BPI B Self-declared

Transcription

BPI B Self-declared

COVER. BACKCOVER. SPINE.indd 6
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The cover of this Integrated Annual and
Sustainability Report is printed on Naturalis 250
gsm, uncoated, 55% recycled. The inside pages
UK-based Forest Stewardship Council.
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COVER.
BACKCOVER.
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ABOUT THE COVER
Many Filipinos, even those gainfully employed, don’t seem to
have adequate financial resources at their disposal—78.5%, or
about eight in 10, of Filipino households don’t have a deposit
account. Among those who do have them, seven in 10 have
only one account.1
1 According to the 2009 Consumer Finance Survey of the Bangko Sentral ng Pilipinas
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ABOUT THIS REPORT
This report of the Bank of the Philippine Islands (BPI) combines our Annual
Report to shareholders with our Sustainability Report, covering financial
year January to December 2013.
This is the third year we are publishing an integrated report that is
intended primarily for our institutional investors, customers, civil society
organizations, and anybody interested to know more about our financial
and non-financial performance. This Report presents a holistic view
of our economic, financial, operational, social, environmental and
governance performance.
Reporting process. The content of this report was determined based on the
following: issues that are currently most important to our stakeholders and
business operations; consultations with our business units to identify the
social, environmental and operational topics that are most relevant to our
business as a bank; sustainability issues, risks and opportunities as identified
by the Bank’s Sustainability Office; and performance indicators set by the
Global Reporting Initiative (GRI G3.1) framework (www.globalreporting.org).
Reporting standards. On our sixth year reporting our sustainability
progress, we have maintained the number of GRI indicators reported at 39,
equivalent to a self-declared application level “B.”
Scope of the report. This Report covers the 2013 performance of the BPI
Group of Companies, comprising of the parent Bank of the Philippine
Islands and its subsidiaries. Data in this report were consolidated from
BPI Head Offices, domestic and international branches, satellite offices
and subsidiaries—economic data came from audited financial statements
(complying with Philippine Financial Reporting Standards), while
information on environmental, social and operational performance came
from management information systems and records of the various BPI
Group units.
Assurance. Our Sustainability Office ensures that sustainability practices
are embedded in each of our business groups. The BPI Sustainability Office
(BSO) is composed of a dedicated team of people who drive, monitor
and measure our sustainability performance. The BSO endeavors to seek
external assurance of our report in the near future.
Feedback. We welcome feedback to improve our integrated reporting
process. This Report comes with a feedback form and may also be
downloaded from our website, www.bpiexpressonline.com. Feedback may
be sent to our Corporate Planning Division and Sustainability Office.
Corporate Planning Division
18th Floor BPI Building, 6768 Ayala Avenue
corner Paseo de Roxas, Makati City 0720 PH
Telephones: (632) 8455245, (632) 8169753/9557
E-mail: investorrelations@bpi.com.ph
Sustainability Office
16th Floor BPI Building, 6768 Ayala Avenue
corner Paseo de Roxas, Makati City 0720 PH
Telephone: (632) 8169883
E-mail: fgmaranan@bpi.com.ph
2
2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT
PP 2 About this Report.indd 2
BANK OF THE PHILIPPINE ISLANDS
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CONTENTS
About the Cover
02
03
04
06
08
09
10
12
16
20
22
30
38
44
46
62
64
65
66
70
190
192
193
194
About this Report
Table of Contents
About BPI
BPI’s Stakeholders
Financial Highlights
Economic Contributions
Citations
Message from the Chairman and the President
Board of Directors
Senior Management
Operational Highlights
People
Environment
Special Feature: A United Front
Corporate Governance
Audit Committee Report to the Board of Directors
Summary of Financial Performance
Statement of Management’s Responsibility
for Financial Statements
Independent Auditor’s Report
Audited Financial Statements
Products and Services
Group Directory
Remittance Centers
GRI Index
BPI Credo
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ABOUT BPI
A LEGACY OF STRENGTH
The Bank of the Philippine Islands (BPI) is a
commercial bank with an expanded banking
license. Together with its subsidiaries, BPI offers
a wide range of financial services that include
corporate banking, consumer banking and lending,
investment banking, asset management, securities
distribution, insurance services, leasing, and foreign
exchange. These services are offered to a wide
range of customers, from multinational corporations,
government agencies, large corporations, small- and
medium-sized enterprises (SMEs) and individuals.
Established on August 1, 1851 under Spanish
colonial rule, BPI was originally known as El Banco
Español Filipino de Isabel II, named after then Queen
of Spain, Isabel II. The Bank was the first to be
established in the Philippines, and was responsible
for starting the country’s banking and finance
industry. Playing a unique role in the early economic
history of the Philippines, the Bank performed many
functions that in effect made it the country’s central
bank, including providing credit to the Treasury and
printing and issuing currency in its own name.
Following the Spanish-American War of 1898,
the Bank was reorganized and essentially privatized
under the U.S. federal government’s National Bank
Acts of 1863 and 1864. The reorganization, however,
preserved the Bank’s authority to issue the
Philippine currency. The Bank adopted its current
name on January 1, 1912.
For many years after its founding, BPI was the
only domestic commercial bank in the Philippines.
Its business was largely focused on taking deposits,
extending credit to exporters and traders of raw
materials and commodities, and funding public
infrastructure. Its business grew as the country rose
in prominence as an agricultural exporter.
In the early 1980s, the Monetary Board of the
Central Bank of the Philippines (now the Bangko
Sentral ng Pilipinas) allowed BPI to evolve into a fully
diversified universal bank, to offer investment and
consumer banking services in addition to traditional
commercial banking activities. This transformation
into a universal bank was accomplished through both
organic growth and mergers and acquisitions.
Today, BPI is not only known as the oldest bank
in the Philippines—and indeed, in Southeast Asia—
but it is also an acknowledged leader in Philippine
banking, with total assets of Php 1.2 trillion, market
capitalization of Php 302.5 billion, and a 2013 fullyear net income of Php 18.8 billion.
In January 2014, the Bank successfully raised
Php 25 billion in a stock rights offering, in what is
to-date the largest capital markets transaction in
its 162-year history.
FOUNDING SHAREHOLDERS AND OWNERSHIP STRUCTURE
BPI’s founding shareholders were primarily charities and endowments associated with the Catholic Church, and its
directors consisted of government officials and prominent businesspersons, including Antonio de Ayala, a partner in a
predecessor of today’s Ayala Corporation. In 1969, Ayala Corporation became the Bank’s largest shareholder.
In 1974, People’s Bank and Trust Company, in which Ayala Corporation also had a significant interest, merged with
BPI. As part of the merger, Morgan Guaranty Trust Company of New York acquired a 20% stake in the Bank, which was
sold to DBS Group Holdings Limited of Singapore in 1999. In November 2013, the Government of Singapore Investment
Corp., together with Ayala Corporation, announced its intent to acquire the remaining DBS’s interest in the Bank.
OWNERSHIP
4
Public
33.9%
Ayala Corporation
21.8%
Ayala DBS Holdings Inc.
21.3%
AC International Finance Limited
8.7%
Roman Catholic Archbishop of Manila
8.5%
Others
5.9%
TOTAL
100%
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DELIVERY CHANNELS
812
813
819
820
825
2009
2010
2011
2012
2013
TOTAL BRANCH NETWORK
PHILIPPINES
GREATER MANILA AREA
PROVINCIAL
451
453*
452*
451*
452*
358
357
363*
364*
368*
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
INTERNATIONAL
HONG KONG
EUROPE
1
1
1
1
1
2
2
3
4
4
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
* Includes BPI-Globe BanKO branches
BUSINESS CENTERS
REMITTANCE CENTERS
13
13
15
18
14
21
23
20
17
13
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2,068
2,507
ATMs
1,566
2009
PP 4-5 About BPI.indd 5
1,656
2010
1,868
2011
2012
2013
OTHER
CHANNELS
• INTERNET
BANKING
• MOBILE BANKING
• CONTACT CENTER
• REMITTANCE
PARTNERSHIPS
AND TIE-UPS IN
THE US, EUROPE ,
ASIA AND THE
MIDDLE EAST
• PARTNER
OUTLETS OF
GLOBE BANKO
• SOCIAL MEDIA
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BPI’s STAKEHOLDERS
FROM
ENGAGEMENT
TO ACTION
The Bank of the Philippine Islands, a recognized leader
and pioneer in the Philippine banking industry, seriously
takes its responsibility in developing and sustaining
relationships with its stakeholders, internal and external.
Our stakeholders may be grouped into two: those
who are directly affected by our business operations
and outcomes, and those who guide and influence
us in carrying out our business. The first group
consists of investors, clients, employees, suppliers
and the community at large, while the latter includes
government and regulatory agencies, non-government
and civil society groups and industry organizations.
Our engagement with stakeholders takes on
various forms and is carried out through a range of
information, communication and consultative activities
and disclosures. We conduct dialogues about our role
in society, products and services, business performance
and other issues, at the business unit and Group levels.
This active engagement has allowed the Bank and its
stakeholders to:
• Identify our most significant stakeholder groups
and their specific interests, and determine the most
significant issues from the economic, environmental
and social sustainability perspective.
• Become more responsive in addressing various
concerns, from customer service to financial solutions,
systems, promotion-related complaints, shareholder
return, operational strategies, business outlook,
regulatory compliance, employee conduct, and
employee salaries, benefits and financial assistance.
• Integrate the outcomes of our stakeholder
engagement with well-established risk management
processes, allowing us to address potential risks and
align the management of sustainable issues with our
business processes and strategies.
• Innovate and improve our products, services, systems,
operational processes and practices.
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HOW WE ENGAGE
Investors
Customers
Employees
BPI Express Online
Stockholders’ Meetings
Investors’ Conferences
One-on-One Meetings
Disclosures (SEC and PSE)
Relationship Managers
Branch Service Officers
BPI Customer Care Department
BPI Express Online
BPI Express Mobile
BPI Contact Center
BPI Facebook and Twitter Accounts
BPI Bankers Online
Brochures and Posters
Surveys
Advertisements
Events
E-mail Bulletins
MyBPIOnline portal
Meetings
Surveys
Training Sessions
Quality Circles
Labor Management Councils
Performance Appraisal
Planning Sessions
Volunteerism Activities
Suppliers
Accreditation
Vendor Selection
Suppliers Audit
Industry Groups
Membership
Dialogues and Fora
Sponsorships
Events
Government and Regulatory Agencies
Meetings and Conferences
Partnerships
Sponsorships
Dialogues and Fora
Non-Government and Civil Society Groups
Memberships
Volunteerism Activities
Dialogues and Fora
Events
CSR Activities
MEMBERSHIPS AND PARTNERSHIPS
Industry Organizations
Non-Government and Civil Society Groups
PP 6-7 Stakeholders.indd 7
Bankers Association of the Philippines
Bank Marketing Association of the Philippines
Bankers Institute of the Philippines
Chamber of Thrift Banks
Fund Managers Association of the Philippines
Makati Business Club
Philippine Association of National Advertisers
Philippine Society for Quality
Public Relations Society of the Philippines
Trust Officers Association of the Philippines
Association of Foundations
Corporate Network for Disaster Response
International Finance Corporation
Habitat for Humanity Philippines
League of Corporate Foundations
Philippine Business for Education
Philippine Business for the Environment
Philippine Council for NGO Certification
United States Agency for International Development
World Wildlife Fund-Philippines
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financial highlights
Consistent & sustainable
Net Income
revenues
(in million Php)
(in million Php)
18,811
454
11%
HIGHER
38,407
15%
HIGHER
327
21%
HIGHER
379
34,395
8,516
09
527
41,758
12,899
635
(in BILLION Php)
47,385
16,352
11,312
TOTAL LOANS
52,498
10
11
12
13
09
10
11
TOTAL DEPOSITS
TOTAL ASSETS
(in BILLION Php)
(in Billion Php)
989
878
802
12
13
681
10
12
13
(in BILLION Php)
985
82
844
21%
HIGHER
23%
HIGHER
11
TOTAL CAPITAL
1,195
724
720
09
88
98
106
68
8%
HIGHER
579
09
10
11
12
13
09
10
11
12
RETURN On EQUITY
RETURN On ASSETS
(in %)
(in %)
13
10
11
12
13
Net interest margin
(in %)
1.91
18.05
09
1.87
17.86
15.57
1.53
15.36
1.63
3.72
1.29
3.55
3.67
3.57
10
11
12
3.31
12.96
09
8
10
11
12
13
09
10
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11
12
13
09
13
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financial highlights
Consistent & sustainable
Net Income
revenues
(in million Php)
(in million Php)
18,811
454
11%
HIGHER
38,407
15%
HIGHER
327
21%
HIGHER
379
34,395
8,516
09
527
41,758
12,899
635
(in BILLION Php)
47,385
16,352
11,312
TOTAL LOANS
52,498
10
11
12
13
09
10
11
TOTAL DEPOSITS
TOTAL ASSETS
(in BILLION Php)
(in Billion Php)
989
878
802
12
13
681
10
12
13
(in BILLION Php)
985
82
844
21%
HIGHER
23%
HIGHER
11
TOTAL CAPITAL
1,195
724
720
09
88
98
106
68
8%
HIGHER
579
09
10
11
12
13
09
10
11
12
RETURN On EQUITY
RETURN On ASSETS
(in %)
(in %)
13
10
11
12
13
Net interest margin
(in %)
1.91
18.05
09
1.87
17.86
15.57
1.53
15.36
1.63
3.72
1.29
3.55
3.67
3.57
10
11
12
3.31
12.96
09
8
10
11
12
13
09
10
PP 8 Financial Highlights.indd 8
11
12
13
09
13
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ECONOMIC CONTRIBUTIONS
Creating
value
The Bank is committed to contributing to the development
of the individuals, organizations and institutions it deals
with, thereby creating economic value throughout our
supply chain.
Php 33,081 Million
total economic
contributions in 2013
Php 10,481 M
PHP 52,498 Million
Php 9,088 M
Total revenue in 2013
Php 7,020 M
Php 6,402 M
=Php 33,081 M
Php 90 M
32%
Salaries
and
benefits
paid to
employees
28%
21%
Taxes paid
to the
Government
Amount
paid to
suppliers
and
contractors
19%
Dividends
declared
0%
=100%
Charitable
contributions
* Dividends paid to stockholders amounted to Php 3.2 billion
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9
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CITATIONS
ONLY PHILIPPINE
BANK RATED
INVESTMENT-GRADE
BY TWO MAJOR
RATINGS AGENCIES
In 2013, international ratings agencies thrust BPI back
into the radar of international investors by giving
it investment grade—in October, Moody’s Investors
Service raised BPI’s baseline credit assessment to
baa3 from ba1, while Fitch Ratings in March raised
the Bank’s long-term foreign currency issuer default
rating to BBB- from BB+ .
The baseline credit assessment is an evaluation
of the Bank’s stand-alone financial strength,
excluding extraordinary government support.
Moody’s also upgraded the deposit rating of BPI
to Baa3/Prime-3 from Ba1/Not Prime, with a positive
outlook.
“Overall, Moody’s views the credit profile of BPI ...
to be among the most defensive and best positioned
to withstand a cyclical downturn among Moody’s
rated banks in the Philippines,” Moody’s said in its
October 3, 2013 statement announcing the upgrade.
On the other hand, the BBB- ratings given by
Fitch to the Bank’s long-term foreign currency
and long-term local currency issuer default rating
indicate the Bank’s good credit quality, with low
expectation of default risk.
“Of the major Philippine banks rated by Fitch,
BPI’s ratings have been the highest, due to its
established domestic presence, sound financial
metrics and prudent management,” Fitch said in an
April 1, 2013 statement.
To date, BPI enjoys the distinction of being the
only Philippine bank rated investment-grade by two
international ratings agencies.
RECOGNITIONS
10
AWARDING BODY
AWARD
48th Anvil Awards
Award of Merit, Public Relations Program on a Sustained Basis,
Digital Campaign Category, for BPI on Facebook
Alpha Southeast Asia
• Best Trade Finance Bank in the Philippines
• Best SME Bank, for BPI Family Savings Bank
• Best Cash Management Bank
Annual Global CSR Awards
Finalist, Best Community Program Category, for BPI Bayan nationwide
employee volunteerism program
Asian Banking and Finance Awards
•
•
•
•
Asia Money
Best Cash Management Bank in the Philippines for Large and
Small Corporations
Association of Filipino Franchisers Inc.
Franchise Cornerstone Award
Bankers Institute of the Philippines
(BAIPHIL)
1st BAIPHIL Green Bank Challenge, Best in Paperless Branch Model (for
the Green Branch Model)
Bangko Sentral ng Pilipinas
Pagtugon Award, for Consumer Banking Group’s Customer Care Division
Bureau of the Treasury
Best Performing Government Securities Eligible Dealers, Top Local Bank
and Third Overall
Corporate Governance Asia
Asia’s Most Outstanding Company on Corporate Governance
(Philippines)
Employers Confederation of the Philippines
Grand Winner, Kapatiran sa Industriya (Kapatid) Awards 2013
Euromoney
Best Trade Finance Bank of the Year
Domestic Retail Bank of the Year in the Philippines
Website of the Year-Philippines, for BPI Express Online
Employer Award of the Year-Gold
Philippine Domestic Trade Finance Bank of the Year
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4/8/14 7:20 PM
Global Finance
Best Emerging Markets Banks in Asia (Philippines)
Housing and Urban Development
Coordinating Council and Home
Guaranty Corporation
Most Active Bank Lender for Housing, for BPI Family Savings Bank
International Association of Business
Communicators
• Gold Quill Award of Excellence, for Talk to Us Campaign
• Gold Quill Award of Merit, for Talk to Us on Facebook
International Council of Shopping Centers
Asia Pacific Awards
Best Marketing Position-Finalist
Internet and Mobile Marketing Association of
the Philippines
Boomerang Awards 2013, Program Effectivity Winner for BPI Get Out
More Awareness Campaign
National Statistics Office-NCR
Most Cooperative Business Establishment in the NCR
PANATA
• Certificate of Merit: BPI Puso Mo
• Certificate of Merit: BPI Talk to Us
• 4th PANATA Bronze Award: BPI Talk to Us
PDS Group
Top Corporate Issue Manager and Arranger (for BPI Capital Corporation)
Philippine Dealing and Exchange Corporation
•
•
•
•
Philippine Chamber of Commerce and Industry
Special Citation; Excellence in Ecology and Economy
Philippine Franchise Association
• Chairman’s Award, for BPI Family Savings Bank Ka-Negosyo
Franchising Loan
• Best in the Philippine Franchising Sector, 12th Franchise Excellence
Awards
Radar Global
Gold Medal for Over-All Bank Reputation
Readers’ Digest Trusted Brand 2013
• Gold Trusted Brand, for BPI Express Credit
• Trusted Brand, for BPI Asset Management
Social Media, Banking & Payments Asia
Trailblazer Awards
Channel Excellence Awardee for Facebook.com/bpi
The Asian Banker Achievement Award
Best Trade Finance Bank in the Philippines
The Asset
• Most Astute Investors in the Philippines
• Best Local Currency Bond Individuals in Sales, Trading and Research
The Asset Triple A
• Best Domestic Bank for the Philippines
• Best Asset Management Company, for BPI Asset Management and
Trust Group
• Best Cash Management Bank
• Best Trade Finance Service Provider in the Philippines
The Financial Brand
25th, Overall Power 100 Social Media Rankings for Banks
Trade Finance Awards for Excellence
Best Trade Finance Bank in the Philippines
United Nations Framework Convention on
Climate Change
Recognition given to BPI-IFC for its Sustainable Energy Finance
Program
Most Active Trading Participants in the secondary market
Top Fixed Income Dealing Participant
Top 5 Spot FX Dealers
Top 5 PDDTS/PvP Participants
PP 10 Citations.indd 11
11
4/8/14 7:20 PM
MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT
MAKe the
BEST HAPPEN
BPI CONCLUDED 2013 on a strong note. The
Bank ended the year with approximately
Php 1.2 trillion in assets, Php 635 billion in loans
and Php 989 billion in deposits. Each of these
financial metrics increased more than 20%
over that of the prior year. Net income was
Php 18.8 billion, a 15% increase over the prior
year, representing an all-time high for the Bank.
BPI’s return on equity of 18.1% stood highest among
its peers. The Bank’s robust financial performance
is supportive of the premium that the stock market
continues to give to BPI, which ended 2013
as our country’s largest bank in terms of
market capitalization.
BPI’s strong financial results mask what was a
challenging year in the financial markets, in both
the Philippines and internationally. The U.S. Federal
Reserve and other western central banks addressed
the threat of a deep and prolonged global recession,
brought about by the global financial crisis of 200809, by injecting tremendous amounts of money
into the global financial system. The influx of such
money supply lowered interest rates, which in turn
inflated prices of assets of all kinds. Over several
years of declining interest rates, banks the world
over increased their holdings in securities, which
rose in value and inflated their proportion of trading
gains to total profits.
In early 2013, however, we saw this trend reverse.
The West, and the U.S. in particular, began to see
early indications of renewed economic growth.
The U.S. Federal Reserve reacted by hinting at
“tapering” in the second quarter of 2013. Tapering—
the reduction in the amount of bonds that the
Fed would purchase in the market—effectively
slows down the increases in the supply of liquidity
in the financial system. The effects of the Fed’s
pronouncement were felt almost immediately.
Interest rates in many currencies, taking their cue
from the U.S. dollar, began to rise. With improved
economic growth expectations in the West,
investors began to “rotate” away from Emerging
Markets in favor of Developed Markets. For banks
the world over, the second quarter of 2013, with
interest rates beginning to rise, marked the end of
12
PP 12-15 Message.indd 12
the period of increasing profits from fixed income
securities positions. In fact, banks began to realize
losses on their securities positions.
We reacted quickly to the prospect of a change
in the interest rate regime. The Bank reduced the
size and tenors of its traded securities portfolio,
which had the effect of preserving gains registered
in the first quarter of 2013. With interest rates
expected to move up further, the Bank managed
its book so that a large majority of its loans could
be repriced within one year, which would allow us
to take advantage of higher interest rates. On the
deposit side, we placed increased emphasis on
growing low-cost deposits, thus helping provide
a floor on the Bank’s net interest margins. Growth
in the Bank’s assets would have to be derived
primarily from our loan book, from the assumption
of credit risk as opposed to interest rate risk. Gains
in revenues and net income would have to be
generated by higher loan balances, increases in
non-interest income other than directional trading
income and, eventually, higher net interest margins.
Fortunately, the Philippine economy is growing
at a pace that supports a strategy that is dependent
to a large extent on measured growth in the
intermediation of funds. The Bank’s economists have
estimated annual GDP growth at 7-8% and inflation
at 2-4% over the medium term. The subsequent rise
in real incomes would allow for greater borrowing
capacity in an economy which, by Asian standards,
is underleveraged. This implies that banks in the
Philippines will have significant room to grow.
As long as macroeconomic conditions remain
favorable, BPI will position itself for growth.
Against this backdrop, in the fourth quarter
of 2013, we embarked upon a Php 25-billion
stock rights issue that, when it was completed in
February 2014, increased the capital of the Bank
by almost a quarter. The increase in capital will
allow the Bank to grow at a pace commensurate
with the expected growth in the Philippine
economy. The rights issue, the largest capital raise
completed by BPI in its entire history, was 32%
oversubscribed, and is testimony to the confidence
and support of the Bank’s shareholders.
4/8/14 7:21 PM
JAIME
AUGUSTO
ZOBEL DE
AYALA
CHAIRMAN
4/8/14 7:21 PM
MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT
The bank adopted the slogan “Let’s make it
easy” in May 2010. This slogan spoke of the need,
in a country where 78.5% of the population is
unbanked, to make banking more accessible. In
the four years since we have adopted the slogan,
we have made every effort to be true to it. Since
then, we have grown our client base by 68%, or
2.7 million, and we now serve 6.7 million clients.
A small but growing number of clients bank
with BPI Globe BanKO, the micro lending joint
venture between BPI, Globe Telecom and Ayala
Corporation.
Expanding the ways by which clients can bank
with us has been a key driver of growth in our
client base. Since it introduced automated teller
machines to the Philippines in 1983, BPI has been at
the forefront of banking via electronic channels—
online banking, mobile banking, phone banking.
Today, a significant proportion of our clients are
enrolled in at least one of our electronic channels,
and those enrolled are active users of these
channels. When one adds transactions executed via
our online, mobile and phone banking applications
to transactions executed via our automated teller
and cash acceptance machines, almost 70% of the
Bank’s 270 million transactions are now executed
electronically. In contrast, transactions executed
“traditionally” via a branch teller now account for
only 30% of the bank’s transactions. Growth in
electronic channel usage has allowed our front-line
personnel to devote more time to identifying and
meeting our clients’ financial needs. Higher and
more robust transaction volumes should follow.
As the Bank’s client base grows, an ever greater
percentage of transactions will be executed via
electronic channels. Recognizing this trend, last
year we outsourced a large component of our IT
operations to a world-class vendor. Furthermore,
we continue to invest in our primary IT platforms
to achieve scale, availability, and reliability—at low
cost. We continue not only to invest heavily in
software applications, particularly the client-facing
ones that truly differentiate the experience of BPI’s
clients, but also retain significant control of
these development initiatives in-house, while
diversifying our relationships with vendors who
are best-in-class.
