Lourdes College

Cagayan de Oro City, 9000

FINANCIAL STATEMENTS ANALYSIS:

Bangko de Oro & Bank of the Philippine Islands

An Analysis Paper Presented To

The Faculty of College Department

In partial fulfillment on the

Subject

Accounting 107: Cost Accounting

Dael, Niah Jane C.

Namata, Jesha Jay M.

BSA-2

February 18, 2020

 FINANCIAL RATIO ANALYSIS
LIQUIDITY RATIOS

1. Current Ratio. The current ratio measures a company's ability to pay off its current
liabilities.The higher the ratio, the better the company's liquidity position. (Current
Assets ÷ Current Liabilities)
2. Acid Test or Quick Ratio.The quick ratio measures a company's ability to meet its short-
term obligations with its most liquid assets and therefore excludes inventories from its
current assets. ( Quick Assets ÷ Current Liabilities)
3. Working Capital. The working capital is a measure of liquidity, revealing whether a
business can pay its current obligations with its current liabilities.
( Current Assets - Current Liabilities)
4. Cash Ratio. The cash ratio measures a company’s ability to pay off short-term liabilities
with cash and cash equivalents.
( Cash and Cash Equivalents ÷ Current Liabilities)

SOLVENCY RATIOS

1. Long Term Debt to Equity Ratio. This solvency ratio formula aims to determine the
amount of long-term debt business has undertaken vis-à-vis the Equity and helps in
finding the leverage of the business. ( Long term Debt ÷ Total Equity )
2. Total Debt to Equity Ratio. This solvency ratio formula aims to determine the amount of
total debt (which includes both short-term debt and long-term debt) a business has
undertaken vis-à-vis the Equity and helps in finding the total leverage of the business.
higher the ratio, higher the leverage and higher is the risk on account of heavy debt
obligation (in the form of Interest and Principal Payments) on the part of the business.
( Total Debt ÷ Total Equity)
3. Debt Ratio. This Ratio aims to determine the proportion of total Assets of the company
(which includes both Current Assets and Non-Current Assets) which are financed by
Debt and helps in assessing the total leverage of the business. Higher, the ratio, higher
the leverage and higher is the risk on account of heavy debt obligation (in the form of
Interest and Principal Payments) on the part of the business. ( Total Debt ÷ Total Assets )
4. Financial Leverage. This Ratio aims to determine how much of the business assets
belong to the Shareholders of the company rather than the Debt holders /Creditors.
( Total Assets ÷ Total Equity )
5. Proprietary Ratio. This ratio indicates the extent to which shareholders’ funds have
been invested in the assets of the business. ( Total Equity ÷ Total Assets )

EFFICIENCY RATIOS

1. Asset Turnover Ratio. The asset turnover ratio measures a company’s ability to
generate sales from assets. (Net Sales ÷ Total Assets)
2. Inventory Turnover. The inventory turnover ratio measures how many times a
company’s inventory is sold and replaced over a given period. However, in this analysis
 paper, this ratio is not applicable due to the fact that the nature of the entities being
analyzed is both service companies.
(Cost of Goods Sold ÷ Average Inventory)
3. Number of days of Inventory Turnover. The days sales in inventory ratio measures the
average number of days that a company holds on to inventory before selling it to
customers. This measure can only be derived by using the foregoing ratio; nevertheless,
this cannot be applied in this analysis as well. ( 365 ÷ Inventory Turnover)
4. Accounts Receivable Turnover. The accounts receivable turnover ratio measures how
many times a company can turn receivables into cash over a given period.
( Sales on Account ÷ Average Accounts Receivable)
5. Number of Days of Accounts Receivable Turnover. The days of accounts receivable
ratio measures the average number of days that a company holds on to accounts
receivable before it gets converted into cash. ( 365 ÷ A/R Turnover )

PROFITABILITY RATIO

1. Gross Margin Ratio. The gross margin ratio compares the gross profit of a company to
its net sales to show how much profit a company makes after paying its cost of goods
sold. ( Gross Profit ÷ Net Sales )
2. Operating Margin Ratio. The operating margin ratio compares the operating income of
a company to its net sales to determine operating efficiency.
(Operating Income ÷ Net Sales)
3. Return on Total Assets Ratio. The return on assets ratio measures how efficiently a
company is using its assets to generate profit. ( Net Income ÷ Total Assets )
4. Return on Equity Ratio. The return on equity ratio measures how efficiently a company
is using its equity to generate profit.( Net Income ÷ Shareholder's Equity )
Corporate Profile
BDO is a full-service universal bank in the Philippines. It provides a complete array of
industry-leading products and services including Lending (corporate and consumer), Deposit-
taking, Foreign Exchange, Brokering, Trust and Investments, Credit Cards, Corporate Cash
Management, and Remittances in the Philippines. Through its local subsidiaries, the Bank offers
Leasing and Financing, Investment Banking, Private Banking, Rural Banking, Life Insurance,
Insurance Brokerage, and Stock Brokerage services.

BDO’s institutional strengths and value-added products and services hold the key to its
successful business relationships with customers. Its branches remain at the forefront of setting
high standards as a sales-and service-oriented, customer-focused force. BDO has the largest
distribution network, with more than 1,300 operating branches and over 4,000 ATMs
nationwide.

