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Banco de Oro Unibank, Inc. also known as Banco de Oro and BDO, is the
second largest bank in the Philippines in terms of assets and is owned by the SM Group
Industry is for Finance and Insurance and its products are its Financial Services
(Appendix Illustration 1.1). Its main Headquarters is situated in 12 ABD Avenue Ortigas
Center Mandaluyong City Philippines. As a universal bank, BDO provides a wide range
These services include traditional loan and deposit products, as well as treasury, trust,
cash management, insurance, and credit card services. BDO’s principal market are
currently a select niche in the corporate, market and the middle market banking
After a thorough research primed, the external analysis of BDO shows a figure of
3.15, which confirms that the firm’s strategies effectively take advantage of existing
opportunities and minimize the potential adverse effects of external threats. The internal
analysis on the other hand, shows a figure of 3.67, which dictates that BDO has been
busy striving to be the best for its service not only to its investors and customers, but
also to its internal system that made them recognized and bagged awards a lot of times
and have been coined as the “transformational year”- it emerged as a bigger, better,
into the merger entity, the researcher strongly recommends after comprehensive
consideration with the Grand Strategy Matrix (GSM), to pursue among these strategies;
strategies would lay of a claim to a solid foundation and dynamic synergy upon which to
BDO had its humble beginnings on January 2, 1968 as it started as a Thrift bank called
Acme Savings Bank, having only two branches in Metro Manila. In November of 1976, Acme
was acquired by the Sy group, the group of companies currently owned by retail magnate Henry
Sy, and renamed Banco de Oro Savings and Mortgage Bank. In December of 1994, BDO
became a commercial Bank, and to reflect its new status, BDO is renamed Banco de Oro
Commercial Bank, and in September of 1996, BDO became a universal bank, which led to the
bank’s name changed to its current, Banco de Oro Universal Bank. BDO is one of the many
Metrobank and Chinabank. In its quest to explore and strengthen through vision, innovation and
value, in 1997, BDO involved in an insurance service by establishing a subsidiary called BDO
Insurance Broker, making it a, “bancassurance” firm. In 1999, it expanded its insurance through
partnership with Assicurazoni Generali s.p.a., one of the world’s largest insurance firms, and
Jerneh Asia Berhad, a member of Malaysia’s Kuok Group. In March of 2000, BDO partnered up
with its insurance affiliates, which are Generali Pilipinas Life Assurance Company and Generali
Pilipinas Insurance Company. On June 15, 2001, BDO merged with Dao Heng Bank’s
Philippine subsidiary. The merger boosted the number of BDO’s branches from 108 branches
before the merger to 120 after the merger. It became one of its competitive advantage as it
expanded through its branches, and as it reached out to its increasing number of depositors, it
further expanded when in April 2005, United Overseas Bank sold 66 out of its Philippine
subsidiary’s 67 branches to BDO, and as it set to rationalize its operation from retail to
wholesale banking, BDO, on March 22, 2006, after all United Overseas Bank completed its
integration into BDO network, it increased the number of its BDO branches to 220. On August 5,
2005, Banco de Oro and an SM subsidiary, SM investments, bought 24.76% of the shares of
Equitable PCI bank, the Philippines’ third-largest bank, and 10% of an Equitable PCI affiliate,
Equitable CardNetwork, one of the Philippines’ largest credit card issuers, from the Go Family
that founded the bank. On January 6, 2006, Banco de Oro, with the SM Group of Companies,
submitted to Equitable PCI a merger offer with Banco de Oro as the surviving entity. Under the
proposal, Banco de Oro will swap 1.6 of its shares for every 1 Equitable PCI share and as a
second option, Banco de Oro also offered to base the swap ratio on the book values of both
Standards (IAS). To effect the merger, Banco de Oro needs consent of Equitable PCI
shareholders representing 67% of Equitable PCI. These include the Social Security System
(SSS) with 29%, the Government Service Insurance System (GSIS) with 14%, and the family of
On December 27, 2006 both Banco de Oro Universal Bank and Equitable bank agreed
to merge producing the Banco de Oro-Equitable PCI bank. As of February 2007, it became
known as Banco de Oro Unibank, Inc. As estimated before the merger, their assets as of June
2007 reached about to P608 billion, making them the country’s second biggest bank. Just next
to Metrobank with P669.1 billion and the current third biggest bank in the Philippines with
P592.6 billion. Now BDO has branches in key business and commercial centers in Metro
Manila, Northern and Southern Luzon, Metro Cebu, Iloilo-Bacolod and Mindanao. From 220
branches prior to merger, to the current total of 703 combined branches nationwide, the service
have grown accustomed to and more. Now that the personnel force has doubled – with a total
The data requirement of this paper includes recent surveys, projections and operational
highlights. It also requires information regarding recent trends regarding the industry under
study. For comparative purposes, background of some major competitors in the industry is also
needed, especially in the financial and operations aspect. It is also necessary to have enough
The information required in this paper was obtained primarily through the use of Banco
De Oro 2007 annual report. Authorized personnel were asked for a copy of financial highlights
and other relevant information. The information regarding competitors was obtained through the
use of internet. Certain internal information regarding the company under study was obtained
through personal interview with Ma. Teresita M. del Mundo, branch manager, BDO Arranque
Manila. Extensive research was made through the use of the internet to look for relevant figures,
This paper is limited only to Banco de Oro which operates solely in the Philippines.
Among the different sectors of this industry, this paper focuses on the banking institutions. The
focus of this paper is on the company’s performance and position in the banking and finance
The annual report for the most recent year (2008) was not yet available when this study
was used. It is assumed therefore that the financial statements for the year 2008 were the same
as that of the year 2007, which is the most recently available financial statement. The
researcher made this assumption with consideration of the global financial crisis but
conservative enough for undesirable events this year that affected the company’s financial
standing. This annual report was used as a basis for comparison and projections. It is also
assumed that there will be no dividend payments in the years within the time frame of the
projections. The projections also assume that no tax holidays or special tax treatments and
intends to become and to achieve at some point in the future and what they will do to achieve it.
For some beliefs, these statements are just a waste of time, since they do believe that these
statements are just used for nothing but being published in the annual report and displayed in
reception areas. But as negated by Warren Bennis, a noted writer on leadership says: “To
choose a direction, an executive must have developed a mental image of the possible and
desirable future state of the organization. This Image, which we call vision, may be vague as a
dream or as precise as a goal or mission”. Mission on the other hand, makes the leader’s view
concrete of the direction and purpose of the organization. It is a vital element in any attempt to
were able to determine who they will serve and where to focus
serve.
2. Products or Yes “Consistently providing innovative products and flawless delivery
Services of services” – They were very clear as to what they are going to
statement they have made. Although they did not tell that they
already consider it. And for me, its concise statement made it
mission to clearly
3. Markets Yes “Proactively re-inventing ourselves to meet market demands”
through this statement. They were very clear that they will re-
Although they were not able to clearly state that they are into
the business will expand through its resources, how its assets
further cultivate for the demands in the market with their existing
Growth and wealth than simply maximizing profit, they have clearly stated
rewards.
that they are safe in the arms of their company. That the
company will cater the needs of its people, and will re-invent,
others that concerns them, feel free as if it’s their own. The
reason they want them to make them feel its their own is that
7. Self Yes With commitment to serve that shows through the quality of
Concept service and products they offer, they have considered this
Public image addresses the environmental concerns and other social and
doing it. They should have stated their commitment to fulfill its
social, ethical, environmental and economic responsibilities,
people because they are gaining profit from them, and might
stereotype the company’s image that it’s concerns are only for
profiteering resources.
9. Concern for Yes They clearly stated that they are committed to the growth of their
Generally speaking, BDO has a positive impact as it includes their concern to their
employees, customers and investors. There are lapses in statements in terms of technology and
concern for public image; however, it remains clear in its direction and quest for innovation and
growth. It strengths for being concise in its statement, makes it more memorable as it includes
engaging words. It simplicity has already describe of its bright future with its clear intention to
improve along with the people they are working with. But in terms of its achievements, it has not
articulated in its statements their recognitions in the field of public service and activities aiming
in the development of our country. Being socially aware and socially responsible could be a key
strength to influencing their employees and possibly attracting more investors since they benefit
in two ways, one is through their savings, interest and other transactions that would give them
profit, second is through the development programs BDO has instilled in the country.
