THE BANCO DE ORO UNIBANK INC.

INDUSTRY ANALYSIS PAPER

An Industry Analysis Paper

Presented to the Faculty of the Applied Business Program
School of Economics
University of Asia and the Pacific

In Partial Fulfillment
of the Requirements for the course on
Industry Analysis

By
Dimple Tabangcura

October 2022

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INTRODUCTION

Banco De Oro Unibank, Inc. (BDO) is the number one universal and commercial
bank in terms of asset size and loans in the Philippines as of June 30, 2014 (BSP, 2014). It is
the product of a merger and through the years it has represented a firm consolidation of
strengths and competencies (BDO, 2014). It is a full-service universal bank and has the
ability to provide a wide array of products and services to its personal consumer and the
corporate market (BDO, 2014). It was governed by its founder and chairman emeritus, Mr.
Henry Sy Sr. until his death, the bank is currently at the top of its game. Henry Sy Sr. is
ranked by the Forbes as the number one richest man in the Philippines with self-made worth
(Forbes.com LLC, 2014) as evidence with the good reputation of the bank in the past years.
With the continuous increase of international banks in the Philippines, BDO would have to
revamp itself and gain more competitive advantage in order to remain sustainable. This paper
would focus on the financial status and operations of the bank from the years 2011-2013 in
conjunction with the upcoming ASEAN integration.1

Banco De Oro (BDO) Unibank Inc.: A Bank in Good Standing

BDO Unibank, Inc. is the most awarded bank in the Philippines. Over the years,
award-giving bodies and financial organizations in the Philippines, Asia, Europe, and other
regions have recognized our efforts to find ways for our clients, the industry, and our
community2.  Proudly, it is to be a consistent winner in domestic and international banking
awards in the last two decades, continuously earning awards in categories like private
banking, investment banking, asset and fund management, cash management, private wealth
management, and bonds and equities. It has also been recognized for our environment, social,
and governance initiatives. Among our most recent banking awards in 2018 are:
● “2018 Best Bank in the Philippines” by Finance Asia and Alpha Southeast Asia
● “2018 Best Domestic Bank” by Euromoney’s Asiamoney Best Bank Awards
● “2018 Strongest Bank in the Philippines” by The Asian Banker Strongest Banks by Balance Sheet
● “2018 Best Domestic Bank” by The Asset Triple A Country Awards
● “Platinum Award” by The Asset Corporate Awards
 
Industry Growth Rate: BDO Unibank Inc. for Corporate Years 2014-2021
  The revenue of BDO Unibank Inc. has amounted to approximately 4.18 billion US
dollars during the 2021 financial year. BDO Unibank Inc. operates in the three segments such
as commercial, investment and private banking.3 (Statistia Research and Development, 2022)

Figure 1. Revenue of BDO Unibank Inc. from Financial Year 2014-2021

1
Cadsawan, L.-A., Caoile, P., Disuanco, J., Garcia, R., Tumpalan, J., Wu, S., & Yao, M. (2015). A Financial
and Operational Analysis of Banco De Oro. DLSU Research Congress 2015, 1, 233–286.
https://doi.org/10.2307/j.ctv86dhh6.12
2
https://www.bdo.com.ph/about-bdo/awards-and-citations
3
https://www.statista.com/statistics/1061621/philippines-revenue-bdo-unibank/

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 Source: Originally published by Statistia Research and Development

Financial Highlights

BDO Unibank Inc. generated Php 42.8 billion for the fiscal year 2021. Thus, the same
has obtained an increase of 51% YoY. The graphs presented below show its financial and
operating highlights. Moreso, it includes all financial data based SEC format.4

Figure 2. Financial Highlights

4
https://www.bdo.com.ph/sites/default/files/pdf/BDO-Unibank-2021-Annual-Report-Financial-Highlights.pdf

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Banco De Oro Unibank Inc. At A Glance: Simplified

2020 July – BDO Unibank, Inc. (BDO) recorded P4.3 billion in profits in the 1H
2020 vs. P20.1 billion in the comparable period last year, as the Bank booked total provisions
of P22.4 billion in anticipation of potential delinquencies due to the COVID-19 pandemic.
The provisions are anticipatory in nature, and meant to safeguard the balance sheet. By
recognizing the provisions upfront, the Bank can now focus on growing its business as
restrictions under ECQ/GCQ are gradually relaxed. Core businesses held up well amid the
COVID-19 pandemic, with Pre-Provision Operating Income (PPOP) up 17%.
 
