ATENEO DE MANILA UNIVERSITY

Graduate School of Business

Strategic Management S07

LANDBANK OF THE PHILIPPINES

Submitted by:

MITTI A. PANEL

S190108

Submitted to:

Prof Hans Clifford Yao, MBA

June 15, 2022

 TABLE OF CONTENTS
EXECUTIVE SUMMARY . . . . . . . . .07
I. INTRODUCTION
A. Company Background . . . . . . . 09
B. Organizational Structure . . . . . . 12
C. Human Resources 13
D. Distribution Channel 14
1. Branches and Branch-Lites
2. Lending Centers
3. Agri-Hubs
4. Automated Teller Machines (ATMs) and Cash Deposit Machines (CDMs)
E. Market Share 16
II. RESEARCH DESIGN AND METHODOLOGY 18
A. Scope and Delimitation 19
III. COMPANY’S VISION AND MISSION 20
A. LBP’s Current Vision Statement 20
B. Recommended Vision Statement 21
C. LBP’s Current Mission Statement 21
D. Recommended Mission Statement 24
IV. EXTERNAL ANALYSIS 26
A. Philippine Banking Sector 26
B. Industry Definition 26
1. Access to Credit 27
2. Safety of Deposits 27
3. Payment Services 27
4. Investment Opportunities 28
C. External Environment 29
1. Pestel Analysis 29
a. Political 30
b. Economic 35
c. Sociological 37
d. Technological 40
e. Legal 42
f. Environmental 43
2. External Factors Evaluation (EFE) 45
a. Opportunities 45
b. Threats 53
3. Porter’s Five Forces 57
a. Bargaining Power of Suppliers 58
b. Bargaining Power of Buyers 62
c. Threat to New Entrants 66
d. Threat of Substitution 70
e. Competitive Rivalry 73
4. Competitor’s Analysis 77

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 a. Banco De Oro (BDO) 78
b. Metrobank (MBTC) 79
5. Competitive Profile Matrix (CPM) 80
6. Summary of External Issues 95
a. Major Opportunities and Threats 95
b. Industries Attractiveness 96
c. Company’s Competitive Position 97
d. Strategic Issues related to External Environment 97
V. INTERNAL ANALYSIS 98
A. McKinsey 7S 98
1. System 99
2. Structures 100
3. Style 102
4. Strategy 102
5. Skills 104
6. Staff 105
7. Shared Values 106
B. Value Chain Analysis 107
1. Primary Activities 108
2. Support Activities 112
C. Internal Management Audit 114
1. Management Audit 115
2. Marketing Audit 116
3. Operational Audit 117
4. Research and Development Audit 117
5. Management Information Audit 118
D. Financial Statement Analysis 119
1. LBP’s Size and Market Share 120
2. LBP’s Performance Indicators 122
3. Applicable Financial Ratios 123
a. Profitability Ratios 123
b. Liquidity Ratios 127
c. Activity Ratios 128
d. Leverage Ratios 130
E. Internal Factors Evaluation (IFE) 131
1. Strengths 131
2. Weaknesses 134
F. Summary of Internal Issues 138
1. Major Strength and Weakness 138
2. Strategic Issues related to Internal Environment 139
VI. STRATEGY FORMULATION 140
A. Strategic Formulation Tools
1. Strength, Weakness, Opportunities, Threats (SWOT) Matrix 140
a. Attack Strategies 140

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 b. Develop Strategies 141
c. Reinforce Strategies 142
d. Avoid Strategies 143
e. Summaries of Recommended Strategies 144
2. SPACE Matrix 146
3. Boston Consulting Group (BCG) Matrix 148
4. Internal – External (IE) Matrix 149
5. Grand Strategy Matrix 150
6. QSPM 151
VII. OBJECTIVES, STRATEGY RECOMMENDATIONS AND ACTION PLANS 153
A. Strategic and Financial Objectives 153
1. Key Strategic Issues 153
2. Strategic Objectives 154
3. Financial Objectives 154
B. Strategic Recommendations 154
VIII. STRATEGY IMPLEMENTATION 162
A. Strategy Map 162
B. Action Plans 163
C. Financial Projections and Evaluation of Strategies 168
1. Assumptions 168
2. Impact of Strategies on Financial Objectives
a. Impact of Strategies in LBP’s Total Assets 170
b. Impact of Strategies in LBP’s Total Deposits 170
3. Financial Projections 171
a. LBP Projected Balance Sheet 171
b. LBP Projected Income Statement 172
D. Vision Alignment 173
E. Overall Evaluation 174
IX. STRATEGY EVALUATION, MONITORING AND CONTROL 175
X. BIBLIOGRAPHY 176
XI. APPENDICES
A. LBP Statement of Financial Position 2018 – 2021 181
B. LBP Balance Sheet: Vertical and Horizontal Analysis 182
C. LBP Income Statement 2018 - 2021 183
D. LBP Income Statement: Vertical and Horizontal Analysis 184
E. LBP Projected Income Statement 2022 – 2025 185
F. LBP Projected Balance Sheet 2022 – 2025 186
G. LBP Projected Cashflow 2022-2025 187
H. BDO Statement of Financial Position 2018 – 2021 188
I. BDO Income Statement 2018 – 2021 188
J. MBTC Statement of Financial Position 2018 – 2021 189
K. MBTC Income Statement 2018 – 2021 190

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 XII. LIST OF TABLES
1. LBP ATM Distribution per Branch Group 16
2. Analysis of Current Vision Statement 20
3. Evaluation of Recommended Vision Statement 21
4. Analysis of Current Mission Statement 22
5. Evaluation of Recommended Mission Statement 24
6. Universal Banks Financial Indicators with CAGR 28
7. BBB Projects Completion Status 34
8. Basic Deposit Account Product Features 43
9. External Factor Evaluation Matrix 45
10. Bank Capitalization Requirements 69
11. Summary of Evaluation of Five Competitive Forces 76
12. Universal Banking Leaders as of 31 Dec 2021 77
13. Competitive Profile Matrix 80
14. No of Customer Touchpoints per Bank 85
15. Technological Trends per Bank 87
16. Capitalization per Bank 89
17. Saving Account Features per Bank 90
18. Asset Quality Ratio per Bank 92
19. Employee Performance per Bank 94
20. LBP Management Audit Assessment 115
21. LBP Marketing Audit Assessment 116
22. LBP Operational Audit Assessment 117
23. LBP Research and Development Audit Assessment 117
24. LBP Management and Information System Audit 118
25. Growth % of Significant Items in LBP Income Statement 119
26. Total Assets of Top Universal Bank for years 2017, 2019 – 2020 120
27. Growth Rate of Banks Total Asset from 2017 – 2021 121
28. Total Market Share by Assets per Bank from 2017 – 2021 122
29. LBP’s Performance Indicator for years 2017, 2019 – 2021 122
30. Internal Factors Evaluation 131
XIII. LIST OF FIGURES
1. LBP’s Logo with ‘Serving the Nation’ tagline 09
2. LBP Organizational Structure 13
3. LBP Branches Area of Coverage Per Group 15
4. Universal Banks Market Share Per Assets 17
5. Universal Banks Market Share Per Deposits 17
6. Universal Banks Market Share Per Total Loans 17
7. Universal Banks Market Share Per Total Capital 17
8. PESTLE Analysis 29
9. Consideration in Opening an Account 31
10. Barriers to Account Ownership 32
11. Inflation rates 35
12. Porter’s Five Forces Model 58

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 13. Bank Service Discontinuation Rating 81
14. Reason for Choosing primary Banks PH 82
15. Bank Ratings on Proactive Behavior 83
16. Preferred Channel During Pre-, Purchased and Post Purchased Stage 84
17. LBP McKinsey 7S 97
18. LBP Value Chain 103
19. LBP SPACE Matrix 146
20. LBP BCG Matrix 148
21. LBP IE Matrix 149
22. LBP Grand Strategy Matrix 150
23. LBP QSMP Matrix 151
24. Strategy Map 162

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EXECUTIVE SUMMARY

Landbank of the Philippines (hence referred to as LBP) is one of the country's largest

universal banks and the largest government-controlled corporation. LBP has skillfully reconciled

its social obligation to promote rural development with its imperative to be financially

sustainable. The LBP and UCPB merger was approved in June 2021, but transitions, integration,

and migration were concluded in March 2022. The merger resulted in a stronger and more

resilient institution for LBP. With the slogan 'Serving the Nation,' LBP aspires to be at the forefront

of promoting financial inclusion in the country by providing widely accessible financial solutions.

Taking into account important external circumstances, the government's goal for financial

inclusion, the expansion of digital banking and financial technology, and the economy's adoption

and transition to cashless transactions drove key market prospects. In tandem with this technical

development, however, fraud and cyber risks are on the rise, as is the participation of financial

institutions in money laundering and terrorism financing activities.

LBP presently holds the second largest market share, placing it in the middle of its

industry. With a CPM score of 2.70 and an EFE score of 3.02. Where there is a need for a more

secure financial environment, quality and responsive consumer connection, and innovative and

adaptable products and services, key strategic concerns pertinent to the external environment

must be addressed.

With strong solvency and financial ratios and diversified products as LBP’s top advantage,

LBP score 2.91 in IFE. Nonetheless, company’s weaknesses such as unsatisfactory customer

service, and limited customer touchpoints which are deemed vital as part of the service industry,

were noted.

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 Strategic issues pertaining to internal aspects include the restricted opportunities for

customer participation and the lack of integration in internal procedures, which leads to an

unpleasant customer experience. In addition, due to its modest capitalization, LBP is extremely

leveraged, with the majority of its finances being driven by its level of deposit liabilities; hence,

LBP must maintain a stable balance act in order to continue being financially able to serve its

principal sectors.

Strategy formulation tools have recommended to capitalize market penetration, market

development, and product development strategies. LBP remains in the 'Question Mark' quadrant

prior to and throughout a pandemic; therefore, to shift to the 'STAR' position, LBP should have

an extensive market expansion strategy and produce superior strategies than its competitors,

which is also a recommendation from SWOT, IE and Grand matrices. QSMP likewise suggests

prioritizing market penetration and development strategies.

Strategic objectives include raising the level of assets and deposits to continue assisting

high-risk creditors, expanding client touchpoints and engagements, and enhancing the quality of

customer service provided, and providing innovative and accessible products and services

especially to unserved and underserved areas.

Strategic recommendations for market penetration and development include, among

others, improving the ratio of ATMs-to-Card base, improving and incorporating various

government transactions and other relevant banking needs in mobile banking applications to

reduce branch traffics, offering a low-cost basic savings account to encourage every Filipino to

participate in the financial system, etc.

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 I. INTRODUCTION

Figure 1. LBP’s logo with 2022 tagline ‘Serving the Nation’

A. Company Background

With assets of P2.58 trillion as of December 2021, Landbank of the Philippines (herein

referred to as LBP) is the largest government-owned and controlled corporation (GOCC) in

the Philippines. It is also the second largest universal bank in the Philippines.

The LBP was founded as a result of the passage of Republic Act (RA) 3844, often

known as the Agricultural Land Reform Code. LBP was established on August 8, 1963 with

the purpose of providing funding for the acquisition and distribution of agricultural estates

for the purpose of division and resale to small landholders, in addition to the financing of

the purchase of the landholding by the agricultural lessee. At this point in time, the allowed

capitalization of LBP is P1.5 billion pesos, but the original capital was only P200 million.

(LBP, n.d.)

By 1973, the LBP was in a precarious financial position due to a lack of resources and

money that were necessary for the fulfillment of its designated function. The LBP was given

new life on July 21 as a result of Presidential Decree No. 251. The Decree bestowed the LBP

the authority to engage in universal banking, making it the first bank in existence at the

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 time to hold such an authorization. The LBP, which is a universal bank that is controlled by

the government, has a social responsibility to encourage the development of rural areas.

In addition, the order broadened the scope of the LBP's authority to encompass loans for

initiatives in the fields of agriculture, industry, homebuilding, home finance, and other

constructive endeavors.

At the end of its corporate existence, RA 10374 added 50 years to LBP's corporate

existence. Through Executive Order 198, the LBP's authorized capital reached P25 billion

and was later increased to P200 billion by 2016. With its provisions to give LBP with at least

P30 billion in capital infusion, LBP will be able to continue supporting the government's

plans for sustainable and equitable growth.

Development Bank of the Philippines (DBP) is a government development bank

entrusted with providing banking services to agricultural and industrial firms. On February

4, 2016, an executive order was signed to prepare the merger of LBP and DBP. Later that

same year, however, the new administration annulled the merger.

Five years later, on June 25, 2021, Executive Order 142 makes it necessary for the LBP

and the United Coconut Planters Bank (UCPB), a government-controlled financial

institution that primarily served the needs of coconut growers, to merge into a single

institution. As a result of the merger, LBP emerged as the sole surviving entity.

The regulatory permission for the merger was successfully achieved, and on March 1,

2022, the merger of UCPB and LBP went into effect as planned. The newly merged bank

had a total asset value of P2.9 trillion, which put the state-owned financial institution in a

better position to access unbanked and underserved communities.

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 Over the years, LBP has effectively balanced its social responsibility of fostering rural

development with its need to be financially viable. In an effort to offer a comprehensive

array of banking and financial services, LBP partnered with the following different

subsidiaries:

1. LBP Insurance Brokerage, Inc. (LIBI). Organized to provide service in bank’s insurance

requirements and other general insurance brokerage management to address

exposures of the and its clients. (LBP, n.d.)

2. LBP Leasing and Finance Corporation (LLFC) SEC-registered corporation that leases

equipment, extends credit to industrial, commercial, agricultural, and other

businesses, and finances merchandise. LLFC is created to aid LBP and its clients on

financing and leasing both financial and operating facilities. (LBP, n.d.)

3. LBP Countryside Development Foundation Inc (LCDFI). LCDFI primarily provides

financial literacy and capacity building programs that strengthen cooperatives and

assist farmers and fishers’ development. (LBP, n.d.)

4. LBP Resource and Development Corporation (LBRDC). Primarily engaged in

construction, project management, brokering services and real estate management.

Furthermore, LBRDC has expanded its line of business to various facilities

maintenance and manpower services. (LBP, n.d.)

5. Overseas Filipino Bank (OFBank), formerly Philippine Postal Savings Bank, OFbank is

now the first government digital-only bank authorized to provide financial goods and

services to Overseas Filipinos. OFBank's online account opening is facilitated by a

computerized process made possible by artificial intelligence. (LBP, n.d)

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 As of March 2022, the absorption of UCPB companies by LBP is still undecided, and

they will operate separately. The mapping of UCPB and LBP is examined intentionally to

combine their operations and prevent overlap with existing LBP subsidiaries.

In contrast to private banks, the LBP, in addition to its universal functions, performs a

number of additional significant functions. Among there are:

1. Providing support to CARP through land valuation, collection of farmer’s land

amortization and bond serving for the landowners.

2. Extending financial assistance to Small Farmers and Fishers (SFF) and their

organizations, Micro, Small and Medium Enterprises MSMEs, large agribusiness

enterprises, Local Government Units (LGUs), power producers and distribution

utilities, water districts and private developers, and among others.

3. Serves a major deliver conduit of National Government (NG) programs

4. Extend various services to the NG via online collection and modified disbursement

scheme.

B. Organization Structure

LBP's Board of Directors allocate duties and responsibilities to six (6) Board-level

Committees, which are managed by the President and CEO (PCEO). The PCEO manages the

bank's day-to-day operations, which are subdivided and delegated by function.

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 Figure 2. LBP Organizational Structure

The Board of
Directors

Audit and
Risk Oversight
Compliance
Committee
Committee

Agri-Agra Social
Trust Committee
Concerns Committee

Corporate Related Party

Governance Transaction
Committee Committee

The President & CEO

Agricultural and
Branch Banking Corporate Services Treasury and Digital Banking
Operations Sector Development
Sector Sector Investment Sector Sector
Lending Sector

Corporate affairs Banking Operations Corporate Banking Asset and Liability Digital Banking
Branches Group
Group Group Group Management Group Management Group

Managers/ Dept Managers/ Dept Managers/ Dept Managers/ Dept Managers/ Dept Managers/ Dept
Heads Heads Heads Heads Heads Heads

Rank & File Rank & File Rank & File Rank & File Rank & File Rank & File

C. Human Resources

LBP will have a total manpower of 10,261 by the end of the year 2020. This

includes 9,680 regular employees and 581 contractual workers. The number of women

makes up the majority of the workforce, accounting for 66% of the total (6,855), while

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 men only make up 34% (3,406). Furthermore, in terms of age bracket, 15.42% are

members of Gen Z (people aged 25 and younger), 34.54% are Millennials or Gen Y

(people aged 26 to 35 years old), 18.57 percent are Gen X (people aged 36 to 45 years

old), and 32.57 percent are Baby Boomers (people aged 45 and older), with a turn-over

rate recorded at 1.57%.

D. Distribution Channels

The efficiency with which LBP processes client transactions and provides services

is directly correlated to the distribution channels that are deployed by the company.

Among these services are fund disbursements/drawdowns, remittances and fund

transfers facilities, investments, collection of accounts receivable, payment of debts,

project/program implementation, and product launching.

1. Branches and Branch-Lites

By the end of 2021, the total number of LBP branches and branch-lite locations

across the country increased to 678, covering all 81 provinces. In order to facilitate

more effective management and more streamlined administration, the company's

branches have been organized into ten distinct groups according to their respective

geographic regions. The following is a synopsis of the LBP's coverage broken down by

area groups:

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 Figure D. LBP Branches Area of coverage per group

2. Lending Centers

LBP opened nine new Lending Centers in the year 2020, bringing the total

number of Lending Centers (LC) located in the key provinces of the country up to 55.

This was done to help facilitate the delivery of the Bank's loan products and services

throughout the country, particularly to those in need of credit assistance. (LBP, 2020)

3. Agri-Hubs

In accordance with the Bank's objective to increase its reach and touchpoints,

LBP developed Agri-hubs in the provinces that produce the most paddy rice. Agri-

hubs are envisioned as a means for LBP to provide a one-stop-shop facility where

branch banking, lending, and agrarian functions can be offered under one roof to

meet the banking needs of clients, especially farmers and fishermen. Five Agri-hubs

were established in 2020 in Calabanga (Camarines Sur), Barotac Viejo (Iloilo), Echague

(Isabela), Sual (Pangasinan), and Sta. Maria (Camarines Sur) (Ilocos Sur). (LBP, 2020)

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 4. Automated Teller Machines (ATMs) and Cash Deposit Machines (CDMs)

At the end of 2021, LBP’s total number of ATMs grows to 2,560 ATMs

comprising of 12.56% of the total 20,378 ATM networks of the universal banking

industry, and 250 CDMs strategically located across regions, with the following

distribution per areas covered.

Table 1. LBP ATM Distribution per Branch Group

E. Market Share

Universal banks compete for the rankings of four (4) financial indicators: assets,

deposits, loans, and capital. These metrics are the primary determinants of bank

profitability and the basis for their activities.

In terms of total asset, LBP held 14% of the total assets of banking industries,

making it the second largest universal bank in the country.

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 Figure 4. Universal Banks Market Share Per Assets

LBP has a 15% stake of the banking industry's overall deposit total of Php 14,821

trillion, with total deposits of Php 2,268 trillion, short of leader’s total deposit by more than

500 billion.
Figure 5. Universal Banks Market Share Per Deposits

LBP is ranked fourth in terms of loans and capitalization, having a 9 percent share

in both categories. As of December 2021, LBP has a total loan of Php 877 billion and total

capital of Php 207 billion.

Figure 6. Universal Banks Market Share Per Total Loans Figure 7. Universal Banks Market Share Per Total Capital

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 II. RESEARCH DESIGN AND METHODOLOGY

This term paper used exploratory and descriptive research to evaluate the feasibility

and viability of the presented strategies for achieving the study's objectives. Weights and

ratings are justified and validated through a comprehensive, factual, and meticulous

examination of public and historical data.

Some of the information contained in this paper was obtained from confidential

company sources and the official website of the LBP. Other information, such as competitor

and industry-related data, is extracted from the official websites of BSP and each of its

competitors.

The essential components of Fred David's Vision and Mission Statement were utilized

to assess and improve the existing company's Vision and Mission Statement. PESTLE

framework was used to identify and evaluate pertinent external factors, an External Factor

Evaluation (EFE) Matrix to identify potential external opportunities and threats, and

Porter's Five Forces Model to evaluate and assess industry competitiveness. In addition,

LBP's Internal Factor Evaluation (IFE) Matrix was developed based on an analysis of the

company's internal performance using key performance metrics, internal strengths and

weaknesses, various department audits, and McKinsey's 7S model.

In order to establish the desired objective and appropriate strategies, various

strategy formulation tools are used. The SWOT, SPACE, BCG, IE, Grand Strategy, and QSPM

Matrices are among these tools. Suggested and recommended strategies of the tools

presented are summarized evaluated. Key strategic issues have been identified and are

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 being addressed through strategic and financial objectives that are in line with the

company's vision and mission.

