Submitted By:Matienzo, Millicent S.J.4ALM

Submitted To:Prof. Ricardo Palo

San Beda College ManilaMarch 5, 2015

EXECUTIVE SUMMARYBanco de Oro Unibank, Inc. or BDO is a universal bank in the Philippines involved Finance and Insurance industry and provides financial services that extends not only to personal banking, but also corporate banking. It is owned by the SM Group of Companies one of the countrys largest conglomerates, which is in turn owned by Henry Sy. BDO is now the largest bank in the Philippines in terms of assets, loans and deposits. Its market niche touches the corporate market, the middle market banking segment and the retail or consumer market.In the conducted external analysis of BDO (4.3.1.) and its competitor analysis (4.2.2.), it is shown that BDOs is equipped in taking effective advantage of opportunities and minimizing threats. The analysis show that there are opportunities present for BDO to take, such that of the rise in demand for mobile banking applications, increase in automotive loans and the unification into a single market come the 2015 ASEAN Economic Integration which pose as challenges that BDO should overcome. However, there are also threats that BDO should minimize. In the internal analysis (5.8) and the financial analysis (5.3), it was shown that BDO is in a position that is proactively upgrading and striving to cater to its clients and providing quality services. It shows the strengths of BDO as a business, which should be utilized more in answer to opportunities. Meanwhile, such analysis also showed BDOs weaknesses that should be mitigated. it was also found that BDO is in a position to aggressively take on the challenges posed by the opportunities stated. In doing so, the objectives for BDO formulated were to increase in net income while maintaining expense, increase in market share, increase in presence in rural areas and to invest more in technology. In order to achieve such, based on the strategy formulation matrices (6.1. to 6.7.), it was recommended for BDO to pursue intensive strategies which are that of product development and market penetration and also horizontal integration.I. INTRODUCTION1. Nature of BusinessBanco de Oro Unibank, Inc. or BDO is a universal bank that is involved in providing financials services to individuals and corporate markets and specializes in lending, deposit-taking, Foreign, Exchange, brokering, trust and investments, credit cards, corporate cash management and remittances in the Philippines. BDO belongs to the SM Group of Companies, one of the country's largest conglomerates, with businesses spanning between retail, mall operations, property development, and financial services owned by tycoon Henry Sy.BDO provides services for both individuals and corporations. As for individuals or also called as personal banking, it offers eBanking; with services such as phone banking, ATM banking, online banking and mobile banking, trust and investments, account management, credit card management, loans, remittances and insurance. BDO also offers services to corporations such as cash management services, trade facilities, investment banking, treasury, foreign exchange, investment advisory services, insurance, leasing and financing, trust and investments and corporate credit card management.

2. BDOs HistoryBDO had its beginnings on January 2, 1968 as it started as a thrift bank having the name Acme Savings Bank while having only two branches in Metro Manila. In November of 1976, Acme was acquired by Henry Sy and was renamed as Banco de Oro Savings and Mortgage Bank. In December of 1994, Banco de Oro became a Commercial Bank, and to portray its new status as a bank, it was renamed Banco de Oro Commercial Bank, and in September of 1996, BDO became a universal bank, which made BDO to change its name to its current, Banco de Oro Universal Bank. BDO is one of the banks owned by a Chinese-Filipino in the Philippines. Examples of other include Metrobank and Chinabank. In order to remain competitive and strengthen itself through vision, innovation and value, in 1997, BDO became involved in insurance services by establishing a subsidiary called BDO Insurance Broker, thus making it a, bancassurance firm. In 1999, it expanded its insurance through partnership with Assicurazoni Generali S.P.A., one of the worlds largest insurance firms, and Jerneh Asia Berhad, a member of the Kuok Group in Malaysia. In March 2000, BDO partnered up with its insurance affiliates, Generali Pilipinas Life Assurance Company and Generali Pilipinas Insurance Company. On June 15, 2001, BDO merged with Dao Heng Banks Philippine subsidiary. The merger increased the number of BDOs branches from 108 branches prior to the merger to 120 after the merger. BDOs expansion through its increasing number of branches had become one of BDOs competitive advantages, and as it reached out to its increasing number of depositors. The bank further expanded in April 2005, United Overseas Bank sold 66 out of 67 of its Philippine subsidiarys 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, BDO and 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 Card Network, one of the Philippines largest credit card issuers, from the Go Family. On December 27, 2006 both Banco de Oro Universal Bank and Equitable bank had agreed to merge, thus making the Banco de Oro-Equitable PCI bank. As of February 2007, it became known as Banco de Oro Unibank, Inc. As of March 31, 2014, BDO is the countrys largest bank in terms of total resources, capital, customer loans, total deposits, and assets under management and has about 23,600 employees. In December 2014, BDO had acquired Mindanaos largest rural bank.

II. RESEARCH DESIGN AND METHODOLOGYIn order to accomplish this paper the data requirements include that of financial statements, operational highlights, financial projections and recent surveys. Industry studies, trends, economic conditions are also required regarding the industry analysis. To achieve the comparison between the subject company and its competitors, information and background regarding top competitors are sought. Lastly, to complete the paper, internal information on BDO is also gathered.Sources are gathered mostly from BDOs website and annual reports. Correspondence through phone calls and emails with BDO representatives were also used. Other secondary sources were also gathered from the National Statistics Coordination Board, National Statistics Office, National Economic Development Authority, World Bank, Bangko Sentral ng Pilipinas websites.The financials for the years 2014 to 2016 are merely projected and should not be taken as actual statements of BDO. Although this paper is submitted in 2015, it was written in 2014, thus the study was based on 2013 information. It is also assumed that, for financial projections, the tax treatment were the same and that there were no dividend payments during the years projected. There are no direct citations found throughout the paper for consistency purposes in the format. However, all the references used are found in the bibliography. This is so as not to constitute as plagiarism.It should be noted further this paper is limited only Banco de Oro Unibank, Inc. who operates in the Philippines, however it must be said that there are BDO branches abroad. The paper is focused mainly on industries serving in the financial and insurance sector and that the study is for studying the performance of the company and its strategic position.

III. COMPANYS MISSION AND VISION

3.1 Corporate Mission-Vision StatementTo be the preferred bank in every market we serve by consistently providing innovative products and flawless delivery of services, proactively reinventing ourselves to meet market demands, creating shareholders value through superior returns, cultivating in our people a sense of pride and ownership, and striving to be always better than what we are today tomorrow.

3.2. Evaluation of the Mission-Vision StatementThe vision statement was found to be as what answers the question What do we want to become. BDO answered such question almost as though immediately because the answer to such is found at the very beginning of the statement. BDO states that it desires To be the preferred bank in every market we serve... Upon first glance, the vision of the company is evidently clear, thus making it a viable mission-vision statement.The mission statement, it is evaluated based on Fred Davids Framework and Characteristics of a Mission Statement. BDOS mission statement is not lengthy in character as it has fifty five words which follows that such statements are to be only up to two hundred and fifty words in length. Moreover, the mission statement is broken down to be able to fully comprehend and evaluate the mission statement.COMPONENTSPRESENCESPECIFIC STATEMENT

1. CustomersYesIn the phrase in every market we serve implies that BDOs pool of customers is large and diverse seeing as that it uses the markets instead of customers. It may be implied that these markets are BDOs customers who are willing to transact and invest with BDO as their preferred banking institution.

2. Products Or ServicesYesWith the statement consistently providing innovative products and flawless delivery of services, BDO aims to provide its customers with products that is adaptive to the needs of its clients and as well as with the advancement of technology. More so, BDO aims to deliver such products with its swift and efficient service. The statement is concise as to mentioning its products and services.

3. MarketsYesBDO mentions the statement proactively reinventing ourselves to meet market demands. It states its aim to satisfy its clients through reinvention and innovation. It is evidently clear that BDO has addressed its plans to meet market demands.

4. TechnologyNoThe mission-vision statement made no mention of how BDO will make use of technology as to improve their business. It makes it unclear to clients on the bank will be catering to the needs and demands of the clients.

5. Concern For Survival, Growth And ProfitabilityYesWith the phrase creating shareholders value through superior returns implies that BDO is not only concerned with maximizing profits but also with maximizing their shareholders wealth. They are concerned with more than gaining customers. BDO is also engaged in retaining and satisfying their clients. Moreover, striving to be always better than what we are today tomorrow provides BDOs concern for its growth.

6. PhilosophyYesCultivating in our people a sense of pride and ownership show that BDO is concerned with its shareholders and employees . It also gives its people a sense of belongingness in the company. BDO instills in its people pride in being part of the company and its successes. Such ensures that people will desire to remain and patronize the company.

