69%
Industry Benchmarks
Industry analysis is a technique which makes it easier for a business to
understand its place compared to other companies providing similar products and
services. A significant component of successful strategic planning is recognizing the
forces at work in the industrial sector.
Using industry averages enables a company to measure and benchmark itself
against where it stands in comparison to businesses in the same industry. Industry
averages of financial accounting data helps assess the overall performance of the
company. Another method to equate a specific company with the average of all industry
participants is using ratio analysis and comparisons. A business can gain knowledge
88
about where to stand in relation to the industry average by contrasting a specific ratio
for one company with that of the overall industry.
DuPont Model of Universal Banking Industry
Figure 39 DuPont Model of Universal Banking Industry
Income Statement
BPI
BDO
UBP
SECB
Interest Income
71,647
515,548
26,843
29,179
Interest Expense
21,478
112,962
8,821
10,519
Net Interest Income
50,169
402,586
18,022
18,660
Impairment losses
4,663
22,920
1,568
11,519
Other operating income
10,454
170,124
8,534
13,681
Other operating expense
13,287
351,788
14,844
8,880
Tax expense
6,330
41,671
1,568
1,712
Net Income
23,160
160,386
8,987
9,073
Profitability Ratios
BPI
BDO
UBP
SECB
Net Profit Margin
25.48%
31%
27.18%
33%
ROA
1.25%
1.30%
1.48%
1.28%
ROE
15.16%
13%
11.59%
9.20%
Balance Sheet
BPI
BDO
UBP
SECB
Current Assets
1,823,388
11,858,943
564,661
690,624
Net Fixed Assets
63,855
739,788
41,005
6,022
Total Asset
1,887,243
12,598,631
605,666
696,646
Current Liability
1,511,955
10,626,975
478,709
603,213
Long-term debt
169,581
336,699
50,932
8,015
Total Liability
1,681,536
10,963,674
529,641
611,228
Shareholder's Equity
205,707
1,634,957
77,026
85,414
89
Final Leverage (FLM)
BPI
BDO
UBP
SECB
10.90%
7.70%
7.79%
7.00%
90
Competitive Profile Matrix (CPM)
BDO
Key Success Factors
Weight
BDO
Union Bank
Security Bank
Score
Weighted
score
Score
Weighted
score
Score
Weighted
score
Score
Weighted
score
Market Position
0.2
4
0.8
4
0.8
4
0.8
3
0.6
Infrastructure and
Quality of Service
0.15
3
0.6
4
0.45
2
0.3
3
0.45
Diversification
0.05
3
0.15
3
0.15
3
0.15
3
0.15
Management and
Human Resource
0.05
3
0.06
4
0.15
3
0.15
3
0.15
Capitalization
0.2
4
0.8
4
0.8
4
0.8
3
0.6
Assets Quality
0.1
4
0.4
4
0.4
4
0.4
3
0.3
Profitability
0.1
4
0.4
4
0.4
4
0.4
3
0.3
Liquidity and Financial
Flexibility
0.15
4
0.6
4
0.6
4
0.6
3
0.45
Total
1
4.35
3.75
3.6
3
Figure 40 Competitive Profile Matrix Between BDO and Competitors
91
The Competitive Profile Matrix (CPM) allows comparing the company to its
competitors to reveal the relative strengths and weaknesses in the marketplace,
infrastructure and product efficiency, capitalization, asset quality, profitability and
liquidity, and financial stability. Based on the total weighted score, BDO is the best
player in the banking industry with 4.35 followed by BPI (3.75), UBP (3.6), and SECB
(3). BDO has already shown its capability in the banking industry by placing it on the top
of the competition. The table above shows that BDO has an almost perfect rating score
in all factors except in diversification. Even though it has the same score as its
competitors, it needs to improve and maintain being ahead on the top. The CPM
illustrates that BDO is not quite far ahead in the competition and should still be wary.
92
CHAPTER VI
INTERNAL ASSESSMENT
Major Strengths
1. Successful business relationship with customers
Response Rate: 3
BDO’s institutional strengths and value-added goods and services hold the key to its
successful business relationships with customers. Its branches remain on top of setting
high standards as a sales and service-oriented, customer-focused force on the front line.
2. Largest bank in the country in terms of assets, loans and deposits
Response Rate: 4
After the Asian Banker called it 2019's Strongest Bank by Balance Sheet in the
Philippines for the second straight year, BDO Unibank, Inc. retains its #1 spot in the local
banking industry, and in terms of total assets, loans, deposits, and trust funds under
management, BDO Unibank, Inc. ranks as the largest bank in the country based on
published statements of condition.
3. One of the largest distribution networks nationwide
Response Rate: 4
BDO, with 740 operating branches and over 1,500 ATMs nationwide, has one of
the largest distribution networks. Also, BDO Network Bank is the country’s
largest rural bank with 105 branches.
4. Most number of remittances abroad
Response Rate: 4
93
The Bangko Sentral ng Pilipinas (BSP) again acknowledged the role of BDO
Unibank as a trusted partner of overseas Filipinos in sending their hard-earned
money back home to their loved ones by presenting the "Commercial Bank that
Generated the Largest Overseas Filipino Remittances" award during the BSP
Stakeholders Awards recently held in 2019.
5. Increasing value of capitalization for the past 5 years
Response Rate: 4
As the capital investment partner of the top companies globally, BDO Capital continues
to build upon its strengths.
6. Good Fixed Asset Turnover
Response Rate: 4
The data in their financial ratios shows an increased in 2019, it means that this year
BDO increased its use on its assets to have more net interest income but even it
increased, the cutoffs and standard are unfavorable to BDO, it may indicate that it does
not rely heavily on its assets to generate more new interest income.
7. Member of the SM Group
Response Rate: 3
BDO is a member of SM Group, one of the largest and most successful
conglomerates in the world, with businesses ranging from retail, mall operations,
property development (residential, commercial, resorts/hotel), and financial
services. Although part of a family conglomerate, a team of competent managers
and bank officers handle the day-to-day operations of BDO.
8. Up-to-date electronic banking services
Response Rate: 3
94
With an up-to-date electronic banking services of BDO, it can be used to access
your bank accounts and do transactions through BDO ATM, BDO Internet
Banking, BDO Phone Banking, BDO Mobile Banking, and BDO Call Center
provided you request to specifically enroll these accounts.
9. Longer banking hours
Response Rate: 3
Amid the General Community Quarantine (GCQ) or Enhanced Community
Quarantine (ECQ) guidelines, BDO Unibank, Inc. and BDO Network Bank
branches are both open to serve more customers. Although several businesses
continue to run on shortened business hours, branches of the BDO and BDO
Network Bank are open until 4:00 pm and ready to meet different banking needs,
including Forex and encashment requirements.
Major Weaknesses
1. Security in data assets
Response Rate: 1
A threat of security breaches and attacks could be several causes of which is the
crumbling personal relationships between managers and customers and a
reputation for security, also the increase of digital assets in the banking and
financial institutions.
2. Slow online banking system
Response Rate: 2
95
Many customers are not satisfied with BDO’s online banking system. Sometimes
their application and website are always under maintenance.
3. Limited technical support team.
Response Rate: 1
Some customers say their upfront service is slow at any branch. Also, they
are not responding to emails sent to them by their customers.
Internal Factor Evaluation (IFE) Matrix.
Figure 41 Internal Factors Evaluation Matrix BDO Unibank, Inc.
Strengths
Weight
Rating
Weighted
Score
1. Successful business relationship with customers
0.08
3
0.24
2. Largest bank in the country in terms of assets, loans, and deposits
0.11
4
0.44
3. One of the largest distribution networks nationwide
0.09
4
0.36
4. Most number of remittances abroad
0.09
4
0.36
5. Increasing value of capitalization for the past 5 years
0.10
4
0.40
6. Good Fixed Asset Turnover
0.09
4
0.36
7. Member of the SM Group
0.08
3
0.24
8. Up-to-date electronic banking services
0.08
3
0.24
9. Longer banking hours
0.07
3
0.21
Weaknesses
Weight
Rating
Weighted
Score
1. Security in data assets
0.08
1
0.08
2. Slow online banking system
0.06
2
0.12
3. Limited technical support team
0.07
1
0.07
TOTAL
1.00
3.12
96
IFE Analysis:
The Internal Factor Evaluation Matrix (IFE) above lists the twelve key internal
factors. Nine of these factors are considered as strengths of BDO, while there are only
three
weaknesses.
