I

TABLE OF CONTENTS

CHAPTER TITLE PAGE

I THE PROBLEM AND ITS SCOPE 1

INTRODUCTION 1

Rationale of the Study 2

Theoretical Background 3

Flow of Research Process 7

Flow Chart

THE PROBLEM

Statement of the Problem

SIGNIFICANCE OF THE STUDY

The Management/Company

The Respondents/Customers

The Researcher

The Future Researcher

RESEARCH DESIGN
 Research Method

Research Environment

Research Respondents

Research Instrument

Data Gathering

Data Treatment

Data Analysis

DEFINITION OF TERMS

II THE DATA

III THE PROPOSAL

Proposal Title

Rationale

Proposal Design

Proposed Action Plan

Budgetary Proposal

Post Evaluation

IV SUMMARY, FINDINGS, CONCLUSION AND RECOMMENDATION

BIBLIOGRAPHY

APPENDICES

Transmittal Letter

Editor’s Certification
 Curriculum Vitae (include your current 2 x 2 picture)

Questionnaire (attach A COPY your questionnaire to avoid deduction)

LIST OF TABLES

TABLE TITLE PAGE

1 Respondents of the Study (FGD)

2 Title for table 2

3 Title for table 3

4 Title for table 4

5 Title for table 5

6 Summary Table (must be presented, deduction)

 LIST OF FIGURES

FIGURE TITLE PAGE

1 Research Flow Chart

2 Research Environment (Location/Google Map)

3
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CHAPTER I

THE PROBLEM AND ITS SCOPE

INTRODUCTION

Rationale of the Study

The Philippine Stock Exchange (PSE) is the Philippines' national stock

exchange and one of the oldest in Southeast Asia, having been in operation

since August 8, 1927. Apart from the PSEi, the bourse's main index is the PSE

Composite Index (PSEi), which is made up of thirty listed businesses. There are

also six sector-based indices. The Philippine Stock Exchange Index (PSEi) is the

most closely watched index in the country, as well as one of the most closely

observed economic indicators. Four large banks are among the thirty companies

listed on the PSEi. BDO Unibank, Inc., Bank of the Philippine Islands,

Metropolitan Bank & Trust Company, and Security Bank Corporation are the four

financial institutions.

The financial system is the lifeblood of the economy, providing the means

for exchanging goods and services, managing savings and giving funding for

investments to people and businesses, and analyzing and managing financial

risks. A robust financial system is essential for economic growth because it helps

the economy to function even when macroeconomic conditions are not optimum.

One of central banks' primary responsibilities is to preserve and enhance

financial system stability.

The Philippines is dealing with one of Asia's worst Covid-19 outbreaks,

and the country's gross domestic product has been shrinking for five quarters,
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including a 4.2 percent loss in the first three months of 2021 due to the harsh

restrictions imposed over the previous year. The financial industry is not immune

to the pandemic's negative effects. The Bangko Sentral ng Pilipinas (BSP) has

announced the Bayanihan Act RA No. 11469's implementing rules and

regulations. The law mandates all lenders supervised by the BSP to give their

borrowers a 30-day grace period or extension for payment of debts due during

the enhanced community quarantine (ECQ) period, without charging them any

additional interest, fines, or fees. The BSP also eased the standards of know-

your-customer (KYC) for both over-the-counter and electronic or online

transactions. This is to ensure that, notwithstanding the COVID-19 scenario,

Filipinos continue to have access to basic government and banking services.

The purpose of this research is to evaluate the impact of Covid-19

pandemic on bank's liquidity, solvency and profitability based on their financial

conditions through financial ratios and annual report. From this evaluation, this

will provide each bank what are the practices or strategies they can implement or

improve on especially in time of a pandemic. This will also help stakeholders

such as investors and customers have an objective evaluation in choosing the

banks to put or keep their stakes.

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Theoretical Background

This research study is anchored on theory of Nicolas Schmidlin (2014)

that mentioned those who wish to value companies and invest successfully in the

long term have to be able to understand and interpret financial statements. The

primary purpose of accounting is to quantify operational processes and to

present them to stakeholders including shareholders and creditors but also

suppliers, employees and the financial community. The financial statement forms

a condensed representation of these processes. It delineates the assets and

liabilities as well as performance indicators such as turnover, profit and cash

flow. Evaluating and interpreting this data against the background of business

activity is an important component of the valuation process.

Accounting information is classified according to the uses of the

information. The broadest set of accounting information is Managerial Accounting

Information. Managerial Accounting Information is comprised of all the

accounting information, including financial accounting, available within the

corporation that is used by corporate decision makers. Financial Accounting

Information is a subset of Managerial Accounting Information and is used

primarily for reporting the company’s financial condition to outside fund providers:

banks, debt holders, and stock investors. Tax Accounting Information is used to

construct tax returns for governments (McGowan, Carl, et al. 2015).

Financial statement analysis is a process which examines past and

current financial data for the purpose of evaluating performance and estimating

future risks and potential. Financial statement analysis is used by investors,

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creditors, security analysts, bank lending officers, managers, auditors, taxing

authorities, regulatory agencies, labor unions, customers, and many other parties

who rely on financial data for making economic decisions about a company

(Deltacpe LLC, 2014).

Financial ratios are used for all kinds of purposes. These include the

assessment of the ability of a firm to pay its debts, the evaluation of business and

managerial success and even the statutory regulation of firm's performance. Not

surprisingly they become norms and actually affect performance. The traditional

textbooks of financial analysis also emphasize the need for a firm to use industry-

wide averages as targets (Fouike, 1968), and there is evidence that firms do

adjust their financial ratios to such targets.

According to Sandeep (2015), it is important to choose financial ratios that

are applicable to the business at hand. There are hundreds of financial ratios

available, some of which apply to all businesses and some of which are industry

specific. Different users such as bankers, creditors, investors, and regulators use

ratios to analyze the financial situation of the company for their decision-making

purpose. Based on the results, bankers and creditors decide to lend, or not, and

potential shareholders choose to invest in a company. Financial ratios are

classified according to the objective of analysis. The following types of ratios are

commonly used and our focus on this study.