A strategy map and action plans are developed for effective implementation.

Financial projections and evaluations are used to estimate the impact of strategies on

financial objectives.

Norton’s and Kaplan’s Balance Scorecard was used to evaluate, monitor and control

the performance and initiative from the four (4) identified perspectives: capacity and

growth, internal process, customer and financial performance.

A. Scope and Delimitation

This strategic management study includes a clear evaluation of LBP's overall

performance in relation to its business function and mandate, as well as strategic and

financial goals. This paper did not focus on a specific sector, but rather provided a

general yet comprehensive analysis of the company.

Financial data and projections are derived from each company's audited financial

statements, which are posted and published on their respective websites. However, due

to the absence of the LBP 2021 Audited Financial Statement, the Balance Sheet

published on the BSP website, and the Income Statement published on the LBP website

were used to estimate financial projections.

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 III. COMPANY’S VISION AND MISSION

A. LBP’s Current Vision Statement

“By 2023, LANDBANK shall be the leading universal bank that promotes inclusive

growth, especially in the unbanked and underserved areas, through the delivery of

innovative financial products and services powered by digital banking platforms.” (LBP,

n.d.)

Analysis of the Vision Statement

Table No. 2. Analysis of Current Vision Statement

Parameters Presented? Evaluation

| Yes or No |
Q: “What do we want Yes xxx ‘the leading universal bank that
to become” promotes inclusive growth’ xxx
---
Clearly proclaims its objective to
become the leading universal bank
fostering inclusive economic growth.
Concise & Inspirational No Concise, yet devoid of motivation and
purpose for its stakeholders
Aspiration No Although it seeks to encourage inclusive
growth in unbanked and underserved
communities, there are no concrete
measures outlined to achieve this
objective.
Time-bound Yes ‘By 2023’ xxx
---
2019 was the year of the most recent
update, which reflects its strategy for
the medium term.

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 B. Recommended Vision Statement

“By 2025, LANDBANK shall be at the forefront of bringing-in the unbanked, making

every Filipino financially included while delivering innovative, and responsive digital

financial products and services, aspiring to become the largest deposit-based bank in the

country.”

Table No. 3. Evaluation of Recommended Vision Statement

Parameters Presented? Particular

| Yes or No |
Q: “What do we want Yes xxx ‘to be at the forefront of bringing-in
to become” the unbanked xxx
Concise & Yes xxx ‘bringing in the unbanked, making
Inspirational every Filipino financially included xxx
Aspiration Yes xxx ‘to become the largest deposit-
based bank in the country’
Time-bound Yes ‘By 2025’ xxx

C. LBP’s Current Mission Statement

To Our Clients and Public: We provide accessible and best technology solutions to

deliver timely and responsive financial and support services to meet the needs of our

clients, especially Small Farmers and Fishers (SFFs), Micro, Small and Medium Enterprises

(MSMEs), Countryside Financial Institutions (CFIs), Local Government Units (LGUs) and

government agencies, while promoting sustainable development anchored on good

governance.

To Our Employees: We are the employer of choice. We develop and nurture talents

who exemplify the highest standards of ethics, social responsibility, and service

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 excellence. We support diversity and cultivate a healthy work environment with equal

opportunity for professional growth and advancement” (LBP, n.d.)

Analysis of the Mission Statement

Table No. 4. Analysis of Current Mission Statement

Parameters Presented? Evaluation

| Yes or No |
Customers Yes xxx ‘clients, especially Small Farmers and
Fishers (SFFs), Micro, Small and Medium
Enterprises (MSMEs), Countryside Financial
Institutions (CFIs), Local Government Units
(LGUs) and government agencies’ xxx
----
In the mission statement, the mandated
and priority sector was referred to as
customers. Nevertheless, if LBP is to be at
the vanguard of financial inclusion
initiatives, it must be able to capture other
potential markets.
Product/ Services Yes xxx ‘accessible and best technology
solutions to deliver timely and responsive
financial and support services ’ xxx
---
LBP is aware of what it must deliver and
offer to its customers.
Market Yes xxx ‘clients, especially Small Farmers and
Fishers (SFFs), Micro, Small and Medium
Enterprises (MSMEs), Countryside Financial
Institutions (CFIs), Local Government Units
(LGUs) and government agencies’ xxx
---
In accordance with its mandate, LBP
identified its major target market and
priority industry. Nonetheless, if LBP

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 desires to be at the lead of the financial
inclusion drive, it must be able to grab
additional potential markets.
Technology Yes xxx ‘best technology solutions’ xxx
---
Although it mentions offering the finest
technology solution, providing 'the best' is
ambiguous.
Concern for Yes xxx ‘promoting sustainable development’
Survival/ Growth/ ---
Profitability Promoting sustainable development will
ensure the company's survival for future
generations.
Self-Concept Yes xxx ‘we are the employer of choice’ xxx
---
It identifies itself as an employer of choice
but failed to establish itself as a financial
institution providing financial services.
Philosophy Yes xxx ‘anchored on good governance’ xxx
---
As a government institution, it upholds the
rule of law with appropriate attention.
Concern for Public Yes Xxx ‘while promoting sustainable
Image development anchored on good
governance’ xxx
---
In line with its ideology, it ensures the
absence of abuse and corruption through
strict adherence to policy and the law.
Concern for Yes xxx ‘We develop and nurture talents who
Employees exemplify the highest standards of ethics,
social responsibility, and service excellence.
We support diversity and cultivate a
healthy work environment with equal
opportunity for professional growth and
advancement’ xxx
---

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 Employee welfare and career
advancement are stated.
Nation Building No There is no indication of an advocacy for
nation-building.

D. Recommended Mission Statement

“We at LANDBANK provide and deliver agile and responsive financial products and

services through multiple digital platforms to every Filipino. We act as a catalyst in

promoting financial inclusion in the unbanked and underserved areas, meeting the needs

of our stakeholders, especially Small Farmers and Fishers, Micro, Small, and Medium

Enterprises, Cooperatives, Countryside Financial Institutions, Local Government Units,

government agencies, and those included in the marginalized sectors while promoting

sustainable socio-economic development anchored on good governance.

As an employer of choice, we develop, sustain and reinforce a growth and high-

performance mindset. We thrive and nurture talents who exemplify the highest

standards of ethics, social responsibility and service excellence. We support diversity and

cultivate a healthy work environment with equal opportunity for professional growth

and advancement.”

Table No. 5. Evaluation of Recommended Mission Statement

Parameters Presented? Particular

| Yes or No |
Customers Yes xxx ‘every Filipino’ xxx
Product/ Services Yes xxx ‘agile and responsive financial
products and services’ xxx
Market Yes xxx ‘every Filipino’ … ‘unbanked and
underserved areas’ … ’especially Small
Farmers and Fishers, Micro, Small, and

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 Medium Enterprises, Cooperatives
Countryside Financial Institutions, Local
Government Units , government agencies,
and those included in the marginalized
sectors’ xxx
Technology Yes xxx ’multiple digital platforms’ xxx
Concern for Yes xxx ‘sustainable socio-economic
Survival/ Growth/ development’ xxx
Profitability
Self-Concept Yes xxx ‘catalyst in promoting financial
inclusion’… ‘an employer of choice’ xxx
Philosophy Yes xxx ‘anchored on good governance’ xxx
Concern for Yes xxx ‘while promoting sustainable socio-
Public Image economic development anchored on good
governance’ xxx
Concern for Yes xxx ‘we develop, sustain and reinforce a
Employees growth and high-performance mindset.
We thrive and nurture talents who
exemplify the highest standards of ethics,
social responsibility and service excellence.
We support diversity and cultivate a
healthy work environment with equal
opportunity for professional growth and
advancement’
Nation Building Yes xxx ’promoting financial inclusion in the
unbanked and underserved areas’

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 VI. EXTERNAL ANALYSIS

A. Philippine Banking Sector

In 2020, a worldwide pandemic brought unprecedented devastation to the

Philippines. Economic recession and unemployment soared, and inflation ramped up

towards the end of the year. As one of the pillars of the economy, the banking sector

was not spared from this devastation, resulting to deteriorated asset quality, provisions

increased, and profit plunged.

Undeniably, the pandemic has become the banking sector’s primary challenge

and it is reckless to forego the financial inclusion initiatives which the sector has started.

In year 2021, although vaccination program commenced, COVID-19 cases still

significantly increased, and this remained a challenged for the financial system for the

years ahead.

By end of 2021, with 92% of the total assets in the system, universal and

commercial banks remained the most significant in the banking sector. At a CAGR of

8.75% these banks had the fastest growth in terms of asset from 2017-2021.

B. Industry Definition

Industry as defined by is a group of competitors producing substitutes that are

close enough that the behavior of any firms affects each other’s either directly or

indirectly (Porter, 1979). The subject of this paper, LBP, belongs to the Financial Services

Industry – which satisfies the need for delivery of basic financial services such as

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 traditional banking, investments, foreign exchange, insurances, credits cards and among

others.

Players from this industry must primarily satisfies the following financial needs:

1. Access to Credit

Retailers, business, private and public corporations, and agencies needs

access to credit to finance various commitments and undertaking, such as capital

requirements, insurances, payment options, among others, necessary to meet every

day needs of both individuals and business operations and activities.

2. Safety of Deposits

Deposits are funds kept in a bank, typically for safekeeping and interest. The

role of financial of system is to safeguard these deposits while maintaining a

balancing mechanism between their depositors and creditors. Depositors are

individuals, corporations, businesses, and agencies who deposit their funds and

maintain account in banks, subsequently can use their deposits as entry to access

credit.

3. Payment Services

The most basic form of mode of payments are currency and checks, however

over years, financial industry has evolved and developed technological

breakthroughs. Payment systems had expanded to the use of automated teller

machines (ATM), credit cards, mobile payments, e-wallets, quick response (QR) code,

among others. As the industry rapidly gearing into cashless payment system, financial

institutions are accelerating in the adoption of digital payments.

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 4. Investment Opportunities

Financial Institutions serves as a marketplace for funds and other assets to

mobilize deposits and capitals into where it is most useful.

BSP classifies banks by their power and scope of authorities into: (1) Universal

Banks, (2) Commercial Banks, (3) Thrift Banks, (4) Rural Banks, (5) Cooperative Banks,

and (6) Islamic Bank. To focus the conduct of strategic planning, industry will be

further segmented into Universal Banking Industry. Universal bank exercise the

same power and authority with commercial banks with the following additional

power and services:

1. As an investment house

2. To invest in non-allied enterprises

3. Own up to 100% of the equity in a Thrift, and Rural Bank

4. In case of publicly listed universal bank, to own up to 100% of the voting stocks

of one universal or commercial bank.

As the most the significant sector in the banking activity, the table below show

the industry’s performance before and during and during pandemic period.
Table No. 6. Universal Banks Financial Indicators with CAGR

Based on the above data, all four (4) indicators drastically decline during the

period of pandemic. The top five (5) key players in universal bank industry are the Banco

De Oro (BDO), LBP, Metropolitan Bank and TCo (MBTC), Bank of Philippine Island (BPI)

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 and the Philippine National Bank (PNB). Based on the 2021 BSP data, their performances

and market positions are shown on the succeeding illustrations.

C. External Environment

Companies do not exist in vacuum, rather operates, and interact with its external

environment. Macroenvironment analysis is needed to conduct in understanding the

potential changes taking place in any external environment. These changes are in the

form of either an opportunity or a threat to one’s industry, hence will affect company’s

strategic decision making. This macro environment analysis can be performed using

several tools.

1. PESTLE Analysis.

In reference to PESTLE framework, there are six (6) segments that can drive

macroenvironment potential revolutions. These are political, economic, sociological,

technological, legal, and environmental. The following are the identified factors that

can potentially affect LBP’s strategic direction.

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 a. Political

1) BSP’s National Strategy for Financial Inclusion Reform (NSFIR) – Opportunity

Financial inclusion occurs when everyone has effective access to a wide

range of financial products and services (NSFIR, 2015). On 15 July 2015, the BSP

launched its NSFIR strategy, which has the potential to improve the welfare of

unserved and underserved markets, such as the low-income and marginalized,

agriculture and agrarian reform sectors, and indigenous people, among others.

Significant components of the definition that are essential for the

planning, implementation, and monitoring of this Strategy include the phrases

"effective access" and "wide range of financial products and services." Both of

these phrases are important in achieving the goals of the definition. The ability

to get what you need at the time you need it is what we mean when we talk

about effective access.

Financial service providers (FSPs) such as banks, pawnshops, remittance

agencies, money changers, foreign exchange dealers, and loan associations

(NSSLAs), cooperatives, lending firms, and financial companies play an

important part in inclusive finance in the Philippines. (BSP, 2019)

Based on the BSP’s Financial Inclusion in the Philippines Dashboard

Report (FIPDR) as of 3rd quarter of 2021, there are 77.2 million adults, and

estimated to have 53% have accounts, the same percentage of adults with

savings. Fifty-one percent (51%) of those who saved money kept their money

at home, and only 21% kept in money in the banks.

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 For access to credit, 33% of adult Filipinos borrowed. Most loans in which

54% came from informal sources such as family and friends, informal lenders.

Few individuals acquired credit through official institutions such as

lending/financing firms, cooperatives, microfinance non-governmental

organizations (NGOs), and only a portion or 3% from banks.

Based on the result the 2019 Financial Inclusion Survey, the minimum

beginning deposit is the most important factor for accountholders (44%) when

opening an account. Other important factors include interest rate (34%),

keeping a minimum balance (32%), the reputation of the financial institution

(32%), and documentation requirements (29%). In addition, a financial

institution's dormancy fees (17 percent) and customer service (14 percent) are

considered. It seems that accountholders are less concerned with the distance

of the financial institution (12%) and waiting time (12%) when determining

whether to create an account.

Figure 9. Considerations in Opening an Account

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 The number of unbanked Filipinos decreased by 1.6 million from 52.8

million in 2017 to 51.2 million in 2019. Cost and utility issues were the key

factors preventing account ownership. As claimed by nearly half (45%) of the

unbanked, lack of sufficient funds remained the primary reason for not having

a bank account. This is followed by a lack of perceived necessity for a bank

account (27%) and the absence of documentation requirements (26%).

Figure 10. Barriers to Account Ownership

A financial system that is inclusive is not only pro-growth, but also pro-

poverty, with the ability to alleviate income inequality and poverty, as well as

promote social cohesion and shared economic prosperity. In contrast, financial

exclusion leaves disadvantaged and low-income portions of society with no

alternative to informal solutions, leaving them exposed to financial distress,

debt, and poverty.

The establishment of Philippine Identification Systems (PhilSys) is one of

the by-products of this initiative. The project emphasizes inclusive coverage,

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 allowing access to the most vulnerable groups, including the poor, people living

in geographically isolated and disadvantaged areas, indigenous peoples, and

individuals with disabilities. A foundational digital ID system, such as PhilSys,

will contribute to the development of the nation. It will allow the Philippines to

abandon inefficient and costly physical documents, processes, and credentials

in favor of their digital equivalents.

2) Build, Build, Build Policy – Opportunity

The recent-ended-Duterte administration's Build, Build, Build (BBB)

Program promises to bring in the "Golden Age of Infrastructure" in the

Philippines. (Manila Bulletin News, 2021)

The initiative intends to increase public infrastructure spending from an

average of 2.9% GDP under the late Aquino administration to approximately

7.3% by the conclusion of the Duterte administration. From 2016 to 2022, it will

cost approximately P8 trillion to P9 trillion to address the country's enormous

infrastructure backlog.

The government provided PhP1.02 trillion for infrastructure in 2021, of

which 79.2% (PhP807.5 billion) had been allocated from January to September.

The estimated infrastructure expenditures for 2022 are PhP1.18 trillion, or 5.3%

of GDP, which is less than the previous objective of 7.3%.

The Infrastructure Flagship Projects (IFPs) is a sub-list of priority projects

recognized by the National Economic and Development Authority Board

Committee on Infrastructure and the Investment Coordination Committee

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 under the BBB (ICC). On January 3, 2022, fifteen projects were finished. (Manila

Bulletin News, 2021)

In 2021, eight projects with a combined value of PhP94,6 billion were

completed. 77 IFPs worth PhP3.51 trillion are now active, while 27 projects

worth PhP1.09 trillion are in the pipeline. In terms of completion, 18 IFPs will

be finished within the administration's term, while eight projects will be

brought to completion in the second semester of 2022 and eighty-six projects

will be delivered to completion in 2023 and beyond.

Table No. 7. BBB Projects Completion Status

The official development assistance (ODA), which would cost a total of

PhP2.6 trillion, will be used to fund almost half (54 projects) of the 112 flagship

projects. The largest sources of ODA loans are Japan and China, which finance

15 and 13 projects, respectively. The Asian Development Bank (ADB) would

fund ten (10) projects, while the World Bank (WB) would fund five (5) and Korea

would fund six (6).

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 b. Economic

1) Inflation and Interest Rates – Threat

For the first four (4) months of the year, the average inflation stood at

3.7% slightly higher compared to 4.03% of the same period last year. However,

the 4.9% inflation in April was the highest recorded since January 2019. These

were mainly brought by higher annual increase in the index of food and non-

alcoholic beverages with 3.8%; transport at 13.0%; and housing, water,

electricity, gas and other fuels at 6.9%. (PSA, 2022)

Figure 11. Inflation Rates

The BSP expects 2022 inflation to settle above target reaching an average

of 4.6% and projected an average of 3.9% next year. These estimates were

higher compared to previous approximation of 3.7% for this year and 3.3% for

2023. (BSP, n.d.)

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 In spite of the ongoing anxiety regarding the COVID-19 pandemic, the

Overnight Reversed Repurchased (RRP) rates of the BSP have been maintained

at 2.0% since November 2020. The RRP rate was maintained at its previous level

in order to keep the cost of borrowing money from the bank at a manageable

level, thereby increasing demand, which in turn contributes to the expansion

of the economy. Despite this, the BSP made the decision on 19 May 2022 to

increase the RRP rate to 2.25 percent, effective the following day, May 2022.

The decision was to urge the banks to increase lending rates resulting to

expensive borrowings or lending for individual and business. Subsequently,

lesser spending, decelerating demand and ultimately resulting to low and

steady inflation.

2) Money Laundering and Terrorism Financing Activities – Threat

The COVID-19 epidemic has brought about a level of transformation in

industries and lifestyles all around the world that has never been seen before.

Regrettably, it also offered a window of opportunity for numerous financial

criminal syndicates to carry out their money laundering activities by capitalizing

on the continued uncertainties and worries surrounding the pandemic.

Recently, banks in the Philippines have been issuing warnings about the rise of

money mule scams. At the same time, experts have been advocating for stricter

rules to prevent the impact of rising financial crimes in the middle of the

uncertain economic situation. Money mules are inherently risky because they

add layers to the trail of money that leads from a victim to a criminal actor.

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 These layers make it more difficult for authorities to precisely identify the origin

of unlawful cash, which hinders their ability to effectively combat illegal activity.

They are frequently involved in moving chess pieces within a much broader,

more intricate international criminal operation such as the trafficking of

humans or drugs. To make matters even more complicated, people who act as

money mules are frequently the targets of scams themselves.

c. Sociological

1) The shift to cashlite – cashless transactions – Opportunity

With the introduction of the QR Ph Person-to-Merchant (P2M) payment

system, the Philippines are well on their way toward becoming a cash-lite

society. In addition to continuing to encourage the expansion and development

of new methods of digital payment through the implementation of laws and

regulations that make this possible, the BSP works to broaden access to

financial services. Inventions in digital payment have resulted in cheaper

transaction fees and the elimination of many of the obstacles that have

traditionally prevented people from possessing a transaction account. Digital

payments are becoming more commonplace, easier to use, and more cost-

effective as a result of the broad adoption of the internet and the development

of new technologies, which is accelerating the gradual transition toward an

economy that relies less on cash.

In addition, because of the rapid outbreak of the COVID-19 global

pandemic, the transition toward the use of digital payment methods has

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 become an absolute need. This is because the "New Economy" environment

has made the establishment of physical separation restrictions the norm.

Filipinos can lessen the need for mobility and protect themselves from the

health risks associated with face-to-face and over the counter (OTC) financial

transactions by using digital payments with the appropriate amount of care and

awareness. Since more and more people are getting their goods and services

through online shopping, the increased use of digital payment methods will also

help the expansion of fintech companies that are involved in e-commerce.

(Business World New, 2021)

According to the data that was just released by the BSP, the volume of

monthly digital payments in 2020 reached 20.1 percent, which is a slight

improvement over the target of 20% by 2020 that was established when NRPS

was first introduced in 2015. The expansion of the volume of monthly digital

payments is being driven primarily by high-frequency, low-value retail

transactions such as payments made to merchants and payments made from

person to person (P2P)- which has the greatest potential to further accelerate

the adoption of electronic payment methods.

