Chapter 1

THE PROBLEM AND ITS BACKGROUND

This chapter provides an understanding of what the problem is its context,

the scope and limitations of the study as well as its significance.

Background of the Study

Loan services played a big role in the success of banking industry due to

increasing demand for funds. It opens a great competition within the industry that

result to a better banking performance. It is designed to attract more customers

which have a greater contribution to its profitability.

Obtaining a loan is not that easy due to some economical factors.

Perhaps, it is because of strict qualifications, limited transactions or long time

processes. So, by making the services easy to access with, innovations are

necessary. This might result to a high level of customer satisfaction and

consistent growth rate.

The group has decide to study the BDO loan service innovation to have a

clear idea of what and how do their innovations affect the bank’s performance,

relationship with the customers, profitability, and standing within the industry

since they are the most prestigious bank here in the Philippines so far.

The researchers want to provide valid informations on how BDO loan

services can provide finds to the ordinary customers as a source of investment

and to continue to run their businesses without sacrificing their needs and to offer

the appropriate loan base on their status in life that not only large company can

1

avail loan in BDO. The researchers also want to show the difference of interest

rates of loan in BDO between to other lending institutions, which one is more

convenient.

Statement of the Problem

This study aims to focus on the loan services offered by the bank.

Specifically, it sought to answer the following question:

1. What are the different loan service innovations made by the BDO Unibank?

2. Is there clear evidence that there is an increase in profitability within the

bank?

3. How do the above mentioned innovations affect the following performance

indicators;

3.1 Profitability;

3.2 Growth rate;

3.3 Return of asset; and

3.4 Return of equity

4. How does it contribute to the development of the BDO Loan Service?

5. How does it affect the increase in customer’s satisfaction and patronage?

2

Hypothesis

There is no significant relationship between the loan service and the

market share and profitability.

 

Significance of the Study

This study aims to identify the services made by the bank.

The study will benefit the following:

 Bankers, through this research these may help them to create a new

idea for them to improve their banking services which they offer to their

customers that may contribute to increase their funds.

Borrowers, these will give them information on what are the new services

that they may be used and influence their borrowing decision.

 Businesses, this will serve as their sources as one of their concerns for

them to have reliable source of fund that will be a life blood of every business.

Investors, this will give them an idea which will help them as their basis

on when and where to invest considering that investing is very risky thing to do.

Students, it will serve as their basis to be equipped about the knowledge

that may be use for employment and will serve as there guide  for their future

research work.

3

Scope and Limitations

The research study will be focusing on the loan services of BDO Unibank

for the past four years (2007-2010). The researchers used the secondary data

which are the financial statements and news sites in analyzing the flow of its loan

progression.

4

Chapter 2

REVIEW OF RELATED LITERATURE AND STUDIES

This chapter deals with the review of related literature and studies which

served as anchorage of the present study.

Foreign

Lending networks on the Web give SMALL BUSINESSES more places to

borrow money with fewer hassles. One is the latest technology in loan services is

the Fast Credit Online - innovations on banking services. LiveCapital and

several other online companies have built networks of lenders that small

businesses can tap into quickly and easily. In the case of LiveCapital, 70 financial

institutions belong to the network, among them American Express, Citibank, First

Union, G.E.Capital and Wells Fargo. Mike Grossman, LiveCapital's co-founder

and CEO, says its customers value convenience and anonymity as opposed to

"going from bank to bank and getting grilled by a loan officer." Real-time credit

approval doesn't always replace the intangible value of personal banking.

( Wilcox, Melynda Dovel, March, 2001 )

HK Bldg & Loan Expands into China's Energy Management Industry.

HK BLDG & LOAN's engagement in the energy saving industry not only

represents significant prospects for the Company, but also guarantees a new,

5

recurring and steady income stream. Commenting on the acquisition, Mr. Au Tin

Fung, Executive Director of The Hong Kong Building and Loan Agency Limited

said, "The Board is most pleased with the opportunity to acquire Weldtech

Technology which is known for its proprietary UPPC system, and a reputable

industry player with industry expertise, strong research and development ability

and prospects for growth. Enabled by the Chinese government's commitment to

reduce carbon emission, we are confident that the diversification into the energy

management industry will yield long-term returns to our shareholders." (Japan

Corporate News,2011)

Hagens Berman Files Class-Action Suit Against Aurora Loan Services,

LLC.

A group of homeowners filed a class-action lawsuit against Aurora Loan

Services, LLC, claiming the mortgage company duped them into paying tens of

thousands of dollars each to have troubled mortgages reviewed by the company

with promises of loan modifications, only to have their property foreclosed with

little or no notice. IThe suit contends that, after a period of months, Aurora

foreclosed on the homes without giving the borrowers any notice that their

requests for loan modification were denied and without allowing borrowers

access to any method for ending their loan deficiency, despite the provisions of

the workout agreements. (Thrifts and Mortgage Finance,2010)

6

Local

As Asians become wealthier, businesses turn to innovation to boost growth.The

growing middle class in Asia presents huge opportunity for businesses and is

fueling product and service innovations in the region, the latest study from

foreign donor Asian Development Bank. In a special chapter of Key Indicators

for Asia and the Pacific 2010, the flagship annual statistical publication of the

Manila-based lender, found that Asia's consumers spent an estimated $4.3 trillion

(in 2005 purchasing power parity dollars), or about one-third of the world’s

developed countries’ consumption expenditure, in 2008 and by 2030 will likely

spend $32 trillion, comprising about 43 percent of the worldwide consumption.

“Developing Asia’s middle class is rapidly increasing its size and purchasing

power, and will be an increasingly important force in global economic

rebalancing,” said ADB Chief Economist Jong-Wha Lee. “Even though the Asian

middle class has significantly lower income and spending relative to the Western

middle class, its growth in expenditures has been remarkable and its absolute

levels are commanding.” (Entrepreneur.com.ph,2010)

MANILA, Philippines - Carmen Copper Corporation (CCC), a subsidiary of Atlas

Consolidated Mining and Development Corporation, has obtained loans

amounting to $150 million to refinance debt and fund working capital

requirements. In a disclosure to the Philippine Stock Exchange, Atlas said the

board of directors CCC has approved and accepted the terms of the $140 million

7

Offtake Loan Facility to be provided by Banco de Oro Unibank, Inc. (BDO). The

Atlas board of directors has also approved and accepted the terms of the $10

million Convertible Loan Facility to be provided by BDO. (Manila Bulletin, Dec 2,

2010)

In December 1986, the Center for Agriculture and Rural Development (CARD)

Inc. was organized as a social development foundation to address the growing

poverty incidence in depressed communities in Regions IV and V. Over the

years, in adapting traditional microfinance to the context of the Philippines, I

believe CARD made specific differences as to credit products. Group lending is

not practiced now in favor of individual loans by CARD MRI.While the small

loan amount provide some risk protection by spreading risks over many

borrowers, the MFIs still needed to develop unique approaches to minimize the

cost of servicing, manage risk given the collateral-free credit. ( Kiva

Microfinance,2010)

The USAID-supported Microenterprise Access to Banking Services (MABS)

program is an initiative of the Rural Bankers Association of the Philippines

(RBAP). In partnership with the Philippine rural banking industry, the program

aims to significantly expand access to financial services for micro-

entrepreneurs. This highlight discusses one of the MABS Program's most

8

innovative projects; using mobile phone banking to reach rural micro-

entrepreneurs.GCASH creates virtual mobile wallets. The services use GCash,

the mobile money platform of Philippine telecommunications company Globe

Telecom. Launched in 2004, GCASH turns mobile phones into “virtual mobile

wallets.” With GCASH, users can buy or “cash in” GCASH credits (converting

cash to GCASH), or they can “cash out” their GCASH credits (converting GCASH

to cash). GCASH can be converted not only to cash, but also to call or text

credits, transferred to other people’s mobile wallets phone-to-phone, used to pay

for goods, services, and bills, and sent as remittances. (Owens, J. & Balingit,

C., 2007)

