For the Year 2013

Transcription

For the Year 2013

PROXY
I,
________________________
do
hereby
appoint
___________________________ as my proxy and representative at the Annual
Stockholders’ Meeting of Metropolitan Bank & Trust Company to be held on April
30, 2014, with authority to participate in the deliberations and to vote in my behalf
all the shares standing in my name for the election of directors and/or approval of
transactions included in the Agenda or any related matter which may properly
arise during the said Meeting or any adjournment thereof.
In witness whereof, I hereby signed on _______________ at _______________
Signature of Stockholder
:
_______________________________
Name
:
_______________________________
Note: If you cannot attend the meeting in person and you wish to be represented, you may designate your authorized representative by submitting a signed proxy document on or before April 23, 2014 to the Stock Transfer Department (Metrobank Trust Banking), 17th Floor, GT Tower International, 6813 Ayala Avenue corner H.V. Dela Costa Street, Makati City. Stockholders who wish to do so may adopt the above proxy form. The proxy document need not be notarized. COVER SHEET
2
0
5
7
3
SEC Registration Number
M E T R O P O L I T A N
B A N K
&
T R U S T
C OM P A N Y
G i
l
P u y
i
y
(Company’s Full Name)
M e
t
r
o b a n k
A v
e
n u e,
1
2
P
0
0
l
a
z a,
S
e n.
M a k a
t
i
C
t
J.
a
t
(Business Address: No. Street City/Town/Province)
1
2
ATTY. LAARNI D. BERNABE
898-8733
(Contact Person)
(Company Telephone Number)
3 1
Month
Day
2 0
-
I
S
(Form Type)
(Fiscal Year)
0 4
3 0
Month
Day
(Annual Meeting)
NONE
(Secondary License Type, If Applicable)
Corporation Finance Department
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
3,205 as of
March 7, 2014
Total No. of Stockholders
Domestic
Foreign
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
2
SEC Number 20573
File Number______
METROPOLITAN BANK & TRUST COMPANY
Metrobank Plaza, Sen. Gil J. Puyat Avenue, 1200 Makati City
(Company’s Address)
898-8000
(Telephone Number)
December 31
_____________________________________________________________________________
(Fiscal year ending)
FORM 20-IS
(Form Type)
(Amendment Designation, if applicable)
March 31, 2014
(Period Ended Date)
None
(Secondary License Type and File Number)
3
INFORMATION STATEMENT
for the
Stockholders’ Meeting on
April 30, 2014 at 3:00 p.m.
Metrobank Auditorium
Metrobank Plaza
Sen. Gil J. Puyat Avenue
Makati City
5
SECURITIES AND EXCHANGE COMMISSION
SEC Form 20-IS
Information Statement Pursuant to Section 20
of the Securities Regulation Code
1.
Check the appropriate box:
Preliminary Information Statement
X Definitive Information Statement
2.
Name of Registrant as specified in its charter
3.
Province, country, or other jurisdiction of
incorporation or organization
Manila, Philippines
4.
SEC Identification Number
20573
5.
BIR Tax Identification Code
000-477-863
6.
Address of principal office
Metrobank Plaza
Sen. Gil J. Puyat Avenue, Makati City
7.
Registrant’s telephone number, including area code
8.
Date, time and place of the meeting of security holders
1200
Postal Code
(632) 898-8000; (632) 898-8733
April 30, 2014, 3:00 PM, Metrobank Auditorium
Metrobank Plaza, Sen. Gil J. Puyat Avenue, Makati City
9.
Approximate date on which the Information Statement is first to be sent or given to security holders
April 3, 2014
10. Securities registered pursuant to Sections 4 and 8 of RSA (information on number of shares and amount of debt
is applicable only to corporate registrant):
Title of Each Class
Number of Shares of
Common Stock Outstanding
Common Shares
2,744,801,066
11. Are any or all of registrant’s securities listed on the Philippine Stock Exchange?
Yes
X
No_____
12. If yes, disclose the name of such Stock Exchange and the class of securities listed therein:
Stock Exchange
:
Class of Securities :
Philippine Stock Exchange
Common Shares
6
A. GENERAL INFORMATION
Item 1. Date, Time, and Place of Meeting of Security Holders
Date
:
April 30, 2014
Time
:
3:00 P.M.
Place
:
Metrobank Auditorium, Metrobank Plaza, Sen. Gil J. Puyat Avenue, Makati City
Mailing Address
:
The approximate date on which the Information Statement is first to be sent or given to security holders is on April 3,
2014.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
Item 2. Dissenter’s Right of Appraisal
There is no matter included in the Agenda of the Annual Stockholders’ Meeting which may give rise to the exercise by
the stockholders of the right of appraisal.
In general, any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his
shares in case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any
stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of
any class, or of extending or shortening the term of corporate existence. Appraisal right is also available in case of
sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property
and assets of the corporation; in case of merger or consolidation.
In the above instances, the appraisal right may be exercised by any stockholder who shall have voted against the
proposed corporate action by making a written demand on the corporation for payment of the fair value of his shares
within thirty (30) days after the date on which the vote was taken: Provided, that failure to make the demand within
such period shall be deemed a waiver of the appraisal right. If the proposed corporate action is implemented or
effected, the corporation shall pay to such stockholder, upon surrender of the certificate(s) of stock representing his
shares, the fair value thereof as of the day prior to the date on which the vote was taken, excluding any appreciation or
depreciation in anticipation of such corporate action.
Item 3. Interests of Certain Persons in or Opposition to Matters to be Acted Upon
(a) Since the beginning of the last fiscal year, there is no director, officer or nominee for election as director, or any
associate of the foregoing persons with any substantial interest, direct or indirect, by security holdings or
otherwise, which has to be acted upon, other than election to office.
(b) There is no director who has informed the Registrant in writing that he intends to oppose any action to be taken
up at the Annual Stockholders’ Meeting.
B. CONTROL AND COMPENSATION INFORMATION
Item 4. Voting Securities and Principal Holders Thereof
(a) Number of shares outstanding as of March 7, 2014
Number of votes entitled
:
:
2,744,801,066 shares
One (1) vote per share
(b) Record date to determine stockholders entitled to notice and
to vote at the regular meeting
:
March 7, 2014
(c) Number of holders as of March 7, 2014
:
3,205 holders
All of the securities of the issuer are listed in the Philippine Stock Exchange.
7
(d) Election of Directors
Majority vote is required for the election of directors. Security holders shall have the right to cumulative
voting. Cumulative voting is allowed provided that the total votes cast by a stockholder shall not exceed the
number of shares registered in the name of that security holder in the books of the registrant as of the record
date multiplied by the whole number of directors to be elected. There is no condition precedent to the exercise
of the right to cumulative voting.
(e) Security Ownership of Certain Record and Beneficial Owners and Management
(1) Security Ownership of Certain Record and Beneficial Owners
As of March 7, 2014, the following stockholders own more than 5% of the common voting securities:
Title of
Class
1
Common
Shares
Name, address of record
owner and relationship with
issuer
PCD NOMINEE
CORPORATION (NonFilipino)
(Participants are stockholders
of the issuer)
37/F The Enterprise Center
Ayala Avenue, Makati City
2
Common
Shares
GT CAPITAL HOLDINGS,
INC.*
(A stockholder of the issuer)
43/F GT Tower International
Ayala Avenue Corner H.V.
Dela Costa Street, Makati City
Name of Beneficial
Owner and
Relationship with
Record Owner
Various PCD
Participants; Record
Owners
There is no
participant of PCD
who holds more
than 5% of the
common voting
securities of the
registrant.
Beneficial and
Record Owner
The following
persons own more
than 5% of the
outstanding voting
shares of GT
Capital Holdings,
Inc.:
Grand Titan
Capital Holdings,
Inc. – 59.306%
PCD Nominee
Corporation (NonFilipino) –
33.224%
PCD Nominee
Corporation
(Filipino) – 7.101%
GT Capital
Holdings, Inc. is a
publicly-listed
company that is
majority owned and
controlled by
George S.K. Ty and
the members of his
family through
Grand Titan
Capital Holdings,
Inc.
Citizenship
No. of Shares
Held
Percentage
Foreign
932,398,102
33.970%
Filipino
689,261,391
25.112%
8
Title of
Class
3
Common
Shares
Name, address of record
owner and relationship with
issuer
PCD NOMINEE
CORPORATION (Filipino)
(Participants are stockholders
of the issuer)
37/F The Enterprise Center
6766 Ayala Avenue, Makati
City
4
Common
Shares
PHILIPPINE SECURITIES
CORPORATION (PSC)*
(A stockholder of the issuer)
2/F GT Tower International
Ayala Avenue corner H.V.
Dela Costa Street, Makati City
Name of Beneficial
Owner and
Relationship with
Record Owner
Various PCD
Participants; Record
Owners
There is no
participant of PCD
who holds more
than 5% of the
common voting
securities of the
registrant.
Philippine
Securities
Corporation;
Beneficial and
Record Owner
Citizenship
No. of Shares
Held
Percentage
Filipino
380,001,081**
13.844%
Filipino
139,581,359***
5.085%
The following
persons own more
than 5% of the
outstanding voting
shares of PSC:
Arthur Ty –
55.886%
George Siao Kian
Ty -26.038%
Mary V. Ty –
15.624%
TOTAL
2,141,241,933
78.011%
*
The Presidents of the above named corporations have the power to vote their respective shares.
** Net of 6,001,127 shares owned by PSC
*** Inclusive of 6,001,127 shares lodged with PCD Nominee Corporation
(2) Security Ownership of Directors and Management
As of March 7, 2014, the registrant’s directors and officers as a group held a total of 21,396,183 common
voting shares, broken down as follows:
Citizenship
Percent
of
Class
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
0.434%
0.330
0.015
0.000
0.000
0.000
0.000
0.000
0.000
0.000
Beneficial Ownership
Title of Class
Name of Beneficial Owner
No. of Shares Nature
Directors (14)
1 Common Shares
2 Common Shares
3 Common Shares
4 Common Shares
5 Common Shares
6 Common Shares
7 Common Shares
8 Common Shares
9 Common Shares
10
Common Shares
GEORGE S. K. TY
ARTHUR TY
FRANCISCO C. SEBASTIAN
FABIAN S. DEE (a)
ROBIN A. KING (b)
JESLI A. LAPUS (b)
MS. REMEDIOS L. MACALINCAG (b)
VICENTE B. VALDEPEÑAS, JR. (b)
RENATO C. VALENCIA (b)
REX C. DRILON II (b)
11,906,326
9,046,962
424,195
650
130
130
1,040
130
871
1,430
Direct
Direct
Direct
Direct
Direct
Direct
Direct
Direct
Direct
Direct
9
Title of Class
11
12
13
14
Common Shares
Common Shares
Common Shares
Common Shares
Sub-total
FRANCISCO F. DEL ROSARIO, JR. (b)
MS. AMELIA B. CABAL
EDMUND A. GO
ATTY. ANTONIO V. VIRAY
No. of
Shares
Nature
130
Direct
143
Direct
4,576
Direct
1,573
Direct
21,388,286
Citizenship
Filipino
Filipino
Filipino
Filipino
Percent
of
Class
0.000
0.000
0.000
0.000
0.779%
(a) Director and President
(b) Independent Directors
Title of Class
Officers (9)
Senior Executive Vice Presidents (2)
1
JOSHUA E. NAING
2
FERNAND ANTONIO A.
TANSINGCO
Executive Vice Presidents (7)
3
MS. MARITESS B. ANTONIO
4
ELIGIO C. LABOG, JR.
5
BERNARDITO M. LAPUZ
6
MS. CORAZON MA. THERESE B.
NEPOMUCENO
7
Common Shares
ANICETO M. SOBREPEÑA
8
MS. VIVIAN L. TIU
9
BERNARDO H. TOCMO
Sub-total
Total (Directors and Officers)
No. of
Nature
Shares
Citizenship
Percent
of
Class
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
7,897
Direct
Filipino
Filipino
Filipino
7,897
21,396,183
0.000%
0.000%
0.779%
(3) Voting Trust Holders of 5% or More
There is no person who holds more than 5% of the registrant’s securities under a voting trust or similar
agreement.
(4) Changes in Control
There is no arrangement that may result in a change in control of the registrant. There is no change in control
that has occurred since the beginning of the last fiscal year.
Item 5. Directors and Executive Officers
A.
Incumbent Directors (14) - All directors are elected for a term of one year and until their successors shall have
been elected and qualified.
Name
1
Dr. George
S. K. Ty
Citizenship
Filipino
Age
Position
Experience
81
Group
Chairman
• Chairman of the
Metrobank Group
since May 2006
• Founder of Metrobank
• Chairman of
Metrobank
Foundation, Inc. (MFI)
since 1979
Directorship
in Other
Listed
Companies
Chairman
Emeritus, GT
Capital
Relatives
up to the
4th Civil
Degree
Arthur Ty,
Chairman
(son)
Alfred Ty,
Corporate
Secretary
(son)
10
Name
Dr. George
S. K. Ty
(continuation)
Citizenship
Age
Position
Experience
• Chairman of Toyota
Motor Philippines
Corporation (TMPC)
since 1988
• Honorary Chairman,
Manila Medical
Services, Inc. (MMSI)
[formerly Manila
Doctors Hospital] since
2010
• Chairman, MMSI from
1979 to 2010
• Honorary
Chairman/Board of
Trustee, Manila Tytana
Colleges (MTC)
[formerly Manila
Doctors College] since
2008
Global Business Power
Corporation (GBPC)
since July 2007
Philippine Securities
Corp (PSC) since April
1997
Great Mark Resources
Corp. since 2006
Federal Land, Inc. (FLI)
since 2006
• Chairman Emeritus, GT
Capital Holdings, Inc.
(GT Capital) since July
2007
• Senior Adviser,
Philippine Savings
Bank (PSBank) since
April 2008
• Senior Adviser,
Philippine Axa Life
Insurance Corp.
(PALIC) since 2010
• Senior Adviser,
Metropolitan Bank
(China) Ltd. (MBCL)
since March 2010
• Senior Adviser, First
Metro Investment
Corporation (FMIC)
since April 2011
• Senior Adviser, Cebu
Energy Development
Corp. (CEDC) since
May 2011
• Director, Global
Treasure Holdings, Inc.
since August 2006
Directorship
in Other
Listed
Companies
Relatives
up to the
4th Civil
Degree
Anjanette T.
Dy Buncio,
Vice
President
(daughter)
Zandra M.
Ty, Vice
President
(daughter-inlaw)
11
Name
Citizenship
Age
Position
Dr. George
S. K. Ty
(continuation)
2
3
4
Arthur Ty
Filipino
47
Chairman
Francisco C.
Sebastian
Filipino
59
Vice
Chairman
Fabian S.
Dee
Filipino
51
Director
Experience
• Director, Horizon
Royale Holdings, Inc.
since July 2008
• Founder, TMP School
of Technology in 2013
• Chairman of Metrobank
since April 2012
• Chairman of MBCL
since 2010
• Vice Chairman of
PSBank since 2001
• Chairman of GT Capital
since July 2012
FMIC since April 2012
• President of Metrobank
from 2006 to 2012
• Executive Vice
President and Head of
Metrobank’s Consumer
Lending Group from
2000 to 2004
• Director of Metrobank
Card Corporation
(MCC) from 2002 to
2009
• Chairman, FMIC since
2011
• Director and President,
FMIC from 1997 to
2011
Metrobank since May
2006
• Chairman, FMIC since
April 2011
• Chairman, First Metro
Asset Management, Inc.
(FAMI) since May 2005
• Chairman since 2007
and Director since
2003, GBPC
• Chairman, CEDC since
2008
• Director, FLI since
April 2013
• Chairman, FLI from
April 2007 to 2013
• Chairman, Resiliency
(SPC), Inc. since
October 2009
• Chairman, IFS
Philippines since April
2011
• President of Metrobank
since April 2012
• Trustee, Metrobank
Foundation, Inc. since
May 2012
• Chairman, MCC since
April 24, 2006
Directorship
in Other
Listed
Companies
Vice
Chairman of
PSBank
Chairman of
GT Capital
Relatives
up to the
4th Civil
Degree
George
S.K.Ty,
Group
Chairman
(father)
Zandra M.
Ty, Vice
President
(wife)
Alfred Ty,
Corporate
Secretary
(brother)
Anjanette T.
Dy Buncio,
Vice
President
(sister)
None
None
None
None
12
Name
Citizenship
Age
Position
Fabian S.
Dee
(continuation)
5
Robin A.
King
Filipino
67
Independent
Director
Experience
• Director, FMIC
Equities, Inc. since
November 2001
• Adviser, Metrobank
from April 15, 2011 to
April 24, 2012
• Head of Metrobank’s
National Branch
Banking Sector (NBBS)
from May 2006 to April
2012
• Director, Metrobank
from October 2007 to
April 2011
• Chairman, Metro
Remittance (Singapore)
Pte. Ltd. since August
4, 2010
• Director, SMBC Metro
Investment Corporation
(SMBC Metro) from
January 1, 2005 to April
18, 2006
• Consultant, FMIC from
September 14, 2005 to
May 10, 2006
Account Management
Group from January
2005 to April 2006
• Deputy Head of
Metrobank’s Account
Management Group
from June 2002 to
December 2004
• Vice Chairman, Toyota
Manila Bay Corporation
(TMBC) from April
2003 to April 2004
• Director, TMBC from
April 2002 to April
2003
Marketing Center II
from September 2001 to
May 2002
• Adviser, Metropolitan
Bank (Bahamas)
Limited (Metrobank
Bahamas) from 2006 to
October 2008
• Independent Director,
Metrobank since April
2011
FMIC from 2010 to
2011
TFSPC from 2007 to
2010
Directorship
in Other
Listed
Companies
Relatives
up to the
4th Civil
Degree
None
None
13
Name
Citizenship
Age
Position
Robin A. King
(continuation)
6
Jesli A. Lapus
Filipino
64
Independent
Director
7
Ms. Remedios
L. Macalincag
Filipino
77
Independent
Director
Experience
• President and CEO,
Global Business Bank,
Inc. from 1997 to 2002
International Bank of
California from 1994 to
1997
Metrobank since August
2010
• Adviser, Metrobank from
1998 to 2006
• Chairman, STI Education
Services Group Inc. since
2013
• Chairman, LBP Service
Corp. since May 2012
• Director, Philippine Life
Financial Assurance
Corp. since June 2012
• Director, STI Education
System Holdings, Inc.
since 2013
• Adviser to the Board,
Radiowealth Finance
Corporation since 2013
• Director, Radiowealth
Finance Corporation from
2010 to 2013
• Chairman, MTC from
2010 to 2013
• Trustee, Asian Institute of
Management from 2010
to 2013
• Secretary, Department of
Trade and Industry 2010
• Secretary, Department of
Education from 2006 to
2010
• Congressman, 3rd District
Tarlac House of
Representatives, 1998 to
2006
• President/CEO, Land
Bank of the Philippines,
1992 to 1998
• Undersecretary,
Department of Agrarian
Reform, 1987 to 1989
• Independent Director of
Metrobank since October
2004
• Chairman/President,
Premium Equities, Inc.
since 1989
• Director, SMBC Metro
from April to November
2004
Development Bank of the
Philippines (DBP) from
1998 to 2002
Directorship
in Other
Listed
Companies
Relatives
up to the
4th Civil
Degree
Director, STI
Education
System
Holdings,
Inc. since
2013
None
None
None
14
Name
Citizenship
Age
Position
Ms. Remedios
L. Macalincag
(continuation)
8
Dr. Vicente B.
Valdepeñas, Jr.
Filipino
76
Independent
Director
Experience
• Chairman/Vice
Chairman, LGU
Guarantee Corporation
from 1998 to 2002
• Director, Megalink from
2001 to 2002
• Director, DBP-Daiwa
Securities from 1998 to
2002
2011
• Chairman and Member,
Advisory Panel,
ASEAN+3 (China, Japan,
South Korea) since May
2011
• Consultant, Bangko
Sentral ng Pilipinas (BSP)
since July 3, 2008
• Member of the Monetary
Board, BSP from 1997 to
2008
• Ex-Officio Member,
Monetary Board, BSP
from 1983 to 1986
• Member of the Study
Group by the Bank for
International Settlements
on Dynamics of Policy
Committees that included
the central banks of
Brazil, Canada, England,
European Central Bank,
Japan, Mexico, the
Philippines, Sweden and
the United States from
2007 to 2009
• Executive Director of the
South East Asian Central
Banks (SEACEN)
Research and Training
Centre at Kuala Lumpur
from 1987 to 1996
• Consultant of the Swedish
International
Development Authority
on Bank Supervision in
1990
• Consultant of Citibank on
external debt rescheduling, rationalization
of bank investment
portfolio, and public
policy analysis in 1986
• Minister of Economic
Planning and DirectorGeneral of the National
Economic and
Development Authority
(NEDA) from 1983 to
1986
Directorship
in Other
Listed
Companies
Relatives
up to the
4th Civil
Degree
None
None
15
Name
Citizenship
Age
Position
Dr. Vicente
B.
Valdepeñas,
Jr.
(continuation)
9
10
Renato C.
Valencia
Filipino
Rex C. Drilon
II
Filipino
71
Independent
Director
67
Independent
Director
Experience
• Member of Batasang
Pambansa and Chairman of
its Committee on SocioEconomic Planning and
Development from 1983 to
1985
• Deputy Minister, Ministry
of Trade and Industry from
1976 to 1983
• Administrator, National
Cottage Industry Authority
from 1982 to 1983
Metrobank since October
1998
• President and CEO, Roxas
Holdings, Inc. since
November 1, 2011
• Director, Roxas &
Company, Inc. since
October 7, 2010
• Chairman/Director,
iPeople, Inc. since
September 2, 2005
• Director, Anglo Philippine
Holdings Corporation since
March 19, 2007
• Director, House of
Investments, Inc. since
March 18, 2005
• Director, Malayan
Insurance Company, Inc.
since March 18, 2005
• Director, Vulcan Industrial
& Mining Corporation since
November 2009
Metrobank since
September 2012
FMIC since 2011
FAMI since June 2012
• Board Adviser, Institute of
Corporate Directors since
January 2013
• President/Trustee, Institute
of Corporate Directors
since March 2010
• Trustee, Institute for
Solidarity in Asia since
November 2010
• Incorporator / Director,
Uniwireless, Inc. since
2012
• Consultant / Adviser,
Carmelray Industrial Corp.
since 2012
• Vice Chairman, Iloilo
Economic Devt.
Foundation since May 2011
Directorship
in Other
Listed
Companies
Director,
Roxas &
Company,
Inc. since
October 7,
2010
None
Relatives
up to the
4th Civil
Degree
None
None
16
Name
Citizenship
Age
Position
Rex C. Drilon
II
(continuation)
11
Francisco F.
Del Rosario,
Jr.
Filipino
66
Independent
Director
12
Ms. Amelia
B. Cabal
Filipino
67
Director
Experience
• Chairman, Wainwright
Corp. since September
2011
• Director, Keyland Corp.
since September 2011
• Chairman, National
Advisory Group for Police
Transformation and
Development since 2011
• Trustee and Secretary,
Shareholders Association
of the Philippines since
2011
2013
• Director, DMCI Homes,
Inc., since 2011
• Director, Mapre Insular
Insurance Corp. since 2011
• Cabinet Member, Habitat
for Humanity Phils. since
2009
• Trustee, ABS-CBN
Foundation since 2007
• Trustee, Center for Family
Ministries since 2009
• Trustee, Repertory Phils.
Foundation since 2010
• Member, Philippine Navy
Board of Advisors since
2010
• President/CEO, Roxas &
Co., Inc. from 2006 to 2010
• Executive Vice President,
De La Salle University
System from 2002 to 2004
• Chairman/CEO, Asia
Pacific Network from 1998
to 2005
• Executive Vice President,
GSIS from 1992 to 1994
• President/Director, Cultural
Center of the Philippines,
from 1994 to 1995
• Undersecretary,
Department of National
Defense in 2005
• Vice Chairman/President
and CEO, DBP from 2010
to 2012
• Chairman, DBP from 1995
to 1998
• Trustee, Civil Aeronautics
Board from 2004 to 2005
• Director, Metrobank since
April 2012
• Director, Metrobank 2009
to 2011
• Director, PSBank in 2011
Directorship
in Other
Listed
Companies
Relatives
up to the
4th Civil
Degree
None
None
None
None
17
Name
Citizenship
Age
Position
Ms. Amelia
B. Cabal
(continuation)
13
Edmund A.
Go
14 Atty. Antonio
V. Viray
Filipino
63
Director
Filipino
74
Director
Experience
• Bank Supervisor, MBCL
since 2010
Deutsche Regis Partners,
Inc. since 2012
Ionics EMS, Inc. since
2012
Ionics, Inc. since 2012
• Director of Metrobank
since May 2007
• Director, MBCL since
December 2010
• Director for Investments,
Ateneo de Manila
University since March
2010
• Adviser, PSBank since
November 2007
• SEVP/Head of Metrobank
Treasury Group from 2000
to 2007
• Chairman, Metrobank
Bahamas from 2004 to
2010
• Chairman, ORIX Metro
Leasing and Finance
Corporation (OMLFC)
from 2003 to 2007
• Director, FMIIC-Hong
Kong from 2003 to 2007
• Consultant, PDEx on
Securities Training and
Development from 2008 to
2010
• Director, The Ritz Towers
Condominium Association,
Inc. from 2006 to 2008
• Investment-Consultant, St.
Peter Life, Inc. since
August 2011
• Director, Metrobank since
September 2012
• Of Counsel, Feria Tantoco
Robenio Law Office since
2008
• Corporate Secretary, GT
Capital since 2008
• Corporate Secretary,
Grand Titan Holdings, Inc.
since 2008
• Corporate Secretary,
Golden Treasure Holdings,
Inc. since 2008
• Chairman/President, AVIR
Development Corp. since
1993
Directorship
in Other
Listed
Companies
Relatives
up to the
4th Civil
Degree
None
None
None
None
18
Name
Citizenship
Age
Position
Experience
Directorship
in Other
Listed
Companies
Relatives
up to the
4th Civil
Degree
• Assistant Corporate
Secretary, Metrobank from
1988 to 2007
• Former General Counsel,
Metrobank from 1986 to
2003
Atty. Antonio
V. Viray
(continuation)
The Independent Directors, namely, Mr. Renato C. Valencia, Ms. Remedios L. Macalincag, Mr. Jesli A. Lapus,
Mr. Robin A. King, Dr. Vicente B. Valdepeñas, Jr., Mr. Rex C. Drilon II and Mr. Francisco F. Del Rosario, Jr.
have always possessed the qualifications, and none of the disqualifications of an independent director.
B. Executive Officers (9)
Name
Citizenship
Age
Position
1
Joshua E.
Naing
Filipino
53
Senior
Executive
Vice
President
2
Fernand
Antonio A.
Tansingco
Filipino
47
Senior
Executive
Vice
President
Experience
• Head of Metrobank’s Financial and
Control Sector since November 2013
• Metrobank Controller from October
2002 to November 2013
• Director, Metro Remittance Center,
Inc. (USA) since June 2008
• Director, Metro Remittance (Hong
Kong) Limited since January 2009
• Director, MB Remittance Center
(Hawaii), Ltd. since April 2010
• Director, GBPC from September
2009 to October 2013
• Director, CEDC from September
2009 to April 2013
• Director, Metro Remittance (Italia),
S.p.A. from May 2008 to November
2013
• Director, Metro Remittance (Spain),
S.A. from May 2009 to July 2013
• Head of Metrobank’s Financial
Market Sector since December 2013
• Head of Metrobank’s Treasury
Group since January 2007
• Adviser, Metro Remittance (UK)
Limited since February 1, 2013
• Head of Investment Marketing
Distribution Division-NBBS from
June 16, 2011 to January 1, 2013
• Head of Metrobank’s Corporate
Planning Division from May 2007 to
May 2011
• Chairman, Metro Remittance (Italia)
S.p.A. from July 1, 2010 to April 22,
2013
• Chairman, Metro Remittance (UK)
Limited from April 28, 2010 to
February 1, 2013
• Vice Chairperson, Philippine Axa
Life Insurance Corporation (PALIC)
since April 15, 2010 to present
• Chairman and Director, Metrobank
Bahamas since August 5, 2010
Relatives
up to the 4th
Civil Degree
None
None
19
Name
Citizenship
Age
Fernand
Antonio A.
Tansingco
(continuation)
3
Ms. Maritess
B. Antonio
Filipino
53
4
Eligio C.
Labog, Jr.
Filipino
58
5
Bernardito M.
Lapuz
Filipino
54
6
Ms. Corazon
Ma. Therese
B.
Nepomuceno
Filipino
52
7
Aniceto M.
Sobrepeña
Filipino
60
Position
Experience
• Director, PALIC from September
15, 2009 up to April 15, 2010
• Director, FMIIC-Hong Kong from
March 2008 to August 2009
• Senior Vice President, Head of
Global Markets and Treasurer,
Standard Chartered Bank from
August 2004 to December 2006
• Senior Vice President, Head of
Trading, Standard Chartered Bank
from April 2000 to August 2004
Executive Vice • Group Head, Metrobank’s Internal
President
Audit Group (IAG) since March 1,
2010
• Deputy Group Head, Metrobank’s
IAG from June 16, 2008 to February
29, 2010
• Chief Internal Auditor, Banco De
Oro from July 1, 2007 to June 15,
2008
Executive Vice • Head of Metrobank’s Commercial
President
Banking Group since June 1, 2012
• Head, Metrobank’s Branch Lending
Group from 2005 to May 31, 2012
• Head, Metrobank’s Account
Management Center I, II and III
from October 1, 1998 to April 1,
2005
• Director, Jaka Tagaytay Holdings.
Corp. since November 28, 2003
• Director, Northpine Land, Inc. since
December 7, 2009
• Director, Taal Land, Inc. since
November 28, 2003
• Corporate Secretary and Director of
TMBC since July 19, 2012
Executive Vice • Head of Metrobank’s Risk
President
Management Group since September
2006
• Corporate Secretary, PALIC since
November 2000
Executive
• Head, Credit Group since 2012
Vice President • Deputy Group Head, Credit Group
from 2005 to 2012
• Vice President, Operational Risk
Management of Standard Chartered
Bank from 1999 to 2005
• Vice President, Loans Review of
Security Bank from 1998 to 1999
• Area Credit Marketing Officer of
PCIBank from 1984 to 1998
Executive
• President, MBFI since May 2006
Vice President • President, MMSI since 2003
• Chairman, MTC from 2008 to 2010
• Executive Vice Chairman, MTC
from 2010 to 2011
• Vice Chairman, MTC since 2011
• Executive Director, GT-Metro
Foundation, Inc. since January 2010
• Vice Chairman, FLI since 2011
Relatives
up to the 4th
Civil Degree
None
None
None
None
None
20
Name
Citizenship
Age
Position
Aniceto M.
Sobrepeña
(continuation)
8
Ms. Vivian L.
Tiu
Filipino
53
Executive
Vice
President
9
Bernardo H.
Tocmo
Filipino
52
Executive
Vice
President
Experience
Relatives
up to the 4th
Civil Degree
• Member, Board of Trustees,
PinoyMe Foundation since 2007
• Member, Galing Pook Foundation
since 2000
• Member, International Center for
Innovation Transformation and
Excellence in Governance
(INCITEGov) since 2000
• Member, Board of Trustee,
Philippine Business for Education
since 2008
• Member, Philippine Institute of
Environmental Planners since 1995
• Head of Metrobank’s Human
Resources Management Group since
2001
• Corporate Secretary of MTC since
2004
• Head, Human Resource Division,
Equitable PCI Bank from 1988 to
2001
• Head of Metrobank’s NBBS since
February 16, 2014
• Deputy Head of Metrobank’s NBBS
from April 1, 2013 to February 15,
2014
• Director, MCC since April 19, 2003
• Head, Metrobank’s National Sales
Office and NBBS Countryside
Regions from May 2011 to March
2012
• Region Head, Metrobank’s NBBS
Visayas Region from May 2008 to
April 2011
None
None
None of the Bank’s directors and officers works with the government.
C.
Significant Employee
The above list of executive officers represent the most significant employees of the registrant.
Nomination Procedure
1.
A stockholder may submit nominations for directorial positions to the Nominations Committee.
2.
The nominating stockholder shall submit his proposed nomination in writing to the Nominations Committee,
together with the biodata, acceptance and conformity of the would-be nominee. In the case of a nominee for the
position of an independent director, the would-be nominee is also required to submit a Certification that he/she
has all the qualifications and none of the disqualifications to become an independent director.
3.
The Nominations Committee shall screen the nominations of directors prior to the submission of the Definitive
Information Statement and come up with a Final List of Candidates.
The Nominations Committee is chaired by Mr. Renato C. Valencia (an independent director) with Messrs.
Francisco C. Sebastian and Robin A. King (independent director) as members.
4.
Only nominees whose names appear in the Final List of Candidates shall be eligible for election as director.
21
Nominee Directors
Based on the Bank’s Articles of Incorporation and By-laws, the total number of directors is fourteen (14). Out of this
number, existing regulations as well as the Bank’s Corporate Governance Manual provide that at least twenty percent
(20%) but not less than two (2) members of the Board shall be independent directors.
As of the date of this report, there are seven (7) nominees for independent directors, namely, Messrs. Francisco F. Del
Rosario, Jr., Rex C. Drilon II, Robin A. King, Jesli A. Lapus, Vicente B. Valdepeñas, Jr., Renato C. Valencia, and Ms.
Remedios L. Macalincag. They were nominated by Yao Yee Heo, Judy Pua Uy, Elvira L. Andal, Nieves J. Katigbak,
Marie T. Yu, Dulce Y. Edillor, and Jeanette B. Bautista, respectively. The nominees for independent directors are not
related either by consanguinity or affinity to the persons who nominated them. Likewise, there are seven (7) nominees
for non-independent director positions, namely, Messrs. George S.K. Ty, Arthur Ty, Francisco C. Sebastian, Fabian S.
Dee, Edmund A. Go, Antonio V. Viray, and Vicente R. Cuna Jr.
The nominees, with the exception of Mr. Vicente R. Cuna Jr., are incumbent directors of the Bank. All fourteen (14)
nominees confirmed and accepted their nomination to become directors. No other nomination has been submitted to
the registrant.
Mr. Vicente R. Cuna Jr. is 52 years old and has been serving as President of PSBank (the savings bank subsidiary of
Metrobank) since April 2013 on the basis of secondment from the Parent Company. Prior to the secondment, Mr.
Cuna was the Head of the Institutional Banking Sector of Metrobank. Mr. Cuna is also an incumbent director of First
Metro Investment Corporation. He joined Metrobank in 2006 as Executive Vice President/Head of the Corporate
Banking Group. He has held various directorial positions within the Metrobank Group, including being ViceChairman of PSBank from April 2009 to April 2011. Mr. Cuna has an extensive experience in the banking and
financial services, inclusive of a 3 year-stint as Vice-President at Citibank New York from 1992 to 1995 and a 9- year
turn as Vice-President of Citibank Manila from 1995 to 2006.
For a complete background information on the other nominee directors, please refer to Item 5. Directors and Executive
Officers.
Based on a joint evaluation made by the Nominations Committee and the Corporate Governance Committee, all
nominees have the qualifications and none of the disqualifications provided by law. The evaluation was made
following the requirements of the Securities Regulation Code, the applicable regulations of the Bangko Sentral ng
Pilipinas and the Securities and Exchange Commission (including SEC Memorandum Circular No. 9, series of 2011
on the term limit of independent directors), as well as the Bank’s Corporate Governance Manual.
Legal Proceedings
To the Bank’s best knowledge and information, there are no material legal proceedings filed by or against the
registrant’s directors and executive officers during the past five years.
Certain Relationships and Related Transactions
In the ordinary course of business, the Group has loan transactions with investees and with certain directors, officers,
stockholders and related interests (DOSRI) based on BSP Circular No. 423 dated March 15, 2004, as amended.
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 the respective total equity or 15.00% of total
loan portfolio, whichever is lower, of the Bank, PSBank, FMIC and ORIX Metro.
Transactions with related parties and with certain directors, officers, stockholders and related interests (DOSRI) are
discussed in Note 31 of the audited financial statements of the Group as presented in Exhibit 3.
Others
No director has resigned or declined to stand for reelection because of disagreement with the registrant.
No director has informed the registrant in writing that he intends to oppose any action to be taken up at the Annual
Stockholders’ Meeting.
22
Item 6. Executive Compensation
2014 (Estimate)
Name and Principal Position
Salary
George S. K. Ty
Group Chairman
2
Arthur Ty
Chairman
3
Fabian S. Dee
Director and President
4
Fernand Antonio A. Tansingco
Senior Executive Vice President
5
Joshua E. Naing
Total for the President and four (4) other highest paid
executive officers and directors named above
All executive officers and directors as a group unnamed
(except the President and four other highly
compensated executive officers and directors
mentioned above)
Bonus
Other Annual
Compensation*
1
P86.98 million
P21.74 million
P15.65 million
P220.61 million
P55.15 million
P36.36 million
2013
Salary
George S. K. Ty
Group Chairman
2
Arthur Ty
Chairman
3
Fabian S. Dee
4
5
Joshua E. Naing
mentioned above)
Bonus
Other Annual
Compensation*
1
P76.57 million
P24.91 million
P16.17 million
P189.52 million
P79.93 million
P32.77 million
2012
Salary
George S. K. Ty
Group Chairman
2
Arthur Ty
Chairman
3
Fabian S. Dee
4
Vicente R. Cuna, Jr.
Executive Vice President
5
Executive Vice President
mentioned above)
Bonus
Other Annual
Compensation*
1
*
P64.50 million
P23.44 million
P20.80 million
P165.07 million
P72.42 million
P41.01 million
Inclusive of directors’ per diem amounting to P31.44 million, P30.08 million and P25.22 million as of December 31, 2014, 2013,
and 2012, respectively.
23
The directors receive fees, bonuses and allowances that are already included in the amounts stated above. Aside from
the said amounts, they have no other compensation plan or arrangement with the registrant. The directors receive
compensation based on their banking or finance experience and their attendance in the meetings of the board and the
committees where they are members or chairs of.
The executive officers receive salaries, bonuses and other usual cash benefits that are also already included in the
amounts stated above. Aside from the said amounts, they have no other compensation plan or arrangement with the
registrant.
There are no warrants or options held by the registrant’s officers and directors.
Item 7. Independent Public Accountants
SyCip Gorres Velayo & Co., CPAs (SGV) has been the external auditors of the Bank since 1962. Representatives of
SGV are expected to be present at the stockholders meeting and will have the opportunity to make a statement if they
desire to do so and will be available to answer appropriate questions.
Mr. Aris C. Malantic, SGV Partner, reviewed/audited the Group’s financial statements for the years ended December
31, 2013 and 2012. In compliance with the amended SRC Rule 68 (3) (b) (ix), the signing partners are rotated after
every five years reckoned from the year 2002.
The Bank intends to retain SGV as its external auditors for the year 2014 and is submitting the same to the
stockholders for ratification as endorsed by the Audit Committee with the approval of the Board of Directors.
C. OTHER MATTERS
Proposed Action
1.
Approval of the minutes of the annual meeting of stockholders held on April 15, 2013.
i.
Call to Order and Certification of Quorum. The meeting was called to order by Chairman Arthur Ty at 4:00 o’clock in the
afternoon. The Corporate Secretary, Mr. Alfred Vy Ty, certified that there were 1,609,842,467 common shares actually
present in person or by proxy, out of the 2,111,386,117 common shares outstanding. This constituted 76.246 % of the
outstanding capital stock.
ii.
Approval of the minutes of the annual meeting of stockholders held on April 25, 2012
(Voting results: 76.093% voted in favor, .202% abstained, and 0% voted against)
iii. President’s Report and Open Forum. The Bank’s President, Fabian S. Dee, rendered his annual report for 2012.
The floor was open to questions and comments from the stockholders.
During the open forum, Mr. Philip Turner, a long-time stockholder, congratulated the Bank for the 40% increase in
earnings year-on-year, and asked whether this would translate to dividends. Chairman Ty replied that one of the reasons
for the strong earnings is the Bank’s sale of certain assets in anticipation of the BSP’s Basel 3 capital requirements taking
effect beginning 2014. Through 2013, the Bank would continue to generate more profits to make its capital Basel 3compliant.
Mr. Turner then asked about the extent of the Bank’s future business activities in partnership with Japanese companies,
considering that the Bank had divested its shares in Toyota. President Dee replied that Metrobank had just recently
partnered with Japan Bank for International Cooperation (JBIC) for the development and support of Japanese SMEs
establishing offices in the Philippines. This would be an opportunity for the Bank’s lending business and would also create
local jobs.
Mr. Turner then shifted to the issue of how Metrobank sees newly-listed Philippine Business Bank in competition with
Metrobank subsidiary, PSBank. Chairman Ty confirmed that competition had always been present in the industry,
regardless of a bank’s size, and is driven by each bank’s risk appetite. He expects PSBank to continue to do well.
Another stockholder then stood up and asked the President to comment on statements by analysts that Philippine banks
would not be able to sustain the margins in 2013 as compared to 2012.
President Dee replied that the 2012 performance would show that the Bank was able to mitigate the effects of declining
interest rates. Metrobank’s strategies had always been to increase its CASA deposits, and to increase its capabilities,
products and services that would generate fee-based income. With this two-pronged approaches, the Bank hopes to
continue bucking the industry trend and still show positive margins.
24
The next question from the floor was on the Bank’s policy towards hiring homosexuals or other members of the third sex.
President Dee replied that the Bank’s hiring process does not discriminate in terms of gender preference. Metrobank
always looks at an applicant’s expertise and capabilities as basis for deciding whether an employment opportunity exists
within the company.
Going back to the sale of Toyota shares, Mr. Naing answered a stockholder’s question on how much profit was made. He
said the first tranche of the sale generated a gross profit of P4.2 Billion for the Parent Company. The second and last
tranche of the sale made in January 2013 resulted in the same amount of gross profit.
A follow-up query was raised about how Metrobank’s future operating income would be affected by the divestment of equity
in Toyota. The Controller, Mr. Naing, replied that the impact would not be as significant as the sales proceeds are expected
to generate investment income.
The last question was on the amount of trading gains in FX and other treasury activities for 2012.
The President replied that the 2012 Income Statement showed that trading gains amounted to P5.485 Billion while foreign
exchange profits equaled P3.636 Billion.
There being no other questions from the stockholders, the Chairman moved to the next item in the Agenda.
iv. Ratification/Approval of the following by Stockholders representing at least 2/3’s of the outstanding capital stock.
v.
a)
Amendment of the Articles of Incorporation on the Increase of Authorized Capital Stock from P50 Billion to P100
Billion, with the increase of P50 Billion to be divided into 1.5 Billion Common Shares with a par value of P20 per
share; and 1 Billion Preferred Shares with a par value of P20 per share, which shall be non-voting except as provided
by law and shall have preference over common shares in the distribution of dividends, and with such other features as
may be determined by the Board of Directors (BOD) and to the extent permitted by applicable law. (Common shares
shall be voting and shall earn dividends provided that dividends due to preferred shares, if there is any outstanding,
shall be paid before any dividend is paid to holders of common shares. Pursuant to the Articles of Incorporation,
stockholders shall have no pre-emptive rights to subscribe to any or all issues or disposition of any class of shares.)
(Voting results: 67.48% voted in favor, 2.468% abstained, and 6.347% voted against)
b)
Declaration of 30% Stock Dividends to be issued to fund the increase in the authorized capital stock.
(Voting results: 75.837% voted in favor, 0% abstained, and .458% voted against)
Ratification of Corporate Acts
Stockholders ratified all acts, transactions and resolutions of management and the BOD done in the ordinary course of
business from April 25, 2012 until April 15, 2013, including, among others, the approval of loans, investments, new Bank
products and services and related party transactions.
(Voting results: 75.129% voted in favor, 1.166% abstained, 0% voted against)
vi.
Election of Directors
Upon an explanation made by Mr. Renato C. Valencia, Chairman of the Nominations Committee, that the Nominations
Committee and Corporate Governance Committee chaired by Ms. Remedios L. Macalincag had jointly evaluated the
qualifications of all nominees to the BOD, and that the Committees found that the nominees had all the qualifications and
none of the disqualifications prescribed by law and regulations, and that out of the fourteen (14) nominees, seven (7) were
nominated as independent directors which was higher by five than the minimum required by regulations, the stockholders
then proceeded to elect the following directors:
1)
2)
3)
4)
5)
6)
7)
Dr. George S.K. Ty
Mr. Francisco C. Sebastian
Mr. Arthur Ty
Mr. Fabian S. Dee
Mr. Jesli A. Lapus*
Mr. Renato C. Valencia*
Ms. Remedios L. Macalincag*
8)
9)
10)
11)
12)
13)
14)
Dr. Vicente B. Valdepeñas, Jr.*
Mr. Robin A. King*
Mr. Rex C. Drilon II*
Mr. Francisco F. Del Rosario, Jr.*
Mr. Edmund A. Go
Atty. Antonio V. Viray
Ms. Amelia B. Cabal
* Independent Directors
(Voting results: Each director received between 73.57% to 74.83% vote in favor of his/her election. Between 0% to
.55% abstained. Between .03% to 1.1% voted against).
vii. Election of External Auditors
Upon motion duly made and seconded, the stockholders re-elected SGV & Co. as the issuer’s external auditors for 2013.
(Voting results: 76.123% voted in favor, .113% abstained, .060% voted against)
PART I – BUSINESS
DESCRIPTION OF BUSINESS
1.
Business Development
Metropolitan Bank & Trust Company (“Metrobank” or “the Bank”) was incorporated on April 6, 1962 by a group of
Filipino businessmen to provide financial services to the Filipino-Chinese community. Since its formation, the Bank has
diversified its business, and to date provides a broad range of banking and collateral services to all sectors of the
Philippine economy.
The Bank opened its first office in Binondo, Manila on September 5, 1962. Within a year, the Bank opened its second
branch in Divisoria, Manila. Soon after, the Bank started expanding outside Manila with the opening of its first
provincial branch in Davao. In 1975, the Bank rolled out its first international branch in Taipei, followed by offices in
New York, Guam, Hong Kong, and Tokyo towards the early 1980s. Initially, the role of the Bank’s foreign offices was
to tap expanding Overseas Filipino Workers (OFW) remittance business and to complement its corresponding branch
network. This strategy proved successful as the OFW market grew strongly and the political turbulence in the
Philippines made access to foreign exchange difficult. It was during this period that the Bank started its Foreign
Currency Deposit Unit (FCDU) operations. The Philippine Central Bank authorized Metrobank to operate its FCDU on
April 15, 1977.
In November 1980, the Securities and Exchange Commission (SEC) approved and certified the listing of 500,000
common shares of Metrobank’s capital stock. On February 26, 1981, Metrobank’s common shares were listed on the
Makati Stock Exchange Inc. and the Manila Stock Exchange, (which unified and now The Philippine Stock Exchange,
Inc. or PSE) with the trading symbol of MBT.
On August 21, 1981, Metrobank became one of the first to be granted a universal banking license by the Philippine
Central Bank, now Bangko Sentral ng Pilipinas (BSP). This license allowed the Bank to engage in “non-allied
undertakings”, which include automobile manufacturing, travel services and real estate, as well as finance-related
businesses such as insurance, savings and retail banking, credit card services and leasing.
The original Certification of Incorporation of the Bank was issued by the SEC on April 6, 1962 for a 50-year corporate
term. On March 21 and November 19, 2007, the Board of Directors (BOD) of the Bank and the SEC, respectively,
approved the extension of its corporate term for another 50 years or up to April 6, 2057.
On August 13, 2013, the SEC approved the amendment of the Articles of Incorporation of the Bank for the purpose of
increasing its authorized capital stock from P50 billion to P100 billion composed of 4.0 billion common shares and 1.0
billion non-voting preferred shares, each with a par value of P20 per share. The Bank declared a 30% stock dividend
equivalent to 633.4 million common shares (approved for listing by PSE on September 16, 2013) which was applied as
payment for the required minimum 25% subscription to the increase in authorized capital stock. Total outstanding
shares increased to 2,744,801,066 after the stock dividend.
2.
Business of Registrant
Services/Customers/Clients
Metrobank offers a complete range of commercial and investment banking services. The Bank’s customer base covers
a cross section of the top Philippine corporate market. The Bank has always been particularly strong in the middle
market corporate sector, a significant proportion of which consists of Filipino-Chinese business.
The Bank’s principal business activities involve deposit-taking and lending, trade finance, remittances, treasury,
investment banking and thrift banking. The Bank is also a major participant in the Philippine foreign exchange market.
It is accredited as a Government Securities Eligible Dealer (GSED) and has played an active role in the development of
the domestic capital markets.
The Bank provides investment banking services through First Metro Investment Corporation (FMIC) and retail banking
through Philippine Savings Bank (PSBank) and Metrobank Card Corporation (MCC).
2
Contribution to Sales/Revenues
The net interest income derived from lending, investment and borrowing activities represents 47.60%, 51.75% and
58.23% of the Group’s revenue net of interest and finance charges in 2013, 2012 and 2011, respectively. Other
operating income (consisting of service charges, fees and commissions; net trading and securities gains; net foreign
exchange gain; gain on sale of investments in an associates; gain on sale of non-current asset held for sale; leasing
income; profit from assets sold; income from trust operations; dividend income; and miscellaneous income) and share
in net income of associates and a joint venture account for 52.40%, 48.25% and 41.77% of the Group’s revenue net of
interest and finance charges in 2013, 2012 and 2011, respectively.
Contribution of Foreign Offices
The percentage contributions of the Group’s offices in Asia, the United States and Europe to the Group’s revenue, net
of interest and finance charges, and external net operating income for the years 2013, 2012 and 2011 are as follows:
Offices in
Year
Asia
(Other than
Philippines)
2013
2012
2011
2013
2012
2011
2013
2012
2011
United States
Europe
Percentage Contribution to
External Net
Revenue, Net
Operating Income
2.26
2.48
2.82
3.00
3.62
3.93
0.56
0.65
0.64
0.70
0.81
0.88
0.14
0.17
0.25
0.27
0.40
0.44
Significant Subsidiaries
1. First Metro Investment Corporation (FMIC)
FMIC is an investment house incorporated in the Philippines with principal place of business at 45th Floor, GT
Tower International, Ayala Avenue corner H.V. dela Costa Street, Makati City. On September 22, 2000, FMIC was
merged with Solidbank Corporation (Solidbank) with Solidbank as the surviving entity and subsequently renamed
as First Metro Investment Corporation. FMIC’s shares of stock (originally Solidbank) were listed in the PSE on
October 25, 1963 and were subsequently delisted effective December 21, 2012. The company is a 99.23% owned
subsidiary of Metrobank.
FMIC is primarily engaged in investment banking and has a quasi-banking license. It has four Strategic Business
Units such as:
• Investment Banking Group - manages the investment banking business of the company consisting of
underwriting, financial advisory/consultancy, debt/equity syndication/origination/project financing.
• Financial Markets Group - shall perform proprietary trading of financial securities and equities and
distribution of financial instruments; and manage the liquidity and funding requirements of FMIC.
• Investment Advisory and Trust Group - provides mainly investment advisory services primarily aimed to
create wealth to individuals and institutions including retirement funds and pension funds advisory, as well as,
mutual funds advisory. It may also accept and manage trust, investment management activities and other
fiduciary business that the unit, having acquired a full trust license, can accept and manage.
• Regional Business Development Division - explores business opportunities and networks with market players
in the Asian region. The Division originates business deals for the Strategic Business Units of FMIC and its
key subsidiaries and works closely with these units in the execution of these offshore-originated deals. It
undertakes coverage and relationship building with clients and business partners.
FMIC’s principal products and services are as follows:
• Underwriting - As a leading investment banking institution in the country, FMIC regularly participates in the
underwriting of private debt and equity flotation. FMIC’s core competence in tapping the capital market and
huge capital accounts, as well as wide distribution capability through the Metrobank branch network, is an
enviable advantage that enables FMIC to lead major underwriting activities.
3
• Syndication - Syndicated loans remain as one of the primary lending vehicles for borrowers to finance major
business operations with heavy financial requirements. Its flexibility and innovative nature makes it a highly
attractive funding technique for borrowers, applicable over a broad mix of industries. Financial institutions
originate and arrange these loans for these large borrowers on a consolidated basis. Since secondary market
participation is becoming more and more common-place, smaller capitalized banks are seeking greater return
on their assets as they participate in credit previously outside their pricing or relationship reach.
• Project Financing - FMIC also advises and arranges the financing of specific projects which require huge
capital outlay. Its services in this particular area of investment banking activity normally involve formulating
creative strategies and techniques for the structuring of appropriate financial package to address the funding
requirements of the project.
• Government Securities Dealership - As an eligible government securities dealer, FMIC participates in the
regular auction of government debt instruments. It also taps the secondary market to augment our
government securities trading portfolio for it is heavily into the trading of this particular type of security.
FMIC capitalizes on its wide distribution capability to be able to reach out to the varied clientele of the
Metrobank Group.
• Commercial Paper Dealership - As part of its participation in the underwriting of various private debt issues,
FMIC also distributes and sells commercial papers floated by large and prime corporations.
• Financial Advisory or Consultancy - In addition to extending financial assistance, FMIC renders fee-based
advisory (technical and management) services to clients with regard to investments in the following: debt or
equity instruments, statement of financial position or statement of income items, investment in real estate,
expansion, consolidation, mergers or acquisitions of business activities.
• Investment Advisory - In investment advisory, FMIC offers institutional clients access to fixed income, equity
and dollar investments, as well as FMIC’s research and trading capabilities. The target markets are companies
and high net-worth individuals who neither have the time nor skill to look after their specialized funds.
• Money Market Placements - FMIC offers money market instruments such as treasury bills, fixed income
instruments, commercial papers, promissory notes (PNs) and collateralized PNs or repurchase agreements.
These are short-term investments with maturities ranging from 1 day to 1 year.
• Trust Operations - FMIC offers non-traditional trust products and investment and portfolio management
services through its Trust Division. FMIC's venture into trust business, which was meant to complement the
Bank's existing trust business, focuses primarily on a wide base of fund-rich investors with longer-term
investment and fund management solutions. The Bank's trust business, on the other hand, offers more
traditional trust products such as retirement fund management and estate planning.
Significant Subsidiaries and Associates of FMIC:
• First Metro Securities Brokerage Corporation (FMSBC), a wholly-owned subsidiary, was incorporated in the
Philippines on October 16, 1987 to engage in the trading of or otherwise dealing in stocks, bonds, debentures
and other securities or commercial papers and rendering financial advisory services. It started commercial
operations in June 1994. FMSBC is a member of the PSE. FMSBC serves both institutional and retail
clients. Since October 2006, FMSBC has put in place an online stock trading facility where clients can trade
equities by simply logging on to www.firstmetrosec.com.ph.
• PBC Capital Investment Corporation (PBC Capital), a wholly-owned subsidiary, was incorporated on March
1, 1996 and started commercial operations on March 8, 1996. Metrobank acquired PBC Capital as part of the
acquisition of the Philippine Banking Corporation. It was incorporated primarily to perform basic investment
banking activities, such as equity and debt underwriting, loan arrangement and syndication, financial advisory
services and other corporate finance work.
• SBC Properties, Inc. (SPI), a wholly-owned subsidiary, was incorporated in the Philippines and was
registered with the SEC on June 27, 1997 primarily to engage in the acquisition, development, lease and sale
of real properties intended for residential, commercial or industrial use.
• Prima Ventures Development Corporation (PVDC) (formerly Prima Estate Realty Corporation), a holding
company, is a wholly-owned subsidiary registered with SEC on January 31, 1978. On November 3, 2010, it
sold 50.0% of its 60.0% ownership in Travel Services, Inc. (formerly, First Metro Travel, Inc.), which is
engaged in the general business of travel services both domestic and international.
• FMIC Equities, Inc. (FEI), a wholly-owned subsidiary, was incorporated on November 9, 2001 to acquire,
invest in, own, control, use, lease, sell or otherwise dispose of any and all kinds of property, businesses and
enterprises. On February 27, 2012, the BOD of FEI approved the shortening of its corporate life from 50
years to 11 years from the date of its incorporation.
4
• Resiliency (SPC), Inc., a wholly-owned subsidiary, was registered with the SEC as a financial holding
company on June 22, 2009 primarily to engage in the securitization of assets which shall include, but not
limited to, receivables, mortgage loans and other debt instruments.
• First Metro Global Opportunity Fund, Inc. (FMGOF), formerly First Metro Save and Learn Global Currency
Fund, Inc., a wholly-owned subsidiary, was incorporated on December 23, 2009 to generally engage and to
carry on the business of an open-ended investment company in all the elements and details thereof.
• First Metro Asset Management, Inc. (FAMI), was incorporated on April 21, 2005 to manage, provide and
render management and technical advice/services for partnerships, corporations and other entities. FAMI is
registered and authorized by the SEC to act as an investment company adviser and manager, administrator,
and principal distributor of First Metro Save and Learn Fixed Income Fund, Inc., First Metro Save and Learn
Equity Fund, Inc., First Metro Save and Learn Balanced Fund, Inc., First Metro Save and Learn Dollar Bond
Fund, Inc., First Metro Global Opportunity Fund, Inc. and First Metro Philippine Equity Exchange Traded
Fund, Inc. FAMI is 70.0% owned by FMIC, while 30.0% is shared equally by the Catholic Educational
Association of the Philippine (CEAP) and by the Marist (Marist Brothers) Development Foundation.
• First Metro Save and Learn Dollar Bond Fund, Inc. (SALDBF), formerly First Metro Save and Learn Money
Market Fund, Inc., 99.36% owned by FMIC, was incorporated on November 4, 2008. SALDBF is an openend mutual fund engaged in selling its capital to the public and investing the proceeds in selected high grade
stocks and fixed–income securities. It can also redeem its outstanding capital stock at net asset value per
share at any time upon redemption of its investors.
• First Metro Philippine Equity Exchange Traded Fund, Inc. (FMETF), 85.54% owned by FMIC, was
incorporated on January 15, 2013 and subsequently registered under the Philippine Investment Company Act
and the Securities Regulation Code as an open-end investment company engaged in the business of investing,
reinvesting and trading in and issuing and redeeming its shares of stock in creation unit in exchange for basket
of securities representing an index.
• Aurora Towers, Inc. (ATI), 50.0% owned by FMIC, was incorporated on May 12, 1982. It is a joint venture
undertaking by FMIC and Progressive Development Corporation. ATI owns condominium units in Cubao.
• Cathay International Resources Corporation, 35.0% owned by FMIC, was incorporated on April 26, 2005
primarily to acquire by purchase or exchange and use for investment or otherwise sell or transfer properties.
It owns Marco Polo Cebu Plaza Hotel.
• Charter Ping An Insurance Corporation (CPAIC), 33.33% owned by FMIC, was incorporated in December
1987 and has been a major player in the non-life insurance industry for the past years. As of December 31,
2012, based on the rankings published by the Insurance Commission, CPAIC ranked no. 6 and no. 3 among
the country’s top 10 non-life insurance companies in terms of gross premiums and assets, respectively. On
January 27, 2014, FMIC sold its ownership in CPAIC to GT Capital as discussed in Note 36 of the audited
financial statements of the Group as presented in Exhibit 3.
• Philippine Axa Life Insurance Corporation (“AXA Philippines”) (PALIC), 28.18% owned by FMIC, is a life
insurance company incorporated in November 1962. Year 2013 is the 13th year of the joint venture between
Metrobank and the AXA Group (the world’s largest insurance company). PALIC affirmed its position as a
major player and formidable new entrant in the life insurance industry. As of December 31, 2012, it ranked
no. 4 and no. 5 based on premium income and total assets owned, respectively, based on Insurance
Commission.
• Dahon Realty Corporation, (DRC), 20.0% owned by FMIC, was incorporated in May 1989. Its primary
purpose is to purchase, lease, develop and manage any real estate or interest acquired therein, and to
mortgage, sell, lease or otherwise dispose of any land, building or other structure without engaging in the
subdivision business. DRC leases its property to Honda Philippines, Inc. for the latter’s manufacturing plant
and warehouses.
• First Metro International Investment Company Ltd. (FMIIC), 20.0% owned by FMIC, was incorporated in
Hong Kong in 1972.
• Orix Metro Leasing and Finance Corporation (OMLFC), 20.0% owned by FMIC, was incorporated and
registered with SEC on June 28, 1977. Its primary purpose is to engage in financing by leasing of all kinds of
real and personal property, extending credit facilities to consumers and enterprises by discounting commercial
papers or accounts receivable, or by buying or selling evidences of indebtedness, and underwriting of
securities.
• Skyland Realty Development Corporation (SRDC), 20.0% owned by FMIC, was incorporated on November
6, 1974 to handle the development of Skyland Plaza in Makati. SRDC is an inactive company.
5
• Lepanto Consolidated Mining Company (LCMC), 16.93% owned by FMIC, was incorporated in 1936 and
until 1997 was operating an enargite copper mine located in Mankayan, Benguet. LCMC shifted to gold
bullion production in 1997 through its Victoria Project. LCMC continues to produce gold from its Victoria
and Teresa operations, both located in Mankayan, Benguet.
• First Metro Save and Learn Equity Fund, Inc. (SALEF), 16.31% owned by FMIC, was registered in SEC on
May 27, 2005 and registered in Philippine Investment Company Act on September 6, 2005 as an open-end
mutual fund primarily engaged in selling its capital and investing the proceeds in selected stocks with strong
balance sheets and attractive valuations.
• First Metro Save and Learn Balanced Fund, Inc. (SALBF), 14.52% owned by FMIC, was incorporated in the
Philippines on January 29, 2007 and subsequently registered under the Philippine Investment Company Act
last May 10, 2007 to engage in the trading of stocks and fixed income securities.
• First Metro Save and Learn Fixed Income Fund, Inc. (SALFIF), 11.43% owned by FMIC, was incorporated
in the Philippines on June 3, 2005 and subsequently registered under the Philippine Investment Company Act
on September 6, 2005. SALFIF is an open-end mutual fund company engaged in selling its capital to the
public and investing the proceeds in selected high grade fixed income generating instruments, such as bonds,
commercial papers and other money market instruments. It stands at any time to redeem its outstanding
capital stock at net asset value per share.
2. Philippine Savings Bank (PSBank)
PSBank was incorporated on June 30, 1959 to primarily engage in savings and mortgage banking. PSBank is the
country’s first publicly listed thrift bank. Its principal office is located at the PSBank Center, 777 Paseo de Roxas
corner Sedeno Street, Makati City.
It has outpaced some of its key competitors and is the country’s second largest thrift bank in terms of assets. It
mainly caters the retail and consumer markets and offers a wide range of products and services such as deposits,
loans, treasury and trust. PSBank’s network comprises 224 branches and 551 ATMs in strategic locations
nationwide.
PSBank has a 25% interest in Toyota Financial Services Philippines Corporation (TFSPC). It also has a 40%
interest in Sumisho Motor Finance Corporation (SMFC), a partnership with Sumitomo Corporation of Japan.
TFSPC and SMFC are not listed in the stock exchange.
3. Metrobank Card Corporation (A Finance Company) (MCC)
MCC (formerly Unibancard Corporation [Unicard]), was incorporated on August 6, 1985. It is one of the pioneers
in the credit card industry. MCC was created in June 2002 as the result of the three-way merger of the credit card
operations of Unicard, AB Card Corporation and Solidcard Products Corporation. In October 2003, Metrobank
went into a credit card joint venture with Australia New Zealand Banking Group Ltd. (ANZ). ANZ Funds Pty Ltd.,
a wholly-owned subsidiary of ANZ Bank, acquired 40% equity in MCC, while Metrobank holds 60%. The entry of
ANZ into MCC provides MCC access to the technology platform and innovations needed for a more effective
broadening of its card business.
MCC aims to be the leading payment solutions provider in the Philippines. It is dedicated to its customers,
committed to its people and their development, steadfast in fulfilling its responsibility to the community, and
consistent in delivering maximized shareholders’ value.
MCC posted a solid P2.0 billion net profit after tax in 2013, which is 17% higher than prior year. MCC also grew its
customer base to 1,315,949 cards-in-force which yielded a 11% growth in billings and 18% growth in receivables.
Given that it has performed better than industry average, MCC improved its industry ranking from 2nd to 1st in terms
of card base, maintained 2nd ranking in receivables and 3rd ranking in Billings by end of 2013.