Living in the virtue of honesty by abiding with the highest ethical standards
D. Recommend more effective ways of communicating the vision and mission statement
One of the most critical and yet hardest to corporate challenges is through
communicating vision and mission statements effectively. Corporations are beginning to realize
the value of binding the employees to the company and involving them more in corporate affairs
transmitting information. Beyond putting the vision mission statements of one’s company in the
front hallways or in annual reports. It must be more than that. It must be instilled in the hearts of
its employees and transform employees behavior that will definitely result to excellence and
deep sense of belongingness in terms that they know that they can put their hearts in to what
they are doing, in earning for a living. This can make your employees work as a team, and will
In line with other audiences such as shareholders and investors, they should be
demonstrated with its corporate vision mission, setting out stories, finding and creating
examples of leaders embodying these in their actions, let them understand its traits and
importance. Creating dialogue with anyone involved in the corporation, from its employees to its
shareholders, getting feedbacks on how they experience culture and values in practice, and
then aligning in them the vision mission of the corporation would help them understand it clearly.
Moreover, it is necessary to align and be guided accordingly by the vision mission statements in
decision making. Be consistent in the company’s behavior, words and deeds, and bridge that
gap between employees to employees, employees to top management, the corporation to its
A. General Environment
culturally strongly Euro-American. Western Rule have left an indelible imprint on the Philippines,
serving as a means for the introduction of Western culture and as the catalyst for the
emergence of a sense of Philippine political and cultural unity. The country has experienced
some cultural trends such as; health food/diet craze, working women, children as consumers
early in life and youth as young investors which has paved a way to the integration of more
people to the banking industry. These eventually result to the affection of cultural enterprise,
industry development, household behavior, poverty reduction, voice and participation and other
Globalizing forces that drive one’s own identity. The population density of the Philippines is high,
but the distribution of the population is uneven. Parts of Metro Manila have a population density
that is more than 100 times that of some outlying areas such as the mountainous area of
northern Luzon. The country’s birth rate remains significantly higher than the world average
although there were efforts to slow the overall growth rate in mid-20’s. It had limited success in
part because reductions in the birth rate have been offset to some degree by reductions in the
death rate. The problem that the banking sector faces due to this over population lies in the fact
that almost 7.4% of the population was unemployed. This meant that an estimated 7.4M
Filipinos were not producing any income and were of no help for the banking system. As for
banking and gender, we have seen a great increase in men and women approaching banks for
their services such as savings, loans and even insurance due to the growing instability of our
economy and the fact that more and more people, not just women, are being driven to work due
to the economic crisis the country and the world is facing. Many former stay at home husbands
or wives have opted to getting a jobs in order to help sustain their family’s interests and needs.
2. Technology
distribution technology have influenced all aspects of banking activity. And was regard as the
main driving forces for the changes in banking industry. It has been influencing the competition
Entry barrier have been declining, new competitor have emerged. Some financial products and
services have become more transparent and commodities, customer show willing to unbundled
the demand for financial products and services, all these lead to a more competitive market
environment. Due to lowered entry and exist and deconstruction, for some sub-financial
markets, contestability in banking is also raised. On the other hand, it has also raised the
influence on the Economy of scale since Competitive pressure force banks to lower their cost.
Bank seeks to get economy of scale in bank procession instead of being a big bank. Bank
seeks to secure the optimal business structure, and secure the competitive imperative of
economy of scale. There are other options to get economy of scale, including joint venture and
confederation of financial firms. Small firms also can get economy of scale by outsourcing, i.e.
buy in economy of scale. It has also impacted on the way banking and financial services are
delivered. A wide range of alternative delivery mechanism becomes available, Internet, ATM
and other means of computerizations and these Reduces the dependence on the branch
network as a core delivery mechanism. With the development of technology, the financial
systems are substantially over-supplied with delivery system through a duplication of network,
bank has to change their delivery strategy and rationalize their branch network strategy.
Financial service could not provide the level of service it does without the support of advanced
3. Economic Environment
In 2008, our world experienced high oil prices, which led to drastic high food prices due
to the extremely loose monetary policies and low interest rates of the U.S. Federal Reserve, as
well as using food crop products such as corn ethanol and biodiesel as an alternative to
petroleum) and global inflation; a substantial credit crisis leading to the drastic bankruptcy of
large and well established investment banks as well as commercial banks in various, diverse
nations around the world; increased unemployment; and signs of contemporaneous economic
The National Economic and Development Authority (NEDA) and the Board of
Investments were created in the late 20th century to help both public and private sectors in
planning further economic development. Much of the initial capital investment of many private
rural banks was provided by the government, and private development banks have likewise
received government assistance. Many commercial and thrift banks have been established
since the mid-1990s in response to increased liberalization, privatization, and the lifting of a ban
on foreign banks. The Philippine Stock Exchange, though still relatively small, has been growing
rapidly since weathering the Asian economic crisis at the end of the 20th century. But
nowadays, government is establishing banks in order to tailor economic activities to their wider
cultural and spiritual values, so that the operational activity is more directly valuable to the poor
themselves. Proposals of interest will be those that analyze recent Bank projects’ record of
success, or offer other ways of supporting the ability of the poor to reflect their culture in
development processes as it is facilitated by bank activities. Economy speaks out for the poor
as they seek help to those who are willing to take stock and draw on their values and strengths
Over a period of time, the banking industry of the Philippines has seen a transformation
with the reforms being carried out by both the banking regulator and the government. The
reform process has resulted in improved banking industry, with industry income touching new
heights in 2008. Moreover, the Philippine banking industry has been undergoing consolidation
that will further strengthen its position as new entities will increase the competition level.
Moreover, banks will be geared up in facing the inconsiderate economic outlook, which
The importance and benefits of a strong regulatory system with an open and well-
regulated financial sector fuels economic growth and a strong financial sector offers stability,
making the economy more resilient in the face of external and domestic shocks. In the
Philippines, the Bangko Sentral considers the sound supervisory and regulatory environment,
as well as the implementation of a broad set of financial reforms, as factors that have helped to
foster sustainability and growth in the banking industry. Year-end 2002 figures revealed a
steady growth in deposits, the resumption of lending activities, capitalization and bottom line
figures.
The important relationship between banks and political, legal and governmental welfare has
bank regulation and supervision. According to the National Bureau of Economic Research, the
International Monetary Fund, World Bank, and other international agencies have developed
extensive checklists of "best practice" recommendations that they urge all countries to adopt.
Most influentially, the Basel Committee on Bank Supervision recently revised and extended the
1988 Basel Capital Accord. The first support of these new recommendations develops more
extensive procedures for computing minimum bank capital requirements. The second support
focuses on enhancing official supervisory practices and ensuring that supervisory agencies
have the power to scrutinize and discipline banks. The third pillar envisions greater market
discipline of banks through policies that force banks to disclose accurate, transparent
estate tax, withholding tax and other percentage taxes which at its normal tax rate is 35 % from
July 1, 2005 to December 31, 2008.The amendment for next year will be effective on January 1,
2009 for the 30% Normal tax rate applicable to Domestic Corporation together with the resident
and nonresident foreign corporation limited to the sources within the Philippines.
New potential competitors are always a threat to any industry, other possible threats
regulatory requirements. In keeping with the aspect of Economies of scale, threat of new entries
would be low since minimum size of operations for banks to keep it profitable is quite high. The
threat of new entrants according to Capital Requirements and Access to distribution channels is
low since setting up a new business such as a bank needs a lot of capital investment not to
mention the technology required to compete with rivals such as ATM machines and access to
distribution channels can be monopolized by other competitors. Brand loyalty of customers also
shows a low threat to existing banking firms due to the fact that most banking institutions
prioritize customer service among other things. As for Government Policy the threat of a new
entrant is also low since there are several legal aspects that cannot be attained easily by new
businesses especially in the banking sector. With regards to Scarcity of important resources
such as qualified and expert staffing, the playing field is tilted to known banking operations
rather than to new banking operations due also to the fact that they control distribution channels
and have a higher brand loyalty making them the preferred choice of would be job-seekers.