DOLE pushes Nego-Kart as loan project innovation under PGMA's poverty

alleviation program. Tacloban City (November 14) -- In line with President Gloria

Macapagal Arroyo's poverty alleviation program, the DOLE, in its sustained effort

to protect the welfare of workers, recently launched a financial assistance

program to help the ambulant vendors. Nego-Kart or Negosyo sa Kariton is a

project for ambulant vendors on major cities of the country. The Negosyo sa

Kariton or Nego Kart program aims to give vendors and street hawkers loans

so that they would not have to patronize loan sharks. (PIA Press Release,

March 2011)

9

A. Theoretical Framework

As Finance Innovations Director Jennifer Wagg says, “It’s not just about

finding the loan with the best interest rate. There are a lot of options available

from lenders that can provide flexibility, particularly for those who have financial

discipline.” The trick is to match the right lender, loan and options to you. It’s vital

to personalize a loan structure to suit your needs. Finance Innovations takes the

time to listen to you to assess your needs, for now and into the future, so that we

can match you with the best finance for your situation. We then help you to

complete the loan process to ensure the finances you require to live your dreams

are established quickly and easily. Finance Innovations are the finance brokers

who can help you reach your financial dreams, while saving you time, money and

hassles.

B. CONCEPTUAL FRAMEWORK

10

BDO Loan Service Innovations:

Personal LoanHouse LoanCar Loan

Impact on bank’s:

ProfitabilityGrowth RateReturn on AssetReturn on Equity

Development of BDO Loan Service

Increase on:

Customer’s SatisfactionPatronage

Figure 1

Figure 1 shows the conceptual framework used by the researchers in the study.

The researchers should be able to identify the different kind of loan services

offered by the bank which are the personal loan, house loan and car loan.

Through the use of interview and analysis, the researchers should be able to

evaluate the data gathered to know its internal and external effects in the bank.

Successful assessment on the loan services will lead to the increase in

profitability of the bank and will heighten up its standing in the Philippine banking

industry

Definition of Terms

To make the study clearer and more meaningful to the reader, the

researchers defined the following terms:

Commercial bank is a type of financial intermediary and a type of bank

which is also known as business banking that provides checking accounts,

savings accounts, and money market accounts and that accepts time deposits

Creditor is a party (e.g. person, organization, company, or government)

that has a claim to the services of a second party.

Debtor is a person who owes a debt.

Financial Statement is the records that outline the financial activities of a

business, an individual or any other entity which meant to present the financial

11

information of the entity in question as clearly and concisely as possible for both

the entity and for readers. For businesses usually include: income statements,

balance sheet, statements of retained earnings and cash flows, as well as other

possible statements.

Financial system is a network of various institutions which generates,

circulates, and controls money and credit.

Growth rate is the amount of increase that a specific variable has

gained within a specific period and context. For investors, this typically

represents the compounded annualized rate of growth of a company's revenues,

earnings, dividends and even macro concepts - such as the economy as a

whole. 

Innovation is can be seen as the process that renews.

Investor is any party that makes an investment, something that exists and

not, as is commonly assumed, the introduction of something new.

Loan is a sum of money borrowed at a particular interest rate.

Loan Service is the process by which a mortgage bank or subservicing

firm collects the timely payment of interest and principal from borrowers. The

level of service varies depending on the type of loan and the terms negotiated

between the firm and the investor seeking their services.

Market share is the percentage or proportion of the total available market

or market segment that is being serviced by a company.

Profitability is the ability of a firm to generate net income on a consistent

basis. It is often measured by price to earnings ratio.

12

Return on Asset is an indicator of how profitable a company is relative to

its total assets. ROA gives an idea as to how efficient management is at using its

assets to generate earnings. Calculated by dividing a company's annual earnings

by its total assets, ROA is displayed as a percentage. Sometimes this is referred

to as "return on investment".

Return on Equity is the amount of net income returned as a

percentage of shareholders equity. Return on equity measures a corporation's

profitability by revealing how much profit a company generates with the money

shareholders have invested.  

Universal bank participates in many kinds of banking activities and is

both a Commercial bank and an Investment bank.

13

Chapter 3

METHODOLOGY

This chapter presents the research method used, the instrumentation and

the procedures in gathering the data.

Research Design

The documentary method of research was employed in this study.

Documentary research is the use of outside sources to support the

viewpoint or argument of an academic work. The process of documentary

research often involves some or all of conceptualizing, using and assessing

documents. The analysis of the documents in documentary research would be

either quantitative or qualitative analysis (or both).

Research Instrument

The researcher used secondary data. The secondary data are through the

use of information gathered from the outside sources of the company and

financial statements of the Bank for documentary analysis of their profitability,

market share, growth rate, return on asset and return on equity

14

Validation

The researcher presented the draft to the professor for further review,

amendment and revisions. Feedback from other people who has the proficiency

of making good interview questions has been considered for its improvement.

15

Chapter 4

PRESENTATION, INTERPRETATION AND ANALYSIS

This chapter aims to present all the data gathered. Interpret and analyze each

findings.

1. Personal Loans

Personal Loans

Enjoy low interest rates, easy payment terms on your financing needs

such as:

Home Renovation / Upgrades

Tuition / Education

Furniture

Appliances / Electronic Gadgets

Vacation / Travel

Balance Transfer / Debt Consolidation

Special Events

Health and Wellness

Medical Emergencies

16

See sample computation for a P50,000 cash loan payable in 24 equal

monthly installments:

The computation above will serve as your guide. BDO at its sole

discretion, shall determine the final amount and term to be approved.

The computed fixed monthly amortization using the factor rates

indicated below may differ from the monthly amortization computed

and generated by the BDO system due to the rounding-off of the factor

rate, which is automated in BDO's system.

Desired

Amountx

Factor Rate

(of chosen tenor)=

Fixed Monthly

Amortization

P50,000 0.054166667 P2,708.33

17

Interest Rate Table

Tenor Factor Rate Monthly Add-on Rate Effective Rate/Annum

6 0.179666667 1.30% 26.27%

12 0.095833333 1.25% 26.62%

18 0.068055556 1.25% 26.75%

24 0.054166667 1.25% 26.58%

36 0.040277778 1.25% 25.98%

·         *Rates are valid beginning April 27, 2009. Interest rates may

be subject to change by Banco de Oro ("BDO") in accordance with

the prevailing market rates for similar transactions and terms.

Product Features

Flexible Loan Amounts

Minimum of P10,000

Maximum of P500,000

Easy Payments Terms

Choice of payments in either 6, 12, 18, 24 or 36 months

Fixed Monthly Payments

Pay the same amount every month

18

Various Payment Options

Convenient Application

Submit your application at any of BDO 668 Branches

Top-Up Loan Feature

Secure and additional Personal Loan equal to or greater (subject to

submission of new income documents) than the original Personal Loan

Subject to at least 50% paid up from the original loan term

Minimum application Requirements

Filipino citizen or foreigner residing in the Philippines for more than two (2)

years

Must be 21 years old at time of application but no more than 70 years old

upon maturity

Minimum Gross Annual Income

P120,000 for SALARIED EMPLOYEES

P400,000 for SELF-EMPLOYED/PROFESSIONALS

Must have at least one (1) landline at either residence or office

Residence or office must be within BDO serviceable area.

19

Additional application requirement for SALARIED EMPLOYEES

Must be a permanent employee or at least 1 year tenure with a company.

Additional application requirements for SELF-EMPLOYED

Must be a sole proprietor or majority part-owner of a company operating

for at least 2 years.

Additional application requirements for PROFESSIONALS

Must be in private practice for at least 1 year.