7. Self-ConceptYesBDO thinks of itself as a preferred banking institution for its markets and has its sights set on becoming as such to all markets through striving to be always better than what we are today tomorrow. This implies that BDO is committed to progress and its clients.

8. Concern For Public ImageYesThere was a of BDOs concern for its public image other than in its aim for being the preferred banking institute in every market.... However, BDO has a separate corporate sustainability statement and its environmental concerns.

9. Concern For EmployeesYesBDO shows its concern for its employees through cultivating in our people a sense of pride and ownership. BDO wants its employees to be proud of their membership in the company and being part of its accomplishments and milestones.

Overall, BDOs mission-vision statements gives a clear picture of what it aims to be as a company. However, there are factors from the Fred Davids Framework that are absent in the companys statement, but nonetheless, BDOs mission-vision statement is a useful tool to map out BDOs plans for its business and clients as well as a tool for clients to briefly glimpse of what BDO is.3.3. Recommendations on Communicating the Mission And Vision StatementThe mission and vision statements are important for establishing the Banks identity as well as communicating to its stakeholders the nature of its business. In order to do this, BDOs needs to go beyond putting up its statements inside company headquarters and bank branches. Such statements instilled in the hearts of its employees which may result to increased employee productivity and deep sense of belongingness. This will lead to a contribution to an overall success.

As to the general public and its customers, as well as potential investors, local or foreign, BDOs employees must show the embodiment of these statements. They may show success stories of BDO personnel in application of their mission and vision statements. This is aside from the common practice of posting its mission and vision statements in ATM screens and bank branches. Generally, it needs to consistent in the companys behavior, statements and actions, and must bridge that gap between employees to employees, employees to top management, the corporation to its customer and collectively support the vision mission to the reality.

IV. EXTERNAL ANALYSIS4.1. General Environment4.1.1. Political, Legal and Government AspectsAccording to Republic Act No. 8791 or the General Banking Law of 2000, in its Declaration of Policy, it recognizes the fiduciary nature of banking that requires the highest standards of integrity and performance. This is why it is upon the State to promote and maintain a stable and efficient banking and financial system by creating and upholding laws not only intended for the supervision of banking and financial institutions but also for the protection and benefit of the clients of such banks and financial institutions. The banking industry is an industry that is imbued with public interest that requires itself to be regulated by the government. Mainly, the General Banking Act of 2000 governs all banking institutions through the Bangko Sentral ng Pilipinas and its Monetary Board. It is imposed in the Monetary Board, the governance, supervision, authority over such banking and financial institutions as well as to provide policy direction. Aside from BSP Circulars, the banking industry is protected by the Philippine Deposit Insurance Corporation. Being an industry generally involved with money, capitalization requirements are specific and must strictly be followed. As well as managerial requirements especially for universal and commercial banks.4.1.2. Economic DevelopmentsIn 2013, the Philippines had earned roughly P11,546,104,000,000 as its Gross Domestic Product according to National Statistics Coordination Board. From the year 2000, the countrys GDP continually increases. It is in 2013 that the Philippine Economy expanded by 7.2%. There were boosts in several sectors, especially in the service sector. However, there were also slow downs in certain sectors such as imports and construction. Also contributing to these slow downs are the impact of typhoons that hit the country, which may have reduced the GDP growth.Philippine financial markets experienced large volatilities as investors responded to the tapering of the United States stimulus program, wherein stock and bond prices fell significantly. However, monetary and fiscal policy supported growth. While government finances continue to improve due to tax improvements and efficient spending. On the other hand, remittances and export of services were more or less unaffected by the slow growth in advanced economies. Cash remittances increased by 6.4% in the previous year, along with the increasing demand for skilled Filipino workers.The services sector remained the main source of growth which expanded by 7.1%. This explains the resilient growth of financial intermediation and other business activities. Manufacturing grew by 10.5% due to the strong domestic demand for food, chemical products, communication products, basic metals, etc. While agriculture barely contributed to the growth as several decline in the production of corn, coconut, sugarcane and banana occurred.One major economic change to be seen is the preparation and the actual integration in 2015 of the ASEAN community. This movement unifies the markets of Southeast Asian nations into one. Aligning each member country to another through political and economic measures. The banking industry is one of the sectors that is predicted to be affected by such integration as the Philippines opens its doors to foreign investors. However, foreign competitors will be on the prowl as well. Nonetheless, there has been no indication regarding a change the General Banking Law and the guidelines and requirements in establishing banks in the Philippines, thus saving the local banking industry from penetration. 4.1.3. Socio-cultural, Demographic, Lifestyle ChangesThe Philippines is a society that is confronted by many socio-cultural challenges, such a rapid population growth, ethnic, religious and poverty problems. The Philippines, being under the rule of Western powers for centuries, has left a mark which had become a part of the Filipino identity. Over the years, the country had been witness to many cultural and lifestyle trends that have influenced the banking industry.The Philippines has a dense population but with an uneven distribution. It has an estimated population of 101,112,799 Million and fifty percent of which is urban, especially in Metro Manila, which has the highest density. For the last quarter of 2014, it was recorded that the Philippines had a 6% unemployment rate, making the employment rate at 94%. With, the large percentage of Filipinos who are employed, this contribute to the growth of the banking industry. Their profit indicates the ability to engaged in banking and financial activities.Lifestyle and business trends affect the banking industry. Aside from young adults to the elderly, banking trends for the young have been prevalent recently. Junior savings accounts, jumpstart accounts and other savings plan for children. Also, an increase in the number of universities and colleges partner up with banks in the collection process of tuition fees. 4.1.4. Technological DevelopmentsThe banking industry is not easily swayed by technological trends, however, when such a trend does, it leaves a huge impact. Banks are developing new branch formats that consist of sturdier alternatives to the traditional bank branch. Banking customers also now handle their banking transactions via smartphones and tablets than through other channels. This makes the mobile banking channel a key element in earning customer loyalty. Mobile banking is coupled with transactions with other banking channels so as to deliver seamless service. There was a reported rise in the use of a banks mobile banking application by 19% in the previous year. Despite the large patronage of mobile banking, there is still a decline in the usage of bank branches, ATMs and even online banking.However, there is an increase in omnichannel consumers. Omnichannel means accessing with more than one banking channels. Despite mobile banking rising to mass appeal, clients still prefer combining digital and physical channels in banking. Bain and Company, Inc. sees that this is critical for effective service, marketing and selling, because customers expect to be able to hop from one channel to another. Said company also provided that banks that pull ahead in loyalty by investing heavily in mobile to better experience will reap financial benefits. While banks that lag investing in such advantage will miss reaping the financial benefits as well as fall behind in investment. Behind this advantage, however, comes a small problem: hidden defection. These small hidden defects that result to lesser customer satisfaction which may result to bank switching. Banks that fail to respond against these defects risk profits. Aside from defection, which is an entirely internal concern, there also exist a threat of security breaches and attacks. Several causes of which is the crumbling personal relationships between managers and customers and a reputation for security, also the increase of digital assets in the banking and financial institutions.4.2. Industry and Competitor Analysis4.2.1. Porters Five Forces ModelPORTERS FIVE FORCES MODEL

Rivalry among competitorsHigh

Threat of substitutesMedium

Threat of new entrantsLow

Bargaining power of suppliersLow

Bargaining power of consumersMedium

Rivalry Among CompetitorsThe banking industry, being as it is, an industry that is difficult to penetrate as the government regulates the establishment and organization of banks in the country. This implies that there are not so many banks operating in the Philippines. Competition in the banking industry is very tight.As for rivalry among competitors based on the differentiation of products, rivalry is also tight. Most banks offer the same financial services; lending, credit card services, foreign exchange, insurance, remittances, etc. Most banks usually differ in its rates and on the manner of delivery, nonetheless, services offered are relatively same. With respect to strategies, the competition is also high. Each bank has its own strategy to outperform another.Threat of SubstitutesConsidering the difficulty in entering the banking industry and the competitive rates and charges, there remains a possibility of substitutes to cater clients who are not able to transact with banks. The business of lending extends to pawnshops and lending houses which may be a become a substitute. Even pawnshops now have remittances services. Nonetheless, the threats are still relatively low to medium because not all banking services can be substituted by other channels such as the credit card services. Although the switching from a primary banks services to avail of another is another kind of threat of substitute is due to the differences in service rates and interests caused by the competitive pressure brought about the tight competition in the banking industry.Threat of New EntrantsBeing imbued with public interest and its nature being fiduciary, the banking industry requires itself to be regulated. The law provides for strict compliance in the requirements for the establishment of banks in the Philippines. Capitalization requirements is relatively high so as to keep banks liquid in its operations. Such requirement is necessary so as to protect to who invest and transact with banks and so as to prevent frequent cessation of banks. As for brand loyalty, most customers prefer more established banks which have proven themselves through the test of time. There is also the scarcity of important resources. Capital is not the only element that gives banks the ability to operate. Technology and qualified and expert staffing are also important. High switching costs for customers especially in terms of long term contracts and transactions hinders the threat of new banking institutions. Considering these factors, it is easily said that the threat of new entrants is low.Bargaining Power of SuppliersSuch bargaining power is low. The services provided by the banking industry cannot be easily substituted. While differentiation of services are also limited. There is also the possibility of forward integration. Taking all these factors it shows that suppliers have little power the banking industry. Banks high capitalization gives them the ability or at least the possibility of control over its suppliers.Bargaining Power of ConsumersThe consumers bargaining power is a major force which affects the level of competition in the banking industry. However, their bargaining power is only medium. There may be stiff competition in banks, nonetheless, their services cannot be easily replaced or substituted. Consumers do not have much power in controlling banks and their services. Moreover, the governments regulation also hinders banking in constantly changing and updating their services without compliance with the requirements.COMPETITORS

