I.

PURPOSE
The purpose of this financial analysis report is to consider Bank of
the Philippine Island's exposure to risks before making a trading or
investing decision in the bank's finance or stocks. The analysts will
also determine how profitable and liquid the bank is over its three
years of operations from 2012 to 2014 by analyzing the entitys
consolidated financial statements. The users of these financial
statements include the potential investors and the company. The
analysts will then give recommendations for the entitys
improvement.

II.

CORPORATE OVERVIEW
A. INDUSTRY ANALYSIS
Bank of the Philippine Islands is a bank that engages in the
provision of commercial banking services. Its financial services
are the economic services provided by the finance industry,
which encompasses a broad range of business that manage
money, including credit unions, banks, credit-card companies,
insurance companies, accountancy companies, consumer-finance
companies, stock brokerages, investment funds and some
government-sponsored enterprises.
The Bank offers wholesale and retail lending, and facilitates
overseas Filipino (OF) remittances, bank assurance, asset finance
and leasing, government
securities
dealing, securities
distribution, and foreign exchange. The Bank offers corporate,
commercial and retail banking products. The Bank has two major
categories for products and services. The first category covers its
core financial intermediation business, which includes deposit
taking, lending and securities investments. The second category
covers services ancillary to the Banks' financial intermediation
business. These include investment banking and corporate
finance, asset management and trust services, foreign exchange,
securities
distribution,
securities
trading,
credit
card,
international trade transactions, drafts, fund transfers and
deposit related services.
In Global Markets, their core competence is the management of
the banks positions in liquidity, interest rates, foreign exchange,
and fixed income capital markets instruments. They are one of
the largest Eligible Dealers in government securities, and are a
major counterparty to the Bureau of the Treasury (BTr). Their
Bank of the Philippine Islands

prudent stance in markets risk-taking resulted in significant

retention of comprehensive income from net income,
underscoring their focus on quality of earnings and their desire to
achieve profitability through the interest rate cycle.
They retain in-house economists who conduct extensive research
on Philippine and global macro-economic trends. Furthermore,
they gather market intelligence through formal advisory
arrangements with major international banks and asset
managers. Finally, they have reinforced their sales and
distribution teams to improve across-the-board connectivity with
institutional, corporate, private banking, and retail clients,
thereby improving their intelligence about market movements
and generating flow-related volume and revenues. They are a
significant complement to BPI Capital, as it increases its capital
markets origination activity and builds out its syndicate
functions.
In 2014, they opened investments and foreign exchange centers
in Manila and Quezon City; we also plan to open yet another in
Cebu City in February 2015. They have also strategically placed
marketing units present in areas like Cebu, Davao and
Pampanga, complementing the ability of our branch network to
provide funding, foreign exchange, and hedging products to our
clients. We are committed to providing services tailored to the
local needs of its clients needing to access fast-moving global
and capital markets.
Their performance in Global Markets points to significant
opportunities for earnings growth for BPI:
Awarded by the BTR as the 2nd Best Performing Government
Securities Eligible Dealer;
Ranked No. 3 by the Philippine Dealing and Exchange
Corporations fixed income exchange;
Awarded Overall Best Local Currency Interest Rate Research
and Market Coverage by Asia money, in recognition of its firstrate economic and financial markets research.
BDO, BPI and Metrobank are the biggest commercial and
universal banks in the Philippines. BDO is controlled by Henry
Sys SM Group, BPI is controlled by the Ayala Group and
Metrobank is controlled by George Tys group. What people like
about BPI is it has a lot of ATMs and branches, with 1,600 ATMs
Bank of the Philippine Islands

spread out all over the country. It is the only one that directly
accepts peso bills for deposit at several of its ATMs in Metro
Manila. BPI offers a local credit card with a lower interest rate
and lower- cost installment and loan features. For their
competitors BDO and Metrobank, BDO works longer banking
hours, they are open on Saturdays, Sundays and most holidays
for branches located in SM malls. BDO also has a lot of branches
and ATMs, 1372 ATMs and 716 as of June 2010. For Metrobank, it
offers a zero- fee credit card and its M Free Mastercard is forever.
Also, they have 1,200 ATMs nationwide, over 730 branches and
42 foreign branches.

