STAMPS - EastWest Bank

COVER SHEET
S.E.C. Registration Number
(Company's Full Name)
(Business Address: No. Street City / Town / Province)
575-3871
ATTY. BENEDICTO M. VALERIO, JR
Company Telephone Number
SEC 17.4
FORM TYPE
Secondary License Type, if Available
Amended Articles Number/Section
Dept. Requiring this Doc.
Total Amount of Borrowings
-r
Domestic
Total No. of Stockholders
To be accomplished by SEC Personnel concerned
LCU
File Number
Document l.D.
Cashier
STAMPS
Remarks = pls. Use blank ink for scanning purposes
Foreign
SECURITIES AND EXCHANGE COMMISSI
SEC FORM I7-A,AS AMENDED
ANNUAL REPORT PURSUANT TO SECTION
17
OF THE SECURITIES REGULATION CODE AND SECTION
OF THE CORPORATION CODE OF THE PHILIPPINES
I4I
1. For the fiscal year ended December 31, 2014
2.
SEC Identification Number ASO9 4-002733
3.
BIR Tax Identification No. 003-921-057
4.
Exact name of issuer as specified in its charter EAST WEST BANKING CORPORATION
5. Metro Manila.
Philippines
7
. Theleaufort, sth Avenuei
6.
.
Province, Country or other jurisdiction
incorporation or org anizati on
of
corn er 23rd Stree
n
Industry
(sEcUseonly)
Classifi cation Code:
Fort Bonifacio Global Ci
Ta
Address of principal office
8. +632 575-3888
Issuer's telephone number, including area code
9.
Former name, former address, and former fiscal year, if changed since last report.
10. Securities registered pursuant to Sections 8 and l2 of the SRC, or Sec. 4 and 8 ofthe RSA
Title of Each
Common
class
shares
Number of Shares of common stock
Outstanding and Amount of Debt Outstanding
1,12g,409,610 shares
I 1. Are any or all of these securities listed on a Stock Exchange.
Yes[X]
If yes,
No
[]
state the name of such stock exchange and the classes of securities
listed therein:
The above common shares are listed in the philippine Stock Exchange
(pSE)
12. Check whether the issuer:
(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder
or Section 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation
Code of the Philippines during the preceding twelve (12) months (or for such shorter period that the
registrant was required to file such reports);
Yes [ X ]
No [ ]
(b) has been subject to such filing requirements for the past ninety (90) days.
Yes [ X ]
No [ ]
13. State the aggregate market value of the voting stock held by non-affiliates of the registrant. The
aggregate market value shall be computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date within sixty (60) days prior to the
date of filing. If a determination as to whether a particular person or entity is an affiliate cannot be
made without involving unreasonable effort and expense, the aggregate market value of the common
stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the
circumstances, provided the assumptions are set forth in this Form. (See definition of "affiliate" in
“Annex B”).
Shares Held by Non-Affiliates
as of December 31, 2014
271,476,810 shares
Market Value per Share as of
December 31, 2014
23.95
Total Market Value
as of December 31, 2014
Php6,501,869,600
APPLICABLE ONLY TO ISSUERS INVOLVED IN
INSOLVENCY/SUSPENSION OF PAYMENTS PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
14. Check whether the issuer has filed all documents and reports required to be filed by Section 17 of the
Code subsequent to the distribution of securities under a plan confirmed by a court or the
Commission.
Not Applicable
DOCUMENTS INCORPORATED BY REFERENCE
15. If any of the following documents are incorporated by reference, briefly describe them and identify
part of SEC Form 17-A into which the document is incorporated:
(a) Any annual report to security holders;
(b) Any information statement filed pursuant to SRC Rule 20;
(c) Any prospectus filed pursuant to SRC Rule 8.1.
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EAST WEST BANKING CORPORATION
TABLE OF CONTENTS
SEC FORM 17-A
Page
PART I – BUSINESS AND GENERAL INFORMATION
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Issuer's Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or Plan of Operation
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
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34
34
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35
37
48
49
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Issuer
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
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55
56
57
PART IV – CORPORATE GOVERNANCE
Item 13. Corporate Governance
58
PART V - EXHIBITS AND SCHEDULES
ANNEX A – Certification on Qualification of Independent Directors
ANNEX B – Certification that None of the Directors and Officers work with the Government
ANNEX C – List of Owned and Leased Branches
ANNEX D – Annual Corporate Governance Report
ANNEX D – 2014 Audited Consolidated Financial Statements
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PART I - BUSINESS AND GENERAL INFORMATION
Item 1. Business
Overview of the Bank
East West Banking Corporation (“EW”, “EastWest”) was granted authority by the Bangko Sentral ng
Pilipinas (BSP) to operate as a commercial bank under Monetary Board (MB) Resolution. No. 101
dated July 6, 1994, and commenced operations on July 8, 1994. EastWest was also granted authority
by the BSP to operate an expanded foreign currency deposit unit under MB Resolution No. 832 dated
August 31, 1994. As of December 31, 2014, EastWest is effectively 75% owned by Filinvest
Development Corporation (“FDC”). EastWest’s ultimate parent company is ALG Holdings
Corporation.
On February 17, 2014, the SEC approved the application of EW to change its registration from a
“Government Securities Eligible Dealer” (with broker-dealer of securities functions) to an
“Underwriter of Securities Engaged in Dealing Government Securities” (with broker-dealer of
securities functions), in accordance with the SRC and other applicable laws, rules and regulations.
EW’s registration as an “Underwriter of Securities Engaged in Dealing Government Securities” had
an initial validity of up to December 31, 2014, and has been extended to November 2015.
EW has been listed on the PSE since May 7, 2012.
Mergers and Acquisitions
In 2003, EW acquired Ecology Savings Bank, Inc., while in 2009, EW acquired AIG PhilAm. In
2011, EW acquired Green Bank (A Rural Bank), Inc. (GBI). Its most recent acquisition was in 2012,
when it acquired Finman Rural Bank, Inc. (FRBI).
On August 19, 2011, EW entered into a deed of assignment for the purchase of a majority of the
outstanding shares and control of GBI. Consequently, GBI became a subsidiary of EW. On July 11,
2012, EW acquired an 83.17% interest in FRBI, a rural bank engaged in the business of extending
credit to farmers, tenants, and rural enterprises. EW subsequently increased its ownership in FRBI to
100.00% through additional share acquisitions and capital contributions in 2012 and 2013. In May
2013, FRBI changed its name to East West Rural Bank, Inc. (“EWRB”) and entered into an asset
purchase agreement with GBI, effectively consolidating all of the Bank’s rural banking business in
EWRB.
On March 28 and June 5, 2014, the BSP and the SEC respectively, approved the proposed merger
between EW and GBI. On July 31, 2014, the merger between EW and GBI was completed.
Securities Issuances
On July 2, 2010, the Bank issued Lower Tier 2 unsecured subordinated notes with par value of P1.50
billion and a coupon rate of 7.50% , maturing on January 2, 2021 with a call option date of January 2,
2016. On July 25, 2008, the Bank issued Lower Tier 2 unsecured subordinated notes with par value of
P1.25 billion and a coupon rate of 8.63%, maturing on January 26, 2019 with an optional redemption
date on January 25, 2014.
On January 25, 2014, the Bank exercised its call option on the said notes. The redemption was
approved by EW’s Board on August 29, 2013 and by the BSP on November 7, 2013. On July 4, 2014,
the Bank completed its issuance of Basel III-compliant Tier 2 unsecured subordinated notes with a
total face value of P5 billion with a coupon rate of 5.5% and maturing in January 2025.
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In February 2014, the Bank issued the fourth tranche of its 3.25% fixed coupon rate unsecured
LTNCDs (“Series 2 LTNCDs”) maturing on September 9, 2019 amounting to P0.83 billion.
Subsequently, in April 2014, the Bank issued the fifth tranche of the Series 2 LTNCDs with a face
value of P0.91 billion.
On July 4, 2014, the Bank issued Basel III-compliant Tier 2 unsecured subordinated notes with a total
face value of P5 billion at a coupon rate of 5.5% maturing in January 2025.
On March 12, 2008, GBI issued Lower Tier 2 unsecured subordinated notes in favor of Land Bank of
the Philippines, with par value of P112.50 million and coupon rate of 9.72%, maturing on March 13,
2018 with a call option date of March 23, 2013. The Notes was included in the net assets of GBI that
were merged with EastWest. On October 31, 2014, EastWest redeemed the Notes at P112.50 million
plus accrued interest and taxes of P1.70 million.
Subsidiary
East West Rural Bank, Inc.
EWRB (formerly FRBI) consolidated, through an asset acquisition effective November 1, 2013, the
rural banking business of GBI and FRBI, the two rural banks that EW earlier acquired in 2011 and
2012, respectively. FRBI was incorporated and registered with the SEC on November 5, 1997, with
the purpose of accumulating deposits and granting loans to various individuals and corporate entities
as well as government and private employees. In May 2013, its name was changed to EWRB. GBI
was founded on June 20, 1974 as Rural Bank of Nasipit (Agusan Del Norte), Inc., primarily to engage
in the business of extending credit to small farmers, tenants and deserving rural industries or
enterprises and to transact business which may be legally done by rural banks organized in accordance
with R.A. No. 7353, Rural Bank Act of 1992.
As of December 31, 2014, EWRB had 47 branches and five ATMs.
Principal Business Activities
Retail Banking
The retail banking segment mainly covers traditional branch banking products and services such as
deposits, back-to-back/emerging market loans and other over-the-counter (“OTC”) transactions. It
also caters to the needs of high net-worth clients for alternative investment channels and cash
management requirements of mid-market corporates. It includes entire transaction processing, service
delivery and infrastructure consisting of the Bank’s network of branch stores, ATMs, as well as its
internet banking platform.
Products and Services Offered to Retail Clients
The Bank offers a comprehensive range of deposit products, consisting primarily of the following:
Peso demand deposits, Peso savings deposits, and Peso time deposits, long – term Peso deposits, US
Dollar savings deposits, US Dollar time and non – interest bearing checking accounts. The Bank’s
deposit products carry varying interest rates, depending on among others, market interest rates, and
the rate of return on the Bank’s earning assets and the interest rates offered by other commercial
banks.
EW also offers a suite of innovative banking services that appeal to retail customers, including a 24hour Internet banking facility that provides individual and corporate customers e-statements and
online check imaging facilities, a bill payment facility that allows settlement of various bills over the
counter and via ATM and internet banking, and a point of sale (POS) payment facility that allows
ATM/debit cardholders to use their ATM/debit cards to pay for merchandise and services rendered by
the merchant via POS terminals installed in accredited establishments.
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The table below sets out the list and description of the various products and services being offered by
the Bank:
Branch Products / Services
Description
DEPOSIT PRODUCTS
Regular Checking Account
The Regular Checking Account is a non-interest bearing Pesodenominated checking account wherein funds can be withdrawn
through the issuance of checks.
ATM Access Savings
The ATM Access Savings Account is savings account evidence by
a Visa Debit Card. In lieu of the passbook, a statement of account
is given to the depositors. This account earns interest at 0.25% per
annum.
Cool Savers Kiddie Account
Cool Savers is an interest-earning Peso savings deposit account for
children that is evidenced by a passbook
Passbook Savings Account
The Passbook Savings Account is an interest-bearing Pesodenominated deposit account. This account allows a client to
deposit and withdraw their funds anytime by presenting a
passbook
Passbook Savings with Debit
Card
An interest bearing savings deposit account that has both passbook
and Visa debit card having their transactions documented in a
passbook while enjoying the advantages and convenience of
modern banking.
Basic Savings Account
The most affordable interest earning savings account offered by
EastWest Bank. With only P100 initial deposit and P500 required
balance to earn interest. Evidenced by a Visa Debit Card.
Renminbi Savings Account
Third Currency savings account evidenced by a passbook for
Renminbi.
Dollar Savings Account
Interest-bearing U.S. dollar-denominated savings account with
passbook.
Peso Time Deposit Account
Interest-bearing, term deposit evidenced by a certificate issued in
favor of the depositor with a specific maturity period. It allows a
client to earn higher yields compared to a regular savings deposit
rate. Interest rate on the time deposit account varies based on the
term and the amount of the deposit.
Dollar Time Deposit
Account
Interest-bearing, U.S. dollar denominated deposit account
evidenced by a certificate issued in favor of the depositor with a
term ranging from 30 days to as long as 5 years. Interest rate on
the time deposit account varies based on the term and the amount
of the deposit.
Renminbi Time Deposit
Account
Interest-bearing, Chinese Yuan denominated deposit account
evidenced by a certificate issued in favor of the depositor with a
term ranging from 30 days to as long as 180 days. Interest rate on
the time deposit account varies based on the term and the amount
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of the deposit.
Basic Checking Account
The affordable Checking account requring only P1,000 as initial
deposit and maintaining balance. It comes with a Checkbook and a
Visa Debit Card.
ChequeMax
Interest-bearing Peso-denominated account that offers superior
convenience to both personal and corporate account holders in
accessing funds.
ChequeMax Rewards
Interest-bearing checking account that comes with a record book,
a debit card and a checkbook. An account holder earns reward
points for every P5,000 increment above the required ADB, which
can then be used to redeem gift certificates.
VISA Debit Card
EastWest Debit Card is Visa branded that allows customers
cashless shopping, dining or online payments. The Debit Card can
be used to pay for purchases both locally and abroad; and are
accepted in over one million Visa ATMs worldwide.
Visa Prepaid Card
EastWest Prepaid Card is a Visa branded reloadable card used for
cashless shopping, dining or online payments. Since the EastWest
Prepaid Card is Visa branded, it card can be used to pay for
purchases both locally and abroad; and are accepted in over one
million Visa ATMs worldwide.
Visa Travel Card
EastWest Travel Card is a multi-currency card that may be loaded
with multiple currencies for convenience and easy access to funds
when traveling in different countries without the worry on
fluctuating exchange rates.
CONSUMER LOANS
Home Loan
The EastWest Bank Home Loan is a loan tailor-fit to clients’
unique house financing needs for acquisition of vacant lot, house
and lot or condominium units; construction and renovation; as
well as multi-purpose for home equity or refinancing of an
existing mortgage loan. Loan terms are flexible with various
fixing options and with tenor as long as 30 years.
Auto Loan
The EastWest Bank Auto Loan is a loan that allows clients to
acquire brand new or pre-owned vehicles.
Salary Loan
The EastWest Bank Salary Loan is a multi-purpose loan that can
be availed by qualified employees of accredited companies to
finance their personal needs.
Personal Loan
EastWest Bank Personal Loan is a no collateral multi-purpose loan
that caters to the client’s personal financial requirements.
EASTWEST BANK
CREDIT CARDS
EastWest Visa and
EastWest Visa/MasterCard Classic/Gold allows Cardholders to
experience shopping privileges through its Perks & Limitless
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MasterCard
Rewards Program. Cardholders may convert their Limitless
Rewards points into Rewards Vouchers which they can use to
purchase merchandise or exchange for gift certificates at partner
merchants. Cardholders may also enjoy free Comprehensive
Travel Accident and Inconvenience Insurance of up to Php20
million when they purchase travel tickets using their EastWest
Gold Visa/MasterCard.
EastWest EveryDay
MasterCard
EastWest EveryDay MasterCard is the all-in-one cash rebate card.
Designed to be part of the Cardholder's daily activity, it converts
everyday spending into smart spending with its cash rebate
feature. It is the only credit card in the market that gives
Cardholders up to 5% rebate on supermarket, gas and drugstore
purchases (essential items) for a minimum spend amount of
Php10,000 on non-essential items each month. They may earn
either 3% or 0.5% on essential purchases for non-essential
purchases of Php5,000 to below Php10,000, or below Php5,000,
respectively.
EastWest Platinum
MasterCard
EastWest Platinum MasterCard allows Cardholders to enjoy the
following exclusive features and benefits that suit their premium
lifestyle and discerning taste: Free Lifetime Annual Membership
Fee, Free EastWest Platinum Virtual Card, Free Priority Pass
Membership, Free Comprehensive Travel Accident and
Inconvenience Insurance of up to Php20 million and access to
exclusive Premium Perks.
EastWest Dolce Vita
Titanium MasterCard
EastWest Dolce Vita Titanium MasterCard makes sure
Cardholders live the sweet life with its special features. Shopping,
dining and unwinding will surely be taken to a higher level with
irresistible deals from list of partner merchants with Dolce Vita
Loves.
The Dolce Vita Cares, on the other hand, allows
Cardholders to avail themselves of health and wellness offers to
keep their body in shape. Dolce Vita rewards Cardholders with
free beauty and relaxation treats every time they reach the required
minimum spend with the Pampered by Dolce Vita. Through the
Dolce Vita Charms Loyalty Program, every Php100 charged to
their EastWest Dolce Vita MasterCard will earn 1 Charm which
can be redeemed as Charms Vouchers that may be used to
purchase merchandise or exchange for gift certificates at partner
merchants.
EastWest Practical
MasterCard
EastWest Practical MasterCard provides Cardholders with an
affordable line of credit for their basic needs. It offers a low
monthly interest rate of 2.99% for the basic necessities (groceries,
gas and drugstore purchases) and 3.49% for all other transactions.
Hyundai MasterCard
Hyundai MasterCard Cardholders can earn up to 5% rebate on fuel
purchases and 0.5% rebate on retail purchases. Rebates can be
redeemed as Hyundai Vouchers which Cardholders may use to
purchase merchandise or avail of services at any authorized
Hyundai dealership. Cardholders can also enjoy an exclusive 10%
discount on preventive maintenance services (PMS) ─ parts,
selected accessories and PMS labor at authorized Hyundai
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dealerships.
CORPORATE SUITE
Payroll Credit System (PCS)
Payroll Credit System for crediting transactions features a fully
automated online processing of credit data. It also has a data entry
facility where you can directly input the employee’s name,
account number and the net pay.
eCredit
eCredit is an online banking service and disbursement system that
enables you to submit payroll instructions, schedule pay dates, and
view status.
Timekeeping System
Timekeeping System is a standalone electronic system that
automates the daily time recording and timekeeping computation
developed exclusively for EastWest Bank clients.
Payroll Assist
Payroll Assist is a unique stand-alone and comprehensive payroll
software facility that makes your payroll process easy and
convenient. It allows you to automate your payroll preparation
and crediting process with the use of proprietary software
developed exclusively for EastWest Bank Clients. It offers a
complete solution to your entire payroll requirements, from
periodic salary credits to government- mandated deductions.
Payroll Assist Plus
Payroll Assist Plus is an expanded payroll outsourcing facility
aimed to address the requirements of companies that would like to
eliminate the hassle and cost entailed by in-house processing.
Bizcheque Plus
Bizcheque Plus is an accounts payable system and check writing
facility that can address special requests or customization
requirements from clients. This can include but is not limited to
new reports, specialized check, revised voucher format and others.
Cheque Prepare
Cheque Prepare is a specially-designed check-writing service for
companies with large volumes of check payments. This facility
provides an end-to-end solution to your check disbursement
operations by handling the check preparation up to the releasing of
your company’s checks, freeing you from the burden of
voluminous check cutting, disbursement and issuance. It also
provides periodic reports that allow you to easily track and
monitor the status of your checks.
eSettle
e-SETTLE is a web-based electronic fund transfer facility that
enables clients of the Bank with high volume disbursements to pay
their suppliers by crediting their EastWest Bank’s Savings or
Checking Accounts.
Deposit Management
System
It is a full scale deposit supervision facility, exclusively offered to
Eastwest Bank depositors. It is a stand-alone, network ready tool
that allows a depositor to automate the deposit slip creation
process, trace deposit records, generate historical reports and reprint deposit transactions. The DMS also allows the individual
check printing through its check printing module.
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Bills Collect
Bills Collect is a facility where the bank serves as the collecting
agent, accepting payments via Internet, Automated Tellering
Machine (ATM) and over-the-counter (OTC) through its strategic
network of branches. The bank receives cash or checks payments
for the Biller from individual and corporate customers and credits
them directly to the Biller’s collection account. All payments
received through any of the Bank’s payment channels are
accounted for and consolidated into a daily collection summary,
which is transmitted to the Biller online.
Cheque Depot
Cheque Depot provides corporate customers with the convenience
of having their post-dated checks (PDCs) safe-kept with the bank
for immediate deposit to their account on due date. The facility
electronically captures check details and monitors value dates for
automatic deposit to the customer’s account. It is ideal for
corporate customers who manage large volumes of PDCs.
Cheque Collect
Cheque Collect is a check collection service for the bank’s
corporate clients, wherein the bank picks up checks from the
client’s customers at the customer premises.
HMO/Hospital Collection
and Settlement Facility
HMO/Hospital Collection and Settlement Facility is a special
arrangement for selected clients in the HMO and Hospital industry
which provides operational efficiency through pick-up services
and immediate settlement of receivables or payments.
Mobile ATM
Ideal for any event like bazaars, fairs, and concerts, or if you
simply need an ATM to service your payroll requirements, the
Mobile ATM provides you with all the services of a regular ATM,
with more convenience and flexibility. It can be deployed in any
location you prefer, when you prefer, on weekdays or weekends.
Now, you can enjoy the benefits of an ATM without having to
leave your location.
Bancnet e-Gov
BancNet e-Gov is an online BancNet facility which allows clients
to file and settle government payments to Bureau of Internal
Revenue (BIR), Social Security System (SSS), Philippine Health
Insurance Corporation (Philhealth), and Home Development
Mutual Fund (Pag-ibig).
OTHER SERVICES
Net Access
Net Access is a 24-hour online banking facility which enables both
individual and corporate clients to access their accounts by
logging on to www.eastwestbanker.com.
Pay@Store
Pay@Store is a facility that allows debit cardholders to use their
ATM cards to pay for merchandise and services rendered by the
merchant via Point of Sale (POS) terminals installed in accredited
establishments.
Bills Pay
Bills Pay is a facility which allows settlement of various bills over
the counter, internet banking and ATMs.
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TRUST PRODUCTS &
SERVICES
Escrow Services
The institutional Trustee as escrow agent for two counterparties
protects their individual interests by ensuring that the terms and
conditions mutually agreed upon by these two parties in a separate
contract, are fulfilled. This service is convenient for transactions
such as buying/selling of assets on installment basis, or disposition
of assets subject to mandate restrictions or clearances.
Living Trust
This trust, which is created by a trust agreement, starts to operate
during the lifetime of the trustor. Under this arrangement, the
trustor transfer assets to a trustee for the latter to manage as the
trust agreement dictates. The functions and authorities to be
exercised by the trustee are defined in the trust agreement. These
would include : (1) the scope or extent of the trustee’s investment
powers; (2) the beneficiaries; (3) the terms and conditions under
which the income and/or principal of the trust is to be paid or to be
disposed of ultimately.
Retirement Fund
Funding a retirement plan may take the form of a trust where the
trustor/employer regularly contributes to the trust fund. The trustee
will then invest and re-invest the fund, and will pay out the
retirement benefits due in accordance with the retirement plan set
up by the employer. Normally, a trusteed retirement plan enjoys
tax exemption on the income of its retirement fund. The tax
privilege extends also to the retirement benefits received by the
employees under certain conditions, and to the employer to the
extent of contributions to the retirement fund.
Mortgage Trust Indenture
This usually comes in the form of specific restrictions on the
borrowing company to ensure that the mortgaged assets will not
be impaired in value. The trustee receives specific periodic reports
to see to it that the borrowing corporation is complying with its
commitments. Sometimes the assets offered as security are
equipment, real estate or simply blocks of shares of stock.
Directional Investment
Management Agreement
This product consists of open-ended placements, which undertake
active portfolio management of the account thru pre-approved list
of securities.
TREASURY PRODUCTS
Peso or U.S. Dollar
denominated Fixed Income
Securities
These are Peso or U.S. dollar-denominated fixed income securities
in the form of Treasury Bills or Bonds which are distributed or
sold to client and qualified investors or other professional
counterparties of the Bank to whom the Bank makes a market
price for.
Issuers of the securities are usually the Republic of the
Philippines, Bangko Sentral ng Pilipinas, Government-Owned or
Controlled Corporations and Philippine corporations. The tenor of
the bills or bonds ranges from as short as 7 days to as long as 30
years.
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Foreign Exchange Products
The bank also buys and sells US dollars and other foreign
currencies versus the Philippine Peso from their retail and
corporate accounts in accordance with regulatory requirements in
the buying and selling of foreign exchange. The bank also makes
markets in USD/P foreign exchange for professional
counterparties.
Access to Investment Products
The Bank also offers investors access to investment products such as including treasury bills and
bonds, fixed rate treasury notes and retail treasury bonds. Customers can also invest in long-term
fixed income debt instruments issued by public and private entities.
Cash Management Services
The Bank offers a wide range of cash management solutions to assist mid-market corporates,
composed primarily of entrepreneurial and family-owned businesses, including (i) a facility for
payroll preparation and crediting, (ii) an interest-earning checking account that provides a customized
standalone check-writing facility and a comprehensive accounts payable system, (iii) an end-to-end
automated solution for the creation, disbursement and monitoring of checks, (iv) a check depot
service whereby the Bank retains a corporate customer’s post-dated checks for immediate deposit to
the customer’s account on the same date indicated on the checks, (v) a bill collection service whereby
the Bank acts as a collecting agent and transmits consolidated payments to the customer online or via
electronic file transfer and (vi) deposit pickup services, in which the Bank sends an armored vehicle to
pick up cash and check deposits at the customer’s premises.
Consumer Lending
The Bank offers various types of consumer lending products to individuals, which consist principally
of credit cards, auto loans, residential mortgage loans and personal loans. The Bank considers various
factors in pricing its loan products, including the capacity of the borrower to repay the loan, estimated
delinquency rates, funding costs, expenses related to making loans and a target spread. Loan terms are
differentiated according to factors such as a customer’s financial condition, age, loan purpose,
collateral and the quality of relationship with the Bank.
Credit Cards
In 2004, the Bank began issuing MasterCard credit cards under the name “East West Bank
MasterCard” in partnership with AIG. In 2009, the Bank acquired the Philam Savings Bank, which
issues Visa credit cards. After the acquisition, the Bank integrated its Visa and MasterCard businesses
into a single business unit. From an initial base of 10,000 credit cards issued during 2004, the Bank
has since grown to have issued 971,000 and 1,037,000 credit cards, comprising 15.3% and 15.2% of
the total market share for credit cards in the Philippines (excluding Banco de Oro Unibank, Inc. which
ceased to be member of the Credit Cards Association of the Philippines since 2013), as of December
31, 2013 and 2014, respectively. Revenues from the credit card operations consist principally of
annual fees paid by cardholders, interest on deferred and installment payments, cash advance fees,
interchange fees paid by service establishments and late payment charges. Annual cardholder fees
range from P1,200 to P2,500. As of December 31, 2014, the interest rate on deferred payments range
from 2.75% to 3.50% per month and the interest rate on installment payments range from zero to
3.50% per month. One-time fees for cash advances are approximately 7.0% of the total cash advance
amount, and interchange fees range from 0.3% to 2.3% of the purchased amount. Revenues relating to
the credit card business are reflected in the Bank’s financial statements as interest income and other
operating income from service charges, fees and commissions.
The Bank seeks to diversify its distribution channels, form alliances with merchants and manage its
product portfolio in order continue to grow its credit card business. The Bank currently markets and
9
sells its credit cards directly to customers, as well as through third party telemarketing agencies.
Credit Card customers may participate in a variety of instant and loyalty based rewards programs that
allow them to redeem merchandise or gift certificates at partner establishments. The Bank attempts to
identify and capitalize on gaps in the market by offering products tailored to meet the needs of
underserved markets. The Bank’s credit card products come in different grades, from regular cards to
premium class cards at different annual membership fees.
Auto Loans
The Bank’s auto loans are offered through car dealerships (including second-hand car dealers),
independent sales agents and the Bank’s branches. The Bank provides economic incentives to car
dealerships and independent sales agents based on each approved auto loan amount. A key
competitive factor in the automotive loan business is the speed by which a bank can process an
automotive loan, as dealers will offer a loan to multiple banks and the Bank offers a three-hour auto
loan approval process, which the Bank believes is an important aspect to its success in growing its
auto loan portfolio. The Bank’s auto loan business also engages in strategic partnerships with major
car brands to develop exclusive programs. Additionally, the Bank cross-sells its auto loans with the
products of other units and offers special plans for existing and repeat customers.
All of the Bank’s auto loans are secured by a chattel mortgage over the car being purchased. In
addition to being subject to the Bank’s internal credit checks, the Bank generally requires the
borrower to make a minimum down payment of 20.0% (or a minimum down payment of 15.0% for
long-term customers with verifiable good credit) of the purchase price. Depending on whether the car
being purchased is a new car or a second-hand car, the interest rate of the Bank’s auto loans can range
from 8.5% to 18.0%, with an average maturity of 55 months. Generally, when an installment payment
falls 90 days past due, the Bank may commence foreclosure proceedings. Foreclosed cars are
generally sold by the Bank through public auction.
Residential Home Mortgage Loans
The large majority of EW’s residential mortgage loans are extended to property buyers in the
Philippines who intend to occupy residential units in the form of house and lot, townhouse or
condominiums, with a small proportion being extended to individuals purchasing lots for investment
purposes or for future dwelling via house construction loans. All of EW’s home mortgage loans are
secured by a first mortgage on the property and each applicant undergoes a stringent credit evaluation
process. EW requires its borrowers to make a minimum down payment of 20.0% of the appraised
value for house acquisition or construction, 25.0% for lot acquisition and 35.0% for conversion of real
estate assets into rental/leasing business. EW also refinances existing housing loans. EW offers loans
at adjustable and fixed interest rates. EW uses its branch store network as a key distribution channel
and maintains marketing campaigns to attract property buyers independently from real estate
developers, which serve as distribution channels for mortgage loan providers. The average maturity of
EW’s home mortgage loans is ten years. In line with industry practice in the Philippines, interest rate
on EW’s home mortgage loan portfolio is set at a fixed rate applicable for an initial period of between
one and five years, depending on the maturity of the loan. Upon expiry of the initial period, the
interest rate is reset at a fixed rate applicable for succeeding periods.
When a borrower falls in arrears with its mortgage payments, the buyer can either agree to a voluntary
disposition of the property to EW, or EW may commence foreclosure proceedings. EW sells
mortgaged collateral that has been foreclosed, primarily in public auctions or by brokers on behalf of
EW. Foreclosure of the mortgaged collateral generally takes between six and 24 months.
EW currently offers various home financing products with differentiating features, which included a
mix of competitive interest rates and what the Bank believes to be the longest payment term in the
market of up to 30 years. As most residential mortgage loans available in the market only allow up to
a maximum payment term of 20 years, EW’s longer payment term means lower and consequently
10
lighter amortization payments for the borrower. EW also gives the borrowers the option to adopt a
fixed-term pricing scheme to protect borrowers against the risk of fluctuating interest rates.
EW’s home loans are available in different loan packages, tailored to fit the needs of specific markets.
LotAcquire is a loan specifically designed for the acquisition of a vacant lot. Other products offered
by EW include HomeAcquire, HomeConstruct and HomeImprove.
Personal Loans
The Bank’s personal loans business provides unsecured, uncollateralized consumer loans to qualified
individuals for multi-purpose personal use. The primary distribution channel for personal loans is the
Bank’s branches and third party sales agencies. The Bank offers personal loans to employed and selfemployed individuals with annual income of not less than P180,000. As of December 31, 2014, the
Bank has an outstanding personal loan balance of P2,609 million. The monthly add-on interest rates
for a personal loan ranges from 1.5% to 1.7% and is payable in fixed equal monthly installments from
six to 36 months. The primary distribution channel for personal loans is the Bank’s branches and third
party sales agencies.
Corporate Banking
The Bank’s corporate banking activities are primarily focused on offering loans to mid-market
corporate customers, which are predominantly entrepreneurial or family-owned businesses. The Bank
also offers cash management services to its corporate customers through its retail banking group. See
“—Retail Banking—Cash Management Services”. The Bank’s corporate banking activities focus on
developing and managing relationships with its corporate clients, providing an opportunity for the
Bank to offer products and services from other business segments to such clients. The Bank believes
that the development and expansion of its mid-market customer base is essential to the growth and
success of the Bank and intends to concentrate on growing its mid-market portfolio as its core target
customer group.
Loan Products
The Bank provides a wide range of loan products and services to its corporate customers, including
revolving credit lines, bills purchased, acceptances, trade finance facilities and term loans. In line with
its strategy to create a balanced and diversified portfolio, the Bank’s corporate customers are engaged
in various industries in the Philippines. Facilities offered to corporate customers include both secured
and unsecured loan products, depending on the credit risks associated with the customer and its
business.
The Bank intends to continue to expand its corporate banking portfolio by increasing loan product
marketing activities to its existing customers as well as targeting new corporate customers through its
expanded combined customer network.
11
Rural Banking
To extend its reach to underserved segments of the market that have the potential for growth, the
Bank has established a rural bank arm. Backed by the strong track record of its predecessor entities,
EWRB is capable of catering to the banking needs of customers outside the urban areas in the country
and provide wider access to innovative products and delivery channels. EWRB currently offers the
following products:
-
DepEd Teacher Loan – Allows public school teachers (permanent personnel of the Philippine
Department of Education) to borrow a maximum of P450,000 up to a maximum term of 3
years.
-
Small Business Loan – Intended for all Small-Medium Enterprises (SMEs), with a maximum
loan limit of P5.0 million.
-
Social Security System (“SSS”) Pensioners’ Loan – Intended for all SSS retirees, survivorship
and total disability pensioners whose SSS pension is directly credited to savings accounts
with EWRB.
As of December 31, 2014, EWRB has a network of 47 branches and 5 ATMs, most of which are
located in the Visayas and Mindanao.
Treasury and Trust
Treasury
The Bank’s treasury has primary responsibility for managing the Bank’s liquidity, interest rate and
foreign exchange exposures. The Bank manages its liquidity position by regularly reviewing its cash
flow position, debt maturity profiles, availability of credit facilities and overall liquidity position to
mitigate the effects of fluctuations in cash flow. The Bank’s treasury actively engages in trading for its
own proprietary account. It trades local treasury bills and bonds, foreign-currency denominated bonds
and foreign exchange. The Bank is an accredited Government Securities Eligible Dealer.
As of December 31, 2014, the Bank had P18,992 million of trading and investment securities, which
included P8,745 million and P10,247 million of Peso and U.S. dollar-denominated securities,
respectively, and accounted for 10.1% of the Bank’s total assets. As of December 31, 2014, 78.1% of
the Bank’s trading and investment securities portfolio was invested in government securities.
Trust
The Bank offers a wide range of trust products and services, including fund management, investment
management services, custodianship, administration and collateral agency services and stock and
transfer agency services. In addition to offering trust services to corporate and high net-worth
individual customers (customers with a total relationship balance of P2.5 million), the Bank provides
retail customers with alternative investment opportunities through its unit investment trust funds
(UITFs), which are available in Peso and U.S. dollar-denominated UITFs. In a UITF, funds of various
investors are pooled and invested in a diversified portfolio of liquid securities, term deposits, money
market instruments or stocks in accordance with the investment objectives and restrictions stated in
the Declaration of Trust. For the year ended December 31, 2014, total assets held in trust amounted to
P6,810 million and total revenue from the Bank’s trust products amounted to P20 million.
Percentage of Sales or Revenues and Net Income Contributed by Foreign Sales
This is not relevant to the operations of the Bank.
12
Distribution Networks
Branch Network
The branch network is focused more on the Philippines’ major industrial and commercial regions in
Metro Manila and has key locations outside of Metro Manila such as Metro Cebu, Metro Davao,
Northern Luzon, South Luzon Industrial Zone, Iloilo, Bacolod and Mindanao. Within these regions,
EW has strategically positioned its branches in key business and commercial centers, which are areas
that generally boast of higher per capita incomes, and have higher growth and traffic, thereby
maximizing the number of transactions and deposits per branch.
Each branch is managed by a branch head responsible for both the sales and operational functions of
the branch. Each branch head reports to a division head, which supervises 15 to 18 branches.
Branches are grouped geographically and such groups include North Luzon, South Luzon, Southern
Metro Manila, Eastern Metro Manila, Northern Metro Manila, Downtown Manila, Visayas and
Mindanao.
As of December 31, 2014, the Parent Bank has 358 branches in various parts of the country, majority
of which are located within Metro Manila.
The following table sets out the distribution of the Parent Bank’s branches for each region as of
December 31, 2014.
December 31,
2012
2013
2014
Metro Manila ......................................
145
174
204
Other areas of Luzon ...........................
51
64
84
Visayas ................................................
28
34
36
Mindanao ...........................................
21
28
34
Total Branches .................................
245
300
358
ATMs .................................................
261
427
533
EWRB Branch Store Network
As of December 31, 2014, EWRB, a wholly owned subsidiary of EWBC, has a network of 47
branches mostly located in Visayas and Mindanao. The table below sets out the details of EWRB’s
branches and ATMs in the Philippines in operation as of the specified dates.
2012
Metro Manila ............................................................
Other areas of Luzon .................................................
Visayas ......................................................................
Mindanao ...................................................................
Total Branches .........................................................
ATMs ........................................................................
1
7
15
24
47
45
As of December 31,
2013
1
7
15
24
47
45
2014
1
7
15
24
47
5
ATM Network
EW provides 24-hour banking services through its network of 533 ATMs as of December 31, 2014,
compared with 427 ATMs as of December 31, 2013. Of these 533 ATMs, 350 are located at EW’s
branches while 183 are located off-site. Customers are given access to the ATM facilities through
ATM cards and debit cards, which are available to checking and savings account holders. As of
December 31, 2014, EWRB, EW’s subsidiary, has five ATMs in addition to EW’s network of 533
ATMs.
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The Bank also is a member of Bancnet, which is an ATM network that allows its member banks
customers to use ATM terminals operated by other Bancnet member banks. Furthermore, Bancnet has
agreements with other ATM networks in the Philippines, namely Expressnet and Megalink, which
gives its customers access to all ATMs in the Philippines. Customers of the Bank that use ATMs
operated by other banks must pay a service charge for accessing these networks.
Access to Investment Products
EW, through its Branch network is able to offer its investors access to investment products such as but
not limited to treasury bills and bonds, fixed rate treasury notes and retail treasury bonds. Customers
can also invest in long-term fixed income debt instruments issued by public and private entities.
Listed below are the branches of the Parent Bank as of December 31, 2014:
1. PASONG TAMO - G/F Dacon Bldg., 2281 Pasong Tamo Extension, Makati City
2. THE FORT - G/F Unit 3A Marajo Tower, 26th St. corner 4th Ave., Fort Bonifacio, Global City Taguig
3. MAKATI STOCK EXCHANGE - G/F - Makati Stock Exchange Building, Ayala Triangle, Ayala Ave., Makati City
4. EVANGELISTA - Evangelista cor. Mojica St. Bangkal, Makati City
5. BURGOS CIRCLE - G/F Unit H & I, Crescent Park Residences, Burgos Circle cor. 2nd Ave., Bonifacio Global City, Taguig City.
6. MAGALLANES VILLAGE - G/F Unit 102, Tritan Plaza Building, San Antonio St., Paseo De Magallanes, Makati City Philippines, 1232
7. AYALA AVENUE - SGV 1 - SGV 1 Bldg.,6760 Ayala Avenue, Makati City
8. THE FORT - BEAUFORT - G/F 23rd Avenue corner 5th Avenue Fort Bonifacio, Global City, Taguig City
9. MCKINLEY HILL - Unit 1 - Cp-1, Commerce and Industry Plaza, McKinley Hill, Bonifacio Global City, Taguig City
10. SAN LORENZO VILLAGE - A. ARNAIZ AVENUE - The E. Hotels Makati Bldg., No. 906 A. Arnaiz Ave., San Lorenzo Village, Makati City
11. THE FORT - 26 STREET 11TH AVENUE - U25 & 26, North Tower, South of Market Building, 26th Street corner 11th Avenue, BGC, Taguig City
12. THE FORT - F1 - Unit F , G/F, F1 Center Building, 32nd Street corner 5th Avenue, Bonifacio Global City, Taguig
13. PEREA - G/F Greenbelt Mansion, 106 Perea Street, Legaspi Village, Makati City
14. THE FORT - ACTIVE FUN - Active Fun Building, 9th Avenue corner 28th Street, City Center, Bonifacio Global City, Taguig City
15. GIL PUYAT - G/F Metro House Bldg., 345 Sen. Gil Puyat Ave.,, Makati City
16. AYALA - HERRERA - G/F PBCom Tower, 6795 Ayala Ave. cor. V. Rufino St., (formerly Herrera St.), Salcedo Village, Makati City 1226
17. VALERO - G/F Retail 1B Area, Paseo Park View Tower, 140 Valero St., Salcedo Village, Makati City
18. AYALA - PASEO - G/F Philamlife Tower, 8767 Paseo de Roxas St., Makati City
19. MAKATI AVENUE - PACIFIC STAR - G/F- High Rise, Pacific Star Building Sen. Gil Puyat Ave. cor. Makati Ave.,
20. MAKATI AVENUE - Unit No.2 A and W Building, Juno St. cor. Makati Avenue, Brgy. Bel-air, Makati City
21. J.P. RIZAL - No. 805 J.P. Rizal cor. F. Zobel St., San Miguel Village, Makati City
22. H.V. DELA COSTA - Unit GFC-2 Classica 1 Condominium, 112 H.V. Dela Costa St. Salcedo Village Makati City
23. JUPITER - PASEO DE ROXAS - No. 30 Jupiter cor. Paseo De Roxas Sts., Brgy. Bel-Air, Makati City
24. TORDESILLAS - U105, Le Metropole Condominium, H.V. Dela Costa St., corners Tordesillas St., and Sen. Gil Puyat Ave., Salcedo Village, Makati City
25. GIL PUYAT - SALCEDO - Unit 1C, G/F Country Space 1 Building, Gil Puyat Avenue, Salcedo Village, Makati City
26. LEVISTE - Unit Ground B, LPL Mansions Building, 122 L.P. Leviste Street, Salcedo Village Makati City
27. SALCEDO - G/F First Life Center, 174 Salcedo St.,Legaspi Village Makati City
28. PASEO DE ROXAS - G/F Paseo De Roxas Bldg.,111 Paseo de Roxas St. corner Legaspi St.,Legaspi Village, Makati City
29. DELA ROSA - PASONG TAMO - G/F King’S Court Ii Bldg 2129 Don Chino Roces Ave., Cor Dela Rosa St., Makati City
30. LEGASPI VILLAGE - G/F - Libran Bldg., Legaspi St. Cor. V.A. Rufino Ave., Legaspi Village, Makati City
31. AMORSOLO - G/F Unit C, Aegis People's Support Building, Amorsolo St., Makati City
32. METROPOLITAN AVENUE - Savana Building 3, Metropolitan Avenue corner Venecia Street, Barangay Sta. Cruz, Makati City
33. BAGTIKAN - G/F High Pointe Bldg. No. 1184 Chino Roces Ave. near cor. Bagtikan, Brgy. San Antonio, Makati City
34. RADA - Unit No. 102, G/F La Maision Condominium Bldg., Rada St., Legaspi Village, Makati City
35. BENAVIDEZ - Unit 103, One Corporate Plaza, Benavidez St. Legaspi Village, San Lorenzo, Makati City Makati City
36. AMORSOLO - QUEENSWAY - G/F Queensway Building, No.118 Amorsolo St., Legaspi Village, Makati City
37. AYALA AVENUE - RUFINO BUILDING - Unit 1, G/F Rufino Building, 6784 Ayala Avenue corner V.A. Rufino Street, Makati City
38. LEGASPI - DELA ROSA - G/F I – Care Building, Dela Rosa Street corner Legaspi Village, Makati City
39. GIL PUYAT - DIAN - G/F, Wisma Cyberhub Bldg., No 45 Sen. Gil Puyat Ave., Makati City
40. CHINO ROCES - LA FUERZA - Unit/s 10 & 11 La Fuerza Plaza 1, 2241 Don Chino Roces Avenue, Makati City
41. P. OCAMPO AVENUE - 245 P. Ocampo Ave. corner Flordeliz St., Barangay La Paz, Makati City
42. STO. CRISTO - G/F, Sto. Cristo Po Taw Building, 107-108 Sto Cristo corner Foderama Sts., Binondo, Manila
43. ESCOLTA - G/F, First United Bldg., 413 Escolta corner Banquero St., Binondo, Manila
44. T. ALONZO - G/F 623 T. Alonso St., Sta. Cruz, Manila
45. BINONDO - G/F, Uy Su Bin Bldg., 535-537 Quintin Paredes St., Binondo, Manila
46. DIVISORIA - 802 Ilaya St., Binondo Manila
47. BACLARAN - 2/F, New Galleria Baclaran Shopping Mall, LRT South Terminal, Taft Ave. Extension, Pasay City
48. SOLER - G/F, R & S Tower, 941 Soler St., Binondo, Manila
49. 168 MALL - 4/F Unit 4H 09-11, 168 Mall Building 5, Soler St., Binondo, Manila
50. CITY PLACE SQUARE - 3/F C-P2-3, Cityplace Square, Reina Regente near corner Felipe II St., Binondo, Manila
51. JOSE ABAD SANTOS - TAYUMAN - G/F & 2/F Cada Bldg., 1200 Tayuman St., cor. Jose Abad Santos Ave.Tondo, Manila
52. MASANGKAY - 1411-1413 Masangkay St., Tondo, Manila
53. TOMAS MAPUA - LOPE DE VEGA - G/F & 2/F, Valqua Building., 1003 Tomas Mapua St. cor. Lope de Vega St., Sta. Cruz, Manila
14
54. QUIAPO - G/F, E & L Haw Building, 502 Evangelista St., Quiapo, Manila
55. 999 SHOPPING MALL - Unit 10 & 3C-2, 3/F, 999 Shopping Mall 2, C.M. Recto Street, Tondo Manila
56. ELCANO - Elcano Building, 622 El Cano Street, Binondo, Manila
57. JUAN LUNA - PRITIL - G/F 1953-1955 Juan Luna St., Tondo, Manila
58. ONGPIN - G/F, Commercial Unit G1, Strata Gold Condominium Bldg. 738 Ongpin St. Binondo Manila
59. YLAYA - Ground Floor, Josefa Building, No. 981, Ylaya Street corner Padre Rada Street, Tondo, Manila
60. RIZAL AVENUE - BLUMENTRITT - No. 2412 Rizal Avenue, Sta. Cruz, Manila
61. BINONDO - JUAN LUNA - No. 580 Juan Luna Street, Binondo, Manila
62. PADRE FAURA - G/F, Esperanza Osmeña Bldg., 1991 A. Mabini St., Malate, Manila
63. INTRAMUROS - G/F, BF Condominium, 104 A. Soriano Avenue corner Solano St., Intramuros, Manila
64. UN AVENUE - G/F, Philam Bldg., U.N. Ave. corner Ma. Orosa St., Ermita, Manila
65. PACO - 1050 Pedro Gil St., Paco, Manila
66. ROXAS BOULEVARD - G/F, DENR Building, 1515 Roxas Boulevard, Ermita, Manila
67. GIL PUYAT - F.B. HARRISON - No. 131 Gil Puyat Avenue Extension, Brgy. 24, Zone 4, Pasay City
68. TAFT - NAKPIL - RLR Building, 1820 Taft Avenue near corner Nakpil Street, Malate, Manila
69. PASAY - D. MACAPAGAL BOULEVARD - No. 8 President Diosdado Macapagal Blvd., Pasay City
70. TAFT AVENUE - Philippine Academy of Family Physicians (PAFP) Bldg. 2244 Taft Avenue, Manila
71. T.M. KALAW - Annexes A, A -1,A-2,A-3 &A- 4 Ditz Building, 444 T.M. Kalaw Street, Ermita, Manila
72. PASAY - LIBERTAD - Unit 265-E Nemar Building , Libertad St. Pasay City
73. PAZ M. GUAZON - Units 5 & 6 Topmark Bldg., 1763 Paz M. Guazon Street, Paco, Manila
74. SAMPALOC - J. FIGUERAS - No. 427-433 J. Figueras Street, Sampaloc, Manila
75. PASAY - OCEANAIRE - GF U108 & 109, Podium Commercial Area, Oceanaire Condo, Sunrise Drive cor Rd. 23, SM Mall of Asia Complex, Pasay City
76. PEDRO GIL - No. 574 Pedro Gil Street, Manila
77. A. MABINI - R. SALAS - G/F & 2/F Jesselton Tower No. 1453 A. Mabini St., corner R. Salas St., Brgy. 668, Zone 72, Ermita, Manila
78. TAYTAY - Ground Floor, Valley Fair Town Center Bldg.Ortigas Avenue Ext. Taytay, Rizal 1920
79. ANTIPOLO - MARCOS HIGHWAY - G/F Ciannat Complex, Marcos Highway, Brgy. Mayamot, Antipolo City
80. REGALADO - Regalado Ave. Cor. Archer St., North Fairview Subd. Quezon City
81. TANDANG SORA - Lot 80 - A Kalaw Hills Subd. Brgy. Culiat Tandang Sora Quezon City
82. KATIPUNAN - 132 Katipunan Road, Brgy.Ignatius Village, Katipunan, Quezon City
83. ANTIPOLO - M. L. QUEZON - #146 ML Quezon St., cor. Dimanlig St. Brgy. San Roque Antipolo City
84. MARIKINA - GIL FERNANDO AVENUE - Gil-Fernando Ave. Cor. Estrador St.,Midtown Subdivision, Brgy. San Roque, Marikina City
85. TAYTAY - MANILA EAST - Manila East Road, Brgy.San Juan, Taytay, Rizal
86. DON ANTONIO HEIGHTS - Lot 24 Block 7, Holy Spirit Drive, Don Antonio Heights Brgy. Holy Spirit Quezon City
87. MARIKINA - CONCEPCION - Bayan- Bayanan Avenue, Marikina City
88. U.P. VILLAGE - No. 65 Maginhawa St., U.P. Village, Diliman, Quezon City
89. COMMONWEALTH - No. 272 Commonwealth Avenue, Bgy. Old Balara, Quezon City
90. FAIRVIEW - #72 Commonwealth Ave. Corner Camaro St., East Fairview. Quezon City
91. LOYOLA HEIGHTS - KATIPUNAN - Unit 13, Elizabeth Hall Building, Lot 1 Blk. 41 Katipunan Avenue, Loyola Heights, Quezon City
92. MARIKINA - J.P. RIZAL - No. 367 J.P. Rizal Street, Sta. Elena, Marikina City
93. MARIKINA - PARANG - 90 JP Rizal St, Brgy Calumpang, Marikina City.
94. XAVIERVILLE - No. 60 Xavierville Avenue, Xavierville Subdivision, Brgy. Loyola Heights, Quezon City
95. RIZAL - MONTALBAN - 240 E. Rodriguez Hi-way, Manggahan, Rodriguez, Rizal
96. ROOSEVELT - 184 Roosevelt Avenue San Francisco Del Monte Quezon City
97. CONGRESSIONAL - Blk.7 Lot 4A Congressional Ave. Project 8 Quezon City
98. BANAWE - G/F PPSTA 1 Building Quezon Avenue corner Banawe St. Quezon City
99. DEL MONTE - 271 Del Monte, cor. Biak na Bato Quezon City
100. A. BONIFACIO - 659 A. Bonifacio Ave. Balintawak, Quezon City
101. MAYON - 170 Mayon Ave. Quezon City
102. BANAWE - SCOUT ALCARAZ - Unit ABC G/F #740 Banawe Ave. near corner Sct Alcaraz QC
103. BANAWE - N. ROXAS - #42 Banawe Ave corner Nicanor Roxas QC
104. EDSA - HOWMART - 1264 EDSA near corner Howmart Road brgy. A. Samson Q.C.
105. EDSA - MUÑOZ - Lemon Square Bldg. 1199 EDSA Muñoz Brgy. Katipunan, Quezon City
106. MASAMBONG - Annexes B & C, L.G. Atkimson Building, No. 627 Del Monte Avenue, Brgy. Masambong Quezon City
107. ROOSEVELT - STO. NIÑO - 187 Roosevelt Avenue, Brgy. Sto. Niño, San Francisco Del Monte, Quezon City
108. ARANETA AVENUE - #195 Araneta Ave Bgy Santol QC
109. NORTH EDSA - UGF units 4,5,6&7 EDSA Grand Residences, EDSA cor. Corregidor St., Quezon City
110. A. BONIFACIO - BALINGASA - G/F, 2/F & 3/F, Units D & E, Winston Plaza 1 Building, No. 880 A. Bonifacio Avenue, Brgy. Balingasa, Quezon City
111. VISAYAS AVENUE - G/F unit B,C & D No. 15 Visayas Ave. Brgy. Vasra Quezon City
112. BANAWE - KALIRAYA - Titan 168 Building, 126 Banawe Street near cor. Kaliraya St., Quezon City
113. SHORT HORN - Ground Flr. West Star Business Ctr., Bldg. # 31, Shorthorn St., Brgy. Bahay Toro Proj.8, Quezon City
114. DEL MONTE - D. TUAZON - 155 Del Monte Ave., Barangay Manresa, Quezon City
115. MAYON - DAPITAN - 181 Mayon Street near corner Dapitan Street Brgy. Sta. Teresita Quezon City
116. E. RODRIGUEZ - WELCOME ROTONDA - G/F AEK Building, No. 40 E. Rodriguez Sr. Avenue, Brgy. Don Manuel, Quezon City
117. EDSA - KALOOKAN - 490 EDSA, Kalookan City
118. VALENZUELA - KM 12 JLB Enterprises Bldg. McArthur Highway Marulas Valenzuela City
119. GRACE PARK - 896 8th Avenue cor. J. Teodoro Grace Park, Caloocan City
120. PASO DE BLAS - NO. 191, Paso De Blas Valenzuela City
121. GOVERNOR PASCUAL - 3315 Gov. Pascual Ave. Cor. Maria Clara St., Malabon City
122. NOVALICHES - Lot 489-B2 Quirino Hiway Novaliches Quezon City
123. POTRERO - Bldg. 1 & 2 Mary Grace Bldg. Mc Arthur H-way del monte St. Potrero Malabon
124. NORTH BAY - G/F Melandria III Building No. 1090 Northbay Blvd. (South) Navotas City
15
125. CALOOCAN - MABINI - G/F Gee Bee Bldg., No. 428, A. Mabini St., Brgy. 15, Zone 2, Caloocan City
126. BAESA TOWN CENTER - Baesa Town Center Retail Store#4 #232 Quirino Highway Baesa Quezon City
127. GRACE PARK - 7TH AVENUE - G/F Units 1,2 &3, No. 330 Rizal Ave. Ext, near cor. 7th Avenue., East Grace Park, Caloocan City
128. LAGRO - Lot 2, Blk. 6, Quirino Highway, Lagro, Novaliches, Quezon City
129. MALABON - RIZAL AVENUE - Malabon - Rizal Avenue No. 726 Rizal Avenue, Brgy. Tañong, Malabon City
130. NOVALICHES - TALIPAPA - Units C,D,E,F & G, No. 526 Quirino Highway, Brgy. Talipapa, Novaliches Quezon City
131. GRACE PARK - 11TH AVENUE - G/F, Remcor V Building, Block 172, Lot 5, Rizal Avenue Ext., Caloocan City
132. VALENZUELA - DALANDANAN - 212 Km. 15 Mac Arthur Hiway Dalandanan Valenzuela City
133. NAVOTAS - M. NAVAL - No. 895 M. Naval Street, Brgy. Sipac-Almasen, Navotas City
134. GENERAL LUIS - KAYBIGA - No. 4 Gen. Luis St., Barangay Kaybiga, Caloocan City
135. GRACE PARK - 3RD AVENUE - No. 215 Rizal Ave. Ext, Brgy. 45, Grace Park West, Caloocan City
136. VALENZUELA - GEN. T. DE LEON - Units 4 & 5, G/F, Liu Shuang Yu Bldg., No. 3026 Gen. T. De Leon St. Brgy. Gen. T. De Leon, Valenzuela City
137. CUBAO - G/F Prince John Condominium 291 P. Tuazon Avenue, near cor 18th Ave., Cubao Q.C.
138. ANONAS - 94 Anonas St. Cor K-6TH Sts. Kamias Quezon City
139. BAGUMBAYAN - 184-B E. Rodriguez Jr. Avenue, Brgy. Bagumbayan,Libis, Quezon City
140. QUEZON AVENUE - G/F, Sunshine Blvd. Plaza, Quezon Avenue corner Scout Santiago, Quezon City
141. TOMAS MORATO - 257 Tomas Morato St. near corner Scout Fuentabella, Quezon City
142. WEST AVENUE - 108 West Avenue corner West Lawin St., Quezon City
143. NEW MANILA - Aurora Blvd. cor Doña Juana Rodriguez Ave., New Manila, Quezon City
144. SOUTH TRIANGLE - 1604 Quezon Avenue, Brgy. South Triangle, Quezon City
145. TIMOG - G/F, Timog Arcade, 67 Timog Avenue, Quezon City
146. E. RODRIGUEZ - G/F M. C. Rillo Bldg. #1668 E. Rodriguez Ave. Bgy. Mariana QC
147. KAMIAS - No. 10 Kamias Road corner Col. Salgado St., Brgy. West Kamias, Quezon City
148. EASTWOOD CITY - Unit D,Techno plaza 1, Eastwood City, Cyber Park, E. Rodriguez Jr., Avenue (C-5), Brgy Bagumbayan, Quezon City
149. QUEZON AVENUE - DR. GARCIA - 940 Quezon Avenue near corner Dr. Garcia St., Brgy. Paligsahan, Quezon City
150. CUBAO - PHILAM - G/F, Philamlife Building, Aurora Blvd. corner General Araneta Street, Cubao, Quezon City
151. E. RODRIGUEZ - CUBAO - No. 1731 E. Rodriguez Sr. Avenue, Brgy. Pinagkaisahan, Cubao, Quezon City
152. KAMUNING - JPY Building, No. 52 Kamuning Road, Kamuning, Quezon City
153. TIMOG - MOTHER IGNACIA - No. 21 Timog Ave., Brgy. South Triangle, 1103 Quezon City
154. AURORA BOULEVARD - ANONAS - Rosario Bldg., No. 999 Aurora Blvd., Lauan and Anonas Sts., Bgy. Duyan-duyan, Project 3, Quezon City
155. BONI SERRANO - No.107 Boni Serrano Ave., Brgy. Lipunan ng Crame, Quezon City
156. ORTIGAS - G/F Unit 103 AIC Gold Tower Condominium corner Emerald & Garnet Aves., Ortigas Center, Pasig City
157. PASIG - SHAW - #27 Shaw Blvd, Pasig City
158. PASIG - POBLACION - A.Mabini corner Blumentrit Street, Brgy. Kapasigan, Pasig City
159. TEKTITE - East Tower, Phil. Stock Exchange Ctr Exchange Drive, Ortigas Center, Pasig City
160. SAN MIGUEL AVENUE - Medical Plaza Building San Miguel Avenue, Ortigas, Pasig City
161. EMERALD - Unit 103 Hanston Bldg, F. Ortigas Jr. Rd. Ortigas Center, Pasig City
162. C. RAYMUNDO - #172 C. Raymundo Ave., Brgy. Maybunga, Pasig City 1607
163. ORTIGAS - ROCKWELL - Unit No. W-01 Tower 1, The Rockwell Business Center, Ortigas Avenue, Pasig
164. PASIG - BOULEVARD - #2 Lakeview Drive corner Pasig Blvd, Brgy Bagong Ilog,Pasig City
165. JULIA VARGAS - G/F, Unit 101, One Corporate Center, Julia Vargas Avenue corner Meralco Avenue, Ortigas Center, Pasig City
166. GARNET - Unit 102 Prestige Tower, Emerald Avenue, Ortigas Center, Pasig City
167. PASIG - VALLE VERDE - 102 E. Rodriguez Jr. Avenue, Ugong, Pasig City
168. PASIG - ROSARIO - Unit 3, 1866 Ortigas Avenue Extension, Rosario Pasig City
169. PASIG - SANTOLAN - G/F Santolan Bldg., 344 A. Rodriguez Avenue, Santolan, Pasig City
170. PATEROS - M. Almeda corner G. De Borja Street, San Roque, Pateros
171. ORTIGAS - ADB AVENUE - Units G1 & G2, g/f ADB Avenue Tower, Ortigas Center, Pasig City
172. MANDALUYONG - SHAW - G/F Sunshine Square 312, Shaw blvd. Mandaluyong city
173. ANNAPOLIS - G/F, The Meriden Condominium Building Unit 1A, Annapolis St. NorthEast, Greenhills San Juan City
174. GREENHILLS - G/F ALCCO Bldg. Ortigas Avenue Greenhills-West, San Juan City
175. SAN JUAN - F. Blumentritt St. cor. M. Salvador St. San Juan City
176. PIONEER - UG-09 Pioneer Pointe Condominium,128 C. Pioneer St. Mandaluyong City
177. MANDALUYONG - LIBERTAD - G/F Unit A,B &C, Dr. Aguilar Bldg., No. 46 D.M. Guevarra St. cor. Esteban St. Mandaluyong City
178. GREENHILLS SHOPPING CENTER - G/F Annapolis Carpark Unit AC-14 Greenhills Shopping Ctr
179. WILSON - 220B Wilson St. San Juan City
180. CONNECTICUT - Unit B, G/F Fox Square Building, No. 53 Connecticut Street, Northeast Greenhills, San Juan City
181. BONI AVENUE - G/F Lourdes Bldg. II, 667 Boni Ave., Bgy. PlainView, Mandaluyong City
182. GREENHILLS - NORTH - G/F BTTC Bldg., Ortigas Ave. cor. Roosevelt St., Greenhills, San Juan City
183. MANDALUYONG - WACK-WACK - G/F, GDC Building, 710 Shaw Blvd., Bgy. Wack-Wack, Mandaluyong City
184. KALENTONG - G/F No. 908 Unit 1&2 Ground Floor Kalentong Street, Mandaluyong City
185. GREENHILLS - PROMENADE - Unit 3, G/F & 2/F Promenade Building, Missouri Street, Greenhills, San Juan City
186. BETTERLIVING - 100 Dona Soledad Avenue, Betterliving Subd.Barangay Don Bosco, Paranaque City 1711
187. PRESIDENT'S AVENUE - # 35 President's Avenue BF Homes Paranaque City 1700
188. FESTIVAL MALL 1 - 2nd Level, Festival Supermall Filinvest Corporate City, Alabang Muntinlupa City 1781
189. WESTGATE - Westgate, Filinvest Corporate City, Alabang Muntinlupa City 1770
190. SUCAT - Unit 707-6 Columbia AirFreight Complex Miescor Drive, Ninoy Aquino Ave. Barangay Sto. Niño Paranaque City 1700
191. FESTIVAL MALL 2 - Level 1, Festival Supermall, Filinvest Corp. City, Alabang Muntinlupa City 1781
192. ALABANG - MADRIGAL - Ground Floor, Philamlife Bldg. Madrigal Business Park, Acacia Avenue, Muntinlupa City 1780
193. MUNTINLUPA - G/F Remenes Center Building, # 22 National Hi-way Putatan, Muntinlupa City 1772
194. ALABANG - COMMERCE AVENUE - Spectrum Center – Block 28 Commerce Ave corner Filinvest Avenue, Filinvest City, Alabang, Muntinlupa City
195. WEST SERVICE ROAD - West Service Road corner Sampaguita Avenue UPS IV Subd., Paranaque City 1700
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196. SUCAT - EVACOM - 8208 Dr. A. Santos Avenue Barangay San Isidro, Paranaque City 1700
197. BETTERLIVING - DOÑA SOLEDAD AVENUE - Blk 9, Lot 3 Dona Soledad Ave. cor. Peru St., BetterLiving, Paranaque City
198. SUCAT - KINGSLAND - No. 5 & 6, G/F & 2/F Kingsland Building, Dr. A. Santos Avenue, Sucat, Paranaque City
199. BF HOMES - AGUIRRE - 327 Aguirre Avenue, BF Homes, Paranaque City
200. ALABANG - ENTRATA - Unit G3 & G4 Entrata, Filinvest Corporate City, Alabang, Muntinlupa City
201. SUCAT - KABIHASNAN - G/F Unit 3 & 4 Perry Logistics Center Building, Ninoy Aquino Avenue, Paranaque City
202. BICUTAN - EAST SERVICE ROAD – G/F, Waltermart Bicutan, East Service Rd. cor. Mañalac Ave. Brgy. San Martin de Porres, Parañaque City
203. ALABANG HILLS - Don Gesu Bldg., Don Jesus Blvd., Brgy. Cupang, Muntinlupa City
204. MIA ROAD - Salud-Dizon Building 1, No. 5 MIA Road, Tambo, Parañaque City
205. LAS PIÑAS - Alabang-Zapote Road corner Crispina Ave. Pamplona III, Las Pinas City 1740
206. IMUS - G/F, LDB Bldg., 552 Gen. Aguinaldo Highway, Imus City, Cavite
207. BACOOR - General E. Aguinaldo Highway Talaba Bacoor City Cavite
208. CARMONA - Lot 1947-B, Paseo de Carmona Compound, Governor’s Drive, Brgy. Maduya, Carmona, Cavite
209. GENERAL TRIAS - G/F, Unit 102 VCentral Gentri Bldg., Governor’s Drive, Manggahan, General Trias, Cavite
210. LAS PIÑAS - BF RESORT - #10 BF Resort Drive, BF Resort Village. Las Pinas City 1740
211. LAS PIÑAS - MARCOS ALVAREZ AVENUE - G/F & 2/F, 575 Marcos Alvarez Ave., Talon V, Las Pinas
212. PUERTO PRINCESA - RIZAL AVENUE - Rizal Avenue, Brgy. Manggahan, Puerto Princesa City, Palawan
213. BACOOR - MOLINO - G/F Units 101, 102 & 103 VCENTRAL Mall Molino Bldg., Molino Blvd., Bacoor, Cavite City
214. CAVITE - NAIC - Corner Daang Sabang and Ibayo Silangan Road, Naic, Cavite
215. CAVITE - TANZA - Antero Soriano Avenue, Daang Amaya 2 Tanza, Cavite
216. DASMARIÑAS - Km. 31 Gen. Emilio Aguinaldo Highway, Brgy. Zone 4 Dasmarinas City Cavite
217. LAS PIÑAS - ALMANZA - Aurora Arcade Building, Alabang - Zapote Road, Almanza Uno, Las Pinas City
218. CAVITE CITY - P. Burgos Ave., Brgy. Caridad, Cavite City
219. CAVITE - TRECE MARTIREZ - G/F Dionets Commercial Place Building, San Agustin Road/Trece Martires - Indang Road, Trece Martires City, Cavite
220. CAVITE - SILANG - J. Rizal Street, Silang, Cavite
221. LAS PINAS - AGUILAR - J.Aguilar Avenue corner Casimiro Drive, Brgy. BF International, Las Piñas City, Metro Manila
222. KAWIT - CENTENNIAL - Centennial Road, Tabon, Kawit, Cavite
223. BATANGAS - 54-A D. Silang St., Batangas City
224. LIPA - No. 18, Lot 712 ABC, B. Morada Avenue, Lipa City, Batangas
225. BATANGAS - BAUAN - J.P. Rizal Street corner San Agustin Street, Bauan Batangas
226. MINDORO - CALAPAN - G/F Paras Building, J.P. Rizal Street, Bgy. San Vicente South, Calapan City, Oriental Mindoro
227. BATANGAS - TANAUAN - Brgy. Darasa, Tanauan , Batangas City
228. BATANGAS - LEMERY - G/F LDMC Building, Ilustre Ave. Dist III, Lemery, Batangas
229. BATANGAS - ROSARIO - Rosario-Padre Garcia-Lipa Road, Poblacion Rosario, Batangas
230. BATANGAS - NASUGBU - J. P. Laurel Street, Poblacion, Nasugbu, Batangas
231. BATANGAS - STO. TOMAS - Sto. Tomas - Km. 67 Maharlika Highway, Poblacion, Sto. Tomas, Batangas
232. BATANGAS - BALAYAN - Corner Paz Street and Union Street, Poblacion, Balayan, Batangas
233. LUCENA - 152 Quezon Avenue, Lucena City, Quezon
234. CALAMBA - G/F, SQA Bldg, Brgy. Uno, Crossing, Calamba City, Laguna
235. NAGA - G/F, LAM Bldg., 19 Peñafrancia Avenue, Naga City, Camarines Sur
236. SAN PABLO - 9022 J. P. Rizal Avenue, San Pablo City, Laguna
237. SAN PEDRO - Old National Highway, Brgy. Nueva, San Pedro, Laguna
238. LAGUNA - CABUYAO - No. 26 J. P. Rizal Street, Poblacion, Cabuyao City, Laguna
239. LEGAZPI CITY - Block 2 Lot 3-B, Landco Business Park, Legazpi City, Albay
240. LAGUNA - BIÑAN - G/F, Units 1,2,3 & 4, Simrey's Commercial Bldg, Nat’l Highway cor Alma Manzo Road, Brgy. San Antonio, Biñan City, Laguna
241. SORSOGON CITY - Ma. Bensuat T. Dogillo Bldg., Magsaysay St., Poblacion, Sorsogon City
242. LAGUNA - STA. ROSA - Unit No. 6, G/F Paseo 5 - Paseo de Sta Rosa, Greenfield City, Don Jose, Santa Rosa City, Laguna
243. ALBAY - TABACO - Manuel Cea Bldg. I, Santillan Street, Poblacion, Tabaco City, Albay
244. SAN FERNANDO, PAMPANGA - 2nd floor Felix S. David Bdg., MacArthur Hi-way, Dolores City of San Fernando, Pampanga
245. ANGELES, PAMPANGA - 2014 Sto. Rosario St., Brgy San Jose, Angeles City
246. TARLAC - Mariposa Bldg.,F. Tanedo St., Tarlac City
247. OLONGAPO - G/F 1215 Rizal Ave., West Tapinac, Olongapo City
248. BALANGA - Don Manuel Banzon Ave. Cor. Cuaderno St. Dona Fransica Balanga City, Bataan
249. PAMPANGA - APALIT - RH7, Mac Arthur Highway, Apalit, Pampanga
250. ANGELES - BALIBAGO - Saver's Mall Bldg. Mac Arthur Highway, Balibago Angeles City
251. PAMPANGA - SAN FERNANDO SINDALAN - G/F T & M Building, Brgy. Sindalan, Mac Arthur Highway, San Fernand Pampanga
252. BATAAN - DINALUPIHAN - Bgy. San Ramon, Dinalupihan, Bataan
253. PAMPANGA - GUAGUA - Good Luck Building, No. 303 Guagua- Sta. Rita Arterial Road, Bgy. San Roque, Guagua, Pampanga
254. MEYCAUAYAN - MALHACAN - Malhacan Tollgate, Meycauayan City Bulacan
255. TARLAC - PANIQUI - No. 130 M.H. Del Pilar Street corner Mac Arthur Highway, Paniqui, Tarlac City
256. BULACAN - BALAGTAS - Burol 1st, MacArthur Highway, Balagtas, Bulacan
257. SUBIC BAY - G/F Bldg., 1109 Rizal Highway, Subic Bay Freeport Zone, Olongapo City
258. SAN FERNANDO - JOSE ABAD SANTOS - Kingsborough Commercial Center Bldg, G/F U1A &1B Jose Abad Santos Ave., San Fernando, Pampanga
259. BULACAN - MALOLOS - No. 1197 G/F BUFECO Bldg., Brgy. Sumapang Matanda, Mac Arthur Highway Malolos, Bulacan
260. ZAMBALES - IBA - Lot No. 1-A, Zambales - Pangasinan Provincial Road, Brgy. Sagapan, Iba, Zambales
261. BATAAN - MARIVELES - 8th Avenue, Freeport Area of Bataan (FAB), Mariveles, Bataan
262. CABANATUAN - Melencio St. corner Gen. Luna ST, Cabanatuan City
263. SANTIAGO, ISABELA - 74 National Highway, Brgy. Victory Norte, Santiago City, Isabela
264. BALIUAG - Benigno S. Aquino Ave., Poblacion Baliuag, Bulacan
265. CAUAYAN, ISABELA - Maharlika Highway Cauayan City, Isabela
266. TUGUEGARAO - College Ave. cor Rizal and Bonifacio St. Tuguegarao City
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267. NUEVA ECIJA - SAN JOSE - Paulino Building, Brgy. Abar 1st Maharlika Road, San Jose Nueva Ecija
268. NUEVA VIZCAYA - SOLANO - Maharlika Road, Poblacion, Solano, Nueva Vizcaya
269. BULACAN - PLARIDEL - Lot 1071-A Daang Maharlika Road, (prev. Cagayan Valley Road) Banga First, Plaridel Bulacan
270. NUEVA ECIJA - GAPAN - G/F, Units 105,106 & 2/F, Unit 205, TSI Building, Jose Abad Santos Avenue, Sto. Niño, Gapan, Nueva Ecija
271. ISABELA - ILAGAN - Maharlika Highway corner Florencio Apostol Street, Calamagui 1, Ilagan, Isabela
272. NUEVA ECIJA - TALAVERA - Lot No. 269–A Maharlika Road, Poblacion, Talavera, Nueva Ecija
273. BULACAN - SAN JOSE DEL MONTE - Dalisay Resort, Gov. F. Halili Avenue, Tungkong Mangga, San Jose del Monte, Bulacan
274. DAGUPAN - Maria P. Lee Bldg, Perez Blvd, Dagupan City
275. BAGUIO - ABANAO - 77 Abanao Ave., Baguio City
276. LAOAG - Ablan Bldg., J.P. Rizal Ave. corner Don Severo Hernando Ave., Laoag City
277. LA UNION - Quezon Ave., cor Ancheta St. San Fernando, La Union
278. URDANETA - S&P Bldg Nancayasan Urdaneta City
279. PANGASINAN - SAN CARLOS - Palaris Street , San Carlos City, Pangasinan
280. BAGUIO - SESSION ROAD - Unit B 101 Lopez Bldg Baguio Session
281. ILOCOS SUR - CANDON - G/F KAMSU Building Brgy San Jose, Candon City, Ilocos Sur
282. PANGASINAN - ROSALES - Estrella Compound, Carmen Eat Rosales, Mac Arthur Highway, Pangasinan
283. DAGUPAN - A.B. FERNANDEZ AVENUE - New Star Building, A. B. Fernandez Avenue, Dagupan City
284. BENGUET - LA TRINIDAD - KM 5, Central Pico, La Trinidad, Benguet
285. VIGAN - Quezon Ave., Vigan City Ilocos Sur
286. PANGASINAN - LINGAYEN - J.S. Molano Real State Lessor Building, Avenida Rizal East Lingayen, Pangasinan
287. LA UNION - AGOO - Mac Arthur Highway, Barangay San Antonio, Agoo, La Union
288. ILOCOS NORTE - SAN NICOLAS - Barangay 2, San Nicolas, Ilocos Norte
289. CEBU - BANILAD - Archbishop Reyes Ave.,cor J. Panis St. Banilad, Cebu City
290. CEBU - MAGALLANES - 60 Quiaco Bldg., Magallanes cor Gonzales Sts, Cebu City
291. CEBU - ESCARIO - Cebu Capitol Commercial Complex Bldg., N. Escario Street, Cebu City
292. CEBU - MANDAUE - G/F Ramcar Bldg., M.C. Briones Highway, Mandaue City
293. CEBU - MACTAN - G/F Bldg. II, M. L. Quezon National Highway, Pusok, Lapu-lapu City
294. CEBU - MANDAUE NORTH ROAD - Block 01, 02 & 03, Upper Floor, ALDO Bldg.,North Road, Basak, Mandaue City, Cebu
295. CEBU - GRAND CENIA - G/F Grand Cenia Bldg., Archbishop Reyes Avenue, Cebu City
296. CEBU - PARK MALL - Alfresco 4, Units 39, 40 & 40a Parkmall, Mandaue City, Cebu
297. CEBU - M. VELEZ - AYS Building A. S. Fortuna Street Banilad, Mandaue City
298. CEBU - A.S. FORTUNA - 151 M. Velez St., Guadalupe, Cebu City
299. CEBU - TALISAY - Tabunok Highway, Talisay City, Cebu
300. CEBU - A.C. CORTES - Carlos Perez Building, A.C. Cortes Avenue, Ibabao, Mandaue City Cebu
301. CEBU - BASAK PARDO - South Point Place Building, N. Bacalso Avenue, South Road, Basak Pardo, Cebu City
302. CEBU - JUAN LUNA - Stephen Jo Building, Juan Luna Cebu City
303. CEBU - MINGLANILLA - La Nueva - Minglanilla Center, Minglanilla, Cebu
304. CEBU - FUENTE OSMEÑA - G/F Cebu Women's Club Building, Fuente Osmena, Cebu City
305. CEBU - IT PARK - G/F, Calyx Center, W. Ginonzon Street corner Abad Street, Asia Town, IT Park, Cebu City
306. CEBU MAGALLANES - NOLI ME TANGERE - CLC Building, 280 Magallanes St. near cor. Noli Me Tangere, Cebu City
307. ILOILO - LEDESMA - Sta Cruz Arancillo Bldg., Ledesma corner Fuentes Sts.,Iloilo City
308. BACOLOD - Lacson corner Luzuriaga Sts, Bacolod City
309. ILOILO - IZNART - G/F, B&C Square Bldg., Iznart St. cor. Solis St.,Iloilo City
310. ILOILO - MOLO - GT Plaza Mall, MH del Pilar St., Molo, Iloilo City
311. BACOLOD - MANDALAGAN - Lopue's Mandalagan Corp. Bldg., Brgy. Mandalagan,Bacolod City
312. BORACAY - Alexandrea Building, Main Road, Bgy. Balabag, Boracay Island, Malay, Aklan
313. DUMAGUETE CITY - Don Joaquin T. Villegas Building, Colon Street Dumaguete City
314. BACOLOD - HILADO - Hilado Street, Bacolod City
315. ILOILO - JARO - Jaro Townsquare, Mandaue Foam Building, Quintin Salas, Jaro Iloilo City
316. ORMOC CITY - G/F, Don Felipe Hotel Building, Aviles Street, Ormoc City
317. TAGBILARAN CITY - CPG Avenue, 2nd District, Tagbilaran City
318. BACOLOD - ARANETA - Unit 1A and 1B Metrodome Building, Araneta corner Alunan Street, Singcang Barangay 39, Bacolod City
319. ROXAS CITY - Corner Roxas Avenue and Osmeña St., (formerly Pavia St.) Roxas City, Capiz
320. KALIBO - Roxas Avenue Extension, Buswang New, Kalibo, Aklan
321. TACLOBAN CITY - MARASBARAS - JGC Building, Ground Floor, National Road, Brgy. 77 Marasbaras, Tacloban City
322. ANTIQUE - SAN JOSE - St. Nicholas Commercial Building, T.A. Fornier Street, San Jose, Antique
323. CATBALOGAN CITY - Curry Avenue corner San Bartolome Street, Catbalogan City, Samar
324. SILAY - Rizal Street, Silay City, Negros Occidental
325. DAVAO - LANANG - Lot 6, Blk 5, Insular Village, Bo. Pampanga, Buhangin, Lanang, Davao City
326. DAVAO - STA. ANA - Ground Floor, GH Depot Building, Governor Sales St., Sta. Ana, Davao City
327. DAVAO - MATINA - Lot 16, Blk 3, McArthur Highway, Matina, Davao City
328. DAVAO - TORIL - Saavedra Street, Toril, Davao City
329. DAVAO - TAGUM - Gaisano Grand Arcade, Apokon Road, Lapu-Lapu Extension, Brgy. Visayan Village, Tagum City
330. DAVAO - C.M. RECTO - P&E Building, Poblacion Brgy. 035 CM Recto Avenue, Davao City
331. DAVAO - BAJADA - J.P. Laurel Avenue, corner Iñigo St., Davao City
332. DAVAO - J.P. LAUREL - JP Laurel Avenue, Davao City
333. DAVAO - PANABO CITY - Quezon Street, Sto. Nino Panabo City, Davao del Norte
334. DAVAO - BUHANGIN - Km. 5 Buhangin Road, corner Gladiola Street, Buhangin, Davao City
335. DAVAO - DIGOS - Commercial Space-4, RJ and Sons Realty & Trading Corporation Bldg., V. Sotto Street, Brgy. Zone-1, Digos City, Davao del Sur
336. DAVAO - AGDAO - Door 2 and 3, Cabaguio Building, J.P. Cabaguio Avenue, Davao City
337. DAVAO - MAC ARTHUR MATINA - BGP Commercial Complex II Bldg., McArthur Highway, Matina, Davao City
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338. DAVAO - QUIRINO - Centron Building, Quirino Avenue corner General Luna Street, Davao City
339. DAVAO - MAGSAYSAY - Lot 100-C Brgy. 030 Poblacion, R. Magsaysay Ave., Davao City
340. CAGAYAN DE ORO - No. 50 Juan Sia Building, Don Apolinar Velez St., Cagayan de Oro City
341. ZAMBOANGA - N.S. Valderrosa St. corner Corcuerra Street, Zamboanga City
342. COTABATO - No. 31 Quezon Avenue, Cotabato City
343. ILIGAN - Ground Floor, Party Plaza Building, Quezon Avenue Extension, Rabago, Iligan City
344. GENERAL SANTOS - Ireneo Santiago Boulevard, General Santos City
345. BUTUAN - Ground Floor Deofevente Building, Lot No. 7,Governor J. Rosales Avenue, Brgy. Imadejas, Butuan City
346. OZAMIZ - Ground Floor, Casa Esperanza, Don Anselmo Bernad Avenue, Ozamiz City
347. KORONADAL CITY - G/F RCA Building, Gen. Santos Drive, Koronadal City, South Cotabato
348. PAGADIAN - FS PAJARES AVENUE - BMD Estate Bldg., F. Pajares cor. Sanson St., Pagadian City,Zamboanga del Sur
349. CAGAYAN DE ORO CITY - COGON - De Oro Construction Supply, Inc. Bldg. Don Sergio Osmena St., corner Limketkai Drive Cagayan de Oro City
350. SURIGAO CITY - G/F, EGC Building, Rizal Street Washington, Surigao City, Surigao del Norte
351. ZAMBOANGA CITY - CANELAR - Printex Building, M.D. Jaldon Street, Zamboanga City
352. BUKIDNON - VALENCIA - Tamay Lang, Parklane, G. Laviña Ave., Poblacion, Valencia City, Bukidnon
353. DIPOLOG CITY - G/F Felicidad II Bldg., Quezon Ave., Miputak, Dipolog City
354. GENERAL SANTOS CITY - PIONEER - Laiz Bldg., Pioneer cor. Magsaysay Ave., Gen. Santos City
355. CAGAYAN DE ORO - CARMEN - RTS Building, Vamenta Boulevard, Carmen, Cagayan De Oro City
356. CAGAYAN DE ORO - LAPASAN - Lapasan Highway, Cagayan De Oro City
357. KIDAPAWAN CITY - Doña Leonila Complex, National Highway, Poblacion, Kidapawan City North Cotabato
358. GENERAL SANTOS - CALUMPANG - Calumpang Medical Specialist Bldg.,National Highway, Calumpang, General Santos City
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PASIG BRANCH - 360 Dr. Sixto Antonio Avenue, Brgy. Caniogan, Pasig City
MEYCAUAYAN BRANCH - #2605 Malhacan National Road, Brgy. Malhacan Meycauayan City Bulacan, 3020
STA. ROSA LAGUNA BRANCH - FLC Business Center, National Highway, Brgy. Macabling, Sta. Rosa, Laguna
CAINTA BRANCH - Unit 101, East 1900 Building, Gate 3 Vista Verde Executive Village, Felix Avenue Cainta, Rizal
LUCENA BRANCH - Ground Flr., BENCO Bldg., Enriquez Cor Juarez Sts., Lucena City, Quezon Province
PALAWAN BRANCH - Brgy.San Pedro, Puerto Princesa city, Palawan 5300
LEGASPI BRANCH - Door 2&3, Bicol Wei Due Fraternity Bldg., Quezon Avenue, Oro Site, Legazpi City,
NAGA BRANCH - Door 2, Romar 1 Bldg.,Elias Angeles St. Brgy. Dinaga, Naga City, Camarines Sur
BACOLOD BRANCH - R.S Bldg., Cor. Hilado Ext., & 6th St., Capitol Shopping Center, Brgy.17, bacolod Negros Occidental
ILOILO BRANCH - 1st Level Robinsons Place Mabini St., Roxas Village, Ilo-ilo City, 5000
ROXAS BRANCH - Door 1& 2 Gaisano Arcade Bldg.,Arnaldo Blvd., Roxas City
BOGO BRANCH - M.H. Del Pilar St., Corber P. Rodriquez, Carbon, Bogo City, Cebu
LAPU-LAPU BRANCH - M.L Quezon Nat'l.H-way Pusok,Lapu-Lapu City, 6501
MANDAUE BRANCH - PSO 246/490 Dayzon Bldg., Lopez Jaena St., Subangdaku, Mandaue City, Cebu
TALISAY BRANCH - Paul Sy Bldg., National Highway Tabunok,Talisay City, Cebu 6045
TAGBILARAN BRANCH - EB Gallares Bldg. CPG Avenue, Tagbilaran City, 6300
RAMOS BRANCH - V Yap Bldg F. Ramos St., Cebu City
TOLEDO BRANCH - Peñalosa St., Luray I, Toledo City Cebu, 6038
MAASIN BRANCH - R. Kangleon Cor., Rafols Sts., Tunga-tunga, Maasin City, Southern Leyte,6600
TACLOBAN BRANCH - Insular Bldg.,Avenida-Veteranos Avenue, Tacloban City,Leyte
BAYBAY BRANCH - M.L. Quezon St., Corner De. Veloso St., Baybay Leyte
ORMOC BRANCH - Real corner San Vidal, Ormoc City
CALBAYOG BRANCH - Irigon Bldg., Pajarito St., Calbayog City, Western Samar, 6710
CAGAYAN DE ORO BRANCH - Tiano-Cruz Taal St. Divisoria, Cagayan de Oro City, 9000
GINGOOG BRANCH - Don Restituto, Baol St. Gingoog City, Misamis Oriental, 9014
VALENCIA BRANCH - JBT Bldg., Apolinario Mabini Corner, Magsaysay St., Valencia City, Bukidnon
NABUNTURAN BRANCH - Purok 11, Brgy. Poblacion, Nabunturan, Compostela Valley
TAGUM BRANCH - Quezon St.,Pioneer Avenue,Tagum City, 8100
DAVAO BRANCH - T. Monteverde St., Davao City, Davao del Sur
MATI BRANCH - Magricom Bldg., Limatoc St., Central, Mati, Davao Oriental, 8200
GENERAL SANTOS BRANCH - UTD Bldg., J. Catolico Avenue, Lagao, General Santos City, 9500
KORONADAL BRANCH - Purok Mabuhay, Brgy. Zone IV, Koronadal City
PAGADIAN BRANCH - Jamisola Corner Ariosa Sts.,Santiago Dist., Pagadian City
BUTUAN BRANCH - Montilla Boulevard, Butuan City, Agusan del Norte
NASIPIT BRANCH - Roxas St.,Brgy. 4, Nasipit,Agusan Del Norte
KITCHARAO BRANCH - Brgy. Songkoy, National Highway, Kitcharao, Agusan del Norte
BAYUGAN BRANCH - Libres St., Taglatawan Bayugan City, Agusan del Sur
SAN FRANCISCO BRANCH - Quezon St.,Brgy.2 San Francisco, Agusan del Sur, 8501
SURIGAO BRANCH - San Nicolas Cor.,Diez St., Surigao City, Surigao del Norte
TANDAG BRANCH - Napo Nat'l H-way Bag-ong Lungsod, Tandag, Surigao del Sur
AMPAYON BRANCH - Brgy. Ampayon, Butuan City
CABADBARAN BRANCH - Rara Corner A. Curato Streets, Cabadbaran City, Agusan del Norte, 8605
DAPA BRANCH - Brgy. 11, Mabini St., Dapa, Surigao del Norte 8417
MADRID BRANCH - Arpilleda Corner Buniel Streets, Brgy. Quirino, Madrid, Surigao del Sur
MANGAGOY BRANCH - Espiritu St., Brgy. Mangagoy, Bislig City,8311
TAGOLOAN BRANCH - National Highway, Poblacion Tagoloan, Misamis Oriental, 9001
TRENTO BRANCH - J. Luna St., Trento, Agusan del Sur
19
Status of Publicly-Announced New Product or Service
All publicly-announced new products or services of the Bank are in commercial distribution.
Competition
The banking industry in the Philippines is composed of universal banks, commercial banks, savings
banks, savings and mortgage banks, private development banks, stock savings and loan associations,
rural banks and cooperative banks.
As of December 31, 2014, the universal and commercial banking sector consisted of 36 banks, of
which 21 were universal banks and 15 were commercial banks. Of the 21 universal banks, 12 were
private domestic banks, three were government banks and six were branches of foreign banks. Of the
15 commercial banks, five were private domestic banks, two were subsidiaries of foreign banks and
eight were branches of foreign banks.
Commercial banks have all the general powers incident to corporations and all powers that may be
necessary to carry on the business of commercial banking, such as the power to accept drafts and to
issue letters of credit, discount and negotiate promissory notes, drafts, bills of exchange and other
evidences of indebtedness, accept or create demand deposits, receive other types of deposits and
deposit substitutes, buy and sell foreign exchange and gold and silver bullion, and lend money on a
secured or unsecured basis. Universal banks are banks that have authority, in addition to commercial
banking powers, to exercise the powers of investment houses, to invest in the equity of business not
related to banking, and to own up to 100% of the equity in a thrift bank, a rural bank, or a financial
allied or non-allied enterprise. A publicly-listed universal or commercial bank may own up to 100%
of the voting stock of only one other universal or commercial bank.
Thrift banks primarily accumulate the savings of depositors and invest them, together with capital
loans secured by bonds, mortgages in real estate and insured improvements thereon, chattel mortgage,
bonds and other forms of security or in loans for personal and household finance, secured or
unsecured, or in financing for home building and home development; in readily marketable debt
securities; in commercial papers and accounts receivables, drafts, bills of exchange, acceptances or
notes arising out of commercial transactions. Thrift banks also provide short-term working capital and
medium- and long-term financing for businesses engaged in agriculture, services, industry, and
housing as well as other financial and allied services for its chosen market and constituencies,
especially for small and medium-sized enterprises and individuals. As at December 31, 2014, there
were 69 thrift banks.
Rural banks are organized primarily to make credit available and readily accessible in the rural areas
on reasonable terms. Loans and advances extended by rural banks are primarily for the purpose of
meeting the normal credit needs of farmers and fishermen, as well as the normal credit needs of
cooperatives and merchants. As of December 31, 2014, there were 545 rural and cooperative banks.
Specialized government banks are organized to serve a particular purpose. The existing specialized
banks are the Development Bank of the Philippines (“DBP”), Land Bank of the Philippines (“LBP”),
and Al-Amanah Islamic Investment Bank of the Philippines (“AAIIB”). DBP was organized primarily
to provide banking services catering to the medium- and long-term needs of agricultural and industrial
enterprises, particularly in rural areas and preferably for small- and medium-sized enterprises. LBP
primarily provides financial support in all phases of the Philippines’ agrarian reform program. In
addition to their special functions, DBP and LBP are allowed to operate as universal banks. AAIIB
was organized to promote and accelerate the socio-economic development of the Autonomous Region
of Muslim Mindanao through banking, financing and investment operations and to establish and
participate in agricultural, commercial and industrial ventures based on Islamic banking principles and
rulings.
20
During the past decade, the Philippine banking industry has been marked by two major trends — the
liberalization of the industry, and mergers and consolidation.
Foreign bank entry was liberalized in 1994, enabling foreign banks to invest in up to 60% of the
voting stock of an existing bank or a new banking subsidiary, or to establish branches with full
banking authority. This led to the establishment of ten new foreign bank branches in 1995. The
General Banking Law further liberalized the industry by providing that the Monetary Board may
authorize foreign banks to acquire up to 100% of the voting stock of one domestic bank. Under the
General Banking Law, any foreign bank, which prior to the effectiveness of the said law availed itself
of the privilege to acquire up to 60% of the voting stock of a domestic bank, may further acquire
voting shares of such bank to the extent necessary for it to own 100% of the voting stock thereof.
The Bank faces competition from both domestic and foreign banks, in part, as a result of the
liberalization of the banking industry by the Government. Since 1994, a number of foreign banks,
which have greater financial resources than the Bank, have been granted licenses to operate in the
Philippines. Such foreign banks have generally focused their operations on the larger corporations and
selected consumer finance products, such as credit cards. The foreign banks have not only increased
competition in the corporate market, but have as a result caused more domestic banks to focus on the
commercial middle-market, placing pressure on margins in both markets.
Since September 1998, the BSP has been encouraging consolidation among banks in order to
strengthen the Philippine banking system. Mergers and consolidation result in greater competition, as
a smaller group of “top tier” banks compete for business.
As of December 31, 2014, the ten largest commercial banks account for approximately 80.8% of total
assets and 81.9% of total deposits of the commercial banking system based on published statements of
condition.
Certain factors arising from the 1997 Asian crisis and the 2008 global financial crisis also resulted in
greater competition and exert downward pressure on margins. Banks instituted more restrictive
lending policies as they focused on asset quality and reduction of their NPLs, which resulted in
increasing liquidity. As Philippine economic growth further accelerates and banks apply such liquidity
in the lending market, greater competition for corporate, commercial and consumer loans is expected.
As of December 31, 2014, the ten largest commercial banks account for approximately 85.1% of the
net customer loan portfolio of the commercial banking system, based on published statements of
condition.
Sources and Availability of Raw Materials and Names of Principal Suppliers
This is not relevant to the operations of the Bank.
Customer Concentration
The Bank has a diversified customer base and there is no concentration of business in major customer
groups. As such, the Bank is not dependent upon a single customer or a few customers
Transactions with and/or Dependence on Related Parties
In the ordinary course of business, the Bank has loan transactions with some subsidiaries and with
certain directors, officers, stockholders and related interests. Under the Bank’s policies, these loans
are made substantially on the same terms as loans to other individuals and businesses of comparable
risks. Refer to Note 26 of the attached 2014 Audited Financial Statements of EastWest for the details
of related party transactions.
