BDO case study

1. BDO
Unibank Inc.

2. I. INTRODUCTION

3. A. Company profile
I. HISTORY
O 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.

4. O 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.

5. O BDO is one of the many banks owned by a Chinese-
Filipino in the Philippines, including one of its
competitor’s Metro bank and China bank. 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, “banc assurance” 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
GeneraliPilipinas Insurance Company. On June 15, 200
1, BDO merged with Dao Heng Bank’s Philippine
subsidiary.

6. O The merger boosted the number of BDO’s
branches from 108 branches before the merger
to 120 after the merger.
O 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.

7. OOn 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
ONow BDO has branches in key
business and commercial centers in
Metro Manila, Northern and Southern
Luzon, Metro Cebu, Iloilo-Bacolod and
Mindanao. .

8. II. Mission
O BDO Foundation was established as the
corporate social responsibility arm and channel
for outreach and socio-economic development
programs of BDO Unibank’s internal and
external publics. It aims to respond to the
needs of the marginalized sector of society,
especially those affected by disasters, for
decent shelter and educational facilities, health
care and sustainable livelihood.

9. Vision
OBDO Foundation aims to be a
leading, dynamic and responsive
organization that creates
opportunities and supports
initiatives to improve the country’s
socio-economic development.

10. III. Organizational Structure

11. IV. Income Statement

15. B. COMPETITORS PROFILE
1. Ranking Of Competitors
Rank
Universal and
Commercial Banks
Assets in millions of PhP
(Sept 2017)
1 BDO Unibank 2,484,620.57
2 Metrobank 1,627,441.03
3 BPI 1,541,030.66
4 Land Bank 1,479,365.22
5 SecurityBank 796,957.01

16. 2. STRENGTH AND WEAKNESSES OF THE
COMPETITORS
 METROPOLITAN BANK AND TRUST COMPANY
STRENGTH:
O Strong dealer community.
O Strong Brand Portfolio.
O Successful track record of integrating complimentary
firms through mergers & acquisition.
O Highly successful at Go To Market strategies for its
products.
O Strong distribution network.
O Good Returns on Capital Expenditure
O Successful track record of developing new products –
product innovation.
O Reliable suppliers

17. WEAKNESSES
O The company has not being able to tackle the challenges
present by the new entrants in the segment and has lost
small market share in the niche categories..
O Investment in Research and Development is below the
fastest growing players in the industry.
O Need more investment in new technologies.
O Not very good at product demand forecasting leading to
higher rate of missed opportunities compare to its
competitors.
O Not highly successful at integrating firms with different
work culture.
O Limited success outside core business
O Organization structure is only compatible with present
business model thus limiting expansion in adjacent
product segments.

18.  BANK OF THE PHILIPPINE ISLAND
STRENGTH
O Has a multi-channel distribution network comprising
600+ retail branches, 40 investment centers, commercial
partners, telephone banking (BPI Directo) and a home
banking service (BPI Net)
O Has a strong customer base with approx 2 million
customers
O BPI has the best capital indicators regardless of the
criterion, its pensions are covered
O It is the only listed bank which has not issued State-
guaranteed debt to manage liquidity, it records the lowest
absolute and relative utilization of ECB resources
O The bank has the lowest rate of loan leverage and the
lowest credit risk indicators
O 10,000 people work as a part of the bank.

19. WEAKNESSES
OIts net operating income has been
decreasing over the past few years
OLimited international presence which
increases the geographic risk
OIt is not completely free from the credit risks
with respect to customers and
counterparties which could adversely affect
it’s results.

20. LAND BANK OF THE PHILIPPINES
STRENGTH
Ohigh growth rate
Oexperienced business units
Oskilled workforce
WEAKNESSES
Ocompetitive market
Ofuture productivity

21. SECURITY BANK
STRENGTH
Oexperienced business units
Oreduced labor cost
Omonetary assistance provided
Oskilled workforce
Obarriers of market entry
Odomestic market
WEAKNESSES
Ofuture cost structure

22. II. INDUSTRY
ANALSIS

23. A. EXTERNAL FACTORS
1. ECOMOMIC FORCE
 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
product such as corn ethanol and biodiesel as an
alternative to petroleum and global inflations; a
substantial credit crisis leading to the drastic bankruptcy
large and well established investment banks as well
commercial banks in various, diverse nations around
the world; increased unemployment; and signs of
contemporaneous economic downturns in major
economies Of the world a global recession.

24.  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.
 Economy speaks out for the poor as they seek help
to those who are willing to take stock and draw on
their values and strength sin setting priorities and
decision-making on project.

25. 2.Social, Cultural, and Demographic
Forces
 Philippine society is a unique blend of diversity and h
omogeneity. The country is 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.

26.  These eventually result to the affection of cultural
enterprise, industry development, household
behaviour, 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 mountains are of northern
Luzon.
 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.

27. 3. Political, Government and Legal
Forces
 Over a period of time, the banking industry of the
Philippines has seen a transformation with the forms
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 its position as new entities will increase the
competition level. Moreover banks will be geared up
in facing inconsiderate Economic outlook, which
increases the likelihood of a sharp increase in
unemployment or corporate bankruptcies.