BDOBPIMETROBANK

Critical Success FactorsWeightedRateWSRateWSRateWS

Financial Position.3041.2041.2041.20

Customer Loyalty.123.363.363.36

Customer Service.224.884.883.66

Market Share.164.643.484.64

Innovation.084.324.322.16

Management.124.484.484.48

TOTAL1.003.883.723.50

Ratings: 4 = Major strength, 3 = Minor strength, 2 = Minor weakness, 1 = Major weakness

4.2.2. Competitive Profile Matrix

Metropolitan Bank & Trust Co. was incorporated on September 5, 1962 by a group of Filipino businessmen principally to provide financial services to the Filipino-Chinese community. It is one of the largest banking and financial institutions in the Philippines. It is engaged in banking, financing, leasing, real estate and stock brokering services. It is a multi-awarded bank with a solid track record for over fifty years. The bank offers its full range of services to large local and multinational corporations, middle market, small market entrepreneurs, high net worth individuals and retailers.

Bank of the Philippine Islands, Inc. is a commercial banking institution in the Philippines. BPI offers a wide range of services such as corporate banking, insurance, securities distribution, consumer banking and lending and foreign exchange. The bank is also known as the oldest bank in Southeast Asia. BPI is also a high-rated and multi-awarded bank.

The Banking industry generally considers financial position, customer loyalty, customer service, market share, innovation and management. Financial position is given the heaviest weight seeing as that the banking industry is primarily in the business of circulating, saving, lending, investing money and securities. A stable financial position of a bank is a must.

Banks are regulated by the Government through the Bangko Sentral ng Pilipinas whose powers emanate from the General Banking Act of 2000. The Act mandates that establishing universal and commercial banks require high capitalization. With such capitalization, equates to profit. BDO, BPI and MTC are ranked equally based on their respective profits for the previous year which is roughly 18,000-22,000 (in Million PHP). Moreover, the financial position of a bank is what appeals to clients usually when choosing, because such financial position, will in turn, affect the banks capability to serve its clients.

Customer service received the second heaviest weight seeing as that the services provided by the bank attracts the clients. These banking and financial services are the lifeblood of the bank, without such services, there will be no business - no service to be acquired by the clients. A bank with a wide range of services is preferable for clients to so as to save the hassle of transacting with different banks to accommodate their needs. BDO and BPI, with such wide range of services and, further, the accessibility of such services play as a major strength against its competitors. Whereas, MTC has lesser services and lesser accessibility than both BDO and BPI.

Bank assets are also critical success factors. BDO and MTCs market share are relatively higher than that of BPIs thus receiving a higher rating. Such ranking contemplated the banks receivables and deposits.

COMPETITORS

BDOBPIMETROBANK

Market Share, 2013P4,919P3,404P3,466

In Billion PHP

Customer loyalty and management are given similar weight seeing that the way how the bank is being managed affects its clients. Client satisfaction with the banks services and its management contributes to the clients retention and loyalty with the bank. All three banks received equal ratings for both factors.

Lastly, innovation in the banking industry is a critical success factor due to the fact that technology has been integrated in banking and financing solutions such as mobile and online banking. Further innovations that suit and adapt to social trends and clients needs also contribute to client retention. BDO and BPI are rated higher than MTC considering their services such as e-Banking, mobile banking, online banking and phone banking; and remittance services.

4.3. Summary and Conclusion4.3.1. External Factor Evaluation MatrixKEY EXTERNAL FACTORSWEIGHTRATINGWEIGHTED SCORE

OPPORTUNITIES

Rise in demand for mobile banking applications.204.80

Increase in loyal Omnichannel customers .124.48

Harnessing mergers and acquisitions to access the talents needed.033.09

Boosts in automotive loans.054.02

Unification into a single market come 2015 ASEAN Economic Integration.203.60

Increase in strength and profits from remittances from OFWs.103.30

THREATS

Bank switching due to hidden defection.054.02

Decrease in online, ATM and branch usage due to rise in mobile applications..033.09

Possibility of crumbling reputation for security and relationships between managers and customers.073.21

Vulnerability to security breaches and attacks due to increase in digital assets in banking and financial institutions.154.60

TOTAL1.00-3.11

Ratings: 4=Superior, 3=Above average, 2=Average, 1=Below Average

4.3.2. External Factor Evaluation AnalysisThe unification and integration of markets in the Southeast Asian Region in the 2015 Economic Integration gives the banking industry a platform and motive for product and market development. Seeing as there will be new markets, a development of products is an opportunity for gaining potential foreign customers as well as to adapt to future trends and remain competitive with other banks come the integration. The change is necessary, thus, development is relatively possible. This is why Opportunity 5 has the greatest weight in the matrix.

Opportunity 1 has been given the same great weight in the matrix. Aside from the future integration, the adaptation of the people of mobile banking continues to rise. Banking customers now handle more of their banking interactions, on average, via smartphones and tablets than through any other channel and the mobile channel has become a key element in the bid to earn customer loyalty as Bain and Company, Inc. reports. In line with this, it gives BDO the opportunity to make most of the new mobile capabilities, especially when not all banks are not capable of such services yet.

Omnichannel means accessing with more than one banking channel. Despite mobile banking rising to mass appeal, clients still prefer combining digital and physical channels in banking. Bain and Company, Inc. sees that this is critical for effective service, marketing and selling, because customers expect to be able to switch from one channel to another. It gives BDO the chance to access more clients by focusing on Omnichannel customers, thus it is given the second heaviest weight in the matrix.The Philippine economic condition also had provided probable opportunities to the banking industry. As the service sector remains strong, banks and its services continue to remain strong. Moreover, the increase in demand for skilled Filipino workers abroad in turn give an increase in remittances.

This rise in mobile banking is also susceptible to threats. There is this hidden defection of customers who go to another provider for additional products. As well as dependence on mobile banking reduces customer and bank managers interaction and relationship. ATM usage will also be threatened to decrease, as increase in mobile banking continues. Most of these threats are interrelated that is why their weights are also in close ranking with the others. However, the greatest weight in threats is given to Threat 5, wherein the scope of mobile banking continuous widening, the susceptibility of the banks information and client database to security breaches also increased.