21
Patents, Trademarks, Copyrights, Licenses, Franchises, Concessions and Royalty Agreements
Held
In 1994, EW obtained a Certificate of Registration and bank license from the Philippine SEC to
operate under the corporate name “East West Banking Corporation.”
EW uses a variety of names and marks, including the name “East West Banking Corporation” and
EW’s logo, in connection with its business. The Bank has registered such names and marks with the
Intellectual Property Office of the Philippines.
On January 25, 2012, the Bank obtained a certification from the BSP on a US-based bank using a
similar name. As certified by BSP, the US-based bank has not been issued a license to operate as a
banking institution in the Philippines. The BSP also certified that the Bank is among the commercial
banks it supervises. On October 10, 2013, the Intellectual Property Office of the Philippines issued a
decision in favor of the Bank, cancelling the mark “EAST WEST BANK & COMPASS LOGO”
previously registered in the name of a US-based bank.
Need for Government Approval of Principal Products or Services
The Bank’s principal products and services are offered to customers only upon receipt of the
necessary regulatory approvals or clearances. The Bank strictly complies with the related regulatory
requirements such as reserves, liquidity position, loan exposure limits, cap on foreign exchange
holdings, provision for losses, anti-money laundering provisions and other reportorial requirements.
Effect of Existing or Probable Governmental Regulations on the Business
The Bank strictly complies with the Bangko Sentral ng Pilipinas (BSP) requirements in terms of
capitalization reserves, liquidity position, limits on loan exposure, cap on foreign exchange holdings,
provision for losses, anti-money laundering provisions and other reportorial requirements as well as
other regulatory agencies such as the Securities and Exchange Commission, Philippine Stock
Exchange, Philippine Deposit Insurance Corporation and the Bureau of Internal Revenues, among
others.
Amount Spent on Research and Development Activities
The Bank’s research and development activities are mainly driven market research and process
improvements. EastWest’s businesses are heavily dependent on the ability to timely and accurately
collect and process a large amount of financial and other information across numerous and diverse
markets and products at its various branches, at a time when transaction processes have become
increasingly complex with increasing volume.
The amount spent on research and development activities (in million pesos) and its percentage to
revenues for the last three years has been as follows:
Year
Amount
=1.58
P
=2.23
P
=0.73
P
2014
2013
2012
Costs and Effects of Compliance with Environmental Laws
This is not relevant to the operations of the Bank.
22
% of Revenue
0.01%
0.02%
0.01%
Employees
As at December 31, 2014, EastWest had 4,714 full-time employees compared to 4,305 in 2013. The
following table categorizes EastWest’s full-time employees rank, as of December 31, 2014 and 2013:
Rank
Executives
Managers
Rank and File
Total
2014
184
1,885
2,645
4,714
2013
165
1,670
2,470
4,305
The Bank’s subsidiary rural banks have a 537 officers/staff, bringing the combined manpower of
5,251.
EastWest anticipates it will have approximately 5,500 employees by the end of 2015. This anticipated
significant increase in the number of employees is related to the hiring of branch personnel to
compliment the branches opened in the last three years.
There is no existing collective bargaining agreement between EastWest and any of its employees, and
EastWest’s employees are not part of any labor union.
Financial Risk Management Objectives and Policies
Risk Management
To ensure that corporate goals and objectives, and business and risk strategies are achieved, the EW
utilizes a risk management process that is applied throughout the organization in executing all
business activities. Employees’ functions and roles fall into one of the three categories where risk
must be managed in the business units, operating units and governance units.
EW’s activities are principally related to the use of financial instruments and are exposed to credit
risk, liquidity risk, operational risk and market risk, the latter being subdivided into trading and nontrading risks. Forming part of a coherent risk management system are the risk concepts, control tools,
analytical models, statistical methodologies, historical researches and market analysis, which are
being employed by EW. These tools support the key risk process that involves identifying,
measuring, controlling and monitoring risks.
Risk Management Structure
a. Board of Directors (the Board or BOD)
EW’s risk culture is practiced and observed across the Group putting the prime responsibility
on the BOD. It establishes the risk culture and the risk management organization and
incorporates the risk process as an essential part of the strategic plan of the Group. The BOD
approves EW’s articulation of risk appetite which is used internally to help management
understand the tolerance for risk in each of the major risk categories, its measurement and key
controls available that influence EW’s level of risk taking. All risk management policies and
policy amendments, risk-taking limits such as but not limited to credit and trade transactions,
market risk limits, counterparty limits, trader’s limits and activities are based on EW’s
established approving authorities which are approved by EW’s BOD. At a high level, the
BOD also approves EW’s framework for managing risk.
b. Executive Committee
This is a board level committee, which reviews the bank-wide credit strategy, profile and
performance. It approves the credit risk-taking activities based on EW’s established
approving authorities and likewise reviews and endorses credit-granting activities, including
the Internal Credit Risk Rating System. All credit proposals beyond the credit approving
23
limit of the Loan and Investments Committee passes through this committee for final
approval.
c. Loan and Investments Committee
This committee is headed by the Chairman of EW whose primary responsibility is to oversee
EW’s credit risk-taking activities and overall adherence to the credit risk management
framework, review business/credit risk strategies, quality and profitability of EW’s credit
portfolio and recommend changes to the credit evaluation process, credit risk acceptance
criteria and the minimum and target return per credit or investment transaction. All credit
risk-taking activities based on EW’s established approving authorities are evaluated and
approved by this committee. It establishes infrastructure by ensuring business units have the
right systems and adequate and competent manpower support to effectively manage its credit
risk.
d. Asset-Liability Management Committee (ALCO)
ALCO, a management level committee, meets on a weekly basis and is responsible for the
over-all management of EW’s market, liquidity, and financial position related risks. It
monitors EW’s liquidity position and reviews the impact of strategic decisions on liquidity. It
is responsible for managing liquidity risks and ensuring exposures remain within established
tolerance levels. The ALCO’s primary responsibilities include, among others, (a) ensuring
that EW and each business unit holds sufficient liquid assets of appropriate quality and in
appropriate currencies to meet short-term funding and regulatory requirements, (b) managing
financial position and ensuring that business strategies are consistent with its liquidity, capital
and funding strategies, (c) establishing asset and/or liability pricing policies that are consistent
with the financial position objectives, (d) recommending market and liquidity risk limits to
the Risk Management Committee and BOD and (e) approving the assumptions used in
contingency and funding plans. It also reviews cash flow forecasts, stress testing scenarios
and results, and implements liquidity limits and guidelines.
e. Risk Management Committee (RMC)
RMC is a board level committee who convenes monthly and is primarily responsible to assist
the Board in managing EW's risk taking activities. This is performed by the committee by
institutionalizing risk policies and overseeing EW's risk management system. It develops and
recommends risk appetite and tolerances for EW's major risk exposures to the Board. Risk
management principles, strategies, framework, policies, processes, and initiatives and any
modifications and amendments thereto are reviewed and approved by RMC. It oversees and
reports to the Board the effectiveness of the risk management system, overall risk profile, and
compliance with the risk appetite and tolerances that the Board approved.
f.
Risk Management Subcommittee (RMSC)
RMSC is a management level committee who convenes monthly and is responsible to assist
RMC in fulfilling its responsibilities in managing EW's risk taking activities. This is
performed by the committee by implementing the risk management principles, strategies,
framework, policies, processes, and initiatives across EW. It leads the effective conduct of
risk and capital management. It oversees and directs the management of EW's overall risk
profile. The committee likewise oversees risk incidents, control gaps, and control
deficiencies and management actions in implementing the corresponding corrective actions.
g. Audit Committee (Audit Com)
The Audit Com assists the BOD in fulfilling its oversight responsibilities for the financial
reporting process, the system of internal control, the audit process, and EW’s process for
monitoring compliance with laws and regulation and the code of conduct. It retains oversight
responsibilities for operational risk, the integrity of EW’s financial statements, compliance,
legal risk and overall policies and practices relating to risk management. It is tasked to
24
discuss with management EW’s major risk exposures and ensures accountability on the part
of management to monitor and control such exposures including EW’s risk assessment and
risk management policies. The Audit Com discusses with management and the independent
auditor the major issues regarding accounting principles and financial statement presentation,
including any significant changes in EW’s selection or application of accounting principles;
and major issues as to the adequacy of EW’s internal controls; and the effect of regulatory
and accounting initiatives, as well as off-balance sheet structures, on the financial statements
of EW.
h. Corporate Governance and Compliance Committee (CGCC)
The CGCC is responsible for ensuring the BOD’s effectiveness and due observance of
corporate governance principles and guidelines. It reviews and assesses the adequacy of the
CGCC’s charter and Corporate Governance Manual and recommends changes as necessary.
It oversees the implementation of EW’s compliance program and ensures compliance issues
are resolved expeditiously. It assists Board members in assessing whether EW is managing
its compliance risk effectively and ensures regular review of the compliance program.
i.
Risk Management Division (RMD)
RMD performs an independent risk governance function within EW. RMD is tasked with
identifying, measuring, controlling and monitoring existing and emerging risks inherent in
EW’s overall portfolio (on- or off-balance sheet). RMD develops and employs risk
assessment tools to facilitate risk identification, analysis and measurement. It is responsible
for developing and implementing the framework for policies and practices to assess and
manage enterprise-wide market, credit, operational, and all other risks of EW.
It also develops and endorses risk tolerance limits for BOD approval, as endorsed by the
RMC, and monitors compliance with approved risk tolerance limits. Finally, it regularly
apprises the BOD, through the RMC, the results of its risk monitoring.
j.
Internal Audit Division (IAD)
IAD provides an independent assessment of EW’s management and effectiveness of existing
internal control systems through adherence testing of processes and controls across the
organization. The IAD audits risk management processes throughout EW annually or in a
cycle depending on the latest audit rating. It employs a risk-based audit approach that
examines both the adequacy of the procedures and EW’s compliance with the procedures. It
discusses the results of all assessments with management, and reports its findings and
recommendations to the Audit Committee which in turn, conducts the detailed discussion of
the findings and recommendations during its regular meetings. IAD’s activities are suitably
designed to provide the BOD with reasonable assurance that significant financial and
operating information is materially complete, reliable and accurate; internal resources are
adequately protected; and employee performance is in compliance with EW’s policies,
standards, procedures and applicable laws and regulations.
k. Compliance Division
Compliance Division is responsible for reviewing any legal or regulatory matters that could
have a significant impact on EW’s financial statements, EW’s compliance with applicable
laws and regulations, and inquiries received from regulators or governmental agencies. It
reviews the effectiveness and adequacy of the system for monitoring compliance with laws
and regulations and the results of management's investigation and follow-up (including
disciplinary action) for any instances of noncompliance.
Credit Risk
Credit risk refers to the potential loss of earnings or capital arising from an obligor/s, customer/s or
counterparty’s failure to perform and/or to meet the terms of any contract with the Group. Credit
25
risks may last for the entire tenor and set at the full amount of a transaction and in some cases may
exceed the original principal exposures. The risk may arise from lending, trade financing, trading,
investments and other activities undertaken by the Group. To identify and assess this risk, the Group
has a structured and standardized credit rating, and approval process according to the borrower or
business and/or product segment. For large corporate credit transactions, EW has a comprehensive
procedure for credit evaluation, risk assessment and well-defined concentration limits, which are
established for each type of borrower. At the portfolio level, which may be on an overall or by
product perspective, RMD manages the Group’s credit risk.
Credit concentration
Excessive concentration of lending plays a significant role in the weakening of asset quality. The
Group reduces this risk by diversifying its loan portfolio across various sectors and borrowers. The
Group believes that good diversification across economic sectors and geographic areas, among others,
will enable it to ride through business cycles without causing undue harm to its asset quality.
RMD reviews the Group’s loan portfolio in line with the Group’s policy of not having significant
concentrations of exposure to specific industries or group of borrowers. Management of
concentration of risk is by client/counterparty and by industry sector. For risk concentration
monitoring purposes, the financial assets are broadly categorized into loans and receivables, loans and
advances to banks, and investment securities. RMD ensures compliance with BSP’s limit on
exposure to any single person or group of connected persons by closely monitoring large exposures
and top 20 borrowers for both single and group accounts.
Aside from ensuring compliance with BSP’s limit on exposures to any single person or group of
connected persons, it is EW’s policy to keep the expected loss (determined based on the credit risk
rating of the account) of large exposure accounts to, at most, one and a half percent (1.50 %) of their
aggregate outstanding balance. This is to maintain the quality of the Group’s large exposures. With
this, accounts with better risk grades are given priority in terms of being granted a bigger share in the
Group’s loan facilities.
Aligned with the Manual of Regulations for Banks definition, the Group considers its loan portfolio
concentrated if it has exposures of more than thirty percent (30.00%) to a particular industry.
Collateral and other credit enhancements
Collaterals are taken into consideration during the loan application process as they offer an alternative
way of collecting from the client should a default occur. The percentage of loan value attached to the
collateral offered is part of the Group’s lending guidelines. Such percentages take into account safety
margins for foreign exchange rate exposure/fluctuations, interest rate exposure, and price volatility.
Collaterals are valued according to existing credit policy standards and, following the latest appraisal
report, serve as the basis for the amount of the secured loan facility.
Premium security items are collaterals that have the effect of reducing the estimated credit risk for a
facility. The primary consideration for enhancements falling under such category is the ease of
converting them to cash.
The Group is not permitted to sell or re-pledge the collateral in the absence of default by the owner of
the collateral. It is the Group’s policy to dispose foreclosed assets in an orderly fashion. The
proceeds of the sale of the foreclosed assets, included under Investment Properties, are used to reduce
or repay the outstanding claim. In general, the Group does not occupy repossessed properties for
business use.
As part of the Group’s risk control on security/collateral documentation, standard documents are
made for each security type and deviation from the pro-forma documents are subject to Legal Services
26
Division’s approval prior to acceptance.
Internal Credit Risk Rating System
EW employs a credit scoring system for all corporate borrowers to assess risks relating to the
borrower and the loan exposure. Borrower risk is evaluated by considering (a) quantitative factors
under financial condition and (b) qualitative factors, such as management quality and industry
outlook.
Financial condition assessment focuses on profitability, liquidity, capital adequacy, sales growth,
production efficiency and leverage. Management quality determination is based on EW’s strategies,
management competence and skills and management of banking relationship. On the other hand,
industry prospect is evaluated based on its importance to the economy, growth, industry structure and
relevant government policies. Based on these factors, each borrower is assigned a Borrower Risk
Rating (BRR), an 11-scale scoring system that ranges from 1 to 10, including SBL. In addition to the
BRR, EW assigns a Facility Risk Rating (FRR) to determine the risk of the prospective (or existing)
exposure with respect to each credit facility that it applied for (or under which the exposure is
accommodated). The FRR focuses on the quality and quantity of the collateral applicable to the
underlying facility, independent of borrower quality. Consideration is given to the availability and
amount of any collateral and the degree of control, which the lender has over the collateral. FRR
applies both to balance sheet facilities and contingent liabilities. One FRR is determined for each
individual facility taking into account the different security arrangements or risk influencing factors to
allow a more precise presentation of risk. A borrower with multiple facilities will have one BRR and
multiple FRRs. The combination of the BRR and the FRR results to the Adjusted Borrower Risk
Rating (ABRR).
The credit rating for each borrower is reviewed annually. A more frequent review is warranted in
cases where the borrower has a higher risk profile or when there are extraordinary or adverse
developments affecting the borrower, the industry and/or the Philippine economy.
The following is a brief explanation of EW’s risk grades:
Rating Description
1
Excellent
2
Strong
3
Good
Account/Borrower Characteristics
 low probability of going into default within the coming year; very
high debt service capacity and balance sheets show no sign of any
weakness
 has ready access to adequate funding sources
 high degree of stability, substance and diversity
 of the highest quality under virtual economic conditions
 low probability of going into default in the coming year
 access to money markets is relatively good
 business remains viable under normal market conditions
 strong market position with a history of successful financial
performance
 financials show adequate cash flows for debt servicing and
generally conservative balance sheets
 sound but may be susceptible, to a limited extent, to cyclical
changes in the markets in which they operate
 financial performance is good and capacity to service debt
remains comfortable
 cash flows remain healthy and critical balance sheet ratios are at
par with industry norms
 reported profits in the past three years and expected to sustain
profitability in the coming year
27
Rating Description
4
Satisfactory
5
Acceptable
5B
Acceptable
6
Watchlist
7
Special
Mention
8
Substandard
Account/Borrower Characteristics
 clear risk elements exist and probability of going into default is
somewhat greater, as reflected in the volatility of earnings and
overall performance
 normally have limited access to public financial markets
 able to withstand normal business cycles, but expected to
deteriorate beyond acceptable levels under prolonged unfavorable
economic period
 combination of reasonably sound asset and cash flow protection
 risk elements for the Parent Company are sufficiently
pronounced, but would still be able to withstand normal business
cycles
 immediate deterioration beyond acceptable levels is expected
given prolonged unfavorable economic period
 there is sufficient cash flow either historically or expected in the
future in spite of economic downturn combined with asset
protection
 financial condition hard to ascertain due to weak validation of
financial statements coupled by funding leakages to other
business interests whose financial condition is generally unknown
 continuous decline in revenues and margins due to competition;
increasing debt levels not commensurate to growth in revenues
and funding requirements
 thin margin business with banks financing bulk of working
capital and capex requirements coupled by substantial dividend
pay-outs
 chronically tight cashflows with operating income negative or
barely enough for debt servicing
 lines with banks maxed out and availments evergreen with
minimal payments made over time or with past record of past due
loans with other banks, cancelled credit cards and court cases
 affected by unfavorable industry or company-specific risk factors
 operating performance and financial strength may be marginal
and ability to attract alternative sources of finance is uncertain
 difficulty in coping with any significant economic downturn;
some payment defaults encountered
 net losses for at least two consecutive years
 ability or willingness to service debt are in doubt
 weakened creditworthiness
 expected to experience financial difficulties, putting the Parent
Company’s exposure at risk
 collectability of principal or interest becomes questionable by
reason of adverse developments or important weaknesses in
financial cover
 negative cash flows from operations and negative interest
coverage
 past due for more than 90 days
 there exists the possibility of future loss to the Parent Company
unless given closer supervision
28
Rating Description
9
Doubtful
10
Loss
Account/Borrower Characteristics
 unable or unwilling to service debt over an extended period of
time and near future prospects of orderly debt service are
doubtful
 with non-performing loan (NPL) status
 previously rated ‘Substandard’ by the BSP
 loss on credit exposure unavoidable
 totally uncollectible
 prospect of re-establishment of creditworthiness and debt service
is remote
 lender shall take or has taken title to the assets and is preparing
foreclosure and/or liquidation although partial recovery may be
obtained in the future
 considered uncollectible or worthless and of such little value that
continuance as bankable assets is not warranted although the
loans may have some recovery or salvage value
It is EW’s policy to maintain accurate and consistent risk ratings across the credit portfolio. This
facilitates a focused management of the applicable risk and the comparison of credit exposures across
all lines of business, geographic regions and products. The rating system is supported by a variety of
financial analytics, combined with processed market information to provide the main inputs for the
measurement of counterparty risk. All internal risk ratings are tailored to the various categories and
are derived in accordance with EW’s rating policy. The risk ratings are assessed and updated
regularly.
External ratings
The Group also uses external ratings, such as Standard & Poor’s, Moody’s, and Fitch, to evaluate its
counterparties and in its assignment of credit risk weights to its banking book exposures.
Transactions falling under this category are normally of the following nature: placements with other
banks, money market lending, debt security investments, and to some extent, equity security
investments.
Borrowers with unquestionable repaying capacity and to whom the Group is prepared to lend on an
unsecured basis, either partially or totally, are generally rated as High Grade borrowers. Included in
the High Grade category are those accounts that fall under ‘Excellent’, ‘Strong’, ‘Good’ and
‘Satisfactory’ categories under ICRRS (with rating of 1-4).
Standard rated borrowers normally require tangible collateral, such as real estate mortgage (REM), to
either fully or partially secure the credit facilities as such accounts indicate a relatively higher credit
risk than those considered as High Grade. Included in Standard Grade category are those accounts
that fall under ‘Acceptable’, ‘Watchlist’ and ‘Special mention’ categories under ICRRS (with rating
of 5-7).
Substandard Grade accounts pertain to corporate accounts falling under the ‘Substandard,’ ‘Doubtful’
and ‘Loss’ categories under ICRRS (with rating of 8-10) and unsecured revolving credit facilities.
Those accounts that are classified as unrated includes unquoted debt securities, accounts receivable,
accrued interest receivable and sales contract receivable for which the Group has not yet established a
credit rating system.
Impairment Assessment
On a regular basis, the Group conducts an impairment assessment exercise to determine expected
losses on its loans portfolio.
29
The main considerations for the loan impairment assessment include whether any payments of
principal or interest are overdue by more than 30 to 90 days as applicable, or if there are any known
difficulties in the cash flows of counterparties, credit rating downgrades, or infringement of the
original terms of the contract. The Group addresses impairment assessment in two areas: specific or
individually assessed allowances and collectively assessed allowances.
a. Specific Impairment Testing
Specific impairment testing is the process whereby classified accounts are individually
significant subject to impairment testing. Classified accounts are past due accounts and
accounts whose credit standing and/or collateral has weakened due to varying circumstances.
This present status of the account may adversely affect the collection of both principal and
interest payments.
Indicators of impairment testing are past due accounts, decline in credit rating from
independent rating agencies and recurring net losses.
The net recoverable amount is computed using the present value approach. The discount rate
used for loans with fixed and floating interest rate is the original effective interest rate and last
repriced interest rate, respectively. Net recoverable amount is the total cash inflows to be
collected over the entire term of the loan or the expected proceeds from the sale of collateral.
Specific impairment testing parameters include the account information (original and
outstanding loan amount), interest rate (nominal and historical effective) and the business
plan. Also included are the expected date of recovery, expected cash flows, probability of
collection, and the carrying value of loan and net recoverable amount.
The Group conducts specific impairment testing on significant classified and restructured
corporate accounts.
b. Collective Impairment Testing
All other accounts which were not individually assessed are grouped based on similar credit
characteristics and are collectively assessed for impairment under the Collective Impairment
Testing. This is also in accordance with PAS 39, which provides that all loan accounts not
included in the specific impairment test shall be subjected to collective testing.
Collective impairment testing of corporate accounts
Corporate accounts, which are unclassified and with current status are grouped in accordance
with EW’s internal credit risk rating. Each internal credit risk rating would fetch an
equivalent loss impairment where the estimated loss is determined in consideration of EW’s
historical loss experience. Impairment loss is derived by multiplying the outstanding loan
balance on a per internal credit risk rating basis against a factor rate. The factor rate, which
estimates the expected loss from the credit exposure, is the product of the Default Rate (DR)
and the Loss Given Default Rate (LGDR).
DR is estimated based on the
3-year historical average default experience by internal credit risk rating of the Parent
Company, while, LGDR is estimated based on loss experience (net of recoveries from
collateral) for the same reference period.
Collective impairment testing of consumer accounts
Consumer accounts, both in current and past due status are collectively tested for impairment
as required under PAS 39. Accounts are grouped by type of product - personal loans, salary
loans, housing loans, auto loans and credit cards.
The estimation of the impaired consumer products’ estimated loss is based on three major
concepts: age buckets, probability of default and recoverability. Per product, exposures are
categorized according to their state of delinquency - (1) current and (2) past due (which is
30
subdivided into 30, 60, 90, 120, 150, 180 and more than 180 days past due). Auto, housing
and salary loans have an additional bucket for its items in litigation accounts. The Group
partitions its exposures as it recognizes that the age buckets have different rates and/ or
probabilities of default. The initial estimates of losses per product due to default are then
adjusted based on the recoverability of cash flows, to calculate the expected loss of the Group.
Auto and housing loans consider the proceeds from the eventual sale of foreclosed collaterals
in approximating its recovery rate; while credit cards, salary loans and personal loans depend
on the collection experience of its receivables. Further for housing loans, due to the nature of
the assets offered as security, and as the exposures are limited to a certain percentage of the
same, this product possess the unique quality of obtaining full recoverability. These default
and recovery rates are based on the Group’s historical experience, which covers a minimum
of two to three (2-3) years cycle, depending on the availability and relevance of data.
Liquidity Risk
Liquidity risk is the risk that sufficient funds are unavailable to adequately meet all maturing
liabilities, including demand deposits and off-balance sheet commitments. The main responsibility of
daily asset liability management lies with EW’s Treasury Group, specifically the Liquidity Desk, and
the Subsidiary’s Fund Management Department which are tasked to manage the balance sheet and
have thorough understanding of the risk elements involved in the respective businesses. Both EW and
the Subsidiary’s liquidity risk management are then monitored through each entity’s ALCO.
Resulting analysis of the balance sheet along with the recommendation is presented during the weekly
ALCO meeting where deliberations, formulation of actions and decisions are made to minimize risk
and maximize returns. Discussions include actions taken in the previous ALCO meeting, economic
and market status and outlook, liquidity risk, pricing and interest rate structure, limit status and
utilization. To ensure that both EW and Subsidiary has sufficient liquidity at all times, the respective
ALCO formulates a contingency funding plan which sets out the amount and the sources of funds
(such as unutilized credit facilities) available to both entities and the circumstances under which such
funds will be used.
By way of the Maximum Cumulative Outflow (MCO) limit, the Group is able to manage its long-term
liquidity risks by placing a cap on the outflow of cash on a per tenor and on a cumulative basis. The
Group takes a multi-tiered approach to maintaining liquid assets. The Group’s principal source of
liquidity is comprised of COCI, Due from BSP, Due from other banks and IBLR with maturities of
less than one year. In addition to regulatory reserves, EW maintains a sufficient level of secondary
reserves in the form of liquid assets such as short-term trading and investment securities that can be
realized quickly.
Market Risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate
due to changes in market variables such as interest rates, foreign exchange rates, and equity prices.
EW treats exposures to market risk as either for trading or accrual/balance sheet exposure. The market
risk for the trading portfolio is managed and monitored based on a VaR methodology. Interest rate
risk of accrual portfolios are managed and monitored using sensitivity analyses.
Market risk in the trading books
The Board has set limits on the level of market risk that may be accepted. Price risk limits are applied
at the business unit level and approved by the BOD based on, among other things, a business unit’s
capacity to manage price risks, the size and distribution of the aggregate exposure to price risks and
the expected return relative to price risks.
EW applies the Value at Risk (VaR) methodology to assess the market sensitive positions held for
trading and to estimate the potential economic loss based on parameters and assumptions. VaR is a
method used in measuring market risk by estimating the potential negative change in the market value
of a portfolio at a given confidence level and over a specified time horizon.
31
Objectives and limitations of the VaR Methodology
EW uses the VaR model of Bloomberg Portfolio Analytics using one-year historical data set to assess
possible changes in the market value of the Fixed Income, Equities, and Foreign Exchange trading
portfolio. The Interest Rate Swaps (IRS) trading portfolio’s market risk is measured using Monte
Carlo VaR. The Bloomberg and Monte Carlo VaR models are designed to measure market risk in a
normal market environment. The use of VaR has limitations because correlations and volatilities in
market prices are based on historical data and VaR assumes that future price movements will follow a
statistical distribution. Due to the fact that VaR relies heavily on historical data to provide
information and may not clearly predict the future changes and modifications of the risk factors, the
probability of large market moves may be underestimated.
VaR may also be under or over estimated due to assumptions placed on risk factors and the
relationship between such factors for specific instruments. Even though positions may change
throughout the day, the VaR only represents the risk of the portfolio at the close of each business day,
and it does not account for any losses that may occur beyond the 99.00% confidence level.
In practice, actual trading results will differ from the VaR calculation and, in particular, the
calculation does not provide a meaningful indication of profits and losses in stressed market
conditions. To determine the reliability of the VaR model, actual outcomes are monitored through
hypothetical and actual backtesting to test the accuracy of the VaR model.
Stress testing provides a means of complementing VaR by simulating the potential loss impact on
market risk positions from extreme market conditions, such as 500 bps increase in Philippine peso
interest rates and 300 bps increase in US dollar interest rates adopted from the uniform stress testing
framework of the BSP.
VaR assumptions
The VaR that EW use is premised on a 99.00% confidence level that this potential loss estimate is not
expected to be exceeded if the current market risk positions were to be held unchanged for a given
holding period. Foreign exchange VaR is measured using one day holding period while fixed income
VaR has holding period of five (5) days. Furthermore, EW’s equity and IRS trading positions are
assumed to be closed out in ten (10) days. The use of a 99.00% confidence level means that within the
set time horizon, losses exceeding the VaR figure should occur, on average, not more than once every
hundred days.
VaR is an integral part of EW’s market risk management and encompasses investment positions held
for trading. VaR exposures form part of the market risk monitoring which is reviewed daily against
the limit approved by the Board. The trading activities are controlled through the Market Risk Limit
(MRL), which is a function of EW’s qualifying capital and the trading income generated throughout
the year. RMD reports compliance to the MRL and trader’s VaR limits on a daily basis. If the MRL
of individual trader’s limit is exceeded, such occurrence is promptly reported to the Treasurer, Chief
Risk Officer and the President, and further to the Board through the RMC.
Foreign Currency Risk
EW holds foreign currency denominated assets and liabilities, thus, fluctuations on the foreign
exchange rates can affect the financial and cash flows of EW. Managing the foreign exchange
exposure is important for banks with exposures in foreign currencies. It includes managing foreign
currency positions in order to control the impact of changes in exchange rates on the financial position
of EW.
EW’s foreign currency exposures emanate from its net open spot and forward FX purchase and sell
transactions, and net foreign currency income accumulated over the years of its operations. Foreign
currency-denominated deposits are generally used to fund EW’s foreign currency-denominated loan
32
and investment portfolio in the FCDU. In the FCDU books, BSP requires banks to match the foreign
currency assets with the foreign currency liabilities. Thus, banks are required to maintain at all times
a 100.00% cover for their currency liabilities held through FCDU. EW is in compliance with said
regulation as of December 31, 2014 and 2013.
Total foreign exchange currency position is monitored through the daily BSP FX position reports,
which are subject to the overbought and oversold limits set by the BSP at 20.00% of unimpaired
capital or $50.00 million, whichever is lower. Internal limits regarding the intraday trading and endof-day trading positions in FX, which take into account the trading desk and the branch FX
transactions, are also monitored.
Market Risk in the Banking Book
Interest rate risk
A critical element of risk management program consists of measuring and monitoring the risks
associated with fluctuations in market interest rates on the Group’s net interest income. The shortterm nature of its assets and liabilities reduces the exposure of its net interest income to such risks.
EW employs re-pricing gap analysis on a monthly basis to measure the interest rate sensitivity of its
assets and liabilities. The re-pricing gap analysis measures, for any given period, any mismatches
between the amounts of interest-earning assets and interest-bearing liabilities that would re-price, or
mature (for contracts that do not re-price), during that period. The re-pricing gap is calculated by first
distributing the assets and liabilities contained in the Group’s statement of financial position into tenor
buckets according to the time remaining to the next re-pricing date (or the time remaining to maturity
if there is no re-pricing), and then obtaining the difference between the total of the re-pricing (interest
rate sensitive) assets and re-pricing (interest rate sensitive) liabilities. If there is a positive gap, there
is asset sensitivity which generally means that an increase in interest rates would have a positive
effect on the Group’s net interest income. If there is a negative gap, this generally means that an
increase in interest rates would have a negative effect on net interest income.
The Group also monitors its exposure to fluctuations in interest rates by using scenario analysis to
estimate the impact of interest rate movements on its interest income. This is done by modeling the
impact to the Group’s interest income and interest expenses of different parallel changes in the
interest rate curve, assuming the parallel change only occurs once and the interest rate curve after the
parallel change does not change again for the next twelve months.
Operational Risk
Operational risk is the loss resulting from inadequate or failed internal processes, people and systems
or from external events. It includes legal, compliance and reputational risks but excludes strategic
risk.
Other Risk Exposures
Group risk exposures other than credit, market, liquidity and operational, while existent, are deemed
insignificant relative to the mentioned risks and if taken in isolation. Hence, management of these
risks are instead collectively performed and made an integral part of the Group’s internal capital
adequacy assessment process (ICAAP) and enterprise risk management initiatives.
The last internal capital adequacy assessment results of the Group show that these other risks remain
insignificant to pose a threat on the Group’s capacity to comply with the minimum capital adequacy
ratio of 10% as prescribed by BSP.
33
Item 2. Properties
EastWest’s head office is located at East West Corporate Center, The Beaufort, 5th Avenue corner 23rd
Street, Fort Bonifacio Global City, Taguig City, Philippines.
The list of branch premises owned and leased, including the name of lessors, is filed as part of this
Form 17-A as Annex C.
The Bank believes all its facilities and properties are currently in good condition. As of date of this
report, there are no liens or encumbrances on any of the properties of EastWest. The Bank may
consider encumbering some of its properties as part of its normal supplementary funding operations.
The Bank will continue to reconfigure the mix of its branches and adjusts to the needs of its
customers.
For the years ended December 31, 2014 and 2013, the total rentals of the Group charged to operations
amounted to P
=629.29million and P
=542.47million, respectively.
Item 3. Legal Proceedings
For the past five (5) years, the Bank, its affiliates, subsidiaries, directors and officers, have not been
involved in any legal proceedings that would affect their ability, competence or integrity, and/or
involving a material or substantial portion of their property before any court of law or administrative
body in the Philippines or elsewhere, save in the usual routine cases of the Bank arising from the
ordinary conduct of its business.
All legal proceedings involving the Bank are efficiently and competently attended to and managed by
a group of ten (10) in-house lawyers who are graduates of reputable law schools in the country. As its
external counsels, the Bank retains the services of respected law firms, including Sobreviñas Hayudini
Navarro and San Juan Law Offices; Sycip Salazar Hernandez & Gatmaitan Law Office; Añover
Añover San Diego & Primavera Law Offices, Veralaw (Del Rosario Raboca Gonzales Grasparil );
Jimenez Gonzales Liwanag Bello Valdez Caluya & Fernandez ; and Quitain Law Office.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted during 2014 to a vote of security holders, through the solicitation of
proxies or otherwise.
34
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Issuer's Common Equity and Related Stockholder Matters
Market Information
The common shares of EW have been listed on the PSE on May 7, 2012. The table below shows the
high and low prices of EW shares transacted at the PSE since its listing:
Year Ended December 31, 2012
2nd Quarter – 2012
3rd Quarter – 2012
4th Quarter – 2012
High
P20.70
=
=23.50
P
=29.25
P
Low
P18.50
=
=18.50
P
=22.55
P
Year Ended December 31, 2013
1st Quarter – 2013
2nd Quarter – 2013
3rd Quarter – 2013
4th Quarter – 2013
High
P36.20
=
=37.85
P
=30.70
P
=26.95
P
Low
P29.00
=
=27.50
P
=22.80
P
=23.20
P
Year Ended December 31, 2014
1st Quarter – 2014
2nd Quarter – 2014
3rd Quarter – 2014
4th Quarter – 2014
High
29.00
31.60
30.45
27.10
Low
24.05
28.10
26.90
23.55
High and Low price of the Registrant’s shares as of April 10, 2015 (last practicable trading day) were
=24.75 and P
P
=24.35, respectively.
Holders
The Bank had 84 shareholders of record as of January 31, 2015. Common shares outstanding as of
said date stood at 1,128,409,610 shares.
35
EastWest top 20 shareholders as of January 31, 2015 are as follows:
Name of Stockholder
1. Filinvest Development Corporation
2. Filinvest Development Corporation Forex
3. PCD Nominee Corporation (Non-Filipino)
4. PCD Nominee Corporation (Filipino)
5. F. Yap Securities, Inc.
6. Philippine Air Force Educational Fund, Inc.
7. Washington Sycip
8. Gerardo Susmerano
9. Manuel A. Santiago or Ella C. Santiago
10. Alfonso S. Teh
11. Vicente M. De Vera
12. Joshua Cheng
13. Miriam Cheng Bona
14. Ivy B. Uy
15. Ching Bun Teng
16. Catherine L. Tan
17. Miguel T. Tan
18. William Go Kim Huy
19. Quirino Cheong Gotauco
20. Edwin U. Lim
TOTAL
Number of Shares
451,354,890
394,941,030
168,029,319
109,254,479
2,491,600
390,000
322,000
320,000
220,400
200,000
100,000
100,000
100,000
75,000
64,000
60,000
60,000
50,000
46,000
40,500
1,128,219,218
Percent
40.00%
35.00%
14.89%
09.68%
00.22%
00.03%
00.03%
00.03%
00.02%
00.02%
00.01%
00.01%
00.01%
00.01%
00.01%
00.01%
00.01%
00.01%
00.00%
00.00%
99.99%
Based on the Public Ownership Report of the Bank as of December 31, 2014, 24.06% of the total
outstanding shares are owned by the public.
Equity Ownership of Foreigners on Common Shares as of January 31, 2015 is as follows:
Nationality
Number of
Stockholders
American
Filipino
Non-Filipino
Total
Number of Shares
1
81
2
84
322,000
960,058,290
168,029,320
1,128,409,610
Declaration of Dividends
No dividends were declared and paid by the Bank in 2014 and 2013.
There were no recent sales of unregistered or exempt securities, including issuance of securities
constituting an exempt transaction.
36
Item 6. Management's Discussion and Analysis or Plan of Operation.
Economy
The country’s Gross Domestic Product (GDP) grew by 6.9% in the fourth quarter of 2014, faster than
the 6.3% in the same quarter in 2013 and 5.3% in the third quarter of 2014. Full year GDP grew by
6.1%, 2nd among selected Asian economies, next to China’s 7.4%. Services are the biggest sector of
the Filipino economy and account for 57% of total GDP. Within services the most important
segments are: trade, repair of motor vehicles and household goods (17% of total GDP); real estate,
renting and business activities (11%); transport, storage and communication (8%); financial services
(7%) and public administration, defense and social security (4%). Industry accounts for 31 percent of
GDP. Within industry, manufacturing (22% of total GDP) and construction (5%) are the most
important. Agriculture contributes the remaining 12% of GDP.
Average inflation rate for the year was at 4.1%, marking 2014 as the 6th consecutive year that
inflation has been kept within the government’s target range of 3-5%. This robust performance was
supported by a sound banking system that continued to be profitable, well-capitalized and able to
intermediate funds to the productive sectors of the economy, while maintaining good credit standards.
In 2014, the Bangko Sentral ng Pilipinas (BSP) raised the minimum required level of bank capital,
recognizing that the new normal of banking treats conventional risks more aggressively while
constantly identifying newer forms of risks. The BSP also achieved fairly significant milestones in
re-writing the credit risk framework, in crafting the implementing guidelines for Republic Act
10641(An act allowing the full entry of Foreign Banks in the Philippines) and introducing a Financial
Consumer Protection Framework.
Economic outlook continue to remain bullish for the Philippines. The Philippine banking system is
the only one, out of the 69 jurisdiction that it rates, which Moody’s judged as having a positive
outlook. This sound performance of the banks was due to progressive implementation of deep
reforms and prudent risk-taking activities of banks despite the ample liquidity in the global economy.
December 31, 2014 vs. December 31, 2013
Financial Performance Highlights
The Bank’s recurring income, driven by growth in core loans and deposits, continue to post strong
growth, with Net Interest Income and Fee-based income growing by 19% and 30%, respectively.
However, the Bank’s net income increased slightly by 1% at P
=2.07 billion, largely as a result of lower
trading gains. The Return on Equity (ROE) and Return on Assets (ROA) remain healthy at 10.2%
and 1.3%, respectively at the heels of an aggressive branch store expansion program.
Total assets stood at P
=188.26 billion or 32% higher than end-2013. The growth in assets was driven
mainly by the growth in customer loans which grew by 28% y/y, in line with the Bank’s expectation
and strategy of growing consumer and middle market corporate loans. Consumer loans grew by 34%
to P
=65.78 billion led by auto loans, salary loans (to public school teachers c/o the subsidiary rural
bank) and credit cards. Corporate loans, which are mostly in the middle market sector, grew by 21%
to P
=56.35 billion. The loan portfolio mix was relatively unchanged with consumer loans still
accounted for more than half of the loan portfolio at 54%.
Operating expenses, excluding provision for losses, increased by 15% to P
=8.94 billion from P
=7.79
billion in the same period last year, mainly due to the full year effect in expenses of the 55 branch
stores opened in various periods of 2012 and the 58 new branch stores which opened in 2013.
Provision for losses increased by 7% to P
=3.31 billion y/y as a result of the growth in the Bank’s
37
customer loan portfolio. The Bank’s operating income posted a growth of 13% to P
=14.89 billion from
=13.16 billion in the same period last year. Solid growth in core earnings was anchored on the bank’s
P
industry leading net interest margin (NIM) of 8.1%. Core income (net interest income and other
income, excluding trading gains) increased by 21%.
Financial Position
Loans
Customer loans grew by 28% as against year-end 2013 and stood at P
=122.13 billion. The Bank
remains focused in growing its consumer and mid-market corporate loans, with consumer loans still
taking up more than half of total customer loans at 54%.
Corporate loans, which are largely in the middle market sector, stood at P
=56.35 billion or 21% better
than 2013. The growth resulted mainly from the expansion of its account officer pool, as the Bank
continues to maintain its prudent credit risk underwriting and management standards.
Credit cards receivables ended 2014 at P
=21.48 billion, which is 11% higher than the same period last
year. The credit cards growth was in line with the Bank’s strategy to increase market share. Based on
the Credit Cards Association of the Philippines (CCAP), EW’s 12% growth is almost twice that of the
cards industry’s single digit growth rate, solidifying its position as the 5 th largest in the industry in
terms of receivables.
Auto loans stood at P
=22.30 billion or 54% higher than last year, which is higher than the 29%
recorded car industry sales for the year. Mortgage loans grew by 21% to P
=9.19 billion, while other
consumer loans increased by 70% to P
=12.81 billion. The growth in other consumer loans were largely
attributable to: (1) Growth in rural bank subsidiaries salary loans (to public school teachers) which
increased by 86% to P
=10.03 billion; and (2) The parent bank’s personal loans which increased by 32%
to P
=2.61 billion.
Deposits
Deposits stood at P
=147.69 billion as of December 31, 2014, up by 33% from last year. The growth is
largely attributable to the expanded branch store network as reflected in the growth of low cost
deposits (CASA) which ended at P
=70.63 billion for an increase of 10% from last year. High cost
deposits (inclusive of LTNCDs) on the other hand increased by 65% to end at P
=77.06 billion.
The strong growth in high yielding consumer loans and declining funding costs resulted to Net
Interest Margin (NIM) of 8.1% as of December 31, 2014, while industry average NIM is at 3.0%.
Capital
The Bank’s Capital Adequacy Ratio (CAR) under Basel 3, remain more than adequate at 13.11% as
of end 2014 despite the increase in risk weighted assets, particularly customer loans which increased
by 28%. The Bank’s Tier 1 ratio stood at 9.34%. The Bank’s Tier 1 capital is composed entirely of
common equity.
The Bank’s Board of Director has approved a program to raise additional common equity tier-1
capital by as much as P
=8 billion through a rights offer. The additional capital will pre-fund the Bank’s
anticipated growth in earning assets.
38
Credit Quality
The Bank’s overall NPL ratios increased as the Bank continue to gain market share in the credit cards
space. The Bank’s NPL to Total Customer Loans, net of fully provided NPLs, inched up higher to
4.2%1 in December 31, 2014 from 4.1%1 as of December 31, 2013. The increase in NPL was
expected in line with the build-up of revenue base for the consumer loan business. The Bank’s net
NPL ratio at solo level and as per BSP reporting increased to 3.1%2 in December 2014.
1
2
Total NPLs less: 100% covered NPLs divided by Total Customer Loans less: 100% covered NPLs (at Group level)
NPL ratio disclosed to the BSP (at Parent level)
Result of Operations
Revenues
Net Revenues for 2014 grew by 13% to P
=14.89 billion from P
=13.16 billion in 2013 on account of
strong core earning income (net interest income and other income, excluding trading gains) which
grew by 21%. Securities trading gains was at P
=805.5 million, or 49% lower as compared to P
=1.58
billion gains posted in 2013. Foreign exchange trading gains was 60% higher at P
=193.5 million
compared to the P
=121.2 million gains posted last year.
Net Interest Income
Net Interest Income stood at P
=10.03 billion, 19% or P
=1.63 billion higher than the P
=8.39 billion
registered in 2013. The higher net interest income was a result of the double digit growth in lending
coupled by the decline in funding costs due to healthy growth in low cost funds (CASA). Interest
income in 2014 increased by 18%, while interest expense increased only by 12%, compared to last
year.
Fee Income
Other income (excluding Trading gains) in 2014 was at P
=3.87 billion, or 26% higher than the P
=3.07
billion registered last year. The increase primarily came from P
=3.30 billion of service charges, fees,
commissions and other charges, which is 30% higher than last year on account of increasing CASA
base and consumer loan portfolio which are rich in transactional service fees.
The Bank also posted one-time income from gains on sale of investment property in 2014, which
resulted for gain on sale of assets to go up by P
=286.6 million.
Trading Income
Securities trading gains was at P
=805.5 million, or 49% lower as compared to P
=1.58 billion gains
posted in 2013, as the Bank took a conservative position until end of 2014 on account of market
volatility. Foreign exchange trading gains went up to P
=193.5 million compared to the P
=121.2 million
gains posted last year.
Operating Costs
Total operating expenses increased by 15% to P
=8.94 billion from P
=7.79 billion in the same period last
year as the full effect of the branch store expansion in 2013 and the branch stores opened in 2014 have
reflected on expenses. Compensation and fringe benefits of P
=3.01 billion was P
=291.7 million or 11%
higher than the same period last year on account of the higher manpower headcount for the new
branch stores and business expansion particularly in the areas of consumer and corporate lending
groups. Total headcount have increased by 497 year on year, to end at 5,251 for both the parent Bank
and its rural bank. Taxes and licenses increased by 13% to P
=974.9 million as a direct result of higher
39
operating income. Depreciation and amortization of P
=862.0 million was 20% higher while Rent
expense of P
=629.3 million was 16% higher both on account of the new branch stores that were opened
throughout 2013 and 2014.
Miscellaneous expenses increased by 17% to P
=3.46 billion due to the following: (1) Service charges
and commissions increased by P
=162.6 million on account of expansion in consumer loans, especially
in credit cards application processing; (2) Postage related expenses increased by P
=40.5 million on
account of higher courier services on credit cards and SOA delivery as a result of larger client base;
(3) Securities, messengerial and janitorial expenses, as well as utilities cost increased by P
=85.5 million
on account of new corporate head quarters and branch stores; (4) Technological fees increased by P
=
63.3 million as the Bank recently implemented a new core banking system to complement its existing
businesses. The rest were spread out across various variable expenses such as PDIC insurance (i.e.
o/a of higher deposit level), repairs and maintenance, transportation & travel, among others which are
all related to growth in loans and deposit businesses.
Cost-to-Income ratio slightly increased to 60.0% in 2014 from 59.2% last year largely due lower
trading gains.
Provisions
Provisions for loan losses grew by 7% to P
=3.31 billion in 2014 from P
=3.10 billion in 2013, on account
of the growth in consumer loans, particularly credit cards and personal loans.
Summary of Key Financials and Ratios
Balance Sheet
(in PHP billions)
December 31, 2014
December 31, 2013
y/y Growth %
Assets
Consumer Loans
Corporate Loans
Low Cost Deposits (CASA)
High Cost Deposits
Capital
188.26
65.78
56.35
70.63
77.06
21.45
142.30
48.94
46.70
64.43
46.74
19.39
32%
34%
21%
10%
65%
11%
Profitability
(in PHP billions)
Net Interest Income
Other Income
Operating Expenses
Provision for Losses
Net Income After Tax
December 31, 2014
December 31, 2013
y/y Growth %
10.03
4.86
8.94
3.31
2.07
8.39
4.77
7.79
3.10
2.06
19%
2%
15%
7%
1%
December 31, 2014
December 31, 2013
10.2%
1.3%
8.1%
60.0
13.1
11.1%
1.6%
8.4%
59.2%
17.0%
Variance
b/(w)
(0.9%)
(0.3%)
(0.3%)
(0.8%)
(3.9%)
Key Financial Ratios
Return on Equity
Return on Assets
Net Interest Margin1
Cost-to-Income Ratio
Capital Adequacy Ratio
40
Other Information:
As of December 31, 2014, EW Bank has a total of 358 branches, with 163 of these branch stores in
the restricted areas and a total of 204 of these branch stores in all of Metro Manila. For the rest of the
country, the Bank has 84 branches in other parts of Luzon, 36 branches in Visayas, and 34 branch
stores in Mindanao. The total ATM network is 533, composed of 350 onsite ATMs and 183 off-site
ATMs. Total headcount of EW Bank is 4,714.
The Bank’s subsidiary rural bank has a total of 47 branches, 5 ATMs and 537 officers/staff, bringing
the group store network total to 405 with 538 ATMs and combined manpower of 5,251.
December 31, 2013 vs. December 31, 2012
Financial Performance Highlights
The Bank’s net income increased by 13% to P
=2.06 billion from P
=1.82 billion in the same period last
year, which resulted to a Return on Equity (ROE) and Return on Assets (ROA) of 11.1% and 1.6%,
respectively.
Total assets stood at P
=142.30 billion or 17% higher than end-2012. The growth in assets was driven
mainly by the growth in customer loans which grew by 32% y/y, in line with the Bank’s expectation
and strategy of growing consumer and middle market corporate loans. Consumer loans grew by 29%
to
0
=48.94 billion led by credit cards, salary loans (to public school teachers c/o the rural bank) and auto
P
loans. Corporate loans, which are mostly in the middle market sector, grew by 35% to P
=46.70 billion.
The loan portfolio mix was relatively unchanged with consumer loans still accounted for about half of
the loan portfolio at 51%.
Operating expenses, excluding provision for losses, increased by 24% to P
=7.79 billion from P
=6.26
billion in the same period last year, mainly due to the full year effect in expenses of the 123 branch
stores opened in various periods of 2012 and the 55 new branch stores which opened in 2013.
Provision for losses increased by 103% to P
=3.1 billion y/y as a result of the growth in the Bank’s
customer loan portfolio. The Bank’s operating income posted a growth of 35% to P
=13.16 billion from
=9.78 billion in the same period last year. Solid growth in core earnings was anchored on the bank’s
P
industry leading net interest margin (NIM) of 8.4%. Other operating income posted 29% growth,
mainly driven by the 36% growth in recurring transactional service fees, 25% growth in securities
trading gains, and 49% growth in miscellaneous income on account of the sale of written-off credit
cards receivables in the first half of 2013.
Financial Position
Loans
Customer loans grew by 32% as against year-end 2012 and stood at P
=95.64 billion. The Bank
remains focused in growing its consumer and mid-market corporate loans, with consumer loans still
taking up about half of total customer loans at 51%.
Corporate loans, which are largely in the middle market sector, stood at P
=46.70 billion or 35% better
than 2012. The growth resulted mainly from the expansion of its account officer pool, as the Bank
continues to maintain its prudent credit risk underwriting and management standards.
Credit cards receivables ended 2013 at P
=19.37 billion, which is 21% higher than the same period last
year. The credit cards growth was in line with the Bank’s strategy to increase market share. Based on
41
the Credit Cards Association of the Philippines (CCAP), EW’s 21% growth was more than 3-times
that of the cards industry’s single digit growth rate, solidifying its position as the 5th largest in the
industry in terms of receivables.
Auto loans stood at P
=14.46 billion or 27% higher than last year, which is higher than the 16%
recorded car industry sales for the year. Mortgage loans grew by 16% to P
=7.57 billion, while other
consumer loans increased by 95% to P
=7.55 billion. The growth in other consumer loans were largely
attributable to: (1) Growth in rural bank subsidiaries salary loans (to public school teachers) which
increased
by
119%
to
=5.38 billion; and (2) The parent bank’s personal loans which increased by 58% to P
P
=1.98 billion.
Deposits
Deposits stood at P
=111.18 billion as of December 31, 2013, up by 22% from last year. The growth is
largely attributable to the expanded branch store network as reflected in the growth of low cost
deposits (CASA) which ended at P
=64.43 billion for an increase of 28% from last year. High cost
deposits (inclusive of LTNCDs) on the other hand increased by 14% to end at P
=46.74 billion. As a
result, low cost (CASA) to total deposits ratio improved further to 58%, up from 55% the previous
year.
The strong growth in high yielding consumer loans and low cost funds (CASA) resulted to another
record Net Interest Margin (NIM) of 8.4% as of December 31, 2013, while industry average NIM
went down to 3.0%.
Capital
The Bank’s Capital Adequacy Ratio (CAR) under Basel 2, remain more than adequate at 17.0% as of
end 2013 despite the increase in risk weighted assets, particularly customer loans which increased by
32.9%. The Bank’s Tier 1 ratio stood at 13.8%. The Bank’s Tier 1 capital is composed entirely of
common equity.
The Bank’s capital ratios are still above regulatory limits even under the implementation of Basel 3
regulations in January 2014. Nonetheless, the Bank obtained Board of Director’s approval to issue, in
one or more tranches, up to P
=10.0 billion of Basel 3 eligible securities in the form of Additional Tier 1
(AT1) and/or Tier 2 capital, subject to regulatory approvals. The additional qualifying capital, which
are non-dilutive to common shareholders, will be used to cover the existing Tier 2 amounting to P
=2.75
billion which is not Basel 3 eligible, additional deductions under Basel 3 (e.g. Intangible assets) and to
pre-fund the Bank’s anticipated growth in earning assets.
Credit Quality
The Bank’s overall NPL ratios increased as the Bank continue to gain market share in the credit cards
space where it has improved its ranking in terms of accounts receivable to 5th place from 6th place in
the same period last year. The Bank’s NPL to Total Customer Loans, net of fully provided NPLs,
inched up higher to 4.1%1 in December 31, 2013 from 3.5%1 as of December 31, 2012. The increase
in NPL was expected in line with the build-up of revenue base for the credit cards business. The
Bank’s net NPL ratio at solo level and as per BSP reporting remains unchanged at 2.6%2 in December
2013.
1
2
Total NPLs less: 100% covered NPLs divided by Total Customer Loans less: 100% covered NPLs (at Group level)
NPL ratio disclosed to the BSP (at Parent level)
42
Result of Operations
Revenues
Net Revenues for 2013 grew by 35% to P
=13.16 billion from P
=9.78 billion in 2012 on account of
strong core earning income (net interest income and other income, excluding trading gains) which
grew by 38%. Securities trading gains was at P
=1.58 billion, or 25% higher as compared to P
=1.26
billion gains posted in 2012, as the Bank took advantage of market opportunities in the first few
months of the year and took a conservative position in the 2nd half of the year at the back of volatile
market conditions. Foreign exchange trading gains was 46% lower at P
=121.2 million compared to the
=223.2 million gains posted last year.
P
Net Interest Income
Net Interest Income stood at P
=.39 billion, 38% or P
=2.30 billion higher than the P
=6.09 billion registered
in 2012. The higher net interest income was a result of the double digit growth in lending coupled by
the decline in funding costs due to healthy growth in low cost funds (CASA). Interest income in 2013
increased by 26%, while interest expense declined by 15%, compared to last year, resulting for NIMs
to further improving to 8.4%.
Fee Income
Other income (excluding Trading gains) in 2013 was at P
=3.07 billion, or 39% higher than the P
=2.21
billion registered last year. The increase primarily came from P
=2.53 billion of service charges, fees,
commissions and other charges, which is 36% higher than last year on account of increasing CASA
base and consumer loan portfolio which are rich in transactional service fees.
The Bank also posted one-time income from gains on sale assets and written-off credit cards
receivables in 2013, which resulted for miscellaneous income to go up by 49%.
Trading Income
Securities trading gains was at P
=1.58 billion, or 25% higher as compared to P
=1.26 billion gains posted
in 2012, as the Bank took advantage of market opportunities in the first four (4) months of 2013 and
realized a significant portion of its trading position. After which, it took a conservative position until
end of 2013 on account of market volatility. Foreign exchange trading gains went down to P
=121.2
million compared to the P
=223.2 million gains posted last year.
Operating Costs
Total operating expenses increased by 24% to P
=7.79 billion from P
=6.26 billion in the same period last
year as the full effect of the branch store expansion in 2012 and the branch stores opened in 2013 have
reflected on expenses. Compensation and fringe benefits of P
=2.72 billion was P
=732.3 million or 37%
higher than the same period last year on account of the higher manpower headcount for the new
branch stores and business expansion particularly in the areas of consumer and corporate lending
groups. Total headcount have increased by 521 year on year, to end at 4,754 for both the parent Bank
and its rural banks. Taxes and licenses increased by 20% to P
=865.3 million as a direct result of higher
operating income. Depreciation and amortization of P
=717.7 million was 28% higher while Rent
expense of P
=542.5 million was 32% higher both on account of the new branch stores that were opened
throughout 2012 and 2013.
Miscellaneous expenses increased by 14% to P
=2.95 billion due to the following: (1) Advertising
expenses went down by P
=24.98 million due to higher branding related spends in 2012 and lower
advertising/publicity spends on billboards and promo give-away items for 2013; (2) Service charges
43
and commissions increased by P
=121.93 million on account of expansion in consumer loans, especially
in credit cards application processing; (3) Postage related expenses increased by P
=125.89 million on
account of higher courier services on credit cards and SOA delivery as a result of larger client base;
(4) Securities, messengerial and janitorial expenses, as well as utilities cost increased by P
=90.67
million on account of new corporate head quarters and branch stores. The rest were spread out across
various variable expenses such as PDIC insurance (i.e. o/a of higher deposit level), repairs &
maintenance, transportation & travel, among others which are all related to growth in loans and
deposit businesses.
Cost-to-Income ratio declined to 59.2% in 2013 from 64.0% last year due to steady growth in core
earnings and trading gains realized at the earlier part of the year, which partially offset the increased
expenses related to the branch store expansion.
Provisions
Provisions for loan losses grew by over two-times to P
=3.10 billion in 2013 from P
=1.53 billion in 2012,
on account of the growth in consumer loans, particularly credit cards.
Summary of Key Financials and Ratios
Balance Sheet
(in PHP billions)
December 31, 2013
December 31, 2012
y/y Growth %
Assets
Consumer Loans
Corporate Loans
Low Cost Deposits (CASA)
High Cost Deposits
Capital
142.30
48.94
46.70
64.43
46.74
19.39
121.40
37.83
34.55
50.37
40.84
17.32
17%
29%
35%
28%
14%
12%
Profitability
(in PHP billions)
Net Interest Income
Other Income
Operating Expenses
Provision for Losses
Net Income After Tax
December 31, 2013
December 31, 2012
y/y Growth %
8.39
4.77
7.79
3.10
2.05
6.09
3.70
6.26
1.53
1.82
38%
29%
24%
103%
13%
December 31, 2013
December 31, 2012
11.1%
1.6%
8.4%
59.2%
17.0%
11.9%
1.9%
7.0%
64.0%
17.4%
Variance
b/(w)
(0.8%)
(0.3%)
1.4%
4.8%
(0.4%)
Key Financial Ratios
Return on Equity
Return on Assets
Net Interest Margin1
Cost-to-Income Ratio
Capital Adequacy Ratio
(1) Starting April 2012, the BSP stopped paying interest on reserves on customer deposits of banks. The December 2013
computation considered the Bank's deposit with the BSP as non-earning. In 2012, it is considered part of earning assets. NIM in
December 2012 would have been 8.0% if this was to be calculated on same basis as that of December 2013.
Other Information:
As of December 31, 2013, EW Bank has a total of 300 branches, with 140 of these branch stores in
the restricted areas and a total of 174 of these branch stores in all of Metro Manila. For the rest of the
country, the Bank has 64 branches in other parts of Luzon, 34 branches in Visayas, and 28 branch
44
stores in Mindanao. The total ATM network is 427, composed of 292 onsite ATMs and 135 off-site
ATMs. Total headcount of EW Bank is 4,305.
The Bank’s subsidiary rural banks have a total of 47 branches, 45 ATMs and 449 officers/staff,
bringing the group store network total to 347 with 472 ATMs and combined manpower of 4,754.
Known trends, demands, commitments, events or uncertainties
There are no known demands, commitments, events or uncertainties that will have a material impact
on the Bank’s liquidity within the next twelve (12) months.
Events that will trigger direct or contingent financial obligation
There are no events that will trigger direct or contingent financial obligation that is material to the
Bank, including any default or acceleration of an obligation.
Material off-balance sheet transactions, arrangements or obligations
There are no material off-balance sheet transactions, arrangements, obligations (including contingent
obligations), and other relationships of the Bank with unsolicited entities or other persons created
during the reporting period other than those disclosed in the financial statements.
Capital Expenditures
The Bank’s capital expenditures for the years ended December 31, 2012, 2013 and 2014 were P2,292
million, P1,614 million and P1,767 million, respectively. The Bank’s primary capital expenditures for
2012, 2013 and 2014 were mainly invested in property and equipment, branch licenses and capitalized
software.
The Bank estimates capital expenditures for the year 2015 will be P1,533.1 million to be invested in
software and computer equipment.
Significant Elements of Income or Loss
Significant elements of the consolidated net income of the Group for the 12 months ended December
31, 2014 and 2013 came from its continuing operations.
Seasonal Aspects
There are no seasonal aspects that had a material effect on the Bank’s financial condition and results
of operations.
Vertical and Horizontal Analysis of Material Changes for the Period
The term “material” in this section shall refer to changes or items amounting to five percent (5%) of
the relevant accounts or such lower amount, which the Bank deems material on the basis of other
factors.
I. Balance Sheet – December 31, 2014 vs. December 31, 2013
- Cash and cash equivalents increased by 54% to P
=5.99 billion due to due to higher
year-end cash requirements and increase in the number of branch stores.
- Due from BSP increased by 25% to P
=23.13 billion mainly on higher deposit reserves
and liquid funds placed with BSP.
- Due from other banks increased by 104% to P
=3.58 billion due to increased levels of
placements and working balances with counterparty banks.
- Interbank loans receivable and Securities Purchased Under Resale Agreements
(SPURA) decreased by 7% to P
=2.89 billion as more funds were placed to other liquid
assets.
- Financial Assets at Fair Value through Profit and Loss increased by 423% to P
=10.18
billion due to movements in the Bank’s proprietary trading portfolio.
45
-
-
-
Financial Assets at Fair Value through Other Comprehensive Income increased by
34% to P
=14.4 million as a result of the improvement in market prices of its equity
security.
Loans and Receivables-Net accelerated by 29% to P
=121.42 billion driven by high
growth in consumer and corporate loans.
Investment properties decreased by 9% to P
=912.7 million due to the disposal of a
portion of the Bank’s repossessed assets.
Goodwill and Other Intangible Assets increased by 21% due to increase in branch
stores in the restricted areas.
Other assets increased by 170% to P
=2,423.1 million as a result of the branch
expansion.
Deposit liabilities increased by 33% to P
=147.69 billion mainly due to increase in
deposit taking activities coming from branch expansion.
Bills and acceptance payables increased by 62% to P
=5.32 billion mainly from higher
volume of interbank and other short term borrowings.
Accrued Taxes, Interest and Other Expenses and Cashier’s Checks and Demand Draft
Payable inched up by 29% and 45%, respectively, due to higher transaction volumes
during the period.
Unsecured subordinated debt (UnSD) increased by 126% as the Bank issued Php5.0
billion BASEL III compliant Tier 2 notes last July 2014.
Income tax payable inched up by 140% to P
=184.6 million due to higher taxable
income during the year.
Other liabilities jumped by 26% to P
=4.54 billion. The increase was due to higher
balances of bills purchased (with contra-account classified under Loans and
Receivables).
II. Balance Sheet – December 31, 2013 vs. December 31, 2012
- Cash and cash equivalents increased by 20% to P
=3.9 billion due to due to higher yearend cash requirements and increase in the number of branch stores.
- Due from BSP decreased by 15% to P
=18.5 billion as more funds from BSP-SDA
accounts were placed instead to higher-yielding loans.
- Due from other banks increased by 7% to P
=1.7 billion due to increased levels of
placements and working balances with counterparty banks.
- Interbank loans receivable and Securities Purchased Under Resale Agreements
(SPURA) increased by 435% to P
=3.1 billion as excess funds were parked to BSP
overnight placements.
- Financial Assets at Fair Value through Profit and Loss declined by 54% to P
=1.9
billion. The Bank took a conservative position and disposed sizable portion of its
Financial Assets at Fair Value through profit and loss.
- Financial Assets at Fair Value through Other Comprehensive Income increased by
8% to P
=10.7 million as a result of the improvement in market prices of its equity
security.
- Investment Securities at Amortized Cost decreased by 6% to P
=9.1 billion due to the
maturity and sale of various government securities and private bonds.
- Loans and Receivables-Net accelerated by 32% to P
=94.0 billion driven by high
growth in consumer and corporate loans.
- Property and equipment grew by 26% to P
=3.5 billion on account of aggressive branch
store expansion.
- Investment properties increased by 7% to P
=1.0 billion on account of the improvement
in the appraisal value of various ROPA.
- Goodwill and Other Intangible Assets increased by 8% due to the acquisition of
additional branch licenses from BSP.
46
-
-
-
Other assets decreased by 8% to P
=897.5 million as advances made to contractors on
the construction of branch stores were re-classed to property and equipment account
upon completion.
Deposit liabilities increased by 22% to P
=111.2 billion mainly due to increase in
deposit taking activities, particularly CASA, coming from branch expansion.
Bills and acceptance payables decreased by 41% to P
=3.3 billion mainly as the Bank
tapped other sources of funding such as CASA and LTNCD.
Accrued Taxes, Interest and Other Expenses and Cashier’s Checks and Demand Draft
Payable inched up by 9% and 12%, respectively, due to higher transaction volumes
during the period.
Income tax payable inched up by 195% to P
=82.9 million due to higher taxable income
during the year.
Other liabilities jumped by 31% to P
=3.6 billion. The increase was due to higher
balances of bills purchased (with contra-account classified under Loans and
Receivables).
III. Income Statement – December 31, 2014 vs. December 31, 2013
- Interest income increased by 18% to P
=11.67 billion in 2014 from P
=9.86 billion in
2013 primarily due to an increase in lending activities, largely driven by growth in
credit cards, auto loans, corporate loan and salary loans to public school teachers.
- Interest expense increased by 12% to P
=1.64 billion in 2014 from P
=1.46 billion in 2013
primarily due to strong growth in deposits and other borrowings.
- Service charges, fees and commissions increased 30% to P
=3.30 billion from P
=2.53
billion in 2013, resulting from the expansion of business lines, particularly with
respect to fees generated by retail banking and consumer lending.
- Trading and securities gain decreased by 49% as the Bank took advantage of the
favorable market conditions during the 1st half of last year. Foreign exchange gains,
on the other hand, increased by 60% at the back of volatile currency exchange rates in
the last half of 2013.
- Gain on sale of assets increased by 1890% in 2014 as the Bank was able to disposed
sizable portion of its investment properties at premium.
- Trust income dropped by 30% to Php20.4 million due to the decline in assets under
management account.
- Miscellaneous income also decreased by 45% to P
=222.0 million as the Bank had onetime gains last year on the sale of its written-off credit card portfolio.
- Manpower costs continue to rise from P
=2.72 billion last year to P
=3.01 billion this year
on account of business and branch expansion program.
- The Bank continued its conservative provisioning on account of its credit expansion,
by setting aside P
=3.33 billion in provision for probable losses, an increase of 7% from
what was booked in 2013.
- Taxes and licenses, Depreciation and amortization, Rent and Miscellaneous expenses
increased by 13%, 20%, 16% and 17%, respectively, on account of business
expansion.
IV. Income Statement – December 31, 2013 vs. December 31, 2012
- Interest income increased by 26% to P
=9.86 billion in 2013 from P
=7.82 billion in 2012
primarily due to an increase in lending activities, largely driven by growth in credit
cards, auto loans, corporate loan and salary loans to public school teachers.
- Interest expense decreased by 15% to P
=1.46 billion in 2013 from P
=1.73 billion in
2012 primarily due to strong growth low cost funds and the reduction in the cost of
term deposits.
- Service charges, fees and commissions increased 36% to P
=2.53 billion from P
=1.86
billion in 2012, resulting from the expansion of business lines, particularly with
respect to fees generated by retail banking and consumer lending.
47
-
-
-
Trading and securities gain increased by 24.7% as the Bank took advantage of the
favorable market conditions during the 1st half of the year. Foreign exchange gains,
on the other hand, decreased by 46% at the back of volatile currency exchange rates
in the last half of 2013.
Gain on sale of assets increased by 130% in 2013 as the Bank was able to disposed
sizable portion of its repossessed assets at premium.
Miscellaneous income also increased by 49% to P
=272 million due to higher volume
transactions as a result of the branch expansion.
Manpower costs continue to rise from P
=1.98 billion last year to P
=2.72 billion this year
on account of business and branch expansion program.
The Bank continued its conservative provisioning on account of its credit expansion,
by setting aside P
=3.10 billion in provision for probable losses, an increase of 103%
from what was booked in 2012.
Taxes and licenses, Depreciation and amortization, Rent and Miscellaneous expenses
increased by 20%, 28%, 32% and 14%, respectively, on account of business
expansion.
Below are the financial ratios that are relevant to the Group for the year ended December 31, 2014
and 2013:
2014
2013
(1)
78.41%
86.05%
Current ratio
115.78%
112.86%
Solvency ratio(2)
(3)
6.34
7.78
Debt-to-equity
(4)
7.34
8.78
Asset-to-equity
(5)
255.42%
260.70%
Interest rate coverage ratio
Profitability ratio
1.60%
1.28%
Return on asset (6)
(7)
11.11%
10.17%
Return on equity
8.43%
22.61%
Net profit margin(8)
85.15%
85.93%
Gross profit margin(9)
-
1 Current assets divided by current liabilities
2 Total assets divided by total liabilities
3 Total liabilities divided by total equity
4 Total assets divided by total equity
5 Income before interest and taxes divided by interest expense
6. Net income divided by average total assets. Average total assets is based on average monthly balances
7. Net income attributable to equity holders of the Parent Company divided by average total equity attributable to
equity holders of the Parent Company. Average total equity is based on average monthly balances
8 Income before income tax over total interest income
9 Net interest income over total interest income
Item 7. Financial Statements
The consolidated financial statements of the Bank are filed as part of this Form 17-A as Annex E.
48
Item 8. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
Sycip Gorres Velayo & Co. (SGV & Co.), a member firm of Ernst & Young Global Limited has been
the Bank's independent accountant for 20 years and is again recommended for appointment at the
scheduled annual stockholders' meeting.
None of the Bank's external auditors have resigned during the two most recent fiscal years (2013 and
2014) or any interim period. In compliance with SEC Memorandum Circular No. 8, Series of 2003,
and Amendments to SRC Rule 68 on the rotation of external auditors or signing partners of a firm
every after five (5) years of engagement, Ms. Josephine Adrienne Abarca was assigned as the signing
partner in 2013, replacing Ms. Janet A. Paraiso who was assigned since 2009. Representatives of SGV
& Co. are expected to be present at the meeting to respond to matters relating to the auditors’ report
on the 2014 financial statements of the Bank that may be pertinently raised during the meeting. Their
representative will be given the opportunity to make a statement if they so desire.
The Bank has paid the following fees to SGV & Co relative to the regular and special engagements
rendered by the latter that are reasonably related to the performance of the audit or review of the
Bank’s financial statements:
Fiscal Year
2014
2013
2012
Audit Fees and Other
Related Fees
=3,500,000
P
=3,750,000
P
=3,830,000
P
Tax Fees
-
No other services were rendered by SGV & Co. that were not related to the audit or review of the
Bank’s financial statements.
The Bank's Audit Committee, which is composed of Messrs. Carlos Alindada (Chairman), Paul
Aquino, Jose Sandejas and Ms. Josephine Yap, approves the audit fees and fees for non-audit
services, if any, of external auditors, as emphasized in the Audit Charter.
Per SGV & Co.'s representation during the Audit Committee meeting on February 26, 2015, they
confirm that they did not have any disagreement with Management that could be significant to the
Bank’s financial statements or their auditor’s report. Further, there are no matters that in their
professional judgment may reasonably be thought to bear on their independence or that they gave
consideration to in reaching the conclusion that independence has not been impaired.
There were no disagreements with SGV & Co. on accounting and financial disclosures.
49
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Issuer
The Nomination Committee of the Board of Directors of EW has determined that the following, all of
whom are incumbent directors, possess all the qualifications and none of the disqualifications for
directorship set out in EW’s Manual on Corporate Governance, duly adopted by the Board pursuant to
SRC Rule 38.1 and SEC Memorandum Circular No. 16, Series of 2002. Below is the list of candidates
prepared by the Nomination Committee:
Name
Age
Citizenship
Nominated as
Jonathan T. Gotianun
Antonio C. Moncupa, Jr.
Andrew L. Gotianun, Sr.
Mercedes T. Gotianun
L. Josephine G. Yap
Benedicto M. Valerio, Jr.
Jose S. Sandejas
Carlos R. Alindada
Paul A. Aquino
62
57
88
87
60
57
75
79
72
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Director
Director
Director
Director
Director
Director
Independent Director
Independent Director
Independent Director
Nominated by
Relationship
with Nominees
FDC
Beneficial Owner
Not Related
Beneficial Owner
Beneficial Owner
Beneficial Owner
Not Related
Not Related
Not Related
Not Related
FDC FOREX CORP
FDC
FDC
FDC FOREX CORP
FDC FOREX CORP
FDC
FDC
FDC FOREX CORP
The Nomination Committee has determined that the nominees for independent directors possess all
the qualifications and have none of the disqualifications for independent directors as set forth in the
Revised Manual on Corporate Governance. The nominees for the independent directors have no
relationship / affiliation with FDC and FFC.
A certification on the qualifications of the Independent Directors and that none of the above named
directors and officers work with the government is attached herewith as Annex A and B, respectively.
The Nominations Committee is composed of Paul A. Aquino as Chairman, Jose S. Sandejas, Jonathan
T. Gotianun, Carlos R. Alindada and Benedicto M. Valerio, Jr. as members.
The current list of the Bank’s members of the Board is as follows:
ANDREW L. GOTIANUN, SR., 87 years old, Filipino
Chairman Emeritus
Mr. Andrew Gotianun, Sr. is the Founder of Filinvest Development Corporation and Chairman
Emeritus of EastWest Bank since April 2007. Concurrently, he is the Chairman Emeritus of the Board
of Filinvest Development Corporation, Chairman of Andremerc Holdings Corp., Filinvest Land Inc.,
Pacific Sugar Holdings and A.L Gotianun Inc. (formerly ALG Holdings Inc.). He worked for the
Insular Bank of Asia and America from 1980 to 1985 and for Filinvest Credit Corporation from 1970
to 1985. He is a graduate of San Beda College with an Associate Degree in Commercial Science.
JONATHAN T. GOTIANUN, 61 years old, Filipino
Chairman
Mr. Jonathan Gotianun is the Chairman of Filinvest Development Corporation and Chairman of
EastWest Rural Bank. Prior to his election as Chairman of the Board, he was Vice-Chairman and
Director since 1994. He holds a degree in Commerce from the Santa Clara University in California
and a Masters in Management from Northwestern University in Illinois. Mr. Gotianun sits as
Chairman of EastWest Bank since April 2007.
50
ANTONIO C. MONCUPA, JR., 56 years old, Filipino
President, CEO and Director
Mr. Antonio Moncupa, Jr. has been the President and CEO of EastWest since January 1, 2007. He is
currently the First Vice President of the Bankers Association of the Philippines (BAP) and Chairman
of the BAP Open Market Committee. Mr. Moncupa also sits as Board Member of PDEX Market
Governance Board and Pasberfund Realty Holdings, Inc. He is a Director of Green Bank. Mr.
Moncupa holds a double degree in Economics and Accounting from the De La Salle University, and a
Masters in Business Administration from the University of Chicago. Before joining EastWest, he was
EVP and Chief Financial Officer of the International Exchange Bank.
MERCEDES T. GOTIANUN, 86 years old, Filipino
Director
Mrs. Mercedes Gotianun is a Director of Filinvest Development Corporation, Davao Sugar Central
Corporation, Filinvest Land, Inc., and Vice-Chairman of Filinvest Alabang, Inc. Mrs. Gotianun holds
a degree in BS Pharmacy (magna cum laude) from the University of the Philippines. She has been
serving as a Director of EastWest Bank since 1995.
LOURDES JOSEPHINE GOTIANUN YAP, 60 years old, Filipino
Director
Mrs. Lourdes Josephine Gotianun Yap is the President and Chief Executive Officer of Filinvest
Development Corporation and Chairman of Filinvest Asia Corporation, Cyberzone Properties, Inc.
and The Palms Country Club. She is also the President of Filinvest Land, Inc., Filinvest Alabang, Inc.
and Festival Supermall, Inc. Mrs. Yap holds a degree in Business Management from the Ateneo de
Manila University and a Masters in Business Administration major in Finance from the University of
Chicago. She has been a Director of EastWest Bank since August 2000.
CARLOS R. ALINDADA, 78 years old, Filipino
Independent Director
Mr. Carlos Alindada is formerly Chairman and Managing Partner of SGV & Co., Director of the
National Power Corporation and Commissioner of the Energy Regulation Commission. He graduated
with a degree in Accounting from the University of the East, and a Masters in Business
Administration in Corporate Finance from New York University. He also pursued an Advance
Management Program at Harvard University. Mr. Alindada has been a Director of EastWest Bank
since April 2002.
PAUL A. AQUINO, 72 years old, Filipino
Independent Director
Mr. Paul Aquino is an Adviser of the Energy Development Corporation, President of Keitech
Educational Foundation and the Honorary Consul of the Government of Malta. Mr. Aquino is also a
Director of Skycable Inc. He is a graduate of BS in Electrical Engineering and holds a Masters in
Business Administration from Santa Clara University in California. He was conferred Doctor of
Management Science (Honoris Causa) by the Philippine School of Business Administration. He has
been a Director of the Bank since October 2009.
JOSE S. SANDEJAS, 74 years old, Filipino
Independent Director
Mr. Jose Sandejas is formerly a Director of Benguet Consolidated Corporation, Petron Corporation,
and the Board of Investments. He graduated with a degree in Chemical Engineering from the De La
Salle University and pursued a doctorate degree in Materials Engineering from Rensselaer
Polytechnic Institute. He has been serving as Director of EastWest Bank since April 2002.
51
BENEDICTO M .VALERIO, JR., 56 years old, Filipino
Director /Corporate Secretary
Atty. Benedicto M. Valerio, Jr. is actively engaged in the practice of law and specializes in litigation
and corporate work. He was Assistant Corporate Secretary of International Exchange Bank from
2001-2006 and also served as its General Counsel. He holds a BS Commerce degree from the De La
Salle University and Bachelor of Laws from the Ateneo de Manila University. He finished his
Masters in Business Administration at the Ateneo Graduate School of Business. Atty. Valerio has
been a Director since July 2012 and a Corporate Secretary of EastWest Bank since April 2007.
The current list of the Bank’s Executive Officers is as follows:
ANTONIO C. MONCUPA, JR., 56 years old, Filipino
President, CEO and Director
Mr. Antonio Moncupa, Jr. has been the President and CEO of EastWest since January 1, 2007. He is
currently the First Vice President of the Bankers Association of the Philippines (BAP) and Chairman
of the BAP Open Market Committee. Mr. Moncupa also sits as Board Member of PDEX Market
Governance Board and Pasberfund Realty Holdings, Inc. He is a Director of Green Bank. Mr.
Moncupa holds a double degree in Economics and Accounting from the De La Salle University, and a
Masters in Business Administration from the University of Chicago. Before joining EastWest, he was
EVP and Chief Financial Officer of the International Exchange Bank.
JOSE EMMANUEL U. HILADO, 51 years old, Filipino
Senior Executive Vice President and Chief Operating Officer
Mr. Jose Emmanuel U. Hilado has 29 years of solid banking experience from various major banks,
occupying senior management roles involving International Banking and Treasury which includes
Asset and Liability Management, Trading, Portfolio Management, Global Distribution and Advisory
and Financial Institutions Management. He completed his degree in BS Business Economics from the
University of the Philippines, Diliman as a Dean’s List Medalist. He earned his Executive MBA
degree from Kellogg-Hongkong University of Science and Technology. He is a Certified Treasury
Professional from the BAP-Ateneo Graduate School. Prior to joining East West Bank, Mr. Hilado was
the Senior Executive Vice President and Treasurer of RCBC.
GERARDO SUSMERANO, 50 years old, Filipino
Senior Executive Vice President and Head – Retail Banking and Operations
Mr. Gerardo Susmerano has served as Senior Executive Vice President and Head of Retail Banking
and Operations since September 2006. He is also re-elected as a Director of BANCNET for 20122013. Mr. Susmerano obtained his Bachelor’s Degree in Accounting from the University of Santo
Tomas and Master’s Degree in Business Administration from the Asian Institute of Management.
JACQUELINE S. FERNANDEZ, 52 years old, Filipino
Executive Vice President and Head – Consumer Lending
Ms. Jacqueline S. Fernandez is Executive Vice President and Head of EastWest’s Consumer Lending
Cluster. She has been with the Bank since March 16, 2006. Before joining EastWest, she was Vice
President and Head of the Management and Performance Standards Group of the Standard Chartered
Bank. Ms. Fernandez earned her degree in Economics from the University of the Philippines and
holds a Masters degree in Business Administration from the same university.
ARTURO L. KIMSENG, 64 years old, Filipino
Executive Vice President and Chief Audit Executive
Mr. Arturo L. Kimseng has more than 45 years professional experience, 35 years of which he spends
in the banking industry. He started his banking career at Cebu City Savings and later joined SyCip
Gorres Velayo & Co. as staff auditor. He joined Family Bank in 1977 and progressed as Head of
Audit. He joined BPI upon the acquisition of Family Bank by the Ayala Group and retired as Chief
52
Audit Executive in 2011. He earned his degree in BS in Commerce from the University of San Carlos
in 1970.
RENATO K. DE BORJA, JR., 43 years old, Filipino
Senior Vice President and Chief Finance Officer
Mr. Renato K. De Borja, Jr. is the Chief Finance Officer of EastWest and has been with the Bank
since September 1, 2009. Mr. De Borja is formerly a Director of EWRB. He was the Chief Finance
Officer of Citigroup Business Process Solutions (CBPS) and at Metrobank Card Corporation prior to
his joining EastWest. Mr. De Borja graduated with a degree in Accountancy from the University of
Santo Tomas and is a Certified Public Accountant.
MANUEL ANDRES D. GOSECO, 47 years old, Filipino
Senior Vice President and Treasurer
Mr. Manuel Andres D. Goseco is EastWest’s Treasurer and has been with the Bank since October 18,
2010. His professional experience covers economic research, corporate planning, trust and
investments, and development of mutual funds and other products and services. Before joining
EastWest, he was the Director and Head of Financial Markets Sales of Standard Chartered Bank –
Manila Branch. Mr. Goseco holds a degree in BA Economics from the Ateneo De Manila University,
and a Masters in Economics from the Fordham University, Graduate School of Arts and Sciences,
New York City.
ERNESTO T. UY, 54 years old, Filipino
Senior Vice President and Head – Corporate Banking Group
Mr. Ernesto T. Uy is Senior Vice President and Head of the Corporate Banking Group. He has been
with the Bank since September 2008. Before joining EastWest, he was Senior Vice President and
Unit Head at Banco De Oro Universal Bank. Mr. Uy obtained his Bachelor’s Degree in Industrial
Management Engineering from De La Salle University and his Master’s Degree in Industrial
Engineering and Management from the Asian Institute of Technology.
IVY B. UY, 42 years old, Filipino
Senior Vice President and Deputy Head for Retail Banking Group
Ms. Ivy B. Uy has joined the bank in Sept 2006 as FVP/Division Head for Central MM Division, and
in 2008 as Deputy group Head of Branch Banking. Before joining EastWest, she was a Center Head Manila Area of International Exchange Bank. Ms. Uy holds a degree in Hotel and restaurant
management from the University of Sto. Tomas and finished a Management development Program in
Asian Institute of Management.
MARIE DENISE N. TAMBUATCO, 55 years old, Filipino
Senior Vice President AND Head, Marketing Group
Ms. Marie Denise N. Tambuatco is a seasoned marketing communications professional, occupying
senior marketing officer positions in various consumer institutions, not only in the Philippines, but in
the region, among which are Maxis Berhad, a leading telecommunications provider in Malaysia, P.T.
Johnson Home Hygiene Products Indonesia, makers of Baygon and Bayfresh, XPotential Thailand, a
consultancy firm and Bayer South East Asia –Singapore. She is a graduate of AB Mass
Communication from the De La Salle University. Prior to joining East West Bank, she was the Senior
Vice President for Marketing of Manila Hotel.
STEPHEN O. SANTOS, 42 years old, Filipino
First Vice President and Head – Corporate Banking Cluster 2
Mr. Stephen O. Santos is a graduate of Manufacturing Engineering and Management from De La
Salle University and gained his Masters in Business Administration from National Taiwan University.
He has a total of 21
years of professional experience, with the last 13 in banking institutions.
Prior to joining East West Bank, he was the Vice President and Team Head, Chinese Desk, Ortigas
Team of Corporate Banking at the Bank of the Philippine Islands.
53
ANGEL MARIE L. PACIS, 46 years old, Filipino
First Vice President and Trust Officer – Investments Cluster
Ms. Angel Marie L. Pacis graduated cum laude with a degree in BS Economics from the University of
the Philippines in Diliman and has completed the units of her master’s degree in business
administration also from the University of the Philippines. She also graduated with distinction from
the Trust Institute Foundation of the Philippines One-year Course on Trust Operations and passed the
Level 2 Chartered Financial Analyst Exam. She is currently an adviser to the Board of Directors –
Trust Officers Association of the Philippines and is a lecturer at the Trust Institute Foundation of the
Philippines. Prior to joining East West Bank, she was the Vice President and Head of Institutional
Asset Management 2 at the Bank of the Philippine Islands.
VIRGILIO L. CAMILO, 52 years old, Filipino
First Vice President and Head – Bank Operations
Mr. Virgilio L. Camilo has been the Head of Bank Operations since August 2013. Before joining
EastWest, he was the Head of Operations Group of Planters Development Bank. He earned his degree
in BS in Accountancy from San Sebastian College-Manila.
GRACE N. ANG, 39 years old, Filipino
First Vice President & Chief Risk Officer
Ms. Grace N. Ang has been the Chief Risk Officer of EastWest since August 1, 2008. She currently
sits as Director/Treasurer of Pasberfund Realty Holdings, Inc. Before joining EastWest, she was with
International Exchange Bank as Senior Manager. She was also appointed as Director of AIG Philam
Savings Bank, Inc. from March 12 to September 03, 2009. Ms. Ang holds a degree in Accounting
from the De La Salle University and is a Certified Public Accountant.
MA. BERNADETTE T. RATCLIFFE, 54 years old, Filipino
First Vice President and Chief Compliance Officer
Ms. Ma. Bernadette T. Ratcliffe has more than 20 years experience in various senior management
roles involving controllership, treasury, financial planning and compliance. Prior to her appointment
as Compliance Officer, she was the Chief of Staff of the President of East West Bank. She completed
her BS Business Administration and Accountancy Degree and Masters in Business Administration
from the University of the Philippines – Diliman and is a Certified Public Accountant.
RENATO P. PERALTA, 56 years old, Filipino
First Vice President and Head – Credit Policy & Review
Mr. Renato P. Peralta joined EastWest as Head of Credit Policy & Review in June of 2009. Prior to
joining EastWest, he was Head of UCPB Securities, Inc. Mr. Peralta graduated from the Ateneo de
Manila University with a Bachelor of Arts degree in Economics.
There is no person, not being an executive officer of the Company, who is expected to make a
significant contribution to its business. The Company, however, occasionally engages the services of
consultants
Family Relationships
Mr. Andrew L. Gotianun, Sr. is married to Mrs. Mercedes T. Gotianun. They are the parents of
Jonathan T. Gotianun and Mrs. Josephine G. Yap.
54
Involvement in Certain Legal Proceedings
For the past five (5) years, the Bank, its affiliates, subsidiaries, directors and officers, have not been
involved in any legal proceedings that would affect their ability, competence or integrity, and/or
involving a material or substantial portion of their property before any court of law or administrative
body in the Philippines or elsewhere, save in the usual routine cases of the Bank arising from the
ordinary conduct of its business.
All legal proceedings involving the Bank are efficiently and competently attended to and managed by
a group of ten (10) in-house lawyers who are graduates of reputable law schools in the country. As its
external counsels, the Bank retains the services of respected law firms, including Sobreviñas Hayudini
Navarro and San Juan Law Offices; Sycip Salazar Hernandez & Gatmaitan Law Office; Añover
Añover San Diego & Primavera Law Offices; Veralaw (Del Rosario Raboca Gonzales Grasparil);
Jimenez Gonzales Liwanag Bello Valdez Caluya & Fernandez ; and Quitain Law Office.
Item 10. Executive Compensation
The following are the Bank’s CEO and four most highly compensated executive officers for the year
ended 2014:
Name
Antonio C. Moncupa, Jr. .....................................
Gerardo Susmerano.............................................
Jacqueline S. Fernandez ......................................
Arturo L. Kimseng ..............................................
Renato K. De Borja, Jr. .......................................
Position
Chief Executive Officer
Head of Retail Banking
Head of Consumer Lending
Chief Audit Executive
Chief Finance Officer
The following table identifies and summarizes the aggregate compensation of the Bank’s CEO and
the four most highly compensated executive officers of the Bank in 2012, 2013 and 2014 estimates:
Year
CEO and the most highly compensated officers named above .........
Aggregate compensation paid to all officers and Directors as a
group unnamed ..............................................................................
2012
2013
2014
2012
2013
2014
Total(1)
(P in millions)
60.8
66.8
77.8
379.4
449.1
524.3
________________
Notes:
(1)
Includes salary, bonuses and other income.
The growth in aggregate compensation of the CEO and the four most highly compensated executive
officers of the Bank for 2015 is estimated to be the same as that of the prior year.
There are no actions to be taken as regards any bonus, profit sharing, pension or retirement plan,
granting of extension of any option warrant or right to purchase any securities between the Bank and
its directors and officers.
Remunerations given to directors which were approved by the Board Remuneration Committee
amounted to P
=13.1 million in 2014 and P
=10.2 million in 2013.
55
Standard Arrangement
Non-executive directors receive per diem of P
=60,000 per committee and special board meeting and
=120,000 per regular board meeting.
P
Executive directors do not receive per diem as the same has been considered in their compensation.
Other Arrangement
The Bank has no other arrangement with regard to the remuneration of its existing directors and
executive officers aside from the compensation received as stated above.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Record and beneficial owners holding 5% or more of voting securities as of January 31, 2015:
Name of Beneficial
Owner
& Relationship with
Record
Owner
ALG Holdings
Corporation
(Parent Company of
FDC)
Filinvest
Development
Corporation
(Parent Company of
EW)
Title of
Class
Common
Name, Address of Record Owner &
No. of
Relationship with Issuer
Citizenship
Shares Held
%
Filinvest Development Corporation
6/F The Beaufort, 5th Ave. cor, 23rd St., Fort
Filipino
451,354,890
40.00%
Bonifacio Global City, Taguig City
(Stockholder)
Common
Filinvest Development Corporation Forex
Corporation
6/F The Beaufort, 5th Ave. cor, 23rd St., Fort
Filipino
394,941,030
35.00%
Bonifacio Global City, Taguig City
(Stockholder)
Common
PCD Nominee Corporation
37th Floor, Tower I, The Enterprise Center,
Various
Non-Filipino
168,029,319
14.89%
6766 Ayala Ave. corner Paseo de Roxas,
stockholders/clients
Makati City
PCD Nominee Corporation
Common
37th Floor, Tower I, The Enterprise
Various
Filipino
109,254,479
09.68%
Center,6766 Ayala Ave. corner Paseo de
stockholders/clients
Roxas, Makati City
Based on the list provided by the Philippine Depository and Trust Corp. to the Bank’s transfer agent, Stock Transfer Service,
Inc., as of January 31, 2015 none among the stockholders under the PCD Nominee Corporation holds 5% or more of the Bank’s
securities.
Filinvest Development Corporation (FDC) is the record and beneficial owner of 45% of the
outstanding capital stock of the Bank. It is also the beneficial owner – through registered owner FDC
Forex Corporation of 30% of the shares of the Bank. FDC is majority owned by A.L. Gotianun, Inc.
The Bank and FDC’s ultimate parent company is A.L. Gotianun, Inc.
Mr. Andrew L. Gotianun, Sr.’s family is known to have substantial holdings in the companies that
own the shares of ALG Holdings, Inc. and, as such, could direct the voting or disposition of the shares
of said companies.
Except as stated above, the Bank has no knowledge of any person holding more than 5% of the
Bank’s outstanding shares under a voting trust or similar agreement. The Bank is likewise not aware
of any arrangement which may result in a change in control of the Bank, or of any additional shares
which the above-listed beneficial or record owners have the right to acquire within thirty (30) days,
from options, warrants, rights, conversion privilege or similar obligation, or otherwise.
56
Security Ownership of Management
Security Ownership of Directors and Executive Officers as of January 31, 2015are as follows:
Title of
Class
Common
Common
Common
Common
Common
Common
Common
Common
Common
Name
Position
Andrew L. Gotianun
Jonathan T. Gotianun
Antonio C. Moncupa, Jr.
Mercedes T. Gotianun
L. Josephine Gotianun-Yap
Paul A. Aquino
Carlos A. Alindada
Jose Sandejas
Benedicto M. Valerio, Jr.
Director, Chairman Emeritus
Director, Chairman of the Board
Director, President & CEO
Director
Director
Director
Director
Director
Director/Corporate Secretary
Subtotal
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Common
Common
Common
Common
Common
Common
Common
Common
Common
Common
Common
Jose Emmanuel U. Hilado
Gerardo Susmerano
Jacqueline S. Fernandez
Arturo L. Kimseng
Ernesto T. Uy
Manuel Andres D. Goseco
Ivy B. Uy
Renato K. De Borja, Jr.
