queenbank - corporate strategy.doc

1

CHAPTER 1

INTRODUCTION

Background of the Study In this era of globalization, competition is so stiff that no businesses are

spared. The influx of communication technologies brought the world closer to

each other making opportunities for businesses to go globally.

Service industries, which include banks, messenger services, hospitals

and others, now find themselves involved in marketing activities in order to

capture more customers. Innovative products and services are being developed

so as to satisfy the needs of their respective customers.

In the banking industry, almost all of the competing banks (big and

medium size and even several small ones) have created a marketing

department, which shall oversee the implementation of banks marketing

program. This new department brings bank products and services closer to their

target clients. Marketing officers talk personally to prospective clients, individual

or company. Gone now are the days that banks wait for walk-in customers.

2

Statement of the Problem

Queen City Bank, a thrift bank, has been operating in Davao City for the

past ten years. Despite these years, however, there seemed to be some problem

besetting the Davao Branch in terms of extending loans, and lack of public

awareness. This problem has caused them to have low profit performance over

the past years. How can Queen City Development Bank Davao branch attain a

32% increase in outstanding loans for the year 2008?

Goals of the Study

The goals of this study is to increase the branchs profit performance and

improve its marketing reach in the next five years

Specifically, it has the following goals to achieve:

1. To determine the financial performance of Queenbank Davao Branch

in terms of gross income, expenses, profitability, and liquidity

2. To determine the marketing performance of Queenbank Davao Branch

in terms of public awareness and competitive position

3. To identify the banking needs of the local residents in the Chinatown

area.

3

Objectives of the Study

To increase its customer awareness on Queen City Development Bank,

Davao branch from 32% to 48% clients for the year 2008.

To increase gross profit of the branch by at least 22.18% for the year

2008.

To increase branchs current ratio from .11 to .15 in the year 2008.

Importance of the Study

Benefits of this study may accrue to the following:

Queenbank Davao Branch- results of the study will give branch

management insights on how they stand in Davao City. Findings may serve as

basis for formulating new strategies to improve its performance

Local Banking Industry Results of the study will help local banking

association of the banking needs of local residents, thus could pave way for

development of new bank product and services

Students findings from this study will make them aware of how bank

industry operates and thus could make them more knowledgeable of banking

operations

4

Scope and Limitations

This study is limited to improving the performance of Queenbank Davao in

terms of profit. This study shall confide strictly on result of branchs operational

performance during year 2007 as provided.

This study is also limited in determining the marketing awareness of the

local public on bank existence, branchs competitive position, identifying banking

needs of local residents, and planned actions that will improve the present

banking condition of the branch under study.

Methodology

Survey Design- The main instrument used in gathering information is the

used of a constructed questionnaire. It was distributed to the different

respondents within strategic areas of Davao City.

Direct interviews were conducted with respondents and branch personnel

to support the extraction of data.

Secondary data to supplement the needs of the study were provided by

the concerned branch with restrictions in order to have confidentiality of some

branch data.

5

Sampling Design- non-probability sampling specifically, convenience

sampling was used as the sampling design. This sampling design was used

because of time and financial constraints of the student researchers. Also, the

researchers would like to test ideas, or to gain ideas about the subject of interest

which is about feasibility of relocating the thrift bank in the Chinatown area.

Conceptual Framework

Figure 1 shows the conceptual framework of this study. It shows the

studys input in terms of banks programs and output whether the bank should

relocate or not

Figure 1: Conceptual Paradigm of the Study Showing Input and Output

Input Output

Queenbank Davao

Programs

- Capital Budgeting

- Survey results

- Review of related literature

- Industry analysis

- Analysis of the financial

statements provided by the

Decision of

whether to add

a new branch

or to relocate

the current

branch

6

Definition of Terms

The following definitions of terms are presented for easy understanding of

the readers.

Strategic Planning

The basic idea and process of strategic planning has been around for

many years. Strategic planning represents a paradigm shift from what is known

as long-range planning. Strategic planning was developed as a proactive

alternative to long-range planning. Formal "strategic planning," on the other

hand, is a top-down, vision-driven process that is used to develop an

organization's future value. Russell Ackoff, professor at the Wharton School of

Business and a noted strategic planning consultant, notes, "Planning . . . is

anticipatory decision-making. It is the process of deciding . . . before action is

required.

Growth Strategies

It is the most widely pursued strategy designed to achieve growth in sale,

assets, profits or some combinations. Continuing growth means increasing sales

and a chance to take advantage of the experience curve to reduce per unit cost

of products sold, resulting to increase profit. Market penetration, market

development, and product development are basic types of growth strategies that

companies adopt.

7

Market penetration strategy- this strategy seeks to increase market

share for present products or services in present markets through greater

marketing efforts. This strategy is widely used alone and in combination with

other strategies. It includes increasing the number of salesperson, increasing

advertising expenditures, offering extensive sales promotions or increasing

publicity efforts.

New product development- is a strategy that seeks increased sales by

improving or modifying present products or services. Product development

usually entails large research and development expenditures. Banks are

expanding geographically by adding branches aggressively.

8

CHAPTER 2

REVIEW OF RELATED LITERATURE

Origin of Thrift Bank Industry

A thrift bank is a bank that focuses on taking deposits from consumers

and originating home mortgages. It emerged from the British building society in

late eighteenth century and its primary purpose was to help working class men

and women save for the future and for home acquisition. Certain provisions were

promulgated for one to become a thrift member. One such provision is for the

prospective member to subscribe shares from the organization by paying the

shares in regular monthly installments. When accumulated monthly installments

of the members are big enough, members are allowed to borrow money for

purpose of buying a house. The amount of money the member can borrow is

equal to the face value of the subscribed shares thus, loans granted were

actually advances made on their unpaid shares. The member then repays the

loan and interest through regular monthly installments. The accumulated interest

and other fees less operating expenses thus would be the profit of the thrift

organization. It will be the basis for the dividend each member will receive at the

end of the year.

Few thrift institutions were organized after its first formation in 1831. The

situation only changed in the late nineteenth century where urban growth

9

became visible and demand for housing increased as an aftermath of the

Industrial Revolution as number of thrifts began to mushroom.

Although industrialization was a major factor to the growth of thrift banks,

there are other reasons that led to the boom of thrift banks in the 19th and early

20th century. These are: First, thrifts were not-for-profit cooperative organizations

that were typically managed by the members. Second, thrifts in the nineteenth

century were very small having only at least 200 members. These local

institutions serve well-defined groups of aspiring homeowners.

Also, thrift mortgages have longer term of repayment, ranging from eight

to twelve years to which a borrower can repay both the principle and interest over

time. This type of loan, known as the amortizing mortgage, was commonplace by

the late nineteenth century, and was especially beneficial to borrowers with

limited resources. Also, these home mortgages were primarily available to

working class men and women.

10

Thrift Bank Industry in the Philippines

The industry continued to grow rapidly as total assets rose anew by 12.4

percent underpinned by the sharp rise in investments, net (45.3 percent).

However, its underlying fundamentals remained weak as evidenced by sustained

overall et operating loss, by deteriorating cost efficiency, and by still increasing

proportion of distressed assets to total assets (29.2 percent). Loss provisioning

also further eroded and balance sheet leverage increased. On the positive side,

the ability to mobilize deposits remained robust as deposits rose by 14.7 percent.

Nevertheless, assessment of overall industry performance is not straightforward

as it is complicated by very wide variation in individual bank performance. In

particular, a handful of troubled banks materially tainted industry performance

indicators.

Table 1: List of players in the industry Davao Chapter ( thrift and savings

banks)

* Anchor Savings Bank * Bank Wise

* Asia United Banks * RCBC Savings Bank

* Asian Bank * Maybank

* BPI Family Savings Bank * Micro Enterprise Bank

* Banco Filipino * Queenbank

* Philam Savings * Planters Development Bank

The industry was still dominated by BPI Family Savings Bank whereas

Asiatrust Development Bank replaced Banco Filipino and Philam Savings for the

fifth slot in terms of assets and loans, respectively (table 2).

11

Table 2

TOP FIVETHRIFT BANKS (NATIONWIDE) Based on Published Statements as of June 2004 (Amounts in P Billion)

ASSETS Rank Name of Bank Amount 1 BPI Family Savings Bank 63.3 2 Philippine Savings Bank 39.0 3 Planters Development Bank 30.6 4 RCBC Savings Bank 29.0 5 Asia Trust Development Bank 12.0 Total 173.9 %share 60.2

LOANS Rank Name of Bank Amount 1 BPI Family Savings Bank 39.1 2 Philippine Savings Bank 21.3 3 RCBC Savings Bank 17.1 4 Planters Development Bank 15.2 5 Asia Trust Development Bank 6.2 Total 98.9 % share 64.7

Source: Office of Supervisory Policy Department, Supervision and Examination

Sector

The industry chalked up a 7.3 percent growth in total loan portfolio.