The
rate
suggests
whether
internal
factors
are
major
strength/weakness and minor strength/weakness. For strength, the rate of four indicates
major strength, while three is a minor strength. For weaknesses, one indicates a major
weakness, while a rate of two indicates a minor weakness. In assessing performance in
the industry, the weights are used to determine the value of the factor found. The
greater the weight, the more critical it is.
The company’s top strength is being the largest bank in the country in terms of
assets, loans, and deposits, with the highest weight amongst nine major strengths. The
next major strength of BDO is their increasing value of capitalization for the past five
years and having a good fixed asset turnover. BDO is one of the largest distribution
networks nationwide and has the most number of remittances abroad. Also, they have
implemented longer banking hours and have up-to-date electronic banking services.
The weaknesses show that they lack security in data assets, which is their major
weakness. Although they have a successful business relationship with their customers,
they have slow online banking system and limited technical support teams that may
affect their relationship with their customers.
97
CHAPTER VII
STRATEGY FORMULATION
Strengths, Weaknesses, Opportunities, and Threats (SWOT) Matrix
Weaknesses
Strengths
1.
2.
3.
4.
5.
6.
7.
8.
9.
Successful business relationship with customers
Largest bank in the country in terms of assets,
loans and deposits
One of the largest distribution networks
nationwide
Most number of remittances abroad
Increasing value of capitalization for the past 5
years
Good Fixed Asset Turnover
Member of the SM Group
Up-to-date electronic banking services
Longer banking hours
2.
3.
4.
5.
Security in data assets
Slow online banking system
Limited technical support team
Threats
Opportunities
1.
1.
2.
3.
Harnessing mergers and acquisition to have
talents needed.
Increase in strength and profits from remittances
from OFWs.
High demand of mobile banking applications
Drive towards sustainable energy projects.
Increase in the demand of loans during
pandemic.
1.
2.
3.
4.
5.
Continuous development of bank competitors
Decline in the usage of ATMs and physical
branches due to demand in mobile applications.
Mobile scam and malware in mobile banking
Rise of inflation rate and interest rates
of payments and decrease on the ability to pay
of debtors during pandemic.
Figure 42 SWOT Matrix of BDO Unibank, Inc.
98
SWOTS Recommended Strategies
Following the SWOTS analysis indicated above, we are using the TOWS analysis for
the creation of strategies based on the SWOTS indicated:
I.
Strength – Opportunity (SO) Strategies
•
SO#1
By improving the increased fixed assets of BDO, like the number of remittances
abroad, will lead to the increase in strengths and profit came from OFW. (S4, S6,
O2)
•
SO#2
Providing strategies for the proper acquisition and utilization of assets, loans and
deposits, and capital to move towards the growing demand for renewable energy
projects that would support the financial sector, resulting in large scale
investment. (S5, S6, O4)
•
SO#3
Improvement of the mobile banking applications to increase the demand of
customers. (S1, S7, S8, S9, O3)
•
SO#4
Allocating more budget for the improvement of mobile banking applications. (S5,
O3)
•
SO#5
The new and improved services will access more markets. (S3, S8, O2)
•
SO#6
99
Provide a successful marketing strategies and fast customer service to assist
every loan transaction of the customer.
II.
Strength-Threats (ST) Strategies
•
ST#1
Improve and enhance the data protection and security measures. (S5, S8, T3)
•
ST2#1
Provide an extension of payment terms for loans and other services to increase
the demand in order not to decrease its funds for the public. (S2, T2)
•
ST#3
Improvement of services and proper utilization of assets and capital to amplify
marketing strategies. (S1, S2, S5, S7, S9, T1)
III.
Weakness – Opportunity (WO) Strategies
•
WO#1
Acquire professionals who will provide and improve security measures. (W3, O1)
•
WO#2
Improve mobile banking application security and privacy to increase the demand
of customers (W1, O3)
•
WO#3
Use of improved mobile banking application and marketing strategies. (W2, O3)
IV.
Weakness – Threats (WT) Strategies
100
•
WT#1
Improve the mobile banking application and its security. (W1, W3, T3)
•
WT#2
Acquaint employees to be better and improve the efficiency of the system of
service. (W2, T1)
•
WT#3
Acquire professionals that will provide security and protection of data and
information. (W3, T3)
TOWS Analysis:
Using the result of the TOWS, the company should be exploring further for the
WT strategies recommendation. The company should be wary of the use of mobile
banking applications for the different transactions made by its customers. It needs to
improve the data and security protection in the online banking system. To be more
efficient, it must provide different tips or warning signs to prevent mobile scams and
malware attacks. Besides, the company should also focus further on its SO strategies to
increase or expand its market and continue to be in a good position in the banking
industry.
101
Recommendation:
Using SO#1 and SO#4, the company must take advantage of the continuous
development of technology by being more efficient in providing secured use of online
banking. The larger capitalization and assets can acquire more remittances abroad to
expand its market and increase profits from OFW’s. Besides, this recommendation of
WO#2 and WO#3 strategies would further give a faster transaction in the banking
system and acquire more professionals to provide security and protection of online
banking.
102
Internal-External (IE) Matrix
Figure 43 Internal-External (IE) Matrix of BDO Unibank, Inc.
The IFE Total Weighted Scores
4.0
STRONG
3.0
AVERAGE
2.0
WEAK
1.0
3.12
The EFE Total Weighted Scores
HIGH
3.0
2.78
MEDIUM
Grow
and
build
2.0
LOW
1.0
103
Analysis
BDO garnered a score of 3.12 in the IFE matrix and a score of 2.78 in the EFE
Matrix. In plotting the total weighted scores, it falls quadrant IV, or the grow and build
region. That suggests that BDO can use Intensive (market penetration, market
development, and product development) or integrative (backward integration, forward
integration, and horizontal integration) strategies.
104
Strategic Position and Action Evaluation (SPACE) Matrix
Figure 44 SPACE Matrix of BDO Unibank, Inc.
Conservative
FP
Aggressive
CP
IP
Defensive
SP
Competitive
105
Internal Analysis
Financial Position (FP)
Return on Investment
Leverage
Liquidity
Earnings per share
5
5
4
5
External Analysis
Stability Position (SP)
Loan Range
Inflation Rate
Technological Changes
Competitive Pressure
Barriers to entry into
market
Average
External Analysis
Industry Position (IP)
Growth Potential
Profit Potential
Financial Stability
Resource Utilization
Working Capital
5
Average
4.8
Internal Analysis:
Competitive Position (CP)
Market Share
-3
Product Quality
-3
Customer Loyalty
-2
Capacity Utilization
-1
Technological knowhow
-2 Extent Leveraged
Average
-2.2 Average
-3
-5
-2
-3
-5
-3.6
5
5
5
5
4
4.8
Direct Vector Coordinates: x-axis: (-2.2) + 4.8 = 2.6 and y-axis: (-3.6) + 4.8 = 1.2
Following Fred David’s Strategic Management book, the bank should pursue
Aggressive Strategies.
106
CHAPTER VIII
SUMMARY OF MATRICES
BOSTON CONSULTING GROUP (BCG) MATRIX
Figure 45 BCG Matrix of BDO Unibank, Inc.
Star
?
Investment Banking
Market Growth
Commercial Banking
Cash Cow
Relative Market Share
Dog
Analysis of BCG Matrix:
Boston Consulting Group Matrix is also called a business portfolio. It allows an
organization to manage its portfolio to businesses by assessing its relative market share
position and the industry growth rate. The BCG Matrix is done with the consideration of
107
BDO is segmented by the revenue of their SBU, namely Commercial Banking and
Investment Banking.
Having the largest market share in the Banking industry based on Commercial Banking
ahead of BPI by at least 64% in market share and with a high market growth rate, BDO
can be considered in the Stars position in the Boston Consultancy Group (BCG) Matrix.