Through selective acquisitions and organic growth, BDO has positioned itself for increased
balance sheet strength and continuing expansion into new markets. As of December 31, 2018,
BDO is the country’s largest bank in terms of total resources, customer loans, deposits, assets
under management and capital, as well as branch and ATM network nationwide.

BDO is a member of the SM Group, one of the country’s largest and most successful
conglomerates with businesses spanning retail, mall operations, property development
(residential, commercial, hotels and resorts), and financial services. Although part of a
conglomerate, BDO’s day-to-day operations are handled by a team of professional managers
and bank officers. Further, the Bank has one of the industry’s strongest Board of Directors,
composed of professionals with extensive experience in various fields that include banking,
accounting, finance, law, risk management, and retailing/marketing.

BDO is a publicly listed company (PLC), with its shares currently being traded at the
Philippine Stock Exchange under the symbol “BDO”.

Corporate Mission
To be the preferred bank in every market we serve.
Corporate Vision
To be the leading Philippine bank and financial services company that empowers
customers to achieve their goals and aspirations, combining our entrepreneurial spirit,
international perspective, and intense customer focus to deliver a personalized banking
experience that is easy, straightforward, and convenient, while taking pride in building long-
term relationships and finding better ways to deliver offerings of the highest standard.

Core Values
Commitment to Customers. We are committed to delivering products and services that
surpass customer expectations in value and every aspect of customer service, while remaining
prudent and trustworthy stewards of their wealth.

Commitment to a Dynamic and Efficient Organization. We are committed to creating an

organization that is flexible, responds to change, and encourages innovation and creativity; we
are committed to the process of continuous improvement in everything we do.

Commitment to Employees. We are committed to our employees’ growth and

development and we will nurture them in an environment where excellence, integrity,
teamwork, professionalism, and performance are valued above all else.

Commitment to Shareholders. We are committed to providing our shareholders with

superior returns over the long term.

BDO Unibank
Statement of Financial Position
For the Fiscal year ended December 31, 2018
Amounts in millions of Philippine Pesos

Notes 2018 2017

RESOURCES

Cash and other cash items 7 P 53,749 P 45,006

Due from Bangko Sentral ng Pilipinas 7 354,132 353,308

Due from other Banks 8 55,292 51,479

Trading and investment securities 9 385,197 332,927

Loans and other receivables - net 10 2,071,834 1,791,786

Premises, Furnitures, Fixtures and 11 33,660 29,346

Equipment - net

Investment Properties - net 12 19,785 18,040

Other Resources - net 13 48,598 46,212

TOTAL RESOURCES P 3,022,247 P 2,668,104

LIABILITIES and EQUITY

Deposit liabilities 15 P 2,419,965 P 2,121,012

Bills Payable 16 143,623 130,484

Subordinated Notes Payable 17 10,030 10,030

Insurance Contract Liabilities 18 28,506 25,986

Other Liabilities 19 91,974 82,252

Total Liabilities 2,694,098 2,369,764

EQUITY 20

Attributable to:

Shareholders of Parent Bank 327, 372 297,488

Non - controllable interests 777 852

328,149 298,340

TOTAL LIABILITIES and EQUITY p 3,022,247 P 2,668,104

BDO Unibank
Income Statement
For the years ended December 31, 2018 and 2017
Amounts in Millions of Philippine Pesos Except Per Share Data

Note 2018 2017

Interest Income 21 P 129,040 P 99,795

Interest Expense 22 30,748 18,042

Net Interest Income 98,292 81,753

Impairment Losses - net 9, 13, 14 6,286 6,537

Net Income aftr Impairment Loss 92,006 75,216

Other Operating Income 23 49,674 47,206

Other Operating Expenses 23 98,034 84,865

Profit Before Pre - Acquisition Income 43,646 37,557

Pre - acquisition income 28 - -

Profit Before Tax 29 43,646 37,557

Tax Expense 11,007 9,452

Net Profit P 32,639 P 28,105

Earnings Per Share 30

Basic P 7.40 P 6.42

Diluted P 7.40 P 6.42

LIQUIDITY RATIOS

1. Current Ratio :
2,920,204 ÷ 2,563,588 = 1.1391081562 = 1.14
 This means that the firm can meet its current short term obligations 1.14 times over. In order to
stay solvent, the firm must have a current ratio at least 1.0 X, which means that it can exactly meet its
current obligations.

2. Acid test Ratio :

2,920,204 ÷ 2,563,588 = 1.1391081562 = 1.14
This means that the firm can meet its current short term obligation with its liquid assets since a
result of 1.0 is considered to be the normal quick ratio.

3. Working Capital :
2,920,204 - 2,563,588 = 356,616
The result indicates that the firm can pay its short term liabilities such as debt obligations and
still have P 356,616 left over as cash or operating liquidity.

4. Cash Ratio :
53,749 ÷ 2,563,588 = 0.0209663175 × 100 = 2.10 %
The figure above indicates that the firm possess cash and cash equivalents to pay off only 2.10 %
of its current liabilities.

