2011 Annual Report

Transcription

2011 Annual Report

UCPB 2011 Annual Report / 1
ABOUT THE COVER
2011 Annual Report
Mission is Possible
Vision
“In the middle of difficulty lies
opportunity.” This adage from Albert
Einstein captures the story of UCPB
in 2011.
Even in the toughest environments
that made our mission of ultimately
bringing UCPB back to the top of
the Philippine banking industry
seemingly a daunting or impossible
task, we have proven that hard work
and continuous improvement can
pay off.
With focus on the right priorities
and plans, the right people in place,
and a commitment to the highest
level of execution — these are what
will make the Bank well-positioned
to drive the business further and
achieve sustained growth. These are
what make our MISSION POSSIBLE...
today, tomorrow, and in the future.
2 / UCPB 2011 Annual Report
We will be the best bank for our clients by providing them
the best service in the most inexpensive way possible.
Our Brand
The infinity-like sign in our logo represents two hands
clasping — yours and ours — symbolizing the solid
partnership we seek to build with you. The perpetual
motion depicted in the logo reflects our commitment to
continue innovating to keep abreast of your evolving needs.
Our brand promise:
A bank that makes banking personal by going the extra mile
to understand and meet your needs. “It’s personal.”
About UCPB
UCPB is a leading provider of financial
products and services to corporations,
private and government institutions,
middle-market companies, small - and
medium-sized businesses, and individuals
in the Philippines.
Established in 1963, UCPB was the first
private Philippine bank to become a
universal bank in 1981. The parent
company and its subsidiaries (the Group)
are engaged in all aspects of financial
services such as banking, financing,
leasing, real estate and stock brokering.
As a bank, the parent company is
organized to provide expanded commercial
banking services such as deposit products,
loans and trade finance, domestic and
foreign fund transfers, treasury, foreign
exchange, investment banking and trust
services.
Being always at the forefront of customer
service innovations is among UCPB’s key
strengths. It was among the first banks
to introduce an ATM service in the late
1980s. In 1991, it took the lead with three
other banks in organizing Megalink, the
Philippines’ first shared ATM network.
UCPB has a multi-channel service delivery
network that enables it to meet clients’
needs anywhere in the country, 24/7.
As of end-2011, its network consists of
183 branches and 263 ATMs, as well as
telephone banking and Internet banking
facilities.
Contents
Message from the Chairman
4
Message from the President
6
Financial Highlights
8
Operational Highlights
Branch Banking
Corporate and Consumer Banking
Treasury
Trust Banking
Human Resources
Marketing
10
Corporate Social Responsibility
26
Risk Management
30
Corporate Governance
32
Board of Directors
36
Advisory Council
42
Management Committee
44
Senior Officers
48
Products and Services
51
Audited Financial Statements
54
Branches and Subsidiaries
143
Beyond the business of banking, UCPB
is also a key player in countryside
development. Its UCPB-CIIF Finance
and Development Corp. and UCPB-CIIF
Foundation implement various credit
programs and community-building
activities in 62 of the country’s 64
coconut-producing provinces to help uplift
the quality of life in coconut-producing
communities.
MESSAGE FROM THE
CHAIRMAN
“
Regaining our leadership
in the Philippine banking
industry remains our mission.
We will turn our customers
into strong believers that our
MISSION IS POSSIBLE.
”
44 // UCPB
UCPB 2011
2011 Annual
Annual Report
Report
By nearly every measure, 2011 proved to be a
tough year for many parts of the world. Major
economies, such as the United States and countries
in the Eurozone, continued to reel from fiscal
crises while other parts like the Middle East and
North Africa were marred by political unrests.
Closer to home, some of our Asian neighbors
suffered from a series of natural disasters. Japan
was hit by a massive earthquake that triggered
a devastating tsunami and a nuclear meltdown.
Coupled with the severe flooding in Thailand, this
led to the disruption of the supply chain, affecting
many of the region’s electronics and automotive
industries.
While the global economic contagion still reached
our shores, our much improved macroeconomic
fundamentals were enough to cushion the blows.
As a result, the Philippine economy managed
to post a modest 3.7% growth in gross domestic
product (GDP) in 2011. While this was far from the
7.6% growth in 2010, this was achieved, not only
during a tumultuous period for the global economy,
but during an election year when we experienced
a slump in exports.
Several factors also drove the performance of the
Philippine financial markets:
• Steady inflows from overseas Filipinos’ remittances
and IT/BPO revenues were enough to offset the
outflow of foreign portfolio funds and relatively
stabilized the local currency against the US dollar;
• These inflows also enabled the country to post a
current account surplus in the last eight years and
boost our international reserves to record highs;
• Interest rates continued to fall to historic lows
on benign inflation, ample liquidity and less
aggressive borrowing by the government;
• The Philippine Stock Exchange index emerged as
one of the world’s best-performing markets while
US dollar-denominated Philippine bonds (i.e.,
ROPs) also closed higher versus their levels in 2010.
The Philippine economy’s remarkable performance
has not gone unnoticed as we continued to enjoy
a series of credit rating upgrades from various
international ratings agencies. The goal to achieve
an investment-grade rating is now within reach.
Against the backdrop of a rosy macroeconomic
picture, UCPB continued its strong momentum
in 2011, as we stayed focused on delivering an
outstanding experience for our customers across
the country.
Your Board of Directors is pleased with the
Bank’s performance, achieved once again in a
challenging economic environment. Maintaining
success requires strong plans, adept leadership,
and unwavering alignment — all of which UCPB
continues to demonstrate.
Regaining our leadership in the Philippine banking
industry remains our mission. We will turn our
customers into strong believers that our MISSION
IS POSSIBLE by continuing to keep our focus in
elevating their entire banking experience. We
will also strengthen our resolve to make UCPB a
more relevant and meaningful brand in all the
communities we serve.
Our Board — comprised of diverse and experienced
leaders across the business landscape — remains
committed to overseeing UCPB’s direction and
promoting strong corporate governance. We eagerly
embrace our responsibilities to help ensure the
strength of this great brand moving forward.
We know the business environment remains
challenging. Our gains will continue to be hard
won. But with your investment in our brand and
your support — as well as the hard work and
dedication of our associates and partners — we
are confident of our continuous growth and in
delivering sustainable business results for the longterm benefit of our shareholders.
Speaking on behalf of the Board of Directors,
it is an honor and privilege to serve you, our
shareholders.
Menardo R. Jimenez
Chairman
REPORT FROM THE
PRESIDENT
“
In a year marked by increased
i
market volatility, UCPB
UC
continued to perform well,
setting a new record in
the
profitability, and defying
defy
odds.
”
3
UCPB 2011
2011 Annual
Annual Report
Report
66 // UCPB
In 2011, everywhere you look seemed like bad
news. The stubbornly sluggish economic recovery
in the United States that has led to a period of
prolonged monetary and fiscal stimulus. The
sovereign debt concerns in Europe that continued
to dampen global economic growth. The threat of
rising inflation in emerging markets, coupled with
economic disruptions from natural calamities.
In a year marked by increased market volatility
and persistent concerns about the global economic
challenges that lay ahead of us, UCPB continued to
perform well, setting a new record in profitability,
and defying the odds. In fact, we even reached
another milestone in 2011: the bigger share of
UCPB’s revenues was due to our own efforts.
Our net income grew by 24.90% to PhP3.06 billion
from PhP2.45 billion in 2010. This was the third
year in a row that we have posted positive gains
and surpassed the profitability targets under our
business plan. And we were able to improve our
financial performance year after year through
the positive buildup of our earning assets, a
conservative loan loss provisioning policy, and
improved operating efficiency.
Our net interest income grew by 9.28% in 2011 to
PhP6.61 billion, as the Bank generated more loans
and reduced funding costs. Our deposits expanded
by 7.00% to PhP164.61 billion from PhP153.84
billion in 2010, with low-cost funds growing faster
at 9.38% to PhP111.73 billion from PhP102.15
billion the previous year.
We were able to replace maturing high-cost longterm funds with lower-cost alternatives such as
the issuance of Long Term Negotiable Certificates
of Deposits (LTNCD) amounting to PhP7.59 billion
(including 2010 placements), which also improved
our debt maturity profile to match our long-term
consumer loans. UCPB also benefited from its
subsidiaries’ significant income contributions and
from the sale of nonperforming assets.
Our consolidated loan portfolio expanded by
13.76% to PhP70.52 billion from PhP61.99 billion in
2010. This was mainly due to the sustained growth
of our consumer loans, by 34.53% to PhP18.96
billion from PhP14.09 billion year-on-year. This
heady loan expansion was achieved without
sacrificing the quality of our assets. Our overall
nonperforming loan (NPL) ratio went down to
7.79% in 2011 from 36.32% in 2004.
We have conservatively set aside PhP1.02 billion
in total provision for loan losses to cushion against
any unforeseen economic downturn.
More importantly, we have managed to build up
our capital much faster than what we committed
under our rehabilitation plan. The Bank’s Capital
Adequacy Ratio (CAR) stood at 11.92% in 2011,
meeting the requirement of the Bangko Sentral ng
Pilipinas.
All these achievements were made possible only
through focus, determination and hard work.
In 2011, we renovated a total of 89 branches and
relocated four branches to better locations in line
with our goal to elevate the banking experience
of our customers. We have a total network of 183
branches. We also increased our ATMs to 263 from
242 in 2010 and replaced 223 outdated ATMs with
newer and more efficient ones.
As well as physical improvements, we also invested
in our people, whom we consider as our primary
wealth.We embarked on continuing training
programs to reinforce skills, attitudes and behavior
and the rollout of the sales management process to
drive business growth. Since 2010, our investment
in training has amounted to PhP58.80 million, of
which PhP27.20 million was made in 2011.
Overall, the Bank continues to demonstrate a
strong track record of steady growth. We expect
2012 to be another challenging year for the global
economy, but one that will again test UCPB’s
tenacity to weather any storm.
With the unwavering support of our customers,
stakeholders, associates and our Board of Directors
and Advisory Council, UCPB will regain its
leadership in the Philippine banking industry. We
have proven that this mission is possible, and we
will continue to march on.
Jeronimo U. Kilayko
President and CEO
Investing in Strength
Our 2011 financial results demonstrate our growing strength and stability,
and continuing strategy that position UCPB for long-term success:
• Sustained our position as one of the most profitable universal banks in the Philippines, with a net
income of PhP3.06 billion, 24.90% higher than in 2010;
• Continued buildup of loan assets, low-cost deposit funding growth and improved operating
efficiency led to a Return on Average Capital of 19.49% from 18.05% previously;
• Achieved vast improvement in overall asset quality, with a non-performing loan (NPL) ratio down to
7.79% in 2011 from 36.32% in 2004; and
• Increased capital buildup led to a Capital Adequacy Ratio (CAR) of 11.92% — meeting the
requirement of the Bangko Sentral ng Pilipinas and the prescribed international standard.
Note: Figures above are consolidated UCPB Parent & Subsidiaries.
NET INCOME
CAPITAL
in billion PhP
1.66 2.45
in billion PhP
3.06
12.45
(2.71)
LOANS
in billion PhP
61.99
42.88
Consolidated
TOTAL ASSETS
in billion PhP
164.61
95.78
17.62
3.05
DEPOSITS
153.84
131.86
14.70
in billion PhP
70.52
183.78
162.81
51.86
200.47
119.22
2008
2009
2010
2011
Operating Results
Net Income (Loss) in billion PhP
Return of Average Capital Funds in percent
Return on Average Assets in percent
(2.71)
(49.01)
(1.49)
1.66
21.40
1.18
2.45
18.10
1.4
3.06
19.50
1.6
Resources at year-end
Total Resources
Loans
Deposits
Capital
119.22
42.88
95.78
3.05
162.81
51.86
131.86
12.45
183.78
61.99
153.84
14.7
200.47
70.52
164.61
17.62
Parent Company
2008
2009
2010
2011
Number of Employees
Number of Branches
Number of ATMs
2,692
178
219
2,735
178
227
2,817
183
242
2,883
183
263
in billion PhP
Creating possibilities
UCPB recognizes that the primary reason for its existence is to create value for the nation by
becoming a major source of high-quality capital information. The Bank engages vigorously in all
facets of the universal banking business to strengthen services to the general banking public and
the country’s economic engine continuously and dynamically moving.
9.55%
year-on-year growth
in low-cost funds to
PhP109.41 billion
A NEW EXPERIENCE IN BRANCH BANKING
Branch Banking provides a full range of deposit and lending products to
individual and institutional clients — from depository and loan products,
such as checking and savings accounts; home loans and lines of credit,
credit cards and direct loans for automobiles and other personal financing
needs, as well as products designed to meet the specific needs of small
businesses, including cash management services.
89
branches renovated,
in addition to four
branches relocated
As the needs of our customers evolve, UCPB is looking toward the future
and tailoring offerings to reflect how people want to bank today. To
enhance our customers’ branch banking experience, we renovated a total
of 89 branches and relocated four branches across our footprint in 2011.
We also installed 21 new ATMs in various parts of Metro Manila, Luzon,
Visayas and Mindanao.
Beyond bricks and mortar, we implemented an
enhanced sales management process and introduced
a sales council strategy. Through these Branch
Banking initiatives, our customers can depend on
our knowledgeable and reliable branch associates
to provide banking products and services that meet
their needs and help reach their financial goals.
Proof that we have started reaping the fruits of
these initiatives was the more than 75,000 new
accounts we booked in 2011. The number of our
customer accounts increased to 570,560 in 2011
from 494,674 the previous year. This drove up our
deposit level by 7.08% to PhP160.53 billion from
PhP149.92 billion in 2010. It also raised our low-cost
funds by 9.55% to PhP109.41 billion from PhP99.87
billion, previously.
In addition to deposit generation, our branches also
helped us book PhP3.07 billion worth of housing
loans, personal loans and auto loans; PhP5.6 billion
in Treasury fixed income sales and PhP10.59 billion
in trust placements.
Note: Figures above reflect those of the Parent Company only.
Liwayway Marketing Corporation
Little things count
The Liwayway Marketing Corporation, makers of the Oishi brand of
snack products, is a giant in the food industry.
The company traces its roots to a small family business in post-World War II
Philippines and has since expanded its operations to China in the early 1990s,
and Vietnam, Myanmar, Indonesia, and Thailand in the following years.
In the Philippines, Oishi has remained to be one of the most recognizable names in snack food
items. But when it comes to banking needs, Liwayway still points to the small things that make
UCPB unique. “We have fostered a long-term relationship with UCPB over the years. We value
the warm and friendly people and the reliable and quick response to our requests and queries,
either through the FB Harrison branch or the Corporate Banking Group in the Head Office. The
management had always been supportive of Liwayway,” it said. In Liwayway’s factory in Imus,
Cavite, they have two UCPB ATM’s that serve the needs of employees there.
For Liwayway, which had seen strong growth, not only in the Philippines but also across Asia, UCPB
has always been a steady partner in its expansion. This was rooted, it said, on a solid relationship
that was built over the years.
“China, in the early 1990s, was just beginning to open up, and there was no certainty of success
there. Nevertheless, UCPB was one of the first banks that believed in the vision of our Chairman
Emeritus Carlos Chan to expand the business and set up shop in Shanghai,” the company said.
Today, the Liwayway Group of Companies has its sights
set on Cambodia and India, emerging markets which it
compares to Vietnam in the early 1990s, where it now has
four factories. Its Philippine operations remain active,
with its Tarlac factory becoming operational in 2011. The
local market still holds the highest consumption rate of
Oishi products across Asia.
And as Liwayway continues to explore opportunities
across Asia and perhaps even beyond, it is confident that
UCPB, with its strong tradition of service and dedication,
will remain firmly committed in supporting the Group as
it sets to face the challenges and opportunities of the
coming years.
“We believe we will continue to see this strong
relationship in the coming years,” the company said.
Carlos Chan
Chairman Emeritus
Liwayway Group of Companies
DMCI Homes
A partnership cemented over time
DMCI Homes always takes pride in building homes that are resilient and
affordable. For nearly 60 years now, it has been the developer of choice
for young families because of the communities it helped raise from the
ground.
This is why in securing the foundation for its own future, the
major property developer turned to a similarly sturdy institution.
UCPB was among those who laid one of the first bricks.
“UCPB believed in our projects when we were just starting.
I remember there were still no roads in Taguig then, and
representatives from UCPB would go with us on ocular visits,”
said Alfredo R. Austria, president of DMCI Homes. “The environment was so different then. Access to
financing was much more challenging, but UCPB had always had vision.”
UCPB has always been flexible and competitive — qualities that are crucial in an industry as fast
changing as real estate, said Mr. Austria.
“As you know, documents can be hard to come by when it comes to property. Sometimes, our
documents would be delayed or we would be missing a signature. It takes time to get titles or for
names to be transferred. UCBP always understands the situation and accommodates our requests just
to see through a transaction,” he added.
This close relationship, which started with UCPB Home Loans Group, has today expanded. UCPB,
through its Branch Banking Group, now also services subsidiary DMCI Homes Property Management
Corporation (DPMC), which manages all finished projects of DMCI Homes. The subsidiary is headed by
Ms. Ana Maria A. Ferrer, vice president of the Property Management Office.
DPMC taps UCPB for its wide array of cash management services and electronic banking facilities and
government payments. Through discussions with the Bank, the major property developer was able to
come up with payment schemes that made it easier for its customers to avail of financing. In addition,
UCPB’s deposit pickup facility has also eliminated the risk for employees in depositing payments
collected by DPMC.
“The flexibility is always there. They will always find new ways and means that will allow us to serve
our customers,” he said. “UCBP is a good partner to have.” Mr. Austria stressed.
Ana Maria A. Ferrer, VP for
Property Management Office,
DMCI Homes Property Management
Corporation; and Alfredo R.
Austria, president of DMCI Homes
DEFYING THE ODDS IN CORPORATE & CONSUMER BANKING
UCPB has a long track record of corporate and consumer banking
experience, providing complete financial solutions, as well as
creating total customer relationships. This track record enabled
us to differentiate our products and services from the market
and helped us expand our portfolio.
Amid the feverish competition and the continuous squeeze
in profit margins due to falling interest rates in 2011, our
Corporate and Consumer Banking Group booked PhP57.51 billion
in total loans.
Taking advantage of lending opportunities coming from a broad
range of industries enabled our corporate banking segment
to account for 73.03% of the loan portfolio. Commercial loans
increased by 7.50% to Php42.00 billion from PhP39.07 billion a
year ago.
The consumer loan segment, however, was our bigger source
of growth as our consumer loan portfolio expanded by 33.41%
to PhP15.51 billion. In 2011, we continued to develop trusted
relationships with property developers and auto dealerships and
agents that originate loans on our behalf.
These higher loan volumes, combined with lower funding costs,
boosted our net interest income to P4.84 billion, 16.35% higher
than P4.16 billion in 2010.
33.41%
year-on-year increase in consumer
loans to PhP15.51 billion
7.50%
increase in corporate loans to
PhP42.00 billion
Note: Figures above reflect those of
the Parent Company only.
Finding a perfect partner
Wilbert T. Lee may not own a single share in
UCPB, but this does not stop him from feeling
like a part owner of the bank.
“Ever since LKY started banking with UCPB in May 2010, the bank
had always gone the extra mile for us,” said the president and CEO
of the LKY Group, which owns a chain of hotels and resorts in the
country.
It was the Bank’s Corporate and Commercial Banking Division, he
added, that started this beautiful working relationship when it
granted the company’s initial loan to renovate the former Mayon
Imperial Hotel into a world class 115-room The Oriental Hotel in
Legazpi, Albay. Soon after, UCPB financed LKY Group’s expansion in
the hospitality and accommodations business with the construction
of The Oriental Hotel in Leyte.
LKY Resorts and Hotels, Inc. became the latest addition to the
LKY Group of Companies. It is envisioned to acquire and operate
resorts and hotels and address the growing demand for exquisite
accommodation and first-class service by both international and local tourists. Its primary focus has been
on regional tourist destinations.
Apart from the credit facilities, Mr. Lee also noted the many ways through which UCPB has made banking
efficient and trouble-free. “I’ve always found UCPB to be reliable especially when dealing with an
agreed timetable for loan approval and processing. Never have I encountered a bank that delivers on its
promises and agreements on time. For a businessman like myself, that is very important, as it greatly
affects things like cash flow projections and timely completion of projects,” he said.
The executive even cited instances when the bank accommodated special requests from the LKY
Group, particularly during emergency situations when it needed the helping hand the most. “Several
times, it has made the impossible possible. When we had to rush deposits and withdrawals or when
we have a sudden need for funds because an expected deposit or collection did not materialize, we
can immediately draw from our line. Other banks would normally ask for at least a day to process the
release,” he explained.
“They even extend banking hours just to wait for our deposits. I always
feel lucky being given this kind of excellent service.”
The hospitality business may seem daunting at times, but for Mr. Lee,
building and running a hotel chain had been made easier because of
UCPB’s dependability.
Wilbert T. Lee
President and CEO
LKY Group
A personal business
The business of Harbour Centre Port Terminals Inc. (HCPTI) is certainly
large-scale. But in choosing a banking partner, it prefers those that deal
with its clients “like family.”
“The people behind UCPB have always been very supportive and attentive to our
needs, both corporate and personal,” said HCPTI President and CEO Dr. Michael L.
Romero. “The treatment of every UCPB personnel has always been very sincere.”
“It seems that we are like one family,” he stressed.
HCPTI’s current portfolio includes a 25-year contract to develop, manage and
operate Manila North Harbor, the country’s busiest port, and its very own Harbour
Centre, a multi-purpose private commercial port terminal located within
the 79-hectare port-city complex called Manila Harbour Centre.
Citing consistent economic growth, HCPTI is bullish about business prospects in the country and is
currently working toward increasing the number of its ports, both domestically and in Asia. A dependable
credit facility is therefore crucial.
The 16-year-old company has been banking with UCPB for more than two and a half years now, starting
in December 2009 when the bank’s Corporate Banking Group extended a much-needed credit line for the
firm’s expansion.
Dr. Romero said the “helping hand” has been “memorable” for HCPTI since UCPB came at a trying time
in the company when it needed the financial assistance the most. Its current loan portfolio with UCPB
amounts to more than P600 million, which was used to bankroll the expansion of its port facilities, as well
as provide additional working capital.
Hailed as a first-class business port, HCPTI is also a private
company’s response to the call of the Philippine government for
vigorous private sector participation in the port sector, an area
of investment that is vital in an economy centered on maritime
trade. As it works toward modernizing port facilities, adequate
infrastructure, and updated cargo handling techniques, the
company’s contribution to the national economy is clear.
While Dr. Romero said HCPTI certainly appreciates the efficiency
of UCPB’s services, he stressed that it’s the bank’s service
that will make the company stay for a long time. “UCPB has
always been there to support us. It always goes the extra
mile to support our needs. To me, it has been a very personal
relationship,” he added.
Dr. Michael L. Romero
President and CEO
Harbour Centre Port Terminals, Inc.
Easy breezy owning a home
For any hardworking man, there is nothing more
comforting than to come home to a relaxing
space after a long day’s work. For Jose “Jim”
Alvarez, Jr., this dream became a reality soon
enough.
In June 2011, the president of Kia Motors Ortigas, an authorized
dealer of Kia vehicles and parts, became a proud homeowner after
availing of a home loan from UCPB.
His new place, despite being located right in the middle of the
bustling Makati Central Business District, still maintains an intimate,
cozy ambiance, he said.
“What I like about the place is the neighborly feel of the
community,” Mr. Alvarez explained. “You can see kids playing and
owners walking their dogs. It feels like I am able to escape from the
city whenever I come home.”
While settling in his new house has been a pleasant experience, the process of getting the home loan
could have potentially been very complicated, he said, had it not been for UCPB’s personal touch.
“I bought the unit on an SPV. Since I’m not a banker, I wasn’t very familiar with the process.
Fortunately, my product officer walked me through the whole thing and went the extra mile in making
sure everything was clear to me,” he said.
That person is Smile Wambangco, UCPB assistant vice president and home loans officer. Mr. Alvarez
said she was able to explain in layman’s terms all the nitty-gritty of the loan. “I received excellent
service from start to finish,” Mr. Alvarez said. “It was seamless. All the documents were prepared
ahead of time. Everything was organized. I never had to wait for anything.”
He said UCPB even provided him with a comprehensive checklist detailing the process and all that
he needed to know to conclude the sale. “That was not part of their scope of work, so I really
appreciated the extra effort,” he added.
His new home also serves as an investment. “Property values continue to go up and we have several
more years of growth according to industry experts,” he explained.
Whether it is for investment for the future or simply to find a sanctuary to escape the office routine,
owning your dream home need not be a headache. As Mr. Alvarez could attest, it can be as easy as
ticking items on a checklist.
Jose Alvarez, Jr.
President
Kia Motors Ortigas
A partner in building a life
When Stephen and Riza Rimbon tied the knot, they wanted
a beautiful beginning to what they envisioned was a lifetime
together. And so aside from preparing for the big day, they also
made sure that their lives as a couple would be as trouble-free.
“One of the first things that we wanted was a place of our own,” said Stephen. “We were
thinking of renting an apartment but decided to buy instead. It’s a big investment for us,
but we think it’s worth every centavo.”
The couple was in the thick of wedding preparations when they started applying for a
home loan from UCPB. Needless to say, their busy schedules – juggling the nitty-gritty of
wedding planning while working – meant they had little time for the loan application.
“Between working and attending to all the things for the wedding, we had little time to
spare for all the paperwork involved in applying for a home loan,” Stephen admitted.
Thankfully, he said, UCPB was there to go the extra mile in making sure that not only
would they be able to move in to their new home right after the wedding, but that the
process would be as seamless as possible.
“The process was very convenient for us. For instance, the UCPB Product Officer for Home
Loans, Ms. Princess Chua, was always kind enough to meet us up even after work hours at
a convenient location for us so we could sign some paperwork,” he explained.
But even before the Rimbon couple availed of a home loan, for them UCPB was already
ahead of the competition. “Initially, we were looking at several bank loans, and UCPB
offered the best option for us in terms of rates and payment scheme. And the fact that our
developer is accredited by UCPB made the process a lot easier and faster,” he said.
Their new home in Pasig City is conveniently located near their place of work. The twobedroom unit will surely witness the growth of the young family. For their part, the
Rimbons are just thankful to UCPB for giving them the jumpstart that all newlyweds need.
Stephen Rimbon and wife Riza
UCPB Home Loan clients
A dream home fulfilled
Genaro and Catalina Canzon were attending a house blessing in Cainta,
Rizal when they found themselves absolutely in love with the area.
“Our old house was in Caloocan,” shared Catalina, an accountant. “It was close to the kids’ schools,
and back then that was the priority of the family.”
When their children graduated from college and started working, the location of the house no longer
made sense, she added. It was far from the business districts and made the daily commute from the
house to the workplace a little difficult at times. “When we found out that the front lot was going to
be turned into a wet market, we realized we needed to make a change. The old house was no longer
conducive for family living,” she explained.
And so when they happened to be in the quaint and friendly neighborhood of Greenwoods in Cainta
to attend an officemate’s house blessing, they considered it a blessing in disguise. Even then they
knew that finding a dream house is different from the actual process of acquiring a new property. In
addition, the busy working couple can spare little time in fixing all the paperwork.
“With my line of work, I’m always swamped with things to do. I need a bank that can handle that kind
of schedule. I need someone who’s easy to talk to, that even as early as 7 a.m., I can call them up
and they will tell me what I need to do,” Mrs. Catalina explained. It thus came as no surprise that the
Canzon couple found their experience with UCPB as simply “flawless.”
“We were already happy with the home loan itself, but the service also made a lot of difference,” she
said. “In fact, we were so happy with the loan that we have convinced four other officemates to avail
of home loans from UCPB.”
Even her personal and office car loans are also with UCPB, which Catalina attributes to her “personal
relationship” with the bank. But it was the purchase of the Cainta house — their “dream house,” she
stressed — that solidified the Canzon family’s relationship with the bank. Their spacious home fits four
bedrooms, a swimming pool and a family room where the kids play billiards and darts. The kids love
staying over and bringing home friends.
“Everything that we could want in a home, it’s already here,”
she said. From the location of the house to how it looks, Catalina
said they really could not ask for anything more. Aside from the
newfound convenience and comfort, the house gives her growing
family more chances to enjoy each other’s company.
And with UCPB helping them achieve their dreams, this dream
home will hopefully witness the fulfillment of more.
Genaro and Catalina Canzon
UCPB Home Loan clients
We have fostered a long-term relationship with UCPB over
the years. We value the warm and friendly people and the
reliable and quick response to our requests and queries.
Carlos Chan, Chairman Emeritus, Liwayway Group of Companies
SEIZING OPPORTUNITIES IN TREASURY
2011 was again a very difficult year for the world economy. The lingering sovereign debt crisis of some
nations in the Eurozone caused a widespread loss of market confidence in major economies. The U.S.
economy continued to face a weakening pace of recovery, compounded by the loss of its sovereign triple-A
credit rating.
Asia was not in isolation. Natural calamities in Japan and Thailand caused supply bottlenecks while the
emergence of asset bubbles in China gave rise to fears of a wider economic slowdown in the region.
In this uncertain global economic environment, pockets of volatility, liquidity stress and risk aversion
abound. Inevitably, this tough environment had an impact on the performance of UCPB’s Treasury Banking
Group.
Our Treasury Group was also able to seize better funding opportunities from the increased market liquidity.
In addition to investing in more fixed income instruments, we successfully sold PhP3.12 billion worth of
Long-Term Negotiable Certificates of Time Deposit (LTNCDs), which replaced our costly “double-yourmoney” scheme.
LTNCDs are deposit products that
have higher returns and longer
maturities compared to regular
time deposits. These instruments
were sold through UCPB’s 183
branches nationwide and from the
secondary market after the offer
period.
The oversubscription on our
LTNCDs reflects the resilience
of our earnings power amid the
challenging conditions and the
strength of the franchise we have
built over the years.
7.59
billion pesos of Long-Term
Negotiable Certificates of Time
Deposit issued from 2010-2011
Note: Figures above reflect those
of the Parent Company only.
LEADING THE BUSINESS OF TRUST
While considered one of the best-performing stock markets in
the world, the benchmark Philippine Stock Exchange index (PSEi)
ended 2011 with a meager 4.07% increase, mirroring the volatility
in the global financial markets.
While this drove many local equity-linked funds into a downward
spiral, UCPB’s two equity-based unit investment trust funds
(UITFs) bucked the trend and even managed to rank among the
top three best performers in the local trust industry. This resulted
in a 47.41% increase in our Trust Banking Group’s income to
PhP123.42 million from PhP83.37 million in 2010. Our assets under
management grew 68.78% to PhP95.06 billion from the previous
year’s PhP57.34 billion.
We continued to reap the gains from our conservative investment
strategy, which remains tailor-fit to our clients’ risk appetite.
Offering competitive returns, the United Equity Fund rewarded
investors with an 10.96% rate of return, outperforming the PSEi by
6.89%. The United Balanced Fund provided a 10.36% rate of return,
7.02% higher than the combined 3.35% rates of return of the PSEi and
the HSBC Money Market Index (HSBCMMi). The United Conservative
Fund also gained hefty earnings with an annual return of 7.93%,
higher than HSBCMMi’s 2.26%. United Cash Management Fund also
held its own in terms of fund growth as it posted a 2.78% rate of
return when most time deposits only averaged 2.30%. United US$
Money Market Fund clients also enjoyed a rate of return of 1.51%
when most US dollar time deposits gave a rate of return of 1.40%.
65.78%
growth in assets under
management to PhP95.06 billion
48.03%
increase in trust income
to PhP123.26 million
Our trust funds’ sterling performance did not go unnoticed, as a
survey of 153 retirement funds by Towers Watson again ranked
UCPB as the best performing fund manager in the past three and
five years. With heightened local and foreign buying interest seen
in 2012, UCPB’s Trust Banking Group is again facing bright growth
prospects and gearing up to seize greater opportunities from
improving market sentiments.
MEETING THE DEMANDS IN HUMAN RESOURCES
To effectively respond to the rapidly changing domestic and global economies, we continue to enhance our
associates’ capabilities by pursuing programs that allow them to acquire skills vital to having a knowledgedriven organization and a strong work culture.
In 2011, our HR programs and initiatives focused on improving technical knowhow to address the
requirements of our various sales units. In the branches, we continue to pursue sales trainings and trained
region heads on market intelligence and business analytics to further enhance their sales effectiveness.
Associates in our treasury and trust units were also sent out to training programs and conventions, not only
to build on their technical skills, but also to raise their visibility in the industry and establish networking
opportunities.
To support UCPB’s strategic thrust into consumer financing, we provided the necessary support by beefing up
on organizational resources critically needed to meet our business objectives.
We have put in place the necessary processes and tools that allow our organization to continually learn and
transform itself. We have completed a new Job Evaluation system and revised our Performance Management
system to ensure that performance is closely aligned with our rewards system and the values espoused by
our brand. The new system allows us to monitor and guide the progress of each associate’s career.
Several associates participated in various overseas training programs and international events to help them
gain wider exposure, knowledge and experience. These programs and events were held in ASEAN countries
and one in the United States.
We also continue to engage our associates in different programs — from wellness such as health
management activities and sports events, to corporate social responsibility initiatives — with the goal of
promoting a healthy lifestyle for them and their families. This is part of the culture of “family” that makes
UCPB proud as an organization.
BUILDING THE BRAND THROUGH MARKETING
UCPB embarked on a number of marketing and communication campaigns
to raise brand awareness in a market that is increasingly becoming
competitive. These campaigns, together with various new product initiatives
and product promotions, contributed to strong sales performance.
These products likewise allowed UCPB to effectively reach and serve more
customers, including the growing segment of the overseas Filipinos and their
families:
• The UCPB eMoney Card: A prepaid and reloadable cash card that
individuals and businesses can use to send or receive remittances,
commissions, payroll credits, allowances and other types of payouts.
• The UCPB U-remit Account: a special account for overseas Filipinos and
their beneficiaries. Compared to regular accounts, the UCPB U-remit has lower average daily balance and
maintaining balance requirements. OFWs and their beneficiaries can also choose to keep their money in peso
savings, peso checking and USD savings accounts.
• The UCPB U-remit (Online Remittance) System: A web-based system that remittance companies and UCPB
partners abroad can access to initiate and transmit remittance instructions online. U-remit users are given
the option to use the data entry or the file upload facility in sending the remittance instructions to UCPB.
Auto-email and SMS notifications are sent to the remitters and their beneficiaries for every successful
transaction coursed through the U-remit system.
• Savings account in British Pound and Euro currencies were also added to the foreign currency savings
account offerings on top of US Dollar and Yen Savings. These new account types will enable clients, including
overseas Filipinos, to conduct transactions in various currencies.
In addition to these products, UCPB also enhanced its payroll and bills payment offerings for USD-denominated
transactions, such as USD salaries and payments. We also tapped the Megalink network to provide costeffective and real-time interbank fund transfer service to clients through the Megalink IBFT and BATON
facilities. This allowed our clients to transfer funds to accounts in other Megalink-member banks within
minutes.Through Megalink’s Cross Border Services (MCBS), Mastercard, Cirrus, KFTC and JCB international
cardholders can also use the UCPB ATM to check their account balances and withdraw funds in the local
currency.
To enable clients to send files to the Bank through a secured channel, UCPB also launched a web-based
secured file transfer service. Furthermore, customers are now able to keep abreast of the Bank’s performance
through the enhanced corporate website.
HELPING THE NATION THROUGH
CORPORATE SOCIAL RESPONSIBILITY
True to its mandate, UCPB continued to look after the welfare of coconut farmers by providing several
financing and livelihood programs geared towards bringing long-lasting changes to their lives.
Through the United UCPB-CIIF Finance and Development Corporation (Cocofinance), one of the two
corporate social responsibility arms of the United Coconut Planters Bank-CIIF Group of Companies, a total
of 20,139 coconut farmers in 62 provinces received PhP591 million worth of loans in 2011 under its various
enterprise development programs. Most of the funds were used in crop production and commodities trading
to increase the farmers’ income from coconut trees.
Cocofinance’s programs aim to empower even the smallest of farmers by providing them with additional
income, which can go to their children’s education or further investment in business. It has long partnered
with cooperatives in countless coconut farming communities in the country, believing in the power of
solidarity and a sense of camaraderie in the barangay level.
Other programs that benefit coconut farmers and their families are the following:
• Buklod-Unlad (BUKO): A total of 2,579 wives and daughters of coconut farmers received PhP22.3 million to
open sari-sari stores in their neighborhood, engage in livestock raising or handicrafts.
• Magniniyog Tungo sa Tunay na Pag-unlad (MATUTUPAD) Program: This helps bankroll new coconut
farmer organizations; the Cocopreneur Financing Program, which aims to stimulate the coconut industry
by encouraging entrepreneurs who make use of coconut and coconut derivatives as raw materials; and the
Rural Financial Institutions Micro-Enterprise Credit Program, which facilitates the release of loans to coconut
farmers in areas where there are very few viable cooperatives.
Corporate Social Responsibility
591
From buko to books
UCPB-CIIF Foundation’s flagship program is the COCOFOUNDATION
Scholarship that was launched in 2004 for the children of coconut
farmers.
In 2011, 112 scholars in college and 69 in vocational-technical courses
were added to the growing family of Cocofoundation scholars,
bringing the total number of scholars to 1,433. The scholarship
program produced 40 college degree holders and 56 graduates of voctech courses. There were 387 who graduated from college, of whom
three were magna cum laude and 45 were cum laude honors from
various state colleges and universities. A total of 417 have completed
vocational courses mainly from Don Bosco Training Centers.
million pesos in loans extended
in 2011, benefitting 20,139
coconut farmers in 62 provinces The Foundation also donates educational materials through the UCPB-
22.3
million pesos in loans extended
to 2,579 wives and daughters
of coconut farmers to support
various livelihood oppprtunities
1,433
total number of Cocofoundation
scholars as of 2011
90,000
CIIF’s Kabalikat sa Edukasyon Project. Schools that received beginning
reading kits for grade 1 pupils have reached 421 while 67 other public
schools were given an educational television package with video
lessons for English, Math, Science, Values and History. These aimed to
assist pupils in improving their academic performance and increasing
the retention rate in schools. More than 90,000 pupils in coconutgrowing areas have benefited from this project.
Under the Kabalikat sa Edukasyon infrastructure program, ten schools
located in depressed and primarily coconut-growing communities
received grants for the construction of sanitation facilities such as
comfort rooms and wash areas.
Other CSR initiatives
• Tara Na at Mag-Organic Farming Project: UCPB-CIIF tap scholargraduates who completed agriculture technology courses to teach
organic farming techniques to coconut farmers. This benefited 120
coconut farmers from various cooperatives in Camarines Norte,
Masbate, Cebu and Gingoog City, Misamis Oriental.
• Apprenticeship Programs: Launched in 2009, a total of 112 studenttrainees have undergone the Apprenticeship Program which aims to
expose them to corporate work to become successful professionals
in the future. The bank’s Human Resources Group also hosted a
two-day lecture and observation tour for four faculty members from
Araullo University and Wesleyan University in Cabanatuan and Our
Lady of Fatima College in Valenzuela City. The program aimed to
enhance the quality of teaching in the country’s business schools.
• Calamity Relief Effort: Victims of calamities such as typhoons and
floods received monetary and in-kind assistance from management
and fellow associates — proof of the strong bond within the UCPB
family, especially in times of need.
schoolchildren who benefited
from educational materials
donated under the Kabalikat sa • Operation Smile: UCPB associates and their families participated in
Operation Smile Fun Run to support the charitable organization’s
Edukasyon program of UCPB-CIIF
fund raising activities for its medical missions that benefit children
with necro-facial deformities.
RISK
MANAGEMENT,
COMPLIANCE
& CORPORATE
GOVERNANCE
Operating on sound principles
UCPB recognizes the importance of maintaining a sound system of internal
control across the organization to ensure good corporate governance as
well as to safeguard shareholders’ interest. The system of internal controls
that we have in place enables us to drive our business operations in a more
efficient and effective manner, ensures sound financial reporting and control
procedures as well as compliance with the relevant laws and regulations.
Risk Management
This system of internal controls covers, not only financial controls, but
also controls relating to governance, operations, risk management and
compliance with applicable laws, regulations, rules, directives, guidelines as
well as internal policies, processes and procedures.
The Parent Company and its subsidiaries manage
their respective financial risks separately. The
subsidiaries have their own risk management
procedures 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. The risk
reports of the subsidiaries are noted by the Parent
Risk Management Committee.
The Parent Company’s activities are principally
related to the use of financial instruments. The
Parent Company accepts deposits from customers
at rates set by the Treasury Group depending on
the volume of placements, and for various periods,
and seeks to earn above average interest margins
by investing these funds. The Parent Company
seeks to increase these margins by consolidating
short-term funds and lending for longer periods at
higher rates, while maintaining sufficient liquidity
to meet all claims that might fall due.
The Parent Company also trades in financial
instruments where it takes positions to take
advantage of short-term market movements in
bonds and shares of stocks.
The Parent Company has exposure to the following
major risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
Risk Management Framework
To manage the financial risk for holding financial
assets and liabilities, the Parent Company
operates an integrated risk management system to
address the risks it faces in its banking activities,
including liquidity, credit and market risks. The
Parent Company’s risk management objective is
to adequately and consistently identify, measure,
control and monitor the risk profile inherent in the
Parent Company’s activities.
The Parent Company’s Risk Management Committee
(RMC) has overall responsibility for the creation and
oversight of the Parent Company’s corporate risk
policy and is actively involved in the assessment,
planning, review and approval of all the risks in
the Parent Company’s organization. The Parent
Company also has in place an authorization
structure that defines and sets limits on the type
and value of transactions that each position can
approve.
Within the Parent Company’s overall risk
management system, the Risk Management Division
(RMD) is responsible for managing these risks
in a more detailed and proactive fashion on a
continuing basis through performance of risk and
return analysis.
Our Commitment to Good Corporate Governance
The Board of Directors (Board) of UCPB recognizes that good corporate governance
is and has been fundamental to the long-term success of our business.
Not only has it helped establish the Bank’s
credibility and bolster our corporate reputation, it
has also enhanced our shareholder value, provided
assurance to investors, strengthened the trust of our
customers in our businesses and of our employees
in the organization, as well as improved the overall
competitive positioning of our Bank.
To attain our vision to be the best bank for our
clients by providing them the best service in
the most inexpensive way possible, the Board
places an emphasis on the tenets of transparency,
accountability, integrity and corporate performance
as the prerequisites of a responsible corporate entity.
To ensure the highest standards of integrity, business
ethics and professionalism are upheld across our
organization, we follow a corporate governance
program that is in accordance with the best market
practices and in conformity with the BSP requirement.
Compliance System
The main responsibility for overseeing the planning
and implementation of our compliance efforts rests
with our Chief Executive Officer, assisted by our
Chief Compliance Officer.
Under recent regulatory mandates, UCPB’s
Compliance System now cover:
• Regulatory Compliance Risk Management –
identifies, asseses, monitors and mitigates risks
of legal or regulatory sanctions, financial loss that
UCPB may suffer as a result of its failure to comply
with all applicable laws, rules and regulations.
• Corporate Governance Risk Management – ensures
high ethical standards of business conduct and
good governance principles of transparency,
accountability and fairness governs within UCPB.
• Reputation Risk Management – identifies, asseses,
monitors, mitigates risks and potential risks
resulting from Management’s processes and
decisions that may negatively affect UCPB’s
reputation, market standing and public trust.
• Anti-Money Laundering Act and Terrorist Financing.
Under the compliance program is the enforcement
of the Anti-Money Laundering Act and Terrorist
Financing (AMLTF). We have developed the
Customer Due Diligence and risk rating policy that
requires all our business units to fully establish
our client’s identity. This covers policies on
accountabilities, account opening, monitoring,
records retention and reporting.
We are using a BSP-compliant system that helps
business units and branches efficiently monitor
transactions.
Board of Directors
The Board is responsible for governing the business
and affairs of the Bank and for exercising all such
powers pursuant to our articles of incorporation.
While carrying out their duties and responsibilities,
the Board is committed to ensuring that the highest
corporate governance standards are adhered to.
The overall principal responsibilities of the Board of
Directors are as follows:
• providing strategic leadership to the Bank;
• reviewing, approving and monitoring the
implementation of the Bank’s strategic business
plans and policies;
• ensuring the Bank maintains an effective system
of internal controls and are able to identify and
manage principal risks resulting in efficiency in
operations and a stable financial environment;
• acting as a guardian of the Bank’s corporate
values and ethical principles in parallel with the
goal to enhance shareholders’ value;
Governance Structure
UCPB’s governance model conforms to the relevant regulatory requirements as well as best market practices.
To implement and oversee our adherence to good corporate governance principles, we have adopted the
following structure in our bank:
Shareholders
Board of Directors
Board Committees
Assists in the general
supervision, administration and
management of the Bank
Audit
Executive
Ensures that the auditing,
accounting, financial management
principles and practices are in line
with international and Philippine
best practices and conform with
all legislative and regulatory
requirements
Compensation and Remuneration
Assists the Board in fulfilling its
responsibilities as related to the
development of criteria and goals for
the Bank’s compensation policy. The
Committee reviews, evaluates and
recommends to the Board the benefit
plans and compensation policy for the
Bank and wholly owned subsidiaries.
Trust
Manages the Bank’s
trust and fiduciary
activities
Ensures that the principles of
good corporate governance of
transparency, accountability and
fairness shall govern the conduct
of business of UCPB and UCPB
Group
Coconut Farmers
Program Development
Supports and assists in the
development and implementation
of impact projects beneficial
to the small and marginalized
coconut farmers
Legal Oversight
Recommends to the Board policies
and guidelines in case management
including the adoption of legal
strategies in important cases
for or against the Bank. The
Committee shall render oversight
in the monitoring, supervision and
handling of cases by the Bank’s
external counsels, as well as by its
internal lawyers.
Risk Management
Assists the Board in performing
its oversight functions to
manage the risks of the Bank
Corporate Social
Responsibility
Spearheads the formulation and
implementation of the Bank’s
initiatives to contribute to national
development, with particular
focus on the coconut industry,
thereby promoting the welfare of
underprivileged sectors of society,
primarily the small coconut farmer
communities and other marginalized
communities in areas where the Bank
conducts its business, through the
active involvement and participation
of the Bank’s associates in such
initiatives and the prudent and
expedient allocation of the Bank’s
other resources
• monitoring and evaluating the performance
of the Management Team to ensure that the
performance criteria remains dynamic; and
• ensuring the formulation of a succession plan
for long-term business continuity.
as are granted to it by law or reasonably necessary
to accomplish the purpose or purposes for which
the Bank is formed.”
Thirteen out of 15 members of the UCPB Board are
Independent Directors. They ensure that there is an
effective check and balance in the functioning of
the Board. They meet the criteria of independence
as they are not involved in the day-to-day
management of the Bank, nor do they participate
in any business dealings of the Bank. This ascertains
that they remain free of any conflict of interest and
can undertake their roles and responsibilities in an
effective manner.
Composition
According to the Bank’s by-laws, “The Corporate
powers of the Bank shall be vested in and
exercised, its business conducted, and its property
controlled by a Board of Directors composed of
fifteen (15) members.” It further states that: “The
Board of Directors shall always act in the best
interest of the Bank in a manner characterized
by transparency, accountability and fairness.
The Board of Directors, entrusted with trust and
confidence, shall direct and supervise the affairs
of the Bank under its collective responsibility, shall
exercise such powers and perform such functions
Being the governing body of a major financial
provider, the Board recognizes that its Members
must have the appropriate mix of skills as well as
the necessary knowledge, experience and
Attendance in UCPB Board Meetings in 2011
Board of Directors
01.07
01.28
03.01
03.08
03.18
03.24
04.28
05.26
06.30
08.04
08.11
08.25
09.29
10.27
11.15
Menardo R. Jimenez
11.24
12.16
Total
Present/Absent
14 / 0
Jeronimo U. Kilayko
2/0
Datu Mao K. Andong, Jr.
17 / 0
Arthur A. Bautista
13 / 1
Raul V. Del Mar
15 / 2
Nilo T. Divina
13 / 0
Karlo Marco P. Estavillo
15 / 2
Angela E. Ignacio
14 / 0
Higinio O. Macadaeg, Jr.
11 / 3
Cristina Q. Orbeta
17 / 0
Jose Alfonso A. Poblete
14 / 0
Danilo V. Pulido
14 / 0
Oscar C. Solidor
17 / 0
Efren M. Villaseñor
17 / 0
John Y. Young
13 / 1
Advisory Council
Andres D. Bautista
12/ 2
Richard R.T. Amurao
12 / 2
Valentin A. Araneta
3/0
Jovencito R. Zuño
7/1
Jeronimo U. Kilayko
7/0
Corporate Secretary
Jose A. Barcelon
17 / 0
Legend:
Present
(Regular Meeting)
Present
((Special Meeting)
On official business
Absent
commitment to effectively contribute towards the
growth and expansion of the Bank.
Being on the Board of a financial institution, Board
Members are required to be responsive to the
constantly changing global financial landscape.
The Board regularly reviews its own composition
to ensure that appropriate balance is maintained
and that there is an adequate mix of skills and
experience. Directors attend corporate governance
seminars conducted by accredited government or
private institutions prior to assumption of office.
Every year, we conduct a self-assessment of our
corporate governance practices, covering all the
members of the Board, Board meetings, Board
committees, and various related issues. Our 2011
self-rating indicated that we have fully complied
with the best practices in corporate governance.
Board Meetings
The Board held a total of 17 meetings in 2011 to
discuss business strategy, financial performance,
matters pertaining to compliance and governance,
as well as reports on matters deliberated by Board
Committees and their recommendations. The Board
also reviewed regular management reports and
information on corporate and business issues to
assess performance against business targets and
objectives.
Apart from the regular monthly meetings, the Board
also held special meetings to discuss directions or
decisions that required expeditious action between the
scheduled meetings.