Commercial banking has the highest profit, which is 161.6 million, and has the highest
market share in relevance to their SBUs. Con
Being in a division with a high relative market share and a high growth rate, to
retain or improve their dominant positions, the organization should receive substantial
investment. The strategies appropriate are market penetration, market development,
and product development as intensive strategies or related diversification.
108
GRAND STRATEGY MATRIX (GSM)
Figure 46 GSM of BDO Unibank, Inc.
Q2
Rapid Market Growth
Weak Competitive Position
Market Development
Market Penetration
Product Development
Forward Integration
Backward Integration
Horizontal Integration
Related Diversification
Strong Competitive Position
1.
2.
3.
4.
5.
6.
7.
Q1
Slow Market Growth
Q3
Q4
Looking at the Grand Strategy Matrix (GSM), BDO is located in quadrant I. They
are in an excellent strategic position. Market penetration, market growth, and product
development are the ideal tactics. They can afford to take advantage of external
opportunities in many sectors, being in quadrant I. When necessary, they can
aggressively take risks.
109
SUMMARY OF STRATEGIES
The summary of strategies tallied the strategies that were recommended by the
strategy formulation tools used from the data obtained from the internal and external
analysis.
Table 29 Summary of Strategies David’s Framework
STRATEGY OPTIONS
SWOT
SPACE
IE
BCG
GSM
TOTAL
Forward Integration
x
x
x
x
4
Backward Integration
x
x
x
x
4
Horizontal Integration
x
x
x
x
4
Market Penetration
x
x
x
x
x
5
Market Development
x
x
x
x
x
5
Product Development
x
x
x
x
x
5
x
2
Related Diversification
x
Unrelated Diversification
x
1
Retrenchment
Divestiture
Liquidation
110
QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)
Figure 47 QSPM of BDO Unibank, Inc.
Opportunities
1. Harnessing mergers and acquisition to have talents needed
2. Increase in strength and profits from remittances from OFWs
3. High demand of mobile banking applications
4. Drive towards sustainable energy projects
5. Increase in the demands of loans during pandemic
Threats
1. Continuous development of bank competitors
2. Decline in the usage of ATMs and physical branches due to
demand in mobile applications
3. Mobile scam and malware in mobile banking
4. Rise of inflation rate and interest rates
5. Failure of payments and decrease in the ability to pay of
debtors during pandemic
Strengths
1. Successful business relationship with customers
2. Largest bank in the country in terms of assets, loans, and
deposits
3. One of the largest distribution networks nationwide
4. Most number of remittances abroad
5. Increasing value of capitalization for the past 5 years
6. Good Fixed Asset Turnover
7. Member of the SM Group
8. Up-to-date electronic banking services
9. Longer banking hours
Weaknesses
1. Security in data assets
2. Slow online banking system
3. Limited technical support team
TOTAL
Market
Penetration/Development
Weight
AS
TAS
0.11
4
0.44
0.08
4
0.32
0.13
4
0.52
0.09
4
0.36
0.10
3
0.30
Weight
AS
TAS
0.09
3
0.27
Product
Development
AS
TAS
4
0.44
4
0.32
4
0.52
3
0.27
3
0.30
AS
TAS
3
0.27
0.10
0.13
0.09
4
4
3
0.40
0.52
0.27
4
4
2
0.40
0.52
0.18
0.08
Weight
0.08
2
AS
4
0.16
TAS
0.32
2
AS
4
0.16
TAS
0.32
0.11
0.09
0.09
0.10
0.09
0.08
0.08
0.07
Weight
0.08
0.06
0.07
4
4
4
4
3
4
4
2
AS
3
4
3
0.44
0.36
0.36
0.40
0.27
0.32
0.32
0.14
TAS
0.24
0.24
0.21
7.18
4
4
4
4
2
4
4
2
AS
3
4
3
0.44
0.36
0.36
0.40
0.18
0.32
0.32
0.14
TAS
0.24
0.24
0.21
6.91
111
CHAPTER IX
PROPOSED STRATEGIES
Generic Strategy
Differentiation
Cost Focus
Differentiation
Focus
Cost
Differentiation
Narrow Target
Scope
Broad Target
Cost Leadership
Source of Competitive Advantage
Figure 48 Generic Strategies Banco De Oro Inc.
112
To achieve and continue as the largest distribution network nationwide, BDO
Unibank, Inc. should focus on having differentiation with its competitors, namely: BPI,
UPB, and SEBC. Their core should be on developing innovative products and services,
attracting the consumers to purchase their offers. To formulate their products and
services, it will take them to present strategies.
In developing these strategies, the following measurements should be relatively
to their common target which is gaining and satisfying consumers.
Table 30 Strategic Objectives for Banco De Oro Inc.
Improving operational performance, but also enhancing its ability
to satisfy consumer needs.
Profitability
Retaining the industry-leading return on equity with an outstanding
financial record of drawing more buyers and to reduce the risk.
Further strengthen the digital network of the Bank to become a
successful distribution of sales and service channel.
The company will be able to market products/services to the same
Productivity and
consumers and attract new consumers.
Innovation
With its price advantage, the company will be able to expand its
branches in remote areas while retaining its high level of services.
A company that strengthens digital optimization programs: ATMs
and Online Banking that can be easily accessible.
113
A
banking
sector
that
adds
complete
functionality
on
products/services and results in higher customer satisfaction.
Differentiation
Boost their strategic edge as a result of improved productivity and
specialization of services.
Customer
Relationship
Creation of a consumer feedback system to improve the services
delivered.
Providing a strong customer experience to the client to win their
loyalty.
114
Specific Strategy
According to the Mission-Vision declaration of BDO, the Matrix for External
Factor Assessment (EFE), and the Internal Factor Evaluation Matrix (EFE), the
following strategies can be addressed:
I.
Investing more in mobile banking technology, financial transactions, and
applications
II.
To achieve a continuously higher net income expenditure
III.
To increase the sector's market share
IV.
To have an even higher net income while maintaining costs
Strategy Implementation
Based on the internal and external analysis that form the basis of matching
strategies, three strategies are used to maximize the market share and improve it.
Horizontal integration, Market, and Product Development are the following methods.
The most suitable of the three is Product Development. In a sector with comparatively
high growth rates, BDO has a high market share. In the banking sector, various players
are part of BDO's competitors. UBP, SECB, and BPI are in the top three. Doing so will
raise the company's market share.
115
1. Horizontal Integration
To increase its reach, BDO will develop its goods and services by harnessing
mergers and acquisitions to have talents needed to meet new technology's innovation,
apart from producing more branches or ATMs. This, in essence, would lead to an
expansion of the BDO's relative market share. Provided the high capitalization of BDO,
development of digital network and programs of the Bank is possible to implement.
a.) To have an ever higher net income while maintaining costs
The benefit is one measure of success in any sector. As far as BDO is
concerned, it would convert plans into revenues to see how those goals are
accomplished. The technological creation for BDO would transform into innovative and
improved goods and services that will improve sales and raise interest earnings,
applications for loans, acquisitions, and receivables. BDO is expected to begin with a
10% increase followed by a steady 5% increase per year. Also, BDO has the task of
establishing shareholder value through higher returns. Besides, the reduction in the
BDO capital adequacy ratio is discussed, which is either an increase in equity or a profit
increase. BDO is expected to begin with an increase of 10% then slowly increase by
10% annually. To further profit growth, BDO should sustain expenditures rather than
reducing or lowering them, except for operational expenditures, if necessary while
retaining other expenditures.
Figure 49 Value Proposition Canvas Banco De Oro Inc.
116
- Increase in the demand
of loans during pandemic.
- More customer
- Most number of
remittances abroad
- A company that strengthens
the process of digital
optimization programs
- Increasing demand of
banking applications
- Business relationship
Gain creators
- Online presence without
much hassle
-Good fixed asset turnover
Gains
-Innovative technology
services
Products &
services
Pains
Customer
job(s)
- Improvement of the mobile banking
applications
- Use up-to-date programs to weed out
malware and prevent viruses from
spreading
- Tighten the security by providing EMV
chip and code/pin.
- Acquire professionals who will provide
and improve security measures
- Drive towards sustainable energy
projects. The new and improved
services will access more markets
- Provide different tips or warning signs
to prevent mobile scams and malware
attacks.