For many of our clients, banking is no longer
about mere access to financial services—it is about
using that access to make the kinds of financial
decisions that improve and enrich lives. Surveys
confirm what we intuitively know—that our clients
want the best for themselves and their families.
It is BPI’s objective to help Filipinos achieve their
financial objectives by helping them make more
intelligent and informed financial decisions. In a
nutshell, we want to help them change the way
they think about money, so that they can get the
best out of life. Hence, in March 2014, we adopted
a new slogan:
“Make the Best Happen”
As a good corporate citizen, we want to make the
best happen for all our constituencies. BPI Foundation,
which focuses on entrepreneurship, education and
the environment, is a very important part of what
we stand for. The Foundation works to encourage
entrepreneurship amongst families of Overseas
Filipino Workers. Every year, working with the
Department of Science and Technology and 10 leading
Philippine universities, the Foundation identifies and
rewards outstanding student scientists in the hope
that these students will continue to pursue scientific
work that helps improve lives. Last year, working with
Habitat for Humanity Philippines, the Foundation
provided 60 public school teachers with homes in
Bistekville, Quezon City and Panabo, Davao.
In the area of environment, BPI Foundation
has continued to undertake, together with WWF
Philippines, a study that assesses the risks to business
faced by the Philippines’ major cities as a result
of climate change. An earlier phase of the study
identified Tacloban as particularly vulnerable. Sadly,
the destruction in Tacloban wrought by Typhoon
Yolanda proved the study prescient. Finally, the
Foundation, working with the bank’s human resources
group, led a fundraising effort for the victims of
Typhoon Yolanda that saw every peso raised by BPI
employees matched, peso for peso, by the Bank.
The fundraising raised over Php 20 million for
typhoon relief.
Since its founding in 1851, our institution has been
inextricably linked to the growth of the Philippine
economy. The prospects we see in our country today
create tremendous opportunities for BPI. It is our
intention to take advantage of good macroeconomic
fundamentals by carefully and systematically
overlaying scale over what are some of the best
financial metrics in the Philippine banking industry. If
we execute properly, we will be the bank that clients
turn to for their most important financial transactions,
an employer of choice for those that want to pursue
a career in banking, and a preferred bank holding
for investors that appreciate superior risk-adjusted
returns over the economic cycle. To give life to our
slogan “Make the Best Happen” is our commitment
to all our stakeholders, our promise to our nation, and
the standard to which we hold ourselves.
JAIME AUGUSTO ZOBEL DE AYALA
Chairman
CEZAR P. CONSING
President
4/8/14 7:22 PM
CEZAR
P. CONSING
PRESIDENT
15
4/8/14 7:22 PM
PP 16-19 Board of Directors .indd 16
4/8/14 7:25 PM
4/8/14 7:25 PM
4/8/14 7:25 PM
4/8/14 7:26 PM
SENIOR
MANAGEMENT
OFFICE OF THE CHAIRMAN
Chairman
Jaime Augusto Zobel de Ayala
Corporate Secretary
Carlos B. Aquino
Vice Presidents
Rosemarie B. Cruz
Marita Socorro D. Gayares
Angela Pilar B. Maramag
Gerardo I. Rarela
OFFICE OF THE PRESIDENT
President
Cezar P. Consing
Vice President
Conrado E. Laza
Vice Presidents
Rebecca U. Anselmo
Nieves J. Basa
Ma. Nanette A. Biason
Ma. Luisa L. Cruz
Dennis S. David
Ivy Maria E. De Guzman
Jo Ann B. Eala
Ma. Cristina U. Javier
Maria Antonia O. Leong
Maria Teresa Anna K. Lim
Irmingardo O. Ludovice
Francisca Ann M. Lustre
Noelito C. Marcos
Barbara S. Munoz
Elfrida S. Narboneta
Ma. Concepcion Q. Narciso
Arnold E. Oliva
Rafael J. Pertierra
Victoria Marie G. Ricardo
Jose Martin S. Sangco
Andre Angelo S. Santos
Elisa M. Silva
Barbara Ann C. Untalan
Vice Presidents
Remarie Suzette A. Ayson
Ruth B. Bandera
Miguel P. Cervantes Jr.
Smith L. Chua
Tomas S. Chuidian
Yvette Mari V. de Peralta
Odette S. Diaz
Irene A. Diomampo
Roberto Martin S. Enrile
Ruben Enrique A. Espiritu
Mario Gerardo Z. Evaristo
Maria Paz A. Garcia
Jenny C. Guevara
Carlos A. Jalandoni
Marijoy Y. Kawpeng
Aileen Beryl A. Limketee
Ma. Lourdes B. Montelibano
Maria Socorro D. Ramirez
Ruby Rosario J. Severino
Christmas G. Sevilla
Eliza May T. Taco
Cecilia P. Tanchoco
RISK MANAGEMENT
GLOBAL MARKETS
RETAIL SEGMENTS AND
CHANNELS
Senior Vice President
Edgardo O. Madrilejo
Executive Vice President
Antonio V. Paner
Natividad N. Alejo
Vice Presidents
Frances S. Amado
Homer L. Aniceto
Daniel S. Bables
Susan L. Erguiza
Beatrice Marie R. Guzman
Florentino T. Gonzalez III
Nicanor A. Mendiola
Sylvia P. Sumagpang
Senior Vice Presidents
Michael D. Calleja
Raul D. Dimayuga
Marie Christine O. Lopez
Roy Emil S. Yu
Angelie O. King
Marie Josephine M. Ocampo
Manuel C. Tagaza
Sylvia P. Yngente
Heidi P. Ver
CORPORATE BANKING
Alfonso L. Salcedo Jr.
Joseph Anthony M. Alonso
Olga S. Ang
Reymundo S. Castro
Mario B. Palou
Maria Corazon S. Remo
Angela C. Santiano
Judy K. Tecson
Roland Gerard R. Veloso Jr.
PP 20-21 Senior Management.indd 20
Vice Presidents
Henry C. Arceo
Jaena A. Cebrero
Melinda V. Dulay
Rinaldo H. Fernandez
Susana M. Manalo
Donarber N. Pineda
Jennifer Gayle P. Singian
Arthur Noel S. Tan
ASSET MANAGEMENT & TRUST
Maria Theresa M. Javier
Estelito C. Biacora
Paul Joseph M. Garcia
Eugenio P. Mercado
Mario T. Miranda
Vice Presidents
Nestor S. Aldeguer
Roberto O. Bautista
Miguel L. Bernabe
Irene R. Bueno
Maria Rosario F. Crisostomo
Arlene S. Dayrit
Brenno C. Dytoc
Jesusa Camila V. Gangoso
Carlo Carmelo S. Gatuslao
Rosa Maria L. Gayos
Noemi G. Go
Carmencita Lilia B. Gozar
Luis D. Ibarra Jr.
Jose Raul E. Jereza IV
Danilo L. Kimseng
Maria Consuelo A. Lukban
4/8/14 7:26 PM
Gerardo E. Magpantay
Armando T. Navarette Jr.
Rodolfo K. Mabiasen
Ma. Carmina T. Marquez
Jerome B. Minglana
Angelito N. Pamintuan
Joseph Philip Anthony S.
Parungao
Ma. Cristina L. San Diego
Mary Catherine Elizabeth P.
Santamaria
Enrico A. Santos
Ma. Dina F. Soriano
Ana Liza C. Sta. Ana
Rommel D. Tadique
Wilfredo T. Tan Di
CARD BANKING
Ma. Cristina L. Go
Aniceta P. del Mundo
Vice Presidents
Jose M. de Vera
Cecile Catherine A. dela Paz
Richmond Ezer O. Escolar
Maria Angelica G. Florentino
Jesus Angelo O. Gomez
Aileen S. Lamasuta
Genaro N. Lualhati IV
ENTERPRISE CORPORATE
SERVICES
Joseph Albert L. Gotuaco
Fidelina A. Corcuera
Ma. Corazon G. Guzman
Florendo G. Maranan
Pilar Bernadette C. Marquez
Vice Presidents
Jocelyn C. Alviar
Maria Concepcion A. Bednar
Rosario J. Benedicto
Ma. Judith L. Castillo
Napoleon I. Cruz Jr.
Josephine F. Fernandez
Roberto E. Galvez
Santiago L. Garcia Jr.
Edgardo R. Jimenez
Marian T. Katigbak
Ailen C. Kho
Roseller B. Lim
Melvin M. Miranda
BPI FAMILY SAVINGS BANK
President
Jose Teodoro K. Limcaoco
BPI SECURITIES
Joaquin Ma. B. Abola
Ma. Mercedes D. Roces
Jocelyn C. Sta. Ana
Vice Presidents
Ramon Noel S. Altamirano
Luisito R. Ballelos
Ma. Lourdes D. Barrameda
Felipe P. Carlos
Amy Belen R. Dio
Rodolfo B. Fernandez
Charito O. Hiteroza
Miriam Jane M. Jacinto
Lourdes O. Mallare
Susan E. Pimentel
Erick M. Ramos
Ma. Christina Z. Sison
Jose Roman H. Santos
Herbert Vincent D. Tuason
Managing Director & CEO
Michaelangelo D. Oyson
Directors
Richard Anthony Y. Liboro
Marianna M. Ongpin
Diosdado C. Salang Jr.
BPI LEASING
Vice Presidents
Samuel C. Tang
Christine Grace A. Bandol
Gracia C. de Jesus
BPI FOREX CORPORATION
Vice President
Manuel C. Sanchez
BPI/MS INSURANCE
BPI EUROPE PLC
President
Kenichi Tanabe
Managing Director
Alexander B. Tan III
Senior Business Director
Perfecto M. Domingo
BPI INTERNATIONAL FINANCE
LTD. (HONG KONG)
Business Director
Ma. Perpetua A. Cutiongco
Managing Director
Jose Esteban J. Salvan
BPI DIRECT SAVINGS
AYALA PLANS, INC.
Vice President
Victoria Louella G. Mangalindan
Director
Elizabeth J. Tan
BPI CAPITAL
Daniel Gabriel M. Montecillo
Cecilia L. Tan
Vice Presidents
Bonifacio M. Banzon
Reginaldo Anthony B. Cariaso
PP 20-21 Senior Management.indd 21
Luis Geminiano E. Cruz
Eric Roberto M. Luchangco
Jose Eduardo A. Quimpo II
Sheila Marie U. Tan
Luis C. Urcia
George S. Uy-Tioco Jr.
NOTE: Senior Management list is
as of December 31, 2013.
21
4/8/14 7:26 PM
Consistent
growth,
BPI ended 2013 with the highest market capitalization in the industry at Php 302.5 billion, and
Php 1.2 trillion in assets, making it the third-ranking bank in this category. The Bank’s share price
ended at Php 85.00 and traded at a premium of
2.9x its book value per share of P29.37.
Our capital adequacy ratio (CAR) was at
13.7%, lower than 2012’s 14.2%, but still above the
regulatory minimum requirement of 10%.
The Bank posted a net income of P18.8
billion for the full year 2013, representing a 15.0%
increase over P16.4-billion 2012 net income, and
translating to an ROE (return on equity) of 18.1%
and an ROA (return on assets) of 1.9%.
Our net loan portfolio increased by 20.6% to
Php 635 billion as both the corporate and consumer market segments delivered double-digit
Stockholder’s Data
2013 2012
5.19
4.60*
Earnings per share (Php)
growth of 23% and 13%, respectively. Loan-todeposit ratio ended at 65%. Asset quality further
improved, with the Bank’s 90-day gross NPL
ratio closing at 1.80%, as compared to 2.09% as
of year-end 2012. The Bank’s reserve-to-NPL
ratio by end-2013 was at 105%. Impairment losses
stood at Php 2.6 billion, compared with Php 2.9
billion in 2012.
Driven by growth in savings and demand
deposits, the Bank’s deposit base grew to Php
989 billion, Php 186 billion higher compared to
2012’s Php 802 billion. Our float-to-bought ratio
continued to improve at 69:31, compared to
2012’s 61:39. Assets under management stood at
Php 580 billion, the second largest in the industry. The Bank’s customer base increased 12%,
with customer count at 6.7 million by end-2013.
2011
3.63*
2010 2009
3.38
2.62
8,180
6,401
6,401
6,122
Cash dividends declared (Php million)
2010
5,844
2009
Month
Customer Count
December 2013
6.7M
December 2012
5.9M
2.3
1.8
1.8
1.8
1.8
Cash dividends per share (Php)
Year-on-year increase (%)
12%
29.37
Book value per share (Php)
27.19*
24.45*
22.78
20.57
*Restated
Note: No stock dividends were
paid from 2009 to 2013.
The Bank’s financial performance in 2013 is built on the strength of its wide range of retail, commercial and
corporate banking products and services tailored to the needs of its customers, offered through the Bank’s
various business segments and channels.
22
PP 28-35 Operational Highlights NEW.indd 22
4/8/14 7:28 PM
OPERATIONAL HIGHLIGHTS
expanding
reach
Consumer Banking: Democratizing access
BPI’s consumer banking business encompasses
the Bank’s deposit products, retail customer
segments and branch distribution network for
a variety of other services such as retail loans,
credit cards, investments and bancassurance.
• In line with the inclusive finance agenda of the
BSP, we increased field sales and improved
the capabilities of field sales personnel. The
Bank now offers deposit-taking with the use of
point-of-sale devices, allowing field personnel
to open and accept deposits outside branch
premises, thus giving a broader sector of
society access to financial services. In addition,
our investment products are now more
accessible to a greater number of people, as
the Bank’s minimum investment amount has
been lowered to Php 10,000.
• An important strategy we adopted towards
client acquisition was our “My Branch, My
Store” program, tasking each and every retail/
branch manager to treat his branch as his own
business, challenging him to understand his
customers’ needs better. This strategy allowed
each branch to undertake its own initiatives
to address client requirements, resulting in
increased volume, reduced costs and higher
bottom line.
• Through mass media-based brand-building
initiatives, under a marketing campaign we
called “Talk to Us,” we brought to light everyday
financial needs and aimed to drive customers to
have more meaningful conversations with Bank
personnel. This campaign framed the branches
not only as transactional places, but as venues
for financial advice.
• The Bank made huge investments in
developing more relationship managers and
more specialized training to build a stronger
team of financial experts through an RM
Academy. Through this academy, bank’s
relationship managers (RMs) undergo financial
advisory training to impress upon them the
Bank’s high professional standards and the
role they play in helping customers reach their
financial goals, with due consideration for
the latter’s risk appetite. They are trained in
life-stage and portfolio analysis and the use of
customer information, among other tools, to
support them in their functions.
• We extended our BEA (BPI Express
Assist) facility to the Web, expanding the
BEA transaction capabilities outside the
branch through BEA Online, a Banking
by Appointment online facility. Through
BEA Online, clients can pre-process their
transactions, pick a time slot and preferred
branch, and set appointments from anywhere
they could access the Web. When such clients
show up for their appointment at the branch,
they are immediately serviced by Bank
personnel. BEA itself has reduced waiting time
at the teller’s counter by an average of 30%,
and now accounts for up to 95% of BPI’s overthe-counter branch banking transactions.
• Branch front liners, who have a deep
understanding of their local markets, were
empowered to tailor and deliver marketing
programs for their customers. Through
a program called LAMP, or Local Area
Marketing Program, branches created and
ran localized programs, not only giving rise
to more empowered and highly engaged RMs
but making BPI more relevant in the
local community.
23
4/8/14 7:28 PM
In 2013, the Bank’s total deposits increased by
23% at Php 989 billion, from previous year’s
Php 802 billion. Total deposits include savings
and current accounts.
‘Who you are is always more important
than what you have’
In line with the Bank’s advocacy of financial wellness,
internationally acclaimed financial guru and multi-awarded TV
host Suze Orman came back to the Philippines in May 2013 to
meet audiences in Manila and Cebu.
Orman, backed by years of personal experience and
professional expertise, spoke at length about how Filipinos
could handle their personal finances more efficiently and more
successfully. As in her first trip to the Philippines upon the Bank’s
invitation in 2012, Orman dispensed nuggets of financial wisdom
during her last sojourn, among them:
• If you want the Philippines
to progress, start investing
in yourselves—stay with the
peso.
• Get more pleasure out of
saving than spending.
• Live below your means, but
within your needs.
• Who you are is always more
important than what you
have.
• You will never be powerful in
life unless you have power
over your money.
At the core:
Customer
Relationship
Management
At BPI, we use our capability
for analytics—gathering
and analyzing data—to
undertake more insightful
initiatives guided by
customer insights and
behavior. Our Customer
Relationship Management
(CRM) team has developed
customer needs-based and
analytics-driven campaigns
across the retail segments,
with over 100 campaigns
implemented in 2013.
The team also
spearheaded the
development of a strategic
CRM roadmap across
people, process and
technology, transforming
the Bank and catapulting
it to a strong position to
excellently respond to
customers’ needs through
a unique, integrated and
sustainable customer
experience.
Consumer Lending: Continued market leadership
BPI Family Savings Bank, BPI’s consumer lending
arm, fortified its market leadership position in
the thrift bank industry in 2013, with total loans
amounting to Php 146.9 billion, for a double-digit
growth of 16%.
Home loans. BPI Family Savings Bank’s home loan
portfolio grew by 19%, while home loan releases
expanded by 17%. In the first half of the year,
strategic partnerships with real estate organizations
were forged, which made possible, among other
things, linking to each other’s website to help
complete the process of home acquisition. Potential
homebuyers can, through a partner real estate
firm’s website, use a home mortgage calculator
powered by the Bank.
Auto loans. Last year, the BPI Family Auto Loan’s
Online Auto Financing System embedded in the
websites of partner car manufacturers and dealers
served to more conveniently assist potential car
buyers choose the best and suitable car financing
package. The system now offers a complete carbuying process, with its First-Car Plan offering
24
special deals and discounted rates on starter
models from partner-car makers.
Loans for business format franchising. In line with
BPI Family’s Ka-Negosyo Franchise Financing
Program, the Bank introduced the Ka-Negosyo
Franchise Finder, an interactive directory of
franchise businesses that visitors could search
for updated company information and franchise
packages; the directory also contains an e-mail
facility allowing prospective franchisees to
communicate directly with the franchisor. We have
also sustained our Ka-Negosyo Best List of
expert-evaluated accredited franchise brands,
providing the public a short list of franchise
businesses with a proven track record and business
model. Partnerships in the Ka-Negosyo program
have resulted in an 8% increase in our small and
medium enterprise (SME) loan volume.
A Customer Help Desk was established to address
all customer concerns and complaints received
from the BSP, the Office of the President and other
sources, to ensure timely and effective resolution
of such complaints.
4/8/14 7:28 PM
Card Banking: Payments growth and healthy lending
The Bank offers card-based products and solutions
that allow cardholders to enjoy cashless shopping
with their credit, debit and prepaid cards. In
2013, Card Banking delivered a strong year—a
combination of growth in payment transactions and
healthy lending.
• Non-collateralized loans generated from the credit
cards and personal loans businesses grew by a
robust 8% and 41%, respectively. The credit cards
business maintained its market position as the
third most-used card issuer in the Philippines,
posting a Php 8.7-billion or 11% growth in billings.
The personal loans business showed impressive
gains, with close to 29,000 accounts booked with
a current loan amount of Php 1.8 billion.
• Debit card transactions processed through
the Express Payment System (EPS) facility
increased by a healthy 16%, translating to 22%
growth in billings. The Prepaid Cards business,
by catering to the unserved market especially in
Customer satisfaction
In 2013, we continued to conduct
customer satisfaction surveys to
identify, among others, the drivers
for customer satisfaction and areas
for improvement. These surveys also
meant to determine if clients would
recommend BPI and its products
and services to family and friends.
These are some of the key findings:
In the “mystery client survey,”
where service standards were
measured based on customer
feedback on certain parameters,
like service time, grooming and
corporate image projection, service
readiness and product/service
inquiry, the Bank scored 89.82,
keeping the previous year’s score.
The Bank’s “net promoter
score,” or the likelihood of clients
recommending BPI to family and
friends, reached 54.28%, quire high
by net promoter score standards.
e-commerce, grew its cardholder base by 36%. In
fact, the prepaid portfolio showed a major shift
in transactions from ATM cash withdrawals to
spending at merchants and online, with 24% of the
transactions now done online.
• In March 2013, BPI Family Savings Bank launched
its first credit card, in response to the strong
consumer demand for a low-rate, no-frills
alternative to cash. Continuing BPI Family’s
tradition of offering accessible products, the card
comes with a 2% finance charge, the lowest in the
country.
• A variant of the BPI personal loan, Personal Loan
Seafarers was developed to cater to the unique
circumstances of Filipino seafarers, a major
segment of overseas Filipino workers (OFWs).
Loan terms are aligned with their employment
contracts, and the loan repayment schedule closely
follows their cash flow. This variant now accounts
for almost 18% of all BPI personal loans.
The Bank aggressively grew its personal loans
receivables by 46% while improving the delinquency
profile of the portfolio. The marked improvement in
the product delivery system with the introduction
of a one-day processing lane reduced overall
processing time by 40%, enhancing the overall
customer experience.
BPI boosted its third-party payment centers to
173 locations nationwide when it partnered with a
giant shopping center chain.
The increasing Internet penetration rate in
the Philippines has resulted in BPI’s continued
expansion in the e-commerce space, with the Bank’s
e-commerce business experiencing 72% growth
year-on-year.
In September 2013, the BPI BebaPay Card,
a prepaid card and an early entrant in the
micropayments arena, was launched at the
De La Salle University (Taft), the Bank’s
first university partner for this product.
The initiative converted more than 50% of
the DLSU student population from being
cash transactors to BebaPay cardholders
and accredited more than half of the total
concessionaires and merchants within
the university. “Beba,” which means “to
transport” in Swahili, was piloted by
Google in Kenya.
25
4/8/14 7:28 PM
Banking evolved
1.71
million
BPI clients banking
online or via their
mobile devices
Electronic Banking: More cost-effective
Self-service transactions carried out by clients through its 24/7
and more cost-effective service channels now account for 71% of
the Bank’s total transactions.
• In 2013, our ATM network grew by 21%, for a total of 2,181 ATMs and
326 cash deposit machines. Through this expanded network, both
withdrawal transactions and deposit volumes posted marked increases.
Deposit transactions via the cash deposit machines increased by 90%.
Additional ATM security features, such as PIN shields, fraudulent device
inhibitors and anti-skimming software, were installed.
• BPI Express Online’s enrolled client base grew by 30% in 2013,
resulting in a client base of 1,550,850. The total financial transaction
count passing through this site was 18,060,756, a 15.3% growth over
last year’s count. Total financial transactions grew by 19.6% to Php 263
billion.
• An eDonations facility was introduced to make it easy for our
customers to provide assistance to victims of typhoons and other
calamities via different foundations and charitable organizations.
• The Bank now has 221 online banking kiosks located inside BPI
branches, giving customers access to BPI Express Online on bank
premises. In 2013, these kiosks generated 96,122 new enrollments,
representing an increase of 60% year-on-year. The number of financial
transactions processed through the kiosks was 353,597, a growth of
35% from previous year.
• BPI ExpressLink, the Internet banking platform for corporate accounts,
recorded a total financial transaction count of 28,565,559, a 20%
increase year-on-year, for a total transaction amount of Php 1.75 trillion.
These transactions were carried out by 18,176 enrolled customers,
an annual increase of 24%. ExpressLink Mobile, an app intended for
corporate customers, now has a client base of 3,927, a 192% growth
from last year’s number.
• BPI Express Mobile grew its unique user base by 56% in 2013 to
674,830 users, making it the country’s leader in mobile banking. Total
financial count increased by 205% to over 3.3 million, valued at Php
22.3 billion, an astounding 393% growth year-on-year.
• BPI Express Phone, the Bank’s phone-banking platform, recorded over
6 million transactions, for a total financial transaction value of Php
10.9 billion.
5.6 million
Inquiries via BPI
Express Phone’s
Self-Service
Facility
216 million
ATM transactions in 2013
263,000
Branch appointments
scheduled via BPI
Express Online
5.4
million
Total transactions
via cash deposit
machines
344,000
Clients paying their bills
electronically
26,849
26
Number of point-of-sale
terminals, with total acquired
consolidated billings of
Php 9 billion
4/8/14 7:28 PM
Corporate Banking:
Strong loan portfolio
The Bank’s Corporate Banking business provides
revolving credit, term credit, and trade finance
products and services to Philippine-based
corporations as well as a broad spectrum of
multinationals. It also offers deposit taking, cash
management and other transaction services to
these corporate clients.
• Driven by lending to top corporates. With a
year-on-year increase of 23%, Corporate
Banking had more than doubled its loan
portfolio in just four years. This impressive loan
record may be attributed to the top corporate
sector, with exposure to multinationals,
including non-residents, growing by 58%, and
to local conglomerates by 41%.
• Term loans. Loan demand was particularly
strong in the manufacturing, real estate,
utilities, construction and financial
intermediation industries, mostly in the form of
term loans, thereby providing stability to loan
levels.
• NPL ratio was kept at 1% which is lower than
the Bank and industry’s previous NPL ratios.