MCC continued to dominate in the premium card segment with sustained premium perks for the Metrobank
Platinum MasterCard and Metrobank World MasterCard in partnership with premiere restaurant and entertainment
partners. Customers’ purchasing power continued to be enhanced with strategic rewards tie-ups with key merchant
partners, 0% installment promotions, as well as the sustained availability of Cash2Go and Balance Transfer.
Even with its growth in card billings and receivables, MCC maintained its asset quality with a 4.83% past due rate,
better than the industry average of 5.52%. MCC continues to be an industry leader in portfolio management and
proactive credit and collections strategies. Meanwhile, its merchant acquiring business line registered P64.5 billion
in billings, representing a 19% increase from 2012. This major accomplishment catapulted MCC from 3rd to 2nd
ranking in the acquiring business. With an expected booming economy and healthy consumer spending in 2014,
MCC will continue to provide its customers better products, bigger rewards, and enhanced customer experiences to
increase its market share as it looks forward to achieving more milestones!
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4. ORIX METRO Leasing and Finance Corporation (ORIX Metro)
ORIX Metro was incorporated in the Philippines and was registered with the SEC on June 28, 1977. Its primary
purpose is to engage in financing by leasing all kinds of real and personal property; extending credit facilities to
consumers and enterprises by discounting commercial papers or accounts receivable, or by buying or selling
evidences of indebtedness; and underwriting of securities.
On January 12, 2007, the BSP lifted the moratorium on the granting of quasi-banking licenses to investment houses
and finance companies. On August 24, 2007, ORIX Metro was authorized by the BSP to engage in quasi-banking
functions. ORIX Metro engaged in quasi-banking functions effective January 1, 2008 as agreed to by the BSP
subject to certain conditions.
ORIX Metro and its subsidiaries' ultimate Parent Company is Metrobank. As of December 31, 2013, ORIX Metro
is 40% and 20% owned by Metrobank and FMIC, respectively. The registered office address of ORIX Metro is at
21st Floor, GT Tower International, Ayala Avenue corner H.V. dela Costa Street, Makati City.
5. Metropolitan Bank (China) Ltd. (MBCL)
MBCL is a wholly-owned subsidiary of Metrobank established in the People’s Republic of China with the approval
of China Banking Regulatory Commission (CBRC) on January 14, 2010. In accordance with the “Regulations of
the People’s Republic of China on the Administration of Foreign-Funded Bank”, MBCL is licensed to carry out all
of the following businesses in foreign currency and provides RMB businesses to non-Chinese citizens such as:
accepting deposits; granting short-term, medium-term and long-term loans; handling acceptance and discount of
negotiable instruments; buying and selling government bonds, corporate bonds and non-stock negotiable securities
in other foreign currency; providing L/C services and guaranties; handling domestic and overseas settlement; buying
and selling foreign currencies either for itself or on behalf of its clients; selling insurance on commission basis;
providing bank cards; inter-bank funding; providing service of safety deposit box; providing credit standing
investigation and consultation service; and other business activities approved by CBRC.
MBCL started its operations on March 2, 2010. Its headquarters is located in Nanjing, Jiangsu Province. It is the
first wholly-foreign-owned bank incorporated in Jiangsu Province, China. Former Metrobank Shanghai Branch and
Pudong Sub-Branch were absorbed by MBCL. Its branches are MBCL Nanjing Branch, MBCL Shanghai Branch
and MBCL Pudong Sub-Branch, MBCL Changzhou and MBCL Quanzhou Branch.
6. Metropolitan Bank (Bahamas) Limited
This is a wholly-owned subsidiary of Metrobank based in The Bahamas. It holds 26.74% of the outstanding capital
stock of FMIIC based in Hong Kong.
7. First Metro International Investment Company Limited
FMIIC is a Hong Kong-registered company incorporated in 1972. It was engaged mainly in deposit-taking, loans,
and remittances from 1976 until 2008 when it retained the investment activity. Metrobank acquired majority shares
in FMIIC in 1978. Currently, Metrobank owns 53.26%, Metrobank Bahamas owns 26.74%, and FMIC owns the
remaining 20%.
8. Metro Remittance (Hong Kong) Limited
This is a wholly-owned subsidiary of Metrobank which was incorporated in Hong Kong in October 1994.
Complementing the bank’s international branches, offices and subsidiaries, its six (6) branches and 27 active
remittance agents all over Hong Kong provide easy access to remittance services to OFWs in the region.
9. Metro Remittance (Singapore) Pte. Ltd.
Established in April 2004, this is a wholly-owned remittance center of Metrobank conducting money-changing
businesses and providing remittance services to Filipinos and other nationals in Singapore. The Company started
commercial operations on November 12, 2004.
10. Metro Remittance (USA), Inc. (MR USA)
The Company was established to pursue Metrobank’s plan of expanding its remittance operations in California,
U.S.A. In order to have a stronger presence in Southern California, the Daly City branch was moved to Artesia City
on July 15, 2011. At present, MR USA has 37 agent locations all over California.
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11. Metro Remittance Center, Inc. (MRCI)
MRCI, formerly known as Asia Money Link Corporation, was incorporated under the General Corporation Law of
the State of Delaware on November 12, 1992 for the purpose of providing money transmission services to its
clients. It is a wholly-owned subsidiary of Metrobank.
MRCI along with Metrobank, has been offering money transmission services to the Filipino-American market in the
New York area for several years. MRCI offers inexpensive, prompt and reliable money transmission services
through its licensed operations in the U.S., fully supported by its parent and by the extensive bank and branch
network in the Philippines.
MRCI officially started doing business on February 8, 1997 after obtaining the necessary regulatory approvals. The
Company is licensed to do business in New York, New Jersey, Illinois and Nevada. MRCI’s main office is located
at 69-11 C Roosevelt Avenue, Woodside, New York, 11377. Its subsidiaries are:
•
Metro Remittance (Canada), Inc.
The Company was established to further strengthen the Bank's presence and address the remittance
needs of the growing number of Filipinos in Canada. Its branches are MRCI-Vancouver and MRCIToronto which opened on August 1 and November 6, 2006, respectively.
•
MB Remittance Center (Hawaii), Ltd.
The Company was established in 2002 and acquired
provides money transmission services to Filipinos in Hawaii.
by
MRCI
in
2005
which
12. Metro Remittance (UK) Limited (MR UK)
Metrobank acquired all of the outstanding shares of MR UK in May 2004. It was incorporated on September 24,
2002 in England as a private limited company and commenced trading at its premises at Kensington Church Street
in London on June 4, 2003. The Company provides fast, secure and affordable money transmission services to the
Philippines. It utilizes on-line, real-time computerized links with Metrobank, which completes the funds delivery
processes to named beneficiaries.
13. Metro Remittance (Japan) Co. Ltd. (MR Japan)
MR Japan is a wholly-owned subsidiary of Metrobank. It was incorporated in Yokohama, Japan on May 8, 2013. It
started its remittance operations on October 31, 2013. The Company was established to expand the Bank’s presence
as well as to strengthen its remittance business in Japan.
Distribution Methods of Products and Services
To remain strongly positioned and retain its leadership, Metrobank continued to upgrade and expand its distribution
channels:
1.
Branches
Metrobank ended 2013 with 632 branches as compared to 608 in 2012. Selected branches in Metro Manila and the
countryside were relocated to maximize visibility and greater reach to its clients. Branch renovations were done
and continued to reflect the Bank’s customer centric and sales oriented focus to its existing and potential clients.
2.
Remittance Centers
To further expand the remittance business of the Bank and its presence in the international market, remittance
alliances were established between the Bank and several well-established businesses in the country.
International Remittance Tie-Ups
FIL-EXPRESS INTERNATIONAL REMITTANCE & DELIVERY SERVICES is a newly formed corporation and is
registered with BSP as a remittance agent on December 12, 2012. Its main office is located at Room 604
Annapolis Tower Condominium, 43 Annapolis Street, Greenhills, San Juan City. The remittance arrangement with
Fil-Express was implemented on July 16, 2013.
LARI EXCHANGE is a foreign corporation with principal office at P.O. Box 988, Liwa Street, Abu Dhabi, United
Arab Emirates. It is licensed by the Central Bank of UAE to provide money remittance services. The remittance
arrangement with Lari Exchange officially started on November 2013.
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OUR YES CORPORATION is a BSP accredited Remittance Agent which was incorporated in 2004 with the
mission to service the remittance needs of the Overseas Filipinos for distribution to their loved ones in the
Philippines.
PNG REMITTANCE SERVICES is a sole proprietorship accredited by the Bangko Sentral ng Pilipinas in March
2009 as a Remittance Agent. PNG Remittance Services was established in 2006.
MERCHANTRADE ASIA SDN BHD is a Malaysian based company that was established on November 11, 1996
and was officially permitted by Bank Negara Malaysia to accept money remittances on February 8, 2007.
EZ MONEY EXPRESS SDN BHD was incorporated on August 27, 2007 under the Malaysian Companies Act, 1995
and became an authorized remittance company licensed by Bank Negara Malaysia (the Central Bank of Malaysia)
in July 2008.
UAE EXCHANGE MALAYSIA SDN. BHD. aka Fast Remit SDN. BHD. is an overseas branch of UAE Exchange,
Abu Dhabi. The company was given the Money Service Business License by Bank Negara Malaysia in 2011 and
started operations in Malaysia since then.
WELL CHAIN INTERNATIONAL CO. LTD. is a licensed remittance and brokerage company based in Taiwan. It
offers manpower and remittance services to Overseas Filipino Workers in Taiwan as well as other nationalities.
Well Chain was established in September 1999.
NONGHYUP BANK (NH Bank) is a specialized bank in Korea established under the National Agricultural
Cooperative Federation (NACF) Act. It was launched in March 2012 as a result of re-organization of NACF
following the Government’s decision to carry out the Government’s Agricultural financing activities effectively
and because of this NH Bank gets an extremely high support from the Korean Government. NACF was
established in 1961 to act as the government policy arm to implement its agricultural policy.
DIAMOND LEAF LIMITED (doing business as Moneymet) is a licensed financial service company in New
Zealand. It was incorporated with the Registrar of Companies, New Zealand on November 23, 2012.
JC INTERNATIONAL was incorporated and registered with the Registrar of Companies in New Zealand as a
money transfer service on November 23, 2010.
PESO EXPRESS was incorporated and registered with the Registrar of Companies in New Zealand as a money
transfer service on July 3, 2012.
TINDAHANPNOY MONEY TRANSFER LIMITED was incorporated and registered with the Registrar of
Companies in New Zealand as a money transfer service on September 12, 2012.
VALUTRANS SPA is licensed by the Central Bank of Italy to provide person-to-person money remittance services
originating in Italy, UK and Portugal. The company was founded in July 2007.
WORLDREMIT LTD. is a private company registered with the Registrar of Trade Marks Intellectual Property
Office, UK on September 27, 2010. On June 13, 2012, it was authorized by the Financial Services Authority
(FSA) of UK to do money remittance.
Local Remittance Tie-Ups
New Bills Payment Tie-up
WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC. is known as a “Filipino ministry” founded by
foreign missionaries who began their missionary work among the Filipino people in Manila. Since then, it has
grown into an international work reaching thousands in 20 different countries worldwide. It has been sending
Filipino missionaries to numerous Filipino communities throughout Asia, Europe, and the United States. After
establishing a fellowship for Filipino domestic workers in Hong Kong, WWCF also spread throughout the Middle
East, bringing their way of worship.
BLUE CROSS INSURANCE, INC. is a market specialist in medical, travel and accident insurance. It offers
medical plans for individuals, families, groups and travel insurance plans. It is based in the Philippines, with sister
companies in Thailand, Indonesia, Vietnam and other operating entities in Hong Kong.
APPLEONE PROPERTIES, INC. is a dynamic player in the real estate business based in Cebu City, with almost
20 years of real estate development experience. Its entry into vertical development started with APPLEONE
PROPERTIES, INC.'s acquisition of a 1,786 sqm lot located at the prime business corridor of Cebu City, the Cebu
Business Park. The company launched its 16-floor mixed-use development last December 2010 known as
APPLEONE - EQUICOM TOWER which is located in a very prime area where major establishments, dining and
entertainment destinations are established. The Company owns other subsidiary companies such as Venray
Construction, Brickwall Construction and Development Corporation, Golden Bee International, Inc., and Money
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Tree International Finance Corporation, a lending company, which also serves the in-house financing requirements
of its buyers.
FIRST METRO ASSET MANAGEMENT, INC. was established by FMIC in partnership with the Catholic
Educational Association of the Philippines (CEAP) and Marist Brothers Foundation to engage in the mutual fund
business, promote savings mobilization and advocate investment literacy among Filipinos (refer to discussions on
significant subsidiaries and associates of FMIC).
HEALTHWAY MEDICAL CLINIC INC. is a trusted and preferred network of mall-based clinic in the Philippines.
It offers a unique one-stop-shop setting where minor surgical operations, special medical examinations and
preventive healthcare and specialized medical consultations are performed under the administration of reputable
and experienced doctors in the country. Healthway Medical is under the umbrella group of GenRx Healthcare, a
division of HKR International Limited, a publicly listed company in Hong Kong.
New Payout Partner
ROBINSONS INC. is one of the largest retailer in the Philippines with more than 30 years of retail experience. It
operates 35 mall chains strategically located in prime areas within Metro Manila and selected provincial areas.
Through Robinsons’ Business Centers, it offers various collection and distribution services such as acceptance of
payments for utilities and offer foreign exchange and remittance services.
New Shipping Tie-ups
CLEENE MARITIME CORPORATION was organized in 1995 for the purpose of engaging in shipping, crewing,
and manning business for overseas operations. It provides seafarers for various shipping vessels of foreign
principals, particularly for Japanese and Taiwanese principals.
F.A. VINNEN PHILIPPINES, INC. is a multi-national corporation formed in October 2012 to solely provide F.A.
Vinnen & Co. technically skilled, reliable and excellent seafarers. F.A. Vinnen & Co. (GmBH & Co. Kg), its
principal, is a traditional shipping company operating container vessels worldwide. It is the oldest shipping
company in Bremen and the second oldest in Germany.
MICHAELMAR PHILS., Inc. was established in 1997. It was formed with the objective of recruiting and
providing highly qualified Filipino seafarers to reputable principals and shipowners. Its seafarers serve onboard
vessels of various types and sizes, including tankers, bulk carriers, reefers and car carriers.
SKANFIL MARITIME SERVICES INC. is one of the largest manning agents in the Philippines with over 4,000
crewmembers for more than 250 vessels. It provides Filipino crew for Philippine flag vessels owned by a Swedish
and Filipino joint venture group. Originally serving traditional reefer fleet, Skanfil steadily attracted more
reputable ship owners which ultimately expanded its fleet to include bulk, container, general cargo, passenger, roro, chemical, product and oil tankers plus various types of off-shore vessels such as dive support, platform support,
survey, seismic multi-purpose supply, cable lay, cable repair and pipe-lay units.
3.
ATMs
All of Metrobank’s 1,385 ATMs are full-featured and allow a wide array financial and non-financial transactions
for its clients and those of Bancnet member banks. Apart from being the first bank to secure EMV-chip (Euro
MasterCard VISA) certification in the Philippines, it has also started deploying Cash Accept Machines in select
branches to allow clients to make real-time cash deposits to their accounts 24 by 7, thus providing more secure and
convenient solutions to meet its clients’ banking needs.
4.
Metrophone
Metrophone is the bank’s IVRS (Interactive Voice Response System) banking platform, and one of the first
electronic banking channels made available to Metrobank customers. The Bank continues to pursue improvements
by exploring the development of more features and functionalities that will further enhance the channel’s overall
user experience.
5.
Mobile Banking
Mobile Banking is the Bank’s newest electronic banking channel, while primarily catering to feature phones that
fill up the majority of the mobile market, it will soon launch its Apple iOS and Android mobile banking
applications for use in the increasingly popular smart phones that have flooded the market.
6.
Metrobankdirect
Metrobankdirect is the Bank’s internet browser based banking platform that allows its clients to access their
accounts and make financial transactions at their own personal convenience. Re-launched recently with more
10
features to enhance a user’s experience, such as online enrolment, Metrobankdirect now makes internet banking a
truly online experience.
7.
Tax Direct Facility
Taxdirect is a web based payment facility of Metrobank that allows both retail and corporate clients to pay their
dues on tax returns filed through the BIR EFPS website.
Competition
The Philippine banking industry can be characterized by competitive price and service offerings. All banks in general
have similar product offerings and compete mainly through differentiation in service levels and targeting specific niche
markets. Mergers, acquisitions and closures reduced the number of players in the industry from a high of 50 to 38
universal and commercial banks in 2009.
The Bank faces competition not only from domestic banks but also from foreign banks, in part, as a result of the
liberalization of the banking industry. Since 1994, a number of foreign banks have been granted licenses to operate in
the Philippines. These foreign banks have generally focused their operations on the larger corporations and selected
consumer finance products, such as credit cards.
As of December 31, 2013, the Philippine banking system was composed of 20 universal banks and 16 commercial
banks. Of the universal banks, 11 are local private universal banks, 3 are government banks and 6 are
branches/subsidiaries of foreign banks. Among the commercial banks, 6 are private, 2 are subsidiaries of foreign banks
and 8 are branches of foreign banks.
Corporate loan demand remained largely for working capital requirements as some corporations have been able to
access the debt capital market for long-term funding. Corporate lending thus remained very competitive resulting in
narrower spreads. Most of the recent growth in loans has come from the consumer segment, middle corporate market
and SMEs.
OFWs continued to show significant potential and banks have been increasingly focusing on this segment. For its part,
the Bank is actively cross-selling products other than the typical remittance services to its OFW clientele.
Innovations and Promotions
•
The new Metrobank Cash Accept Machine was rolled-out to allow clients to make deposits any time of the day, with
real time crediting and to top-up of prepaid cards for free. By 2014, the Cash Accept Machines were able to accept
deposits of non-ATM passbook accounts and incorporate bills payment functions.
•
Metrobank, together with its thrift bank subsidiary PSBank, is the first in the Philippines to have ATMs certified to
acquire EMV-chip enabled cards. The EMV is a global standard initiated by Europay, Mastercard and Visa to ensure
the security and inter-operability of chip cards at chip-enabled ATMs and merchant terminals, fortifying protection
against ATM-related fraudulent activities.
•
The Bank launched new debit and prepaid cards. The debit card is a MasterCard-enabled product which provides the
convenience of cashless transactions at over 30 million Mastercard-affiliated merchants worldwide, and easy free
access to funds through Metrobank, Bancnet, Expressnet and Megalink ATMs nationwide. The prepaid card is a
stored value card with the same features as the debit card, but requires no initial deposit and maintaining balance. It
provides users an easy and convenient way to transfer funds and to reload using an existing Metrobank account.
•
The Bank’s internet banking service was further improved in 2013. System enhancements now allow for online
enrolment of accounts and third party accounts, transfer of funds to unregistered Metrobank accounts, management
of transaction limits, and heightened security features.
•
The Wealth Manager Service Portal (WMSP) managed by the Bank’s Treasury Group, allows enrolled clients to
view Treasury-related offerings and current indicative rates, perform bond-calculation on their own and request a
call from an Investment Specialist to expedite their requests;
•
ROPA Web is a new search module which facilitates the Bank’s ROPA disposition business. Customized to meet
the needs of brokers, potential buyers and the general public, this system provides real-time on-line viewing of
property profiles and the downloading of lists of real properties and vehicles for sale.
•
Internally the Bank improved its SME loan approval process which streamlines end-to-end procedures affecting
credit, risk and control groups and reduces turnaround times from application to credit approval and the actual release
of proceeds.
11
Transactions with and/or Dependence on Related Parties
Transactions with related parties and with certain directors, officers, stockholders and related interests (DOSRI) are
discussed in Note 31 of the audited financial statements of the Group as presented in Exhibit 3.
Patents, Trademarks, Copyrights, Licenses, Franchises, Concessions, and Royalty Agreements Held
The Bank’s major products and service lines are sold through Metrobank trade names or trademarks, among others:
1.
2.
For ATMs: Metrobank Electronic Touch or Metrobank E.T.
For credit cards: Metrobank Visa/MasterCard Classic; Visa/MasterCard Gold; Femme Visa; Platinum MasterCard;
Platinum Dollar MasterCard; World MasterCard; M Cards; Robinson-Cebu Pacific MasterCard; Toyota
MasterCard; Value MasterCard and Metrobank ON. Features: Bills2Pay, Shopping Perks & Privileges, Balance
Transfer, Cash2Go/Cash Rush, Design My Card; and Rewards.
3. For phone banking: Metrophone Banking
4. For internet banking: MetrobankDirect
5. For mobile banking: Metrobank Mobile Banking
6. For remittance services: Metrobank Superbilis Padala, World Cash Card, MetroRemit, PayStation and Collect
Anywhere
7. For consumer lending: Metrobank Home Loan; Metrobank Car Loan
8. For special current account: MetroChecking Extra, Account One
9. For special savings account for kids below 18 yrs.: Fun Savers Club
10. For Trust products: Metro Money Market Fund; Metro Max-3 Bond Fund; Metro Wealth Builder Fund; Metro
Max-5 Bond Fund; Metro Balanced Fund; Metro Equity Fund; Metro $ Money Market Fund; Metro $ Max-3 Bond
Fund; and Metro $ Max-5 Bond Fund
11. Metrobank and logo (new and old logo)
Corporate licenses include the following:
1.
2.
3.
4.
5.
6.
7.
For Metrobank: expanded commercial banking license, FCDU license, license for trust operations, type 2 limited
dealer authority, government securities eligible dealer (GSED) with broker-dealer of securities functions
For PSBank: savings bank license, FCDU license, license for trust operations, GSED (non market maker) as
dealer-broker, type 3 limited user authority and quasi-banking license
For FMIC: investment house, quasi banking and trust licenses
For ORIX Metro: financing company and quasi-banking license
For MCC: quasi-banking license and finance company
For TFSPC: quasi-banking license
For MBCL: business license to expire on January 13, 2040
All the Bank’s trademark registrations, except for Metrobank E.T., are valid for 10 years with expiration dates varying
from 2017 to 2018. Metrobank E.T. Registration is valid for 20 years and will expire in 2015. The Bank closely
monitors the renewal dates of registrations to protect and secure its rights to these trademarks. Corporate licenses
issued by different regulatory bodies have no specific expiration dates except for the GSED licenses of Metrobank and
PSBank which will expire in December 2014 and FMIC’s investment house license which will expire in November
2014.
Government Approval of Principal Products or Services
The Group regularly obtains approvals and permits from regulatory bodies and agencies, as applicable, prior to the
offering of its products and services to the public.
Effect of Existing or Probable Government Regulations
Capital Adequacy
Under existing BSP regulations, the determination of the compliance with regulatory requirements and ratios is based
on the amount of the “unimpaired capital” (regulatory net worth) as reported to the BSP, which is determined on the
basis of regulatory accounting policies that differ from PFRS in some respects.
The risk-based capital ratio of a bank, expressed as a percentage of qualifying capital to risk-weighted assets, should not
be less than 10.00% for both stand-alone basis (head office and branches) and consolidated basis (the Parent Company
and subsidiaries engaged in financial allied undertakings but excluding insurance companies). Qualifying capital and
risk-weighted assets (RWA) are computed based on BSP regulations. RWA consist of total assets less cash on hand,
due from BSP, loans covered by hold-out on or assignment of deposits, loans or acceptances under letters of credit to
the extent covered by margin deposits and other non-risk items determined by the Monetary Board (MB) of the BSP.
The Group and its individually regulated operations have complied with all externally imposed capital requirements
throughout the year.
12
The issuance of BSP Circular No. 639 covering the Internal Capital Adequacy Assessment Process (ICAAP) in 2009
supplements the BSP’s risk-based capital adequacy framework under Circular No. 538. In compliance with this new
circular, the Group has adopted and developed its ICAAP framework to ensure that appropriate level and quality of
capital are maintained by the Group. Under this framework, the assessment of risks extends beyond the Pillar 1 set of
credit, market and operational risks and onto other risks deemed material by the Group. The level and structure of
capital are assessed and determined in light of the Group’s business environment, plans, performance, risks and budget;
as well as regulatory edicts. BSP requires submission of an ICAAP document every January 31. The Group has
complied with this requirement.
In December 2010, the Basel Committee for Banking Supervision published the Basel III framework (revised in June
2011) to strengthen global capital standards, with the aim of promoting a more resilient banking sector. On January 15,
2013, the 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 6.0% and Tier 1 capital ratios of 7.5%. It also
introduces a capital conservation buffer of 2.5% comprised of CET1 capital. BSP existing requirement for Total CAR
remains unchanged at 10% 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 upon the effectivity of Basel III. 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 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. The Group is required to comply with this Circular
effective on January 1, 2014.
The Group 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.
Applicable Tax Regulations
Under Philippine tax laws, the RBU of the Bank and its domestic subsidiaries are subject to percentage and other taxes
(presented as ‘Taxes and licenses’ in the statement of income) as well as income taxes. Percentage and other taxes paid
consist principally of gross receipts tax (GRT) and documentary stamp tax (DST). Income taxes include 30% regular
corporate income tax (RCIT) and 20.00% final taxes paid, which is a final withholding tax on gross interest income
from government securities and other deposit substitutes. Interest allowed as a deductible expense is reduced by an
amount equivalent to 33% of interest income subjected to final tax.
Current tax regulations also provide for the ceiling on the amount of EAR expense that can be claimed as a deduction
against taxable income. Under the regulation, EAR expense allowed as a deductible expense for a service company like
the Bank and some of its subsidiaries is limited to the actual EAR paid or incurred but not to exceed 1.00% of net
revenue. The regulations also provide for MCIT of 2.00% on modified gross income and allow a NOLCO. The MCIT
and NOLCO may be applied against the Group’s income tax liability and taxable income, respectively, over a threeyear period from the year of inception.
FCDU offshore income (income from non-residents) is tax-exempt while gross onshore income (income from residents)
is subject to 10.00% income tax. In addition, interest income on deposit placements with other FCDUs and offshore
banking units (OBUs) is taxed at 7.50%. Income derived by the FCDU from foreign currency transactions with nonresidents, 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.
The applicable taxes and tax rates for the foreign branches of the Bank are discussed in Note 28 of the audited financial
statements of the Group as presented in Exhibit 3.
Research and Development Costs
For the last three fiscal years, the Bank has not incurred any expenses for research and development.
Employees
Metrobank had 10,353 employees as of December 31, 2013. By year-end 2014, the Bank projects to have 10,706
employees.
13
As of year-end 2013:
AVPs and up
Senior Managers and down
By year-end 2014 (projected):
AVPs and up
Senior Managers and down
Officers
Rank and File
Total
306
4,022
4,328
6,025
6,025
306
10,047
10,353
463
4,350
4,813
5,893
5,893
463
10,243
10,706
Majority of the registrant’s rank and file employees are members of the employees’ union. Benefits or incentive
arrangements of the rank and file employees are covered by the Collective Bargaining Agreement (CBA) that is
effective for three years. The Bank continues to ensure that its employees are properly compensated. Management and
the employees’ union have signed a new CBA that is effective for three years beginning January 2013 until December
2015. The Bank has not experienced any labor strikes and the management of the Bank considers its relations with its
employees and the Union to be harmonious.
Risk Management
The Group has exposures to the following risks from its use of financial instruments: (a) credit; (b) liquidity; and (c)
market risks. Detailed discussions and analysis on Risk Management of the Group are disclosed in Note 4 of the
Audited Financial Statements as presented in Exhibit 3.
Risk management framework
The BOD has overall responsibility for the oversight of the Bank’s risk management process. On the other hand, the
risk management processes of the subsidiaries are the separate responsibilities of their respective BOD. Supporting the
BOD in this function are certain Board-level committees such as Risk Oversight Committee (ROC), Audit Committee
(AC) and senior management committees through the Executive Committee, Asset and Liability Committee (ALCO)
and Policy Committee.
The Bank and its subsidiaries manage their respective financial risks separately. The subsidiaries have their own risk
management processes but are structured similar to that of the Bank. To a certain extent, the respective risk
management programs and objectives are the same across the Group. Risk management policies adopted by the
subsidiaries and affiliates are aligned with the Bank’s risk policies. To further promote compliance with PFRS and
Basel II and to prepare for Basel III, the Bank created a Risk Management Coordinating Council (RMCC) composed of
the risk officers of the Bank and its financial institution subsidiaries.
Credit Risk
Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its
contractual obligations. The Group manages and controls credit risk by setting limits on the amount of risk it is willing
to accept for individual counterparties, related groups of borrowers, for market segmentation, and industry
concentrations, and by monitoring exposures in relation to such limits. The same is true for treasury-related activities.
Each business unit is responsible for the quality of its credit portfolio and for monitoring and controlling all credit risks
in its portfolio. Regular reviews and audits of business units and credit processes are undertaken by IAG and Risk
Management Group (RSK).
Liquidity Risk
Liquidity risk is defined as the current and prospective risk to earnings or capital arising from the Group’s inability to
meet its obligations when they become due. The Group manages its liquidity risk through analyzing net funding
requirements under alternative scenarios, diversification of funding sources and contingency planning. Specifically for
the Bank, it utilizes a diverse range of sources of funds, although short-term deposits made with its network of domestic
branches comprise the majority of such funding. To ensure that funding requirements are met, the Bank manages its
liquidity risk by holding sufficient liquid assets of appropriate quality. It also maintains a balanced loan portfolio that is
repriced on a regular basis. Deposits with banks are made on a short-term basis.
In Metrobank, the Treasury Group uses liquidity forecast models to estimate its cash flow needs based on its actual
contractual obligations under normal and extraordinary circumstances. RSK generates Maximum Cumulative Outflow
(MCO) reports on a monthly basis to estimate short- and long-term net cash flows of the bank under business-as-usual
and stress parameters. The Group’s financial institution subsidiaries (excluding insurance companies) prepare their
respective MCO reports. These are reported to the Bank’s ALCO and ROC monthly.
14
Market Risk
Market risk is the possibility of loss to future earnings, fair values or future cash flows that may result from changes in
the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest
rates, foreign currency exchange rates, equity prices and other market factors. The Bank’s market risk originates from
its holdings in foreign currencies, debt securities and derivatives transactions. The Bank manages market risk by
segregating its balance sheet into a trading book and a banking book. ALCO, chaired by the Bank’s Chairman is the
senior review and decision-making body for the management of all related market risks. The Bank enforces a set of
risk limits to properly monitor and manage the market risks. The risk limits are approved by the BOD. The RSK serves
under the RMC and performs daily market risk analyses to ensure compliance with the Bank’s policies. The Treasury
Group manages asset/liability risks arising from both banking book and trading operations in financial markets.
Market Risk - Trading Book
In measuring the potential loss in its trading portfolio, the Parent Company uses Value-at-Risk (VaR) as a primary tool.
The VaR method is a procedure for estimating portfolio losses exceeding some specified proportion based on a
statistical analysis of historical market price trends, correlations and volatilities. VaR estimates the potential decline in
the value of a portfolio, under normal market conditions, for a given “confidence level” over a specified holding period.
The limitations of the VaR methodology are recognized by supplementing VaR limits with other position and
sensitivity limit structures and by doing stress testing analysis. These processes address potential product concentration
risks, monitor portfolio vulnerability and give the management an early advice if an actual loss goes beyond what is
deemed to be tolerable to the bank, even before the VaR limit is hit.
Metrobank and PSBank perform stress testing on a quarterly basis while FMIC performs stress testing daily to
complement the VaR methodology. The stress testing results of the Parent Company are reported to the ALCO and
subsequently to the ROC and the BOD.
Market Risk - Banking Book
The Group uses Earnings-at-Risk Methodology to measure the potential effect of interest rate movements to net interest
earnings. The measurement and monitoring of exposures are done monthly.
Interest rate risk
EAR is derived by multiplying the repricing gap by the change in interest rate and the time over which the repricing gap
is in effect. The repricing/maturity gap is a method that distributes rate-sensitive assets, liabilities, and off-balance
sheet positions into time bands. Floating rate positions are distributed based on the time remaining to next repricing
dates. On the other hand, fixed rate items are distributed based on the time remaining to respective maturities. There
are certain balance sheet items that may require set-up of assumptions as to their distribution to time bands. For the
Bank, rate-sensitive positions that lack definitive repricing dates or maturity dates (e.g. demand and savings deposit
accounts) are assigned to repricing time bands based on frequency or pattern of interest rate change. Dynamic
assumptions, which considers potential amount of loan pre-payments and time deposit pre-terminations, are based on
analysis of historical cash flow levels.
Foreign currency risk
Foreign exchange risk is the probability of loss to earnings or capital arising from changes in foreign exchange rates.
The Group takes on exposure to effects of fluctuations in the current foreign currency exchange rates on its financial
performance and cash flows. Foreign currency liabilities generally consist of foreign currency deposits in the Group’s
FCDU account. Foreign currency deposits are generally used to fund the Group’s foreign currency-denominated loan
and investment portfolio in the FCDU. Banks are required by the BSP to match the foreign currency liabilities with the
foreign currency assets held in FCDUs. In addition, the BSP requires a 30.00% liquidity reserve on all foreign currency
liabilities held in the FCDU. Outside the FCDU, the Group has additional foreign currency assets and liabilities in its
foreign branch network. The Group’s policy is to maintain foreign currency exposure within acceptable limits and
within existing regulatory guidelines.
PART II – SECURITIES OF THE REGISTRANT
MARKET PRICE OF AND DIVIDENDS ON REGISTRANT’S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
In November 1980, the SEC approved and certified the listing of 500,000 common shares of Metrobank’s capital stock with
par value of P100.00 each. On February 26, 1981, the listing and trading of Metrobank’s common shares with the Makati
Stock Exchange Inc. and Manila Stock Exchange (which unified) took effect with the trading symbol of MBT. Today, the
Bank’s common shares are all listed at the PSE.
15
Average market prices per share for each quarter within the last two years and subsequent interim periods were as follows:
YEAR
2014
2013
2012
QUARTER/ PERIOD
ENDED
February 28
January 31
March 31
June 30
September 30
December 31
March 31
June 30
September 30
December 31
MARKET PRICES
HIGH
LOW
CLOSE
82.40
70.35
82.00
79.80
70.35
76.00
92.38
78.31
90.00
106.54
80.00
85.38
90.80
76.54
83.00
92.00
70.00
75.55
90.00
68.45
87.35
94.00
82.00
92.50
100.20
90.20
92.50
104.70
90.30
102.00
AVERAGE
77.99
76.43
85.31
94.06
83.70
80.98
81.02
88.31
94.50
96.55
Closing price as of March 28, 2014 was P78.05 per share.
Holders
The Bank has 3,205 stockholders as of March 7, 2014.
Top Twenty Stockholders
Following are the top 20 stockholders as of March 7, 2014:
NAME OF STOCKHOLDER
1
2
3
4
5
6
7
8
9
10
PCD Nominee Corporation (Non-Filipino)
GT Capital Holdings, Inc.
PCD Nominee Corporation (Filipino)*
Philippine Securities Corp.**
Horizon Royale Holdings, Inc.
Federal Homes, Inc.***
Global Treasure Holdings, Inc.****
Grand Estate Property Corporation
Grand Titan Capital Holdings, Inc.
Ausan Resources Corporation
Glam Holdings Corporation
Inter-Par Phils. Res. Corp.
Go, James
Metrobank Foundation, Inc.
Ty, George Siao Kian
Chua, Gabriel
Bloomingdale Enterprises, Inc.
Ty, Alfred
Ty, Arthur
Asia Pacific Cap. Equities and Securities, Inc.
Ty, Anjanette
Ty, Alesandra Vy
11
12
13
14
15
16
17
18
19
20
*
**
***
****
*****
TOTAL NO. OF
COMMON
SHARES HELD
932,398,102
689,261,391
380,001,081
139,581,359
76,050,000
65,500,712
64,741,646
54,600,000
43,660,500
29,250,000
29,250,000
29,250,000
22,401,206
20,319,767
11,906,326
11,396,444
10,696,591
9,047,190
9,046,962
7,386,802
4,456,007
4,453,116
PERCENT TO TOTAL NO. OF
OUTSTANDING
COMMON SHARES
33.970
25.112
13.844
5.085
2.771
2.386
2.359
1.989
1.591
1.066
1.066
1.066
0.816
0.740
0.434
0.415
0.390
0.330
0.330
0.269
0.162
0.162
Net of 6,001,127 shares owned by PSC; 7,700,712 shares owned by Federal Homes, Inc.;
2,500,000 shares owned by Global Treasure Holdings, Inc.
Inclusive of 6,001,127 shares lodged with PCD Nominee Corporation
As of March 7, 2014, public ownership on the Bank was at 48.720%. Of the total shares issued, 34.031% represents
foreign ownership.
16
Dividends
Except for prior approval by the BSP, there are no restrictions that limit the ability of the Bank to pay cash dividends.
Details of cash dividend distribution from 2010 to 2013 follow:
Date of Declaration
January 23, 2013
January 25, 2012
March 25, 2011
February 17, 2010
Cash Dividend
Amount
Per Share
(In Millions)
P1.00
P2,111
P1.00
P2,111
P1.00
P2,111
P0.60
P1,084
Date of
BSP Approval
February 8, 2013
February 13, 2012
April 28, 2011
March 8, 2010
Record Date
March 8, 2013
March 5, 2012
May 16, 2011
March 25, 2010
Payment Date
April 3, 2013
March 26, 2012
May 23, 2011
April 15, 2010
The computation of surplus available for dividend declaration in accordance with SEC Memorandum Circular No. 11 issued
in December 2008 differs to a certain extent from the computation following BSP guidelines.
The Bank paid the semi-annual coupon amounting to USD5.6 million in 2006 to 2013 after obtaining their respective BSP
approvals. Details for 2010 to 2013 are as follows:
Date of BSP Approval
August 12, 2013
February 6, 2013
August 12, 2012
February 1, 2012
August 11, 2011
February 10, 2011
August 9, 2010
February 4, 2010
Date Paid
August 15, 2013
February 15, 2013
August 15, 2012
February 15, 2012
August 15, 2011
February 15, 2011
August 16, 2010
February 16, 2010
Recent Sales of Unregistered or Exempt Securities
The information required under Part II paragraph (A) (4) of Annex C of the Securities Regulation Code (SRC) under SRC
Rule 12 is not applicable to the Bank.
Compliance with Lead Practice on Corporate Governance
Board Commitment
The Board leads in establishing the tone of good governance from the top and in setting corporate values, codes of conduct
and other standards of appropriate behavior for itself, the senior management and other employees. It is primarily
responsible for approving and overseeing the implementation of the Bank’s strategic objectives, risk strategy, corporate
governance and corporate values. The Board ensures consistent adoption of corporate governance policies and systems
across the Group. Further, the Board is also responsible for monitoring and overseeing the performance of senior
management.
In 2012, the Articles of Incorporation and By-laws of the Bank was amended increasing the number of directors from twelve
(12) to fourteen (14). At the end of 2013, the Board was comprised of 14 directors, seven (7) of which or 50% are
independent directors, the highest in the banking industry. Both BSP and SEC require a minimum of 20% representation of
independent directors in the Board.
As defined in the regulations, an independent director is independent of management and free from any business or other
relationship, has not engaged and does not engage in any transaction with the institution or with any of its related companies
or with any of its substantial shareholders, whether by himself or with other persons or through a firm of which he is a
partner or a company of which he is a director or substantial shareholder, other than transactions which are conducted at
arms length and could not materially interfere with or influence the exercise of his judgment. The Bank and its independent
directors are guided by all the qualifications of the independent director including the limit on the number of companies in a
business conglomerate the independent director may be elected, as well as the term limits set forth in SEC Memorandum
Circular No. 9-2011, and as adopted in BSP Circular No. 749. All members of the Board were selected based on their
qualifications such as integrity/probity, physical/mental fitness, competence, relevant education/financial literacy/training,
diligence and knowledge/experience. The Board continues to conduct and maintain the affairs of the institution within the
scope of its authority as prescribed in the Bank’s By-Laws and in existing laws, rules and regulations and ensures effective
compliance.
17
Continuing Education
All the members of the Board have attended the required Corporate Governance Seminar. In maintaining their professional
integrity, the directors continuously seek to enhance their skills, knowledge and understanding of the activities that the Bank
is engaged in or intends to pursue as well as the developments in the banking industry including regulatory changes through
continuing education or training. A policy on continuing education for directors is in place and the Corporate Secretary
maintains the record of trainings attended by them.
Evaluation System
The Board has a rating system and procedures to determine and measure compliance with the Corporate Governance
Manual: (i) each Director self-rates; (ii) the Corporate Governance Committee (CGC) rates itself, the Board and the
President; and (iii) the Audit, Risk Management and other Board committees respectively rate themselves. When a director
or officer has multiple positions in the Group, CGC determines whether or not said director or officer is able to and has been
adequately carrying out his/her duties.
The results of the annual self-assessment are summarized by the CGC and reported to the Board.
Other Measures Undertaken
1.
Manual on Corporate Governance
To enforce bank-wide compliance, a copy of the Board-approved Manual on Corporate Governance is available in the
Bank’s Insight Online (intranet) for easy access by the Board, Management and all employees of the Bank. Likewise, it
is posted in the Bank’s website to be accessible by the public.
2.
Code of Conduct and Ethics for Directors and Metrobank Code of Conduct for Employees
In 2013, acknowledging that the position of a bank director is one of utmost trust and confidence and believing that
fairness, accountability and transparency are the guiding principles of good corporate governance, the members of the
BOD have adopted the Code of Conduct and Ethics for Directors. It describes the behavioral standards expected from a
director so that he/she can better understand and meet the expectations and requirements of the organization and
regulators.
Included in the Code is the basic principle that a director should not use his position to make profit or to acquire benefit
or advantage for himself and/or his related interests, avoiding situations that would compromise his impartiality.
The Bank also has the Metrobank Code of Conduct for employees which includes the principles of ensuring the proper
discharge of duties and responsibilities, the avoidance of conflict of interest between the Bank’s business and the
personal activities, the preservation of confidential information which mandates adoption of every practicable measure
to preserve confidential information at all times and the prohibition of direct or indirect offering or receiving by an
employee of any gift, gratuity, other payment or entertainment from any person, be it a client, vendor, supplier, business
partner or subordinate, when the gift might affect the employee’s judgment or actions in the performance of his/her
duties.
These Codes of Conduct aim to instill a commitment and dedication to the virtues of honesty and integrity, together
with a high sense of prudence, responsibility and efficiency in the conduct of duties. The Bank is a business
community, each Metrobanker belongs to this community where the action of one affects and reflects on the others. It
is imperative that directors, officers and employees live by the values that the Bank stands for and reflect these values in
their behavior.
To enforce bank-wide compliance, the Bank’s Codes of Conduct for directors and employees are posted in the Bank’s
intranet and the Human Resources Management Group Public Folder for easy access of all directors, officers and
employees of the Bank.
The Codes are implemented by the CGC and the Human Resources Group and breaches are subject to appropriate
disciplinary actions which may range from reprimand, suspension, termination, set forth under the Corporate
Governance Manual and the Bank’s Manual on Policies and Procedures in accordance with the principles of due
process.
3.
Fair Business Transactions
The members of the Board conduct fair business transactions with the Bank and ensure that personal interest does not
bias Board decisions. Directors whenever possible, avoid situations that would give rise to a conflict of interest. If
transactions with the Bank cannot be avoided, it is done in the regular course of business and upon terms not less
favorable to the Bank than those offered to others.
The Bank has adopted a policy on related party transactions where transactions with related parties are reviewed by a
Board Committee composed of independent directors and require prior written approval of the members of the Board,
18
with the exclusion of the director concerned in case the transaction involves him or his related interests. Also, directors
report their transactions of the Bank’s shares. The directors are expected to act honestly and in good faith, with loyalty
and in the best interest of the Bank, its stockholders, regardless of the amount of their stockholdings, and other
stakeholders such as its depositors, investors, borrowers, other clients and the general public.
4.
Board Committees
a)
Nominations Committee
The Nominations Committee, jointly with the CGC, reviews and evaluates the qualifications of all persons
nominated to the Board. Moreover, it also reviews the qualifications of those nominated to other positions
requiring approval by the Board.
b)
Corporate Governance Committee
The CGC assists the Board in fulfilling its statutory and fiduciary responsibilities, enhancing shareholder value,
and protecting shareholders’ interest through (a) effective oversight on corporate governance practices, (b)
ensuring the effectiveness and observance by the Board of corporate governance principles and guidelines, (c)
providing oversight in the implementation of Bank’s Compliance System, including oversight and monitoring of
Bank’s compliance with Anti-Money Laundering laws, rules and regulations; (d) making recommendations to the
Board regarding the continuing education of directors, assignment to board committees, succession plan for the
senior officers, and the remuneration policy linked to the corporate and individual performance.
c)
Audit Committee
The AC assists the Board in fulfilling its statutory and fiduciary responsibilities, enhancing shareholder value, and
protecting shareholder’s interest through (a) effective oversight of internal and external audit functions, (b)
transparency and proper reporting, (c) compliance with laws, rules and regulations; and code of conduct, and (d)
adequate and effective internal controls.
d)
Risk Oversight Committee
The ROC, as an extension of the Board, shall be responsible for the development and oversight of the risk
management program of the Bank and its Trust Banking Group.
e)
Related Party Transactions Committee
The Related Party Transactions Committee assists the Board in ensuring that transactions with related parties
(including internal group transactions) are reviewed to assess risks, are subject to appropriate restrictions to ensure
that such are conducted at arm’s-length terms and that corporate or business resources of the Bank are not
misappropriated or misapplied. After appropriate review, the committee shall disclose all information and endorse
to the Board with recommendations, the proposed related party transactions.
f)
Legal and Tax Advisory Committee
The Legal and Tax Committee, as an extension of the Board, shall oversee the extent and management of the legal
and tax issues which are of relevance to the Bank.
g)
Domestic Equity Investments Committee
The Domestic Equity Investments Committee has been established to assist the Board in overseeing the
development and maintenance of the Bank’s domestic equity investments policy and in monitoring its
implementation by Management.
h)
Overseas Banking Committee
The Overseas Banking Committee assists the Board in its oversight functions over the operations and financial
performance of the overseas branches and subsidiaries, their compliance with the rules and regulations of their
respective host countries and their adherence to the parent Bank’s business and corporate governance policies as
prescribed by the BSP and SEC.
i)
Information Technology Steering Committee
Pursuant to BSP Circular No. 808 “Guidelines on Information Technology Risk Management for All Banks and
other BSP-supervised Institutions”, the Board approved the creation of the Information Technology Steering
Committee on October 23, 2013. It is tasked to oversee the formulation and execution of the Information
Technology (IT) strategic plan, ensure management of IT risks and oversee IT performance and resources to
ensure a safe, sound, controlled and efficient IT operating environment.
19
j)
Trust Committee
The Trust Committee is responsible for the oversight of all Trust activities and shall act within the sphere of
authority as provided by the pertinent rules and regulations in the exercise of fiduciary powers under the Manual or
Regulations for Banks (MORB) and BSP Circular 766 Guidelines in Strengthening Corporate Governance and
Risk Management Practices on Trust, Other Fiduciary Business, and Investment Management Activities.
5.
Corporate Governance (CG) Scorecard
The Bank submitted the duly accomplished CG Disclosure Template to PSE and the Annual Corporate Governance
Report (ACGR) to SEC on March 27, 2013 and June 27, 2013, respectively.
6.
Plans for Improvement of Corporate Governance
Recognizing that the ultimate responsibility for the overall quality of corporate governance rests with the Board, greater
weight on the practices and performance of the Board and senior management shall be the main focus. The Bank will
continue to actively seek ways to adopt best practices in corporate governance.
7.
Awards
•
•
•
•
•
•
Strongest Bank in the Philippines by The Asian Banker
Financial Inclusion Award by The Banker
Top 3 Government Securities Eligible Dealer in the primary market by the Bureau of Treasury
Top 2 participant in the secondary market by Philippine Dealing and Exchange Corp.
Awarded for Best Execution through Active Use of Fixed-Income Broker Internet Order System (FI-BIOS) by
Philippine Dealing and Exchange Corp.
All Trusteed Funds Managed with Full Discretion with at least 5 Funds in the 112th Towers Watson Survey on
Investment Performance of Retirement Funds in the Philippines
Deviations
This is not applicable to the Bank.
20
PART III - MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Audited Financial Statements
The audited financial statements of the Group and the Bank are presented in Exhibit 3 as an attachment to this report,
together with the notarized Statement of Management Responsibility for Financial Statements which was signed by the
Chairman, President, Head of Financial and Control Sector, Controller and Treasurer of the registrant.
Statements of Financial Position
(Amounts in millions)
2013
Assets
Cash and Other Cash Items
Due from Bangko Sentral ng Pilipinas (BSP)
Due from Other Banks
Interbank Loans Receivable and Securities
Purchased Under Resale Agreements
Financial Assets at Fair Value Through
Profit or Loss (FVPL)
Available-for-Sale (AFS) Investments
Held-to-Maturity (HTM) Investments
Loans and Receivables
Investments in Associates and a Joint
Venture
Property and Equipment
Investment Properties
Non-Current Asset Held For Sale
Deferred Tax Assets
Goodwill
Other Assets
Total Assets
Liabilities and Equity
Liabilities
Deposit Liabilities
Bills Payable and Securities Sold Under
Repurchase Agreements
Derivative Liabilities
Manager’s Checks and Demand Drafts
Outstanding
Income Taxes Payable
Accrued Interest and Other Expenses
Bonds Payable
Subordinated Debt
Deferred Tax Liabilities
Other Liabilities
Total Liabilities
December 31
2012
2011
(As Restated) (As Restated)
Increase (Decrease)
2013 vs. 2012
Amount
%
Increase (Decrease)
2012 vs. 2011
Amount
%
P29,742
166,774
26,275
P24,382
131,278
22,996
P20,954
156,537
32,761
P5,360
35,496
3,279
21.98
27.04
14.26
P3,428
(25,259)
(9,765)
16.36
(16.14)
(29.81)
122,011
23,392
24,367
98,619
421.59
(975)
(4.00)
55,441
273,429
38,425
611,064
72,920
123,041
51,451
525,895
8,908
143,223
47,457
457,556
(17,479)
150,388
(13,026)
85,169
(23.97)
122.23
(25.32)
16.20
64,012
(20,182)
3,994
68,339
718.59
(14.09)
8.42
14.94
6,274
15,756
13,125
7,190
5,206
7,857
14,868
15,345
15,422
1,102
8,871
6,409
9,271
16,660
13,937
15,471
8,577
6,413
9,255
(8,594)
411
(2,297)
(1,102)
(1,681)
(1,203)
(1,414)
(57.80)
2.68
(14.89)
(100.00)
(18.95)
(18.77)
(15.25)
(1,792)
1,408
(49)
1,102
294
(4)
16
(10.76)
10.10
(0.32)
100.00
3.43
(0.06)
0.17
P1,378,569
P1,046,643
P962,076
P331,926
31.71
P84,567
8.79
P1,016,268
P738,694
P680,993
P277,574
37.58
P57,701
8.47
127,204
4,452
97,108
6,692
99,657
2,826
30,096
(2,240)
30.99
(33.47)
(2,549)
3,866
(2.56)
136.80
3,927
676
8,507
11,643
8,628
479
54,080
3,489
1,326
8,341
11,556
14,243
244
40,241
2,610
597
7,199
4,678
19,735
157
28,876
438
(650)
166
87
(5,615)
235
13,839
12.55
(49.02)
1.99
0.75
(39.42)
96.31
34.39
879
729
1,142
6,878
(5,492)
87
11,365
33.68
122.11
15.86
147.03
(27.83)
55.41
39.36
1,235,864
921,934
847,328
313,930
34.05
74,606
8.80
21
2013
Equity
Equity Attributable to Equity Holders of
the Bank
Common stock
Hybrid capital securities
Capital paid in excess of par value
Surplus reserves
Surplus
Remeasurement losses on retirement plan
December 31
2012
2011
(As Restated) (As Restated)
Increase (Decrease)
2013 vs. 2012
Amount
%
Increase (Decrease)
2012 vs. 2011
Amount
%
P54,896
6,351
19,312
1,235
55,525
P42,228
6,351
19,312
1,108
48,418
P42,228
6,351
19,312
1,002
35,712
P12,668
127
7,107
30.00
11.46
14.68
106
12,706
10.58
35.58
(2,870)
(2,011)
(1,460)
(859)
(42.72)
(551)
(37.74)
(481)
2,439
4,460
(2,920)
(119.72)
(2,021)
(45.31)
Non-controlling Interest
272
647
134,887
7,818
757
(869)
117,733
6,976
433
26
108,064
6,684
(485)
1,516
17,154
842
(64.07)
174.45
14.57
12.07
324
(895)
9,669
292
74.83
(3,442.31)
8.95
4.37
Total Equity
142,705
124,709
114,748
17,996
14.43
9,961
8.68
P1,378,569
P1,046,643
P962,076
P331,926
31.71
P84,567
8.79
P49,892
11,623
38,269
40,655
78,924
49,497
P45,016
14,162
30,854
26,224
57,078
37,853
P45,068
15,631
29,437
19,696
49,133
34,523
P4,876
(2,539)
7,415
14,431
21,846
11,644
10.83
(17.93)
24.03
55.03
38.27
30.76
(P52)
(1,469)
1,417
6,528
7,945
3,330
(0.12)
(9.40)
4.81
33.14
16.17
9.65
29,427
19,225
14,610
10,202
53.07
4,615
31.59
1,477
30,904
6,748
P24,156
2,548
21,773
3,856
P17,917
1,423
16,033
3,542
P12,491
(1,071)
9,131
2,892
P6,239
(42.03)
41.94
75.00
34.82
1,125
5,740
314
P5,426
79.06
35.80
8.87
43.44
P22,488
1,668
P24,156
P15,399
2,518
P17,917
P11,031
1,460
P12,491
P7,089
(850)
P6,239
46.04
(33.76)
34.82
P4,368
1,058
P5,426
39.60
72.47
43.44
P24,156
P17,917
P12,491
P6,239
34.82
P5,426
43.44
(897)
(556)
-
(341)
(61.33)
(556)
(100.00)
(2,917)
(2,517)
3,732
(400)
(15.89)
(6,249)
(167.44)
(498)
1,746
330
(2,099)
152
362
(828)
3,845
(250.91)
183.18
178
(2,461)
117.11
(679.83)
(1,669)
(4,286)
4,246
2,617
61.06
(8,532)
(200.94)
P21,590
P13,075
P16,737
P8,515
65.12
(P3,662)
(21.88)
P19,740
1,850
P21,590
P12,256
819
P13,075
P14,931
1,806
P16,737
P7,484
1,031
P8,515
61.06
125.89
65.12
(P2,675)
(987)
(P3,662)
(17.92)
(54.65)
(21.88)
Net unrealized gain (loss) on AFS
investments
Equity in net unrealized gain on AFS
investments of associates
Translation adjustment and others
Total Liabilities and Equity
Statements of Income
Interest Income
Interest and Finance Charges
Net Interest Income
Other Operating Income
Total Operating Income
Total Operating Expenses
Income Before Share in Net Income of
Associates and a Joint Venture
Share in Net Income of Associates and a
Joint Venture
Income Before Income Tax
Provision for Income Tax
Net Income
Attributable to:
Equity holders of the Bank
Non-controlling interest
Statements of Comprehensive Income
Net Income
Other Comprehensive Income for the
Year, net of tax
Items that may not be reclassified to
profit or loss:
Change in remeasurement loss of
retirement liability
Items that may be reclassified to profit or
loss:
Change in net unrealized gain on AFS
investments
Change in equity in net unrealized
gain on AFS investments of
associates
Total Comprehensive Income for the
Year
Attributable to:
Equity holders of the Bank
22
Key Performance Indicators
The performance of the Bank and its significant majority-owned subsidiaries are measured by the following key indicators:
Performance Indicators
Company Name
Book
Value
Per Share
Basic/
Diluted
Earnings
Per Share
Return on
Average
Equity
Return on
Average
Assets
Net Interest Margin on
Average
Earning Assets
For the Interim Period, January 31, 2014 (unaudited)
Metrobank Group
FMIC (a)
PSBank
MCC
P46.61
49.93
67.77
6.31
P1.31
11.81
0.57
0.19
6.63%
23.48%
10.16%
39.28%
0.65%
5.39%
1.24%
6.47%
3.90%
2.59%
6.14%
15.12%
P46.83
50.70
67.69
6.12
P8.02
30.96
12.19
2.01
17.80%
68.34%
18.72%
34.49%
1.85%
13.54%
2.38%
5.53%
3.90%
4.25%
5.88%
15.45%
P52.75
39.40
62.55
5.52
P5.44*
8.68
9.47
1.70
13.64%
25.04%
14.89%
33.50%
1.53%
3.88%
1.92%
5.40%
3.62%
2.07%
5.19%
15.40%
For the Year 2013
Metrobank Group
FMIC (a)
PSBank
MCC
For the Year 2012
Metrobank Group
FMIC (a)
PSBank
MCC
(a) FMIC and Subsidiaries
* Restated to include the effect of stock dividend issued in 2013.
A separate schedule showing financial soundness indicators of the Group as of December 31, 2013 and 2012 is presented in
Exhibit “A” as an attachment to this report.
2013 Performance
Financial Position
The Group closed the year 2013 with audited consolidated total assets at P1.38 trillion up by P331.93 billion from P1.05
trillion as of December 31, 2012. Consolidated total liabilities likewise increased to P1.24 trillion from P921.93 billion as
funds sourced from total deposit liabilities and bills payable and securities sold under repurchase agreements increased by
P277.57 billion and P30.10 billion, respectively, although subordinated debts decreased by P5.62 billion. With the continued
focus on asset quality, the NPL ratio of the Group further improved to 1.29% from 1.83% in 2012. Meanwhile, equity
attributable to equity holders of the Bank grew by P17.15 billion (or 14.57%) from P117.73 billion to P134.89 billion mainly
due to higher earnings generated for the year.
The increase of P5.36 billion or 21.98% in Cash and Other Cash Items was due to the higher level of cash maintained by the
Bank, in anticipation of heavy cash requirements of clients. Due from BSP which represents 12.10% of the Group’s total
assets increased by P35.50 billion (or 27.04%). Due from Other Banks increased by P3.28 billion (or 14.26%) mainly due to
the net effect of the movements in accounts maintained with various local and foreign banks.
Interbank Loans Receivable and SPURA increased by P98.62 billion or 421.59% with the increment coming mostly from
higher balance of term placements with BSP by P89.55 billion.
Financial Assets at FVPL consist of held-for-trading (HFT) securities amounting to P51.36 billion in 2013 or decreased by
P19.23 billion (or 27.24%) from P70.58 billion in 2012; and derivative assets which represent mark-to-market of foreign
currency forwards, interest rate swaps, credit default swaps, cross currency swaps, and interest rate derivatives with positive
fair value amounting to P4.09 billion or increased by P1.75 billion (or 74.69%) from P2.34 billion in 2012. The decline in
HFT securities resulted from the disposal of investments in various government securities by the Bank. HTM Investments
also went down by P13.03 billion or (25.32%) mainly due to the reclassification by PSBank and FMIC of their HTM
investments totaling to P13.3 billion (consisting of dollar denominated bonds amounting to US$73.5 million and peso
denominated bonds of P10.3 billion) and P16.3 billion, respectively, to AFS investments. The change in intention was
primarily driven by the need to increase capital position with the implementation of Basel III effective 2014. The P150.39
billion (or 122.23%) increase in AFS investments resulted from higher investments in government securities by P141.68
23
billion (or 136.45%), private debt securities by P4.92 billion (or 29.62%) and equity securities by P3.78 billion (or
119.39%).
Loans and Receivables, representing 44.33% and 50.25% of the Group’s total assets as of December 31, 2013 and 2012,
respectively, expanded by P85.17 billion (or 16.20%). Receivables from customers grew by P85.68 billion, with growth
coming from all segments. Unquoted debt securities on the other hand, declined by P2.63 billion due to various redemptions
and disposals during the year.
Investments in Associates and a Joint Venture went down by P8.59 billion (or 57.80%) resulting from the sale of 40%
ownership of FMIC in Global Business Power Corporation (GBPC) (20% to Orix Corporation of Tokyo, Japan and 20% to
Meralco PowerGen Corporation). Investment Properties also went down by P2.30 billion (or 14.89%) due to continuous
disposal of foreclosed properties. Non-Current Asset Held For Sale decreased by P1.10 billion (or 100%) resulting from the
sale of the remaining 15% ownership of the Bank in TMPC to GT Capital Holdings, Inc. (GT Capital).
Deferred Tax Assets decreased by P1.68 billion (or 18.95%) due to net movements in temporary tax base differences.
Goodwill decreased by P1.20 billion (or 18.77%) due to booking of impairment loss. Other Assets consist of, among others,
Assets held under joint ventures, software costs, inter-office float items and creditable withholding tax. The decreases in
inter-office float items (P0.42 billion), creditable withholding taxes (P0.32 billion) and miscellaneous assets (P0.05 billion)
contributed to the P1.41 billion (or 15.25%) decline in Other Assets.
Deposit liabilities represent 82.23% and 80.12% of the consolidated total liabilities as of December 31, 2013 and 2012,
respectively. The Group’s deposit level, sourced mainly by the Bank, PSBank and MBCL reached P1.02 trillion as of
December 31, 2013 and was higher by P277.57 billion (or 37.58%) from P738.69 billion as of December 31, 2012.
Demand, savings and time deposits grew by 41.86% to P150.69 billion, 18.98% to P362.92 billion and 53.52% to P502.66
billion, respectively. Low cost deposits represent 50.52% and 55.65% of the Group’s total deposits as of December 31, 2013
and 2012, respectively.
Bills Payable and SSURA representing 10.29% and 10.53% of the Group’s total liabilities as of December 31, 2013 and
2012, respectively, increased by P30.10 billion (or 30.99%). Interbank borrowings with foreign and local banks which are
mainly short-term borrowings increased by P14.32 billion (or 50.71%) while balance of SSURA also increased by P15.85
billion. Derivative Liabilities which represent mark-to-market of foreign currency forwards, interest rate swaps, credit
default swaps, cross currency swaps, and interest rate derivatives with negative fair value decreased by P2.24 billion (or
33.47%).
The increase of P0.44 billion (or 12.55%) in Manager’s Checks and Demand Drafts Outstanding resulted from normal
banking operations of the Bank and PSBank. Income Taxes Payable decreased by 49.02% to P0.68 billion as a result of
lower taxable income subject to regular corporate income tax in 2013.
Subordinated Debt decreased by 39.42% from P14.24 billion to P8.63 billion. On October 4, 2013, the Bank exercised the
call option on its P5.5 billion 7.75% Lower Tier 2 Peso Notes. On the other hand, MCC exercised the call option on its 2019
Peso Notes amounting to P1.3 billion on July 31, 2013 but subsequently issued a 10-year Peso Notes on December 20, 2013
at 100.00% of the principal amount of P1.17 billion and bear interest at 6.21% per annum.
The P0.24 billion (or 96.31%) increase in Deferred Tax Liabilities was mainly due to the net movement of the account
recognized by Orix Metro and FMIC. Other Liabilities increased by 34.39% to P54.08 billion primarily due to higher
balances of marginal deposits by P4.97 billion; accounts payable P2.14 billion; bills purchased (with contra account
classified under Loans and Receivables) by P1.42 billion; and retirement liabilities by P0.52 billion.
Equity attributable to equity holders of the Bank went up to P134.89 billion in 2013, P17.15 billion (or 14.57%) higher than
the P117.73 billion balance in 2012. The P12.67 billion increase in common stock represents the 30% stock dividends
issued by the Bank which is equivalent to 633.4 million common shares that represents at least the minimum 25%
subscribed and paid-up capital for the increase in the authorized capital stock. Details of the Bank’s capital stock are
discussed in Note 23 of the audited financial statements of the Group as presented in Exhibit 3. Surplus Reserves increased
by P0.13 billion (or 11.46%) as a result of the Bank’s additional appropriations for trust business and self-insurance in 2013.