Board Committees and Composition
To be able to devote more time for strategic and
critical matters, the Board has delegated specific
responsibilities to the following Board Committees:
Executive Committee
Jeronimo U. Kilayko
Chairman
Cristina Q. Orbeta
Arthur A. Bautista
Ma. Angela E. Ignacio
Trust Committee
Menardo R. Jimenez
Jeronimo U. Kilayko
Alexandra C. Deveras
Nilo T. Divina
Legal Oversight Committee
Raul V. Del Mar
Chairman
Nilo T. Divina
Coconut Farmers Program Development Committee
Chairman
Jeronimo U. Kilayko
Raul V. Del Mar
Oscar C. Solidor
Compensation & Remuneration Committee
Menardo R. Jimenez
Chairman
Jeronimo U. Kilayko
Cristina Q. Orbeta
John Y. Young
Corporate Governance Committee
Danilo V. Pulido
Chairman
Jeronimo U. Kilayko
Nilo T. Divina
Corporate Social Responsibility Committee
Jeronimo U. Kilayko
Chairman
Oscar C. Solidor
John Y. Young
Audit Committee
Cristina Q. Orbeta
Chairman
Arthur A. Bautista
Danilo V. Pulido
Risk Management Committee
Menardo R. Jimenez
Jeronimo U. Kilayko
Arthur A. Bautista
Cristina Q. Orbeta
Chairman
Chairman
Board of Directors
Chairman of the Board of Directors, UCPB; Chairman, Fibers Trading Inc., Majent
Management & Development Corporation, Menarco Holdings, Inc., Meedson Properties
Corporation, Nuvoland Philippines Inc., Opticolors Inc., and Association of Abaca Pulp
Manufacturers, Inc.; Chairman and Director, CBTL Holdings, Inc. and Coffee Bean and
Tea Leaf Philippines; Director, President and CEO, Albay Agro Industrial Development
Corporation; Board Director, San Miguel Corporation, San Miguel Purefoods Co. Inc.,
Magnolia Inc., Mabuhay Philippines Satellite Corporation, Unicapital Finance and
Investments, Inc., Unicapital, Inc., Blue Crystal Ocean Holdings, Inc., Dasoland Holdings
Corporation, Laubach Road Holdings, Inc., Letras Y Figuras Holdings, Inc., Mandarine
Tree Holdings, Inc., Pan Phil. Aqua Culture Corporation, Redfoot Holdings, Inc. and
Philippine Chamber of Commerce and Industry; Member of Board of Trustees, Foundation
for Crime Prevention and Teodoro F. Valencia Foundation, Inc.; Commissioner, Patrol
117 Commission; Member, Philippine Chamber of Commerce & Industry-Council of
Business Leaders, Philippine Institute of Certified Public Accountants, Manila Overseas
Press Club, Philippine Constitution Association and FEU Alumni Foundation, Inc.; Former
President and CEO, GMA Network, Inc.; Doctorate in Business Management (Honoris
Causa), University of Pangasinan; Doctorate in Business Management (Honoris Causa),
Pamantasan ng Lungsod ng Maynila; Doctorate in Communications (Honoris Causa),
Polytechnic University of the Philippines; Certified Public Accountant; Bachelor of Science
in Commerce, Far Eastern University
Menardo R. Jimenez
Chairman
Jeronimo U. Kilayko
Director, President and CEO
Director, President and CEO, UCPB; Chairman, UCPB Savings Bank, UCPB Leasing
and Finance Corporation, UCPB Securities, Inc. and United Foreign Exchange
Corporation; President, Techinfo Solutions and K5 Distribution; Director, AFC
Merchant Bank in Singapore, Megalink, United Coconut Chemicals Inc. and 14
holding companies; Vice Chairman, UCPB CIIF Finance and UCPB Foundation;
Former Director and Vice Chairman, Bank of Commerce; Former Director and
Vice President, Central Visayas Finance Corporation; Former Chairman and
Chief Executive Officer, UCPB, CIIF Oil Mills, UCPB General Insurance Co.
Inc., United Coconut Planters Life Assurance Corporation and United Coconut
Chemicals, Inc.; Former Director and President, San Miguel Properties; various
executive positions in Asean Finance Corporation Ltd.-Singapore, IBI Asia, Bank
of America, Merill Lynch and Land Bank of the Philippines; Bachelor of Science
in Liberal Arts and Commerce, De La Salle University
Director
Director, UCPB; National Chairman, Kaunlaran ng mga Magsasaka at
Manggagawa ng Pilipinas; Chairman, South & West Mindanao Coconut
Farmers Congress (SOWESMINCOCO); Director, Kaunlaran Magsasaka, Inc.;
National President, Coconut Peasants’ Reform Alliance; Vice President,
Mindanao Pambansang Koalisyon ng mga Samahan ng Magsasaka at
Manggagawa sa Niyugan; Consultant and former Director, United Coconut
Planters Life Assurance Corporation; various executive positions in
government; Bachelor of Arts in Economics, Gregorio Araneta University
Foundation
Arthur A. Bautista
Director
Director, UCPB; President, Kuya’s at the Fort/Jed and Julian’s; former
President, First Federal Consultants Corporation and Sorbetes Pinoy; senior
executive positions, Bank of the Philippine Islands, Citytrust Banking
Corporation, Financial Transaction Corporation, USA, and Fil-Pride Philippines;
Candidate, Master in Business Administration, De La Salle Graduate School
of Business; Bachelor of Science in Business Administration, De La Salle
University
Atty. Raul V. Del Mar
Director
Director, UCPB; former Deputy Speaker, House of Representatives for two
terms; former Congressman, Cebu City-1st district for six terms; former
Commission on Appointments Head, House of Representatives contingent for
two terms; 20 years perfect attendance in House plenary sessions; principal
author of 48 laws; Papal Awardee, “Croce Pro-Ecclecia et Pontifice” conferred
by Ricardo Cardinal Vidal; Bachelor of Laws, Ateneo De Manila University;
Doctor of Humanities (Honoris Causa), Cebu Normal University
Doctor of Philosophy in Technology Management (Honoris Causa), Cebu
Technological University; Past President, Cebu Chamber of Commerce and
Industry, Rotary Club of Cebu East and Cebu Jaycees; Paul Harris Fellow,
Rotary International; Jake Gonzales Fellow, Jaycees International
Atty. Nilo T. Divina
Director
Director, UCPB; Author, 2010, 2005 Handbook on Commercial Law and
various law articles; Founder and Managing Partner, Divina and Uy Law
Office; Dean, Law Professor and Bar Reviewer, University of Sto. Tomas;
Held senior executive positions in Equitable-PCI Bank, and Philippine Charity
Sweepstakes Office; Recipient, 2005 Most Outstanding Male Faculty Award;
Finalist, search for the Ten Most Outstanding Students of the Philippines;
Awardee, Manuel Luis Quezon Award for Exemplary Leadership, University
of Sto. Tomas; Rector’s Awardee for academic excellence, University of
Sto. Tomas; Member, Philippine Bar; International Tax Law Post-Graduate
Diploma, Robert Kennedy College, Switzerland; Bachelor of Laws (magna
cum laude), University of Santo Tomas; Bachelor of Arts in Behavioral
Science (cum laude), University of Sto. Tomas
Atty. Karlo Marco P. Estavillo
Director
Director, UCPB; General Manager, San Miguel Properties, Inc.; Fellow and
Corporate Secretary, Asia-Pacific Policy Center; Assistant Corporate Secretary, The Diamond Hotel; Legal Counsel and Corporate Secretary, various
private corporations; Bachelor of Science in Business Management, Ateneo
de Manila University; Bachelor of Laws, College of Law, University of the
Philippines
Director
Director, UCPB; Commissioner and Undersecretary, Governance Commission
for Government-Owned or –Controlled Corporations; Director, UCPB Savings
Bank and UCPB Securities, Inc.; Former Vice President, Philippine Deposit
Insurance Corporation; Former Special Assistant to the Secretary of Finance,
Department of Finance; Former President, Technistock Corporation; Held
senior executive positions in Lincoln Indicators Australia, Kim Eng Securities
(Philippines) Inc.; Masters in Applied Finance, University of Melbourne,
Australia; Certificate for Outstanding Achievement in the Masters in Applied
Finance Program, University of Melbourne, Australia; Diploma in Financial
Services, PS146 Training Australia; Bachelor of Science in Applied Economics
and Bachelor of Science in Commerce major in Management of Financial
Institutions, De La Salle University; Best Thesis, De La Salle University
Economics Department, 1993; “Financial Distress Prediction Models in the
Philippines”; Certified Finance and Treasury Professional (CFTP), Australia
Board of Directors
Director
Director, UCPB, UCPB Properties, Inc., UCPB Leasing and Finance Corporation,
UCPB Securities, Inc. and United Foreign Exchange Corporation; Executive
Vice President and Head of Corporate and Consumer Banking Group, UCPB;
held senior executive positions in Equitable-PCI Bank, Metropolitan Bank and
Trust Company, Solidbank Corporation, Standard Chartered Bank and Citytrust
Banking Corporation; Advanced Management Training Program, Wharton
School, University of Pennsylvania; Bachelor of Science in Management,
Ateneo de Manila University
Cristina Q. Orbeta
Director
Director, UCPB, UCPB Savings Bank and UCPB Leasing and Finance
Corporation; Executive Vice President, Philippine Deposit Insurance
Corporation; former Director, Bangko Sentral ng Pilipinas; former Executive
Director, Central Bank Board of Liquidators; held senior executive positions
in Calyon Manila Offshore Branch, Credit Lyonnais Manila Offshore Branch;
former consultant, the United Kingdom’s Department for International
Development, Asian Development Bank and the World Bank; Master of Public
Administration, Harvard University; Master in Economics and Bachelor of
Arts in Mathematics (magna cum laude), University of the East
Director
Director, UCPB; Founder and Managing Director, Assistforce, LLC, California
and Tri-Globe, LLC, California; held executive positions in MC Kesson
Corporation, USA , Kaiser Foundation Health Plan, Inc. USA, Bancom
Development Corporation and SGV and Co.; Recipient, Sixto Roxas Award for
Excellence in Economics, De La Salle University; Master in Health Services
Administration, St. Mary’s College, Moraga, California; Master of Management,
Kellogg School of Management, Northwestern University, Illinois; Bachelor of
Arts (Honors Program) major in Economics, De La Salle University
Danilo V. Pulido
Director
Director, UCPB; Chairman and President, Emilia Properties, Inc.;
former Director, Rural Bank of Sanchez Mira; held senior executive
positions in Philippine National Bank, Philippine Exchange Company,
National Investment and Development Corporation; Master of Business
Administration, University of the Philippines; Bachelor of Science in
Business Administration, University of the Philippines
Oscar C. Solidor
Director
Director, UCPB; Chairman, Alyansa Sa Mga Timawang Mag-uugmad sa
Amihanang Mindanao (ATIMAN-MINDANAO); Secretary-General, Lakas ng
Magsasakang Pilipino (LMP); Council Member, Pambansang Kilusan ng mga
Samahang Magsasaka at Manggagawa sa Niyugan (PKSMMN); Member, Caraga
Conference for Peace and Development (CCPD); Bachelor of Science in
Agriculture, Central Mindanao University
Director
Director, UCPB; Chairman and Founding Member, Quezon Farmers
Cooperative; National President, Pambansang Koalisyon ng mga Samahan
ng mga Magsasaka at Manggagawa sa Niyugan; President and Founding
Member, Coconut Farmers Federation for Rural Advancement; Founding
Member, Coconut Farmers Technology Center – Southern Tagalog Region
and the Katipunan ng mga Magsasaka at Mangingisda ng Pilipinas - Northern
Samar; Founder, Samar Island Peasant Alliance Group (SIPAG); Municipal
Development Assistant, Municipality of Lopez in Quezon; Community Affairs
Officer, Bondoc Development Program; Former Alternate Commissioner,
Farmers Sector Council of the National Anti-Poverty Commission
John Y. Young
Director
Director, UCPB; President and CEO, Ginza Restaurant Inc. and JEDCOR
Development Corporation; President, Wander Lanes Travel Co. Inc. and
Victor D. Young Enterprises; Board Member, Cebu Southern Motors and Royal
Winds Inc.; Bachelor of Science in Commerce, University of San Carlos
Atty. Jose A. Barcelon
Corporate Secretary
Corporate Secretary, UCPB, UCPB Savings Bank, UCPB Properties, Inc.,
UCPB Securities, Inc., UCPB Leasing and Finance, United Coconut Planters
Life Assurance Corporation, UCPB General Insurance, Inc., and Cocoplans;
Head, UCPB Legal Services Group; former Director and Corporate
Secretary, United Coconut Planters International, United Funds, Inc.,
Silahis Marketing Corporation, Minola Refining Corporation, San Pablo
Corporation and Granex, U.S.A.; former Partner, R.B. Ancheta Law Office
and Mendoza and Barcelon Law Office; former Special Legislative Officer,
Senate of the Philippines; Bachelor of Laws and Bachelor of Arts in Political
Science, University of the Philippines, Diliman
Board of Directors
3
6
4
5
1
2
7
1 Menardo R. Jimenez
5 Arthur A. Bautista
2 Jeronimo U. Kilayko
6 Atty. Karlo Marco
3 Oscar C. Solidor
7 Ma. Angela E. Ignacio
4 Higinio O. Macadaeg, Jr.
8 Datu Mao K. Andong, Jr.
Chairman
Director, President
and CEO
10 Jose Alfonso A. Poblete
14 Atty. Nilo T. Divina
11 Cristina Q. Orbeta
15 Danilo V. Pulido
12 Efren M. Villaseñor
16 Atty. Jose A. Barcelon
Director
Director
Director
Director
Director
Director
Director
Director
Director
P. Estavillo
Director
Director
13 Atty. Raul V. Del Mar
9 John Y. Young
Director
Corporate Secretary
Director
12
9
16
14
10
15
13
8
11
Advisory Council
Atty. Andres D. Bautista
Chairman
Chairman, Advisory Council, UCPB; Chairman, Presidential Commission on
Good Government; Interim Chairman, United Coconut Planters Life Assurance
Corporation (Cocolife), UCPB General Insurance Inc., United Coconut
Chemicals, Inc. (Cocochem), UCPB-CIIF Finance and Development Corporation
and UCPB-CIIF Foundation; Executive Committee Chairman and Director, CIIF
Oil Mills Group; Co-founder, Master in Business Administration-Juris Doctor
Program, De La Salle Graduate School of Business and FEU Institute of Law;
Columnist, The Philippine Star; President, Harvard Club of the Philippines;
Master of Laws, Harvard Law School; Bachelor of Laws (valedictorian), Ateneo
Law School
Atty. Richard R.T. Amurao
Adviser
Adviser, UCPB; Commissioner, Presidential Commission on Good Government;
Board, Chemfields Inc. and Independent Realty Corporation; Consultant,
Asian Development Bank; Held various positions in government, including
the Office of the President of the Philippines and Department of Justice;
Master of Laws (with honors), London School of Economics and Political
Science, United Kingdom; Juris Doctor-Evelio Javier Leadership awardee,
Ateneo De Manila University; Bachelor of Arts in Management Economics,
Ateneo de Manila University
Valentin A. Araneta
Adviser
Adviser, UCPB; President and Vice Chairman, Philippine Deposit Insurance
Corporation; Member, Board of Trustees, Finex Research & Development
Foundation; Former Independent Director, Metropolitan Bank & Trust Company;
Former President and Chief Operating Officer, Rizal Commercial Banking
Corporation; Former Vice Chairman, Great Pacific Savings Bank; Former Senior
Executive Vice President and CEO, Director, Philippine National Bank; Bachelor
of Arts in Economics, Ateneo de Manila University; Advanced Management
Program, Wharton, University of Pennsylvania
Atty. Jovencito R. Zuño
Adviser
Adviser, UCPB; Associate Director, Institute of Corporate Directors; Legal
Consultant, Senate Blue Ribbon Committee; Member, Melo Commission;
Lifetime Member/Adviser/Coordinator, National Prosecutors League of the
Philippines; Member, Rotary Club of Rosario, Batangas; Former Chief State
Prosecutor, Department of Justice; Outstanding Prosecutor, Consumers
Union of the Philippines; Awardee for Judicial Excellence, Guillermo B.
Guevarra Award; Bachelor of Laws, University of the East; Bachelor of Arts
(outstanding alumnus), Lipa City Colleges
Atty. Jovencito R. Zuño
Adviser
Atty. Richard R.T. Amurao
Adviser
Valentin A. Araneta
Adviser
Atty. Andres D. Bautista
Chairman
Management Committee
(as of May 2012)
1
2
3
7
8
9
13
14
15
1 Jeronimo U. Kilayko
President and CEO
2 Cesar A. Rubio
Chief Finance Officer,
Executive Vice President and Head,
Support Services Group
3 Edmond E. Bernardo
Branch Banking Group
4 Eulogio V. Catabran III
Treasury Banking Group
5 Higinio O. Macadaeg, Jr.
Corporate Consumer Banking Group
6 Evangelina P. Samonte
Operations Group
7 Ramon B. Tañafranca
Information and Technology
Management Group
8 Atty. Jose A. Barcelon
Senior Vice President and Head,
Legal Services Group
9 Rosario M. Dayrit
Human Resources Group
4
5
6
10
11
12
16
17
18
10 Norman Martin C. Reyes
Marketing Group
11 Alexandra C. Deveras
Trust Officer, First Vice President and
Head, Trust Banking Group
12 Franco P. Magalong
Chief Risk Officer, First Vice President and
Head, Risk Management Division
13 Ildefonso R. Jimenez
Corporate Secretary,
First Vice President and Head,
Office of the Corporate Secretary
14 Pinky S. Derequito
First Vice President and Head,
Internal Audit Division
15 Frank C. Capalongan
Chief Compliance Officer, Vice
President and Head, Bank
Compliance Division
16 Aristides S. Armas
President, UCPB Leasing and
Finance Corporation
17 Vincent K. De Leon
President, UCPB Securities, Inc.
18 Joseph C. Justiniano
President, UCPB Savings Bank
Senior Officers
(as of May 2012)
BANK COMPLIANCE DIVISION
FRANK C. CAPALONGAN
Chief Compliance Officer, Vice
President and Head,
Bank Compliance Division
ARTURO D. SAYAO, JR.
Assistant Vice President 2 and Head
Operations Department
ANTONIO C. ROMERO
Anti-Money Laundering Department
BRANCH BANKING GROUP
EDMOND E. BERNARDO
NOEL T. CALALANG
Vice President and Head
Branch Banking Support Division
JOSEFINA M. CARAOS
Vice President
BM, Main Office Branch
RODOLFO G. DE GUZMAN
North-Central Luzon Region
RONALDO E. ELAMPARO
West Metro Manila Region
NATIVIDAD R. FRANCISCO
East Metro Manila Region
ANTHONY EVAN A. LLUCH
Mindanao Region
MANUEL R. MACAM
South Metro Manila Region
ANGEL H. MOJICA
North Metro Manila Region
MODESTO M. SICANGCO
Visayas Region
RENE A. ALIMAGNO
Assistant Vice President 2
BM, Lipa-Recto Branch
CLARA JEAN F. ARCE
BM, Ortigas Branch
CARMINDA A. BACULI
BM, Novaliches Branch
HERMILO A. BAGABALDO
BM, Lacson-Galo Branch
EVANGELINE R. BALASBAS
BM, P. Tuazon Branch
CRISPULO B. BALTAZAR, JR.
BM, Solano Branch
FRANCISCO M. BASA, JR.
Branch Services Department
VOLTAIRE REX C. CASTRO
BM, Ayala Branch
ROWENA Z. CATOLOS
BM, Pioneer Branch
SOCORRO S. CHUA
BM, T. M. Kalaw Branch
ELIZABETH D. ORBE
BM, Karuhatan Branch
ROSITA R. CARREON
BM, Tomas Morato Branch
JANE V. DE GUZMAN
BM, Baguio Branch
FIEL AMOR J. PACLEB
BM, Tordesillas Branch
CIELITO L. CELADA
BM, Lagro Branch
MARILU P. DE GUZMAN
BM, New Manila Branch
JESSICA S. PANGILINAN
BM, Tarlac Branch
ERLINDA P. DACANAY
BM, Mindanao Avenue Branch
ALICE R. DE VERA
BM, Marikina Branch
EVELYN B. PASAJOL
BM, Bohol Avenue Branch
MERLINE S. DELA CRUZ
BM, San Miguel Branch
ELIZABETH B. DEE
BM, Juan Luna Branch
NEPTALI F. RAMOS
BM, Laguna Branch
ALEXANDER L. DIMACUHA
BM, Araneta Avenue Branch
SUSAN C. DESAMERO
BM, Dela Rosa Branch
JOSE MARI V. REYES
Branch Automation Support
Department
CLARISSA R. DULATRE
BM, Chino Roces Branch
ROSALINDA T. DOMINGO
BM, Guadalupe Branch
CEFERINO T. DULDULAO
BM, West Avenue Branch
GUILLERMA M. ESPIRITU
BM, Subic Branch
NOEL G. GERAPUSCO
BM, Jaro Branch
CHONA LESLIE R. GOCO
BM, Calapan Branch
JOCELYN T. GOMEZ
South Luzon Region
JOSE JERIC E. GOMEZ
BM, San Pablo Branch
LOLITA A. GONZALES
BM, BF Parañaque Branch
NEBELLEE M. GUMBAN
BM, San Pedro-Davao Branch
JOCELYN G. HERNANDEZ
BM, Lemery Branch
EVELYN E. HERRERA
BM, Centro-Lucena Branch
IRENE L. LIM
BM, Escolta Branch
MA. CECILIA V. LIM
BM, Velez Branch
ROMEO S. LINDAIN
BM, Herrera Branch
JUAN P. LIWAG
BM, McKinley Hill Branch
EVA MARIE N. MAGNO
BM, Cambridge Branch
MERVYN NICASIO M. MAGNO, JR.
BM, Butuan Branch
ROMEO G. MILLERA
BM, Sucat Branch
ROLANDO V. ROBIÑOL
BM, Sta. Rosa Branch
MA. CRISTINA B. ROBLEDO
BM, Commonwealth Branch
MA. DINAH V. SACRO
BM, Puyat-Bautista Branch
ROSALYN R. SALINAS
BM, Lipa-Big Ben Branch
SAMUEL L. SANTOS
BM, San Fernando Branch
RAYMUNDO A. SARANZA
BM, Tagbilaran Branch
EMILY D. SERRANO
BM, Caloocan Branch
MONINA A. SUNGA
BM, Blueridge Branch
MA. THERESA D. TAMAYO
BM, F.B. Harrison Branch
MA. THERESA T. DY
BM, Pasong Tamo Ext. Branch
JESUS PROSPERO K. ESTARIS
BM, Boni Avenue Branch
ROSARIO IRENE L. FERNANDO
BM, West Avenue Branch
PABLO C. FORMARAN III
BM, Marvin Plaza Branch
MINA C. GAN
SO, Hanston Square Branch
MERCEDITAS ASSUMPTION A. GUEVARA
BM, Roxas Branch
ROMANA M. HIZON
BM, Paso de Blas Branch
JOEL VICTOR P. JAVIER
BM, Pasay Road Branch
ALERIS A. JOVEN
BM, Masinag Branch
LEILA O. TERTE
BM, Lucena Guinto Branch
GEMMA C. LACAMBRA
Branch Marketing Support Dept.
MA. CHRISTINA V. UNTALAN
BM, Muñoz Branch
CLARITA V. LUBER
BM, Metropolitan Branch
JAIME C. YU, JR.
BM, Cauayan Branch
ARTURO A. MACAM, JR.
BM, Banaue Branch
MA. ANA T. ABALA
BM, San Andres Branch
JONATHAN M. MALIGAYA
BM, Daet Branch
MARISSA D. AUYONG
BM, Mandaluyong Branch
GINA S. MERCADO
BM, P. Ocampo Branch
ANGELA L. BAES
BM, Zamboanga Branch
RODRIGO H. PADA
BM, Tektite Branch
MA. CRISTINA V. BALAOING
BM, E. Rodriguez Branch
DOLORES M. PALO
BM, Loyola Heights Branch
VICTORIA C. BERNAL
BM, Quirino Highway Branch
CRISANTIAGO T. PAROJINOG
BM, Cogon Branch
Senior Officers
(as of May 2012)
LORELEI P. PLETE
BM, Vigan Branch
ALEXANDER M. BORJA
RM, CCBD-Metro Manila 2
MA. LOURDES CARIDAD B. PONCE
BM, Banilad Branch
MA. CRISTINA J. CORONA
RM, CCBD-VISMIN Area
GINA K. REYES
BM, Baliuag Branch
MILAGROS A. CRUZ
GRACE S. SABINO
BM, Limay Branch
KRISTINE MARIE G. CUEVAS
Assistant Vice President 2 and Head,
Personal Loans Department
ROSARIO M. DAYRIT
Senior Vice President and Head
Human Resources Group
MICHAEL S. RABENA
Computer Operations Section
ARTURO JEROME J. SALCEDO
BOO, Cambridge Branch
LEONCIO M. ESTACION
Collection and Asset Recovery Department
MA. ELENA I. REFULGENTE
Automation Support Section
MARY ANN H. SALGADO
BM, Libertad-Bacolod Branch
MARY JEAN A. GO
CYNTHIA C. DE RIVERA
Customer Quality Management
Division
GUILBERT P. SAMPEDRO
BM, Global City Branch
RAMONITA C. MENDOZA
LDD-Consumer
MARIA THERESA C. SANTOS
BM, San Jose Branch
RICHMOND U. TAN
DAISY B. SERNEO
BM, Baclaran Branch
CORPORATE SERVICES DIVISION
BALDWIN A. AGUILAR
Corporate Real Estate Services Department
LINDA S. ORTIZ
General Services Department
HUMAN RESOURCES GROUP
STELLA MARIA A. FULGENCIO
Organizational Development Department
TERESITA B. ANGELES
Compensation and HR Loans Department
AUGUSTO M. JOCSON, JR.
Planning and Research Section
JAIME D. LAMBINO
Systems Project Officer
GERONIMO S. MANGUBAT II
User Support Section
WILLIAM P. BRILLANTES
Network Management Unit
WILFREDO H. CALAPATAN
INFORMATION AND TECHNOLOGY
MANAGEMENT GROUP
IMELDA T. GONZALES
MARIA FLOREBETH O. VILLAPAZ
RAMON B. TAÑAFRANCA
Executive Vice President and Head
Information and Technology Methods Group
JULIET D. PERIABRAS
MERLE PERPETUA C. SINGSON
BM, Grace Park Branch
CAROLINA O. ZAVALA
MELVIN P. GUANZON
Information Technology Division
ALFREDO R. TORRES
Shift Operations Unit
JENNIFER L. TAGLE
BM, The Fort Branch
CHARON B. WAMBANGCO
Product Officer
ERIBERTO C. CONTRERAS
Data Center Services Department
ALOIDA B. TANUNLIONG
BM, Shangri-la Branch
RAUL M. CABATINGAN
EDGAR V. YABES
BM, La Union Branch
CYNTHIA Q. CAMACHO
RAMONA E. CRUZ
Consulting and Development
Services Department 2
DOREEN C. YAP
BM, Clarkfield Branch
AUGUSTUS CAESAR M. CASTAÑEDA
Product Officer
CORPORATE AND CONSUMER
BANKING GROUP
HIGINIO O. MACADAEG, JR.
Corporate and Consumer Banking Group
DANIELYN P. CASAUL
Asset Management and
Disposition Division
DINAH P. CENIZA
MANUEL L. CINCO
CAID-VISMIN
VICTOR C. DELA CRUZ
RM, CCBD-Luzon Area
YOLANDA L. DE CLARO
Real Estate Department
MA. CARMELA G. FELICIDARIO
ANGELITO S. ESTANISLAO
Vice President and Team Head
CCBD-VISMIN Area
ROMIL D. LANGONES
RAMON L. FERNANDEZ, JR.
CCBD-Luzon Area
RONALDO G. MANGUBAT
RM-CCBD-VISMIN Area
JOJI S. NORICO
Credit Administration Division
EDUARDO E. OROZCO
Product Officer, CFBC Unit
VICTOR RUBEN L. TUASON
Remittance Marketing Division
TERESITA F. SOLITARIA
CARINA FRANCESCA C. UY
CCBD-Metro Manila 1
REMIGIO T. VARGAS
Credit Appraisal & Investigation Dept.
ANNA CHRISTINA M. VICENTE
CCBD-Metro Manila 2
INTERNAL AUDIT DIVISION
PINKY S. DEREQUITO
First Vice President and Head
Internal Audit Division
LILIA M. DIOKNO
Information Systems Audit Department
GIL V. OBIAS
Information Planning and
Management Department
MA. LUZ S. HABALUYAS-CANTORIA
Head Office Audit Department
MANUEL JOEY A. REGALA
Information Security Department
CARLITO I. SANTOS
Audit Officer
IRMA C. SURTIDA
Productivity and Methods Department
ANNA RUTH F. MONTEMAYOR
Loans Audit Services Department
JANETTE L. TEMPONGKO
Consulting and Development
Services Department 1
NELSON J. MONTEMAYOR
Audit Officer
MARKETING GROUP
CARIDAD P. ABAD
CYNTHIA Y. ASONG
JONES J. BALLESTEROS
Telecoms Section
NORMAN MARTIN C. REYES
Marketing Group
CHARINA C. DE LA CRUZ
Product Officer
OFFICE OF THE CORPORATE
SECRETARY
DANILO U. CUA
Programmers Pool
ATTY. ILDEFONSO R. JIMENEZ
First Vice President and
Corporate Secretary
ELENORA C. CUA
Engineering Section
ATTY. MARGARITA MARIA A. NACPIL
Assistant Vice President 2,
Assistant Corporate Secretary and Head
Corporate Secretary Department
CHRISTIAN RON P. GAERLAN
Technical Services Section
MA. ELISA D. IBANA
Quality Assurance Section
LEGAL SERVICES GROUP
ATTY. JOSE A. BARCELON
Legal Services Group
Senior Officers
(as of May 2012)
ATTY. MARIA ANGELICA L. RAYEL
Lending, Investment and Marketing
Department
ATTY. JONATHAN M. ACOSTA
Branch, Trust and Operations Department
ATTY. CECILIA M. CABATIT
JUSTINIANO M. BABATE
Trade Services Department
SHEILA S. ANG
Trading Department
MARY CLAIRE D. CANTOR
Treasury Accounting Department
SANDRA S. GO
Sales and Distribution Department
NIDA C. LIM
Local Operations Department
MENCHIE E. LAGAC
RISK MANAGEMENT DIVISION
ATTY. HILDA B. GUZMAN
ATTY. MIGNONETTE C. ALDAY
ATTY. CRISPIN V. AMORANTO
ATTY. JOSIEBETH P. BASA
Department
ATTY. ART BERNARD D. BERNALES
Department
ATTY. CESAR G. DAVID
Remedial and Enforcement Department
ATTY. KABAITAN R. GUINHAWA-VALMONTE
ATTY. JASON ROBERT M. PAREDES
ATTY. FRANCISCO B.A. SAAVEDRA
FRANCO P. MAGALONG
Chief Risk Officer, First Vice President and Head
Risk Management Division
MA. PAZ Q. CUEVAS
Market Risk
REBECCA M. LIM
Credit Risk
SUPPORT SERVICES GROUP
CESAR A. RUBIO
Chief Financial Officer, Executive Vice
President and Head
Support Services Group
CYNTHIA A. ALMIREZ
Vice President and Controller
Controllership Division
JERRY N. VALIENTE
MELIZA B. ZULUETA
MIS/Business Officer
STEPHEN S. SEVIDAL
First Vice President and
Chief Investment Officer
MA. CATALINA M. CRUZ
Trust Sales Department
RAMON ANTONIO C. TORRES
Managed Portfolios Department
MA. CRISTINA M. FAROL
Assistant Vice President 2 and
Trust Risk Officer
ALEXANDER L. ANDRES
Subsidiaries Financial Accounting
Department
MARIA VICTORIA C. MENDOZA
Investment Evaluation and
Special Trust Department
CRISOLOGO F. SAGNIP
Regulatory Management and Reports
Department
DELIA E. MERLE
Trust Operations Division
OFFICE OF THE PRESIDENT
LORENA P. ALCOVER
Budget and Planning
ANNA LENINA P. ESTAVILLO
Office of the President
RACHELL D. ARZAGA
Financial Accounting Department
MARIA TERESA T. PALOMO
Office of the President
OPERATIONS GROUP
TREASURY BANKING GROUP
EULOGIO V. CATABRAN III
Treasury Banking Group
EVANGELINA P. SAMONTE
Operations Group
HELEN G. OLETA
First Vice President and Chief Dealer
Trading Department
ARNEL A. VALLES
International Banking and
Treasury Operations Division
RICHARD Q. LIM
Vice President
Trading Department
BENJAMIN P. APAN
Loans Operations Division
MARIO A. GULLE
Clearing Center
ELZEBER O. MURALLOS
Remittance Services Department
ROMEO L. ALONZO
Foreign Operations Department
ARTURO I. LIPIO, JR.
ELIZABETH C. TERRADO
Fund Management Department
JONATHAN THADDEUS V. JIMENEZ
Trading Department
MA. CHRISTINE D. PAGKALINAWAN
CORAZON R. GUEVARRA
Lending Division
EVANGELINE P. REYES
Controllership Division
ESTER T. SALCEDO
Bank Compliance Division
WILFREDO S. BAUTISTA
Information Technology Division
TRUST BANKING GROUP
ALEXANDRA C. DEVERAS
Trust Officer, First Vice President and Head
Trust Banking Group
MARGARITA A. GUADINES
Strategic Planning and Analysis
Division
JERONIMO U. KILAYKO
Director, President and CEO
UCPB SAVINGS BANK
JOSEPH C. JUSTINIANO
President
UCPB-CIIF FOUNDATION INC.
UCPB-CIIF FINANCE AND
DEVELOPMENT CORPORATION
EDGARDO C. AMISTAD
President
UCPB LEASING AND FINANCE
CORPORATION
ARISTIDES S. ARMAS
President
RAYMOND C. ALONZO
Operations
MERCY K. CHUA
Account Officer
VIRGINIA P. FUGOSO
Account Officer
MA. LUISA S. GOPICO
Compliance Officer
MICHAEL ROBERT L. MENDOZA
Account Officer
JOSEFINA ANNA D. TRINIDAD
Human Resources Division
RICO C. DE GUZMAN
Credit Administration Division
AMADO T. DE LEON, JR.
Branch Banking – Luzon Region
NARISA BERLIN R. DURAN
Risk Management Division
MANUEL C. MADRIDEJOS
Treasury Division
CARLO P. YAMSUAN
Auto Loans Department
Products and Services
Deposits
Peso Accounts
• Multi-One
• ATM Peso Savings Account
• Passbook Peso Savings Account
• Regular Checking Account
• Kiddie Max
Foreign Currency Accounts
• US$ Savings Account
• Euro
• Yen
• Pounds Sterling
Time Deposits
• Peso Time Deposit
• US$ Time Deposit
Remittance Services
U-remit Accounts
• U-remit ATM Savings Account
• U-remit Passbook Savings Account
• U-remit US$ Savings Account
• U-remit Peso Checking Account
Inward Remittances Through Tie-Ups and
Correspondent Banks
• Direct Credit to UCPB Accounts
• Direct Credit to Local Bank Accounts
• Cash Pick Up over UCPB Branches
• Cash Pick Up over Mlhuillier Branches
• Payout Centers for:
1. MoneyGram
2. Coinstar
3. Uniteller
4. EzRemit
5. Cash Express
Cash Management
Collections
• Bills Payment/Collection Facility
• Over the Counter Collection Facility
• Auto Collect (Automatic Debit
Arrangement with ADA Online)
• Paymate (Payment Acceptance through
ATM, Internet and Phone Banking)
• One Way Depository Arrangement
(OWDA Plus)
• Post-Dated Check Warehousing with
Online Facility (PDC.Biz)
• National Government Collections
(Bureau of Treasury)
• Night Depository Service
• Deposit Pick-Up
• Mobile ATM
Disbursements
• MCWriter with Online Facility (MC
Writer.Biz)
• UCPB eMoney Card
• Payroll Facilities
• CM Payroll (Payroll Crediting Facility)
• Payroll Max (Payroll Software for
Salary Preparation and Crediting)
• BIR-eFPS
• Pension Crediting
• Direct Deposit for US Pensioners
Account Management
• Automatic Transfer Arrangement
• Sweep
Electronic Banking Facilities
• UCPB CM.biz
• UCPB Connect
• UCPB Telebanking
• UCPB My1Time.Com
Special Services
• Conduit Clearing Arrangement with Online
Facility (CCA.Biz)
• Depository and Custodianship Service
Consumer Loans
• Auto Loans
• Home Loans
• Personal Loans
• Small Business Loans
• UCPB Credit Card
Commercial Credit
Non-Trade Short-Term Loan
• Omnibus Line
• Promissory note-Peso/Foreign Currency
• Bridge Financing
• Check Discounting
• Domestic/Foreign Bills Purchase
• Domestic/Foreign DAUD
• Foreign Currency Settlement
• Quedan
• Quedan Rediscounted-Peso/Foreign
Currency
• Account Receivable Discounting
• Committed Credit Line
• Guidance Line for Commercial Paper
• Guidance Line for Domestic BP
• Short-Term Loan
Non-Trade Long-Term Loan
• Term Loan-Peso/Foreign Currency
• Term Loan/Syndicated-Peso/Foreign
Currency
• Term Loan-Special Funding (DBP,
LBP,SSS)
• Term Loan with GuaranteeGFSME,SPGFC,HIGC
Trade Financing
• Documentary Credit-Foreign/Domestic
• Standby Documentary Credit
• Trust Receipt Financing
• Shipside Bond/Bank Guarantee
• Documents Against Acceptance
• Documents Against Payment
• Open Account Arrangement
• Collection of Custom Duties and Taxes (E2M)
• Export Documentary Credit Advising
• Export Advance
• Export Bills Purchase
• Export Bills for Collection
Lease Financing
• Financial Lease
• Amortized Commercial Loan
• Receivable Financing
• Factoring
Trust
Personal Trust Services
Living Trust Account
Individual Agency Accounts (IMA)
Unit Investment Trust Funds
• United Cash Management Fund
• United Conservative Fund
• United Balanced Fund
• United Equity Fund
• United US$ Money Market Fund
Administratorship
Executorship
Guardianship
Safekeeping
Escrow
• Buy and Sell
• Capital Gains
• POEA
Corporate Trust Services
Institutional Agency Account (IMA)
Unit Investment Trust Funds
• United Cash Management Fund
• United Conservative Fund
• United Balanced Fund
• United Equity Fund
• United US$ Money Market Fund
Employee Benefit Fund Management
Mortgage Trust Indenture
Loan Agency
Pre Need Fund Management
Safekeeping
Escrow
• Buy and Sell
• POEA
Treasury
Peso-Denominated Investments:
Government Securities
• Treasury Bills
• Retail / Treasury Notes
• ROP US$ Denominated Debts
• BSP$ Denominated Debts
Prime Corporate Bonds
Repurchase Agreement
US Dollar-Denominated Investments:
Republic of the Philippines (ROP)
Dollar Bonds
Prime Corporate Bonds
Commercial Papers
STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The Management of United Coconut Planters Bank (the Bank) is responsible for the preparation and fair presentation of the consolidated
financial statements as of and for the years ended December 31, 2011 and 2010, including the additional components attached therein,
in accordance with accounting principles generally accepted in the Philippines for banks (PGAAP for Banks). This responsibility includes
designing and implementing internal controls relevant to the preparation and fair presentation of the consolidated financial statements
that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and
making accounting estimates that are reasonable in circumstances.
In this regard, management maintains a system of accounting and reporting which provides for the necessary internal controls
to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition
and liabilities are recognized. The management discloses to the audit committee and to its external auditors: (i) all significant
deficiencies in the design or operation of internal controls that could adversely affect its ability to record, process and report
financial data; (ii) material weaknesses in the internal controls; and (iii) any fraud that involves management or other employees
who exercise significant roles in internal controls.
The Board of Directors (the Board) reviews and approves the consolidated financial statements.
SyCip Gorres Velayo & Co., the independent auditors appointed by the Board, has examined the consolidated financial statements
of the Bank in accordance with Philippine Standards on Auditing, and has expressed its opinion on the fairness of presentation upon
completion of such examination.
MENARDO R. JIMENEZ
Chairman of the Board
JERONIMO U. KILAYKO
President and Chief Executive Officer
CESAR A. RUBIO
Chief Finance Officer
March 29, 2012
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors
United Coconut Planters Bank and Subsidiaries
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of United Coconut Planters Bank and Subsidiaries (the Group)
and the parent company financial statements of United Coconut Planters Bank (the Bank or the Parent Company), which comprise
the statements of financial position as at December 31, 2011 and 2010, and the statements of income, statements of comprehensive
income, statements of changes in equity and statements of cash flows for the years then ended, 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 these financial statements in accordance with
accounting principles generally accepted in the Philippines for banks (PGAAP for banks) as described in Note 2 to the financial
statements, and for such internal control as management determines is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance
with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of 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 qualified audit opinion.
Basis for Qualified Opinion
As discussed in Note 1 to the financial statements, the Bank embarked on a 10-year Rehabilitation Plan (the Rehabilitation Plan) as
part of the Financial Assistance Agreement entered into with the Philippine Deposit Insurance Corporation (PDIC) on July 7, 2003. The
Rehabilitation Plan was approved by the Bangko Sentral ng Pilipinas (BSP) on January 10, 2005. On May 15, 2008, PDIC and the Monetary
Board of the BSP, in its Resolution No. 590, approved the amended Rehabilitation Plan of the Bank with the following concessions: (a)
issuance of 12.0 billion Capital Notes to PDIC; (b) authority to accept deposits from the National Government, Local Government Units
and Government-Owned and Controlled Corporations; (c) staggered booking of unbooked valuation reserves and deferred charges for
10 years starting January 2008; (d) waiver of certain monetary penalties; and (e) continued access to the BSP rediscounting facility. On
February 26, 2009, the Monetary Board of the BSP, in its Resolution No. 345, approved to defer the start of the staggered booking of the
unbooked valuation reserves and deferred charges to January 1, 2009 and exempt the Bank from sanctions that may be imposed for its
non-compliance with the 10.0% capital adequacy ratio and all the capital-based regulatory ratios for the year 2008 until such time that
the Bank’s amended Rehabilitation Plan is fully implemented. Pursuant to the amended Rehabilitation Plan, as at December 31, 2008,
the Bank did not book credit and impairment losses on available-for-sale investments, loans and receivables, investment properties
and other assets totaling 13.4 billion, and deferred the recognition of losses on sale and dacion en pago settlement totaling 15.7
billion. These 29.1 billion unbooked valuation reserves and deferred losses will be booked by the Bank on a staggered basis starting in
2009. As discussed in Notes 1, 12 and 13, the Bank recognized 582.0 million and 291.1 million of the unbooked valuation reserves and
deferred losses in 2011 and 2010, respectively, by a charge to surplus (deficit) for the year and not to the opening balance of surplus
(deficit) of the earliest year presented. Unbooked valuation reserves and deferred losses amounted to 28.0 billion and 28.6 billion as
of December 31, 2011 and 2010, respectively.
The unbooked valuation reserves and deferred losses referred to in the preceding paragraph were determined based on BSP guidelines
which differ in some respects from PGAAP for banks. As discussed in Notes 12 and 13 to the financial statements, under PGAAP for
banks, as at December 31, 2011 and 2010, additional credit and impairment losses on available-for-sale investments, loans and
receivables, investment properties and other assets amounting to 5.5 billion and 5.6 billion, respectively, and deferred losses on sale
and dacion en pago settlement amounting to 15.8 billion and 15.5 billion, respectively, should have been charged against operations
in the years the losses were incurred.
As discussed in Note 11 to the financial statements, the Bank did not recognize the related accumulated depreciation on certain
investment properties amounting to 2.9 billion and 3.0 billion as at December 31, 2011 and 2010, respectively. PGAAP for banks
requires that depreciation expense be recognized on depreciable investment properties.
Had the Bank booked (a) the losses discussed in the seventh paragraph in the years these were incurred and (b) the depreciation on
certain investment properties discussed in the eighth paragraph, deficit would have increased, and equity and total assets would have
decreased by 24.2 billion and 24.1 billion as at December 31, 2011 and 2010, respectively, inclusive of the decrease in net income in
2011 and 2010 of 787.5 million and 56.0 million, respectively. The Bank did not recognize the losses since it believes that the total
unbooked valuation reserves and deferred losses referred to in the sixth paragraph of 28.0 billion and 28.6 billion as at December
31, 2011 and 2010, respectively, that will be recognized on a staggered basis is sufficient to cover the financial impact of the unbooked
adjustments for losses.
As discussed in Note 23 to the financial statements, the 12.0 billion Capital Notes issued to PDIC in 2009 should have been presented
as a financial liability and not as an equity instrument in the statements of financial position because of its contingent settlement
provision. As allowed by BSP and in keeping with the objectives of the Rehabilitation Plan, the Bank has presented the Capital Notes
in the equity section of the statements of financial position. Had the Bank presented the Capital Notes as financial liability, total
liabilities would have increased and total equity would have decreased by 12.0 billion as of December 31, 2011 and 2010.
As discussed in Note 7 to the financial statements, on various dates in 2011, the Parent Company sold held-to-maturity (HTM) investments
with aggregate carrying amount of 3.2 billion thereby realizing gains of 0.3 billion. As a result of these disposals, the Group and the
Parent Company are prohibited under PGAAP for Banks from classifying any financial asset as HTM investments in 2011 and until 2013.
However, as of December 31, 2011, the Group and the Parent Company continue to classify government securities with aggregate carrying
amount of 28.2 billion and 28.1 billion, respectively, and fair value of 32.2 billion and 32.0 billion, respectively, as HTM investments.
The Parent Company’s remaining HTM bonds were funded from the 30.0 billion savings deposits maintained by the National Government
with the Bank as part of the concessions granted under the amended Rehabilitation Plan. Had the Parent Company reclassified these
investments to available-for-sale (AFS), net unrealized gain on AFS investments of the Group and of the Parent Company, which is included
in the equity section of the statements of financial position, would have increased by 4.0 billion and 3.9 billion, respectively.
Qualified Opinion
In our opinion, except for the possible effects and effects of the matters described in the Basis for Qualified Opinion paragraphs,
the financial statements present fairly, in all material respects, the financial position of the Group and of the Parent Company as at
December 31, 2011 and 2010, and their financial performance and their cash flows for the years then ended in accordance with PGAAP
for banks as described in Note 2 to the financial statements.
Emphasis of Matter
We draw attention to Note 1 to the financial statements, which indicates that the Bank’s corporate life will expire on May 10, 2013. On June 30,
2011, the Bank’s Board of Directors (BOD) approved the extension of its corporate term for another 50 years or up to May 10, 2063. On January
26, 2012, the BOD also approved the calling of a Stockholders’ Meeting of the Bank in May 2012 to approve the extension of the corporate life.
The Bank’s losses prior to 2005, including the losses not recognized by the Bank as discussed in the Basis for Qualified Opinion paragraphs,
brought the Bank’s capital below the required minimum capital requirement for a universal bank. As discussed in Note 1 to the financial
statements, the Bank’s management has taken active steps in ensuring the continued liquidity of the Bank, and implemented its capital
build-up plan pursuant to the Financial Assistance Agreement with PDIC and the memorandum of agreement (MOA) that was signed
with the Republic of the Philippines, PDIC and the Presidential Commission on Good Government (PCGG) on July 25, 2008. The terms
and conditions of the MOA were implemented in March 2009. The Bank has also received the 30.0 billion deposits of the National
Government. As presented in Note 23 to the financial statements, as of December 31, 2011, the Bank has already complied with the
required risk-based capital ratio.
As discussed in Note 23 to the financial statements, a substantial portion of the outstanding shares of the Bank remains sequestered
by the PCGG. In addition, as discussed in Notes 10 and 27 to the financial statements, the Coconut Industry Investment Fund (CIIF)
Companies have substantial investments in 14 CIIF Holding Companies whose funds were invested in San Miguel Corporation (SMC) shares
that were sequestered by the PCGG in May 1986. As discussed in Notes 23 and 27 to the financial statements, on January 24, 2012, the
Supreme Court rendered a decision on two cases involving (a) the ownership of the Bank’s sequestered shares, and (b) the ownership
over the CIIF Companies, the 14 CIIF Holding Companies and the shares of stock in San Miguel Corporation held by the 14 CIIF Holding
Companies, together with all dividends declared, paid and issued thereon as well as any increments thereto arising from, but not limited
to, exercise of pre-emptive rights. On February 14, 2012, the Philippine Coconut Producers Federation, Inc., et al., filed a Motion for
Reconsideration on the decision rendered by the Supreme Court, citing certain substantial and grave errors of fact. The impact of the
Supreme Court ruling and the pending Motion for Reconsideration on the financial statements cannot be determined at this time.
Our opinion is not qualified in respect of the foregoing matters.
Report on the Supplementary Information Required Under Revenue Regulations Nos. 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 33 to the financial statements is presented for purposes
of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the
responsibility of the management of United Coconut Planters Bank. 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 a whole.
SYCIP GORRES VELAYO & CO.