• Liquidity ratios

• Solvency ratios

• Profitability ratios
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Liquidity ratios

Liquidity ratios show the ability of the company to pay short-term

obligations if they came due immediately with assets that can be quickly

converted to cash. This is done by comparing current assets to current liabilities.

Lenders, for example, may consider the outcomes of liquidity ratios when

deciding whether to extend a loan to a company. A company would like to be

liquid enough to manage any currently due obligations but not too liquid where

they may not be effectively investing in growth opportunities. Three common

liquidity measurements are working capital, current ratio, and quick ratio

(Franklin, et al. 2019).

Current Ratio

The current ratio considers the amount of current assets available

to cover current liabilities (Franklin, et al. 2019). The higher the current

ratio, the more likely the company can cover its short-term debt. The

formula for current ratio is:

Solvency Ratios

Solvency refers to the company’s ability to meet its obligations with

respect to long-term debt. Assessment of a company’s ability to pay its long-term

obligations (i.e., to make interest and principal payments) generally includes an

in-depth analysis of the components of its financial structure. Solvency ratios

provide information regarding the relative amount of debt in the company’s

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capital structure and the adequacy of earnings and cash flow to cover interest

expenses and other fixed charges (such as lease or rental payments) as they

come due (Robinson et al., 2015).

Debt-to-Assets Ratio

This ratio measures the percentage of total assets financed with

debt. For example, a debt-to-assets ratio of 0.40 or 40 percent indicates

that 40 percent of the company’s assets are financed with debt. Generally,

higher debt means higher financial risk and thus weaker solvency

(Robinson et al., 2015).

Debt-to-Equity Ratio

The debt-to-equity ratio measures the amount of debt capital

relative to equity capital. Interpretation is similar to the preceding two

ratios (i.e., a higher ratio indicates weaker solvency). A ratio of 1.0 would

indicate equal amounts of debt and equity, which is equivalent to a debt-

to-capital ratio of 50 percent. Alternative definitions of this ratio use the

market value of stockholders’ equity rather than its book value (or use the

market values of both stockholders’ equity and debt) (Robinson et al.,

2015).

Profitability ratios

Profitability ratios measure income relative to sales and resources,

determining the ability of a company to generate earnings and effective

 7

employment of resources (Monea. 2009). It is considered that a company is

doing well when a profitability ratio has a higher value relative to the same ratio

from a previous period.

The main profitability ratios to which have to be considered are the following:

• Gross Profit Margin;

• Net Profit Margin;

• Return on Assets;

• Return on Equity.

Gross Profit Margin

Gross profit margin measures the gross profit earned on

sales taking into consideration company’s costs of goods sold,

excepting other costs. Gross profit is the profit we earn before we

take off any administration costs, and this has a higher value than

net profit. An average value of gross profit margins varies from

industry to industry, or type of company within an industry.

Net Profit Margin

Net profit margin shows what percent of profit is made from

sales. Similarly with the gross profit margin, net profit margin varies

from business to business, or type of company within an industry.

Net Profit = Gross Profit – Expenses.

Return on Assets
 8

Return on assets is a measure of how effectively the

company’s assets are being used to generate profit. Return on

assets indicates the capital intensity of the company, being useful to

take into consideration the idea of trying to convert assets into

profit.

Return on Equity

Return on Equity measures the rate of return on the

ownership investments. It measures company’s efficiency at

generating profits from each monetary unit or net assets, being one

of the most financial ratios, showing how well a company uses

investments to generate earnings growth. It is an important ratio for

owners and potential investors.

Flow of Research Process

The Research flow chart illustrates the step-by-step procedures to be

undertaken about a particular study. It showed a graphical and symbolic

presentation of a process that consisted of the input, the process, and the output.
 9

The Input shows what the researcher would like to determine/discover in

this research study. The main interest is to collect the financial statements of the

company so that it can be used as the data base for the foregoing analysis. The

Process is the second phase of the flow which involved the data mining,

financial statement analysis and interpretation of the results.

The Output shows the outcome or result of the study and what possible

recommendation/s or proposals to address the needs of the company of interest

in this study.
O

Performance
Proposal to

Financial
Improve
 I
P

N
R
D
P A
O
T
A

Statement of the Problem

FINA
P NICA
L
R M STAT
I EME
O N
THHE NTS
DA
I
IMPACT OF FI TA
COVID-19 N
S G
PANDEMIC
IO BANK’S -RATIOS
O
LIQUIDITY, M -
L SOLVENCY E PRESENTATI

THE PROBLEM
AND LI T ON
H -ANALYSIS
Q O -
D INTERPRETA
UI

FIGURE 1
Research Flow Chart
10
 11

The purpose of the study is to critically analyze the effectiveness of

selected publicly-listed banks’ performances and operations during the height of

Covid-19 pandemic for business years 2019-2020.

In order to attain the objectives, the following queries were asked:

1. What is the trend of company’s financial performance for business years 2019-

2020 as analyzed from the financial statements in terms of the following:

1.1 Liquidity;

1.2 Solvency; and

1.3 Profitability?

2. Is there a significant difference among the trend of company’s financial

performance for business years 2019-2020 in the three ratios?

3. Based on the findings of the study, what recommendations can be proposed

for further improvement of the PSEi banking sector financial performance?

Statement of Hypotheses

Null Hypothesis: There is no significant difference among the trend of company’s

financial performance for business years 2019-2020 in the three ratios

SIGNIFICANCE OF THE STUDY

This study is beneficial to the following sectors:

The Bank Management

 12

Through the comprehensive analysis of the company’s financial

statement, the management of the establishment will now have hindsight of the

performance of the company in the midst of a pandemic. This knowledge will

become very necessary in operating the business and the management

decisions on matter that progresses the interest of the company.

To the Creditors

On one hand, the study provides clear information for the creditors that

provide financing to the businesses. The financial performance of the company

reflected in the different ratios can be a good parameter of the creditors who

want to lend to any of the banks under the PSEi and be assured that will pay

them back with interest.

To the Customers

On the other hand, through the financial statement analysis, the

customers will be more appeased of the sustainability of they can acquire

information that they are assured that every banking service is under control

during pandemic.

