Rural Bank of Suares
In a stockholders’ meeting of the Rural Bank of Suares (RBS), Peter Arguelles, the bank general manager, proposed that the bank should open another branch in the capital city. However, the stockholders are reluctant with this motion, given that there are branches of the big banks of Manila and already two rural banks in the city. For more than 20 years, the Rural Bank of Suares struggled financially because of the government’s lending program. Point-of-View:
For this case, the point-of-view of the stockholders will be used Statement of the Problem:
Should the stockholders follow Peter Arguelles and expand to the capital city or should they not? Areas of consideration:
First, the banking industry in the late 1990s can be categorized by three major trends: Deregulation, Technological innovation, and Globalization. These trends combined to induce a consolidation in the industry that knew no borders. The mantra heard in corporate boardrooms and analyst conference calls was “bigger is better.” The rationales for this were largely two-fold. On the operational side, banks believed that only by being larger than the competition could they take full advantage of the economies of scale and economies of scope that the technology revolution was offering. Thus, by getting larger banks could reduce their expense ratios and earn a higher net interest margin. On the marketing side of the business, banks also felt that bigger was better. Deregulation in the US and elsewhere had made the buzzwords of relationship banking and cross-selling more than academic musings. To bank executives everywhere, these words represented the keys to winning back some of market share banks had been losing to equity markets and other financial intermediaries. Moreover, buying land and constructing a building for the new branch in the city would be too risky for the company since they are not assured of the success of the said...