Also, High switching costs for customers such as long term contracts hinders the threat of any
BDO has been very aggressive and competitive in its field as it offers its best quality
service to its depositors, bringing in customers who patronize their products, as it also expands
to its quest to explore and strengthen through vision, innovation and value. It has always been a
challenge to different companies, what their rival competing firms has to offer. These factors
such as to enhance quality, add features, provide services, extending warranties, and
increasing advertisements, are one of the primary reasons why BDO has been very aggressive,
intense since all banking institutions offer the same product which is financial services, whatever
it may be; leasing, loaning, savings.etc. With respect to strategies, threat is also intense due to
the fact that almost all banking institutions have their own perks and advantages that lure
customers in their own way. Whether it’s BDO’s long banking hours, BPI’s Tele-Banking or
Metrobank’s convenient credit policy. There is also Low market growth rates in the banking
industry meaning that a banking firm can only truly grow with the loss or assimilation of other
banking firms as was the case for Banco De Oro Unibank which is comprised of Banco De Oro
3. Threat of substitutes
increase as the relative price of substitute/services declines and as consumers’ switch cost
decrease. The scale of competitive pressure derived from development of substitute products
from competitors is generally evidenced by rivals’ plans for expanding production capacity, as
well as their sales and profit growth numbers. BDO, with its keen reading of international
financial trends, it enable themselves to access unique opportunities for increased value for
their customers. The threat of substitutes as far as customer brand loyalty is concerned is
medium since brand changing in banks is rare. Only poor account management and bad
customer relations lead to shifting in banks since banking institutions in our country operate
primarily in similar standards set by the government. Every banking establishment keeps a
close relationship with their customers so I believe that in this aspect, the threat for substitute is
low. As for relative pricing of performance of substitutes, the threat is medium since banking
institutions’ rates have only slight discrepancies. It’s only a matter of which bank rate you can
afford. Current trends also show that there is a low threat of substitution since it will be unwise
to move your savings to another savings institution provided that it is able to stay afloat during
With BDO merging to with another organization, they have expanded their networks
through branches and means and squeeze out important cost savings for themselves. With
these they have managed themselves very well, making them agile in their means, with its quick
ability to apply power of information to respond to their customers’ needs amid shifting market
conditions. With its, merging two organizations, with their distinct character and cultures, into
one cohesive and solid team presented great challenges and complex priorities for Human
Resource Management. In order to solidify their team faced with the increased expectations
following the merger, they have made corporate culture enhancement programs to ensure that
the bank faces the client with a common set of servicing philosophies. Other than that, the
and staffs, the resolution of issues between unions, and the administration of the required
training and development programs to adequately support the changes in structure, system, and
services.
industry. With BDO’s inventive mindset, they view banking as a continuous creative process,
challenging them to always find ways to better serve their customers. They have special
services that gains customer loyalty compared to its rivals, in which they have offered a variety
of products and services to their customers. Through Generali pilipinas and BDO insurance
Broker, Inc. the bank achieved record expansion in the insurance business in 2007. It grew by
26% in terms of total gross premiums while BDO insurance broker, Inc. sailed to a 156%
increase in commission income due to the growth in bancassurance operations and the merger
with Equitable Banking Corporation insurance Brokers, Inc. With its list of achievements in the
corporate world, customers are attracted by it being the best performing fund manager for the
5th consecutive year. This has achieved the highest growth in assets under management of
P274 Billion, representing vigorous 60% increase from the previous year. In consideration with
our economy facing a volatile global financial environment, BDO focused on the successful
integration of the treasury operations of the merged entity. The combined team, with the years
of experience and expertise in the multi fixed-income, foreign exchange, and derivatives in the
markets, sought to make adjustments in their strategy to compensate for expected downturn in
the US and world economy, and volatility it brings. Gradually, to gain increasing bargaining
power, it shifted its portfolio to place more emphasis on spread income and less dependency on
trading gains. While more challenges appear on the horizon, particularly the forecast of a US
recession and the newly implemented SEC rules on over-the-counter market trading of
securities, BDO remains upbeat on its prospects. Increased volatilities and widened spreads
To sum it up, The threat of new entrants in the banking industry can be considered low
since there are many steep requirements that are needed to be meant such as a high capital
investment, a share in distribution channels, government policies and of course the presumption
of an economy of scale. For the rivalry between competitors, we can clearly see that there are
intense threats present since banking institutions use similar strategies, there is low growth rate
for companies and not much differentiation between services leaving the choice up to the
consumers. Medium was the level of threat given to the threat of substitutes since there is a
slight conformity between the prices of the services rendered by banks and this business
usually centers itself in customer care and relationship. The threat of substitution is possible but
seldom happens. I believe that a clear explanation of why the bargaining power of suppliers is
low is the word service. This is why there are plenty of substitutes so banks can accommodate
anyone from any social class. As for the bargaining power of buyers it can be classified as
medium since banking operations have been always aimed to serve people.
COMPETITOR ANALYSIS
Collectively, the Philippine banking industry posted a Compound Annual Growth Rate
(CAGR) hike of 8.46% in asset base between 2004 and 2007 of which, Industry deposits in the
country grew at a CAGR of 9.82% from 2004 to 2007. The deposit mobilization is concentrated
with universal and commercial banks which some of its key players are Metropolitan Bank and
Trust, Bank of the Philippine Islands, Land Bank of the Philippines and Banco de Oro UniBank
Inc. which account for the majority of the Philippine banking industry deposit. Financial
Intermediation was the largest shareholder of the loan disbursal by banks during 2004-2007.
Bancassurance will account for 65% of the total sales of insurance products by 2011. Increasing
at a CAGR of 69.78%, micro financing in the Philippines is expected to reach 56.5 Billion Pesos.
Increasing mobile penetration will expand the mobile banking user base to more than 11 Million
by 2011.
Metrobank, as the largest Philippine bank, is always trying to stave off competition to
stay as the country's largest bank. It is largest in terms of its assets with P669.1 billion ($14.5
billion) (P46=$1) as of June 2007 and is also the largest Philippine bank in terms of overseas
presence. It has a total of 8,721 employees. It has a diverse offering of financial services, from
Metropolitan Bank & Trust Company (MBT) was incorporated on September 5, 1962 by
community. Metrobank eventually expanded its business to provide a broad range of banking
and collateral services to all sectors of the Philippine economy. As of August 21, 1981,
Metrobank was granted a universal banking license by the Bangko Sentral ng Pilipinas (BSP).
This license allowed Metrobank to engage in non-allied undertakings, which include automobile
manufacturing, travel services and real estate, as well as finance-related businesses such as
insurance, savings and retail banking, credit card services and leasing.
Metrobank offers commercial and investment banking services. Its principal business
activities involve borrowing and lending, trade finance, remittances, treasury, investment
banking, credit card and savings banking. It is also a major participant in the foreign exchange
market in the Philippines, and is accredited by the BSP as a government securities dealer. The
company's customer base covers a cross section of the top Philippine corporate market, but has
always been particularly strong in the middle market corporate sector of the economy, a
investment banking services through First Metro Investment Corporation and retail banking
• MBTC Technology
• Toyota Cubao
• MB Remittance Center HK
Ownership
• Philippine Depository and Trust Corporation: 17.96% (11.47% Filipino, 6.49% foreign)
It continues on its expansion thrusts as it expects to end the year with a total of 552
domestic branches and an automated teller machine (ATM) network reaching 800. The bank will
intensify the promotion of its electronic banking services to retail customers, including self-
service channels like phone and Internet banking. While deposit taking is still the key business
of branch banking, the bank steadily expanded its other retail businesses like housing and car
loans, bancassurance and credit cards. It likewise concluded its roll-out of its sales
effectiveness program that helped re-engineer all branches into sales-driven brick-and-mortar
outlets.
At the start of the last quarter of 2008, Metrobank’s funding was boosted by a 7.6 percent
growth in deposits to P541.4 billion. Cost of deposits was almost flat despite rising interest
rates, as low cost deposits grew by 10.9 percent, accounting for 45 percent of the total deposit
base. The increase in ATM coverage, meanwhile, has led to a corresponding increase in usage.