• Agribusiness financing. We strengthened
funding for agribusiness, facilitating among
other things, the setting up of farm facilities,
expanding or rehabilitating existing facilities,
and raising additional working capital. Special
financing solutions were set up for poultry
and pig farming. We also forged a strategic
partnership with the PIC (Pig Improvement
Company) International Group.
• Partnership with USAID. We sealed
cooperation agreement with the U.S. Agency
for International Aid for a 10-year, Php
2.46-billion credit facility to encourage lending
to SMEs. This facility will help provide SMEs
increased access to capital in the provinces of
Batangas, Iloilo and Misamis Oriental (Cagayan
de Oro City).
• PEZA desk. To respond to the peculiar
needs of locators in so-called ecozones, we
strengthened our relationship with both the
Philippine Economic Zone Authority and the
companies located and conducting business
from within the ecozones through a dedicated
corporate banking desk.
Global Markets:
Challenging environment
The Global Markets business of the Bank
manages its liquidity position, trades fixedincome securities and provides global financial
services to its clients.
• Despite the volatile global financial
environment, the local currency treasury desk
registered an increase of over 40% in securities
trading income. The Bank was also granted
Type 2 Dealership Authority from the BSP to
engage in Non-Deliverable Swap (NDS) and
Type 3 Limited End-User Authority to utilize
Foreign Exchange Options, Bond Options
and Credit Default Swap (CDS) for
hedging purposes.
• Remittances remained strong in 2013, posting
a 6.9% year-on-year increase in remittance
volume. Total remittance transaction count
grew by 10%, to 6.3M. The Bank’s market share
in the remittance industry is at a solid 28%.
• The BSP allowed the Bank to open a
Representative Office in Japan to encourage
more Japan-based Filipinos to send their
remittances through banks and its partners,
instead of informal channels.
• An online remittance service platform called
Web Service Automation was developed
and launched in September 2013 through a
partnership with Wells Fargo US.
• The securities business of BPI International
Finance Ltd. (BPI IFL) posted consistent
growth, as more clients shifted from traditional
deposits to higher-yielding investments.
Income from service fees rose by more than
13% and trading gains increased by more than
120%. BPI IFL’s loan portfolio increased by 47%.
• BPI Europe started accepting deposit accounts
and introduced remittance facilities in its Milan,
Italy branch in 2013. Clients can now fund their
remittance to the Philippines through the post
office or through the domestic transfer system
in Italy. Online remittance service facilities were
also introduced.
27
4/8/14 7:28 PM
Investment Banking: Benchmark transactions
BPI’s investment banking subsidiary, BPI Capital Corporation, has remained at
the forefront of the most notable transactions of 2013. It has also maintained
its leadership status by advising and underwriting a number of benchmark
transactions, among them:
• The Development Bank of the Philippines Php 5.7 billion Tier 2 bonds, the
country’s first Basel III-compliant issue;
• The Php 3.9 billion acquisition by Max’s Group of Companies of Pancake
House, Inc., a landmark transaction in the Philippine food service industry;
• The US$165-million acquisition financing for Del Monte Pacific Limited’s
(DMPL) US$1.675-billion acquisition of the consumer food business of Del
Monte Corporation in the US, a transformational transaction for DMPL; and
• The Automatic Fare Collection System Public-Private Partnership (PPP)
project, won by the AF Consortium of Ayala Corporation and Metro Pacific
Investment Corporation. This was an important milestone in the Philippine
government’s PPP iniitative to increase infrastructure investment in the
Philippines.
BPI Capital also introduced some of the most well-known Philippine
corporates to the domestic capital markets for the very first time, such as Manila
Electric Company’s debut domestic retail bond offering, valued at Php 15 billion.
It has also been active in the U.S. dollar and international markets. Named
Sole Issue Manager and Joint Lead Underwriter of the US$500-million
corporate note issuance of AES Philippines and as Lead Manager in the US$500
million syndicated loan for Indonesian Export and Import Bank, BPI Capital is
fulfilling lead roles in non-peso and offshore transactions.
BPI Capital’s participation in capital-raising transactions reached an all-time
high in 2013, being actively involved in over a dozen successful capital market
transactions including equity, syndicated loans, as well as corporate bond and
note issuances, with a combined issue value of over P459 billion.
Its subsidiary BPI Securities was equally active in 2013, increasing its
engagement with its customer base with the establishment of, among other
programs, the Premier/Elite Investors Club, the Youth Investor Club, and
I-TRAC, which stands for Invest-In-You Trading Academy. Started in April 2013,
I-TRAC is a series of lectures on fundamental analysis, website navigation and
technical analysis, aimed at demystifying stock trading and exposing starting
investors to the possibilities and returns that come with investing in the
Philippine stock market.
This line of investor education programs has successfully combined practical
and straightforward advice with updated and in-depth research, equipping
clients with the necessary skills to maximize their portfolio profitability.
BPI Securities also strengthened its online presence via Facebook and
Twitter, and increased branding for BPITrade.com, its fully integrated online
stock trading platform. BPITrade.com also offers real-time stock market quotes,
efficient portfolio management and comprehensive research.
28
4/8/14 7:28 PM
Asset Management and Trust: Higher yields
The Bank’s Asset Management and Trust business
remains to be a strong business contributor in
2013 generating Php 3.8 billion in gross revenues
from continuing operations, up by 28% from the
previous year.
• BPI continued to be a major player in the Philippine
asset management industry, with assets under
management (AUM) amounting to Php 576 billion,
a 16% annual growth over the past 10 years,
outpacing the annual industry growth rate of
14.6%.
• Despite the complete wind-down of the Special
Deposit Account facility for individual and
investment management accounts, revenues grew
by 28% as we expanded our investment funds
business to comprise 68% of total revenue, and
45% of total AUM.
• Its core fund management business composed
of the BPI Investment Funds and the segregated
portfolio accounts cushioned the impact of the
slowdown in non-core traditional trust business,
growing 66% and 11% in volume, respectively.
• The AUM of our peso fixed income funds grew
by Php 95.1 billion or 109%, while our peso equity
funds increased by Php 9.4 billion or 26%.
• The overall customer base of this business increased
by over 6%, with online investors growing by a
record 132% in 2013, driven primarily by the Personal
Banking and the Overseas Filipino segments,
expanding the Bank’s reach in the mass market.
• Apart from BPI Expressonline, our investments
funds are now in the BPI Mobile app.
• New investment products were launched, the BPI
Philippine Equity Index Fund and the BPI Philippine
High Dividend Equity Fund, to provide more
higher-yielding investment options in a low interest
rate environment.
Insurance: Securing lives
and property
RESPONSIBLE marketing
BPI-Philam Life Assurance Corporation (BPI-Philam) has
secured its position as leading bancassurance company in
the life insurance industry. A joint venture of Bank of the
Philippine Islands and Philippine American Life and General
Insurance Company, BPI-Philam has proven that the combined
synergy of the two largest financial institutions in the
Philippines is a formula for success.
To reach revenue goals and sustainable growth objectives,
BPI-Philam strengthened its human resource
complement, intensified sales and bank training programs,
improved customer service and launched iPoS, an iPad
application that allows paperless and straight-through
processing of new sales. Favorable market sentiment in 2013
led to a stronger take-up of the company’s variable universal
life (VUL) products.
BPI/MS Insurance Corporation, the country’s best
financially managed non-life insurance company, grew its
gross premiums written by 10.2% in 2013 year-on-year, to
reach Php 5.1 billion (unaudited). Its net income after tax
was Php 610.5 million (unaudited), resulting in an ROE
of 26%.
To help mitigate the dire conditions brought about by
super-typhoon Yolanda in November 2013, BPI/MS created
a special task force to handle Yolanda-related claims in a
prompt and judicious manner.
BPI practices the highest standards in
marketing its products and services. In 2013,
• There were no reported incidents of noncompliance with regulations concerning
product and service information,
and those referring to marketing
communications.
• Marketing communications across BPI
are reviewed periodically at the business
unit level; the frequency of these reviews
vary according to requirement. These
reviews are embodied and specified in
various standards and codes, including
the Bank’s own Branding Guidelines, the
BSP Compliance Matrix, Risk and Control
Self-Assessment and those of the PDIC.
• BPI does not sell products that are
prohibited in certain markets or the
subject of stakeholder questions or public
debate.
• The Bank did not receive any
substantiated complaint concerning
breaches of customer privacy.
• There were no legal actions against
BPI concerning anti-competitive
behavior and violations of anti-trust and
monopoly legislation.
29
4/8/14 7:28 PM
emPloYer
Of cHOIcE
Individual talent and collective
strength form the lifeblood of the
Bank’s human resource. BPI in
2013 enjoyed another landmark
year with the introduction of many
product and service innovations,
thanks in no small part to the skills,
commitment and drive of BPI’s
13,000-strong organization, fueled
by the Bank’s many employee engagement and talent management
programs.
The Bank has, in fact, exceeded
the Global Financial Institutions
benchmark for Employee Engagement of the Asian Banking and
Finance Awards, garnering an
overall score of 82% and showing
strength in three main engagement
drivers: career development and
opportunities, goal clarity, and leadership. Coming from this milestone,
the Bank introduced more initiatives to boost competency development among its officers and staff;
worked to accelerate promotions;
and identified the right metrics to
better align human resource
measures with corporate strategy.
Moreover, it introduced a
number of employee engagement
efforts to sustain or further boost
employee commitment.
total headcount: 13,024
Gender spread among employees
FEMALES: 70% (9,150)
MALES: 30% (3,874)
30
PP X-X People.indd 30
BANK OF tHE PHILIPPINE ISLANDS
4/8/14 7:47 PM
87%
people
8%
5%
0.18%
Geographic spread among employees
LUZON: 87% (11,298)
vISAyAS: 8% (1,023)
MINDANAO: 5% (679)
OUtSIDE PH: 0.18% (24)
Employment type
SENIOR MANAGEMENt (vP AND UP): 1% (168)
MIDDLE MANAGEMENt (SENIOR MANAGER tO AvP): 7% (855)
JUNIOR SUPERvISORy (SPEcIALISt, MANAGEMENt tRAINEE, ASSt. MANAGER tO MANAGER): 29% (3,840)
RANK AND FILE: 63% (8,161)
93%
7%
Employment contract
PERMANENt: 93% (12,177)
PROBAtIONARy: 7% (847)
cONtRActUAL: 0
BANK OF tHE PHILIPPINE ISLANDS
31
4/8/14 7:47 PM
New employee hires
Of the 1,934 employees hired in 2013, a majority
were female and below 30 years old. Most of the
hiring happened in Luzon. Below is the complete
information:
AGE GROUP
NUMBER
percentage
Below 30
1,771
92%
30-50
152
8%
Over 50
11
1%
GENDER
NUMBER
PERCENTAGE
Male
604
31%
Female
1,330
69%
REGION
NUMBER
PERCENTAGE
Luzon
1,685
87%
Visayas
132
7%
Mindanao
115
6%
Outside the PH
2
0%
A learning organization
BPI has one of the most systematic employee
training and development programs not only in the
banking industry, but also in the entire business
community. Unibankers—as BPI employees are
called—are offered a wide range of mandatory,
functional, leadership, and core courses to build
their everyday competencies and prepare them for
greater responsibilities.
At BPI, each employee is required to participate in
at least five days’ worth of training every year.
In 2013, BPI employees logged more than 50,000
training days.
Training programs accompany a Unibanker from
her first days in the company all throughout her
career in BPI. Here are some of the programs that
received an even bigger boost in 2013:
New Employee Orientation (NEO) and Values
Orientation Workshop (VOW) programs. The
NEO and VOW programs were revamped in 2013,
making them more engaging for a new generation
of Unibankers. New programs were also launched
to boost personal effectiveness: the Personal
Effectiveness (PEP) and Professional Enhancement
(PEF) Programs.
Officers Training Program (OTP). In response to
the Bank’s growing need for more officers, the
OTP was beefed up in 2013 to accommodate 328
Management Trainees (MTs)—an 80% jump from the
previous year. Of the total number of MTs, 79% were
internal staff candidates, a 10% increase from the
previous year.
Sales Officers Training Program (SOTP). In 2013, 41
SOTP MTs were trained compared to 39 the previous
year. Two tracks were offered for the SOTP: Asset
Management and Trust and Consumer Banking.
32
Stepping Up to Management (SUM). One of the
Bank’s most important HR collaborations is Stepping
Up to Management, a partnership with Harvard
Business Publishing (HBP). Over the course of
eight weeks, SUM participants are taught people
management skills that would prepare them to
proactively coach and empower their teams. In
2013, participation in SUM jumped by 59%, from 161
participants in 2012 to 256 in 2013. This program was
also expanded to areas outside Metro Manila, with
classes held in Cebu, Davao, Angeles (Pampanga),
Negros and Dagupan (Pangasinan). This enabled BPI
not only to boost the competencies of its provincial
managers, but it also created an opportunity for
managers to work more closely together and forge
better teamwork and synergy.
Leadership Excellence Acceleration Program
(LEAP). LEAP is another of BPI’s award-winning
programs, likewise developed in partnership with
HBP. In 2013, 109 officers graduated from LEAP’s
16-week Executive Development Program, bringing
the number of people trained to almost 900
since 2009. LEAP was recognized by the People
Management Association of the Philippines (PMAP)
in 2012 as its People Program of the Year because
of the huge impact it has brought to the Bank’s level
of innovation and leadership, and the way it has
“democratized executive education in the country.”
Relationship Managers (RM) Academy. The RM
Academy is an intensive, six-module, two-month
program built for Relationship Managers who help
manage clients’ financial portfolios. The program
strengthens the role of Financial Advisory to help
clients become more successful in their businesses
and their financial management.
In 2013, the RM Academy moved to the next level
with the successful holding of the RM Congress.
More than 376 RMs for individual accounts and
product managers from all over the country
converged to discuss the latest relationshipmanagement trends and initiatives. About 75% of
the RMs for individual accounts are now certified
with the Academy’s Financial Advisory for Consumer
Banking Course.
To make learning even more convenient for
Unibankers, BPI introduced the My eLearning
online platform, a portal that enables Unibankers
to take online training courses, access educational
materials, and administer their own learning
programs. Over 80 online courses are now available
through this portal.
In 2013, online learning received another
boost with the introduction of Leadership Café,
a “blended” learning program that combines an
employee’s online learning experience with a
4/8/14 7:47 PM
people
one-hour, face-to-face discussion with his Area
Manager. These blended learning programs help
increase the level of retention and insights derived
from online lessons—thanks to face-to-face
interactions, employees and managers alike are
able to process these insights and manage their
application in real-life situations.
Aside from all of these learning programs, the
Bank also helps employees due for retirement
transition to the next phase in their lives, through
annual seminars on investment opportunities,
entrepreneurial prospects, and estate planning.
Average hours of training per employee
By gender
31.38
hours
Male
Female
33.40
hours
By employment category
17.57 hours
Middle management: 44.22 hours
Junior supervisory: 38.68 hours
Rank and file: 29.15 hours
Senior management:
Average no. of training hours per employee:
32.80
Percentage of employees receiving regular performance
and career development reviews
Number of employees who underwent performance review
GENDER
Male
NUMBER
3,874
OFFICERS
NON-UNIONIZED STAFF
SPECIALISTS
TOTAL
98
155
1,629
1,376
42.04%
Female
9,150
2,624
248
229
3,101
33.89%
TOTAL
13,024
4,000
346
384
4,730
36.32%
Nurturing talent
BPI has one of the lowest voluntary attrition rates
in the banking industry, at only 6% in 2013. The
Bank employs a wide range of employee retention
strategies and runs a wide range of health, wellness,
communications, community development, and
administrative programs to cater to Unibankers’
various needs and promote a healthy work-life balance.
PERCENTAGE
Health and wellness programs. BPI recognizes
that health is the true wealth of its Unibankers; it
therefore runs programs and seminars on illness
prevention, risk control, cancer awareness and
stroke prevention. Wellness fairs—where employees
and family members are able to avail of physical
examinations and vaccinations—are also regularly
conducted in BPI offices and business centers.
33
4/8/14 7:47 PM
“Keep fit, feed a child” program. This unique
wellness program, now on its fourth year, engaged
Unibankers who pledged to lose weight for the
benefit of Kabisig ng Kalahi, a non-government
organization that conducts feeding programs
in elementary schools. From among Kabisig ng
Kalahi’s numerous beneficiaries, BPI zeroed in on
30 kindergarten, grade 1 and grade 2 students
from the Gregorio del Pilar Elementary School in
Tondo, Manila. Every pound lost by an employee
was matched by a Php 100 donation from the Bank
to the feeding program. In 2013, BPI donated Php
60,000 to this program, providing healthy lunch
and milk every school day for six months to each
of the 30 school children. After six months in this
feeding program, the children attained their ideal,
age-appropriate weight.
Internal communications. Communication across
the organization has been enhanced through
the HR Intranet portal called myBPIonline. Aside
from sharing information and company news,
myBPIonline also houses employee self-help
tools and articles on Unibankers’ most common
concerns and interests. This editorial strategy
has quadrupled the portal’s hits and improved
employee engagement.
Another online platform that has made it easy
for employees to manage their HR concerns is
My e-HR. A Web-based self-service facility using
the Oracle-Peoplesoft platform, My e-HR brings
HR closer to Unibankers and allows them to view
pay slips, loan applications, absence balances,
timesheets, PLR and CBA letters, e-Clearance, BIR
forms and employment benefits.
Interest clubs. BPI is one of the few companies in
the country that maintain in-house interest clubs
for its employees. In 2013, the Bank launched the
Interest Club Month, a celebration that highlighted
the different activities of the 12 interest clubs such
as photography, culinary, singing, and sports.
Recognition programs. Employee recognition
is a big part of BPI’s culture. Every year, the
company organizes various events to celebrate the
accomplishments and milestones of its corporate
community. These include the Unibank Excellence
Awards, the Corporate Anniversary, the Service
Awards Night for Regular Retirees, and the Service
Awards Night for 25-Year Awardees.
Rewarding excellence
A key component of BPI’s employee value
proposition is to provide an attractive and
competitive compensation package for its human
resource.
Aside from offering a basic monthly salary that
is above the mandatory minimum wage applied
34
uniformly across the country, BPI offers generous
benefits that include quarterly bonuses (inclusive
of 13th month pay), overtime pay, and various leave
credits (vacation, sick, emergency and maternity/
paternity).
BPI administers its compensation programs
in a manner that would attract and retain quality
individuals, and so that they would be encouraged
and rewarded for high level performance. It
maintains sound salary structures that recognize the
potential, competence and responsibility levels of
individuals, at the same time taking into account the
prevailing pay levels in the area for equivalent work.
The Bank’s compensation packages are
reviewed on a regular basis, while job evaluations
are conducted at the beginning of the year to serve
as the bases for salary adjustments and promotions.
One of the major incentives for employees is
the grant of a performance bonus (PB), which is
designed to correlate quality of performance with
overall bank profitability by providing a one-time
PB on a yearly basis to deserving officers. The PB is
based not only on officers’ individual productivity
and performance relative to their assigned targets,
but also in comparison with their peers within
their rank, taking due recognition of the individual’s
overall impact on the Bank’s performance for
the year.
It could be said, therefore, that BPI’s pay
philosophy is anchored on the following key
principles in compensation administration: reflective
of internal equity, externally competitive, and
emphasis on rewards based on performance.
Most of the 1,315 employees who left BPI in 2013
were below 30 years old, female and based
in Luzon. The rest of the employee turnover
information is as follows:
AGE GROUP
NUMBER
Below 30
percentage
849
65%
30-50
315
24%
Over 50
151
11%
GENDER
NUMBER
512
Male
Female
REGION
803
NUMBER
Luzon
1,205
PERCENTAGE
39%
61%
PERCENTAGE
92%
Visayas
60
5%
Mindanao
50
4%
Employee attrition is at 10.1% (1,315 turnover/13,024
total workforce), but only 6% of these employees left
voluntarily. The others left due to regular retirement
and termination.
4/8/14 7:47 PM
people
Ratio of basic salary and remuneration by employee category
Employee Category
Male to female ratio*
Senior Management
56:44
Middle Management
36:64
Junior Supervisory
34:66
Rank and File
27:73
*Defined as total salaries per gender over total salaries (male + female)
Return to work and retention rates after parental leave
No. of employees entitled to parental leave in 2013: 5,965
Gender
No. of employees who
took parental leave
Male
No. of employees who returned to
work after parental leave ended*
114
Female
468
Total
582
107
448
555
*Employees whose parental leaves ended within 2013
Other financial benefits. There are currently 26 labor
unions in BPI, and employees are free to join any of
these unions. At present, 95% (or 7,729 individuals)
of the Bank’s 8,161 rank-and-file employees are
covered by Collective Bargaining Agreements (CBA).
BPI also offers a wide variety of financial products
and services to its employees, at very affordable terms.
The Bank offers low-interest rates for auto and housing
loans, emergency loans, and other multi-purpose loans;
employees also enjoy medical and group term insurance
for additional security. It also offers a generous
retirement benefit plan, which is determined by the
employee’s age, tenure with the company, and
monthly compensation.
Another testament to BPI’s commitment of
aligning interests among external and internal
stakeholders is the recent launch of the Executive
Stock Purchase Plans (ESPP). Through the ESPP,
officers are given the opportunity to buy shares
of stock in BPI, at a discounted price based on
the volume weighted average of BPI’s share price
for the past 30 days. Management believes that a
stronger alignment between BPI’s officers and its
shareholders will lead to improved financial results
for the Bank. Indeed, improved financial results for
the Institution are cascaded to Unibankers.
Performance management. All BPI employees
undergo regular performance evaluations based
on their individual key result areas (KRAs) and
accomplishments. These include targets in
earnings performance, asset quality, business
volume, customer satisfaction, and corporate
governance, among others. In 2013, all officers and
specialists in the organization underwent regular
performance evaluation.
Moreover, BPI is one of the few companies in the
Philippines using a cloud-based performance
management system. Called MyPACT
(Performance Alignment, Conversations and Total
Development), the system allows officers to set
KRAs and objectives at the start of the year, create
developmental plans, record performance through
online journals, and assess performance. Supervisors
approve goals and appraisals of their individual team
members via the online system.
Promotion to senior management. In 2013, BPI
rolled out a new process to identify and select
new Senior Officers, ensuring that the Bank would
be able to promote its most deserving nominees
given its increasing size and the market’s increasing
complexity. President Cezar P. Consing has formed
Nomination Committees for vetting promotions
for Vice Presidents and Senior Vice Presidents,
using systematic and consolidated promotion data.
Three new Senior Vice Presidents and 20 new Vice
Presidents were chosen through the process.
Ensuring sound governance
BPI not only adheres to labor laws and regulations;
it also implements best practices in workplace
employee relations.
The Bank recruits qualified talent regardless of
race, color, gender, religion, political stand, or social
background. It maximizes local skills and talents in
areas where there are BPI cash centers, branches and
business centers meant to serve the local populace.
It takes a proactive role in recruiting graduates of
universities in the areas outside Metro Manila, giving BPI
the competitive advantage of local market knowledge.
The Bank also believes that excellent
communication, open dialogue, and cooperation
35
4/8/14 7:47 PM
BPI also has a grievance mechanism embedded
in the CBA to promptly dispose and amicably
settle grievances. Clear steps are defined to allow
arbitration at every level possible. The Bank’s Labor
Management Council meets regularly at the regional
level in order to take a proactive role in resolving
possible issues that might arise due to changing
workplace conditions.
with employees results in good relations between
management and labor. Thus, BPI maintains
harmonious relations and constant communication
with its 26 labor unions.
To this end, activities involving management
and the unions are regularly held. These activities
include quarterly Management Conferences, formal
and informal huddles on urgent issues, team-building
workshops, learning sessions and knowledge
sharing. These activities have helped create a
conducive and open atmosphere for offering
feedback, settling disputes, if any, and keeping
updated on labor trends and regulations.
Empowering volunteers
Social accountability and corporate citizenship are
deeply embedded in BPI’s DNA and are very much
a part of the Bank’s mission and corporate strategy.
Diverse talent base
Board of Directors
No. of Directors: 14
Below 30 years old: 0
male: 11 (79%)
30-50 years old: 1 (7%)
Over 50 years old: 13 (93%)
female: 3 (21%)
Senior Management
Below 30 years old: 0
No. of OFFICERS: 168
30-50 years old: 52 (31 male, 21 female; 31%)
Male: 86
Over 50 years old: 116 (55 male, 61 female; 69%)
FEMale: 82
Middle Management
Below 30 years old: 7 (5 male, 2 female; 1%)
No. of OFFICERS: 855
30-50 years old: 532 (198 male, 334 female; 62%)
Male: 308
FEMale: 547
Junior Supervisory
Below 30 years old: 1,400 (521 male, 879 female; 36%)
No. of OFFICERS: 3,840
30-50 years old: 2,165 (646 male, 1,519 female; 56%)
Male: 1,287
FEMale: 2,553
Rank and File
No. of Rank-and-File Employees: 8,161
Male: 2,193 Female: 5,968
Below 30 years old: 4,644 (1,211 male, 3,433 female; 57%)
30-50 years old: 3,126 (839 male, 2,287 female; 38%)
36
4/8/14 7:47 PM
people
The Bank takes pride in its employee volunteerism
program, called BPI Bayan, which stands for
Bayanihan Para sa Inang Bayan, which encourages
Unibankers to create sustainable volunteer programs
for their respective communities. First launched in
2011, BPI Bayan activities range from social services
to entrepreneurship, educational and environmentrelated projects.