Josephine Adrienne A. Abarca
Partner
CPA Certificate No. 92126
SEC Accreditation No. 0466-AR-1 (Group A),
February 11, 2010, valid until February 10, 2013
Tax Identification No. 163-257-145
BIR Accreditation No. 08-001998-61-2009,
June 1, 2009, valid until May 31, 2012
PTR No. 3174577, January 2, 2012, Makati City
March 29, 2012
UNITED COCONUT PLANTERS BANK AND SUBSIDIARIES
STATEMENTS OF FINANCIAL POSITION
(In Thousands)
Consolidated
Parent Company
As of December 31
ASSETS
Cash and Other Cash Items (Note 14)
Due from Bangko Sentral ng Pilipinas (Note 14)
Due from Other Banks
Interbank Loans Receivable and Securities
Purchased Under Resale Agreements (Note 6)
Financial Assets at Fair Value Through Profit or
Loss (Note 7)
Available-for-Sale Investments (Note 7)
Held-to-Maturity Investments (Note 7)
Loans and Receivables (Notes 8 and 26)
Property and Equipment (Note 9)
Investments in Subsidiaries, Associates and Joint
Venture (Note 10)
Investment Properties (Note 11)
Deferred Tax Assets (Note 22)
Intangible and Other Assets (Note 12)
LIABILITIES AND EQUITY
LIABILITIES
Deposit Liabilities (Notes 14 and 26)
Demand
Savings
Time
Long Term Negotiable Certificate of Deposits
Bills Payable and Securities Sold Under
Repurchase Agreements (Note 15)
Accrued Taxes, Interest and Other Expenses (Note 16)
Income Tax Payable
Deferred Tax Liabilities (Note 22)
Other Liabilities (Note 17)
EQUITY
Equity Attributable to Equity Holders of the Parent Company
Common stock (Note 23)
Capital notes (Notes 1 and 23)
Surplus reserves (Note 24)
Surplus (Deficit) (Notes 13 and 23)
Net unrealized gain (loss) on available-for-sale
investments (Note 7)
Equity in net unrealized gain (loss) on available-for-sale
investments of associates (Note 10)
Translation adjustment
Equity in translation adjustment of an associate (Note 10)
Non-controlling Interest
2011
2010
2011
2010
4,757,246
32,579,118
1,898,901
5,080,842
22,601,760
2,154,600
4,607,502
32,305,984
1,851,226
4,934,052
22,480,433
1,959,230
1,225,579
1,354,696
1,098,579
1,070,696
1,931,324
19,734,335
28,216,682
70,517,710
2,342,591
1,816,740
14,501,586
34,020,203
61,988,567
1,766,560
1,923,896
19,518,546
28,073,365
63,890,062
2,232,671
1,756,577
14,355,390
33,876,053
56,239,693
1,680,677
7,482,576
6,778,291
54,201
22,952,884
6,955,249
7,143,835
48,385
24,349,718
3,919,787
6,494,918
—
19,746,619
3,913,415
6,908,899
—
21,024,527
200,471,438
183,782,741
185,663,155
170,199,642
13,007,774
98,722,144
45,284,080
7,593,890
8,779,761
93,372,107
47,217,436
4,466,765
12,929,685
96,478,317
43,528,507
7,593,890
8,702,472
91,171,412
45,574,723
4,466,765
164,607,888
153,836,069
160,530,399
149,915,372
8,757,569
574,203
46,622
66,121
8,797,583
7,226,095
1,216,993
38,183
67,941
6,702,360
8,431,403
616,476
—
30,492
8,229,068
6,999,942
1,176,913
22,286
34,791
6,191,491
182,849,986
169,087,641
177,837,838
164,340,795
1,484,843
12,000,000
896,483
2,661,295
1,484,843
12,000,000
896,483
191,024
523,533
139,896
426
(656)
2,644
17,568,568
52,884
168
(65,439)
2,643
14,649,618
45,482
1,484,843
12,000,000
896,483
(7,048,288)
492,935
—
(656)
—
7,825,317
—
1,484,843
12,000,000
896,483
(8,572,808)
(115,768)
—
(65,439)
—
5,858,847
—
17,621,452
14,695,100
7,825,317
5,858,847
200,471,438
183,782,741
185,663,155
170,199,642
See accompanying Notes to Financial Statements.
STATEMENTS OF INCOME
(In Thousands)
Consolidated
Parent Company
As of December 31
INTEREST INCOME ON
Loans and other receivables (Notes 8 and 26)
Trading and investment securities (Note 7)
Due from BSP and other banks
Interbank loans receivable and securities purchased
under resale agreements (Note 6)
2011
2010
2011
2010
5,781,544
3,421,058
254,340
4,912,796
3,246,315
479,994
4,837,163
3,394,140
248,797
4,164,798
3,211,426
473,204
9,545
144,906
3,240
130,848
9,466,487
8,784,011
8,483,340
7,980,276
2,480,759
379,910
2,452,766
286,197
2,399,204
330,265
2,378,680
234,545
2,860,669
2,738,963
2,729,469
2,613,225
NET INTEREST INCOME
Trading and securities gain - net (Notes 7 and 26)
Service charges, fees and commissions
Gain on sale of nonfinancial assets
Foreign exchange gain (loss) - net (Note 7)
Income from trust operation
Miscellaneous income (Note 20)
6,605,818
899,206
720,529
131,579
(32,733)
123,264
521,370
6,045,048
1,091,021
732,003
67,924
191,731
83,625
311,670
5,753,871
890,045
557,567
102,636
(32,733)
123,417
476,147
5,367,051
1,060,746
586,133
13,994
191,815
83,366
256,707
TOTAL OPERATING INCOME
8,969,033
8,523,022
7,870,950
7,559,812
Compensation and fringe benefits (Notes 25 and 26)
Taxes and licenses (Note 22)
Occupancy expense (Note 19)
Depreciation and amortization (Note 11)
Provision for credit and impairment losses (Note 13)
Security, clerical and messengerial
Insurance
Litigation and assets acquired
Miscellaneous expense (Note 21)
1,663,335
701,724
559,942
530,247
471,972
372,694
364,331
88,290
824,253
1,496,217
672,867
611,090
421,647
1,301,224
224,700
335,167
168,078
746,169
1,482,617
617,778
523,570
481,663
450,282
354,502
348,592
77,999
713,709
1,335,823
595,900
576,126
369,814
1,250,001
206,757
321,181
160,922
649,431
TOTAL OPERATING EXPENSES
5,576,788
5,977,159
5,050,712
5,465,955
INCOME BEFORE SHARE IN NET INCOME OF ASSOCIATES
SHARE IN NET INCOME OF ASSOCIATES (Note 10)
3,392,245
527,068
2,545,863
653,063
2,820,238
—
2,093,857
—
INCOME BEFORE INCOME TAX
PROVISION FOR INCOME TAX (Note 22)
3,919,313
859,653
3,198,926
749,207
2,820,238
713,718
2,093,857
655,432
NET INCOME
3,059,660
2,449,719
2,106,520
1,438,425
Attributable to:
Equity holders of the Parent Company
3,052,271
7,389
2,442,643
7,076
3,059,660
2,449,719
INTEREST AND FINANCE CHARGES ON
Deposit liabilities (Notes 14 and 26)
Bills payable (Note 15)
STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
Consolidated
Parent Company
As of December 31
Net Income
Other Comprehensive Income (Loss):
Net unrealized gain on available-for-sale investments (Note 7)
Equity in net unrealized gain on available-for-sale
investments of associates (Note 10)
Translation adjustment
Equity in translation adjustment of associates (Note 10)
Other Comprehensive Income, net of tax
Total Comprehensive Income
Total Comprehensive Income attributable to:
Equity holders of the Parent Company
2011
2010
2011
2010
3,059,660
2,449,719
2,106,520
1,438,425
383,650
125,547
377,167
119,681
258
64,783
1
448,692
3,508,352
234
(37,183)
(328)
88,270
2,537,989
3,500,950
7,402
2,530,857
7,132
3,508,352
2,537,989
—
64,783
—
441,950
2,548,470
—
(37,183)
—
82,498
1,520,923
STATEMENT OF CHANGES IN EQUITY
(In Thousands)
Years Ended December 31, 2011 and 2010
Consolidated
Equity Attributable to Equity Holders of the Parent Company
Other Comprehensive Income (Note 31)
Balance at January 1, 2011
Amortization of unbooked valuation reserves
and losses (Notes 1 and 13)
Total comprehensive income
Common
Stock
(Note 23)
1,484,843
Capital
Notes
(Notes 1and 23)
12,000,000
Surplus
Reserves
(Note 24)
896,483
Surplus
(Deficit)
(Notes 13)
191,024
Net Unrealized
Gain on
Availablefor-Sale
Investments
(Note 7)
139,896
Equity in
Net Unrealized
Gain on
Availablefor-Sale
Investments
of Associates
(Note 10)
168
Translation
Adjustment
( 65,439)
Equity from
Translation
Adjustments
of Associates
(Note 10)
2,643
—
64,783
—
1
—
—
—
—
—
—
(582,000)
3,052,271
—
383,637
—
258
1,484,843
12,000,000
896,483
2,661,295
523,533
426
Total comprehensive income (loss)
1,484,843
12,000,000
896,483
( 1,960,546)
14,405
—
—
—
—
—
—
(291,073)
2,442,643
Balance at December 31, 2010
1,484,843
12,000,000
896,483
191,024
Total comprehensive income
17,621,452
( 66)
( 28,256)
2,971
12,409,834
38,350
12,448,184
—
125,491
—
234
—
(37,183)
—
(328)
139,896
168
( 65,439)
2,643
Deficit
(Notes 13)
( 8,572,808)
Net Unrealized
Gain (Loss) on
Availablefor-Sale
Investments
(Note 7)
115,768
Translation
Adjustment
( 65,439)
Total Equity
5,858,847
—
—
—
—
(582,000)
2,106,520
—
377,167
—
64,783
1,484,843
12,000,000
896,483
( 7,048,288)
492,935
( 656)
7,825,317
Total comprehensive income (loss)
1,484,843
12,000,000
896,483
( 9,720,160)
( 3,913)
( 28,256)
4,628,997
—
—
—
—
—
—
(291,073)
1,438,425
—
119,681
—
(37,183)
(291,073)
1,520,923
1,484,843
896,483
( 8,572,808)
115,768
( 65,439)
5,858,847
12,000,000
(582,000)
3,508,352
52,884
—
—
—
7,402
17,568,568
Other Comprehensive Income (Note 31)
Surplus
Reserves
(Note 24)
896,483
Total Equity
14,695,100
2,644
Parent Company
Capital
Notes
(Notes 1and 23)
12,000,000
(582,000)
3,500,950
Non-controlling
Interest
45,482
( 656)
Years Ended December 31, 2011 and 2010
Common
Stock
(Note 23)
1,484,843
Total
14,649,618
(582,000)
2,548,470
(291,073)
2,530,857
14,649,618
—
7,132
45,482
(291,073)
2,537,989
14,695,100
STATEMENTS OF CASH FLOWS
(In Thousands)
Consolidated
Parent Company
Years Ended December 31
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) before income tax
Adjustments for:
Provision for credit and impairment losses (Note 13)
Gain on sale of nonfinancial assets
Loss on foreclosure (Note 20)
Mark-to-market gain on financial assets at fair value
through profit or loss
Trading gain on available-for-sale investments (Note 7)
Trading gain on held-to-maturity investments (Note 7)
Share in net income of associates (Note 10)
Amortization of Long Term Negotiable Certificate of Deposits
Changes in operating assets and liabilities:
Decrease (increase) in the amounts of:
Financial assets at fair value through profit or loss
Loans and receivables
Other assets
Increase (decrease) in the amounts of:
Deposit liabilities
Accrued taxes, interest and other expenses
Other liabilities
2011
2010
2011
2010
3,919,313
3,198,926
2,820,238
2,093,857
471,972
530,247
(131,579)
2,122
1,301,224
421,647
(67,924)
18,353
450,282
481,663
(102,636)
2,122
1,250,001
369,814
(13,994)
18,353
(279,153)
(212,072)
(335,213)
(527,068)
10,663
(361,833)
(653,099)
—
(653,063)
847
(271,310)
(210,754)
(335,213)
—
10,663
(345,125)
(639,532)
—
—
847
164,569
(9,466,649)
992,444
(364,222)
(11,917,506)
(2,528,684)
103,991
(8,509,732)
915,976
(381,214)
(10,740,936)
(2,157,339)
7,644,694
(642,790)
2,095,223
17,506,309
(2,379,131)
(1,824,494)
7,487,902
(560,437)
2,037,577
16,932,168
(2,376,941)
(2,006,919)
Net cash generated from operating activities
Income taxes paid
4,236,723
(864,034)
1,697,350
(937,569)
4,320,332
(740,303)
2,003,040
(814,820)
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale investments
Held-to-maturity investments
Property and equipment (Note 9)
Software costs (Note 12)
Proceeds from sale of:
Available-for-sale investments
Held-to-maturity investments
Property and equipment
Investment properties
Proceeds from maturity of held-to-maturity investments
3,372,689
759,781
3,580,029
1,188,220
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Settlements of bills payable
Availments of bills payable
Issuance of Long Term Negotiable Certificate of
Deposits (Note 14)
Net cash provided by financing activities
TRANSLATION ADJUSTMENT
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
Cash and other cash items
Due from Bangko Sentral ng Pilipinas
Due from other banks
Interbank loans receivable and Securities purchased under
repurchasing agreements (Note 6)
(27,399,382)
(113,924)
(978,568)
(58,313)
(54,454,681)
(523,582)
(899,423)
(101,031)
(26,664,172)
(113,924)
(927,440)
(55,329)
(53,878,875)
(523,582)
(865,227)
(100,811)
23,004,057
3,925,684
37,211
884,773
1,882,000
49,911,745
—
244,530
890,520
547,928
22,325,468
3,925,684
34,119
819,739
1,882,000
49,267,838
—
239,055
852,131
516,989
1,183,538
(4,383,994)
1,226,145
(4,492,482)
(2,521,452)
4,052,926
(170,387,159)
171,578,428
(577,439)
2,008,900
(170,242,943)
171,315,687
3,116,462
4,466,765
3,116,462
4,466,765
4,647,936
5,658,034
4,547,923
5,539,509
64,783
(37,183)
64,783
(37,183)
9,268,946
1,996,638
9,418,880
2,198,064
5,080,842
22,601,760
2,154,600
5,140,215
13,584,792
2,884,253
4,934,052
22,480,433
1,959,230
4,891,510
13,461,441
2,768,396
1,354,696
7,586,000
1,070,696
7,125,000
31,191,898
29,195,260
30,444,411
28,246,347
(forward)
Consolidated
Parent Company
CASH AND CASH EQUIVALENTS AT END OF YEAR
Due from Bangko Sentral ng Pilipinas
Interbank loans receivable and Securities purchased under
repurchasing agreements (Note 6)
2011
2010
2011
2010
4,757,246
32,579,118
1,898,901
5,080,842
22,601,760
2,154,600
4,607,502
32,305,984
1,851,226
4,934,052
22,480,433
1,959,230
1,225,579
1,354,696
1,098,579
1,070,696
40,460,844
31,191,898
39,863,291
30,444,411
OPERATIONAL CASH FLOWS FROM INTEREST
Consolidated
Parent Company
Interest paid
Interest received
2011
2010
2011
2010
3,555,428
9,456,463
4,970,522
8,875,818
3,326,075
8,481,022
4,846,356
8,057,611
NOTES TO FINANCIAL STATEMENTS
1. Corporate Information
United Coconut Planters Bank (the Bank, UCPB or the Parent Company) is a universal bank incorporated in the Philippines on May
10, 1963. The Parent Company and its subsidiaries (the Group) are engaged in all aspects of financial services such as banking,
financing, leasing, real estate and stock brokering. As a bank, the Parent Company is organized to provide expanded commercial
banking services such as deposit products, loans and trade finance, domestic and foreign fund transfers, treasury, foreign
exchange, investment banking and trust services. In addition, the Bank is licensed to enter into regular financial derivatives.
The Bank was authorized to engage in trust operations in June 1963 and in foreign currency deposit operations in October 1977.
At the end of 2011, the Bank has 183 branches and 263 automated teller machines, located nationwide. The Bank’s registered
address and main office is at UCPB Building, Makati Avenue, Makati City.
As a banking institution, the Bank’s operations are regulated and supervised by the Bangko Sentral ng Pilipinas (BSP). In this
regard, the Bank is required to comply with the rules and regulations of the BSP such as those relating to maintenance of reserve
requirements on deposit liabilities and deposit substitutes and those relating to the adoption and use of safe and sound banking
practices as promulgated by BSP. The Bank is subject to the provisions of the General Banking Law of 2000 (Republic Act No.
8791).
The Bank’s corporate life will expire on May 10, 2013. On June 30, 2011, the Board of Directors (BOD) approved the extension
of its corporate term for another 50 years or up to May 10, 2063. On January 26, 2012, the BOD approved the calling of a
Stockholders’ Meeting of the Bank in May 2012 to approve the extension of the corporate life.
Rehabilitation Plan
On July 7, 2003, the Bank entered into a Financial Assistance Agreement (the Agreement or FAA) with the Philippine Deposit
Insurance Corporation (PDIC). The financial assistance from PDIC amounting to 20.0 billion has three components:
a.
b.
c.
8.0 billion direct purchase of nonperforming loans;
7.0 billion in Tier 2 capital with a cost to the Bank of 5.0% due in 2013; and
5.0 billion purchase of nonperforming loans with buyback by 2013.
On February 26, 2004, PDIC endorsed to BSP for approval the Bank’s 10-year Business/Rehabilitation Plan (the Plan). Part of the
Plan is the Bank’s business strategy that has the following elements: (1) separation of “bad bank” from the “good bank”; (2)
right-sizing and streamlining of operations to reduce costs; and (3) capital raising which aims to withstand the limitation brought
about by the unresolved ownership issues (see Note 23). The BSP approved the Plan on January 10, 2005, including the following
concessions: (a) temporary relief by reducing the risk-weighted capital ratio to 8.0% for a period of three years up to 2007 or
until such time that the Bank is able to comply with the required 10.0% capital adequacy ratio, whichever comes earlier; and (b)
staggered booking of required valuation reserves for 10 years.
Conversion of PDIC financial assistance to Interim Tier 1 Capital Notes
The Monetary Board (MB), in its Resolution No. 590 dated May 15, 2008, decided to:
1. Approve the amended 10-year Rehabilitation/Business Plan (2008-2017) of the Bank and grant to the Bank (the Issuer) the
authority to issue 12.0 billion Interim Tier 1 Capital Notes (the Capital Notes or Notes) to PDIC which will qualify as Interim
Tier 1 capital (see Note 23), provided that:
a. The Capital Notes to be issued meet the minimum features under Circular No. 595 dated January 11, 2008; and
b. UCPB’s Articles of Incorporation shall be amended to:
i. Increase its authorized capital of 3.25 billion to an amount that will cover the amount of the Capital Notes; and
ii. Remove the ownership limitation in the Bank, which is 1.0% of the issued and outstanding preferred and common shares,
for a stockholder who is not a stockholder as of December 31, 1979.
2. Grant to UCPB the following concessions:
a. Authority to accept deposits from the National Government (NG), Local Government Units (LGU) and Government-Owned
and Controlled Corporations (GOCC), with the ceiling of 5.9 billion increased by the amount that the NG will deposit with
the Bank.
b. Consider the government securities (GS) purchased out of the 30.0 billion deposit of the NG as alternative/eligible
compliance with the liquidity reserves and liquidity floor requirement;
c. Staggered booking of the unbooked valuation reserves and deferred charges aggregating to 27.9 billion consistent with
the Bank’s approved 10-Year Business/Rehabilitation Plan: Provided, that subsequent valuation reserves to be required in
excess of the 27.9 billion shall be immediately booked and no dividend shall be declared while the concession is in effect;
d. Waiver of certain monetary penalties; and
e. Continued access to the BSP Rediscounting Facility, subject to a rediscount ceiling of 1.5 billion.
1
Non-performing assets wherein the required valuation reserves were approved by the BSP for staggered booking are considered “bad bank” assets.
The aforementioned MB approval was further clarified under MB Resolution No. 687 issued on June 17, 2008, which states that
“UCPB’s Articles of Incorporation shall be amended prior to the conversion of the Capital Notes to capital stock”.
On May 15, 2008, the PDIC Board, in its Resolution No. 2008-05-073, approved the conversion of PDIC’s 12.0 billion Financial
Assistance into Capital Notes eligible as Interim Tier 1 capital.
On July 25, 2008, the Republic of the Philippines (ROP), PDIC, Presidential Commission on Good Government (PCGG) and the
Bank executed a Memorandum of Agreement (MOA), for the strengthening of the Bank’s capital through the issuance of capital
notes consistent with BSP rules and regulations, and subscription thereof by PDIC via the conversion of PDIC’s outstanding 2003
Financial Assistance of 12.0 billion. In addition, the MOA provides for the maintenance by the ROP of at least 25.0 billion but
not to exceed 30.0 billion of deposits in the Bank.
On March 31, 2009, the 2003 FAA and the Subscription Agreement have been amended and signed, respectively, by the PDIC. On
the same date, the Bank issued the Capital Notes, which has no maturity date and has the following features:
1. Dividend/Coupon Rate - Dividend/Coupon rates as follows:
•
•
•
•
•
2.0% from April 1, 2009 to March 31, 2011;
12.0% from April 1, 2015 to March 31, 2017 and;
14.0% from April 1, 2017 onwards.
The Issuer shall have full and absolute discretion (i) whether or not to declare and pay coupons on the Notes, and (ii) over
the amount and timing of coupon payments, in the event that, in the exercise of its discretion, the Issuer decides to declare
and pay coupons. The Issuer shall, everytime it declares and pays dividends on its common shares, likewise pay coupons on
the Notes. Coupons on the Notes may be declared and paid only (i) to the extent that the Issuer has sufficient profits and/or
retained earnings distributable; and (ii) if, after such declaration and payment, the Issuer shall be able to meet the capital
adequacy and liquidity thresholds, determined in accordance with BSP regulations prevailing at the time of declaration and
payment of coupons.
Coupons on the Notes shall be non-cumulative. Moreover, the Issuer shall have full control and access to any waived coupon
payments. The Notes have no step-up provisions in the coupon rate in conjunction with the redemption option.
2. Repayment/Redemption of the Capital Notes - Redemption of the Notes shall be subject to prior written BSP approval. The
Capital Notes may be redeemed, in whole or in part, at the sole option of the Issuer, anytime after five (5) years from the
date of issuance of the Notes. However, the option granted to the Issuer may be exercised within five (5) years from the date
of issuance of the Notes upon the infusion of sufficient capital which is neither smaller in size nor lower in quality than the
Notes, unless the Issuer’s capital adequacy ratio remains more than adequate after redemption of the Notes. In the event of
insolvency of the Issuer, the Holder shall be, immediately and without need for demand, entitled to repayment of the Notes.
3. Assignability - The Holder may assign or transfer the Capital Notes to any person or entity provided prior written notice of
such assignment or transfer is given to the Issuer.
4. Conversion Right - At any time, the Holder of the Notes shall have the right to convert the Notes, in whole or in part, to
Special Preferred Shares of the Issuer which, in turn, shall be convertible into Common Shares.The Issuer shall ensure that
its Articles of Incorporation and By-laws shall be amended to accommodate all the rights of the Holder under the Notes. The
conversion right provided herein shall be superior to the redemption option of the Issuer. Accordingly, in the event the Issuer
serves notice to the Holder of the exercise of a redemption option, the Holder shall have 45 days to notify the Issuer and the
BSP in writing that instead of being repaid pursuant to the redemption, the Holder shall instead convert the Notes to Special
Preferred Shares.
5. Conversion Price - The Notes shall be convertible to Special Preferred Shares or Common Shares with an aggregate par value
of 12.0 billion at the time of conversion.
6. Failure to Comply with Obligations - In case the Issuer fails to perform any of its material obligations under the Notes,
including the conversion of the Notes into Special Preferred Shares or Common Shares, then the Notes shall become due and
demandable, and the Holder shall have the following rights:
i. Collect the principal of the Notes in the amount of 12.0 billion and interest at the rate of 14.0%; and
ii. Institute such proceedings to enforce any of the obligations of the Issuer if the Issuer continues to fail to perform its
material obligation within 30 days from written notice of the Holder.
The Subscription Agreement includes Insolvency of the Issuer clause with the following consequences:
a) If the Issuer becomes insolvent, PDIC shall, within fifteen (15) days after it acquires knowledge of the occurrence of the
Issuer’s Insolvency, give the Issuer a written notice declaring all the Notes then outstanding, including all accrued coupon
thereon, to be due and payable immediately, and upon any such declaration the same shall be immediately due and payable,
subject only to subordination.
b) Paragraph (a) is further subject to the condition that PDIC may rescind and annul such declaration and its consequences,
upon such terms, conditions, and agreements, if any, as it may determine, but no such rescission and annulment shall extend
to or shall affect any subsequent default or shall impair any right of PDIC consequent thereto.
Subordination mentioned under paragraph (a) means that the Notes are not deposits of the Issuer and are not guaranteed
or insured by the Issuer or any party related to the Issuer or covered by any other arrangement that legally or economically
enhances the priority of the claim of the Holder as against the depositors, other creditors and holders of Lower Tier 2 and Upper
Tier 2 capital instruments, if any, of the Issuer.
In order to accommodate the conversion of the Capital Notes to Special Preferred Shares or Common Shares, should the Holder
of the Capital Notes decide to convert, the proposed amendment to the Bank’s Articles of Incorporation was approved at
the regular BOD meeting on April 28, 2009 with the written assent of at least 2/3 of the Bank’s stockholders. The proposed
amendments include:
a) Reclassifying (i) 1,002,829,769 unissued common shares of the Bank and (ii) 750,000,000 unissued preferred shares of the
Bank, all with a par value of 1.0 per share, into 1,752,829,769 Special Preferred Shares;
b) Denying pre-emptive right over the issuance of special preferred and common shares for the conversion of special preferred
shares and the Capital Notes; and
c) Deletion of ownership limitation in the Bank, which is 1.0% of the issued and outstanding preferred and common shares, for a
stockholder who is not a stockholder as of December 31, 1979.
In March 2011, the Bank filed with the SEC the application for the amended Articles of Incorporation to address these proposed
amendments. The SEC approved the said amendments on May 10, 2011 (see Note 23).
Staggered booking of required valuation reserves and deferred charges
On February 26, 2009, the MB, in its Resolution No. 345, decided to:
1. Consider the year 2009 as the start of the 10-year rehabilitation period (2009-2018) of the Bank instead of 2008 as contained
in the Bank’s Rehabilitation Plan approved by the MB under Resolution No. 590 dated May 15, 2008;
2. Exempt the Bank from sanctions that may be imposed for its non-compliance with the 10.0% Capital Adequacy Ratio (CAR)
and all the capital-based regulatory ratios for the year 2008 until such time that the Bank’s Rehabilitation Plan is fully
implemented; and
3. Approve the following requests of the Bank:
a. Reversal of all previous staggered bookings of unbooked valuation reserves and amortization of deferred losses, based on
the Special Purpose Vehicle (SPV) formula that the Bank has been providing starting 2007 in accordance with the original
rehabilitation program approved by the BSP on January 10, 2005 (the Bank’s Surplus as of January 1, 2008 was restated for
the effect of the amortization of valuation reserves);
b. Deferment of any staggered booking or amortization of unbooked valuation reserves and deferred losses until the Bank’s
recapitalization is completely in place starting January 2009 and to accordingly revise the schedule of the staggered
booking of unbooked valuation reserves and amortization of deferred losses following the concept of affordability per the
latest approved business plan by the BSP; and
c. Temporary relief from full compliance with the required 10.0% CAR as provided under Section 34 of Republic Act No. 8791
(the General Banking Law of 2000) by reducing the Bank’s CAR to 8.0% for a period of three years up to 2011 or until such
time that the Bank is able to comply with the required 10.0% CAR, whichever comes first.
On May 20, 2010, the MB, in its Resolution No. 697 confirmed the implementation of the Bank’s approved amortization of
unbooked valuation reserves and deferred losses as follows:
1. Any excess valuation reserves resulting from assets pertaining to the “bad bank” shall be allowed for re-allocation to another
asset requiring additional valuation reserves as long as these assets are part of the “bad bank” assets and within the 29.1
billion approved for staggered booking; and,
2. Any actual losses from the sale of real and other properties acquired from the “bad bank” assets shall be booked as deferred
losses provided the total losses to be deferred shall not exceed the unbooked valuation reserves for that property and subject
to the condition that the Bank shall submit quarterly monitoring report for the status of the “bad bank” assets and allocation
of valuation reserves for each asset pool.
As of December 31, 2008, the unbooked valuation reserves that the Parent Company will recognize on a staggered basis starting
January 2009, as allowed by the BSP, amounted to 29.1 billion. This consists of the (a) 27.9 billion unbooked valuation reserves
and deferred charges allowed to be staggered in the MB Resolution No. 590 dated May 15, 2008, and (b) 1.2 billion additional
unbooked valuation reserves that will be recognized on a staggered basis arising from the reversal of previously amortized
valuation reserves due to the resetting of the start of amortization of the unbooked valuation reserves and deferred charges
as allowed under MB Resolution No. 345 dated February 26, 2009. The unbooked valuation reserves and deferred charges were
determined based on the criteria set by the BSP which differ from accounting principles generally accepted in the Philippines
for banks (PGAAP for banks) in certain respects. As of December 31, 2011 and 2010, the balance of unbooked valuation reserves
and deferred charges amounted to 28.0 billion and 28.6 billion, respectively, net of the 582.0 million and 291.1 million
amortization recognized in 2011 and 2010, respectively, which were added directly to negative surplus (see Note 13).
As discussed in Notes 12 and 13, the 29.1 billion unbooked valuation reserves and deferred charges allowed by BSP to be deferred
consist of 13.4 billion impairment and credit losses on loans and receivables, AFS investments, investment properties and other
assets, and 15.7 billion losses on sale and dacion en pago settlement.
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 liabilities
at fair value through profit or loss (FVPL) and available-for-sale (AFS) investments that are measured at fair value. The financial
statements are presented in Philippine Peso, and all values are rounded to the nearest thousand pesos ( 000) except when
otherwise indicated.
The financial statements of the Parent Company reflect the accounts maintained in the Regular Banking Unit (RBU) and Foreign
Currency Deposit Unit (FCDU). The financial statements individually prepared for these units are combined after eliminating
inter-unit accounts.
The functional currency of RBU and FCDU is Philippine Peso and United States Dollar (USD), respectively. For financial reporting
purposes, FCDU accounts and foreign currency-denominated accounts in the RBU are translated into their equivalents in
Philippine Peso (see accounting policy on Foreign Currency Translation).
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.
Statement of Compliance
The accompanying financial statements have been prepared in accordance with PGAAP for banks, particularly the retroactive
adjustment of dilution loss on the conversion of redeemable preferred shares to common shares of certain associates of the
Parent Company (see Note 10), which is permitted by the BSP for prudential regulation and the SEC for financial reporting
purposes, except for the following departures from PGAAP for banks:
1. staggered booking of required credit and impairment losses on loans and receivables, AFS investments, investment properties
and other assets, and losses on sale and dacion en pago settlement, which were allowed separately by the BSP (see Note 1);
2. non-recognition of depreciation on certain investment properties (see Note 11);
3. presentation of Interim Tier 1 Capital Notes as an equity instrument instead of as a financial liability in the statements of
financial position (see Note 23); and,
4. non-reclassification of held-to-maturity (HTM) investments with aggregate amortized cost of 28.2 billion and fair value
of 32.2 billion for the Group and 28.1 billion and 32.0 billion for the Parent Company as of December 31, 2011 to AFS
investments despite breaching the tainting rule of PAS 39 in 2011 (see Note 7).
Basis of Consolidation and Investments in Subsidiaries
The consolidated financial statements of the Group are prepared for the same reporting period as the Parent Company, using
consistent accounting policies.
The following are the wholly and majority-owned subsidiaries of the Parent Company as of December 31, 2011:
Subsidiary
Financial Markets:
UCPB Leasing and Finance Corporation (ULFC)
UCPB Securities, Inc. (USI)
UCPB Savings Bank, Inc. (USB)
Real Estate:
Balmoral Resources Corporation (BRC)
Green Homes Development Corporation (GHDC)
UPI – Macaria Homes Corporation (UPI-MHC)
Effective Percentage
of Ownership
Country of
Incorporation
Functional
Currency
100.00
100.00
97.37
Philippines
Philippines
Philippines
Philippine Peso
Philippine Peso
Philippine Peso
100.00
100.00
100.00
Philippines
Philippines
Philippines
Philippine Peso
Philippine Peso
Philippine Peso
Subsidiaries are all entities over which the Parent Company has the power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Parent Company controls another entity.
All significant intra-group balances, transactions, income and expenses, and profits and losses resulting from intra-group
transactions are eliminated in full.
Subsidiaries are consolidated from the date on which control is transferred to the Parent Company. Control is achieved when
the Parent Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its
activities. Consolidation of subsidiaries ceases when control is transferred out of the Group.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statements of income from
the date of acquisition up to the date of disposal, as appropriate. When a change in ownership interest in a subsidiary occur
which result in 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 recycle the same to profit or loss or surplus (deficit);
• recognizes the fair value of the consideration received;
• recognizes the fair value of any investment retained; and,
• recognizes any surplus or deficit in profit or loss.
Until December 31, 2010, UCPB Properties, Inc. (UPI) was a wholly-owned subsidiary of the Parent Company. On March 23,
2011 and March 1, 2011, the BOD and stockholders of BRC and UPI, respectively, approved a Plan of Merger where UPI shall be
merged into and be part of BRC, and its separate corporate existence shall cease by operation of law effective January 1, 2011.
On July 13, 2011, the SEC approved the Certificate of Filing of the Articles and Plan of Merger. The merger was accounted for
in accordance with the pooling of interest method where the identifiable assets acquired and liabilities assumed from UPI were
recognized by BRC at their carrying values in UPI’s books.
On June 2, 2011, the Parent Company’s interest in UPI - Macaria Homes Corporation (UPI-MHC) increased from 50% to 100% (see
Note 10).
In the Parent Company’s separate financial statements, investments in subsidiaries are carried at cost, less accumulated
impairment in value. Dividends earned are reported as dividend income when the right to receive the payment is established.
Non-controlling Interests
Non-controlling interests represent the portion of profit or loss and the net assets not owned directly or indirectly, 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 are allocated against the interests of the non-controlling interest even if
this results in the non-controlling interests having a deficit balance.
Acquisitions of non-controlling interests that do not result in a loss of control are accounted for as an equity transaction whereby
the difference between the consideration and the fair value of the share of the net assets acquired is recognized as an equity
transaction and attributed to the owners of the Parent Company.
Changes in Accounting Policies
The accounting policies adopted are consistent with those of the previous financial year except for the adoption of the following
new and amended Philippine Financial Reporting Standards (PFRS) and Philippine Interpretations which became effective on
January 1, 2011:
Philippine Accounting Standards (PAS 24) Amendment, Related Party Transctions
The amendments clarify the definition of a related party. The new definitions emphasize a symmetrical view of related party
relationships and clarify the circumstances in which persons and key management personnel affect related party relationships
of an entity. In addition, the new amendment introduces an exemption from the general related disclosure requirements
for transactions with government and entities that are controlled, jointly controlled or significantly influenced by the same
government as the reporting entity.
PAS 32 Amendment, Financial Instruments: Presentation - Classification of Rights Issues
The amendment to PAS 32 amended the definition of a financial liability to enable entities to classify rights issues and certain
options or warrants as equity instruments. The amendment is applicable if the rights are given pro rata to all of the existing
owners of the same class of an entity’s non-derivative equity instruments, to acquire a fixed number of the entity’s own equity
instruments for a fixed amount in any currency.
Philippine Interpretation IFRIC 14 (Amendment), Prepayments of a Minimum Funding Requirement
The amendment of the interpretation removes an unintended consequence when an entity is subject to minimum funding
requirements and makes an early payment of contributions to cover such requirements. The amendment permits a prepayment
of future service cost by the entity to be recognized as a pension asset.
Improvements to Philippine Financial Reporting Standards (PFRSs) 2010
The omnibus amendments to PFRSs issued in 2010 were issued primarily with a view to removing inconsistencies and clarifying
wordings. There are separate transitional provisions for each standard. The adoption of the amendments did not have any
impact in the accounting policies, financial position or performance of the Group.
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PFRS 3, Business Combinations
PFRS 7, Financial Instruments: Disclosures
PAS 1, Presentation of Financial Statements
PAS 27, Consolidated and Separate Financial Statements
Philippine Interpretation IFRIC 13, Customer Loyalty Programmes
Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments
Significant Accounting Policies
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents consist of Cash and other cash items, Due from BSP and
other banks, and Interbank loans receivable and Securities purchased under resale agreements (SPURA) with the BSP that are
convertible to known amounts of cash, with original maturities of three months or less from dates of placements and that are
subject to insignificant risk of changes in value.
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) 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 effective interest method.
Foreign Currency Translation
Transactions and balances
The books of accounts of the RBU are maintained in Philippine pesos, while those of the FCDU are maintained in USD. For
financial reporting purposes, the foreign currency-denominated monetary assets and liabilities in the RBU are translated in
Philippine pesos based on the Philippine Dealing System (PDS) closing rate prevailing at the statement of financial position date,
and foreign currency-denominated income and expenses at the prevailing exchange rate at the date of transaction. Foreign
exchange differences arising from revaluation and translation of foreign currency-denominated monetary assets and liabilities
are credited to or charged against operations in the year in which the rates changed.
The assets and liabilities of the FCDU of the Parent Company 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 its income and expenses are
translated at PDS weighted average rate (PDSWAR) for the year. Exchange differences arising on translation are taken directly
to other comprehensive income and accumulated as a separate component of equity in the statement of financial position as
Translation adjustment.
Financial Instruments - Recognition and Measurement
Date of recognition
Regular way purchases and sales of financial assets that require delivery of assets within the time frame generally established
by regulation or convention in the market, except for derivatives, are recognized on the settlement date. Settlement date is
the date on which the transaction is settled by delivery of the assets that are the subject of the agreement. Settlement date
accounting refers to (a) the recognition of an asset on the day it is received by the Group, and (b) the derecognition of an asset
and recognition of any gain or loss on disposal on the day that it is delivered by the Group. Any change in the fair value of the
financial asset to be received is recognized in the statement of income for financial assets at FVPL and in other comprehensive
income for AFS investments. Deposits, amounts due to banks and customers, loans and receivables and spot transactions are
recognized when cash is received by the Group or advanced to the borrowers.
Derivatives are recognized on trade date - the date that the Group becomes a party to the contractual provisions of the
instrument. Trade date accounting refers to (a) the recognition of an asset to be received and the liability to pay for it on the
trade date, and (b) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a
receivable from the buyer for payment on the trade date.
Initial recognition of financial instruments
The classification of financial instruments at initial recognition depends on the purpose for which the financial instruments
were acquired and their characteristics. All financial assets and financial liabilities are recognized initially at fair value plus
any directly attributable cost of acquisition or issue, except in the case of financial assets and financial liabilities at FVPL. The
Group categorizes its financial assets as: financial assets at FVPL, differentiating those that are held-for-trading (HFT) and
those designated as such, HTM investments, AFS investments, and loans and receivables. Financial liabilities are categorized
into financial liabilities at FVPL and other financial liabilities carried at cost or amortized cost. Management determines the
classification of these instruments at initial recognition and, where allowed and appropriate, re-evaluates such designation at
every statement of financial position date.
Deposit Liabilities to the Government
As allowed by Philippine Interpretations Committee (PIC) Q&A 2007-02, Accounting for Government Loans with Low Interest
Rates, the Bank initially recognized the deposit liabilities received as part of the Rehabilitation Plan at nominal amounts and
these are not subsequently revalued.
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, option pricing models, and other relevant valuation models.
‘Day 1’ difference
Where the transaction price is different from the fair value of 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 immediately
recognizes the difference between the transaction price and fair value (a ‘Day 1’ difference) in the statement of income unless
it qualifies for recognition as some other type of asset or liability. In cases where the data used 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.
Financial assets or financial liabilities held for trading
HFT financial assets or financial liabilities are recorded in the statement of financial position at fair value. Changes in fair value
relating to the HFT positions are recognized in the statement of income as Trading and securities gain - net. Interest earned
or incurred is recognized as Interest income or Interest expense, respectively, in the statement of income, while dividends
earned are recognized as Dividends (included under Miscellaneous income in the statement of income) when the right to receive
payment has been established.
Included in this classification are the Group’s investments in debt and equity securities which have been acquired principally for
the purpose of selling or repurchasing in the near term.
Derivative instruments
The Parent Company is counterparty to derivative contracts, such as forward foreign exchange contracts and warrants. These
derivatives are entered into as a service to customers and as a means for reducing or managing the Parent Company’s respective
foreign exchange exposures, as well as for trading purposes. Such derivative 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. Derivatives are carried
as assets when the fair value is positive and as liabilities when the fair value is negative. Any gains or losses arising from changes
in fair value of derivatives are taken directly to the statement of income and are included in Trading and securities gain - net for
warrants and in Foreign exchange gain - net for forward foreign exchange contracts.
Embedded derivatives
Embedded derivatives are bifurcated from their host contracts and carried at fair value with fair value changes being recognized
in the statement of income and are included in Trading and securities gain-net, when the entire hybrid contracts (composed of
both the host contract and the embedded derivative) are not accounted for as financial assets or financial liabilities at FVPL,
when their economic risks and characteristics are not 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. As of
December 31, 2011 and 2010, the Parent Company’s embedded derivatives comprise of call and index-linked options and range
accrual.
The Group assesses the existence of an embedded derivative on the date it first becomes a party to the contract, and performs
re-assessment only where there is a change to the contract that significantly modifies the contractual cash flows.
Financial assets or liabilities designated at FVPL
Financial assets and liabilities classified in this category are designated by management on initial recognition. Management may
only designate an instrument at FVPL upon initial recognition when the following criteria are met, and designation is determined
on an instrument-by-instrument basis:
• The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the
assets or liabilities or recognizing gains or losses on them on a different basis; or
• The assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their
performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or
• The financial instrument contains an embedded derivative, unless the embedded derivative does not significantly modify the
cash flows or it is clear, with little or no analysis, that it would not be separately recorded.
As of December 31, 2011 and 2010, the Group does not have financial assets or financial liabilities designated as at FVPL.
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. After initial measurement, these investments
are carried at amortized cost using the effective interest method, less any 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 effective interest rate
(EIR). The amortization is included in ‘Interest income’ in the statement of income. The losses arising from impairment of
such investments are recognized in the statement of income under ‘Provision for credit and impairment losses’. The effects of
restatement on foreign currency-denominated HTM investments are recognized in the statement of income.
If the Group were to sell more than an insignificant amount of HTM investments before maturity (other than in certain specific
circumstances), the entire category would be tainted and would have to be reclassified as AFS investments. Furthermore, the
Group would be prohibited to classify any financial assets as HTM investments for the following two years. In 2011, the Bank
partly disposed its HTM investments (see Note 7).
Loans and receivables, amounts due from BSP and other banks, interbank loans receivable and SPURA
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 as such are not categorized as financial
assets at FVPL or AFS investments. They also do not include those for which the Group may not recover substantially all of its
initial investments, other than because of credit deterioration.
After initial measurement, Loans and receivables, Due from BSP, Due from other banks and Interbank loans receivable and SPURA
are subsequently measured at amortized cost using the effective interest 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.
AFS investments
AFS investments are those which are designated as such or do not qualify to be classified as designated at FVPL, HTM
investments or loans and receivables. These are purchased and held indefinitely, and may be sold in response to liquidity
requirements or changes in market conditions. Included in this classification are the Group’s investments in government and
private debt securities and quoted and unquoted equity securities.
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 recognized as other comprehensive income and accumulated in Net unrealized gain on AFS
investments in the equity section of the statement of financial position.
When the instrument is disposed of, the cumulative gain or loss previously recognized in other comprehensive income is
recognized as Trading and securities gain - net in the statement of income as a reclassification adjustment. Where the Group
holds more than one investment in the same security, these are deemed to be disposed of on a weighted average basis.
Interest earned on holding AFS investments are reported as Interest income using the effective interest method. Dividends
earned on holding AFS investments are recognized in the statement of income as Dividends (included under Miscellaneous income
in the statement of income) when the right of the payment has been established. The losses arising from impairment of such
investments are recognized as Provision for credit and impairment losses in the statement of income.
Other financial liabilities
Issued financial instruments or their components, which are not designated at FVPL, are classified as liabilities under Deposit
liabilities, Bills payable and SSURA 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, other financial liabilities not qualified as and not designated at FVPL, are subsequently measured at
amortized cost using the effective interest method. Amortized cost is calculated by taking into account any discount or premium
on the issue and fees that are an integral part of the EIR.
Reclassification of Financial Assets
A financial asset is reclassified out of the FVPL category when the following conditions are met:
• the financial asset is no longer held for the purpose of selling or repurchasing it in the near term; and
• there is a rare circumstance.
A financial asset that is reclassified out of the FVPL category is reclassified at its fair value on the date of reclassification. Any
gain or loss already recognized in the statement of income is not reversed. The fair value of the financial asset on the date of
reclassification becomes its new cost or amortized cost, as applicable.
For a financial asset reclassified out of the AFS investments category to loans and receivables or HTM investments, any previous
gain or loss on that asset that has been recognized in other comprehensive income is amortized to profit or loss over the
remaining life of the investment using the effective interest method. Any difference between the new amortized cost and the
expected cash flows is also amortized over the remaining life of the asset using the effective interest method. If the asset is
subsequently determined to be impaired then the amount recorded in equity is recycled to the statement of income.
The BSP, through BSP Circular No. 628, Guidelines on the Reclassification of Financial Assets Between Categories, allowed creditlinked notes (CLNs) and other similar instruments that are linked to ROP to be reclassified (a) out of HFT investments into AFS
investments, HTM investments or Unquoted debt securities classified as loans (UDSCL); or (b) from AFS investments to UDSCL or
HTM investments, without bifurcating the embedded derivatives from the host instrument: Provided, that this shall only apply
to CLNs that are outstanding as of the effective date of reclassification, which shall not be on or later than November 15, 2008.
Reclassification is at the election of management, and is determined on an instrument-by-instrument basis. An analysis of the
Parent Company’s reclassified financial assets is disclosed in Note 7.
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 risk and rewards of the asset but has transferred
the control of the asset.
Where the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement,
and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset,
the asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes
the form of a guarantee over the transferred asset is measured at the lower of original carrying amount of the asset and the
maximum amount of consideration that the Group could be required to repay.
Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired. Where an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of 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.
Impairment of Financial Assets
The Group assesses at each statement of financial position date whether there is an objective evidence that a financial asset or
a 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 had occurred after the initial recognition of the
asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial
asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the
borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate
that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that
correlate with defaults.
Financial assets carried at amortized cost
For financial assets carried at amortized cost, which includes HTM investments and loans and receivables, 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 assets’ carrying
amount and the present value of 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, whether or not foreclosure
is probable. The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is
recognized in Provision for credit and impairment losses in the statement of income. Interest income continues to be recognized
based on the original EIR of the asset.
If, in a subsequent year, 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 credited to ‘Provision for credit and impairment losses’ 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.
A write-off is made when all or part of a claim is deemed uncollectible. Write-offs are charged against previously established
allowance for credit losses. Recoveries in part or in full of amounts previously written-off are credited to Provision for credit and
impairment losses.
If the Group determined that no objective evidence of impairment exists for an individually assessed financial asset, whether
significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and that group of
financial assets is collectively assessed for impairment. Those characteristics are relevant to the estimation of future cash flows
for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of
the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is or continues
to be recognized are not included in a collective assessment of impairment.
For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the industry of the
borrower. 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 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.
Certain consumer loans are assessed for impairment collectively because these receivables are not individually significant. 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 account-level monitoring of monthly peso movements between different age buckets, from 1 day past due to 180
days past due. The net flow to write-off methodology relies on the historical data of net flow tables to establish a percentage
(‘net flow rate’) of receivables that are current or in any state of delinquency (i.e., 30, 60, 90, 120, 150 and 180 days 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 receivables as of the statement of financial position date and the net flow rates determined for the current and each
delinquency bucket.
The carrying amount of the financial asset at amortized cost is reduced by the impairment loss (included under Provision for
credit and impairment losses) directly for all financial assets at amortized cost with the exception of Loans and receivables,
where the carrying amount is reduced through the use of an allowance account. Loans and receivables, together with the
associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral has
been realized. The amount of impairment loss is recognized as ‘Provision for credit and impairment losses’ in 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.
AFS investments
For AFS investments, the Group assesses at each statement of financial position date whether there is objective evidence that an
investment is impaired.
In the case of AFS equity investments, objective evidence of impairment would include a significant or prolonged decline in
the fair value of the investment below its cost. The Group treats ‘significant’ generally as 20.0% and ‘prolonged’ as greater
than twelve (12) months. Where there is evidence of impairment, the cumulative loss - measured as the difference between
the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in
the statement of income - is removed from equity and recognized in the statement of income. Impairment losses on equity
investments are not reversed through the statement of income. Increases in fair value after impairment are recognized directly
in other comprehensive income.
If there is objective evidence that there is impairment loss on an unquoted equity instrument that is not carried at fair value
because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of
such an unquoted equity instrument has been incurred, the amount of loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a
similar financial asset.
In the case of AFS debt investments, the Group assesses individually whether there is objective evidence of impairment based on
the same criteria as financial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative
loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that
investment previously recognized in the statement of income. Future interest income is based on the reduced carrying amount
and is accrued based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss.
Such accrual is recorded as part of Interest income in the statement of income. If, in subsequent year, the fair value of a debt
investment increased and the increase can be objectively related to a credit event occurring after the impairment loss was
recognized in the statement of income, the credit loss is reversed through the statement of income.
As discussed in Note 1, as of December 31, 2008, the Parent Company, as allowed by the BSP, has deferred the recognition of
valuation reserves aggregating to 13.4 billion. As allowed by the BSP, these unbooked valuation reserves will be recognized on a
staggered basis starting January 2009. The Bank recognizes the amortization as an addition to negative surplus (see Note 13).
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position, if and only
if, there is a legally enforceable right to offset the recognized amounts and there is an intention to either 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,
therefore, the related assets and liabilities are presented gross in the statement of financial position.
Operating Segments
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and
incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An
operating segment’s operating results are reviewed regularly by the chief operating decision maker to make decisions about
resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of corporate assets (primarily the
Group’s main office), main office expenses, and income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire property and equipment, and intangible
assets other than goodwill.
Revenue Recognition
The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent.
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. Revenue is measured at the fair value at the consideration received or receivable, excluding taxes. 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 HFT and AFS investments, interest income is
recorded at the EIR which is the rate that exactly discounts estimated future cash payments or receipts through the expected
life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or
financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment
options), 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.
Once the recorded value of a financial asset or group of similar financial assets has been reduced due to an impairment loss,
interest income should be recognized using the original EIR applied to the new carrying amount.
Service charges and penalties
Service charges and penalties are recognized only upon collection or accrued when there is reasonable degree of certainty as to
its collectibility.
Fee and commission income
The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be
divided into the following two categories:
a. Fee income earned from services that are provided over a certain period of time
Fees earned for the provision of services over a period of time are accrued over that period. These fees include 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.
Dividend income
Dividend income is recognized when the Group’s right to receive payment is established.
Trading and securities gain - net
Trading and securities gain - net represents results arising from trading activities including all gains and losses from changes in
fair value of financial assets and financial liabilities held for trading and derivatives, and gains and losses from disposal of AFS
investments and HTM investments.
