MORE than what’s expected
2009 Annual Report
VISION To be the country’s consumer and retail bank of choice MISSION As an INSTITUTION: To conform to the highest standards of integrity, professionalism, and teamwork For our CLIENTS: To provide superior products and reliable, top-quality services responsive to their banking needs
About the
Cover MORE than what’s expected Many companies say a great deal about meeting customer expectations by providing quality service. At PSBank, we believe in going the extra mile, not just for our customers, but also for our various stakeholders – from enhancing shareholder value to constantly unlocking opportunities for our employees. This is the reason we have chosen MORE than what’s expected as the theme of our 2009 annual report. Simply put, this means running a marathon, not just a 100-meter dash, to be closer to our goal of being the country’s consumer and retail bank of choice.
For our EMPLOYEES: To place a premium on their growth, and nurture an environment of teamwork where outstanding performance is recognized For our SHAREHOLDERS: To enhance the value of their investments CORE VALUES In realizing our mission and vision, we will be: • proactive in serving our customers; • performance-driven and recognized, reinforced, and rewarded accordingly; • professional to the highest standards and in all respects; • people-oriented in our dealings with our internal and external customers alike.
About Contents 02 04 08 10 12 17 18 22 26 30 39 40 44 46 50 52
Financial Highlights Operational Milestones Message from the Chairman President’s Report Customers Products & Services Shareholders People Communities Corporate Governance Audit Committee Report Risk Management Board of Directors and Advisers Senior Management CFO’s Report Management’s Discussion and Analysis
54
Statement of Management’s Responsibility
55
Independent Auditor’s Report
56
Audited Financial Statements
138 146
PSBank
PSBank Branches Metrobank Directory
Since it opened its first branch on September 26, 1960, Philippine Savings Bank (PSBank) has grown into the country’s second-largest thrift bank in terms of assets. It is the first publicly listed thrift bank in the Philippines. It caters mainly to the retail and consumer markets and offers a wide range of products and services such as deposits, loans, treasury and trust. As of December 31, 2009, PSBank has 170 branches and 306 ATMs nationwide, of which 133 are offsite. The Bank is also able to reach customers worldwide through PSBank Remote Banking, its online banking facility, which has more than 30,000 registered users. PSBank belongs to the Metrobank Group, whose companies are engaged in banking, financing, leasing, power generation, real estate and stock brokering through a network of over 800 local and international branches, offices and agencies. For more information about PSBank, log on to its website, www.psbank.com.ph
PSBank 2009 Annual Report
1 >>
Financial Highlights
TOTAL ASSETS (in Php billion) 93.1
55.1
2005
62.4
2006
68.7
2007
74.6
2008
77.4
48.0
2005
2006
57.8
2007
61.7
2008
Increase due to continuous expansion in loan portfolio
2009
TOTAL DEPOSITS (in Php billion)
51.4
25%
25% Growth due to active deposit generation campaigns and establishment of more branches and ATMs
35.7
14% Increase due to sustained demand for auto, housing and personal loans
29.4 31.2
1,018.2 646.4
940.2
818.8
2006
2007
2008
11.0 7.1
6.6
2006
2007
2008
>> 02
2006
2007
2008
PSBank 2009 Annual Report
2009
30%
2009
BREAKDOWN OF LOANS AND RECEIVABLES 36% Auto Loans
33% Mortgage Loans
19% SME Loans
7% Personal Loans
2005
Increase driven by the doubledigit growth in net interest income, income from net service fees and commissions, and other operating income
Growth placed the bank’s total capital adequacy ratio at 14.44%, well above the 10% minimum required level for all local banks.
8.5 5.3
32%
2009
CAPITAL FUNDS (in Php billion)
2005
TOTAL LOANS AND RECEIVABLES, NET (in Php billion) 47.3
1,240.0
2005
2009
41.6
NET INCOME (in Php million)
Auto Loans Php 17.2 billion Mortgage Loans Php 15.6 billion SME Loans Php 8.8 billion Personal Loans Php 3.2 billion
STATEMENTS OF CONDITION (December 31) 2009 ASSETS Cash and Other Cash Items Interbank Loans Receivable and Securities Purchased Under Resale Agreements Investments Loans and Receivables Investments in an Associate and a Joint Venture Property and Equipment Investment Properties Other Assets LIABILITIES AND EQUITY Liabilities Deposit Liabilities Subordinated Notes and Bills Payable Other Liabilities Equity Common Stock Capital Paid in Excess of Par Value Surplus Reserves and Surplus Net Unrealized Gains and Cumulative Translation Adjustment STATEMENTS
2008
2007
2006
2005
9,099,722,803
5,941,771,647
4,917,346,802
6,775,002,405
3,954,589,308
5,900,000,000 23,282,265,995 47,308,237,957
750,000,000 19,505,842,607 41,603,346,112
5,306,462,184 16,513,213,747 35,656,415,013
900,000,000 17,980,291,094 31,227,740,193
16,790,347,397 29,369,241,237
788,310,337 1,985,474,732 2,582,767,705 2,141,050,112 93,087,829,641
369,951,789 1,765,934,385 2,776,144,811 1,923,728,112 74,636,719,463
323,131,186 1,750,116,412 2,484,664,315 1,711,923,710 68,663,273,369
150,661,634 1,724,110,239 2,522,567,610 1,070,864,948 62,351,238,123
1,608,598,929 2,329,437,516 1,084,576,936 55,136,791,323
77,390,211,286
61,678,482,921
57,846,984,413
51,444,852,290
48,024,147,242
1,973,881,534 2,711,598,326 82,075,691,146
2,208,541,621 2,276,970,219 66,163,994,761
1,968,276,843 2,247,937,657 62,063,198,913
1,965,931,227 1,791,722,651 55,202,506,168
1,793,577,123 49,817,724,365
2,402,524,910
2,402,524,910
2,019,383,150
2,019,383,150
1,795,015,200
2,818,083,506 5,087,136,893
2,818,083,506 4,027,311,845
1,220,819,206 3,231,311,748
1,220,819,206 2,576,578,772
693,554,524 2,191,968,323
704,393,186 11,012,138,495 93,087,829,641
(775,195,559) 8,472,724,702 74,636,719,463
128,560,352 6,600,074,456 68,663,273,369
1,331,950,827 7,148,731,955 62,351,238,123
638,528,911 5,319,066,958 55,136,791,323
OF INCOME (Years ended December 31)
Interest Income Interest Expense Net Interest Income Net Service Fees and Commission Income Total Operating Income Other Expenses Provision for (Benefit from) Income Tax Net Income
2009
2008
2007
2006
2005
7,529,532,086 2,696,054,957 4,833,477,129
6,129,607,034 2,420,109,373 3,709,497,661
5,492,440,909 2,294,106,474 3,198,334,435
5,158,958,572 2,398,491,189 2,760,467,383
4,909,676,487 2,187,321,561 2,722,354,926
596,241,357 6,271,337,230 4,942,951,461
534,365,260 4,937,458,499 3,843,526,649
463,915,160 4,866,602,454 4,217,796,960
407,746,060 4,055,704,943 3,146,545,391
361,733,042 3,414,632,481 3,033,720,414
133,501,051
200,600,860
(321,946,895)
95,496,572
(265,446,139)
1,240,014,416
940,151,593
1,018,221,941
818,777,825
646,358,206
PSBank 2009 Annual Report
03 >>
Operational Milestones Increased bookings through branches by 19% through various marketing activities and strategic use of branch locations Reduced turnaround time by 50% due to process enhancements Introduced on-site encoding that enables clients to apply for a loan at open houses of real estate developers and get the status the same day
Branches as of 2009
10%
Increase in the number of PSBank Remote Banking users, now totalling 30,000
Expanded offsite ATM network to 133 in Metro Manila and neighboring provinces Opened six new branches: Balanga, Bataan; Kalayaan Avenue, Taguig City; Parang, Marikina City; Butuan City, Agusan del Norte; Puerto Princesa, Palawan; and Lipa City, Batangas
Increased auto loan portfolio by 16% and bookings by 11% Sustained dealer coverage, operation of sales desks, and aggressive promotion in provincial branches Launched “Isang Tulog Lang” campaign that focuses on getting a PSBank Auto Loan in as fast as 24 hours via SMS Launched PSBank Pre-Owned Automart in May 2009 as a dealership for previously owned vehicles
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PSBank 2009 Annual Report
47% Increase in revenues from mortgage loans
E-Banking
Opened a new branch in Kalayaan Avenue, Taguig City, which will serve as the model for new and soon-tobe renovated branches
Auto Loans
Branch Banking
Market share in auto loans
300%
Mortgage Banking
170
Generated over 1.5 million online activities and transactions Added 41 new merchants for bills payment – from credit card issuers and insurance companies to charitable organizations Added new features such as Quick Loan Inquiry, eStatements, and Check Images which make for less paper and better client monitoring of issued checks
Renamed Money Card as PSBank Flexi to best capture the product’s flexibility features Launched Flexi Deals, a merchant tie-up program whereby PSBank Flexi clients enjoy discounts and freebies in selected establishments
Personal Loans
Adopted a conservative sales acquisition strategy due to the global crisis
2009
Exceeding
Expectations
2009 was a significant year for PSBank as we continued to take great strides in enhancing our menu of products and services, as well as strengthening our delivery channels and internal infrastructure. We are working harder to deliver the financial solutions our customers require, the simpler and faster banking experience they desire, and the services and support they deserve. We will always strive to take that extra step to continuously offer our various stakeholders more than what they expect from PSBank. We believe that we will only succeed in delivering a different kind of banking experience if we build a different kind of bank – a PSBank that is Simple lang. Maaasahan.
PSBank 2009 Annual Report
05 >>
Operational Milestones
99%
Initiated mandatory certification programs for credit verifiers, file matchers and real estate appraisers to maintain the quality of the bank’s loan portfolio Completed the programming of Blackberry enhancements for field credit verifiers which aims to speed up the credit processing of all PSBank consumer products
Accessibility of PSBank’s new Customer Service Hotline
Finance & Treasury
24/7
Increased customer access to PSBank services through new Customer Service hotline and emails Collaborated with Collections Department in handling customers’ loan inquiries Enhanced processes of handling customer requests and feedback, and informing concerned business units through automation
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PSBank 2009 Annual Report
44% Growth in placements with Treasury
Marketing & Communications
For auto loans, over 90% of loan applications were processed within 24 hours
Increased peso and dollar deposits through improved Treasury marketing to clients
Customer Service
Credit Administration
Turnaround time on PSBank mortgage loan applications with credit decision in five days
Implemented system enhancements to improve reportorial compliance and productivity tracking
Launched the OFW Savings Account; “Isang Tulog Lang” campaign for Auto Loans; Instant ATM Issuance; and Prime Rebate, the only loan rebate program in Philippine banking Infused innovative promos to perk up branch openings Re-established the Market Research Division to support the needs of various units
Implemented the 2009 Internal Audit Plan which included 293 projects for completion Completed assurance reviews of all branches, loans/sales desks, and head office units Attained a quality assessment opinion/ rating of “General Conformance” with International Standards for the Professional Practice of Internal Auditing, as required by regulators
Number of projects included in 2009 Internal Audit Plan
Compliance
Internal Audit
293
PSBank ATM availability in 2009 vs. 96% in 2008
IT & Operations
Aligned internal audit processes with best practices
99%
Fostered harmonious working relations with regulators through quarterly meetings and timely submission of reports Improved the level of PSBank’s compliance with the Anti-Money Laundering Act (AMLA) Updated the Corporate Governance Manual based on the latest SEC and BSP policies Conducted an annual compliance risk assessment of the bank
Expanded PSBank’s ATM channel to a total of 306 ATMs in 2009 Improved the bank’s system infrastructure through the acquisition of a storage machine to house data requirements for the next five years Upgraded the mainframe system which resulted in faster system processing, online response time and provision for additional capacity Upgraded the bank’s network infrastructure by moving to the IP/VPN technology, resulting in higher bandwidth capacity and significant improvements in branches’ access to the bank’s systems Implemented a Host-to-Host Remittance System that allows automatic data transmission from partner institutions to the PSBank server, which facilitates real-time processing of remittance transactions and offers remitters the option to send money through auto-crediting of PSBank accounts or via branch pickup PSBank 2009 Annual Report
07 >>
Message from the Chairman
We are a leading consumer and retail bank whose great strength has always been to cope with and stay ahead of change and exceed expectations.
Constantly identifying with the changing needs of our various stakeholders is our response to the demands of a marketplace characterized by volatility and complexity. This tactical positioning becomes more compelling as we turn 50 this year. Our institutional longevity principally draws its strength from a corporate culture which identifies with the need to continuously innovate our menu of product and service offerings while constantly expanding our reach and presence. The global economic crisis has not changed this fundamental approach to the way we do business. For many companies and individuals, 2009 has been among the most challenging of times. It was a year when the Philippine banking industry was not only coping with the fallout from the economic recession in many major markets, but was also learning to navigate through some of the most profound shifts in tried and tested business models. To PSBank, it was a year of exceeding expectations and delivering stellar results. We are happy to report that we are entering our 50th year in Philippine banking with a solid performance and with expectations of even stronger years ahead. Aside from a management team with a proven record of imagination and achievement, we also have a healthy balance sheet that allows us to continue making prudent investments for the future. Robust industry Against the backdrop of an economic recession on the global stage, Philippine banks performed relatively well in 2009. The sector posted a double-digit growth of 13.1% from negative 0.8% in 2008.
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PSBank 2009 Annual Report
Unlike during previous crises, the sector continued to mobilize deposits and fund new loans. Non-performing loan ratios declined, while provisions generally increased. Despite the global financial turmoil, the capital adequacy ratio of the Philippine banking system remained largely stable at 15.68%. More importantly, other key metrics suggest that the economy was not all that bad: inflation was lower at 3.2%; domestic liquidity was higher; the country’s balance of payments surplus rose to US$ 5.3 billion; and Gross International Reserves of US$ 44.2 billion were an all-time high. Moving forward While 2009 has been a trying year across many firms and industries, it was an exciting year for PSBank. For one, The Asian Banker, a leading regional publication, recognized PSBank as the No. 1 Philippine bank out of the top 150 Asia-Pacific banks in terms of financial performance and attractiveness to the global investor community. We also reaped a total of six awards from prestigious institutions for our good governance and disclosure practices in our 2008 annual report. All these recognitions resonated with our preparedness for the advent of any economic crisis. It also came from the confidence we had in ourselves as a result of our adherence to prudent and sound banking principles. As we remain excited about the future, we also take a hard look at our business with a renewed sense of urgency and focus. Yes, the economic and political environments may continue to be testy, particularly with the coming elections.
But the opportunity to bring PSBank to new customers, in new locations, via new immersive channels is a reason for us to look to the future with more vigor. In 2010 and beyond, we will continue to deliver the PSBanking experience of Simple lang, Maasahan with innovation and greater value for our various stakeholders. Simply put, if a bank works hard to give its customers products they can’t get anywhere else at prices they think are fair, they will reward that bank with their business and their loyalty. PSBank will continue to honor that loyalty by continuing to provide you, our shareholders and customers, more than what you expect of a banking institution. We are delighted to welcome our former adviser, Mr. Joaquin Aligguy, who has joined our Board of Directors and brings his broad perspective and extensive experience in our sector. In the same vein, we thank Mr. David O. Chua and Atty. Alfredo P. Javellana II for sharing their expertise with the Board over the last four years. They have played an important role in constructively challenging our strategy and ensuring that PSBank is very well governed. We also thank our shareholders, customers, management team, people and partners for their continued support. We look forward to MORE future successes with you.
JOSE T. PARDO
PSBank 2009 Annual Report
09 >>
President’s Report In challenging times like these, it’s easy for companies to let uncertainty manage them. It’s convenient to argue for prudence, to be satisfied with merely meeting minimum expectations. At PSBank, we have always been driven, not only by what the present allows, but by the benefits that the future can bring—what it holds, how it’s shaped, what needs to be started today, and how we adapt to it. We believe trying times give us more reason to think long-term and require us to push beyond what is convenient in the short term. We continue to be guided by what our various customers and stakeholders need over the long haul. We pursue it with determination while not allowing current business conditions to be a distraction. SO WHAT DO WE SEE? A growing need for access. Tomorrow’s customers will expect it of their bank. They will define the time, place and mode of access that is convenient to them. PSBank has to provide its customers with options that suit their preferred manner of interacting and banking with us. Shared expectations between PSBank and its customers. Their hallmarks are high quality, simplicity of use, and consistent service delivery. On such a platform we must build an array of choices for our clients. A need for innovation. It continues with the best of the old, and makes it work seamlessly with the excitement of the new. These are three critical areas in which PSBank continues to invest—access, expectation, and innovation—to stay competitive in good times and bad. HOW DO WE EXECUTE THESE? As Filipinos become global and mobile, they need fast and convenient access to information, ideas and opportunities. PSBank has to be there to provide for their needs. To this end, we continue to strategically expand our network and delivery channels to provide various access points to more customers.
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PSBank 2009 Annual Report
In 2009, we installed 117 new ATMs, of which 108 are offsite, and opened six new branches. As a result, we ended the year with a network of 170 branches and 306 ATMs nationwide. It must have made a difference to customers since the volume of transactions in PSBank ATMs was 45.8% higher than the previous year’s level mainly due to the high availability of our machines 24/7.
We also insist on simplifying our processes. Our aim is to ensure that every customer experience is a hallmark of PSBank’s consistent quality service. We regularly re-assess the alignment of our organization and resources so that these are focused and deployed to processes that support the banking experience customers not only deserve, but have come to expect of PSBank.
PSBank Remote Banking grew its customer base to more than 30,000 users and 61 registered companies for bills payment. Our online banking facility allows us to reach more customers beyond the confines of our branches. They are able to remotely experience PSBank’s Simple lang, Maaasahan right in their homes or offices, here or abroad, through PC or mobile Internet.
As we invest in the future, we remain guided by our core values. Through good times or bad, we continue to build talent and teamwork in our organization. Our people resources are PSBank to our customers, and they’re the ones ultimately responsible for every customer experience. Through their extraordinary efforts over the past 49 years, PSBank has been able to make a difference in the market which customers have recognized through repeat sales, referrals, and a growing relationship with PSBank.
Despite the economic slowdown, PSBank continues to differentiate itself by expanding its portfolio of innovative products and financial solutions. In 2009, we launched the Overseas Filipino Savings Account, the Instant ATM card, and the PSBank Prime Rebate, the industry’s first loan rebate program in the country, to respond to our customers’ unique needs. We also launched a pioneering effort to extend financing to motorcycle buyers. We became the first savings bank in the country to partner with a global integrated trading and investment company, Sumitomo Corporation, which has a wide and diverse range of business interests in Japan, Asia, the Americas, Europe, and China. The partnership formed a Php 2-billion motorcycle financing company called Sumisho Motor Finance Corporation and will provide financing for all brands at easy-to-acquire terms.
The strategic role our people play has also been highlighted and recognized by reputable local and international organizations. Our 2008 annual report garnered a total of six awards from the Management Association of the Philippines, the International Association of Business Communicators, and the Public Relations Society of the Philippines. For 49 years, we’ve been confident about a more prosperous future because we’ve been part of creating it. This will not change as we celebrate our 50th year as a banking institution in 2010. I am very excited about what the next 50 years will bring as we aim to continue to pleasantly surprise you by going beyond what you expect.
HOW DO WE DO MORE? To continually improve our profitability, we need to be able to do more: simply, efficiently and with available resources. That’s why we continue to invest in powerful and enabling information technology solutions.
PASCUAL M. GARCIA III
PSBank 2009 Annual Report
11 >>
Customers
More than just variety.
>>12
PSBank 2009 Annual Report
To stay ahead and be top of mind of customers, PSBank recognizes it is no longer enough just to meet their expectations. We are discovering fresh and exciting opportunities in offering more than what’s expected to customers. This leads to new frontiers towards revenue growth. 2009 was no ordinary year as PSBank unveiled its Kakaiba brand campaign that captures the uniqueness and innovativeness of its products and services. The year saw the launch of the PSBank Prime Rebate, the first and only loan rebate program in Philippine banking, that rewards borrowers with discounts for advance or excess loan payments. We also launched the “Isang Tulog Lang” campaign for our Auto Loan product that highlights the ease in owning a car through our fast 24-hour approval through SMS.
Products & services
that fit every customer need. We tapped the Overseas Filipino market and offered the PSBank OF Savings Account (OFSA) in 2009. The product enables OFWs or any of their family members to have a savings account that does not require an opening or maintaining balance. The year also saw another industry first from PSBank with the launch of a personalized instant ATM that customers can get on the spot in all our 170 branches nationwide. In 2009, PSBank also invested more in growing and strengthening our various delivery channels. Our online banking facility, PSBank Remote Banking, now has more than 60 billers and 30,000 registered users. We also added 108 new offsite ATMs in various high-traffic locations, bringing our ATM network nationwide to 306. We also opened a new 24/7 Customer Service hotline and email addresses to make PSBank more accessible to our customers anytime, anywhere.
133
offsite ATMs
PSBank continues to extend its reach and presence through its growing ATM network that provides day and night, 24/7 banking to customers nationwide. In 2009, the bank opened 108 new offsite ATM sites in various shopping malls, supermarkets, and MRT and bus stations, bringing PSBank closer to its customers.
PSBank 2009 Annual Report
13 >>
Customers Personal Loan Bernard Liberia, President and Owner, Automobili Co.
Housing Loan Ms. Carmen Soriano, singer/celebrity
Singing my way
Secret to looking young I started with one car. Now I have over 200. Growing up, I knew that the best, and sometimes only, way to attain financial security was to go into business. For that reason I took up Business Administration in college. I dabbled in commercial modeling when I was young and worked for a car company after graduation. But being in business has always been my ultimate goal. I was 30 when I started Automobili Co. in 2001. I saved some money from work and bought a car for just Php 28,000; I sold it for Php 58,000. The rest, as they say, is history. Today, Automobili has three outlets, including a sprawling showroom in the Open Car Park of SM Bicutan Building A. We have over 200 cars for sale, and currently employ 25 people. Four years ago, there was a particular car I wanted to buy so badly. I was already banking with PSBank then, so I talked to the branch manager. She told me: “Don’t panic. We have something good for you.” That’s how I was introduced to PSBank Flexi. I got approval after just five days. The card was even delivered to my office address. It started off as a personal loan. As a businessman for over 10 years, however, I know that the key to more sales in a car exchange is to have more cars. Simply put, the more choices clients have, the more they can decide on what to buy. But getting one’s business off the ground is pretty hard if you don’t have sufficient funding to buy more units to display. This was the opportunity that the PSBank Flexi addressed.
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PSBank 2009 Annual Report
People think that just because I’m a celebrity, I can easily get things done. Therefore, it is easy to assume that I can easily achieve things when financial needs become inevitable. I’m a very private person and do not appear much on newspapers, magazines, or television. Whatever achievements I have accomplished have been made possible by following the requirements and documents of banks, done in the proper and legal manner. I have been a client of PSBank for the past 20 years and consider myself fortunate to have chosen PSBank for my banking needs, such as mortgage and other loans. Whatever problems I have encountered, the officers and personnel have been very helpful in assisting me. I’m glad that PSBank is there to help make life simpler.
The card provides me back-up capital. I can withdraw the money from an ATM, which is available 24 hours a day. Really, it’s as good as cash, without the hassle of holding on to cold cash. It even comes with a checkbook so I can have safe, cashless transactions with my suppliers and dealers. It’s also nice that I can pay my loan on my own terms. For instance, most of the time, I buy a car today and sell it tomorrow. When I do this, I pay the loan in full. Since PSBanking is so hassle-free, I don’t get stressed out running my business. I know that I always have a safety net whenever I need it. Thanks to PSBank, people say I look younger than my 39 years!
“PSBank is more than just a bank. It supports our goals in life. They go the extra mile to please their customers.” Auto Loan Abelardo Valenzuela, President, Mideast Scientific and Medical Equipment Services
More mileage from banking My company, two daughters and I literally got going with PSBank. I took out a corporate loan from the Bank in early 2006 to purchase five delivery vans for my hospital equipment rental company, Mideast Scientific and Medical Equipment Services. Both my daughters bought their cars using PSBank Auto Loan. So when I say PSBank takes us to our destination, I mean it quite literally. This financing, like many good decisions in life, was borne of advice from someone I trust. That was four years ago, and the loan has so far allowed me to stretch my capital funds. Other than giving us our much-needed delivery facility, this financing has also lessened our need to shell out cash. Today, our financial standing is good enough that we are ready for the next big step in the business: purchasing our very own building. It also didn’t hurt that PSBank rates are good, and that the approval process is very fast. So fast, in fact, that once you complete all the required documents, you can expect an answer in as quickly as one day. And why stop there? Both of my daughters got their cars by borrowing from PSBank. PSBank capitalizes on good credit risks, and that’s something we appreciate. To us, PSBank is more than just our bank. It supports our goals in life. They go the extra mile to please their customers. I am glad PSBank is here to help make our journey to success faster.
SME Loan Allan and Tess Ramos, owners of Wellbest Curtain House
More than the usual banking experience
My wife and I started weaving our story of financial success when we were still kids. We met while our parents sold garments in the same corridor of Central Market. Let’s just say PSBank helped us in getting there faster. Growing up, I became familiar with the garments industry so it was the logical thing to get into. We eventually realized there was a growing market for curtains. Wellbest Curtain House is now in several major retail stores. From our single store at the back of the busy and crowded Baclaran shopping district, we have thankfully gone a long way since starting the business in 1997. Wellbest is what we call our “active income.” It’s where we get most of our money. As we are in our mid-30s, we know that we can’t be as hands-on with a business like this forever. And so we decided to have something on the side – our “passive income” if you will. We wanted to get into something that requires minimal or no supervision at all. So we invested in apartments that we rent out. Our goal is to eventually switch everything from “active” to “passive” income. And since the value of land in the city doesn’t really go down, it made perfect sense for a young family such as ours (our kids are 11 and six years old). Making this transition is where PSBank enters the picture. We took out an SME loan from PSBank in July last year. This allowed us to buy another four-storey apartment building. Since this ultimately pays for itself – a self-liquidating asset – the loan also functions as additional capital for our main business. Instantly, we were issued a check that was ready for encashment. That was the main attraction, really. The process was very light and comfortable. It was very quick but without sacrificing security. With PSBank, what we have is more than the usual banking experience. The bank does more than what’s expected: it offers several incentives for early payments, such as rebates and lower interest rates. For business people like us, every centavo counts. So every time we get extra cash on hand, we pay. That way, we save even more money in the long run. And the more we save, the closer we are to realizing our dream.
PSBank 2009 Annual Report
15 >>
Customers
PSBank Remote Banking Luisito Bacani, IT Dept., Philippine Daily Inquirer
“All I have to do is turn on my computer – as if the bank is there, just for me. With this kind of service that gives you more than what you expect, there’s no reason not to like PSBank. With Remote Banking, I love PSBank even more!”
More than hooked It was an advertisement in the Philippine Daily Inquirer, where I’ve been working since 1996, that caught my eye. The ad talked about PSBank Remote Banking. It promised to make banking more convenient for ordinary Filipinos like me. With just a click of a mouse and in the comfort of my home or office. Any time and all the time, since the Internet knows no holidays. I figured PSBank would be true to its word. For I had been banking with them for five years by then and had not encountered any problem with my payroll and checking accounts. Neither had my wife Evelyn, who also works at the Inquirer. And since I did not want to waste any more of my time lining up in bank branches or going to the nearest ATM (I’d rather spend time with my son Gio), I decided to give Remote Banking a try. I have been hooked since. Four years ago, Remote Banking required me to get a “passphrase” from my PSBank branch of account. Similar to the PIN mailer that ATM or credit card users get, the passphrase helps ensure the security of online transactions. These days, as part of PSBank’s continuing improvements in its Remote Banking service, everything is done online. There is no more need to go to the branch to get a new passphrase. Still, security is not compromised. I go to the site often, especially to inquire about my ATM account balance. The conventional approach is to review one’s debits and credits by asking for a printout from branch
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PSBank 2009 Annual Report
personnel. And there are days when the queue can be quite long. You can be spared all that waiting by using Remote Banking since the numbers are all there. Plus I can easily transfer money from my ATM account to a checking account on specific dates. I have also enrolled specific accounts for immediate or futuredated bills payment of credit cards, utilities like water and electricity, cable and phone. After the one-time enrollment, you can pay by just clicking the mouse or tapping a keyboard. Banking really becomes so easy and I feel like I have more control over my accounts. I can also e-mail any log-in or access problem to remotebanking@psbank.com.ph and expect a prompt reply. I also get the added benefit of knowing the latest exchange rates. I can even apply for a loan online if I choose to. Remote Banking helps me do everything – and I mean everything I need. Except, of course, withdraw cash (but who knows? it may come soon!). Before this service came along, I often went to a PSBank branch for one reason or another. Sometimes, I would even go more than once. But with Remote Banking, I can visit the site whenever I want and wherever the Internet is available. No dress code to follow, too. Now, the only time I have to be physically present in the bank is to withdraw cash. You can just imagine the time I am able to save. All I have to do is turn on my computer and it is as if the bank is there, just for me. With this kind of service that gives you more than what you expect, there’s no reason not to like PSBank. With Remote Banking, I love PSBank even more!
Products and Services Billers and PSBank Channels Available Deposit Products • PSBank ATM Savings • PSBank Regular Passbook Savings • PSBank Passbook with ATM • PSBank Regular Checking • PSBank Premium Checking • PSBank Dollar Savings • PSBank Dollar Time Deposit • PSBank Peso Time Deposit • PSBank 1-, 2-, or 3-Year Time Deposit • PSBank Prime Time Deposit • PSBank Premium US Dollar Time Deposit • PSBank OF Savings Consumer Loan Products • PSBank Auto Loan • PSBank Flexi/Money Card • PSBank Home Loan • PSBank Home Credit Line • PSBank Home Construction Loan • PSBank MultiPurpose Loan • PSBank MasterCard Business Loan Products • PSBank SME Business Credit Line • PSBank Credit Line • PSBank Short/Medium Term Loan • PSBank Standby Credit Line Certification • PSBank Domestic Bills Purchase Line • PSBank Domestic Letter of Credit/ Trust Receipt Line Payment Collection Services • PSBank Credit Card • Metrobank VISA • Metrobank MasterCard • SSS • Globe Telecom Fund Transfer Services • Telegraphic Transfer of Funds • Gift Checks/Cashier’s Checks • Foreign and Domestic Remittances • Foreign Demand Draft Trust Services • Living Trust • Employee Benefit Trust • Agency - Escrow • Agency - Investment Management • Safekeeping/Custodianship • Common Trust Fund Other Services • Payroll Services • SSS Pensioner’s Remittance Program • Safety Deposit Facility • Overnight Depository Box
UTILITIES First Peak Manila Water Co., Inc. Meralco Primewater Subic Water Visayan Electric Company TELECOMMUNICATIONS Bayantel Digitel Eastern Telecoms Globe Telecom Innove PLDT PT&T/Greendot Smart Communications CREDIT CARDS Allied Bank VISA Banco Filipino VISA Bankard-RCBC/JCB Intl BDO Credit Card Citibank VISA/MC Citibank Card Services Diners Card/Security Bank Credit Cards East West Card HSBC Credit Cards MBTC/PSB Card Metrobank MC Dollar Metrobank Unicard Metrobank VISA Dollar Metrobank VISA Peso Standard Chartered VISA/MC Union Bank VISA Credit LOANS Chinatrust Salary Stretch Citibank Savings Loan Citifinancial Corporation Citystate Bank Loan HSBC Personal Loan PSBank Loans CABLE AND INTERNET Destiny Cable - CATV Destiny Cable - Internet Infocom Planet CATV Legend:
ATM
Skycable/ Homecable/ ZPDEE INSURANCE FG Financial Fortune Care Fortune Life Great Life Financial Paramount Life Pioneer Life, Inc. PNB Life Insurance, Inc. Prulife U.K. Insurance MEMBERSHIP CLUBS CDC-Mimosa REAL ESTATE IPM Realty Rockwell Residential SCHOOLS DBTC INC - CEBU La Salle Greenhills TRAVEL AND TOLL FEES Cebu Pacific EasyTrip E-Pass Skyway GOVERNMENT NSO Helpline Plus SSS Contribution - OFW CHARITIES AND NON-PROFITS Bantay Bata Church of Jesus Christ FEBC Philippines Knowledge Channel Operation Smile Philippines Piso Para sa Pasig Resources for the Blind Inc. World Vision OTHERS British Embassy Directories Phils Corp. Loadcomph Manila Memorial PAFP / Family Physicians
PSBank Remote Banking
PSBank 2009 Annual Report
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Shareholders
More than a promise.
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PSBank 2009 Annual Report
PSBank’s overriding goal is to create long-term shareholder value by maintaining our financial strength and integrity in the marketplace. We believe we can achieve this objective by ensuring the soundness of our financial performance and maintaining transparency in all our dealings. In pursuit of this goal, our strategy is to: • Sustain the momentum of being a leader in our sector in terms of financial performance, shareholder value, product and service innovation, and customer service quality, and • Continuously improve our adherence to best corporate governance practices and reporting.
A long-term commitment to enhancing shareholder value. PSBank has a shareholder base comprising some 1,775 common shareholders of record as of March 8, 2010. These are private and institutional shareholders, including mutual funds and insurance companies. In 1994, PSBank became the first savings bank to publicly list on the Philippine Stock Exchange. Our largest shareholder continues to be our parent company, Metrobank, which accounts for 76% of total PSBank shares of 240 million. Over the past 49 years, we were able to grow our capital base due to the active participation of our shareholders who trust and believe in our business model and in our future.
LEVELING UP. PSBank stock price closed at Php 57.50 per share as of end-December 2009, 40% higher than the Php 41.00 per share the previous year. Earnings per Share was higher at Php 5.16 as of December 2009 from Php 3.98 the previous year.
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Shareholders Capital raising PSBank is now the largest capitalized thrift bank in the Philippines. Through rights offers that allowed our shareholders to participate in our success, we were able to grow our capital base to Php 11.1 billion as of end-2009. A rights offer in March 2006 raised Php 750 million while another in February 2008 generated Php 2 billion. Both were oversubscribed. Prior to these transactions, the bank raised Php 2 billion through an unsecured subordinated debt or Tier 2 offer that allowed a wider range of investors to place their funds in PSBank. The Tier 2 bonds allowed holders to earn an interest of 10% on the placements over the period of five years, with an option for PSBank to call or pay back the bonds in 2011. Shareholder communications PSBank’s Finance Group manages our investor relations and coordinates shareholder communications. It is responsible for providing accurate and timely information to all shareholders and regulators. We comply with the disclosure rules of the Philippine
Stock Exchange, the Securities and Exchange Commission, and the Bangko Sentral ng Pilipinas. Our shareholder communications aim to ensure compliance with the rules and directives that apply to information to all stakeholders. Our goal is for all participants in the market to receive quick, simultaneous, accurate, relevant and reliable information about anything that may affect the share price of the bank. All press releases, annual reports and other relevant information are published on our website www.psbank.com.ph as well as on our Intranet site called InfoChannel. Transparency At the heart of our shareholder relations strategy is transparency. Shareholders depend on PSBank’s good financial performance to enhance the value of their stock. Applying high standards of transparency in financial reporting and governance practices boosts the confidence of our shareholders in PSBank. For three consecutive years, PSBank has consistently made it to the Management Association of the Philippines’ (MAP) Best
Shareholder Lisa Mijares
More than excellent returns I watch the stock market everyday. I know, for instance, that PSBank shares cost Php 28 in 2005, that they’ve reached the high Php 50s, and that they currently stand in the mid-Php 40s. It was thus my informed choice, more than anything else, to invest in PSBank shares during its stock rights offering five years ago. Like most sophisticated shareholders, I asked myself several questions before I invested in this bank. Is it really stable? Is it growing? More importantly, do I believe in this institution? That PSBank shares have shown sustained growth over the years answered my first two questions. But it was my personal dealings with the bank that developed my trust for the long haul. The bank makes it a point to regularly reach out to its clients, update them on what’s going on, and inform them of programs and promos. They provide information that customers and shareholders need to know. It’s very transparent. This allows me to make decisions based on credible and timely information. In fact, the bank has dedicated Customer Service associates to answer questions from clients and shareholders in a jiffy.
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PSBank 2009 Annual Report
It doesn’t worry me that I’m five years away from retirement. The rapid growth of PSBank and its share prices tells me that I’ve made the right choice as an investor. In fact, I am so satisfied that I also took out an auto loan from the bank in 2006. Like PSBank shares, the loan stayed true to its promise – quick approval and low interest rate. So while I have shares invested in other publicly listed entities, I don’t see myself selling my PSBank shares anytime soon. Its excellent returns may have been enough to convince a financially savvy investor like me, but it is the way the bank relates to its shareholders that has made all the difference. For this reason, it gives me more pride to say I own part of this bank – even with just my Php 10,000 stock investment.
Annual Report Awards, which annually recognizes the top 20 publicly listed Philippine companies for adhering to the principles of good governance (transparency, accountability and fairness) in financial reporting and disclosure practices. Our 2008 Annual Report, with the theme “Inspiring Change”, received a total of six awards in 2009 from various prestigious institutions. This includes being the “Best in Corporate Governance Disclosure among Financial Institutions” and the “Best in Compliance with Philippine Financial Reporting Standards among Financial Institutions” given by the MAP. The annual report was recognized as the fifth best overall. In addition, the annual report was also recognized by the International Association of Business Communicators and the Public Relations Society of the Philippines as an effective communication tool. We take pride in these achievements as they clearly affirm the quality of governance, transparency and compliance in PSBank. We hope that our clients and investors become more confident in supporting us. Our mission is to keep adding more value to our innovative banking products and services. We would then ultimately become the consumer and retail bank of choice.
Dr. Victor L. Caparas, holder of PSBank Tier-2 bonds
Getting lucky
“I can rest easy that my investment is solid and sound, primarily because PSBank is run well.”
I consider myself a lucky man, and participating in PSBank’s Tier-2 issue is one of the best decisions I have ever made in my life.
Since then, things have worked out very nicely. PSBank is not as “flashy” as other banks, but it continues to exceed expectations.
As a doctor, I don’t really get much in terms of retirement. It’s important then to have sound investments for my family’s future.
Don’t get me wrong. I’m not a trader. I wake up at 4:30 a.m. and my daily itinerary is always packed. I wanted to invest in something without thinking about it too much, and that’s what I got.
I’m a very busy man. I head the Ophthalmology Department of The Medical City as well as the ophthalmology section of the Ateneo School of Medicine and Public Health. This is why I need to make my hardearned money work for me, but with minimal supervision. When my first cousin informed me of an issue PSBank had five years ago, I considered it perfect timing. I’m not very adept at financial matters so I need the advice of family members who are bankers. I’ve heard many good things about PSBank. The promise of earning half of my principle in five years by investing in PSBank bonds was enough to convince me to go for it.
Sure, from time to time, I check the business pages of dailies for stock prices, but that’s about it. My PSBank bonds are very low maintenance, and I can rest easy that they’re solid, primarily because the bank is run well. Right now, I can say that I’m lucky. I’m 13 years away from retirement, my wife has a thriving practice in pediatric dentistry, and our only son, after an undergraduate scholarship at Harvard, is now very successful in the US. As a bondholder, I hope for more investment opportunities. If there’s another PSBank issue that’s as attractive, I won’t even think twice. As an investor, how often can you say that?
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People
More than job security.
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PSBank 2009 Annual Report
At PSBank, we believe that a motivated, committed and productive workforce that delivers the level of service that is more than what’s expected by our stakeholders is vital to our long-term business success. We are committed to ensuring that we attract and retain the best talent and create an environment in which all our employees can flourish. In 2009, PSBank invested in providing a total of 115 formal training programs to employees. Every PSBanker spent an average of 16 hours or two days of training in 2009. In addition to attracting top talent, the bank also demonstrates its commitment to professional career development. One of our homegrown programs, the Staff Professional Enhancement and Educational Development (SPEED) Program has been running successfully for the past four years.
Unlocking opportunities. The program is offered to high-performing branch staff and incoming officer candidates of our business units. Through SPEED, the bank is able to draw on a ready stream of talent and ensure its business sustainability. PSBank also ensures that its people share in its success by offering a compensation and benefits scheme superior to industry standards. In 2009, the bank successfully and swiftly capped its Collective Bargaining Agreement that provides additional benefits and incentives tied to performance and profitability targets. Emergency cash assistance, calamity loans and relief goods were also given to more than 500 PSBankers who were affected by Typhoons Ondoy and Pepeng in 2009.
2,501
PSBankers
Out of PSBank’s total workforce as of end-2009 , 67% occupy rank and file positions and 54% are below the age of 30. Nearly 60% of the total are union members. Women comprise the majority of its people as they account for 64% of its personnel complement.
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People PSBank Loyalty Awardee Benjamin J. Oporto, Senior Manager/Head, Cebu-Colon Branch
Big on loyalty
PSBank SPEED Valedictorian Gwen C. Ayson, ATM Business Development Department Head
Fast forward Fresh out of college with a degree in economics from UP Pampanga, I first tried my luck working in my own hometown. I started taking an interest in banking and decided to move to Metro Manila. There I first worked in another bank before I eventually got an opportunity to work at PSBank’s Head Office in 2005. I was appointed as a secretary to the bank president, Mr. Pascual M. Garcia III. Under his helm, I got the training I was looking for. Everyday at 8 a.m., I would already be in his meetings where I’d be briskly taking notes. As I attended meetings of every department and strategic business unit, I soon began to understand banking and got to know many people. This made me acquire the discipline of working fast and always being on my toes. All these were in preparation for even bigger things to come, I thought. And I was not wrong. It was not long before Mr. Garcia recommended me to take the SPEED (Staff Professional Enhancement and Educational Development) program of the bank. Initially, I thought I wasn’t working fast enough so he wanted me to enroll in a course that produced hyper employees. SPEED turned out to be a program he conceived to develop bank officers from the rank and file who consistently excel in their work. It ran for six months, the first three of which were held in a classroom and the other three spent on the job. I joined the seventh batch with 19 trainees. I was particularly conscious of trying to prove that I deserved to be part of SPEED. People would naturally suspect that coming from the Office of the President already gave me an advantage. What people didn’t know was that one had to pass a tough exam and an even tougher interview before a panel of mentors and senior bank officers. I got an exam mark high enough to exempt me from the interview. In the end, discipline and diligence paid off. I graduated from the program as batch valedictorian. I now head the ATM Business Development Department. At 26, I feel I’m making headway in my career. SPEED certainly fast-tracked my movement up the corporate ladder. When people ask me what I’ve learned in the program, I tell them I learned to work in a team and deal with others. I also learned to be patient. Everything comes in its own time.
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PSBank 2009 Annual Report
I started with PSBank in 1976. Just to give you an idea of how long ago that was, it was way, way before the first ATM was introduced in the country. What we did then was “conventional banking” in its purest form. There were already computer-like machines though they were the size of library shelves. I was 27 years old when I joined PSBank as a bookkeeper. Due to diligence, I was promoted to Branch Cashier three years later. Since then, I’ve moved up the ranks to Branch Officerin-Charge, Senior Officer-inCharge, and Manager. Today, five years prior to retirement, I hold the rank of Senior Manager as Branch Head of PSBank Cebu-Colon. I am often asked, “Why have you stayed with PSBank?” My usual reply is: “Why shouldn’t I?” Up to now, I can humbly say I am still “marketable.” Rival banks have never stopped knocking on my doors, but I always say “no.” For PSBank is not just a stable company; it also knows how to value its people. Our benefit scheme is one of, if not the best, in the industry. And we never stop learning. We are required to complete 16 hours of training every year. So aside from what I learn on the job – and I learned a lot – I pick up new things. My growth in PSBank, however, hasn’t only been on a professional level. Over the years, I’ve learned that diligence, honesty and loyalty are worth treasuring. Most importantly, I’ve learned to respect myself as a person. When I do that, I discover that people – regardless of whether they’re my superiors or subordinates – respect me as well. My biggest challenge over the years was dealing with technology. Everything is so high-tech now. There are a lot of aspects in modern banking that were unthinkable three decades ago. The human aspect of banking – dealing with customers and ensuring their satisfaction – has remained largely the same, however. Loyalty is very important to me. I always tell everyone how to have loyal clients: be their friend. This way, you’ll play a bigger role in their lives. This goes beyond just being their banker. I know I’m replaceable, especially now that customers are bombarded with choices, and loyalty is even harder to gain. I am also loyal when it comes to my sport. I’ve been playing tennis for 25 years now. When I retire, I look forward to spending more time on the court. Right now I can only play during weekends and holidays – barely enough for the four clubs of which I’m a member. Tennis is the only other thing aside from working in PSBank that I’ve done longer and enjoyed just as much. I invested 34 of my years in the company – for which I got a Loyalty Award. I’ve never regretted a single day.