SOLVENCY RATIOS

1. Long term Debt to Equity Ratio :

130,510 ÷ 328,149 = 0.3977156718 = 0.4
A long term debt to equity ratio should be less than 1.0 and ideally should be less than 0.5. The
result indicates that the company is being more financed by its shareholder’s capital.

2. Total Debt to Equity Ratio :

2,694,098 ÷ 328,149 = 8.209983879 = 8.21
A value higher than 1.00 means that more assets are financed by debts than those financed by
money of shareholders or vice versa.

3. Debt Ratio :
2,694,098 ÷ 3,022,247 = 0.8914221769 = 0.9
The result means that a greater portion of the business is funded by the equity since the ratio is
below than 1.0.
 4. Financial Leverage :
3,022,247 ÷ 328, 149 = 9.209983879 = 9.21
The higher the ratio, the higher the leverage and higher is the financial risk on account of heavy
debt obligation taken to finance the assets of the business. *

5. Proprietary Ratio :
328,149 ÷ 3,022,247 = 0.1085778231 x 100 = 10.9 %
It means that the stockholders contributed 10.9% of the total assets of the company. A low
proprietary ratio therefore indicates that the company is already heavily dependign on the debts for its
operation.

EFFICIENCY RATIOS

1. Asset Turnover Ratio :

98,292 ÷ 3,022,247 = 0.0325228216 = 0.03
The results indicate that for every Peso earned in total assets, the company generates 0.03 in
sales.

2. Accounts Receivable Turnover :

129,040 ÷ 407,105.5 = 0.3169694342 x 100 = 31.70
Therefore the company collected its average accounts receivable approximately 31.70 times over
the fiscal year ended.

3. Number of days of Accounts Receivable Turnover :

365 ÷ 5.5 = 66.36 days
The average customer takes approximately 66 days to pay their debt to the firm.

PROFITABILITY RATIOS

1. Gross Margin Ratio :

141,680 ÷ 98,292 = 1.441419444 × 100 = 144.14
This means that after the company has paid its costs the firm still has 144.14 % of its sales
revenue to cover his operating costs.

2. Operating Margin Ratio :

43,646 ÷ 98,292 = 0.4440442762
The result means that only P 0.44 remains to cover all non-operating expenses of the business.
 3. Return on Total Assets Ratio :
32,639 ÷ 3,022,247 = 0.01079958058 x 100 = 1.08 %
The firm has 1.08 %; in other words, every peso that the firm invested in assets during the year
produced 0.01 of net income.

4. Return on Equity Ratio :

32,639 ÷ 328,149 = 0.09946396302
This means that every peso of common shareholder’s equity earned about P 0.10 during the
year.

DERIVATIONS:

Current Assets

Cash and other cash items .............................. 53,749

Due from Bangko Sentral ng Pilipinas ............ 354,132

Due from other Banks. ....................................... 55,292

Trading and investment Securities. ................. 385,197

Loans and other receivables - net. ................... 2,071,834

Total Current Assets ................................................ 2,920,204

Current Liabilities

Deposit Liabilities. ............................................... 2,419,965

Bills Payable. ........................................................ 143,263

Total Current Liabilities. ............................................... 2,563,588

Quick Assets

Cash and other cash items .............................. 53,749

Due from Bangko Sentral ng Pilipinas ............ 354,132

Due from other Banks. ....................................... 55,292

Trading and investment Securities. ................. 385,197

 Loans and other receivables - net. ................... 2,071,834

Total Quick Assets. ..................................................... 2,920,204

Long term Debt

Subordinated Notes Payable. ............................ 10,030

Insurance Contract Liabilities. ............................ 28,506

Other Liabilities. ................................................. 91,974

Total Long term Debt ................................................. 130,510

Gross Profit

Net Interest Income after impairment losses. ... 92,006

Other Operating Income. .................................. 49,674

Total Gross Profit ....................................................... 141,680

Average Accounts Receivable

2018 2017

Due from Bangko Sentral ng Pilipinas ............ 354,132 353,308

Due from other Banks. ....................................... 55,292 51,479

Total Accounts Receivable. ........................................ 409,424 + 404,787 ÷ 2

Total Average Accounts Receivable. ......................... 407,105.5

Average Total Assets

2017 ........................................................... 2,668,104

2018 ........................................................... 3,022,247

Total ........................................................... 5,690,351

÷ 2
Total Average Assets. ................................................ 2,845,175.5

Net Sales

Interest Income ............................................. 129,040

Interest Expense ............................................ 30,748

Net Sales. ....................................................... 98,292

COMPARATIVE BALANCE SHEET WITH HORIZONTAL & VERTICAL ANALYSIS RESPECTIVELY:

BDO Unibank
For the Fiscal year ended December 31, 2018
Amounts in millions of Philippine Pesos