Industrys loan portfolio is extended to the real estate, renting, business activities,

construction, other community, social, and personal services, private households,

manufacturing, agriculture, fishery, hunting and forestry, wholesale and retail

trade, repair of motor vehicles, health and social work, electricity, gas, and water,

education and automobile sectors.

12

INVESTMENTS: The industrys investments (gross0 reached P52.0

billion, a substantial increment of 43.5 percent. Huge portions of the industrys

total investments were placed in debt instruments.

DEPOSITS: The industry continued to rely on deposit liabilities for funding.

The industry mobilized additional deposits worth P26.7 billion or 14.7 percent for

funding.

Queen City Development Bank

Queen City Development Bank, a thrift bank, was established in 1981

from the success in business of its owner and founder Mr. Rogelio Florete, Sr. At

present, the Florete group owns eighty percent of the company. Its main office is

located in Iloilo City where two other branches are strategically located.

For its twenty- four years of operations, it was able to operate in ten key

cities in Visayas and Mindanao. Bacolod, Cagayan, Cebu, Dagupan, Davao and

Naga. It is one of the top thrift banks outside the National Capital Region

.

Queenbank is committed on satisfying customers needs by providing

them various products and services; and earning the clients trust and confidence

in the company, on the process. As a highly conservative and liquid company,

Queenbank continues to prosper by achieving the fundamentals of: (1) managing

risks effectively through quality loan accounts, and; (2) handling over-all

operating costs.

13

Tuesday, June 17, 2003

Search on for most SME-friendly bank

THE Davao City Chamber of Commerce and Industry (DCCCI) has announced

the start of the evaluation for the Most SME-Friendly Bank Awards of 2003.

In an interview Monday, DCCCI advocacy officer Karl Catalan said banks

deserve such recognition, being the center of the mainstream financial system

providing assistance to the small and medium enterprises (SMEs).

The contest, which is open to all banks in Davao City, has three categories -- for

commercial bank, thrift bank, development or rural bank.

Four major awards will be given away to the Most SME-Friendly Government

Commercial Bank, Most SME-Friendly Private Commercial Bank, Most SME-

Friendly Thrift Bank, and Most SME-Friendly Rural Bank.

Search and nomination committee established by the SME Resource Network of

the Davao City SME Center and the representative from the Bangko Sentral ng

Pilipinas will be responsible for evaluating all candidates.

The group will base their assessment on the following criteria: the number of

SME accounts, borrowers, the total amount lent to SMEs, employment generated

14

as a result of financial assistance to the SMEs, innovative use of collateral

substitutes to accommodate the SME borrower, and the handling of account.

Banks should be accommodating and easy to negotiate with, especially if

delayed payments, restructuring, and other loan or payment adjustments are

concerned.

Bank candidates are requested to submit documents such as certified copy of

financial statements, copy of organizational chart and others necessary for the

comprehensive deliberation of the screening and nomination committee.

Last year's Most SME-Friendly Thrift Bank was Planter's Development Bank,

while the Most SME-Friendly Rural Bank was the One Network Rural Bank of

Southern Philippines in Davao City.

The Most SME-Friendly Commercial Bank in 2002 was Rizal Commercial

Banking Corporation while the Most SME-Friendly Government Bank was the

Land Bank of the Philippines. CEU

15

One Network Bank resources hit P4.2B

By Ted P. Torres

The Philippine STAR 03/21/2006

DAVAO CITY The total resources of One Network Bank (ONB) has reached

P4.15 billion last year, or a growth of approximately 38 percent from the P3 billion

reported in 2004.

That puts the Mindanao-based rural bank (RB) in the leadership position among

the countrys rural banking system, and 14th overall among the thrift banks.

Net income, however, dropped by 33 percent from P186 million in 2004 to P125

million due mainly to provisioning for probable losses, adjustments to the new

accounting standards, higher investments in government securities and bonds,

and operating costs of new branches and automatic teller machines (ATMs).

Capital adequacy ratio (CAR) remained a healthy 18 percent while its ratio to

liabilities to capital ratio was recorded at 489 percent at the end of 2005.

"We, however, failed to meet our targets which turned out to be overly optimistic

and bullish," ONB president Alex V. Buenaventura said.

Total deposits grew to P2.98 billion last year up by 28 percent from the previous

16

year, but off target by 11 percent from its earlier targets. Loan portfolio likewise

grew by 28 percent from P2 billion in 2004 to P2.6 billion.

Past due ratio nonetheless remained at a healthy 11 percent.

Interest income from loans remained the top contributor to revenues, accounting

for more than 70 percent of gross income, followed by service charges and fees,

commissions and interest on investments.

Earning assets to total assets ratio stood at 85 percent while return on assets

(ROA) stood at five percent well above the minimum ratio of 1.8 percent required

by the Bangko Sentral ng Pilipinas (BSP).

Non-performing asset (NPA) ratio stood at 10.3 percent at the end of 2005 while

its non-performing loan (NPL) ratio was placed at 8.9 percent.

Meanwhile, ONB presently operates 61 branches Mindanao-wide making its the

widest branch network even surpassing the commercial banks in the area. By the

end of 2006, it expects to open at least four more to bring its network to 65.

Of its total branch network, 17 are located in areas that does not have a single

bank presence. Another 12 branches are located in areas where no commercial

banks operate.

17

Supporting its branch network, is the 37 ATM units integrated with the MegaLink

network located in various onsite and offsite locations in Mindanao.

In fact, ONBs Gaisano-Cagayan de Oro offsite ATM was ranked number one

within the MegaLink network with most number of transactions of the total 449

MegaLink offsite units nationwide. MegaLink has a total of 1,900 ATM units.

Major headway likewise had been achieved in the remittance business.

ONB has linked up with various bank and non-banking institutions with domestic

and overseas operations. It has alliances with Banco de Oro Universal Bank

(BdO), the Philippine National Bank (PNB), Peragram, the Rizal Commercial

Banking Corp. (RCBC), PetNet, MoneyGram, and UniTeller.

Buenaventura revealed that they are finalizing arrangements with Equitable PCI

Bank which will make ONB among the leading banking institution in the

remittance business in Mindanao.

Mindanao reportedly accounts for roughly $4 billion in remittance business of the

$8.6 billion recorded in 2004.

One Network Bank is the first rural bank to get the nod of the Philippine Clearing

18

House Corp. (PCHC) for its first-ever checking account.

Dealing directly with PCHC, instead of a commercial bank acting as clearing

bank, speeds up and expedites clearing of its own checking account. It also

unlocks two-thirds of the reserve deposit block with the commercial bank thus

allowing ONB to reallocate for lending.

ONB is a product of a historic merger between three rural banks based in

Mindanao. One Network Rural Bank is a three-way consolidation between

Network Rural Bank (Davao del Sur) Inc., the Rural Bank of Panabo (Davao del

Norte) Inc., and the Provident Rural Bank of Cotabato (North Cotabato) Inc.

19

Davao thrift banks urged to serve small firms.

(From BusinessWorld (Philippines))

DAVAO CITY - Hardly able to influence lending policies of big banks,

the Department of Trade and Industry's regional office would try to

convince smaller financial institutions in the Davao region to be more

active in the government's micro-lending and small business program.

Entrepreneurs have complained that big banks remained restrictive

with respect to loan applications including access to the P10-billion

small and medium enterprise fund, or SME fund, channeled through

government financial institutions.

Marizon Loreto, Trade assistant regional director, said most thrift

banks operating in the Davao region are accredited conduits of state-

run banks especially programs on development financing.

Ms. Loreto said other government agencies, such as the Department of

Science and Technology, are also helping the Trade department drum

up increased activities in the micro-enterprise and small business

segments of the industry. The Science department's "SME Start" drive,

she said, provides technology transfer assistance for projects that are

technology based.

20

A complementary assistance for this type of projects is also provided

to qualified proponents, she added.

Ms. Loreto also clarified that the department is not focusing its

financial assistance to just small enterprises under the P10-billion

funding program launched early this year.

She said the regional office is also strengthening its current programs

aimed at micro-enterprise development.

Based on latest feedback, the department's program has remained

slow- starting with very few project applications submitted to the

banks. This was observed notwithstanding recent efforts to convince

the banks to relax their lending policies that generally choke flow of

capital to new and expanding small- and medium-scale businesses.

21

CHAPTER 3

OPERATION REVIEW Review of the Organizational Management

Organizational Structure- At present the, bank has seven personnel and

is headed by its branch manager, Mrs. Merlyn Emberda.