Over the past two years, BPI Bayan has
involved a total of 4,961 employees who put in a
total of 47,890 volunteer hours and impacted 137
communities nationwide. In 2013 alone, 42 BPI Bayan
projects were implemented.
On its 162nd Anniversary in 2013, the Bank
through BPI Bayan started the Nationwide
Volunteers Day, which enabled BPI employees to
do volunteer work in their adopted beneficiaries,
all in one day. Unibankers brought the effort online,
using the hashtags #VolunteersDay and #BPIBayan,
generating additional support from netizens.
In late 2013, when a series of catastrophes hit
the country—an insurgent uprising in Zamboanga in
September, a series of earthquakes in Bohol and Cebu
in October, and super-typhoon Yolanda devastating
several provinces in the Visayas in November—
Unibankers stepped up to help. Unibankers sent cash
and in-kind donations, and volunteered to prepare
relief packages. Many employees joined The Ayala
Group’s One Big Ayala Volunteer Night in various
relief centers of the Department of Social Welfare and
Development (DSWD).
Because of the severity of the damage wrought
by supertyphoon Yolanda, BPI launched the 10M+10M
Campaign to raise funds for the badly hit communities.
Unibankers were challenged to raise Php 10 million,
with the Bank pledging to match donations pesofor-peso. Employees launched their own fund-raising
efforts, with some choosing to donate their Christmas
Party budgets. In a span of 17 days, Unibankers were
Zero’s not a
bad number
after all
Reaping rewards
2013 was a “grand slam” year for BPI Human Resources,
proving that beyond its technological, service, and
product innovations, the Bank is also a leader in
human resources and an employer of choice.
In June 2013, BPI was named Grand Winner in
the Kapatid Awards by the Employers Confederation
of the Philippines (ECOP), besting well-known
multinational corporations for the coveted prize.
ECOP is an umbrella organization of Philippine
business organizations, acting as a single voice
for the business community on important national
issues related to employment, industrial relations,
labor and related social issues. Overall, BPI was
recognized for having balanced work practices in
four categories: Strategic Visioning, Productivity
and Quality, Social Accountability, and Partnering
for Business and Job Survival, Industrial Peace and
Harmony.
A month later, in July 2013, BPI also won the
Employer of the Year-Gold, the highest award in its
category, in the 2013 Asian Banking & Finance Retail
Banking Awards given by Asian Banking and Finance
Magazine. The Bank bested all other competitors
from all over the Asia Pacific.
In October 2013, the efforts of the Bank in human
resource and development were further recognized
when HR Group Head Fidelina A. Corcuera was named
the 2013 PMAP People Manager of the Year by the
People Management Association of the Philippines
(PMAP), the largest organization of human resource
management practitioners in the country.
In 2013, there were no health incidents
reported among BPI Unibankers.
No injuries
No occupational diseases
No serious work-related diseases
No work-related accidental deaths
There were also no labor incidents
reported in 2013.
No labor discrimination
No compulsory labor
No cases of abuse,
including child abuse
No cases of grievances related to
human rights
able to raise over Php 11 million, equally matched by
the Bank. (See Special Feature, “A United Front”)
All security personnel
under third-party security
agencies and 70% of
security personnel
directly hired by BPI
have received formal
training in BPI’s policies
and specific procedures
for human rights issues
and their application to
security.
37
4/8/14 7:47 PM
Now, more
than ever
Going and living green—especially in a year that saw the
country hit by the two most devastating natural calamities
in recent memory—gained a renewed importance for
the Bank in 2013, as we continued to demonstrate our
commitment to the highest standards of environmental
sustainability and social responsibility.
Sustainable energy financing
Five years after we launched a pioneering venture
with the World Bank-affiliated International Finance
Corporation (IFC), we continued to boost private
sector investments in energy efficiency and
renewable energy projects, capturing the bulk of the
IFC’s Sustainable Energy Finance (SEF) Program’s
total loan portfolio in the country.
For 2013, total loans and leases released under the
SEF Program amounted to Php 4.6 billion, slightly
higher than in 2012, bringing our total SEF loan
portfolio to Php 13.4 billion. Outstanding loans as of
end-2013 reached Php 9.77 billion.
SEF projects saved approximately 115,613 MWh of
energy per year, while producing 1,105,011 MWh of
clean energy annually. Greenhouse gas emissions
avoided reached 808,793 tons per year.
Most of the projects financed in 2013 were energy
efficiency projects such as the construction of
energy-efficient office buildings, warehouses and
factories; retrofits of existing buildings; and upgrading
of equipment and refrigeration systems.
Meanwhile, renewable energy projects financed
during the year include biomass drying facilities and
recovery systems and the installation of solar PV
systems.
Apart from financing sustainable energy projects to
small and medium enterprises (SMEs), we are also
committed to educating our employees about energy
solutions that they could impart to our clients. We
held in-house training sessions and workshops in the
country’s key cities to train our account officers and
relationship managers on the recent technologies
under SEF, and identified financing opportunities and
influenced the utilization of energy finance in their
respective markets and areas.
The SEF Team also conducted two SEF Boot
Camps during the year, both in Puerto Princesa,
Palawan. The boot camps are training workshops for
preselected account officers (AOs) jointly conducted
by BPI and the IFC. It aims to equip AOs with the
knowledge and expertise they need to effectively
market SEF to their clients.
As a leader in sustainable energy financing in East
Asia, the Bank was invited to international events
such as the FinNet 2013 in Washington, D.C.; the
IFC Financial Sector Partners Meet in Kochi, India;
and the HK Global Investor Forum. These fora were
opportunities for us to share our expertise in SEF
and the best practices adopted in the Philippines.
• A 571-kWp (kilowatt-peak) solar rooftop
project with the Asian Development Bank,
which is expected to reduce ADB’s total energy
consumption by 8% yearly;
The SEF Philippines initiated by the IFC in 2008 with
BPI as lead partner bank was also recognized by the
United Nations Framework Convention on Climate
Change in the “Momentum for Change” activities in
Warsaw, Poland. The award recognized innovative
projects and activities that contributed to the global
fight against climate change.
• Retrofitting of an international school’s facilities
as well as replacing its old HVAC (heating,
ventilation and air conditioning) and lighting
systems; and
BPI has been fully compliant with environmental laws
and regulations, and has not been sanctioned for
non-compliance with such laws and regulations.
Some of the more notable projects financed under
the SEF Program include:
38
• Acquisition of a biomass recovery system for the
additional steam supply of a bottling company.
PP X-X Environment NEW layout_ugec new.indd 38
4/8/14 7:45 PM
envIronment
SUStaINaBLe eNerGY
FINANCEPROGRAM
2012
2013
tYPE of Loan
DiffEREncE
Sustainable energy loans
Php 4.2 billion
Php 4.6 billion
9.52%
Total outstanding loans
Php 7.35 billion
Php 9.77 billion
32.96%
SeF
PROJECTIMPACT
2012
2013
DiffEREncE
Total energy saved
(MWh per year)
89,821
115,613
28.71%
Clean energy produced
(MWh per year)
630,742
1,105,011
75.19%
Carbon emissions abated
(tons CO2 per year)
645,774
808,793
25.24%
39
4/8/14 7:45 PM
Climate risk adaptation
Saving paper
Our partnership with WWF Philippines on the
ClimateRiskAdaptationProjecthititsthirdphase
in2013,coveringthecitiesofAngeles,Batangas,
Naga and Tacloban. The program aims to help city
planners and decision makers assess the impacts of
climate change, identify opportunities and decide
on life-saving sustainability strategies to allow
Philippine cities to retain their economic viability in
a climate-defined future.
We also made new strides in cutting our paper use.
UnderourAssetManagementandTrust,
the growing usage of alternative channels, such as
BPI Expressonline and the BPI Mobile smartphone
app, helped sustain our campaign for paperless
transactions and reporting, such that the number
of investors who opted not to receive hardcopy
statements grew by 57% in 2013.
This project is based on the climate trends drawn
from existing climate studies and city-specific
socio-economic information for the last 20 years
and the scenario-building exercises of various
stakeholder participants of an action-oriented
proposal for the next 30 years.
The BPI Card Banking’s mission—to provide
customers with electronic payment solutions
that would diminish the use of cash—has led it to
relentlessly pursue migration from cash payments
to digital and other e-solutions.
In addition, because of BPI Cards’ no-frills
proposition, card holders also need not to worry
abouttrackingandredeemingrewards.Arebate
program is in place allowing the bank to save on
paper for gift certificates—and on fuel, which would
have been consumed to deliver the redemptions.
The study’s first two phases covered the cities of
Baguio,CagayandeOro,Cebu,Davao,Dagupan,
Iloilo, Laoag and Zamboanga from 2011 to 2012.
These studies, entitled BusinessRiskAssessment
and Management of Climate Impacts, are publicly
available on the BPI Foundation websites
and WWF.
To facilitate paperless payments, about 1.15 million
offline contactless cards were produced, generating
more than Php 1.5 billion pesos in billings.
reDUCeD USe
OFPAPER
57%
36
Reductionofhard
copy statements by
BPI investors
Pages of paper saved per
customer who opts for card
banking and e-statements
ABOUT 1.15 MILLION
Bank cards produced
to facilitate paperless
payments
40
4/8/14 7:45 PM
envIronment
Saving fuel and energy
Our Central Security Office also aided our
sustainability initiatives. To save on fuel, it
establishedtheCentralVideoandAlarm
MonitoringSystem(CVAMS),whichconnectsall
branches and cash centers to the Central Security
Office for real-time monitoring and immediate
response. This system eliminates the need for
motorized roving guards—about 80 of them—
inspecting the branches during non-banking hours.
Oncecompleted,theCVAMSwillsaveforthebank
Php 45 million in costs for transport services. So
far the Security Group’s savings generated by this
amount to 67,200 liters of fuel, worth about
Php 3.36 million.
Energy-wise, the Central Security Office
implemented several process improvements,
enhancing the group’s security and control, thus
extending the useful life of equipment by about
20%. The expected direct annual savings of this
move is Php 15.5 million, which would otherwise go
to equipment replacement and repair costs.
Overall, these projects are saving for the Bank
an estimated 160,439 kilowatt hours, or Php 1.92
million per 12-hour branch operation (or Php 12
pesos per kWh).
FUeL aND eNerGY
SAVINGS
67,200
Liters of fuel
saved with
CVAMS
PHP 45 MILLION
Cost savings on
transport services
upon completion of
CVAMS
160,439
kilowatt
hours
Energy
saved with
CVAMS
and server
move
20%
PHP 15.5
MILLION
Cost
savings with
enhancements
in security
system
Lifespan increase
of equipment used
(DVRs, recorders)
with move to
single server
cabinet
PHP 1.92
MILLION PER
12-HOUR
OPERATION
(OR PHP 12
PER KWH)
Cost
equivalent
of energy
saved with
CVAMS and
server
move
PHP 3.36 MILLION
Cost savings
generated
in 2013 with
CVAMS
4/8/14 7:45 PM
Solar-powered branches
We installed a 5 kW commercial solar photovoltaic
(PV)systematourAyalaAvenueExtension(Makati
City) branch, which would lead to savings in this
branch’s electricity bill. Outfitting this branch made
sense because it is not surrounded by tall buildings,
allowing the solar panels to freely catch sunlight.
This is our second “green” branch after we opened
a solar power system at the 10-square-meter branch
insidetheAsianDevelopmentBankheadquarters
in Pasig City in 2012. We also outfitted the Cainta
Junction(Rizalprovince)branchwithsolarpanels.
We expect about half of our branches fitted with PV
systems that in turn will lead to substantial savings
in monthly electricity consumption.
We have also changed the standard for our
branches’ horizontal and vertical signage by
usingLEDlightsinsteadoffluorescentlamps.In
general,althoughLEDlampscostmorethanthe
fluorescents, they use half as much electricity, last
six times longer, and provide annual operating cost
savings of 50 percent over fluorescent lights.
SOLARPOWERaNDLEDSAVINGS
400+
Number of BPI branches
expected to switch to
solar power
50%
Annualcostsavings
ofswitchingtoLED
bulbs from CFL bulbs
for bank signages
Other energy-consumption numbers registered by BPI in 2012-2013
Diesel fuel (in liters) used in generators
Location
Branches
Head office
Business/Cash centers
Tenanted sites
total
42
2012
2013
198,452
(427 branches)
151,226
(450 branches)
4,600
4,200
423
607
4,000
10,000
207,475
166,033
4/8/14 7:45 PM
environment
Other energy-consumption numbers registered by BPI in 2012-2013
Electricity (in kilowatt hours) consumed and saved
Location
2012
2013
ENERGY SAVED
27,223,559
(695 branches)
25,880,466
(686 branches)
1,343,093
14,064,440
13,828,446
235,994
426,825
455,000
(28,175)
Tenanted sites
12,127,7402
1 1,1 1 8,062
1,009,678
TOTAL
53,842,564
51,281,974
2,560,590
Branches
Head office
Water (in cubic meters) consumed and saved
Location
2012
2013
WATER SAVED
303,376
(626 branches)
404,355
(629 branches)
(100,979)
133,277
150,464
(17,187)
2,510
3,368
(858)
Tenanted sites
89,068
98,634
(9,566)
TOTAL
528,231
656,821
(128,590)
Branches
Head office
Greenhouse gas emissions (in metric tons of CO2)
Reason for GHG
emission
2012
Fuel use
555
Electricity use
26,660
3
Business-related travel
Foreign travel
Use of armored cars
TOTAL
Reductions
achieved
2013
447
108
25,392
1,268
37,049
43,175
(6,126)
35,249
41,297
(6,048)
1,800
1,878
(78)
64,264
69,014
(4,750)
Waste (in tons) by type and disposal method
Waste
Recyclable materials
collected by accredited
junk shops
2012
2013
waste reduced
59
82
(23)
Residuals collected by
MACEA4 and sent to landfills
156
161
(5)
TOTAL
215
243
(28)
The number indicated in the 2012 Integrated Annual and Sustainability Report (20,656,688 kWh) is erroneous.
The number in the table above is the correct amount.
Emission factor used in 2012 was based on on “ CDM Baseline Construction for te Electricity Grids in the Philippines” published by the Institute for Global
Enviroment Strategies and the Manila Observatory. For 2013 date, the Indirect C02 Emissions from Purchased Electricity tool (2007) Version 3.0, developed
by World Resource Institute (WRI), was used. For uniformity, data for 2012 was recomputed using the latter tool.
4
MACEA, or the Makati Commercial Estate Association, is an association of owners, lessees and occupants of lots in the Makati Central Business Disctrict.
2
3
43
4/8/14 7:45 PM
A UNITED
FRONT
Employees, management
and partners join hands to
rebuild areas devastated
by super-typhoon
Yolanda
BPI has a total of three branches in Tacloban
City: Tacloban Main on Justice Romualdez
Street, Tacloban Rizal on Rizal Avenue and
Tacloban Marasbaras on Senator Tabuan
National Highway, Marasbaras.
Immediately after the storm, the first action
the Bank undertook was to track each of the
45 employees that manned the Tacloban City
branches. Everyone was located, with the last
one taking two weeks to find.
BPI airlifted food, blankets and other
PP 60-61 Yolanda.indd 44
provisions: flashlights, medicines and generator
sets to its people and their families. In the first
few days when Tacloban remained in a flux,
with its airport barely functioning, BPI had to
use a helicopter to bring in the deliveries.
Eventually, it became obvious that the
needs of the employees would have to be
sustained for a longer period of time. Logistical
challenges hampered the continuous sending
of relief goods by air. It was far more efficient
to relocate the 45 individuals and their families
to the YMCA in Cebu City where they were
sheltered and provided meals. When there was
again a semblance of stability in Tacloban, they
were repatriated.
Fund-matching campaign
BPI initiated a fund-raising program that
pooled together donations from BPI
4/8/14 7:29 PM
employees all over the country for the
rehabilitation in the aftermath of the storm.
Under the fund-matching campaign, dubbed
“10M + 10M,” the Bank promised to match the
donations made by its employees peso-for-peso
if the donation reached Php 10 million.
In a little over two weeks, BPI employees raised
over Php 11 million, resulting in a combined
donation of more than Php 22 million, from the
Bank and its employees.
The BPI Foundation also received
donations from different sources from the
public, which amounted to Php 10 million, for a
grand total of some Php 33 million.
Of this amount, Php 10 million was allotted
for building 2-storey, 4-classroom school
buildings in the devastated areas. These
school buildings follow the architectural plan
already being used by the Foundation in
similar rebuilding efforts in Cagayan de Oro.
This Misamis Oriental city was hit by massive
floods triggered by typhoon Sendong back
in December 2011, leaving residents displaced
and structures wiped out.
The houses, on the other hand, were
allotted first for teachers whose houses were
destroyed by the typhoon. Each house is
estimated to cost Php 200,000.
The Bank has partnered with different
organizations such as Habitat for Humanity
and the Department of Education to specialize
in specific areas of rehabilitation to put
this amount to good use, rebuilding houses
and school buildings in areas hit by
super-typhoon Yolanda.
Repairing BPI branches
The plight of the three branches was another
matter. In the event of a natural calamity, the
Bank can normally reopen a branch within
two to three days of sustaining major damage.
Rehabilitation for the three in this case took
some time because Tacloban, which faces
Cancabato Bay in the San Juanico Strait, juts
out from an outlying area. Bringing heavy
equipment posed a challenge.
Generator sets had to be brought in as
the electricity infrastracture in the area was
all but wiped out. All BPI ATM machines had
to be completely replaced as these had been
submerged in water from the storm surge.
Marasbaras branch sustained the heaviest
damage with its roof blown off, all walls
destroyed, and the furniture covered in mud
and wet. The Rizal branch, being near the sea,
bore the strong impact of the rush of water.
Tacloban Main was reopened 10 days after the
typhoon struck, Rizal reopened almost two
weeks after. Marasbaras as of February 2014
remained non-operational.
PP 60-61 Yolanda.indd 45
PREPARING FOR
A CHANGING
CLIMATE
In 2010, the BPI Foundation and
the World Wide Fund for Nature
(WWF) jointly undertook a
study on climate change and
how it would likely affect the
future of 12 major cities in
the Philippines. Included in
the study, entitled Business
Risk Assessment and the
Management of Climate Change
Impacts, was Tacloban, a city
along the northeastern coast
of Leyte.
Among other things,
Tacloban was cited for its
increasing subjection to stronger
cyclones, as seen from its weather
history in the last five years. That
it also sat barely three meters
above sea level while facing the
Pacific Ocean (from which most
tropical cyclones come) only
served to expose it to further
potential risks.
Scenarios drawn by the study
became reality when Typhoon
Yolanda (Haiyan) hit the Visayas
region in November 2013. It
turned out to be the strongest
typhoon recorded in history, with
record wind speeds creating a
storm surge that killed more than
6,000 people in the Philippines.
September of 2013 was
the last time BPI Foundation
Executive Florendo G. Maranan
saw Tacloban City as it was,
alive and rife with business
activity. In the aftermath of
Yolanda, coconut trees in once
thick groves were felled like
sticks. Houses were wiped out,
buildings had their roofs ripped
off, posts were toppled to the
ground and many bodies of
those who did not survive the
calamity were woefully half
buried in the mire. Maranan,
though, notes that in spite of the
havoc and the ruin, “you could
still see lots of people willing to
pick up from the devastation.”
The BPI-WWF study is a
contribution towards helping
people prepare for climate
change events.
45
4/8/14 7:29 PM
SOUND,
RESPONSIBLE
AND
EFFECTIVE
At BPI, we believe that our strength, growth
and banking leadership are founded on a sound,
responsible and effective corporate governance.
Our policies and standards comply with applicable
laws and regulations, and are regularly reviewed
and updated to conform to changes in the
regulatory environment. We pursue best practices
in risk management across all our businesses to
ensure integrity in everything we do.
We use the standards of the BsP Capital Adequacy,
Asset Quality, management Quality, Earnings,
Liquidity and sensitivity to market Risk (CAmELs)
rating and the Corporate Governance scorecard
prescribed by the Institute of Corporate Directors
(ICD) to measure our governance quality. In 2013,
we were bestowed Asia’s most Outstanding
Company on Corporate Governance (Philippines) by
Corporate Governance Asia.
Board of Directors
Our Board of Directors (Board), the highest
governance body of the Bank, ensures that a
strong and effective governance system is in place
throughout the entire organization. The Board is
responsible for the long-term success of the Bank
for the benefit of all our stakeholders. Its directive
includes setting strategic business directions,
appointing senior executive officers, confirming the
appropriate organizational structures, approving
major strategies and policies, overseeing major
risk-taking activities, monitoring business and
management performance, and generating a
reasonable investment return to shareholders.
interest or relationship with BPI at the time of
election or appointment and/or re-election.
Thirteen of these 14 directors are non-executive
officers of the Bank.
Qualification: They are highly qualified business
professionals with a broad range of experience and
expertise required in the governance of a financial
institution.
Selection: They are elected by BPI stockholders
who are entitled to one vote per share at the Annual
stockholders’ meeting.
Compensation/Incentive Structure:
The Bank’s By-Laws provide that “Each director
shall be entitled to receive from the Bank, pursuant
to a resolution of the Board of Directors, fees and
other compensation for his services as director. The
Board of Directors shall have the sole authority to
determine the amount, form and structure of the
fees and other compensation of the directors. In no
case shall the total yearly compensation of directors
exceed one percent (1%) of the net income before
income tax of the Bank during the preceding year.”
Structure of Compensation Packages: The
directors receive per diems for attendance
in meetings of the entire Board or of Board
Committees. The per diem amount is set and
approved by a resolution of the Board. historically,
it is a fraction of one percent (1%) of the total
net income of the Bank. Bonuses may be given
as approved by stockholders during the Annual
stockholders’ meeting, upon recommendation
of the Personnel Committee.
Composition: 14 directors, five of whom are
Independent Directors, or those who have no
46
PP X-X Corporate Governance_ugec new.indd 46
4/8/14 7:44 PM
This compensation structure is the same as
last year’s.
Note: Executive Directors receive remuneration as
Officers and not as Directors of the Company.
Board committees and memberships
The Board carries out its various responsibilities
through the Executive Committee and delegates
specific responsibilities to other committees that
focus on certain areas as allowed by law. The
different committees of the Board are:
Executive Committee. This committee shall, in the
interim between meetings of the Board, possess
and exercise all the powers of the Board in the
management and direction of the affairs of the
Bank subject to the provisions of the BPI By-Laws
and the limitations of the law. It approves all major
policies and oversees all major risk-taking activities.
It functions as the Board’s committee for the
approval of all major credit risks.
Composition of the Executive Committee
Chairman
Vice ChairmanFernando Zobel de Ayala
Members
Cezar P. Consing, President and CEO
Rebecca G. Fernando
Aurelio R. Montinola III
Antonio Jose U. Periquet (Independent)
Chng Sok Hui*
Alternate MemberMercedita S. Nolledo
(for Jaime Augusto Zobel de Ayala
and Fernando Zobel de Ayala)
Corporate Governance Committee. This committee
assists the Board in fulfilling its corporate
governance responsibilities, and ensures the
Board’s effectiveness and due observance of sound
corporate governance principles and guidelines.
Composition of the Nominations Committee
Chairman
Romeo L. Bernardo (Independent)
MembersSolomon M. Hermosura
Xavier P. Loinaz (Independent)
Chng Sok Hui*
Audit Committee. This committee monitors and
evaluates the adequacy and effectiveness of the
BPI Group’s internal control system. It also provides
oversight of the overall management of operating
risks, financial reporting and control, internal audit
and external auditors, quality of compliance with
the Corporate Governance Manual, and reviews
conducted by the BSP.
Composition of the Audit Committee
ChairmanXavier P. Loinaz (Independent)
Members
Octavio V. Espiritu (Independent)
Oscar S. Reyes
Khoo Teng Cheong*
Risk Management Committee. This committee is
tasked with nurturing a culture of risk management
across the enterprise, proposing guidelines and
regularly reviewing risk management structures,
limits, issues and measurements across the BPI
Group, in order to meet and comply with regulatory
and international standards on risk measurement
and management. It also supports technology and
training for key personnel in risk management.
Composition of the Risk Management Committee
Chairman
Octavio V. Espiritu (Independent)
Members
Cezar P. Consing
Composition of the Corporate
Governance Committee
Khoo Teng Cheong*
Chairman
Artemio V. Panganiban (Independent)
Members
Solomon M. Hermosura
Mercedita S. Nolledo
Oscar S. Reyes
Chng Sok Hui*
Nominations Committee. This committee ensures
that the Board of Directors is made up of individuals
of proven integrity and competence, and that
each Director possesses the ability and the resolve
to effectively oversee the Bank. This committee
also reviews and evaluates the qualifications of
all persons nominated to positions in the Bank
requiring the appointment of the Board.
Trust Committee. This committee oversees
the proper administration and management of
the Bank’s trust and other fiduciary business
and its investment activities to ensure effective
management of all risks inherent in the business.