Notes 2018 2017 Change in %

RESOURCES 2018 2017

Cash and other cash items 7 P 53,749 P 45,006 19.43 % 1.78 % 1.68 %

Due from Bangko Sentral ng Pilipinas 7 354,132 353,308 0.23 % 11.71 % 13.24 %

Due from other Banks 8 55,292 51,479 7.41 % 1.83 % 1.93 %

Trading and investment securities 9 385,197 332,927 15.70 % 12.75 % 12.49 %

Loans and other receivables - net 10 2,071,834 1,791,786 15.63 % 68.55 % 67.16 %

Premises, Furnitures, Fixtures and 11 33,660 29,346 14.70 % 1.11 % 1.10 %

 Equipment - net

Investment Properties - net 12 19,785 18,040 9.67 % 0.65 % 0.68 %

Other Resources - net 13 48,598 46,212 5.16 % 1.61 % 1.73 %

TOTAL RESOURCES P 3,022,247 P 2,668,104 13.27 % 100 % 100 %

LIABILITIES and EQUITY

Deposit liabilities 15 P 2,419,965 P 2,121,012 14.09 % 80.07 % 79.50 %

Bills Payable 16 143,623 130,484 10.07 % 5.33 % 4.89 %

Subordinated Notes Payable 17 10,030 10,030 0 0.37 % 0.38 %

Insurance Contract Liabilities 18 28,506 25,986 9.70 % 1.06 % 0.97 %

Other Liabilities 19 91,974 82,252 11.82 % 3.41 % 3.08 %

Total Liabilities 2,694,098 2,369,764 13.69 %

EQUITY 20

Attributable to:

Shareholders of Parent Bank 327, 372 297,488 10.05 % 10.83 % 11.15 %

Non - controllable interests 777 852 (8.80 %) 0.26 % 0.03 %

328,149 298,340 9.99 % 10.86 % 11.18 %

TOTAL LIABILITIES and EQUITY P 3,022,247 P 2,668,104 13.27 %

COMPARATIVE INCOME STATEMENT WITH HORIZONTAL & VERTICAL ANALYSIS

RESPECTIVELY:
BDO Unibank
For the years ended December 31, 2018 and 2017
Amounts in Millions of Philippine Pesos Except Per Share Data

Note 2018 2017 Change in %

Interest Income 21 P 129,040 P 99,795 29.31% 2018 2017

Interest Expense 22 30,748 18,042 70.42 % 23.83 % 18.08 %

Net Interest Income 98,292 81,753 20.23 %

Impairment Losses - net 9, 13, 14 6,286 6,537 (3.84 %) 4.87 % 6.55 %

Net Income after 92,006 75,216 22.32 %

Impairment Loss

Other Operating Income 23 49,674 47,206 5.23 % 38.50 % 47.30 %

Other Operating Expenses 23 98,034 84,865 15.52 % 75.97 % 85.04 %

Profit Before Pre - 43,646 37,557 16.21 % 33.82 % 37.63 %

Acquisition Income

Pre - acquisition income 28 - -

Profit Before Tax 29 43,646 37,557 16.21 % 33.82 % 37.63 %

Tax Expense 11,007 9,452 16.45 % 8.53 % 9.47 %

Net Profit P 32,639 P 28,105 16.13 % 25.29 % 28.16 %

Earnings Per Share 30

Basic P 7.40 P 6.42

Diluted P 7.40 P 6.42

Corporate Profile
Founded in 1851, Bank of the Philippine Islands is the first bank in the Philippines and in
the Southeast Asian region. BPI is a universal bank and together with its subsidiaries and
affiliates, it offers a wide range of financial products and solutions that serve both retail and
corporate clients.

BPI's services include consumer banking and lending, asset management, insurance,
securities brokerage and distribution, foreign exchange, leasing, and corporate and investment
banking.

The bank has a network of over 800 branches in the Philippines, Hong Kong and Europe,
and close to 3,000 ATMs and CDMs (cash deposit machines).

The establishment of BPI, originally known as El Banco Español Filipino de Isabel II, ushered
in the start of the Philippine banking and finance industry. The bank performed many functions,
from providing credit to the National Treasury to printing and issuing currency, making it in
effect the country's first Central Bank. BPI proudly carries on this tradition, financing many
private and public sector initiatives and enterprises in support of economic growth and nation
building. BPI is acknowledged as a leading provider of financial services in the Philippines.

Mission
We nurture every Filipino’s future with a trusted approach to managing money and innovation
that makes life easier every day.

The BPI Credo

We believe our first responsibility is to our CLIENTS.

If we understand and address our clients' financial needs, we will be trusted with their most
important financial transactions, and we will build lasting relationships. We do well when our
clients do well.

We believe in our responsibility to our PEOPLE.

We seek to hire the best people for each job, provide them with the means to perform at a high
level and reward them fairly. We value integrity, professionalism, and loyalty. We promote a
culture of mutual respect, meritocracy, performance, and teamwork. We strive to be the
employer of choice among Philippine financial institutions.

We believe in our responsibility to our SHAREHOLDERS.

We treat capital as a most valuable asset, and seek to generate superior returns while being
prudent in risk taking, spending, and investment.

We believe in our responsibility to our COUNTRY.

Our prosperity is greatly dependent on the well-being of our nation. We aim to be inclusive and
responsible in nation building. Through BPI Foundation, we are committed to the welfare and
sustainability of the communities we serve.

Vision
Building a Better Philippines.

Review of Mission and Vision Statements

In the Board strategy session last November 2018, the Board and the senior management
committee reviewed and approved the Bank's mission and vision and strategic plans for the
coming years.