Surplus increased to P55.53 billion up by P7.11 billion (or 14.68%) from P48.42 billion. The increase was attributable to
the P22.49 billion higher in net income generated by the Group (excluding non-controlling interests) net of the 30% stock
dividends of P12.67 billion, the 5% cash dividends of P2.11 billion and the two semi-annual coupon payments on HT1
capital securities totaling to US$11.25 million paid by the Bank during the year. Remeasurement losses on retirement plan
increased by P0.86 billion (or 42.72%) from a loss of P2.01 billion as a result of increase in actuarial losses from experience
adjustments and change in actuarial assumptions, computed based on the revised PAS 19 (Employee Benefits). The
amendments to PAS 19 include, among others, changes in accounting for defined benefit plans, applied retrospectively from
January 1, 2011, including the treatment of actuarial gains and losses that are now recognized in OCI and permanently
excluded from profit and loss. Net unrealized gain on AFS investments decreased by P2.92 billion (or 119.72%) caused by
the various disposals of AFS investments and fair value movements. Equity in net unrealized gain on AFS investments of
associates decreased by P0.49 billion (or 64.07%) as a result of decrease in net unrealized gain recognized by FMIC’s
associates. Translation adjustment and others increased by P1.52 billion (or 174.45%) resulting from the exchange
differences arising on the translation of the HT1 capital securities, foreign currency-denominated assets and liabilities of
foreign subsidiaries and the FCDU of the Bank and PSBank.
24
The P0.84 billion (or 12.07%) increase in non-controlling interest was attributed to the net income generated by the
majority-owned subsidiaries, net of cash dividend declared for the year and the effect of the reduction in the net unrealized
gain on AFS investments.
Results of Operations
Net income attributable to equity holders of the Bank reached P22.49 billion for the year 2013, P7.09 billion (or 46.04%)
higher than the P15.40 billion net income recorded for the year 2012. As a result, return on average equity (ROE) improved
to 17.80% from 13.64% in 2012. Likewise, return on average assets (ROA) went up to 1.85% from 1.53%. The net increase
was mainly attributed to the improvement in net interest income by P7.42 billion and other operating income by P14.43
billion; the decrease in share in net income of associates and a joint venture by P1.07 billion; and higher total operating
expenses and provision for income tax by P11.64 billion and P2.89 billion, respectively.
Net Interest Income which represents 48.49% of the Group’s total operating income amounted to P38.27 billion for the year
2013, up by P7.42 billion (or 24.03%) from P30.85 billion in 2012. Interest income increased by P4.88 billion (or 10.83%)
while interest expense went down by P2.54 billion (or 17.93%). The increase in interest income was due to higher interest
from loans and receivable by P2.81 billion (or 8.58%), trading and investment securities by P0.95 billion (or 9.10%) and
interbank loans receivable and SPURA by P1.87 billion (or 338.66%) offset by the decline in interest income on deposit with
banks and others by P0.75 billion (or 58.95%). On the other hand, the drop in interest expense was caused by the lower
interest on deposit liabilities and bills payable and SSURA by P1.20 billion (or 13.70%) and P1.34 billion (or 24.77%),
respectively.
Other operating income representing 51.51% of the Group’s total operating income went up to P40.66 billion or higher by
P14.43 billion (or 55.03%) from P26.22 billion in 2012. This was driven by the increase in trading and securities gain by
P10.50 billion and the gross gain of P7.39 billion of FMIC from the sale of its 40% ownership in GBPC. On the other hand,
the Group recognized foreign exchange loss of P2.27 billion from foreign exchange gain of P3.64 billion in 2012.
Total Operating Expenses went up by P11.64 billion (or 30.76%) to P49.50 billion in 2013 from P37.85 billion in 2012.
Significant movements were noted in compensation and fringe benefits by P1.23 billion (or 8.52%), taxes and licenses by
P2.86 billion (or 54.35%) and miscellaneous expenses by P0.93 billion (or 10.15%). Further, provision for credit and
impairment losses increased by P6.24 billion (or 139.44%) as a result of the additional provision on loans and receivables
and goodwill impairment.
Share in Net Income of Associates and a Joint Venture went down by P1.07 billion (or 42.03%) on account of the decrease
in the net income of certain associates.
Provision for Income Tax increased by P2.89 billion (or 75.00%) in 2013 coming from deferred income tax and final tax by
P3.06 billion and P0.53 billion, respectively.
Income attributable to non-controlling interest amounted to P1.67 billion in 2013 went down by P0.85 billion (or 33.76%)
from P2.52 billion in 2012 on account of the decline on the results of operations of certain majority-owned subsidiaries.
Total comprehensive income went up by P8.52 billion from P13.08 billion in 2012 to P21.59 billion in 2013 due to the net
effect of the P6.24 billion increase in the net income of the Group and the P3.85 billion increase in translation adjustment
and others reduced by the decreases in net unrealized gain on AFS investments and remeasurement loss of retirement
liability of P1.23 billion and P0.34 billion, respectively. For the year ended December 31, 2013, total comprehensive income
attributable to equity holders of the Bank went up to P19.74 billion from P12.26 billion in 2012.
Market share price as of December 31, 2013 was at P75.55 from P102.00 in 2012 with a market capitalization of P207.37
billion as at December 31, 2013.
2012 Performance
Financial Position
The Group closed the year 2012 with audited consolidated total assets breaching the P1.0-trillion mark at P1.05 trillion
which grew by P84.57 billion from P962.08 billion in 2011. Consolidated total liabilities likewise increased to P921.93
billion from P847.33 billion as funds sourced from total deposit liabilities and bonds payable increased by P57.70 billion and
P6.88 billion, respectively, although subordinated debts decreased by P5.49 billion. With the continued focus on asset
quality, the NPL ratio of the Group further improved to 1.83% from 2.22% in 2011. Meanwhile, equity attributable to equity
holders of the Bank grew by P9.67 billion (or 8.95%) from P108.06 billion to P117.73 billion on account of higher earnings
generated for the year.
The increase of P3.43 billion or 16.36% in Cash and Other Cash Items was due to the higher level of cash maintained by the
Bank, in anticipation of heavy cash requirements of clients. Due from BSP which represents 12.54% of the Group’s total
assets decreased by P25.26 billion (or 16.14%). The funds were used for treasury and investment activities and for loan
25
expansion. Due from Other Banks decreased by P9.77 billion (or 29.81%) mainly due to the net effect of the movements in
accounts maintained with various local and foreign banks.
Financial Assets at FVPL consist of held-for-trading (HFT) securities and derivative assets amounting to P70.58 billion and
P2.34 billion, respectively, in 2012, and P6.57 billion and P2.34 billion, respectively, in 2011. The increment of P64.01
billion (or 718.59%) resulted from the investments made in various government securities by the Bank and FMIC. With
increased volume of investments in HFT, related trading gain improved significantly by 6.95%. The P20.18 billion (or
14.09%) decrease in AFS Investments resulted from lower investment in government securities by P23.29 billion (or
18.32%) while investment in private debt securities and equity securities went up by P2.52 billion (or 17.88%) and P0.60
billion (or 23.18%), respectively. Further, the Group took advantage of the favorable market during the year. HTM
investments went up by P3.99 billion or (8.42%). The increment resulted from the higher investments in private bonds and
treasury notes by P4.64 billion, P1.57 billion, respectively, reduced by the decrease in investments in government bonds by
P2.15 billion.
Loans and Receivables representing 50.25% and 47.56% of the Group’s total assets as of December 31, 2012 and 2011,
respectively, expanded by P68.34 billion (or 14.94%). Receivables from customers grew by P71.29 billion, with growth
coming from corporate and consumer loans. Unquoted debt securities on the other hand, declined by P4.69 billion due to
various redemptions and disposals during the year.
Investments in Associates and a Joint Venture went down by P1.79 billion (or 10.76%) resulting from the reclassification to
non-current asset held for sale of the Bank’s investment in TMPC and the P314.0 million deposit for the future stock
subscription of FMIC in Cathay International Resources Corporation which was returned in December 2012. However, this
was offset by the cost of additional investments made by FMIC; the recorded share in net income of associates net of cash
dividends received; and the Group’s share in net unrealized gain on AFS investments of associates.
Property and Equipment increased by P1.41 billion (or 10.10%). Acquisitions of IT equipment and new availments under
the operating lease agreement of a subsidiary contributed to the P1.0 billion increase in FFE while bank premises
renovations and constructions caused the P0.31 billion increase in building under construction. Non-Current Asset Held For
Sale represents the 30% ownership of the Bank in TMPC reclassified from Investment in Associates and a Joint Venture, of
which 15% was sold in December 2012. The balance of P1.10 billion as of December 31, 2012 represents the remaining
15% ownership of the Bank in TMPC. Details of the Bank’s divestment of TMPC shares are discussed in Notes 13 of the
audited financial statements of the Group as presented in Exhibit 3.
Deposit liabilities represent 80.12% and 80.37% of the consolidated total liabilities as of December 31, 2012 and 2011,
respectively. The Group’s deposit level, sourced mainly by the Bank, PSBank and MBCL reached P738.69 billion as of
December 31, 2012, higher by P57.70 billion (or 8.47%), from P680.99 billion as of December 31, 2011. Demand and
savings deposits grew by 36.91% to P106.23 billion and 7.78% to P305.03 billion, respectively. Time deposits likewise
went up by 2.20% to P327.43 billion.
Bills Payable and SSURA which represents 10.53% and 11.76% of the Group’s total liabilities as of December 31, 2012 and
2011, respectively, decreased by P2.55 billion (or 2.56%). Interbank borrowings with foreign and local banks which are
mainly short-term borrowings increased by P5.05 billion (or 21.77%) while balance of SSURA decreased by P7.63 billion.
The increment of P3.87 billion (or 136.80%) in Derivative Liabilities came from the movements in fair values of derivative
financial instruments, primarily from cross currency swap, foreign currency forward and interest rate swap transactions of
the Bank.
The increase of P0.88 billion (or 33.68%) in Manager’s Checks and Demand Drafts Outstanding resulted from normal
banking operations of the Bank and PSBank. Income taxes payable increased by 122.11% to P1.33 billion as a result of
higher taxable income in 2012. The increase of P1.14 billion (or 15.86%) in Accrued Interest and Other Expenses was due
to the increase in accrual for various expenses which include among others, accruals for salaries and other employee
benefits, rentals, taxes, insurance on deposits, professional fees, advertisements and IT expenses.
The P6.88 billion (or 147.03%) increase in Bonds Payable represents scripless fixed rate corporation bonds issued by FMIC
on August 10, 2012, in addition to the P5.0 billion bonds issued in 2011, with face value totaling to P7.0 billion and fixed
rates of 5.5% and 5.75% per annum. Subordinated Debt decreased by 27.83% from P19.74 billion to P14.24 billion. On
October 22, 2012, the Bank exercised its call option and redeemed the P8.5 billion 2017 Lower Tier 2 Peso Notes. PSBank,
on the other hand, issued a 10-year Peso Notes on February 20, 2012 with face value of P3.0 billion and bear interest at
5.75% per annum.
Deferred Tax Liabilities went up by P0.09 billion (or 55.41%) due to the deferred tax liability recognized by Orix Metro and
FMIC. Other Liabilities increased by 39.36% to P40.24 billion primarily due to higher balances of bills purchased (with
contra account classified under Loans and Receivables) by P4.52 billion; marginal deposits by P1.47 billion; retirement
liability by P1.40 billion; and deposits on lease contracts by P0.24 billion.
Equity attributable to equity holders of the Bank went up to P117.73 billion in 2012, P9.67 billion (or 8.95%) higher than the
P108.06 billion balance in 2011. Surplus Reserves increased by P0.11 billion (or 10.58%) as a result of the Bank’s
additional appropriations for trust business and self-insurance in 2012. Surplus improved to P48.42 billion at the end of
2012, up by P12.71 billion (or 35.58%) from the previous year’s balance of P35.71 billion. The increase is attributable to the
P15.40 billion net income generated by the Group in 2012, net of the 5% cash dividends of P2.11 billion and the two semi-
26
annual coupon payments on HT1 capital securities totaling to US$11.25 million paid by the Bank during the year.
Remeasurement losses on retirement plan increased by P0.55 billion (or 37.74%) from a loss of P1.46 billion as a result of
increase in actuarial losses from experience adjustments and change in actuarial assumptions, computed based on the revised
PAS 19. Net Unrealized Gain on AFS Investments decreased by P2.02 billion (or 45.31%) caused by the various disposals
of AFS investments and fair value movements. The Group took advantage of the favorable market during the year. Equity
in net unrealized gain on AFS investments of associates increased by P0.32 billion (or 74.83%) as a result of the net
unrealized gains recognized by FMIC. Translation Adjustment and Others went down by P0.84 billion. Exchange
differences arising on the translation of the HT1 capital securities, foreign currency-denominated assets and liabilities of
foreign subsidiaries and the FCDU of the Bank and PSBank are taken directly to this account.
The increase of P0.29 billion or 4.37% in non-controlling interest was attributable to the net income generated by the
majority-owned subsidiaries, net of the cash dividend declared for the year and the effect of the reduction in the net
unrealized gain on AFS investments.
Net income attributable to equity holders of the Bank reached P15.40 billion for the year 2012, P4.37 billion (or 39.60%)
higher than the P11.03 billion net income recorded for the year 2011. As a result, return on average equity (ROE) improved
to 13.64% from 11.27% in 2011. Likewise, return on average assets (ROA) went up to 1.53% from 1.19%. The increase
was mainly attributed to the improvement in net interest income by P1.42 billion, other operating income by P6.53 billion
and share in net income of associates and a joint venture by P1.13 billion. On the other hand, total operating expenses and
provision for income tax increased by P3.33 billion and P0.31 billion, respectively.
Net Interest Income which represents 54.06% of the Group’s total operating income increased to P30.85 billion for the year
2012, up by P1.42 billion (or 4.81%) from P29.44 billion in 2011. Interest income was lower by P0.05 billion (or 0.12%)
while interest expense went down by P1.47 billion (or 9.40%). The decline in interest income was due to lower interest from
deposits with banks and others by P4.41 billion (or 77.58%), mainly due to the removal of interest on deposits maintained
with the BSP for the reserve requirement, while interest from loans and receivables, trading and investment securities and
interbank loans receivable and SPURA increased by P3.69 billion (or 12.72%), P0.57 billion (or 5.76%) and P0.09 billion
(or 20.31%), respectively. On the other hand, the drop in interest expense was caused by the lower interest on deposit
liabilities by P1.48 billion (or 14.44%).
Other operating income representing 45.94% of the Group’s total operating income went up to P26.22 billion or higher by
P6.53 billion (or 33.14%), from P19.70 billion in 2011. This was driven by the steady growth in fee-based revenues which
improved by P0.46 billion, earnings from treasury and investment activities which increased by P2.45 billion and higher
profit realized from sale of assets which went up by P0.23 billion.
Total Operating Expenses went up by P3.33 billion (or 9.65%) to P37.85 billion in 2012, from P34.52 billion in 2011.
Significant movements were noted in compensation and fringe benefits by P1.10 billion (or 8.23%), taxes and licenses by
P0.66 billion (or 14.37%) and miscellaneous expenses by P0.68 billion (or 8.00%). In addition, provision for credit and
impairment losses also increased by P0.66 billion (or 17.13%).
Share in Net Income of Associates and a Joint Venture went up by P1.13 billion (or 79.06%) on account of the increase in
the net income of certain associates.
Provision for Income Tax increased by P0.31 billion (or 8.87%) in 2012 coming from higher corporate income tax by P0.98
billion brought about by higher taxable income during the year, offset by the P0.29 billion decrease in final tax.
Income attributable to non-controlling interest amounted to P2.52 billion in 2012, which went up by P1.06 billion (or
72.47%) from P1.46 billion in 2011 on account of the improvements on the results of operations of certain majority-owned
subsidiaries.
Total comprehensive income went down by P3.66 billion from P16.74 billion in 2011 to P13.08 billion in 2012, due to the
net effect of the P5.43 billion increase in the net income of the Group and the decreases in net unrealized gain on AFS
investments and translation adjustments of P6.25 billion and P2.46 billion, respectively. For the year ended December 31,
2012, total comprehensive income attributable to equity holders of the Bank went down to P12.26 billion from P14.93
billion in 2011.
Market share price as of December 31, 2012 improved to P102.00 from P67.95 in 2011 resulting in a market capitalization
of P215.36 billion as at December 31, 2012.
27
Key Variable and Other Qualitative and Quantitative Factors
Plans for 2014
Further enhancing on its medium-term plan, the Bank will continue to build on its recent successes by implementing
strategies focused on (a) increasing volume and market share through improved products and services, (b) increasing
operational efficiency, and (c) becoming an employer of choice with continuous enhancements for its employees and the
organization.
From a business perspective, the Bank will continue to balance compliance to regulatory requirements with opportunities
from key customer segments. It shall develop new products and services to promote internal synergies as well as create a
stronger retail banking and wealth management platform. These are expected to complement the already stable corporate and
commercial franchise.
The Bank seeks to further enhance the customer experience by improving service delivery and creating customized value
adding solutions. To enable this, the Bank is developing an improved Core Banking system and a business analytics module.
The Bank will continue to invest in people and technology to support business growth.
•
The Bank continues to train employees in technical, analytical, sales and behavioral programs primarily to improve
their management skills. This has created a pool of qualified employees for succession planning and higher
responsibilities. Employee key result areas (KRAs) are continuously being aligned to meet corporate objectives. This
approach challenges the organization to always perform at the highest level.
•
The Bank will again evaluate areas where automation is needed and where process improvements can be implemented.
This should help achieve operational efficiency and contribute to enhancing the overall customer experience.
To remain relevant in the growth areas of the Philippines, the Bank will continue to pursue its branch expansion strategy.
Since 2012, the Bank opened a total of 71 branches on a consolidated basis, bringing its total domestic network to 856
branches, the largest in the industry. The Bank will also actively seek partners to expand the coverage of its remittance
centers and agents.
From a risk management perspective, the Bank will actively prepare for new banking regulations. With capital requirements
under Basel III, it shall closely monitor the Bank’s core businesses and those of its subsidiaries, allied-undertakings, and
affiliates, with the view of increasing revenues via non-risk weighted assets, particularly through remittance, trade,
insurance, and other fee-based streams.
Capital position
The Bank will continue to actively improve on the Group's strong capital position. The Bank has benefited from significant
capital markets transactions and corporate restructuring in the past. In 2006, the Bank issued U.S.$125.0 million Hybrid Tier
1 capital security in February and 173,618,400 common shares at P38.00 per common share in October. The Bank issued
subordinated notes in October 2007 for P8.5 billion with a coupon of 7.0%; in October 2008 for P5.5 billion with a coupon
of 7.75%; and in May 2009 for P4.5 billion with a coupon of 7.5%. In May 2010, the Bank raised an additional P5.0 billion
in capital through a private placement of common shares. In January 2011, the Bank raised approximately U.S.$220.0
million through a rights offer for 200 million common shares at the offer price of P50.00 per rights share. In August 2013,
the Bank increased its capital stock from P50 billion to P100 billion and on September 16, 2013, it issued a stock dividend
equivalent to 633,415,805 common shares (with a par value of P20) that was applied as payment of the required subscription
to the increase in capital stock, which further improved the Bank’s capital position.
Basel III penalizes banks for their holdings in non-allied undertakings. As such, the Group has actively sought to divest
itself of such undertakings and strengthen its standing under Basel III. As a result of the Bank’s sale of its ownership in
TMPC to GT Capital in the fourth quarter of 2012 and the first quarter of 2013 as well as the partial sale of the FMIC’s
holdings in GBPC in the second and fourth quarters of 2013, the Bank has been able to increase its CAR position under
Basel III. The Bank continues to review its holdings in non-allied undertakings and may sell additional stakes in the near
term.
The Bank also took measures to redeem previously issued subordinated debt issuances. The Bank exercised the call option
on its P8.5 billion 7.0% and P5.5 billion 7.75% Lower Tier 2 Notes on October 22, 2012 and October 4, 2013, respectively.
The early redemptions of these instruments are in accordance with the terms and conditions of the notes which were
originally issued on October 19, 2007 and October 3, 2008, respectively. By redeeming the notes, the Bank is avoiding a
step-up in the interest rate and the capital decay from the instruments.
28
2013 Economic Performance
The Philippine economy once again put on a strong performance, posting remarkable expansions in the first three quarters of
the year. Year-to-date average GDP growth came in at 7.4%, second fastest growth in the ASEAN region including China.
Economic growth was mainly supported by solid personal consumption spending, higher investment spending, robust
services sector, a rebound in the industry sector, and improvement in external trade. On the demand side, consumption
spending posted a year-to-date growth of 5.6%, supported by robust OFW remittances amid a low inflation environment.
Investment spending or fixed capital investment posted a growth of 24% from a contraction by 9% in the same period in
2012. Both merchandise exports and imports managed to show improvement compared to 2012 amid the progress in the
economies of some of its top trading partners. On the supply side, the industry and services sectors performed strongly. The
sustained expansions in the construction and manufacturing subsectors supported the overall industry sector growth, while a
general expansion across all sub-sectors propelled overall services sector growth.
Inflation came in lower to average 3% from 3.2% the previous year amid stable global and domestic commodity prices.
Full-year inflation still came within the government’s target range of 3% to 5% for 2013. Amid muted inflationary pressure,
the BSP decided to keep policy rates steady at 3.5% for the RRP facility and 5.5% for the RP facility.
The National Government’s fiscal gap narrowed to P111.5 billion in the January to November period, significantly lower
than the P238 billion deficit ceiling, amid the government’s prudent fiscal management. Revenue collections and
expenditures both grew 11% and 9%, respectively.
It was a roller-coaster ride for the domestic financial market with marked ups and downs throughout the year. Many
emerging economies experienced a sharp fall in currency and capital markets because of the US Federal Reserve’s plans to
taper quantitative easing. The PSEi managed to post a modest 1.3% rise for the year, with the index hitting its lowest point
of 5,562.13 in August. The Philippine Peso, along with other emerging Asian currencies, ended the year lower by 9% from
the start of the year close of P40.86.
Nevertheless, economic prospects continue to be positive for the Philippine economy given its solid macroeconomic
fundamentals. External risks remain amid the tapering of the US QE program, slackening in some emerging economies, and
continuing troubles in Europe’s credit markets.
Liquidity
To ensure that funds are more than adequate to meet its obligations, the Bank proactively monitors its liquidity position
daily. Based on this system of monitoring, the Bank does not anticipate having any cash flow or liquidity problem within the
next twelve months. As of December 31, 2013, the contractual maturity profile shows that the Bank has at its disposal about
P580 billion of cash inflows in the next twelve (12) months from its portfolio of cash, placements with banks, debt securities
and receivable from customers. This will cover 66% of the P882 billion total deposits that may mature during the same
period. These cash inflows exclude AFS investments with maturities beyond one (1) year but may easily be liquidated in an
active secondary market. Inclusive of these securities, the total financial assets will cover 91% of the total deposits that may
mature during the same period. On the other hand, historical balances of deposits showed that no substantial portion has
been withdrawn in one year.
Events That Will Trigger Material Direct or Contingent Financial Obligation
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. No material losses are anticipated as a result of these
transactions.
In September 2008, the Bank filed petitions for rehabilitation against two Philippine subsidiaries of Lehman Brothers
Holdings, Inc. (Lehman) in connection with a combined =
P2.4 billion loan exposure. These came as a result of the
declaration of bankruptcy filed by Lehman, a surety under the loan agreements. The rehabilitation plans were duly approved
by the Rehabilitation Court (RC). A Management Committee was created for each of the two (2) Lehman subsidiaries and
these Management Committees oversaw and managed the company assets until their abolition in July 2012. In lieu thereof,
the RC appointed a Comptroller who was nominated by the Bank. Earlier, in April 2012, the RC resolved to recognize the
new equity holder in Philippine Investment One (SPV-AMC), Inc. (PI One) and Philippine Investment Two (SPV-AMC),
Inc. (PI Two). On October 31, 2012, the Parent Company and PI One and PI Two (thru the new equity holder) entered into a
universal compromise agreement to settle the issues among the parties. Said compromise bears the conformity of the
Rehabilitation Receiver. On August 30, 2013, the RC issued an Order excluding another creditor bank as a creditor of PI
Two entitled to payments under the approved Rehabilitation Plan. The Court of Appeals, however, issued a Temporary
Restraining Order enjoining the RC from enforcing such Order upon a petition filed before it by this creditor bank. In
November 2013, the Court of Appeals issued a resolution denying this creditor bank’s application for the issuance of a writ
of preliminary injunction and accordingly, upheld the RC’s order excluding it as creditor of PI Two.
On October 17, 2011, a consortium of eight banks including the Bank filed a Petition for Certiorari, Prohibition and/or
Mandamus (with Urgent Application for a Temporary Restraining Order (TRO) and/or Writ of preliminary Injunction) with
29
the Supreme Court (SC) against respondents the ROP, Bureau of Internal Revenue (BIR) and its Commissioner, the
Department of Finance and its Secretary and the Bureau of Treasury (BTr) and the National Treasurer, asking the Court to
annul BIR Ruling No. 370-2011 which imposes a 20-percent final withholding tax on the 10-year Zero-Coupon Government
Bonds (also known as the PEACe bonds) that matured on October 18, 2011 and command the respondents to pay the full
amount of the face value of the PEACe Bonds. On October 18, 2011, the SC issued the TRO enjoining the implementation
of the said BIR ruling on the condition that the 20-percent final withholding tax be withheld by the petitioner banks and
placed in escrow pending resolution of the Petition. However, to date, the respondents have not complied with the said
TRO, i.e., they have not credited the banks’ escrow accounts with the amount corresponding to the questioned 20-percent
final tax. The case is still pending resolution with the SC.
Several suits and claims relating to the Group’s lending operations and labor-related cases remain unsettled. In the opinion
of management, these suits and claims, if decided adversely, will not involve sums having a material effect on the Group’s
financial statements.
Material Off-Balance Sheet Transactions, Arrangements or Obligations
The following is a summary of contingencies and commitments of the Group at their peso-equivalent contractual amounts
arising from off-balance sheet items as of December 31, 2013 and 2012 (in millions):
Trust Banking Group accounts
Commitments
- Credit card lines
- Underwriting
- Undrawn – facilities to lend
Unused commercial letters of credit
Bank guaranty with indemnity agreement
Credit line certificate with bank commission
Late deposits/payments received
Outstanding shipside bonds/airway bills
Inward bills for collection
Outward bills for collection
Outstanding guarantees
Confirmed export letters of credits
Traveler’s check unsold
Others
2013
P
=324,839
2012
=420,440
P
69,595
1,835
32,641
6,777
5,206
2,082
936
903
443
78
72
12,360
P
=457,767
55,247
1,200
415
29,284
4,071
5,444
1,709
1,147
886
520
80
69
11
5,324
=525,847
P
Other Relationships of the Registrant with Unconsolidated Entities or Other Persons
The Group has ownership in the following significant unconsolidated entities as of December 31, 2013:
Effective
% of Ownership
Lepanto Consolidated Mining Company
Sumisho Motor Financing Corporation*
Toyota Financial Services Philippines Corporation
Northpine Land, Inc.
SMBC Metro Investment Corporation
Taal Land, Inc.
Cathay International Resources Corporation
Philippine AXA Life Insurance Corporation
Charter Ping An Insurance Corporation
16.80%
30.39%
34.00%
20.00%
30.00%
35.00%
34.73%
27.96%
33.07%
* Represents investments in a joint venture of the Group.
Material Commitments for Capital Expenditures
In 2013, the Bank incurred about P946.7 million for capital expenditures, of which P782.6 million and P164.1 million were
incurred for furniture, fixtures and equipment (including information technology) and land, buildings and leasehold
improvements, respectively. Information technology–related expenditures include upgrades of personal computers, central
processing units, automatic tellering machine tandem hosts, corporate local area networks, servers, and on-line back-up
recovery centers as required by the BSP. Capital expenditures were sourced from the Bank’s working capital.
30
For the year 2014, the Bank estimates to incur capital expenditures of about P2.5 billion, of which P1.2 billion is estimated
to be incurred for information technology. This amount is not considered material to the Bank’s operations.
Significant Elements from Continuing Operations
Standards Issued But Not Yet Effective
Standards issued but not yet effective up to date of issuance of the Group’s financial statements are listed in Note 2 of the
audited financial statements of the Group as presented in Exhibit 3. The listing consists of standards and interpretations
issued, which the Group reasonably expects to be applicable at a future date. The Group intends to adopt these standards
when they become effective. Except as otherwise indicated, the Group does not expect the adoption of these new and
amended PFRS and Philippine Interpretations to have significant impact on its financial statements. The Group will assess
impact of these amendments on its financial position or performance when they become effective.
Information on Independent Accountant
1.
SGV has been the external auditors of the registrant since 1962. In compliance with the amended SRC Rule 68 (3) (b)
(ix), the signing partners are rotated after every five years reckoned from the year 2002. The following SGV Partners
have reviewed/audited the financial statements of the registrant and signed the reports of the independent auditors for
the years ended as indicated below:
SGV Partner
Mr. Aris C. Malantic
Ms. Vicky B. Lee-Salas
Years Ended December 31
2013 and 2012
2012 and 2011
2011 and 2010
2010 and 2009
2009 and 2008
2008 and 2007
2007 and 2006
2.
The Bank intends to retain SGV as its external auditors for the year 2014. The external auditors are appointed annually
by the registrant’s Board of Directors in its organizational meeting held immediately after the Annual Stockholders’
Meeting.
3.
The aggregate fees billed and paid for each of the last two fiscal years for professional services rendered by the
registrant’s external auditors are summarized below:
Nature of Services Rendered
Audit and
Audit-Related
Fees
All Other Fees
Total Fees
Annual audit of the Consolidated, Parent Company and FCDU Financial
Statements in connection with statutory and regulatory filings, including the
Combined Financial Statements of Trust and Managed Funds Operated by the
Trust Banking Group with Supplementary Combining Information.
Seminar fees, consultancy and valuation services.
Aggregate Fees
(in millions)
2013
2012
P7.09
P7.09
P7.40
3.27
P10.67
Audit Committee’s Approval Policies and Procedures for Above Services
The Institutional Accounting Division of the Bank’s Controllership Group, upon consultation with the Controller, Financial
and Control Sector Head and the President, reviews the continuing eligibility of the Bank’s external auditors and/or other
probable candidates, considering certain criteria, during the first quarter of each year for appointment by a majority vote of
the BOD on its first meeting after the annual stockholders’ meeting held on any day in April or May of each year.
Upon selection by the Controller, Financial and Control Sector Head and the President, the recommendation for hiring of the
preferred external auditors shall be presented by the Controller to the AC, who shall then evaluate and endorse the
appointment of the external auditors to the BOD for approval as authorized by the stockholders. This shall be included by
the Corporate Secretary in the agenda of the organizational meeting of the BOD held immediately after the Annual
Stockholders’ Meeting.
31
Appointment of Members and Composition of the Audit Committee
The members of the AC are appointed annually by the BOD of the registrant. It shall be composed of at least three (3) board
members, at least two (2) of whom shall be independent directors, including the Chairman, preferably with accounting and
finance experience, and one (1) of whom shall have related audit experience commensurate with the size, complexity of
operations and risk profile of the Bank. The registrant’s AC is composed of the following:
Names of Members
Renato C. Valencia
Remedios L. Macalincag
Vicente B. Valdepeñas, Jr.
Francisco F. Del Rosario, Jr.
Amelia B. Cabal
Antonio S. Abacan, Jr.
Cornelio C. Gison
Designation - Audit Committee
Chairman
Vice-Chairman
Member
Member
Member
Adviser
Adviser
Designation - Registrant
Independent Director
Director
Chairman, Board of Advisers
Board Adviser
As provided in its amended charter, one of the duties and responsibilities of the AC is to exercise effective oversight of
external audit functions. With respect to the registrant’s independent external auditors, the AC is responsible to:
1.
2.
3.
Appoint and terminate the independent external auditors;
Review the annual plan (including scope and frequency) of the external auditors;
Discuss with external auditors before the audit commences the nature, scope and expenses of the audit, and ensure
coordination where more than one audit firm is involved;
4. Review independent external auditors’ report on the results of the audit of the annual financial statements before these
are submitted to the BOD for approval, focusing particularly on any change/s in accounting policies and procedures,
major estimates, assumptions and judgmental areas, unusual or complex transactions, significant adjustments, material
errors and fraud, going concern assumption, compliance with accounting standards, and compliance with tax, legal and
regulatory requirements;
5. Review reports of external auditors and ensure that Management is taking appropriate corrective actions, in a timely
manner in addressing control weaknesses and non-compliance with policies, laws and regulations and other issues
identified by auditors;
6. Keep the nature and extent of non-audit services provided by the external auditors under review and disallow any nonaudit work that will conflict with or pose a threat to the independence of the external auditors;
7. Meet with the lead audit partner and other members of the audit team as necessary, without the presence of
management, to discuss issues arising from the audit and any other matters that the external auditors may wish to raise
with the AC and vice versa;
8. Conduct regular performance appraisal of external auditors;
9. Ensure that the external auditors shall have free and full access to all the Bank’s records, properties and personnel
relevant to the audit activity, and that audit be given latitude in determining the scope, performing work, and
communicating results and shall be free from interference by outside parties in the performance of work; and
10. Recommend necessary enhancements in the audit processes.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
SGV & Co. has been the external auditors of the Bank since 1962 with engagement partner being changed every five (5)
years effective 2002 in accordance with SEC and BSP regulations. There have been no disagreements with the Bank’s
independent accountants on any matter of accounting principles or practices, financial statement disclosures, or auditing
scope or procedure.
Material Subsequent Events
1.
In January 2014, FMIC sold =
P3.8 billion of its AFS investments previously classified under HTM investments, as
discussed in Note 8 of the audited financial statements of the Group, and recognized trading gains of =
P526.3 million.
2.
On October 23, 2013, the BOD of Orix Metro approved the declaration of a 20% stock dividend amounting to =
P252.9
million or =
P20.00 per share based on par value of =
P100.00 to all stockholders of record as of even date. This was
approved by the BSP on January 14, 2014 and issued by ORIX Metro on January 15, 2014.
3.
On January 24, 2014, the BOD of PSBank declared a 7.50% cash dividend for the fourth quarter of 2013 amounting to
=
P180.2 million or =
P0.75 per share to all stockholders as of date to be determined upon BSP approval.
4.
On January 27, 2014, FMIC sold 33.3% of its ownership in Charter Ping An to GT Capital at a consideration of =
P712.0
million which resulted in a gain of P
=210.0 million, as approved by the BOD on January 23, 2014.
32
5.
On January 30, 2014, the BSP approved the amendment to the terms and conditions of the Bank’s issuance of Basel IIIcompliant Tier 2 capital notes as discussed in Note 20 of the audited financial statements of the Group as presented in
Exhibit 3. Specifically, the BSP approved the issuance of up to USD500 million equivalent in either USD or PHP or
combination in one or more tranches over the course of one (1) year.
6.
On February 10, 2014, the BSP approved the semi-annual coupon payment on HT1 Capital amounting to USD 5.6
million which the Bank paid on February 18, 2014.
7.
On February 18, 2014, the BOD approved the Bank’s exercise of the call option on its =
P4.5 billion Lower Tier 2 Peso
Notes on May 6, 2014.
Others
As of December 31, 2013, the Group has no significant matters to report on the following:
1.
Known trends, events or uncertainties that would have material impact on liquidity and on the sales or revenues.
2.
Explanatory comments about the seasonality or cyclicality of operations.
3.
Issuances, repurchases and repayments of debt and equity securities except for the exercise of the call option on the
2018 Peso Notes and issuance of common stock by the Bank and for the exercise of the call option on the 2019 Peso
Notes and the issuance of the 2023 Peso Notes by MCC as discussed in Notes 20 and 23 of the audited financial
statements of the Group as presented in Exhibit 3.
4.
Unusual items as to nature, size or incidents affecting assets, liabilities, equity, net income or cash flows except for the
payments of cash dividend and semi-annual coupons on the HT1 Capital as discussed in Note 23 of the audited
financial statements of the Group as presented in Exhibit 3.
5.
Effect of changes in the composition of the Group, including business combinations, acquisition or disposal of
subsidiaries and long-term investments, restructurings, and discontinuing operations except for the establishment of MR
Japan, a wholly-owned subsidiary, as discussed in Note 2 and sale of certain investees company as discussed in
Note 11 of the audited financial statements of the Group as presented in Exhibit 3.
SEC FORM 17-A (ANNUAL REPORT)
A copy of SEC Form 17-A (2013 Annual Report) will be provided free of charge upon written
request addressed to:
Assistant Corporate Secretary
Metropolitan Bank & Trust Company
11/F Metrobank Plaza, Sen. Gil J. Puyat Avenue, 1200 Makati City
PART IV – SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this report is
true, complete and correct.
This report is signed in the City of Makati on March 31, 2014.
Registrant
By:
Assistant Corporate Secretary
Exhibit A
METROPOLITAN BANK & TRUST COMPANY AND SUBSIDIARIES
FINANCIAL INDICATORS
AS OF DECEMBER 31, 2013 AND 2012
2013
2012
a)
Liquidity Ratio
51.65%
42.94%
b)
Loans to Deposits Ratio
60.14%
71.15%
c)
Debt to Equity Ratio
916.22%
783.07%
d)
Asset to Equity Ratio
1022.02%
889.00%
e)
Return on Average Equity
17.80%
13.64%
f)
Return on Average Assets
1.85%
1.53%
g)
Net Interest Margin on Average Earning Assets
3.90%
3.62%
h)
Operating Efficiency Ratio
49.13%
58.47%
i)
Capital Adequacy Ratio
16.65%
16.29%
RECONCILIATION OF SURPLUS AVAILABLE FOR DIVIDEND DECLARATION *
AS OF DECEMBER 31, 2013
(In P Millions)
UNAPPROPRIATED SURPLUS AS ADJUSTED TO AVAILABLE FOR
DIVIDEND DISTRIBUTION AT BEGINNING OF YEAR
P
13,757
Add: Net income actually earned/realized during the year:
16,714
Net income during the year closed to Surplus
Less: Non-actual/unrealized income net of tax:
Unrealized foreign exchange gain-net
Fair value adjustment (mark-to-market gains)
Other unrealized gains or adjustments to retained earnings
as result of certain transactions accounted for under PFRS
5
5,259
346
5,610
Net income actually earned during the year
11,104
Add(Less):
Dividend declarations during the year
Stock dividend
Appropriations of Retained Earnings during the year
Effect of change in accounting for retirement benefits (PAS 19)
Others (coupon payment of hybrid capital securities)
UNAPPROPRIATED SURPLUS AVAILABLE FOR DIVIDEND DISTRIBUTION AT END OF YEAR
* The computation of surplus available for dividend declaration in accordance with SEC
Memorandum Circular No. 11 issued in December 2008 differs to a certain extent from
the computation following Bangko Sentral ng Pilipinas guidelines.
(2,111)
(12,668)
(127)
(312)
(475)
(15,693)
P
9,168 *
Subsidiaries and Associates
As of December 31, 2013
(Metrobank)
ASSOCIATES
SUBSIDIARIES
First Metro Investment
Corporation (FMIC)
and subsidiaries, associates
and a joint venture
(Refer to
separate sheet
for FMIC's
organizational
structure)
Metro Remittance (Hongkong)
Limited
Metro Remittance (Singapore)
Pte. Ltd.
Philippine Savings Bank
(PSBank)
and a joint venture and an
associate
SMBC Metro
Investment
Corporation
Toyota Financial
Services Philippines
Corporation
Northpine Land, Inc.
Taal Land, Inc.
Metro Remittance (USA), Inc.
Metro Remittance Center, Inc.
and subsidiaries
(Refer to
separate sheet
for PSBank's
organizational
structure)
MB Remittance Center
(Hawaii), Ltd.
Metro Remittance
(Canada), Inc.
Metrobank Card Corporation
(A Finance Company)
Metro Remittance (UK) Limited
ORIX Metro Leasing and
Finance Corporation
(ORIX METRO)
and subsidiaries
(Refer to separate
sheet for ORIX
METRO's
organizational
structure)
Metro Remittance (Japan) Co.,
Ltd.
Metro Remittance (Italia),
S.p.A.*
Metropolitan Bank (China) Ltd.
Philbancor Venture Capital
Corporation *
Metropolitan Bank (Bahamas)
Limited
Circa 2000 Homes, Inc.*
First Metro International
Investment Company
Limited, and a subsidiary
MBTC Technology, Inc.*
Golly Investments
Limited
* In the process of dissolution
First Metro Investment Corporation
Subsidiaries, Joint Venture and Associates
First Metro Investment Corporation
(FMIC)
SUBSIDIARIES
First Metro Securities
Brokerage
Corporation
PBC Capital
Investment
Corporation
Prima Ventures
Development
Corporation
JOINT VENTURE
ASSOCIATES
Cathay
International
Resources
Corporation
Aurora Towers,
Inc.
Skyland Realty
Development
Corporation
Charter Ping An
Insurance
Corporation
FMIC Equities,
Inc.
Dahon Realty
Corporation
First Metro Insurance
Brokers Corporation
SBC Properties,
Inc.
First Metro Global
Opportunity Fund,
Inc.
First Metro Save &
Learn Dollar Bond
Fund, Inc.
Philippine Axa
Life Insurance
Corporation
Resiliency (SPC),
Inc.
Refer to
Metrobank's
ownership
(separate
sheet)
First Metro Asset
Management,
Inc.
First Metro
Philippine Equity
Exchange Traded
Fund, Inc.
First Metro Save
& Learn Fixed
Income Fund,
Inc.
First Metro Save &
Learn Balanced
Fund, Inc.
First Metro Save
& Learn Equity
Fund, Inc.
Orix Metro
Leasing and
Finance
Corporation
(ORIX METRO)
and subsidiaries
First Metro
International
Investment
Company Limited,
and a subsidiary
Refer to
Metrobank's
ownership
(separate
sheet)
Lepanto
Consolidated
Mining Company
Joint Venture and Associate
(PSBank)
JOINT VENTURE
Sumisho Motor Finance
Corporation
ASSOCIATE
Toyota Financial
Services Philippines
Corporation
Refer to
Metrobank's
ownership
(separate sheet)
ORIX Metro Leasing and Finance Corporation (ORIX METRO)
Subsidiaries
ORIX Metro Leasing and
Finance Corporation
(ORIX METRO)
OMLF
International
Trading and
Development
Corporation
OMLF Servicer
Corporation
ORIX Rental
Corporation
ORIX Auto
Leasing
Philippines
Corporation
OMLF Insurance
Agency, Inc.
Metropolitan Bank & Trust Company and Subsidiaries
Schedule of All the Effective Standards and Interpretations
December 31, 2013
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of December 31, 2013 Framework for the Preparation and Presentation of Financial Statements Conceptual Framework Phase A: Objectives and qualitative characteristics PFRSs Practice Statement Management Commentary Philippine Financial Reporting Standards PFRS 1 First‐time Adoption of Philippine Financial Reporting (Revised) Standards Amendments to PFRS 1 and PAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate Amendments to PFRS 1: Additional Exemption for First‐time Adopters Amendments to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for First‐time Adopters Amendments to PFRS 1: Severe Hyperinflation and Removal of Fixed Date for First‐time Adopters Amendments to PFRS 1: Government Loans Amendment to PFRS 1: Meaning of Effective PFRSs PFRS 2 Share‐based Payment Amendments to PFRS 2: Vesting Conditions and Cancellations Amendments to PFRS 2: Group Cash‐settled Share‐based Payment Transactions Amendment to PFRS 2: Definition of Vesting Condition PFRS 3 (Revised) Business Combinations Amendment to PFRS 3: Accounting for Contingent Consideration in a Business Combination Amendment to PFRS 3: Scope Exceptions for Joint Arrangements PFRS 4 PFRS 5 PFRS 6 PFRS 7 Insurance Contracts Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts Non‐current Assets Held for Sale and Discontinued Operations Exploration for and Evaluation of Mineral Resources Financial Instruments: Disclosures Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets ‐ Effective Date and Transition Amendments to PFRS 7: Improving Disclosures about Financial Instruments Amendments to PFRS 7: Disclosures ‐ Transfers of Financial Assets Amendments to PFRS 7: Disclosures ‐ Offsetting Financial Assets and Financial Liabilities Amendments to PFRS 7: Mandatory Effective Date of PFRS 9 and Transition Disclosures Adopted 3 3 Not Adopted Not Applicable 3 3 3 3 3 3 3 3 3 3 Effective 07/01/14 (Not early adopted) 3 Effective 07/01/14 (Not early adopted) 3 Effective 07/01/14 (Not early adopted) 3 3 3 3 3 3 3 3 3 Amendments to PFRS 7: Additional hedge accounting disclosures (and consequential amendments) resulting from the introduction of the hedge accounting chapter in PFRS 9 PFRS 8 Operating Segments 3 Effective date of PFRS 9 was subsequently removed (Not early adopted) Revised version of PFRS 9 has no stated mandatory effective date (Not early adopted) PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of December 31, 2013 Amendments to PFRS 8: Aggregation of Operating Segments and Reconciliation of the Total of the Reportable Segments’ Assets to the Entity’s Assets PFRS 9 Financial Instruments Amendments to PFRS 9: Mandatory Effective Date of PFRS 9 and Transition Disclosures Adopted Not Adopted Effective 07/01/14 (Not early adopted) PFRS 10 PFRS 11 PFRS 12 PFRS 13 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 Effective 07/01/14 (Not early adopted) 3 3 3 3 3 Joint Arrangements Disclosures of Interests in Other Entities Amendments to PFRS 12: Investment Entities 3 3 Fair Value Measurement Amendment to PFRS 13: Short‐term Receivables and Payables 3 Amendment to PFRS 13: Portfolio Exception Philippine Accounting Standards PAS 1 Presentation of Financial Statements (Revised) Amendments to PAS 1: Capital Disclosures 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 Amendment to PAS 1: Comparative Information PAS 2 Inventories PAS 7 Statement of Cash Flows PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors PAS 10 Events after the Reporting Period PAS 11 Construction Contracts PAS 12 Income Taxes Amendments to PAS 12‐ Deferred Tax: Recovery of Underlying Assets PAS 16 Property, Plant and Equipment Amendment to PAS 16: Revaluation Method – Proportionate Restatement of Accumulated Depreciation PAS 17 Leases PAS 18 Revenue PAS 19 Employee Benefits Amendments to PAS 19: Actuarial Gains and Losses, Group Plans and Disclosures PAS 19 Employee Benefits (Amended) Amendments to PAS 19: Defined Benefit Plans: Employee Contribution PAS 20 Accounting for Government Grants and Disclosure of Government Assistance PAS 21 The Effects of Changes in Foreign Exchange Rates Amendment: Net Investment in a Foreign Operation PAS 23 Borrowing Costs (Revised) Not early adopted) Effective date of PFRS 9 was subsequently removed (Not early adopted) Effective date of PFRS 9 was subsequently removed (Not early adopted) Effective 01/01/14 (Not early adopted) Effective 01/01/14 (Not early adopted) Effective 07/01/14 (Not early adopted) Effective 07/01/14 (Not early adopted) Reissue to incorporate a hedge accounting chapter and permit early application of the requirements for presenting in other comprehensive income the “own credit” gains or losses on financial liabilities designated under the fair value option without early applying the other requirements of PFRS 9 Consolidated Financial Statements Amendments to PFRS 10: Investment Entities Not Applicable Page 2 of 4 PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of December 31, 2013 PAS 24 Related Party Disclosures (Revised) Amendments to PAS 24: Key Management Personnel Not Applicable PAS 26 PAS 27 PAS 27 (Amended) Accounting and Reporting by Retirement Benefit Plans Consolidated and Separate Financial Statements Separate Financial Statements Amendments for investment entities 3 3 PAS 28 PAS 28 (Amended) PAS 29 PAS 31 PAS 32 Investments in Associates Investments in Associates and Joint Ventures 3 Not Adopted Effective 07/01/14 (Not early adopted) Effective 01/01/14 (Not early adopted) 3 Financial Reporting in Hyperinflationary Economies Interests in Joint Ventures (Replaced by PFRS 11) Financial Instruments: Disclosure and Presentation Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation Amendments to PAS 32: Classification of Rights Issues Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities PAS 33 Earnings per Share PAS 34 Interim Financial Reporting PAS 36 Impairment of Assets Amendments to PAS 36: Recoverable Amount Disclosures for Non‐Financial Assets PAS 37 Provisions, Contingent Liabilities and Contingent Assets PAS 38 Intangible Assets Amendments to PAS 38 : Revaluation Method – Proportionate Restatement Of Accumulated Amortization PAS 39 Financial Instruments: Recognition and Measurement Amendments to PAS 39: Transition and Initial Recognition of Financial Assets and Financial Liabilities Amendments to PAS 39: Cash Flow Hedge Accounting of Forecast Intragroup Transactions Amendments to PAS 39: The Fair Value Option Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets ‐ Effective Date and Transition Amendment to Philippine Interpretation IFRIC‐9 and PAS 39: Embedded Derivatives Amendment to PAS 39: Eligible Hedged Items Amendment to PAS 39: Novation of Derivatives and Continuation of Hedge Accounting PAS 40 Investment Property Amendments to PAS 40: Clarifying the Interrelationship between PFRS 3 and PAS 40 when Classifying Property as Investment Property or Owner‐Occupied Property PAS 41 Agriculture Philippine Interpretations 3 3 3 3 3 3 3 Effective 01/01/14 (Not early adopted) Effective 01/01/14 (Not early adopted) 3 3 3 3 3 3 3 3 3 3 Effective 01/01/14 (Not early adopted) IFRIC 1 IFRIC 2 IFRIC 4 IFRIC 5 IFRIC 6 Changes in Existing Decommissioning, Restoration and Similar Liabilities Members’ Share in Co‐operative Entities and Similar Instruments Determining Whether an Arrangement Contains a Lease Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds Liabilities arising from Participating in a Specific Market ‐ Waste Electrical and Electronic Equipment Adopted 3 3 3 3 3 3 3 Effective 07/01/14 (Not early adopted) 3 3 3 3 3 3 Page 3 of 4 PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of December 31, 2013 IFRIC 7 Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies IFRIC 8 Scope of PFRS 2 (Replaced by amendments to PFRS 2) IFRIC 9 Reassessment of Embedded Derivatives Amendments to Philippine Interpretation IFRIC‐9 and PAS 39: Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment IFRIC 11 PFRS 2‐ Group and Treasury Share Transactions (Replaced by amendments to PFRS 2) IFRIC 12 Service Concession Arrangements IFRIC 13 Customer Loyalty Programmes IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Amendments to Philippine Interpretations IFRIC ‐ 14, Prepayments of a Minimum Funding Requirement IFRIC 16 Hedges of a net Investment in a Foreign Operation IFRIC 17 Distributions of Non‐cash Assets to Owners IFRIC 18 Transfers of Assets from Customers IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine IFRIC 21 Levies Adopted Not Adopted Not Applicable 3 3 3 3 3 3 3 3 3 3 3 3 3 3 Effective 01/01/14 (Not early adopted) 3 3 Introduction of the Euro Government Assistance ‐ No Specific Relation to Operating Activities 3 SIC‐12 Consolidation ‐ Special Purpose Entities 3 Amendment to SIC‐12: Scope of SIC‐12 SIC‐13 Jointly Controlled Entities ‐ Non‐Monetary Contributions by Venturers (Replaced by PFRS 11) 3 SIC‐15 Operating Leases ‐ Incentives SIC‐25 Income Taxes‐ Changes in the Tax Status of an Entity or its 3 Shareholders SIC‐27 Evaluating the Substance of Transactions Involving the Legal 3 Form of a Lease 3 SIC‐29 Service Concession Arrangements: Disclosures SIC‐31 Revenue ‐ Barter Transactions Involving Advertising Services 3 SIC‐32 Intangible Assets ‐ Web Site Costs Standards and Interpretations applicable to annual periods beginning on or after January 1, 2014 (where early application is allowed) will be adopted by the Group as they become effective. SIC‐7 SIC‐10 Page 4 of 4 3 3 3 COVER SHEET
2 0 5 7 3
SEC Registration Number
M E T R O P O L I T A N
A N D
B A N K
&
T R U S T
C OM P A N Y
S U B S I D I A R I E S
M e t r o b a n k
t
A v e n u e ,
P l a z a ,
S e n .
M a k a t i
C i t y
G i l
J .
P u y a
(Business Address: No. Street City/Town/Province)
Ms. Marilou C. Bartolome
898-8000
(Contact Person)
1 2
3 1
Month
Day
(Company Telephone Number)
A A F S
Month
(Form Type)
(Fiscal Year)
Day
(Annual Meeting)
(Secondary License Type, If Applicable)
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
Foreign
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
*SGVFS004156*
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
Metrobank Plaza, Sen. Gil J. Puyat Avenue
Makati City
Report on the Financial Statements
We have audited the accompanying financial statements of Metropolitan Bank & Trust Company and
Subsidiaries (the Group) and of Metropolitan Bank & Trust Company (the Parent Company), which
comprise the statements of financial position as at December 31, 2013 and 2012 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, 2013, and a summary of significant
accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
The Group’s management is responsible for the preparation and fair presentation of the financial
statements in accordance with accounting principles generally accepted in the Philippines for banks for
the Group and Philippine Financial Reporting Standards for the Parent Company as described in
Note 2 to the financial statements, and for such internal control as the Group’s 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 Group’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 Group’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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
*SGVFS004156*
A member firm of Ernst & Young Global Limited
-2Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Group as at December 31, 2013 and 2012 and its financial performance and its cash flows for each
of the three years in the period ended December 31, 2013 in accordance with the accounting principles
generally accepted in the Philippines for banks as described in Note 2 to the financial statements.
In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Parent Company as at December 31, 2013 and 2012 and its financial performance and its cash
flows for each of the three years in the period ended December 31, 2013 in accordance with Philippine
Financial Reporting Standards.
Report on the Supplementary Information Required Under Revenue Regulations 19-2011
and 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 19-2011 and
15-2010 in Note 38 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.
Aris C. Malantic
Partner
CPA Certificate No. 90190
SEC Accreditation No. 0326-AR-2 (Group A),
March 15, 2012, valid until March 14, 2015
Tax Identification No. 152-884-691
BIR Accreditation No. 08-001998-54-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 4225187, January 2, 2014, Makati City
February 18, 2014
*SGVFS004156*
A member firm of Ernst & Young Global Limited
STATEMENTS OF FINANCIAL POSITION
(In Millions)
Consolidated
January 1,
December 31
2012
2012
(As Restated - (As Restated Note 2)
Note 2)
2013
ASSETS
Cash and Other Cash Items
Due from Bangko Sentral ng Pilipinas
(Note 16)
Due from Other Banks
Interbank Loans Receivable and Securities
Purchased Under Resale Agreements
(Notes 7 and 33)
Financial Assets at Fair Value Through
Profit or Loss (Notes 8, 17 and 29)
Available-for-Sale Investments
(Note 8)
Held-to-Maturity Investments
(Note 8)
Loans and Receivables (Note 9)
Investments in Subsidiaries (Note 11)
Investments in Associates and a
Joint Venture (Note 11)
Property and Equipment (Note 10)
Investment Properties (Note 12)
Non-Current Asset Held For Sale (Note 13)
Deferred Tax Assets (Note 28)
Goodwill (Note 11)
Other Assets (Note 14)
LIABILITIES AND EQUITY
LIABILITIES
Deposit Liabilities (Notes 16 and 31)
Demand
Savings
Time
Bills Payable and Securities Sold Under
Repurchase Agreements (Notes 17
and 31)
Derivative Liabilities (Notes 8 and 31)
Manager’s Checks and Demand Drafts
Outstanding
Income Taxes Payable
Accrued Interest and Other Expenses
(Note 18)
Bonds Payable (Note 19)
Subordinated Debt (Note 20)
Deferred Tax Liabilities (Note 28)
Other Liabilities (Note 21)
Parent Company
January 1,
December 31
2012
2012
Note 2)
2013
P
= 29,742
P
=24,382
P
=20,954
P
= 26,532
P
=21,540
P
=16,985
166,774
26,275
131,278
22,996
156,537
32,761
143,724
8,947
111,515
7,873
146,636
13,310
122,011
23,392
24,367
96,872
15,046
3,222
55,441
72,920
8,908
36,140
57,635
4,597
273,429
123,041
143,223
226,943
102,574
115,976
38,425
611,064
–
51,451
525,895
–
47,457
457,556
–
38,358
456,895
24,882
21,491
398,563
24,922
17,464
352,042
25,399
6,274
15,756
13,125
–
7,190
5,206
7,857
P
= 1,378,569
14,868
15,345
15,422
1,102
8,871
6,409
9,271
P
=1,046,643
16,660
13,937
15,471
–
8,577
6,413
9,255
P
=962,076
578
10,296
9,504
–
6,333
–
4,696
P
= 1,090,700
578
10,321
11,898
336
7,276
1,203
6,285
P
=799,056
1,263
9,408
11,044
–
7,008
1,203
7,198
P
=732,755
P
= 150,694
362,915
502,659
1,016,268
P
=106,229
305,034
327,431
738,694
P
=77,589
283,011
320,393
680,993
P
= 134,788
348,244
407,722
890,754
P
=94,516
293,934
245,969
634,419
P
=71,667
272,331
237,638
581,636
127,204
4,452
97,108
6,692
99,657
2,826
45,993
4,452
16,223
6,425
13,600
2,689
3,927
676
3,489
1,326
2,610
597
2,816
267
2,732
912
1,955
322
8,507
11,643
8,628
479
54,080
1,235,864
8,341
11,556
14,243
244
40,241
921,934
7,199
4,678
19,735
157
28,876
847,328
6,002
–
4,497
–
28,860
983,641
5,907
–
9,977
–
25,450
702,045
4,547
–
18,442
–
19,491
642,682
(Forward)
*SGVFS004156*
-2Consolidated
January 1,
December 31
2012
2012
Note 2)
2013
EQUITY
Equity Attributable to Equity Holders of the
Parent Company
Common stock (Note 23)
Hybrid capital securities (Note 23)
Capital paid in excess of par value
Surplus reserves (Note 24)
Surplus (Notes 23 and 24)
Remeasurement losses on retirement plan
(Note 26)
Net unrealized gain (loss) on available-for-sale
investments (Note 8)
Equity in net unrealized gain on available-for-sale
investments of associates (Note 11)
P
=54,896
6,351
19,312
1,235
55,525
(2,870)
(481)
272
647
134,887
7,818
142,705
P
=1,378,569
P
=42,228
6,351
19,312
1,108
48,418
P
=42,228
6,351
19,312
1,002
35,712
Parent Company
January 1,
December 31
2012
2012
Note 2)
2013
P
= 54,896
6,351
19,312
1,235
30,903
P
=42,228
6,351
19,312
1,108
29,570
P
=42,228
6,351
19,312
1,002
21,115
(2,011)
(1,460)
(2,617)
(1,877)
(1,358)
2,439
4,460
(2,133)
1,613
2,377
433
26
108,064
6,684
114,748
P
=962,076
–
(888)
107,059
–
107,059
P
= 1,090,700
757
(869)
117,733
6,976
124,709
P
=1,046,643
–
(1,294)
97,011
–
97,011
P
=799,056
–
(954)
90,073
–
90,073
P
=732,755
See accompanying Notes to Financial Statements.
*SGVFS004156*
STATEMENTS OF INCOME
(In Millions, Except Earnings Per Share)
Consolidated
Parent Company
2013
INTEREST INCOME ON
Loans and receivables (Notes 9 and 31)
Trading and investment securities (Note 8)
Interbank loans receivable and securities
purchased under resale agreements (Note 31)
Deposits with banks and others (Note 16)
INTEREST AND FINANCE CHARGES
Deposit liabilities (Notes 16 and 31)
Bills payable and securities sold under repurchase
agreements, bonds payable, subordinated debt
and others (Notes 17, 19, 20 and 31)
NET INTEREST INCOME
Trading and securities gain - net (Notes 8 and 31)
Service charges, fees and commissions (Note 31)
Gain on sale of investment in an associate
(Note 11)
Gain on sale of non-current asset held for sale
(Notes 13 and 31)
Leasing (Notes 12, 27 and 31)
Income from trust operations (Notes 24 and 29)
Profit from assets sold (Note 12)
Dividends (Note 11)
Foreign exchange gain (loss) - net (Note 31)
Miscellaneous (Note 25)
TOTAL OPERATING INCOME
Compensation and fringe benefits
(Notes 26 and 31)
Provision for credit and impairment losses
(Note 15)
Taxes and licenses
Depreciation and amortization
(Notes 10, 12 and 14)
Occupancy and equipment-related cost (Note 27)
Amortization of software costs (Note 14)
Miscellaneous (Note 25)
TOTAL OPERATING EXPENSES
INCOME BEFORE SHARE IN NET
INCOME OF ASSOCIATES AND A
JOINT VENTURE
SHARE IN NET INCOME OF ASSOCIATES
AND A JOINT VENTURE (Note 11)
INCOME BEFORE INCOME TAX
PROVISION FOR INCOME TAX (Note 28)
NET INCOME
Attributable to:
Equity holders of the Parent Company
(Note 32)
Basic/Diluted Earnings Per Share Attributable
to Equity Holders of the Parent Company
(Note 32)
2012
2011
(As Restated - Note 2)
2013
2012
2011
P
=35,537
11,415
P
=32,728
10,463
P
=29,035
9,893
= 18,156
P
9,106
P
=17,652
7,118
P
=15,656
5,146
2,417
523
49,892
551
1,274
45,016
458
5,682
45,068
1,705
282
29,249
269
499
25,538
311
4,498
25,611
7,556
8,756
10,234
4,975
5,679
7,010
4,067
11,623
38,269
17,182
8,640
5,406
14,162
30,854
6,680
8,123
5,397
15,631
29,437
6,246
7,666
873
5,848
23,401
8,586
3,555
1,389
7,068
18,470
1,706
3,527
1,460
8,470
17,141
3,710
3,558
7,388
–
370
–
–
–
3,440
1,638
1,071
894
435
(2,266)
2,233
78,924
3,403
1,380
853
1,119
156
3,636
874
57,078
‒
1,017
695
886
136
1,623
1,057
49,133
4,201
243
1,057
643
10,006
(2,575)
421
49,538
4,164
207
841
1,118
1,773
3,380
373
35,559
–
196
687
826
2,777
1,539
420
30,854
15,634
14,406
13,310
11,018
10,385
9,308
10,722
8,131
4,478
5,268
3,823
4,606
5,294
4,167
777
3,162
1,186
2,609
2,400
2,225
284
10,101
49,497
2,188
2,107
236
9,170
37,853
2,104
1,959
230
8,491
34,523
1,112
1,286
139
6,162
29,178
1,028
1,215
120
5,964
22,651
1,080
1,139
120
5,382
20,824
29,427
19,225
14,610
20,360
12,908
10,030
1,477
30,904
6,748
= 24,156
P
2,548
21,773
3,856
P
=17,917
1,423
16,033
3,542
P
=12,491
–
20,360
3,646
= 16,714
P
–
12,908
1,760
P
=11,148
–
10,030
2,119
P
=7,911
P
= 22,488
1,668
= 24,156
P
P
=15,399
2,518
P
=17,917
P
=11,031
1,460
P
=12,491
P
= 8.02
P
=5.44*
P
=3.86*
*Restated to include the effect of stock dividend issued in 2013 (Note 23).
