Scribd Logo
Upload

Welcome to Scribd!

  • 25 views

    Zeke Part Stratma

    Uploaded by

    Adriana Carinan
    Metrobank faces the key strategic issue of how to allocate resources to maximize competitive advantage. It increased interest income through higher loans but also incurred higher operating expenses. While net income grew 34.8%, this was lower than 2012's 43.4% growth. The recommendation is for Metrobank to focus on sustaining its competitive advantage in other operating income, like trading and trust operations, by investing in professional management, partnerships, and marketing to boost this segment.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Zeke Part Stratma

    Uploaded by

    Adriana Carinan
    25 views8 pages
    Metrobank faces the key strategic issue of how to allocate resources to maximize competitive advantage. It increased interest income through higher loans but also incurred higher operating expenses. While net income grew 34.8%, this was lower than 2012's 43.4% growth. The recommendation is for Metrobank to focus on sustaining its competitive advantage in other operating income, like trading and trust operations, by investing in professional management, partnerships, and marketing to boost this segment.

    Original Description:

    Stratma

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Metrobank faces the key strategic issue of how to allocate resources to maximize competitive advantage. It increased interest income through higher loans but also incurred higher operating expenses. While net income grew 34.8%, this was lower than 2012's 43.4% growth. The recommendation is for Metrobank to focus on sustaining its competitive advantage in other operating income, like trading and trust operations, by investing in professional management, partnerships, and marketing to boost this segment.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    25 views8 pages

    Zeke Part Stratma

    Uploaded by

    Adriana Carinan
    Metrobank faces the key strategic issue of how to allocate resources to maximize competitive advantage. It increased interest income through higher loans but also incurred higher operating expenses. While net income grew 34.8%, this was lower than 2012's 43.4% growth. The recommendation is for Metrobank to focus on sustaining its competitive advantage in other operating income, like trading and trust operations, by investing in professional management, partnerships, and marketing to boost this segment.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 8

    IX.

    STATEMENT OF THE PROBLEM- KEY STRATEGIC ISSUES

    Where should Metrobank allocate its resources to maximize its competitive advantage?

    Under this major problem of the bank, these are the strategic issues underlying that need
    to be solved:

     Did Metrobank conduct an intelligent move by increasing its effort to its Interest Income,
    specifically Loans and Receivables?
     Is the bank really focuses on its competitive advantage to earn more profits without
    incurring much cost in 2013 just like what it did in 2012 where it gained 40% increase in
    its consolidated income?
     In what aspects should the Metrobank focus on to bring back or sustain that income
    growth rate for the next years of its operations?

    Observation and Discussion of the Problem:

    c c

    Financial Highlights of Metrobank in its Annual Report 2013

    As observed in the highlights of Metrobank in its 2013 Annual report, the company has
    been able to sustain a growth in its net income by achieving 34.8% increase. However, notice
    that the performance of Metrobank in 2012 is significantly higher, achieving 43.4% on its record.
    It seems that Metrobank has not been able to sustain something, thus, resulting to a significant
    decline. One may argue that maybe it is because of the external pressures, according to
    Euromonitor, those pressures have posed low effect toward bank companies. Philippines is still
    as recognized as ever as the awakening economic tiger in Asia.

    c c

    Another rationale still that can be cited that this shows a problem is that though Net
    Interest Income has risen by 19.2% (24.0%-4.8%; difference from incremental changes that
    happened between 2012-2013), if one will look at the increase in Operating Expense, the change
    is huge. Operating Expense has grown by 21.2% (30.8%-9.6%), a little higher than the rate made
    from the Net Interest Income.

    Trimming down, such increase has been made from the increase in Loans and
    Receivables that pulled up the Credit and Impairment Losses.

    Operational result from Metrobank 2013 Annual Report


    Breakdown of Credit Loss and Impairment from annual report 2013

    In conclusion, Metrobank has somehow not made the right decision of putting so much
    effort in gaining interest income for it has also incurred the company costs which increase rate is
    a little higher than what Net Interest Income has made.

    To test how the Metrobank has used its net income in the year, we find its Return on
    Equity:

    Return on Equity (ROE) is an internal performance measure of a bank’s profitability


    from the shareholder’s point of view, typically measured through dividing net income by average
    shareholder’s equity. It is also shows much profit a company generates with the money
    shareholders have invested.
    Metrobank’s Return on Equity significantly has increased only by 20.73% during the
    year of 2013, while having an increase of 21.23% during 2012. The decrease is due to the decline
    on the growth of net income during 2013.

    X. ALTERNATIVE COURSES OF ACTION

    From the problem cited above, these two are the following Alternative courses of Action
    we would like to propose to Metrobank:

    ACA 1: PRAGMATISTIC STRATEGY- PROPELLING TOWARD INCREASING


    INTEREST INCOME TO AVOID WASTE OF EFFORTS

    Since Metrobank has already made a move by expanding its loans to gain more interest
    income by increasing compensation and fringe benefits to employees which has grown the
    figures of Operating Expense as well, these employees who enjoy the increase in their salaries
    and benefits may also be assigned to be developed and create programs to ensure that loans and
    receivables will be collected on time. In this way, the effort of Metrobank will not be wasted, but
    rather will be utilized pragmatically.

