CUSTOMER SATISFACTION OF LANDBANK OF THE PHILIPPINES AND BANCO

DE ORO IN TERMS OF CAR LOAN SERVICES IN SURIGAO CITY

A Thesis Presented To

The faculty of the College of Business and Technology

St. Paul University Surigao

In Partial Fulfillment of the Requirements for the Degree

Bachelor of Science in Business Administration

Major in Financial Management

By:

CONTE, ARAH MAE

CORRALES, ERIC EMMANUEL R.

April 2019
 CHAPTER 1

THE PROBLEM AND ITS BACKGROUND

. Banks, nowadays, are vital to people specially to investors because the banking system

acts as a control mechanism for the flow of capital. The management of capital allows banks to

flourish financially, which raises the stock value for shareholders. The banking sector plays a

major part of our lives, investing in assets such as securities.

Investment banks play the role of intermediaries when corporate mergers occur. The

banking establishment may also provide financial consultation and information to companies.

Investment banks deal largely with such investment endeavors as initial public offerings and

private share offerings. Banks offer a safe place where people can store their money so people do

not have to carry excessive amounts of cash. Consumers also use banks to issue wire transfers.

Banks provide underwriting services by attaching the institution's name to a transaction. For

instance, a check with a bank's name on it provides credibility and peace of mind to the person

accepting the payment. The banking sector also issues debit and credit cards for the purchase of

goods and services.

Finance is the life blood of trade, commerce and industry. Nowadays, banking sector acts

as the backbone of modern business and development of any country mainly depends upon the

banking system. The term bank is either derived from old Italian word banca or from a French

word banque both mean a Bench or money exchange table. In olden days, European money

lenders or money changers used to display (show) coins of different countries in big heaps

(quantity) on benches or tables for the purpose of lending or exchanging. A bank is a financial

institution which deals with deposits and advances and other related services. It receives money
from those who want to save in the form of deposits and it lends money to those who need it.

(Akrani, 2011)

Since banks are vital to peoples everyday life, we as the researchers conducted this study

to help enhance the services of the top banks in commercial and government categories, to help

potential customers where to transact their business that is hassle-free, convenient, and efficient,

where after their transaction they will be satisfied on the service offered by the bank, thus,

patronize the bank in terms of frequent transaction.

The criteria in choosing the participants is that all of them have experienced availing car

loan transaction. Questionnaires will be given to them personally after being ensured that the

transaction mentioned above have been experienced first-hand by them. Data will then gathered

and analyzed.

Landbank of the Philippines and Banco de Oro were chosen to be the subject of the study

since both banks are ranked top 1 as to total assets in their categories, LBP for Government and

BDO for Commercial based on Bangko Sentral ng Pilipinas (BSP)’ ranking as to total assets as

of December 31, 2018.

Conceptual Framework of the Study

This study was anchored on Pettinger (2012) concept on bank transactions which

describes that banks offers services that satisfies the customers’ need in terms of transacting car

loans and loan processing. The target of this study is to be able to assess the bank service offered

by both banks. This is to assist the customer to have maximum understanding on the services

being offered by both banks.

of the participants in different context. Some studies revealed that there is positive relation, other

studies showed negative relation, while evidence exist that there is no relation between them.

Similarly, Petterson (2010) studied the relationship between customer satisfaction and profile of

the participants on the concept of the Customer Satisfaction of Landbank of the Philippines and

Banco de Oro in terms of Car Loans in Surigao City.

Figure 1 shows the schematic diagram of the study.

Box 1 shows the profile of the participants as to:

Age refers to the length of time that a person has lived.

Sex refers to either of the two sexes male or female.

Civil Status refers to your family situation. It can mean being single, married, in

a civil union, adopted, divorced, a member of a single-parent family, or any form of

family ties or affinity with another person.

Educational Attainment refers to the highest level of education that a person has

successfully completed.

Occupation refers to the activity to which one regularly devotes oneself, especially one's

regular work, or means of getting a living.

affordability, convenience, security.