Document Requirements

Proof of Income for SALARIED EMPLOYEES

Photocopy of the latest BIR Form 2316 or W2 signed by employer's

authorized representative (MANDATORY) AND

Submit ANY ONE of the following:

Original copy of Certificate of Employment and Income (COEI) issued in

the last three (3) months indicating status, length of service and

breakdown of compensation

Photocopy of last full month pay slip

Proof of Income for SELF-EMPLOYED/ PROFESSIONALS

Photocopy of Registration of Business Name

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For Single Proprietorship  issued by the DTI (Department of Trade and

Industry)

For Partnerships  issued by the SEC (Securities and Exchange

Commission)

Photocopy of latest ITR and W4 with BIR/ Bank Stamp (MANDATORY)

Photocopy of lasted Audited Financial Statements for the last two (2)

years

Photocopy of Bank Statements for the last six (6) months (OPTIONAL)

Proof of Identification

Photocopy of at least two (2) valid photo-bearing identification documents,

front and back, issued and signed by an official authority such as:

Passport

Driver's License

Professional Regulations Commission (PRC) ID

National Bureau of Investigation (NBI) Clearance

Police Clearance

21

Postal ID

Voters ID

Barangay Certification

Government Service Insurance System (GSIS) e-card

Social Security System (SSS) Card

Senior Citizen Card

Overseas Workers Welfare Administration (OWWA) ID

OFW ID

Seaman's Book

Alien Certification of Registration/Immigrant Certificate of Registration

Government Office and GOCC ID, e.g. Armed Forces of the Philippines

(AFP ID), Home Development Mutual Fund (HDMF ID).

Certification from the National Council for the Welfare of Disabled

Persons (NCWDP)

Department of Social Welfare and Development Certification (DSWDC)

Integrated BAR of the Philippines ID

22

Company ID's issued by private entities or institutions registered with or

supervised or regulated either by the BSP, SEC, or IC.

For Resident Foreigners only

Copy of Employment Contract or Certificate of Employment

Letter from the Embassy (if Embassy Official)

Submit photocopy of ANY ONE of the following:

Valid Passport with Resident Visa; OR

Work Permit and valid Visa; OR

Special Investor's Resident Visa and Visas Philippine

Economic Zone Authority or Visa with EO226; OR

ACR or ICR or ACR1

Application Instructions

Secure BDO Personal Loan application form from any BDO Branch.

Completely fill-out and sign on the Personal Loan application form.

Submit completely filled-out and signed application form together with

complete document requirements (please refer to document requirements

indicated above) to any BDO Branch or Direct Sales Agent of BDO

23

Fees and Charges

Processing Fee  P1,300

Late Payment Fee 5% of the unpaid installment due or P300, whichever is

higher

Installment Acceleration Fee  5% of the outstanding principal balance or

P300, whichever is higher

Returned Check Fee  P500 per returned check

Credit Card Annual Fee  WAIVED

Lost Billing Reminder Card Replacement  P250 per card replacement

SOA Reprinting  P100 for every SOA request

1.1.1 BDO Asenso Kabayan Personal Loan Secured

Product Description

CLG Personal Loan for OFW is offered against hold-out on Joint or Individual

account deposits maintained with BDO as security.

The following are the type of deposits allowed for this facility

Peso or Dollar Savings Account

Peso or Dollar Time Deposit - at least co-terminus with the loan tenor

24

Minimum deposit requirement is PHP 15,000 or its dollar equivalent.

Though, loan proceeds will be in PHP.

Applicant shall be the OFW only. However, if the deposit collateral is a

joint account, beneficiary may apply as a principal borrower of the loan

The following cannot be allowed to be held as collateral:

"In Trust For" accounts

Accounts with existing/ongoing hold-out arrangements

Product Features

Multipurpose - use it for various purposes such as:

Tuition/ Education

Health and Wellness

Emergencies (medical, memorial, etc.)

Appliances/Furniture/Electronic Gadgets

Vacation/Travel

Special Events (weddings, anniversaries, etc.)

Balance Transfer/Debt Consolidation

Personal Investments (business, insurance, etc.)

Car Repairs/Upgrades

House Renovation/Upgrades

Lot Down Payments

Interest Rates Prevailing upon application

25

Fixed Monthly Payments - pay the same amount every month with any of

the following flexible payment terms:

6 months

12 months

18 months

24 months

36 months

Loan proceeds can be released either by Credit to BDO account or

Manager's Check

Term of deposit should be at least co-terminus or longer than the term of

the loan

Re-availment Feature or TOP-UP Loan

Existing personal loans with good credit standing may qualify for re-

availment/top up loan.

The available deposit account on hold is to be used as a basis for the

additional loan limits to be granted.

Loan Amount

For Peso Account maximum of 90% of the deposit account balance

For Dollar Account maximum of 80% of the deposit account balance; the

prevailing buying rate shall be used to determine the peso equivalent

For our Kabayans working abroad, please use the Asenso Kabayan

application forms by clicking on the following links "For Personal Loans

Secured":

26

1. Application Form

2. Deed of Assignment Form

3. Special Power of Attorney Form

4. Auto-Debit Arrangement Form

1.1.1.1 BDO Asenso Kabayan Personal Loan Unsecured

Product Description

CLG Personal Loan for OFW is a multi-purpose, non-collateral loan for

individuals with fixed income and paid through monthly amortization at a

fixed interest rate and period.

2. BDO Unibank Financial Statements

27

3. Effect of the loan service innovations to the following performance indicators.

3.1 Profitability;

3.2 Growth rate;

3.3 Return of asset; and

3.4 Return of equity

3.1 Profitability

(In Millions of Philippine pesos)

Gross Profit Margin =

2007 - 33350/34176 = 97.6%

2008 - 30780/31563 = 97.5%

2009 - 39502/40140 = 98.4%

Operating Profit Margin =

2007 - 9417/34176 = 27.5%

28

Gross ProfitsTotal Revenues

Operating ProfitsTotal Revenues

2008 - 3683/31563 = 11.66%

2009 - 7760/40140 = 19.33%

Net Profit Margin =

2007 - 6518/34176 = 19.07%

2008 - 2182/31563 = 6.91%

2009 - 5951/40140 = 14.82%

EPS =

2007 - Basic = Php 3.36

2008 - Basic = Php 0.64

2009 - Basic = Php 2.71

3.2 Growth rate =

2007 - 6518-3969.6/3969.6 = 64.19%

2008 - 2182-6518/6518 = -66.52%

2009 - 5951-2182/2182 = 172.7%

3.3 Return of asset =

29

Net Profit after TaxTotal Revenues

Earnings Available for Common Stockholders Number of Shares of Common Stock Outstanding

Net Income (final)-Net Income (Initial) Net Income (Initial)

Net Profit after TaxTotal Assets

2007 - 6 518/617 208 = 0.0105

2008 - 2182/802 032 = 0.00272

2009 - 5951/862 049 = 0.0069

3.4 Return of equity =

2007 - 6 518/62 486.3 = 10.43%

2008 - 2182/57 774 = 3.78 %

2009 - 5951/67 887 = 8.77 %

*2010 Financial Statements of BDO Unibank is not yet available.

4. The contribution of new loan services of BDO Unibank to its

profitability.

BDOLF’s loan portfolio surges 28% in 2010

March 3, 2011

BDO Leasing and Finance, Inc. (BDOLF) ended 2010 with a 28-percent

growth in loan portfolio to P14.58 billion from P11.39 billion the previous

year.

The company, which is a subsidiary of BDO Unibank, Inc., said the increase

was largely attributed to management's renewed focus on corporate

accounts.

30

Net Profit after TaxTotal Equity

As a result, BDOLF’s net income last year improved to P308.7 million from

P300.0 million in 2009. Gross income, meanwhile, amounted to P2.04 billion.

The company also managed to reduce by 7 percent last year its past due

accounts to P665.0 million from P715.3 million in 2009.

BDOLF provides leasing and financing products to commercial clients. Its

leasing products include direct leases, sale-leaseback arrangements and

operating leases. Financing products, on the other hand, include commercial

and retail loans, installment paper purchase and factoring of receivables.

Loan availments of clients are used to finance the purchase of automobiles,

trucks, office equipment, industrial, agricultural and office machinery, and

real property, and financial assets such as receivables.