V. COMPANY ANALYSIS5.1. ManagementThere are twelve duly elected Board of Directors for BDO. Henry Sy, Sr., aged 90, is BDOs Chairman Emeritus. He is the Founder and Chairman of SM Group of Companies. His pioneering of the SM Malls, Shoemart Department Store and Supermarket, earned him the title of the Philippines Retail King. He also become known as the richest man in the Philippines.Teresita T. Sy-Coson, aged 60, is the current Chairperson of BDO. Ms. Sy-Coson is also the Vice-Chairperson of SM Investments Corporation. Likewise, she also holds other management positions in BDO affiliates and in the SM Group.Jesus A. Jacinto, Jr., aged 66, serves as the Vice Chairman of the Board of BDO and is concurrently the Chairman and President of BDO Insurance Brokers, Inc. He also holds several key positions is the Banking industry, such as CityTrust Banking and Citibank N.A.Christopher A. Bell-Knight, aged 69, is the Director of BDO. He previously served as BDOs Adviser for several years. He was the Vice President and Country Head of The Bank of Nova Scotia. Mr. Bell-Knight had over four decades of experience in the banking industry and a fourth of which was spent in credit and marketing.Atty. Jose F. Buenaventura, aged 79, is an independent director of BDO. He also has been a Senior Partner of the Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Firm. Likewise, he serves as Corporate Secretary of Country Club Development Corp., The Country Club, Inc. and Peter Paul Philippine Corp., and is the Assistant Corporate Secretary of Johnson & Johnson Philippines, Inc.Jones M. Castro, Jr., aged 65, serves as an independent director of BDO. He served as Area Head for South and Southeast Asia of the Wells Fargo Bank, San Francisco from 2009 to 2011. Mr. Castro likewise had over four decades of experience in the Banking industry.Chai Hong Cheo, aged 61, serves as one of BDOs directors. He also serves as Managing Director of Group Credit (Middle Market) & Corporate Planning & Strategy at United Overseas Bank Ltd. He also has over thirty years of experience in corporate banking and finance.Atty. Antonio C. Pacis, aged 73, is one of BDOs directors. He also serves as Managing Partner of Pacis & Reyes Attorneys. Mr. Pacis also serves as a Corporate Secretary of EBC Srategic holdings Inc., Armstrong securities Inc. and Paluwagan ng Bayan Savings Bank.Josefina N. Tan, aged 68, is one of BDOs directors. Ms. Tan serves as a Secretary and Treasurer of PP & P Insurance Underwriter and East Star Realty Corp. Ms. Tan serves as a Secretary of Precy Beauty Centre. She also serves as Vice Chairman of the Board of Trustees of Miriam College.Nestor V. Tan, aged 56, serves as a director of BDO and its President and Chief Executive Officer. He was associated with Bankers Trust Company in New York, as Vice President and the Barclays Group in New York and London, where he served as Planning Director and Head of Strategic Planning for Corporate and Institutional Services Group.Jimmy T. Tang, aged 78, is one of BDOs independent directors. Mr. Tang serves as the Chairman and President of the Avesco Group of Companies and as the President of the Federation of Filipino-Chinese Chamber of Commerce and Industry. He also serves as the President of Avesco Marketing Corporation.Gilberto C. Teodoro, Jr., aged 49, is also one of BDOs independent directors. He serves as a member of the Board of Directors of Philippine Geothermal Production Company, Incorporated, Canlubang Sugar Estate and member of the Board or Advisors of Seawood Resources, Incorporated. He serves as an Independent Director of BDO Unibank, Inc. Mr. Teodoro served as Secretary of National Defense from 2007 to 2009 and was a Member of the Philippine House of Representatives from 1998 to 2007.

5.2. MarketingBanco de Oros marketing division is headed by Mr. Rafael G. Besa, who is Senior Vice President and Group head of Marketing Communications for Banco De Oro. His division is made up of several marketing communicators and marketing communication managers who are practicing advertising, branding, direct marketing, marketing promotions and public relations for the BDO.

BDOs marketing unit is tasked with broadening its market through commercials, advertising and promotions by showing BDOs different services and products as well as its promotional offers. It also branches out its advertising by teaming up with other BDO affiliates like the SM Group.

5.3. Finance and AccountingFinancial Performance Indicators

201320122011

Return on Average Equity14.2%11.3%11.4%

Return on Average Common Equity14.5%11.5%11.7%

Return on Average Assets1.6%1.3%1.0%

Net Interest Margin3.2%3.4%3.5%

Capital Adequacy Ratio15.5%19.2%15.8%

Financial Highlights (in Billion PHP)

201320122011

Resources1,672.81,241.51,097.3

Net Profit22.614.510.5

Operating Expenses43.339.536.3

Equity164.4154.497.0

Based on the table above, it shows steady 56% growth for BDO since 2011 in terms of profit. The lending the business was one of its strongest points both in the large corporate, middle market and small and medium enterprise segments as well as in the personal loan sector, more particularly with automotive loans. It can also be noted that there was a decrease in operating expense for BDO since 2011.It was mentioned in one of BDOs reports that there was a seesaw ride in equities, nevertheless, there was a huge increase in equity from 2011 to 2012 and continues to increase in 2013.

5.4. Production and OperationsBDO is a full-service universal bank established and operating in the Philippines. It provides a wide range of industry-leading products and services including Lending, Deposit-taking, Foreign Exchange, Brokering, Trust and Investments, Credit Cards, Corporate Cash Management and Remittances in the Philippines. Dennis Velasquez is the Executive Vice President and Head of Central Operations. The bank through its operations satisfying customers remain at the front of establishing high standards as a sales and service-oriented, customer-focused force. BDOs banking services in the Philippines are either for Personal Banking and Business (Corporate) Banking.

PERSONALBUSINESS

eBanking Online, Mobile, ATM and Phone Banking Options Savings, Checking Accounts and Time Deposits Trusts and Investments Loans Personal, Home, Auto and Business Loans Credit Cards Remittances and Insurance Private Bank and Wealth Management Services Cash Management Services Project Finance, Working Capital and Small Business Loans Foreign Exchange and Trade Facilities Trade Settlement, Letters of Credit, Trust Receipts and Export Bill Purchases Investment Banking Business Insurance Trusts and Investments Leasing and Financing Corporate Credit Cards and Merchant Accreditation

Aside from conducting operations in the Philippines, BDO also established itself in Hong Kong and keeps offices in other countries such as United States of America, England, Germany, New Zealand and Japan. Anthony Chua serves as BDOs Executive Vice President and Head for Global Operations. While Lorna Tan serves as one of BDOs Senior Vice Presidents and as Chief Executive of BDO Hong Kong branch. The BDO branch in Hong Kong offers Deposits for Savings and Checking Accounts in US Dollars and HK Dollars, Deposit Related Services, Commercial and Industrial Loans, Trade Services, Debit Cards and Remittance Services.

5.5. Research and DevelopmentResearch and Development is essential in every company despites its high rankings. It shows that such companies still strives for improvement. The banking industrys trends and development is not so much as fast-paced seeing as it is a strict industry regulated by the State. Nonetheless, the banking industry still develops over time. For BDO to cope up with trends in the industry and as well as to better serve its clients it has different subsectors and group leaders for development. Enrico Hernandez is a Senior Vice President and Head of Information Technology Development. Belinda Fernandez is another Senior Vice President and Head of the Treasury Group for Product Development. Maria Lourdes de Vera, another Senior Vice President and Head of Trusts and Investments Group for Product and Market Development. Lastly, Noel Andrada is another Senior Vice President and Head of Trusts and Investments Group for Business Development.

5.6. Information Technology (MIS)Technology is at the core almost all developments in industries across the globe, the banking industry is no exception. A well-maintained Management Information System and IT Department is needed. Ricardo Martin is the Head of the Information Technology Group. The department is tasked in controlling information online, especially confidential client information and database. It also goes in hand with the Marketing Group so as to establish its presence on the Web and for disseminating information across BDO groups.In its IT operations, BDO has implemented systems that make branch-based and electronic services available to clients for a reasonable cost and for longer periods of time. BDO puts itself if not ahead or at least at par with the local banking industry.

5.7. Human ResourceAt the helm of every company is its employees and personnel. The Human Resource group is tasked the hiring and firing of employees, as well as compensation, performance evaluation, settlement of employee related conflicts and other matters related to the banks employees. Evelyn Salagubang is a Senior Vice President and Head of Human Resources Group.