Net Interest Income (NII) likewise went up by 17%. Customer loans rose by 11% to
P2.3 trillion, while total deposits went up by 9% to P2.6 trillion, driven by the 19% expansion
in Current Account/Savings Account (CASA) deposits which now account for 77% of total
deposits. As of end-June 2020, branch operations have been fully restored from only 45% at
the start of the ECQ in mid-March 2020. Non-interest income settled at P24.8 billion, led by
fee-based income with P13.4 billion and insurance premiums with P7.0 billion.
 
Operating expenses dipped by 1% to P56.0 billion on lower volume-related expenses,
and despite the additional costs and operational adjustments to adapt to the “new normal” to
ensure the security, health, and safety of BDO employees and clients. Gross non-performing
loan (NPL) ratio increased to 1.95% while NPL cover settled at 139.4%. Total capital base
settled at P367.5 billion, with Capital Adequacy Ratio (CAR) and Common Equity Tier 1
(CET1) ratio at 13.8% and 12.7%, respectively, despite the upfront provisions. These ratios
are well above regulatory minimum and deemed sufficient to support the Bank’s anticipated
asset growth as well as regularly quarterly dividends.
 
Going forward, BDO believes that its solid balance sheet, sustained business growth,
and dedicated team effort will allow the Bank to weather the COVID-19 crisis and sustain its
long-term performance post-pandemic.5

Banco De Oro Unibank Inc.: Its Market Classification

BDO is a full-service universal bank in the Philippines. It provides a complete array

of industry-leading products and services including Lending (corporate and consumer),
Deposit-taking, Foreign Exchange, Brokering, Trust and Investments, Credit Cards, Retail
Cash Cards, Corporate Cash Management and Remittances in the Philippines. Through its
local subsidiaries, the Bank offers Investment Banking, Private Banking, Leasing and
Finance, Rural Banking, Life Insurance, Insurance Brokerage and Online and Non-Online
Brokerage services.
  BDO’s institutional strengths and value-added products and services hold the key
to its successful business relationships with customers. On the front line, its branches remain
at the forefront of setting high standards as a sales and service-oriented, customer-focused
force. The Bank has the largest distribution network operating branches. 6

5
https://www.bdo.com.ph/news-and-articles/BDO-P4.3B-Net-Income-1H-first-half-2020-P22.4B-Upfront-
Provisions
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https://www.bdo.com.ph/mobile/about-bdo--- Corporate Profile

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 Figure 3. BDO Unibank Inc. Commercial Bank Expansion

Source: BDO Official Website under Corporate Profile Section

Figure 4. BDO Unibank Inc. Market Reach

Source: BDO Official Website under Corporate Profile Section

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SWOT Analysis

Competitive analysis of BDO Unibank Inc. The fundamental reference of the same is
anchored in the study SWOT and PESTLE Research Reports which was published on
February 2022. The same is presented through tabular presentation of significant summary
arising from analytical findings therewith. 7

Table 1. SWOT Analysis Matrix

Strengths Weaknesses

The largest bank in the Philippines with Limited presence in the rural areas,
widespread operations, even in international inconsistencies in customer services. Its
markets. Long standing partnership with online platform is still inconsistent in its
Munich Re automation solutions (MRAS) performance
helps business operations and expansion
through automation. It has been awarded for
its effective communications strategy at the
country’s quill awards. It has financed many
green projects of Philippines, building better
image for itself. And, it collaborative credit
card services with JCBI has categorically
benefit both the companies and the ASEAN
region.
Opportunities Threats

Creation of bills and enactment of laws on Due to pandemic, the economy of the country
taxation has reduced tax percentage favoring (Philippines) has paralyzed thereby posed
the growth of the company. Poor banking decrease or decline which resulted to
penetration of the region can be resolved financial crisis. Cyber fraud is on the rise in
through digital banking. Hence, strong the country. Foreign online banks can offer
balance sheets can enable them to enter into higher benefits in comparison to brick and
successful partnership, merger and mortar banks. ASEAN banks are rapidly
acquisition, to grow and expand their expanding into Philippine markets which can
business. swallow into the market share of indigenous
banks. And, languishing infrastructure
development in the country, disrupts the
growth of the banking industry while sluggish
internet speed resulting in slow digital growth
in the country.