Review of the Corporate Strategy

The Board, at its annual Strategic Planning session on November 2018, reviewed and approved
the company's corporate strategy as part of its continued commitment to its duties and
responsibilities as stated in the Manual on Corporate Governance.

CORE VALUES
CUSTOMER SERVICE

Establish friendly relationships with clients, putting them first in our list of priorities, to delight
them with our services, and to always try to anticipate their every need.
EXCELLENCE

Employees, whatever their functions are, should always give their best and continuously
upgrade their knowledge, skills, habits, and attitudes to meet each challenge with
determination and drive, opening themselves to unlimited possibilities.
LOYALTY

To be proud of BPI, to be true to its ideals and vision, and to actively promote and defend what
BPI stands for.
TEAMWORK

Build deep and lasting relationships founded on trust and respect, to be totally committed to
the achievement of the objectives of our team and of BPI, to actively participate as one in any
undertaking, to contribute our individual knowledge and talents for the benefit of all.
INTEGRITY

As bankers, we should be worthy of the confidence put in us by BPI and the society it stands
for, earn the trust of those we meet and interact with, and always do what is morally, and
socially correct, contributing in our small way in shaping the future.
CONCERN FOR PEOPLE

Employees should be genuinely interested in people, to help others in every way possible, to
contribute to a sound environment, to be fair, supportive, friendly, caring, and sincere in our
relations with the people we meet.

STATEMENT OF FINANCIAL POSITION

Bank of Philippine Islands
As of December 2017 and 2018
(in Millions of pesos)

ASSETS

Notes 2018 2017

Cash and other Cash Items 4 P 43, 536 P 35, 132

Due from Bangko Sentral ng Pilipinas 4 225, 907 255,948

Due from Other Banks 4 12, 477 14, 406

Interbank Loans Receivable and Securities purchased under 4,5 34, 323 18,586
agreements to resell
Financial Assets at Fair Value through other Profit or Loss 6,7 16, 721 10,313

Financial Assets at Fair Value through other Comprehensive Income 8 37, 206 -

Investment Securities at Amortized Cost, net 9 287, 571 -

Available for Sale Securities, net 8 23, 313

Held to maturity securities 9 277,472

Loans and advances, net 10 1, 354, 896 1, 202, 338

Assets held for Sale, net 3, 363 3, 578

Bank Premises, Furniture, Fixtures and Equipment, net 11 16, 252 15, 056

Investments in Subsidiaries and Associates, net 12 5, 659 6, 386

Assets attributable to Insurance operations 2,4 16, 582 17, 406

Deferred Income Tax Assets 13 8, 536 8, 091

Other Assets, net 14 22, 199 15, 880

TOTAL ASSETS P 2, 085, 228 P 1, 903, 905

LIABILITIES AND CAPITAL FUNDS

Notes 2018 2017

Deposit Liabilities 15 P 1, 585, 746 P 1, 502, 200

Derivative Financial Liabilities 7 3, 891 4, 788

Bills Payable and Other Borrowed Funds 16 166, 901 83, 517

Due to BSP and Other Banks 3, 968 1, 218

Manager’s Check and Demand Drafts Outstanding 6, 931 7, 022

Accrued taxes, Interest and Other Liabilities 9, 057 7, 117

 Liabilities attributable to Insurance Operations 2 14, 056 14, 513

Deferred Credits and Other Liabilities 17 43, 120 39, 979

TOTAL LIABILITIES 1, 833, 690 1, 720, 354

CAPITAL FUNDS ATTRIBUTABLE TO THE EQUITY HOLDERS OF BPI 18

Share Capital 44, 961 39, 336

Share Premium 74, 181 29, 771

Reserves 4, 096 254

Surplus 127, 459 116, 415

Accumulated Other Comprehensive Loss (2, 176) (5, 088)

248, 521 180, 688

Non-Controlling Interests 3, 017 2, 863

TOTAL CAPITAL FUNDS 251, 538 183, 551

TOTAL LIABILITIES AND CAPITAL FUNDS P 2, 085, 228 P 1, 903, 905

STATEMENT OF COMPREHENSIVE INCOME

Bank of Philippine Islands
Year ended December 2017 and 2018
(in Millions of pesos)

Notes 2018 2017

INTEREST INCOME

On Loans and Advances P 64, 401 P 54, 615

On Investments Securities 9, 616 9, 185

On deposits with BSP and other banks 1, 713 2, 049

80,190 65,849
INTEREST EXPENSE

On Deposits 15 21, 255 16, 660

On Bills payable and other Borrowed funds 16 3, 092 1, 150

24, 347 17, 810

Net Interest Income 55, 843 48, 039

Provision for Credit and Impairment Losses 5,9,10,14 4, 923 3, 795

Net Interest Income after Provision for Credit and Impairment Losses 50,920 44, 244

Other Income fees and Commissions 8, 244 7, 716

Income from foreign Exchange Trading 2, 128 2, 136

Income attributable to Insurance Operations 2 1, 223 1, 413

Trading gain on Securities 719 923

Other Operating Income 19 10, 387 10, 793

22, 681 22, 981

OTHER EXPENSES

Compensation and Fringe Benefits 21 15, 315 13, 897

Occupancy and Equipment related expenses 11, 20 13, 146 11, 344

Other Operating Expenses 21 15, 141 13, 292

43, 602 38, 533

Profit before Income Tax 29, 999 28, 692

IINCOME TAX EXPENSE 22

Current P 7, 404 P 6, 418

Deffered 13 (734) (462)