*SGVFS004156*
STATEMENTS OF COMPREHENSIVE INCOME
(In Millions)
Consolidated
Parent Company
Net Income
Other Comprehensive Income for the Year,
Net of Tax
Items that may not be reclassified to profit or loss:
Change in remeasurement loss of
retirement liability
Items that may be reclassified to profit or loss:
Change in net unrealized gain on availablefor-sale investments (Note 8)
Change in equity in net unrealized gain on
available-for-sale investments of
associates (Note 11)
(Notes 8 and 11)
Total Comprehensive Income for the Year
Attributable to:
Equity holders of the Parent Company
2013
= 24,156
P
2012
2011
P
=17,917
P
=12,491
2013
= 16,714
P
2012
2011
P
=11,148
=
P7,911
(897)
(556)
–
(740)
(519)
–
(2,917)
(2,517)
3,732
(3,746)
(764)
1,555
(498)
330
152
–
–
–
1,746
(1,669)
= 21,590
P
(2,099)
(4,286)
P
=13,075
362
4,246
P
=16,737
406
(3,340)
= 12,634
P
(340)
(1,104)
P
=9,525
(10)
1,545
=
P9,456
= 19,740
P
1,850
= 21,590
P
P
=12,256
819
P
=13,075
P
=14,931
1,806
P
=16,737
= 12,634
P
–
= 12,634
P
P
=9,525
–
P
=9,525
=
P9,456
–
=
P9,456
*SGVFS004156*
STATEMENTS OF CHANGES IN EQUITY
(In Millions)
Common
Stock
(Note 23)
Balance at January 1, 2013, as previously
reported
Effect of change in accounting for
(Note 2):
Retirement benefits (PAS 19)
Consolidated financial statements
(PFRS 10)
Balance as at January 1, 2013, as restated
Total comprehensive income for the year
Transfer to surplus reserves
Cash dividends
Coupon payment of hybrid capital securities
(Note 32)
Stock dividends
Balance at December 31, 2013
reported
(Note 2):
Retirement benefits (PAS 19)
Consolidated financial statements
(PFRS 10)
Cash dividends
(Note 32)
Hybrid
Capital
Securities
(Note 23)
Capital Paid
In Excess
of Par Value
Consolidated
Equity Attributable to Equity Holders of the Parent Company
Equity in Net
Unrealized
Net Unrealized
Gain on
Gain/(Loss) on
AvailableAvailablefor-Sale Remeasurement
for-Sale
Investments
Losses on
Surplus
Surplus
(Notes 23
Investments
of Associates
Retirement
Reserves
(Note 8)
(Note 11) Plan (Note 26)
and 24)
(Note 24)
P
= 42,228
P
= 6,351
P
= 19,312
P
= 1,108
P
= 48,692
P
= 2,438
P
= 758
-
-
-
-
(274)
-
-
42,228
-
6,351
-
19,312
-
1,108
127
-
48,418
22,488
(127)
(2,111)
1
2,439
(2,920)
-
(1)
757
(485)
-
12,668
P
= 54,896
P
= 6,351
P
= 19,312
P
= 1,235
(475)
(12,668)
P
= 55,525
(P
=481)
P
= 272
=
P42,228
P
=6,351
=
P19,312
P
=1,002
=
P35,986
-
-
-
-
(274)
42,228
-
6,351
-
19,312
-
1,002
106
-
35,712
15,399
(106)
(2,111)
=
P42,228
P
=6,351
=
P19,312
P
=1,108
(476)
=
P48,418
P
=4,458
P
=435
-
-
2
4,460
(2,021)
P
=2,439
(2)
433
324
P
=757
=
P(2,011)
(2,011)
(859)
(P
=2,870)
=
P(1,460)
Translation
Adjustment
and Others
(P
=869)
(869)
1,516
-
Total
P
= 120,018
Non-controlling
Interest
P
= 7,002
Total
Equity
P
= 127,020
(2,285)
(26)
(2,311)
117,733
19,740
(2,111)
6,976
1,850
(1,008)
124,709
21,590
(3,119)
P
= 647
(475)
P
= 134,887
P
= 7,818
(475)
P
= 142,705
P
=26
=
P109,798
P
=6,706
=
P116,504
-
(1,734)
(22)
(1,756)
6,684
819
(527)
114,748
13,075
(2,638)
(1,460)
(551)
-
26
(895)
-
108,064
12,256
(2,111)
(P
=2,011)
(P
=869)
(476)
=
P117,733
P
=6,976
(476)
=
P124,709
(Forward)
*SGVFS004156*
-2-
Common
Stock
(Note 23)
reported
retirement benefits (PAS 19) (Note 2)
Issuance of shares of stock
Cash dividends
(Note 32)
Hybrid
Capital
Securities
(Note 23)
Capital Paid
In Excess
of Par Value
Consolidated
Equity Attributable to Equity Holders of the Parent Company
Equity in Net
Unrealized
Net Unrealized
Gain on
Gain on
AvailableAvailablefor-Sale Remeasurement
for-Sale
Losses on
Investments
Surplus
Surplus
Investments
Retirement
of Associates
Reserves
(Notes 23
(Note 8)
Plan (Note 26)
(Note 11)
(Note 24)
and 24)
=
P38,228
P
=6,351
=
P13,484
P
=912
38,228
4,000
-
6,351
-
13,484
5,828
-
912
90
-
=
P42,228
P
=6,351
=
P19,312
P
=1,002
=
P27,640
=
P-
Translation
Adjustment
and Others
P
=1,238
P
=284
(P
=503)
(274)
27,366
11,031
(90)
(2,111)
1,238
3,222
-
284
149
-
(1,460)
(1,460)
-
(503)
529
-
(484)
=
P35,712
P
=4,460
P
=433
(P
=1,460)
P
=26
Total
Non-controlling
Interest
Total
Equity
=
P87,634
P
=5,383
=
P93,017
(1,734)
85,900
14,931
9,828
(2,111)
(484)
=
P108,064
(22)
5,361
1,806
(483)
P
=6,684
(1,756)
91,261
16,737
9,828
(2,594)
(484)
=
P114,748
*SGVFS004156*
-3Parent Company
Balance at January 1, 2013, as previously reported
Effect of change in accounting for retirement benefits (PAS 19) (Note 2)
Balance at January 1, 2013, as restated
Cash dividends
Stock dividends
Coupon payment of hybrid capital securities (Note 32)
Cash dividends
Issuance of shares of stock
Cash dividends
Common
Stock
(Note 23)
= 42,228
P
–
42,228
–
–
–
12,668
–
= 54,896
P
P
=42,228
–
42,228
–
–
–
–
P
=42,228
P
=38,228
–
38,228
–
4,000
–
–
–
P
=42,228
Hybrid
Capital
Securities
(Note 23)
= 6,351
P
–
6,351
–
–
–
–
–
= 6,351
P
P
=6,351
–
6,351
–
–
–
–
P
=6,351
P
=6,351
–
6,351
–
–
–
–
–
P
=6,351
Capital Paid
In Excess
of Par Value
= 19,312
P
–
19,312
–
–
–
–
–
= 19,312
P
P
=19,312
–
19,312
–
–
–
–
P
=19,312
P
=13,484
–
13,484
–
5,828
–
–
–
P
=19,312
Surplus
Reserves
(Note 24)
= 1,108
P
–
1,108
–
127
–
–
–
= 1,235
P
P
=1,002
–
1,002
–
106
–
–
P
=1,108
P
=912
–
912
–
–
90
–
–
P
=1,002
Net Unrealized
Gain (Loss) on
Available- Remeasurement
Surplus
for-Sale
Losses on
(Notes 23
Investments
Retirement
and 24)
(Note 8) Plan (Note 26)
= 29,882
P
= 1,613
P
=–
P
(312)
–
(1,877)
29,570
1,613
(1,877)
16,714
(3,746)
(740)
(127)
–
–
(2,111)
–
–
(12,668)
–
–
(475)
–
–
= 30,903
P
(P
=2,133)
(P
=2,617)
P
=21,427
P
=2,377
=
P–
(312)
–
(1,358)
21,115
2,377
(1,358)
11,148
(764)
(519)
(106)
–
–
(2,111)
–
–
(476)
–
–
P
=29,570
P
=1,613
(P
= 1,877)
P
=16,201
P
=822
=
P–
(312)
–
(1,358)
15,889
822
(1,358)
7,911
1,555
–
–
–
–
(90)
–
–
(2,111)
–
–
(484)
–
–
P
=21,115
P
=2,377
(P
= 1,358)
Translation
Adjustment
and Others
(P
=1,294)
–
(1,294)
406
–
–
–
–
(P
=888)
(P
= 954)
–
(954)
(340)
–
–
–
(P
= 1,294)
(P
= 944)
–
(944)
(10)
–
–
–
–
(P
=954)
Total
Equity
= 99,200
P
(2,189)
97,011
12,634
–
(2,111)
–
(475)
= 107,059
P
P
=91,743
(1,670)
90,073
9,525
–
(2,111)
(476)
P
=97,011
P
=75,054
(1,670)
73,384
9,456
9,828
–
(2,111)
(484)
P
=90,073
*SGVFS004156*
STATEMENTS OF CASH FLOWS
(In Millions)
Consolidated
2013
CASH FLOWS FROM OPERATING
ACTIVITIES
Income before income tax
Adjustments for:
(Note 15)
Trading and securities gain on
available-for-sale investments (Note 8)
Depreciation and amortization (Notes 10, 11,
12 and 14)
Share in net income of associates and a
joint venture (Note11)
Profit from assets sold (Notes 10 and 12)
Gain on initial recognition of investment
properties and chattel properties
acquired in foreclosure (Note 25)
Amortization of software costs (Note 14)
Amortization of discount on subordinated
debt and bonds payable
Unrealized market valuation loss (gain) on
financial assets and liabilities at
FVPL
Dividends (Note 11)
Gain on sale of non-current asset held for
sale (Notes 13 and 31)
Net loss on sale/dissolution of investment in
subsidiaries (Note 11)
(Note 11)
Changes in operating assets and liabilities:
Decrease (increase) in:
Financial assets at fair value
through profit or loss
Loans and receivables
Other assets
Increase (decrease) in:
Deposit liabilities
Manager’s checks and demand
drafts outstanding
Accrued interest and other
expenses
Other liabilities
Net cash generated from (used in) operations
Dividends received
Income taxes paid
Net cash provided by (used in) operating
activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisitions of:
Available-for-sale investments
Held-to-maturity investments
Property and equipment (Note 10)
Investments in subsidiaries, associates
and a joint venture (Note 11)
Proceeds from sale of:
Available-for-sale investments
Property and equipment
Parent Company
2012
2011
2013
2012
2011
P
= 30,904
=
P21,773
=
P16,033
P
= 20,360
=
P12,908
=
P10,030
10,722
4,478
3,823
5,294
777
1,186
(12,833)
(7,096)
(5,831)
(4,816)
(4,004)
(3,671)
2,400
2,188
2,104
1,112
1,028
1,080
(1,477)
(894)
(2,548)
(1,119)
(1,423)
(886)
–
(643)
–
(1,118)
–
(826)
(649)
284
(139)
236
(238)
230
(61)
139
(122)
120
(135)
120
29
42
62
20
35
36
(4,624)
(435)
3,747
(156)
(3,440)
(3,403)
–
(7,388)
–
–
944
(136)
–
–
(370)
(3,691)
(10,006)
3,721
(1,773)
(4,201)
(4,164)
968
(2,777)
–
1
14
–
–
–
–
19,958
(95,041)
245
(63,989)
(73,989)
(2,217)
4,200
(68,937)
(1,293)
23,201
(61,553)
1,191
(53,016)
(48,037)
(1,257)
3,518
(60,620)
(1,160)
277,574
57,701
29,731
256,335
52,783
17,828
438
879
567
84
777
561
166
12,920
228,859
716
(5,482)
1,142
11,191
(51,279)
2,981
(3,706)
2,003
3,587
(15,830)
1,454
(3,397)
95
2,366
225,227
10,006
(3,347)
1,360
5,612
(34,356)
1,773
(1,437)
1,775
(1,278)
(33,365)
2,741
(1,569)
224,093
(52,004)
(17,773)
231,886
(34,020)
(32,193)
(982,284)
(23,798)
(3,295)
(481,008)
(21,577)
(3,841)
(483,687)
(30,811)
(2,783)
(882,101)
(23,798)
(1,560)
(408,144)
(19,303)
(2,208)
(360,008)
(18,953)
(1,228)
(959)
(644)
(1,278)
(41)
(41)
877,988
1,301
503,669
585
477,238
313
759,206
954
424,436
430
–
345,574
206
(Forward)
*SGVFS004156*
-2Parent Company
Consolidated
2013
Investments in subsidiaries and
associates (Note 11)
Investment properties (Note 12)
Non-current asset held for sale
(Notes 13 and 31)
Decrease (increase) in interbank loans receivable and
securities purchased under resale agreements
(Note 33)
Proceeds from maturity of held-to-maturity
investments
Net cash provided by (used in) investing
activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Settlements of bills payable
Availments of bills payable and securities
sold under repurchase agreement
Proceeds from issuance of shares of stock
(Note 23)
Repayments of subordinated debt (Note 20)
Proceeds from issuance of:
Bonds payable (Note 19)
Subordinated debt (Note 20)
Cash dividends paid (Note 23)
Coupon payment of hybrid capital
securities (Note 23)
Net cash provided by (used in) financing
activities
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
Cash and other cash items
Due from other banks
CASH AND CASH EQUIVALENTS
AT END OF YEAR
2012
2011
2013
2012
2011
P
= 14,308
3,059
P
=314
4,090
P
=175
4,424
=
P–
2,402
P
=71
3,287
=
P–
4,084
4,537
4,500
–
4,537
4,500
–
(492)
6,932
(102,703)
(3,380)
1,768
17,583
16,017
20,291
(18,624)
(133,961)
(492)
6,932
(3,380)
1,768
15,277
15,434
14,925
(13,123)
(1,767,989)
(983,041)
(1,001,574)
(1,271,929)
(467,160)
(249,712)
1,798,085
980,491
1,015,718
1,301,699
469,783
252,907
–
(6,800)
–
(8,500)
9,828
(2,000)
–
(5,500)
–
(8,500)
9,828
–
–
1,170
(3,119)
6,958
2,968
(2,638)
–
–
(2,594)
–
–
(2,111)
–
–
(2,111)
–
–
(2,111)
(475)
(476)
(484)
(475)
(476)
(484)
20,872
(4,238)
18,894
21,684
(8,464)
10,428
142,262
(35,951)
(17,503)
119,609
(27,559)
(34,888)
24,382
131,278
22,996
20,954
156,537
32,761
20,201
168,402
38,780
21,540
111,515
7,873
16,985
146,636
13,310
16,996
162,391
19,416
19,048
197,704
23,403
233,655
23,775
251,158
10,702
151,630
2,258
179,189
15,274
214,077
29,742
166,774
26,275
24,382
131,278
22,996
20,954
156,537
32,761
26,532
143,724
8,947
21,540
111,515
7,873
16,985
146,636
13,310
117,175
P
= 339,966
19,048
=
P197,704
23,403
=
P233,655
92,036
P
= 271,239
10,702
=
P151,630
2,258
=
P179,189
OPERATIONAL CASH FLOWS FROM INTEREST
Consolidated
Interest paid
Interest received
2013
P
= 11,663
48,836
Parent Company
2012
2011
2013
=
P14,371
=
P15,432
P
= 5,904
44,714
44,193
27,985
2012
2011
P
=7,316
P
=8,255
25,133
25,059
*SGVFS004156*
NOTES TO FINANCIAL STATEMENTS
1. Corporate Information
Metropolitan Bank & Trust Company (the Parent Company) is a universal bank incorporated in
the Philippines on April 6, 1962. The Securities and Exchange Commission (SEC) approved the
renewal of its Certification of Incorporation until April 6, 2057 on November 19, 2007.
In November 1980, the SEC approved and certified the listing of its shares and on
February 26, 1981, the listing and trading took effect in Makati Stock Exchange, Inc. and Manila
Stock Exchange which unified and now, The Philippine Stock Exchange, Inc. (PSE). The
universal banking license was granted by the Philippine Central Bank, now Bangko Sentral ng
Pilipinas (BSP) on August 21, 1981.
The Parent Company and its subsidiaries (the Group) are engaged in all aspects of banking,
financing, leasing, real estate and stock brokering through a network of over 1,000 local and
international branches, subsidiaries, representative offices, remittance correspondents and
agencies. As a bank, the Parent Company provides services such as deposit products, loans and
trade finance, domestic and foreign fund transfers, treasury, foreign exchange, trading and
remittances, and trust services. Its principal place of business is at Metrobank Plaza, Sen. Gil J.
Puyat Avenue, Makati City.
2. Summary of Significant Accounting Policies
Basis of Preparation
The accompanying financial statements have been prepared on a historical cost basis except for
financial assets and financial liabilities at fair value through profit or loss (FVPL) and availablefor-sale (AFS) investments that have been measured at fair value.
The financial statements of the Parent Company and Philippine Savings Bank (PSBank) include
the accounts maintained in the Regular Banking Unit (RBU) and Foreign Currency Deposit Unit
(FCDU). The functional currency of RBU and FCDU is Philippine peso and United States Dollar
(USD), respectively. For financial reporting purposes, FCDU accounts and foreign currencydenominated accounts in the RBU are translated into their equivalents in Philippine peso (see
accounting policy on Foreign Currency Translation). The financial statements of these units are
combined after eliminating inter-unit accounts.
The accompanying financial statements provide comparative information in respect of the
previous years. An additional statement of financial position at the beginning of the earliest year
presented is included when there is a retrospective application of an accounting policy, a
retrospective restatement, or a reclassification of items in financial statements. A statement of
financial position as at January 1, 2012 is presented in the 2013 financial statements due to the
retrospective application of certain accounting policies as discussed in this Note.
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 respective
functional currencies of the subsidiaries are presented under Basis of Consolidation.
*SGVFS004156*
-2The financial statements are presented in Philippine peso (PHP), and all values are rounded to the
nearest million pesos (P
=000,000), except when otherwise indicated.
Statement of Compliance
The financial statements of the Group have been prepared in compliance with the accounting
principles generally accepted in the Philippines for banks or Philippine GAAP for banks. As
discussed in Note 8, in 2011, First Metro Investment Corporation (FMIC), a majority-owned
subsidiary of the Parent Company, participated in a bond exchange transaction under the liability
management exercise of the Philippine Government. The SEC granted an exemptive relief from
the existing tainting rule on held-to-maturity (HTM) investments under Philippine Accounting
Standard (PAS) 39, Financial Instruments: Recognition and Measurement, while the BSP also
provided the same exemption for prudential reporting to the participants. Following this
exemption, the basis of preparation of the financial statements of the availing entities shall not be
Philippine Financial Reporting Standards (PFRS) but should be the prescribed financial reporting
framework for entities which are given relief from certain requirements of the PFRS. Except for
the aforementioned exemption which is applied starting 2011, the financial statements of the
Group have been prepared in compliance with the PFRS.
The financial statements of the Parent Company have been prepared in compliance with the PFRS.
Presentation of Financial Statements
Financial assets and financial liabilities are offset and the net amount reported in the statement of
financial position only when there is a legally enforceable right to offset the recognized amounts
and there is an intention to settle on a net basis, or to realize the assets and settle the liability
simultaneously. Income and expense are not offset in the statement of income unless required or
permitted by any accounting standard or interpretation, and as specifically disclosed in the
accounting policies of the Group.
Basis of Consolidation
The consolidated financial statements include the financial statements of the Parent Company and
of its subsidiaries and are prepared for the same reporting period as the Parent Company using
consistent accounting policies. The following are the wholly and majority-owned foreign and
domestic subsidiaries of the Parent Company in 2013 and 2012 (Note 11):
Country of
Subsidiary
Incorporation
Financial Markets:
Domestic:
FMIC and Subsidiaries (99.21% in 2012)
Philippines
Philippine Savings Bank (PSBank)
Philippines
Metrobank Card Corporation (A Finance Company)
(MCC)
Philippines
ORIX Metro Leasing and Finance Corporation
(ORIX Metro) and Subsidiaries (59.84% in 2012) Philippines
Foreign:
Metropolitan Bank (China) Ltd. (MBCL)
China
Metropolitan Bank (Bahamas) Limited (Metrobank
Bahamas)
The Bahamas
First Metro International Investment Company
Limited (FMIIC) and Subsidiary (99.84% in
2012)
Hong Kong
Remittances:
Metro Remittance (Hong Kong Limited (MRHL) Hong Kong
Metro Remittance (Singapore) Pte. Ltd. (MRSPL) Singapore
Effective Percentage
of Ownership
Functional Currency
99.23
75.98
PHP
PHP
60.00
PHP
59.85
PHP
100.00
100.00
Chinese Yuan
United States Dollar
(USD)
99.85
Hong Kong Dollar
(HKD)
100.00
100.00
HKD
Singapore Dollar
(Forward)
*SGVFS004156*
-3-
Subsidiary
Metro Remittance (UK) Limited
Country of
Incorporation
United Kingdom
United States of
America (USA)
USA
Japan
Italy
Spain
Effective Percentage
of Ownership
Functional Currency
100.00
Great Britain Pound
Metro Remittance (USA), Inc (MR USA)
100.00
USD
Metro Remittance Center, Inc. MRCI)
100.00
USD
Metro Remittance (Japan) Co. Ltd. (MR Japan)
100.00
Japanese Yen
Metro Remittance (Italia), S.p.A.(MR Italia)*
100.00
Euro (EUR)
Metro Remittance (Spain), S.A. (MR Spain)**
100.00
EUR
Others:
Philbancor Venture Capital Corporation***
Philippines
60.00
PHP
Real Estate
Circa 2000 Homes, Inc. (Circa)***
Philippines
100.00
PHP
Computer Services
MBTC Technology, Inc. (MTI)***
Philippines
100.00
PHP
* On July 16, 2013, the Parent Company’s BOD approved the voluntary closure of MR Italia effective
November 1, 2013; in process of dissolution.
** Liquidated in July 2013.
*** In process of dissolution.
MR Japan, a wholly-owned subsidiary, was established in Yokohama, Japan on May 8, 2013 to
carry on remittance business to foreign countries and undertake intermediary business between
Japan and the Philippines.
All significant intra-group balances, transactions, income and expenses and profits and losses
resulting from intra-group transactions are eliminated in full in the consolidation (Note 31).
Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
Control is achieved where the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the
investee. Consolidation of subsidiaries ceases when control is transferred out of the Group or the
Parent Company. The results of subsidiaries acquired or disposed of during the year are included
in the consolidated statement of income from the date of acquisition or up to the date of disposal,
as appropriate.
Changes in the Parent Company’s ownership interest in a subsidiary that do not result in a loss of
control are accounted for within equity. Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of the consideration paid or received is
recognized directly in equity and attributed to the owners of the Parent Company.
When a change in ownership interest in a subsidiary occurs which results in a loss of control over
the subsidiary, the Parent Company:
· derecognizes the assets (including goodwill) and liabilities of the subsidiary;
· derecognizes the carrying amount of any non-controlling interest;
· derecognizes the related other comprehensive income recorded in equity and recycles the
same to statement of income or retained earnings;
· recognizes the fair value of the consideration received;
· recognizes the fair value of any investment retained;
· recognizes any surplus or deficit in statement of income; and
· reclassifies the Parent Company’s share of components previously recognized in other
comprehensive income (OCI) to profit or loss or surplus, as appropriate, as would be required
if the Group had directly disposed of the related assets or liabilities.
Entity with significant influence over the Group
GT Capital Holdings, Inc. (GT Capital) holds 25.112% of the total shares of the Parent Company
as of December 31, 2013 and 2012.
*SGVFS004156*
-4Non-controlling Interest
Non-controlling interest represents the portion of profit or loss and the net assets not held by the
Group and 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 Parent Company. Any losses applicable to the
non-controlling interests in excess of 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 are accounted for as equity transactions.
Changes in Accounting Policies and Disclosures
The Group applied, for the first time, the following applicable new and revised accounting
standards. Unless otherwise indicated, these new and revised accounting standards have no
impact to the Group. Except for these standards and amended PFRS which were adopted as of
January 1, 2013, the accounting policies adopted are consistent with those of the previous
financial year.
PFRS 7, Financial Instruments: Disclosures - Offsetting Financial Assets and Financial
Liabilities (Amendments)
These amendments require an entity to disclose information about rights of set-off and related
arrangements (such as collateral agreements). The new disclosures are required for all recognized
financial instruments that are set off in accordance with PAS 32, Financial Instruments:
Presentation. These disclosures also apply to recognized financial instruments that are subject to
an enforceable master netting arrangement or ‘similar agreement’, irrespective of whether they are
set-off in accordance with PAS 32. The amendments require entities to disclose, in a tabular
format unless another format is more appropriate, the following minimum quantitative
information. This is presented separately for financial assets and financial liabilities recognized at
the end of the reporting period:
a) The gross amounts of those recognized financial assets and recognized financial liabilities;
b) The amounts that are set off in accordance with the criteria in PAS 32 when determining the
net amounts presented in the statement of financial position;
c) The net amounts presented in the statement of financial position;
d) The amounts subject to an enforceable master netting arrangement or similar agreement that
are not otherwise included in (b) above, including:
i. Amounts related to recognized financial instruments that do not meet some or all of the
offsetting criteria in PAS 32; and
ii. Amounts related to financial collateral (including cash collateral); and
e) The net amount after deducting the amounts in (d) from the amounts in (c) above.
The additional disclosures required by the amendments are presented in Note 4 to the financial
statements.
PFRS 10, Consolidated Financial Statements
The Group adopted PFRS 10 in the current year. PFRS 10 replaced the portion of PAS 27,
Consolidated and Separate Financial Statements, that addressed the accounting for consolidated
financial statements. It also included the issues raised in SIC 12, Consolidation - Special Purpose
Entities. PFRS 10 established a single control model that applied to all entities including special
purpose entities. The changes introduced by PFRS 10 require management to exercise significant
judgment to determine which entities are controlled, and therefore, are required to be consolidated
by a parent, compared with the requirements that were in PAS 27.
*SGVFS004156*
-5The application of PFRS 10 affected the accounting for the Group’s interest in First Metro Save
and Learn Balance Fund, Inc. (FMSALBF) and First Metro Save and Learn Equity Fund, Inc.
(FMSALEF), subsidiaries of FMIC, collectively referred to as the Funds. FMIC holds 17.97%
and 22.58% equity interests, respectively, and for all financial years up to December 31, 2012, the
Funds were considered to be associates under the previously existing PAS 28, Investments in
Associates, and were accounted for using the equity method. At the date of initial application of
PFRS 10, the Group assessed that it controls the Funds based on the factors explained in Note 3,
Judgments and Estimates.
As a result of the adoption of PFRS 10, the Group retrospectively consolidated the accounts of
FMSALBF and FMSALEF. Non-controlling interests have been recognized at the proportionate
share of the net assets of the subsidiaries. The opening balances at January 1, 2012 and
comparative information for the year ended December 31, 2012 have been restated accordingly.
The following tables show the significant increase (decrease) in the following accounts in the
consolidated statements of comprehensive income, net equity, and statements of cash flows as a
result of the adoption of PFRS 10:
Statements of comprehensive income
Other income
Operating expenses
Share in net income of associates and a joint venture
Net income
Total comprehensive income
Attributable to non-controlling interest
2011
2012
=123
P
P
=1,161
20
25
(14)
(285)
101
870
101
870
101
870
Statements of financial position
Financial assets at FVPL
Total assets
Other liabilities
Total liabilities
Net impact on equity
December 31
2012
P
=6,199
5,076
5,355
5,076
–
2011
=2,720
P
2,721
2,913
2,721
–
Statements of cash flows
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
2011
2012
(P
=138)
(P
=40)
332
(187)
–
–
=194
P
(P
=227)
PFRS 11, Joint Arrangements
PFRS 11 replaces PAS 31, Interests in Joint Ventures, and SIC-13, Jointly-controlled Entities Non-monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly
controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the
definition of a joint venture must be accounted for using the equity method.
*SGVFS004156*
-6PFRS 12, Disclosure of Interests in Other Entities
PFRS 12 sets out the requirements for disclosures relating to an entity’s interests in subsidiaries,
joint arrangements, associates and structured entities. The requirements in PFRS 12 are more
comprehensive than the previously existing disclosure requirements for subsidiaries (for example,
where a subsidiary is controlled with less than a majority of voting rights). While the Group has
subsidiaries with material non-controlling interests, there are no unconsolidated structured entities.
PFRS 12 disclosures are provided in Note 11.
PFRS 13, Fair Value Measurement
PFRS 13 establishes a single source of guidance under PFRSs for all fair value measurements.
PFRS 13 does not change when an entity is required to use fair value, but rather provides guidance
on how to measure fair value under PFRS. PFRS 13 defines fair value as an exit price. PFRS 13
also requires additional disclosures.
As a result of the guidance in PFRS 13, the Group re-assessed its policies for measuring fair
values, in particular, its valuation inputs such as non-performance risk for fair value measurement
of liabilities. The Group has assessed that the application of PFRS 13 has not materially impacted
the fair value measurements of the Group. Additional disclosures, where required, are provided in
the individual notes relating to the assets and liabilities whose fair values were determined. Fair
value hierarchy is provided in Note 5.
PAS 1, Presentation of Financial Statements - Presentation of Items of Other Comprehensive
Income (OCI) (Amendments)
The amendments to PAS 1 change the grouping of items presented in OCI. Items that could be
reclassified (or “recycled”) to profit or loss at a future point in time (for example, upon
derecognition or settlement) would be presented separately from items that will never be
reclassified.
PAS 19, Employee Benefits (Amendment) (PAS 19R)
PAS 19R includes a number of amendments to the accounting for defined benefit plans, including
actuarial gains and losses that are now recognized in OCI and permanently excluded from profit
and loss; expected returns on plan assets that are no longer recognized in profit or loss, instead,
there is a requirement to recognize interest on the net defined benefit liability (asset) in profit or
loss, calculated using the discount rate used to measure the defined benefit obligation, and;
unvested past service costs are now recognized in profit or loss at the earlier of when the
amendment occurs or when the related restructuring or termination costs are recognized. Other
amendments include new disclosures, such as, quantitative sensitivity disclosures. Further, the
transition to PAS 19R had an impact on the net defined benefit plan obligations due to the
difference in accounting for interest on plan assets and unvested past service costs. The effect of
the adoption of PAS 19R is explained below.
The Group operates a defined benefit pension plan, which requires contributions to be made to a
separately administered fund. PAS 19R has been applied retrospectively from January 1, 2011.
As a result, expected returns on plan assets of defined benefit plans are not recognized in profit or
loss. Instead, interest on net defined benefit obligation (net of the plan assets) is recognized in
profit or loss, calculated using the discount rate used to measure the net pension obligation or
asset. Also, unvested past service costs can no longer be deferred and recognized over the future
vesting period. Instead, all past service costs are recognized at the earlier of when amendment
occurs and when the Group recognizes related restructuring or termination costs. Until 2011, the
Group’s unvested service costs were recognized as an expense on a straight-line basis over the
average period until the benefits become vested. Upon transition to PAS 19R, past service costs
are recognized immediately if the benefits have vested immediately following the introduction of,
or changes to, a pension plan.
*SGVFS004156*
-7The impact of PAS 19R on the statements of financial position of the Group and the Parent
Company follows:
As
restated
Consolidated
As
previously
reported
Parent Company
Change
As restated
As previously
reported
Change
As at December 31, 2012
Retirement liability
Deferred tax asset
Equity
P
=4,278
1,287
(2,991)
P
=972
292
(680)
P
=3,306
995
(2,311)
P
=3,891
1,171
(2,720)
P
=758
227
(531)
P
=3,133
944
(2,189)
As at January 1, 2012
Retirement liability (asset)
Deferred tax asset (liability)
Equity
P
=2,581
778
(1,803)
=
P68
21
(47)
P
=2,513
757
(1,756)
P
=2,290
691
(1,599)
(P
=101)
(30)
71
P
=2,391
721
(1,670)
PAS 27, Separate Financial Statements (as revised in 2011)
As a consequence of the new PFRS 10, Consolidated Financial Statements, and PFRS 12,
Disclosure of Interests in Other Entities, what remains of PAS 27 is limited to accounting for
subsidiaries, jointly controlled entities, and associates in separate financial statements.
PAS 28, Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the new PFRS 11, Joint Arrangements and PFRS 12, Disclosure of Interests
in Other Entities, PAS 28 has been renamed PAS 28, Investments in Associates and Joint
Ventures, and describes the application of the equity method to investments in joint ventures in
addition to associates.
Amendments to PFRS 1 covering first time adoption of PFRS on government loans and Philippine
Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine are not
applicable to the Group.
Significant Accounting Policies
Foreign Currency Translation
Transactions and balances
For financial reporting purposes, 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 currencydenominated income and expenses, at the prevailing exchange rates as at the date of transaction.
Foreign exchange differences arising from revaluation and translation of foreign-currency
denominated assets and liabilities are credited to or charged against operations in the year in which
the rates change.
Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates as at the dates of the initial transactions. Non-monetary items
measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined.
FCDU, foreign branches and subsidiaries
As at the reporting date, the assets and liabilities of foreign branches and subsidiaries and FCDU
of the Parent Company and PSBank are translated into the Parent Company’s presentation
currency (the Philippine peso) at PDS closing rate prevailing at the statement of financial position
date, and their income and expenses are translated at PDS weighted average rate (PDSWAR) for
the year. Exchange differences arising on translation are taken to statement of comprehensive
income. Upon disposal of a foreign entity or when the Parent Company ceases to have control
*SGVFS004156*
-8over the subsidiaries or upon actual remittance of FCDU profits to RBU, the deferred cumulative
amount recognized in the statement of comprehensive income is recognized in the statement of
income.
Fair Value Measurement
The Group measures financial instruments, such as, derivatives, and non-financial assets such as
investment properties, at fair value at each balance sheet date. Also, fair values of financial
instruments measured at amortized cost are disclosed in Note 5.
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.
A 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.
The Group determines the policies and procedures for both recurring fair value measurement, such
as financial assets at FVPL, and for non-recurring measurement, such as investment properties.
External valuers are involved for valuation of significant assets, such as investment properties.
Selection criteria include market knowledge, reputation, independence and whether professional
standards are maintained.
*SGVFS004156*
-9For 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 as explained above.
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.
Derivatives are recognized on trade date basis. Deposits, amounts due to banks and customers and
loans are recognized when cash is received by the Group or advanced to the borrowers.
Initial recognition of financial instruments
All financial instruments are initially measured at fair value. Except for financial assets and
financial liabilities valued at FVPL, the initial measurement of financial instruments includes
transaction costs. The Group classifies its financial assets in the following categories: financial
assets at FVPL, HTM investments, AFS investments, and loans and receivables while financial
liabilities are classified as financial liabilities at FVPL and financial liabilities carried at amortized
cost. The classification depends on the purpose for which the investments were acquired and
whether they are quoted in an active market. Management determines the classification of its
investments at initial recognition and, where allowed and appropriate, re-evaluates such
designation at every reporting date.
Determination of fair value
The fair value for financial instruments traded in active markets at the statement of financial
position date is based on their quoted market price or dealer price quotations (bid price for long
positions and ask price for short positions), without any deduction for transaction costs. When
current bid and ask prices are not available, the price of the most recent transaction is used since it
provides evidence of the current fair value as long as there has not been a significant change in
economic circumstances since the time of the transaction.
For all other financial instruments not listed in an active market, the fair value is determined by
using appropriate valuation techniques. Valuation techniques include net present value
techniques, comparison to similar instruments for which market observable prices exist, options
pricing models, and other relevant valuation models.
‘Day 1’ difference
Where the transaction price in a non-active market is different with 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 the 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.
Derivatives recorded at FVPL
The Parent Company and some of its subsidiaries are counterparties to derivative contracts, such
as currency forwards, currency swaps, interest rate swaps, call options, non-deliverable forwards
and other interest rate derivatives. These derivatives are entered into as a service to customers and
as a means of reducing or managing their respective foreign exchange and interest rate exposures,
as well as for trading purposes. Such derivative financial instruments are initially recorded at fair
value on the date at which the derivative contract is entered into and are subsequently remeasured
at fair value. Any gains or losses arising from changes in fair values of derivatives (except those
*SGVFS004156*
- 10 accounted for as accounting hedges) are taken directly to the statement of income and are included
in ‘Trading and securities gain - net’. Derivatives are carried as assets when the fair value is
positive and as liabilities when the fair value is negative.
Hedge accounting
For the purpose of hedge accounting, hedges are classified primarily as either: (a) a hedge of the
fair value of an asset, liability or a firm commitment (fair value hedge); or (b) a hedge of the
exposure to variability in cash flows attributable to an asset or liability or a forecasted transaction
(cash flow hedge); or (c) a hedge of a net investment in a foreign operation (net investment
hedge). Hedge accounting is applied to derivatives designated as hedging instruments in a fair
value, cash flow, or net investment hedge provided certain criteria are met.
At the inception of a hedge relationship, the Group formally designates and documents the hedge
relationship to which the Group wishes to apply hedge accounting and the risk management
objective and strategy for undertaking the hedge. The documentation includes identification of the
hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how
the Group will assess the effectiveness of changes in the hedging instrument’s fair value in
offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the
hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in
fair value or cash flows and are assessed on an ongoing basis to determine that they actually have
been highly effective throughout the financial reporting periods for which they were designated.
Cash flow hedge
The effective portion of the gain or loss on the hedging instrument is recognized directly as
‘Translation adjustment and others’ in the statement of comprehensive income. Any gain or loss
in fair value relating to an ineffective portion is recognized immediately in the statement of
income.
Amounts recognized as other comprehensive income are transferred to the statement of income
when the hedged transaction affects profit or loss, such as when the hedged financial income or
financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost
of a nonfinancial asset or liability, the amounts taken to other comprehensive income are
transferred to the initial carrying amount of the nonfinancial asset or liability.
If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain
or loss previously recognized in the statement of comprehensive income are transferred to the
statement of income. If the hedging instrument expires or is sold, terminated or exercised without
replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss
previously recognized in other comprehensive income remains in other comprehensive income
until the forecast transaction or firm commitment affects profit or loss. If the related transaction is
no longer expected to occur, the amount is recognized in the statement of income.
Hedge effectiveness testing
To qualify for hedge accounting, the Group requires that at the inception of the hedge and
throughout its life, each hedge must be expected to be highly effective (prospective effectiveness),
and demonstrate actual effectiveness (retrospective effectiveness) on an ongoing basis. The
documentation of each hedging relationship sets out how the effectiveness of the hedge is
assessed. The method that the Group adopts for assessing hedge effectiveness will depend on its
risk management strategy.
*SGVFS004156*
- 11 For prospective effectiveness, the hedging instrument must be expected to be highly effective in
offsetting changes in fair value or cash flows attributable to the hedged risk during the period for
which the hedge is designated. The Group applies the dollar-offset method using hypothetical
derivatives in performing hedge effectiveness testing. For actual effectiveness to be achieved, the
changes in fair value or cash flows must offset each other in the range of 80.0% to 125.0%. Any
hedge ineffectiveness is recognized in the statement of income.
Embedded derivatives
The Group has certain derivatives that are embedded in host financial (such as structured notes
and debt instruments) and nonfinancial (such as lease and service agreements) contracts. These
embedded derivatives include interest rate derivatives in debt instruments which include structured
notes and foreign currency derivatives in debt instruments and lease agreements.
Embedded derivatives are bifurcated from their host contracts and carried at fair value with fair
value changes being reported through profit or loss, when the entire hybrid contracts (composed of
both the host contract and the embedded derivative) are not accounted for as financial assets or
liabilities at FVPL, when their economic risks and characteristics are not clearly and closely
related to those of their respective host contracts, and when a separate instrument with the same
terms as the embedded derivatives would meet the definition of a derivative. The Group assesses
whether embedded derivatives are required to be separated from the host contracts when the
Group first becomes a party to the contract. Reassessment of embedded derivatives is only done
when there are changes in the contract that significantly modifies the contractual cash flows.
Financial assets or financial liabilities held for trading
Financial assets or financial liabilities held for trading are recorded in the statement of financial
position at fair value. Changes in fair value relating to the held for trading positions are
recognized in ‘Trading and securities gain - net’. Interest earned or incurred is recorded in
‘Interest income’ or ‘Interest expense’ respectively, while dividend income is recorded in
‘Dividends’ when the right to receive payment has been established. Included in this classification
are debt and equity securities which have been acquired principally for the purpose of selling or
repurchasing in the near term.
AFS investments
AFS investments include debt and equity instruments. Equity investments classified under AFS
investments are those which are neither classified as held-for-trading (HFT) nor designated at
FVPL. Debt securities are those that do not qualify to be classified as HTM investments or loans
and receivables, are purchased and held indefinitely, and may be sold in response to liquidity
requirements or changes in market conditions.
After initial measurement, AFS investments are subsequently measured at fair value. The
effective yield component of AFS debt securities, as well as the impact of restatement on foreign
currency-denominated AFS debt securities, is reported in the statement of income. The unrealized
gains and losses arising from the fair valuation of AFS investments are excluded, net of tax, from
reported earnings and are included in the statement of comprehensive income as ‘Net unrealized
gain on AFS investments’.
When the security is disposed of, the cumulative gain or loss previously recognized in the
statement of comprehensive income is recognized as ‘Trading and securities gain - net’ in the
statement of income. Gains and losses on disposal are determined using the average cost method.
*SGVFS004156*
- 12 Interest earned on holding AFS investments are reported as ‘Interest income’ using the effective
interest rate (EIR) method. Dividends earned on holding AFS investments are recognized in the
statement of income as ‘Dividends’ when the right of the payment has been established. The
losses arising from impairment of such investments are recognized as ‘Provision for credit and
impairment losses’ in the statement of income.
HTM investments
HTM investments are quoted non-derivative financial assets with fixed or determinable payments
and fixed maturities for which the Group’s management has the positive intention and ability to
hold to maturity. Where the Group sells other than an insignificant amount of HTM investments,
the entire category would be tainted and reclassified as AFS investments unless for sales or
reclassifications that:
·
·
·
are so close to maturity or the financial asset’s call date (for example, less than three months
before maturity) that changes in the market rate of interest would not have a significant effect
on the financial asset’s fair value;
occur after the entity has collected substantially all of the financial asset’s original principal
through scheduled payments or prepayments; or
are attributable to an isolated event that is beyond the entity’s control, is non-recurring and
could not have been reasonably anticipated by the entity.
After initial measurement, these investments are subsequently measured at amortized cost using
the EIR method, less impairment in value. Amortized cost is calculated by taking into account
any discount or premium on acquisition and fees that are an integral part of the EIR. The
amortization is included in ‘Interest income’ in the statement of income. Gains and losses are
recognized in statement of income when the HTM investments are derecognized or impaired, as
well as through the amortization process. The losses arising from impairment of such investments
are recognized in the statement of income under ‘Provision for credit and impairment losses’. The
effects of revaluation on foreign currency-denominated HTM investments are recognized in the
statement of income.
The Group follows Philippine GAAP for banks in accounting for its HTM investments in the
consolidated financial statements. Under Philippine GAAP for banks, the gain on exchange on
FMIC’s participation in the domestic bond exchange was deferred and amortized over the term of
new bonds (see Statement of Compliance discussion).
This accounting policy relates to the statement of financial position captions ‘Due from BSP’,
‘Due from other banks’, ‘Interbank loans receivable and securities purchased under resale
agreements (SPURA)’ and ‘Loans and receivables’. These are financial assets with fixed or
determinable payments and fixed maturities that are not quoted in an active market. They are not
entered into with the intention of immediate or short-term resale and are not classified as ‘other
financial assets held for trading’, designated as AFS investments or ‘financial assets designated at
FVPL’.
Loans and receivables include purchases made by MCC’s cardholders which are collected on
installments and are recorded at the cost of the items purchased plus interest covering the
installment period which is initially credited to unearned discount, shown as a deduction from
‘Loans and receivables’.
Loans and receivables also include ORIX Metro’s lease contracts receivable and notes receivable
financed which are stated at the outstanding balance, reduced by unearned lease income and
unearned finance income, respectively.
*SGVFS004156*
- 13 After initial measurement, ‘Due from BSP’, ‘Due from other banks’, ‘Interbank loans receivable
and SPURA’ and ‘Loans and receivables’, are subsequently measured at amortized cost using the
EIR method, less allowance for credit losses. Amortized cost is calculated by taking into account
any discount or premium on acquisition and fees and costs that are an integral part of the EIR.
The amortization is included in ‘Interest income’ in the statement of income. The losses arising
from impairment are recognized in ‘Provision for credit and impairment losses’ in the statement of
income.
Other financial liabilities
Issued financial instruments or their components, which are not designated at FVPL, are classified
as liabilities under ‘Deposit liabilities’, ‘Bills 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.
After initial measurement, bills payable and similar financial liabilities not qualified as and not
designated at FVPL, are subsequently measured at amortized cost using the EIR method.
Amortized cost is calculated by taking into account any discount or premium on the issue and fees
that are an integral part of the EIR.
Derecognition of Financial Assets and Liabilities
Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of financial
assets) is derecognized when:
·
·
·
the rights to receive cash flows from the asset have expired; or
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 risks 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 of the asset, the asset is recognized to the extent of the
Group’s continuing involvement in the asset. The extent of the Group’s continuing involvement
in the transferred asset is the extent to which it is exposed to changes in the value of the
transferred asset. When the Group’s continuing involvement takes the form of guaranteeing the
transferred asset, the extent of the Group’s continuing involvement is the lower of (i) the amount
of the asset and (ii) the maximum amount of the consideration received that the Group could be
required to repay (‘the guarantee amount’). When the Group’s continuing involvement takes the
form of a written or purchased option (or both) on the transferred asset the extent of the Group’s
continuing involvement is the amount of the transferred asset that the Group may repurchase.
However, in case of a written put option to an asset that is measured at fair value, the extent of the
Group’s continuing involvement is limited to the lower of the fair value of the transferred asset
and the option exercise price. When the Group’s continuing involvement takes the form of a cashsettled option or similar provision on the transferred asset, the extent of the Group’s continuing
involvement is measured in the same way as that which results from non-cash settled options.
*SGVFS004156*
- 14 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 securities sold under
repurchase agreements (SSURA) included in ‘Bills Payable and SSURA’ and is considered as a
loan to the Group, reflecting the economic substance of such transaction.
Conversely, securities purchased under agreements to resell at a specified future date (‘reverse
repos’) are not recognized in the statement of financial position. The corresponding cash paid
including accrued interest, is recognized in the statement of financial position as SPURA, and is
considered a loan to the counterparty. The difference between the purchase price and resale price
is treated as interest income and is accrued over the life of the agreement using the EIR method.
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.
Financial assets carried at amortized cost
For financial assets carried at amortized cost such as loans and receivables, due from other banks,
and HTM investments, 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 EIR.
If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the
current EIR, adjusted for the original credit risk premium. The calculation of the present value of
the estimated future cash flows of a collateralized financial asset reflects the cash flows that may
result from foreclosure less costs for obtaining and selling the collateral.
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 the statement of income. Interest income continues to be recognized based on
the original EIR of the asset. Financial assets, together with the associated allowance accounts,
*SGVFS004156*
- 15 are written off when there is no realistic prospect of future recovery and all collateral has been
realized. If, in a subsequent period, the amount of the estimated impairment loss decreases
because of an event occurring after the impairment was recognized, the previously recognized
impairment loss is reduced by adjusting the allowance account. If a future write-off is later
recovered, any amounts formerly charged are credited to the ‘Provision for credit and impairment
losses’ in the statement of income.
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 credit risk characteristics similar to those in
the Group. Historical loss experience is adjusted on the basis of current observable data to reflect
the effects of current conditions that did not affect the period 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 in 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.
The Group also uses the Net Flow Rate method to determine the credit loss rate of a particular
delinquency age bucket based on historical data of flow-through and flow-back of loans across
specific delinquency age buckets. The allowance for credit losses is determined based on the
results of the net flow to write-off methodology. Net flow tables are derived from monitoring of
monthly peso movements between different stage buckets, from 1-day past due to 180-day past
due. The net flow to write-off methodology relies on the last 12 months of net flow tables to
establish a percentage (‘net flow rate’) of accounts receivable that are current or in any state of
delinquency (i.e., 30, 60, 90, 120, 150 and 180 day past due) as of reporting date that will
eventually result in write-off. The gross provision is then computed based on the outstanding
balances of the receivables as of statement of financial position date and the net flow rates
determined for the current and each delinquency bucket. This gross provision is reduced by the
estimated recoveries, which are also based on historical data, to arrive at the required allowance
for credit losses.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is
recognized in the statement of income, to the extent that the carrying value of the asset does not
exceed its amortized cost at the reversal date.
AFS investments
In case of quoted equity investments classified as ‘AFS investments’, this would include a
significant or prolonged decline in the fair value of the investments below its cost. Where there is
evidence of impairment, the cumulative loss - measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that financial asset previously
*SGVFS004156*
- 16 recognized in the statement of income - is removed from the statement of comprehensive income
and recognized in the statement of income. Impairment losses on equity investments are not
reversed through the statement of income. Increases in fair value after impairment are recognized
directly in the statement of comprehensive income.
In case of unquoted equity investments classified as ‘AFS investments’, the amount of the
impairment is measured as the difference between the carrying amount of the financial asset and
the present value of estimated future cash flows discounted at the current market rate of return for
a similar financial asset. Such impairment losses shall not be reversed.
In case of debt instruments classified as ‘AFS investments’, impairment is assessed based on the
same criteria as financial assets carried at amortized cost. Future interest income is based on the
reduced carrying amount and is accrued based on the rate of interest used to discount future cash
flows for the purpose of measuring impairment loss. Such accrual is recorded as part of ‘Interest
income’ in the statement of income. If subsequently, the fair value of a debt instrument increased
and the increase can be objectively related to an event occurring after the impairment loss was
recognized in the statement of income, the impairment loss is reversed through the statement of
income.
Restructured loans
Where possible, the Group seeks to restructure loans rather than to take possession of collateral.
This 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 subject to an individual or collective impairment
assessment, calculated using the loan’s original EIR. The difference between the recorded value
of the original loan and the present value of the restructured cash flows, discounted at the original
EIR, is recognized in ‘Provision for credit and impairment losses’ in the statement of income.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount is 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,
and the related assets and liabilities are presented gross in the statement of financial position.
Terminal Value of Leased Assets and Deposits on Finance Leases
The terminal value of leased assets, which approximates the amount of guaranty deposit paid by
the lessee at the inception of the lease, is the estimated proceeds from the sale of the leased asset at
the end of the lease term. At the end of the lease term, the terminal value of the leased asset is
generally applied against the guaranty deposit of the lessee when the lessee decides to buy the
leased asset.
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 instruments
classified as AFS investments, interest income is recorded at the EIR, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial instrument or a
*SGVFS004156*
- 17 shorter period, where appropriate, to the net carrying amount of the financial asset. The
calculation takes into account all contractual terms of the financial instrument (for example,
prepayment options), including any fees or incremental costs that are directly attributable to the
instrument and are an integral part of the EIR, but not future credit losses. The adjusted carrying
amount is calculated based on the original EIR. The change in carrying amount is recorded as
‘Interest income’.
Once the recorded value of a financial asset or group of similar financial assets carried at
amortized cost has been reduced due to an impairment loss, interest income continues to be
recognized using the original EIR applied to the new carrying amount.
Purchases by credit cardholders, collectible on an installment basis, are recorded at the cost of the
items purchased plus a 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 consolidated statement
of financial position. The unearned discount is taken up to interest income over the installment
terms and is computed using the EIR method.
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 investment fund fees, custodian fees, fiduciary fees, commission income,
credit related fees, asset management fees, portfolio and other management fees, and advisory
fees. Loan commitment fees for loans that are likely to be drawn down are deferred (together
with any incremental costs) and recognized as an adjustment to the EIR on the loan.
b. Fee income from providing transaction services
Fees arising from negotiating or participating in the negotiation of a transaction for a third
party - such as underwriting fees, corporate finance fees and brokerage fees for the
arrangement of the acquisition of shares or other securities or the purchase or sale of
businesses - 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 EIR as for the other participants.
Leasing income - Finance lease
The excess of aggregate lease rentals plus the estimated residual value over the cost of the leased
equipment constitutes the unearned lease income. Residual values represent estimated proceeds
from the disposal of equipment at the time lease is estimated. The unearned lease income is
amortized over the term of the lease, commencing on the month the lease is executed using the
EIR method.
Dividend income
Dividend income is recognized when the Group’s right to receive payment is established.
Trading and securities gain - net
Results arising from trading activities include all gains and losses from changes in fair value for
financial assets and financial liabilities at FVPL and gains and losses from disposal of financial
assets held for trading, AFS and HTM investments.
*SGVFS004156*
- 18 Rental income
Rental income arising on leased properties is accounted for on a straight-line basis over the lease
terms on ongoing leases and is recorded in the statement of income under ‘Leasing’.
Discounts earned and awards revenue on credit cards
Discounts are taken up as income upon receipt from member establishments of charges arising
from credit availments by the Group’s cardholders and other credit companies’ cardholders when
Group is acting as an acquirer. These discounts are computed based on certain agreed rates and
are deducted from amounts remitted to the member establishments. This account also includes
interchange income from transactions processed by other acquirers through VISA Inc. (Visa) and
MasterCard Incorporated (MasterCard) and service fee from cash advance transactions of
cardholders.
MCC operates a loyalty points program which allows customers to accumulate points when they
purchase from member establishments using the issued card of MCC. The points can then be
redeemed for free products subject to a minimum number of points being obtained. Consideration
received is allocated between the discounts earned, interchange fee and the points earned, with the
consideration allocated to the points equal to its fair value. The fair value is determined by
applying statistical analysis. The fair value of the points issued is deferred and recognized as
revenue when the points are redeemed.
Income on direct financing leases and receivables financed
Income on loans and receivables financed with short-term maturities is recognized using the EIR
method. Interest and finance fees on finance leases and loans and receivables financed with longterm maturities and the excess of the aggregate lease rentals plus the estimated terminal value of
the leased equipment over its cost are credited to unearned discount and amortized over the term
of the note or lease using the EIR method.
Underwriting fees, commissions, and sale of shares of stock
Underwriting fees and commissions are accrued when earned. Income derived from sales of
shares of stock is recognized upon sale.
Upon loss of significant influence over an associate, the Group measures and recognizes any
retained investment at its fair value. Any difference between the carrying amount of the associate
upon loss of significant influence and the fair value of the retained investment and proceeds from
disposal is recognized in profit or loss.
The gain or loss arising from the sale of non-current asset held for sale is included in profit or loss
when the item is derecognized. The gain or loss arising from the derecognition of non-current
asset held for sale is determined as the difference between the net disposal proceeds and its
carrying amount on the date of the transaction.
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 the collectibility of the sales
price is reasonably assured. Revenue on sale of residential and commercial units is recognized
only upon completion of the project. Payments received before completions are included under
‘Miscellaneous liabilities’.
*SGVFS004156*
- 19 Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash and other cash items,
amounts due from BSP and other banks, and interbank loans receivable and SPURA with original
maturities of three months or less from dates of placements and that are subject to insignificant
risk of changes in value.
Property and Equipment
Land is stated at cost less any impairment in value and depreciable properties including buildings,
furniture, fixtures and equipment and leasehold improvements are stated at cost less accumulated
depreciation and amortization, and any impairment in value. Such cost includes the cost of
replacing part of the property and equipment when that cost is incurred, if the recognition criteria
are met but excludes repairs and maintenance costs.
Building under construction (BUC) is stated at cost and includes cost of construction and other
direct costs. BUC is not depreciated until such time that the relevant asset is completed and put
into operational use.
Depreciation is calculated on the straight-line method over the estimated useful life of the
depreciable assets. Leasehold improvements are amortized over the shorter of the terms of the
covering leases and the estimated useful lives of the improvements.
The range of estimated useful lives of property and equipment follows:
Buildings
Furniture, fixtures and equipment
Leasehold improvements
25 to 50 years
2 to 5 years
5 to 20 years
The depreciation and amortization method and useful life are reviewed periodically to ensure that
the method and period of depreciation and amortization are consistent with the expected pattern of
economic benefits from items of property and equipment.
An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount of
the asset) is included in the statement of income in the year the asset is derecognized.
Investments in Subsidiaries, Associates and a Joint Venture (JV)
Investment in subsidiaries
Subsidiaries pertain to all entities over which the Group has control. Control is achieved when the
Group is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. When the Group has less
than a majority of the voting or similar rights of an investee, the Group considers all relevant facts
and circumstances in assessing whether it has power over an investee, including:
· the contractual arrangement with the other vote holders of the investee;
· rights arising from other contractual arrangements; and
· the Group’s voting rights and potential voting rights.
Investment in associates
Associates pertain to all entities over which the Group has significant influence. Significant
influence is the power to participate in the financial and operating policy decisions of the investee,
but is not control or joint control over those policies. In the consolidated financial statements,
investment in associates is accounted for under the equity method of accounting.
*SGVFS004156*
- 20 Investment in a JV
A JV is a type of joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing
of control of an arrangement, which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control. Investment in a JV is accounted for
under the equity method of accounting. The Group’s investment in a JV represents the 40.00%
interest of PSBank in Sumisho Motor Finance Corporation (SMFC).
Under the equity method, an investment in an associate or a JV is carried in the statement of
financial position at cost plus post-acquisition changes in the Group’s share of the net assets of the
associate or JV. Goodwill relating to an associate and a JV is included in the carrying value of the
investment and is not amortized. When the Group increases its ownership interest in an associate
or a JV that continues to be accounted for under the equity method, the cost for the additional
interest is added to the existing carrying amount of the associate or JV and the existing interest in
the associate or JV is not remeasured. The Group’s share in an associate or a JV’s postacquisition profits or losses is recognized in the statement of income while its share of postacquisition movements in the associate or JV’s equity reserves is recognized directly in the
statement of comprehensive income. When the Group’s share of losses in an associate or a JV
equals or exceeds its interest in the associate or JV, including any other unsecured receivables, the
Group does not recognize further losses, unless it has incurred obligations or made payments on
behalf of the associate or JV. Profits and losses resulting from transactions between the Group
and an associate or JV are eliminated to the extent of the Group’s interest in the associate or JV.
In the Parent Company financial statements, investments in subsidiaries, associates and a JV are
carried at cost less allowance for impairment losses.
Investment Properties
Investment properties are measured initially at cost, including transaction costs. An investment
property acquired through an exchange transaction is measured at fair value of the asset acquired
unless the fair value of such an asset cannot be measured in which case the investment property
acquired is measured at the carrying amount of asset given up. Foreclosed properties are classified
under ‘Investment properties’ 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, investment properties are carried at cost less accumulated depreciation (for
depreciable investment properties) and impairment in value.
Investment properties are derecognized when they have either been disposed of or when the
investment property is permanently withdrawn from use and no future benefit is expected from its
disposal. Any gains or losses on the retirement or disposal of an investment property are
recognized in the statement of income in ‘Profit from assets sold’ 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 operations in the year 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 based on appraisal reports but not to
exceed 50 years for buildings and condominium units.
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,
*SGVFS004156*
- 21 and only when, there is a change in use evidenced by commencement of owner occupation or
commencement of development with a view to sale.
Non-Current Assets Held for Sale
Non-current assets held for sale are measured at the lower of their carrying amount and fair value
less costs to sell. Non-current assets are classified as held for sale if their carrying amounts will be
recovered principally through a sale transaction rather than through continuing use. This condition
is regarded as met only when the sale is highly probable and the asset is available for immediate
sale in its present condition, management has committed to the sale, and the sale is expected to
have been completed within one year from the date of classification (Note 13).
Interest in Joint Operations
The Group is a party to joint operations whereby it contributed parcels of land for development
into residential and commercial units. In respect of the Group’s interest in the joint operations, the
Group recognizes the following: (a) the assets that it controls and the liabilities that it incurs; and
(b) the expenses that it incurs and its share of the income that it earns from the sale of units by the
joint operations. The assets contributed to the joint operations are measured at the lower of cost or
net realizable value. Net realizable value is the estimated selling price in the ordinary course of
business less estimated costs necessary to make the sale (Note 14).
Chattel Mortgage Properties
Chattel mortgage properties comprise of repossessed vehicles. Chattel mortgage properties are
stated at cost less accumulated depreciation and impairment in value. Depreciation is calculated
on a straight-line basis using the remaining useful lives from the time of acquisition of the
vehicles. The useful lives of chattel mortgage properties are estimated to be 5 years.
Subordinated Notes
Subordinated notes issued by SPVs (presented as ‘Investments in SPVs’ under ‘Other assets’ in
the Parent Company financial statements) are stated at amortized cost reduced by an allowance for
credit losses. The allowance for credit losses is determined based on the difference between the
outstanding principal amount and the recoverable amount which is the present value of the future
cash flow expected to be received as payment for the subordinated notes.
Intangible assets
Intangible assets include software costs and exchange trading right (included under
‘Miscellaneous assets’) presented under ‘Other assets’.
Software costs
Software costs are capitalized on the basis of the cost incurred to acquire and bring to use the
specific software. These costs are amortized over three to five years on a straight-line basis.
Costs associated with maintaining the computer software programs are recognized as expense
when incurred. Software costs are carried at cost less accumulated amortization.
Exchange trading right
Exchange trading right is a result of the PSE conversion plan to preserve access of FMIC’s
subsidiary to the trading facilities and continue transacting business in the PSE. The exchange
trading right has an indefinite useful life as there is no foreseeable limit to the period over which
this asset is expected to generate net cash inflows. It is carried at the amount allocated from the
original cost to the exchange membership seat (after a corresponding allocation was made to the
value of the PSE shares) less any allowance for impairment losses. FMIC’s subsidiary does not
intend to sell the exchange trading right in the near future.
*SGVFS004156*
- 22 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. With respect to investments in associates
and a JV, goodwill is included in the carrying amounts of the investments. Following initial
recognition, goodwill is measured at cost net of impairment losses (see accounting policy on
Impairment of Nonfinancial Assets).
Impairment of Nonfinancial Assets
Property and equipment, investments in subsidiaries, associates and a JV, investment properties,
and chattel mortgage properties
At each statement of financial position date, the Group assesses whether there is any indication
that its nonfinancial assets may be impaired. When an indicator of impairment exists or when an
annual impairment testing for an asset is required, the Group makes a formal estimate of
recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell
and its value in use (VIU) and is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets, in
which case the recoverable amount is assessed as part of the cash generating unit to which it
belongs. Where the carrying amount of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. In assessing VIU, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset.
An impairment loss is charged to operations in the year in which it arises.
An assessment is made at each statement of financial position date as to whether there is any
indication that previously recognized impairment losses may no longer exist or may have
decreased. If such indication exists, the recoverable amount is estimated. A previously
recognized impairment loss is reversed only if there has been a change in the estimates used to
determine the asset’s recoverable amount since the last impairment loss was recognized. If that is
the case, the carrying amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in
the statement of income. After such a reversal, the depreciation expense is adjusted in future years
to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over
its remaining life.
Intangible assets
Intangible assets with indefinite useful lives are tested for impairment annually at statement of
financial position date either individually or at the cash generating unit level, as appropriate.
Intangible assets with finite lives are assessed for impairment whenever there is an indication that
the intangible asset may be impaired.
Goodwill
Goodwill is reviewed for impairment, annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired. Impairment is determined for
goodwill by assessing the recoverable amount of the cash generating unit (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. The Group performs its impairment test of goodwill
annually.
*SGVFS004156*
- 23 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 gives rise to the reassessment for scenarios (a), (c) or (d) above, and at
the date of renewal or extension period for scenario (b).
Residual Value of Leased Assets and Deposits on Lease Contracts
The residual value of leased assets, which approximates the amount of guaranty deposit paid by
the lessee at the inception of the lease, is the estimated proceeds from the sale of the leased asset at
the end of the lease term. At the end of the lease term, the residual value of the leased asset is
generally applied against the guaranty deposit of the lessee when the lessee decides to buy the
leased asset.
Group as lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to the
ownership of the leased item, are capitalized at the inception of the lease at the fair value of the
leased property or, if lower, at the present value of the minimum lease payments and included in
‘Property and equipment’ with the corresponding liability to the lessor included in ‘Other
liabilities’. Lease payments are apportioned between the finance charges and reduction of the
lease liability so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are recorded directly to ‘Interest expense’.
Capitalized leased assets are depreciated over the shorter of the estimated useful lives of the assets
or the respective lease terms, if there is no reasonable certainty that the Group will obtain
ownership by the end of the lease term.
Leases where the lessor retains substantially all the risk and benefits of ownership of the assets are
classified as operating leases. Operating lease payments are recognized as an expense in the
statement of income on a straight-line basis over the lease term. Contingent rental payable are
recognized as expense in the year in which they are incurred.
Group as lessor
Finance leases, where the Group transfers substantially all the risks and benefits incidental to the
ownership of the leased item to the lessee, are included in the statement of financial position under
‘Loans and receivables’. A lease receivable is recognized at an amount equivalent to the net
investment (asset cost) in the lease. All income resulting from the receivable is included in
‘Interest income’ in the statement of income.
Leases where the Group does not transfer substantially all the risks and benefits of ownership of
the assets are classified as operating leases. Initial direct costs incurred in negotiating operating
leases are added to the carrying amount of the leased asset and recognized over the lease term on
the same basis as the rental income. Contingent rents are recognized as revenue in the year in
which they are earned.
*SGVFS004156*
- 24 Retirement Cost
The Group has a noncontributory defined benefit retirement plan except for FMIIC and its
subsidiary which follow the defined contribution retirement benefit plan and the Mandatory
Provident Fund Scheme (MPFS). The retirement cost of the Parent Company and most of its
subsidiaries is determined using the projected unit credit method. Under this method, the current
service cost is the present value of retirement benefits payable in the future with respect to services
rendered in the current year.
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 profit or loss. Past service costs are recognized
when plan amendment or curtailment occurs. These amounts are calculated periodically by
independent qualified actuaries.
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
profit or loss.
Retirement expense is presented under ‘Compensation and fringe benefits’ in the statement of
income.
Remeasurements comprising actuarial gains and losses, return on plan assets 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.
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). If the fair value of the plan assets is higher than the present
value of the defined benefit obligation, the measurement of the resulting defined benefit asset is
limited to the present value of economic benefits available in the form of refunds from the plan or
reductions in future contributions to the plan.