Metrobank registered 85.4 million ATM transactions, with over 30 percent from use of
Metrobank ATMs by local and international non-Metrobank cardholders. It boasts of its current
record of above average 99 percent service availability, among the highest within the Bancnet
consortium. BancNet is one of the country’s three major ATM service providers.
BPI is the oldest bank in the Philippines still in operation and holds the record as the
largest bank in terms of market capitalization in the Philippines (P136 billion = US$3.24 billion
as of March 2008), and has consistently been the most profitable bank in the Philippines. It is
owned by the Ayala Corporation, the largest conglomerate in the Philippines, and is based in
Makati City's Central Business District, on the corner of Ayala Avenue and Paseo de Roxas,
across from the Philippine headquarters of HSBC. BPI is also the oldest bank in Southeast Asia
and has a long and distinguished history that spans over a century.
It has either influenced or has been influenced by many nations, including parts of the
former Spanish Empire, especially Mexico, and the United States. While it is considered by
many as an old institution, BPI is trying, with moderate success, to promote itself as a dynamic
institution that caters to its various clients, which hail from various sectors of Philippine society.
The Group's principal activities are corporate banking, consumer banking, investment
banking, asset management, corporate finance, securities distribution and insurance services.
The Group derives its revenue from three operating business segments namely, Consumer
Banking, Investment Banking and Corporate Banking. Their total sale in 2007 is P46,
019,000,000, with a total of 11,925 employees. Consumer Banking covers deposit taking and
servicing, consumer lending such as home mortgages, auto loans and credit care finance as
well as the remittance business. It includes the entire transaction processing and service
well as phone and Internet-based banking platforms. Investment Banking provides services
covering corporate finance, securities distribution, asset management, trust fiduciary services as
well as proprietary trading and investment activities. Corporate Banking consists of the entire
BPI also pioneered rural banking in the Philippines, as its countryside banking
operations preceded that of many other banks' rural banking operations by many years. Today,
it maintains a large rural branch network, with some branches dating bank to the Spanish or
American colonial periods. Its branch network of 830 branches is by far the largest branch
The bank has received several awards from various financial magazines, such as “Euro
money” and the Far Eastern Economic Review. Its most recent award was for the best retail
Ownership
• BPI established the Philippines' first ATM system, with its ATMs being called Express Tellers.
The system eventually evolved into the Expressnet ATM consortium, which has seven members
• Expressnet is also known for its Express Payment System (EPS), which was at first the debit
• BPI pioneered the concept of the banking kiosk in the Philippines, with its kiosks being called
Express Banking Centers or EBCs or by its older name, the Convenience Banking Center.
EBCs can be found in malls, supermarkets, plazas and other locations and operate beyond
normal Philippine banking hours, which are from 9.00 to 15.00 on weekdays.
• The first local bank in the Philippines to introduce 24 hour branch banking called BPI Express.
• BPI is the first bank in the Philippines to make use of a call center and telephone banking,
• Launched BPI Express Mobile - Mobile Banking facility which enables accountholders to
inquire about their deposit, credit card, auto and housing loan and BPI Prepaid Card balances,
transfer funds between enrolled deposit accounts, pay bills to over 200 merchants, reload Globe
Telecom and Touch Mobile prepaid mobile phones and BPI Prepaid Cards BPI Express Cash,
• Launched BPI Express Credit Gold Mastercard with Paysafe System, the country's first EMV
• The first airline co-brand chip credit card issued in the Philippines - BPI WorldPerks
• The first local bank in the country to offer most number of third currencies in its products
and services - Savings Accounts and Time Deposit Accounts (As of March 2007)
Position
2. Technology 0.07 4 0.28 3 0.21 3 0.21
3. Customer 0.185 4 0.74 4 0.74 2 0.37
Service
4. Strategic 0.175 4 0.70 4 0.70 3 0.525
Locations
5. Customer 0.05 3 0.15 3 0.15 3 0.15
Loyalty
6. Organization 0.06 4 0.24 4 0.24 4 0.24
Structure
7. Management 0.08 4 0.32 4 0.32 4 0.32
8. Human Capital 0.05 4 0.20 4 0.20 3 0.15
9. Innovation 0.08 4 0.32 3 0.24 3 0.24
10. Market Share 0.15 3 0.45 4 0.60 3 0.45
Total 1.00 3.70 3.80 2.955
In the Banking industry, the determined critical success factors are financial position,
management, human capital, innovation, and market share. The highest weight is given to
customer service simply because the customers are the bread and butter of any banking
institution. Following the merger last May, there has been a tremendous surge of numbers in the
organization of BDO- 15,000 people, 700 branches, and 1,200 ATMs. With these, there is an
increase in customer numbers and with higher expectations to fulfill. That’s why BDO was given
the highest rating together with Metrobank as far as customer service is concerned. With an
increase in numbers of personnel, the company now tends to a higher number of customers.
Considering the extent of competition in the banking industry, one should not only put a branch
in any location but in a strategic location. That’s why strategic location is the second factor given
the highest weight. Putting up branches in strategic locations like mall and urban areas will give
an advantage over its competitors. Metrobank and BDO were given the highest rating for their
branches were located strategically. Almost anywhere you can see their branches. Their ATM
machines are highly accessible. The next factor is market share. Being the market leader in an
industry is a certain advantage. Comparing the net assets of the Big three in the banking
industry, Metrobank shadows over the rest. BDO being the second largest is trailing behind
while BPI follow suit. The next factor with a given weight of 10% is financial position. The Big
three in the industry are Metrobank, BDO and BPI having a net assets of P669,100,000,
P60,540,628, 136,000,000 respectively. Having the same weight at 8%, the next factors are
management and innovation. Everyone was given the highest rating in management due to their
sheer expertise in managing their own respective organizations. Being in an industry that
adheres in servicing the customers with utmost importance, innovation is needed. With new age
at hand, industries should adhere and cater to time-conscious consumers with fast and state of
the art technology. Early preparation for business growth and capacity required to put the
necessary adjustments in place and move towards a smooth implementation. The next factor is
Organizational Structure. Having the mall magnate, Henry Sy, as the Chairman Emeritus and
Teresita Sy-Coson, as the Chairperson, we can say that BDO has a good organizational
structure. The last two factors are Customer Loyalty and Human Capital. Merging two
organizations, with their distinct characters and cultures, into one cohesive and solid team
presented great challenges and complex priorities for Human Resource Management. BDO
trust. With such a huge manpower, they provide training and development programs to
adequately support the changes in structure, systems, and services. Everyone was given a
threatening crisis. Although GDP and GNP increased drastically in the past years due to the
appreciation of peso against the US dollar and a huge surge of OFW remittances, the Philippine
economy will feel the domino effect of the crisis in the upcoming months. Mass layoffs,
decrease in consumer spending, withdrawal of investments and deposits. With the decrease in
spending of households, the industry will take a sudden turn. With every country feeling the
effect of the sudden turn of events, very few businessmen will invest in our country to conduct
business. In this matter, capital sources will drastically decrease. A strong peso, increase in
remittances, and slight improvement of GDP-GNP will give the economy a shield to lessen the
impact of the ‘tsunami’ crisis. The improving technological conditions brought about a change in
the lifestyles of Filipinos. As a result, this brings an increase in production which provides for a
higher capital and higher borrowings. While bottom line numbers may not be as impressive, the
industry is clearly building for the future, putting a lot of emphasis on asset quality, governance
Opportunities:
Weight Rating Weighted Score
Trade and industry 0.10 4 0.40
expansion that will
generate a desired
multiplier effect on
incomes.
Inflation is expected 0.08 3 0.24
to depreciate
Upturn in Investments 0.10 4 0.60
elevating it to become
the largest trust
business in the
country.
Benign inflation and 0.10 3 0.30
an improved fiscal
position served as key
factors that held
interest rates at their
lowest levels.
Record-High 0.10 3 0.30
Remittances through
extensive distribution
networks coupled with
robust market base
and overseas
networks
Building business’ 0.07 2 0.14
confidence through
increased government
spending, increased
volatilities and
widened spreads by
means of expansion.