Being the premier universal bank in the country, BDO has utilized its strengths in
building customer loyalty throughout the years. With their slogan, “We Find Ways”, the bank
has been able to build a strong customer base to the extent of operating in extensive banking
hours. BDO is capable of meeting the customers’ needs efficiently with the use of advanced
technology. This allowed the company to diversify and innovate its services through offering
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https://www.swotandpestle.com/bdo-unibank/

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loans and deposits, payments and settlement services, asset management, investment banking,
dealership and brokerage, insurance services, etc. In addition, BDO has a firm and competent
management operated by the Sy family, which pioneered the establishment of SM Malls.
However, due to its limited international presence, BDO has not yet expanded into most of
the geographical areas of the ASEAN region. The bank has also limited presence in rural
areas, and some branches pose inconsistencies with regard customer services. Also, a big
threat to BDO would be the tight competition in the market, with Bank of the Philippine
Islands (BPI) and Metropolitan Banking Corporation (Metrobank) as its close competitors.
The competitors of BDO in the market are not just confined in domestic financial institutions
but also in foreign banks. This can be due to the increase of the presence of foreign banks as
there is an existence of foreign bank liberalization act. 8

Table 2. SWOT Analysis Matrix according to the study of Cadsawan et.al. (2015)9

8
Cadsawan, L.-A., Caoile, P., Disuanco, J., Garcia, R., Tumpalan, J., Wu, S., & Yao, M. (2015). A Financial
and Operational Analysis of Banco De Oro. DLSU Research Congress 2015, 1, 233–286.
https://doi.org/10.2307/j.ctv86dhh6.12
9
https://www.dlsu.edu.ph/wp-content/uploads/pdf/conferences/research-congress-proceedings/2015/EBM/
002EBM_Caoile_PV.pdf

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 On a lighter note, the weaknesses and threats currently experienced by the BDO can
be transformed into opportunities and later on, become strengths of the company. BDO can
expand their company to foreign markets by taking advantage in the ASEAN integration
since global tie-ups can boost the bank’s presence abroad. Another effective option would be
to merge with other banks. BDO could also increase its exposure in the Philippines,
especially to rural areas to create new and loyal customers. Instead of focusing
internationally, the bank can focus on the local level first and strengthen the market, then
gradually increase exposure afterwards. BDO can overcome its tight competitors by
continuously improving and innovating its product and services. Through this, the bank’s
market shares would progressively improve soon after. The SWOT matrix presented in Table
2 shows that BDO has more strengths that it could use to counter the threats, especially its
competitors. The company can maximize its strengths and eliminate weaknesses through
expansion and wide customer base. Using these abilities, it can also maximize the
opportunities that come with the ASEAN integration. As of December 2014, BDO announced
that it would acquire Consuji-led One Network Bank (ONB), which is one of the biggest rural
banks in the country and leading bank in the Mindanao area (Dumlao, 2014). 3.3 Porter’s
Five Forces Analysis Figure 1 summarizes the findings for BDO using Porter’s Five Forces
Model.10

Figure 5. Summarizes the findings for BDO using Porter’s Five Forces Model

Threat of New Entrants – Low In the banking industry, there is a high

capital requirement (reserve requirement) needed as set by BSP. Setting up a bank requires a
huge amount of investments and technology requirements, especially with today’s fast-paced
digital age. Although there are many international banks present in the Philippines, the law
10
Al-Araki, M. (2013). SWOT analysis revisited through PEAK-framework. Journal of Intelligent and Fuzzy
Systems, 25(3), 615- 625. doi: 10.3233/IFS-120668

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still regulates the number of foreign banks to be present in the country. Customers, on the
other hand, still have that brand loyalty and as one of the most trusted banks, most people
would still prefer BDO. Lastly, there are high switching costs for the consumers, especially
the depositors who have deposited via time-deposit. Customers find it difficult to switch to
other banks as their investments have a certain term.

Rivalry among Competitors – High Banks are constantly competing with one
another, either through fast service, variety of products, or innovative measures. BDO has its
equally balanced competitors, which are Metrobank and BPI. Lastly, with the
undifferentiated services (banks offer the same services like loans and deposits and asset
management to name a few) banks would compete with each other even more to get a larger
market share. Threat of Substitutes – Low.There are no substitutes for financial services
other than the substitutes of the nonbanks that have quasi-banking functions. In the banking
industry alone, only banks are considered. Bargaining Power of Suppliers – Moderate
Usually the suppliers of banks are only for ATM machines, cards, and slips. They can change
their prices depending on the market condition and these materials and equipment are
necessary for the banks to function in their daily transactions, but without the banks, suppliers
would have no use for these materials. Bargaining Power of Buyers – Moderate The buyers
are the consumers of the banks and they are either individuals or corporate accounts. They
can easily choose to invest their money in a different bank depending on the interest rates.
Similarly, the bank being the supplier, gives these products and services to benefit the buyers
financially.11