Bernadette T. Ratcliffe
Renato P. Peralta
Grace N. Ang
Senior Executive Vice President
Senior Executive Vice President
Executive Vice President
Executive Vice President
Senior Vice President
Senior Vice President
Senior Vice President
Senior Vice President
First Vice President
First Vice President
First Vice President
Subtotal
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Total
Citizenship
Beneficial/
Record
4,301,060
4,271,210
455,010
4,301,060
5,702,910
10,010
10
20,010
500
19,061,780
Percent of
Ownership
0.38%
0.38%
0.04%
0.38%
0.51%
0.00%
0.00%
0.00%
0.00%
1.69%
50,000
320,000
23,800
30,000
25,000
150,000
150,000
50,000
10,000
46,300
55,000
910,100
0.00%
0.03%
0.00%
0.00%
0.00%
0.01%
0.01%
0.00%
0.00%
0.00%
0.01%
0.08%
10,554,780
1.77%
The aggregate shareholdings of all directors and officers as a group is 1.77%.
Voting trust holders of 5% or more
To the extent known to the Bank, there is no person or group of persons holding more than 5 % of the
common shares by virtue of a voting trust or similar agreement as there has been no voting trust
which has been filed with the Bank and the Securities and Exchange Commission.
Change in Control
There have been no arrangements that have resulted in a change of control of the Bank during the
period covered by this report.
Item 12. Certain Relationships and Related Transactions
The Bank and its subsidiaries and affiliates in their normal course of business, have certain related
party transactions. Kindly refer to Note 26 of the Notes to the Audited Consolidated Financial
Statements for the summary of related-party transactions among members of the Filinvest Group.
There were no other transactions during the last two years, or any proposed transactions, to which the
Bank was or is to be a party, in which any director or executive officer, any nominee for election as a
director, any security holder or any member of the immediate family of any of the foregoing persons,
had or is to have a direct or indirect material interest.
57
PART IV – CORPORATE GOVERNANCE
Item 13. Corporate Governance
Corporate Governance and Compliance Committee
EastWest commits to the highest standards of good corporate governance in realizing its vision and
mission. The Bank believes that sound corporate practices based on fairness, accountability and
transparency is essential in achieving growth and stability as well as enhancing investor confidence.
The Bank aims to create and sustain value for its various stakeholders. To achieve this, the Bank’s
Board of Directors, senior management and employees understand that compliance with regulations
and best practice standards is everybody’s responsibility. The Bank accomplishes this by adopting
measures designed to align the shareholders’ and senior management’s objectives with that of the
employees.
The Board of Directors conducts its functions as a full Board and through its six committees:
Executive, Corporate Governance and Compliance, Audit, Risk Management, Compensation and
Trust. Board-approved Corporate Governance policies are contained in the Manual on Corporate
Governance which is premised on the Corporate Code of the Philippines, Securities Regulations
Code, 2009 SEC Revised Code of Corporate Governance and relevant provisions from the Bangko
Sentral ng Pilipinas Manual of Regulations for Banks. These policies are made known to every
member of the EastWest Bank organization.
The Bank’s Code of Ethics ensures that all employees adhere to the highest standards of quality,
honesty, transparency and accountability. To further emphasize its commitment to integrity,
EthicsDirect encourages employees to report, in good faith, to Senior Management any misconduct
within their respective business units. EthicsDirect is a program that protects in confidence the
identity of the employee who disclosed the suspected offense within the organization.
Eastwest Bank values the contribution of its employees in fostering a culture of good corporate
governance. The Employee Relations Council, composed of representatives from different units,
ensures that interests and concerns of personnel are heard and addressed.
Going beyond adherence to regulatory framework, EastWest Bank fosters a culture of partnership
within its organization to ensure that long-term success and performance of the Bank are achieved.
The Corporate Governance and Compliance Committee leads the Bank in defining corporate
governance policies and attaining best practices while overseeing the implementation of the Bank’s
compliance program, money laundering prevention program and ensuring that regulatory compliance
issues are resolved expeditiously. Added to its strategic governance role is the nomination function
where it reviews and evaluates the qualification of individuals nominated to the Board as well as those
nominated to other positions requiring appointment by the Board. The Committee is responsible for
the periodic administration of performance evaluation of the Board and its committees. It conducts an
annual self-evaluation of its performance in accordance with the criteria provided in the 2009 SEC
Code of Corporate Governance and the Bangko Sentral ng Pilipinas Manual of Regulations for Banks.
At the forefront of the implementation of its mandates is the Compliance Division led by the Chief
Compliance Officer.
The Committee, consisting of the Chairman of the Board and four directors, meets every two months.
See Annex D for the Bank’s 2014 Annual Corporate Governance Report.
58
PART V - EXHIBITS AND SCHEDULES
Item 14. Exhibits and Reports on SEC Form 17-C
(a) Exhibits
ANNEX A – Certification on Qualification of Independent Directors
ANNEX B – Certification that None of the Directors and Officers work with the Government
ANNEX C – List of Owned and Leased Branches
ANNEX D – Annual Corporate Governance Report
ANNEX E – Consolidated Audited Financial Statements
(b) Reports on SEC Form 17-C
The following reports have been submitted by the Bank during the year 2014 through official
disclosure letters:
REPORT
Setting of Annual Stockholders’ Meeting date and Record Date.
BSP approval of the Plan of Merger and Articles of Merger of EW
and GBI
Special Board Meeting results Amedment to Articles of
Incorporation and By-laws; Issuance of Preferred Shares,
Establishment of Bancassurance business and non life insurance
and Establishment of wholly owned finance and leasing company.
Corrected – Special Board Meeting results Amedment to Articles
of Incorporation and By-laws; Issuance of Preferred Shares,
Establishment of Bancassurance business and non life insurance
and Establishment of wholly owned finance and leasing company.
Results of the 2014 Annual Stockholder's Meeting
BSP approval EW Tier 2 issuance and Resignation of Atty.
Isagani Cortes as head of Compliance Division and Atty. Winnie
Pineda as head of Legal Services Division.
Ad Interim appoointment of Ms. Bermadette T. Ratcliffe and Atty.
Lourdes A. Ona as heads of Compliance Division and Legal
Services Division, respectively.
EW-GBI merger
Press Release in relation to the EW's Basel III-compliant
unsecured subordinated Tier 2 Notes.
Appointment of Mr.Jose Emmanuel U. Hilado as the Chief
Operating Officer and Ms. Deniece Tambuatco as SVP Head of
Marketing, Promotions of senior officers: Gerardo Susmerano,
Renato Peralta and Grace Ang and regular appointment of Atty.
Lourdes A. Ona as Head of Legal Servives Department and Ms.
Bernadette T. Ratcliffe as Head of Compliance Division.
Press Release- Eastwest continues to post strong growth in core
banking revenues.
Resignation of Mr. Gerry Verzola as head of Corporate Banking
Group 2
SEC Certificate of Filing of the Articles of Incorporartion and the
Bylaws on the Amendment to the Principal Address of the Bank.
BSP letter of approval of the appointment of Ms. Ratclifffe as
Chief Compliance Officer
Hiring of Mr. Stephen O. Santos FVP and Head of Corporate
59
DATE REPORTED
February 3, 2014
April 7, 2014
April 11, 2014
April 14, 2014
April 30, 2014
May 19, 2014
June 3, 2014
June 10, 2014
July 3, 2014
August 5, 2014
August 12, 2014
September 5, 2014
October 27, 2014
October 29, 2014
December 1, 2014
Banking 2
Hiring of Ms. Angel Marie L. Pacis s FVP and Trust Officer
Result of Regular Board Meeting – Setting of Annual
Stockholders’ Meeting date and Record Date, Authorization for
the issuance of Stock Rights Offer and the establishment of
Insurance Brokerage
Re assigment of Mr. Noli De Pala as new FI Sales Head
Result of Special Board Meeting - Amendment of Articles of
Incorporation to increase authorized capital stock.
Order issued by the Securities and Exchange Commission, Special
Hearing Panel 1 (“SEC”) dated 19 March 2015, Granting EW’s motion
to exercise it rights to convert notes into VMC common shares.
60
December 22, 2014
February 3, 2015
February 17, 2015
March 9, 2015
March 25, 2015
ANNEX A – Certification on Qualification of Independent Director
ANNEX B – Certification that None of the Directors and Officers work with the Government
ANNEX C
Branches Owned as of December 31, 2014
Branch
Location
1. The Fort - Beaufort
The Beaufort, 5th ave. corner 23rd St., Bonifacio Global City, Taguig City
2. Betterliving
100 Doña Soledad Ave., Betterliving Subd., Brgy. Don Bosco,
3. Davao - Lanang
Lot 6 Blk 5, Insular Village, Pampanga Buhangin, Lanang Davao City
4. Pioneer
UG-09 Pioneer Pointe Condominium, Pioneer St., Mandaluyong City
5. Tandang Sora
Lot 80-A Kalaw Hills Subd., Brgy. Culiat, Tandang Sora
Branches and Buildings Leased as of December 31, 2014
Branch
Lessor
Gil Puyat
Univille Development Corp.
Cubao
Co Beng Kay
Ortigas
Quantum Summit Inc.
Las Piñas
Lemon Square Inc.
Edsa-Kalookan
Antonio V. Tan Jr.
Roosevelt
Ma. Teresita G. Nino
Pasig Shaw
Hi-Light Corporation
Pasig - Poblacion
Bde Property Holding, Inc.
Ayala Avenue - Herrera
Filinvest Asia Corporation
Imus
Flaviano Barbon
Taytay
Ch & Ch Realty Dev. Corp.
Congressional
Teresa Ignacio
Anonas
Heirs Of Artemio And Natividad Espidol
President'S Avenue
Shirley M. Chong-Sublessor
Antipolo-Marcos Highway
Cathay Builder'S Center Inc.
Regalado
Lita Genilo
Bagumbayan
First Queensland Devt Inc.
Bacoor - Aguinaldo Highway
Emerson T. Santos
Padre Faura
Metro Square Management Services
Sto. Cristo
Sto. Cristo Development Corp
Pasong Tamo
Asia Industries
Mandaluyong Shaw
Litton & Co., Inc.
Quezon Avenue
St. Francis Plaza Corp.
Katipunan
Baywalk Realty Holdings Inc.
Escolta
First United Building Corporation
Banawe
Grayline Plans Inc
Festival Supermall
Filinvest Alabang Inc.
Annapolis
Francis C. Yu
San Fernando - Dolores
Davsan Commercial Corporation
Cabanatuan
O'Neill C. Tecson
Lucena
Belinder Realty Corporation
Calamba
Sqa Macroland Holdings Corporation
Westgate
Filinvest Alabang, Inc.
Dagupan
Susa Erfe-Mejia Crisologo
Cagayan De Oro
Juan Y. Sia
Zamboanga
Akmad J. Sarapuddin
Baguio City
Garpaz Enterprises Inc (Dr. Pacita B. Salvosa)
Cebu - N. Escario Cash Center
Cebu Capitol Commercial Complex Corp
Tomas Morato
Fe Tolentino-Rubio
Sucat
Columbia Airfreight
Angeles, Pampanga
Victoria L. Angeles
Valenzuela
Jlb Enterprises Inc
Greenhills - West
Alcco Realty Corp
Valero
Charlex International Corp
Salcedo
First Life Finance Company, Inc.
Tektite (Renewal)
Pioneer Stationers Inc.
Festival Mall Level 1
Filinvest Land,Inc.
Tarlac
Central Luzon Realty And Development Corporation
T. Alonzo
Derrick Ong Lee
Batangas
Nestor Thomas V. Dy
West Avenue
Felecita D. Borlongan
Cebu - Mandaue Briones Highway
Just To Chip
Naga
Manubay Agro-Industrial & Development Corp, Inc.
Laoag
Roque Ravelo Ablan Jr
Cebu-Banilad
Philippine Duplicators, Inc.
Cebu - Magallanes
Gck Realty
La Union
Lal Merchandani
Cotabato
Susan Uy Sy
Tacloban
Washington Trading Inc.
Isabela
Ma. Theresa Ku-Daquis
New Manila
Rsd Resources Inc.
Malabon
Consolidated With Malabon - 250
Intramuros
Home Guaranty Corp
Davao - Sta. Ana
Davao Gh Enterprise
Del Monte
Philiprose Corporation
Grace Park
Remcor Industrial And Manufacturing Corp.
Binondo
Charlex Realty Corporation
Paseo De Roxas
Grandunion Supermarket
Baliuag Bulacan
Dps Bulk Cement, Inc.
Davao-Matina
Rebecca Melocoton Torno
Lipa City
Segundo And Violeta Bancoro
The Fort
Mar - Nol Realty Corporation
Iloilo
Arancillo, Carrol, Borromeo
Urdaneta Pangasinan
Samson Hilomen
Paso De Blas
Pio Alejandrino
Isabela - Cauayan
Leonicia Coloma Uy
Governor Pascual Malabon
Jessica Lucero Ng
Bacolod
Nick'S Lumber & Hardware Inc
Divisoria
Aurora Veloso Yap
Paseo De Roxas - Philam Tower
The Philippine American Life And General Insurance Comp
San Miguel Avenue-Ortigas
Unity Fishing Devt. Corp.
Alabang Madrigal
Ctp Red I Corporation
Un Avenue
The Philippine American Life And General Insurance Company
Dela Rosa Pasong Tamo
Kings Development
Baclaran
New Galleria Baclaran Inc
A. Bonifacio
Engco Lim And Jully Lim
Paco
Worth Properties Inc.
Soler
R & S Tower Inc
San Juan
Everen Realty Corporation
Legaspi Village
Regina Properties Inc.
Amorsolo
First Gateway Real Estate Corp
Makati Stock Exchange
Ayala Land Inc
Carmona
New Alabang Centro Management & Development Co., Inc
Olongapo
Kriztopher John K. Fernandez
South Triangle
King Chu Hung Cheng
Novaliches
Arnold S. Magsalin
Iligan City
Sps. Francisco Ma. & Jeannette L. Garcia
Emerald
Hanston Commercial And Industrial Corp
C. Raymundo
Itsp, International, Inc.
Roxas Blvd.
Natural Resources Developemnt Corporation
Cebu Mactan
Aurello P. Dela Paz
Malabon - Potrero
Golden A Incorporated
General Santos City
Zenaida Y. Chua
Evangelista
Iza Rowen M. Jonota
Mandaluyong Libertas
Saint Bk4M Inc
Balanga Bataan
Sps. Reynaldo Paul And Maria Clara A. Chico
Northbay Navotas
Melcon Development Corporation
Muntinlupa
Menzi V. Arellana
Butuan
Deofavente Realty Corporation
General Trias-Cavite
Visionproperties Development Corporation
Burgos Circle
Izukan Inc.
Ozamiz
Ozamiz Universal Auto Mart Inc.
San Pablo
Leopoldo B. Almeda
San Pedro
Filrent Property Management Corporation
B.F. Resort
Spouses Enrique P. Lima And Carmelita P. Lima
168 Mall
Yeeloofa Development Corporation
Iloilo - Iznart
B & C Corporation
Magallanes
Tritan Ventures, Incorporated
Cebu - Mandaue North Road
Aldo Development & Resources Inc
Davao Toril
Samuel Or Henry Or Alan Edgardo Yu Alegre
Antipolo
Zacarias L. Tapales
Tuguegarao
Mkt Mark Corporation
Marikina - Gil Fernando Ave
Sps. Rolando A. Nermariano And Mary C. Mariano
Greenhills Shopping Center
Ortigas And Company Limited Partnership
Cebu - Grand Cenia
Filinvest Land,Inc.
Taft - Nakpil
Spouses Luis D. Reynoso And Remedios Lopez Reynoso
Taytay - Manila East
Estrelita Felix
Caloocan - A. Mabini
Antonio F. Baello
Iloilo - Molo
Ibc Internation Builders Corp
Alabang Commerce
Filinvest Alabang, Inc.
Metropolitan Avenue
Pss Realty And Development Corporation
Ortigas - Rockwell
Rockwell Land Corporation
Pangasinan - San Carlos
Golden Arches Development Corp
Pasig Blvd.
Josefina Menguito Gayamat
Mayon
Missoni Realty Corporation
Davao - Tagum
Dynasty Management And Development Corporation
Don Antonio Heights
Clark Ignatius Castañeda
City Place Square
Megaworld Corporation
Baesa
Baesa Redevelopment Corporation
Banawe - Sct. Alcaraz
Pollandre Manufacturing Inc.
Timog Avenue
Ushio Relaty & Devt Corp
West Service Road Branch
Antonio S. Bonoan, Jr.
Wilson Branch
Gertim Multiresources Inc.
Pasong Tamo - Bagtikan
Grand Crowne Pacific Inc.
Sucat - Evacom
Consuelo Ko Ong
Banawe - N. Roxas
Rosendo Uy,Medring Sioco, Bobby Uy
Baguio Session Road
J.P. Leap Inc
Edsa Howmart
Rowena Balingit Batac
E. Rodriguez
M C Rillo Realty Development Corporation
Jose Abad Santos - Tayuman
Emerina Cada Eusebio
Pampanga - Apalit
Richard Linton Chua Wang
Ayala Ave. - Sgv 1
Marilag Corporation
Marikina - Concepcion
Atty. Deogracias G, Eufemio
Balibago - Angeles
J.A.D. Saver'S Development Company, Inc.
Betterliving - Doña Soledad Ave.
Sps. Renato G. Silverio And Alegria V. Silverio
Ilocos Sur - Candon
Sps. Shirley And Kansu Chan
Cebu - A.S. Fortuna
Arturo Y. Sing
Cebu - M. Velez
Tong Tiong Lam Real Estate, Inc.
Connecticut
Fox Square Management
Davao - C.M. Recto
Sps. Pedro A. Anino And Ester A. Anino
Edsa - Muñoz
Lemon Square Inc
Kamias
Ma. Lourdes I. Joson
Koronadal City
911 Emergency Pawnshop Inc.
Pasay - D. Macapagal Blvd.
Hobbies Of Asia Inc.
Bacolod - Mandalagan
Lopue'S Mandalagan Corp
Las Piñas - Marcos Alvarez
Dante D. Dimaano
Masambong
L. G. Atkimson Import - Export Inc.
Masangkay
Sps. Pio Quintin Tan Paterno Jr And Naty O. Paterno
Makati Ave - Pacific Star
Penta Pacific Realty Corporation
Pagadian - Fs Fajares Ave.
Pagadian Bmd Estate Co.,
Puerto Prinsesa - Rizal Ave
Palawan Amity Corporation
Cebu - Park Mall
Golden Great Value Properties Inc.
Rada
Desta Development Corporation
Roosevelt - Sto. Nino
Sps. Edna L. Liao And Chin Guat B. Liao
Pampanga - San Fernando Sindalan
Timoteo Ramos
Sucat - Kingsland
Alaric Properties Inc.
Taft Avenue
Philippine Academy Of Family Physicians
Tomas Mapua - Lope De Vega
Valqua Industrial Corporation
T.M. Kalaw
Ditz Realty Corp, Inc.
Up Village
Lourdes N. Cando
Benavidez
Multi Development And Construction Corporation
Araneta Avenue
Ilo Construction Inc.
Quiapo
Luz Sui Haw
999 Shopping Mall
Nation Realty Inc.
Amorsolo - Queensway
Amvel Land Development Corporation
Makati Avenue
Ang Tiam Chay (Fernando Ang)
Eastwood City
Megaworld Corporation
North Edsa
Edsa Grand Realty And Development Corporation
Bf Homes - Aguirre Ave
Atty. Alberto Pedro B. Arcilla
Quezon Avenue - Dr. Garcia Sr.
Kayumanggi Press, Inc.
J. P. Rizal
Jose/Ofelia Lasala Corporation
Grace Park - 7Th Ave
Maria Belina Genato San Dejas
Bacoor - Molino
Emerson T. Santos
Davao - Bajada
Amalgated Capital, Inc
Pasay - Libertad
E Hotel
Ayala Avenue - Rufino Building
Var Building Inc.
Batangas - Bauan
William B. Generoso
Alabang Entrata
Filinvest Alabang Inc - Entrata
Boni Avenue
Pedro L. Cagalingan
Boracay
Maria Victoria Aguirre - Salem
Pangasinan - Rosales
Bernadette E. Arellano
Cagayan De Oro City - Cogon
De Oro Construction Supply Inc.
Mindoro - Calapan
Sps. Roberto J. Paras And Rosemarie B. Paras
Cavite - Naic
Atty. Prescila Torres Baylosis
Cavite - Tanza
Priscilla Arca - Torres
Cebu - Fuente Osmeña
Cebu Woman'S Club Inc.
Cebu - Asia Town It Park
Innoland Development Corp
Cebu - Juan Luna
Jo Cinema Corporation
Cebu - Minglanilla
Second Wind Development Inc.
Cebu Talisay
Aileen G. Sy
Cebu - A.C Cortes
The Ancestors Realty Inc.
Cebu - Basak Pardo
Aztique Grans Inc
Cebu Magallanes - Nilo Me Tangere
Central Lumber Corporation
Commonwealth
Crissant Real Estate Services & Development Corporation
Cubao - Araneta Center
The Philippine American Life And General Insurance Company
Dagupan - A.B. Fernandez Avenue
Alan C. Ngo, Benedict Ngo, Sheila Ann Ngo
Dasmariñas
Mabini Dela Rea Leveriza
Davao - Jp Laurel
Cecilia S. Aledia
Davao - Panabo
Medelyn Tan Du Ursos
H.V. Dela Costa
Pragmatic Development And Contruction Corporation
Legaspi - Dela Rosa
The Insular Life Assurance Compant Ltd
Bataan - Dinalupihan
Norberto S. Jimenez
Dumaguete City
Jonathan V. Lee
El Cano
San Juna Diego Property Holdings Inc.
Fairview
Danilo Domingo Garcia
Pampanga - Guagua
Feliciano O. Tan
Bacolod - Hilado
V. T. Marketing Inc.
Iloilo - Jaro
Mandaue Foam Industries, Inc.
Julia Vargas
Amberland Corporation
Benguet - La Trinidad
Oliver L. Omengan
Lagro
Sps. Lourdes Tan Lim And Alfredo Iu Lim
Loyola Heights - Katipunan
Mendez Management Corporation
Malabon - Rizal Ave.
Flaviano Gozon Felizardo Iii
Marikina - J.P. Rizal
Niña Anele Dolino
Mckinley Hill
Megaworld Corporation
Meycauyan - Malhacan
Fabeco Development Inc.
Ormoc City
P. Larrazabal & Sons Enterprises, Inc.
Garnet
Ipm Trading & Development Corp
Tarlac Paniqui
Luz M. Jo
San Lorenzo - A. Arnaiz Avenue
Aaron Investment Corporation (The E - Hotel)
Pasig - Valle Verde
New Move Realty, Inc.
Pasig - Rosario
Kathleen De Jesus And Carolyn De Jesus
Pasig - Santolan
Jesus F. Ignacio
The Fort 26Th St-11Th Ave
Jsd Global Properties And Development Inc.
Nueva Ecija - San Jose
Sps. Edilberto P. Lim And Leonor P. Lim
Nueva Vizcaya - Solano
Sps. Philip A. Dacayo And Eufemia A. Dacayo
Surigao City
Ernesto G. Chua
Tagbilaran
E.B. Gallares Properties Associates Inc
Novaliches - Talipapa
Copengco Development, Co., Inc.
Batangas - Tanauan
Lima H. Olfato
The Fort - F1
Simor Abaca Products, Inc
Vigan
Ramon L. Filart
Zamboanga City - Canelar
Jonathan Sherwin A. Ebol
Las Pinas - Almanza
Araro Philippines Corporation
Greenhills - North
Hantex Land Corporation
Mandaluyong Wack - Wack
Greenfield Development Corporation
Sucat - Kabihasnan
Wizard Security Systems Inc.
Gil Puyat - Dian
Henley Resources Corporation
A. Bonifacio - Balingasa
Corsa Sales Corporation
Bicutan - East Service Road
Waltermart Ventures Inc
Kalentong
Tomas T. Toh
Juan Luna - Pritil
Well & Well Realty Corporation
Visayas Avenue
Gboy & Jb Inc.
Bukidnon Valencia
J. K. La Viña & Sons Realty Corporation
Plaridel Bulacan
Visram Leasing Services Corporation
Laguna - Cabuyao
Jacinto S. Garcia
Cavite City
Elenita C. Bernal
Davao - Buhangin
D3G Y10 Corporation
Grace Park - 11Th Ave
Remcor Industrial And Manufacturing Corporation
Nueva Ecija - Gapan
Sps. David Parcutela Sta. Ines Jr. And Raquel Tioseco Sta. Ines
Valenzuela - Dalandanan
Malanday Machinery & Manufacturing Corporation
Alabang Hills
Don Gesu Realty Corporation
Marikina - Parang
Magdalena B. Victorino
Navotas - M. Naval
Corazon G. Ignacio
Ongpin
Karesman Realty
Ylaya Padre Rada
L.R.L & Sons Inc
Banawe - Kaliraya
Titan 168 Corp
Pangasinan - Lingayen
Sps. Menandro T. Molano And Merly S. Molano
Balagtas - Bulacan
Jocelyn Cundangan Alipio, Gerell S. Cundangan And Josie Marie S. Cundangan
Subic Bay
Jemeryk Portal System Integration (.Ipsi) Inc.
Cavite - Trece Martires
Ms. Nenita Nuestro Alonzo
Information Technology Group
Regina Properties, Inc.
Cbd Luzon
Amelita M. Sayuno
Call Center Division
Filinvest Asia Inc.
Laguna - Biñan
Simreys Realty Corporation
Batangas - Lemery
Leaders Dimension Mega Corporation
Bacolod - Araneta
Jtm Bacolod Realty Inc.
Roxas - City
Wyb Realty And Holding Corp
Kalibo
Cristina Lao - Co
Tacloban City - Marasbaras
Jgc Financing Company, Inc.
Davao - Digos
Davao Rj And Sons Realty And Trading Corporation
Perea
William D. Ty And Wilfredo D. Ty
General Luis - Kaybiga
Isagani S.A. Gonzales
San Jose - Antique
Vicente Conpinco Ong And Sons Incorporated
Batangas Rosario
Emma A. Alcantara
Grace Park - 3Rd Ave
Marites Cadawan Huang
Isabela - Ilagan
Imelda Diana P. Beilgo
La Union - Agoo
Dominga E. Chan,
Ilocos Norte - San Nicolas
Sps. Gerry Casiano And Nenita Cu Casiano
San Fernando Pampanga - Jose Abad Ave.
Edgardo E. Chua
Cavite - Silang
Luz Belardo - Consuegra
Davao Agdao
G Tan G Holdings, Inc.
Davao - Mac Arthur Matina
Unotres Realty Inc
Project 8 - Shorthorn
Weststar Realty Corporation
Jupiter
Royal Banner Corporation
Dipolog City
Fsa Development Corporation
General Santos - Pioneer Avenue
Laiz Development Corporation
Tordesillas
Hitesh-Ravi Development Corp
Bluementritt - Rizal Avenue
Mercury Group Of Companies Inc.
Chino Roces - La Fuerza
La Fuerza Inc.
Gil Puyat - Salcedo Village
Seawind Realty & Development Inc
Batangas - Nasugbu
Edmundo Villadolid
Juan Luna - Binondo
Goldfleece, Inc.
Paz M. Guazon
Ernesto S. Chuakaw,
Sampaloc - J. Figueras
Zenaida G. Tan
Del Monte - D. Tuazon
Emerson Cruz Oliver
Valenzuela - Gen. T. De Leon
Kevin Batalla Tuazon
E. Rodriguez Sr. Ave. - Cubao
United Pharmachem Agrivet Inc.
Mia Road
So Management Corporation,
Las Piñas - J. Aguilar Ave.
Liberty B Canastra
Malolos
Bulacan Federation Fo Cooperatives
Nueva Ecija - Talavera
Dioscoro F. De Leon
Kawit - Centennial
Alicia R. San Juan
Batanggas- Sto. Tomas
Rolando Dlp. Montecillo
Sorsogon City
Moises Dogillo
Silay
Charito Hofileña-Hain
Davao - Quirino
Binansel Inc.
Davao - Magsaysay
Jonathan John Villanueva Tay
Cagayan - Carmen
Evangeline Si Leonor
Cagayan De Oro - Lapasan
Hetrs Of Salvador S. Uy
Kidapawan
Heirs Of Januario T. Espejo Sr.
Gen Santos - Calumpang
Gen San Kimros Corp
The Fort - Active Fun
Petaluma Properties, Inc,
Pasay - Oceanaire
Sunlay 9 Corporation
Pateros
Aurora Robles
Sta. Rosa
Greenfield Development Corporation
Mayon - Dapitan
Noli G. Tan Et Al
Bataan - Mariveles
Freeport Area Of Bataan
Kamuning
Jesus Yambao
Xavierville
Anthony Malixi
Tabaco City
Johnny Cea
Ortigas - Adb Avenue
Alliance In Motion Realty Development Corp
A. Mabini - R. Salas
Sbros Realty Corporation
P. Ocampo Avenue
Jm Macalino Auto Center
Montalban - Rizal
Christine Nocon Malonzo
Timog - Mother Ignacia
Torq Thrust Marketing Corporation
Aurora Blvd. - Anonas
Montag Development Inc.
Boni Serrano Ave.
Chosenland Philippines Development Corporation
ANNEX D – Annual Corporate Governance Report
SECURITIES AND EXCHANGE COMMISSION
SEC FORM
-
ACGR
ANNUAT CORPORATE GOVERNANCE REPORT
GENERAT INSTRUCTIONS
(A)
Use of Form ACGR
This SEC Form shall be used to meet the requirements
(B) Preparation of
ofthe Revised Code of Corporate Governance.
Repor
Thesegeneral instrubtionsarenottobefiledwiththereport. Theinstructionstothevariouscaptionsoftheform
shall not be omitted from the report as filed. The report shall contain the numbers and captions of all items. lf
any item is inapplicable or the answer thereto is in the negotive, an appropriate statement to that effect shall be
made. Provide an explanation on why the item does not apply to the company or on how the company's practice
differs from the Code.
(C) Signature and Filing of the Report
A.
Three (3) complete set of the report shall be filed with the Main Office of the Commission.
B.
At least one complete copy of the report filed with the Commission shall be manually signed.
C.
All reports shall comply with the full disclosure requirements of the Securities Regulation Code.
D.
This report is required to be filed annually together with the company's annual report.
(D) Filing an Amendment
Any material change in the facts set forth in the report occurring within the year shall be reported through
Form 17-C. The cover page for the SEC Form 17-C shall indicate "Amendment to the ACGR".
SEC
TABLE OF CONTENTS
1)
BOARD OF DTRECTORS
(a) Composition of the Board
(b) Corporate Governance PolicY
(c) Review and Approval of Vision and
(d) Directorship in Other Companies
Mission
(e) Shareholding in the ComPanY
2) CHATRMAN AND CEO
3) SUCCESSTON PLAN FOR CEO/PRESTDENT AND TOP MANAGEMENT POSITION/
4) OTHER EXECUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS
5) CHANGES lN THE BOARD OF DIRECTORS
6) ORIENTATION AND EDUCATION PROGRAM
B.
CODE OF BUSINESS CONDUCT
&
ETH!CS.....
...'.'..'..13
1) POLTCIES
2) DISSEMINATION OF CODE
3) COMPLIANCE WITH CODE
4\
RELATED PARTY TRANSACTIONS
(a) Policies and Procedures
(b) Conflict of lnterest
5)
5)
C.
FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS
ALTERNATIVE DISPUTE RESOLUTION
ATTENDANCE...............
BOARD MEETINGS &
1) SCHEDULE OF MEETINGS
DETAILS OF ATTENDANCE OF DIRECTORS
2)
3) SEPARATE MEETING OF NON-EXECUTIVE
4) MINIMUM QUORUM REQUIREMENT
s) AccESS TO INFORMATION
5) EXTERNAL ADVICE
7) CHANGES IN EXISTING POLICIES
D.
,,...,,..2I
DIRECTORS
MATTERS...................
REMUNERATION
REMUNERATION PROCESS
REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS
.............24
1)
2l
3)
AGGREGATE REMUNERATION
4I STOCK RIGHTS, OPTIONS AND WARRANTS
5) REMUNERATION OF MANAGEMENT
E. BOARD COMM1TTEES...................
1) NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES
2) COMMITTEE MEMBERS
3) CHANGES IN COMMITTEE MEMBERS
4) WORK DONE AND ISSUES ADDRESSED
5) COMMITTEE PROGRAM
F.
MANAGEMENT SYSTEM.......
1) STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM
RISK
2l
3)
RrsK POLICY
CONTROLSYSTEM SET UP
26
33
SECURITIES AND EXCHANGE COMMISSION
SEC FORM
-
ACGR
ANNUAT CORPORATE GOVERNANCE REPORT
1.
Report is Filed for the Year: 2014
2.
Exact Name of Registrant as Specified in its
3.
Podium of the Beaufort, 5th Avenue Cor. 23'd Sts., Bonifacio Global City, Taguig
Address of Principal
4.
SEC
Charter:
EAST WEST BANKING CORPOXATION
Office
ldentification Number:
ASO94-002733
Postal
5.
I
6.
7.
Code 1634
(SEC Use Only)
il
nd uSfry Cla ssifi catio n Code
BlRTax ldentification Number: 003-921-057
(632l-s7s-3888
lssue/s Telephone number, including area code
8.
Former name or forrner address, if changed from the last report
)
G.
TNTERNAL
1)
2l
AUDIT AND
CONTRO1.................
.......41
STATEMENT ON EFFECTIVENESS OF INTERNAL CONTROL SYSTEM
TNTERNAL AUDTT
(a) Role, Scope and lnternal Audit Function
(b) Appointment/Removal of lnternal Auditor
(c) Reporting Relationship with the Audit Committee
(d) Resignation, Re-assignment and Reasons
(e) Progress against Plans, lssues, Findings and Examination Trends,
(f)
Audit Control Policies and Procedures
(g) Mechanisms and Safeguards
H.
ROIE OF
STAKEHOLDERS...............
....................44
1) POLTCY AND ACTTVTTTES
2) CORPORATE RESpONSTBTLTTY REpORT
3) MECHANISMS FOR EMPLOYEE PARTICIPATION
4l
!.
PROCEDURES FOR HANDLTNG COMPLATNTS
DrscrosuRE AND
1)
TRANSPARENCY..............
.......48
OWNERSHIP STRUCTURE
2l ANNUAL REPORT DTSCLOSURE
3) EXTERNAL AUDITOR'S FEE
4) MEDTUM OF COMMUNTCATTON
5) DATE OF RELEASE OF AUDTTED FTNANC|AL REPORT
6) COMPANY WEBSTTE
7) DTSCLOSURE OF RPT
J.
K.
/
RrGHTSOFSTOCKHOrDERS..................
52
1) RTGHTTO PARTTCTPATE EFFECTTVELY tN STOCKHOLDERS',
2I TREATMENT OF MINORITY STOCKHOLDERS
TNVESTORS RELATTONS
PROGRAM...
1)
COMMUNTCATTON
3)
INVESTOR REIATIONS PROGRAM
ACQUISITION OF CORPORATE CONTROL
2I
MEETTNGS
...............57
POLTCTES
tNtTtATtVES.................
L.
CORPORATE SOCTAT RESPONSIBTUW
M.
BOARD, DIRECTOR, COMMTTTEE AND CEO
N.
INTERNAL BREACHES AND SANCT!ONS...............
APPRA|SAL..
...................59
..........................59
50
A.
BOARD MATTERS
1)
Board of Directors
9
9
(a) Composition of the Board
Complete the table with information on the Board of Directors:
lf
nominee
Date
identify
first
,
FDC
NED
SINCE
April 25,2014
ASM April
25,20t4
20
April 25,2014
ASMApril 25,20t4
20
April 25,2014
ASM April 25,20L4
20
April 25, 2014
ASM April 25,2OL4
L4
April 25,2014
ASM April 25,2014
8
April 25,2014
ASM April 25,2014
2 years
INCEP
TION
1994
L.
I
2.GOTIANUN,
/Special Meeting)
elected
the
principal
1. GOTIANUN,
SR. ANDREW
Elected when (Annual
FDC
NED
SINCE
INCEP
MERCEDES T.
TION
1994
3.GOTIANUN,
FDC
NED
SINCE
INCEP
JONATHAN T.
TION
L994
4.GOTlANUN-
NA
NED
FDC FOREX
15,
2000
YAP, LOURDES
JOSEPHINE
5.MONCUPA,
JR. ANTONIO
AUG.
FDC FOREX
ED
SEPT.
L6,
2005
c.
6. VALERIO, JR.
FDC FOREX
NED
BENEDICTO M.
7. SANDBAS,
D
JOSE S.
8. ALINDADA,
ID
CARLOS R.
9. AQUtNO,
PAUI A,
(b)
ID
)
JULY
26,
and
20L2
months
April 25, 2014
ASM April 25,2OL4
5
2 years
FDC (Rel.
APRIT
None)
20L2
FDC (Rel.
APRIL
None)
20L2
FDC FOREX
ocr
(Rel. None)
10,
2 years
and 8
2012
months
and 8
months
April 25, 2014
ASM April 25,2014
2 years
and 8
months
April 25, 2014
ASM April 25,2014
Provide a brief summary of the corporate governance policy that the board of directors has adopted. Please
emphasis the policy/ies relative to the treatment of all shareholders, respect for the rights of minority
shareholders and of other stakeholders, disclosure duties, and board responsibilities.
The Corporate Governance Manual was designed to define the framework of rules, systems and processes
that governs the performance of the Board of Directors and Management. lt establishes the structure by
which the Bank executes and carries out its Corporate Governance.
I Reckoned from the election immediately following January 2,2072.
The BanlCs Board conducts its functions as a full board and through its committees. The Board established
committees to assist it in discharging its responsibilities. Each committee has a mandate outlining the
authority delegated to it by the board.
It shall be the Board's responsibility to foster the long-term success of the Bank and secure its sustained
competitiveness in a manner consistent with its fiduciary responsibility, which it shall exercise in the best
interest of the Bank, its shareholders and other stakeholders, namely, its depositors and other creditors, its
management and employees, the regulators and government, the community where it operates and the
public in general. The Board shall conduct itself with utmost honesty, integrity and transparency in the
discharge of its duties, functions and responsibilities.
The Board is committed to respect the rights of the stockholders such as but not limited tor
a.
b.
c.
a.
Voting rights - Shareholders shall have the right to elect, remove and replace directors and vote on
certain corporate acts in accordance with the Bank Code
Pre-emptive right - All stockholders shall have pre-emptive rights, unless the same is denied in the
articles of incorporation or an amendment thereto. They shall have the right to subscribe to the
capital stock of the Bank.
Powers of inspection - All shareholders shall be allowed to inspect .orpoy'.t" books and records
including minutes of Board meetings and stock registries in accordance with the Corporation Code and
shall be furnished with annual reports, including financial statements, without cost or restrictions
Right to information - All shareholders shall have access to any and all information relating to matters
for which the management is accountable for and to those relating to matters for which the
management shall include such information and, if not included, then the minority shareholders shall
be allowed to propose to include such matters in the agenda of stockholders' meetinB, being within the
definition of "legitimate purposes".
a.
Rights to dividends - Sharehotders shall have the right to receive dividends subject to the discretion of
d.
the Board.
Appraisal right.
- The shareholder shall have appraisa! rights or the right to dissent and demand
payment of the fair value of their shares in the manner provided for under Section 82 of the
Corporation Code of the Philippines
How often does the Board review and approve the vision and mission?
This depends on the numbers of strategic meetings which are normally held at the beginning of the year
during planning sessions and as often as needed to accommodate any revision. /
(c)
Directorship in Other Companies
(i)
Directorship in the Company's Group2
ldentify, as and if applicable, the members of the company's Board of Directors who hold the office of
director in other companies within its Group:
Directo/s Name
Andrew T, Gotianun Sr.
ofthe
Company
Corporate Name
Group
Filinvest Development
Corporation
I
I
II
,",
if
rman.
I Chairman Emeritus
I
Filinvest Land, lnc
Davao Sugar Central
Corporation
Filinvest Farm Corp.
Pacific Sugar Holdings
ALG Holdings, lnc
'The Group
is composed
I Chairman
I
I Chairman
I Chairmary
I Chairman
of the parent, subsidiaries, associates and joint ventures of the company.
6
I Corporate
Jonathan T. Gotianun
Eilinrra.r
.,.,..vEJs
Name of the
srvEtupmenf LorD.
cert."iio_ lnc
Davao Sugar
Filinvest Alabans. lnc.
Mercedes T. Gotianun
EW Rural Bank
Chairman
vest Develop.
rp.
Filinvest Land, lnc "n-Co
uavao Sugar Central
Corporation
Filinwa<+
Alaha-r-rrqvqttS,
rnc.
Yap
I .r.rrYE)t At(roanq. lnc.
Filinvest Asia Corp.
Cyberzo
n
e p rope ft-esJn c.
-The Palms Country Club
Jilinyest Development Corp.
Festival Supermall, lnc
r ne pahs Country Club
)
rectoilEDf/
Fi li n
Lourdes JosephineGoiianun
(i
-
Chairman
Executive oi
President
Executive oirectoTlEsident
and CEO
Executive D irectoTTEsident
Chairman
Chairman
Chairman / president
rrestoenl
President
Directorship in Other Listed Companies
ldentify' as and if applicable, the members
of the company,s Board of Directors
who are also directors of
publicly-listed companies outside
of its Group:
Relationship within the Company and
its Group
Provide details' as and if applicable,
of any relation among the members
of the Board of Directors, which
links them to significant shareholders
i, tf," iorp.n y and/orin its group:
Description of the relationship
(iv)
Has the company set a limit on
the number of board seats in other companies
(publicly risted, ordinary
and companies with secondary license)
that an inoiviauai oirelio,. o,, cEo may
hold simurtaneousry? rn
seats in other pubricry
npanies imposed and observed? yes,
rr
il,]i,irllJl ,,5o.;::;:[:i:frd
ril;J;;
The Bank follows the rute provided
bv the. BSP on interrocking directorships
in order to protect the
the excessive concentration of economic
,"*"r,-r""r"i, competitive advantage or conflict
ff*"".t"tJ"
(d)
Shareholding in the Company
7
Complete the following table on the members of the company's Board of Directors who directly and indirectly
own shares in the company:
Record date as of December 3L,2Ot4
Number of Direct shares
Number of
lndirect shares / Through
(name of record owner)
4,21,.,2O0
JONATHAN T.
GOTIANUN
10
ANDREW L.
GOTIANUN SR.
10
MERCEDES T.
Team Gladiolal Berit
10
GOTIANUN
JOSEPHINE
I
t.
195,410
GOTIANUN YAP
'
holdings lnc
562,500/Andremerc
Holdings Corp.
552,500/Andremerc
Holdines Coro.
3,407,500/share in EW
Trust Account & shares
held by immediate
0.378s
0.0587
0.0587
0.3193
family
ANTONIO C.
MONCUPAJR.
455,010
BENEDICTO M.
500
VATERIO JR.
CARLOS R. ALINDADA
JOSE S. SANDUAS
TOTAL
2l
I
0.0403
0
0.00
10
0
0.00
20,010
0
0.0018
0.0009
10,010
PAUL A. AQUINO
0
0
9,003,700
680,980
0.8583
Chairman and CEO
(a)
Do different persons assume the role of Chairman of the Board of Directors and CEO? lf no, describe the
checks and balances laid down to ensure that the Board gets the benefit of independent views.
ruol-___-]
ldentify the Chair and CEO:
JONATHAN T. GOTIANUN
ANTONIO C. MONCUPA JR.
(b)
Roles, Accountabilities and Deliverables
Define and clarify the roles, accountabilities and deliverables of the Chairman and CEO.
Chief Executive officer
The function of the Chairman is to
Roles,
Accountabilities,
Deliverables
preside at all meetings of the
stockholders and the Board of Directors.
He may also cal! special meetings of the
stockholders and the Board of Directors
pursuant to Section 3 of Article ll and
Section 4 of Article lll.
The Presidentrwho shall be elected
by the Board from among its
members, shall be the Chief
Executive Officer of the corporation.
He shal!, subject to the control of the
Board , have direct and immediate
supervision over the long term and
daily operations and management of
the Bank and shall execute and
8
@theBoard
?lso erctv'"Board. He shall
ard takes an
--iia
2.
with
at his
ee meetings'
3.
l'
discretion, deleg
^ -^^:-^ trfficer some of his
?r€ dcrtrcv=-'
Board of Directors
He is also requested
to attend all
^c'l.rpsSionoftheCEo/ManagingDirector/Presidentandthetop
3)
esigned
who can fill in
n"l""t"
cr[rlo':;;;,
Officer
ofiicer
inn,tt', covers senior
;H;
to identifv and
Po)*rv'
positions.
assess
n:::lll':"Jlfl"l1i:
to
develoPment Plans
e
as the President /
in the Bank such
riticar positions
whether operations'
e the variou'l';;;;-t; '"its' yet equally important
ent pool ,"r'",i"r'."."ndary
ds in the branches'
t-ii?iffi;-,
il.
High Potential
plan,for identified
preparation of career
il;ning and
; H;;
fl:-::Ji,",il1ffi,,ifidl,.*:"#,Jii:i1"',:'"1'trIl'"':il[;T#il."nt
:fl liJj;,llffi i[;;ii',.:.:[,h=ff i"l"'ffi xll'"'nl$JJ:ii;
Job Evaluation
1.
theJutt
Deveropment
them for uiee"r rir;onsibilitiesin
2.
3.
Talent Managemet
talents
4. il;;;
DeveloPment
pran ror these kev
Prosrams
the Senior Mana
of the Chairman
2'
The GrouP Head
The Division
/
positions'
the Banlcs critical
the candidates for
vets
comp*ance committee
Governance and
corporate
The
external hires'
lv.
Board?
or directors in the
and background
4)
,::.n".::,'-;-"
'::';:::il:ilffi:1"*'""""'"
explain'
''"""
,t is the po,icv or:."-:TI
background, business
,i#t^t
considers
1t1""::il;":"":tl1:1
of the Board' it
' - -^r^a+ino th€ members
criticar
l:""';H"$11[:::,Tl'rHllJli"lllJ;i""'"-"*
-'
-or.,sott^"'o
in the communitY'
"::t
9
Does it ensure that at least one non-executive director has an experience in the sector or industry the company
belongs to? Please explain.
The Bank thru Corporate Governance and Compliance Committee ensures that the directors are qualified prior
to their election /appointment taking into account their integrity, physical fitness,'competence, education,
moral standing and relevant experience among others.
Define and clarify the roles, accountabilities and deliverables of the Executive, Non-Executive and lndependent
D
i
recto rs:
Executive
The President and
CEO
is the only
Executive
Director of the Bank. He
shall, subject to
control of the Board,
the
have direct
Role
i
I
Non-Executive
The
Non-executive
Director is one who
is
not involved in the day
to day management of
the Bank and
lndependent Director
An lndependent Director
is one who has no
business
or
relationship
which
with the Bank
could
or
could
perceived
reasonably be
business
to
is
and
generally free from any
immediate supervision
over the long-term and
daily operations and
management of the
that could hamper their
objectivity or judgment
on the business and
Bank.
activities of the Bank.
relationship
materially interfere
with the exercise of his
independent judgment
in carrying out his
responSibilities as a
Director.
To ensure a high standard of best practice for the Bank, its stockholders and
other stakeholders, the Board shall:
a. Approve and monitor the implementation of strategic objectives;
b. Approve and oversee the implementation of policies governing major areas
of banking operations;
c. Approve and oversee the implementation of risk management policies;
d. Oversee selection and performance of Directors and Senior Management
and adopt an effective succession planning program;
e. Consistently conduct the affairs of the institution with a high degree of
integrity;
f. Define appropriate governance policies and practices for the Bank and for its
own work and establish means to ensure that such are followed and
periodically reviewed for ongoing improvement;
g. Constitute committees to increase efficiency and allow deeper focus in
Accou ntabilities,
Deliverables
specific areas.
h. Effectively utilize the work conducted by the internal audit, risk management
and compliance functions and the external auditors;
i. Establish and maintain an alternative dispute resolution system in the Bank
that can amicably settle conflicts or differences between the Bank and its
stockholders, and the Bank and third parties, including the regulatory
authorities;
j. Establish and maintain an investor relations program that will keep the
stockholders informed of important developments in the Bank.
k. Formulate and implement policies and procedures that would ensure the
integrity and transparency of related party transactions between and among
the Bank and its parent company.
l. Ensure the consistent adoption of corporate governance policies and systems
across the group.
m. ldentify the Bank's stakeholders in the community in which it operates or
are directly affected by its operations and formulate a clear policy of accurate,
timely and effective communication with them.
10
Provide the company's definition of "independence" and describe the company's compliance to the definition.
The Bank defines independence as having no business relationship with the Bank which could or could
reasonably be perceived to materially interfere with the exercise of his independent judgment in carrying out
his responsibilities as a Director.
Does the company have a term limit of five consecutive years for independent directors? lf after two years, the
company wishes to bring back an independent director who had served for five years, does it limit the term for no
more than four additional years? Please explain.
In accordance with BSP Circular No. 749 series of 2012 and SEC Circular No. 9 series of 2OLL, the Bank's
independent directors have a term limit of five (5) consecutive years. lf after two years, the Bank decides to
bring back an independent director who had served for five years, it shall limit the term for no more than four
(41 additional years.
s)
Changes in the Board of Directors (Executive, Non-Executive and lndependent Directors)
(a) Resignation/Death/Removal
lndicate any changes In the composition of the Board of Directors that happened ddring the period:
Name
Date of Cessation
Position
Reason
None
(b)
Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement and Suspension
Describe the procedures for the selection/appointment, re-election, disqualification, removal, reinstatement
and suspension of the members of the Board of Directors. Provide details of the processes adopted
(including the frequency of election) and the criteria employed in each procedure:
Procedure
Process
Adopted
j
Criteria
a. Selection/Appointment
(i) Executive Directors
(ii) Non-Executive Directors
The Board's Corporate Governance and Compliance
Committee accepts nomination and vets qualified
nominees based on the criteria provided in the By-laws
for
election/re-election
at the Annudl Stockholders
Meeting.
The Bank follows the rules on permanent and temporary
disqualification outlined
(iii) lndependent Directors
in its
By-laws, MORB Section
X143 of the Bangko Sentral ng Pilipinas, the Corporation
Code and SEC issuances,
The Bank follows the rules and procedures prescribed by
the Bangko Sentral ng Pilipinas under MORB Section X143
for removal, reinstatement and suspension of its
directors.
b. Re-appointment
(i)
Executive Directors
(ii) Non-Executive Directors
See response
to "a"
See response
to "a"
(iii) lndependent Directors
c. Permanent Disqualification
(i) Executive Directors
(ii) Non-Executive Directors
(iii) lndependent Directors
1,1,
Procedure
i
ero.ess
Adopted ]
criteria
d. Temporary Disqualification
(i)
Executive Directors
(ii) Non-Executive Directors
See response
to "a"
See response
to "a"
See response
to "a"
See response
to "a"
(iii) lndependent Directors
e.
Removal
(i) Executive Directors
(ii) Non-Executive Directors
(iii) lndependent Directors
(i) Executive Directors
(ii) Non-Executive Directors
(iii) lndependent Directors
g, Suspension
(i) Executive Directors
(ii) Non-Executive Directors
(iii) lndependent Directors
Voting Results of the last Annual General Meeting:
East West Bank Stockholder's Meeting was held on April 25,2OL4.
Name of
Director
I
Votes Received
JONATHAN T. GOTTANUN
The total votes received for the election of the
ANDREW t. GOTIANUN SR.
Board
of
975,O62,82L
MERCEDES T. GOTIANUN
Directors were 86.41% or
voting shares 'of the total
outstanding subscribed capital stock
LOURDES JOSEPHINE GOTIANUN YAP
of the
bank.
ANTONIO C. MONCUPA JR.
ATW. BENEDICTO M. VALERIO
JR.
I rosr s. SANDEJAS
CARLOS R. ALINDADA
I paur
6)
A.
AeutNo
Orientation and Education Program
a.
Disclose details of the company's orientation program for new directors, if any.
The Bank provides a seminar
BSP
b.
/ training in corporate governance for new Directors in compliance with
regulation under MORB Section 141.2.
State any in-house training and external courses attended by Directors and Senior Management3 for the
past three (3) years:
ln September 2oL2, the
Bank had
a
Board Retreat where members
of the
Board and Senior
Management had sessions on Corporate Governance with compliance, risk management and internat
3
Senior Management refers to the CEO and other persons having authority and responsibility for planning, directing
and controlllng the activities of the company.
72
audit
ln
as
focus of discussion.
the lnstitute of Corporate Directors
(lCD), a SEC-accredited training provider,
conducted an exclusive Corporate Governance Training Seminar for the Board and Senior Management
of the Bank at Crimson Hotel, Alabang.
December 2OL4,
the Bank's training arm provides, in coordination with an accredited BSP training
provider, offered Corporate Governance Courses for senior officers of the Bank with the rank of
Assistant Vice President and up. There were a total of four runs of this seminar in 2013 and two in
EWB Academy,
20L4.
c.
Continuing education programs for directors: programs and seminars and roundtables attended during
the year.
Date of
Training
I
Board of Directors:
1.
2.
3.
4.
5.
6.
7.
8.
Andrew
L.
Gotianun,
Sr.
Jonathan T. Gotianun
Josephine L. Gotianun-YaP
Carlos R. Alindada
Paul A. Aquino
Jose S. Sandejas
1. The ASEAN
Atty. Benedicto M. Valerio
Corporate
Governance
Antonio C. Moncupa, Jr.
Scorecard (ACGS)
Exercise and the
Senior Management:
1. Jose Emmanuel U. Hilado
2. Gerardo Susmerano
3. Jacqueline S. Fernandez
4.
5.
Arturo
ACGR Posting
L. Kimseng
December 02,
20L4
Rene K. De Borja Jr.
Manuel Andres D. Goseco
Denise N. Tambuatco
Ernesto T. Uy
Grace N. Ang
Virgilio
L.
Requirements on
Publicly Listed
Companies (PtC)
Websites
2. Preliminary 2OL4
!nstitute of Corporate
Directors (lCD)
Rating
3. SpecialTopics in
Financial Reporting
ACGS
and
Camilo
lnternal/External
Audit
Consuelo V. Dantes
Randall A. Evangelista
Gina Marie C. Galita
4. Review of
SEC
Issuances
Renato P. Peralta
15. Ma. Bernadette T. Ratcliffe
16. Gerone G. Jimenez
17. Clarissa Maria A. Villalon
18. MariCris Q. Mauhay
19. Lourdes A. Ona
B.
1)
CODE OF BUSINESS CONDUCT
Discuss briefly
& ETHICS
the company's policies on the following business conduct or ethics affecting directors, senior
management and employees:
Business Conduct &
Ethics
Directors
Senior Management
13
Directors
The Corporate
Governance Manual
provides that a Director
or Officer must fully
disclose/notify Senior
Management and the
Board of any conflict of
interest or presumption
thereof involving him/her
which could materially
impair his/her judgment,
exercise of duties and
responsibilities and
loyalty to the Bank.
Conflict of lnterest
Senior Management
The Bank's Code of Ethics and Discipline provides that
no employee may engage in any business or activity
that, directly or indirectly, is in competition with that of
the Bank or to the performance of his respective job or
work assignments.
The Bank also maintains a pglicy on Related Party
Transactions and Conflict of lnterest which provide
guidance on 1. ldentification of related party transactions, and actual
and potential conflicts of interest that may arise in the
course of the Bank's business.
The Bank, in its
2. Establishment of transparency in related party
transactions and personal dealings to promote
operational integrity in the business.
commitment to ensure
the transparency and
3. The proper and restricted use of confidential,
fairness in dealing with all
its stakeholders, has
established policies to
avoid potential conflict of
interest. Conflict of
interest is defined as any
situation in which the
Bank's directors, officers
and employees have a
(a)
j
sensitive andf or material information not available to
the public.
4. The establishment and maintenance of Chinese
Walls.
competing interest
against the Bank or its
customers.
As a general rule, all
Directors, Officers and
Employees of the Bank
shall not engage in any
transaction that may be
construed as having
conflict of interest with
the Bank or its customers.
Although, it is not
possible to enumerate all
situations which could
constitute a conflict, the
facts and merits of each
situation shall determine
the interest in question to
bring it within the area of
potential conflict. Conflict
of interest of all
employees shall be
governed by the Code of
Ethics and Discipline and
any inquiries and request
for clarification on this
matter shall be referred
to the Human Resources
Group. This shall be
L4
Directors
Senior Management
discussed with the
employee's immediate
Supervisor and Chief
Compliance Officer.
ln case of doubt, any
material matter that
poses conflict of interest
shall be vetted by the
Corporate Governance
and Compliance
Committee and endorsed
to the Board for approval.
(b) Conduct of Business
and Fair Dealings
The Bank's Code of Ethics and Discipline describes the policies on Trust and
Confidence / Honesty and lntegrity.
It is the obligation of every director, officer and employee to preserve an maintain
the trust and confidence bestowed on him/her by the Bank when it entrusts to
him/her records, documents, cash and other restricted and confidential matters
pertinent to bank operations and business.
1.1. Confidentiality of Bank Transactions - Bank transactions are confidential. Any
information and f or data relative thereto should not be divulged.
1.2. Accuracy and Completeness of Data and Records - The records, data and
information owned, used and managed by the Bank should be accurate, updated
and complete at all times. Every employee is responsible for the integrity of
information, records and reports under his/her control. Financial information
provided to the Bank's shareholders, regulatory bodies and other must embody
the highest standards of fairness and accuracy.
1.3. Confidentiality of Bank Records - The Bank prohibits the unauthorized disclosure
or reproduction of classified an confidential records, documents,
correspondences and information pertaining to the Bank's business or affairs.
1.4. tntegrity of Bank Records - The integrity of the records of the Bank must be
maintained at all times. Any willful action, which would affect the integrity of
the said records, including falsification, misrepresentation or concealment of
material and/or relevant facts, will not be tolerated and will be subjected to
appropriate disciplinary action.
1.5. Turnover of Bank Records and Documents upon Resignation/Separation - All
Bank records and documents in the custody of an employee must be
surrendered to the Bank upon the employee's resignation/separation from the
Bank.
1.5. confidential Relationship between Employee and customers - Employee must
maintain the confidential relationship between the Bank and each of its
customers. Likewise, those by virtue of their responsibilities are privy to
employees' personal data should keep in strictest confidence such information
unless required by Management or by court of law.
1.7. confidential lnformation - confidential information is considered to be
privileged and must be held in strictest confidence and must never be discussed
outside the normal and necessary course of employment with the Bank for the
purpose of furthering any personal interest or as a means of making any
personal gain.
(c)
Receipt of gifts from
Code of Ethics and Discipline
third parties
Section 11. No employee shall accept gifts or lavish entertainment from customers
or
suppliers either for himself, his family or his dependents. ,
15
Directors
Senior Management
Section 12. Receiving of gifts, percentage and commission'in exchange for a favor to
a client is strictly prohibited.
(d) Compliance with
Laws & Regulations
The Board of Directors
shall:
a. Oversee the
implementation of the
Compliance Program and
ensure that compliance
issues are resolved
expeditiously;
b. Constitute a Committee
that will be responsible in
coordinating, monitoring
Compliance, which is essential
to the Bank's continued
growth and stability, is the responsibility of every
East
West Banker.
The Compliance Division headed by the
Chief
Compliance Officer is vested with the role of overseeing
the design of the Bank's Compliance Program and
coordinating its effective implementation towards the
sound management of Business and Compliance Risks.
It is also the Division's mandate to propagate the right
compliance culture while avoiding an overly risk-averse
environment that inhibits business growth.
and facilitating compliance
with existing laws, rules
and regulations; and
c. Act as the approver of
the Compliance Manual
and amendments thereto.
ln coordination with the Compliance Division and
corollary to the Bank's Compliance Program, each
Business and Support Unit shall develop and implement
policies and procedures consistent with the BODapproved Compliance Manual embodying the Bank's
Compliance Program.
Each employee has
knowledge
the responsibility to have a working
of all relevant laws, rules and
regulations
applicable to his assignment and is expected to fulfill his
duties and responsibilities set forth in
the
Unit's/Group's Compliance Program.
(e)
Respect for Trade
Secrets/Use of Non-
public lnformation
The Bank's confidential information shall be adequately protected in its entire
lifecycle. Creation, access, and usage of confidential information is on a need-toknow basis while transmission, storage, and disposal shall adopt secured handling.
Authorized users must not distribute the Bank's confidential information to
unauthorized internal and external parties. Management approval is required before
anyone can distribute the Bank's confidential information. Any approved material
that is to be distributed must contain all proper copyright, trademark and disclaimer
notices.
Code of Ethics and Discipline
Section F 1. It is the obligation of every employee to preserve and maintain the trust
and confidence bestowed on him by the Bank when it entrusts to him records,
documents, cash and other restricted and confidential matters pertinent to Bank
operations and business
section F 2. Bank transactions are confidential and any information and/or data
relative thereto may not be divulged. strict compliance to R.A. 1405, which prohibits
the disclosure of deposits of any nature, should be observed at all times.
section F 3. The Bank prohibits the unauthorized disclosure or reproduction of
classified and confidential records, documents, correspondence and information
pertaining to the Bank business or affairs.
Section F 5. All Bank records and documents in the custody of an employee must be
surrendered to the Bank upon the employee's resignation/separation from the Bank.
section F 5. Employees must maintain the confidential relationship between the
Bank and each of its customers.
Section F 7. Likewise, those by virtue of their
16
Business Conduct &
Ethics
personal data should keep in strictest confidence such information, unless required
by the Management or by court of law.
(f)
Use of Company
Funds, Assets and
lnformation
Code of Ethics and Discipline
section 15. Employees shall not use Bank stationery, office supplies and/or
equipment for personal purposes, nor should any employee perform, during working
hours or inside Bank premises, any work not related to his iob or connected with the
Bank's business.
The Bank also has an lnformation Security Policy, and new hires are required to read
it and sign the attached acknowledgment form.
(C) Employment &
Labor Laws &
Policies
(h)
Disciplinary action
The Employee Handbook, given out during the New Employees' orientation program
(NEoP) and the code of Ethics and Discipline contain Bank policies, and rules and
regulations that are in accordance with existing Labor [ads.
consistent with the General Banking Act of 2000 and the fiduciary nature of the
relationship of banks with its depositors and because the banking business is
impressed with public interest, the Bank adopts a poticy to promote the highest
standards of integrity and the highest degree of diligence and responsibility among
its directors, officers and employees. ln line with this, the directors, officers and
employees must conduct themselves in a manner consistent with the Bank,s core
values and be instrumental in the promotion of the Bank's good name and
reputation and in the achievement of its business goals and objectives.
The Bank has thus set standards of discipline and work ethics for its officers and
employees and shall, when circumstances so warrant, impose appropriate
disciplinary action against employees who, by their acts or omissions, commit
infractions and breach the work standards, policies and procedures, rules and
regulations of the Bank.
(i)
Whistle Blower
Employees, directors, stakeholders, clients, service providers and other third parties
are encouraged to report, in good faith, knowledge of any misconduct, irregularity or
act detrimental to the interests of the Bank and its stakeholders.
The reporting party or otherwise referred to as the "whistleblower" has a choice of
communication channels to report any knowledge of misconduct or irregularity. The
report may be through the normal channel of reporting bank concerns which is
through the direct supervisor/manager of the personnel or officer involved in the
reportable behavior. However, if the reported misconduct or irregularity is not acted
upon by the direct supervisor or in the judgment of the whistleblower, the direct
supervisor is not in a position to address his report, the whistleblower may email
his/her report to the whistle Blowing committee or cail any of the following
designated officers:
1.
2.
3.
4.
Head, Human Resources Division
Chief Audit Executive
Chief Risk Officer
Chief Compliance Officer
lf the issue to be reported is serious and sensitive, the whistleblower may directly
approach the president and cEo or the chairman of the Board of Directors.
A
Directors reporting an activity under this policy may raise his
n of the Audit Committee, Chairman of the Corporate
or the Chairman of the Board of Directors.
The whistleblower may discrose his/her identity or opt
to remain anonymous.
Business Conduct &
Ethics
Directors
I
Senior Management
However, sufficient information must be provided to aid in the investigation of the
reported misconduct, irregularity or improper activity. The whistleblower should
refrain from obtaining evidence for which he/she does not have right of access but
his/her cooperation in the investigation, if needed, is expected.
Ample protection is accorded to a whistleblower which includes, among others: (i)
Confidentiality of identity and of the information reported; (ii) Non-retaliation
against the whistleblower; (iii) Protection and security of his/her person and his/her
family; (iv)Transfer to another unit; and/or, (v) Reinstatement to the same or
comparable position and back benefits and pay, if warranted by the circumstances.
On the other hand, any person implicated in the reported'act is accorded the right to
be informed of the act he/she is alleged to have committed, its penalties or
consequences, the right to counsel of his own choice, the right to be heard and
present evidence on his/her defense, and the right to be informed of the resolution
of the investigation or action taken.
This policy sets forth a reporting process beyond the normal reporting line to provide
an alternative venue for reporting any irregularity, misconduct or suspicious
activities to the Management but this is without prejudice to established procedures
of the Bank in handling disciplinary cases under its Code of Ethics and Discipline.
(j)
ConflictResolution
A Grievance Committee composed of officers and representatives of the Bank's
Employee Relations Council was created with the following responsibilities.
1. To uphold fairness, justice and cooperation in the investigation of issues involving
any employee.
2. To ensure that both parties are given equal opportunities to present their sides.
3. To assist in the mediation of grievances at the earliest possible time.
4. To refer the grievance matter to the Human Resources Division (HRD) pursuant to
established procedure of the Bank on handling administrative complaints
Once a complaint is referred to HRD through an incident report, appropriate
investigation is conducted. !f there is a violation of the Bank's policies, concerned
employees are accorded due process and if sanction is warranted, appropriate
sanctions are meted.
2)
Has
the Code of Ethics or Conduct been disseminated to all directors, senior management and employees?
Yes. As soon as they join the organization, directors, senior management and employees are provided a copy
the Code of Ethics and Discipline as well as the Employee Handbook.
3)
of
Discuss how the company implements and monitors compliance with the code of ethics or conduct.
of Ethics aims to enforce the Bank standards and ensure impartiality and fair treatment of all
employees when disciplinary action is required. The Management, through its line managers, enforces the code
The Code
of ethics but all employees are welcome to file reports/complaints when they find that offenses have been
committed. Human Resources, along with legal Department and lnternal Audit Group, conduct a preliminary
investigation.
lf the findings indicate that there is basis, administrative proceedings are then conducted.
r Minor offenses would warrant a disciplinary action of oral reprimand, written warning, or suspension
of not more than five (5) days, and may be decided on by the Line Manager/Group Head after taking
into consideration the employee's reply and issuing a Notice of Disciplinary Action.
o Serious offenses would warrant a disciplinary action of more than five (5) days suspension up to
termination and shall be decided on by the President after submitting a written reply and the conduct
of a formal hearing with the Committee on Ethics and Discipline.
4)
Related Party Transactions
(a) Policies and Procedures
Describe the company's policies and procedures for the review, approval or ratification, monitoring and
recording of related party transactions between and among the company and its parent, joint ventures,
subsidiaries, associates, affiliates, substantial stockholders, officers and directors, including their spouses,
children and dependent siblings and parents and of interlocking director relationships of members of the
Board.
Policies and Procedures
Related Party Transactions
1) Parent Company
2) Joint Ventures
3)Subsidiaries
(4) Entities Under Common Control
ln line with the Bank's thrust to promote transparency, any
Related Party transaction shall be on an arms-length basis
and no favorable or special treatment shal! be afforded to
sucn relateo party unless tne same treatment snall De
yd
(5) Su bstantial Stockholders
(6) Officers including
spouse/chi ldren/si blings/pa rents
(7) Directors including
spouse/children/siblings/parents
(8) lnterlocking director relationship
of Board of Directors
(b)
r5,.
Y
All Related Party Transactions shall be reviewed and vetted
t.., +l.a
larnarrla
rtauarnraaa
-al{
r^amalianaa
fammiltaa
which serves as the Board's Related Party Committee. This
Committee is comoosed of 5 Board members. 3 of whom
are independent directors. Furthermore, the Chief
Compliance Officer and the Chief Audit Executive sit as nonvoting members in the said committee whenever there are
Related Party Transactions for vetting. Upon approval, the
transactions shall be endorsed and presented to the Board
for approval. All approved Related Party Transactions are
reported to the Bangko Sentral ng Pilipinas in accordance
with the regulatory reporting requirements.
Conflict of lnterest
(i)
Directors/Officers and 5% or more Shareholders
ldentify any actual or probable conflict of interest to which directors/officers/5% or more shareholders
may be involved.
Details of Conflict
of lnterest (Actual or probable)
(ii)
Name of Director/s
None
Name of Officer/s
Name of Significant Shareholders
None
None
Mechanism
Describe the mechanism laid down to detect, determine
and resolve any possible conflict of interest
between the company and/or its group and their directors,
officers and significant shareholders.
The Related party Transactions and Conflict of ln
Transaction (RpT) and personal Dealings by any
employees, regardless of employment status,
refers to immediate family members, members
owned by the Relevant person with the Bank sh
1g
special treatment shall be accorded to such related parties unless the same treatment shall be given to
all parties similarly interested in
such dealings. All RPT, transactions with directors, officers,
stockholders and related interest (DOSRI) and personal dealings of directors, officers and their
connected persons shall be vetted by the Corporate Governance and Compliance Committee (CGCC)
before these are presented to the Board of Directors for approval.
The Bank further issued an inter-office memorandum that provides guidelines on loan-related
transactions and purchase of Bank's Real and other Properties Acquired ({OPA) by DoSR! and their
Related Party that shall require vetting of CGCC.
s)
Family, Commercial and Contractual Relations
(a) lndicate, if applicable, any relation of a family,a commercial, contractual or
business nature that exists
between the holders of significant equity (5% or more), to the extent that they are known to the company:
(b)
lndicate, if applicable, any relation of a commercial, contractual or business nature
holders of significant equity (5% or more) and the company:
Borrowing Client
(c)
that
exists between the
Subject to the rules of the BAP
on DOSR! accommodation,
shareholder has a credit facility
with the company which it may
avail from time to time
lndicate any shareholder agreements that may impact on the control, ownership and strategic direction of
the company:
Name of Shareholders
% of Capital Stock affected
(Parties)
Brief Description of the
Transaction
None
6) Alternative
Dispute Resolution
(3) years in amicably
Describe the alternative dispute resolution system adopted by the company for the last three
and third
settling conflicts or differences between the corporation and its stockholders, and the corporation
parties, including regulatory authorities.
Stockholders
Corporation & Third Parties
The Bank, comPlies with aPPlicable
laws, rules and regulations on the
matter of alternative dispute resolution
and that, whenever circumstances
warrant, the Bank expresses or
manifests its willingness and openness
to reasonable (extra-iudicial) resolution
of disputes with third parties. Further,
the Bank complies with the provisions of
Alternative DisPute Resolution
whenever incorporated in contracts it
a
either by consanguinity or affinity'
Family relationship up to the fourth civil degree
20
Corporation & Regulatory Authorities
enters into."
There has been no dispute between
regulatory authorities in the last three
Years.
/
C.
BOARD MEETINGS & ATTENDANCE
1)
Are Board of Directors' meetings scheduled before or at the beginning of the year?
Yes.
2l
Attendance
of
Directors
There were twelve (12) regular board meetings, four (4) special board meetings and one (1) organizationa!
meeting of the Board held from January to December 20t4 or a total of seventeen (17) Board of Directors'
Meetings.
Name
Board
Chairman
JONATHAN
T.
GOTIANUN
No. of
Date of
Election
April25,
Meetings
Attended
t7
't7
100
L7
t7
100
L7
16
94.t2
L7
t7
100
t7
t7
100
L7
L7
100
L7
L7
100
L7
L7
100
t7
t7
100
20L4
Member
ANDREW L. GOTIANUN SR.
April25,
20L4
MERCEDES T. GOTIANUN
Member
Member
L.JOSEPHINE GOTIAN UN YAP
April25,
20t4
April25,
2014
Member
ANTONIO C. MONCUPA JR.
Member
BENEDICTO M. VALERIO JR.
April25,
20t4
April25,
2014
lndependent
JOSE S. SANDEJAS
Director
CARTOS R. ATINDADA
lndependent
Director
PAUt A. AQUINO
lndependent
Director
3)
April25,
20t4
April25,
20t4
April25,
20t4
Do non-executive directors have a separate meeting during the year without the presence of any executive? lf
yes, how many times?
None
4)
ls
the minimum quorum requirement for Board decisions set at two-thirds of board members? Please explain.
No. As prescribed by the Bylaws of the Bank, at least a majority of the members of the Board of Directors shall
constitute a quorum to do business, except in those cases where the Corporation Code provides for a greater
percentage.
s)
Access
to lnformation
(a) How many
days in advance are board paperst for board of directors meetings provided to the board?
to be ta(en in the board meeting'
Board papers consist of complete and adequate information about the matters
the Board, disclosures, budgets,
lnformation includes the background or explanation on matters brought before
forecasts and internal financial
s
documents'
21.
3-7 days before the meeting
(b)
Do board members have independent access
to Management and the Corporate Secretary?
Yes
(c)
of the role of the company secretary. Does such role include assisting the Chairman in
preparing the board agenda, facilitating training of directors, keeping directors updated regarding any
relevant statutory and regulatory changes, etc?
State the policy
Pursuant to the 2009 SEC Revised Code of Corporate Governance, Bank's Corporate Governance Manual
and Amended Bylaws of the Bank, below are details relative to responsibilities of the Corporate Secretary:
The Corporate Secretary should be:
3.1.1 A Filipino citizen and a resident of the Philippines
3.1.2 Be loyal to the mission, vision and objectives of the corporation;
3.1.3 Work fairly and objectively with the Board, Management and stockholders;
3.1.4 Have appropriate administrative and interpersonal skills;
3.1.5 Be aware of the laws, rules and regulations necessary in the performance
responsibilities;
3.1.6 Have a working knowledge of the operations of the corporation'
of his duties and
Duties and Responsibilities
1. He shall have custody of the Stock certificate Book, Stock and Transfer Book and the corporate
Seal.
2.
3.
4.
5.
G.
7.
8.
g.
(d)
prepare Ballots
for the annual election and keep a complete and up-to-date roll of
the
stockholders and their addresses.
He shall also perform such duties as are incident to his office and those which may be required of
him by the Board of Directors and ofthe President.
Gathers and analyzes all documents, records and other information essential to the conduct of his
duties and responsibilities to the Bank.
Informs the members of the Board, in accordance with the by-laws of the agenda of their meetings
and ensure that the members have before them accurate information that will enable them to
arrive at intelligent decisions on matters that require their approval.
Attends all Board meetings, except when justifiable causes, such as, illness, death in the
immediate family and serious accidents, prevent him from doing so.
Safe keeps and preserves of the integrity of the minutes of the meetings of the Board and its
committees, as well as the other official records of the Bank'
Ensures that all Board procedures, rules and regulations are strictly followed by the members.
Submits to the Securities and Exchange Commission, at the end of every fiscal year, an annual
sworn certification on the directors' record of attendance in Board meetings.
ls the company secretary trained in legal, accountancy or company secretarial practices? Please explain
should the answer be in the negative.
yes. The Corporate Secretary is actively engaged in the practice of law and specializes in corporate work
and litigation.
(e) Committee Procedures
get information necessary
Disclose whether there is a procedure that Directors can avail of to enable them to
committees:
different
to be able to prepare in advance for the meetings of
v"'fx-l
ruo[__-l
As a matter of policy, materials for the meeting
are
Details of the procedures
disseminated to the committee members at least a day before
the meeting date. Further information required by the
committee member/s, if any, are made available within the
meeting day or subsequently as agreed with the concerned
committee member/s.
All items for Executive Committee approval are sent to and
maintained by the Corporate Secretary. All members of the
Board have access to these records.
As a matter of policy, materials for the meeting
are
disseminated to the committee members at least a day before
the meeting date. Further information required by the
committee member/s, if any, are made 6vailable within the
meeting day or subsequently as agreed with the concerned
committee member/s.
All records
Committee
members
Corporate Governance and
Compliance Committee
(Nomination)
the Audit Committee is maintained by the
and its Secretary and can be accessed by the
of
of the
Board.
As a matter of policy, materials for the meeting
are
disseminated to the committee members at least 2 days before
the meeting date. Further information required by the
committee member/s, if any, are made available within the
meeting day or subsequently as agreed with the concerned
committee member/s.
All records of the Corporate Governance and Compliance
Committee is maintained by the Committee and its Secretary
and can be accessed by the members of the Board.
Remuneration
As a matter of policy, materials for the meeting
are
disseminated to the committee members at least a day before
the meeting date. Further information required by the
committee member/s, if any, are made available within the
meeting day or subsequently as agreed with the concerned
committee member/s.
All records of the Remuneration Committee is maintained by
the committee and its Secretary and can be accessed by the
members
of the
Board.
As a matter of policy, materials for the meeting are
disseminated to the committee members at least a day before
the meeting date. Further information required by the
committee member/s, if any, are made available within the
meeting day or subsequently as agreed witfr the concerned
committee member/s.
All records of the Risk Committee is maintained by the
Committee and its Secretary and can be accessed by the
members
of the Board.
Materials for the regular meeting are distributed to the
committee members at least 2 days before the meeting date'
Additional information that may be
23
the meeting or afterward to the concerned Committee
member(s). Special meetings may be requested
discuss specifi c issues.
/
convened to
All records of the Trust Committee is maintained by the
Committee and its Secretary and can be accessed by the
members of the Board.
6)
External Advice
lndicate whether or not a procedure exists whereby directors can receive external'advice and, if so, provide
details:
There is no formal procedure. lf the directors see the need, they can seek external advice.
7)
Change/s in existing policies
lndicate, if applicable, any change/s introduced by the Board of Directors (during its most recent term) on
existing policies that may have an effect on the business of the company and the reason/s for the change:
All major policies and procedures, including revision and modifications thereto, are subject to periodic
review and require approval of the Board of Directors. This is to ensure compliance to laws and regulations
and alignment to Bank's strategy.
D.
REMUNERATION MATTERS
1)
Remuneration Process
Disclose the process used for determining the remuneration of the CEO and the four (4) most highly compensated
management officers:
Human Resources Group recommends a proposed compensation package for the CEO and all Senior
Management Officers to the Remuneration Committee. This Committee, composed of five members including
the president and one independent director, evaluates and recommends to the Board incentives and other
equity-based plans designed to attract and retain qualified and competent senior officers'
2l
Remuneration Policy and Structure for Executive and Non-Executive Directors
how the
Disclose the company's policy on remuneration and the structure of its compensation package. Explain
is
calculated.
Directors
Non-Executive
compensation of Executive and
Remuneration
Policy
Executive Directors
Non-Executive Directors
Structure of
Compensation Packages
For the CEO, please see response to number 1.
Please see response in number 3.
remuneration (fees, allowances, benefitsDo stockholders have the opportunity to approve the decision on total
last three (3) years.
in-kind and other emoluments) of board of directors? Provide details for the
of the Board'
Stockholders do not approve the decision on total remuneration
3)
Aggregate Remuneration
accrued during the most recent year:
Complete the following table on the aggregate remuneration
24
The following are the Bank's CEO and four most highly compensated executive officers for the year ended 2014:
Name
Position
Jr.................
Gerardo Susmerano
Jacqueline S. Fernandez
Arturo L. Kimseng...
Renato K. De Borja, Jr.................
Antonio
C.
....... Chief Executive Officer
......... Head of Retail Banking
Moncupa,
...
Head of Consumer Lending
.......... Chief Audit Executive
.......... Chief Finance Officer
The following table identifies and summarizes the aggregate compensation of the Bank's CEO and the four most
highly compensated executive officers of the Bank in 2Ot2,2013 and 2014 estimates:
Total(1)
(P in millions)
CEO and
the most highly compensated officers named above ...........,
2012
2013
2014
50.8
55.8
77.8
Aggregate compensation paid to all officers and Directors as a
20L2
group unnamed
2013
20t4
379.4
449.1
524.3
Notes:
(t)
lncludes salary, bonuses and other income'
The growth in aggregate compensation of the CEO and the four most highly compensated executive officers of
the Bank for 2015 is estimated to be the same as that of the prior year.
as regards any bonus, profit sharing, pension or retirement plan, granting of
any option warrant or right to purchase any securities between the Bank and its directors and
There are no actions
extension of
to be taken
officers
Remunerations given to directors which were approved by the Board Remuneration Committee amounted to
13.1 million in 2014 and F10.2 million in 2013.
4)
P
Stock Rlghts, Options and Warrants
EW has no stock rights, options and warrants.
(a)
Board of Directors
Complete the following table, on the members of the company's Board of Directors who own or are entitled
/
to stock rights, options or warrants over the company's shares:
I Number of
|
,ndir".t
option/Rights/
option/nights/
Warrants |I 'W"rrrn1r'
Number of Direct
Directo/s Name
I
I
I
I
None
(b) Amendments of lncentive Programs
including the criteria
lndicate any amendments and discontinuation of any incentive programs introduced,
during the Annual
approval
to
subject
are
these
whether
used in the creation of the program. Disclose
Stockholders' Meeting:
25
None
5)
Remuneration of Management
ldentify the five (5) members of management who are not at the same time executive'directors and indicate the
total remuneration received during the financial year:
The following are the Bank's CEO and four most highly compensated executive officers for the year ended 2014:
Position
Name
Jr.................
Gerardo Susmerano
Jacqueline S. Fernandez
Arturo L. Kimseng...
Renato K. De Borja, Jr.................
Antonio C. Moncupa,
The total remuneration for the
CEO
....... Chief Executive Officer
......... Head of Retail Banking
...
Head of Consumer Lending
.......... Chief Audit Executive
.......... Chief Finance Officer
and the most highly compensated officers named above
is
F77.8 million
in 2014.
E.
BOARD COMMITTEES
1)
Number of Members, Functions and Responsibilities
Provide details on the number of members
power/authority delegated to it by the Board:
of each
committee,
its functions, key responsibilities and the
Committee Charter
Committee
l*"rl I
Functions I Responsib
I
Executive
4
None
The Composition and
mandate of the Executive
Committee (ExCom) is
defined in Section 8, Article
lll of the By-laws of the
Bank, to wit: "(T)he Board of
Directors may create an
Executive Committee, the
composition of which shall
include not less than three
members of the Board to be
appointed by the Board. The
Executive Committee, by a
majority vote of its
members , and subject to
such limitations as the
Board may prescribe, is
empowered to approved
andlor implement any or all
corporate acts within the
competence of the Board
except those acts expressly
reserved by the Corporation
Code to the Board of
Directors."
The Executive committee
has six members, five of
which are regular members
The primary
function of the
ExCom is
to
Power
itities
i
The
responsibili
ties of the
Currently
the
ExCom is
approve the
ExCom
empower
recommendation
of management
for the grant of
were
ed
already
cited in its
charter,
power and
approve
clean
loans up
loans that are
within its ,
authority as fixed
by the Board from
time to time, to
confirm the
approval by the
Loan Committee
of the
recommendation
for the grant of
credit
accommodation
within the
authority of the
said Committee as
fixed by the Board
from time to time
and to endorsed
to the Board the
grant of credit
accommod6tion
functions.
to
to the
maximum
amount
of
P25OMM
and
secured
loans up
to the
maximum
amount
of
500MM.
It is also
empower
to act
on all
request
ed
for
approval
of the
26
Committee
I
ttto. of Members
Committee
Charter I
and an alternate member
who is appointed by the
Board during its
Organizational Meeting that
is held after the Annual
Stockholder's Meeting of
the Bank. lt meets there (3)
times a month during which
meetings, the management
present updates on bank
operations, request for loan
approval and request for
endorsement to the board
of various matters which are
within the exclusive
competence of the said
body.
Functions I
fey
I
which per policy
of the Bank
requires Board
approval. Finally,
as mandated by
the Board, all
Power
Board
needing
immediat
e action
subject to
the
latter's
confirmat
requests for
Board action are
sent to the
Executive
Committee for
ion
except
those
endorsement to
the Board.
reserved
to the
Board
under
pertinent
rules like
the grant
of DOSR!
The loan approval limit of
the Executive Committee is
determined by the Board
and is covered by written
resolutions.
accommo
dation,
transactio
ns
involving
related
interest,
I
etc.
Audit
None
Corporate
Governanc
1
3
Please see attached lnternal Audit Charter (Annex 1)
2
3
Corporate Governance and Compliance Committee (Annex 2)
3
1
Ensures that remuneration arrangements support the strategic
e and
Complianc
e
(Nominatio
n)
Remunerat
ion
1
Others
Trust
2
:
oblectives of the institution and enablg the recruitment and retention
of key talents in accordance with applicable regulations.
3
None
1
3
Please see attached Trust Committee Charter (Annex 3)
Comm
Others
:
Please see attached Risk Committee Charter (Annex 4)
Risk Comm
Committee Members
2)
(a)
Executive Committee
*For year ended 2014
Office
Name
%
Chairman
JONATHAN T.
GOTIANUN
April25,20L4
38
37
97.30
Member (ED)
ANTONIO C. MONCUPA
April25,20L4
38
38
100
20
8
27
(b)
Member
ANDREW t. GOTIANUN
(NED)
sR.
Member
MERCEDES T.
(NED)
GOT]ANUN
Member
T.JOSEPHINE GOTIANUN
(NED)
YAP
April25,2OL4
38
35
91.89
April 25, 2014
38
33
85.47
April25,2Ot4
38
33
86.47
20
20
L4
Audit Committee
Paul A.
Aquino
I
APril 25,
members.
Disclose the profile or qualifications of the Audit Committee
1.
Carlos R. Alindada
-
o
(Director); National Power Corporation
Tanduay Holdings, lnc. (Director); Citibank Savings, lnc.
2001-2004); SGV & Co' (Chairman
(commissioner,
(Director, zoor); rnergy Regulation commission
and Managing Partner, (1995-1999)
r
Education:
o BBA Accounting, University of the East, 1954
o Masters in Business Administration in corporate Finance, New York University, 1959
o Advance Management Program, Harvard University' 1975
Jose S. Sandejas
o
(chairman); Pilipinas Transport lnd'' lnc'
soloil, lnc. (chairman & President); Pilipinas Hino, lnc.
(chairman); st'
(chairman); Philworld Travel, lnc. (chairman); Diversified Holdings, lnc'
credit Mutual
Home
(Director);
Corp.
Trust
&
Scholastica,s college (Chairman); lnsular lnvestments
corporation
(Director);
Petron
corporation
Bldg. & Loan Assn. (Director); Benguet consolidated
(Director); Board of lnvestments (Director)
o
Education:
oBsChemicalEngineering(CumLaude),DeLaSalleUniversity'1961
o
Paul A.
ph.D in Materials Engineering, Rensselaer Polytechnic lnstitute, NY, USA, 1952
Aquino
,
o
(Trustee); Energy Development corporation
skycable lnc. (Director); Tanging Yaman Foundation
KEI Tech Educatlonal Foundation, lnc.
(Consultant); Government of Malta (Honorary Consul);
(President)
o
Education:
oBachelorofArts,AteneoDeManilaUniversity'1963
o
BS
California, UsA, 1965
Electrical Englneering, Santa Clara University,
28
o
4.
Masters in Business Administration, Santa Clara University, California, USA, 1967
Lourdes Josephine T. Gotianun-Yap
o Filinvest Development Corp. (President & CEO); Filinvest Asia Corp. (President); Cyberzone
Properties, lnc. (President); The Palms Country Club (President)
r
Education:
o
o
Management, Ateneo De Manila, 1975
Masters in Business Administration (maior in Finance), University of Chicago, 1977
BS Business
Describe the Audit Committee's responsibility relative to the external auditor.
As contained in the Audit Committee Charter
xxx B. Power and Authority,
o Oversee the resolution of disagreement between management and the external auditors, in the
event they arise. xxx
o Meet with the company officers, external auditors, or outside counsel, as necessary.
E.
Responsibilities
The Audit Committee provides oversight of the institution's financial reporting and internal and
external audit functions. lt is responsible for the appointment of the internal auditor as well as
the independent external auditor who shall both report directly to the Audit Committee. xxx
o
Financial Statements
o
Review with management and the external auditors the results of the audit, including any
difficulties encountered.
lnternal Control
o
Understand the scope of internal and external auditors' review, of internal control over
financial reporting, and obtain reports on significant findings and recommendation.
External Audit
.
Appoint a BSP-accredited external auditor for the purpose of preparing or issuing an audit
report or related work.
o
o
o
(c)
the independent auditors audit plan -
discuss scope, staffing, reliance upon
general audit approach, and coverage
department,
audit
internal
and
the
management
may have.
that
the
Committee
of
concern
provided to any significant areas
Review and confirm the independence of the external auditors on relationships by obtaining
statements from the auditors on the relationships between the auditors and the company,
including non-audit services, and discussing the relationships with the auditors.
Prior to publishing the year-end earnings, discuss the results of the audit with the
Review
o
independent auditors.
On an annual basis, the Committee should review and discuss with the independent auditors
all significant relationships they have with the Bank that could impair the auditors'
o
independence.
On a regular basis, meet separately with the external auditors to digcuss any matters that the
committee or auditors believe should be discussed privately.
Nomination Committee
ofthe Corporate Governance
and Compliance Committee which includes its duties and responsibilities as the Nomination
Committee. lt reviews and evaluates the qualification of individuals nominated to the board as well as
those nominated to other positions requiring appointment by the board to ensure alignment with the
The Board of Directors approved on April 28,2Ot1, the revised Charter
Bank's strategy
29
Name
Office
Chairman
Paul A. Aquino
April 25,
8
8
LOO%
20L4
2 years
and 8
months
Member (ED)
Jonathan Gotianun
April25,
8
5
8
8'
75%
20
L00%
2 years
2014
Member (NED)
Carlos Alindada
April25,
and 8
20L4
months
Member (lD)
Jose Sandejas
April 25,
8
8
LOO%
2 years
and 8
2014
months
Member
Atty. Benedicto Valerio
April25,
8
88%
7
20L4
years
and 5
2
months
(d) Remuneration Committee
Office
Chairman
lourdes Josephine G. YaP
Member (NED)
Mercedes T. Gotianun
Member (NED)
Jonathan T. Gotianun
Member (lD)
Member (ED)
(e)
Jose S. Sandejas
Antonio C. MoncuPa
April
25,
April
25,
25,
25,
20t4
April
1-
May
1-
May
29,2Ot4
2014
April
May
29,20t4
2014
April
1-
29,20t4
2014
25,
20L4
1-
May
29,20L4
1-
May
29,2014
1
100
L4
1
100
20
1
100
20
L
100
2 years
and 8
months
I
100
8
Others (Specify)
provide the same information on all other committees constituted by the Board of Directors:
Risk Management Committee
Office
Chairman (lD)
Name
Jose Sandeias
April
25,
t2
L2
100
2 years
and 8
20L4
months
Member (NED)
Member (lD)
Lourdes JosePhine YaP
April
Carlos Alindada
April
25,
L2
11
92
L2
L2
100
L4
2014
25,
2014
2 years
and 8
months
30
April
Paul Aquino
Member (lD)
25,
20t4
Trust Committee
No. of
MeetinBs
Office
Yo
Held
Chairman
April
Jonathan T. Gotianun
25,
4
2
50
20
4
3
75
8
4
2
50
20
4
4
100
2 years
2014
Member (ED)
April
Antonio C. Moncupa, Jr.
25,
20L4
Andrew
L.
April
Gotianun, Sr.
25,
20t4
Member
Atty. Benedicto
(NED)
Valerio
Member
Arnulfo V. de Pala
April
M.
25,
and 5
months
2014
4
June 9, 2011
4
100
3 years
and 5
months
3) Changes in Committee
Members
lndicate any changes in committee membership that occurred during the year and the reason for the changes:
I
Reason
Name
Name of Committee
Executive
None
None
Audlt
Nomination
Remuneration
None
None
None
None
None
None
RISK
None
None
TRUST
None
None
I
I
Work Done and lssues Addressed
Describe the work done by each committee and the significant issues addressed during the year'
I
Executive
Audit
For 2O14, the Executive Committee
NONE
approved 301 loan applications. lt
recommended to Board all requests
for Board action referred to bY the
management which it deems are
worthy of Board consideration.
Oversight function over external
and internal audit work Plan and
results. Reviews also
BSP
report on
Resolutions of significant audit
issues noted during the regular
audits were monitored monthlY.
examination.
Corporate
Governance and
Oversight of the Bank's ComPliance
Significant issues addressed were
those raised in the 2014 BSP
31
Compliance
Laundering and Terrorist Financing
Deterrence. lt also monitored the
implementation of the bank's
compliance program for the year. !t
nominated to the Board of Directors
candidates to key senior
management positions in the bank.
examination of the bank. Actions
taken and planned resolutions were
monitored monthly by the
Compliance Division and reported
to the Committee every other
month.
Remuneration
The Compensation Committee,
assisted by the Human Resources
No significant issues.
Division, was responsible for
harmonizing the salaries of the
employees of the bank in
accordance with the performance,
responsibility and adherence to the
prescribed culture. lt was also
responsible for the implementation
of the reward system thru
promotion of deserving emPloYees,
grant of bonus and incentives.
Risk
The highlights of the Committee's
accomplishments include:
These initiatives aimed to:
familiarize the Board and
Basel !!l awareness for the
Senior Management Team
Board and Senior Management
lmplementation of monthlY
(SMT) with the Basel lll
standards, its objectives,
impact to the banking system,
and requirements with respect
to Bank's risk and capital
management
allow more extensive
discussions on matters
pertaining to risk and capital
management to heighten risk
oversight
improve management of key
committee meeting
Review and approval of the
revised framework on
operational risk and
information security
lmplementation of the monthlY
SMT meeting focused on risk and
capital management
operational riskS and
information secu rity concerns
transition from silo-based to
integrated management of risk
and capital
Trust
o
o
!nstituted tighter documentary
requirements such as mandatorY
letters of instructions
lnstituted regular monitoring of
documentary deficiencies of the
o
.