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
recognized in the statement of income under Miscellaneous income.
Gain (loss) on foreclosed assets
Gain or loss on foreclosed assets is recognized upon collection of existing receivable through foreclosure of asset used as collateral
as the difference between the fair market value of the foreclosed asset and the net carrying value of the receivable settled.
Gain (loss) on sale of receivables
Gain or loss on sale of receivables is recognized upon sale of receivables, without recourse, as the difference between the
selling price and the outstanding balance of receivables sold.
Other income
Income from sale of services is recognized upon rendition of the service. Income from sale of properties is recognized upon
completion of the earning process and when the collectibility of the sales price is reasonably assured.
Real estate revenue
Real estate revenue and cost from completed projects are accounted for using the full accrual method. Revenue is recognized upon
or after delivery/transfer of the real estate to the buyer. When the sale of real estate does not meet the revenue recognition, the
sale is accounted for under the deposit method. Under this method, revenue from pre-sold units is not recognized and the receivable
from the buyer is not recorded. The real estate inventories continue to be reported as Investment properties and the related liability
as customer deposits included in accounts payable under Other liabilities in the statement of financial position.
Expense Recognition
Expenses are recognized when decrease in future economic benefits related to a decrease in an asset or increase in liability has
arisen that can be measured reliably. Expenses are recognized when incurred or when the related revenue is earned.
Operating expenses
Operating expenses constitute costs which arise in the normal business operation and are recognized when incurred.
Taxes and licenses
This includes all other taxes, local and national, and are recognized when incurred.
Interest expense
Interest expense for all interest-bearing financial liabilities are recognized in the statement of income using the EIR of the
financial liabilities to which they relate.
Property and Equipment
Land is stated at cost less any impairment in value and depreciable properties including buildings, leasehold improvements, and
furniture, fixtures and equipment are stated at cost less accumulated depreciation and amortization, and any impairment in value.
The initial cost of the Group’s property and equipment consists of its purchase price, including import duties, taxes and any directly
attributable cost to bring the property and equipment to its working condition and location for its intended use. Expenditures
incurred after the property and equipment have been put into operation, such as repairs and maintenance, are charged against
operations in the year the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted
in an increase in the future economic benefits expected to be obtained from the use of an item of property and equipment beyond
its originally assessed standard of performance, the expenditures are capitalized as an additional cost of property and equipment.
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 life of property and equipment follow:
Buildings
Furniture, fixtures and equipment
Leasehold improvements
10 to 50 years
3 to 10 years
5 to 10 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 from derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the statement of income in the year the asset is derecognized.
The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated
recoverable amounts, the assets are written down to their recoverable amounts (see accounting policy on Impairment of
Nonfinancial Assets).
Investments in Associates and Joint Venture
The Group’s investments in associates and joint venture are accounted for using the equity method of accounting. Associates
pertain to all entities over which the Group has significant influence but not control, generally accompanying a shareholding
of between 20.0% and 50.0% of the voting rights. Joint venture pertains to the Group’s interest in a jointly controlled entity,
whereby the venturers have contractual arrangement that establishes control over the economic activities of the entity.
Under the equity method, investments in associates/joint venture are 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/joint venture. Goodwill relating to an associate
is included in the carrying value of the investment and is not amortized. The Group’s share in an associate/joint venture’s
post- acquisition profits or losses is recognized in the statement of income, and its share of post-acquisition movements in the
associate/joint venture’s equity reserves is recognized in other comprehensive income. When the Group’s share of losses in an
associate/joint venture equals or exceeds its interest in the associate/joint venture, 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/joint
venture. Profits and losses resulting from transactions between the Group and an associate/joint venture are eliminated to the
extent of the interest in the associate/joint venture.
After the application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on
the Group’s investments in associates/joint venture. The Group determines at each statement of financial position date whether
there is any objective evidence that the investment in associate/joint venture is impaired. If this is the case, the Group
calculates the amount of impairment as the difference between the recoverable amount of the investment and its carrying value
and recognizes the impairment loss in the statement of income.
Upon loss of significant influence over the associate, the Group measures and recognizes any remaining 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
remaining investment and proceeds from disposal is recognized in the statement of income.
Upon loss of joint control and provided the former jointly controlled entity does not become a subsidiary or associate, the Group
measures and recognizes its remaining investment at its fair value. Any difference between the carrying amount of the former
jointly controlled entity upon loss of joint control and the fair value of the remaining investment and proceeds from disposal is
recognized in the statement of income. When the remaining investment constitutes significant influence, it is accounted for as
an investment in an associate.
In the Parent Company’s separate financial statements, investments in associates and joint venture are carried at cost, less
allowance for impairment losses.
Jointly Controlled Operations
A jointly controlled operation involves the use of assets and other resources of the Group and other venturers rather than the
establishment of a corporation, partnership or other entity. The Group accounts for the assets it controls and the liabilities and
expenses it incurs, and the share of the income that it earns from the sale of goods or services by the joint venture.
Business Combinations
Business combinations from January 1, 2010
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate
of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the
acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value
or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in
operating expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition
date. This includes the separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest
in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be
transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the
contingent consideration which is deemed to be an asset or liability, will be recognized in accordance with PAS 39 either in the
statement of income or as a change to other comprehensive income. If the contingent consideration is classified as equity, it
should not be remeasured until it is finally settled within equity.
Goodwill is initially measured at cost being the excess of the aggregate of fair value of the consideration transferred and the
amount recognized for non-controlling interest over the fair value of the net identifiable assets acquired and liabilities assumed.
If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in the
statement of income.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cashgenerating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the
acquiree are assigned to those units.
Business combinations prior to January 1, 2010
In comparison to the above-mentioned requirements, the following differences applied:
• Business combinations were accounted for using the purchase method. Transaction costs directly attributable to the
acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was
measured at the proportionate share of the acquiree’s identifiable net assets.
• Business combinations achieved in stages were accounted for as separate steps. Any additional acquired share of interest did
not affect previously recognized goodwill.
• When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree were not
reassessed on acquisition unless the business combination resulted in a change in the terms of the contract that significantly
modified the cash flows that otherwise would have been required under the contract.
• Contingent consideration was recognized if, and only if, the Group had a present obligation, the economic outflow was more
likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were
recognized as part of goodwill.
Investment Properties
Investment properties are measured initially at cost, including transaction costs. An investment property acquired through an
exchange transaction is initially 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 the 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, depreciable investment properties (except those of the Parent Company) are carried at cost
less accumulated depreciation 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 under Gain on sale of nonfinancial assets in the year of
retirement or disposal.
Expenditures incurred after the investment properties have been put into operations, such as repairs and maintenance costs, are
normally charged to profit or loss 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 but not to exceed:
Buildings
Condominium units
10 to 50 years
5 years
Transfers are made to investment properties when, and only when, there is a change in use evidenced by ending of owner
occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are
made from investment properties when, and only when, there is a change in use evidenced by commencement of owner
occupation or commencement of development with a view to sale.
Real Estate Inventories
Real estate inventories are stated at the lower of cost or net realizable value (NRV). Cost shall comprise all costs of purchase, costs
of conversion and other costs incurred in bringing the inventories to their present location and condition. NRV is the estimated selling
price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
Intangible Assets
Intangible assets consist of software costs and exchange trading right. An intangible asset is recognized only when its cost can be
measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Group.
Software costs
Software costs (presented under Intangible and other assets in the statement of financial position) 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 ten years on a
straight-line basis. Costs associated with maintaining the computer software programs are recognized as expense when incurred.
The amortization period and the amortization method for software cost are reviewed periodically to be consistent with the
changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset.
Exchange trading right
Exchange trading right (presented under Intangible and other assets in the statement of financial position) is carried at the amount
allocated from the original cost of the exchange membership seat (after a corresponding allocation was made to the value of the
Philippine Stock Exchange shares) less impairment in value. USI does not intend to sell the exchange trading right in the near future.
Impairment of Nonfinancial Assets
The Group assesses at each statement of financial position date whether there is any indication that an asset may be impaired.
Nonfinancial assets include property and equipment, investment properties, investment in subsidiaries, associates and joint
venture, chattel properties acquired, software costs, and exchange trading right. If any indication exists, or when annual
impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable
amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less cost to sell and its value in use. Where the
carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to
its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by
valuation multiples or other available fair value indicators.
For assets excluding exchange trading right, 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 Group estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is
reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last
impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable
amount, nor exceeds the carrying amount that would have been determined, net of depreciation or amortization, had no
impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of income.
For exchange trading right, impairment is determined by assessing the recoverable amount of the asset or CGU at each
statement of financial position date. Where the recoverable amount is less than the carrying amount of the asset or CGU, an
impairment loss is recognized immediately in the statement of income. Impairment losses cannot be reversed for subsequent
increases in the recoverable amount in future periods.
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; or
(b) a renewal option is exercised or extension granted, unless that term of the renewal or extension was initially included in the
lease term; or
(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).
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 in the statement of financial position. 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 risks 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.
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 under Loans and receivables in the statement of financial position. 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.
Retirement Cost
The Group has funded noncontributory defined benefit retirement plans. The retirement cost of the Group is calculated annually
by an independent actuary 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 liability or asset recognized in the statement of financial position in respect of defined benefit pension plans is the
present value of the defined benefit obligation at the statement of financial position date less the fair value of plan assets,
together with adjustments for unrecognized actuarial gains or losses and past service costs. The present value of the defined
benefit obligation is determined by discounting the estimated future cash outflows using interest rate on government bonds
that have terms to maturity approximating the terms of the related retirement liability. Actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions are credited to or charged against income when the net
cumulative unrecognized actuarial gains and losses at the end of the previous period exceeded 10.0% of the higher of the defined
benefit obligation and the fair value of plan assets at that date. These gains or losses are recognized over the expected average
remaining working lives of the employees participating in the plan.
Past service costs, if any, are recognized immediately in the statement of income, unless the changes to the pension plan are
conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the pastservice costs are amortized on a straight-line basis over the vesting period.
The defined benefit asset or liability comprises the present value of the defined benefit obligation less past service costs not yet
recognized and less the fair value of plan assets out of which the obligations are to be settled directly. The value of any asset
is restricted to the sum of any cumulative unrecognized net actuarial losses and past service cost and the present value of any
economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.
Provisions
Provisions are recognized when the 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 in the statement of income.
Related Party Relationships and Transactions
Related party relationship exists when one party has the ability to control, directly, or indirectly through one or more
intermediaries, the other party or exercises significant influence over the other party in making financial and operating decisions.
Such relationship also exists between and/or among entities which are under common control with the reporting enterprise, or
between, and/or among the reporting enterprise and its key management personnel, directors, or its shareholders. In considering
each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.
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
substantially enacted at the statement of financial position date.
Deferred taxes
Deferred tax is provided, using the balance sheet method, on all temporary differences at the statement of financial position
date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax is provided on all temporary differences at the statement of financial position date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable
temporary differences, except:
• 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 income nor taxable income; and
• In respect of taxable temporary differences associated with investments in subsidiaries and associates, 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 corporate income tax (RCIT), and unused net operating loss carryover
(NOLCO), to the extent that it is probable that sufficient taxable profit will be available against which the deductible temporary
differences and carryforward of unused tax credits from MCIT and unused NOLCO can be utilized except:
• 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
income nor taxable income; and
• In respect of deductible temporary differences associated with investments in subsidiaries and associates, 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 income 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 taxable income 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.
In the consolidated financial statements, deferred tax assets and liabilities are measured at the tax rates that are applicable
to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantially enacted at the statement of financial position date.
Current tax and deferred tax relating to items recognized in other comprehensive income are also 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 related to the same taxable entity and the same taxation authority.
Equity
Common stock is measured at par value for all shares issued and outstanding. When the shares are sold at a premium, the
difference between the proceeds and the par value is credited to Additional paid-in capital account. Direct costs incurred
related to equity issuance, such as underwriting, accounting and legal fees, printing costs and taxes are chargeable to Additional
paid-in capital account. If the Additional paid-in capital is not sufficient, the excess is added to negative 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
shares issued.
Deficit represents accumulated losses (net of earnings) of the Parent Company and amortization of unbooked valuation reserves
and deferred losses, as discussed in Note 1.
Dividends on Common Shares
Dividends on common shares are recognized as a liability and deducted from equity when approved by the BOD of the Parent
Company and the BSP, in the case of cash dividends; and the BOD, shareholders of the Parent Company and its subsidiaries and
the BSP in the case of stock dividends. Dividends declared during the year but are approved by the BSP after the statement of
financial position date are dealt with as an event after the reporting period.
Debt Issue Costs
Issuance, underwriting and other related expenses incurred in connection with the issuance of debt instruments are deferred and
amortized over the terms of the instruments using the effective interest method. Unamortized debt issue costs are included in
the measurement of the related carrying value of the debt instrument in the statement of financial position.
Events after the Reporting Period
Any post-year-end event that provides additional information about the Group’s position at the statement of financial position
date (adjusting event) is reflected in the financial statements. Post-year-end events that are not adjusting events, if any, are
disclosed when material to the financial statements.
Fiduciary Activities
Assets and income arising from fiduciary activities together with related undertakings to return such assets to customers are
excluded from the financial statements where the Parent Company and a subsidiary act in a fiduciary capacity such as nominee,
trustee or agent.
Future Changes in Accounting Policies
The Group will adopt the following standards, interpretations and amendments to standards enumerated below when these
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 the financial statements.
Effective in 2012
PAS 1 Amendments, Financial Statement Presentation - Presentation of Items of Other Comprehensive Income (OCI)
The amended standard is effective for annual periods beginning on or after July 1, 2012. 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.
PFRS 7 Amendments, Financial Instruments: Disclosures - Disclosures - Transfers of Financial Assets
The amendments to PFRS 7 are effective for annual periods beginning on or after July 1, 2011. The amendments will allow users
of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitizations),
including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The
amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the
end of a reporting period.
PAS 12 Amendment, Income Taxes - Deferred Tax: Recovery of Underlying Assets
The amendment to PAS 12 is effective for annual periods beginning on or after January 1, 2012. It provides a practical solution to
the problem of assessing whether recovery of an asset will be through use or sale. It introduces a presumption that recovery of
the carrying amount of an asset will normally be through sale.
Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments
This interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration
paid. The equity instruments issued are measured at their fair value. In case that this cannot be reliably measured, the instruments
are measured at the fair value of the liability extinguished. Any gain or loss is recognized immediately in profit or loss.
Effective in 2013
PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities
The amendments to PFRS 7 are to be retrospectively applied for annual periods beginning on or after January 1, 2013. 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.
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.
PFRS 10, Consolidated Financial Statements
This standard is effective for annual periods beginning on or after January 1, 2013.
PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements that address the accounting for
consolidated financial statements. It also includes the issues raised in SIC-12 Consolidated - Special Purpose Entities. The Group
is assessing the impact on its financial position and performance.
PFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced
by PFRS 10 will 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. The Group is assessing the
impact on its financial position and performance.
PFRS 11, Joint Arrangements
This standard is effective for annual periods beginning on or after January 1, 2013.
PFRS11 replaces PAS 31, Interest on Joint Ventures and SIC-13 Jointly-controlled Entities – Non-monetary Contributions by
Venturers. The standard removes the option to account for a jointly controlled entities (JCEs) using proportionate consolidated.
Instead, JCEs that meet the definition of a joint control must be accounted for using the equity method. The Group is assessing
the impact on its financial position and performance.
PFRS 12, Disclosure of Interests in Other Entities
PFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including
subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard is effective for annual periods
beginning on or after January 1, 2013.
PFRS 13, Fair Value Measurement
This standard represents the completion of the joint project to establish a single source for the requirements on how to measure
fair value under PFRS. This standard does not change when an entity is required to use fair value, but rather, describes how to
measure fair value under PFRS, when fair value is required or permitted to be used. This standard is effective for annual periods
beginning on or after January 1, 2013.
PAS 19 Amendments, Employee Benefits - Defined Benefit Plans
The amendments focus on the following key areas: the elimination of the option to defer the recognition of actuarial gains and
losses resulting from defined benefit plans (the corridor approach); the elimination of options for the presentation of gains and
losses relating to those plans; and the improvement of disclosure requirements that will better show the characteristics of defined
benefit plans and the risks arising from those plans. The amendments to the recognition, presentation and disclosure requirements
will ensure that the financial statements provide investors and other users with a clear picture of an entity’s commitments resulting
from defined benefit plans. The amendments to PAS 19 are effective for annual periods beginning on or after January 1, 2013.
PAS 27, Separate Financial Statements (as revised in 2011)
The amendment is effective for annual periods beginning on or before January 1, 2013. As a consequence of the new PFRS
10 and PFRS 12, what remains of PAS 27 is limited to accounting for subsidiaries, jointly controlled entities and associates in
separate financial statements. The Group is assessing the impact on its financial position and performance.
PAS 28, Investments in Associates and Joint Ventures (as revised in 2011)
The amendment is effective for annual periods beginning on or after January 1, 2013. As a consequence of the new PFRS 11 and
PFRS 12, PAS 28 has been remained PAS 28, Investment in Associates and Joint Ventures. The standard describes the application
of the equity method to investments in joint ventures in addition to associates. The Group is assessing the impact on its financial
position and performance.
Effective in 2014
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial liabilities
The amendments to PAS 32 are to be retrospectively applied for annual periods beginning on or after January 1, 2014. These
amendments to PAS 32 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.
Effective 2015
PFRS 9, Financial Instruments: Classification and Measurement
PFRS 9, as issued in 2010, reflects the first phase of the work on the replacement of PAS 39 and applies to classification and
measurement of financial assets and financial liabilities as defined in PAS 39. The standard is effective for annual periods
beginning on or after January 1, 2015. In subsequent phases, impairment, hedge accounting and impairment of financial assets
will be addressed. The adoption of the first phase of PFRS 9 will have an effect on the classification and measurement of the
Group’s financial assets. The Group will quantify the effect in conjunction with the other phases, when issued, to present a
comprehensive picture of the impact of adoption on the financial position or performance of the Group.
3. Significant Accounting Judgments and Estimates
The preparation of the consolidated and the parent company financial statements in compliance with PFRS requires the Group to
make judgments and estimates that affect the reported amounts of assets, liabilities, income and expenses and the disclosures
of contingent assets and contingent liabilities. Future events may occur which can cause the judgments and 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) Going concern
The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satisfied that
the Group has the resources to continue in business for the foreseeable future. Though the Parent Company’s losses prior to
2005, including the losses not recognized, as discussed in Notes 12 and 13, brought its capital below the required minimum
capital requirement for a universal bank, the Parent Company’s management has taken active steps in ensuring its continued
liquidity and implemented its capital build-up plan pursuant to the FAA with PDIC and the MOA that was signed with the ROP,
PDIC and PCGG (see Notes 1 and 23). As of December 31, 2011, the Bank has already complied with the risk-based capital
ratio. Thus, the financial statements continue to be prepared on the going concern basis.
b) Operating leases
Group as lessor
The Group has entered into commercial property leases on its investment property portfolio. Based on factors such as,
retention of ownership title to the leased property, period of lease contract relative to the estimated useful economic life
of the leased property and bearer of executory costs, the Group has determined that it retains all the significant risks and
rewards of ownership of these properties, and so accounts for these as operating leases.
Group as lessee
The Group has entered into leases on premises it uses for its operations. The Group has determined, based on the evaluation
of the lease agreement, that all significant risks and rewards of ownership of the properties remain with the lessors, and so
accounts for these as operating leases.
c)
Finance leases
ULFC has entered into finance leases in which it has determined, based on the evaluation of the lease agreement, that it
transfers all the significant risks and rewards of ownership of the properties it leases out. The lessees have the option to
purchase the leased assets at a price that is expected to be sufficiently lower than the fair value at the date the option becomes
exercisable and the lease term is for the major part of the economic life of the asset and at the inception of the lease, the
present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset.
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. Refer to Note 5 for the fair values
and the measurement bases of the financial instruments.
e)
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. Refer to Note 7 for discussion on the Parent Company’s breach of the tainting rule in 2011.
f)
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.
g)
Embedded derivatives
Where a hybrid instrument is not classified as financial assets 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.
h) 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 legal counsel handling the Group’s defense in this matter and is based
upon an analysis of potential results. Management does not believe that the outcome of this matter will affect the results
of operations. 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 these proceedings (see Note 28).
i)
Functional currency
PAS 21 requires management to use its judgment to determine the entity’s functional currency such that it most faithfully
represents the economic effects of the underlying transactions, events and conditions that are relevant to the entity. In
making this judgment, the Group considers the following:
a) the currency that mainly influences sales prices for financial instruments and services (this will often be the currency in
which sales prices for its financial instruments and services are denominated and settled);
b) the currency in which funds from financing activities are generated; and
c) the currency in which receipts from operating activities are usually retained.
j)
Sequestration of shares of the Bank and CIIF Oil Mills by the Republic of the Philippines
As discussed in Note 23, the Group is involved in legal proceedings on the ownership of the Bank’s shares and of the CIIF
Oil Mills, which were subject of a Supreme Court Ruling issued in January 2012. The Group, in consultation with its legal
counsels, currently believes that the said Supreme Court Ruling will not have a material effect on the consolidated financial
statements pending Motion for Reconsideration. Future financial performance could be materially affected as a result of the
Supreme Court decision.
Estimates
a) Impairment of loans and receivables
The Group reviews its individually significant loans and receivables at each statement of financial position date to assess
whether an impairment loss should be recorded in the statement of income. In particular, judgment by management
is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. In
estimating these cash flows, the Group makes judgments about the borrower’s financial situation and the NRV of collateral.
These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future
changes to the allowance.
Loans and receivables that have been assessed individually and found not to be impaired and all individually insignificant
loans and advances are then assessed collectively, in groups of assets with similar characteristics, to determine whether
provision should be made due to incurred loss events for which there is objective evidence but whose effects are not yet
evident. The collective assessment takes account of data from the loan portfolio, concentrations of risks and economic data.
The carrying values of loans and receivables and the related allowance for credit losses of the Group and the Parent Company
are disclosed in Notes 8 and 13.
As of December 31, 2011 and 2010, however, the Parent Company has deferred the booking of credit and impairment losses
on certain loans and receivables amounting to 602.4 million and 1.0 billion, respectively (see Note 13). These credit and
impairment losses form part of the unbooked valuation reserves allowed by the BSP as discussed in Note 1.
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. 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 the reported fair value of the financial instruments. Refer to Notes 5 and 7 for
information on the fair values of these instruments.
c) Valuation of unquoted equity investments
The Group’s investments in equity securities that do not have a quoted market price in an active market and whose fair value
cannot be reliably measured are carried at cost, less allowance for impairment losses.
As of December 31, 2011 and 2010, the carrying value of unquoted AFS equity securities (included under AFS investments)
amounted to 149.6 million and 379.1 million, respectively, for the Group and 148.6 million and 378.0 million,
respectively, for the Parent Company (see Notes 7 and 13).
d) Impairment of AFS equity investments
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 20.0% or more of the original cost of investment, and ‘prolonged’ as greater than 12 months. In
making this judgment, the Group evaluates among other factors, the normal volatility in share price for quoted equity
securities and the future cash flows and the discount factors for unquoted equities.
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, 2011 and 2010, allowance for impairment losses on certain AFS equity securities amounted to 508.3
million and 301.2 million, respectively, for the Group and 508.2 million and 301.1 million, respectively, for the Parent
Company (see Note 13). As of December 31, 2011 and 2010, the carrying value of AFS equity securities (included under AFS
investments) amounted to 603.9 million and 867.7 million, respectively, for the Group and 553.7 million and 823.2
million, respectively, for the Parent Company (see Notes 7 and 13).
As of December 31, 2011 and 2010, however, the Parent Company has deferred the booking of impairment losses on certain
AFS equity investments amounting to 384.3 million and 585.1 million, respectively (see Note 13). This forms part of the
unbooked valuation reserves allowed by the BSP as discussed in Note 1.
e) Impairment of AFS debt investments
The Group determines that AFS debt investments are impaired based on the same criteria as financial assets carried at
amortized cost.
The Group and the Parent Company determined that there is no evidence of impairment on its AFS debt investments. As of
December 31, 2011 and 2010, the carrying value of AFS debt securities (included under AFS investments) amounted to 19.1
billion and 13.6 billion, respectively, for the Group and 19.0 billion and 13.5 billion, respectively, for the Parent Company
(see Notes 7 and 13).
f) Impairment of nonfinancial assets
Property and equipment, investment properties, chattel properties acquired, land held for sale, software cost and exchange trading right
The Group assesses impairment on assets whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The factors that the Group considers important which could trigger an impairment review
include the following:
• significant underperformance relative to expected historical or projected future operating results;
• significant changes in the manner of use of the acquired assets or the strategy for overall business; and
• significant negative industry or economic trends.
An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount.
In 2011 and 2010, there were no indicators of impairment on the Group’s and the Parent Company’s property and equipment,
software costs and exchange trading right that could trigger an impairment review.
As of December 31, 2011 and 2010, the carrying value of property and equipment amounted to 2.3 billion and 1.8 billion,
respectively, for the Group and 2.2 billion and 1.7 billion, respectively, for the Parent Company (see Note 9).
As of December 31, 2011 and 2010, the carrying value of software costs amounted to 411.9 million and 459.0 million,
respectively, for the Group and 408.3 million and 451.5 million, respectively, for the Parent Company (see Note 12).
As of December 31, 2011 and 2010, the carrying value of the Group’s exchange trading right amounted to 1.5 million (see
Note 12).
The recoverable amount of investment properties and chattel properties acquired and land held for sale is determined based
on fair value less cost to sell. As of December 31, 2011 and 2010, the carrying value of investment properties amounted to 6.8
billion and 7.1 billion, respectively, for the Group and 6.5 billion and 6.9 billion, respectively, for the Parent Company (see
Note 11).
As of December 31, 2011 and 2010, the Parent Company, however, has deferred the booking of impairment losses on investment
properties amounting to 2.5 billion (see Note 13). This forms part of the unbooked valuation reserves allowed by the BSP as
discussed in Note 1.
As of December 31, 2011 and 2010, the carrying value of land held for sale (included under Other Assets in the statements
of financial position) of the Group and of the Parent Company amounted to 1.7 billion and 2.1 billion, net of allowance for
impairment amounting to 301.7 million and nil, respectively (see Notes 12 and 13).
As of December 31, 2011 and 2010, the carrying value of chattel properties acquired amounted to 185.1 million and 87.2
million net of allowance for impairment amounting to 25.2 million and nil, respectively, for the Group and 160.9 million and
84.2 million, respectively net of allowance for impairment amounting to 42.3 million and nil for the Parent Company (see
Notes 12 and 13).
Investments in subsidiaries, associates, and joint venture
The Group and the Parent Company assesses impairment on its investments in subsidiaries, associates and joint venture
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Among
others, the factors that the Group and the Parent Company considers important which could trigger an impairment review on
its investments in subsidiaries, associates and joint venture include the following:
• deteriorating or poor financial condition;
• recurring net losses; and
• significant changes (i.e. technological, market, economic, or legal environment in which the subsidiary, associate and
jointly controlled entity operates) with an adverse effect on the subsidiary, associate or jointly controlled entity have
taken place during the period, or will take place in the near future.
An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable
amount is determined based on the asset’s fair value less cost to sell, which considers the estimated realizable and
settlement amounts of the assets and liabilities of the subsidiary, associate or joint venture.
As of December 31, 2011 and 2010, the carrying values of the Group’s investment in associates and joint venture amounted
to 7.5 billion and 7.0 billion, respectively. As of December 31, 2011 and 2010, the carrying values of the Parent Company’s
investments in subsidiaries, associates and joint venture amounted to 3.9 billion, net of allowance for impairment losses
amounting to 370.3 million and 372.2 million, respectively (see Notes 10 and 13).
As of December 31, 2011 and 2010, the Parent Company, however, has deferred the booking of impairment losses on
investment in associates and joint venture amounting to 789.0 million and 791.1 million, respectively (see Note 13). This
forms part of the unbooked valuation reserves allowed by the BSP as discussed in Note 1.
g) Estimated useful lives of property and equipment, investment properties, software costs and chattel properties acquired
The Group reviews on an annual basis the estimated useful lives of property and equipment, depreciable investment
properties, software costs and chattel properties acquired based on expected asset utilization as anchored on business
plans and strategies that also consider expected future technological developments and market behavior. It is possible that
future results of operations could be materially affected by changes in these estimates brought about by changes in the
factors mentioned. A reduction in the estimated useful lives of property and equipment, depreciable investment properties,
software costs and chattel properties acquired would decrease their respective balances and increase the recorded
depreciation and amortization expense.
As of December 31, 2011 and 2010, the carrying value of depreciable property and equipment amounted to 2.2 billion and 1.7
billion, respectively, for the Group and 2.1 billion and 1.6 billion, respectively, for the Parent Company (see Note 9).
As of December 31, 2011 and 2010, the carrying value of depreciable investment properties amounted to 3.1 billion for the
Group and 3.1 billion and 3.0 billion, respectively, for the Parent Company (see Note 11). In 2011 and in prior years, the
Parent Company did not recognize depreciation on its investment properties from the “bad bank” assets as required under
PAS 40, Investment Property. As of December 31, 2011 and 2010, the unbooked accumulated depreciation amounted to 2.9
billion and 3.0 billion, respectively
h) Recognition of deferred tax assets
Deferred tax assets are recognized for all unused tax losses and credits to the extent that it is probable that taxable income
will be available against which the losses can be utilized. Significant management judgment is required to determine the
amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable income
together with future tax planning strategies.
The Group reviews its deferred tax assets at each statement of financial position date and reduces the carrying amount to
the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred
tax asset to be utilized. The estimates of future taxable net income indicate that certain temporary differences will be
realized in the future. The recognized net deferred tax assets and unrecognized deferred tax assets of the Group and of the
Parent Company are disclosed in Note 22.
i) Retirement benefits
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, expected rates of return on assets, future salary
increases, mortality rates and future pension increases. Due to 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. Refer to Note 25 for the details
of assumptions used in the calculation. While the Group believes that the assumptions are reasonable and appropriate,
significant differences between actual experiences and assumptions may materially affect the cost of employee benefits and
related obligations.
As of December 31, 2011 and 2010, the Group’s net retirement asset (included under Other assets in the statements of
financial position) amounted to 10.6 million and 23.0 million (see Note 12), respectively, while its net retirement liability
(included under Other liabilities in the statements of financial position) amounted to 6.6 million (see Note 17).
As of December 31, 2011 and 2010, the Parent Company’s net retirement asset amounted to 6.3 million and 19.0 million,
respectively (see Note 12).
j)
NRV of real estate inventories
The Group determines the net realizable value of its real estate inventories based on its estimated selling price in the
ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
In determining the net realizable value of the real estate inventories, management considers whether those real estate
inventories are damaged or if their selling prices have declined. Likewise, management also considers whether the
estimated costs of completion or the estimated costs to be incurred to make the sale have increased. The amount and
timing of recorded expenses for any period would differ if different estimates were utilized. As of December 31, 2011 and
2010, real estate inventories of the Group amounted to P=3.1 billion (net of impairment losses amounting to 114.6 million)
and 3.2 billion, respectively (see Notes 12 and 13).
4. Financial Risk Management
a. Introduction
The Parent Company and its subsidiaries manage their respective financial risks separately. The subsidiaries have their own
risk management procedures 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.
The Parent Company’s activities are principally related to the use of financial instruments. The Parent Company accepts
deposits from customers at rates set by the Treasury Group depending on the volume of placements, and for various periods,
and seeks to earn above-average interest margins by investing these funds. The Parent Company seeks to increase these
margins by consolidating short-term funds and lending for longer periods at higher rates, while maintaining sufficient
liquidity to meet all claims that might fall due.
The Parent Company also trades in financial instruments where it takes positions to take advantage of short-term market
movements in bonds and shares of stocks.
The Parent Company has exposure to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
Risk Management Framework
To manage the financial risk for holding financial assets and liabilities, the Parent Company operates an integrated risk
management system to address the risks it faces in its banking activities, including liquidity, credit and market risks. The
Parent Company’s risk management objective is to adequately and consistently identify, measure, control and monitor
the risk profile inherent in the Parent Company’s activities. The Parent Company’s Risk Management Committee (RMC) has
overall responsibility for the creation and oversight of the Parent Company’s corporate risk policy and is actively involved in
the assessment, planning, review and approval of all the risks in the Parent Company’s organization. The Parent Company
also has in place an authorization structure that defines and sets limits on the type and value of transactions that each
position can approve.
Within the Parent Company’s overall risk management system, the Risk Management Division (RMD) is responsible for managing
these risks in a more detailed and proactive fashion on a continuing basis through performance of risk and return analysis.
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 and for geographical and industry concentrations, and by monitoring exposures in relation to such limits.
Management of Credit Risk
The Parent Company manages its credit risk and loan portfolio through a stringent process of loan approval. The screening
process is directed by the senior officers of its Corporate and Consumer Banking Group. The process establishes the
creditworthiness of the individual loan applicant based on best credit practices, and takes into consideration the current
business condition and medium-term potential of the industry in which the loan applicant operates in.
In compliance with BSP requirements, the Parent Company established in December 2004 an Internal Credit Risk Rating
(ICRR) system for the purpose of measuring credit risk for corporate borrowers in a consistent manner, as accurately as
possible, and thereafter uses the risk information for business and financial decision making. The ICRR system covers
corporate borrowers with asset size of above 15.0 million, requiring financial statements from 2005 onwards to be audited
by SEC-accredited auditing firms.
On a continuing basis, the Parent Company generates credit risk ratings for existing loan accounts to assess their
performance and to determine which account will be retained, expanded, or phased out. A separate review of the loan
portfolio is conducted by the RMD to assess the quality of individual accounts and the concentration of the Parent Company’s
credit exposures.
Maximum exposure to credit risk before collateral held or other credit enhancements
The Group and the Parent Company’s maximum exposure to credit risk is equal to the carrying value of its financial assets
except for certain secured loans and receivables shown below:
Consolidated
2011
Gross
Maximum Fair Value
Exposure of Collaterals
Loans and receivables:
Receivables from
customers
Corporate loans
Consumer loans
Sales contract receivable
41,097,910
17,876,504
1,063,640
60,038,054
38,870,692
19,279,196
895,932
59,045,820
Financial
Net Effects of
Exposure Collaterals
25,006,407
3,842,238
409,390
29,258,035
2010
Gross
Financial
Maximum Fair Value
Net Effects of
(In Thousands)
16,091,503
14,034,266
654,250
30,780,019
38,379,809
13,213,255
1,381,330
52,974,394
43,948,948
37,224,534
1,931,923
83,105,405
32,449,632
3,134,472
485,705
36,069,809
5,930,177
10,078,783
895,625
16,904,585
Parent
2011
Gross
Maximum Fair Value
Loans and receivables:
Receivables from
customers
Corporate loans
Consumer loans
38,299,781
14,555,310
994,502
53,849,593
36,795,618
17,630,210
826,794
55,252,622
Financial
Net Effects of
24,074,304
788,128
340,252
25,202,684
2010
Gross
Financial
Maximum Fair Value
Net Effects of
(In Thousands)
14,225,477
13,767,182
654,250
28,646,909
35,724,969
10,747,468
1,336,802
47,809,239
42,396,674
13,044,263
1,931,923
57,372,860
30,481,884
682,248
485,705
31,649,837
5,243,085
10,065,220
851,097
16,159,402
The Group holds collateral against loans and receivables to customers in the form of hold-out on deposits, real estate
mortgage, chattel mortgage, mortgage trust indenture, standby letters of credit or bank guaranty, government guaranty,
assignment of receivables, pledge of shares, personal and corporate guaranty and other forms of security. Fair market
value is based on the value of the collateral assessed at the time of borrowing and are updated upon renewal of the
loan. Collateral is generally not held over loans and advances to banks, except when securities are held as part of reverse
repurchase and securities borrowing activity.
It is the Group’s policy to dispose foreclosed assets in an orderly fashion. The proceeds of the sale of the foreclosed assets
classified as ‘Investment properties’ and ‘Chattel properties acquired’ are used to reduce or repay the outstanding claim.
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, geographic, internal rating buckets, currency, term and security.
For risk concentration monitoring purposes, the financial assets are broadly categorized into (1) loans and receivables, (2)
trading and financial investment securities, (3) loans and advances to banks, and (4) others. To mitigate risk concentration,
the Group has established regular monitoring system to spot breaches in regulatory and internal limit.
An analysis of concentrations of credit risk at the statement of financial position date is shown below:
Loans and
Receivables*
Financial intermediaries
Government
Real estate, renting and business activities
Wholesale and retail trade, repair of motor
vehicles, motorcycles, personal and
household goods
Manufacturing
Agriculture, hunting and forestry and fishing
Construction
Transport, storage and communication
(forward)
Consolidated
2011
Loans and
Investment
Advances
Securities** to Banks***
(In Thousands)
Others****
Total
6,615,315
1,743,675
18,812,362
3,453,759
43,053,269
1,902,160
35,703,598
—
—
2,500
—
—
45,775,172
44,796,944
20,714,522
14,946,686
10,928,894
6,545,291
44,628
634,816
—
516,093
733
1,280,989
2,159
—
—
—
—
—
—
—
—
—
—
14,946,686
11,444,987
6,546,024
1,325,617
636,975
Loans and
Receivables*
Other community, social and personal
services activities
Less: Unearned interest discount
Allowance for credit and impairment losses
Consolidated
2011
Loans and
Investment
Advances
Securities** to Banks***
(In Thousands)
16,039,188
181,462
—
76,310,855
337,212
5,010,226
70,963,417
50,390,624
—
508,283
49,882,341
35,703,598
—
—
35,703,598
Others****
Total
3,405,541
19,626,191
3,408,041 165,813,118
—
337,212
—
5,518,509
3,408,041 159,957,397
* Includes Security deposit to PCHC recorded under Other assets.
** Comprised of financial assets at FVPL, AFS investments and HTM investments.
*** Comprised of due from BSP, due from other banks and interbank loans receivable and SPURA.
**** Comprised of letters of credit.
Loans and
Receivables*
Government
vehicles, motorcycles, personal and household goods
Manufacturing
Construction
services activities
4,914,410
1,877,949
13,740,797
Consolidated
2010
Loans and
Investment
Advances
Securities**
to Banks***
(In Thousands)
4,079,142
26,111,056
42,489,122
—
844,923
—
Others****
Total
—
—
—
35,104,608
44,367,071
14,585,720
9,293,050
11,115,156
4,380,536
1,503,215
5,345,415
695,297
613,899
—
—
1,761,292
—
—
—
—
—
—
—
—
—
—
9,988,347
11,729,055
4,380,536
1,503,215
7,106,707
15,210,171
67,380,699
397,979
4,548,446
62,434,274
156,049
50,639,724
—
301,195
50,338,529
—
26,111,056
—
—
26,111,056
4,304,036
4,304,036
—
—
4,304,036
19,670,256
148,435,515
397,979
4,849,641
143,187,895
Others***
Total
* Includes Security deposit to PCHC recorded under Other assets.
** Comprised of financial assets at FVPL, AFS investments and HTM investments.
*** Comprised of due from BSP, due from other banks and interbank loans receivable and SPURA.
**** Comprised of letters of credit.
Loans and
Receivables
Parent Company
2011
Loans and
Investment
Advances
Securities*
to Banks**
(In Thousands)
Government
Manufacturing
Construction
services activities
5,480,705
1,743,675
18,674,750
3,407,103
42,739,262
1,901,534
35,255,789
—
—
—
—
—
44,143,597
44,482,937
20,576,284
14,729,308
9,930,793
6,413,404
44,628
634,816
—
515,806
—
1,280,988
—
—
—
—
—
—
—
—
—
—
—
14,729,308
10,446,599
6,413,404
1,325,616
634,816
11,174,536
68,826,615
137,013
4,799,540
179,322
50,024,015
—
508,208
—
35,255,789
—
—
3,405,541 14,759,399
3,405,541 157,511,960
—
137,013
—
5,307,748
63,890,062
49,515,807
35,255,789
3,405,541
* Comprised of financial assets at FVPL, AFS investments and HTM investments.
** Comprised of due from BSP, due from other banks and interbank loans receivable and SPURA.
*** Comprised of letters of credit.
152,067,199
Loans and
Receivables
Parent Company
2010
Loans and
Investment
Advances
Securities*
to Banks**
Others***
Total
(In Thousands)
Government
Manufacturing
Construction
services activities
4,763,311
1,877,949
13,493,900
4,035,874
42,188,632
844,100
25,510,359
—
—
—
—
—
34,309,544
44,066,581
14,338,000
9,293,050
10,216,264
4,267,483
1,503,215
5,345,415
695,297
613,118
—
—
1,759,501
—
—
—
—
—
—
—
—
—
—
9,988,347
10,829,382
4,267,483
1,503,215
7,104,916
9,968,837
60,729,424
215,493
4,274,238
152,618
50,289,140
—
301,120
—
25,510,359
—
—
4,298,581
4,298,581
—
—
14,420,036
140,827,504
215,493
4,575,358
4,298,581
136,036,653
56,239,693
49,988,020
25,510,359
* Comprised of financial assets at FVPL, AFS investments and HTM investments.
** Comprised of due from BSP, due from other banks and interbank loans receivable and SPURA.
*** Comprised of RCOCI and letters of credit.
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 loan pricing and provision for credit losses. The model on risk ratings is assessed and updated regularly. Validation of the risk
rating is performed by the RMD to maintain accurate and consistent risk ratings across the credit portfolio.
The following table shows the description of credit quality of commercial loans:
Credit Quality
High grade
Standard grade
Substandard grade
Impaired
ICRRS Grade
1
2
3
4
5
6
7
8
9
10
Description
Excellent
Strong
Good
Satisfactory
Acceptable
Watchlist
Especially mentioned
Substandard
Doubtful
Loss
1 - Excellent
The rating is given to a borrower with a very low probability of going into default in the coming year. The borrower has a
high degree of stability, substance and diversity and has access to public markets to raise substantial amounts of funds at any
time; has a very strong debt service capacity and has conservative balance sheet leverage. The track record of the borrower
in terms of profit is very good and he 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. Borrowers 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.
3 - Good
This rating is given to smaller corporations with limited access to public capital markets or to alternative financial markets.
While probability of default is quite low, it bears some degree of stability and substance. However, borrower may be susceptible
to cyclical changes and more concentration of business risk, by product or by market. Typical for this type of borrower is the
combination of comfortable asset protection and an acceptable balance sheet structure. The debt service capacity of the
borrower is strong and has reported profits for the past three years and is expected to be profitable again in the current year.
4 - Satisfactory
This rating is given to a borrower where clear risk elements exist and the probability of default is somewhat greater and normally
has limited access to public markets. The probability is reflected in volatility of earnings and overall performance. The borrower
should be able to withstand normal business cycles, but any prolonged unfavorable economic period would create deterioration
beyond acceptable levels. The borrower has the combination of reasonably sound asset and cash flow protection with adequate
debt service capacity and has reported profits in the past year and is expected to report profits in the current year.
5 - Acceptable
This rating is given to a borrower whose risk elements are sufficiently pronounced to withstand normal business cycles but any
prolonged unfavorable economic and/or market period would create an immediate deterioration beyond acceptable levels. The
risk to this borrower is still acceptable as there is sufficient cashflow 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.
6 - Watchlist
This rating is given to a borrower which incurs net losses and has salient financial weaknesses, specifically in profitability,
reflected on statements. 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. No
immediate threat to the repayment of the loan exists through normal course of business but factors may exist that could
adversely affect the creditworthiness of the borrower.
8 - Substandard
This rating is given to a borrowerwhere repayment of the loan, through normal course of business, may be in jeopardy due to
adverse events. There exists the possibility of future losses to the institution unless given closer supervision.
9 - Doubtful
This rating is given to a borrower who is unable or unwilling to service debt over an extended period of time and near future
prospects of orderly debt service is doubtful. Existing facts, conditions, and values make full collection or liquidation 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. The collectible amount with
no collateral or which collateral is of little value. Is difficult to measure and more practical to write off than to defer these
even though partial recovery may be obtained in the future.
The Parent Company subjects commercial loans with ICRR of 8 to 10 to specific impairment test.
Due from BSP, due from other banks, and interbank loans receivable are classified as high grade since these are deposited in/
or transacted with reputable banks which has low probability of insolvency. Unquoted debt securities classified as loans are
classified as high grade based on the reputation of the counterparty.
The table below shows credit quality per class of financial assets, based on the Parent Company’s rating system (gross of
allowance for credit losses and unearned interest discount):
Due from BSP
Interbank loans receivable and SPURA
Receivables from customers
Corporate loans
Consumer loans
Unquoted debt securities
Sales contracts receivable
Accrued interest receivable
Accounts receivable
Other receivables
Other Assets - Security deposit to PCHC
Total
Consolidated
2011
Neither past due nor impaired
Past due
Standard Sub-standard
but not
High Grade*
Grade**
Grade***
Unrated impaired
(In Thousands)
32,579,118
—
—
—
—
1,898,901
—
—
—
—
1,225,579
—
—
—
—
35,703,598
—
—
—
—
Total
—
—
—
—
32,579,118
1,898,901
1,225,579
35,703,598
45,059,522
18,960,889
8,213,719
1,083,069
1,449,519
705,005
393,425
445,707
76,310,855
18,925,846
3,141,136
8,213,719
39,573
956,361
22,854
391,561
445,707
32,136,757
17,948,103
137,938
—
28,383
139,534
369
226
—
18,254,553
1,249,144 3,140,890
— 14,353,235
—
—
795
631,237
20,665
64,288
—
633
1,638
—
—
—
1,272,242 18,190,283
426,602 3,368,937
1,194,381
134,199
—
—
2,819
380,262
14,415
254,256
—
681,149
—
—
—
—
1,638,217 4,818,803
67,840,355
18,254,553
1,272,242
1,638,217
* Includes loans and receivables with an ICRRS Grade of 1-4
** Includes loans and receivables with an ICRRS Grade of 5-7
*** Includes loans and receivables with an ICRRS Grade of 8-9
Impaired
18,190,283
4,818,803
112,014,453
Due from BSP
Corporate loans
Consumer loans
Accounts receivable
Other receivables
Other Assets - Security deposit to PCHC
Other assets Returned checks and
other cash items
Total
Consolidated
2010
Past due
but not
High Grade*
Grade**
Grade***
Unrated
impaired
(In Thousands)
22,601,760
—
—
—
—
2,154,600
—
—
—
—
1,354,696
—
—
—
—
26,111,056
—
—
—
—
Impaired
Total
—
—
—
—
22,601,760
2,154,600
1,354,696
26,111,056
18,116,491
1,608,634
6,683,106
8,608
1,247,465
11,677
333,790
445,707
28,455,478
14,541,742
607,200
—
32,800
96,824
720
—
—
15,279,286
248,344
3,332
—
3,120
—
—
—
—
254,796
4,525,513
9,697,204
—
1,336,802
92
175,726
—
—
15,735,337
134,233
1,243,543
—
—
8,953
—
—
—
1,386,729
4,599,427
934,550
—
—
86,161
648,803
132
—
6,269,073
42,165,750
14,094,463
6,683,106
1,381,330
1,439,495
836,926
333,922
445,707
67,380,699
—
54,566,534
—
15,279,286
—
254,796
1,456,456
17,191,793
—
1,386,729
—
6,269,073
1,456,456
94,948,211
Impaired
Total
—
—
—
—
32,305,984
1,851,226
1,098,579
35,255,789
42,000,485
15,513,298
7,932,107
1,011,499
1,407,951
961,275
68,826,615
Due from BSP
Corporate loans
Consumer loans
Accounts receivable
Total
Parent Company
2011
Past due
but not
High Grade*
Grade**
Grade***
Unrated impaired
(In Thousands)
32,305,984
—
—
—
—
1,851,226
—
—
—
—
1,098,579
—
—
—
—
35,255,789
—
—
—
—
16,153,636
—
7,932,107
—
954,903
—
25,040,646
16,944,209
—
—
—
99,424
—
17,043,633
1,230,494
4,064,854
— 14,353,235
—
—
—
631,237
20,665
64,288
—
295,829
1,251,159 19,409,443
366,291 3,241,001
1,094,974
65,089
—
—
—
380,262
14,415
254,256
—
665,446
1,475,680 4,606,054
60,296,434
17,043,633
1,251,159
1,475,680
4,606,054
104,082,404
Parent Company
2010
Past due
but not
High Grade*
Grade**
Grade***
Unrated
impaired
(In Thousands)
22,480,433
—
—
—
—
1,959,230
—
—
—
—
1,070,696
—
—
—
—
Impaired
Total
—
—
—
22,480,433
1,959,230
1,070,696
19,409,443
Due from BSP
Corporate loans
Consumer loans
25,510,359
—
—
—
—
—
25,510,359
16,840,257
—
13,322,619
—
—
—
4,310,020
9,697,204
28,929
1,035,229
4,353,981
895,703
38,855,806
11,628,136
(forward)
Accounts receivable
Other assets Returned checks and
other cash items
Total
Parent Company
2010
Past due
but not
High Grade*
Grade**
Grade***
Unrated
impaired
(In Thousands)
6,389,794
—
—
—
—
—
—
—
1,336,802
—
1,213,603
96,824
—
92
8,953
—
—
—
265,726
—
Impaired
Total
—
—
86,161
632,034
6,389,794
1,336,802
1,405,633
897,760
24,443,654
13,419,443
—
15,609,844
1,073,111
5,967,879
60,513,931
—
49,954,013
—
13,419,443
—
—
1,451,001
17,060,845
—
1,073,111
—
5,967,879
1,451,001
87,475,291
Trading and Investment Securities
In ensuring the quality of its trading and investment portfolio, the Parent Company uses the credit risk rating from published
data providers like Moody’s, Standard and Poor (S & P), Fitch, and such other rating agencies as may be approved by the MB
of the BSP.