28.  The importance and benefits of a strong regulatory
system with an open and well-regulated financial
sector offers stability, making the economy more
resilient in the Face of external and domestic
shocks.
 In the Philippine, the Bangkong 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 figure revealed a steady
growth in deposits, the resumption of lending
activities, capitalization and bottom line figures.

29.  The important relationship between banks and
political, legal and governmental welfare hassled
researchers and international institutions to develop
policy recommendations concerning bank regulation
and supervision.
 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.

30. O The third pillar envisions greater market discipline
of banks through that force banks to disclose
accurate, transparent information. Companies are
subject to government imposed taxes such as
income tax, donor’s tax, 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.

31. 4.Technological Forces
 The developments in information collection, storage,
and processing and transmission and 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 and the
degree of contestability in banking. Due to the
development of technology, bank’s superiority in
information is deteriorated.
 Entry barrier have been declining, new competitor
had emerged.

32.  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 scale.
 It has also impacted on the way banking and
financial services are delivered.
 The creation of a new supply channel has
substantially reduced the cost of financial
transaction.

33. B. INTERNAL FACTORS
O 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 fulfilment of
the Bank’s corporate social responsibility
objectives and programs.
The bank’s endeavours hewed closely to a long-
standing track record of support to social
development, reflecting a clear vision of a future built
on a foundation of excellence, self-determination,
and fearless initiative.

34. 1. MANAGEMENT
 Committees reaffirmed in their
respective areas how the Bank
interprets corporate governance’s
conscious and methodical effort,
reinforced in an active and day-to-day
advocacy of financial responsibility,
integrity, and commitment to service.

35. 2. FINANCE / ACCOUNTING
Profitability
O 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.
Liquidity
O 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 the end of 2007 liquid assets accounted for
42% of total assets comprising mostly government
securities cold be swiftly converted into cash.

36. Capital Adequacy
O 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.
O 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 relative
to total assets.

37. 3. Marketing
 Over the curse of 10 years, BDO via a combination
of organic growth and acquisition 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.
 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.

38. 4. Production / Operation
 Banco de Oro’s banking services can be classified
into 4 categories: Personal banking, Business
banking, Investment banking and Wealth
management.
 Personal banking deals with:
- Branch Banking
- Consumer Loans
- Credit Cards, Insurance
- Remittance
- Electronic Banking
- Investment & Advisory Services

39. - Unit Investment and Trust Fund For Business
banking
- Cash Management
- Merchant Acquiring
- Insurance Loans
- Trade Facilities
- Corporate Trust Services
- Wealth Management:
- Private banking
- Investment & Advisory Services
- Personal Trust Services
- Equity & Quasi Equity
- Underwriting and Management
- Direct Equity Investment
- Fixed- Income Underwriting
- Packaging and Syndication

40. 5. Research and Development
 Every company needs research and development. In
the banking industry, there is a need for research
and development. These changes and development
will bring increase service and customer satisfaction.
 It successfully 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 the Makati Corporate Center offices.

41. III. COMPETITIVE
ANALYSIS: PORTERS
FIVE MODEL

42. 1. RIVALRY AMONG NEW
ENTRANTS
Porters five forces
1. Rivalry among new entrants Intense
2. Threat of new entrants Low
3. Threat of substitutes Medium
4. Bargaining power of suppliers Low
5. Bargaining power of buyers Medium

43.  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 primary reasons why BDO has been very
aggressive, a threat to all banking firms:

44. List of other participating banks in the Philippines (PSE INC.)
1. AsiaTrust Development Bank, Inc.
2. Banco Filipino Savings and Mortgage Bank
3. Bank of the Philippine Islands (BPI)
4. China Banking Corporations
5. Chinatrust (Phils.) Commercial Bank Corporation
6. Citystate Savings Bank, Inc.
7. Export and Industry Bank, Inc.
8. Metropolitan Bank and Trust company
9. Philippine Bank of Communication10
10. Philippine National Bank11
11. Philippine Savings Bank12.
12. Philippines Trust Company13
13. Rizal Commercial Banking Corporation14.
14. Security Bank Corporation15.

45. O As for rivalry among competitors especially to
differentiation of product, the threat is 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
and Equitable-PCI Bank.

46. 2. THREAT OF NEW ENTRANTS
 New potential competitors are always a threat to any
industry, other possible threats include; changing
demographics/shifting demands, emergence of cheaper
technologies and regulatory requirements.
 . 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.

47. 3. THREAT OF SUBTITUTE
 In banking institutions, competitive pressures arisin
g from substitute products/services 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.
 It’s only a matter of which bank rate you can afford.

48. 4. BARGAINING OF POWER OF
SUPPLIERS
 With BDO merging to with another organization, they
have expanded their networks through branches and
means and squeeze out important cost savings for
themselves.
 . Other than that, the speed availability of services
of next generation components
have widely denomination of initiatives focused on the
harmonization of the benefits and compensation
packages of officers 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.