Rapid Technological 0.06 2 0.12
Advancement to meet
heightened demands
in the market and
administrative
centers.
Threats:
Projected Increase in 0.07 2 0.14
Inflation due to US
recession.
Market Volatility and 0.07 3 0.21
Shifting Investors
Global Financial 0.15 4 0.60
Crisis
Confidence Over the 0.05 2 0.10
Country’s Solid
Fundamentals
Viruses and various 0.05 2 0.10
forms of damaging
software
Total 1.00 3.25
The External Factor Evaluation Matrix (EFE) is concerned solely with external factors.
These factors are ones that are subjected to the will of social, economic, political, and legal
forces. The firm’s strategies effectively take advantage of existing opportunities and minimize
the potential adverse effects of external threats. The opportunities and threats here are the
critical success factors in the external environment that can help position the industry to be
profitable. The chief opportunities identified include the favorable economic environment that
fosters mergers and acquisitions. Furthermore, the banking industry themselves have a unique
window of opportunity to merge or acquire other banking institutions which in turn promotes
globalization. The weight given to each factor implies the relative importance of each factor. The
range of weight is from 0.0 which is ‘not important’ and 1.0 which is ‘very important.’ A rating of
1 is given for poor response and a rating of 4 for superior response. Responsiveness to threats
is measured by the degree to which the company minimizes the incurrence or impact of threats.
advantage of opportunities.
Among seven opportunities, the improvement in investments was given the highest
rating. BDO was given the highest responsiveness rate. A big sudden upturn in investment gave
BDO the second largest bank in the Philippines. With the recent growth of the economy and
increase in tax impositions, there was a huge pour of investments coming from foreign
businessmen giving thousands of jobs which in turn provide an increase in consumer spending
and investments. It augmented the purchasing power of the consumers, furthering the
economy’s consumption-led growth and boosting the deposits, investments and capital
borrowings. With this at hand, banks fight for market leadership through formalization of unique
expansion. In recent years, the Philippines experienced its strongest economy and its best
performance yet. With an ever increasing remittances from overseas Filipino workers, an
improved financial condition after suffering its record high of almost 12% in inflation due to
weekly oil price hike and food shortage, and industry expansion which brought forth
globalization. They were given equal weight with the industry expansion having a superior
response and record high remittances and low inflation environment having the same ratings of
three. With good economic environment, it is a proper time for expansion and globalization. The
industry should learn to expand whether domestically or internationally. The move of expansion
will reflect both challenges and the rewards of that process. The power of synergy will serve to
reinforce the potential for sustainable growth. The opportunity with the lowest weights are the
increased in government spending and rapid technological advancement. This enabled the
government to channel more resources to productive spending, the first time it has done so in
recent years. With the technological wars at hand, the industry should adhere to such changes
for business growth, BDO supports Branch Banking’ conversion, relocation, and opening
the staff’s capability to rise to heightened demand and expectations for IT support in the bank.
Compared to opportunities, there are only four threats for BDO with Global Financial
Crisis as the biggest threat and with the highest weight as well. With the stable economy, there
is a projection of a shift in economic conditions. Investors believed that the crisis will bring a big
swing in market conditions and withdrawal of investments. Investor confidence will decline
amidst the country’s solid fundamentals. Having an economy and market so volatile, depositors
and investors alike will think about of spending and depositing. Less borrowing, less spending,
high projection of inflation, bankruptcy of trust funds and other lending institutions will cripple the
industry without a strong foundation. Faced with this type of environment, the bank doubled its
efforts to build on the contemporary strengths and enhanced its risk management system to
meet the demands of the bank. Credit policies, procedures and guidelines were the first to be
harmonized. A common set of approval authorities and processes, including the risk rating
system and a credit committee approval process, were rolled out. BDO management has
closely monitored and directly managed the bank’s Non Performing Loans (NPL) and past-due
accounts, ensuring the implementation of appropriate strategies to maximize collection and
recovery of assets. Taking this approach fine-tuned the bank’s recovery efforts, thus making
progress in terms of a more proactive strategy and improved NPL levels over time. These
efforts suggest the company’s attempt to eliminate if not, lessen the impact of the threats
For BDO, the commitment towards the building for the future extends well beyond the
Bank and its network; it reaches far higher than the business targets for the year. Building for
the future is given real meaning in the profound, continued fulfillment of the Bank’s corporate
social responsibility objectives and programs. The bank’s endeavors hewed closely to a long-
standing track record of support to social development, reflecting a clear vision of a future built
A.Management
There are thirteen duly elected board of directors for Banco De Oro. Henry Sy, Sr., 84,
Filipino, is the Chairman Emeritus of BDO. He is the Founder and Chairman of SM Group of
Companies, he is known as the visionary of Philippine retail because of his innovations in the
industry. the shoe store he founded in 1958 as since evolved into a dynamic group of
companies, with retail merchandising and shopping centers as core businesses and
Teresita T. Sy-Coson, 57, Filipino is the Chairperson of BDO. Concurrently, she sits as
Chairperson and/or Director of various BDO subsidiaries such as BDO Private Bank, BDO
Leasing and Finance, Inc. (formerly PCI Leasing & Finance, Inc.), and BDO Capital &
Shoemart, Inc., multi-Realty Development Corporation, and First Asia Realty Development
Corporation.
Corazon S. De la Paz-Bernardo, 66, Filipino, assumed the post of Vice Chairperson of
BDO in July 2007. Prior to that, she served as the Chairperson of Equitable PCI Bank from
February 2006 to June 2007. She is currently the President and CEO of SSS.
Jesus A. Jacinto, Jr., 60, Filipino, was elected Vice Chairman of the Bank in May 1996,
and is concurrently the Chairman and President of BDO Insurance Brokers, Inc. He is likewise a
Director and Treasurer of BDO Realty Corporation. Mr. Jacinto is currently a Director and Vice
2005. He was formerly a Director of Solidbank Corp. from 1990 to 1998, and Vice President and
Country Head of the Bank of Nova Scotia. He has had over 40 years of banking experience in
Nazario S. Cabuquit, Jr., 74, Filipino, was elected Director of EPCIBank on July 2005.
he had also been elected to the board of several EPCIB subsidiaries as well as various board
committees in both EPCIB and some of its subsidiaries. He currently serves on the BDO Board
as a nominee of the SSS, where he is Special Assistant to the President and CEO.
Terence Ong Sea Eng, 58, Singaporean, was appointed BDO Director in July 2006. He
is also presently a Senior Executive Vice President of United Overseas Bank Ltd. and a Director
then University of Singapore and was previously the Deputy General Manager of the Board of
Henry T. Sy, Jr., 54, Filipino, was elected BDO Director in July 2007. he is the Vice
Inc., and a Director of SM Prime Holdings, Inc., and San Miguel Corporation. He is chiefly
responsible for the real estate acquisitions and development activities of the SM Group of
Companies and holds Board positions in several companies within the SM Group.