The table below shows credit risk rating of trading and investment securities (gross of allowance for credit and impairment
losses):
Consolidated
2011
AAA to BBB-
BB+ to B-
CCC to D
and unrated
Total
(In Thousands)
Financial assets at FVPL:
Debt securities:
Government
Private
Equity securities:
Quoted
Derivative assets
AFS investments:
Debt securities:
Government
Private
Equity securities:
Quoted
Unquoted
HTM investments:
Government
—
82,994
1,673,691
—
—
—
1,673,691
82,994
51,045
79,754
213,793
—
31,210
1,704,901
12,630
—
12,630
63,675
110,964
1,931,324
—
4,571,399
13,126,687
—
—
1,432,321
13,126,687
6,003,720
51,109
—
4,622,508
320
1,145
13,128,152
425,213
634,424
2,491,958
476,642
635,569
20,242,618
—
4,836,301
28,216,682
43,049,735
—
2,504,588
28,216,682
50,390,624
Consolidated
2010
AAA to BBB-
BB+ to B-
CCC to D
and unrated
Total
(In Thousands)
Debt securities:
Government
Private
Equity securities:
Quoted
Derivative assets
AFS investments:
Debt securities:
Government
Private
Equity securities:
Quoted
Unquoted
HTM investments:
Government
Private
211,699
79,426
1,147,184
—
—
—
1,358,883
79,426
5,517
183,040
479,682
—
31,210
1,178,394
158,664
—
158,664
164,181
214,250
1,816,740
418,672
4,955,367
5,890,995
1,948,553
—
420,280
6,309,667
7,324,200
43,429
—
5,417,468
—
—
7,839,548
458,526
666,959
1,545,765
501,955
666,959
14,802,781
—
—
33,705,073
315,130
—
—
33,705,073
315,130
—
5,897,150
34,020,203
43,038,145
—
1,704,429
34,020,203
50,639,724
Parent Company
2011
CCC to D
BB+ to Band unrated
Total
AAA to BBB-
(In Thousands)
Debt securities:
Government
Private
Equity securities:
Quoted
Derivative assets:
AFS investments:
Debt securities:
Government
Private
Equity securities:
Quoted
Unquoted
HTM investments:
Government
—
82,994
1,668,573
—
—
—
1,668,573
82,994
48,735
79,754
—
31,210
12,630
61,365
110,964
211,483
1,699,783
12,630
1,923,896
—
4,571,399
12,961,114
—
1,432,321
12,961,114
6,003,720
1,963
—
320
—
425,213
634,424
427,496
634,424
4,573,362
12,961,434
2,491,958
20,026,754
—
4,784,845
28,073,365
42,734,582
—
2,504,588
28,073,365
50,024,015
Parent Company
2010
CCC to D
BB+ to Band unrated
AAA to BBB-
Total
(In Thousands)
Debt securities:
Government
Private
Equity securities:
Quoted
Derivative assets:
AFS investments:
Debt securities:
Government
Private
Equity securities:
Quoted
Unquoted
HTM investments:
Government
Private
211,699
79,426
1,092,538
—
—
—
1,304,237
79,426
—
183,040
—
31,210
158,664
—
158,664
214,250
474,165
1,123,748
158,664
1,756,577
418,672
4,955,367
5,789,298
1,948,555
—
420,278
6,207,970
7,324,200
—
—
—
—
458,526
665,814
458,526
665,814
5,374,039
7,737,853
1,544,618
14,656,510
—
—
—
5,848,204
33,560,923
315,130
33,876,053
42,737,654
—
—
—
1,703,282
33,560,923
315,130
33,876,053
50,289,140
Aging analysis of past due but not impaired loans and receivables are shown below:
Within 1 Year
Corporate loans
Consumer loans
55,951
271,046
—
—
1,194,381
426,602
14,415
2,819
1,311,220
326,997
1,638,217
Consolidated
2010
More than 1 year
(In Thousands)
Total
1,022,436
97,026
8,953
221,107
37,207
—
1,243,543
134,233
8,953
1,128,415
258,314
1,386,729
Parent Company
2011
Within 1 Year
More than 1 year
(In Thousands)
Corporate loans
Consumer loans
Total
1,138,430
155,556
14,415
2,819
Within 1 Year
Corporate loans
Consumer loans
Consolidated
2011
More than 1 year
(In Thousands)
Total
1,039,023
95,245
14,415
55,951
271,046
—
1,094,974
366,291
14,415
1,148,683
326,997
1,475,680
Within 1 Year
Corporate loans
Consumer loans
856,000
17,650
8,953
882,603
Parent Company
2010
More than 1 year
(In Thousands)
179,229
11,279
—
190,508
Total
1,035,229
28,929
8,953
1,073,111
Past due but not impaired Loans and receivables
These are loans and receivables where contractual interest or principal payments are past due but the Group believes that
impairment is not appropriate on the basis of the level of collateral available or status of collection of amounts owed to the Group.
Impaired Loans and receivables and Investment securities
Impaired loans and receivables and investment securities are loans and receivables and investment securities for which the
Group determines that it is probable that it will be unable to collect all principal and interest due based on the contractual
terms of the promissory note and securities agreements.
Liquidity Risk
Liquidity risk is generally 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 Parent Company closely monitors the current and prospective maturity structure of its resources and liabilities and the
market condition to guide pricing and asset/liability allocation strategies to manage its liquidity risks. Liquidity risks are
monitored and managed by using the Maximum Cumulative Outflow limits and funding diversification/concentration limits.
In addition, the Parent Company manages liquidity risk by holding sufficient liquid assets of appropriate quality to ensure
short-term funding requirements are met and by maintaining a balanced loan portfolio which is repriced on a regular
basis. In addition, the Parent Company seeks to maintain sufficient liquidity to take advantage of interest rate and foreign
exchange rate opportunities when they arise.
The table below shows the maturity profile of the financial assets used for liquidity management and the maturity profile of
financial liabilities based on contractual undiscounted cash flows:
On Demand
Financial Assets
Due from BSP
Interbank loans receivable and SPURA*
HFT securities*
AFS investments*
Loans and Receivables
Financial Liabilities
Non-derivative liabilities
Deposit liabilities
Demand
Savings
Time
LTNCD
Bills payable and SSURA
Accrued interest and other expenses
Other liabilities
Bills purchased - contra
Cash letter of credit
Accounts payable
Margin deposits
Manager’s check
Deposit on lease contracts
Outstanding acceptances
Due to PDIC
Due to Treasurer of the Philippines
Miscellaneous
Consolidated
2011
Within 1 Year
Beyond 1 year
(In Thousands)
Total
4,757,246
13,221,394
1,898,901
1,224,596
2,310
—
696,986
—
9,059,153
—
1,009
1,836,005
21,815,624
41,558,111
—
10,490,054
—
—
63,675
789,931
47,270,641
4,757,246
32,770,601
1,898,901
1,225,605
1,901,990
22,605,555
89,525,738
21,801,433
74,269,902
58,614,301
154,685,636
13,007,774
2,530,026
—
—
—
96,478,317
37,405,341
471,438
—
—
7,955,017
9,342,922
13,007,774
99,008,343
45,360,358
9,814,360
15,537,800
—
25,034
134,355,096
8,864,261
506,362
17,297,939
26,166
—
167,190,835
8,890,427
531,396
—
—
—
—
—
—
—
—
—
—
15,562,834
3,021,230
1,255,053
1,176,681
1,119,049
836,404
—
183,769
153,779
64,669
63,419
151,599,772
—
—
—
—
—
304,245
—
—
—
—
17,628,350
3,021,230
1,255,053
1,176,681
1,119,049
836,404
304,245
183,769
153,779
64,669
63,419
184,790,956
*Includes equity securities based on expected disposal
On Demand
Financial Assets
Due from BSP
HFT securities*
AFS investments*
Deposit liabilities
Demand
Savings
Time
LTNCD
Other liabilities
Accounts payable
Margin deposits
Manager’s check
Due to PDIC
Consolidated
2010
Within 1 Year
Beyond 1 year
(In Thousands)
Total
5,080,842
2,789,970
2,154,600
1,366,320
—
—
637,483
—
19,811,790
—
39,720
1,466,396
—
33,133,016
—
—
—
—
—
13,681,710
44,174,725
5,080,842
22,601,760
2,154,600
1,406,040
1,466,396
13,681,710
77,945,224
12,029,215
54,450,922
57,856,435
124,336,572
8,779,761
—
—
—
—
93,372,107
40,523,162
310,701
—
—
6,741,050
5,691,480
8,779,761
93,372,107
47,264,212
6,002,181
8,779,761
1,089,675
—
—
—
—
—
—
—
—
—
—
—
9,869,436
134,205,970
7,171,704
1,174,631
5,790,166
2,968,823
342,526
1,288,892
270,149
502,821
—
183,769
153,779
64,669
154,117,899
12,432,530
27,790
—
248,528
—
—
—
—
—
304,245
—
—
—
13,013,093
155,418,261
8,289,169
1,174,631
6,038,694
2,968,823
342,526
1,288,892
270,149
502,821
304,245
183,769
153,779
64,669
177,000,428
On Demand
Financial Assets
Due from BSP
HFT Securities*
AFS debt securities*
Deposit liabilities
Demand
Savings
Time
LTNCD
Other liabilities
Accounts payable
Margin deposits
Manager’s check
Due to PDIC
Miscellaneous
Total
4,607,502
12,948,260
1,851,226
1,097,596
—
—
—
—
9,059,153
—
1,009
1,834,725
21,810,329
36,912,068
—
10,490,054
—
—
—
663,032
41,832,083
P4,607,502
32,497,467
1,851,226
1,098,605
1,834,725
22,473,361
78,744,151
20,504,584
69,617,284
52,985,169
143,107,037
12,929,685
—
—
—
12,929,685
—
—
—
96,659,437
35,725,122
471,438
132,855,997
8,564,261
587,579
—
—
7,872,565
9,342,922
17,215,487
—
—
12,929,685
96,659,437
43,597,687
9,814,360
163,001,169
8,564,261
587,579
—
—
—
—
—
—
—
—
—
12,929,685
3,018,208
1,255,053
1,088,285
1,119,049
789,926
183,769
153,779
61,292
13
149,677,211
—
—
—
—
—
—
—
—
—
17,215,487
3,018,208
1,255,053
1,088,285
1,119,049
789,926
183,769
153,779
61,292
13
179,822,383
Parent Company
2011
Within 1 Year
Beyond 1 year
(In Thousands)
On Demand
Financial Assets
Due from BSP
HFT Securities*
AFS debt securities*
Deposit liabilities
Demand
Savings
Time
LTNCD
Other liabilities
Accounts payable
Manager’s check
Margin deposits
Due to PDIC
Miscellaneous
Parent Company
2010
Within 1 Year
Beyond 1 year
(In Thousands)
Total
4,934,052
2,668,643
1,959,230
1,082,320
—
—
—
—
19,811,790
—
39,720
1,394,914
—
30,917,462
—
—
—
—
—
13,551,585
37,788,009
4,934,052
22,480,433
1,959,230
1,122,040
1,394,914
13,551,585
68,705,471
10,644,245
52,163,886
51,339,594
114,147,725
8,702,472
—
—
—
—
91,171,412
38,892,048
310,701
—
—
6,722,591
5,691,480
8,702,472
91,171,412
45,614,639
6,002,181
8,702,472
1,089,675
—
130,374,161
5,914,011
1,140,546
12,414,071
21,049
—
151,490,704
7,024,735
1,140,546
—
—
—
—
—
—
—
—
—
2,966,861
1,180,263
461,522
342,526
270,149
180,058
144,110
47,997
13
—
—
—
—
—
—
—
—
—
2,966,861
1,180,263
461,522
342,526
270,149
180,058
144,110
47,997
13
9,792,147
143,022,217
12,435,120
165,249,484
Market Risk
Market risk is the risk of loss to future earnings, fair values or future cash flows that may result from changes in the price of a
financial instrument. Trading portfolios are exposed to market risk because the values of trading positions are sensitive to changes
in market prices. Assets and liabilities portfolios are affected by market risks because the revenues derived from these activities,
such as securities gains and losses and net interest income are sensitive to changes in interest and foreign exchange rates. The
Bank’s market risk originates from its holdings of foreign exchange instruments, debt securities and derivatives.
Market risks are monitored on a daily basis by the Risk Management Division, which functions independently from the business
units. The Group uses various loss limits and risk measurement methodologies as follows:
•
•
•
•
•
•
Stop loss limits
Loss alert limits
Position limits
Mark-to-market valuation
Value-at-Risk (VaR)
Earnings-at-risk
VaR methodology assumptions and parameters
The Bank computes the statistical VaR to estimate the maximum potential loss that can be incurred in its trading books under normal
market conditions given a specified confidence level and holding period. VaR is one of the key measures in the Bank’s management of
market risk. The Bank uses a 1-day and a 10-day holding period for its foreign exchange VaR and interest rate VaR, respectively. The
Bank adopts a historical simulation approach using a 99.0% confidence level and a 260-day observation period in its VaR calculation.
The Bank’s VaR limit is agreed annually by the Treasury Banking Group and Risk Management Division and presented to the RMC based
on the tolerable risk appetite of the Bank. Monitoring reports, which include the VaR figures and exposures to VaR limits are sent to
the risk-taking units on a daily basis. These are also reported monthly to the RMC.
The VaR figures are backtested against actual and unrealized profit and loss of the trading book to validate the robustness of the
VaR model. While VaR measures risk during times of normality, it is supplemented with stress testing, which is used to measure the
potential effect of a crisis or low probability event. The RMD conducts stress testing to measure and monitor market risks in extreme
market conditions. Results of backtesting and stress testing are reported to the RMC on a monthly basis.
Although VaR is an important tool for measuring market risk, the assumptions on which the model is based do give rise to the
following limitations:
• The holding period assumes that it is possible to hedge or dispose of positions within that period. This is considered to be a
realistic assumption in almost all cases but may not be the case in situations in which there is severe market illiquidity for a
prolonged period;
• A 99.0% confidence level does not reflect losses that may occur beyond this level. Even within the model used, there is a one
percent probability that losses could exceed the VaR;
• VaR is calculated on an end-of-day basis and does not reflect exposures that may arise on positions during the trading day;
• The use of historical data as a basis for determining the possible range of future outcomes may not always cover all possible
scenarios, especially those of an exceptional nature;
• The VaR measure is dependent upon the Bank’s position and the volatility of market prices; and
• The VaR of an unchanged position reduces if the market price volatility declines and vice versa.
A summary of the VaR position of the trading portfolios of the Bank as of December 31, 2011 and 2010 is as follows:
At Dec 31
Foreign currency risk
Interest rate risk
2,530
21,025
At Dec 31
Interest rate risk
10,477
7,462
2011
Average
(In Thousands)
6,884
30,787
2010
Average
(In Thousands)
4,117
19,208
Maximum
Minimum
18,665
69,738
37
5,001
Maximum
Minimum
14,545
71,257
9
3,386
The total interest rate risk VaR of the fixed-income instruments in the portfolios of the Bank as of December 31, 2011 and 2010 is
as follows:
At Dec 31
Interest rate risk
275,100
At Dec 31
Interest rate risk
147,152
2010
Average
(In Thousands)
196,661
2009
Average
(In Thousands)
100,441
Maximum
Minimum
328,627
77,714
Maximum
Minimum
233,096
37,619
The limitations of the VaR methodology are recognized by supplementing VaR limits with other position and sensitivity limit
structures, including limits to address potential concentration risks within each trading portfolio. In addition, the Bank uses
a wide range of stress tests to model the financial impact of a variety of exceptional market scenarios on individual trading
portfolios and the Bank’s overall position.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or fair values of financial
instruments.
The Bank measures the sensitivity of its assets and liabilities to interest rate fluctuations by way of gap analysis. The analysis
provides the Bank with a measure of the impact of changes in interest rates on the accrual portfolio or reported earnings (the
risk exposure of future accounting income). The repricing gap is calculated by subtracting the interest rate sensitive liabilities
in each time bucket from interest rate sensitive assets to produce repricing gap for that particular time bucket. The difference
in the amount of assets and liabilities maturing would then give the Bank an indication of its exposure to the risk of potential
changes in net interest income.
A positive gap occurs when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities
and is favorable to the Bank during a period of rising interest rates since it is in a better position to invest in higher yielding
assets more quickly than it would need to refinance its interest bearing liabilities. Conversely, during a period of falling interest
rates, a positively gapped position could result in a restrained growth for or even declining net interest income.
The Group also monitors its exposure to fluctuations in interest rates by measuring the impact of interest rate movements on its
interest income. This is done by modeling the impact and doing a sensitivity scenario analysis of various changes in interest rates
to the Group’s interest-related income and expenses.
The following table sets forth the repricing gap position of the Parent Company as of December 31, 2011 and 2010:
Up to 1 month
2011
1 to 3 months 3 to 6 months 6 to 12 months
(In Thousands)
Total
Financial assets
Interbank loans receivable
Financial assets at FVPL
HTM investments
1,498
961
26,450
1,742
4,010
—
—
5,639
11
12,876
—
—
3,062
—
—
—
—
7,063
—
219
1,498
961
42,214
1,753
17,105
Total financial assets
34,661
18,526
3,062
7,282
63,531
Deposit liabilities
Demand
Savings
Time
Bills payable
Other liabilities
—
—
30,039
7,783
37,822
—
—
1,493
646
2,139
—
—
279
—
279
1,584
60,738
1,203
—
63,525
1,584
60,738
33,014
8,429
103,765
558
127,050
207,530
119,768
(143,999)
( 143,999)
—
Total financial liabilities
Repricing gap
Cumulative gap
75,644
( 40,983)
(40,983)
Up to 1 month
4,278
14,248
(26,735)
2,504
(24,231)
2010
1 to 3 months 3 to 6 months 6 to 12 months
(In Thousands)
Total
Financial assets
Due from BSP
Finacial assets at FVPL
HTM investments
22,480
1,649
558
3,761
—
—
—
—
—
11,600
—
—
—
—
—
8,299
—
—
—
—
—
11,510
1,487
1,882
22,480
1,649
558
35,170
1,487
1,882
Total financial assets
28,448
11,600
8,299
14,879
63,226
Deposit liabilities
Demand
Savings
Time
Bills payable
Other liabilities
8,657
28,649
18,447
3
—
—
—
7,330
504
—
—
—
1,700
589
—
—
—
1,141
3,659
48
8,657
28,649
28,618
4,755
48
55,756
7,834
Total financial liabilities
Repricing gap
Cumulative gap
( 27,308)
(27,308)
3,766
(23,542)
2,289
6,010
(17,532)
4,848
70,727
10,031
(7,501)
( 7,501)
—
The following table sets forth, for the period indicated, the impact of changes in interest rates on the Parent Company’s net
interest income:
Changes in interest rates (in basis points)
Change on annualized net interest income
PHP
USD
Total
Change on annualized net interest income
PHP
USD
Total
( 53,854)
7,866
2011
-50
+100
(In Thousands)
53,854
( 48,437)
(7,866)
9,833
48,437
(9,833)
( 45,988)
45,988
38,604
+50
+50
( 91,855)
(69,570)
( 161,425)
( 38,604)
2010
-50
+100
(In Thousands)
91,855
( 183,710)
69,570
(139,139)
161,425
( 322,849)
-100
-100
183,710
139,139
322,849
Given the repricing position of the assets and liabilities of the Parent Company as of December 31, 2011 and 2010, if interest
rates increased by 100 basis points, the Parent Company would expect annualized interest income to decrease by 38.6 million
and 322.8 million, respectively. This Earnings-at-risk computation is accomplished monthly.
The following table sets forth the estimated change in equity due to a reasonably possible change in market prices of quoted
bonds classified under AFS investments, brought about by movement in the interest rate curve as of December 31, 2011 and 2010:
Change in equity (in thousands)
+50
( 561,763)
Consolidated
2011
-50
+100
617,997
( 1,129,205)
-100
1,244,781
Consolidated
2010
+50
( 424,331)
+50
( 583,763)
-50
450,440
+100
( 826,479)
-100
927,103
Parent Company
2011
-50
+100
603,697 ( 1,129,105)
-100
1,251,181
Parent Company
2009
+50
( 422,731)
-50
447,140
+100
( 822,579)
-100
921,203
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.
The Parent Company manages its exposure to effects of fluctuations in the foreign currency exchange rates by maintaining foreign
currency exposure within the existing regulatory guidelines and at a level that it believes to be relatively conservative for a financial
institution engaged in that type of business. 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 30.0% liquidity reserve on all foreign currency liabilities held in the FCDU.
The Parent Company’s policy is to maintain foreign currency exposure within acceptable limits and within existing regulatory
guidelines. The Parent Company believes that its foreign currency exposure on its assets and liabilities is within conservative limits
for a financial institution engaged in this type of business.
The Group does not present the sensitivity analysis on the impact on profit and loss and equity based on the reasonably possible
change of foreign currency since its subsidiaries’ exposure to foreign currency risk is minimal.
The following tables summarize the Parent Company’s exposure to foreign exchange risk as of December 31, 2011 and 2010.
Included in the table are the Parent Company’s assets and liabilities at carrying amounts, categorized by currency (amounts in USD):
USD
Assets
Cash and due from BSP
AFS investments
HTM investments
Other assets
Liabilities
Deposit liabilities
Bills payable
Other liabilities
Net Exposure
2011
Others
(In Thousands)
Total
11,986
34,455
25,036
2,862
204,646
—
138,782
3,533
421,300
319
3,567
—
13
2,564
—
1,062
—
7,525
12,305
38,022
25,036
2,875
207,210
—
139,844
3,533
428,825
372,058
11,300
263
37,220
420,841
459
914
—
—
2,008
2,922
4,603
372,972
11,300
263
39,228
423,763
5,062
USD
Assets
Cash and due from BSP
AFS investments
HTM investments
Other assets
Liabilities
Deposit liabilities
Bills payable
Other liabilities
Net Exposure
2010
Others
(In Thousands)
Total
12,471
49,629
24,400
41,773
185,583
70,924
97,960
16,722
499,462
1
2,277
—
—
2,593
—
126
—
4,997
12,472
51,906
24,400
41,773
188,176
70,924
98,086
16,722
504,459
420,477
19,224
389
43,748
483,838
15,624
102
—
—
359
461
4,536
420,579
19,224
389
44,107
484,299
20,160
The following table sets forth, for the period indicated, the impact of reasonably possible changes in foreign exchange rates on
the Parent Company’s pretax income and equity (amounts in thousands except for the percentages):
2011
change in
currency rate
Effect on
in % profit before tax
Currency
USD
Others
Currency
USD
Others
Effect on
Equity
2010
change in
currency rate
Effect on
in % profit before tax
Effect on
Equity
1%
1%
( 5,373)
1,124
5,575
893
+1.00%
+1.00%
6,849
1,989
2,877
—
-1%
-1%
5,373
(1,124)
(5,575)
(893)
-1.00%
-1.00%
(6,849)
(1,989)
(2,877)
—
Equity price risk
Equity price risk is the risk of loss arising from movements in equity prices. The Bank manages its exposures to equity prices by
way of stop loss limits. The Board of Directors (BOD) approves limits on the amount of potential loss that may be undertaken,
which is monitored daily by the RMD and reported to the RMC.
The effect of equity price fluctuations is insignificant, therefore, the sensitivity analysis was not presented.
5. Fair Value Measurement
The methods and assumptions used by the Group and the Parent Company 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 considering that these accounts consist mainly of overnight deposits and floating rate placements.
Trading and investment securities
Fair values of debt securities (financial assets at FVPL, AFS investments 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 based on quoted market prices, prices provided by independent parties, or prices derived using acceptable valuation models.
Fair values of 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.
Deposit liabilities and bills payable
Carrying amounts of demand and savings deposit liabilities approximates fair value considering that these are due and
demandable. Carrying amounts of bills payable approximates fair value due to their short term maturities. Fair values of time
deposit liabilities and LTNCDs are estimated using the discounted cash flow methodology, using current incremental borrowing
rates for similar borrowings with maturities consistent with those remaining for the liability being valued.
Other liabilities
Carrying amounts of other liabilities maturing within one year approximate fair values in view of the relatively short-term
maturities of these instruments. Other liabilities maturing beyond one year are not reported at fair value and are not significant
to the Group’s total financial liabilities.
The following tables summarize the carrying amounts and fair values of the financial assets and liabilities.
2011
Consolidated
Parent Company
Carrying Value
Fair Value Carrying Value
Fair Value
(In Thousands)
Financial Assets
Due from BSP
Debt securities
Government
Private
Quoted equity securities
Derivative assets
AFS investments
Debt securities
Government
Private
Equity securities
Quoted
Unquoted
HTM investments:
Government
Corporate loans
Consumer loans
Accounts receivable
Other receivables
Other assets – Security deposit to PCHC
Deposit liabilities
Demand
Savings
Time
LTNCD
Bills payable
Other liabilities
Accounts payable
Margin deposits
Manager’s check
Due to PDIC
Derivative liability
Miscellaneous
4,757,246
32,579,118
1,898,901
1,225,579
40,460,844
4,757,246
32,579,118
1,898,901
1,225,579
40,460,844
4,607,502
32,305,984
1,851,226
1,098,579
39,863,291
4,607,502
32,305,984
1,851,226
1,098,579
39,863,291
1,673,691
82,994
63,675
110,964
1,931,324
1,673,691
82,994
63,675
110,964
1,931,324
1,668,573
82,994
61,365
110,964
1,923,896
1,668,573
82,994
61,365
110,964
1,923,896
13,126,687
6,003,720
13,126,687
6,003,720
12,961,114
6,003,720
12,961,114
6,003,720
454,301
149,627
454,301
149,627
405,155
148,557
405,155
148,557
19,734,335
19,734,335
19,518,546
19,518,546
28,216,682
32,229,607
28,073,365
32,035,358
41,097,910
17,876,504
8,213,719
1,063,640
1,415,629
456,883
393,425
445,707
70,963,417
161,306,602
41,076,531
18,758,609
8,550,643
764,768
1,415,629
241,711
393,425
445,707
71,647,023
166,003,133
38,299,781
14,555,310
7,932,107
994,502
1,379,273
729,089
—
—
63,890,062
153,269,160
38,459,492
16,440,407
8,129,705
719,334
1,379,273
218,723
—
—
65,346,934
158,688,025
13,007,774
98,722,144
45,284,080
7,593,890
164,607,888
8,757,569
531,396
13,010,823
99,020,647
43,406,172
7,669,289
163,106,931
8,757,569
531,396
12,929,685
96,478,317
43,528,507
7,593,890
160,530,399
8,431,403
587,579
12,917,380
96,490,621
41,514,381
7,669,289
158,591,671
8,431,403
587,579
3,021,230
1,255,053
1,176,681
1,119,049
836,404
304,245
183,769
153,779
64,669
4,286
63,419
182,079,437
3,021,230
1,255,053
1,176,681
1,119,049
836,404
304,245
183,769
153,779
64,669
4,286
63,419
180,578,480
3,018,208
1,255,053
1,088,285
1,119,049
789,925
—
183,769
153,779
61,292
4,286
13
177,223,040
3,018,208
1,255,053
1,088,285
1,119,049
789,925
—
183,769
153,779
61,292
4,286
13
175,284,312
2010
Consolidated
Parent Company
Carrying Value
Fair Value Carrying Value
Fair Value
(In Thousands)
Financial Assets
Due from BSP
Debt securities
Government
Private
Derivative assets
AFS investments
Debt securities
Government
Private
Equity securities
Quoted
Unquoted
HTM investments
Government
Private
Corporate loans
Consumer loans
Accounts receivable
Other receivables
Other assets - Returned checks and other cash items
Other assets - Security deposit to PCHC
Deposit liabilities
Demand
Savings
Time
LTNCD
Other liabilities
Accounts payable
Manager’s check
Margin deposits
Due to PDIC
Miscellaneous
5,080,842
22,601,760
2,154,600
1,354,696
31,191,898
5,080,842
22,601,760
2,154,600
1,354,696
31,191,898
4,934,052
22,480,433
1,959,230
1,070,696
30,444,411
4,934,052
22,480,433
1,959,230
1,070,696
30,444,411
1,358,883
79,426
164,181
214,250
1,816,740
1,358,883
79,426
164,181
214,250
1,816,740
1,304,237
79,426
158,664
214,250
1,756,577
1,304,237
79,426
158,664
214,250
1,756,577
6,309,667
7,324,200
6,309,667
7,324,200
6,207,970
7,324,200
6,207,970
7,324,200
488,624
379,095
488,624
379,095
445,195
378,025
445,195
378,025
14,501,586
14,501,586
14,355,390
14,355,390
33,705,073
315,130
34,020,203
38,570,464
315,130
38,885,594
33,560,923
315,130
33,876,053
38,382,317
315,130
38,697,447
38,379,809
13,213,255
6,683,106
1,381,330
1,423,988
573,157
333,922
1,456,456
445,707
63,890,730
145,421,157
37,953,038
13,841,910
6,907,782
1,382,988
1,423,988
148,404
333,922
1,456,456
445,707
63,894,195
150,290,013
35,724,969
10,747,468
6,389,794
1,336,802
1,390,126
650,534
—
1,451,001
—
57,690,694
138,123,125
35,229,516
10,763,470
6,614,469
1,348,787
1,390,126
129,474
—
1,451,001
—
56,926,843
142,180,668
8,779,761
93,372,107
47,217,436
4,466,765
153,836,069
7,226,095
1,174,631
8,779,761
93,372,107
47,278,367
4,485,470
153,915,705
7,226,095
1,174,631
8,702,472
91,171,412
45,574,723
4,466,765
149,915,372
6,999,942
1,140,546
8,702,472
91,171,412
45,513,792
4,485,470
149,873,146
6,999,942
1,140,546
2,968,823
1,288,892
502,821
342,526
270,149
248,528
180,058
144,110
50,192
42,595
168,275,489
2,968,823
1,288,892
502,821
342,526
270,149
248,528
180,058
144,110
50,192
42,595
168,355,125
2,966,861
1,180,263
461,522
342,526
270,149
—
180,058
144,110
47,997
13
163,649,359
2,966,861
1,180,263
461,522
342,526
270,149
—
180,058
144,110
47,997
13
163,607,133
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either
directly or indirectly; and
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on
observable market data.
The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:
Consolidated
Financial Assets at FVPL (Note 7)
Debt securities
Government
Private
Derivative assets
AFS Investments (Note 7)
Debt securities
Government
Private
Parent Company
2011
Total
Level 1
(In Thousands)
Level 1
Level 2
1,673,691
82,994
63,675
—
—
—
—
110,964
1,673,691
82,994
63,675
110,964
13,126,687
5,573,956
454,301
20,975,304
—
429,764
—
540,728
13,126,687
6,003,720
454,301
21,516,032
Level 2
Total
1,668,573
82,994
61,365
—
—
—
—
110,964
1,668,573
82,994
61,365
110,964
12,961,114
5,573,956
405,155
20,753,157
—
429,764
—
540,728
12,961,114
6,003,720
405,155
21,293,885
Consolidated
Financial Assets at FVPL (Note 7)
Debt securities
Government
Private
Derivative assets
AFS Investments (Note 7)
Debt securities
Government
Private
Parent Company
2010
Total
Level 1
(In Thousands)
Level 1
Level 2
Level 2
Total
1,358,883
79,426
164,181
31,210
—
—
—
183,040
1,358,883
79,426
164,181
214,250
1,304,237
79,426
158,664
31,210
—
—
—
183,040
1,304,237
79,426
158,664
214,250
6,309,667
6,888,240
488,624
—
435,960
—
6,309,667
7,324,200
488,624
6,207,970
6,888,240
445,195
—
435,960
—
6,207,970
7,324,200
445,195
15,320,231
619,000
15,939,231
15,114,942
619,000
15,733,942
During the years ended December 31, 2011 and 2010, there were no transfers between Level 1 and Level 2 fair value
measurements, and no transfers into and out of Level 3 fair value measurement.
6. Interbank Loans Receivable and Securities Purchased Under Resale Agreements
This account consists of:
SPURA
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
1,098,579
1,070,696
1,098,579
1,070,696
127,000
284,000
—
—
1,225,579
1,354,696
1,098,579
1,070,696
Interbank loans receivable have maturities of one day to three months and earn annual interest of 1.0% to 4.8% and 3.3% to 3.5%
for Philippine peso-denominated receivables and 0.1% to 0.8% and 0.1% to 0.6% for US dollar-denominated receivables in 2011
and 2010, respectively.
As of December 31, 2011 and 2010, the Group’s outstanding balance of SPURA represents overnight placements with BSP where
the underlying collateral securities cannot be sold or repledged.
7. Trading and Investment Securities
Financial Assets at FVPL
This account consists of the following:
Consolidated
2011
Held-for-trading
Debt securities
Government
Private
Equity securities
Quoted
Derivative assets
Parent Company
2010
2011
(In Thousands)
2010
1,673,691
82,994
1,756,685
1,358,883
79,426
1,438,309
1,668,573
82,994
1,751,567
1,304,237
79,426
1,383,663
63,675
1,820,360
110,964
1,931,324
164,181
1,602,490
214,250
1,816,740
61,365
1,812,932
110,964
1,923,896
158,664
1,542,327
214,250
1,756,577
HFT Philippine peso-denominated debt securities earn annual interest of 0.8% to 8.8% and 2.8% to 8.8% in 2011 and 2010, respectively.
HFT US dollar-denominated debt securities earn annual interest of 3.8% to 7.0% and 2.0% to 7.0% in 2011 and 2010, respectively.
As of December 31, 2011 and 2010, trading and investment securities include net unrealized gain (loss) from fair value changes
amounting to ( 24.2 million) and 94.8 million, respectively, for the Group and ( 24.1 million) and 97.5 million, respectively,
for the Parent Company.
AFS Investments
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
Debt securities
Government (Note 27)
Private
Equity securities
Quoted
Unquoted
Less allowance for impairment losses (Note 13)
13,126,687
6,003,720
19,130,407
6,309,667
7,324,200
13,633,867
12,961,114
6,003,720
18,964,834
6,207,970
7,324,200
13,532,170
476,642
635,569
1,112,211
20,242,618
508,283
19,734,335
501,955
666,959
1,168,914
14,802,781
301,195
14,501,586
427,496
634,424
1,061,920
20,026,754
508,208
19,518,546
458,526
665,814
1,124,340
14,656,510
301,120
14,355,390
AFS Philippine peso-denominated debt securities earn annual interest of 3.2% to 8.9% and 4.8% to 8.9% in 2011 and 2010, respectively.
AFS US dollar-denominated debt securities earn annual interest of 1.9% to 12.0% and 3.1% to 12.0% in 2011 and 2010, respectively.
The Group’s and the Parent Company’s investments in unquoted equity shares include shares of stock of ASEAN Finance
Corporation (AFC), with acquisition cost of Singapore Dollar (SGD) 5 million ( 169.0 million and 169.6 million as of December
31, 2011 and 2010, respectively). As of December 31, 2011 and 2010, the related allowance for impairment losses on such equity
securities amounted to 38.3 million and 47.1 million, respectively (see Note 13).
Investments in unquoted equity securities also include investments in public utilities and other private companies.
The movements of net unrealized gains (losses) on AFS investments are as follows:
Balance at beginning of year
Unrealized gains during the year
Amounts realized in profit or loss
Balance at end of year
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
139,896
14,405
115,768
( 3,913)
595,709
778,590
587,921
759,213
(212,072)
(653,099)
(210,754)
(639,532)
523,533
139,896
492,935
115,768
As of December 31, 2011 and 2010, the Group’s recognized deferred tax liability on unrealized gain on AFS investments
amounted to 15.8 million and 10.6 million, respectively (see Note 22).
HTM Investments
Debt securities
Government (Note 27)
Private
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
28,216,682
33,705,073
28,073,365
33,560,923
—
315,130
—
315,130
28,216,682
34,020,203
28,073,365
33,876,053
The Group’s HTM investments earn annual interest of 3.8% to 18.3% and 2.2% to 18.3% in 2011 and 2010, respectively for pesodenominated investments while its US dollar-denominated HTM investments earn annual interest of 6.3% to 6.8% in 2011 and 2010.
The Parent Company’s HTM investments earn annual interest of 3.8% to 7.8% and 2.2% to 7.8% in 2011 and 2010, respectively for pesodenominated investments while its US dollar-denominated HTM investments earn annual interest of 6.3% to 6.8% in 2011 and 2010.
On various dates in 2011, the Parent Company sold HTM investments with aggregate carrying amount of 3.2 billion thereby realizing
gains of 0.3 billion. As a result of these disposals, the Group and the Parent Company are prohibited under PGAAP for banks from
classifying any financial asset as HTM investments in 2011 and until 2013. However, as of December 31, 2011, the Group and the
Parent Company continue to classify government securities with aggregate carrying amount of 28.2 billion and 28.1 billion,
respectively, and fair value of 32.2 billion and 32.0 billion, respectively, as HTM investments.The Parent Company’s remaining HTM
bonds were funded from the 30.0 billion savings deposits maintained by the NG with the Bank as part of the concessions granted
by the MB, in its resolution No. 590, of the amended rehabilitation plan (see Note 14). Had the Parent Company reclassified these
investments to AFS, net unrealized gain on AFS investments of the Group and of the Parent Company, which is included in the equity
section of the statements of financial position, would have increased by 4.0 billion and 3.9 billion, respectively.
Interest Income and Trading and Securities Gain - net
Interest income on trading and investment securities follows:
AFS investments
HTM investments
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
149,397
158,692
143,129
149,339
857,851
567,532
852,042
557,772
2,413,810
2,520,091
2,398,969
2,504,315
3,421,058
3,246,315
3,394,140
3,211,426
Trading and securities gain - net consists of the following:
HFT investments
AFS investments
HTM investments
Unquoted debt securities classified as loans
Derivatives
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
320,261
282,240
312,418
265,532
212,072
653,099
210,754
639,532
335,213
—
335,213
—
72,768
76,089
72,768
76,089
(41,108)
79,593
(41,108)
79,593
899,206
1,091,021
890,045
1,060,746
Reclassification of Financial Assets
2008 was characterized by a substantial deterioration in global market conditions, including severe shortage of liquidity and
credit availability. These conditions led to a reduction in the level of market activity for many assets and the inability to sell
other than at substantially lower prices. Following the amendments to PAS 39 and PFRS 7 effective July 1, 2008, and as a result
of the contraction in the market for many classes of assets, the Parent Company reviewed its financial assets that were classified
as HFT and AFS investments, in order to determine whether the classification remained appropriate.
Reclassification from financial assets at FVPL
The Parent Company identified financial assets eligible under the amendments, and reclassifications were made on
September 11, 2008. Where it was determined that the Parent Company no longer intended to trade, management reviewed
the instruments to determine whether it was appropriate to reclassify to AFS investments, HTM investments or Loans and
receivables. The reclassification was performed where the Parent Company, at the reclassification date, had the clear intention
and ability to hold the financial asset for the foreseeable future or until maturity.
The following are the carrying values and fair values of reclassified financial assets at FVPL as of reclassification date and each
statement of financial position date:
December 31, 2010
Government Debt Securities
Private Debt Securities
Carrying Value
Fair Value
Carrying Value
Fair Value
(In Thousands)
Reclassified to:
HTM investments
338,952
338,952
378,790
378,790
—
—
—
—
December 31, 2009
Carrying Value
Fair Value
Carrying Value
Fair Value
(In Thousands)
Reclassified to:
HTM investments
359,691
39,175
398,866
369,413
38,136
407,549
—
—
—
—
—
—
September 11, 2008
Carrying Value
Fair Value
Carrying Value
Fair Value
(In Thousands)
Reclassified to:
HTM investments
AFS investments
372,012
220,073
39,075
631,160
372,012
220,073
39,075
631,160
—
238,522
—
238,522
—
238,522
—
238,522
In 2010, securities reclassified from financial assets at FVPL to loans and receivables with total carrying amount of 39.2 million
were sold on various dates for net gains of 0.01 million.
In 2011, securities reclassified from financial assets at FVPL to HTM investments with total carrying amount of 331.0 million
were sold on various dates for net gains of 54.3 million.
As of September 11, 2008, unrealized loss on reclassified financial assets at FVPL amounted to 0.9 million. Had these securities
not been reclassified to AFS investments, HTM investments and Unquoted debt securities under loans and receivables, additional
market gains of 44.0 million would have been recognized in the statements of income in 2010.
EIR on the reclassified securities ranged from 6.4% to 7.2%. As of reclassification date, the Parent Company expected to recover
all of the principal and interest due on the reclassified investments.
Reclassifications from AFS investments to Loans and Receivables
Where the Parent Company determined, at the reclassification date (September 11, 2008), that it had the clear intention and
ability to hold certain AFS investments for the foreseeable future, these investments were reclassified to loans and receivables.
The following are the carrying values and fair values of AFS investments reclassified to Loans and receivables as of reclassification date
and each statement of financial position date:
December 31, 2009
September 11, 2008
Carrying Value
Fair Value
(In Thousands)
563,630
552,284
1,014,263
1,014,263
In 2010, securities reclassified from AFS investments to unquoted debt securities under loans and receivables with total carrying
amount of 563.8 billion were sold on various dates for net gains of 1.4 million.
As of September 11, 2008, unrealized loss (included in Net unrealized gain (loss) on AFS investments under the equity section of
the statements of financial position) on reclassified AFS investments amounted to 10.6 million.
EIR of AFS investments reclassified to loans and receivables ranged from 1.2% to 7.2%. As of reclassification date, the Parent
Company expected to recover all of the principal and interest due on the reclassified investments.
Reclassifications from AFS investments to HTM investments
As a result of change in intention, on September 11, 2008, the Parent Company reclassified certain AFS investments to HTM
investments. The Parent Company established the positive intention and ability to hold these investments until maturity.
The following are the carrying values and fair values of reclassified AFS government securities to HTM investments as of
reclassification date and each statement of financial position date:
December 31, 2011
December 31, 2010
December 31, 2009
September 11, 2008
Carrying Value
Fair Value
(In Thousands)
10,358
11,196
2,757,299
3,004,181
3,346,068
3,395,997
3,369,771
3,369,771
In 2011, securities reclassified from AFS investments to HTM investments with total carrying amount of 2.7 billion were sold on
various dates for net gains of 277.6 million.
As of September 11, 2008, unrealized loss (included in Net unrealized gain (loss) on AFS investments under the equity section of
the statements of financial position) on reclassified AFS investments amounted to 78.8 million. Had these securities not been
reclassified to HTM investments, additional market gains of 0.8 million and 246.9 million would have been credited to other
comprehensive income in 2011 and 2010, respectively.
EIR of AFS investments reclassified to HTM investments amounting to 3.4 billion ranged from 6.3% to 9.5%. As of reclassification
date, the Parent Company expected to recover all of the principal and interest due on the reclassified investments.
Structured Notes
The Parent Company invested in structured notes, which are broadly defined as bond instruments (which can be floating rate, fixed rate
or zero coupon) embedded with forwards or options that are linked to interest indices and reference credits (or reference entities).
The Parent Company also has structured investments that contain enhanced coupons - such as a bonus interest rate where the
Parent Company will receive additional interest when the ROP-credit default swap (CDS) will fall within a certain range.
As of December 31, 2011 and 2010, the host instruments of the structured notes described above are included under AFS
investments and Loans and receivables, while the embedded derivatives were bifurcated and presented separately under
Financial assets or liabilities at FVPL.
Shown below are the details of the carrying values of the host instruments and the embedded derivatives:
2011
(In Thousands)
Host instruments included in:
AFS investments
Loans and receivables (Note 8)
Embedded derivatives:
Derivative assets
2010
211,660
26,824
412,788
98,986
40,536
174,117
The Parent Company used market observable inputs and acceptable standard valuation models in calculating the fair values of
the structured notes and the embedded derivatives. Market observable inputs are either directly based on estimates coming
from independent pricing services or indirectly observed from historical and prevailing movements in critical valuation inputs.
The fair values calculated by the Parent Company are significantly affected by the choice of the valuation models and the
underlying assumptions. Even if market observable inputs were used, fair value estimates may significantly change, in light of the
judgment exercised in the selection of assumptions. Among the assumptions used include probability of default on the reference
entity (as implied by market observable spreads), counterparty spread, volatility, interest rate curve estimation and recovery rate.
Derivative Financial Instruments
The table below shows the fair values of the derivative financial instruments of the Parent Company, recorded as derivative assets
or derivative 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 of the derivative are measured. The notional amounts indicate
the volume of transactions outstanding as of December 31, 2011 and 2010 and are not indicative of either market risk or credit risk.
Assets
Freestanding derivatives:
Warrants
Forward exchange bought
Forward exchange sold
Range accrual
Index linked option
2011
Liabilities Notional Amounts
(In Thousands)
31,210
35,569
3,072
577
—
—
4,286
—
US$68
US$1,068,250
US$55,000
SGD2,500
40,536
—
110,964
—
—
4,286
US$14,688
US$5,000
Assets
Freestanding derivatives:
Warrants
Range accrual
Index linked option
2010
Liabilities
Notional Amounts
(In Thousands)
31,210
4,732
2,016
109
2,066
—
—
—
—
—
US$68
US$12,840
US$32,900
EUR2,000
SGD3,293
130,155
43,962
214,250
—
—
—
US$49,688
US$5,000
Movements in the fair values of the derivatives follow:
2011
2010
(In Thousands)
214,250
162,040
(6,753)
88,516
(100,819)
(36,306)
106,678
214,250
Changes in fair value during the year
Fair value of settled contracts
Changes in fair value of derivatives other than currency forwards amounting to ( 41.1 million) and 79.6 million in 2011 and
2010, respectively, are included under Trading and securities gain - net in the statements of income. Changes in fair value
of currency forwards amounting to 34.4 million and 8.9 million in 2011 and 2010, respectively, are included under Foreign
exchange gain - net in the statements of income.
8. Loans and Receivables
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
Receivables from customers:
Corporate loans
Consumer loans
Unquoted debt securities (Note 7)
Accounts receivable
Other receivables
45,059,522
18,960,889
64,020,411
337,212
63,683,199
8,213,719
1,083,069
1,449,519
705,005
393,425
42,165,750
14,094,463
56,260,213
397,979
55,862,234
6,683,106
1,381,330
1,439,495
836,926
333,922
42,000,485
15,513,298
57,513,783
137,013
57,376,770
7,932,107
1,011,499
1,407,951
961,275
—
39,071,299
11,628,136
50,699,435
215,493
50,483,942
6,389,794
1,336,802
1,405,633
897,760
—
Less allowance for credit and impairment losses (Note 13)
75,527,936
5,010,226
66,537,013
4,548,446
68,689,602
4,799,540
60,513,931
4,274,238
70,517,710
61,988,567
63,890,062
56,239,693
Less unearned discounts and capitalized interest
Breakdown of restructured receivables from customers follows:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
1,690,145
1,744,054
1,556,975
1,581,497
17,144
30,324
13,751
26,932
1,707,289
1,774,378
1,570,726
1,608,429
Corporate loans
Consumer loans
In 2011 and 2010, unquoted Philippine peso-denominated debt securities consist of private securities with EIR ranging from 6.2%
to 10.8% and 6.8% to 10.8%, respectively.
In 2011 and 2010, unquoted US dollar-denominated debt securities consist of private securities with EIR ranging from 3.4% to
19.7% and 10.0% to 10.5%, respectively.
In 2008, the Parent Company entered into a sale agreement covering certain zero coupon-bearing bonds with total face amount
of US$44.7 million ( 2.1 billion). The objective of this sale agreement was to convert the zero coupon-bearing bonds into a
coupon-earning instrument. Based on the derecognition principles of PAS 39, the sale did not qualify for derecognition because
the significant risks and rewards on the bonds remained with the Parent Company. As of December 31, 2011 and 2010, the
carrying amount of the bonds amounted to US$15.8 million ( 694.4 million) and US$33.5 million ( 1.5 billion), respectively.
Interest income on loans and receivables consist of:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
4,885,671
3,983,279
3,977,814
3,259,213
642,722
633,489
625,284
614,534
158,756
152,738
142,639
152,738
94,364
141,751
91,426
138,114
—
199
—
199
31
1,340
—
—
5,781,544
4,912,796
4,837,163
4,164,798
Restructured loans
Customer liabilities under trust receipts
Others
BSP Reporting
The following table shows information relating to receivables from customers by collateral as of December 31, 2011 and 2010:
Consolidated
2011
Amount
%
2010
Amount
Parent Company
%
2011
Amount
%
2010
Amount
%
(In Thousands)
Secured by:
Real mortgage
Chattel mortgage
Rights other than above
Assignment of deposits
Other securities
Secured
Unsecured
20,945,572
6,379,415
1,404,484
871,841
6,651,790
36,253,102
27,767,309
64,020,411
32.72
9.96
2.20
1.36
10.39
56.63
43.37
100.00
12,457,440
4,929,966
50,989
41,945
4,332,846
21,813,186
34,447,027
56,260,213
22.14
8.76
0.09
0.08
7.70
38.77
61.23
100.00
19,120,771
5,933,665
1,404,484
871,841
5,804,300
33,135,061
24,378,722
57,513,783
33.24
10.32
2.44
1.52
10.09
57.61
42.39
100.00
11,908,260
4,455,981
50,989
41,945
2,825,230
19,282,405
31,417,030
50,699,435
23.49
8.79
0.10
0.08
5.57
38.03
61.97
100.00
As of December 31, 2011 and 2010, information on the concentration of credit as to industry of receivables from customers follow:
Consolidated
2011
Amount
%
2010
Amount
Parent Company
%
2011
Amount
%
2010
Amount
%
(In Thousands)
Wholesale and retail trade,
repair of motor vehicles,
motorcycles, personal and
household goods
Real estate, renting and
business activities
Manufacturing
Agriculture, hunting and
forestry, fishing
(forward)
14,890,774
23.26
9,259,413
16.46
14,702,187
25.56
9,259,413
18.26
13,366,144
10,159,416
20.88
15.87
13,693,111
10,790,857
24.34
19.18
12,516,891
9,293,508
21.76
16.16
13,435,351
9,891,965
26.50
19.51
6,919,165
5,191,907
10.81
8.11
4,344,899
3,679,857
7.72
6.54
6,344,966
5,066,320
11.03
8.81
4,231,846
4,235,003
8.35
8.35
Consolidated
2011
Amount
%
Parent Company
2010
Amount
%
2011
Amount
%
2010
Amount
%
(In Thousands)
Construction
Other community, social and
personal services activities
Total
Unearned interest discounts
611,682
25,972
0.96
0.04
1,848,425
1,495,638
3.28
2.66
611,682
25,972
1.06
0.05
1,848,425
1,495,638
3.65
2.95
12,518,139
63,683,199
337,212
64,020,411
19.55
99.48
0.52
100.00
10,750,034
55,862,234
397,979
56,260,213
19.11
99.29
0.71
100.00
8,815,244
57,376,770
137,013
57,513,783
15.33
99.76
0.24
100.00
6,086,301
50,483,942
215,493
50,699,435
12.00
99.57
0.43
100.00
The BSP considers that loan concentration exists when the total loan exposure to a particular industry exceeds 30.0% of the total
loan portfolio.