Pain relievers
- Security in data assets
- Slow online banking system
- development of bank
competitors
- Attract new
relationship-based
customers/
acquisition job
- Availability in all
areas, as with rural
areas
- Decline in the usage of
ATMs and physical branches
due to demand in mobile
applications.
-Lacks technical teams
The value proposition canvas shows that security and technological flawlessness
in online banking are core challenges for the BDO Unibank, Inc. or consumers in this
field. The pain killers that would have to be applied have to with the economies of scale
to address cost and strategic positioning of resources to address these pain points.
117
2. Market Development/Penetration
BDO should continue to pursue its market penetration as one of the leading players
in the banking sector and the biggest market share in the industry. The preferred
banking institution on the markets it represents as one of its duties. In its new status,
BDO cannot be complacent. Enhanced marketing strategy for its latest products would
help BDO in its existing markets explore deeper target. However, when its base is more
robust, BDO should not lose sight of its current markets.
a.) To increase the sector's market share
While BDO is at the top of the market, it would be too costly to be
complacent, especially if the banking industry players are very aggressive as
they will overpower BDO in the market share. It is also intended to discuss the
goal of BDO to become the leading bank in its markets. The rise in market share
would also further boost BDO's capitalization, strengthen its finances, deliver
new goods, and a proactive reinvention to fulfill market demands consistently.
The larger capitalization and assets can acquire more remittances abroad to
expand its market and increase profits from OFW's.
3. Product Development
One of the BDO's priorities is to invest more in mobile banking and other banking
innovations. It was expected to develop BDO's mobile banking program. The simple
transfers should be prepared and tap-free for such an application. Protection, including
updated codes, and coding systems and backup systems, should also be strengthened.
118
BDO wants technologies to improve its services in bank branches, aside from
online services. This addresses its goal to provide services flawlessly. Use computers
to speed up transfers or to arrange delays. To achieve its goals, BDO must bear in
mind that quality service must become its priority. BDO must capitalize on its good
support
units
in
Research
and
Development
and
Information
Technology
Departments to promote this product growth. The high capitalization of BDO is also an
indicator that the firm can afford this growth.
a.)
Investing
further
in
mobile
banking
software
technology
and
transactions of banks.
This is BDO's response to the market's growth for mobile banking
applications in the banking sector. BDO capitalizes on its assets, suitable support
units for science and information, and technology by spending more on
technology and its high capitalization. The incorporation of better technologies in
BDO's goods and services also ensures that service delivery and innovation are
more flawless, both part of the BDO Project Vision declarations. Better security
also provides secure transactions that resolve the insecurity of digital properties
against infringements and assaults and the protection of BDO. This target
responds in 10-folds to BDO's targets.
b.) Hiring of new employees/Employees Training and Development for new
processes
An increasing demand of new technology demand for a further training and
development of skill or hiring of new employees to secure the handling wave of
119
consumers using their mobile devices during the time of pandemic. It is a fair
opportunity to add additional workers to accommodate the growing numbers of
mobile users. Some employees will be differentiated by their expertise in modern
media, marketing, and industry technology. This is a fundamental matter for a
business; younger applicants who are technologically advanced could be superior to
elderly candidates for these skills.
With strategies 1 and 2 being set in place, Banco De Oro can now improve
its services and products, which is the new introduction of services and products.
Figure 50 Business Model Canvass BDO Unibank, Inc.
Key Partners
-Investment
partners
-Technology
Vendors
-Regulatory
Agencies
Key
Activities
Value
Propositions
-Branch
Operations
-Deposits
Products
(Lower
-Call
center Interest
Operations
Rates)
IT Operations
Key
Resources
-Physical and
IT
Infrastructure
- Loan Assets
Cost Structure
Relationship
- Personal
Assistance
- Automation
where
possible
-Loan
Products
(Higher
Interest
Rates)
Customer
Segments
-Retail and
Corporate
Customers
(Depositors)
- Retail and
Corporate
Customers
(Borrowers)
Channels
- Bank
Branches,
ATMs, Call
Centers,
Internet,
Mobile
Devices
Revenue Streams
120
-Internet Expenses
-Interest Income
-Channel Costs
-Fee Income
The table shows the estimated additional cost establishing maintenance for
Banco De Oro to achieve the strategies.
Figure 51 Additional Cost Establishing Maintenance for Banco De Oro
Action Plan
Expected Output
Timetable
Responsible
Cost
Department
Employees
Training and
Development
for new
processes
Motivated staff
and developed
knowledge and
skills
AugustOctober
Human
Resource
Management
Php 500,000.00
Opportunity
Analysis
regarding
investment
and asset
acquisitions
Capital and
strategic
acquisition
increase
NovemberDecember
Accounting
and Finance
Department,
Treasury
Department
Php 500,000.00
Partnership,
merger, and
acquisition
with large
scale
organizations
To suppress
rivals and maintain
bigger share
JanuaryMarch
Human
Resource
Management
Php
100,000,000.00
Updating
technologies
of the
company
Enhancing the
industry
competitive edge,
increasing
operating
efficiency,
enhancing service
April-May
Technology
Management
Group
Php
50,000,000.00
121
quality
Total
Php
151,000,000
122
CHAPTER X
ACTION PLANS AND PROGRAMS
Strategy Implementation
Matching Strategy with Strategy
1.) Management
In a nation that is loaded with banking stalwarts, BDO Unibank keeps on
standing tallest, driving the Philippines from the front into another period of
computerized or digital banking as well as, maybe more significantly,
comprehensive banking.
The biggest bank in the country, across a scope of measurements
including total assets, BDO has been for some time considered the Philippine
full-service financial institution of the decision. It offers a complete set-up of
financial products and administrations or services to a different customer base
and through a broad and developing cluster of channels. Also, BDO offers longbanking hours before and during the pandemic to serve its customers longer.
2.) Project and Operations Management
To accomplish and proceed as the biggest dispersion networks cross
country, the BDO Unibank, Inc. should zero in on having separation from its
competitors, specifically: BPI, UPB, and SEBC. Their center ought to create
imaginative items and administrations, pulling in the customers to buy their
offers. To plan their items and administrations, it will take them to introduce
methodologies.
123
In building up these methodologies, the accompanying estimations should
be moderate to the standard objective, acquiring and fulfilling purchasers.
3.) Finance/Accounting
BDO Capital offers financial advisory assistance to organizations or
companies needing to investigate possible ways to add short-, medium or longterm development possibilities. BDO Capital gives a menu of choices
contemplating its present business profile, market/industry where it should be,
and plans and prospects. Advisory services may cover corporate and obligation
rebuilding and consolidations and obtaining exchanges.
BDO is a leading financial institution that offers a scope of inventive items
or products and services to address various companies or organizations' issues.
With long stretches of involvement with the business, it created unique
methodologies that have permitted it to prevail in various economic situations. To
help different organizations or companies experience the same achievement to
keep on getting a charge out of, BDO gives proficient and dependable monetary
warning administrations.
BDO perceives that it tends to be trying to deal with a business,
particularly when market circumstances change consistently. This is the reason
for financial advisors try to offer your company or organization a lift by providing
master guidance. The experts will assess profile, market execution, and industry.
The structure sound techniques will help settle on the privileged monetary
choices and drive your business forward. With BDO, its customers will have the
certainty to investigate different freedoms and grow its compass.
124
4.) Banking Technology
Innovation has helped keep money with decreased expenses, creating
extra income, and overseeing hazard openness more capably. The consistent
reconciliation of innovation into the branch acquaints clients with computerized
presence, such as versatile banking or online exchanges yet. Also, it makes the
branches more effective and holding up occasions less critical. However, it has
additionally opened the entryway for enormous and little contenders.
5.) Corporate Structure
The bank has kept on conveying a stellar performance even into 2020,
posting 7-percent development in pre-arrangement working benefit during the
year's first quarter, contrasted with a year sooner. However, more than its
financial performance, it is the nature through which it has moved toward two key
objectives—boosting financial inclusion and banking digitization—that has
acquired the bank numerous approvals and extensively improved the financial
experience of the regular BDO client.