Reduction of operational risks.
lmprove investment discipline.
branch network
o
Maintained tight approval
control of one-off investment
proposals.
o
Reviewed and apProved
managed accounts and discussed
performance of keY managed
accounts and UITFs
32
5)
Committee Program
Provide a list of programs that each committee plans to undertake to address relevant issues in the improvement
or enforcement of effective governance for the coming year.
Planned Programs
Name'' of Committee
lssues
to be Addressed
None
Executive
To promote and instill control
Audit
Control Appreciation and Fraud
Prevention Program
awareness and appreciation among
the bank's store officers to
minimize occurrence of fraud and
loss exposure due to fraud and
Corporate Governance
Enhance the Bank's Compliance
Raise awareness and understanding
and
Program, including its Anti-Money
Laundering and Terrorist Financing
Deterrence, to promote and
improve the organization's culture
of the Bank's compliance risks and
institute the right policies, systems
and procedures to ensure strict
adherence to rules and regulations.
Compliance
(Nomination)
Remu
None
neration
The Committee planned for and is
now undergoing a more in depth
risk and capital management
education program.
Rsk
Trust
Offer investment solutions and
portfolios utilizing a complete array
of investment funds necessary for
optimal portfolio construction
within an operational framework
that is in line with regulatorY
standards.
F.
RISK MANAGEMENT SYSTEM
1)
Disclose the following:
(a)
The in depth education program is
for the Committee's more
entrenched appreciation and
understanding of the significant
risks that the Bank faces, how the
Bank manages them, and the new
and emerging trends in the conduct
of risk and capital management.
lncrease competitiveness and
differentiation of the business in
the industry.
!mprove operational framework to
ensure efficiency and internal
controls over asset mana8ement
and account administration.
Overall risk management philosophy of the company;
provide clear
The Bank,s risk philosophy has been defined and outlined by its Board of Directors in order to
directions and mandate in the conduct of risk management at all levels across the Bank. The underlying
premise of the Bank,s risk philosophy is that every entity in the Bank exists to provide value for the Bank's
the regulators
stakeholders, namely, its depositors and other creditors, its management and employees,
in
general. All units the Bank face
and government, the community where it operates and the public in
in doing business'
uncertainty and thus are challenged to determine how much uncertainty to accept
or enhance value. Value is
Uncertainty presents both risk and opportunity, with the potential to erode
balance between growth
optimal
an
achieve
to
obiectives
maximized when management sets strategy and
in pursuit of the Bank's
capifal
deploys
effectively
and return goals and, its related risks, and efficiently and
objectives.
guidelines:
The Bank is broadly directed by the following
.
o
o
o
o
align risk appetite with its business plan and strategies
proactive risk management
reduce surprises of unexpected losses
identify and manage all material risks
optimize use of capital
(b) A statement that the directors have reviewed the effectiveness of the risk management system
and
commenting on the adequacy thereof;
Not discounting the risk strategies and policies setting and risk exposure monitoring regularly performed by
(RMC), the Board performs its
comprehensive review of the effectiveness of the Bank's risk management system through its annual
lnternal Capital Adequacy Assessment Process (ICAAP) exercise. While the exercise's prime objective is to
assess adequacy of the Bank's capital to cover for its risk exposures, embedded in this assessment is an
assessment of the Bank's risk management system effectiveness that ensures risk exposures are contained
within prescribed tolerances, and necessarily with sufficient capital cover.
the Board of Directors through the Risk Management Committee
The Bank's 2014 ICAAP Document, which summarizes the results of the assessment, indicates that the Bank
is exposed to various risks. Alongside its primary risk exposure in credit are exposures in market,
operations, liquidity, compliance, reputational, strategic, interest re-pricing, and credit concentration to
certain industry. Despite these risk exposures, the Bank remains to have adequate capital to cover for
these exposures. This signifies that risks are well contained as a consequence of an effective risk
management system in place. With that, the Board confirmed the adequacy of the existing risk
management infrastructure through its approval of the 2014 ICAAP Document last January 2OL4.To date, a
similar review is being performed to update last year's assessment. This is expected to be completed not
later than March 2015.
(c)
Period covered by the review;
The review covered the Bank's risk and capital management performance for the year 2013, plus a S-year
forward looking view while the on-going review indicated above covers the year 2014 and similarly
prospective 5-year period.
(d)
How often the risk management system is reviewed and the directors' criteria for assessing its effectiveness;
and
The Bank,s risk and capital management system, mainly its policies and processes, is constantly challenged
and refined as stakeholder reliance on an effective risk management system becomes more pronounced
for sound business decision-making purposes. At a minimum, the review is performed on an annual basis
through its ICAAp exercise. This is without prejudice to the monthly RMC meetings diligently held to tackle
and approve risk and capital management policies and limit structures, and where the results of the
monitoring of the Bank's risk and capital management initiatives are comprehensively reported.
(e) where
no review was conducted during the year, an explanation why not.
N/A
2)
Risk Policy
(a)
Company
policy, setting out and assessing the risk/s
Give a general description of the company's risk management
behind the policy for each kind
covered by the system (ranked according to priority), along with the objective
of risk:
To ensure that borrower accounts
process and authority commensurate
to the risks the Bank will assume with
the approval of said account.
Employment of credit limits (at
various levels)
To contain Bank credit exposures
within borrowers' capacity to pay and
Bank's risk tolerance.
Securitization and/or insurance
To have credit risk mitigant as an
alternative source of collection by the
Bank from its clients should a default
occur.
Maintain a minimum level of quality
for its credit portfolio
To keep the Bank's credit portfolio
Diversification
To reduce credit concentration risk in
quality within acceptable level
whereby credit losses are still
acceptable and within the Bank's
credit risk appetite.
terms of industry sectors, and specific
borrowers andlor group of related
borrowers.
Operational risk
Segregation of duties and
responsibilities, and dual control
To prevent unauthorized or invalid
Hierarchy of approving authorities
To ensure that transactions entered
into by the Bank is reviewed and
authorized by the appropriate
activities arising from monopoly of
the whole process by one person or
unit in the Bank.
body/ies and level of authority/ies
within the Bank.
Four eye policy
To ensure that transactions are
accurately done through verifi cation
or second look by another person.
lndependent validation
To ensure reliance on reported
completeness and accuracy of records
and estimates through a review by a
party other than the one performing
the task.
Market (includes
interest rate) risk
Trading of liquid instruments
To ensure that price fluctuations are
relatively contained (in contrast to
price fluctuations in illiquid
instruments).
Employment of market risk limits (at
various levels) including loss alert
system
To cap the Bank's market risk
exposure within its risk tolerance and
sufficient leeway is allowed to
appropriately dispose limit breaches
without unnecessarily increasing the
Bank's risk.
3s
Liquidity risk
Maintenance of adequate liquidity
To ensure that the Bank has sufficient
reserves
liquidity to draw from to settle its
obligations as and when it falls due.
Contain cash outflows within
acceptable levels, as reflected in the
liquidity risk limits
Ensure that there is adequate liquidity
to meet expected and unexpected
Contingency funding planning
To ensure that all available sources of
outflows.
funding are identified and procedures
are set to address an event of severe
liquidity requirement.
(b) Group
Give a general description of the Group's risk management policy, setting out and assessing the risk/s covered
by the system (ranked according
Risk Exoosure
to priority), along with the objective behind the policy for each kind of risk:
Risk Management
Policy I
Obiective
Not applicable
(c)
MinorityShareholders
lndicate the principal risk of the exercise of controlling shareholders' voting power.
Risk to Minority Shareholders
in controlling shareholders' exercise of its voting power is
shareholders
minority
The principal risk of the
actions by the controlling shareholders that may be
corporate
to
due
the risk of share value reduction
is
considered by the Bank to have a remote possibility
This
risk
detrimental to the minority shareholders.
given
Bank's controlling shareholders track record of
the
of happening to the minority shareholders
public
debut a year ago, there were no cited incidents that
prudent management. Since the Bank's
by the
caused detrimental damage to the Bank's share value as a result of unsound corporate action/s
Bank's controlling shareholders.
3)
Control System Set UP
(a)
Company
faced by the
Briefly describe the control systems set up to assess, manage and control the main issue/s
company:
Risk Assessment
Operational risk
(i.e. fraud activities)
Risk Manigement and Control
(Monitoring and Measurement
(stiuctures, Procedures, Actions Taken)
Results of the Bank's risk self
assessment performed shows that the
Bank is exposed to operational risk
such as business disruptions, process
Having established better or tiShter
control environment in the Bank's store
operations, the Bank further pursued
errors and failures, and fraudulent
activities to which the BanKs
management considers as high risk
exposure.
The above self-assessment results
came on the back of the regular
the operationalization of its well-laid
Operational Risk Framework with the
senior management team at the
forefront to perform the same.
Overall operational risk management is
directed through Board-aPProved
policies as embodied in the Bank's
36
Risk Assessment
(Monitoring and Measurement
Process)
monitoring by each of the Bank's
business and operating units. Collated
by the Risk Management Division, the
reports are analyzed on a Group-wide
perspective and reported monthly to
the Risk Management Committee of
the Board.
Operational risk is measured in both
financial and non-financial terms in
accordance with the Board approved
risk appetite and tolerances. lt is
performed by assessing the likelihood
of an operational risk happening, and
estimating the consequential business
impact when the event happens having
considered the effectiveness of
controls in reducing operational risk.
Operational Risk Management Manual.
Self-assessment activities are performed
to understand risk exposures and its
control enviroriment at point of
occurrence to be able to proactively
mitigate unacceptable residual
exposures.
Operational risk events, both near-miss
and actual losses, are recorded, tracked,
and monitored. The root cause of the
operational risk event is determined to
evaluate soundness of control design
and effective execution of said control
that is essential to surface control design
issues or execution lapses. This
facilitates actions that should prevent
the recurrence of said risk event. Key
risk indicators are also monitored on a
periodic basis to provide early-warnings
on potential losees or control
breakdowns.
Further, to ensure continuity of the
Bank's operations, business continuity
and disaster recovery planning is
performed in readiness for adverse
internal and external disruptions.
On the other hand, to mitigate losses,
insurance coverage for various purposes
is maintained by the Bank. ExamPle,
insurance coverage for its employee's
health and safety, and for potential
property loss or damage to its physical
assets.
(b) Group
Briefly describe the control systems Set up to assess, manage and control the main issue/s faced by the
company:
Risk Exposure
Risk
Assessment -T
Risk Management and Control
Not applicable
(c)
Committee
down and supervising
ldentify the committee or any other body of corporate governance in charge of laying
its
functions:
of
these control mechanisms, and give details
Oversight on the Bank's overall credit
risk management
The Committee's function includes:
.
to review the bank-wide credit
Committee/Unit
Details of its Functions
Control Mechanism
strategy, profile and performance.
to approve the credit risk-taking
activities based on the established
approving authorities and likewise
reviews and endorses creditgranting activities, including the
lnternal Credit Risk Rating System
Corporate Governance
and Compliance
Committee (CGCC)
Oversight on the Bank's overall
corporate governance and
compliance system. !t also serves as
the Board's Nomination Committee.
The Committee's function includes:
to review and assesses the
adequacy of the CGCC's charter
and Corporate Governance
Manual and recommends changes
as necessary.
to oversee the implementation of
the compliance program and
ensures compliance issues are
resolved pxpeditiously.
to assists the Board in assessing
the effectiveness of managing
compliance risk and ensures
regular review of the compliance
program.
to review and evaluate the
qualifications of all persons
nominated to the Board and to
other positions requiring
appointment by the Board.
to review and vet all related PartY
transactions
Risk Management
Committee (RMC)
Oversight on the Bank's overall risk
management system
The Committee's function includes:
.
o
e
Audit Committee
(AuditCom)
lndependent Examination the Bank's
internal control sYstem
to develop risk appetite and
tolerances for the Bank and
recomm6nds them to the Board
to review and approve risk
management PrinciPles,
strategies, policies, and initiatives
to oversee the overall risk
management, risk Profile, and
compliance with the Board
approved risk aPPetite and
tolerances
The Committee's function includes:
.
to examine the major risk
exposures and ensures
accountabilitY on the Part of
management to monitor and
control such exPosures including
the risk dssessment and risk
.
management Policies
to examine the major issues
38
Control Mechanism
Details of its Functions
regarding accounting principles
and financial statement
presentation, including any
significant changes in selection or
application of accounting
principles
.
to examine the major
issues as
to
the adequacy of internal controls;
to examine the effect of
regulatory and accounting
initiatives, as well as off-balance
sheet structures, on the financial
statements
Trust Committee
Oversight on the proper
management of trust and other
fiduciary business
The Committee's function includes:
Acceptance and closing oftrust
and other fiduciary accounts
lnitial review of assets placed
under the trustee's fiduciary
custody
lnvestment, re-investment and
disposition of funds or property
Review and approval of
transactions between trust and/or
fiduciary accounts, and
Review oftrust and other
fiduciary accounts at least once
every twelve (12) months to
determine the advisability of
retaining or disposing of the trust
or fiduciary assets and/or whether
the accoynt is being managed in
accordance with the instrument
creating the trust or other
fiduciary relationship.
The TrustCom shall also Preside
over the proper conduct of the
trust's business, reviewing on a
periodic basis, business
development initiatives as:
a. Staffing and delineation of
responsibility /
accountabilitY
b.
ProactivedeveloPment
and imPlementation of
strategies for cultivating
of revenue streams and
cost management
c.
Application and
rt'ronitoring of the ProPer
performance benchmarks.
39
Details of its Functions
Control Mechanism
Executive Management
Committee
looks into broad organizational and
operational issues, and approves
major initiatives. Serves as the lT
Steering Committee as well.
The Committee's function includes:
1. Reviews strategies and key
execution plans and monitors
performance vs plans and historical
numbers.
2. Discusses employee, customer and
competitive trends and formulates
strategies and action plans in response
to trends.
3. Evaluates, approves, prioritizes and
monitors major projects and initiatives
4. Reviews and monitors broad
organizational situation
5. As !T Steering Committee
- Evaluates, approves, monitors and
prioritizes IT projects
- Monitors progress of !T Strategic
Plan, regularly reviews the plan and
identify opportunities that will align
the plan to the Bank's business
strategy.
- !dentifies business solutions that may
leverage technology
- Reviews lT policies, procedures and
standards, when needed.
Loan and lnvestments
Committee (LoanCom)
Oversight on credit risk control
The Committee's function includes:
.
to oversge the credit risk-taking
.
Asset-Liability
Management
Committee (AICO)
Oversight on market, liquiditY, and
other financial position related risk
activities and overall adherence to
the credit risk management
framework,
to review business/credit risk
strategies, quality and profitability
of the credit portfolio and
recommend changes to the credit
evaluation process, credit risk
acceptance criteria and the
minimum and target return Per
credit or investment transaction
The Committee's function includes:
o
.
o
ensuring that there is sufficient
liquid assets of aPProPriate
quality and in aPProPriate
currencids to meet short-term
funding and regulatory
requirements,
managing financial Position and
ensuring that business strategies
are consistent with its liquiditY,
capital and funding strategies,
establishing asset and/or liability
pricing policies that are consistent
40
Control Mechanism
.
.
o
objectives,
recommending market and
liquidity risk limits to the Risk
Management Committee and BOD
approving the assumptions used
in contingency and funding plans.
reviews cash flow forecasts, stress
testing scenarios and results, and
implements !iquidity limits and
guidelineis.
Risk Management
Subcommittee (RMS)
Oversight on the implementation
and execution ofthe Bank's risk
management policies and procedures
The Committee's function includes:
.
.
to oversee and direct the
management of the overal! risk
profile
to spearhead the implementation
of the Bank's risk management
o
initiatives
to lead the effective conduct of
o
to oversee the overall risk
risk management
incidents and control gaps or
deficiencies and implementation
of corresponding corrective
actions
G.
INTERNAL AUDIT AND CONTROT
I
nternal Control System
Disclose the following information pertaining to the internal control system of the company:
(a) Explain how the internal control system
is defined for the company;
lnternal control is broadly defined as a process, effected by the bank's Board of Directors, Management
and other personnel, designed to provide reasonable assurance regarding the achievement of its
objectives.
The bank's internal control was designed to:
o Safeguard the bank's assets
o Ensure adherence to regulations, particularly those of the BSP, Anti-Money Laundering Council (AMtC),
o
o
(b)
Philippine Deposit lnsurance Corporation (PDIC) and
Maintain reliability of accounting data
Promote oPerational efficiencY
SEC'
/
A statement that the directors have reviewed the effectiveness of the internal control system and whether
they consider them effective and adequate;
report to
The Audit Committee prepares annually a self-assessment on their performance and an annual
internal
of
the
and
adequacy
the
effectiveness
of
assessment
their
the Board of Directors with regards
controls of the Bank, among others.
(c)
Period covered bY the review;
Latest report was for the calendar year 2013'
4t
(d)
How often internal controls are reviewed and the directors' criteria for assessing the effectiveness of the
internal control system; and
The Audit Committee reviews the effectiveness and efficiency of internal control every meeting. An
assessment will be given to the Board, when appropriate and necessary. Annually, the Audit Committee
prepares a formal report to the Board of Directors.
(e)
Where no review was conducted during the year, an explanation why not.
Not applicable
2l
lnternalAudit
(a) Role, Scope and lnternal Audit Function
Give a general description of the role, scope
of internal audit work and other details of the internal audit
function.
Role
(b)
Scope
Refer to the
Refer to the
attached lnternal
Audit Charter
attached lnternal
Audit Charter
ln-house but
certain functions
may be
outsourced, if the
need arises.
Arturo L. Kimseng
EVP & Chief dudit
Executive
Refer to the
attached
!nternal Audit
Charter
Do the appointment and/or removal of the lnternal Auditor or the accounting /auditing firm or corporation
to which the internal audit function is outsourced require the approval of the audit committee?
Yes
(c)
Dlscuss the internal auditor's reporting relationship with the audit committee. Does the internal auditor have
direct and unfettered access to the board of directors and the audit committee and to all records, properties
and personnel?
Internal Audit is functionally reporting to the Audit Committee. lnternal Audit reports to the Audit
Committee at least 4 times per year. For 20t4, the Audit Committee met 13 times.
The Chief Audit Executive (CAE) has direct access and unfettered access to the Board and the Audit
Committee. lnternal Audit has unrestricted access to all records, properties and personnel.
(d)
Resignation, Re-assignment and Reasons
Disclose any resignation/s or re-assignment of the internal audit staff (including those employed by the thirdparty auditing firm) and the reason/s for them.
There were 17 lnternal Audit staff who left due
to various
reasons such as career change, family
circumstance, health condition and migration
(e)
Progress against Plans, lssues, Findings and Examination Trends
State the internal audit's progress against plans, significant issues, significant findings and examination
trends.
42
lnternal Audit monitors the accomplishment of the work plan quarterly and reports to the Audit
Committee on a semi-annual basis. Also, status of corrective/remedial measures undertaken on high risk
issues is reported to the Audit Committee during its regular meeting.
The relationship among progress, plans, issues and findings should be viewed as an internal control review
cycle which involves the following step-by-step activities:
1)
Preparation of an audit plan inclusive of a timeline and milestones;
2)
Conduct of examination based on the plan;
Evaluation of the progress in the implementation of the plan;
3)
4)
Documentation of issues and findings as a result of the examination;
Determination of the pervasive issues and findings ("examination trends") based on single year
5)
result and/or year-to-year results;
6)
Conduct ofthe foregoing procedures on a regular basis.
3)
Audit Control Policies and Procedures
Dlsclose all internal audit controls, policies and procedures that have been established by the company and
the result of an assessment as to whether the established controls, policies and procedures have been
implemented under the column "lmplementation."
Description
Policies & Procedures
lnternal Audit
lmplementation
Manual,
which includes
the
following, among others:
Provides
Audit Risk
Assessment
Model
Risk-based
Audit
Methodology
Audit Rating System
Outsourcing Policies
risk assessment measurement
criterla
based on key business risk variables to calculate the
weighted risk rating and rank the auditable units/
entities. The main purpose of the Risk Assessment
Methodology is to enhance the objectivity and
transparency and provide for a sound basis for the
preparation of the Annual Audit Plan (audit
frequency, intensity and timing).
Guidelines to promote consistency and objectivity in
the formulation of an overall assessment lratingfor
each audit engagement.
Covers the process of obtaining external service
providers to support or complement the lnternal
Audit Activity, in conformance with the lnstitute of
lnternal Auditor's Practice Advisory 1210.A1-1 and
regulatory requirements of the Bangko Sentral ng
Pilipinas, currently under Circular 755, and as may
be amended in the
future.
All
established
controls, policies and
procedures
have
been implemented.
,
Audit Program Guides provide the audit steps /
Various Audit Program
Guides
4l
procedures for a particular audit engagement. These
are reviewed and updated when deemed necessary,
i.e. based on the results of walkthrough procedures
there are changes in the process brought about by
changes in the system, regulations, etc.
Mechanism and Safeguards
State the mechanism established by the company to safeguard the independence of the auditors, financial
analysts, investment banks and rating agencies (example, restrictions on trading in the company's shares and
imposition of internal approval procedures for these transactions, limitation on the non-audit services that an
external auditor may provide to the company):
43
lnvestment Banks
lnternal Audit
functionally reports to
the Audit Committee
Not Applicable
Not Applicable
The Bank has a signed
agreement where the
naiing Agencies
commit to express an
independent,
objective and fair
credit opinion,
adhering to its credit
composed of
independent directors
lnternal Auditors'
Declaration of
lndependence signed
annually.
rating standards and
ensuring that the
credit rating function
shall be performed
External Auditors issue
statement of their
with utmost
independence in
compliance with
professional
competence.
regulation.
(h) State the officers (preferably the Chairman and the CEO) who will have to attest to the company's full
compliance with the SEC Code of Corporate Governance. Such confirmation must statd that all directors, officers
and employees of the company have been given proper instruction on their respective duties as mandated by
the Code and that internal mechanisms are in place to ensure that compliance.
Jonathan T. Gotianun, Chairman
Jr., President and CEO
C.
T.
Ratcliffe,
Chief Compliance Officer
Ma. Bernadette
Antonio
H.
ROLE OF STAKEHOTDERS
1)
Disclose the company's policy and activities relative to the following:
Activities
Policy
Customers'welfare
Under the vision and mission
statement of the bank, customer
treated equally with the
is
shareholders and employees as
major stakeholder of the bank.
Su ppl
i
er/contractor selection
practice
Only pre-qualified bidders are
allowed to bid and the bid is
awarded to the lowest bidder.
Directors, senior management
and employees are constantly
reminded that the bank is the
lust the custodian of the money
of the depositors and all risk
taking activities should be taken
only if it will not prejudice the
depositors,
1. Notice of bidding;
prequalification to bid.
2. Announcement of prequalified bidder.
3. Submission of bid
documents/bond.
4. Bidding
5. Awarding.
5. Notice to proceed.
Environmentally friendly value-
Contribute to conservation of trees
chain
thru adoption of paperless media
transaction.
1. Electronic instead of paper
based communication.
2. Adoption of other electronic
based banking products and
44
transactions.
Promotion of specific cause for
improvement of the Community.
Sponsor community and school
based social programs.
Anti-corruption programmes and
Section t (Rules and Regulations) of
Section II (Employee Discipline)
procedu res?
the Bank's Code of Ethics and
ofthe Bank's Code of Ethics and
Discipline describes the policies
covering the following:
F. Trust and
Confidence/Honesty and
Discipline describes the policies
covering the following:
Community interaction
C.
D.
AdministrativeCharges
Schedule of Penalties
!ntegrity
G.
Preservation of Bank
Property
l.
J.
K.
Business and Personal
Conduct
Outside Activities
Conflict of lnterest
Safeguarding creditors' rights
2l
Does the company have a separate corporate responsibility (CR) report/section or sustainability report/section?
There is no separate
3)
CSR
section in the EastWest Annual Report.
Performance-enhancing mechanisms for employee participation.
(a) What are the company's policy for its employees' safety, health, and welfare?
Caring for the health and well being, as well as for the safety and security of our employees, Eastwest
provide HMO and group life insurance coverage. Employees'financial security extends beyond retirement
a retirement benefit plan that helps them reap the benefits of long years of hard work and allows
them to enjoy life after their tenure with Eastwest.
with
As an organization, EastWest believes in providing a learning environment which gives our people all the
opportunities for them to accumulate knowledge, continuously hone their skills and sharpen their
competencies. EastWest Bank's Learning Academy mission is to provide the necessary training programs to
all employees that will help them increase their level of awareness, improve their skills and develop the
right attitude in performing their jobs.
(b) Show data relating
to health, safety and welfare of its employees.
HEALTH RELATED FRINGE BENEFITS
AVAITED
1.
Annual Physical Examination (Head
Offices and Branches)
L,255
2.
3.
Executive Check-up
Pre-employment Physical Examination
62
1,510
4.
Medical Retainer onsite clinics
Physician
Nurses
7.
4
3
Total Amount for emergency medicines
and clinic supplies
P685,955
Monthly Medical Specialists
Consultation
Monthly Health Advisories
4L2
t2
4S
8. Flu Vaccinations for employees &
Dependents
1,500
9. Wellness Programs
368
Safetv & Securitv Programs:
Training Program
I
rrequency
I
Participants
Bank Safety and Security Orientation
Twice
for New Employees Orientation
month
Employees
Security Customer Service Program
Modules:
1. Bank Security Operations
2. EW Customer Service Standards
3. Emergency Preparedness &
Annual
per
Security
Guard per
Security
All agencydeployed
Security Guards
Response
4. ATM-related Fraud- !dentification
Agency
a
New EWB
Program (NEOP)
(Covers topics on Bonk Emergency
Preporedness ond Response for fire,
eorthquake, bomb threot and
and Prevention
Safety and Security Seminar for
As
Service
scheduled
Manasers
Safety and Security Division (SSD)
As
Safety and
Quarterly ln-House/Field Training
scheduled
Security
Division
Operations
Center Officers
Safety and Security Seminar Store Officers Development Program
annual
/
Semi-
Store Officers
(c) State the company's training and development programmes for its employees. Show the data.
EWB has various training programs such as Foundational Courses, Development Programs, Bank
Development, Business Development, Governance, Risk and Compliance, Leadership and Personal
Effectiveness . The attached file shows the various ongoing and scheduled classroom courses as well as our
list of online courses.
El.h
2014 EWB
Courses. pdf
(d) State the company's reward/compensation policy that accounts for the performance of the company beyond
short-term financial
measures
)
The Bank's Compensation programs will reflect the following beliefs and intentions:
We are in the service industry. As such we recognized that the key factor to succeed is
and retain an employee corps that could compete effectively.
to build
Having the right people is the first and most important step in achieving the Bank,s vision of being
a "world-class bank anchored on service excellence in our chosen markets,,.
We will use compensation to attract and retain top performers, and provide base salary,
incentives and rewards that direct behaviour & performance to achieve the Bank's goals &
strategies as well as build and sustain the Bank's values and culture.
We will keep our competitive positioning at or near the 50th percentile of identified competitor
banks for annual base salary and total cash compensation (base plus bonus or incentives). Total
cash compensation above the 50th percentile may be attained for core employees who hold
critical positions and exceed performance expectations.
The general level of the variable component (bonus) of the compensation will be correlated to the
Bank's performance.
lf the
Bank achieves above average resultp, the bonus pool will
correspondingly increase and possibly push the average total compensataon higher than the 50th
percentile level. ln this way, the fortunes of the Bank and that of its workforce are tied tightly.
We wilt maintain a salary structure consistent with the aforementioned competitive positioning
and at the same time ensures internal consistency whereby the salary is reflective of the
employee's duties and responsibilities; competencies relevant to the job, performance and
contributions to the business. The salary structure shall specify ranges (minimum, midpoint, and
maximum) which are set to correspond to each of the corporate ranks or levels in the bank's job
classification framework.
Similarly, we will provide a fringe benefits program that is competitive with the target market in
terms of benefit mix and amounts. The program will complement our base compensation and pay
incentives in attracting and retaining employees who meet or exceed performance standards.
o
The benefits program will be a mix of benefits that are mandated by law and those commonly
given in the industry such as health and life insurances, employee loans, car benefits, retirement,
etc. The specific benefit amounts shall be competitively positioned at median or averate of the
target market.
o
The Human Resources Group shall review and recommend changes to the compensation and
benefits programs in order to maintain its competitiveness and responsiveness to the needs of the
organization.
o
4l
The Compensation Committee shall review and approve proposed changes in the compensation
structure and benefits program ofthe Bank'
what are the company's procedures for handling complaints by employees concerning illegal
(including
corruption) and unethical behaviour? Explain how employees are protected from retaliation'
parties are encouraged to report,
Employees, directors, stakeholders, clients, service providers and other third
to
the interests of the Bank and its
detrimental
or
act
irregularity
good
knowledge of any misconduct,
in
faith,
stakeholders.
a choice of communication channels to
The reporting party or otherwise referred to as the "whistteblower" has
the normal channel of reporting
be
through
report any knowledge of misconduct or irregularity. The report may
personnel or officer involved in the
bank concerns wtriih is through the direct supervisor/manater of the
is not acted upon by the direct
reportable behavior. However, if the reported misconduct or irregularity
supervisor is not in a position to address his
supervisor or in the judgment of the whistleblower, the direct
call any of the
whistlebio*", r"y email his/her report to the whistle Blowing committee or
report, the
following designated officers:
1.
2.
3.
4.
Head, Human Resources Division
Chief Audit Executive
Chief Risk Officer
Chief ComPliance Officer
47
!f the issue to be reported is serious and sensitive, the whistleblower may directly approach the President and
or the Chairman of the Board of Directors. A member of the Board of Directors reporting an activity under
this policy may raise his concerns to the Chairman of the Audit Committee, Chairman of the Corporate
Governance Committee or the Chairman of the Board of Directors.
CEO
to remain anonymous. However, sufficient information
must be provided to aid in the investigation of the reported misconduct, irregularity or improper activity. The
whistleblower should refrain from obtaining evidence for which he/she does not have right of access but
his/her cooperation in the investigation, if needed, is expected.
The whistleblower may disclose his/her identity or opt
Ample protection is accorded to a whistleblower which includes, among others: (i) Confidentiality of identity
and of the information reported; (ii) Non-retaliation against the whistleblower; (iii) Protection and security of
his/her person and his/her family; (iv) Transfer to another unit; and/or, (v) Reinstatement to the same or
comparable position and back benefits and pay, if warranted by the circumstances.
On the other hand, any person implicated in the reported act is accorded the right to be informed of the act
he/she is alleged to have committed, its penalties or consequences, the right to counsel of his own choice, the
right to be heard and present evidence on his/her defense, and the right to be informed of the resolution of the
investigation or action taken.
This policy sets forth a reporting process beyond the normal reporting line to provide an alternative venue for
reporting any irregularity, misconduct or suspicious activities to the Management but this is without preiudice
to established procedures of the Bank in handling disciplinary cases under its Code of Ethics and Discipline.
DISCTOSURE AND TRANSPARENCY
1)
Ownership Structure
(a)
Holding 5% shareholding or more
I
FilinvestDevelopment
I
Shares
Percent
I
Filinvest
Development
|
I
L5.L3% I Various
17o,690,570
PCD Nominee
Corporation -Foreign
ruominee
Beneficial Owner
AtG Holdings
:::r::1'r:l
I eco
I corporation - Filipino
I
451,354,890
394,941,030
Filinvest Development
I
Number of
I stockholders/clients
Various
I
stockholders/clients
I
Name of Senior
Management
Antonio C. Moncupa, Jr.
455,010
0.o4%
Gerardo Susmerano
320,000
0.03%
.lacqueline S. Fernandez
Arturo L. Kimseng
23,800
0.00%
30,000
0.oo%
Ernesto T. Uy
25,000
o.00%
Manuel Andres D. Goseco
150,000
lvy B. Uy
150,000
Renato K. De Borja, Jr.
Bernadette T. Ratcliffe
50,000
0.01%
0.0t%
0.00%
10,000
0.00%
Arnulfo V. De Pala
10,000
0.oo%
Renato P. Peralta
46,300
o.00%
Grace N.
2)
40,000
15,000
|
o.ot%
Does the Annual Report disclose the following:
Key risks
Yes
Corporate objectives
Yes
Financial performance indicators
Yes
Non-financial performance indicators
Yes
Dividend policy
No
Details of whistle-blowing policy
Yes
Biographical details (at least age, qualifications, date of first appointment, relevant
experience, and any other directorships of listed companies) of
di rectors/com missioners
Training and/or continuing education programme attended by each
di rector/com missioner
Yes
Yes
Number of board of directors/commissioners meetings held during the year
Yes
Attendance details of each director/commissioner in respect of meetings held
Yes
Details of remuneration of the CEO and each member of the board of
rectors/com missioners
Yes
di
Should the Annual Report not disclose any of the above, please indicate the reason for the non-disclosure.
Dividend Policy - the Bank has yet to finalize its Dividend Policy. ln prior years' statement, the Bank has
disclosed dividends attached to its Preferred Shares. Once the Dividend Policy on its common shares has
been finalized, the same shall be included in the annual report.
3)
External Auditor's fee
PHP 13,000,000
4)
Medium of Communication
List down the mode/s of communication that the company is using for disseminating information'
1.
2.
3.
4.
5.
6.
Periodic submission of structured reports to the PSE and SEC
lmmediate submission of unstructured reports to PSE and SEC in the event a material information occurs
Annual investor briefing participation locally and abroad
of queries by various existing and potential investors through personal meetings, email,
Accommodation
and tele-conference
press releases to leading newspapers in circulation pertaining to significant developments happening in the
Bank
the above information
Continuous update of the Bank's website (www.eastwestbanker'com) for all of
released to the Public
s)
Date of release of audited financial report: February 27'2Ot4
6)
ComPanY Website
information about the following?
Does the company have a website disclosing up-to-date
Business oPerations
prior years)
Financial statements/reports (current and
Materials provided in briefings to analysts and media
Yes
Shareholdi ng structu re
Yes
Group corporate structu re
Yes
Downloadable annual report
Yes
Notice of AGM and/or EGM
Yes
Company's constitution (company's by-laws, memorandum and articles of
association)
Yes
Should any of the foregoing information be not disclosed, please indicate the reason thereto.
Not applicable
7l
Disclosure of RPT
The amounts and the balances arising from the foregoing significant related party transactions of the
Group and of the Parent Company are as follows:
2014
A
Catesorv
Significant investors:
Loans receivable
Volume
P-
Balance
P5,621,850
Terms and Conditions/llature
Loans granted with
a
term of seven years, interest
of
4.500/o, secured, no imPairment
Deposit liabilities
-
2,864568
Deposit liabilities with interest ranging from 0.50% to
Accrued interest receivable
-
60,224
Accrued expenses
-
13,297
-
3,500,000
Interest income accrued on outstanding loans
receivable
Payable for management and professional fees paid by
FDC (reimbursement for exPenses)
Unused credit lines
Interest income on loans receivable
I iabi I ities
Interest
1.00o/o
Guarantees and commitments
Interest income
Key management personnel:
228219
-
Loans receivable
-
37,777
Loans granted with terms ranging from three to twenty
years, interest ranging from 5.59o/oto 10.42o/o,
Deposit liabilities
-
259,726
Accrued interest receivable
-90
Deposit liabilities with interest ranging from 0.50% to
5.88%
Interest income accrued on outstanding loans
receivable
Interest income on loans receivable
it liabilit
Interest
2310222
Loans granted with terms ranging from two months to
thirteen and a halfyears, interest ranging from
3.75%olo 6.40%,76% secured by real estate and
chattel mortgage, no imPairment
Receivables purchased by the Parent Company from
secured at 987o
lnterest income
I
nterest
Other related parties:
Loans receivable
857,158
Receivables purchased
FLI
99,680
Financial assets at FVTPL
Parent Company, with interest rates ranging from
I 5,815,423
Deposit liabilities
17,048
Accrued interest receivable
Guarantees and commitments
FLI- issued debt securities held for trading by the
Accounts receivable
P_
Gain on sale of land
264,132
lnterest income
lnterest exPense
220370
5,267,068
P411,597
5.40Yo ro 5.64%, unimPaired
Deposit liabilities with interest ranging from 0.50% to
5.88%
lnterest income accrued on outstanding loans
receivable
Unused credit lines
Receivable from FAI on the sale ofland by the Parent
Company, payable in 5 years, interest of6.00%
(Note l0)
Service fee exPense
Rent expense
2t,406
5,434
31,401
Gain recognized on the sale of the Parent Company's
land to FAI (Note l0)
Interest income on loans receivable
Interest expense on deposit liabilities
Service fees paid to FLI for account servicing
equivalent to l.l2%oofloan arnounts collected by
FLI on behalfofthe Parent Company (see Note 9)
Rent expenses paid for lease transactions with other
50
2014
Category
Amount/
Outstanding
Volume
Balance
Terms and Conditions/Nature
related parties such as Filinvest Asia Corporation,
FAI and FLI
The Group's significant investors pertain to FDC, the immediate Parent Company of the Group, and FDC
Forex Corporation (a company under common control of FDC).
Key management personnel are those persons having authority and responsibility for planning, directing
and controlling the activities of the Group, directly or indirectly. The Group considers the members of the
Management Committee to constitute key management personne! for purposes of PAS 24. The Group
provides banking services to its key management personnel.
Other related parties pertain to the Group's affiliates (subsidiaries of FDC).
The Group and the Parent Company had no outright purchases and outright saie of debt securities with
significant shareholders and key management personne! in 2014 and 2013. ln 2OL4, the Parent Company
purchased peso-denominated debt securities issued by Filinvest Land, lnc., an affiliate, with market value
amounting to 99.68 million as of December 31, 2014.
No provision and allowance for loan losses was recognized by the Group for loans to significant investors,
key management personnel and other related parties in 2Ol4 and 2013.
The parent Company's subsidiaries have no transactions with related parties outside of the Group. The
transactions disclosed above are the same for the Group and the Parent Company.
Parent Companv Related Partv Transactions
Transactions between the Parent Company and its subsidiary (EWRB) meet the definition of related party
transactions. Details of the Parent Company's subsidiary are disclosed in Note 1.
In addition to the transactions discussed above, the following are the transactions between the Parent
position
Company and its subsidiary that are recognized in the Parent Company's stateflents of financial
and statements of income and eliminated in the consolidated financial statements:
2011
AmounU
C"t.*rO
Subsidiaries:
Volume
Outstanding
Balance
Loans receivable
P300,000
P300,000
Receivables purchased
5,740,168
3,890,662
Accrued interest receivable
-
7'887
Accounts receivable
-
564,845
Deposit liabilities
-
166,573
72,206
Terms and Conditions/ Nature
Loans granted with a term ofone month or 30 days,
interest rate of 4.00%", unsecured, no impairment
Receivables purchased by the Parent Company from
EWRB (Note 9)
Interest on receivables purchased from EWRB and
loans granted to EWRB at 4.00'/. per annum
Amount collected by EWRB from bonowers on behalf
of the Parent Company that remained unremitted by
EWRB
Accounts PaYable
Interest income
lnterest exPense
Service fee expense
2,537
519
16,482
Deposit liabilities with interest rates of 0.057oto 5.87%
Cash reloading transactions between EWRB and the
Parent ComPanY
Interest income on outstanding loans receivable
ilities
account servicing
amounts collected bY
nt Company for the
receivables purchased (see Note 9)
WhenRPTsareinvolved,whatprocessesareinplacetoaddresstheminthemannerthatwillsafeguardthe
and other stakeholders?
interest of the
compa^;;.;
in particular of its minority shareholders
51
lnlinewiththeBank,sthrusttopromotetransparency,anyRelatedPartytransactionsha]]beonanarmslengthbasisandnofavorableorspecialtreatmentshallbeaffordedtosuchrelatedpartyunlessthesame
in such dealing'
similarly interested
treatment shall be accorded to all parties
regulatory reporting
J.
requirements'
,
RIGHTS OF STOCKHOLDERS
Exceptforpre.emptiveright,thestockho|dersoftheBankpossessalltherightsofastockholderunderthe
wit:
Corporation Code of the Philippines' to
or by proxy at stockholders' meeting'
Right to attend and vote in person
1)
adoPt new bY-laws'
person to call such
any cause there is no authorized
5)
a
and be registered as a
or stocks or other evidence of stock ownership
certificate
of
ffi;ltH'issuance
stockholder.
assets uPon dissolution'
.e
tatements upon request and to
'"t"i'"
financial report of
rivative suits'
ency.
in certain cases'
ares and withdraw from the corporation
ed'
1)RighttoparticipateeffectivelyinandvoteinAnnual/Specialstockholders,Meetings
(a)
Quorum
in its
Stockholders' Meeting as set forth
convene the Annual/special
to
required
quorum
the
on
Give details
By-laws.
registered
the
'
of at least a maioritv of the outstallT.:.:::l''
As prescribed in the bYl
owners
proxy shall constitute a
stock present in person or by
in those case whether the
to do busine"
""t"pt
gieater percentage vis-i-vis the
corporate Code provides.a
;;;;
Corporate Acts
(b) System Used to Approve
to approve corporate acts'
Explain the system used
all laws and
(c)
Stockholders' Rights
List any Stockholders' Rights concerning Annual/Special Stockholders' Meeting that differ from those laid
down in the Corporation Code.
Stockholders' Rights not in
irThe
The Corooration Code
Corporation Code
None
Dividends
Record
Date
I
Pryment Date
(d) Stockholders' Participation
1.
State, if any, the measures adopted to promote stockholder participation in the Annual/Special Stockholders'
Meeting, including the procedure on how stockholders and other parties interested may communicate
directly with the Chairman of the Board, individual directors or board committees. lnclude in the discussion
the steps the Board has taken to solicit and understand the views of the stockholders as well as procedures
for putting forward proposals at stockholders' meetings.
o
the participation of the shareholders thru widespread dissemination of the notice of the
shareholders' meeting including the use of newspaper publication and the service to each of the
Ensure
By-laws.
.
o
/
shareholder of the bank thru modes allowed in the
Encourage direct participation by providing relevant materials to the entire shareholder regardless o
the number of their shares.
Have a Question and Answer period to be participated by stockholders during the ASM.
I
2
Communication Procedure
State the company policy of asking shareholders to actively participate in corporate decisions regarding:
a.
b.
c.
Amendments to the company's constitution
Authorization of additional shares
Transfer of all or substantially all assets, which in effect results in the sale of the company
transfer of assets
All proposals for amendment of the corporate charters, issuance of additional shares and
the shareholders
by
are sent to all the shareholders of record in order that the same could be considered
will explain the rationale and after, questions are
number of votes
entertained from the floor. The vote required to adopt proposal is based on the
in a meeting called for that
purpose. The Chair
prescribed by law.
giving out of notices to the AGM where items
Does the company observe a minimum of 21 business days for
Yes
to be resolved by shareholders are taken up?
a.
Date of sending out notices; February L4, 2014
b.DateoftheAnnual/Specialstockholders,Meeting:April25,2ol4
Stockholders' Meeting' Refer to the attached
State, if any, questions and answers during the Annual/Special
(Annex 10)
minutes of the Annual Stockholder's Meeting
Resolutions
Result of AnnuaUspecial Stockholders' Meeting's
stockholders' Meeting on
Refer to the attached Minutes of the Annual
April 25'
2OL4' (Please see Annex 10)
53
l.
Approvin8 |
10.
11.
I
t4
15
6. Resolution I
9.
8. Dissenting |
tz.
Abstainin8
13
,L7
16
Dateof publishingof theresultof thevotestakenduringthemostrecentAGMforall
resolutions:
The Bank published the results of its Annual Stockholder's Meeting the day after the Annual Stockholder's
meeting held on April 25, 2014.
(e)
Modifications
State, if any, the modifications made in the Annual/Special Stockholders' Meeting regulations during the most
recent year and the reason for such modification;
Reason for Modification
Modifications
None
(f)
Stockholders' Attendance
(i)
Details of Attendance in the Annual/specialstockholders' Meeting Held:
Below is the attendance report provided by the bank's stock transfer agent, Stock Transfer Service lnc
for those stockholders who were attended in person or in proxy during the Annual Stockholder's
Meeting on APril 25'20t4.
1. Andrew Gotlanun Sr.
-NED/Chalrman
Emerftus
2. MercedesT.
Gotlanun
-
IVED
3. LJosephlneT.
Gotlanun Yap-NED/
Chohmon olthe
Votlng by
show of
hands
Compnsotlon
Annual
Commlttee
4. Jonathan T. Gotlanun
-NED/ Chotrman
5. Antonlo C. MoncuPa
Ir. - ED/ Presldent ond
Aprll25,2014
85.s0
86.41
cto
6. JoseS.SandelasNED/ Cholmonof Rlsk
Management
Commlttee
-
7. Carlos R. Allndada
NED/ Cholrmon ol Audtt
Commtttce
8.
Paul
Aqulno-NED/
Chqlrmanof CorPomte
Govemance ond
54
%of
SH
Attend
in8
ln
Percon
Compllance Commlttee
9. Benedicto M. Valerlo
!r, -NED/Cotpm?c
(i) Does the company appoint an independent party (inspectors) to count andlor validate the votes at the
ASM/SSMs?
Yes.
()
Do the company's common shares carry one vote for one share? lf not, disclosp and give reasons for any
divergence to this standard. Where the company has more than one class of shares, describe the voting
rights attached to each class of shares.
Yes, one vote for one share'
(e)
Proxy Voting Policies
State the policies followed by the company regarding proxy voting in the Annual/Special Stockholders'
Meetlng.
Company's Policies
Execution and acceptance of proxies
Form for proxy are sent to the stockholders of record as
part of ASM with instructions on how to accomplish it,
including the instruction of the shareholder on how to vote
Notary
Proxies are required to be notarized.
Submission of Proxy
Proxies may be submitted to the office 9f the corporate
secretary or to the office designated in the principal office
Proxy may cover one or several shares at the option of the
I
severat Proxies
Validity of Proxy
Proxies executed abroad
lnvalidated ProxY
Validation of ProxY
Violation of ProxY
Valid only for a specific meeting.
Uniform rutes for proxies executed in the Philippines and
Shareholders of invalidated proxies are informed in writing
at a date which would give them sufficient time to address
noted deficiencies before the ASM.
Cut-off date for validation of the proxy is indicated in the
notice of meeting. Validation is done by the Corp Sec
assisted by the stock and transfer
Proxies are voted strictly in accordance with its term.
(h) Sending of Notices
State the comPanY's Policies and procedure on the sending
Meeting.
of notices of Annuauspecial
stockholders'
Notices may be sent by registered mail, personal
service or by publication.
(i)
Definitive lnformation Statements and Management Report
Number of Stockholders entitled to receive
Definitive lnformation Statements and
Management Report and Other Materials
Date of Actual Distribution of Definitive
lnfnrmrliaa
(i.iamani
and M:n:oemant
All
21 days before scheduled meeting.
Rpnart
and Other Materials held by market
participants/certain beneficial owners
Date of Actual Distribution of Definitive
lnformation Statement and Management Report
and Other Materials held by stockholders
21 days before scheduled meeting.
State whether CD format or hard copies were
The CD format was distributed at initial
distribution and the hard copies at actual
distributed
lf yes, indicate whether requesting stockholders
were provided hard copies
U)
Notice of ASM is published in a newspaper of
general circulation. ASM kit, together with the
notice, is also sent to all stockholders of record
record date.
asofa
Yes
Does the Notice of Annual/Special Stockholders' Meeting include the followinS:
Each resolution
to
Yes
be taken up deals with only one item.
Profiles of directors (at least age, qualification, date of first appointment,
experience, and directorships in other listed companies) nominated for
election/re-election.
Yes
The auditors to be appointed or re-appointed.
Yes
An explanation of the dividend policy, if any dividend is to be declared.
Yes
Not applicable
The amount payable for final dividends.
Documents required for proxy vote.
Yes
Should any of the foregoing information be not disclosed, please indicate the reason thereto.
2)
Treatment of Minority Stockholders
(a)
State the company's policies with respect to the treatment of minority stockholders.
lmplementation
Policies
No discrimination.
All queries during the stockholders meeting are
entertained regardless of the number of the
shares the shareholder has in the Bank. No
preference is given to any of the stockholders
by virtue of the number of the shares that they
Observance of right.
The rights of a shareholder under its by-laws
hold.
and the law are respected by the Bank.
(b)
Oo minority stockholders have a right
to nominate candidates for board of directors?
55
Yes.
Minority shareholders have the right to nominate and elect the members of the board of directors
which is impliedly expressed in the rights of the shareholders prescribed in the Corporation Code of the
Philippines.
K.
INVESTORS RETATIONS PROG RAM
1)
Discuss the company's external and internal communications policies and how frequently they are reviewed.
Disclose who reviews and approves major company announcements. ldentify the committee with this
responsibility, if it has been assigned to a committee.
The Bank's communication frameworks are centralized through the following
a.
unats:
)
Strategic Management Department (SMD)
SMD is responsible for the investor relations framework of the Bank. Thus, all structured public disclosure
and announcement of material information shall be coursed through SMD. tikewise, all external
announcements, i.e. press releases, newspaper ads, etc. that will be released by any of the Bank's units
shall be coursed through SMD for clearance. SMD reviews and ensures the accuracy of all financial and
non-financial external announcements prior to providing clearance. Likewise, if the announcement is
material in nature, SMD shall ensure that it is properly disclosed to the PSE or SEC prior to release to the
press or to external parties. SMD is also responsible in informing all Bank Directors and Principal Officers of
the blackout trading period prior to the disclosure of material information.
b.
Bank Marketing and Corporate Communications (BMCC)
to ensure that these comply
process
on the nature of the
would
depend
The
approval
with the Bank's communication standards.
/
announcement, such
BMCC is responsible for the release of all external and internal communication
as:
-
product specific announcements (e.g. advertisements, promotions, branch opening, etc.) shall be
endorsed by the project owner and approved by the head of the unit in charge of the product. The
approval of the unit head signifies that the information to be released is accurate and has gone
through the necessary approval process set forth by the Bank'
Bank-wide related announcements (e.g. financial performance, branding, etc.) shall be endorsed by the
project owner and approved by the President I CEo.
SMD shall be informed by BMCC prior to release of announcement to ensure that there is no material
information to be disclosed. SMD ensures that the public is informed ahead, through appropriate PSE
/ SEC disclosures, prior to BMCC's release of the announcement through the press or to other externa!
party.
2l
Describe the company's investor relations program including its communications strategy to promote effective
communication with its stockholders, other stakeholders and the public in general. Disclose the contact details
(e.g. telephone, fax and email) of the officer responsible for investor relations.
(1)Objectives
(2) Principles
The objective of EastWest's !nvestor Relations (!R) framework
is to ensure that the investing public is fully informed at all
times of significant developments and material information
pertaining to the Bank, and no investor shall be disadvantaged
lack of access to these information.
The lR principle pertain to the strict adherence on the timely,
accurate and credible reporting of all corporate information,
business performance, and any material information of the
Bank based on the disclosure standards set by the Philippine
Stock Exchange (PSE) and the Securities and Exchange
Commission (SEC).
57
As a llsted company, IR is a critical function of EastWest Bank
(EW) in order to ensure that all our clients and investors have
access to the same level of information. Likewise, it is
important that all officers and employees of EW provide same
standard of information to the public to establish credibility to
the public on the way we do business.
(3) Modes of Communications
All these are envisaged contribute to a6hieving fair valuation of
our listed shares.
The following are the modes of communication used in the
lnvestor Relations framework:
a.
b.
d.
Periodic submission of structured reports to the PSE
and SEC
lmmediate submission of unstructured reports to PSE
and SEC in the event a material information occurs
Annual investor briefing participation locally and
abroad
Accommodation of queries by various existing and
potential investors through personal meetings, email,
and tele-conference
Press releases to leading newspapers in circulation
pertaining to significant developments happening in
the Bank
Continuous update of the Bank's website
(www.eastwestbanker.com) for all of the above
information released to the public
The Bank's lnvestor Relations is under Strategic Management
f.
(4) lnvestors Relations Officer
Department with the following contact information:
Address: 5th Fl., The Beaufort, 5th Avenue corner 23'd street,
Bonifacio Global City, Taguig City, Philippines
Email: [email protected]
Website: http://www.eastwestbanker.com/info/ir main.asp
The following are the official contact persons under
EW
Investor Relations:
Aerol Paul B. Banal
Corporate Planning Offi cer
[email protected]
Tel. No. (531) 5753888 loc. 3585
Fax No. (632) 5753888
|oc.3523
/
The following are the other Corporate !nformation Officers of
EW, as submitted to the Philippine Stock Exchange (PSE):
Atty. Benedicto M. Valerio, Jr.
Corporate Secretary
[email protected]
Tel. No. (632) 5753871
Fax No. (532) 8150519 I 1632!. 8t84t47
Rene K. De Borja, Jr.
Chief Finance Officer
rkd eboria @eastwestbanker.com
58
3)
What are the company's rules and procedures governing the acquisition of corporate control in the capital
markets, and extraordinary transactions such as mergers, and sales ofsubstantial portions ofcorporate assets?
Name ofthe independent party the board of directors ofthe company appointed to evaluate the fairness
transaction price.
ofthe
Once a target company is identified, a memorandum of understanding (MOU) or a letter of intent (including
nondisclosure agreement) will be executed prior to commencing preliminary transactions among parties to the
acquisition.
The Management will then create a Due Diligence Team. At the outset, the Due Diligence Team wil! have to
agree on the scope of the examination/investigation (i.e. Corporate, financial, legal, etc.).
Should the Bank decide to continue with the merger and acquisitions (M&A) after due diligence investigations,
the legal documentations (i.e. Deed of Assignment, Articles and Plan of Merger) will be drafted.
All proposed M&A transactions are presented to the Board for approval. !f the transaction received majority
vote consent from the boards of directors, such M&A transaction must be approved by the shareholders.
The sharehotders of all of the involved companies shall be given a notice. This notice should also inform them
as
to the purpose of the meeting and include a summary of the plan for the M&A. An affirmative vote of
stockholders representing at least two-thirds of the outstanding capital stock of the Bank is needed to approve
the plan.
After approval, any amendment to the plan for the M&A must similarly be approved by a maiority vote from
the board of directors and an affirmative vote from stockholders representing at least two thirds of the BanlCs
outstanding capital stock.
Bank acquisition, mergers and consolidations are subject to the approval of the Bangko Sentral ng Pilipinas
(BSp). The Bank should consult with the BSP prior to the finalization of any M&A transaction.
The price/exchange ratio to be applied in the M&A shall be determined by the Board in consultation with a
reputable independent auditor.
L.
CORPORATE SOCIAL RESPONSIBITITY !NITIATIVES
Discuss any initiative undertaken or proposed to be undertaken by the company.
Beneficiary
Initiative
The Bank is in the process of drafting a CSR charter.
E.ployees, Community, Regiulators, Customers and
Shareholders
M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAT
Disclose the process followed and used in assessing the annual performance of
individual director, and the CEO/President.
the board and its committees,
Criteria
Board of Directors
Board Committees
lndividual Directors
A self-assessment form is
Criteria used in the self-
the members of
accomplished
of the Year to
the
start
the Board at
the
bY
assess its performance and
effectiveness as a body, the various
committees, the CEO/President and
CEO/President
the lndividual Directors. The overall result of the annual selfassessment is Presented to the
assessment are in accordance with
SEC Memorandum Circular No.
6, Series of 2009 (Revised Code of
Corporate Governance) and
Subsection X141.3 (Power/Duties
and Responsibilities of Directors)
of the Manual of Regulations for
Banks (MORB).
59
Board through the Corporate
Governance and Compliance
Committee
N.
Each guide question is rated from
1-10, with 10 being the highest
(the lowest being not obserued and
the highest being lorgely
(CCCC).
INTERNAT BREACHES AND SANCTIONS
Discuss the internal policies on sanctions imposed for any violation or breach of the corporate governance manual
involving directors, officers, management and employees
Sanctions
Violations
First violation
Reprimand
Second violation
Suspension
from office. The duration of
9n the gravity of
suspension shall depend
violation.
Third violation
the
the
Maximum penalty of removal from office shall be
imposed.
60
Pursuant to the requirement of the Securities and Exchange Commission, this Annual Corporate Governance Report is
on
signed on behalf of the registrant by the undersigned, thereunto duly authorized, in the City
April 2015.
of
Taguis
_
SIGNATURES
Jonathan T. Gotianun
Chairman of the Board
*".W#^atcrirre
Chief ComPliance Officer
suBscRtBED AND SWORN
to before me this _
their
as
day
20-,
of
affiant(s) exhibiting to me
follows:
NAME/NO.
Jonathan T. Gotianun
PI.ACE OF ISSUE
DATE OF ISSUE
Passport E89194744 - lssued on 20
Manila
SeP 13
Antonio C. MoncuPa
Paul A. Aquino
Jan 14
Carlos R. Alindada
Manila
Passport E81531531 - lssued on 09
Dec 2010
Passport EC0067879 - lssued on 22
Passport E88591905 - lssued on 8
Manila
July
Manila
13
Atty. Benedicto M. Valerio
Passport EC1485358 - lssued on 27
June 2014
Passport ECt32t279 - lssued on 05
Ma. Bernadette T. Ratcliffe
Jun 14
5SS No. 33-0271881-9
Jose S. Sandejas
Manila
Manila
NOTARY PUBTIC
ATTY.
MA.
Appointmc
.264:asl."'.
Roll N,r.13ai'iu
PTR
/
|
ldP
,
'r!'|t
lri:time Nc. 07083
No.4746654January 5,
2015 6l
,
MTNUTES
oF THE 2oll ANNUAL srocKHoLDERS niieertnc
EAST WEST BANKING CORPORATION
April 25, 2014 9:30 a m
Ballroom, Crimson Hotel, Filinvest Corporate City, Alabang, Munttnlupa City
Mr Allan Tumbaga was called to lead the National Anthem at the
beginning of the Annual Stockholder's Meeting
TING
The meeting was called to order by the Chairman, Mr. Jonathan T
Gotianun, who presrded over the same
The Corporate Secretary, Atly. Benedicto M Valerio, Jr , certified that the
notice of the meeting together with the copies of the lnformation Statement and
Audited Financial Stitement of the Bank were sent to each stockholder of record
as of Februarv 28, 2014 erther by personal service or by rnail, in compliance with
the By-LawS as certitied to by the stock and transfer agent of the Bank
Chairman directed the Corporate Secretary to attach the proof of
service of the notice of meeting to the records of the meeting which the latter did
The
3. DETERMINATION .SIF gUORUM
The Corporate Secretary repo(ed to the shareholders in attendance that
a quorum exists for the business at hand after determining that:
(a)
As of record date of this meeting or Febru ary 28,
1 ,1 28,409,610 common shares of stock outstanding
Z61E,,
there were
(b)
of stock are represented in the
(c)
That represents Eighty Six and Forty One percent (86.41%) of
975,062,821 common shares
meetrng erther in person or by proxy,
the Bank's total issued and outstanding capital stock
AL OF
THE
so
MEETING ON A[')RlL 19,2013
The first item of the Agenda is the approval of the minutes of the April 19
a
2013 Annual Stockholders' Meeting The Corporate Secretary certified that
Aprit 25, 20)4
Ell' Annutl,lt ockhol<lar's lulcat i ng
I'ttga )
copy of the aforesatd minutes was duly sent to each of the stockholders as part
of the materials for the April25,2O14 Annual Stockholders Meeting.
Upon motion was duly made and seconded there being no obiection that
was regrstered durrng the discussions, the Minutes of the Annual Stockholders'
Meeting held on April 19,2013 was approved
5. PRESENTATION OF THE CHAIRMAN'S REPORT AND APPROVAL
OF
TS
The next item in the Agenda was the approval of the Financial Statement
of the Bank and the report ot2013 Financial and Operational Hrghhghts
The Corporate Secretary certified that copies of the Chairman s Report
and Audited Financial Statement were furnished to the shareholders as part of
the materials for the stockholders' meeting
Upon motion duly made and seconded, there being no objection raised in
the ensuing discussions, the 2013 Chairman's Report and the Audited Financial
Statements were duly noted and approved by the Stockholders
The President, Mr Antonio C. Moncupa, Jr was called by the Chairman to
present the 2013 Frnancial & Operational Highlights of the Bank The full text of
the said report was recorded in the minutes of the meeting, to wrt:
"Good morning to everyone
Dear shareholders, we are
happy to see you this morning
Let me give you the headline nurnbers in 2013.
The Bank's total assets grew by 17Vo lo P142 3 bil[on
Loans grew by 32% to P94.0 billion, while Deposits grew by 22% to
P111 2 billion The groMh are one of the highest in the industry but
that is also because our base is relattvely small
ln terms of income, our total revenues (or Operating lncorne)
grew by 35olo to P13 2 billion. Total operating expenses, including
provrsron for losses, grew at a faster pace of 40%lo P10I billion.
As a result, net rncome grew by 13% to P2 'l billion.
ln terms of our Branch Stores, we opened 178 stores in the
last two years (123 stores in 2012and 55 stores in 2013) We are
on track to have at least 400 stores by the end of 201q As of
yesterday afternoon, we already have 375 branches
EIY Annuul ,9tockholdar's ltlee ting
April
25, 2011
Let rne go through the details of the growth of the Bank's
balance sheet and income statement.
On the loan side, our corporate loans grew faster than
consumer loans. Corporate loans recorded a groMh of 35o/o to end
alP46.7 billion The growth is marnly coming from the expansion of
our lending groups. Consumer loans grew by 29% lo end at P48,9
billion and it remains to be our key differentiator. Our consumer
loans account for more than 50% of our total customer loaris, whrch
remains to be the largest proportion of consumer loan portfolio
when compared against our peer banks, We now rank 5'n in terms
of credit cards portfofio and we are also arnong the banks with the
largest auto loan frnancing All other consumer loan products
posted double-digit grovuth Our Rural bank subsidiary increased
its salary loans to public schoolteachers by over 100o/o
Our deposits grew by 22% to end at P111 2 billion Low cost
deposits (or CASA) increased by P1a"1 billion or 28o/o, High cost
deposits (includlng LTNCD) on the other hand increased by only
P5.9 billion As a result, CASA to total deposits ratio improved to
58% from 55%, and our funding cost (or interest expense) has
gone down.
The groMh in earning assets coming from high,yielding
customer loans, coupled with lower funding costs resulted for the
Bank to post its industry-leading Net lnterest Margin (NlM) of 8.4%
- more than 2x that of lndustry Our net interest income grew by
38% to P8 4 billion, as rnterest income grew by 26% whrle interest
expense declined by 15o/o. This is the result of our efforts to
manage our funding cost by moving our deposit structure to low
cost deposits (or CASA) from high cost deposits
As a result of our expansion, service charges, fees, and
commissions which are recurring in nature grew by 36% to P2 5
billion The growth in recurring fee-based income is a result of our
larger consumer loan books and expanded store network which are
rich in transactional fees
ln terms of trading revenues, we were fortunate since we
were able to unload our trading securities before rates siarted to
rise in the rniddle of last year. As a result, trading income grew by
14o/o lo P1 7 billion While we don't rely on trading as a main
revenue source, we belteve that we have the competency to take
advantage of market opportunities.
Pugt
-i
till
Anntttt Stot'kholder's l.lcet ing
April 25,201J
Pogt J
Operating Expenses, excluding provision for loan losses,
went up by 24o/o lo P7 8 billion The full year effect of the 123
stores that were opened in 2012 and the initial impact of the 55
more stores that were opened in 2013 are now reflecting in our
expenses. These are mostly up-front costs on manpower and
infrastructure related to the expansion. !t takes around one to three
years for the Stores to start being productive However, these
investments are necessary to ensure that the Bank remaans
competitive in this ever growing competitive market
Provision for losses more than doubled to P3 1 billion, which
is matnly due to our focus on Consumer loans While the growth in
consumer portfolio attracts higher NPL and credrt costs, we believe
that we are still ahead on a risk-adjusted return basis aS the yield of
this portfolio will still outwergh the front Ioaded costs in the long run
as the vintages mature.
All told, despite the up-front costs, our Net lncome grew by
13o/o lo P2 1 billion Thrs translates to a Return on Equity (ROE)
and Return on assets (ROA) of 11 1oh and 1 6Yo, respectively we
are happy with the results since we have expected worse in
consideration of the investments that we have made for the
expanslon.
What to ExPect in 2014t
First, we expect to consolidate what has been built
a
Productivity - We have added headcount and infrastructure,
so what we need to focus now ls to increase the productivity of
the organization. We have to emphasize training and re-focus
ourselves to improve our Servioe standards and service Culture
Our Human Resource and EastWest Academy shall continue
focus on training and organizational
their rnitiatives
development to address the growing demands of the business
and of our customers'
to
b, Automation . ln 2014, we expect to go live with our new core
banking solution - Temenos' 124, which we believe iS One Of
the better core banking solutions tn the world This should
irnprOve our service level with our custorners Our internet
core
banking is also expected to be replaced together with our
banking system
c Risk and Governance - we shall continue to enhance our risk
andgovernancepractlcestoprotectthegainsWehave
Ell'',4nnuul Stockholder's Mcet ing
,
.4pril 2 5. ?011
l'ct,gc 5
achieved* As the years have progressed, banking has,become
more complex. This is why we need to put in the consciousness
of our people the importance of control and good management
practices We have enhanced our internal audit framework and
risk management practrces, which is also to be suppoded by the
rmplementation of our core banking system this year. Achieving
a BSP CAMELS rating of 4 remains to be the Bank's target We
believe that with the preparation put in place we are getting
closer towards this goal.
Second, we expect the irnpact of expansion costs to be felt
this year We have opened 178 branches in the last two (2) years.
The full year effect of these branches, together with the branches
we will open thrs year wil! be felt in our 2014 results The costs of
our store expanSiOn are up-front and expected revenues come
much later Our challenge is how to accelerate our revenue glowth
coming from our expanded Store network, as well as the expansion
of the different line units
Next, we expect lower trading revenues in 2014 Fixed
income markets have bottomed and the expectation is for rates to
inch up higher We erpect this situation to pose a challenge to
EastWest, as well as the general banking industry.
As a summary, 2014 will not be easy, as we
have
communicated two years ago. However, ln 2015, we expect things
to be better and by 2016 we expect the benefits of our expansaon to
be more pronounged. The investments that we have made are
necessary aS we are bUilding our revenue base lt is the cost we
have to pay now, but we will harvest the fruits of this expansion in
the future
Thank you very rnuch,"
6, RATIFIGATION OF ALL ACTS OF THE BOARD OF DIRECTORS
AND
CORPORATE OFFICERS
The next item in the Agenda was the approval of all acts of the Board and
Corporate Officers
of the Bank The Corporate Secretary certified that a
summary of these actions were given to the shareholders as part of the materials
for the meeting
Upon motion duly made and seconded, there being no objection rarsed
during the discussions that ensued, all acts and resolutions and proceedings of
the Board of Directors and Officers of the Bank for the year 2013 were approved
confirmed and ratified
.lpril 2 5. ){) I -t
EII' A.nnuul Stockfuil der's Mee r ng
r
l'age 6
7. ELECTION OF THE MEMBERS OF THE BOARD OF DIRECTORS
FOR
2014-2015.
The Chairrnan anformed the shareholders that the next item of the Agenda
is the election of the members of the Board of Directors of the Bank The
Corporate Secretary explained that the Bank earher submitted the final list of all
candidates who were nominated and pre-screened in accordance wrth the
Cornpany's Manual on Corporate Governance" They are:
ANDREW
L
GOTIANUN. SR
T GOTIANUN
JONATHAN T GOTIANUN
L JOSEPHINE GOTIANUN YAP
MERCEDES
ANTONIO C MONCUPA JR
ATTY BENEDICTO M VALERIO. JR
JOSE
S
SANOEJAS
CARLOS R ALINDADA, and
PAUL
A
AOUINO
That Messrs Jose S. Sandeias, Carlos R Alindada and Paul A Aquino
were also named by the Nomination Committee as nominees for the position of
I
ndependent Directors.
No other nomination for election of the Board of Directors was submitted
to the Nomination Committee within the period allowed under the Revised
Manual on Corporate Governance, or on March 03, 2014 as provided in the
lnformatron Statement furnished to the stockholders.
Upon molron was duly made and seconded and no o6iections being
rendered during the discussions, the followtng persons were therefore declared
etected Directors of the Bank for the fiscal year 2014 to 2015 and until their
successors have been elected and qualifred:
ANDREW L GOTIANUN SR
MERCEDES T GOTIANUN
T GOTTANUN
L JOSEPHINE GOTIANUN YAP
ANTONIO C MONCUPA, JR
JONATHAN
ATTY BENEDICTO M VALERIO JR
JOSE S SANDEJAS.
CARLOS R ALINDADA,
PAUL
A
AOUINO,
lndependent Director
lndependent Director
lndependent Director
ITORS
The appointment by the stockholders of the Company's External Audttors
was the next item of the Agenda The Chairman reported that the management
upon recommendatlon of the Company's Audit Committee, is endorsing the re-
EII' tlnntrul Stockfutldar'v
trlccling
.4pril )5, ?l)la
appointment of the auditing firm of Sycip Gorres Velayo and Company as
exteinal auditor for the Company for the year 2014
Upon motion was duly made and seconded and no objection being
rendered during the discussion, the re-appointment of the auditing firm of Sycrp
Gorres Velayo and Company as external auditors for the Yeat 2O14 was
approved
9. OTHER IVIATTERS
A. Amendment of the address of the Principal Otfice of the Bank.
The next itern of the Agenda under Other Matters is the request for
confirmation and ratification of the action of the Board amending the address of
the principal office of the Bank from Metro Manila as stated in its Articles of
lncorporation and By-laws to the Beaufort, Stn Avenue cor 23'd St, Bonifacio
Global City, Taguig City pursuant to Memorandum Circular No. 6, Series o12014
issued by the Securities and Exchange Comrnission
Upon motion duly made and seconded there being no objection that was
raised in the drscussions, the shareholders ratified and confirrned the following
action of the Board, to wit.
"RESOLVED, to change the principal office of the
Bank
that is indicated in its Articles of lncorporation from Metro Manila to
The Beaufort Sth Avenue cor 23'd St , Bonifacio Global City,
Taguig City
RESOLVED FURTHER, that in view of the foregoing, that
the THIRD Article of the Bank be amended to read as follows.
erly
(Amended as of April 10,2014)
RESOLVED, FINALLY that Section '1 of the By-Laws be
arnended to read as follows:
1
Q{frcr:s. The prrncipal cf{ie.* ol ti:e eorpomtierrt shall irr:
located 61TFre Beaufon 5r{'Avenue cq1---2,3 rtl--$-t,-B-ff-:!"1{gp"lg"9lqfr$!
Citv. Taquiq City. Subject to Bangko Sentral ng Pilipinas approval
the Corporation may open and maintain branch offices at such
places within the Philipprnes as the Board of Directors may
delermine
(Amended as of April 10, 2014)"
Section
lilV A.nnuul Snrckholdcr s lVccring
Pugt ,\
tlpril 25, 2011
B. Authority to Engage in Bancassurance
Business
,
The next item under Other Matters is the request for confirmation and
ratification of the action of the Board to authorize the Bank to engage in
Ba ncassura
nce Business
Upon motion duly made and seconded, there being no objection that was
raised in the ensuing discussions, the shareholders ratified and confirmed the
following actions of the Board.
authorize the Bank to engage in
Bancassurance business subject to an efficient and effective exit
"RESOLVED,
to
mechanism or contingency plan in case the business farl or do not
prosper that the management shall provide prior to actually
engaging in Bancassurance business.
RESOLVED, FURTHER, to authorize the bank to engage in
non-life insurance either as a General Agent or as a Broker
RESOLVED, FURTHER, to confirm the authority granted by
the Board during the February 2014 Regular Board meeting for the
Bank to engage the services of JP Morgan as Frnancial Advisor in
choosing a bancassurance Partner
RESOLVED, FURTHER, to authorize Mr Jonathan T
Gotianun, Charrrnan, and Mr. Antonio C Moncupa, Jr , President
and CEO, to negotiate and finalize the terms of the foregoing
engagement
C. Authority to Establish a Wholly-Owned Finance and Leasing
Company.
,
The request for confirmation and ratification of the action of the Board to
authorize the Bank to invest in a wholly owned finance and leasing company was
discussed Upon motion duly made and seconded, their being no objection that
was raised in the ensuing discussions, the shareholders confirmed and ratified
the following actions of the Board, to wit:
"RESOLVED, to authorize the Bank to invest in a wholly
owned finance and leasing company subject to an effrcient and
effective exit mechantsm or contingency plan in case the investee's
operations fail or do not prosper that the managemenl shall provide
prior to actually investing with the investee."
,
EIV A,nnuul ,\ttockholclcr's ll'{aattng
'
,lpril
25, 201
I
I'ugc
I
RESOLVED FURTHER, to authorize the Bank's frnance
and leasing subsidiary to invest in a company that will engage in
rental and operating lease products, if the said subsrdiary decides
to do so in the future
D. Listing of the Preferred Shares
The Chairman presented to the shareholders for their
approval the
following corporate actions that were taken by the Board with regards to the
capital of the Bank, to wit:
RESOLUTION NO. SP-04-2014-04
"RESOLVED, AS lT lS HEREBY RESOLVED, to guthorize
the Corporation to: (a) offer and issue up to a maximum of
500,000,000 perpetual non-cumulative Tier 1 preferred shares that
qualify as additional Tier 1 capital of the Corporation, at par value of
Php10 00 per share (the "Shares"); (b) register the Shares with the
Securities and Exchange Comrnission ("SEC"), as may be
applicable, pursuant to the Securities Regulatron Code and its
rmplementing rules and regulations; (c) secure the approval of the
Bangko sentral ng Pilipinas ("BSP"), as may be applicable, for the
recognition of the Shares as additional Tier 'l capital pursuant to
rules and regulations issued by the BSP; and (d) cause the listing
of the Shares with the Philippine Stock Exchange, as Management
may deem necessarY:
"RESOLVED, FURTHER, to direct the Management to
evaluate all aspects relatlng to the proposed offering and issuance
of the Shares, including the timing, the distribution, the tdrms and
conditions of the offering and issuance of the Shares, engagement
of undenruriters, arrangers, trustees, counsel, or such other parties
which are necessary forthe offering and issuance of the Shares;
"RESOLVED, FURTHER, that the following officers of the
Corporation be authorized, as they are hereby authorized, to act for
and on behalf of the Corporation:
Name
Antonio C Moncupa, Jr.
Renato K De Borja
Maricel L Madrid
Andres Manuel D. Goseco
Benedicto M Valerio, Jr
Position
President and CEO
Chief Finance Officer
Controller
Treasurer
Corporate Secretary
Ell/ Annunl,Jtockfutlder'.s lvlact inx
'
April 2 5, 201 I
l'}ugr l0
such that any one of the above listed officers, acting singly, be
authorized to: (a) file and cause the filing of the application for the
registration of the Shares with the SEC pursuant to the Securities
Regulation Code and its implementing rules and regulations; (b)
execute the regislrataon statement and such other forms,
documents or certificataon required by the SEC for such registration
of the Shares; (c) file and execute such application or such other
documents necessary to secure the BSP approval for the
recognition of the Shares as additional Tier 1 capital; and (d) file
and cause the listing of the Shares with the PSE, (d) execute and
submit to the PSE application forms, and such other cer'?ifications
and documents required by the pSE; (e) cause the payment of
necessary fees, as required, for: (i) the registration of the Shares
under the Securities Regulation Code and its implementing rules
and regulation, (ii) the BSP approval for recognition of Shares as
additional Tier 1 capital, and (iii) the I'sting of the Shares with PSE;
(f) execute the underwriting agreement or document wtth such
parties as may be required for the offering and issuance of the
Shares; and (g) perlorm such other acts which are necessary to
give effect to the foregotng;
"RESOLVED, FINALLY, to approve the disclosures in the
Registration Statement and Offerrng Prospectus to be filed with the
Securities
and Exchange
Commission,
and assume
responsrbility for the information contained therein
full
"
After deliberating on the matter, upon motion duly made and seconded
there berng no objection that was raised, the shareholders approved, confirmed
and ratifred the foregoing action of the Board and furlher authorized the Board to
decide and determine whether the perpetual non-cumulative preferred shares
that the Bank wrll issue is Tier 1 or Tier 2 compllant
10, OPEN FORUM
ln response to a query of a shareholder whether the Bank is prepared
now and in the future to compete with the bigger banks, the Chairman explained
that the actions that were taken by the Bank in the last five years were
preparations for it to be more competitive: The Bank acquired AIG Philam
Savings Bank which doubled its Credit Card and Auto Loans portfolio; lt acquired
Green Bank Rural Bank (now East West Rurat Bank) which allowed it to
established more branches in the restrictive area; lt undertoofi an expansion
program in the last thee years by adding 180 branches, a feat no other bank has
done in the past; Internally, it has embarked on improving the training of its
personnel which has more than doubled and upgrading its lT infrastructure; lt
has increased its capital; and, it went public thru an IPO These were done to
increase the size of the Bank so that it can compete better with the bigger banks
EtL',,|nnuul
,
St
ockfu tlder's' Mecl ing
;lpril
25.
20l1
I'ugc I I
shares that the Bank intends to
on the question relative to the preferredwiil
have no convertibility feature
issue the chairman exprained that the shares the dilution of the shares of the
to common or votil,g fr"r"rr"d shares to avoid
and that if there is a need for additional capital
existing cornmon
=n-"i"'.,oroers
offering will be made'
thru the issuance of common shares' an
lighten the burden of the
on whether or not the Bank has any plan tothat
the expansion program
explained
Bank,s expanslon pr-ogrrr, the. chairman
effect of ine program was calculated' like the
was planned five years ago and. the
open branch would be immediately productive
Bank cannot expecLthati newly
capital to fund the growth and
To soften the toaJ, tne Bank-increased its
wnlie tne profit yierd is better These will help
embarked on consumer business
pl.otitaoility while at the same time addressing
the Bank to attain some level of
Using the analogy that the
the efficiency and profitability- of its branches'
cross' the Chairman explained that
expansion is like'il"-UrrO"n of .rrrying 11r"
theBankishopingthatresurrectlonw.llcomeandthentheBankwillbe
kholder's expectation The
transformed ln such a wa'
igation to the people that
management is working v
ng what it needs to do and
invested in the Bank, man
t,vi.g ,"ry hard to achieve
*
fee
^JliT"rffi,:'ffi: ;tii:
.o.[rny. Manaoement
of course, management alsb fee:ls a great
invested/put moriJy ,i; [; Balk
employees
deposits with the Bank and to the
responsibilrty for'ir{" p"ople that
working that a[ these group benefit in the
that work for rt, and so managemant'i=
process.
TheChairman,rnanswertothequestionsonthepreferredshares.
stock exchange, its yield
lisied in the
confirmed that the said shares will be
whichwoulddependonmarketconditionshavenotyetbeendeterminedanditis
open to whoever wants to buY
RelativetotheauthoritygrantedbytheshareholdersfortheBanktoenter
that the Bant< is still
into Bancassurance business, the Chairman reported
interested potential partners'
studying tne uusiness and that there are several
will it partner with'
and that it rs still in the process of selecting who
on the issue of the Bank declaring dividends, the chairman explained that
will engage in
when it went public, it informed the prospective investors that rt
when the
expansion and growth in the next few years and 2014 is the height
still declare
expenses for thls will be felt but if and when proper. the Bank will
dividends.
, EWlVnuol Snrckholder's lvleering
1
April
25,
?0ll
Puge
I
)
1. ADJOURNMENT
Upon motion was duly made and seconded and no objections being rendered
during the discussions, no other rnatters were taken up for consideration,
therefore, the meeting was adjourned
The Chairman also invited all the Stockholders who were present
and
participated in the said meeting to join in the refreshments served by the Bank for
this occasion
CERTIFIED GORRECT:
Corporate Secretary
ATTESTED TO:
T. GOTIANUN
hairman of the Board
CORPORATE GOVERNANCE AND COMPLIANCE
COMMITTEE CHARTER
I. OBJECTIVE
The Corporate Governance and Compliance Committee shall assist the Board of
Directors (BOD) in fulfilling its corporate governance responsibilities and in
providing oversight in the implementation of the Bank's Compliance system,
including the Bank's Money Laundering and Terrorist Financing Prevention
Program (MLPP). lt shall review and evaluate the qualifications of all persons
nominated to the Board as well as those nominated to other positions requiring
appointment by the Board of Directors.
!I. MEMBERSHIP
The Corporate Governance and Compliance Committee shall be composed of
the Chairman of the Board and at least three (3) members of the Board of
Directors, two (2) of whom shall be independent directors'
,
III. DUTIES AND RESPONSIBILITIES
On Corporate Governance:
l. lt shall be responsible for ensuring the Board's effectiveness and due
2.
3.
observance of corporate governance principles and guidelines.
lt shall make recommendations to the Board regarding the continuing
education of directors, assignment to Board Committees and succession
plan for the Board members and senior officers.
lt shall decide whether or not a Director is able to and has been adequately
carrying out his/her duties as director bearing in mind the director's
contribution and performance (e.g. competence, candor, attendance,
preparedness and participation).
shall adopt internal guidelines that address the competing time
commitments that are faced when directors serve on multiple boprds.
lt shall decide the manner by which the Board's performance may be
evaluated and propose an objective performance criteria approved by the
Board. Such performance indicators shall address how the Board has
enhanced long term shareholders' value.
lt shall oversee the periodic performance evaluation of the Board and its
committees and executive management; and shall also conduct an annual
self-evaluation of its performance in accordance with the criteria provided in
the 2009 SEC Code of Corporate Governance.
4. lt
5.
6.
Revised: MARCH 2014
Page 1 of 2
Contains EWB Confidential lnformation
7. lt shall oversee the accomplishment of a scorecard on the scope, nature
and extent of the actions taken to meet the objectives of the 2009 SEC
Code of Corporate Governance which the commission may require
annually.
8. lt shall review and assess the adequacy
of this Charter, thd Corporate
Governance Manual and recommend changes for the approval of the Board
at least annually.
On Compliance:
1.
lt shall oversee the implementation of the Bank's Compliance Program and
ensure that compliance issues are resolved expeditiously.
2. lt shall endorse the appointment of a Compliance Officer to the Board of
Directors with a rank of at least Vice President and who a) directly reports
to the Chairman of the Board and b) be responsible for coordinating,
monitoring and facilitating compliance with applicable laws, rules and
regulations.
3. lt shall vest the Compliance Officer and the Compliance Department with
the appropriate authority and provide the necessary support and resources.
4. lt shall assist the Board members in making an informed assessment as to
whether the Bank is managing its compliance risk effectively.
5. lt shall ensure the regular review and updating, at least anndally, of the
Compliance Program to incorporate changes in laws and regulations for
approval by the Board.
6. lt shall have oversight on the Bank's compliance with the anti-money
laundering and terrorist financing prevention laws, rules and regulations.
7. lt shall ensure the proper and efficient implementation of the MLPP, which
includes implementation of the KYC policies and procedures, AML related
record retention policies, electronic system of capturing covered and
suspicious transactions and AML training program;
g. lt shall review and vet all Related Party transactions and Personal Dealings
in accordance with the Bank's policies and procedures'
IV. MEMBERS' DUTIES AND RESPONSIBILITIES
The individual members of the Committee shall have and accordingly observe
the specific duties and responsibilities of a director contained in the Manual of
Regutations for Banks Subsection X141.3d and Article 3G of the'2009 SEC
Code of Corporate Governance.
V. MEETINGS
The Corporate Governance and Compliance Committee shall meet bimonthly/once every 2 months or whenever necessary to discuss, agree and
prepare reports on its recommendations.
The Committee Secretary shall develop the agenda for each meeting and send
out notice at least three (3) days before the meeting date. He shall likewise
prepare/distribute minutes of the meetings and make other regular reports to
the Board, as needed.
Revised: MARCH 2014
Page 2 of 2
Contains EWB Confldential lnformation
EAST WEST BANKING CORPORATION
RISK MANAGEMENT COMMI TEE CHARTER
1,
PURPOSE
.
1.1. The purpose of the
Risk Management Committee (RMC) is
to assist the
Board of Directors (Board) in fulfilling its responsibilities in managing the
Bank's risk taking activities.
't.2. The nature of the Risk Management Committee's responsibilities is one of
development and oversight. The responsibility for executing the Bank's risk
management policy and framework lies with Senior Management led by the
Chief Risk Officer (CRO).
2.
AUTHORITY
z.r"
To aid in fulfilling its duties and responsibilities, the Board of Diiectors has
bestowed upon the Risk Management Committee the authority to:
z.i.t. Review and approve principles, policies, strategies,
processes and
control frameworks pertaining to risk management recommended by
the Chief Risk Officer'
2.1.2. Form and delegate authority to sub-committees.
access to management and auditors
(internal and external), and receive regular repofcs. ,
2.1.). Have direct and unrestricted
2,1.4. Obtain advice and assistance from independent professional advisors.
2.1.j.
j.
Conduct or direct any investigation when the need arises.
MEMBERSHIP
3.1. The Risk Managernent Committee is composed of a majority of
executive directors,
3.2.
The Committee shall have no less than three (3) members.
j.j.
Each member shall be appointed by the Board
of Directors.
non-
:.
).4.
4.
Members must possess adequate knowledge and understanding of the
institution's risk exposures as well as the expertise to develop appropriate
risk policy and strategy.
MEETINGS.
4,1. The Risk Management Committee may conduct meetings only when
a
majority of the Committee members are present.
4)-. Although not members of the Committee, the Chief Risk Officer and a
representative from the Risk Management Division to act as Committee
Secretary shall regularly attend the meetings.
4;,
Meetings shall be held on a quarterly basis, as a minimum.
4.4. The Risk Management Committee may request non-members to ioin the
meetings when deemed necessary to address the Committee's obiectives.
4.j.
Non-members may be asked by the Committee
part of any meeting'
to withdraw for all or any
q.6. The agenda shall be prepared by the CRO prior to the meetings. At
a
minimum, the agenda should include reports on limits compliance, as well as
the profile of the Bank's risk exposures. Minutes of the meeting shall be
prepared by the Committee Secretary and noted by the CR'O.
5.
DUTIES AND RESPONSIBILITIES
S.t.
ldentifies and evaluates the Bank's risk exposures. The Committee assesses
the likelihood of each risk identified and estimates its irnpact to the Bank.
Further attention shall be given to those risks that are more likely to happen
and bear more costly impact to the Bank.
5.2.
Ensures that all risk management strategies and policies for all types of risks
are developed, properly documented, and effectively communicated to the
organization. The Committee also ensures that the concerned units follow
the loss mitigating strategies and procedures laid out in the risk
management policies.
,
5.3. Evaluates and approves all types of recommended risk tolerances including
portfolio credit tolerances, market and liquidity risk limits, and operational
risk parameters that includes information security; taking into consideration
the overall risk appetite of the Board.
5.4. Enslires that relevant risks are measured and.monitored for all portfolios
and business activities.
5.5.
Evaluates the magnitude, direction and distribution of risKs across the Bank.
Provides direction to the Bank on how to control or mitigate these risks
through its developed risk management strategies and policies.
5.6. Evaluates and reports to the Board the Bank's over-all risk exposures and
the effectiveness of its over-all risk management practices and processes
and recommends further action or policy revisions, if necessary.
5.7.
Ensures that timely corrective actions are carried out whenever Iimits are
breached.
5.8. Recommends the allocation
of
capital
in order to
manage risk
and
corresponding earnings.
5.9.
On internal audit --
5.9.1. Ensures that the Bank's risk management framework is evaluated
regularly by lnternal Audit.
5.9.2. Reviews issues raised by lnternal and External Auditors regarding the
Bank's risk management framework,
j.9.3.
Relays to the Audit Committee any issues that the Committee sees as
relevant.
5.10. Examines other matters referred by the Board.
5.rr. Reviews, at least annually, the Committee's charter and recommend any
proposed changes to the Board for approval.
Sign-off Sheet
Aetion
,
I erepared
I
I
Reviewed
Name
ciu..
Designation Signature
N.
I
RMC Chairman
Jonathan T. Gotianun
BOD Chairman
Date
TRUST COMMITTEE CHARTER
A. Objective
The Trust Committee shall assist the Board of Directors (BOD) in fulfllling its
responsibilities to oversee the proper management and administration of trust and
other fiduciary business.
B. Composition of the
1.
The Trust Committee (TrustCom) shall be composed of at least five (5) members, to
include the following:
.
.
o
2.
Trust Committee
The President
The Trust Officer
At least three (3) Directors appointed by the Board on a regular rotation basis
The members of the TrustCom shall be designated as follows:
. Director - Chairman of the Committee
.
o
.
.
Member
President
Trust Officer
Director
Director
-
Member
Member
Member
g.
The TrustCom Chairman shall be appointed by the Board and shall remain as
Chairman until such time the Board appoints another Director to chair the
TrustCom.
4.
Members of the TrustCom shall, in addition to meeting the qualification standards
prescribed for directors and officers offinancial institutions, possess the necessary
technical expertise in trust and fiduciary business (MORB, Subsections
X406.314406Q.3). The Trust Officer, on the other hand, shall have at least two (2)
years of actual experience or training in trust operations (MORB, Subsection 1406.3)
5. Except for the President/CEo,
a Director who is also an offrcer of the Bank shall not
be qualifi.ed to be a member of the TrustCom. In case, however, that the TrustCom
shall be composed of more than frve (5) members, the appointment therein of an
operating offrcer may be allowed only if required balance in the membership of at
least (3) members of the Board for every operating officer shall be maintained.
6.
In lieu of or in addition to the three Directors, the Board may appoint "independent
professionals" to the Trust Committee subject to confirmation by the Monetary
Board, provided that such independent professionals meet the prescribed minimum
requirements (MORB Subsections X406.3/4406Q.3).
C. Meetings
1.
The TrustCom shall meet at least once every quarter (or three months), or more
frequently as circumstances may warrant. Members may participate via electronic
mail, teleconference or videoconference.
2.
A simple majority shall constitute a quorum for the TrustCom, provided the
Chairman or his designated alternate, shall always be present. An officer of the
Trust Division, other than the Trust Officer, shall act as Secretary of TrustCom and
shall record the minutes of the meeting.
3.
The Committee Secretary shall develop and prepare the agenda for each meeting
and notice will be sent out at least three (a) days before the meeting date.
The Committee Secretary shall prepare the Minutes of the meetihgs and shall
subsequently summarize and present them to the Board of Directors for approval
/notation.
The Committee Secretary shall ensure that copies of the Minutes of the TrustCom as
well as all recommend,ations /proposals approved by the TrustCom are duly fi-led and
kept within the premises of the offi.ce and shall be made available at any time upon
request by any one of the TrustCom members, the Bank's Compliance Officer, Aud.it
Division or by any regulatory body'
4.
b.
D. Responsibilities and Administration
The Trust Committee, duly constituted and authorized by the Board, shall act within
the sphere of authority as provided in the Bank's By-Laws and/or as may be delegated
by the Board. It shall undertake such responsibilities, but not limited to the following:
1.
Acceptance and closing oftrust and other fiduciary accounts
Initial review of assets placed under the trustee's fiduciary custof,y
2.
3. Investment, re-investment and disposition of funds or property
4. Review and approval oftransactions between trust and/or fiduciary accounts, and
b. Review of trust and other frd.uciary accounts at least once every twelve (12) months
6.
to determine the ad.visability of retaining or disposing of the trust or frduciary assets
and/or whether the account is being managed in accordance with the instrument
creating the trust or other fiduciary relationship'
The TrustCom shall also preside over the proper conduct of the trust's business,
reviewing on a periodic basis, business development initiatives asl
.
.
.
Staffrng and delineation of responsibility / accountability
Proactive development and implementation of strategies for cultivating of
revenue streams and cost management
Application and monitoring of the proper performance benchmarks.
O eas[wesl
AUDIT COUIIiITTEE CHARTER
A . Purpose
To assist the board of directors in fulfilling its oversight responsibilities:
.
.
.
for the financial reporting process,
the system of internal control, and
the company's process for monitoring compliance with laws and regulations and the
code of conduct.
To provide reasonable assurance on the overall management of credit, market,
liquidity,
operational, legal and other risks of the bank.
B. Power and Authority
The audit committee has authority to conduct or authorize investigations into any matters within
its scope of responsibility. lt is empowered to:
Appoint, compensate, and oversee the work of any registered public accounting firm
employed by the organization.
.
.
Oversee the resolution of disagreement between management and the external auditors,
in the event theY arise.
o
.
Pre-approve all auditing and permitted non-audit services.
.
.
.
Retain and compensate independent counsel, consultants and other experts and
advisors laccounting, financial or otherwise) and also may use the services of the
corporation's regulai counsel or other advisors to the bank. The bank will provide
appropriate funding, as determined by the committee, for payment of compensation to
the independent auditor for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services, for payment of Co_mpensation to any
experts or advisors retained by the committee and for payment of ordinary administrative
expenses of the committee.
Seek any information it requires from employees (all of whom are directed to cooperate
with the committee's request) or external parties'
Meet with the company officers, external auditors, or outside counsel, as necessary.
The powers and responsibilities delegated to !he_ committee may be exercised in any
and
manner the committee deems appropiiate (including delegation to subcommittees)
charter
in
this
without any requirement for board approval except as othenruise specified
or the board\s'delegation. Any decision by the committee, including any decision !o
any of its delegated powers, is at the committee's
exercise or refrain fio,
"*"r.ising
wi[nin the scope of the powers and responsibilities
sole
may exercise all the powers and authority of the board
delegated to
ted by law, has the authority to determine which matters
and,1o the
ated authoritY'
are within
discretio
i
ful
the
C. MembershiP
Audit committee members in accordance
The Board of Directors shall determine the number of
of members of the board of
with sEC and BSp ."grt.tionr. The committee sha[ consists
2
EastWest Bank
Audit Committee Charter
directors, at least two (2) of whom shall be independent directors, including the chairperson.
The committee's members, including its chair, preferably with accounting, auditing or related
financial management expertise or experience, are appointed by the board upon the
recommendation of the board's Corporate Governance Committee. The board, upon such
recommendation, also may appoint one or more additional members of the board as alternate
members of the committee to replace any absent member at any committee meeting.
D. Meetings
The Audit Committee shall meet at least four times annually, or more frequently
as
circumstances dictate. To the extent practicable, each of the Audit Comffiittee members shall
attend each of the regularly scheduled meetings in person.