To the Suppliers

The suppliers of the company, just like the creditors, shall be acquiring

information such that the different ratios are a good indicator of the banks and be

assured that business will be more viable and sustainable despite a pandemic.

To the Employees
 13

The employees will have the confidence and security by knowing the

financial status of the company and also take on some responsibility in any cases

the ratios will fluctuate from one condition to another being an important part of

the frontline services of the company.

The Researcher

The researcher being an investor will also accrue different information

very relevant to investing in the banking sector especially on the status based

from the analysis results. The researcher himself will have a well-informed

decision whether to make an investment.

The Future Researchers

Using the analysis and results of this current research, the interest of the

future researchers can be aided by looking at the data included in this study.

Likewise, the variables measured in this paper can be added or tailored-fit to the

respective companies of the future proponents of their research and guide them

on how to go about it step by step.

RESEARCH DESIGN

Research Method

This study employed data mining technique. It is based only on secondary

data, there is no need of population and sampling method.

Research Subjects
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The focus of this study are the banking sectors that are included in PSEi.

The researcher selected the top four banks of the country in terms of assets.

These companies are BDO Unibank, Inc.(BDO), Bank of the Philippine Islands

(BPI), Metropolitan Bank & Trust Company (MBTC) and Security Bank

Corporation (SBC).

Data Gathering Procedure

Data are collected from the annual financial reports of BDO Unibank, Inc.,

Bank of the Philippine Islands, Metropolitan Bank & Trust Company and Security

Bank Corporation from 2019 to 2020. These data are published by PSE Edge on

its website. The financial statements for ratio analysis that are used are: balance

sheets and income statement of BDO Unibank, Inc., Bank of the Philippine

Islands, Metropolitan Bank & Trust Company and Security Bank Corporation

from 2019 to 2020.

Data Treatment

The data were collected from the financial statements of BDO Unibank,

Inc., Bank of the Philippine Islands, Metropolitan Bank & Trust Company and

Security Bank Corporation and after their collection; data were processed and

analyzed through ratios and Microsoft Office Excel 2007. The analysis was on

the Impact of Covid-19 Pandemic on Bank's Liquidity, Solvency and Profitability

and the following ratios were used for analysis:

Liquidity Ratios:

   Current Ratio = Current Assets / Current Liabilities

Solvency Ratios:
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Debt to Asset Ratio = Total Debt / Total Assets

Debt to Equity Ratio = Total Debt / Total Shareholder’s Equity

Profitability Ratios

Gross Profit Margin = Sales - Cost of Service / Sales

   Net Profit Margin = Net Profit / Sales

   Return on Assets = Net Income / Total Assets

   Return on Equity = Net Income / Total Stockholders' Equity

DEFINITION OF TERMS

The following terms were operationally defined as follows:

Data Mining. The practice of examining and analyzing a large database, in this

context are the financial statements, in order to generate new and meaningful

information.

Financial Performance. Financial performance is a subjective measure of how

well the BDO Unibank, Inc., Bank of the Philippine Islands, Metropolitan Bank &

Trust Company and Security Bank Corporation can use its assets from the

primary mode of business and generate revenues.

Financial Ratios. Financial ratios are relationships determined from a company's

financial information and used for comparison purposes.

Financial Statement. This refers to the written records submitted by BDO

Unibank, Inc., Bank of the Philippine Islands, Metropolitan Bank & Trust

Company and Security Bank Corporation that convey the business activities and

the financial performance of a company

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Liquidity. Liquidity is the ability to pay its short-term obligations

Profitability. The degree to which BDO Unibank, Inc., Bank of the Philippine

Islands, Metropolitan Bank & Trust Company and Security Bank Corporation and

their activity yields profit or financial gain. Most practical way of measuring how

efficient a business is to the market and to the management

Solvency. The ability of BDO Unibank, Inc., Bank of the Philippine Islands,

Metropolitan Bank & Trust Company and Security Bank Corporation to pay its

long-term obligations as well as its ability to withstand the shocks.

CHAPTER II
 17

THE DATA

This chapter presents, analyzes and interprets the data collected in the

study especially the financial statements of the banks. The data pertained to the

different financial ratios adopted by BDO Unibank, Inc., Bank of the Philippine

Islands, Metropolitan Bank & Trust Company and Security Bank Corporation.

This chapter is composed of two sections. Appendix A presents the banks

financial position and performance from business year 2019-2020 as analyzed

from the financial statements.

LIQUIDITY RATIO

Liquidity refers to an enterprise's ability to pay short-term obligations; the

term also refers to a company's capability to sell assets quickly to raise cash. 

Current Ratio

This current ratio reveals whether the firm can cover its short-term debts; it

is an indication of a firm’s market liquidity and ability to meet creditor’s demands.

Table 1

Current Ratio

N=4
 18

Current Ratio
Banks 2020 Banks 2019
SECB 0.86 SECB 0.67
MBT 0.62 BDO 0.50
BDO 0.52 MBT 0.38
BPI 0.26 BPI 0.20
Average 0.57 Average 0.44

For the fiscal years 2019 and 2020, Security Bank Corporation has the

highest current ratio of the four banks, as shown in Table 1. The bank has

sustained a higher current ratio in 2020 because it has significantly reduced its

payables on repurchase agreements, margin deposits, and cash letters of credit

as noted from their statement of financial position.

Figure 1

Trend of Bank’s Current Ratio

In general, anything greater than one is considered to be a good current

ratio, with 1.5 to 2 being the ideal. If this is the case, the company has more than

enough cash on hand to meet its obligations while also making efficient use of its
 19

capital. As illustrated in the chart above, the liquidity of the four banks improved

in 2020 when compared to their liquidity in the previous year.

SOLVENCY RATIOS

Solvency refers to an enterprise's capacity to meet its long-term financial

commitments.

Debt to Asset Ratio

Debt to asset ratio is a financial ratio that measures the extent of a

company’s leverage. The debt ratio is defined as the ratio of total debt to total

assets, expressed as a decimal or percentage. It can be interpreted as the

proportion of a company’s assets that are financed by debt.