PSBank Employee Beneficiary Ma. Eloisa S. Lago, File Management Assistant and Typhoon Ondoy survivor
The silver lining Whenever I tell my life story, people find it hard to believe. I am a single parent who came from a broken family. My children, Jasmine Reigne, 7, and Allen Zion, 4, have always been in poor health. They have gone through many yayas, most of whom did not treat them well. As far as I remember, from 2005 to 2008, my kids’ health started to suffer. This forced me to go on leave from my work, no matter how much I sought to avoid doing so. That was the time when my kids alternately suffered from gastroenteritis, typhoid fever, and pulmonary problems. They were both admitted in the hospital for pneumonia when I found myself entering into a pact with God. I promised the Lord I would start fixing my life if my kids got healed. I already had my share of bad luck so I asked God to just spare my children. So when Typhoon Ondoy struck in September 2009, even though I was not a very religious person, I thought it was a test of my faith. I was in Ortigas to fetch the new yaya when the heavy rains started pouring at about 8 a.m. When I got off the MRT-Buendia station in Pasong Tamo, the floodwater was already chest high. I decided to walk all the way to our apartment on Bautista Street. I was singing praise songs to divert from worrying but my legs started to hurt from arthritis due to the flood and rain. Our house is near the creek and located at the boundary of Tramo, Pasay and Makati where the river overflowed. Our 34-square meter apartment was completely submerged in chin-high water when I arrived. Our things were no longer there. The fuse box started to trip so I had to bring my two kids to higher ground. But I don’t know how to swim and I was already having cramps. I kept on praying that I
wouldn’t faint, as I hadn’t eaten yet. I shouted for help and a neighbor who lived five houses away heard me and came to our rescue. He brought us to the second floor of their apartment. At 8 p.m., I got a text from a co-employee at PSBank, informing me there were relief goods being distributed to all PSBank employees who were affected by the typhoon. I texted Ms. Reby Igot, our Loans Operation Division Head, and she immediately asked for my home address. The next day, the floodwater was gone and we received the relief goods – cough medicines, toothpaste, soap, towel, noodles, two kilos of rice, bread, canned goods, and mineral water–brought to our doorstep. I was touched to get help from officers who didn’t know me at all. In our department, the staff even passed the hat around so I was able to buy clothes for my kids in Divisoria. The bank also extended Php 5,000 in cash assistance, and I used this to buy beddings for my kids. We were also given a five-day emergency leave. Three weeks later, I tried applying for a calamity loan with SSS and Pag-IBIG Fund, but didn’t get any during the week after the calamity. When PSBank announced the availability of a calamity loan of up to Php 75,000 at a very affordable interest rate per annum, I felt it was a gift from heaven. It only took three days before I got an approval on the loan. I immediately had the house fixed, bought books for the kids, and purchased a refrigerator, TV, LPG stove, and electric fan. The money was well spent. It took two weeks to get the house back to normal. The financial assistance was a big help, but what I didn’t expect was PSBank’s giving me hope. Having gone through Ondoy, I wrote a letter to our President. I thanked him and told him how grateful and blessed we are to have that kind of support and assistance as Ondoy victims.
I realized that life is really too short. It’s important to ask forgiveness for all our shortcomings and not to let a single day pass without thanking those who help us, regardless of our different status in life. The Ondoy experience really changed my personal as well as professional life. Personally, I learned to appreciate simple things. Even with a small amount of food supply for a single day, we were still thankful. I learned that there really are good people around us, who serve as God’s instrument in times of adversity. Since my Ondoy experience, I’ve become more persevering in my job. Knowing that I work for a company that cares for its people compels me to give my very best at all times. I had always known that a PSBanker’s touch is warm and caring, but it was only in the aftermath of the Ondoy tragedy that I experienced it to the fullest – more than what I had expected. And every waking moment of my life, I always thank and praise God for this.
Branches Affected by Typhoons Typhoon Ondoy submerged Metro Manila and surrounding provinces in September 2009. This was regarded as the worst flooding in four decades. Nearly 500 PSBank employees from the National Capital Region and Luzon were badly affected. Ten PSBank branches were also not spared from floodwaters and mud and had to be closed temporarily. Yet even during natural calamities, PSBank continued to go the extra mile. Some branches in flooded areas even offered rides in makeshift bancas so customers could still conduct banking transactions.
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Communities
More than just cans.
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PSBank 2009 Annual Report
At PSBank, we recognize that doing more than what’s expected of a bank entails carrying a responsibility to assist a broader spectrum of stakeholders. After all, our health and vitality as an institution is closely tied to the well-being of Filipinos and the communities we serve. Thus we made a commitment to Corporate Social Responsibility (CSR), and strive to earn the trust and respect of our customers, employees, shareholders, and our partner organizations. By being responsible, acting ethically, doing well in our business and doing good in society at large, we not only ensure the health of our business, but also uplift the quality of life in the communities we are part of. An Operation Smile beneficiary gets his smile back
Tools that change lives. PSBank’s CSR thrust consists of three main elements: • Corporate support through donations; • Fundraising initiatives that build on our strong branch network nationwide; and • Programs that engage our customers and employees and foster stronger partnerships While the causes we support are diverse – depending on the needs of the communities and the times – we focus on projects and organizations that give poor and disadvantaged children the fighting chance for a brighter future. We partner with institutions that produce tangible and positive results, particularly in the area of education.
9 lives
The simple act of placing coinbanks in all of our 170 branches and head office units enabled us to raise donations from customers and PSBank employees. The proceeds changed the lives of nine children born with cleft lips, cleft palates and other facial deformities through our partnership with Operation Smile Philippines, Inc.
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Communities More CSR programs PSBank initiated several CSR programs that touch the communities it serves and help disadvantaged children. Clockwise below: (1) Relief drive in partnership with the Philippine Daily Inquirer and Philippine National Red Cross for the victims of Typhoons Ondoy and Pepeng. (Photo courtesy of the Philippine National Police) (2) A beneficiary of Resources for the Blind, one of the child-friendly institutions the Bank regularly supports; (3) One of the 100 PSBank depositors who won a scholarship for a blind child through the Save It Forward program; (4) PSBank’s partnership in the Search for the Country’s Outstanding Policemen in Service (COPS) is now on its third year.
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PSBank 2009 Annual Report
In 2009, the devastation caused by Typhoons Ondoy and Pepeng gave us an opportunity to grow our network of CSR partners as well as engage our customers and employees. More than the expected corporate giving, PSBank tied up with the Philippine Daily Inquirer, one of the nation’s most widely circulated broadsheets, and initiated a donation drive that benefited the typhoon victims. The bank mobilized all delivery channels – its 170 branches, 306 ATMs and its online banking facility, PSBank Remote Banking – to gather relief goods and raise funds as well as raise awareness on the fundraising campaign. We also carried out initiatives to help hasten the process of bringing normalcy back to the lives of those affected, including our own employees, even as we also struggled to cope with the temporary suspension of operations of 10 of our branches located in areas submerged in floodwaters. While the Ondoy Relief Drive was temporary, it gave PSBank the platform to demonstrate not just its firm commitment to reach out to communities but also its brand promise of Simple lang, Maaasahan even in the practice of CSR.
Going the extra mile PSBank’s CSR Efforts in 2009
PSBank Save It Forward Program This program integrates PSBank’s corporate social responsibility thrust with its business goals. Engaging its customers, the bank gave away 200 scholarships through a raffle promo from July 2008 to April 15, 2009. One hundred winning PSBank depositors each received a scholarship worth up to Php 100,000 that they can give to their own child/dependent for school year 2009-2010. Under their names, PSBank also paid for the completion of the elementary or high school education of less fortunate children from World Vision and Resources for the Blind. Total amount of assistance: Php 608,700
PSBank Educational Assistance Program Association of Chinese-Filipino Schools in the Philippines and Chiang Kai Shek College
More value in education Not all Chinese-Filipino students are children of taipans. Take nine-year-old Kristen Audrey Gaurino, whose father works in a restaurant on Macapagal Avenue. Or 46year-old Elizabeth King, a nursing student who raises three children while earning her degree. Or Ashley Ann Altura, a working student who tutors elementary students in English and Chinese. Kristen, Elizabeth, and Ashley are just a few of the 49 underprivileged but deserving students from Chinese schools that PSBank supports through a scholarship program. This is in partnership with the Association of Chinese Filipino Schools in the Philippines and Chiang Kai Shek College. Now on its second year, the PSBank Educational Assistance Program is one of PSBank’s corporate social responsibility efforts. The scholars were chosen based on their family income, academic standing, and character. Most of the students come from single-income families. There’s Analyn Chu, a grade 5 student of Manila Patriotic School. Her mother sells jewelry on the sidewalks of Ongpin Street in Manila’s Chinatown. Irene To, a third-year BS Marketing student of Chiang Kai Shek College, gets support from her father who works in China. And Ivana Hester Cheng is a third-year BS Accountancy major in Chiang Kai Shek, thanks to her mother who works as an insurance agent. These scholars all came to know about the program through their schools. They are intellectually gifted students at the top tier of their classes. Asked how they will pay it back, the scholars – already high academic performers – say PSBank expects nothing in return except for them to simply “study hard.” But the scholars already have plans. Eight-year-old Nicole Kendra See Uy, a grade 2 student at UNO School, says she wants to be a doctor “so I can help people, especially the poor.” Ivana Cheng wants to work in PSBank if given the opportunity as the bank will also invite its college scholars for practicum and give them priority hiring status. “If I do well in my studies and get recognized for it, I can tell people that I am a PSBank scholar. This way, PSBank is also recognized for its efforts,” she shares. Elizabeth King, who is the most senior of the bunch, has a different take on the matter. “I will tell my children, who are also scholars, to value their education and give back to the community.”
PSBank Educational Assistance Program Started in 2008, the program aims to provide access to education to 49 underprivileged but deserving students for school year 2009-2010. Scholarships were given to 39 elementary and high school students from member schools of the Association of Chinese-Filipino Schools in the Philippines and 10 college students from Chiang Kai Shek College. Total amount of assistance: Php 590,000 Search for the Country’s Outstanding Policemen in Service (COPS) Since 2007, PSBank has been a program partner in the annual search initiated by Metrobank Foundation, Inc. jointly with the Rotary Club of New Manila East and the Philippine National Police. The bank extends assistance in the program’s information campaign. It also leverages on its wide network of 170 PSBank branches nationwide for accepting nominations. It also maintains the program website, www.cops.com.ph, which features inspiring stories in the police force that often go unnoticed. Total cash prize for 10 COPS awardees: Php 2.5 million Typhoon Ondoy Relief Drive with Inquirer In partnership with the Philippine Daily Inquirer and Philippine National Red Cross, PSBank accepted donations for victims of Typhoons Ondoy and Pepeng. This enabled PSBank customers to donate through their peso and dollar accounts. Its 170 branches also accepted cash donations while its Metro Manila branches received relief goods. In addition, the bank waived interbranch fees to help customers. It opened a hotline, distributed relief goods and extended emergency cash assistance to affected PSBank employees. The relief drive started in October 2009. Total amount raised: Php 2.9 million (peso account) and US$ 5,605 (dollar account) Operation Smile PSBank raised cash donations from customers and employees by placing Operation Smile coin banks in its 170 branches and head office units. Donors may also have their PSBank ATM accounts debited or transfer funds donated through PSBank Remote Banking. In December 2009, PSBank turned over the donations to Operation Smile Philippines which funded the operation of nine children with cleft lip, cleft palate and other facial deformities. Total amount raised: Php 140,000 as of December 2009 Assistance to child-friendly organizations The bank extends assistance to three organizations that take care of the needs of indigent, visually impaired and special children. In December 2009, PSBank turned over Php 100,000 each to World Vision, Resources for the Blind, and the Chosen Children Foundation as annual donation. Total amount donated: Php 300,000
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Corporate Governance
More than just compliance.
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PSBank 2009 Annual Report
A sound business strategy. PSBank has pursued a strategy of providing a sustainable increase in shareholder value and improvements in all aspects of operations over the years. Principles of good management, adherence to transparency, and the continuous enhancement of control systems in the interest of our stakeholders are key elements of this strategy. Our corporate culture promotes confidence in PSBank and is an essential component in the long-term creation of shareholder value. We believe good corporate governance is characterized not only by adherence to formal regulations, but by responsible management put into action. We aim to be transparent in all our dealings, comply with disclosure policies, act with fairness, and be held accountable for all our actions.
The Bank crafted a Manual of Corporate Governance in 2002 in compliance with Securities and Exchange Commission (SEC) guidelines. Since then, we have consistently worked on improving our corporate governance practices.
In December 2009, the Bank’s Corporate Governance Manual was updated and approved by its Board of Directors. The updated manual is now posted on the Bank’s website, www.psbank.com.ph, and on its Intranet called InfoChannel for the knowledge and guidance of all concerned.
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Corporate Governance
We believe having independent directors helps our Board operate autonomously. In 2005, we started appointing independent directors, all of whom passed an evaluation process and attended the requisite seminar on corporate governance prior to sitting in our Board. We amended our corporate by-laws to include provisions on independent directors and the creation of a Nominations Committee in 2006. This was in addition to provisions on the conduct of meetings, creation of committees, and definition of the duties and responsibilities of directors and officers of the Bank. In January 2009, the Bank revised its Code of Conduct to adjust it to new laws and enactments, BSP guidelines and circulars, as well as present policies, procedures, rules and regulations of the Bank. In March 2009, the bank initiated a roundtable discussion on Corporate Governance between senior management, Board of Directors and advisers, and the BSP examination team consistent with its efforts on continuing education and updates on industry best practices. The discussion centered on how corporate governance of banks drives the CAMELS (Capital, Assets, Management, Earnings, Liquidity and Sensitivity to Risks) rating. PSBank actively discloses market-sensitive information and material changes in its operation to the Securities and Exchange Commission (SEC), the Philippine Stock Exchange (PSE), and other regulatory agencies. It complies with reporting requirements by submitting complete and accurate reports and ensures transparency to shareholders by posting its latest public disclosures on the Investor Relations section of its corporate website. These include PSBank’s disclosures to regulators, financial performance, dividend declarations, and other corporate developments. >>32
PSBank 2009 Annual Report
Recognition of Corporate Governance Practices In 2009, PSBank garnered several awards from various prestigious organizations which pay recognition to best corporate governance practices. The Management Association of the Philippines (MAP) has affirmed our efforts in this area by citing PSBank’s 2008 Annual Report with the theme “Inspiring Change” in the 7th MAP Best Annual Report awards. In addition to being the only bank to land among the top five best annual reports, PSBank also received two special awards: for Best in Corporate Governance Disclosure among Financial Institutions, and Best in Compliance with Philippine Financial Reporting Standards. The MAP awards participating listed companies and has included representatives from the academe, private sector, the Philippine Stock Exchange, and government regulators such as the SEC and the Bangko Sentral ng Pilipinas (BSP) in its roster of judges. Leading regional financial publication The Asian Banker also recognized PSBank as the most attractive Philippine bank in a survey it conducted in 2009. The survey shows the annual ranking of the top 150 banks in 12 markets in the Asia-Pacific region, including Japan. Asia Pacific’s most attractive banks to the global investor community were evaluated based on financial performance, quality of information disclosure, quality of investor relations, and corporate governance. In terms of financial performance, PSBank was ranked 26th overall and 106th overall in investor relations. The Most Attractive Banks ranking is a combination of the weighted average between the Financial Performance ranking and the rank for Investor Relations Services.
PSBank’s Code of Conduct was amended and approved by its Board of Directors in January 2009 to make it more attuned to new laws of the BSP, as well as current rules and regulations of the Bank. Corporate Governance Policies Our Manual of Corporate Governance seeks to institutionalize the principles of good corporate governance in the entire organization and follows the standards on corporate governance set forth by the SEC and the BSP. PSBank’s corporate governance code covers the following key areas:
Code of Business Conduct PSBank’s Code of Conduct was amended and approved by its Board of Directors in January 2009 to make it more attuned to new laws of the BSP as well as current rules and regulations of the Bank. It seeks to define the standards which must be followed in all business dealings and relationships of its employees, both officers and staff. The code of conduct includes provisions on the following:
1. The principles of corporate governance, namely fairness, accountability and transparency, that the bank adheres to. 2. The establishment of a compliance system wherein the Board of Directors is responsible for the long-term success of PSBank and its competitiveness in a manner consistent with its fiduciary responsibilities. 3. The duties and responsibilities of the Board of Directors. 4. The role of the Independent Director. 5. The organization of Board committees specifically the Nominations Committee, Compensation and Remuneration Committee, Audit Committee, Risk Management Committee, Corporate Governance Committee and Trust Committee to aid in complying with principles of good corporate governance. 6. The roles of the Corporate Secretary, External Auditor, Internal Auditor, Chief Executive and the Compliance Officer in enabling an environment of good corporate governance. 7. The requirement to communicate the contents of the manual to all directors, executives and employees of the company. 8. The continuing education and training needed on corporate governance principles. 9. The reportorial or disclosure system on corporate governance. 10. Our commitment to respect and promote investors’ right and protection, including the voting right, pre-emptive right, power of inspection, right to inspection, right to information, right to dividends, and appraisal right.
1. A discussion of the disciplinary process which serves to ensure compliance with the Bank’s policies and procedures. 2. General policies to establish a professional working environment and secure a favorable reputation for the Bank. 3. Corrective measures for unacceptable behavior or failure to comply with the Bank’s rules, policies and procedures. 4. Schedule of penalties for attendance and punctuality; attire requirements; conduct and behavior; dishonesty; health, safety and security; reporting of violations; and information security to serve as a guide for management.
Most Attractive Bank PSBank ranked the highest among Philippine banks in terms of attractiveness based on a survey by The Asian Banker, a leading regional financial publication. In terms of financial performance, PSBank was ranked 26th overall.
11. The annual evaluation of the Board as a body, the performance of its oversight committees and each of its directors. 12. Penalties for non-compliance with the corporate governance manual. PSBank 2009 Annual Report
33 >>
Corporate Governance The code of conduct also includes provisions on management of personal finances, conflict of interest, non-disclosure of information, and insider information. Board of Directors The Board of Directors is committed to uphold corporate governance principles. It is accountable to PSBank’s shareholders and the banking public for safeguarding their investment and maintaining public trust. Our Board sets strategic goals and procedures to guide and direct the Bank’s activities and policy decisions, and to monitor management performance.
Board of Directors Corporate Governance Committee Compliance
PSBank has consistently maintained the presence of independent directors, tasked to provide independent judgment, outside experience and objectivity, in its Board. The Chairman assists in the effective functioning of the Board and different committees that have various areas of focus.
Our Board held 12 regular meetings in 2009, in addition to the annual stockholders and organizational meetings. The attendance of PSBank directors was maintained at 95% in 2009, from the same level in 2008. In addition to regular meetings, special Board meetings may be called by the Chairman, President, or any three directors. Directors are also required to attend regular committee meetings aside from attending Board meetings. Committee memberships are assigned based on expertise and the requirements of each committee.
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PSBank 2009 Annual Report
Trust
Executive Committee Audit Committee Nominations Committee
Internal Audit Compliance
Compensation / Remuneration Committee
Sitting on our Board are 11 directors who are all qualified business professionals with the expertise and experience required in directing PSBank’s strategic path. They are elected by stockholders entitled to vote during the Annual Stockholders Meeting (ASM). The Board approves the overall business strategy of the Bank, including the approval of risk policy and risk management procedures. Individual Board members avoid conflicts of interest in their activities and commitments to other businesses. The Board oversees the activities of members of the Senior Management team and receives sufficient timely information to judge their performance.
Trust Committee
Risk Management Committee RMO
President
Management Committees • Credit Committee • ALCO • Investment Committee • AML Committee • Outsourcing Committee • IT Steering Committee • Emergency Committee • Policy Committee • Personnel Committee
ARMC
All Business, Finance, Operations, Security, and other Support groups
The following PSBank Board Oversight committees have one or more independent directors as members: Audit, Compensation and Remuneration, Nominations and Review, and Corporate Governance. Following BSP regulations, no member of the Executive Committee or the Trust Committee sits in the Audit Committee. For attending Board and committee meetings and in consideration of their valuable contributions in the formulation of the Bank’s overall strategy, the directors each receive a monthly professional fee. The total per diem and transportation allowance paid to directors for their attendance in Board meetings in 2009 was Php 12.2 million. Prior to Board meetings, all Directors are provided with a set of documents that detail PSBank’s financial and operational performance, various committee activities, regulatory developments, and items for their information and approval. The Board has access to the Corporate Secretary and an Assistant Corporate Secretary who manage the flow of information to the Board prior to the meetings.
Board members also have access to a permanent compilation of documents related to past board activities and can readily seek clarification from management should they have concerns about the Bank or any of the items submitted for their consideration. In 2008 and 2009, the Board underwent a self-evaluation of their performance using rating sheets from the Corporate Governance committee with the aim of ensuring their continuing effectiveness and identifying possible areas of improvement. They also determined the performance of each committee where they serve as either a chair or member.
The Executive Committee reviews and approves credit proposals within its limits. It recommends additional conditions and requirements on applications for Board approval. The committee is composed of Board members, as well as credit representatives from both Metrobank and PSBank. The Committee meets regularly, with matters that require credit decisions coursed through the committee members every two weeks. Composition with number of meetings attended: Jose T. Pardo, Chairman* Arthur V. Ty, Chairman**
The Board, through the Corporate Governance Committee, also accomplishes the annual Corporate Governance Scorecard jointly formulated by the SEC and the Institute of Corporate Directors, in cooperation with the BSP, University of Asia and the Pacific, and the Institute of Internal Auditors. In 2009, a similar Corporate Governance Scorecard was also accomplished by the Bank for the BSP. As a body, the Board and its directors individually identify areas with room for improvement and accordingly, adopt the necessary policy or procedural changes.
(1/1) (4/4)
Members: Vicente R. Cuna Jr., Vice-Chairman (3/3) Pascual M. Garcia III (4/4) Ma. Theresa G. Barretto (4/4) Corazon Ma. Therese B. Nepomuceno, Metrobank representative (4/4) Pablito C. Veloria, PSBank representative (4/4) * Independent Director, replaced by Arthur V. Ty in April 2009 ** Formerly Vice-Chairman of the Executive Committee prior to assuming the position of Chairman
Board-level committees To aid in corporate governance, seven committees were established to support the Board in the performance of its functions. Attendance in PSBank Board Meetings in 2009
July 29
Jan. 20
Feb. 24
March 24
April 28
> >
> >
> >
>
>
>
>
>
>
>
>
>
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
May 18
June 30
Aug. 28
Sept. 24
Oct. 13
Nov. 16
Dec. 14
TOTAL
ASM
PRESENT ABSENT April 28
DIRECTORS
Jose T. Pardo Jovencio F. Cinco* Vicente R. Cuna Jr. Arthur V. Ty Regis V. Puno David O. Chua ** Alfredo P. Javellana II Pascual M. Garcia III Ma. Theresa G. Barretto Ma. Ursula R. Resurreccion Samson C. Lim Margaret T. Cham Joaquin Aligguy
> > > > > > > > >
NA
> > > > > >
> > > > > > > > >
> > > > > > > > > >
NA
NA
NA
> > >
> > > >
> > > >
> >
> >
> >
> >
> > > > >
> > > > > > > > > >
NA
NA
> > >
> > > >
> >
> >
> >
> > > > > >
> >
> > > > > > > > > >
NA
NA
NA
NA
>
>
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> > > >
> >
> > > >
> >
> >
> >
> >
> > >
> > > > > > >
> > > > > > > > > >
> > > > > > > > >
> > > > > > > > > >
>
12 3 8 12 11 9 11 12 11 11 11 12 2
0 0 1 0 1 1 1 0 1 1 1 0 0
NA
0 0 0 0
> > > >
0 0
> >
> > > > > > > > > >
ADVISERS
George S. K. Ty Edmund A. Go Domingo Y. Lee Joaquin Aligguy
> > > >
NA
NA
NA
NA
NA
> >
> > >
NA
NA
12 7 12 10
> >
> >
12 12
OTHERS
Rolando A. Rodriguez Laarni D. Bernabe
> >
* Mr. Jovencio F. Cinco’s term as Director of the Bank ended on April 2009. He was replaced by Mr. Vicente R. Cuna, Jr. ** Mr. David O. Chua resigned as Director of the Bank effective November 2009. He was replaced by Mr. Joaquin Aligguy.
PSBank 2009 Annual Report
35 >>
Corporate Governance The Audit Committee provides independent oversight of the Bank’s financial reporting, control, internal and external audit functions. It monitors and evaluates the Bank’s compliance with laws, rules, and regulations, code of conduct and effectiveness of the internal control system. The Committee is composed of members of the Board, at least two of whom shall be independent directors including the chairman and preferably with auditing, accounting or related financial management expertise. The Committee meets monthly.
The Corporate Governance Committee assists the Board in fulfilling its corporate governance responsibilities. It ensures the Board’s effectiveness and due performance of corporate governance principles and guidelines. It reviews and evaluates the qualifications of all persons nominated to the Board as well as those nominated to other positions requiring appointment by the Board. The Committee meets quarterly. Composition with number of meetings attended: Samson C. Lim, Chairman*
Composition with number of meetings attended: Jovencio F. Cinco, Chairman* Jose T. Pardo, Chairman**
(4/4) (8/8)
Members: David O. Chua*** Alfredo P. Javellana II Samson C. Lim** Joaquin Aligguy
(10/10) (12/12) (12/12) (2/2)
* Replaced by Jose T. Pardo in April 2009 ** Independent Director *** Resigned effective November 2009. His resignation was not due to any disagreement with the bank, Board or management. Replaced by Joaquin Aligguy in November 2009.
The Risk Management Committee assesses the probability of each risk becoming reality and estimates its possible effects and cost, develops a written plan defining the strategies for managing and controlling risks, and communicates the risk management plan to affected parties. The committee is composed of at least three members of the Board who possess a range of expertise as well as knowledge of the bank’s risk exposures. It is composed of the members of the Board and a representative from Metrobank. The Committee meets monthly. Composition with number of meetings attended: Alfredo P. Javellana II, Chairman* Vicente R. Cuna Jr., Chairman Members: Pascual M. Garcia III Ma. Ursula R. Resurreccion David O. Chua** Bernardito M. Lapuz, Metrobank representative Edmund A. Go, Adviser
(5/5) (7/8)
(13/13) (8/8)
* Replaced by Vicente R. Cuna Jr. in April 2009 ** Resigned in November 2009. His resignation was not due to any disagreement with the bank, Board or management.
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PSBank 2009 Annual Report
Members: Regis V. Puno Vicente R. Cuna, Jr. Jovencio F. Cinco** Jose T. Pardo***
(3/3) (3/3) (2/2) (1/1) (1/1)
* Independent Director ** Replaced by Vicente R. Cuna Jr. in April 2009 *** Independent Director, appointed in July 2009
The Trust Committee supervises the proper exercise of the Bank’s fiduciary powers, including the acceptance and closing of trust and other fiduciary accounts, review of assets placed under fiduciary custody, and investment, reinvestment and disposition of funds and property. The committee is composed of at least five members including the President and Trust Officer, who is a non-voting member. The Committee meets quarterly. Composition with number of meetings attended: Regis V. Puno, Chairman Members: Ma. Theresa G. Barretto Ma. Ursula R. Resurreccion Pascual M. Garcia III Edmund A. Go, Adviser Stella A. Sampayan, Trust Officer* * Appointed in April 2009
(12/13) (12/13) (6/11)
(4/4) (4/4) (4/4) (4/4) (2/2) (3/3)
The Audit Committee found that our organizational network of risk management, control and governance processes is generally adequate and fully functioning.
The Nominations and Review Committee reviews and evaluates all persons nominated to the Board, as well as those nominated to other positions requiring appointment by the Board. It is mandated to have at least three voting member directors, one of whom must be independent. The Nominations and Review Committee is guided by its charter, as well as Bangko Sentral guidelines for the qualification and disqualification of directors set forth in the Manual of Regulations for Banks. The Committee meets at least once a year.
Executive Management
Composition with number of meetings attended:
Senior Management consists of a core group of individuals responsible for overseeing bank operations. They have the necessary skills to manage business under their supervision, as well as appropriate control over key individuals in these areas. They contribute to good governance by supervising line managers in specific business areas in ways that are consistent with policies and procedures set by the Board.
Arthur V. Ty, Chairman Members: Samson C. Lim* Pascual M. Garcia III
(1/1) (1/1) (1/1)
* Independent Director
The Remuneration and Compensation Committee establishes a formal and transparent procedure for developing a policy on executive remuneration. It is composed of at least three members, one of whom shall be an independent director. The head of the Bank’s Human Resources Group sits in this committee as a resource person. The Committee meets at least once a year. Composition with number of meetings attended: Jose T. Pardo, Chairman*
(1/1)
Members: Arthur V. Ty (1/1) Alfredo P. Javellana II (1/1) Ma. Rita Rosette R. Villamin, HR Officer (1/1) * Independent Director
The Board appoints the President who is responsible for managing and implementing the Bank’s business strategies and day-to-day operations. The President’s function within the organization is separate and distinct from the Chairman and Vice Chairmen of the Board, which are non-executive positions. A group of senior officers supports the President through their work in the Bank’s major groups.
Guided by an organizational strategy, management decision making is supported by performance metrics – both financial and non-financial. This allows management to measure the efficiency and effectiveness of various operating groups. Financial reports, based on robust underlying accounting systems, are regularly generated and presented to management. Audit Committee The Audit Committee serves as an independent oversight of the Board of Directors whose role is to ensure that the Bank has strong and effective processes relating to independence, governance, risk management, internal control, compliance, and financial reporting. Our Audit Committee had 12 meetings in 2009. Regular discussions focused on organizational and procedural controls that include engagement results of reviews on branches, head office units, Bank systems and applications, special investigation cases, and details on internal control compliance. Also discussed in the meetings are the regulatory compliance updates.
PSBank 2009 Annual Report
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Corporate Governance Among the items the committee reviewed and approved in 2009, with the support of internal and external auditors, were the 2010 Annual Internal Audit Plan using the risk-based approach; the Audit Committee Charter, and the 2009 yearend review conducted by the external audit firm SGV and Co. PSBank engages auditors to review internal control processes related to the disclosure of financial statements, with emphasis on due professional care in the conduct of audit reviews and examinations. It also reviewed and recommended to the Board the approval and revisions of the Bank’s Compliance Manual and the Anti-Money Laundering Manual. A significant achievement is the committee’s assessment that the Bank’s organizational network of risk management, control and governance processes, as designed and represented by management, are generally adequate and functioning. The Audit Committee approved audit and audit-related fees of Php 1.55 million in 2008 and Php 1.75 million in 2009 for services that are normally provided in connection with statutory and regulatory filings or engagements. Internal Audit and Compliance We have established internal controls and systems in various areas of operations to protect PSBank from risks intrinsic in its business. Our Internal Audit Group evaluates the effectiveness of these control systems and compliance programs and recommends measures to improve governance, risk management, and internal control processes. We have a three-pronged approach to ensuring compliance within the organization: • Our Auxiliary Compliance Officers or Compliance Coordinators conduct random compliance testing to develop a compliance culture across the ranks. A reporting process helps the Chief Compliance Officer and the Chief Audit Executive detect any regulatory infractions. • Our Internal Audit conducts surprise visits to our branches and other operating units. Independent Compliance Testing is conducted to ensure compliance with anti-money laundering rules and other regulatory requirements. • Our Compliance Office performs oversight function to validate testing by Compliance Coordinators and Internal Auditors. The Chief Compliance Officer also conducts random visits to our branches and head office units to check the progress of compliance testing.
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PSBank 2009 Annual Report
We make sure all our people undergo the basic Anti-Money Laundering (AML) training. For our front-liners and officers, we conduct seminars for an in-depth understanding of AMLA regulations and its applications in day-to-day banking transactions. We safeguard against money laundering and curb possibly fraudulent accounts by strictly adopting Know-Your-Customers business principles. In response to the BSP’s mandate for a continuous improvement of the Bank’s Compliance Program, our Board reviewed and approved amendments to Corporate Governance Manual in November 2009 and its Compliance and AMLA Manuals in December 2009 to cover regulatory changes and best practices, new regulations on antimoney laundering and in compliance with the new SEC Corporate Governance Code. Similarly, the Board reviewed and approved all product manuals and operation manuals to ensure that regulatory changes and best practices are considered and integrated in PSBank’s policies and procedures. Our efforts to promote education through training programs have developed the competencies of our people. Our Chief Compliance Officer conducted Quarterly Compliance Forums to regularly update all Compliance Coordinators/Auxiliary Compliance Officers and Internal Audit Officers on recently issued regulatory requirements. We use these sessions to conduct enhancement training on Compliance Testing, Corporate Governance, and CAMELS. Moving Forward We at PSBank believe that building a culture of compliance will mitigate compliance risks and prepare us to face regulatory demands. We aim to combine the strength of our workforce and technology to have an effective operating framework that delivers long-term results. We expect this bank-wide compliance program to provide key groups, business units, and branches with the skills and tools to raise our compliance standards.
Audit Committee Report Report of the Audit Committee to the Board of Directors For the year ended 31 December 2009 The Audit Committee has an oversight role of ensuring that the Bank has a strong and effective governance, risk management, internal control, compliance, and financial reporting processes. However, management has the primary responsibility for the financial statements and the adequacy of disclosure in conformity with the generally accepted accounting principles, including internal control and risk management systems. In 2009, the Audit Committee performed in their monthly meetings the following significant actions as provided for in the Board-approved Audit Committee Charter: • Discussed and approved the overall scope and plans of both the Internal Audit Group (IAG) and Sycip Gorres and Velayo (SGV); • Reviewed the results of IAG’s examinations and evaluations of internal control processes together with management’s responses and timetable for the implementation of recommendations to improve the operations of the branches and head office units including the information systems and security; • Reviewed and discussed the year-end financial statements with SGV who are responsible for expressing an independent opinion on the audited financial statements and their conformity to generally accepted accounting principles. Reasonableness of significant judgments and accounting estimates, and the propriety of the disclosures in the financial statements were also discussed; • Evaluated the process in assessing the significant risks and related-risk mitigation efforts of the Bank; • Reviewed, approved, and endorsed to the Board the revised Audit Committee Charter which was ratified last February 2009; • Discussed the final report on the results of the external quality assurance review of the Bank’s internal audit activity by Manabat San Agustin & Co., where IAG received the rating of “General Conformance” which signifies that the relevant structures, policies, and procedures of the IAG activity comply with the International Standards for the Professional Practice of Internal Auditing; • Reviewed the adequacy and competencies of the IAG staff. The Bank sponsored the in-house Certified Internal Auditor review classes as part of the continuing professional development of the internal auditors. • Monitored and assessed the Bank’s compliance with existing laws, rules, and regulations. Based on the reviews and discussions undertaken and subject to the limitations on the roles and responsibilities provided for in the Audit Committee Charter, the Committee recommends to the Board of Directors that the audited financial statements be included in the Annual Report for the year ended 31 December 2009, for filing with the Securities and Exchange Commission and other regulatory bodies. 19 February 2010
JOSE T. PARDO Audit Committee Chairman
SAMSON C. LIM Member
JOAQUIN ALIGGUY Member
EMMA B. CO Secretary
PSBank 2009 Annual Report
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Risk Management
More than a commitment,
a risk management culture PSBank operates a consumer banking business model with services ranging from deposit products for retail customers to loan products for SMEs and corporations. It maintains a strong presence through its network of 170 branches and 306 ATMs nationwide, and via its online banking facility, PSBank Remote Banking, which has more than 30,000 registered users. As such, there are many ways in which changes in business conditions and the general economy can adversely affect the Bank’s profitability. Having a solid risk management framework helps us understand the impact of these changes, as well as the sensitivity of our business goals to such changes, and the scope of management actions to mitigate their impact. Managing risk effectively in an organization such as ours requires a strong risk management culture. Our culture supports sound commercial decision-making that adequately balances risk and reward. Our risk management structure Responsibility for managing risk rests, not just on the Board of Directors as the highest level of the organization, but also on every PSBank employee.
Administrative Risk Management Committee (ARMC) is composed of the President, the Executive Vice President or Senior Officer with responsibility over the lending business, and the Heads of Branch Banking, Internal Audit, Compliance, Finance, Operations, Credit Administration, Treasury and Risk Management Office. Senior Management is actively involved in planning, approving, reviewing, and assessing all risks through various committees, including: Credit Committee (Crecom), AssetLiabilities Committee (ALCO), Investment Committee (IC), Policy Committee (Polcom), Anti-Money Laundering Committee (AMLC), Outsourcing Committee, IT Steering Committee, Emergency Committee (Emcom), and the Personnel Committee (Percom). The ARMC, in particular, provides a means of facilitating overall risk management. Risk Management Office (RMO) is independent of any line function and reports directly to the Board through the RMC. Along with the President and its management-level counterpart, the ARMC, the RMO supports the RMC in carrying out its responsibilities by: • Analyzing, communicating, implementing, and maintaining the risk management policies approved by the RMC and Board;
Our Board and senior management are actively involved in planning, approving, reviewing, and assessing risks through various committees. The parameters they set govern all our risk-taking activities.
• Spearheading the regular review of the Bank’s risk management policies and making or elevating recommendations that enhance the risk management process to the RMC and Board, for their approval; and
Board of Directors takes the lead in all major initiatives. It approves broad risk management strategies and policies, and ensures that these are consistent with the Bank’s overall objectives.
• Ensuring that the risks arising from the Bank’s activities are identified, measured, analyzed, reported to and understood by risk takers, management, and the Board. It analyzes limit exceptions and recommends enhancements to the limits structure. It covers the three key areas – credit, market and operational risk.
Risk Management Committee (RMC) is comprised of at least three Directors appointed by the Board. They possess expertise and knowledge of the Bank’s risk exposures, which enable them to develop appropriate strategies for preventing losses or minimizing the impact of losses. The RMC develops and oversees the entire risk management process, ensuring that it remains effective, that limits are observed, and immediate corrective actions are taken whenever needed.
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PSBank 2009 Annual Report
Other groups such as the Security Command, Information Security, Process Management, and specialized operations support or control units also perform functions that complement our overall risk management setup.
Managing risk effectively requires a strong risk management culture that supports sound decision making and adequately balances risk and reward. Various Types of Risks Credit Risk Credit risk is the risk that a counterparty will fail to meet its contractual obligation. Our lending business follows credit policy guidelines set by our Board, RMC, and RMO. These guidelines serve as our minimum standards for extending credit. People engaged in the credit process are required to understand and adhere to these policies. Our product manuals contain business plans and define the business parameters by which credit activity is to be performed. Before extending a loan, we observe a system of checks and balances, including the approval by at least two credit officers through the Crecom, Excom, or the Board. The ARMC and RMC review our business strategies and ensure that revenue-generating activities meet our risk standards. We hold regular audit and quality assurance checks across the organization. Our Board – through the Excom, Crecom, ARMC, and RMC – ensures that all our business segments follow sound credit policies and practices. We manage risk concentration by type of individual or group of borrowers, by geographical region, and by industry sector. We assess the credit quality of financial assets using the BSP’s credit classifications. The Bank continues to enhance its credit rating systems with the use of statistical credit scoring models. In 2009, enhancement was implemented for credit scoring of PSBank Flexi loan clients. Pilot Stress Testing models and enhanced Auto Loan scoring models were likewise developed.
Market Risk This covers the areas of trading, interest rate, and liquidity risks. Trading market risk is the risk to earnings and capital arising from changes in the value of traded portfolios of financial instruments. Interest rate risk arises from movements in interest rates. Liquidity risk is the inability to meet obligations when they fall due without incurring unacceptable loses. The Bank’s market risk policies and implementing guidelines are regularly reviewed by ALCO, ARMC, RMC and Board to ensure that these are up-to-date and in line with changes in the economy, environment and regulations. The RMC and the Board set the comprehensive market risk limit structure and define the parameters of market activities that the Bank can engage in. The Bank utilizes various measurement and monitoring tools to ensure risk-taking activities are managed within instituted market risk parameters. In 2009, the Bank continued to improve risk management capabilities and launched a project for a new Market Risk and Assets Liabilities Management system as part of the Metrobank Group’s Risk Management Coordinating Council (RMCC) initiatives to align and standardize risk measures amongst its membercompanies. It is expected to be fully implemented in 2010. Other related information can be found in the market risk discussion in Note 5 of the Financial Statements. Trading Market Risk PSBank’s trading portfolios are currently composed of peso- and dollar-denominated sovereign debt securities that are marked-tomarket daily.
Other related information can be found in the credit risk discussion in Note 5 of the Financial Statements.
PSBank 2009 Annual Report
41 >>
Risk Management We discourage dependence on Large Funds Providers by capping their concentration as a percentage of total deposits. This ensures that we will not be vulnerable to a substantial drop in deposit level should there be an outflow of large deposits. We use Value-at-Risk (VaR) to measure the extent of market risk exposure arising from these portfolios. VaR is a statistical measure that calculates the maximum potential loss from a portfolio over a holding period, within a given confidence level. Our current VaR model is based on a parametric methodology with a one-day holding period and a 99% confidence level. We also perform back testing to validate the VaR model, and stress testing to determine the impact of extreme market movements on our portfolios. We have established position and tenor limits for our trading portfolios. We closely monitor our daily profit and loss against loss triggers and stop-loss limits. To a certain extent, the Bank also carries foreign exchange (FX) risk. It is the bank’s policy to maintain exposures within approved position and loss limits and within regulatory guidelines. The bank also uses VaR to measure the extent of market risk exposure arising from its FX position. In August 2009, the BSP approved the bank’s application for a Type 3 Derivative License Limited User Authority for plain vanilla FX forwards. This license will enable the Bank to effectively manage its FX risk against adverse exchange rate movements. Structural Interest Rate Risk The interest rate sensitivity gap report measures interest rate risk by identifying gaps between repricing dates of assets and liabilities. Our sensitivity gap model calculates the effect of possible rate movements on our interest rate profile. We use the sensitivity gap model to estimate our Earnings-At-Risk (EAR) should interest rates move against our interest rate profile. Our EAR limits are based on a percentage of PSBank’s projected earnings and capital for the year. We also perform stress-testing analysis to measure the impact of various scenarios based on interest rate volatility and shift in the yield curve. The ALCO is responsible for managing PSBank’s structural interest rate exposure. Its goal is to achieve a desired overall interest rate profile while remaining flexible to interest rate movements and changes in economic conditions. RMO, ARMC, and RMC review and oversee our interest rate risks. Liquidity Risk In managing our liquidity position, we ensure that we have more than adequate funds to meet our maturing obligations. We use the Maximum Cumulative Outflow (MCO) Model to measure liquidity risk arising from the mismatches of our assets and liabilities. >> 42 PSBank 2009 Annual Report
We administer stress testing to assess PSBank’s funding needs and strategies under different conditions. Stress testing enables us to gauge our capacity to withstand both temporary and long-term liquidity disruptions. The Liquidity Contingency Funding Plan (LCFP) helps us manage a liquidity crisis, whether under moderate, severe, or extreme stress scenario. Liquidity limits for normal and stress conditions cap the projected outflows on a cumulative and per tenor basis. We discourage dependence on Large Funds Providers (LFPs) by capping their concentration as a percentage of total deposits. This ensures that we will not be vulnerable to a substantial drop in deposit level should there be an outflow of large deposits. ALCO is responsible for managing the liquidity of PSBank while RMO, ARMC, and RMC review and oversee our overall liquidity risk management. Operational Risk Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. To mitigate these, we constantly strive to maintain our strong “control culture,” prudent use of technology and effective internal control system, which are key factors towards continuous selfimprovement under a “no surprise” operating environment. Our Board-approved bank-wide organizational chart clearly establishes areas of management responsibility, accountability and reporting lines for all our senior officers. Operational risk management policies and frameworks are continuously reviewed and updated, subject to RMC and Board approval to ensure that they remain relevant and effective. In 2009, the Bank revised its risk rating criteria, controls rating criteria and risk rating matrix in line with the recommendation of the RMCC to align and standardize said measures amongst its member-companies. Our products and operating manuals, policies and procedures spell out internal controls implemented by our business and operating support units. Our Internal Audit Group regularly reviews and provides independent assurance on control adequacy and compliance with these manuals. We continually identify and assess operational risks across the Bank and develop controls to mitigate and manage them as part of continuing efforts to enhance our Operational Risk Management
Framework. To ensure that we manage all operational risks adequately, specialized functions are engaged in risk management. These include our IT, Information Security, Financial Control, Legal, Compliance, Human Resources and Security Command. Our Internal Audit Group regularly reports to the Board’s Audit Committee on the effectiveness of internal controls. The Bank likewise has a Business Continuity Plan and a Disaster Recovery Program that are reviewed and tested on an annual basis to ensure their effectiveness in the advent of business disruption, systems failure and disasters. Technology Risk The risk to earnings or capital arising from deficiencies in systems design, implementation, ongoing maintenance of systems or equipment and the failure to establish adequate security measures, contingency plans, testing and auditing standards. To provide simpler, faster, more convenient and secured banking services to our growing clientele and to avail of an advanced Management Information System that enables us to make fast and well-informed business decisions, we continually invest in Information Technology by venturing into core business process automations, key system enhancements, and information security solutions.
