Rural Bank of Suares
In a stockholders’ meeting of the Rural Bank of Suares (RBS), Peter Arguelles, the bank general manager, proposed that the bank should open another branch in the capital city. However, the stockholders are reluctant with this motion, given that there are branches of the big banks of Manila and already two rural banks in the city. For more than 20 years, the Rural Bank of Suares struggled financially because of the government’s lending program.
For this case, the point-of-view of the stockholders will be used
Statement of the Problem:
Should the stockholders follow Peter Arguelles and expand to the capital city or should they not?
Areas of consideration:
First, the…show more content… Also the company is not yet financially stable and capable enough to be granted the loan to invest for the properties. The cost of land acquisition, building construction, equipment, and fixtures, which is 10.5 million Php, is very large compared to its annual net income of only two million Php.
Another major point in the analysis of this case is the competition of Rural Bank of Suares which are Manila-based banks the two other rural banks in the capital city. Manila bank branches don’t offer small loans. In that sense, RBS can use this to their advantage and cater to specific the loan market. However, the more pressing problem is that RBS shares this specific target market with other rural banks in the capital city. RBS aims to distinguish itself from competition through better service. On another note, the presence of rural banks in the city signifies that they have a profitable business, which bodes well for RBS planning an expansion.
An additional point of consideration is the various types of loans that the Bank of Suares had to offer at the time. We see in Exhibit One that most of their revenue came from agricultural loans, comprising approximately 52% of their total income in 1994, as compared to the 7.6% and 3% from commercial and industrial loans, respectively. Also from 1994 to 1995, revenue from agricultural loans increased by 4,391,810.96 Php; it is the one that experienced the highest gain out of all the income generating