6, 670 5, 958

NET INCOME FOR THE YEAR 23, 329 22, 736

Attributable to:

Equity Holders of BPI 23, 078 22, 416

Non-controlling interests 251 320

23, 329 22, 736

Earnings per share for Net Income attributable to the Equity Holders of BPI
during the year

Basic and Diluted 18 5.35 5.69

 FINANCIAL RATIOS
LIQUIDITY RATIOS
1. Current Ratio:

1,691,223 ÷ 1,776,494= 0.9520004008 = 0.95

This means that the firm cannot meet its current short term obligations. In order to stay solvent, the
firm must have a current ratio at least 1.0 X, which means that it can exactly meet its current
obligations.

2. Acid Test Ratio:

316,243 ÷ 1,776,494= 0.1780152368 = 0.17

 This means that the firm cannot meet its current short term obligation with its liquid assets since a
result of 1.0 is considered to be the normal quick ratio.

3. Working Capital:

1,691,223 - 1,776,494= (85,271)

The result indicates that the firm cannot pay its short term liabilities such as debt obligations; since
current liabilities exceed current assets.

4. Cash Ratio

43,536 ÷ 1,776,494= 0.0245066969 or 2.45%

The figure above indicates that the firm possesses cash and cash equivalents to pay off only
2.45% of its current liabilities.

SOLVENCY RATIOS
1. Long Term Debt to Equity Ratio:

57,176 ÷ 251,538= 0.2273056159 = 0.23

A long term debt to equity ratio should be less than 1.0 and ideally should be less than 0.5. The
result indicates that the company is being more financed by its shareholder’s capital.

2. Total Debt to Equity Ratio:

1, 833, 690 ÷ 251,538= 7.289912459 =7.29

A value higher than 1.00 means that more assets are financed by debts than those financed by
money of shareholders or vice versa.

3. Debt Ratio:

1,833,690 ÷ 2,085,228= 0.8793714644 =0.88

The result means that a greater portion of the business is funded by the equity since the ratio is
below than 1.0.

4. Financial Leverage:
 2,085,228 ÷ 251,538= 8.289912459
The higher the ratio, the higher the leverage and higher is the financial risk on account of heavy
debt obligation taken to finance the assets of the business.

5. Proprietary Ratio:

251,538 ÷ 2,085,228= 0.1206285356 × 100= 12.06%

It means that the stockholders contributed 12.06% of the total assets of the company. A low
proprietary ratio therefore indicates that the company is already heavily depending on the debts for its
operation.

EFFICIENCY RATIOS
1. Asset Turnover Ratio:

55,843 ÷ 1,994,566.50 = 0.02799756238 =0.03

The results indicate that for every Peso earned in total assets, the company generates 0.03 in sales.

2. Accounts Receivable Turnover:

80,190 ÷ 280,823.50= 0.2855530253 × 100= 28.55

Therefore the company collected its average accounts receivable approximately 28.55 times over
the fiscal year ended.

3. Number of days Accounts Receivable Turnover:

365 ÷ 28.56= 12.78011204 or 12.78 days

The average customer takes approximately 12.78 days to pay their debt to the firm.

PROFITABILITY RATIOS
1. Gross Margin Ratio:

22,681 ÷ 55,843= 0.40615654 or 40.62%

This means that after the company has paid its costs the firm still has 40.62 % of its sales revenue to
cover his operating costs.

2. Operating Margin Ratio:

29,999 ÷ 55,483= 0.537202514 =0.53

The result means that only P 0.53 remains to cover all non-operating expenses of the business.

3. Return on Total Assets Ratio:

23,329 ÷ 2,085,228= 0.01118774542 or 1.11%

The firm has 1.11%; in other words, every peso that the firm invested in assets during the year
produced 0.01 of net income.

4. Return on Equity Ratio:

23,329 ÷ 119,142= 0.1958083631 = 0.20

This means that every peso of common shareholder’s equity earned about P 0.20 during the year.

DERIVATIONS

Current Assets

Cash and other Cash Items 43,536

Due from Bangko Sentral ng Pilipinas 225,907

Due from other Banks 12,477

Interbank loans receivable and securities 34,323

purchased under agreements to resell

Financial Assets at FVPL. 16,721

Loans and Advances 1,354,896

Assets held for sale 3,363

Total Current Assets 1,691,223

Current Liabilities

Deposit Liabilities 1,585,746

Derivative Financial Liabilities 3,891

Bills Payable and other Borrowed Funds 166,901

Due to Bangko Sentral ng Pilipinas 3,968

Manager's checks and Demand drafts outstanding 6,931

Accrued taxes, Interest, and other Expenses 9,057

Total Current Liabilities 1,776,494

Quick Assets

Cash and other Cash Items 43,536

Due from Bangko Sentral ng Pilipinas 225,907

Due from other Banks 12,477

Interbank loans receivable and securities 34,323

purchased under agreements to resell
Tota Quick Assets 316,243

Long Term Debt

Liabilities attributable to insurance operations 14,056

Deferred credits and other liabilities 43,120

Total Long term Debt 57,176

Net Sales

Interest Income 80,190

Less: Interest Expense ( 24,437)