A legal review process, which our Legal Department performs, is the primary control mechanism for this type of risk to ensure that the Bank’s contracts and documentation adequately protects its interest and complies with applicable legal and regulatory requirements. Regulatory Risk Regulatory Risk, also known as Compliance Risk covers the potential loss from non-compliance with laws, rules and regulations, policies and procedures, and ethical standards. We recognize that compliance risk can diminish our reputation, reduce our franchise value, limit our business opportunities, and reduce our potential to expand. Thus, PSBank, guided by our Compliance Office, continuously promotes a culture of compliance. Strategic Risk Strategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper resolution of conflicts, and slow response to industry changes. Strategic risk can influence our long-term goals, business strategies, and resources. Thus, we utilize both tangible and intangible resources to carry out our business strategies. These include communication channels, operating systems, delivery networks, and managerial capacities and capabilities.
Given this heavily automated operating environment, we make sure that we continuously identify and quantify risks to the greatest extent possible and establish controls to manage technology-associated risks through effective planning, proper implementation, periodic measurement and monitoring of performance.
Reputational Risk Reputational risk is the current and prospective impact on earnings or capital arising from negative public opinion. This affects our ability to establish new relationships or services, or manage existing relationships. The risk may expose us to litigation, financial loss, or a decline in customer base.
Legal Risk Legal risk is the potential loss due to non-existent, incomplete, incorrect, and unenforceable documentation that we use to protect and enforce our rights under contracts and obligations.
All employees are responsible for building PSBank’s reputation and exercising an abundance of caution when dealing with customers and communities.
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Board of Directors and Advisers Jose T. Pardo Chairman
Arthur V. Ty Vice Chairman
Vicente R. Cuna, Jr. Vice Chairman
Pascual M. Garcia III Director/President
Joaquin Aligguy Director
Ma. Theresa G. Barretto Director
Margaret T. Cham Director
Samson C. Lim Director
Regis V. Puno Director
Ma. Ursula R. Resurreccion
Rolando A. Rodriguez Corporate Secretary
Director
Senior Advisers: Dr. George S.K. Ty Amb. Domingo Lee Adviser: Edmund A. Go
>> 44
PSBank 2009 Annual Report
Jose T. Pardo Chairman / Independent Director
Ma. Theresa G. Barretto Director
Chairman of the Bank since 2003. Former Secretary of Finance and Secretary of Trade and Industry of the Philippines, and Member of the Board of Governors of Asian Development Bank and the World Bank. Director of National Grid Corporation of the Philippines. First graduate under the Harvard-DLSU Advisory Program in 1963. Has BS Commerce-Accountancy and MBA degrees from De La Salle University.
Director of the Bank since 2006. Director of Endel Enterprises. Has a BS Commerce degree from Assumption College and Curso de Estudios Hispanicos from La Universidad de Madrid in Spain.
Arthur V. Ty Vice Chairman Vice Chairman of the Bank since 2001. President of listed company Metropolitan Bank and Trust Company. Director of Metrobank Card Corporation. Chairman of Metrobank Technology, Inc. and Vice Chairman of Metrobank Foundation, Inc. An Economics graduate from University of California-Los Angeles and an MBA graduate from Columbia University.
Vicente R. Cuna, Jr. Vice Chairman Vice Chairman of the Bank since April 2009. Executive Vice President of listed company Metropolitan Bank and Trust Company. Director of Asia Pacific Top Management International Resources Corporation and SBMC Metro Investment Corporation. Has an AB Economics degree from De La Salle University and completed coursework for an MBA from the Ateneo de Manila Graduate School of Business.
Pascual M. Garcia III Director / President President of the Bank since 2001. Adviser of listed company Metropolitan Bank and Trust Company. Director of Toyota Financial Services. Director of Sumisho Motor Finance Corporation. Former Director of Metrobank Card Corporation. Former President and Director of the Bank of Southeast Asia and DBS Bank Philippines, Inc. Graduated from the Ateneo de Zamboanga with a BS Commerce degree.
Joaquin Aligguy Director Director of the Bank since November 2009. Corporate Secretary of Manila Doctors Hospital, Director of Asia Pacific Land (Nanjing) Ltd., Aspac Land Development (Shanghai) Co. Ltd., Adviser of Metrobank Foundation and Trustee of the Kaisa Heritage and Angelo King Foundations. Graduated with an AB in Philippine Literature from the University of the Philippines.
Margaret T. Cham Director Director since 2003. Director of Orix Metro Leasing Corp. and Federal Land Inc. President of Glam Holdings Corp. and Glamore Holdings Corp. Vice President of Great Mark Resources Inc., Global Treasure Holdings Inc., Grand Titan Capital Holdings Inc. Vice President of Metrobank Foundation. Vice President / Corporate Secretary of the Norberto and Tytana Ty Foundation. Has a BS Humanities degree from De La Salle University.
Samson C. Lim Independent Director Director of the Bank since 2008. President of Automatic Centre and Blims Fine Furniture. Chairman of Collins International Trading Inc. and Francorp Philippines. Has a BS Liberal Arts degree from Ateneo de Manila University with honors, Masters in Business Economics from University of Asia and the Pacific, and completed the Asian Institute of Management Top Management Program.
Regis V. Puno Director Director of the Bank since May 2004. Senior Partner at Puno and Puno Law Offices. Former Undersecretary of the Department of Justice. Has AB Economics degree from the University of the Philippines, Bachelor of Laws from Ateneo de Manila University, and Masters of Laws from Georgetown University Law Center, Washington, D.C., USA
Ma. Ursula R. Resurreccion Director Director of the Bank since 2006. Director of Rural Bank of Candelaria. Has a Bachelor of Arts degree from St. Louis University, Baguio City.
Rolando A. Rodriguez Corporate Secretary Corporate Secretary since 2005 and Executive Vice President of the Bank since 2003. Former Senior Vice President of Equitable-PCI Bank. Director of Pampanga Sugar Development Corp. and Okeelanta, Inc. Chairman of the Foundation for Lingap Kapampangan, Inc. Graduated with honors in BS Accountancy and BA Economics from De La Salle University. Completed course work for MS in Industrial Economics from University of Asia and the Pacific.
PSBank 2009 Annual Report
45 >>
Senior Management Pascual M. Garcia III, President Rolando A. Rodriguez, EVP
Andre Manuel L. Abellanosa, VP Eliel B. Aparri, VP Raye Claudine Q. Baron, VP Minda L. Cayabyab, VP Emma B. Co, VP Jose Nazario R. Cruz, VP Grace G. Dela Cruz, VP
Stella A. Sampayan, VP Mary Jane M. Valero, VP Pablito C. Veloria, VP Ma. Rita Rosette R. Villamin, VP Dan Jose D. Duplito, AVP Abigail P. Melicor, AVP
>> 46
PSBank 2009 Annual Report
Jose Vicente L. Alde, SVP Jaime Valentin L. Araneta, SVP Yolanda L. Dela Paz, SFVP
Perfecto Ramon Z. Dimayuga, Jr., SVP Noli S. Gomez, SVP Ma. Patricia L. Casta単eda, FVP Norberto M. Coronel III, FVP Jose Jesus B. Custodio, FVP Neil C. Estrellado, FVP Jose Martin A. Velasquez, FVP
Nerissa J. Lazaro, VP Jan Nikolai M. Lim, VP Francis C. Llanera, VP Antonio Jude Martin P. Montinola, VP Edeza A. Que, VP Ismael S. Reyes, VP
PSBank 2009 Annual Report
47 >>
Profiles of Senior Management Pascual M. Garcia III, President
President of the Bank since September 2001. Member of the following committees: Assets and Liabilities, Policy, Personnel, and IT Steering. (See Board of Directors for more information.)
Rolando A. Rodriguez, Executive Vice President
Joined the Bank in 2003. Member of the following committees: Assets and Liabilities, Credit, Personnel, IT Steering and Emergency. (See Board of Directors for more information.)
Jose Vicente L. Alde, Senior Vice President
Joined the Bank in October 2007. Head of Branch Banking Group. Member of Assets and Liabilities, Credit, Investment and Emergency Committees. Held various Branch Banking and Treasury Positions as Vice President of ABN-AMRO Bank. Earned a Bachelor in Computer Science degree with honors from the University of the Philippines and an MBA from Asian Institute of Management.
Jaime Valentin L. Araneta, Senior Vice President
Joined the Bank in August 2001. Head of the Bank’s E-Banking Unit. Member of Assets and Liabilities, Anti-Money Laundering, Personnel Committees. Former Group Vice President for Branches of Associates Finance Inc., (Citigroup) and Vice President for Head Office Sales and Corporate Services of Jardine Pacific Finance Inc. Has an AB Philosophy and Law and MBA units from Ateneo de Manila University.
Yolanda L. Dela Paz, Senior First Vice President
Joined the Bank in September 1983. Head of Specialized Lending Desk. Member of the Credit Committee. Former Supervisor of Equitable Computer Services and Office-in-Charge in an Equitable Banking Corporation branch. Has a Bachelor of Business Administration degree, major in Accounting from the University of the East.
Perfecto Ramon Z. Dimayuga, Jr., Senior Vice President
Chief Finance Officer and Head of Finance since January 2006. Member of Assets and Liabilities, Investment, Personnel, IT Steering and Outsourcing Committees. Worked in the Treasury Departments of Bank of the Philippine Islands, DBS Bank Phils, Inc., Mindanao Development Bank, Citytrust Banking Corporation and Rizal Commercial Banking Corporation. Has an AB in Economics from the Ateneo de Manila University and MBA from the University of the Philippines.
Noli S. Gomez, Senior Vice President
Joined the Bank in October 2001. Head of the Bank’s Operations Group. Member of Asset and Liabilities, Anti-Money Laundering, Policy, Personnel, Outsourcing, IT Steering and Emergency Committees. Former Chief Risk Officer and Head of Systems and Methods at DBS Bank Phils. and Systems Management Officer of the Bank of the Philippine Islands. Has a BS Civil Engineering degree from Mapua Institute of Technology. Licensed Civil Engineer with distinction.
Ma. Patricia L. Castaneda, First Vice President
Joined the Bank in August 2005 as Chief Risk Officer. Member of Assets and Liabilities, Investment, Anti-Money Laundering and IT Steering Committees. Former Market Risk Officer of BDO Private Bank (formerly Banco Santander Phils, Inc.). Previously connected with TA Bank as Corporate Finance Manager and with BPI as Risk Management Officer. Has a BS Business Economics degree with honors from the University of the Philippines.
>> 48
PSBank 2009 Annual Report
Norberto M. Coronel III, First Vice President
Joined the Bank in December 2007. Head of SME Banking Group. Member of the Assets and Liabilities Committee. Former FVP and Head of Equity Underwriting and Placements at Investment & Capital Corporation of the Philippines and AVP of Investment Banking Division at United Coconut Planters Bank. Has a BS Business Management degree from Ateneo de Manila University and an MBA from the University of the Philippines.
Jose Jesus B. Custodio, First Vice President
Joined the Bank in December 2001. Head of the Bank’s Auto Loans Division. Member of the Assets and Liabilities Committee. Former Head of Auto Loans-Retail Sales of Citytrust Banking Corporation and Fleet and Floorstock Department Head of BPI Family Savings Bank. Has a BS Business Management degree from Ateneo de Manila University.
Neil C. Estrellado, First Vice President
Joined the Bank in March 2002. Head of Information Technology Division under Operations Group. Member of Anti-Money Laundering, Outsourcing and IT Steering Committees. Worked as Project Leader for Overseas-Chinese Banking Corporation Ltd., formerly Lead IT Analyst / Project Manager for DBS Philippines (formerly Bank of Southeast Asia) and Systems Analyst for CityTrust Banking Corporation. Has a BS Mathematics degree from Ateneo de Manila University.
Jose Martin A. Velasquez, First Vice President
Joined the Bank in September 2004. Head of Treasury Group. Member of the Assets and Liabilities and Investment Committee. Former Deputy Treasurer at First Metro Investment Corporation and Senior Dealer at BPI Capital Corporation. Earned a BA Economics and BS Commerce major in Management of Financial Institutions and MBA from De La Salle University.
Andre Manuel L. Abellanosa, Vice President
Joined the Bank in February 2003. Head of the Treasury Marketing and Currencies Division under Treasury Group. Member of the Assets and Liabilities Committee. Former Senior Trader at BPI Capital Corporation; Head for Foreign Exchange Trading at DBS Forex Corporation; and Unit Head of Private Banking at Bank of South East Asia. Has a BS Management degree from Colegio de San Juan de Letran.
Eliel B. Aparri, Vice President
Joined the Bank in April 2000. Head of the Bank’s Account Management Division I under the SME Banking Group. Previously with Asian Bank as Vice President and Area Head of South Metro Manila and Southern Luzon. Earned an AB Economics degree from the University of Santo Tomas and MBA units from the University of Santo Tomas and De La Salle University.
Raye Claudine Q. Baron, Vice President
Joined the Bank in August 2009. Head of Process Management Division under Operations Group. Member of Policy and Emergency Committees. Formerly with AIG PhilAm Savings Bank Inc. as Senior Assistant Vice President for Project Management and Operations Control Department. Has a BS Business Management degree from Ateneo de Manila University and an MBA from the University of the Philippines.
Minda L. Cayabyab, Vice President
Joined the Bank in May 1998. Head of the Financial Accounting and Services Division under the Finance Group. Former Senior Auditor with Joaquin Cunanan PricewaterhouseCoopers Phils. Has a BS Business Administration, major in Accounting degree with honors from the Pamantasan ng Lungsod ng Maynila and is a Certfied Public Accountant.
Emma B. Co, Vice President
Joined the Bank in December 2001. Chief Audit Executive and Head of the Internal Audit Group. Member of the Anti-Money Laundering Committee. Formerly with Mercator Group as Senior Manager for Audit; IT Audit Officer at Union Bank of the Philippines and Financial Auditor at Philippine Banking Corporation. Has a BS Commerce, major in Accounting degree from the University of Santo Tomas; Bachelor of Laws from Lyceum of the Philippines; and MS in Information Management from Ateneo de Manila University. Certified Public Accountant and Lawyer.
Ismael S. Reyes, Vice President
Joined the Bank in September 2008. Head of Network and Business Development Division under Branch Banking Group. Member of the Assets and Liabilities Committee. Formerly with iRemit Inc. as Division Head of Market Management; Bank of the Philippine Islands as Head and Operations Manager of the Funds Transfer Department; and Project Officer of Far East Bank and Trust Company’s International Banking Group – Remittance Center. Has a BS Economics degree from the University of Santo Tomas.
Stella A. Sampayan, Vice President Jose Nazario R. Cruz, Vice President
Joined the Bank in August 2001. Area Head of North Sector under Branch Banking Group. Previously with DBS Bank Philippines as Assistant Vice President; RCBC as Assistant Vice President and Country Representative of RCBC Hong Kong. Has a BS in Mathematics and MBA from Far Eastern University, and a Bachelor of Laws from Bulacan State University.
Joined the Bank in January 2009. Head of the Bank’s Trust Division. Member of the Assets and Liabilities and Investment Committees. Previously with ING Bank NV-Manila as Funds Business Head; American Express Bank as Trust Department Head; and Citibank NA as Product Manager for the Asset Management Group. Has a BS Business Administration degree, major in Management of Financial Institutions from De La Salle University.
Grace G. Dela Cruz, Vice President
Mary Jane M. Valero, Vice President
Joined the Bank in January 2001. Chief Compliance Officer since August 2006. Member of the Anti-Money Laundering and Outsourcing Committees. Former Assistant Vice President for Branches Centralized Operations and Systems Support Division of PCI Bank. Has a Business Administration degree from Mindanao State University and is an MBA Candidate at Ateneo Graduate School of Business.
Nerissa J. Lazaro, Vice President
Joined the Bank in March 2003. Area Head of North Metro Sector under Branch Banking Group. Former Assistant Vice President / Area Head for Sales-East Metro Manila Branches and Regional Banking Head for RCBC Savings Bank; and Branch Head of Edsa Central and Lagro Branches for Capitol Bank. Has an AB Economics degree from University of Santo Tomas.
Jan Nikolai M. Lim, Vice President
Joined the Bank in November 2005. Head of Mortgage Banking Division. Member of Assets and Liabilities Committee. Former Senior Assistant Vice President for Credit Cards and Personal Loans and Head of the Cross Sell Team in Standard Chartered Bank; Former Manager at Citibank N.A. Has a BS Manufacturing Engineering and Management degree from De La Salle University.
Francis C. Llanera, Vice President
Joined the Bank in December 2007. Head of Collections and Remedial Management Division. Member of the Anti-Money Laundering Committee. Previously with Union Bank of the Philippines as Credit Card Collections Head; American International Group where he worked in Credit Risk Management; and Far East Bank as Credit Card Remedial Head. Has a BS Commerce degree from the University of Santo Tomas.
Antonio Jude Martin P. Montinola, Vice President
Joined the Bank in March 2009. Member of the Assets and Liabilities and Emergency Committees. Formerly with Harrison Communications Inc. – McCann-Erickson Philippines as Group Account Director and Arc Worldwide – CRM/Digital Agency of Leo Burnett as Business Unit Director. Has a BS in Interdisciplinary Studies from Ateneo de Manila University.
Joined the Bank in August 2002. Head of Customer Service Division. Former Front Office Manager of Mandarin Oriental Hotel Manila and Duty Manager of the Westin Philippine Plaza. Has BS Psychology and BA Guidance and Counseling degrees from St. Scholastica’s College.
Pablito C. Veloria, Vice President
Joined the Bank in September 2006. Head of Credit Administration Group. Member of the Assets and Liabilities and Credit Committees. Formerly with BPI Family Savings Bank as Head of Consumer Credit Evaluation, Field Support, Credit Investigation, Housing Loan Evaluation, Share Finance Credit and Mortgage Credit Investigation. Has a BS Civil Engineering degree from Adamson University.
Ma. Rita Rosette R. Villamin, Vice President
Joined the Bank in February 2003. Head of Human Resources Group. Member of the Personnel Committee. Previously with SM Supermalls as Senior Manager for Human Resources, Litton Mills as Training Manager and OD Training Consultant for Guthrie-Jensen Consultants Inc. Has a BS Hotel and Restaurant Management degree from the University of Santo Tomas, and Professional Education from the University of the Philippines.
Dan Jose D. Duplito, Assistant Vice President
Joined the Bank in March 2005. Head of Information Security Department under the Office of the President. Member of the IT Steering Committee. Worked as Information Security Consultant for TIM Corp. and I-Sentry Security Services; Lead Web Developer for Writers Edge, Inc.; and Linux Administrator for PharmAsia-Cuvest Inc. Has a BS Mechanical Engineering degree from the University of the Philippines.
Abigail P. Melicor, Assistant Vice President
Joined the Bank in March 2006. Head of the Personal Loans Division. Member of the Assets and Liabilities Committee. Formerly with Standard Chartered Bank as Channel Head – Senior Manager for Personal Loans; AIG Credit Cards as Assistant Manager; and TA Bank as Manager under Account Management Group. Has a BS Commerce degree major in Economics from the University of Santo Tomas.
Edeza A. Que, Vice President
Joined the Bank in October 2005. Formerly with Standard Chartered Bank as Credit Risk Manager for Consumer Banking; Risk Management Officer in American International Group Credit Card Co.; and Actuarial Officer in BPI Family Savings Bank. Has a BS Statistics degree with honors and MS in Statistics from the University of the Philippines.
PSBank 2009 Annual Report
49 >>
CFO’s Report PSBank reported a net income of Php 1.24 billion in 2009 with strong earnings from our loans and investments, coupled with higher trading gains. This represented a 32% improvement from the Php 940.15-million bottom line in 2008 and is the highest level achieved by the Bank in its history.
Sustained Growth
Financial Strength
Further building on our strength in the consumer banking sector, we sustained our growth track during the year and benefited from higher loan volumes.
Our total assets reached Php 93.09 billion in 2009, continuing the growth track that we set in previous years. By maintaining consistency in product and service delivery, our total loan portfolio expanded by 14% to Php 47.31 billion. Auto loans grew by 14% while mortgage and personal loans increased by 9% and 3%, respectively. We continue to focus on consumers, with 76% of our portfolio in this sector.
Interest income from our loans and investments went up by 23% to Php 7.53 billion. On the other hand, the increase in interest expenses was limited to Php 2.70 billion, or only 11% more compared to the previous year. Overall, net interest income rose 30% to Php 4.83 billion. Other operating income, including net service fees and commissions and net earnings of an associate was 16% higher at Php 1.48 billion compared with Php 1.27 billion in 2008. This increase was driven primarily by better returns on our trading and investment portfolio. Benefiting from favorable opportunities in the market, gains from bond trading improved 172% to Php 543.63 million. However, our foreign exchange position proved mildly adverse to our bottom line as it grew by only Php 12.34 million from Php 186.80 million in 2008. Net service fees and commissions income contributed Php 596.24 million in 2009, up by 12% from Php 534.37 million, previously. We ended the year with total loan loss provisions of Php 1.11 billion, representing a 92% increase from a provisioning level of Php 577.40 million in 2008 to take into consideration losses incurred by the consumer sector during the destructive typhoons that visited our country last year.
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PSBank 2009 Annual Report
Our capital base continues to be the highest in the thrift bank industry at Php 11.01 billion and this has allowed us to continue expansion efforts while consistently rewarding our shareholders with dividends. Our Board of Directors approved a total of Php 144.15 million in dividends, equivalent to Php 0.60 per share, in 2009. PSBank shares ended the year at Php 57.50 per share, a 40% appreciation from Php 41.00 per share in end-2008. This compares well with other listed companies in the Philippine Stock Exchange (PSE), where the PSE Index gained 63% over the same 12-month period. We continued to be the recipient of PhilRating’s vote of confidence with its issue rating of PRS Aa+ for our Tier 2 bond callable in 2011.
Optimistic Stance Underscoring PSBank’s commitment to the consumer sector, we formed a joint venture with Sumitomo Corporation to provide financing for all motorcycle brands. Sumisho Motor Finance Corporation (SMFC), which has an authorized capital of Php 2 billion, aims to tap into a niche market and provide Filipinos with affordable means of transportation. SMFC is 40% owned by PSBank and started commercial operations in March 2010. We also continue to maintain our 25% equity investment in Toyota Financial Services Philippines Corporation, which generated Php 26.77 million in cash dividends for PSBank in 2009. As earlier envisioned, we were able to generate complementary income through additional interest earnings of Php 43.23 million from our mortgage loans from Balikatan Housing Finance, Inc. Even as the Philippines slowly recovered from the effects of the global economic slowdown, severe typhoons prevented the consumer sector from outpacing the sluggish performance of the manufacturing and agriculture sectors in 2009. Still, there continue to be bright spots: the sustained flow of overseas Filipino remittances and reports that larger portions of these funds are now channeled to savings or productive investments. We remain committed to consistently providing our clients with simple and reliable banking even as the country faces a year of transition. We will stay a step ahead in all facets of operations, generate more value for our various stakeholders, provide more than what’s expected of us to surprise and delight our customers, and always raise the bar for ourselves and others. Please expect these and more from PSBank in 2010.
P11B Capital base as of 2009 – highest in the RP thrift banking industry
23%
Increase in interest income in 2009 vs. 2008
76% Share of consumer loans in PSBank’s total loan portfolio
PERFECTO RAMON Z. DIMAYUGA Chief Financial Officer
PSBank 2009 Annual Report
51 >>
Management’s Discussion and Analysis
Statements of Condition Assets Our total assets by December 31, 2009 stood at Php 93.09 billion, up 25% or Php 18.45 billion from the previous year. The growth was primarily attributed to increases in loans and receivables, investments in government securities, and securities purchased under resale agreements. Loans and Receivables, net Our loans and receivables grew Php 5.70 billion or 14% from the last year. The bank continued to benefit from the growth trend in the consumer loans sector. Our auto, mortgage and personal loans thus registered positive results. Our SME Banking portfolio increased by Php 2.69 billion while Auto and Mortgage loans grew Php 2.32 billion and Php 1.18 billion, respectively. Capital Capital funds improved by 30% to Php 11.01 billion due to a significant increase in the Bank’s net unrealized gain. This stemmed from available-for-sale investments which rose to Php 819.83 million. We declared quarterly dividends for our stockholders equivalent to Php 0.60 per share in 2009, consistent with the Bank’s dividend policy. Securities and Investments Interbank Loans Receivable and Securities Purchased under Resale Agreements (SPURA) increased 687% as we invested our excess funds in government securities. Our Available-for-Sale Securities climbed Php 1.45 billion or 9% and Held-to-Maturity was higher by Php 3.16 billion or 196%. On the other hand, Fair Value through Profit or Loss Investments declined Php 833.73 million as the Bank repositioned its investment portfolio in 2009. Investment Properties decreased by Php 193.38 million or 7% from last year while the Investments in an Associate and a Joint Venture increased by 113%. The latter represented the Bank’s 25% stake in Toyota Financial Services Philippines Corporation (TFSPC), and 40% interest in Sumisho Motor Finance Corporation (SMFC).
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PSBank 2009 Annual Report
The bank’s stake in TFSPC posted a 6% increase to Php 393.21 million with the recognition of share in the associate’s profit amounting to Php 50.03 million in 2009. SMFC had total assets of Php 1.0 billion as of end-2009 and started commercial operations in the first quarter of 2010. Property and Equipment was 12% higher year-on-year to Php 1.99 billion with the opening of six branches, branch relocations, expansion of ATMs and purchases of computer equipment, furniture and fixtures in 2009. Deferred Tax Deferred Tax Assets increased 13% to Php 1.26 billion from Php 1.11 billion, previously. This resulted from the payment of MCIT and the increase in provisions for impairment and credit losses. It was offset by the decrease in NOLCO amounting to Php 211.88 million as the Bank applied the remaining NOLCO in 2009. Liabilities Our Total Liabilities as of December 31, 2009 were Php 82.08 billion, an increase of 24% from last year. Our Total Deposits grew 25% to Php 77.39 billion from Php 61.68 billion recorded during the same period last year. We continue to service our Subordinated Notes Payable or Tier 2 bonds of Php 1.97 billion, for which PSBank maintained its PRS Aa+ rating from Philratings over the past three years. Deposits The Bank’s deposits grew by 25% to Php 77.39 billion in 2009. Demand and time deposits both increased by 28% or Php 1.79 billion and Php 13.12 billion, respectively. Demand deposits ended the year at Php 8.19 billion and time deposits at Php 59.80 billion. Savings deposits were higher by Php 795 million to Php 9.40 billion.
Statements of Income Net Income The bank ended 2009 with a Net Income after Tax of Php 1.24 billion, 32% better than the Php 940.15 million it posted in 2008. Interest Income Total interest income grew by Php 1.40 billion to Php 7.53 billion year-onyear. Driven by the build-up of our total loan portfolio, total interest income from loans and receivables increased 13% to Php 5.38 billion. This was followed by higher interest income from investment securities which rose by 92% to Php 1.94 billion. The bank’s interest income from Due from BSP improved 9% to Php 92.99 million, reflecting our ample liquidity. On the other hand, interest income from Other Banks dipped by 76% or Php 18.77 million to Php 5.84 million. In the same vein, interest income from Interbank Loans Receivable and Securities Purchased under Resale Agreements was lower by 58% to Php 109.76 million. Our Interest Expense from various deposit products rose by 13% to Php 2.49 billion from Php 2.20 billion in 2008. Like in 2008, we paid Php 205.74 million in interest payments to holders of our Tier 2 Unsecured Subordinated Notes. With the reduction in our bills payable, interest expenses for these declined by 72% to P4.83 million. Non-Interest Income Other Operating Income went up by 16% due to significantly higher trading revenues in 2009. Income from our trading activities was Php 543.63 million, an increase of Php 343.89 million or 172% from last year. The increase was supported by a 12% improvement in our net service fees and commission income to Php 596.24 million from Php 534.37 million in 2008. However, we reflected a 93% reduction in our foreign exchange gains to Php 12.34 million in 2009. There was also a 12% decline in our income from foreclosures and the sale of investment properties to Php 197.36 million from Php 223.83 million in 2008.
Capital Adequacy Ratio (%) 09
14.44 17.42
08
15.70
07 06
19.41 12.51
05
Earnings Per Share (in Php) 09
5.16 3.98
08
5.04
07
4.05
06
3.60
05
Return on Average Equity (%) 09
12.73 12.47
08
14.81
07
13.13
06
13.43
05
Return on Average Assets (%) 09 08
1.48 1.31 1.55
07
Total Other Expenses were higher at Php 4.94 billion from the previous year. Compensation and fringe benefit-related costs increased by 22% to Php 1.49 billion, while Occupancy and equipment-related costs also increased by 18% to Php 362.87 million. The increases were due to investments in technology and new branches. As of December 31, 2009, the Bank had 170 branches and 306 ATMs.
1.38
06 05
1.20
PSBank 2009 Annual Report
53 >>
Statement of Management’s Responsibility
SECURITIES AND EXCHANGE COMMISSION SEC Building, EDSA Greenhills Mandaluyong City, Metro Manila The management of Philippine Savings Bank is responsible for all information and representations contained in the financial statements as of December 31, 2009. The financial statements have been prepared in conformity with Philippine Financial Reporting Standards and reflect amounts that are based on the best estimates and informed judgment of management with an appropriate consideration to materiality. In this regard, management maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized. The management likewise discloses to the Bank’s audit committee and to external auditor (i) all significant deficiencies in the design or operation of internal controls that could adversely affect its ability to record, process and report financial data; (ii) material weaknesses in the external controls; and (iii) any fraud that involves management or other employees who exercise significant roles in internal controls. The Board of Directors reviews the financial statements before such statements are approved and submitted to the stockholders of Philippine Savings Bank. Sycip, Gorres, Velayo & Co., the independent auditors appointed by the Board of Directors and Stockholders, have examined the financial statements of Philippine Savings Bank in accordance with Philippine Standards on Auditing and has expressed its opinion on the fairness of presentation upon completion of such examination in its report to the stockholders and Board of Directors.
JOSE JO OSE S T. PARDO Chairman of the Board
PASCUAL GARCIA P PA SCUALL M. M G ARCIA A III I President
PERFECTO RAMON JR. TO RAMO ON Z.. DIMAYUGA, DIMAYU Chief Finance Officer
SUBSCRIBED AND SWORN TO before me this _______ affiants exhibiting to me their passports, as follows:
Name Jose T. Pardo Pascual M. Garcia III Perfecto Ramon Z. Dimayuga, Jr.
54
PSBank 2009 Annual Report
Passport No. XX0609733 TT0917161 XX1825566
Date of Issue 02/26/2008 09/27/2006 08/15/2008
Place of Issue Manila City Manila City Manila City
Independent Auditor’s Report
The Stockholders and the Board of Directors Philippine Savings Bank PSBank Center 777 Paseo de Roxas corner Sedeño Street Makati City We have audited the accompanying financial statements of Philippine Savings Bank, which comprise the statements of condition as at December 31, 2009 and 2008, and the statements of income, the statements of comprehensive income, the statements of changes in equity and the statements of cash flows for each of the three years in the period ended December 31, 2009, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Philippine Savings Bank as of December 31, 2009 and 2008, and its financial performance and its cash flows for each of the three years in the period ended December 31, 2009 in accordance with Philippine Financial Reporting Standards.
SYCIP GORRES VELAYO & CO.
Aris C. Malantic Partner CPA Certificate No. 90190 SEC Accreditation No. 0326-AR-1 Tax Identification No. 152-884-691 PTR No. 2087547, January 4, 2010, Makati City February 19, 2010 PSBank 2009 Annual Report
55
Statements of Condition
December 31 2009
2008
Cash and Other Cash Items (Note 16)
2,632,884,729
1,436,234,455
Due from Bangko Sentral ng Pilipinas (Note 16)
4,937,990,387
3,228,768,914
Due from Other Banks (Note 29)
1,528,847,687
1,276,768,278
5,900,000,000
750,000,000
248,043,099
1,081,772,381
18,261,371,820
16,813,786,476
Held-to-Maturity Investments (Note 8)
4,772,851,076
1,610,283,750
Loans and Receivables (Notes 9 and 29)
47,308,237,957
41,603,346,112
788,310,337
369,951,789
Property and Equipment (Note 11)
1,985,474,732
1,765,934,385
Investment Properties (Note 12)
2,582,767,705
2,776,144,811
Deferred Tax Asset (Note 27)
1,256,530,049
1,110,811,220
Goodwill and Other Intangible Assets (Note 13)
197,472,852
158,516,420
Other Assets (Note 14)
687,047,211
654,400,472
93,087,829,641
74,636,719,463
8,188,088,242 9,403,399,256 59,798,723,788 77,390,211,286
6,393,728,469 8,607,973,024 46,676,781,428 61,678,482,921
1,973,881,534
2,208,541,621
Treasurer’s, Cashier’s and Manager’s Checks
505,738,363
339,901,057
Accrued Taxes, Interest and Other Expenses (Note 18)
895,023,135
904,943,414
17,425,906
14,073,344
1,293,410,922
1,018,052,404
82,075,691,146
66,163,994,761
ASSETS
Interbank Loans Receivable and Securities Purchased Under Resale Agreements (Note 7) Fair Value Through Profit or Loss Investments (Note 8) Available-for-Sale Investments (Notes 8 and 16)
Investments in an Associate and a Joint Venture (Note 10)
LIABILITIES AND EQUITY Liabilities Deposit Liabilities (Notes 16 and 29) Demand Savings Time Subordinated Notes and Bills Payable (Notes 17 and 29)
Income Tax Payable (Note 27) Other Liabilities (Note 19)
(Forward)
56
PSBank 2009 Annual Report
December 31 2009
2008
Common Stock (Note 21)
2,402,524,910
2,402,524,910
Capital Paid in Excess of Par Value (Note 21)
2,818,083,506
2,818,083,506
854,463,783
730,462,341
4,232,673,110
3,296,849,504
819,829,053
(677,288,505)
(115,435,867)
(97,907,054)
11,012,138,495
8,472,724,702
93,087,829,641
74,636,719,463
Equity
Surplus Reserves (Note 30) Surplus Net Unrealized Gain (Loss) on Available-for-Sale Investments (Note 8) Cumulative Translation Adjustment (Note 2)
See accompanying Notes to Financial Statements.
PSBank 2009 Annual Report
57
Statements of Income
Years Ended December 31 INTEREST INCOME ON Loans and receivables (Notes 9 and 29) Investment securities (Note 8) Due from BSP (Note 16) Due from other banks (Note 29) Interbank loans receivable and securities purchased under resale agreements (Note 7)
INTEREST EXPENSE ON Deposit liabilities (Notes 16 and 29) Subordinated notes payable (Note 17) Bills payable (Notes 17 and 29)
NET INTEREST INCOME Service fees and commission income Service fees and commission expense NET SERVICE FEES AND COMMISSION INCOME (Note 22) OTHER OPERATING INCOME (CHARGES) Trading and securities gains - net (Note 8) Gain on foreclosure (Note 12) Foreign exchange gain (loss) Gain on sale of property and equipment (Note 11) Gain (loss) on sale of investment properties (Note 12) Miscellaneous (Note 23) Total Operating Income OTHER EXPENSES Compensation and fringe benefits (Notes 24 and 29) Provision for credit and impairment losses (Note 15) Taxes and licenses (Notes 27 and 31) Occupancy and equipment-related costs (Note 25) Depreciation and amortization (Note 11) Security, messengerial and janitorial services Amortization of other intangible assets (Note 13) Miscellaneous (Note 26)
(Forward)
58
PSBank 2009 Annual Report
2009
2008
2007
5,376,067,642 1,944,869,980 92,985,420 5,844,863
4,745,054,266 1,012,129,324 85,433,773 24,609,925
3,992,118,454 1,022,088,272 161,580,430 80,667,029
109,764,181 7,529,532,086
262,379,746 6,129,607,034
235,986,724 5,492,440,909
2,485,486,486 205,737,407 4,831,064 2,696,054,957
2,196,675,829 205,983,474 17,450,070 2,420,109,373
2,088,983,072 205,123,402 – 2,294,106,474
4,833,477,129 642,921,038 46,679,681
3,709,497,661 631,459,004 97,093,744
3,198,334,435 549,646,349 85,731,189
596,241,357
534,365,260
463,915,160
543,632,852 206,142,134 12,337,918 9,804,030 (18,582,156) 88,283,966 6,271,337,230
199,740,186 211,126,132 186,796,847 3,833,000 8,870,359 83,229,054 4,937,458,499
1,109,801,619 146,218,220 (62,425,728) 3,791,575 (67,333,361) 74,300,534 4,866,602,454
1,488,633,458 1,109,756,584 559,775,883 362,869,511 328,535,606 147,976,617 27,761,608 917,642,194 4,942,951,461
1,223,833,877 577,400,627 451,660,304 307,401,215 274,104,098 128,687,095 26,750,792 853,688,641 3,843,526,649
1,227,477,428 674,955,260 705,022,145 303,813,401 265,303,860 140,374,503 25,855,079 874,995,284 4,217,796,960
Years Ended December 31 2009
2008
2007
INCOME BEFORE SHARE IN NET EARNINGS OF AN ASSOCIATE AND A JOINT VENTURE AND INCOME TAX SHARE IN NET EARNINGS OF AN ASSOCIATE AND A JOINT VENTURE (Note 10)
1,328,385,769
1,093,931,850
648,805,494
45,129,698
46,820,603
47,469,552
INCOME BEFORE INCOME TAX
1,373,515,467
1,140,752,453
696,275,046
133,501,051
200,600,860
(321,946,895)
1,240,014,416
940,151,593
1,018,221,941
5.16
3.98
5.04
PROVISION FOR (BENEFIT FROM) INCOME TAX (Note 27) NET INCOME Basic/Diluted Earnings Per Share (Note 28)
See accompanying Notes to Financial Statements.
PSBank 2009 Annual Report
59
Statements of Comprehensive Income
Years Ended December 31 NET INCOME Other Comprehensive Income Net unrealized gain (loss) on AFS investments (Note 8) Cumulative translation adjustment (Note 2) TOTAL COMPREHENSIVE INCOME, NET OF TAX
See accompanying Notes to Financial Statements.
60
PSBank 2009 Annual Report
2009 1,240,014,416
2008 940,151,593
2007 1,018,221,941
1,497,117,558 (17,528,813)
(805,848,857) (97,907,054)
(1,203,390,475) –
2,719,603,161
36,395,682
( 185,168,534)
61
PSBank 2009 Annual Report
See accompanying Notes to Financial Statements.