Composition of the Trust Committee
ChairmanMercedita S. Nolledo
Vice Chairman
Members
Cezar P. Consing
Rebecca G. Fernando
Fernando Zobel de Ayala
Maria Theresa M. Javier, Trust Officer
*Resigned effective November 28, 2013
47
4/8/14 7:44 PM
Personnel and Compensation Committee. This
committee directs and ensures the development
and implementation of long-term Human Resources
Strategy/Plan based on the Board’s vision of the
organization.
Retirement/Pension Committee. This committee
oversees the investment portfolio and fiduciary,
administrative and other non-investment aspects of
the Retirement Plan.
Composition of the Personnel and Compensation
ChairmanMercedita S. Nolledo
Committee
Members
Cezar P. Consing
ChairmanFernando Zobel de Ayala
Rebecca G. Fernando
Composition of the Retirement/Pension Committee
Members
Oscar S. Reyes
Chng Sok Hui*
Fidelina A. Corcuera, Human Resources Officer
*Resigned effective November 28, 2013
Operating management
The President and Chief Executive Officer is
responsible for the overall management of the
Bank and the implementation of all major business
strategies. The Bank’s major businesses—Retail
Segments and Channels, Corporate Banking, Global
Markets, Card Banking and Asset Management and
Trust—are revenue-generating and are responsible
for serving a segment of the Bank’s customer base.
In additin, the Bank’s Enterprise Corporate
Services is responsible for its infrastructure,
ensuring service delivery levels and discipline
with respect to operational and capital
expenditures.
The following is an overview of the functional
organizational structure of the Bank and its
principal activities:
BOARD OF DIRECTORS
BOARD OF DIRECTORS
TRUST COMMITTEE
BOARD OF DIRECTORS
RISK MANAGEMENT COMMITTEE
ASSET MANAGEMENT
& Trust
RISK MANAGEMENT
BOARD OF DIRECTORS
AUDIT COMMITTEE
EXECUTIVE COMMITTEE
Corporate Secretary
President
Compliance
Internal Audit
Central Security Office
Retail Segments
and Channels
Corporate Banking
Global Markets
Centralized Operations
Financial Markets
& Treasury
Electronic Channels
Global Financial Services
Integrated Marketing
Card Banking
Enterprise Corporate
Services
Total Quality Office,
Sustainability Office,
Premises and General
Services & BPI
Foundation
Corporate Planning
& Accounting
48
BPI Family Savings Bank
Human Resources
Management
BPI Capital Corporation
Information Systems
BPI/MS, Ayala Plans
Legal Services
4/8/14 7:44 PM
Through a formal planning and budgeting process,
management is able to pursue business goals and
implement strategies. It lays down well-defined
operating policies and procedures, and ensures the
accuracy of reports to protect the Bank’s integrity,
promote fairness and transparency, efficiency, and
accountability in the conduct of our business, and
ultimately, to attain customer satisfaction. The
Bank’s management is periodically reviewed and
rewarded according to their performance relative to
assigned targets.
Specific management committees ensure that
major risks are identified, measured, and controlled
against set internal standards and/or limits. These
management committees include the Credit
Committee (Crecom), Asset and Liability Committee
(ALCO), Capital Management Committee (CMC),
Operational Risk Management Committee (ORMC),
and Information Technology Steering Committee
(ITSC).
The members of these committees are composed
of the Bank’s senior management, including
representatives of business segments, the Risk
Management Office, and other senior executives.
Risk management
We have a comprehensive and integrated Risk
Management and Capital Management Framework
guiding the management of all our risk exposures;
it also ensures that the Bank has adequate capital
to cover and mitigate these risks. This Framework
follows BSP regulations and directives to implement
an active and effective Internal Capital Adequacy
Assessment Process (ICAAP) and risk management
processes within the Bank.
The Board of Directors carries out its risk
management function through the Risk
Management Committee (RMC). Several
committees and units manage our financial and
non-financial risk exposures at the management
level. The Risk Management Office recommends risk
management policies and methodologies, closely
coordinates and facilitates risk management best
practices with the various business units of the
Bank, and in the process, promotes an enterprisewide risk appreciation and education.
Major risks identified in the Bank’s business are
credit risk, market risk (liquidity risk and interest
rate risk) and operational risk (people and process
risks, information technology and physical security
risks, compliance and regulatory risks, legal risk,
and reputation risk, among others). Due to the
significant size of our loan portfolio and financial
assets, we give due attention to credit, market,
and operational risk management.
Financial risk management is carried out by our
dedicated and skilled team of risk managers
who regularly monitor and report risk exposures
against carefully established credit risk and market
risk limits and metrics approved by the RMC. We
also closely monitor our operational risks due
to the continuous developments in our business
processes, information systems and technology, as
well as their relatively significant share in our total
risk-weighted assets.
Credit risk. The Credit Policy and Risk Management
(CPRM) division is responsible for the overall
management of the Bank’s credit risk, anchored on
a comprehensive set of policies and prudent loan
underwriting processes.
CPRM ensures that credit risks taken are consistent
with acceptable parameters while ensuring
compliance with regulatory requirements, in
support of the Bank’s sustained loan volume
growth. In 2013, the Bank has generally complied
with the regulatory and prudential requirements
relating to credit risk management (e.g. DOSRI
and SBL compliance, credit concentration risk, and
mandatory lending to SMEs, among others).
We continue to maintain a diversified loan portfolio
with no significant concentration in any sector.
The top sectors with the largest exposure where
risk was spread out among its sub-sectors were
real estate (real estate exposure is within the
BSP’s 20% regulatory ceiling, exclusive of loans to
individuals for housing purposes), manufacturing
(with petroleum and food products at only about
5% each of the total portfolio), and wholesale
and retail trade (also at about 5% each of the
total portfolio, broken down into retail trade and
wholesale and commission trade).
Our commercial loans accounted for about 78% of
the total portfolio; consumer loans accounted for
the balance of 22%. Large borrowers comprised
approximately 83% of commercial loans, while SMEs
accounted for the remaining 17%.
In 2013, CPRM reviewed 12 lending units and
portfolios nationwide, with an overall generally
acceptable credit performance and portfolio
quality based on the credit reviews. Even with
the continued expansion of our loan portfolios,
asset quality has improved in terms of both nonperforming loan (NPL) amounts and ratio. The
gross 90-day NPL ratio stood at 1.8% and net
30-day NPL ratio at 0.49%, the lowest for the
Bank in the last six years. NPL reserves cover
also improved further in 2013 to 105%, from 96%
in 2012. The BPI Group’s loan exposure in areas
affected by super-typhoon Yolanda in November
last year has been minimal vis-à-vis its total
loan portfolio.
49
4/8/14 7:44 PM
We regularly monitor our credit risk scoring models
as to their predictive power and overall model
performance. Rating models for Corporates, Auto
(Head Office Direct and Retail Marketing Loans),
and Credit Cards maintained their acceptable
performances in year 2013 based on statistical
measures. The Retail Housing and Property Equity
Loans credit risk scorecards and the SME internal
credit risk rating model were significantly enhanced
as part of the Bank’s preparations to transition
into the Basel II Internal Ratings-Based approach—
probability of default (PD) estimates have been
incorporated into these models. For consumer
loans, a more comprehensive suite of data analytics
and MIS for our credit cards, auto, and mortgage
portfolios was continuously implemented, resulting
in a proactive loan portfolio risk management.
On model risk management, our Risk Models
Validation (RMV) division, the Bank’s model risk
manager, conducted independent model validation
activities which focused on our credit risk models—
credit risk scorecards for Retail Housing and credit
cards, and PD models. The independent validation
of a risk model is governed by the Bank’s Model Risk
Management Policy and Governance Framework,
aimed at ensuring an active and effective model risk
management in the BPI Group.
Other milestones achieved in 2013 include the
automation of IRB-compliant CAR reports
generation, as well as the development of new
credit risk management systems to enhance the
timely and accurate reporting of the Bank’s loan
portfolio, credit concentration and credit risk data
analytics.
Market risk. The Market Risk Management (MRM)
division measures and reports the Bank’s exposure
to market risk, liquidity risk, and interest rate risk in
the banking book.
In 2013, the RMC reviewed risk measurements and
established risk limits consistent with the Bank’s
balance sheet and profitability goals, objectives
and overall risk appetite. In light of the major
developments in the global and local financial
markets in 2013, the RMC and management carefully
and extensively considered the consequent impact
of this market volatility on the Bank’s profitability,
resulting in key decisions and strategies to mitigate
the potential adverse impact on earnings and
shareholder value.
The measurement of our market risk exposure was
improved through the adoption of the Historical
Simulation methodology used for Value-at-Risk
(VaR) calculation for all trading and derivative
instruments and through the full implementation
of an automated market risk system. Moreover, the
Bank’s market risk management processes were
50
enhanced, policies and model documentation were
continuously improved, and stronger risk controls
were developed with the organization of a new
Dealing Room Risk Management Team—all these
are the primary components of an effective market
risk management system.
Operational risk. Operational risk is the risk of
loss resulting from inadequate or failed internal
processes, people, systems and management, or
from external events. Our operational risk definition
is comprehensive enough to include legal and
tax risks, physical security risk, compliance and
regulatory risk, and reputation risk.
We manage our operational risks through a
framework that ensures such risks are properly
identified, managed, monitored, mitigated
and reported. Recognizing the importance of
establishing a risk-aware culture in the management
of operational risks, the Bank has embedded risk
management in its core processes.
The Operational Risk Management Committee
(ORMC) monitors the Bank’s operational risks
by reviewing key risk indicators (KRIs), risk and
control self-assessments (RCSAs), and incident
management. The ORMC is supported by the
Operational Risk Management (ORM) division that
oversees the implementation of our enterprisewide operational risk management program,
which encompasses policy formulation processes,
KRI monitoring processes, RCSAs, incident
management processes, and risk management
awareness and appreciation programs.
Our RCSA includes scorecards and more business
process-specific assessment templates. Online
views for end-to-end risk assessment by products
and channels have also been made available, and
are updated whenever there are new or updated
programs to be implemented. Each business unit
undertakes regular risk self-assessment to identify,
assess, and measure its operational risks. Key
risk indicators are used to detect early warning
signals, and these are monitored for appropriate
management actions to prevent and mitigate actual
losses. Operational risk losses and incidents are
used as information for reporting and providing
risk-profiling information to the Board, the Risk
Management Committee, and senior management.
Product approval and project approval
requirements have been established to ensure that
the risks associated with the introduction of new
products and services are identified, analyzed, and
addressed prior to launch or prior to investing in
new products and projects. For online products and
services, precautionary measures are implemented
to protect our customers’ confidentiality and
interests. Regular project value realization reviews
4/8/14 7:44 PM
are also conducted to assess effectiveness.
Our Information Security and Technology Risk
Management team protects the Bank against
operational risks arising from the use of information
technology in our business processes. The team
also ensures the confidentiality, integrity and
availability of the Bank’s information assets through
the implementation of appropriate security controls
and measures that protect against the misuse
or compromise of information assets. New and
appropriate security technologies are regularly
identified, implemented and updated as part of our
technology risk management strategy to mitigate
threats to the Bank’s information technology
environment. It also promotes our competitiveness
and long-term viability through the use of
appropriate and cost-effective I.T. solutions. Our
Systems Quality Assurance and Management (SQM)
team ensures compliance of automated systems to
information security polices and control standards.
To lessen the impact of unforeseen operational
risk events and in the event of unplanned business
interruptions, a Business Continuity Program (BCP)
has been put in place to ensure the recovery and
availability of critical customer service facilities.
The Bank’s Disaster Recovery Preparedness (DRP)
has been enhanced with the installation of bigger
and more robust BCP sites for critical head office
services. Enterprise-wide testing of our critical
application systems were conducted all throughout
2013. We also continued strengthening our
employees’ awareness of our Business Continuity
Program through varied training and activities.
The Central Security Office (CSO) is responsible
for the security of the Bank’s facilities and the
overall safety of our customers and employees. Its
main objectives are the maximum protection of the
Banks’ personnel and property, close monitoring of
incidents to enhance speedy response and extend
appropriate assistance in the rescue of personnel
in distress, if needed, and prevention of crime. The
latter includes assisting law enforcement agencies
in the apprehension and prosecution of crimes
committed against the Bank. The CSO uses a
three-tiered defense system—intelligence, target
hardening and incident management—to achieve
these objectives.
We continually adopt new and reliable security
technologies like the deployment of the stateof-the-art Graphical Management System
(GMS), which integrates all the Bank’s alarms,
access control and centralized closed-circuit TV
(CCTV) systems. To date, all regular BPI and BFB
branches have CCTVs installed and key branches
are connected to the Central Video and Alarm
Monitoring System (CVAMS). All cash centers are
also connected to CVAMS and are monitored 24/7
through our centralized Security Operations Center
(SOC).
The Bank’s fraud risk and whistleblower programs
help prevent and detect fraud or misconduct, and
enable fast and coordinated incident responses,
including establishing the cause of fraud, remedial
actions, and damage control procedures.
The Legal Affairs and Dispute Resolution (LeADR)
division oversees the Bank’s legal and tax
exposures. LeADR provides “pro-active, effective,
timely and accessible” (PETA) opinions to address
legal concerns in the Bank’s daily operations and
provide guidance in the legal aspects of new
products, services or special projects. LeADR
issues Legal Advisory Bulletins (LABs) that serve
as ready reference for all employees of the BPI
Group on the handling of legal issues, new laws and
regulatory requirements. This division also issues
Tax Advisory Bulletins (TABs), supplemented by
the various tax briefings held for the BPI Group,
aimed at promoting tax compliance awareness
and a deeper understanding of the different BIR
regulations and circulars. As part of its support
service, LeADR provides training, conducts
lectures, and provides legal documentation and
advisory services. Collaborative risk assessment
exercises on potential or ongoing litigation issues
by our team of experienced lawyers were also
institutionalized. To expedite the resolution of legal
cases, LeADR pursues both reasonable compromise
and aggressive litigation techniques, as and when
necessary.
LeADR adheres to the pursuit of excellence and the
observance of professionalism in all its activities,
guided by the spirit of collaboration, imbued with
honesty, integrity, and mutual respect. By extending
legal services and advisory to the different units of
the Bank in an optimal and timely fashion, LeADR
promotes the Bank’s objectives and protects its
interests.
An operational risk management training
and awareness program, which includes risk
appreciation courses, is available in the Bank’s
eLearning platform, facilitating the promotion of an
effective risk management culture within the BPI
Group.
Management of risk exposure
The Bank uses various methodologies to measure
its risk exposure. Our credit risk exposures take into
account our existing exposure to the counterparty
(by asset class), the counterparty’s probability
51
4/8/14 7:44 PM
In compliance with Basel and BSP standards on
minimum capital requirement, our CAR calculation
is computed based on qualifying capital and riskweighted assets. We also measure the Bank’s
credit risk exposures in terms of regulatory capital
requirement using the standardized approach.
Using this method, our credit exposures to
sovereigns, corporates and banks are risk-weighted
to reflect external credit assessment from eligible
ratings agencies, i.e. PhilRatings, S&P, Moody’s and
Fitch, were applicable. This method also allows
the use of eligible collaterals, i.e. cash, financial
instruments and guarantees to mitigate credit
risk. The Bank ensures all documentation used in
the collateralized transactions and guarantees are
binding on all parties and legally enforceable in the
relevant jurisdiction.
of default, and the value recoverable from the
counterparty in the event of default.
The credit risk rating and probability of default
models were developed internally by our Credit
Policy and Risk Management team using statistical
methods on quantitative and qualitative risk factors,
including credit judgment overlays (for borrowerspecific and other factors that cannot be modeled
statistically). The models are independently
validated, and their predictive power and
performance are regularly monitored.
Credit risk exposures are classified and managed
according to rating grades. Each rating grade
has a corresponding probability of default that
exponentially increases as one moves from the
best to the worst rating grade. The migration
of accounts between rating grades is regularly
monitored and analyzed. Loss provisioning also
takes into account the rating grade of each
exposure. While specific reserves are set up for
defaulted exposures, provisioning for non-default
exposures is based on expected loss (EL), which is a
function of the probability of default and loss given
default (standardized approach). Expected losses
are constantly assessed and measured following
our internal policies and the BSP regulatory
provisioning policies.
Using the Basel II regulatory standardized
approach, our total credit risk-weighted assets
amounted to Php 619.8 billion, and are composed
of on-book credit exposures after risk mitigation
at Php 612.2 billion net of specific provisions, offbalance sheet risk-weighted assets at Php 6.5
billion and counterparty risk-weighted assets in
the trading book of Php 2.3 billion. Below is the
summary table in million pesos.
CREDIT RISK-WEIGHTED ASSETS (In Php millions)
AMOUNT
Credit Risk-Weighted Assets Total Risk Weighted On-Balance Sheet Assets
612,242.38
Total Risk Weighted Off-Balance Sheet Assets
6,474.53
Total Counterparty Risk-Weighted Assets in the Trading Book
(Derivatives and Repo-style Transactions)
Total Gross Risk-Weighted Assets
621,029.07
Deductions: General loan loss provision (in excess of the amount permitted
to be included in Upper Tier 2)
TOTAL CREDIT RISK-WEIGHTED ASSETS
52
2,312.16
(1,235.53)
619,793.54
4/8/14 7:44 PM
The Bank’s credit risk exposures on both on- and off-balance sheet assets after mitigation, broken down by
risk buckets, for the years ended December 31, 2013 and December 31, 2012 are as follows:
SCHEDULE A
December 31, 2013
ON-BALANCE SHEET ASSETS
(In Php millions)
Cash on hand
Risk Weights
Total
Credit Risk
Exposure
after Risk
Mitigation
0%
20%
50%
75%
100%
Total Credit
RiskWeighted
Assets
150%
25,501.9
25,501.9
25,501.9
Checks and other cash items
218.7
218.7
218.7
Due from Bangko Sentral ng
Pilipinas (BSP)
244,546.8
244,546.8
244,546.8
Due from other banks
15,802.9
5,022.1
8,576.6
2,204.2
15,802.9
Available-for-sale (AFS)
financial assets
89,960.4
68,045.2
5,416.2
10,015.4
5,385.4
88,862.2
Held-to-maturity (HTM)
financial assets
95,701.9
68,236.9
73.3
16,203.9
2,267.1
86,781.2
431.3
431.3
431.3
608,002.6
4.3
37,267.9
36,829.6
41,192.0
487,112.5
5,596.3
608,002.6
11,518.1
11,518.1
11,518.1
Sales contract receivables
(SCR)
78.0
66.6
11.4
78.0
Real and other properties
acquired
5,225.2
5,225.2
5,225.2
1,096,987.8
417,853.3
47,998.1
71,625.4
41,192.0
497,035.9
11,264.2
1,086,969.0
21,152.5
21,152.5
21,152.5
1,118,140.2
417,853.3
47,998.1
71,625.4
41,192.0
518,188.3
11,264.2
1,108,121.4
Total risk-weighted on-balance
sheet assets not covered by
credit risk mitigants
9,599.6
35,812.7
30,894.0
518,188.3
16,896.4
611,391.1
Total risk-weighted
on-balance sheet
Assets covered by
credit risk mitigants
270.8
467.3
113.2
851.3
TOTAL RISK-WEIGHTED
9,870.4
36,280.0
30,894.0
518,301.5
16,896.4
612,242.4
Unquoted debt securities
classified as loans
Loans and receivables
Loans and receivables arising
from repurchase agreements,
certificates of assignment/
participation with recourse,
and securities lending and
borrowing transactions
Total exposures excluding other
assets
Other assets
Total exposures, including other
assets
53
4/8/14 7:44 PM
December 31, 2012
ON-BALANCE SHEET
ASSETS (In million Php)
Cash on hand
Checks and other cash items
Due from BSP
Total
Credit Risk
Exposure
after Risk
Mitigation
22,949.7
Risk Weights
0%
20%
75%
100%
150%
22,949.7
860.9
119,086.5
50%
22,949.7
860.9
860.9
119,086.5
6,914.8
Total
Credit Risk
Weighted
Assets
119,086.5
2,708.2
2,315.0
1,891.6
6,914.8
Available-for-sale (AFS)
financial assets
104,131.9
67,531.6
7,343.2
9,148.6
16,140.1
100,163.4
Held-to-maturity (HFM)
financial assets
76,245.7
50,114.1
261.6
530.9
14,394.1
65,300.7
Unquoted debt securities
classified as loans
Loans and receivables arising
from repurchase agreements,
certificates of assignment/
participation with recourse,
and securities lending and
borrowing transactions
698.0
492,843.2
3.7
38,137.6
38,137.6
Sales contracts receivables
(SCR)
698.2
Real and other properties
acquired
7,140.7
Total exposures excluding
other assets
869,707.3
Other assets
26,850.8
Total exposures, including
other assets
896,558.1
297,823.1
297,823.1
-
61,643.0
378,492.4
698.0
4,652.1
492,843.2
38,137.6
33,111.4
38,108.9
61,643.0
411,572.8
43.6
698.2
7,140.7
7,140.7
12,534.5
854,793.8
26,850.8
Total risk-weighted onbalance sheet assets covered
by credit risk mitigants
54
26,114.4
654.6
Total risk-weighted onbalance sheet assets not
covered by credit risk
mitigants
TOTAL RISK-WEIGHTED
21,937.5
698.0
26,850.8
33,111.4
38,108.9
61,643.0
438,423.6
12,534.5
881,644.6
6,622.3
19,054.5
46,232.2
438,423.6
18,801.7
529,134.4
349.4
5.0
6,971.7
19,059.5
106.0
46,232.2
438,529.7
460.5
18,801.7
529,594.9
4/8/14 7:44 PM
Schedule B
December 31, 2013
OFF-BALANCE SHEET
Credit
Equivalent
Amount
Risk Weights
0%
20%
50%
75%
100%
Total RiskWeighted
OffBalance
Sheet
150%
Direct credit substitutes
(e.g. general guarantees
of indebtedness and
acceptances)
3,527.2
-
-
-
692.8
2,603.5
-
3,296.3
Transaction-related
contingencies (e.g.
performance bonds, bid
bonds, warranties and
stand-by LCs related to
particular transactions)
1,667.4
-
-
-
61.3
1,585.7
-
1,647.0
Trade-related
contingencies arising
from movement of goods
(e.g. documentary credits
collateralized by the
underlying shipments)
and commitments with
an original maturity of up
to one (1) year
1,553.3
-
0.7
-
57.7
1,472.9
-
1,531.3
-
0.7
-
811.7
5,662.1
-
6,474.5
TOTAL RISK-WEIGHTED
OFF-BALANCE SHEET
ASSETS
December 31, 2012
OFF-BALANCE SHEET
Credit
Equivalent
Amount
Risk Weights
0%
20%
50%
75%
100%
Total RiskWeighted
OffBalance
Sheet
150%
Direct credit substitutes
(e.g. general guarantees
of indebtedness and
acceptances)
3,746.6
-
-
-
1,039.8
2,360.2
-
3,400.0
Transaction-related
contingencies (e.g.
performance bonds, bid
bonds, warranties and
stand-by LCs related to
particular transactions)
1,026.6
-
-
-
48.3
962.2
-
1,010.5
Trade-related
contingencies arising
from movement of goods
(e.g. documentary credits
collateralized by the
underlying shipments)
and commitments with
an original maturity of up
to one (1) year
1,804.6
-
-
-
104.7
1,665.0
-
1,769.7
-
-
-
1,192.8
4,987.4
-
6,180.2
TOTAL RISK-WEIGHTED
OFF-BALANCE SHEET
ASSETS
55
4/8/14 7:44 PM
SCHEDULE C
December 31, 2013
COUNTERPARTY ASSETS IN
THE TRADING BOOKS
(In Php millions)
Credit
Equivalent
Amount
Total
Counterparty
Risk-Weighted
Assets in
the Trading
Book
Risk Weights
0%
20%
50%
100%
150%
Derivative Exposures
Interest Rate Contracts
Exchange Rate Contracts
Credit Derivatives
364.0
-
23.2
123.3
1.3
-
147.8
3,523.9
-
50.0
1,181.8
910.4
-
2,142.2
44.4
-
73.2
22.2
TOTAL COUNTERPARTY
RISK-WEIGHTED ASSETS OF
DERIVATIVE TRANSACTIONS
-
1,327.3
22.2
911.6
-
2,312.2
December 31, 2012
COUNTERPARTY ASSETS IN
THE TRADING BOOKS
(In Php millions)
Credit
Equivalent
Amount
Total
Counterparty
Risk-Weighted
Assets in
the Trading
Book
Risk Weights
0%
20%
50%
100%
150%
Derivative Exposures
Interest Rate Contracts
Exchange Rate Contracts
360.2
24.3
119.3
4,948.9
117.4
1,157.4
141.7
1,276.7
TOTAL COUNTERPARTY
RISK-WEIGHTED ASSETS OF
DERIVATIVE TRANSACTIONS
-
Our total outstanding investments in structured
products as of end-2013 amounted to Usd 213
million, composed of investments in Credit-Linked
Notes (CLNs) at 56.0% of total structured products;
Range Accrual and Callable Range Accrual Notes at
28.0%; and Capped Floaters and Gold-Linked notes
at 13.0% and 2.0%, respectively. The Bank’s exposure
on selling credit protection is limited to investments
in CLNs.