49. 5. BARGAINING POWER OF
BUYERS
 Bargaining power represents a major force affecting the
intensity of competition in an industry. With BDO’s
inventive mind set, they view banking as a continuous
creative process, challenging them to always find ways
to better serve their customers.
O 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 spread scan lead to opportunities.

50. IV. STRATEGIC
FORMULATION
(SWOT MATRIX)

51. Strengths-S Weaknesses-W
1.) Escalating Fiscal Performance
and reliable Financial Position
1.) Total earnings per share is
2.86in 2007 compared to
2006 P3.08
2.) Reputation 2.) Pecuniary Wealth
3.) BDO Information Technology
as merged banks
4.) Human Resource Integration
and Organizational development
5.) Positive net present
valueventures6.) Risk
Management responsible for
flagging adverse trends
Opportunities-O SO Strategies WO Strategies
1.) Trade and industry expansion
that will generate a desired
multiplier effect on incomes.
2.) Inflation is expected to
depreciate.
3.) Upturn in Investments elevating it
to become the largest trust business
in the country.
4.) Benign inflation and an improved
fiscal position served as key factors
that held interest rates at their lowest
levels.
5.) Record-High Remittances
through extensive distribution
networks coupled with robust market
base and overseas networks.
1.) Increase salaries and develop
new employee package through
increase income.(W3, O1, O3, O5,
O6)
2.) Increase borrowings. (WI, O2,
O4)
3.) Emlpoyee Benefits
•Ranked 3rd in volume of branch
networks(compared to BPI and
Metrobank)
SWOT
2.) Increase revenue growththroug
h expansion of electronicbanking
by means of ATMnetworks and
phone banking. (S1,S2, S3, O1,
O3, O4, O5, O7)
1.) Invest on research anddevelop
ment and technology for the enhan
cement of customer service and
transactions. (S3,O7)

52. 6.) Building business’ confidence
through increased government
spending, increased volatilities and
widened spreads by means
of expansion.
7.) Rapid Technological
Advancement to meet heightened
demands in the market and
administrative centers.
Threats-T ST Strategies WT Strategies
1.) Projected Increase in Inflation
due to US recession.
1.) Double the effort of the Risk
Management Group to build on
the
complementary strength of BDO
and enhance its risk management
system to meet the demands of
the merge bank.(S6, T1, T3, T4)
1.) Invest on unrelated
diversification to minimize the risk
of bankruptcy.
(W1,W2,W3,S1,S2,S3,S4)
2.) Market Volatility and Shifting
Investors
2.) Product development (S1, S2,
S3, O1, O2, O3)
3.) Global Financial Crisis
4.) Confidence Over the Country’s
Solid Fundamentals
5.)Viruses and various forms
of damaging software that can
damage company technology
4.) Retrenchment to decrease
cost(S1, S4, T3)
2.) Terminate employees
or moderate
salaries(W1,W2,W3,S1,S2,S3,S4)
3.) Set-up adept computer systems
in new branches to efficiently
protect the bank’s technological
structure.(W4,T5
3.) Develop and add more bank
intermediation activities; funding,
lending and investing.
(S1,S2,S3,S6,T2,T4)
3.)Expected increase in profit can
lead to expansion of additional
branches(W4,O1,O5)
3.) Amplify advertising to clients
and potential investors by means
of websites. S1, S2, S3, O1, O3,
O4,O5, O7)

53. O by means of the rapid technological advancement i
n our generation, Market development – Ascertain
BDO’s services by means of amplification of its
strengths, Unrelated diversification – by adding
new services to cater the demands of the market
,Horizontal integration
by controlling the market by means of BDO’s
business 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 declining
market shares and sales.

54. V. STRATEGIC
IMPLEMENTATION

55. 1. OBJECTIVES
To adhere professional ethics
To deliver high quality services
To provide timely responses to
clients
To build good lasting relationship
within the society

56. 2. RECOMMENDATION
 As part of its continued drive to encourage people to
move beyond just saving their money but also to begin
investing, Banco De Oro has launched the I Invest Ad
series, specifically talking about how the Bank can help
achieve one's financial goals through proper investment
management.
 “BDO has always been very active in educating Filipinos
about the value of investing. Through the I Invest
campaign, we want to show our "kababayans" that they
have the power to realize their plans in life -- whether
this is to see their children finish college, to continue
their current lifestyle when they retire or to simply enjoy
life -- by becoming investors - the earlier, the better,"
said Ador A. Abrogena, executive vice president and
head of BDO Trust and Investments Group (BDO TIG).

57.  BDO has consolidated trust assets of P457 billion,
the largest in the industry and accounting for 25%
market share as of year-end 2009. BDO TIG offers
a wide range of trust and investment products,
including pooled funds like the Unit Investment
Trust Funds (UITFs) that offer a way for investors
with similar objectives to obtain the benefits of
diversification and ease of investing / redemption
and the more customized portfolios for those who
prefer to invest in securities of their own selection.
It also provides investment management and trust
administration for clients with specialized needs.