Josefina N. Tan, 62, Filipino, is a director of BDO. Concurrently, she serves as Director
and President of BDO Private Bank and a Director of BDO Realty Corp. Ms. Tan is also the Vice
Chairperson of Miriam College, the President of Regal Properties, Inc., and a trustee in the
Nestor V. Tan, 50, Filipino, was elected President and Director of BDO in July 1998. He
concurrently sits as Director of various subsidiaries of BDO including BDO Capital and
Investment Corp., BDO Realty Corp., General Pilipinas Insurance Corp., BDO Leasing and
Dealing Exchange Corp., Philippines Securities & Settlement Corp., and Philippinne Depository
Jimmy T. Tang, 72, Filipino, has served as Director of the Bank since 1984. He is also
the President of Avesco Marketing Corp. and presently the Honorary President of the
July 2007. He is currently Chairman of EBC Investments, Inc. He was likewise appointed
Chairman and President of EBC Strategic Holdings Corp. He serves as Director and Corporate
Secretary of APC Group, Inc., Philippine Global Communications, Inc., PhilCom Corp., and
Corporate Governance
The Bank enforced strict accountability and transparency while, at the same time,
maintaining operational efficiency and pursuing dynamic innovations to deliver increased value
to the banking public. This Pro-active and long-term view of corporate governance was
translated into concrete actions and results by the Bank’s various working committees. The
committees reaffirmed in their respective areas how the Bank interprets corporate governance
Executive Committee
The Executive committee is headed by Teresita T. Sy-Coson with Nestor V. Tan; Jesus
A. Jacinto, Jr.; Corazon S. De la Paz-Bernardo; Josefina N. Tan as members. They are the
ones authorized to act on behalf of the Board of Directors on matters affecting the operations of
the bank subject to legal limits and by laws of the bank, and such ceilings that may be imposed
by the Board of Directors. It has the authority to approve within set limits, for instance,
technology-related project or such other initiatives for enhancing the Bank’s operating and
service delivery capabilities; operating policies and/ or manuals; and the establishment of
branches and/or extension offices as well as domestic or foreign subsidiaries. The Executive
Committee meets as necessary to pass upon matters referred to it and is comprised of at least
Audit Committee
Bernardo; Henry T. Sy, Jr.; Jimmy T. Tang; Christopher A. Bell-Knight as members and Nazario
S. Cabuquit, Jr.; and Jesus G. Tirona as advisers. They act on behalf of the Board and provides
oversight of the Bank’s financial reporting and control as well as internal and external audit
functions. It reviews and assesses the Bank’s annual audit plan, its system of internal controls,
and regular financial and audit reports. It further reviews strategic issues relating to plans and
policies, financial and system controls, and methods of operation, seeing to their adequacy and
compensation policies and practices with the corporate culture, strategy, and control
environment as well as with peer institutions and designed to attract and retain qualified and
competent individuals. It evaluates and recommends to the Board incentives and other equity-
Headed by Teodoro B. Montecillo wih Jesus A. Jacinto, Jr.; Nazario S. Cabuquit, Jr.;
Jimmy T. Tang; and Christopher A. Bell-Knight as members and Antonio C. Pacis as adviser.
They assist the Board in shaping the Bank’s corporate governance policies and practice.
Besides reviewing and assessing these policies and practices, it recommends applicable
effectiveness. It also oversees the annual performance self-evaluation of the Board, its
own performance.
Credit Committee
The credit committee takes charge of the review and approval of the Bank’s loans and
investments as well as other credit related issues. It assesses the viability of credit and
investment proposals or related party, with specific attention of the appropriateness of the credit
extension and risks involved. Proposals beyond its approving authority are endorsed to the
Executive Committee. It also sees to regular credit reviews on a per account and portfolio basis,
as well as assessments of credit policies and procedures, risk standards, and, where required,
Nomination Committee
The nomination committee provides oversight on the qualifications of all nominees to the
Board as well as to other Bank positions requiring Board appointment. It recommends to the
Board the state of nominees for election to the Board during the Bank’s annual stockholders’
meeting. In case of Board seat vacancies, it seeks to qualified nominees and recommends
The risk management committee is responsible for policy development and oversight
over the Bank’s credit, market and operating risk exposures. It oversees the system of limits of
discretionary authority that the Board delegates to management, ensuring that these are
observed and any breaches are immediately corrected. It establishes the framework for
reporting risk to the Board including the assessment on the probability and potential impact of
each identified risk exposure of the Bank. These reports include information on portfolio
Trust Committee
The trust committee, acting within Board-set limits, is authorized to review and approve
transactions between trust and/or fiduciary accounts, to accept and close trust and other
fiduciary accounts and to approve the investment, reinvestment, and disposition of funds or
property. It evaluates trust and other fiduciary accounts at least once yearly to determine
compliance with the instrument creating the trust or other fiduciary relationship, as well as the
B.Marketing
Over the course of 10 years, BDO – via a combination of organic growth and
acquisitions – has steadily increased its market position, from being the 16th largest Philippine
bank by assets in 1997, when it was first granted a universal banking license, to second largest
in 2007.This transformation has been funded and managed by the Sy Family’s SM Group,
which plays a dominant role in retail marketing in the Philippines because of its shopping malls,
Banco de Oro’s marketing division is headed by Mr. Rafael G. Besa who is Senior Vice
President and Group head of Marketing Communications for Banco De Oro. This group is made
advertising, branding, direct marketing, marketing promotions and public relations for the sake
of BDO.
Their marketing unit’s task is to broaden its market thru advertising and commercials
showing the different services that BDO can offer. Another one is their continued publication of
their different promos with companies such as SMART Telecommunications and PLDT. As for
the distribution of their services, BDO currently has 665 branches and over 1.253 ATM’s
nationwide.
C.Finance/Accounting
Profitability
The strength, quality and consistency of BDO's underlying earnings are important elements
underpinning its sound profitability. To enhance earnings, the bank improved its funding mix in
2007 as it shifted away from high-cost deposits. This helped to support an increase in net
interest income for the year. However, operating costs also rose as a result of the merger and
there were declines in trust fees. As a result, net profitability, as measured by returns on
average assets, was flat. Following the merger with EPCI, a moderate dilution in overall
profitability -- with the incurrence of integration expenses and EPCI's higher operating expenses
– is expected. But this situation should improve in time through the realization of revenue
synergies.
Liquidity
BDO is unlikely to experience any funding pressure for at least the next 12 months. Should
unexpected liquidity needs materialize, the bank's comfortable level of liquid assets (at end-
2007, liquid assets accounted for 42% of total assets) - comprising mostly government
Capital Adequacy
The bank’s capital position has come under downward pressure from both a shift in its asset mix
in favor of higher risk-weighted assets and the emergence of one-off changes associated with
Basel II. It has maintained its regulatory capital ratios through the issuance of subordinated
debt. However, from a ratings perspective, these instruments are ratings neutral, as such capital
retains fixed charges and provides limited loss-absorption capacity. Therefore, downward
pressure on the bank’s ratings could emerge if it does not additionally increase its Tier 1 capital.
Over the past year, BDO has shifted away from liquid, lower-risk securities in favor of increased
consumer and corporate loans. This shift should help to improve its earnings profile, but it also
entails taking on more credit risks, as evidenced by the faster growth in its risk-weighted assets
implementation of a new capital charge for operational risk, BDO – like other Philippine banks –
The bank has offset this reduction in part through the issuance of new shares and subordinated
debt. BDO issued 31.4 million in new common shares to the International Finance Corporation
(IFC) on August 31, 2007, pursuant to IFC's conversion of its remaining US$10 million
equity
Return on average 1.0% 0.9% 1.2%
assets
Net interest margin 4.0% 3.0% 3.8%
Capital to risk 15.2% 15.0% 17.5%
assets ratio
Resources Capital Funds
Net Income
D. Production/Operations
Banco de Oro’s banking services can be classified into 4 categories: Personal banking,
• Electronic Banking
Every company needs research and development. In the banking industry, there is a
need for research and development. These changes and development will bring increased
service and customer satisfaction. It will bring enhance intermediation and financing activities.
As far as banking industry is concern, the research and development falls under innovation and
technology. BDO tackled the challenges of operational integration while ensuring minimal
impact on client servicing. BDO strive to achieve one bank/ one face/ one service to its client
base in the shortest possible time. While integration is clearly a priority, the Bank did not lose
sight of the need to maintain and grow the business. The results reported by different operating
units showed equally impressive results attesting to the value and business case for the Bank.
Attesting to innovation and IT, BDO in its early preparation for business growth and
capacity required as a result of the merger enabled Information Technology to put to the
completed the interconnection of the Makati and Benguet Networks, as well as upgraded the
Bank’s main computers and other servers. It is also relocated the Business Continuity Centers
(BCC) of the Parent Bank and its subsidiaries to cluster around Benguet Center in Ortigas and
BDO’s management is composed of great leaders and thinkers with a vast experience in
banking and finance. All of the Directors and managers are well educated and has the capacity
to lead and with a great deal of expertise. BDO is composed of different committees that will
address the different issues the firm has to face on the daily basis. Every committee has a big
part to the profitability and growth of not only the whole organization but the whole country as
well. They should have integrity, honesty, and dedication to work, responsibility, honesty and
transparency in their chosen field of work or expertise. They are the decision makers of the firm.