B. Business Strategy
Historical Perspective
Through the years, BPI strove to deliver the highest standards of
convenience banking through the ingenuity of technology and
creative management. As the recognized "most technologically
advanced bank", BPI introduced the first successful automated
teller machine (ATM) service in the Philippines. Among BPI's
other firsts are: the issuance of the first debit card, the
introduction of cashless shopping with the Express Teller Card,
the establishment of banking kiosks, the Express Banking
Centers, the launching of telephone banking with the Express
Phone, and the use of a Call Center. BPI has distinguished itself
by catering to the ever-evolving needs and lifestyles of the
public.
Bank of the Philippine Islands (BPI) is that country's secondlargest bank, trailing only Metropolitan Bank & Trust. It is also the
Philippines' oldest bank and one of the oldest of all Asian banks.
BPI offers a full range of commercial and retail financial services,
including corporate finance services, asset management, and
brokerage and other financial consulting services. BPI's retail
network includes more than 700 branches throughout the
Philippines, as well as branches in New York, Hong Kong, and
Tokyo. The bank also operates a network of more than 1,200
automated teller machines and more than 8,500 retailer-based
point-of-sale machines. In 1999, BPI pioneered online banking in
the Philippines with the launch of online bank BPI Direct in 1999.
In addition to its banking products and services, BPI has also
developed a strong non-life insurance operation, chiefly under
Bank of the Philippine Islands

subsidiary BPI/MS Insurance Corporation. Listed on the

Philippines Stock Exchange, BPI has long been majority
controlled by Philippines conglomerate Ayala Corporation.
Primary Focus of Operations
The primary focus of operations of the Bank of the Philippine
islands is to offer a wide range of financial products and solutions
that serve both retail and corporate clients. Also, BPI is
acknowledged as a leading provider of financial services in the
Philippines. Their products and services teams work to design
and deliver financial products that address specific top-of-mind
needs, and in ways that clients find accessible, convenient, and
efficient. In so doing, they also adhere to their mission of
financial inclusiveness to an ever growing base of Filipino clients.
Most Important Strategy
Bank of the Philippines strategies are: provide comprehensive
payment solutions to both retail and corporate clients, offer a
comprehensive array of bills and supplier payment services, both
electronic and in-branch, and their mobile applications offer
some of the most function-rich payment solutions available to
Philippine customers.
Major Operating Segments
The Bank of the Philippine Islands operates in three segments:
Consumer Banking, Corporate Banking and Investment
Banking. Consumer Banking segment covers deposit taking
and servicing, consumer lending such as home mortgages, auto
loans and credit card finance, as well as the remittance business.
Corporate Banking segment consists of the entire lending,
leasing, trade and cash management services provided by the
BPI to corporate and institutional customers. Investment
Banking segment includes the various business groups
operating in the investment markets, and dealing in activities
other than lending and deposit taking.
At present, Bank of the Philippine Islands (BPI or the Bank)
registered P4.9 billion in net income in 2015 Q1, up 36% from
2014 Q1. This result translated to annualized ROE and ROA of
13.8% and 1.5%, respectively. BPIs core lending and deposit
businesses sustained strong growth. Net Loans stood at P730
billion, up 14% year-on-year as lending to corporates increased
Bank of the Philippine Islands

by 13% and retail loans grew by 16%. Total deposits was P1,159
billion, a 17% increase year-on-year.
Five- year Forecast for the Company
The business outlook of BPI is a positive one because given that
the company progressed over its three years of operations, it is
probable that future economic benefits will still flow to the entity
for the next two years of its operations. Although the companys
assets, liabilities and capital funds are performing inconsistently,
still the company was still able to cover up all its obligations and
was also able to generate income from deposits by P802.3 billion
in 2012 to P1, 176.2 billion in 2014.
In the forecasted balance sheet in the years 2015 and 2016
shows an increase of its total resources and liabilities which
implies that BPI can generate more of its assets, at the same
time an additional obligation to its creditors.
In the forecasted income statement in the years 2015 and 2016
indicates an increase in the banks gross income of P 46,787 in
2015 and P 52,738 in 2016. Also, earnings per share increased to
P5 which is a good sign of investment.

Bank of the Philippine Islands