At the firm level, a surviving examination shows that the powerful
connection between system and design is an essential precondition to the fruitful
execution of new business methodologies. Likewise, a match between proper
authoritative components and procedure has been found to lessen uncertainty
inside the firm and increment system execution's adequacy. An improper
organizational structure will prompt helpless dynamic, which may adversely
influence the procedure used cycle.
125
6.) Organization Culture
Individuals first. Uncommon consistently, every way. Embrace change.
Strengthening through information. Pick responsibility.
These are BDO's guiding principles, the arrangement of norms for its
work, how to treat its customers, and how one another. It controls through the
difficulties of our calling and makes BDO a dynamic and steady workspace.
The bank utilizes the abbreviation CORE to show the qualities ingrained
across its branches and staff concerning client support:
-
C for "Costumer focus": Everything BDO does should have the
client's evenhanded at the top of the priority list;
-
O for "Out-of-the-box" thinking: Does not compelled by
conventional methods of getting things done;
-
R for "Right attitude": The additional mile realizing that a work
isn't done until the customer is fulfilled;
-
E for "Excellent execution": From start to finish, the entire
servicing measure should work without an issue.
126
Figure 52 Departmental Action Plans for BDO Unibank, Inc.
Strategies
Bases if
Strategy based on
IFE and
EFE
If With significant
difference
Measure
Performance Planned vs actual
objective
if with significant
difference
Action Plan
(Continue or
Take Corrective
Action)
Operations
Strategies
Providing a successful marketing strategies and fast customer
service to assist every loan transaction of the customer.
YES
YES
Take Corrective
Action
Improving employee’s workplace and
arranging plan
YES
YES
Take Corrective
Action
Improve and enhance the data protection and security measures of
significant data.
YES
YES
Take Corrective
Action
Maximizing banks quality
administration
YES
YES
Take Corrective
Action
Regulatory Compliance mandated by
BSP
NO
NO
Continue Present
Course
NO
NO
Continue Present
Course
YES
YES
Take Corrective
Action
Improve handling funds, portfolios and
securities.
Marketing Strategies
Improvement of the mobile banking applications & Investing in digital
marketing
127
to expand the interest of
clients
The new and improved services that will access more markets
YES
YES
Take Corrective
Action
Marketing & Sales
Team
YES
YES
Take Corrective
Action
Introduce better items or products with remarkable highlights yet at the
same time pertinent in banking & financial industry
same time pertinent in banking & financial
industry
YES
YES
Take Corrective
Action
NO
Continue Present
Course
YES
YES
Take Corrective
Action
YES
YES
Take Corrective
Action
YES
YES
Take Corrective
Action
NO
NO
Continue Present
Course
Increase more funds in marketing segment to gain popularity
in public, and boosting banks
brand
Human Resource
NO
Consistent improvement of labor force in organizational structure of the
banks
Labor force for banks specialized development dependent on the
business
interest
Increase standards of employee classification for specific category.
Build up a relationship with human resource development
agency.
128
Finance
Collection policy and Payment of loan
program.
YES
YES
Accomplish and proceed as the biggest dispersion networks cross country
YES
YES
Take Corrective
Action
Take Corrective
Action
Innovation in the mode of
payment
YES
YES
Take Corrective
Action
Improving the estimation of bank measures to prevent insignificant
accounts mistake in records
NO
NO
Continue Present
Course
Gain efficiency in Financial
Statements.
YES
NO
Take Corrective
Action
Offering financial advisory assistance to organizations or companies
needing
NO
NO
Continue Present
Course
NO
NO
Continue Present
Course
Improving calculation on product estimate and compliance management
129
CHAPTER XI
STRATEGY EVALUATION AND CONTROL
Measuring and Monitoring of Organization Performance
Strategy Evaluation is the last phase in strategic management in which it is as
necessary as the design of the strategy as it sheds light on the feasibility and
effectiveness of the systematic plans to accomplish the desired outcomes.
Organizations may also determine the efficacy of the new approach by socio-economic,
political, and technical developments in today's competitive business environment. The
importance of strategy evaluation depends on the ability, through organizational
performance, to manage the activities undertaken by supervisors, organizations, and
departments. Strategic evaluation can also help assess whether the decisions match
the intended strategy requirements which includes varying elements such as the
development of inputs for new strategic planning, the urge for feedback, assessment
and compensation, the development of the strategic management process and the
legitimacy of strategic choice.
Action Plan
Action plan is the method of turning goals and priorities into practice,
encouraging proposals to become concrete. It is defined by the creation of an action
plan for each portion and intermediate action phase both of which ultimately contribute
to the ultimate objective. Below is the action plan for BDO Unibank, Inc.
130
Figure 53 Action Plans for BDO Unibank, Inc.
Department Responsible
Strategies
Key Result Areas (KRA)
Action
Plan
Operation Strategies
Providing a successful marketing strategies
•
and fast customer service to assist every loan
Department
Marketing
Credit
Management
transaction of the customer
Improving
employees’
workplace
and
•
Human
Assessment
Resource Manpower
Continue
Scheduling To
arranging plan
Department
Software
Improve and enhance the data protection and
•
Management Information and To
security measures of significant data
Technology Department
Data System
•
Project
Maximizing banks quality administration
Regulatory Compliance mandated by BSP
Improve
handling
funds,
portfolios,
Information
Operations
securities
Implement
and
Department
Management Reports
•
Disclosure
Executive
•
Accounting,
Finance,
and
Reports
Department
and
implement
Treasury
Department
Quality To
Implement
Annual
Continue
Investment Portfolio Reports To
and Schedule
take
Action
Marketing Strategies
banking
•
I.T. Department
applications & investing in digital marketing to
•
Accounting,
Improvement
of
the
mobile
Social Media Platforms
To
Implement
131
expand the interest of clients
Finance,
Treasury
Department
The new and improved services that will
access more markets
•
R&D Department
•
Marketing
Updated Sales Reports
To
implement
Department
•
Marketing and Sales Team
Marketing
Department
Scout
•
with qualities that parallel the
Accounting,
Finance,
potential
employees
Treasury company ideals
To
implement
Department
•
Introduce
better
items
or
products
with
Research
and
Development
remarkable highlights yet at the same time
Department
pertinent in banking & financial industry
•
(R&D)
Banking Supervision
To
implement
Marketing
Department
•
Marketing
Increase more funds in marketing segment to
Department
gain popularity in public, and boosting banks
•
brand
Finance,
Commercial
Accounting,
production studio
industry/ To
take
action
Treasury
Department
Human Resource
Consistent improvement of labor force in
•
Human
Resource Scout
potential
employees To
132
organizational structure of the banks
Department
with qualities that parallel the implement
company ideals
Labor force of banks specialized development
•
dependent on the business interest in terms of
Department
technological advancements
•
IT Department
•
Human
Build up a relationship with human resource
Human
Resource
IT development programs
Resource Scout
employees
with qualities that parallel the
Department
development agency
potential
company ideals
To
implement
To
take
action
Finance
Collection
policy
and
Payment
of
loan
program
•
Finance,
To
Treasury Loan Portfolio
implement
Department
•
Accomplish precise analysis on labor cost
Accounting,
Accounting,
Finance,
Treasury Project budget reports
Department
•
Innovation in the mode of payment
To
take
action
Accounting,
Finance,
Treasury Performance
Department
management To
reports
•
R&D Department
Improving the estimation of bank measures to
•
Accounting,
prevent insignificant accounts mistakes in
Finance,
record
Department
Treasury
Performance
implement
Management To
Reports/ Financial Statements
implement
133
Gain efficiency in Financial Statements
•
R&D Department
•
Accounting,
Finance,
Treasury Auditing, Financial Report
Department
Offering
financial
advisory
assistance
to
organizations or companies needing
Improving calculation on product estimate and
compliance management
•
Accounting,
Finance,
Treasury Economic condition analysis
Department
•
Accounting,
Finance,
Department
Treasury
Performance
reports
To
take
action
To
implement
management To
take
action
134
Balanced Scorecard
The Balanced Scorecard makes it easier for organizations to properly match their
corporate framework with strategic priorities. Organizations need to make sure that all
company divisions and support functions are operating for the same priorities in order to
implement a strategy well. To accomplish that and relate strategy to tasks, cascading
the Balanced Scorecard into those units would help. Below is the balance scorecard for
BDO Unibank, Inc.