Table 2

Debt Ratio

n=4

Debt to Asset Ratio

Banks 2020 Banks 2019
SECB 0.81 SECB 0.85
MBT 0.86 BDO 0.87
BPI 0.87 MBT 0.88
BDO 0.88 BPI 0.88
Average 0.86 Average 0.87

Although Security Bank Corporation has the least assets, Table 2 shows

that they have the highest debt-to-asset ratio of any of the financial institutions.

Figure 2

Trend of Bank’s Debt Ratio

 20

In general, many investors look for a company to have a debt to asset

ratio between 0.3 and 0.6. From a pure risk perspective, debt ratios of 0.4 or

lower are considered better, while a debt ratio of 0.6 or higher makes it more

difficult to borrow money. As shown in the chart, all four banks, with the

exception of BDO Unibank, Inc., have seen an improvement in their debt-to-asset

ratio.

Debt to Equity Ratio

Debt to Equity Ratio is ratio is used to evaluate a company's financial

leverage. The D/E ratio is an important metric used in corporate finance. It is a

measure of the degree to which a company is financing its operations through

debt versus wholly-owned funds.

Table 3

Debt to Equity Ratio

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n=4

Debt to Equity Ratio

Banks 2020 Banks 2019
SECB 429% SECB 570%
MBT 637% MBT 670%
BPI 692% BPI 708%
BDO 759% BDO 760%
Average 629% Average 677%

Given that the debt-to-equity ratio measures a company’s debt relative to

the value of its net assets, it is most often used to gauge the extent to which a

company is taking on debt as a means of leveraging its assets. A high

debt/equity ratio is often associated with high risk; From the data above, it shows

that BDO Unibank, Inc has been financing their growth with debt.

Figure 3

Trend of Bank’s Debt to Equity Ratio

PROFITABILITY RATIOS
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Profitability ratios are a class of financial metrics that are used to assess a

business's ability to generate earnings relative to its revenue, operating costs,

balance sheet assets, and shareholders' equity over time, using data from a

specific point in time.

Gross Profit Margin

Gross profit margin measures the gross profit earned on sales taking into

consideration company’s costs of goods sold, excepting other costs. Gross profit

is the profit we earn before we take off any administration costs, and this has a

higher value than net profit.

Table 4

Gross Profit Margin

n=4

Gross Profit Margin

Banks 2020 Banks 2019
BDO 85% BDO 75%
MBT 80% MBT 66%
SECB 76% BPI 65%
BPI 75% SECB 61%
Average 79% Average 67%
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Figure 4

Trend of Bank’s Gross Profit Margin Ratio

An average value of gross profit margins varies from industry to industry,

or type of company within an industry.

Net Profit Margin

The net profit margin is determined of net profit after tax to net sales. It

argues that how much of sales are changeover after al expense. Net Profit

margin which equals to Net profit after tax over sales times 100. Often referred to

simply as a company's profit margin, the so-called bottom line is the most often

mentioned when discussing a company's profitability.

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Table 5

Net Profit Margin

n=4

Net Profit Margin

Banks 2020 Banks 2019
BPI 17% BPI 23%
BDO 13% BDO 20%
MBT 10% MBT 20%
SECB 8% SECB 13%
Average 12% Average 19%

Figure 5

Trend of Bank’s Net Profit Margin Ratio

While undeniably an important number, investors can easily see from a

complete profit margin analysis that there are several income and expense

operating elements in an income statement that determine a net profit margin.

Net profit includes non-operating incomes and profits. Non-Operating Incomes

 25

such as dividend received, interest on investment, profit on sales of fixed assets,

commission received, discount received etc.

Return on Assets (ROA)

Return on Assets is a profitability ratio that provides how much profit a

company is able to generate from its assets. In other words, return on assets

(ROA) measures how efficient a company's management is in generating

earnings from their economic resources or assets on their balance sheet.

Table 6

Net Profit Margin

n=4

Return on Assets
Banks 2020 Banks 2019
SECB 1.03% BDO 1.40%
BPI 0.98% BPI 1.38%
BDO 0.80% SECB 1.30%
MBT 0.56% MBT 1.20%
Average 0.84% Average 1.32%
 26

Figure 6

Trend of Bank’s Net Profit Margin Ratio

According to Korkmaz (2016), the higher the ratio, the better the company

is at using their assets to generate income (i.e., how many pesos of earnings

they derive from each peso of assets they control). It is also a measure of how

much the company relies on assets to generate profit. The return on assets gives

an indication of the company’s capital intensity, which will depend on the

industry. Companies that require large initial investments will generally have

reduced return on assets.

Return on Equity

Return on Equity is a measure of financial performance calculated by

dividing net income by shareholders' equity. ROE is considered a measure of

how effectively management is using a company’s assets to create profits.

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Table 7

Return on Equity

n=4

Return on Equity
Banks 2020 Banks 2019
BPI 8% BDO 12%
BDO 7% BPI 11%
SECB 6% SECB 9%
MBT 4% MBT 9%
Average 6% Average 10%

Figure 7

Trend of Bank’s Return on Equity Ratio

The return on equity (ROE) measures profitability related to ownership

measuring a firm’s efficiency at generating profits from every unit of the

 28

shareholders’ equity. ROEs between 15 percent and 20 percent are generally

considered good.

SECTION 2

ANOVA FOR THE SIGNIFICANT DIFFERENCE OF FINANCIAL

PERFORMANCE AMONG THE TWO YEARS OF OPERATIONS

This section shows the ANOVA for the significant difference of financial

performance among the two years of operations of BDO Unibank, Inc., Bank of

the Philippine Islands, Metropolitan Bank & Trust Company and Security Bank

Corporation. This is done to show if there is a sufficiency of evidence to show

that the difference in the ratios is really significant or not.

