Bpi Strategic Management Report

Topics: Bank, Online banking, Philippines Pages: 38 (11169 words) Published: July 2, 2012
A strategic management paper for the
Bank of the Philippine Islands (BPI)

Business managers are often worried with immediate issues and problems, which sometimes made them forget the objectives. Nowadays with the highly competitive business market, planning methods are needed to be able to perform smoothly and orderly.

Strategic management is used as a planning tool to help the organization do a better job, to know where to focus their energy on. It is used to guarantee that the employees are working towards the same goal, also to be able to consider and alter the direction of the firm with regards to the change in the business environment.

Bank of the Philippines Islands began in 1828, when King Ferdinand VII of Spain declared the establishment of public banks in the Philippines. It took about 23 years, before the bank became a reality. Antonio de Urbiztondo y Eguila, was the one behind the organization of the bank. As the highest ranking government official in the Philippines in 1850, he called for the support of the committee of civil and ecclesiastical officials, Junte de Authoridades, for the approving the banks statues and by-laws. Through the following years, BPI has been closely linked with the Spanish crown, that they even established a branch their first branch in Madrid. But the plan did not push through, instead their first branch materialized in Iloilo in 1897, because that was time wherein economic prominence was present in Iloilo and the Panay region. After the World War II, BPI was closely getting involved in the development of the industries.

In 1969, Ayala Corporation became the dominant shareholder of the bank. Which led to momentous changes in the way the bank conducted its business. For example, BPI fast-tracked their growth by engaging in a fusion with People’s Bank and Trust Company in 1974 and many other fusion was made like Commercial bank and Trust Company in 1981, Ayala Investment and Development Corporation in 1982, Makati Leasing and Finance Corporation in 1982, Family Bank and Trust Company in 1985, City Trust Banking Corporation in 1996, and many more. They became a universal bank in 1982, hence started taking in non-allied undertakings.

Through the years, BPI has uphold their position and expanded as a commercial bank. For years, they have been recognized as one of the best banks in the region. They are consistent with their governance and business. Now they celebrate their 160th anniversary, as an icon in the Asia Finance, not just only for being the oldest commercial banking institution in Asia but also as the prime mover in the development of markets and industries.

Philippine banks generate more than 18% from corporate banking and over 48% from investment banking and treasury,despite efforts to diversify into retail banking which contribute around 34% to total income. This is even lower than compared to 5 years ago, when retail banking accounted for 36%. The financial market is dominated by three banks, which are owned by large conglomerates. Combined they hold more than 60% of the retail banking market and have strengthened in recent years their dominance in their respective strength areas, such as BDI in mortgages, Metrobank in auto loans and BDO in credit cards. Overall, banks have managed to grow at a strong pace while being able to conserve high margins and avoid aggressive pricing competition.

Retail banking in the Philippines is a liability driven business model. Only 16% of retail funds are used for retail lending, while most funds are used in the more profitable areas of corporate lending, accounting for on average 35% of profits in the last 5 years for the four largest banks excluding BDO, investment banking and in the treasury business, accounting for 32% in the same timeframe. Retail banking itself only generates 27% of profits. The industry is beset by high operational cost and credit risk.

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