5.8. Internal Factor Evaluation MatrixKEY INTERNAL FACTORSWEIGHTRATINGWEIGHTED SCORE

STRENGHTS

Experienced management.153.45

International presence.063.18

Up-to-date electronic banking services.083.24

Strong support units in I.T. and R&D.124.48

High capitalization.2541.00

Skilled workforce.084.32

WEAKNESS

Security in data assets.101.10

Less branches in Rural Areas.082.16

Decrease in Capital Adequacy Ratio in 2013.041.04

Slow Customer Service.042.08

TOTAL1.00-3.05

Ratings: 4=Major Strength, 3=Minor Strength, 2=Minor Weakness, 1=Major Weakness

5.9. Internal Factor Evaluation AnalysisThe Internal Factor Evaluation Matrix (IFE) provides BDOs strengths and weakness which are rated whether such factors are major or minor strengths and weaknesses. The rate of four suggests a major strength while three a minor strength. As for weaknesses, a rate of one suggests a major weakness while the rate of two implies a minor weakness. According to the IFE Matrix, BDO has three major strengths, which are its strong support units, high capitalization and experienced management. Based on BDOs annual reports and financial statements, the firms financial performance continues to improve over the years such as the 8.1% increase in Net Profits from 2012 to 2013 as well as its increased resources from P1,097.3 Billion in 2011 to P1,672.8 Billion in 2013.BDO boasts its IT Department as one of its support units in providing for better service for longer periods of time to consumers. While Security, being a major weakness, BDO compensates through its Risk Management Group to address situations on managing operational, credit and reputational risks. It also addressed the security concern through investing in backup systems that will allow operations to continue with limited disruption to customer services.Aside from its major strengths, BDOs experienced management, upgraded electronic banking services and its international presence are also considered as its minor strengths. Given the fact the BDO is managed by one of the most successful business owners and as well as experienced international bankers makes BDO a well-supervised and managed banking and financial institution. Moreover, its upgraded electronic banking services puts BDO at least a notch higher over its competitors who offer no such service or an underdeveloped electronic banking service. It puts BDO in a competitive stand over other banks. BDOs presence in Hong Kong and in other international offices makes its banking services available to a wider scope of clients, thus providing more service which may equal to more profit. As well as its ties with international companies makes BDO open to more opportunities.Having mentioned security as one of BDOs weaknesses, there is also BDOs weak presence in rural areas, slow customer service and a decrease in capital adequacy ratio. A weak presence in rural areas may show that its marketing strategy is either ineffective or unfocused. BDO has less branches in rural areas which make its services unavailable in these places. Capital adequacy ratio is that which determines the banks capacity to meet the time liabilities and other risks. A decreased capital adequacy ratio may show a diminishing ability of BDO to meets its liabilities and risks. However, it is not at an alarming rate of decrease, nevertheless, such decrease must be noted.VI. STRATEGY FORMULATION6.1. Strengths, Weaknesses, Opportunities and Threats (SWOT) MatrixSWOT MATRIXSTRENGTHSWEAKNESSES

(S1) Experienced management(S2) International presence(S3) Up-to-date electronic banking services(S4) Strong support units in I.T. and R&D(S5) High capitalization(S6) Skilled workforce(W1) Security in data assets(W2) Less branches in rural areas(W3) Decrease in capital adequacy ratio(W4) Slow customer service

OPPORTUNITIESSO STRATEGIES1. Improvement of both mobile applications and branch banking system to increase number of omnichannel customers. (S3, S4, S5, O2)2. Improvement of mobile banking applications. (S5, O1, O6)3. Reach more markets with new and improved services (S2, S4, S5, O4, O5, O6)4. Provide better remittance service by innovating transfer system (S2, S4, S5, O6)

WO STRATEGIES1. Acquire employees who will help improve security measures (W1, O3)2. Acquire competitor banks or smaller banks to increase equity (W3, O3, O5)3. Use of improved mobile banking applications and amplified marketing strategies (W2, W4, O1)

(O1) Rise in demand for mobile banking applications(O2) Increase in loyal omnichannel customers(O3) Harnessing mergers and acquisition to access the talents needed(O4) Boosts in automotive loans(O5) Unification into a single market come 2015 ASEAN Economic Integration(O6) Increase in strength and profits from remittances from OFWS

THREATSST STRATEGIES1. Improve security measures and data protection (S3, S4, S5, T1, T3, T4)2. Amplify marketing strategies for other banking channels (S4, S5, T2)

WT STRATEGIES1. Improve mobile banking and its security (W1, T1, T3, T4)2. Acquaint employees with better and more efficient systems of service (W4, T3)3. Amplify advertising for clients and investors to increase (W2, W3, T2)

(T1) Bank switching due to hidden defection(T2) Decrease in online, ATM and branch usage due to rise in mobile applications(T3) Possibility of crumbling reputation for security and relationship between managers and customers(T4) Vulnerability to security breaches and attacks due to increase in digital assets in banking and financial institutions

Based on the matrix above, the following strategies were generated; a) product development through improvement of mobile banking applications, branch banking systems for security, better customer service and increase customer loyalty and increase profit; b) market development to take advantage of the upcoming ASEAN Economic Integration; c) market penetration through amplified marketing strategies to increase rural area presence; and d) horizontal integration to increase equity and assets which will in turn increase capital adequacy

6.2. Strategic Position and Action Plan Evaluation (SPACE) MatrixINTERNAL STRATEGIC POSITION

FINANCIAL STRENGTH (FS)RATINGS

Return on investment6

Liquidity5

Responsible Risk Management5

Average:5.33

COMPETITIVE ADVANTAGE (CA)RATINGS

Market share-1

Customer Loyalty-2

Technological know-how-2

Vertical integration-1

Average:-1.5

EXTERNAL STRATEGIC POSITION

ENVIRONMENTAL STABILITY (ES)RATINGS

Barriers of entry into market-1

Competitive pressure-4

Price range of competing products-2

Technological changes-2

Average:-2.25

INDUSTRY STRENGTH (IS)RATINGS

Financial stability5

Resource utilization5

Potential for growth6

Capital intensity6

Average:5.5

Directional Vector Coordinates: X Axis: -1.5 + (5.5) = 4 Y Axis: -2.25 + (5.33) = 3.08

(4, 3.08)Competitive

Defensive

ConservativeAggressive

The graph above shows that BDOs directional vector point to the upper right quadrant, the Aggressive quadrant. This shows that BDO is in a prime condition to use its strengths and take advantage of opportunities. It is also in such condition to overcome weakness and mitigate threats. Intensive and diversification strategies are more aligned to address this situation.

6.3. Boston Consulting Group (BCG) MatrixThis Matrix allows an organization to manage its portfolio to businesses by assessing its relative market share position and the industry growth rate. Having the largest market share in the Banking industry based on, assets, deposits, loan receivables, branches in operation, ATMs and assets under management, ahead of Metrobank Co. by at least 48% in market share and with a high market growth rate, BDO can be considered in the Stars position in the Boston Consultancy Group (BCG) Matrix. Having considered BDOs large market share and its industry growth rate, the strategies appropriate may either be market penetration, market development and product development as intensive strategies, or related diversification.Stars

6.4. The Internal External (IE) MatrixIn the Internal Factor Evaluation (IFE) Matrix, BDO received a total weighted score of 3.05 which suggests that BDOs strengths are capable of mitigating its weaknesses, thus making it one of the strongest and most stable banks in the Philippines. While in its External Factor Evaluation (EFE) Matrix, BDO received a total weighted score of 3.11 which suggests that the external environment of the industry and BDOs response to opportunities and threats.

Plotting these scores in the Internal-External (IE) Matrix, it appeared that such is plotted in Cell I, the Grow and Build region. In such region, it suggests that the firm should pursue intensive and vertical integration strategies such as market development, product development, market penetration, horizontal integration, backward integration and forward integration strategies.

6.5. The Grand Strategy Matrix (GSM)

Rapid Market Growth

Q4Q3Q21. Market Development2. Market Penetration3. Product Development4. Forward Integration5. Backward Integration6. Horizontal Integration7. Related Diversification

Slow Market GrowthWeak Competitive PositionStrong Competitive Position

In the above illustration, BDO is located in Quadrant I. This entails that BDO has a very strong strategic position. This means the BDO has an established competitive advantage and makes use of it as long as possible. Strategies such as market penetration, market development, product development and the vertical integration strategies are relevant for such firms positioned in Quadrant I. With such position, it means that firms can afford to take advantage of external opportunities and handle risks aggressively if necessary.

6.6. Summary of Strategic Formulation Tools

STRATEGIC FORMULATION TOOLS

STRATEGIESTOWSSPACEBCGIEGSMTOTAL

Market Development 5

Market Penetration 5

Product Development 5

Horizontal Integration 3

Forward Integration 2

Backward Integration 2

Related Diversification 3

Unrelated Diversification 1

In sum, the most prevalent strategies that came up in the previous matrices presented, market development, market penetration, product development garnered the highest total. Related diversification closely followed. While vertical integration strategies and unrelated diversification trained in the end.

6.7. The Quantitative Strategy Planning Matrix (QSPM)

From the above matrices presented, such had revealed several strategies that are compatible with BDOs position in the industry. The QSPM indicates which of these strategies are the best. It is to evaluate alternative strategies based on the previously present internal factors of BDO and the external factors of the banking and financial industry.