Accessibility refers to the quality of being easily obtained by the investors.

Affordability refers to the ability the investor could afford or inexpensiveness.

Convenience refers to the quality of being useful, easy, or suitable for the investor.

Security refers to the safety of a financial institution against terrorism, theft, robbery and

bankruptcy.

Box 2 presents the Customer Satisfaction in terms of car loan service.

Customer Satisfaction refers to the percentage of how bank services supplied by

Landbank of the Philippines and Banco de Oro meets or surpasses the customer expectation.

Car Loan Services refers to the service offered by banks that allows the customer to have

a car to be paid for specific terms or no. of years.

This study assessed the customer satisfaction of Landbank of the Philippines and Banco

de Oro.

Specifically, it sought to answer the following questions:

1. What is the profile of the participants as to:

a. Age

b. Sex

c. Civil Status

d. Educational Attainment

e. Occupation

2. What is the level of customer satisfaction by the financial institutions in

terms of:

 Affordability

 Accessibility

 Convenience; and

 Security

3. Based on the results of the study, what intervention maybe proposed?

a. Age
a. Affordability Car Loan
b. Sex Proposed
b. Accessibility
Services Intervention
c. Civil Status c. Security
d. Educational d. Convenience

Attainment
e. Occupation

Figure 1. Schematic Diagram of the Study entitled “Customer Satisfaction of Landbank of the

Philippines and Banco de Oro in Terms of Car Loan Services in Surigao City”
 Hypothesis

At .05 level of significance it is hypothesized that there is no significant difference in the

level of customer satisfaction when they are grouped according to the stated variables?

Significance of the Study

The result of the study would be useful to the following sectors of the society:

Investor. The results of the study will serve as knowledgeable information to be used in

their decision where they will transact their car loans in times they need it.

Bank. This study will make the bank realize how factors like accessibility, affordability,

convenience and security of the service can affect the number of possible investors in the society.

The number of investors could affect the profit of the banking institutions because the lower the

number of clients availing the loan service the lower they get profit. The result of this study can

give ideas to the bank on improving their service through which they can gain profit as well as

have more clients.

Future Researchers. This could be used by the future researchers as the result can

contribute ideas and concepts relative to loan services and comparability between banks in the

locality of Surigao.

Prospect Investors. The results of this study will serve as knowledgeable information to

be used in their decision where they will entrust their money to the financial institutions.
 Branch Manager. This study will make the branch manager realize that a certain service

on their loans needs improvement; therefore, there is a possibility that they will change their

strategies for the good of the firm.

Scope and Limitation of the Study

This study will focus on the customer satisfaction of Landbank of the Philippines and

Banco de Oro in terms of Car Loan in Surigao City. The variables that will be considered in this

study are as follows: Accessibility, Affordability, Convenience, and Security. These are

indicators that can affect the satisfaction in the Customer Satisfaction of Landbank of the

Philippines and Banco de Oro in terms of Car Loan in Surigao City. The participants are the

customers of Landbank of the Philippines and Banco de Oro in Surigao City. This study will be

conducted this of academic year 2018-2019.

Definition of Terms

The following include terms and their definition for the readers to better understand the

study.

Car Loan Service. It refers to the transaction where the customer owns a car which lends

money from the bank for personal usage and pays it in specific terms or no. of years.
 CHAPTER 2

REVIEW OF RELATED LITERATURE

A Bank is a financial institution which is involved in borrowing and lending money.

Banks take customer deposits in return for paying customers an annual interest payment.

The banks then use the majority of these deposits to lend to other customers for a variety of

loans. The difference between the two interest rates is effectively the profit margin for banks.

Banks play an important role in the economy for offering a service for people wishing to save.