135
Figure 54 Balanced Scorecard for BDO Unibank,
Inc.
Strategies
Tools
Reporting
Expected Output
Primary
Responsibility
Operations Strategies
Providing
a
successful
marketing strategies and fast
customer
service
to
assist
every loan transaction of the
Credit
Assessment
Quarterly
Marketing Department
interest
Semi-
Human Resource
expense on deposit
annual
Department
Monthly
IT Department
Management
customer
employees’ Manpower Scheduling •
Improving
workplace and arranging plan
Software
liabilities
Improve and enhance the data Management
protection
security Information and Data •
and
measures of significant data
Maximizing
banks
administration
Regulatory
Productivity efficiency
of banks
and
Quality •
Management Reports
Compliance Disclosure
mandated by BSP
Improve
System
quality Project
Lower
Increase in leveraging
debt
and
Annually
Annual Reports
handling
funds, Investment
portfolios, and securities
Annually
Operations
Department
Executive Department
Accounting, Finance,
Portfolio
Quarterly
Reports and Schedule
and Treasury
Department
Sales and Marketing Strategies
Improvement of
the mobile Social
Media
•
Increase in assets
Quarterly
Marketing and IT
136
banking
applications
& Platforms
to protect
investing in digital marketing to
depositors and
expand the interest of clients
creditors
The
new
and
improved
services that will access more
markets
Updated
Sales
Reports
•
Increase in clients
•
Increase in ale per
Department
Research and
Quarterly
Marketing Department
year
Scout
potential
employees
Marketing and Sales Team
Development and
with
Semi-
Human Resource
qualities that parallel
annual
Department
the company ideals
Introduce
better
products
with
items
or
remarkable
highlights yet at the same time Banking Supervision
Quarterly
pertinent in banking & financial
Marketing and R&D
Department
industry
Increase
more
marketing
segment
popularity
in
funds
to
public,
in
Accounting, Finance,
gain Commercial industry/
Quarterly
and production studio
and Treasury and
Marketing Department
boosting banks brand
Human Resource Operations
Consistent
improvement
of Scout
labor force in organizational employees
potential
with
•
Maintain customer
Semi-
Human Resource
annual
Department
137
structure of the banks
qualities that parallel
the company ideals
Labor
force
specialized
of
development
in
•
banks
dependent on the business
interest
attrition
terms
of
Maintain employee
retention
IT
development
Semi-
Human Resource and
annual
IT Department
with
Semi-
Human Resource
qualities that parallel
annual
Department
programs
technological advancements
Build up a relationship with
human resource development
agency
Scout
employees
potential
the company ideals
Finance and Accounting Operations
Collection policy and Payment
of loan program
Loan Portfolio
•
Lower
rate
for
delinquent
Accounting, Finance,
Annually
Department
accounts
Accomplish precise analysis on
labor cost
Project budget reports
•
Increase in noninterest
revenue
Accounting, Finance,
Annually
payment
management reports
Improving the estimation of Performance
•
and Treasury
Department
accounts
Innovation in the mode of Performance
and Treasury
Accounting, Finance,
Lower
than
30
days
late
for
payment dues
Annually
and Treasury
Department
Annually
Accounting, Finance,
138
bank
measures
to
prevent Management Reports/
and Treasury
insignificant accounts mistakes Financial Statements
Department
in record
Gain efficiency in Financial Auditing,
Statements
Offering
Report
financial
advisory
assistance to organizations or
companies needing
Improving
product
Financial
calculation
estimate
compliance management
on
and
Economic
Accounting, Finance,
Annually
and Treasury
Department
condition
analysis
Performance
management reports
Accounting, Finance,
Annually
and Treasury
Department
Accounting, Finance,
Annually
and Treasury
Department
139
Strategy Map
Figure 55 Strategy Map for BDO Unibank, Inc.
The strategy map above illustrates that through a faster processing time and
online servicing, improving employee retention will benefit the company. In comparison,
product awareness development leads to creative services and features, in which will
bring new potential high valued clients to the company. Customer loyalty would also
remain strong with the enhanced internal procedures, both online and physical
branches nationwide. This leads to a greater chance that current consumers will seek
new or additional services. To conclude, the rise in the amount of sales made by both
new and current customers would result in an increase in sales and an improvement in
market share. The strengthened financial condition would then contribute to sustaining
the high productivity of the operation.
140
CHAPTER XII
PROJECTED FINANCIAL STATEMENT
Projected Statements of Financial Position
Figure 56 Projected Statements of Financial Position for BDO Unibank, Inc.
Statements of Financial Position
FOR THE YEARS ENDED DECEMBER 31, 2015, 2016, 2017, 2018 AND 2019
(Amounts in Millions of Philippine Pesos)
RESOURCES
CASH AND OTHER CASH
ITEMS
DUE FROM BANGKO
SENTRAL NG PILIPINAS
DUE FROM OTHER
BANKS
TRADING AND
INVESTMENT
SECURITIES
LOANS AND OTHER
RECEIVABLES - Net
PREMISES, FURNITURE,
FIXTURES AND
EQUIPMENT - Net
INVESTMENT
PROPERTIES - Net
OTHER RESOURCES - Net
TOTAL RESOURCES
LIABILITIES AND EQUITY
DEPOSIT LIABILITIES
BILLS PAYABLE
SUBORDINATED NOTES
PAYABLE
INSURANCE CONTRACT
LIABILITIES 1
OTHER LIABILITIES
Total Liabilities
EQUITY
Attributable to:
Shareholders of the Parent
Bank
Non-controlling Interests
Total Equity
TOTAL LIABILITIES AND
EQUITY
2019
2020
-15%
2021
-10%
2022
-5%
2023
3%
2024
6%
2.05%
62,726
53,317
45,320
38,522
32,743
27,832
10.02%
306,938
260,897
221,763
188,498
160,224
136,190
1.17%
35,820
30,447
25,880
21,998
18,698
15,894
11.27%
345,278
293,486
249,463
212,044
180,237
153,202
71.03%
2,175,655
1,833,976
1,558,880
1,325,048
1,126,291
957,348
1.39%
42,494
36,120
30,702
26,097
22,182
18,855
1.00%
2.66%
100%
12,595
81,594
3,063,100
26,036
69,355
2,603,635
22,131
58,952
2,213,090
18,811
50,109
1,881,126
15,990
42,593
1,359,114
13,591
36,204
1,598,957
79.62%
4.81%
2,438,737
147,321
2,072,926
125,223
1,761,987
106,439
1,497,689
90,474
1,273,036
76,902
1,082,081
65,367
0.33%
10,030
8,526
7,247
6,160
5,236
4,450
3.19%
87.95%
97,802
2,693,890
83,132
2,289,807
70,662
1,946,336
60,063
1,654,385
51,053
1,406,227
43,395
1,195,293
12.05%
369,210
192,730
163,820
369,210
266,754
266,754
226,741
12.05%
313,829
313,829
226,741
192,730
163,820
100%
3,063,100
2,603,635
2,213,090
1,881,126
1,359,114
1,598,957
141
Projected Income Statement
Figure 57 Projected Income Statement for BDO Unibank, Inc.
