School of Business and Management

Xavier University Ateneo de Cagayan

Corrales Avenue, Cagayan de Oro City, 9000 Philippines

In partial fulfilment of the

Requirements
In
BA13: Business Policy

A Case Study Analysis of Equitable PCI Bank

Submitted by:
Baquial, Razel Ann Marie S.
Cuaresma,Jonna Cyle C.
Masayon, Mary Apple Jane
Pahamtang, Karen Michelle P.
Villaester, Don Laurence B.

Submitted to:
Lorelei Pabillore, MBA
March 6, 2014

Third Person Point of View

I.

Statement of the Problem

Is the merger of Equitable Philippine Commercial International Bank (Equitable PCI
Bank) and Banco de Oro Universal Bank (BDO) beneficial to Equitable PCI Bank, BDO
being the largest shareholder when in fact PCI is the 3rd largest bank while BDO is
ranked 5th largest in the Philippines in terms of asset?

II.

Objectives
To determine the effect of the merger to PCI bank, its pros and cons.
To determine the effect of the BDO-PCI bank merger to the Philippine economy
and to the banking business.

III.

Areas of Consideration
At the time of merger PCI is the 3rd largest bank and BDO is the 5th largest bank
in terms of asset in the Philippines and PCI had almost three times the capital
BDO.
Equitable PCI Bank was known for a wide range of services from savings
to insurance and, its wholly-owned subsidiary Equitable CardNetwork, was the
largest Philippine credit card issuer. It received many awards and recognitions
since the time it was established.
In the late 90s PCI was known to be the most aggressive bank in terms of
acquisition and merger but then in 2000, BDO became the most aggressive.
Equitable PCIs debt rating is currently a B and Banco de Oro has a B+ rating.
Since 2004, BDO wanted to merge with PCI; it was only successful on December
2006 with the formation of Banco de Oro Unibank, Inc.

IV.

Alternative Courses of Action

1. Merger of Equitable PCI Bank and BDO which resulted to Banco de Oro Unibank,
Inc.
Advantages:
The merger would lead to a creation of the 2 nd largest bank and in
time would become 1st on the list.
Equitable PCIs debt rating could rise.
Increase capital adequacy ratio (CAR) without having to raise more
capital.
Wider network and international links as the merger would attract
many investors.
Increase of the market share and the fair market value of the bank.
Would lead to a creation of a stronger and more profitable bank and
would contribute greatly to the economy.

Disadvantages:

Conflict of interest between the top management of the two banks.

Would monopolize the banking industry and would create legal
disputes among its competitors.
Banco de Oro would become the surviving entity thereby deleting the
name of Equitable PCI bank in the banking industry.
Problems in the transition would definitely occur.

2. Equitable PCI Bank and BDO remain two single entities.

Advantages:
Retention of the name which it took the bank years to establish.
No possibility of lay-offs of the employees.
The top management would retain their position.
The bank would remain independent and can grow on its own and can
still achieve the highest rank in the market with their effective
competitive strategies.
Disadvantages:
The bank might incur higher cost for capital generation.
Expansion to become the nations largest would entail more cost of
capital.

To become the nations largest would take time and might be

impossible since at that time the banking business were dominated by
2 major players namely MetroBank and BPI.
V.

Conclusion/Recommendation
The group concludes that the merger of Equitable Philippine Commercial
International Bank (Equitable PCI Bank) and Banco de Oro Universal Bank (BDO) is
beneficial to Equitable PCI Bank, the merger resulted to Banco de Oro Unibank which
became the 2nd largest bank after the merger and now known as the 1 st largest bank in
the Philippines. The merger created a powerhouse institution with a major presence in
business lines such as retail banking, asset management, foreign exchange remittances,
credit cards, and underwriting which benefited the economy of the Philippines. The only
loophole in the merger is the vanishing of Equitable PCI Banks name which took the
company years to establish and is renowned in the banking industry. Though the
company name is gone its substance is still present which the group believed
contributed to the success of the Banco de Oro Unibank.