Banks also play an important role in offering finance to businesses who wish to invest and

expand. These loans and business investment are important for enabling economic growth. The

main purpose of banks is keeping money safe for customers, offering customers interest on

deposits, help to protect against money losing value against inflation, lending money to firms,

customers and homebuyers, offering financial advice and related financial services, such as

insurance. (Pettinger, 2012)

According to Pettinger (2012), a bank can become more profitable by using a percentage

of its deposits to lend to other customers. If a bank pays 2% on bank deposits, but lends money

to firms and consumers at 6%, then it can make a bigger profit on its deposits. A bank just needs

to keep sufficient liquidity to meet the demands of customers to withdraw money. Bank Lending

varies from unsecured personal loans to secured mortgage lending. Unsecured lending tends to

be at a higher interest rate because of the risk factor. Secured mortgage lending is at a lower rate,

but can be over 30 years or more.

According to Heaton(2013), banks issue loans to both people and companies. Without

banks, it would be very hard for people to buy a home or start a business, or for companies to
make investments, As financial intermediaries, they earn enough to support their activities by the

difference between the interest rate paid to savers and the interest rate charged on loans. When

customers make deposits in a savings account, they earn interest on the principal. Similarly,

when customers take out loans, they pay interest on the principal. By charging the borrower a

slightly higher interest rate than that which is given to the depositor, a bank is able to cover its

expenses.

The major business of banks is that of a financial intermediary between savers and

borrowers. The bank simplifies this process by eliminating the need for savers to find the right

borrowers and the right time to directly make a loan. Banks are generally trusted by the public.

When people put their savings into banks, they receive little more than a paper receipt in

return. There are two organizations in place to ensure that banks are trustworthy with individuals'

money and reasonable in the loans that they make. A commercial bank is a financial institution

that provides various financial services, such as accepting deposits and issuing loans.

Commercial bank customers can take advantage of a range of investment products that

commercial banks offer like savings accounts and certificates of deposit. The loans a commercial

bank issues can vary from business loans and auto loans to mortgages. The types of loan a

commercial bank can issue vary and a commercial bank may specialize in just one or a few types

of loans. Commercial banks can offer mortgages, which help borrowers buy homes with the

homes as the collateral backing the loans. They can also issue car loans with automobiles as

collateral. Commercial banks also can engage in issuing personal loans, lines of credit or credit

cards. In addition to the interest it earns on its loan book, a commercial bank can generate

revenue by charging its customers fees for mortgages and other banking services (Pettinger,

2012).
 According to Singidunum (2012), marketing mix has both communicative and operative

functions. Communicative function is needed to transfer to users the relevancy of services for

their needs or preferences. Operative function aims to remove boundaries in transactions or

exchange, so that the users, who have opted for that service, can enter the exchange process with

minimal effort.

The overall confidence of clients in the banking industry has been significantly reduced

thus the contacts with their clients through the improvement of bank products and services have

to be re-established by banks. It is important for banks to find an effective way to pay attention

to clients individually and be able to distinguish and analyze financial needs of clients.

A commercial bank is a type of financial institution that accepts deposits; offers checking

account services; makes business, personal, and mortgage loans; and offers basic financial

products like certificates of deposit (CDs) and savings accounts to individuals and small

businesses. A commercial bank is where most people do their banking, as opposed to an

investment bank. Banks and similar business entities, such as thrifts or credit unions, offer the

most commonly recognized and frequently used financial services: checking and savings

accounts, home mortgages, and other types of loans for retail and commercial customers. Banks

also act as payment agents via credit cards, wire transfers, and currency exchange.

Banco de Oro

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. On the front line, its branches remain at the

forefront of setting high standards as a sales and service-oriented, customer focused force. BDO

has one of the largest distribution networks, with more than 1,100 operating branches and over

3,600 ATMs nationwide (including One Network Bank).

Through selective acquisitions and organic growth, BDO has positioned itself for

increased balance sheet strength and continuing expansion into new markets. As of 31 December

2016, BDO is the country’s largest bank in terms of consolidated 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 between retail, mall operations, property development

(residential, commercial, resorts/hotel), 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, bank regulations and risk management, strategy formulation and merchandise

marketing.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

Corporate Governance

BDO’s corporate governance is anchored on five (5) basic principles: accountability,

fairness, integrity, transparency and performance. This governance philosophy is deeply rooted

in BDO’s corporate culture as it believes that effective governance is a collective effort of its

directors, officers and staff. As such, the Bank upholds the highest standards of ethical behavior

and responsible conduct of business as it protects the interests of and creates value for its

shareholders.