    One may argue that instead of having the increase of compensation and fringe benefits be
    utilized for the second ACA, it will mean nothing because at the very first place, Metrobank has
    performed well on its Sustainable Competitive Advantage even without drastically increasing
    employees’ salaries and benefits.

    ACA 2: STRENGTH STRATEGY- MOVING AHEAD BY DISREGARDING THE


    COSTS MADE AND MAXIMIZING COMPETITIVE SUSTAINABLE ADVANTAGE

    Metrobank may let go of the incurred costs in its expansion of loans and receivables, and
    its increase of compensation and fringe benefits as well by looking ahead and focusing now on
    its Sustainable Competitive Advantage—its Other Operating Income brought by great
    partnership. This will be done through allocating its resources in improving and sustaining its
    systems in receiving trade and securities gains and other sources of Other Operating Income.
    XI. RECOMMENDATION

    ACA 2: STRENGTH STRATEGY- MOVING AHEAD BY DISREGARDING THE


    COSTS MADE AND MAXIMIZING ITSCOMPETITIVE SUSTAINABLE
    ADVANTAGE

    If one will notice, the strength of Metrobank itself has been the Other Operating Income
    which consists 52% of the Total Operating Income. In addition, there is a significant incremental
    increase in the growth of the other operating income as it has displayed 21.9%. So investing
    more resources to sustain this edge of Metrobank will surely make the company strong in the
    long term.

    Notice the operating expenses incurred in 2012. It has risen from 2011 to 2012 by 9.6%.
    But it already made a huge significance, since Other Operating Income has increased anyway by
    21.9%.

    Specifically, these are the following areas Metrobank may improve to sustain its Other
    Operating Income:
    Statement from Annual Report 2012

    This has been the peak year of Other Operating Income. Metrobank may do it again by
    focusing its efforts on the following:

    Part of the Statement of Income, Metrobank Annual Report 2013

    Metrobank should prioritize these two sources of Other Operating Income that push the
    Total Operating Income upward: Trading and Securities Gain, and Income from Trust
    Operations.

    For trading and securities gains, Metrobank may allocate some of its resources in to
    develop more their policies and new talents in terms of professional fund management. In
    addition, investing funds to the company’s public relations to foster high relationship with other
    third parties is advisable, thus securing a stable flow of gain from trade and securities.
    For Income from Trust Operations, Metrobank may then allocate its resources in
    advertising and marketing its UITF programs to give middle-income people a chance to invest in
    trust funds. Notice the growth rate of the income in this segment: from 2011-2012, 18.52%, and
    2012-2013, 20.35%. This will boost the income, and at the same time, enhance the liquidity of
    the company since these kinds of funds are long-term.

    XII. IMPLEMENTATION

    Since 2015, ASEAN Integration has already begun, there will be a lot of investments
    happening in the Philippines. Metrobank may take this as an opportunity to be the leading bank
    that handles intermediary responsibilities between ASEAN businesses within the country since
    its sustainable competitive advantage has been on its excellence on services and gains from being
    the middle company in terms of trading of bonds and stocks, as proven by the significant amount
    of Metrobank’s Other Operating Income. In addition, it may also decide to expand in Visayas
    since BPOs such as Teleperformance are currently expanding to satellite cities of various
    provinces. Metrobank may handle the payroll system of employees and gain another source of
    Other Operating Income. For its UITF development, instead of just focusing on introducing new
    programs for loans and receivables where Metrobank is currently not performing well, it may
    transfer its efforts in informing and persuading the middle-income public to invest in trust funds
    instead.

    XIII. LEARNINGS

    We were introduced in the financial world of banking industry since we had to find a
    major problem out of swimming number and propose strategies! So we were forced to read two
    annual reports. But we love how this became an opportunity for us to explore more what we
    don’t know since some of us are not Finance students.

    The ultimate learning, we should say we had, is the importance of financial figures in
    making the next move. Everything we learned from Finance just made sense.

    To succeed in banking is not as simple as to owning the most number of market shares on
    assets, or even having the most number of operating branch networks. It all comes down to how
    knowledgeable you are to the consumer preferences, as well as how you will take advantage of
    this infromation in the implementation of value chain activities.
    References:

    Annual Reports. (2013). Metrobank. Retrieved on April 19, 2015, from


    https://www.metrobank.com.ph/images/Annual%20Reports/2013%20Annual%20Report.p
    df

    Business profile. (n.d.). Metrobank. Retrieved on April 19, 2015, from


    https://www.metrobank.com.ph/Business_profile.asp

    Philippine Commercial Banking Highlights as of 3Q12. (2012). Banco De Oro. Retrieved on


    April 19, 2015, from https://www.bdo.com.ph/sites/default/files/pdf/corporate_governance/
    3rd%20 Quarter%202012%20HIGHLIGHTS_Top%2010_graphs.pdf

    Profile. (n.d.). Metrobank Foundation. Retrieved on April 19, 2015, from


    http://www.mbfoundation.org.ph/profile_a-history-of-sharing-1.html

    Republic Act No. 8791. (2000). Banko Sentral ng Pilipinas. Retrived on April 19, 2015, from
    http://www.bsp.gov.ph/downloads/Regulations/gba.pdf

    You might also like