We manage the market risk exposures of both our
trading and non-trading portfolios. Our assets in
both on- and off-balance sheet trading portfolios
are subject to trading gains and losses. Market risk
exposure from these portfolios is measured by
MARKET RISK-WEIGHTED ASSET
-
143.6
1,765.7
-
3,040.5
1,765.7
-
3,184.1
the respective VaR models also as part of market
risk management. The bank undertakes hedging
strategies to mitigate the risks arising from various
investments of the Bank. For example, it enters into
interest rate swaps too much the interest rate risk
associated with long-term debt securities In terms
of capital usage using the standardized approach,
total market risk-weighted assets stood at Php
8.5 billion by end-2013, of which foreign exchange
exposure accounted for more than half, followed by
interest rate exposures and equity exposure at 37%
and 7%, respectively. The table below presents the
breakdown of the MRWA, in Php millions:
TOTAL MARKET RISK-WEIGHTED ASSETS
Using Standardized Approach:
Interest Rate Exposures
3,194.45
Equity Exposures
564.94
Foreign Exposures
4,765.95
TOTAL MARKET RISK-WEIGHTED ASSETS
56
8,525.34
4/8/14 7:44 PM
Our liquidity risk is observed and monitored
through the metric Minimum Cumulative Liquidity
Gap (MCLG), which is computed monthly and
measures net inflow level of the BPI Group
(BPI, on a consolidated basis, should be liquid
enough to provide sufficient buffer for critical
liquidity situations). A red flag is raised should the
MCLG projected for the next quarter breaches
the RMC-prescribed MCLG limit. Interest rate
risk measurement is fundamental to our banking
business. Movements in interest rates can expose
the Bank to adverse shifts in the level of net interest
income and can impair the underlying values of its
assets and liabilities. The BPI Group is exposed to
interest rate risk on unfavorable changes in the rate
curves, which would have adverse effects on the
Group’s earnings and its economic value of equity.
Interest rate risk exposure arising from the core
banking activities is measured and monitored
monthly by Earnings-at-Risk (EaR), or the potential
deterioration in net interest income over the next 12
months due to adverse movements in interest rates;
and by Balance Sheet Value-at-Risk (BSVaR), or the
impact on the economic value of the future cash
flows in the banking book due to changes in interest
rates. As of end-December 2013, the BPI Group’s
BSVaR level of Php 2.0 billion and EaR of Php 1.2
OPERATIONAL RISK EVENTS
billion were well within the Bank’s established risk
appetite. Our interest rate gap model is measured
based on the repricing maturity of the balance
sheet accounts. To illustrate, loans are mapped on
either the maturity date (for accounts paying fixed
interest rate) or next interest rate review date (for
accounts paying floating interest rate). Meanwhile,
repricing schedules of deposit accounts that do
not have defined maturity dates (e.g. savings and
current accounts) are based on the pattern of the
Bank’s historical review of deposit rates and the
depositors’ behavior. These assumptions were the
same ones used last year.
Our exposure to operational risks are identified,
assessed, and monitored as an integral part of the
BPI Group’s business processes. We currently use
the Basel II regulatory basic indicator approach
(BIA) to quantify the operational risk-weighted
assets, using the historical total annual gross
income as the main measure of risk. For the year
2013, the Bank’s total operational risk-weighted
assets (ORWA) stood at Php 77.2 billion.
The table below shows the estimated risk-weighted
assets distribution for our operational risks based
on the key operational risk events, exposures, and
estimated losses for the year 2013:
PERCENT TO BPI’s TOTAL
ESTIMATED
LOSSES FOR 2013
ESTIMATE TO OPERATIONAL
RISK-WEIGHTED ASSETS (ORWA)
FOR 2013 (IN Php MILLIONS)
Fraud – Internal/External
32%
24,575
Process Failures
24%
18,958
Legal and Tax Cases
22%
16,852
Damage to Physical Assets
13%
9,831
Technology/Information Security
7%
5,617
Customer Complaints
2%
1,404
TOTAL
a
100%
77,237a
Total Operational Risk-Weighted Assets (ORWA) as of 31 December 2013
Capital adequacy
The Capital Management Committee (CMC) oversees
the strategic allocation of the Bank’s capital and risk
assets. It also ensures compliance with the regulatory
capital adequacy ratio (CAR) and internal minimum
CAR (IMCAR). In compliance with the regulatory
directive for banks to conduct an Internal Capital
Adequacy Assessment Process (ICAAP) following
Basel II-Pillar II guidelines, the Bank submitted its
2014 ICAAP to the BSP on January 30, 2014. This
comprehensive evaluation process of the Bank’s
material risks and capital adequacy reflected an
IMCAR of 10.65% that is commensurate to the nature
and extent for most of the risks the Bank has taken.
The capital buffer of 0.65% over the 10.0% regulatory
CAR was set to cover exposure beyond Pillar I risks.
57
4/8/14 7:44 PM
For internal monitoring purposes, the RMC approved
a CAR Management Action Trigger (CARMAT) of
11.5% at which management would review the capital
level and undertake specific actions to build capital,
as necessary.
As of December 31, 2013, BPI’s solo (parent) and
consolidated risk-based CAR stood at 13.7% and 12.2%
respectively, well within the regulatory requirement of
10.0%, and above the Bank’s set IMCAR and CARMAT.
The table below sets out the Bank’s CAR components
for the years ended December 31, 2013 and
December 31, 2012:
Amount (Php Billion)
Risk
2013
2012
Adjusted Tier 1
92.0
Adjusted Tier 2
4.6
8.9
96.7
90.7
619.8
539.0
8.5
29.3
77.2
70.7
Total risk-weighted assets
705.6
638.9
Consolidated CAR (%)
13.70
14.19
12.15 12.58
Total Qualifying Capital
Total Credit risk-weighted assets
Total Market risk-weighted assets
Total Operational risk-weighted assets
Solo (Parent) CAR (%)
81.7
The Bank’s total qualifying capital of Php 96.7 billion and Php 90.7 billion for 2013 and 2012, respectively,
were more than the regulatory CAR’s aggregate and per risk category capital requirements as follows:
Regulatory Capital
Risk
(in Billion Php)
2013
2012
Credit Risk
62.0
53.9
Market Risk
0.9
2.9
Operational Risk
7.7
7.1
70.6
63.9
Total
The Bank’s total qualifying capital for 2013 and 2012 were largely composed of Tier 1 at 95.2% and 90.2%
respectively. Below is the composition of the Bank’s qualifying capital:
December 31, 2013
Amount (Php Million)
Nature of Item
Tier 1
Gross Qualifying Capital*
Deductions from Tier 1 and Tier 2 Capital
Investments in equity of unconsolidated subsidiary
securities dealers/brokers, insurance companies, and
non-financial allied undertakings, after deducting
related goodwill
TOTAL QUALIFYING CAPITAL
% to Total
Tier 2
93,616.32
Total
6,257.04
99,873.37
1,609.03
1,609.03
3,218.05
92,007.30
4,648.02
96,655.32
95.2
4.8
100.0
December 31, 2012
Nature of Item
Tier 2
Total
Gross Qualifying Capital*
Deductions from Tier 1 and Tier 2 Capital
Investments in equity of unconsolidated subsidiary
securities dealers/brokers, insurance companies, and
non-financial allied undertakings, after deducting
related goodwill
83,124.95
1,377.65
1,377.65
2,755.29
TOTAL QUALIFYING CAPITAL
81,747.30
8,907.06
90,654.36
90.2
9.8
100.0
% to Total
58
Tier 1
10,284.70
93,409.65
4/8/14 7:44 PM
*Total Gross Qualifying Capital Breakdown
December 31, 2013
Nature of Item
Tier 1
Tier 2
Total
Core Capital
Paid-up common stock
35,563.56
35,563.56
Additional paid-in capital
8,235.30
8,235.30
Retained earnings
41,715.78
41,715.78
Undivided profits
18,007.33
18,007.33
(212.72)
(212.72)
133.48
133.48
Cumulative foreign currency translation
Minority interest in subsidiary financial allied undertakings
which are less than wholly owned (for consolidated basis)
Net unrealized gains on available-for-sale equity securities
purchased (subject to a 55% discount)
46.75
46.75
General loan loss provision (limited to 1.00% of credit riskweighted assets)
6,210.29
6,210.29
6,257.04
109,699.78
103,442.74
Deductions
Net unrealized losses on available-for-sale equity securities
purchased
Total outstanding unsecured credit accommodations, both
direct and indirect, to DOSRI (net of specific provisions, if any),
and unsecured loans, other credit accommodations and
guarantees granted to subsidiaries and affiliates (net of
specific provisions, if any) referred to in Circular No. 560
Deferred income tax (net of allowance for impairment, if any)
Gross Qualifying Capital
19.70
19.70
1,929.60
1,929.60
7,877.12
7,877.12
(9,826.42)
(9,826.42)
93,616.32
6,257.04
99,873.37
December 31, 2012
Nature of Item
Tier 1
Tier 2
Total
Core Capital
Paid-up common stock
35,562.26
Additional paid-in capital
35,562.26
8,236.38
8,236.38
Retained earnings
31,840.95
31,840.95
Undivided profits
16,276.75
16,276.75
Cumulative foreign currency translation
(445.52)
(445.52)
258.29
258.29
Minority interest in subsidiary financial allied undertakings
which are less than wholly owned (for consolidated basis)
Net unrealized gains on available-for-sale equity securities
purchased (subject to a 55% discount)
106.42
106.42
General loan loss provision (limited to 1.00% of credit riskweighted assets)
5,178.29
5,178.29
5,000.00
5,000.00
10,284.70
102,013.82
Lower Tier 2
E
ligible Amount of Lower Tier 2 Capital (limited to 50% of
Tier 1 Capital)
91,729.12
Deductions
Net unrealized losses on available-for-sale equity securities
purchased
Total outstanding unsecured credit accommodations, both
direct and indirect, to DOSRI (net of specific provisions, if any),
and unsecured loans, other credit accommodations and
guarantees granted to subsidiaries and affiliates (net of
specific provisions, if any) referred to in Circular No. 560
Deferred income tax (net of allowance for impairment, if any)
Goodwill
Gross Qualifying Capital
0.01
0.01
1,961.28
1,961.28
6,640.36
6,640.36
2.52
2.52
(8,604.17)
(8,604.17)
83,124.95
10,284.70
93,409.65
59
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The Bank’s consolidated and solo Tier 1 capital
ratio likewise compared favorably with regulatory
CAR, IMCAR and CARMAT at 13.0% and 12.2%,
respectively. Last year’s consolidated and solo Tier 1
capital ratio were at 12.8% and 12.6%, respectively.
within the work units; and two, audit reviews of the
Compliance Office, Internal Audit, and the
external auditors.
In 2013, the Bank carried out the following
initiatives in preparation for the adoption of Basel III
requirements, as well as improve the Bank’s risk and
capital management process:
Internal Audit is an independent unit that reports
directly to the Board through the Audit Committee.
It supports the Audit Committee in fulfilling
its oversight responsibilities by providing an
independent, objective assessment of the Bank’s
risk management, internal controls, and governance
processes. Internal Audit also works closely with
the Risk Management Office, Compliance Office,
external auditors and other oversight units for a
comprehensive view of risks and compliance in the
institution, and ensures that business units proactively
manage risk and compliance exposures.
• Identified the transition and implementation
plans to be able to meet the revised minimum
capital requirement prescribed by Basel III
(e.g. issuance of additional capital).
• Explored Basel III-based enhancements for the
Bank’s existing Basel System.
• Continuous development of Basel II IRB
PD-based credit risk models. The Bank
has completed its FIRB PD model for large
corporate and PD-based behavioral scorecard
for the retail housing segment, and is currently
developing the corporate SME PD and
LGD models.
• Continuous training of key officers of the Bank
on Basel III principles and standards through
internal and public seminars and briefings.
A more detailed discussion on capital adequacy can
be found on Note 3.7 of the 2013 Audited Financial
Statements.
Compliance system
The Compliance Office upholds compliance
with relevant laws and regulations of the BSP,
Securities and Exchange Commission (SEC),
Philippine Deposit Insurance Corporation (PDIC),
and other regulatory agencies. This is done through
effective liaison and dialogue with the regulators, as
well as the prompt dissemination, within the Bank,
of new developments affecting our operations. It
oversees the implementation of the compliance
system throughout the organization. The compliance
function is further strengthened by the formal
designation of the major Group Compliance
Coordinating Officers (GCCOs) who are
responsible in coordinating the implementation
of the compliance program within their respective
business groups.
The Compliance Office promotes adherence
and awareness to laws, rules and regulations
by electronically posting these information in a
compliance database. Our Compliance Office,
Corporate Planning and Corporate Secretary jointly
review our compliance to the Securities act, and the
rules set forth by the SEC and the PSE.
The compliance to the Bank’s Corporate Governance
Manual, policies and code of conduct is enforced
using a two-pronged approach: one, self-regulation
60
Internal audit
Internal Audit has an established quality assurance
and improvement program to ensure that audit
activities conform to the International Standards
for the Professional Practice of Internal Auditing
(Standards). Key components of the program include
on-going quality assessments of audit processes and
methodologies, an annual internal self-assessment
and an external quality assurance review by qualified
professionals once every five years as required
under the Standards. The results of the external
assessments by SGV & Co./Ernst and Young in 2008
and 2012, both with overall “Generally Conforms”
rating, validated Internal Audit’s conformity with
professional standards and internal requirements.
Internal Audit ensures that each audit staff possesses
and improves knowledge, skills and competencies
through relevant training
programs and seminars, as well as
certifications with professional organizations
in specialized areas.
Conflict-of-interest policies
The Bank has in place conflict-of-interest policies that
place the interest of the Bank above and ahead of
the personal interests of its directors and employees.
These policies prohibit directors and employees from
using their position of authority or rank to directly or
indirectly derive personal gain or advantage.
Conflict of interest and whistleblower policies and
guidelines are available in the Management and
Operating Manual (MOM) and Personnel Policy
Manual electronic databases for everyone’s easy
access and guidance. Policy updates and reminders
are regularly communicated to all employees.
Anti-money laundering
The Anti-Money Laundering Unit (AMLU) is
responsible for monitoring customers, accounts,
transactions and counterparties in compliance
with the Anti-Money Laundering Law and various
4/8/14 7:44 PM
government regulations. Our Anti-Money
Laundering Program covers all companies under
the BPI Group.
We continue to strengthen our efforts in preventing
and combating financial crime. Our commitment
to assist in the fight against money laundering,
corruption and terrorist financing led to the increase
in the manpower of our AMLU and investment in the
latest AML monitoring and detection technology.
An integrated approach in formulating the Bank’s
policies, procedures, education, training and
systems has been pursued in not only to adhere to
regulations but also to international best practices.
We constantly review our program to ensure
compliance with the latest legislative and regulatory
developments. The Bank’s AML program outlines
the policies and procedures on enforcing rules
for enhanced customer due diligence, detection
and countering acts of money laundering, as well
as handling of suspicious transactions. AMLU’s
centralized AML risk management system captures
all required customer and transactional information
from our various legacy applications and analyzes
these data for abnormal and suspicious transaction
patterns. The AML system is regularly evaluated
and enhanced to continually improve the conduct
of due diligence and money laundering detection
from customer onboarding, transaction processing
and account monitoring. The Bank has designed
a structured AML training program, which is
conducted regularly to equip front-line and
operations personnel on Know Your Customer (KYC)
guidelines as well as money laundering detection
and prevention procedures.
Related party transactions
In the normal course of business, the Bank
transacts with related parties consisting of its
subsidiaries and associates, and with its directors,
officers, stockholders and related interests
(DOSRI), including transactions with Ayala
Corporation (AC) and its subsidiaries (Ayala
Group). All transactions involving DOSRI
are duly reported to the BSP. These
transactions, such as loans and advances,
deposit arrangements, trading of
government securities and commercial
papers, sale of assets, lease of Bank
premises, investment advisory/management,
service arrangements and advances for
operating expenses are made in normal
banking activities, and have terms and
conditions that are comparable to those
offered to non-related parties or to similar
transactions in the market. The BPI Group is
committed to fully comply with the General
Banking Act and BSP regulations concerning
DOSRI loans.
A more detailed discussion on related party
transactions can be found on Note 31 of the
2013 Audited Financial Statements.
Communication and information
Management is primarily responsible
to the Board for the adequate flow of
information, such as but not limited to
financial information. Any variance between
projections and actual results requires
management’s explanation to the Board,
were applicable.
The Board is committed to fully disclose at all
times all material information about the Bank
for the benefit of its shareholders. All material
information that could potentially affect
share price are publicly disclosed through the
PSE and SEC.
More information on BPI’s corporate
governance philosophy, policies and
practices may be found in our website,
www.bpiexpressonline.com.
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62
PP Audit Report to the BOD.indd 62
4/8/14 7:37 PM
PP Audit Report to the BOD.indd 63
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SUMMARY OF FINANCIAL PERFORMANCE
64
RESULTS OF
OPERATIONS
FINANCIAL
CONDITION
BPI earned a net income of Php 18.8 billion in 2013,
representing a Php 2.5-billion, or 15.0%, increase
relative to Php 16.4 billion earned last year. This
increase in net income was achieved through a
Php 5.1-billion, or 10.8%, increase in total revenues
but was partly reduced by the Php 1.9 billion and
Php 995 million increases in operating expense and
taxes, respectively. Return on equity improved to 18.1%
from last year’s 17.9%, while return on assets declined
to 1.87% from previous year’s 1.91%.
Total revenue growth to Php 52.5 billion from last
year’s Php 47.4 billion was sustained by the increases
in both net interest and non-interest income, up by
Php 2.9 billion and Php 2.2 billion, respectively.
Net interest income closed at Php 30.3 billion,
representing a 10.4% increase from last year. This
increase in net interest income was the result of a
Php 151.4 billion, or 17.7%, expansion in average asset
base partly tempered by the 26 basis points drop in
net interest spreads.
Non-interest income of Php 22.2 billion increased
11.3% from last year’s Php 19.9 billion. Other operating
income increased Php 1.6 billion, or 20.8%, mainly due
to increases in trust fees, bank premises rental, profit
from assets sold and miscellaneous income. Fees and
commissions, income from the insurance business
and income from foreign exchange trading likewise
increased by Php 774 million, or 15.1%, Php 755 million,
or 108.8%, and Php 360 million, or 21.4%, respectively.
Fees and commissions’ increase was attributed to
increases in service charges, bank commissions, and
underwriting fees. Trading gain on securities ended
Php 1.1 billion, or 18.1%, lower than last year due to
lower securities inventory level as tempered by
market corrections.
Impairment losses at Php 2.6 billion, decreased
Php 275 million, or 9.4%, from 2012 due to last
year’s provisions for non-credit related items and
foreclosed assets.
Other expenses at Php 26.7 billion, increased
Php 1.9 billion, or 7.7%, from last year’s Php 24.8
billion. Occupancy and equipment-related expenses
increased Php 847 million, or 11.8%, due to increases in
computer equipment and software costs, contractual,
rental, and depreciation cost. Other operating
expenses increased Php 883 million, or 12.4%, on
higher regulatory cost, fines and penalties, litigation
expenses, management and other professional fees,
and other miscellaneous transaction related expenses.
The Bank’s total resources reached Php 1.2
trillion, Php 210.1 billion, or 21.3%, higher than
last year’s Php 985.2 billion. This increase
was attributed largely to the Php 186.3
billion, or 23.2%, increase in total deposits,
which reached Php 988.6 billion. Current
and savings deposits increased Php 194.2
billion or 39.5%.
Total capital funds increased Php 7.7
billion, or 7.8%, to Php 105.8 billion from
the previous year’s Php 98.1 billion. This
growth in capital came from the increase in
profits from operation, net of cash dividends
paid. Accumulated other comprehensive
income(loss) decreased Php 4.6 billion, or
322.7% on lower market valuation of the
Bank’s available-for-sale securities and the
higher actuarial losses on the Bank’s defined
benefit plan. The Bank’s capital adequacy
ratio using Basel II framework at 13.7%
declined from last year’s 14.2% as the risk
weighted assets increased at a faster rate
than the qualifying capital. This year’s CAR
remained substantially higher than BSP’s
10% requirement.
BPI’s market capitalization remained the
largest in the industry at Php 302.5 billion.
The Bank’s share price traded at a premium
of 2.9x its book value per share of Php 29.37.
Loans, net of impairment losses, stood at
Php 635.2 billion, representing a Php 108.6
billion, or 20.6%, increase from prior year’s
Php 526.6 billion. This increase in loans was
brought about by the higher loan demand
from multinationals and conglomerates.
Non-performing loans ratio at 0.49%
improved from last year’s 1.5% and below
the industry’s 2.4% (November 2013).
Liquid assets increased Php 93.3 billion,
or 44.2%, to Php 304.2 billion largely on
higher balances with BSP.
Investment securities at Php 183.7 billion
increased Php 1.1 billion from prior year’s
Php 182.6 billion. Held-to-maturities
securities increased Php 19.9 billion, or
26.1% due to additional investments, while
available-for-sale securities decreased
Php 18.8 billion, or 17.7%, due to reduction in
local and foreign securities position.
PP x-x Financial Performance.indd 64
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PP xb Responsibility.indd 65
65
4/8/14 7:15 PM
66
P-P Financial Statements.indd 66
4/8/14 7:11 PM
67
4/8/14 7:12 PM
68
4/8/14 7:12 PM
69
4/8/14 7:12 PM
STATEMENTS OF CONDITION
DECEMBER 31, 2013 and 2012 and JANUARY 1, 2012
(In Millions of Pesos)
Notes
Consolidated
December
December
31, 2012
31, 2013
(Restated)
January
1, 2012
(Restated)
December
31, 2013
Parent
December
31, 2012
(Restated)
January
1, 2012
(Restated)
RESOURCES
CASH AND OTHER CASH ITEMS
7
25,696
23,293
22,395
24,888
22,518
21,661
DUE FROM BANGKO SENTRAL NG
PILIPINAS
7
244,483
119,079
83,759
195,076
105,244
70,807
DUE FROM OTHER BANKS
7
17,070
7,582
9,297
8,789
4,724
5,567
7, 8
12,406
38,927
35,277
5,046
10,843
24,867
9
16,550
5,920
5,389
16,550
5,920
5,389
10
4,597
22,098
12,275
2,626
19,055
11,638
INTERBANK LOANS RECEIVABLE AND
SECURITIES PURCHASED UNDER
AGREEMENTS TO RESELL
FINANCIAL ASSETS AT FAIR VALUE
THROUGH PROFIT OR LOSS
- DERIVATIVE FINANCIAL ASSETS
- TRADING SECURITIES
AVAILABLE-FOR-SALE SECURITIES, net
11
87,556
106,403
74,084
81,736
92,845
64,500
HELD-TO-MATURITY SECURITIES
12
96,172
76,243
89,742
85,900
67,822
79,723
LOANS AND ADVANCES, net
13
635,194
526,640
454,499
480,146
389,962
337,425
5,852
6,887
9,148
3,480
4,379
6,431
ASSETS HELD FOR SALE, net
BANK PREMISES, FURNITURE,
FIXTURES AND EQUIPMENT, net
14
12,205
12,421
12,322
8,030
8,101
8,199
INVESTMENT PROPERTIES, net
15
1,597
2,582
2,637
1,597
2,575
2,630
INVESTMENTS IN SUBSIDIARIES AND
ASSOCIATES, net
16
4,176
3,680
3,069
6,793
7,088
7,008
ASSETS ATTRIBUTABLE TO INSURANCE
OPERATIONS
5, 7
14,586
13,451
12,240
-
-
-
DEFERRED INCOME TAX ASSETS, net
17
6,176
5,087
5,284
4,296
3,525
3,677
18
11,048
1,195,364
14,948
985,241
12,148
843,565
7,414
932,367
10,930
755,531
8,099
657,621
OTHER RESOURCES, net
Total resources
(forward)
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STATEMENTS OF CONDITION
DECEMBER 31, 2013 and 2012 and JANUARY 1, 2012
Notes
Consolidated
December
December
31, 2012
31, 2013
(Restated)
January
1, 2012
(Restated)
December
31, 2013
Parent
December
31, 2012
(Restated)
January
1, 2012
(Restated)
LIABILITIES AND CAPITAL FUNDS
DEPOSIT LIABILITIES
19
988,586
802,274
681,101
785,403
628,365
544,414
DERIVATIVE FINANCIAL LIABILITIES
9
16,360
5,827
4,814
16,360
5,827
4,814
BILLS PAYABLE
20
26,179
26,280
19,136
18,990
16,963
9,887
DUE TO BANGKO SENTRAL NG PILIPINAS
AND OTHER BANKS
2,051
2,035
1,717
2,052
2,036
1,717
MANAGER’S CHECKS AND DEMAND
DRAFTS OUTSTANDING
7,183
5,794
4,131
6,026
4,508
3,389
3,396
ACCRUED TAXES, INTEREST AND OTHER
EXPENSES
4,907
4,819
4,026
3,456
2,709
UNSECURED SUBORDINATED DEBT
21
-
5,000
5,000
-
5,000
5,000
LIABILITIES ATTRIBUTABLE TO INSURANCE
OPERATIONS
5
13,061
10,793
9,937
-
-
-
22
31,230
1,089,557
24,297
887,119
25,387
755,249
26,338
858,565
19,563
685,718
20,965
592,895
35,563
8,316
1,680
62,137
35,562
8,317
1,603
49,794
35,562
8,317
1,462
41,763
35,563
8,316
1,680
32,053
35,562
8,317
1,603
24,054
35,562
8,317
1,462
19,948
1,420
96,696
1,426
98,122
985,241
(165)
86,939
1,377
88,316
843,565
(3,810)
73,802
73,802
932,367
277
69,813
69,813
755,531
(563)
64,726
64,726
657,621
DEFERRED CREDITS AND OTHER
LIABILITIES
Total liabilities
CAPITAL FUNDS ATTRIBUTABLE TO THE
EQUITY HOLDERS OF BPI
Share capital
Share premium
Reserves
Surplus
Accumulated other comprehensive (loss)
income
NON-CONTROLLING INTERESTS
Total capital funds
Total liabilities and capital funds
23
(3,161)
104,535
1,272
105,807
1,195,364
(The notes on pages 1 to 100 are an integral part of these financial statements.)