Queen City Development Bank

Davao Branch

Mrs. Merlyn G.

Emberda

Branch Manager

Katherine Fillone

Teller

Everley Mahinay

New Accounts

Clerk

Pharida T.

Ocampo

Branch Accountant

Dennis Sulamin

Loans Clerk

Jennifer Turtoga

Accounting

Clerk

Vacant

Casa Bookkeeper

22

Review of Marketing Aspect

Product line- presently Queenbank has variety of product and services

offered to the public. They offer deposit, loans and other relevant banking

services. Please see exhibit 1.

Product loan policies- the bank strictly follows loan policies set by the

Bangko Sentral ng Pilipinas

Marketing strategy- The Davao branch has no dedicated marketing

officer but instead relies on the marketing activities that the branch manager can

squeeze in her schedule. Marketing expenditures are subsidized by the main

company, the outlets of which are the BOMBO radyo and Star FM, both sister

companies of Queen Development Bank. Aside from this, the branch also relies

heavily on referrals and walk in clients.

This current setup has its advantages and disadvantages: the advantage

is that the branch no longer spends for its own marketing activities since this is

already provided for by the main company through its sister companies in the

radio broadcasting business. The disadvantage is that very few people are

actually informed of the presence and services offered by the bank, specifically,

the only people who actually listen to BOMBO radyo and Star FM. It has been

determined in the survey that we conducted that very few people actually rely on

the Radio ads as a basis for their decision in choosing a bank. The marketing

activities being done by the branch manager is also limited as compared to what

a dedicated marketing officer can do.

23

Review of Financial Aspect

Demand Projection

Projection method using the formula

For minimum demand requirement for savings and checking account:

Dd= Le x P x M

Where:

Dd= future demand on the expected amount that will be deposited

Le= Labor employed in Davao City

P= percentage of those that would avail the savings/time deposit reserve

M= minimum amount to be deposited

1-Savings Deposit

Year Working Population x

Percentage Target x Min.Req.Bal = Demand

2007 470,000 0.50% 500 1,175,000.00

2008 475,000 0.50% 500 1,187,500.00

2- Checking Account

2007 470,000 0.50% 2,000 4,700,000.00

2008 475,000 0.50% 2,000 4,750,000.00

3- Time Deposit

2007 470,000 0.50% 1,000 2,350,000.00

2008 475,000 0.50% 1,000 2,375,000.00

24

For minimum demand requirement for savings and checking account:

Dd= Le x P x M x F

Where:

Dd= future demand on the expected amount that will be deposited

Le= Labor employed in Davao City

P= percentage of those that would avail the savings/time deposit reserve

M= minimum amount to be deposited

F= frequency or the number of borrowing from a thrift bank per year

4- Credit Services Working Population X

Percentage Target X Min.Req.Bal. x Frequency = Demand

2007 470,000 0.50% 5,000 1 11,750,000.00

2008 475,000 0.50% 5,000 1 11,875,000.00

Gross income- branch gross income is erratic as shown by it gross

income generation for four years (from present 2007- down to 2004) as follows:

3,228,000; 2,835,000; 3,032,000; and 955,000

Expenses- the branchs expenses run down as follows (2004-2007):

3,943,000; 3,604,000; 3,237,000; 2,828,000. Bank incurs high cost of operations.

Profitability- branch profitability ratio is decreasing in the past four years:

(1.00),(1.47), (1.55), and (1.02). This suggests that bank has some income

problems. (Please see exhibit 3)

Liquidity- branchs liquidity is decreasing as shown by its computed

liquidity for four- year period- 0.12, 0.11, 0.12, 0.15. This may suggest of a

deteriorating financial condition

25

Review of Human Resource Aspect

The branch starts the recruitment and selection process by advertising

vacant spots in schools (Ateneo de Davao University, Holy Cross, Etc.). When

respondents apply, they must pass their resumes. After the collection of resumes

is an exam in order to choose at least top 20 of those respondents, 20 will be cut

to ten. The next step is the interview session wherein they will choose potential

employees. The last step is that several tests will be conducted in order to

measure the stability and psychological aspects of the respondents.

Review on Operations

This review is based on the comparative study done by the group on

selected items of the financial statements (Exhibit 1.7)

Assets

Loans

Although the loan where rather low on 2004 for it was increase by

538.02% from 2004 to 2007 although it had a minor decline in 2006. Although the

company was able to increase commercial loan, it has only deposit to loan ratio

of .06:1 peso compared to the industry leader of 1:75 deposit to loan ratio.

Past Due

The past due of the company was reduced to zero on year 2007

presumed due to the good efforts of the management.

Liabilities

26

Deposit

There is an average increase of deposit of 10% from 2004 to 2007

showing that the efforts of the Manager of marketing Queen Bank is highly

effective.

Income Statement

Income

Although there was a net loss for the past 4 years there is also a

substantial increase in interest income and other income. We assume that this is

due to the efforts of the branch manager to increase deposits of the company.

Expenses

Based on our comparative study there was a decrease in most of the

operating expenses of the branch, we assume that these is due to the cost

cutting measures of the branch, but there are some items such as light and

power which is uncontrollable

Items in Litigation (Asset and Expenses)

During our deliberation we were able to find out that the items in litigation

was not improved for the past four years yet the litigation expenses keeps on

increasing for the these years. We assume that there may be a problem in the

legal department due to the high expense but no output is produced.

27

Technical Aspects

Office equipment- bank has enough office equipments to cater their

office needs and operations

Management information systems- bank has just enough management

information applications for banking operations

Internal factor Analysis Summary

Internal Strategic Factors

Weight

Rating

Weighted

Score

Comments

Strengths

Experienced top management

Employee relations Variety of product Access to radio broadcast Well-trained employees

Weaknesses

Weak financial position 66% of our respondents

are unaware

No parking space for client

Technology use

Only few avail of the loan services

.10

.05

.15

.10

.05

.10

.15

.10

.05

.15

3

3

5

4

4

4

5

4

3

5

.30

.15

.75

.40

.20

.40

.75

.40

.15

.75

Good but conservative

Shows good relations

At par with other banks

Sister company Star FM

New batches of employees that has

undergone trainings

Low financial ratio

Not known to most of the people in

the city

One way street, limited parking

Sub par in terms of technology

acquisition

Only 57% out of the budgeted loans

were disposed

Total

1.00

4.30

28

CHAPTER 4

ENVIRONMENTAL ANALYSIS IN DAVAO CITY

Davao City Profile

Population

Davao City is home to over a million people. Daytime population (which

includes transients) is estimated to reach almost 2 million since it is the center of

trade, commerce, and services in Southern Philippines. Its population growth rate

is 2.83% while density is at 469 persons per square kilometer. Urban density

however is higher at 2,262 people per square kilometer.

Labor Force

About 48% of the total population is of working age. Of this, a little over

88% are employed. Davaoeos like their fellow Filipinos, are English-speaking

and highly trainable. Most are known to have a natural inclination towards arts

and creativity, the reason why many have been successful in design and related

enterprises.

Geography

Davao City is the capital of the Davao Region (or Region XI). It is

strategically located at the Southeastern part of Mindanao with latitude of 658 to

7 34 North and a longitude of 12514 to 12540 East.

29

Its boundary line passes through the top of the countrys highest peak, the

Mt. Apo. On the north, Davao del Norte bound it, while on the east, partly by

Davao del Norte and the Davao Gulf.

The citys strategic location makes it the center of trade not only in the

Southern Mindanao region or the whole of Mindanao but also in the East ASEAN

Growth Area (EAGA).

Accessibility

Davao City is very accessible. As your gateway to the Philippine South, it

has regular air, sea, and land linkages to major points in the country. It is one (1)

hour and 40 minutes away from Manila (the countrys capital) by plane and only

40 minutes away from Cebu City. It has 4 times weekly flights to Singapore and

twice weekly flights to Manado Indonesia

Physical Infrastructure

The presence of basic infrastructure within the City such as airport,

seaports, roads, bridges, and telecommunications has sustained the economic

growth in the last 10 years.

Due to the Citys unprecedented growth, a clamor for higher capacity

infrastructures resulted to a number of modernization projects now ongoing to

meet the demands of the new millennium.

30

Airport

The Davao International Airport is the busiest airport in Southern

Philippines. Expansion and modernization began in 1998. Today, the DIA has

begun accommodating wider-bodied jets such as Boeing 747s.