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.
As of December 31, 2011 and 2010, nonperforming loans (NPLs) not fully covered by allowance for credit losses follow:
Total NPLs
Less NPLs fully covered by allowance
for credit and impairment losses
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
4,789,067
4,019,172
4,519,229
3,787,318
3,006,647
1,782,420
2,154,774
1,864,398
2,914,069
1,605,160
2,060,123
1,727,195
As of December 31, 2011 and 2010, secured and unsecured NPLs follow:
Secured
Unsecured
Consolidated
Parent
2011
2010
2011
(In Thousands)
2,403,140
1,796,451
2,238,317
2,385,927
2,222,721
2,280,912
4,789,067
4,019,172
4,519,229
Company
2010
1,699,601
2,087,717
3,787,318
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 nonperforming.
In the case of receivables that are payable in monthly installments, the total outstanding balance thereof shall be considered
nonperforming when three (3) or more installments are in arrears. In the case of receivables that are payable in daily, weekly
or semi-monthly installments, the total outstanding balance thereof shall be considered nonperforming at the same time that
they become past due in accordance with existing BSP regulations, i.e., the entire outstanding balance of the receivable shall
be considered as past due when the total amount of arrearages reaches ten percent (10.0%) 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.
Certain receivables from customers amounting to nil and 338.8 million as of December 31, 2011 and 2010, respectively, were
rediscounted with the BSP (included under Bills Payable - BSP) under the rediscounting privileges of the Parent Company (see
Note 15).
9. Property and Equipment
The composition of and movements in property and equipment account follow:
Land
Building and
Improvement
Consolidated
2011
Furniture,
Fixtures and
Equipment
Leasehold
Improvements
Total
(In Thousands)
Cost
Additions/Transferred-in
Disposals/Transferred-out
Accumulated depreciation
and amortization
Disposals
Net book value at end of year
100,703
975
—
1,036,794
259,177
—
2,702,373
433,145
(645,607)
506,535
320,091
(29,485)
4,346,405
1,013,388
(675,092)
101,678
1,295,971
2,489,911
797,141
4,684,701
—
—
—
—
101,678
660,023
54,516
—
714,539
581,432
1,757,755
263,922
(604,250)
1,417,427
1,072,484
162,067
50,545
(2,468)
210,144
586,997
2,579,845
368,983
(606,718)
2,342,110
2,342,591
Building and
Improvement
Consolidated
2010
Furniture,
Fixtures and
Equipment
Land
Leasehold
Improvements
Total
(In Thousands)
Cost
and amortization
Disposals
108,362
—
(7,659)
100,703
—
—
—
—
100,703
Land
1,005,135
69,930
(38,271)
1,036,794
2,460,652
603,265
(361,544)
2,702,373
282,983
226,228
(2,676)
506,535
3,857,132
899,423
(410,150)
4,346,405
636,012
48,090
(24,079)
660,023
376,771
1,691,381
205,335
(138,961)
1,757,755
944,618
104,934
59,713
(2,580)
162,067
344,468
2,432,327
313,138
(165,620)
2,579,845
1,766,560
Building and
Improvement
Parent Company
2011
Furniture,
Fixtures and
Leasehold
Equipment Improvements
Total
(In Thousands)
Cost
and amortization
Disposals
94,862
975
—
95,837
1,029,242
250,455
—
1,279,697
2,543,714
409,755
(623,873)
2,329,596
477,256
301,075
(26,351)
751,980
4,145,074
962,260
(650,224)
4,457,110
—
—
—
—
654,573
54,016
—
708,589
1,653,194
247,020
(584,943)
1,315,271
156,630
43,949
—
200,579
2,464,397
344,985
(584,943)
2,224,439
95,837
571,108
1,014,325
551,401
2,232,671
Land
Building and
Improvement
Parent Company
2010
Furniture,
Fixtures and
Leasehold
Equipment
Improvements
Total
(In Thousands)
Cost
Additions
Disposals
and amortization
Disposals
102,521
—
(7,659)
94,862
998,015
69,272
(38,045)
1,029,242
2,300,652
575,518
(332,456)
2,543,714
256,819
220,437
—
477,256
3,658,007
865,227
(378,160)
4,145,074
—
—
—
630,775
47,777
(23,979)
1,580,271
188,049
(115,126)
102,767
53,863
—
2,313,813
289,689
(139,105)
—
654,573
1,653,194
156,630
2,464,397
94,862
374,669
890,520
320,626
1,680,677
As of December 31, 2011 and 2010, the cost of fully depreciated property and equipment still in use amounted to 309.8 million
and 125.0 million, respectively, for the Group and 246.6 million and 63.2 million, respectively, for the Parent Company.
10. Investments in Subsidiaries, Associates and Joint Venture
This account consists of investments in shares of stock as follows:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
Acquisition cost:
Wholly owned subsidiaries
BRC
ULFC
UPI
GHDC
USI
UPI-MHC
Majority owned subsidiary
USB
Allowance for impairment (Note 13)
Acquisition cost:
Associates:
UCPB-CIIF Finance and Development
Corporation (UCFDC) (10.26% owned)
Legaspi Oil Company, Inc. (LOCI) (17.50% owned)
San Pablo Manufacturing Corporation (SPMC) (12.77% owned)
Southern Luzon Coconut Oil Mills, Inc. (SLCOMI) (17.48% owned)
Granexport Manufacturing Corporation (GMC) (2.84% owned)
Accumulated equity in net income:
Share in net income of associates
Equity in net unrealized gain on AFS
investments of associates
Equity in translation adjustment
—
—
—
—
—
—
—
—
—
—
—
—
2,970,130
400,000
—
287,489
35,000
14,451
2,654,631
400,000
315,500
287,489
35,000
—
—
—
—
—
—
—
—
—
370,781
4,077,851
(370,264)
3,707,587
370,781
4,063,401
(372,186)
3,691,215
100,000
56,000
25,000
24,950
6,250
212,200
100,000
56,000
25,000
24,950
6,250
212,200
100,000
56,000
25,000
24,950
6,250
212,200
100,000
56,000
25,000
24,950
6,250
212,000
6,740,238
527,068
6,087,175
653,063
—
—
—
—
7,267,306
6,740,238
—
—
426
2,644
168
2,643
—
—
—
—
7,482,576
6,955,249
3,919,787
3,903,415
(Forward)
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
Acquisition Cost:
Joint venture:
UPI-MHC
Accumulated equity in net loss:
Balance at beginning and end of year
—
6,250
—
—
(6,250)
10,000
—
—
—
—
—
—
7,482,576
6,955,249
3,919,787
3,913,415
Investments in CIIF Companies
The Parent Company has significant influence over UCFDC, LOCI, SPMC, SLCOMI and GMC through its direct ownership in such
investee companies and through the exercise of its fiduciary functions as administrator of the Coconut Industry Investment Fund
(CIIF). In addition, the Parent Company has indirect investments in Cagayan de Oro Oil Co., Inc. (CDOOCI) and Iligan Coconut
Industries, Inc. (ICII) through LOCI. LOCI, SPMC, SLCOMI, GMC, CDOOCI and ICII, herein referred to as the CIIF Companies, which
were established from the CIIF. The CIIF formed part of the Coconut Consumers Stabilization Fund (CCSF), otherwise known as
the coconut levy fund, which was created in 1973 by Presidential Decree No. 276.
The CIIF Companies wholly own, collectively, the 14 CIIF Holding Companies (14 Holding Companies) whose funds were invested
in 725 million common shares of San Miguel Corporation (SMC) that were sequestered by the PCGG in May 1986 (see Note 27).
Loss on Dilution
In September 1986, GMC, SPMC and CDOOCI, collectively referred to as the Three Oil Mills, issued to the CIIF companies 360
million redeemable preferred shares with a par value of 1.0 per share to finance the investments in SMC through the 14 Holding
Companies. In 1992, CDOOCI issued additional 13 million preferred shares. Except for the 1992 issuance by CDOOCI, all the
redeemable preferred shares have matured and became mandatorily redeemable in September 2006 at twice the fair market
value or twice the par value, whichever is higher, based on the terms of the preferred shares.
On April 25, 2008, the BOD of the Parent Company, as CIIF Administrator, approved the extension of the redemption period and
the conversion of the aforementioned redeemable preferred shares to common shares at par considering that the mandatory
redemption price of the redeemable shares would be onerous to the Three Oil Mills. On April 30, 2008, the respective BOD
of the Three Oil Mills approved the amendment of the respective Articles of Incorporation to facilitate the conversion of the
redeemable preferred shares. The SEC approved the amended Articles of Incorporation to incorporate the convertibility feature
of the redeemable preferred shares on February 25, 2009, and the amendment to increase the authorized capital and to
reclassify the redeemable preferred shares into common shares on February 26, 2010.
Under PAS 28, Investments in Associates, the Parent Company’s share in the profit or loss of the Three Oil Mills should only be
based on present ownership interest and should not consider the possible exercise or conversion of potential voting rights.
Hence, the dilutive effect of the conversion of the preferred shares should only be recognized upon actual conversion in 2010.
However, as discussed with and allowed by the SEC and BSP, the dilutive effect of the conversion of the redeemable preferred
shares on the Parent Company’s investments in SPMC and CDOOCI was recognized in 2008 since at that time, the respective
BODs of the Parent Company, as CIIF administrator, and of SPMC and CDOOCI have already agreed to the conversion and SPMC
and CDOOCI have sufficient common shares to cover the conversion. Loss on dilution recognized in 2008 amounted to 1.1
billion. However, the dilutive effect of the conversion on the investment in GMC was recognized only in 2009 because GMC
did not have sufficient common shares to cover the conversion in 2008. The Articles of Incorporation of GMC was amended to
increase the authorized capital stock only in 2009. Loss on dilution recognized in 2009 amounted to 1.2 billion.
The following tables present the financial information of significant associates as of and for the years ended December 31, 2011
and 2010:
2011
Statements of Financial Position
Total
Total Assets
Liabilities
LOCI
GMC
SPMC
UCFDC
SLCOMI
* Represents sales less cost of sales
25,585,060
16,135,951
2,138,724
1,094,290
7,479,297
1,112,702
2,289,087
442,423
12,302
65,067
Statements of Income
Operating
Gross Income*
Income (Loss)
(In Thousands)
195,326
61,071
347,716
153,800
318,857
1,599,977
83,748
91,628
—
(12,227)
Net Income
1,666,311
957,392
39,340
16,635
508,567
2010
Statements of Financial Position
Total
Total Assets
Liabilities
LOCI
GMC
SPMC
UCFDC
SLCOMI
24,930,833
15,572,508
2,242,698
1,080,430
6,970,944
2,124,900
2,686,893
585,737
13,842
65,340
Statements of Income
Operating
Gross Income*
Income (Loss)
(In Thousands)
303,657
45,337
272,060
38,406
215,766
1,134,367
82,680
86,325
—
(13,674)
Net Income
(Loss)
( 1,113,489)
875,158
258,002
2,158
490,190
* Represents sales less cost of sales
Investment in a Joint Venture
On January 12, 1997, UPI entered into a Joint Venture Agreement with Macaria Homes Corporation (MHC) to establish a joint venture
corporation, UPI-MHC, which shall engage in the real estate development of properties located in Biñan and Sta. Rosa, Laguna,
utilizing a self-contained community concept, including facilities for social and recreational, commercial and institutional use and to
sell house and lot packages within such community at a profit or rate of return mutually agreed upon by both UPI and MHC.
In 2010, UPI assigned its investment in and advances to UPI-MHC amounting to 6.3 million and 86.7 million, respectively, to
the Parent Company to settle its outstanding loans payable amounting to 74.5 million. The fair value of the net assets of UPIMHC at assignment date was 20.0 million and the fair value of the 50.0% ownership interest transferred to the Parent Company
was 10.0 million. Gain recognized by the Parent Company from the assignment, included under Miscellaneous - others (see Note
20) in the statement of income, amounted to 20.9 million.
On August 31, 2011, the Parent Company’s co-venturer in UPI-MHC assigned its investment in and advances to UPI-MHC
amounting to 6.3 million and 52.1 million, respectively, to the Parent Company as consideration for certain investment
properties amounting to 39.6 million. The fair value of the net assets of UPI-MHC at assignment date was 21.4 million and the
fair value of the 50.0% ownership interest transferred to the Parent Company was 10.7 million. Gain recognized by the Parent
Company from the assignment, included under Miscellaneous - others (see Note 20) in the statement of income, amounted to
22.8 million (net of incidental expenses amounting to 0.4 million). With the assignment, UPI-MHC became a wholly-owned
subsidiary of the Parent Company.
On August 1, 2011, the Parent Company received 49.0 million from UPI-MHC as return of its capital of 6.3 million and partial
settlement of advances to the joint venture in the amount of 42.7 million.
11. Investment Properties
Investment properties consist of foreclosed real estate properties and investments in real estate. The difference between the
fair value of the asset upon foreclosure and the carrying value of the loan is recognized under Gain/ (Loss) on foreclosures under
Miscellaneous income in the statements of income (see Note 20).
Consolidated
2011
Buildings and
Land Improvements
2010
Buildings and
Land Improvements
Total
Total
(In Thousands)
Cost
Additions
Disposals
Reclassifications
Balance at End of Year
Accumulated Depreciation and Amortization
Depreciation and amortization
Disposals
Allowance for impairment losses (Note 13)
Provision for (recovery of) impairment loss
Disposals
Reclassifications
Net Book Value at End of Year
4,140,037
191, 600
(608,034)
—
3,723,603
—
—
—
—
49,808
(35,137)
2,763
(934)
4,937
21,437
3,702,166
3,375,005
172,085
(153,437)
—
3,393,653
7,515,042
363,685
(761,471)
—
7,117,256
6,853,476
137,672
(725,265)
(2,125,846)
4,140,037
3,417,943
47,336
(108,094)
17,820
3,375,005
10,271,419
185,008
(833,359)
(2,108,026)
7,515,042
15,200
10,668
(4,266)
21,602
15,200
10,668
(4,266)
21,602
—
—
—
—
17,972
5,970
(8,742)
15,200
17,972
5,970
(8,742)
15,200
306,199
(53,942)
45,002
—
(1,333)
295,926
3,076,125
356,007
(89,079)
47,765
(934)
3,604
317,363
6,778,291
30,196
21,633
—
(2,021)
—
49,808
4,090,229
391,804
(274,073)
188,468
—
—
306,199
3,053,606
422,000
(252,440)
188,468
(2,021)
—
356,007
7,143,835
Parent Company
2011
Buildings and
Land Improvements
2010
Buildings and
Land Improvements
Total
Total
(In Thousands)
Cost
Additions
Disposals
Reclassification
Accumulated Depreciation and Amortization
Disposals
Allowance for Impairment Losses (Note 13)
Provision for (recovery of) impairment loss
Net Book Value at End of Year
3,875,953
166,162
(578,714)
—
3,463,401
3,340,175
163,533
(146,302)
—
3,357,406
7,216,128
329,695
(725,016)
—
6,820,807
—
—
—
—
2,603
5,249
(780)
7,072
2,603
5,249
(780)
7,072
—
20,368
2,763
23,131
3,440,270
304,626
(53,942)
45,002
295,686
3,054,648
304,626
(33,574)
47,765
318,817
6,494,918
6,612,500
100,885
(747,159)
(2,090,273)
3,875,953
3,380,934
50,219
(90,978)
—
3,340,175
9,993,434
151,104
(838,137)
(2,090,273)
7,216,128
—
—
—
—
—
2,603
—
2,603
—
2,603
—
2,603
—
—
—
—
3,875,953
389,885
(273,727)
188,468
304,626
3,032,946
389,885
(273,727)
188,468
304,626
6,908,899
The aggregate market value of investment properties as of December 31, 2011 and 2010 amounted to 8.6 billion and 8.8 billion,
respectively, for the Group and 8.2 billion and 8.1 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. The Group is exerting continuing efforts to dispose these properties.
The details of depreciation and amortization recognized in the statements of income follow:
Property and equipment (Note 9)
Other assets (Note 12)
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
368,983
313,138
344,985
289,689
10,668
5,970
5,249
2,603
150,596
102,539
131,429
77,522
530,247
421,647
481,663
369,814
The Parent Company’s depreciation and amortization on investment properties pertain to the “good bank”. In 2011 and in prior
years, the Parent Company did not recognize depreciation on its investment properties pertaining to the “bad bank” (as defined
in Note 1), as required under PAS 40, Investment Property. Had the Parent Company recognized depreciation expense on these
investment properties, net income in 2011 and 2010 of both the Group and the Parent Company would have decreased by 26.7
million and 23.9 million, respectively, and deficit of both the Group and the Parent Company would have increased by 2.9
billion and 3.0 billion as of December 31, 2011 and 2010, respectively.
12. Intangible and Other Assets
Deferred charges
Real estate inventories
Land held for sale
Interoffice float items
Creditable withholding tax
Software costs
Prepaid expenses
Chattel properties acquired
Sundry debit
Retirement assets (Note 25)
Documentary stamps on hand
Exchange trading right
Returned checks and other cash items
Others
Less: allowance for credit and impairment (Note 13)
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
15,761,535
15,490,241
15,761,535
15,490,241
3,183,895
3,201,895
—
—
2,019,258
2,090,273
2,019,258
2,090,273
693,366
729,081
694,191
729,238
556,544
473,935
455,470
472,702
411,898
459,037
408,251
451,458
410,048
264,234
396,681
238,961
238,185
156,284
203,165
84,221
50,142
38,487
49,592
35,574
10,570
22,977
6,347
18,958
21,694
3,404
20,653
2,774
1,500
1,500
—
—
—
1,456,456
—
1,451,001
260,615
168,207
211,219
153,036
23,619,250
24,556,011 20,226,362
21,218,437
666,366
206,293
479,743
193,910
22,952,884
24,349,718
19,746,619
21,024,527
Others include deposits on rental, power, water and telephone meter.
As of December 31, 2011 and 2010, the latest transacted price of the exchange trading right (as provided by the Philippine Stock
Exchange (PSE)) amounted to 8.50 million and 7.50 million, respectively.
The composition of and movements in deferred charges of the Parent Company follow:
Balance at January 1
Additions (reversal) - net
Balance at December 31
Balance at January 1
Additions - net
Balance at December 31
Loss on sale
of NPLs
Loss on sale
of Investment
Properties
2011
Loss on sale of
Land Held for
Sale
(In Thousands)
10,916,063
36,848
10,952,911
3,097,238
229,177
3,326,415
41,147
5,286
46,433
Loss on sale
of NPLs
Loss on sale
of Investment
Properties
2010
Loss on sale of
Land Held for
Sale
(In Thousands)
10,881,903
34,160
10,916,063
2,923,054
174,184
3,097,238
—
41,147
41,147
Others
1,435,793
(17)
1,435,776
Total
15,490,241
271,294
15,761,535
Others
Total
1,435,793
—
1,435,793
15,240,750
249,491
15,490,241
Deferred charges - Others pertains to losses incurred from sale of investment securities and dacion en pago settlements.
As discussed in Note 1, the BSP has allowed the Parent Company to defer the losses on sale and dacion en pago settlements
up to 15.7 billion and to start amortization in 2009. Any additional losses on the sale of investment properties pertaining to
the “bad bank” (as defined in Note 1) were allowed by BSP to be deferred provided that the losses deferred do not exceed the
approved unbooked valuation reserves. In 2009, amortization of 31.4 million was added directly to negative surplus. In 2011
and 2010, no amortization was made. Had the Parent Company booked these losses, net income in 2011 and 2010 would have
decreased by 271.3 million and 249.5 million, respectively, and deficit as of January 1, 2010 would have increased by 15.2 billion.
Real estate inventories pertain mainly to the real estate inventories of BRC, GHDC and UPI-MHC. The carrying value of the real
estate inventories of BRC as of December 31, 2011 and 2010 amounted to 2.5 billion (net of impairment losses amounting
to 114.6 million) and 2.7 billion, respectively, with fair values amounting to 1.7 billion and 1.9 billion, respectively. As
of December 31, 2011 and 2010, impairment losses amounting to 789.0 million and 776.6 million, respectively, were not
recognized as this is part of the unbooked valuation reserves allowed by BSP to be deferred (see Note 13).
Movements in Software costs of the Group and of the Parent Company follow:
Additions
Amortization
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
459,037
421,993
451,458
406,682
58,313
101,031
55,329
100,811
(105,452)
(63,987)
(98,536)
(56,035)
411,898
459,037
408,251
451,458
Movements in Chattel properties acquired of the Group and of the Parent Company follow:
Software costs
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
105,452
63,987
98,536
56,035
45,144
38,552
32,893
21,487
150,596
102,539
131,429
77,522
Land Held for Sale
The Parent Company entered into various memoranda of agreement (MOA) for the development of various parcels of land as follows:
a) In 2005, the Parent Company entered into a MOA with a third party individual (as co-landowner) and Sta. Lucia Realty and
Development, Inc. (SLRD - as the developer) for the development of the land located in Alfonso, Cavite into a subdivision.
The parties agreed that the Parent Company and the third party individual will contribute the land and SLRD shall contribute
its expertise as a developer. In consideration of the services to be rendered, SLRD is entitled to receive 47.0% of the
saleable lots, while the Parent Company and the third party individual are entitled to 35.0% and 18.0% of the saleable
lots, respectively. The construction has been completed and selling activities are actively being performed by the Parent
Company’s accredited marketing agency.
b) In 2006, the Parent Company entered into a MOA with Century Properties Inc. (CPI) for the development of the land located
along H.V Dela Costa Street, Salcedo Village, Makati City into a multi-storey mixed-used condominium building. The parties
agreed that the Parent Company will contribute the land and CPI shall contribute its expertise as a developer. CPI shall
invite individuals and other parties who wish or intend to own a condominium unit and for said parties to contribute funds
to answer for the costs of construction and other related expenses. In consideration of the services to be rendered by CPI,
the Parent Company shall transfer/convey to CPI 80.0% of the saleable units and parking spaces. In 2010, the construction
of the multi-storey condominium has been completed and all the units (except for parking spaces) have been turned over to
the buyers/owners. This transaction resulted in a loss (included in Deferred charges under Intangible and other assets in the
statements of financial position to be booked on a staggered basis as allowed by the BSP) in 2011 and 2010 amounting to 5.3
million and 41.1 million, respectively.
c) In 2006, the Parent Company entered into a MOA with Tagaytay Grasslands Company, Inc. (TGCI) for the development of the
land located in Nasugbu, Batangas into hotel and beach club, parking spaces and condominiums. The parties agreed that the
Parent Company will contribute the land and TGCI shall contribute its expertise as a developer and financial capital by way
of funding the development and all related expenses of the hotel and beach club, parking spaces and condominiums, and
related site development and improvements. In consideration of the services to be rendered by TGCI, the Parent Company
shall transfer/convey to TGCI 62.0% of the saleable units of the hotel and beach club and condominiums and 50% of the
parking spaces. As of December 31, 2011, construction has not been completed.
As of December 31, 2011 and 2010, the Parent Company recognized advances from customers (included in Accounts payable
under Other liabilities in the statements of financial position) amounting to 158.1 million and 142.2 million, respectively
representing collections from pre-selling activities.
13. Allowance for Credit and Impairment Losses
Changes in the allowance for credit and impairment losses follow:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
Balance at beginning of year:
AFS investments (Note 7)
Debt securities
Private
Equity securities
Quoted
Unquoted
Loans and receivables (Notes 8)
Corporate loans
Consumer loans
Accounts receivable
Investments in subsidiaries and associates (Note 10)
Investment properties (Note 11)
Land held for sale
Others
(forward)
—
369,600
—
369,600
13,331
287,864
102,322
263,997
13,331
287,789
102,322
263,922
301,195
735,919
301,120
735,844
3,387,962
881,208
263,769
15,507
4,548,446
2,287,135
300,373
388,532
9,773
2,985,813
3,130,837
880,668
247,226
15,507
4,274,238
2,149,521
216,276
373,399
9,709
2,748,905
—
356,007
—
422,000
372,186
304,626
372,186
389,885
—
—
206,293
206,293
5,411,941
—
—
235,022
235,022
4,378,754
—
—
193,910
193,910
5,446,080
—
—
40,141
40,141
4,286,961
Provision for credit and impairment losses
Foreign currency revaluation
Accounts written-off/recoveries
Balance at beginning of year:
Equity securities
Quoted
Unquoted
Corporate loans
Consumer loans
Accounts receivable
Investments in subsidiaries and associates (Note 10)
Investment properties (Note 11)
Land held for sale
Real estate inventories
Others
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
471,972
1,301,224
450,282
1,250,001
582,000
291,073
582,000
291,073
(1,790)
(16,754)
(1,790)
(16,754)
38,115
(542,356)
—
(365,201)
1,090,297
1,033,187
1,030,492
1,159,119
22,341
485,942
508,283
13,331
287,864
301,195
22,341
485,867
508,208
13,331
287,789
301,120
3,630,831
1,077,954
19,429
248,122
33,890
5,010,226
—
317,363
3,387,962
881,208
—
263,769
15,507
4,548,446
—
356,007
3,565,759
955,920
16,997
232,186
28,678
4,799,540
370,264
318,817
3,130,837
880,668
—
247,226
15,507
4,274,238
372,186
304,626
301,716
114,529
25,202
224,919
666,366
6,502,238
—
—
—
206,293
206,293
5,411,941
301,716
—
42,308
135,719
479,743
6,476,572
—
—
—
193,910
193,910
5,446,080
Below is the breakdown of provision for (recovery of) credit and impairment losses:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
Equity securities
Quoted
Unquoted
Corporate loans
Consumer loans
Accounts receivable
Investments in subsidiaries and associates
Other assets
9,009
48,713
—
21,484
9,009
48,713
—
21,484
57,722
21,484
57,722
21,484
586,339
123,325
(63,470)
16,997
(8,220)
654,971
—
(89,079)
(151,642)
471,972
865,189
675,791
(136,548)
—
1,832
1,406,264
—
(252,440)
125,916
1,301,224
586,339
75,252
(63,550)
16,997
(8,220)
606,818
(116,450)
(33,574)
(64,234)
450,282
834,129
664,392
(136,939)
—
1,832
1,363,414
—
(273,727)
138,830
1,250,001
As discussed in Note 1, the BSP has allowed the Parent Company to defer recognition of credit and impairment losses on AFS
investments, loans and receivables, investment properties and other assets amounting to 13.4 billion as of December 31, 2008.
BSP also allowed deferral of losses on sale and dacion en pago settlement amounting to 15.7 billion as of December 31, 2008. As
allowed by BSP, the Parent Company is to amortize the unbooked valuation reserves and losses over 10 years starting in 2009 based
on the affordability plan approved by BSP. In 2011 and 2010, amortization recognized by the Parent Company as an addition to
negative surplus amounted to 582.0 million and 291.1 million, respectively, with details as follows:
AFS investments
Other assets*
2011
2010
(In Thousands)
149,888
8,576
(80,248)
64,328
47,765
188,468
464,595
29,701
582,000
291,073
*Includes amortization for investment in BRC, chattel properties acquired, land held for sale and other assets pertaining to the “bad bank”.
Movements in the BSP-approved valuation reserves and losses follow:
Amortization
2011
2010
(In Thousands)
28,556,198
28,847,271
(582,000)
(291,073)
27,974,198
28,556,198
As of December 31, 2011 and 2010, the following table shows the comparison of the allowance for credit and impairment losses
recognized by the Parent Company and the required balances under PGAAP for banks:
Per Books
AFS investments
Other assets
508,208
4,799,540
318,817
850,007
6,476,572
Per Books
AFS investments
Other assets
301,120
4,274,238
304,626
566,096
5,446,080
2011
Per PGAAP
(In Thousands)
892,530
5,401,955
2,850,487
2,878,013
12,022,985
2010
Per PGAAP
(In Thousands)
886,265
5,305,771
2,840,748
2,052,186
11,084,970
Deficiency
384,322
602,415
2,531,670
2,028,006
5,546,413
Deficiency
585,145
1,031,533
2,536,122
1,486,090
5,638,890
The deficiency was not booked by the Parent Company as it is included in the valuation reserves and losses allowed by the BSP
to be deferred and amortized over 10 years. Had the Parent Company booked the deficiency, net income in 2011 and 2010 would
have decreased by 489.5 million and increased by 217.4 million, respectively, and deficit as of January 1, 2010 would have
increased by 5.3 billion.
14. Deposit Liabilities
The total liquidity and statutory reserves as reported to the BSP follows:
Due from BSP:
Reserve deposit account
Demand deposit account
Consolidated
Parent Company
2011
2010
2011
2010
(In
n Thousands)
4,756,454
5,061,353
4,607,212
4,933,728
9,088,000
13,310,811
6,280,000
9,170,810
9,000,000
13,205,430
6,200,000
9,129,484
27,155,265
20,512,163
26,812,642
20,263,212
Demand, savings and time deposit liabilities bear annual interest rates ranging from 0.5% to 4.5% and 0.5% to 3.0% in 2011 and
2010, respectively, for peso-denominated deposit liabilities and 0.0% to 4.6% in 2011 and 2010 for US dollar-denominated
deposit liabilities.
As discussed in Note 1, as part of the concessions granted to the Bank by the MB under Resolution No. 590 dated May 15, 2008
under the amended rehabilitation plan, the Bank is authorized to accept deposits from the NG, LGU and GOCC, with the ceiling
of 5.9 billion increased by the amount that the NG will deposit to with the Bank. As of December 31, 2011 and 2010, the savings
deposits of the NG amounted to 30.0 billion. 28.2 billion of the 30.0 billion was used to purchase government securities which
the Bank is using to comply with liquidity reserves and liquidity floor requirement of the BSP. These government securities are
classified as HTM investments (see Note 7). The remaining balance of 1.8 billion is included under Due from BSP.
Long Term Negotiable Certificate of Deposits due 2016 (LTNCD Series 1)
On November 25, 2010, the Parent Company issued 6.25% fixed coupon rate (EIR of 6.52%) Unsecured Long Term Negotiable
Certificate of Deposits (LTNCD) at par value of 4.5 billion. The LTNCD matures on February 25, 2016, subject to pre-termination
by the Parent Company in whole, but not in part, in accordance with BSP rules. As of December 31, 2011 and 2010, the fair
value of LTNCD Series 1 amounted to 4.5 billion.
The issuance of the foregoing LTNCD under the terms approved by the BOD was approved by the BSP on October 19, 2010.
Long Term Negotiable Certificate of Deposits due 2016 (LTNCD Series 2)
On August 19, 2011, the Parent Company issued 6.00% fixed coupon rate (EIR of 6.25%) Unsecured LTNCD at par value of 3.2 billion.
The LTNCD matures on November 19, 2016, subject to pre-termination by the Parent Company in whole, but not in part, in accordance
with BSP rules. As of December 31, 2011, the fair value of LTNCD Series 2 amounted to 3.1 billion.
The issuance of the foregoing LTNCD under the terms approved by the BOD was approved by the BSP on May 20, 2011.
The Parent Company incurred debt issue costs amounting to 53.4 million and 33.5 million on the LTNCD Series 1 and 2, respectively.
The movements in unamortized debt issue costs in 2011 and 2010 follow:
Issuances
Amortization
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
52,524
—
52,524
—
33,538
53,371
33,538
53,371
(10,663)
(847)
(10,663)
(847)
75,399
52,524
75,399
52,524
On February 3, 2011 and November 11, 2011, the Parent Company listed its 4.5 billion LTNCD Series 1 due 2016 and 3.15 billion
LTNCD Series 2 due 2016, respectively, in Philippine Dealing Exchange Corp (PDEX) subject to its Trading and Settlement Operating
Guidelines. The Parent Company’s LTNCD Series 1 and 2 are traded and settled in accordance with PDEX rules, procedures and
guidelines.
Interest expense on deposit liabilities follow:
Demand
Savings
Time
LTNCD
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
23,814
16,311
23,816
16,285
492,147
468,153
468,798
446,597
1,602,822
1,940,841
1,544,614
1,888,337
361,976
27,461
361,976
27,461
2,480,759
2,452,766
2,399,204
2,378,680
Under existing BSP regulations, non-FCDU deposit liabilities and deposits subsitutes of the Parent Company are subject to
liquidity reserves equivalent to 11.0% starting July 15, 2005 (under BSP Circular No. 491) and statutory reserves equivalent to
10.0% starting August 5, 2011 (under BSP Circular No. 732). Prior to August 5, 2011, statutory reserves equivalent was 9.0%. On
the other hand, deposit liabilities of USB are subject to liquidity reserves equivalent to 2.0% and statutory reserves equivalent to
6.0%. The Parent Company and USB were in compliance with such regulations as of December 31, 2011 and 2010.
15. Bills Payable and Securities Sold Under Repurchase Agreements
This account consists of borrowings from the following:
SSURA
Foreign banks
Local banks
Social Security System (SSS)
BSP
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
7,934,044
5,797,317
7,934,044
5,797,317
495,392
842,782
495,392
842,782
326,166
236,653
—
10,500
1,967
10,549
1,967
10,549
—
338,794
—
338,794
8,757,569
7,226,095
8,431,403
6,999,942
Bills payable bear annual interest rates ranging from 0.4% to 5.6% and 0.5% to 6.0% in 2011 and 2010, respectively. Interest
expense on bills payable amounted to 379.9 million in 2011 and 286.2 million in 2010 for the Group and 330.3 million in 2011
and 234.5 million in 2010, for the Parent Company.
Bills Payable to BSP
Certain receivables from customers amounting to nil and 338.8 million as of December 31, 2011 and 2010, respectively, were
rediscounted with the BSP under the rediscounting privileges of the Parent Company (see Note 8).
Bills Payable to SSS
Borrowings from SSS represent amounts loaned to educational institutions through the Parent Company, as a conduit financial
institution of the SSS for its lending programs, at annual interest rates ranging from 10.0% to 13.0%. These are secured through a
deed of assignment of the credits and collaterals of the individual borrowers and are being repaid in the same manner and in the
same term/period provided in the promissory notes of the borrowers with due dates ranging from December 2011 to April 2016.
16. Accrued Taxes, Interest and Other Expenses
Accrued other expenses
Accrued interest payable
Accrued taxes payable
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
446,314
384,127
410,825
356,523
85,082
790,504
176,754
784,023
42,807
42,362
28,897
36,367
574,203
1,216,993
616,476
1,176,913
Accrued other expenses include accruals for various operating expenses such as payroll, repairs and maintenance, utilities,
rental and contractual services.
17. Other Liabilities
Cash letters of credit
Accounts payable (Note 12)
Margin deposits
Manager’s check
Other credits
Deposit on lease contract
Due to PDIC
Due to Treasury of the Philippines
Withholding tax payable
Sundry credit
Retirement liability (Note 25)
Derivative liability (Note 7)
Miscellaneous
Consolidated
Parent
2011
2010
2011
(In Thousands)
3,021,230
2,968,823
3,018,208
1,255,053
342,526
1,255,053
1,176,681
1,288,892
1,088,285
1,119,049
270,149
1,119,049
836,404
502,821
789,926
396,368
491,859
378,587
304,245
248,528
—
183,769
180,058
183,769
153,779
144,110
153,779
64,669
50,192
61,292
50,882
57,178
46,095
49,323
10,606
49,283
6,633
6,633
—
4,286
—
4,286
175,212
139,985
81,456
8,797,583
6,702,360
8,229,068
Company
2010
2,966,861
342,526
1,180,263
270,149
461,522
468,644
—
180,058
144,110
47,997
53,205
10,509
—
—
65,647
6,191,491
18. Maturity Profile of Assets and Liabilities
The following tables present the assets and liabilities by contractual maturity, settlement, and expected recovery dates:
Consolidated
Due Within
One Year
2011
Due Beyond
One Year
Total
Due Within
One Year
2010
Due Beyond
One Year
Total
(In Tho
Thousands)
Financial Assets - at gross
Due from BSP
AFS investments
HTM investments
Receivables from customer
Accounts receivable
Other receivables
Other assets
Returned checks & other cash items
Nonfinancial Assets - at gross
Deferred tax assets
Others
4,757,246
32,579,118
1,898,901
1,225,579
1,931,324
—
—
—
—
—
—
—
20,242,618
28,216,682
4,757,246
32,579,118
1,898,901
1,225,579
1,931,324
20,242,618
28,216,682
5,080,842
22,601,760
2,154,600
1,354,696
1,816,740
—
—
—
—
—
—
—
14,802,781
34,020,203
5,080,842
22,601,760
2,154,600
1,354,696
1,816,740
14,802,781
34,020,203
33,174,152
1,750,182
246,245
1,449,519
473,594
393,425
30,846,259
6,463,537
836,824
—
231,411
—
64,020,411
8,213,719
1,083,069
1,449,519
705,005
393,425
26,717,869
11,510
3,590
1,439,495
229,776
333,922
29,542,344
6,671,596
1,377,740
—
607,150
—
56,260,213
6,683,106
1,381,330
1,439,495
836,926
333,922
—
79,879,285
—
86,837,331
—
166,716,616
1,456,456
63,201,256
—
87,021,814
1,456,456
150,223,070
—
—
—
—
269,344
269,344
80,148,629
4,684,701
7,482,576
7,117,256
54,201
23,349,906
42,688,640
129,525,971
4,684,701
7,482,576
7,117,256
54,201
23,619,250
42,957,984
209,674,600
—
—
—
—
448,825
448,825
63,650,081
4,346,405
6,955,249
7,515,042
48,385
22,650,730
41,515,811
128,537,625
4,346,405
6,955,249
7,515,042
48,385
23,099,555
41,964,636
192,187,706
Less:
Unearned interest discount
Accumulated depreciation and amortization
Total
Deposit liabilities
Demand
Savings
Time
LTNCD
Other liabilities
Bills purchased-contra
Accounts payable
Margin deposits
Manager’s checks
Due to PDIC
Miscellaneous
Nonfinancial Liabilities
Deferred tax liability
Income tax payable
Withholding taxes payable
Other liabilities
337,212
2,363,712
6,502,238
200,471,438
397,979
2,595,045
5,411,941
183,782,741
13,007,774
98,722,144
37,407,506
—
149,137,424
—
—
7,876,574
7,593,890
15,470,464
13,007,774
98,722,144
45,284,080
7,593,890
164,607,888
8,779,761
93,372,107
39,824,073
—
141,975,941
—
—
7,393,363
4,466,765
11,860,128
8,779,761
93,372,107
47,217,436
4,466,765
153,836,069
8,731,403
531,396
26,166
—
8,757,569
531,396
7,216,969
1,174,352
9,126
279
7,226,095
1,174,631
3,021,230
1,255,053
1,176,681
1,119,049
836,404
—
183,769
153,779
64,669
4,286
63,419
—
—
—
—
—
304,245
—
—
—
—
—
3,021,230
1,255,053
1,176,681
1,119,049
836,404
304,245
183,769
153,779
64,669
4,286
63,419
2,968,823
342,526
1,288,892
270,149
502,821
—
180,058
144,110
50,192
—
42,595
—
—
—
—
—
248,528
—
—
—
—
—
2,968,823
342,526
1,288,892
270,149
502,821
248,528
180,058
144,110
50,192
—
42,595
166,278,562
15,800,875
182,079,437
156,157,428
12,118,061
168,275,489
—
42,807
46,622
50,882
19
166,418,892
66,121
—
—
—
564,098
16,431,094
66,121
42,807
46,622
50,882
564,117
182,849,986
—
42,362
38,183
57,178
777
156,295,928
67,941
—
—
—
605,711
12,791,713
67,941
42,362
38,183
57,178
606,488
169,087,641
Parent Company
Due Within
One Year
2011
Due Beyond
One Year
Total
Due Within
One Year
2010
Due Beyond
One Year
Total
(In Thousands)
Thou
Financial Assets - at gross
Due from BSP
AFS investments
HTM investments
Accounts receivable
Other assets
Returned checks & other cash items
4,607,502
32,305,984
1,851,226
1,098,579
1,923,896
—
—
—
—
—
—
—
20,026,754
28,073,365
4,607,502
32,305,984
1,851,226
1,098,579
1,923,896
20,026,754
28,073,365
4,934,052
22,480,433
1,959,230
1,070,696
1,756,577
—
—
—
—
—
—
—
14,656,510
33,876,053
4,934,052
22,480,433
1,959,230
1,070,696
1,756,577
14,656,510
33,876,053
31,512,438
1,740,028
239,923
1,168,353
444,661
26,001,345
6,192,079
771,576
239,598
516,614
57,513,783
7,932,107
1,011,499
1,407,951
961,275
25,737,270
—
2,753
1,405,633
200,520
24,962,165
6,389,794
1,334,049
—
697,240
50,699,435
6,389,794
1,336,802
1,405,633
897,760
—
76,892,590
—
81,821,331
—
158,713,921
1,451,001
60,998,165
—
81,915,811
1,451,001
142,913,976
—
—
—
260,709
260,709
4,457,110
4,290,051
6,820,807
19,965,653
35,533,621
4,457,110
4,290,051
6,820,807
20,226,362
35,794,330
—
—
—
279,854
279,854
4,145,074
4,285,601
7,216,128
19,487,582
35,134,385
4,145,074
4,285,601
7,216,128
19,767,436
35,414,239
77,153,299
117,354,952
194,508,251
61,278,019
117,050,196
178,328,215
Nonfinancial Assets - at gross
es
Other assets
Total
Less:
Unearned interest discount
Accumulated depreciation and amortization
Total
Deposit liabilities
Demand
Savings
Time
LTNCD
Accrued interest and other expense
Other liabilities
Bills purchased-contra
Margin deposits
Accounts payable
Manager’s checks
Due to PDIC
Miscellaneous
Nonfinancial Liabilities
Deferred tax liability
Income tax payable
Withholding taxes payable
Other liabilities
137,013
2,231,511
6,476,572
185,663,155
215,493
2,467,000
5,446,080
170,199,642
12,929,685
96,478,317
35,651,933
—
145,059,935
—
—
7,876,574
7,593,890
15,470,464
12,929,685
96,478,317
43,528,507
7,593,890
160,530,399
8,702,472
91,171,412
38,199,274
—
138,073,158
—
—
7,375,449
4,466,765
11,842,214
8,702,472
91,171,412
45,574,723
4,466,765
149,915,372
8,431,403
587,579
—
—
8,431,403
587,579
6,990,816
1,140,267
9,126
279
6,999,942
1,140,546
3,018,208
1,255,053
1,119,049
1,088,285
789,926
183,769
153,779
61,292
4,286
13
—
—
—
—
—
—
—
—
—
—
3,018,208
1,255,053
1,119,049
1,088,285
789,926
183,769
153,779
61,292
4,286
13
2,966,861
342,526
270,149
1,180,263
461,522
180,058
144,110
47,997
—
13
—
—
—
—
—
—
—
—
—
—
2,966,861
342,526
270,149
1,180,263
461,522
180,058
144,110
47,997
—
13
161,752,577
15,470,464
177,223,041
151,797,740
11,851,619
163,649,359
—
28,897
—
46,095
—
74,992
161,827,569
30,492
—
—
—
509,314
539,806
16,010,270
30,492
28,897
—
46,095
509,314
614,798
177,837,839
—
36,367
22,286
53,205
—
111,858
151,909,598
34,791
—
—
—
544,788
579,579
12,431,198
34,791
36,367
22,286
53,205
544,788
691,437
164,340,796
19. Operating Lease Contracts
The Group leases the premises of most of its offices and branches for periods ranging from 1 to 20 years from the date of the
contracts, which terms are renewable upon the mutual agreement of the parties. Rent expense charged to operations (included
under Occupancy expense in the statements of income) amounted to 319.5 million and 275.6 million in 2011 and 2010,
respectively, for the Group and 300.3 million and 243.9 million in 2011 and 2010, respectively, for the Parent Company.
Future minimum rentals payable under non-cancelable operating leases are as follows:
Within one year
After one year but not more than five years
After more than five years
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
214,551
194,866
193,913
182,770
416,879
422,496
375,338
393,416
85,013
109,574
74,286
103,004
716,443
726,936
643,537
679,190
20. Miscellaneous Income
Income from assets acquired
Rental income (Note 26)
Dividends
Loss on foreclosures (Note 11)
Others (Note 10)
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
41,308
117,484
42,737
75,511
22,665
23,683
28,270
23,269
8,734
1,824
7,132
645
(2,122)
(18,353)
(2,122)
(18,353)
450,785
187,032
400,130
175,635
521,370
311,670
476,147
256,707
In 2011, the Parent Company recognized income of 104.5 million under Others resulting from the compromise agreement
entered with third parties on the rescinded sale of the Parent Company’s loans and investment properties. Others also include
recovery on written-off accounts and penalty charges.
21. Miscellaneous Expense
Postage, telephone, cable and telegram
Travelling expense
Management and other professional fees
Stationery and supplies used
Representation and entertainment (Note 22)
Fuel and lubricant
Supervision and examination fees
Advertising
Computer-related expense
Fees and commission
Freight expense
Membership fees
Fines, penalties and other charges
Miscellaneous
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
131,126
131,126
126,763
122,011
104,515
72,760
96,305
63,167
83,619
54,871
80,712
32,775
83,403
71,361
75,016
63,737
76,426
26,298
72,421
22,587
76,001
61,190
68,545
56,093
62,076
54,089
60,415
51,788
33,640
25,286
31,941
24,458
32,258
104,793
32,203
104,650
22,048
39,882
20,636
38,234
12,293
15,516
9,718
18,230
9,869
8,172
9,450
8,678
6,166
269
5,347
4,506
76,185
24,795
45,416
82,182
824,253
746,169
713,709
649,431
22. 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 statements of income) as well as income taxes. Percentage and other taxes paid
consist principally of gross receipts tax (GRT) and documentary stamp taxes (DST). Income taxes include corporate income
tax, as discussed below, and 20.0% final taxes paid, which is a final withholding tax on gross interest income from government
securities and other deposit substitutes.
RA No. 9337, An Act Amending National Internal Revenue Code, provides that the RCIT rate shall be 35.0% and interest allowed
as a deductible expense shall be reduced by an amount equivalent to 42.0% of interest income subject to final tax until
December 31, 2008. Starting January 1, 2009, the RCIT rate is 30.0% and interest allowed as a deductible expense is reduced by
an amount equivalent to 33.0% of interest income subjected to final tax.
Current tax regulations also provide for the ceiling on the amount of entertainment, amusement and recreation (EAR) expense
that can be claimed as a deduction against taxable income. In 2011 and 2010, EAR amounted to 76.4 million and 26.3 million,
respectively, for the Group and 72.4 million and 22.6 million, respectively, for the Parent Company (see Note 21). 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 1.0% of net revenue. The regulations also provide for
MCIT of 2.0% on modified gross income and allow a NOLCO. The MCIT and NOLCO may be applied against the entity’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 10.0% income tax. In addition, interest income on deposit placements with other FCDUs and offshore banking units (OBUs) is
taxed at 7.5%. 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 10.0% income tax.
The provision for income tax consists of:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
Current:
Final tax
RCIT
MCIT
Deferred
654,760
147,683
70,030
872,473
(12,820)
652,857
93,911
31,711
778,479
(29,272)
647,987
—
70,030
718,017
(4,299)
638,028
—
31,711
669,739
(14,307)
859,653
749,207
713,718
655,432
The reconciliation of the statutory income tax to the effective income tax is shown below:
Statutory income tax
Tax effects of:
FCDU income
Nondeductible expenses
Net unrecognized DTA
Tax paid and tax-exempt income
Nontaxable income
Effective income tax
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
1,175,794
959,678
846,071
628,157
(364,703)
441,448
168,810
(248,817)
(312,879)
859,653
(456,400)
435,998
412,632
(345,434)
(257,267)
749,207
(364,703)
426,713
205,426
(248,738)
(151,051)
713,718
(456,400)
433,974
455,142
(345,312)
(60,129)
655,432
Components of net deferred tax liabilities are as follows:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
Deferred tax asset on:
Accumulated depreciation on investment properties
Unrealized loss on foreclosed assets
MCIT
Others
Effective income tax
Deferred tax liability on:
Unrealized gain on foreclosure
Retirement asset
Unrealized gain on AFS investments
Unrealized foreign exchange gain
Unrealized gain on financial assets at FVPL
Lease income differential between finance
and operating lease method
Debt issue cost
Others
Net deferred tax liability
467
20,559
5,665
41
—
26,732
1,446
409
—
—
67
1,922
—
—
—
—
—
—
—
—
—
—
—
—
(19,655)
(3,171)
(15,823)
—
(3,608)
(22,986)
(6,893)
(10,639)
(7,409)
(9,369)
(2,629)
(1,904)
—
—
(3,608)
—
(5,687)
—
(9,977)
(7,473)
(28,245)
(13,680)
(8,671)
(92,853)
—
(6,671)
(5,896)
(69,863)
—
(13,680)
(8,671)
(30,492)
—
(6,671)
(4,983)
(34,791)
( 66,121)
( 67,941)
( 30,492)
( 34,791)
Components of net deferred tax assets shown in the consolidated statements of financial position follow:
2011
2010
((In Thousands)
Deferred tax asset on:
Provision for accrual of expenses
Retirement liability
Others
Deferred tax liability on:
Unrealized gain on foreclosure
Unrealized gain on FVPL
Net deferred tax assets
52,570
3,308
—
1,990
1,737
59,605
37,330
3,527
2,333
1,990
7,329
52,509
(5,350)
(54)
(5,404)
(4,124)
—
(4,124)
54,201
48,385
The Group and the Parent Company did not set up deferred tax asset on the following temporary differences:
NOLCO
Lease income differential between finance and
operating lease method
MCIT
Unrealized loss on foreclosure
Unrealized loss on AFS investments
Unrealized loss on financial assets at FVPL
Unrealized foreign exchange loss
Accrued expense
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
4,235,424
6,947,061
4,157,813
6,869,450
5,414,282
5,680,357
5,313,711
5,536,961
—
107,036
62,892
—
82,589
—
61,708
19,277
174,964
45,395
23,878
13,070
1,128
—
—
—
—
107,036
57,441
—
82,406
—
61,708
19,277
—
40,479
23,878
13,070
451
—
—
—
9,983,208
12,885,853
9,799,392
12,484,289
Management believes that the future income tax benefits arising from these temporary differences will not be realized within
the availment period.