BDO posts audited 2010 net income of P8.8 billion

February 28, 2011

BANCO De Oro Unibank, Inc. (BDO) ended 2010 with an audited net income

of P8.8 billion, up 46 percent from the P6 billion it earned a year before, and

exceeding its initial earnings guidance of P8.1 billion.

The Bank, prior to the income release, has reported that its consolidated

resources hit the P1-trillion mark at the end of 2010, making it the first

Philippine bank to achieve that milestone.

BDO’s strong performance was a result of a more diversified and sustainable

earnings stream from its core lending, deposit-taking and service

31

businesses. Gross customer loans expanded 15 percent to P541.5 billion

with firm growth across all business segments. Total deposits, meanwhile,

rose 13 percent to P782.6 billion. A larger earning asset base coupled with

lower funding costs resulted in the 12-percent increase in net interest income

to P34.2 billion. The Bank’s fee-based service income likewise grew to P10.4

billion on strong contributions from trust, private banking, remittance,

transaction banking, insurance, investment banking, and credit cards.

BDO continued efforts to prudently manage the balance sheet to protect it

through economic cycles. It boosted provisions to P6.7 billion and raised

non-performing loan (NPL) coverage to 92 percent from 80 percent a year

ago, despite the decline in the gross NPL ratio to 4.7 percent from the

previous year’s level of 5 percent. Capital Adequacy Ratio (CAR) remained

sound at 14 percent, well above the current regulatory minimum of 10

percent.

Return on average Common Equity improved to 11.7 percent in 2010

compared to 10.4 percent in 2009. Following its solid financial performance

in 2010, the Bank hopes to build on its gains to pursue further growth

opportunities to enhance shareholder value.

Source: http://www.bdo.com.ph/news-archive.asp

BDO sees lending slowdown in ‘09INQUIRER.net

First Posted 17:42:00 12/10/2008

32

Filed Under: Banking,  Economy and Business and Finance ,world financial crisis

MANILA, Philippines—Banco de Oro, the country’s largest bank, expects lending

to slowdown in 2009 as companies defer major capital expenditures due to the

global financial crisis.

BPO president Nestor Tan said he believed the crisis would be hardest on the

export and industrials sectors and these would show the most slowdown in loan

demand.

“We still expect borrowers across the board, but you might see some deferment

in major capital expenditures and that will have an effect on slowing down on

loan activity,” Tan said.

The global squeeze will not cause Philippine companies to close shop, he said,

but more corporate defaults are a big possibility.

“We just don’t know the extent. That is why we are continuously reviewing our

portfolio and doing stress tests. We are looking at vulnerable industries and

looking at our exposures,” he said.The bank is also prepared to do refinancing

and loan restructuring for clients.

BDO still has around 40 to 50 “undeployed” branch licenses, but Tan said these

might not all open in 2009.

Consumer and housing loans have already shown a marked deceleration this

year, but Tan said he would still look closely at the first and second quarters next

year to see if these two are hit by the crisis.

33

“One month may not tell the story… You have to look at the trend over time. We

are only two months after the meltdown. We will probably look at it in the first and

second quarter next year. When the crisis hit, the natural inclination is for

everybody to fall back and that has created a substantial decline. But that doesn’t

mean everybody is stopping. That only means they are assessing situation,” Tan

said.

BDO sees P7-B profit in ’07, eyes capital hike

By Daxim Lucas

Inquirer

Posted date: July 28, 2007

MANILA, Philippines -- Banco de Oro Unibank Inc. (BDO) -- the new corporate

name of the mall magnate Henry Sy’s financial giant -- expects to post double-

digit profit growth this year despite the added costs associated with its acquisition

of Equitable PCI Bank.

In a press briefing, BDO president and CEO Nestor Tan said he expected the

bank to post a P7.05-billion net income in 2007, marking a 10-percent increase

over the combined P6.39 billion in pro forma net income reported by the former

Banco de Oro Univeral Bank and Equitable PCI Bank before their formal merger.

BDO announced Friday the appointment of Henry Sy’s daughter Teresita as

chairperson of BDO.

34

Tan said higher profits would be achieved through the bank’s continued loan

expansion and the improved mix of its loans business, higher consumer lending,

as well as lower cost of funds with the increase in low-cost deposits.

Tan pointed out that the bank would likely continue to outpace the rest of the

banking industry in terms of earnings growth, continuing a trend that started in

2001.

Over the past five years, BDO’s profitability combined with that of Equitable-PCI

has grown by a compounded annual growth rate of 58.8 percent, compared with

the industry average of 32.6 percent.

BDO received approval for its merger with Equitable PCI last May and is in the

process of integrating its operations with the Equitable PCI, which was the

country’s third-largest bank in assets.

The merged entity will be the second-biggest bank in assets, with P608 billion,

and the largest in capitalization, with P73 billion.

Tan said the merged entity would have to further boost its capitalization after

cleaning up the books of Equitable PCI. He said BDO would raise $150-$200

million in capital from international investors later this year or in early 2008 to its

equity position. He said the new funds might come in the form of “tier 2” capital --

long-term debt convertible into equity, which is considered as compliance with

capital adequacy ratio requirements.

BDO’s capital adequacy ratio -- the ratio of equity to risk assets -- is between

12.5 percent and 13.0 percent, compared with the industry average of 18

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percent. Tan said BDO’s the ratio fell because of the risks it had to absorb due to

the merger. Tan also said BDO would spend P1 billion this year and another P1

billion next year for integration costs with Equitable PCI. These would be aside

from provisions BDO had to make for soured loans and assets to buttress its

books from the risks in Equitable PCI’s portfolio. BDO also wrote off P15.7 billion

worth of goodwill in Equitable PCI’s books, Tan said. 

Bank lending seen to slow down in second half

By Michelle Remo

Philippine Daily Inquirer

MANILA, Philippines—Banco De Oro expects bank lending to slow down to a

single-digit level this year, brought on by a moderate increase in interest rates in

the second half of the year.

But lending activities will still be sufficient to help the economy post decent

growth this year, said BDO, the country’s largest bank in terms of assets. In the

first 11 months of 2010, data from the Bangko Sentral ng Pilipinas showed that

outstanding loans extended by universal and commercial banks, including

overnight deposits with the BSP, reached P2.5 trillion—up by 10.3 percent year

on year. Overnight deposits parked with the BSP effectively serve as loans to the

central bank.

In its 2011 outlook, BDO said lending activities would continue to be strong, but

the growth rate might not match that of 2010. Also, economic growth may range

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from 5 to 6 percent this year, BDO said. Such a growth rate may be considered

respectable, according to BDO. It said that a repeat of the 7-percent growth seen

last year would not likely occur in 2011 due to base effects.

But there are still risks that may affect its economic forecast, BDO said. These

risks include accelerated inflation, given rising prices of oil in the world market

and external factors, such as the debt crisis in Europe and uncertainty of

economic performance of industrialized countries that serve as export markets

for the Philippines. According to the latest government report, the economy,

measured in terms of gross domestic product, grew by 7.5 percent in the first

three quarters of 2010. It was the fastest rate of expansion seen in over three

decades.

“While the country faces a challenge to repeat the economic expansion recorded

in 2010, it is still expected to grow between 5 and 6 percent this 2011 due to solid

macroeconomic fundamentals,” BDO said.

In 2011, power and utilities companies, as well as those involved in

infrastructure, are the ones expected to engage in borrowing, BDO said. Banks

expect companies to secure loans to fund public infrastructure projects under the

government’s Public-Private Partnership (PPP) program. The program is meant

to ease the government’s financial strain while it pursues vital infrastructure

projects with the help of the private sector.

The government has already started inviting private entities to invest in public

infrastructure projects even as it struggles to balance its budget. On consumers,

the bank said that growing income levels could boost their confidence to secure

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loans for big-ticket items, such as real estate and automobiles. “Consumer

lending is expected to continue to grow due to strong consumer confidence,

vibrant consumer demand, currently low penetration rates, higher per capita

income and borrowing capacity,” BDO said. It added that more flexible loan

terms offered by various banks could also entice consumers to borrow more.