Table #. The Significant Difference of Performance of BDO Unibank, Inc., Bank

of the Philippine Islands, Metropolitan Bank & Trust Company and Security Bank

Corporation

p-
Financial Ratio value Decision Description
LIQUIDITY RATIOS      
Reject There is a significant
Current Ratio 0.01
Null difference
Reject There is a significant
Quick Ratio 0.02
Null difference

Reject There is a significant

SOLVENCY RATIO 0.012
Null difference

Profitability Ratios
Reject There is a significant
Return on Equity 0.03
Null difference
Reject There is a significant
Return on Assets 0.023
Null difference
 29

*Difference is significant at 0.05 level of significance

Since all the p-values shown in Table # in the ANOVA result were all less

than the level of significance (0,05), then we reject the null hypothesis of no

significant difference of the performance through the financial ratios. Therefore,

there is sufficient evidence to show that the difference in the performances of

BDO Unibank, Inc., Bank of the Philippine Islands, Metropolitan Bank & Trust

Company and Security Bank Corporation is significant. The Analysis of Variance

(One Factorial Design) signifies that the BDO Unibank, Inc., Bank of the

Philippine Islands, Metropolitan Bank & Trust Company and Security Bank

Corporation have practically improved in terms of their financial performance

through the significant difference in all ratios included.

The differences in this context were brought about by the different

business strategies and supply-demand realities on the business years included.

There were challenges faced by the company with respect to the supply

acquisitions abroad while the demand side was waiting for service. Likewise, at

times, there were accrued expenses to advance the purchase abroad even if

there were no clients yet needing of the products and services just to assure that

delays would be prevented.

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CHAPTER III

THE PROPOSAL

This chapter presents a number of improvement schemes to address the

need for changes in the practices and strategies currently adopted by BDO

Unibank, Inc., Bank of the Philippine Islands, Metropolitan Bank & Trust

Company and Security Bank Corporation.

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Proposal Title:

“IMPROVEMENTS OF THE FINANCIAL PERFORMANCE OF SELECTED

BANKS”
.
Rationale:

The main purpose of conducting financial analysis is to measure a

business’s profitability, solvency and liquidity. The actual metrics tracked and

methods applied vary from stakeholder to stakeholder, depending on his or her

interests and needs. For example, investors are interested in the long-term

earnings power of the organization and perhaps its sustainability and growth.

Creditors want to ensure the interest and principal is paid on the organization’s

debt securities when due.

Using the data results and corresponding analysis, the BDO Unibank, Inc.,

Bank of the Philippine Islands, Metropolitan Bank & Trust Company and Security

Bank Corporation always take advantage of the information and implications

derived from the reported financial ratios.

Proposal 1: Company should be Mindful of the Financial Ratios – LIKE

HOW?

To provide more utilization on the financial ratio reporting of the company

as evidenced in this current research, the proponent would like to propose that

the company be always mindful to be using financial ratios as a practice in their

financial reporting. Likewise, the company should also keep in mind that ratios

are only one way to determine their financial performance. –HOW?

Proposal 2:
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Proposal 3:

Proposal 4:

Proposal Evaluation Scheme

For the monitoring of the foregoing proposals’ effectiveness, the following

implementation scheme will be appropriated:

Post Implementation Scheme

The financial performance and status of the company shall be analyzed

again after one year of the implementation of the program.

CHAPTER IV

SUMMARY, FINDINGS, CONCLUSION AND RECOMMENDATION

This chapter presents the summary, findings, conclusion and recommendation of

the research study.

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SUMMARY

The purpose of the study is to critically analyze the effectiveness of PSEi

banking sector’s performances and operations during the height of Covid19

pandemic for business years 2019-2020.

In order to attain the objectives, the following queries were asked:

2. What is the trend of company’s financial performance for business years 2019-

2020 as analyzed from the financial statements in terms of the following:

2.1 Liquidity

2.2 Solvency

2.3 Profitability

2. Is there a significant difference among the trend of company’s financial

performance for business years 2019-2020 in the three ratios?

3. Based on the findings of the study, what recommendations can be proposed

for further improvement of the of PSEi banking sector financial performance?

This study is based only on secondary data, there is no need of population

and sampling method.

FINDINGS

In the course of the study, the following findings are gathered from the analysis of

data of the previous chapter.

 34

1. The trend of the financial ratios in terms of profitability is generally

increasing in terms of value which is indicative of a promising profitable

orientation of the whole business.

2. The trend of the financial ratios in terms of liquidity is decreasing in

terms of value which necessarily means that BDO Unibank, Inc., Bank

of the Philippine Islands, Metropolitan Bank & Trust Company and

Security Bank Corporation have become more liquid in its finances.

3. The trend of the financial ratios in terms of solvency is increasing that

is, the values reflected the company can considered financially healthy.

4. There a significant difference of financial performance among the three

areas for the past two years of operations.

CONCLUSION

The findings revealed that the summary of the data gathered was generally rated

as effective, hence, the researcher concluded that the results of the research

study conformed to the theory of (author) theory)

RECOMMENDATIONS

Primary Recommendation

It is recommended that the proposed Improvements of the Financial Performance

of BDO Unibank, Inc., Bank of the Philippine Islands, Metropolitan Bank & Trust

Company and Security Bank Corporation as discussed in detail in Chapter III

must be implemented.

Secondary Recommendation
 35

Future Researchers must look further on the following topics in the future:

1. To pursue a comparative analysis of financial ratios across all

Philippines banks.

2. To make another research that focuses on the qualitative evidences

vis-à-vis the ratios generated in this study.

3. To validate the proposed improvements using evidenced-based

approach in research and do a comparison if significant changes in the

performance will be achieved by the company.