Balance at January 1, 2009 Total comprehensive income (loss) for the year Appropriation of surplus for trust business Cash dividends Balance at December 31, 2009 Balance at January 1, 2008 Total comprehensive income (loss) for the year Appropriation of surplus for trust business Issuance of common stock Cash dividends Balance at December 31, 2008 Balance at January 1, 2007 Total comprehensive income (loss) for the year Appropriation of surplus for trust business Cash dividends Balance at December 31, 2007
Common Stock (Note 21) 2,402,524,910 – – – 2,402,524,910 2,019,383,150 – – 383,141,760 – 2,402,524,910 2,019,383,150 – – – 2,019,383,150
Statements of Changes in Equity
Capital Paid in Excess of Par Value (Note 21) 2,818,083,506 – – – 2,818,083,506 1,220,819,206 – – 1,597,264,300 – 2,818,083,506 1,220,819,206 – – – 1,220,819,206
Surplus Reserves (Note 30) 730,462,341 – 124,001,442 – 854,463,783 636,447,182 – 94,015,159 – – 730,462,341 534,624,988 – 101,822,194 – 636,447,182
Net Unrealized Gain (Loss) on Cumulative Available-for-Sale Translation Investments Adjustment Surplus (Note 8) (Note 2) 3,296,849,504 ( 677,288,505) ( 97,907,054) 1,240,014,416 1,497,117,558 (17,528,813) (124,001,442) – – (180,189,368) – – 4,232,673,110 819,829,053 ( 115,435,867) 2,594,864,566 128,560,352 – 940,151,593 (805,848,857) (97,907,054) (94,015,159) – – – – – (144,151,496) – – 3,296,849,504 ( 677,288,505) ( 97,907,054) 2,041,953,784 1,331,950,827 – 1,018,221,941 (1,203,390,475) – (101,822,194) – – (363,488,965) – – 2,594,864,566 128,560,352 –
Total 8,472,724,702 2,719,603,161 – (180,189,368) 11,012,138,495 6,600,074,456 36,395,682 – 1,980,406,060 (144,151,496) 8,472,724,702 7,148,731,955 (185,168,534) – (363,488,965) 6,600,074,456
Statements of Cash Flows
Years Ended December 31 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Provision for credit and impairment losses (Note 15) Depreciation and amortization (Note 11) Amortization of other intangible assets (Note 13) Loss (gain) from sale of investment properties (Note 12) Amortization of debt issuance costs (Note 17) Unrealized trading loss on fair value through profit or loss investments (Note 8) Gain from sale of property and equipment (Note 11) Share in net earnings of an associate and a joint venture (Note 10) Gain on foreclosure (Note 12) Realized gain on sale of available-for-sale investments (Note 8) Changes in operating assets and liabilities: Decrease (increase) in: Fair value through profit or loss investments Loans and receivables Other assets Increase (decrease) in: Deposit liabilities Treasurer’s, cashier’s and manager’s checks Accrued taxes, interests and other expenses Other liabilities Cash generated from (used in) operations Income taxes paid Net cash provided by (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of: Other intangible assets (Note 13) Property and equipment (Note 11) Held-to-maturity investments Available-for-sale investments Proceeds from sale of: Available-for-sale investments Investment properties (Note 12) Chattel mortgage (Note 14) Property and equipment Proceeds from redemption of held-to-maturity investments at maturity Dividends received (Note 10) Acquisition through business combination net of cash acquired Investment in an associate (Note 10) Investment in a joint venture (Note 10) Net cash provided by (used in) investing activities (Forward) 62
PSBank 2009 Annual Report
2009
2008
2007
1,373,515,467
1,140,752,453
696,275,046
1,109,756,584 328,535,606 27,761,608 18,582,156 2,939,913
577,400,627 274,104,098 26,750,792 (8,871,058) 2,664,778
674,955,260 265,303,860 25,855,079 67,333,361 2,345,616
11,127,300 (9,804,030)
18,710,369 (3,832,301)
1,190,651 (3,791,575)
(45,129,698) (206,142,134)
(46,820,603) (211,126,132)
(47,469,552) (146,218,220)
(503,223,604)
(230,643,975)
(979,514,117)
822,456,959 (7,448,053,545) (100,044,178)
318,693,518 (7,337,206,992) (176,504,283)
(593,751,827) (5,973,827,242) 236,617,876
15,703,125,456 165,837,306 (9,936,508) 239,305,697 11,480,610,355 (275,867,318) 11,204,743,037
3,780,725,331 (37,801,879) 39,901,023 16,082,613 (1,857,021,621) (146,001,219) (2,003,022,840)
6,132,700,246 14,744,780 273,361,897 149,186,516 795,297,655 (156,838,023) 638,459,632
(66,718,040) (474,230,433) (3,163,556,793) (10,014,727,372)
(19,097,954) (230,060,966) (87,733,714) (17,773,948,651)
(74,872,359) (224,947,130) – (27,610,465,116)
10,467,963,859 549,652,415 521,165,533 39,380,202
13,655,161,223 229,599,094 328,405,707 40,368,764
29,443,735,140 358,886,449 210,959,228 24,055,684
– 26,771,150 – – (400,000,000) (2,514,299,479)
258,255,187 – – –
303,476 – 269,562,365 (125,000,000)
(3,599,051,310)
2,272,217,737
Years Ended December 31 CASH FLOWS FROM FINANCING ACTIVITIES Settlements of bills payable Availments of bills payable Dividends paid (Note 21) Issuance of common stock (Note 21) Net cash provided by (used in) financing activities Effect of exchange rate differences NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR Cash and other cash items (Note 16) Due from Bangko Sentral ng Pilipinas (Note 16) Due from other banks (Note 29) Interbank loans receivable and securities purchased under resale agreements (Note 7) CASH AND CASH EQUIVALENTS AT END OF YEAR Cash and other cash items (Note 16) Due from Bangko Sentral ng Pilipinas (Note 16) Due from other banks (Note 29) Interbank loans receivable and securities purchased under resale agreements (Note 7)
OPERATIONAL CASH FLOWS FROM INTEREST Interest paid Interest received
2009
2008
2007
( 2,706,900,000) 2,469,300,000 (144,151,496) – (381,751,496) (731,217)
( 6,177,600,000) 6,415,200,000 (143,863,698) 1,980,406,060 2,074,142,362 (4,105,551)
– – (361,870,788) – (361,870,788) –
8,307,951,156
(3,532,037,339)
2,548,806,581
1,436,234,455 3,228,768,914 1,276,768,278
1,093,135,036 3,280,015,727 544,196,039
983,807,392 4,211,947,612 1,579,247,401
750,000,000 6,691,771,647
5,306,462,184 10,223,808,986
900,000,000 7,675,002,405
2,632,884,729 4,937,990,387 1,528,847,687
1,436,234,455 3,228,768,914 1,276,768,278
1,093,135,036 3,280,015,727 544,196,039
5,900,000,000 14,999,722,803
750,000,000 6,691,771,647
5,306,462,184 10,223,808,986
2,740,452,986 7,391,750,548
2,289,195,803 5,658,615,033
2,380,853,878 5,097,659,489
See accompanying Notes to Financial Statements.
PSBank 2009 Annual Report
63
Notes to Financial Statements
1.
Corporate Information Philippine Savings Bank (the Bank) was incorporated in the Philippines primarily to engage in savings and mortgage banking. The Bank’s shares are listed in the Philippine Stock Exchange. The Bank offers a wide range of products and services such as deposit products, loans, treasury and trust functions that serve mainly to the retail and consumer market. On September 6, 1991, the Bank was authorized to perform trust functions. As of December 31, 2009 and 2008, the Bank had 170 and 164 branches, respectively. The Bank added 117 Automated Tellering Machines (ATMs) in Metro Manila and in provincial locations in 2009, bringing the total number of ATMs to 306 as of December 31, 2009 from 189 as of December 31, 2008. The original Certificate of Incorporation of the Bank was issued by the Securities and Exchange Commission on June 30, 1959. On March 28, 2006, the board of directors (BOD) of the Bank approved the amendment of Article Four of its Amended Articles of Incorporation to extend the corporate term of the Bank, which expired on June 30, 2009, for another 50 years or up to June 30, 2059. As of December 31, 2009, the Bank is seventy-six percent (76%) owned by Metropolitan Bank & Trust Company (MBTC), its parent company. The Bank’s principal place of business is located at PSBank Center, 777 Paseo de Roxas corner Sedeño Street, Makati City.
2.
Accounting Policies Basis of Preparation The accompanying financial statements have been prepared under the historical cost basis except for fair value through profit or loss (FVPL) investments and available-for-sale (AFS) investments that have been measured at fair value. The accompanying financial statements of the Bank include the accounts maintained in the Regular Banking Unit (RBU) and Foreign Currency Deposit Unit (FCDU). The functional currency of the RBU and the FCDU is Philippine Peso and United States Dollar (USD), respectively. For financial reporting purposes, FCDU accounts and foreign currency-denominated accounts in the RBU are translated into their equivalents in Philippine pesos (see accounting policy on foreign currency translation). The financial statements of these units are combined after eliminating inter-unit accounts. Statement of Compliance The financial statements of the Bank have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).
64
PSBank 2009 Annual Report
Changes in Accounting Policies and Disclosure The accounting policies adopted are consistent with those of the previous financial year except for the following new and amended PFRS and Philippine Interpretations which were adopted as of January 1, 2009: New Standard and Amendments to Standards • PFRS 8, Operating Segments, effective January 1, 2009 • Philippine Accounting Standards (PAS) 1, Presentation of Financial Statements, effective January 1, 2009 • PFRS 7 Amendments - Improving Disclosures about Financial Instruments, effective January 1, 2009 Standards and interpretations that have been adopted and that are deemed to have an impact on the financial statements or performance of the Bank are described below: New Standard PFRS 8, Operating Segments PFRS 8 replaced PAS 14, Segment Reporting, upon its effective date. The Bank concluded that the operating segments determined in accordance with PFRS 8 are the same as the business segments previously identified under PAS 14 with the addition of the Bank’s Branch Banking Group. The Bank has identified the Branch Banking Group to be among the reportable segments to comply with the PFRS requirement, as these small Bank offices constitute a large share in the Bank’s performance and are being evaluated regularly by Management. The Bank presented the new disclosure requirements prescribed under this PFRS in Note 6. Amendments to Standards PAS 1, Presentation of Financial Statements The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented in a reconciliation of each component of equity. In addition, the standard introduces the statement of comprehensive income: it presents all items of recognized income and expense, either in one single statement, or in two linked statements. The Bank has elected to present two linked statements. Amendment to PFRS 7, Financial Instruments: Disclosures The amendments to PFRS 7, Financial Instruments: Disclosures, require additional disclosures about fair value measurement and liquidity risk. Fair value measurements related to items recorded at fair value are to be disclosed by source of inputs using a three level fair value hierarchy, by class, for all financial instruments recognized at fair value. In addition, reconciliation between the beginning and ending balance for level 3 fair value measurements is now required, as well as significant transfers between levels in the fair value hierarchy. The amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and financial assets used for liquidity management. The fair value hierarchy has the following levels: (a) quoted prices in active markets for identical assets or liabilities (Level 1); (b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (Level 2); and (c) inputs for the asset or liability that are not based on observable market data (Level 3). The Bank used judgment in assessing the significance of a particular input to the fair value measurement in its entirety, considering factors specific to the asset or liability. The fair value measurement disclosures are presented in Note 4. The issuance of and the amendments to the following PAS and Philippine Interpretations did not have any impact on the accounting policies, financial position or performance of the Bank: • •
PAS 23, Borrowing Costs (Revised) Amendments to PAS 27, Consolidated and Separate Financial Statements - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate PSBank 2009 Annual Report
65
• • • • •
Amendment to PAS 32, Financial Instruments: Presentation, and PAS 1, Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation, effective January 1, 2009 Philippine Interpretation IFRIC-9 and PAS 39 Amendments, Embedded Derivatives, effective June 30, 2009 Philippine Interpretation IFRIC-13, Customer Loyalty Programmes, effective July 1, 2008 Philippine Interpretation IFRIC-16, Hedges of a Net Investment in a Foreign Operation Philippine Interpretation IFRIC-18, Transfers of Assets from Customers
Improvements to PFRS 2008 The omnibus amendments to PFRSs issued in 2008 were issued primarily with a view to remove inconsistencies and clarify wordings. There are separate transitional provisions for each standard. The adoption of the amendments resulted in changes in accounting policies but did not have any impact on the financial position or performance of the Bank. Summary of Significant Accounting Policies Foreign Currency Translation The financial statements are presented in Philippine pesos, which is the Bank’s functional and presentation currency. The books of accounts of the RBU are maintained in Philippine pesos, while those of the FCDU are maintained in USD. RBU As at reporting date, the monetary assets and liabilities of the RBU are translated in Philippine pesos based on the Philippine Dealing System (PDS) closing rate prevailing at end of the year and foreign currency-denominated income and expenses, at the exchange rates as at the date of the initial transaction. Foreign exchange differences arising from restatements of foreign currency-denominated assets and liabilities in the RBU are credited to or charged against current operations in the year in which the rates change. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. FCDU As at the reporting date, the assets and liabilities of the FCDU are translated to the Bank’s presentation currency (the Philippine Peso) at PDS closing rate prevailing at the statement of condition date, and its income and expenses are translated using the exchange rates as at the dates of the initial transaction. Exchange differences arising on translation to the presentation currency are taken to the statement of comprehensive income under ‘Cumulative translation adjustment’. Upon disposal of the FCDU, the deferred cumulative amount recognized in the statement of comprehensive income is recognized in the statement of income. The Bank adopted this policy in 2008 when the Bangko Sentral ng Pilipinas (BSP) issued BSP Circular No. 601 on February 13, 2008. This Circular included a provision requiring Banks to use the USD as the functional currency in its FCDU. The Bank recorded ‘Cumulative translation adjustment’ amounting to 97.9 milion under equity as of result of adopting this policy. Financial Instruments - Initial Recognition and Subsequent Measurement Date of recognition Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace are recognized on the settlement date. Deposits, amounts due to banks and loans are recognized when cash is received by the Bank or advanced to the borrowers. Initial recognition of financial instruments All financial instruments, including trading and investment securities and loans and receivables, are initially measured at fair value. Except for FVPL investments and liabilities, the initial measurement of financial assets and liabilities includes transaction costs. The Bank classifies its financial assets in the following categories: FVPL investments, Held-to-maturity (HTM) investments, AFS investments, and loans and receivables. The classification depends on the purpose for which the investments were acquired and whether they are quoted in an active market. Management determines the classification of its investments at initial recognition and, where allowed and appropriate, re-evaluates such designation at every
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reporting date. Financial liabilities are classified into liabilities at FVPL and other financial liabilities at amortized cost. As of December 31, 2009 and 2008, the Bank had no liabilities at FVPL. Determination of fair value The fair value for financial instruments traded in active markets at the statement of condition date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. When current bid and asking prices are not available, the price of the most recent transaction is used since it provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction. For all other financial instruments not listed in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include net present value techniques, comparison to similar instruments for which market observable prices exist, options pricing models, and other relevant valuation models. ‘Day 1’ profit Where the transaction price in a non-active market is different from the fair value from other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Bank recognizes the difference between the transaction price and fair value (a ‘Day 1 profit’) in the statement of income in ‘Trading and securities gains - net’. In cases where use is made of data, which is not observable, the difference between the transaction price and model value is only recognized in the statement of income when the inputs become observable or when the instrument is derecognized. For each transaction, the Bank determines the appropriate method of recognizing the ‘Day 1’ profit amount. Derivatives recorded at FVPL Derivative financial instruments are initially recorded at fair value on the date at which the derivative contract is entered into and are subsequently remeasured at fair value. Any gains or losses arising from changes in fair values of derivatives (except those accounted for as accounting hedges) are taken directly to the statement of income and are included in ‘Trading and securities gain - net’. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. As of December 31, 2009 and 2008, derivatives comprise Republic of the Philippines (ROP) paired warrants acquired to lower the risk weighted assets and improve the capital adequacy ratio of the Bank. For purposes of hedge accounting, hedges, if any, are classified primarily as either: a) a hedge of the fair value of an asset, liability or a firm commitment (fair value hedge); or b) a hedge of the exposure variability in cash flows attributable to an asset or a liability or a forecasted transaction (cash flow hedge). Hedge accounting is applied to derivatives designated as hedging instruments in a fair value, cash flow, or net investment hedge provided certain criteria are met. In 2009 and 2008, the Bank did not apply hedge accounting treatment for its derivative transactions. Designated financial assets or financial liabilities at FVPL Designated financial assets or financial liabilities classified in this category are designated by management on initial recognition when the following criteria are met: • •
•
the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis; or the assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or the financial instrument contains an embedded derivative, unless the embedded derivative does not significantly modify the cash flows or it is clear, with little or no analysis, that it would not be separately recorded.
Designated financial assets and financial liabilities at FVPL are recorded in the statement of condition at fair value. Changes in fair value of financial assets and liabilities designated at FVPL are recorded in ‘Trading and securities gains - net’. Interest earned or incurred is recorded in interest income or expense, respectively, while dividend income is recorded in other operating income according to the terms of the contract, or when the right of the payment has been established. As of December 31, 2009 and 2008, the Bank had no designated financial assets or financial liabilities at FVPL.
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Other financial assets or financial liabilities held for trading Other financial assets or financial liabilities held for trading (classified as FVPL investments) are recorded in the statement of condition at fair value. Changes in fair value relating to the held for trading positions are recognized in ‘Trading and securities gains - net’. Interest earned or incurred is recorded as interest income or expense, respectively, while dividend income is recorded in other operating income when the right to receive payment has been established. Included in this classification are debt securities which have been acquired principally for the purpose of selling in the near term. Embedded derivatives An embedded derivative is separated from the host contract and accounted for as a derivative if all of the following conditions are met: • • •
the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristic of the host contract; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid or combined instrument is not recognized at fair value through profit or loss.
The Bank assesses whether embedded derivatives are required to be separated from host contracts when the Bank first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. The Bank determines whether a modification to cash flows is significant by considering the extent to which the expected future cash flows associated with the embedded derivative and the host contract and whether the change is significant relative to the previously expected cash flows on the contract. As of December 31, 2009 and 2008, the Bank does not have any embedded derivatives. HTM investments HTM investments are quoted non-derivative financial assets with fixed or determinable payments and fixed maturities for which the Bank’s management has the positive intention and ability to hold to maturity. Where the Bank sells other than an insignificant amount of HTM investments, the entire category would be tainted and reclassified as AFS investments. After initial measurement, these investments are subsequently measured at amortized cost using the effective interest rate (EIR) amortization method, less impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the EIR. The amortization is included in ‘Interest income’ in the statement of income. Gains and losses are recognized in income when the HTM investments are derecognized and impaired, as well as through the amortization process. The losses arising from impairment of such investments are recognized in the statement of income under ‘Provision for credit and impairment losses’. The effects of restatement on foreign currency denominated HTM investments are recognized in the statement of income. Amounts due from BSP and other banks, interbank loans receivable and securities purchased under resale agreements, loans and receivables This accounting policy relates to the statement of condition captions ‘Due from BSP’, ‘Due from other banks’, ‘Interbank loans receivable and securities purchased under resale agreements (SPURA)’ and ‘Loans and receivables’. These are nonderivative financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not classified as ‘FVPL investments’, designated as ‘AFS investments’ or ‘designated financial assets at FVPL’. After initial measurement, ‘Due from BSP’, ‘Due from other banks’, ‘Interbank loans receivable and SPURA’ and ‘Loans and receivables’ are subsequently measured at amortized cost using the EIR amortization method, less allowance for credit losses. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortization is included in the ‘Interest income’ in the statement of income. The losses arising from impairment are recognized in ‘Provision for credit and impairment losses’ in the statement of income.
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AFS investments AFS investments are those which are designated as such or do not qualify to be classified as FVPL investments, HTM investments or loans and receivables. They are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market conditions. They include equity investments, money market papers and other debt instruments. After initial measurement, AFS investments are subsequently measured at fair value. The effective yield component of AFS debt securities, as well as the impact of restatement on foreign currency-denominated AFS debt securities, is reported in earnings. The unrealized gains and losses arising from the fair valuation of AFS investments are excluded, net of tax, from reported earnings and are reported as ‘Net unrealized gain (loss) on AFS investments’ in the equity section of the statement of condition. When the security is disposed of, the cumulative gain or loss previously recognized in equity is recognized as ‘Trading and securities gains - net’ in the statement of income. Where the Bank holds more than one investment in the same security, these are deemed to be disposed on a weighted average basis. Interest earned on holding AFS investments are reported as interest income using the EIR. Dividends earned on holding AFS equity investments are recognized in the statement of income as ‘Miscellaneous income’ when the right of the payment has been established. The losses arising from impairment of such investments are recognized as ‘Provision for credit and impairment losses’ in the statement of income. Other liabilities at amortized cost This category represents issued financial instruments or their components, which are not designated at FVPL and comprises ‘Deposit liabilities’, ‘Subordinated notes and bills payable’, ‘Treasurer’s, cashier’s and manager’s checks’, ‘Accrued interest payable’, ‘Accounts payable’, ‘Bills purchased-contra’, ‘Other credits’, ‘Due to BSP’, ‘Dividends payable’, ‘Due to Treasurer of the Philippines’ and ‘Deposits for keys-Safety deposit boxes (SDB)’, where the substance of the contractual arrangement results in the Bank having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares. The components of issued financial instruments that contain both liability and equity elements are accounted for separately, with the equity component being assigned the residual amount after deducting from the instrument as a whole the amount separately determined as the fair value of the liability component on the date of issue. After initial measurement, borrowed funds and similar financial liabilities not qualified as and not designated as FVPL, are subsequently measured at amortized cost using the EIR amortization method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an integral part of the EIR. Derecognition of Financial Assets and Liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is derecognized where: • the rights to receive cash flows from the asset have expired; or • the Bank retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or • the Bank has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained the risk and rewards of the asset but has transferred control over the asset. Where the Bank has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control over the asset, the asset is recognized to the extent of the Bank’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of original carrying amount of the asset and the maximum amount of consideration that the Bank could be required to repay. Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of
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an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statement of income. Repurchase and Reverse Repurchase Agreements Securities sold under agreements to repurchase at a specified future date (‘repos’) are not derecognized from the statement of condition. The corresponding cash received, including accrued interest, is recognized in the statement of condition as a loan to the Bank, reflecting the economic substance of such transaction. The Bank had no outstanding repurchase agreements as of December 31, 2009 and 2008. Conversely, securities purchased under agreements to resell at a specified future date (‘reverse repos’) are not recognized in the statement of condition. The corresponding cash paid, including accrued interest, is recognized in the statement of condition as SPURA, and is considered a loan to the counterparty. The difference between the purchase price and resale price is treated as interest income and is accrued over the life of the agreement using the EIR amortization method. Offsetting Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of condition if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the statement of condition. Impairment of Financial Assets The Bank assesses at each statement of condition date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Financial assets carried at amortized cost For financial assets carried at amortized cost, which includes loans and receivables, due from banks and HTM investments, the Bank first assesses at each reporting date whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred). The carrying amount of the asset is reduced through use of an allowance account and the amount of loss is charged to the statement of income. Interest income continues to be recognized based on the original EIR of the asset. Loans, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral has been realized. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reduced by adjusting the allowance account. If a future write-off is later recovered, any amounts formerly charged are credited to ‘Provision for credit and impairment losses’ in the statement of income. If the Bank determines that no objective evidence of imp airment exists for individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses for impairment. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment for impairment.
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The present value of the estimated future cash flows is discounted at the financial asset’s original EIR. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR, adjusted for the original credit risk premium. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as industry and collateral type. Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period in which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash flows reflect, and are directionally consistent with changes in related observable data from period to period (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Bank to reduce any differences between loss estimates and actual loss experience. Restructured loans Where possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement on new loan conditions. Once the terms have been renegotiated, the loan is no longer considered past due. Management continuously reviews restructured loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original EIR if the original loan has fixed interest rate and the current repriced rate if the original loan is repriceable. The difference between the recorded value of the original loan and the present value of the restructured cash flows, discounted at the applicable interest rate, is recognized in ‘Provision for credit and impairment losses’ in the statement of income. AFS investments For AFS investments, the Bank assesses at each statement of condition date whether there is objective evidence that a financial asset or group of financial assets is impaired. In case of equity investments classified as AFS investments, this would include a significant or prolonged decline in the fair value of the investments below its cost. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the statement of income - is removed from equity and recognized in the statement of income. Impairment losses on equity investments are not reversed through the statement of income. Increases in fair value after impairment are recognized in the statement of comprehensive income. In the case of debt instruments classified as AFS investments, impairment is assessed based on the same criteria as financial assets carried at amortized cost. Future interest income is based on the reduced carrying amount and is accrued based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded as part of ‘Interest income’ in the statement of income. If, in subsequent years, the fair value of a debt instrument increased and the increase can be objectively related to an event occurring after the impairment loss was recognized in the statement of income, the impairment loss is reversed through the statement of income.
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Revenue Recognition Revenue is recognized to the extent that it is probable that economic benefits will flow to the Bank and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: Interest income For all financial instruments measured at amortized cost and interest bearing financial instruments classified as AFS investments, interest income is recorded at the EIR, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options), includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses. The adjusted carrying amount is calculated based on the original EIR. The change in carrying amount is recorded as interest income. Once the recorded value of a financial asset or group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognized using the original EIR used to discount future cash flows. Fee and commission income Fees earned for the provision of services over a period of time are accrued over that period. These fees include investment fund fees, custodian fees, fiduciary fees, portfolio fees, credit related fees and other management fees. Dividends Dividend income is recognized when the Bank’s right to receive payment is established. Trading and securities gains - net Income results from disposal of AFS investments and trading activities including all gains and losses from changes in fair value for financial assets and financial liabilities at FVPL. Rental income Rental income arising from leased properties is accounted for on a straight-line basis over the lease terms on ongoing leases and is recorded in the statement of income under ‘Other operating income’. Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash and other cash items, amounts due from BSP and other banks, and interbank loans receivable and SPURA that are convertible to known amounts of cash with original maturities of three months or less from dates of placements and that are subject to insignificant risk of changes in value. Business Combination Business combinations are accounted for using the purchase accounting method. This involves recognizing identifiable assets (including previously unrecognized intangible assets) and liabilities (including contingent liabilities and excluding future restructuring) of the acquired business at fair value. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. If the cost of acquisition is less than the fair values of the identifiable net assets acquired, the discount on acquisition is recognized directly in the statement of income in the year of acquisition. Business Combination Under Common Control Business combinations involving entities or businesses under common control are accounted similar to pooling of interest method. It involves reflecting the assets and liabilities of the acquired business at their carrying amounts. No new goodwill is recognized as a result of the combination. Investment in an Associate Associates are entities over which the Bank has significant influence but not control, generally accompanying a shareholding of between 20.00% and 50.00% of the voting rights. The Bank’s investment in associate represents its 25.00% interest in Toyota Financial Services Philippines Corp. (TFSPC), an entity not listed on the stock exchange. Investment in an associate is accounted for under the equity method of accounting.
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The reporting period of TFSPC is the fiscal year-ending March 31. However, TFSPC prepares financial statements for a 12-month period ending December 31 for the use of the Bank in applying the equity method. The length of the reporting period is the same from period to period. Where necessary, adjustments are made to bring the accounting policies in line with those of the Bank. Under the equity method, an investment in an associate and a joint venture is carried in the statement of condition at cost plus post-acquisition changes in the Bank’s share in the net assets of the associate. Goodwill relating to an associate and a joint venture is included in the carrying value of the investment and is not amortized. The Bank’s share in an associate’s and a joint venture’s post-acquisition profits or losses is recognized in the statement of income, and its share of postacquisition movements in the associate’s and joint venture’s other comprehensive income is recognized in the statement of comprehensive income. When the Bank’s share of losses in an associate and a joint venture equals or exceeds its interest in the associate or joint venture, including any other unsecured receivables, the Bank does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture. Profits and losses resulting from transactions between the Bank and an associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. Investment in a Joint Venture Investment in a joint venture represents the Bank’s interest in a jointly controlled entity, whereby the venturers have a contractual arrangement that establishes joint control over the economic activities of Sumisho Motor Finance Corporation (SMFC), an entity not listed on the stock exchange. The Bank’s investment in a joint venture represents its 40.00% interest in SMFC. Investment in a joint venture is accounted for under the equity method of accounting. The reporting period of SMFC is the calendar year ending December 31. Where necessary, adjustments are made to bring the accounting policies in line with those of the Bank. Property and Equipment Land is stated at cost less any impairment in value and depreciable properties including building, furniture, fixtures and equipment, and leasehold improvements are stated at cost less accumulated depreciation and accumulated impairment losses. The initial cost of property and equipment consists of its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the assets have been put into operation, such as repairs and maintenance, are normally charged against operations in the year in which the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of property and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as additional cost of property and equipment. Depreciation is calculated on a straight-line basis over the useful life of the asset as follows: Building
25-50 years
Furniture, fixtures and equipment
3-5 years depending on the type of assets
Leasehold Improvements
5 years or the term of the related leases, whichever is shorter
An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of income in the year the asset is derecognized. The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the asset or cash-generating units are written down to their recoverable amount (see policy on Impairment of Nonfinancial Assets). The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year-end to ensure that these are consistent with the expected pattern of economic benefits from the items of property and equipment. PSBank 2009 Annual Report
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Investment Properties Investment properties are measured initially at cost, including transaction costs. An investment property acquired through an exchange transaction is measured at fair value of the asset acquired unless the fair value of such an asset cannot be measured in which case the investment property acquired is measured at the carrying amount of asset given up. Foreclosed properties are classified under investment properties from foreclosure date. Expenditures incurred after the investment properties have been put into operations, such as repairs and maintenance costs, are normally charged to income in the period in which the costs are incurred. Subsequent to initial recognition, investment properties are carried at cost less accumulated depreciation and impairment in value except for land which is stated at cost less impairment in value. Depreciation is calculated on a straight-line basis using the remaining useful lives from the time of acquisition of the investment properties. The estimated useful lives of the depreciable assets are as follows: Building Condominium Units
15-40 years 10 years
Investment properties are derecognized when they have either been disposed of or when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in the statement of income in ‘Gain (loss) on sale of investment properties’ in the year of retirement or disposal. Transfers are made to investment properties when, and only when, there is a change in use evidenced by ending of owner occupation, commencement of an operating lease to another party or ending of construction or development. Chattel Mortgage Properties Chattel mortgage properties comprise repossessed vehicles. Chattel mortgage properties are stated at cost less accumulated depreciation and impairment in value. Depreciation is calculated on a straight-line basis using the remaining useful lives from the time of acquisition of the vehicles. The useful lives of chattel mortgage properties are estimated to be 5 years. Goodwill Goodwill is initially measured at cost being the excess of the acquisition cost over the share in the net fair value of the acquired identifiable assets, liabilities and contingent liabilities. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired is, from the acquisition date, allocated to each of the cash generating units that are expected to benefit from the synergies of the combination, irrespective of whether the acquired other assets or liabilities are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of income in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible
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assets may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of income in the expense category consistent with the function of the intangible asset. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortized. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis. Gains or losses arising from the derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of income when the asset is derecognized. License fees License fees arose from acquisition of branches from a local bank. License fees have indefinite useful lives and are tested for impairment on an annual basis. Software costs Software costs are carried at cost less accumulated amortization and any impairment in value. Given the history of rapid changes in technology, computer software are susceptible to technological obsolescence. Therefore, it is likely that their useful life is short. Software costs are amortized on a straight-line basis over 5 years but maybe shorter depending on the period over which the Bank expects to use the asset. Impairment of Nonfinancial Assets Property and equipment, investment and chattel mortgage properties At each reporting date, the Bank assesses whether there is any indication that its nonfinancial assets may be impaired. When an indicator of impairment exists or when an annual impairment testing for an asset is required, the Bank makes a formal estimate of the recoverable amount. Recoverable amount is the higher of an asset’s (or cash-generating unit’s) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is assessed as part of the cash generating unit to which it belongs. Where the carrying amount of an asset (or cash generating unit) exceeds its recoverable amount, the asset (or cash generating unit) is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or cash generating unit). An impairment loss is charged to operations in the year in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is charged to the revaluation increment of the said asset. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of income unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation expense is adjusted in future years to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining life.
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Goodwill Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of the cash generating unit (or group of cash generating units) to which the goodwill relates. Where the recoverable amount of the cash generating unit (or group of cash generating units) is less than the carrying amount of the cash generating unit (or group of cash generating units) to which goodwill has been allocated, an impairment loss is recognized immediately in the statement of income. Impairment losses relating to goodwill cannot be reversed for subsequent increases in its recoverable amount in future periods. The Bank performs its annual impairment test of goodwill at the statement of condition date. Intangible assets Intangible assets with indefinite useful lives are tested for impairment annually at the statement of condition date either individually or at the cash generating unit level, as appropriate. Intangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired. Investment in an associate and a joint venture After application of the equity method, the Bank determines whether it is necessary to recognize an additional impairment loss of the Bank’s investment in an associate and a joint venture. The Bank determines at each statement of condition date whether there is any objective evidence that the investment in an associate and a joint venture are impaired. If this is the case the Bank calculates the amount of impairment as being the difference between the fair value of the associate and joint venture and the carrying amount and recognizes the amount in the statement of income. Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies: (a) there is a change in contractual terms, other than a renewal or extension of the arrangement; (b) a renewal option is exercised or extension granted, unless that term of the renewal or extension was initially included in the lease term; (c) there is a change in the determination of whether fulfillment is dependent on a specified asset; or (d) there is a substantial change to the asset. Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gives rise to the reassessment for scenarios (a), (c) or (d) above, and at the date of renewal or extension period for scenario (b). Bank as a lessee Finance leases, which transfer to the Bank substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are reflected in the statement of income under ‘Interest expense’. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Bank will obtain ownership by the end of the lease term. Leases where the lessor retains substantially all the risk and benefits of ownership of the assets are classified as operating leases. Operating lease payments are recognized as an expense in the statement of income on a straight-line basis over the lease term.
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Bank as a lessor Leases where the Bank does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned. Retirement Cost The Bank has a funded, noncontributory defined benefit retirement plan, administered by trustees, covering their permanent employees. The retirement cost of the Bank is determined using the projected unit credit method. Under this method, the current service cost is the present value of retirement benefits payable in the future with respect to services rendered in the current period. The liability recognized in the statement of condition in respect of defined benefit pension plan is the present value of the defined benefit obligation at the statement of condition date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rate on government bonds that have terms to maturity approximating the terms of the related retirement liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are credited to or charged against income when the net cumulative unrecognized actuarial gains and losses at the end of the previous period exceeded 10% of the higher of the defined benefit obligation and the fair value of plan assets at that date. These excess gains or losses are recognized over the expected average remaining working lives of the employees participating in the plan. Past-service costs, if any, are recognized immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortized on a straight-line basis over the vesting period. The defined benefit asset or liability comprises the present value of the defined benefit obligation less past service costs not yet recognized and less the fair value of plan assets out of which the obligations are to be settled directly. The value of any asset is restricted to the sum of any past service cost not yet recognized and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan. Provisions Provisions are recognized when the Bank has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Bank expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of income, net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as ‘Interest expense’. Contingent Liabilities and Contingent Assets Contingent liabilities are not recognized in the financial statements but are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized but are disclosed in the financial statements when an inflow of economic benefits is probable. Debt Issue Costs Issuance, underwriting and other related expenses incurred in connection with the issuance of debt instruments are deferred and amortized over the terms of the instruments using the EIR method. Unamortized debt issuance costs are netted against the related carrying value of the debt instrument in the statement of condition.
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Income Taxes Income tax on profit or loss for the year comprises current and deferred tax. Income tax is determined in accordance with Philippine tax law. Income tax is recognized in the statement of income, except to the extent that it relates to other comprehensive income items recognized directly in the statement of comprehensive income. Current income tax Current income tax is the expected tax payable on the taxable income for the period, using the tax rates enacted at the statement of condition date, together with adjustments to tax payable in respect to prior years. Deferred income tax Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the statement of condition date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences, including asset revaluation. Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits from excess minimum corporate income tax (MCIT) over the regular corporate income tax (RCIT) and unused net operating loss carryover (NOLCO), to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carryforward of unused MCIT and unused NOLCO can be utilized. The carrying amount of deferred tax assets is reviewed at each statement of condition date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each statement of condition date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and deferred taxes related to the same taxable entity and the same taxation authority. Deferred tax assets and liabilities are measured at the tax rates that are applicable to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of condition date. Current tax and deferred tax relating to items recognized directly in equity is also recognized in equity and not in the statement of income. Earnings Per Share Basic earnings per share (EPS) is computed by dividing net income for the year by the weighted average number of common shares issued and outstanding during the year, after giving retroactive effect to stock dividends declared, stock rights exercised and stock splits, if any, declared during the year. As of December 31, 2009, there were no potential common shares with dilutive effect on the basic EPS of the Bank. Dividends on Common Shares Dividends on common shares are recognized as a liability and deducted from equity when approved by the BOD of the Bank and the BSP. Dividends for the year that are approved after the statement of condition date are dealt with as an event after the statement of condition date. Subsequent Events Post year-end events that provide additional information about the Bank’s position at the statement of condition date (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes to the financial statements when material. Segment Reporting The Bank’s operating businesses are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Financial information on business segments is presented in Note 6. The Bank’s assets generating 78
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revenues are all located in the Philippines (i.e., one geographical location). Therefore, geographical segment information is no longer presented. Fiduciary Activities Assets and income arising from fiduciary activities together with related undertakings to return such assets to customers are excluded from the financial statements where the Bank acts in a fiduciary capacity such as nominee, trustee or agent. Standards Issued but not yet Effective Standards and Interpretations issued but not yet effective up to the date of issuance of the Bank’s financial statements are listed below: New Standards and Interpretations PFRS 3, Business Combinations (Revised) and PAS 27 Consolidated and Separate Financial Statements (Amended) The revised standards are effective for annual periods beginning on or after July 1, 2009. PFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after this date. The changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will have an impact in the amount of goodwill recognized, the reported results in the period that an acquisition occurs and future reported results. PAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes by PFRS 3 (Revised) and PAS 27 (Amended) will affect future acquisitions or loss of control of subsidiaries and transactions with non-controlling interests. PFRS 3 (Revised) will be applied prospectively while PAS 27 (Amended) will be applied retrospectively with few exceptions. Philippine Interpretation IFRIC-15, Agreement for Construction of Real Estate This Interpretation, effective for annual periods beginning on or after January 1, 2012, covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The Interpretation requires that revenue on construction of real estate be recognized only upon completion, except when such contract qualifies as construction contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case revenue is recognized based on stage of completion. Contracts involving provision of services with the construction materials and where the risks and reward of ownership are transferred to the buyer on a continuous basis will also be accounted for based on stage of completion. Philippine Interpretation IFRIC-17, Distributions of Non-Cash Assets to Owners This Interpretation is effective for annual periods beginning on or after July 1, 2009 with early application permitted. It provides guidance on how to account for non-cash distributions to owners. The Interpretation clarifies when to recognize a liability, how to measure it and the associated assets, and when to derecognize the asset and liability. The Bank does not expect the Interpretation to have an impact on the consolidated financial statements as the Bank has not made non-cash distributions to shareholders in the past. Amendments to Standards PAS 39 Amendment - Eligible Hedged Items The amendment to PAS 39, Financial Instruments: Recognition and Measurement, effective for annual periods beginning on or after July 1, 2009, clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. This also covers the designation of inflation as a hedged risk or portion in particular situations. The Bank has concluded that the amendment will have no impact on the financial position or performance of the Bank, as the Bank has not entered into any such hedges. PFRS 2 Amendments - Group Cash-settled Share-based Payment Transactions The amendments to PFRS 2, Share-based Payments, effective for annual periods beginning on or after January 1, 2010, clarify the scope and the accounting for group cash-settled share-based payment transactions. The Bank has concluded
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that the amendment will have no impact on the financial position or performance of the Bank since the Bank has not entered into any such share-based payment transactions. Improvements to PFRSs 2009 The omnibus amendments to PFRSs issued in 2009 were issued primarily with a view to removing inconsistencies and clarifying wording. The amendments are effective for annual periods beginning on or after January 1, 2010 except otherwise stated. The Bank has not yet adopted the following amendments and anticipates that these changes will have no material effect on the financial statements:
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•
PFRS 2, Share-based Payment: clarifies that the contribution of a business on formation of a joint venture and combinations under common control are not within the scope of PFRS 2 even though they are out of scope of PFRS 3, Business Combinations (Revised). The amendment is effective for annual periods on or after July 1, 2009.
•
PFRS 5, Non-current Assets Held for Sale and Discontinued Operations: clarifies that the disclosures required in respect of non-current assets and disposal groups classified as held for sale or discontinued operations are only those set out in PFRS 5. The disclosure requirements of other PFRSs only apply if specifically required for such non-current assets or discontinued operations.
•
PFRS 8, Operating Segment Information: clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker.
•
PAS 1, Presentation of Financial Statements: clarifies that the terms of a liability that could result, at anytime, in its settlement by the issuance of equity instruments at the option of the counterparty do not affect its classification.
•
PAS 7, Statement of Cash Flows: explicitly states that only expenditure that results in a recognized asset can be classified as a cash flow from investing activities.
•
PAS 17, Leases: removes the specific guidance on classifying land as a lease. Prior to the amendment, leases of land were classified as operating leases. The amendment now requires that leases of land are classified as either ‘finance’ or ‘operating’ in accordance with the general principles of PAS 17. The amendments will be applied retrospectively.
•
PAS 36, Impairment of Assets: clarifies that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in PFRS 8 before aggregation for reporting purposes.
•
PAS 38, Intangible Assets: clarifies that if an intangible asset acquired in a business combination is identifiable only with another intangible asset, the acquirer may recognize the group of intangible assets as a single asset provided the individual assets have similar useful lives. Also clarifies that the valuation techniques presented for determining the fair value of intangible assets acquired in a business combination that are not traded in active markets are only examples and are not restrictive on the methods that can be used.
•
PAS 39, Financial Instruments: Recognition and Measurement: clarifies the following: o that a prepayment option is considered closely related to the host contract when the exercise price of a prepayment option reimburses the lender up to the approximate present value of lost interest for the remaining term of the host contract; o that the scope exemption for contracts between an acquirer and a vendor in a business combination to buy or sell an acquiree at a future date applies only to binding forward contracts, and not derivative contracts where further actions by either party are still to be taken; and o that gains or losses on cash flow hedges of a forecast transaction that subsequently results in the recognition of a financial instrument or on cash flow hedges of recognized financial instruments should be reclassified in the period that the hedged forecast cash flows affect profit or loss.
•
Philippine Interpretation IFRIC-9, Reassessment of Embedded Derivatives: clarifies that it does not apply to possible reassessment at the date of acquisition, to embedded derivatives in contracts acquired in a business combination between entities or businesses under common control or the formation of joint venture.
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•
3.
Philippine Interpretation IFRIC-16, Hedge of a Net Investment in a Foreign Operation: states that, in a hedge of a net investment in a foreign operation, qualifying hedging instruments may be held by any entity or entities within the group, including the foreign operation itself, as long as the designation, documentation and effectiveness requirements of PAS 39 that relate to a net investment hedge are satisfied.
Significant Accounting Judgments and Estimates The preparation of the financial statements in accordance with PFRS requires the Bank to make judgments and estimates that affect the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and contingent liabilities. Future events may occur which will cause the judgments and assumptions used in arriving at the estimates to change. The effects of any change in judgments and estimates are reflected in the financial statements as they become reasonably determinable. Judgments and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Judgments (a) Operating leases Bank as lessor The Bank has entered into commercial property leases on its investment property portfolio. The Bank has determined that it retains all the significant risks and rewards of ownership of these properties which are leased out on operating leases. Bank as lessee The Bank has entered into lease on premises it uses for its operations. The Bank has determined that all significant risks and rewards of ownership of the properties it leases on operating lease are not transferable to the Bank. (b) Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded on the statement of condition cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. These estimates may include consideration of liquidity, volatility and correlation. (c) HTM investments The classification to HTM investment requires significant judgment. In making this judgment, the Bank evaluates its intention and ability to hold such investments to maturity. If the Bank fails to keep these investments to maturity other than in certain specific circumstances - for example, selling an insignificant amount close to maturity - it will be required to reclassify the entire portfolio as AFS investments. The investments would therefore be measured at fair value and not at amortized cost. As of December 31, 2009 and 2008, the market value of HTM investments amounted to 5.1 billion and 1.9 billion, respectively (see Note 4). The carrying value of HTM investments amounted to 4.8 billion and 1.6 billion as of December 31, 2009 and 2008, respectively (see Note 8). (d) Financial assets not quoted in an active market The Bank classifies financial assets by evaluating, among others, whether the asset is quoted or not in an active market. Included in the evaluation on whether a financial asset is quoted in an active market is the determination on whether quoted prices are readily and regularly available, and whether those prices represent actual and regularly occurring market transactions on an arm’s length basis.
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(f) Functional currency PAS 21 requires management to use its judgment to determine the entity’s functional currency such that it most faithfully represents the economic effects of the underlying transactions, events and conditions that are relevant to the entity. In making this judgment, the Group considers the following: a) the currency that mainly influences sales prices for financial instruments and services (this will often be the currency in which sales prices for its financial instruments and services are denominated and settled); b) the currency in which funds from financing activities are generated; and c) the currency in which receipts from operating activities are usually retained. Estimates (a) Credit losses on loans and receivables The Bank reviews its loans and receivables at each reporting date to assess whether an impairment loss should be recorded in the statement of income. In particular, the management estimates the amount and timing of future cash flows based on a number of factors and calculates the impairment loss. Actual results may differ, at which event, the Bank adjusts the impairment loss and ensures that allowance for it remains adequate. In addition to specific allowance against individually significant loans and receivables, the Bank also makes a collective impairment allowance against exposures which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when originally granted. This collective allowance is based on any deterioration in the internal rating of the loan or investment since it was granted or acquired. This collective allowance is based on changes in factors that are indicative of incurred losses, such as deterioration in payment status and underlying property prices, among others. As of December 31, 2009 and 2008, the allowance for credit losses on loans and receivables of the Bank amounted to 3.9 billion and 3.1 billion, respectively (see Note 15). Loans and receivables are carried at 47.3 billion and 41.6 billion as of December 31, 2009 and 2008, respectively (see Note 9). (b) Valuation of unquoted equity securities Valuation of unquoted equity securities is normally based on one of the following: • recent arm’s length market transactions; • current fair value of another instrument that is substantially the same; • the expected cash flows discounted at current rates applicable for instruments with similar terms and risk characteristics; or • other valuation models. The determination of the cash flows and discount factors for unquoted equity securities requires significant estimation. The Bank calibrates the valuation techniques periodically and tests them for validity using either price from observable current market transactions in the same instrument or from other available observable market data. As of December 31, 2009 and 2008, the allowance for impairment losses on unquoted equity securities of the Bank amounted to 43.8 million. The carrying amounts of unquoted equity securities amounted to 1.4 million as of December 31, 2009 and 2008 (see Note 8). (c) Impairment of quoted AFS equity securities The Bank treats AFS equity securities as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires judgment. The Bank treats ‘significant’ generally as 20% or more of the original cost of the investment, and ‘prolonged’, greater than 12 months. In addition, the Bank evaluates other factors, including normal volatility in share price for quoted equities. As of December 31, 2009 and 2008, the allowance for impairment losses on quoted AFS equity investments amounted to 2.2 million. Quoted AFS equity investments are carried at 3.0 million as of December 31, 2009 and 2008 (see Note 8).