The volume of monthly digital payments made to merchants went up by

47.8%, while the volume of monthly digital payments made from P2P went up

by 18.1%. The increased use of transaction accounts for e-commerce and P2P

remittances might be responsible for the expansion of these specialized

applications of blockchain technology. The government continues to be the

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 most cash-lite among payers, with 93.2% of its total monthly retail payments

volume already in digital form. This is despite the fact that payments made by

the government (G2X) only represent a small share of the total monthly retail

payments volume. Furthermore, payments made by businesses (B2X) appear

to be the most negatively impacted by the pandemic as they have posted a

decline in their monthly digital payment volume, with a decrease of 19.8% from

65 million in 2019 to 52 million monthly digital payment volume in 2020. This

represents a decrease from 65 million monthly digital payment volume in 2019.

Paying suppliers accounts for 88.2% of all B2X transactions, while less than one

percent of the company's monthly retail payment volume is processed

electronically. (Business World New, 2021)

The ongoing initiative on e-OR and e-Invoicing, in conjunction with the

digitalization of new payment streams, seeks to address the challenges

associated with digitalizing the B2X use-case.

2) Growing numbers of MSMEs – Opportunity

Despite the COVID-19 pandemic, the total number of micro, small, and

medium-sized enterprises (MSMEs) reached 2.081 million by the end of August

2021, up from 1.7 million in 2020 and 1.5 million in 2019, respectively. These

businesses are the driving force behind the Philippines' robust economic

growth. They make up more than 99 percent of all registered businesses in the

nation and are responsible for the creation of 60 percent of all jobs. These

companies are finding it more challenging to participate in global value chains

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 as a direct result of the COVID-19 crisis. Boosting the competitiveness of smaller

businesses can encourage greater resilience in the face of the pandemic and

other future shocks, all while promoting growth that is both inclusive and

sustainable.

d. Technological

1) The evolution of Digital Banking and Financial Technology – Opportunity

Sixty-nine percent (69%) of the adult population possesses a mobile

phone. Seventy-five percent (75%) of mobile phone owners possess a

smartphone. This represents 52 percent of the total adult population with a

smartphone, a significant increase from 2017 Financial Inclusion Survey of 38%.

(BSP, 2021)

More than fifty-three percent (53%) of the adult population uses the

internet. Most internet users (89 percent) access the web via mobile data.

Other internet access channels include home subscription (11%), internet shop

(5%), and public WIFI (5%). Only home subscription and public WIFI have

experienced significant declines from 2017 levels among these channels. (BSP,

2021)

Only 12% of mobile phone owners, particularly those in the upper class,

in Metro Manila and Visayas, and the younger demographic, use their mobile

phones to conduct financial transactions. For the remaining 88 percent who do

not use their mobile phones for financial transactions, lack of awareness

continues to be the leading reason (52 percent), followed by lack of trust (32%),

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 weak or nonexistent mobile signal (16%), and preference for branch or ATM

transactions (14%). (BSP, 2021)

However, mobile phones and the internet can only facilitate financial

inclusion if they are supported by the necessary infrastructure. Physical

infrastructure, including dependable electricity and mobile networks, is crucial.

In addition, financial infrastructure is required.

While it may not be cost-effective for financial institutions to open a

branch in every location with a large unbanked population, they can use agent

banking to offer basic financial services to customers by forming partnerships

with post offices or retail shops. Digital payment users must be able to deposit

and withdraw cash in a secure, dependable, and convenient manner at cash-in

and cash-out points, be they bank agents, mobile money agents, or ATMs.

Individuals who receive digital payments should ideally maintain their funds in

digital form and make purchases and bill payments electronically. However, in

many locations, especially in developing economies, digital payments are not

yet widely accepted for everyday purchases at local retail stores and markets.

Therefore, most people must be able to withdraw at least a portion of digital

payments.

Technology and physical infrastructure are only two components of the

whole picture. Moreover, regardless of the technology employed, financial

services must be tailored to the needs of disadvantaged groups, such as

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 women, the poor, and first-time users with limited literacy and numeracy skills.

(World Bank, 2017)

2) Increasing number and occurrence of Cyber threats and attacks- Threats

Since the pandemic began, an increasing number of people have turned

to digital financial transactions. As a result, the Cybersecurity Committee of the

Banker Association of the Philippines (BAP) reported that in 2021,

approximately P1 Billion had been lost to cyber fraud in the country. This loss

was measured in terms of unauthorized withdrawals and illegal transfers. The

total industry loss was calculated using the data collected by BAP, which

included compiled reports submitted by individuals who had been the victims

of fraud. (Philippine Information Agency, 2022)

e. Legal

1) BSP Memo No. 2022 – 003. Reiteration on Basic Deposit Account (BDA)–

Opportunity

A BDA is a non-interest-bearing or interest-bearing account that is

intended to promote financial inclusion. This account will provide Filipinos,

particularly the unserved and underserved, with the ability to receive and make

payments, as well as store value. It will have the fundamental capabilities that

define ease, accessibility, convenience, and cost-effectiveness for both banks

and customers. (MORB 2020) The following are the minimum features of BDA;

banks are given the freedom to customize these features based on the needs

of their identifies markets.

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 Table No. 8. Basic Deposit Account Product Feature

The 2019 Financial Inclusion Survey found that 60% of adults still do not

know about the BDA which is an initiative that was put forward by the BSP in

2018 to address these considerations. As a no-frills bank account, the BDA has

an opening deposit of less than P100, no minimum balance, no dormancy fees,

and basic requirements (e.g., any official identification document). The

implementation of the Philippine Identification System (PhilSys) assisted

account opening problems caused by a lack of acceptable identification

documents.

f. Environmental

1) Philippines being located at the typhoon belt – Threat

The Philippines straddles the typhoon belt, a region of the western Pacific

Ocean where approximately one-third of the world's tropical cyclones form.

Not only is this region the most active in the planet, but it also experiences the

most severe storms. On average, 20 hurricanes and typhoons strike the

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 Philippines each year, and their destructiveness is increasing. The Philippines'

northern Luzon and eastern Visayas are the most regularly affected islands.

Locally known as "Odette," Super Typhoon Rai was the fifteenth storm to

strike the Philippines in 2021 and the strongest. On 16–17 December 2021,

Super Typhoon Rai made nine landfalls, severely impacting the livelihoods of

poor farmers and fishers and exacerbating the effects of previous climate-

induced shocks including the 2019 coronavirus pandemic. Beyond its

immediate effects, Super Typhoon Rai had a negative impact on the food

security of households that rely on agriculture and fishing as their major or

secondary source of income, as their productive capacity and earnings were

interrupted.

Due to the fact that many farmers' cooperatives have limited loan

absorption capacity and a "dole out" mindset still persists, agricultural lending

is a high-risk, but not necessarily high-return, enterprise.

As the agricultural sector's contribution to the national economy declines,

economic growth slows, whereas a thriving agricultural sector could lead to a

rise in demand for financial services, which would accelerate economic and

industry growth.

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 2. External Factors Evaluation

Table No. 9. External Factor Evaluation Matrix

Legend:
LT – Long Term, ST – Short Term
P – Political, E – Economic, S – Sociological, T - Technological, L – Legal, En – Environmental

Responsiveness Rating:
4 – Excellent, 3 – Outstanding, 2 – Average, 1 - Inferior

a. Opportunities (63%)

1) BSP National Strategy for Financial Inclusion Reform (NSFIR) – 15% (4)

Because the data reveals a lot of chances to boost account ownership

among the 51.2 million or 71% of total adult Filipinos who remained unbanked,

the BSP's Financial Inclusion effort was given 15% of the total weight. The

initiative can also indicate ways to utilize new products and technologies in

order to increase account usage among individuals who already have an

account. (BSP, 2019)

LBP was rated excellent (4) for NSFIR due to its co-located strategy with

Philippine Statistic Authority (PSA) on the roll out of Philippine Identification

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 System to allow registrants to open account transactions, hence gaining access

to basic banking and financial services. LBP has engaged cooperatives, small and

medium enterprises, private entities and among others to serve as Agent

Banking Partners (ABP) in order to simplify the process of opening an account

and performing Know-Your-Customer (KYC) activities at PhilSys registration

areas.

The purpose of the PhilSys Program is to facilitate easier public and

private transactions by providing legitimate forms of identification to Filipino

citizens. In addition to this, it seeks to facilitate the delivery of financial services

and interventions of government support to beneficiaries located all over the

country in a seamless manner. (LBP, n.d.)

Client onboarding is the full process by which a user begins his

relationship with a bank or financial institution as a customer or client (Digipay

Guru, 2022). As of December 31, 2021, LBP has onboarded 7.2 million unbanked

PhilSys registrants. These registrants have already utilized their prepaid cards

for various transactions amounting to P86.1 million, including loading cash,

withdrawals and making payment via POS terminals and online, among others.

Moreover, LBP with vision to be at forefront of financial inclusion in the

country, targets to provide at least one bank account per Filipino household

equivalent to 13.5 million accounts throughout its co-locating strategy.

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 2) The era of digital banking and financial technology – 13% (3)

Moving money from cash into accounts has potential benefits that go

beyond simply increasing the number of people who hold accounts and use

them. According to the findings of recent research, the digitization of payment

processes has the potential to enhance efficiency by accelerating payment

times while simultaneously lowering the costs associated with sending and

receiving payments. (World Bank, 2017)

It can also improve the security of payments, which will result in a

decreased rate of crime related with those payments. It has been demonstrated

that increasing the proportion of payments made using digital methods rather

than cash will both increase transparency and decrease corruption. Switching

to digital payments can lead to considerable increases in saving as well as the

substitution of informal saving for formal saving. This is because switching to

digital payments provides an important first entrance point into the formal

financial system.

Large opportunities are seen in digital banking financial technology as this

may perhaps the new normal of financial system, hence a weight of 13%.

Overseas Filipino Bank (OFBank) was the first Philippine bank to operate

without physical branches. It was established on January 29, 2020, by the LBP,

and it enables customers to carry out banking transactions anywhere in the

world at any time. It was formerly known as Philippine Postal Bank, Inc. (PPB,

Inc.), and now operates as a subsidiary of LBP. After obtaining a banking license

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 from the BSP, LBP was able to successfully renovate the PPB Inc. and was

subsequently recognized as the first digital-only bank in the country.

In addition, this is in accordance with BSP Circular No. 940, Section 2017,

which states that banks are permitted to offer banking services via cash agents.

As LBP continues to respond to the growing demand for digital banking, the

company is making significant strides in expanding its ABP program. LBP has a

total of 907 ABP across the country as of the 31st of March 2022. These ABP

offer card sales, cash-ins, cash-outs, fund transfers, and bill payments, among

other services, which enables customers to gain access to financial services with

increased convenience and reduced costs associated with travel.

LBP was quick to respond on these opportunities; however, there are still

a lot of work to be done in terms of innovation and advance technology, leaving

LBP to enhance and improve its system, which is why only giving it a score of

three (3).

3) The shift to cashlite – cashless transactions – 11% (3)

Payments continue to be the most common type of financial transaction

in 2019, with 61.2 million Filipinos, or 85 percent of the adult population,

making payments to the government (such as taxes, licenses, loans, and

contributions) and private institutions (such as credit card companies, banks,

and insurance companies) (e.g., bills payment, loans, purchases and services).

(BSP, 2019)

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 The goal of the BSP's Digital Payments Transformation Roadmap is to

bring seventy percent of adult Filipinos into the formal financial system by the

year 2023. This will be accomplished by converting fifty percent of the volume

of retail payments into digital form. (Philippine Daily Inquirer News, 2022)

Although there are already a great number of alternative payment

channels for all types of payment transactions, the most popular channel of

payment for these kinds of transactions continues to be payments made in

person over the counter. The transition toward a cashless economy in the

county presents a number of adults who do not have bank accounts with an

opportunity for local banks to aggressively expand their market share and

contribute to an initiative the government is pursuing to increase financial

inclusion for all citizens. After taking all of these factors into account, this

opportunity is scored of 11%.

Since 2019, LBP has adopted and implemented the NRPS framework,

specifically the PesoNet and the InstaPay, across its various retail and

institutional banking channel in order to comply with MORB 803 – National

Retail Payment System (NRPS). LBP's responsiveness to this opportunity has

been rated as "outstanding," despite the fact that a number of improvements

were implemented to keep up with the rapid pace of technological change.

One of LBP’s recent innovations was the launched of LANDBANKPay – an

all-in-one mobile wallet which allows the users to pay bills safely and

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 conveniently, load up mobile phones and tollway RFID accounts, purchase

through e-Commerce as well as fund transfer anytime and anywhere. (LBP, n.d.)

4) Growing numbers of MSMEs – 10% (3)

The Philippines' micro, small, and medium-sized enterprises (MSMEs)

account for nearly 63% of the country's workforce and make up 99.5 percent of

the country's business establishments. In the preceding years, micro, small, and

medium-sized enterprises were accountable for forty percent of the country's

gross domestic product (GDP). During the second quarter of 2020, and almost

four months after the community quarantine was put into place, the GDP of the

country fell to 16.5 percent as the Philippines experienced recession due to the

COVID-19 pandemic. This caused the country to enter a downward spiral. (DTI,

n.d.)

Since the implementation of community lockdowns MSMEs have

continued to suffer from disrupted cashflow and ongoing expenses, which has

led to losses in income. Nearly eighty percent of those reported that their

average monthly income was lower than it was before the pandemic, when

compared to their average monthly income before the pandemic. Although

only a small percentage of businesses attempted to keep their employees on

full pay despite suffering income losses, the majority of businesses experienced

such severe disruptions to their cash flow that 25% of them started firing

employees. (United Nations Devt Program, 2020)

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 The number of MSMEs reached 996.7 thousand by the end of the year

2020. This represents a slight increase from the total number of MSMEs in 2019,

(Businessworld, ADB 2021). In spite of the pandemic, which has resulted in the

loss of jobs and stable incomes for a large number of professionals, the closure

of existing businesses, and a decline in the total amount of loans to MSMEs, an

increased number of new businesses have been established. Due to the fact

that financial institutions view this as an opportunity to recalibrate their lending

programs to accommodate new businesses, a weight of 10% has been assigned.

It is anticipated that there will be an increase in the number of MSMEs as the

pandemic's grip loosens.

On the other hand, LBP's response was about outstanding, as evidenced

by the fact that the P37.218 billion in loans it disbursed to MSMEs in June 2021.

However, this only accounted for 4.89% of its total loan portfolio, LBP though

can still make enough of an effort to provide financial assistance to micro, small,

and medium-sized enterprises (MSMEs), even though it has a number of

programs available on its products line and that this sector is one of its

mandates. Perhaps this is because of the risk that MSMEs carry.

5) Regulating BSP’s Basic Deposit Account (BDA) – 8% (2)

MORB 213, which focuses on BDA and its requirements, is discussed. The

purpose of promoting and enforcing this BDA is to encourage Filipinos,

particularly those who do not have bank accounts, to participate in the financial

system. This opportunity to provide low-cost product to potential bank

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 customers was given a weight of 8%, which reinforced the goals of financial

inclusion and the digital banking era.

Since LBP has not yet begun implementing its initiative in accordance with

this regulation, we cannot give it full credit for responsiveness (1). However, in

comparison to other universal banks, LBP continues to have the lowest required

minimum amount for savings accounts. The opening deposit and monthly

maintenance fee for an LBP savings account is only P500.

6) Build, Build, Build (BBB) Policy – 6% (2)

The P9 trillion BBB Program aims to encourage investments, facilitates

jobs creation, boost economic growth, and improve quality of life urban and

rural communities. This seen as opportunity for the industry as part of these

funds shall be disbursed through bank financing, thus giving it a weight of 6%.

LBP facilitated the right-of-way appraisal as part of this opportunity and

as a support to the national government initiative. This was done in accordance

with Republic Act 10752 of the Act, which facilitated the acquisition of the right-

of-way site or location for national government infrastructure projects. The

Department of Public Works and the Department of Transportation had utilized

the appraisal services offered by LBP to assist in accelerating the completion of

the projects. Despite the fact, LBP received an ‘average’ score for its

responsiveness to this opportunity, the company has not yet taken advantage

of the funding opportunities for this project.

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 b. Threats (37%)

1) Money Laundering and Terrorism Financing Activities (ML/TF) – 13% (4)

The activities of money laundering and terrorist organizations present a

significant risk to both the institutions of the financial system and the

confidence that people have in it. Money launderers pose a threat to financial

institutions like banks. If it turns out that a financial institution was involved in

the laundering of criminal proceeds, then the integrity and confidence of the

entire financial system as a whole could be gravely undermined, which would

result in a loss of public trust. (Kehoe, n.d.)

Due to the fact that the size of the global money laundering industry is

unknown, the level of risk to the financial system can only be estimated and is

therefore assigned a weight of 13%. If there is not robust international

cooperation among institutions, as a fundamental pre-requisite to any

monetary policy, then professional money launderers will simply move their

operations from one country to another in search of countries with more lax

laws and regulations pertaining to money laundering.

LBP's Money Laundering and Terrorist Financing Prevention Program

(MTPP) is one of most recent system improvements that the company has been

able to develop and put into practice. The program incorporates risk-based

policies and procedures, with the goals of promoting high ethical and

professional standards and preventing the use of LBP for activities related to

ML/TF. This program is being continuously monitored and updated in order to

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 guarantee that it is in accordance with the most recent and newly issued

regulatory requirements. The level of the LBP's responsiveness to this threat

has been rated as "excellent" because there is no record of the LBP being

involved in any activities involving the ML/TF. The MTPP program incorporates

the detailed procedures, which range from customer identification to the

periodic updating of customer records, checking against the watchlists, alert

investigation, and a number of other options.

2) Increasing number of cyber threats and attacks – 12% (3)

Financial institutions are currently in the process of implementing

cutting-edge technologies such as artificial intelligence (AI), cloud computing,

and digital services. The vast majority of FIs are increasingly putting their trust

in software that can be run in the cloud in order to enhance their abilities in the

areas of information processing, the detection of fraud, and financial analytics.

(PICUS, n.d)

The COVID-19 pandemic that occurred during this time period

accelerated the process of transitioning the industry's IT infrastructure (digital

transformation), as well as the development of virtual banks and financial

services. As a direct consequence of undergoing digital transformation,

businesses now run an ever-increasing number of newly developed

applications, devices, and infrastructure components, all of which contribute to

an increase in the attack surface when taken together. These financial

institutions and their customers are exposed to a greater level of cybersecurity

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 risk as a direct result of all of these factors. In addition, the growth of new

technological advancements in the finance industry has had an impact on the

industry's risk profile, and it has posed a potential effect on banks' risk

management, cybersecurity, and compliance control. Hence, this threat has

gained the weight of 12%.

LBP authored a proposal on cyber-defense solutions for Government FIs

(GFIs). The 720 million shared cyber defense solution shall provide 2-year

service of security monitoring and management, vulnerability management,

threat intelligence and incident response. (Business Mirror News, 2022).

LBP was recently linked to an incident involving a cyber-attack, in which

some teachers alleged that they had lost as much as P121,000 each from their

LBP accounts. However, LBP had denied, and the hacking incident and the

occurrence was due to "phishing." Phishing is when an attacker poses as a

legitimate institution and sends fraudulent messages designed to trick

customers into revealing sensitive information. Even though it has not been

conclusively established that the LBP was involved in the incident, the

organization should implement additional precautions within its security

system, earning it a score of 3.

3) Inflation and Interest Rates – 7% (2)

There are two distinct angles from which one can examine interest

rates: those of the lender and those of the borrower. The fees that are charged

for lending money are referred to as lending rates, and the fees that are

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 charged for borrowing money are referred to as borrowing rates. Instead of

regulating the interest rates charged by banks, the BSP is only responsible for

setting the RRP rate, which is the rate at which the BSP borrows money from

banks in order to keep prices stable. Moreover, the rate of inflation is a factor

that affects the increase or decrease in interest rates. The BSP is responsible for

regulating the increase or decrease of the RRP in order to send a signal to the

market regarding the overall level of interest. This risk will continue to pose a

challenge in the future, and one of the ways in which it can be mitigated is for

financial institutions to strategically position themselves in the market; as a

result, it has been assigned a weight of 7%.

Considering that this threat cannot be completely avoided, LBP and

other financial institutions may have to resorted to continuously repricing their

products and services in order to keep pace with it, which is why was given a

score of 2.

4) Philippine being at the typhoon belt – 5% (2)

The Philippine Area of Responsibility was hit by 21 typhoons in 2021;

unfortunately, there was single super typhoon registered during that year. One

of the aspects about which our monetary system ought to be concerned is the

fact that the nation in question is located within the so-called typhoon belt.

Typhoons are entering the country, which is causing widespread destruction to

social services and communities. Although this is not the most pressing worry

to consider, it is the same situation with inflation and interest rates in that this

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 the negative effect of this threat cannot be eliminated but can only be reduced;

hence, it has been assigned the lowest possible weight of 5%.