LIST OF REFERENCES

APPENDIX A

BANKS COMPARATIVE STATEMENTS OF FINANCIAL POSITION

FROM BUSINESS YEAR 2019-2020

 36

BDO UNIBANK, INC. AND SUBSIDIARIES

(In Mllions of Pesos)

Notes 2020 2019

RESOURCES
Cash And Other Cash Items 7 74,851.00 64,140.00
Due From Bangko Sentral Ng Pilipinas 7 308,636.00 309,040.00
Due From Other Banks 8 65,289.00 38,956.00
Trading And Investment Securities 9 508,810.00 435,905.00
Loans And Other Receivables - Net 10 2,301,981.00 2,225,777.00
Premises, Furniture, Fixtures And Equipment - Net 11, 12 44,330.00 46,551.00
Investment Properties - Net 13 15,851.00 16,911.00
Other Resources - Net 14 55,152.00 51,578.00
Total Resources 3,374,900.00 3,188,858.00
Liabilities And Equity
Deposit Liabilities 16 2,610,151.00 2,485,228.00
Bills Payable 17 209,744.00 167,524.00
Subordinated Notes Payable 18 10,030.00
Insurance Contract Liabilities 19 58,410.00 42,473.00
Other Liabilities 20 103,574.00 113,016.00
Total Liabilities 2,981,879.00 2,818,271.00
Equity 21
Attributable To:
Shareholders Of The Parent Bank 391,423.00 368,932.00
Non-Controlling Interests 1,598.00 1,655.00
Total Equity 393,021.00 370,587.00
Total Liabilities And Equity 3,374,900.00 3,188,858.00
 37

BANK OF THE PHILIPPINE ISLANDS

(In Mllions of Pesos)

Notes 2020 2019

ASSETS
Cash And Other Cash Items 4 37,176.00 47,256.00
Due From Bangko Sentral Ng Pilipinas 4 223,989.00 207,845.00
Due From Other Banks 4 40,155.00 22,356.00
Interbank Loans Receivable And Securities Purchased Under Agreements To Resell 4,5 30,251.00 22,570.00
Financialassets At Fair Value Through Profit Or Loss 6,7 37,210.00 24,105.00
Financial Assets At Fair Value Through Other Comprehensive Income 8 130,186.00 53,905.00
Investment Securities At Amortized Cost, Net 9 244,653.00 275,105.00
Loans And Advances, Net 10 1,407,413.00 1,475,336.00
Assets Held For Sale, Net 2,971.00 3,155.00
Bank Premises, Furniture, Fixtures And Equipment, Net 11 18,832.00 23,748.00
Investments in Subsidiaries and Associates, Net 12 7,510.00 6,746.00
Assets Attributable To Insurance Operations 2 18,726.00 17,790.00
Deferred Income Tax Assets, Net 13 17,525.00 9,706.00
Other Assets, Net 14 16,846.00 15,407.00
Total Assets 2,233,443.00 2,205,030.00

Liabilities And Equity

Deposit Liabilities 15 1,716,177.00 1,695,343.00
Derivative Financial Liabilities 7 5,657.00 2,877.00
Bills Payable And Other Borrowed Funds 16 151,947.00 150,837.00
Due To Bangko Sentral Ng Pilipinas And Other Banks 1,491.00 2,946.00
Manager'S Checks And Demand Drafts Outstanding 7,108.00 8,299.00
Accrued Taxes, Interest And Other Expenses 8,902.00 9,865.00
Liabilities Attributableto Insuranceoperations 2 14,347.00 14,061.00
Deferred Credits And Other Liabilities 17 45,857.00 47,768.00
Total Liabilities 1,951,486.00 1,931,996.00
Capital Funds Attributable To The Equity Holders Of BPI 18
Share Capital 45,045.00 44,999.00
Share Premium 74,764.00 74,449.00
Reserves 416.00 5,108.00
Accumulatedother Comprehensive Loss (5,899.00) (2,439.00)
Surelus 165,509.00 147,460.00
279,835.00 269,577.00
Non-Controlling Interests 2,122.00 3,457.00
TOTAL EQUITY 281,957.00 273,034.00
TOTAL LIABILITIES AND EQUITY 2,233,443.00 2,205,030.00
 38

METROPOLITAN BANK & TRUST COMPANY AND SUBSIDIARIES

(In Mllions of Pesos)

Notes 2020 2019

ASSETS
Cash and Other Cash Items 38,469.00 32,956.00
Due from Bangko Sentral ng Pilipinas (BSP) 4, 16 304,906.00 219,994.00
Due from Other Banks (Note 4) 4 38,233.00 54,767.00

Interbank Loans Receivable and Securities Purchased Under Resale Agreements (SPURA) 4, 7, 26 79,394.00 72,174.00
Investment Securities at

Fair Value Through Profit or Loss (FVTPL) 8 77,551.00 61,867.00

Fair Value Through Other Comprehensive Income (FVOCI) 4, 8 569,445.00 202,520.00
Amortized Cost 4, 8 23,293.00 251,628.00
Loans and Receivables 4, 9 1,252,929.00 1,483,568.00
Property and Equipment 10 24,617.00 25,700.00
Investments in Associates and a Joint Venture 11 6,248.00 6,591.00
Goodwill 11 5,199.00 5,200.00
Investment Properties 12 7,667.00 7,762.00
Deferred Tax Assets 28 14,028.00 10,512.00
Other Assets 14 13,184.00 15,574.00
Total Assets 2,455,163.00 2,450,813.00
Liabilities And Equity
LIABILITIES
Deposit Liabilities 16, 31
Demand 515,378.00 411,873.00
Savings 795,979.00 665,634.00
Time 450,103.00 592,897.00
Long-Term Negotiable Certificates 35,755.00 43,740.00
1,797,215.00 1,714,144.00
Bills Payable and Securities Sold Under Repurchase Agreements (SSURA) 17, 31 139,614.00 238,281.00
Derivative Liabilities 8 13,465.00 7,427.00
Manager’s Checks and Demand Drafts Outstanding 6,024.00 6,806.00
Income Taxes Payable 2,711.00 4,188.00
Accrued Interest and Other Expenses 18 9,149.00 10,499.00
Bonds Payable 19, 31 91,397.00 80,486.00
Subordinated Debts 20 1,167.00 7,660.00
Non-equity Non-controlling Interest 21 8,315.00 6,553.00
Other Liabilities 21 52,931.00 56,278.00
Total Liabilities 2,121,988.00 2,132,322.00