Attractive financing schemes boost auto, housing sectors

By Abigail L. Ho

Philippine Daily Inquirer

Posted date: March 15, 2011

MANILA, Philippines—For many Filipinos, having their own home and car is the

ultimate measure of fulfillment. Fortunately for them, owning a home and a

vehicle has become easier to accomplish, thanks in large part to the slew of

financing schemes that banks are now offering.

Auto and housing loans have long been part of banks’ portfolio of services, but it

has not always been easy for consumers to avail themselves of such loans. For

one, not everyone has something to post as collateral. For another, it is not very

easy to come up with all the documents that banks require. And even if one does

cough up the collateral and the documents, having loans approved is not always

a sure thing.

But these days, taking out a loan for a home or a car is easier, and cheaper, than

ever. Banks are scrambling to get consumers on the loan bandwagon, offering

24-hour loan approval and large prompt payment discounts. Interest rates are

relatively low and payment terms are flexible.

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The country’s top banking groups—Banco de Oro, Metropolitan Bank and Trust

Co. and Bank of the Philippine Islands—all offer attractive and easy-to-secure

financing schemes and have long dominated the market. But recently, more

players are battling for the consumer, including HSBC, East West Bank and

Philippine National Bank.

Low rates, 24-hour approvals

Auto loans are relatively easy to secure and finance. Looking at the offerings of

BDO, BPI, Metrobank, Metrobank subsidiary Philippine Savings Bank and

Philippine National Bank, interest rates range from 4.21 percent for 12 monthly

installments with one-month advance to 34.7 percent for 60 monthly payments.

Under its Metrocar loan program, Metrobank offers one of the lowest interest

rates. Minimum loan amount is placed at P250,000, while the minimum

downpayment required is 20 percent of the vehicle’s net selling price. Payment

terms range from 12-60 months and amortization can be made through post-

dated checks or an automatic debit arrangement from the deposit account. The

bank also boasts “fast” approval and even provides assistance in sourcing

vehicles. PSBank, while offering higher rates than its parent bank, lures

consumers with its 24-hour loan approval and prompt-payment discounts.

BDO may not offer the lowest rates in the market, but it charges less than most

commercial banks in the market. Loans can also be approved in as short as 24

hours and terms extend to as long as six years.

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Borrowers will also earn BDO Rewards points, which correspond to various perks

and privileges, throughout the life of the loan.

The Ayalas’ BPI also offers flexible payment terms of up to six years, approval

within 24 hours, and automatic debit arrangements, but restricts eligibility to

individuals with a gross monthly income of P40,000. Its thrift bank unit, BPI

Family Bank, has also been aggressive in its freebies, which can be anything

from free insurance with an Act of God coverage or protection against

externalities such as the Ondoy-induced flooding to global positioning system

(GPS) navigator units. Freebies are given for loans of at least P700,000 with a

minimum term of 36 months for brand-new cars meant for private use.

BPI Family has also been known for regularly holding the “Auto Madness”

campaign, a model that PNB recently adopted with its own “Gear Up!” auto fair at

the PNB Financial Center Parking Lot. Car loans with as low as 4.21-percent

interest rate for a 12-month term are offered, but only to those who will come to

the auto fair.

Nonbank financing

Even auto industry leader Toyota Motor Philippines Corp. is riding on the

financing bandwagon through Toyota Financial Services Philippines (TFS).

According to Toyota first vice president for vehicle operations Rommel Gutierrez,

in-house financing schemes make it even easier for consumers to acquire brand-

new vehicles.

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“Toyota dealers and TFS collaborate to make sure Toyota customers get the

best purchasing experience through its quick and convenient one-stop-shop

financing service. Customers only need to talk to a Toyota dealer marketing

professional who can assist them on all their vehicle purchase requirements,” he

related.

Whether from banks or from auto companies themselves, Chamber of

Automotive Manufacturers of the Philippines Inc. president Elizabeth Lee said

these financing schemes provide a huge boost to the local auto sector as these

make purchasing a vehicle easier for consumers.

“Having a healthy financing environment is a key factor that affects vehicle sales.

Note the credit crunch and freeze that happened in the United States, which

stifled car sales. Banks have been, and so far continue to be, aggressive with

relatively low interest rates. Attractive financing packages (from banks and) auto

players make buying a vehicle affordable and easy,” she said.

More affordable housing loans

Housing loans have also become easier to obtain, particularly with the surge in

popularity of condominium buildings that cater to young professionals and upstart

families.

In December 2007, the Bangko Sentral ng Pilipinas relaxed rules on real estate

lending to spur the growth of the property industry. Prior to this move, from 2001

to 2007, outstanding real estate loans for acquisition of residential property grew

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by an average of 14 percent a year, according to real property website Global

Property Guide.

At that time, few banks had housing loans on their roster of services and those

who did imposed highly restrictive lending conditions. Interest rates were very

high and loan approvals took a very long time.

Back then, major commercial banks charged an interest of around 9.5 percent for

a one-year mortgage and as high as 11 percent for loans with rates fixed for at

least five years.

Now, banks like EastWest Bank are offering home loan interest rates as low as

5.88 percent for the first year. HSBC, which created a lot of buzz when it

introduced record-low interest rates last year, has further sweetened its offering

with a housing loan with an interest rate of 5.75 percent for one-year repricing

and 8.99 percent for five-year repricing.

In a study, CLSA Asia Pacific said market leaders BDO, Metrobank and BPI are

cognizant of the moves of HSBC and East West but have no intention of

matching those rates so far.

“Given the limited platform of HSBC (25 branches) and East West (89 branches),

the big three believe that the target market and reach of these two banks may be

limited,” the research said. “They are, however, monitoring things closely and

would re-evaluate things in a couple of months if needed.”—With a report from

Doris C. Dumlao

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BDO posts 159% jump in 9-month net income

By Doris Dumlao

Philippine Daily Inquirer

Posted date: October 27, 2009

TYCOON HENRY SY’S BANCO DE Oro Unibank reported a 159-percent growth

in net profit in the first nine months from a year ago, fueled by higher interest and

fee-based income as well as improved trading gains.

The net profit booked by the country’s biggest bank from January to September

this year amounted to P4 billion, of which P1.9 billion or nearly half was

generated in the third quarter alone. The net profit for July to September stood

70 percent higher than the level in the same quarter last year, the bank said in a

statement.

“In spite of the possible impact of the recent typhoons, the bank is maintaining a

positive outlook for the rest of the year and next, and is optimistic about meeting

its full-year profit target of P5.5 billion,” the BDO disclosure said.

On the asset side, gross lending portfolio expanded 16 percent to P424.5 billion

as of end-September from a year ago, supported by broad-based demand from

all market segments. BDO caters to top-tier corporations, the middle market as

well as consumers.Net interest income for the nine-month period went up 31

percent to P22.3 billion. Gross interest income expanded 21 percent on the back

43

of higher loan volume, while interest expense grew at a slower pace of 7 percent

due to an improved funding mix.

On the funding side, deposits rose 12 percent year-on-year to P643.8 billion with

the redeployment of branch licenses and steady growth in low-cost deposits.

“Building on earlier gains and leveraging on its various competitive advantages,

the bank’s loans, deposits, net interest income and fee-based income sustained

their growth,” the bank said. “Income from trading activities also increased given

a more stable financial environment,” it said.

BDO has grown substantially through a series of mergers and acquisitions,

buying one new bank almost every year this decade. It took over Dao Heng

Philippines in 2001, First e-Bank in 2002, Banco Santander Philippines in 2003,

United Overseas Bank-Philippines

in 2005, Equitable PCI Bank in 2006, American Express Savings Bank in 2007

and GE Money Bank earlier this year. It is also nearing a deal to acquire the 50-

branch Export and Industry Bank.

The purchase will involve up to 100 percent of the shares of stock of Export

Bank. About 90 percent of the bank’s shareholders are represented in the board,

while the remaining 10 percent will have the option to accept a prospective

tender offer by BDO.