A majority of the Audit Committee members currently holding office constitutes a quorum for the
transaction of business. The Audit Committee shall take action by the affirmative vote of a
majority of the Audit Committee members present at a duly held meeting.
The Audit Committee shall meet periodically in separate executive sessions with management
(including the chief executive officer, chief operating officer and chief finance officer), the
internal iuditors and the independent auditor, and have such other direct and independent
interaction with such persons from time to time as the members of the Audit Committee deem
appropriate.
The Audit Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditor to attend a meeting of the Committee or to meet with
any members of, or consultants to, the Committee.
E. Responsibilities
The audit committee provides oversight of the institution's financial reporting and internal and
external audit functions. lt shall be responsible for the appointment of the internal auditor as well
as the independent external auditor who shall both report directly to the audit committee. lt shall
monitor and evaluate the adequacy and effectiveness of the internal control system. All
committee members and alternate members serve at the pleasure of the board and any
member or alternate member may be removed, with or without cause, by the board.
The audit committee shall ensure that a review of the effectiveness of the institution's internal
controls, including financial, operational and compliance controls, and risk management, is
conducted at least annuallY.
The committee will carry out the following responsibilities.
Financial Statements
o
complex and
Review quarterly the significant accounting and reporting issues, including
professional
and
recent
judgmLntal
and
areas,
unusual transattions anO highly
statements.
financial
on
the
impact
regulatory pronouncements, and understand their
o
audit, including any
Review with management and the external auditors the results of the
difficulties encountered.
3
EastWest Bank
Audit Committee Charter
Separate Meetings with the management and lndependent Auditor.
ln
separate
meetings with the independent auditors, the committee will:
o
Discuss with the independent auditor the report that the auditor is required to make
to the committee regarding:
- All
accounting policies and practices
to be used that the independent
auditor
identifies as critical.
- All alternative treatments
within generally accepted accounting principles for
policies and practices related to material items that have been discussed among
management and the independent auditor, including the ramifications of the use of
such alternative disclosures and treatments, and the treatment preferred by the
auditor.
-
Other material written communications between the independent auditor and
management of the bank, such aS any management letter, management
representation letter, reports on observations and recommendations on internal
controls, independent auditor's engagement and independence letters, schedule of
unadjusted audit differences and any listing of adjustments and reclassifications
not recorded.
Review and discuss with management and the independent auditor the annual audited
financial statements, including the Company's specific disclosures made in
management's discussion and analysis, and recommend to the Board whether the
audited financial statements should be included in the bank's Annual Report.
Review with management and the independent auditor: (1) major issues regarding
accounting principles and financial statement presentation, including any significant
changes in the Company's selection or application of accounting principles; and (2)
majoi issues as to the adequacy of the Company's internal controls and any special
audit steps adopted in light of material control deficiencies and the adequacy of
disclosures about changes in internal control over financial reporting; and (3) the effect
of regulatory and accounting initiatives, as well as off-balance sheet structures, on the
financial statements of the Company.
Discuss with management the Company's major risk exposures and the steps
management has taken to monitor and control such exposures including the Company's
risk assessment and risk management polictes.
Review disclosures made to the Audit Committee by the bank's QEO and CFO about
any significant deficiencies in the design or operations of internal controls or material
weaknLsses therein and any fraud involving management or other employees who have
a significant role in the bank's internal controls.
lnternal Control
.
Consider
the effectiveness of the company's internal control system, including
information technology security and control'
4
EastWest Bank
Audit Committee Charter
.
Understand the scope of internal and external auditors' review of internal control over
financial reporting, and obtain reports on significant findings and recpmmendation.
lnternal Audit
.
Review with Management and the Chief Audit Executive the charter, plans, activities,
staffing, and organizational structure of the internal audit function annually.
.
Ensure there are no unjustified restrictions or limitations in the performance of the
internal audit function.
.
Review the effectiveness of the internal audit function, including compliance with the
lnstitute of lnternal Auditors' Standards for the Professional Practice of lnternal Auditing.
.
On a regular basis, meet separately with the chief executive to discuss any matters that
the committee or internal audit believes should be discussed privately.
.
Review significant findings contained in reports prepared by the internal audit together
with management's response and follow-up for corrective action.
.
significant fraud or regulatory noncompliance that
occurred at the Bank considering internal controls that should be strengthened to reduce
the risk of a similar event in the future.
.
Separate Meetings with the lnternal Auditor. The committee will meet periodically with
the corporation's internal auditor to discuss the responsibilities, budget and staffing of
the corporation's internal audit function and any issues that the internal auditor believes
warrant audit committee attention. The committee will discuss with the internal auditor
any significant reports to management prepared by the internal auditor and any
responses from management.
.
Review and approve the appointment and replacement of the Chief Audit Executive
(CAE). The Audit Committee will have direct input into evaluations of the CAE's
performance as well as any decisions regarding CAE compensation.
Review
all reports concerning
ExternalAudit
.
Appoint a BSP-accredited external auditor for the purpose of preparing or issuing an
audit report or related work.
.
Review the independent auditors audit plan discuss scope, staffing, reliance upon
management and the internal audit department, general audit approach, and coverage
providLd to any significant areas of concern that the Committee may have.
.
Review and confirm the independence of the external auditors on relationships by
obtaining statements from the auditors on the relationships between the auditors and the
.orprn!, including non-audit services, and discussing the relationships with the
-
auditors.
5
EastWest Bank
Audit Committee Charter
.
Prior
to publishing the year-end earnings, discuss the results of the audit with the
independent auditors.
.
On an annual basis, the Committee should review and discuss with the independent
auditors all significant relationships they have with the Bank that could impair the
auditors' independence.
.
On a regular basis, meet separately with the external auditors to discuss any matters
that the committee or auditors believe should be discussed privately.
Compliance
.
Review the effectiveness of the system for monitoring compliance with laws and
regulations and the results of management's investigation and ) follow-up (including
disciplinary action) of any instances of noncompliance.
.
On at least an annual basis, review with the Bank's counsel, any legal/regulatory matters
that could have a significant impact on the Bank's financial statements, compliance with
applicable laws and regulations, and inquiries received from regulators or governmental
agencles.
.
Obtain an annual report from the general counsel regarding the adequacy of the
Company's compliance Program.
F. Reporting Responsibilities
.
Regularly report to the board of directors about committee activities, issues, and related
recommendations.
o
Provide an open avenue of communication between internal audit, the external auditors,
and the board of directors.
.
Report annually
.
Review any other reports the company issues that relate to committee responsibilities.
to the shareholders, describing the committee's
composition,
responsibilities and how they were discharged, and any other information required by
rule, including approval of non-audit services.
G. Other Responsibilities
.
.
.
Perform other activities related to this charter as requested by the board of directors.
.
Establish procedures
lnstitute and oversee special investigations as needed.
Maintain minutes of meetings and periodically report to the Board
significant results of the foregoing activities.
of Directors on
for the receipt, retention and treatment of complaints on
accounting, internal accounting controls or auditing matters, as well as for confidential,
o
EastWest Bank
Audit Committee Charter
anonymous submissions
by bank
employees concerns regarding questionable
accounting or auditing matters.
.
Review and assess the adequacy of the committee charter annually, requesting board
approval for proposed changes, and ensure appropriate disclosure as may be required
by law or regulation.
.
o
Confirm annually that all responsibilities outlined in this charter have been carried out.
Evaluate the committee's performance on
Assessment Template)
a
regular basis. (Attachment 1
-
Self-
H. Functiona! Support
The lnternal Audit of EastWest Bank shall ensure and provide functional support to the Audit
Committee in the rendition of its function.
Revised April 18,2013
Approved by:
The Audit Committee
Carlos R. Alindada
Jose S. Sandejas
Chairman
Member
Josephine G. Yap
Paul A. Aquino
Member
Member
ANNEX E – Audited Financial Statements
East West Banking Corporation and Subsidiaries
Financial Statements
December 31, 2014 and 2013
and Years Ended December 31, 2014, 2013 and 2012
and
Independent Auditors’ Report
COVER SHEET
for
AUDITED FINANCIAL STATEMENTS
SEC Registration Number
A S 0 9 4 - 0 0 2 7 3 3
Company Name
E A S T
A N D
W E S T
B A N K I N G
C O R P O R A T I O N
S U B S I D I A R I E S
Principal Office (No./Street/Barangay/City/Town/Province)
T h e
B e a u f o r t
c o r n e r
B o n i
C i
2 3 r d
f a c i o
,
5 t h
A v e n u e
S t r e e t
G l o b a l
,
C i
F o r t
t y
,
T a g u i g
t y
Form Type
Department requiring the report
Secondary License Type, If Applicable
A F S
COMPANY INFORMATION
Company’s Email Address
Company’s Telephone Number/s
Mobile Number
575-3888
No. of Stockholders
Annual Meeting
Month/Day
Fiscal Year
Month/Day
CONTACT PERSON INFORMATION
The designated contact person MUST be an Officer of the Corporation
Name of Contact Person
Email Address
Renato K. De Borja, Jr.
Telephone Number/s
Mobile Number
575-3887
Contact Person’s Address
Note: In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission
within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated.
*SGVFS010664*
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors
East West Banking Corporation
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of East West Banking
Corporation and Subsidiaries (the Group) and the parent company financial statements of East West
Banking Corporation (the Parent Company), which comprise the statements of financial position as at
December 31, 2014 and 2013, and the statements of income, statements of comprehensive income,
statements of changes in equity and statements of cash flows for each of the three years in the period
ended December 31, 2014, and a summary of significant accounting policies and other explanatory
information.
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, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
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 about 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 auditor’s 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 auditor considers 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 the accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
*SGVFS010664*
A member firm of Ernst & Young Global Limited
-2We 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
the Group and of the Parent Company as at December 31, 2014 and 2013, and their financial
performance and their cash flows for each of the three years in the period ended December 31, 2014,
in accordance with Philippine Financial Reporting Standards.
Report on the Supplementary Information Required Under Revenue Regulations 15-2010
Our audits were conducted for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplementary information required under Revenue Regulations 15-2010 in
Note 33 to the financial statements is presented for purposes of filing with the Bureau of Internal
Revenue and is not a required part of the basic financial statements. Such information is the
responsibility of the management of the Parent Company. The information has been subjected to the
auditing procedures applied in our audit of the basic financial statements. In our opinion, the
information is fairly stated in all material respects in relation to the basic financial statements taken as
whole.
SYCIP GORRES VELAYO & CO.
Josephine Adrienne A. Abarca
Partner
CPA Certificate No. 92126
SEC Accreditation No. 0466-AR-2 (Group A),
February 4, 2013, valid until February 3, 2016
Tax Identification No. 163-257-145
BIR Accreditation No. 08-001998-61-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 4751251, January 5, 2015, Makati City
February 26, 2015
*SGVFS010664*
A member firm of Ernst & Young Global Limited
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors
East West Banking Corporation
East West Corporate Center
The Beaufort
5th Avenue corner 23rd Street
Fort Bonifacio Global City
Taguig City
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of East West Banking
Corporation and Subsidiaries (the Group) and the parent company financial statements of East West
Banking Corporation (the Parent Company), which comprise the statements of financial position as at
December 31, 2014 and 2013, and the statements of income, statements of comprehensive income,
statements of changes in equity and statements of cash flows for each of the three years in the period
ended December 31, 2014, and a summary of significant accounting policies and other explanatory
information.
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, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
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 about 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 auditor’s 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 auditor considers 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 the accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
*SGVFS010664*
A member firm of Ernst & Young Global Limited
-2We 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
the Group and of the Parent Company as at December 31, 2014 and 2013, and their financial
performance and their cash flows for each of the three years in the period ended December 31, 2014,
in accordance with Philippine Financial Reporting Standards.
Report on the Supplementary Information Required Under Revenue Regulations 15-2010
Our audits were conducted for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplementary information required under Revenue Regulations 15-2010 in
Note 33 to the financial statements is presented for purposes of filing with the Bureau of Internal
Revenue and is not a required part of the basic financial statements. Such information is the
responsibility of the management of the Parent Company. The information has been subjected to the
auditing procedures applied in our audit of the basic financial statements. In our opinion, the
information is fairly stated in all material respects in relation to the basic financial statements taken as
whole.
SYCIP GORRES VELAYO & CO.
Josephine Adrienne A. Abarca
Partner
CPA Certificate No. 92126
SEC Accreditation No. 0466-AR-2 (Group A),
February 4, 2013, valid until February 3, 2016
Tax Identification No. 163-257-145
BIR Accreditation No. 08-001998-61-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 4751251, January 5, 2015, Makati City
February 26, 2015
*SGVFS010664*
A member firm of Ernst & Young Global Limited
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
TO ACCOMPANY INCOME TAX RETURN
The Stockholders and the Board of Directors
East West Banking Corporation
East West Corporate Center
The Beaufort
5th Avenue corner 23rd Street
Fort Bonifacio Global City
Taguig City
We have audited the financial statements of East West Banking Corporation (the Bank) as at and for
the year ended December 31, 2014, on which we have rendered the attached report dated
February 26, 2015.
In compliance with Revenue Regulations V-20, we are stating that no partner of our Firm is related by
consanguinity or affinity to the president, managers or principal stockholders of the Bank.
SYCIP GORRES VELAYO & CO.
Josephine Adrienne A. Abarca
Partner
CPA Certificate No. 92126
SEC Accreditation No. 0466-AR-2 (Group A),
February 4, 2013, valid until February 3, 2016
Tax Identification No. 163-257-145
BIR Accreditation No. 08-001998-61-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 4751251, January 5, 2015, Makati City
February 26, 2015
*SGVFS010664*
A member firm of Ernst & Young Global Limited
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
ON SUPPLEMENTARY SCHEDULES
The Stockholders and the Board of Directors
East West Banking Corporation
East West Corporate Center
The Beaufort
5th Avenue corner 23rd Street
Fort Bonifacio Global City
Taguig City
We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of East West Banking Corporation and Subsidiaries (the Group) and the parent
company financial statements of East West Banking Corporation (the Parent Company) as at
December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014,
included in the Form 17-A, and have issued our report thereon dated February 26, 2015. Our audits
were made for the purpose of forming an opinion on the basic financial statements taken as a whole.
The schedules listed in the Index to the Financial Statements and Supplementary Schedules are the
responsibility of the Parent Company’s management. These schedules are presented for purposes of
complying with Securities Regulation Code Rule 68, As Amended (2011) and are not part of the basic
financial statements. These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state, in all material respects, the
information required to be set forth therein in relation to the basic financial statements taken as a
whole.
SYCIP GORRES VELAYO & CO.
Josephine Adrienne A. Abarca
Partner
CPA Certificate No. 92126
SEC Accreditation No. 0466-AR-2 (Group A),
February 4, 2013, valid until February 3, 2016
Tax Identification No. 163-257-145
BIR Accreditation No. 08-001998-61-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 4751251, January 5, 2015, Makati City
February 26, 2015
*SGVFS010664*
A member firm of Ernst & Young Global Limited
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
ON SUPPLEMENTARY SCHEDULES
The Stockholders and the Board of Directors
East West Banking Corporation
East West Corporate Center
The Beaufort
5th Avenue corner 23rd Street
Fort Bonifacio Global City
Taguig City
We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of East West Banking Corporation and Subsidiaries (the Group) and the parent
company financial statements of East West Banking Corporation (the Parent Company) as at
December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014,
included in the Form 17-A, and have issued our report thereon dated February 26, 2015. Our audits
were made for the purpose of forming an opinion on the basic financial statements taken as a whole.
The accompanying schedule of all the effective standards and interpretations (Part 1, 4J) is the
responsibility of the Parent Company’s management. This schedule is presented for the purpose of
complying with Securities Regulation Code Rule 68, As Amended (2011) and is not part of the basic
financial statements. This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states, in all material respects, the
information required to be set forth therein in relation to the basic financial statements taken as a
whole.
SYCIP GORRES VELAYO & CO.
Josephine Adrienne A. Abarca
Partner
CPA Certificate No. 92126
SEC Accreditation No. 0466-AR-2 (Group A),
February 4, 2013, valid until February 3, 2016
Tax Identification No. 163-257-145
BIR Accreditation No. 08-001998-61-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 4751251, January 5, 2015, Makati City
February 26, 2015
*SGVFS010664*
A member firm of Ernst & Young Global Limited
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
ON SUPPLEMENTARY SCHEDULES
The Stockholders and the Board of Directors
East West Banking Corporation
East West Corporate Center
The Beaufort
5th Avenue corner 23rd Street
Fort Bonifacio Global City
Taguig City
We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of East West Banking Corporation and Subsidiaries (the Group) and the parent
company financial statements of East West Banking Corporation (the Parent Company) as at
December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014,
included in the Form 17-A, and have issued our report thereon dated February 26, 2015. Our audits
were made for the purpose of forming an opinion on the basic financial statements taken as a whole.
The accompanying map of the relationships of the companies within the group (Part 1, 4H) is the
responsibility of the Parent Company’s management. These schedules are presented for the purpose
of complying with Securities Regulation Code Rule 68, As Amended (2011) and are not part of the
basic financial statements. These schedules have been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, fairly states, in all material respects, the
information required to be set forth therein in relation to the basic financial statements taken as a
whole.
SYCIP GORRES VELAYO & CO.
Josephine Adrienne A. Abarca
Partner
CPA Certificate No. 92126
SEC Accreditation No. 0466-AR-2 (Group A),
February 4, 2013, valid until February 3, 2016
Tax Identification No. 163-257-145
BIR Accreditation No. 08-001998-61-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 4751251, January 5, 2015, Makati City
February 26, 2015
*SGVFS010664*
A member firm of Ernst & Young Global Limited
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
ON SUPPLEMENTARY SCHEDULES
The Stockholders and the Board of Directors
East West Banking Corporation
East West Corporate Center
The Beaufort
5th Avenue corner 23rd Street
Fort Bonifacio Global City
Taguig City
We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of East West Banking Corporation and Subsidiaries (the Group) and the parent
company financial statements of East West Banking Corporation (the Parent Company) as at
December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014,
included in the Form 17-A, and have issued our report thereon dated February 26, 2015. Our audits
were made for the purpose of forming an opinion on the basic financial statements taken as a whole.
The accompanying supplementary schedules required by Annex 68-E is the responsibility of the
Parent Company’s management. This schedule is presented for the purpose of complying with
Securities Regulation Code Rule 68, As Amended (2011) and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly states, in all material respects, the information
required to be set forth therein in relation to the basic financial statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Josephine Adrienne A. Abarca
Partner
CPA Certificate No. 92126
SEC Accreditation No. 0466-AR-2 (Group A),
February 4, 2013, valid until February 3, 2016
Tax Identification No. 163-257-145
BIR Accreditation No. 08-001998-61-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 4751251, January 5, 2015, Makati City
February 26, 2015
*SGVFS010664*
A member firm of Ernst & Young Global Limited
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
ON SUPPLEMENTARY SCHEDULES
The Stockholders and the Board of Directors
East West Banking Corporation
East West Corporate Center
The Beaufort
5th Avenue corner 23rd Street
Fort Bonifacio Global City
Taguig City
We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of East West Banking Corporation and Subsidiaries (the Group) and the parent
company financial statements of East West Banking Corporation (the Parent Company) as at
December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014,
included in the Form 17-A, and have issued our report thereon dated February 26, 2015. Our audits
were made for the purpose of forming an opinion on the basic financial statements taken as a whole.
The accompanying Reconciliation of Retained Earnings Available for Dividend Declaration
(Part 1, 4C; Annex 68-C) is the responsibility of the Parent Company’s management. This schedule is
presented for the purpose of complying with Securities Regulation Code Rule 68, As Amended (2011)
and is not part of the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion, fairly states, in all
material respects, the information required to be set forth therein in relation to the basic financial
statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Josephine Adrienne A. Abarca
Partner
CPA Certificate No. 92126
SEC Accreditation No. 0466-AR-2 (Group A),
February 4, 2013, valid until February 3, 2016
Tax Identification No. 163-257-145
BIR Accreditation No. 08-001998-61-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 4751251, January 5, 2015, Makati City
February 26, 2015
*SGVFS010664*
A member firm of Ernst & Young Global Limited
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors
East West Banking Corporation
East West Corporate Center
The Beaufort
5th Avenue corner 23rd Street
Fort Bonifacio Global City
Taguig City
We have audited the accompanying consolidated financial statements of East West Banking
Corporation and Subsidiaries (the Company) as of and for the year ended December 31, 2014, on
which we have rendered the attached report dated February 26, 2015.
In compliance with Securities Regulation Code Rule No. 68 as amended (2011), we are stating that the
above Company has eighty one (81) stockholders owning ten (10) or more shares each.
SYCIP GORRES VELAYO & CO.
Josephine Adrienne A. Abarca
Partner
CPA Certificate No. 92126
SEC Accreditation No. 0466-AR-2 (Group A),
February 4, 2013, valid until February 3, 2016
Tax Identification No. 163-257-145
BIR Accreditation No. 08-001998-61-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 4751251, January 5, 2015, Makati City
February 26, 2015
*SGVFS010664*
A member firm of Ernst & Young Global Limited
EAST WEST BANKING CORPORATION AND SUBSIDIARIES
STATEMENTS OF FINANCIAL POSITION
Consolidated
2014
ASSETS
Cash and Other Cash Items (Note 15)
Due from Bangko Sentral ng Pilipinas
(Notes 14 and 15)
Due from Other Banks
Interbank Loans Receivable
Financial Assets at Fair Value Through Profit or
Loss (Note 8)
Financial Assets at Fair Value Through Other
Comprehensive Income (Note 8)
Investment Securities at Amortized Cost (Note 8)
Loans and Receivables (Notes 9, 14 and 26)
Investments in Subsidiaries (Note 1)
Property and Equipment (Notes 10 and 14)
Investment Properties (Notes 11 and 14)
Deferred Tax Assets (Note 23)
Goodwill and Other Intangible Assets
(Notes 7 and 12)
Other Assets (Notes 13 and 14)
TOTAL ASSETS
Parent Company
December 31
2013
2014
(Amounts in Thousands)
2013
P
=5,993,499
P
=3,884,538
P
=5,912,309
P
=3,811,185
23,128,678
3,580,528
2,893,384
18,537,655
1,751,824
3,116,529
22,970,798
3,493,976
2,893,384
18,404,125
1,604,404
3,116,529
10,182,690
1,948,703
10,182,690
1,948,703
14,419
8,794,878
121,423,411
−
3,513,104
912,687
977,426
10,733
9,080,320
93,960,575
−
3,452,741
1,006,716
995,125
14,419
8,794,878
116,400,687
521,000
3,351,442
911,987
952,751
10,733
9,079,907
91,329,469
1,409,449
3,320,631
811,423
1,176,342
4,424,773
2,423,106
P
=188,262,583
3,655,735
897,499
P
=142,298,693
4,350,242
2,406,012
P
=183,156,575
2,627,030
878,308
P
=139,528,238
P
=45,356,947
25,269,000
69,027,909
8,033,623
147,687,479
5,317,652
P
=39,568,923
24,865,438
41,275,731
5,466,003
111,176,095
3,288,935
P
=45,473,939
24,632,542
65,029,612
8,033,623
143,169,716
5,317,652
P
=39,651,700
22,338,254
41,275,731
5,466,003
108,731,688
3,288,940
1,341,275
1,256,982
6,463,731
184,577
4,563,080
166,814,776
1,038,175
866,457
2,862,500
76,935
3,597,377
122,906,474
1,269,453
1,256,982
6,463,731
127,952
4,528,463
162,133,949
1,011,611
866,457
2,750,000
52,208
3,473,640
120,174,544
11,284,096
978,721
43,906
9,158,976
11,284,096
978,721
41,869
7,087,635
11,284,096
978,721
43,906
8,733,639
11,284,096
978,721
41,869
7,055,732
5,722
1,925
5,722
1,925
LIABILITIES AND EQUITY
LIABILITIES
Deposit Liabilities (Notes 15 and 26)
Demand
Savings
Time
Long-term negotiable certificates of deposits
Bills and Acceptances Payable (Note 16)
Accrued Taxes, Interest and Other Expenses
(Note 17)
Cashier’s Checks and Demand Draft Payable
Subordinated Debt (Note 18)
Income Tax Payable
Other Liabilities (Note 19)
TOTAL LIABILITIES
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT COMPANY
Common Stock (Note 21)
Additional Paid in Capital (Note 21)
Surplus Reserves (Note 27)
Surplus (Note 27)
Net Unrealized Gain on Financial Assets at
Fair Value Through Other Comprehensive
Income (Note 8)
(Forward)
*SGVFS010664*
-2Consolidated
2014
Remeasurement Losses on Retirement Plans
Cumulative Translation Adjustment
NON-CONTROLLING INTEREST
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
(P
= 31,394)
7,780
21,447,807
−
21,447,807
P
=188,262,583
Parent Company
December 31
2013
2013
2014
(Amounts in Thousands)
(P
=13,877)
(P
=13,877)
(P
= 31,238)
5,228
5,228
7,780
19,385,597
19,353,694
21,022,626
6,622
−
−
19,392,219
19,353,694
21,022,626
P
=142,298,693
P
=139,528,238
P
=183,156,575
See accompanying Notes to Financial Statements.
*SGVFS010664*
EAST WEST BANKING CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME
Consolidated
2014
INTEREST INCOME
Loans and receivables (Notes 9 and 26)
Trading and investment securities (Note 8)
Due from other banks and interbank loans
receivable
INTEREST EXPENSE
Deposit liabilities (Note 15)
Subordinated debt, bills payable and other
borrowings (Notes 16 and 18)
Parent Company
Years Ended December 31
2013
2012
2014
2013
(Amounts in Thousands)
P
=11,050,262
561,606
P
=9,160,880
533,366
P
=6,835,521 P
=10,550,724
842,262
561,606
55,184
11,667,052
161,725
9,855,971
137,833
7,815,616
1,327,478
1,171,564
313,689
1,641,167
10,025,885
2012
P
=8,761,129
533,359
P
=6,688,256
842,261
54,362
11,166,692
153,039
9,447,527
136,996
7,667,513
1,424,556
1,259,377
1,044,019
1,393,282
291,811
1,463,375
8,392,596
303,237
1,727,793
6,087,823
313,689
1,573,066
9,593,626
280,017
1,324,036
8,123,491
294,689
1,687,971
5,979,542
3,297,839
499,525
193,517
2,528,470
1,005,237
121,236
1,860,223
988,110
223,193
2,669,714
499,525
193,516
2,204,867
1,005,237
121,236
1,737,154
988,110
223,193
19,417
93,784
42,412
19,047
90,551
29,853
305,997
20,372
301,763
222,031
14,886,346
572,490
29,017
15,161
406,927
13,164,918
276,883
27,842
4,904
272,237
9,783,627
305,997
20,372
300,890
214,860
13,817,547
572,490
29,017
8,217
401,032
12,556,138
276,883
27,842
(4,284)
228,118
9,486,411
3,007,855
2,716,119
1,983,616
2,845,964
2,592,816
1,883,482
3,311,349
974,893
3,097,641
865,315
1,530,795
722,607
3,255,426
885,651
2,975,701
795,968
1,507,833
682,997
NET INTEREST INCOME
Service charges, fees and commissions
(Note 22)
Trading and securities gain (Note 8)
Foreign exchange gain
Gain on asset foreclosure and dacion
transactions
Gain on sale of investment securities at
amortized cost (Note 8)
Trust income (Note 27)
Gain (loss) on sale of assets (Note 10)
Miscellaneous (Note 22)
TOTAL OPERATING INCOME
OPERATING EXPENSES
Compensation and fringe benefits
(Notes 24 and 26)
Provision for impairment and credit losses
(Notes 9, 10, 11, 13 and 14)
Taxes and licenses
Depreciation and amortization
(Notes 10, 11 and 13)
Rent (Note 25)
Amortization of intangible assets (Note 12)
Miscellaneous (Note 22)
TOTAL OPERATING EXPENSES
INCOME BEFORE INCOME TAX
PROVISION FOR INCOME TAX
(Note 23)
NET INCOME
670,291
629,291
191,681
3,463,563
12,248,923
2,637,423
575,615
542,474
142,031
2,951,332
10,890,527
2,274,391
431,072
410,178
129,975
2,583,001
7,791,244
1,992,383
647,554
607,007
182,388
3,330,593
11,754,583
2,062,964
542,051
518,232
138,301
2,818,539
10,381,608
2,174,530
393,017
386,662
125,658
2,473,200
7,452,849
2,033,562
564,045
P
=2,073,378
218,656
P
=2,055,735
176,002
P
=1,816,381
396,414
P
=1,666,550
183,539
P
=1,990,991
188,015
P
=1,845,547
ATTRIBUTABLE TO:
Equity holders of the Parent Company
Non-controlling interest
NET INCOME
P
=2,073,378
−
P
=2,073,378
P
=2,055,570
165
P
=2,055,735
P
=1,817,409
(1,028)
P
=1,816,381
Basic Earnings Per Share Attributable to
Equity Holders of the Parent
Company (Note 29)
Diluted Earnings Per Share Attributable
to Equity Holders of the Parent
Company (Note 29)
P
=1.84
P
=1.82
P
=1.85
P
=1.84
P
=1.82
P
=1.76
See accompanying Notes to Financial Statements.
*SGVFS010664*
EAST WEST BANKING CORPORATION AND SUBSIDIARIES
STATEMENTS OF COMPREHENSIVE INCOME
Consolidated
2014
NET INCOME FOR THE YEAR
P
=2,073,378
OTHER COMPREHENSIVE INCOME
(LOSS) FOR THE YEAR,
NET OF TAX
Items that will not be reclassified to profit
or loss in subsequent periods:
Change in remeasurement gain (loss)
of retirement liability (Note 24)
Change in net unrealized gains on
financial assets at fair value
through other comprehensive
income (Note 8)
Items that may be reclassified to profit or
loss in subsequent periods:
Cumulative translation adjustment
TOTAL OTHER COMPREHENSIVE
INCOME (LOSS)
Parent Company
Years Ended December 31
2013
2012
2014
2013
(Amounts in Thousands)
P
=2,055,735
(17,517)
370
3,797
751
2,552
21,579
(11,168)
22,700
P
=1,816,381
(31,241)
P
=1,666,550
P
=1,990,991
2012
P
=1,845,547
(17,361)
370
3,797
751
(8,652)
2,552
21,579
(8,652)
(39,018)
(11,012)
22,700
(39,018)
875
TOTAL COMPREHENSIVE INCOME,
NET OF TAX
P
=2,062,210
P
=2,078,435
P
=1,777,363
ATTRIBUTABLE TO:
Equity holders of the Parent Company
Non-controlling interest
TOTAL COMPREHENSIVE INCOME
P
=2,062,210
−
P
=2,062,210
P
=2,078,270
165
P
=2,078,435
P
=1,778,391
(1,028)
P
=1,777,363
P
=1,655,538
P
=2,013,691
(31,241)
875
P
=1,806,529
See accompanying Notes to Financial Statements.
*SGVFS010664*
EAST WEST BANKING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CHANGES IN EQUITY
Common
Stock
Balances at January 1, 2014
Net income
Other comprehensive income
Total comprehensive income
Transfer to surplus reserves (Note 27)
Acquisition of non-controlling interest (Note 1)
Balances at December 31, 2014
=
P11,284,096
−
−
−
−
−
= 11,284,096
P
Common
Stock
Balances at January 1, 2013
Net income
Other comprehensive income
Total comprehensive income
Transfer to surplus reserves (Note 27)
Acquisition of non-controlling interests (Note 1)
Balances at December 31, 2013
P
=11,284,096
−
−
−
−
−
P
=11,284,096
Consolidated
Year Ended December 31, 2014
Equity Attributable to Equity Holders of the Parent Company
Net Unrealized
Gain on
Financial Assets
at Fair Value Remeasurement
Through Other
Losses on
Additional
Comprehensive
Retirement
Paid in
Surplus
Plan
Capital
Reserves
Surplus
Income
(Amounts in Thousands)
=
P978,721
−
−
−
−
−
= 978,721
P
=
P41,869
−
−
−
2,037
−
= 43,906
P
=
P7,087,635
2,073,378
−
2,073,378
(2,037)
−
= 9,158,976
P
=
P1,925
−
3,797
3,797
−
−
= 5,722
P
(P
= 13,877)
−
(17,517)
(17,517)
−
−
(P
= 31,394)
Consolidated
Year Ended December 31, 2013
Equity Attributable to Equity Holders of the Parent Company
Net Unrealized
Gain on
Financial Assets
at Fair Value Remeasurement
Additional
Through Other
Losses on
Paid in
Surplus
Comprehensive
Retirement
Capital
Reserves
Surplus
Plan
Income
(Amounts in Thousands)
P
=978,721
−
−
−
−
−
P
=978,721
P
=38,967
−
−
−
2,902
−
P
=41,869
P
=5,034,967
2,055,570
−
2,055,570
(2,902)
−
=
P7,087,635
P
=1,174
−
751
751
−
−
P
=1,925
(P
= 14,247)
−
370
370
−
−
(P
= 13,877)
Cumulative
Translation
Adjustment
=
P5,228
−
2,552
2,552
−
−
= 7,780
P
Cumulative
Translation
Adjustment
(P
= 16,351)
−
21,579
21,579
−
−
P
=5,228
Total
=
P19,385,597
2,073,378
(11,168)
2,062,210
−
−
= 21,447,807
P
Total
P
=17,307,327
2,055,570
22,700
2,078,270
−
−
P
=19,385,597
NonControlling
Interest
=
P6,622
−
−
−
−
(6,622)
=−
P
NonControlling
Interest
P
=13,553
165
−
165
−
(7,096)
P
=6,622
Total
Equity
=
P19,392,219
2,073,378
(11,168)
2,062,210
−
(6,622)
= 21,447,807
P
Total
Equity
P
=17,320,880
2,055,735
22,700
2,078,435
−
(7,096)
P
=19,392,219
*SGVFS010664*
-2-
Balances at January 1, 2012
Net income
Other comprehensive income (loss)
Total comprehensive income (loss)
Conversion of preferred stock
to common stock (Note 21)
Issuance of common stock (Note 21)
Dividends paid (Note 21)
Transfer to surplus reserves (Note 27)
Acquisition of non-controlling interests (Note 1)
Acquisition of a subsidiary (Note 7)
Balances at December 31, 2012
Common
Stock
Additional
Paid in
Capital
P
=3,873,528
−
−
−
=
P−
−
−
−
3,000,000
4,410,568
−
−
−
−
P
=11,284,096
−
978,721
−
−
−
−
P
=978,721
Balances at January 1, 2014
Net income
Other comprehensive income
Total comprehensive income
Excess of the merged net assets over investment in subsidiary (Note 7)
Transfer to surplus reserves (Note 27)
Balances at December 31, 2014
Consolidated
Year Ended December 31, 2012
Equity Attributable to Equity Holders of the Parent Company
Net Unrealized
Gain on
Financial Assets
at Fair Value Remeasurement
Through Other
Losses on
Preferred
Surplus
Comprehensive
Retirement
Stock
Reserves
Surplus
Plan
Income
(Amounts in Thousands)
P
=3,000,000
P
=36,183
P
=4,287,842
P
=299
P
=16,994
−
−
1,817,409
−
−
−
−
−
875
(31,241)
−
−
1,817,409
875
(31,241)
(3,000,000)
−
−
−
−
−
=
P−
−
−
−
2,784
−
−
P
=38,967
Common
Stock
Additional
Paid in
Capital
= 11,284,096
P
−
−
−
−
−
= 11,284,096
P
= 978,721
P
−
−
−
−
−
= 978,721
P
−
−
(1,067,500)
(2,784)
−
−
P
=5,034,967
−
−
−
−
−
−
P
=1,174
−
−
−
−
−
−
(P
= 14,247)
Cumulative
Translation
Adjustment
Total
NonControlling
Interest
Total
Equity
(P
= 7,699)
−
(8,652)
(8,652)
P
=11,207,147
1,817,409
(39,018)
1,778,391
P
=16,452
(1,028)
−
(1,028)
P
=11,223,599
1,816,381
(39,018)
1,777,363
−
−
−
−
−
−
(P
= 16,351)
−
5,389,289
(1,067,500)
−
−
−
P
=17,307,327
−
−
−
−
(8,773)
6,902
P
=13,553
−
5,389,289
(1,067,500)
−
(8,773)
6,902
P
=17,320,880
Parent Company
Year Ended December 31, 2014
Net Unrealized
Gain on
Financial
Assets at
Fair Value
Through Other
Comprehensive
Surplus
Income
Reserves
Surplus
(Amounts in Thousands)
= 41,869
P
= 7,055,732
P
= 1,925
P
−
1,666,550
−
−
−
3,797
−
1,666,550
3,797
−
13,394
−
2,037
(2,037)
−
= 43,906
P
= 8,733,639
P
= 5,722
P
Remeasurement
Losses on
Retirement
Plan
(P
= 13,877)
−
(17,361)
(17,361)
−
−
(P
= 31,238)
Cumulative
Translation
Adjustment
= 5,228
P
−
2,552
2,552
−
−
= 7,780
P
Total
Equity
= 19,353,694
P
1,666,550
(11,012)
1,655,538
13,394
−
= 21,022,626
P
*SGVFS010664*
-3-
Balances at January 1, 2013
Net income
Other comprehensive income
Total comprehensive income
Transfer to surplus reserves (Note 27)
Balances at December 31, 2013
Balances at January 1, 2012
Net income, as restated
Other comprehensive income (loss)
Total comprehensive income (loss)
Conversion of preferred stock to common stock (Note 21)
Issuance of common stock (Note 21)
Transfer to surplus reserves (Note 27)
Dividends paid (Note 2)
Balances at December 31, 2012
Common
Stock
Additional
Paid in
Capital
P
=11,284,096
−
−
−
−
P
=11,284,096
P
=978,721
−
−
−
−
P
=978,721
Common
Stock
Additional
Paid in
Capital
Preferred
Stock
P
=3,873,528
−
−
−
3,000,000
4,410,568
−
−
P
=11,284,096
=
P−
−
−
−
−
978,721
−
−
P
=978,721
P
=3,000,000
−
−
−
(3,000,000)
−
−
−
=
P−
Parent Company
Year Ended December 31, 2013
Net Unrealized
Gain on
Financial
Assets at
Fair Value
Through Other
Surplus
Comprehensive
Reserves
Surplus
Income
(Amounts in Thousands)
P
=38,967
P
=5,067,643
P
=1,174
−
1,990,991
−
−
−
751
−
1,990,991
751
2,902
(2,902)
−
P
=41,869
P
=7,055,732
P
=1,925
Parent Company
Year Ended December 31, 2012
Net Unrealized
Gain on
Financial
Assets at
Fair Value
Through Other
Surplus
Comprehensive
Income
Reserves
Surplus
(Amounts in Thousands)
P
=36,183
P
=4,292,380
P
=299
−
1,845,547
−
−
−
875
−
1,845,547
875
−
−
−
−
−
−
2,784
(2,784)
−
−
(1,067,500)
−
P
=38,967
P
=5,067,643
P
=1,174
Remeasurement
Losses on
Retirement
Plan
(P
= 14,247)
−
370
370
−
(P
= 13,877)
Remeasurement
Losses on
Retirement
Plan
P
=16,994
−
(31,241)
(31,241)
−
−
−
−
(P
= 14,247)
Cumulative
Translation
Adjustment
(P
= 16,351)
−
21,579
21,579
−
P
=5,228
Cumulative
Translation
Adjustment
(P
= 7,699)
−
(8,652)
(8,652)
−
−
−
−
(P
= 16,351)
Total
Equity
P
=17,340,003
1,990,991
22,700
2,013,691
−
P
=19,353,694
Total
Equity
P
=11,211,685
1,845,547
(39,018)
1,806,529
−
5,389,289
−
(1,067,500)
P
=17,340,003
See accompanying Notes to Financial Statements.
*SGVFS010664*
EAST WEST BANKING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Consolidated
CASH FLOWS FROM OPERATING
ACTIVITIES
Income before income tax
Adjustments for:
Provision for impairment and credit losses
(Note 14)
Depreciation and amortization
(Notes 10, 11 and 13)
Gain on asset foreclosure and dacion
transactions (Note 31)
Amortization of intangible assets (Note 12)
Gain on sale of investment securities at
amortized cost (Note 8)
Loss (gain) on sale of assets (Note 10)
Changes in operating assets and liabilities:
Decrease (increase) in the amounts of:
Financial assets at fair value through
profit or loss
Loans and receivables
Other assets
Increase (decrease) in the amounts of:
Deposit liabilities
Accrued taxes, interest and other
expenses
Cashier’s checks and demand draft
payable
Other liabilities
Net cash generated from (used in) operations
Income taxes paid
Net cash provided by (used in) operating
activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of:
Investment securities at amortized cost
(Note 8)
Investment properties and other
repossessed assets (Notes 11 and 13)
Property and equipment (Note 10)
Proceeds from maturity of investment
securities at amortized cost
Acquisitions of:
Investment securities at amortized cost
Property and equipment (Note 10)
Branch licenses (Note 12)
Capitalized software (Note 12)
Additional investments in subsidiaries,
including deposit for future stock
subscription (Notes 1 and 9)
Acquisition of a subsidiary, net of cash
acquired (Note 7)
Merged cash from GBI (Note 7)
Net cash used in investing activities
Parent Company
Years Ended December 31
2012
2014
(Amounts in Thousands)
2014
2013
2013
2012
P
= 2,637,423
P
=2,274,391
P
=1,992,383
P
= 2,062,964
P
=2,174,530
P
=2,033,562
3,311,349
3,097,641
1,530,795
3,255,426
2,975,701
1,507,833
670,291
575,615
431,072
647,554
542,051
393,017
(19,417)
191,681
(93,784)
142,031
(42,412)
129,975
(19,047)
182,388
(90,551)
138,301
(29,853)
125,658
(305,997)
(301,763)
(572,490)
(15,161)
(276,883)
(4,904)
(305,997)
(300,890)
(572,490)
(8,217)
(276,883)
4,284
(8,233,987)
(30,787,731)
(1,525,820)
2,311,622
(26,352,284)
55,444
4,637,440
(24,939,561)
(279,269)
(8,233,987)
(28,198,525)
(1,525,456)
2,311,622
(26,023,078)
50,280
4,637,440
(23,090,111)
(284,698)
36,511,384
19,967,290
14,529,375
34,438,028
20,213,066
12,928,919
303,100
82,640
202,922
225,375
231,628
46,730
261,829
865,775
(961,463)
(168,349)
390,525
1,032,510
3,650,868
(277,259)
152,059
766,593
2,861,495
(189,421)
261,829
1,031,835
(710,438)
(167,475)
(877,913)
390,525
943,342
3,784,380
(431,198)
152,059
879,013
2,504,027
(191,980)
3,353,182
2,312,047
(1,129,812)
3,373,609
2,672,074
3,927,754
1,718,088
1,564,795
3,927,754
1,718,088
1,564,795
474,788
29,742
419,428
40,226
297,321
107,507
468,559
27,966
288,095
415
285,412
8,909
46,553
101,485
363,302
46,553
101,485
363,302
(3,383,280)
(805,803)
(505,196)
(455,523)
−
−
−
(670,965)
(706,894)
(1,216,121)
(214,800)
(183,115)
−
−
−
(41,703)
(2,322,322)
(1,221,624)
(822,000)
(248,169)
−
(19,700)
−
(2,300,890)
(3,383,280)
(729,746)
(505,196)
(401,008)
−
−
7,269
(541,129)
(706,894)
(1,188,606)
(214,800)
(179,989)
(2,322,322)
(1,153,716)
(822,000)
(246,688)
(348,377)
(168,426)
−
−
(530,583)
(34,098)
−
(2,524,832)
(Forward)
*SGVFS010664*
-2Parent Company
Consolidated
2014
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from bills and acceptances payable
Payments of bills and acceptances payable
Issuance of unsecured subordinated debt, net
of issuance cost (Note 18)
Acquisition of non-controlling interest
(Note 1)
Payment of subordinated debt
Issuance of common stock, net of direct cost
related to issuance (Note 21)
Payments of dividends (Note 21)
Net cash provided by (used in) financing
activities
P
= 209,111,418
(207,082,701)
4,963,731
(6,622)
(1,362,500)
−
−
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
Cash and other cash items
Due from Bangko Sentral ng Pilipinas
Due from other banks
Interbank loans receivable
CASH AND CASH EQUIVALENTS AT
END OF YEAR
Cash and other cash items
Due from Bangko Sentral ng Pilipinas
Due from other banks
Interbank loans receivable
NET OPERATIONAL CASH FLOWS
FROM INTEREST AND DIVIDENDS
Interest received
Interest paid
Dividend received
2013
Years Ended December 31
2012
2014
(Amounts in Thousands)
P
=2,847,172 P
=18,317,295 P
= 207,333,218
(5,129,624) (14,909,096) (205,432,706)
−
(7,096)
(1,251)
−
−
−
(8,773)
−
5,389,289
(1,067,500)
2013
2012
P
=2,847,177 P
=18,317,295
(5,129,624) (14,906,730)
4,963,731
−
−
−
(1,362,500)
–
−
−
−
−
−
−
−
5,389,289
(1,067,500)
5,623,326
(2,290,799)
7,721,215
5,501,743
(2,282,447)
7,732,354
8,305,543
(20,455)
4,290,513
8,334,224
(140,956)
4,329,609
3,884,538
18,537,655
1,751,824
3,116,529
27,290,546
3,235,161
21,855,275
1,637,917
582,648
27,311,001
2,243,104
11,315,202
1,739,088
7,723,094
23,020,488
3,811,185
18,404,125
1,604,404
3,116,529
26,936,243
3,180,497
21,789,239
1,524,815
582,648
27,077,199
2,190,159
11,306,441
1,527,896
7,723,094
22,747,590
5,993,499
23,128,678
3,580,528
2,893,384
P
= 35,596,089
3,884,538
18,537,655
1,751,824
3,116,529
P
=27,290,546
3,235,161
21,855,275
1,637,917
582,648
P
=27,311,001
5,912,309
22,970,798
3,493,976
2,893,384
P
= 35,270,467
3,811,185
18,404,125
1,604,404
3,116,529
P
=26,936,243
3,180,497
21,789,239
1,524,815
582,648
P
=27,077,199
P
= 11,253,183
1,516,473
25,527
P
=9,788,379
1,488,540
69,237
P
=7,771,785
1,857,219
975
P
= 10,726,087
1,447,607
25,527
P
=9,356,900
1,343,580
69,237
P
=7,702,386
1,747,772
975
See accompanying Notes to Financial Statements.
*SGVFS010664*
EAST WEST BANKING CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. Corporate Information
East West Banking Corporation (the Parent Company) was granted authority by the Bangko
Sentral ng Pilipinas (BSP) to operate as a commercial bank under Monetary Board (MB)
Resolution No. 101 dated July 6, 1994, and commenced operations on July 8, 1994. The Parent
Company was also granted authority by the BSP to operate an expanded foreign currency deposit
unit under MB Resolution No. 832 dated August 31, 1994. On July 31, 2012, the Parent Company
received the approval of the BSP to operate as a universal bank. As of December 31, 2014, the
Parent Company is effectively 75.01% owned by Filinvest Development Corporation (FDC). The
Parent Company’s ultimate parent company is A.L. Gotianun, Inc. The Parent Company’s head
office is located at East West Corporate Center, The Beaufort, 5th Avenue corner 23rd Street, Fort
Bonifacio Global City, Taguig City.
The Parent Company is a domestic corporation registered with the Securities and Exchange
Commission (SEC) on March 22, 1994. In 2012, the Parent Company conducted an initial public
offering (IPO) of its 283,113,600 common shares. The Parent Company’s common shares were
listed and commenced trading in the Philippine Stock Exchange (PSE) on May 7, 2012
(see Note 21).
Through its network of 358 and 300 branches as of December 31, 2014 and 2013, respectively, the
Parent Company provides a wide range of financial services to consumer and corporate clients.
The Parent Company’s principal banking products and services include deposit-taking, loan and
trade finance, treasury, trust services, credit cards, cash management and custodial services.
On March 19, 2009, the Parent Company effectively obtained control of the following entities:
a) AIG Philam Savings Bank (AIGPASB)
b) PhilAm Auto Finance and Leasing, Inc. (PAFLI)
c) PFL Holdings, Inc. (PFLHI)
On March 31, 2009, AIGPASB, PAFLI and PFLHI were merged to the Parent Company.
On August 19, 2011, the Parent Company acquired 84.78% of the voting shares of Green Bank
(A Rural Bank), Inc. (GBI) for =
P158.55 million. GBI is engaged in the business of extending
credit to small farmers and tenants and to deserving rural industries or enterprises and to transact
all businesses which may be legally done by rural banks. In 2012, the Parent Company acquired
additional shares from the non-controlling shareholder amounting to P
=8.77 million and from
GBI’s unissued capital stock amounting to =
P19.65 million, thereby increasing its ownership to
96.53% as of December 31, 2012. In 2013, the Parent Company’s deposit for future stock
subscription to GBI amounting to P
=700.00 million was applied to the 441,000,000 common shares
issued by GBI to the Parent Company. In addition, the Parent Company contributed additional
capital amounting to =
P1.28 million and acquired non-controlling interest amounting to
P
=0.20 million, thereby increasing its ownership to 99.84% as of December 31, 2013. The Parent
Company’s investment in GBI amounted to =
P888.45 million as of December 31, 2013. In 2014,
the Parent Company completed its planned merger with GBI. Prior to the merger, the Parent
Company acquired the remaining non-controlling interest of GBI. The Parent Company’s
investment in GBI was closed against the merged assets and liabilities as of the date of merger
(see Note 7).
*SGVFS010664*
-2On July 11, 2012, the Parent Company acquired 83.17% voting shares of FinMan Rural Bank, Inc.
(FRBI) for P
=34.10 million. FRBI’s primary purpose is to accumulate deposit and grant loans to
various individuals and small-scale corporate entities as well as government and private
employees (see Note 7). In 2012, the Parent Company acquired additional shares of FRBI from its
unissued capital stock amounting to =
P20.00 million, thereby increasing its ownership to 91.58% as
of December 31, 2012. On May 21, 2013, FRBI changed its name to East West Rural Bank, Inc.
(EWRB). In 2013, the Parent Company’s deposit for future stock subscription to EWRB
amounting to P
=120.00 million was applied to the 46,000,000 common shares issued by EWRB to
the Parent Company. In addition, the Parent Company contributed additional capital amounting to
P
=340.00 million and acquired the remaining non-controlling interest amounting to =
P6.90 million,
thereby increasing its ownership to 100.00% as of December 31, 2013. The Parent Company’s
investment in EWRB amounted to P
=521.00 million as of December 31, 2014 and 2013,
respectively.
GBI and EWRB (the Subsidiaries) were consolidated with the Parent Company on
August 19, 2011 and July 11, 2012, respectively, the dates on which control was transferred to the
Parent Company.
In May 2013, GBI and EWRB entered into an asset purchase agreement with assumption of
liabilities (the Purchase and Assumption Agreement) for the transfer of certain assets and
liabilities of GBI to EWRB. The transfer of the assets and liabilities took effect on
October 31, 2013 after the receipt of the required approvals from the regulators. The transfer of
the assets and liabilities of GBI to EWRB was part of the Parent Company’s plan to combine the
rural banking business of its two subsidiaries into a single entity. After the transfer, EWRB will
continue the rural banking business of GBI and the remaining assets and liabilities of GBI will be
merged to the Parent Company, with the latter as the surviving entity. On July 31, 2014, GBI was
merged to the Parent Company (see Note 7). The merger of the Parent Company and GBI will
enable the Parent Company to achieve branding leverage and economy in management and
operations. With the merger, EWRB becomes the only subsidiary of the Parent Company as of
December 31, 2014.
The accompanying financial statements of the Group and of the Parent Company were approved
and authorized for issue by the Parent Company’s Board of Directors (the Board or BOD) on
February 26, 2015.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements include the consolidated financial statements of the
Parent Company and its Subsidiaries (collectively referred to herein as the Group) as of
December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012, and of
the Parent Company as of December 31, 2014 and 2013 and for the years ended
December 31, 2014, 2013 and 2012.
The accompanying financial statements have been prepared on a historical cost basis except for
financial assets at fair value through profit or loss (FVTPL), financial assets at fair value through
other comprehensive income (FVTOCI) and derivative financial instruments that have been
measured at fair value. The financial statements are presented in Philippine peso and all values
are rounded to the nearest thousand except when otherwise indicated.
*SGVFS010664*
-3The financial statements of the Parent Company 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 the 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 peso, which is the Parent Company’s
presentation currency (see accounting policy on Foreign Currency Transactions and Translation).
The financial statements individually prepared for these units are combined after eliminating
inter-unit accounts.
Each entity in the Group determines its own functional currency and items included in the
financial statements of each entity are measured using that functional currency. The functional
currency of both subsidiaries is the Philippine peso.
Statement of Compliance
The accompanying financial statements have been prepared in compliance with Philippine
Financial Reporting Standards (PFRS).
Presentation of Financial Statements
The Group presents its statement of financial position broadly in order of liquidity. An analysis
regarding recovery or settlement within 12 months after the statement of financial position date
(current) and more than 12 months after the statement of financial position date (non-current) is
presented in Note 20.
Basis of Consolidation
The Subsidiaries are fully consolidated from the date of acquisition, being the date on which the
Parent Company obtains control and continue to be consolidated until the date when the control
ceases. The financial statements of the subsidiaries are prepared for the same reporting period as
the Parent Company using consistent accounting policies.
All significant intra-group balances, transactions, income and expenses and profits and losses
resulting from intra-group transactions are eliminated in the consolidation.
Subsidiaries are fully consolidated from the date on which control is transferred to the Parent
Company. Control is achieved where the Parent Company is exposed, or has rights, to variable
return from its involvement with an entity and has the ability to affect those returns through its
power over the entity. The Parent Company has power over the entity when it has existing rights
that give it the current ability to direct relevant activities (i.e., activities that signicantly affect the
entity’s returns). Consolidation of subsidiaries ceases when control is transferred out of the Parent
Company. The results of subsidiaries acquired or disposed of during the period are included in the
consolidated statement of income from the date of acquisition or up to the date of disposal, as
appropriate.
Non-Controlling Interest
Non-controlling interest represents the portion of profit or loss and net assets not owned, directly
or indirectly, by the Parent Company.
Non-controlling interests are presented separately in the consolidated statement of income,
consolidated statement of comprehensive income, and within equity in the consolidated statement
of financial position, separately from equity attributable to the equity holders of the Parent
Company. Any losses applicable to the non-controlling interests are allocated against the interests
of the non-controlling interest even if this results in the non-controlling interest having a deficit
balance. Acquisitions of non-controlling interests that does not result in a loss of control are
*SGVFS010664*
-4accounted for as equity transaction, whereby the difference between the consideration and the fair
value of the share of net assets acquired is recognized as an equity transaction and attributed to the
owners of the Parent Company.
Changes in Accounting Policies and Disclosures
The accounting policies adopted are consistent with those of the previous financial year except for
the adoption of the following new and amended standards and interpretations, which became
effective beginning January 1, 2014. Unless otherwise indicated, adoption of these new and
amended standards and interpretations did not have material impact to the Group.
Investment Entities (Amendments to PFRS 10, Consolidated Financial Statements, PFRS 12,
Disclosure of Interests in Other Entities, and PAS 27, Separate Financial Statements)
These amendments provide an exception to the consolidation requirement for entities that meet the
definition of an investment entity under PFRS 10. The exception to consolidation requires
investment entities to account for subsidiaries at fair value through profit or loss. The
amendments must be applied retrospectively, subject to certain transition relief. These
amendments have no impact to the Group, since none of the entities within the Group qualifies to
be an investment entity under PFRS 10.
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial
Liabilities (Amendments)
These amendments clarify the meaning of ‘currently has a legally enforceable right to set-off’ and
the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for
offsetting and are applied retrospectively.
PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets
(Amendments)
These amendments remove the unintended consequences of PFRS 13, Fair Value Measurement,
on the disclosures required under PAS 36. In addition, these amendments require disclosure of the
recoverable amounts for assets or cash-generating units (CGUs) for which impairment loss has
been recognized or reversed during the period.
Philippine Interpretation IFRIC 21, Levies (IFRIC 21)
IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers
payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching
a minimum threshold, the interpretation clarifies that no liability should be anticipated before the
specified minimum threshold is reached. Retrospective application is required for IFRIC 21. This
interpretation has no impact on the Group as it has applied the recognition principles under
PAS 37, Provisions, Contingent Liabilities and Contingent Assets, consistent with the
requirements of IFRIC 21 in prior years.
Annual Improvements to PFRSs (2010-2012 cycle)
In the 2010-2012 annual improvements cycle, seven amendments to six standards were issued,
which included an amendment to PFRS 13, Fair Value Measurement. The amendment to PFRS 13
is effective immediately and it clarifies that short-term receivables and payables with no stated
interest rates can be measured at invoice amounts when the effect of discounting is immaterial.
*SGVFS010664*
-5Annual Improvements to PFRSs (2011-2013 cycle)
In the 2011-2013 annual improvements cycle, four amendments to four standards were issued,
which included an amendment to PFRS 1, First-time Adoption of Philippine Financial Reporting
Standards-First-time Adoption of PFRS. The amendment to PFRS 1 is effective immediately. It
clarifies that an entity may choose to apply either a current standard or a new standard that is not
yet mandatory, but permits early application, provided either standard is applied consistently
throughout the periods presented in the entity’s first PFRS financial statements.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash and other cash items
(COCI), amounts due from BSP and other banks, and interbank loans and receivable (IBLR) with
original maturities of three months or less from dates of placements and that are subject to
insignificant risks of changes in value.
Foreign Currency Transactions and Translation
The books of accounts of the RBU are maintained in Philippine peso, while those of the FCDU are
maintained in USD. For financial reporting purposes, the monetary assets and liabilities of the
FCDU and the foreign currency-denominated monetary assets and liabilities in the RBU are
translated in Philippine peso based on the Philippine Dealing System (PDS) closing rate prevailing
at the statement of financial position date and foreign currency-denominated income and expenses,
at the prevailing exchange rate at the date of transaction. Foreign exchange differences arising
from revaluation and translation of foreign currency-denominated assets and liabilities of the RBU
are credited to or charged against operations in the period in which the rates change. Exchange
differences arising from translation of the accounts of the FCDU to Philippine peso as the
presentation currency are taken to the statement of comprehensive income under Cumulative
translation adjustment.
Non-monetary items that are measured in terms of historical cost 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 was
determined.
Fair Value Measurement
The Group measures certain financial instruments such as financial assets at FVTPL, financial
assets at FVTOCI and derivative financial instruments, at fair value at each statement of financial
position date. Also, fair values of financial instruments carried at amortized cost and investment
properties carried at cost are measured for disclosure purposes.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
· In the principal market for the asset or liability, or
· In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.
*SGVFS010664*
-6A fair value measurement of a non-financial asset takes into account a market participant's ability
to generate economic benefits by using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements
are categorized within the fair value hierarchy, described as follows, based on the lowest level
input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the
Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing
categorization (based on the lowest level input that is significant to the fair value measurement as
a whole) at the end of each reporting period.
External appraisers are involved for valuation of significant non-financial assets, such as
investment properties. Selection criteria include market knowledge, reputation, independence and
whether professional standards are maintained.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities
on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair
value hierarchy (see Note 5).
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,
the date that an asset is delivered to or by the Group. Settlement date accounting refers to (a) the
recognition of an asset on the day it is received by the Group, and (b) the derecognition of an asset
and recognition of any gain or loss on disposal on the day that it is delivered by the Group.
Securities transactions and related commission income and expense are recorded also on a
settlement date basis. Deposits, amounts due to banks and customers, loans and receivables and
derivatives are recognized when cash is received by the Group or advanced to the borrowers.
Derivatives are recognized on trade date - the date that the Group becomes a party to the
contractual provisions of the instrument. Trade date accounting refers to (a) the recognition of an
asset to be received and the liability to pay for it on the trade date, and (b) derecognition of an
asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable
from the buyer for payment on the trade date.
The Group recognizes financial instruments when, and only when, the Group becomes a party to
the contractual terms of the financial instruments.
*SGVFS010664*
-7‘Day 1’ difference
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 Group recognizes the difference
between the transaction price and fair value (a ‘Day 1’ difference) in the statement of income. In
cases where transaction price used 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
Group determines the appropriate method of recognizing the ‘Day 1’ difference amount.
Classification, Reclassification and Measurement of Financial Assets and Financial Liabilities
For purposes of classifying financial assets, an instrument is an ‘equity instrument’ if it is
non-derivative and meets the definition of ‘equity’ for the issuer (under PAS 32, Financial
Instruments: Presentation). All other non-derivative financial instruments are ‘debt instruments’.
Financial assets at amortized cost
Financial assets are measured at amortized cost if both of the following conditions are met:
·
·
the asset is held within the Group’s business model whose objective is to hold assets in order
to collect contractual cash flows; and
the contractual terms of the instrument give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
Financial assets meeting these criteria are measured initially at fair value plus transaction costs.
They are subsequently measured at amortized cost using the effective interest method less any
impairment in value, with the interest calculated recognized as Interest income in the statement of
income. The Group classified Cash and other cash items, Due from BSP, Due from other banks,
IBLR, Investment securities at amortized cost and Loans and receivables as financial assets at
amortized cost.
The Group may irrevocably elect at initial recognition to classify a financial asset that meets the
amortized cost criteria above as at FVTPL if that designation eliminates or significantly reduces
an accounting mismatch had the financial asset been measured at amortized cost. As of
December 31, 2014 and 2013, the Group has not made such designation.
Financial assets at FVTOCI
At initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument
basis) to designate equity investments as at FVTOCI. Designation at FVTOCI is not permitted if
the equity investment is held for trading.
A financial asset is held for trading if:
·
·
·
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group
manages together and has evidence of a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument or a financial
guarantee.
*SGVFS010664*
-8Financial assets at FVTOCI are initially measured at fair value plus transaction costs.
Subsequently, they are measured at fair value, with no deduction for sale or disposal costs. Gains
and losses arising from changes in fair value are recognized in other comprehensive income and
accumulated in Net unrealized gain (loss) on financial assets at FVTOCI in the statement of
financial position. When the asset is disposed of, the cumulative gain or loss previously
recognized in Net unrealized gain (loss) on financial assets at FVTOCI is not reclassified to profit
or loss, but is reclassified directly to Surplus.
The Group has designated certain equity instruments that are not held for trading as at FVTOCI on
initial application of PFRS 9 (see Note 8).
Dividends earned on holding these equity instruments are recognized in the statement of income
when the Group’s right to receive the dividends is established in accordance with PAS 18,
Revenue, unless the dividends clearly represent recovery of a part of the cost of the investment.
Dividends earned are recognized in the statement of income under Miscellaneous income.
Financial assets at FVTPL
Debt instruments that do not meet the amortized cost criteria, or that meet the criteria but the
Group has chosen to designate as at FVTPL at initial recognition, are measured at fair value
through profit or loss.
Equity investments are classified as at FVTPL, unless the Group designates an investment that is
not held for trading as at FVTOCI at initial recognition.
The Group’s financial assets at FVTPL include government securities, private bonds and equity
securities held for trading purposes.
Financial assets at FVTPL are carried at fair value, and fair value gains and losses on these
instruments are recognized as Trading and securities gain in the statement of income. Interest
earned on these investments is reported in the statement of income under Interest income while
dividend income is reported in the statement of income under Miscellaneous income when the
right of payment has been established. Quoted market prices, when available, are used to
determine the fair value of these financial instruments. If quoted market prices are not available,
their fair values are estimated based on inputs provided by the BSP, Bureau of Treasury and
investment bankers. For all other financial instruments not listed in an active market, the fair
value is determined by using appropriate valuation techniques.
The fair value of financial assets denominated in a foreign currency is determined in that foreign
currency and translated at the PDS closing rate at the statement of financial position date. The
foreign exchange component forms part of its fair value gain or loss. For financial assets
classified as at FVTPL, the foreign exchange component is recognized in the statement of income.
For financial assets designated as at FVTOCI, any foreign exchange component is recognized in
other comprehensive income. For foreign currency denominated debt instruments classified at
amortized cost, the foreign exchange gains and losses are determined based on the amortized cost
of the asset and are recognized in the statement of income.
Reclassification of financial assets
The Group can reclassify financial assets if the objective of its business model for managing those
financial assets changes. The Group is required to reclassify the following financial assets:
·
from amortized cost to FVTPL if the objective of the business model changes so that the
amortized cost criteria are no longer met; and
*SGVFS010664*
-9·
from FVTPL to amortized cost if the objective of the business model changes so that the
amortized cost criteria start to be met and the instrument’s contractual cash flows meet the
amortized cost criteria.
Reclassification of financial assets designated as at FVTPL at initial recognition is not permitted.
A change in the objective of the Group's business model must be effected before the
reclassification date. The reclassification date is the beginning of the next reporting period
following the change in the business model.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading
or is designated as at FVTPL.
A financial liability is held for trading if:
· it has been incurred principally for the purpose of repurchasing it in the near term; or
· on initial recognition it is part of a portfolio of identified financial instruments that the Group
manages together and has evidence of a recent actual pattern of short-term profit-taking; or
· it is a derivative that is not designated and effective as a hedging instrument or a financial
guarantee.
Management may designate a financial liability at FVTPL upon initial recognition when the
following criteria are met, and designation is determined on an instrument by instrument basis:
·
·
·
The designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the liabilities or recognizing gains or losses on them on a
different basis; or
The liabilities are part of a group of financial liabilities 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.
Financial liabilities at amortized cost
Financial liabilities are measured at amortized cost using the effective interest method, except for:
a. financial liabilities at fair value through profit or loss which are measured at fair value; and
b. financial liabilities that arise when a transfer of a financial asset does not qualify for
derecognition or when the continuing involvement approach applies.
Issued financial instruments or their components, which are not designated at FVTPL, are
classified as financial liabilities at amortized cost under Deposit liabilities, Bills and acceptances
payable or other appropriate financial liability accounts, where the substance of the contractual
arrangement results in the Group 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.
*SGVFS010664*
- 10 After initial measurement, bills payable and similar financial liabilities not qualified as and not
designated as FVTPL, are subsequently measured at amortized cost using the effective interest
method. Amortized cost is calculated by taking into account any discount or premium on the
issuance and fees that are an integral part of the effective interest rate (EIR).
Impairment of Financial Assets
The Group assesses at each statement of financial position 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.
For financial assets classified and measured at amortized cost such as loans and receivables, due
from other banks and investment securities at amortized cost, the Group first assesses whether
objective evidence of impairment exists individually for financial assets that are individually
significant, or collectively for financial assets that are not individually significant. For
individually assessed financial assets, 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 present value of the estimated future cash
flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable
interest rate, the discount rate for measuring any impairment loss is the current effective interest
rate, 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.
Financial 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. The
carrying amount of the asset is reduced through use of an allowance account and the amount of
loss is charged to Provision for impairment and credit losses in the statement of income. Interest
income continues to be recognized based on the original effective interest rate 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 write-off is later recovered, except for credit card receivables, any amounts formerly
charged are credited to the Provision for impairment and credit losses in the statement of income.
For credit card receivables, if a write-off is later recovered, any amounts previously charged to
Provision for impairment and credit losses are credited to Miscellaneous income in the statement
of income.
*SGVFS010664*
- 11 If the Group determines that no objective evidence of impairment 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.
For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis
of credit risk characteristics such as industry, collateral type, past-due status and term. 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 similar credit risk characteristics. 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 on 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 property prices, payment status, or other
factors that are indicative of incurred losses of the Group and their magnitude). The methodology
and assumptions used for estimating future cash flows are reviewed regularly by the Group to
reduce any differences between loss estimates and actual loss experience.
For credit cards receivables, salary loans and personal loans, the Group is using net flow rate
methodology for collective impairment (see Note 4).
Restructured loans
Loan restructuring may involve extending the payment arrangements and the agreement of 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 subjected to an individual or
collective impairment assessment, calculated using the loan’s original effective interest rate. The
difference between the recorded value of the original loan and the present value of the restructured
cash flows, discounted at the original effective interest rate, is recognized in Provision for
impairment and credit losses in the statement of income.
Derecognition of Financial Assets and Financial 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 when:
·
·
·
the rights to receive cash flows from the asset have expired;
the Group 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 Group 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 the control of the asset.
Where the Group 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 Group’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 Group could be required to repay.
*SGVFS010664*
- 12 Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged,
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 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 financial position. The corresponding cash received, including
accrued interest, is recognized in the statement of financial position as a loan to the Group,
reflecting the economic substance of such transaction.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount reported in the statement of
financial position 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, where the
related assets and liabilities are presented gross in the statement of financial position.
Property and Equipment
Land is stated at cost less any impairment in value and depreciable properties including buildings,
leasehold improvements and furniture, fixtures and equipment are stated at cost less accumulated
depreciation and amortization, and any impairment in value.
The initial cost of property and equipment consists of its purchase price, including import duties,
taxes and any directly attributable costs of bringing the assets to their working condition and
location for their intended use. Expenditures incurred after the property and equipment 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 an item of property and equipment beyond its originally assessed standard of
performance, the expenditures are capitalized as additional cost of the assets. When assets are
retired or otherwise disposed of, the cost and the related accumulated depreciation and
amortization and any accumulated impairment in value are removed from the accounts and any
resulting gain or loss is credited to or charged against current operations.
Depreciation and amortization are computed using the straight-line method over the following
estimated useful lives (EUL) of the property and equipment.
Buildings
Furniture, fixtures and equipment
Years
30-40
3-5
The cost of the leasehold improvements is amortized over the shorter of the covering lease term or
the EUL of the improvements of 10 years.
The estimated useful life and the depreciation and amortization method are reviewed periodically
to ensure that the period and the method of depreciation and amortization are consistent with the
expected pattern of economic benefits from items of property and equipment.
*SGVFS010664*
- 13 Investment Properties
Investment properties are measured initially at cost, including transaction costs. An investment
property acquired through an exchange transaction is measured at the 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 the asset given up. Foreclosed properties
are recorded as Investment properties upon: (a) entry of judgment in case of judicial foreclosure;
(b) execution of the Sheriff’s Certificate of Sale in case of extra-judicial foreclosure; or
(c) notarization of the Deed of Dacion in case of dation in payment (dacion en pago). Subsequent
to initial recognition, depreciable investment properties are carried at cost less accumulated
depreciation and any impairment in value.
Investment properties are derecognized when they have either been disposed of or when the
investment properties are permanently withdrawn from use and no future benefit is expected from
their disposal. Any gains or losses on the retirement or disposal of investment properties are
recognized in the statement of income under Gain on sale of assets in the year of retirement or
disposal.
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.
Depreciation is calculated on a straight-line basis using the remaining useful lives from the time of
acquisition of the investment properties but not to exceed 10 years for both buildings and
condominium units.
Foreclosed properties of land or building are classified under investment properties from
foreclosure date. Other foreclosed properties which do not qualify as land or building are
classified as other repossessed assets included in Other assets in the statement of financial
position.
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. Transfers are made from investment properties when,
and only when, there is a change in use evidenced by commencement of owner occupation or
commencement of development with a view to sale.
Business Combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition
is measured as the aggregate of the consideration transferred, measured at acquisition date fair
value and the amount of any non-controlling interest in the acquiree. For each business
combination, the acquirer elects whether to measure the non-controlling interest in the acquiree at
fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related
costs incurred are expensed in the statement of income.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree. If the business combination is achieved in
stages, the acquisition date fair value of the acquirer’s previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date through profit or loss.
*SGVFS010664*
- 14 Any contingent consideration to be transferred by the acquirer will be recognized at fair value at
the acquisition date. Subsequent changes to the fair value of the contingent consideration, which
is deemed to be an asset or liability, will be recognized in accordance with PFRS 9 either in profit
or loss or as a change to other comprehensive income. If the contingent consideration is classified
as equity, it should not be remeasured until it is finally settled within equity.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration
transferred and the amount recognized for non-controlling interest over the net identifiable assets
acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets
of the subsidiary acquired, the difference is recognized in the statement of income.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash-generating units (CGU) that are expected to
benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units.
Where goodwill forms part of a CGU 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 CGU retained.
Acquisitions of non-controlling interests are accounted for as transactions with owners in their
capacity as owners and therefore no goodwill is recognized as a result. Adjustments to noncontrolling interests arising from transactions that do not involve the loss of control are based on a
proportionate amount of the net assets of the subsidiary.
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 at the date of acquisition.
Following initial recognition, intangible assets, excluding goodwill and branch licenses, are
carried at cost less any accumulated amortization and any accumulated impairment losses.
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 assets may be impaired. The
amortization period and the amortization method for an intangible asset with a finite useful life are
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.
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment
annually or more frequently, either individually or at the CGU level. The assessment of indefinite
life is reviewed annually to determine whether the indefinite life continues to be supportable. If
not, the change in useful life from indefinite to finite is made on a prospective basis.
*SGVFS010664*
- 15 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.
Intangible assets include goodwill, branch licenses, customer relationship, core deposits and
capitalized software (see Note 12).
Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the
cost of the business combination over the Group’s interest in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is
measured at cost less accumulated impairment losses. Goodwill is reviewed for impairment
annually or more frequently if events or changes in circumstances indicate that the carrying value
may be impaired.
Branch licenses
Branch licenses are determined to have indefinite useful lives. These are tested for impairment
annually either individually or at the CGU level. Such intangible assets are not amortized. The
useful life is reviewed annually to determine whether indefinite useful 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.
Customer relationship and core deposits
Customer relationship and core deposits are the intangible assets acquired by the Group through
business combination. These intangible assets are initially measured at their fair value at the date
of acquisition. The fair value of these intangible assets reflects expectations about the probability
that the expected future economic benefits embodied in the asset will flow to the Group.
Following initial recognition, customer relationship and core deposits are measured at cost less
accumulated amortization and any accumulated impairment losses. Customer relationship related
to the credit cards business is amortized on a straight-line basis over its useful life of 40 years
while the customer relationship related to the auto loans business and core deposits are amortized
on a straight-line basis over its useful life of 13 and 10 years, respectively (see Note 12).
Capitalized software
Capitalized software acquired separately is measured at cost on initial recognition. Following
initial recognition, capitalized software is carried at cost less accumulated amortization and any
accumulated impairment losses. The capitalized software is amortized on a straight-line basis over
its estimated useful life of 5 years.
Impairment of Nonfinancial Assets
An assessment is made at each statement of financial position date whether there is any indication
of impairment of property and equipment, investment properties, other repossessed assets and
intangible assets, or whether there is any indication that an impairment loss previously recognized
for an asset in prior years may no longer exist or may have decreased. If any such indication
exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated at
the higher of the asset’s value in use or its fair value less cost to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset.
*SGVFS010664*
- 16 An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable
amount. An impairment loss is charged against the statement of income in the period in which it
arises, unless the asset is carried at a revalued amount in which case the impairment loss is
charged against the revaluation increment of the said asset.
A previously recognized impairment loss is reversed only if there has been a change in the
estimates used to determine the recoverable amount of an asset, but not to an amount higher than
the carrying amount that would have been determined (net of any depreciation) had no impairment
loss been recognized for the asset in prior years. A reversal of an impairment loss is credited to
current operations, unless the asset is carried at a revalued amount in which case the reversal of the
impairment loss is credited to the revaluation increment of the said asset.
The following criteria are also applied in assessing impairment of specific assets:
Property and equipment, investment properties and other repossessed assets
The carrying values of the property and equipment and investment properties are reviewed for
impairment when events or changes in circumstances indicate the carrying values may not be
recoverable. If any such indication exists and where the carrying values exceed the estimated
recoverable amounts, the assets or CGUs are written down to their recoverable amounts.
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 CGU (or group
of CGUs) to which the goodwill relates. Where the recoverable amount of the CGU (or group of
CGUs) is less than the carrying amount of the CGU (or group of CGUs) 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.
Branch licenses
Branch licenses are tested for impairment annually at the statement of financial position date either
individually or at the CGU level, as appropriate.
Other intangible assets
Other intangible assets such as customer relationship, core deposits and capitalized software are
assessed for impairment whenever there is an indication that they may be impaired.
Revenue Recognition
Revenue is recognized to the extent that it is probable that economic benefits will flow to the
Group 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 assets at
FVTPL, interest income is recorded at the effective interest rate, 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.
*SGVFS010664*
- 17 The calculation takes into account all contractual terms of the financial instrument (for example,
prepayment options) and includes any fees or incremental costs that are directly attributable to the
instrument and are an integral part of the effective interest rate, but not future credit losses. The
adjusted carrying amount is calculated based on the original effective interest rate. The change in
the 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 effective interest rate applied to the new carrying
amount.
Service charges and penalties
Service charges and penalties are recognized only upon collection or accrued when there is a
reasonable degree of certainty as to its collectibility.
Fee and commission income
The Group earns fee and commission income from a diverse range of services it provides to its
customers. Fee income can be divided into the following two categories:
a) Fee income earned from services that are provided over a certain period of time
Fees earned for the provision of services over a period of time are accrued over that period.
These fees include commission income, fiduciary fees and credit related fees.
b) Fee income from providing transaction services
Fees arising from negotiating or participating in the negotiation of a transaction for a third
party are recognized on completion of the underlying transaction. Fees or components of fees
that are linked to a certain performance are recognized after fulfilling the corresponding
criteria. Loan syndication fees are recognized in the statement of income when the
syndication has been completed and the Group retains no part of the loans for itself or retains
part at the same effective interest rate as for the other participants.
Dividend income
Dividend income is recognized when the Group’s right to receive payment is established.
Trading and securities gain
Trading and securities gain represents results arising from trading activities including all gains and
losses from changes in fair value of financial assets and financial liabilities held for trading.
Commissions earned on credit cards
Commissions earned on credit cards are taken up as income upon receipt from member
establishments of charges arising from credit availments by credit cardholders. These
commissions are computed based on certain agreed rates and are deducted from amounts
remittable to member establishments.
Purchases by credit cardholders, collectible on an installment basis, are recorded at the cost of the
items purchased plus certain percentage of cost. The excess over cost is credited to Unearned
discount and is shown as a deduction from Loans and receivables in the statement of financial
position.
The unearned discount is taken to income over the installment terms and is computed using the
effective interest method.
*SGVFS010664*
- 18 Customer loyalty programmes
Award credits under customer loyalty programmes are accounted for as a separately identifiable
component of the transaction in which they are granted. The fair value of the consideration
received in respect of the initial sale is allocated between the award credits and the other
components of the sale. Income generated from customer loyalty programmes is recognized as
part of Service charges, fees and commissions in the statement of income.
Other income
Income from sale of services is recognized upon rendition of the service. Income from sale of
properties is recognized upon completion of the earning process and when the collectibility of the
sales price is reasonably assured.
Expense Recognition
Expenses are recognized in the statement of income when decrease in future economic benefit
related to a decrease in an asset or an increase in a liability has arisen that can be measured
reliably. Expenses are recognized in the statement of income:
· on the basis of a direct association between the costs incurred and the earning of specific items
of income;
· on the basis of systematic and rational allocation procedures when economic benefits are
expected to arise over several accounting periods and the association can only be broadly or
indirectly determined; or
· immediately when expenditure produces no future economic benefits or when, and to the
extent that, future economic benefits do not qualify or cease to qualify, for recognition in the
statement of financial position as an asset.
Expenses in the statement of income are presented using the nature of expense method. General
and administrative expenses are cost attributable to administrative and other business activities of
the Group.
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of
the arrangement and requires an assessment of whether the fulfillment of the arrangement is
dependent on the use of a specific asset or assets and 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 gave rise to the reassessment for scenarios (a), (c) or (d) above, and at the
date of renewal or extension period for scenario (b).
Group as lessee
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset 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. Contingent rents are recognized
as an expense in the period in which they are incurred.
*SGVFS010664*
- 19 Retirement Cost
Defined benefit plan
The net defined benefit liability or asset is the aggregate of the present value of the defined benefit
obligation at the end of the reporting period reduced by the fair value of plan assets (if any),
adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling
is the present value of any economic benefits available in the form of refunds from the plan or
reductions in future contributions to the plan.
The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method.
Defined benefit costs comprise the following:
· Service cost
· Net interest on the net defined benefit liability or asset
· Remeasurements of net defined benefit liability or asset
Service costs which include current service costs, past service costs and gains or losses on nonroutine settlements are recognized as expense in the statement of income. Past service costs are
recognized when plan amendment or curtailment occurs.
Net interest on the net defined benefit liability or asset is the change during the period in the net
defined benefit liability or asset that arises from the passage of time which is determined by
applying the discount rate based on government bonds to the net defined benefit liability or asset.
Net interest on the net defined benefit liability or asset is recognized as expense or income in the
statement of income.
Remeasurements comprising actuarial gains and losses, return on plan assets (excluding net
interest on defined benefit asset) and any change in the effect of the asset ceiling (excluding net
interest on defined benefit liability) are recognized immediately in other comprehensive income in
the period in which they arise. Remeasurements are not reclassified to profit or loss in subsequent
periods. All remeasurements are recognized in other comprehensive income account.
Remeasurement gains (losses) on retirement plan are not reclassified to profit or loss in
subsequent periods.
Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance
policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to
the Group. Fair value of plan assets is based on market price information. When no market price
is available, the fair value of plan assets is estimated by discounting expected future cash flows
using a discount rate that reflects both the risk associated with the plan assets and the maturity or
expected disposal date of those assets (or, if they have no maturity, the expected period until the
settlement of the related obligations).
The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined
benefit obligation is recognized as a separate asset at fair value when and only when
reimbursement is virtually certain.
Termination benefit
Termination benefits are employee benefits provided in exchange for the termination of an
employee’s employment as a result of either an entity’s decision to terminate an employee’s
employment before the normal retirement date or an employee’s decision to accept an offer of
benefits in exchange for the termination of employment.
*SGVFS010664*
- 20 A liability and expense for a termination benefit is recognized at the earlier of when the entity can
no longer withdraw the offer of those benefits and when the entity recognizes the related
restructuring costs. Initial recognition and subsequent changes to termination benefits are
measured in accordance with the nature of the employee benefit, as either post-employment
benefits, short-term employee benefits, or other long-term employee benefits.
Employee leave entitlement
Employee entitlement to annual leave are recognized as a liability when the employees render the
services that increases their annual leave enititlement. The cost of accumulating annual leave are
measured as the additional amount that the Group expects to pay as a result of the unused
entitlement that has accumulated at the end of the reporting period.
Provisions and Contingencies
Provisions are recognized when the Group has a present obligation (legal or constructive) as a
result of a past event; 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. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at pre-tax rate that reflects current market assessments
of the time value of money and where, appropriate, the risk specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time is recognized as
Interest expense in the statement of income.
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 in the financial statements but are disclosed when an inflow of economic
benefits is probable.
Income Taxes
Current taxes
Current tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or substantively enacted at the statement of
financial position date.
Deferred taxes
Deferred tax is provided, using the balance sheet liability method, on all temporary differences at
the statement of financial position 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, with certain
exceptions. Deferred tax assets are recognized for all deductible temporary differences,
carryforward of unused tax credits from the excess of Minimum Corporate Income Tax (MCIT)
over the regular income tax 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 the carryforward of unused tax credits from excess MCIT and unused NOLCO can
be utilized. Deferred tax, however, is not recognized on temporary differences that arise from the
initial recognition of an asset or liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting income nor taxable income or loss.
The carrying amount of deferred tax assets is reviewed at each statement of financial position 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.
*SGVFS010664*
- 21 Current tax and deferred tax relating to items recognized directly in equity is recognized in other
comprehensive income and not in the statement of income.
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 financial position date.
Equity
Capital stock is measured at par value for all shares issued. When the Group issues more than one
class of stock, a separate account is maintained for each class of stock and the number of shares
issued.
When the shares are sold at a premium, the difference between the proceeds and the par value is
credited to Additional paid in capital account. When shares are issued for a consideration other
than cash, the proceeds are measured by the fair value of the consideration received. In case the
shares are issued to extinguish or settle the liability of the Group, the shares shall be measured
either at the fair value of the shares issued or fair value of the liability settled, whichever is more
reliably determinable.
Direct cost incurred related to the equity issuance, such as underwriting, accounting and legal fees,
printing costs and taxes are charged to Additional paid in capital account. If additional paid-in
capital is not sufficient, the excess is charged against Surplus.
Surplus represents accumulated earnings of the Group less dividends declared.
Dividends on Common Shares
Dividends on common shares are recognized as a liability and deducted from equity when
declared and approved by BOD of the Parent Company and approved by the BSP. Dividends for
the year that are declared and approved after the statement of financial position date, if any, are
dealt with as an event after the financial reporting date and disclosed accordingly.
Earnings Per Share (EPS)
Basic EPS is determined by dividing the net income for the year attributable to common shares by
the weighted average number of common shares outstanding during the year while diluted EPS is
computed by dividing net income for the year attributable to common shares by the weighted
average number of outstanding and dilutive potential common shares. Basic and diluted EPS are
given retroactive adjustments for any stock dividends declared in the current year, if any.
Segment Reporting
A business segment is a group of assets and operations engaged in providing products or services
that are subject to risks and returns that are different from those of other business segments. A
geographical segment is one that provides products or services within a particular economic
environment that is subject to risks and returns that are different from those segments operating in
other economic environments.
The Group’s operations are organized according to the nature of products and services provided.
Financial information on business segments is presented in Note 6.
*SGVFS010664*
- 22 Events after the Financial Reporting Date
Post year-end events that provide additional information about the Group’s position at the
statement of financial position date (adjusting events) are reflected in the financial statements.
Post year-end events that are not adjusting events are disclosed in the notes when material to the
financial statements.
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 Parent Company
acts in a fiduciary capacity such as nominee, trustee or agent.
Future Changes in Accounting Policies
Standards issued but are not yet effective up to the date of issuance of the financial statements are
listed below. This is a listing of standards and interpretations issued, which the Group reasonably
expects to be applicable at a future date. Except as otherwise indicated, the Group does not expect
the adoption of these new and amended standards to have a significant impact on the financial
statements.
PFRS 9, Financial Instruments - Classification and Measurement (2010 version)
PFRS 9 (2010 version) reflects the first phase on the replacement of PAS 39 and applies to the
classification and measurement of financial assets and liabilities as defined in PAS 39, Financial
Instruments: Recognition and Measurement. PFRS 9 requires all financial assets to be measured
at fair value at initial recognition. A debt financial asset may, if the fair value option (FVO) is not
invoked, be subsequently measured at amortized cost if it is held within a business model that has
the objective to hold the assets to collect the contractual cash flows and its contractual terms give
rise, on specified dates, to cash flows that are solely payments of principal and interest on the
principal outstanding. All other debt instruments are subsequently measured at fair value through
profit or loss. All equity financial assets are measured at fair value either through other
comprehensive income (OCI) or profit or loss. Equity financial assets held for trading must be
measured at fair value through profit or loss. For FVO liabilities, the amount of change in the fair
value of a liability that is attributable to changes in credit risk must be presented in OCI. The
remainder of the change in fair value is presented in profit or loss, unless presentation of the fair
value change in respect of the liability’s credit risk in OCI would create or enlarge an accounting
mismatch in profit or loss. All other PAS 39 classification and measurement requirements for
financial liabilities have been carried forward into PFRS 9, including the embedded derivative
separation rules and the criteria for using the FVO. As the Group had early adopted the first phase
of PFRS 9 (2009 version) effective January 1, 2011, adoption of PFRS 9 (2010 version) will have
no impact on the Group’s financial position and performance.
PFRS 9 (2010 version) is effective for annual periods beginning on or after January 1, 2015. This
mandatory adoption date was moved to January 1, 2018 when the final version of PFRS 9 was
adopted by the Philippine Financial Reporting Standards Council (FRSC). Such adoption,
however, is still for approval by the Board of Accountancy (BOA).
Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate
This interpretation covers accounting for revenue and associated expenses by entities that
undertake the construction of real estate directly or through subcontractors. The SEC and the
FRSC have deferred the effectivity of this interpretation until the final Revenue standard is issued
by the International Accounting Standards Board (IASB) and an evaluation of the requirements of
the final Revenue standard against the practices of the Philippine real estate industry is completed.
*SGVFS010664*
- 23 The following new standards and amendments issued by the IASB were already adopted by the
FRSC but are still for approval by BOA:
Effective January 1, 2015
PAS 19, Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments)
PAS 19 requires an entity to consider contributions from employees or third parties when
accounting for defined benefit plans. Where the contributions are linked to service, they should be
attributed to periods of service as a negative benefit. These amendments clarify that, if the amount
of the contributions is independent of the number of years of service, an entity is permitted to
recognize such contributions as a reduction in the service cost in the period in which the service is
rendered, instead of allocating the contributions to the periods of service. This amendment is
effective for annual periods beginning on or after January 1, 2015.
Annual Improvements to PFRSs (2010-2012 cycle)
The Annual Improvements to PFRSs (2010-2012 cycle) are effective for annual periods beginning
on or after January 1, 2015 and are not expected to have a material impact on the Group. They
include:
PFRS 2, Share-based Payment - Definition of Vesting Condition
This improvement is applied prospectively and clarifies various issues relating to the definitions of
performance and service conditions which are vesting conditions, including:
· A performance condition must contain a service condition
· A performance target must be met while the counterparty is rendering service
· A performance target may relate to the operations or activities of an entity, or to those of
another entity in the same group
· A performance condition may be a market or non-market condition
· If the counterparty, regardless of the reason, ceases to provide service during the vesting
period, the service condition is not satisfied.
PFRS 3, Business Combinations - Accounting for Contingent Consideration in a Business
Combination
The amendment is applied prospectively for business combinations for which the acquisition date
is on or after July 1, 2014. It clarifies that a contingent consideration that is not classified as equity
is subsequently measured at fair value through profit or loss whether or not it falls within the
scope of PAS 39, Financial Instruments: Recognition and Measurement (or PFRS 9, Financial
Instruments, if early adopted). The Group shall consider this amendment for future business
combinations.
PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of the
Total of the Reportable Segments’ Assets to the Entity’s Assets
The amendments are applied retrospectively and clarify that:
· An entity must disclose the judgments made by management in applying the aggregation
criteria in the standard, including a brief description of operating segments that have been
aggregated and the economic characteristics (e.g., sales and gross margins) used to assess
whether the segments are ‘similar’.
· The reconciliation of segment assets to total assets is only required to be disclosed if the
reconciliation is reported to the chief operating decision maker, similar to the required
disclosure for segment liabilities.
*SGVFS010664*
- 24 PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Revaluation Method Proportionate Restatement of Accumulated Depreciation and Amortization
The amendment is applied retrospectively and clarifies in PAS 16 and PAS 38 that the asset may
be revalued by reference to the observable data on either the gross or the net carrying amount. In
addition, the accumulated depreciation or amortization is the difference between the gross and
carrying amounts of the asset.
PAS 24, Related Party Disclosures - Key Management Personnel
The amendment is applied retrospectively and clarifies that a management entity, which is an
entity that provides key management personnel services, is a related party subject to the related
party disclosures. In addition, an entity that uses a management entity is required to disclose the
expenses incurred for management services.
Annual Improvements to PFRSs (2011-2013 cycle)
The Annual Improvements to PFRSs (2011-2013 cycle) are effective for annual periods beginning
on or after January 1, 2015 and are not expected to have a material impact on the Group. They
include:
PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements
The amendment is applied prospectively and clarifies the following regarding the scope exceptions
within PFRS 3:
· Joint arrangements, not just joint ventures, are outside the scope of PFRS 3.
· This scope exception applies only to the accounting in the financial statements of the joint
arrangement itself.
PFRS 13, Fair Value Measurement - Portfolio Exception
The amendment is applied prospectively and clarifies that the portfolio exception in PFRS 13 can
be applied not only to financial assets and financial liabilities, but also to other contracts.
PAS 40, Investment Property
The amendment is applied prospectively and clarifies that PFRS 3, and not the description of
ancillary services in PAS 40, is used to determine if the transaction is the purchase of an asset or
business combination. The description of ancillary services in PAS 40 only differentiates between
investment property and owner-occupied property (i.e., property, plant and equipment).
Effective January 1, 2016
PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification of
Acceptable Methods of Depreciation and Amortization (Amendments)
The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern of
economic benefits that are generated from operating a business (of which the asset is part) rather
than the economic benefits that are consumed through use of the asset. As a result, a revenuebased method cannot be used to depreciate property, plant and equipment and may only be used in
very limited circumstances to amortize intangible assets. The amendments are effective
prospectively for annual periods beginning on or after January 1, 2016, with early adoption
permitted. These amendments are not expected to have any impact to the Group given that the
Group has not used a revenue-based method to depreciate its non-current assets.
*SGVFS010664*
- 25 PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants (Amendments)
The amendments change the accounting requirements for biological assets that meet the definition
of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants
will no longer be within the scope of PAS 41. Instead, PAS 16 will apply. After initial recognition,
bearer plants will be measured under PAS 16 at accumulated cost (before maturity) and using
either the cost model or revaluation model (after maturity). The amendments also require that
produce that grows on bearer plants will remain in the scope of PAS 41 measured at fair value less
costs to sell. For government grants related to bearer plants, PAS 20, Accounting for Government
Grants and Disclosure of Government Assistance, will apply. The amendments are retrospectively
effective for annual periods beginning on or after January 1, 2016, with early adoption permitted.
These amendments are not expected to have any impact to the Group as the Group does not have
any bearer plants.
PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements
(Amendments)
The amendments will allow entities to use the equity method to account for investments in
subsidiaries, joint ventures and associates in their separate financial statements. Entities already
applying PFRS and electing to change to the equity method in its separate financial statements will
have to apply that change retrospectively. For first-time adopters of PFRS electing to use the
equity method in its separate financial statements, they will be required to apply this method from
the date of transition to PFRS. The amendments are effective for annual periods beginning on or
after January 1, 2016, with early adoption permitted. These amendments will not have any impact
on the financial statements of the Group.
PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and Joint
Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
These amendments address an acknowledged inconsistency between the requirements in PFRS 10
and those in PAS 28 (2011) in dealing with the sale or contribution of assets between an investor
and its associate or joint venture. The amendments require that a full gain or loss is recognized
when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain
or loss is recognized when a transaction involves assets that do not constitute a business, even if
these assets are housed in a subsidiary. These amendments are effective from annual periods
beginning on or after 1 January 2016.
PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations
(Amendments)
The amendments to PFRS 11 require that a joint operator accounting for the acquisition of an
interest in a joint operation, in which the activity of the joint operation constitutes a business must
apply the relevant PFRS 3 principles for business combinations accounting. The amendments also
clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an
additional interest in the same joint operation while joint control is retained. In addition, a scope
exclusion has been added to PFRS 11 to specify that the amendments do not apply when the
parties sharing joint control, including the reporting entity, are under common control of the same
ultimate controlling party.
The amendments apply to both the acquisition of the initial interest in a joint operation and the
acquisition of any additional interests in the same joint operation and are prospectively effective
for annual periods beginning on or after January 1, 2016, with early adoption permitted.
*SGVFS010664*
- 26 PFRS 14, Regulatory Deferral Accounts
PFRS 14 is an optional standard that allows an entity, whose activities are subject to rateregulation, to continue applying most of its existing accounting policies for regulatory deferral
account balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14 must present
the regulatory deferral accounts as separate line items on the statement of financial position and
present movements in these account balances as separate line items in the statement of profit or
loss and other comprehensive income. The standard requires disclosures on the nature of, and risks
associated with, the entity’s rate-regulation and the effects of that rate-regulation on its financial
statements. PFRS 14 is effective for annual periods beginning on or after January 1, 2016. Since
the Group is an existing PFRS preparer, this standard would not apply.
Annual Improvements to PFRSs (2012-2014 cycle)
The Annual Improvements to PFRSs (2012-2014 cycle) are effective for annual periods beginning
on or after January 1, 2016 and are not expected to have a material impact on the Group. They
include:
PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes in Methods of
Disposal
The amendment is applied prospectively and clarifies that changing from a disposal through sale
to a disposal through distribution to owners and vice-versa should not be considered to be a new
plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption
of the application of the requirements in PFRS 5. The amendment also clarifies that changing the
disposal method does not change the date of classification.
PFRS 7, Financial Instruments: Disclosures - Servicing Contracts
PFRS 7 requires an entity to provide disclosures for any continuing involvement in a transferred
asset that is derecognized in its entirety. The amendment clarifies that a servicing contract that
includes a fee can constitute continuing involvement in a financial asset. An entity must assess the
nature of the fee and arrangement against the guidance in PFRS 7 in order to assess whether the
disclosures are required. The amendment is to be applied such that the assessment of which
servicing contracts constitute continuing involvement will need to be done retrospectively.
However, comparative disclosures are not required to be provided for any period beginning before
the annual period in which the entity first applies the amendments.
PFRS 7 - Applicability of the Amendments to PFRS 7 to Condensed Interim Financial Statements
This amendment is applied retrospectively and clarifies that the disclosures on offsetting of
financial assets and financial liabilities are not required in the condensed interim financial report
unless they provide a significant update to the information reported in the most recent annual
report.
PAS 19, Employee Benefits - regional market issue regarding discount rate
This amendment is applied prospectively and clarifies that market depth of high quality corporate
bonds is assessed based on the currency in which the obligation is denominated, rather than the
country where the obligation is located. When there is no deep market for high quality corporate
bonds in that currency, government bond rates must be used.
*SGVFS010664*
- 27 PAS 34, Interim Financial Reporting - disclosure of information ‘elsewhere in the interim
financial report’
The amendment is applied retrospectively and clarifies that the required interim disclosures must
either be in the interim financial statements or incorporated by cross-reference between the interim
financial statements and wherever they are included within the greater interim financial report
(e.g., in the management commentary or risk report).
Effective January 1, 2018
PFRS 9, Financial Instruments - Hedge Accounting and amendments to PFRS 9, PFRS 7 and
PAS 39 (2013 version)
PFRS 9 (2013 version) already includes the third phase of the project to replace PAS 39 which
pertains to hedge accounting. This version of PFRS 9 replaces the rules-based hedge accounting
model of PAS 39 with a more principles-based approach. Changes include replacing the rulesbased hedge effectiveness test with an objectives-based test that focuses on the economic
relationship between the hedged item and the hedging instrument, and the effect of credit risk on
that economic relationship; allowing risk components to be designated as the hedged item, not
only for financial items but also for non-financial items, provided that the risk component is
separately identifiable and reliably measurable; and allowing the time value of an option, the
forward element of a forward contract and any foreign currency basis spread to be excluded from
the designation of a derivative instrument as the hedging instrument and accounted for as costs of
hedging. PFRS 9 also requires more extensive disclosures for hedge accounting.
PFRS 9 (2013 version) has no mandatory effective date. The mandatory effective date of
January 1, 2018 was eventually set when the final version of PFRS 9 was adopted by the FRSC.
The adoption of the final version of PFRS 9, however, is still for approval by BOA.
PFRS 9, Financial Instruments (2014 or final version)
In July 2014, the final version of PFRS 9, Financial Instruments, was issued. PFRS 9 reflects all
phases of the financial instruments project and replaces PAS 39, Financial Instruments:
Recognition and Measurement, and all previous versions of PFRS 9. The standard introduces new
requirements for classification and measurement, impairment, and hedge accounting. PFRS 9 is
effective for annual periods beginning on or after January 1, 2018, with early application
permitted. Retrospective application is required, but comparative information is not compulsory.
Early application of previous versions of PFRS 9 is permitted if the date of initial application is
before February 1, 2015.
The adoption of PFRS 9 will have an effect on the classification and measurement of the Group’s
financial assets and impairment methodology for financial assets, but will have no impact on the
classification and measurement of the Group’s financial liabilities. The adoption will also have an
effect on the Group’s application of hedge accounting. The Group is currently assessing the
impact of adopting this standard.
The following new standards issued by the IASB has not yet been adopted by the FRSC:
IFRS 15, Revenue from Contracts with Customers
IFRS 15 was issued by IASB in May 2014 and establishes a new five-step model that will apply to
revenue arising from contracts with customers. Under IFRS 15 revenue is recognized at an amount
that reflects the consideration to which an entity expects to be entitled in exchange for transferring
goods or services to a customer. The principles in IFRS 15 provide a more structured approach to
measuring and recognizing revenue. The new revenue standard is applicable to all entities and will
supersede all current revenue recognition requirements under IFRS. Either a full or modified
*SGVFS010664*
- 28 retrospective application is required for annual periods beginning on or after 1 January 2017 with
early adoption permitted. The Group is currently assessing the impact of IFRS 15 and plans to
adopt the new standard on the required effective date once adopted locally.
3. Significant Accounting Judgments and Estimates
The preparation of the financial statements in compliance with PFRS requires the Group 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 these
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) Contingencies
The Group is currently involved in various legal proceedings. The estimate of the probable
costs for the resolution of these claims has been developed in consultation with outside
counsels handling the Group’s and the Parent Company’s defense in these matters and is based
upon an analysis of potential results. The Group currently does not believe that these
proceedings will have a material adverse effect on its financial position. It is possible,
however, that future results of operations could be materially affected by changes in the
estimates or in the effectiveness of the strategies relating to these proceedings (see Note 28).
b) Functional currency
PAS 21, The Effects of Changes in Foreign Exchange Rates, 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. The Parent Company determined that the RBU’s and FCDU’s functional currency
is the Philippine peso and USD, respectively. In addition, GBI and EWRB determined that
their respective functional currency is in Philippine peso. In making these judgments, the
Group considers the following:
·
·
·
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)
the currency in which funds from financing activities are generated; and
the currency in which receipts from operating activities are usually retained.
c) Operating leases
The Group has entered into lease commitments for its occupied offices and branches. Based
on an evaluation of the terms and conditions of the lease agreements, there will be no transfer
of ownership of assets to the Group at the end of the lease term. The Group has determined
that all significant risks and rewards of ownership are retained by the respective lessors. Thus,
the leases are classified as operating leases (see Note 25).
*SGVFS010664*
- 29 d) Business model for managing financial assets
Change in the Business Model
Under PFRS 9, the Group can only reclassify financial assets if the objective of its business
model for managing those financial assets changes.
In 2012, management deemed it necessary to change the way it manages its investment
securities because of significant changes in its strategic plans, funding structure and cash flow
profile brought about by the Parent Company’s IPO and its branch expansion program.
Management considered the previous model not adequate to capture the fast evolution of the
Parent Company’s business strategies. Prior to the change, the Parent Company’s business
model for the financial assets carried at amortized cost was focused on minimizing, if not to
close, the maturity gap in its statement of financial position by matching core deposits, taken
from the longest tenor bucket of the maturity gap, with longer termed debt instruments. In
2012, the Parent Company’s business model was revised and now focuses on asset-liability
management based on the Parent Company’s maximum cumulative outflow and expansion of
the Parent Company’s investment portfolios to reflect the Parent Company’s investment
strategy.
The Parent Company has determined that the changes qualify as a change in business model
for managing financial assets that would require reclassifications of certain financial assets.
Accordingly, the Parent Company made certain reclassifications pursuant to the new business
model effective July 1, 2012, resulting in =
P711.89 million of Trading and securities gain in the
statement of income, representing the difference between the aggregate amortized cost of
certain securities amounting to =
P5.58 billion and their aggregate fair value of P
=6.29 billion at
the reclassification date.
Sale of Investment Securities at Amortized Cost
The Parent Company’s business model allows for financial assets to be held to collect
contractual cash flows even when sales of certain financial assets occur. PFRS 9, however,
emphasizes that if more than an infrequent sale is made out of a portfolio of financial assets
carried at amortized cost, the entity should assess whether and how such sales are consistent
with the objective of collecting contractual cash flows. In making this judgment, the Parent
Company considers the following:
·
·
·
·
·
sales or derecognition of debt instrument under any of the circumstances spelled out under
paragraph 7, Section 2 of BSP Circular No. 708, Series of 2011;
sales in preparation for funding a potential aberrant behavior in the depositors’ withdrawal
pattern triggered by news of massive withdrawals or massive withdrawal already
experienced by other systemically important banks in the industry;
sales attributable to an anticipated or in reaction to major events in the local and/or
international arena that may adversely affect the collectability of the debt instrument and
seen to prospectively affect adversely the behavior of deposits or creditors;
sales attributable to a change in the Parent Company’s strategy upon completion of the
other phases of PFRS 9; and
sales that the Asset-Liability Management Committee (ALCO) deems appropriate to be
consistent with managing the Parent Company’s balance sheet based upon but are not
limited to the set risk limits and target ratios that have been approved by the BOD.
*SGVFS010664*
- 30 In 2014, the Parent Company sold various securities from different portfolios in its hold-tocollect business model. The sale was primarily driven by the need to improve the Parent
Company’s capital position in relation to the change in the regulatory capital requirements
caused by the Basel III implementation. Also, on various dates in 2013, the Parent Company
sold a substantial portion of government securities from one of the portfolios in its hold-tocollect business model. The securities were sold to fund the lending requirement for FDC.
As a result of the more than infrequent number of sales of securities, the Parent Company
assessed whether such sales are still consistent with the objective of collecting contractual
cash flows. The Parent Company concluded that although more than infrequent number of
sales has been made out of the portfolio, this is not significant enough to be a change in the
business model to trigger reclassification of the remaining securities in the portfolio. The
Parent Company has now two business models on the affected portfolios, the first for the
remaining securities in the portfolios after the sale and the second for the new securities to be
acquired under the portfolios after the sale. The remaining securities in the portfolios will
remain to be classified as measured at amortized cost and new securities to be acquired after
the sale will be classified as at FVTPL.
In 2012, the Parent Company sold government securities classified as investment securities at
amortized cost. The sale of investment securities was contemplated to secure financing for the
Parent Company’s future capital expenditures. The Parent Company has determined that the
sale of investment securities in 2012 is still consistent with its business model of managing
financial assets to collect contractual cash flows.
e) Cash flow characteristics test
Where the financial assets are classified as at amortized cost, the Group assesses whether the
contractual terms of these financial assets give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal outstanding, with interest
representing time value of money and credit risk associated with the principal amount
outstanding. The assessment as to whether the cash flows meet the test is made in the
currency in which the financial asset is denominated. Any other contractual term that changes
the timing or amount of cash flows (unless it is a variable interest rate that represents time
value of money and credit risk) does not meet the amortized cost criteria.
Estimates
a) Impairment of financial assets at amortized cost
The Group reviews its loans and receivables at each statement of financial position date to
assess whether impairment loss should be recorded in the statement of income. In particular,
judgment by management is required in the estimation of the amount and timing of future cash
flows when determining the impairment loss. Such estimates are based on assumptions about
a number of factors and actual results may differ, resulting in future changes to the allowance.
In addition to specific allowance against individually significant loans and receivables, the
Group 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. These internal
ratings take into consideration factors such as any deterioration in country risk, industry and
technological obsolescence, as well as identified structural weaknesses or deterioration in cash
flows.
*SGVFS010664*
- 31 The carrying values of investment securities and loans and receivables and the related
allowance for credit and impairment losses of the Group and of the Parent Company are
disclosed in Notes 8 and 9, respectively.
b) Fair values of financial instruments
The fair values of derivatives that are not quoted in active markets are determined using
valuation techniques. Where valuation techniques are used to determine fair values, they are
validated and periodically reviewed by qualified personnel independent of the area that
created them. All models are reviewed before they are used, and models are calibrated to
ensure that outputs reflect actual data and comparative market prices. To the extent practical,
the models use only observable data, however areas such as credit risk (both own and
counterparty), volatilities and correlations require management to make estimates. Changes in
assumptions about these factors could affect reported fair value of financial instruments.
Refer to Note 5 for the fair value measurements of financial instruments.
c) Recognition of deferred tax assets
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that
taxable income 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.
The recognized and unrecognized net deferred tax assets of the Group and of the Parent
Company are disclosed in Note 23.
d) Impairment of nonfinancial assets
The Group 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
Group 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 carrying values of the Group’s and of the Parent Company’s nonfinancial assets follow:
Property and equipment (Note 10)
Branch licenses (Note 12)
Goodwill (Note 12)
Investment properties (Note 11)
Capitalized software (Note 12)
Other repossessed assets (Note 13)
Customer relationship (Note 12)
Core deposits (Note 12)
Consolidated
2013
2014
=3,452,741
P
=3,513,104
P
1,662,200
2,167,396
1,316,728
1,316,728
1,006,716
912,687
522,128
794,325
162,194
195,102
133,788
129,476
20,891
16,848
Parent Company
2013
2014
=3,320,631
P
=3,351,442
P
1,036,800
2,167,396
919,254
1,293,250
811,423
911,987
516,297
743,272
162,194
195,102
133,788
129,476
20,891
16,848
*SGVFS010664*
- 32 e) Impairment of Goodwill
The Group determines whether goodwill is impaired at least on an annual basis. Goodwill is
written down for impairment where the net present value of the forecasted future cash flows
from the CGU is insufficient to support its carrying value. The Group has used the cost of
equity as the discount rate for the value in use (VIU) computation. The Group determined the
cost of equity using capital asset pricing model.
Future cash flows from the CGU are estimated based on the theoretical annual income of the
CGUs. Average growth rate was derived from the average increase in annual income during
the last 5 years.
The recoverable amount of the CGU has been determined based on a VIU calculation using
cash flow projections from financial budgets approved by the BOD covering a five-year
period. The pre-tax discount rate applied to cash flow projections is 11.68% and 13.09% as of
December 31, 2014 and 2013, respectively. Key assumptions in VIU calculation of CGUs are
most sensitive to the following assumptions: a) interest margin; b) discount rates; c) market
share during the budget period; and d) projected growth rates used to extrapolate cash flows
beyond the budget period.
The carrying values of goodwill of the Group and of the Parent Company are disclosed in
Note 12.
f)
Estimated useful lives of property and equipment, investment properties, other repossessed
assets and intangible assets (excluding land, goodwill and branch licenses)
The Group reviews on an annual basis the estimated useful lives of property and equipment,
investment properties, other repossessed assets and intangible assets based on expected asset
utilization as anchored on business plans and strategies that also consider expected future
technological developments and market behavior. It is possible that future results of
operations could be materially affected by changes in these estimates brought about by
changes in the factors mentioned. A reduction in the estimated useful lives of property and
equipment, investment properties, other repossessed assets and intangible assets would
decrease their respective balances and increase the recorded depreciation and amortization
expense.
As of December 31, 2014 and 2013, the carrying values of property and equipment,
investment properties and other repossessed assets and intangible assets (excluding land,
goodwill and branch licenses) of the Group and of the Parent Company follow:
Property and equipment (Note 10)
Investment properties (Note 11)
Intangible assets (Note 12)
Other repossessed assets (Note 13)
2014
=3,391,737
P
248,168
940,649
195,102
Consolidated
2013
=3,162,248
P
302,374
676,807
162,194
Parent Company
2013
2014
=3,056,827
P
=3,251,412
P
255,451
250,030
670,976
889,596
162,194
195,102
g) Retirement obligation
The cost of defined benefit retirement plans and the present value of the defined benefit
obligation are determined using actuarial valuations. The actuarial valuation involves making
various assumptions. These include the determination of the discount rates, future salary
increases, and mortality rates. Due to the complexity of the valuation, the underlying
assumptions and its long-term nature, defined benefit obligations are highly sensitive to
changes in these assumptions. All assumptions are reviewed at each reporting date.
*SGVFS010664*
- 33 In determining the appropriate discount rate, management considers the interest rates of
government bonds with extrapolated maturities corresponding to the expected duration of the
defined benefit obligation.
The mortality rate is based on publicly available mortality tables for the Philippines and is
modified accordingly with estimates of mortality improvements. Future salary increases are
based on expected future inflation rates.
The present value of the defined benefit obligation of the Group and of the Parent Company
and details about the assumptions used are disclosed in Note 24.
4. Financial Risk Management Objectives and Policies
Risk Management
To ensure that corporate goals and objectives, and business and risk strategies are achieved, the
Parent Company utilizes a risk management process that is applied throughout the organization in
executing all business activities. Employees’ functions and roles fall into one of the three
categories where risk must be managed in the business units, operating units and governance units.
The Parent Company’s activities are principally related to the use of financial instruments and are
exposed to credit risk, liquidity risk, operational risk and market risk, the latter being subdivided
into trading and non-trading risks. Forming part of a coherent risk management system are the
risk concepts, control tools, analytical models, statistical methodologies, historical researches and
market analysis, which are being employed by the Parent Company. These tools support the key
risk process that involves identifying, measuring, controlling and monitoring risks.
Risk Management Structure
a. Board of Directors (the Board or BOD)
The Parent Company’s risk culture is practiced and observed across the Group putting the
prime responsibility on the BOD. It establishes the risk culture and the risk management
organization and incorporates the risk process as an essential part of the strategic plan of the
Group. The BOD approves the Parent Company’s articulation of risk appetite which is used
internally to help management understand the tolerance for risk in each of the major risk
categories, its measurement and key controls available that influence the Parent Company’s
level of risk taking. All risk management policies and policy amendments, risk-taking limits
such as but not limited to credit and trade transactions, market risk limits, counterparty limits,
trader’s limits and activities are based on the Parent Company’s established approving
authorities which are approved by the Parent Company’s BOD. At a high level, the BOD also
approves the Parent Company’s framework for managing risk.
b. Executive Committee
This is a board level committee, which reviews the bank-wide credit strategy, profile and
performance. It approves the credit risk-taking activities based on the Parent Company’s
established approving authorities and likewise reviews and endorses credit-granting activities,
including the Internal Credit Risk Rating System. All credit proposals beyond the credit
approving limit of the Loan and Investments Committee passes through this committee for
final approval.
*SGVFS010664*
- 34 c. Loan and Investments Committee
This committee is headed by the Chairman of the Parent Company whose primary
responsibility is to oversee the Parent Company’s credit risk-taking activities and overall
adherence to the credit risk management framework, review business/credit risk strategies,
quality and profitability of the Parent Company’s credit portfolio and recommend changes to
the credit evaluation process, credit risk acceptance criteria and the minimum and target return
per credit or investment transaction. All credit risk-taking activities based on the Parent
Company’s established approving authorities are evaluated and approved by this committee.
It establishes infrastructure by ensuring business units have the right systems and adequate and
competent manpower support to effectively manage its credit risk.
d. Asset-Liability Management Committee (ALCO)
ALCO, a management level committee, meets on a weekly basis and is responsible for the
over-all management of the Parent Company’s market, liquidity, and financial position related
risks. It monitors the Parent Company’s liquidity position and reviews the impact of strategic
decisions on liquidity. It is responsible for managing liquidity risks and ensuring exposures
remain within established tolerance levels. The ALCO’s primary responsibilities include,
among others, (a) ensuring that the Parent Company and each business unit holds sufficient
liquid assets of appropriate quality and in appropriate currencies to meet short-term funding
and regulatory requirements, (b) managing financial position and ensuring that business
strategies are consistent with its liquidity, capital and funding strategies, (c) establishing asset
and/or liability pricing policies that are consistent with the financial position objectives,
(d) recommending market and liquidity risk limits to the Risk Management Committee and
BOD and (e) approving the assumptions used in contingency and funding plans. It also
reviews cash flow forecasts, stress testing scenarios and results, and implements liquidity
limits and guidelines.
e. Risk Management Committee (RMC)
RMC is a board level committee who convenes monthly and is primarily responsible to assist
the Board in managing the Parent Company's risk taking activities. This is performed by the
committee by institutionalizing risk policies and overseeing the Parent Company's risk
management system. It develops and recommends risk appetite and tolerances for the Parent
Company's major risk exposures to the Board. Risk management principles, strategies,
framework, policies, processes, and initiatives and any modifications and amendments thereto
are reviewed and approved by RMC. It oversees and reports to the Board the effectiveness of
the risk management system, overall risk profile, and compliance with the risk appetite and
tolerances that the Board approved.
f.
Risk Management Subcommittee (RMSC)
RMSC is a management level committee who convenes monthly and is responsible to assist
RMC in fulfilling its responsibilities in managing the Parent Company's risk taking activities.
This is performed by the committee by implementing the risk management principles,
strategies, framework, policies, processes, and initiatives across the Parent Company. It
leads the effective conduct of risk and capital management. It oversees and directs the
management of the Parent Company's overall risk profile. The committee likewise oversees
risk incidents, control gaps, and control deficiencies and management actions in
implementing the corresponding corrective actions.
g. Audit Committee (Audit Com)
The Audit Com assists the BOD in fulfilling its oversight responsibilities for the financial
reporting process, the system of internal control, the audit process, and the Parent Company’s
process for monitoring compliance with laws and regulation and the code of conduct. It
*SGVFS010664*
- 35 retains oversight responsibilities for operational risk, the integrity of the Parent Company’s
financial statements, compliance, legal risk and overall policies and practices relating to risk
management. It is tasked to discuss with management the Parent Company’s major risk
exposures and ensures accountability on the part of management to monitor and control such
exposures including the Parent Company’s risk assessment and risk management policies.
The Audit Com discusses with management and the independent auditor the major issues
regarding accounting principles and financial statement presentation, including any significant
changes in the Parent Company’s selection or application of accounting principles; and major
issues as to the adequacy of the Parent Company’s internal controls; and the effect of
regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial
statements of the Parent Company.
h. Corporate Governance and Compliance Committee (CGCC)
The CGCC is responsible for ensuring the BOD’s effectiveness and due observance of
corporate governance principles and guidelines. It reviews and assesses the adequacy of the
CGCC’s charter and Corporate Governance Manual and recommends changes as necessary. It
oversees the implementation of the Parent Company’s compliance program and ensures
compliance issues are resolved expeditiously. It assists Board members in assessing whether
the Parent Company is managing its compliance risk effectively and ensures regular review of
the compliance program.
i.
Risk Management Division (RMD)
RMD performs an independent risk governance function within the Parent Company. RMD is
tasked with identifying, measuring, controlling and monitoring existing and emerging risks
inherent in the Parent Company’s overall portfolio (on- or off-balance sheet). RMD develops
and employs risk assessment tools to facilitate risk identification, analysis and measurement.
It is responsible for developing and implementing the framework for policies and practices to
assess and manage enterprise-wide market, credit, operational, and all other risks of the Parent
Company.
It also develops and endorses risk tolerance limits for BOD approval, as endorsed by the
RMC, and monitors compliance with approved risk tolerance limits. Finally, it regularly
apprises the BOD, through the RMC, the results of its risk monitoring.
j.
Internal Audit Division (IAD)
IAD provides an independent assessment of the Parent Company’s management and
effectiveness of existing internal control systems through adherence testing of processes and
controls across the organization. The IAD audits risk management processes throughout the
Parent Company annually or in a cycle depending on the latest audit rating. It employs a riskbased audit approach that examines both the adequacy of the procedures and the Parent
Company’s compliance with the procedures. It discusses the results of all assessments with
management, and reports its findings and recommendations to the Audit Committee which in
turn, conducts the detailed discussion of the findings and recommendations during its regular
meetings. IAD’s activities are suitably designed to provide the BOD with reasonable
assurance that significant financial and operating information is materially complete, reliable
and accurate; internal resources are adequately protected; and employee performance is in
compliance with the Parent Company’s policies, standards, procedures and applicable laws
and regulations.
*SGVFS010664*
- 36 k. Compliance Division
Compliance Division is responsible for reviewing any legal or regulatory matters that could
have a significant impact on the Parent Company’s financial statements, the Parent
Company’s compliance with applicable laws and regulations, and inquiries received from
regulators or governmental agencies. It reviews the effectiveness and adequacy of the system
for monitoring compliance with laws and regulations and the results of management's
investigation and follow-up (including disciplinary action) for any instances of
noncompliance.
Credit Risk
Credit risk refers to the potential loss of earnings or capital arising from an obligor/s, customer/s
or counterparty’s failure to perform and/or to meet the terms of any contract with the Group.
Credit risks may last for the entire tenor and set at the full amount of a transaction and in some
cases may exceed the original principal exposures. The risk may arise from lending, trade
financing, trading, investments and other activities undertaken by the Group. To identify and
assess this risk, the Group has a structured and standardized credit rating, and approval process
according to the borrower or business and/or product segment. For large corporate credit
transactions, the Parent Company has a comprehensive procedure for credit evaluation, risk
assessment and well-defined concentration limits, which are established for each type of borrower.
At the portfolio level, which may be on an overall or by product perspective, RMD manages the
Group’s credit risk.
Credit concentration
Excessive concentration of lending plays a significant role in the weakening of asset quality. The
Group reduces this risk by diversifying its loan portfolio across various sectors and borrowers.
The Group believes that good diversification across economic sectors and geographic areas,
among others, will enable it to ride through business cycles without causing undue harm to its
asset quality.
RMD reviews the Group’s loan portfolio in line with the Group’s policy of not having significant
concentrations of exposure to specific industries or group of borrowers. Management of
concentration of risk is by client/counterparty and by industry sector. For risk concentration
monitoring purposes, the financial assets are broadly categorized into loans and receivables, loans
and advances to banks, and investment securities. RMD ensures compliance with BSP’s limit on
exposure to any single person or group of connected persons by closely monitoring large
exposures and top 20 borrowers for both single and group accounts.
Aside from ensuring compliance with BSP’s limit on exposures to any single person or group of
connected persons, it is the Parent Company’s policy to keep the expected loss (determined based
on the credit risk rating of the account) of large exposure accounts to, at most, one and a half
percent (1.50 %) of their aggregate outstanding balance. This is to maintain the quality of the
Group’s large exposures. With this, accounts with better risk grades are given priority in terms of
being granted a bigger share in the Group’s loan facilities.
Aligned with the Manual of Regulations for Banks definition, the Group considers its loan
portfolio concentrated if it has exposures of more than thirty percent (30.00%) to a particular
industry.
*SGVFS010664*
- 37 Credit concentration profile as of December 31, 2014 and 2013
Maximum credit risk exposures
The following table shows the Group’s and the Parent Company’s maximum exposure to credit
risk after taking into account any collateral held or other credit enhancements:
Consolidated
2013
2014
Loans and receivables:
Receivables from
customers
Corporate lending
Consumer lending
Carrying
Amount
Fair Value
of Collateral
Maximum
Exposure to
Credit Risk
P55,161,693
=
64,004,558
= 119,166,251
P
P6,617,435
=
27,095,096
= 33,712,531
P
P47,750,198
=
46,777,781
=94,527,979
P
Financial Effect
of Collateral
Carrying
Amount
Fair Value
of Collateral
Maximum
Exposure to
Credit Risk
Financial
Effect of
Collateral
P7,411,495
=
17,226,777
= 24,638,272
P
=47,588,271
P
44,871,825
=92,460,096
P
=13,143,982
P
20,544,130
=33,688,112
P
=38,940,835
P
38,413,862
=77,354,697
P
=8,647,436
P
6,457,963
=15,105,399
P
Financial
Effect of
Collateral
Parent Company
2013
2014
Loans and receivables:
Receivables from
customers
Corporate lending
Consumer lending
Carrying
Amount
Fair Value
of Collateral
P55,461,693
=
58,162,486
= 113,624,179
P
P6,617,435
=
27,095,096
= 33,712,531
P
Maximum
Exposure to
Credit Risk
Financial Effect
of Collateral
Carrying
Amount
Fair Value
of Collateral
Maximum
Exposure to
Credit Risk
P7,411,495
=
17,226,777
=24,638,272
P
=47,588,271
P
41,887,643
=89,475,914
P
=13,143,982
P
20,543,332
=33,687,314
P
=38,940,835
P
38,299,448
=77,240,283
P
P48,050,198
=
40,935,709
= 88,985,907
P
=8,647,436
P
3,588,195
=12,235,631
P
For off-balance sheet items, the figures presented below summarize the Group’s and the Parent
Company’s maximum exposure to credit risk:
Consolidated
2013
2014
Off-balance sheet items
Direct credit substitutes
Transaction-related contingencies
Trade-related contingencies arising
from movement of goods and
commitments with an original
maturity of up to one (1) year
Net Credit
Exposure
Credit
Equivalent
Amount
Credit Risk
Mitigation
Net Credit
Exposure
=
P−
−
P
= 243,729
619,081
=
P400,119
711,373
=
P−
−
=
P400,119
711,373
−
=
P−
372,352
P
= 1,235,162
419,995
P
=1,531,487
−
=
P−
419,995
P
=1,531,487
Credit Risk
Mitigation
Net Credit
Exposure
Credit
Equivalent
Amount
Credit Risk
Mitigation
P
= 243,729
619,081
372,352
P
= 1,235,162
Parent Company
2013
2014
Off-balance sheet items
Direct credit substitutes
Transaction-related contingencies
Trade-related contingencies arising
from movement of goods and
commitments with an original
maturity of up to one (1) year
Credit
Equivalent
Amount
Credit Risk
Mitigation
Net Credit
Exposure
Credit
Equivalent
Amount
P
= 243,729
619,081
=
P−
−
P
= 243,729
619,081
=
P400,119
711,373
=
P−
−
=
P400,119
711,373
372,352
P
= 1,235,162
−
=
P−
372,352
P
= 1,235,162
419,995
P
=1,531,487
−
=
P−
419,995
P
=1,531,487
Large exposures and top 20 borrowers
The table below summarizes the large exposures and top 20 borrowers of the Parent Company:
Aggregate Exposure (in billions)
Composite Risk Rating
Total Expected Loss/Aggregate Exposure
2014
Top 20 Borrowers
Single
Group
Borrowers
Borrowers
P
=25.60
P
=32.65
3.42
3.56
0.73%
0.87%
Large Exposures
Group
Single
Borrowers
Borrowers
P
=18.88
P
=25.91
3.26
3.40
0.69%
0.72%
*SGVFS010664*
- 38 -
Aggregate Exposure (in billions)
Composite Risk Rating
Total Expected Loss/Aggregate Exposure
2013
Top 20 Borrowers
Single
Group
Borrowers
Borrowers
P
=20.03
P
=24.09
3.25
3.40
0.68%
0.82%
Large Exposures
Group
Single
Borrowers
Borrowers
P
=13.83
P
=16.49
2.80
2.93
0.54%
0.58%
As of December 31, 2014 and 2013, the maximum credit exposure to any client or counterparty is
about =
P4.59 billion and =
P4.46 billion, respectively. The credit exposures, after due consideration
of the allowed credit enhancements, of the Group, are all compliant with the regulatory single
borrower’s limit and considered to be the maximum credit exposure to any client or counterparty.
Concentration by industry
An industry sector analysis of the financial assets of the Group follows:
Financial intermediaries
Real estate, renting and business activity
Private households with employed persons
Wholesale and retail trade, repair of motor
vehicles
Manufacturing
Agriculture, fisheries and forestry
Transportation, storage and communication
Others****
Loans and
Receivables*
P
= 16,736,056
19,206,893
81,835,479
2014
Loans and
Advances to
Banks**
P
= 30,085,290
−
−
Investment
Securities***
P
= 18,991,987
−
−
Total
P
= 65,813,333
19,206,893
81,835,479
15,387,384
−
−
15,387,384
7,880,310
−
−
7,880,310
2,347,987
−
−
2,347,987
1,023,348
−
−
1,023,348
26,213,540
−
−
26,213,540
170,630,997
30,085,290
18,991,987
219,708,274
Allowance for credit losses (Note 14)
(3,811,163)
−
−
(3,811,163)
P
= 166,819,834
P
= 30,085,290
P
= 18,991,987
P
= 215,897,111
*
Includes commitments and contingent accounts.
** Comprised of Other cash items, Due from BSP, Due from other banks and IBLR.
*** Comprised of Financial assets at FVTPL, Financial assets at FVTOCI and Investment securities at amortized cost.
**** Pertains to unclassified loans and receivables, commitments and contingent accounts.
Financial intermediaries
Real estate, renting and business activity
Private households with employed persons
Wholesale and retail trade, repair of motor
vehicles
Manufacturing
Agriculture, fisheries and forestry
Transportation, storage and communication
Others****
Loans and
Receivables*
P
=27,311,023
24,897,531
61,426,923
2013
Loans and
Advances to
Banks**
P
=23,564,450
−
−
Investment
Securities***
P
=11,039,756
−
−
Total
P
=61,915,229
24,897,531
61,426,923
15,129,128
−
−
15,129,128
14,848,725
−
−
14,848,725
1,424,364
−
−
1,424,364
1,632,873
−
−
1,632,873
33,371,803
−
−
33,371,803
180,042,370
23,564,450
11,039,756
214,646,576
Allowance for credit losses (Note 14)
(4,002,355)
−
−
(4,002,355)
P
=176,040,015
P
=23,564,450
P
=11,039,756
P
=210,644,221
*
Includes commitments and contingent accounts.
** Comprised of Other cash items, Due from BSP, Due from other banks and IBLR.
*** Comprised of Financial assets at FVTPL, Financial assets at FVTOCI and Investment securities at amortized cost.
**** Pertains to unclassified loans and receivables, commitments and contingent accounts.
*SGVFS010664*
- 39 An industry sector analysis of the financial assets of the Parent Company follows:
Financial intermediaries
Real estate, renting and business activity
Private households with employed persons
Wholesale and retail trade, repair of motor
vehicles
Manufacturing
Agriculture, fisheries and forestry
Transportation, storage and communication
Others****
Allowance for credit losses (Note 14)
*
**
***
****
15,355,395
7,875,235
1,657,975
1,023,118
26,083,041
165,525,332
(3,728,222)
P
= 161,797,110
−
−
−
−
−
29,819,601
−
P
= 29,819,601
Investment
Securities***
P
= 18,991,987
−
–
Total
P
= 65,120,069
19,176,794
78,045,293
−
−
−
−
−
18,991,987
−
P
= 18,991,987
15,355,395
7,875,235
1,657,975
1,023,118
26,083,041
214,336,920
(3,728,222)
P
= 210,608,698
Includes commitments and contingent accounts.
Comprised of Other cash items, Due from BSP, Due from other banks and IBLR.
Comprised of Financial assets at FVTPL, Financial assets at FVTOCI and Investment securities at amortized cost.
Pertains to unclassified loans and receivables, commitments and contingent accounts.
Financial intermediaries
Real estate, renting and business activity
Private households with employed persons
Wholesale and retail trade, repair of motor
vehicles
Manufacturing
Agriculture, fisheries and forestry
Transportation, storage and communication
Others****
Allowance for credit losses (Note 14)
*
**
***
****
Loans and
Receivables*
P
= 16,308,481
19,176,794
78,045,293
2014
Loans and
Advances to
Banks**
P
= 29,819,601
−
−
Loans and
Receivables*
P
=27,250,596
24,858,454
61,397,521
2013
Loans and
Advances to
Banks**
P
=23,133,121
−
−
15,016,409
14,827,935
605,639
1,628,341
30,777,047
176,361,942
(3,975,337)
P
=172,386,605
−
−
−
−
−
23,133,121
−
P
=23,133,121
Investment
Securities***
P
=11,039,343
−
–
Total
P
=61,423,060
24,858,454
61,397,521
−
−
−
−
−
11,039,343
−
P
=11,039,343
15,016,409
14,827,935
605,639
1,628,341
30,777,047
210,534,406
(3,975,337)
P
=206,559,069
Includes commitments and contingent accounts.
Comprised of Other cash items, Due from BSP, Due from other banks and IBLR.
Comprised of Financial assets at FVTPL, Financial assets at FVTOCI and Investment securities at amortized cost.
Pertains to unclassified loans and receivables, commitments and contingent accounts.
Collateral and other credit enhancements
Collaterals are taken into consideration during the loan application process as they offer an
alternative way of collecting from the client should a default occur. The percentage of loan value
attached to the collateral offered is part of the Group’s lending guidelines. Such percentages take
into account safety margins for foreign exchange rate exposure/fluctuations, interest rate exposure,
and price volatility.
Collaterals are valued according to existing credit policy standards and, following the latest
appraisal report, serve as the basis for the amount of the secured loan facility.
Premium security items are collaterals that have the effect of reducing the estimated credit risk for
a facility. The primary consideration for enhancements falling under such category is the ease of
converting them to cash.
The Group is not permitted to sell or re-pledge the collateral in the absence of default by the owner
of the collateral. It is the Group’s policy to dispose foreclosed assets in an orderly fashion. The
proceeds of the sale of the foreclosed assets, included under Investment Properties, are used to
reduce or repay the outstanding claim. In general, the Group does not occupy repossessed
properties for business use.
*SGVFS010664*
- 40 As part of the Group’s risk control on security/collateral documentation, standard documents are
made for each security type and deviation from the pro-forma documents are subject to Legal
Services Division’s approval prior to acceptance.
Credit collaterals profile
The table below provides the collateral profile of the outstanding loan portfolio of the Parent
Company:
Security
REM*
Other Collateral**
Unsecured
Corporate Loans
2013
2014
11.13%
15.33%
24.50%
17.86%
64.37%
66.81%
Consumer Loans
2013
2014
14.80%
14.29%
23.74%
34.41%
61.46%
51.30%
* Real Estate Mortgage
** Consists of government securities, stocks and bonds, hold-out on deposits, assignment of receivables etc.
As for the computation of credit risk weights, collaterals of the back-to-back and Home Guaranty
covered loans, and Philippine sovereign guarantees are the only credit risk mitigants considered as
eligible.
Internal Credit Risk Rating System
The Parent Company employs a credit scoring system for all corporate borrowers to assess risks
relating to the borrower and the loan exposure. Borrower risk is evaluated by considering
(a) quantitative factors under financial condition and (b) qualitative factors, such as management
quality and industry outlook.
Financial condition assessment focuses on profitability, liquidity, capital adequacy, sales growth,
production efficiency and leverage. Management quality determination is based on the Parent
Company’s strategies, management competence and skills and management of banking
relationship. On the other hand, industry prospect is evaluated based on its importance to the
economy, growth, industry structure and relevant government policies. Based on these factors,
each borrower is assigned a Borrower Risk Rating (BRR), an 11-scale scoring system that ranges
from 1 to 10, including SBL. In addition to the BRR, the Parent Company assigns a Facility Risk
Rating (FRR) to determine the risk of the prospective (or existing) exposure with respect to each
credit facility that it applied for (or under which the exposure is accommodated). The FRR
focuses on the quality and quantity of the collateral applicable to the underlying facility,
independent of borrower quality. Consideration is given to the availability and amount of any
collateral and the degree of control, which the lender has over the collateral. FRR applies both to
balance sheet facilities and contingent liabilities. One FRR is determined for each individual
facility taking into account the different security arrangements or risk influencing factors to allow
a more precise presentation of risk. A borrower with multiple facilities will have one BRR and
multiple FRRs. The combination of the BRR and the FRR results to the Adjusted Borrower Risk
Rating (ABRR).
The credit rating for each borrower is reviewed annually. A more frequent review is warranted in
cases where the borrower has a higher risk profile or when there are extraordinary or adverse
developments affecting the borrower, the industry and/or the Philippine economy.
*SGVFS010664*
- 41 The following is a brief explanation of the Parent Company’s risk grades:
Rating
1
Description
Excellent
2
Strong
3
Good
·
·
·
·
·
·
·
·
·
·
·
·
·
4
Satisfactory
·
·
·
5
Acceptable
·
·
·
·
5B
Acceptable
·
·
·
·
·
6
Watchlist
·
·
·
7
Special Mention
·
·
·
·
Account/Borrower Characteristics
low probability of going into default within the coming year; very high debt
service capacity and balance sheets show no sign of any weakness
has ready access to adequate funding sources
high degree of stability, substance and diversity
of the highest quality under virtual economic conditions
low probability of going into default in the coming year
access to money markets is relatively good
business remains viable under normal market conditions
strong market position with a history of successful financial performance
financials show adequate cash flows for debt servicing and generally
conservative balance sheets
sound but may be susceptible, to a limited extent, to cyclical changes in the
markets in which they operate
financial performance is good and capacity to service debt remains comfortable
cash flows remain healthy and critical balance sheet ratios are at par with
industry norms
reported profits in the past three years and expected to sustain profitability in the
coming year
clear risk elements exist and probability of going into default is somewhat
greater, as reflected in the volatility of earnings and overall performance
normally have limited access to public financial markets
able to withstand normal business cycles, but expected to deteriorate beyond
acceptable levels under prolonged unfavorable economic period
combination of reasonably sound asset and cash flow protection
risk elements for the Parent Company are sufficiently pronounced, but would
still be able to withstand normal business cycles
immediate deterioration beyond acceptable levels is expected given prolonged
unfavorable economic period
there is sufficient cash flow either historically or expected in the future in spite
of economic downturn combined with asset protection
financial condition hard to ascertain due to weak validation of financial
statements coupled by funding leakages to other business interests whose
financial condition is generally unknown
continuous decline in revenues and margins due to competition; increasing debt
levels not commensurate to growth in revenues and funding requirements
thin margin business with banks financing bulk of working capital and capex
requirements coupled by substantial dividend pay-outs
chronically tight cashflows with operating income negative or barely enough for
debt servicing
lines with banks maxed out and availments evergreen with minimal payments
made over time or with past record of past due loans with other banks, cancelled
credit cards and court cases
affected by unfavorable industry or company-specific risk factors
operating performance and financial strength may be marginal and ability to
attract alternative sources of finance is uncertain
difficulty in coping with any significant economic downturn; some payment
defaults encountered
net losses for at least two consecutive years
ability or willingness to service debt are in doubt
weakened creditworthiness
expected to experience financial difficulties, putting the Parent Company’s
exposure at risk
*SGVFS010664*
- 42 Rating
8
Description
Substandard
·
·
·
·
9
10
Doubtful
Loss
·
·
·
·
·
·
·
·
Account/Borrower Characteristics
collectability of principal or interest becomes questionable by reason of adverse
developments or important weaknesses in financial cover
negative cash flows from operations and negative interest coverage
past due for more than 90 days
there exists the possibility of future loss to the Parent Company unless given
closer supervision
unable or unwilling to service debt over an extended period of time and near
future prospects of orderly debt service are doubtful
with non-performing loan (NPL) status
previously rated ‘Substandard’ by the BSP
loss on credit exposure unavoidable
totally uncollectible
prospect of re-establishment of creditworthiness and debt service is remote
lender shall take or has taken title to the assets and is preparing foreclosure
and/or liquidation although partial recovery may be obtained in the future
considered uncollectible or worthless and of such little value that continuance as
bankable assets is not warranted although the loans may have some recovery or
salvage value
It is the Parent Company’s policy to maintain accurate and consistent risk ratings across the credit
portfolio. This facilitates a focused management of the applicable risk and the comparison of
credit exposures across all lines of business, geographic regions and products. The rating system
is supported by a variety of financial analytics, combined with processed market information to
provide the main inputs for the measurement of counterparty risk. All internal risk ratings are
tailored to the various categories and are derived in accordance with the Parent Company’s rating
policy. The risk ratings are assessed and updated regularly.
Credit Quality Profile as of December 31, 2014 and 2013
External ratings
The Group also uses external ratings, such as Standard & Poor’s, Moody’s, and Fitch, to evaluate
its counterparties and in its assignment of credit risk weights to its banking book exposures.
Transactions falling under this category are normally of the following nature: placements with
other banks, money market lending, debt security investments, and to some extent, equity security
investments.
Investments and financial securities
The table below shows credit quality, based on external ratings, per class of financial assets that
are neither past due nor impaired of the Group:
Due from BSP
Due from other banks
IBLR
Financial assets at FVTPL:
Government securities
Private bonds
Equity securities
Investment securities at amortized cost:
Government securities
Private bonds
Financial assets at FVTOCI:
Quoted equity securities
Unquoted equity securities
AA/A
P
= 23,128,678
3,379,539
2,893,384
2014
BB/B
P
=−
81,062
–
Unrated
P
=−
119,927
–
Total
P
= 23,128,678
3,580,528
2,893,384
7,391,724
1,307,094
–
8,698,818
–
367,339
–
367,339
–
890,874
225,659
1,116,533
7,391,724
2,565,307
225,659
10,182,690
7,536,445
1,258,433
8,794,878
–
–
–
–
–
–
7,536,445
1,258,433
8,794,878
–
127
127
P
= 46,895,424
–
–
–
P
= 448,401
7,273
7,019
14,292
P
= 1,250,752
7,273
7,146
14,419
P
= 48,594,577
*SGVFS010664*
- 43 -
Due from BSP
Due from other banks
IBLR
Financial assets at FVTPL:
Government securities
Private bonds
Equity securities
Investment securities at amortized cost:
Government securities
Private bonds
Financial assets at FVTOCI:
Quoted equity securities
Unquoted equity securities
AA/A
P
=18,537,655
1,309,675
1,340,729
691,437
74,483
190,915
956,835
7,667,254
928,394
8,595,648
–
127
127
P
=30,740,669
2013
BB/B
=
P−
375,143
1,775,800
Unrated
=
P−
67,006
–
–
–
376,855
92,288
522,725
615,013
–
376,855
Total
P
=18,537,655
1,751,824
3,116,529
691,437
543,626
713,640
1,948,703
–
–
484,259
484,259
413
413
7,667,254
1,413,066
9,080,320
–
–
–
7,486
3,120
10,606
P
=693,038
7,486
3,247
10,733
P
=34,445,764
P
=3,012,057
The table below shows credit quality, based on external ratings, per class of financial assets that
are neither past due nor impaired of the Parent Company:
Due from BSP
Due from other banks
IBLR
Financial assets at FVTPL:
Government securities
Private bonds
Equity securities
Investment securities at amortized cost:
Government securities
Private bonds
Financial assets at FVTOCI:
Quoted equity securities
Unquoted equity securities
Due from BSP
Due from other banks
IBLR
Financial assets at FVTPL:
Government securities
Private bonds
Equity securities
Investment securities at amortized cost:
Government securities
Private bonds
Financial assets at FVTOCI:
Quoted equity securities
Unquoted equity securities
AA/A
P
= 22,970,798
3,292,987
2,893,384
2014
BB/B
P
=–
81,062
–
Unrated
P
=–
119,927
–
Total
P
= 22,970,798
3,493,976
2,893,384
7,391,724
1,307,094
–
8,698,818
–
367,339
–
367,339
–
890,874
225,659
1,116,533
7,391,724
2,565,307
225,659
10,182,690
7,536,445
1,258,433
8,794,878
–
–
–
–
–
–
7,536,445
1,258,433
8,794,878
–
127
127
P
= 46,650,992
–
–
–
P
= 448,401
7,273
7,019
14,292
P
= 1,250,752
7,273
7,146
14,419
P
= 48,350,145
AA/A
P
=18,404,125
1,309,675
1,340,729
2013
BB/B
=
P−
227,723
1,775,800
Unrated
=
P−
67,006
−
Total
P
=18,404,125
1,604,404
3,116,529
691,437
74,483
190,915
956,835
−
376,855
−
376,855
−
92,288
522,725
615,013
691,437
543,626
713,640
1,948,703
7,667,254
928,394
8,595,648
−
484,259
484,259
−
−
−
7,667,254
1,412,653
9,079,907
−
127
127
P
=30,607,139
−
−
−
P
=2,864,637
7,486
3,120
10,606
P
=692,625
7,486
3,247
10,733
P
=34,164,401
*SGVFS010664*
- 44 The tables below show the credit quality, based on the credit rating system, by class of loans and
receivables that are neither past due nor impaired of the Group:
Receivables from customers:
Corporate lending
Consumer lending
Unquoted debt securities
Accounts receivable
Accrued interest receivable
Sales contract receivable
Receivables from customers:
Corporate lending
Consumer lending
Unquoted debt securities
Accounts receivable
Accrued interest receivable
Sales contract receivable
High Grade
Standard
Grade
2014
Substandard
Grade
Unrated
Total
P
= 24,852,588
9,902,051
34,754,639
–
–
–
–
–
P
= 34,754,639
P
= 28,538,405
28,089,398
56,627,803
–
–
–
–
–
P
= 56,627,803
P
=–
22,749,148
22,749,148
–
–
–
–
–
P
= 22,749,148
P
=–
–
–
209,513
763,051
1,066,830
64,913
2,104,307
P
= 2,104,307
P
= 53,390,993
60,740,597
114,131,590
209,513
763,051
1,066,830
64,913
2,104,307
P
= 116,235,897
High Grade
Standard
Grade
2013
Substandard
Grade
Unrated
Total
P
=21,207,719
5,933,895
27,141,614
−
9,064
51,290
2,247
62,601
P
=27,204,215
P
=22,489,408
20,580,491
43,069,899
−
7,548
3,435
421
11,404
P
=43,081,303
=
P−
19,207,950
19,207,950
−
781
270
2,797
3,848
P
=19,211,798
=
P−
−
−
208,132
860,571
622,055
162,797
1,853,555
P
=1,853,555
P
=43,697,127
45,722,336
89,419,463
208,132
877,964
677,050
168,262
1,931,408
P
=91,350,871
The tables below show the credit quality, based on the credit rating system, by class of loans and
receivables that are neither past due nor impaired of the Parent Company:
Receivables from customers:
Corporate lending
Consumer lending
Unquoted debt securities
Accounts receivable
Accrued interest receivable
Sales contract receivable
Receivables from customers:
Corporate lending
Consumer lending
Unquoted debt securities
Accounts receivable
Accrued interest receivable
Sales contract receivable
High Grade
Standard
Grade
2014
Substandard
Grade
Unrated
Total
P
= 25,152,588
4,072,668
29,225,256
–
–
–
–
–
P
= 29,225,256
P
= 28,538,405
28,089,398
56,627,803
–
–
–
–
–
P
= 56,627,803
P
=–
22,749,148
22,749,148
–
–
–
–
–
P
= 22,749,148
P
=–
–
–
209,097
1,327,405
1,037,681
64,913
2,639,096
P
= 2,639,096
P
= 53,690,993
54,911,214
108,602,207
209,097
1,327,405
1,037,681
64,913
2,639,096
P
= 111,241,303
High Grade
Standard
Grade
2013
Substandard
Grade
Unrated
Total
P
=21,207,719
2,820,024
24,027,743
−
−
−
−
−
P
=24,027,743
P
=22,489,408
20,556,206
43,045,614
−
−
−
−
−
P
=43,045,614
=
P−
19,196,101
19,196,101
−
−
−
−
−
P
=19,196,101
=
P−
−
−
208,132
860,571
622,055
162,797
1,853,555
P
=1,853,555
P
=43,697,127
42,572,331
86,269,458
208,132
860,571
622,055
162,797
1,853,555
P
=88,123,013
*SGVFS010664*
- 45 Borrowers with unquestionable repaying capacity and to whom the Group is prepared to lend on
an unsecured basis, either partially or totally, are generally rated as High Grade borrowers.
Included in the High Grade category are those accounts that fall under ‘Excellent’, ‘Strong’,
‘Good’ and ‘Satisfactory’ categories under ICRRS (with rating of 1-4).
Standard rated borrowers normally require tangible collateral, such as real estate mortgage (REM),
to either fully or partially secure the credit facilities as such accounts indicate a relatively higher
credit risk than those considered as High Grade. Included in Standard Grade category are those
accounts that fall under ‘Acceptable’, ‘Watchlist’ and ‘Special mention’ categories under ICRRS
(with rating of 5-7).
Substandard Grade accounts pertain to corporate accounts falling under the ‘Substandard,’
‘Doubtful’ and ‘Loss’ categories under ICRRS (with rating of 8-10) and unsecured revolving
credit facilities.
Those accounts that are classified as unrated includes unquoted debt securities, accounts
receivable, accrued interest receivable and sales contract receivable for which the Group has not
yet established a credit rating system.
Impairment Assessment
On a regular basis, the Group conducts an impairment assessment exercise to determine expected
losses on its loans portfolio.
The main considerations for the loan impairment assessment include whether any payments of
principal or interest are overdue by more than 30 to 90 days as applicable, or if there are any
known difficulties in the cash flows of counterparties, credit rating downgrades, or infringement of
the original terms of the contract. The Group addresses impairment assessment in two areas:
specific or individually assessed allowances and collectively assessed allowances.
a. Specific Impairment Testing
Specific impairment testing is the process whereby classified accounts are individually
significant subject to impairment testing. Classified accounts are past due accounts and
accounts whose credit standing and/or collateral has weakened due to varying circumstances.
This present status of the account may adversely affect the collection of both principal and
interest payments.
Indicators of impairment testing are past due accounts, decline in credit rating from
independent rating agencies and recurring net losses.
The net recoverable amount is computed using the present value approach. The discount rate
used for loans with fixed and floating interest rate is the original effective interest rate and last
repriced interest rate, respectively. Net recoverable amount is the total cash inflows to be
collected over the entire term of the loan or the expected proceeds from the sale of collateral.
Specific impairment testing parameters include the account information (original and
outstanding loan amount), interest rate (nominal and historical effective) and the business
plan. Also included are the expected date of recovery, expected cash flows, probability of
collection, and the carrying value of loan and net recoverable amount.
The Group conducts specific impairment testing on significant classified and restructured
corporate accounts.
*SGVFS010664*
- 46 b. Collective Impairment Testing
All other accounts which were not individually assessed are grouped based on similar credit
characteristics and are collectively assessed for impairment under the Collective Impairment
Testing. This is also in accordance with PAS 39, which provides that all loan accounts not
included in the specific impairment test shall be subjected to collective testing.
Collective impairment testing of corporate accounts
Corporate accounts, which are unclassified and with current status are grouped in accordance
with the Parent Company’s internal credit risk rating. Each internal credit risk rating would
fetch an equivalent loss impairment where the estimated loss is determined in consideration of
the Parent Company’s historical loss experience. Impairment loss is derived by multiplying
the outstanding loan balance on a per internal credit risk rating basis against a factor rate. The
factor rate, which estimates the expected loss from the credit exposure, is the product of the
Default Rate (DR) and the Loss Given Default Rate (LGDR). DR is estimated based on the
3-year historical average default experience by internal credit risk rating of the Parent
Company, while, LGDR is estimated based on loss experience (net of recoveries from
collateral) for the same reference period.
Collective impairment testing of consumer accounts
Consumer accounts, both in current and past due status are collectively tested for impairment
as required under PAS 39. Accounts are grouped by type of product - personal loans, salary
loans, housing loans, auto loans and credit cards.
The estimation of the impaired consumer products’ estimated loss is based on three major
concepts: age buckets, probability of default and recoverability. Per product, exposures are
categorized according to their state of delinquency - (1) current and (2) past due (which is
subdivided into 30, 60, 90, 120, 150, 180 and more than 180 days past due). Auto, housing and
salary loans have an additional bucket for its items in litigation accounts. The Group partitions
its exposures as it recognizes that the age buckets have different rates and/ or probabilities of
default. The initial estimates of losses per product due to default are then adjusted based on the
recoverability of cash flows, to calculate the expected loss of the Group. Auto and housing
loans consider the proceeds from the eventual sale of foreclosed collaterals in approximating
its recovery rate; while credit cards, salary loans and personal loans depend on the collection
experience of its receivables. Further for housing loans, due to the nature of the assets offered
as security, and as the exposures are limited to a certain percentage of the same, this product
possess the unique quality of obtaining full recoverability. These default and recovery rates
are based on the Group’s historical experience, which covers a minimum of two to three (2-3)
years cycle, depending on the availability and relevance of data.
The table below shows the aging analysis of the past due but not impaired loans and receivables
per class of the Group and of the Parent Company. Under PFRS 7, a financial asset is past due
when a counterparty has failed to make payments when contractually due.
Loans and receivables:
Corporate lending
Consumer lending
Less than
30 days
31 to
60 days
P
= 7,294
10,777
P
= 18,071
P
=–
390,374
P
= 390,374
Consolidated
2014
61 to
91 to
90 days
180 days
P
=–
6,862
P
= 6,862
P
=–
435,502
P
= 435,502
More than
180 days
Total
P
=–
466,046
P
= 466,046
P
= 7,294
1,309,561
P
= 1,316,855
*SGVFS010664*
- 47 -
Loans and receivables:
Corporate lending
Consumer lending
Less than
30 days
31 to
60 days
=
P–
–
=
P–
=
P–
–
=
P–
Less than
30 days
31 to
60 days
P
= 7,294
10,777
P
= 18,071
P
=–
390,374
P
= 390,374
Loans and receivables:
Corporate lending
Consumer lending
Loans and receivables:
Corporate lending
Consumer lending
Less than
30 days
31 to
60 days
=
P–
–
=
P–
=
P–
–
=
P–
Consolidated
2013
61 to
91 to
90 days
180 days
More than
180 days
Total
=
P–
261,972
P
=261,972
P
=77,232
807,377
P
=884,609
P
=77,232
1,154,386
P
=1,231,618
Parent Company
2014
61 to
91 to
90 days
180 days
More than
180 days
Total
P
=–
423,096
P
= 423,096
P
=–
446,368
P
= 446,368
P
= 7,294
1,277,477
P
= 1,284,771
Parent Company
2013
61 to
91 to
90 days
180 days
More than
180 days
Total
P
=77,232
450,994
P
=528,226
P
=77,232
763,015
P
=840,247
=
P–
85,037
P
=85,037
P
=–
6,862
P
= 6,862
=
P–
85,037
P
=85,037
=
P–
226,984
P
=226,984
Collaterals of past due but not impaired loans mostly consist of real estate mortgage (REM) of
industrial, commercial, residential and developed agricultural real estate properties.
Credit risk weighting as of December 31, 2014 and 2013
Total credit risk exposure after risk mitigation
The table below shows the different credit risk exposures of the Group and of the Parent Company
after credit risk mitigation, by risk weight applied in accordance with BSP Circular No. 538
(amounts in thousands):
Credit risk exposure after risk
mitigation
On-balance sheet assets
Off-balance sheet assets
Counterparty in the banking book
(derivatives and repo-style
transactions)
Counterparty in the trading book
(derivatives and repo-style
transactions)
Credit-linked notes in the banking
book
Securitization exposures
Credit Risk Weighted Assets
Credit risk exposure after risk
mitigation
On-balance sheet assets
Off-balance sheet assets
Counterparty in the banking book
(derivatives and repo-style
transactions)
Consolidated
2014
Risk Buckets
50%
75%
Capital
Deduction
0%
20%
P
=6,264,965
–
P
=28,977,799
–
P
=3,565,001
–
P
=2,363,843
–
–
–
–
–
–
–
–
6,264,965
P
=–
–
–
28,977,799
P
=–
100%
150%
Total
P
=2,763,221
–
P
=116,881,268
1,235,163
P
=6,010,306
–
P
=160,561,438
1,235,163
–
–
2,157,060
–
2,157,060
–
–
–
23,897
–
23,897
–
–
3,565,001
P
=713,000
–
–
2,363,843
P
=1,181,922
–
–
2,763,221
P
=2,072,416
–
–
120,297,388
P
=120,297,388
–
–
6,010,306
P
=9,015,459
–
–
163,977,558
P
=133,280,185
75%
100%
150%
Total
Consolidated
2013
Risk Buckets
50%
Capital
Deduction
0%
20%
=
P2,462,822
–
=
P22,413,466
–
=
P3,663,390
–
=
P4,514,002
–
=
P6,933,876
–
=
P85,758,201
1,531,487
=
P3,823,801
–
=
P127,106,736
1,531,487
–
–
–
–
–
2,029,162
–
2,029,162
(Forward)
*SGVFS010664*
- 48 -
Counterparty in the trading book
(derivatives and repo-style
transactions)
Credit-linked notes in the banking
book
Securitization exposures
Credit Risk Weighted Assets
Credit risk exposure after risk
mitigation
On-balance sheet assets
Off-balance sheet assets
Counterparty in the banking book
(derivatives and repo-style
transactions)
Counterparty in the trading book
(derivatives and repo-style
transactions)
Credit-linked notes in the banking
book
Securitization exposures
Credit Risk Weighted Assets
Credit risk exposure after risk
mitigation
On-balance sheet assets
Off-balance sheet assets
Counterparty in the banking book
(derivatives and repo-style
transactions)
Counterparty in the trading book
(derivatives and repo-style
transactions)
Credit-linked notes in the banking
book
Securitization exposures
Credit Risk Weighted Assets
Capital
Deduction
0%
20%
=
P–
=
P–
=
P2,177
–
–
2,462,822
=
P–
–
–
22,413,466
=
P–
–
–
3,665,567
=
P733,113
Consolidated
2013
Risk Buckets
50%
75%
100%
150%
Total
=
P–
=
P–
=
P20,777
=
P–
=
P22,954
–
–
4,514,002
=
P2,257,001
–
–
6,933,876
=
P5,200,407
–
–
89,339,627
=
P89,339,627
–
–
3,823,801
=
P5,735,702
–
–
130,690,339
=
P103,265,850
Parent Company
2014
Risk Buckets
50%
75%
100%
150%
Total
Capital
Deduction
0%
20%
P
=6,986,899
–
P
=28,759,985
–
P
=3,543,745
–
P
=2,363,843
–
P
=2,763,221
–
P
=111,258,962
1,235,163
P
=5,981,826
–
P
=154,671,582
1,235,163
–
–
–
–
–
2,157,060
–
2,157,060
–
–
–
–
–
23,897
–
23,897
–
–
6,986,899
P
=–
–
–
28,759,985
P
=–
–
–
3,543,745
P
=708,749
–
–
2,363,843
P
=1,181,922
–
–
2,763,221
P
=2,072,416
–
–
114,675,082
P
=114,675,082
–
–
5,981,826
P
=8,972,739
–
–
158,087,702
P
=127,610,908
Parent Company
2013
Risk Buckets
50%
75%
100%
150%
Total
Capital
Deduction
0%
20%
=
P3,788,855
–
=
P22,207,803
–
=
P3,662,406
–
=
P4,514,002
–
=
P6,933,876
–
=
P82,168,463
1,531,487
=
P3,498,936
–
=
P122,985,486
1,531,487
–
–
–
–
–
2,029,162
–
2,029,162
–
–
2,177
–
–
20,777
–
22,954
–
–
3,788,855
=
P–
–
–
22,207,803
=
P–
–
–
3,664,583
=
P732,917
–
–
4,514,002
=
P2,257,001
–
–
6,933,876
=
P5,200,407
–
–
85,749,889
=
P85,749,889
–
–
3,498,936
=
P5,248,404
–
–
126,569,089
=
P99,188,618
Liquidity Risk
Liquidity risk is the risk that sufficient funds are unavailable to adequately meet all maturing
liabilities, including demand deposits and off-balance sheet commitments. The main responsibility
of daily asset liability management lies with the Parent Company’s Treasury Group, specifically
the Liquidity Desk, and the Subsidiary’s Fund Management Department which are tasked to
manage the balance sheet and have thorough understanding of the risk elements involved in the
respective businesses. Both the Parent Company and the Subsidiary’s liquidity risk management
are then monitored through each entity’s ALCO. Resulting analysis of the balance sheet along
with the recommendation is presented during the weekly ALCO meeting where deliberations,
formulation of actions and decisions are made to minimize risk and maximize returns. Discussions
include actions taken in the previous ALCO meeting, economic and market status and outlook,
liquidity risk, pricing and interest rate structure, limit status and utilization. To ensure that both
the Parent Company and Subsidiary has sufficient liquidity at all times, the respective ALCO
formulates a contingency funding plan which sets out the amount and the sources of funds (such
as unutilized credit facilities) available to both entities and the circumstances under which such
funds will be used.
*SGVFS010664*
- 49 By way of the Maximum Cumulative Outflow (MCO) limit, the Group is able to manage its longterm liquidity risks by placing a cap on the outflow of cash on a per tenor and on a cumulative
basis. The Group takes a multi-tiered approach to maintaining liquid assets. The Group’s
principal source of liquidity is comprised of COCI, Due from BSP, Due from other banks and
IBLR with maturities of less than one year. In addition to regulatory reserves, the Parent
Company maintains a sufficient level of secondary reserves in the form of liquid assets such as
short-term trading and investment securities that can be realized quickly.
Analysis of financial assets and liabilities by remaining contractual maturities
The table below shows the maturity profile of the financial assets and liabilities of the Group and
of the Parent Company, based on its internal methodology that manages liquidity based on
contractual undiscounted cash flows (amounts in millions):
Financial Assets
Cash and cash equivalents*
Investments and trading
securities**
Loans and receivables***
Consolidated
2014
>1 to 3
>3 to 6
months
months
On demand
Up to
1 month
P
= 35,510
P
=–
P
=–
–
–
P
= 35,510
2,483
18,997
P
= 21,480
2,320
13,550
P
= 15,870
>6 to 12
months
Beyond 1
year
Total
P
=–
P
=–
P
= 720
P
= 36,230
2,427
10,054
P
= 12,481
3,678
7,834
P
= 11,512
14,179
90,613
P
= 105,512
25,087
141,048
P
= 202,365
Financial Liabilities
Deposit liabilities****
Bills and acceptances payable
Subordinated debt
Other liabilities
Contingent liabilities
P
=–
P
= 4,990
P
= 7,231
P
= 7,243
P
= 2,901
P
= 133,237
P
= 155,602
–
5,396
–
–
–
28
5,424
–
–
–
–
–
6,500
6,500
1,383
90
9
9
3
5,647
7,141
–
1,656
65
41
297
(1,336)
723
P
= 1,383
P
= 12,132
P
= 7,305
P
= 7,293
P
= 3,201
P
= 144,076
P
= 175,390
*** Consist of cash and cash other items, due from BSP, due from other banks and IBLR
*** Consist of financial assets at FVTPL, investment securities at amortized cost, financial assets at FVTOCI and interest receivables
from investment securities at amortized cost.
*** Consist of loans and receivables, sales contract receivables, bills purchased, accrued interest receivables, accounts receivables,
unearned discounts, allowance for probable losses, investment properties, other intangible assets and other assets.
****Consist of demand and savings deposit, time certificate of deposit, long term negotiable certificates of deposit and interest payable
for these deposit liabilities.
Financial Assets
Cash and cash equivalents*
Investments and trading
securities**
Loans and receivables***
Consolidated
2013
>1 to 3
>3 to 6
months
months
On demand
Up to
1 month
P
=21,780
P
=5,451
=
P–
–
–
P
=21,780
881
12,526
P
=18,858
759
9,937
P
=10,696
>6 to 12
months
Beyond 1
year
Total
=
P–
=
P–
P
=210
P
=27,441
244
8,077
P
=8,321
665
4,146
P
=4,811
13,942
68,917
P
=83,069
16,491
103,603
P
=147,535
Financial Liabilities
Deposit liabilities****
Bills and acceptances payable
Subordinated debt
Other liabilities
Contingent liabilities
=
P–
P
=12,213
P
=15,398
P
=12,633
P
=6,676
P
=66,271
P
=113,191
–
2,379
588
–
–
460
3,427
–
1,250
–
–
–
1,613
2,863
919
56
18
22
12
5,006
6,033
–
713
553
681
1,093
(1,753)
1,287
P
=919
P
=16,611
P
=16,557
P
=13,336
P
=7,781
P
=71,597
P
=126,801
** * Consist of cash and cash other items, due from BSP, due from other banks and IBLR
** * Consist of financial assets at FVTPL, investment securities at amortized cost, financial assets at FVTOCI and interest receivables
from investment securities at amortized cost.
*** Consist of loans and receivables, sales contract receivables, bills purchased, accrued interest receivables, accounts receivables,
unearned discounts, allowance for probable losses, investment properties, other intangible assets and other assets.
****Consist of demand and savings deposit, time certificate of deposit, long term negotiable certificates of deposit and interest payable
for these deposit liabilities.
*SGVFS010664*
- 50 -
Financial Assets
Cash and cash equivalents*
Investments and trading
securities**
Loans and receivables***
Parent Company
2014
>1 to 3
>3 to 6
months
months
On demand
Up to
1 month
P
= 35,270
P
=–
P
=–
–
–
P
= 35,270
2,483
18,996
P
= 21,479
2,320
13,340
P
= 15,660
>6 to 12
months
Beyond 1
year
Total
P
=–
P
=–
P
= 633
P
= 35,903
2,427
9,746
P
= 12,173
3,678
7,230
P
= 10,908
14,179
85,755
P
= 100,567
25,087
135,067
P
= 196,057
Financial Liabilities
Deposit liabilities****
Bills and acceptances payable
Subordinated debt
Other liabilities
Contingent liabilities
P
=–
P
= 4,775
P
= 7,015
P
= 7,132
P
= 2,824
P
= 128,847
P
= 150,593
–
5,182
–
–
–
28
5,210
–
–
–
–
–
6,500
6,500
1,383
90
9
8
3
5,485
6,978
–
1,656
65
41
297
(1,336)
723
P
= 1,383
P
= 11,703
P
= 7,089
P
= 7,181
P
= 3,124
P
= 139,524
P
= 170,004
*** Consist of cash and cash other items, due from BSP, due from other banks and IBLR
*** Consist of financial assets at FVTPL, investment securities at amortized cost, financial assets at FVTOCI and interest receivables
from investment securities at amortized cost.
*** Consist of loans and receivables, sales contract receivables, bills purchased, accrued interest receivables, accounts receivables,
unearned discounts, allowance for probable losses, investment properties, other intangible assets and other assets.
****Consist of demand and savings deposit, time certificate of deposit, long term negotiable certificates of deposit and interest payable
for these deposit liabilities.
Financial Assets
Cash and cash equivalents*
Investments and trading
securities**
Loans and receivables***
Parent Company
2013
>1 to 3
>3 to 6
months
months
On demand
Up to
1 month
P
=21,535
P
=5,401
=
P–
–
–
880
12,517
P
=18,798
759
9,930
P
=10,689
P
=21,535
>6 to 12
months
Beyond 1
year
Total
=
P–
=
P–
=
P–
P
=26,936
244
8,068
P
=8,312
665
4,118
P
=4,783
15,341
65,352
P
=80,693
17,889
99,985
P
=144,810
Financial Liabilities
Deposit liabilities****
Bills and acceptances payable
Subordinated debt
Other liabilities
Contingent liabilities
=
P–
P
=11,168
P
=14,765
P
=12,158
P
=6,379
P
=66,113
P
=110,583
–
2,251
588
–
–
450
3,289
–
1,250
–
–
–
1,500
2,750
919
55
17
22
12
4,379
5,404
–
713
553
681
1,093
(1,753)
1,287
P
=919
P
=15,437
P
=15,923
P
=12,861
P
=7,484
P
=70,689
P
=123,313
*** Consist of cash and cash other items, due from BSP, due from other banks and IBLR
*** Consist of financial assets at FVTPL, investment securities at amortized cost, financial assets at FVTOCI and interest receivables
from investment securities at amortized cost.
*** Consist of loans and receivables, sales contract receivables, bills purchased, accrued interest receivables, accounts receivables,
unearned discounts, allowance for probable losses, investment properties, other intangible assets and other assets.
****Consist of demand and savings deposit, time certificate of deposit, long term negotiable certificates of deposit and interest payable
for these deposit liabilities.
The Parent Company manages liquidity by maintaining sufficient liquid assets in the form of
cash and cash equivalents, investments securities and loan receivables with what it assesses
to be sufficient of short-term loans. As of December 31, 2014 and 2013, =
P49.34 billion and
P
=35.59 billion, respectively, or 39.28% and 37.50%, respectively, of the Parent Company’s total
gross loans and receivables had remaining maturities of less than one (1) year. The total portfolio
of trading and investment securities is comprised mostly of sovereign-issued securities that have
high market liquidity. The Parent Company was fully compliant with BSP’s limits on FCDU
Asset Cover and FCDU Liquid Assets Cover, having reported ratios above 100.00% and 30.00%,
respectively, as of December 31, 2014 and 2013. With the above presented liquidity profile, the
Group remains to be inhibited from liquidity risk that it can’t adequately manage.
*SGVFS010664*
- 51 Market Risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate
due to changes in market variables such as interest rates, foreign exchange rates, and equity prices.
The Parent Company treats exposures to market risk as either for trading or accrual/balance sheet
exposure. The market risk for the trading portfolio is managed and monitored based on a VaR
methodology. Interest rate risk of accrual portfolios are managed and monitored using sensitivity
analyses.
Market risk in the trading books
The Board has set limits on the level of market risk that may be accepted. Price risk limits are
applied at the business unit level and approved by the BOD based on, among other things, a
business unit’s capacity to manage price risks, the size and distribution of the aggregate exposure
to price risks and the expected return relative to price risks.
The Parent Company applies the Value at Risk (VaR) methodology to assess the market sensitive
positions held for trading and to estimate the potential economic loss based on parameters and
assumptions. VaR is a method used in measuring market risk by estimating the potential negative
change in the market value of a portfolio at a given confidence level and over a specified time
horizon.
Objectives and limitations of the VaR Methodology
The Parent Company uses the VaR model of Bloomberg Portfolio Analytics using one-year
historical data set to assess possible changes in the market value of the Fixed Income, Equities,
and Foreign Exchange trading portfolio. The Interest Rate Swaps (IRS) trading portfolio’s market
risk is measured using Monte Carlo VaR. The Bloomberg and Monte Carlo VaR models are
designed to measure market risk in a normal market environment. The use of VaR has limitations
because correlations and volatilities in market prices are based on historical data and VaR assumes
that future price movements will follow a statistical distribution. Due to the fact that VaR relies
heavily on historical data to provide information and may not clearly predict the future changes
and modifications of the risk factors, the probability of large market moves may be
underestimated.
VaR may also be under or over estimated due to assumptions placed on risk factors and the
relationship between such factors for specific instruments. Even though positions may change
throughout the day, the VaR only represents the risk of the portfolio at the close of each business
day, and it does not account for any losses that may occur beyond the 99.00% confidence level.
In practice, actual trading results will differ from the VaR calculation and, in particular, the
calculation does not provide a meaningful indication of profits and losses in stressed market
conditions. To determine the reliability of the VaR model, actual outcomes are monitored through
hypothetical and actual backtesting to test the accuracy of the VaR model.
Stress testing provides a means of complementing VaR by simulating the potential loss impact on
market risk positions from extreme market conditions, such as 500 bps increase in Philippine peso
interest rates and 300 bps increase in US dollar interest rates adopted from the uniform stress
testing framework of the BSP.
VaR assumptions
The VaR that the Parent Company use is premised on a 99.00% confidence level that this potential
loss estimate is not expected to be exceeded if the current market risk positions were to be held
unchanged for a given holding period. Foreign exchange VaR is measured using one day holding
period while fixed income VaR has holding period of five (5) days. Furthermore, the Parent
*SGVFS010664*
- 52 Company’s equity and IRS trading positions are assumed to be closed out in ten (10) days. The
use of a 99.00% confidence level means that within the set time horizon, losses exceeding the VaR
figure should occur, on average, not more than once every hundred days.
VaR is an integral part of the Parent Company’s market risk management and encompasses
investment positions held for trading. VaR exposures form part of the market risk monitoring
which is reviewed daily against the limit approved by the Board. The trading activities are
controlled through the Market Risk Limit (MRL), which is a function of the Parent Company’s
qualifying capital and the trading income generated throughout the year. RMD reports compliance
to the MRL and trader’s VaR limits on a daily basis. If the MRL of individual trader’s limit is
exceeded, such occurrence is promptly reported to the Treasurer, Chief Risk Officer and the
President, and further to the Board through the RMC.
The table below pertains to interest rate risk of the Parent Company’s fixed income trading
portfolio:
Year-end VaR
Average VaR
Highest VaR
Lowest VaR
2014
P
=200,969
107,839
233,073
8,023
2013
=13,122
P
67,046
324,284
3,392
The year-end VaR for 2014 was based on the Parent Company’s fixed trading book valued at
P
=9.9 billion with average yields of 3.73% and 3.90% for the Peso and Foreign currency
denominated bonds respectively. Its average maturities are 8 years and 5 months for the Peso
portfolio and 11 years and 2 months for the foreign currency portfolio. The year-end VaR for 2013
was based on a portfolio position size equal to =
P1.20 billion with an average yield of 3.56% and
average maturity of 5 years and 5 months.
The market risk in the Parent Company’s IRS trading positions is shown in the table below:
2014
P
=8,674
4,521
8,674
3,789
Year-end VaR
Average VaR
Highest VaR
Lowest VaR
The Parent Company commenced entering into IRS in 2014 and its outstanding IRS deals have a
total notional amount of $10.00 million where the Parent Company pays fixed rate and receives
floating rate interest.
The table below pertains to the market risk of the Parent Company’s equity trading positions:
Year-end VaR
Average VaR
Highest VaR
Lowest VaR
2014
P
=664
13,618
49,371
664
2013
=39,759
P
60,457
87,143
39,759
*SGVFS010664*
- 53 Foreign Currency Risk
The Parent Company holds foreign currency denominated assets and liabilities, thus, fluctuations
on the foreign exchange rates can affect the financial and cash flows of the Parent Company.
Managing the foreign exchange exposure is important for banks with exposures in foreign
currencies. It includes managing foreign currency positions in order to control the impact of
changes in exchange rates on the financial position of the Parent Company.
The VaR below pertains to foreign exchange risk of the Parent Company:
2014
P
=4,369
1,780
6,571
10
Year-end VaR
Average VaR
Highest VaR
Lowest VaR
2013
=1,963
P
2,423
8,364
13
The Parent Company’s foreign currency exposures emanate from its net open spot and forward FX
purchase and sell transactions, and net foreign currency income accumulated over the years of its
operations. Foreign currency-denominated deposits are generally used to fund the Parent
Company’s foreign currency-denominated loan and investment portfolio in the FCDU. In the
FCDU books, BSP requires banks to match the foreign currency assets with the foreign currency
liabilities. Thus, banks are required to maintain at all times a 100.00% cover for their currency
liabilities held through FCDU. The Parent Company is in compliance with said regulation as of
December 31, 2014 and 2013.
Total foreign exchange currency position is monitored through the daily BSP FX position reports,
which are subject to the overbought and oversold limits set by the BSP at 20.00% of unimpaired
capital or $50.00 million, whichever is lower. Internal limits regarding the intraday trading and
end-of-day trading positions in FX, which take into account the trading desk and the branch FX
transactions, are also monitored.
The table below summarizes the exposure to foreign exchange risk of the Parent Company as of
December 31, 2014 and 2013:
Assets
Gross FX assets
Contingent FX assets
Liabilities
Gross FX liabilities
Contingent FX liabilities
Net exposure
USD
2014
Other
Currencies
Total
$624,465
58,080
682,545
$13,224
13,224
$637,689
58,080
695,769
573,872
98,000
671,872
$10,673
11,028
78
11,106
$2,118
584,900
98,078
682,978
$12,791
*SGVFS010664*
- 54 -
Assets
Gross FX assets
Contingent FX assets
Liabilities
Gross FX liabilities
Contingent FX liabilities
Net exposure
USD
2013
Other
Currencies
Total
$494,222
31,524
525,746
$1,203
−
1,203
$495,425
31,524
526,949
462,080
59,000
521,080
$4,666
81
24
105
$1,098
462,161
59,024
521,185
$5,764
The table below indicates the sensitivity currencies which the Parent Company had significant
exposures as of December 31, 2014 and 2013 (amounts in millions):
Foreign currency appreciates
(depreciates)
+10.00%
-10.00%
USD
P
=47.73
(47.73)
2014
GBP
P
=1.09
1.09
EUR
P
=3.41
3.41
JPY
P
=.60
.60
Foreign currency appreciates
(depreciates)
+10.00%
-10.00%
USD
P
=20.72
(20.72)
2013
GBP
P
=1.96
(1.96)
EUR
P
=1.85
(1.85)
JPY
P
=.25
(.25)
The analysis calculates the effect of a reasonably possible movement of the currency rate against
Peso, with all other variables held constant on the statement of income. A negative amount
reflects a potential net reduction in statement of income while a positive amount reflects net
potential increase. There is no other impact on the Parent Company’s equity other than those
already affecting the statements of income.
Market Risk in the Banking Book
Interest rate risk
A critical element of risk management program consists of measuring and monitoring the risks
associated with fluctuations in market interest rates on the Group’s net interest income. The shortterm nature of its assets and liabilities reduces the exposure of its net interest income to such risks.
The Parent Company employs re-pricing gap analysis on a monthly basis to measure the interest
rate sensitivity of its assets and liabilities. The re-pricing gap analysis measures, for any given
period, any mismatches between the amounts of interest-earning assets and interest-bearing
liabilities that would re-price, or mature (for contracts that do not re-price), during that period.
The re-pricing gap is calculated by first distributing the assets and liabilities contained in the
Group’s statement of financial position into tenor buckets according to the time remaining to the
next re-pricing date (or the time remaining to maturity if there is no re-pricing), and then obtaining
the difference between the total of the re-pricing (interest rate sensitive) assets and re-pricing
(interest rate sensitive) liabilities. If there is a positive gap, there is asset sensitivity which
generally means that an increase in interest rates would have a positive effect on the Group’s net
interest income. If there is a negative gap, this generally means that an increase in interest rates
would have a negative effect on net interest income.
*SGVFS010664*
- 55 The following table provides for the average interest rates by period of re-pricing (or by period of
maturity if there is no re-pricing) of the Group as of December 31, 2014 and 2013:
RBU
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Financial liabilities:
Deposit liabilities
Bills payable
Subordinated debt
FCDU
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Financial liabilities:
Deposit liabilities
RBU
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Financial liabilities:
Deposit liabilities
Bills payable
Subordinated debt
FCDU
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Financial liabilities:
Deposit liabilities
Up to
1 month
>1 month
to 3 months
2014
>3 months
to 6 months
>6 months
to 12 months
>12 months
−
2.27%
−
−
4.55%
3.63%
−
4.86%
−
−
6.46%
−
−
9.25%
3.10%
1.59%
1.51%
−
1.92%
−
−
2.43%
−
−
4.23%
−
−
3.60%
−
6.03%
−
3.04%
0.61%
−
2.79%
−
−
3.78%
−
−
4.86%
−
−
6.72%
4.00%
1.36%
1.27%
1.56%
1.68%
2.56%
Up to
1 month
>1 month
to 3 months
2013
>3 months
to 6 months
>6 months
to 12 months
>12 months
1.99%
4.82%
2.49%
−
5.23%
2.49%
−
5.21%
−
−
7.15%
−
−
8.04%
3.08%
1.08%
0.77%
8.63%
1.43%
0.68%
−
1.65%
−
−
4.01%
−
−
4.26%
−
7.65%
0.19%
1.49%
3.15%
−
−
3.15%
−
3.55%
3.15%
−
5.35%
−
−
6.77%
3.24%
1.34%
1.37%
1.43%
1.63%
2.54%
The following table provides for the average interest rates by period of re-pricing (or by period of
maturity if there is no re-pricing) of the Parent Company as of December 31, 2014 and 2013
RBU
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Financial liabilities:
Deposit liabilities
Bills payable
Subordinated debt
FCDU
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Financial liabilities:
Deposit liabilities
Up to
1 month
>1 month
to 3 months
2014
>3 months
to 6 months
>6 months
to 12 months
>12 months
−
2.28%
−
−
4.54%
3.63%
−
4.81%
−
−
6.22%
−
−
9.41%
3.10%
1.60%
1.51%
−
1.95%
−
−
2.44%
−
−
4.31%
−
−
7.62%
6.03%
−
3.04%
0.61%
−
2.79%
−
−
3.78%
−
−
4.86%
−
−
6.72%
4.00%
1.36%
1.27%
1.56%
1.68%
2.56%
*SGVFS010664*
- 56 -
RBU
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Financial liabilities:
Deposit liabilities
Bills payable
Subordinated debt
FCDU
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Financial liabilities:
Deposit liabilities
Up to
1 month
>1 month
to 3 months
2013
>3 months
to 6 months
>6 months
to 12 months
>12 months
1.99%
4.92%
2.49%
−
6.41%
2.49%
−
7.34%
−
−
9.77%
−
−
9.34%
3.08%
1.06%
0.77%
8.63%
1.40%
0.68%
−
1.54%
−
−
4.14%
−
−
4.26%
−
7.50%
0.19%
1.49%
3.15%
−
−
3.15%
−
3.55%
3.15%
−
5.35%
−
−
6.77%
3.24%
1.34%
1.37%
1.43%
1.63%
2.54%
The following tables sets forth the interest rate re-pricing gap of the Group as of December 31,
2014 and 2013 (amounts in millions):
2014
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Contingent assets
Total financial assets
Financial liabilities:
Deposit liabilities
Bills and acceptances payable
Subordinated debt
Contingent liabilities
Total financial liabilities
Asset-liability gap
Up to
1 month
> 1 to
3 months
> 3 to
6 months
>6 to
12 months
>12 months
Total
P
=−
29,634
2,422
2
32,058
P
=−
6,030
2,212
672
8,914
P
=−
3,753
2,201
−
5,954
P
=−
2,207
3,246
4
5,457
P
=−
55,609
7,455
−
63,064
P
=−
97,233
17,536
678
115,447
42,730
5,289
−
−
48,019
(P
= 15,961)
14,504
−
−
−
14,504
(P
= 5,590)
2,183
−
−
6
2,189
P
= 3,765
1,285
−
−
−
1,285
P
= 4,172
16,423
−
6,500
669
23,592
P
= 39,472
77,125
5,289
6,500
675
89,589
P
= 25,858
Up to
1 month
> 1 to
3 months
> 3 to
6 months
>6 to
12 months
>12 months
Total
P
=2,512
30,721
870
34,103
=
P–
4,136
708
4,844
=
P–
4,549
13
4,562
=
P–
4,470
–
4,470
=
P–
30,548
8,173
38,721
P
=2,512
74,424
9,764
86,700
29,768
2,251
1,250
22
33,291
P
=812
3,619
1,032
–
–
4,651
P
=193
545
–
–
–
545
P
=4,017
360
–
–
–
360
P
=4,110
14,462
–
1,613
–
16,075
P
=22,646
48,754
3,283
2,863
22
54,922
P
=31,778
2013
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Total financial assets
Financial liabilities:
Deposit liabilities
Bills and acceptances payable
Subordinated debt
Contingent liabilities
Total financial liabilities
Asset-liability gap
*SGVFS010664*
- 57 The following tables sets forth the interest rate re-pricing gap of the Parent Company as of
December 31, 2014 and 2013 (amounts in millions):
2014
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Contingent assets
Total financial assets
Financial liabilities:
Deposit liabilities
Bills and acceptances payable
Subordinated debt
Contingent liabilities
Total financial liabilities
Asset-liability gap
Up to
1 month
> 1 to
3 months
> 3 to
6 months
>6 to
12 months
>12 months
Total
P
=−
29,928
2,422
2
32,352
P
=−
6,012
2,212
672
8,896
P
=−
3,734
2,201
−
5,935
P
=−
2,134
3,246
4
5,384
P
=−
49,703
7,455
−
57,158
P
=−
91,511
17,536
678
109,725
1,264
−
−
−
1,264
P
= 4,120
16,423
−
6,500
669
23,592
P
= 33,566
73,126
5,289
6,500
675
85,590
P
= 24,135
39,445
5,289
−
−
44,734
(P
= 12,382)
13,829
−
−
−
13,829
(P
= 4,933)
2,165
−
−
6
2,171
P
= 3,764
Up to
1 month
> 1 to
3 months
> 3 to
6 months
>6 to
12 months
>12 months
Total
P
=2,512
30,839
870
34,221
=
P−
4,116
708
4,824
=
P−
4,530
13
4,543
=
P−
4,434
−
4,434
=
P−
27,433
8,173
35,606
P
=2,512
71,352
9,764
83,628
28,209
2,251
1,250
22
31,732
P
=2,489
3,153
1,032
−
−
4,185
P
=639
512
−
−
−
512
P
=4,031
339
−
−
−
339
P
=4,095
14,462
−
1,500
−
15,962
P
=19,644
46,675
3,283
2,750
22
52,730
P
=30,898
2013
Financial assets:
Cash and cash equivalents
Loans and receivables
Investment securities
Total financial assets
Financial liabilities:
Deposit liabilities
Bills and acceptances payable
Subordinated debt
Contingent liabilities
Total financial liabilities
Asset-liability gap
With the above negative re-pricing profile, the Group could expect positive returns from the
following months after the end of 2014 should there be a downward movement in interest rates.
The Group also monitors its exposure to fluctuations in interest rates by using scenario analysis to
estimate the impact of interest rate movements on its interest income. This is done by modeling
the impact to the Group’s interest income and interest expenses of different parallel changes in the
interest rate curve, assuming the parallel change only occurs once and the interest rate curve after
the parallel change does not change again for the next twelve months.
The following table sets forth, for the period indicated, the impact of changes in interest rates on
the Group’s non-trading net interest income (amounts in millions). There is no other impact on the
Group’s equity other than those already affecting the statements of income.
Change in basis points
+100bps
-100bps
2014
(P
=165.5)
165.5
2013
P44.8
=
(44.8)
*SGVFS010664*
- 58 The following table sets forth, for the period indicated, the impact of changes in interest rates on
the Parent Company’s non-trading net interest income (amounts in millions). There is no other
impact on the Parent Company’s equity other than those already affecting the statements of
income.
Change in basis points
+100bps
-100bps
2014
(P
=149.7)
149.7
2013
=64.6
P
(64.6)
Market Risk Weighting as of December 31, 2014 and 2013
The table below shows the different market risk-weighted assets (in millions) of the Parent
Company using the standardized approach:
Type of Market Risk Exposure
Interest Rate Exposures
Foreign Exchange Exposures
Equity Exposures
2014
P
=7,791
572
–
P
=8,363
2013
=1,874
P
256
7
=2,137
P
Only the Parent Company has a trading book portfolio.
Operational Risk
Operational risk is the loss resulting from inadequate or failed internal processes, people and
systems or from external events. It includes legal, compliance and reputational risks but excludes
strategic risk.
Adopting the Basic Indicator Approach in computing, below is the total operational risk-weighted
assets of the Group and Parent Company (amounts in millions).
Group
Parent Company
2014
P
=18,151
17,419
2013
=15,338
P
14,701
2012
=12,973
P
12,229
Other Risk Exposures
Group risk exposures other than credit, market, liquidity and operational, while existent, are
deemed insignificant relative to the mentioned risks and if taken in isolation. Hence, management
of these risks are instead collectively performed and made an integral part of the Group’s internal
capital adequacy assessment process (ICAAP) and enterprise risk management initiatives.
The last internal capital adequacy assessment results of the Group show that these other risks
remain insignificant to pose a threat on the Group’s capacity to comply with the minimum capital
adequacy ratio of 10% as prescribed by BSP.