BDO UNIBANK, INC,
Statements of Income
FOR THE YEARS ENDED DECEMBER 31, 2015, 2016, 2017, 2018 AND 2019
(Amounts in Millions of Philippine Peso Except Per Share Data)
2019
INTEREST
INCOME
INTEREST
EXPENSE
NET INTEREST
INCOME
IMPAIRMENT
LOSSES - Net
NET INTEREST
INCOME
AFTER
IMPAIRMENT
LOSSES
OTHER
OPERATING
INCOME
OTHER
OPERATING
EXPENSES
PROFIT BEFORE
PREACQUISITION
INCOME
PROFIT BEFORE
TAX
TAX EXPENSE
NET PROFIT
2020
2021
2022
2023
2024
100% 153,981.00 130,883.85 117,795.47 111,905.70 115,262.87 122,178.64
30%
38,581.00
39,265.16
35,338.64
33,571.71
34,578.86
36,653.59
74%
114,500.00
91,618.85
82,456.47
82,333.70
80,684.01
85,525.05
7%
5,699.00
9,161.87
8,245.68
7,833.40
8,068.40
8,552.51
71%
108,801.00
82,456.98
74,210.79
74,500.30
72,615.61
76,972.54
28%
43,145.00
36,673.25
33,005.93
31,355.63
32,296.30
34,234.08
63%
94,337.00
82,456.83
74,211.14
70,500.59
72,615.61
76,972.55
37%
9%
29%
57,609.00
13,376.00
44,233.00
36,673.41
11,369.60
25,303.81
33,005.57
10,232.64
22,772.93
35,355.34
9,721.01
25,634.33
32,296.30
10,012.64
22,283.66
34,234.08
10,613.40
23,620.68
142
Statement of Financial Position Assumption
•
Due to COVID-19 pandemic will less 5% in the total assets, liabilities and equity
until 2022 and will add 3% each in 2023 to 2024.
•
The target total assets, liabilities and equity by 2024 is 1.5 billion as a sign for
recovery after pandemic.
Revenue Assumptions
•
Due to COVID-19 pandemic will less 5% cumulative revenue until 2022 and will
add 3% each in 2023 to 2024 in which the interest income (revenue) of BDO are
21% lesser than 2019.
•
The target interest income (revenue) by 2024 is 122 million as a sign for recovery
after pandemic.
•
The interest expense in 2019 increased by 5% each year.
•
The impairment loss in 2019 increased by 3% each year.
•
The other operating income expenses in 2019 increased by 2% each year.
Projected Financial Ratios
Figure 58 Projected Liquidity Ratios for BDO Unibank, Inc.
Liquidity Ratios
Measure
Company
2020 2021 2022 2023 2024 Average
Current Ratio
BDO
1.08
1.08
1.08
1.08
1.08
Trend
1.08
143
Cash Ratio
BDO
0.02
0.02
0.02
0.02
0.02
0.02
Liquidity Assumptions:
•
The current and Quick ratio still has an average of 0.55, and this indicates that
BDO will manage to maintain its capacity to finance current expenses during the
pandemic.
•
BDO can improve its liquidity ratios by using sweeping accounts, cutting
operating costs, and paying off liabilities in various ways.
Figure 59 Projected Leverage Ratios for BDO Unibank, Inc.
Leverage Ratios
Measure
Company
2020
2021
2022
2023
2024 Average
Debt Ratio
BDO
0.88
0.88
0.88
0.88
0.88
0.88
Debt to
Equity Ratio
BDO
7.30
7.30
7.30
7.30
7.30
7.30
Trend
144
Leverage Assumptions:
•
BDO's leverage ratios are stable or show no changes for the 5-year average.
This means that the company has managed to have enough cash flow to pay its
debt.
•
BDO may take this as an opportunity to reduce its debt-to-capital ratio by
increasing sales revenues and, potentially, earnings.
Figure 60 Projected Activity Efficiency Ratios for BDO Unibank, Inc.
Activity Efficiency Ratios
Measure
Company
2020
2021
2022
2023
2024 Average Trend
Asset Turnover
Ratio
BDO
0.05x 0.05x 0.06x 0.07x 0.09x
0.06x
Fixed Asset
Turnover Ratio
BDO
1.00x 1.05x 1.18x 1.43x 1.78x
1.29x
Activity Efficiency Assumptions:
•
BDO manages to increase its asset turnover ratio. However, it is still below the
industry average, and it may indicate that it still does not rely heavily on its assets
to generate more new interest income.
145
•
The fixed asset turnover ratio decreases compared to the past 5-year average,
but it is still favorable compared to the industry average. This may indicate that
BDO is still using more fixed assets in generating income.
Figure 61 Projected Profitability Ratios for BDO Unibank, Inc.
Profitability Ratios
Measure
Company
2020
2021
2022
2023
Net Interest
Margin
2024 Average Trend
BDO
3.52%
3.73%
4.38%
5.05%
6.29%
4.59%
Return on
Assets
BDO
5.03%
5.32%
5.95%
7.21%
8.99%
6.50%
Return on
Equity
BDO
41.71% 44.16% 49.35% 59.81% 74.58%
53.92%
Profitability Assumptions:
•
BDO's Net Interest Margin has an upward trend, which indicates that the
company has an increasing interest percentage for the next five years.
•
The ROA and ROE increased for the next five years, which means better
leverage and asset management.
146
Conclusion
BDO Unibank Inc. is the Philippines’ leading local bank in terms of total assets
and loans. The financial institution should focus more on its strengths and improve its
services and maintain as the top local bank against its competitors. With the increasing
value of capitalization in the last five years and having a good, fixed asset turnover, it is
expected to be here in the long run. Its financial operations were doing well from 2015
to 2019, but due to the COVID-19 pandemic, the banking industry suffered a huge
setback. As for its operations, several threats hinder the bank for 2020 and the coming
years. However, with the right strategy, BDO can recover from the losses caused by the
pandemic.
With the rising demand for mobile banking applications caused by several
lockdowns nationwide and the convenience it offers to BDO clients, it is prone to threats
such as malware and mobile scams. Further research and developments must be done
on BDO’s products and services and studies on other banks to compare their different
characteristics and figure out the right strategy to face the impact of the worldwide
pandemic to recover by the next few years fully. BDO is currently taking progressive
steps to boost its economic recovery and sustainability but implementing these
strategies in time for future situations to come remains.
147
List of Figures
Figure 1 Milestones of BDO Unibank, Inc. ............................................................... 11
Figure 2 Business Model Canvass of Banking Companies ..................................... 12
Figure 3 Dupont Analysis of BDO Unibank, Inc........................................................ 13
Figure 4 BDO Unibank, Inc. Five (5) Year Financial Statement for
years 2015-2019 ........................................................................................................... 15
Figure 5 BDO Unibank, Inc. Five (5) Year Income Statement for
years 2015-2019 ........................................................................................................... 16
Figure 6 Statement of Cashflow of BDO Unibank, Inc. 2015 to 2019 ..................... 17
Figure 7 Trendline of Current Ratios of BDO Unibank, Inc. .................................... 20
Figure 8 Trendline of Cash Ratios of BDO Unibank, Inc.......................................... 21
Figure 9 Trendline of Liquidity Ratios of BDO Unibank, Inc. .................................. 22
Figure 10 Trendline of Net Interest Margin of BDO Unibank, Inc. ........................... 23
Figure 11 Trendline of Gross Profit Margin of BDO Unibank, Inc. .......................... 24
Figure 12 Trendline of ROA of BDO Unibank, Inc. ................................................... 25
Figure 13 Trendline of ROE of BDO Unibank, Inc..................................................... 26
Figure 14 Trendline of TIE of BDO Unibank, Inc. ...................................................... 27
Figure 15 Trendline of EPS of BDO Unibank, Inc. .................................................... 28
Figure 16 Trendline of Profitability Ratios of BDO Unibank, Inc. ............................ 29
Figure 17 Trendline of Receivable Turnover Ratios of BDO Unibank, Inc. ............ 30
Figure 18 Trendline of Asset Turnover Ratios of BDO Unibank, Inc. ..................... 31
Figure 19 Trendline of Fixed Asset Turnover Ratios of BDO Unibank, Inc. ........... 32
Figure 20 Trendline of Equity Turnover Ratios of BDO Unibank, Inc. .................... 33
Figure 21 Trendline of Efficiency Ratios of BDO Unibank, Inc................................ 34
Figure 22 Trendline of Debt Equity Ratios of BDO Unibank, Inc............................. 35
148
Figure 23 Trendline of Debt Ratios of BDO Unibank, Inc. ....................................... 35
Figure 24 Trendline of Stability Ratios of BDO Unibank, Inc. ................................. 26
Figure 25 Trendline of Debt to Asset Ratios of BDO Unibank, Inc. ........................ 37
Figure 26 Trendline of Debt-to-Equity Ratios of BDO Unibank, Inc. ....................... 38
Figure 27 Trendline of Equity Ratios of BDO Unibank, Inc. .................................... 39
Figure 28 Trendline of Leverage Ratios of BDO Unibank, Inc. ................................ 40