Banks

Currently, there are around 60 banks (excluding branches), 22 financing

companies, and 9 lending firms operating in the city. These can handle

financial/monetary transactions from the most basic to the most complicated

The Economy of Davao City

Like the rest of the country, Davao City operates on an economic system

that is market-oriented, although pricing mechanisms remain regulated in a few

sectors (particularly on basic commodities) to protect consumers.

http://www.davaocity.gov.ph/theeconomy/Images/a1.jpgThe competitiveness of the

market has been enhanced through the dismantling of protection for "infant

industries" and the breakdown of industries with monopolistic or cartel

tendencies. On the international front, the economy has been opened up to

global competition, through a tariff reduction program and the loosening of

restrictions on inward foreign investment. The result is a diverse economy,

featuring a sound mix between the agricultural (roughly 45%), industrial (15%)

and service (at around 35%) industries. Poverty reduction has become the main

goal of the local government which is being addressed through programs and

projects one of which is the encouragement of inward investments to industries

31

that are labor-intensive. Fortunately for Davao, private investments has Davao

Citys economy is steadily growing in the last two decades. The City has shifted

counting investments from millions in the 80s to billions in the 90s and up to the

present millennium. Among Asian cities, Davao has maintained its competitive

position in attracting investments and in penetrating new foreign markets owing

to its resilient exports base, peaceful business climate, better quality of life, and

rich pool of skilled workforce.

With over 1.2-Million people as primary market base, the city is conducive

to business as evidenced by the presence of the countrys top 200 companies.

Inflow of investments has been remarkable in the last ten years. Export in the

City is now billion dollar industry with a growing niche market for its products.

http://www.davaocity.gov.ph/theeconomy/Images/2.jpgThe stable banana and

flourishing pineapple industries are among the countrys leading export

commodities. A net exporter since 1987, Davao City largely contributed in

making the Philippines as the worlds top 3 banana exporter.

Primarily an agricultural area, almost all kinds of fruits thrive in Davao including

the exotic Durian. Other major agriculture-based exports are pomelo, mango,

coconut, papaya, mangosteen, and even flowers.

The productive linkages between established businesses and Davao City

community reinforced the competitive quality of life in a city that has consistently

maintained single digit inflation rate since 1993.

32

Along with flourishing investments and exports, the low inflation rate serve

as concrete illustration of the remarkable gains from Davao Citys sustained

competitiveness nurtured by high level of responsiveness of the local

government which put priority focus in facilitating business-friendly initiatives and

in ensuring a peaceful and prosperous environment

Statistical Records of Davao City

Refer to Exhibit 1.2

Analysis of the Key Environment Variables

Industry Analysis

Davao City is home to 146 Banking Institution and 28 of them are thrift

banks. The ne portfolio for thrift Banks is 1,229 billion, 1,419 billion, 1,237 billion

from 2004 to 2006 respectively.

Based on the Review of related literature the leading thrift bank is

Mindanao is One Network Bank therefore we will use ONB as a model for our

analysis. According to our source that ONB has a loan interest of 18% to 22%.

The Minimum amount of Loan is 5,000 and maximum of 500,000 per person. The

Bank uses a Loan to Deposit Ratio of .75:1 which the group will use for

comparison.

The researcher conducted a survey on the probability that the

establishments located at the Chinatown area would open an account with

Queen City Development Bank and the results are as follows. As for the main

factors that the respondents look for in a bank, they ranked security as the

highest (82%), followed by accessibility(63%), customer service(39%),

33

convenience(36%), attractive services(13%), bank layout(7%), and other factors

unspecified(2%).Among the offered services of a thrift bank, 61% would like to

open a savings account, 49% prefer to have a checking account, 36% ATM, and

28% would like to avail of the loans. As for the importance of an established bank

name, 88% said they would trust a bank with an established bank name, while

12% said that they do not really care. As for the factors that make a thrift bank

reliable, service ranked the highest with a rating of 56%, followed by policies

(47%), years in the industry (44%), and popularity got an 18% rating. The

respondents also consider the following attributes of the banks employees:

approachability (62%), competence (46%), knowledge in the field (45%), and

friendliness (39%). Sixty-eight percent of the respondents in the area answered

that they use a private vehicle in going to a bank, while only 32% commute.

Before opening an account with a branch, they rely information from

friends(52%), relatives (39%), newspaper (30%), television (18%), radio (6%),

others unspecified (1%). Regarding the respondents awareness on the

existence of Queen City Development Bank, 66% said they are not aware of its

existence while 32% are already aware. Fifty-three percent of the respondents

are willing to open an account with the branch while 40% are not willing. Some

are still unsure about opening an account with the branch. They account for 7%

of the total respondents in the Chinatown area. The external factors are also

being considered.

34

The evaluation on the branchs opportunities and threats is shown in the table of

external strategic factors below:

External Factor Analysis Summary

External Strategic Factors

Weight

Rating

Weighted

Score

Comments

Opportunities

City becoming highly urbanized

61% of the respondents are interested to open a

savings account

Center for regional development

53% of the respondents are willing to patronize

the services of the bank

Moderate industry attractiveness

Wide market E-Banking development Strong industry

relationship

26 out of 28 are willing to avail business loans

Threats

Rising competition Potential new

players/entrants

BSP/Government regulations

66% of the respondents are not aware of the

existence of Queen Bank

88% view an establish bank name as important

.10

.10

.05

.10

.05

.10

.05

.05

.10

.05

.05

.05

.10

.05

4

5

3

5

3

4

3

3

5

3

3

3

4

3

.40

.50

.15

.5

.15

.40

.15

.15

.50

.15

.15

.15

.40

.15

Top cities in the Philippines

Potential clients

Trade center for Southern

Mindanao

Potential clients

Less power for supplier, buyers

One of most populated city

Residents are technology users

Davao Bankers association

Big Potential Clients

New product offerings

Rising number of banks

Strict banking policy

Since the respondents are

unaware of the bank an

established bank name ill be a

threat for the company

Total

1.00

4.10

35

CHAPTER 5

SUMMARY, ANALYSIS, CONCLUSIONS AND RECOMMENDATIONS

This chapter presents the summary, conclusions, and recommendations

for this study.

Summary of Findings

1. The banks financial performance is not doing well as indicated by its

financial ratio results for profitability, liquidity and solvency and negative

income statements for the year 2007.

2. The level of marketing awareness of public on existence of Queenbank is

low with only 32 counts out of 100 respondents. Main sources of

information are from friends and relatives since they trust these people

more than ads. Billboards/signage, newspapers radio and television may

do but they are only secondary in terms of their decision to open an

account with the branch. (Please see exhibit 3).

3. Its present location along San Pedro Street, which is a one way street, can

be considered as a factor contributory to its identity crisis.

4. Queenbank is a niche in the thrift bank industry in Davao City.

5. Savings accounts and checking accounts are the main banking needs of

the respondents from the Chinatown area. However, the medium-sized

establishments would prefer to loan from commercial banks since these

banks allow clients to loan at lower interest rates as compared to thrift

banks.

36

Analysis

Internal Factors (IFAS Table) External Factors (EFAS Table)

Strengths

Experienced top management

Employee relations

Variety of product

Access to radio broadcast

Well-trained employees

Weaknesses

Weak financial position

66% of our respondents are unaware of the existence of the bank

No parking space for client

Technology use Only few avail of the

loan services

Opportunities

City becoming highly urbanized

61% of the respondents are interested to open a savings account

Center for regional development

53% of the respondents are willing to patronize the services of the bank

Moderate industry attractiveness

Wide market E-Banking

development Strong industry

relationship 26 out of 28 are

willing to avail business loans

Engage in a better marketing strategy to capture well its target and potential market

Develop companys reputation to attract customers and to gain higher market share.

To maximize radio advertising to capture those who are willing to avail business loan

Offer variety of products to compete in a highly competitive industry

Expand Queen City Development Bank, Davao branchs presence in the region through constant advertisement and reducing its unnecessary expenses.

Make use of the 53% respondents who are willing to avail the branchs service by giving excellent c

Customer service. Provide more

parking areas to accommodate more clients

37

especially in a wide range of market

Threats

Rising competition Potential new

players/entrants BSP/Government

regulations 66% of the

respondents are not aware of the existence of Queen Bank.

88% of the respondent view an establish bank name as important.

Making a bigger and better signage, allocating enough parking space and do enough marketing to keep up with the competition.

Make use of experienced top management to penetrate wide market considering BSP/ Government regulations

Apply the cost leadership theory.

Queen Bank Davao

branch must be competitive.

The branch must also apply some cost reduction methods

38

SPACE Matrix Internal Strategic Position Financial strength +5 +1 best to +6 worst Y-axis

Competitive Advantage -4 -6 worst to -1 best 5 + (-4) = 1 External Strategic Position Environmental stability -3 -6 unstable to -1 stable X-axis

Industry Strength +2 +1 best to +6 worst 2 + (-3) = -1 Figure 3 Space Matrix Conservative

(1,-1)

Aggressive

X-Axis Defensive

Competitive

Analysis:

Queen City Development bank is currently in the conservative stage.