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(d)
Impairment of nonfinancial assets Property and equipment, investment and chattel mortgage properties, and other intangible assets The Bank assesses impairment on assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The factors that the Bank considers important which could trigger an impairment review include the following: • significant underperformance relative to expected historical or projected future operating results; • significant changes in the manner of use of the acquired assets or the strategy for overall business; and • significant negative industry or economic trends. The Bank recognizes an impairment loss whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is computed using the value in use approach for property and equipment and, fair value less cost to sell for investment properties and chattel mortgage properties. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to which the asset belongs. As of December 31, 2009 and 2008, there were no main events and circumstances that led to the recognition of impairment losses for individually significant investment properties. As of December 31, 2009, the carrying values of property and equipment, investment properties, other intangible assets and chattel mortgage properties amounted to 2.0 billion, 2.6 billion, 143.9 million and 180.4 million, respectively. As of December 31, 2008, the carrying values of property and equipment, investment properties, other intangible assets and chattel mortgage properties amounted to 1.8 billion, 2.8 billion, 105.0 million and 248.5 million, respectively (see Notes 11, 12, 13 and 14). Goodwill The Bank’s management conducts an annual review for any impairment in value of the goodwill. Goodwill is written down for impairment where the net present value of the forecasted future cash flows from the business is insufficient to support its carrying value. The Bank used its weighted average cost of capital in discounting the expected cash flows from specific cash generating units. Future cash flows from the business are estimated based on the theoretical annual income of the cash generating units. Average growth rate was derived from the average increase in annual income during the last 5 years. The recoverable amount of the cash generating unit has been determined based on a value-in-use calculation using cash flow projections from financial budgets approved by senior management covering a five-year period. The pre-tax discount rate applied to cash flow projections is 12.00%. Key assumptions in value-in-use calculation of cash generating units are most sensitive to the following assumptions: a.) interest margin; b.) discount rates; and c.) projected growth rates used to extrapolate cash flows beyond the budget period. As of December 31, 2009 and 2008, the Bank’s goodwill amounted to 53.6 million (see Note 13).
(e) Fair value of investment properties The fair values of the Bank’s investment properties have been derived on the basis of recent sales of similar properties in the same areas as the investment properties and taking into account the economic conditions prevailing at the time the valuations were made. (f) Present value of retirement obligation The cost of defined benefit pension plan and other post employment benefits is determined using actuarial valuation. The actuarial valuation involves making assumptions about discount rates, expected rates of return on plan assets, future salary increases, mortality rates and future pension increases. Due to the long term nature of this plan, such estimates are subject to significant uncertainty.
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The expected rate of return on plan assets of 6.00% and 10.00% as of January 1, 2009 and 2008, respectively, was based on market prices prevailing on the date of valuation, applicable to the period over which the obligation is to be settled. The assumed discount rates were determined using the market yields on Philippine government bonds with terms consistent with the expected employee benefit payout as of statement of condition dates. Refer to Note 24 for the details of assumptions used in the calculation. As of December 31, 2009 and 2008, the present value of the retirement obligation of the Bank amounted to 512.3 million and 354.0 million, respectively (see Note 24). (g)
Recognition of deferred income taxes Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Estimates of future taxable income indicate that temporary differences will be realized in the future. As discussed in Note 27, net recognized deferred tax assets as of December 31, 2009 and 2008 amounted to 1.3 billion and 1.1 billion, respectively.
(h)
4.
Contingent liabilities The Bank is a defendant in legal actions arising from normal business activities. Management believes that the ultimate liability, if any, resulting from these cases will not have a material effect on the Bank’s financial statements (see Note 31).
Fair Value Measurement The following describes the methodologies and assumptions used to determine the fair values of financial instruments: Cash and other cash items, Due from BSP, Due from other banks, Interbank loans receivable and SPURA, Accounts receivable, Accrued interest receivables, Bills purchased, Returned checks and other cash items (RCOCI), Shortages, and Petty cash fund - Carrying amounts approximate fair values due to the relatively short-term maturities of these assets. Debt investments - Fair values are generally based upon quoted market prices. If the market prices are not readily available, fair values are estimated using either values obtained from independent parties offering pricing services or adjusted quoted market prices of comparable investments or using the discounted cash flow methodology. Quoted equity investments - Fair values are based on quoted prices published in markets. Unquoted equity investments - Fair values could not be reliably determined due to the unpredictable nature of future cash flows and the lack of suitable methods of arriving at a reliable fair value. Currently, there is no available market to sell these unquoted equity investments. The Bank will hold unto the investment until management decides to sell them when there will be offers to buy out such investments on the appearance of an available market where the investments can be sold. Receivable from customers and other receivables except Accounts receivable, Accrued interest receivable, Bills purchased and Security deposits - Fair values of loans are estimated using the discounted cash flow methodology, using the Bank’s current incremental lending rates for similar types of loans. Subordinated notes and bills payable and Time deposit - The fair value of quoted debt instruments are based on market value of instruments with similar characteristics. For unquoted instruments, fair values are estimated using the discounted
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cash flow methodology using the Bank’s current incremental borrowing rates for similar borrowings with maturities consistent with those remaining for the liability being valued. Demand deposits, Savings deposits, Treasurer’s, cashier’s and manager’s checks, Accrued interest payable, Accounts payable, Bills purchased-contra, Other credits, Dividends payable, Due to Treasurer of the Philippines, Due to BSP, and Deposits for keys-SDB - Carrying amounts approximate fair values due to either the demand nature or the relatively shortterm maturities of these liabilities. Set out below is a comparison by class of carrying amounts and fair values of financial instruments that are carried in the financial statements (in thousands):
Financial Assets Loans and receivables Cash and other cash items Due from BSP Due from other banks Interbank loans receivable and SPURA Receivable from customers: Consumption loans Real estate loans Commercial loans Personal loans Bills discounted Other receivables: Accrued interest receivable Sales contract receivable Unquoted debt securities Accounts receivable Bills purchased Other assets (Note 13): Security deposits RCOCI Shortages Petty cash fund FVPL investments Held for Trading - Government securities Derivatives - Republic of the Philippines (ROP) warrants AFS investments Government debt securities Private debt securities Quoted equity securities Unquoted equity securities HTM investments Government bonds Treasury notes Total assets
2009 Carrying Value
Fair Value
2,632,885 4,937,990 1,528,848 5,900,000
2,632,885 4,937,990 1,528,848 5,900,000
1,436,234 3,228,769 1,276,768 750,000
1,436,234 3,228,769 1,276,768 750,000
17,225,020 15,595,543 8,816,419 3,191,161 12,897
13,567,880 10,176,751 7,096,661 3,624,792 12,305
15,197,954 14,418,374 6,530,997 3,383,771 15,793
11,554,997 9,205,551 5,310,900 4,078,788 15,793
1,002,095 636,924 400,000 299,479 128,699
1,002,095 402,252 435,803 299,479 128,699
955,811 614,015 – 426,029 60,603
955,811 394,929 – 426,029 60,603
69,064 46,062 402 384
53,497 46,062 402 384
67,368 35,395 964 384
53,517 35,395 964 384
173,265
173,265
1,035,745
1,035,745
74,778
74,778
46,027
46,027
18,256,949 – 3,005 1,418
18,256,949 – 3,005 1,418
16,617,771 191,593 3,005 1,418
16,617,771 191,593 3,005 1,418
3,129,095 1,643,756 85,706,138
3,353,275 1,723,631 75,433,106
837,229 773,055 67,905,072
999,129 864,152 58,544,272
2008 Carrying Value
Fair Value
(Forward)
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85
Financial Liabilities Other liabilities at amortized cost Deposit liabilities Demand Savings Time Subordinated notes and bills payable Treasurer’s, Cashier’s and Manager’s Checks Accrued interest payable Other liabilities (Note 19): Accounts payable Other credits Bills purchased-contra Due to BSP Others* Total liabilities
2008 Carrying Value
2009 Carrying Value
Fair Value
8,188,088 9,403,399 59,798,724 1,973,882 505,738 189,492
8,188,088 9,403,399 61,327,885 2,171,165 505,738 189,492
6,393,728 8,607,973 46,676,781 2,208,542 339,901 233,890
6,393,728 8,607,973 46,890,545 2,914,695 339,901 233,890
636,652 189,583 130,002 7,495 56,181 81,079,236
636,652 189,583 130,002 7,495 56,181 82,805,680
490,612 179,708 61,905 28,169 17,726 65,238,935
490,612 179,708 61,905 28,169 17,726 66,158,852
Fair Value
* Others under financial liabilities comprise of dividends payable, due to Treasurer of the Philippines, deposit for keys, payment orders payable and overages.
The following table shows financial instruments recognized at fair value (in thousands); analyzed among those whose fair value is based on: •
Level 1 - quoted in market prices in active markets for identical assets or liabilities; when fair values of listed equity and debt securities, as well as publicly traded derivatives at the reporting date are based on quoted market prices or binding dealer price quotations, without any deduction for transaction costs, the instruments are included within Level 1 of the hierarchy.
•
Level 2 - those involving inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); for all other financial instruments, fair value is determined using valuation techniques. Valuation techniques include net present value techniques, comparison to similar instruments for which market observable prices exist and other revaluation models; and
•
Level 3 - those with inputs for the asset or liability that are not based on observable market data (unobservable inputs); instruments included in Level 3 include those for which there is currently no active market.
2009 Financial Assets FVPL investments Held for trading - government securities Derivatives - ROP warrants AFS investments Government debt securities Quoted equity securities
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PSBank 2009 Annual Report
Level 1
Level 2
Level 3
Total
173,265 74,778
– –
– –
173,265 74,778
17,196,092 3,005
1,060,857 –
– –
18,256,949 3,005
2008 Financial Assets FVPL investments Held for trading - government securities Derivatives - ROP warrants AFS investments Government debt securities Private debt securities Quoted equity securities
5.
Level 1
Level 2
Level 3
Total
1,035,745 46,027
– –
– –
1,035,745 46,027
11,807,470 – 3,005
4,810,301 191,593 –
– – –
16,617,771 191,593 3,005
Financial Risk Management Policies and Objectives The Bank has exposure to the following risks from its use of financial instruments: • • •
Credit risk Market risk Liquidity risk
Organization risk management structure continues to be a top-down organization, with the BOD at the helm of all major initiatives. Discussed below are the relevant sections on roles and responsibilities from the Risk Management Committee (RMC) Charter: BOD The corporate powers of the Bank are vested in and are exercised by the BOD, who conducts its business and controls its property. The BOD approves broad risk management strategies and policies and ensures that risk management initiatives and activities are consistent with the Bank’s overall objectives. The BOD appoints the members of the RMC. RMC The RMC is composed of at least three BOD members who possess a range of expertise and adequate knowledge of the Bank’s risk exposures to be able to develop appropriate strategies for preventing losses and minimizing the impact of losses when they occur. The RMC oversees the system of limits to discretionary authority that the BOD delegates to Management and ensures that the system remains effective, the limits are observed, and that immediate corrective actions are taken whenever limits are breached. The RMC meets on a monthly basis and is supported by the Risk Management Office (RMO). RMC resolutions, which require the concurrence of its majority, are presented to the BOD for confirmation. RMO The RMO, headed by the Chief Risk Officer, is a function that is independent from the Bank’s business line functions and reports directly to the BOD, through the RMC. The RMO assists the RMC in carrying out its responsibilities by: • •
analyzing, communicating, implementing, and maintaining the Risk Management Policies approved by the RMC and the BOD; spearheading the regular review of the Bank’s Risk Management Policy Manual and making or elevating recommendations that enhance the risk management process to the RMC and the BOD, for their approval;
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•
ensuring that the risks arising from the Bank’s activities are identified, measured, analyzed, reported to and understood by Risk Takers, Management, and the Board. The RMO analyzes limit exceptions and recommends enhancements to the limits structure.
The RMO does not assume risk-taking accountability nor does it have approving authority. The RMO’s role is to act as liaison and to provide support to the Board, RMC, the President, the Administrative Risk Management Committees (ARMC) and other Management Committees, Risk Takers and other Support and Control Functions on risk-related matters. Other management committees include, but are not limited to: the Credit Committee (CreCom), Assets-Liabilities Committee (ALCO), Investment Committee, Anti-Money Laundering Committee, Outsourcing Committee, Information Technology Steering Committee, Emergency Committee, Policy Committee and the Personnel Committee. President The President is the Chief Executive Officer of the Bank and has the primary responsibility of carrying out the policies and objectives of the BOD. The President exercises the authorities delegated to him by the BOD and may recommend such policies and objectives he deems necessary for the continuing progress of the Bank. ARMC The ARMC is the management-level counterpart of the BOD-level RMC, and provides the latter with the necessary support of Senior Management on risk-related matters. As defined in the Risk Management Policy Manual, Senior Management is actively involved in planning, approving, reviewing and assessing all risks through various committees. The ARMC, in particular, provides a means of facilitating overall risk management. The ARMC is composed of the President, the Executive Vice President or Senior Officer with responsibility over the lending business, and the Heads of Branch Banking, Internal Audit, Compliance, Finance, Operations, Credit Administration, Treasury and Risk Management. The ARMC oversees operational, credit, market and liquidity risk management, and recommends to the RMC and the BOD enhancements to the risk management policies and strategies of the Bank, including limits on decision-making, positions, transactions and exceptions. The ARMC exercises the authorities delegated to it by the RMC and the BOD, and the ARMC’s corporate acts are subject to the review and confirmation by the RMC and the BOD. Risk management The risk management framework aims to maintain a balance between the nature of the Bank’s businesses and the risk appetite of the BOD. Accordingly, policies and procedures are reviewed regularly and revised as the organization grows and as financial markets evolve. New policies or proposed changes in current policies are presented to the RMC and the BOD for approval. a. Credit risk and concentration of assets and liabilities and off-balance sheet items Credit risk is the risk that a counterparty will not settle its obligations in accordance with the agreed terms. The Bank’s lending business follows credit policy guidelines set by the BOD, RMC and RMO. These policies serve as minimum standards for extending credit. The people engaged in the credit process are required to understand and adhere to these policies. Product manuals are in place for all loans and deposit products that actually or potentially expose the Bank to all types of risks that may result in financial or reputational losses. A product manual defines a product and the risks associated with it plus the corresponding risk-mitigating controls. It embodies the business plans and defines the business parameters within which a product or activity is to be performed.
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PSBank 2009 Annual Report
The system of checks around extension of credit includes approval by at least two credit officers through CreCom, Executive Committee (ExCom) or BOD. The ARMC and RMC review the business strategies and ensure that revenuegenerating activities are consistent with the risk tolerance and standard of the Bank. Regular audit and quality assurance checks are conducted across all functional units. The BOD - through the ExCom, CreCom, ARMC and RMC ensure that sound credit policies and practices are followed through all the business segments. Credit Approval Credit approval is the documented acceptance of credit risk in the credit proposal or application. The Bank’s credit decision-making for consumer loans utilizes the recommendation of the credit scoring and is performed at the CreCom level appropriate to the size and risk of each transaction in conformity with corporate policies and procedures in regulating credit risk activities. The Bank’s ExCom may approve deviations or exceptions, while the BOD approves material exceptions such as large exposures, loans to directors, officers, stockholders and other related interests (DOSRI), and loan restructuring. Credit delegation limits are identified, tracked and reviewed at least annually by the Bank’s Senior Credit Officer together with the Credit Risk Manager. Borrower Eligibility The Bank’s credit processing commences when a customer expresses his intention to borrow through a credit application. The Bank gathers data on the customer; ensure they are accurate, up-to-date and adequate to meet the minimum regulatory requirements and to render credit decision. These data are used for the intended purpose only and are managed in adherence to the customer information secrecy law. The customer’s credit worthiness, repayment ability and cash flow are established before credit is extended. The Bank independently verifies critical data from the customer, ensuring compliance with Know Your Customer requirements under the Anti-Money Laundering Act of 2000. The Bank requires that customer income be derived from legitimate sources and supported with government-accepted statements of income, assets and liabilities. The Bank makes certain that a customer is capable of entering into a credit contract by accepting guarantors or sureties provided they are a relative or a financial partner who have passed its credit acceptance criteria. Loan Structure The Bank structures loans for its customers based on the customer’s capability to pay, the purpose of loan, and for collateralized loan, the collateral’s economic life and liquidation value over time. The Bank establishes debt burden guidelines and minimum income requirement to assess the customer’s capacity to pay. The Bank utilizes credit bureau data, both external and internal, to obtain information on customer’s current commitments and credit history. These are sourced from the databases of the Banker’s Association of the Philippines and the Credit Management Association of the Philippines. The Bank takes into account environmental and social issues when reviewing credit proposals of small business and commercial mortgage customers. The Bank ensures that all qualified securities pass through the BOD for approval. Assignments of securities are confirmed and insurance are properly secured. The Bank uses credit scoring models and decision systems for consumer loans as approved by the BOD. Initial loan limits are recommended by the CreCom and ExCom and approved by the BOD. The Bank ensures that secured loans are within ceilings set by local regulators. Succeeding loan availments are based on account performance and customer’s credit worthiness.
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The CreCom and ExCom recommend to the BOD any credit exceptions that merit approval provided they are supported by strong business rationale. The Bank relays credit approval at once thru Short Messaging Service but loan proceeds are paid out after documentations are completed. Credit Management The Bank maintains credit records and documents on all borrowings and capture transaction details in its loan systems. The credit risk policies and system infrastructure ensure that loans are monitored and managed at all times. The Bank’s Management Information System provides statistics that its business units need to identify opportunities for improving rewards without necessarily sacrificing risk. Statistical data on product, productivity, portfolio, profitability, performance and projection are made available regularly. The Bank conducts regular loan review through the RMC, with the support of the RMO. The Bank examines its exposures, credit risk ratios, provisions and customer segments. The Bank’s unique customer identification and unique group identification methodology enables it to aggregate credit exposures by customer or group of borrowers. Aggregate exposures of at least 0.1 billion are put on a special monitoring. The RMC assesses the adequacy of provisions for credit losses regularly. The Bank’s automated loan grading system enables the Bank to set up provision per account. The Bank also performs impairment analyses of loans and receivables, whether on individual or collective basis, in accordance with PFRS. The Bank continues to enhance its credit rating systems with the use of statistical credit scoring models. In 2009, enhancement for credit scoring of PSBank Flexi loan clients was implemented. Pilot stress testing models and enhanced Auto Loan scoring models were likewise developed. The SME loan credit scoring model development continues amidst data complexity and availability challenges. Maximum Exposure to Credit Risk Without Taking Account of Any Collateral and Other Credit Enhancements The table below shows the Bank’s gross maximum credit exposure, net of allowance for credit and impairment losses, to on-and-off-balance sheet credit risk exposures without deducting collateral and other credit enhancements to credit risk for the component of the statement of condition (in thousands):
FVPL investments Held for trading - Government securities Derivatives - ROP warrants AFS investments Government debt securities Private debt securities Quoted equity securities Unquoted equity securities HTM investments Government bonds Treasury notes Loans and receivables Due from BSP Due from other banks Interbank loans receivable and SPURA Receivables from customers: Consumption loans Real estate loans Commercial loans (Forward) 90
PSBank 2009 Annual Report
2009
2008
173,265 74,778
1,035,745 46,027
18,256,949 – 3,005 1,418
16,617,771 191,593 3,005 1,418
3,129,095 1,643,756
837,229 773,055
4,937,990 1,528,848 5,900,000
3,228,769 1,276,768 750,000
17,225,020 15,595,543 8,816,419
15,197,954 14,418,374 6,530,997
Personal loans Bills discounted Other receivables: Accrued interest receivable Sales contract receivable Unquoted debt instrument Accounts receivable Bills purchased Other Assets: Security deposits RCOCI Shortages Total Stand-by credit lines Total credit risk exposure
2009 3,191,161 12,897
2008 3,383,771 15,793
1,002,095 636,924 400,000 299,479 128,699
955,811 614,015 – 426,029 60,603
69,064 46,062 402 83,072,869 104,023 83,176,892
67,368 35,395 964 66,468,454 151,343 66,619,797
Concentration of risk is managed by borrower, by group of borrower, by geographical region and by industry sector. As of December 31, 2009 and 2008, the maximum credit exposure to any borrower amounted to 1.9 billion and 1.7 billion, respectively, before taking account of collateral or other credit enhancement. The distribution of the Bank’s financial assets and off-balance sheet items before taking into account any collateral held or other credit enhancements can be analyzed by the following geographical regions (in thousand pesos):
2009
Luzon Visayas Mindanao Less allowance for credit and impairment losses Total
Banking Activities 16,948,236 85,464 121,874 17,155,574
Trading Activities 28,345,516 184,362 380,785 28,910,663
Others 35,820,896 2,653,947 2,652,050 41,126,893
Total 81,114,648 2,923,773 3,154,709 87,193,130
780,227 16,375,347
340,334 28,570,329
2,895,677 38,231,216
4,016,238 83,176,892
2008
Luzon Visayas Mindanao Less allowance for credit and impairment losses Total
Banking Activities 27,713,848 81,132 100,548 27,895,528
Trading Activities 6,258,082 154,630 258,899 6,671,611
Others 31,630,829 1,957,631 1,634,495 35,222,955
Total 65,602,759 2,193,393 1,993,942 69,790,094
596,610 27,298,918
196,131 6,475,480
2,377,556 32,845,399
3,170,297 66,619,797
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91
Additionally, the tables below show the distribution of maximum credit exposure by industry sector of the Bank as of December 31, 2009 and 2008 (in thousands): 2009
Financial intermediaries Other community, social and personal activities Real estate, renting and business activities Wholesale and retail trade Transportation, storage and communication Agricultural, hunting and forestry Electricity, gas and water Manufacturing Public administration and defense compulsory social security Construction Hotel and restaurants Private households Mining and quarrying Others Less allowance for credit and impairment losses Total
Loans and Receivables 3,336,764
Loans and Advances to Banks* 12,366,838
Investment Securities** 23,420,776
Others*** 115,528
Total 39,239,906
14,661,003
–
–
2,229
14,663,232
13,403,671 8,903,959
– –
– –
66,542 –
13,403,671 8,970,501
3,699,425 2,279,255 1,472,316 1,357,032
– – – –
– – – –
– – – –
3,699,425 2,279,255 1,472,316 1,357,032
866,251 495,459 440,726 126,699 9,192 134,214 51,185,966
– – – – – – 12,366,838
– – – – – – 23,420,776
– 35,251 – – – – 219,550
866,251 530,710 440,726 126,699 9,192 134,214 87,193,130
3,877,728 47,308,238
– 12,366,838
138,510 23,282,266
– 219,550
4,016,238 83,176,892
* Comprised of Due from BSP, Due from other banks and Interbank loans receivable and SPURA. ** Comprised of FVPL investments, AFS investments and HTM investments. *** Comprised of financial assets classified under Other assets (such as RCOCI, Security deposits and shortages) and Stand-by credit lines.
2008
Financial intermediaries Other community, social and personal activities Real estate, renting and business activities Wholesale and retail trade Agricultural, hunting and forestry Transportation, storage and communication Private households Manufacturing Public administration and defense compulsory social security (Forward) 92
PSBank 2009 Annual Report
Loans and Receivables 2,119,172
Loans and Advances to Banks* 5,255,537
Investment Securities** 19,551,853
Others*** 104,110
Total 27,030,672
12,343,839
–
–
1,927
12,345,766
12,198,943 9,174,963 2,646,947
– – –
– – –
– 92,254 –
12,198,943 9,267,217 2,646,947
2,427,670 1,297,796 797,458
– – –
– – –
– – –
2,427,670 1,297,796 797,458
582,506
–
–
–
582,506
2008
Construction Hotel and restaurants Electricity, gas and water Mining and quarrying Others Less allowance for credit and impairment losses Total * ** ***
Loans and Receivables 468,183 435,911 54,419 5,683 174,144 44,727,634
Loans and Advances to Banks* – – – – – 5,255,537
Investment Securities** – – – – – 19,551,853
Others*** 56,779 – – – – 255,070
Total 524,962 435,911 54,419 5,683 174,144 69,790,094
3,124,287 41,603,347
– 5,255,537
46,010 19,505,843
– 255,070
3,170,297 66,619,797
Comprised of Due from BSP, Due from other banks and Interbank loans receivable and SPURA. Comprised of FVPL investments, AFS investments and HTM investments. Comprised of financial assets classified under Other assets (such as RCOCI, Security deposits and shortages) and Stand-by credit lines.
Credit Quality Description of the loan grades for loans, receivables and stand-by credit lines: Loans and receivables rated as high or standard grades refer to those accounts that do not have greater than normal risk or have potential weaknesses only per BSP’s credit classification followed by the Bank for its periodic credit evaluation. Accounts defined as past due per PFRS are not included in this category. High grade represents those accounts which are rated as good by the Bank’s internal scoring system based on its defined factors. Using statistical means, the Bank has established the borrowers’ ability to meet their obligations in full and no loss is anticipated. The credit scoring system considers the combination of application data, internal and external data. Standard grade represents those accounts that display potential weaknesses, by the occurrence of limited or random delinquency, which when left uncorrected, may affect the repayment of the loan and increase credit risk to the Bank. Substandard grade represents those accounts which involve a substantial and unreasonable degree of risk to the Bank because of unfavorable record or unsatisfactory characteristics. These accounts show possibility of future loss to the Bank due to their weaknesses that may include impaired collateral or minimum repayment of loan. Unrated grade represents those other assets accounts which the Bank has not yet defined its credit classification. For investments, the Bank classifies accounts based on the rating of Moody’s Investors Service (Moody’s rating) as follows: High grade - represents those investments which fall under any of the following grade: Aaa - fixed income obligations are judged to be of the highest quality, with the smallest degree of risk. Aa1, Aa2, Aa3 - fixed income are judged to be of high quality and are subject to very low credit risk, but their susceptibility to long-term risks appears somewhat greater. A1, A2, A3 - fixed income obligations are considered upper-medium grade and are subject to low credit risk, but have elements present that suggest a susceptibility to impairment over the long term. Baa1, Baa2, Baa3 - fixed income obligations are subject to moderate credit risk. They are considered medium grade and as such protective elements may be lacking or may be characteristically unreliable.
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Those investments that do not fall under any of the definition of high-grade are rated as standard. The tables below show the credit quality per class of financial assets (in thousands): 2009 Neither Past Due nor Individually Impaired
High Grade FVPL investments Derivatives - ROP warrants – Held for trading Government securities – AFS investments Government debt securities – Quoted equity securities – Unquoted equity securities – HTM investments Government bonds – Treasury notes – Loans and receivables Due from BSP – Due from other banks – Interbank loans receivable and SPURA – Receivables from customers: Consumption loans 14,953,074 Real estate loans 12,948,465 Commercial loans 7,689,776 Personal loans 2,900,851 Bills discounted 1,443 Other receivables: Accrued interest receivable 279,234 Sales contract receivable 443,834 Unquoted debt instrument 400,000 Accounts receivable 263,895 Bills purchased 130,002 Other assets: Security deposits – RCOCI – Shortages – Total 40,010,574
Standard Substandard Grade Grade
Unrated
74,778
–
–
–
–
74,778
173,265
–
–
–
–
173,265
18,256,949 – –
– – –
– – –
– – –
92,500 5,194 45,239
18,349,449 5,194 45,239
3,129,095 1,643,756
– –
– –
– –
– –
3,129,095 1,643,756
4,937,990 1,528,848
– –
– –
– –
– –
4,937,990 1,528,848
5,900,000
–
–
–
–
5,900,000
3,456 25,438 93,870 48 –
480 26,055 235,797 – –
– – – – –
2,836,383 2,411,582 210,189 2,015,878 11,454
– 355,344 1,269,563 – –
17,793,393 15,766,884 9,499,195 4,916,777 12,897
393,373 – – 1 –
264,176 – – 8 –
– – – – –
54,327 55,702 – 365,202 4,628
192,356 168,942 95,611 85,530 –
1,183,466 668,478 495,611 714,636 134,630
– – – 36,160,867
– – – 526,516
69,064 46,062 402 115,528
– – – 7,965,345
– – – 2,310,279
69,064 46,062 402 87,089,109
Shown gross of allowance for credit and impairment losses
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PSBank 2009 Annual Report (Forward)
Past Due but not Individually Individually Impaired Impaired
Total
2008 Neither Past Due nor Individually Impaired
High Grade FVPL investments Derivatives - ROP warrants – Held for trading Government securities – AFS investments Government debt securities Private debt securities 191,593 Quoted equity securities – Unquoted equity securities – HTM investments Government bonds – Treasury notes – Loans and receivables Due from BSP – Due from other banks – Interbank loans receivable and SPURA – Receivables from customers: Consumption loans 12,287,951 Real estate loans 11,181,274 Commercial loans 5,032,244 Personal loans 2,970,831 Bills discounted 4,323 Other receivables: Accrued interest receivable 790,112 Sales contract receivable 361,345 Unquoted debt instrument – Accounts receivable 362,159 Bills purchased 61,905 Other assets: Security deposits – RCOCI – Shortages – Total 33,243,737
Standard Substandard Grade Grade
Unrated
Past Due but not Individually Impaired
46,027
–
–
–
–
46,027
1,035,745
–
–
–
–
1,035,745
16,617,771 – –
– – –
– – –
– – –
– – 5,194 45,239
16,617,771 191,593 5,194 45,239
837,229 773,055
– –
– –
– –
– –
837,229 773,055
3,228,769 1,276,768
– –
– –
– –
– –
3,228,769 1,276,768
750,000
–
–
–
–
750,000
377 30,078 410,690 – –
1,492 26,767 29,557 30 –
– – – – –
3,336,992 3,179,431 371,698 1,797,958 11,470
– 94,975 1,352,088 – –
15,626,812 14,512,525 7,196,277 4,768,819 15,793
3,229 – – 14 –
558 – – 1,665 –
– – – – –
138,781 120,560 – 353,378 4,628
113,004 163,115 95,611 37,343 –
1,045,684 645,020 95,611 754,559 66,533
– – – 25,009,752
– – – 60,069
67,368 35,395 964 103,727
– – – 9,314,896
– – – 1,906,569
67,368 35,395 964 69,638,750
Individually Impaired
Total
Shown gross of allowance for credit and impairment losses
Impairment Assessment Impairment losses are recognized based on the results of specific (individual) and collective assessment of credit exposures. Impairment has taken place when there is a presence of known difficulties in the payments of obligation by counterparties, a significant credit rating downgrade takes place, infringement of the original terms of the contract has happened or when there is inability to pay principal or interest overdue beyond a threshold (e.g. 90 days). These and other factors, either singly or in tandem with other factors, constitute observable events or data that meet the definition of objective evidence of impairment. Individually assessed allowances The Bank determines the allowances appropriate for each significant loan or advance on an individual basis. Items considered when determining amounts of allowances include an account’s age, payment and collection history, timing of expected cash flows and realizable value of collateral.
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The Bank sets criteria for specific loan impairment testing and uses the Discounted Cash Flow method to compute for impairment loss. Accounts subjected to specific impairment and are found to be impaired shall be excluded from the collective impairment computation. Collectively assessed allowances Allowances are assessed collectively for losses on commercial loans and advances that are not significant. Impairment losses are estimated by taking into consideration the historical losses on the portfolio and the expected receipts and recoveries once impaired. The Bank is responsible for deciding the length of historical loss period which can extend for as long as five years. The impairment allowance is then reviewed by the Bank to ensure alignment with the Bank’s overall policy. The Bank uses the Net Flow Rate method to determine the credit loss rate of a particular delinquency age bucket based on historical data of flow-through and flow-back of loans across specific delinquency age buckets. The method applies to consumer loans, as well as, salary and home equity loans granted to employees of the Bank. For commercial loans, the Bank uses Historical Loss Rate method in determining the credit loss rate based on the actual historical loss experienced by the Bank on each specific industry type.
96
PSBank 2009 Annual Report
PSBank 2009 Annual Report
97
– – –
– – – – – 751,145 751,734 46,653 44,358 – 14,323 18,611 – 2,772 – – – – 1,629,596
–
– – – – – – – – 74,036 – 2,310 – – – – – – – 76,346
–
– – – – – 1,193,582 1,504,995 150,587 199,021 – 23,379 22,886 – 3,206 – – – – 3,097,656
18,256,949
3,129,095 1,643,756 4,937,990 1,528,848 5,900,000 14,957,010 12,999,958 8,019,443 2,900,899 1,443 936,783 443,834 400,000 263,904 130,002 69,064 46,062 402 76,813,485
61 to 90 days
– –
31 to 60 days
– –
Less than 30 days
– – – 468,713
5,731 – – 1,977 –
235,027 109,886 69 116,023 –
– – –
– –
–
– –
91 to 180 days
Past Due but not Individually Impaired
74,778 173,265
Neither Past Due nor Individually Impaired
Shown gross of allowance for impairment and credit losses
FVPL investments Derivatives - ROP warrants Held for trading - Government securities AFS investments Government debt securities Quoted equity securities Unquoted equity securities HTM investments Government bonds Treasury notes Loans and receivables Due from BSP Due from other banks Interbank loans receivable and SPURA Receivables from customers: Consumption loans Real estate loans Commercial loans Personal loans Bills discounted Other receivables: Accrued interest receivable Sales contract receivable Unquoted debt instrument Accounts receivable Bills purchased Other assets: Security deposits RCOCI Shortages Total
2009
– – – 2,693,034
8,584 14,205 – 357,247 4,628
656,629 44,967 12,880 1,582,440 11,454
– – –
– –
–
– –
74,778 173,265 18,349,449 5,194 45,239 3,129,095 1,643,756 4,937,990 1,528,848 5,900,000 17,793,393 15,766,884 9,499,195 4,916,777 12,897 1,183,466 668,478 495,611 714,636 134,630 69,064 46,062 402 87,089,109
92,500 5,194 45,239 – – – – – – 355,344 1,269,563 – – 192,356 168,942 95,611 85,530 – – – – 2,310,279
Total – –
Over Individually Impaired 180 days
Aging Analysis of Past Due but not Impaired Loans per Class of Financial Assets The succeeding tables show the total aggregate amount of gross past due but not individually impaired loans and receivables per delinquency bucket. Under PFRS, a financial asset is past due when the counterparty has failed to make a payment when contractually due (in thousands):
PSBank 2009 Annual Report
Shown gross of allowance for impairment and credit losses.
FVPL investments Derivatives - ROP warrants Held for trading - Government securities AFS investments Government debt securities Private debt securities Quoted equity securities Unquoted equity securities HTM investments Government bonds Treasury notes Loans and receivables Due from BSP Due from other banks Interbank loans receivable and SPURA Receivables from customers: Consumption loans Real estate loans Commercial loans Personal loans Bills discounted Other receivables: Accrued interest receivable Sales contract receivable Unquoted debt instrument Accounts receivable Bills purchased Other assets: Security deposits RCOCI Shortages Total
2008
98
– – – – – – – – – – – 1,905,336 2,103,910 258,740 328,577 – 36,337 64,885 – 2,843 – – – – 4,700,628
16,617,771 191,593 – – 837,229 773,055 3,228,769 1,276,768 750,000 12,289,820 11,238,119 5,472,491 2,970,861 4,323 793,899 361,345 – 363,838 61,905 67,368 35,395 964 58,417,285
Less than 30 days
46,027 1,035,745
Neither Past Due nor Individually Impaired
– – – 1,221,465
12,788 15,426 – 1,267 –
501,135 583,067 18,697 89,085 –
– – –
– –
– – – –
– –
31 to 60 days
– – – 506,336
6,885 9,459 – 2,005 –
192,801 226,404 5,038 63,744 –
– – –
– –
– – – –
– –
61 to 90 days
– – – 455,062
7,578 3,556 – 1,153 –
163,710 116,787 14,869 147,409 –
– – –
– –
– – – –
– –
91 to 180 days
Past Due but not Individually Impaired
– – – 2,431,405
75,193 27,234 – 346,110 4,628
574,010 149,263 74,354 1,169,143 11,470
– – –
– –
– – – –
– –
Over 180 days
– – – 1,906,569
113,004 163,115 95,611 37,343 –
– 94,975 1,352,088 – –
– – –
– –
– – 5,194 45,239
– –
Individually Impaired
67,368 35,395 964 69,638,750
1,045,684 645,020 95,611 754,559 66,533
15,626,812 14,512,525 7,196,277 4,768,819 15,793
3,228,769 1,276,768 750,000
837,229 773,055
16,617,771 191,593 5,194 45,239
46,027 1,035,745
Total
Of the total aggregate amount of gross past due but not individually impaired loans and individually impaired loans and advances to customers, the fair value of collateral that the Bank held as at December 31, 2009 and 2008 was 11.5 billion and 11.1 billion, respectively. Collateral and Other Credit Enhancements The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding acceptability of types of collateral and valuation parameters. The main types of collaterals obtained are as follow: - For SPURA; securities - For commercial lending; mortgages over real estate properties, deposit accounts and securities - For consumer lending; mortgages over real estate and chattel Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for credit and impairment losses. It is the Bank’s policy to dispose of repossessed properties in an orderly fashion and proceeds are used to repay or reduce the outstanding claim. In general, the Bank does not occupy repossessed properties for business use. The Bank holds collateral against loans and receivables in the form of real estate and chattel mortgages, guarantees, and other registered securities over assets. Estimates of fair value are based on the value of collateral assessed at the time of borrowing and generally are not updated except when a loan is assessed to be impaired. Generally, collateral is not held over loans and advances to banks except for SPURA. The Bank is not allowed to sell or pledge collateral held under SPURA. Collateral usually is not held against investment securities, and no such collateral was held as of December 31, 2009 and 2008. The following table shows the fair value of collateral held against Loans and receivables (in thousands):
On individually impaired Land Building Chattel mortgage properties On past due but not impaired loans Land Building Chattel mortgage properties On neither past due nor impaired loans Land Building Chattel mortgage properties Debt securities
2009
2008
919,817 639,103 504,670 2,063,590
1,221,369 245,884 464,382 1,931,635
2,306,114 2,773,357 4,309,038 9,388,509
1,745,396 2,747,858 4,685,362 9,178,616
14,276,253 17,448,794 23,034,545 5,728,369 60,487,961 71,940,060
14,438,644 14,980,600 19,620,353 738,068 49,777,665 60,887,916
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99
Carrying Amount per Class of Financial Assets which Terms have been Renegotiated Restructured loans are defined as performing or non-performing loans (NPL) which principal terms and conditions have been modified in accordance with an agreement setting forth a new plan of payment or a schedule of payment on a periodic basis. When the loan account becomes past due and is being restructured or extended, the approval of the BOD is required before loan booking and is always governed by the BSP rules on restructuring. Restructuring of DOSRI loans also requires BOD approval. The table below shows the total aggregate amount of gross restructured loans (in thousands).
Receivables from customers Commercial loans Real estate loans Consumption loans Total restructured financial assets
2009
2008
918,896 121,926 15 1,040,837
1,004,867 103,098 221 1,108,186
b. Market risk Market risk management covers the areas of trading and interest rate risks. The Bank utilizes various measurement and monitoring tools to ensure risk-taking activities are managed within instituted market risk parameters. The Bank revalues its trading portfolios on a daily basis and checks the revenue or loss generated by each portfolio in relation to their level of market risk. The Bank’s risk policies and implementing guidelines are regularly reviewed by ALCO, ARMC, RMC and BOD to ensure that these are up-to-date and in line with changes in the economy, environment and regulations. The RMC and the BOD set the comprehensive market risk limit structure and define the parameters of market activities that the Bank can engage in. Market risk is the risk to earnings and capital arising from changes in the value of traded portfolios of financial instruments (trading market risk) and from movements in interest rates (interest rate risk). The Bank’s market risk originates primarily from holding peso and dollar-denominated debt securities. The Bank utilizes Value at Risk (VaR) to measure and manage market risk exposure. VaR estimates the potential decline in the value of a portfolio, under normal market conditions, for a given confidence level over a specified holding period. Trading activities The Bank’s trading portfolios are currently composed of peso and dollar-denominated sovereign debt securities that are marked-to-market daily. The Bank also uses VaR to measure the extent of market risk exposure arising from these portfolios. VaR is a statistical measure that calculates the maximum potential loss from a portfolio over a holding period, within a given confidence level. The Bank’s current VaR model is based on a parametric methodology with a 1-day holding period and a 99% confidence level. VaR reports are prepared on a daily basis. The Bank’s BOD and management are advised whenever potential losses exceed prudent levels. VaR reports are reported to the RMC and BOD on a monthly basis. When there is a breach in VaR limits, Treasury is expected to close or reduce their position and bring it down within the limit unless approval from the President is obtained to retain the same. All breaches are reported to the President for regularization. In addition to the regularization and approval of the President, breaches in VAR limits and special approvals are likewise reported to the RMC and BOD for their information and confirmation. Back testing is employed to verify the effectiveness of the VaR model. The bank performs back-testing to validate the VaR model and stress testing to determine the impact of extreme market movements on the portfolios. Results of backtesting are reported to the RMC and BOD on a monthly basis. Stress testing is also conducted, based on historical maximum percentage daily movement and on an ad-hoc rate shock to estimate potential losses in a crisis situation. 100
PSBank 2009 Annual Report
The Bank has established position, VaR, stop loss, loss trigger, and tenor limits for its trading portfolios. Daily profit or loss of the trading portfolios is closely monitored against loss triggers and stop-loss. Responsibility for managing the Bank’s trading market risk remains with the RMC. With the support of RMO and the ARMC, the RMC recommends to the BOD changes in market risk limits, approving authorities and other activities that need special consideration. Discussed below are the limitations and assumptions applied by the Bank on its VaR methodology: a. b. c. d.
VaR is a statistical estimate and thus, does not give the precise amount of loss. In statistical terms, rather than giving the entire tail, it is giving an arbitrary point in the tail; VaR is not designed to give the probability of bank failure, but only attempts to quantify losses that may arise from a bank’s exposure to market risk; the VaR parametric model is based on the assumption that financial risk and returns are normally distributed, which may not apply for volatile markets, instruments, and time periods; and VaR systems are backward-looking. It attempts to forecast likely future losses using past data. As such, this assumes that past relationships will continue to hold in the future. Major shifts therefore (i.e. an unexpected collapse of the market) are not captured and may inflict losses much bigger than anything the VaR model may have calculated.
The Bank’s interest rate VaR follows (in thousands):
As of year-end Year to date average High Low
2009 3,459 11,325 32,371 32
2008 10,964 5,668 49,675 11
Non-trading activities Interest Rate Risk The Bank follows a prudent policy on managing its assets and liabilities to ensure that exposure to fluctuations in interest rates are kept within acceptable limits. One method by which the Bank measures the sensitivity of its assets and liabilities to interest rate fluctuations is by way of “gap” analysis. This analysis provides the Bank with a static view of the maturity and repricing characteristics of its balance sheet positions. An interest rate gap report is prepared by classifying all assets and liabilities into various time period categories according to contracted maturities or anticipated repricing dates, whichever is earlier. The difference in the amount of assets and liabilities maturing or being repriced in any time period category would then give the Bank an indication of the extent to which it is exposed to the risk of potential changes in net interest income. The interest rate sensitivity gap report measures interest rate risk by identifying gaps between the repricing dates of assets and liabilities. The Bank’s sensitivity gap model calculates the effect of possible rate movements on its interest rate profile. The Bank uses sensitivity gap model to estimate Earnings-at-Risk (EaR) should interest rates move against its interest rate profile. The Bank’s EaR limits are based on a percentage of the Bank’s projected earnings for the year. The Bank also performs stress-testing analysis to measure the impact of extreme interest rate movements. The ALCO is responsible for managing the Bank’s structural interest rate exposure. The ALCO’s goal is to achieve a desired overall interest rate profile while remaining flexible to interest rate movements and changes in economic conditions. The RMO, ARMC and RMC review and oversee the Bank’s interest rate risks.