As of December 2021, the damage caused by the super typhoon, which

affected both the agriculture sector and the infrastructure, was estimated to

be more than P3.5 billion. As one of its mandated areas, the LBP has provided

local government units with an offer of cash support in the amount of P20.9

million so that they can recover from the effects of the typhoon. A donation

campaign has been activated as part of the LBP's AMBAG System (Alternative

Mechanism of Benevolent Assistance for the Greater Good), which ensures that

the majority of the bank's branches and ATMs will continue to function in order

to meet all of its customers' urgent banking requirements. The LBP makes

consistent efforts to restore the availability of all of its touchpoints in regions

that have been impacted. In spite of the fact that these initiatives are

commendable, LBP ought to be able to aggressively deliver an effective

responses and programs; for this reason, LBP was rated as "average."

3. Porter’s Five Forces

An organization's level of performance is greatly affected by its relationship

with its environment, which Michael Porter argues is a critical component of

developing an effective competitive strategy. A company's relevant environment is

so large that the most important characteristics still reside at the industry level. It's

critical to understand how a company's ability to deal with external forces affects all

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 of the other enterprises in the sector. these variables include new entrants, the ability

to negotiate with both parties (buyers and sellers), as well as a threat of substitutes

and competition from other businesses. There are many 'competitors' in this

industry, but in this case, they include customers, suppliers, competitors, and new

entrants.

Furthermore, these forces determine the intensity of the industry’s

competition and profitability, and the strongest forces become crucial in strategy

formulation.

Figure 12. Porter’s Five Forces Model

a. Bargaining Power of Suppliers – HIGH

Supplier’s power refers to the vulnerability of the industry to suppliers’

ability in threatening to raise the cost and prices or reduce the quality of purchased

goods and services. Powerful suppliers can squeeze profitability out of an industry,

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 hence unable to recover cost and subsequently increase its own prices (Porter,

2004).

In financial service industry, the suppliers are the depositors, investors,

government agencies, other financial institutions, service providers, employees

and among others. Their inputs are the fund, software, hardware, human resource

and among others, that are needed to operate the financial system.

Depositors tend to have low switching cost in changing banks, especially if

other banks can offer higher valuation for their funds. Although for retailers there

is not much impact, mass withdrawal, volume of fund was withdrawn or huge

depositors/ investors pulling funds out of the institution can handicap a bank.

Nevertheless, suppliers are not concentrated, and not differentiated as money is

fungible, and almost no threat of forward integration with the depositors or

investors.

1) Presence of Substitute Inputs (Low)

This refers to the ability of substitute inputs to weaken the position of

suppliers because they provide buyers with alternatives that are neither

expensive nor expensive.

Financial Institutions can either get their funds from lending and investing

activities either from public’s deposits or investments or by borrowing from

interbank market. However, the latter requires more cost and has reputation

implications. As such reducing bargaining power or suppliers.

2) Importance of Customers to Suppliers (Moderate)

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 When suppliers sell to a variety of industries and a single industry account

for only a tiny portion of total revenues, suppliers are more likely to wield more

power. Suppliers' fortunes will be tightly related to the industry's fortunes if it

is an important customer, and they will wish to defend it by reasonable pricing

and help in activities such as research and development and/or lobbying.

Depositors/investors have the option of allocating their resources in the

financial services industry. Individual clients can use their money to buy things

for themselves, start a business, lend to others, or save it in a bank or invest in

bonds and equities, among other things. Corporate clients can utilize the cash

to grow their operations, lend to other businesses, store excess funds with the

bank, or engage in other money market activities. Because these fund suppliers

are key system providers in the financial services industry, this characteristic

makes suppliers' negotiating power moderated.

3) Importance of Suppliers Product as an Input (High)

When a supplier's product provides a crucial input to the buyer's

business, the provider has more bargaining leverage.

Deposits, which are crucial inputs to purchasers or financial institutions

since they are utilized largely to fund their lending and investment activities,

are the suppliers' products. Without these funds, the financial institution will

most likely resort to general borrowings such as bills payables or unsecured

subordinated debts, which are more expensive than deposits and will likely

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 reduce profits, jeopardizing the firm's long-term viability. As a result, these

variable increases suppliers' bargaining strength.

4) Suppliers’ and Firms’ Switching Cost (Low)

If a financial institution switches from one service/system provider to

another (e.g., core banking system), they will incur some costs, albeit they can

negotiate better terms with their new supplier to offset contract pre-

termination costs. As a result, this characteristic reduces suppliers' bargaining

strength.

5) Threat of Forward and Backward Integration (Low)

Service providers (e.g., people and IT systems) are unlikely to buy a

financial institution with more resources. The knowledge required to run a bank

differs significantly from that required to manage labor or information

technology systems.

Only UBs, on the other hand, are permitted to invest in unrelated

businesses. Manufacturing, wholesale and retail trade, real estate, and other

businesses fall under this category (MORB, 2020). Backward integration in the

financial services business is uncommon due to this constraint. Hence, reduces

suppliers' bargaining leverage.

Because there is no better option for inputs or funds/money from the

public (funds supplier), suppliers have high bargaining power. Despite the

presence of other fund providers like as banks and the BSP, the funds are

ultimately obtained from the general population, who has the choice of where to

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 invest their money. In the financial services industry, alternative labor suppliers,

IT infrastructure, and other facilities have low to moderate impact.

b. Bargaining Power of Buyers - HIGH

The ability of the industry's significant buyer groups to compete with the

industry by forcing down prices, bargaining for higher quality or more services, or

pitting competitors against each other for the benefit of industry profitability is

referred to as buyer’s bargaining power. Creditors and loan borrowers were

among the major ‘buyer’ of this industry.

1) Buyer and Firm Concentration (Low)

The magnitude of a buyer's contribution to the industry’s overall

profitability determines buyer concentration. When a single buyer purchases a

big percentage of sales, the buyer's business becomes more important in the

results. The industry provides services to both individuals and corporations

(Porter, 2004). It makes most of its money from loans.

While businesses, particularly huge conglomerates, are among the top

borrowers of financial institutions, the industry is unlikely to be concentrated

on any single company or group of companies since it is tightly supervised and

controlled to reduce the risk of concentration. Given this, no single buyer or

group of buyers can have a major impact on the industry's overall success. As a

result, this variable reduces buyers' bargaining power.

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 2) Product Differences (High)

Because several sellers provide alternative products and services, buyers

can exert influence on industry players. Because banks offer similar

products/services, clients can transact with whichever firm provides good

customer service, attractive rates, and greater accessibility. As a result, this

determinant increases the bargaining power of buyers.

3) Switching Cost (High)

This refers to the extent to which buyers are tethered to sellers due to

switching costs. Alternatively, if the latter has high switching costs in

comparison to the former, the buyer exerts influence over them.

Existing players in this industry have high switching costs due to large

investments in technological infrastructure as well as branching networks to

provide greater accessibility to their products and services to their clients.

Clients can switch from one company to another within the industry for little or

no cost. In this regard, these determinant increases buyers' bargaining power.

4) Buyer Information (High)

When a buyer has complete information about demand, actual market

prices, and even supplier costs, he or she has more bargaining power than when

information is limited. With complete information, the buyer is in a better

position to ensure that the best prices are offered to others.

Clients in this industry have broad and easy access to information about

the industry's players. Borrowers can now more easily access and compare

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 rates and service quality among industry participants thanks to advances in

information technology. As a result, these determinant increases buyers'

bargaining power.

5) Ability to Backward Integrate (Moderate)

A buyer group can exert influence on industry players whenever it has the

ability or can credibly threaten to integrate backward and produce the

industry's product itself, especially if vendors are overly profitable.

Most large banking groups are owned by large conglomerates in order to

facilitate and support the latter's activities. These financial institutions also

generate significant returns, adding to the profitability of the conglomerates.

Aside from being capital intensive, the system is highly regulated, making

acquisition and purchase uncommon. As a result, these determinant limits

buyers' bargaining power.

6) Brand Identity on Quality (Moderate)

This refers to a company's recognized and sought-after reputation for

quality or credibility. Because of their size, history, investments in technological

infrastructure to broaden geographic reach, and service awards, banks in the

top ten largest financial institutions in the Philippines have developed brand

identity. Meanwhile, the brand identity of TBs, RBs, and Cooperative Banks is

typically limited to a single location or region, but clients seek them out because

of what they can offer. Most financial institutions in the industry are still

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 developing a brand name that clients will recognize and use. As a result, this

determinant limit buyers' bargaining power.

7) Total Purchases (Moderate)

This refers to the product's price in relation to total product expenditures.

It is the percentage of total expenditure that customers spend on your

products. The financial services industry is primarily concerned with risk-taking

activities such as assessing a customer's creditworthiness, which is linked to

how products/services are priced. The higher the financial institution's risk

assessment of the customer's condition, the higher the customer's funding

cost. As a result of this determinant, buyers' bargaining power is moderated.

8) Buyer’s Profit (Moderate)

Low profits create incentives to reduce purchasing costs. If customers no

longer find the industry's products/services profitable or sustainable, they will

work harder to bargain with sellers to lower the latter's prices. Diverse

customers (from individuals to private corporations) may find the industry's

products/services profitable, but there are also those who do not. In this

regard, this determinant is rated as moderate.

While the financial services industry is not concentrated in any individual or

group of businesses, buyers' overall bargaining power poses a significant threat to

the industry.

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 c. Threat to New Entrants – LOW

The threat of potential new entrants is determined by the barriers to entry

and the reaction of existing firms in an industry (Porter, 2004). If the barriers to

entry are high, a newcomer can expect harsh retaliation from existing

firms/competitors in an industry; thus, the threat of entry is low.

1) Economies of Scale (High)

It refers to decreases in unit costs of a product (or operation or function

that goes into producing a product) as the absolute volume per period increases

(Porter, 1980). This barrier prevents entry by forcing potential entrants to

either enter on a large scale and risk a strong reaction from existing firms or

enter on a small scale and accept the cost disadvantage.

The country's financial services industry is primarily bank-based, with

banking institutions accounting for 92% of the total assets of the system by

2021. There are a few large banks (U/KBs) and many medium and small banking

institutions (TBs, RBs, and NBFIs). These financial institutions will continue to

compete on cost by investing in cutting-edge technology and streamlining

operations to achieve economies of scale. The continued industry consolidation

and exit of weaker players increases the advantage of surviving firms'

economies of scale due to shared infrastructure and synergies created by such

an event.

Banks' geographic expansion has increased the economies of scale of

industry participants while broadening their client base. According to a BSP

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 report from March 2022, there were 13,193 operational banking units,

including 499 head offices and 12,683 branches and other offices. This figure is

expected to rise as the moratorium in restricted areas is lifted and domestic

banks continue to expand their presence in strategic areas of the country. This

equates to increased customer volumes sharing the cost of facilities and the

banking system, resulting in a lower cost of service.

With the extensive branch networks and synergies created by shared

infrastructure and increased resources as a result of ongoing consolidation and

mergers of existing banking institutions, new entrants would have difficulty

matching to gain greater economies of scale. Higher costs imposed on new

entrants would result in diseconomies of scale, raising this barrier.

2) Product Differentiation (High)

Established businesses have brand identification and customer loyalty as

a result of previous advertising, customer service, production differences, or

being an industry pioneer (Porter, 2004). For many years, most customers have

relied on the same companies for financial services such as savings, loans, and

insurance. Because financial services firms deal with public funds, trust is

essential for maintaining a loyal customer base. Players took a long time to

establish integrity and credibility with customers, which are factors those new

entrants in this industry will struggle to match.

New entrants should heavily invest in advertising to create brand

awareness and technological infrastructure to deliver quality service and build

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 strong relationships with sophisticated clienteles such as investment banking in

order to establish loyal customer bases or maintain customer-firm

relationships. The necessary skills and relationships with such clients cannot be

developed in a short period of time. As a result, product differentiation serves

as a high barrier to entry, forcing new entrants to spend heavily to overcome

existing customer loyalty.

3) Capital Requirements and Government Policy (High)

This raises the barrier to entry by requiring potential entrants to invest

heavily in land, facilities, equipment, and human resources in order to compete

with existing firms. The Bangko Sentral ng Pilipinas (BSP) imposes high capital

requirements on banks and other non-financial institutions operating in the

country. Banks and non-financial institutions face greater risk and must

maintain excess funds to continue operations. Indicated on Section 121 of

MORB 2021 version, the following are the new minimum capital requirements

in establishment of a bank:

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 Table No. 10. Bank Capitalization Requirements

This barrier to entry is rated as high because entering the financial

services industry would necessitate a large amount of capital, which new

entrants may find difficult to obtain.

Government interventions, such as licensing requirements and

restrictions on raw material access, can limit or even prevent entry into

industries. In the financial services industry, the BSP is the primary regulator

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 who sets entry barriers. The Philippine Deposit Insurance Corporation (PDIC),

the Insurance Commission (IC), and the Securities and Exchange Commission

are the other government regulators (SEC). Other types of financial institutions

are governed by associations such as the Bankers' Association of the Philippines

(BAP), the Rural Bankers Association of the Philippines (RBAP), the Chamber of

Thrift Banks, BAIPHIL, and the Cooperative Development Authority (CDA).

Potential entrants into the financial services industry must operate within the

legal parameters set by Philippine laws and regulations. This combination of

factors raises the entry barrier significantly.

4) Access to Inputs (High)

Given the high capitalization requirements for entering the financial

services industry, new entrants may struggle to obtain the necessary capital

through traditional channels. The cost of capital may be too high, which may

have a negative impact on the long-term viability of new entrants. The cost of

acquiring highly skilled employees will rise as well, because established industry

players are more likely to attract better human resources than new entrants.

Given all these considerations, the barrier to entry for is high.

d. Threat of Substitution – LOW

Substitutes limit an industry's potential returns by putting a cap on the prices

that firms in the industry can profitably charge (Porter, 2004). Identifying

substitute products entails looking for other products that can perform the same

function as the industry's product. For example, securities brokers are increasingly

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 confronted with substitutes such as real estate, insurance, money market funds,

and other ways for individuals to invest capital, which is heightened by the equity

markets' poor performance.

However, there are relatively few substitute products among financial

institutions in the Philippines, as banks and NBFIs continue to offer diverse and

innovative products at competitive rates that substitute products may find difficult

to match.

Although establishments of digital banks and e-wallets application poses a

threat to banking systems in terms of deposit takings, they still have limited

substitute for other banking services such as access to credits and investments.

1) Switching Cost (Moderate)

This refers to substitute products' ability to entice buyers away from the

industry due to low switching costs. Customers' switching costs vary as a result

of using services from entities outside the financial services industry. These

switching costs include, among other things, pre-termination charges for long-

term deposits (such as time deposits and long-term negotiable certificate of

deposits), loans, and other investment products. Similarly, because the industry

usually matches the tenor of the products to their funding source (i.e., the bank

keeps time deposits to match with long-term loans), industry participants

discouraged switching by charging higher service fees for pre-termination.

Meanwhile, short-term deposits such as savings and demand can be easily

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 withdrawn and used to obtain substitutes. As a result, the impact of this

determinant on the threat of substitute products is rated as moderate.

2) Price Performance of Substitute (Low)

This refers to the attractiveness of the substitute product's price-

performance trade-off in comparison to the industry's products. Accessible and

reasonably priced substitutes set a competitive ceiling on the prices that the

industry can charge; however, if these products are relatively cheaper than the

latter's products, it puts pressure on industry players to lower their prices and

thus squeeze profit margins (Porter, 2004).

Consumers pay more for "shadow banking" firms' services and products,

such as in-house financing provided by real estate property developers.

However, service fees for e-money platforms such as G-Cash and Paymaya are

very low when compared to industry participants. Similarly, Filipinos have

greater access to these platforms than banks and NBFIs. However, these

substitutes only meet a small portion of the financial services needs of

customers. The financial services industry's products continue to be innovative

and less expensive than most substitutes, making the threat of substitute

products low.

The threat of substitute products is LOW because, while they essentially

meet the same need, their respective risk appetites differ depending on the type

of market pursued (in this case, the individual buyers). Individual buyers appear to

be a high-risk market, particularly for institutions that serve primarily bulk

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 accounts. As a result, rates (one of the most important factors for buyers) vary

depending on which loans are available. For example, the annual interest rate for

salary loans at SSS is at 10% while the annual interest rate at BDO is at least 17%

p.a. Furthermore, as the real estate sector grows, shadow banking services such

as in-house financing from condominium contractors and real estate property

developers pose a threat to the financial services industry. Similarly, the

emergence of e-money platforms such as G-Cash, Paymaya and among others has

enticed clients in the financial services industry to switch to lower-cost substitute

products.

e. Competitive Rivalry – HIGH

The degree of competition among existing firms in the industry is referred

to as the intensity of rivalry among existing competitors. Rivalry arises when one

or more competitors feel under pressure.

1) Equally Balanced Competitors (High)

Any moves or countermoves made by industry actors result in market

instability, which heightens competitiveness. There are over a thousand active

banks in the Philippines, and each has branches around the nation. There is

intense competition among these banks, as everyone vies for market share

within the industry. So, competition is intense.

2) Industry Growth (High)

It transforms competition into a battle of market share for enterprises

pursuing expansion. The effects COVID-19 have slowed the business activity of

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 financial institutions, making it to some have been reducing their branch

networks. For businesses to justify their existence, they will be compelled to

capture their competitors' market share, hence increasing the competitive

intensity. Due to some government regulations, market interest rates were not

competitive.

3) High Fixed Costs (High)

High fixed costs provide significant pressures for all enterprises to fill

capacity, which frequently results in escalating price cuts when there is excess

capacity.

The cost of storage in the financial services business is reflected in the

interest rates paid by depositors. Even if it is not invested or lent to borrowers,

interest expenses begin accruing as soon as it is accepted. When the demand

for loans is limited, the competition for low-cost capital intensifies and

enterprises must function at maximum capacity to cover the fixed interest

costs. Consequently, rivalry is intense.

4) Minimal Differentiation (High)

Undifferentiated items facilitate the entry of new competitors into an

industry. If switching costs are low, consumers will readily adopt a new brand.

Homogeneous products tend to heighten industry competition, and new

entrants will be on the offensive in terms of image-building against the

incumbents. They will make every effort to defend their market share,

intensifying competition.

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 5) Capacity Augmented in Large Increments (High)

Capacity expansions result in an increase in supply, which increases the

pressure on businesses. Distribution Channels within the financial services

business augment operational capacities. To generate money, resources must

be fully utilized, and everyone will do everything possible to prove they are

more deserving than their competition. This will increase competition between

banks that utilize the same distribution channels. Thus, capacity will result in

fierce competition among competitors.

6) Diverse Competitors (High)

Competitors differ in their strategies, origins, personalities, and

affiliations to their parent organizations. They have different aims and

strategies for competing and may constantly collide in the process. There are

numerous industrial participants that may operate on a small or large scale. The

various participants in the financial services business are sponsored by a parent

corporation with diverse interests in utilities, beverages, insurance, etc. This

situation results in intense competition among industry participants.

7) Strategic Stakes (High)

When a number of enterprises have substantial stakes in a particular

industry's success, competition becomes even more turbulent. In an industry

where enterprises are highly diverse and able to establish synergy inside their

strategic business unit, they will have a strategic advantage in the market to

which they belong. They may have an interest in banking that will allow them

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 to utilize the branch network, enhance their client relationships, and offer their

products as well. These initiatives heighten the competition between the major

players.

8) Exit Barriers (High)

Exit barriers are economic, strategic, and societal reasons that prevent

businesses from leaving the market, despite receiving low or negative returns

on investment. Existing players will find it difficult to exit the financial services

business due to highly specialized assets such as machines, ATMs, branch

structures, equipment, and big capitalization. They will attempt to maintain its

position and choose to remain, hence intensifying rivalry and competitiveness.

While sector growth is somewhat high, players are required to spend

extensively in physical and IT infrastructure to achieve economies of scale and

provide clients with better access to their products and/or services; thus,

competition among existing firms is intense.

Table No. 11. Summary of Evaluation of Five Competitive Forces

Five Competitive Forces Evaluation

Bargaining Power of Suppliers HIGH
Bargaining Power of Buyers HIGH
Threat of New Entrants LOW
Threat of Substitutes LOW
Competitive Rivalry HIGH

The industry is reasonably competitive, with most forces being high. Both rivalry

between companies and the purchasing power of consumers are moderate to high.

Nevertheless, Philippine banking remains a highly attractive venture. As of the 1st

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 quarter of 2022, BSP posted 9.57% ROE, and with improving CARG since the pandemic.

Clearly, the market is not yet saturated, and there are many opportunities to be taken

advantage of. The interest rates offered by foreign banks demonstrate this. In order to

take advantage of the industry's health and growth, it is now up to the participants to

differentiate themselves in this highly competitive environment.

4. Competitor’s Analysis

The top five (5) financial organizations in the Philippines—Banco de Oro (BDO)

LBP, Metrobank (MBTC), Bank of Phill Island (BPI), and Philippine National Bank—

currently control the majority of the universal banking market (PNB). They were being

categorized into the following four key subgroups: assets, deposits, loans, and capital.