They must develop their markets, penetrate new markets, and develop new

products and services that would satisfy customers needs.

39

Figure 4: Grand Strategy Matrix

Rapid Market Growth Quadrant II

Queen City Development

Bank

Quadrant 1

Weak Competitive Position

Quadrant III

Quadrant IV

Strong Competitive Position

Slow Market Growth Suggested strategies: Market development, market penetration, and new product development.

Market development through market penetration

The branch may increase market awareness through the following:

- Advertising through Bombo radio and Star FM regularly

- satisfy current clients through excellent services. The survey results

show that friends and relatives referrals would be a big factor in the

respondents decision to open a new account with a bank branch.

- The branch head and other officers

40

Product Development

The branch must improve current product and service offerings or coming

up with new and innovative products to satisfy the customers needs by making

the best of what it has. The branch may introduce to membership cards with

rewards system for its clients, extend their banking hours and days, give

incentives to loyal clients, and reach out more to the masses rather than to

medium enterprises. Efficiency of transactions must be monitored. Moreover, the

branch may also lower the amount required to open a new account like 100

pesos, for example. If a client could recommend a client who would be accepted

by the branch, then they client could also be given points or rewards.

41

Conclusion

It is possible to increase the customer awareness on Queen City

Development Bank Davao branch by introducing reward systems for its clients

and employees. It is advisable to relocate the branch to a more visible location.

In our Deliberation the company it is improbable for the company to add up a

branch (Base on Exhibit 1.8) since it still has a negative rate of return after 5

years and rather concentrate on the relocation of the branch.

The gross profit of the bank would by at least 22.18% by increasing the loan

portfolio by 5 million pesos.

The branch liquidity is important for the branch to be able to perform well

financially. This shows that there is a need for them to increase their assets by

increasing outstanding loans.

42

Recommendation

The deteriorating financial performance of the branch may be the result of a low

marketing effort exerted by the branch in terms of public awareness. Its present

location can be a factor for the sub par performance but can be overcome if a

strong marketing activity were made. However, a relocating to a more spacious

and strategically location is advantageous subject for viability.

Based on the above findings and conclusions, the following

recommendations are strongly recommended to address banks short and long

term problems

The group recommends a relocation of the branch to a more spacious

and highly visible area. The branch should relocate to a more spacious and

highly visible area which was earlier proposed to be located at the LYR building

located corner of Villa Abrille St., and J.P. Laurel Avenue, Davao City.

The branchs appearance should be improved. Along with the

improvements, the branch should also improve its signage (if possible electronic

signage) so that the passersby would take notice of the existence of the branch.

We also recommend that the branch implement a reward system for both the

clients and the employees to motivate them to invite more clients to avail of their

services especially the loans, that is, if the branch accepts the application, since

43

the results of the survey showed that they usually rely on information from friends

and relatives rather than from ads (since they think advertisements are not so

reliable). The branch may also consider extending credit lines to students,

young professionals, and to micro businesses (e.g., sari-sari stores, farmers,

public market vendors). Micro businesses are the main target of thrift banks.

The branch should aggressively campaign about the loan services

they are currently offering so that more clients would come to hear about it and

avail of the service. We should target for an increase of five million pesos in

loans to be availed by clients. This might help in improving the negative income

level of the branch.

The branch should also monitor its litigation expenses since it is

increasing every year yet, the items in litigation are not improving. If expense in

litigation would be lowered then it would help put the branch in a profitable

position, and therefore, the branch would now be improving its liquidity.

In addition since Bombo Radyo is their sister company they may request

for an additional air-time for Queen City Development Bank advertisements.

They may also perform checklist/monitoring on proper execution of the activities

planned to increase customer awareness.

The branch may increase revenue generation by actively marketing big

accounts and marketing possible source of income from services rendered. They

may also follow the strategy employed by ONB (One Network Bank) one is to

locate their branches in mass market area like Bankerohan Market and Agdao

Market. Another strategy is to allow an opening account/minimum balance of

44

P100 for their savings accounts. They may also increase revenue by minimizing

controllable cost by not only monitoring their litigation expenses but to reduce it

to the least possible cost. The branch may also engage in aggressive deposit

generation campaign, develop & introduce new deposit products like the P100

opening account to meet the changing needs of its clientele, implement a loyalty

program for valued deposit clients (e.g. birthday greeting cards, birthday gifts,

free dinner, etcU), and establish a customer care center which will formulate and

rollout strategies on customer acquisition, retention, and satisfaction. And with

their current financial standing of the branch, the branch should really minimize

their expenses by reducing power consumption by turning on the air-conditioner

at 8:45am or 9:00am and turn it off at 2:45pm or 3:00pm. They may also do little

things like recycling supplies (e.g. bond papers, envelops, and other supplies) or

difficult things like bargaining with the owner of the building to suspend the yearly

increase of office building rental or reduce the monthly building rental and invite

GSIS (Government System Insurance Services) to allow the branch to encash

pensioner claims. The branch may also culture the relationship with the client

especially those with high average daily balance by giving them special

accommodations as long as it does not violate bank policy and government

regulations. The manager may monitor the quarterly target of the branch and be

strict with the attainment of internal targets.

45

APPENDICES

46

Exhibit 2.1 Matrix of Objectives

Objective

1 2 3 4 1. Attain 32%

increase in

outstanding

loans for the

year 2008.

2. Increase its

customer

awareness on

Queen City

Development

Bank, Davao

branch from

32% to 48%

for the year

2008..

3. Increase

gross profit of

the branch from

by at least

22.18% the year

2008.

4. To increase branchs current ratio from .06 to .15 in the year 2008.

47

1999 2002 2003 2004 2005 2006

INVESTMENTS (in Billion Pesos)

Mayor's Permit (New) 1,235.64 958.11 1,520.30 1,557.97 2,858.42 3,962.00

Davao City Investment

Promotion Center NR 880.90 1,206.34 1,321.56 1,747.78 1,813.88

Board of Investments (in

millions) 123.50 307.87 98.81 236.79 345.48 2,384.15

PRIVATE BUILDING CONTSTRUCTION

No. of Building Permits 2,425 2,821 4,044 6,367 3,274 3,266

Value (in millions) 1,110 1,481 1,682 7,397 3,317 32,896

INFLATION RATE 4.5 3.9 3.7 7.9 9.9 5.9

BANKING AND FINANCE

Banks 146 141 140 140 141 149

Other Financial

Institutions 930 710 798 871 926 1,096

FOREIGN TRADE (in US$ million)

Exports FOB 293 738 848 993 584 651

Imports FOB 170 258 318 408 337 230

Balance of Trade 123 480 530 585 246 421

LABOR & EMPLOYMENT

Labor Force (in '000) 466 519 522 524 Na na

Participation Rate 66.6 66.9 66.8 66.3 Na na

No. of Employed (in

'000) 417 462 465 465 Na na

Employment Rate 89.6 89 89.1 88.8 Na na

No. of Unemployed (in

'000) 49 57 57 59 Na na

Unemployment Rate 10.4 11 10.9 11.2 Na na

LITERACY RATE 98.24 96.98 n/a

TOURIST ARRIVALS (in '000)

Region XI 586 541 596 691 716 763

Davao City 359 431 496 568 573 574

AVE. MONTHLY CRIME VOLUME (per 100,000 pax)

8.33 7.80 6.49 8.75 11.81 10.30

CRIME SOLUTION EFFECIENCY 95.23 92.23 90.25 89.16 88.55 83.06

NUMBER OF MOTOR VEHICLES 74,592 81,375 80,161 89,540 90,008 107,777

UTILITIES

Power Consumption (in million kilowatt hrs) 857 937 994 1,092 1,093 1,112

Water Consumption (in

million cu. m.) 41 45 46 49 51 51

Telephone Subscribers

(PLDT & Bayantel) n/a 63,770* 65,000* 73,326 71,637

* PLDT subscribers only

na- data not yet available

48

Exhibit 1.2 Davao City Statistical Record

EXHIBIT 1.3

SERVICES OFFERED BY QUEEN CITY DEVELOPMENT BANK

Deposit Services Loan Services Other Services

Peso Savings Queenbank All-Purpose Loan Fund Transfer (on-line)

Dollar Savings Business Loan Business Payroll Services

Peso Time Deposit Business Line of Credit Safety Deposit Box

Dollar Time Deposit Commercial Loan SSS Payments

Platinum Savings Depoit Real Estate Loan Collection Services

Business Checking Account Term Loan Pick-up Deposit Services

Business International Checking Account 1:1 Loan Gift Checks

Automatic Transfer Account Domestic Bills of Purchase Visa/ Mastercard

Speedcard ATM Receivable Rediscounting Automated Teller Machine

Foreign Remittances Gas Dealership

Car Financing

Consumer Personal Loan

Industrial Loan

Agricultural Loan

Housing Loan

Specialized Lending Programs

Business Letters of Credit

49

Exhibit 1.4 Sample Questionnaire

Good day! We are students of Ateneo de Davao University conducting a research about

the feasibility of relocating or opening of a particular thrift bank. The proposed area is at

LYR Building, near Chicken Ati-Atihan, Villa Abrille St. Davao City. We would like to

inform you that the information generated will be kept confidential. God bless!