Total Net Sales 55,843

Sales

Interest Income 80,190

Gross Profit 22, 681

 Shareholder’s Equity
Share Capital 44,961
Share Premium 74,181
Total Shareholder's Equity 119,142

Average Accounts Receivable 2018 2017

Due from Bangko Sentral ng Pilipinas 225,907 225,948

Due from other Banks 12,477 14,406

Interbank loans receivable and securities 34,323 18,586

272,707 + 288,940 = 561,647 / 2

Total Average Accounts Receivable 280,823.50

Average Total Assets

2017 1,903,905

2018 2,085,228
3,989,133 / 2 = 1,994,566.50

COMPARATIVE BALANCE SHEET WITH HORIZONTAL & VERTICAL ANALYSIS RESPECTIVELTLY:

Bank of Philippine Islands
For the Fiscal year ended December 31, 2017 and 2018

Notes 2018 2017 Change in Percentage (%)

ASSETS 2018 2017

Cash and other Cash Items 4 43, 536 35, 132 23.92 2.09 1.85

Due from Bangko Sentral ng Pilipinas 4 225, 907 255,948 -11.74 10.83 13.44

Due from other Banks 4 12, 477 14, 406 -13.39 0.60 0.76

Interbank Loans Receivable and Securities 4,5 34, 323 18,586 84.67 1.65 0.98
purchased under agreements to resell

Financial Assets at Fair Value through other 6,7 16, 721 10,313 62.14 0.80 0.54
Profit or Loss

Financial Assets at Fair Value through other 8 37, 206 1.78 1.96
Comprehensive Income
Investment Securities at Amortized Cost, 9 287, 571 13.79
net

Available for Sale Securities, net 8 23, 313

Held to maturity securities 9 277,472

Loans and advances, net 10 1, 354, 896 1, 202, 338 12.69 64.98 63.15

Assets held for Sale, net 3, 363 3, 578 -6.01 0.16 0.19

Bank Premises, Furnitures, Fixtures and 11 16, 252 15, 056 7.94 0.78 0.79
Equipment, net

Investments in Subsidiaries and Associates, 12 5, 659 6, 386 -11.38 0.27 0.34

net

Assets attributable to Insurance operations 2,4 16, 582 17, 406 -4.73 0.80 0.91

Deferred Income Tax Assets 13 8, 536 8, 091 5.50 0.41 0.42

Other Assets, net 14 22, 199 15, 880 39.79 1.06 0.83

TOTAL ASSETS 2, 085, 228 1, 903, 905 9.52

Notes 2018 2017 Change in Percentage

(%)

Deposit Liabilities 15 1, 585, 746 1, 502, 200 5.56 76.05 78.90

Derivative Financial Liabilities 7 3, 891 4, 788 -18.73 0.19 0.24

Bills Payable and Other Borrowed Funds 16 166, 901 83, 517 99.84 8.00 4.39

Due to BSP and Other Banks 3, 968 1, 218 225.78 0.19 0.06

Manager’s Check and Demand Drafts 6, 931 7, 022 -1.30 0.33 0.37
Outstanding
Accrued taxes, Interest and Other Liabilities 9, 057 7, 117 27.26 0.43 0.37

Liabilities attributable to Insurance 2 14, 056 14, 513 -3.15 0.67 0.76
Operations

Deferred Credits and Other Liabilities 17 43, 120 39, 979 7.86 2.07 2.10
 TOTAL LIABILITIES 1, 833, 690 1, 720, 354 6.59

CAPITAL FUNDS ATTRIBUTABLE TO THE 18

EQUITY HOLDERS OF BPI

Share Capital 44, 961 39, 336 14.30 2.16 2.07

Share Premium 74, 181 29, 771 149.17 3.56 1.56

Reserves 4, 096 254 1,512 0.20 0.01

Surplus 127, 459 116, 415 9.49 6.11 6.11

Accumulated Other Comprehensive Loss (2, 176) (5, 088) -57.23 -0.10 -0.27

248, 521 180, 688 37.54

Non-Controlling Interests 3, 017 2, 863 5.38 0.14 0.15

TOTAL CAPITAL FUNDS 251, 538 183, 551 37.04

TOTAL LIABILITIES AND CAPITAL FUNDS 2, 085, 228 1, 903, 905 9.52

COMPARATIVE INCOME STATEMENT WITH HORIZONTAL & VERTICAL ANALYSIS RESPECTIVELY:

Bank of Philippine Islands
For the years ended December 31, 2018 and 2017
Notes 2018 2017 Change in Percentage (%)

INTEREST INCOME 2018 2017

On Loans and Advances 64, 401 54, 615 17.92

On Investments Securities 9, 616 9, 185 4.69

On deposits with BSP and other 1, 713 2, 049 -16.40

banks

80,190 65,849 21.78

INTEREST EXPENSE

On Deposits 15 21, 255 16, 660 27.58 26.51 25.30

On Bills payable and other 16 3, 092 1, 150 168.87 3.86 1.75

Borrowed funds
 24, 347 17, 810 36.70 30.36 27.05

Net Interest Income 55, 843 48, 039 16.25 72.95

Provision for Credit and Impairment 5,9,10,14 4, 923 3, 795 29.72 6.14 5.76
Losses