(BSP, 2022)

Table No. 12. Universal Banking Leaders as of 31 Dec 2021

In order to accomplish the goals of this strategic management paper, only BDO

and MBTC were taken into consideration as primary competitors of LBP. Since, in

terms of their assets and deposits, these two companies are the most equivalent to

one another. In addition, the LBP ought to focus on the development of strategies

that will enable it to advance up the ranks in terms of the total amount of capital and

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 loans that it provides. In terms of the total of capital and loans that they make

available as of the year 2021, the LBP holds the fourth greatest market share overall

among universal banks.

a. Banco De Oro (BDO)

BDO has positioned itself for higher balance sheet strength and continued

expansion into new markets by selectively acquiring other firms and growing

organically. BDO has grown to become the largest bank in the country as of the 30

of September 2021, in terms of its consolidated resources, client loans, deposits,

assets under management, and capital, as well as its statewide branch and ATM

network. (BDO, n.d.)

BDO’s strategy focuses on three core areas including, diversifying and

sustaining earnings via strong businesses, vast market coverage, and a strong

client acquisition and service culture; creating operating leverage through

designing a growth- and scalability-friendly operating platform; and prudently

managing its balance sheet by conserving risk assets, managing current and long-

term funding sources, and ensuring growth capital. (BDO, 2021)

By end of 2021, BDO posted a growth of 6% on its loan portfolio, 8% increase

in total deposits and reached a P424.5 billion total capital, with Capital Adequacy

Ratio (CAR) at 14.6%.

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 b. Metrobank (MBTC)

Metrobank is a universal bank that offers its entire range of banking services

to large local and global enterprises, as well as to the middle market, high net

worth individuals, and retail parts of the economy. The bank has considerable

equity holdings in a variety of allied and non-allied businesses, including life and

non-life insurance, bancassurance, consumer banking, investment management,

credit cards, leasing, real estate development, and vehicle production and

distribution. It holds a large equity ownership in both domestic and foreign

companies. (MBTC, 2021)

MBTC has developed a strategy with a time horizon of three to five years

with the objective of creating an organization that is even more powerful and

which welcomes and promotes continuous innovation while at the same time

continuously improving our operations in an environment that is constantly

evolving commercially and economically. Its strategies consist of improving

efficiencies, retaining a stronghold in commercial banking, developing consumer

banking, practicing conservative risk management, and optimizing corporate and

capital structure. (MBTC, 2021)

By end of 2021, MBTC posted a growth of less than 1% for its assets, 4.9%

growth in deposits, and a slight decline on its capital with CAR at 20.1%.

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 5. Competitive Profile Matrix (CPM)

Table No. 13. Competitive Profile Matrix

a. Quality of Service

The quality of service provided by the bank is evaluated based on the

judgment of services such as reliability, response, empathy, and safety. These

factors all contribute to the bank's ability to attract new customers as well as retain

its existing ones, which, in turn, increases market share and profitability, thereby

improving the firm's financial performance. (International Journal of Engineering

and Information System, 2017)

According to the most recent survey that was carried out, 45% of the

respondents stopped using the services provided by their bank because other
Figure 13. Bank Service Discontinuation Rating
banks could provide and deliver and better product and offers service choices.

Another factor that contributes to the discontinuation of services provided by

their banks is the availability of better and cheaper fees from other banks, which

accounts for 37% of the respondents (EMIS, 2021). Taking all of this into account,

the quality of the service stands out as the most important primary critical success

factor with an 18% weight.

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 Source: EMIS. Philippine Retail Banking Customer Experience Management Study 2021

The same survey also revealed that BDO had the highest customer churn,

with 36% of respondents terminating their services with the company, followed

by 28% of MBTC respondents and only 17% of that of LBP.

Another factor that might be consider knowing the key determinant for

customers in choosing their primary bank. The same survey revealed that trust

including brand reputation, organizational stability, reliability is the most

important factor in choosing a retail bank. LBP received a response rate of 97

percent for this factor, followed by BDO and MBTC at 96%.

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 Figure 14. Reason for Choosing Primary Banks, PH

Source: EMIS. Philippine Retail Banking Customer Experience Management Study 2021

In addition, channel integration is the process of connecting all information

about a customer's interactions with a brand across all touchpoints and

contributes to quality of service. Customers may experience increased levels of

irritation if the channels they use to communicate with a business are not

connected, in contrast to the situation in which those channels are integrated.

(EMIS, 2021)

On the contrary, BDO customers perceive their bank well integrated with

88% response, while LBP got a 75% well integrated response and got 83%.

Furthermore, another factor revealed, how customers observed their banks in

terms of improving its customer care and service. BDO leads with 54%, followed

by MBTC with 52% and LBP at 44%.

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 Figure 15. Bank’s Ratings on Proactive Behavior

Source: EMIS. Philippine Retail Banking Customer Experience Management Study 2021

Taking into account all of the aspects that were just covered, Quality of

Service was BDO’s minor strength (3) as well as of MBTC (3) and LBP being its

minor weakness (2).

b. Customer Touchpoints

A customer touch point is any point at which a customer interacts with a firm

organization, whether it be face-to-face, through an application or website, a

telephone interaction or through any other method of communication. Customer

touchpoints in this paper referred to branches, online platform or the website,

customer care contact center, mobile application, and self-service channels.

On the EMIS survey, the three stages of decision-making that occur for the

banking experience were also discussed. These stages are pre-purchase, purchase,

and post-post-purchase. During the pre-purchase stage, a customer engages with

a set of parameters that contribute to the decision to conduct business with a

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 retail bank. During the purchase stage, a customer uses certain methods to make

a purchase. During the post-purchase stage, a customer engages with their bank

and provides the reason why. (EMIS, 2021) Hence, scored 16% and as one of the

major critical success factors for banking industry.

Figure 16. Preferred Bank Channel During, Pre- , Purchased and Post Stage

Source: EMIS. Philippine Retail Banking Customer Experience Management Study 2021

Even though there is a continuing worry about public safety as a result of

COVID-19, and there are now online venues for customers' interactions,

respondents still preferred to visit the banks physically for most of the stages.

Below is the summary of networks of the three (3) banks:

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 Table No.14. No of Customer Touchpoints per Bank

Sources: 2021 BDO & MBTC AR; LBP website

In terms of branch distribution networks, BDO remains the largest networks

with 1,544 local branches and a total 4,484 ATMs and CDMs nationwide. On the

other hand, Metrobank has 951 branches scattered nationwide with 2,316

automated machines. Moreover, LBP had the least number of branches with 768

but is the only bank that is present among 81 provinces of the country. In addition

to support and provide better assistance, LBP launched it Agent Banking with 896

of which distributed to underserved areas.

An Agent Banking is form of a branch-less banking whereby a bank enters

into agreement with an agent (usually a retail outlet) to perform limited financial

services on behalf of the bank. The Agent Banking Partner (ABP) operates a smart

POS machine that can conduct Agent Banking (Prepaid) Card Sale with electronic

Know-your-client, Cash-out from LANDBANK Peso-denominated Prepaid Cards or

participating BancNet ATM cards, cash-in/top-up, balance query, and fund

transfer. LBP has a total 896 Agent Banking Partners by end of 2021.

Moreover, on one of the articles of Grit, Ph, Digital banks and online

platforms were ranked based on three specified criteria: Innovative and useful

feature, average rating, number of installs and active users and the awards

received in banking industry. Key features of each online banking were also

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 mentioned in the article. Among the three banks, BDO ranks 6th place, LBP on the

7th place and MBTC on the 8th place. (Grit Ph, 2022)

Considering all of the aspects that were just covered, Customer’s Touchpoint

was BDO’s major strength (4), followed by LBP (2) and MBTC (2) both being their

minor weakness (2).

c. Technological Innovation and IT Infrastructure

Banking infrastructures and other types of financial institutions are essential

to the functioning of any economy. It is essential for the growth of an economy

that these different sectors work together effectively. As a direct result of the

expansion of digital technology, there has been a huge paradigm shift in the way

banking and financial services are provided. As a result, customers find it both

convenient and flexible at the same time, new trends are gathering steam at an

increasingly rapid rate. The following are the identified technological trends in

banking industry today: Digitization, Mobile Banking, Branchless Bank, e-wallet

application and among others.

LBP’s Digital On-Boarding System (DOBS) was introduced last December

2018 as the first online account opening portal among universal banks. On the

other hand, BDO completed its IT transformation introduce the BDO Online

Account opening by three years (3) after, while MBTC is yet to catch up with this

innovation.

In addition, customers of these banks have been able to take advantage of

the perks and convenience offered by their mobile banking application. With this

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 application, customers have been able to perform bank transfers either within the

same bank or to accounts held at other banks, as well as pay bills to long list of

partner merchants.

LBP’s OFbank was among the six banks that had granted a digital banking

licensed by BSP. OFBank was one of the entities that first acquired the license,

along with Tonik Digital Bank, UNOBank, Union Digital Bank, GOtyme, and the

MayaBank.

An e-wallet application is one of the new innovations that are appearing in

the financial sector. An application using a consumer's smartphone as the point of

payment for a contactless transaction. BDO launched its e-wallet application –

BDO Pay in March 2021, the country’s first bank-backed mobile wallet with over a

half million enrolled user. (BDO, 2021). This was followed by LBP which has

recently launched its LANDBANKPay: the all-in-one mobile wallet on 22 April 2022.

As of date, MBTC has yet to launch its own e-wallet application.

Table No. 15. Technological Trends per Bank

In the banking industry, safety and security have always been top priorities,

as this helps to ensure that both the assets of the banks and customer funds are

shielded from any potential threats. Given the rapid pace at which technological

change is occurring, it is necessary for the banking industry to make technological

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 expertise one of its core competencies, hence, a 15% weight for technological

innovation and IT security infrastructure.

Banks are continuing to strengthen their defenses against cyberattacks in

order to protect the integrity of the company as well as the interests of their

depositors and to ensure that they are in compliance with the BSP IT Risk

Management policy. Nonetheless, recent events have put these defenses to the

test. BDO has been involved to an estimated P5 million cybercrime incident last

Dec 2021. Per investigation, BDO confirmed that the incidents stemmed from a

10-year-old web service that is for phase out. (Inquirer News, Dec 2021)

LBP, on the other hand, was subject to the same investigation because it was

also implicated in alleged hacking incidents. The management of the bank

vehemently refuted the event and asserted that the victims had been duped by a

phishing scam. The LBP welcomed NBI in investigating the matter, but evidence of

the purported cyberattacks has not been presented. (LBP, n.d.) Furthermore,

MBTC has reported no recent cybercrime attack.

Organizations shouldn't see security and innovation as contraries. IT forces

across sectors must use appropriate security measures to innovate. In

consideration with all the factors being laid out, innovation and security are one

of the major strengths of LBP (4), while considered minor strength for BDO and

minor weakness for MBTC.

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 d. Capitalization

Capital shall refer to the unimpaired paid-in capital, surplus, and undivided

profits. (MORB, 2020). The bank is able to support its day-to-day activities because

to the capitalization it has. The capital of the bank is the most important factor in

maintaining a secure and reliable financial system. Banks operate in an

environment that is fraught with potential for loss due to a variety of factors.

Banks need to be able to weather economic storms and remain operating

profitably if they are to maintain their stability and continue to safeguard the

savings of their customers, hence a critical success factor (14%).

Pursuant to the BSP’s Guidelines and Implementation of Basel III, Capital

Adequacy Ratio (CAR) must be at least 10% of its risk-weighted assets. (MORB,

2020)

Table No. 16. Capitalization per Bank

Source: BSP 2021

All three satisfies the minimum requirement sets by BSP, hence by ranking,

BDO leads with total capital of P423 billion at 18.13% CAR, followed by MBTC

having P306 billion at 19.04% CAR and leaving behind LBP with P207 billion capita

and 18.13% CAR.

e. Product Diversification & Pricing

Product diversification refers to the process of expanding an existing market

for a particular commodity or service. This also includes providing clients with new

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 products as well as other goods and services in addition to the products and

services they already buy.

Product diversification can be beneficial to the financial success of

companies. When the bank offers a variety of deposit and loan products to its

many diverse consumers, there is a possibility that its financial performance may

improve. Participating in activities and developing initiatives that are helpful to

the community will not only help improve the financial positions of banks but will

also help the banks establish new projects. The products that are being offered

are somewhat similar to those that are being supplied by the rival companies, and

there is not much that distinguishes one product from another. On the other hand,

the company utilizes a few distinct pricing models for each of them that are seen

as a factor in choosing and maintaining one’s bank account.

Considering the factors that have covered, product diversification

contributes to the success of bank’s operation, hence given 12% weight.

Table No. 17. Savings Account Features per Bank

Source: BSP, LBP, BDO, MBTC

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 Landbank provides its priority sectors, which are viewed as high-risk

borrowers by private banks, with access to a comprehensive portfolio of goods

and services. Other basic banking products and services features offered by these

three banks were just slightly differentiated from one another, and the

institutions' pricing structures were the sole factor that distinguished them from

one another. Hence, this factor is a major strength to LBP, followed by BDO and

MBTC.

f. Asset Quality

Asset Quality is the overall risk attached to an individual or institution's

various assets. This measures a FI's credit risk prediction. Loans are the most

common asset that requires strict asset quality determination if borrowers’

default on repayment. Financial performance measures a company's ability to

generate revenue from its assets. Therefore, asset quality is crucial – with 10%

weight.

There three indicators that are used to measure asset quality, Net NPL,

Coverage NPL Ratio and NPL Ratio.

Any financial organization is aware that not every loan they make will be

repaid in its entirety. Because of this, risk assessment and accurately quantifying

the percentage of loans that go unpaid are both extremely significant. Banks make

an effort to forecast the rate at which their non-performing loans will accrue in

order to reduce the risk that their assets will deteriorate, as well as to better

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 prepare for and decide the appropriate level of provisions to set aside for potential

losses.

Even without missed contractual payments, a financial asset is non-

performing if it is impaired under existing accounting standards, characterized as

doubtful or loss, in litigation, and/or full repayment of principal and interest is

uncertain without foreclosure of collateral. (MORB, 2020)

In addition, a non-performing loan coverage ratio evaluates a financial

institution's capacity to take on additional losses. The higher the ratio, the less

susceptible the bank is to risk, and the better it can protect its assets.

A NPL ratio is used to assess a financial institution's credit risk as well as the

quality of its current loan portfolio. A high ratio of non-performing loans (NPL)

shows that the bank faces a greater potential for loss in the event that it is unable

to collect the money that is owing to it. Indicators of the asset quality of the three

banks are compared and summarized in the following table:

Table No. 18. Asset Quality Ratio per Bank

Source: BSP 2021

Placing them in rank, Asset quality is major strength of MBTC with the least

NPL ratio and highest NPL coverage ratio. Although, LBP has high risk portfolio, it

still has a higher coverage ratio than BDO, hence scored it with 3, and BDO with 2.

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 g. Digital Marketing and Promotions

The pandemic of COVID-19 has faced financial institutions with an array of

new challenges. Prior to the epidemic, branch office foot traffic had been

dropping, but this tendency has now increased dramatically. Branches will

continue to provide value in the near future, but the impact of physical bank

presence on deposit growth is likely to reduce. Banks must progressively create

effective marketing strategies to reach their target markets, hence, an effective

marketing and promotions contributes (8%) in attracting and retaining bank’s

clientele.

With marketers no longer constrained to traditional media, social media

marketing was developed. The most significant change, though, was how social

networking became the primary resource for learning, discovering new

professional prospects, and expanding our brands. Humans are sociable and

people’s interaction drive business. This demonstrates the significance of social

media advertising.

BDO dominates in social media presence with over 3.8 million followers in

Facebook alone, and yet to launched in other platforms. LBP is aggressively

expanding its social media networking by launching its social sites in Facebook,

Instagram, Twitter and Viber Community with a total 1.785 million followers. This

leaves MBTC on the last spot with over 316,000 total followers for its Facebook

and Twitter official accounts. Yet, LBP need to strengthen its digital footprint, thus

a minor weakness for both LBP (2) and MBTC (2)

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 Companies grasped the significance of social media ads. Brands may build

an audience organically on Facebook, Instagram, Twitter, and other platforms by

posting informative or entertaining content.

h. Management and Employee Empowerment

Empowering employees is crucial to the success of modern firms. Employee

empowerment also aids organizations in attaining their objectives, but also aids in

defining their mission, hence one of the keys in organizational success (5%)

Studies demonstrate that firms with engaged employees have lower

turnover, more productivity and profitability, and improved employee and

customer satisfaction. Employee engagement is a critical success factor for

ensuring that employees are totally committed to the organization's success.

Table No. 19. Employee Performance per Bank

The ranking of these three financial institutions on this particular critical

success factor is limited to the aforementioned factors. BDO had the highest

turnover rate for 2021, while LBP had the lowest. The NIPE was determined by

comparing the bank's current number of employees to its net profit. This

determines how much profit each employee contributed to the company during

the specified time period. Moreover, a customer satisfaction survey revealed that

MBTC had the highest proportion of satisfied customers (95%), followed by BDO

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 (91%). LBP has the lowest customer satisfaction rating, with only 84% of

customers being satisfied.

Taking into account all of these factors, management and employees are

among MBTC's major strengths, whereas they are among LBP's minor strengths.

BDO may view these as minor flaws and should permit any necessary calibration.

6. Summary of External Issues

a. Major Opportunities and Threats

The BSP's initiative to expand access to financial services represents a

tremendous opportunity for the whole banking industry, including LBP. If this

shift is successful, it might be beneficial not only for the banking industry but also

for the nation's overall economy. If financial inclusion is to be achieved, then the

push toward a cashlite economy, which could further speed the push toward a

cashless future, can be accomplished more realistically.

Another window of opportunity that must not be missed is the current era

of digital banking and technological advancements in the financial sector. The

economy is increasingly dependent on digitalization, which is becoming its

lifeline. As quarantine restrictions loosen and the economy begins to slowly

recover, financial institutions have a responsibility to maintain the rise in digital

adoption and guarantee that the financial systems are prepared to make this

digital sector competitive while also maintaining its safety.

However, increasing technologies are accompanied by an increase in

cyber-attacks, money laundering, and terrorism affecting financial institutions.

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 This menace will always instill fear and dread in a sizable number of depositors

and investors. Consequently, fintech players, regulators, financial institutions,

and other stakeholders should continue to collaborate with technological

advancements to create safe and secure solutions while pushing for a sustainable

digital Philippines.

b. Industries Attractiveness

Despite the pandemic restriction, the universal banking industry is

extremely attractive, with a CAGR of 8.8% from 2017 to 2021. With the relaxation

of quarantine rules and the gradual recovery of the economy, growth is

predicted to surpass the pre-pandemic level of 10.9%. In addition, at the end of

2021, the BSP had reported an industry ROE of 8.98%, an increase of 2.44

percentage points from that of previous year. Consequently, despite the

uncertainty presented by the pandemic, the industry is still seen as attractive.

The attractiveness of the industry is also demonstrated by Porter's five

forces framework. However, the most significant causes for concern are intense

rivalry as well as the bargaining power of buyers and suppliers. Because of this,

firms in the industry are being compelled to aggressively grow their market

share, infrastructure, and penetration in order to achieve economies of scale,

increase customer accessibility to their products and services, and acquire new

customers.

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 c. Company’s Competitive Position

LBP sits in the middle of the group with a CPM score of 2.96 and an EFE

score of 2.84. Since fierce competition is a big concern, CPM has a stronger case

for LBP's industry position. LBP's diverse and inexpensive products, as well as its

technology breakthroughs and IT infrastructure, are among its greatest assets.

These elements contribute to the solid brand identification of LBP. However, in

order to maintain and strengthen its position as a market leader, LBP must focus

its efforts on improving the quality of its products and services as well as its

capitalization.

d. Strategic Issues related to External Environment

1) The availability of products, services, or strategies that contribute to the

industry's dual goals of digital growth and financial inclusion while

preserving a secure and stable financial environment.

2) A scarcity of client touchpoints that could satisfy the financial demands of

customers not only in urban areas, but also in underserved and unbanked

regions.

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 V. INTERNAL ANALYSIS

A comprehensive analysis of the firm's internal components, both real and intangible,

can offer company decision makers with information that can help them develop

opportunities for growth and areas in which they have a competitive edge. In the following

part, LBP's internal business components will be evaluated.

A. McKinsey 7S

The McKinsey 7s model is a strategy tool that highlights seven (7) important

organizational factors that must be addressed and aligned for a successful change

management process and for regular performance improvement. System, structure,

style, strategy, skills, personnel, and shared values are the seven (7) aspects. This study

analyses LBP's regular performance and identifies crucial areas for enhancement in

order to maintain LBP's performance level.