Corporate Social Responsibility

The Bank carries out its corporate social responsibility (CSR) through the BDO

Foundation, the CSR arm of BDO Unibank that promotes initiatives based on the Bank’s long-

standing record of support to social development. The Bank’s corporate social responsibility

focuses on its disaster response advocacy that is achieved through three main interventions,

namely, relief, rehabilitation and reconstruction, particularly in areas affected by natural or man-

made disasters. The Bank’s CSR projects focus on the following: relief operations in disaster-

stricken provinces; rehabilitation/reconstruction of rural health centers; construction of houses in

resettlement areas, multi-purpose halls and school buildings; and support for livelihood projects

for families with disabled members (persons with disabilities).

Also, the BDO Foundation actively promotes volunteerism among its employees who help

out in the Foundation’s various activities that include, among others, community building,

livelihood/skills training, fund raising, and environmental/green initiatives. Through these, the
Bank hopes that it is able to give back to society and make a positive contribution to the broader

community it serves. For more details, please refer to “ESG - Corporate Social Responsibility”

on the Bank’s website.

Environmental Initiatives

BDO imposes limits and monitors exposure to certain industries, e.g., Gaming, Tobacco

and Alcohol, as well as restricts lending to other sectors under the Exclusion List (those deemed

to have adverse or harmful effects to the community and the environment).

Through its Sustainable Energy Finance (SEF) Program in cooperation with IFC, the Bank

supports green energy investments in Energy Efficiency (EE) and Renewable Energy (RE)

projects. The Bank likewise partnered with the Japan Bank for International Cooperation (JBIC)

for the latter’s Green Facility, a USD50 million relending credit facility open to RE, EE and

Green building projects which reduce Greenhouse gas emissions.

As well, BDO has a “Go Green Campaign” implemented across the Bank and its branches

that raises awareness on environmental issues, espouses good environmental practices in the

workplace and mobilizes volunteers for conservation initiatives.

BDO’s Scanning machine is used to easily upload systemized date for easy access during

customer’s transaction in the bank. This technology has been use for about a year now in NCR

and Metro Manila.

In Surigao, they have recently used this system for about a month now. The bank is still

undergoing training & adoption of the system. With the use of this system, customer’s
transaction would be a lot easier. Transactions would not be longer than 10 minutes (theoretical)

with the use of this system.

As time goes by, the system will be upgraded with the latest updates and up-to-date

improvements for the betterment of the bank.

Landbank of the Philippines

The Land Bank of the Philippines is a government financial institution that strikes a

balance in fulfilling its social mandate of promoting countryside development while remaining

financially viable. This dual function makes LANDBANK unique. The profits derived from its

commercial banking operations are used to finance the Bank's developmental programs and

initiatives.

Over the years, LANDBANK has successfully managed this tough balancing act as

evidenced by the continued expansion of its loan portfolio in favor of its priority sectors: the

small farmers and fishers, a good part of which are agrarian reform beneficiaries; micro and

SMEs; agri- and aqua-projects of local government units and government-owned and controlled

corporations; communications, transportation, housing, education, health care, environment-

related projects, tourism, and utilities.

LANDBANK is by far the largest formal credit institution in the rural areas. It also ranks

among the top five commercial banks in the country in terms of deposits, assets and loans.
Based on Bangko Sentral ng Pilipinas (BSP) ranking as to total assets as of December 31, 2018

Commercial Category: Government Category:

1. Banco de Oro 1. Landbank of the Philippines

2. Metropolitan Bank and Trust Company 2. Development Bank of the Philippines

3. Bank of the Philippine Islands 3. AL-AMANAH ISLAMIC INVESTMENT

4 Security Bank Corporations BANK OF THE PHILIPPINES

5. Philippine National Bank

6. China Bank

Loan services provide a variety of services designed to assist an individual or business in

increasing associated wealth. This does not include traditional consumer banking. Instead, the

institution focuses on investment vehicles such as trading and asset management. Financing

options may also be provided for the purpose of assisting with these services (Pettinger, 2012).