STRATEGIC ALTERNATIVES

Market DevelopmentMarket PenetrationProduct DevelopmentHorizontal Integration

Internal StrengthWASTASASTASASTASASTAS

Experienced management.15--------

International presence.064.241.062.123.18

Up-to-date online banking services.08--------

Strong support units in I.T. and R&D.123.363.364.483.36

High capitalization.2541.003.753.7541.00

Skilled workforce.08--------

Internal WeaknessWASTASASTASASTASASTAS

Security in data assets.10--------

Less branches in rural areas.082.164.321.083.24

Decrease in capital adequacy ratio.043.121.042.084.16

Slow customer service.041.041.044.161.04

Total1.00

OpportunitiesWASTASASTASASTASASTAS

Rise in demand for mobile banking applications.202.403.604.801.20

Increase in loyal omnichannel customers.121.124.482.243.36

Harnessing mergers and acquisition to access the talents needed.03--------

Boosts in auto-loans.052.104.203.051.05

Unification into a single market come 2015 ASEAN Economic Integration.204.802.401.203.60

Increase in strength and profits from remittances from OFWS.10--------

OpportunitiesWASTASASTASASTASASTAS

Bank switching due to hidden defection.051.053.154.201.05

Decrease in online, ATM and branch usage due to rise in mobile applications.031.032.064.163.12

Possibility of crumbling reputation for security and relationship between managers and customers.07--------

Vulnerability to security breaches and attacks due to increase in digital assets in banking and financial institutions.151.151.154.604.60

Total1.00

Total of Sum of Attractiveness Score3.573.694.023.96

VII. OBJECTIVES, STRATEGY RECOMMENDATIONS AND ACTION PLANS7.1. Strategic and Financial ObjectivesBy relating BDOs Mission-Vision statement, External Factor Evaluation (EFE) Matrix and Internal Factor Evaluation Matrix (EFE), there are issues with which the following objectives are formed to address as such:

1. To increase market share in the industryDespite BDO being in the primal position in the market, it is going to be too costly to be complacent especially when the banking industrys players are very competitive as they may overtake BDO in the market share. It is also to address BDOs mission in becoming the preferred bank in the markets it serves. The increase in market share also contributes to the increase in BDOs capitalization to further finance improvement which addresses its mission to consistently provide innovation products and proactive reinvention to meet market demands.

2. To invest more in technology to improve mobile banking applications and other bank transactionsThis is BDOs answer to the opportunity in the banking industry which is the rise in the demand of mobile banking applications. In investing more in technology, BDO capitalizes its strengths which are its strong support units in R&D and I.T. as well as its high capitalization. Integrating better technology in BDOs products and services will also translate to a more flawless delivery of services as well innovated products, both of which are in BDOs Mission-Vision statements. Better technology also means safer transactions which answer the issues on vulnerability of digital assets to breaches and attacks as well as BDOs security. This objective answers BDOs goals in ten folds.

3. To have a continuously increasing net income while maintain expensesIn every business, profit is one of the indicators that such is doing well. As for BDO, to see whether such objectives are attained, strategies are implemented, it will translate to profits. The development in technology for BDO will translate to new and better products and services which will likely increase profit, which will in turn be an increase in interest income, loan applications, investment and receivables. BDO should start with a 10% increase then gradually adding 5% each year in growth. Moreover, BDO has a mission to create shareholder value through superior returns. Aside from such, this will address the decrease of BDOs capital adequacy ratio which is to either increase in equity or increase in profit. BDO should start with a 10% increase then gradually adding 10% each year in growth. To further take advantage of growth, instead of cutting or lessening expenses, BDO should maintain expenses, except when extremely necessary, especially for operating expenses, but nonetheless, other expenses should be maintained.

4. To increase BDOs presence in the rural areas One of BDOs weaknesses is its lesser branches and ATM in the rural areas all over the Philippines. Bank accessibility becomes it weakness. In order to address this, BDO should establish more bank branches or ATMs in rural areas to serve more clients. This will also answer BDOs mission for flawless delivery of services. An increase in profits and market share will also likely to result.7.2. Recommendations7.2.1. Restated Mission-Vision StatementTo be the preferred bank in every market we serve by consistently providing innovative products and flawless delivery of services, proactively reinventing ourselves to meet market demands by keeping up and making use of the latest technological breakthroughs, creating shareholders value through superior returns, cultivating in our people a sense of pride and ownership, and striving to be always better than what we are today tomorrow.

7.2.2. Business Strategies1. Product DevelopmentOne of BDOs objectives is to invest more in technology to improve mobile banking applications and other bank transactions. BDOs mobile banking application should be developed. Such application should have the basic transactions ready and available with a tap. Security should also be tightened, like having better password and coding systems as well as back up systems.Aside from online services, BDO must use technology to develop its services in bank branches. This is to address its mission on the flawless delivery of services. Using machines to make transactions faster or to make queues more organized. BDO has to keep in mind that quality service should be its priority so as to meet its objectives. To facilitate this product development, BDO must capitalize on its strong support units in R&D and I.T. Departments. BDOs high capitalization is also an indication that the company can afford such development.

2. Market PenetrationBeing one of the top players in the banking industry and having the largest market share in the industry, BDO should still exert efforts in market penetration. One of its missions is to be the preferred banking institution in the markets it serves. BDO cannot be complacent with its current position. Amplification of its marketing strategies using its new products will help dig a deeper niche for BDO in its current markets. BDO has to develop its market, but nonetheless it should not lose sight of its current market where foundation is deeper. This also to address its issue in rural areas which is already a penetrated market, but it has to amplify marketing strategies along with other strategies to capture this market. Establishing more branches or ATMs in rural areas should also increase its presence in the rural areas.

3. Horizontal IntegrationAside from establishing more branches or ATMs to increase presence, BDO can acquire rural banks in the areas it needs to penetrate so as to lessen competition and increase more presence in the area. This will in turn translate to an increase in its relative market share which is another objective of BDO. Considering BDOs high capitalization, it would be able to buy out a rural bank. Moreover, BDO has experienced management as one of its strengths who may be capable of negotiating to acquire other banks at better prices.

7.2.3. Organizational StrategiesThe strategies would head no change in the organizational structure of BDO as to the top management. However, with the establishment of new branches in rural areas, it is recommended that there should be a new position in the Branch Banking Group of BDO, that instead of per area, it should be per region instead. More so, there should be another manager to oversee all bank branches in a province. With the acquisition of a rural bank through horizontal integration, more employees and executives should be hire so as to manage the newly acquired bank. BDO may also choose to retain the existing employees of the newly acquired bank.

7.3. Strategy Map7.3.1 Below is a strategy map for product development wherein it is recommended that BDO should invest more in technology to improve its mobile banking application. Such step is to fulfill the strategy for product development.Increase in capital adequacy

Increase in equity

Financial

Increase in net income

Increase customer satisfaction

Growth in number of clients

Feedback

Decrease load time for mobile bank application

Internal Process

Innovate products using latest technology

Learning & Growth

7.3.2. Below is a strategy map for market penetration wherein it is recommended that BDO should establish a rural bank to gain more presence in an already penetrated or serviced geographical area, which are rural areas.Increase in capital adequacy

Increase in equity

Financial

Increase in net income

Increase customer satisfaction

Growth in number of clients

Feedback

Improved accessibility of services

Internal Process

Conduct studies and researches for the establishment of a new bank branch

Learning & Growth

7.3.3. Below is a strategy map for horizontal integration wherein it is recommended that BDO should acquire a rural bank to gain more presence in an already penetrated or serviced geographical area, which are rural areas and to increase in market share through buying out or acquiring the competition.

Increase in market share

Increase in equity

Financial

Increase in net income

Increase customer satisfaction

Growth in number of clients

Feedback

Decrease in time to acquire another bank or business

Internal Process

Conduct studies and researches for the acquisition of a rural bank

Learning & Growth

7.4. Financial ProjectionsWith the recommended strategies being mentioned, such will aid in the achievement of the stated strategic and financial strategies. The implementation of the strategies will translate to a change in the finances of BDO. The following are the financial projections for BDO following the strategies and fulfillment of the stated objectives:

7.4.1. Statement of IncomeSTATEMENT OF INCOMEFOR THE YEAR ENDED DECEMBER 2013AND PROJECTED FOR DECEMBER 2014, 2015, 2016(amounts in Million of Philippine Pesos)

ActualProjected

2013201420152016

Interest IncomeP54,104P59,514.4P71,417.28P92,842.46

Interest Expense(P13,440)(P13,440)(P13,440)(P13,440)

Net Interest IncomeP43,166P46,074.4P57,977.28P79,402.46

Impairment Losses(P7,001)(P7,001)(P7,001)(P7,001)

Net Interest Income after Impairment LossesP36,165P39,073.4P50,996.28P72,401.46

Other Operating IncomeP31,844P35,072.4P42,086.88P54,712.94

Other Operating Expenses(P43,259)(P43,259)(P47,584.9)(P57,101.88)

Profit before TaxP24,750P30,886.8P45,498.26P70,012.52

Tax Expense(P2,104)(P2,625.38)(P3,867.35)(P5,951.06)

Net ProfitP22,646P28,261.42P41,630.91P64,061.46

One of BDOs financial objectives is to have a continuously increasing income while maintaining expenses except when necessary. The projected income statement reflects its compliance with the objectives formulated. Moreover, the statement above reflects the result or income from the implementation of the recommended business strategies. The interest income and other operating income were computed at increasing rates of 10% whose increase is justified by the implemented strategies, while expenses for interest and impairment losses were maintained and the tax expense rate was also remained at 8.50%. Meanwhile, operating expenses remained the same only until 2014 and increase by 10% in 2015 and 20% in 2016. It is so because it is in 2015 when the upgraded and improved mobile banking application will be launched. Such justified the 47.31% change in net profits from 2014. While in 2016, there will be establishment of the new bank branch and the acquisition of a new rural bank. This supported the 53.88% change in net profits from 2015 to 2016. The changes in the amounts are justified using the strategies implemented as well as compliance of the financial objectives.