PSBank 2009 Annual Report
101
The table below demonstrates the sensitivity of net interest income and equity to reasonably possible changes in interest rates. 2009 Sensitivity of equity
Change in basis points
Sensitivity of net interest income
0 up to 6 months
Currency PHP USD
+25 +15
(77,100,072) (3,330,587)
(78,178) –
Currency PHP USD
-25 -15
(69,530,065) (730,717)
81,946 –
Over 1 year to 5 years
More than 5 years
Total
– –
(6,099,661) –
(81,092,220) (181,471,829)
(87,270,059) (181,471,829)
– –
5,934,095 –
82,806,070 185,966,500
88,822,111 185,966,500
Over 6 months to 1 year (In Pesos)
2008 Sensitivity of equity
Change in basis points
Sensitivity of net interest income
0 up to 6 months
Currency PHP USD
+25 +15
(50,008,875) (9,823,418)
(52,303) (47,371)
Currency PHP USD
-25 -15
(45,126,703) (8,248,457)
15,032 47,402
Over 1 year to 5 years
More than 5 years
Total
– –
(10,974,154) (262,905)
(70,465,758) (145,953,230)
(81,492,215) (146,263,506)
– –
10,956,573 264,588
71,982,948 149,182,288
82,954,553 149,494,278
Over 6 months to 1 year (In Pesos)
The impact on the Bank’s equity excludes the impact on transactions affecting the statement of income. Foreign Currency Risk Foreign currency risk is the risk of an investment’s value changing due to an adverse movement in currency exchange rates. It arises due to a mismatch in the Bank’s foreign currency assets and liabilities. The Bank’s policy is to maintain foreign currency exposure within the approved position and loss limit and within existing regulatory guidelines. The Bank’s VaR for its foreign exchange position for trading and non-trading activities are as follow (in thousands):
As of year-end Year to date average High Low
102
PSBank 2009 Annual Report
2009 724 4,276 7,562 355
2008 1,371 2,002 11,983 25
The table below summarizes the Bank’s exposure to foreign exchange risk as of December 31, 2009 and 2008. Included in the table are the Bank’s assets and liabilities at carrying amounts (in thousands).
Assets Cash Due from other banks FVPL investments AFS investments HTM investments Other assets Total assets Liabilities Deposit liabilities Savings deposits Time deposits Bills payable Accrued taxes, interest and other expenses Other liabilities Total liabilities Net exposure
c.
2009
2008
$1,570 25,594 5,317 257,351 36,277 20,176 346,285
$1,949 19,642 2,138 226,285 1,846 7,757 259,617
17,507 297,903 – 595 547 316,552 $29,733
14,039 252,976 5,000 837 968 273,820 ($14,203)
Liquidity Risk The Bank’s policy on liquidity management emphasizes on three elements of liquidity, namely, cashflow management, ability to borrow in the interbank market, and maintenance of a stock of high quality liquid assets. These three approaches complement one another with greater weight being given to a particular approach, depending upon the circumstances. The Bank’s objective in liquidity management is to ensure that the Bank has sufficient liquidity to meet obligations under normal and adverse circumstances and is able to take advantage of lending and investment opportunities as they arise. The main tool that the Bank uses for monitoring its liquidity is the Maximum Cumulative Outflow (MCO) reports, which is also called liquidity gap or maturity matching gap reports. The MCO is a useful tool in measuring and analyzing the Bank’s cash flow projections and monitoring liquidity risks. The liquidity gap report shows the projected cash flows of assets and liabilities representing estimated funding sources and requirements under normal conditions, which also forms the basis for the Bank’s Contingency Funding Plan (CFP). The CFP projects the Bank’s funding position during both temporary and long-term liquidity changes to help evaluate the Bank’s funding needs and strategies under changing market conditions. The Bank discourages dependence on large funds providers (LFPs) by capping the concentration of LFPs as a percentage of total deposits. This ensures that the Bank will not be vulnerable to a substantial drop in deposit level as a result of an outflow due to large depositors.
Financial assets Analysis of equity and debt securities at FVPL and AFS investments into maturity groupings is based on the expected date on which these assets will be realized. For other assets, the analysis into maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier the expected date the assets will be realized. Financial liabilities The maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date and does not consider the behavioral pattern of the creditors. When counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Bank can be required to pay.
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103
Analysis of Financial Assets and Liabilities by Remaining Maturities The table below shows the maturity profile of the Bank’s financial assets and liabilities based on contractual undiscounted repayment obligations (in millions):
2009 On demand Financial Assets FVPL investments Derivatives - ROP warrants Held for trading - Government securities AFS investments Government debt securities Quoted equity securities Unquoted equity securities HTM investments Government bonds Treasury notes Loans and receivables Due from BSP Due from other banks Interbank loans receivable and SPURA Receivables from customers: Consumption loans Real estate loans Commercial loans Personal loans Bills discounted Other receivables: Accrued interest receivable Sales contract receivable Unquoted debt instrument Accounts receivable Bills purchased Other assets: Security deposits RCOCI Financial Liabilities Deposit liabilities Demand Savings Time Treasurer’s, cashier’s and manager’s checks Accrued interest payable Subordinated notes payable Other liabilities
104
PSBank 2009 Annual Report
Up to Over 1 to 1 month 3 months
Over 3 to Over 6 to 12 Total within 6 months months 1 year
Beyond 1 year
Total
75
–
–
–
–
75
–
75
173
–
–
–
–
173
–
173
– – –
317 – –
634 – –
18,021 – –
– – –
18,972 – –
– 5 45
18,972 5 45
– –
23 13
46 27
68 40
137 81
274 161
4,666 3,240
4,940 3,401
1,163 1,528
2,507 –
1,285 –
– –
– –
4,955 1,528 5,902
– – –
4,955 1,528 5,902
5,902
–
–
–
–
358 71 307 1,933 12
857 367 420 162 –
1,647 772 823 401 1
2,325 1,234 676 624 –
4,120 2,574 1,346 1,539 –
9,307 5,018 3,572 4,659 13
12,772 21,839 9,336 717 –
22,079 26,857 12,908 5,376 13
1,023 – 96 715 130
123 12 2 – –
38 24 – – –
– 36 15 – –
– 69 2 – –
1,184 141 115 715 130
– 893 400 – –
1,184 1,034 515 715 130
– 46 13,532
2 – 4,805
1 – 5,699
2 – 23,041
5 – 9,873
10 46 56,950
72 – 53,985
82 46 110,935
8,188 9,403 – 17,591
– – 40,197 40,197
– – 7,097 7,097
– – 1,859 1,859
– – 1,103 1,103
8,188 9,403 50,256 67,847
– – 12,536 12,536
8,188 9,403 62,792 80,383
505 – – 137 18,233
– – – – 40,197
– 152 – – 7,249
– 37 – 637 2,533
– – – – 1,103
505 189 – 774 69,315
– – 2,171 246 14,953
505 189 2,171 1020 84,268
2008
Financial Assets FVPL investments Derivatives - ROP warrants Held for trading - Government securities AFS investments Government debt securities Private debt securities Quoted equity securities Unquoted equity securities HTM investments Government bonds Treasury notes Loans and receivables Due from BSP Due from other banks Interbank loans receivable and SPURA Receivables from customers: Consumption loans Real estate loans Commercial loans Personal loans Bills discounted Other receivables: Accrued interest receivable Sales contract receivable Unquoted debt instrument Accounts receivable Bills purchased Other assets: Security deposits RCOCI Shortages Deposit liabilities Demand Savings Time Bills payable Treasurer’s, cashier’s and manager’s checks Accrued interest payable Subordinated notes payable Other liabilities
Over 3 to Over 6 to 12 Total within months 1 year 6 months
Up to 1 month
Over 1 to 3 months
46
–
–
–
–
1,036
–
–
–
– – – –
309 5 – –
618 10 – –
– –
9 8
1,219 1,276
Beyond 1 year
Total
46
–
46
–
1,036
–
1,036
15,068 1,949 – –
– – – –
15,995 1,964 – –
– – 5 45
15,995 1,964 5 45
18 15
27 23
55 45
109 91
993 942
1102 1033
1,007 –
1,022 –
– –
– –
3,248 1,276
– –
3,248 1,276
750
–
–
–
–
750
–
750
253 74 259 1,372 16
706 76 3,620 76 2
1,366 207 1,565 287 2
1,963 435 1,876 602 –
3,537 967 4,355 964 –
7,825 1,759 11,675 3,301 20
11,244 12,896 3,333 929 –
19,069 14,655 15,008 4,230 20
1,046 – 96 755 62
– – – – –
– 1 – – –
– 3 – – –
– 5 – – –
1,046 9 96 755 62
– 636 – – –
1,046 645 96 755 62
– 35 – 8,295
1 – – 5,819
– – – 5,111
1 – – 21,947
5 – – 9,933
7 35 – 51,105
70 – – 31,093
77 35 – 82,198
6,394 8,608 – 15,002 –
– – 25,615 25,615 238
– – 7,661 7,661 –
– – 2,637 2,637 –
– – 1,245 1,245 –
6,394 8,608 37,158 52,160
– – 9,732 9,732
6,394 8,608 46,890 61,892
339 9 – 90 15,440
– 188 – – 26,041
– – 50 – 7,711
– 37 50 499 3,223
– – 100 1 1,346
238 339 234 200 590 53,761
– – – 1,995 188 11,915
238 339 234 2,195 778 65,676
On demand
PSBank 2009 Annual Report
105
6.
Segment Information The Bank’s operating segments are organized and managed separately according to the nature of services provided and the different markets served, with each segment representing a strategic business unit that offers different products and serves different markets. The Bank’s reportable segments are as follows: (a) Consumer Banking - principally provides consumer-type loans generated by the Home Office; (b) Corporate Banking - principally handles loans and other credit facilities for corporate and institutional customers acquired in the Home Office; (c) Branch Banking - serves as the Bank’s main customer touch point which offers consumer and corporate banking products; and (d) Treasury - principally handles institutional deposit accounts, providing money market, trading and treasury services, as well as managing the Bank’s funding operations by use of government securities and placements and acceptances with other banks. These segments are the bases on which the Bank reports its primary segment information. The Bank evaluates performance on the basis of information about the components of the entity that Management uses to make decisions about operating matters. There are no other operating segments than those identified by the Bank as reportable segments. There were no inter-segment revenues and expenses included in the financial information. The Bank has no single customer with revenues from which is 10.00% or more of the Bank’s total revenue. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. Primary segment information (by business segment) for the years ended December 31, 2009, 2008 and 2007 follows (in thousands):
2009
Operating Income Interest income Service fees and commissions Other operating income* Total operating income Non-cash expenses Depreciation and amortization Provision for credit and impairment losses Amortization of other intangible assets Total non-cash expenses Interest expense Service fees and commissions expense Subtotal Compensation and fringe benefits Taxes and licenses Occupancy and equipment Security, messengerial and janitorial services Miscellaneous Subtotal (Forward) 106
PSBank 2009 Annual Report
Consumer Banking
Corporate Banking
Branch Banking
Treasury
Total
1,535,965 94,149 86,252 1,716,366
144,319 43,129 26,975 214,423
5,539,707 505,643 172,421 6,217,771
309,541 – 555,971 865,512
7,529,532 642,921 841,619 9,014,072
93,360
9,553
223,504
2,119
328,536
340,309
408,408
201,079
159,960
1,109,756
10,703 444,372 –
2,392 420,353 –
14,274 438,857 1,532,559
393 162,472 1,163,496
27,762 1,466,054 2,696,055
6,836 6,836 296,481 106,462 33,104
3,131 3,131 80,889 23,780 5,727
36,713 1,569,272 1,094,701 317,653 322,910
– 1,163,496 16,562 111,881 1,128
46,680 2,742,735 1,488,633 559,776 362,869
27,850 238,398 702,295
2,139 35,457 147,992
117,112 629,522 2,481,898
876 14,265 144,712
147,977 917,642 3,476,897
2009
Income (loss) before equity in net earnings of an associate and a joint venture Equity in net earnings of an associate and a joint venture Income before income tax Provision for income tax Net income Segment assets Investments in an associate and a joint venture Deferred tax asset Total assets Segment liabilities *
Consumer Banking
Corporate Banking
Branch Banking
Treasury
Total
562,863
(357,053)
1,727,744
(605,168)
1,328,386
35,951,432
45,130 1,373,516 133,501 1,240,014 91,042,990
20,298,156
788,310 1,256,530 93,087,830 82,075,691
17,158,612
426,585
8,175,634
365,166
29,757,312
60,985,784
Other operating income includes trading and securities gains - net, gain on foreclosure, foreign exchange gain, gain on sale of property and equipment, loss on sale of investment properties and miscellaneous income.
Operating Income Interest income Service fees and commissions Other operating income* Total operating income Non-cash expenses Depreciation and amortization Provision for credit and impairment losses Amortization of other intangible assets Total non-cash expenses Interest expense Service fees and commissions expense Subtotal Compensation and fringe benefits Taxes and licenses Occupancy and equipment Security, messengerial and janitorial services Miscellaneous Subtotal Income (loss) before equity in net earnings of an associate and a joint venture Equity in net earnings of an associate and a joint venture Income before income tax Provision for income tax
Consumer Banking
Corporate Banking
2008 Branch Banking
Treasury
Total
1,239,707 102,197 71,603 1,413,507
145,570 31,060 57,356 233,986
4,721,928 498,202 193,233 5,413,363
22,402 – 371,404 393,806
6,129,607 631,459 693,596 7,454,662
86,241
9,057
176,631
2,175
274,104
252,126
103,864
197,223
24,187
577,400
11,822 350,189
2,065 114,986
12,328 386,182 1,918,395
536 26,898 501,714
26,751 878,255 2,420,109
15,714 15,714 237,785 109,315 22,899
4,776 4,776 59,942 15,876 4,963
76,604 1,994,999 911,752 264,429 278,351
– 501,714 14,355 62,041 1,188
97,094 2,517,203 1,223,834 451,661 307,401
104,289 219,381 693,669
23,121 37,301 141,203
1,277 584,034 2,039,843
– 12,973 90,557
128,687 853,689 2,965,272
353,935
(26,979)
992,339
(225,363)
1,093,932 46,820 1,140,752 200,600
(Forward) PSBank 2009 Annual Report
107
Net income Segment assets Investments in an associate and a joint venture Deferred tax asset Total assets Segment liabilities
Consumer Banking
Corporate Banking
2008 Branch Banking
Treasury
16,573,009
5,049,098
27,691,411
23,842,438
Total 940,152 73,155,956
11,709,563
369,952 1,110,811 74,636,719 66,163,995
387,085
68,309
53,999,038
* Other operating income includes trading and securities gains - net, gain on foreclosure, foreign exchange gain, gain on sale of property and equipment, gain on sale of investment properties and miscellaneous income.
2007
Operating Income Interest income Service fees and commissions Other operating income* Total operating income Non-cash expenses Depreciation and amortization Provision for credit and impairment losses Amortization of other intangible assets Total non-cash expenses Interest expense Service fees and commissions expense Subtotal Compensation and fringe benefits Taxes and licenses Occupancy and equipment Security, messengerial and janitorial services Miscellaneous Subtotal Income (loss) before equity in net earnings of an associate Equity in net earnings of an associate Income before income tax Benefit from income tax Net income Segment assets Investment in an associate Deferred tax asset Total assets Segment liabilities
Consumer Banking
Corporate Banking
Branch Banking
Treasury
Total
1,003,626 83,609 22,008 1,109,243
120,673 24,192 70,386 215,251
4,047,146 406,929 62,879 4,516,954
320,996 34,916 1,049,080 1,404,992
5,492,441 549,646 1,204,353 7,246,440
47,650
14,703
200,358
2,593
265,304
310,661
26,227
338,067
–
674,955
10,148 368,459 – 13,041 13,041 224,917 156,898 21,706
1,909 42,839 – 3,773 3,773 46,206 24,472 3,889
13,214 551,639 1,835,162 63,471 1,898,633 943,774 511,405 277,042
584 3,177 458,944 5,446 464,390 12,581 12,247 1,177
25,855 966,114 2,294,106 85,731 2,379,837 1,227,478 705,022 303,814
18,034 206,150 627,705
1,793 21,906 98,266
119,543 632,243 2,484,007
1,005 14,696 41,706
140,375 874,995 3,251,684
100,038
70,373
(417,325)
895,719
13,905,849
4,863,763
24,774,478
23,641,205
331,414
51,365
50,211,249
11,469,171
648,805 47,470 696,275 (321,947) 1,018,222 67,185,295 323,131 1,154,848 68,663,274 62,063,199
* Other operating income includes trading and securities gains - net, gain on foreclosure, foreign exchange gain, gain on sale of property and equipment, gain on sale of investment properties and miscellaneous income.
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PSBank 2009 Annual Report
7.
Interbank Loans Receivable and Securities Purchased Under Resale Agreements SPURA are lending to counterparties collateralized by government securities with face value amounting to 5.9 billion and 750.0 million as of December 31, 2009 and 2008, respectively. The market values of the collateralized government securities amounted to 5.7 billion and 738.0 million as of December 31, 2009 and 2008, respectively. The Bank is not allowed to resell to third parties collateral held under SPURA. Interest income on interbank loans receivable and SPURA consists of: Interbank loans receivable SPURA
8.
2008 131,102,732 131,277,014 262,379,746
2009 7,315,639 102,448,542 109,764,181
2007 130,004,578 105,982,146 235,986,724
Fair Value Through Profit or Loss, Available-for-Sale and Held-to-Maturity Investments FVPL investments consist of the following: Securities held for trading ROP warrants Less unrealized loss on FVPL investments
2009 173,347,309 85,821,050 259,168,359 11,125,260 248,043,099
2008 1,044,298,818 49,478,940 1,093,777,758 12,005,377 1,081,772,381
As of December 31, 2009 and 2008, the Bank has outstanding ROP paired warrants which give the Bank the option or right to exchange its holdings of ROP Global Bonds (Paired Bonds) into peso-denominated government securities upon occurrence of a predetermined credit event. Paired Bonds shall be risk weighted at 0%, provided that the 0% risk weight shall be applied only to the Bank’s holdings of Paired Bonds equivalent to not more than 50.00% of the total qualifying capital. Further, the Bank’s holdings of said warrants booked in the FVPL category are likewise exempted from capital charge for market risk as long as said instruments are paired with ROP Global Bonds up to a maximum of 50.00% of the total qualifying capital. On August 19, 2009, the BSP approved the Bank’s application for Type 3 Limited User Authority for plain vanilla foreign exchange (FX) forwards which is limited to outright buying or selling of FX forwards at a specific price and date in the future and do not include non-deliverable forwards. As of December 31, 2009, the Bank has no outstanding forward buy and sell contracts. AFS investments consist of the following:
Debt securities: Government (Note 30) Private Equity securities: Quoted Unquoted Less allowance for impairment losses
2009
2008
18,349,448,980 –
16,617,770,217 191,593,419
5,194,005 45,239,002 18,399,881,987 138,510,167 18,261,371,820
5,194,005 45,239,002 16,859,796,643 46,010,167 16,813,786,476
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Movement in the net unrealized gain (loss) on AFS investments follows:
Balance at January 1 Net gain from sale fo AFS investment taken to profit or loss Changes in fair values of AFS investment
2009 ( 677,288,505)
2008 128,560,352
(503,223,604) 2,000,341,162 1,497,117,558 819,829,053
(230,643,975) (575,204,882) (805,848,857) ( 677,288,505)
As of December 31, 2009 and 2008, allowance for impairment losses on quoted equity securities amounted to 2.2 million. The allowance for impairment losses on unquoted equity securities amounted to 43.8 million as of December 31, 2009 and 2008. As of December 31, 2009 and 2008, allowance for impairment losses for debt securities amounted to 92.5 million and nil, respectively. Movements in the allowance for impairment losses on AFS investments follow: 2009 Balance at beginning of year Provisions charged to current operations (Note 15) Balance at end of year
Quoted 2,188,665
Unquoted 43,821,502
Total 46,010,167
2008 46,010,167
92,500,000 94,688,665
– 43,821,502
92,500,000 138,510,167
– 46,010,167
2009 3,129,095,361 1,643,755,715 4,772,851,076
2008 837,229,182 773,054,568 1,610,283,750
2008 35,435,937 762,851,508 213,841,879 1,012,129,324
2007 64,113,560 705,474,436 252,500,276 1,022,088,272
HTM investments consist of the following:
Government bonds Treasury notes (Note 29)
Interest income on investment securities consists of:
FVPL investments AFS investments HTM investments
2009 60,178,392 1,595,771,154 288,920,434 1,944,869,980
Peso-denominated AFS investments bear nominal annual interest rates ranging from 5.50% to 14.00% in 2009 and 5.23% to 14.00% in 2008 and 2007 while foreign currency-denominated AFS investments bear nominal annual interest rate ranging from 7.50% to 10.63% in 2009 and 2008, and 5.00% to 7.75% in 2007. Peso-denominated HTM investments bear nominal annual interest rates ranging from 4.57% to 18.25% in 2009, 10.75% to 18.25% in 2008 and 10.25% to 18.25% in 2007 while foreign currency-denominated HTM investments bear nominal annual interest rate of 6.38% to 9.50% in 2009 and 9.00% in 2008 and 2007.
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Trading and securities gains on investment securities consist of:
FVPL investments: Realized Unrealized AFS investments
2009
2008
2007
51,536,548 (11,127,300) 40,409,248 503,223,604 543,632,852
( 12,193,420) (18,710,369) (30,903,789) 230,643,975 199,740,186
131,478,153 (1,190,651) 130,287,502 979,514,117 1,109,801,619
Trading gains on AFS investments represent the gains realized and reclassified by the Bank from net unrealized gain under the equity section of the statement of condition.
9.
Loans and Receivables This account consists of:
Receivables from customers: Consumption loans Real estate loans Commercial loans Personal loans Bills discounted Less unearned discounts Other receivables: Accrued interest receivable Accounts receivable Sales contract receivable Unquoted debt instrument Bills purchased (Note 19) Less allowance for credit losses (Note 15)
2009
2008
21,577,160,469 15,766,884,237 9,499,195,319 5,194,328,260 12,912,847 52,050,481,132 4,061,334,981 47,989,146,151
18,906,410,840 14,512,525,480 7,196,277,025 5,066,336,215 15,792,593 45,697,342,153 3,577,115,986 42,120,226,167
1,183,465,914 714,635,789 668,477,904 495,610,552 134,629,291 51,185,965,601 3,877,727,644 47,308,237,957
1,045,684,376 754,558,882 645,020,107 95,610,552 66,532,933 44,727,633,017 3,124,286,905 41,603,346,112
Personal loans comprise deposit collateral loans, employee salary and consumer loan products such as Money Card, multipurpose loan and flexi-loan. Unquoted debt instrument represents investments in convertible notes and in private bonds. The convertible notes are provided with 100% allowance for impairment losses as of December 31, 2009 and 2008. As of December 31, 2009 and 2008, 48.51% and 44.92%, respectively, of the total receivables from customers are subject to periodic interest repricing. Remaining receivables earned average annual fixed interest rates of 15.39%, 15.17% and 14.79% in 2009, 2008 and 2007, respectively.
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Interest income on loans and receivables consists of:
Receivables from customers: Consumption loans Real estate loans Personal loans Commercial loans Bills discounted Other receivable: Sales contract receivable Unquoted debt instrument
2009
2008
2007
1,896,953,617 1,465,738,219 945,735,689 977,615,675 460,547
1,749,224,772 1,218,544,529 950,225,398 761,248,012 356,631
1,526,587,222 1,056,602,726 596,888,198 758,470,742 1,009,146
63,606,126 25,957,769 5,376,067,642
65,454,924 – 4,745,054,266
52,560,420 – 3,992,118,454
Interest income accreted on impaired loans and receivables amounted to 104.3 million, 108.3 million and 8.8 million in 2009, 2008 and 2007, respectively. On April 23, 2007, the Bank participated in a private auction to bid for the 1st batch of performing residential mortgage loan portfolio consisting of 357 accounts of Balikatan Housing Finance, Inc. (BHFI) with principal balance of 126.8 million. On May 15, 2007, BHFI selected the Bank as the successful bidder. On July 30, 2008 and December 12, 2008, the Bank purchased the 2nd and 3rd batch of performing residential mortgage loans from BHFI. Details of the loans purchased follow:
Number of accounts purchased Principal balance of loans purchased Bid Price
First Sale 357 126,817,101 136,431,599
Third Sale 88 35,618,314 36,633,930
Second Sale 643 247,777,405 256,346,373
As of December 31, 2009, the carrying value and fair value of the collateral loans amounted to 315.2 million and 178.5 million, respectively. As of December 31, 2008, the carrying value and fair value of the collateral loans amounted to 369.2 million and 205.8 million, respectively. An Assignment Agreement for each portfolio was executed between BHFI (the Assignor) and the Bank (the Assignee). The Assignment Agreement contains the terms of the sale including the representations and warranties of the assignor and assignee. The Bank designated Bahay Financial Services (BFS) as the Servicing Entity that will manage, service and administer the acquired loans. A Servicing Agreement was executed between BFS and the Bank. BSP Reporting The breakdown of receivables from customers (gross of unearned discounts) as to secured and unsecured and as to type of security follows:
Secured by: Chattel Real estate Deposit hold-out Unsecured
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PSBank 2009 Annual Report
2009
%
2008
%
21,577,160,470 19,581,311,859 210,857,877 41,369,330,206 10,681,150,926 52,050,481,132
41.45 37.62 0.41 79.48 20.52 100.00
18,906,618,263 18,843,779,449 293,211,104 38,043,608,816 7,653,733,337 45,697,342,153
41.38 41.24 0.64 83.26 16.74 100.00
As of December 31, 2009 and 2008, NPLs follow:
Secured Unsecured
2009 2,192,769,144 1,958,506,774 4,151,275,918
2008 1,997,450,842 1,613,399,441 3,610,850,283
Generally, NPLs refer to loans whose principal and/or interest is unpaid for thirty (30) days or more after due date or after they have become past due in accordance with existing BSP rules and regulations. This shall apply to loans payable in lump sum and loans payable in quarterly, semi-annual, or annual installments, in which case, the total outstanding balance thereof shall be considered nonperforming. In the case of receivables that are payable in monthly installments, the total outstanding balance thereof shall be considered nonperforming when three (3) or more installments are in arrears. In the case of receivables that are payable in daily, weekly, or semi-monthly installments, the total outstanding balance thereof shall be considered nonperforming at the same time that they become past due in accordance with existing BSP regulations, i.e., the entire outstanding balance of the receivable shall be considered as past due when the total amount of arrearages reaches ten percent (10%) of the total receivable balance. Receivables are classified as nonperforming in accordance with BSP regulations, or when, in the opinion of management, collection of interest or principal is doubtful. Receivables are not reclassified as performing until interest and principal payments are brought current or the loans are restructured in accordance with existing BSP regulations, and future payments appear assured. Restructured receivables which do not meet the requirements to be treated as performing receivables shall also be considered as NPLs. Current banking regulations allow banks with no unbooked valuation reserves and capital adjustments to exclude from nonperforming classification loans classified as Loss in the latest examination of the BSP which are fully covered by allowance for credit and impairment losses, provided that interest on said receivables shall not be accrued. As of December 31, 2009 and 2008, the NPLs of the Bank not fully covered by allowance for credit losses follow:
Total NPLs NPLs fully covered by allowance for credit and impairment losses
2009 4,151,275,918 (2,650,628,890) 1,500,647,028
2008 3,610,850,283 (2,053,672,411) 1,557,177,872
Restructured loans as of December 31, 2009 and 2008 amounted 1.0 billion and 1.1 billion, respectively. The Bank’s loan portfolio includes non-risk loans as defined under BSP regulation totaling 6.3 billion and 1.2 billion as of December 31, 2009 and 2008, respectively.
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As of December 31, 2009 and 2008, loan concentration as to economic activity follows (gross of unearned discounts):
Other community, social and personal activities Real estate Wholesale and retail trade Public utilities Agriculture Manufacturing Banks, insurance and other financial institutions Services Mining and quarrying Others
2009 16,279,744,883 14,292,466,286 8,796,860,213 4,050,290,496 2,266,926,621 873,144,519 1,833,787,458 494,440,157 10,601,965 3,152,218,534 52,050,481,132
2008 14,983,547,008 12,826,969,394 9,195,664,490 2,662,614,068 2,635,093,412 725,996,318 690,857,797 487,654,587 7,107,996 1,481,837,083 45,697,342,153
% 31.28 27.46 16.90 7.78 4.35 1.68 3.52 0.95 0.02 6.06 100.00
% 32.79 28.07 20.12 5.83 5.77 1.59 1.51 1.07 0.02 3.23 100.00
Others relates to economic activities classified as electricity, gas and water, construction, health and social work, public administration and defense, extra-territorial organization and bodies, education and fishing. Thrift banks are not covered by the loan concentration limit of 30% prescribed by the BSP.
10. Investments in an Associate and a Joint Venture The composition of this account follows:
Investment in an associate Investment in a joint venture
2009 393,214,989 395,095,348 788,310,337
2008 369,951,789 – 369,951,789
2009 13,994,948,280 12,422,088,320 1,572,859,960 2,702,784,096 200,137,400
2008 10,852,151,896 9,372,344,740 1,479,807,156 1,320,848,132 187,282,412
Investment in an Associate The Banks owns 2,500,000 shares of TFSPC representing 25% ownership. The following illustrates the summarized financial information of TFSPC:
Total assets Total liabilities Net assets Gross revenue for the year Net profit for the year
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PSBank 2009 Annual Report
Movement in this account follows:
Balance at end of year Accumulated equity in net earnings: Balance at beginning of year Equity in net earnings Cash dividend Balance at end of year
2009 270,546,789
2008 270,546,789
99,405,000 50,034,350 (26,771,150) 122,668,200 393,214,989
52,584,397 46,820,603 – 99,405,000 369,951,789
Investment in a Joint Venture In August 2009, the Bank entered into a joint venture agreement (JVA) with Sumitomo Corporation, Sumitomo Corporation of the Philippines and Philippine Savings Bank Retirement Fund. The objective of the parties was to establish a joint venture that will primarily engage in the business of providing financing in the form of lending and leasing services for the purchase of motorcycles. The JVA outlines the roles and responsibilities of each party, pre-incorporation activities, formation of the joint venture corporation, pre-emptive rights, funding and financial support of the parties, shareholders and board of directors matters, composition of key management personnel as nominated by the parties, pre-emptive rights and rights of first refusal. On September 11, 2009, the Bangko Sentral ng Pilipinas approved the Bank’s application to form a joint venture with Sumitomo Corporation. SMFC, the joint venture company was incorporated on November 26, 2009. The Bank owns 4,000,000 shares of SMFC representing 40% ownership. The following illustrates the summarized financial information of the Bank’s investment in SMFC as of December 31, 2009: Share in the joint venture’s statement of financial position:
Current assets Non-current assets Current liabilities Equity
401,693,653 15,666,131 (22,264,436) 395,095,348
Share in the joint venture’s statement of income:
Other income Pre-operating expenses Loss before income tax Benefit from income tax Loss for the year
1,727,706 (8,981,167) (7,253,461) 2,348,809 ( 4,904,652)
As of December 31, 2009, total current assets, non-current assets and non-current liabilities of SMFC amounted to 1.0 billion, 39.2 million and 55.7 million, respectively. Total other income, pre-operating expenses and benefit from income tax amounted to 4.3 million, 22.4 million and 5.9 million in 2009. SMFC has not yet started its commercial operations as of December 31, 2009.
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Movement in this account in 2009 follows:
SMFC (4,000,000 shares representing 40% ownership) Equity in net loss
400,000,000 (4,904,652) 395,095,348
The Bank has no share of any contingent liabilities of SMFC or capital commitments to SMFC as of December 31, 2009.
11. Property and Equipment The composition of and movements in this account follow:
Cost Balance at beginning of year Acquisitions Disposals Balance at end of year Accumulated Depreciation and Amortization Balance at beginning of year Depreciation Disposals Balance at end of year Net Book Value
Cost Balance at beginning of year Acquisitions Disposals Balance at end of year Accumulated Depreciation and Amortization Balance at beginning of year Depreciation Disposals Reclassification Balance at end of year Net Book Value
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PSBank 2009 Annual Report
2009 Furniture, Fixtures and Leasehold Equipment Improvements
Land
Building
183,623,179 25,179,802 – 208,802,981
1,327,535,732 20,365,659 – 1,347,901,391
1,077,277,112 361,146,875 (206,278,846) 1,232,145,141
180,522,818 67,538,097 – 248,060,915
2,768,958,841 474,230,433 (206,278,846) 3,036,910,428
208,802,981
148,099,163 16,591,143 – 164,690,306 1,183,211,085
736,456,938 173,750,293 (176,702,674) 733,504,557 498,640,584
118,468,355 34,772,478 – 153,240,833 94,820,082
1,003,024,456 225,113,914 (176,702,674) 1,051,435,696 1,985,474,732
2008 Furniture, Leasehold Fixtures and Equipment Improvements
Total
Total
Land
Building
155,471,541 32,707,984 (4,556,346) 183,623,179
1,301,208,247 32,728,719 (6,401,234) 1,327,535,732
982,574,703 142,675,028 (47,972,619) 1,077,277,112
162,831,317 21,949,235 (4,257,734) 180,522,818
2,602,085,808 230,060,966 (63,187,933) 2,768,958,841
183,623,179
139,780,812 16,097,117 (3,873,655) (3,905,111) 148,099,163 1,179,436,569
628,298,593 124,031,518 (19,778,284) 3,905,111 736,456,938 340,820,174
83,889,991 37,578,595 (3,000,231) – 118,468,355 62,054,463
851,969,396 177,707,230 (26,652,170) – 1,003,024,456 1,765,934,385
Gain on sale of property and equipment amounted to 9.8 million in 2009 and 3.8 million in 2008 and 2007. The details of depreciation and amortization under the statements of income follow:
Property and equipment Investment properties (Note 12) Chattel mortgage properties (Note 14)
2009 225,113,914 59,779,588 43,642,104 328,535,606
2008 177,707,230 54,747,337 41,649,531 274,104,098
2007 192,037,087 53,679,244 19,587,529 265,303,860
The Bank declared loss on properties arising from casualty brought about by the calamities in 2009 amounting to 4.9 million.
12. Investment Properties The composition of and movements in this account follow:
Cost Balance at beginning of year Additions Disposals Balance at end of year Accumulated Depreciation Balance at beginning of year Depreciation (Note 11) Disposals Balance at end of year Allowance for Impairment Losses Balance at beginning of year Provisions for the year (Note 15) Reversals Balance at end of year Net Book Value
Land
2009 Building Improvements
Total
1,861,068,518 271,355,783 (423,003,858) 1,709,420,443
1,370,371,532 316,318,373 (186,548,672) 1,500,141,233
3,231,440,050 587,674,156 (609,552,530) 3,209,561,676
336,302,333 59,779,588 (29,235,565) 366,846,356
336,302,333 59,779,588 (29,235,565) 366,846,356
35,595,865 3,519,843 (3,977,261) 35,138,447 1,098,156,430
118,992,906 153,037,103 (12,082,394) 259,947,615 2,582,767,705
83,397,041 149,517,260 (8,105,133) 224,809,168 1,484,611,275
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Cost Balance at beginning of year Additions Disposals Balance at end of year Accumulated Depreciation Balance at beginning of year Depreciation (Note 11) Disposals Balance at end of year Allowance for Impairment Losses Balance at beginning of year Provisions for the year (Note 15) Reversals Balance at end of year Net Book Value
Land
2008 Building Improvements
Total
1,698,087,565 363,424,106 (200,443,153) 1,861,068,518
1,274,776,929 254,580,571 (158,985,968) 1,370,371,532
2,972,864,494 618,004,677 (359,429,121) 3,231,440,050
339,371,080 54,747,337 (57,816,084) 336,302,333
339,371,080 54,747,337 (57,816,084) 336,302,333
27,547,788 22,883,597 (14,835,520) 35,595,865 998,473,334
148,829,099 51,048,109 (80,884,302) 118,992,906 2,776,144,811
121,281,311 28,164,512 (66,048,782) 83,397,041 1,777,671,477
Depreciation and provision for impairment losses on investment properties amounted to 53.7 million and 99.3 million, respectively, in 2007. The details of the net book value of investment properties follow:
Real estate properties acquired in settlement of loans and receivables Bank premises leased to third parties and held for capital appreciation
2009 2,286,402,095 296,365,610 2,582,767,705
2008 2,462,776,565 313,368,246 2,776,144,811
As of December 31, 2009 and 2008, the aggregate fair value of investment properties amounted to 2.7 billion and 3.0 billion, respectively. Gain on foreclosure amounted to 206.1 million, 211.1 million and 146.2 million in 2009, 2008 and 2007, respectively. Loss on sale of investment properties amounted to 18.6 million and 67.3 million in 2009 and 2007, respectively, while gain on sale amounted to 8.8 million in 2008. Rental income on investment properties included in net income amounted to 52.9 million, 53.1 million and 52.8 million in 2009, 2008 and 2007, respectively (see Notes 23 and 25).
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PSBank 2009 Annual Report
13. Goodwill and Other Intangible Assets This account consists of: 2009 53,558,338
2008 53,558,338
120,790,777 23,123,737 197,472,852
82,634,345 22,323,737 158,516,420
Balance at beginning of year Additions Amortization Balance at end of year
Software Costs 82,634,345 65,918,040 (27,761,608) 120,790,777
2009 License Fees 22,323,737 800,000 – 23,123,737
Total 104,958,082 66,718,040 (27,761,608) 143,914,514
Balance at beginning of year Additions Amortization Balance at end of year
Software Costs 82,634,345 65,918,040 (27,761,608) 120,790,777
2008 License Fees 22,323,737 800,000 – 23,123,737
Total 158,516,420 66,718,040 (27,761,608) 197,472,852
2009 230,891,098 180,437,602 69,064,080 61,954,548 46,062,282 43,714,076 32,702,233
2008 185,495,819 248,451,131 67,368,428 33,658,703 35,394,893 20,396,674 32,018,252
8,431,511 9,676,172 4,113,609 687,047,211
17,135,005 12,901,562 1,580,005 654,400,472
Goodwill Other intangible assets Software costs License fees
The movements of other intangible assets follow:
Amortization of software costs in 2007 amounted to 25.9 million.
14. Other Assets This account consists of:
Prepaid expenses Chattel mortgage properties - net Security deposits Stationeries and supplies on hand RCOCI Sundry debits Documentary stamps on hand Inter-office float items - net of allowance for impairment losses of 6.1 million in 2008 Deferred charges Others
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On December 14, 2009, the BOD approved the write-off of the unaccounted inter-office float items amounting to 6.1 million. The movements of chattel mortgage properties follow:
2009 248,451,131 498,026,287 (521,781,622) (43,642,104) 181,053,692 (616,090) 180,437,602
Balance at beginning of year Additions Disposals Depreciation (Note 11) Allowance for impairment losses (Note 15) Balance at end of year
2008 168,546,433 449,959,936 (328,405,707) (41,649,531) 248,451,131 – 248,451,131
15. Allowance for Credit and Impairment Losses Details of the provision for credit and impairment losses charged to current operations follow:
AFS investments (Note 8) Loans and receivables Investment properties (Note 12) Chattel mortgage properties (Note 14)
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2009 92,500,000 863,603,391 153,037,103 616,090 1,109,756,584
2008 – 526,352,518 51,048,109 – 577,400,627
2007 2,188,665 573,463,694 99,302,901 – 674,955,260
Gross amount of loans individually impaired, before deducting any individual impairment allowance
2008 At January 1 Provisions for the year charged against current operations At December 31 Individual impairment Collective impairment
Gross amount of loans individually impaired, before deducting any individual impairment allowance
2009 At January 1 Provisions for the year charged against current operations Reversal of allowance Amount Written off At December 31 Individual impairment Collective impairment
` 355,344
116,876 (39,687) – 171,341 123,441 47,900 171,341
1,269,563
43,770 (26,274) – 682,776 520,657 162,119 682,776
–
63,176 428,858 – 428,858 428,858
94,975
15,772 94,152 18,831 75,321 94,152
1,352,088
42,911 665,280 562,494 102,786 665,280
Consumption Real Estate Commercial 365,682 622,369 78,380
Receivables from Customers
–
139,514 – – 568,372 – 568,372 568,372
Consumption Real Estate Commercial 428,858 665,280 94,152
Receivables from Customers
–
405,821 1,385,048 – 1,385,048 1,385,048
Personal 979,227
–
340,568 – – 1,725,616 – 1,725,616 1,725,616
Personal 1,385,048
Changes in the allowance for credit losses on loans and receivables follow (in thousands):
168,942
549 – – 31,554 25,446 6,108 31,554
Other Receivables
85,530
111,398 – (24,771) 415,157 85,530 329,627 415,157
95,611
– – 95,611 95,611 – 95,611
–
– – 5,930 – 5,930 5,930
113,004
(20,576) 89,873 27,894 61,979 89,873
37,343
24,187 328,530 11,921 316,609 328,530
163,115
(5,608) 31,005 7,289 23,716 31,005
–
670 5,930 – 5,930 5,930
121
1,856,136
526,353 3,124,287 724,040 2,400,247 3,124,287
Total 2,597,934
2,167,346
863,603 (85,391) (24,771) 3,877,728 897,018 2,980,710 3,877,728
Total 3,124,287
PSBank 2009 Annual Report
95,611
– 95,611 95,611 – 95,611
Sales Unquoted Accrued Debt Contract Interest Accounts Bills Investment Receivable Receivable Receivable Purchased 95,611 36,613 110,449 5,260 304,343
192,356
110,928 (19,430) – 181,371 46,333 135,038 181,371
Sales Unquoted Accrued Debt Contract Interest Accounts Bills Investment Receivable Receivable Receivable Purchased 95,611 31,005 89,873 5,930 328,530
Other Receivables
16. Deposit Liabilities As of December 31, 2009 and 2008, under existing BSP regulations, non-FCDU deposit liabilities are subject to statutory reserve of 4.00% and 6.00%, respectively, and liquidity reserve of 2.00% for both years. As of December 31, 2009 and 2008, the Bank is in compliance with such regulation. Available reserves as of December 31, 2009 and 2008 follows:
Cash Due from BSP AFS investments
2009 2,555,221,249 914,926,770 1,236,249,084 4,706,397,103
2008 1,342,486,701 1,185,717,206 967,549,710 3,495,753,617
Deposit liabilities earned average fixed interest rate of 3.61%, 4.87%, and 3.94% in 2009, 2008 and 2007, respectively.