Name (Optional): ________________________

Name of Company (Optional): _____________________________________

Location: R. Magsaysay Villa Abrille Monteverde

Sta. Ana Ave. Obrero Banggoy

J.P. Laurel Others (please specify): __________

Type of Business: Auto Parts Hardware Boutique Grocery

Restaurant Assorted goods

Others (pls. specify): _________

1. What is/are the main factors that you look for in choosing a bank?

___ Security ___ Convenience

___ Accessibility ___ Attractive services

___ Customer Service ___ Bank layout

___ Others (pls. specify) _________________

2. Among the offered services of a thrift bank, what product is/are you most interested

in?

___ ATM

___ Loans (car, home, business)

___ Savings

___Checking Account

___ Others (pls. specify) _________________

2.1 If you are interested in Loans, What Kind of Loan

___ Car Loan ___ Home Loan ____ Business Loan

___ Others (pls. specify) ________

3. Does an establish Bank name Important to you?

___ Yes ___ No

50

4. What are the factors that make a thrift bank reliable?

___ Policies ___ Popularity

___ Services ___ Years in the industry

___ Others (pls. specify) __________________

5. What certain attribute of the bank employee matter to you most?

___ Approachability ___ Competence

___ Friendliness ___ Knowledge in the field

___ Others (pls. specify) ____________________

6. What is your means of transportation in going to a bank?

___ Public Utility Vehicle (Jeepney, taxi) ___ Private Vehicle

7. In opening an account in a thrift bank, from where or to whom do you usually rely for

information?

___ Friends ___ Television

___ Newspaper ___ Relatives

___ Radio

___ Others (pls. specify) ___________________

8. Are you Aware of the Existence of Queen City Development Bank in Davao City

___ Yes ____ No

9. If Queen City Bank will open a branch in LYR Bldg, near Chicken Ati-Atihan, Villa

Abrille St. Davao City, would you consider patronizing their services?

___ Yes ___ No

-Thank You very much for your cooperation! -

51

Exhibit 1.5 Survey Result

Type of Business

R Magsaysay Villa Abrille Monteverde Sta. Ana Obrero Banggoy Jp Laurel Others Total Percentage

Auto Parts 17 3 5 3 28 0.28

Hardware 1 3 3 1 8 0.08

Boutique 1 1 1 2 5 0.05

Grocery 1 1 1 3 0.03

Restaurant 1 2 2 1 6 0.06

Assrted Goods 3 3 1 2 1 1 11 0.11

Others 10 2 8 1 5 2 3 8 39 0.39

1. What is/are the main factors that you look for in choosing a bank?


Security 10 22 14 11 8 4 6 7 82 0.82

accesibility 9 17 11 3 6 5 4 8 63 0.63

customer srvc 5 15 8 1 2 3 3 2 39 0.39

Convinience 6 8 7 3 3 1 1 7 36 0.36 Attractive services 0 5 1 4 1 0 2 13 0.13

Bank layout 1 3 2 1 7 0.07

Others 1 1 2 0.02

52

2. Among the offered services of a thrift bank, what product is/are you most interested in?


ATM 7 7 5 3 4 1 2 7 36 0.36

loans 4 9 5 3 2 2 3 28 0.28

savings 14 10 14 2 6 3 4 8 61 0.61 Checking account 8 15 6 8 4 3 3 2 49 0.49

others 0 0

2.1 If you are interested in Loans, What Kind of Loan


Car Loan 3 4 1 1 9 0.321429

Housing Loan 2 5 1 1 1 4 1 15 0.535714

Business Loan 3 11 4 2 1 2 3 26 0.928571

Others 1 0 1 0.035714

3. Does an establish Bank name Important to you?


Yes 15 21 15 13 9 3 3 9 88 0.88

No 2 1 1 4 3 1 12 0.12

53

4. What are the factors that make a thrift bank reliable?


policies 6 10 8 3 5 2 3 10 47 0.47

popularity 3 3 1 3 3 2 3 18 0.18

service 7 17 9 4 9 3 5 2 56 0.56

Years in industry 8 5 9 7 2 2 5 6 44 0.44

others 0 0 0 0

5. What certain attribute of the bank employee matter to you most?


approachability 6 15 13 7 6 2 8 5 62 0.62

friendliness 8 13 4 2 6 1 1 4 39 0.39

compitence 7 15 5 7 3 1 3 5 46 0.46 knowledge in field 9 17 5 1 2 3 2 6 45 0.45

others 1 1 0.01

54

6. What is your means of transportation in going to a bank? Public Utility Vehicle 10 3 3 1 6 5 4 32 0.32

Private Vehicle 6 18 11 11 10 3 5 4 68 0.68

7. In opening an account in a thrift bank, from where or to whom do you usually rely for information?


friends 6 11 13 6 6 5 5 52 0.52

newspaper 10 5 4 4 1 3 3 30 0.3

Radio 5 0 1 0 0 0 6 0.06

Telivision 4 3 1 2 3 2 0 3 18 0.18

relatives 3 13 5 2 6 3 5 2 39 0.39

others 1 1 0.01

8. . Are you Aware of the Existence of Queen City Development Bank in Davao City


Yes 4 6 7 1 6 3 5 32 0.32

No 13 14 11 5 8 3 6 6 66 0.66

9. If Queen City Bank will open a branch in LYR Bldg, near Chicken Ati-Atihan, Villa Abrille St. Davao City, would you consider patronizing their services


Yes 6 5 10 6 9 3 5 9 53 0.53

No 11 11 4 5 4 1 3 1 40 0.4

not sure 6 1 7 0.07

55

Exhibit 1.6- Financial ratio

Liquidity

2007 2006 2005 2004

Current Assets 1,919,968.48 1,585,343.81 1,795,136.16 1,102,285.85 Cureent Liabilites 16,566,578.18 14,101,934.87 14,410,724.81 7,532,884.83 0.115894089 0.112420304 0.124569457 0.146329842

Solvency Debt ratio 2007 2006 2005 2004

Total Liabilities 16776047.34 14916302.87 12092234.74 7515531.67 Total Assets 16060788.63 14147136.9 12919751.73 5686061.6 1.04453447 1.05436902 0.935949467 1.321746439

Total Liabilities 16776047.34 14916302.87 12092234.74 7515531.67 Total Owners -715258.71 -488224.07 -131902.78 -1829630.07 -23.45451667 -30.55216608 -91.67535923 -4.107678264 Total Owner -715258.71 -488224.07 -131902.78 -1829630.07 Total Assets 16060788.63 14147136.9 12919751.73 5686061.1 -0.04453447 -0.034510451 -0.01020939 -0.321774606 Profitability 2007 2006 2005 2004

Rate of Return

Income -715000 -721000 -205000 -1873000 Investment -715258.71 -488224.07 -131902.78 -1829630.07 0.999638299 1.476780938 1.554174976 1.023704207