They decide on what is best for the company. They decide on certain issues to address the day-
to-day operations of the Bank. With a wide spectrum of human capital or workforce, BDO
adheres to customer service and customer satisfaction. BDO should find different ways aside
from the conventional banking practice. The firm should explore to uncharted lands of
opportunities and minimize threats. Being the second largest bank in the Philippines, BDO
boast a high amount of capital or net assets. BDO shares a place with Metrobank and BPI as
one of the market leaders in banking industry. The firm should never pass the chance for the
innovation of their services and adding up state of the art technologies to adhere to the
Key Internal
Performance and
reliable Financial
Position
Reputation 0.15 4 0.60
Technology as
merged banks
Human Resource 0.10 4 0.40
Integration and
Organizational
development
Positive net present 0.10 4 0.40
value ventures
Risk Management 0.07 4 0.28
responsible for
flagging adverse
trends
Weaknesses:
Total earnings per 0.15 1 0.15
compared to 2006
P3.08
Pecuniary Wealth 0.10 2 0.20
Employee Benefits 0.10 2 0.20
Lesser volume of 0.08 1 0.08
branches compared
to
top competitors
Total 1.00 3.76
The Internal Factor Evaluation Matrix (IFE) found above lists nine key internal factors.
Six of these factors are considered strengths of BDO while three are weaknesses. The rate
suggests whether internal factors are major strength/weakness and minor strength/weakness.
For strength, the rate of four suggests major strength while three a minor strength. For
weaknesses, a rate of one suggests a major weakness while the rate of two implies minor
weakness. The weights used determine the importance of the factor identified in determining
success in the industry. The higher the weight, the more important it is.
Reputation has the highest weight amongst six major strengths. One important strength
of Banco De Oro is its reputation. When two industry leaders and models of excellence merge,
the result is an outstanding scorecard of proven and recognized distinction overall as well as in
specific areas of the business. This was evident in awards received by the Bank in 2007, which
displayed its pacesetting as an institution and as dominant player in the fields of investment
banking, trade finance, trust banking, and countryside development. Building for the future
means taking inspiration from these achievements and forging ahead to set new records. BDO
outperformed other Philippine banks to garner the coveted Best Bank title, made more
significant by the fact that the Bank won during what was described as its “transformational
year”- it emerged as a bigger, better, and stronger entity after the merger. Awarded by the
prestigious international publication, Euromoney, BDO was cited for its excellent management,
impressive fiscal performance, and continuing business expansion. BDO proved itself as a
major force to reckon with in the highly competitive Philippine banking industry. That’s why it
was given the highest rating for its upstanding nature in the industry and its good reputation not
The next factor with the highest given weight was Positive Net Present Value Ventures
which was also given the highest rating. BDO focuses on intermediation activities. Business
lending, Leasing, Consumer Lending, Branch Banking, and Treasury was the major
intermediation activities of BDO. The Bank’s funding, lending, and investing activities strong
growth on the back of superior execution abilities, innovative products, and expansion into new
markets. Emphasis on client relationships continues to be the mantra as the Bank strives to
bring more value to more people with its improved reach and servicing capabilities. Branch
Banking heralded an unparalleled expansion of the BDO branch network, from 250 branch
licenses prior to the merger to the staggering current total of 703 combined branches
nationwide. The priority was the integration of the former EPCIBank branches into the BDO
system to assure the banking public of the continued excellent service they have grown
accustomed to and more. Branch servicing areas have been upgraded and expanded, office
hours now reflect the needs of its client base, and products now include the offerings of the
combined entity.
The next major strengths are the strong Financial Performance and Stable Financial
Position and Human Resource Integration. They were given the same weight but given different
ratings, a three rating and four rating respectively. Although after the merge, BDO boost a total
of P617, 421, 476 resources, compared to the biggest bank which is Metrobank they still lack
some figures to topple the reigning king of banking industry. That’s why it was given a rating of
three. But in terms of workforce, BDO shadows over the rest of the other competitors in the
industry, with a staggering 15,000+ personnel nationwide. The group ironed out adjustments in
the technical and operational areas, including the Human Resource Information System (HRIS)
and other technology-driven systems, policies, and procedures. Now that the personnel force
has doubled- with a total count of close to 16, 000 employees- the Bank considers human
Following suit is the Risk Management with a rating of four. One of the programs or
policy that BDO can really boast is their Risk Management. It is very timely to have a very good
risk management due to ‘tsunami crisis.’ The team doubled its effort to build on the
complementary strengths of BDO and EPCI and enhanced its risk management system to meet
the demands of the merged Bank. There’s Credit and Remedial Management, Market and
Liquidity Risk Management, Operating Risk Management, and Asset Management that they
offered.
The factor that was given the lowest rating was Information Technology. In terms of IT,
BDO was only subpar. Their main goal after the merger was not about Information Technology
but the integration of both banks and its eventual ‘harmonization.’ Although there was some
move to integrate IT in the operations of the firm but it was still in the premature stage without
utmost importance. Certain moves was conducted for retooling and team-building activities to
reinforce the capabilities of the staffs to rise to heightened demand and expectations for IT
The Bank’s earnings per share, which is one of the profitability indicators, declined from
P3.08 in the year 2006 to P2.86 in the year 2007. That’s why it was given a high weight and a
rating of 1. Although the firm’s net income doubled, so does its common shares outstanding
which brought forth a decline in the earnings per share. This means that a stock holder will earn
less from his or her investment this year compared to last year. BDO carries a minimal cash
balances on hand and other cash items. Carrying excessive cash on hand may prove unwise for
some but in banking parlance, it is somewhat appropriate to hold a sufficient amount of cash.
We don’t know what depositors think. Having P320 billion savings deposits liabilities compared
to P20 billion cash on hand is somewhat unwise. With the looming crisis and recent event that
brought the bankruptcy of many finance institutions, depositors may immediately withdraw their
investments in fear of losing their money. Also BDO did not declare any dividends. With a huge
amount of resources and a huge number of workforce, they lack to compensate their employees
very well.
V. STRATEGY FORMULATION
A. STRENGTHS-WEAKNESSES-OPPORTUNITIES-THREATS (SWOT) Matrix
The following are the strategies formulated from the SWOT analysis; Product
Unrelated diversification – by adding new services to cater the demands of the market,
confidence and upsurge in investments elevating it to become the largest trust business
in the country and Retrenchment – benefits of decreasing assets and cost to reverse
It is also one of the Stage 2 matching tools. It has a four-quadrant framework that
most appropriate for a given organization. The x-axis represents two internal
dimensions (financial strength [FS] and competitive advantage [CA]) while the y-axis
represents two external dimensions (environmental stability [ES] and industry strength
[IS]). 1
directional vector points to the upper right quadrant which is the Aggressive quadrant.
BDO is in an excellent position to use its internal strengths to take advantage of external
and Intensive strategies should be use by the company in this kind of situation.
position and industry growth rate. The BCG Matrix allows a multidivisional organization
to manage its portfolio to businesses by examining the relative market share position
and the industry growth rate of each division relative to all other divisions in the
organization.
Having an annual growth rate of 8.46% and relative market share of 84%, BDO is
considered as Stars in the Boston Consulting Group (BCG) Matrix. (See appendix)
Being in a division with a high relative market share and a high industry growth rate, the
positions. The appropriate strategies are Forward, backward, and horizontal integration;
The IE Matrix is based on two key dimensions: The IFE total weighted scores on
the x-axis and the EFE total weighted scores on the y-axis. It has nine grids (starting on
the first grid in the top-left side and moving to the right) which can be divided into three
major regions. The three major regions of the matrix are: grow and build grids (grids I, II,
IV), hold and maintain grids (grids III, IV and VII) and harvest or divest grids (grids VI,
VIII and IX). The total weighted scores derived from the divisions allow construction of
As seen, BDO garnered a score of 3.75 in the EFE matrix which suggests that
the external environment the company is stable and also shows that the external threats
are leveled out by external opportunities that the company can utilize. In the IFE matrix,
BDO accumulated a score of 3.25 which shows that its strengths also level out its
at Region I, or the “grow and build” region. This would suggest that BDO should pursue
horizontal integration).