But while the buyout could involve almost all of the publicly listed Export Bank’s

shares, certain assets will be carved out such that BDO would take over only the

core commercial banking assets.

44

Among the assets that are not included in the deal under consideration are

Export Bank’s subsidiaries involved in property (Urbancorp Realty Holdings Inc.)

securities brokerage (EIB Securities Inc.), insurance brokerage (Urbancorp

Insurance Brokers Inc.), nonlife insurer (Value Gen Financial Insurance T Co.

Inc.) and thrift banking (EIB Savings Bank).

Banco De Oro nets P8.8 B profit in 2010

Cebu Daily News

First Posted 08:13:00 03/01/2011

Filed Under: business,  Banking

MANILA—The country's largest lender, the Henry Sy-led Banco De Oro Unibank,

grew its net profit last year by 46 percent to P8.8 billion, exceeding its target, as a

robust economic environment supported lending, treasury and other fee-based

businesses. The bank, which breached the P1-trillion mark in resources, earlier

targeted to chalk up only P8.1 billion in net profit for 2010.  The end-2010 results

translated to a return on average common equity of 11.7 percent, higher than

10.4 percent in 2009. In a disclosure to the Philippine Stock Exchange on

Monday, BDO attributed its strong performance to “a more diversified and

sustainable earnings stream from its core lending, deposit-taking and service

businesses.” Gross customer loans expanded 15 percent to P541.5 billion with

firm growth across all business segments. 

45

Total deposits, meanwhile, rose 13 percent to P782.6 billion. A larger earning

asset base coupled with lower funding costs resulted in the 12 percent increase

in net interest income to P34.2 billion. 

The growth in noninterest income was not disclosed. On the other hand, the

bank’s fee-based service income hit P10.4 billion.

BDO attributed the increase to strong contributions from trust, private banking,

remittance, transaction banking, insurance, investment banking and credit cards. 

On asset quality, BDO said it continued efforts to prudently manage the balance

sheet to protect it through economic cycles.

It boosted provisions to P6.7 billion and raised nonperforming loan (NPL)

coverage to 92 percent from 80 percent a year ago, despite the decline in the

gross NPL ratio to 4.7 percent from the previous year’s level of 5 percent. 

Capital adequacy ratio (CAR) to risk assets remained ended the year at 14

percent, well above the current regulatory minimum of 10 percent. 

“Following its solid financial performance in 2010, the bank hopes to build on its

gains to pursue further growth opportunities to enhance shareholder value,”

BDO's disclosure said. Inquirer

BDO widens lead over rivals  

Philippine Daily Inquirer

First Posted 22:34:00 08/08/2010

46

MANILA, Philippines—Tycoon Henry Sy’s Banco de Oro Unibank has retained its

bragging right as the country’s largest banking conglomerate, widening its lead

over nearest rival Metropolitan Bank & Trust Co. as of end-June. Based on the

latest statement of financial condition filed by the two banks on Thursday, BDO

ended the first semester with consolidated assets of P874.99 billion. Loans and

receivables stood at P495 billion while deposit liabilities amounted to P691

billion.

Metropolitan Bank & Trust Co., on the other hand, reported P818.68 billion in

consolidated assets. Its loans and receivables amounted to P406.98 billion while

the deposit base stood at P588 billion.BDO has dislodged Metrobank as the

country’s largest bank in resources since the third quarter of 2008. Earlier this

year, both BDO and Metrobank beefed up their capital ahead of more stringest

capital adequacy requirements expected to be drawn up under the Basel 3 global

framework. BDO has grown substantially at the turn of the century to become the

country’s largest bank through a series of merger and acquisition deals. 

The   bank  has gobbled up one new   bank  almost every year: Dao Heng

Philippines in 2001, First e-Bank in 2002, Banco Santander Philippines in

2003, United   Overseas   Bank -Philippines in 2005, Equitable PCI Bank in 2006,

American Express Savings Bank in 2007 and GE Money Bank in 2009. It is now

currently working on the acquisition of Export and Industry Bank.The Banker

placed BDO 396th among its Top 1000 World Banks ranking, a survey

conducted annually by the British banking and finance magazine. BDO climbed

40 notches from its previous world ranking of 436th. The rankings are based on

47

the definition of core or tier 1 capital as prescribed by Basel ’s Bank for

International Settlements (BIS). Doris C. Dumlao

Fitch affirms BDO rating   Keeps bank rating at ‘C/D’

By Doris Dumlao

Philippine Daily Inquirer

LONDON-BASED CREDIT WATCHER Fitch Ratings has affirmed its ratings on

the country’s biggest bank Banco de Oro Unibank, noting that the earnings buffer

of retail tycoon Henry Sy’s bank appeared sufficient to absorb rising credit costs.

In a statement yesterday, Fitch said it kept BDO’s “individual” rating at “C/D” and

“support” rating at “3.”“

The affirmation of BDO’s individual rating reflects its reasonable capacity to

weather the economic slowdown, as higher loan losses are likely to impact only

its earnings and capital impairment risks remain fairly low,” Fitch said.

The credit watchdog said this partly alleviated its concern over the bank’s

reduced capital cushion, noting that its core or tier 1 capital adequacy ratio (CAR)

had declined to 8.4 percent as of end-June this year from 10.7 percent at end-

2007 due to rapid balance sheet growth and weak earnings in 2008.

The agency also noted that while BDO’s earnings buffer appeared sufficient to

absorb rising credit costs, it believed it was relatively low compared to its higher-

rated peers.Fitch’s individual rating on banks ranges from a high of “A” to a low of

“F” with gradations of A/B, B/C, C/D, and D/E. A bank rated “C” is defined to be

48

“an adequate bank, which, however, possesses one or more troublesome

aspects. There may be some concerns regarding its profitability and balance

sheet integrity, franchise, management, operating environment or prospects.”

On the other hand, a bank rated “D” means a bank “has weaknesses of internal

and/or external origin” and “there are concerns regarding its profitability and

balance sheet integrity, franchise, management, operating environment or

prospects.” Banks in emerging markets are seen necessarily faced with a greater

number of potential deficiencies of external origin.“

Downside risks to BDO’s individual rating may be mitigated by improving

macroeconomic conditions, which if sustained could result in better profitability in

the second half of 2009 through 2010. This, together with the possibility of

additional strategic investment from GE Capital, could help raise the bank’s tier 1

CAR to slightly more than 9 percent by end-2009,” Fitch said.

In the agency’s opinion, capital enhancement measures would be crucial to help

preserve BDO’s financial profile and rating, particularly when uncertainties

regarding the economic recovery lingered over the next 12-18 months.

On the other hand, Fitch said BDO’s support rating, which is the highest among

rated Philippine banks, reflected its systemic importance in the country as it

singlehandedly accounted for about 14 percent of the banking system’s total

assets.

Banks see better lending business this year

49

Special Report

By LEE C. CHIPONGIAN

January 5, 2010, 2:53pm

Bankers may be sleeping better at night. But, like the rest of the economy, banks

were affected by the volatile operating environment. “(However) banks are

resilient establishments and are flexible enough (to defy) factors that would result

in low profits,” said Nestor Tan, chief executive officer and president of the

country’s largest financial institution in assets size since 2008, Banco de Oro

Unibank (BDO).

As for the Philippines’ third biggest bank, Bank of the Philippine Islands (BPI), its

top executive expects the national elections this year will drive spending and perk

up business and economic activities which would translate to more funding that

the banks could certainly provide.

BPI president Aurelio Montinola III, also the head of the Bankers Association of

the Philippines, said prospects will be better than 2009’s. “From a country point

of view, how can you not do better than a one-percent growth (in GDP),”

Montinola said. “The elections will stimulate the economy and remittances have

continued to surprise on the upside. Loan growth (in 2009) was strong so it might

trail off.”