BDO Unibank Inc. Economic Impact According to Sustainability Report (2019)

Through the years, BDO has strengthened its position as the country’s leading full-
service bank with capabilities to serve every Filipino’s banking needs. The Bank continues to
expand its business franchise through sustained branch expansion focused on provincial
areas, as well as increased market coverage to cover the unbanked and underserved segments
of the population in support of financial inclusion. These initiatives have allowed BDO to
increase the economic value it generates, boosting economic activity in the country.12

Figure 6. Economic Value Table (2019)

11
BDO. (2012). 2011 annual report. Retrieved from https://www.bdo.com.ph/sites/default/files/
pdf/PBAR11.pdf BDO. (2013). Annual report 2012. Retrieved from ttps://www.bdo.com.ph/sites/default/files/
pdf/Annual%20Report%20Volume%201%20- %20Optimized.pdf BDO. (2014).
12
https://www.bdo.com.ph/sites/default/files/pdf/BDO-2019-Sustainability%20Report.pdf

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 Source: BDO Annual Sustainability Report (2019)
BDO’s direct economic value generated grew from P89 billion in 2015 to P183
billion in 2019, for a CAGR* of 20%. A large share of the economic value distributed in
2019 was accounted for by wages and benefits, totalling P35 billion, benefitting the Bank’s
more than 38,000 employees and supporting their professional and personal development.
The Bank concurrently increased its payments to the government from P12 billion in 2015 to
P29 billion in 2019, duly contributing its share in nation-building. Further, payments to
suppliers and third-party service providers (embedded in other operating costs) generate
positive social and economic contribution to the communities where these businesses
operate.13

BDO Unibank Inc.: Contributory Mechanism for Nation-Building

The Bank contributes to national economic development not just through financial
inclusion but also through financing of infrastructure, eco-friendly solutions, and clean and
renewable energy sources. Since 2010, the Bank’s Sustainable Finance Desk under the
Institutional Banking Group has financed eligible business projects that pursue energy
efficiency, green building, clean transportation, pollution prevention and control, sustainable
management of natural resources and land use, eco-efficient technology, sustainable water
and waste water management, terrestrial and aquatic biodiversity conservation, and climate
change adaptation.
 
BDO’s Social and Environmental Management System Policy was developed in
partnership with the International Finance Corporation (IFC) to categorize the risks of project
proposals based on their environmental and social impact. IFC is a member of the World
Bank Group and is the largest global development institution focused on the private sector in
developing countries. Meanwhile, BDO’s Disaster Response strategy addresses both
Economic & Social issues and helps economic recovery in areas hard-hit by natural or man-
made disasters.
 
The Bank’s other activities through the BDO Foundation, its corporate social
responsibility arm, have profound Social Impact as well, from financial education across
various sectors of society to fund raising for target communities, and donating test kits and
vaccines in light of the COVID-19 pandemic. The Bank’s Governance-based Sustainability
strategy ensures that all its sustainability initiatives are aligned with business performance
and managed and disclosed in an accountable and transparent manner.
 
 
On the financial-side, the Bank’s foray into sustainable investments continues to pay
dividends for the last five years since the instrument was first launched. As of end-2020, the
value of the assets under management of BDO’s environmental, social, and corporate
governance-themed Unit Investment Trust Fund grew 79% to PhP99.4 million from P55.5
million in 2016. When COVID-19 was declared a full blown pandemic in 2020, drastic health
measures and social distancing protocols had to be implemented to mitigate the spread of the
virus, including temporarily closing down businesses or cutting down on their manpower
hours. This subsequently triggered a freefall in share prices in March 2020—wiping out
Php1.6 trillion in market value in the local bourse on March 19, 2020 in the process.
 
13
https://www.bdo.com.ph/sites/default/files/pdf/BDO-2019-Sustainability%20Report.pdf

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Since that market plunge however, the BDO ESG UITF recovered dramatically, posting
19.90% returns in the past three months and 13.95% in the past six months ending in
December 2020. From Php55.5 million in 2016, the assets under management of BDO ESG
UITF have grown steadily to Php60.1 million in 2017, Php66.6 million in 2018, Php75.2
million in 2019, and Php99.4 million in 2020.
 