7.4.2. Statement of Financial PositionSTATEMENT OF FINANCIAL POSITIONFOR THE YEAR ENDED DECEMBER 2013 AND PROJECTED FOR DECEMBER 2014, 2015, 2016(amounts in Million of Philippine Pesos)

ActualProjected

20132014(Increase by 10%)2015(Increase by 20%)2016(Increase by 30%)*

Total AssetsP1,672,778P1,840,055.8P2,208,066.96P2,870,487.05

Total LiabilitiesP1,508,424P1,659,266.9P1,991,120.28P2,558,456.36

Total Stockholders EquityP164,534P180,788.9P216,946.68P312,030.69

Total Liabilities and EquityP1,672,778P1,840,055.8P2,208,066.96P2,870,487.05

One of the financial objectives of BDO is to have a continuously increase in net income (7.3.1.). The increase in income translates to an increase in assets because an increase income may be due to increase in loan receivables, deposits, investments, cash and net property plant and equipment. The 10% increase in each year is justified by the implementation of the recommended strategies. In 2015, the increase was justified by the launch of the updated and improved mobile banking application of BDO. This means more clients can access BDOs services and it also translates to a flawless delivery of services. It satisfies further, one of the formulated objectives which is to invest more in technology to improve its mobile banking application. While in 2016, the increase is justified by the establishment of a new bank branch and the acquisition of a rural bank. This also satisfies BDOs objective which is to increase presence in rural areas. An increase in market share is to be expected as well, being that the assets of BDO are also increasing. Liabilities also increased as the assets increase. This reflects that while there was an increase in assets during acquisition the implementation of the strategies, there is also a relative increase in liabilities.

7.4.3. Financial HighlightsFinancial Highlights (in Billion PHP)

*2016*2015*2014201320122011

Resources2,870.42,208.01,840.11,672.81,241.51,097.3

Net Profit64.141.628.322.614.510.5

Operating Expenses57.147.643.343.339.536.3

Equity312.0216.9180.7164.4154.497.0

*Projected amounts based on 7.4.1 and 7.4.2 respectively.

The above table shows the financial highlights of BDO from 2011 to 2013 which are based on its Annual Reports. While the amounts from 2014 to 2016 are gathered fro the above statements which are projections supported by the strategies and objectives formulated. It can be seen that there is a continuous increase in all aspects.

7.5. Departmental Action Programs7.5.1. Product DevelopmentThis is to take advantage of BDOs high capitalization and strong support units in R&D and I.T. Departments. Such is also to address BDOs mission to consistently provide innovative products and flawlessly deliver services. Lastly, this is to take the opportunity of the rising demand for mobile banking applications.

PRODUCT DEVELOPMENT

ACTIVITIESEXPECTED OUTPUT(S)TIMETABLEDEPARTMENT(S) RESPONSIBLE

Improving BDOs mobile banking application

Research on latest technology relevant to banking and security.Canvass for software and systems that are relevant to bank applications and security systems3 months(January 2014 to March 2014)- Research and Development (R&D) Department- Information Technology (I.T) Department

Convene regarding research results and developmentsArrive at a decision on which systems and software to purchase1 2 weeks(April 2014)- Executive Department- R&D Department- I.T. Department

Purchase software and systems agreed uponAcquire the software and systems agreed upon by management1 week(April 2014)- I.T. Department- Accounting, Finance, Treasury Department

Integrate software purchase to existing mobile banking applicationArrive at an improved mobile banking application that will meet market demands and if possible, exceed.3 months(April 2014 to middle of June 2014)Information Technology Department

Brief employees regarding the features, uses and possible issues and its remediesGive the all employees knowledge regarding the application as well as possible issues that may arise and how to address them1 week(June 2014)All Departments

Testing of mobile application for employees and select clientsTest the application and acquire reviews from users1 month(July 2014)- Marketing Department- Operations Department- I.T. Department- R&D Department

Convene regarding testing results and possible developments and adjustments to be madeDiscuss the results of the application, adjustments to be made and other possible issues that may arise1 month(August 2014)- Executive Department- R&D Department- I.T. Department

Adjustments and final touches to the application and testingFinalize the application and test the application and acquire reviews from users1 month(September 2014)- Marketing Department- Operations Department- I.T. Department- R&D Department

Soft Launch of the application to all clientsThe final testing of the application to all clients and acquire reviews for final touches1 month(October 2014)- Marketing Department - Operations Department- I.T. DepartmentR&D Department

Convene regarding soft launch results and discuss adjustments needFinalize application that is going to be ready for official launch and address all issues for flawless release

2 months(November to December 2014)- Executive Department- R&D Department- I.T. Department- Marketing Department

Official Release of the applicationRelease of the mobile banking application available for all clientsJanuary 2015All Departments

7.5.2. Market PenetrationA better and more flawless delivery of services is to be expected when the bank in accessible. Aside from addressing the objective to increase market share. The establishment of new branches in rural areas solves BDOs minimal presence in rural areas. Such strategy also utilizes BDOs high capitalization. This also means a larger network of clients which may translate to more profits that is an answer to BDOs mission to create shareholder value through superior returns.

MARKET PENETRATION

ACTIVITIESEXPECTED OUTPUT(S)TIMETABLEDEPARTMENT(S) RESPONSIBLE

Establishing new branches in rural areas

Research regarding areas for possible establishment of new branch, opportunity analysis and market researchGather data and research that will aid in reaching a decision on whether to establish a new branch3 months(January to March 2015)- R&D Department- Marketing Department

Convene with management to discuss data gatheredReach a decision on whether to establish a new branch and other details regarding such1 month(April 2015)- R&D Department- Marketing Department- Executive Department- Accounting & Finance Department

Advertise for bidding for contractors on the design and construction of the new branchHire a contractor for the design and construction of the new branch from the bidding1 week(June 2015)- R&D Department- Marketing Department- Operations Department

Convene and negotiate with contractorsFinalize a plan for the new branch ready for execution3 weeks(June 2015)Executive Department

Settle all necessary requirements (Purchasing, Legal and Financial) Settle all necessary requirements to be ready for execution2 weeks(July 2015)- Executive Department- Legal Department- Accounting & Finance Department

Construction of the new branchExecution of plans for the establishment of the new branch5 months(July to November 2015)(Contractors)- Executive Department- Accounting & Finance Department

Hiring of new employees and managers for new branchAcquire talents to be as employees for the new branch1 month(September 2015)Human Resource Department

Training of new employeesIntegrate and acquaint new employees to BDO1 month(October 2015)Human Resource Department

Convene with management regarding plans for new branch and strategizeCome up with strategies and management plans for running the new branch1 month(November 2015)R&D Department- Marketing Department- Executive Department- Operations Department

Finalize all necessary requirements for conducting operations in new branchSettlement of all necessary items and finalization of contract between contractors1 month(December 2015)- Executive Department- Accounting & Finance Department

Formally open new branchStart of operations in the new branch(January 2016)- Marketing Department- Executive Department- I.T. Department- Operations Department

Amplify marketing strategies in area of new branchPromote and advertise new branch in the area(January 2016)- Marketing Department- I.T. Department

Convene with management regarding the progress and operations of new branchAssess the performance of the new branch and look for areas for improvement(July 2016)- R&D Department- Executive Department- Operations Department- Accounting & Finance Department

7.5.3. Horizontal IntegrationSuch integration is a response to BDOs weakness which is lesser presence in rural areas. The acquisition of a rural bank entails a greater relative market share for BDO which is one of its objectives. This will also utilize BDOs high capitalization, experienced management and strong support units in the R&D and I.T. Departments. The acquisition will generate more profits seeing as the BDOs network and operations will be expanding. This in turn will address one of BDOs mission that is to create shareholder value through superior returns.