Figure 17. LBP McKinsey 7S

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 1. System

a. Organizational System

Because the LBP is a government-owned financial institution, its

organizational structure has been subjected to numerous reorganizations and

analyses, all of which have been approved by regulatory bodies. This was done to

guarantee that the business operations are managed efficiently and that there are

no disagreements or conflicts. Systems are broken up into many sectors, the

majority of which are of a departmental character.

b. Defined Controls for Systems

Each specified and demarcated system of LBP is built with procedures and

rules, which are then thoroughly analyzed by Technical Working Groups (TWG) for

the purposes of evaluating performance, target attainment, and ensuring

regulatory compliance. These controls and procedures have been developed

exclusively for the systems and projects in question. Each system has a security

matrix that has been thoroughly created for accurate tagging of responsibility and

accountability.

c. Monitoring and Evaluating Controls

The Codified Approving/Signing Authority (CASA) Manual has a section

devoted to defining designated controls. LBP conducts ongoing analyses and

checks on employee performance. The majority of this is accomplished through

the use of an internal audit, which typically consists of a mix of observation and

informal discussion. During the annual performance review process, feedback is

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 received both for individual employees and for the head of the department as a

whole. In addition to this, this is done to guarantee the detection of performance

gaps and lags as well as to classify process improvements.

d. Internal Process for Organizational Alignment

LBP established a specialized process and methods for ensuring that all

departments and systems are aligned and working towards a greater common

business goal and targets. This was accomplished by ensuring that all systems are

designing towards specific targets based on their areas of expertise and aligning

themselves with the bank's vision and strategy. The strategic leadership of LBP

ensures that all of the bank's systems are provided with resources and are directed

toward achieving particular targets in order to accomplish the bank's overarching

aim.

2. Structure

a. Organizational Hierarchy

LBP operates according to a governance hierarchy that is led from the very

top by the Board of Directors. The Board of Directors, in turn, delegate their

powers and responsibilities to six (6) Board level committees, which are supervised

by the President and CEO. The President and Chief Executive Officer are directly

responsible for managing day-to-day operations, which have been segmented and

allocated in accordance with their respective functional duties. Employees have

minimal to no access to top management and leadership as a result of the

organizational structure, which reveals that there are many managerial positions

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 in between levels of the organization. In addition to this, because the organization

is hierarchical, the decision-making process is sluggish.

b. Inter-Departmental Coordination

Given the hierarchal structure of the organization, inter-departmental

coordination is not commendable. For projects that require multiple expertise,

LBP form interdepartmental teams closely coordinated with respective

management committee to ensure effective and organized communication.

c. Centralization vs Decentralization

LBP adopts a hybrid structure of centralization and decentralization. Like

any other financial institution and considering it to be a public office, LBP

supports decentralized decision making, Jobs roles are designed to be carried out

with responsibility, and employees must have mutual coordination and

understanding with their respective supervisors.

Moreover, majority of its activities and communication is centralized to

ensure that supervisors and managers oversee and approved various efforts

undertaken by employees are aligned with organization strategy and values.

d. Communication

LBP has established systems to ensure communication between

employees and various managerial levels, which will contribute to an

improvement in the organization's structure as a whole. The manner in which

communication and information are defined and organized within the

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 organization to guarantee that no task or organization objective will be

jeopardized as a result of a misunderstanding or the spread of false information.

3. Style

a. Authoritarian Leadership

The authoritarian style of leadership is prevalent among Business Units. In a

system where the bulk of tasks are governed by policies and practices that adhere

to intended regulations, innovation is not promoted. This type of atmosphere

encourages these leaders, based on their expertise and awareness of the

regulatory limits, to favor their own judgment and views above those of other

group members.

b. Strong Internal Competition

With a diverse workforce, LBP encourages a vigorous and healthy

competition within the organization. However, the formation of silos and

occasionally the absence of cooperation between teams, units, and departments

can be attributed to excessively competitive behavior.

4. Strategy

a. Retail and Direct Approach

LBP is broadening its base of personal deposits and electronic money

accounts – as a primary product in account preservation; this strategy paves the

way for a larger and more stable fund source while simultaneously structurally

lowering the costs of funds and ensuring higher profitability. Cascade the

concessional terms of our financial services to farmers and fishers, micro and

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 SMEs, and other individual borrowers, which is a move to capture a much bigger

share of the MSME market. This strategy was adopted to grow the bank's loan

portfolio, to deliver financial services to many SFF and MSMEs. The lending units

have been strategically restructured, and lending officers have been deployed, to

cover all 1,488 municipalities across the country. Roughly 500 teams have been

assigned the responsibility of ensuring that all lending requirements in their

respective coverage areas are met as soon as possible. This is made possible by

the Digital Lending System, which LBP shall continue to improve so that it can

handle the entire end-to-end loan process, beginning with the processing of

applications and continuing all the way through approval booking and collection

for all loan products.

b. Expanding reach and deepen penetration

The co-location strategy with the PSA had become successful, resulting to

bank 13.5 million previously unbanked thereby significantly increasing the number

of banked adult Filipinos. LBP expands touchpoints for service delivery while

advancing financial inclusion. LBP broaden its Agent Banking Program (ABP)

reaching remote areas by tapping more agent banking partners especially the

LGUs. With this, LBP establish touchpoints in LGUs across the country. Initially

targeted to reach 75% on 2021, to 83% this year and 87% in 2023.

c. Go Digital

Create a road map that is both clear and consistent for the digital

transformation. At the beginning of 2022, the GCG gave its approval to a plan to

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 establish the Digital Banking Sector, which was necessary in order to pursue digital

transformation in a more aggressive manner.

d. Develop a sense of competence and service excellence among employees

With all the transformations being undertaking, there is a need to prepare,

equip, retool, and empower its human resource. LBP reinforce a growth and high-

performance mindset. The business landscape is evolving rapidly which calls for

continuous learning updating skill sets and acquiring new abilities. LBP to bring in

a new breed of accounting and finance graduates, mathematicians, Agri-scientist,

and other relevant talents which kill insights and possess the initiative to develop

critical thinking this scission making and thought process or paradigm that is

solutions oriented.

5. Skills

a. Employee Skills

LBP has a commendable workforce, as required by constitution that to a

acquire positions in public offices required Civil Service Eligibility. All employees

are recruited not only based on their merits and qualifications but also their

character. LBP grooms these professional further to facilitate growth and

development

b. Skills vs Task Requirements

LBP define task and job roles. Subsequently hires and trains employees for

skill levels accordingly with respect to those task and roles. Human Resource

Department ensures that all its job requirements are met and that employees have

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 sufficient skills to perform their respective jobs in accordance with the values and

culture as well as the business goals and strategy of the bank.

c. Skill Management

LBP pays attention to enhancing the skills and capacities of its employees. It

arranges regular training and workshops to provide growth and development

opportunities for its employees.

d. Company’s competitive advantage

Although Human resource developed specific jobs roles and requirement for

the employees, it fails to project core competitive advantage among employees.

Employees are lured to opportunities offered by other institutions and

corporations. LBP should provide competitive benefit to employees where other

players cannot imitate creating a unique and non-substitutable competency for

LBP

6. Staff

a. Employee skill level vs Business Goals

Employees from different roles are hired both internally and externally

depending on the urgency and the skill level required, with this, LBP employees

are skilled per the requirement of their jobs and positions. Prior to assumption,

newly hired employees undertake training to familiarize themselves with the

company and its values. External training along with in-house training are provided

for skill level enhancement.

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 b. Number of Employees

By end of 2020. LBP has 10,261 employees, 9,680 regular employees and 581

contractual employees with 1.57% turn-over rate. The number of staff members

changes from one place to another according to the requirements of the

operations being carried out. LBP recruitment actively promotes diversity and

collaborates closely with members to ensure the achievement of operational

objectives. LBP places the utmost importance on the contributions made by its

team members and other workers in driving the company's success.

c. Gaps in required capabilities and capacities

The Human Resources section of the company has a methodical approach

in place that coordinates all of the other departments in order to locate

prospective job openings or skills gaps. The Human Resources Department is

responsible for making arrangements for recruitments that may be permanent

or contractual in character, as well as making arrangements for training

sessions for the existing personnel if those sessions are required.

5. Shared Values

LBP defines and communicates its core principles in order to develop a creative

and supportive organizational structure that will enable people to achieve at their

highest level and increase their motivation and dedication. The following are the

main values of LBP's "Keeping IACCES Alive" initiative.

• Innovation. Solicits innovative ideas, methods, and approaches based on original,

novel, or conventional methodologies to continuously improve financial products,

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 service delivery, and work processes that are linked with the LBP's goals and

strategy.

• Accountability. Takes responsibility for decisions and actions and handles all

business and financial activities according to the highest social, ethical, and legal

standards of the organization.

• Collaboration. Collaborates across and within boundaries to achieve outcomes

and promote an inclusive atmosphere.

• Customer Focus. Maintains a strong service focus to ensure customer satisfaction

through fostering customer relationships with internal and external clients.

• Excellence. Creates and implements product and service standards to ensure

uniformity, accuracy, reliability and effectiveness.

• Social Responsibility. Creates a proactive impact on the lives of employees and

strikes a balance between consumer, stakeholder, and bank business benefits.

B. Value Chain Analysis

A business can be distinguished by the activities it undertakes. Ultimately, these

actions generate value for consumers. The value chain framework consists of two (2)

major activities: (1) primary activities involving the physical creation of the product and

its subsequent delivery to the consumer; and (2) required support activities which help

and improve the performance of primary activities. This article focuses on only those

LBP actions that are beneficial to banking customers.

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 Figure 18. LBP Value Chain

1. Primary Activities

a. Supply Chain Management.

The primary input in providing banking products/services by financial

institutions is funds or money. As a result, obtaining funds is the most important

activity in LBP's supply chain.

Deposits from private individuals, private companies, government agencies,

government-owned or controlled corporations (GOCCs), and local government

units will power LBP's supply chain. This provides the Bank with an additional

significant funding source, which its privately-held competitors are also

attempting to penetrate.

With the support of the National Government, LBP is faced with a captured

market (LGUs and other government agencies) with limited capacity to infuse

capital due to priority programs and budget deficits.

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 b. Operations.

As a universal financial institution, LBP's operations revolve around

accepting deposits from depositors and investors to finance its lending activities

to individual and business creditors; investing funds in securities, bonds, and other

investment opportunities for additional capitalization; sending and accepting

remittances for OFW beneficiaries; and trading currencies and securities on behalf

of clients. Monday through Friday, banking and lending activities are offered from

8:30 a.m. LBP has multiple channels of delivery. As of December 2021, LBP has

678 branches that offer a variety of banking services, including deposits,

withdrawals, acceptance of government and private payments, investment

acceptance and processing, and other financial services. Including 65 branch lite

locations that are restricted to deposit and withdrawal services only. LBP is the

only bank in the country with a presence in all 81 provinces, with branches

strategically placed to optimize their reach, particularly in unbanked and

underserved communities, thereby encouraging financial inclusion. Furthermore,

the positioning and layout of these branches maximizes consumer orientation and

projects professionalism.

In addition, the LBP maintains 55 lending centers that provide key industries

with direct access to loan facilities. LBP established five (5) Agri-hubs in addition

to lending centers. These Agri-hubs provide access to branch, lending, and

agrarian operation services all in one convenient location. These Agri-hubs are

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 strategically located to rice high-producing provinces as well as unbanked and

underserved rice farming areas.

LBP is continuing to make significant headway in growing its network. A total

of 2,810 automated teller machines (ATMs) and 167 cash deposit machines

(CDMs) are placed around the country by the end of the year 2021. The ability for

bank customers to complete transactions such as deposits and withdrawals

without having to physically visit a branch has made automated teller machines

(ATMs) and cash deposit machines (CDMs) extremely useful.

Alternately, LBP customers can utilize their mobile devices and internet

connectivity to access their deposit accounts and conduct simple operations such

as fund transfers and bill payments. With the release of the Landbank Digital

Onboarding System (DOBS) in 2018, prospective LBP customers can now open

accounts without visiting a physical branch.

c. Marketing and Sales.

With a purpose to reach underserved and unbanked populations, the

majority of LBP marketing and advertising campaigns are concentrated in

provincial areas. LBP cooperated with provincial radio stations and broadcasted

"Balitang Landbank" in order to reach the underserved and bring them into the

financial system. LBP, in conjunction with other government agencies, supported

a variety of activities that support the National Government's program delivery.

In addition, cross-selling of banks' financial products is encouraged within the

business, and rewards-based advertising is promoted. Last but not least, LBP takes

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 efforts to enhance brand quality and incorporate Corporate Social Responsibility

(CSR) into its operational activities in an effort to promote sustainable

development.

The Bank also adds value to its clients by offering low interest rates and

flexible loan terms, collaborating with credible institutions to deliver financial

services to end-users, and developing long-term and strong relationships with

Official development assistance funders and government agencies.

Marketing efforts are primarily focused on projects aimed at increasing the

competitiveness of Philippine industries, such as those related to agriculture and

aquaculture, infrastructure, transportation, LGU projects, and environmental

protection, among others.

In addition, LBP was successful during the pandemic in launching its social

media accounts and community for the announcement of its projects and

programs; as a result, clients and potential clients are now able to communicate

with LBP in a manner that is more convenient for them. As of writing the total

number of LBP accounts followers have reached 1.7 million.

d. Service.

LBP provides excellent service by fully disclosing the features, terms, and

conditions of the Bank's products and services; providing timely

responsive financial and technical support; making pertinent product and service

information readily available through different types of media (i.e., posters,

brochures, websites, social media accounts); and strictly adhering to all BSP and

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 National Government laws and regulations in the fair design and sale of financial

products and services.

Moreover, LBP considers providing quality and outstanding customer

service to be one of its primary business objectives. The Bank separates

complaints into two broad categories: those that require special handling

(complaints for special handling, or CSH), and those that are more prevalent.

Common incidents are those that are raised or reported through branch workers,

customer service network on various communications such as phone, email, and

social media. CSH are those that are routed through regulatory authorities and

agencies. These cases have been noted and will be resolved through the protocols

that are currently in place at the bank.

2. Supporting Activities:

a. Human Resource Management (HRM).

Through its innovative recruitment, development, and employee retention

programs, LBP places a priority on the cultivation of its most valuable asset, its

vibrant team. This includes training development (for both staff and officers), the

On-the-Job Training Development Support Program, the Graduate Development

Education Program, an enhanced Performance Management System to be used

as a basis to measure and evaluate employee performance as a basis for

promotion or the giving of incentives and rewards (such as the Gawad Punla

loyalty award, bonuses, and the merit incentive program), and other training and

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 assessment interventions required for new senior executives in accordance with

Civil Service regulations.

Providing employee wellness activities (such as sporting competitions,

health forums, annual physical examinations, nutritional counseling, sports

activities, small group learning sessions, gyms, day care centers, and so on),

disseminating internal communications, and establishing a grievance machinery

mechanism are all things that the bank does in order to ensure that it will be able

to keep its employees. These are all things that the bank does in order to ensure

that it will be able to keep its employees

b. Product and Technology Development.

LBP continually evaluates, innovates, and introduces value-added products

in order to become responsive and sensitive to the ever-changing banking

demands of its rapidly expanding and diversified customer base. Cash

Management Solutions are built in order to continually take use of the latest

technology that is accessible. In light of the rise of the epidemic and the

introduction of digital banking, LBP is continually reviewing and upgrading its IT

infrastructure in order to increase the bank's capacity, as well as its level of

information technology security, in accordance with the enhancement of

regulatory compliance. To ensure that its network and security solutions are

always up to date, the bank regularly purchases new servers and disk storage

systems, which it then sets up. There are other recommendations for new process

improvements programs that aim to increase the standards for loans and credit,

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 streamline the process, and shorten the approval duration, all while strengthening

the credit facility portfolio.

c. General Administration.

The trio that focuses on the risk controls of the bank includes risk

management, compliance auditing, and auditing overall compliance. These three

(3) are in charge of overseeing the role of identifying, assessing, measuring,

controlling, monitoring, and reporting risks that are inherent in all activities

carried out by the Bank. In addition, in order to be in compliance with BSP 1048,

which is titled "BSP Regulation on Financial Consumer Protection," the bank

ensures that it is readily available to assist customers with their needs and

concerns across all channels. Furthermore, the bank guarantees consumer

protection services, addresses and prevents or mitigates identified or associated

risks of financial harm to depositors, borrowers, and other clients, as well as the

bank itself.

C. Internal Management Audit

Strategic management is the method and science of planning, implementing, and

evaluating the cross-functional decisions that enable an organization to achieve its

objectives. (David, 2013). The performance of an internal audit of strategic management

affords the opportunity to comprehend the nature and impact of decisions in other

functional business areas of the organization. The following were the areas that required

evaluation:

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 1. Management Audit

Table No. 20. LBP Management Audit Assessment

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 2. Marketing Audit

Table No. 21. LBP Marketing Audit Assessment

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 3. Operational Audit
Table No. 22. LBP Operational Audit Assessment

4. Research and Development Audit

Table No. 23. LBP Research and Development Audit Assessment

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 5. Management Information Audit

Table No. 24. LBP Management Information and System Audit Assessment

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 D. Financial Statement Analysis

The strengths and weaknesses of LBP can be determined by analyzing its financial

statement. Financial analysis is examining the relationship between items on the

financial accounts (ratio and percentage analysis) and identifying patterns in these

relationships.

In order to compute financial ratios, the most recent position of LBP as of

December 31, 2021, as opposed to December 31, 2018, to December 31, 2020, was

used. The data that were used in the financial study were applicable to "Parent," here

known as the LBP. The "Group" is a collective term that refers to the Parent company as

well as all of its subsidiaries. Considering this, LBP will henceforth be referred to as

"Parent" solely within the context of this section.

As the economy steadily recovers, LBP achieved P74.377 billion in gross revenue,

a little improvement from the previous year, when the epidemic nearly wiped off the

entire industry. Additional substantial amounts are listed below.

Table No. 25. Growth% of Significant items in LBP Income Statement

Source: LBP 2021

Profitability, Liquidity, and Leverage ratios are most relevant for evaluating the

balanced scorecard's financial performance component. Given the risk involved with a

firm's financial liabilities or debt (liquidity & leverage), these metrics are important for

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 evaluating the financial returns (profitability) of a company. From an operations

perspective, activity ratios are much more useful to evaluation.

1. LBP’s Size and Market Share

In terms of market share, LBP ranked fourth since 2017. By 2019, LBP had

surpassed BPI and reached the P2 billion mark for its total assets. As LBP continues to

expand, 2020 likewise gain significance. By the end of the year, LBP surpassed MBTC

short of P200 million in total assets.

As of 31 December 2021, the tables below contain key data indicating LBP's

standing among the top five (5) leading universal banks. All numbers are derived from

the BSP's official data.

a. Total Assets
Table No. 26. Total Assets of Top Universal Banks for years 2017, 2019-2021

Source: BSP 2021

As of the year 2021, LBP ranks second among the universal banks in terms

of its entire assets held amounted to Php 2.586 billion, which was almost Php

900 million less than the total assets held by BDO, the leader in the market. As

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 a result of the merger with UCPB, it is anticipated that LBP will surpass the Php

3 trillion mark in total assets by the year 2022.

b. Growth Rate
Table No. 27. Growth Rate of Banks’s Total Assets from 2017 - 2021

Source: BSP 2021

Prior to the occurrence of COVID-19, which affected nearly every business,

LBP's CAGR was 12.2% greater than the industry's average CAGR of 10.9%.

Moreover, despite the majority of businesses suffering due to the global

pandemic, LBP continues to do well with a CARG of 8.3%, about double that of the

banking industry as a whole. LBP has been a growth driver for the banking

industry, as seen by its continued growth notwithstanding the difficulty posed by

COVID-19. As the economy gradually returns to normal, LBP is the only universal

bank to have recaptured its pre-recession growth of 12%.

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 c. Market Share Table No. 28. Total Market Share by Asset per Banks from 2017 - 2021

Source: BSP 2021

LBP is continuously increasing its market share. By the end of 2021, LBP

will have 13.4% of the industry's total assets. Following the UCPB merger and its

support to the government’s financial inclusion strategy, it is anticipated that

LBP's market share will increase in the coming years.

2. LBP’s Performance Indicators

Shown below are the LBP’s performance in selected bank’s performance

indicators for years 2017 – 2021.

Table No. 29. LBP’s Performance Indicators for years 2017, 2019-2021

Source: BSP 2021

a. Deposits

The LBP's total deposit liabilities have shown a CAGR of 12.30% between

the years 2017 and 2021. Prior to the pandemic, a growth rate of 11.9 % was

recorded; however, this number plummeted to 8.4% as a direct result of the

COVID-19 beginning in 2020 and continuing into 2021.