The breakdown of NOLCO with the corresponding validity periods follow:
Year Incurred
2010
2009
2008
Year Incurred
2010
2009
2008
Amount
274,679
3,960,745
2,711,637
6,947,061
Amount
266,014
3,891,799
2,711,637
6,869,450
Consolidated
Applied/Expired
(In Thousands)
—
—
2,711,637
2,711,637
Parent Company
Applied/Expired
(In Thousands)
—
—
(2,711,637)
( 2,711,637)
Balance
Expiry Year
274,679
3,960,745
—
4,235,424
2013
2012
2011
Balance
Expiry Year
266,014
3,891,799
—
4,157,813
2013
2012
2011
Balance
Expiry Year
70,030
31,711
5,295
—
107,036
2014
2013
2012
2011
Balance
Expiry Year
70,030
31,711
5,295
—
107,036
2014
2013
2012
2011
Details of the MCIT are as follows:
Year Incurred
Amount
2011
2010
2009
2008
70,030
31,711
8,496
5,188
115,425
Year Incurred
Amount
2011
2010
2009
2008
70,030
31,711
5,295
3,473
110,509
Consolidated
Applied/Expired
(In Thousands)
—
—
(3,201)
(5,188)
( 8,389)
Parent Company
Applied/Expired
(In Thousands)
—
—
—
(3,473)
( 3,473)
23. Equity
As of December 31, 2011 and 2010, the Bank’s equity consists of (amounts in thousands, except par value and number of shares):
Common stock - 1 par value (Note 1)
Authorized shares - - 1,497,170,231 shares in 2011 and 2,500,000,000 shares in 2010
Subscribed - 1,497,170,231 shares (net of subscription receivable of 12,327)
Special Preferred stock - 1 par value (Note 1)
Authorized shares - 1,752,829,769 shares in 2011 Subscribed
Capital notes (Note 1)
1,484,843
—
12,000,000
13,484,843
Common Shares
A substantial portion of the outstanding common shares of the Bank remains sequestered as a result of the sequestration
orders issued by the PCGG on June 26, 1986. Court proceedings on the ownership issue have been ongoing since then with the
Sandiganbayan and the Supreme Court. Meantime, PCGG exercises the right to vote on the sequestered shares of the Bank.
On July 11, 2003, the Sandiganbayan promulgated its “Partial Summary Judgment” granting the ROP’s “Motions for Partial Summary
Judgment” and stated that 64.98% of the Bank’s shares of stock, which form part of the 72.2% charged by the Philippine Coconut Authority
(PCA) to the Coconut Consumers Stabilization Fund (CCSF), are conclusively owned by the ROP and that the Bank’s shares registered in the
name of defendant Cojuangco and those of his dummies and nominees belong to the ROP as the true and beneficial owner.
On May 11, 2007, the Sandiganbayan ruled that there are no more triable issues that have to be addressed that would
necessitate the presentation of evidence by the parties. The Sandiganbayan had rendered Partial Summary Judgment
promulgated on July 11, 2003 that practically excluded any other issue concerning the ownership of the 72.2% shares of the
Bank, which the Court has declared to be owned by the government.
As the Sandiganbayan had already declared Presidential Decree (P.D.) 755 to be constitutionally infirmed “(i) for having allowed the
use of the CCSF to benefit directly private interests by the outright and constitutional grant of absolute ownership of the FUB/UCPB
shares paid for by PCA entirely with the CCSF to the undefined “coconut farmers”, which negated or circumvented the national policy
or public purpose declared by P.D. No. 755 to accelerate the growth and development of the coconut industry and achieve its vertical
integration; and (ii) for having unduly delegated legislative power to the PCA”, there appears to be no other issue on ownership, such
defense of defendants Cocofed, et al. which seeks to prove during trial will necessarily fail and would only be a futile effort.
While initially, in its Partial Summary Judgment of July 11, 2003, the Court ordered that instant case to proceed with respect to
issues not disposed of, it appears that all pertinent issues have already been addressed by the Court and trial could be dispensed
with. The Sandiganbayan also said that “there is no more point in proceeding with trial where the principal issue of ownership
of the Bank’s shares as well as the relevant sub-issues have already been resolved.”
On May 28, 2007, defendant Cojuangco filed a Motion for Reconsideration/Modification, praying that the Resolution of the Court
on May 11, 2007 be reconsidered so as to allow defendant Cojuangco to present evidence in his defense, particularly on the fact
the Court itself has found relevant but not established because not stipulated upon, and his counterclaims, subject to whatever
rebuttal evidence plaintiff may present and, thereafter, the Court may declare its “Partial Summary Judgement” of July 11,
2003, subject to whatever modifications it may find appropriate to make, final and subject to appeal by any of the parties.”
On May 28, 2007, COCOFED, et. al., filed a Class Action Petition for Review on Certiorari praying that the Supreme Court; (i)
annul and set aside the Partial Summary Judgment dated July 11, 2003; (ii) annul and set aside the Partial Summary Judgment
dated May 7, 2004 (see Note 27), and Resolution dated May 11, 2007, of the Sandiganbayan; (iii) dismiss with prejudice, the two
cases in so far as Cocofed, et. al., and the more than one million coconut farmers who are similarly situated are concerned; (iv)
lift the sequestration orders of the PCGG issued and levied over the sequestered assets.
However, in its Resolution dated June 5, 2007, the Sandiganbayan declared that “in view of its judgment declaring ownership
in favor of the government of the subject UCPB shares, the Partial Summary Judgment is now considered a final and appealable
judgment.”
On June 20, 2007, defendant Cojuangco filed a Motion for Reconsideration on the Sandiganbayan Resolution dated June 5,
2007, and the Partial Summary Judgment dated July 11, 2003. The court did not grant defendant Cojuangco any opportunity
to present evidence on his counterclaims, nor did it render judgment thereon; and the Court’s decision is “indefinite” and may
not be considered as final and may not be executed in at least 2 aspects, namely: i) it does not identify with particularity “the
Cojuangco UCPB shares of stock” which are declared as belonging to the plaintiff Republic as the true and beneficial owner; and
ii) while it includes in its judgment the UCPB shares of stock of alleged fronts, nominees and dummies of defendant Cojuangco
which form part of the 72.2% shares of the FUB/UCPB paid for by the PCA, the alleged fronts, nominees and dummies are not
named and identified, much less the particular shares of stock belonging to them.
On November 29, 2007, the Sandiganbayan resolved that the Motion for Reconsideration of defendant Cojuangco was bereft of merit as
it found no cogent reasons to reverse its Resolution of June 5, 2007 and the Partial Summary Judgment dated July 11, 2003.
On January 24, 2012, the Supreme Court affirms the resolutions issued by the Sandiganbayan on June 5, 2007, that there is no
more necessity of further trial with respect to the issue of ownership of (i) the sequestered UCPB shares, (ii) the CIIF block of
SMC shares, and (iii) the CIIF companies as they have been finally adjudicated in the Partial Summary Judgment dated July 11,
2003 and May 7, 2004.
On February 14, 2012, Cocofed et. al., filed a Motion for Reconsideration of the decision rendered by the Supreme Court on
January 24, 2012, citing certain substantial and grave errors of fact.
As of March 29, 2012, the aforementioned cases and motions are still pending.
Preferred Shares
On May 10, 2011, the SEC approved the amendments on the Articles of Incorporation of the Bank including the reclassification
of 1,002,829,769 unissued common shares and 750,000,000 unissued preferred shares of the Bank, all with par value of 1.0 per
share into 1,752,829,769 perpetual, non-cumulative, special preferred shares.
In the event of winding up, the holder(s) of the shares of Special Preferred Stock shall have no priority claim in respect of
principal and dividends on the shares of Special Preferred Stock which is higher than or equal to that of the depositors, other
creditors and holders of Lower Tier 2 and Upper Tier 2 capital instruments, if any, of the Bank. However, the rights and claims
of such holder(s) of the shares of Special Preferred Stock, in the event of winding up, are superior to the rights and claims of
holder(s) of shares of Common Stock.
No stockholder of the Bank shall have any pre-emptive right or preferential right to purchase or subscribe to (i) the 1,752,829,769
shares of Special Preferred Stock stated above, (ii) any additional shares of Special Preferred Stock, (iii) any unissued share of Common
Stock upon conversion of Special Preferred Stock, and (iv) any unissued share of Common Stock upon conversion of the Interim Capital
Notes of the Bank, with (ii), (iii) and (iv) becoming operative upon an increase in the authorized capital stock of the Bank.
Capital Notes
As fully discussed in Note 1, the Bank obtained 12.0 billion financial assistance from PDIC on July 7, 2003 consisting of a 7.0 billion
5.0% Unsecured Subordinated debt due in 2013 and 5.0 billion proceeds from sale of NPLs with buyback by 2013. On March 31, 2009,
the ROP, PDIC, PCGG and the Bank agreed to convert the PDIC financial assistance into Capital Notes. On the same date, the Bank
issued 12.0 billion Interim Tier 1 Capital Notes (the Capital Notes or Notes) to PDIC which will qualify as Interim Tier 1 capital. As
discussed also in Note 1, the Capital Notes has no maturity date but shall become due and demandable if the Bank fails to perform any
of its material obligations under the Notes. As not all such obligations are within the control of the Bank, the Capital Notes does not
qualify as an equity instrument under PAS 32, Financial Instruments: Presentation. Under PAS 32, the Capital Notes should be presented
as a financial liability in the statements of financial position. However, as allowed by BSP and in keeping with the objectives of the
Rehabilitation Plan, the Bank has presented the Capital Notes in the equity section of the statements of financial position.
Capital Management
The primary objectives of the Group’s capital management are to ensure that it complies with externally imposed capital
requirements and it 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 years.
Regulatory Qualifying Capital
Under existing BSP regulations, the determination of the Parent Company’s compliance with regulatory requirements and ratios
is based on the amount of the Parent Company’s “unimpaired capital” (regulatory net worth) as reported to the BSP, which is
determined on the basis of regulatory accounting policies which differ from PFRS in some respects.
The amount of surplus funds available for dividend declaration is also determined on the basis of regulatory net worth after
considering certain adjustments.
The BSP, sets and monitors capital requirements for the Bank. In implementing current capital requirements, the BSP requires
the Bank to maintain a prescribed ratio of qualifying capital to risk-weighted assets.
In addition, the risk-based capital ratio (RBCAR) of a bank, expressed as a percentage of qualifying capital to risk-weighted
assets, should not be less than 10.0% for both stand-alone basis (head office and branches) and consolidated basis (Parent
Company and subsidiaries engaged in financial allied undertakings but excluding insurance companies). Qualifying capital and
risk-weighted assets are computed based on BSP regulations. Risk-weighted assets 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 MB of the BSP.
On August 4, 2006, the BSP, under BSP Circular No. 538, issued the prescribed guidelines implementing the revised risk-based capital
adequacy framework for the Philippine banking system to conform to Basel II capital adequacy framework. The new BSP guidelines took
effect on July 1, 2007. Thereafter, banks were required to compute their Capital Adequacy Ratio (CAR) using these guidelines.
The Bank’s RBCAR, as submitted to the BSP as of December 31, 2011 and 2010 are shown in the table below:
Tier 1 capital
Tier 2 capital
Gross qualifying capital
Less required deductions
Total qualifying capital
Risk weighted assets
Tier 1 capital ratio
Total capital ratio
Consolidated
Parent Company
2011
2010
2011
2010
(In Millions)
16,529
14,152
16,529
14,107
659
459
587
400
17,188
14,611
17,116
14,507
1,720
1,629
4,683
4,225
15,468
12,982
12,433
10,282
129,762
122,489
121,299
115,147
11.66%
11.92%
10.47%
10.60%
10.25%
10.25%
8.93%
8.93%
The regulatory qualifying capital of the Group and of the Parent Company consists of Tier 1 (core) capital, which comprises
paid-up common, capital notes, surplus (deficit) including current year profit and surplus reserves less required deductions such
as unbooked valuation reserves (except for the 29.1 billion deferral of losses discussed in Notes 1, 12 and 13), unsecured credit
accommodations to directors, officers, stockholders and related interests (DOSRI) and deferred tax. The other component of
regulatory capital is Tier 2 (supplementary) capital, which includes unsecured subordinated debt and general loan loss provision.
As of December 31, 2011, the Bank has already complied with the required RBCAR. As discussed in Note 1, on February 26, 2009, the
MB of the BSP exempted the Bank from sanctions that may be imposed for its non-compliance with the 10.0% CAR and all capital-based
regulatory ratios for the year 2008 until such time that the Bank’s Rehabilitation Plan is fully implemented and approved the Bank’s
request for temporary relief by reducing the Bank’s CAR to 8.0% for a period of three years up to 2011 or until such time that the Bank is
able to comply with the required 10.0% CAR, whichever comes first.
24. Surplus Reserves
As of December 31, 2011 and 2010, this account consists of (in thousands):
Reserve for trust business
Reserve for self-insurance
Reserve for contingencies
Others
117,664
26,000
6,000
746,819
896,483
In compliance with existing BSP regulations, 10.0% 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 function equals 20.0% of the Parent Company’s
authorized capital stock (see Note 27).
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.
‘Others’ represents stock dividends declared on common stock in prior years, which were not released to the Parent Company’s
shareholders due to the unsettled sequestration issue.
25. Retirement Plan and Other Employee Benefits
Expenses recognized for salaries and employee benefits are presented below:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
1,006,082
934,202
869,495
810,062
435,795
357,615
411,850
339,599
137,332
122,998
124,582
111,488
84,126
81,402
76,690
74,674
1,663,335
1,496,217
1,482,617
1,335,823
Salaries and wages
Fringe benefits
Short-term medical benefits
Retirement - defined benefit plan
The Parent Company and its significant subsidiaries have funded noncontributory defined benefit retirement plans covering all
their respective permanent and full-time employees.
The principal actuarial assumptions used in determining retirement liability of the Parent Company and significant subsidiaries
as of January 1, 2011 and 2010 are shown below:
2011
Average remaining working life
Discount rate
Expected rate of return on assets
Future salary increases
Parent
Company
USB
USI
16 years
9.0%
8.0%
6.0%
16 years
10.7%
6.0%
6.0%
17 years
12.0%
7.0%
5.0%
2010
Parent
Company
USB
(In Thousands)
16 years
16 years
10.2%
8.5%
8.0%
6.0%
6.0%
6.0%
USI
27 years
11.0%
7.0%
5.0%
As of December 31, 2011, the discount rate (with reference to PDST-R2 index) of the Parent Company, USB and USI is 6.6%, 6.9%
and 12.0%, respectively.
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.
The net retirement asset of the Group and the Parent Company follows:
Fair value of plan assets
Present value of obligation
Surplus (deficit)
Unrecognized actuarial losses (gains)
Net retirement asset
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
1,502,624
1,469,193
1,484,309
1,444,114
1,695,171
1,286,946
1,643,131
1,253,630
(192,547)
182,247
(158,822)
190,484
196,484
(165,903)
165,169
(171,526)
3,937
16,344
6,347
18,958
Retirement asset (liability) included in Other Assets (Other Liabilities) are as follows:
Retirement asset (Note 12)
Retirement liability (Note 17)
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
10,570
22,977
6,347
18,958
(6,633)
(6,633)
—
—
3,937
16,344
6,347
18,958
The movements in the retirement asset recognized in the statements of financial position follow:
Retirement expense
Contributions
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
16,344
12,883
18,958
12,557
(84,126)
(81,402)
(78,712)
(74,674)
71,719
84,863
66,101
81,075
3,937
16,344
6,347
18,958
As of December 31, 2011 and 2010, retirement asset was fully recognized because it did not exceed the limit provided by PAS 19,
Employee Benefits.
Changes in the present value of retirement obligation follow:
Actuarial losses
Benefits paid
Interest cost
Current service cost
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
1,286,946
1,041,886
1,253,630
1,002,301
348,682
199,720
322,648
205,449
(143,185)
(131,757)
(129,084)
(123,313)
116,400
105,612
112,827
102,235
86,328
71,485
83,110
66,958
1,695,171
1,286,946
1,643,131
1,253,630
The movements in the fair value of plan assets follow:
Actuarial gains (losses)
Benefits paid
Expected return on plan assets
Contributions
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
1,469,193
1,187,066
1,444,114
1,159,254
(12,191)
234,563
(12,352)
234,358
(143,185)
(131,757)
(129,084)
(123,313)
117,088
94,458
115,530
92,740
71,719
84,863
66,101
81,075
1,502,624
1,469,193
1,484,309
1,444,114
The movements in unrecognized actuarial gains (losses) are as follows:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
165,903
132,297
171,526
144,396
(348,682)
(199,720)
(322,648)
(205,449)
(12,191)
234,563
(12,352)
234,358
(194,970)
167,140
(163,474)
173,305
(1,514)
(1,237)
(1,695)
(1,779)
( 196,484)
165,903
( 165,169)
171,526
Actuarial losses on retirement obligation
Actuarial gains (losses) on plan assets
Actuarial gains recognized
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
2011
Cash and cash equivalents
Fixed income
Equity instruments
Others
Parent
Company
USB
USI
6.09%
50.73%
36.40%
6.78%
100.00%
30.6%
66.5%
—
2.9%
100.00%
15.33%
51.39%
30.92%
2.36%
100.00%
2010
Parent
Company
USB
(In Thousands)
10.09%
28.10%
59.80%
70.20%
28.46%
—
1.65%
1.70%
100.00%
100.00%
USI
13.31%
78.06%
—
8.63%
100.00%
The amounts included in ‘Compensation and fringe benefits’ in the statements of income are as follows:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
86,328
71,485
83,110
66,958
116,400
105,612
112,827
102,235
(117,088)
(94,458)
(115,530)
(92,740)
(1,514)
(1,237)
(1,695)
(1,779)
84,126
81,402
78,712*
74,674
Current service cost
Interest cost
Amortizations of actuarial gains
* 2.02 million of which pertains to retirement expense charged by the Parent Company to its subsidiaries for seconded employees.
The actual return on plan assets follows:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
( 12,191)
234,563
( 12,352)
234,358
117,088
94,458
115,530
92,740
104,897
329,021
103,178
327,098
Actuarial gains (losses) on plan assets
The Group and the Parent Company expect to contribute 123.2 million and 112.6 million, respectively, to its retirement plan
in 2012.
Amounts for the current and previous years follow:
Present value of retirement obligation
Surplus (deficit)
Experience adjustments on retirement obligation
Experience adjustments on plan asset
Change in assumptions
2011
2010
1,502,624
1,695,171
(192,547)
(76,210)
(12,191)
(154,022)
1,469,193
1,286,946
182,247
55,026
234,563
144,694
Consolidated
2009
2008
(In Thousands)
1,187,066
970,068
1,041,886
976,655
145,180
(6,587)
(78,381)
250,520
158,421
(64,806)
77,427
(243,765)
2007
1,034,424
977,036
57,388
22,180
1,148
(270,286)
Present value of retirement obligation
Surplus (deficit)
Experience adjustments on retirement obligation
Experience adjustments on plan asset
Change in assumptions
2011
2010
1,484,309
1,643,131
(158,822)
(51,427)
(12,352)
(154,022)
1,444,114
1,253,630
190,484
51,427
234,358
154,022
Parent Company
2009
2008
(In Thousands)
1,159,254
938,510
1,002,301
949,867
156,953
(11,357)
(94,352)
255,438
157,830
(64,585)
77,171
(242,863)
2007
998,032
943,720
54,312
44,349
5,279
(270,780)
26. Related Party Transactions
Parties are considered to be related if one party has the ability, directly, or indirectly, to control the other party or exercise
significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if
they are subject to common control or common significant influence.
In the ordinary course of business, the Group has loan and deposit transactions with certain DOSRI. The Parent Company also has
loans and deposit transactions with its subsidiaries and associates.
Under existing policies of the Group, these loans are made on substantially the same terms as loans granted to other individuals
and businesses of comparable risks. Existing banking regulations limit the amount of individual loans to DOSRI, 70.0% 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 15.0% of the total
loan portfolio of the Group, whichever is lower. In 2011 and 2010, interest income on DOSRI loans amounted to 10.7 million and
2.5 million, respectively.
BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts. The following table shows information
relating to the loans, other credit accommodations and guarantees classified as DOSRI accounts under regulations existing prior
to said Circular, and new DOSRI loans, other credit accommodations granted under said circular:
Total outstanding DOSRI accounts (in thousands)
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
Consolidated
2011
2010
289,868
193,218
Parent Company
2011
2010
287,058
190,873
0.46%
0.34%
0.50%
0.37%
0.46%
0.46%
14.13%
1.22%
0.34%
0.34%
17.44%
2.27%
0.50%
0.50%
14.27%
1.24%
0.37%
0.38%
17.66%
2.29%
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
accommodation and guarantees to each of the bank’s/quasi-bank’s subsidiaries and affiliates shall not exceed 10.00% of the net
worth of the lending bank/quasi-bank, provided that the unsecured portion of which shall not exceed 5.00% of such net worth.
Further, the total outstanding loans, credit accommodations and guarantees to all subsidiaries and affiliates shall not exceed
20.00% of the net worth of the lending bank/quasi-bank; and the subsidiaries and affiliates of the lending bank/quasi-bank are
not related interest of any director, officer and/or stockholder of the lending institution, except where such director, officer or
stockholder sits in the BOD or is appointed officer of such corporation as representative of the bank/quasi-bank. As of December
31, 2011 and 2010, 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, as reported to the BSP, 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 subsidiaries and affiliates represent 8.6% and 10.5%, respectively, of the Parent Company’s net worth.
Other related party transactions conducted by the Parent Company in the normal business include the following:
Transactions with Subsidiaries
For the years ended December 31, 2011 and 2010, financial assets at FVPL and AFS investment securities transactions with
subsidiaries include outright sales totaling to 5.8 billion and 3.2 billion, respectively, and outright purchases totaling to 5.7
billion and 3.2 billion, respectively. Gain (loss) on sale of financial assets at FVPL and AFS investments in 2011 and 2010 amounted
to 26.7 million and ( 5.0) million, respectively.
In 2011 and 2010, the Parent Company purchased lease contracts and other loans receivables from ULFC, on a without recourse
basis, with a total price of 570.6 million and 629.6 million, respectively.
The Parent Company has lease agreements with some of its subsidiaries in 2011 and 2010 with aggregate monthly rental of 0.6
million and 0.5 million, respectively and for periods ranging from 1 to 3 years. The lease agreements include the share of the
subsidiaries in the maintenance of the building. The income related to these agreements, is included under Miscellaneous income Rent in the Parent Company’s statements of income.
The account balances with respect to transactions of the Parent Company with its subsidiaries as of and for the years ended
December 31, 2011 and 2010 follow (amounts in thousands):
Related party
USBI
ULFC
USI
UPI
BRC
GHDC
UPI-MHC
UFEC
Nature of Transaction
Loans and receivable
Accounts receivable
Deposit liabilities
Interest income
Interest expense
Rent income
Accounts receivable
Deposit liabilities
Interest income
Interest expense
Rent income
Accounts receivable
Deposit liabilities
Interest expense
Rent income
Deposit liabilities
Interest income
Interest expense
Deposit liabilities
Interest income
Interest expense
Deposit liabilities
Accounts receivable
Deposit liabilities
Interest expense
Deposit liabilities
Interest expense
Elements of Transactions
Statements of Financial
Statements
Position Amounts
of Income Amounts
2011
2010
2011
2010
80,000
3,000
—
—
684
621
—
—
118,558
101,017
—
—
—
—
3,422
—
—
—
157
281
—
—
2,939
2,165
650,250
621,250
—
—
414
255
—
—
95,759
117,628
—
—
—
—
34,263
35,009
—
—
179
282
—
—
3,153
3,531
200
84
—
—
33,888
25,352
—
—
—
—
55
94
—
—
1,260
403
—
346,714
—
—
—
29,870
—
—
—
—
—
326
—
—
—
346
193,714
—
—
—
17,722
90,329
—
—
—
—
14,111
—
—
—
150
—
24,464
1,519
—
—
105,070
145,170
—
—
1,799
31
—
—
—
—
19
—
5,020
5,015
—
—
—
—
72
202
Accounts receivable from UPI-MHC pertains to expenses paid by the Parent Company, which were billed subsequently for
reimbursement.
Transactions with Associates
The account balances with respect to transactions of the Parent Company with its associates as of and for the years ended
December 31, 2011 and 2010 follow (amounts in thousands):
Related party
LOCI
SPMC
SLCOM
Loans receivable
Deposit liabilities
Interest income
Interest expense
Loans receivable
Deposit liabilities
Interest income
Interest expense
Deposit liabilities
Interest expense
Statements
Position Amounts
of Income Amounts
2011
2010
2011
2010
335,117
499,198
—
—
11,373
15,031
—
—
—
—
16,525
23,016
—
—
33
155
—
—
451
265
—
20,055
—
—
22,198
18,437
—
—
—
—
308
1,266
—
—
41
71
—
—
117
99
261
168
—
—
—
—
1
0.7
—
—
8
13
Related party
GMC
UCFDC
Loans receivable
Deposit liabilities
Interest income
Interest expense
Deposit liabilities
Accounts payable
Interest expense
Statements
Position Amounts
of Income Amounts
2011
2010
2011
2010
804,358
679,310
—
—
23,558
6,088
—
—
—
—
20,781
14,673
—
—
71
91
—
—
460
334
337,566
339,801
—
—
24
23
—
—
—
—
66
15,251
The compensation of the key management personnel of the Group in 2011 and 2010 follows:
Short-term employee benefits
Termination benefit
Post-employment benefits
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
ousands)
319,955
300,259
284,389
277,786
18,623
10,172
18,623
10,172
1,455
1,560
—
—
340,033
311,991
303,012
287,958
Transactions with Other Related Party
Loans and receivables from Stephan Philippines, Inc., an affiliate, amounted to 320.7 million and 384.9 million as of December 31,2011
and 2010 , respectively, with related interest income of 6.6 million and 8.0 million in 2011 and 2010, respectively.
27. Trust Operations
Securities and other properties amounting to 95.1 billion and 57.3 billion as of December 31, 2011 and 2010, respectively,
held by the Bank in fiduciary or agency capacity (for a fee) for its customers are not included in the accompanying statements of
financial position since these are not properties of the Bank (see Note 28).
In compliance with the requirements of the General Banking Act relative to the Bank’s trust functions:
a. Investments in government securities with total face value of 907.5 million (included under AFS investments) and 554.0
million (included under HTM investments) as of December 31, 2011 and 2010, repectively, are deposited with the BSP as
security for the Bank’s faithful compliance with its fiduciary obligations; and
b. 10.0% of the Bank’s trust income is transferred to surplus reserve. This yearly transfer is required until the surplus reserve for
trust function is equivalent to 20.0% of the Bank’s authorized capital stock. Income from trust operations is reported net of
the related expenses.
As of December 31, 2011 and 2010, the reserve for trust functions amounted to 117.7 million and is shown as part of Surplus
reserves in the statements of financial position (see Note 24). The amount of surplus for appropriation for 2011 and 2010 in
compliance with BSP requirement amounted to 6.5 million and 4.1 million, respectively. This will be recognized by the Bank
when it has sufficient surplus to cover such appropriation. As of December 31, 2011 and 2010, the cumulative unrecognized
appropriation amounted to 176.2 million and 169.7 million, respectively.
On March 5,1981, the BSP directed the Bank to manage the investments of the CIIF. The Bank, as administrator of the CIIF Fund
through its BOD, had placed the CIIF assets under the management of the Trust Banking Group (TBG).
The Parent Company has investments in LOCI, SPMC, SLCOMI and GMC, herein referred to as CIIF companies, which were
established from the CIIF Fund. The CIIF form part of the CCSF, otherwise known as the coconut levy fund which was created
in 1973 by Presidential Decree No. 276. These CIIF companies have investments in 14 Holding Companies whose funds were
invested in SMC shares that were sequestered by the PCGG in May 1986.
Under Presidential Decree No. 1468 dated June 11, 1978, the Bank was given full power and authority to make investments in the
form of shares of stock in corporations organized for the purpose of engaging in the establishment and the operation of industries
and commercial activities and other allied business undertakings relating to the coconut and other palm oils industry in all its
aspects and the establishment of a research into the commercial and industrial uses of coconut and other palm oil products.
The investments in the 14 Holding Companies, together with those of the other CIIF Oil Mills and Iligan Coconut Industries, Inc.
(ICII), and the loans and advances granted by the CIIF Oil Mills and ICII to the 14 Holding Companies, were used to purchase the
shares of stock in SMC. As of December 31, 2001, the loans and advances granted to the 14 Holding Companies were fully collected.
The Bank and SMC executed and subsequently implemented in 1991, a compromise agreement and amicable settlement
involving the SMC shares of stock held by the 14 Holding Companies. Notwithstanding the implementation of the compromise
agreement and amicable settlement, all the subject SMC shares of stock remain sequestered by the PCGG. Certain parties,
however, filed before the Sandiganbayan their opposition to the implementation of the said agreement. The Bank believes,
however, that there would be no liability that may arise from the above case.
On November 10, 1993, the ROP, acting through the PCGG, filed before the Sandiganbayan a motion for authority to sell all the
14 Holding Companies’ shares of stock of SMC. The proceeds of the sale would then be utilized to pay for the indebtedness of
the CIIF companies to the Bank and any remaining balance thereof would be used for urgently needed projects designed for the
benefit of the coconut farmers and pursuant to the intent of the CIIF. The motion was opposed by certain parties.
On September 27, 1996, the 14 Holding Companies and the Bank, as administrator of the CIIF companies and as then creditor of
the 14 Holding Companies filed a joint motion before the Sandiganbayan and respectfully moved that they be authorized to sell
all the 14 Holding Companies’ SMC class B shares and to buy an equal number of SMC Class A shares. The motion was denied on
December 12, 1997. On January 7, 1998, the 14 Holding Companies and the Bank filed a motion for reconsideration.
On May 7, 1998, in an “en banc” resolution, the PCGG lifted the sequestration of the SMC shares, subject to the approval of
the Sandiganbayan. The lifting of the sequestration on the SMC shares owned by the 14 Holding Companies will enable the CIIF
companies to re-deploy their resources in response to the demands of an ever-changing business environment and to initiate
strategic programs aimed at enhancing the competitiveness of the Philippine coconut industry.
On February 9, 1999, the Sandiganbayan considered the motion dated November 10, 1993 withdrawn without prejudice to
whatever action the parties may take for the revival or resuscitation thereof under such terms which may be appropriate at that
time. On March 12, 1999, certain parties filed a motion for permission to present evidence in relation to their opposition of said
November 10, 1993 motion to sell all the SMC shares.
On November 8, 2000, the President of the Philippines issued Executive Order (EO) No. 313 which:
a. creates an irrevocable trust fund to be known as the Coconut Trust Fund (Trust Fund) to be managed by the Trust Fund
Committee (Trustee);
b. provides that the subject SMC shares shall form part of the initial capital of the Trust Fund;
c. for the purpose of implementing the creation of the Trust Fund, directs the 14 Holding Companies, acting through the
Administrator of the coconut levy fund, to:
• convey the subject SMC shares to the Trustee; and
• sign, execute and deliver such documents, deed or contracts, under such conditions consistent with EO No. 313; and,
d. mandates the PCGG and the Office of the Solicitor General (OSG) to lift the sequestration of the subject SMC shares and take
all the necessary steps to implement its purposes and objectives.
As a first step towards the implementation of EO No. 313, the PCGG adopted resolutions on November 28, 2000, lifting the
sequestration of the subject SMC shares. On January 10, 2001, a Motion to Withdraw Complaint was filed by the PCGG before
the Sandiganbayan requesting for the exclusion of the subject SMC shares from Civil Case No. 0033-F and for the cause of action
against the defendant Cojuangco and the 14 Holding Companies, in connection with the said shares to be considered withdrawn.
As a result of the installation of the new dispensation, on January 30, 2001, a Manifestation and Motion to Hold in Abeyance and
Motion to Withdraw Complaint dated January 10, 2001 was filed before the Sandiganbayan requesting to defer action on the
aforementioned motion until February 25, 2001 or later, for the reason that EO No. 313 is still undergoing review by the Office of
the President for possible amendment, suspension and revocation.
On May 7, 2004, the First Division of the Sandiganbayan resolved the ownership issue through a Partial Summary Judgment. It
declared that the CIIF companies, the 14 Holding Companies and the CIIF block of SMC shares of stock totaling 33,133,266 shares
as of 1983, together with all dividends declared, paid and issued thereon as well as any increments thereto arising from, but
not limited to, exercise of pre-emptive rights are owned by the government in trust for all the coconut farmers and ordered
reconveyance to the government. Further, the Supreme Court ordered that trial of the case to proceed with respect to the
issues which have not been disposed of in this Partial Summary Judgment.
Certain parties filed a Motion for Reconsideration to such Sandiganbayan decision. The motion for reconsideration was denied by
Sandiganbayan on December 28, 2004.
On March 29, 2005, the 14 Holding Companies, as authorized by the PCGG, exercised their pre-emptive rights first on the SMC
“B” shares and thereafter on the SMC “A” shares of SMC’s 10.0% stock offering to the extent of the cash dividends held by the 14
Holding Companies. The 14 Holding Companies subscribed to 27,952,430 Class B shares and 695,641 Class A shares, respectively,
resulting in total shareholdings of 307,395,776 Class B shares and 446,452,536 Class A shares.
On May 10, 2007, the Sandiganbayan granted the defendant Cojuangco Motion for Authority to sell SMC shares. The defendant
Cojuangco manifested that the said shares would be sold to the SMC Retirement Plan. The sale was subsequently consummated
per manifestation of the defendant Cojuangco with a report that the proceeds thereof were applied to the outstanding loan
obligations of the defendant Cojuangco. Subsequent thereto, the Sandiganbayan ruling on the manifestations of the defendant
Cojuangco emphasized the following caveat in the Resolution allowing the sale of the shares, to wit: “This notwithstanding
however, while the Supreme Court exempts the sale from the express condition that it shall be subject to the outcome of the
case, the defendant Cojuangco may well be reminded that despite the deletion of the said condition, they cannot transfer to
any buyer any interest than what they have.”
On May 11, 2007, the Sandiganbayan ruled that the Motion for Partial Summary Judgment dated May 7, 2004 is now deemed a
separate appealable judgment which, at the Sandiganbayan, finally disposes of the ownership of the CIIF Block of SMC shares,
without prejudice to the continuation of proceedings with respect to the remaining claims particularly those pertaining to the
defendant Cojuangco’s block of SMC shares.
On October 11, 2007, the Philippine Coconut Producers Federation, Inc. (Cocofed) filed a Class Action Urgent Application for
Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction to the Supreme Court for the following:
a. Issue a TRO and/or writ of Preliminary Injunction enjoining the ROP, PCGG, the Bank, 14 Holding Companies and the CIIF Oil
Mills, their respective officers, employees, agents and representatives as well as those acting in their stead and under their
directives from using, in any way, the accrued cash dividends on the so-called “CIIF Block” of SMC shares.
b. Direct the ROP to justify to the Supreme Court the reasons why operating losses were incurred this year purportedly
necessitating the use of the dividends of the SMC shares for the normal operations of the CIIF Oil Mills.
On November 28, 2007, the Sandiganbayan ruled that “there is no more issue as to the so-called CIIF Block of SMC shares in view
of the Supreme Court’s Partial Summary Judgment promulgated on May 7, 2004 that was modified on May 11, 2007, where the
Supreme Court declared the said shares to be owned by the government in trust for the coconut farmers”. The Sandiganbayan,
with respect to the 20.0% of the defendant Cojuangco’ block of SMC shares, dismissed the Third Amended Complaint for failure
of the plaintiff (ROP) to prove by preponderance of evidence its causes of action against the defendant Cojuangco.
On July 18, 2008, the Cocofed filed a motion to the Supreme Court of the Philippines to approve the proposed sale of the SMC
shares, under certain terms and conditions set forth. Aside from the said proposal, the said motion also includes the following:
• Ordering of the lifting of the sequestration on those SMC shares so that the buyer of those SMC shares acquire absolute
ownership thereof free of all liens, writs, claims and demands including any and all rights, interest and demands that
Cocofed have or may have under the provisions of Article 1381 and 1385 of the New Civil Code.
• Directing the CIIF Oil Mills and all other party litigants which includes the Bank and 14 Holding Companies; and their respective
directors, officers, employees, agents and all other persons acting in their behalf to perform such acts and execute such
documents as required to effectuate the sale of the SMC shares in accordance with the terms and conditions as set forth in the
motion, and otherwise to comply strictly with the judgment of this Honorable Court approving the sale of the SMC shares.
On February 17, 2009, Cocofed filed a Manifestation regarding withdrawal of offer to purchase SMC shares. Sometime in midJune 2009, the Office of the Solicitor General (OSG) filed its comment to Cocofed’s motion to approve proposed sale of SMC
shares and the manifestation. In the said Comment, OSG prayed that it be allowed to sell the CIIF Block of SMC shares.
On October 5, 2009, all the 753,848,312 SMC common shares were converted into 753,848,312 SMC preferred shares.
On June 18, 2009, the ROP, through the OSG, filed its comment on the Cocofed’s Manifestation regarding withdrawal of offer to
purchase SMC shares dated February 17, 2009, praying that the ROP be allowed to sell the subject CIIF Block of SMC shares.
Exchange Offer to 14 Holding Companies for the Conversion of SMC Common Shares to SMC Series 1 Preferred Shares
On July 24, 2009, Cocofed interposed the Urgent Motion to Approve the Conversion of the SMC Common shares into SMC Series
1 Preferred Shares in response to the Exchange Offer tendered by SMC on the same date. Cocofed sought the Supreme Court’s
approval of the conversion of 753,848,312 class A and class B common shares of SMC registered in the name of the 14 Holding
Companies into 753,848,312 SMC Series 1 Preferred Shares, herein referred to as “the conversion.” Cocofed proposes to
constitute a trust fund to be known as the Coconut Industry Trust Fund for the benefit of the coconut farmers, with the ROP,
acting through the Philippine Coconut Authority, as trustee.
The ROP then filed its comment questioning Cocofed’s personality to seek the Supreme Court’s approval of the desired
conversion, maintaining that the CIIF Block of SMC shares are sequestered assets and in “custodia legis” under PCGG’s
administration. It postulated that, owing to the sequestrated status of the said common shares, only PCGG has the authority to
approve the proposed conversion and seek the necessary Supreme Court approval.
On the preliminary issue as to the proper party to seek the approval on the conversion, the Supreme Court rules that it is
the PCGG, not Cocofed, that is authorized to seek the approval of the Supreme Court of the SMC Series 1 Preferred Shares
conversion. As records show, PCGG sequestered the 753,848,312 SMC common shares registered in the name of the 14 Holding
Companies on April 7, 1986. From that time on, these sequestered shares became subject to the management, supervision, and
control of PCGG, pursuant to EO No. 1, Series of 1986.
The PCGG, thereafter, conducted an in-depth inquiry, thorough study and judicious evaluation of the pros and cons of the
proposed conversion. PCGG took into consideration the following:
• Resolution of the Bank’s BOD, approved during its July 20, 2009 special meeting, where it categorically decided and
concluded that it is financially beneficial to convert the CIIF Block of SMC shares as offered by SMC based on market
conditions at that time.
• Resolution No. 365-2009 of the Bank’s BOD issued on August 28, 2009 reiterating its position that the proposed conversion is
financially beneficial.
• Confirmation of the Department of Finance (DOF), upon the recommendation of the Development Bank of the Philippines
(DBP), that the CIIF Block of SMC shares’ conversion is financially and economically advantageous and that it shall work for
the best interest of the farmers who are the ultimate and beneficial owners of said shares.
• Letter of the OSG dated July 30, 2009 which opined that the proposed conversion is legally allowable as long as PCGG
approval is obtained.
Hence on September 2, 2009 and pursuant to the confirmation of the DOF and legal opinion of the OSG and subject to the
conditions set forth in the said OSG opinion and requests of the OSG to seek the approval of the Honorable Supreme Court for
the said proposed conversion, the PCGG issued Resolution No. 2009-037-756 approving the proposed conversion.
On September 17, 2009, in an “en banc” resolution, the Supreme Court resolved the approval of the conversion of the
753,848,312 SMC common shares registered in the name of the 14 Holding Companies to 753,848,312 SMC Series 1 Preferred
Shares, the converted shares to be registered in the name of the 14 Holding Companies in accordance with the terms and
conditions specified in SMC’s Exchange Offer. The resolution was arrived in light of the succeeding findings:
• It is a sound business strategy to preserve and conserve the value of the government’s interests in CIIF SMC shares.
Preservation is attained by fixing the value today at a significant premium over the market price and ensuring that such value
is not going to decline despite negative market conditions. Conservation is realized through an improvement in the earnings
value via the 8.0% per annum dividends versus the uncertain and most likely lower dividends on common shares.
• A fixed dividend rate of 8.0% per annum translates to 6.0 per preferred share or a guaranteed yearly dividend of 4.5 billion
for the entire sequestered CIIF SMC shares, which is estimated to increase annual dividend earnings by about 77.0%. With the
bold investments of SMC in various lines of business, there is no assurance of substantial earnings in the coming years. There
may even be no earnings. The modest dividends that accrue to the common shares in the recent years may be a thing of the
past and may even be obliterated by poor or unstable performance in the initial years of operation of newly-acquired ventures.
Moreover, the conversion may be viewed as a sound business strategy to preserve and conserve the value of the government’s interests
in the CIIF Block of SMC shares. Preservation is attained by fixing the value today at a significant premium over the market price and
ensuring that such value is not going to decline despite negative market conditions. Conservation is realized through an improvement
in the earnings value via the 8.0% per annum dividends versus the uncertain and most likely lower dividends on common shares.
Moreover, the Supreme Court resolved that the SMC Series 1 Preferred Shares shall remain in “custodia legis” and their ownership
shall be subject to the final ownership determination of the Supreme Court. Until the ownership issue has been resolved, the
preferred shares in the name of the 14 Holding Companies shall be placed under sequestration and PCGG management. The PCGG
has powers to protect and preserve the sequestered preferred shares even if there are no government-nominated directors in the
BOD of SMC. The Supreme Court further ordered that the net dividend earnings and/or redemption proceeds from the SMC Series
1 Preferred Shares shall be deposited in an escrow account with the Land Bank of the Philippines (LBP) or DBP.
On October 5, 2009, the completion of the share exchange was executed. The CIIF Block of SMC shares, made up of 446,452,536 class A
shares and 307,395,776 class B shares, were converted into SMC preferred shares through a block sale at the Philippine Stock Exchange, Inc.
The 14 Holding Companies received a total of 753,848,312 Series 1 Preferred Shares from SMC for which stock certificates were issued.
The SMC preferred shares are perpetual, cumulative, non-voting shares and were listed on the PSE on September 9, 2010. The
SMC Series 1 Preferred Shares are redeemable at the option of SMC, starting on the third anniversary from the issue date (the
optional redemption date) or any dividend payment date thereafter, at a redemption price equal to the issue price of the shares
plus accrued and unpaid dividends. The BOD of SMC shall have the sole discretion to declare dividends on these shares.
On October 6, 2009, the Bank filed a Motion for Leave to Intervene and to File and Admit Attached Motion for Partial
Reconsideration regarding the resolution dated September 17, 2009, praying that the September 17, 2009 resolution be partially
reconsidered, by directing the deposit of the net dividend earnings on, and/or redemption proceeds from the SMC Series 1
Preferred Shares in a trust account with the Bank, in the name of the ROP, represented by the PCGG in-trust-for the 14 Holding
Companies, as provided for by Presidential Decree 1468.
On November 9, 2009, PCGG received an offer from Fortman Cline Capital Markets Limited to acquire/purchase the 753,848,312
SMC Series 1 Preferred Shares for 75.0 per share or for an aggregate amount of 56.5 billion. In view of this, the ROP, acting
through the PCGG, filed before the Supreme Court a Motion to Approve Sale of CIIF SMC Series 1 Preferred Shares on November
16, 2009. The said motion includes the following:
• the Honorable Supreme Court allow the respondent the ROP, through the PCGG, to sell the subject SMC Series 1 Preferred
Shares and that the proceeds of said sale be deposited in an escrow account; and
• the Honorable Supreme Court make a final determination as to the ownership of the subject shares and adjudge the ROP as
the owner of said shares in trust for all the coconut farmers.
On November 16, 2009, the ROP, represented by the PCGG, filed a Motion to Approve Sale of CIIF SMC Series 1 Preferred Shares
before the Supreme Court, praying that the Supreme Court allow the ROP, through the PCGG, to sell the subject CIIF SMC Series
1 Preferred Shares and that the proceeds of said sale be deposited in an escrow account; and make a final determination as to
the ownership of the subject shares and adjudge the ROP as the owner of the said shares in trust for all the coconut farmers.
On February 11, 2010, the Supreme Court resolved to:
a. Deny for lack of merit the Motion for Reconsideration dated October 7, 2009 filed by oppositors-intervenors (Jovito R.
Salonga, Wigberto E. Tañada et. al.); and the Motion to Admit Motion for Reconsideration regarding the conversion of SMC
Shares dated October 16, 2009 filed by movants-intervenors Wigberto Tañada et. al.
b. Partially grant the Motion for Leave to Intervene and to File and Admit Attached Motion for Partial Reconsideration dated
October 5, 2009, and the Motion for Partial Reconsideration dated October 6, 2009 filed by movant-intervenor the Bank.
c. Amend its Resolution dated September 17, 2009 to give to the PCGG the discretion in depositing on escrow the net dividend
earnings on, and/or redemption proceeds from, the Series 1 Preferred Shares of SMC, either with the DBP or LBP or with the
Bank, having in mind the greater interest of the government and the coconut farmers.
On September 28, 2010, the Supreme Court issued a temporary restraining order enjoining the Republic through the PCGG, from
releasing the cash dividends on the SMC preferred shares to the accounts of the 14 holding companies and using the same.
On April 12, 2011, the Supreme Court declared that the block of shares in San Miguel Corporation in the names of respondents
Cojuangco, et al. is the exclusive property of Cojuangco, et al. as registered owners. Accordingly, the lifting and setting aside
of the Writs of Sequestration affecting said block of shares are affirmed; and the annotation of the conditions prescribed in the
Resolutions promulgated on October 8, 2003 and June 24, 2005 is cancelled.
On January 24, 2012, the Supreme Court declared that the CIIF block of San Miguel Corporation (SMC) shares of stock totaling
33,133,266 shares as of 1983 together with all the dividends declared, paid and issued thereon as well as any increments
thereto arising from, but not limited to, exercise of pre-emptive rights are declared owned by the government to be used
only for the benefit of all coconut farmers and for the development of the coconut industry and ordered reconveyed to the
government. The court affirms the resolutions issued by the Sandiganbayan on June 5,2007, that there is no more necessity of
further trial with respect to the issue of ownership of (i) the sequestered UCPB shares, (ii) the CIIF block of SMC shares, and (iii)
the CIIF companies as they have been finally adjudicated in the Partial Summary Judgment dated July 11, 2003 and May 7, 2004.
On February 14, 2012, Cocofed et. al., filed a Motion for Reconsideration on the decision rendered by the Supreme Court on
January 24, 2012, citing certain substantial and grave errors of fact.
As at March 29, 2012, the Supreme Court has not yet granted the motion filed by Cocofed et.al.
28. Commitments and Contingent Liabilities
In the normal course of the Group’s operations, there are various outstanding commitments and contingent liabilities which are
not reflected in the accompanying financial statements. The Group recognizes in its books any losses and liabilities incurred in
the course of its operations as soon as these become determinable and quantifiable. No material loss or liability is anticipated to
be recognized in the accompanying financial statements as a result of these commitments and transactions.
The following is a summary of contingencies and commitments at their peso-equivalent contractual amounts arising from offbalance sheet items:
Trust department accounts (Note 27)
Spot exchange bought
Standby LC
Sight import LC outstanding
Spot exchange sold
Usance import LC outstanding
Outward bills for collection
Others
Consolidated
Parent Company
2011
2010
2011
2010
(In
n Thousands)
95,056,740
57,340,514
95,056,740
57,340,514
2,148,160
335,175
2,148,160
335,175
1,781,271
1,532,715
1,781,271
1,532,715
1,282,846
734,802
1,282,846
734,802
920,640
861,910
920,640
861,910
341,424
580,063
341,424
580,063
136,741
210,350
136,741
210,350
4,993,428
3,602,501
4,903,461
3,509,089
The Group received various letter notices and preliminary assessment notices from the Bureau of Internal Revenue (BIR) for
taxable years 1998 to 2002. The Group, and all other banks with FCDU operations, was assessed for FCDU’s GRT and DST. The
assessments were protested on the basis of their legality. Compromise settlements were made with the BIR and the Group is
still waiting for the issuance of clearances.
The Group is defendant in various cases pending in courts for alleged claims against the Group, the outcome of which are not
fully determinable at present. However, in the opinion of the Group’s management, the liabilities or losses, if any, arising from
these claims is not material and should be recorded upon their final determination.
29. 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 each segment representing a strategic business unit. The Group derives revenues from the
following main operating business segments:
The Branch Banking Group oversees the operation of the Group’s branches and ATM networks, which are the primary sales and
distribution platforms for products and services. Its primary tasks are to solicit deposits; cross-sell and distribute all of the group’s
products and services, as allowed by regulation; generate sales leads for specialized products; and manage customer relationships.
Corporate and Consumer Banking Group
The Corporate and Consumer Banking Group (CCBG) manages the Group’s loan portfolio. It has a Consumer Banking Division
to handle the consumer loan market, a Corporate and Commercial Banking Division to handle the corporate and institutional
loan markets, and a Remittance Marketing Division for the overseas remittance market. Apart from credit lines, the Corporate
and Commercial Banking Division also provides transactional banking, trade finance, foreign exchange, trust banking, financial
advisory and capital markets solutions to its corporate and institutional clients.
The CCBG also oversees the Group’s equity brokerage business through USI and the Group’s lease financing business through ULFC.
Treasury Group
The Treasury Group (TG) manages the Group’s assets and liabilities. Working with the Asset and Liability Committee, TG
recommends the pricing strategy for deposits and loans to ensure that deposit-taking units offer competitive yields to generate
the funding requirements of the Group, and the lending units, in turn, offer rates that will attract the targeted borrowers. In
addition, the TG manages the regulatory reserve requirements of the Group as well as ensures its liquidity position. The TG also
engages in fixed income securities and foreign exchange trading.