Net Interest Income after Provision 50,920 44, 244 15.09

for Credit and Impairment Losses

Other Income fees and Commissions 8, 244 7, 716 15.09 10.28 11.72

Income from foreign Exchange 2, 128 2, 136 -0.37 2.65 3.24

Trading

Income attributable to Insurance 2 1, 223 1, 413 -13.45 1.53 2.15

Operations

Trading gain on Securities 719 923 -22.10 0.90 1.40

Other Operating Income 19 10, 387 10, 793 -3.76 12.95 16.39

22, 681 22, 981 -1.31

OTHER EXPENSES

Compensation and Fringe 21 15, 315 13, 897 10.20 19.10 21.10
Benefits

Occupancy and Equipment 11, 20 13, 146 11, 344 15.89 16.39 17.23
related expenses

Other Operating Expenses 21 15, 141 13, 292 13.92 18.88 20.18

43, 602 38, 533 13.15 54.37 58.52

Profit before Income Tax 29, 999 28, 692 4.55 37.41 43.57

IINCOME TAX EXPENSE 22

Current 7, 404 6, 418 15.36 9.23 9.75

Deffered 13 (734) (462) 58.87 -0.92 -0.70

6, 670 5, 958 11.95

NET INCOME FOR THE YEAR 23, 329 22, 736 2.61

Attributable to:

Equity Holders of BPI 23, 078 22, 416 2.95

 Non-controlling interests 251 320 -21.56

23, 329 22, 736

Earnings per share for Net Income

attributable to the Equity Holders of
BPI during the year

Basic and Diluted 18 5.35 5.69

CONCLUSION AND RECOMMENDATION

Based from the calculations of the Financial ratios of both banks, Bangko de Oro and Bank
of the Philippine Islands; the researchers were able to determine which firm performs better
than the other. With this, the researchers were able to find out that investing under Bangko de
Oro would be preferable and beneficial to prospect investors. In terms of liquidity, Bangko de
Oro Unibank was able to meet its short-term obligations compared to the Bank of Philippine
Islands. BDO's current assets were sufficient enough to pay off its currently maturing
obligations. In opposition, BPI has resulted to a negative balance in its working capital which is
unfavorable to any other business as well.

Looking into the companies' solvency, it may be observed that a small gap differentiates
both companies. However, both companies are considered solvent enough to pay its long term
liabilities. Also, it indicates that the companies were mostly funded by their shareholders and
not by taking out loans or by indebtedness.
Considering the entities' efficiency ratios, Bank of the Philippine Islands however resulted
into a better performance. Both companies are presumed to be efficient in consuming their
assets in order to generate revenue. When the number of days in Accounts Receivable ratio will
be taken into account, it is evident that BPI performs better than BDO. Yet, it does not affect
that investing in BDO is more likely to be considered than in BPI.
 Both companies showed positive results under their profitability ratios; but at some
certain ratios, it was found out that Bangko de Oro is more promising than the Bank of the
Philippine Islands in a way that its gross margin ratio is twice higher than the net sales or net
interest income it has generated for the year. Thus, with all the aforementioned results of the
financial statement analysis performed, it became clearer that Bangko de Oro is indeed more
ideal to invest at rather than its close competitor, Bank of the Philippine Islands.

In order for the Bank of the Philippine Islands to improve, it is advised for them to first, pay
off liabilities in a short span of time as possible. In this way, currently maturing liabilities will be
decreased and would inversely affect the liquidity of the business. Second is to use long term
financing rather than short term ones to acquire assets or finance projects. Removing short-
term debt from the balance sheet allows a company to save some liquidity in the near term and
put it to better use. Third and last, the entity must ensure that customers or depositors are
being invoiced as quickly as possible and ensure that they pay on time. Following those would
boost the Bank's performance or standing.

REFERENCES:

Hayes, A. (2019, May 9). Liquidity ratio definition. Retrieved from

https://www.investopedia.com

( 2019, Nov 27 ). Liquidity ratio, formula with examples. Retrieved from https://cleartax.in

Corporate Finance Institue ( 2015 - 2020). What are financial ratios. Retrieved from
https://corporatefinanceinstitute.com

My Accounting Course (2019). Return on equity ratio. Retrieved from

https://www.myaccountingcourse.com

Quick Assets (2019). What are quick assets. Retrieved from https://www.wallstreetmojo.com

Solvency Ratios (2019). What are solvency ratios. Retrieved from

https://www.wallstreetmojo.com

Hayes, A. (2019, April 20). Debt ratio definition. Retrieved from

https://www.investopedia.com

Accounting for Management. Org (2012 - 2019). Proprietary ratio. Retrieved from
https://www.accountingformanagement.org

Bangko de Oro.(2018). BDO 2018 Annual Report. Retrieved from https://www.bdo.com.ph ›

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Audited Financial Statements for the year ending December ... - BDO Unibank, Inc.
Bank of the Philippine Islands.(2018). Bank of the Philippine islands financial statements.
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