71
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STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2013
(In Millions of Pesos, Except Per Share Amounts)
Notes
2013
INTEREST INCOME
On loans and advances
On held-to-maturity securities
On available-for-sale securities
On deposits with BSP and other banks
On trading securities
Gross receipts tax
INTEREST EXPENSE
On deposits
On bills payable and other borrowings
NET INTEREST INCOME
IMPAIRMENT LOSSES
NET INTEREST INCOME AFTER
IMPAIRMENT LOSSES
OTHER INCOME
Trading gain on securities
Fees and commissions
Income from foreign exchange trading
Income attributable to insurance operations
Other operating income
Gross receipts tax
OTHER EXPENSES
Compensation and fringe benefits
Occupancy and equipment-related expenses
Other operating expenses
INCOME BEFORE INCOME TAX
PROVISION FOR INCOME TAX
Current
Deferred
19
20, 21
11, 13, 18
5
24
26
14, 15, 25
26
2013
Parent
2012
(Restated)
2011
(Restated)
32,368
4,930
2,615
1,641
690
(1,442)
40,802
30,790
5,191
3,424
1,230
847
(1,373)
40,109
27,156
6,023
3,592
2,488
812
(1,382)
38,689
20,255
4,434
2,436
904
628
(1,000)
27,657
19,356
4,638
3,126
702
763
(963)
27,622
16,762
5,383
3,374
2,001
767
(1,009)
27,278
9,530
948
10,478
30,324
2,648
11,648
1,007
12,655
27,454
2,923
11,721
1,102
12,823
25,866
2,150
5,187
597
5,784
21,873
1,599
6,929
588
7,517
20,105
2,003
7,601
668
8,269
19,009
1,583
27,676
24,531
23,716
20,274
18,102
17,426
4,839
5,885
2,042
1,449
9,514
(1,555)
22,174
5,908
5,111
1,682
694
7,878
(1,342)
19,931
2,948
4,607
1,770
949
6,687
(1,070)
15,891
3,983
4,823
1,652
8,556
(1,307)
17,707
4,717
4,256
1,372
6,771
(1,122)
15,994
2,712
3,777
1,596
5,917
(943)
13,059
10,641
8,040
8,022
26,703
23,147
10,470
7,193
7,139
24,802
19,660
10,270
6,534
6,552
23,356
16,251
8,292
6,460
5,872
20,624
17,357
8,262
5,798
5,378
19,438
14,658
7,917
5,080
5,296
18,293
12,192
4,147
6
4,153
18,994
3,576
(418)
3,158
16,502
3,570
(408)
3,162
13,089
2,644
245
2,889
14,468
2,444
(213)
2,231
12,427
2,556
(274)
2,282
9,910
18,811
183
18,994
16,352
150
16,502
12,899
190
13,089
14,468
14,468
12,427
12,427
9,910
9,910
5.19
4.60
3.63
3.99
3.49
2.79
27
17
NET INCOME FOR THE YEAR
Attributable to:
Equity holders of BPI
Non-controlling interests
Earnings per share for net income attributable to
the equity holders of BPI during the year:
Basic and diluted
Consolidated
2012
2011
(Restated)
(Restated)
23
72
4/8/14 7:12 PM
STATEMENTS OF TOTAL COMPREHENSIVE INCOME
Note
NET INCOME FOR THE YEAR
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified
to profit or loss
Net change in fair value reserve on availablefor-sale securities, net of tax effect
Fair value reserve on investments of
insurance subsidiaries, net of tax effect
Share in other comprehensive income of
associates
Currency translation differences
Item that will not be reclassified to profit or
loss
Actuarial (losses) gains on defined benefit
plan, net of tax effect
Total other comprehensive (loss) income, net of
tax effect
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR
Attributable to:
Equity holders of BPI
Non-controlling interests
2013
18,994
Consolidated
2012
2011
(Restated)
(Restated)
16,502
13,089
2013
14,468
Parent
2012
(Restated)
12,427
2011
(Restated)
9,910
23
(3,983)
(718)
1,420
(3,671)
(550)
1,495
(309)
161
(63)
-
-
-
(88)
233
503
(104)
351
(4)
-
-
-
(491)
1,752
(864)
(4,638)
1,594
840
14,356
18,096
13,929
14,230
126
14,356
17,937
159
18,096
13,737
192
13,929
(416)
1,390
(4,087)
840
775
10,381
13,267
10,685
10,381
10,381
13,267
13,267
10,685
10,685
(720)
73
4/8/14 7:12 PM
STATEMENTS OF CHANGES IN CAPITAL FUNDS
Share
capital
Balance, January 1, 2011 (Previously
reported)
Effect of adoption of PAS 19 (R)
Balance, January 1, 2011 (Restated)
Comprehensive income
Net income for the year
Other comprehensive income for the year
Total comprehensive income for the
year
Transactions with owners
Employee stock option plan:
Exercise of options
Cash dividends
Transfer from surplus to reserves
Others
Other changes in non-controlling interests
Total transactions with owners
Balance, December 31, 2011
Balance, January 1, 2012
year
Cash dividends
(forward)
74
Consolidated
Attributable to equity holders of BPI (Note 23)
Accumulated
other
Share
comprehensive
premium Reserves Surplus
income (loss)
35,562
35,562
8,317
8,317
1,367
1,367
35,318
46
35,364
-
-
-
12,899
-
-
-
-
-
-
35,562
35,562
-
81,031
(1,424)
79,607
1,244
1,244
Total
equity
82,275
(1,424)
80,851
838
12,899
838
190
2
13,089
840
12,899
838
13,737
192
13,929
8,317
8,317
(41)
138
(2)
95
1,462
1,462
41
(6,401)
(138)
(2)
(6,500)
41,763
41,763
(165)
(165)
(6,401)
(4)
(6,405)
86,939
86,939
(59)
(59)
1,377
1,377
(6,401)
(4)
(59)
(6,464)
88,316
88,316
-
-
-
16,352
-
1,585
16,352
1,585
150
9
16,502
1,594
-
-
-
16,352
1,585
17,937
159
18,096
35,562
8,317
141
141
1,603
(8,180)
(141)
(8,321)
49,794
1,420
(8,180)
(8,180)
96,696
(110)
(110)
1,426
(8,180)
(110)
(8,290)
98,122
467
(1,470)
(1,003)
Total
Noncontrolling
interests
4/8/14 7:12 PM
Other comprehensive loss for the year
Total comprehensive income (loss) for
the year
Cash dividends
Others
Share
capital
35,562
Consolidated
Attributable to equity holders of BPI (Note 23)
Accumulated
other
Share
comprehensive
premium Reserves Surplus
income (loss)
8,317
1,603
49,794
1,420
Total
96,696
18,811
Noncontrolling
interests
1,426
Total
equity
98,122
-
-
-
18,811
-
(4,581)
(4,581)
183
(57)
18,994
(4,638)
-
-
-
18,811
(4,581)
14,230
126
14,356
-
-
(6,401)
(76)
9
(6,468)
62,137
(3,161)
(6,401)
10
(6,391)
104,535
(280)
(280)
1,272
(6,401)
10
(280)
(6,671)
105,807
1
76
1
(1)
-
-
-
1
35,563
(1)
8,316
77
1,680
75
4/8/14 7:12 PM
Parent (Note 23)
Share
capital
Balance, January 1, 2011 (Previously
reported)
Effect of adoption of PAS 19 (R)
Balance, January 1, 2011 (Restated)
year
Employee stock option plan:
Exercise of options
Cash dividends
Others
Balance, January 1, 2012
year
Cash dividends
Accumulated
other
comprehensive
income (loss)
Share
premium
Reserves
8,317
8,317
1,336
1,336
16,542
25
16,567
-
-
-
9,910
-
775
9,910
775
-
-
-
9,910
775
10,685
8,317
8,317
(11)
137
126
1,462
1,462
11
(6,402)
(137)
(1)
(6,529)
19,948
19,948
(563)
(563)
(6,402)
(1)
(6,403)
64,726
64,726
-
-
-
12,427
-
840
12,427
840
-
-
-
12,427
840
13,267
8,317
141
141
1,603
(8,180)
(141)
(8,321)
24,054
277
(8,180)
(8,180)
69,813
35,562
35,562
35,562
35,562
35,562
Surplus
(303)
(1,035)
(1,338)
Total
61,454
(1,010)
60,444
(forward)
76
4/8/14 7:12 PM
Parent (Note 23)
Other comprehensive loss for the year
Total comprehensive income (loss) for
the year
Cash dividends
Others
Share
capital
35,562
Share
premium
8,317
Reserves
1,603
Surplus
24,054
Accumulated
other
comprehensive
income (loss)
277
Total
69,813
-
-
-
14,468
(4,087)
14,468
(4,087)
-
-
-
14,468
(4,087)
10,381
-
-
76
1
77
1,680
(6,401)
(76)
8
(6,469)
32,053
(3,810)
(6,401)
9
(6,392)
73,802
1
1
35,563
(1)
(1)
8,316
77
4/8/14 7:12 PM
STATEMENTS OF CASH FLOWS
Consolidated
Notes
CASH FLOWS FROM OPERATING
ACTIVITIES
Income before income tax
Adjustments for:
Impairment losses
Depreciation and amortization
Share in net income of associates
Dividend income
Interest income
Interest expense
Operating loss before changes in
operating assets and liabilities
Changes in operating assets and
liabilities
(Increase) decrease in:
Due from Bangko Sentral ng
Pilipinas
Interbank loans receivable and
securities purchased under
agreements to resell
Trading securities, net
Loans and advances, net
Assets held for sale
Assets attributable to insurance
operations
Other resources
Increase (decrease) in:
Deposit liabilities
Due to Bangko Sentral ng Pilipinas
and other banks
Manager’s checks and demand
drafts outstanding
Accrued taxes, interest and other
expenses
Liabilities attributable to insurance
operations
Derivative financial instruments
Deferred credits and other liabilities
Net cash from (used in) operations
Interest received
Interest paid
Income taxes paid
Net cash from (used in) operating
activities
11, 13, 18
14, 15
24
Parent
2012
(Restated)
2011
(Restated)
23,147
19,660
16,251
17,357
14,658
12,192
2,648
3,459
(590)
(28)
(42,244)
10,478
2,923
3,346
(138)
(27)
(41,482)
12,655
2,150
3,040
(216)
(47)
(40,071)
12,823
1,599
2,125
(1,923)
(28,657)
5,784
2,003
2,188
(1,383)
(28,585)
7,517
1,583
1,921
(1,210)
(28,287)
8,269
(3,130)
(3,063)
(6,070)
(3,715)
(3,602)
(5,532)
-
-
54,303
-
-
52,010
2013
2013
2012
(Restated)
2011
(Restated)
17,345
(110,369)
434
(9,887)
(74,049)
1,868
3,859
(722)
(77,418)
2,328
16,291
(91,710)
900
(7,593)
(53,801)
1,759
3,861
(1,236)
(62,188)
2,137
(2,059)
3,212
(724)
(3,661)
(329)
(4,295)
2,901
(3,603)
(3,007)
186,312
121,173
(38,665)
157,038
83,951
(47,522)
16
317
(283)
16
318
(285)
1,389
1,663
(56)
1,518
1,120
(95)
542
557
(536)
306
652
(654)
2,267
(106)
3,250
99,103
42,407
(10,932)
(5,243)
856
387
3,949
39,386
41,152
(12,418)
(2,961)
724
154
(990)
(67,996)
40,467
(13,380)
(2,813)
125,335
65,159
(43,722)
(106)
3,157
86,596
28,927
(6,149)
(3,660)
105,714
608
3,191
23,000
27,479
(7,423)
(2,079)
154
(1,316)
(63,673)
28,623
(8,780)
(1,723)
40,977
(45,553)
(forward)
78
4/8/14 7:12 PM
STATEMENTS OF CASH FLOWS
Notes
CASH FLOWS FROM INVESTING
ACTIVITIES
(Increase) decrease in:
Available-for-sale securities, net
Held-to-maturity securities
Bank premises, furniture, fixtures and
equipment, net
Investment properties, net
Investment in subsidiaries and
associates, net
Assets attributable to insurance
operations
Dividends received
Net cash (used in) from investing activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash dividends paid
Increase (decrease) in:
Bills payable
Unsecured subordinated debt
Net cash used in financing activities
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
January 1
December 31
2013
Consolidated
2012
2011
(Restated) (Restated)
2013
Parent
2012
(Restated)
2011
(Restated)
11
12
14,479
(19,695)
(32,756)
13,230
14
(2,557)
909
(2,748)
(12)
(3,247)
3
(349)
(24)
(120)
936
28
(6,249)
(614)
27
(22,897)
183
47
41,707
1,923
(9,070)
1,383
(16,246)
(3,201)
(11,380)
(3,201)
(3,201)
(11,380)
(3,201)
(100)
(5,000)
(8,301)
7,144
(4,236)
(5,733)
(8,934)
(2,973)
(6,174)
7,076
(4,304)
(7,356)
(10,557)
110,785
38,026
(10,949)
90,470
20,427
(16,051)
188,987
299,772
150,961
188,987
143,329
233,799
122,902
143,329
39,147
5,694
7,078
(17,879)
(28,286)
12,165
(1,406)
912
(1,416)
(12)
(1,784)
(2)
(80)
(39)
302
35,311
5,363
1,210
40,059
7
161,910
150,961
138,953
122,902
79
4/8/14 7:12 PM
NOTES TO FINANCIAL STATEMENTS
AS AT DECEMBER 31, 2013 AND 2012 AND JANUARY 1, 2012 AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 2013
Note 1 - General Information
Bank of the Philippine Islands (“BPI” or the “Parent Bank”) is a domestic commercial bank with an expanded
banking license and has its registered office address, which is also its principal place of business, at BPI Building,
Ayala Avenue corner Paseo de Roxas, Makati City. BPI and its subsidiaries as detailed in Note 2.3 (collectively
referred to as the “BPI Group”) offer a whole breadth of financial services that include corporate banking, consumer
banking, investment banking, asset management, corporate finance, securities distribution, and insurance services.
At December 31, 2013, the BPI Group has 13,024 employees (2012 - 12,406 employees) and operates 825
branches and 2,181 ATMs (2012 - 820 branches and 2,068 ATMs) to support its delivery of services. The BPI
Group also serves its customers through alternative electronic banking channels such as telephone, mobile phone
and the internet. The BPI shares have been traded in the Philippine Stock Exchange (PSE) since
October 12, 1971. The Parent Bank was registered with the Securities and Exchange Commission (SEC) on
January 4, 1943. This license was extended for another 50 years on January 4, 1993.
These financial statements have been approved and authorized for issuance by the Board of Directors of the
Parent Bank on February 19, 2014.
Note 2 - Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
The financial statements of the BPI Group have been prepared in accordance with Philippine Financial Reporting
Standards (PFRS). The term PFRS in general includes all applicable PFRS, Philippine Accounting Standards
(PAS), and interpretations of the Philippine Interpretations Committee (PIC), Standing Interpretations Committee
(SIC) and International Financial Reporting Interpretations Committee (IFRIC) which have been approved by the
Financial Reporting Standards Council (FRSC) and adopted by the SEC.
As allowed by the SEC, the pre-need subsidiary of the Parent Bank continues to follow the provisions of the
Pre-Need Uniform Chart of Accounts (PNUCA) prescribed by the SEC and adopted by the Insurance
Commission.
The financial statements comprise the statement of condition, statement of income and statement of total
comprehensive income shown as two statements, statement of changes in capital funds, statement of cash flows
and the notes.
These financial statements have been prepared under the historical cost convention, as modified by the
revaluation of trading securities, available-for-sale financial assets and all derivative contracts.
The preparation of financial statements in conformity with PFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the BPI Group’s
accounting policies. Changes in assumptions may have a significant impact on the financial statements in the
period the assumptions changed. Management believes that the underlying assumptions are appropriate and
that the financial statements therefore fairly present the financial position and results of the BPI Group. The
areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are
significant to the financial statements are disclosed in Note 4.
80
4/8/14 7:12 PM
2.2 Changes in accounting policy and disclosures
New and amended standards adopted by the BPI Group
The following standards have been adopted by the BPI Group effective January 1, 2013 and have a material
impact on the BPI Group:
PAS 1 (Amendment), Financial Statement Presentation - Other Comprehensive Income (effective
July 1, 2012). The main change resulting from these amendments is a requirement for entities to group
items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to
profit or loss subsequently (reclassification adjustments). The required change in presentation has been
effected in the statement of total comprehensive income.
PAS 19 (Revised), Employee Benefits (effective January 1, 2013). These amendments eliminate the corridor
approach and calculate finance costs on a net funding basis. The amendments also require recognition of all
actuarial gains and losses in other comprehensive income as they occur and of all past service costs in
profit or loss. The amendments replace interest cost and expected return on plan assets with a net interest
amount that is calculated by applying the discount rate to the net defined benefit asset (liability). See Notes
29 and 33 for the impact of the adoption on the financial statements.
PFRS 7 (Amendment), Financial instruments: Disclosures - Offsetting Financial Assets and Financial
Liabilities (effective January 1, 2013). This amendment includes new disclosures to facilitate comparison
between those entities that prepare PFRS financial statements to those that prepare financial statements in
accordance with United States Generally Accepted Accounting Principles (US GAAP). See Note 3.3.4 for
the disclosure required by the amended standard.
PFRS 12, Disclosures of Interests in Other Entities (effective January 1, 2013). This new standard includes
the disclosure requirements for all forms of interests in other entities, including joint arrangements,
associates, structured entities and other off balance sheet vehicles. See Note 16 for the disclosures required
by the new standard.
PFRS 13, Fair Value Measurement (effective January 1, 2013). This new standard aims to improve
consistency and reduce complexity by providing a clarified definition of fair value and a single source of fair
value measurement and disclosure requirements for use across PFRS. The requirements, which are largely
aligned with IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on
how it should be applied where its use is already required or permitted by other standards within PFRS!
Apart from the additional disclosures required by PFRS 13, there is no other significant impact on the
financial statements as the current fair value measurement followed by the BPI Group is already consistent
with the requirements of the new standard. See Note 3.5 for the disclosures required by the new standard.
New standards, amendments and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods
beginning after January 1, 2013, and have not been applied in preparing these financial statements. None of
these is expected to have a significant effect on the financial statements, except the following as set out below:
PFRS 9, Financial Instruments. This new standard addresses the classification, measurement and
recognition of financial assets and financial liabilities. It replaces the parts of PAS 39, Financial Instruments:
Recognition and Measurement that relate to the classification and measurement of financial instruments,
and hedge accounting. PFRS 9 requires financial assets to be classified into two measurement categories:
those measured as at fair value and those measured at amortized cost. The determination is made at initial
recognition. The classification depends on the entity’s business model for managing its financial instruments
and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains
most of the PAS 39 requirements. The main change is that, in cases where the fair value option is taken for
financial liabilities, part of the fair value change due to an entity’s own credit risk is recorded in other
comprehensive income rather than in profit or loss, unless this creates an accounting mismatch. PFRS also
details the changes in requirements to hedge accounting that will allow entities to better reflect their risk
management activities in the financial statements. The mandatory effective date of PFRS 9, which is for
annual periods beginning January 1, 2015 has been deferred and left open pending the finalization of the
impairment classification and measurement requirements. The BPI Group has yet to assess the full impact
of PFRS 9 and intends to adopt PFRS 9 upon completion of the IASB project. The BPI Group will also
consider the impact of the remaining phase of PFRS 9 when issued!
(2)
81
4/8/14 7:12 PM
There are no other standards, amendments or interpretations that are not yet effective that have a material
impact on the BPI Group.
2.3 Consolidation
The consolidated financial statements comprise the financial statements of the BPI Group as at
December 31, 2013. The subsidiaries financial statements are prepared for the same reporting year as the
Parent Bank. The consolidated financial statements include the financial statements of the Parent Bank and the
following subsidiaries as at December 31:
Subsidiaries
BPI Family Savings Bank, Inc.
BPI Leasing Corporation
BPI Direct Savings Bank, Inc.
BPI International Finance Limited
BPI Europe Plc.
BPI Securities Corp.
BPI Card Finance Corp.
Filinvest Algo Financial Corp.
BPI Rental Corporation.
BPI Investment Management Inc.
Santiago Land Dev. Corp.
BPI Operations Management Corp.
BPI Computer Systems Corp.
BPI Foreign Exchange Corp.
BPI Express Remittance Corp. USA
BPI Express Remittance Corp. Nevada
BPI Express Remittance Center HK (Ltd.)
Green Enterprises S. R. L. in Liquidation
(formerly BPI Express Remittance
Europe, S.p.A.)
Prudential Investments, Inc.
First Far - East Development Corporation
FEB Stock Brokers, Inc.
Citytrust Securities Corporation
BPI Express Remittance Spain S.A
FEB Speed International
AF Holdings and Management Corp.
Ayala Plans, Inc
FGU Insurance Corporation
BPI/MS Insurance Corporation
BPI Globe BanKO, Inc.
Country of
incorporation
Philippines
Philippines
Philippines
Philippines
Hong Kong
England and Wales
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
USA
USA
Hong Kong
Italy
Philippines
Philippines
Philippines
Philippines
Spain
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Principal activities
Banking
Investment house
Leasing
Banking
Financing
Banking (deposit)
Securities dealer
Financing
Financing
Rental
Investment management
Land holding
Operations management
Business systems service
Foreign exchange
Remittance
Remittance
Remittance
Remittance
Investment house
Real estate
Securities dealer
Securities dealer
Remittance
Remittance
Financial management
consultancy
Pre-need
Non-life insurance
Non-life insurance
Banking
% of ownership
2013
2012
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
98.67
94.62
50.85
40
100
98.67
94.62
50.85
40
BPI has control over BPI Globe BanKO, Inc. since BPI is largely involved in key decisions concerning financial
and operating policies and activities of, and provision of technological support and technical know-how to BPI
Globe BanKO, Inc.
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(a) Subsidiaries
Subsidiaries are all entities over which the BPI Group has control. The BPI Group controls an entity when it is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. The BPI Group also assesses existence of control where it does not
have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of defacto control. De-facto control may arise in circumstances where the size of the BPI Group’s voting rights
relative to the size and dispersion of holdings of other shareholders give the BPI Group the power to govern the
financial and operating policies.
Subsidiaries are fully consolidated from the date on which control is transferred to the BPI Group. They are deconsolidated from the date that control ceases.
The BPI Group applies the acquisition method of accounting to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the equity interests issued by the BPI Group. The
consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date. On an acquisition-by-acquisition basis, the BPI Group recognizes any non-controlling interest in
the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s
identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying 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 BPI Group is recognized at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or
liability is recognized in accordance with PAS 39 either in profit or loss or as a change to other comprehensive
income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is
not accounted for within equity.
The excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in the
acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of
the BPI Group’s share of the identifiable net assets acquired is recorded as goodwill. If the total of consideration
transferred, non-controlling interest recognized and previously held interest measured is less than the fair value
of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized
directly in profit or loss.
Inter-company transactions, balances and unrealized gains on transactions between group companies are
eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the BPI Group, except for the pre-need subsidiary
which follows the provisions of the PNUCA as allowed by the SEC.
When the BPI Group ceases to have control, any retained interest in the entity is re-measured to its fair value at
the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the
initial carrying amount for purposes of subsequently accounting for the retained interest as an associate, joint
venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in
respect of that entity are accounted for as if the BPI Group had directly disposed of the related assets or
liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to
profit or loss.
(b) Transactions with non-controlling interests
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity
transactions - that is, as transactions with the owners in their capacity as owners. For purchases from noncontrolling interests, the difference between any consideration paid and the relevant share acquired of the
carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to noncontrolling interests are also recorded in equity.
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Interests in the equity of subsidiaries not attributable to the Parent Bank are reported in consolidated equity as
non-controlling interests. Profits or losses attributable to non-controlling interests are reported in the statement
of income as net income (loss) attributable to non-controlling interests.
(c) Associates
Associates are all entities over which the BPI Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates in the
consolidated financial statements are accounted for using the equity method of accounting. Under the equity
method, the investment is initially recognized at cost and the carrying amount is increased or decreased to
recognize the investor’s share of the profit or loss of the investee after the date of acquisition. The BPI Group’s
investment in associates includes goodwill identified on acquisition (net of any accumulated impairment loss).
If the ownership interest in an associate is reduced but significant influence is retained, a proportionate share of
the amounts previously recognized in other comprehensive income is reclassified to profit or loss where
appropriate.