EQUITY

Equity Attributable to Equity Holders of the Parent Company

Common stock 23 89,948.00 89,948.00
Capital paid in excess of par value 23 85,252.00 85,252.00
Treasury stock 23, 31 (65.00) (72.00)
Surplus reserves 24 2,260.00 2,098.00
Surplus 23 153,282.00 144,154.00
Net unrealized gain on investment securities at FVOCI 8 7,611.00 2,629.00
Remeasurement losses on retirement plans 11, 27 (4,778.00) (5,531.00)
Equity in other comprehensive income (losses) of investees 11 (22.00) 345.00
Translation adjustment and others 11 (9,284.00) (9,269.00)
324,204.00 309,554.00
Non-controlling Interest 11 8,971.00 8,937.00
TOTAL EQUITY 333,175.00 318,491.00
TOTAL LIABILITIES AND EQUITY 2,455,163.00 2,450,813.00
 39

SECURITY BANK CORPORATION AND SUBSIDIARIES

(Amounts in Thousands)

2020 2019

ASSETS
Cash and Other Cash Items 13,310,838.00 9,883,536.00
Due from Bangko Sentral ng Pilipinas (Note 19) 47,391,378.00 56,118,831.00
Due from Other Banks (Notes 7 and 33) 10,034,045.00 9,275,093.00
Interbank Loans Receivable and Securities Purchased Under Resale
Agreements with the Bangko Sentral ng Pilipinas 18,640,597.00 1,059,900.00
Financial Assets at Fair Value through Profit or Loss 10,748,188.00 4,865,699.00
(Note 10)
Financial Assets at Fair Value through Other
Comprehensive Income (Note 12) 68,771,607.00 24,728,834.00
Investment Securities at Amortized Cost (Note 13) 23,392,257.00 208,942,523.00
Loans and Receivables (Notes 14 and 33) 438,851,590.00 448,598,749.00
Investments in Subsidiaries and a Joint Venture (Note 15) 708,901.00 317,115.00
Property, Equipment, and Right-of-use Assets (Note 16) 5,517,976.00 5,907,296.00
Investment Properties (Note 17) 1,092,610.00 1,061,025.00
Deferred Tax Assets (Note 29) 7,261,871.00 2,283,555.00
Goodwill (Note 4) 841,602.00 841,602.00
Intangible Assets (Note 18) 2,721,749.00 2,641,727.00
Assets of Disposal Group Classified as Held for Sale (Note 38) – 7,231,266.00
Other Assets (Note 18) 3,565,462.00 9,249,761.00
TOTAL ASSETS 652,850,671.00 793,006,512.00

Liabilities And Equity

Deposit Liabilities (Notes 19 and 33)
Demand 177,326,780 150,080,183
Savings 98,705,363 82,156,987
Time 139,688,272 244,763,458
Long-term Negotiable Certificates of Deposit 24,690,165 22,605,231
440,410,580 499,605,859
Financial Liabilities at Fair Value through
Profit or Loss (Note 20) 1,098,381 1,104,235
Derivative Liabilities Designated as Hedges (Note 11) – 4,939,603
Bills Payable and Securities Sold Under
Repurchase Agreements (Note 21) 21,084,361 93,589,005
Acceptances Payable 437,948 491,917
Margin Deposits and Cash Letters of Credit 61,770 920,733
Manager’s and Certified Checks Outstanding 3,862,905 4,120,763
Income Tax Payable (Note 29) 61,495 358,420
Notes and Bonds Payable (Note 22) 45,710,678 48,163,022
Accrued Interest, Taxes and Other Expenses (Note 24) 3,745,825 4,576,985
Liabilities of Disposal Group Classified as Held
for Sale (Note 38) – 3,722,752
Other Liabilities (Note 25) 13,070,694 13,126,992
TOTAL LIABILITIES 529,544,637 674,720,286
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY 7,635,389 7,635,389
Capital stock (Note 27)
Additional paid-in capital (Note 27) 38,524,323 38,524,323
Surplus (Note 27) 75,787,131 71,265,080
Net unrealized gain on financial assets at fair value through other
comprehensive income (Note 12) 2,022,546 893,196
Net unrealized gain (loss) on subsidiaries’ financial assets at fair value
through other comprehensive income
(Notes 12 and 15) 6,074 14,980
Cumulative foreign currency translation (669,429) (53,698)
123,306,034 118,279,270
NON-CONTROLLING INTEREST – 6,956
TOTAL EQUITY 123,306,034 118,286,226
TOTAL LIABILITIES AND EQUITY 652,850,671 793,006,512
 40

BANKS COMPARATIVE STATEMENTS OF INCOME

FROM BUSINESS YEAR 2019-2020

BDO UNIBANK, INC. AND SUBSIDIARIES

(In Mllions of Pesos)

Notes 2020 2019

Interest Income 22 157,031.00 160,572.00
Interest Expense 23 23,331.00 40,681.00
Net Interest Income 133,700.00 119,891.00
Impairment Losses - Net 9, 10, 14, 15 30,240.00 6,166.00
Net Interest Income After Impairment Losses 103,460.00 113,725.00
Other Operating Income 24 55,210.00 60,111.00
Other Operating Expenses 24 112,640.00 114,649.00
Profit Before Tax 46,030.00 59,187.00
Tax Expense 30 17,776.00 15,019.00
Net Profit 28,254.00 44,168.00

BANK OF THE PHILIPPINE ISLANDS

(In Mllions of Pesos)

Notes 2020 2019

Interest Income
On Loans And Advances 82,312.00 86,056.00
On Investment Securities 12,052.00 12,709.00
On Deposits With BSP and other Banks 1,944.00 1,722.00
96,308.00 100,487.00
Interest Expense
On Deposits 15 18,986.00 28,874.00
On Bills Payable And Other Borrowed Funds 16 5,058.00 6,038.00
24,044.00 34,912.00
Net Interest Income 72,264.00 65,575.00
Provision For credit and Impairment Losses 5,9,10,1 28,000.00 5,562.00
2,14
Net Interest income After Provision for Credit and Impairment Losses 44,264.00 60,013.00
Other Income
Fees And Commissions 8,899.00 9,068.00
Income from foreign Exchange trading 2,155.00 2,111.00
Securities Trading Gain 3,310.00 3,882.00
Income Attributable To Insurance Operations 2 1,506.00 1,223.00
Net Gains (Losses) On Disposals of Investment Securities At Amortized Cost 9 4,647.00 128.00
Other Operating Income 19 9,142.00 10,275.00
29,659.00 26,687.00
Other Expenses
Compensation And Fringe benefits 21 18,005.00 17,369.00
Occupancy And Equipment-Related
Expenses 11,20 14,606.00 14,736.00
Other Operating Expenses 21 15.54 16,239.00
48,154.00 48,344.00
Profit Before Income Tax 25.77 38,356.00
Income Tax Expense 22
Current 10,751.00 9,975.00
Deferred 13 (6.85) (620.00)
3,906.00 9,355.00
Net Income From Continuing Operations 21,863.00 29,001.00
Net (Loss) Income From
Discontinued Operations 12 (211.00) 82.00
Net Income After Tax 21,652.00 29,083.00
 41