Figure 29 Trendline of WACC of BDO Unibank, Inc. ................................................ 42
Figure 30 Table of Organization BDO Unibank, Inc.................................................. 45
Figure 31 External Factors Evaluation Matrix BDO Unibank, Inc. .......................... 71
Figure 32 Type of Banks Amount in the Philippines ................................................ 75
Figure 33 Number of Commercial Banks in the Philippines .................................... 77
Figure 34 Number of Thrift Banks in the Philippines ............................................... 78
Figure 35 Number of Rural Banks in the Philippines ............................................... 78
Figure 36 Porter’s Five Forces Model for BDO Unibank, Inc. .................................. 80
Figure 37 Comparison of Competitors’ Financial Statements
Vs Banco de Oro Unibank .......................................................................................... 84
Figure 38 Comparison of Competitors’ Financial Ratios
Vs Banco de Oro Unibank .......................................................................................... 86
Figure 39 DuPont Model of Universal Banking Industry.......................................... 89
Figure 40 Competitive Profile Matrix Between BDO and Competitors .................. 91
Figure 41 Internal Factors Evaluation Matrix BDO Unibank, Inc. ............................ 96
Figure 42 SWOT Matrix of BDO Unibank, Inc............................................................ 98
Figure 43 Internal-External (IE) Matrix of BDO Unibank, Inc. ................................ 103
Figure 44 SPACE Matrix of BDO Unibank, Inc. ....................................................... 105
Figure 45 BCG Matrix of BDO Unibank, Inc. ........................................................... 107
Figure 46 GSM of BDO Unibank, Inc........................................................................ 109
149
Figure 47 QSPM of BDO Unibank, Inc. .................................................................... 111
Figure 48 Generic Strategies Banco De Oro Inc. .................................................... 112
Figure 49 Value Proposition Canvas Banco De Oro Inc. ....................................... 117
Figure 50 Business Model Canvass BDO Unibank, Inc. ........................................ 120
Figure 51 Additional Cost Establishing Maintenance for Banco De Oro ............. 121
Figure 52 Departmental Action Plans for BDO Unibank, Inc. ................................ 127
Figure 53 Action Plans for BDO Unibank, Inc. ........................................................ 131
Figure 54 Balanced Scorecard for BDO Unibank, Inc. ........................................... 136
Figure 55 Strategy Map for BDO Unibank, Inc. ....................................................... 140
Figure 56 Projected Statements of Financial Position for BDO Unibank, Inc. ..... 141
Figure 57 Projected Income Statement for BDO Unibank, Inc. ............................. 142
Figure 58 Projected Liquidity Ratios for BDO Unibank, Inc. ................................. 143
Figure 59 Projected Leverage Ratios for BDO Unibank, Inc. ................................ 144
Figure 60 Projected Activity Efficiency Ratios for BDO Unibank, Inc. ................. 145
Figure 61 Projected Profitability Ratios for BDO Unibank, Inc. ............................ 145
150
List of Tables
Table 1 Current Five (5) Year Current Ratios of BDO Unibank, Inc. ....................... 20
Table 2 Current Five (5) Year Cash Ratios of BDO Unibank, Inc. ........................... 21
Table 3 Current Five (5) Year Liquidity Ratios of BDO Unibank, Inc. ..................... 22
Table 4 Current Five (5) Year Net Interest Margin of BDO Unibank, Inc. ................ 23
Table 5 Current Five (5) Year Gross Profit Margin of BDO Unibank, Inc. ............... 24
Table 6 Current Five (5) Year Return on Assets of BDO Unibank, Inc. ................... 25
Table 7 Current Five (5) Year Return on Equity of BDO Unibank, Inc. ................... 26
Table 8 Current Five (5) Year Time Interest Earned of BDO Unibank, Inc. ............. 26
Table 9 Current Five (5) Year Earnings Per Share of BDO Unibank, Inc. ............... 27
Table 10 Current Five (5) Year Profitability Ratios of BDO Unibank, Inc. ............... 28
Table 11 Current Five (5) Year Receivable Turnover Ratios of BDO
Unibank, Inc. ................................................................................................................ 29
Table 12 Current Five (5) Year Asset Turnover Ratios of BDO Unibank, Inc. ........ 30
Table 13 Current Five (5) Year Fixed Asset Turnover Ratios of
BDO Unibank, Inc. ....................................................................................................... 31
Table 14 Current Five (5) Year Equity Turnover Ratios of BDO Unibank, Inc. ....... 32
Table 15 Current Five (5) Year Efficiency Ratios of BDO Unibank, Inc. ................. 33
Table 16 Current Five (5) Year Debt Equity Ratios of BDO Unibank, Inc. .............. 34
Table 17 Current Five (5) Year Debt Ratios of BDO Unibank, Inc. .......................... 35
Table 18 Current Five (5) Year Stability Ratios of BDO Unibank, Inc. .................... 36
Table 19 Current Five (5) Year Debt to Asset Ratios of BDO Unibank, Inc. ........... 37
Table 20 Current Five (5) Year Debt to Equity Ratios of BDO Unibank, Inc. .......... 37
Table 21 Current Five (5) Year Equity Ratios of BDO Unibank, Inc. ....................... 38
Table 22 Current Five (5) Year Leverage Ratios of BDO Unibank, Inc.................... 39
Table 23 Current Five (5) Year WACC of BDO Unibank, Inc. ................................... 33
Table 24 Summary of Frameworks, Tools, Activities and Outputs For this
Strategic Management Paper ..................................................................................... 40
Table 25 Current Vision Analysis............................................................................... 57
Table 26 Current Mission Analysis ............................................................................ 58
Table 27 Current Vision Analysis............................................................................... 59
151
Table 28 Current Vision Analysis............................................................................... 61
Table 29 Summary of Strategies David’s Framework ............................................ 110
Table 30 Strategic Objectives for Banco De Oro Inc. ............................................. 113
152
List of Annexes
Annex 1 Financial Statements of BDO Unibank, Inc 2015-16 ................................ 154
Annex 2 Financial Statements of BDO Unibank, Inc 2017-18 ................................ 159
Annex 3 Financial Statements of BDO Unibank, Inc 2019 ..................................... 163
Annex 4 Competitor 1 Financial Statements of BPI 2015-16 ................................. 167
Annex 5 Competitor 1 Financial Statements of BPI 2017-18 ................................. 172
Annex 6 Competitor 1 Financial Statements of BPI 2019 ...................................... 177
Annex 7 Competitor 2 Financial Statements of UBP 2015-16 ............................... 182
Annex 8 Competitor 2 Financial Statements of UBP 2017-18 ............................... 186
Annex 9 Competitor 2 Financial Statements of UBP 2019 ..................................... 190
Annex 10 Competitor 3 Financial Statements of SECB 2015-16 ........................... 194
Annex 11 Competitor 3 Financial Statements of SECB 2017-18 ........................... 201
Annex 12 Competitor 3 Financial Statements of SECB 2019 ................................ 206
153
Annex 1 Financial Statements of BDO Unibank, Inc 2015-16
154
155
156
157
158
Annex 2 Financial Statements of BDO Unibank, Inc 2017-18
159
160
161
162
Annex 3 Financial Statements of BDO Unibank, Inc 2019
163
164
165
166
Annex 4 Competitor 1 Financial Statements of BPI 2015-16
167
168
169
170
171
Annex 5 Competitor 1 Financial Statements of BPI 2017-18
172
173
174
175
176
Annex 6 Competitor 1 Financial Statements of BPI 2019
177
178
179
180
181
Annex 7 Competitor 2 Financial Statements of UBP 2015-16
182
183
184
185
Annex 8 Competitor 2 Financial Statements of UBP 2017-18
186
187
188
189
Annex 9 Competitor 2 Financial Statements of UBP 2019
190
191
192
193
Annex 10 Competitor 3 Financial Statements of SECB 2015-16
194
195
196
197
198
199
200
Annex 11 Competitor 3 Financial Statements of SECB 2017-18
201
202
203
204
205
Annex 12 Competitor 3 Financial Statements of SECB 2019
206
207
208
209
210
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