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 b. Loans

The LBP's total loans have shown a CAGR of 7.3% between the years 2017

and 2021. There was a 15% growth rate reported prior to the pandemic. However,

because of implementation of various restrictions and COVI_19 had so

dramatically dragged the economy into recession, the figures hardly budged at all.

c. Capital

Prior to the pandemic, LBP's capitalizations increased by 19.4% as a result

of its operations and exemptions from remitting dividends to the national

government to fund its different national development plans. However, activities

have become sluggish as a result of national lockdowns and travel restrictions,

resulting in diminished operational efficiency and profitability. The growth of

11.7% during the pandemic was the consequence of a variety of government

capital injections to continue providing aid during the pandemic.

3. Applicable Financial Ratios

a. Profitability Ratios

The profitability ratios provide insight into the overall economic

performance of a company.

1) Revenue Growth Rate

Source: LBP 2021

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 When the pandemic struck in 2020, net interest revenue plummeted

from 16.11% of the previous year to 5.72% less by the end of the year. By the

end of 2021, net interest income inched up to 5.66% due to continuing

economic uncertainty and a sluggish recovery.

Despite the slow-moving increase, LBP’s revenue growth is still

competitive on that of the industry leader, BDO. MBTC on the other hand,

posted decline on its revenue by end of 2021.

2) Gross Profit Margin

The Gross Profit Margin indicates the proportion of revenue available to

pay operating expenses and generate a profit. It is the same as Net Interest

Margin for banks, which gauges the difference between their interest income

and the interest paid out to their lenders.

LBP had a steady increase on its gross profit margin from 80% to 84% by

end of 2021. The increase was due to lower operating expenses as a result of

pandemic restrictions. However, LBP still is the least profitable in terms interest

earning products with 83.71%, far below its competitors’ and industry’s

average with 89.7% and 87.72% margin, respectively. It can be professed that

LBP is not aggressive in regulating high interest rates as it targets to cover the

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 marginalized sectors, which are perceived as high-risk by other private

institutions.

3) Operating Profit Margin

The operating profit margin reveals the profitability of current operations

excluding interest and tax expenses.

Source: LBP 2021

A 1% increase in operating margin was recorded by LBP for 2021, the

slight improvement was due to a less operating expense as a result of pandemic

restrictions.

Moreover, LBP’s operating income of 29.91% still falls short from of

competitor’s and industry average. The jump on both averages was merely

driven by MBTC with 42.05% record by end of 2021.

4) Return on Assets (ROA)

Source: LBP 2021

LBP's net profit margin in 2021 is at 29%, consistent with the previous

year's performance. At this level, it is possible to conclude that LBP is effective

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 at generating revenue that exceeds its costs. Total asset turn-over, on the other

hand, fell by a quarter percentage point, from 3.13% to 2.88%. A total asset

turnover of 2.88% means that for every Php 1 invested in a bank's asset, an

income of 1.56 times is generated.

Furthermore, ROA fell from 0.90 percent in 2020 to 0.84 percent at the

end of 2021, implying that the bank generates 0.84 percent net income from

its total assets. As a result, the bank's net income is asset-conservative rather

than asset-driven.

When we compare LBP's ROA to that of the identified competitors, we can

conclude that LBP is underperforming both with its competitors and its

industry’s average.

5) Return on Stockholder’s Equity (ROE)

Return on equity (ROE) measures the profit made by stockholders on

their investment in the company.

Source: LBP 2021

LBP’s 10% ROE at the end of 2021 is lower compared to Dec 2020. This

means that for every Php1.00 revenue earned, the net return is Php 0.10. In

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 comparison to the competitor's average of 8.52% and the industry average of

9.17%, LBP is performing well with 10%.

b. Liquidity Ratios

1) Working Capital

Unfavorable Net Working Capitals for LBP were reported annually from

2018 to 2021. Banks utilize a greater level of leverage than manufacturing or

production-oriented companies. It serves primarily as a lender and borrower of

financial resources. Due to the fact that the bank has no control over the time

of a depositor's withdrawal, the funds deposited by that depositor are classified

as current liabilities.

2) Current Ratio

The current ratio demonstrates a company's ability to pay current

liabilities with assets that can be converted to cash quickly. A ratio of 1.0 or

higher is preferable.

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 A current ratio of one or less indicates that debtor loans are illiquid assets

that are funded with the bank's short-term deposit liabilities. The liquid asset

to deposit ratio is also 22%, which is the percentage cover that the bank's total

deposits can provide for its liquid assets. As a result, current assets are

insufficient to cover all current liabilities when they become due.

c. Activity Ratios

The activity ratios reflect how efficiently or inefficiently a company uses its

resources. It assesses a company's ability to convert various accounts on its

balance sheets into cash or sales. Activity ratios are used to assess a company's

relative efficiency based on how it uses its assets, leverage, or other balance-sheet

items. These ratios are essential for analyzing whether a company's management

is adequately generating revenues, cash flow, etc. from its available resources.

1) Fixed Asset Turnover

This ratio indicates the extent to which a company's fixed assets, such as

land, buildings, and equipment, are utilized to create sales. A low fixed assets

turnover indicates that a company has excessive investment in fixed assets

relative to its revenues; it is essentially a productivity metric.

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 LBP's fixed asset turnover by 2021 is still on par with previous years'

results. A 7.26 ratio means that every Php 1 invested in fixed assets generates

7.26 times the revenue.

Moreover, the 7.26 ratio is higher compared with competitor’s and

industry average, hence LBP is performing stronger than them.

2) Total Asset Turnover

This ratio considers both net fixed assets and current assets. It also

indicates how efficiently assets are used; a low ratio indicates that too many

assets are being used to generate sales and/or that some assets (fixed or

current assets) should be liquidated or reduced.

According to the data presented above, LBP generates an average of Php

3 in sales for every Php 1 invested in total assets. Although this is the level at

which LBP has performed since 2018, if it is able to reduce its investments in

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 accounts receivable and inventory, which burden the company's operating

performance, it may be able to increase the ratio and be more productive.

In addition, LBP’s performance is still at par with its competitor’s and

industry average.

d. Leverage Ratios

The leverage ratios provide insight into the extent to which a company is

exposed to financial risk by revealing the ratio of its debt to its equity.

1) Debt to Equity Ratio

The average debt-to-equity ratio of the bank is 12.04, which indicates that

the percentage of debt financing to equity financing is greater than 1,

confirming that LBP is heavily leveraged. However, this does not imply that the

bank has a bad financial position, as its positive net income margin expansion

from 2018 to 2021 demonstrates that the bank relies primarily on its lending

activities to generate profits.

2) Debt to Asset Ratio

This ratio measures how much borrowed money has been used to fund

the firm's operations. Low ratios are preferable because high fractions indicate

excessive debt use and a higher risk of bankruptcy.

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 At the end of 2021, LBP’s 0.92 debt-to-asset ratio is less than 1.0, indicating

that the bank's total liabilities are not being used excessively to finance the

bank's operations, implying a lower risk of bankruptcy.

E. Internal Factors Evaluation (IFE)

Table No. 30. Internal Factors Evaluation

4 – Major Strength, 3 – Minor Strength, 2 – Minor Weakness, 1 – Major Weakness

1. Strengths (59%)

a. Strong Solvency and Financial Ratios (18%) - 4

Basis: Financial Analysis, MA - Management

LBP has earned a reputation for being among the strongest banks in the

country, and the indication of having strong solvency ratio and being financially

sound is the bank's persistent growth and aggressive expansions. Despite the

impact of the pandemic and the limits imposed by the economy, LBP remains the

primary force behind the expansion of the universal banking business, hence a

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 major strength for LBP. Moreover, LBP’s ability to continue serving small farmers

and entrepreneurs – who preserved as risky by other private financial institutions

- is an mark of being financially viable.

Furthermore, in the first quarter of 2022, LBP announced a net income of

13.2 billion, representing an exceptional increase of 141% in comparison to the

performance of the same time in the previous year. LBP’s ROE of 10.47%, although

lower compared to previous years is still remarkable. The growth in LBP's revenue

is directly correlated to the robust economic revival taking place across the

country. With LBP of its strong financial position, LBP was able to increase its

capacity to provide financial assistance to the agriculture sector as well as to other

mandated sectors.

b. Responsive & Diversified Products and Low Pricing (14%) – 4

Basis: MA – Marketing, CPM

With the advent of technical breakthroughs and the altering customer

behavior brought on by the pandemic, the products and services given by

Landbank should address the challenges and wants of its clients. Hence, given a

weight of 14%. LBP has been adaptable in the face of the technological shifts that

have taken place in the sector it operates in. Because of the extensive variety of

products and services that it offers, it is able to serve practically any kind of

customer, including private enterprises, government agencies, local government

units (LGUs), and microfinance institutions, amongst others. LBP was successful in

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 developing products that were tailored to the requirements of these customers.

It is a priority for the providers of financial services to guarantee that the clients'

risk profiles, funding levels, and financial goals are satisfied.

There is very little to no differentiation in the goods offered by banks;

nonetheless, LBP's low-cost leadership initiatives ensure that its products remain

competitive while promoting financial inclusions. Hence, a major strength for LBP.

c. Strong Brand Reputation (12%) – 3

Basis: MA – Management,

The corporate reputation of a bank influences a company's impression of

the worth of the services it receives, and consequently its loyalty and retention. It

is crucial for both the pre-buying and purchasing phases of the service acquisition

process, hence a 12% weight is given for this factor.

LBP has a unique dual purpose, encouraging national development as a

government agency and ensuring the financial stability of a financial institution.

LBP adhered strictly to this function by establishing excellent governance and

providing adequate customer care. Thus, a major strength for LBP.

d. Direct Affiliation with National Government (10%) – 3

Basis: 7S – Strategy

Financial institutions are heavily influenced by the government. A strong

relationship with the government reduces the likelihood of operational issues

arising. In addition, government expenditure is one of the most important

determinants of economic performance; therefore, LBP can capitalize and build

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 partnerships with various government agencies engaging government-finance

initiatives. Considered this a minor strength for LBP, which represented 10% of the

total internal important components.

e. Good Management and Employee Empowerment (5%) – 3

Basis: MA – Management, CPM, 7S – Shared Values

Consistently, research has showed that when individuals feel empowered

at work, bolstered by competent management, it is linked to higher job

performance, job happiness, and organizational loyalty. Hence, part (5%) of key

internal factors that were considered

This characteristic is considered to be one of LBP's most significant

strengths because it is supported by its experienced executives and management

as well as programs geared to power employee engagement. The continual growth

of bank networks and the achievement of a variety of awards, both locally and

globally, are two examples that support this assertion.

2. Weaknesses (41%)

a. Unsatisfactory Customer Service (13%) – 2

Basis: MA – Marketing, CPM

Customer service encompasses the entire consumer experience across all of

the bank's customer touchpoints, including the branches, internet, mobile

application, and social media platforms. The experience provided by these

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 platforms and amenities will increase client retention and satisfaction overall.

Hence, this factor weight 13% of the overall internal rating.

Since the most majority of government accounts and transactions are

handled by LBP, customer-facing services are frequently neglected in favor of

improving support for back-office operations. This is done in an effort to satisfy

the bulk and majority of government accounts and transactions. When it comes to

customer satisfaction, surveys consistently place LBP at the very bottom of the list.

Thus, a minor weakness of LBP as part also part of the service industry. This may

be perceived as a result of the long queues that are present in almost all of its

branches as well as the limited presence of ATMs.

Moreover, there is insufficient evaluation of the adequateness of branch

personnel, as well as its execution and monitoring. This evaluation should seek to

address the long lines in the branches and the reoccurring occurrences of

offline/out-of-cash ATMs, especially onsite ATMs.

b. Limited Capitalization (11%) – 2

Basis: CPM, Financial Analysis

Capital can be utilized for investing or lending reasons, hence scoring this

factor of 11%.

When considering total capitalization, LBP is positioned in the fourth

position among the top five (5) universal banks. This is in accordance with

Executive Order 198 section 2016, which allows for authorized capital of up to Php

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 200 billion, with the provision of capital injection of at least Php 30 billion, in order

to maintain its designated objective of supporting sustainable growth.

Considering this as a minor weakness, as government institution

participating in various government activities, LBP can revisit its mandate boosting

its capitalization boosting its operations and assistance on various government

activities and initiatives.

c. Limited Customer Touchpoints (9%) – 2

Basis: MA – Operational, CPM

Banks' primary customer touchpoints are branches and ATMs, and the

accessibility of these mediums to customers will affect their overall satisfaction.

The availability of branch network facilitates access to these engagements and will

aid in client acquisition and retention, hence an internal factor (9%) that must be

consider.

While recognizing the goal of LBP to promote inclusive growth by prioritizing

the deployment of its ATMs and branches and expanding its agent banking

partners in unbanked and underserved areas, LBP was unable to account for the

increased burden on clients in areas with a high number of depositors as a result

of fewer branches and ATMs. This limitation was also mentioned in a number of

publications, including the Manila Times and [Link]. Thus, a minor weakness

for LBP.

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 d. Limited Marketing and Promotions (8%) – 2

Basis: MA – Marketing, CPM

Marketing plays an instructional role in the banking business; it can be used

to reach more consumers and enlighten them about the advantages of investing

their money with the bank; this will result in the bank obtaining more deposits and

higher market share, hence comprises 8% of the overall internal factors.

Due of its capitalization concerns, LBP has limited marketing and

promotions. Unlike other private banks, LBP lacks sufficient basis for celebrity

endorsements in advertising. As it must utilize its resources to promote its primary

functions in various government programs, it is required to do so. In contrast, LBP

capitalizes on social media during the pandemic and began promoting its social

media presence. Consequently, LBP has just a slight limitation, as it may develop

and expand its social media presence by capitalizing on the movement in customer

behavior toward social media platforms.

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 F. Summary of Internal Issues

1. Major Strengths and Weakness

In conclusion, the LBP's strong financial success is its most significant

advantage. The bank manages to establish a record for year-over-year net income

growth despite the capitalization issue and the strain that comes with contributing to

nation development while remaining financially sustainable. Additionally, LBP is able

to collect additional deposits and capitals due to its strong ties and relationships with

a number of government agencies. These deposits and capitals are then used to

finance the operations and investments of LBP. In addition, LBP's market share

continues to expand as a result of the vast selection of products and services it offers

to players of all levels and classes.

In contrast, while LBP continues to support a significant number of government

entities, collecting government payments available only for LBP and other collection

efforts by these government institutions hinder LBP's ability to offer superior services

to its retail customers. Despite the fact that this is a manpower issue, if LBP wishes to

become the country's largest bank, it should be able to position itself so that it can

serve the bulk of the banking population. In addition, given the number of

government agencies and employees holding accounts with the bank, it is essential

to have sufficient touchpoints to improve the banking experience not just for the

bank's existing customers, but also for those who remain unbanked and prospective

consumers.

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 2. Strategic Issues related to Internal Environment

a. LBP should be able to synchronize customer-facing services, work processes, and

digital platforms to provide agile, accessible and responsive Bank products and

services to all stakeholders without sacrificing any of its value-chain participants.

b. LBP should retain sufficient capital, solvency, and financial ratios to serve more

small farmers and the underprivileged, who are labeled high-risk by other

commercial financial institutions.

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 VI. STRATEGY FORMULATION

The subsequent recommended corporate strategies are constrained and based on

the previously provided industry opportunities and threats, as well as the from the

identified company's strengths and weaknesses, and shall be led by the subsequent

strategic formulation tools.

A. Strategic Formulation Tools

1. Strength, Weakness, Opportunities, Threats (SWOT) Matrix

a. Attack Strategies (Strength – Opportunities)

1) Market Development: (S1-S2-S5-O1-O2-O3-O5)

Expand the strategic co-location between PSA and PhilSys. Instead of

solely giving the LBP Agent Bank Card, facilitate the onboarding of registrants

using the LBP e-wallet application and the basic deposit account.

2) Product Development: (S1-S2-O1-O5)

Revisit product and service offerings and improve pricing positions to

accelerate financial inclusion and minimize customer uncertainty.

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 3) Product Development: (S1-S3-S4-O1-O4).

Include lending products and other government agencies offering

capitalization assistance on diverse digital platforms, such as e-wallets and

mobile banking applications. Consequently, reduce the documentation

requirements for MSMEs and other startup businesses.

4) Market Penetration (S3-S4-S5-O1-O6)

Create more partnerships with other government agencies and LGUs and

participate in Build, Build, Build Policy to generate more funding to extend

support for national development.

b. Develop Strategies (Strength – Threats)

1) Functional Strategy (S3-S5-T1-T2)

Enhance technological oversight. Provide sufficient training in

cybersecurity, IT governance, and service management.

2) Product Development (S1-S2-S3-T3-T4)

Proposed repositioning of bank's products and provision of pricing

models that are flexible and adaptable to inflation, interest rates, and other

economic uncertainties.

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 3) Market Penetration (S1-S4-S5-T3-T4).

Create partnership with other government agencies in pushing financial

inclusions and extend supports to underserved areas.

c. Reinforce Strategies (Opportunities – Weaknesses)

1) Market Penetration (O1-O2-W2-W3).

Enter into a co-branding agreement with other financial institutions to

share the installation of local ATMs in convenience stores and other partner

agencies.

2) Product Development (O2-O3-W1-W2).

Collaborate with government institutions on their digitization initiatives

and projects

3) Market Penetration (O1-W1-W3).

Evaluate the ATM-to-depositor ratio and assess the adequacy of branch

manpower and establish specific benchmarking targets relative to other

commercial banks.

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 4) Market Penetration (O2-W3-W4).

Develop an effective marketing strategy and engage in multiple digital

banking initiatives that promote social media presence and engagement.

d. Avoid Strategies (Weaknesses – Threats)

1) Product Development (T2 – W2 – W3).

Develop and improve existing banking applications that allow for

customer interactions and engagements, as well as other capabilities that

facilitate a convenient and secure banking experience.

2) Product Development (T3- T4 – W1 – W3)

Strengthen IT infrastructure and digital touchpoints allowing to perform

other financial services such as investing and providing access to variety of

merchants.

3) Market Development (T1-T2-W1-W4)

Develop effective marketing plan, incorporating anti-fraud information,

educating costumers about ML/TF activities.

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 e. Summaries of Recommended Strategies

The following strategies are recommended based on the SWOT matrix, which

considers external opportunities and threats as well as LBP's internal strengths and

weaknesses.

1) Product Development Strategies

a) Revisit product and service offerings and improve pricing positions to

accelerate financial inclusion and minimize customer uncertainty.

b) Include lending products and other government agencies offering

capitalization assistance on diverse digital platforms, such as e-wallets and

mobile banking applications. Consequently, reduce the documentation

requirements for MSMEs and other startup businesses.

c) Proposed repositioning of bank's products and provision of pricing models

that are flexible and adaptable to inflation, interest rates, and other

economic uncertainties.

d) Collaborate with government institutions on their digitization initiatives and

projects

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 e) Develop and improve existing banking applications that allow for customer

interactions and engagements, as well as other capabilities that facilitate a

convenient and secure banking experience.

f) Strengthen IT infrastructure and digital touchpoints allowing to perform

other financial services such as investing and providing access to variety of

merchants.

2) Market Penetration Strategies

a) Create partnerships with other government agencies and LGUs and

participate in Build, Build, Build Policy to generate more funding to extend

support for national development.

b) Create collaboration with other government agencies in pushing financial

inclusions and extend supports to underserved areas.

c) Enter into a co-branding agreement with other financial institutions to share

the installation of local ATMs in convenience stores and other partner

agencies.

d) Develop an effective marketing strategy and engage in multiple digital

banking initiatives that promote social media presence and engagement.

e) Evaluate the ATM-to-depositor ratio and assess the adequacy of branch

manpower and establish specific benchmarking targets relative to other

commercial banks.

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 3) Market Development Strategies

a) Expand the strategic co-location between PSA and PhilSys. Instead of solely

giving the LBP Agent Bank Card, facilitate the onboarding of registrants using

the LBP e-wallet application and the basic deposit account.

b) Develop effective marketing plan, incorporating anti-fraud information,

educating costumers about ML/TF activities.

4) Functional Strategy

a) Enhance technological oversight. Provide sufficient training in cybersecurity,

IT governance, and service management.

2. SPACE Matrix

Figure 19. LBP SPACE Matrix

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 These evaluations were founded on an examination of financial records, LBP

annual reports, and statistics relevant to the sector as a whole as its primary source

of information. The ratings for the company's financial position inside the SPACE

matrix were obtained by comparing the company's financial ratios with the averages

of both its competitors and the industry as a whole.

The space matrix that was just presented indicates that LBP ought to take a

more aggressive tactic. As a result of its rapid expansion, LBP maintains a strong

competitive position in the market. In order to overcome its internal weaknesses and

mitigate its external threats, the company needs to utilize its internal strengths to

develop a market penetration and development strategy, foster product

development plan, and may consider integration with other companies such as

merger and acquisition.

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 Following the assessment using the space matrix, to further strengthen

financial and market positions, LBP shall employ the following strategies: Market

Penetration, Market Development, Product Development.

