Oriental Bank Case Study

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MINDANAO STATE UNIVERSITY GRADUATE SCHOOL

MANAGERIAL ACCOUNTING

SATURDAY 1:00 PM- 4:00 PM

CASE STUDY: ORIENTAL BANK

SUBMITTED BY:

ROY ANGELO MALALUAN

JOY ANN TAN

KRISTY ADAJAR

KENNETH CLAUDIO

MAY JOY SOBERANO

KRISTINE ERA SUMAGAYSAY

JESS PALMOS

SUBMITTED TO:

PROF. EDGAR MABAD, CPA

Case Background

Oriental Bank

        Edgar Cruz Nicolas account officer of Oriental Bank was called by his section head, Valentin Gaspar Abelgas on a Rainy day in May 1995. Abelgas wanted a review of two loan accounts of Oriental Bank, Trinity Iron and Steel Company and Buffalo Foundry Company. Oriental Bank had existing short-term credit lines established at about the same time in 1992. Abelgas noted that the experience of Oriental Bank with these two companies had been very different. He mentioned to Nicolas that while Buffalo Foundry met its obligations, Trinity Iron and Steel exceeded its credit lines and requested renewal of credit lines.

        “Maybe Trinity Iron and Steel is not yet a problem account because they have stayed current, but only because you were always quick to get credit committee approvals of renewals and excess availment over existing credit lines.” Abelgas told Nicolas.

        “But this time, why don’t we evaluate the credit requirements, strengths and risk of these two accounts so that nothing will surprise us later?” he continued. Nicolas then proceeded to look at the files of the two companies.

The Trinity Iron and Steel Company

        Trinity Iron and Steel Company was established in 1946 by Daniel Bautista. It was originally a trading company named Bautista Enterprises involved in the business of buying and selling spare parts, a lucrative business after World War II. After accumulating capital from the profitable buy and sell business, Baustista opened a foundry in 1960 in Valenzuela, Bulacan. Early customers of the company were rice mills and sugar milling companies which bough replacement parts and mill supplies. As the sugar mills grew during the 1960s and early 1970s, so did the business of Trinity Iron and Steel Company, which grew into two large plants in Valenzuela and Baesa, Caloocan City. By 1976, it had several modern electric furnaces in operation, replacing the traditional coal-fired furnaces which Bautista acquired in the 1960s.

        Trinity Iron and Steel expanded its products into casting products for cement companies, textile factories and machine shops. These diverse groups of customers required a wide range of foundry products and machining services which Trinity Iron and Steel was able to offer. Its foundry and machining capacity was among the largest in the area. Its reputation as a reliable supplier was built on its capacity to accommodate orders of whatever scale from many types of businesses at any time during the year.