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.
*SGVFS004156*
- 25 Payments to the defined contribution retirement benefit plans and the MPFS are recognized as
expenses when employees have rendered service entitling them to the contributions.
Equity
When the shares are sold at a premium, the difference between the proceeds and par value is
credited to ‘Capital paid in excess of par value’, net of direct costs incurred related to the equity
issuance. If ‘Capital paid in excess of par value’ is not sufficient, the excess is charged against
surplus. When the Group issues more than one class of stock, a separate account is maintained for
each class of stock and the number of stocks issued.
Subscriptions receivable pertains to the uncollected portion of the subscribed stocks.
Surplus represents accumulated earnings of the Group less dividends declared.
Own equity instruments which are reacquired (treasury stocks) are recognized at cost and
deducted from equity. No gain or loss is recognized in the profit or loss on the purchase, sale,
issue or cancellation of the Group’s own equity instruments. Any difference between the carrying
amount and the consideration, if reissued, is recognized in ‘Capital paid in excess of par value’.
Voting rights related to treasury stocks are nullified for the Group and no dividends are allocated
to them respectively. When the stocks are retired, the Common stock account is reduced by its par
value and the excess of cost over par value upon retirement is debited to capital paid in excess of
par value at the time the stocks were issued and to surplus for the remaining balance.
Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a
result of a past event and it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. Where the Group expects some or all of a provision to be reimbursed, for example,
under an insurance contract, the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is presented in the
statement of income, net of any reimbursement. If the effect of the time value of money is
material, provisions are determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and, where appropriate, the
risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognized as ‘Interest expense’.
Contingent Liabilities and Contingent Assets
Contingent liabilities are not recognized in the financial statements but are disclosed unless the
possibility of an outflow of resources embodying economic benefits is remote. Contingent assets
are not recognized but are disclosed in the financial statements when an inflow of economic
benefits is probable.
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 taxing 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 on 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.
*SGVFS004156*
- 26 Deferred tax liabilities are recognized for all taxable temporary differences, except:
a. Where the deferred tax liability arises from the initial recognition of goodwill or 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 profit nor taxable profit or loss.
b. In respect of taxable temporary differences associated with investments in subsidiaries, where
the timing of the reversal of the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable future.
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 income will be available against which the deductible temporary differences and
carryforward of unused tax credits from MCIT and unused NOLCO can be utilized except:
a. Where the deferred tax asset relating to the deductible temporary difference arises 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 profit nor taxable profit or
loss.
b. In respect of deductible temporary differences associated with investments in subsidiaries,
deferred tax assets are recognized only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be available against
which the temporary differences can be utilized.
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 future taxable profit will be
available to allow all or part of the deferred income tax asset to be utilized. Unrecognized
deferred tax assets are reassessed at each statement of financial position date and are recognized to
the extent that it has become probable that future taxable income will allow the deferred tax asset
to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
year 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.
Current tax and deferred tax relating to items recognized directly in equity are recognized in other
comprehensive income and not in the statement of income.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set
off current tax assets against current tax liabilities and deferred taxes relate to the same taxable
entity and the same taxation authority.
Earnings Per Share
Basic earnings per share (EPS) is computed by dividing net income for the year attributable to
equity holders of the Parent Company by the weighted average number of common shares
outstanding during the year after giving retroactive effect to stock dividends declared and stock
rights exercised during the year. The Group does not have dilutive potential common shares.
Dividends on Common Shares
Cash dividends on common shares are recognized as a liability and deducted from the equity when
approved by the Board of Directors (BOD) of the Parent Company and the BSP while stock
dividends are deducted from equity when approved by BOD, shareholders of the Parent Company
and the BSP. Dividends declared during the year but are approved by the BSP after the statement
of financial position date are dealt with as a subsequent event.
*SGVFS004156*
- 27 Coupon Payment on Hybrid Capital Securities
Coupon payment on hybrid capital securities (HT1 Capital) is treated as dividend for financial
reporting purposes, rather than interest expense and deducted from equity when due, after the
approval by the BOD of the Parent Company and the BSP.
Debt Issue Costs
Issuance, underwriting and other related costs incurred in connection with the issuance of debt
instruments are deferred and amortized over the terms of the instruments using the EIR method.
Unamortized debt issuance costs are included in the related carrying amount of the debt instrument
in the statement of financial position.
Capital Securities Issuance Costs
Issuance, underwriting and other related costs incurred in connection with the issuance of the
capital securities are treated as a reduction of equity.
Events after the Statement of Financial Position Date
Post year-end events that provide additional information about the Group’s position at the
statement of financial position date (adjusting event) are reflected in the financial statements. Post
year-end events that are not adjusting events, if any, are disclosed when material to the financial
statements.
Segment Reporting
The Group’s operating businesses are organized and managed separately according to the nature
of the products and services provided, with each segment representing a strategic business unit
that offers different products and serves different markets. Financial information on business
segments is presented in Note 6.
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,
PSBank and FMIC act in a fiduciary capacity such as nominee, trustee or agent.
Standards Issued but not yet Effective
PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets
(Amendments)
These amendments remove the unintended consequences of PFRS 13 on the disclosures required
under PAS 36. In addition, these amendments require disclosure of the recoverable amounts for
the assets or cash-generating units (CGUs) for which impairment loss has been recognized or
reversed during the period. These amendments are effective retrospectively for annual periods
beginning on or after January 1, 2014 with earlier application permitted, provided PFRS 13 is also
applied. The amendments affect disclosures only and have no impact on the Group’s financial
position or performance.
Investment Entities (Amendments to PFRS 10, PFRS 12 and PAS 27)
These amendments are effective for annual periods beginning on or after January 1, 2014. They
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. It is not expected that this amendment
would be relevant to the Group since none of the entities in the Group would qualify to be an
investment entity under PFRS 10.
*SGVFS004156*
- 28 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. IFRIC 21 is effective for annual periods beginning on or
after January 1, 2014. The Group does not expect that IFRIC 21 will have material financial
impact in future financial statements
PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives and
Continuation of Hedge Accounting (Amendments)
These amendments provide relief from discontinuing hedge accounting when novation of a
derivative designated as a hedging instrument meets certain criteria. These amendments are
effective for annual periods beginning on or after January 1, 2014. The Group has not novated its
derivatives during the current period. However, these amendments would be considered for future
novations.
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial
Liabilities (Amendments)
The amendments clarify the meaning of “currently has a legally enforceable right to set-off” and
also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as central
clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The
amendments affect presentation only and have no impact on the Group’s financial position or
performance. The amendments to PAS 32 are to be retrospectively applied for annual periods
beginning on or after January 1, 2014.
PAS 19, Employee Benefits – Defined Benefit Plans: Employee Contributions (Amendments)
The amendments apply to contributions from employees or third parties to defined benefit plans.
Contributions that are set out in the formal terms of the plan shall be accounted for as reductions
to current service costs if they are linked to service or as part of the remeasurements of the net
defined benefit asset or liability if they are not linked to service. Contributions that are
discretionary shall be accounted for as reductions of current service cost upon payment of these
contributions to the plans. The amendments to PAS 19 are to be retrospectively applied for annual
periods beginning on or after July 1, 2014.
The Group will assess the impact of these amendments on its financial position or performance
when they become effective.
Annual Improvements to PFRSs (2010-2012 cycle)
The Annual Improvements to PFRSs (2010-2012 cycle) contain non-urgent but necessary
amendments to the following standards:
PFRS 2, Share-based Payment – Definition of Vesting Condition
The amendment revised the definitions of vesting condition and market condition and added the
definitions of performance condition and service condition to clarify various issues. This
amendment shall be prospectively applied to share-based payment transactions for which the grant
date is on or after July 1, 2014. This amendment does not apply to the Group as it has no sharebased payments .
PFRS 3, Business Combinations – Accounting for Contingent Consideration in a Business
Combination
The amendment clarifies that a contingent consideration that meets the definition of a financial
instrument should be classified as a financial liability or as equity in accordance with PAS 32.
Contingent consideration that is not classified as equity is subsequently measured at fair value
*SGVFS004156*
- 29 through profit or loss whether or not it falls within the scope of PFRS 9 (or PAS 39, if PFRS 9 is
not yet adopted) The amendment shall be prospectively applied to business combinations for
which the acquisition date is on or after July 1, 2014. 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 require entities to disclose the judgment made by management in aggregating
two or more operating segments. This disclosure should include a brief description of the
operating segments that have been aggregated in this way and the economic indicators that have
been assessed in determining that the aggregated operating segments share similar economic
characteristics. The amendments also clarify that an entity shall provide reconciliations of the total
of the reportable segments’ assets to the entity’s assets if such amounts are regularly provided to
the chief operating decision maker. These amendments are effective for annual periods beginning
on or after July 1, 2014 and are applied retrospectively. The amendments affect disclosures only
and have no impact on the Group’s financial position or performance.
PFRS 13, Fair Value Measurement – Short-term Receivables and Payables
The amendment clarifies that short-term receivables and payables with no stated interest rates can
be held at invoice amounts when the effect of discounting is immaterial. This amendment has no
impact on the Group’s financial position or performance.
PAS 16, Property, Plant and Equipment – Revaluation Method – Proportionate Restatement of
Accumulated Depreciation
The amendment clarifies that, upon revaluation of an item of property, plant and equipment, the
carrying amount of the asset shall be adjusted to the revalued amount, and the asset shall be treated
in one of the following ways:
a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the
carrying amount of the asset. The accumulated depreciation at the date of revaluation is
adjusted to equal the difference between the gross carrying amount and the carrying amount of
the asset after taking into account any accumulated impairment losses.
b. The accumulated depreciation is eliminated against the gross carrying amount of the asset.
The amendment is effective for annual periods beginning on or after July 1, 2014. The amendment
shall apply to all revaluations recognized in annual periods beginning on or after the date of initial
application of this amendment and in the immediately preceding annual period. The amendment
has no impact on the Group’s financial position or performance.
PAS 24, Related Party Disclosures – Key Management Personnel
The amendments clarify that an entity is a related party of the reporting entity if the said entity, or
any member of a group for which it is a part of, provides key management personnel services to
the reporting entity or to the parent company of the reporting entity. The amendments also clarify
that a reporting entity that obtains management personnel services from another entity (also
referred to as management entity) is not required to disclose the compensation paid or payable by
the management entity to its employees or directors. The reporting entity is required to disclose
the amounts incurred for the key management personnel services provided by a separate
management entity. The amendments are effective for annual periods beginning on or after
July 1, 2014 and are applied retrospectively. The amendments affect disclosures only and have no
impact on the Group’s financial position or performance.
*SGVFS004156*
- 30 PAS 38, Intangible Assets – Revaluation Method – Proportionate Restatement of Accumulated
Amortization
The amendments clarify that, upon revaluation of an intangible asset, the carrying amount of the
asset shall be adjusted to the revalued amount, and the asset shall be treated in one of the
following ways:
a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the
carrying amount of the asset. The accumulated amortization at the date of revaluation is
adjusted to equal the difference between the gross carrying amount and the carrying amount of
the asset after taking into account any accumulated impairment losses.
b. The accumulated amortization is eliminated against the gross carrying amount of the asset.
The amendments also clarify that the amount of the adjustment of the accumulated amortization
should form part of the increase or decrease in the carrying amount accounted for in accordance
with the standard.
The amendments are effective for annual periods beginning on or after July 1, 2014. The
amendments shall apply to all revaluations recognized in annual periods beginning on or after the
date of initial application of this amendment and in the immediately preceding annual period. The
amendments have no impact on the Group’s financial position or performance.
Annual Improvements to PFRSs (2011-2013 cycle)
The Annual Improvements to PFRSs (2011-2013 cycle) contain non-urgent but necessary
amendments to the following standards:
PFRS 1, First-time Adoption of Philippine Financial Reporting Standards – Meaning of ‘Effective
PFRSs’
The amendment clarifies that an entity may choose to apply either a current standard or a new
standard that is not yet mandatory, but that permits early application, provided either standard is
applied consistently throughout the periods presented in the entity’s first PFRS financial
statements. This amendment is not applicable to the Group as it is not a first-time adopter of
PFRS.
PFRS 3, Business Combinations – Scope Exceptions for Joint Arrangements
The amendment clarifies that PFRS 3 does not apply to the accounting for the formation of a joint
arrangement in the financial statements of the joint arrangement itself. The amendment is effective
for annual periods beginning on or after July 1 2014 and is applied prospectively.
PFRS 13, Fair Value Measurement – Portfolio Exception
The amendment clarifies that the portfolio exception in PFRS 13 can be applied to financial assets,
financial liabilities and other contracts. The amendment is effective for annual periods beginning
on or after July 1 2014 and is applied prospectively.
PAS 40, Investment Property
The amendment clarifies the interrelationship between PFRS 3 and PAS 40 when classifying
property as investment property or owner-occupied property. The amendment stated that judgment
is needed when determining whether the acquisition of investment property is the acquisition of an
asset or a group of assets or a business combination within the scope of PFRS 3. This judgment is
based on the guidance of PFRS 3. This amendment is effective for annual periods beginning on or
after July 1, 2014 and is applied prospectively. The amendment has no significant impact on the
Group’s financial position or performance.
*SGVFS004156*
- 31 Mandatory Date Yet to Be Determined
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 interpretation
requires that revenue on construction of real estate be recognized only upon completion, except
when such contract qualifies as construction contract to be accounted for under PAS 11 or
involves rendering of services in which case revenue is recognized based on stage of completion.
Contracts involving provision of services with the construction materials and where the risks and
reward of ownership are transferred to the buyer on a continuous basis will also be accounted for
based on stage of completion. The SEC and the Financial Reporting Standards Council (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.
PFRS 9, Financial Instruments
PFRS 9, as issued, reflects the first and third phases of the project to replace PAS 39 and applies to
the classification and measurement of financial assets and liabilities and hedge accounting,
respectively. Work on the second phase, which relate to impairment of financial instruments, and
the limited amendments to the classification and measurement model is still ongoing, with a view
to replace PAS 39 in its entirety. 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 liabilities designated as at FVPL using the fair value option, 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 relating to the entity’s own 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 to PFRS 9, including the embedded
derivative bifurcation rules and the criteria for using the FVO. The adoption of the first phase of
PFRS 9 will have an effect on the classification and measurement of the Group’s financial assets,
but will potentially have no impact on the classification and measurement of financial liabilities.
On hedge accounting, PFRS 9 replaces the rules-based hedge accounting model of PAS 39 with a
more principles-based approach. Changes include replacing the rules-based 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 financial
instrument as the hedging instrument and accounted for as costs of hedging. PFRS 9 also requires
more extensive disclosures for hedge accounting.
PFRS 9 currently has no mandatory effective date. PFRS 9 may be applied before the completion
of the limited amendments to the classification and measurement model and impairment
methodology. The Group conducted an evaluation of the financial impact of the adoption of
PFRS 9 based on the audited financial statements as of December 31, 2012 and decided not to
early adopt PFRS 9 in its 2013 financial reporting.
*SGVFS004156*
- 32 3. Significant Accounting Judgments and Estimates
The preparation of the financial statements in compliance with PFRS requires the Group to make
estimates and assumptions that affect the reported amounts of assets, liabilities, income and
expenses and the disclosures of contingent assets and contingent liabilities. Future events may
occur which can cause the assumptions used in arriving at the estimates to change. The effects of
any change in estimates are reflected in the financial statements as they become reasonably
determinable. Judgments and estimates are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. The following are the critical judgments and key assumptions
that have a significant risk of material adjustment to the carrying amounts of assets and liabilities
within the next financial year:
Judgments
a. Consolidation of subsidiaries
The determination whether the Group has control over an investee company requires
significant judgment. The Group considers that the following criteria are all met, including:
(a) an investor has the power over an investee; (b) the investor has exposure, or rights, to
variable returns from its involvement with the investee; and (c) the investor has the ability to
use its power over the investee to affect the amount of the investor’s return.
As discussed in Note 2, in accordance with PFRS 10, the Group included the accounts of
FMSALBF and FMSALEF in its consolidated financial statements. The Group re-assessed
the control conclusion for these Funds. Although the ownership is less than half of the voting
power of these investees, the Group has control due to its power to direct the relevant
activities of the Funds through First Metro Asset Management Inc. (FAMI), a subsidiary of
FMIC, which acts as the fund manager of the Funds. Further, the Group has the exposure to
variable returns from its investments and its ability to use its power over the Funds to affect
their returns.
b. Existence of significant influence over an associate with less than 20.0% ownership
As discussed in Note 11, there are instances that an investor exercises significant influence
even if its ownership is less than 20.0%. The Group applies significant judgment in assessing
whether it holds significant influence over an investee and considers the following:
(a) representation in the board of directors or equivalent governing body of the investee;
(b) participation in policy-making processes, including participation in decisions about
dividends or other distributions; (c) material transactions between the investor and the
investee; (d) interchange of managerial personnel; or (e) provision of essential technical
information.
c. HTM investments
The classification under HTM investments requires significant judgment. In making this
judgment, the Group evaluates its intention and ability to hold such investments to maturity.
If the Group fails to keep these investments to maturity other than in certain specific
circumstances - for example, selling an insignificant amount close to maturity - it will be
required to reclassify the entire portfolio as AFS investments. The investments would
therefore be measured at fair value and not at amortized cost. In 2013 and 2012, the Group
follows Philippine GAAP for banks in accounting for HTM investments in the consolidated
financial statements (Notes 2 and 8).
In addition, as discussed in Note 8, the Group’s management has determined that the change
in intention on certain HTM investments of PSBank and FMIC in response to the significant
increase in the regulatory capital requirements of the BSP is an isolated event that is beyond
the Group’s control and is non-recurring and could not have been reasonably anticipated.
*SGVFS004156*
- 33 d. Fair value of financial instruments
Where the fair values of financial assets and financial liabilities recorded in the statement of
financial position cannot be derived from active markets, these are determined using internal
valuation techniques using generally accepted market valuation models. The inputs to these
models are taken from observable markets where possible, but where this is not feasible, a
degree of judgment is required in establishing fair values. These judgments may include
considerations of liquidity and model inputs such as correlation and volatility for longer dated
derivatives (Note 5).
e. Financial assets not quoted in an active market
The Group classifies financial assets by evaluating, among others, whether the asset is quoted
or not in an active market. Included in the evaluation on whether a financial asset is quoted in
an active market is the determination on whether quoted prices are readily and regularly
available, and whether those prices represent actual and regularly occurring market
transactions on an arm’s length basis.
f.
Embedded derivatives
Where a hybrid instrument is not classified as financial assets or liabilities at FVPL, the Group
evaluates whether the embedded derivative should be bifurcated and accounted for separately.
This includes assessing whether the embedded derivative has a close economic relationship to
the host contract.
g. Leases
Operating lease
Group as lessor
The Group has entered into commercial property leases on its investment properties portfolio
and over various items of furniture, fixtures and equipment. The Group has determined based
on an evaluation of the terms and conditions of the arrangements (i.e., the lease does not
transfer ownership of the asset to the lessee by the end of the lease term, the lessee has no
option to purchase the asset at a price that is expected to be sufficiently lower than the fair
value at the date the option is exercisable and the lease term is not for the major part of the
asset’s economic life), that it retains all the significant risks and rewards of ownership of these
properties which are leased out on operating leases.
Group as lessee
The Group has entered into lease on premises it uses for its operations. The Group has
determined, based on the evaluation of the terms and conditions of the lease agreement
(i.e., the lease does not transfer ownership of the asset to the lessee by the end of the lease
term and lease term is not for the major part of the asset’s economic life), that the lessor
retains all the significant risks and rewards of ownership of these properties.
Finance lease
The Group has determined based on an evaluation of terms and conditions of the lease
arrangements (i.e., present value of minimum lease payments amounts to at least substantially
all of the fair value of leased asset, lease term is for the major part of the economic useful life
of the asset, and lessor’s losses associated with the cancellation are borne by the lessee) that it
has transferred all significant risks and rewards of ownership of the properties it leases out on
finance leases.
*SGVFS004156*
- 34 h. 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. In making this judgment, the Group considers the following: (a) the currency that
mainly influences sales prices for financial instruments and services (this will often be the
currency in which sales prices for its financial instruments and services are denominated and
settled); (b) the currency in which funds from financing activities are generated; and (c) the
currency in which receipts from operating activities are usually retained.
i.
Contingencies
The Group is currently involved in legal proceedings. The estimate of the probable cost for
the resolution of claims has been developed in consultation with the aid of the outside legal
counsel handling the Group’s defense in this matter and is based upon an analysis of potential
results. It is probable, however, that future results of operations could be materially affected
by changes in the estimates or in the effectiveness of the strategies relating to this proceeding
(Note 30).
Estimates
a. Credit losses of loans and receivables
The Group reviews its loan portfolios and receivables to assess impairment on a semi-annual
basis with updating provisions made during the intervals as necessary based on the continuing
analysis and monitoring of individual accounts by credit officers. In determining whether
credit losses should be recorded in the statement of income, the Group makes judgments as to
whether there is any observable data indicating that there is a measurable decrease in the
estimated future cash flows from a portfolio of loans before the decrease can be identified with
an individual loan in that portfolio. This evidence may include observable data indicating that
there has been an adverse change in the payment status of borrowers in a group, or national or
local economic conditions that correlate with defaults on assets in the group. Management
uses estimates in the amount and timing of future cash flows when determining the level of
allowance required. Such estimates are based on assumptions about a number of factors and
actual results may differ, resulting in future changes in 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.
The carrying values of loans and receivables and the related allowance for credit losses of the
Group and the Parent Company are disclosed in Note 9. In 2013 , 2012 and 2011, provision
for credit losses on loans and receivables amounted to P
=8.69 billion, P
=4.31 billion and
=
P3.38 billion, respectively, for the Group and =
P3.26 billion, =
P0.72 billion and =
P0.46 billion,
respectively, for the Parent Company.
*SGVFS004156*
- 35 b. Fair values of structured debt instruments and derivatives
The fair values of structured debt instruments and derivatives that are not quoted in active
markets are determined using valuation techniques such as discounted cash flow analysis and
standard option pricing models. The models incorporate various inputs including the credit
quality of counterparties. Where valuation techniques are used to determine fair values, they
are reviewed by qualified personnel independent of the area that created them. All models are
reviewed before they are used and to the extent practicable, models use only observable data.
Changes in assumptions about these factors could affect reported fair value of financial
instruments. As of December 31, 2013, credit valuation adjustments (CVA) are applied to
over-the-counter derivative instruments where the theoretical base spread is discounted using
the relevant yield curve as discount rate. The effect of such CVA on the marked-to-market
value of derivatives is not material. Refer to Note 5 for the information on the fair values of
these investments and Note 8 for information on the carrying values of these instruments.
c. Valuation of unquoted equity securities
The Group’s investments in equity securities that do not have quoted market price in an active
market and whose fair value cannot be reliably measured are carried at cost less impairment
losses.
As of December 31, 2013 and 2012, the carrying value of unquoted AFS equity securities
amounted to =
P3.5 billion and P
=0.3 billion, respectively, for the Group and P
=0.1 billion for both
years for the Parent Company (Note 8).
d. Impairment of AFS equity securities
The Group determines that AFS equity securities are impaired when there has been a
significant or prolonged decline in the fair value below its cost. This determination of what is
significant or prolonged requires judgment. The Group treats ‘significant’ generally as
20.00% or more of the original cost of investment, and ‘prolonged’, greater than 12 months.
In making this judgment, the Group evaluates among other factors, the normal volatility in
share price. In addition, impairment may be appropriate when there is evidence of
deterioration in the financial health of the investee, industry and sector performance, changes
in technology, and operational and financing cash flows.
As of December 31, 2013 and 2012, allowance for impairment losses on AFS equity
securities amounted to P
=568.3 million and P
=572.8 million, respectively, for the Group and
=
P178.0 million and =
P176.2 million, respectively, for the Parent Company. As of
December 31, 2013 and 2012, the carrying value of AFS equity securities (included under
AFS investments) amounted to =
P6.4 billion and =
P2.6 billion, respectively, for the Group and
P
=325.1 million and =
P455.8 million, respectively, for the Parent Company (Notes 8 and 15).
e. Recognition of deferred income taxes
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that
taxable profit will be available against which the losses can be utilized. Significant
management judgment is required to determine the amount of deferred tax assets that can be
recognized, based upon the likely timing and level of future taxable profits together with
future tax planning strategies. The estimates of future taxable income indicate that certain
temporary differences will be realized in the future. The recognized net deferred tax assets
and unrecognized deferred tax assets for the Group and the Parent Company are disclosed in
Note 28.
*SGVFS004156*
- 36 f.
Present value of retirement liability
The cost of defined retirement pension plan and other post employment benefits is determined
using actuarial valuations. The actuarial valuation involves making assumptions about
discount rates, future salary increases, mortality rates and future pension increases. Due to the
complexities involved in the valuation and the long-term nature of these plans, such estimates
are subject to significant uncertainty. The assumed discount rates were determined using the
market yields on Philippine government bonds with terms consistent with the expected
employee benefit payout as of the statement of financial position date. The present values of
the retirement liability of the Group and the Parent Company are disclosed in Note 26.
g. Impairment of nonfinancial assets
Property and equipment, investments in subsidiaries, associates and a JV, investment
properties, software costs and chattel mortgage properties
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:
a) significant underperformance relative to expected historical or projected future operating
results; b) significant changes in the manner of use of the acquired assets or the strategy for
overall business; and c) significant negative industry or economic trends. The Group uses fair
value less costs to sell in determining recoverable amount. The carrying values of the
property and equipment, investments in subsidiaries and associates and a JV, investment
properties, software costs and chattel mortgage properties of the Group and the
Parent Company are disclosed in Notes 10, 11, 12 and 14, respectively.
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. The Group estimated
the discount rate used for the computation of the net present value by reference to industry
cost of capital. Future cash flows from the business are estimated based on the theoretical
annual income of the CGU. 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 senior management covering a five-year period. In 2013 and 2012, the
applicable pre-tax discount rate applied to cash flow projections is 16.78% and 14.92%,
respectively. Key assumptions in VIU calculation of CGUs are most sensitive to discount
rates and growth rates used to project cash flows.
The Parent Company has undergone reorganizations of various units and has changed its
business plans which affected the recoverable amount of the CGUs to which the goodwill
relates. As of December 31, 2013, the Parent Company has fully impaired its goodwill
amounting to P
=1.2 billion.
As of December 31, 2013 and 2012, goodwill amounted to P
=5.2 billion and P
=6.4 billion
respectively, for the Group. As of December 31, 2012, =
P1.2 billion pertained to the Parent
Company (Note 11).
*SGVFS004156*
- 37 4. Financial Risk and Capital Management
Introduction
The Group has exposure to the following risks from its use of financial instruments: (a) credit;
(b) liquidity; and (c) market risks.
Risk management framework
The BOD has overall responsibility for the oversight of the Parent Company’s risk management
process. On the other hand, the risk management processes of the subsidiaries are the separate
responsibilities of their respective BOD. Supporting the BOD in this function are certain Boardlevel committees such as Risk Oversight Committee (ROC), Audit Committee (AC) and senior
management committees through the Executive Committee, Asset and Liability Committee
(ALCO) and Policy Committee.
The AC is responsible for monitoring compliance with the Parent Company’s risk management
policies and procedures, and for reviewing the adequacy of risk management practices in relation
to the risks faced by the Parent Company. The AC is assisted in these functions by the Internal
Audit Group (IAG). IAG undertakes both regular and ad-hoc reviews of risk management
controls and procedures, the results of which are reported to the AC.
The Parent Company and its subsidiaries manage their respective financial risks separately. The
subsidiaries have their own risk management processes but are structured similar to that of the
Parent Company. To a certain extent, the respective risk management programs and objectives are
the same across the Group. Risk management policies adopted by the subsidiaries and affiliates
are aligned with the Parent Company’s risk policies. To further promote compliance with PFRS
and Basel II and to prepare for Basel III, the Parent Company created a Risk Management
Coordinating Council (RMCC) composed of the risk officers of the Parent Company and its
financial institution subsidiaries.
Credit Risk
Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails
to meet its contractual obligations. The Group manages and controls credit risk by setting limits
on the amount of risk it is willing to accept for individual counterparties, related groups of
borrowers, for market segmentation, and industry concentrations, and by monitoring exposures in
relation to such limits. The same is true for treasury-related activities. Each business unit is
responsible for the quality of its credit portfolio and for monitoring and controlling all credit risks
in its portfolio. Regular reviews and audits of business units and credit processes are undertaken
by IAG and Risk Management Group (RSK).
Management of credit risk
The Parent Company faces potential credit risks every time it extends funds to borrowers, commits
funds to counterparties, guarantees the paying performance of its clients, invests funds to issuers
(e.g., investment securities issued by either sovereign or corporate entities) or enter into either
market-traded or over-the-counter derivatives, either through implied or actual contractual
agreements (i.e., on- or off-balance sheet exposures). The Parent Company manages its credit risk
at various levels (i.e., strategic level, portfolio level down to individual obligor or transaction) by
adopting a credit risk management environment that has the following components:
· Formulating credit policies in consultation with business units, covering collateral
requirements, credit/financial assessment, risk grading and reporting and compliance with
regulatory requirements;
· Establishment of authorization limits for the approval and renewal of credit facilities;
*SGVFS004156*
- 38 ·
Limiting concentrations of exposure to counterparties and industries (for loans), and by issuer
(for investment securities);
Utilizing the Internal Credit Risk Rating System (ICRRS) in order to categorize exposures
according to the risk profile. The risk grading system is used for determining impairment
provisions against specific credit exposures. The current risk grading framework consists of
ten grades reflecting varying degrees of risk of default and the availability of collateral or
other credit risk mitigation; and
Monitoring compliance with approved exposure limits.
·
·
The ICRRS contains the following:
a. Borrower Risk Rating (BRR) - an assessment of the credit worthiness of the borrower (or
guarantor) without considering the type or amount of the facility and security arrangements. It
is an indicator of the probability that a borrower cannot meet its credit obligations when it falls
due. The assessment is described below:
Component
Financial Condition
Description
Refers to the financial condition of the borrower based
on audited financial statements as indicated by certain
financial ratios. The Financial Factor Evaluation is
conducted manually.
Refers to the prospects of the industry as well as the
company’s performance and position in the industry.
Refers to the management’s ability to run the
company successfully.
Industry Analysis
Management Quality
Credit Factor
Weight
40.00%
30.00%
30.00%
b. Facility Risk Factor (FRF) - determined for each individual facility considering the term of the
facility, security arrangement and quality of documentation. This factor can downgrade or
upgrade the BRR based on the elements relating to cover (collateral including pledged cash
deposits and guarantee), quality of documentation and structure of transactions.
c. Adjusted Borrower Risk Rating (ABRR) - combination of BRR and FRF.
Maximum exposure to credit risk after collateral held or other credit enhancements
An analysis of the maximum credit risk exposure relating to on balance sheet assets is shown
below:
Consolidated
Carrying
Amount
Interbank loans receivable
and SPURA
Loans and receivables - net
Receivables from
customers
Commercial loans
Residential mortgage
loans
Auto loans
Trade
Others
Accounts receivable
Accrued interest receivable
Sales contract receivable
Total
2013
Financial
Effect of
Collateral
or Credit
Fair Value
of Collateral Enhancement
Maximum
Exposure to
Credit Risk
Carrying
Amount
2012 (As Restated - Note 2)
Financial
Effect of
Collateral
Maximum
or Credit
Exposure to
Fair Value
Credit Risk
P
= 94,548
P
= 95,623
P
= 94,476
P
= 72
P
=4,993
P
=4,989
P
=4,989
=
P4
139,551
254,828
125,884
13,667
116,322
278,710
71,842
44,480
62,369
53,933
29,678
1,336
286,867
1
1,986
408
289,262
P
= 383,810
135,727
91,979
62,232
53,532
137
401
29,678
1,287
45,170
1
546
40
45,757
P
= 45,829
51,972
45,689
21,476
3,769
239,228
117,116
80,165
–
7,555
483,546
51,858
45,327
–
3,589
172,616
114
362
21,476
180
66,612
–
–
78
482,612
1
2,042
882
485,537
P
= 581,160
49
241,697
–
1,440
368
243,505
P
= 337,981
–
–
–
–
1,289
579
241,096
=
P246,089
647
1,276
485,469
=
P490,458
647
527
173,790
=
P178,779
642
52
67,306
=
P67,310
*SGVFS004156*
- 39 -
Carrying
Amount
and SPURA
Receivables from
customers
Commercial loans
Residential mortgage
loans
Auto loans
Trade
Others
Total
Parent Company
2013
Financial
Effect of
Collateral
Maximum
Carrying
or Credit Exposure to
Fair Value
Amount
of Collateral Enhancement Credit Risk
Financial
Effect of
Collateral
Maximum
or Credit
Exposure to
Fair Value
Credit Risk
P
= 79,872
P
= 79,938
P
= 79,800
P
= 72
P
=6,182
P
=7,770
P
=6,182
=
P–
116,239
224,374
103,622
12,617
100,016
257,266
57,488
42,528
34,355
15,970
29,678
1,287
197,529
1,354
136
199,019
P
= 278,891
81,393
36,338
–
–
342,105
809
319
343,233
P
= 423,171
34,218
15,579
–
–
153,419
809
101
154,329
P
= 234,129
137
391
29,678
1,287
44,110
545
35
44,690
P
= 44,762
29,588
14,557
21,476
120
165,757
627
213
166,597
=
P172,779
67,159
33,145
–
–
357,570
450
436
358,456
=
P366,226
29,473
14,254
–
–
101,215
450
166
101,831
=
P108,013
115
303
21,476
120
64,542
177
47
64,766
=
P64,766
The following tables show the effect of rights of set-off associated with the recognized financial
assets and financial liabilities.
Financial assets recognized by type
Consolidated
2013
Derivative assets
SPURA
2012
Derivative assets
SPURA
Parent Company
2013
Derivative Assets
SPURA
2012
Derivative Assets
Financial liabilities recognized by type
Consolidated
2013
Derivative liabilities
SSURA
2012
SSURA
Parent Company
2013
SSURA
2012
SSURA
Effect of Remaining Rights
of Set-Off (including rights to
set-off financial collateral)
offsetting criteria
Fair Value of
Financial
Financial
Instruments
Collateral
Gross Carrying
Amounts
(before
offsetting)
Gross Amounts
Offset in
Accordance
with the
Offsetting
Criteria
Net Amount
Presented in
Statement of
Financial
Position
P
= 114,506
94,548
P
= 209,054
P
= 110,734
–
P
= 110,734
P
= 3,772
94,548
P
= 98,320
P
= 1,298
–
P
= 1,298
=
P–
94,476
P
= 94,476
P
= 2,474
72
P
= 2,546
=
P102,287
4,993
=
P107,280
=
P100,246
–
=
P100,246
P
=2,041
4,993
P
=7,034
P
=892
–
P
=892
=
P–
4,989
P
=4,989
P
=1,149
4
P
=1,153
P
= 112,264
79,324
P
= 191,588
P
= 108,506
–
P
= 108,506
P
= 3,758
79,324
P
= 83,082
P
= 1,298
–
P
= 1,298
=
P–
79,252
P
= 79,252
P
= 2,460
72
P
= 2,532
=
P102,287
=
P102,287
=
P100,246
=
P100,246
P
=2,041
P
=2,041
P
=892
P
=892
=
P–
=
P–
P
=1,149
P
=1,149
Gross Carrying
Amounts
(before
offsetting)
Gross Amounts
Offset in
Accordance
with the
Offsetting
Criteria
Net Amount
Presented in
Statement of
Financial
Position
Effect of Remaining Rights
of Set-Off (including rights to
set-off financial collateral)
offsetting criteria
Fair Value of
Financial
Financial
Instruments
Collateral
Net Exposure
P
= 115,897
25,117
P
= 141,014
P
= 111,466
–
P
= 111,466
P
= 4,431
25,117
P
= 29,548
P
= 1,298
–
P
= 1,298
=
P–
25,098
P
= 25,098
P
= 3,133
19
P
= 3,152
=
P127,580
9,267
=
P136,847
=
P120,903
–
=
P120,903
P
=6,677
9,267
=
P15,944
P
=892
–
P
=892
=
P–
9,267
P
=9,267
P
=5,785
–
P
=5,785
P
= 115,897
22,180
P
= 138,077
P
= 111,466
–
P
= 111,466
P
= 4,431
22,180
P
= 26,611
P
= 1,298
–
P
= 1,298
=
P–
22,180
P
= 22,180
P
= 3,133
–
P
= 3,133
=
P124,589
5,066
=
P129,655
=
P118,180
–
=
P118,180
P
=6,409
5,066
=
P11,475
P
=892
–
P
=892
=
P–
5,066
P
=5,066
P
=5,517
–
P
=5,517
Net Exposure
*SGVFS004156*
- 40 Excessive risk concentration
Credit risk concentrations can arise whenever a significant number of borrowers have similar
characteristics and are affected similarly by changes in economic or other conditions. The Parent
Company analyzes the credit risk concentration to an individual borrower, related group of
accounts, industry, internal rating buckets, and security. For risk concentration monitoring
purposes, the financial assets are broadly categorized into (1) loans and receivables and (2) trading
and financial investment securities. To mitigate risk concentration, the Parent Company
constantly checks for breaches in regulatory and internal limits.
Concentration of risks of financial assets with credit risk exposure
An analysis of concentrations of credit risk at the reporting date based on carrying amount is
shown below:
Consolidated
2013
Concentration by Industry
Financial intermediaries
Manufacturing (various industries)
Wholesale and retail trade
Real estate, renting and business activities
Private households
Transportation, storage and communication
Electricity, gas and water
Other community, social and personal
activities
Construction
Hotel and restaurants
Agricultural, hunting and forestry
Public administration and defense,
compulsory social security
Mining and quarrying
Others****
Less allowance for credit losses
Concentration by Location
Philippines
Asia
USA
Europe
Others
Private households
activities
Construction
Loans and
Receivables
Loans and
Advances to
Banks*
Investment
Securities**
Others***
Total
P
= 38,353
124,090
96,062
102,998
130,305
36,505
42,953
P
= 315,062
–
–
–
–
–
–
P
= 16,614
1,891
99
3,124
868
3,197
7,830
P
= 10,764
9,652
9,402
563
69,611
4,936
408
P
= 380,793
135,633
105,563
106,685
200,784
44,638
51,191
3,066
16,462
12,764
6,258
–
–
–
–
58
524
–
–
34
6,160
82
47
3,158
23,146
12,846
6,305
1,912
1,049
12,861
625,638
16,626
P
= 609,012
–
–
–
315,062
2
P
= 315,060
–
202
333,456
367,863
568
P
= 367,295
–
234
1,908
113,801
9,956
P
= 103,845
1,912
1,485
348,225
1,422,364
27,152
P
= 1,395,212
P
= 603,058
22,075
328
102
75
625,638
16,626
P
= 609,012
P
= 270,127
34,245
4,281
4,258
2,151
315,062
2
P
= 315,060
P
= 328,670
15,445
15,973
4,038
3,737
367,863
568
P
= 367,295
P
= 111,403
2,047
351
–
–
113,801
9,956
P
= 103,845
P
= 1,313,258
73,812
20,933
8,398
5,963
1,422,364
27,152
P
= 1,395,212
P
=47,505
99,704
93,057
87,974
69,276
39,683
40,697
P
=177,668
-
P
=36,231
659
210
1,397
2,648
2,475
P
=10,516
8,779
8,812
2,557
40
4,307
533
P
=271,920
109,142
102,079
91,928
69,316
46,638
43,705
18,183
9,772
11,454
5,636
-
1
-
39
5,804
2
13
18,223
15,576
11,456
5,649
2,930
-
-
-
2,930
(Forward)
*SGVFS004156*
- 41 Consolidated
Others****
Philippines
Asia
USA
Europe
Others
Loans and
Receivables
P
=824
13,204
539,899
15,726
P
=524,173
Loans and
Advances to
Banks*
=
P177,668
2
P
=177,666
Investment
Securities**
P
=411
203,953
247,985
573
P
=247,412
Others***
P
=237
57,429
99,068
9,583
P
=89,485
Total
P
=1,472
274,586
1,064,620
25,884
P
=1,038,736
P
=529,711
9,300
644
229
15
539,899
15,726
P
=524,173
P
=145,819
25,794
4,649
1,294
112
177,668
2
P
=177,666
P
=217,419
17,459
4,519
4,148
4,440
247,985
573
P
=247,412
P
=96,841
1,697
530
99,068
9,583
P
=89,485
P
=989,790
54,250
10,342
5,671
4,567
1,064,620
25,884
P
=1,038,736
Loans and
Receivables
Loans and
Advances to
Banks*
Investment
Securities**
Others***
Total
P
= 32,007
114,839
88,753
70,242
50,273
40,872
28,577
12,174
12,120
4,125
829
P
= 249,543
-
P
= 10,384
166
22
4
868
3,532
2,121
45
P
= 10,354
9,651
9,402
557
16
408
4,936
6,106
82
47
234
P
= 302,288
124,656
98,177
70,803
51,157
44,812
35,634
18,280
12,202
4,172
1,108
512
-
48
15
575
121
9,049
464,493
9,650
P
= 454,843
249,543
P
= 249,543
284,429
301,619
178
P
= 301,441
1,194
43,002
9,956
P
= 33,046
121
294,672
1,058,657
19,784
P
= 1,038,873
P
= 460,238
3,615
421
144
75
464,493
9,650
P
= 454,843
P
= 224,024
15,051
4,118
4,199
2,151
249,543
P
= 249,543
P
= 265,173
12,876
15,795
4,038
3,737
301,619
178
P
= 301,441
P
= 40,842
1,811
349
43,002
9,956
P
= 33,046
P
= 990,277
33,353
20,683
8,381
5,963
1,058,657
19,784
P
= 1,038,873
P
=34,179
95,433
71,517
61,509
45,335
35,228
30,815
6,386
10,358
4,324
517
P
=134,434
-
P
=27,683
494
91
3
–
2,073
2,404
53
P
=9,974
8,780
8,810
947
40
531
4,306
5,749
3
13
237
P
=206,270
104,707
80,418
62,459
45,375
37,832
37,525
12,135
10,361
4,337
807
Parent Company
2013
Private households
Construction
activities
Others****
Philippines
Asia
USA
Europe
Others
Private households
Construction
(Forward)
*SGVFS004156*
- 42 Parent Company
Loans and
Receivables
Loans and
Advances to
Banks*
Investment
Securities**
Others***
Total
P
=770
=
P-
=
P-
=
P–
P
=770
–
1,272
40,662
9,583
P
=31,079
142
158,908
762,046
17,992
P
=744,054
P
=402,313
P
=119,731
P
=152,268
P
=38,486
1,694
8,958
16,749
1,646
788
4,442
4,273
530
265
1,192
4,147
14
111
4,439
405,074
134,434
181,876
40,662
8,233
–
176
9,583
P
=396,841
P
=134,434
P
=181,700
P
=31,079
*
Comprised of Due from BSP, Due from other banks and Interbank loans receivable and SPURA.
** Comprised of Financial assets at FVPL, AFS investments and HTM investments.
*** Comprised of applicable accounts under Other assets, financial guarantees and loan commitments and other
credit related liabilities.
**** Includes government-issued debt securities.
P
=712,798
29,047
10,033
5,604
4,564
762,046
17,992
P
=744,054
activities
Others****
Philippines
Asia
USA
Europe
Others
142
8,561
405,074
8,233
P
=396,841
134,434
–
P
=134,434
149,075
181,876
176
P
=181,700
Credit quality per class of financial assets
The credit quality of financial assets is assessed and managed using external and internal ratings.
The credit quality is generally monitored using the 10-grade ICRR system which is integrated in
the credit process particularly in provision for credit losses. Probability of default (PD) models
are used in parallel to the ICRRS. The models are assessed and recalibrated as needed. Validation
of the individual borrower’s risk rating is performed by the Credit Group to maintain accurate and
consistent risk ratings across the credit portfolio. The credit quality with the corresponding
ICRRS Grade and description of commercial loans follows:
High Grade
1 - Excellent
An excellent rating is given to a borrower with a very low probability of going into default and
with high degree of stability, substance and diversity. Borrower has access to raise substantial
amounts of funds through public market at any time; very strong debt service capacity and has
conservative balance sheet ratios. Track record in profit terms is very good. Borrower exhibits
highest quality under virtually all economic conditions.
2 - Strong
This rating is given to borrowers with low probability of going into default in the coming year.
Normally has a comfortable degree of stability, substance and diversity. Under normal market
conditions, borrower has good access to public markets to raise funds. Have a strong market and
financial position with a history of successful performance. Overall debt service capacity is
deemed very strong; critical balance sheet ratios are conservative. Concerned multinationals or
local corporations are well capitalized.
*SGVFS004156*
- 43 Standard Grade
3 - Good
This rating is given to smaller corporations with limited access to public capital markets or to
alternative financial markets. Access is however limited to favorable economic and/or market
conditions. While probability of default is quite low, it bears characteristics of some degree of
stability and substance. However, susceptibility to cyclical changes and more concentration of
business risk, by product or market, may be present. Typical is the combination of comfortable
asset protection and an acceptable balance sheet structure. Debt service capacity is strong.
4 - Satisfactory
A ‘satisfactory’ rating is given to a borrower where clear risk elements exist and probability of
default is somewhat greater. Volatility of earnings and overall performance: normally has limited
access to public markets. Borrower should be able to withstand normal business cycles, but any
prolonged unfavorable economic period would create deterioration beyond acceptable levels.
Combination of reasonable sound asset and cash flow protection: debt service capacity is
adequate. Reported profits in the past year and is expected to report a profit in the current year.
5 - Acceptable
An ‘acceptable’ rating is given to a borrower whose risk elements are sufficiently pronounced
although borrower should still be able to withstand normal business cycles. Any prolonged
unfavorable economic and/or market period would create an immediate deterioration beyond
acceptable levels. Risk is still acceptable as there is sufficient cash flow either historically or
expected for the future; new business or projected finance transaction; an existing borrower where
the nature of the exposure represents a higher risk because of extraordinary developments but for
which a decreasing risk within an acceptable period can be expected.
Substandard Grade
6 - Watchlist
This rating is given to a borrower that belongs to an unfavorable industry or has company-specific
risk factors which represent a concern. Operating performance and financial strength may be
marginal and it is uncertain if borrower can attract alternative course of finance. Borrower finds it
hard to cope with any significant economic downturn and a default in such a case is more than a
possibility. Borrower which incurs net losses and has salient financial weaknesses, reflected on
statements specifically in profitability. Credit exposure is not at risk of loss at the moment but
performance of the borrower has weakened and unless present trends are reversed, could lead to
losses.
7 - Especially Mentioned
This rating is given to a borrower that exhibits potential weaknesses that deserve management’s
close attention. These potential weaknesses, if left uncorrected, may affect the repayment of the
loan and thus, increase credit risk to the Bank.
Impaired
8 - Substandard
These are loans or portions, thereof which appear to involve a substantial and unreasonable degree
of risk to the Bank because of unfavorable record or unsatisfactory characteristics. There exists
the possibility of future losses to the Bank unless given closer supervision. Borrower has welldefined weaknesses or weaknesses that jeopardize loan liquidation. Such well-defined weaknesses
may include adverse trends or development of financial, managerial, economic or political nature,
or a significant weakness in collateral.
*SGVFS004156*
- 44 9 - Doubtful
This rating is given to a nonperforming borrower whose loans or portions thereof have the
weaknesses inherent in those classified as Substandard, with the added characteristics that existing
facts, conditions, and values make collection or liquidation in full highly improbable and in which
substantial loss is probable.
10 - Loss
This rating is given to a borrower whose loans or portions thereof are considered uncollectible or
worthless and of such little value that their continuance as bankable assets is not warranted
although the loans may have some recovery or salvage value. The amount of loss is difficult to
measure and it is not practical or desirable to defer writing off these basically worthless assets
even though partial recovery may be obtained in the future.
The credit quality of consumer loan applicants are currently evaluated using PD models.
For booked consumer loans, the description of credit quality is as follows:
High Grade
Good credit rating
This rating is given to a good repeat client with very satisfactory track record of its loan repayment
(paid at least 50.00%) and whose account did not turn past due during the entire term of the loan.
Standard Grade
Good
A good rating is given to accounts which did not turn past due for 90 days and over.
Limited
This rating is given to borrowers who have average track record on loan repayment (paid less than
50.00%) and whose account did not turn past due for 90 days and over.
Substandard Grade
Poor
A poor rating is given to accounts who reached 90 days past due regardless of the number of times
and the number of months past due.
Poor litigation
This rating is given to accounts that were past due for 180 days and over and are currently being
handled by lawyers.
Impaired
Poor repossessed
This rating is given to accounts whose collaterals were repossessed.
Poor written-off
This rating is given to accounts that were recommended for write-off.
*SGVFS004156*
- 45 Trading and investment securities
In ensuring quality investment portfolio, the Parent Company uses the credit risk rating from the
published data providers like Moody’s, Standard & Poor’s (S&P) or other reputable rating
agencies. Presented here is Moody’s rating - equivalent S&P rating and other rating agencies
applies:
Credit Quality
High grade
Standard grade
Substandard grade
Impaired
Aaa
Ba1
B3
D
Aa1
Ba2
Caa1
Aa2
Ba3
Caa2
External Rating
A1
A2
A3
B1
B2
Caa3
Ca
C
Baa1
Baa2
Baa3
The following table shows the credit quality of financial assets:
Consolidated
Loans and
Receivables
Loans and
Advances to
Banks*
Investment
Securities**
Others***
Total
P
= 315,062
P
= 366,000
P
= 103,845
–
–
–
–
2013
Neither past due nor impaired
Past due but not impaired
Impaired
Gross
Net
P
= 598,241
13,164
14,233
625,638
16,626
P
= 609,012
315,062
2
P
= 315,060
1,863
367,863
568
P
= 367,295
9,956
113,801
9,956
P
= 103,845
P
= 1,383,148
13,164
26,052
1,422,364
27,152
P
= 1,395,212
Impaired
Gross
Net
P
=513,058
11,965
14,876
539,899
15,726
P
=524,173
P
=177,668
–
–
177,668
2
P
=177,666
P
=246,316
–
1,669
247,985
573
P
=247,412
P
=89,132
–
9,936
99,068
9,583
P
=89,485
P
=1,026,174
11,965
26,481
1,064,620
25,884
P
=1,038,736
Parent Company
Loans and
Receivables
Loans and
Advances to
Banks*
Investment
Securities**
Others***
Total
2013
P
= 454,309
P
= 249,543
P
= 301,366
P
= 33,046
P
= 1,038,264
623
–
–
–
623
Impaired
9,561
–
253
9,956
19,770
Gross
464,493
249,543
301,619
43,002
1,058,657
9,650
–
178
9,956
19,784
Net
P
= 454,843
P
= 249,543
P
= 301,441
P
= 33,046
P
= 1,038,873
P
=393,358
P
=134,434
P
=181,530
P
=30,726
P
=740,048
289
–
–
–
289
Impaired
11,427
–
346
9,936
21,709
Gross
405,074
134,434
181,876
40,662
762,046
8,233
–
176
9,583
17,992
Net
P
=396,841
P
=134,434
P
=181,700
P
=31,079
P
= 744,054
*
Comprised of Due from BSP, Due from other banks and Interbank loans receivable and SPURA.
** Comprised of Financial assets at FVPL, AFS investments and HTM investments.
*** Comprised of applicable accounts under Other assets, financial guarantees and loan commitments and other credit related
liabilities.
*SGVFS004156*
- 46 The table below shows the credit quality per class of financial assets that are neither past due nor
individually impaired (gross of allowance for credit losses):
2013
Loans and advances to banks
Due from BSP
Interbank loans receivable and SPURA
HFT investments
Debt securities
Government
Private
BSP
Equity securities - quoted
Derivative assets
AFS investments
Debt securities
Government
Private
Subtotal
Equity securities
Quoted
Unquoted
Subtotal
HTM investments
Government bonds
Private bonds
Treasury notes
Receivables from customers
Commercial loans
Residential mortgage loans
Auto loans
Trade
Others
Unquoted debt securities
Accounts receivable
Other receivables
Others
Due from BSP
HFT investments
Debt securities
Government
Private
Derivative assets
Consolidated
Substandard
Grade
High Grade
Standard
Grade
P
= 148,132
19,279
105,332
272,743
P
= 18,642
6,734
12,647
38,023
=
P–
30,494
1,177
19
4,610
1,547
37,847
8,873
684
–
–
–
4,938
211
14,706
202,368
8,976
211,344
37,027
4,319
41,346
–
–
–
–
89
–
89
31
–
31
453
889
–
–
3,277
453
211,797
4,166
45,512
148
148
179
37,437
22
–
–
–
45
37,482
22
–
–
–
–
120,700
19,458
28,541
6,650
51,895
227,244
1,620
4,731
872
231
231,249
38,694
19,755
21,632
6,714
318,044
2,342
964
17
35,302
1,811
120
1,490
208
38,931
–
18
–
234,698
70,091
P
= 864,658
183
321,550
6
P
= 419,819
=
P–
11,164
8,462
19,626
1,037
368
508
1,404
3,317
Unrated
Total
=
P–
262
4,034
4,296
P
= 166,774
26,275
122,013
315,062
–
2,328
2,799
39,367
2,332
19
9,637
4,086
55,441
6,094
8,236
14,330
245,520
21,531
267,051
247
69
316
14,646
1,589
3,494
5,083
272,134
921
38,380
471
–
–
–
–
921
–
45
38,425
P
= 39,984
98
98
133
246
1,510
161
129
2,277
33,748
P
= 58,687
387,251
59,963
48,416
29,772
58,915
584,317
4,095
6,696
2,411
410
312
598,241
103,845
P
= 1,383,148
P
=131,278
11,312
7,369
149,959
=
P–
400
–
400
=
P–
120
7,563
7,683
P
=131,278
22,996
23,394
177,668
60,611
111
7,334
730
68,786
290
290
322
205
527
61,648
801
8,132
2,339
72,920
–
755
12
–
39,716
–
–
–
–
–
(Forward)
*SGVFS004156*
- 47 -
AFS investments
Debt securities
Government
Private
Subtotal
Equity securities
Quoted
Unquoted
Subtotal
HTM investments
Government bonds
Private bonds
Treasury notes
Commercial loans
Auto loans
Trade
Others
Accounts receivable
Other receivables
Others
2013
Due from BSP
HFT debt securities
Government
Private
BSP
Derivative assets
AFS investments
Debt securities
Government
Private
Subtotal
Equity securities
Quoted
Unquoted
Subtotal
HTM investments
Government bonds
Private bonds
High Grade
Standard
Grade
Consolidated
Substandard
Grade
Unrated
Total
P
=7,222
15,557
22,779
P
=86,288
86,288
=
P27
27
P
=10,299
1,055
11,354
P
=103,836
16,612
120,448
297
17
314
23,093
623
623
86,911
–
51
51
78
299
210
509
11,863
1,219
278
1,497
121,945
4,200
4,335
42
8,577
29,795
9,593
39,388
-
3,486
3,486
37,481
4,335
9,635
51,451
100,887
18,843
28,626
3,228
20,612
172,196
4,806
1,392
105
301
9
178,809
P
=233,422
178,643
30,389
13,304
14,416
7,188
243,940
1,562
3,343
55
1,279
250,179
2,010
P
=597,233
49,896
428
19
3,893
150
54,386
218
54,604
15
P
=55,387
26,593
26,593
–
167
2,263
240
203
29,466
87,107
P
=140,132
329,426
49,660
41,949
21,537
54,543
497,115
6,368
5,120
2,423
541
1,491
513,058
89,132
P
=1,026,174
High Grade
Standard
Grade
Unrated
Total
P
= 143,724
8,785
92,838
245,347
=
P57
57
=
P-
=
P105
4,034
4,139
P
= 143,724
8,947
96,872
249,543
30,421
781
19
1,547
32,768
464
107
571
-
472
2,329
2,801
30,421
1,717
19
3,983
36,140
199,959
8,062
208,021
4,237
4,237
31
31
6,093
8,236
14,329
206,083
20,535
226,618
208,021
7
7
4,244
31
182
61
243
14,572
189
61
250
226,868
37,437
37,437
-
-
921
921
38,358
38,358
Parent Company
Substandard
Grade
(Forward)
*SGVFS004156*
- 48 -
Commercial loans
Auto loans
Trade
Others
Accounts receivable
Other receivables
Others
Due from BSP
HFT debt securities
Government
Private
Derivative assets
AFS investments
Debt securities
Government
Private
Subtotal
Equity securities
Quoted
Unquoted
Subtotal
HTM investments
Government bonds
Private bonds
Commercial loans
Auto loans
Trade
Others
Accounts receivable
Other receivables
Others
High Grade
Standard
Grade
P
= 92,510
801
1,348
6,420
16,623
117,702
4,248
121,950
266
P
= 645,789
P
= 220,978
34,802
14,700
21,632
429
292,541
376
292,917
P
= 297,789
=
P–
7,668
6,458
14,126
Parent Company
Substandard
Grade
Unrated
Total
P
= 34,536
641
21
1,490
36,688
741
37,429
P
= 37,460
=
P133
246
1,461
145
28
2,013
32,780
P
= 57,226
P
= 348,024
36,244
16,069
29,542
17,052
446,931
133
5,611
1,461
145
28
454,309
33,046
P
= 1,038,264
P
=111,515
102
1,026
112,643
=
P–
–
–
–
=
P–
103
7,562
7,665
P
=111,515
7,873
15,046
134,434
970
368
1,404
2,742
53,615
111
640
54,366
–
–
–
–
–
322
205
527
54,585
801
2,249
57,635
6,777
14,887
21,664
69,073
–
69,073
27
–
27
10,299
1,055
11,354
86,176
15,942
102,118
12
–
12
21,676
–
–
–
69,073
–
–
–
27
213
61
274
11,628
225
61
286
102,404
4,200
4,334
8,534
9,471
–
9,471
–
–
–
3,486
–
3,486
17,157
4,334
21,491
86,766
803
1,405
3,165
15,174
107,313
123
537
–
–
–
107,973
–
P
=155,051
168,215
29,322
13,252
14,416
394
225,599
–
2,954
–
–
–
228,553
–
P
=474,106
49,711
400
18
3,893
39
54,061
–
217
–
–
–
54,278
–
P
=54,305
–
–
–
–
–
–
–
166
1,994
227
167
2,554
30,726
P
=56,586
304,692
30,525
14,675
21,474
15,607
386,973
123
3,874
1,994
227
167
393,358
30,726
P
=740,048
Notes:
1. Accounts are presented gross of allowance for credit losses but net of unearned interest and discount.
2. For classification by grade, refer to Risk Rating Table for Investments (based on Moody’s Rating Scale) as guide.
*SGVFS004156*
- 49 Breakdown of restructured receivables from customers by class are shown below:
Consolidated
2013
P
= 3,326
605
1
69
P
= 4,001
Commercial loans
Auto loans
Others
Parent Company
2012
(As Restated Note 2)
P
=5,982
174
1
16
P
=6,173
2013
P
= 2,830
525
–
–
P
= 3,355
2012
P
=5,282
71
–
4
P
=5,357
Aging analysis of past due but not impaired loans and receivables is shown below:
Consolidated
2013
Commercial loans
Auto loans
Trade
Others
Receivables from customers - net of
unearned discounts and capitalized
interest
Accounts receivable
Commercial loans
Auto loans
Trade
Others
interest
Accounts receivable
Within
30 days
31-60 days
61-90 days
91-180 days
Over
180 days
Total
P
= 173
2,191
3,261
–
589
P
= 137
664
1,193
–
420
P
= 68
224
472
–
28
P
= 47
135
373
1
86
P
= 232
1,018
988
–
442
P
= 657
4,232
6,287
1
1,565
6,214
40
3
–
P
= 6,257
2,414
20
4
–
P
= 2,438
792
11
1
–
P
= 804
642
12
3
6
P
= 663
2,680
35
274
13
P
= 3,002
12,742
118
285
19
P
= 13,164
P
=669
2,140
2,479
–
239
=
P54
652
955
–
515
=
P30
199
389
–
390
=
P24
37
298
1
92
=
P98
143
619
11
1,465
P
=875
3,171
4,740
12
2,701
5,527
39
17
30
P
=5,613
2,176
15
2
10
P
=2,203
1,008
8
1
5
P
=1,022
452
6
2
4
P
=464
2,336
38
278
11
P
=2,663
11,499
106
300
60
P
=11,965
Parent Company
2013
Commercial loans
Auto loans
Trade
Others
interest
Within
30 days
31-60 days
61-90 days
91-180 days
Over
180 days
Total
P
= 51
6
–
–
–
P
= 87
–
–
–
–
P
= 65
–
–
–
–
P
= 42
–
–
1
–
P
= 95
197
70
–
5
P
= 340
203
70
1
5
57
–
P
= 57
87
–
P
= 87
65
1
P
= 66
43
–
P
= 43
367
3
P
= 370
619
4
P
= 623
(Forward)
*SGVFS004156*
- 50 Parent Company
Commercial loans
Auto loans
Trade
Others
interest
Within
30 days
31-60 days
61-90 days
91-180 days
Over
180 days
Total
=
P5
6
–
–
–
=
P12
–
–
–
–
=
P25
–
–
–
–
=
P12
–
–
2
–
=
P64
114
46
–
–
P
=118
120
46
2
–
11
–
=
P11
12
–
=
P12
25
–
=
P25
14
–
=
P14
224
3
P
=227
286
3
P
=289
The Group holds collateral against loans and receivables in the form of real estate and chattel
mortgages, guarantees, and other registered securities over assets. Estimates of fair value are
based on the value of collateral assessed at the time of borrowing and are regularly updated
according to internal lending policies and regulatory guidelines. Generally, collateral is not held
over loans and advances to banks except for reverse repurchase agreements. Collateral usually is
not held against investment securities, and no such collateral was held as of December 31, 2013
and 2012.
Liquidity Risk
Liquidity risk is defined as the current and prospective risk to earnings or capital arising from the
Group’s inability to meet its obligations when they become due.
The Group manages its liquidity risk through analyzing net funding requirements under alternative
scenarios, diversification of funding sources and contingency planning.
Specifically for the Parent Company, it utilizes a diverse range of sources of funds, although shortterm deposits made with its network of domestic branches comprise the majority of such funding.
To ensure that funding requirements are met, the Parent Company manages its liquidity risk by
holding sufficient liquid assets of appropriate quality. It also maintains a balanced loan portfolio
that is repriced on a regular basis. Deposits with banks are made on a short-term basis.
In the Parent Company, the Treasury Group uses liquidity forecast models to estimate its cash
flow needs based on its actual contractual obligations under normal and extraordinary
circumstances. RSK generates Maximum Cumulative Outflow (MCO) reports on a monthly basis
to estimate short- and long-term net cash flows of the bank under business-as-usual and stress
parameters. The Group’s financial institution subsidiaries (excluding insurance companies)
prepare their respective MCO reports. These are reported to the Parent Company’s ALCO and
ROC on a monthly basis.
The table below summarizes the maturity profile of financial instruments and gross-settled
derivatives based on contractual undiscounted cash flows.
Financial assets
Analysis of equity securities at FVPL into maturity groupings is based on the expected date on
which these assets will be realized. For other financial assets, the analysis into maturity grouping
is based on the remaining period from the end of the reporting period to the contractual maturity
date or if earlier the expected date the assets will be realized.
*SGVFS004156*
- 51 Financial liabilities
The maturity grouping is based on the remaining period from the end of the reporting period to the
contractual maturity date. When counterparty has a choice of when the amount is paid, the
liability is allocated to the earliest period in which the Group can be required to pay.