56

liquidity Ratio

Current Ratio = Current Asset/Current liabilies

Current Asset Current Liabilities Current Ratio

2004 1,443,546.79 Php7,532,864.83 0.191633173

2005 1,795,186.16 Php14,410,724.81 0.124572926

2006 1,102,206.05 Php14,101,934.87 0.078159916

2007 1,919,968.48 Php16,566,578.18 0.115894089

Profitability Ratios

Net Profit Margin = Net profit after taxes/Net sales

Net Profit After taxes Net Sales Net Profit Margin

2004 (Php1,873,000.00) Php955,000.00 -1.961256545

2005 (Php205,000.00) Php3,032,000.00 -0.067612137

2006 (Php769,000.00) Php2,835,000.00 -0.271252205

2007 (Php715,000.00) Php3,398,000.00 -0.210417893

57

Return on Investment = Net Profit after taxes/ Total Asset

Net Profit After taxes Total Asset Return on Investment

2004 (Php1,873,000.00) Php7,629,073.81 -0.245508177

2005 (Php205,000.00) Php14,327,851.06 -0.014307798

2006 (Php769,000.00) Php14,147,135.90 -0.054357292

2007 (Php715,000.00) Php16,060,788.63 -0.044518362

Return on Equity = Net Profit after taxes/Shareholders Equity

Net Profit After Taxes Shareholders Equity Return on Equity

2004 (Php1,873,000.00) Php1,873,109.63 -0.999941472

2005 (Php205,000.00) Php204,348.18 -1.003189752

2006 (Php769,000.00) Php769,168.77 -0.999780581

2007 (Php715,000.00) Php715,258.71 -0.999638299

Activity Ratios

Asset Turnover = Sales/total asset

Sales Total Asset Asset turnover

2004 Php955,000.00 Php7,629,073.81 0.125179022

2005 Php3,032,000.00 Php14,327,851.06 0.211615823

2006 Php2,835,000.00 Php14,147,135.90 0.200393919

2007 Php3,398,000.00 Php16,060,788.63 0.21157118

58

Fixed Asset turnover = sales/Fixed Asset

Sales Fixed Asset Fixed Asset turnover

2004 Php955,000.00 Php7,646,874.59 0.124887624

2005 Php3,032,000.00 Php7,468,849.84 0.405952732

2006 Php2,835,000.00 Php6,435,536.31 0.440522726

2007 Php3,398,000.00 Php6,365,849.84 0.533785761

Days of Cash = Cash/(net sales for year /365)

Cash Net Sales for year Days of Cash

2004 Php380,837.63 Php955,000.00 146

2005 Php317,755.64 Php3,032,000.00 38

2006 Php316,493.52 Php2,835,000.00 41

2007 Php889,405.30 Php3,398,000.00 96

Leverage Ratios

Debt to Asset Ratio = Total Debt/Total Asset

total Debt total Asset Debt to Asset Ratio

2004 Php7,629,183.70 Php7,629,073.81 1.000014404

2005 Php14,612,235.24 Php14,327,851.06 1.019848348

2006 Php14,916,302.87 Php14,147,135.90 1.054369095

2007 Php16,776,047.34 Php16,060,788.63 1.04453447

59

Debt to Equity Ratio = Total Debt/shareholders Equity

total Debt Shareholders Equity Debt to Asset Ratio

2004 Php7,629,183.70 Php1,873,109.63 4.073004365

2005 Php14,612,235.24 Php204,348.18 71.50655925

2006 Php14,916,302.87 Php769,168.77 19.39275677

2007 Php16,776,047.34 Php715,258.71 23.45451667

Currrent Liabilities to Equity = Current Liabilities/Shareholders Equity

Current Liabilities Shareholders Equity Current liabilities to Equity

2004 Php7,532,864.83 Php1,873,109.63 4.021582458

2005 Php14,410,724.81 Php204,348.18 70.52044608

2006 Php14,101,934.87 Php769,168.77 18.33399303

2007 Php16,566,578.18 Php715,258.71 23.16165878

60

Exhibit 1.7 Comparative Study

Assets 2004 2005 Increase (Decrease) 2006

Increase (Decrease) 2007

Increase (Decrease) Average

Cash 380,837.83 317,755.64 Decrease 316,493.52 889,405.30 Increase

Due from PCHC courters 14,592.52 33,883.75 Increase 14,400.00 Decrease -

Due from other banks - CA/SA 706,367.90 1,443,546.79 Increase 1,254,450.29 Decrease 1,030,563.18 Decrease

Commercial Loans and Others 150,000.00 142,500.00 1,980,598.12 Increase 957,030.00 Decrease

Past due Loans 1,500,000.00 1,500,000.00 142,500.00 Decrease - Decrease

Items in litigation 4,026,638.51 4,026,638.41 4,026,638.41 4,026,638.41

Due from (to) branches (7,027,408.93) 1,148,290.63 Increase (145,430.86) Decrease 3,278,703.06 Increase Net Bank and furniture and fixture (Owned/Aquirred) 155,630.55 284,953.45 Increase 1,137,510.48 Increase 998,473.72 Decrease

Real Property 7,629,903.59 7,451,878.84 Decrease 6,418,567.31 Decrease 6,348,878.84 Decrease

Other Asset 865,795.83 289,187.28 Decrease 271,522.14 Decrease 322,324.31 Increase Total 8,402,357.80 16,638,634.79 Increase 15,417,249.41 decrease 13,825,378.41 Decrease

Liabilities

Demand 2,097,711.88 2,322,232.36 Increase 4,144,189.57 Increase 5,143,681.05 Increase

Regular Savings 4,538.055.33 4,266,597.13 Decrease 6,072,705.94 Increase 7,116,837.87 increase

Time/Platinum Savings 897,097.72 7,329,395.42 Increase 3,857,999.99 Decrease 4,096,769.66 Increase

Other liabilities 96,318.77 113,510.33 Decrease 814,367.80 Increase 209,469.16 decrease Total Deposit 7,629,183.70 14,031,735.24 Increase 14,889,263.30 Increase 16,566,757.74 Increase

Equity

Unwined Profit (1,873,109.93) (204,384.18) Decrease (769,116.77) Decrease (715,258.71) Increase

Deposit to Loans Ratio 0.02 0.01 0.13 0.06 0.06

Percentage change (deposit) 0.456290789 0.05759372 0.101256653 0.205047054 Indusrtry recommended Deposit to loan Ratio 5,721,887.78 10,523,801.43 11,166,947.48 12,425,068.31

61

Exhibit 1.8 Relocation/add up a branch

Project: Relocation of Present Branch Site

A. Cost

1. Relocation Cost P100,000.00

2. Renovation Cost New Site 300,000.00

3. New Acquisition

a. Furniture and Fixtures P100,000.00

b. Cost to remove Vault door 100,000.00

c. Cost to install Vault door to new site 100,000.00

d. Construction of Vault Area 100,000.00

e. Installation of New computers 200,000.00 600,000.00

Total Cost to Relocate P1, 000,000.00

Expected Cash Inflow after Relocation

Years Cash Inflow* Rate** (20%) Present Value Net Present Value

1 P287,995.00 .833 P239,900.00 P39,900.00 2 331,194.00 .694 229,849.00 29,849.00 3 380,873.00 .579 220,525.00 20,525.00 4 438,004.00 .482 211,118.00 11,118.00 5 503,705.00 .402 202,489.00 2,489.00 Total P1,921

,771.00 P1,103,881.00 P

103,881.00***

*15% increase in current assets basing on the survey that deposit base will

increase by 15-20%

**Rate/ Cost of Capital/ Required Rate of Return (20% banking industry

standard)

*** maximize shareholders wealth amounting to P103, 881.00

Average Cash Inflow= P1, 921, 771.00 /5 years= P 384,354.00

62

Payback Period= P1, 000, 000.00/ P384, 354.00=2.6 yrs.

Years Cash Inflow* Rate**

(20%) Present Value Net Present

Value 1 P383,994.00 .833 P319,867.00 P119,867.00 2 460,792.00 .694 319,789.00 119,789.00 3 552,951.00 .579 320,159.00 120,159.00 4 663,541.00 .482 319,827.00 119,827.00 5 796,249.00 .402 320,092.00 120,092.00 Total P2,857,527.00 P1,559,734.00

P559,734.00*** *20% increase in current assets basing on the survey that deposit base will

increase by 15-20%

**Rate/Cost of Capital/Required Rate of Return (20% banking industry standard)

***maximize shareholders wealth amounting to P559, 734.00

Average Cash Inflow= P2, 857,527.00/5 yrs= P 571, 505.40

Payback Period= P 1, 000, 000.00/571, 505.40= 1.7 yrs.

63

Analysis: Since the present value of 10% increase in current assets is only P691,

312.00 or a net present value of P-308,688.00 which is smaller than the amount

invested of P1, 000,000.00, the project is not acceptable. An increase of 15%

increase in current assets will have a present value of P1,103,881.00 or a net

present value of P103,881.00 which is bigger than the amount invested of P1,

000, 000 which will maximize shareholders wealth by P103,881.00. And an

increase of 20% increase in current assets will have a present value of P1, 559,

734.00 or a net present value of P559, 734.00 which is also bigger than the

amount invested of P1, 000, 000.00 which will maximize shareholders wealth by

P559, 734.00. The company should target an increase of 15-20% increase in

current assets specifically cash on hand, which is feasible basing on the survey

proving an increase in deposit base of at least 15-20%.