Another alternative tool in formulating strategies is the GSM. It has also four
quadrants just like the SPACE Matrix but GSM is base of two evaluative dimensions:
position. The perfect strategies are market penetration, market development, and
product development. Being in the quadrant I, they can afford to take advantage of
external opportunities in several areas. They can take risks aggressively when
necessary.
The QSPM objectively indicates which alternative strategies are best. It is a tool
identified external and internal critical success factors. Taking into account both the
external and internal factors that would affect the company, the QSPM matrix suggests
Equitable-PCI. The QSPM also shows that BDO can also apt to engage in Market
promos using their ties with SM and SMART to reel in potential customers.
VI. STRATEGIC OBJECTIVES AND RECOMMEND STRATEGIES
TOTAL 34
Being in a high growth rate industry, BDO should remain vigilant for possible takeover of
competitors. They should increase or retain their market share to maintain their sphere of
influence and dominance in the industry. They should never be complacent because with tough
competition and being in a high growth rate industry, competitors may take advantage and have
an equal or if not, a greater market shares in just a short span of time. To prevent this, BDO
should increase their network branches. Comparing with other tough competitors in the industry
(Metrobank and BPI), BDO is only third in terms of branches all over the country. They should
put branches and ATM networks in key strategic location. They should not only focus in Metro
The deposits have declined by 5.25% which indicates relatively poor banking programs
to attract probable depositors and retain existing ones. They should increase their deposits
because it is their source of funds which they can invest on certain portfolios to earn money.
With an increase in deposits, the firm can grab external opportunities and minimize threats
when they come around. A low deposit indicates poor management and they should address it
Nowadays, people are so busy that they can’t find time to go to the bank, if they have,
the banks are now close. To ease this problem, the company should invests on this kind of high
end technologies like cash-less transaction, debit cards, cash cards and other innovative ideas.
The company can implement an online banking system. This online banking system will be able
to give customers and depositors alike a much greater convenience than before which in return,
4.) To have an increasing growth rate on loans, receivables and interest income.
One of the chief operating revenue of a bank is the interest on loans. That’s why
to increase the performance and income of the bank, loans should also increase. One way to
address it is an online loan application. The customers may avail the application online provided
that he or she has a good credit terms. Another way is attracting new and potential investors.
Advertisement is a good way in attracting investors. Giving out loan packages with special
features is a good catch. BDO should have a 10% increase in its loans for the next year and
increase of 5% in the succeeding years for its improving market share and enhanced service.
Given below are the following strategies that Banco De Oro may pursue to increase their
market share and take a competitive advantage over its competitors using the given internal
strength and weaknesses and external opportunities and threats stated before:
To lessen the competition in the industry, BDO must acquire some of its competitors to
increase its relative market share and to be the market leader in the banking industry. It is hard
for BDO to acquire its main competitors (Metrobank and BPI) but the bank may acquire the
other banks. They may also want to purchase their stocks just to gain control, if they don’t want
them to integrate it to their organization, to broaden their influence in the industry. BDO should
look at their internal weakness and address it by acquiring other banks with internal strength
that BDO lacks. By doing so, the firm can increase its market share and can become the
number one bank in the country. Seeking stock control is almost the same as the acquisition but
in a different aspect. BDO will not have any problem with this, given the fact that it has a strong
financial position.
BDO is a well known established bank in the country especially in Metro Manila and
other key cities. It is known for its service and dedication. But in some part of the country, in the
rural areas and some provinces, people tend to transact with rural banks. One move should
BDO make is to establish a market in that specific area to have an increase in transaction which
equals an increase in income. Rural banks offer less interest rate than those well established
banks but they are more prone to the global crisis that is happening. Another way is to integrate
those rural banks as part of the BDO conglomerate or acquire them to lessen the competition in
BDO may be investing and inventing new ideas and programs but that’s also what their
competitors are doing. To differentiate their intermediation programs from the rest of the group,
the firm should think of a unique program that the competitor’s program has not. Since there is a
record high dollar remittances from OFWs, the firm may take the idea of money transfer
business firms. They may provide also such service but in a different way. Product development
means increasing the reliability and dependency of the customers on the bank. More than the
demand itself, the firm must be able to respond urgently. By improving BDO’s product quality, or
service, in terms of reliability and dependency, it will be able to have a proactive stand on the
perceived problems of the customers which will make the company, the preferred bank.
The firm does not have a research and development team which could take advantage
of available technology to initiate innovation in the banking industry. The team must invest on
this and conduct studies, surveys, and research how to carry out their service without
Banco De Oro has been performing well in its operation for the past years. Its main
operation is all in the Philippines and its transactions are denominated in Philippine peso except
for foreign currency transactions but they are denominated in Philippine peso at the current
exchange rate. The Financial statements of BDO attest to the claim that it is in an excellent
condition and good financial performance and position. As presented in the table below, the
figures have all increased significantly since the merger took place with EPCIB.
Financial Highlights
The recommended strategies for BDO are expected to maximize the company’s
strength and competitive advantage while minimizing the impact of threats and eliminating
its present weaknesses. These strategies have financial effects to the company and the
following are the financial projections considering the impact of these strategies
On
Loans and other
receivables 21, 414, 488 23, 555, 937 27, 089, 327 32, 507, 193
Investment and
Trading 11, 743, 428 12, 917 771 14, 855, 436 17, 826, 524
Securities
Due from other
Income 21, 436, 732 24, 818, 182 30, 919, 318
*expense to sales ratio is 40%
**expense to sales ratio is 35%
Increasing its income would lead to an increase in the market share. Increasing income
would mean that there are more customer transactions, more investors investing, more loan
applications which would lead to expansion and establishment of more branches and eventually
an increase in the market share. To enhance these projections and to fully fulfill the strategies,
the firm should decrease their expenses by reducing their bills payable and other liabilities. We
cannot decrease the interest in the deposits liabilities which would to decrease in customer
deposits. That would affect the recommended strategy. Due to recommended retrenchment in
the SWOT analysis (see SWOT analysis) expenses would decrease. BDO has over 15, 00
employees. Decreasing it would decrease the salaries and wages. 34% of the total other
operating expenses of BDO is for salaries and wages. (See financial statements)
Actual Projected
2007 2008 2009 2010
(10% increase) (15% increase) (20% increase)
Total Assets 617, 421, 476 679, 163, 626 781, 038, 170 937, 245, 804
Total
Liabilities 556, 880, 848 612, 568, 933 704, 454, 273 845, 345, 128
Total
Stockholders'
Equity 60, 540, 628 66, 594, 691 76, 583, 895 91, 900, 674
Total
Liabilities
and Equity 617, 421, 476 679, 163, 624 781, 038, 168 937, 245, 801
The increase in income and decrease in the operating expense would subsequently lead
to an increase in the net assets of BDO. The branch expansion network and advertising will
increase transactions and will eventually lead to an increase in market share. The combination
of these factors will result in an increase in BDO clients, as a result, an increase in business
transactions.
The increase in liabilities is a result of increase in deposits for the succeeding years.
Increase in liabilities will likewise increase the asset. These deposits may belong on the cash
balance and major part of it will be invested in different investments like trading securities and
bonds. Increase in deposits will increase the loans and receivables of the bank thereby
The total equity of BDO will also follow the increasing trend. The projected income
statement of the Bank resulted into an increase in the net income every year, following the year
2007. These are then transferred to the Retained Earnings section, which forms part of the
Stockholders’ Equity of BDO. The acquisition of assets, mainly the increase in the number of
branch networks, which increases total assets, will also result in the increase in the
Stockholders’ Equity.
VII. Action Plans and Departmental Programs
Based upon the internal and external analysis which are the basis of the matching tools
used for the formulation of strategies, three strategies stands out the company can use to
increase the market share and for better improvement. These strategies are: Horizontal
Integration, Market and Product Development. Of the three, horizontal integration is the most
appropriate. BDO has a high market share but in an industry with a high relative growth rate.
There are numerous players in the banking industry which only means competition. The top
three are Metrobank, BDO and BPI. Doing so would increase the market share of the company.
Management Management
recognitions and
awards
• http://www.mobilephonebanking.org
• http://www.wikipedia.com
• http://bdo.com.ph
• www.metrobank.com.ph