2013
Financial Assets
Due from BSP
and SPURA
HFT investments
Derivative assets*
Trading:
Receive
Pay
AFS investments
HTM investments
Loans and receivables:
Accounts receivable
Other receivables
Other assets
Returned checks and other
cash items
Residual value of leased assets
Pledged certificate of time
deposit
Miscellaneous
Financial Liabilities
Non-derivative liabilities
Deposit liabilities
Demand
Savings
Time
Bills payable and SSURA
Manager's checks and demand
drafts outstanding
Accrued interest payable
Accrued other expenses
Bonds payable
Subordinated debt
Other liabilities
Bills purchased - contra
Accounts payable
Outstanding acceptances
Marginal deposits
Deposits on lease contracts
Dividends payable
Notes payable
Miscellaneous
Derivative liabilities*
Trading:
Pay
Receive
Loan commitments and financial
guarantees
On demand
Up to
1 month
1 to
3 Months
P29,742
=
166,474
17,836
=–
P
300
914
=–
P
–
150
–
111,517
185
Consolidated
3 to
6 months
6 to
12 months
Beyond
1 Year
Total
=–
P
–
233
=–
P
–
53
=–
P
–
7,097
P29,742
=
166,774
26,283
6,258
1,937
2,495
–
122,207
18,914
30,032
–
26
–
49,157
19,372
(18,985)
387
542
220
17,062
(16,866)
196
437
–
6,085
(5,671)
414
1,306
–
7,497
(7,200)
297
3,769
990
2,539
(2,022)
517
333,181
62,746
52,555
(50,744)
1,811
339,235
63,956
23,585
–
2,889
7,235
42
12
90,017
5
133
1
9
112
75,012
22
8
6
30
–
50,796
405
5
1
22
–
54,884
1,452
338
480
48
190
387,833
4,340
448
691
323
–
682,127
6,224
3,821
8,414
474
314
14
6
–
4
54
36
–
39
–
98
–
529
68
712
–
1
= 248,021
P
–
5
= 223,080
P
–
4
= 112,245
P
–
8
= 55,166
P
–
18
= 65,138
P
266
63
= 798,034
P
266
99
= 1,501,684
P
= 150,694
P
362,915
–
513,609
–
=–
P
–
304,575
304,575
69,120
=–
P
–
129,551
129,551
30,295
=–
P
–
21,459
21,459
9,176
=–
P
–
21,077
21,077
5,612
=–
P
–
32,039
32,039
13,906
= 150,694
P
362,915
508,701
1,022,310
128,109
3,927
246
5,304
–
–
–
499
97
–
–
–
301
3
87
127
–
50
–
169
4,628
–
282
153
338
86
–
391
–
25,953
8,579
3,927
1,769
5,557
26,547
13,420
16,637
1,382
-–
–
–
–
3
541,108
-5,002
365
–
8
3
–
–
379,669
–
–
551
324
55
–
–
–
161,294
–
1,067
59
6,495
52
–
–
–
43,155
–
886
26
–
197
26
–
48
28,731
–
–
–
–
679
–
517
–
82,064
16,637
8,337
1,001
6,819
991
29
517
51
1,236,021
22,358
(21,596)
762
3,138
(1,470)
1,668
2,099
(1,684)
415
–
–
–
–
–
–
–
–
2,114
= 543,222
P
42,859
(40,270)
2,589
2,133
= 384,391
P
11,022
(9,877)
1,145
9,508
= 171,947
P
7,258
= 51,175
P
7,570
= 37,969
P
73,653
= 156,132
P
81,476
(74,897)
6,579
102,236
= 1,344,836
P
(Forward)
*SGVFS004156*
- 52 -
Financial Assets
Due from BSP
and SPURA
HFT investments
Derivative assets*
Trading:
Receive
Pay
AFS investments
HTM investments
Loans and receivables:
Accounts receivable
Other receivables
Other assets
Returned checks and other cash
items
Pledged certificate of time
deposit
Miscellaneous
Deposit liabilities
Demand
Savings
Time
drafts outstanding
Bonds payable
Subordinated debt
Other liabilities
Accounts payable
Marginal deposits
Dividends payable
Notes payable
Deposits for keys
Miscellaneous
Trading:
Pay
Receive
Loan commitments and
financial guarantees
On demand
Up to
1 month
1 to
3 Months
Consolidated
3 to
6 months
6 to
12 months
Beyond
1 Year
Total
P
=24,382
115,278
20,762
=
P–
16,005
1,876
=
P–
–
281
=
P–
–
68
=
P–
–
10
=
P–
–
–
P
=24,382
131,283
22,997
2,548
12,943
3,905
3,436
616
–
23,448
57
15,070
56,364
67
–
–
71,558
–
–
–
–
–
45,525
(45,052)
473
3,115
840
27,930
(27,271)
659
2,203
1,434
4,817
(4,537)
280
5,155
3,103
2,627
(2,421)
206
14,511
5,182
1,447
(1,125)
322
131,301
87,278
82,346
(80,406)
1,940
156,285
97,837
4,863
–
3,706
6,442
37
40
113,106
16
76
331
7
395
67,941
42
9
288
53
1,058
34,819
101
1
45
26
–
35,435
1,472
6
135
53
–
331,557
8,383
262
118
804
–
587,721
10,014
4,060
7,359
980
1,493
18
6
–
27
62
21
–
32
–
83
–
440
80
609
–
–
P
=178,139
–
7
P
=164,287
–
4
P
=134,324
–
5
P
=47,138
–
14
P
=57,723
452
492
P
=561,409
452
522
P
=1,143,020
P
=106,229
305,034
–
411,263
–
=
P–
–
228,853
228,853
51,223
=
P–
–
56,046
56,046
22,326
=
P–
–
12,872
12,872
5,284
=
P–
–
17,094
17,094
3,846
=
P–
–
17,734
17,734
15,023
P
=106,229
305,034
332,599
743,862
97,702
3,489
–
4,100
–
–
–
879
117
–
106
–
249
–
–
156
–
232
595
–
263
–
87
2
602
6,027
–
363
17
14,590
10,450
3,489
1,810
4,831
15,192
17,002
15,217
23
–
–
–
26
–
1
2
434,121
–
3,996
395
–
8
40
–
–
53
285,670
–
–
346
152
27
–
–
–
–
79,302
–
1,569
111
–
42
–
–
–
–
20,968
–
606
107
–
167
–
–
–
–
28,538
–
–
9
1,694
588
–
517
–
–
60,985
15,217
6,194
968
1,846
832
66
517
1
55
909,584
24,933
(24,239)
694
13,554
(13,081)
473
3,115
(2,809)
306
6,584
(5,933)
651
5,237
(3,932)
1,305
53,423
(49,994)
3,429
–
–
–
56,930
P
=491,051
4,589
P
=290,953
8,277
P
=88,052
5,579
P
=26,853
6,278
P
=35,467
5,301
P
=67,591
86,954
P
=999,967
*SGVFS004156*
- 53 -
2013
Financial Assets
Due from BSP
Interbank loans receivable and
SPURA
HFT investments
Derivative assets*
Trading:
Receive
Pay
AFS investments
HTM investments
Accounts receivable
Other receivables
Other assets
items
Pledge certificate of time
deposit
Miscellaneous
Deposit liabilities
Demand
Savings
Time
drafts outstanding
Subordinated debt
Other liabilities
Accounts payable
Marginal deposits
Trading:
Pay
Receive
guarantees
Financial Assets
Due from BSP
SPURA
HFT investments
Derivative assets*
Trading:
Receive
Pay
Parent Company
3 to
6 to
6 months
12 months
On demand
Up to
1 month
1 to
3 months
P26,532
=
143,424
6,440
=–
P
300
2,075
=–
P
–
190
=–
P
–
198
–
88,128
4,051
–
–
29,958
–
–
–
–
–
Beyond
1 Year
Total
=–
P
–
49
=–
P
–
2
P26,532
=
143,724
8,954
1,937
2,943
–
97,059
–
–
–
29,958
21,142
(20,763)
379
411
220
17,068
(16,869)
199
191
–
6,097
(5,678)
419
522
–
7,938
(7,654)
284
2,636
990
2,539
(2,022)
517
283,074
62,674
54,784
(52,986)
1,798
286,834
63,884
2,365
–
2,360
6,910
22
12
88,182
–
–
–
8
18
72,137
–
–
–
30
–
43,377
133
–
–
21
–
34,131
–
–
–
40
–
280,968
1,113
–
–
49
–
521,160
1,246
2,360
6,910
170
30
–
–
54
–
–
–
54
–
–
= 188,065
P
–
–
= 179,721
P
–
–
= 106,810
P
–
–
= 46,607
P
–
–
= 41,073
P
266
–
= 628,663
P
266
–
= 1,190,939
P
= 134,788
P
348,244
–
483,032
–
=–
P
–
250,440
250,440
45,996
=–
P
–
121,833
121,833
–
=–
P
–
19,886
19,886
–
=–
P
–
6,805
6,805
–
=–
P
–
9,780
9,780
–
= 134,788
P
348,244
408,744
891,776
45,996
2,816
–
4,031
–
–
469
–
–
–
185
–
84
–
28
–
4,584
–
9
–
–
–
212
–
–
2,816
903
4,031
4,668
16,587
–
–
–
506,466
–
4,674
365
–
301,944
–
–
551
324
122,977
–
–
59
–
24,557
–
–
26
–
6,840
–
–
–
–
9,992
16,587
4,674
1,001
324
972,776
22,358
(21,595)
763
3,138
(1,470)
1,668
2,099
(1,684)
415
81,476
(74,896)
6,580
–
–
–
42,859
(40,270)
2,589
11,022
(9,877)
1,145
2,114
= 508,580
P
2,079
= 306,612
P
9,506
= 133,628
P
7,011
= 32,331
P
7,569
= 16,077
P
4,058
= 14,465
P
32,337
= 1,011,693
P
P
=21,540
96,014
7,873
=
P–
15,504
–
=
P–
–
–
=
P–
–
–
=
P–
–
–
=
P–
–
–
P
=21,540
111,518
7,873
–
9,887
821
2,728
1,661
–
15,097
–
–
56,364
–
–
–
56,364
–
–
–
45,525
(45,052)
473
27,930
(27,271)
659
4,817
(4,537)
280
2,627
(2,421)
206
1,447
(1,125)
322
82,346
(80,406)
1,940
(Forward)
*SGVFS004156*
- 54 -
AFS investments
HTM investments
Accounts receivable
Other receivables
Other assets
items
Pledge certificate of time
deposit
Miscellaneous
Deposit liabilities
Demand
Savings
Time
drafts outstanding
Subordinated debt
Other liabilities
Bills purchased – contra
Accounts payable
Marginal deposits
Trading:
Pay
Receive
guarantees
On demand
=
P–
–
Up to
1 month
P
=2,718
822
1 to
3 months
P
=2,036
1,371
2,643
–
3,070
5,646
34
168
93,291
–
–
–
7
–
65,137
–
–
–
18
–
–
–
–
–
P
=136,988
Parent Company
3 to
6 months
P
=4,544
2,298
6 to
12 months
P
=13,864
4,111
Beyond
1 Year
P
=97,165
24,890
Total
P
=120,327
33,492
28,940
–
–
–
24
–
26,569
357
–
–
50
–
236,595
1,173
–
–
141
–
453,175
1,530
3,070
5,646
274
168
63
–
–
–
63
–
–
P
=122,702
–
–
P
=126,469
–
–
P
=38,814
–
–
P
=46,818
452
426
P
=361,164
452
426
P
=832,955
P
=94,516
293,934
–
388,450
–
=
P–
–
177,043
177,043
16,228
=
P–
–
50,727
50,727
–
=
P–
–
11,443
11,443
–
=
P–
–
6,374
6,374
–
=
P–
–
897
897
–
P
=94,516
293,934
246,484
634,934
16,228
2,732
–
3,338
–
–
597
–
107
–
112
–
84
–
23
–
191
–
13
–
5,882
–
214
–
4,669
2,732
959
3,338
10,933
15,156
–
–
–
409,676
–
3,690
395
–
198,060
–
–
346
152
51,421
–
–
111
–
11,768
–
–
107
–
12,376
–
–
9
–
5,789
15,156
3,690
968
152
689,090
24,933
(24,239)
694
13,524
(13,073)
451
2,648
(2,388)
260
6,523
(5,908)
615
2,805
(1,664)
1,141
50,433
(47,272)
3,161
–
–
–
1,682
P
=411,358
3,373
P
=202,127
8,269
P
=60,141
5,564
P
=17,592
5,788
P
=18,779
4,860
P
=11,790
29,536
P
=721,787
*Does not include derivatives embedded in financial and nonfinancial contracts.
Market Risk
Market risk is the possibility of loss to future earnings, fair values or future cash flows that may
result from changes in the price of a financial instrument. The value of a financial instrument may
change as a result of changes in interest rates, foreign currency exchange rates, equity prices and
other market factors. The Parent Company’s market risk originates from its holdings in foreign
currencies, debt securities and derivatives transactions. The Parent Company manages market risk
by segregating its balance sheet into a trading book and a banking book. ALCO, chaired by the
Parent Company’s Chairman is the senior review and decision-making body for the management
of all related market risks. The Parent Company enforces a set of risk limits to properly monitor
and manage the market risks. The risk limits are approved by the BOD. The RSK serves under
the ROC and performs daily market risk analyses to ensure compliance with the Parent
Company’s policies. The Treasury Group manages asset/liability risks arising from both banking
book and trading operations in financial markets.
*SGVFS004156*
- 55 Market risk - trading book
In measuring the potential loss in its trading portfolio, the Parent Company uses Value-at-Risk
(VaR) as a primary tool. The VaR method is a procedure for estimating portfolio losses exceeding
some specified proportion based on a statistical analysis of historical market price trends,
correlations and volatilities. VaR estimates the potential decline in the value of a portfolio, under
normal market conditions, for a given “confidence level” over a specified holding period.
VaR methodology assumptions and parameters
The Parent Company is using 260-day Historical Simulation Method to compute the VaR. This
method assumes that market rates volatility in the future will follow the same movement that
occurred within the specified historical period. In calculating VaR, the Parent Company uses a
99.00% confidence level and a one-day holding period. This means that, statistically, within a
one-day horizon, the trading losses will exceed VaR in 1 out of 100 trading days. Like any other
model, the Historical Simulation Method has its own limitations. To wit, it cannot predict
volatility levels which did not happen in the specified historical period. The validity of the VaR
model is verified through a daily backtesting analysis, which examines how frequently both actual
and hypothetical daily losses exceed VaR. The result of the daily backtesting analysis is reported
to the ALCO and ROC monthly. The Parent Company measures and monitors the VaR daily and
this value is compared against the set VaR limit.
A summary of the VaR levels of the trading portfolio of the Parent Company appears below:
Rates and FX
December 27
Average
Highest
Lowest
Parent Company
Fixed Income
P296.42
=
283.79
448.91
123.81
FX Options
P212.60
=
203.47
373.87
37.81
P18.70
=
13.23
35.45
3.49
Parent Company
Rates
and FX
Jan - May 221
Fixed
Income
FX
Options
December 28
Average
P
=176.59
P
=161.33
P
=1.63
Highest
234.62
292.02
6.15
Lowest
143.40
32.67
0.00
1/Correlated Rates and FX VaR and FX Options VaR; Uncorrelated Fixed Income VaR
2/Fully correlated VaR across all trading products
May 23 - December 312
Rates
Fixed
FX
and FX
Income
Options
P
=189.12
191.81
273.07
135.79
P
=260.93
149.81
384.04
60.79
P
=7.71
3.94
14.42
0.02
Rates and Foreign Exchange (FX) VaR is the correlated VaR of the following products: FX Spot,
Outright Forward, NDF, FX Swaps, IRS and CCS. The Fixed Income VaR is the correlated VaR
of these products: peso and foreign currency bonds, bond forwards and credit default swaps. A
correlated VaR can give a better measure of the probable portfolio losses as it takes into account
the natural hedging existing within the portfolio.
The financial institution subsidiaries with trading portfolios adopted the Parent Company
methodology in 2011. Below is the summary of the VaR levels of FMIC and PSBank.
FMIC
Bonds
December 27
Average
Highest
Lowest
PSBank
Bonds
EQUITIES
PHP
USD
PHP
P
=31.83
45.63
121.24
27.62
P
=115.40
65.86
182.04
9.60
USD–
0.14
1.07
–
P
=3.82
2.17
10.06*
1.79*
USD
USD–
–
7.64**
1.21**
USD–
41.17
1.15*
0.51*
FX
USD–
–
0.00**
0.00
P
= 0.43
0.84
1.96
0.01
* January 1 to May 31
** June 1 to December 31
*SGVFS004156*
- 56 FMIC
EQUITIES
December 28
Average
Highest
Lowest
P37.40
=
36.31
49.50
18.40
Bonds
PHP
P23.34
=
34.55
216.58
1.62
USD
USD 1.17
0.23
1.21
0.00
Bonds
PHP
=–
P
3.65
13.14
0.01
PSBank
USD
FX
=–
P
2.51
10.39
0.22
P1.03
=
1.04
1.95
0.02
The limitations of the VaR methodology are recognized by supplementing VaR limits with other
position and sensitivity limit structures and by doing stress testing analysis. These processes
address potential product concentration risks, monitor portfolio vulnerability and give the
management an early advice if an actual loss goes beyond what is deemed to be tolerable to the
bank, even before the VaR limit is hit.
The Parent Company and PSBank perform stress testing on a quarterly basis while FMIC
performs stress testing on a daily basis to complement the VaR methodology. The stress testing
results of the Parent Company are reported to the ALCO and subsequently to the ROC and the
BOD.
Market risk - banking book
The Group uses Earnings-at-Risk Methodology to measure the potential effect of interest rate
movements to net interest earnings. The measurement and monitoring of exposures are done on a
monthly basis.
EAR is derived by multiplying the repricing gap by the change in interest rate and the time over
which the repricing gap is in effect. The repricing/maturity gap is a method that distributes ratesensitive assets, liabilities, and off-balance sheet positions into time bands. Floating rate positions
are distributed based on the time remaining to next repricing dates. On the other hand, fixed rate
items are distributed based on the time remaining to respective maturities. There are certain
balance sheet items that may require set-up of assumptions as to their distribution to time bands.
For the Parent Company, rate-sensitive positions that lack definitive repricing dates or maturity
dates (e.g. demand and savings deposit accounts) are assigned to repricing time bands based on
frequency or pattern of interest rate change. Dynamic assumptions, which considers potential
amount of loan pre-payments and time deposit pre-terminations, are based on analysis of historical
cash flow levels.
The table below shows the earnings-at-risk profile of the Parent Company and certain subsidiaries
as of December 31, 2013 and 2012:
2013
2012
Parent
Company
(P
= 1,656.51)
(P
=1,106.96)
FMIC
(P
= 268.10)
(P
=169.02)
PSBank
(P
= 54.13)
(P
=82.05)
MCC ORIX Metro
P
=45.42
(P
= 0.47)
(P
=27.86)
(P
=0.17)
Total
(P
=1,933.79)
(P
=1,386.06)
Foreign currency risk
Foreign exchange risk is the probability of loss to earnings or capital arising from changes in
foreign exchange rates. The Group takes on exposure to effects of fluctuations in the current
foreign currency exchange rates on its financial performance and cash flows. Foreign currency
liabilities generally consist of foreign currency deposits in the Group’s FCDU account. Foreign
currency deposits are generally used to fund the Group’s foreign currency-denominated loan and
investment portfolio in the FCDU. Banks are required by the BSP to match the foreign currency
liabilities with the foreign currency assets held in FCDUs. In addition, the BSP requires a 30.00%
liquidity reserve on all foreign currency liabilities held in the FCDU. Outside the FCDU, the
Group has additional foreign currency assets and liabilities in its foreign branch network. The
Group’s policy is to maintain foreign currency exposure within acceptable limits and within
existing regulatory guidelines.
*SGVFS004156*
- 57 The following table sets forth, for the year indicated, the impact of reasonably possible changes in
the USD exchange rate and other currencies per Philippine peso on pre-tax income and equity:
Consolidated
Change in
currency
Currency rate in %
USD
EUR
JPY
GBP
Others
USD
EUR
JPY
GBP
Others
+1.00%
+1.00%
+1.00%
+1.00%
+1.00%
-1.00%
-1.00%
-1.00%
-1.00%
-1.00%
2013
Effect on
profit
before
tax
(P
=23.24)
19.00
(6.21)
0.78
9.09
23.24
19.00
6.21
(0.78)
(9.09)
Effect on
equity
(P
=359.67)
–
–
–
–
359.67
–
–
–
–
Change in
currency
rate in %
+1.00%
+1.00%
+1.00%
+1.00%
+1.00%
-1.00%
-1.00%
-1.00%
-1.00%
-1.00%
Parent Company
2012
Effect on
profit
before
tax
(P
=76.13)
18.02
12.87
2.02
89.06
76.13
(18.02)
(12.87)
(2.02)
(89.06)
Effect on
equity
P
=1.01
–
–
–
–
(1.01)
–
–
–
–
Change in
currency
rate in %
+1.00%
+1.00%
+1.00%
+1.00%
+1.00%
-1.00%
-1.00%
-1.00%
-1.00%
-1.00%
2013
Effect on
profit
before
tax
Effect
on
equity
(P
=25.35)
18.87
(6.21)
0.78
9.09
23.35
(18.87)
6.21
(0.78)
(9.09)
(P
=0.87)
–
–
–
–
0.87
–
–
–
–
Change in
currency
rate in %
+1.00%
+1.00%
+1.00%
+1.00%
+1.00%
-1.00%
-1.00%
-1.00%
-1.00%
-1.00%
2012
Effect on
profit
before
tax
Effect on
equity
(P
=78.14)
18.02
12.87
2.02
89.06
78.14
(18.02)
(12.87)
(2.02)
(89.06)
P
=0.94
–
–
–
–
(0.94)
–
–
–
–
Information relating to Parent Company’s currency derivatives is included in Note 8. As of
December 31, 2013 and 2012, the Parent Company has outstanding foreign currency spot
transactions (in equivalent peso amounts) of P
=8.4 billion and =
P9.2 billion, respectively (sold), and
P
=9.6 billion and =
P8.6 billion, respectively (bought).
The impact on the Parent Company’s equity already excludes the impact on transactions affecting
the profit and loss.
Capital Management
The primary objectives of the Group’s capital management are to ensure that it complies with
externally imposed capital requirements and maintains strong credit ratings and healthy capital
ratios in order to support its business and to maximize shareholders’ value.
The Group manages its capital structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristics of its activities. In order to maintain or adjust the
capital structure, the Group may adjust the amount of dividend payment to shareholders, return
capital structure, or issue capital securities. No changes were made in the objectives, policies and
processes from the previous year.
Regulatory Qualifying Capital
Under existing BSP regulations, the determination of the compliance with regulatory requirements
and ratios is based on the amount of the “unimpaired capital” (regulatory net worth) as reported to
the BSP, which is determined on the basis of regulatory accounting policies that differ from PFRS
in some respects.
The risk-based capital ratio of a bank, expressed as a percentage of qualifying capital to riskweighted assets, should not be less than 10.00% for both stand-alone basis (head office and
branches) and consolidated basis (the Parent Company and subsidiaries engaged in financial allied
undertakings but excluding insurance companies). Qualifying capital and risk-weighted assets
(RWA) are computed based on BSP regulations. RWA consist of total assets less cash on hand,
due from BSP, loans covered by hold-out on or assignment of deposits, loans or acceptances under
letters of credit to the extent covered by margin deposits and other non-risk items determined by
the Monetary Board (MB) of the BSP.
*SGVFS004156*
- 58 The details of CAR as of December 31, as reported to the BSP, based on BSP Circular 538 or
Basel II follow:
Consolidated
Parent Company
2013
2012
2013
2012
Tier 1 capital
= 123,895
P
P
=100,056
= 118,183
P
P
=96,180
Less: Required deductions
1,380
1,187
24,721
20,725
Sub-total
122,515
98,869
93,462
75,455
Excess from Tier 2 deducted to Tier 1 Capital*
–
–
(15,868)
(7,061)
Net Tier 1 Capital
122,515
98,869
77,594
68,394
Tier 2 capital
15,021
19,588
8,853
13,664
Less: Required deductions
1,380
1,187
24,721
20,725
Sub-total
13,641
18,401
(15,868)
(7,061)
Excess of Tier 2 deducted to Tier 1 Capital*
–
–
15,868
7,061
Net Tier 2 Capital
13,641
18,401
–
–
Total Qualifying Capital
= 136,156
P
P
=117,270
= 77,594
P
P
=68,394
*Deductions to Tier 2 Capital are capped at its total gross amount and any excess shall be deducted from Tier 1 Capital.
Credit RWA
Market RWA
Operational RWA
Total RWA
P
= 665,376
58,196
94,240
817,812
P
=571,063
62,586
86,227
719,876
P
= 483,969
52,222
55,791
591,981
P
=424,347
48,903
53,184
526,434
Tier 1 capital ratio
Total capital ratio
14.98%
16.65%
13.73%
16.29%
13.11%
13.11%
12.99%
12.99%
The regulatory qualifying capital of the Parent Company consists of Tier 1 (core) capital, which
comprises paid-up common stock, HT1 Capital, surplus including current year profit, surplus
reserves and non-controlling interest less required deductions such as unsecured credit
accommodations to DOSRI, deferred income tax, and goodwill. Certain adjustments are made to
PFRS-based results and reserves, as prescribed by the BSP. The other component of regulatory
capital is Tier 2 (supplementary) capital, which includes unsecured subordinated debt, general loan
loss provision, and net unrealized gains on AFS equity securities.
Standardized credit risk weights were used in the credit assessment of asset exposures. Third
party credit assessments were based on the ratings by Standard & Poor's, Moody's, Fitch and
PhilRatings on exposures to Sovereigns, MDBs, Banks, LGUs, Government Corporations,
Corporates.
The Group and its individually regulated operations have complied with all externally imposed
capital requirements throughout the year.
The issuance of BSP Circular No. 639 covering the Internal Capital Adequacy Assessment
Process (ICAAP) in 2009 supplements the BSP’s risk-based capital adequacy framework under
Circular No. 538. In compliance with this new circular, the Group has adopted and developed its
ICAAP framework to ensure that appropriate level and quality of capital are maintained by the
Group. Under this framework, the assessment of risks extends beyond the Pillar 1 set of credit,
market and operational risks and onto other risks deemed material by the Group. The level and
structure of capital are assessed and determined in light of the Group’s business environment,
plans, performance, risks and budget; as well as regulatory edicts. BSP requires submission of an
ICAAP document every January 31. The Group has complied with this requirement.
In December 2010, the Basel Committee for Banking Supervision published the Basel III
framework (revised in June 2011) to strengthen global capital standards, with the aim of
promoting a more resilient banking sector. On January 15, 2013, the 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
*SGVFS004156*
- 59 as their subsidiary banks and quasi-banks, in accordance with the Basel III standards. The Group
is required to comply with this circular effective on January 1, 2014.
The Circular sets out a minimum Common Equity Tier 1 (CET1) ratio of 6.0% and Tier 1 capital
ratios of 7.5% with effect from January 1, 2014. It also introduces a capital conservation buffer of
2.5% comprised of CET1 capital. BSP existing requirement for Total CAR remains unchanged at
10% 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 upon the effectivity of Basel III. 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 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.
The Group 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.
5. Fair Value Measurement
The methods and assumptions used by the Group in estimating the fair value of financial
instruments are:
Cash and other cash items, due from BSP and other banks and interbank loans receivable and
SPURA - Carrying amounts approximate fair values in view of the relatively short-term maturities
of these instruments.
Trading and investment securities - Fair values of debt securities (financial assets at FVPL, AFS
and HTM investments) and equity investments are generally based on quoted market prices.
Where the debt securities are not quoted or the market prices are not readily available, the Group
obtained valuations from independent parties offering pricing services, used adjusted quoted
market prices of comparable investments, or applied discounted cash flow methodologies. For
equity investments that are not quoted, the investments are carried at cost less allowance for
impairment losses due to the unpredictable nature of future cash flows and the lack of suitable
methods of arriving at a reliable fair value.
Derivative instruments - Fair values are estimated based on quoted market prices, prices provided
by independent parties, or prices derived using acceptable valuation models. The models utilize
published underliying rates (e.g interest rates, Foreign Exchange (FX) rates, Credit Default Swap
(CDS) rates, FX volatilities and spot and forward FX rates) and are implemented through
validated calculation engines.
Loans and receivables - Fair values of the Group’s loans and receivables are estimated using the
discounted cash flow methodology, using current incremental lending rates for similar types of
loans. Where the instrument reprices on a quarterly basis or has a relatively short maturity, the
carrying amounts approximate fair values.
Liabilities - Fair values are estimated using the discounted cash flow methodology using the
Group’s current incremental borrowing rates for similar borrowings with maturities consistent
with those remaining for the liability being valued, if any. The carrying amount of demand and
savings deposit liabilities approximates fair value considering that these are due and demandable.
*SGVFS004156*
- 60 The following tables summarize the carrying amounts and fair values of the financial assets and
liabilities, analyzed among those whose fair value is based on:
· Quoted market prices in active markets for identical assets or liabilities (Level 1);
· Those involving inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and
· Those with inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3).
2013
Consolidated
Assets Measured at Fair Value
Financial Assets
HFT investments
Debt securities
Government
Private
BSP
Equity securities
Quoted
Derivative assets
Currency forwards
Interest rate swaps
Cross currency swaps
Put option
Call option
Embedded derivatives in
non-financial contract
Derivative assets
AFS investments
Debt securities
Government
Private
Equity Securities
Quoted
Assets for which Fair Values are Disclosed
Financial Assets
HTM investments
Government
Treasury notes
Loans and receivables-net
Commercial loans
Auto loans
Trade
Others
Carrying
Value
Level 1
Level 2
Level 3
Total Fair
Value
= 39,367
P
2,332
19
41,718
= 39,294
P
2,306
19
41,619
= 73
P
26
–
99
=–
P
–
–
–
= 39,367
P
2,332
19
41,718
9,637
9,637
–
–
9,637
1,059
1,061
1,652
215
93
–
–
–
–
–
1,059
1,061
1,652
215
93
–
–
–
–
–
1,059
1,061
1,652
215
93
6
4,086
55,441
–
–
51,256
6
4,086
4,185
–
–
–
6
4,086
55,441
245,520
21,531
267,051
241,566
21,012
262,578
3,954
519
4,473
–
–
245,520
21,531
267,051
2,882
269,933
= 325,374
P
2,882
265,460
= 316,716
P
–
4,473
= 8,658
P
–
–
=–
P
2,882
269,933
= 325,374
P
= 38,380
P
45
38,425
= 41,176
P
46
41,222
= 25
P
–
25
=–
P
–
–
= 41,201
P
46
41,247
385,251
64,496
54,101
29,847
60,767
594,462
4,639
421
599,522
–
–
–
–
–
–
–
–
–
383,705
64,782
58,082
29,854
60,922
597,345
5,067
442
602,854
–
–
–
–
–
–
–
–
–
383,705
64,782
58,082
29,854
60,922
597,345
5,067
442
602,854
(Forward)
*SGVFS004156*
- 61 2013
Consolidated
Other assets
Miscellaneous
Non-financial assets
Investment properties
Liabilities Measured at Fair Value
Financial liabilities at FVPL
Currency forwards
Interest rate swaps
Call option (FX option)
Credit default swaps
Embedded derivatives in non-financial
contact
Liabilities for which Fair Values are Disclosed
Deposit Liabilities
Time
Bonds payable
Subordinated debt
Other liabilities
Carrying
Value
Level 1
Level 2
Level 3
Total Fair
Value
= 712
P
97
809
638,756
=–
P
–
–
41,222
= 680
P
104
784
603,663
=–
P
–
–
–
13,125
= 651,881
P
–
= 41,222
P
22,941
= 626,604
P
–
=–
P
22,941
= 667,826
P
= 1,365
P
1,407
1,641
11
10
=–
P
–
–
–
–
= 1,365
P
1,407
1,641
11
10
=–
P
–
–
–
–
= 1,365
P
1,407
1,641
11
10
18
4,452
–
–
18
4,452
–
–
18
4,452
= 502,659
P
127,204
11,643
8,628
=–
P
–
4,561
= 509,097
P
127,768
12,820
4,832
=–
P
–
–
–
= 509,097
P
127,768
12,820
9,393
991
= 651,125
P
–
= 4,561
P
951
= 655,468
P
–
=–
P
951
= 660,029
P
= 680
P
104
784
644,885
2013
Parent Company
Assets Measured at Fair Value
Financial Assets
HFT investments
Debt securities
Government
Private
BSP
Derivative assets
Currency forwards
Interest rate swaps
Put option purchased - warrants
Call option
contract
Carrying
Value
Level 1
Level 2
Level 3
Total Fair
Value
= 30,421
P
1,717
19
32,157
= 30,421
P
1,717
19
32,157
=–
P
–
–
–
=–
P
–
–
–
= 30,421
P
1,717
19
32,157
1,059
1,061
1,639
215
3
–
–
–
–
–
1,059
1,061
1,639
215
3
–
–
–
–
–
1,059
1,061
1,639
215
3
6
3,983
36,140
–
–
32,157
6
3,983
3,983
–
–
–
6
3,983
36,140
(Forward)
*SGVFS004156*
- 62 2013
Parent Company
AFS investments
Debt Securities
Government
Private
Equity Securities
Quoted
Assets for which Fair Values are Disclosed
Financial Assets
HTM investments - Government
Loans and receivables-net
Commercial loans
Auto loans
Trade
Others
Non-Financial Assets
Investment properties
Liabilities Measured at Fair Value
Currency forwards
Interest rate swaps
Call option
contract
Liabilities for which Fair Values are Disclosed
Time deposits
Subordinated debt
Total financial liabilities
Carrying
Value
Level 1
Level 2
Level 3
Total Fair
Value
= 206,083
P
20,535
226,618
= 205,895
P
20,311
226,206
= 188
P
224
412
=–
P
–
–
= 206,083
P
20,535
226,618
264
226,882
= 263,022
P
264
226,470
= 258,627
P
–
412
= 4,395
P
–
–
=–
P
264
226,882
= 263,022
P
= 38,358
P
= 41,176
P
=–
P
=–
P
= 41,176
P
347,808
36,482
16,120
29,617
17,056
447,083
534
148
447,765
486,123
–
–
–
–
–
–
–
–
–
41,176
344,300
36,709
16,208
29,625
17,056
443,898
534
148
444,580
444,580
–
–
–
–
–
–
–
–
–
–
344,300
36,709
16,208
29,625
17,056
443,898
534
148
444,580
485,756
9,504
P
= 495,627
–
P
= 41,176
18,264
P
= 462,844
–
P
=–
18,264
P
= 504,020
= 1,365
P
1,407
1,641
11
10
=–
P
–
–
–
–
= 1,365
P
1,407
1,641
11
10
=–
P
–
–
–
–
= 1,365
P
1,407
1,641
11
10
18
= 4,452
P
–
=–
P
18
= 4,452
P
–
=–
P
18
= 4,452
P
= 407,722
P
45,993
4,497
= 458,212
P
=–
P
–
4,561
= 4,561
P
= 407,722
P
45,993
–
= 453,715
P
=–
P
–
–
=–
P
= 407,722
P
45,993
4,561
= 458,276
P
Consolidated
Parent Company
Carrying Value
Fair Value
Carrying Value
Fair Value
Financial Assets
Financial assets at FVPL (Note 8)
HFT investments
Debt securities
Government
Private
Derivative assets
AFS investments (Note 8)
Debt securities
Government
Private
Equity securities
Quoted
Unquoted
P
=61,648
801
8,132
2,339
72,920
P
=61,648
801
8,132
2,339
72,920
P
=54,585
801
–
2,249
57,635
P
=54,585
801
–
2,249
57,635
103,836
16,612
103,836
16,612
86,176
15,942
86,176
15,942
2,314
279
123,041
2,314
279
123,041
395
61
102,574
395
61
102,574
(Forward)
*SGVFS004156*
- 63 2012 (As Restated - Note 2)
Consolidated
Parent Company
Carrying Value
Fair Value
Carrying Value
Fair Value
HTM investments (Note 8)
Government
Treasury notes
Private
Due from BSP
SPURA (Note 7)
SPURA
Loans and receivables - net (Note 9)
Commercial loans
Auto loans
Trade
Others
Accounts receivable
Other receivables
Other assets (Note 14)
Interoffice float items
Returned checks and other cash items
Other investments
Pledged certificate of time deposit
Miscellaneous
Total financial assets
Financial liabilities at amortized cost
Deposit liabilities
Demand
Savings
Time
Managers checks and demand drafts
outstanding
Accrued interest and other expenses
(Note 18)
Other liabilities (Note 21)
Accounts payable
Marginal deposits
Dividends payable
Miscellaneous
Total financial liabilities
P
=37,481
9,635
4,335
51,451
P
=45,795
12,162
4,333
62,290
P
=17,157
–
4,334
21,491
P
=21,498
–
4,333
25,831
24,382
131,278
22,996
24,382
131,278
22,996
21,540
111,515
7,873
21,540
111,515
7,873
18,399
4,993
23,392
18,399
4,993
23,392
15,046
–
15,046
15,046
–
15,046
331,937
53,137
45,837
21,377
54,871
507,159
6,992
2,605
5,324
602
1,491
524,173
335,687
53,423
46,849
21,377
56,435
513,771
8,107
2,605
5,324
598
1,491
531,896
307,057
30,753
14,705
21,346
15,615
389,476
831
2,169
3,963
236
166
396,841
309,454
31,030
14,705
21,346
15,615
392,150
831
2,169
3,963
236
166
399,515
928
609
80
13
452
449
P
=976,164
928
559
80
13
452
424
P
=994,651
665
–
63
10
452
353
P
=736,058
665
–
63
10
452
353
P
=743,072
P
=6,692
P
=6,692
P
=6,425
P
=6,425
106,229
305,034
327,431
738,694
97,108
106,229
305,034
330,682
741,945
97,213
94,516
293,934
245,969
634,419
16,223
94,516
293,934
245,969
634,419
16,223
3,489
3,489
2,732
2,732
6,642
11,556
14,243
6,642
12,224
14,686
4,297
–
9,977
4,297
–
9,866
15,217
6,195
1,846
968
832
66
543
25,667
P
=904,091
15,217
6,195
1,846
968
769
66
543
25,604
P
=908,495
15,156
3,691
152
968
–
–
–
19,967
P
=694,040
15,156
3,691
152
968
–
–
–
19,967
P
=693,929
*SGVFS004156*
- 64 -
Level 1
Financial Assets
HFT investments
Debt securities
Government
Private
Equity securities
Derivative assets
Total financial assets at FVPL
AFS investments
Debt securities
Government
Private
Total AFS investments
Total
P
=61,581
801
8,132
–
P
=70,514
P
=67
–
–
2,339
P
=2,406
=
P–
–
–
–
=
P–
P
=61,648
801
8,132
2,339
P
=72,920
P
=102,240
15,449
2,314
P
=120,003
P
=1,596
1,163
–
P
=2,759
=
P–
–
–
=
P–
P
=103,836
16,612
2,314
P
=122,762
P
=6,692
=
P–
P
=6,692
Parent Company
Level 2
Level 3
Total
=
P–
Level 1
Financial Assets
HFT investments
Debt securities
Government
Private
Derivative assets
Total financial assets at FVPL
AFS investments
Debt securities
Government
Private
Consolidated
Level 2
Level 3
P
=54,585
801
–
P
=55,386
=
P–
–
2,249
P
=2,249
=
P–
–
–
=
P–
P
=54,585
801
2,249
P
=57,635
P
=86,062
15,110
395
P
=101,567
P
=114
832
–
P
=946
=
P–
–
–
=
P–
P
=86,176
15,942
395
P
=102,513
=
P–
P
=6,425
=
P–
P
=6,425
When fair values of listed equity and debt securities, as well as publicly traded derivatives at the
reporting date are based on quoted market prices or binding dealer price quotations, without any
deduction for transaction costs, the instruments are included within Level 1 of the hierarchy.
For all other financial instruments, fair value is determined using valuation techniques. Valuation
techniques include net present value techniques, comparison to similar instruments for which
market observable prices exist and other revaluation models.
Instruments included in Level 3 include those for which there is currently no active market.
*SGVFS004156*
- 65 6. Segment Information
The Group’s operating businesses are recognized and managed separately according to the nature
of services provided and the different markets served with segment representing a strategic
business unit. The Group’s business segments follow:
·
·
·
·
·
·
Consumer Banking - principally providing consumer type loans and support for effective
sourcing and generation of consumer business;
Corporate Banking - principally handling loans and other credit facilities and deposit and
current accounts for corporate and institutional customers;
Investment Banking - principally arranging structured financing, and providing services
relating to privatizations, initial public offerings, mergers and acquisitions;
Treasury - principally providing money market, trading and treasury services, as well as the
management of the Group’s funding operations by use of treasury bills, government securities
and placements and acceptances with other banks, through treasury and corporate banking;
Branch Banking - principally handling branch deposits and providing loans and other loan
related businesses for domestic middle market clients; and
Others - principally handling other services including but not limited to remittances, leasing,
account financing, and other support services. Other operations of the Group comprise the
operations and financial control groups.
Segment assets are those operating assets that are employed by a segment in its operating activities
and that either are 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 that either are 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. The Group
has no significant customers which contributes 10.00% or more of the consolidated revenue net of
interest expense. Transactions between segments are conducted at estimated market rates on an
arm’s length basis. Interest is charged/credited to business segments based on a pool rate which
approximates the cost of funds. The following table presents revenue and income information of
operating segments presented in accordance with PFRS and segment assets and liabilities:
Consumer
Banking
Corporate
Banking
Investment
Banking
2013
Net interest income (expense)
Third party
Intersegment
Net interest income (expense) after
intersegment transactions
Non-interest income
Revenue - net of interest expense
Non-interest expense
Income (loss) before share in net income
of associates and a JV
Share in net income of associates and a JV
Provision for income tax
Non-controlling interest in net income of
consolidated subsidiaries
Net income (loss)
Statement of Financial Position
Total assets
Total liabilities
–
P
= 2,470
–
P
= 2,534
–
P
= 486
P
= 97,439
P
= 41,792
P
= 202,740
P
= 197,033
Other Segment Information
Capital expenditures
P
= 409
P
= 293
P
= 3,665
Treasury
Branch
Banking
Others
Total
P
= 7,851
(280)
P
= 7,999
(4,014)
(P
=44)
–
P
= 11,148
(5,995)
P
= 9,994
12,443
P
= 1,321
(2,154)
P
= 38,269
–
7,571
4,068
11,639
8,307
3,985
382
4,367
1,573
(44)
731
687
149
5,153
13,426
18,579
2,547
22,437
3,646
26,083
17,123
(833)
18,402
17,569
19,798
38,269
40,655
78,924
49,497
2,794
110
(370)
538
–
(52)
16,032
–
(3,242)
8,960
–
64
(2,229)
1,367
(2,286)
29,427
1,477
(6,748)
–
P
= 12,790
–
P
= 9,024
(1,668)
(P
=4,816)
(1,668)
P
= 22,488
P
= 861
=
P6
P
= 503,490
P
= 481,636
P
= 321,033
P
= 377,608
P
= 253,006
P
= 137,789
P
= 1,378,569
P
= 1,235,864
=
P–
=
P–
=
P–
P
= 105
=
P7
P
= 426
P
= 328
P
= 949
P
= 1,886
P
= 2,599
P
= 1,332
P
= 4,902
P
= 3,653
P
= 2,684
P
= 10,722
3,332
–
(862)
P
= 212
P
= 103
(P
=157)
*SGVFS004156*
- 66 -
2012 (As restated - Note 2)
Third party
Intersegment
Non-interest income
Net income (loss)
Total assets
Total liabilities
2011 (As restated - Note 2)
Third party
Intersegment
Non-interest income
Net income (loss)
Total assets
Total liabilities
Consumer
Banking
Corporate
Banking
Investment
Banking
Treasury
Branch
Banking
Others
Total
P
=6,785
(217)
P
=8,860
(5,672)
(P
=66)
–
P
=6,730
(3,837)
P
=7,392
10,979
P
=1,153
(1,253)
=
P30,854
–
6,568
3,435
10,003
7,007
3,188
234
3,422
1,342
(66)
739
673
106
2,893
8,193
11,086
1,220
18,371
3,106
21,477
13,918
(100)
10,517
10,417
14,260
30,854
26,224
57,078
37,853
2,996
–
(796)
2,080
1
(155)
567
–
(29)
9,866
–
(1,844)
7,559
–
(232)
(3,843)
2,547
(800)
19,225
2,548
(3,856)
–
P
=2,200
–
P
=1,926
–
P
=538
–
P
=8,022
–
P
=7,327
(2,518)
(P
=4,614)
(2,518)
=
P15,399
=
P64,184
=
P33,952
=
P208,115
=
P205,180
P
=2,210
P
=2,302
=
P306,726
=
P278,774
=
P264,946
=
P295,235
P
=200,462
=
P106,491
=
P1,046,643
=
P921,934
P
=446
P
=311
P
=3,051
P
=281
P
=81
P
=83
=
P–
=
P–
=
P–
P
=75
P
=15
=
P–
P
=229
P
=879
P
=572
P
=3,472
P
=1,138
P
=772
P
=4,503
P
=2,424
P
=4,478
P
=5,809
(76)
P
=8,643
(2,327)
(P
=59)
–
P
=8,973
(2,722)
P
=3,943
5,697
P
=2,128
(572)
=
P29,437
–
5,733
2,919
8,652
5,946
6,316
214
6,530
1,447
(59)
460
401
113
6,251
6,696
12,947
1,932
9,640
3,138
12,778
13,105
1,556
6,269
7,825
11,980
29,437
19,696
49,133
34,523
2,706
–
(750)
5,083
8
(154)
288
–
(31)
11,015
–
(1,490)
(327)
–
(113)
(4,155)
1,415
(1,004)
14,610
1,423
(3,542)
–
P
=1,956
–
P
=4,937
–
P
=257
–
P
=9,525
–
(P
=440)
(1,460)
(P
=5,204)
(1,460)
=
P11,031
=
P55,060
=
P47,350
=
P197,713
=
P188,735
P
=1,131
P
=1,125
=
P344,522
=
P333,810
=
P228,735
=
P230,033
=
P134,915
=
P46,275
=
P962,076
=
P847,328
P
=504
P
=251
P
=1,979
P
=108
P
=67
P
=272
=
P–
=
P–
=
P–
P
=139
P
=199
=
P7
P
=100
P
=654
P
=430
P
=2,148
P
=1,163
P
=1,135
P
=2,999
P
=2,334
P
=3,823
Non-interest income consists of service charges, fees and commissions, profit from assets sold,
trading and securities gain - net, foreign exchange gain - net, income from trust operations,
leasing, dividends and miscellaneous income. Noninterest expense consists of compensation and
fringe benefits, taxes and licenses, provision for credit and impairment losses, depreciation and
amortization, occupancy and equipment-related cost, amortization of software costs and
miscellaneous expense.
*SGVFS004156*
- 67 Geographical Information
The Group operates in four geographic markets: Philippines, Asia other than Philippines, USA and
Europe (Note 2). The following tables show the distribution of Group’s external net operating
income and non-current assets allocated based on the location of the customers and assets,
respectively, for the years ended December 31:
Philippines
Asia
(Other than
Philippines)
P
= 48,614
11,155
37,459
39,130
10,630
P
= 65,959
P
= 1,243
462
781
1,000
92
P
= 1,689
–
–
P
= 440
Non-current assets
Interest income
Interest expense
Net interest income
Non-interest income
Total external net operating income
P
= 30,985
P
= 667
P
=44,264
13,940
30,324
24,637
4,444
P
=50,517
Non-current assets
Interest income
Interest expense
Net interest income
Non-interest income
Non-current assets
2013
Interest income
Interest expense
Net interest income
Non-interest income
USA
Europe
Total
P
= 35
6
29
411
=
P–
P
= 114
P
= 49,892
11,623
38,269
40,655
10,722
P
= 68,202
P
= 25
P
= 13
P
= 31,690
P
=708
215
493
1,118
34
P
=1,577
=
P44
7
37
329
–
P
=366
=
P–
–
–
140
–
P
=140
P
=45,016
14,162
30,854
26,224
4,478
P
=52,600
P
=33,775
P
=550
=
P31
=
P13
P
=34,369
P
=44,285
15,479
28,806
17,948
3,822
P
=42,932
P
=729
146
583
1,198
1
P
=1,780
=
P54
6
48
352
–
P
=400
=
P–
–
–
198
–
P
=198
P
=45,068
15,631
29,437
19,696
3,823
P
=45,310
P
=32,970
P
=391
P
=110
=
P19
P
=33,490
–
–
114
Non-current assets consist of property and equipment, investment properties, chattel properties
acquired in foreclosure, software costs, assets held under joint operations and non-current asset
held for sale.
7. Interbank Loans Receivable and Securities Purchased Under Resale Agreements
This account consists of:
Interbank loans receivable (Note 31)
SPURA
Less allowance for impairment losses
(Note 15)
Consolidated
2013
P
=27,465
94,548
122,013
2
P
=122,011
2012
P
=18,401
4,993
23,394
Parent Company
2012
2013
P
=15,046
P
=17,548
–
79,324
15,046
96,872
2
P
=23,392
–
P
=96,872
–
P
=15,046
The outstanding balance of SPURA represents overnight placements with the BSP where the
underlying securities cannot be sold or repledged to parties other than BSP.
*SGVFS004156*
- 68 8. Trading and Investment Securities
Consolidated
AFS investments (Notes 11, 29 and 31)
2013
P
=55,441
273,429
38,425
P
=367,295
Parent Company
2012
P
=72,920
123,041
51,451
P
=247,412
2013
P
=36,140
226,943
38,358
P
=301,441
2012
P
=57,635
102,574
21,491
P
=181,700
Financial assets at FVPL consist of the following:
Consolidated
HFT investments (Note 31)
Debt securities
Government (Note 17)
Private
BSP
Derivative assets (Note 31)
Parent Company
2013
2012
2013
2012
P
=39,367
2,332
19
41,718
9,637
51,355
4,086
P
=55,441
P
=61,648
801
–
62,449
8,132
70,581
2,339
P
=72,920
P
=30,421
1,717
19
32,157
–
32,157
3,983
P
=36,140
P
=54,585
801
–
55,386
–
55,386
2,249
P
=57,635
Derivative Financial Instruments
The following are fair values of derivative financial instruments of the Parent Company recorded
as derivative assets/liabilities, together with the notional amounts. The notional amount is the
amount of a derivative’s underlying asset, reference rate or index and is the basis upon which
changes in the value are measured. The notional amounts indicate the volume of transactions
outstanding as of December 31, 2013 and 2012 and are not indicative of either market risk or
credit risk.
December 31, 2013
Freestanding derivatives:
Currency forwards
BOUGHT:
USD
CNY
TWD
EUR
JPY
CHF
THB
AUD
SOLD:
USD
CNY
Notional
Amount
Average
Forward Rate
(in every USD 1)
Assets
Liabilities
P
=769
182
17
7
–
1
–
–
P
= 181
2
–
–
2
–
1
–
USD 754
CNY 1,664
TWD 933
EUR 14
JPY 1,141
CHF 3
THB 10
AUD 3
P
=43.6032
CNY 0.1612
TWD 0.0338
EUR 1.3687
JPY 0.0096
CHF 1.1160
THB 0.0312
AUD 0.8888
57
15
1,078
94
USD 1,723
CNY 2,922
P
=43.7730
CNY 0.1632
(Forward)
*SGVFS004156*
- 69 -
JPY
EUR
THB
SGD
AUD
Put option purchasedwarrants
Interest rate swaps - PHP
Interest rate swaps - FX
Cross currency swaps - PHP
Over-the-counter FX Option
Embedded derivatives in:
Financial contract*
Nonfinancial contract**
December 31, 2012
Freestanding derivatives:
Currency forwards
BOUGHT:
USD
CNY
EUR
JPY
TWD
SOLD:
USD
CNY
JPY
EUR
AUD
NZD
SGD
THB
Put option purchasedwarrants
Interest rate swaps - PHP
Interest rate swaps - FX
Cross currency swaps - PHP
Over-the-counter FX Option
Embedded derivatives in:
Financial contract*
Nonfinancial contract**
Average
Forward Rate
(in every USD 1)
JPY 0.0097
EUR1.3699
THB 0.0304
SGD 0.7900
AUD 0.8925
Assets
P
=11
–
–
–
–
Liabilities
P
=3
1
–
–
3
Notional
Amount
JPY 2,827
EUR 1
THB 29
SGD 11
AUD 5
215
892
169
1,639
–
–
3
–
857
550
234
1,407
10
11
USD 645
P
=55,694
USD 1,270
USD 1,154
P
=13,632
USD 35
USD 89
–
6
P
=3,983
18
–
P
=4,452
USD 1
USD 0
P
=39
47
25
–
–
P
=1,280
3
1
1
–
USD 1,324
CNY 2,283
EUR 31
JPY 16
TWD 116
P
=41.9696
CNY 0.1577
EUR 1.3223
JPY 0.0125
TWD 0.0344
1,098
5
1
–
–
–
–
–
28
109
–
50
50
–
–
–
USD 2,101
CNY 2,138
JPY 191
EUR 13
AUD 80
NZD 1
–
THB 12
P
=41.5060
CNY 0.1572
JPY 0.0117
EUR 1.2278
AUD 1.0010
NZD 0.8328
SGD 0.8166
THB 0.0326
199
791
21
8
5
–
3
–
1,050
654
3,163
–
1
15
USD 645
P
=38,972
USD 710
USD 961
P
=500
USD 10
USD 48
–
7
P
=2,249
20
–
P
=6,425
USD 2
USD 0
*
As of December 31, 2013 and 2012, derivative liabilities pertain to interest rate derivatives embedded in structured debt instrument
with outstanding notional amount of USD 1.1 million and USD 1.7 million, respectively.
** Nonfinancial host contracts include foreign currency derivatives with average notional amounts of USD 1,440 and
USD 1,415 per month as of December 31, 2013 and 2012, respectively (with maturities until 2021).
*SGVFS004156*
- 70 As of December 31, 2013 and 2012, the Group’s derivative assets include embedded call option in
a financial contract amounting to P
=90.4 million and =
P27.4 million, respectively; currency forwards
and derivative assets from Put Option Purchased Warrants of P
=1.4 million and P
=63.4 million,
respectively, as of December 31, 2012; and interest rate swaps of =
P13.3 million as of
December 31, 2013.
Derivatives designated as accounting hedges
MCC has two cross-currency swap agreements with a certain bank to hedge the foreign exchange
and interest rate risks arising from its dollar-denominated loan with the same bank. Under the
agreements, MCC, on a quarterly basis, pays fixed annual interest rates ranging from 4.1% to
5.5% in 2013 and 2012, respectively, on the peso principals and receives floating interest at 3
months LIBOR on the USD principals. As of December 31, 2013 and 2012, the swaps which are
designated as hedging instruments under cash flow hedges have an aggregate positive and
negative fair value of =
P13.3 million and =
P267.3 million, respectively. Cash outflows relating to the
hedged item amounting to =
P2.2 billion and P
=2.9 billion are expected to be settled within one year
and beyond one year, respectively. MCC assessed the hedge relationship of the swaps and the
hedged loans as highly effective. The effective fair value changes on the swaps that were deferred
in equity under ‘Translation adjustment and others’ as of December 31, 2013 and 2012 amounted
to =
P17.7 million and =
P81.9 million, respectively. This is to recognize the offsetting effect of the
change in fair value of the swaps and that of the hedged loans in the statement of income due to
movements in the foreign exchange rates. No ineffectiveness was recognized in 2013 and 2012.
AFS investments consist of the following:
Consolidated
2013
Debt securities:
Government (Note 17)
Private (Note 14)
Equity securities:
Quoted
Unquoted
Less allowance for impairment losses
(Note 15)
2012
Parent Company
2013
2012
P
= 245,520
21,531
267,051
P
=103,836
16,612
120,448
P
= 206,083
20,535
226,618
P
=86,176
15,942
102,118
3,182
3,764
6,946
273,997
2,619
547
3,166
123,614
356
147
503
227,121
485
147
632
102,750
568
P
= 273,429
573
P
=123,041
178
P
= 226,943
176
P
=102,574
AFS investments include net unrealized gains (losses) as follows:
Consolidated
Balance at the beginning of year
Unrealized gains recognized in other
comprehensive income
Amounts realized in profit or loss
Tax (Note 28)
Balance at end of year
2013
P
=2,546
9,910
(12,833)
(377)
6
(P
=371)
Parent Company
2012
P
=5,063
4,684
(7,096)
2,651
(105)
P
=2,546
2013
P
=1,613
2012
P
=2,377
1,163
(4,816)
(2,040)
(93)
(P
=2,133)
3,269
(4,004)
1,642
(29)
P
=1,613
*SGVFS004156*
- 71 HTM investments consist of the following:
Consolidated
Government bonds (Note 17)
Treasury notes
Private bonds
2013
P
=38,380
45
–
P
=38,425
2012
P
=37,481
9,635
4,335
P
=51,451
Parent Company
2013
P
=38,358
–
–
P
=38,358
2012
P
=17,157
–
4,334
P
=21,491
HTM investments include US government securities with carrying value of USD 1.0 million (with
peso equivalent of =
P45.1 million and =
P41.6 million as of December 31, 2013 and 2012,
respectively) which are pledged by MR USA to the State Treasury Office pursuant to the
California Financial Code and in accordance with the requirements of the California Department
of Financial Institutions relative to its license as a transmitter of money.
Bond Exchange Transaction
In July 2011, the Republic of the Philippines (ROP) through the Department of Finance and the
Bureau of Treasury embarked on the 6th phase of its Domestic Debt Consolidation via a Liability
Management exercise executed through the Exchange Offer, Subscription Offer and Tender
Offer - i.e., exchange of eligible fixed income government bonds for a new 10-year bonds (due
2022) or 20-year bonds (due 2031) wherein the proceeds of a simultaneous issuance of additional
new 20-year bonds were used to buy back Eligible Bonds via Tender Offer.
To encourage existing bondholders to participate given the existing tainting rule on HTM
investment under PAS 39, on June 28, 2011, the SEC granted all holders of eligible bonds
currently classified as HTM that will exchange more than insignificant amount of such bonds
under this program, an exemptive relief from the tainting rule subject to the following conditions:
· disclosure to SEC of the (i) the date of the exchange, (ii) amount of eligible bonds exchanged,
(iii) amount of total HTM portfolio before and after the exchange;
· Day 1 profit or loss shall not be recognized and any unrealized gains or losses shall be
amortized over the term of the new benchmark bonds;
· exemption shall not extend to Eligible Bonds that will be bought back by the ROP and shall
not likewise apply if transaction would be a combination of tender offer for cash and exchange
for new bonds;
· basis of preparation of the financial statements shall not be PFRS but should be the prescribed
financial reporting framework for entities which are given relief from certain requirements of
the PFRS. This basis of financial reporting shall be adopted by the availing entity until such
time that the ground for its coverage under the tainting rule of PAS 39 is no longer present;
and
· appropriate clearance shall be obtained from the BSP and Insurance Commission, as the
primary regulators of banks and insurance companies, respectively.
On October 11, 2011, the BSP through Circular 738 issued exemption from tainting provision for
prudential reporting on certain securities booked under HTM category which are covered by an
offer and accepted tender offer pursuant to liability management transactions of the ROP, among
others.
In July 2011, given its nature of business, FMIC participated in the domestic bond exchange
covering its =
P3.0 billion eligible government bonds classified as HTM investments to extend the
bond holdings (from maturity date of December 16, 2020 to July 19, 2031) and benefit from the
*SGVFS004156*
- 72 higher yields (from 5.875% to 8.00%). FMIC has complied with the disclosure and other
requirements of the SEC as follows:
a. total HTM Investments portfolio of FMIC before and after the exchange remain the same
while the gain on exchange of =
P14.5 million is deferred and amortized over the term of the
new bonds; and
b. as disclosed in Note 2, the related financial statements of the Group have been prepared in
accordance with Philippine GAAP for banks.
Reporting under PFRS
As of December 31, 2013 and 2012, had the Group accounted for the transaction under PFRS, the
unamortized balance of the deferred gain on exchange of P
=0.2 million and P
=13.4 million,
respectively, would have been credited to the Group’s 2011 net income and the entire HTM
investments portfolio of the Group with amortized cost of P
=38.4 billion and P
=51.5 billion,
respectively, would have been reclassified to AFS investments and carried at fair value with net
unrealized gain of =
P2.8 billion and =
P10.8 billion, respectively, being recognized in other
comprehensive income.
Reclassification of HTM Portfolio in 2013
In 2013, PSBank and FMIC reclassified its HTM investments totaling to P
=13.3 billion (consisting
of dollar denominated bonds amounting to US$73.5 million and peso denominated bonds of
P
=10.3 billion) and =
P16.3 billion, respectively, to AFS investments as they no longer intend to hold
them up to maturity but rather stands ready to sell such investments. The change in intention was
primarily driven by the need to increase capital position in view of the following directions set
forth in BSP Circular No. 781:
·
·
·
Significant increase in the industry’s regulatory capital requirements in view of the early
implementation of Basel III effective 2014;
Inclusion of “loss absorbency” feature in the issuance of additional Tier 2 capital; and
For PSBank, disqualification of its P
=3.0 billion subordinated debt as Tier 2 Capital under
Basel III.
The change in intention and eventual disposal of the said HTM investment portfolio in response to
the significant increase in regulatory capital requirements is one of the conditions permitted under
PAS 39 thus, not covered by the tainting rule.
As of December 31, 2013, out of the reclassified securities of PSBank, bonds originally costing
P
=12.6 billion (dollar denominated bonds of US$73.5 million and peso denominated bonds of
=
P9.6 billion) have been sold with total trading gain of =
P4.0 billion. For FMIC, bonds totaling
P
=11.3 billion have been sold with total trading gain of P
=3.8 billion.
Interest income on trading and investment securities consists of:
AFS investments
HTM investments
2013
P
= 1,775
8,119
1,521
P
= 11,415
Consolidated
2012
2011
P
=1,326
P
=476
5,743
6,270
3,394
3,147
P
=10,463
P
=9,893
Parent Company
2013
P
= 1,495
6,469
1,142
P
= 9,106
2012
P
=1,190
4,840
1,088
P
=7,118
2011
P
=382
3,683
1,081
P
=5,146
*SGVFS004156*
- 73 In 2013, 2012 and 2011, foreign currency-denominated trading and investment securities bear
nominal annual interest rates ranging from 0.54% to 10.63%, 0.88% to 11.63% and 0.80% to
10.63%, respectively, for the Group and from 0.63% to 10.63%, 0.88% to 11.63% and 0.80% to
9.88%, respectively, for the Parent Company while peso-denominated trading and investment
securities bear nominal annual interest rates ranging from 1.70% to 14.60%, 3.30% to 18.25% and
3.70% to 18.25%, respectively, for the Group and from 1.70% to 14.60%, 3.30% to 11.50% and
3.70% to 14.00%, respectively, for the Parent Company.
Trading and securities gain - net consists of:
HFT investments
AFS investments
Derivative asset/liabilities - net
2013
P
= 992
12,833
3,357
P
= 17,182
Consolidated
2012
2011
P
=3,699
P
=1,338
7,096
5,831
(4,115)
(923)
P
=6,680
P
=6,246
Parent Company
2013
P
= 409
4,816
3,361
P
= 8,586
2012
P
=1,791
4,004
(4,089)
P
=1,706
2011
P
=1,007
3,671
(968)
P
=3,710
Trading gains on AFS investments include realized gains/losses previously reported in other
comprehensive income.
9. Loans and Receivables
Consolidated
2013
Receivables from customers (Note 31):
Commercial loans
Auto loans
Trade loans
Others
Less unearned discounts and capitalized
interest
Unquoted debt securities (Note 17):
Government
Private
Accounts receivable (Note 31)
Accrued interest receivable (Note 31)
Other receivables (Note 31)
Less allowance for credit losses (Note 15)
Parent Company
2012
2013
2012
P
= 393,676
65,686
57,734
30,186
63,937
611,219
P
=338,830
53,838
52,109
21,715
59,052
525,544
P
= 354,064
36,910
16,568
29,956
17,099
454,597
P
=311,618
31,184
15,852
21,684
15,671
396,009
3,942
607,277
7,180
518,364
580
454,017
1,376
394,633
1,609
3,745
5,354
5,873
8,414
458
314
627,690
16,626
P
= 611,064
1,910
6,076
7,986
5,782
7,359
637
1,493
541,621
15,726
P
=525,895
191
829
1,020
4,412
6,910
156
30
466,545
9,650
P
= 456,895
494
819
1,313
4,792
5,646
244
168
406,796
8,233
P
=398,563
Receivables from customers consist of:
Loans and discounts
Less unearned discounts and
capitalized interest
Customers’ liabilities under letters of
credit (LC)/trust receipts
Bills purchased (Note 21)
Consolidated
2012
2013
P
=488,645
P
= 564,374
Parent Company
2012
2013
P
=358,992
P
= 407,870
3,942
560,432
7,180
481,465
580
407,290
1,376
357,616
30,186
16,659
P
= 607,277
21,715
15,184
P
=518,364
29,956
16,771
P
= 454,017
21,684
15,333
P
=394,633
*SGVFS004156*
- 74 Receivables from customers-others of the Group include credit card receivables, notes
receivables financed and lease contract receivables amounting to =
P32.6 billion, =
P4.7 billion and
=
P4.0 billion, respectively, as of December 31, 2013 and =
P27.8 billion, =
P4.6 billion and
P
=3.8 billion, respectively, as of December 31, 2012.