*SGVFS010664*
- 59 -
5. Fair Value Measurement
The following table provides the fair value hierarchy of the Group’s and of the Parent Company’s
assets and liabilities measured at fair value and those for which fair values are required to be
disclosed:
Carrying
Value
Assets measured at fair value
Financial assets
Financial assets at FVTPL:
HFT investments:
Government securities
Private bonds
Equity securities
Derivative assets
Financial assets at FVTOCI
Assets for which fair values are disclosed
Financial assets
Investment securities at amortized cost:
Government securities
Private bonds
Loans and receivables
Receivable from customers:
Corporate lending
Consumer lending
Unquoted debt securities
Non-financial assets
Investment properties
Total assets
Liabilities measured at fair value
Financial liabilities
Derivative liabilities
Liabilities for which fair values are disclosed
Financial liabilities
Deposit liabilities
Time
LTNCD
Subordinated debt
Total liabilities
P
= 7,391,724
2,565,307
225,659
10,182,690
110,668
14,419
P
= 7,391,724
2,565,307
225,659
10,182,690
110,668
14,419
P
= 7,255,622
2,565,307
225,659
10,046,588
–
14,419
P
= 136,102
–
–
136,102
110,668
–
P
=–
–
–
–
–
–
7,536,445
1,258,433
8,794,878
7,660,169
1,258,656
8,918,825
7,433,658
1,258,656
8,692,314
226,511
–
226,511
–
–
–
55,161,693
64,004,558
291,836
119,458,087
55,019,062
58,798,980
291,836
114,109,878
–
–
–
–
–
–
–
–
55,019,062
58,798,980
291,836
114,109,878
912,687
P
= 139,473,429
1,285,877
P
= 134,622,357
–
P
= 18,753,321
–
P
= 473,281
1,285,877
P
= 115,395,755
P
= 101,290
P
= 101,290
P
=–
P
= 101,290
P
=–
69,027,909
8,033,623
77,061,532
6,463,731
P
= 83,626,553
69,029,018
8,825,239
77,854,257
7,462,161
P
= 85,417,708
–
–
–
–
P
=–
–
–
–
–
P
= 101,290
69,029,018
8,825,239
77,854,257
7,462,161
P
= 85,316,418
Carrying
Value
Assets measured at fair value
Financial assets
Financial assets at FVTPL:
HFT investments:
Government securities
Private bonds
Equity securities
Consolidated
2014
Fair Value
Quoted Prices
Significant
Significant
in active
observable unobservable
market
inputs
inputs
(Level 1)
(Level 2)
(Level 3)
Total
P
=691,437
543,626
713,640
1,948,703
Consolidated
2013
Fair Value
Significant
observable
Quoted Prices in
inputs
active market
(Level 2)
Total
(Level 1)
P
=691,437
543,626
713,640
1,948,703
P
=553,340
543,626
713,640
1,810,606
P
=138,097
–
–
138,097
Significant
unobservable
inputs
(Level 3)
=
P–
–
–
–
(Forward)
*SGVFS010664*
- 60 -
Derivative assets
Financial assets at FVTOCI
Assets for which fair values are disclosed
Financial assets
Investment securities at amortized cost:
Government securities
Private bonds
Loans and receivables
Receivable from customers:
Corporate lending
Consumer lending
Unquoted debt securities
Non-financial assets
Investment properties
Total assets
Liabilities measured at fair value
Financial liabilities
Derivative liabilities
Liabilities for which fair values are disclosed
Financial liabilities
Deposit liabilities
Time
LTNCD
Subordinated debt
Total liabilities
Carrying
Value
=
P90
10,733
Derivative assets
Financial assets at FVTOCI
Assets for which fair values are disclosed
Financial assets
Investment securities at amortized cost:
Government securities
Private bonds
Loans and receivables
Receivable from customers:
Corporate lending
Consumer lending
Unquoted debt securities
Non-financial assets
Investment properties
Total assets
Significant
unobservable
inputs
(Level 3)
=
P–
–
7,667,254
1,413,066
9,080,320
7,826,667
1,455,827
9,282,494
7,601,814
1,455,827
9,057,641
224,853
–
224,853
–
–
–
47,558,271
41,871,825
208,753
89,638,849
47,011,932
50,102,457
208,753
97,323,142
–
–
–
–
–
–
–
–
47,011,932
50,102,457
208,753
97,323,142
1,006,716
P
=101,685,411
1,420,398
P
=109,985,560
–
P
=10,878,980
–
P
=363,040
1,420,398
P
=98,743,540
P
=21,978
P
=21,978
=
P–
P
=21,978
=
P–
41,275,731
5,466,003
46,741,734
2,862,500
P
=49,626,212
41,314,743
6,997,876
48,312,619
4,099,986
P
=52,434,583
–
–
–
–
=
P–
–
–
–
–
P
=21,978
41,314,743
6,997,876
48,312,619
4,099,986
P
=52,412,605
Carrying
Value
Assets measured at fair value
Financial assets
Financial assets at FVTPL:
HFT investments:
Government securities
Private bonds
Equity securities
Consolidated
2013
Fair Value
Significant
observable
Quoted Prices in
inputs
active market
(Level 2)
Total
(Level 1)
=
P90
=
P–
=
P90
10,733
10,733
–
Parent Company
2014
Fair Value
Quoted Prices
Significant
Significant
in active
observable unobservable
market
inputs
inputs
(Level 1)
(Level 2)
(Level 3)
Total
P
= 7,391,724
2,565,307
225,659
10,182,690
110,668
14,419
P
= 7,391,724
2,565,307
225,659
10,182,690
110,668
14,419
P
= 7,255,622
2,565,307
225,659
10,046,588
–
14,419
P
= 136,102
–
–
136,102
110,668
–
P
=–
–
–
–
–
–
7,536,445
1,258,433
8,794,878
7,660,169
1,258,656
8,918,825
7,433,658
1,258,656
8,692,314
226,511
–
226,511
–
–
–
55,461,693
58,162,486
209,097
113,833,276
55,019,062
58,798,980
209,097
114,027,139
–
–
–
–
–
–
–
–
55,019,062
58,798,980
209,097
114,027,139
911,987
P
= 133,847,918
1,285,174
P
= 134,538,915
–
P
= 18,753,321
–
P
= 473,281
1,285,174
P
= 115,312,313
*SGVFS010664*
- 61 -
Carrying
Value
Liabilities measured at fair value
Financial liabilities
Derivative liabilities
Liabilities for which fair values are disclosed
Financial liabilities
Deposit liabilities
Time
LTNCD
Subordinated debt
Total liabilities
P
= 101,290
P
= 101,290
P
=–
P
= 101,290
P
=–
65,029,612
8,033,623
73,063,235
6,463,731
P
= 79,628,256
65,029,772
8,825,239
73,855,011
7,462,161
P
= 81,418,462
–
–
–
–
P
=–
–
–
–
–
P
= 101,290
65,029,772
8,825,239
73,855,011
7,462,161
P
= 81,317,172
Carrying
Value
Assets measured at fair value
Financial assets
Financial assets at FVTPL:
HFT investments:
Government securities
Private bonds
Equity securities
Derivative assets
Financial assets at FVTOCI
Assets for which fair values are disclosed
Financial assets
Investment securities at amortized cost:
Government securities
Private bonds
Loans and receivables
Receivable from customers:
Corporate lending
Consumer lending
Unquoted debt securities
Non-financial assets
Investment properties
Total assets
Liabilities measured at fair value
Financial liabilities
Derivative liabilities
Liabilities for which fair values are disclosed
Financial liabilities
Deposit liabilities
Time
LTNCD
Subordinated debt
Total liabilities
Parent Company
2014
Fair Value
Quoted Prices
Significant
Significant
in active
observable unobservable
market
inputs
inputs
(Level 1)
(Level 2)
(Level 3)
Total
Parent Company
2013
Fair Value
Significant
observable
Quoted Prices in
inputs
active market
(Level 2)
Total
(Level 1)
Significant
unobservable
inputs
(Level 3)
P
=691,437
543,626
713,640
1,948,703
90
10,733
P
=691,437
543,626
713,640
1,948,703
90
10,733
P
=553,340
543,626
713,640
1,810,606
–
10,733
P
=138,097
–
–
138,097
90
–
=
P–
–
–
–
–
–
7,667,254
1,412,653
9,079,907
7,826,667
1,455,414
9,282,081
7,601,814
1,455,414
9,057,228
224,853
–
224,853
–
–
–
47,558,271
41,887,643
208,132
89,654,046
47,011,932
46,716,063
208,132
93,936,127
–
–
–
–
–
–
–
–
47,011,932
46,716,063
208,132
93,936,127
811,423
P
=101,504,902
1,048,808
P
=106,226,542
–
P
=10,878,567
–
P
=363,040
1,048,808
P
=94,984,935
P
=21,978
P
=21,978
=
P–
P
=21,978
=
P–
41,275,731
5,466,003
46,741,734
2,750,000
P
=49,513,712
41,379,781
6,997,876
48,377,657
3,952,174
P
=52,351,809
–
–
–
–
=
P–
–
–
–
–
P
=21,978
41,379,781
6,997,876
48,377,657
3,952,174
P
=52,329,831
*SGVFS010664*
- 62 In 2014 and 2013, there were no transfers between Level 1 and Level 2 fair value measurements,
and no transfers into and out of Level 3 fair value measurements.
The methods and assumptions used by the Group in estimating the fair value of the financial
instruments are:
COCI, due from BSP and other banks and IBLR - The carrying amounts approximate fair values
due to the short-term nature of these accounts. IBLR consist mostly of overnight deposits and
floating rate placements.
Loans and receivables - Fair values of loans and receivables are estimated using the discounted
cash flow methodology, using the Parent Company’s current incremental lending rates for similar
types of loans and receivables.
Debt securities - Fair values are generally based on 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.
Equity securities - Fair values of quoted equity securities are based on quoted market prices.
Unquoted equity investments are simply carried at cost since there is insufficient information
available to determine fair values and there are no indicators that the investments are impaired.
Derivative instruments - Fair values of derivative instruments, mainly forward foreign exchange
contracts, are valued using a valuation technique with market observable inputs. The most
frequently applied valuation technique is forward pricing, which uses present value calculations.
The model incorporates various inputs including the foreign exchange rates and interest rate
curves prevailing at the statement of financial position date.
Liabilities - The fair values of liabilities approximate their carrying amounts due to either the
demand nature or the relatively short-term maturities of these liabilities except for time deposit
liabilities, LTNCD and subordinated debt whose fair value are estimated using the discounted cash
flow methodology using the Parent Company’s incremental borrowing rates for similar
borrowings with maturities consistent with those remaining for the liability being valued.
Derivative Financial Instruments
The Parent Company’s freestanding derivative financial instruments, which mainly consist of
foreign currency forward contracts and swaps, and interest rate swaps, are transactions not
designated as hedges. The table below sets out information about the Parent Company’s
derivative financial instruments and the related fair value as of December 31, 2014 and 2013:
Foreign Currency Forward Contracts and Swaps
Notional amount
Derivative assets
Derivative liabilities
2014
$40,000
P
=13,661
6,450
2013
$32,000
=90
P
22,017
Interest Rate Swaps
Notional amount
Derivative assets
Derivative liabilities
2014
$10,000
P
=97,007
94,840
2013
$–
=–
P
–
*SGVFS010664*
- 63 The net movements in fair value changes of all derivative instruments are as follows:
2014
Derivative assets (liabilities) - net at beginning
of year
Changes in fair value of derivatives
Fair value of settled instruments
Derivative assets (liabilities) - net at end of year
(P
=21,927)
(827,779)
859,084
P
=9,378
2013
(P
=56,368)
(3,585,414)
3,619,855
(P
=21,927)
Fair value changes of foreign currency forwards and swaps are recognized as Foreign exchange
gain in the statements of income while fair value changes of interest rate swaps are recognized as
part of Trading and securities gain (see Note 8).
6. Segment Reporting
The Group’s main operating businesses are organized and managed primarily, according to the
current organizational structure. Each segment represents a strategic business unit that caters to
the bank’s identified markets. The Group’s business segments are:
(a) Retail banking - this segment mainly covers traditional branch banking products and services
such as deposits, back-to-back/emerging market loans and other over-the-counter (OTC)
transactions. It likewise caters to the needs of high net-worth clients for alternative investment
channels. It includes entire transaction processing, service delivery and infrastructure
consisting of the Group’s network of branches, automated teller machines as well as its
internet banking platform;
(b) Corporate banking - this segment handles lending and trade financing for both large
corporations and middle market clients;
(c) Consumer banking - this segment primarily caters to loans for individuals;
(d) Treasury and Trust - this segment consists of Treasury and Trust operations of the Group.
Treasury focuses on providing money market, trading and treasury services, as well as the
management of the Group’s funding operations through debt securities, placements and
acceptances with other banks. Trust includes fund management, investment management
services, custodianship, administration and collateral agency services, and stock and transfer
agency services. In addition, the Parent Company through Trust, provides retail customers
with alternative investment opportunities through its unit investment fund products;
The ‘Elimination Items’ includes the Group’s executive office and elimination items related to the
Group’s segment reporting framework.
Management monitors the operating results of its business units separately for the purpose of
making decisions about resource allocation and performance assessment. Segment assets are
those operating assets employed by a segment in its operating activities and are either directly
attributable to the segment or can be allocated to the segment on a reasonable basis. Segment
liabilities are those operating liabilities that result from the operating activities of a segment and
are either directly attributable to the segment or can be allocated to the segment on a reasonable
basis. Interest income is reported net, as management primarily relies on the net interest income
as performance measure, not the gross income and expense.
*SGVFS010664*
- 64 The Group’s revenue-producing assets are located in the Philippines (i.e., one geographical
location); therefore, geographical segment information is no longer presented. The Group has no
significant customers which contribute 10.00% or more of the consolidated revenue, net of interest
expense.
The segment results include internal transfer pricing adjustments across business units as deemed
appropriate by management. Transactions between segments are conducted at estimated market
rates on an arm’s length basis. Interest is charged/credited to the business units based on a pool
rate which approximates the marginal cost of funds.
Segment information of the Group as of and for the years ended December 31, 2014, 2013 and
2012 follow (amounts in millions):
Retail
Banking
Statement of Income
Net Interest Income:
Third Party
Intersegment
Noninterest Income
Revenue - Net of Interest Expense
Noninterest Expense
Income Before Income Tax
Provision for Income Tax
Net Income for the Year
Statement of Financial Position
Total Assets
Total Liabilities
Statement of Income
Depreciation and Amortization
Provision for Impairment and Credit
Losses
Statement of Income
Net Interest Income:
Third Party
Intersegment
Noninterest Income
Revenue - Net of Interest Expense
Noninterest Expense
Income Before Income Tax
Provision for Income Tax
Net Income for the Year
Statement of Financial Position
Total Assets
Total Liabilities
Statement of Income
Depreciation and Amortization
Provision for Impairment and Credit
Losses
Corporate
Banking
2014
Consumer
Treasury Elimination
Banking and Trust
Items
Total
P
= 2,754
53
2,807
765
3,572
(4,180)
(608)
−
(P
=608)
P
=703
578
1,281
214
1,495
(746)
749
−
P
=749
P
=6,263
−
6,263
2,839
9,102
(6,281)
2,821
−
P
=2,821
P
=84
−
84
810
894
(267)
627
−
P
=627
P
=222
(631)
(409)
232
(177)
(775)
(952)
(564)
(P
=1,516)
P
=37,246
141,846
P
=61,300
36,105
P
=57,649
2,971
P
=18,048
14,360
P
=14,020
(28,467)
574
24
191
15
58
862
5
251
2,642
−
413
3,311
Retail
Banking
Corporate
Banking
2013
Consumer
Treasury Elimination
Banking
and Trust
Items
Total
P
=2,122
50
2,172
654
2,826
(3,440)
(614)
−
(P
=614)
P
=10,026
−
10,026
4,860
14,886
(12,249)
2,637
(564)
P
=2,073
P
=188,263
166,815
P
=597
426
1,023
56
1,079
(761)
318
−
P
=318
P
=5,334
−
5,334
2,391
7,725
(5,456)
2,269
−
P
=2,269
=
P5
−
5
1,474
1,479
(267)
1,212
−
P
=1,212
P
=335
(476)
(141)
197
56
(966)
(910)
(219)
(P
=1,129)
P
=8,393
−
8,393
4,772
13,165
(10,890)
2,275
(219)
P
=2,056
P
=25,539
109,315
P
=47,192
21,556
P
=44,414
1,806
P
=10,124
10,579
P
=15,030
(20,350)
417
27
191
17
66
718
3
376
2,191
4
526
3,100
P
=142,299
122,906
*SGVFS010664*
- 65 -
Retail
Banking
Statement of Income
Net Interest Income:
Third Party
Intersegment
Noninterest Income
Revenue - Net of Interest Expense
Noninterest Expense
Income Before Income Tax
Provision for Income Tax
Net Income for the Year
Statement of Financial Position
Total Assets
Total Liabilities
Statement of Income
Depreciation and Amortization
Provision for Impairment and Credit
Losses
P
=1,702
30
1,732
726
2,458
(2,668)
(210)
(27)
(P
=237)
Corporate
Banking
2012
Consumer
Treasury Elimination
Banking
and Trust
Items
Total
P
=315
321
636
72
708
(394)
314
(11)
P
=303
P
=3,676
−
3,676
1,554
5,230
(4,024)
1,206
379
P
=1,585
P
=90
−
90
1,353
1,443
(265)
1,178
(29)
P
=1,149
P
=305
(351)
(46)
(9)
(55)
(441)
(496)
(488)
(P
=984)
P
=6,088
−
6,088
3,696
9,784
(7,792)
1,992
(176)
P
=1,816
P
=22,152
94,377
P
=35,424
15,318
P
=39,246
1,088
P
=13,067
7,464
P
=11,514
(14,165)
P
=121,403
104,082
328
19
141
25
48
−
42
1,514
−
(25)
561
1,531
Noninterest income consists of service charges, fees and commissions, gain on sale of assets, gain
on asset foreclosure and dacion transactions, trading and securities gain, gain on sale of investment
securities at amortized cost, foreign exchange gain, trust income and miscellaneous income.
Noninterest expense consists of compensation and fringe benefits, taxes and licenses, depreciation
and amortization, rent, amortization of intangible assets, provision for impairment and credit
losses, and miscellaneous expenses.
7. Business Combination and Merger
Acquisition of East West Rural Bank, Inc. (formerly FinMan Rural Bank, Inc.)
On January 26, 2012, the BOD of the Parent Company approved the acquisition of the outstanding
shares of FRBI. FRBI is a rural bank engaged in deposit-taking, rural credit, and consumer
lending services to the public. On February 9, 2012, the Parent Company entered into a
Memorandum of Understanding with the majority shareholders of FRBI to acquire all of the
outstanding shares of FRBI.
On June 20, 2012, the BSP approved the acquisition of up to 100.00% of the total outstanding
shares of FRBI. On July 11, 2012, the Parent Company obtained control of FRBI through the
purchase of 83.17% of the outstanding capital stock of FRBI for =
P34.10 million. The Parent
Company acquired additional shares of FRBI amounting to P
=20.00 million, thereby increasing its
ownership to 91.58% as of December 31, 2012. On January 23, 2013, the Parent Company
acquired the remaining non-controlling interest amounting to =
P6.90 million, thereby increasing its
ownership to 100.00%.
The Parent Company has elected to measure the non-controlling interest in the acquiree at fair
value.
*SGVFS010664*
- 66 The fair values of the identifiable assets and liabilities acquired at the date of acquisition are as
follows:
Fair Value
recognized on
acquisition date
Assets
Cash and other cash items
Due from BSP
Due from other banks
Investment securities at amortized cost
Loans and receivables
Property and equipment
Other assets
Liabilities
Deposit liabilities
Accrued taxes, interest and other expenses
Other liabilities
Fair value of net assets acquired
=243
P
376
13,779
410
6,005
7,219
315
28,347
9,895
383
547
10,825
=17,522
P
The goodwill recognized by the Parent Company can be attributed to the synergy potentially to be
gained by the microfinance business from the planned integration of GBI and FRBI.
Consideration transferred
Non-controlling interest measured at fair value
Fair value of the net assets acquired
Goodwill
=34,098
P
6,902
(17,522)
=23,478
P
Analysis of cash flows on acquisition:
Consideration transferred
Net cash acquired with the subsidiary*
Net cash outflow (included in cash flows from
investing activities)
P34,098
=
(14,398)
P
=19,700
*includes Cash and other cash items, Due from BSP and Due from other banks.
From the date of acquisition to December 31, 2012, the total operating income and net loss of
FRBI consolidated to the Group amounted to P
=3.00 million and P
=0.29 million, respectively.
If the acquisition had taken place at the beginning of the year, the Group’s total operating income
would have increased by P
=2.03 million while net income before tax would have increased by
P
=0.02 million for the year ended December 31, 2012.
Acquisition of Green Bank (a Rural Bank), Inc. (GBI)
On May 5, 2011, the BOD of the Parent Company approved the acquisition of the outstanding
shares of GBI. GBI is a rural bank in the Caraga region with branches scattered across the
Visayas and Mindanao. On May 24, 2011, the Parent Company, GBI, and the majority
shareholders of GBI entered into a Memorandum of Understanding to acquire the shares
representing 84.78% of the outstanding shares of GBI.
*SGVFS010664*
- 67 On August 12, 2011, the BSP approved the acquisition of up to 100.00% of the total outstanding
shares of GBI. On the same date, the BSP approved in-principle the granting of certain incentives
to the Parent Company. Subsequently, on January 30, 2012, the Parent Company obtained the
final approval of the BSP on the said incentives.
On August 19, 2011, the Parent Company acquired 84.78% of the voting shares of GBI. It is on
this date that the Parent Company effectively obtained control of GBI. The acquisition provides
the Parent Company the opportunity to expand its nationwide footprint, given GBI’s wide network
of 46 branches and 94 microfinance-oriented other banking offices, and to pursue the microfinance
model of GBI.
The Parent Company has elected to measure the non-controlling interest in the acquiree at fair
value.
The fair values of the identifiable assets and liabilities acquired at the date of acquisition are as
follows:
Fair Value
recognized on
acquisition date
Assets
Cash and other cash items
Due from BSP
Due from other banks
Loans and receivables
Property and equipment
Investment properties
Other assets
Liabilities
Deposit liabilities
Bills payable
Unsecured subordinated debt
Accrued taxes, interest and other expenses
Other liabilities
Fair value of net liabilities acquired
=98,503
P
10,843
318,009
1,097,181
220,035
186,377
33,009
1,963,957
1,193,553
1,062,878
111,282
206,388
26,633
2,600,734
(P
=636,777)
In addition to the above identifiable assets and liabilities, the Group recognized the fair value of
branch licenses acquired as a result of the business combination amounting to =
P625.40 million
and the related deferred tax liability of =
P187.62 million.
Consideration transferred
Non-controlling interest measured at fair value
Fair value of net liabilities acquired, including
the fair value of branch licenses, net of
deferred tax liability
Goodwill
=158,548
P
16,452
198,996
=373,996
P
*SGVFS010664*
- 68 The goodwill recognized by the Parent Company can be attributed to factors such as increase in
geographical presence and customer base due to branch licenses acquired.
Merger of Green Bank, Inc. with the Parent Company
On June 21, 2013, the Parent Company and GBI entered into a Plan of Merger Agreement. Under
the agreement, GBI will be merged to the Parent Company upon completion of its equity
restructuring and the transfer of certain assets and liabilities to EWRB. GBI’s equity restructuring
and the transfer of assets and liabilities to EWRB were completed in 2013.
On March 28, 2014 and June 5, 2014, the BSP and the SEC, respectively, approved the merger of
the Parent Company and GBI. On July 31, 2014, the Parent Company and GBI concluded its
merger.
The assets and liabilities of GBI merged to the Parent Company were based on the carrying
amounts in the consolidated financial statements of the Parent Company. The following are the
carrying amounts of the assets and liabilities of GBI (including the goodwill, branch licenses and
related deferred tax liability recognized at the acquisition of GBI in 2011) merged to Parent
Company at the date of merger:
Carrying value
recognized on
date of merger
Assets
Due from BSP
Loans and receivables
Bank premises, furniture, fixtures and equipment (Note 10)
Investment properties (Note 11)
Branch licenses (Note 12)
Goodwill (Note 12)
Other assets
Liabilities
Subordinated notes
Bills payable
Deferred tax liability of branch licenses
Accounts payable and accrued expenses
Other liabilities
Carrying amount of the net assets merged
=7,269
P
141,663
22,870
189,146
625,400
373,996
2,661
1,363,005
112,500
128,200
187,620
32,467
174
460,961
=902,044
P
The excess of the carrying amount of the net assets of GBI merged to the Parent Company over
the carrying amount of the Parent Company’s Investment in GBI was recognized as an adjustment
to Surplus, as shown below:
Carrying amount of the net assets merged
Carrying amount of the Parent Company’s Investment in GBI
Adjustment to Surplus
=902,044
P
888,650
=13,394
P
*SGVFS010664*
- 69 -
8. Trading and Investment Securities
The Group and the Parent Company have the following trading and investment securities:
Consolidated
Financial assets at FVTPL
Financial assets at FVTOCI
Investment securities at amortized cost
2014
P
=10,182,690
14,419
8,794,878
P
=18,991,987
2013
P
=1,948,703
10,733
9,080,320
P
=11,039,756
Parent Company
2013
2014
P
=1,948,703
P
=10,182,690
10,733
14,419
9,079,907
8,794,878
P
=11,039,343
P
=18,991,987
Financial assets at FVTPL
Financial assets at FVTPL of the Group and of the Parent Company consist of:
Held-for-trading:
Government securities
Private bonds
Equity securities
2014
2013
P
=7,391,724
2,565,307
225,659
P
=10,182,690
=691,437
P
543,626
713,640
=1,948,703
P
As of December 31, 2014 and 2013, financial assets at FVTPL include net unrealized gain of
P
=52.65 million and =
P131.15 million, respectively, for the Group and for the Parent Company.
Financial assets at FVTOCI
As of December 31, 2014 and 2013, financial assets at FVTOCI of the Group and of the Parent
Company consist of:
Quoted equity securities
Unquoted equity securities
2014
P
=7,273
7,146
P
=14,419
2013
=7,486
P
3,247
=10,733
P
The Group has designated the above equity investments as at FVTOCI because they are held for
long-term investments rather than for trading. The unquoted equity securities pertain to golf
shares.
In 2014 and 2013, no dividends were recognized on these equity investments and no cumulative
gain or loss was transferred within equity.
The movements in Net unrealized gain on financial assets at FVTOCI follow:
Balance at beginning
Unrealized gains for the year
Balance at end
2014
P
=1,925
3,797
P
=5,722
2013
=1,174
P
751
=1,925
P
*SGVFS010664*
- 70 Investment securities at amortized cost
As of December 31, 2014 and 2013, investment securities at amortized cost of the Group and of
the Parent Company consist of:
Consolidated
Government securities
Private bonds
2014
P
=7,536,445
1,258,433
P
=8,794,878
2013
P
=7,667,254
1,413,066
P
=9,080,320
Parent Company
2013
2014
P
=7,667,254
P
=7,536,445
1,412,653
1,258,433
P
=9,079,907
P
=8,794,878
Peso-denominated government bonds have effective interest rates ranging from 5.70% to 6.02% in
2014, 2013 and 2012. Foreign currency-denominated bonds have effective interest rates ranging
from 2.87% to 7.07% in 2014, 2013, and 2012.
In 2014, the Parent Company sold securities carried at amortized cost, with aggregate carrying
amount of P
=3.62 billion, and recognized a gain amounting to =
P306.00 million. The gain is
presented as Gain on sale of investment securities at amortized cost in the statement of income.
The sale was driven by the need to improve the capital position of the Parent Company in relation
to the change in the regulatory capital requirements caused by the Basel III implementation. As a
result of the sale in 2014, subsequent acquisitions of investment securities in the affected
portfolios will be classified as financial assets at FVTPL while the remaining securities will
remain to be classified as investment securities at amortized cost. As of December 31, 2014, the
remaining investment securities in the affected portfolios amounted to P
=926.73 million. Additions
to the portfolios subsequent to the sale amounted to =
P106.48 million and is carried at fair value
through profit or loss.
In 2013, the Parent Company sold government securities carried at amortized cost, with aggregate
carrying amount of P
=1.10 billion, and recognized a gain amounting to P
=572.49 million. The gain is
presented as Gain on sale of investment securities at amortized cost in the statement of income.
The securities were sold to fund the lending requirement for FDC. As a result of the sale in 2013,
subsequent acquisitions of investment securities in the affected portfolio will be classified as
financial assets at FVTPL while the remaining securities will remain to be classified as investment
securities at amortized cost. As of December 31, 2014 and 2013, the remaining government
securities in the portfolio amounted to =
P233.57 million and =
P231.42 million, respectively. There
were no additions to the portfolio subsequent to the sale.
In 2012, the Parent Company sold government securities classified as investment securities at
amortized cost with aggregate carrying amount of P
=1.29 billion and recognized a gain amounting
to =
P276.88 million, which is presented as Gain on sale of investment securities at amortized cost
in the statement of income. The sale was contemplated to secure financing for the Parent
Company’s capital expenditures on branch expansion. The Parent Company concluded that the
sale is consistent with its business model of managing financial assets to collect contractual cash
flows.
Refer to Note 3 for the judgments made related to the sale and derecognition of investment
securities at amortized cost.
Interest income on trading and investment securities follows:
Financial assets at FVTPL
Investment securities at amortized cost
2014
P
= 169,745
391,861
P
= 561,606
Consolidated
2013
P
=106,912
426,454
P
=533,366
2012
P
=185,963
656,299
P
=842,262
Parent Company
2013
2012
2014
P
=106,912
P
=185,963
P
= 169,745
426,447
656,298
391,861
P
=533,359
P
=842,261
P
= 561,606
*SGVFS010664*
- 71 Trading and securities gain of the Group and of the Parent Company consists of:
2013
P
=1,005,237
−
1,005,237
572,490
P
=1,577,727
2014
P
=497,352
2,173
499,525
305,997
P
=805,522
Financial assets at FVTPL
Interest rate swaps
Investment securities at amortized cost
2012
P
=988,110
−
988,110
276,883
P
=1,264,993
On June 25, 2012, the BOD approved the change in the Parent Company’s business model.
Management deemed it necessary to change the way it manages its investment securities because
of significant changes in its strategic plans, funding structure and cash flow profile brought about
by the IPO and its branch expansion program. Accordingly, the Parent Company made certain
reclassifications pursuant to the new business model effective July 1, 2012, resulting in
P
=711.89 million of Trading and securities gain in the statement of income representing the
difference between the aggregate amortized cost of certain securities amounting to P
=5.58 billion
and their aggregate fair value of =
P6.29 billion at the reclassification date. Refer to Note 3 for the
discussion on the change in the business model.
9. Loans and Receivables
Loans and receivables consist of:
Consolidated
2013
2014
Receivables from customers:
Corporate lending
Consumer lending
Unearned discounts
P
=56,486,240
65,827,805
122,314,045
(182,014)
122,132,031
Unquoted debt securities:
Government securities
Private bonds
Other receivables:
Accounts receivable
Accrued interest receivable
Sales contracts receivable
Allowance for credit and impairment
losses (Note 14)
P
=49,015,326
47,256,601
96,271,927
(636,865)
95,635,062
Parent Company
2013
2014
P
=56,786,240
59,878,190
116,664,430
(155,728)
116,508,702
P
=49,015,326
44,198,217
93,213,543
(589,681)
92,623,862
39,429
352,062
391,491
37,184
342,897
380,081
39,429
341,323
380,752
36,563
342,897
379,460
1,304,002
1,198,722
208,328
2,711,052
125,234,574
985,244
784,853
177,690
1,947,787
97,962,930
1,867,317
1,163,810
208,328
3,239,455
120,128,909
1,415,482
723,205
162,797
2,301,484
95,304,806
(3,811,163)
P
=121,423,411
(4,002,355)
P
=93,960,575
(3,728,222)
P
=116,400,687
(3,975,337)
P
=91,329,469
Credit card receivables under consumer lending amounted to P
=21.55 billion and =
P19.41 billion as
of December 31, 2014 and 2013, respectively.
Receivables from customers consist of:
Consolidated
Loans and discounts
Customers’ liabilities under letters of
credit/trust receipts
Bills purchased
2014
P
=117,895,627
2013
P
=91,645,274
2014
P
=112,246,012
Parent Company
2013
P
=88,586,890
3,317,693
1,100,725
P
=122,314,045
2,704,310
1,922,343
P
=96,271,927
3,317,693
1,100,725
P
=116,664,430
2,704,310
1,922,343
P
=93,213,543
*SGVFS010664*
- 72 In 2013, the Parent Company entered into a purchase of receivables agreement with EWRB,
whereby the Parent Company will purchase, on a without recourse basis, certain salary loans of
EWRB. In 2014 and 2013, the total salary loans purchased by the Parent Company amounted to
P
=5.74 billion and =
P2.91 billion, respectively. The Parent Company’s acquisition cost of the salary
loans approximate the fair value at the acquisition date. As of December 31, 2014 and 2013,
outstanding salary loans purchased from EWRB, included in Loans and discounts of the Parent
Company, amounted to =
P3.89 billion and =
P2.49 billion, respectively. In connection with the
purchase of receivables agreement, the Parent Company and EWRB also entered into an account
servicing and collection agreement whereby the Parent Company agreed to pay service fees
equivalent to 0.37% of the loan amounts collected by EWRB on behalf of the Parent Company.
The service fees paid by the Parent Company to EWRB amounted to =
P16.48 million and
P
=1.67 million in 2014 and 2013, respectively (see Note 26).
The Parent Company has a memorandum of understanding with Filinvest Land, Inc. (FLI), an
entity under common control of FDC, whereby the Parent Company will purchase, on a without
recourse basis, installment contracts receivable from FLI. On various dates in 2013 and 2012,
several deeds of assignment were executed wherein FLI sold, assigned and transferred without
recourse to the Parent Company all the rights, titles and interest in various loan accounts and the
related mortgages. In 2014 and 2013, the total receivables purchased by the Parent Company
without recourse under the terms of the foregoing assignment agreement amounted to
nil and =
P0.27 billion, respectively. Outstanding receivables purchased included in Loans and
discounts amounted to P
=0.86 billion and =
P1.31 billion as of December 31, 2014 and 2013,
respectively. The Parent Company’s acquisition cost of the installment contracts receivable
approximates fair value at the acquisition date. The Parent Company and FLI also entered into an
account servicing and collection agreement wherein the Parent Company would pay service fees
equivalent to 1.12% of loan amounts collected by FLI on behalf of the Parent Company related to
its purchase of installment contracts receivable. The total service fees paid by the Parent Company
to FLI amounted to P
=5.43 million and =
P2.58 million in 2014 and 2013, respectively (see Note 26).
A reconciliation of the allowance for impairment and credit losses per class of loans and
receivables for the Group and the Parent Company as of December 31, 2014 follows:
At January 1
Provision for impairment and
credit losses (Note 14)
Write-off (Note 14)
Interest accrued on impaired loans
At December 31
Specific impairment
Collective impairment
Gross amount of individually impaired loans
At January 1
Provision for impairment and
credit losses (Note 14)
Write-off (Note 14)
Interest accrued on impaired loans
At December 31
Consolidated
2014
Corporate Lending Consumer Lending
P
= 1,427,055
P
= 1,747,911
196,637
(274,927)
(24,218)
P
= 1,324,547
P
= 558,859
765,688
P
= 1,324,547
P
= 931,129
2,922,177
(3,028,855)
−
P
= 1,641,233
=
P−
1,641,233
P
= 1,641,233
=
P−
Parent Company
2014
Corporate Lending Consumer Lending
P
= 1,427,055
P
= 1,720,893
196,637
(274,927)
(24,218)
P
= 1,324,547
2,867,938
(3,028,855)
−
P
= 1,559,976
Others
P
= 827,389
Total
P
= 4,002,355
149,119
(131,125)
−
P
= 845,383
P
= 171,655
673,728
P
= 845,383
P
= 380,752
3,267,933
(3,434,907)
(24,218)
P
= 3,811,163
P
= 730,514
3,080,649
P
= 3,811,163
P
= 1,311,881
Others
P
= 827,389
Total
P
= 3,975,337
147,435
(131,125)
−
P
= 843,699
3,212,010
(3,434,907)
(24,218)
P
= 3,728,222
*SGVFS010664*
- 73 -
Specific impairment
Collective impairment
Gross amount of individually impaired loans
Parent Company
2014
Corporate Lending Consumer Lending
P
= 558,859
P
=−
765,688
1,559,976
P
= 1,324,547
P
= 1,559,976
P
= 931,129
P
=−
Others
P
= 171,655
672,044
P
= 843,699
P
= 380,752
Total
P
= 730,514
2,997,708
P
= 3,728,222
P
= 1,311,881
A reconciliation of the allowance for the impairment and credit losses per class of loans and
receivables for the Group and the Parent Company as of December 31, 2013 follows:
Consolidated
2013
Corporate Lending Consumer Lending
Others
P
=1,068,639
P
=1,429,929
P
=655,497
At January 1
Provision for impairment and
credit losses (Note 14)
Write-off (Note 14)
Interest accrued on impaired loans
At December 31
Specific impairment
Collective impairment
411,967
(6,210)
(47,341)
P
=1,427,055
P
=948,461
478,594
P
=1,427,055
Gross amount of individually impaired
loans
P
=963,228
2,229,435
(1,911,453)
−
P
=1,747,911
=
P−
1,747,911
P
=1,747,911
354,747
(182,855)
−
P
=827,389
=
P−
827,389
P
=827,389
=
P−
=
P−
Parent Company
2013
Corporate Lending Consumer Lending
Others
P
=1,068,639
P
=1,408,488
P
=655,497
At January 1
Provision for impairment and
credit losses (Note 14)
Write-off (Note 14)
Interest accrued on impaired loans
At December 31
Specific impairment
Collective impairment
411,967
(6,210)
(47,341)
P
=1,427,055
P
=948,461
478,594
P
=1,427,055
Gross amount of individually impaired
loans
P
=963,228
2,112,733
(1,800,328)
−
P
=1,720,893
=
P−
1,720,893
P
=1,720,893
354,747
(182,855)
−
P
=827,389
=
P−
827,389
P
=827,389
=
P−
=
P−
Total
P
=3,154,065
2,996,149
(2,100,518)
(47,341)
P
=4,002,355
P
=948,461
3,053,894
P
=4,002,355
P
=963,228
Total
P
=3,132,624
2,879,447
(1,989,393)
(47,341)
P
=3,975,337
P
=948,461
3,026,876
P
=3,975,337
P
=963,228
The Parent Company took possession of various properties previously held as collateral with an
estimated value of =
P487.60 million in 2014, =
P563.45 million in 2013 and P
=357.76 million in 2012
(see Notes 11 and 13).
The following is a reconciliation of the individual and collective allowances for impairment and
credit losses on loans and receivables of the Group and of the Parent Company:
Consolidated
At January 1
Provision for impairment and
credit losses
Write-off
Interest accrued on impaired loans
At December 31
Specific
Impairment
P
= 948,461
81,198
(274,927)
(24,218)
P
= 730,514
2014
Collective
Impairment
P
= 3,053,894
3,186,735
(3,159,980)
−
P
= 3,080,649
Total
P
= 4,002,355
3,267,933
(3,434,907)
(24,218)
P
= 3,811,163
Specific
Impairment
P
=632,691
369,321
(6,210)
(47,341)
P
=948,461
2013
Collective
Impairment
P
=2,521,374
Total
P
=3,154,065
2,626,828
(2,094,308)
−
P
=3,053,894
2,996,149
(2,100,518)
(47,341)
P
=4,002,355
*SGVFS010664*
- 74 Parent Company
2014
Collective
Impairment
P
= 3,026,876
Specific
Impairment
P
= 948,461
At January 1
Provision for impairment and
credit losses
Write-off
Interest accrued on impaired loans
At December 31
81,198
(274,927)
(24,218)
P
= 730,514
Total
P
= 3,975,337
3,130,812
(3,159,980)
−
P
= 2,997,708
3,212,010
(3,434,907)
(24,218)
P
= 3,728,222
Specific
Impairment
P
=632,691
369,321
(6,210)
(47,341)
P
=948,461
2013
Collective
Impairment
P
=2,499,933
Total
P
=3,132,624
2,510,126
(1,983,183)
−
P
=3,026,876
2,879,447
(1,989,393)
(47,341)
P
=3,975,337
Interest income on loans and receivables consist of:
2014
P
= 11,019,641
6,403
24,218
P
= 11,050,262
Receivables from customers
Unquoted debt securities
Interest accrued on impaired loans
Consolidated
2013
P
=9,106,302
7,237
47,341
P
=9,160,880
2012
P
=6,772,393
21,951
41,177
P
=6,835,521
2014
P
= 10,520,104
6,402
24,218
P
= 10,550,724
Parent Company
2013
2012
P
=8,706,551
P
=6,625,128
7,237
21,951
47,341
41,177
P
=8,761,129
P
=6,688,256
BSP Reporting
Of the total receivables from customers of the Parent Company as of December 31, 2014, 2013
and 2012, 33.43%, 33.27%, and 34.70%, respectively, are subject to periodic interest repricing.
The remaining peso receivables from customers earn annual fixed interest rates ranging from
1.13% to 23.68%, 1.50% to 16.96%, and 2.23% to 23.86% in 2014, 2013 and 2012, respectively,
while foreign currency-denominated receivables from customers earn annual fixed interest rates
ranging from 3.08% to 7.56%, 1.56% to 7.56% and 2.78% to 9.00% in 2014, 2013 and 2012,
respectively.
The details of the secured and unsecured receivables from customers of the Group and of the
Parent Company follow:
Consolidated
Gross
Amount
Loans secured by:
Chattel
Real estate
Hold-out on deposit
Others
Unsecured
P
= 21,509,682
18,275,599
6,129,665
2,266,396
48,181,342
73,950,689
P
= 122,132,031
Parent Company
2013
2014
%
17.61
14.96
5.02
1.86
39.45
60.55
100.00
Gross
Amount
=
P10,691,354
12,079,279
6,986,624
4,455,937
34,213,194
61,421,868
=
P95,635,062
2013
2014
%
Gross
Amount
11.18 P
= 21,509,682
12.63
16,974,840
7.31
6,129,665
4.66
5,062,078
35.78
49,676,265
64.22
66,832,437
100.00 P
= 116,508,702
%
18.46
14.57
5.26
4.34
42.63
57.37
100.00
Gross
Amount
=
P10,691,353
11,933,785
6,986,624
4,455,937
34,067,699
58,556,163
=
P92,623,862
%
11.54
12.88
7.54
4.82
36.78
63.22
100.00
Information on the concentration of credit as to industry follows (in millions):
Consolidated
2014
Personal consumption
Real estate, renting and
business activity
Wholesale and retail trade
Manufacturing
Financial intermediaries
Agriculture, fisheries and
forestry
Transportation, storage and
communications
Others
Gross
Amount
= 51,501
P
Parent Company
2013
%
42.17
Gross
Amount
P
=35,819
19,132
14,245
6,800
5,697
15.67
11.66
5.57
4.66
2,347
955
21,455
= 122,132
P
2014
%
37.45
Gross
Amount
= 47,523
P
14,108
11,871
6,307
5,941
14.75
12.41
6.60
6.21
1.92
1,214
0.78
17.57
100.00
661
19,714
P
=95,635
2013
%
40.79
Gross
Amount
P
=33,295
%
35.95
19,102
14,213
6,795
4,944
16.40
12.20
5.83
4.24
14,096
11,933
6,298
5,541
15.22
12.88
6.80
5.98
1.27
1,657
1.42
606
0.65
0.69
20.62
100.00
954
21,321
= 116,509
P
0.82
18.30
100.00
658
20,197
P
=92,624
0.71
21.81
100.00
*SGVFS010664*
- 75 BSP Circular No. 351 allows banks to exclude from nonperforming classification receivables
classified as ‘Loss’ in the latest examination of the BSP which are fully covered by allowance for
credit losses, provided that interest on said receivables shall not be accrued and that such
receivables shall be deducted from the total receivable portfolio for purposes of computing NPLs.
Subsequently, the BSP issued BSP Circular No. 772, which requires banks to compute their net
NPLs by deducting the specific allowance for credit losses on the total loan portfolio from the
gross NPLs. The specific allowance for credit losses shall not be deducted from the total loan
portfolio in computing the NPL ratio.
As of December 31, 2014 and 2013, NPLs of the Group and of the Parent Company as reported to
the BSP follow:
Gross NPLs
Deductions as required by the BSP
Consolidated
2013
2014
P
=5,311,975
P
=5,769,505
(2,743,840)
(2,112,161)
P
=2,568,135
P
=3,657,344
Parent Company
2013
2014
P
=4,648,407
P
=5,576,281
(2,224,252)
(1,947,018)
P
=2,424,155
P
=3,629,263
As of December 31, 2014 and 2013, secured and unsecured NPLs of the Group and of the Parent
Company as reported to the BSP follow:
Consolidated
Secured
Unsecured
2014
P
=3,214,825
2,554,680
P
=5,769,505
2013
P
=2,151,441
3,160,534
P
=5,311,975
Parent Company
2013
2014
P
=2,016,763
P
=3,214,825
2,631,644
2,361,456
P
=4,648,407
P
=5,576,281
10. Property and Equipment
The composition of and movements in the Group’s property and equipment follow:
Land
Cost
As of January 1
Additions
Disposals
As of December 31
Accumulated Depreciation and Amortization
As of January 1
Depreciation and amortization
Disposals
As of December 31
Allowance for Impairment Losses (Note 14)
As of January 1
Disposals
As of December 31
Net Book Value
Buildings
2014
Furniture,
Fixtures and
Leasehold
Equipment Improvements
Total
P
= 959,298
21,438
(10,294)
970,442
P
= 1,862,956
237,747
(439,372)
1,661,331
P
= 2,312,119
546,618
(194)
2,858,543
P
= 5,424,866
805,803
(618,986)
5,611,683
−
−
−
−
77,467
28,741
(8,271)
97,937
1,221,114
293,640
(432,896)
1,081,858
672,120
246,726
(62)
918,784
1,970,701
569,107
(441,229)
2,098,579
−
1,424
(1,424)
−
P
= 872,505
P
= 290,493
−
(169,126)
121,367
−
P
= 121,367
−
−
−
P
= 579,473
−
−
−
P
= 1,939,759
1,424
(1,424)
−
P
= 3,513,104
*SGVFS010664*
- 76 -
Land
Cost
As of January 1
Additions
Disposals
As of December 31
Accumulated Depreciation and Amortization
As of January 1
Depreciation and amortization
Disposals
As of December 31
Allowance for Impairment Losses (Note 14)
Provision during the year
Disposals
As of December 31
Net Book Value
P
=298,692
−
(8,199)
290,493
Buildings
2013
Furniture,
Fixtures and
Leasehold
Equipment Improvements
Total
P
=919,934
62,557
(23,193)
959,298
P
=1,528,710
421,945
(87,699)
1,862,956
P
=1,614,702
731,619
(34,202)
2,312,119
P
=4,362,038
1,216,121
(153,293)
5,424,866
−
−
−
−
53,710
30,080
(6,323)
77,467
1,043,391
254,690
(76,967)
1,221,114
524,248
182,046
(34,174)
672,120
1,621,349
466,816
(117,464)
1,970,701
−
−
−
P
=290,493
1,955
(531)
1,424
P
=880,407
−
−
−
P
=641,842
−
−
−
P
=1,639,999
1,955
(531)
1,424
P
=3,452,741
As of December 31, 2014 and 2013, the cost of fully depreciated property and equipment still in
use by the Group amounted to =
P845.45 million and =
P981.12 million, respectively.
The composition of and movements in the Parent Company’s property and equipment follow:
Land
Cost
As of January 1
Additions
Acquired from merger (Note 7)
Disposals
As of December 31
Accumulated Depreciation and Amortization
As of January 1
Depreciation and amortization
Acquired from merger (Note 7)
Disposals
As of December 31
Net Book Value
Cost
As of January 1
Additions
Disposals
As of December 31
Accumulated Depreciation and Amortization
As of January 1
Depreciation and amortization
Disposals
As of December 31
Net Book Value
Buildings
2014
Furniture,
Fixtures and
Leasehold
Equipment Improvements
Total
P
= 263,804
−
5,353
(169,127)
100,030
P
= 868,799
21,043
31,650
−
921,492
P
= 1,856,651
202,700
−
(435,634)
1,623,717
P
= 2,324,974
506,003
−
−
2,830,977
P
= 5,314,228
729,746
37,003
(604,761)
5,476,216
−
−
−
−
−
P
= 100,030
54,562
26,594
14,133
−
95,289
P
= 826,203
1,242,027
277,731
−
(429,330)
1,090,428
P
= 533,289
697,008
242,049
−
−
939,057
P
= 1,891,920
1,993,597
546,374
14,133
(429,330)
2,124,774
P
= 3,351,442
2013
Furniture,
Fixtures and
Leasehold
Equipment Improvements
Land
Buildings
Total
P
=263,804
−
−
263,804
P
=807,518
61,281
−
868,799
P
=1,505,265
401,358
(49,972)
1,856,651
P
=1,599,007
725,967
−
2,324,974
P
=4,175,594
1,188,606
(49,972)
5,314,228
−
−
−
−
P
=263,804
31,923
22,639
−
54,562
P
=814,237
1,050,468
240,835
(49,276)
1,242,027
P
=614,624
520,671
176,337
−
697,008
P
=1,627,966
1,603,062
439,811
(49,276)
1,993,597
P
=3,320,631
In 2014, the Parent Company sold a land previously intended for an office site with a carrying
value of =
P169.13 million to Filinvest Alabang, Inc. (FAI), an entity under common control of
FDC, that resulted in a gain amounting to =
P264.13 million, included under Gain on sale of assets
in the statement of income. Under the terms of the sale, the selling price of =
P433.26 million is
payable annually for five (5) years until 2019 with a fixed interest rate of 6.00% per annum. As of
*SGVFS010664*
- 77 December 31, 2014, the accounts receivable (included under Loans and receivable in the statement
of financial position) recognized by the Parent Company for this sale transaction amounted to
P
=411.60 million (see Note 26).
As of December 31, 2014 and 2013, the cost of fully depreciated property and equipment still in
use by the Parent Company amounted to P
=704.70 million and P
=862.55 million, respectively.
11. Investment Properties
The composition of and movements in the Group’s investment properties follow:
2014
Buildings and
Land Improvements
Cost
At January 1
Additions
Disposals
At December 31
Accumulated Depreciation and
Amortization
At January 1
Depreciation and amortization
Disposals
At December 31
Accumulated Impairment Losses (Note 14)
At January 1
Disposals
At December 31
Net Book Value
Cost
At January 1
Additions
Disposals
At December 31
Accumulated Depreciation and
Amortization
At January 1
Depreciation and amortization
Disposals
At December 31
Accumulated Impairment Losses (Note 14)
At January 1
Provisions during the year
Disposals
At December 31
Net Book Value
=847,004
P
51,952
(149,178)
749,778
−
−
−
−
142,662
(57,403)
85,259
=664,519
P
Total
=571,672
P
44,171
(94,463)
521,380
=1,418,676
P
96,123
(243,641)
1,271,158
248,231
46,849
(36,350)
258,730
248,231
46,849
(36,350)
258,730
21,067
(6,585)
14,482
=248,168
P
163,729
(63,988)
99,741
=912,687
P
Land
2013
Buildings and
Improvements
P796,858
=
209,064
(158,918)
847,004
P502,897
=
134,486
(65,711)
571,672
=1,299,755
P
343,550
(224,629)
1,418,676
218,281
50,250
(20,300)
248,231
218,281
50,250
(20,300)
248,231
14,098
15,439
(8,470)
21,067
=302,374
P
143,826
34,529
(14,626)
163,729
=1,006,716
P
−
−
−
−
129,728
19,090
(6,156)
142,662
=704,342
P
Total
*SGVFS010664*
- 78 The composition of and movements in the Parent Company’s investment properties follow:
2014
Buildings and
Land Improvements
Cost
At January 1
Additions
Acquired from merger (Note 7)
Disposals
At December 31
Accumulated Depreciation and
Amortization
At January 1
Depreciation and amortization
Acquired from merger (Note 7)
Disposals
At December 31
Accumulated Impairment Losses (Note 14)
At January 1
Disposals
At December 31
Net Book Value
=698,634
P
42,566
148,953
(142,937)
747,216
−
−
−
−
−
142,662
(57,403)
85,259
=661,957
P
Land
Cost
At January 1
Additions
Disposals
At December 31
Accumulated Depreciation and
Amortization
At January 1
Depreciation and amortization
Disposals
At December 31
Accumulated Impairment Losses (Note 14)
At January 1
Provision during the year
Disposals
At December 31
Net Book Value
P623,953
=
105,233
(30,552)
698,634
−
−
−
−
131,203
15,913
(4,454)
142,662
=555,972
P
Total
=508,412
P
52,771
51,186
(94,474)
517,895
=1,207,046
P
95,337
200,139
(237,411)
1,265,111
231,894
46,845
10,993
(36,349)
253,383
231,894
46,845
10,993
(36,349)
253,383
21,067
(6,585)
14,482
=250,030
P
163,729
(63,988)
99,741
=911,987
P
2013
Buildings and
Improvements
Total
P459,367
=
110,897
(61,852)
508,412
=1,083,320
P
216,130
(92,404)
1,207,046
207,886
43,691
(19,683)
231,894
207,886
43,691
(19,683)
231,894
13,896
15,333
(8,162)
21,067
=255,451
P
145,099
31,246
(12,616)
163,729
=811,423
P
The Group’s and the Parent Company’s investment properties consist entirely of real estate
properties and land improvements acquired in settlement of loans and receivables.
The aggregate fair value of the investment properties of the Group amounted to P
=1.29 billion and
P
=1.42 billion as of December 31, 2014 and 2013, respectively. The aggregate fair value of the
investment properties of the Parent Company amounted to P
=1.29 billion and =
P1.05 billion as of
December 31, 2014 and 2013. Fair value has been determined based on valuations made by
independent and/or in-house appraisers. Valuations were derived on the basis of recent sales of
similar properties in the same area as the investment properties taking into account the economic
conditions prevailing at the time the valuations were made.
*SGVFS010664*
- 79 As of December 31, 2014 and 2013, the carrying values of foreclosed investment properties of the
Group and of the Parent Company still subject to redemption period by the borrower amounted to
=
P58.79 million and =
P153.70 million, respectively.
Direct operating expenses from investment properties not generating rent income amounted to
P
=47.83 million, P
=49.33 million and =
P69.87 million for the Group in 2014, 2013 and 2012,
respectively, and =
P47.83 million, P
=43.57 million and =
P64.75 million for the Parent Company in
2014, 2013 and 2012, respectively.
12. Goodwill and Other Intangible Assets
As of December 31, 2014 and 2013, the intangible assets of the Group consist of:
Cost
As of January 1
Acquisitions
Write-off
As of December 31
Accumulated Amortization
As of January 1
Amortization
Write-off
As of December 31
Net Book Value
Cost
As of January 1
Acquisitions
As of December 31
Accumulated Amort ization
As of January 1
Amortization
As of December 31
Net Book Value
2014
Customer
Relationship
Core
Deposits
Goodwill
Branch
Licenses
P
= 1,316,728
−
−
1,316,728
P
= 1,662,200
505,196
−
2,167,396
P
= 154,626
−
−
154,626
P
= 40,433
−
−
40,433
P
= 977,873
455,523
(2,651)
1,430,745
P
= 4,151,860
960,719
(2,651)
5,109,928
−
−
−
−
P
= 1,316,728
−
−
−
−
P
= 2,167,396
20,838
4,312
−
25,150
P
= 129,476
19,542
4,043
−
23,585
P
= 16,848
455,745
183,326
(2,651)
636,420
P
= 794,325
496,125
191,681
(2,651)
685,155
P
= 4,424,773
Goodwill
Branch
Licenses
2013
Customer
Relationship
Core
Deposits
Capitalized
Software
Total
P
=1,316,728
−
1,316,728
P
=1,447,400
214,800
1,662,200
P
=154,626
−
154,626
P
=40,433
−
40,433
P
=794,758
183,115
977,873
P
=3,753,945
397,915
4,151,860
−
−
−
P
=1,316,728
−
−
−
P
=1,662,200
17,639
3,199
20,838
P
=133,788
14,387
5,155
19,542
P
=20,891
322,068
133,677
455,745
P
=522,128
354,094
142,031
496,125
P
=3,655,735
Capitalized
Software
Total
As of December 31, 2014 and 2013, the intangible assets of the Parent Company consist of:
Cost
As of January 1
Acquisitions
Acquired from merger (Note 7)
As of December 31, 2013
Accumulated Amortization
As of January 1
Amortization
As of December 31
Net Book Value
2014
Customer
Relationship
Core
Deposits
Capitalized
Software
Total
Goodwill
Branch
Licenses
P
= 919,254
−
373,996
1,293,250
P
= 1,036,800
505,196
625,400
2,167,396
P
= 154,626
−
−
154,626
P
= 40,433
−
−
40,433
P
= 963,136
401,008
−
1,364,144
P
= 3,114,249
906,204
999,396
5,019,849
−
−
−
P
= 1,293,250
−
−
−
P
= 2,167,396
20,838
4,312
25,150
P
= 129,476
19,542
4,043
23,585
P
= 16,848
446,839
174,033
620,872
P
= 743,272
487,219
182,388
669,607
P
= 4,350,242
*SGVFS010664*
- 80 -
Cost
As of January 1
Acquisitions
As of December 31
Accumulated Amortization
As of January 1
Amortization
As of December 31
Net Book Value
Goodwill
Branch
Licenses
2013
Customer
Relationship
Core
Deposits
Capitalized
Software
Total
P
=919,254
−
919,254
P
=822,000
214,800
1,036,800
P
=154,626
−
154,626
P
=40,433
−
40,433
P
=783,147
179,989
963,136
P
=2,719,460
394,789
3,114,249
−
−
−
P
=919,254
−
−
−
P
=1,036,800
17,639
3,199
20,838
P
=133,788
14,387
5,155
19,542
P
=20,891
316,892
129,947
446,839
P
=516,297
348,918
138,301
487,219
P
=2,627,030
Goodwill
The acquisition of EWRB in 2012 resulted in goodwill amounting P
=23.48 million, which has been
allocated to EWRB (see Note 7).
The acquisition of GBI in 2011 resulted in goodwill amounting to P
=374.00 million. The goodwill
has been allocated to branch operations of GBI (see Note 7).
As discussed in Note 1, on October 31, 2013, GBI transferred certain assets and liabilities to
EWRB. The assets and liabilities transferred include the branches where the goodwill from the
acquisition of GBI had been allocated. The branches coming from GBI were combined with the
branch operations of EWRB after the transfer. Consequently, the goodwill from the acquisition of
EWRB and GBI amounting to =
P23.48 million and =
P374.00 million, respectively, are now allocated
to the branch operations of EWRB, which is now considered as a single CGU for purposes of
impairment testing.
The business combination between the Parent Company and AIG Philam Savings Bank
(AIGPASB) Group in 2009 resulted in goodwill amounting to P
=769.04 million, which has been
allocated to the auto and credit cards lending unit acquired from the AIGPASB Group.
The business combination between the Parent Company and Ecology Savings Bank (ESBI) in
2003 resulted in goodwill amounting to P
=172.80 million, which has been allocated to various
branches acquired from ESBI. As of December 31, 2014 and 2013, the carrying amount of
goodwill, after impairment recognized in prior years, amounted to P
=150.21 million.
Key assumptions used in value in use calculations
The recoverable amount of the consumer business lending and branch units have been determined
based on value in use calculations using cash flow projections based on financial budgets
approved by the management covering a five-year period. The discount rates applied to the cash
flow projections is 11.68% and 13.09% in 2014 and 2013, respectively.
Discount rates
Discount rates reflect the current market assessment of the risk specific to each CGU.
Sensitivity to changes in assumptions
Management believes that no reasonably possible change in any of the above key assumptions
would cause the carrying value of the units to exceed their recoverable amount.
Customer Relationship and Core Deposits
The business combination between the Parent Company and AIG Philam Savings Bank
(AIGPASB) Group in 2009 resulted in acquisition of customer relationship and core deposits
amounting to P
=154.63 million and P
=40.43 million, respectively.
*SGVFS010664*
- 81 Branch Licenses
Branch licenses of the Group amounting to P
=2.17 billion as of December 31, 2014 represents:
25 branch licenses acquired by the Parent Company from the BSP amounting to P
=505.20 million
in 2014, 10 branch licenses acquired by the Parent Company from the BSP amounting to
P
=214.80 million in 2013, 42 branch licenses acquired by the Parent Company from the BSP
amounting to P
=822.00 million in 2012 and and 46 branch licenses acquired by the Parent
Company from the acquisition of GBI amounting to =
P625.40 million in 2011.
Branch licenses of the Parent Company amounting to P
=2.17 billion as of December 31, 2014
represents: 25 branch licenses acquired by the Parent Company from the BSP amounting to
P
=505.20 million and 46 branch licenses merged to the Parent Company from GBI amounting to
P
=625.40 million (see Note 7) in 2014, 10 branch licenses acquired by the Parent Company from
the BSP amounting to =
P214.80 million in 2013 and 42 branch licenses acquired by the Parent
Company from the BSP amounting to =
P822.00 million in 2012.
Capitalized Software
Capitalized software pertains to computer software licenses and programs acquired by the Group
and Parent Company for its banking operations. Included in the 2014 and 2013 acquisitions are
software licenses acquired by the Group for the upgrade of its core banking systems amounting to
=
P438.31 million and =
P153.66 million, respectively.
13. Other Assets
This account consists of:
Consolidated
Returned cash and other cash items
Other repossessed assets
Security deposits
Card acquisition costs
Prepaid expenses
Derivative assets (Note 5)
Documentary stamps
Miscellaneous
Allowance for impairment losses (Note 14)
2014
P
=632,970
204,546
197,488
145,479
115,519
110,668
54,020
1,048,039
2,508,729
(85,623)
P
=2,423,106
Parent Company
As of December 31
2013
2013
2014
P
=39,536
P
=39,301
P
=632,970
172,646
172,646
204,546
195,835
189,098
189,413
136,555
136,555
145,479
99,326
95,819
109,420
90
90
110,668
36,893
36,893
54,020
284,274
275,562
1,045,119
965,155
945,964
2,491,635
(67,656)
(67,656)
(85,623)
P
=897,499
P
=878,308
P
=2,406,012
As of December 31, 2014 and 2013, miscellaneous assets of the Group and Parent Company
include sundry debits and interoffice floats amounting to P
=805.66 million and =
P120.93 million,
respectively.
The movements in the allowance for impairment losses on other assets of the Group and the
Parent Company follow:
2014
Accumulated Impairment Losses (Note 14)
As of January 1
Provision during the year
Reversal of allowance from disposals
Write-off
As of December 31
P
=67,656
43,416
(11,304)
(14,145)
P
=85,623
2013
=51,574
P
65,008
(31,506)
(17,420)
=67,656
P
*SGVFS010664*
- 82 The movements in other repossessed assets of the Group and the Parent Company follow:
2013
2014
Cost
As of January 1
Additions
Disposals
As of December 31
Accumulated Depreciation
As of January 1
Depreciation and amortization
Disposals
As of December 31
Net Book Value, gross of impairment
Accumulated Impairment Losses
As of January 1
Provision during the year
Disposals
As of December 31
Net Book Value, net of impairment
P
=206,246
392,267
(364,210)
234,303
=159,176
P
347,316
(300,246)
206,246
33,600
54,335
(58,178)
29,757
204,546
24,299
58,549
(49,248)
33,600
172,646
10,452
10,296
(11,304)
9,444
P
=195,102
15,656
26,302
(31,506)
10,452
=162,194
P
14. Allowance for Impairment and Credit Losses
Details of and changes in the allowance for impairment and credit losses follow:
Consolidated
2014
Balances at the beginning of year:
Loans and receivables (Note 9)
Investment properties (Note 11)
Property and equipment (Note 10)
Other assets (Note 13)
Provisions charged to current operations
(Notes 9, 10, 11 and 13)
Interest accrued on impaired loans
Write-off of loans and receivables
Reversal of allowance on disposals of property
and equipment, investment properties and
other repossessed assets
(Notes 10, 11 and 13)
Write-off of other assets
Balances at the end of year:
Loans and receivables (Note 9)
Property and equipment (Note 10)
Investment properties (Note 11)
Other assets (Note 13)
2013
Parent Company
2014
2013
P
=4,002,355
163,729
1,424
67,656
4,235,164
P
=3,154,065
143,826
−
51,574
3,349,465
P
=3,975,337
163,729
−
67,656
4,206,722
P
=3,132,624
145,099
−
51,574
3,329,297
3,311,349
(24,218)
(3,434,907)
3,097,641
(47,341)
(2,100,518)
3,255,426
(24,218)
(3,434,907)
2,975,701
(47,341)
(1,989,393)
(76,716)
(14,145)
(46,663)
(17,420)
(75,292)
(14,145)
(44,122)
(17,420)
3,811,163
−
99,741
85,623
P
=3,996,527
4,002,355
1,424
163,729
67,656
P
=4,235,164
3,728,222
−
99,741
85,623
P
=3,913,586
3,975,337
−
163,729
67,656
P
=4,206,722
*SGVFS010664*
- 83 -
15. Deposit Liabilities
BSP Circular No. 753, which took effect April 6, 2012, promulgated the unification of the
statutory/ legal and liquidity reserve requirement effective on non-FCDU deposit liabilities from
8.00% to 6.00% and reserve requirement on long-term negotiable certificates of deposits from
3.00% to 7.00%. With the new regulations, only demand deposit accounts maintained by banks
with the BSP are eligible for compliance with reserve requirements. This was tantamount to the
exclusion of government securities and cash in vault as eligible reserves. On April 11, 2014, BSP
Circular 830 took effect which increased the reserve requirements on non-FCDU deposit liabilities
by 1-percentage-point to 7.00%. BSP Circular 832 further increased the reserve requirements of
non-FCDU deposit liabilities to 8.00% starting on the reserve week of May 30, 2014. As of
December 31, 2014 and 2013, the Parent Company is in compliance with such regulations.
As of December 31, 2014 and 2013, Due from BSP of the Parent Company amounting to
=
P23.06 billion and =
P15.89 billion, respectively, were set aside as reserves for deposit liabilities, as
reported to the BSP.
Of the total deposit liabilities of the Parent Company as of December 31, 2014, 2013 and 2012,
about 52.19%, 42.93% and 46.28%, respectively, are subject to periodic interest repricing. The
remaining deposit liabilities earn annual fixed interest rates ranging from 0.50% to 6.25% in 2014,
3.25% to 9.50% in 2013, and 1.21% to 5.23% in 2012.
The Group’s interest expense on deposit liabilities amounted to P
=1.33 billion, =
P1.17 billion and
P
=1.42 billion in 2014, 2013, and 2012, respectively. The Parent Company’s interest expense on
deposit liabilities amounted to =
P1.26 billion in 2014, =
P1.04 billion in 2013 and =
P1.39 billion in
2012.
Long-term Negotiable Certificates of Deposits due 2018 (LTNCD Series 1)
In 2013 and 2012, the Parent Company issued 5.00% fixed coupon rate (average EIR of 4.37%)
unsecured LTNCD maturing on May 18, 2018. The first tranche of the LTNCD Series 1
amounting to =
P1.53 billion was issued at a discount on November 23, 2012, and the second to
seventh tranches aggregating to P
=3.12 billion were issued at a premium in February to May 2013.
The net premium, net of debt issue costs, related to the issuance of the LTNCD Series 1 in 2013
and 2012 amounted to =
P107.91 million and P
=10.64 million, respectively.
Long-term Negotiable Certificates of Deposits due 2019 (LTNCD Series 2)
In 2013, the Parent Company issued 3.25% fixed coupon rate (average EIR of 3.48%) unsecured
LTNCD maturing on June 9, 2019. The first to third tranches of the LTNCD Series 2 aggregating
to =
P0.74 billion were issued in December 2013. The discount, net of debt issue costs related to the
issuance of the LTNCD Series 2 in 2013 amounted to =
P8.42 million. The fourth and fifth tranches
of the LTNCD Series 2 aggregating to =
P1.74 billion were issued in February and April 2014,
respectively. The discount, net of debt issue costs, related to the issuance of the LTNCD Series 2
in 2014 amounted to P
=85.05 million.
Long-term Negotiable Certificates of Deposits due 2020 (LTNCD Series 3)
In 2014, the Parent Company issued 4.50% fixed coupon rate (average EIR of 4.42%) unsecured
LTNCD maturing on April 24, 2020. The first tranche of the LTNCD Series 3 amounting to
=
P0.93 billion was issued in October 2014. The discount, net of debt issue costs, related to the
issuance of the LTNCD Series 3 in 2014 amounted to =
P4.63 million.
*SGVFS010664*
- 84 The movements in unamortized net premium (discount) as of December 31, 2014 and 2013
follow:
Beginning balance
Premium (discount) of issuances during the year
Amortization during the year
Ending balance
2014
P
=67,565
(89,675)
(3,408)
(P
=25,518)
2013
(P
=10,643)
99,496
(21,288)
=67,565
P
16. Bills and Acceptances Payable
Banks and other financial institutions
Outstanding acceptances
BSP
Consolidated
2013
2014
P
=3,274,219
P
= 5,289,389
5,903
28,263
8,813
−
P
=3,288,935
P
=5,317,652
Parent Company
2013
2014
P
=3,274,224
P
= 5,289,389
5,903
28,263
8,813
−
P
=3,288,940
P
=5,317,652
As of December 31, 2014 and 2013, investments in government securities of the Parent Company
(included in Investment securities at amortized cost in the statements of financial position) with
face value of =
P3.32 billion and =
P2.90 billion, respectively, and fair value of =
P4.01 billion and
P
=3.44 billion, respectively, were pledged with other banks as collateral for borrowings amounting
to =
P3.27 million and =
P2.83 billion, respectively.
Bills payable to the BSP, other banks and other financial institutions are subject to annual interest
rates ranging from 0.50% to 3.22% in 2014, 0.60% to 3.50% in 2013, and 0.65% to 5.00% in
2012.
The Group’s interest expense on bills and acceptances payable amounted to P
=39.90 million in
2014, =
P40.23 million in 2013 and P
=66.85 million in 2012. The Parent Company’s interest expense
on bills and acceptances payable amounted to P
=39.90 million in 2014 and =
P38.85 million in 2013
and =
P70.40 million in 2012.
17. Accrued Taxes, Interest and Other Expenses
This account consists of:
Accrued other expenses
Accrued interest payable
Accrued taxes
Consolidated
2013
2014
P
=758,361
P
= 862,748
223,663
348,356
56,151
130,171
P
=1,038,175
P
=1,341,275
Parent Company
2013
2014
P
=743,424
P
=842,525
217,976
343,435
50,211
83,493
P
=1,011,611
P
=1,269,453
Accrued expenses pertain to accruals of various operating expenses such as rent, utilities,
management and professional fees, employee bonus and other expenses of similar nature.
*SGVFS010664*
- 85 -
18. Subordinated Debt
The Group’s and the Parent Company’s subordinated debt consists of (in millions):
Lower Tier 2 unsecured subordinated notes due 2025
Lower Tier 2 unsecured subordinated notes due 2021
Lower Tier 2 unsecured subordinated notes due 2019
Lower Tier 2 unsecured subordinated notes due 2018
Face Value
P
=5,000
1,500
1,250
113
P
=7,863
Carrying Value
Consolidated
Parent Company
2013
2013
2014
2014
=
P−
=
P−
P
=4,964
P
=4,964
1,500
1,500
1,500
1,500
1,250
1,250
−
−
113
−
−
−
P
=2,750
P
=2,863
P
=6,464
P
=6,464
Lower Tier 2 unsecured subordinated notes due 2025
On July 4, 2014, the Parent Company issued 5.50% coupon rate Lower Tier 2 unsecured
subordinated note (the 2025 Notes) with par value of =
P5.00 billion, maturing on January 4, 2025,
but callable on January 4, 2020. The 2025 Notes qualify as Tier 2 capital pursuant to BSP Circular
No. 781 (Basel III), BSP Circular No. 826 on risk disclosure requirements for the loss absorption
features of capital instruments, and other related circulars and issuances of the BSP.
Unless the 2025 Notes are previously redeemed, the 2025 Notes are repayable to the Noteholders
at 100.00% of their face value or at par on the maturity date of January 4, 2025.
From and including the issue date to, but excluding the optional redemption date of January 4,
2020, the 2025 Notes bear interest at the rate of 5.50% per annum and shall be payable quarterly in
arrears on January 4, April 4, July 4, and October 4 of each year, which commenced on October 4,
2014. Unless the 2025 Notes are previously redeemed, the interest rate will be reset at the
equivalent of the prevailing 5-year PDST-R2 at reset date plus initial spread (i.e. the difference
between the Initial interest rate and the prevailing 5-year PDST R2 at the pricing date of the initial
tranche).
The 2025 Notes are redeemable at the option of the Parent Company in whole but not in part on
the call option date at 100% of the face value plus accrued but unpaid interest, subject to the
following conditions:
a. the Parent Company has obtained prior written approval and complied with the requirements
of the BSP prior to redemption of the 2025 Notes
b. the 2025 Notes are replaced with capital of the same or better quality and the replacement of
this capital is done at conditions which are sustainable for the income capacity of the Parent
Company, or
c. the Parent Company demonstrates that its capital position is above the minimum capital
requirements after redemption is exercised
d. the Parent Company is not in breach of (and would not, following such redemption, be in
breach) of applicable regulatory capital requirements (including regulatory capital buffers)
e. the Parent Company is solvent at the time of redemption of the 2025 Notes and immediately
thereafter.
Furthermore, upon the occurrence of a Tax Redemption Event or a Regulatory Redemption Event,
the Parent Company may, subject to compliance with BSP rules and BSP approval, and upon prior
approval of the BSP and with prior written notice to the Noteholders on record, redeem all and not
less than all of the outstanding 2025 Notes prior to the stated maturity by paying the Noteholder
the Redemption Option Amount which, (a) in the case of a Tax Redemption Event is an amount
equal to 100% of the face value of the 2025 Notes plus accrued interest at the interest rate relating
to the then current interest period up to but excluding the date of such redemption, and (b) in the
*SGVFS010664*
- 86 case of a Regulatory Redemption Event is an amount equal to 100% of the face value of the 2025
Notes plus accrued interest at the interest rate relating to the then current Interest Period up to but
excluding the date of such redemption (the “Redemption Option Date”).
The 2025 Notes have a loss absorption feature which means that the 2025 Notes are subject to a
Non-Viability Write-Down in case of a Non-Viability Event. Non-viability is defined as a
deviation from a certain level of Common Equity Tier 1 (CET1) Ratio or inability of the Parent
Company to continue business (closure) or any other event as determined by the BSP, whichever
comes earlier. A Non-Viability Event is deemed to have occurred when the Parent Company is
considered non-viable as determined by the BSP.
Upon the occurrence of a Non-Viability Event, the Parent Company shall write-down the principal
amount of the 2025 Notes to the extent required by the BSP, which could go to as low as zero.
Additional Tier 1 (AT1) capital instruments shall be utilized first before Tier 2 capital instruments
are written-down, until the viability of the Issuer is re-established. In the event the Parent
Company does not have AT1 capital instruments, then the write-down shall automatically apply to
Tier 2 capital.
Loss absorption measure is subject to the following conditions:
a. the principal amount of all series of Tier 1 Loss Absorbing Instruments outstanding having
been Written-Down to zero or converted into common equity of the Parent Company (where
possible) irrevocably, in accordance with, and to the extent possible pursuant to, their terms
(the “Tier 1 Write-Down”)
b. the Tier 1 Write-Down having been insufficient to cure the Non-Viability Event
c. the Parent Company giving the relevant Non-Viability Notice to the Public Trustee and the
Registrar and Paying Agent
Each Noteholder irrevocably agrees and acknowledges that it may not exercise or claim any right
of set-off in respect of any amount owed to it by the Parent Company arising under or in
connection with the 2025 Notes and it shall, to the fullest extent permitted by applicable law,
waive and be deemed to have waived all such rights of set-off.
Lower Tier 2 unsecured subordinated notes due 2021
On July 2, 2010, the Parent Company issued 7.50% coupon rate Lower Tier 2 unsecured
subordinated note (the 2021 Notes) with par value of =
P1.50 billion, maturing on January 2, 2021
but callable on January 2, 2016, and with step-up in interest if not called.
Unless the 2021 Notes are previously redeemed, the 2021 Notes are repayable to the Noteholders
at 100.00% of their face value or at par on the maturity date of January 2, 2021.
From and including the issue date to, but excluding the optional redemption date of
January 2, 2016, the 2021 Notes bear interest at the rate of 7.50% per annum and shall be payable
semi-annually in arrears on January 2 and July 2 of each year, commencing on January 2, 2011.
Unless the 2021 Notes are previously redeemed, the interest rate from and including
January 2, 2016 to, but excluding January 2, 2021, will be reset and such Step-Up interest shall be
payable semi-annually in arrears on January 2 and July 2 of each year, commencing on
July 2, 2016.
*SGVFS010664*
- 87 The Step-Up interest rate shall be computed as the higher of:
a. 80.00% of the 5-year on-the-run Philippine Treasury benchmark bid yield (PDST-F) on
optional redemption date plus the Step-Up spread of 3.44% per annum. The Step-Up spread is
defined as follows:
Step-Up spread = 150.00% of the difference between the Interest Rate and 80.00% of the
5-year PDST-F on the Pricing Date, preceding the initial Issue Date, equivalent to 3.44% per
annum.
b. 150.00% of the difference between the interest rate and the 5-year PDST-F on the pricing date
preceding the initial issue date plus the 5-year PDST-F on the optional redemption date.
Lower Tier 2 unsecured subordinated notes due 2019
On July 25, 2008, the Parent Company issued 8.63% coupon rate Lower Tier 2 unsecured
subordinated note (the 2019 Notes) with par value of =
P1.50 billion, maturing on January 26, 2019
but callable on January 25, 2014, and with step-up in interest if not called.
Unless the 2019 Notes are previously redeemed, the 2019 Notes are repayable to the Noteholders
at 100.00% of their face value or at par on the maturity date of January 26, 2019.
From and including the issue date to, but excluding the optional redemption date of
January 25, 2014, the 2019 Notes bear interest at the rate of 8.63% per annum and shall be payable
semi-annually in arrears on January 25 and July 25 of each year, commencing on
January 25, 2009. Unless the 2019 Notes are previously redeemed, the interest rate from and
including January 25, 2014 to, but excluding January 26, 2019, will be reset and such Step-Up
interest shall be payable semi-annually in arrears on January 25 and July 25 of each year,
commencing on July 25, 2014.
The Step-Up rate shall be computed as the higher of:
a. 80.00% of the 5-year on-the-run Philippine Treasury benchmark bid yield (PDST-F) on
optional redemption date plus the Step-Up spread. The Step-Up spread is defined as follows:
Step-Up spread = 150.00% [8.25% - 80.00% (5-year PDST-F on the pricing date before the
initial issue date)]
b. 150.00% of the difference between the interest rate and the 5-year PDST-F on the pricing date
preceding the initial issue date plus the 5-year PDST-F on the optional redemption date.
On January 25, 2014, the Parent Company exercised its call option on the P
=1.25 billion 2019
Notes due on January 26, 2019 and with optional redemption date of January 25, 2014. The
redemption was approved by the Parent Company’s BOD on August 29, 2013 and by the BSP on
November 7, 2013. The call option amount was the sum of the face value of the Notes, plus
accrued interest amounting to P
=53.85 million, covering the 11th interest period from July 25, 2013
to January 25, 2014 at the interest rate of 8.625%, as of but excluding the call option date.
Lower Tier 2 unsecured subordinated notes due 2018
On March 12, 2008, GBI issued 9.72% per annum Lower Tier 2 unsecured subordinated notes (the
2018 Notes) in favor of Land Bank of the Philippines (LBP) with par value of =
P112.50 million,
maturing on March 13, 2018 but callable on March 13, 2013, and with step-up in interest if not
called. The issuance of the 2018 Notes under the terms approved by the BOD was approved by
the BSP on February 14, 2008.
*SGVFS010664*
- 88 Among the significant terms and conditions of the issuance of the 2018 Notes are:
a. The 2018 Notes must be issued and fully paid up. Only the net proceeds received from the
issuance of the 2018 Notes shall be included as capital.
b. The 2018 Notes bear interest at 9.72% per annum for the first five years of the term, payable
quarterly. On the next 5 years, the rate will be reset at 5-year PDST-F at the time of extension
plus a spread of 4.00% per annum or 10.00% per annum, whichever is higher, subject to
allowable interest rate step-up regulation of the BSP. Upon resetting in 2013, the interest rate
has been fixed at 10.72%.
c. The 2018 Notes are neither secured nor covered by a guarantee by GBI or related party of GBI
or other arrangement that legally or economically enhances the priority of the claim of any
holder of the 2018 Notes as against depositors and other creditors.
d. The 2018 Notes shall not have a priority claim, in respect of principal and coupon payments in
the event of winding up of the Issuer, which is higher than or equal with that of depositors and
other creditors.
e. The 2018 Notes cannot be terminated by LBP before maturity date.
f.
LBP cannot set off any amount that it may owe to GBI against the 2018 Notes.
g. The payment of principal may be accelerated only in the event of insolvency of GBI.
h. The coupon rate or the formulation for calculating coupon payments shall be fixed at the time
of the issuance of the 2018 Notes and may not be linked to the credit standing of GBI.
The 2018 Notes was included in the net assets of GBI that were merged with the Parent
Company (see Note 7). On October 31, 2014, the Parent Company redeemed the 2018 Notes at
P
=112.50 million plus accrued interest and taxes of =
P1.70 million.
The Group’s interest expense on subordinated debt amounted to P
=258.71 million in 2014,
P
=232.16 million in 2013 and =
P232.36 million in 2012. The Parent Company’s interest expense on
subordinated debt amounted to P
=258.71 million in 2014 and =
P220.31 million in 2013 and 2012.
19. Other Liabilities
This account consists of:
Accounts payable
Bills purchased-contra
Deferred revenue
Retention payable
Marginal deposits and letters of credit
Derivative liabilities (Note 5)
Withholding tax payable
Net retirement obligation (Note 24)
Payment orders payable
Miscellaneous
Consolidated
2013
2014
P
=1,223,604
P
=2,082,995
1,363,885
993,784
381,376
463,510
174,451
183,305
–
115,369
22,017
101,290
52,202
66,790
1,364
26,925
52,844
12,145
325,634
516,967
P
=3,597,377
P
=4,563,080
Parent Company
2013
2014
P
=1,102,960
P
=2,052,446
1,363,885
993,784
381,376
463,510
174,451
183,305
–
115,369
22,017
101,290
49,846
64,670
1,198
25,927
52,844
12,145
325,063
516,017
P
=3,473,640
P
=4,528,463
*SGVFS010664*
- 89 Deferred revenue pertains to deferral and release of loyalty points program transactions and
membership fees and dues. As of December 31, 2014 and 2013, miscellaneous liabilities of the
Group and Parent Company include sundry credits and interoffice floats amounting to
=
P253.5 million and =
P247.61 million, respectively.
20. Maturity Analysis of Assets and Liabilities
The following tables show 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 the statement of
financial position date:
Consolidated
Financial assets:
Cash and other cash items
Due from BSP
Due from other banks
IBLR
Financial assets at FVTPL
(Note 8)
Investments at FVTOCI
(Note 8)
Investment securities at
amortized cost (Note 8)
Loans and receivables - gross
(Note 9)
Nonfinancial assets:
Property and equipment
(Note 10)
Investment properties
(Note 11)
Deferred tax assets (Note 23)
Goodwill and other intangible
assets (Note 12)
Other assets (Note 13)
Allowances for impairment and
credit losses on loans and
receivables (Note 14)
Unearned discounts (Note 9)
Financial liabilities:
Deposit liabilities
Bills and acceptances payable
(Note 16)
Cashiers’ checks and demand
drafts payable
Subordinated debt (Note 18)
Accrued interest, taxes and
other expenses (Note 17)
Other liabilities (Note 19)
Nonfinancial liabilities:
Income tax payable
Accrued interest, taxes and
other expenses (Note 17)
Other liabilities (Note 19)
Total
Less than
12 months
2013
Over
12 months
Total
P
=−
−
−
−
P
= 5,993,499
23,128,678
3,580,528
2,893,384
P
=3,884,538
18,537,655
1,751,824
3,116,529
=
P−
−
−
−
P
=3,884,538
18,537,655
1,751,824
3,116,529
10,182,690
−
10,182,690
1,948,703
−
1,948,703
−
14,419
14,419
−
10,733
10,733
−
8,794,878
8,794,878
−
9,080,320
9,080,320
60,968,220
106,746,999
64,448,368
73,257,665
125,416,588
180,004,664
57,216,009
86,455,258
41,383,786
50,474,839
98,599,795
136,930,097
−
3,513,104
3,513,104
−
3,452,741
3,452,741
−
−
912,687
977,426
912,687
977,426
−
−
1,006,716
995,125
1,006,716
995,125
−
2,094,421
2,094,421
108,841,420
4,424,773
328,685
10,156,675
83,414,340
4,424,773
2,423,106
12,251,096
192,255,760
−
307,628
307,628
86,762,886
3,655,735
589,871
9,700,188
60,175,027
3,655,735
897,499
10,007,816
146,937,913
−
−
P
=86,762,886
−
−
P
=60,175,027
(4,002,355)
(636,865)
P
=142,298,693
Less than
12 months
2014
Over
12 months
P
= 5,993,499
23,128,678
3,580,528
2,893,384
−
−
P
= 108,841,420
(3,811,163)
(3,811,163)
(182,014)
(182,014)
P
= 79,421,163 P
= 188,262,583
P
= 114,474,883
P
= 33,212,596
P
= 147,687,479
P
=102,121,470
P
=9,054,625
P
=111,176,095
5,317,652
−
5,317,652
3,288,935
−
3,288,935
1,256,982
−
−
6,463,731
1,256,982
6,463,731
866,457
−
2,862,500
866,457
2,862,500
1,252,060
2,397,713
124,699,290
−
183,305
39,859,632
1,252,060
2,581,018
164,558,922
982,024
1,093,516
108,352,402
−
257,154
12,174,279
982,024
1,350,670
120,526,681
184,577
−
184,577
76,935
−
76,935
89,215
1,516,171
1,789,963
P
= 126,489,253
−
465,891
465,891
P
= 40,325,523
89,215
1,982,062
2,255,854
P
= 166,814,776
56,151
1,416,087
1,549,173
P
=109,901,575
−
830,620
830,620
P
=13,004,899
56,151
2,246,707
2,379,793
P
=122,906,474
*SGVFS010664*
- 90 Parent Company
Financial assets:
Cash and other cash items
Due from BSP
Due from other banks
IBLR
Financial assets at FVTPL
(Note 8)
Investments at FVTOCI
(Note 8)
Investment securities at
amortized cost (Note 8)
Loans and receivables - gross
(Note 9)
Nonfinancial assets:
Investment in subsidiaries
(Note 7)
Property and equipment
(Note 10)
Investment properties
(Note 11)
Deferred tax assets (Note 23)
Goodwill and other intangible
assets (Note 12)
Other assets (Note 13)
Allowances for impairment and
credit losses on loans and
receivables (Note 14)
Unearned discounts (Note 9)
Financial liabilities:
Deposit liabilities
Bills and acceptances payable
(Note 16)
Cashiers’ checks and demand
drafts payable
Subordinated debt (Note 18)
Accrued interest, taxes and
other expenses (Note 17)
Other liabilities (Note 19)
Nonfinancial liabilities:
Income tax payable
Accrued interest, taxes and
other expenses (Note 17)
Other liabilities (Note 19)
Total
Less than
12 months
2013
Over
12 months
Total
P
=−
−
−
−
P
= 5,912,309
22,970,798
3,493,976
2,893,384
P
=3,811,185
18,404,125
1,604,404
3,116,529
=
P−
−
−
−
P
=3,811,185
18,404,125
1,604,404
3,116,529
10,182,690
−
10,182,690
1,948,703
−
1,948,703
−
14,419
14,419
−
10,733
10,733
−
8,794,878
8,794,878
−
9,079,907
9,079,907
61,485,884
106,939,041
58,798,753
67,608,050
120,284,637
174,547,091
56,509,839
85,394,785
39,384,648
48,475,288
95,894,487
133,870,073
−
521,000
521,000
−
1,409,449
1,409,449
−
3,351,442
3,351,442
−
3,320,631
3,320,631
−
−
911,987
952,751
911,987
952,751
−
−
811,423
1,176,342
811,423
1,176,342
−
2,077,327
2,077,327
109,016,368
4,350,242
328,685
10,416,107
78,024,157
4,350,242
2,406,012
12,493,434
187,040,525
−
307,628
307,628
85,702,413
2,627,030
570,680
9,915,555
58,390,843
2,627,030
878,308
10,223,183
144,093,256
Less than
12 months
2014
Over
12 months
P
= 5,912,309
22,970,798
3,493,976
2,893,384
−
−
P
= 109,016,368
(3,728,222)
(3,728,222)
(155,728)
(155,728)
P
= 74,140,207 P
= 183,156,575
−
−
P
=85,702,413
−
−
P
=58,390,843
(3,975,337)
(589,681)
P
=139,528,238
P
= 113,955,417
P
= 29,214,299
P
= 143,169,716
P
=99,686,240
P
=9,045,448
P
=108,731,688
5,317,652
−
5,317,652
3,288,940
−
3,288,940
1,256,982
−
−
6,463,731
1,256,982
6,463,731
866,457
−
−
2,750,000
866,457
2,750,000
1,190,052
2,364,554
124,084,657
−
183,305
35,861,335
1,190,052
2,547,859
159,945,992
961,400
1,093,516
105,896,553
−
964,037
12,759,485
961,400
2,057,553
118,656,038
127,952
−
127,952
52,208
−
52,208
79,401
1,514,713
1,722,066
P
= 125,806,723
−
465,891
465,891
P
= 36,327,226
79,401
1,980,604
2,187,957
P
= 162,133,949
50,211
1,416,087
1,518,506
P
=107,415,059
−
−
−
P
=12,759,485
50,211
1,416,087
1,518,506
P
=120,174,544
21. Equity
Capital Management
The Parent Company actively manages its capital to comply with regulatory requirements, enable
growth targets, withstand plausible stress events and be at par with the Parent Company’s peers.
The primary objective of the Parent Company’s capital management is to ensure that it maintains
adequate capital to cover risks inherent to its banking activities without prejudice to optimizing
shareholders’ value.
*SGVFS010664*
- 91 Regulatory Qualifying Capital
Under existing BSP regulations, the determination of the Parent Company’s compliance with
regulatory requirements and ratios is based on the amount of the Parent Company’s ‘unimpaired
capital’ (regulatory net worth) reported to the BSP, which is determined on the basis of regulatory
policies. In addition, the risk-based Capital Adequacy Ratio (CAR) of a bank, expressed as a
percentage of qualifying capital to risk-weighted assets, should not be less than 10.00% for both
solo basis (head office and branches) and consolidated basis (Parent Company and subsidiaries
engaged in financial allied undertakings). Qualifying capital and risk-weighted assets are
computed based on BSP regulations.
Effective January 1, 2014, the Group complied with BSP issued Circular No. 781, Basel III
Implementing Guidelines on Minimum Capital Requirements, which provides the implementing
guidelines on the revised risk-based capital adequacy framework particularly on the minimum
capital and disclosure requirements for universal banks and commercial banks, as well as their
subsidiary banks and quasi-banks, in accordance with the Basel III standards. The Circular sets
out a minimum Common Equity Tier 1 (CET1) ratio of 6.00% and Tier 1 capital ratio of 7.50%. It
also introduces a capital conservation buffer of 2.50% comprised of CET1 capital. The BSP’s
existing requirement for Total CAR remains unchanged at 10.00% and these ratios shall be
maintained at all times.
Further, existing capital instruments as of December 31, 2010 which do not meet the eligibility
criteria for capital instruments under the revised capital framework shall no longer be recognized
as capital. Capital instruments issued under BSP Circular Nos. 709 and 716 (the circulars
amending the definition of qualifying capital particularly on Hybrid Tier 1 and Lower Tier 2
capitals), and before the effectivity of BSP Circular No. 781, shall be recognized as qualifying
capital only until December 31, 2015. In addition to changes in minimum capital requirements,
this Circular also requires various regulatory adjustments in the calculation of qualifying capital.
On June 27, 2014, the BSP issued Circular No. 839, REST Limit for Real Estate Exposures which
provides the implementing guidelines on the prudential REST limit for universal, commercial, and
thrift banks on their aggregate real estate exposures. The Group should maintain CET1 and CAR
levels at the regulatory prescribed minimums, on a solo and consolidated basis, even after the
simulated results of a 25.00% write-off to the Group’s real estate exposures. These shall be
complied with at all times.
Prior to January 1, 2014, the risk-based capital ratio of the Parent Company is computed in
accordance with the capital adequacy requirements of the New Capital Accord or Basel II, as
contained in the implementation guidelines of BSP Circular No. 538.
The capital-to-risk assets ratio reported to the BSP as of December 31, 2014 and 2013 based on
Basel III and Basel II, respectively, are shown in the table below (amounts in millions):
Tier 1 capital
CET1 capital
Less required deductions
Subtotal
Less: deductions from Tier 1 capital
Net Tier 1 Capital
Tier 2 capital
Less deductions from Tier 2 capital
Net Tier 2 Capital
Total Qualifying capital
Consolidated
2013
2014
P
=19,128
P
=21,209
–
21,209
2,463
6,264
16,665
14,945
–
–
16,665
14,945
3,896
6,023
–
–
3,896
6,023
P
=20,561
P
=20,968
Parent Company
2014
P
=20,784
20,784
6,986
13,798
–
13,798
5,961
–
5,961
P
=19,759
2013
P
=19,130
–
2,380
16,750
704
16,046
3,739
705
3,034
P
=19,080
*SGVFS010664*
- 92 Presented below are the composition of qualifying capital and the related deductions as reported to
the BSP (amounts in millions):
Consolidated
2014
Tier 1 capital:
Paid up common stock
Additional paid-in capital
Retained earnings
Undivided profits
Cumulative foreign currency translation
Minority interest
Core Tier 1 capital
Deductions from Tier 1 capital:
Total outstanding unsecured credit
accommodation to a DOSRI and
subsidiary
Investments in equity securities
Defined benefit asset
Deferred income tax
Goodwill and other intangible assets
Total Deductions
Total Tier 1 Capital
Tier 2 capital:
General loan loss provision
Unsecured subordinated debt
Total Tier 2 capital
Deductions from Tier 1 and Tier 2 capital
Qualifying capital:
Net Tier 1 capital
Net Tier 2 capital
Total qualifying capital
Capital requirements:
Credit risk
Market risk
Operational risk
Total capital requirements
CET1 capital ratio
Tier 1 capital ratio
Total capital ratio
2013
Parent Company
2014
2013
P
=11,284
979
6,849
2,084
13
–
21,209
P
=11,284
979
4,804
2,050
5
6
19,128
P
=11,284
979
6,861
1,647
13
–
20,784
P
=11,284
979
4,910
1,952
5
–
19,130
583
240
26
990
4,425
6,264
14,945
160
–
–
986
1,317
2,463
16,665
883
761
26
966
4,350
6,986
13,798
288
–
–
1,173
919
2,380
16,750
1,060
4,963
6,023
–
1,033
2,863
3,896
–
998
4,963
5,961
–
989
2,750
3,739
1,409
14,945
6,023
20,968
16,665
3,896
20,561
13,798
5,961
19,759
16,046
3,034
19,080
133,495
8,363
18,152
P
=160,010
103,266
2,137
15,322
P
=120,725
127,826
8,363
17,419
P
=153,608
99,189
2,137
14,703
P
=116,029
9.34%
9.34%
13.10%
–
13.80%
17.03%
8.98%
8.98%
12.86%
–
13.83%
16.45%
Qualifying capital and risk-weighted assets (RWA) are computed based on BSP regulations.