USB
The Group considers USB as one operating business segment. USB manages the Group’s consumer loan market particularly
focusing on public school teachers and employees of local government units. USB also provides services such as deposit-taking,
domestic fund transfers and treasury.
Other Segments - this includes other segments that provide support to the Group’s core activities.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on net income before income tax, which is
measured in a manner consistent with that in the statement of income.
Segment assets are those operating assets that are employed by a segment in its operating activities and are either directly
attributable to the segment or can be allocated to the segment on a reasonable basis.
Segment liabilities are those operating liabilities that result from the operating activities of a segment and are either directly
attributable to the segment or can be allocated to the segment on a reasonable basis.
The Group’s assets producing revenues are located in the Philippines (i.e., one geographical location), therefore, geographical
segment information is no longer presented.
The Group has no significant customers which contribute 10.00% or more of the consolidated revenue, net of interest expense.
Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in operating income. Interest
charged for these funds is based on the Group’s cost of capital. There are no other material items of income or expense
between business segments.
Segment information as of December 31, 2011 and 2010 follow:
BBG
Interest income
Interest expense
Net interest income (expense)
Provision for (reversal of) credit
and impairment losses
after depreciation and impairment
Other income
Other expenses
Net income or loss before income tax
Provision for income tax
Net income or loss for the year
Total assets
Total liabilities
40,020
(1,896,130)
(1,856,110)
(199,730)
—
CCBG
4,219,138
(63,833)
4,155,305
(50,356)
2011
Treasury Other Segments
(In Thousands)
4,401,272
23,531
(818,394)
—
3,582,878
23,531
—
(243,819)
(481,982)
(15,443)
(2,055,840)
929,385
(741,692)
(1,868,147)
—
( 1,868,147)
3,622,967
285,620
(123,178)
3,785,409
(4,122)
3,781,287
3,567,435
657,264
(88,199)
4,136,500
—
4,136,500
136,424,795
153,026,133
9,595,867
4,232,622
38,234,571
20,525,389
75,128
(145,160)
1,314,726
(3,676,337)
(2,506,771)
(725,120)
( 3,231,891)
11,742,436
392,870
USB
Total
782,526
(82,312)
700,214
(36,342)
9,466,487
(2,860,669)
6,605,818
(530,247)
(49,675)
(471,972)
614,197
167,872
(417,136)
364,933
(130,411)
234,522
5,603,599
3,354,867
(5,046,542)
3,911,924
(859,653)
3,052,271
6,684,453
200,471,438
4,673,655 182,849,986
BBG
Interest income
Interest expense
Provision for (reversal of) credit
and impairment losses
after depreciation and impairment
Other income
Other expenses
Net income or loss before income tax
Provision for income tax
46,846
(2,162,610)
(2,115,764)
(146,709)
—
(2,262,473)
315,996
(716,066)
(2,662,543)
(36)
CCBG
2010
Treasury Other Segments
3,693,309
(32,503)
3,660,806
(23,879)
(In Thousands)
4,418,094
22,934
(407,871)
(61,889)
4,010,223
(38,955)
—
(218,508)
(600,000)
—
3,036,927
503,188
(165,827)
3,374,288
(7,913)
4,010,223
774,969
(121,221)
4,663,971
(605,562)
USB
Total
602,828
(74,090)
528,738
(32,551)
8,784,011
(2,738,963)
6,045,048
(421,647)
(678,178)
(23,046)
(1,301,224)
(935,641)
1,332,549
(2,939,321)
(2,542,413)
(46,194)
473,141
197,258
(311,852)
358,547
(89,502)
4,322,177
3,123,960
(4,254,287)
3,191,850
(749,207)
Net income or loss for the year
( 2,662,579)
3,366,375
4,058,409
( 2,588,607)
269,045
2,442,643
Total assets
Total liabilities
142,048,743
145,120,901
6,024,583
1,194,224
20,426,365
15,956,982
9,352,110
2,613,964
5,930,940
4,201,570
183,782,741
169,087,641
30. Financial Performance
The following basic ratios measure the financial performance of the Group and the Parent Company before the effects of the
adjustments related to the exceptions discussed in the Statement of Compliance under Note 2 to the financial statements for
the years ended December 31, 2011 and 2010 (amounts in thousands except for the ratios):
Return on average equity (a/b)
a. Net Income
b. Average Equity
Consolidated
2011
2010
19.5%
18.1%
3,059,660
2,449,719
15,691,771
13,571,642
Parent Company
2011
2010
30.8%
27.4%
2,106,520
1,438,425
6,842,083
5,243,923
Return on average assets (c/d)
c. Net Income
d. Average Total Assets
1.6%
3,059,660
186,948,683
1.4%
2,449,719
173,294,201
1.2%
2,106,520
177,931,399
0.9%
1,438,425
160,620,503
Net interest margin (e/f)
e.Net Interest Income
f. Average Earning Assets
4.7%
6,605,818
140,741,299
4.6%
6,045,048
130,984,480
4.0%
5,753,871
142,232,458
4.3%
5,367,051
124,763,579
31. Components of Other Comprehensive Income
Other comprehensive income consists of:
Consolidated
Parent Company
2011
2010
2011
2010
(In Thousands)
Net unrealized gains (losses) on AFS investment, net of tax:
Changes in fair value
Changes in fair value taken to profit or loss
Changes in fair value attributable to non-controlling interest
Cumulative translation adjustment
Net unrealized gain on AFS investments of associates
Translation adjustment of an associate
595,709
(212,072)
13
383,650
64,783
258
1
778,590
(653,099)
56
125,547
(37,183)
234
(328)
587,921
(210,754)
—
377,167
64,783
—
—
759,213
(639,532)
—
119,681
(37,183)
—
—
448,692
88,270
441,950
82,498
32. 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 Parent
Company’s BOD on March 29, 2012.
33. Supplementary Information Required Under Revenue Regulations Nos. 19-2011 & 15-2010
Supplementary Information Required Under Revenue Regulations Nos. 19-2011
Effective taxable year 2011, the Bureau of Internal Revenue through Revenue Regulations No. 19-2011, mandated the use of the
new Income Tax Forms.
To support the computation of tax the Parent Company reported the following in its Annual Income Tax Return for 2011 under
Regular/ Normal Rate:
Interest Income
RBU
FCDU
(In Thousands)
Loans and Receivable
Trading and investment securities
Due from BSP and other banks
Total
Direct Costs of Service:
4,396,883
55,782
1,749
229,661
4,684,075
—
—
—
—
—
RBU
FCDU
(In Thousands)
Interest expense
Salaries and wages and other contributions
Supervision and Examination Fees
Insurance Expense – PDIC
Total
Other Taxable Income:
1,436,380
573,138
52,495
230,460
2,292,473
—
35,142
1,879
12,390
49,411
RBU
FCDU
(In Thousands)
Trading gain
Service charges and fees
Foreign exchange gain
Gain on asset sold/exchange
Miscellaneous
Total
Regular Allowable Itemized Deductions
Compensation and employee benefits
Taxes & licenses
Occupancy expense
Rent expense
Power, light, water
Repairs & maintenance
Depreciation expense
Amortization
Security, messengerial & janitorial
Litigation expense
Insurance expense
Computer-related expense
IT expenses
Miscellaneous expense
Loss on sale of ROPA
Telephone and postage
Travelling expense
Management & other professional fee
Stationery and supplies
Representation and entertainment
Fuel and lubricant
Advertising and publicity
Fees and commission expense
Freight expense
Director’s fees
Membership fees
Periodicals and magazines
Fines and penalties
Miscellaneous
Total
78,071
522,500
123,417
36,871
77,133
271,929
1,109,921
—
25,492
—
1,069
—
2,387
28,948
RBU
623,032
546,416
FCDU
(In Thousands)
38,201
—
260,233
124,847
58,099
14,277
7,655
3,561
290,596
80,747
306,554
77,999
40,658
17,558
4,951
13,325
—
2,395
26,382
1,618
280,880
103,849
79,721
70,336
61,646
57,940
56,651
26,448
26,388
13,385
9,146
7,761
648
247
136,155
3,366,764
—
6,367
4,414
1,222
3,774
3,638
3,305
1,616
1,979
779
422
—
40
—
1,567
132,664
Supplementary Information Required Under Revenue Regulations Nos. 15-2010
On November 25, 2010, the Bureau of Internal Revenue issued Revenue Regulations
(RR) 15-2010 to amend certain provisions of RR 21-2002. The Regulations provide that starting 2010, the notes to financial
statements shall include information on taxes and licenses paid or accrued during the taxable year.
The Parent Company reported and/or paid the following types of taxes for 2011:
Gross receipt tax
Under the Philippine tax laws, financial institutions are subject to percentage and other taxes as well as income taxes.
Percentage and other taxes paid by the Parent Company consist principally of GRT and DST.
Details of the Parent Company’s income and GRT accounts in 2011 are as follows:
Interest income
Other income
Gross receipts
GRT
(In Thousands)
6,893,575
316,430
1,387,834
97,148
8,281,409
413,578
Other taxes and licenses
In 2011, other taxes and licenses of the Parent Company consist of:
Documentary stamps tax*
Fringe benefit tax
Local taxes
Others
Amount
(In Thousands)
403,566
15,966
18,563
38,615
476,710
*Includes DST charged to the Parent Company’s clients/customers
Withholding taxes
Details of total remittances in 2011 and balance of withholding taxes as of December 31, 2011 are as follows:
Interest income
Withholding taxes on compensation and benefits
Expanded withholding taxes
Total remittances
Balance
(In Thousands)
309,486
28,648
178,609
13,002
55,469
4,445
543,564
46,095
Tax Assessments and Cases
As of December 31, 2011, the Parent Company has an ongoing case with the Supreme Court on FCDU GRT.
Branches
and Subsidiaries
(as of May 2012)
REGIONAL OFFICES
EAST METRO MANILA REGION
UCPB Bldg., 358 Shaw Blvd.,
Mandaluyong City
(02) 533-4801; 534-1130
(02) 727-3145 (fax)
NORTH METRO MANILA REGION
UCPB Bldg. 725 Aurora Blvd.
New Manila, Quezon City
(02) 584-9708 to 09; 410-6525
(02) 414-7764 (fax)
SOUTH METRO MANILA REGION
G/F, UCPB Corporate Offices
7907 Makati Ave., Makati City
(02) 811-9224; 811-9226
(02) 811-9227 (telefax)
WEST METRO MANILA REGION
Upper G/F Torre Lorenzo Bldg.,
Taft Avenue corner P. Ocampo St.,
Malate, Manila
(02) 522-0563; 521-8397
(02) 5215667
(02) 521-9436 (fax)
NORTH-CENTRAL LUZON REGION
2/F UCPB Bldg., Sto. Rosario corner
Plaridel Sts., Angeles City
(045) 625-9230
(045) 887-2156 (fax)
SOUTH LUZON REGION
UCPB Bldg., Quezon Avenue
and Leon Guinto St.,Lucena City
(042) 373-6821
(042) 710-2303 (telefax)
VISAYAS REGION
2/F UCPB Bldg., Jones Ave.,
Osmeña Blvd., Cebu City
(032) 253-3798; 255-2547
(032) 253-0344 (fax)
MINDANAO REGION
UCPB Bldg., R. Magsaysay corner
Sales Sts., Davao City
(082) 224-3158; 221-2696
(082) 300-3658 (fax)
METRO MANILA
CALOOCAN CITY
10th Ave. Caloocan
10th Ave., cor. A. Mabini St.
(02) 310-5090; 310-5091
(02) 310-5093
Caloocan
283 EDSA corner Gen. Tinio St.,
Morning Breeze Subdivision
(02) 361-9779; 361-9729
(02) 366-0428 (fax)
Grace Park
Solid Tech Services Bldg.,
205 Rizal Ave., Ext. corner 6th Ave.
(02) 365-7305 to 07
(02) 365-7303
(02) 362-1266 (fax)
LAS PIÑAS
Las Piñas
URCI Townhomes, Alabang-Zapote Rd.
Pamplona 3
(02) 871-1883; 871-2961; 874-4477
(02) 873-2896 (fax)
Zapote
UCPB Bldg., Real St. Zapote
(02) 873-0939; 873-0207
(02) 873-9236; 871-2877
(02) 873-0217 (fax)
MAKATI
Aguirre
PET Bldg., 114 Aguirre St., Legaspi Village
(02) 892-3778; 817-8217; 817-0604
(02) 892-3757 (fax)
Ayala Avenue
G/F Ayala Life - FGU Center,
6811 Ayala Avenue
(02) 845-1630; 845-1240
(02) 845-0810; 845-0724
(02) 845-1265 (fax)
Chino Roces
Alegria Bldg., 2229 Chino Roces Ave.
(02) 816-4675; 819-1223
(02) 893-1657 (fax)
Dela Rosa
Asian Mansion I Building,
109 Dela Rosa St., Legaspi Village
(02) 894-4445; 812-8433
(02) 810-0069; 810-0076
(02) 815-2163 (fax)
Guadalupe
Tan Hock Bldg., P. Burgos corner
EDSA, Guadalupe Nuevo
(02) 882-0364; 882-4311 to 12
(02) 882-4577 (fax)
Herrera
G/F Coherco Corporate Center
116 V.A. Rufino St., Legaspi Village
(02) 813-2990; 813-2992; 813-1136
(02) 811-9086 (fax)
J.P. Rizal
905 J.P. Rizal St. corner Santiago St.,
Brgy,. Poblacion
(02) 897-0020; 899-7235 to 37
(02) 757-1019
(02) 899-7236 (fax)
Main Office
G/F UCPB Corporate Offices,
7907 Makati Avenue
(02) 811-9889; 811-9243
(02) 811-9205; 811-9523
(02) 811-9222 / 811-9068 (fax)
Makati Avenue
Upper G/F Tower A Somerset Olympia
Condominium, Makati Ave. corner
Sto. Tomas St., Urdaneta Village
(02) 892-1511 to 14
(02) 818-8222
(02) 813-2288 (fax)
Marvin Plaza
Marvin Plaza Bldg., Don Chino Roces Ave.
(02) 893-0480; 840-3502
(02) 893-0485 (fax)
Metropolitan Avenue
1046 Bormaheco Condominium,
Metropolitan Ave.
(02) 899-4128; 897-1647; 899-0946
(02) 899-1751 (fax)
Pasay Road
G/F Ginbo Bldg., 824 Arnaiz Ave.,
San Lorenzo Village, Pasay Road
(02) 813-6501; 813-6483
(02) 818-3103; 818-8101
(02) 813-6497 (fax)
Pasong Tamo Extension
2295 Jannov Plaza, Pasong Tamo Ext.
(02) 893-1586; 810-5805
(02) 810-5684; 810-5593
(02) 892-5169 (fax)
Puyat Bautista
Majalco Bldg., Gil Puyat Ave.
and Bautista St., Palanan
(02) 815-1324 to 26; 887-6306
(02) 893-2852 (fax)
Reposo-J.P. Rizal
G/F Margarita Bldg., 748 JP Rizal St.
Brgy. Poblacion
(02) 553-0393 to 95; 553-0396
Salcedo
Philcox Bldg., 172 Salcedo St.,
Legaspi Village
(02) 810-7166 to 67; 892-6916
(02) 894-0430 (fax)
Tordesillas
G/F Tower A, Three Salcedo Place Condo,
102 Tordesillas St., Salcedo Village, Brgy. Bel-Air
(02) 843-4022 to 23
(02) 843-4024 (fax)
Valero
G/F Antel 2000 Corporate Center,
121 Valero St., Salcedo Village
(02) 887-5255 to 57
(02) 887-5258 (fax)
MALABON
Malabon
153 M.H. Del Pilar cor.
Gov. A. Pascual, Tinajeros
(02) 352-4776; 352-6119
(02) 794-7818
(02) 442-6900 (fax)
MANDALUYONG
P. Paterno
713 P. Paterno St., Quiapo, Manila
(02) 733-4239; 733-4941
(02) 733-4225 (fax)
San Andres
G/F Marc 2000 Tower, 1973 Taft Ave.
corner San Andres St., Malate
(02) 524-5426; 524-8116; 523-0125
(02) 524-8107 (fax)
Soler
Aceada Bldg., 949-951 Soler St.,
Binondo, Manila
(02) 245-0216; 245-0016; 243-2171
(02) 245-0011 (fax)
T.M. Kalaw
G/F Traveller’s Life Bldg., 490 T.M.
Kalaw corner Cortada St. Ermita
(02) 522-4775; 522-0746; 524-6115
(02) 524-0504 (fax)
Boni Avenue
G/F Jemtee Bldg 677 Boni Avenue
corner Aliw St.
(02) 533-7651 to 53; 532-2315
(02) 532-1944 (fax)
Tomas Mapua
Hian Chiong Building., 725 Tomas
Mapua St., Sta. Cruz
(02) 733-3367; 734-3158; 734-2448
(02) 733-3359 (fax)
Kalentong
214 Romualdes corner Kalentong Sts.,
Mandaluyong City
(02) 532-0771; 718-0246; 217-6552
(Globe duo)
(02) 531-0959 (fax)
U.N. Avenue
Medical Center Manila Bldg., U.N.
Ave., corner Gen. Luna St., Ermita
(02) 521-3089; 521-3091; 522-4786
(02) 521-3090 (fax)
MARIKINA
Mandaluyong
UCPB Bldg., 358 Shaw Boulevard
(02) 727-5233; 727-1842; 725-1970
(02) 726-2192 (fax)
Robinsons Galleria
G/F Galleria Corporate Center,
EDSA corner Ortigas Avenue
(02) 633-4951; 637-1688
(02) 632-9550 (fax)
Shangri-la Plaza
1st Level Shangri-la Plaza Mall,
EDSA corner Shaw Blvd.,
(02) 633-9276 to 79
(02) 634-3183 (fax)
MANILA
Binondo
509-513 Q. Paredes St., Binondo
(02) 242-5666; 242-5961 to 62
(02) 242-5665 (fax)
Elcano
601-603 Elcano corner
San Nicolas Sts., Binondo
(02) 242-9307; 244-4251 to 53
(02) 242-9405 (fax)
Escolta
G/F FUB Bldg., David corner
Escolta Sts., Sta. Cruz
(02) 243-1326 to 29
(02) 241-4869 (fax)
Juan Luna
G/F First Binondo Center Bldg.,
524 Juan Luna St., Binondo
(02) 243-1980; 243-1982; 353-2451
(02) 243-1981 (fax)
Malate
Unit G4 1322 Golden Empire Tower,
Roxas Blvd. corner Padre Faura, Ermita
(02) 526-5070; 526-7452 to 53
(02) 526-7455 (fax)
Ongpin
839-843 Ongpin St., Sta. Cruz, Manila
(02) 735-7583; 735-6587; 735-8928
(02) 735-7768 (fax)
P. Ocampo
Upper G/F Torre Lorenzo Bldg.,
Taft Avenue corner P. Ocampo St.
(02) 536-3119; 536-3120; 523-1910
(02) 523-1766 (fax)
Concepcion
David Bldg., Bayan-Bayanan Ave.,
Concepcion Uno
(02) 942-2328 to 29
(02) 948-4020 (fax)
Marikina
20 Sumulong Highway, Sto. Niño
(02) 646-2035; 646-9639; 646-9641
(02) 646-9640 (fax)
MUNTINLUPA
Alabang
G/F Unit 102 Civic Prime Bldg.,
2501 Civic corner Market Drive
Filinvest Corp. City, Alabang
(02) 846-7445 to 46
(02) 856-4294 (fax)
Madrigal
G/F Richville Corporate Center
1314 Commerce Ave. Ext.,
Madrigal Business Park, Ayala-Alabang
(02) 807-2927 to 29; 807-6002
(02) 807-2930 (fax)
Muntinlupa
G/F Elizabeth Center Bldg.,
National Road, Putatan
(02) 862-0025 to 26; 861-1918
(02) 862-0027 (fax)
NAVOTAS
Navotas
Lot 1 Lapu-Lapu Ave., corner
North Bay Blvd., Kaunlaran Village
(02) 355-5588; 282-3881; 281-9466
(02) 282-3880 (fax)
PARAÑAQUE
Aquino
G/F Skyfreight Bldg., Aquino Ave., NAIA
(02) 854-5292; 854-5161; 854-5428
(02) 854-5689 (fax)
BF Parañaque
EJV Building, 21 Aguirre Ave., BF Homes
Commercial Center, Parañaque City
(02) 836-4945; 836-4937;836-4916
(02) 836-4946 (fax)
Baclaran
UCPB Bldg., 4010 Airport Road
(02) 853-9746 to 47; 851-0147
(02) 852-1251 (fax)
Branches
and Subsidiaries
(as of May 2012)
Bicutan
J&M Mendoza Bldg., Doña Soledad
Ave. corner Argentina St., Betterliving
Subd., Parañaque City
(02) 824-3337; 823-5260
(02) 821-9774 (fax)
Sucat
8415 Dr. A. Santos Ave (formerly
Sucat Road) Brgy. San Antonio, Sucat
(02) 825-0839
(02) 829-2517
(02) 825-0841 (fax)
PASAY CITY
F.B. Harrison
AIMS Bldg., A. Arnaiz Avenue corner
F.B. Harrison St.
(02) 831-0838; 831-5790; 831-5812
(02) 833-2919 (fax)
Malibay
G/F Commercial Bldg. 715 EDSA, Malibay
(02) 889-9467 to 69
(02) 844-3644 (fax)
PASIG
Hanston Square
G/F Hanston Square Bldg.,
17 San Miguel Ave. Ortigas Center
(02) 706-0937 to 39
(02) 706-0434 (fax)
Ortigas
G/F Emerald Bldg.,14 F. Ortigas Jr.
Road, Ortigas Business Center
(02) 636-0680; 631-6415 to 18
(02) 631-6413 (fax)
Pasig
UCPB Bldg., 12 Dr. Sixto Antonio
Avenue, Kapasigan
(02) 641-0336; 641-0338; 641-0498
(02) 641-3451 (fax)
Batasan
Sweet Haven Square Bldg., Commonwealth
Ave. corner Villongco St.,
(02) 430-9066; 951-0188; 951-7252
(02) 951-1998 (fax)
Roosevelt Avenue
Tres Hermanas, Inc. Bldg.,
Roosevelt corner Quezon Avenue
(02) 372-4740 to 41; 412-2193
(02) 372-4739 (fax)
Blue Ridge
UCPB Bldg., 190 Katipunan Ave.
corner Raja Matanda St., Blue Ridge A
(02) 647-1089; 647-1515
(02) 647-1499 (fax)
Tomas Morato
F.C. Bldg., 290 Tomas Morato Ave.
(02) 922-1694; 924-7505 to 06
(02) 924-6783 (fax)
Bohol Avenue
UCPB Bldg., Sgt. Esguerra St. corner
Quezon Avenue, South Triangle
(02) 926-7626; 927-5606; 927-5607
(02) 922-2098 (fax)
Cambridge
Coronet Bldg., Cambridge St. corner
Aurora Blvd.
(02) 912-2339 to 40; 911-4825; 437-9463
(02) 912-2341 (fax)
Commonwealth Avenue
UCPB Bldg.,125 Commonwealth Ave., Diliman
(02) 931-9395 to 96
(02) 931-0471 (fax)
Del Monte-Bonifacio
161 Del Monte Avenue
(02) 367-0072; 415-2792 to 93
(02) 367-0073 (fax)
Diliman
J&L Bldg., 23 Matalino St.,
Brgy. Central, Diliman
(02) 921-6217; 921-9688; 921-3175
(02) 922-1030 (fax)
E. Rodriguez
2 Judge Jimenez St. corner
E. Rodriguez Sr. Ave., Brgy
Pinagkaisahan, Cubao
(02) 726-8649; 726-1063; 722-4847
(02) 726-1067 (fax)
Pioneer
San Buena Bldg., 9 Shaw Blvd.
corner Pioneer St.
(02) 631-3261 to 62
(02) 631-3271 (fax)
Lagro
St. Andrew Bldg., Quirino Highway
Lagro, Novaliches
(02) 930-7291; 930-7293; 930-7279
(02) 930-7276 (fax)
San Miguel
Unit D G/F San Miguel Properties
Center, St. Francis Avenue,
Ortigas Center, Mandaluyong City
(02) 632-0855 to 57; 634-3380
(02) 632-0862 (fax)
Loyola Heights
SMRC Bldg., Katipunan Ave., Loyola
Heights
(02) 927-6672 to 75; 937-6650; 927-6693
(02) 433-4308 (fax)
Tektite
G/F West Tower, Philippine Stock Exchange
Center, Exchange Rd., Ortigas Center
(02) 638-6756; 638-6758
(02) 638-6759 (fax)
QUEZON CITY
Acropolis
Units 5-7 Village Center 187 E. Rodriguez
Jr. Ave., Bagumbayan, Acropolis
(02) 635-6872; 438-1177
(02) 655-4614 (fax)
Anonas
Hi-Top Supermart, Aurora Blvd. corner
F. Castillo St., Proj. 4, Quezon City
(02) 421-0753 to 54; 799-2485; 799-2383
(02) 913-8301 (fax)
Araneta Avenue
Doña Nena Bldg., 425 Araneta Avenue
corner Bayani St.
(02) 732-9087; 713-1838
(02) 731-2260 (fax)
Aurora Boulevard
UCPB Bldg., 725 Aurora Blvd., New Manila
(02) 584-9752 to 55; 410-6224
(02) 584-9751 (fax)
Banaue
PPSTA Dormitory Bldg., 245 Banaue St.
(02) 732-5131; 732-5132; 712-6388
(02) 732-5138 (fax)
Mindanao Avenue
UCPB Bldg., 14 Mindanao Ave.,Dominic
Subdivision, Brgy. Tandang Sora
(02) 453-8616; 929-3718
(02) 983-9477 (fax)
Muñoz
304 Roosevelt Ave., corner M.H. del
Pilar St., San Francisco del Monte
(02) 372-2421; 372-2422; 411-5173
(02) 372-2423 (fax)
New Manila
Cortes Bldg., 958 E. Rodriguez Sr. Ave.
(02) 722-5474; 722-4714; 721-8104
(02) 721-8658 (fax)
Novaliches
UCPB Bldg., 937 Quirino Highway
(02) 939-5590; 419-1609; 935-4713
(02) 939-6435 (fax)
P. Tuazon
STG Bldg., 190 P. Tuazon St.
corner 10th Avenue, Cubao
(02) 911-7221; 912-5904; 911-7202
(02) 911-7208
Quirino Highway
380 Oeshram Bldg., Sangandaan
Quirino Highway, Novaliches
(02) 938-6863 to 64; 938-6868
(02) 938-6865 (fax)
Visayas Avenue
Far East Asia Commercial Complex,
282 Visayas corner Congressional Avenues
(02) 924-5502 to 04
(02) 924-5884 (fax)
Welcome Rotonda
299 E. Rodriguez Sr. Avenue
(02) 740-8462 to 64
(02) 712-9751 (fax)
West Avenue
CBT Bldg., 60 West Avenue
(02) 371-9796 to 97; 374-2143
(02) 374-3048 (fax)
The Fort
Units 114-115, Forbes Wood Heights
Condo, Rizal Drive, Global City, Taguig
(02) 856-6045 to 47
(02) 856-6049 (fax)
VALENZUELA
Karuhatan
246 McArthur Highway, Karuhatan,
(02) 291-5224 to 25; 293-1389
(02) 293-1390 (fax)
Malanday
UCPB Bldg., McArthur Highway corner
P. Adriano St., Malanday, Valenzuela City
(02) 445-8825, 794-6316
(02) 292-3657 (fax)
Paso de Blas
Servando Bldg., Brgy. Paso de Blas,
Malinta, Valenzuela City
(02) 332-8515; 291-1099
(02) 293-2811 (fax)
NORTH-CENTRAL LUZON
BAGUIO CITY
RIZAL
Antipolo
Circumferential Road, Brgy. San
Roque Antipolo City
(02) 696-7804; 630-1091
(02) 630-1091 (fax)
Baguio
UCPB Bldg., Calderon and T. Claudio Sts.
(074) 442-3132; 443-4685; 304-2910
(074) 442-3133 (fax)
BATAAN
Cainta
UCPB Bldg., Felix Ave., Junction
(02) 655-4050 to 52; 655-4097
(02) 655-3037 (fax)
Balanga
UCPB Bldg., Don M. Banzon Ave.
(047) 237-2765; 791-2084; 791-1722
(047) 237-2875 (fax)
Masinag
Unit G 5-6 Silicone Valley Bldg.,
Sumulong Highway, Antipolo City
(02) 681-5849; 682-3018; 682-3013
(02) 681-5843 (fax)
Limay
UCPB Bldg., National Highway
(047) 244-5890; 244-5891
(047) 244-5892 (fax)
BULACAN
Q. Plaza
Q. Plaza Commercial Complex, Felix
Ave. corner Marcos Highway, Cainta
(02) 645-7068; 645-2547; 645-9468
(02) 645-2541 (fax)
Taytay
Fortunil Bldg. National Road,
San Juan, Taytay
(02) 217-6557; 658-6986 to 89
(02) 658-6990 (fax)
SAN JUAN
Annapolis
G/F Atlanta Center Bldg.,
Annapolis St., Greenhills
(02) 722-7176; 726-6662; 744-6416
(02) 722-8197 (fax)
Greenhills
A&E Bldg., Ortigas Avenue, Greenhills
(02) 722-6961 to 64
(02) 721-3393 (fax)
N. Domingo
UCPB Bldg., 120 N. Domingo St.
(02) 726-0521; 744-5564 to 65
(02) 724-8008 (fax)
TAGUIG
32nd Street BGC
Bonifacio Global City
(02) 478-0211; 478-0357
Global City
G/F Fort Palm Spring Bldg., 30th St.,
cor. 1st Ave., Bonifacio Global City
(02) 659-3749; 659-3753
(02) 846-5609 (fax)
McKinley Hill
IPC Bldg., Upper Mckinley Road, Fort
Bonifacio
(02) 519-1800; 478-7193; 519-1655
(02) 519-1655 (Fax)
Balagtas
Roma Bldg., 491 McArthur Highway,
San Juan, Balagtas
(044) 693-2748; 918-1224
(044) 918-1900 (fax)
Baliuag
PVR Bldg., Benigno S. Aquino Ave.
(044) 766-3227 to 28; 673-2023
(044) 766-7703 (fax)
Meycauayan
Sarmiento Bldg., McArthur Highway, Calvario
(044) 815-2389; 815-3300
(044) 840-8923 (fax)
CAGAYAN
Tuguegarao
Lim Bldg., A. Luna and A. Bonifacio Sts.
(078) 844-1060 to 61
(078) 844-1059 (fax)
ILOCOS NORTE/SUR
Laoag
Bueno Bldg., J.P. Rizal corner E. Ruiz Sts.
(077) 771-4475; 772-2037
(077) 771-5800 (fax)
Vigan
UCPB Bldg., M.L. Quezon Ave.,
Vigan, Ilocos Sur
(077) 722-2720; 632-0086
(077) 722-2719 (fax)
ISABELA
Cauayan
C. Uy Bldg., National Highway
(078) 652-3116
(078) 652-3117 (fax)
Santiago
corner Camacam St.
(078) 682-7255; 682-4822
(078) 682-7097 (fax)
Branches
and Subsidiaries
(as of May 2012)
LA UNION
La Union
Unison Realty Bldg., Quezon Ave.,
San Fernando
(072) 242-0491; 888-5733; 700-0811
(072) 242-0492 (fax)
NUEVA ECIJA
Cabanatuan
Ramoso Bldg., Burgos Ave. and
A. Bonifacio St.
(044) 463-2558; 463-1941
(044) 463-2168 (fax)
NUEVA VIZCAYA
Solano
J.P. Rizal St., Poblacion
(078) 326-5487
(078) 326-5619 (fax)
Lemery
UCPB Bldg., Ilustre Ave., corner
Gen. Luna St, Lemery, Batangas
(043) 214-2588; 411-1362
(043) 411-1362 (fax)
Lipa-Big Ben
Big Ben Commercial Bldg.,
Ayala Highway, Lipa City
(043) 756-7131; 312-0103
(043) 756-7130 (fax)
Lipa-Recto
G/F Wood Heights Bldg.,
C.M. Recto Ave., Lipa City
(043) 756-1811; 312-3811; 756-2311
(043) 756-1312 (fax)
Sto. Tomas
NDN Bldg., JP Laurel Highway
Brgy. San Roque, Sto. Tomas
(043) 784-8360; 784-8210
(043) 784-8226 (fax)
PAMPANGA
Angeles
UCPB Bldg., Sto. Rosario cor. Plaridel Sts.
(045) 625-9818; 888-2754
(045) 888-1672 (fax)
ClarkField
Lily Hill Plaza., C.M. Recto Highway
(045) 599-3472 to 73
(045) 599-3474 (fax)
San Fernando
U2 Bldg., McArthur Highway Dolores
(045) 961-4581; 961-4582; 860-0255
(045) 963-1942 (fax)
PANGASINAN
Dagupan
UCPB Bldg., A. B. Fernandez Ave.
corner Herrero St.
(075) 522-0709; 515-3855
(075) 522-0914 (fax)
Urdaneta
UCPB Bldg., Alexander St., Urdaneta City
(075) 568-1003; 656-2208
(075) 568-2828 (telefax)
TARLAC
Paniqui
(045) 931-0225
(045) 931-0554 (fax)
Tarlac
Que Kian Juat Bldg., F. Tanedo St.
San Nicolas
(045) 982-0158; 982-3028
(045) 982-0159 (fax)
ZAMBALES
Tanauan
P&G Commercial Complex,
President Laurel Highway
(043) 778-6801 to 03
(043) 778-6804 (fax)
CAMARINES NORTE/SUR
Daet
UCPB Bldg., F. Pimentel St.,
Daet, Camarines Norte
(054) 721-1353; 440-3294
(02) 429-0035 (telefax Mla. line)
Naga
UCPB Bldg., Evangelista St.,
Naga City, Camarines Sur
(054) 473-9172; 811-2414
(054) 473-9172 (fax)
CAVITE
Dasmariñas
Toledo Bldg., 2-A Sampaloc 1
(046) 416-6956 to 57
(046) 416-6953 (fax)
Imus
Maliksi Bldg., Aguinaldo Highway
(046) 471-0306; 471-2494
(02) 529-8608 (fax)
Molino
Sologrande Center, Molino, Bacoor
(046) 476-0500; 476-0503
(046) 476-0504 (fax)
Rosario
UCPB Bldg., Gen. Trias Drive, Rosario
(046) 438-3712 to 14
(02) 529-8818 (fax)
LAGUNA
Olongapo
UCPB Bldg., 1869 Rizal Ave.,
West Bajac-Bajac
(047) 223-4870; 222-3478
(047) 222-3046 (fax)
Biñan
UCPB Bldg., Biñan Business Center,
National Highway, Platero, Biñan
(049) 411-3889; 411-3899; 511-8098
(02) 520-6724 (fax)
Subic Bay Freeport
G/F Royal Sky Plaza, Royal Gateway
District, Subic Freeport Zone
(047) 252-7447; 252-6247; 252-3851
(047) 252-2421 (fax)
Calamba
Lazaro and Borres Bldg., National Road Crossing
(049) 545-2252; 545-2241; 545-2902
(02) 520-8837 (fax)
SOUTHERN LUZON
ALBAY
Legaspi
UCPB Bldg., Quezon Ave., Legaspi City
(052) 480-8721; 820-6450
(052) 480-7881 (fax)
BATANGAS
Batangas
UCPB Bldg., C. Tirona corner
P. Zamora Sts., Batangas City
(043) 723-3490; 300-3490
(043) 723-0250 (fax)
Laguna
UCPB Bldg., Km. 32 Old National
Highway, San Pedro
02) 808-4193 to 94
(02) 808-3934 (fax)
Sta. Rosa
UCPB Bldg., National Highway cor.
Provincial Highway, Balibago
(049) 534-1364; 534-1366 to 67
(049) 534-1365 (fax)
MASBATE
Masbate
UCPB Bldg., Quezon Ave. cor. Rosero Stairway
(056) 333-2182; 333-2252
(056) 333-3477 (fax)
MINDORO
Calapan
Baniway Bldg., J.P. Rizal St., Brgy. San
Vicente, South Calapan City, Oriental Mindoro
(043) 288-5678; 288-5252; 441-0867
(043) 288-1733 (fax)
San Jose
Lopez Jaena St., San Jose, Occidental Mindoro
(043) 491-1014
(043) 491-2038 (fax)
QUEZON
Centro
Quezon Ave. cor. San Fernando St., Lucena City
(042) 373-1431; 660-7080
(042) 373-7138 (fax)
Gumaca
Dalisay Bldg., Bonifacio and Gen.
Antonio Luna Sts.
(042) 421-1312; 317-6304
(042) 317-6304 (fax)
Lucena-Guinto
UCPB Bldg., Quezon Ave. co. L. Guinto St.
(042) 710-2417; 660-3667
(042) 710-3659 (fax)
SORSOGON
Sorsogon
UCPB Bldg., Magsaysay Ave. and
Rizal St., Sorsogon
(056) 211-1732; 421-5004
(056) 211-2058 (fax)
VISAYAS
AKLAN
Kalibo
UCPB Bldg., Martelino St.,
(036) 262-3303; 268-4319
(036) 500-7555 (fax)
BOHOL
Tagbilaran
UCPB Bldg., C.P. Garcia Ave.
(038) 411-3262; 501-7891
(038) 411-5204 (fax)
CAPIZ
Roxas
Gaisano Bldg., Arnaldo Blvd.
(036) 621-1850; 621-3547 (036)
621-0239 (fax)
CEBU
Banilad
TPE Bldg., Banilad Road
(032) 346-9252; 346-9234; 346-2460
(032) 344-1181 (fax)
Carbon
UCPB Bldg., Manalili and Progreso Sts.
(032) 254-1671; 255-3382
(032) 254-1922 (fax)
San Pablo
UCPB Bldg., Rizal Ave. cor.
P. Alcantara St., San Pablo City
(049) 562-0977; 562-7721
(049) 562-5120 (fax)
F. Ramos
Yap Bldg., Ramos St., Bgy. Cogon
(032) 255-8497; 256-3772
(032) 255-8498 (fax)
Sta. Cruz
UCPB Bldg., P. Guevarra and P. Burgos Sts.
(049) 501-2590; 810-0728
(049) 808-2003 (fax)
Jones Avenue
UCPB Bldg., Osmeña Blvd.
(032) 253-1251 to 58
(032) 256-2901 (fax)
Mabolo
AMV Bros. Bldg. corner Almendras
and F. Cabahug Streets
(032) 233-2123; 233-1500; 422-4136
(032) 232-7389 (fax)
Mandaue
(032) 345-2894 to 95; 346-1126
(032) 346-2579 (fax)
Mango Avenue
Gen. Maxilom Avenue
(032) 233-7771; 233-7566; 233-7772
(032) 233-7778 (fax)
SM-Cebu
Lower G/F, SM City Cebu,
North Reclamation Area
(032) 231-7971 to 72
(032) 231-7973 (fax)
ILOILO
Iznart
UCPB Bldg., Iznart St.
(033) 335-0741; 337-8843; 337-8923
(033) 338-1471 (fax)
Jaro
UCPB Bldg., Rizal Avenue and Libertad St.
(033) 320-3477; 329-0746; 508-6614
(033) 320-1948 (fax)
Mabini
J&B Bldg., Mabini St., Iloilo City
(033) 337-8008; 335-0429
(033) 335-0415 (fax)
LEYTE
Tacloban
UCPB Bldg., Zamora St.
(053) 325-8682; 325-5056
(053) 523-7173; 523-4443
(053) 321-4612 (fax)
NEGROS OCCIDENTAL / ORIENTAL
Dumaguete
UCPB Bldg., Real and San Jose Sts.
(035) 225-4444; 422-7806; 422-8208
(035) 225-4445 (fax)
Lacson-Galo
UCPB Bldg., Lacson Galo St.
(034) 433-7521 to 25; 434-4419
(034) 433-0182
(034) 433-4085 (fax)
Libertad
UCPB Bldg., P. Hernaez and
Doña Juliana Sts.
(034) 434-7862; 435-0278
(034) 434-7861 (fax)
North Drive
Northpoint Bldg., North Drive, Bacolod City
(034) 435-4114; 434-1370 to 72
(034) 434-1373 (fax)
San Juan
UCPB Bldg., San Juan St. cor. Luzuriaga St.
(034) 433-7990; 435-4299
(034) 434-2461 to 63 (trunkline)
(034) 434-5437 (fax)
NORTHERN SAMAR
Calbayog
UCPB Bldg., Gomez and Nijiaga Sts.
(055) 209-1456; 209-1384; 533-9012
(055) 209-3024 (fax)
MINDANAO
AGUSAN DEL NORTE
Butuan
G/F St. Joseph Parish Hall,
Ester Luna Street, Butuan City
(085) 341-1010; 342-8624; 341-4299
(085) 815-4090 (fax)
Branches
and Subsidiaries
(as of May 2012)
DAVAO CITY
Bajada
G/F DASI Bldg., JP Laurel Ave., Davao City
(082) 305-2887; 305-2890
(082) 222-5917 (fax)
Palma Gil
Ground Floor, Cocolife Bldg.,
C.M. Recto Ave. corner Palma Gil St.
(082) 222-0900 to 02;
(082) 222-0777; 221-0732
(082) 222-0903 (fax)
R. Magsaysay
UCPB Bldg., R. Magsaysay Ave. and Sales St.
(082) 221-2933; 227-4941
(082) 221-7608 (fax)
San Pedro
UCPB Business Center, San Pedro St.
(082) 221-3227; 226-3865; 221-7577
(082) 300-2600 (fax)
LANAO DEL NORTE
Iligan
UCPB Bldg., Mabini & Aguinaldo Sts.
(063) 492-3317; 221-3317; 221-2739
(063) 221-6218 (fax)
MAGUINDANAO
Cotabato
UCPB Bldg., Magallanes cor. Don Rufino Sts.
(064) 421-2640; 421-3229; 421-3366
(064) 421-9227 (fax)
UCPB LEASING AND FINANCE
CORPORATION
HEAD OFFICE
14/F UCPB Corporate Offices
Makati Avenue, Makati City
Marketing
(02) 811-9488; 811-9143
(02) 811-9613 (fax)
Operations
(02) 811-9142
HEAD OFFICE
Sales and Marketing
(02) 811-9975; 811-9978 to 79
Operations
(02) 811-9970 to 71
Trading Floor
(02) 891-9735 to 37
UCPB SAVINGS BANK
HEAD OFFICE
(02) 811-9080
(02) 811-9000 loc. 7231
MISAMIS OCCIDENTAL
Ozamiz
UCPB Bldg., Rizal Avenue & Laurel St.
(088) 521-0322; 521-0323; 521-5088
(088) 521-1516 (fax)
MISAMIS ORIENTAL
Cogon
Chee Bldg., Osmeña & Lim Ket Kai
Avenue, Cagayan de Oro
(08822) 726-581; 725-135; 723-079
(088) 857-1840 (fax)
Velez
Leonila Bldg., Apolinar Velez and Pacana Sts.
(088) 856-4474; 856-4420; 856-4388
(088) 856-4420 (fax)
Tanza
7 A. Soriano Highway, Daang Amayo 1, Tanza
(046) 437-1162; 437-1167
(02) 529-8970 (telefax)
C.M. Recto
G/F St. Augustine Law Bldg.
San Sebastian College-Recoletos
C.M. Recto, Sampaloc, Manila
(02) 734-6262; 734-6276
(02) 734-6277 (telefax)
DSU-Rizal Avenue
Unit 201-203 Tan Han Chi Place
1558 Rizal Ave. corner Mayhaligue St.,
Sta. Cruz, Manila
(02) 309-9558; 743-7426
(02) 743-0750 (telefax)
Morong
317 T. Claudio St., Morong, Rizal
(02) 653-0281; 653-1102
(02) 653-0282 (telefax)
Sta. Cruz
M.F. Tiaoqui Building, Plaza Sta. Cruz,
Sta. Cruz, Manila
(02) 733-0258; 733-7860 to 61
(02) 733-0262 (telefax)
CEBU
Tuburan
Tabo-tabo St., Poblacion, Tuburan
(032) 463-9088
(032) 463-9151 (fax)
ILOILO
LAGUNA
Alaminos
Del Pilar St., Poblacion, Alaminos, Laguna
(049) 805-0655; 805-1723
(049) 567-1296 (telefax)
Iloilo
Angeles Arcade, De Leon St.
(033) 335-0422; 508-7090; 337-0260
(033) 508-7490 (telefax)
LEYTE
UCPB SECURITIES, INC.
METRO MANILA
Oroquieta
UCPB Bldg., Washington St.
(088) 531-1123 to 24
(088) 531-1444 (fax)
SOUTHERN LUZON
CAVITE
Nagcarlan
E.A. Fernandez corner
E. Lucido Sts., Poblacion
(049) 563-3489; 563-3490
(049) 563-3488 (telefax)
Sta. Rosa
Tagaytay Rd., Santarosa Estates Commercial
(049) 508-1784; 508-1785
(049) 508-7-1533 (telefax)
MINDORO
Sablayan
420 P. Urueta St., Brgy. Buenavista,
Sablayan, Occidental Mindoro
(0929) 273-9614; (0917) 881-7938
PALAWAN
Puerto Princesa
55 Roxas St., Puerto Princesa
(048) 433-2066
(048) 433-8187 (telefax)
QUEZON
Atimonan
Quezon and Rizal Streets
(042) 511-1053; 511-1561
(042) 316-5314 (telefax)
Calauag
Arguelles cor. Quezon Sts. Barangay 5
(042) 301-7320
(042) 301-8300 (telefax)
Lucban
Rizal Ave., cor. San Luis St. Barangay 8
(042) 911-1495
(042) 540-4213 (telefax)
Tayabas
Quezon corner General Luna Sts.
(042) 793-2329
(042) 793-2205 (telefax)
Sogod
Osmeña St., Brgy. Zone III
(053) 382-2039
(053) 382-3262 (telefax)
NEGROS OCCIDENTAL
Bacolod
G/F San Antonio Park Square,
Brgy. Mandalangan, Bacolod City
(034) 709-7485 to 86; 441-2345
(034) 441-2103 (telefax)
Escalante
New Libra Mart, Victoria Bldg. North Ave.,
Escalante City, Negros Occidental
(034) 724-8022; 724-8011
(034) 454-0734 (telefax)
La Castellana
Feria corner Roxas Sts., La Castellana,
Negros Occidental
(034) 485-0160; 485-0059(telefax)
MINDANAO
BASILAN
Lamitan
Quezon Blvd., Lamitan, Basilan
(062) 936-0018 (Zamboanga Liaison Office)
(062) 991-2681 (telefax)
DAVAO
Davao
MK Central Bldg. J.P. Laurel, Davao City
(082) 300-0541; 226-3800
(082) 224-4229 (telefax)
MISAMIS OCCIDENTAL
Aloran
Jose Mutia St., Aloran, Misamis Occidental
(0918) 911-3683
(088) 545-4011 (telefax)
CAMARINES SUR
MISAMIS ORIENTAL
Goa
Rizal St., Brgy. Poblacion, Goa, Camarines Sur
(054) 453-1523; 453-0319
(054) 453-1524 (telefax)
Bulua
G/F Forever Books Bldg., Zone 6, Bulua
Cagayan de Oro, Misamis Oriental
(08822) 754-519
(088) 858-8063 (telefax)
NORTH/SOUTH COTABATO
General Santos
UCPB Bldg., Santiago Blvd.
& Magsaysay Avenue,
(083) 552-3783; 552-3574; 301-0089
(083) 301-4948 (fax)
Kidapawan
UCPB Bldg., Quezon Blvd.
Kidapawan, North Cotabato
(064) 288-1520; 288-1787; 450-0160
(064) 288-1421 (fax)
SURIGAO DEL NORTE
Surigao
UCPB Bldg., San Nicolas corner Diez Sts.
(086) 231-7151; 231-7153; 826-1669
(086) 826-0299 (fax)
ZAMBOANGA DEL SUR
Pagadian
Rizal Ave, Sta. Lucia District
(062) 214-1409; 214-1526
(062) 241-1410 (fax)
Zamboanga
UCPB Bldg., Rizal corner Corcuera Sts.
(062) 991-1484; 991-4576; 991-7791
(062) 991-1484 (telefax)
San Mateo
G/F General Luna Street,
Brgy. Banaba, San Mateo
(02) 661-6146;661-6149
(02) 584-9023 (telefax)
Tanay
Plaza Aldea, Tanay, Rizal
(02) 654-0880
(02) 654-0818 (telefax)
CENTRAL LUZON
Sta. Ignacia
URI Bldg., Romulo Highway,
Poblacion West Sta. Ignacia
(045) 605-0382; 605-0380
(045) 605-0379 (telefax)
NORTHERN LUZON
BULACAN
Malolos
Del Pilar Street, Poblacion
(049) 805-0655; 805-1723
(049) 567-1296 (telefax)
Libmanan
T. Dilanco St., Brgy. Poblacion,
Libmanan, Camarines Sur
(054) 511-8222
(054) 451-2048 (telefax)
Pili
National Highway, Brgy. Old San
Roque, Pili, Camarines Sur
(054) 477-7752; 361-1142; 477-5170
(02) 250-8056 (telefax)
VISAYAS
AKLAN
Numancia
Estrella Building, National Highway cor.
Zamora St. Poblacion, Numancia, Aklan
(036) 265-6953
(036) 265-6952 (fax)
Cagayan de Oro
Capistrano-Cruz Taal St., Barangay 7,
Cagayan de Oro City
(088) 857-2355; 852-4099
(08822) 728-064; 728-695
(088) 857-2354 (telefax)
Laguindingan
Daroy St., Brgy. Purok 2 Laguindingan
(088) 555-0264
(08822) 75-6728 (telefax)
ZAMBOANGA
Glan
182-C Enrique Yap St., Poblacion
Glan, Saranggani Province
(083) 893-0080
(083) 262-1010 (telefax)
Sindangan
Mabini St., Sindangan, Zamboanga del Norte
(065) 224-2013 (telefax)
Credits
Published by UCPB
Editorial Services by WRITERS EDGE
Photography by BIEN BAUTISTA
An electronic copy of this annual report
may be downloaded at
www.ucpb.com

2011 Annual Report

Transcription

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