17. Subordinated Notes and Bills Payable This account consists of the following:
Subordinated notes payable Bills payable - interbank call loans
2009 1,973,881,534 – 1,973,881,534
2008 1,970,941,621 237,600,000 2,208,541,621
On January 27, 2006, the Bank issued 2.0 billion, callable Unsecured Subordinated Notes due 2016 with step-up in 2011 (the Notes). The issuance of the Notes under the terms approved by the BOD was approved by the BSP last December 28, 2005. Among the significant terms and conditions of the issuance of the Notes are: a. Issue price at 100% of the principal amount. b. The Notes bear interest at the rate of 10.00% per annum from and including January 27, 2006 with step-up after five years. Interest shall be payable quarterly in arrears every 27th of January, April, July and October of each year, commencing April 27, 2006. c. The Notes will constitute direct, unconditional and unsecured obligations of the Bank and claim in respect of the Notes shall be at all times pari passu and without any preference among themselves. d. Subject to satisfaction of certain regulatory approval requirements, the Bank may redeem all and not less than the entire outstanding Notes, at a redemption price equal to the face value of the Notes together with accrued and unpaid interest based on the interest rate. e. On January 27, 2011 (the Reset date), the Step-up Interest Rate will be based on a 5-year Mart1 FXTN as of Reset date multiplied by 80.00%, plus the Step-up Credit Spread on the twenty-first interest period up to the last interest period in the event that the issuer does not exercise the Call Option. The Step-up Credit Spread is equivalent to 4.2815%. As of December 31, 2009 and 2008, the Bank is in compliance with the terms and conditions upon which the subordinated notes have been issued.
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The movements in subordinated notes payable follow:
Amortized cost Amortization of debt issuance costs
2009 1,970,941,621 2,939,913 1,973,881,534
2008 1,968,276,843 2,664,778 1,970,941,621
2009 189,492,469 85,503,262 620,027,404 895,023,135
2008 233,890,498 58,501,992 612,550,924 904,943,414
Bills payable bear nominal annual interest rate of 1.68% as of December 31, 2008.
18. Accrued Taxes, Interest and Other Expenses This account consists of:
Accrued interest payable Accrued other taxes and licenses payable Accrued other expenses payable
Accrued other expenses payable consists of accruals for salaries and wages, fringe benefits, insurance on deposits, professional fees, advertisements and information technology expenses.
19. Other Liabilities This account consists of: Accounts payable Other credits Bills purchased-contra (Note 9) Net pension liability (Note 24) Withholding taxes payable Sundry credits Dividends payable (Note 21) Due to BSP Due to the Treasurer of the Philippines SSS, Medicare, ECP & HDMF premium payable Miscellaneous
2009 636,651,703 189,582,529 130,001,594 120,484,387 59,832,957 43,328,325 36,037,874 7,495,204 6,332,337 5,445,395 58,218,617 1,293,410,922
2008 490,611,561 179,707,778 61,905,236 81,512,308 41,658,623 70,575,201 – 28,168,697 5,450,980 4,717,941 53,744,079 1,018,052,404
Accounts payable includes payable to suppliers and service providers, and loan payments and other charges received from customers in advance. Other credits represent long-outstanding unclaimed balances from inactive and dormant accounts. Miscellaneous liabilities include incentives for housing loan customers that are compliant with the payment terms amounting to 39.1 million and 33.5 million as of December 31, 2009 and 2008, respectively.
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20. Maturity Analysis of Assets and Liabilities The following table shows an analysis of assets and liabilities analyzed according to whether they are expected to be recovered or settled within one year and beyond one year from statement of condition date (in thousands):
Financial Assets Cash and other cash items Due from BSP Due from other banks Interbank loans receivable and SPURA FVPL investments AFS investments - gross (Note 8) HTM investments Loans and receivables - gross (Note 9) Other assets - gross* (Note 14) Nonfinancial Assets Investments in an associate and joint venture Property and equipment Investment properties - gross (Note 12) Deferred tax assets Other assets - gross** (Note 14) Less allowance for credit and impairment losses Unearned discounts (Note 9)
* **
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Within One Year
2009 Beyond One Year
Total
Within One Year
2008 Beyond One Year
Total
2,632,885 4,937,990 1,528,848
– – –
2,632,885 4,937,990 1,528,848
1,436,234 3,228,769 1,276,768
– – –
1,436,234 3,228,769 1,276,768
5,900,000 248,043 18,399,882 – 11,065,435 66,887 44,779,970
– – – 4,772,851 44,181,866 49,025 49,003,742
5,900,000 248,043 18,399,882 4,772,851 55,247,301 115,912 93,783,712
750,000 1,081,772 16,859,797 – 9,160,180 36,743 33,830,263
– – – 1,610,284 39,144,569 67,368 40,822,221
750,000 1,081,772 16,859,797 1,610,284 48,304,749 104,111 74,652,484
– – – 27,510 415,984 443,494
788,310 1,985,475 2,842,715 1,229,020 353,241 7,198,761
788,310 1,985,475 2,842,715 1,256,530 769,225 7,642,255
– – – – 103,244 103,244
369,952 1,765,934 2,895,138 1,110,811 611,641 6,753,476
369,952 1,765,934 2,895,138 1,110,811 714,885 6,856,720
– – – 45,223,464
– – – 56,202,503
4,276,802 4,061,335 8,338,137 93,087,830
– – – 33,933,507
– – – 47,575,697
3,295,369 3,577,116 6,872,485 74,636,719
Other assets under financial assets comprise of petty cash fund, shortages, RCOCI and security deposits. Other assets under nonfinancial assets comprise of inter-office float items, prepaid expenses, stationery and supplies on hand, sundry debits, documentary stamps on hand, deferred charges, postages stamps, chattel mortgage properties, goodwill and other intangible assets and equity investments.
PSBank 2009 Annual Report
2009 Beyond One Year
Total
Within One Year
2008 Beyond One Year
Total
65,362,751
12,027,460 1,973,882
77,390,211 1,973,882
51,999,484 237,600
9,678,999 1,970,942
61,678,483 2,208,542
505,738 189,492
– –
505,738 189,492
331,439 233,890
– –
331,439 233,890
636,652
1,132 2,412 66,881,979
– 189,583 – – – 6,332 – – 14,197,257
636,652 189,583 130,002 7,495 46,305 6,332 1,132 2,412 81,079,236
490,612 – 61,905 28,169 8,462 – 1,223 – 53,392,784
– 179,708 – – – 5,451 – 2,589 11,837,689
490,612 179,708 61,905 28,169 8,462 5,451 1,223 2,589 65,230,473
705,530 17,426 230,098 953,054 67,835,033
– – 43,401 43,401 14,240,658
705,530 17,426 273,499 996,455 82,075,691
671,053 14,073 117,946 803,072 54,195,856
– – 130,450 130,450 11,968,139
671,053 14,073 248,396 933,522 66,163,995
Within One Year Financial Liabilities Deposit liabilities Subordinated notes and bills payable Treasurer’s, cashier’s and manager’s checks Accrued interest payable Other liabilities Accounts payable Other credits Bills purchased-contra Due to BSP Dividends payable Due to Treasurer of the Philippines Deposits for keys Others* Nonfinancial Liabilities Accrued taxes, and other expenses Accrued income tax payable Other liabilities**
* **
130,002 7,495 46,305
Others under financial liabilities comprise of payment orders payable and overages. Other liabilities under nonfinancial liabilities comprise of advance rentals on bank premises, sundry credits, withholding taxes, SSS, Medicare, ECP & HDMF premium payable, net retirement liability, and miscellaneous liabilities.
21. Equity Issued Capital The Bank’s capital stock consists of: 2009 Shares Authorized common stock - 10 par value Issued and outstanding Balance at beginning of year Issuance during the year Balance at end of year
Amount
2008 Shares
Amount
425,000,000
4,250,000,000
425,000,000
4,250,000,000
240,252,491 – 240,252,491
2,402,524,910 – 2,402,524,910
201,938,315 38,314,176 240,252,491
2,019,383,150 383,141,760 2,402,524,910
Movements in capital paid in excess of par value follow:
Balance at beginning of year Issuance of common stock
2009 2,818,083,506 – 2,818,083,506
2008 1,220,819,206 1,597,264,300 2,818,083,506
2007 1,220,819,206 – 1,220,819,206
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Dividends Paid and Proposed Details of the Bank’s dividend distributions as approved by the Bank’s BOD and the BSP follow:
Date of declaration January 31, 2007 January 31, 2007 March 30, 2007 March 30, 2007 August 28, 2007 December 19, 2007 February 13, 2008 April 29, 2008 July 21, 2008 October 28, 2008 January 20, 2009 May 18, 2009 July 28, 2009 October 13, 2009 January 19, 2010
Cash Dividends Per share Total amount 0.15 30,290,747 0.15 30,290,747 0.15 30,290,747 1.20 242,325,977 0.15 30,290,747 0.15 36,037,874 0.15 36,037,874 0.15 36,037,874 0.15 36,037,874 0.15 36,037,874 0.15 36,037,874 0.15 36,037,874 0.15 36,037,874 0.15 36,037,874 0.15 36,037,874
Date of BSP approval February 23, 2007 February 23, 2007 April 30, 2007 April 30, 2007 October 31, 2007 February 07, 2008 May 19, 2008 July 16, 2008 September 11, 2008 March 6, 2009 June 29, 2009 August 17, 2009 October 20, 2009 December 15, 2009
Record date March 16, 2007 March 16, 2007 May 18, 2007 May 18, 2007 November 23, 2007 February 27, 2008 June 05, 2008 August 5, 2008 October 13, 2008 March 26, 2009 July 23, 2009 September 15, 2009 November 13, 2009 January 14, 2010
Payment date March 30, 2007 March 30, 2007 June 8, 2007 June 8, 2007 December 7, 2007 March 7, 2008 June 16, 2008 August 20, 2008 October 27, 2008 April 15, 2009 August 7, 2009 September 30, 2009 December 1, 2009 January 28, 2010
On January 19, 2010, the BOD of the Bank declared a 1.50% regular cash dividend for the fourth quarter of 2009 amounting to 36.0 million or 0.15 per share on which the Bank is awaiting for the approval of BSP. Capital Management The primary objectives of the Bank’s capital management are to ensure that the Bank complies with externally imposed capital requirements, as mandated by the BSP, and that the Bank maintains healthy capital ratios in order to support its business and maximize returns for its shareholders. The Bank considers its paid in capital and surplus as its capital. The Bank manages its capital structure and makes adjustments in the light of changes in economic conditions and the risk characteristic of its activities. In order to maintain or adjust the capital structure, the Bank may adjust the amount of dividend payment to shareholders or issue capital securities. The major activities in this area include the following: •
On March 2, 2005, the Bank’s BOD approved an amendment to the Bank’s Dividend Policy which provides for an annual regular cash dividend of 6.00% of the par value of the total capital stock payable quarterly at the rate of 1.50% or 0.15/share payable not later than March 31, June 30, September 30 and December 31 of each year.
•
The Bank has issued additional common shares for its qualified stockholders in 2008 and 2006 through stock rights offerings that raised 2.0 billion and 751.6 million in capital, respectively.
Regulatory Capital Under Section 9 of the Thrift Banks Act, the combined capital accounts of each bank should not be less than an amount equal to 10.00% of its risk assets. Risk assets consist of total assets after exclusion of cash on hand, due from BSP, loans covered by hold out or assignment of deposits, loans or acceptances under letters of credit to the extent covered by margin deposits and other non-risk items as determined by the Monetary Board. On June 2, 2006, the Monetary Board of the BSP approved major revisions to the risk-based capital adequacy framework which took effect on July 1, 2007, to align the existing Basel I-compliant framework with the new Basel II standards. As approved, the BSP decided to maintain the present minimum overall capital adequacy ratio (CAR) of banks and quasibanks at 10.00%. However, consistent with Basel II recommendations, it approved major methodological revisions to the calculation of minimum capital that universal banks, commercial banks and their subsidiary banks and quasi-banks should hold against actual credit risk exposures.
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The guidelines for allocating minimum capital to cover market risk was also amended to some extent, primarily to align specific market risk charges on trading book assets with the revised credit risk exposure guidelines. A completely new feature is the introduction of bank capital charge for operational risk. The required disclosures to the public of bank capital structure and risk exposures are also enhanced to promote greater market discipline in line with the so-called Pillar 3 of the Basel II recommendations. The determination of the Bank’s compliance with regulatory requirements and ratios is based on the amount of the Bank’s “unimpaired capital” (regulatory net worth) as reported to the BSP, which is determined on the basis of regulatory accounting practices which differ from PFRS in some respects. As of December 31, 2009 and 2008, the Bank is in compliance with CAR. The table below shows the Bank’s CAR as reported to the BSP (in millions). 2009 9,433 2,397 11,830 2,489 9,341 64,693 11.34% 14.44%
Tier 1 capital Tier 2 capital Gross qualifying capital Less required deductions Total qualifying capital Risk weighted assets Tier 1 capital adequacy ratio Capital adequacy ratio
2008 8,558 2,368 10,926 2,126 8,800 50,523 13.10% 17.42%
Regulatory capital consists of Tier 1 capital, which comprises capital stock, surplus, surplus reserves, and net unrealized gains or loss on AFS investments. Certain adjustments are made to PFRS-based results and reserves, as prescribed by the BSP. The other component of regulatory capital is Tier 2 capital, which is comprised of the Bank’s subordinated debt. Certain items are deducted from the regulatory Gross Qualifying Capital, such as but not limited to equity investments in unconsolidated subsidiary banks and other financial allied undertakings, but excluding insurance companies (for solo basis); investments in debt capital instruments of unconsolidated subsidiary banks (for solo basis); equity investments in subsidiary insurance companies and subsidiary non-financial allied undertakings; and reciprocal investments in equity of other banks/enterprises. Risk-weighted assets are determined by assigning defined risk weights to amounts of on-balance sheet exposures and to the credit equivalent amounts of off-balance sheet exposures. Certain items are deducted from risk-weighted assets, such as the excess of general loan loss provision over the amount permitted to be included in Tier 2 capital. Financial Performance The following basic ratios measure the financial performance of the Bank:
Return on average equity Return on average assets Net interest margin on average earning assets
2009 12.73% 1.48% 6.43%
2008 12.47% 1.31% 5.75%
2007 14.81% 1.55% 5.43%
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22. Net Service Fees and Commission Income This account consists of:
Service Fees and Commission Income Deposit related and other fees received Credit related fees and commissions Trust fees Service Fees and Commission Expense Commissions Brokerage Net Service Fees and Commission Income
2009
2008
2007
442,313,882 195,739,703 4,867,453 642,921,038
415,242,909 206,609,207 9,606,888 631,459,004
347,560,163 173,707,805 28,378,381 549,646,349
41,041,024 5,638,657 46,679,681 596,241,357
93,337,094 3,756,650 97,093,744 534,365,260
82,326,482 3,404,707 85,731,189 463,915,160
2009 55,586,122 5,739,049 26,958,795 88,283,966
2008 56,000,310 8,389,706 18,839,038 83,229,054
2007 56,396,841 4,386,654 13,517,039 74,300,534
23. Miscellaneous Income This account consists of:
Rent (Notes 12 and 25) Insurance income Others
Rent income arises from the lease of investment properties, the surplus office space and safety deposit boxes of the Bank. Others include income from recovery of charged-off assets, dividend income and other miscellaneous income.
24. Retirement Benefits The Bank has a funded, noncontributory defined benefit plan covering substantially all of its employees. The benefits are based on years of service and final compensation. The retirement expense amount included in ‘Compensation and fringe benefits’ in the statements of income follows:
Current service cost Interest cost Expected return on plan assets Net actuarial loss recognized during the year Net retirement expense
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PSBank 2009 Annual Report
2009 5,212,147 120,375,419 (18,553,880) (61,607) 106,972,079
2008 53,923,297 44,630,840 (38,558,698) (648,190) 59,347,249
The amount of net pension liability recognized in the statements of condition under ‘Other Liabilities’ follow:
Present value of defined benefit obligation Fair value of plan assets (Note 29) Deficit Unrecognized actuarial gains Net pension liability
2009 512,298,428 490,836,483 21,461,945 99,022,442 120,484,387
2008 354,045,351 309,231,332 44,814,019 36,698,289 81,512,308
The movements in net retirement liability recognized in the statements of condition follow:
Balance at beginning of year Retirement expense Contributions Balance at end of year
2009 81,512,308 106,972,079 (68,000,000) 120,484,387
2008 104,665,059 59,347,249 (82,500,000) 81,512,308
2009 354,045,351 5,212,147 120,375,419 (36,580,421) 69,245,932 512,298,428
2008 433,309,127 53,923,297 44,630,840 (38,221,136) (139,596,777) 354,045,351
2009 309,231,332 18,553,880 68,000,000 (36,580,421) 131,631,692 490,836,483
2008 385,586,980` 38,558,698 82,500,000 (38,221,136) (159,193,210) 309,231,332
Changes in the present value of the defined benefit obligation are as follow:
Balance at beginning of year Current service cost Interest cost Benefits paid Actuarial loss (gain) Balance at end of year
Changes in the fair value of plan assets are as follow:
Balance at beginning of year Expected return Contributions Benefits paid Actuarial gain (loss) Balance at end of year
The actual return on plan assets amounted to a gain of 150.2 million and a loss of 120.6 million in 2009 and 2008, respectively. The movements in unrecognized actuarial gains are as follow:
Balance at beginning of year Actuarial gain (loss) for the year - obligation Actuarial gain (loss) for the year - plan assets Actuarial loss (gain) recognized Balance at end of year
2009 36,698,289 (69,245,932) 131,631,692 (61,607) 99,022,442
2008 56,942,912 139,596,777 (159,193,210) (648,190) 36,698,289
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The Bank expects to contribute 97.7 million to its defined benefit plan in 2010. The major categories of plan assets as a percentage of the fair value of total plan assets are as follow: 2009 95.77% 4.23%
Equity instruments Other assets
2008 99.62% 0.38%
Other assets include investment in savings and time deposits, and accrued interest receivable. The following table shows the aggregate fair value of equity instruments included in the plan assets: 2009 274,802,678 100,000,000 95,315,300 470,117,978
Bank’s shares SMFC Other listed companies
2008 187,501,897 – 118,548,000 306,049,897
The principal actuarial assumptions used in determining retirement liability as of January 1, 2009 and 2008 are shown below: 2009 21 34.00% 6.00% 10.00%
Average remaining working life Discount rate Expected rate of return on assets Future salary increases
2008 21 10.30% 10.00% 8.50%
The overall expected rate of return on assets is determined based on market prices prevailing on the date of the valuation, applicable to the period over which the obligation is to be settled. As of December 31, 2009, the discount rate used in determining retirement obligation is 10.56%. There has been a widening spread between the rates of return on risk-free fixed income securities and the rates of return on high quality fixed-income securities that reflect credit or risk premiums in 2008. This increased spread has resulted in higher yields-tomaturity and, accordingly, higher discount rates. Information on the Bank’s retirement plan for the current and previous years follows:
Present value of unfunded obligation Fair value of plan assets Deficit Experience adjustments on plan liabilities Experience adjustments on plan assets
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PSBank 2009 Annual Report
2009 512,298,428 (490,836,483) 21,461,945 (29,041,046) 131,631,692
2008 354,045,351 (309,231,332) 44,814,019 (54,151,522) (159,193,210)
2007 433,309,127 (385,586,980) 47,722,147 (23,289,277) 50,211,854
2006 489,386,549 (296,707,051) 192,679,498 8,250,112 31,118,332
25. Leases The Bank leases the premises occupied by its branches for periods ranging from 1 to 20 years renewable under certain terms and conditions. Various lease contracts include escalation clauses, most of which bear an annual rent increase of 10.00%. Rentals charged against operations under these lease contracts amounting to 261.8 million in 2009, 209.5 million in 2008 and 205.6 million in 2007 are shown under ‘Occupancy and equipment-related costs’ in the statements of income. Future minimum rentals payable under non-cancelable operating leases are as follow: 2009 198,766,942 497,656,000 274,637,504 971,060,446
Within one year After one year but not more than five years More than five years
2008 158,297,740 496,859,018 157,507,888 812,664,646
The Bank entered into commercial property leases on its surplus office space. These non-cancelable leases have remaining non-cancelable lease terms between 1 and 5 years. As of December 31, 2009 and 2008, there is no contingent rental income. Rent income of the Bank related to these property leases amounting to 52.9 million in 2009, 53.1 million in 2008 and 52.8 million in 2007 are shown under ‘Miscellaneous income’ in the statements of income. Future minimum rentals receivable under non-cancelable operating leases are as follow:
Within one year After one year but not more than five years
2009 57,933,061 173,758,668 231,691,729
2008 14,952,842 10,877,154 25,829,996
2008 195,557,385 104,091,093 95,608,286 86,169,131 122,464,960 45,397,237 37,439,332 41,357,364 23,798,870 23,435,135 1,114,661 10,937,663 10,177,282 7,317,428 4,347,683
2007 191,851,312 87,708,686 106,321,217 72,907,118 87,466,997 35,905,831 40,126,919 55,644,682 41,452,629 23,436,465 21,235,683 10,340,689 10,550,674 6,478,122 6,233,599
26. Miscellaneous Expenses This account consists of:
Insurance Litigation Information technology Communications Advertising Transportation and traveling Repairs and maintenance Management and professional fees Stationery and supplies Supervision and examination fees Fines, penalties and other charges Donations and charitable contributions Training and seminars Banking fees Membership fees and dues
2009 158,506,606 123,384,434 110,418,684 100,864,563 100,586,400 59,416,287 55,149,320 55,108,460 31,159,010 26,432,612 20,952,591 12,179,450 11,175,319 5,628,722 5,341,052
(Forward)
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Rewards and incentives Meeting allowance Entertainment, amusement and recreation (EAR) (Note 27) Others
2009 5,026,581 3,265,093
2008 5,740,739 3,148,445
2007 3,868,361 3,112,300
2,328,921 30,718,089 917,642,194
1,521,350 34,064,597 853,688,641
1,314,917 69,039,083 874,995,284
Insurance expense includes premiums paid to the Philippine Deposit Insurance Corporation amounting to 132.2 million, 107.4 million and 112.7 million in 2009, 2008 and 2007, respectively. In 2007, other expenses included payments to union members amounting to 57.5 million for the successful completion of the collective bargaining agreement.
27. Income and Other Taxes Under Philippine tax laws, the Bank is subject to percentage and other taxes (presented as ‘Taxes and licenses’ in the statement of income) as well as income taxes. Percentage and other taxes paid consist principally of gross receipts tax (GRT) and documentary stamps taxes (DST). Income taxes include corporate income tax, discussed below, and final taxes paid at the rate of 20.00%, which is a final withholding tax on gross interest income from government securities, and other deposit substitutes. Current tax regulations provide that the RCIT rate shall be 35.00% until December 31, 2008. Starting January 1, 2009, the RCIT rate shall be 30.00%. The interest allowed as a deductible expense is reduced by 42.00% of interest income subjected to final tax under the 35.00% corporate tax regime and 33.00% under the 30.00% corporate tax regime. RA No. 9504, An Act Amending National Internal Revenue Code, provides that starting July 1, 2008, the optional standards deduction (OSD) equivalent to 40.00% of gross income may be claimed as an alternative deduction in computing for the RCIT. The Bank elected to claim itemized expense deductions instead of the OSD in computing for the RCIT in 2009 and 2008. Current tax regulations also provide for the ceiling on the amount of EAR expense that can be claimed as a deduction against taxable income. Under the regulations, EAR expense allowed as a deductible expense for a service company is limited to the actual EAR paid or incurred but not to exceed 1.00% of net revenue. The regulations also provide for MCIT of 2.00% on modified gross income and allow a NOLCO. The MCIT and NOLCO may be applied against the Bank’s income tax liability and taxable income, respectively, over a three-year period from the year of inception. FCDU offshore income (income from non-residents) is tax-exempt while gross onshore income (income from residents) is subject to 10.00% income tax. In addition, interest income on deposit placements with other FCDUs and offshore banking units (OBUs) is taxed at 7.50%. Under current tax regulation, the income derived by the FCDU from foreign currency transactions with non-residents, OBUs, local commercial banks, including branches of foreign banks, is tax-exempt while interest income on foreign currency loans from residents other than OBUs or other depository banks under the expanded system is subject to 10.00% income tax.
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Provision for (benefit from) income tax consists of:
Current: Final tax MCIT Deferred
2009
2008
2007
216,715,098 62,504,782 279,219,880 (145,718,829) 133,501,051
109,842,912 46,721,314 156,564,226 44,036,634 200,600,860
132,838,023 27,510,337 160,348,360 (482,295,255) ( 321,946,895)
Net deferred tax asset consists of:
Deferred tax asset on: Allowance for credit and impairment losses NOLCO Carryforward benefits of MCIT Accumulated depreciation on investment properties Net pension liability Accrued rent Unamortized pension cost contribution Unrealized foreign exchange loss Deferred tax liability on: Net unrealized gain on investment properties Accretion of interest on impaired loans Unrealized foreign exchange gain
2009
2008
1,268,692,219 – 129,370,788 52,551,088 36,145,316 35,138,839 26,977,585 1,847,548 1,550,723,383
974,807,789 211,878,202 74,231,651 35,993,813 24,453,692 31,728,312 33,701,119 – 1,386,794,578
(239,226,809) (54,966,525) – (294,193,334) 1,256,530,049
(224,207,615) (30,062,833) (21,712,910) (275,983,358) 1,110,811,220
In 2007, the Bank recognized NOLCO amounting to 299.7 million which will expire in 2010. As of December 31, 2009, the full amount of NOLCO had already been utilized. In 2009, the Bank’s MCIT and RCIT amounted to 62.5 million and 7.4 million, respectively, resulting to an excess MCIT of 55.1 million. Details of the Bank’s excess MCIT follow:
Inception Year 2007 2008 2009
Amount 27,510,337 46,721,314 55,139,137 129,370,788
Applied/Expired – – – –
Balance 27,510,337 46,721,314 55,139,137 129,370,788
Expiry Year 2010 2011 2012
As of December 31, 2009, the Bank had already paid 45.0 million of its MCIT of 62.5 million.
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133
The reconciliation between the statutory income tax rate and effective income tax rate follows:
Statutory income tax rate Tax effect of: FCDU Income Tax-paid and tax-exempt income Nondeductible expenses Effect of deferred income tax Effective income tax rate
2009 30.00%
2008 35.00%
2007 35.00%
(13.36) (13.90) 6.98 – 9.72%
(3.32) (27.56) 6.51 6.95 17.58%
(37.44) (55.15) 25.97 (14.62) (46.24%)
2009 1,240,014,406
2008 940,151,593
2007 1,018,221,941
240,252,491 5.16
236,306,590 3.98
201,938,315 5.04
28. Earnings Per Share The following table presents information used to calculate basic Earnings Per Share (EPS):
a. Net income b. Weighted average number of common shares for basic earning per share c. Basic/Diluted EPS (a/b)
As of December 31, 2009, there were no potential common shares with dilutive effect on the basic EPS of the Bank.
29. Related Party Transactions Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Corporate entities are also considered to be related if they are subjected to common control or common significant influence. Transactions between related parties are based on terms similar of those offered to non-related parties. In the ordinary course of business, the Bank has loans and other transactions with its affiliates, and with certain DOSRI. Under the Bank’s policy, these loans and other transactions are made substantially on the same terms as with other individuals and businesses of comparable risks. The General Banking Law limits the amount of direct credit accommodations to DOSRI, 70.00% of which must be secured and should not exceed the total of their respective deposits and book value of their respective investments in the Bank. In the aggregate, loans to DOSRI generally should not exceed the lower of the Bank’s total equity or 15.00% of the Bank’s total loan portfolio. BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts.
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The following table shows information relating to the loans, other credit accommodations and guarantees classified as DOSRI accounts under regulations existing prior to said circular and new DOSRI loans and other credit accommodations granted under said circular as of December 31, 2009 and 2008:
Total outstanding DOSRI accounts Percent of DOSRI accounts granted under regulations existing prior to BSP Circular No. 423 to total loans Percent of new DOSRI accounts granted under BSP Circular No. 423 to total loans Percent of unsecured DOSRI accounts to total DOSRI accounts Percent of past due DOSRI accounts to total DOSRI accounts Percent of nonperforming DOSRI accounts to total DOSRI accounts
2009 1,740,885,192
2008 1,260,832,073
3.34%
2.76%
–
–
15.29%
19.86%
34.70%
48.19%
34.70%
48.19%
As of December 31, 2009 and 2008, the Bank has no loans, other credit accommodations and guarantees, as well as availments of previously approved loans and committed credit lines not considered DOSRI accounts prior to the issuance of said circular but are allowed a transition period of two years from the effectivity of the said circular until said circular or said loan, other credit accommodations and guarantees become past due, or are extended, renewed or restructured, whichever comes later. On January 31, 2007, BSP Circular No. 560 was issued providing the rules and regulations that govern loans, other credit accommodations and guarantees granted to subsidiaries and affiliates of banks and quasi-banks. Under the said circular, the total outstanding exposures to each of the bank’s subsidiaries and affiliates shall not exceed 10.00% of bank’s net worth, the unsecured portion of which shall not exceed 5.00% of such net worth. Further, the total outstanding exposures to subsidiaries and affiliates shall not exceed 20.00% of the net worth of the lending bank. BSP Circular No. 560 became effective February 15, 2007. Total interest income from DOSRI loans amounted to 60.8 million, 63.2 million and 76.5 million in 2009, 2008 and 2007, respectively. The following table shows the related party transactions included in the financial statements (in thousands): Elements of Transaction Related Party Relationship Parent Company MBTC
TFSPC
SMFC
Associate
Joint venture
Nature of Transaction Due from other banks Bills payable Interest income Interest expense Investment in an associate Share in net earnings of an associate Investment in a joint venture Accounts receivable Share in net loss of a joint venture
Statements of Condition 2009 2008 830,688 763,598 – 237,600
393,215
395,095 27,675
Statements of Income 2009 2008 2007
5,244 4,851
97,780 17,450
131,506 –
50,034
46,821
47,470
(4,905)
–
–
369,952
– –
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Deposit liabilities include deposits of related parties amounting to 4.0 billion in 2009 and 3.2 billion in 2008. The related interest expense from these deposits amounted to 4.4 million, 17.3 million and 9.5 million in 2009, 2008 and 2007, respectively. The total assets of the retirement fund of employees amounting to 490.8 million and 309.2 million as of December 31, 2009 and 2008, respectively, is being managed by the Bank’s trust department. For the years ended December 31, 2009, 2008 and 2007, held-for-trading and AFS investment securities transactions with related parties include outright purchases totaling to 89.8 billion, 12.6 billion and 15.9 billion, respectively, and outright sales totaling to 68.9 billion, 35.8 billion and 17.0 billion, respectively. Compensation of key management personnel (covering assistant vice presidents and up) included under ‘Compensation and fringe benefits’ in the statements of income follows:
Short-term employee benefits Post-employment pension benefits
2009 151,067,152 2,742,364 153,809,516
2008 147,932,428 1,048,415 148,980,843
Short-term employee benefits include salaries and other non-monetary benefits. As of December 31, 2009 and 2008, treasury bills (classified under HTM investments) with total face value of 50.0 million are pledged by the Bank to MBTC to secure its payroll account with MBTC. As of December 31, 2009 and 2008, MBTC has assigned to the Bank, government securities with total face value of 1.5 billion, to secure the Bank’s deposits to MBTC.
30. Trust Operations Securities and other resources held by the Bank in fiduciary or agency capacity for its customers are not included in the accompanying statements of condition since these are not assets of the Bank. In connection with the trust functions of the Bank, government securities (shown under AFS investments) with face value of 51.5 million as of December 31, 2009 and 2008, are deposited with the BSP in compliance with trust regulations. Additionally, at least 10.00% of the Bank’s net profit realized by the Bank from its trust operations is appropriated to surplus reserve until such reserve for trust functions amounts to 20.00% of the Bank’s regulatory capital. No part of such surplus reserve shall at any time be paid out in dividends, but losses accruing in the course of its trust business may be charged against surplus.
31. Commitments and Contingent Liabilities In the normal course of the Bank’s operations, there are various outstanding commitments and contingent liabilities such as guarantees and commitments to extend credit, which are not reflected in the accompanying financial statements. The Bank does not anticipate significant losses as a result of these transactions.
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The following is a summary of the Bank’s commitments and contingent liabilities at their equivalent peso contractual amounts:
2009 630,040,803 104,023,029 88,146,816 232,334 82,141 24,107
Trust department accounts (Note 30) Stand-by credit lines Late deposits/payments received Items held for safekeeping Outward bills for collection Others
2008 508,442,498 151,342,780 22,273,773 208,889 88,735 75,201
In addition, the Bank received tax assessments from the Bureau of Internal Revenue (BIR) on two banking industry issues. On December 21, 2007, the Bank availed of the tax amnesty program under RA No. 9480 and paid the BIR 265.9 million, shown under ‘Taxes and licenses’ in the statements of income, or equivalent to 5.00% of the Bank’s net worth in 2005, to settle outstanding tax assessments. Management believes that the availment of the tax amnesty law will allow the Bank relief from potential risks emanating from tax exposures including but not limited to the industry issues (i.e., DST on special savings account and value-added taxes on FCDU income). Under RA No. 9480, taxpayers who availed of the tax amnesty program shall be immune from payment of taxes, including interests and surcharges and any civil, criminal or administrative penalties arising from failure to pay any and all internal revenue taxes for taxable year 2005 and prior years. The management position was strengthened on August 27, 2008 when the Court of Tax Appeals (CTA) considered its June 3, 2008 resolution as “Final and Executory”. An “Entry of Judgment” was already made by the CTA and tendered such notice to the Bank on October 13, 2008. Accordingly, no provision was recognized. Also, several suit and claims relating to the Bank’s lending operations and labor-related cases remain unsettled. In the opinion of management, these suits and claims, if decided adversely, will not involve sums having a material effect on the financial statements.
32. Non-cash Investing Activities The following is a summary of certain non-cash investing activities that relate to the analysis of the statement of cash flows:
Addition to investment properties in settlement of loans Addition to chattel mortgage in settlement of loans Net unrealized gain (loss) in AFS investment Cumulative translation adjustment
2009
2008
2007
381,532,020
393,424,106
541,298,660
498,026,287
449,959,936
288,304,144
1,497,117,558 8,008,798
(805,848,857) 43,028,326
(1,203,390,475) –
33. Approval for the Release of the Financial Statements The accompanying comparative financial statements were reviewed and approved for release by the Bank’s Audit Committee and the BOD on February 19, 2010.