HORIZONTAL INTEGRATION

ACTIVITIESEXPECTED OUTPUT(S)TIMETABLEDEPARTMENT(S) RESPONSIBLE

Acquiring/buying out a rural bank

Convene and consult with management regarding integrationReach a decision on whether to conduct research and analysis regarding integration4 months(January to April 2015)- R&D Department- Marketing Department- Executive Department

Conduct research, analyze opportunities and assess current conditionAchieve a study that will be useful in reaching a decision to support the acquiring of a new bank2 months(April to May 2015)- R&D Department- Marketing Department- Executive Department

Look for banks that are for possible acquisitionCome up with a short list of banks for possible acquisition 1 month(June 2015)- R&D Department- Executive Department

Convene and discuss banks on short list Come up with pros and cons in banks in the short list for further analysis1 week(July 2015)- R&D Department- Executive Department

Further research on banks in the short listMore in-depth study on the banks in the short list1 month(July 2015)- R&D Department

Convene and discuss the results of the concluded research study on the banks in the short listCome up to a decision on which bank to purchase based on the research conducted2 weeks(August 2015)- R&D Department- Executive Department- Accounting & Finance Department

Negotiations with the management of the bank to be acquiredSettle all legal responsibilities, finances and other necessary steps so as to acquire the bank3 months(August to October 2015)All Departments

Finalize acquisition and convene with employees regarding suchAccomplish final steps in acquisition and to acquaint employees with the change1 month (November 2015)All Departments

Arrange management at newly acquired bankFire or hire employees and to arrange management at the newly acquired bank1 month(December 2015)- Executive Department- Human Resource Department- Operations Department

Convene with new management regarding business and steps to take in furtherance ofDiscuss with new management about the business1 month(January 2016)Executive Departments

Formally announce to the public the acquisition of the new bankAnnounce to clients, shareholders and the general public of the acquisition(February 2016)All Departments

7.5.4. ManagementIt is not necessary that BDO should change it Board of Trustees. BDO has a good pool of talented managers. BDOs management needs to be more involved and hands-on in the banking operations to get to a deeper level of what the bank needs and in which direction should the bank go. The managers should convene more often to discuss the steps BDO should take.7.5.5. MarketingWith a growing market share due to the increase in presence in rural areas through the establishment of a new bank branch and the acquisition of a rural bank, it means that the number of clients served increase. With this said, there can be an increase in the for more prospective clients. BDO then should amplify its marketing strategies through a more dynamic, flexible and productive Marketing Department. Such should be able to compete with the aggressiveness of the competitors. More training for marketing managers are advised.

7.5.6. Accounting and FinanceThe Finance Department should align itself with all the transactions and movements BDO is undertaking. It must be in support with BDO strategies. Being in the business of banking which is imbedded with public interest and with its fiduciary nature, it is required that its employees act with utmost diligence in the performance of their duties, especially in the Finance Department. There is no drastic change to be done by this department.

7.5.7. OperationsWith many changes in the operations come 2015 and 2016 due to the implementation of the strategies. It is required that the Operations Department polish itself and align itself with the other departments to ensure successful implementation. The Operations Department may need more employees seeing as that a larger market has to be served by BDO due to the establishment of a new bank branch and the acquisition of a rural bank.

7.5.5. Information TechnologyInvesting in technology is one of the non-financial objectives formulated. Thus, it should be that BDOs I.T. Department is developed. It may be fitting for BDO to hire more I.T. Experts or to open a new segment in the department. More funding is also probable to support the upgrade of the department and its systems. A better security for digital assets and data is also needed to support BDOs operation.

7.4.6. Human ResourceWith the establishment of a new bank branch and the acquisition of a rural bank, it is implied that BDO needs to hire more employees. In lieu with this, the Human Resource (HR) Department must increase in competency and be able to hire more talented employees for BDOs growing business. The HR Department should strengthen its ties with head hunting companies. The department should be more efficient and effective also in the training of employees.

7.4.7. Research and DevelopmentThe R&D Department is the in-demand department during the commencement of the implementation of the recommended strategies. This means that to achieve better results and to aid in better research in the market, operations, etc.; the R&D should be developed. More researchers should be hired. There must also be better tools and equipment for efficient gathering of data and better study. This department should not be overlooked. A huge part of the data that BDO managers are collected by the R&D department.

VIII. STRATEGY EVALUATION, MONITORING AND CONTROL

BALANCED SCORECARD FOR BDO

ObjectivesScorecard (KRA)Performance Indicator

FINANCIALIncrease in Net IncomeIncome StatementIncrease by 10, 20 and 30%

Increase in Average EquityReturn on Average Equity; Market ShareIncrease by 20%

Increase in Capital Adequacy RatioLiquidity RatioIncrease by 20%

Increase in Market ShareMarket ShareIncrease by 20%

LEARNING & DEVELOPMENTLessen time to innovate services Time to develop servicesDecrease by 6 months

Increase accessibility of servicesNumber of clients served, market shareIncrease by 10%

INTERNAL PROCESSLessen time in loading for mobile banking applicationsTime to respond of the mobile banking applicationDecrease by 30 seconds to 1 minute

Lessen time to convene, negotiate and acquire a bankTime to reach a decision on the acquisition of a bankDecrease by 3 months

Lessen time to establish a new bank branchTime to establish a new branchDecrease by 3 months

FEEDBACKIncrease customer satisfaction in rural areasCustomer FeedbackIncrease by 30%

Growth of clients (as to number of)Number of clientsIncrease by 20%

The above matrix shows objectives of BDO to monitor performance by using scorecards measured using performance indicators. Financially, BDO plans to increase by 20% in its income, capital adequacy ration and equity. While as for Learning & Development, performance in such is measured using Employee Turnover statistics, Employee Turnover statistics and time to attend to clients. In internal processes, BDOs objective is to lessen time for queuing in bank branches to ensure flawless and efficient delivery of services. Lastly, as to feedback, such is measured using customer feedback surveys and a data on the number of clients of BDO.

VIII. BIBLIOGRAPHY

1. http://investing.businessweek.com/research/stocks/people/person.asp?personId=10198974&ticker=BDO:PM2. https://www.bdo.com.ph/corporate-governance/board-and-shareholder-matters3. https://www.bdo.com.ph/corporate-governance/board-committees-and-memberships4. http://www.reuters.com/finance/stocks/companyOfficers?symbol=BDO.PS5. https://www.bdo.com.ph/hong-kong-home6. https://www.bdo.com.ph/about-bdo/domestic-international-network7. http://www.eiu.com/industry/Financial-services8. http://www.bsp.gov.ph/downloads/Publications/2014/LTP_1qtr2014.pdf9. http://www.bain.com/publications/articles/european-banking-bain-report.aspx10. http://www.bain.com/publications/articles/rebooting-it-why-financial-institutions-need-a-new-technology-model.aspx11. http://www.bain.com/Images/BAIN_BRIEF_Building_the_retail_bank_of_the_future.pdf12. https://www.equitymaster.com/research-it/sector-info/bank/Banking-Sector-Analysis-Report.asp13. http://www.bain.com/publications/articles/customer-loyalty-and-the-digical-transformation-in-p-and-c-and-life-insurance.aspx14. http://www.wavespartnership.org/sites/waves/files/documents/WAVES%20Policy%20Note%20Philippines.pdf15. http://www.worldometers.info/world-population/philippines-population/16. http://data.worldbank.org/indicator/SP.DYN.CBRT.IN17. http://web0.psa.gov.ph/sites/default/files/2014%20PIF.pdf18. http://www.nscb.gov.ph/poverty/default.asp19. https://www2.fdic.gov/SDI/SOB/20. http://www.philstar.com/business/2014/01/30/1284723/philippine-economy-expands-7.2-201321. http://www.bain.com/Images/BAIN_BRIEF_Why_cybersecurity_is_a_strategic_issue.pdf22. http://www.bsp.gov.ph/downloads/regulations/gba.pdf23. https://www.metrobank.com.ph24. http://www.bpi.com.ph25. Baxter, M., & Vater, D. (2013). Building the retail bank of the future. Boston, Massachusetts: Bain & Company.26. Baxter, M., Berez, S., & Padmanabhan, V. (2013). Rebooting IT: Why financial institutions need a new technology model. Boston, Massachusetts: Bain & Company.27. Ali, S., Dixon, J., & Padmanabhan, V. (2014). Why cybersecurity is a strategic issue. Boston, Massachusetts: Bain & Company.28. Philippine Economic Update 2013 (World Bank Document)29. Wealth Accounting and Valuation of Ecosystem Services (WAVES): Country Report on the Philippines30. Philippines in Figures 2011 to 2014 (National Statistics Office)

APPENDIX

9.1. Financial Highlights 2011

9.2. Financial Highlights 2012

9.3. Financial Highlights 2013

9.4. Statement of Income 2013

9.4. Statement of Financial Position 2013