64

Expected Cash Inflow after adding a branch Year Cash Inflow* Rate** (20%) Present Value Net Present

Value 1 P 598,646.17 .833 P 498,672.26 P-301,327.74 2 785,304.05 .694 545,001.01 -254,999.00 3 1,030,161.85 .579 596,463.71 -203,536.29 4 1,351,366.00 .482 651,358.41 -148,641.59 5 1,772,722.33 .402 712,634.38 -87,365.62 Total 5,538,200.40 3,004,129.77 -

995,870.23*** *31.18% increase in current assets (16.18% increase in current assets of the

branch for the past 3 yrs. + 15 % increase in current assets basing on the survey

that deposit base will increase by 15-20%)


standard)

*** minimize shareholders wealth amounting to P995, 870.23

Average Cash Inflow= P5, 538, 200.40 /5 years= P 1, 107, 640.08

Payback Period= P4, 000, 000.00/ P1, 107, 640.08=3.6 yrs.

Year Cash Inflow* Rate** (20%) Present Value Net Present

Value 1 P 694,644.60 .833 P 587,638.95 P -212,361.05 2 945,967.02 .694 656,501.11 -143,498.89 3 1,288,217.88 .579 745,878.15 -54,121.85 4 1,745,295.11 .482 841,232.24 41,232.24 5 2,388,999.09 .402 960,377.63 160,377.63 Total 7,063,123.70 3,791,628.08 -

208,372.00***

65

*36.18% increase in current assets (16.18% increase in current assets of the

branch for the past 3 yrs. + 20 % increase in current assets basing on the survey

that deposit base will increase by 15-20%)


standard)

*** minimize shareholders wealth amounting to P 208, 372, 00

Average Cash Inflow= P7, 063, 123.70 /5 years= P 1, 412, 624.74

Payback Period= P4, 000, 000.00/ P 1, 412, 624.74= 2.8 yrs.

Analysis: Since the present value of 15% increase in current assets is only

3,004,129.77 which is smaller than the amount invested of P4, 000,000.00 and

with a net present value of -995,870.23, the project is not acceptable. And an

increase of 20% increase in current assets will have a present value of

3,791,628.08 which is also smaller than the amount invested of P4, 000, 000.00,

and with a net present value -208,372.00 which will minimize shareholders

wealth by P208,372.00. The company should target an increase of 25%(as

shown below) increase in current assets specifically cash on hand, which is not

feasible basing on the survey proving an increase in deposit base of at least 15-

20%.

66

Year Cash Inflow Rate Present Value Net Present Value

1 P 802, 738.82 .833 P 668,681.44 P -131318.56 2 1,133,306.67 .694 786,514.83 -13,485.17 3 1,600,002.36 .579 926,401.37

126,401.37 4 2,258,883.33 .482 1,088,781.77

288,781.77 5 3,189,091.49 .402 1,282,014.78

482,014.78 Total 8,984,022.67 4,752,394.19

752,394.19 *41.18% increase in current assets (16.18% increases in current assets of the

branch for the past 3 yrs. + 25 % increase in current assets basing on a projected

target to reach a positive net present value)


standard)

*** maximize shareholders wealth amounting to P 752, 394.19

Average Cash Inflow= P8, 984,022.67 /5 years= P 1,796,804.53

Payback Period= P4, 000, 000.00/ P 1,796,804.53= 2.2 yrs.

67

Exhibit 1.9 Financial Study

FINANCIAL STUDY The financial study explores the availability of funds needed to finance the operation of the proposed project, and it determines the financial capability to withstand critical periods in the implementation proper. There are three (3) necessary and important factors in the evaluation of the project; to wit:

1. The amount of the investment; 2. The expected returns from the investment; and 3. The rate of return in the investments that would be acceptable to the

business.

Investment and Sources of Equity The proposed thrift bank operation will be a stock corporation with an initial investment of P 5,720,000.00 only. The total cost of the project is broken down as follows:

Building P 100,000.00 Vehicle 100,000.00 Equipment 2,000,000.00 Vault Computer ATM Typewriter Furniture and Fixtures 1,000,000.00

Tables

Chairs

68

Lightings Pre-Operation Training of Officers& Key Personnel 20,000.00 (P2, 000.00/day X 10 days) Funds Reserved for Loans 500,000.00 Working Capital 2,000,000.00 Total P 5,720,000.00

________________________________________________________________ The sources of the financial requirements are the following:

Incorporators: P 720,000.00 Government Counterpart 5,000,000.00 -Land Bank of the Philippines -Development Bank of the Philippines Total P 5,720,000.00

General Assumptions: The following assumptions were used in the preparation of the study:

1. Revenue. It is the expected total income of the operation and includes the Interest Income of 7.7% per annum based on the loaned amount during the period. Service Charges/Fees of _% per transaction, additional interest income on Past-Due Loans and penalties of __% per annum.

2. Operations Expenses. These are the interests on savings deposits and time deposits, salaries and wages, staff benefits, directors and committee members fees, SSS and Medicare premiums, professional fees, supervision and examination fees, taxes and licenses, insurance on deposits, insurance of buildings & vehicles, depreciation/amortization and other expenses related to the operation of the project.

69

3. Depreciation/Amortization of Banks Properties. The following matrix captures the depreciation of bank properties including the amortization of the Pre- Operating Training of key personnel:

Estimated Life Salvage Value

Building Vehicle 10 years P 20, 000.00

Equipment 10 years 200,000.00

Furniture and Fixtures 5 years 100,000.00

Pre-Operating Training 2 years 10,000.00

The depreciation and amortization are computed using the straight line method except for the vehicle which used the double declining method due to the projected lower maintenance cost in its first few years. 4. Past-Due Loans. Part of the loaned amount disposed during the period

will remain outstanding, since it will be due the following period. It is assumed that 20% of this amount will be treated as receivable or past-due loans. The following are further assumed: a. About ten (10) percent or one half (1/2) of the past due loans will be

paid after six months the following year;

b. About ten (10) percent or one half (1/2) of the past due loans will be settled after one year.

Projected Financial Statements

The projected income statement for year 1-5 is shown in Table FS1. The

project post a net income (loss) of (P795, 000.00) in the first year considering the

70

income trend, the project would accumulate a net income (loss) of (P5, 440,000.00) in five years. The projected balance sheet is presented in Table FS 2. After five years, the total assets shall amount to P90, 648,900.38. The projected cash flow schedule is shown in Table FS3. The project will generate a minimal cash position at year end due to maximization of cash revenues for the operation to minimize interest expense and improve net income.

71

Curriculum Vitae

Philip Gentiles

#57 Molave Corner Lauan Street, Davao City

Tel. No.: 227-7544

Cellphone No. 0917-705-3783

Email address: [email protected]

EDUCATION

Ateneo de Davao University, 2008

Bachelor of Science in Business Administration

Major in Entrepreneurship

AFFILIATIONS

League of Young Entrepreneurs (L.Y.E.) Member (2006-2007)


SKILLS AND QUALIFICATIONS

Hardworking, determined, assertive, well-rounded and flexible.

Computer literate (MS Word, MS Excel, MS PowerPoint)

Fluent in Visayan, Filipino and English

72

Iva Jessica Porticos

#19 Mahogany Street, Roldan Village Maa, Davao City

Tel. No.: 224-0533

Cellphone No.: 0918- 217-0768


EDUCATION




AFFILIATIONS

BA-SEC Energy Committee Member (2006-2007)

BA-SEC Programs Committee Member (2007-2008)



SEMINAR

Mindanao Business Management Youth Congress (MBMYC)

Cagayan de Oro City, (2005)


Computer literate in basic computer programs. (MS Word, MS Powerpoint,

MS Excel)

Good in Communication and Writing Skills

Good in dealing people

Hardworking

73

Venetia Ruth Uyking

#39 Nicasio Torres St., Bo. Obrero, Davao City

Tel. No.: 221 -7768

Cellphone No.: 0926-618-4568


EDUCATION




AFFILIATIONS

BA-SEC Energy Committee Member (2006-2007)

BA-SEC Programs Committee Member (2007-2008)

League of Young Entrepreneurs (L.Y.E.) Secretary (2006-2007)

League of Young Entrepreneurs (L.Y.E.) Secretary (2007-2008)

WORK EXPERIENCE: 2005 (2 months) Assistant Manager Farmacia Sta Ana

I have worked in one of the branches of Farmacia Sta. Ana as an

assistant manager. I have handled sales to customers, employee and supplies

supervision, and daily cash flows.


Computer:

- Microsoft Word, Excel, Access and Power Point

Language:

- Visayan, Filipino, English, and Chinese (Fookien)

Personal:

- I am confident that I would be able to work under pressure. I am

dedicated to work and easily adapts to any given environment.

queenbank - corporate strategy.doc

Documents

davao city

study benefits

marketing awareness

bank industry

branchs profit performance

bank products

queen city development

problem queen city bank