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PSBank Branches
METRO MANILA CALOOCAN CITY Caloocan - EDSA 314 G. Raymundo Bldg. EDSA Monumento T: (02) 364-6549 / 361-2163 F: (02) 364-6548 caloocan@psbank.com.ph Camarin G/F Zabarte Town Center 588 Camarin Road T: (02) 962-4866 / 962-4865 F: (02) 962-4864 camarin@psbank.com.ph Grace Park 647 Rizal Avenue Grace Park T: (02) 362-7639 / 362-7638 F: (02) 362-7463 gracepark@psbank.com.ph Maypajo 132 A. Mabini corner Dimasalang St., Maypajo T: (02) 287-2338 / 285-7012 F: (02) 287-3048 maypajo@psbank.com.ph LAS PIÑAS CITY Alabang – Zapote Sycamore Arcade Alabang-Zapote Road T: (02) 842-3760 / 842-5115 F: (02) 842-1566 alabangzapote@psbank.com.ph BF Resort Drive Resort Dr. cor. Alice Crisostomo St. BF Resort T: (02) 873-6941 / 873-9765 F: (02) 873-6787 bfresort@psbank.com.ph
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Las Piñas G/F Fairland Building Alabang-Zapote cor. V. Guinto St. Pamplona T: (02) 871-2346 / 873-8651 F: (02) 873-8354 laspinas@psbank.com.ph Las Piñas-Pamplona Alabang Zapote Road Pamplona Dos T: (02) 875-3364 / 872-1865 F: (02) 872-1533 laspinaspamplona@psbank.com.ph MAKATI CITY Arnaiz G/F Ginbo Bldg. 824 Arnaiz St. T: (02) 888-5488 / 888-5500 F: (02) 888-5499 arnaiz@psbank.com.ph Ayala Avenue G/F JAKA Bldg., 6780 Ayala Ave. T: (02) 867-1899 / 867-2799 F: (02) 867-1799 ayalaave@psbank.com.ph Chino Roces Avenue ENCM Bldg., 1099 Chino Roces Ave. cor. Mascardo St., Sta. Cruz T: (02) 899-4500 / 899-3700 F: (02) 899-4600 chinorocesave@psbank.com.ph Chino Roces Avenue Extension G/F Lising Bldg. 2301 Pasong Tamo Extension T: (02) 889-4625 / 889-3450 F: (02) 889-2617 edison@psbank.com.ph Gil Puyat - N. Garcia Unit 101-A ITC Bldg. Sen. Gil Puyat Ave. T: (02) 897-0425 / 897-0426 F: (02) 899-3764 tordesillas@psbank.com.ph
Gil Puyat - Tindalo G/F Skyland Plaza Condominium Sen. Gil Puyat Ave. cor. Tindalo St. T: (02) 845-0008 / 845-0064 F: (02) 845-0051 / 845-0065 gilpuyat@psbank.com.ph J.P. Rizal PSBank Bldg. J.P. Rizal cor. Legaspi Sts., Valenzuela T: (02) 896-8408 / 890-0794 F: (02) 895-5847 jprizal@psbank.com.ph Legaspi Village – Palanca G/F Doña Angela Garden Condominium 110 Don Carlos Palanca St., Legaspi Village T: (02) 814-0843 / 817-8801 F: (02) 893-3207 legaspipalanca@psbank.com.ph Legaspi Village – Salcedo Casmer Bldg. 195 Salcedo St., Legaspi Village T: (02) 830-0004 / 840-4283 F: (02) 830-0192 salcedo@psbank.com.ph Magallanes – EDSA 1052 EDSA cor. Lapu-Lapu St. Magallanes Village T: (02) 851-0678 / 851-2921 F: (02) 851-6027 magallanesedsa@psbank.com.ph Makati Avenue 690 Makati Ave. cor. Jupiter St. Bel-Air Village T: (02) 895-8882 / 896-0014 F: (02) 896-8993 makatiave@psbank.com.ph Paseo de Roxas G/F PSBank Center 777 Paseo de Roxas cor. Sedeño St. T: (02) 885-8208 locals 8637 8640, 8642 / 885-8239 F: (02) 845-0066 mob@psbank.com.ph
MALABON CITY Malabon 685 Rizal Ave. Extension San Agustin T: (02) 283-7669 / 283-7668 F: (02) 283-7667 malabon@psbank.com.ph MANDALUYONG CITY Boni Avenue CIFRA Bldg. 641 Boni Ave. T: (02) 531-7702 / 531-8066 F: (02) 531-8141 boniave@psbank.com.ph EDSA – Central Unit 111, G/F EDSA Central Square 3rd St., Greenfield District T: (02) 637-2601 / 637-4005 F: (02) 637-1756 edsacentral@psbank.com.ph Kalentong – Shaw 55 Shaw Blvd. near Kalentong St. T: (02) 531-8193 / 531-8293 F: (02) 531-9353 kalentong@psbank.com.ph Mandaluyong Wack Wack Unit 1A G/F Lee Gardens Condominium Shaw Blvd. cor. Lee St. T: (02) 451-1677 F: (02) 451-1788 wackwack@psbank.com.ph MANILA Balic-Balic G. Tuazon cor. Calabash A Sts. Balic-Balic, Sampaloc T: (02) 781-8184 / 712-0584 F: (02) 781-2645 balic-balic@psbank.com.ph Blumentritt PSBank Bldg. 1680 Blumentritt cor. Oroquieta Sts. T: (02) 741-3858 / 741-0801 F: (02) 743-7327 blumentritt@psbank.com.ph Central Market 1633 Fugoso St. cor. M. Natividad Sta. Cruz T: (02) 733-8294 / 735-1181 F: (02) 733-8293 cmarket@psbank.com.ph
Downtown Center G/F Wellington Bldg. 628 Plaza Lorenzo Ruiz, Binondo T: 243-3125 / 243-3089 / 243-3090 F: 241-0301 downtown@psbank.com.ph
Quezon Boulevard PSBank Bldg. 358 Quezon Blvd. cor. Arlegui St. T: (02) 736-7333 / 736-7334 F: (02) 733-6244 quezonblvd@psbank.com.ph
España Tower Unit G, G/F España Tower 2203 España Blvd., Sampaloc T: (02) 711-2075 / 711-2078 F: (02) 711-2076 espana@psbank.com.ph
Quiapo-Palanca 202 Carlos Palanca cor. Villalobos Sts., Quiapo T: (02) 733-8401 / 733-8402 / 733-8403 F: (02) 733-3868 quiapo-palanca@psbank.com.ph
Harrison Plaza L20 G/F Harrison Plaza Shopping Mall Adriatico and Mabini Sts., Malate T: (02) 524-4394 / 524-4389 F: (02) 524-4384 harrisonplaza@psbank.com.ph J. Abad Santos 1939 Jose Abad Santos Ave., Tondo T: (02) 252-4242 / 252-4277 F: (02) 252-4244 abadsantos@psbank.com.ph
Rizal Avenue 552-554 Rizal Ave., Sta. Cruz T: (02) 733-0233 / 733-3857 F: (02) 733-4075 rizalave@psbank.com.ph San Andres – Adriatico Unit 4, G/F Malate Crown Plaza Condominium 558 San Andres cor. M. Adriatico Sts., Malate T: (02) 524-4932 / 524-4410 F: (02) 524-8530 adriatico@psbank.com.ph
Jaboneros 467 Jaboneros cor. Ilang-Ilang Sts., Binondo T: (02) 243-7330 / 242-8254 F: (02) 242-8253 jaboneros@psbank.com.ph
Soler G/F Athena Tower 1258 Soler cor. Benavidez Sts., Arranque T: (02) 241-3081 / 242-1048 F: (02) 241-3083 soler@psbank.com.ph
Legarda Unit A Legarda Place 2327 Legarda St., Sampaloc T: (02) 735-3285 / 734-6702 F: (02) 733-6984 legarda@psbank.com.ph
T.M. Kalaw G/F Sunview Palace Condominium T.M. Kalaw cor. M.H. del Pilar St., Ermita T: (02) 247-0438 / 247-0419 F: (02) 247-1105 tmkalaw@psbank.com.ph
Ongpin G/F Ongpin Commercial Center Ongpin cor. G. Puyat St., Sta. Cruz T: (02) 733-7393 / 733-6656 F: (02) 733-7397 ongpin@psbank.com.ph
Tabora Picache Bldg., 814 Tabora St. Yangco Market, Divisoria T: (02) 241-8672 / 241-8670 / 247-1979 F: (02) 241-8678 tabora@psbank.com.ph
Paco Units 14 & 15, G/F JCS Bldg. 1521 Paz St., Paco T: (02) 562-9607 / 562-3513 F: (02) 561-3661 paco@psbank.com.ph
U.N. Avenue G/F Linsangan Admiralty Bldg. 1225 U.N. Avenue, Ermita T: (02) 588-0566 / 588-0571 F: (02) 588-0570 unavenue@psbank.com.ph
Padre Faura G/F Padre Faura Wing Robinson’s Place Manila Padre Faura St., Ermita T: (02) 523-0787 / 523-0794 F: (02) 523-0781 padrefaura@psbank.com.ph
Vito Cruz Unit A, G/F Burgundy Westbay Tower Pablo Ocampo St. (formerly Vito Cruz), Malate T: (02) 302-0744 / 302-0476 F: (02) 302-0745 vitocruz@psbank.com.ph
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PSBank Branches Parañaque 8387 Dr. Alejo Santos Ave. T: (02) 825-7314 / 825-1512 F: (02) 829-7048 paranaque@psbank.com.ph Parañaque-La Huerta Quirino Ave. cor. M. Rodriguez St. La Huerta T: (02) 826-9650 / 826-9722 F: (02) 826-9648 lahuerta@psbank.com.ph PASAY CITY Ylaya 999-1003 Ylaya St., Tondo T: (02) 245-6757 / 245-6758 F: (02) 245-5317 ylaya@psbank.com.ph MARIKINA CITY
MUNTINLUPA CITY Alabang Estrellita Bldg. 8 242 Montillano St., Alabang T: (02) 850-1279 / 842-1241 F: (02) 850-0532 alabang@psbank.com.ph
Marikina - Concepcion PSBank Bldg. 22 Bayan-Bayanan Ave., Concepcion T: (02) 942-2411 / 998-2836 F: (02) 942-2462 marikina@psbank.com.ph
Muntinlupa DLA Bldg., National Road, Putatan T: (02) 862-0029 / 862-0552 F: (02) 862-0028 muntinlupa@psbank.com.ph
Marikina - Marcos Highway Unit 18, M&R Complex Marcos Highway cor. Gunting St. San Roque T: (02) 668-1018 / 668-1060 F: (02) 668-1059 marikinamarcoshway@psbank.com.ph
NAVOTAS CITY
Marikina - Parang Lot 2, Blk 9, Atienza Property B.G. Molina cor. E. Rodriguez Sts., Parang T: (02) 942-0013 / 942-0804 F: (02) 942-0617 parang@psbank.com.ph Marikina - Riverbanks A1-24 Riverbanks Arcade Riverbanks Center 84 A. Bonifacio Avenue, Barangka T: (02) 948-6168 / 948-5547 F: (02) 948-5391 riverbanks@psbank.com.ph
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Baclaran BAGVPI Trade Center F.B. Harrison cor. Ortigas Sts. T: (02) 854-0673 / 833-0310 F: (02) 833-0305 baclaran@psbank.com.ph Pasay Taft PSBank Bldg. 2336 Taft Ave. cor. Villareal St. T: (02) 551-1598 / 831-4574 F: (02) 833-8875 pasaytaft@psbank.com.ph PASIG CITY
Navotas 873 N. Naval St. T: (02) 666-6638 / 283-6604 F: (02) 283-6621 navotas@psbank.com.ph PARAÑAQUE CITY BF Homes 11 President Ave. cor. Elizalde St. BF Homes T: (02) 807-9867 / 807-9866 F: (02) 807-9378 bfhomes@psbank.com.ph Bicutan 40 Doña Soledad Ave. Better Living Subdivision T: (02) 776-3009 / 776-2643 F: (02) 776-6409 bicutan@psbank.com.ph
Caniogan 1 Pasig Blvd. Ext. cor. Mercedes Ave. Caniogan T: (02) 642-8767 / 642-8717 F: (02) 642-8715 caniogan@psbank.com.ph Manggahan G1 Manggahan Village Center Amang Rodriguez Ave. cor. Calle Industria, Manggahan T: (02) 748-3386 / 748-3390 F: (02) 748-3398 manggahan@psbank.com.ph Ortigas Unit 110 Parc Chateau Condominium Onyx cor. Sapphire & Garnet Roads Ortigas Center T: (02) 634-4319 / 633-6209 F: (02) 634-4320 ortigas@psbank.com.ph Ortigas – San Miguel G/F The Crescent Bldg. 21 San Miguel Ave., Ortigas Center T: (02) 634-1870 / 634-1773 F: (02) 634-1872 sanmiguel@psbank.com.ph
Pasig Mutya Mariposa Bldg. Caruncho cor. Suarez Avenues T: (02) 747-9092 / 641-7486 F: (02) 641-1122 mutya@psbank.com.ph Pasig-Shaw 112 Shaw Blvd. T: (02) 687-2537 / 687-6561 F: (02) 687-2564 shaw@psbank.com.ph
Banawe 208 Banawe St. T: (02) 742-2797 / 742-2805 F: (02) 742-2790 banawe@psbank.com.ph Boni Serrano PSMBFI Bldg. Cor. 1st & 2nd West Crame, San Juan T: (02) 724-5352 / 727-1215 F: (02) 726-2930 boniserrano@psbank.com.ph
Plaza Bonifacio Javier Bldg., A. Mabini cor. Alkalde Jose Sts., Kapasigan T: (02) 641-5335 / 642-3980 F: (02) 641-1941 plazabonifacio@psbank.com.ph
Commonwealth Aguirre Bldg. 2211 Commonwealth Ave. Capitol District T: (02) 932-2116 / 952-2062 / 931-6934 F: (02) 952-2066 commonwealth@psbank.com.ph
QUEZON CITY
Congressional Avenue 45 Congressional Ave. Ext., Project 8 T: (02) 924-5102 / 920-8036 F: (02) 924-5103 congressional@psbank.com.ph
Acropolis (formerly Libis) G/F The Spa Bldg. 80 E. Rodriguez Jr. Ave. (C5), Libis T: (02) 687-3502 / 687-2816 F: (02) 687-3716 libis@psbank.com.ph Amoranto N.S. Amoranto Ave. cor. Kanlaon St. T: (02) 712-1545 / 742-8736 F: (02) 412-5218 amoranto@psbank.com.ph Araneta Avenue 50 G. Araneta Ave. cor. Landargun St., Brgy. Santol T: (02) 716-1051 / 716-1052 F: (02) 716-1054 aranetaave@psbank.com.ph Araneta Center - New Frontier Space No. 19 New Frontier Cinema Theater Arcade Gen. Roxas Ave., Araneta Center T: (02) 912-6189 / 912-6843 F: (02) 912-7265 newfrontier@psbank.com.ph Balintawak 1238 Go Soc Bldg. EDSA Balintawak T: (02) 362-8191 / 362-8189 F: (02) 362-8187 balintawak@psbank.com.ph
Del Monte Unit 1 & 2 Del Monte Bldg. cor. G. Tuazon & Speaker Perez Sts. T: (02) 410-7037 / 410-0900 / 742-8727 F: (02) 415-3501 delmonte@psbank.com.ph E. Rodriguez SENECA Plaza 1152 E. Rodriguez Sr. Ave., New Manila T: (02) 705-1110 / 724-3775 F: (02) 721-0701 erodriguez@psbank.com.ph Fairview 95 Commonwealth Ave. East Fairview Park T: (02) 939-7520 / 431-1534 F: (02) 938-2141 fairview@psbank.com.ph Farmers Plaza G/F Unit 8, Blk. C, Upper Farmers Plaza Araneta Center, Cubao T: (02) 995-7674 / 995-7672 F: (02) 995-7673 farmersplaza@psbank.com.ph Gilmore Heights Gilmore Heights Condominium Granada cor. Castilla Sts., Valencia T: (02) 724-0210 / 724-0230 F: (02) 724-0255 gilmore@psbank.com.ph
Kamias PHA Bldg. 14 Kamias Road T: (02) 925-8654 / 925-8746 F: (02) 925-8653 kamias@psbank.com.ph Katipunan 309-B Katipunan Ave. Loyola Heights T: (02) 426-7118 / 929-0276 F: (02) 929-0275 katipunan@psbank.com.ph Lagro Blk. 2 Lot 5, Sacred Heart Village Quirino Highway, Lagro T: (02) 930-1827 / 418-1048 F: (02) 939-3184 lagro@psbank.com.ph Mindanao Avenue Unit A & B, 4 CET Bldg. Mindanao cor. Congressional Avenues Bahay Toro, Project 8 T: (02) 920-0576 / 920-0763 F: (02) 920-0478 mindanaoave@psbank.com.ph Novaliches 877 Quirino Highway, Gulod T: (02) 930-0488 / 936-3602 / 419-0208 F: (02) 419-0209 psb-novaliches@psbank.com.ph P. Tuazon 247 P. Tuazon Ave. cor 15th. Ave. Murphy, Cubao T: (02) 911-1119 / 438-4686 F: (02) 911-1181 ptuazon@psbank.com.ph Quezon Avenue Jacinto Realty Bldg. 380 Quezon Ave. cor. Sct. Reyes T: (02) 799-2963 / 374-4255 F: (02) 374-4233 quezonave@psbank.com.ph Quezon City – Matalino 18 St. Thomas Square Matalino cor. Matatag Sts., Brgy. Central T: (02) 928-2471 / 928-1945 F: (02) 929-9587 matalino@psbank.com.ph Roosevelt PSBank Bldg., 348 Roosevelt Ave. San Francisco del Monte T: (02) 372-2132 / 414-5102 F: (02) 414-5097 roosevelt@psbank.com.ph
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PSBank Branches Tandang Sora Amina Bldg. Tierra Bella, Tandang Sora Ave. T: (02) 931-3276 / 932-3346 F: (02) 932-3212 tandangsora@psbank.com.ph
San Juan 5 F. Blumentritt cor. N. Domingo Sts. Brgy. Pedro Cruz T: (02) 724-9468 / 725-7850 F: (02) 726-1090 sanjuan@psbank.com.ph
Balanga G/F SHP II Bldg. Don Manuel Banzon Ave., Balanga, Bataan T: (047) 237-9926 / 237-9928 F: (047) 237-9927 balanga@psbank.com.ph
Timog G/F Castro Bldg. 58 Timog Avenue T: (02) 374-3691 / 374-3692 F: (02) 373-7023 timog@psbank.com.ph
Wilson 1 Barasoain cor. Wilson Sts. T: (02) 724-0306 / 724-0337 F: (02) 724-0329 wilson@psbank.com.ph
Baliuag B.S. Aquino Ave. Bagong Nayon, Baliuag, Bulacan T: (044) 766-1919 / 673-1644 F: (044) 766-1920 baliwag@psbank.com.ph
West Avenue West City Plaza 66 West Avenue T: (02) 411-0677 / 371-9395 F: (02) 371-9396 westave@psbank.com.ph
TAGUIG CITY
Cabanatuan 782-784 Melencio cor. Paco Roman Sts. Cabanatuan City T: (044) 463-8109 / 463-8110 / 464-1437 F: (044) 463-8111 cabanatuan@psbank.com.ph
Bonifacio Global City G/F Units 1 & 2, The Forum Bldg. 31st cor. 2nd Sts., Bonifacio Global City T: (02) 815-9754 / 815-9796 F: (02) 815-9785 bonifacioglobal@psbank.com.ph
RIZAL Antipolo 75 Circumferential Road Bgy. San Roque T: (02) 696-3617 / 696-3588 F: (02) 696-3595 antipolo@psbank.com.ph Cainta G/F Ortigas Royale Condominium Ortigas Ave. Extension Brgy. San Juan, Cainta T: (02) 656-8284 / 656-8290 F: (02) 656-8295 cainta@psbank.com.ph
Taguig - Kalayaan G/F Total Corporate Center Kalayaan Avenue T: (02) 403-1993 / 403-1992 F: (02) 403-1994 kalayaan@psbank.com.ph VALENZUELA CITY Valenzuela Arty Subdivision McArthur Highway, Karuhatan T: (02) 291-8435 / 432-8684 F: (02) 291-6464 valenzuela@psbank.com.ph
Camiling PSBank Bldg., Arellano St. cor. Quezon Ave. Poblacion, Camiling, Tarlac T: (045) 934-0458 F: (045) 934-0336 camiling@psbank.com.ph Dagupan 43 Burgos St. Dagupan City, Pangasinan T: (075) 522-8573 / 515-8571 F: (075) 522-8574 dagupan@psbank.com.ph
NORTH LUZON
Isabela – Cauayan 135 Maharlika Highway Brgy. San Fermin, Cauayan City, Isabela T: (078) 652-1131 / 652-1214 897-1506 / 897-1507 F: (078) 652-1006 cauayan@psbank.com.ph
Alaminos Suki Market, F. Reinoso St., Poblacion Alaminos City, Pangasinan T: (075) 654-0304 / 654-0305 F: (075) 654-0306 alaminos@psbank.com.ph
La Union G/F Nisce Bldg., Quezon Avenue San Fernando City, La Union T: (072) 888-2173 / 888-2371 F: (072) 888-3279 launion@psbank.com.ph
Greenhills 3 Missouri cor. Nevada Sts. North East Greenhills, Greenhills T: (02) 722-7575 / 721-4491 F: (02) 722-8045 greenhills@psbank.com.ph
Angeles Miranda Ext. cor. Sadie Sts., Angeles City T: (045) 625-9443 / 625-9445 F: (045) 888-9432 angeles@psbank.com.ph
Laoag F.R. Castro St., Laoag City T: (077) 770-3336 / 770-3692 F: (077) 770-3337 laoag@psbank.com.ph
N. Domingo Joyce Apartelle 128 N. Domingo St. T: (02) 726-2893 / 726-2896 F: (02) 726-2894 ndomingo@psbank.com.ph
Baguio 38 G. Perfecto St. Malcolm Square, Baguio City T: (074) 442-9483 / 442-5260 / 442-8092 F: (074) 442-8091 baguio@psbank.com.ph
Malolos Paseo del Congreso, Barasoain Brgy. Liang, Malolos City, Bulacan T: (044) 791-0439 / 662-2219 F: (044) 791-0446 malolos@psbank.com.ph
Taytay J.P Rizal Ave. cor. Ison St. Brgy. Dolores, Taytay T: (02) 658-7264 / 660-4756 / 657-4755 F: (02) 658-7251 taytay@psbank.com.ph SAN JUAN
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Malolos McArthur Highway Units 2, 3 & 4 Twins Plaza Commercial Complex McArthur Highway, Bulihan Malolos City, Bulacan T: (044) 790-6279 / 791-9810 F: (044) 791-9811 malolosmcarthur@psbank.com.ph Meycauayan PSBank Bldg., McArthur Highway Calvario, Meycauayan, Bulacan T: (044) 721-0665 / 228-3316 F: (044) 935-2765 meycauayan@psbank.com.ph Olongapo KT Tower Lot 1147, Rizal Ave. cor. 18th St. East Bajac-Bajac, Olongapo City, Zambales T: (047) 224-6681 / 224-6689 F: (047) 224-6682 olongapo@psbank.com.ph Paniqui Paniqui Commercial Complex McArthur Highway Extension Poblacion Norte, Paniqui, Tarlac T: (045) 931-0234 / 931-1539 F: (045) 931-0934 paniqui@psbank.com.ph San Fernando AMHSCO Bldg., Dolores City of San Fernando, Pampanga T: (045) 963-5353 / 963-5354 F: (045) 961-3157 sanfernando@psbank.com.ph
Tarlac – Capas Massway Supermarket Sto. Domingo 1st, Capas, Tarlac T: (045) 615-0813 / 615-0814 F: (045) 615-0815 capas@psbank.com.ph Tuguegarao Luna cor. Del Rosario Sts. Tuguegarao City, Cagayan T: (078) 844-8613 / 844-8751 F: (078) 844-8621 tuguegarao@psbank.com.ph Vigan G/F CAP Bldg. Florentino St., Vigan City T: (077) 632-0872 / 722-5100 F: (077) 632-0871 vigan@psbank.com.ph SOUTH LUZON Batangas P. Burgos St. Batangas City T: (043) 402-8888 / 402-1521 402-1520 F: (043) 723-0627 batangas@psbank.com.ph
Binakayan PSBank Bldg., Tirona Highway National Road, Binakayan, Kawit, Cavite T: (02) 529-8702 / (046) 434-1627 (046) 434-4221 F: (02) 529-8702 binakayan@psbank.com.ph Biñan A. Bonifacio cor. Burgos Sts. Biñan, Laguna T: (049) 411-3406 / 511-9413 F: (049) 520-8216 binan@psbank.com.ph Calamba G/F Anderson I Bldg., National Highway Brgy. Parian, Calamba City, Laguna T: (02) 420-8220 / (049) 545-5978 F: (049) 545-5979 calamba@psbank.com.ph Candelaria Rizal cor. Argao Sts., Candelaria, Quezon T: (042) 741-1263 / 585-8443 F: (042) 585-8444 candelaria@psbank.com.ph Dasmariñas PSBank Bldg. E. Aguinaldo Highway cor. Mangubat St., Dasmariñas, Cavite T: (046) 416-0331/ 416-4476 F: (02) 529-6101 dasmariñas@psbank.com.ph
Sta. Maria Corazon de Jesus St., Poblacion Sta. Maria, Bulacan T: (044) 893-0588 / 288-2543 F: (045) 641-2279 stamaria@psbank.com.ph Santiago Insular Life Bldg., Maharlika Highway Santiago City, Isabela T: (078) 682-2013 / 682-3001 F: (078) 682-1011 santiago@psbank.com.ph Tarlac PSBank Bldg., F. Tañedo St., Tarlac City T: (045) 982-3513 / 982-3669 F: (045) 982-3512 tarlac@psbank.com.ph
PSBank offsite ATM at Victory Station in Cubao, Quezon City
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PSBank Branches Imus Nueno Ave., Imus, Cavite T: (046) 571-0298 / 471-0095 F: (02) 529-8743 imus@psbank.com.ph Legazpi City Tower Bldg. II, Landco Business Park Legazpi City, Albay T: (052) 480-0950 / 480-0948 F: (02) 429-1581 legazpicity@psbank.com.ph
Puerto Princesa 248 Rizal Ave. Puerto Princesa City, Palawan T: (048) 434-1558 / 434-1512 F: (048) 434-1559 puertoprincesa@psbank.com.ph San Pablo Rizal Ave., San Pablo City, Laguna T: (02) 520-6050 / (049) 562-0853 F: (049) 562-7610 sanpablo@psbank.com.ph
Lemery Ilustre Ave. cor. J.P. Rizal St. Lemery, Batangas T: (043) 409-0350 F: (043) 411-1549 lemery@psbank.com.ph
San Pedro Casa Hacienda Commercial Center A. Mabini St., San Pedro, Laguna T: (02) 847-8230 / 808-1185 F: (02) 869-2266 sanpedro@psbank.com.ph
Lipa C.M. Recto Avenue cor. R. Soliman St., Lipa City T: (043) 756-2745 / 756-1711 F: (043) 756-1813 lipa@psbank.com.ph
Sta. Rosa - Balibago Dragon Arcade, Balibago-Tagaytay National Road, Laguna Bel-Air Brgy. Don Jose, Sta. Rosa, Laguna T: (049) 541-0624 / 541-0747 F: (049) 541-0845 starosabalibago@psbank.com.ph
Lipa - JP Laurel Highway Lipa Autoplex Bldg. JP Laurel Highway Lipa City T: (043) 784-6127 / 784-6129 F: (043) 784-6126 lipajplaurel@psbank.com.ph Los Baños PSBank Bldg., Lopez Ave. Batong Malaki, Los Baños, Laguna T: (02) 520-8305 / (049) 536-2147 F: (049) 536-1271 losbanos@psbank.com.ph Lucena Quezon Ave. cor. Evangelista St. Lucena City, Quezon T: (02) 250-8246 / (042) 710-3481 F: (042) 660-6342 lucena@psbank.com.ph Naga CAP Bldg., Panganiban Drive cor. Dinaga St., Naga City, Camarines Sur T: (054) 811-5188 / 472-0452 F: (02) 250-8099 naga@psbank.com.ph
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Tanauan PSBank Bldg., President Laurel Highway Tanauan City, Batangas T: (043) 778-1532 / 778-1432 F: (043) 778-1018 tanauan@psbank.com.ph VISAYAS / MINDANAO Bacolod A. Yu Bldg., Bonifacio cor. Locsin Sts. Bacolod City T: (034) 708-9080 / 435-0069 F: (034) 435-0060 bacolod@psbank.com.ph Bacolod – North Drive Riverside Medical Center B.S. Aquino Drive, Bacolod City T: (034) 435-5042 / 709-0155 F: (034) 435-5044 bacolodnorth@psbank.com.ph Butuan J.C. Aquino St., Butuan City T: (085) 225-9191 / 225-9192 F: (085) 225-9190 butuan@psbank.com.ph
Cagayan de Oro BJS Bldg., Don Apolinar Velez cor. A. Mabini Sts. Cagayan de Oro, Misamis Oriental T: (088) 857-4183 / (08822) 725-184 F: (08822) 726-044 cdo@psbank.com.ph Cebu – Banilad Gaisano Country Mall Banilad, Cebu City T: (032) 231-0948 / 232-5009 F: (032) 231-2966 banilad@psbank.com.ph Cebu – Capitol JRDC Bldg., Osmeña Blvd. Capitol Site, Cebu City T: (032) 254-7417 / 254-7385 F: (032) 254-7583 cebucapitol@psbank.com.ph Cebu – Carbon Plaridel cor. Progreso Sts., Cebu City T: (032) 254-7711 / 254-7712 F: (032) 255-0631 carbon@psbank.com.ph Cebu – Colon Pelaez near Colon St., Cebu City T: (032) 255-7551 / 255-7621 F: (032) 254-6483 colon@psbank.com.ph Cebu – Jones Osmena Blvd. cor. Sanciangko St. Cebu City T: (032) 255-1971 / 255-1483 F: (032) 412-5450 jones@psbank.com.ph Cebu – Taboan C. Padilla cor. T. Abella Sts. Tabo-an Market, Cebu City T: (032) 261-1746 / 261-1747 F: (032) 261-1745 taboan@psbank.com.ph Cebu – Uptown Allisa Bldg., Archbishop Reyes Ave. Cebu City T: (032) 232-7695 / 232-7697 F: (032) 232-7699 uptown@psbank.com.ph
Davao – Madrazo Quirino cor. Cayetano Bangoy Sts. Davao City T: (082) 222-5001 / 222-4280 F: (082) 222-4279 madrazo@psbank.com.ph Davao – Monteverde 88 T. Monteverde & Gempesaw St. Davao City T: (082) 221-0647 / 221-0646 F: (082) 221-0645 monteverde@psbank.com.ph
Mandaue National Highway G/F JTC Bldg. 212 Mandaue National Highway Mandaue City, Cebu T: (032) 346-2249 / 346-5939 F: (032) 346-5886 mandauehway@psbank.com.ph Mandaue – Subangdaku KRC Bldg., Subangdaku Mandaue City, Cebu T: (032) 345-3343 / 345-3342 F: (032) 345-3344 mandaue-subangku@psbank.com.ph
Roxas City Arnaldo Blvd. cor. Datiles St. Brgy. Tangque City, Capiz T: (036) 621-5265 / 621-2633 F: (036) 621-1897 roxascity@psbank.com.ph Tacloban Tacloban Plaza Hotel J. Romualdez Ave., Tacloban City T: (053) 523-0887 / 325-3554 F: (053) 325-3521 tacloban@psbank.com.ph
Davao – Tagum PSBank Bldg., National Highway cor. Pioneer Ave., Tagum City T: (084) 217-2901 / 400-1362 F: (084) 400-1361 tagum@psbank.com.ph
Ormoc - Centrum Aviles cor. San Pedro St., Ormoc City T: (053) 255-7554 / 255-7555 F: (053) 561-8415 ormoc@psbank.com.ph
Tagbilaran Ideal Cinema 3 Bldg. C. P. Garcia Ave., Tagbilaran City T: (038) 411-4523 / 411-4473 F: (038) 501-7010 tagbilaran@psbank.com.ph
Dipolog Lopez Bldg. Rizal Ave. cor. C.P. Garcia St., Dipolog City T: (065) 212-2927 / 212-9297 F: (065) 212-6980 dipolog@psbank.com.ph
Ozamiz Rizal Ave. cor. Capistrano St. Ozamiz City T: (088) 521-3277 / 521-3477 F: (088) 521-3377 ozamiz@psbank.com.ph
Zamboanga Nuñez Avenue Extension Camino Nuevo, Zamboanga City T: (062) 991-8125 / 991-7271 F: (062) 991-8656 zamboanga@psbank.com.ph
Dumaguete City Dr. V. Locsin cor. Real Sts. Dumaguete City T: (035) 226-1582 / 422-0200 F: (035) 226-1583 dumaguete@psbank.com.ph
Pagadian G/F Mendoza Bldg. 22 J.P. Rizal Ave., Pagadian City T: (062) 215-3580 / 215-3581 F: (062) 215-3582 pagadian@psbank.com.ph
General Santos Villanueva Bldg. Santiago Blvd., Naranghita General Santos City T: (083) 552-3337 / 552-3547 F: (083) 553-6632 gensantos@psbank.com.ph Iloilo – Iznart 533 Iznart St., Iloilo City T: (033) 337-1218 / 508-9410 F: (033) 335-0938 iznart@psbank.com.ph Iloilo – Quezon CHO Bldg., 23 C. Quezon St., Iloilo City T: (033) 336-8249 / 336-8248 F: (033) 508-9422 quezon@psbank.com.ph Mandaue – A.C. Cortes N & N Cortes Arcade, A.C. Cortes Ave. Mandaue City, Cebu T: (032) 344-0581 / 344-0582 F: (032) 344-0583 mandaue@psbank.com.ph
PSBank offsite ATM in Makati Avenue
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Metrobank Group Directory DOMESTIC SUBSIDIARIES FIRST METRO INVESTMENT CORPORATION 45th Floor, G.T. Tower International Ayala Ave. cor. H.V. Dela Costa St., Makati City T: (02) 858-7900 FRANCISCO C. SEBASTIAN President TOYOTA MOTOR PHILIPPINES CORPORATION 31st Floor G.T. Tower International Ayala Ave. cor. H.V. Dela Costa St., Makati City T: (02) 858-8200 MICHINOBU SUGATA President PHILIPPINE SAVINGS BANK PSBank Center 777 Paseo de Roxas Avenue corner Sedeño St. Legaspi Village, Makati City T: (02) 885-8208 PASCUAL M. GARCIA III President SUMISHO MOTOR FINANCE CORPORATION 12th Floor, PSBank Center 777 Paseo de Roxas Avenue cor. Sedeño St. Legaspi Village, Makati City T: (02) 802-6888 HIDETOSHI FUKUI President METROBANK CARD CORPORATION Metrobank Card Corp. Center 6778 Ayala Ave., Makati City T: (02) 870-0900 ANNA THERESE CUENCO Senior Vice President ORIX METRO LEASING & FINANCE CORP. 21st Floor G.T. Tower International Ayala Ave. cor. H.V. Dela Costa St., Makati City T: (02) 858-8888 PROTACIO C. BANTAYAN, JR. President SMBC METRO INVESTMENT CORPORATION 20th Floor Rufino Pacific Tower 6784 Ayala Ave. cor. V. Rufino St., Makati City T: (02) 811-0845 to 52 YASUHIRO OASHI President MBTC TECHNOLOGY, INC. 11th & 14th Floors PSBank Center 777 Paseo de Roxas Ave. cor. Sedeño St., Makati City T: (02) 811-4855 JOSE RAYMUND O. VERGARA President
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PHILIPPINE AXA LIFE INSURANCE CORP. Philippine AXA Life Center Sen. Gil J. Puyat Ave. cor. Tindalo St., Makati City T: (02) 885-0101 SEVERINUS P. HERMANS President PHILIPPINE CHARTER INSURANCE CORPORATION Ground & 2nd Floors Skyland Plaza Sen. Gil J. Puyat Ave. cor. Tindalo St., Makati City T: (02) 844-7044 to 54 MELECIO C. MALLILLIN President EMMANUEL R. QUE Executive Vice President FIRST METRO TRAVEL INC. Ground Floor Skyland Plaza Sen. Gil J. Puyat Ave. cor. Tindalo St. Makati City T: (02) 706-8600 REYNALDO D. VILLAR President CLAIRE M. TUGOT Senior Vice President / Deputy General Manager TOYOTA MANILA BAY CORPORATION Metropolitan Park Roxas Blvd. cor. EDSA Extension, Pasay City T: (02) 581-6168 HENRY SY President / General Manager TOYOTA CUBAO, INCORPORATED 926 Aurora Boulevard Cubao, Quezon City T: (02) 981-6168 LEO J. FERRERIA President/General Manager TOYOTA FINANCIAL SERVICES PHILS. CORP. 32nd Floor G.T. Tower International Ayala Avenue cor. H.V. Dela Costa St. Makati City T: (02) 858-8500 DEXTER P. PASION President GOJI MURAMATSU Senior Vice President GLOBAL BUSINESS POWER CORPORATION 10th Floor GT Tower International 6813 Ayala Ave. cor. H.V. Dela Costa St. Salcedo Village, Makati City T: (02) 818-5931 to 35 JESUS N. ALCORDO President
FIRST METRO SECURITIES BROKERAGE CORPORATION 18th Floor PSBank Center 777 Paseo De Roxas cor. Sedeño St. Makati City T: (02) 859-0600 to 02 ROBERT T. YU President GONZALO G. ORDOÑEZ Senior Vice President INTERNATIONAL OFFICES ASIA PACIFIC TAIWAN MB-Taipei Tom Hsieh Officer-In-Charge tom.hsieh@metrobank.com.tw 107 Chung Hsiao East Rd. Sec. 4 Taipei, Taiwan 10690 Republic of China T: 886 (2) 2776-6355 F: 886 (2) 2721-1497 JAPAN MB-Tokyo Kenichi Katakura General Manager k-katakura@metrobank.co.jp kenichi.katakura@metrobank.com.ph mbtokyo@metrobank.com.ph 1/F Chiyoda First Bldg. 3-8-1, Nishi-Kanda, Chiyoda-ku Tokyo, Japan 101-0065 T: 81 (3) 3237-1403 81 (3) 3237-6855 81 (3) 3237-0092 (2/F) F: 81 (3) 3237-1406 81 (3) 3237-0399 (2/F) MB-Osaka Joseph Eric D. Pelaez Branch Head i-pelaez@metrobank.co.jp joseph.pelaez@metrobank.com.ph mbosaka@metrobank.co.jp mbosaka@metrobank.com.ph 1/F Honmachi Central Bldg. 4-2-5, Honmachi, Chou-ku Osaka, Japan 541-0053 T: 81 (6) 6252-1333 F: 81 (6) 6252-2226 KOREA MB-Seoul Hae Won Seok Acting General Manager hae.seok@metrobank.com.ph mbseoul@metrobank.com.ph 2/F Danam Bldg. (formerly International Insurance Bldg.) 120,5-Ka, Namdaemun-Ro Chung-ku, Seoul, Korea 100-704 T: 82 (2) 779-2751 to 52 F: 82 (2) 779-2750
MB-Pusan Mario E. Ramirez Head mario.ramirez@metrobank.com.ph mbpusan@metrobank.com.ph 8/F Samsung Fire & Marine Insurance Bldg. 1205-22 Choryang 1 Dong Dong-gu, Pusan, Korea 601-011 T: 82 ( 51) 462-1091 to 93 F: 82 (51) 462-1090 CHINA MB-Shanghai Derek Cheung General Manager derekcheung@metrobank.com.cn mbtcsh@metrobank.com.cn 1152 Yan’An Road 1/Floor Metrobank Plaza Shanghai 200052 PROC T: 86 (21) 6191-0799 86 (21) 6191-0777 F: 86 (21) 6191-0711 86 (21) 6191-0022 Pudong Sub-Branch 1203 Marine Tower 1 Pudong Ave. Shanghai 200120 PROC T: 86 (21) 6886-0899 86 (21) 6886-0008 ext 12 F: 86 (21) 6886-0007 86 (21) 6886-0009 (Direct Line) Metrobank Beijing 14/F Room 1410 Office Tower One Henderson Center 18 Jian Guo Men Nei St. Beijing, PROC 100005 T: 86 (10) 6518-3359 F: 86 (10) 6518-3358 HONG KONG First Metro International Investment Co., Ltd. Alex C. Lim Managing Director aclim@firstmetrohk.com fmiichk@netvigator.com alex.lim@metrobank.com.ph Head Office Representative Office Unit D 15/F United Centre Bldg. 95 Queensway Rd. Hong Kong T: (852) 2527-5019
Worldwide House Branch Shops 202-206, 2/F Worldwide Plaza No. 19 Des Voeux Rd. Central, Hong Kong SAR T: (852) 2877-9161 F: (852) 2877-3569 Yuen Long Branch yuenlongbranch@mbrchk.com Flat 2, 1st Floor Hung Fook Building No. 25-29 Tung Lok Street Yuen Long, New Territories Hong Kong SAR T: (852) 2521-4965 (852) 2522-4593 F: (852) 2442-0559 Shatin Branch shatinbranch@mbrchk.com Shop 104, Level 3, Shatin Lucky Plaza No. 1-15 Wang Pok Street Shatin, New Territories Hong Kong SAR T: (852) 2698-6455, 2698-4809 F: (852) 2698-4632 Causeway Bay Branch causewaybranch@mbrchk.com Shops 1 & 2, Ground Floor Haven Court, 136-138 Leighton Road Causeway Bay, Hong Kong SAR T: (852) 2613-2130, 2613-2180 F: (852) 2613-1897
MB-New York Ivan S. Atmaja General Manager ivan.atmaja@metrobankny.com customerservice@metrobankny.com 10 East 53rd St. New York, New York 10022 U.S.A. T: 1 ( 212) 832-0855 ext. 228 1 (212) 909-3665 (Direct Line) F: 1 (212) 223-0916 Metro Remittance Center, Inc. (U.S.A.) Milagros S. Alegre General Manager mila.alegre@metroremitusa.com Head Office 41-70 Main St. #A4 Flushing, New York 11355 U.S.A. T: 1 (718) 463-7770, 463-2250 F: 1 (718) 878-3529 Woodside Branch 69-11 C Roosevelt Ave. Woodside, New York 11377 U.S.A. T: 1 (718) 779-8519 to 20 F: 1 (718) 593-4203 Morton Grove (Chicago) Branch Voltaire A. Gella Operations Officer voltaire.gella@metroremitusa.com voltaire.gella@metrobank.com.ph
Tsuen Wan Branch tsuenwanbranch@mbrchk.com Shop 305E, 3rd Floor Nan Fung Centre, New Town Mall Nos. 264-298 Castle Park Road and Nos. 64-98 Sai Lau Kok Road Tsuen Wan, New Territories Hong Kong SAR T: (852) 2498-6261, 2492-4691 F: (852) 2414-9102
6036 West Dempster St., Morton Grove, Illinois 60053, U.S.A. T: 1 (847) 965-2368 F: 1 (847) 965-2413
SINGAPORE
Daly City Office 7317 Mission St. Daly City, CA 94014, U.S.A. T: 1 (650) 756-8803 to 8805 F: 1 (650) 756-8806
Metro Remittance Singapore Pte. Ltd. Ma. Asuncion Charina C. Yap General Manager chary.yap@metrobank.com.ph mbsingapore@metrobank.com.ph 304 Orchard Rd. #03-30 Lucky Plaza Singapore 238863 T: 65 6734-4648, 6734-2748 F: 65 6734-7348 AMERICAS
MB Remittance Centre Limited Marlon B. Hernandez General Manager marlon.hernandez@metrobank.com marlon.hernandez@mbrchk.com
MB-Guam Vicente P. Salazar, Jr. General Manager jojo.salazar@metrobank.com.ph mbguam@metrobankgu.com
United Centre Office unitedcentre@mbrchk.com Shops 2038-2039, 2nd Floor United Centre Shopping Arcade 95 Queensway Central Hong Kong SAR T: (852) 2856-0980, 2856-0990 F: (852) 2856-3902
665 South Marine Drive Tamuning, Guam 96913 T: 1 (671) 649-9555 to 57 F: 1 (671) 649-9558
Metro Remittance Center (California), Inc. Maritess A. Veracruz General Manager tess.veracruz@metroremitca.com unioncity@metroremitca.com dalycity@metroremitca.com
Union City Office 32210 Alvarado Blvd. Union City, CA 94587 U.S.A. T: 1 (510) 324-4300 to 01 F: 1 (510) 324-4302 Metro Remittance Center, Inc. (Canada) Mabelle C. Sia Head mcsia@metroremittance.ca Vancouver@metroremittance.ca Vancouver Office 4292 Fraser Street Vancouver, British Columbia Canada V5V 4G2 T: 1 (604) 874-3373 F: 1 (604) 874-3374 Edgar D. Mararac Head edgar.mararac@metroremittance.ca toronto@metroremittance.ca
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Metrobank Group Directory Toronto Office 1466 Bathurst Street, Suite 108-A Toronto, Ontario Canada M5R 3S3 T: 1 (416) 532-9779 1 (416) 532-3223 F: 1 (416) 534-4040 MB Remittance Center (Hawaii) Ltd. Ramon P. Nicdao General Manager mbremittance@mbrchawaii.com mbhonolulu@metrobank.com.ph ramon.nicdao@mbrchawaii.com ramon.nicdao@metrobank.com.ph Kalihi (Honolulu) Office 2153 North King St. Suite 100-A Honolulu, Hawaii 96819 U.S.A. T: 1 (808) 841-9889 to 90 F: 1 (808) 841-9891 Waipahu (Extension Office) 94-766 Farrington Hwy Waipahu, Hawaii 96797 U.S.A. T: 1 (808) 686-9377 F: 1 (808) 686-9388 Metropolitan Bank (Bahamas) Ltd. John M. Lawrence Vice President john.lawrence@metrobankbahamas.com New Providence Financial Center 2/F, East Bay Street P.O. Box CR-56766, Suite 700 Nassau, Bahamas T: 1 (242) 677-1925 F: 1 (242) 394-2142 EUROPE REGIONAL COORDINATOR FOR EUROPE Maria Victoria R. Rocha Regional Coordinator for Europe mvrocha@metrorem.co.uk ITALY Metro Remittance (Italia) SpA - Rome Via Del Viminale 43 00184 Rome, Italy T: 39 (06) 4891-3091 39 (06) 4891-3095 F: 39 (06) 4898-9882 Metro Remittance (Italia) SpA- MDO Eduardo G. Abrenica General Manager egabrenica@metroremit.it mri-rome@metroremit.it Extension Office Viale delle Medaglie d’Oro 123 Rome 00136 Italy (opposite Philippine Embassy-Rome) T: 39 (06) 3903-1085 F: 39 (06) 3976-3483 Metro Remittance (Italia) SpA - Milan Rodel C. Dimatulac Head rcdimatulac@metroremit.it mri-milan@metroremit.it
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PSBank 2009 Annual Report
Via Victor Hugo 2 20123 Milan, Italy T: 39 (02) 8909-5225 39 (02) 8698-4316 F: 39 (02) 8029-8624 Metro Remittance (Italia) SpA - Bologna Ruby D. Soyosa Head rdsoyosa@metroremit.it mri-bologna@metroremit.it Via Dei Mille, 24 40121 Bologna, Italy T: 39 (051) 421-4330 39 (051) 244-373 F: 39 (051) 421-8757 UNITED KINGDOM Metro Remittance (UK) Limited Maria Victoria R. Rocha General Manager metrorem@btconnect.com mvrocha@metrorem.co.uk 1st Floor, 12 Kensington Church Street London W8 4EP, United Kingdom T: 44 (207) 368-4490 F: 44 (207) 937-6140 SPAIN Metro Remittance Center, S.A. - Madrid Dante G. Mandahuyan Country Manager mrc_madrid@metroremittancecenter.es C/ Tiziano 6 Local 28039 Madrid Spain T: 34 (91) 570-8818 (Direct Line) 34 (91) 570-9229 F: 34 (91) 570-8817 Toll-free: 34900203070 Metro Remittance Center, S.A. - Barcelona Vilma Grace E. De la Cruz Operations Officer-Head mrc_barcelona@metroremittancecenter.es Calle Muntaner No. 3 08001 Barcelona Spain T: 34 (93) 317-0361/0346 F: 34 (93) 317-0630 AUSTRIA MBTC Remittance GmbH - Vienna Olivia A. Urdl Head olive@mbtc.at Singerstrasse 16/8 A-1010 Vienna, Austria T: 43 (1) 512-2292/2248 F: 43 (1) 512-2259 Remittance Partners PACIFIC REMITTANCES SERVICES, INC. Pedro Jaminola Jr. President pjaminola@pacremca.com
PACIFIC REMITTANCES SERVICES, INC. (PACREM) - ANAHEIM BRANCH 901 N. Euclid St. Anaheim, CA 92801 T: 1 (714) 635-2888 F: 1 (714) 635-4888 Criselda Reyes Branch Manager clreyes@pacremca.com PACIFIC REMITTANCES SERVICES, INC. (PACREM) - SAN FRANCISCO 447 Sutter Street, Suite 506 San Francisco, California 94108 T: 1 (415) 694-5767 to 68 F: 1 (415) 694-5766 Roslynne Balasta Branch Supervisor rmbalasta@pacremca.com PACIFIC REMITTANCES SERVICES, INC. (PACREM) - WEST COVINA 1557 E. Amar Road, Suite H West Covina, CA 91792 T: 1 (626) 912-2022 F: 1 (626) 912-2026 Charilyn Stokes Branch Supervisor cestokes@pacremca.com PACIFIC REMITTANCES SERVICES, INC. (PACREM) - ARTESIA 17510 Pioneer Blvd. Suite 208 Artesia, California 90701 T: 1 (562) 207 6874-76 & 78 F: 1 (562) 207 6877 Ms. Gregoria Aure Remittance Specialist gbaure@pacremca.com PACIFIC REMITTANCES SERVICES, INC. (PACREM) - LOS ANGELES 2116 Beverly Blvd. Los Angeles, California 90057 T: 1 (213) 201-2444/2447 F: 1 (213) 201-2448 Ms. Anita Ty Branch Manager acty@pacremca.com PACIFIC REMITTANCES SERVICES, INC. (PACREM) - CARSON 860 E. Carson St. Carson, CA 90745 T: 1 (310) 549-5333 F: 1 (310) 549-5399 Lourdes Panganiban Remittance Specialist lnpanganiban@pacremca.com
Shareholder Information
CORPORATE INFORMATION Company Address Philippine Savings Bank PSBank Center 777 Paseo de Roxas corner Sedeño Street Makati City 1226 Philippines Tel No: (02) 885-8208 Website: www.psbank.com.ph
SHAREHOLDER ASSISTANCE AND SERVICES Investor Relations Finance Group 9th Floor PSBank Center 777 Paseo de Roxas corner Sedeño Street Makati City 1226 Philippines Tel: (02) 885-8206 Fax: (02) 885-8352 Email: investor@psbank.com.ph
ANNUAL SHAREHOLDERS’ MEETING Tuesday, 27 April 2010, 4:00 p.m. 19th Floor PSBank Center 777 Paseo de Roxas corner Sedeño Street Makati City 1226, Philippines STOCK LISTING Philippine Savings Bank (PSBank) common shares are listed and traded at the Philippine Stock Exchange under the ticker symbol “PSB”. SHAREHOLDERS The number of common shareholders of record as of March 8, 2010 was 1,775. MARKET INFORMATION Following are the high and low closing prices of the PSB shares as reported to the Philippine Stock Exchange (PSE) for each quarter of the years ending in 2008 and 2009:
Highest
Lowest
Media Relations Marketing and Communications Group 8th Floor PSBank Center 777 Paseo de Roxas corner Sedeño Street Makati City 1226 Philippines Tel: (02) 885-8021 Fax: (02) 885-8334 Email: info@psbank.com.ph Customer Service Customer Service Division 6th Floor PSBank Center 777 Paseo de Roxas corner Sedeño Street Makati City 1226 Philippines Tel: (+632) 845-8888 Fax: (+632) 845-0048 Email: customerservice@psbank.com.ph Stockholder Services For inquiries regarding dividend payments, change of address or account status:
In Php
2009 First Quarter 39.00 36.00 Second Quarter 41.00 38.00 Third Quarter 43.00 40.00 Fourth Quarter 58.00 42.00 2008 First Quarter 59.04 53.50 Second Quarter 53.50 40.00 Third Quarter 48.00 47.00 Fourth Quarter 47.00 36.00 ANNUAL REPORT IN SEC FORM 17-A The financial report included in this report follows the information contained in the Bank’s SEC form 17-A as required by and submitted to the Securities and Exchange Commission. Copies of this report may be obtained free of charge upon written request to the Office of the Finance Group Head.
Metrobank Trust Banking Stock Transfer Department 17th Floor GT Tower International 6813 Ayala Avenue corner HV dela Costa Street Makati City 1227, Philippines Tel: (02) 857-5696 Fax: (02) 858-8010 ANNUAL REPORT PUBLICATION Cover concept: Philippine Savings Bank and Writers Edge, Inc. Editorial Content: Philippine Savings Bank and Writers Edge, Inc. Layout: Writers Edge, Inc. Portraiture Photography: Albert Labrador Photojournalism: Revoli S. Cortez
To find out MORE about PSBank, go to: www.psbank.com.ph
2009 Annual Report PSBank Center 777 Paseo de Roxas corner Sede単o St., Makati City 1226 Customer Service Hotline: (02) 845-8888 www.psbank.com.ph