Overall, the economy as measured by gross domestic product grew by 1.5

percent year-on-year in the second quarter last year, up from the 0.6 percent rate

posted in the previous quarter, dispelling recessionary fears and defying market

expectations in the process.

50

Expectations

Montinola expects banks’ revenues from treasury operations will remain on the

low side this year – same as in 2008 and 2009, mainly because of a rise in

interest rates and inflation. As such, it is expected that banks will report minimal

trading gains. To improve revenue base, banks will have to rely on their lending

business, as usual. A report from the Bangko Sentral ng Pilipinas (BSP)

indicated that as of October, lending net of banks’ reverse repurchase

placements increased to P2 trillion, up by 4.7 percent compared to the same

period in 2008.

Industry non-performing loans ratio, in the meantime, managed to maintain a

below four-percent average at 3.37 percent also as of October while the total

loan portfolio stood at P2.53 trillion, of which P85.33 billion was bad loans.

Tan noted the weak demand in bank credit because of sluggish economic

activity. Towards the middle of the last quarter, banks were also reporting slower

pace of increase in consumer loans such as auto loans and credit card loans.

Demand for credit was slow despite the low-interest rate environment while the

strong dollar remittances – which are expected to hit more than $18 billion this

year – seem not to be contributing to the growth in real estate loans unlike in past

years.

However for this year, Tan and Montinola are hoping consumer lending will pick

up ahead of the election spending.For BDO, Tan is confident that the bank will

meet its P5.5 billion income target for 2009 and expects positive growth for this

51

year on the back of a double-digit return on assets. As of the end of the third

quarter, the bank reported a P1.9-billion net income, up 70 percent from the

second quarter which brought its nine-month net income to P4 billion, or 159

percent higher year-on-year.

Consumer lending

The Ayala-controlled BPI, as most commercial and thrift banks this year, is

focusing on creating more business and credit for the small and medium

enterprises. The strategy stems from the fact that big corporations are likely to

postpone major expansions until after the May polls. “(This year) I think it will be

SMEs and consumers that will drive growth,” Montinola said. For BPI alone, a

third of its loans were accounted for by big companies while the mid-size firms

also have equal size of the portfolio. Consumer loans account for the rest of the

loans. BDO’s Tan said consumer spending will continue to be the growth driver

of the local economy, with the sustained remittances and with election spending

providing it a boost.

Philippine Savings Bank (PSBank) president Pascual Garcia II said the thrift

banking sector’s prospects for 2010 while still conservative seem to be better

compared to that of 2008 and 2009. Garcia, also president of the Chamber of

Thrift Banks, noted that 2009 was better than expected, in fact he expects his

bank will exceed its P1.1 billion income target. However for this year the banker

sees more growth in the housing sector as well as the auto industry.Vehicle

makers as represented by the Chamber of Automotive Manufacturers of the

52

Philippines is eyeing only four percent sales growth but bankers like Garcia

expects better or 10 percent due to aggressive car loan campaigns.

PSBank, a subsidiary of Metropolitan Bank and Trust Co., rely mostly on

consumer lending to boost income. The bank’s consumer loans such as auto and

housing loans account for 70 percent of its portfolio.

For the next months, most banks expect slower growth in lending to big

businesses or just five percent from 10 percent in 2009 due to the prevalent wait-

and-see attitude of the corporate sector. Any borrowings from the top tier clients

will only be for working capital.

As for lending to the mid-market or SMEs, Montinola sees more opportunity or an

increase of 10 percent to 15 percent compared to what was reported in 2009

while consumer lending is expected to grow by as much as 15 percent.

As of end-September, BPI’s loans increased by eight percent but its net loans

declined by three percent because of slower credit demand. The bank said large

scale industries, which account for 56 percent of total loans, showed a

contraction in its outstanding portfolio because of the relatively huge liquidity in

the system and increased access to capital markets. Still, consumer loans

especially for SMEs are expected to surpass expectations this year. PSBank, for

one, is targeting a 22-percent growth in its net income this year to P1.35 billion.

Capital requirements

BDO, the banking arm of retailing giant SM Group, is considering an additional

capital this year to fund expansion plans. Tan has confirmed this. “We are

53

looking at raising capital to support (an) anticipated expansion.” BDO reached

the number one spot by buying banks. Last year it acquired controlling shares in

GE Money Bank and as of December,

it was still finalizing the buyout of Export and Industry Bank. As part of incentives

for the merger and acquisition, BDO will receive an additional 30 branches in

restricted areas on top of the selling bank’s 51 branches, of which 26 are also

located in closed cities in Metro Manila.Thrift banks are also in the market to

raise more funds this year. Rural banks hardly take advantage of the market by

raising funds, except for the larger rural banks such as the Rural Green Bank of

Caraga of the Visayas and Mindanao areas.

Garcia said PSBank is planning to raise at least P2 billion in tier 2 capital and a

stock rights offering in the second half of 2010. “It could be a mix,” he said.

“We’re looking at other options and a stock rights offer will depend on the

opportunities.” Expanding PSBank has been on the lookout for possible

acquisitions to increase branch numbers.

Green Bank president Joseph Omar Andaya, who is also the president of the

Rural Bankers Association of the Philippines, said the sector's capital health has

remained better than expectations despite a rough start. "Our loan portfolio is as

it should be and we expect to continue lending to our sectors (agri-based) and

SMEs."

Banking business performed better than expected in 2009 – BSP

54

BSP Governor Amando M. Tetangco Jr. said the banking sector has remained

fundamentally sound in 2009. “Important banking reforms, particularly in the

areas of corporate governance, risk management, and asset clean-up, have

strengthened the banking system further, boosting its overall performance in

terms of higher asset growth, enhanced asset quality, improved profitability and

better capitalization,” Tetangco noted as early as October.

By December, he was spouting the same sentiments. “The BSP will continue to

carefully scan the operating environment with a forward-looking perspective, with

a view to moving in a pre-emptive fashion to address any risks to its mandate (of

price stability and to encourage credit),” said Tetangco. BSP’s monetary actions

are also well attuned to business and consumer sentiments.

BDO posts P2.1-B net profit in first half

July 28, 2009, 5:25pm

Banco de Oro Unibank (BDO) reported Wednesday that its net profit from April to

June this year rose 9 percent to P1.1 billion compared to the P1 billion it earned

in the same period a year ago. Compared to the previous quarter, the second

quarter's earnings is likewise better by 11 percent. "Sustaining earlier gains, the

bank's loans, deposits, net interest income and fee-based income continued to

grow. Income from trading activities also improved with a more stable financial

environment," it said in a statement.

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For the first half of the year, while BDO's net profit amounted to P2.1 billion or 10

percent lower from the P2.4 billion it made in the same period last year, it said

the amount still represents a 62 percent growth on a recurring basis, excluding

extraordinary items recorded in 2008.

The bak said gross customer loans grew 28 percent year-on-year to P414.4

billion as of the second quarter on broad-based demand from all market

segments. Deposits, on the other hand, increased 26 percent year-on-year to

P627.1 billion, driven by inflows of low-cost deposits and the redeployment of

branches in high-growth areas.

Its net interest income for the six-month period, meanwhile, rose 32 percent year-

on-year to P14.3 billion because of a larger level of earning assets and an

improved funding mix. Fee-based service income also went up 11 percent year-

on-year to P4.5 billion on the back of higher contributions from funds

management, remittances, credit cards, cash management, investment banking,

and bancassurance activities. Trading and foreign exchange gains, for its part,

improved 46 percent year-on-year to P1.9 billion as the Bank's treasury

operations benefited from a more stable financial market. The bank maintained

its conservative outlook by boosting provisions 64 percent year-on-year to P2.5

billion. A listed entity at the Philippine Stock Exchange, BDO is the largest local

bank in terms of assets, loans and deposits and ranked third in terms of capital,

as of the end of the first quarter 2009.

56

Notwithstanding the prevailing tough economic environment, the bank said it was

keeping an optimistic outlook for the rest of the year, targeting a full-year profit of

P5.5 billion.