METROPOLITAN BANK & TRUST COMPANY AND SUBSIDIARIES

(In Mllions of Pesos)

2020 2019
INTEREST INCOME ON
Loans and receivables (Notes 9 and 31) 85,690 95,847
Investment securities at FVOCI and at amortized cost (Note 8) 17,093 16,573
Investment securities at FVTPL (Note 8) 1,958 1,936
Interbank loans receivable and securities purchased
under resale agreements (SPURA) (Notes 7 and 31) 876 941
Deposits with banks and others 2,170 886
107,787 116,183
INTEREST AND FINANCE CHARGES
Deposit liabilities (Notes 16 and 31) 11,326 23,407
Bills payable and securities sold under repurchase
agreements, bonds payable, subordinated
debts and others (Notes 13, 17, 19, 20, 21 and 31) 10,354 15,779
21,680 39,186
NET INTEREST INCOME 86,107 76,997
PROVISION FOR CREDIT AND IMPAIRMENT
LOSSES (Notes 3 and 15) 40,760 10,078
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT AND IMPAIRMENT LOSSES 45,347 66,919
OTHER OPERATING INCOME
Service charges, fees and commissions
(Notes 25 and 31) 11,703 14,266
Gain on disposal of investment securities at amortized
cost (Note 8) 8,184 150
Trading and securities gain - net (Notes 8, 21 and 31) 6,559 5,322
Foreign exchange gain (loss) - net (Note 31) 4,409 3,798
Leasing (Notes 12, 13 and 31) 2,007 2,122
Income from trust operations (Notes 24 and 31) 1,444 1,241
Dividends (Note 8) 139 172
Profit from assets sold (Notes 10, 12, 14 and 31) 15 585
Miscellaneous (Note 25) 669 1,398
35,129 29,054
OTHER OPERATING EXPENSES
Compensation and fringe benefits
(Notes 27 and 31) 24,890 23,706
Taxes and licenses (Note 28) 9,925 10,219
Depreciation and amortization
(Notes 10, 12 and 14) 5,545 5,538
Occupancy and equipment-related costs (Note 13) 2,080 1,867
Miscellaneous (Note 25) 17,680 16,576
60,120 57,906
INCOME BEFORE SHARE IN NET INCOME
OF SUBSIDIARIES, ASSOCIATES AND
A JOINT VENTURE 20,356 38,067
SHARE IN NET INCOME OF SUBSIDIARIES, ASSOCIATES AND A JOINT VENTURE
(Note 11) 664 868
INCOME BEFORE INCOME TAX 21,020 38,935
PROVISION FOR INCOME TAX (Note 28) 7,046 10,061
NET INCOME 13,974 28,874
 42

SECURITY BANK CORPORATION AND SUBSIDIARIES

(Amounts in Thousands)

INTEREST INCOME ON 34,030,875 33,633,356

Loans and receivables (Notes 14 and 33)
Financial assets at fair value through other comprehensive income and investment securities at 3,558,691 9,243,972
amortized cost (Note 8)
Financial assets at fair value through profit or loss 2,303,291 978,101
(Note 8)
Interbank loans receivable and securities purchased
under resale agreements with the Bangko 405,828 280,295
Sentral ng Pilipinas
Deposits with banks and others (Note 7) 54,267 67,824
40,352,952 44,203,548
INTEREST EXPENSE ON 5,185,516 10,528,259
Deposit liabilities (Notes 19 and 33)
Subordinated note, bills payable, securities sold under repurchase agreements, 3,360,800 5,881,455
notes payable, and other borrowings (Note 21)
Derivatives designated as hedges (Note 11) 550,276 21,837
Derivative instruments (Note 20) 466,680 799,447
Lease liabilities (Note 16) 139,778 128,899
9,703,050 17,359,897
NET INTEREST INCOME 30,649,902 26,843,651
Trading and securities gain - net (Note 9) 11,104,578 1,538,150
Gain on disposal of investment securities at amortized cost (Note 13) 2,252,662 −
Service charges, fees and commissions (Note 31) 3,632,251 4,084,055
Foreign exchange gain - net (Note 6) 437,241 423,912
Profit from assets sold/exchanged 281,636 20,822
(Notes 17 and 18)
Rent (Notes 17, 33 and 34) 516,104 529,292
Share in net income (loss) of subsidiaries and (194,980) 23,799
a joint venture (Note 15)
Miscellaneous (Note 32) 1,693,200 485,009
TOTAL OPERATING INCOME 50,372,594 33,948,690
OPERATING EXPENSES 26,383,042 4,174,274
Provision for credit losses (Note 14)
Compensation and fringe benefits (Notes 30 and 33) 6,404,272 5,581,128
Taxes and licenses 3,341,112 3,183,996
Depreciation and amortization (Note 16) 2,009,962 1,867,239
Amortization of software costs (Note 18) 309,430 259,974
Occupancy costs (Notes 17, 33 and 34) 352,836 364,578
Provision for (recovery of) impairment losses (Note 17) 35,150 8,813
Miscellaneous (Notes 29 and 32) 7,283,465 6,093,197
TOTAL OPERATING EXPENSES 46,119,269 21,533,199
INCOME BEFORE INCOME TAX 4,253,325 12,415,491
PROVISION FOR (BENEFIT FROM) (3,178,931) 2,313,384
INCOME TAX (Note 29)
NET INCOME 7,432,256 10,102,107
43