As of December 31, 2013 and 2012, other receivables include dividends receivable of
=
P1.4 billion, respectively, for the Group, and =
P18.0 million and
=
P158.5 million, respectively, for the Parent Company. Dividends receivable of FMIC from its
investee companies amounted to =
P1.4 billion as of December 31, 2013 and
2012, respectively.
Interest income on loans and receivables consists of:
Receivables from cardholders
Lease contract receivables
Customer liabilities under LC/trust receipts
Restructured loans
Unquoted debt securities and others
2013
P
= 25,853
6,500
1,372
713
268
831
P
= 35,537
Consolidated
2012
2011
P
=23,548
P
=21,097
5,810
4,803
1,156
1,495
848
697
413
427
953
516
P
=32,728
P
=29,035
Parent Company
2012
P
=16,293
–
–
808
335
216
P
=17,652
2013
P
= 16,953
–
–
713
207
283
P
= 18,156
2011
P
=14,323
–
–
697
340
296
P
=15,656
Interest income on unquoted debt securities and others include interest accreted on impaired
receivables in accordance with PAS 39 and interest income on sales contract receivable.
BSP Reporting
As of December 31, 2013 and 2012, 76.81% and 79.81% of the total receivables from customers
of the Group, respectively, are subject to periodic interest repricing. In 2013 and 2012, the
remaining peso receivables from customers earn annual fixed interest rates ranging from 3.00% to
42.00% while foreign currency-denominated receivables from customers earn annual fixed interest
rates ranging from 1.25% to 36.00% and from 1.37% to 36.00%, respectively.
The following table shows information relating to receivables from customers by collateral, gross
of unearned discounts and capitalized interest:
Consolidated
2013
Amount
Secured by:
Real estate
Chattel
Equity securities
Deposit hold-out
Other securities
Others
Unsecured
P
=103,936
69,775
13,674
11,530
98,491
6,999
304,405
306,814
P
=611,219
%
17.00
11.42
2.24
1.88
16.11
1.15
49.80
50.20
100.00
Parent Company
2012
Amount
=
P87,756
62,820
10,785
7,788
73,200
6,485
248,834
276,710
=
P525,544
%
16.70
11.95
2.05
1.48
13.93
1.24
47.35
52.65
100.00
2013
Amount
P
=57,835
17,539
11,421
10,798
98,491
3,624
199,708
254,889
P
=454,597
%
12.72
3.86
2.51
2.37
21.67
0.80
43.93
56.07
100.00
2012
Amount
=
P61,407
17,594
8,510
6,932
73,200
2,255
169,898
226,111
=
P396,009
%
15.51
4.44
2.15
1.75
18.48
0.57
42.90
57.10
100.00
Information on the concentration of credit as to industry of receivables from customers, gross of
unearned discount and capitalized interest, follows:
Parent Company
Consolidated
2013
Amount
Manufacturing (various
industries)
Real estate, renting and business
activities
Private households
Other community, social and
personal activities
%
2012
Amount
%
2013
Amount
%
2012
Amount
%
P
=122,513
20.04
=
P99,022
18.84
P
=113,451
24.96
=
P95,036
24.00
100,861
98,897
82,578
16.50
16.18
13.51
85,548
96,322
73,655
16.28
18.33
14.02
69,937
88,618
49,886
15.39
19.49
10.97
61,232
71,374
45,675
15.46
18.02
11.53
52,385
41,443
8.57
6.78
19,733
37,175
3.75
7.07
512
40,104
0.11
8.82
772
34,941
0.19
8.82
(Forward)
*SGVFS004156*
- 75 Parent Company
Consolidated
Transportation, storage and
communication
Construction
Agricultural, hunting and
forestry
Public administration and
defense, compulsory social
security
Others
2013
Amount
P
=34,743
%
5.68
2012
Amount
=
P37,866
2013
Amount
P
=29,710
%
7.21
%
6.54
2012
Amount
=
P31,216
%
7.88
33,793
16,615
12,738
5.53
2.72
2.08
37,760
9,882
11,512
7.18
1.88
2.19
28,224
12,156
12,111
6.21
2.67
2.66
30,192
6,379
10,359
7.62
1.61
2.62
6,401
1.05
5,756
1.10
4,120
0.91
4,321
1.09
1,872
1,073
5,307
P
=611,219
0.31
0.18
0.87
100.00
3,972
861
6,480
=
P525,544
0.76
0.16
1.23
100.00
121
829
4,818
P
=454,597
0.03
0.18
1.06
100.00
141
519
3,852
=
P396,009
0.04
0.13
0.99
100.00
The BSP considers that concentration of credit exists when total loan exposure to a particular
industry or economic sector exceeds 30.00% of total loan portfolio except for thrift banks.
Current banking regulations allow banks with no unbooked valuation reserves and capital
adjustments to exclude from nonperforming classification those receivables from customers
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.
Non-performing loans (NPLs) not fully covered by allowance for credit losses follow:
Total NPLs
Less NPLs fully covered by
allowance for credit losses
Consolidated
2013
P
=7,808
2012
P
=9,596
Parent Company
2012
2013
P
=4,193
P
=3,125
2,506
P
=5,302
4,992
P
=4,604
1,389
P
=1,736
2,496
P
=1,697
Under banking regulations, NPLs shall, as a general rule, refer to loan accounts whose principal
and/or interest is unpaid for thirty (30) days or more after due date or after they have become past
due in accordance with existing rules and regulations. This shall apply to loans payable in lump
sum and loans payable in quarterly, semi-annual, or annual installments, in which case, the total
outstanding balance thereof shall be considered non-performing.
In the case of receivables that are payable in monthly installments, the total outstanding balance
thereof shall be considered non-performing when three (3) or more installments are in arrears. In
the case of receivables that are payable in daily, weekly, or semi-monthly installments, the total
outstanding balance thereof shall be considered non-performing at the same time that they become
past due in accordance with existing BSP regulations, i.e., the entire outstanding balance of the
receivable shall be considered as past due when the total amount of arrearages reaches 10.00% of
the total receivable balance. Restructured receivables which do not meet the requirements to be
treated as performing receivables shall also be considered as NPLs.
10. Property and Equipment
The composition of and movements in this account follow:
Land
2013
Cost
Balance at beginning of year
Additions
Disposals
Reclassification/others
P
= 5,103
11
(52)
796
5,858
Buildings
P
= 7,740
119
(334)
200
7,725
Consolidated
Furniture,
Fixtures and
Leasehold
Equipment Improvements
P
= 15,198
2,695
(1,244)
24
16,673
P
= 2,406
134
–
142
2,682
Building
Under
Construction
P
= 601
334
–
(895)
40
Total
P
= 31,048
3,293
(1,630)
267
32,978
(Forward)
*SGVFS004156*
- 76 -
Land
Accumulated depreciation and
amortization
Disposals
Allowance for impairment losses (Note 15)
Net book value at end of year
2012
Cost
Additions
Disposals
amortization
Disposals
Accounts charged off/others
2013
Cost
Additions
Disposals
amortization
Disposals
2012
Cost
Additions
Disposals
amortization
Disposals
Buildings
Consolidated
Furniture,
Fixtures and
Leasehold
Building
Under
Construction
Total
=
P–
–
–
–
–
–
P
= 5,858
P
= 3,406
316
(233)
140
3,629
–
P
= 4,096
P
= 10,787
1,537
(490)
80
11,914
2
P
= 4,757
P
= 1,508
228
–
(59)
1,677
–
P
= 1,005
=
P–
–
–
–
–
–
P
= 40
P
= 15,701
2,081
(723)
161
17,220
2
P
= 15,756
P
=4,998
124
(45)
26
5,103
P
=7,530
94
(74)
190
7,740
=
P13,847
2,837
(1,390)
(96)
15,198
P
=2,195
224
–
(13)
2,406
P
=288
562
(249)
601
=
P28,858
3,841
(1,509)
(142)
31,048
3,136
271
(49)
48
3,406
10,421
1,365
(939)
(60)
10,787
1,352
213
–
(57)
1,508
12
(10)
2
P
=4,409
–
–
P
=5,103
–
P
=4,334
–
-
14,909
1,849
(988)
(69)
15,701
–
P
=898
–
P
=601
12
(10)
2
=
P15,345
Parent Company
Furniture,
Fixtures and
Leasehold
Building
Under
Construction
Land
Buildings
P
= 4,508
–
(52)
86
4,542
P
= 5,608
26
(50)
690
6,274
P
= 9,996
1,174
(819)
(7)
10,344
–
–
–
–
–
P
= 4,542
2,937
258
(30)
(7)
3,158
P
= 3,116
8,010
592
(232)
49
8,419
P
= 1,925
P
=4,436
90
(45)
27
4,508
P
=5,458
28
(8)
130
5,608
P
=9,337
1,458
(784)
(15)
9,996
–
P
=4,508
2,713
225
(6)
5
2,937
P
=2,671
7,918
534
(433)
(9)
8,010
P
=1,986
P
= 1,502
26
–
144
1,672
947
109
–
(57)
999
P
= 673
P
=1,401
70
–
31
1,502
881
106
–
(40)
947
P
=555
Total
P
= 601
334
–
(895)
40
P
= 22,215
1,560
(921)
18
22,872
–
–
–
–
–
P
= 40
11,894
959
(262)
(15)
12,576
P
= 10,296
P
=288
562
(249)
601
=
P20,920
2,208
(837)
(76)
22,215
–
P
=601
11,512
865
(439)
(44)
11,894
=
P10,321
Building under construction pertains to bank premises yet to be completed and used by the Parent
Company. The capital expenditures of the Parent Company related to the construction amounted
to =
P562.4 million in 2013 and 2012, respectively.
As of December 31, 2013 and 2012, the cost of fully depreciated property and equipment still in
use amounted to P
=1.8 billion and =
P600.9 million and
P
=78.4 million, respectively, for the Parent Company.
*SGVFS004156*
- 77 11. Investments in Subsidiaries, Associates and a Joint Venture
Investments in subsidiaries consists of:
Acquisition cost:
FMIC
MBCL
PSBank
Circa
ORIX Metro
MCC
MTI
MR USA
MRCI
MR Italia
MR Japan
MR UK
MRHL
MRSPL
FMIIC
Metrobank Bahamas
PVCC
MR Spain
Circa
MTI
MRCI
MR USA
MR Italia
MR UK
MR Spain
Carrying Value
FMIC
MBCL
PSBank
Circa
ORIX Metro
MCC
MTI
MR USA
MRCI
MR Italia
MR Japan
MR UK
MRHL
MRSPL
FMIIC
Metrobank Bahamas
PVCC
MR Spain
2013
2012
=11,751
P
8,658
3,626
837
265
214
200
158
131
66
41
31
26
17
12
8
5
26,046
=11,751
P
8,658
3,626
837
265
214
200
158
131
66
31
26
17
12
8
5
42
26,047
(733)
(185)
(127)
(53)
(66)
–
–
(1,164)
11,751
8,658
3,626
104
265
214
15
105
4
–
41
31
26
17
12
8
5
–
=24,882
P
(719)
(153)
(115)
(53)
(41)
(3)
(41)
(1,125)
11,751
8,658
3,626
118
265
214
47
105
16
25
–
28
26
17
12
8
5
1
=24,922
P
*SGVFS004156*
- 78 The following subsidiaries have material non-controlling interests as of December 31, 2013.
Principal
Activities
Leasing, Finance
Credit Card Services
Banking
ORIX Metro
MCC
PSBank
Effective
Percentage of
Ownership
of Non-Controlling
Interest
40.15%
40.00%
24.02%
The following table presents financial information of subsidiaries with material non-controlling
interests as of December 31, 2013.
Total assets
Total liabilities
Non-controlling interest
Statement of Income
Gross income
Operating income
Net income
Net income attributable to NCI
Total comprehensive income
Statement of Cash Flows
Net cash used in operating activities
Net cash provided by (used in) investing
activities
Net cash provided by (used in) financing
activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning
of year
Cash and cash equivalents at end of year
PSBank
MCC
ORIX Metro
P130,026
=
113,763
3,907
P39,468
=
33,352
2,446
P19,401
=
16,239
1,270
15,025
12,684
2,928
704
2,677
9,983
8,821
2,006
802
2,146
2,972
2,557
602
242
601
(1,915)
(3,478)
(604)
(178)
(949)
16,327
(1,263)
13,149
4,240
584
1,939
386
20,428
33,577
4,628
5,212
2,198
2,584
Investment in associates and a JV consists of:
Parent Company
Consolidated
2013
Acquisition cost:
Lepanto Consolidated Mining Company
(LCMC) (16.80% owned in 2013;16.82%
owned in 2012)
SMFC* (30.39% owned)
Toyota Financial Services Philippines
Corporation (TFSPC) (34.00% owned)
Northpine Land, Inc. (NLI) (20.00% owned)
SMBC Metro Investment Corporation (SMBC
Metro) (30.00% owned)
Taal Land Inc. (TLI) (35.00% owned)
Cathay International Resources Corporation
(CIRC) (34.73% owned in 2013; 34.72%
owned in 2012)
2012
(As Restated –
Note 2)
2013
2012
(As Restated –
Note 2)
P
= 2,397
800
P
=2,397
800
=
P-
=
P-
420
232
420
232
150
232
150
232
180
178
180
178
180
178
180
178
175
175
-
-
(Forward)
*SGVFS004156*
- 79 Consolidated
2013
Philippine AXA Life Insurance Corporation
(PALIC) (27.96% owned )
Charter Ping An Insurance Corporation (CPAIC)
(33.07% owned)
Global Business Power Corporation (GBPC)
(48.72% owned in 2012)
Others
Parent Company
2012
(As Restated –
Note 2)
2013
2012
(As Restated –
Note 2)
P
= 172
P
=172
=
P-
=
P-
60
60
-
-
33
4,647
7,281
33
11,928
740
740
Accumulated equity in net income (loss):
LCMC
SMFC
TFSPC
NLI
SMBC Metro
TLI
CIRC
PALIC
CPAIC
TMPC
GBPC
Others
Share in net income (loss)
LCMC
SMFC
TFSPC
NLI
SMBC Metro
TLI
CIRC
PALIC
CPAIC
GBPC
TMPC
Dividends
NLI
SMBC Metro
PALIC
BPC
TMPC
Divestments/reclassification
GBPC
MPC
LCMC
SMFC
TFSPC
NLI
SMBC Metro
TLI
CIRC
PALIC
CPAIC
GBPC
Others
Equity in net unrealized gain (loss) on AFS
investments
LCMC
TFSPC
SMBC Metro
(58)
(135)
487
96
69
(84)
9
573
263
–
1,062
(22)
2,260
(83)
(85)
407
55
71
(85)
(2)
545
196
1,327
1,735
(22)
4,059
(29)
176
15
22
349
68
876
1,477
25
(50)
80
43
20
1
11
252
67
1,252
847
2,548
(12)
(18)
(251)
–
–
(281)
(2)
(22)
(224)
(1,925)
(653)
(2,826)
(1,938)
(1,938)
(1,521)
(1,521)
(87)
(135)
663
99
73
(84)
9
671
331
(22)
1,518
(58)
(135)
487
96
69
(84)
9
573
263
1,062
(22)
2,260
(59)
(1)
12
(58)
–
13
(Forward)
*SGVFS004156*
- 80 Consolidated
TLI
PALIC
CPAIC
GBPC
LCMC
SMFC
TFSPC
CPAIC
NLI
TLI
Carrying Value
LCMC
SMFC
TFSPC
NLI
SMBC Metro
TLI
CIRC
PALIC
CPAIC
GBPC
Others
Parent Company
2012
(As Restated –
Note 2)
2013
(P
=3)
(P
= 3)
356
301
41
23
417
766
273
(2)
(2)
2013
2012
(As Restated –
Note 2)
31
16
29
76
(162)
(162)
(58)
(104)
(162)
2,251
663
1,082
331
265
(71)
184
1,144
414
11
P
= 6,274
2,312
665
923
270
262
(13)
184
1,101
393
8,760
11
P
=14,868
P
=–
(162)
(162)
(P
=58)
(104)
(162)
–
–
150
232
180
16
–
–
–
–
–
P
= 578
–
–
150
174
180
74
–
–
–
–
–
P
=578
*Represents investment in a JV of the Group.
As of December 31, 2013 and 2012, carrying amount of goodwill amounted to =
P5.2 billion and
=
P6.4 billion, respectively, for the Group and nil and =
P1.2 billion, respectively, for the Parent
Company. The goodwill of the Parent Company amounting to P
=1.2 billion was fully impaired in
2013 (Note 3).
In 2012, the Parent Company invested an additional USD 1.0 million in MR USA which was
approved by the BSP on October 1, 2012.
Investment in FMIC
Relative to the amended rule on minimum public ownership, on October 12, 2012, the BOD of
FMIC in its special meeting approved the voluntary delisting of FMIC’s shares from the PSE and
the buy-back of all of its publicly-owned shares through a tender offer. On October 15, 2012,
FMIC published its Notice to its Shareholders of the proposed voluntary delisting and the intent to
buy back the publicly-owned common shares through a tender offer at =
P89.00 per share. It filed
its initial tender offer report with the SEC and submitted the said report to the PSE on
October 17, 2012. On December 12, 2012, the PSE’s BOD approved such request effective on
December 21, 2012. As required, the FMIC’s shares were suspended for trading for 3 days before
the delisting date or on December 18, 2012. As a result of FMIC’s buyback of its own shares, the
Parent Company’s ownership in FMIC increased from 98.06% to 99.23% and 99.21% as of
December 31, 2013 and 2012, respectively.
Investment of FMIC in GBPC
Following the SEC approval on the increase in authorized capital stock of GBPC to P
=1.0 billion
and the reduction of the par value per share of stock from =
P100.00 to =
P1 a share, the deposit for
future stock subscription of FMIC amounting to =
P5.6 billion as of December 31, 2011 had been
used to subscribe additional 199,058,600 shares of GBPC in January 2012. This resulted in an
increase in percentage of direct ownership to 49.11% from 30.00%. Further, in July 2012, FMIC
*SGVFS004156*
- 81 subscribed to 18,212,638 shares amounting to P
=639.8 million, representing deposit for future stock
subscription (included in its investment in GBPC as of December 31, 2012) in response to a
capital call made by GBPC. A total of additional equity infusion of P
=1.6 billion representing the
proportionate share of FMIC on such capital call was approved by its BOD on June 29, 2012. The
remaining balance of the capital call was paid on February 15 and March 15, 2013 amounting to
P
=222.7 million, respectively.
On June 27, 2013, FMIC sold 20.0% of its ownership in GBPC to ORIX Corporation of Tokyo,
Japan at a consideration of =
P7.2 billion which resulted in a gain of =
P3.1 billion. Further, on
October 22, 2013, FMIC sold another 20.0% to Meralco PowerGen Corporation, a wholly-owned
subsidiary of Manila Electric Company at a consideration of P
=7.2 billion which resulted in a gain
of P
=4.3 billion. As of December 31, 2013, FMIC owned 9.11% of GBPC which warranted the
reclassification of the investment to AFS investments. The sale of GBPC shares was in line with
the Group’s capital raising initiatives in preparation for the implementation of Basel III in the
Philippines on January 1, 2014.
Investment of FMIC in CIRC
As of December 31, 2011, FMIC’s investments include deposit for future stock subscription
amounting to P
=314.0 million which was returned in December 2012.
Investment of FMIC in LCMC
In May 2011, FMIC partially disposed its ownership in LCMC to a third party which resulted in a
gain of =
P370.0 million. FMIC holds less than 20.00% of the ownership interest and voting control
in LCMC but holds 2 out of 9 board seats (or 22.20%) and has the ability to exercise significant
influence through its nominated directors’ active participation in the board and management subcommittee. As of December 31, 2013 and 2012, the fair value of the investment which is
equivalent to the bid price of the shares in the PSE amounted to =
P2.2 billion and =
P7.4 billion,
respectively.
The following tables present financial information of significant associates and a JV as of and for
the years ended:
Total
Total
Assets
Liabilities
Gross
Income
Statement of Income
Operating
Income (Loss)
Net Income
(Loss)
December 31, 2013
PALIC
TFSPC
LCMC
CPAIC
CIRC
NLI
SMFC
SMBC Metro
TLI
P
= 54,931
29,576
8,706
9,134
2,390
2,174
1,739
890
47
P
= 50,863
26,850
1,370
7,776
1,829
647
77
81
–
P
= 10,617
1,931
2,025
1,653
117
234
347
148
1
P
= 1,388
611
(250)
228
0
57
3
102
1
P
= 1,192
437
(258)
193
1
69
6
72
1
December 31, 2012
PALIC
TFSPC
LCMC
CPAIC
CIRC
NLI
SMFC
SMBC Metro
TLI
=
P44,851
22,361
15,096
6,343
2,580
1,984
1,729
884
46
=
P40,891
19,962
6,558
5,122
2,020
467
73
85
0
P
=4,581
1,791
2,282
1,632
230
328
326
117
1
P
=1,048
332
378
288
95
254
(96)
85
1
P
=915
197
251
214
51
180
(103)
66
1
*SGVFS004156*
- 82 Major assets of significant associates and a JV include the following:
PALIC
Cash and cash equivalents
AFS investments
Investment in unit-linked funds
Property and equipment
TFSPC
Receivables - net
LCMC
Inventories
Investments and advances
Property, plant and equipment - net
CPAIC
Receivables - net
Investments
CIRC
Receivables - net
Investment properties - net
NLI
Real estate properties
Receivables - net
SMFC
Receivables - net
SMBC Metro
AFS investments
Receivables - net
TLI
Investments
GBPC
Receivables - net
Property, plant and equipment - net
Prepaid expenses
2013
2012
P
=3,158
735
994
6,305
43,323
221
=2,066
P
536
1,286
6,653
33,758
203
4,138
19,952
3,548
14,897
317
813
6,741
477
812
6,748
5,960
1,763
1,247
1,125
–
439
355
207
456
1,074
505
574
962
348
716
845
790
750
230
–
194
462
234
150
70
424
46
46
10,588
5,150
35,946
2,385
The following tables summarize dividends declared by investee companies of the Parent
Company:
Subsidiary/Associate
2013
Subsidiaries
Cash Dividend
FMIC
FMIC
MCC
PSBank
PSBank
PSBank
PSBank
PSBank
MRSPL
Date of Declaration
Per Share
Total Amount
August 23, 2013
November 5, 2013
February 28, 2013
October 22, 2013
October 22, 2013
July 18, 2013
April 19, 2013
January 22, 2013
July 5, 2013
P
=8.06
13.42
1.50
3.00
0.75
0.75
0.75
0.75
SGD2.00
P
=3,003
5,001
1,500
721
180
180
180
180
34
Date of BSP
Approval
Record Date
Payment Date
October 8, 2013
December 12, 2013
April 11, 2013
November 12, 2013
November 12, 2013
August 8, 2013
May 28, 2013
February 8, 2013
Not required
September 30, 2013
December 20, 2013
April 12, 2013
November 29, 2013
November 29, 2013
September 4, 2013
June 18, 2013
March 5, 2013
July 5, 2013
October 10, 2013
December 26, 2013
April 24, 2013
December 16, 2013
December 16, 2013
September 19, 2013
July 3, 2013
March 20, 2013
July 23, 2013
*SGVFS004156*
- 83 -
Per Share
Total Amount
Date of BSP
Approval
Record Date
Payment Date
P
=4.89
10.00
=
P60
60
Not required
Not required
March 22, 2013
December 9, 2013
April 2, 2013
January 8, 2013
100.00
253
Note 36b
October 23, 2013
Per Share
Total Amount
Date of BSP
Approval
Record Date
Payment Date
P
=0.89
0.75
0.75
0.75
0.15
P
=886
180
180
180
36
August 1, 2012
November 21, 2012
August 13, 2012
May 15, 2012
February 9, 2012
August 7, 2012
December 27, 2012
September 11, 2012
June 7, 2012
March 8, 2012
August 8, 2012
January 14, 2013
September 26, 2012
June 25, 2012
March 23, 2012
April 12, 2012
May 3, 2012
May 2, 2012
USD 0.18
SGD 2.00
HKD 0.39
39
34
17
Not required
Not required
Not required
April 27, 2012
May 3, 2012
May 2, 2012
April 27, 2012
May 3, 2012
May 24, 2012
May 10, 2012
=
P140.58
2,178
Not required
December 31, 2011
Not required
Not required
March 1, 2012
December 13, 2012
May 11, 2012/
June 21, 2012
March 21, 2012
January 8, 2013
November 29, 2012
February 4, 2013
Subsidiary/Associate Date of Declaration
Associates
NLI
December 10, 2012
SMBC
December 9, 2013
Subsidiary
Stock Dividend
ORIX Metro
October 23, 2013
Subsidiary/Associate
2012
Subsidiaries
Cash Dividend
MCC
PSBank
PSBank
PSBank
PSBank
Metrobank
Bahamas
MRSPL
MRHK
Associates
TMPC
Date of Declaration
NLI
SMBC
Subsidiary
Stock Dividend
ORIX Metro
March 1, 2012
December 13, 2012
0.82
12.00
10
72
November 29, 2012
20.00
253
March 22, 2012
October 23, 2012
July 23, 2012
April 27, 2012
January 24, 2012
Dividends declared by significant investee companies of FMIC follow:
Subsidiary/
Associate
2013
Subsidiary
Cash Dividend
FAMI
Associate
Cash Dividend
PALIC
Stock Dividend
PALIC
ORIX Metro
2012
Subsidiary
Stock Dividend
FMSBC*
Per Share
Total Amount
Date of BSP
Approval
Record Date
Payment Date
=
P85.00
=
P20
Not required
July 12, 2013
October 22, 2013
October 16, 2013
89.10
891
Not required
October 16, 2013
November 13, 2013
April 16, 2013
October 23, 2013
100.00
100.00
341
253
Not required
Note 36b
April 16, 2013
October 23, 2013
May 30, 2013
December 28, 2012
100.00
39
Not required
December 28, 2012
January 25, 2013
5.16
1.89
120.57
2,870
1,050
795
Not required
Not required
Not required
December 3, 2012
July 31, 2012
October 24, 2012
March 31, 2013
August 30, 2012
November 9, 2012
Date of Declaration
July 12, 2013
Associates
Cash Dividend
GBPC
December 17, 2012
GBPC
August 11, 2012
PALIC
October 24, 2012
* First Metro Securities Brokerage Corporation
12. Investment Properties
This account consists of foreclosed real estate properties and investments in real estate:
Consolidated
2013
Buildings and
Land Improvements
Cost
Additions
Disposals
= 14,603
P
436
(2,471)
(252)
12,316
= 5,495
P
652
(872)
(192)
5,083
Total
= 20,098
P
1,088
(3,343)
(444)
17,399
Land
P
=14,929
622
(2,873)
1,925
14,603
2012
Buildings and
Improvements
P
=5,236
1,064
(843)
38
5,495
Total
P
=20,165
1,686
(3,716)
1,963
20,098
(Forward)
*SGVFS004156*
- 84 Consolidated
2013
Buildings and
Land Improvements
amortization
Disposals
Allowance for impairment losses
(Note 15)
Provision for impairment loss
Disposals
=–
P
–
–
–
–
2,487
312
(401)
(111)
2,287
= 10,029
P
Total
= 2,036
P
207
(322)
(137)
1,784
= 2,036
P
207
(322)
(137)
1,784
153
88
(13)
(25)
203
= 3,096
P
2,640
400
(414)
(136)
2,490
= 13,125
P
Land
=
P–
–
–
–
–
2,452
246
(373)
162
2,487
P
=12,116
2012
Buildings and
Improvements
Total
P
=2,168
226
(362)
4
2,036
P
=2,168
226
(362)
4
2,036
74
94
(15)
–
153
P
=3,306
2,526
340
(388)
162
2,640
P
=15,422
Parent Company
2013
Buildings and
Land Improvements
Cost
Additions
Disposals
amortization
Disposals
Allowance for impairment losses
(Note 15)
Disposals
= 12,019
P
165
(2,124)
(252)
9,808
–
–
–
–
–
1,937
290
(400)
20
1,847
= 7,961
P
Total
= 3,456
P
170
(567)
2
3,061
= 15,475
P
335
(2,691)
(250)
12,869
1,575
143
(276)
7
1,449
1,575
143
(276)
7
1,449
65
36
(5)
(27)
69
= 1,543
P
2,002
326
(405)
(7)
1,916
= 9,504
P
Land
P
=11,442
395
(2,395)
2,577
12,019
–
–
–
–
–
1,998
26
(275)
188
1,937
P
=10,082
2012
Buildings and
Improvements
Total
P
=3,378
595
(554)
37
3,456
P
=14,820
990
(2,949)
2,614
15,475
1,732
157
(318)
4
1,575
1,732
157
(318)
4
1,575
46
31
(12)
–
65
P
=1,816
2,044
57
(287)
188
2,002
P
=11,898
As of December 31, 2013 and 2012, foreclosed investment properties still subject to redemption
period by the borrower amounted to =
P1.0 billion and =
P719.1 million, respectively, for the Group
and P
=227.7 million, respectively, for the Parent Company.
As of December 31, 2013 and 2012, aggregate market value of investment properties amounted to
P
=22.9 billion and =
P18.3 billion and =
P20.1 billion,
respectively, for the Parent Company, of which the aggregate market value of investment
properties determined by independent external appraisers amounted to P
=20.0 billion and
=
P18.1 billion and =
P20.1 billion, respectively, for the
Parent Company. 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 and taking into account the economic
conditions prevailing at the time the valuations were made.
Rental income on investment properties (included in ‘Leasing income’ in the statement of income)
in 2013, 2012 and 2011 amounted to P
=83.1 million, P
=96.1 million and =
P222.1 million,
respectively, for the Group and =
P37.0 million, =
P30.4 million and =
P144.0 million, respectively, for
the Parent Company.
*SGVFS004156*
- 85 Direct operating expenses on investment properties that generated rental income (included under
‘Litigation expenses’) in 2013, 2012 and 2011 amounted to P
=5.4 million, P
=28.5 million and
P
=18.0 million, respectively, for the Group and =
P5.2 million, P
=27.2 million and =
P17.9 million,
respectively, for the Parent Company.
Direct operating expenses on investment properties that did not generate rental income (included
under ‘Litigation expenses’) in 2013, 2012 and 2011 amounted to P
=281.6 million, =
P288.1 million
and =
P333.2 million, respectively, for the Group and =
P226.3 million, =
P227.7 million and
P
=296.9 million, respectively, for the Parent Company (Note 25).
Net gains from sale of investment properties (included in ‘Profit from assets sold’ in the statement
of income) in 2013, 2012 and 2011 amounted to =
P451.7 million, P
=1.0 billion and =
P807.2 million,
P393.4 million, =
P1.0 billion and =
P800.4 million, respectively, for
the Parent Company (Note 31).
13. Non-Current Asset Held For Sale
On October 22, 2012, the respective BOD of the Parent Company and GT Capital on separate
meetings, upon the endorsement of their respective Related Party Transaction Committees, have
approved in principle the sale of the former’s 30% ownership in TMPC to GT Capital at a
consideration of =
P9.0 billion. This amount was arrived at after an independent valuation exercise
and subjected to third party fairness opinions. The divestment of TMPC shares was undertaken by
the Parent Company to enhance its regulatory capital position in preparation for the
implementation of Basel III. Accordingly, in December 2012, the Parent Company sold its 15%
ownership in TMPC and recognized a gain on sale of P
=3.4 billion and =
P4.2 billion for the Group
and the Parent Company, respectively (Note 31). The remaining 15.0% ownership of the Parent
Company in TMPC was sold in January 2013 wherein the Group and the Parent Company
recognized gain on sale of =
P3.4 billion and =
P4.2 billion, respectively (Note 31).
14. Other Assets
Consolidated
Creditable withholding tax
Assets held under joint operations
Software costs – net
Chattel properties acquired in foreclosure – net
Prepaid expenses
Documentary and postage stamps on hand
Other investments
Retirement asset* (Note 26)
Investments in SPVs – net
Miscellaneous
Less allowance for impairment losses (Note 15)
2013
P
=1,428
1,361
1,127
896
712
552
365
166
68
3
28
–
3,062
9,768
1,911
P
=7,857
2012
P
=1,749
1,189
1,550
832
609
479
385
132
80
13
–
–
3,114
10,132
861
P
=9,271
Parent Company
2013
P
=1,028
1,361
1,061
431
–
28
47
139
54
–
2
–
2,420
6,571
1,875
P
=4,696
2012
P
=1,331
1,189
1,288
514
–
19
79
110
63
10
–
–
2,496
7,099
814
P
=6,285
* Includes retirement asset of a foreign branch in 2013.
*SGVFS004156*
- 86 Assets held under joint operations are parcels of land and former branch sites of the Parent
Company with net realizable value of P
=1.4 billion and =
P1.2 billion as of December 31, 2013 and
2012, respectively, which were contributed to separate joint operations with Federal Land, Inc.
and Federal Land Orix Corporation (Note 31).
Movements in software costs account follow:
Consolidated
2013
Cost
Additions
Disposals/others
Accumulated amortization
Amortization
Disposals/others
2012
Parent Company
2012
2013
P
=1,793
360
(12)
2,141
P
=1,445
662
(314)
1,793
P
=1,097
61
(5)
1,153
P
=688
476
(67)
1,097
961
284
–
1,245
P
=896
1,003
236
(278)
961
P
=832
583
139
–
722
P
=431
501
120
(38)
583
P
=514
Movements in chattel properties acquired in foreclosure follow:
Consolidated
2013
Cost
Additions
Disposals/others
Accumulated depreciation and amortization
Disposals/others
Disposals
2012
Parent Company
2012
2013
P
=587
1,112
(1,023)
676
P
=566
904
(883)
587
P
=28
34
(17)
45
P
=73
22
(67)
28
95
112
(95)
112
127
113
(145)
95
6
10
(4)
12
53
6
(53)
6
13
4
(5)
12
P
=552
9
4
–
13
P
=479
3
3
(1)
5
P
=28
3
–
–
3
P
=19
Investments in SPVs represent subordinated notes issued by Cameron Granville 3 Asset
Management, Inc. and LNC 3 Asset Management, Inc. with face amount of =
P9.4 billion and
P
=2.6 billion, respectively. These notes are non-interest bearing and payable over five (5) years
starting April 1, 2006, with rollover of two (2) years at the option of the note issuers. These were
received by the Parent Company on April 1, 2006 in exchange for the subordinated note issued by
Asia Recovery Corporation (ARC) in 2003 with face amount of =
P11.9 billion. The subordinated
note issued by ARC represents payment on the nonperforming assets (NPAs) sold by the
Parent Company to ARC in 2003. The related deed of absolute sale was formalized on
September 17, 2003 and approved by the BSP on November 28, 2003, having qualified as a true
sale. As of December 31, 2013 and 2012, the estimated fair value of the subordinated notes,
which is the present value of the estimated cash flows from such notes (derived from the sale of
the underlying collaterals of the NPAs, net of the payment to senior notes by the SPV) amounted
to nil, after deducting allowance for impairment losses of P
=8.8 billion.
*SGVFS004156*
- 87 Miscellaneous account includes certificates of deposits totaling USD 6 million and
USD 11 million as of December 31, 2013 and 2012, respectively (with peso equivalent of
P
P451.6 million as of December 31, 2013 and 2012, respectively) that are
pledged by the Parent Company’s New York Branch in compliance with the regulatory
requirements of the Federal Deposit Insurance Corporation and the Office of the Controller of the
Currency in New York. Of the USD 11 million pledged certificate of deposits as of
December 31, 2012, USD 5 million matured in August 2013 and were invested in Floating Rate
notes booked under AFS investments as part of the pledged securities (Note 8).
Further, miscellaneous account includes downpayment to a real estate company, a related party,
amounting to =
P1.1 billion relative to the purchase of commercial and office spaces located at
Bonifacio Global City, Taguig City (Note 31) and a receivable from a third party of
P
=425.7 million pertaining to the final tax withheld on PEACe bonds which matured on
October 18, 2011 (Note 30).
15. Allowance for Credit and Impairment Losses
Changes in the allowance for credit and impairment losses follow:
Consolidated
2013
Balance at beginning of year:
Interbank loans and receivable (Note 7)
Equity securities
Quoted
Unquoted
Loans and receivables (Note 9)
Investments in subsidiaries (Note 11)
Investments in associates (Note 11)
Other assets* (Note 14)
Provisions for credit and impairment losses**
Reversal of allowance on assets sold/settled
Accounts written off/others
Balance at end of year:
Interbank loans and receivable (Note 7)
Equity securities
Quoted
Unquoted
Loans and receivables (Note 9)
Investments in subsidiaries (Note 11)
Other assets* (Note 14)
P
=2
305
268
15,726
–
162
2
2,640
9,731
28,836
9,519
(2,761)
(4,964)
2
Parent Company
December 31
2012
2012
2013
P
=–
337
224
14,884
–
150
12
2,526
9,850
27,983
4,478
(376)
(3,249)
2
P
=–
90
86
8,233
1,125
162
–
2,002
9,675
21,373
4,091
(1,725)
68
–
P
=–
90
86
8,666
754
150
–
2,044
9,601
21,391
777
(275)
(520)
–
305
90
300
92
268
86
268
86
15,726
8,233
16,626
9,650
–
1,125
–
1,164
162
162
162
162
2
–
2
–
2,640
2,002
2,490
1,916
9,731
9,675
10,780
10,737
P
=28,836
P
=21,373
P
=30,630
P
=23,807
* Allowance for credit and impairment losses of other assets include allowance on investments in SPVs, chattel
mortgage properties and miscellaneous assets.
** The amount presented excludes impairment loss on goodwill.
*SGVFS004156*
- 88 Below is the breakdown of provision for credit and impairment losses:
Consolidated
Interbank loans and receivable
(Notes 7 and 33)
AFS investments
Investments in subsidiaries
Investments in associates
Chattel properties acquired in
foreclosure (Note 14)
Goodwill
Other assets
2013
2012
Parent Company
December 31
2011
2012
2013
P
=–
2
8,689
–
–
–
400
=
P2
(32)
4,311
–
–
–
340
=
P–
17
3,378
36
(203)
10
341
4
1,203
424
P
=10,722
4
–
(147)
P
=4,478
–
–
244
P
=3,823
2011
P
=–
2
3,255
79
–
–
326
=
P–
–
720
–
–
–
57
=
P–
–
460
403
–
–
291
3
1,203
426
P
=5,294
–
–
–
P
=777
–
–
32
P
=1,186
With the foregoing level of allowance for credit and impairment losses, management believes that
the Group has sufficient allowance to take care of any losses that the Group may incur from the
noncollection or nonrealization of its receivables and other risk assets.
A reconciliation of the allowance for credit losses by class of loans and receivables is as follows:
Consolidated
Balance at January 1, 2013
Provisions during the year
Accounts written off
Reclassifications/reversals/
others
Individual impairment
Collective impairment
Gross amount of loans
individually determined
to be impaired
others
individually determined
to be impaired
Residential
Commercial
Mortgage
Loans
Loans Auto Loans
P
= 6,169
P
= 700
P
= 736
3,410
493
1,364
(3)
(621)
(42)
Trade
P
= 338
–
(3)
Others
P
= 3,262
3,144
(3,889)
Other
Subtotal Receivables*
P
= 11,205
P
= 4,521
8,411
278
(4,558)
(37)
Total
P
= 15,726
8,689
(4,595)
(1,894)
P
= 7,643
P
= 2,919
4,724
P
= 7,643
–
P
= 1,190
P
= 1,075
115
P
= 1,190
(261)
P
= 1,218
P
= 618
600
P
= 1,218
4
P
= 339
P
= 279
60
P
= 339
(92)
P
= 2,425
P
= 168
2,257
P
= 2,425
(2,243)
P
= 12,815
P
= 5,059
7,756
P
= 12,815
(951)
P
= 3,811
P
= 2,363
1,448
P
= 3,811
(3,194)
P
= 16,626
P
= 7,422
9,204
P
= 16,626
P
= 6,502
P
=5,508
887
(131)
P
= 1,491
P
=628
92
–
P
= 619
P
=511
173
–
P
= 413
P
=389
27
(76)
P
= 1,193
P
=3,009
2,858
(2,591)
P
= 10,218
=
P10,045
4,037
(2,798)
P
= 4,015
P
=4,839
274
(160)
P
= 14,233
=
P14,884
4,311
(2,958)
52
P
=736
=
P2
734
P
=736
(2)
P
=338
P
=206
132
P
=338
(14)
P
=3,262
P
=754
2,508
P
=3,262
(79)
=
P11,205
P
=6,205
5,000
=
P11,205
(432)
P
=4,521
P
=2,856
1,665
P
=4,521
(511)
=
P15,726
P
=9,061
6,665
=
P15,726
P
=208
P
=953
P
=9,750
P
=5,126
=
P14,876
(95)
P
=6,169
P
=4,644
1,525
P
=6,169
P
=7,578
(20)
P
=700
P
=599
101
P
=700
P
=1,006
=
P5
Parent Company
others
individually determined to
be impaired
Residential
Commercial
Mortgage
Loans
Loans Auto Loans
P
= 4,313
P
= 432
P
= 20
3,218
–
2
(42)
(3)
(3)
Trade
P
= 338
–
(3)
Others
P
= 54
–
(12)
Other
P
= 5,157
P
= 3,076
3,220
35
(63)
(36)
Total
P
= 8,233
3,255
(99)
(1,384)
P
= 6,105
P
= 2,362
3,743
P
= 6,105
–
P
= 429
P
= 367
62
P
= 429
–
P
= 19
=
P–
19
P
= 19
4
P
= 339
P
= 279
60
P
= 339
–
P
= 42
P
= 34
8
P
= 42
(1,380)
P
= 6,934
P
= 3,042
3,892
P
= 6,934
(359)
P
= 2,716
P
= 1,772
944
P
= 2,716
(1,739)
P
= 9,650
P
= 4,814
4,836
P
= 9,650
P
= 5,550
P
= 462
=
P–
P
= 413
P
= 42
P
= 6,467
P
= 3,094
P
= 9,561
*SGVFS004156*
- 89 Parent Company
others
individually determined to
be impaired
Commercial
Loans
P
=4,116
614
(115)
Residential
Mortgage
Loans
P
=446
1
–
Auto Loans
P
=21
–
–
Trade
P
=389
27
(76)
Others
P
=38
18
(1)
Other
P
=5,010
P
=3,656
660
60
(192)
(100)
(302)
P
=4,313
P
=3,833
480
P
=4,313
(15)
P
=432
P
=388
44
P
=432
(1)
P
=20
=
P1
19
P
=20
(2)
P
=338
P
=206
132
P
=338
(1)
P
=54
P
=54
–
P
=54
(321)
P
=5,157
P
=4,482
675
P
=5,157
(540)
P
=3,076
P
=2,175
901
P
=3,076
P
=6,561
P
=539
=
P3
P
=208
P
=62
P
=7,373
P
=4,054
Total
P
=8,666
720
(292)
(861)
P
=8,233
P
=6,657
1,576
P
=8,233
=
P11,427
* Allowance for credit losses on other receivables include allowance on unquoted debt securities, accounts receivables, accrued
interest receivable, sales contract receivable and deficiency judgment receivable.
Movements in the allowance for credit and impairment losses on AFS investments and other
assets follow:
Provisions for credit and impairment losses
Disposals
Reclassifications/reversals/others
Provisions for credit and impairment losses
Accounts written-off
Disposals
Reclassifications/reversals/others
Consolidated
AFS
Investments Equity
Securities Other Assets*
P
= 573
P
= 9,731
2
428
–
–
(7)
621
P
= 568
P
= 10,780
P
=561
P
=9,850
(32)
(143)
–
(56)
–
6
44
74
P
=573
P
=9,731
Total
P
= 10,304
430
–
614
P
= 11,348
=
P10,411
(175)
(56)
6
118
=
P10,304
Parent Company
AFS
Investments Equity
Securities Other Assets*
P
= 176
P
= 9,675
2
429
(1)
–
1
633
P
= 178
P
= 10,737
P
=176
P
=9,601
–
–
–
–
–
–
–
74
P
=176
P
=9,675
Total
P
= 9,851
431
(1)
634
P
= 10,915
P
=9,777
–
–
–
74
P
=9,851
* Allowance for credit and impairment losses of other assets include allowance on investments in SPVs, chattel mortgage properties and miscellaneous assets.
16. Deposit Liabilities
Of the total interest-bearing deposit liabilities of the Group as of December 31, 2013 and 2012,
47.40% and 43.20%, respectively, are subject to periodic interest repricing. In 2013, 2012 and
2011, remaining peso deposit liabilities earn annual fixed interest rates ranging from 0.00% to
6.59%, while foreign currency-denominated deposit liabilities earn annual fixed interest rates
ranging from 0.00% to 3.50%.
Interest expense on deposit liabilities consists of:
Demand
Savings
Time
2013
P
=340
799
6,417
P
=7,556
Consolidated
2012
P
=293
1,045
7,418
P
=8,756
2011
P
=276
1,159
8,799
P
=10,234
2013
P
=208
734
4,033
P
=4,975
Parent Company
2012
2011
P
=217
P
=196
988
1,109
4,474
5,705
P
=5,679
P
=7,010
Composition of Reserves
On March 29, 2012, the BSP issued Circular No. 753 mandating the unification of the
statutory/legal and liquidity reserves requirement on deposit liabilities and deposit substitutes. As
such, effective the reserve week starting April 6, 2012, non-FCDU deposit liabilities of the Parent
Company and deposit substitutes of FMIC, ORIX Metro and MCC are subject to required reserves
equivalent to 18.0%. On the other hand, non-FCDU deposit liabilities of PSBank are subject to
required reserves equivalent to 6.0%. In compliance with this Circular, government securities
*SGVFS004156*
- 90 which are used as compliance with the regular and/or liquidity reserve requirements shall continue
to be eligible until they mature and cash in vault shall no longer be included as reserve. The
required reserves shall be kept in the form of deposits maintained in the Demand Deposit
Accounts (DDAs) with the BSP. Further, deposits maintained with the BSP in compliance with
the reserve requirement no longer bear interest.
The Parent Company, PSBank, FMIC, MCC and ORIX Metro were in compliance with such
regulations as of December 31, 2013 and 2012.
The total liquidity and statutory reserve, as reported to the BSP, are as follows:
Due from BSP
2012
2013
=96,014
P
P
=143,492
5,135
7,133
8,000
6,401
3,832
4,408
1,917
2,239
=114,898
P
P
=163,673
Parent Company
PSBank
FMIC
MCC
Orix Metro
17. Bills Payable and Securities Sold Under Repurchase Agreements
This account consists of borrowings from:
Deposit substitutes
Local banks
Foreign banks
SSURA
Consolidated
2013
P
=59,536
21,767
20,784
25,117
P
=127,204
Parent Company
2012
2013
=
P–
P
=–
1,437
5,327
9,720
18,486
5,066
22,180
P
=16,223
P
=45,993
2012
P
=59,607
15,358
12,876
9,267
P
=97,108
Interbank borrowings with foreign and local banks are mainly short-term borrowings. The
Group’s peso borrowings are subject to annual fixed interest rates ranging from 1.00% to 8.54%,
from 1.00% to 8.12% and from 1.00% to 8.54% in 2013, 2012 and 2011, respectively, while the
Group’s foreign currency-denominated borrowings are subject to annual fixed interest rates
ranging from 0.16% to 2.63%, from 0.15% to 1.95% and from 0.10% to 2.90% in 2013, 2012 and
2011, respectively.
Deposit substitutes pertain to borrowings from the public of FMIC, ORIX Metro and MCC.
The following are the carrying values of the investment securities pledged and transferred under
SSURA transactions of the Group and the Parent Company:
Consolidated
2012
2013
Government debt securities (Note 8)
HFT investments
AFS investments
HTM investments
Transferred
Securities
P
=3,314
17,916
6,712
27,942
SSURA
Transferred
Securities
SSURA
P
=2,974
14,303
7,270
24,547
P
=–
5,215
3,371
8,586
P
=–
4,284
2,851
7,135
(Forward)
*SGVFS004156*
- 91 Consolidated
2012
2013
Unquoted debt securities (Note 9)
Government
Private
Transferred
Securities
P
=570
–
570
P
=28,512
SSURA
Transferred
Securities
SSURA
P
=570
–
570
P
=25,117
P
=1,320
812
2,132
P
=10,718
P
=1,320
812
2,132
P
=9,267
Parent Company
2012
2013
Government debt securities (Note 8)
HFT investments
AFS investments
HTM investments
Transferred
Securities
P
=3,314
12,574
6,712
P
=22,600
SSURA
Transferred
Securities
SSURA
P
=2,974
11,936
7,270
P
=22,180
P
=–
5,215
733
P
=5,948
P
=–
4,284
782
P
=5,066
Interest expense on bills payable (included in the ‘Interest expense on bills payable and SSURA,
subordinated debt and others’ in the statement of income) in 2013, 2012 and 2011 amounted to
=
P2.3 billion, =
P3.3 billion and =
P109.6 million,
P
=51.0 million and =
P57.2 million, respectively, for the Parent Company.
18. Accrued Interest and Other Expenses
Accrued interest (Note 31)
Accrued other expenses (Note 31)
Consolidated
2012
2013
P
=1,810
P
=1,770
6,531
6,737
P
=8,341
P
=8,507
Parent Company
2012
2013
P
=959
P
=903
4,948
5,099
P
=5,907
P
=6,002
Accrued other expenses include accruals for salaries and wages, fringe benefits, rentals,
percentage and other taxes, professional fees, advertisements and information technology
expenses.
19. Bonds Payable
This account represents scripless fixed rate corporation bonds issued by FMIC as follows:
Issue Date
November 25, 2011
August 10, 2012
August 10, 2012
Maturity Date
February 25, 2017
November 20, 2017
August 10, 2019
Interest Rate
5.675%
5.50%
5.75%
Redemption
Period
after 4th year
after 4th year
after 5th year
Face Value
P
=5,000
4,000
3,000
P
=12,000
Carrying value
2012
2013
P
=4,793
P
= 4,823
3,790
3,858
2,973
2,962
P
=11,556
P
= 11,643
These bonds are issued in principal amounts of =
P50,000 and in multiples of =
P5,000 in excess of
=
P50,000 with an option to redeem in whole, but not in part, on any quarterly interest payment after
the fourth or fifth anniversary of the issue date at 102.00% of its face value plus accrued interest.
These are exempt securities pursuant to certain provisions of the Securities Regulation Code and
*SGVFS004156*
- 92 are covered by deed of assignments on government securities held in trust by a collateral agent
which shall have aggregate market value of 100.00% of the issued amount, otherwise, additional
government securities shall be offered to increase and maintain the cover at 100.00%.
As of December 31, 2013 and 2012, the carrying amount of the government securities assigned
as collateral classified under AFS investments amounted to =
P11.5 billion, with market value of
P
=12.7 billion as of December 31, 2013 and under HTM investments amounted to =
P10.0 billion,
with market value of P
=12.5 billion in 2012. As of December 31, 2013 and 2012, FMIC has
complied with the terms of the issuance.
Interest expense on bonds payable (included in ‘Interest expense on bills payable and SSURA,
subordinated debt and others’) in 2013, 2012 and 2011 amounted to =
P665.9 million,
P
=26.6 million, respectively.
20. Subordinated Debt
This account consists of the following Peso Notes:
Parent Company
2018
2019
MCC – 2019
MCC – 2023
PSBank – 2022
Maturity Date
Face Value
October 3, 2018
May 6, 2019
P
=5,500
4,500
10,000
1,300
1,170
3,000
P
=15,470
June 30, 2019
December 20, 2023
February 20, 2022
Carrying Value
2012
2013
P
=–
4,497
4,497
–
1,159
2,972
P
=8,628
P
=5,490
4,487
9,977
1,296
–
2,970
P
=14,243
Market Value
2012
2013
P
=–
4,561
4,561
–
1,328
3,504
P
=9,393
P
=5,451
4,415
9,866
1,423
–
3,397
P
=14,686
Peso Notes issued by the Parent Company are unsecured and subordinated obligations and will
rank pari passu and without any preference among themselves and at least equally with all other
present and future unsecured and subordinated obligations of the Parent Company. These Peso
Notes have a term of 10 years and are redeemable at the option of the Parent Company (but not the
holders) after the fifth year in whole but not in part at redemption price equal to 100.00% of the
principal amount together with accrued and unpaid interest on the date of redemption, subject to
the prior consent of the BSP. Further, at any time within the first 5 years from respective issue
dates of these Notes, upon (a) a change in tax status due to changes in laws and/or regulations or
(b) the non-qualification as Lower Tier 2 capital as determined by BSP of these Notes, the Parent
Company may, upon prior approval of BSP and at least 30-day prior written notice to the
Noteholders on record, redeem all and not less than all of the outstanding Peso Notes prior to
stated maturity by paying the face value plus accrued interest at the interest rate. Also, the
following shall be prohibited from purchasing and/or holding these Peso Notes: (1) subsidiaries
and affiliates, including the subsidiaries and affiliates of the Parent Company’s subsidiaries and
affiliates; (2) unit investment trust funds managed by the Trust Department of the Parent
Company, its subsidiaries and affiliates or other related entities; and (3) other funds being
managed by the Trust Department of the Parent Company, its subsidiaries and affiliates or other
related entities where (a) the fund owners have not given prior authority or instruction to the Trust
Department to purchase or invest in the Peso Notes or (b) the authority or instruction of the fund
owner and his understanding of the risk involved in purchasing or investing in the Peso Notes are
not fully documented.
*SGVFS004156*
- 93 Each Noteholder 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 Peso Notes and to the fullest extent
permitted by applicable law, waive and be deemed to have waived all such rights of set-off. These
Notes are not deposits and are not insured by the Philippine Deposit Insurance Corporation
(PDIC).
On September 17, 2008, the BOD of the Parent Company approved the listing of the 2018 Peso
Notes and the 2017 Peso Notes with the Philippine Dealing & Exchange Corporation (PDEx).
Specific terms of these Notes follow:
2018 Peso Notes – issued on October 3, 2008, at 100.00% of the principal amount of =
P5.5 billion
· Bear interest at 7.75% per annum from and including October 3, 2008 to but excluding
October 3, 2013. Interest will be payable quarterly in arrears on January 3, April 3, July 3 and
October 3 of each year, commencing January 3, 2009 up to and including October 3, 2013.
Unless these are previously redeemed, the interest rate from and including October 3, 2013 to
but excluding October 3, 2018 will be reset at the equivalent of the five-year PDST-F as of the
Reset date multiplied by 80.00% plus a spread of 2.71% per annum. Interest will be payable
quarterly in arrears on January 3, April 3, July 3 and October 3 of each year, commencing
January 3, 2014 up to and including October 3, 2018.
On October 4, 2013, the Parent Company exercised the call option on its P
=5.5 billion 7.75%
Lower Tier 2 Notes, ahead of its original maturity on October 3, 2018. The redemption was
approved by the BOD of the Parent Company and by the BSP on July 16, 2013 and
August 15, 2013, respectively.
2019 Peso Notes – issued on May 6, 2009, at 100.00% of the principal amount of =
P4.5 billion
· Bear interest at 7.50% per annum from and including May 6, 2009 to but excluding
May 6, 2014. Interest will be payable quarterly in arrears on August 6, November 6,
February 6, and May 6, commencing August 6, 2009 up to and including May 6, 2014.
Unless these are previously redeemed, the interest rate from and including May 6, 2014 to but
excluding May 6, 2019 will be reset at the equivalent of the five-year PDST-F as of the Reset
date multiplied by 80.00% plus a spread of 3.53% per annum. Interest will be payable
quarterly in arrears on August 6, November 6, February 6 and May 6 of each year,
commencing August 6, 2014 up to and including May 6, 2019.
On April 15, 2013, the BOD approved the issuance of Basel III-compliant Tier 2 capital notes up
to USD500 million in one or more tranches, issued as part of the Parent Company’s regulatory
capital compliance in accordance with Basel III capital guidelines of the BSP and to proactively
manage its capital base for growth and refinancing of maturing capital securities.
MCC
2019 Peso Notes – issued on June 30, 2009 at 100.00% of the principal amount of =
P1.3 billion
· Bear interest at 8.40% per annum from and including June 30, 2009 but excluding
June 30, 2014 which is payable quarterly in arrears every 30th of September, December, March
and June of each year, commencing on September 30, 2009.
· Constitute direct, unconditional, and unsecured obligations of MCC and claim in respect of
the 2019 Notes shall be at all times pari passu and without any preference among themselves.
· Subject to the written approval of the BSP, MCC may redeem all and not less than the entire
outstanding 2019 Notes, at a redemption price equal to the face value together with accrued
and unpaid interest based on the interest rate.
*SGVFS004156*
- 94 On September 30, 2014 (the Reset date), the Step-up Interest Rate will be based on a 5-year
PDST-F FXTN as of the Reset date multiplied by 80.00%, plus the Step-up Credit Spread on the
twenty-first interest period up to the last interest period in the event that the issuer does not
exercise the Call Option. The Step-up Credit Spread is equivalent to 4.92%.
MCC exercised the call option on its 2019 Peso Notes amounting to =
P1.3 billion on July 31, 2013,
as approved by the BSP on June 6, 2013. The redemption fell under the call provisions which had
an original maturity of ten years or until 2019.
2023 Peso Notes – issued on December 20, 2013 at 100.00% of the principal amount of
P
=1.17 billion.
· Bear interest at 6.21% per annum payable quarterly in arrears every 20th of March, June,
September and December each year, commencing on March 20, 2014.
· Basel III - Compliant unsecured subordinated notes qualified as Tier 2 capital as approved by
the BSP on February 17, 2013.
· In case of insolvency or liquidation of MCC, the notes will be subordinated in the right of
payment of principal and interest to all depositors and other creditors of MCC, except those
creditors expressed to rank equally with, or behind holders of the notes.
· If a non-viability trigger event occurs, MCC shall immediately write down some or all of the
notes in accordance with the BSP’s determination.
· Subject to the written approval of the BSP, MCC may redeem all and not less than the entire
outstanding 2019 Notes, at a redemption price equal to the face value together with the
accrued and unpaid interest based on the interest rate.
PSBank
2022 Peso Notes – issued on February 20, 2012 at 100.00% of the principal amount of =
P3.0 billion
· Bear interest at 5.75% per annum from and including February 20, 2012 but excluding
February 20, 2017 which is payable quarterly in arrears every May 20, August 20,
November 20 and February 20, commencing on February 20, 2012.
· Constitute direct, unconditional, and unsecured obligations of PSBank and claim in respect of
the 2022 Notes shall be at all times pari passu and without any preference among themselves.
· Subject to satisfaction of certain regulatory approval requirements, PSBank may redeem all
and not less than the entire outstanding 2022 Notes, at a redemption price equal to the face
value together with accrued and unpaid interest based on the interest rate.
As of December 31, 2013 and 2012, the Parent Company, PSBank and MCC are in compliance
with the terms and conditions upon which these subordinated notes have been issued.
In 2013, 2012 and 2011, interest expense on subordinated debt included in ‘Interest expense on
bills payable and SSURA, subordinated debt and others’ amounted to P
=0.9 billion, P
=1.5 billion
and =
P1.5 billion (including amortization of =
P24.3 million, =
P40.0 million and =
P62.3 million),
respectively, for the Group, and =
P0.7 billion, =
P1.3 billion and =
P1.4 billion (including amortization
of =
P19.7 million, =
P35.2 million and =
P36.7 million), respectively, for the Parent Company.
*SGVFS004156*
- 95 -
21. Other Liabilities
Consolidated
Parent Company
2012
(As restated –
Note 2)
2013
Bills purchased – contra (Note 9)
P
=15,217
P
=16,637
Non-equity non-controlling interests
6,807
10,369
Accounts payable (Note 31)
6,194
8,337
Marginal deposits
1,846
6,819
Retirement liability* (Note 26)
4,312
4,830
968
1,001
832
991
Deferred revenues
708
936
Other credits
496
680
Withholding taxes payable
519
412
Miscellaneous
2,342
3,068
P
=40,241
P
=54,080
* Includes retirement liability of a foreign subsidiary and a foreign branch in 2012.
2013
P
=16,587
–
4,674
324
4,162
1,001
–
98
382
270
1,362
P
=28,860
2012
(As restated –
Note 2)
P
=15,156
–
3,690
152
3,894
968
–
78
341
342
829
P
=25,450
Deferred revenues include deferral and release of MCC’s loyalty points program transactions and
membership fees and dues.
Non-equity non-controlling interests arise when mutual funds are consolidated and where the
Group holds less than 100% of the investment in these funds. When this occurs, the Group
acquires a liability in respect of non-controlling interests in the funds of which the Group has
control. Such non-controlling interests are distinguished from equity non-controlling interests in
that the Group does not hold an equity stake in such funds.
As of December 31, 2013 and 2012, miscellaneous liabilities of the Group include dividends
payable amounting to P
=28.6 million and P
=66.3 million, respectively, and notes payable amounting
to =
P488.1 million.