Under Basel III, the regulatory Gross Qualifying Capital of the Parent Company consists of Tier 1
(core), composed of Common Equity Tier 1 and Additional Tier 1, and Tier 2 (supplementary)
capital. Tier 1 capital comprises share capital, retained earnings (including current year profit) and
non-controlling interest less required deductions such as deferred income tax and unsecured credit
accommodations to DOSRI. Tier 2 capital includes unsecured subordinated debts, revaluation
reserves and general loan loss provision. 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 investments in debt capital
instruments of unconsolidated subsidiary banks (for solo basis) and equity investments in
subsidiary and non-financial allied undertakings.
*SGVFS010664*
- 93 Risk-weighted assets are determined by assigning defined risk weights to the statement of
financial position exposure 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. The risk weights vary from
0.00% to 150.00% depending on the type of exposure, with the risk weights of off-balance sheet
exposures being subjected further to credit conversion factors. Below is a summary of risk
weights and selected exposure types:
Risk weight
0.00%
Exposure/Asset type*
Cash on hand; claims collateralized by securities issued by the national
government, BSP; loans covered by the Trade and Investment
Development Corporation of the Philippines; real estate mortgages covered
by the Home Guarantee Corporation
20.00%
COCI, claims guaranteed by Philippine incorporated banks/quasi-banks
with the highest credit quality; claims guaranteed by foreign incorporated
banks with the highest credit quality; loans to exporters to the extent
guaranteed by Small Business Guarantee and Finance Corporation
50.00%
Housing loans fully secured by first mortgage on residential property;
Local Government Unit (LGU) bonds which are covered by Deed of
Assignment of Internal Revenue allotment of the LGU and guaranteed by
the LGU Guarantee Corporation
75.00%
Direct loans of defined Small Medium Enterprise (SME) and microfinance
loans portfolio; non-performing housing loans fully secured by first
mortgage
100.00%
All other assets (e.g., real estate assets) excluding those deducted from
capital (e.g., deferred income tax)
150.00%
All non-performing loans (except non-performing housing loans fully
secured by first mortgage) and all non-performing debt securities
* Not all inclusive
With respect to off-balance sheet exposures, the exposure amount is multiplied by a credit
conversion factor (CCF), ranging from 0.00% to 100.00%, to arrive at the credit equivalent
amount, before the risk weight factor is multiplied to arrive at the risk-weighted exposure. Direct
credit substitutes (e.g., guarantees) have a CCF of 100.00%, while items not involving credit risk
has a CCF of 0.00%.
In the case of derivatives, the credit equivalent amount (against which the risk weight factor is
multiplied to arrive at the risk-weighted exposure) is generally the sum of the current credit
exposure or replacement cost (the positive fair value or zero if the fair value is negative or zero)
and an estimate of the potential future credit exposure or add-on. The add-on ranges from 0.00%
to 1.50% (interest rate-related) and from 1.00% to 7.50% (exchange rate-related), depending on
the residual maturity of the contract. For credit-linked notes and similar instruments, the riskweighted exposure is the higher of the exposure based on the risk weight of the issuer’s collateral
or the reference entity or entities.
*SGVFS010664*
- 94 The risk-weighted CAR is calculated by dividing the sum of its Tier 1 and Tier 2 capital, as
defined under BSP regulations, by its risk-weighted assets. The risk-weighted assets, as defined
by the BSP regulations, consist of all of the assets on the balance sheet at their respective book
values, together with certain other off-balance sheet items, weighted by certain percentages
depending on the risks associated with the type of assets. The determination of compliance with
regulatory requirements and ratios is based on the amount of the Parent Company’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.
In 2014 and 2013, the Parent Company has complied with the required 10.00% capital adequacy
ratio of the BSP.
The policies and processes guiding the determination of the sufficiency of capital of the Parent
Company have been incorporated in the Parent Company’s Internal Capital Adequacy Assessment
Process (ICAAP) which supplements the BSP’s risk-based capital adequacy framework under
BSP Circular Nos. 538 and 639 to comply with the requirements of the BSP. While the Parent
Company has added the ICAAP to its capital management policies and processes, there were no
changes made on the objectives and policies for the years ended December 31, 2014 and 2013.
The Parent Company has taken into consideration the impact of the foregoing requirements to
ensure that the appropriate level and quality of capital are maintained on an ongoing basis.
Capital Stock
Capital stock consist of:
Common stock - P
=10.00 par value
Authorized - 1,500,000,000 shares
Issued and outstanding - 1,128,409,610 shares
=15,000,000
P
11,284,096
On January 19, 2012 and February 10, 2012, the Parent Company received cash from its
shareholders totaling =
P3.00 billion as deposits for future stock subscription for 300 million
common shares which were subsequently issued in March 2012. Also in the same period, the
preferred shareholders converted a total of 300 million preferred shares amounting to P
=3.00 billion
to 300 million common shares.
With the approvals by the PSE of the Parent Company’s application for listing and by the SEC for
the Registration Statement both on March 14, 2012, a total of 245,316,200 common shares, with
P
=10.00 par value per share, representing 21.70% of outstanding capital stock, were offered and
subscribed through an initial public offering at =
P18.50 per share on April 20 to 26, 2012. The
common shares comprise of (a) 141,056,800 new shares issued by the Parent Company by way of
a primary offer, and (b) 104,259,400 existing shares offered by FDC, the selling shareholder,
pursuant to a secondary offer. Subsequently, on September 5, 2012, 36,715,300 shares under the
over-allotment option were exercised at a price of P
=18.50 per share that brought the subscriptions
to 25.00% of the outstanding capital stock. The Parent Company’s common shares were listed
and commenced trading in the PSE on May 7, 2012.
The total proceeds raised by the Parent Company from the sale of primary offer shares amounted
to =
P2.61 billion while the net proceeds (after deduction of direct costs related to equity issuance)
amounted to =
P2.39 billion.
*SGVFS010664*
- 95 -
22. Income and Expenses
Service charges, fees and commissions consist of:
Credit Cards
Loans
Deposits
Remittances
Others
2014
P
= 1,790,379
1,021,233
385,523
7,144
93,560
P
= 3,297,839
Consolidated
2013
P
=1,614,723
460,944
318,319
1,113
133,371
P
=2,528,470
2012
P
=1,193,859
143,359
292,661
−
230,344
P
=1,860,223
2014
P
= 1,790,379
393,108
385,523
7,144
93,560
P
= 2,669,714
Parent Company
2013
2012
P
=1,614,723
P
=1,193,859
174,234
143,357
318,319
292,661
1,113
−
96,478
107,277
P
=2,204,867
P
=1,737,154
Service charges include late payment charges, pre-termination fees on loans and service charges
on deposit taking-related transactions.
Fees and commissions include credit card membership fees, interchange fees, merchant discounts
and other commissions.
Miscellaneous income consists of:
Recovery on charged-off assets
Rental income
Dividend income
Others
2014
P
= 150,192
4,546
22,221
45,072
P
= 222,031
Consolidated
2013
P
=299,399
3,333
76,946
27,249
P
=406,927
2012
P
=183,537
3,823
975
83,902
P
=272,237
2014
P
= 148,344
4,546
22,221
39,749
P
= 214,860
Parent Company
2013
P
=297,781
3,333
76,946
22,972
P
=401,032
2012
P
=180,821
3,823
975
42,499
P
=228,118
Others include referral income earned on insurance premiums charged through credit cards.
Miscellaneous expenses consist of:
Service charges, fees and commissions
Advertising
Security, messengerial and janitorial
services
Postage, telephone, cables and telegram
Brokerage fees
Insurance
Transportation and travel
Technological fees
Power, light and water
Stationery and Supplies
Management and other professional fees
Entertainment, amusement and
recreation
Repairs and maintenance
Litigation expenses
Supervision fees
Others
2014
P
= 657,067
407,578
Consolidated
2013
P
=494,454
395,164
2012
P
=363,722
420,141
2014
P
= 635,241
401,688
Parent Company
2013
P
=485,648
394,513
429,635
323,304
206,896
264,238
194,571
242,537
183,769
79,992
81,768
362,303
282,808
239,503
211,207
189,705
179,279
165,633
74,742
57,000
271,631
156,915
161,194
185,419
151,334
143,240
122,391
95,945
52,289
403,015
310,845
223,378
249,577
167,762
242,519
171,983
73,088
79,733
340,782
274,372
239,503
197,357
156,789
178,866
155,079
68,156
53,818
253,743
146,840
161,194
176,655
141,237
143,201
110,939
89,401
47,970
48,223
74,303
37,099
42,353
190,230
P
= 3,463,563
47,970
40,525
37,763
35,431
137,845
P
=2,951,332
45,781
39,353
22,893
25,870
324,883
P
=2,583,001
45,306
63,836
37,072
41,010
184,540
P
= 3,330,593
43,838
31,635
36,753
34,270
127,160
P
=2,818,539
39,310
33,132
22,893
25,427
298,000
P
=2,473,200
2012
P
=363,630
419,628
Others include payments for subscriptions, membership fees, trainings, donations and
contributions, delivery and freight expenses, fines, penalties, other charges and clearing fees.
*SGVFS010664*
- 96 -
23. Income and Other Taxes
Under Philippine tax laws, the RBU of the Parent Company and its subsidiaries are subject to
percentage and other taxes (presented as Taxes and licenses in the statements of income) as well as
income taxes. Percentage and other taxes paid consist principally of gross receipts tax and
documentary stamp taxes. Income taxes include corporate income tax, as discussed below, and
final taxes paid which represents final withholding tax on gross interest income from government
securities and other deposit substitutes and income from FCDU transactions. These income taxes,
as well as the deferred tax benefits and provisions, are presented as Provision for income tax in the
statements of income.
Republic Act (RA) No. 9397, An Act Amending National Internal Revenue Code, provides that the
Regular Corporate Income Tax (RCIT) rate shall be 30.00% and the interest expense allowed as a
deductible expense shall be reduced by 33.00% of interest income subjected to final tax.
An MCIT of 2.00% of modified gross income is computed and compared with the RCIT. Any
excess of MCIT over the RCIT is deferred and can be used as a tax credit against future income
tax liability for the next three years. In addition, NOLCO is allowed as a deduction from taxable
income in the next three years from the period of incurrence.
FCDU offshore income (income from non-residents) is tax-exempt while gross onshore income
(income from residents) is generally subject to 10.00% gross income tax. In addition, interest
income on deposit placements with other FCDUs and offshore banking units is subject to a 7.50%
final tax. RA No. 9294, which became effective in May 2004, provides that the income derived
by the FCDU from foreign currency transactions with non-residents, Offshore Banking Units
(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.
In 2011, the BIR issued Revenue Regulation 14-2011, which prescribes the proper allocation of
costs and expenses among the income earnings of financial institutions for income tax reporting.
Only costs and expenses attributable to the operations of the RBU can be claimed as deduction to
arrive at the taxable income of the RBU subject to the RCIT. All costs and expenses pertaining to
the FCDU/EFCDU are excluded from the RBU’s taxable income. Within the RBU, common
costs and expenses should be allocated among taxable income, tax-paid income and tax-exempt
income using the specific identification or the allocation method.
Provision for income tax consists of:
Current:
Regular corporate income tax
Final tax
Deferred
2014
Consolidated
2013
P
= 461,276
77,563
538,839
25,206
P
= 564,045
P
=171,993
68,809
240,802
(22,146)
P
=218,656
2012
P
=84,873
120,369
207,592
(31,590)
P
=176,002
2014
P
= 275,722
77,281
353,003
43,411
P
= 396,414
Parent Company
2013
P
=146,917
66,946
213,863
(30,324)
P
=183,539
2012
P
=84,873
120,151
205,024
(17,009)
P
=188,015
*SGVFS010664*
- 97 The components of the Group’s and the Parent Company’s net deferred tax assets as of
December 31, 2014 and 2013 follow:
Consolidated
2014
Deferred tax asset on:
Allowance for impairment and credit losses
Accumulated depreciation of assets
foreclosed or dacioned
Accrued expenses
Unamortized past service cost
Net retirement obligation
Unrealized trading loss
Deferred tax liability on:
Branch licenses acquired from business
combination (Note 7)
Gain on asset foreclosure and dacion transactions
Unrealized foreign exchange gain
Excess of fair value over carrying value of net
assets acquired from business combinations
Prepaid rent
Parent Company
2013
2014
2013
P
=1,082,393
P
=1,270,549
P
=1,068,408
P
=1,262,016
94,596
134,341
4,889
8,062
144
1,324,425
80,892
61,141
5,958
4,240
46
1,422,826
94,595
123,841
4,889
7,763
144
1,299,640
76,914
61,141
5,958
359
46
1,406,434
187,620
105,380
9,060
187,620
97,392
94,987
187,620
105,270
9,060
−
88,528
94,987
44,939
−
346,999
P
=977,426
46,577
1,125
427,701
P
=995,125
44,939
−
346,889
P
=952,751
46,577
−
230,092
P
=1,176,342
As of December 31, 2014 and 2013, the Group and the Parent Company did not recognize
deferred tax assets on the following temporary differences:
Consolidated
2013
2014
P
=394,890
P
=388,550
8,134
−
P
=403,024
P
=385,550
Allowance for credit and impairment losses
NOLCO
Parent Company
2014
P
=352,226
−
P
=352,226
2013
=
P−
−
=
P−
Provision for deferred income tax charged directly to OCI during the year for the Group and the
Parent Company follows:
Consolidated
2014
P
=7,507
Remeasurements on retirement plan
Parent Company
2013
2014
P
=158
P
=7,440
2013
P
=158
The reconciliation of statutory income tax at statutory tax rate to the effective income tax follows:
Statutory income tax
Additions to (reductions from) income taxes
resulting from the tax effects of:
Nondeductible expenses
FCDU income
Non taxable and tax-exempt income
Interest income subjected to final tax
net of tax paid
Change in unrecognized deferred
tax assets and others
Effective income tax
2014
P
= 791,227
Consolidated
2013
=
P682,317
2012
=
P597,715
2014
P
= 618,889
Parent Company
2013
=
P652,359
2012
=
P610,069
233,066
(250,539)
(139,699)
185,303
(73,524)
(639,005)
135,428
(186,543)
(255,598)
232,698
(250,539)
(139,699)
180,061
(73,524)
(516,165)
135,062
(186,543)
(237,827)
(35,356)
(62,767)
(132,771)
(35,021)
(59,192)
(132,746)
(34,654)
P
= 564,045
126,332
=
P218,656
17,771
=
P176,002
(29,914)
P
= 396,414
−
=
P183,539
−
=
P188,015
*SGVFS010664*
- 98 -
24. Retirement Plan
The existing regulatory framework, RA No. 7641, the Retirement Pay Law requires companies
with at least ten (10) employees to pay retirement benefits to qualified private sector employees in
the absence of any retirement plan in the entity, provided however that the employee’s retirement
benefits under any collective bargaining and other agreements shall not be less than those provided
under the law. The law does not require minimum funding of the plan.
Parent Company
The Parent Company has a funded, noncontributory defined benefit retirement plan (the Plan)
covering substantially all of its officers and regular employees. Under the Plan, all covered
officers and employees are entitled to cash benefits (equivalent to 125.00% of the final monthly
salary for every year of service depending on the tenure of the employee) after satisfying certain
age and service requirements. The Parent Company’s retirement plan is in the form of a trust
administered by the Parent Company’s Trust Division under the supervision of the Retirement
Committee.
GBI
GBI has a funded, noncontributory defined benefit plan covering substantially all of its officers
and regular employees. The benefits are based on years of service and final compensation. The
retirement plan provides retirement benefits equal to 100.00% of the final monthly salary for every
year of service. The retirement plan is in the form of a trust administered by the Parent
Company’s Trust Division.
As of December 31, 2013, GBI only has four remaining employees. As a result of GBI’s transfer
of its assets and liabilities to EWRB (see Note 1), the employment of GBI’s employees had been
terminated. These employees were hired by EWRB after their termination from GBI. The total
amount of retirement benefits paid by GBI to its employees amounted to =
P42.27 million. Loss on
settlement of the retirement plan amounting to =
P24.65 million was recognized and included in
Compensation and fringe benefits expense in the consolidated statement of income. As of
December 31, 2014 and 2013, there were no retirement benefits accruing to the remaining
employees of GBI.
EWRB
In 2013, EWRB provided a noncontributory defined benefit plan covering substantially all of its
officers and regular employees. The benefits are based on years of service and final
compensation. The retirement plan provides retirement benefits equal to 100.00% of the final
monthly salary for every year of service. As of December 31, 2014 and 2013, the retirement plan
of EWRB is unfunded. Prior to 2013, EWRB provides accrual for retirement benefits of its
employees based on the requirements of RA No. 7641.
The net retirement obligation included in ‘Other liabilities’ in the statements of financial position
are as follows:
Present value of the defined benefit obligation
Fair value of plan assets
Net retirement obligation
Consolidated
2013
2014
P
=432,948
P
=555,340
431,584
528,415
P
=1,364
P
=26,925
Parent Company
2013
2014
P
=432,782
P
=554,342
431,584
528,415
P
=1,198
P
=25,927
*SGVFS010664*
- 99 Changes in the present value of the defined benefit obligation as of December 31, 2014 and 2013
recognized in the statements of financial position follow:
Balance at beginning of year
Current service cost
Interest cost
Loss on settlement
Remeasurement (gains) losses:
Actuarial losses arising from deviations of
experience from assumptions
Actuarial losses (gains) arising from changes
in financial assumptions
Actuarial gains arising from changes in
demographic assumptions
Benefits paid
Balance at end of year
Consolidated
2013
2014
P
=342,590
P
=432,948
76,300
89,280
20,439
18,186
24,647
−
Parent Company
2013
2014
P
=322,467
P
=432,782
74,391
88,678
19,670
18,177
−
−
44,863
75,822
44,777
75,822
(10,849)
150,447
(10,984)
150,447
−
(19,088)
P
=555,340
(185,747)
(71,550)
P
=432,948
−
(19,088)
P
=554,342
(185,747)
(24,268)
P
=432,782
Changes in the fair value of plan assets are as follows:
Balance at beginning of year
Contributions
Interest income
Remeasurements
Benefits paid
Balance at end of year
Consolidated
2013
2014
P
=315,547
P
=431,584
82,438
88,802
19,228
18,126
41,050
8,991
(26,679)
(19,088)
P
=431,584
P
=528,415
Parent Company
2013
2014
P
=313,538
P
=431,584
82,138
88,802
19,126
18,126
41,050
8,991
(24,268)
(19,088)
P
=431,584
P
=528,415
The fair value of plan assets by class are as follows:
Cash and cash equivalents
Debt instruments:
Government securities
Private securities
Equity instruments:
Financial services
Holding
Real estate
Telecommunications
Retail
Utilities
Mining
Manufacturing
Services
Transportation
Others
Fair value of plan assets
Consolidated
2013
2014
P
=275,907
P
=284,756
Parent Company
2013
2014
P
=275,907
P
=284,756
56,475
81,097
54,502
30,330
56,475
81,097
54,502
30,330
66,685
9,879
8,859
8,662
3,720
3,714
1,493
1,062
−
−
2,013
P
=528,415
12,684
23,801
7,273
8,319
3,032
4,970
2,008
3,358
4,343
234
823
P
=431,584
66,685
9,879
8,859
8,662
3,720
3,714
1,493
1,062
−
−
2,013
P
=528,415
12,684
23,801
7,273
8,319
3,032
4,970
2,008
3,358
4,343
234
823
P
=431,584
The Group’s plan assets are carried at fair value. All equity and debt instruments held have quoted
prices in active market. The fair value of other assets and liabilities, which include deposits in
banks, accrued interest and other receivables and trust fee payables, approximate their carrying
amount due to the short-term nature of these accounts.
The plan assets are diversified investments and are not exposed to concentration risk.
*SGVFS010664*
- 100 Each year, an Asset-Liability Matching Study (ALMS) is performed with the result being
analyzed in terms of risk-and-return profiles. The Group’s current strategic investment strategy
consists of 70.00% of debt instruments, 25.00% of equity instruments, and 5.00% cash.
The Group expects to contribute P
=88.70 million to the plans in 2015.
The cost of defined benefit retirement plans as well as the present value of the benefit obligation
are determined using actuarial valuations. The actuarial valuation involves making various
assumptions. The principal assumptions used are shown below:
Parent Company
2014
Discount rate
At January 1
At December 31
Future salary increase rate
Average remaining working life
4.20%
4.40%
5.00%
15
EWRB
2014
2013
6.10%
4.20%
5.00%
19
5.20%
4.53%
5.00%
16
2013
5.99%
5.20%
5.00%
24
The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the defined benefit obligation as of December 31, 2014 and 2013,
assuming all other assumptions were held constant.
Decrease in discount rate of 1%
Increase in salary rate increase of 1%
Improvement in employee turnover by 10%
Increase in defined benefit obligation
Consolidated
Parent Company
2013
2013
2014
2014
P
=50,250
P
=50,215
P
=59,734
P
=59,485
49,371
49,336
58,388
58,142
20,988
20,960
24,134
23,925
The amounts included in Compensation and fringe benefits expense in the statements of income
are as follows:
Current service cost
Net interest expense (income)
Loss on settlement
Expense recognized
2014
P
=89,280
60
−
P
=89,340
Consolidated
2013
P
=76,300
1,211
24,647
P
=102,158
2012
P
=50,762
(1,393)
−
P
=49,369
Parent Company
2013
2012
2014
P
=74,391
P
=49,986
P
=88,678
544
(2,791)
51
−
−
−
P
=74,935
P
=47,195
P
=88,729
25. Leases
The Group leases several premises occupied by its head office and branches. Some leases are
subject to annual escalation of 5.00% to 10.00% and for periods ranging from 5 to 15 years,
renewable upon mutual agreement of both parties. For the years ended December 31, 2014, 2013
and 2012, the total rentals of the Group charged to operations amounted to P
=629.29 million,
P
=542.47 million and =
P410.18 million, respectively. For the years ended December 31, 2014, 2013
and 2012, total rentals charged to operations by the Parent Company amounted to P
=607.01 million,
=
P518.23 million and =
P386.66 million, respectively.
Future minimum annual rentals payable under the aforementioned lease agreements follow:
Within one year
After one year but not more than five years
More than five years
Consolidated
2013
2014
P
=441,672
P
=663,588
1,783,259
2,328,911
2,304,121
1,704,035
P
=4,529,052
P
=4,696,534
Parent Company
2013
2014
P
=424,498
P
=637,067
1,742,601
2,238,372
2,220,774
1,640,297
P
=4,387,873
P
=4,515,736
*SGVFS010664*
- 101 -
26. 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. The Group’s related parties include:
·
key management personnel, close family members of key management personnel, and entities
which are controlled, significantly influenced by or for which significant voting power is held
by key management personnel or their close family members,
·
subsidiaries, joint ventures and associates and their respective subsidiaries, and
·
post-employment benefit plans for the benefit of the Group’s employees.
The Group has several business relationships with related parties. Transactions with such parties
are made in the ordinary course of business and on substantially same terms, including interest and
collateral, as those prevailing at the time for comparable transactions with other parties. These
transactions also did not involve more than the normal risk of collectability or present other
unfavorable conditions.
The amounts and the balances arising from the foregoing significant related party transactions of
the Group and of the Parent Company are as follows:
2014
Amount/
Volume
Outstanding
Balance
P
=−
P
= 5,621,850
Deposit liabilities
−
2,864,568
Accrued interest receivable
−
60,224
Accrued expenses
−
13,297
−
228,219
2,954
3,500,000
−
−
−
37,777
Deposit liabilities
−
259,726
Accrued interest receivable
−
90
3,440
846
−
−
−
2,310,222
Receivables purchased
−
857,158
Financial assets at FVTPL
−
99,680
Deposit liabilities
−
15,815,423
Accrued interest receivable
−
17,048
Guarantees and commitments
−
5,267,068
Category
Significant investors:
Loans receivable
Guarantees and commitments
Interest income
Interest expense
Key management personnel:
Loans receivable
Interest income
Interest expense
Other related parties:
Loans receivable
Terms and Conditions/Nature
Loans granted with a term of seven years, interest of
4.50%, secured, no impairment
Deposit liabilities with interest ranging from 0.50% to
1.00%
Interest income accrued on outstanding loans
receivable
Payable for management and professional fees paid by
FDC (reimbursement for expenses)
Unused credit lines
Interest income on loans receivable
Interest expense on deposit liabilities
Loans granted with terms ranging from three to twenty
years, interest ranging from 5.59% to 10.42%,
secured at 98%
Deposit liabilities with interest ranging from 0.50% to
5.88%
Interest income accrued on outstanding loans
receivable
Interest income on loans receivable
Interest expense on deposit liabilities
Loans granted with terms ranging from two months to
thirteen and a half years, interest ranging from
3.75% to 6.40%, 76% secured by real estate and
chattel mortgage, no impairment
Receivables purchased by the Parent Company from
FLI
FLI- issued debt securities held for trading by the
Parent Company, with interest rates ranging from
5.40% to 5.64%, unimpaired
Deposit liabilities with interest ranging from 0.50% to
5.88%
Interest income accrued on outstanding loans
receivable
Unused credit lines
*SGVFS010664*
- 102 2014
Amount/
Volume
P
=−
Outstanding
Balance
P
= 411,597
Gain on sale of land
264,132
−
Interest income
Interest expense
Service fee expense
21,406
220,370
5,434
−
−
−
37,407
−
Category
Accounts receivable
Rent expense
Terms and Conditions/Nature
Receivable from FAI on the sale of land by the Parent
Company, payable in 5 years, interest of 6.00%
(Note 10)
Gain recognized on the sale of the Parent Company’s
land to FAI (Note 10)
Interest income on loans receivable
Interest expense on deposit liabilities
Service fees paid to FLI for account servicing
equivalent to 1.12% of loan amounts collected by
FLI on behalf of the Parent Company (see Note 9)
Rent expenses paid for lease transactions with other
related parties such as Filinvest Asia Corporation,
FAI and FLI
2013
Amount/
Volume
Outstanding
Balance
P
=5,621,850
=
P5,621,850
Deposit liabilities
−
5,019,354
Accrued interest receivable
−
33,599
Accrued expenses
−
7,427
−
57,476
700
3,878,150
−
−
−
29,528
Deposit liabilities
−
194,467
Accrued interest receivable
−
257
2,567
702
−
−
900
729,431
266,777
1,305,636
Deposit liabilities
−
2,782,334
Accrued interest receivable
−
390
Guarantees and commitments
Accounts receivables
−
−
20,271,800
746
Interest income
Interest expense
Service fee expense
26,654
8,765
2,582
−
−
−
Rent expense
41,033
−
Category
Significant investors:
Loans receivable
Guarantees and commitments
Interest income
Interest expense
Key management personnel:
Loans receivable
Interest income
Interest expense
Other related parties:
Loans receivable
Receivables purchased
Terms and Conditions/Nature
Loans granted with a term of one year, interest of
4.50%, secured, no impairment
Deposit liabilities with interest ranging from 0.00% to
1.00%
Interest income accrued on outstanding loans
receivable
Payable for management and professional fees paid by
FDC (reimbursement for expenses)
Unused credit lines
Interest income on loans receivable
Interest expense on deposit liabilities
Loans granted with terms ranging from five to fifteen
years, interest ranging from 5.59% to 10.20%,
unsecured, no impairment
Deposit liabilities with interest ranging from 0.00% to
5.88%
Interest income accrued on outstanding loans
receivable
Interest income on loans receivable
Interest expense on deposit liabilities
Loans granted with terms ranging from three months to
five years, interest ranging from 4.00% to 4.50%,
secured by real estate and chattel mortgage, no
impairment
Receivables purchased by the Parent Company from
FLI
Deposit liabilities with interest ranging from 0.00% to
5.88%
Interest income accrued on outstanding loans
receivable
Unused credit lines
Noninterest-bearing advances, payable on demand, no
impairment
Interest income on loans receivable
Interest expense on deposit liabilities
Service fees paid to FLI for account servicing
equivalent to 1.12% of loan amounts collected by
FLI on behalf of the Parent Company (see Note 9)
Rent expenses paid for lease transactions with other
related parties such as Filinvest Asia Corporation,
Filinvest Alabang, Inc. and FLI
The Group’s significant investors pertain to FDC, the immediate Parent Company of the Group,
and FDC Forex Corporation (a company under common control of FDC).
*SGVFS010664*
- 103 Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Group, directly or indirectly. The Group considers
the members of the Management Committee to constitute key management personnel for purposes
of PAS 24. The Group provides banking services to its key management personnel.
Other related parties pertain to the Group’s affiliates (subsidiaries of FDC).
The Group and the Parent Company had no outright purchases and outright sale of debt securities
with significant shareholders and key management personnel in 2014 and 2013. In 2014, the
Parent Company purchased peso-denominated debt securities issued by Filinvest Land, Inc., an
affiliate, with market value amounting to =
P99.68 million as of December 31, 2014.
No provision and allowance for loan losses was recognized by the Group for loans to significant
investors, key management personnel and other related parties in 2014 and 2013.
The Parent Company’s subsidiaries have no transactions with related parties outside of the
Group. The transactions disclosed above are the same for the Group and the Parent Company.
Parent Company Related Party Transactions
Transactions between the Parent Company and its subsidiary (EWRB) meet the definition of
related party transactions. Details of the Parent Company’s subsidiary are disclosed in Note 1.
In addition to the transactions discussed above, the following are the transactions between the
Parent Company and its subsidiary that are recognized in the Parent Company’s statements of
financial position and statements of income and eliminated in the consolidated financial
statements:
2014
Category
Subsidiaries:
Loans receivable
Amount/
Volume
Outstanding
Balance
P
= 300,000
P
= 300,000
Receivables purchased
5,740,168
3,890,662
Accrued interest receivable
−
7,887
Accounts receivable
−
564,845
Deposit liabilities
Accounts payable
−
−
166,573
72,206
2,537
579
16,482
−
−
−
Interest income
Interest expense
Service fee expense
Terms and Conditions/ Nature
Loans granted with a term of one month or 30 days,
interest rate of 4.00%, unsecured, no impairment
Receivables purchased by the Parent Company from
EWRB (Note 9)
Interest on receivables purchased from EWRB and
loans granted to EWRB at 4.00% per annum
Amount collected by EWRB from borrowers on behalf
of the Parent Company that remained unremitted by
EWRB
Deposit liabilities with interest rates of 0.05% to 5.87%
Cash reloading transactions between EWRB and the
Parent Company
Interest income on outstanding loans receivable
Interest expense on deposit liabilities
Service fees paid to EWRB for account servicing
equivalent to 0.37% of loan amounts collected by
EWRB in behalf of the Parent Company for the
receivables purchased (see Note 9)
*SGVFS010664*
- 104 2013
Category
Subsidiaries:
Loans receivable
Receivables purchased
Amount/
Volume
Outstanding
Balance
P
=1,007
P
=128,200
2,908,212
2,486,170
−
−
1,369
–
1,665
3,371,800
148,868
−
−
−
Guarantees and commitments
Deposit liabilities
Interest income
Interest expense
Service fee expense
Terms and Conditions/ Nature
Loans granted with a term of one month or 30 days,
interest rate of 4.00%, unsecured, no impairment
Receivables purchased by the Parent Company from
EWRB
Unused credit lines
Deposit liabilities with interest rate of 0.00%
Interest income on outstanding loans receivable
Interest expense on deposit liabilities
Service fees paid to EWRB for account servicing
equivalent to 0.37% of loan amounts collected by
EWRB in behalf of the Parent Company for the
receivables purchased (see Note 9)
Transactions with Retirement Plans
Under PFRS, certain post-employment benefit plans are considered as related parties. The Parent
Company’s retirement plan is in the form of a trust administered by the Parent Company’s Trust
Division under the supervision of the Retirement Committee. The values of the assets of the fund
are as follows:
2014
P
=284,756
104,074
137,572
2,013
P
=528,415
Cash and cash equivalents
Equity instruments
Debt instruments
Others
2013
=275,907
P
70,022
84,832
823
=431,584
P
As of December 31, 2014 and 2013, cash and cash equivalents include the savings deposit with
the Parent Company amounting to =
P3.87 million and =
P16.41 million, respectively, and debt
instruments include investments in the Parent Company’s LTNCD amounting to P
=62.10 million
and =
P62.24 million, respectively. Equity instruments include investments in the Parent
Company’s PhilEquity Institutional Feeder Fund amounting to P
=61.36 million, equivalent to
61,273 shares with fair market value of =
P1,001.37 per share and the Parent Company’s equity
securities amounting to =
P0.72 million, equivalent to 30,000 common shares with fair market value
of P
=23.95 per share as of December 31, 2014, and =
P0.73 million equivalent to 30,000 common
shares with fair market value of P
=24.30 per share as of December 31, 2013.
The following are the amounts recognized by the retirement plan arising from its transactions with
the Parent Company for the years ended December 31, 2014, 2013 and 2012.
Trust fees
Interest income on savings deposit
Interest income on investments in
LTNCD
Gain (loss) on investments in equity
shares
2014
=2,462
P
136
2013
P2,095
=
4,796
2012
=1,265
P
149
2,942
2,669
45
1,232
91
(30)
*SGVFS010664*
- 105 Remunerations of Directors and other Key Management Personnel
Total remunerations of key management personnel are as follows:
Short-term employee benefits
Post employment benefits
2014
P
= 160,477
8,192
P
= 168,669
Consolidated
2013
P
=197,933
7,448
P
=205,381
2012
P
=231,210
4,320
P
=235,530
2014
P
= 146,966
8,192
P
= 155,158
Parent Company
2013
P
=187,535
4,160
P
=191,695
2012
P
=225,199
4,320
P
=229,519
Remunerations given to directors which were approved by the Board Remuneration Committee
amounted to =
P13.08 million in 2014, =
P10.16 million in 2013 and =
P7.30 million in 2012 for the
Group and the Parent Company.
Regulatory Reporting
As required by BSP, the Group discloses loan transactions with investees and with certain
directors, officers, stockholders and related interests (DOSRI). Existing banking regulations limit
the amount of individual loans to DOSRI, 70.00% of which must be secured, to the total of their
respective deposits and book value of their respective investments in the lending company within
the Group. In the aggregate, loans to DOSRI generally should not exceed total equity or 15.00%
of total loan portfolio, whichever is lower.
BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts. 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, other credit accommodations granted under said circular:
Total outstanding DOSRI accounts
Percent of DOSRI accounts granted prior
to effectivity of BSP Circular No.
423 to total loans
Percent of DOSRI accounts granted after
effectivity of BSP Circular No. 423
to total loans
Percent of DOSRI accounts to total loans
Percent of unsecured DOSRI accounts to
total DOSRI accounts
Percent of past due DOSRI accounts to
total DOSRI accounts
2014
P
= 7,759,327
Consolidated
2013
2012
P
=6,394,361
P
=1,596,916
2014
P
= 8,085,550
Parent Company
2013
2012
P
=6,394,361
P
=1,596,916
0.000%
0.000%
0.001%
0.000%
0.000%
0.001%
6.283%
6.283%
6.494%
6.495%
2.27%
2.27%
6.869%
6.869%
6.738%
6.738%
2.27%
2.27%
3.315%
2.499%
19.71%
7.216%
2.499%
19.71%
0.001%
0.067%
0.00%
0.001%
0.067%
0.00%
The amounts of loans disclosed for related parties above differ with the amounts disclosed for key
management personnel since the composition of DOSRI is more expansive that of key
management personnel.
BSP Circular No. 560 provides that the total outstanding loans, other credit accommodation and
guarantees to each of the bank’s/quasi-bank’s subsidiaries and affiliates shall not exceed 10.00%
of the net worth of the lending bank/quasi-bank, provided that the unsecured portion of which
shall not exceed 5.00% of such net worth. Further, the total outstanding loans, credit
accommodations and guarantees to all subsidiaries and affiliates shall not exceed 20.00% of the
net worth of the lending bank/quasi-bank; and the subsidiaries and affiliates of the lending
bank/quasi-bank are not related interest of any director, officer and/or stockholder of the lending
institution, except where such director, officer or stockholder sits in the BOD or is appointed
officer of such corporation as representative of the bank/quasi-bank. As of December 31, 2014
and 2013, the Parent Company is in compliance with these requirements.
*SGVFS010664*
- 106 On May 12, 2009, BSP issued Circular No. 654 allowing a separate individual limit of twenty-five
(25.00%) of the net worth of the lending bank/quasi-bank to loans of banks/quasi-banks to their
subsidiaries and affiliates engaged in energy and power generation. As of December 31, 2014 and
2013, the Parent Company is in compliance with these requirements.
27. Trust Operations
Securities and other properties held by the Parent Company in fiduciary or agency capacity for
clients and beneficiaries are not included in the accompanying statements of financial position
since these are not assets of the Parent Company. The combined trust and managed funds of the
Trust Department of the Parent Company amounted to P
=6.91 billion and =
P7.80 billion as of
December 31, 2014 and 2013, respectively.
Government securities with total face value of =
P119.82 million and =
P161.90 million as of
December 31, 2014 and 2013, respectively, are deposited with the BSP in compliance with current
banking regulations related to the Parent Company’s trust functions. These government securities
are recorded as part of investment securities at amortized cost as of December 31, 2014 and 2013.
In accordance with BSP regulations, 10.00% of the profits realized by the Parent Company from
its trust operations are appropriated to surplus reserves. The yearly appropriation is required until
the surplus reserves for trust operations amounts to 20.00% of the Parent Company’s authorized
capital stock.
The Parent Company’s income from its trust operations amounted to P
=20.37 million,
P
=29.02 million and =
P27.84 million in 2014, 2013 and 2012, respectively.
28. Commitments and Contingent Liabilities
In the normal course of the Group’s operations, there are various outstanding commitments and
contingent liabilities which are not reflected in the accompanying financial statements. The Group
does not anticipate material unreserved losses as a result of these transactions.
The Group has several loan related suits and claims that remain unsettled. It is not practicable to
estimate the potential financial impact of these contingencies. However, in the opinion of
management, the suits and claims, if decided adversely, will not involve sums having a material
effect on the Group’s financial statements.
The following is a summary of commitments and contingencies of the Parent Company at their
peso-equivalent contractual amounts arising from off-balance sheet items:
Unused credit line - credit cards
Trust department accounts (Note 27)
Forward exchange sold
Treasurer/cashier/manager’s checks
Unused commercial letters of credit
Spot exchange bought
2014
=28,580,201
P
6,914,400
4,516,250
2,424,865
2,194,609
1,703,870
2013
=26,932,813
P
7,819,270
2,308,540
4,867,487
2,965,080
1,711,332
2012
P22,108,158
=
13,803,205
7,150,910
5,258,228
1,348,261
1,429,038
(Forward)
*SGVFS010664*
- 107 2013
=957,760
P
12,581
930,110
37,132
676
27
27
2014
=1,149,045
P
350,747
240,947
111,494
756
27
2,097
Outstanding guarantees
Late deposits/payments received
Inward bills for collection
Outward bills for collection
Items held for safekeeping
Unsold traveler’s check
Others
2012
=483,008
P
20,202
68,507
14,010
555
25
20
29. Financial Performance
Earnings per share amounts were computed as follows:
a.
b.
c.
d.
e.
f.
g.
Net income attributable to equity
holders of the Parent
Company
Net income attributable to
common shareholders of the
Parent Company
Weighted average number of
outstanding common shares
Weighted average number of
convertible preferred shares
Total weighted average number
of outstanding common and
convertible preferred shares
Basic EPS (b/c)
Diluted EPS (a/e)
2014
2013
2012
P
=2,073,378
P
=2,055,570
P
=1,817,409
2,073,378
2,055,570
1,817,409
1,128,410
1,128,410
981,391
−
−
50,000
1,128,410
1.84
1.84
1,128,410
1.82
1.82
1,031,391
1.85
1.76
The following basic ratios measure the financial performance of the Group and of the Parent
Company:
Return on average equity
Return on average assets
Net interest margin on average earning
assets
2014
10.17%
1.28%
Consolidated
2013
11.11%
1.60%
2012
11.86%
1.87%
2014
8.26%
1.03%
8.05%
8.43%
7.04%
6.93%
Parent Company
2013
10.65%
1.59%
8.02%
2012
12.04%
1.92%
7.03%
30. Offsetting of Financial Assets and Liabilities
The amendments to PFRS 7, which is effective January 1, 2013, require the Group to disclose
information about rights of offset and related arrangements (such as collateral posting
requirements) for financial instruments subject to enforceable master netting agreements or similar
arrangements. The effects of these arrangements are disclosed in the succeeding tables.
*SGVFS010664*
- 108 Financial assets
December 31, 2014
Gross amounts
offset in
Gross carrying accordance with
amounts (before the offsetting
offsetting)
criteria
[a]
[b]
Derivative assets (Note 5)
=
P–
P
= 110,668
Total
=
P–
P
= 110,668
Financial assets
recognized at
end of reporting
period by type
Net amount
presented in
statements of
financial
position
[a-b]
[c]
P
= 110,668
P
= 110,668
Effect of remaining rights of set-off
(including rights to set off financial
collateral) that do not meet PAS 32
offsetting criteria
Fair value of
financial
Financial
collateral
instruments
[d]
=
P–
=
P–
=
P–
=
P–
Net exposure
[c-d]
[e]
P
= 110,668
P
= 110,668
Effect of remaining rights of set-off
(including rights to set off financial
collateral) that do not meet PAS 32
offsetting criteria
Fair value of
Financial
financial
instruments
collateral
[d]
=
P–
=
P–
=
P–
=
P–
Net exposure
[c-d]
[e]
P
=90
P
=90
Effect of remaining rights of set-off
(including rights to set off financial
collateral) that do not meet PAS 32
offsetting criteria
Fair value of
Financial
financial
instruments
collateral
[d]
=
P–
=
P–
–
3,265,389
=
P–
P
= 3,265,389
Net exposure
[c-d]
[e]
P
= 101,290
–
P
= 101,290
Effect of remaining rights of set-off
(including rights to set off financial
collateral) that do not meet PAS 32
offsetting criteria
Fair value of
Financial
financial
instruments
collateral
[d]
=
P–
=
P–
–
63,572
=
P–
=
P63,572
Net exposure
[c-d]
[e]
=
P22,017
–
=
P22,017
December 31, 2013
Net amount
presented in
statements of
financial
position
[a-b]
[c]
P
=90
P
=90
Gross amounts
offset in
Gross carrying accordance with
the offsetting
amounts (before
criteria
offsetting)
[a]
[b]
Derivative assets (Note 5)
P
=90
=
P–
Total
P
=90
=
P–
Financial assets
recognized at
end of reporting
period by type
Financial liabilities
December 31, 2014
Gross amounts
offset in
Gross carrying accordance with
amounts (before the offsetting
criteria
offsetting)
[a]
[b]
Derivative liabilities (Note 5)
=
P–
P
= 101,290
Bills payable* (Note 16 )
–
3,265,389
Total
=
P–
P
= 3,366,679
Financial liabilities
recognized at
end of reporting
period by type
Net amount
presented in
statements of
financial
position
[a-b]
[c]
P
= 101,290
3,265,389
P
= 3,366,679
December 31, 2013
Net amount
presented in
Gross amounts
statements of
Financial liabilities
offset in
financial
recognized at
Gross carrying accordance with
position
end of reporting
amounts (before
the offsetting
[a-b]
period by type
criteria
offsetting)
[a]
[b]
[c]
Derivative liabilities (Note 5)
=
P22,017
=
P–
=
P22,017
Bills payable* (Note 16)
63,752
–
63,752
=
P85, 769
Total
=
P85,769
=
P–
* Included in bills and acceptances payable in the statements of financial position
The amounts disclosed in column (d) include those rights to set-off amounts that are only
enforceable and exercisable in the event of default, insolvency or bankruptcy. This includes
amounts related to financial collateral both received and pledged, whether cash or non-cash
collateral, excluding the extent of over-collateralization.
*SGVFS010664*
- 109 -
31. Notes to Statement of Cash Flows
Transfers from loans and receivables to investment properties as a result of foreclosures amounted
to =
P76.71 million, P
=249.77 million and =
P84.40 million in 2014, 2013 and 2012 respectively, for
the Group, and =
P76.29 million, P
=125.58 million and =
P72.44 million in 2014, 2013 and 2012
respectively, for the Parent Company. Amounts mentioned are exclusive of gain on asset
foreclosure and dacion transactions amounting to P
=19.42 million, P
=93.78 million and
P
=42.41 million in 2014, 2013 and 2012 respectively, for the Group, and =
P19.05 million,
P
=90.55 million and =
P29.85 million in 2014, 2013 and 2012, respectively, for the Parent Company.
In 2014, the Parent Company sold a land with a carrying value of P
=169.13 million to FAI. The
selling price of =
P433.26 million is payable annually for 5 years.
In 2013, the Parent Company applied deposits for future stock subscription amounting to
P
=700.00 million and =
P120.00 million as payments for the acquisitions of 441,000,000 common
shares of GBI and 46,000,000 common shares of EWRB, respectively.
In 2012, the Parent Company assigned to GBI bills payable amounting to P
=700.00 million as
deposits for subscription of 46,000,000 common shares of GBI. Also in 2012, the preferred
shareholders converted a total of 300 million preferred shares amounting to P
=3.00 billion to
300 million common shares.
32. Events Subsequent to Reporting Period
Stock Rights Offering
On January 29, 2015, the Board of Directors, in its regular meeting, approved a rights offering to
be offered first to certain eligible shareholders of the Parent Company (“Stock Rights Offer”)
subject to market conditions and receipt of regulatory approvals. The Stock Rights Offer will be
conducted by way of offering common shares from unissued portion of the Parent Company’s
authorized capital stock.
33. Supplementary Information Required Under Revenue Regulations 15-2010
Supplementary Information under RR No. 15-2010
On November 25, 2010, the BIR issued RR No. 15-2010, requiring the inclusion of information on
various taxes paid and accrued during the taxable year in the notes to the financial statements.
The Parent Company reported and/or paid the following types of taxes for the year ended
December 31, 2014:
Gross Receipts Tax (GRT)
The Parent Company is subject to GRT on its gross income from Philippine sources. GRT is
imposed on interest, commissions and discounts from lending activities at 5.00% or 1.00%,
depending on the remaining maturities of instruments from which such receipts are derived, and at
7.00% on non-lending fees and commissions, trading and foreign exchange gains and other items
constituting gross income.
*SGVFS010664*
- 110 Details of the Parent Company's income and GRT accounts in 2014 are as follows:
Income derived from lending activities
Other income
Gross Receipts
=11,758,610
P
1,580,809
=13,339,419
P
Gross
Receipts Tax
=540,829
P
110,657
=651,486
P
Exclusive of the above GRT schedule, the Parent Company charged GRT to its clients amounting
to =
P6.76 million in 2014.
Other Taxes and Licenses
For the year ended December 31, 2014, other taxes and licenses included in ‘Taxes and licenses’
account of the Parent Company consist of:
Documentary stamps taxes
Local taxes
Fringe benefit taxes
Others
=176,190
P
19,418
15,251
23,306
=234,165
P
Withholding Taxes
Details of withholding taxes remitted and balances as of December 31, 2014 are as follows:
Withholding taxes on compensation and benefits
Expanded withholding taxes
Final withholding taxes
Total
Remittances
=439,467
P
128,967
159,383
=727,817
P
Balance
=28,710
P
20,073
15,887
=64,670
P
On February 20, 2015, a Formal Letter of Demand was received from the BIR assessing the Parent
Company for deficiency taxes, including interests and surcharges, in the amount of =
P18.35
million. This amount was accepted and settled on February 23, 2015.
The Parent Company has no other outstanding assessments from the BIR as of December 31,
2014.
*SGVFS010664*
EAST WEST BANKING CORPORATION AND SUBSIDIARIES
INDEX TO THE FINANCIAL STATEMENTS AND SUPPLEMENTARY
SCHEDULES
AS OF DECEMBER 31, 2014
Annex I:
Reconciliation of retained earnings available for dividend declaration
Annex II:
Schedule of financial ratios
Annex III:
Conglomerate map
Annex IV:
List of all Philippine Financial Reporting Standards
Annex V:
Supplementary Schedules required under SRC Rule 68, As Amended
ANNEX I
EAST WEST BANKING CORPORATION
RECONCILIATION OF RETAINED EARNINGS AVAILABLE FOR
DIVIDEND DECLARATION
AS OF DECEMBER 31, 2014
Presented is the reconciliation of retained earnings available for dividend declaration of the Parent
Company as of December 31, 2014 with amendments based on SEC Bulletin No. 14, Presentation of
Reconciliation of Retained Earnings (amounts in thousands):
Unappropriated retained earnings available for dividend
declaration, beginning
P
=5,349,265
Net income actually earned/realized during the year
1,666,551
Net income during the year closed to retained earnings
7,105,816
Less:
Interest accrued on impaired loans
Unrealized gain on trading securities
Deferred tax assets recognized through profit or loss
Unrealized gain on investment properties
24,218
(381,965)
(43,411)
10,615
Add:
Realized gain on trading securities, categorized as
unrealized in prior years
Realized gain on investment properties, categorized as
unrealized in prior years
62,733
60,769
7,619,861
Less appropriation during the period
Total unappropriated retained earnings available for
dividend declaration, ending
2,037
P
=7,617,824
*SGVFS010664*
ANNEX II
EAST WEST BANKING CORPORATION AND SUBSIDIARIES
SCHEDULE OF FINANCIAL RATIOS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Below are the financial ratios that are relevant to the Group for the year ended December 31, 2014 and
2013:
Current ratio(1)
Solvency ratio(2)
Debt-to-equity(3)
Asset-to-equity(4)
Interest rate coverage ratio(5)
Profitability ratio
Return on asset (6)
Return on equity (7)
Net profit margin(8)
Gross profit margin(9)
2014
86.05%
112.86%
7.78
8.78
260.70%
2013
78.41%
115.78%
6.34
7.34
255.42%
1.28%
10.17%
22.61%
85.93%
1.60%
11.11%
8.43%
85.15%
1 Current assets divided by current liabilities
2 Total assets divided by total liabilities
3 Total liabilities divided by total equity
4 Total assets divided by total equity
5 Income before interest and taxes divided by interest expense
6. Net income divided by average total assets. Average total assets is based on average monthly balances
7. Net income attributable to equity holders of the Parent Company divided by average total equity attributable to equity holders of the
Parent Company. Average total equity is based on average monthly balances
8 Income before income tax over total interest income
9 Net interest income over total interest income
*SGVFS010664*
ANNEX III
EAST WEST BANKING CORPORATION AND SUBSIDIARIES
CONGLOMERATE MAP
AS OF DECEMBER 31, 2014
Below is a map showing the relationship between and among the Group and its ultimate parent company, subsidiaries, and affiliate as of
December 31, 2014:
*SGVFS010664*
ANNEX IV
EAST WEST BANKING CORPORATION
LIST OF ALL PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS)
AS OF DECEMBER 31, 2014
Below is the list of all Philippine Financial Reporting Standards (PFRS), Philippine Accounting
Standards (PAS) and Philippine Interpretations of International Financial Reporting Interpretations
Committee (IFRIC) as of December 31, 2014:
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2014
Adopted
Framework for the Preparation and Presentation of Financial
Statements
Conceptual Framework Phase A: Objectives and qualitative
characteristics
3
PFRSs Practice Statement Management Commentary
3
Not
Adopted
Not
Applicable
3
Philippine Financial Reporting Standards
PFRS 1
(Revised)
PFRS 2
First-time Adoption of Philippine Financial Reporting
Standards
3
Amendments to PFRS 1 and PAS 27: Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or
Associate
3
Amendments to PFRS 1: Additional Exemptions for Firsttime Adopters
3
Amendment to PFRS 1: Limited Exemption from
Comparative PFRS 7 Disclosures for First-time Adopters
3
Amendments to PFRS 1: Severe Hyperinflation and
Removal of Fixed Date for First-time Adopters
3
Amendments to PFRS 1: Government Loans
3
Share-based Payment
3
Amendments to PFRS 2: Vesting Conditions and
Cancellations
3
Amendments to PFRS 2: Group Cash-settled Share-based
Payment Transactions
3
PFRS 3
(Revised)
Business Combinations
PFRS 4
Insurance Contracts
Amendments to PAS 39 and PFRS 4: Financial Guarantee
Contracts
3
3
3
PFRS 5
Non-current Assets Held for Sale and Discontinued
Operations
3
PFRS 6
Exploration for and Evaluation of Mineral Resources
3
PFRS 7
Financial Instruments: Disclosures
3
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets
3
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets - Effective Date and Transition
3
Amendments to PFRS 7: Improving Disclosures about
Financial Instruments
3
*SGVFS010664*
-2-
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2014
Adopted
Amendments to PFRS 7: Disclosures - Transfers of
Financial Assets
3
Amendments to PFRS 7: Disclosures - Offsetting
Financial Assets and Financial Liabilities
3
Amendments to PFRS 7: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
3
PFRS 8
Operating Segments
3
PFRS 9
Financial Instruments (2010 version)*
3
Amendments to PFRS 9: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
3
PFRS 10
Not
Adopted
Financial Instruments (2013 version)
3
Financial Instruments (2014 version)
3
Consolidated Financial Statements
Not
Applicable
3
Amendments to PFRS 10, PFRS12 and PAS27:
Investment Entities
3
Amendments to PFRS 10 and PAS 28: Sale or
Contribution of Assets between an Investor and its
Associate or Joint Venture
3
PFRS 11
(Amended)
Joint Arrangements
3
PFRS 12
Disclosure of Interests in Other Entities
3
Amendments to PFRS 11: Accounting for Acquisitions of
Interests in Joint Operations
3
3
Amendments to PFRS 10, PFRS12 and PAS27:
Investment Entities
3
PFRS 13
Fair Value Measurement
PFRS 14
Regulatory Deferral Accounts
3
IFRS 15
Revenue from Contracts with Customers
3
Philippine Accounting Standards
PAS 1
(Revised)
Presentation of Financial Statements
3
Amendment to PAS 1: Capital Disclosures
3
3
Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation
Amendments to PAS 1: Presentation of Items of Other
Comprehensive Income
3
3
PAS 2
Inventories
PAS 7
Statement of Cash Flows
3
PAS 8
Accounting Policies, Changes in Accounting Estimates
and Errors
3
PAS 10
Events after the Reporting Period
3
PAS 11
Construction Contracts
3
*SGVFS010664*
-3-
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2014
PAS 12
PAS 16
Adopted
Income Taxes
3
Amendment to PAS 12 - Deferred Tax: Recovery of
Underlying Assets
3
Property, Plant and Equipment
3
Not
Adopted
Amendments to PAS 16 and PAS 38: Clarification of
Acceptable Methods of Depreciation and Amortization
3
Amendments to PAS 16 and PAS 41: Bearer Plants
3
PAS 17
Leases
3
PAS 18
Revenue
3
PAS 19
(Amended)
Employee Benefits
3
Amendments to PAS 19: Actuarial Gains and Losses,
Group Plans and Disclosures
3
Amendments to PAS 19: Defined Benefit Plans:
Employee Contributions
3
PAS 20
Accounting for Government Grants and Disclosure of
Government Assistance
PAS 21
The Effects of Changes in Foreign Exchange Rates
Not
Applicable
3
3
Amendment: Net Investment in a Foreign Operation
3
PAS 23
(Revised)
Borrowing Costs
3
PAS 24
(Revised)
Related Party Disclosures
3
PAS 26
Accounting and Reporting by Retirement Benefit Plans
3
PAS 27
(Amended)
Separate Financial Statements
3
3
Amendments to PFRS 10, PFRS12 and PAS27:
Investment Entities
3
Amendments to PAS 27: Equity Method in Separate
Financial Statements
3
PAS 28
(Amended)
Investments in Associates and Joint Ventures
PAS 29
Financial Reporting in Hyperinflationary Economies
3
PAS 31
Interests in Joint Ventures
3
PAS 32
Financial Instruments: Disclosure and Presentation
3
Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation
3
Amendment to PAS 32: Classification of Rights Issues
3
Amendments to PAS 32: Offsetting Financial Assets and
Financial Liabilities
3
PAS 33
Earnings per Share
3
PAS 34
Interim Financial Reporting
3
Amendment to PAS 34: Interim Financial Reporting and
Segment Information for Total Assets and Liabilities
3
*SGVFS010664*
-4-
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2014
Adopted
Impairment of Assets
3
Amendments to PAS 36: Recoverable Amount
Disclosures for Non-Financial Assets
3
PAS 37
Provisions, Contingent Liabilities and Contingent Assets
3
PAS 38
Intangible Assets
3
Amendments to PAS 16 and PAS 38: Clarification of
Acceptable Methods of Depreciation and Amortization
3
Financial Instruments: Recognition and Measurement
3
Amendments to PAS 39: Transition and Initial
Recognition of Financial Assets and Financial Liabilities
3
PAS 36
PAS 39
Amendments to PAS 39: The Fair Value Option
3
Amendments to PAS 39 and PFRS 4: Financial Guarantee
Contracts
3
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets
3
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets – Effective Date and Transition
3
3
Amendments to Philippine Interpretation IFRIC–9 and
PAS 39: Embedded Derivatives
PAS 41
Not
Applicable
3
Amendments to PAS 39: Cash Flow Hedge Accounting of
Forecast Intragroup Transactions
PAS 40
Not
Adopted
Amendment to PAS 39: Eligible Hedged Items
3
Amendment to PAS 39: Novation of Derivatives and
Continuation of Hedge Accounting
3
Investment Property
3
Amendment to PAS 40: Investment Property
3
3
Agriculture
Philippine Interpretations
IFRIC 1
Changes in Existing Decommissioning, Restoration and
Similar Liabilities
3
IFRIC 2
Members’ Share in Co-operative Entities and Similar
Instruments
3
IFRIC 4
Determining Whether an Arrangement Contains a Lease
IFRIC 5
Rights to Interests arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds
3
IFRIC 6
Liabilities arising from Participating in a Specific
Market - Waste Electrical and Electronic Equipment
3
IFRIC 7
Applying the Restatement Approach under PAS 29
Financial Reporting in Hyperinflationary Economies
3
IFRIC 8
Scope of PFRS 2
3
IFRIC 9
Reassessment of Embedded Derivatives
3
Amendments to Philippine Interpretation IFRIC–9 and
PAS 39: Embedded Derivatives
3
3
*SGVFS010664*
-5-
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
INTERPRETATIONS
Effective as of December 31, 2014
Adopted
Not
Adopted
Not
Applicable
IFRIC 10
Interim Financial Reporting and Impairment
3
IFRIC 11
PFRS 2 - Group and Treasury Share Transactions
3
IFRIC 12
Service Concession Arrangements
3
IFRIC 13
Customer Loyalty Programmes
3
IFRIC 14
The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
3
Amendments to Philippine Interpretations IFRIC - 14,
Prepayments of a Minimum Funding Requirement
3
IFRIC 15
Agreements for the Construction of Real Estate
3
IFRIC 16
Hedges of a Net Investment in a Foreign Operation
3
IFRIC 17
Distributions of Non-cash Assets to Owners
3
IFRIC 18
Transfers of Assets from Customers
3
IFRIC 19
Extinguishing Financial Liabilities with Equity
Instruments
3
IFRIC 20
Stripping Costs in the Production Phase of a Surface Mine
3
IFRIC 21
Levies
3
SIC-7
Introduction of the Euro
3
SIC-10
Government Assistance - No Specific Relation to
Operating Activities
3
SIC-12
Consolidation - Special Purpose Entities
3
SIC-13
Amendment to SIC - 12: Scope of SIC 12
3
Jointly Controlled Entities - Non-Monetary Contributions
by Venturers
3
SIC-15
Operating Leases - Incentives
3
SIC-25
Income Taxes - Changes in the Tax Status of an Entity or
its Shareholders
3
SIC-27
Evaluating the Substance of Transactions Involving the
Legal Form of a Lease
3
SIC-29
Service Concession Arrangements: Disclosures.
3
SIC-31
Revenue - Barter Transactions Involving Advertising
Services
3
SIC-32
Intangible Assets - Web Site Costs
3
*This standard has been early adopted by the Bank.
*SGVFS010664*
ANNEX V
EAST WEST BANKING CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULES REQUIRED UNDER SRC RULE 68, AS
AMENDED
AS OF DECEMBER 31, 2014
Below are the additional information and schedules required by SRC Rule 68, as amended that are
relevant to the Group. This information is presented for purposes of filing with the SEC and is not
required part of the basic financial statements.
Schedule A. Financial Assets
Below is the detailed schedule of the Group’s financial assets as of December 31, 2014 (amounts in
thousands):
Name of issuing entity and association of each issue
Financial assets at Fair Value through Profit or Loss
Debt securities
Bureau of Treasury
Republic of The Philippines
First Pacific Company Ltd
International Container Terminal Services
Rizal Commercial Banking Corp
Republic of Indonesa
SM Investment Corp
Pertamina (Pertij)
FPT Finance Limited
Filinvest Land Inc
Korea Development Bank
Banco de Oro
PSALM
ROP warrants
Citibank Manila
Credit Suisse
Equity securities
San Miguel Corporation
LGU Guarantee Corporation
Victorias Millings Corporation
Mabuhay Vinyl Corporation
Number of
shares/principal
amount of
bonds and notes
Amount shown Value based
in the statement on market
Income
of financial quotation at received and
position end of year
accrued
4,068,876
1,840,094
775,445
633,906
365,094
313,040
223,600
223,600
100,620
99,680
89,440
4,472
716
P
=4,153,447
2,812,791
780,800
657,060
367,339
377,926
223,600
233,560
110,074
99,680
88,640
4,555
856
P
=4,153,447
2,812,791
780,800
657,060
367,339
377,926
223,600
233,560
110,074
99,680
88,640
4,555
856
P
=11,085
51,551
7,809
6,846
10,540
5,394
7,358
1,644
294
421
372
161
27
78
43
25,826
20,878
25,826
20,878
–
–
2,847 shares
50 shares
50 shares
9 shares
215,195
10,213
229
21
P
=10,182,690
215,195
10,213
229
21
P
=10,182,690
–
–
–
–
P
=103,052
*SGVFS010664*
-2-
Name of issuing entity and association of
each issue
Investment Securities at Amortized Cost:
Republic of the Philippines
National Power Corp.
International Container Terminal
Services
Bank Of China
Power Sector Asset and Liabilities
Management (PSALM)
Philippine Power Trust I
Republic of Indonesia
Bank of America Corp
Citigroup Inc.
FPT Finance Ltd
Development Bank of the Phils
First Pacific Company Ltd
Financial Assets at Fair Value Through Other
Comprehensive Income:
Roxas Holdings, Inc.
Aboitiz Transport System Corporation
Asiatrust Development Bank
Empire East Land Holdings, Inc.
Caliraya Golf
Phil. Clearing House Corp.
PDSH
Total
Number of
shares/principal
amount of
bonds and notes
Amount shown
in the statement
of financial
position
Value based
on market
quotation at
end of year
Income
received and
accrued
3,037,283
2,894,726
P
=4,046,260
3,037,300
P
=4,033,094
3,168,711
P
=117,816
147,851
894,400
347,686
910,943
347,490
912,288
346,367
9,131
2,991
220,921
186,206
44,720
–
–
–
–
–
7,625,942
223,560
182,837
46,488
–
–
–
–
–
8,794,878
226,511
184,343
47,507
–
–
–
–
–
8,918,821
13,378
34,209
22,976
5,868
5,165
4,858
4,578
2,789
371,610
914 shares
242 shares
18 shares
3 shares
–
–
–
6,126
808
127
213
3,120
2,469
1,556
14,419
P
=18,991,987
6,126
808
127
213
18,187
2,469
1,556
29,486
P
=19,130,997
–
–
–
–
–
–
–
–
P
=475,112
*SGVFS010664*
-3Schedule B. Amounts receivable from directors, officers, employees, related parties
and principal stockholders (other than related parties)
Below is the schedule of advances to employees of the Group with balances above =
P100,000 as of
December 31, 2014 (amounts in thousands):
Balance at
beginning of
year
Additions
Collections
Write off
Current
Not current
Balance at
end of year
Abad, Virginia O.
-
223
-
-
61
162
223
Abalon, Edgar Allan C.
-
296
-
-
85
211
296
Abella, Maria Melanie L.
-
288
-
-
70
218
288
183
-
65
-
79
39
118
Abulencia, Maria Veronica L.
-
230
-
-
61
169
230
Afable, Ruby Charo T.
-
240
-
-
61
179
240
Agcaoili, Ana Jean E.
182
-
73
-
85
23
108
Alcala, Mary Jane D.
279
-
48
-
70
160
230
-
277
-
-
93
184
277
232
108
44
-
141
155
296
-
226
-
-
61
165
226
Andal, Reginald R.
201
-
42
-
57
102
159
Andrade, Ian Daleo R.
252
-
61
-
79
111
190
Angga, Emiliana A.
-
383
-
-
138
245
383
Anonuevo, Janus C.
268
-
47
-
67
154
221
-
146
-
-
57
89
146
Abreu, Raoul Antonio J.
Alcazar, Jose Gerardo D.
Alonde, Rizel A.
Amora, Michael Angelo B.
Antonio, Mary Grace M.
Apaliso, Victor F. Jr.
543
-
221
-
255
67
322
Apuli, Ranulfo T. Jr.
-
142
-
-
56
87
142
Aquino, Grace V.
-
121
-
-
49
71
121
Aquino, Lorna M.
-
250
-
-
61
189
250
Arevalo, Perla R.
204
164
46
-
123
199
322
Arintok, Ariann O.
169
-
35
-
48
86
134
-
125
-
-
46
79
125
232
-
44
-
61
127
188
-
247
-
-
70
177
247
Arnaldo, Jennifer A.
Asuncion, Mary Gay T.
Asuncion, Rodolfo V.
1,200
-
578
-
622
-
622
Atienza, Jason Anthony V.
Atienza, Alan E.
269
-
59
-
79
131
210
Auza, Jonathan L.
306
-
55
-
79
171
251
Bajo, Wilbert Aldrin R.
641
-
21
-
87
534
620
Balatbat, Maria Jocelyn B.
240
-
49
-
67
124
190
Baldoman, Rogelio A.
-
111
-
-
43
68
111
Bales, Joel C.
-
137
-
-
50
86
137
Banal, Aerol Paul B.
169
-
55
-
67
48
114
Banal, Conrad Anthony
Dominic L.
328
-
67
-
91
169
261
Bandol, Jessie C.
276
-
65
-
85
126
211
Banez, Pedro Catalino P.
233
-
44
-
61
128
189
-
133
-
-
50
83
133
161
-
35
-
46
80
126
Baro, Rexie G.
Basilio, Jeziel P.
-
117
-
-
44
73
117
Bauson, Marissa A.
Basilio, Pelagio Iii G.
710
-
150
-
203
356
559
Bautista, Alexander Glen E.
280
216
49
-
164
283
447
*SGVFS010664*
-4-
Bautista, Ericson H.
Bautista, John Rey A.
Balance at
beginning of
year
Additions
Collections
Write off
Current
Not current
Balance at
end of year
186
165
41
-
120
190
310
-
114
-
-
72
42
114
Bautista, Maria Regina J.
213
-
40
-
56
117
173
Bautista, Meybel L.
315
-
55
-
79
181
261
Bayani, Ma Teresa L.
396
-
71
-
102
222
325
-
101
-
-
101
-
101
216
-
42
-
58
116
174
Bayot, Emilia B.
Bernabe, Imelda F.
Billedo, Ma Christina L.
-
191
-
-
49
142
191
Biscocho, Gay A.
240
-
43
-
61
136
197
Bombais, Rosemarie C.
267
-
49
-
70
147
217
-
247
-
-
61
186
247
Borja, Grace M.
232
-
63
-
79
90
169
Borres, Kristoffer Alexis N.
214
-
46
-
70
98
168
Borromeo, Ray Karlo R.
232
-
44
-
61
127
188
Buenaventura, Imelda M.
-
188
-
-
47
141
188
Buendia, Angelica S.
-
316
-
-
143
173
316
Bondoc, Priscilla F.
Cabahug, Janet C.
-
111
-
-
44
67
111
235
-
43
-
61
132
193
-
247
-
-
70
177
247
Cadano, Johoanna R.
397
-
136
-
163
98
261
Cairo, Abigail Joan U.
201
179
46
-
169
164
333
Calixto, Tristan Jorel R.
-
194
-
-
47
147
194
Camilo, Virgilio L.
-
447
-
-
223
224
447
Campanera, Ma Riezl R.
-
193
-
-
53
140
193
Canedo, Noemi S.
191
-
57
-
70
64
134
Canillas, Emmanuel Ramon
Zamora Itf.
179
-
67
-
79
33
112
Capili, Maria Aileen M.
260
-
51
-
70
139
209
-
198
-
-
75
123
198
Cariaga, Catherine M.
235
180
43
-
127
245
372
Caberoy, Ginalyn D.
Cabusao, Ma Jerreza D.
Capobianco, Anna Marie F.
Cariaga, Eric V.
186
-
48
-
61
77
138
Carlos, Violeta A.
236
-
25
-
70
141
211
Caro, Rowena R.
226
-
44
-
61
121
181
-
221
-
-
60
161
221
178
-
48
-
61
69
130
Casambros, Nympha D.
Castillo, Mara Siena L.
Castro, Angelene Elvira L.
-
215
-
-
61
154
215
Castro, John Philip M.
-
219
-
-
61
158
219
Castro, Ma Francesca H.
-
273
-
-
70
203
273
Catane, Roberto Paul D.
217
-
44
-
61
113
174
Catapang, Ritchie C.
-
233
-
-
61
172
233
Cayabyab, Pamela Shiela M.
-
211
-
-
61
151
211
Ceniza, Minnie P.
-
126
-
-
49
77
126
Chan, Mary Jane C.
241
-
72
-
75
94
169
Cheng, Jolly Allan O.
211
-
45
-
61
105
166
Ching, Alan John P.
271
-
49
-
70
152
222
Ching, Jean Margarette L.
231
-
53
-
70
108
178
Ching, Zulaika Jane D.
-
219
-
-
57
162
219
Chua, Catherine Ann H.
-
219
-
-
61
158
219
Chua, Jenice D.
-
479
-
-
161
318
479
*SGVFS010664*
-5-
Balance at
beginning of
year
Chua, Paulina L.
Chua, Tan Guat Dolores L.
Claveria, Leah P.
Not current
Balance at
end of year
68
85
153
61
161
222
Additions
Collections
Write off
Current
218
-
65
-
-
222
-
-
-
100
-
-
44
56
100
248
-
58
-
79
111
190
Co, Aris G.
-
296
-
-
85
211
296
Co, Renato D.
-
225
-
-
58
167
225
Co, Ruth G.
-
289
-
-
79
210
289
Cobarrubias, Malcolm A.
193
-
47
-
61
85
146
Cobarrubias, Maria Cristina S.
250
-
42
-
61
147
208
-
111
-
-
64
46
111
Contreras, Yolanda G.
222
-
45
-
61
117
178
Corpuz, Denise S.
236
-
43
-
61
132
193
Cotabato Sugar Central
Company Inc
-
400,000
-
-
400,000
-
400,000
Cruz, Anne Rachelle R.
287
-
48
-
70
169
239
Clutario, Ma Luisa T.
Concepcion, Anna
Lorraine G.
Cruz, Christian C.
250
-
41
-
61
147
208
Cruz, Flordeliza M.
177
-
47
-
61
69
129
Cruz, Florence G.
199
-
45
-
61
93
154
Cruz, Napoleon S. Jr.
543
-
142
-
182
219
401
Cuaton, Ursulo L. Jr. II
371
130
90
-
178
233
411
Dagoy, Divine Grace F.
209
-
37
-
53
119
172
-
200,000
-
-
200,000
-
200,000
Davao Sugar Central Co Inc
David, Arnold Thomas
Rafael L.
283
-
48
-
70
165
235
De, Guzman Pricilla G.
239
-
42
-
61
136
197
De, Guzman Rachelle D.
184
-
46
-
61
77
138
De, Leon Anna Liza D.
441
-
126
-
158
157
315
De, Leon Maribeth N.
238
-
62
-
68
108
176
De, Luna Baltazar Randy B.
419
-
127
-
160
131
291
De, Peralta Margareth M.
277
161
49
-
177
211
388
Del, Rosario Raquel Y.
217
-
44
-
61
113
174
Dela Cruz, Efren O. Jr.
-
550
-
-
221
329
550
Dela, Cruz Adonis S.
-
393
-
-
146
247
393
Dela, Cruz Glennmore G.
289
-
58
-
79
152
231
Dela, Cruz Marinella A.
214
-
40
-
61
113
173
Delos Santos, Nova B.
166
-
49
-
61
56
116
Deocampo, Joanne B.
184
-
46
-
61
77
138
-
246
-
-
61
186
246
Detubio, Carmen Q.
Dimla, Eduardo S. Jr.
Dmci, Project Developers Inc.
Dogillo, Shella A.
Dolina, Maria Luisa M.
Ducado, Mary Nell A.
1,680
-
91
-
263
1,327
1,590
214,900
24,919
8,765
-
12,181
218,873
231,054
-
120
-
-
62
58
120
222
-
45
-
61
117
178
-
213
-
-
58
155
213
260
-
78
-
99
84
183
Dumlao, Philip C.
-
244
-
-
61
183
244
Dytuco, Dona Marie R.
-
223
-
-
61
162
223
Ebora, Leovelino D.
242
-
42
-
61
140
200
Enanosa, Carlo I.
274
-
67
-
86
120
206
Dumalaog, Rosemarie R.
*SGVFS010664*
-6-
Balance at
beginning of
year
Additions
Collections
Write off
Current
Not current
Balance at
end of year
-
219
-
-
61
158
219
Episcope, Henry C.
227
-
49
-
67
111
178
Erana, Maria Gloria Dulce F.
217
-
51
-
67
99
166
Escalicas, Ma Isabel G.
250
-
41
-
61
147
208
Escoses, Ermelyn D.
264
-
59
-
79
126
205
Esguerra, Arnold B.
223
-
42
-
58
122
181
-
-
51
73
124
Encarnacion, Maria
Esmeralda E.
Fajardo, Annaliza O.
-
124
FDC Misamis Power
Corporation
-
1,478,302
-
-
-
1,478,302
1,478,302
FDC Utilities, Inc.
-
602
-
-
247
355
602
10,668
1,077
963
-
2,398
8,385
10,782
528
-
275
-
253
-
253
Fernandez, Jacqueline S.
Filarchipelago,
Hospitality Inc.
Filinvest, Development
Corporation.
Filomeno, Gay S.
Florendo, Portia Gilda D.
Flores, Gerald H.
Foja, Jacobo G.
Francia, Odelon T. Jr.
Gaba, Glenda S.
5,621,850
-
-
-
-
5,621,850
5,621,850
-
230
-
-
61
169
230
221
-
53
-
66
102
168
-
252
-
-
70
182
252
205
231
55
-
153
228
381
1,257
284
52
-
219
1,270
1,488
-
247
-
-
61
186
247
Gacasan, Rosalina C.
247
-
39
-
61
147
207
Galicia, Olivia S.
185
-
55
-
70
60
130
Galita, Gina Marie C.
-
600
-
-
322
278
600
Gasco, Brian Lesly Hegel S.
-
116
-
-
44
72
116
Geronimo, John Gil M.
300
-
62
-
68
170
238
Gloez, Arthur S. Jr.
178
-
48
-
61
69
129
Go, Irene Q.
235
-
55
-
60
120
180
Gonzales, Edylene D.
-
215
-
-
61
154
215
Guerrero, Nilo B.
151
-
43
-
56
51
107
Guino, Frances Lea C.
286
-
65
-
85
136
221
Gutierrez, Johnell T.
-
289
-
-
79
210
289
Gutierrez, Windy B.
233
-
44
-
61
128
189
Hebron, Marinela C.
236
-
43
-
61
132
193
-
317
-
-
142
175
317
Honorico, Tootsie I.
250
-
60
-
79
111
191
Hulguin, Joseph A.
226
-
44
-
61
121
181
Hementera, Jonah M.
Ignacio, Felipe A.
-
102
-
-
80
22
102
217
-
44
-
61
113
174
-
347
-
-
147
200
347
399
-
88
-
116
195
311
2,328
-
136
-
352
1,840
2,192
Jonsay, Jayvee B.
-
247
-
-
61
186
247
Jose, Hannah Guitar G.
-
211
-
-
61
151
211
Joven, Rhoda T.
222
-
54
-
70
98
168
Junio, Ma Karen B.
174
-
49
-
61
64
125
Kimpo, Cherry Ann
Vanessa C.
251
-
52
-
70
130
200
Kosca, Reginald Dennis B.
231
-
41
-
58
131
190
Iremedio, December E.
Isidro, Rod Louie Jefferson C.
James, Marvin A.
Jaucian, Eufrocina B.
*SGVFS010664*
-7-
Balance at
beginning of
year
Lacambra, Gemma C.
Lacea, Jonne Ann R.
Additions
Collections
Write off
Current
Not current
Balance at
end of year
279
-
59
-
79
142
221
-
244
-
-
61
183
244
Lacsamana, Judy Ulysses A.
232
-
44
-
61
127
188
Ladaban, Justin Robert G.
396
296
120
-
234
339
572
Laguda, Janette S.
511
-
119
-
162
230
392
Lama, Mary Ann B.
225
-
52
-
70
102
172
Lampano, Moises G.
162
-
57
-
70
34
104
Landrito, Ivah Marizol D.
187
284
85
-
179
208
387
Laus, Willeth L.
-
225
-
-
55
170
225
Layug, Jennifer G.
-
230
-
-
61
169
230
214
-
44
-
61
109
170
4,251
-
198
-
633
3,420
4,053
Legaspina, Joanne Marie R.
-
237
-
-
61
176
237
Leuterio, Kristine Karen R.
226
-
41
-
61
124
185
Ligayo, Michael H.
-
192
-
-
54
139
192
Lim, Karen D.
-
234
-
-
61
173
234
Lim, Stanley Jason G.
-
244
-
-
61
183
244
Lima, Ma Barbara V.
250
-
42
-
61
147
208
Lim-Marohombsar, Maria
Cecilia M.
215
-
45
-
61
109
170
-
237
-
-
61
176
237
Lazaro, Zaida Angelita P.
Legaspi, Jocelyn C.
Lingad, Alexander F.
Locsin, Raul Raymund C.
269
-
65
-
68
136
204
Lopez, Anna Lyn M.
-
102
-
-
40
61
102
Lopez, Maylene R.
-
280
-
-
70
211
280
Lopez, Paul John B.
-
247
-
-
70
177
247
Lotho, Glenn B.
220
-
95
-
113
12
125
Lumbres, Ma Susana
Editha G.
193
-
43
-
61
89
150
Lumuthang, Rodney A.
-
244
-
-
70
174
244
Macaballug, Carmina D.
-
122
-
-
47
75
122
Macapagal, Jahil L.
265
-
66
-
85
114
199
Macaraeg, Sally Marie D.
265
-
60
-
79
126
205
Magadia, Jizell P.
150
-
47
-
55
48
103
Magadia, Marlowe L.
-
211
-
-
61
151
211
Magdales, Gerardo C.
208
-
54
-
70
84
154
Maglaki, Jeannette D.
211
378
18
-
151
420
571
Magnaye, Racquel F.
267
291
50
-
187
321
508
Maipid, Paolo Juan Miguel D.
193
-
47
-
61
85
146
Makilan, Claudette G.
235
-
43
-
61
132
193
Mamalayan, Paulino O.
196
-
46
-
61
89
150
Mancilla, Rose Elizabeth B.
-
203
-
-
55
149
203
Manggalo, Debbie T.
-
250
-
-
61
189
250
1,048
-
131
-
214
703
917
-
210
-
-
89
121
210
501
-
17
-
69
414
483
-
129
-
-
49
80
129
250
-
42
-
61
147
208
Maribojoc, Maria Cristina L.
-
237
-
-
61
176
237
Marqueses, Ofelia D.
-
174
-
-
87
87
174
Manguiat, Katherine N.
Maningas, Gisela Michelle S.
Manuel, Karleen L.
Maramag, Maria Katrina N.
Marcelo, Jasmin Mae C.
*SGVFS010664*
-8-
Mateo, Maria Romina M.
Medina, Carlota A.
Balance at
beginning of
year
Additions
Collections
Write off
Current
Not current
Balance at
end of year
-
147
-
-
73
74
147
208
-
70
-
84
54
138
Medina, Iv Aristeo N.
-
251
-
-
70
181
251
Medina, Lizel N.
-
247
-
-
61
186
247
Mendez, Mary Joy C.
-
201
-
-
55
146
201
Mercado, Joel M.
-
756
-
-
253
503
756
Minoza, Eliza Grace C.
-
225
-
-
55
170
225
-
206
-
-
59
147
206
Molina, George T.
Mirabueno, Jo-Anne G.
209
309
63
-
203
252
455
Morales, Cyrus C.
233
-
44
-
61
128
189
Mortel, Maria Kristina A.
254
-
50
-
70
134
204
Mosqueda, Evangeline A.
261
245
108
-
278
121
398
Munoz, Richard Benjamin S.
176
-
60
-
70
46
116
Narciso, Paolo D.
233
-
41
-
61
131
192
Narvacan, Genalyn M.
-
103
-
-
65
38
103
Nasol, Severino D.
-
237
-
-
61
176
237
Natividad, Noel U.
-
244
-
-
67
177
244
Navarrete, Marife S.
-
211
-
-
61
150
211
Navarro, Michael B.
-
104
-
-
44
60
104
Navidad, Jose Ma Oscar.
316
-
56
-
79
181
261
Nayve, Julie Adelyn A.
164
-
48
-
61
55
116
Ng, Estrella B.
233
-
44
-
61
128
189
Nicasio, Myra P.
214
-
44
-
61
109
170
Nonato, Herman D.
184
-
65
-
68
51
119
Nufable, Emerson B.
-
107
-
-
78
29
107
Olalia, Agnes M.
-
272
-
-
70
202
272
Olalia, Anthony M.
208
-
46
-
61
101
162
Olarte, Harold T.
243
-
42
-
61
140
201
Ona, Lourdes A.
304
300
58
-
196
350
547
Ong, Catherine C.
188
-
73
-
85
30
115
Ong, Christina J.
219
-
62
-
79
78
158
Ong, Ma Noemi S.
193
-
47
-
61
86
146
Ong, Michael S.
-
204
-
-
52
151
204
Orcine, Iii William
Cipriano D.
-
219
-
-
61
158
219
211
-
46
-
61
105
166
-
161
-
-
61
100
161
182
-
48
-
61
73
134
-
128
-
-
50
78
128
444
-
151
-
187
106
293
-
280
-
-
70
210
280
238
279
103
-
201
213
415
Panganiban, Maricel G.
-
101
-
-
58
43
101
Panganiban, Rogel L.
-
237
-
-
61
176
237
217
-
44
-
61
113
174
-
200
-
-
55
145
200
2,482
149
132
-
446
2,053
2,499
419
-
108
-
139
171
310
-
124
-
-
33
92
124
Ortiz, Toni Regina L.
Pagtakhan, Mark Alvin A.
Palo, Danilo N.
Palomo, Jesus Enrico L.
Pama, Cristina O.
Pamfilo, Ma Anna Lourdes D.
Pangan, Noel S.
Papag, Marita B.
Paragas, Lex C.
Paras, Ana Maria L.
Pascual, Conrad Paul D. Jr.
Payawal, Roberto A.
*SGVFS010664*
-9-
Balance at
beginning of
year
Additions
Collections
Write off
Current
Not current
Balance at
end of year
Pe, Benito Florence Y.
292
-
56
-
79
157
236
Penafiel, Evangeline S.
206
-
45
-
61
101
162
Penaloza, Allan M.
206
-
45
-
61
101
162
Penarubia, Allan T.
208
-
54
-
70
84
154
Perez, Soraya F.
207
299
36
-
230
240
470
Pilares, Mylene L.
316
439
62
-
252
441
693
-
121
-
-
65
57
121
Pineda, Edgardo B.
Posadas, Jomar N.
-
134
-
-
58
76
134
Presingular, Gerard John C.
206
-
43
-
58
105
163
Prudente, Sarah Melissa A.
-
244
-
-
61
183
244
Puno, Ma Christina C.
264
-
59
-
79
126
205
Purugganan, Francesco
Michael D.
368
-
117
-
145
106
251
Que, Kathryn .
209
-
55
-
70
84
154
Que, Sharon D.
247
-
42
-
61
143
204
Rabor, Almira D.
250
-
44
-
61
145
206
Ramirez, Claire L.
-
260
-
-
67
194
260
196
123
46
-
116
157
273
Ramos, Harold D.
-
116
-
-
47
68
116
Ramos, Karren B.
200
-
43
-
61
97
158
Ramos, Xavier C.
1,396
-
318
-
444
635
1,079
Raymundo, Redentor E.
-
234
-
-
61
173
234
Reboredo, Raymond T.
212
-
88
-
97
27
124
Reburiano, Ma Carina L.
-
244
-
-
61
183
244
Regalado, Daphne Xandra Z.
-
222
-
-
61
161
222
Resurreccion, Mary Anne L.
Ramiscal, Gerna Joanne G.
217
-
44
-
61
113
174
Reyes, Annabelle M.
-
241
-
-
96
144
241
Reyes, Crispin A.
-
260
-
-
70
190
260
Reyes, Frederick D.
-
384
-
-
150
234
384
Reyes, Lovely M.
307
-
67
-
95
146
240
Reyes, Ma Leonora Y.
209
-
78
-
93
39
132
-
213
-
-
55
158
213
Reynoso, Nina May Q.
216
-
56
-
73
87
160
Ricaforte, Gracia Regina E.
177
-
47
-
61
69
130
-
195
-
-
50
145
195
192
-
46
-
61
85
146
-
115
-
-
64
52
115
Rivera, Ravi P. Jr.
180
-
56
-
70
54
124
Rodriguez, Paulo Jose L.
187
263
56
-
189
205
394
Reyes, Rosselyn Grace P.
Ringor, Rowena Y.
Rito, Irene D.
Rivano, Lucas Andre A.
Rojas, Jocelyn D.
-
223
-
-
61
162
223
161
-
47
-
61
53
114
-
275
-
-
79
196
275
Saguinsin, Jannet D.
255
191
51
-
144
251
395
Salazar, Adrian Wilson E.
229
221
52
-
164
234
398
Salvador, Dino Antonio A.
239
-
42
-
61
136
196
Salvador, Francis
Alexandre A.
221
-
44
-
61
117
177
Salvador, Sheila C.
173
-
53
-
67
53
120
Sampang, Renato Z.
693
151
286
-
289
269
558
Rosal, Frederick Voltaire J.
Rosario, Suzette C.
*SGVFS010664*
- 10 -
Samson, Joy P.
Balance at
beginning of
year
Additions
Collections
Write off
Current
Not current
Balance at
end of year
184
247
68
-
142
221
363
San, Agustin Maria Luz R.
-
223
-
-
61
162
223
San, Jose Alina F.
-
215
-
-
61
154
215
San, Jose Editha N.
-
287
-
-
153
133
287
Sangalang, Catherine D.
208
-
54
-
70
84
154
Sangalang, Mai G.
236
-
78
-
92
66
158
Sangkula, Sheena E.
219
-
42
-
59
117
177
Santos, Broderick C.
313
-
56
-
79
178
257
Santos, Silvino C. Jr.
-
208
-
-
58
150
208
Savellano, Roland M.
-
185
-
-
107
78
185
See, Evelyn O.
185
-
48
-
61
77
138
Sen, Neil Allen A.
313
-
73
-
97
143
240
Serrano, Mineleo C.
201
-
65
-
79
56
135
Sibug, Maria Theresa C.
402
-
130
-
159
114
273
-
1,030
-
-
306
724
1,030
185
-
34
-
48
103
151
Siochi, Alberto Antonio E.
-
237
-
-
61
176
237
Siongco, Ma Liza C.
-
303
-
-
79
224
303
259
-
64
-
84
112
196
-
154
-
-
98
56
154
Soliongco, Jocelyn V.
247
-
52
-
70
125
195
Soliven, Erlie G.
202
-
57
-
73
72
145
Soller, Amada Ma Laarni C.
188
-
46
-
61
81
142
Soriano, Leila V.
166
-
40
-
52
73
125
Soriano, Maricel C.
209
-
92
-
105
12
117
Sta, Maria Esther S.
-
144
-
-
96
48
144
Suerte, Felipe Rowen G.
-
451
-
-
140
311
451
Sugay, Rachel Joy R.
-
107
-
-
48
59
107
226
-
44
-
61
121
181
1,636
-
417
-
488
731
1,219
Sy, Rosemarie G.
230
-
55
-
60
115
175
Tan, Catherine T.
201
-
53
-
67
81
148
Tee, Lorita C.
203
-
69
-
85
49
134
-
333
-
-
111
222
333
Teves, Marie Antoinette G.
154
-
46
-
56
52
108
Ticzon, Wilroy V.
288
-
49
-
70
169
239
Tinio, Karsten T.
254
283
51
-
180
306
486
Tomboc, Juancho A.
181
-
62
-
68
51
119
Topacio, Mary Ann E.
247
166
42
-
127
243
371
-
223
-
-
57
166
223
Sierra, Abigail G.
Sigua, Ann Grace D.
Siongco, Yvette Rhodora A.
Sisican, Lilibeth R.
Suico, Arnel T.
Susmerano, Gerardo .
Teves, Elmer A.
Trangia, Jude Thaddeus T.
Trinidad, Arlene R.
174
-
64
-
74
37
111
Tuason, Geraldine M.
233
-
44
-
61
128
189
Tubu, Charisse C.
249
-
41
-
61
147
208
Tumao, Maria Leah L.
217
-
44
-
61
113
174
3,378
-
309
-
600
2,469
3,069
200
-
40
-
55
105
160
-
796
-
-
372
424
796
8,231
-
529
-
1,294
6,408
7,702
Tumbaga, Allan John M.
Ty, Maria Cristina C.
Uy, Ernesto T.
Uy, Ivy B.
*SGVFS010664*
- 11 -
Balance at
beginning of
year
Additions
Uy, Wennievic Y.
Valderrama, Liberty B.
Valencia, Ma Shenie S.
Collections
Write off
Current
Not current
Balance at
end of year
-
230
-
-
61
169
230
217
274
54
-
177
260
436
-
301
-
-
85
216
301
Valenzuela, Nico B.
233
-
44
-
61
128
189
Valera, Valerie Mariflor G.
256
-
61
-
79
117
196
-
462
-
-
170
292
462
Velasco, Rufina Anabelle M.
168
-
59
-
70
39
109
Valoria, Elzon P.
Vergel, De Dios Anthony V.
228
138
43
-
127
196
324
Verzosa, Eugenio C.
219
-
45
-
61
113
174
Viernes, Jovito M.
214
-
55
-
70
89
159
Villa, Archibald V.
270
-
61
-
66
143
209
Villano, Robin Melchor
Jon V.
209
-
63
-
79
67
146
Villano, Robin Melchor V.
277
-
87
-
106
84
190
-
217
-
-
57
161
217
182
-
48
-
61
73
134
Villar, Rhamil B.
Villarama, Maria Aileen A.
Villaraza, Alessandro L.
2,859
-
135
-
369
2,355
2,724
Villegas, Maria Corazon R.
267
-
50
-
70
146
216
Viray, Cecilia P.
288
-
49
-
70
169
239
Vives, Jason P.
247
-
42
-
61
143
204
Yadao, Israel C. Jr.
491
-
118
-
155
217
373
Yambao, Ralph Eduardo A.
185
-
38
-
52
96
147
-
189
-
-
49
141
189
Yuson, Dyan Ann D.
153
-
45
-
57
52
108
Yuson, Ephraim Vincent M.
236
-
43
-
61
132
193
Zamora, Jovito N.
206
382
65
-
257
266
523
Zepeda, Djhoanna R.
242
152
45
-
149
200
349
Young, Christian Irving B.
Schedule C. Amounts receivable from related parties which are eliminated during
the consolidation of financial statements
Below is the schedule of receivables from related parties which are eliminated in the consolidated
financial statements as of December 31, 2014 (amounts in thousands):
Green Bank (A Rural Bank), Inc.
East West Rural Bank
Balance at
beginning
of year
=128,200
P
450,125
=578,325
P
Additions
=–
P
5,017,359
= 5,017,359
P
Collections
= 128,200
P
4,906,466
=5,034,666
P
Balance at
end of year
=–
P
561,018
=561,018
P
*SGVFS010664*
- 12 Schedule D. Intangible Assets
As of December 31, 2014, the goodwill and intangible assets in the Group’s consolidated statements
of financial position follow (amounts in thousands):
Goodwill
Branch licenses
Capitalized software
Customer relationship
Core deposits
Balance at
beginning
of year
=1,316,728
P
1,662,200
522,128
133,788
20,891
=3,655,735
P
Additions
=–
P
505,196
455,523
–
–
=960,719
P
Charged to
cost and
expenses
=–
P
–
183,326
4,312
4,043
=191,681
P
Balance at
end of
year
=1,316,728
P
2,167,396
794,325
129,476
16,848
=4,424,773
P
*SGVFS010664*
- 13 Schedule E. Long-term Debt
Details of the Group’s long term debt* as of December 31, 2014 follow (amounts in millions):
Amount
P
=4,964
1,500
P
=6,464
Lower Tier 2 unsecured subordinated notes due 2025
Lower Tier 2 unsecured subordinated notes due 2021
Current
=
P–
–
=
P–
Noncurrent
P
=4,964
1,500
P
=6,464
*Excludes long-term negotiable certificates of deposit, that are classified as deposit liabilities in the statement of financial position.
Schedule F. Indebtedness to Related Parties (long term loan obligations to related parties)
The Group has no outstanding long term loan obligations to its related parties as of
December 31, 2014.
Schedule G. Guarantees of Securities of Other Issuers
The Group does not have guarantees of securities of other issuers as of December 31, 2014.
Schedule H. Capital Stock
Below is the schedule of the Group’s issued and outstanding capital stock as of December 31, 2014
(amounts in thousands):
Number of Shares
Title of issue
East West Banking
Corporation common shares
Authorized
Issued
and
outstanding
as shown
under related
statement of
financial
position
Reserved for
options,
warrants,
conversion
and other
rights
1,500,000
1,128,410
–
Related
parties
Held by
Directors,
Officers and
Employees
Others
846,378
10,555
271,477
*SGVFS010664*