The BDO ESG UITF followed a similar higher return performance shown by ESG
funds globally, proving the importance of sustainable business practices. While the Fund is
still small, it has the potential to grow in size and importance as more investors are
consciously looking for companies that protect the environment, are socially responsible, and
practice good governance in a sustainable manner. The BDO ESG UITF was the first of its
kind in the Philippines. It allows investors to see value in socially responsible companies as
an investment destination for their funds, and to invest in one fund that covers several
companies, instead of investing separately in every local company that they believe creates a
positive contribution to society. Its importance is further heightened during this time of the
pandemic, as sustainable investment amplifies the Bank's resiliency to unforeseen global or
local crises.

Understanding the Success of BDO Unibank Inc. Through Merger and Acquisition: A
Comprehensive Study14

Mergers and acquisitions have been a popular practice in various industries, including
the banking sector. In the Philippine banking industry, merger and acquisitions have grown
since the start of the new millennium. With this in mind, this paper looks at the countrys
current leader in the banking sector, Banco De Oro Unibank Inc. (BDO). With an asset size
of about Php 875B as of the 2nd quarter of 2010, it is interesting to note how BDO was able
to attain such an achievement through its merger and acquisition activities. This paper aims to
identify and understand the purposes of the mergers and acquisitions between BDO and the
seven (7) other banks since the start of the millennium. The findings obtained in the study can
serve as a platform for future research geared towards the same subject matter. Moreover, the
findings can serve as a point of comparison on how other banks conduct their own mergers
and acquisitions. The study was carried out using a case study approach. An analysis of
interviews with officials from BDO and BSP and findings that were obtained for the seven
(7) different banks were done. The results of the study concluded that Banco de Oro Unibank,
Inc. had various needs that served a main purpose and these needs were met through the
mergers and acquisitions.
BDO: Strong Results Across its Core Businesses
The Bank continues to roll out new digital capabilities and self-service technologies
across branches to make banking services more accessible, easier to use and operationally
efficient. These branch innovations include paperless straight through processing capability,
covering 80% of branch transactions, and card less automated teller machine (ATM)
transactions using biometrics (fingerprint scan or facial recognition) and QR codes. 15The
Bank is now also offering its mobile wallet, BDO Pay, to non-BDO account holders. BDO
14
Afurong, K. M. D., Conner, J. K. R., Meridores, K. I. O., & Sy, K. A. (2012). Understanding the success of
Banco De Oro Unibank, Inc. through Its Mergers and Acquisitions. German Mergers & Acquisitions in the
USA, 119–166. https://doi.org/10.1007/978-3-8350-9469-7_4
15
https://www.bdo.com.ph/news-and-articles/BDO-Unibank-1H-first-half-2022-net-income-P23.9B-12-percent-
up-year-on-year-YOY

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Pay does not require any initial deposit nor maintaining balance, and currently allows fund
transfers to other bank accounts without cost.  BDO’s established business franchise, healthy
capital position, and sustainable earnings performance reinforce the Bank’s resilience against
prevailing macro headwinds and put it in a good position to capitalize on the country’s
structural opportunities for long-term sustainable growth.

REFERENCE LIST

Cadsawan, L.-A., Caoile, P., Disuanco, J., Garcia, R., Tumpalan, J., Wu, S., & Yao, M.
(2015). A Financial and Operational Analysis of Banco De Oro. DLSU Research Congress
2015, 1, 233–286. https://doi.org/10.2307/j.ctv86dhh6.12

BDO. (2012). 2011 annual report. Retrieved from https://www.bdo.com.ph/sites/default/files/

pdf/PBAR11.pdf BDO. (2013).

Afurong, K. M. D., Conner, J. K. R., Meridores, K. I. O., & Sy, K. A. (2012). Understanding
the success of Banco De Oro Unibank, Inc. through Its Mergers and Acquisitions. German
Mergers & Acquisitions in the USA, 119–166. https://doi.org/10.1007/978-3-8350-9469-7_4

Electronic/Website Reference/s:

https://www.bdo.com.ph/about-bdo/awards-and-citations

https://www.statista.com/statistics/1061621/philippines-revenue-bdo-unibank/

https://www.bdo.com.ph/sites/default/files/pdf/BDO-2019-Sustainability%20Report.pdf

https://www.bdo.com.ph/sites/default/files/pdf/BDO-2019-Sustainability%20Report.pdf

https://www.dlsu.edu.ph/wp-content/uploads/pdf/conferences/research-congress-proceedings/2015/
EBM/002EBM_Caoile_PV.pdf

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