22. Maturity Profile of Assets and Liabilities
The following tables present the assets and liabilities by contractual maturity and settlement dates:
Consolidated
Financial Assets – at gross
Due from BSP
(Note 7)
Accounts receivable
Other receivables
2012 (As restated – Note 2)
Due Beyond
One Year
Total
Due Within
One Year
2013
Due Beyond
One Year
Total
Due Within
One Year
P
= 29,742
166,774
26,275
=
P–
–
–
P
= 29,742
166,774
26,275
=
P24,382
131,278
22,996
=
P–
–
–
=
P24,382
131,278
22,996
122,013
55,441
7,363
1,141
–
–
266,634
37,284
122,013
55,441
273,997
38,425
23,394
72,920
25,663
8,851
–
–
97,951
42,600
23,394
72,920
123,614
51,451
308,961
2,111
8,414
3,821
109
314
302,258
3,243
–
–
349
–
611,219
5,354
8,414
3,821
458
314
273,890
1,644
7,359
4,060
133
1,493
251,654
6,342
–
–
504
–
525,544
7,986
7,359
4,060
637
1,493
(Forward)
*SGVFS004156*
- 96 Consolidated
Residual value of leased asset
Other investments
Investments in SPVs
Miscellaneous assets
Non-financial Assets – at gross
Non-current asset held for sale (Note 13)
Deferred tax assets (Note 28)
Goodwill (Note 11)
Retirement asset (Note 26)
Assets held under joint operations (Note 14)
Total
Due Within
One Year
P
= 1,127
68
–
–
8,857
266
–
742,797
=
P–
–
712
3
–
–
426
610,909
P
= 1,127
68
712
3
8,857
266
426
1,353,706
P
=1,550
80
383
–
8,857
452
–
609,385
=
P–
–
226
13
–
–
457
399,747
P
=1,550
80
609
13
8,857
452
457
1,009,132
–
–
–
–
–
–
–
–
–
1,960
1,960
P
= 744,757
32,978
6,436
17,399
–
7,190
5,206
28
1,361
2,052
5,186
77,836
P
= 688,745
32,978
6,436
17,399
–
7,190
5,206
28
1,361
2,052
7,146
79,796
1,433,502
–
–
–
1,102
–
–
–
–
–
2,266
3,368
=
P612,753
31,048
15,030
20,098
–
8,871
6,409
–
1,189
1,722
4,585
88,952
=
P488,699
31,048
15,030
20,098
1,102
8,871
6,409
–
1,189
1,722
6,851
92,320
P
=1,101,452
Less:
Unearned discounts and capitalized interest
(Note 9)
amortization (Notes 10, 12 and 14)
Allowance for credit and impairment losses
(Note 15)
Deposit liabilities
Demand
Savings
Time
Bills payable and SSURA (Note 17)
Manager’s checks and demand drafts
outstanding
Accounts payable
Non-equity non-controlling interest
Marginal deposits
Dividends payable
Miscellaneous
Nonfinancial Liabilities
Retirement liability (Note 26)
Income taxes payable
Withholding taxes payable (Note 21)
Deferred tax and other liabilities
(Notes 21 and 28)
2012 (As restated – Note 2)
Due Beyond
One Year
Total
Due Within
One Year
2013
Due Beyond
One Year
3,942
7,180
20,361
18,793
30,630
P
= 1,378,569
28,836
P
=1,046,643
P
= 150,694
362,915
475,521
989,130
114,199
4,452
=
P–
–
27,138
27,138
13,005
–
P
= 150,694
362,915
502,659
1,016,268
127,204
4,452
=
P106,229
305,034
309,651
720,914
83,094
6,692
=
P–
–
17,780
17,780
14,014
–
=
P106,229
305,034
327,431
738,694
97,108
6,692
3,927
7,326
–
4,497
–
–
11,643
4,131
3,927
7,326
11,643
8,628
3,489
6,641
–
4,266
–
–
11,556
9,977
3,489
6,641
11,556
14,243
16,637
8,337
10,369
6,819
1,001
–
29
–
1,166,723
–
–
–
–
–
991
–
488
57,396
16,637
8,337
10,369
6,819
1,001
991
29
488
1,224,119
15,217
6,194
6,807
1,846
968
243
66
–
856,437
–
–
–
–
–
589
–
482
54,398
15,217
6,194
6,807
1,846
968
832
66
482
910,835
–
676
1,181
412
4,830
–
–
–
4,830
676
1,181
412
–
1,326
1,700
519
4,312
–
–
–
4,312
1,326
1,700
519
3,473
5,742
P
= 1,172,465
1,173
6,003
P
= 63,399
4,646
11,745
P
= 1,235,864
2,496
6,041
=
P862,478
746
5,058
=
P59,456
3,242
11,099
=
P921,934
*SGVFS004156*
- 97 Parent Company
Financial Assets – at gross
Due from BSP
(Note 7)
Accounts receivable
Other receivables
Other investments
Investments in SPVs
Nonfinancial Assets – at gross
Investment in subsidiaries (Note 11)
Non-current asset held for sale (Note 13)
Deferred tax assets (Note 28)
Goodwill (Note 11)
Assets held under joint operations (Note 14)
Total
Due Within
One Year
2012
Due Beyond
One Year
Total
=
P-
P
= 26,532
143,724
8,947
=
P21,540
111,515
7,873
=
P–
–
–
=
P21,540
111,515
7,873
96,872
36,140
4,249
1,141
222,872
37,217
96,872
36,140
227,121
38,358
15,046
57,635
23,694
8,574
–
–
79,056
12,917
15,046
57,635
102,750
21,491
241,374
558
6,910
2,360
80
30
213,223
462
76
-
454,597
1,020
6,910
2,360
156
30
219,247
765
5,646
3,070
111
168
176,762
548
–
–
133
–
396,009
1,313
5,646
3,070
244
168
1,061
54
8,857
266
–
579,155
426
474,276
1,061
54
8,857
266
426
1,053,431
1,288
63
8,857
452
–
485,544
–
–
10
–
–
457
269,883
1,288
63
10
8,857
452
457
755,427
1,214
1,214
P
= 580,369
22,872
26,046
740
12,869
6,333
2
1,361
2,052
2,926
75,201
P
= 549,477
22,872
26,046
740
12,869
6,333
2
1,361
2,052
4,140
76,415
1,129,846
–
–
–
–
336
–
–
–
–
–
1,520
1,856
=
P487,400
22,215
26,047
740
15,475
–
7,276
1,203
1,189
1,722
2,713
78,580
=
P348,463
22,215
26,047
740
15,475
336
7,276
1,203
1,189
1,722
4,233
80,436
835,863
Due Within
One Year
2013
Due Beyond
One Year
P
= 26,532
143,724
8,947
Less:
Unearned discounts and capitalized interest
(Note 9)
Accumulated depreciation and amortization
(Notes 10, 12 and 14)
(Note 15)
Deposit liabilities
Demand
Savings
Time
Bills payable and SSURA (Note 17)
Manager’s checks and demand drafts
outstanding
Accounts payable
Marginal deposits
Nonfinancial Liabilities
Income taxes payable
Withholding taxes payable (Note 21)
580
1,376
14,759
14,058
23,807
P
= 1,090,700
21,373
=
P799,056
P
= 134,788
348,244
398,497
881,529
45,993
4,452
=
P9,225
9,225
-
P
= 134,788
348,244
407,722
890,754
45,993
4,452
=
P94,516
293,934
245,135
633,585
16,223
6,425
=
P834
834
-
=
P94,516
293,934
245,969
634,419
16,223
6,425
2,816
4,934
4,497
-
2,816
4,934
4,497
2,732
4,297
-
--9,977
2,732
4,297
9,977
16,587
4,674
324
1,001
966,807
9,225
16,587
4,674
324
1,001
976,032
15,156
3,690
152
968
683,228
10,811
15,156
3,690
152
968
694,039
267
1,068
270
1,444
3,049
P
= 969,856
4,162
398
4,560
P
= 13,785
4,162
267
1,068
270
1,842
7,609
P
= 983,641
912
1,610
342
907
3,771
=
P686,999
3,894
341
4,235
=
P15,046
3,894
912
1,610
342
1,248
8,006
=
P702,045
*SGVFS004156*
- 98 -
23. Capital Stock
This account consists of (amounts in millions, except par value and number of shares):
2013
Authorized
Common stock – P
=20.00 par value
Preferred stock – P
=20.00 par value
Issued and outstanding
Issuance of stock dividends
Issuance of common stock
HT1 Capital
Shares
2012
2011
4,000,000,000
1,000,000,000
2,500,000,000
–
2,500,000,000
–
2,111,386,017
633,415,049
–
2,744,801,066
–
2,744,801,066
2,111,386,017
–
–
2,111,386,017
2,111,386,017
1,911,386,017
–
200,000,000
2,111,386,017
–
2,111,386,017
2013
P
= 42,228
12,668
–
54,896
6,351
P
= 61,247
Amount
2012
=
P42,228
–
–
42,228
6,351
=
P48,579
2011
=
P38,228
–
4,000
42,228
6,351
=
P48,579
All issued and outstanding shares of the Parent Company are listed with the PSE (Note 1). As of
December 31, 2013 and 2012, the Parent Company’s share price closed at P
=75.55 and =
P102.00 a
share, respectively.
Following the approval of the BOD of the Parent Company on October 13, 2010, on
January 24, 2011, the Parent Company has concluded the P
=10.0 billion stock rights offering,
involving 200 million common shares with a par value of =
P20.00 priced at =
P50.00 per share which
was computed based on the 10-trading day volume-weighted average price of the Parent
Company’s common shares on the PSE prior to the December 10, 2010 pricing date, subject to a
discount of 30.50%. Stockholders were entitled to the rights as of December 20, 2010, the record
date, at the ratio of one (1) right share for every 9.557 common shares held (Note 32).
On March 15, 2013, the BOD of the Bank approved (a) the amendment of the Articles of
Incorporation (AOI) for the purpose of increasing the authorized capital stock and (b) the
declaration of 30% stock dividend, which were ratified by the stockholders representing at least
2/3 of the outstanding capital stock on April 15, 2013. These were subsequently approved by the
BSP on May 15, 2013 while the SEC approved the amended AOI on August 13, 2013.
Following this, the authorized capital stock of the Bank increased from =
P50.0 billion to
P
=100.0 billion consisting of 4.0 billion Common Shares and 1.0 billion Preferred Shares, both with
par value of =
P20 per share. Preferred shares are non-voting except as provided by law; have
preference over Common Shares in the distribution of dividends; subject to such terms and
conditions as may be determined by the BOD and to the extent permitted by applicable law, may
or may not be redeemable; and shall have such other features as may be determined by the BOD at
the time of issuance.
The 30% stock dividend equivalent to 633.4 million common shares amounting to P
=12.7 billion
represents at least the minimum 25% subscribed and paid-up capital for the increase in the
authorized capital stock referred to above. As delegated by the BOD, the President fixed the
record and payment dates on September 3 and 16, 2013, respectively. On September 10, 2013, the
PSE approved the listing of additional 633,415,805 common shares and on September 16, 2013,
the Bank issued the stock dividend and paid the cash equivalent of the related fractional shares.
HT1 Capital represents USD 125.0 million, 9.00% non-cumulative step-up callable perpetual
capital securities with liquidation preference of USD 100,000 per capital security issued by the
Parent Company on February 15, 2006 pursuant to a trust deed with The Bank of New York
(Trustee) and listed with the Singapore Exchange Securities Trading Limited. The HT1 Capital is
*SGVFS004156*
- 99 governed by English law except on certain clauses in the Trust Deed which are governed by
Philippine law. Basic features of the HT1 Capital follow:
· Coupons – bear interest at 9.00% per annum payable semi-annually in arrear from (and
including) February 15, 2006 to (but excluding) February 15, 2016, and thereafter at a rate,
reset and payable quarterly in arrear, of 6.10% per annum above the then prevailing London
interbank offered rate for three-month USD deposits. Under certain conditions, the Parent
Company is not obliged to make any coupon payment if the BOD of the Parent Company, in
its absolute discretion, elects not to make any coupon payment in whole or in part.
·
Coupon Payment Dates – payable on February 15 and August 15 in each year, commencing
on August 15, 2006 (in respect of the period from (and including) February 15, 2006 to (but
excluding) August 15, 2006 and ending on February 15, 2016 (first optional redemption date);
thereafter coupon amounts will be payable (subject to adjustment for days which are not
business days) on February 15, May 15, August 15 and November 15 in each year
commencing on May 15, 2016.
·
Dividend and Capital Stopper – in the event that any coupon payment is not made, the Parent
Company: (a) will not declare or pay any distribution or dividend or make any other payment
on, and will procure that no distribution or dividend or other payment is made on any junior
share capital or any parity securities; or (b) will not redeem, purchase, cancel, reduce or
otherwise acquire any junior share capital or any parity securities. Such dividend and capital
stopper shall remain in force so as to prevent the Parent Company from undertaking any such
declaration, payment or other activity unless and until payment is made to the holders in an
amount equal to the unpaid amount, if any, of coupon payments in respect of coupon periods
in the 12 months including and immediately preceding the date such coupon payment was due,
and the BSP does not otherwise object.
·
Redemption
- may be redeemed at the option of the Parent Company (but not the holders) under optional
redemption, tax event call, and regulatory event call, subject to limitation of the terms of
the issuance.
- may not be redeemed (i) for so long as the dividend and capital stopper is in force; and
(ii) without the prior written approval of the BSP which, as of February 8, 2006, is subject
to the following conditions: (a) the Parent Company’s capital adequacy must be at least
equal to the BSP’s minimum capital ratio; and (b) the HT1 Capital are simultaneously
replaced with the issue of new capital which is neither smaller in size nor lower in quality
than the original issue.
The HT1 Capital is unsecured and subordinated to the claims of senior creditors. In the event of
the dissolution or winding-up of the Parent Company, holders will be entitled, subject to
satisfaction of certain conditions and applicable law, to receive a liquidation distribution
equivalent to the liquidation preference. Also, the HT1 Capital is not treated as deposit and is not
guaranteed or insured by the Parent Company or any of its related parties or the PDIC and these
may not be used as collateral for any loan availments. The Parent Company or any of its
subsidiaries may not at any time purchase HT1 Capital except as permitted under optional
redemption, tax event call, and regulatory event call as described in the terms of issuance. The
HT1 Capital is sold to non-U.S. persons outside the United States pursuant to Regulation under the
U.S. Securities Act of 1933, as amended, and represented by a global certificate registered in the
name of a nominee of, and deposited with, a common depository for Euroclear and Clearstream.
*SGVFS004156*
- 100 The Parent Company paid the semi-annual coupon amounting to USD 5.6 million from 2006 to
2013 after obtaining their respective BSP approvals. Details of approvals and payments from
2011 to 2013 are as follows:
August 12, 2013
February 6, 2013
August 12, 2012
February 1, 2012
August 11, 2011
February 10, 2011
Date Paid
August 15, 2013
February 15, 2013
August 15, 2012
February 15, 2012
August 15, 2011
February 15, 2011
Details of the Parent Company’s cash dividend distributions from 2011 to 2013 follow:
Date of Declaration
January 23, 2013
January 25, 2012
March 25, 2011
Per Share
P
=1.00
1.00
1.00
Total Amount
P
=2,111
2,111
2,111
February 8, 2013
February 13, 2012
April 28, 2011
Record date
March 8, 2013
March 5, 2012
May 16, 2011
Payment date
April 3, 2013
March 26, 2012
May 23, 2011
The computation of surplus available for dividend declaration in accordance with SEC
Memorandum Circular No. 11 issued in December 2008 differs to a certain extent from the
computation following BSP guidelines.
24. Surplus Reserves
Reserve for trust business
Reserve for self-insurance
2013
P
=862
373
P
=1,235
2012
=756
P
352
=1,108
P
In compliance with existing BSP regulations, 10.00% of the Parent Company’s income from trust
business is appropriated to surplus reserves. This yearly appropriation is required until the surplus
reserve for trust business equals 20.00% of the Parent Company’s regulatory net worth.
Reserve for self-insurance represents the amount set aside to cover losses due to fire, defalcation
by and other unlawful acts of the Parent Company’s personnel or third parties.
25. Miscellaneous Income and Expenses
In 2013, 2012 and 2011, miscellaneous income includes gain on initial recognition of
investment properties and other nonfinancial assets amounting to P
=648.8 million, =
P138.9 million
and =
P238.2 million, respectively, for the Group and =
P61.2 million, =
P121.9 million and
P
=135.3 million, respectively, for the Parent Company and recovery on charged-off assets
amounting to P
=455.4 million, P
P324.8 million, respectively, for the Group
and =
P27.9 million, =
P46.2 million and =
*SGVFS004156*
- 101 Miscellaneous expenses consist of:
2013
P
= 1,800
1,672
725
718
705
528
489
487
460
448
409
Security, messengerial and janitorial
Insurance
Advertising
Information technology
Litigation (Note 12)
Communication
Transportation and travel
Stationery and supplies used
Management and professional fees
Supervision fees
Repairs and maintenance
Entertainment, amusement and
representation (EAR) (Note 28)
Others
Consolidated
2012
2011
(As Restated – Note 2)
P
=1,630
P
=1,374
1,480
1,528
580
714
639
706
776
656
474
503
447
395
404
356
465
502
333
265
451
375
238
1,253
P
=9,170
236
1,424
P
= 10,101
217
900
P
=8,491
Parent Company
2013
P
= 1,408
1,333
91
576
450
69
369
308
272
362
249
2012
P
=1,304
1,180
105
577
542
96
342
248
255
263
253
2011
P
=1,141
1,227
55
695
473
127
282
203
255
205
219
198
477
P
= 6,162
188
611
P
=5,964
180
320
P
=5,382
26. Retirement Plan and Other Employee Benefits
The Parent Company and most of its subsidiaries have funded noncontributory defined benefit
retirement plan covering all their respective permanent and full-time employees. Benefits are
based on the employee’s years of service and final plan salary.
For employees of the Parent Company, retirement from service is compulsory upon the attainment
of the 55th birthday or 30th year of service, whichever comes first.
Under the existing regulatory framework, Republic Act (RA) 7641 requires a provision for
retirement pay 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. The Parent Company and most of its subsidiaries meet the
minimum retirement benefit specified under RA 7641.
The principal actuarial assumptions used in determining retirement liability of the Parent
Company and significant subsidiaries are shown below:
Parent
Company
FMIC
PSBank
MCC
ORIX Metro
As of January 1, 2013
Average remaining working life
Discount rate
Future salary increases
9 years
5.00%
8.00%
6 to 8 years
5.23% to 5.50%
10.00%
9 years
5.45%
8.00%
10 years
5.89%
8.00%
20 to 25 years
8.64%
7.00%
As of January 1, 2012
Average remaining working life
Discount rate
Future salary increases
9 years
5.74%
8.00%
6 to 8 years
5.89% to 8.70%
8.00% to 10.00%
9 years
6.30%
8.00%
11 years
7.00%
9.00%
25 years
8.60% to 10.00%
7.00%
The overall expected rate of return on plan assets is determined based on the market prices
prevailing on that date applicable to the year over which the obligation is to be settled.
*SGVFS004156*
- 102 Discount rates used in computing for the present value of the defined benefit obligation (DBO) of
the Parent Company and significant subsidiaries as of December 31, 2013 and 2012 follow:
Parent
Company
4.33%
5.00%
2013
2012
FMIC
4.51% to 5.59%
5.23% to 5.50%
PSBank
4.86%
5.45%
MCC
4.85%
5.89%
ORIX Metro
6.11%
8.60% to 10.00%
Net retirement liability (asset) included in the statement of financial position follows:
Net retirement liability
Consolidated
2012
2013
=
P–
(P
= 26)
4,267
4,830
P
=4,267
P
=4,804
Parent Company
2012
=
P–
3,891
P
=3,891
2013
P
=–
4,162
P
=4,162
The fair value of plan assets by each classes as at the end of the reporting period are as follow:
Due from BSP
Deposit in Banks
FVPL - equity securities
AFS Investments – net
Debt instruments
Private
Government
Equity securities
Quoted
Unquoted
Investment funds
Loans and discounts – net
Other receivables – net
Total Assets
Consolidated
December 31, December 31,
2012
2013
P
=12
P
=115
252
697
264
812
717
1,429
December 31,
2013
P
=–
550
550
–
December 31,
2012
=
P–
191
191
–
327
5,683
6,010
407
4,958
5,365
304
5,303
5,607
374
4,607
4,981
778
200
978
25
7,013
58
93
P
=9,405
708
200
908
11
6,284
131
62
P
=7,458
1,415
13
1,428
–
7,035
58
62
P
=7,705
704
13
717
–
5,698
108
66
P
=6,063
Parent Company
Changes in net defined benefit liability of funded funds in 2013 are as follows:
Consolidated
Net Benefit Cost in Consolidated
Statement of Income
January 1, 2013
Current service cost
Past service cost
Net interest
Sub-total
Benefits paid
Remeasurement in Other Comprehensive
Income
Return on plan assets (excluding amount
included in net interest)
Present Value
of DBO
P
=11,725
1,006
25
580
13,336
(662)
–
Fair Value of
Plan Assets
Net retirement
liability/(asset)
(P
= 7,458)
–
–
(411)
(7,869)
662
P
=4,267
1,006
25
169
5,467
–
(130)
(130)
(Forward)
*SGVFS004156*
- 103 -
Consolidated
Actuarial changes arising from
experience adjustments
Actuarial changes arising from changes
in financial/demographic
assumptions
Changes in the effect of asset ceiling
Sub-total
Contributions paid
December 31, 2013
Parent Company
Statement of Income
January 1, 2013
Past service cost
Net interest
Sub-total
Benefits paid
Income
assumptions
Sub-total
Contributions paid
December 31, 2013
Present Value
of DBO
Fair Value of
Plan Assets
P
=573
(P
= 119)
962
–
1,535
–
P
=14,209
(5)
–
(254)
(1,944)
(P
= 9,405)
Present Value
of DBO
P
=9,954
791
–
482
11,227
(542)
–
563
619
1,182
–
P
=11,867
Fair Value of
Plan Assets
Net retirement
liability/(asset)
P
=454
957
–
1,281
(1,944)
P
=4,804
Net retirement
liability (asset)
(P
= 6,063)
–
–
(333)
(6,396)
542
P
=3,891
791
–
149
4,831
–
(125)
(125)
–
–
(125)
(1,726)
(P
= 7,705)
563
619
1,057
(1,726)
P
=4,162
Changes in net defined benefit liability of funded funds in 2012 are as follows:
Consolidated
Statement of Income
January 1, 2012
Past service cost
Net interest
Sub-total
Benefits paid
Income
assumptions
Changes in the effect of asset ceiling
Sub-total
Contributions paid
December 31, 2012
Present Value
of DBO
P
=9,704
895
43
554
11,196
(715)
Fair Value of
Plan Assets
Net retirement
liability/(asset)
(P
=7,140)
–
–
(406)
(7,546)
715
P
=2,564
895
43
148
3,650
–
–
(450)
(450)
506
(24)
482
738
–
1,244
–
P
=11,725
–
–
(474)
(153)
(P
=7,458)
738
–
770
(153)
P
=4,267
*SGVFS004156*
- 104 Present Value
of DBO
Parent Company
Statement of Income
January 1, 2012
Net interest
Sub-total
Benefits paid
Income
assumptions
Sub-total
Contributions paid
December 31, 2012
Fair Value of
Plan Assets
P
=8,349
726
468
9,543
(638)
Net retirement
liability (asset)
(P
=6,059)
–
(335)
(6,394)
638
P
=2,290
726
133
3,149
–
(307)
(307)
–
484
484
–
565
1,049
–
P
=9,954
565
742
–
P
=3,891
–
(307)
–
(P
=6,063)
The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the retirement benefit obligation as of December 31, 2013, assuming if
all other assumptions were held constant:
Discount rate
+100 basis points (bps)
-100 bps
Salary increase rate
+100 bps
-100 bps
Turnover rate
+100 bps
-100 bps
+200 bps
- 200 bps
Parent
Company
FMIC
PSBank
MCC
P
= 10,960
12,905
P
= 281
334
P
= 1,366
1,693
P
= 365
468
12,646
11,159
331
283
1,681
1,373
451
378
11,396
12,418
–
–
–
–
298
314
1,448
1,587
–
–
–
–
374
457
The Group expects to contribute to the defined benefit retirement plans the required funding for
normal cost in 2014.
The average duration of the defined benefit obligation of the Parent Company as of
December 31, 2013 and 2012 are 12.54 years and 14 years, respectively.
Shown below is the maturity analysis of the undiscounted benefit payments:
Less than 1 year
More than 1 year to 5 years
More than 5 years to 10 years
More than 20 years
Less than 1 year
More than 1 year to 5 years
More than 20 years
Parent
Company
FMIC
PSBank
MCC
Orix
P
= 680
5,251
9,768
8,820
5,206
6,408
P
= 13
368
431
706
499
575
P
= 119
495
1,142
1,879
1,945
3,813
P
=9
109
237
578
762
1,314
P
= 21
13
67
139
203
2,035
P
=472
4,468
8,714
9,501
4,831
5,648
=
P6
70
255
265
309
339
P
=125
433
952
1,470
1,606
2,802
=
P8
68
213
421
688
1,177
=
P–
23
13
135
201
1,768
*SGVFS004156*
- 105 In addition, the Parent Company has a Provident Plan which is a supplementary contributory
retirement plan to and forms part of the main plan, the Retirement Plan, for the exclusive benefit
of eligible employees of the Parent Company in the Philippines. Based on the provisions of the
plan, upon retirement or resignation, a member shall be entitled to receive as retirement or
resignation benefits 100.00% of the accumulated value of the personal contribution plus a
percentage of the accumulated value arising from the Parent Company’s contributions in
accordance with the completed number of years serviced. The Parent Company’s contribution to
the Provident Fund in 2013 and 2012 amounted to =
P134.3 million,
respectively.
As of December 31, 2013 and 2012, the retirement fund of the Parent Company’s employees
amounting to P
=7.7 billion and =
P6.1 billion, respectively, is being managed by the Parent
Company’s Trust Banking Group, which has a Trust Committee, that is mandated to approve, the
plan, trust agreement, investment plan, including any amendments or modifications thereto, and
other activities of the retirement plan. Certain members of the BOD of the Parent Company are
represented in the Trust Committee. The Trust Banking Group of the Parent Company manages
the plan based on the mandate as defined in the trust agreement. Directors’ fees and bonuses of
the Parent Company in 2013, 2012 and 2011 amounted to P
=48.94 million, =
P61.8 million and
P
=35.1 million, respectively, while, officers’ compensation and benefits of the Parent Company
aggregated to =
P5.0 billion, =
P5.4 billion and =
P4.0 billion, respectively.
27. Long-term Leases
The Parent Company leases the premises occupied by some of its branches (about 44.62% and
46.05% of the branch sites in 2013 and 2012, respectively, are Parent Company-owned). Also,
some of its subsidiaries lease the premises occupied by their Head Offices and most of their
branches. The lease contracts are for periods ranging from 1 to 25 years and are renewable at
the Group’s option under certain terms and conditions. Various lease contracts include
escalation clauses, most of which bear an annual rent increase of 5.00% to 10.00%. As of
December 31, 2013 and 2012, the Group has no contingent rent payable.
Rent expense (included in ‘Occupancy and equipment-related cost’ in the statement of income) in
2013, 2012 and 2011 amounted to P
=1.5 billion, P
=1.4 billion and =
P1.3 billion, respectively, for the
Group and =
P812.6 million, P
P721.0 million, respectively, for the
Parent Company.
Future minimum rentals payable under non-cancelable operating leases follows:
Within one year
After one year but not more than five years
More than five years
Consolidated
2012
2013
P
=459
P
=520
1,107
1,793
259
726
P
=1,825
P
=3,039
Parent Company
2012
2013
P
=323
P
=344
986
985
259
201
P
=1,568
P
=1,530
The Group has entered into commercial property leases on its investment property portfolio,
consisting of the Group’s available office spaces and real and other properties acquired and
finance lease agreements over various items of machinery and equipment which are
non-cancelable and have remaining non-cancelable lease terms between 1 and 20 years.
In 2013, 2012 and 2011, leasing income amounted to P
=1.6 billion, =
P1.4 billion and =
P1.0 billion
P243.2 million, P
P196.1 million, respectively,
for the Parent Company.
*SGVFS004156*
- 106 Future minimum rentals receivable under non-cancelable operating leases follows:
Within one year
After one year but not more than five years
More than five years
Consolidated
2012
2013
P
=950
P
=943
1,533
1,494
468
33
P
=2,951
P
=2,470
Parent Company
2012
2013
P
=107
P
=157
132
271
–
33
P
=239
P
=461
28. Income and Other Taxes
Under Philippine tax laws, the RBU of the Parent Company and its domestic subsidiaries are
subject to percentage and other taxes (presented as ‘Taxes and licenses’ in the statement of
income) as well as income taxes. Percentage and other taxes paid consist principally of gross
receipts tax (GRT) and documentary stamp tax (DST). Income taxes include 30% regular
corporate income tax (RCIT) and 20.00% final taxes paid, which is a final withholding tax on
gross interest income from government securities and other deposit substitutes. Interest allowed
as a deductible expense is reduced by an amount equivalent to 33% of interest income subjected to
final tax.
Current tax regulations also provide for the ceiling on the amount of EAR expense (Note 25) that
can be claimed as a deduction against taxable income. Under the regulation, EAR expense
allowed as a deductible expense for a service company like the Parent Company and some of its
subsidiaries is limited to the actual EAR paid or incurred but not to exceed 1.00% of net revenue.
The regulations also provide for MCIT of 2.00% on modified gross income and allow a NOLCO.
The MCIT and NOLCO may be applied against the Group’s income tax liability and taxable
income, respectively, over a three-year period from the year of inception.
FCDU offshore income (income from non-residents) is tax-exempt while gross onshore income
(income from residents) is subject to 10.00% income tax. In addition, interest income on deposit
placements with other FCDUs and offshore banking units (OBUs) is taxed at 7.50%. Income
derived by the FCDU from foreign currency transactions with non-residents, OBUs, local
commercial banks including branches of foreign banks is tax-exempt while interest income on
foreign currency loans from residents other than OBUs or other depository banks under the
expanded system is subject to 10.00% income tax.
Following are the applicable taxes and tax rates for the foreign branches of the Parent Company:
Foreign Branches
USA – New York Branch
Japan – Tokyo and Osaka Branches
Korea – Pusan Branch
Seoul Branch
Taiwan – Taipei Branch
Tax Rates
30.00% income tax ; Business taxes – 0.01% (New York State) and 0.26% (New
York City)
28.05% income tax; Various rates for business taxes – income tax, local business,
sheet value and sheet capital allocations
20.00% income tax; 0.50% education tax
21.00% income tax; 0.50% education tax
17.00% income tax; 2.00% gross business receipts tax; 5.00% VAT
*SGVFS004156*
- 107 The provision for income tax consists of:
Current:
Final tax
RCIT*
MCIT
Deferred*
2013
Consolidated
2012
P
=2,546
1,377
266
4,189
2,559
P
=6,748
P
=2,014
2,331
13
4,358
(502)
P
=3,856
Parent Company
2013
2012
2011
P
=2,301
1,095
268
3,664
(122)
P
=3,542
P
=1,906
115
244
2,265
1,381
P
=3,646
2011
P
=1,220
751
1,971
(211)
P
=1,760
P
=1,392
167
263
1,822
297
P
=2,119
* Includes income taxes of foreign subsidiaries.
Components of net deferred tax assets of the Group and the Parent Company follow:
Consolidated
2013
Deferred tax asset on:
NOLCO
Accrued retirement liability
Unamortized past service cost
Accumulated depreciation of investment
properties
MCIT
Accrued expenses
Unrealized loss on AFS investments
Deferred membership/awards
Unearned rental income
Unrealized losses on financial assets at FVPL
Unrealized foreign exchange loss – net
Others
Deferred tax liability on:
Unrealized gain on financial assets at FVPL
Unrealized gain on initial measurement
of investment properties
Unrealized foreign exchange gain – net
Unrealized gain on AFS investments (Note 8)
Deferred acquisition cost
Others
Net deferred tax assets
Parent Company
2012
(As Restated –
Note 2)
2013
2012
(As Restated –
Note 2)
P
=4,428
1,263
1,454
541
P
=6,201
–
1,293
311
P
=3,688
1,263
1,257
526
P
=4,664
–
1,171
298
464
244
129
93
101
10
263
8,990
504
172
185
10
993
22
112
9,803
401
244
129
93
10
26
7,637
443
130
10
993
24
26
7,759
927
-
927
-
618
20
99
–
136
1,800
P
=7,190
692
78
55
107
932
P
=8,871
371
6
1,304
P
=6,333
454
29
483
P
=7,276
Components of net deferred tax liabilities of the Group follow:
2013
Deferred tax asset on:
Unamortized past service cost
Accrued expenses
Accumulated depreciation of investment properties
Retirement liability
Others
P
=75
6
–
4
–
2
87
2012
(As Restated –
Note 2)
=50
P
6
5
5
1
2
69
(Forward)
*SGVFS004156*
- 108 -
2013
Deferred tax liability on:
Leasing income differential between finance and
operating lease method
Unrealized gain on Financial Assets at FVPL
Unrealized gain on AFS investments (Note 8)
Retirement asset
Others
2012
(As Restated –
Note 2)
P
=280
–
27
6
–
313
=244
P
P
=340
12
8
206
566
P
=479
Net deferred tax liabilities
The Parent Company and certain subsidiaries did not recognize deferred tax assets on the
following temporary differences:
Consolidated
2012
2013
P
=4,339
P
=13,494
777
55
34
30
117
204
NOLCO
MCIT
Others
Parent Company
2012
2013
P
=3,063
P
=9,283
–
–
–
–
–
–
The Group believes that it is not reasonably probable that the tax benefits of these temporary
differences will be realized in the future.
There are no income tax consequences attaching to the payment of dividends by the Group to the
shareholders of the Group.
Details of the excess MCIT credits follow:
Inception Year
2010
2011
2012
2013
Amount
=
P1
123
13
266
P
=403
Consolidated
Used/Expired
Balance
=
P–
=
P1
103
20
–
13
–
266
P
=103
P
=300
Expiry Year
2013
2014
2015
2016
Amount
=
P–
103
–
244
P
=347
Parent Company
Used
Balance
=
P–
=
P–
103
–
–
–
–
244
P
=103
P
=244
Expiry Year
2013
2014
2015
2016
Amount
=
P–
–
–
4,211
P
=4,211
Parent Company
Used
Balance
=
P–
=
P–
–
–
–
–
–
4,211
=
P–
P
=4,211
Expiry Year
2014
2016
Details of the NOLCO follow:
Inception Year
2010
2011
2012
2013
Amount
P
=718
17
42
4,211
P
=4,988
Consolidated
Used/Expired
Balance
=
P–
P
=718
–
17
–
42
–
4,211
=
P–
P
=4,988
Expiry Year
2016
A reconciliation of the statutory income tax rates and the effective income tax rates follows:
Statutory income tax rate
Tax effect of:
Tax-paid and tax-exempt income
Nondeductible interest expense
Nonrecognition of deferred tax asset
FCDU income
Others – net
Effective income tax rate
2013
30.00%
Consolidated
2012
30.00%
2011
30.00%
(27.66)
7.83
6.77
(0.74)
5.64
21.84%
(23.22)
10.23
3.45
(1.81)
(0.94)
17.71%
(21.63)
7.13
6.60
(4.12)
4.12
22.10%
Parent Company
2012
2013
30.00%
30.00
(30.37)
2.75
7.98
(1.08)
8.63
17.91%
(22.25)
3.66
2.13
(2.34)
2.44
13.64%
2011
30.00%
(28.96)
8.51
11.63
(6.69)
6.64
21.13%
*SGVFS004156*
- 109 -
29. Trust Operations
Properties held by the Parent Company and certain subsidiaries in fiduciary or agency capacity for
their customers are not included in the accompanying statements of financial position since these
are not resources of the Parent Company and its subsidiaries (Note 30).
In compliance with current banking regulations relative to the Parent Company and certain
subsidiaries’ trust functions, government securities classified under HFT and AFS investments are
deposited with the BSP. Face value of such government securities follows:
HFT investments
AFS investments
Consolidated
2012
2013
=
P4
P
=7
5,153
5,170
P
=5,157
P
=5,177
Parent Company
2012
2013
P
=P
=5,113
5,130
P
=5,113
P
=5,130
30. 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. No
material losses are anticipated as a result of these transactions.
The following is a summary of contingencies and commitments at their peso-equivalent
contractual amounts arising from off-balance sheet items:
Trust Banking Group accounts (Note 29)
Commitments
Credit card lines
Underwriting
Undrawn – facilities to lend
Unused commercial letters of credit
Bank guaranty with indemnity agreement
Credit line certificate with bank commission
Late deposits/payments received
Outstanding shipside bonds/airway bills
Inward bills for collection
Outward bills for collection
Outstanding guarantees
Confirmed export letters of credits
Traveler’s check unsold
Others
Consolidated
2012
2013
P
=420,440
P
= 324,839
69,595
–
1,835
32,641
6,777
5,206
2,082
936
903
443
78
72
–
12,360
P
= 457,767
55,247
1,200
415
29,284
4,071
5,444
1,709
1,147
886
520
80
69
11
5,324
P
=525,847
Parent Company
2012
2013
P
=418,167
P
= 323,174
–
–
1,835
31,254
6,777
5,206
2,018
936
885
443
78
70
–
340
P
= 373,016
–
–
–
28,309
4,071
5,444
1,647
1,147
638
518
80
65
11
414
P
=460,511
In September 2008, the Parent Company filed petitions for rehabilitation against two Philippine
subsidiaries of Lehman Brothers Holdings, Inc. (Lehman) in connection with a combined
=
P2.4 billion loan exposure. These came as a result of the declaration of bankruptcy filed by
Lehman, a surety under the loan agreements. The rehabilitation plans were duly approved by the
Rehabilitation Court (RC). A Management Committee was created for each of the two (2)
Lehman subsidiaries and these Management Committees oversaw and managed the company
assets until their abolition in July 2012. In lieu thereof, the RC appointed a Comptroller who was
nominated by the Parent Company. Earlier, in April 2012, the RC resolved to recognize the new
equity holder in Philippine Investment One (SPV-AMC), Inc. (PI One) and Philippine Investment
Two (SPV-AMC), Inc. (PI Two). On October 31, 2012, the Parent Company and PI One and
PI Two (thru the new equity holder) entered into a universal compromise agreement to settle the
*SGVFS004156*
- 110 issues among the parties. Said compromise bears the conformity of the Rehabilitation Receiver.
On August 30, 2013, the RC issued an Order excluding another creditor bank as a creditor of PI
Two entitled to payments under the approved Rehabilitation Plan. The Court of Appeals, however,
issued a Temporary Restraining Order enjoining the RC from enforcing such Order upon a
petition filed before it by this creditor bank. In November 2013, the Court of Appeals issued a
resolution denying this creditor bank’s application for the issuance of a writ of preliminary
injunction and accordingly, upheld the RC’s order excluding it as creditor of PI Two.
On October 17, 2011, a consortium of eight banks including the Parent Company filed a Petition
for Certiorari, Prohibition and/or Mandamus (with Urgent Application for a Temporary
Restraining Order (TRO) and/or Writ of preliminary Injunction) with the Supreme Court (SC)
against respondents the ROP, Bureau of Internal Revenue (BIR) and its Commissioner, the
Department of Finance and its Secretary and the Bureau of Treasury (BTr) and the National
Treasurer, asking the Court to annul BIR Ruling No. 370-2011 which imposes a 20-percent final
withholding tax on the 10-year Zero-Coupon Government Bonds (also known as the PEACe
bonds) that matured on October 18, 2011 and command the respondents to pay the full amount of
the face value of the PEACe Bonds. On October 18, 2011, the SC issued the TRO enjoining the
implementation of the said BIR ruling on the condition that the 20-percent final withholding tax be
withheld by the petitioner banks and placed in escrow pending resolution of the Petition.
However, to date, the respondents have not complied with the said TRO, i.e., they have not
credited the banks’ escrow accounts with the amount corresponding to the questioned 20-percent
final tax. The case is still pending resolution with the SC.
Several suits and claims relating to the Group’s lending operations and labor-related cases remain
unsettled. In the opinion of management, these suits and claims, if decided adversely, will not
involve sums having a material effect on the Group’s financial statements.
31. 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 or if they are subjected to common control or common significant influence such as
subsidiaries and associates of subsidiaries or other related parties. Related parties may be
individuals or corporate entities.
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 collectibility or present other
unfavorable conditions.
In the ordinary course of business, the Group has loan transactions with investees and with certain
directors, officers, stockholders and related interests (DOSRI) based on BSP Circular No. 423
dated March 15, 2004, as amended. 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 the respective total equity or 15.00% of
total loan portfolio, whichever is lower, of the Bank, PSBank, FMIC and ORIX Metro.
*SGVFS004156*
- 111 The following table shows information relating to the loans, other credit accommodations and
guarantees classified as DOSRI accounts:
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
Percent of nonaccruing DOSRI accounts to total
DOSRI accounts
Consolidated
2012
2013
P
=12,721
P
=6,438
Parent Company
2012
2013
P
=9,602
P
=5,628
0.00%
0.00%
0.00%
0.00%
1.05%
1.05%
2.42%
2.42%
1.24%
1.24%
2.42%
2.42%
12.55%
20.34%
8.44%
19.22%
1.31%
3.92%
0.00%
0.00%
1.31%
3.92%
0.00%
0.00%
BSP Circular No. 560 provides the rules and regulations that govern loans, other credit
accommodations and guarantees granted to subsidiaries and affiliates of banks and quasi-banks.
Under the said Circular, the total outstanding loans, other credit accommodations 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 reported to the BSP. As of December 31, 2013 and 2012,
the total outstanding loans, other credit accommodations and guarantees to each of the Parent
Company’s subsidiaries and affiliates did not exceed 10.00% of the Parent Company’s net worth,
and the unsecured portion did not exceed 5.00% of such net worth and the total outstanding loans,
other credit accommodations and guarantees to all such subsidiaries and affiliates represent 2.89%
and 5.48%, respectively, of the Parent Company’s net worth.
BSP issued Circular No. 654 allows a separate individual limit to loans of banks/quasi-banks to
their subsidiaries and affiliates engaged in energy and power generation, i.e., a separate individual
limit of twenty-five (25.00%) of the net worth of the lending bank/quasi-bank: provided, that the
unsecured portion thereof shall not exceed twelve and one-half percent (12.50%) of such net
worth: provided further, that these subsidiaries and affiliates are not related interests of any of the
director, officer and/or stockholder of the lending bank/quasi-bank; 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, 2013 and 2012, the total outstanding loans, other
credit accommodations and guarantees to each of the Parent Company’s subsidiaries and affiliates
engaged in energy and power generation did not exceed 25.00% of the Parent Company’s net
worth, as reported to the BSP, and the unsecured portion did not exceed 12.50% of such net worth.
Total interest income on the DOSRI loans in 2013, 2012 and 2011 amounted to P
=275.5 million,
P
P593.5 million, respectively, for the Group and P
=184.0 million,
P
*SGVFS004156*
- 112 Details on significant related party transactions of the Group and the Parent Company follow
(transactions with subsidiaries have been eliminated in the consolidated financial statements):
Category
Entities with Significant Influence
Outstanding Balance:
Receivables from customers*
Deposit liabilities*
Amount/Volume:
Deposit liabilities
Interest income
Gain on sale of non-current asset
held for sale
Subsidiaries
Interbank loans receivable*
Accounts receivable
Amount
P
= 705
231
(2,548)
173
5
3,440
1,882
1,061
322
3,906
Bills payable
635
Bonds payable
309
Accounts payable
Amount/Volume:
Bills payable
Deposit liabilities
Interest income
Service charges, fees and commissions
Foreign exchange gain - net
Leasing income
Dividend income
Miscellaneous income
Interest expense
Securities transactions
Purchases
Sales
Foreign currency
Buy
Sell
94
(6,933)
(293)
34
(208)
130
Consolidated
December 31, 2013
Terms and Conditions/Nature
Secured – P
=580.0 million and unsecured – P
=125.0 million,
no impairment
Short-term lending with interest rates ranging from 2.60% to
3.70% subject to regular repricing with maturity terms from 33
days to 98 days
With annual fixed rates ranging from 0.0% to 0.50%
Generally similar to terms and conditions above
Interest income on receivables from customers
Gain on sale of 15.00% ownership in TMPC
Foreign currency-denominated lending with annual fixed interest
rates ranging from 1.13% to 1.62% and maturity terms from 7
days to 372 days, no impairment
Unsecured with no impairment
With annual fixed rates ranging from 3.70% to 5.59% and
maturity terms from 7 days to 5 years
Outstanding information technology fees and remittance
receivable, non-interest bearing
With annual fixed interest rates ranging from 0.0% to 1.50%
including time deposits with maturity terms from 1 day to
360 days
Short-term foreign currency-denominated borrowings subject to
annual fixed interest rate of 0.19% and maturity term of 34 days
Issued by FMIC with interest rates ranging from 5.50% to 5.75%
and maturity terms from 5 to 7 years
Unpaid various transactional charges, non-interest bearing
14
4,635
167
35
9,971
301
46
Income on receivables from customers and interbank loans
receivables
Income on transactional fees
Income from securities transactions
Net gain from foreign exchange transactions
Income from leasing agreements with various lease terms
Dividend income from various investee companies
Information technology fees
Interest expense on deposit liabilities and bills payable
293,797
172,597
Outright purchases of HFT securities and AFS investments
Outright sale of HFT securities and AFS investments
50,198
42,666
Outright purchases of foreign currency
Outright sale of foreign currency
*SGVFS004156*
- 113 -
Category
Associates
Bonds payable
Amount/Volume:
Deposit liabilities
Foreign exchange loss - net
Leasing income
Dividend income
Interest expense
Outstanding derivatives
Outright purchases
Outright sales
Foreign currency
Buy
Sell
Other Related Parties
Amount
P
= 129
2,507
10
Net gain from securities transactions
Net loss from foreign exchange transactions
Dividend income from an investee company
Interest expense on deposit liabilities
Forward exchange bought with various terms
590
802
154
293
P
= 14,134
1,361
1,069
Bills payable
Amount/Volume:
Bills payable
Deposit liabilities
Interest income
Leasing income
Profit from assets sold
Interest expense
Contingent
Unused commercial LCs
Others
Foreign currency
Buy
Sell
Non-interest bearing domestic bills purchased
358 days
Issued by FMIC subject to annual fixed interest rate of 5.68%
and maturity term of 5 years
64
(58)
396
(12)
20
29
18
118
Consolidated
December 31, 2013
15,174
7,014
(4,187)
4,093
11,852
1,035
(1,546)
14
217
7,388
127
Secured - P
=13,546 million and unsecured - P
=588 million,
no impairment.
Parcels of land and former branch sites of the Parent Company
contributed to joint operations
Downpayment to a related party real estate company relative to
the purchase of commercial and office spaces located at
Bonifacio Global City, Taguig City
With annual fixed rates ranging from 0.0% to 2.00% including
time deposits with maturity terms from 6 days to 360 days
Foreign currency-denominated borrowings with annual fixed
interest rates ranging from 0.26% to 2.00% and maturity terms
from 40 to 49 days and peso denominated borrowings with
annual fixed interest rate of 0.01% to 1.75% and maturity terms
from 15 days to five days
Net gain from sale of investment properties
Gain on sale of FMIC’s 40% ownership in GBPC
33
6
LC transactions with various terms
Include outstanding shipside bonds/
airway bills and outstanding guarantees
2,467
42,895
*SGVFS004156*
- 114 -
Category
Key Personnel
Amount
P
= 67
Deposit liabilities
143
Amount/Volume:
Deposit liabilities
Interest income
(17)
32
1
7
Category
Deposit liabilities
Amount/Volume:
Deposit liabilities
Interest income
Purchases
Sales
Foreign currency - sell
Subsidiaries
Amount
P
=3,253
58
(3,839)
(14)
11
3,403
75
75
90
P
=8,815
1,354
Accounts receivable
Other receivable
257
142
4,113
Bills payable
601
Accounts payable
Amount/Volume:
Bills payable
Deposit liabilities
Interest income
126
Leasing income
6,602
(3,608)
(46)
(4,467)
187
75
1,550
134
27
Consolidated
December 31, 2013
Secured - P
=54.0 million, unsecured - =
P13.0 million,
no impairment, with annual fixed rate ranging from 0.0% to
10.0% and maturity terms from 5 years to 15 years
With various terms and with minimum annual interest rate of
0.0%
Net gain from sale of investment property
Consolidated
December 31, 2012
Secured - P
=2.3 billion and unsecured - P
=1.0 billion,
no impairment
Short-term lending with interest rate of 3.8% subject to regular
repricing with maturity terms from 30 days to 94 days
Peso and foreign currency lending with annual fixed interest rates
ranging from 1.17% to 3.625% and maturity terms from five days
to one year
Unsecured with no impairment
Uncollected information technology fees, non-interest bearing
Dividends receivable as disclosed in Note 11
including time deposits with maturity terms from 5 days to
360 days
Short-term foreign currency borrowings with annual fixed
interest rate of 0.15% and maturity term of 33 days
Interest income on receivables from customers and interbank
loans receivables
Income from foreign exchange transactions
(Forward)
*SGVFS004156*
- 115 -
Category
Dividend income
Interest expense
Purchases
Sales
Foreign currency
Buy
Sell
Associates
Other receivable
Amount/Volume:
Deposit liabilities
Trading and securities loss - net
Leasing income
Dividend income
Interest expense
Outright purchases
Outright sales
Foreign currency
Buy
Sell
Amount
P
=1,112
54
221
106
Consolidated
December 31, 2012
See discussions on Note 11
Information technology fees billed monthly
162,528
164,498
18,211
29,256
P
=65
1,437
2,565
(58)
(1,721)
(9)
(20)
16
677
35
213
1,131
1,549
178
369
P
=18,321
Other receivable
Assets held under operations
26
1,189
1,078
3,322
Bills payable
2,921
Amount/Volume:
Bills payable
Deposit liabilities
Interest income
Leasing income
(2,166)
76
(1,440)
1,207
163
931
37
Secured - P
=13.0 million and unsecured - P
=52.0 million,
no impairment
358 days
Secured - P
=1.4 billion,
no impairment
Various uncollected service fees
Foreign currency-denominated notes with annual interest rates
ranging from 1.0% to 2.0% and maturities from one month to
three years
(Forward)
*SGVFS004156*
- 116 -
Category
Interest expense
Contingent
Others
Foreign currency
Buy
Sell
Key Personnel
Amount
P
=592
64
325
270
20
597
32,838
P
=84
Deposit liabilities
111
Bills payable
253
Amount/Volume:
Deposit liabilities
Interest income
Compensation expense
Category
Deposit liabilities
Amount/Volume:
Gain on sale of non-current asset
held for sale
Subsidiaries
Accounts receivable
Bills payable
Accounts payable
Amount/Volume:
(8)
26
1
42
1,637
Amount
P
= 705
231
Consolidated
December 31, 2012
Income from various transactions
Include bank guaranty with indemnity agreement;
inward bills for collection; outstanding shipside bonds/
airway bills; and outstanding guarantees
Secured - P
=57.0 million,
no impairment
With annual fixed rates ranging from 8.0% to 9.0% and maturity
terms from 5 years to 15 years
Various terms and with minimum annual interest rate of 0.0%
Deposit substitutes of FMIC with various terms
See related discussions below on compensation
Parent Company
December 31, 2013
Secured - P
=125.0 million,
no impairment.
Short-term lending with interest rates ranging from 2.60% to
3.70% subject to regular repricing with maturity terms from 33
days to 98 days
(2,548)
4,201
P
= 1,882
Foreign currency-denominated lending which earn annual fixed
interest rates ranging from 1.13% to 1.62% with maturity terms
from 7 days to 372 days, no impairment
Unsecured with no impairment.
Outstanding information technology fees and remittance
receivable, non-interest bearing
360 days
Short-term foreign currency-denominated borrowings subject to
annual fixed interest rate of 0.19% and maturity term of 34 days
1,061
321
3,803
635
94
(6,433)
(243)
(Forward)
*SGVFS004156*
- 117 -
Category
Bills payable
Deposit liabilities
Interest income
Leasing income
Dividend income
Interest expense
Purchases
Sales
Foreign currency
Buy
Sell
Associates
Amount/Volume:
Deposit liabilities
Leasing income
Dividend income
Outright purchases
Outright sales
Foreign currency
Buy
Sell
14
1,133
167
29
9,972
301
24
Parent Company
December 31, 2013
Income on receivables from customers and interbank loans
receivables
Dividend income from various investee companies
Information technology fees
212,602
86,283
Amount
P
= 49
426
127
50,198
42,666
P
= 129
2,251
64
400
(15)
(12)
11
29
118
84
79
154
293
P
= 13,018
1,361
1,068
11,683
Amount/Volume:
Deposit liabilities
Interest income
Leasing income
Interest expense
(1,812)
8,853
930
(1,546)
12
217
1
358 days
Net loss from securities transactions
Dividend income from an investee company
Secured - P
=509 million,
no impairment.
(Forward)
*SGVFS004156*
- 118 -
Category
Contingent
Others
Foreign currency
Buy
Sell
Key Personnel
Deposit liabilities
Amount/Volume:
Deposit liabilities
Interest income
Category
Deposit liabilities
Amount/Volume:
Deposit liabilities
Interest income
Purchases
Sales
Foreign currency - sell
Subsidiaries
Amount
Parent Company
December 31, 2013
P
= 33
6
Include outstanding shipside bonds/
airway bills and outstanding guarantees
2,467
42,895
P
= 67
143
(1)
32
1
7
Amount
P
=3,253
58
(3,839)
(14)
11
4,164
75
75
90
P
=8,315
1,304
Accounts receivable
Other receivable
256
137
3,376
Bills payable
586
Accounts payable
Amount/Volume:
126
6,097
(3,607)
Secured - P
=54.0 million, unsecured - =
P13.0 million,
no impairment, with annual fixed rate ranging from 0.0% to
10.0% and maturity terms from 5 years to 15 years
With various terms and with minimum annual interest rate
of 0.0%
Parent Company
December 31, 2012
Secured - P
=1.0 billion,
no impairment
Short-term lending with interest rates subject to regular repricing
and with maturity terms from 30 days to 94 days.
Various terms with annual fixed rate ranging from 0.0%
to 0.38%
Peso and foreign currency lending which earn annual fixed
interest rates ranging from 1.17% to 3.625% with maturity terms
from five days to one year.
Unsecured, no impairment
With annual fixed rates ranging from 4.00% to 5.59% with
360 days
Short-term foreign currency borrowings subject to annual fixed
interest rate of 0.15% with maturity term of 33 days
Various transactional charges
(Forward)
*SGVFS004156*
- 119 -
Category
Bills payable
Deposit liabilities
Interest income
Leasing income
Dividend income
Interest expense
Purchases
Sales
Foreign currency
Buy
Sell
Associates
Other receivable
Amount/Volume:
Deposit liabilities
Leasing income
Dividend income
Miscellaneous expense
Outright purchases
Outright sales
Foreign currency
Buy
Sell
Amount
(P
=39)
(153)
173
75
1,536
134
27
1,093
54
221
45
115,596
122,051
18,211
29,256
P
=65
22
1,851
(58)
(1,485)
(9)
(20)
7
677
24
Secured - P
=13.0 million and unsecured P
=52.0 million, no
impairment
with maturity terms from 4 days to 358 days
Foreign exchange transactions
See discussion on Note 11
Expenses from various transactions
250
425
178
369
P
=14,830
1,189
1,068
2,830
Amount/Volume:
Deposit liabilities
Interest income
Leasing income
Interest expense
Contingent
Unused commercial LC
Others
Parent Company
December 31, 2012
Interest income on receivables from customers and interbank
loans receivables
Information technology fees billed monthly
(1,682)
2,521
964
931
11
592
1
270
20
Secured - P
=1.0 billion,
no impairment
Include bank guaranty with indemnity agreement;
inward bills for collection; outstanding shipside bonds/
airway bills; and outstanding guarantees
(Forward)
*SGVFS004156*
- 120 -
Category
Foreign currency
Buy
Sell
Key Personnel
Amount
Deposit liabilities
Amount/Volume:
Deposit liabilities
Compensation expense
*including accrued interest
111
P
=597
32,838
P
=68
(10)
26
42
1,101
Parent Company
December 31, 2012
Secured - P
=41.0 million,
no impairment
With annual fixed rates ranging from 8.0% to 9.0% and maturity
terms from 5 years to 15 years
With various terms and minimum annual interest rate of 0.0%
See related discussion below on compensation
As discussed in Note 13, in December 2012, the Parent Company sold 15% of its ownership in
TMPC to GT Capital which resulted in a gain amounting to =
P3.4 billion and =
P4.2 billion for the
Group and Parent Company, respectively. The remaining 15% ownership was subsequently sold
in January 2013 wherein the Group and the Parent Company recognized gain on sale of
P
=3.4 billion and =
P4.2 billion, respectively .
Receivables from customers and deposit liabilities and their related statement of financial position
and statement of income accounts resulted from the lending and deposit-taking activities of the
Group and the Parent Company. Together with the sale of investment properties; borrowings;
contingent accounts including derivative transactions; outright purchases and sales of HFT
securities and AFS investments; foreign currency buy and sell; leasing of office premises; securing
of insurance coverage on loans and property risks; and other management services rendered, these
are conducted in the normal course of business and at arms-length transactions. The amounts and
related volumes and changes are presented in the summary above. The Parent Company has a
Related Party Transactions Committee headed by an independent director that oversees and
monitors related party transactions. Terms of receivables from customers, deposit liabilities and
borrowings are disclosed in Notes 9, 16 and 17, respectively, while other related party transactions
above have been referred to their respective note disclosures.
As of December 31, 2013 and 2012, government bonds (classified under AFS investments) with
total face value of =
P50.0 million are pledged by PSBank to the Parent Company to secure its
payroll account with the Parent Company. Also, the Parent Company has assigned to PSBank
government securities (classified under AFS investments) with total face value of =
P3.0 billion to
secure PSBank deposits to the Parent Company.
The compensation of the key management personnel of the Group and the Parent Company
follows:
Short-term employee benefits
Post employment benefits
2013
P
=1,866
142
P
=2,008
Consolidated
2012
P
=1,546
91
P
=1,637
2011
P
=1,164
71
P
=1,235
Parent Company
2012
2013
P
=1,040
P
=1,282
61
68
P
=1,101
P
=1,350
2011
P
=682
29
P
=711
*SGVFS004156*
- 121 Transactions with retirement plans
Under PFRS, certain post-employment benefit plans are considered as related parties. The Parent
Company has business relationships with a number of related party retirement plans pursuant to
which it provides trust and management services to these plans. Certain trustees of the plans are
either officers or directors of the Parent Company and/or the subsidiaries. Income earned by the
Parent Company from such services amounted to P
=40.4 million and =
P32.2 million in 2013 and
2012, respectively. As of December 31, 2013 and 2012, the Parent Company sold securities
totaling =
P2.8 billion and =
P3.1 billion, respectively, to its related party retirement plans and
recognized net trading gain of P
=3.7 million and net trading loss of =
P1.0 million, respectively. The
Parent Company also purchased securities totaling P
=1.3 billion and P
=1.1 billion as of
December 31, 2013 and 2012, respectively. Further, as of December 31, 2013 and 2012, the total
outstanding deposit liabilities of the Group to these related party retirement funds amounted to
P
=56.3 million and =
P343.9 million, respectively. Interest expense on deposit liabilities amounted to
=
P2.5 million and =
P9.8 million in 2013 and 2012, respectively.
As of December 31, 2013 and 2012, the related party retirement plans also hold investments in the
equity shares of various companies within the Group amounting to P
=874.7 million and
P
=744.0 million, respectively, with unrealized trading gains of P
=289.7 million,
respectively. As of December 31, 2013 and 2012, the related party retirement plans also hold
investments in mutual funds and trust funds of various companies within the Group amounting to
P
=28.2 million and =
P11.0 million, respectively, with unrealized trading gains of P
=4.7 million and
P
=5.5 million, respectively. As of December 31, 2013 and 2012, dividend income recognized from
these securities amounted to =
P33.4 million and =
P9.2 million, respectively, and realized trading
gains amounting to =
P54.2 million and =
P25.7 million, respectively.
32. Financial Performance
The basis of calculation for earnings per share attributable to equity holdings of the Parent
Company follows (amounts in millions except for earnings per share):
2013
a.
b.
c.
d.
e.
f.
g.
Net income attributable to equity holders of the
Parent Company
Share of hybrid capital securities holders
Net income attributable to common shareholders
Weighted average number of outstanding
common shares of the Parent Company, as
previously reported
Basic/diluted earnings per share, as previously
reported (c/d)
Weighted average number of outstanding
common shares of the Parent Company,
including effect of stock dividend issued in
2013 (Note 23)
Basic/diluted earnings per share, as restated in
2012 and 2011 (c/f)
2012
2011
P
=15,399
(476)
14,923
P
=11,031
(484)
10,547
2,111
2,101
P
=7.07
P
=5.02
2,745
2,745
2,731
P
=8.02
P
=5.44
P
=3.86
P
=22,488
(475)
22,013
*SGVFS004156*
- 122 The following basic ratios measure the financial performance of the Group and the Parent
Company:
Return on average equity
Return on average assets
Net interest margin on average
earning assets
Consolidated
2012
2011
2013
13.64%
11.27%
17.80%
1.53%
1.19%
1.85%
3.90%
3.62%
3.53%
Parent Company
2012
2011
2013
11.68%
9.49%
16.35%
1.46%
1.11%
1.77%
3.17%
2.92%
2.73%
33. Notes to Statements of Cash Flows
The amounts of interbank loans receivable and securities purchased under agreements to resell
considered as cash and cash equivalents follow:
not considered as cash and cash
equivalents
2013
P
= 122,011
(4,836)
P
= 117,175
Consolidated
2012
P
=23,392
(4,344)
P
=19,048
Parent Company
2012
P
=15,046
2011
P
=24,367
2013
P
= 96,872
(964)
P
=23,403
(4,836)
P
= 92,036
(4,344)
P
=10,702
2011
P
=3,222
(964)
P
=2,258
Significant noncash transactions of the Group and the Parent Company include foreclosures of
properties or additions to investment and chattel properties as disclosed in Notes 12 and 14,
respectively; reclassification of investment in GBPC amounting to =
P3.3 billion to AFS
investments in 2013 as discussed in Note 11; and bond exchange transactions in 2011 as discussed
in Note 8.
Further, in 2012, in addition to the reclassification of investment in associate as discussed in
Note 13, the Parent Company also reclassified its land covered by a completed agreement from
assets held under joint operations (under ‘Other assets’) to investments properties amounting to
P
=1.98 billion; and rescinded its sales contract receivable amounting to =
P693.0 million (Note 31).
34. Foreign Exchange
PDS closing rates as of December 31 and PDSWAR for the year ended December 31 are as
follows:
PDS Closing
PDSWAR
2013
P
=44.40
42.43
2012
=41.05
P
42.24
2011
=43.84
P
43.31
35. Other Matters
The Group has no significant matters to report in 2013 on the following:
a.
b.
Known trends, events or uncertainties that would have material impact on liquidity and on the
sales or revenues.
Explanatory comments about the seasonality or cyclicality of operations.
*SGVFS004156*
- 123 c.
d.
e.
Issuances, repurchases and repayments of debt and equity securities except for the exercise of
the call option on the 2018 Peso Notes and issuance of common stock by the Parent Company
and for the exercise of the call option on the 2019 Peso Notes and the issuance of the 2023
Peso Notes by MCC (Notes 20 and 23).
Unusual items as to nature, size or incidents affecting assets, liabilities, equity, net income or
cash flows except for the payments of cash dividend and semi-annual coupons on the HT1
Capital as discussed in Note 23.
Effect of changes in the composition of the Group, including business combinations,
acquisition or disposal of subsidiaries and long-term investments, restructurings, and
discontinuing operations except for the establishment of MR Japan, a wholly-owned
subsidiary, as discussed in Note 2 and sale of certain investees company as discussed in
Note 11.
36. Subsequent Events
a. In January 2014, FMIC sold =
P3.8 billion of its AFS investments previously classified under
HTM investments, as discussed in Note 8, and recognized trading gains of P
=526.3 million.
b. On October 23, 2013, the BOD of Orix Metro approved the declaration of a 20% stock
dividend amounting to =
P252.9 million or =
P20.00 per share based on par value of =
P100.00 to all
stockholders of record as of even date. This was approved by the BSP on
January 14, 2014 and issued by ORIX Metro on January 15, 2014.
c. On January 24, 2014, the BOD of PSBank declared a 7.50% cash dividend for the fourth
quarter of 2013 amounting to P
=180.2 million or P
=0.75 per share to all stockholders as of date
to be determined upon BSP approval.
d. On January 27, 2014, FMIC sold 33.3% of its ownership in Charter Ping An to GT Capital at
a consideration of P
=712.0 million which resulted in a gain of =
P210.0 million, as approved by
the BOD on January 23, 2014.
e. On January 30, 2014, the BSP approved the amendment to the terms and conditions of the
Parent Company’s issuance of Basel III-compliant Tier 2 capital notes as discussed in
Note 20. Specifically, the BSP approved the issuance of up to USD500 million equivalent in
either USD or PHP or combination in one or more tranches over the course of one (1) year.
f.
On February 10, 2014, the BSP approved the semi-annual coupon payment on HT1 Capital
amounting to USD 5.6 million which the Parent Company paid on February 18, 2014.
g. On February 18, 2014, the BOD approved the Parent Company’s exercise of the call option on
its =
P4.5 billion Lower Tier 2 Peso Notes on May 6, 2014.
*SGVFS004156*
- 124 -
37. Approval of the Release of the Financial Statements
The accompanying financial statements of the Group and of the Parent Company were authorized
for issue by the BOD on February 18, 2014.
38. Report on the Supplementary Information Required Under Revenue Regulations (RR)
No. 19-2011 and 15-2010
Supplementary Information Under RR No. 19-2011
In addition to the required supplementary information under RR No. 15-2010, on
January 24, 2014, the BIR issued RR No. 19-2011 which prescribes the new annual income tax
forms that will be used for filing effective taxable year 2013. Specifically, companies are required
to disclose certain tax information in their respective notes to financial statements. For the taxable
year December 31, 2013, the Parent Company reported the following revenues and expenses for
income tax purposes:
Revenues
Services/operations
Non-operating and taxable other income:
Income from trust operations
Trading and securities loss
Others
=17,214
P
=3,381
P
1,057
643
(2,518)
634
=3,197
P
Expenses
Cost of services:
Others
Itemized deductions:
Taxes and licenses
Security, messengerial and janitorial
Depreciation
Rent
Communication, light and water
Information technology
Transportation and travel
Repairs and maintenance
Management and professional fees
EAR
Bad debts
Others
=4,643
P
3,559
=8,202
P
=4,776
P
2,786
1,335
783
772
512
501
349
236
212
187
99
3,870
=16,418
P
*SGVFS004156*
- 125 Supplementary Information Under RR No. 15-2010
On November 25, 2010, the BIR issued RR No. 15-2010 to amend certain provisions of
RR No. 21-2002 which provides that starting 2010 the notes to financial statements shall include
information on taxes, duties and license fees paid or accrued during the taxable year.
The Parent Company reported the following types of taxes for the year ended December 31, 2013
included under ‘Taxes and licenses’ account in the statement of income:
GRT
DST
Capital gains tax
Local taxes
Real estate tax
Others
=2,132
P
1,318
408
91
62
156
=4,167
P
Details of total withholding taxes remitted for the taxable year December 31, 2013 follow:
Taxes withheld on compensation
Final withholding taxes
Expanded withholding taxes
=1,843
P
1,289
180
=
P3,312
*SGVFS004156*

For the Year 2013

Transcription

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