BDO profits to hike 30% to P8.1 billion this year

By LEE CHIPONGIAN

May 28, 2010, 3:57pm

Banco de Oro Unibank, the country's largest in asset size, expects to grow 30

percent to P8.1 billion this year over 2009 income of P6 billion as the bank

focuses more on middle market or big business loan expansion.

BDO President Nestor Tan said there is also big potential for small business and

microlending but the middle market is the segment that they “know best.” “What

we're looking forward to is focused loan growth, conservative provisioning and

NPA (non-performing assets) reduction; branch expansion and sustained growth

in lowcost funding, growth in fee-based services income, and further

improvement in productive (projects),” said Tan.

Tan said they expect loan portfolios to grow 10 percent this year, with consumer

loans especially housing loans growing double-digit figures. “Our consumer

lending is still young and embryonic, and we're still bullish on housing because

we believe there's backlog there,” Tan said. Presently, the bank's market sharing

in its loan portfolios is mostly large ticket lending, but according to Tan, consumer

lending is "growing the fastest."

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For 2010, the bank is also expanding its branches by 40 to almost 750 this year

to ride on the increased economic activities, export and remittances growth. They

expect the economy to grow by five percent, higher than official government

forecast of 1.1 percent, while they see the Greek debt crisis as possible

downside risk, although they think deficit and interest rates are within control.

Tan said they see three trends in the banking sector this year and in the future,

which is a lot of market shift, consolidation and disintermediation to “drive

banking forward.” “In market shift the traditional borrowers are no longer here

and moved overseas and as for consolidation, these are not only mergers and

acquisitions (but the) laggards have to rethink their strategy,” said Tan.

“Disintermediation has been happening for sometime (corporates) no longer

borrow they go direct to the market to raise the funds,” he said. Tan said that for

2010, BDO mainly is “poised for growth.”

BDO Leasing upbeat on growth amid challenges

By JAMES A. LOYOLA

June 3, 2010, 3:29pm

BDO Leasing and Finance Inc. is optimistic about its growth prospects this year,

given the overall business confidence index in an upbeat trend, while also

prepared for possible economic challenges ahead.

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With Banco de Oro Universal Bank as its parent firm, thus resulting in synergy,

BDOLF continued to perform well in 2010 as the net loan portfolio further grew to

P9.8 billion at the end of the first quarter.

BDO Leasing intensified its marketing efforts in 2009 and with the support of its

parent bank, BDO Unibank, grew its net loan portfolio by 19 percent to P9.1

billion from P7.7 billion in 2008 while total assets ballooned to P13.1 billion in

2009 or 25 percent higher than the P10.4 billion the previous year.

Total revenues posted a significant increase from P1.4 billion in 2008 to P2.2

billion in 2009, or a 61 percent increase mainly coming from rental revenues.

It took a conservative stance vis-à-vis the economic environment, taking into

consideration the effects of typhoons Ondoy and Pepeng by increasing its loan

loss provisioning. BDO Leasing also effected a one-off adjustment in

depreciation for its assets in its wholly owned subsidiary, BDO Rental. Despite

these adjustments, coupled with the thinning of margins due to competition, the

company still managed to post a respectable 2009 net income of P300 million.

The steady performance allowed BDO Leasing to declare cash dividends to

shareholders in July and December amounting to P432 million or P0.20 per

share. This is the highest dividend payout made by the company from the time it

became publicly traded in 1997.

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Meanwhile, to support earning asset growth, BDOLF secured an approval from

the Securities and Exchange Commission (SEC) to raise its Short-Term

Commercial Paper (STCP) license from P4 billion to P8 billion.

The STCP issue was given a high rating of "PRS 2 minus" by Philippine Rating

Services Corporation (PhilRatings) based on "BDO Leasing's solid market

position, sound capital base and the continuing benefits derived from its synergy

with the parent company, BDO, as well as the relatively positive prospects for the

local leasing and financing industry."

BDO net profit jumps 173% P6.1 billion

By JAMES A. LOYOLAMarch 1, 2010, 5:21pm

Banco De Oro Unibank Inc. posted a 173 percent jump in audited net income for

2009 to P6.1 billion from P2.2 billion in 2008, driven by robust growth in operating

income and a slower increase in operating costs.

In a disclosure to the Philippine Stock Exchange Monday, the bank said profits

were also 11 percent higher than the P5.5 billion target for 2009.

The Bank's operating income was generated from core businesses, leading to

reduced reliance on volatile trading income.

Net interest income increased 33 percent to P30.6 billion in 2009, given a larger

level of earning assets and improved margins. Net interest income was driven by

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the 20 percent expansion in gross customer loans to P472.7 billion, and growth

in low-cost deposits.

Loan demand was sustained across all market segments, while low-cost deposit

growth was fueled by additional branch redeployments.

Total non-interest income grew 13 percent, while fee-based service income,

exclusive of trading income and one-time gains, grew 12 percent.

BDO’s non-performing loan (NPL) ratio dipped to 3.2 percent from 4 percent as

of the fourth quarter of 2008. As the bank took early steps to adjust its risk

management processes even before the onset of the financial crisis in late 2008.

Nevertheless, the BDO said it maintained its conservative outlook setting aside

provisions of P6.2 billion, thereby improving its NPL coverage ratio to 80 percent.

For this year, BDO hopes to do well by leveraging on its operating scale and

maintaining good growth in its core businesses amid a more favorable operating

environment. In this light, the Bank is considering plans to raise fresh capital to

support its medium-term growth objectives and further reinforce its position in the

industry. The amount, structure and timing have yet to be finalized at this point.

With a strengthened business franchise across most business lines, BDO

maintained its industry leadership in terms of total assets, customer loans,

deposits, and trust assets under management.

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CHAPTER 5

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

This chapter presents the summary of findings throughout the research

study. The conclusion to all of the data have had gathered and

recommendations from the researchers.

Summary of Findings

The BDO maintained its high standard of loan services that made the

customers trust their company and continue their transactions despite of some

issues in banking system. Base on the financial statement of the firm for the past

three years the bank is stable when it comes to the

Conclusion

We therefore conclude that when it comes to credibility, BDO is

unquestionable; In fact, it has shared enough to the economic development and

continues to think for a more classic strategy. It earns confidence and respect for

people in satisfying and securing their clients transactions as well as encouraging

individuals to connect with BDO.

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RECOMMENDATIONS

In a company where economic condition is uncertain, people tend to find

resources in a service that they wanted. So far, BDO offers a reasonable interest

rate in loan services but to be able to serve its clients and encourage individuals,

BDO should continue to invest to new technology and hire dedicated staff and

officers. They must respond and adapt to the growing and changing customer

needs as we move closer to the new millennium where speed and convenience

will be the highest demand for its continuous way on top.

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BIBLIOGRAPHY

Websites:

http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=BDO:PMhttp://www.asianbanks.net/HTML/Countries/PH/PHmktshare.htm?searchFor=2010+market+share+of+universal+and+comerial+banks&goButton=go#: http://business.inquirer.net/money/breakingnews/view/20081210-177210/BDO-sees-lending-slowdown-in-09http://business.inquirer.net/money/topstories/view_article.php?article_id=79197http://business.inquirer.net/money/topstories/view/20110124-316351/Bank-lending-seen-to-slow-down-in-second-half

http://business.inquirer.net/money/features/view_article.php?article_id=325662http://business.inquirer.net/money/topstories/view_article.php?article_id=232582http://business.inquirer.net/money/topstories/view/20100808-285682/BDO-widens-lead-over-rivals

http://business.inquirer.net/money/topstories/view/20090924-226747/Fitch-affirms-BDO-rating http://www.mb.com.ph/node/236996/bank

: http://www.mb.com.ph/node/213210/bdo-po

http://www.mb.com.ph/node/259441/bdo-profit

http://www.mb.com.ph/node/260368/files/horoscope/mbhoroscope.html

http://www.mb.com.ph/articles/245750/bdo-net-profit-jumps-173-p61-billion

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