3. Boston Consulting Group (BCG) Matrix

With the BCG matrix, LBP was compared to its biggest competitor, BDO, to find

out where it stood. Using both pre-pandemic and post-pandemic data, LBP remains

a "question mark" while driving the growth of the banking industry, with a CAGR of

12.49% and RMS of 0.74 from 2017 to 2021.

Figure 20. LBP BCG Matrix

Companies in the "question mark" quadrant are in a market with rapid growth

but low market share. This business has development potential but requires extra

investments to expand its market share. LBP needs a growth strategy that focuses on

increasing its network or developing new products. LBP should produce a product

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 that satisfies the unmet demands of future customers and meets the expectations of

existing customers.

4. Internal-External (IE) Matrix

Figure 21. LBP IE Matrix

With IFE and EFE scores of 2.91 and 3.02, respectively, LPB is in the "winner"

quadrant of the IE Matrix, indicating a "grow and build" position. This suggests that

LBP should follow intensive growth strategy that emphasizes market penetration,

market development and product development.

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 5. Grand Strategy Matrix

Figure 22. LBP Grand Strategy Matrix

As previously noted, the banking market is seeing moderate expansion, and LBP

is in a solid competitive position.

The bank is strategically located in Quadrant I, which is a strong location. The

matrix suggested the following types of strategies: Market Development, Market

Penetration, Product Development, Horizontal, Forward and Backward Integration,

and Related Diversification.

The three sorts of growth strategies proposed by the aforementioned strategy

formulation tools are market penetration, market development, and product

development. Although not explicitly stated, these techniques should be implemented

in tandem with Functional Strategy.

6. QSPM Matrix

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 A QSPM matrix establishes a methodology for ranking strategies and may be

utilized to compare strategies at any level, including corporate, business, and

functional.
Figure 23. LBP QSPM Matrix

The matrix recommended giving priority to market development plans with a

total weight of 3.23 based on the relative strengths and weaknesses of the company's

internal operations. On the other side, the matrix indicated that market penetration

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 should be of the highest priority with a total score of 3.43 when it came to

opportunities and risks presented by the external environment.

Taking into account all of the important elements that have been discussed thus

far, QSPM recommended that market penetration be given the highest priority,

followed by market development and product development. As was mentioned in

the introduction, putting these plans into action should also require functional

strategies.

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 VII. OBJECTIVES, STRATEGY RECOMMENDATIONS AND ACTION PLANS

A. Strategic and Financial Objectives

1. Key Strategic Issues

To enable the bank to achieve the defined vision, the following key strategics

issues must be address:

a. Socio-economic impact

How can LBP contribute to nation building and promote financial inclusion?1

b. Financials

How can LBP provide the best products and services to its primary sectors while

maintaining financially viable?2

c. Stakeholders

How can LBP adapt to the rising customer expectations?2

d. Internal Process:

How can LBP adapt to continuing technological changes?2

e. Employees’ Learning and growth

How can LBP be one of employers choice?

Basis: Recommended Vision Statement

“By 2025, LANDBANK shall be at the forefront of bringing-in the unbanked, making every

Filipino financially1 included while delivering innovative, and responsive digital financial

products and services2,, aspiring to become the largest asset-based bank in the country”

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 2. Strategic Objectives

The following are the company's strategic objectives, which cover all the

strategic challenges that have been identified and take into account its proposed

vision and mission:

a. Introduce a low cost product that would satisfy the need of every Filipino for a

basic deposit account

b. Improve online and digital banking experience of the customers from all stages

of experience

c. Enter agreements with government agencies in their digitization and building

initiatives

d. Increase deposit and asset growth rate to 19% and 21% respectively, by 2025

e. Achieved a 1:2500 ATM-to-Card Base ratio by 2025

3. Financial Objectives

a. Reach a Php 5 trillion mark on asset by 2025

b. Reach a Php 4 trillion mark on deposit by 2025

B. Strategic Recommendations

The following strategies are primarily based on the results of a SWOT analysis and

combine concurrently executable strategies into a single product development or

market penetration strategy:

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 Strategy 1. Expanding network accessibility and customer touchpoints

Market Penetration:

Enter a co-branding arrangement on ATM installed in C-Stores

Expand the LBP’s ATM touchpoints with minimal capital outlay and invest

for integration with Seven Bank’s System – Japan based with ATM platform

businesses. Seven Bank’s model is called the Shared ATM Service or Multi-Bank

Branding where Pito AXM Platform Inc (PAPI) installs ATM with cash recycling

functionalities and enter into co-branding agreement with local banks to enable

bank’s cardholder to transact using these ATMs at no cost to the cardholders.

LBP as a Net Issuer, will benefit in this type of arrangement as the bank’s

cardholders will have a more locations to transact without paying the acquirers

fee imposed in other bank’s ATMs. This strategy address the issue of LBP’s

having limited customer touchpoints and accessibility without hurting its

capital and operating expenses.

As of Dec 2020, there are 2,970 7-Eleven stores in the country. Aside from

withdrawal and account inquiry transactions, the plan to is to banking features

available in these 7-Eleven ATMS, including cash deposits, and fund transfer.

Achieve the 1:2500 ATM-to-Card Base ratio by 2025 (40 ATMs per 100,000 active

cardholders in the area)

In a 2019 study conducted by the Banker’s Association of the Philippines,

the country has 20 ATMs per capita of 100,000 card holders, In, Thailand has

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 94, Singapore has 49, Malaysia has 45 and Indonesia has 40. (Philstar Global,

2019)

By the end of 2021, LBP fall behind a total of 14,357,538 cardholders and

2,560 ATMs. This equates to a ratio of 1:5608 ATMs to cardholders, or roughly

17 ATMs for every 100,000 cardholders. Comparatively, its nearest competitors

BDO and MBTC have a ratio of 1:1,950 and 1:1,211, respectively. LBP reported

having the most total card base customers with 14.357 million, followed by BDO

with 8.2 million and MBTC with 3.7 million. This is due to the fact that LBP

controls the majority of payroll accounts for government agencies and supports

the distribution of various government disbursement initiatives.

Considering this and alongside with LBP expansion strategy, given and

using the current data for the total number of card holders, Assuming there will

no increase in the total card-base ratio for the next 4 years. LBP should have an

additional 3,210 ATMs by 2025. Total number of needed additional ATMs will

adjust in consideration in the increase of the total number of card holders

following the 1: 2,500 ATM-Card base ratio. For the purpose of this paper, the

target of 3,210 is set for the next 4 years.

Strategic 2. Develop an effective marketing plan highlighting LBP’s differentiated

products and services.

Market Development: LBP’s digital Marketing Plan

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 LBP should utilize social media to its advantage by marketing its brand

identity on numerous social media channels. LBP's social media pages on

Facebook, Instagram, Viber, and Twitter have a total of 1.7 million followers.

This is an excellent platform for enhancing marketing and advertising efforts.

LBP’s marketing plan should include the 4P component of Peter Drucker

Marketing Mix Framework – Product, Place, Price, and Promotion.

With LBP's newest slogan, "Serving the Nation," the company intends to

demonstrate that its products and services meet the financial and other

psychological needs of every Filipino.

Product. Customers do not purchase items; rather, they pay for the expected

benefit that they derive from using a particular brand or product. The benefit

of having a basic savings account and the possibility for increased convenience

it delivers should be the primary focus of the marketing plan.

Place. This includes the availability of networks that can be accessed for the

products that are provided. In this scenario, the automated teller machines,

branches, and other access facilities, including mobile and digital banking

that permits customer interactions in the delivery of the service that comes

along with gaining access to the products.

Price. This element highlights the pricing structure of the organization. The LBP,

a government financial institution encouraging inclusive growth, should

position itself as a provider of low-cost products to facilitate credit access for

excluded sectors in particular.

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 Promotion. All of LBP's products and services must be accompanied with a

significant amount of financial knowledge and understanding. To increase

interaction, LBP should offer updates on its promotional activities and new

product launches on all of its social media accounts.

Strategy 3. Develop and promote a product that is affordable to all socioeconomic

classes, especially the underserved.

Product Development: LANDBANK PISO – A savings account with initial deposit of

P1.00 and no maintaining balance.

In line with the call for financial inclusion this low-cost savings account

aims to provide a financial product to the unserved adult Filipinos. The proposal

is to include this the existing co-location strategy of LBP during the PhilSys

registration programs PSA. Data as of Nov 2021, PSA have recorded a 14.423

million registrants and only 24% of these total registrants have accounts

opened with LBP. However, 74% of these accounts are opened via Agent

Banking POS, and only a quarter these opened accounts are into the regular

savings account.

According to World Bank, individuals and businesses are financially

included when they have access to useful and inexpensive financial products

and services that fulfill their needs - transactions, payments, savings, credit, and

insurance – that are provided in a responsible and sustainable manner. (The

World Bank, n.d.)

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 Hence, to further promote financial inclusive a an affordable and low-cost

deposit account is a must. The following is the proposed features of LANDBANK

PISO subject for feasibility study and modification.

Strategy 4. Enhance and boost mobile banking applications.

Market Development: Incorporate the various government collections (BIR, Pag-

IBIG, SSS, GSIS, PHIC and among others) process in LBP MBA and LANDBANKPay.

Long lines at most of LBP's branches, caused by the fact that the majority

of government collection efforts are now being handled by LBP, are a contributing

factor to low levels of consumer satisfaction and a negative experience receiving

customer service.

LBP MBA is a mobile banking application that allows users to conduct

functions like as checking their account balance, transferring funds, and paying

bills using their enrolled mobile devices. On the other side, LANDBANKPay, which

was just recently introduced, is an electronic wallet application that can be used

for making transactions and paying linked retailers. Consequently, if the majority

of these government collection activities are to be incorporated in both of the

products, it has the ability to lower the amount of foot traffic that branches

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 experience and also has the potential to attract extra potential consumers that

further results to increased customer and market share.

Strategy 5. Enter partnership and agreements with government’s initiatives in

digitization and automation process.

Market Penetration: Tap to Pay – DOTr :Automated Fare Collections System

The Automated Fare Collection System (AFCS) is a program of government

which aims to automate and modernize the fare collection system in the country

for greater convenience and safety of the passengers and public drivers by

initiating the use of contactless fare payment instruments.

By acquiring services for Point-of-Sale (POS) and e-Commerce transactions

of MasterCard and other schemes, LBP can potentially attract consumers for its

convenience and value.

According to Metro Rail Transit-3 (MRT-3) management statement

released through [Link], around 45.6 million commuters rode MRT-3 last

year posting an average daily ridership of 136,935. ([Link], 2022)

In its current iteration, the AFCS ticketing system makes use of a form of

smart card technology known as the Beep Card. With the help of this opportunity,

LBP will be able to participate in this project through a collaboration with DOTr.

The proposed strategy is to use LBP’s existing contactless EMV Credit, Debit or

Prepaid for payment as an alternative beep cards. LBP card holders can use their

card to tap into MRT-3 entrances and automatically collects the fare straight from

their bank account.

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 Strategy 6. Reinforcement and empowerment of human resources

Functional Strategy: Reassessment of the adequacy of branches manpower and

construct effective capacity planning

According to the results of surveys, one of the most significant challenges

confronted by LBP is providing unsatisfactory customer service. LBP needs to put

in place efficient capacity planning strategies that will assist the company in

balancing its readily accessible resources to meet the demands of customers and

in determining the gaps that exist between employees and the responsibilities

they are liable for. With this, the management can decide whether there is a lack

of manpower or there is a gap between the job-employee.

In addition, LBP ought to make strategic use of its resources in order to get

the most out of them. This is a weakness that LBP should focus on improving by

improving employee engagement and strategic management in its operations.

LBP should capitalize on its strength of good management and employee

empowerment.

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 VIII. STRATEGY IMPLEMENTATION

A. Strategy Map

The plan outlined above illustrates how LBP will achieve its stated objectives.

Initially, an increase in staff can result in a quicker procedure as more workers share the

workload. The same applies to individuals who have enough product expertise and are

content with their role within the firm. Knowledge enhancement through training and

development enables employees to be innovative and creative, which contributes to

process and product enhancement, hence improving the likelihood of acquiring new

customers.

Similarly, the increase in transactions from new and existing customers as a result

of speedier processing and less system downtime results in increased revenue and

market share. The financial position is strengthened as a result of these operations,

which contributes to operational efficiency.

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 B. Action Plans

Strategy #1. Expanding network accessibility and customer touchpoints

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 Strategy #1. Expanding network accessibility and customer touchpoints

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 Strategy #2. Develop an effective marketing plan highlighting LBP’s differentiated

products and services.

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 Strategy #3. Develop a product that is affordable to all socioeconomic classes,

especially the underserved.

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 Strategy #4. Enhance and boost mobile banking applications.

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 Strategy #5. Enter partnership and agreements with government’s initiatives in

digitization and automation process.

C. Financial Projections and Evaluation of Strategies

1. Assumptions
Deposit and total asset market CAGRs were computed. The pre-pandemic
growth rate covering 2017-2019 was calculated and compared to the pandemic
growth rate for 2019-2021. Then, values are compared.

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 The CAGR for the universal banking industry is 8.75%, while the CAGR for LBP is

12.49%. Prior to and during the pandemic, LBP's CAGR was nearly identical, driving

the expansion of the universal banking industry. As the pandemic restriction eases,

the market is expected to return to its normal growth rate. Therefore, for the

purposes of projection, the asset growth rate is assumed to be 8.75% and to increase

by 1% annually.

The overall market growth rate for deposits is 8.71%, which is nearly the same

as it was prior to the pandemic. On the other hand, LBP surpassed its pre-pandemic

rate of 11.86% with a CAGR of 12.32 %. For the purpose of projecting total deposits,

it is assumed that the market will increase by 1 percent annually with baseline of the

current market growth rate.

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 2. Impact of Strategies on Financial Objectives

a. Impact of Strategies in LBP’s Total Assets

Since then, LBP has been the primary driver of the banking industry's

12.49% CAGR. LBP's total assets will increase by 21 percent by 2025, reaching its

initial goal of Php 5 trillion, as a result of the strategies that are beginning to thrive

by 2023.

b. Impact of Strategies in LBP’s Total Deposits

In terms of Deposit Liabilities, LBP is also the primary driver of growth with

a CAGR of 12.32 percent despite the pandemic that had nearly wiped out all

industries. As the pandemic restriction relaxes and the proposed strategies are

implemented, the LBP's total deposits are projected to reach Php 4 trillion by the

end of 2025, representing a 19 percent increase.

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 3. Financial Projections

a. LBP’s Projected Balance Sheet

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 b. LBP’s Projected Income Statement

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 D. Vision Alignment

“By 2025, LANDBANK shall be at the forefront of bringing-in the unbanked, making every

Filipino financially included while delivering innovative, and responsive digital financial

products and services, aspiring to become the largest deposit-based bank in the country.”

By its co-continuous co-location strategy with PSA during PhilSys registration, LBP

will be at the forefront of bringing in the unbanked. LBP will offer its LANDBANK PISO

product in areas where the lack of a basic savings account is a problem, thereby ensuring

that every Filipino is financially included.

With enhanced mobile banking applications and customer touchpoints in

partnership with various government institutions and private merchants, LBP will make

its innovative, responsive, and digital financial products and services accessible to all as

it strives to become the country's largest bank.

In addition, LBP's financial position improved to the point where it surpassed BDO

at the marginal level in terms of assets and deposit. Despite this, LBP ought to pursue a

consistent strategy for the expansion of its loan and capital portfolio.

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 E. Overall Evaluation

Based on the above financial projections, which take into account all proposed

market development, market penetration, and product development strategies and

assumptions, LBP will reach Php 5 trillion by 2025 with a market share of 17.39 percent.

In addition, as a result of various growth strategies, the total deposit liabilities of LBP will

reach P4 trillion by 2025, accounting for 18.15 percent of the market share of all

universal banks.

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 IX. STRATEGY EVALUATION, MONITORING AND CONTROL

Monitor and evaluate the gaps on a periodic basis between the target

measurements and the existing performance to identify the areas that need improvement

and the areas that should be reinforced.

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 X. BIBLIOGRAPHY

References:
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[Link]/about-us/about-landbank/vision-and-mission
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Manila Bulletin. [Link]
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2028. Retrieved from [Link]
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 [Link]
xdrw&q=fis%20topline%20report%202019#[Link]=0&gsc.q=2019%20Financial%20i
nclusion%20survey&[Link]=
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Inquirer. [Link]
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• Bangko Sentral ng Pilipinas. (2022, February 8). Philippine Sustainable Finance
Roadmap and Guiding Principles. Retrieved from [Link]
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lippine%20Sustainable%20Finance%20Roadmap%20and%20Guiding%20Principles&
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Inclusion Reforms with $300 Million Loan. Asia Development Bank. https://
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• Hani, Aineena (2021, November 30). The Philippines Enhances National Strategy for
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• Diokno, Benjamin E. (2022, March 3). 2022 Philippine Economic Outlook: Broad-based
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• Choon, Timothy (2022, March 5). The Rise of Money Mules. Inquirer. https://
[Link]/150655/the-rise-of-money-mules
• Phaneuf, Alicia (2022, January 4). The disruptive trends & companies transforming
digital banking services in 2022. Insider Intelligence.
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 • Landbank (2019, March 19). LANDBANK earns regional award for digital account
opening. Landbank of the Philippines. [Link]
earns-regional-award-for-digital-account-opening
• Global Compliance News (n.d.). Cyber Security in the Philippines. Retrieved May 23,
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• Pulta, Benjamin (2022, January 4). Senate eyes inquiry into rising cybercrimes, bank
frauds. Philippine News Agency. [Link]
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[Link]
• Villanueva, Joann (2021, November 17). BAP, KBP sign pact for drive vs. cybercrimes.
Philippine News Agency. [Link]
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Transfer (FIST) Act. Fortun Narvasa & Salazar Law. [Link]
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• Bangko Sentral ng Pilipinas (2022, February 8). Forging Pathways to A Cash-Lite
Society – Status of Digital Payments in the Philippines (2021 Edition). Retrieved from
[Link]
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• Mapa, Nicolas (2022, March 4). Philippines: Inflation flat in February but likely to
accelerate in coming months. ING. [Link]
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• Bangko Sentral ng Pilipinas (n.d.). Why Should Interest Interest You. Retrieved May
23, 2022 from [Link]
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• Desiderio, Louella (2021, September 30). MSMEs now number over 2 million as of
August. PhilStar Global. [Link]
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 • Bangko Sentral ng Pilipinas (n.d.). The Philippine Sustainable Finance Roadmap.
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nov-12-21-bsp-publishes-roadmap-and-guiding-principles-on-sustainable-finance
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Social Enterprise Financing. Foundation for Sustainable Society, Inc. Retrieved May 23,
2022 from [Link]
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• The World Bank (n.d.). The Global Findex Database 2017. Retrieved May 23, 2022
from [Link]
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2022 from [Link]
• Bangko Sentral ng Pilipinas (n.d.). Price Stability Monetary Policy Report - May 2022
Report Highlights. Retrieved May 23, 2022 from [Link]
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• Ozarslan, Suleyman (2022, March 24). Key Threats and Cyber Risks Facing Financial
Services and Banking Firms in 2022. Picus. [Link]
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• Nicolas, Bernadette D. (2022, February 10). Government allots P20M for
cybersecurity. Business Mirror. [Link]
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• Al Hila, Amal A. Et. Al. (2017, October 5). The Impact of the Quality of Banking Services
on Improving the Marketing Performance of Banks in Gaza Governorates from the
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Philippines. Grit PH. [Link]

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 • Agcaoili, Lawrence (2019, November 25). Philippines has lowest ATM density in region
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• Bangko Sentral ng Pilipinas. (2018, December). Statistics - Banking Financial
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 XI. APPENDICES

A. LBP Statement of Financial Position 2018 - 2021*

*Note: Due to unavailability of 2021 Audited Financial Statements, the unaudited 2021 Balance
Sheet published/ posted in BSP website is used for the purpose of financial projections.

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 B. LBP Balance Sheet Vertical and Horizontal Analysis

*Note: Due to unavailability of 2021 Audited Financial Statements, the unaudited 2021 Balance
Sheet published/ posted in BSP website is used for the purpose of financial projections.

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 C. LBP Income Statement for years ended 2018 – 2021*

*Note: Due to unavailability of 2021 Audited Financial Statements, the unaudited 2021 Income
Statement published/ posted in LBP website is used for the purpose of financial projections.

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 D. LBP Income Statement: Vertical and Horizontal Analysis

*Note: Due to unavailability of 2021 Audited Financial Statements, the unaudited 2021 Income
Statement published/ posted in LBP website is used for the purpose of financial projections.

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 E. LBP Projected Income Statement 2022 – 2025

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 F. LBP Projected Balance Sheet 2022 – 2025

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 G. LBP Projected Cashflow 2022-2025

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 H. BDO Statement of Financial Position 2018 – 2021

I. BDO Income Statement 2018 – 2021

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 J. MBTC Statement of Financial Position 2018 – 2021

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 K. MBTC Income Statement 2018 - 2021

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