Mullins & Walker (2010), said that “To gain the knowledge necessary to continually

improve the value of their offerings to customers, firms must understand how satisfied existing

and potential customers are with their current offerings.” This focus of customer satisfaction has

become increasingly important as more firms question whether all attempts to improve absolute

quality of their products and services generate sufficient additional sales and profits to justify

their cost.
 (Baumann, et.al 2011), examined the satisfaction of financial institution’s clients which

was based on the overall satisfaction, emotional attitudes towards banks, service quality,

perception of the market situation (costs and benefits of the change) and customer characteristics.

De la Torre, et.al (2010) present the view that SME financing is a very pro table segment

for the commercial banks due to intensifying competition in the other services to the corporate

sectors, and increased competition and the improvement of subsidiaries’ lending technologies

have led banks to gradually expand into the SME and retail markets SME segment can be pro

table to invest in the banks rather than big corporate firms.

Investigating the preference and satisfaction level of customers towards loans, deposits

schemes, insurances and value added services rendered by private and public banks in

Shivamogga district. Business and vehicle loans are fast moving than other services and overall

satisfaction resulted in 50%. Further, overall satisfaction on bank deposit schemes resulted

positively while other services of banking still need to be given attention by focusing on

customer issues. New innovative schemes, strategies to cater to non-users and other services

have to be adopted (Ravi, et. al 2013).

METHOD

This chapter presents the research design, participants of the study, research instrument,

data gathering procedure and data analysis.

Research Design

This study will use the descriptive method. Survey technique will be used. This method is

considered appropriate to this study because the researchers assessed the banking institutions

offering car loan services in Surigao City particularly in the level of customer satisfaction as a

result of these services.

Participants

The participants of this study will be 25 participants of Landbank of the Philippines and

25 participants of Banco de Oro in Surigao City. They are chosen using a purposive-quota

sampling technique. It is purposive because the researchers will only consider the customers that

have experienced all the financial institutions namely: Accessibility, Affordability, Convenience,

and Security of Landbank of the Philippines, and Banco de Oro in Surigao City. This will ensure

that the participants have enough knowledge and information about the banking institutions’

services offered.

Instrument

The study will use a researchers-made questionnaire as the tool to gather data.
 Data Gathering Procedure

The researchers will send a formal letter of request to the college dean, seeking

permission to conduct a survey through the approved questionnaire. A letter of request will be

sent to the head of Landbank of the Philippines, and Banco de Oro asking permission to use their

establishment as subject for this study. Upon approval, the researchers will personally administer

the questionnaires to the informants. Some personal interviews will be conducted to elicit further

data needed in the interpretation and analysis of the results. The questionnaires will be collected

after these are answered. The data gathered from the clients will be sorted, tabulated, and

interpreted.

Ethical Consideration

The researchers will observe ethical considerations while conducting the research to

ensure the protection of the informant’s privacy. The researchers will politely ask the full

consent of the informants prior to the study. All types of communication in relation to the

research will be done with honesty and transparency. The protection of the privacy of research

informants is ensured by the researchers and results of this study are handled with utmost

confidentiality and concern. All gathered information from the informants along with the

information gathered from the other institutions needed for this study are treated with respect and

their privacy will be protected. Representation of primary data findings in a biased way will be

avoided.
 Data Analysis

The following are the statistical tools used to answer the problem:

Simple Percentage. This tool was used in profiling the participants.

Mean and Standard deviation. These measures will be used to get the level of customer

satisfaction of the participants.

Analysis of Variance (ANOVA). This tool will be used to test the difference in the level

of customer satisfaction when grouped according to the variables mentioned.