The BPI Group’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its
share of post-acquisition movements in reserves is recognized in other comprehensive income. The cumulative
post-acquisition movements are adjusted against the carrying amount of the investment. When the BPI Group’s
share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the BPI Group does not recognize further losses, unless it has incurred legal or constructive
obligations or made payments on behalf of the associate.
The BPI Group determines at each reporting date whether there is any objective evidence that the investment in
the associate is impaired. If this is the case, the BPI Group calculates the amount of impairment as the
difference between the recoverable amount of the associate and its carrying value and recognizes the amount
adjacent to ‘share of profit (loss) of an associate’ in profit or loss.
Unrealized gains on transactions between the BPI Group and its associates are eliminated to the extent of the
BPI Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where
necessary to ensure consistency with the policies adopted by the BPI Group.
2.4 Investments in subsidiaries and associates
Investments in subsidiaries and associates in the Parent Bank’s separate financial statements are accounted for
using the cost method in accordance with PAS 27. Under this method, income from investment is recognized in
profit or loss only to the extent that the investor receives distributions from accumulated profits of the investee
arising after the acquisition date. Distributions received in excess of such profits are regarded as a recovery of
investment and are recognized as reduction of the cost of the investment.
The Parent Bank recognizes a dividend from a subsidiary or associate in profit or loss in its separate financial
statements when its right to receive the dividend is established.
The Parent Bank determines at each reporting date whether there is any indicator of impairment that the
investment in the subsidiary or associate is impaired. If this is the case, the Parent Bank calculates the amount
of impairment as the difference between the recoverable amount and carrying value and the difference is
recognized in profit or loss.
Investments in subsidiaries and associates are derecognized upon disposal or when no future economic benefits
are expected to be derived from the subsidiaries and associates at which time the cost and the related
accumulated impairment loss are removed in the statement of condition. Any gains and losses on disposal is
determined by comparing the proceeds with the carrying amount of the investment and recognized in profit or
loss.
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2.5 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
executive officer who allocates resources to, and assesses the performance of the operating segments of the
BPI Group.
All transactions between business segments are conducted on an arm´s length basis, with intra-segment
revenue and costs being eliminated upon consolidation. Income and expenses directly associated with each
segment are included in determining business segment performance.
In accordance with PFRS 8, the BPI Group has the following main banking business segments: consumer
banking, corporate banking and investment banking. Its insurance business is assessed separately from these
banking business segments (Note 6).
2.6 Cash and cash equivalents
Cash and cash equivalents consist of Cash and other cash items, Due from Bangko Sentral ng Pilipinas (BSP),
Due from other banks, and Interbank loans receivable and securities purchased under agreements to resell with
maturities of less than three months from the date of acquisition and that are subject to insignificant risk of
changes in value.
2.7 Repurchase and reverse repurchase agreements
Securities sold subject to repurchase agreements (‘repos’) are reclassified in the financial statements as pledged
assets when the transferee has the right by contract or custom to sell or repledge the collateral; the counterparty
liability is included in deposits from banks or deposits from customers, as appropriate. The difference between
sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective
interest method.
Securities purchased under agreements to resell (‘reverse repos’) are recorded as loans and advances to other
banks and customers and included in the statement of condition under “Interbank loans receivable and securities
purchased under agreements to resell”. Securities lent to counterparties are also retained in the financial
statements.
2.8 Financial assets
2.8.1 Classification
The BPI Group classifies its financial assets in the following categories: financial assets at fair value through
profit or loss, loans and receivables, held-to-maturity securities and available-for-sale securities. The
classification depends on the purpose for which the financial assets are acquired. Management determines the
classification of its financial assets at initial recognition.
(a) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading and those designated at fair value through
profit or loss at inception.
A financial asset is classified as held for trading if it is acquired principally for the purpose of selling or
repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed
together and for which there is evidence of a recent actual pattern of short-term profit-taking. Financial assets
held for trading (other than derivatives) are shown as “Trading securities” in the statement of condition.
Derivatives are also categorized as held for trading unless they are designated as hedging instruments.
Financial assets designated at fair value through profit or loss at inception are those that are managed and their
performance is evaluated on a fair value basis, in accordance with a documented investment strategy.
Information about these financial assets is provided internally on a fair value basis to the BPI Group’s key
management personnel. The BPI Group has no financial assets that are specifically designated at fair value
through profit or loss.
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(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments: (i) that are not
quoted in an active market, (ii) with no intention of being traded, and (iii) that are not designated as available-forsale. Significant accounts falling under this category include loans and advances, cash and other cash items,
due from BSP and other banks, interbank loans receivable and securities purchased under agreements to resell
and accounts receivable included under other resources.
(c) Held-to-maturity securities
Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the BPI Group’s management has the positive intention and ability to hold to maturity. If the BPI
Group were to sell other than an insignificant amount of held-to-maturity assets, the entire category would be
tainted and reclassified as available-for-sale.
(d)
Available-for-sale securities
Available-for-sale securities are non-derivative financial assets that are either designated in this category or not
classified in any of the other categories.
2.8.2
Recognition and measurement
(a) Initial recognition and measurement
Regular-way purchases and sales of financial assets at fair value through profit or loss, held-to-maturity
securities and available-for-sale securities are recognized on trade date, the date on which the BPI Group
commits to purchase or sell the asset. Loans and receivables are recognized upon origination when cash is
advanced to the borrowers or when the right to receive payment is established. Financial assets not carried at
fair value through profit or loss are initially recognized at fair value plus transaction costs. Financial assets
carried at fair value through profit or loss are initially recognized at fair value; and transaction costs are
recognized in profit or loss.
(b) Subsequent measurement
Available-for-sale securities and financial assets at fair value through profit or loss are subsequently carried at
fair value. Loans and receivables and held-to-maturity securities are subsequently carried at amortized cost
using the effective interest method. Gains and losses arising from changes in the fair value of financial assets at
fair value through profit or loss are included in the statement of income (as “Trading gain/loss on securities”) in
the year in which they arise. Changes in the fair value of monetary and non-monetary securities classified as
available-for-sale are recognized directly in other comprehensive income, until the financial asset is
derecognized or impaired at which time the cumulative fair value adjustments previously recognized in other
comprehensive income should be recognized in profit or loss. However, interest is calculated on these securities
using the effective interest method and foreign currency gains and losses on monetary assets classified as
available-for-sale are recognized in profit or loss. Dividends on equity instruments are recognized in profit or loss
when the BPI Group’s right to receive payment is established.
2.8.3
Reclassification
The BPI Group may choose to reclassify a non-derivative financial asset held for trading out of the held-fortrading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial
assets other than loans and receivables are permitted to be reclassified out of the held-for-trading category only
in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In
addition, the BPI Group may choose to reclassify financial assets that would meet the definition of loans and
receivables out of the held-for-trading or available-for-sale categories if the BPI Group has the intention and
ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification.
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Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or
amortized cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date
are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables and
held-to-maturity categories are determined at the reclassification date. Further increases in estimates of cash
flows adjust effective interest rates prospectively.
2.8.4
Derecognition
Financial assets are derecognized when the contractual rights to receive the cash flows from these assets have
ceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership of
the assets are also transferred (that is, if substantially all the risks and rewards have not been transferred, the
BPI Group tests control to ensure that continuing involvement on the basis of any retained powers of control
does not prevent derecognition).
2.9 Impairment of financial assets
(a) Assets carried at amortized cost
The BPI Group assesses at each reporting date whether there is objective evidence that a financial asset or
group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment
losses are incurred only if there is objective evidence of impairment as a result of one or more events that
occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on
the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
The criteria that the BPI Group uses to determine that there is objective evidence of an impairment loss include:
Delinquency in contractual payments of principal or interest;
Cash flow difficulties experienced by the borrower;
Breach of loan covenants or conditions;
Initiation of bankruptcy proceedings;
Deterioration of the borrower’s competitive position; and
Deterioration in the value of collateral.
The BPI Group first assesses whether objective evidence of impairment exists individually for financial assets
that are individually significant, and collectively for financial assets that are not individually significant. If the BPI
Group determines 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 collectively assesses them for impairment. Financial assets that are individually assessed for impairment
and for which an impairment loss is or continues to be recognized are not included in a collective assessment of
impairment.
The amount of impairment loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial asset’s original effective interest rate (recoverable amount). The calculation of
recoverable amount of a collateralized financial asset reflects the cash flows that may result from foreclosure
less costs of obtaining and selling the collateral, whether or not foreclosure is probable. If a loan or held-tomaturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the
current effective interest rate determined under the contract. The carrying amount of the asset is reduced
through the use of an allowance account and the amount of loss is recognized in profit or loss.
For purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit
risk characteristics (i.e., on the basis of the BPI Group’s grading process that considers asset type, industry,
geographical location, collateral type, past-due status and other relevant factors). 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.
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Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on
the basis of the contractual cash flows of the assets in the BPI Group and historical loss experience for assets
with credit risk characteristics similar to those in the BPI 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
currently exist. The methodology and assumptions used for estimating future cash flows are reviewed regularly
to reduce any differences between loss estimates and actual loss experience.
When a loan is uncollectible, it is written off against the related allowance for loan impairment. Such loans are
written off after all the necessary procedures have been completed and the amount of loss has been determined.
If in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating),
the previously recognized impairment loss is reversed by adjusting the allowance account. Subsequent
recoveries of amounts previously written-off are credited to impairment loss in the statement of income.
(b) Assets classified as available-for-sale
The BPI Group assesses at each reporting date whether there is an objective evidence that a security classified
as available-for-sale is impaired. For debt securities, the BPI Group uses the criteria mentioned in (a) above.
For an equity security classified as available-for-sale, a significant or prolonged decline in the fair value below
cost is considered in determining whether the securities are impaired. Generally, the BPI Group treats
‘significant’ as 20% or more and ‘prolonged’ as greater than twelve months. The cumulative loss (difference
between the acquisition cost and the current fair value less any impairment loss on that financial asset previously
recognized in profit or loss) is removed from other comprehensive income and recognized in profit or loss when
the asset is determined to be impaired. If in a subsequent period, the fair value of a debt instrument previously
impaired increases and the increase can be objectively related to an event occurring after the impairment loss
was recognized, the impairment loss is reversed through profit or loss. Reversal of impairment losses
recognized previously on equity instruments is made directly to other comprehensive income.
(c) Renegotiated loans
Loans that are either subject to individual or collective impairment assessment and whose terms have been
renegotiated are no longer considered to be past due but are treated as new loans.
2.10 Financial liabilities
2.10.1
Classification
The BPI Group classifies its financial liabilities in the following categories: financial liabilities at fair value through
profit or loss and financial liabilities at amortized cost.
(a) Financial liabilities at fair value through profit or loss
This category comprises two sub-categories: financial liabilities classified as held for trading, and financial
liabilities designated by the BPI Group as at fair value through profit or loss upon initial recognition.
A financial liability is classified as held for trading if it is acquired or incurred principally for the purpose of selling
or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed
together and for which there is evidence of a recent actual pattern of short-term profit-taking. Derivatives are
also categorized as held for trading unless they are designated and effective as hedging instruments. Gains and
losses arising from changes in fair value of financial liabilities classified as held for trading are included in the
statement of income and are reported as “Trading gains/losses”. The BPI Group has no financial liabilities that
are designated at fair value through profit loss.
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(b) Other liabilities measured at amortized cost
Financial liabilities that are not classified as at fair value through profit or loss fall into this category and are
measured at amortized cost. Financial liabilities measured at amortized cost include deposits from customers
and banks, bills payable, amounts due to BSP and other banks, manager’s checks and demand drafts
outstanding, subordinated notes and other financial liabilities under deferred credits and other liabilities.
2.10.2
Recognition and measurement
(a) Initial recognition and measurement
Financial liabilities not carried at fair value through profit or loss are initially recognized at fair value plus
transaction costs. Financial liabilities carried at fair value through profit or loss are initially recognized at fair
value; and transaction costs are recognized as expense in profit or loss.
(b) Subsequent measurement
Financial liabilities at fair value through profit or loss are subsequently carried at fair value. Other liabilities
are measured at amortized cost using the effective interest method.
2.10.3
Derecognition
Financial liabilities are derecognized when they have been redeemed or otherwise extinguished (i.e. when the
obligation is discharged or is cancelled or has expired). Collateral (shares and bonds) furnished by the BPI
Group under standard repurchase agreements and securities lending and borrowing transactions is not
derecognized because the BPI Group retains substantially all the risks and rewards on the basis of the
predetermined repurchase price, and the criteria for derecognition are therefore not met.
2.11 Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The fair value of a non-financial asset is measured based on its highest and best use. The asset’s current use is
presumed to be its highest and best use.
The fair value of financial and non-financial liabilities takes into account non-performance risk, which is the risk
that the entity will not fulfill an obligation.
The BPI Group classifies its fair value measurements using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes
listed equity securities and debt instruments on exchanges (for example, Philippine Stock Exchange, Inc.,
Philippine Dealing and Exchange Corp., etc.).
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from prices). This level includes the majority of
the over-the-counter (“OTC”) derivative contracts. The primary source of input parameters like LIBOR yield
curve or counterparty credit risk is Bloomberg.
Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
This level includes equity investments and debt instruments with significant unobservable components. This
hierarchy requires the use of observable market data when available. The BPI Group considers relevant and
observable market prices in its valuations where possible. The BPI Group has no assets or liabilities
classified under Level 3 as at December 31, 2013 and 2012.
The appropriate level is determined on the basis of the lowest level input that is significant to the fair value
measurement.
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(a) Financial instruments
For financial instruments traded in active markets, the determination of fair values of financial assets and
financial liabilities is based on quoted market prices or dealer price quotations. This includes listed equity
securities and quoted debt instruments on major exchanges and broker quotes mainly from Bloomberg.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those
prices represent actual and regularly occurring market transactions on an arm’s length basis. If the above criteria
are not met, the market is regarded as being inactive. Indications that a market is inactive are when there is a
wide bid-offer spread or significant increase in the bid-offer spread or there are few recent transactions.
For all other financial instruments, fair value is determined using valuation techniques. In these techniques, fair
values are estimated from observable data in respect of similar financial instruments, using models to estimate
the present value of expected future cash flows or other valuation techniques, using inputs (for example, LIBOR
yield curve, FX rates, volatilities and counterparty spreads) existing at reporting dates. The BPI Group uses
widely recognized valuation models for determining fair values of non-standardized financial instruments of lower
complexity, such as options or interest rate and currency swaps. For these financial instruments, inputs into
models are generally market observable.
For more complex instruments, the BPI Group uses internally developed models, which are usually based on
valuation methods and techniques generally recognized as standard within the industry. Valuation models are
used primarily to value derivatives transacted in the OTC market, unlisted debt securities (including those with
embedded derivatives) and other debt instruments for which markets were or have become illiquid. Some of the
inputs to these models may not be market observable and are therefore estimated based on assumptions.
The fair value of OTC derivatives is determined using valuation methods that are commonly accepted in the
financial markets, such as present value techniques and option pricing models. The fair value of foreign
exchange forwards is generally based on current forward exchange rates, with the resulting value discounted
back to present value.
In cases when the fair value of unlisted equity instruments cannot be determined reliably, the instruments are
carried at cost less impairment. The fair value for loans and advances as well as liabilities to banks and
customers are determined using a present value model on the basis of contractually agreed cash flows, taking
into account credit quality, liquidity and costs. The fair values of contingent liabilities and irrevocable loan
commitments correspond to their carrying amounts.
(b) Non-financial assets or liabilities
The BPI Group uses valuation techniques that are appropriate in the circumstances and applies the technique
consistently. Commonly used valuation techniques are as follows:
Market approach - A valuation technique that uses observable inputs, such as prices, broker quotes and
other relevant information generated by market transactions involving identical or comparable assets or
group of assets.
Income approach - A valuation technique that converts future amounts (e.g., cash flows or income and
expenses) to a single current (i.e., discounted) amount. The fair value measurement is determined on the
basis of the value indicated by current market expectations about those future amounts.
Cost approach - A valuation technique that reflects the amount that would be required currently to replace
the service capacity of an asset (often referred to as current replacement cost).
The fair values were determined in reference to observable market inputs reflecting orderly transactions, i.e.
market listings, published broker quotes and transacted deals from similar and comparable assets, adjusted to
determine the point within the range that is most representative of the fair value under current market conditions.
The fair values of BPI Group’s investment properties and foreclosed assets (shown as Assets held for sale) fall
under level 2 of the fair value hierarchy. The BPI Group has no non-financial assets or liabilities classified under
Level 3 as at December 31, 2013 and 2012.
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2.12 Classes of financial instruments
The BPI Group classifies the financial instruments into classes that reflect the nature of information and take into
account the characteristics of those financial instruments. The classification made can be seen in the table
below:
Classes (as determined by the BPI Group)
Categories
(as defined by PAS 39)
Financial assets
Financial assets at fair value
through profit or loss
Main classes
- Trading securities
- Derivative financial assets
- Cash and other cash items
- Loans and advances
to banks
- Loans and advances to
customers
- Others
Held-to-maturity investments
Available-for-sale financial
assets
Financial liabilities
Financial liabilities at fair
value through profit or loss
Financial liabilities at
amortized cost
Off-balance sheet
financial
instruments
Sub-classes
- Debt securities
- Equity securities
- Investment securities
(debt securities)
(debt securities)
(equity securities)
- Due from BSP
- Due from other banks
- Interbank loans receivable and
securities purchased under agreements
to resell
- Real estate
mortgages
- Loans to
- Auto loans
individuals
(retail)
- Credit cards
- Others
- Large corporate
- Loans to
customers
corporate
- Small and mediumentities
sized enterprises
- Accounts receivables
- Sales contracts receivable
- Rental deposits
- Other accrued interest and fees
receivable
- Government
- Others
- Government
- Others
- Listed
- Unlisted
- Derivative financial liabilities
- Demand
- Deposits from
- Savings
customers
- Time
- Deposits from banks
- Bills payable
- Due to BSP and other
banks
- Manager’s check and
demand drafts outstanding
- Interest payable
- Unsecured subordinated
debt
- Other liabilities
- Accounts payable
- Outstanding acceptances
- Dividend payable
Loan commitments
Guarantees, acceptances and other financial facilities
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2.13 Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of condition when there is
a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or
realize the asset and settle the liability simultaneously.
2.14 Derivative financial instruments
Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are
subsequently re-measured at their fair value. Fair values are obtained from quoted market prices in active
markets including recent market transactions, and valuation techniques (for example for structured notes),
including discounted cash flow models and options pricing models, as appropriate. All derivatives are carried as
assets when fair value is positive and as liabilities when fair value is negative.
Certain derivatives embedded in other financial instruments are treated as separate derivatives when their
economic characteristics and risks are not closely related to those of the host contract and the host contract is
not carried at fair value through profit or loss. The assessment of whether an embedded derivative is required to
be separated from the host contract is done when the BPI Group first becomes a party to the contract.
Reassessment of embedded derivative is only done when there are changes in the contract that significantly
modify the contractual cash flows. The embedded derivatives are measured at fair value with changes in fair
value recognized in profit or loss.
The BPI Group’s derivative instruments do not qualify for hedge accounting. Changes in the fair value of any
derivative instrument that does not qualify for hedge accounting are recognized immediately in the statement of
income under “Trading gain/loss on securities”.
2.15 Bank premises, furniture, fixtures and equipment
Land and buildings comprise mainly of branches and offices. All bank premises, furniture, fixtures and
equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that
is directly attributable to the acquisition of an asset which comprises its purchase price, import duties and any
directly attributable costs of bringing the asset to its working condition and location for its intended use.
Subsequent costs are included in the asset’s carrying amount or are recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the BPI
Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit
or loss during the year in which they are incurred.
Land is not depreciated. Depreciation for buildings and furniture and equipment is calculated using the straightline method to allocate cost or residual values over the estimated useful lives of the assets, as follows:
Building
Furniture and equipment
Equipment for lease
25-50 years
3-5 years
2-8 years
Leasehold improvements are depreciated over the shorter of the lease term (ranges from 5 to 10 years) and the
useful life of the related improvement (ranges from 5 to 10 years). Major renovations are depreciated over the
remaining useful life of the related asset.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount. The recoverable amount is the higher of an asset’s fair value
less costs to sell and value in use. Bank premises, furniture, fixtures and equipment with carrying value of
P56 million were fully impaired as at December 31, 2013 (2012 - nil).
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An item of Bank premises, furniture, fixtures and equipment is derecognized upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the item) is included in profit or loss in the period the item is derecognized.
2.16 Investment properties
Properties that are held either to earn rental income or for capital appreciation or both, and that are not
significantly occupied by the BPI Group are classified as investment properties. Transfers to, and from,
investment property are made when, and only when, there is a change in use, evidenced by:
(a) Commencement of owner-occupation, for a transfer from investment property to owner-occupied property;
(b) Commencement of development with a view of sale, for a transfer from investment property to real
properties held-for-sale and development;
(c) End of owner occupation, for a transfer from owner-occupied property to investment property; or
(d) Commencement of an operating lease to another party, for a transfer from real properties held-for-sale and
development to investment property.
Transfers to and from investment property do not result in gain or loss.
Investment properties comprise land and building. Investment properties are measured initially at cost, including
transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated
depreciation and impairment losses, if any. Depreciation on investment property is determined using the same
policy as applied to Bank premises, furniture, fixtures, and equipment. Impairment test is conducted when there
is an indication that the carrying amount of the asset may not be recovered. An impairment loss is recognized for
the amount by which the property’s carrying amount exceeds its recoverable amount, which is the higher of the
property’s fair value less costs to sell and value in use.
An item of investment properties is derecognized upon disposal or when no future economic benefits are expected
to arise from the continued use of the asset. Any gains and losses arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss
in the period the item is derecognized.
2.17 Foreclosed assets
Assets foreclosed shown as Assets held for sale in the statement of condition are accounted for at the lower of cost
and fair value less cost to sell similar to the principles of PFRS 5. The cost of assets foreclosed includes the
carrying amount of the related loan less allowance for impairment at the time of foreclosure. Impairment loss is
recognized for any subsequent write-down of the asset to fair value less cost to sell.
Foreclosed assets not classified as Assets held for sale are accounted for in any of the following classification using
the measurement basis appropriate to the asset as follows:
(a) Investment property is accounted for using the cost model under PAS 40;
(b) Bank-occupied property is accounted for using the cost model under PAS 16; and
(c) Financial assets are classified as available-for-sale.
2.18 Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the BPI Group’s share in the net
identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of
subsidiaries is included in “Miscellaneous assets” under Other resources in the consolidated financial statements.
Goodwill on acquisitions of associates is included in Investments in subsidiaries and associates. Separately
recognized goodwill is carried at cost less accumulated impairment losses. Gains and losses on the disposal of a
subsidiary/associate include carrying amount of goodwill relating to the subsidiary/associate sold.
Goodwill is an indefinite-lived intangible asset and hence not subject to amortization.
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Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each cash-generating unit is
represented by each primary reporting segment.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances
indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the
higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense
and is not subsequently reversed.
(b) Contractual customer relationships
Contractual customer relationships acquired in a business combination are recognized at fair value at the
acquisition date. The contractual customer relationships have finite useful lives and are carried at cost less
accumulated amortization. Amortization is calculated using the straight-line method over the expected life of the
customer relationship.
(c) Computer software
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use
the specific software. These costs are amortized on a straight-line basis over the expected useful lives (three to five
years). Computer software is included in “Miscellaneous assets” under Other resources.
Costs associated with developing or maintaining computer software programs are recognized as an expense as
incurred. Development costs that are directly attributable to the design and testing of identifiable and unique
software products controlled by the BPI Group are recognized as intangible assets when the following criteria are
met:
it is technically feasible to complete the software product so that it will be available for use;
management intends to complete the software product and use or sell it;
there is an ability to use or sell the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the
software product are available; and
the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalized as part of the software product include the software development
employee costs and an appropriate portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognized as an expense when incurred.
Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
2.19 Impairment of non-financial assets
Assets that have indefinite useful lives - for example, goodwill or intangible assets not ready for use - are not subject
to amortization and are tested annually for impairment. Assets that have definite useful lives are subject to
amortization and are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill
that suffered impairment are reviewed for possible reversal of impairment at each reporting date.
2.20 Borrowings and borrowing costs
The BPI Group’s borrowings consist mainly of bills payable and unsecured subordinated debt. Borrowings are
recognized initially at fair value, being their issue proceeds, net of transaction costs incurred. Borrowings are
subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the
redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are
capitalized as part of the cost of the asset. All other borrowing costs are expensed as incurred. The BPI Group has
no qualifying asset as at December 31, 2013 and 2012.
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2.21 Interest income and expense
Interest income and expense are recognized in profit or loss for all interest-bearing financial instruments using the
effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability
and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial
instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial
liability.
When calculating the effective interest rate, the BPI Group estimates cash flows considering all contractual terms of
the financial instrument but does not consider future credit losses. The calculation includes all fees paid or received
between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other
premiums or discounts.
Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss,
interest income is recognized using the rate of interest used to discount the future cash flows for the purpose of
measuring impairment loss.
2.22 Fees and commission income
Fees and commissions are generally recognized on an accrual basis when the service has been provided.
Commission and fees arising from negotiating or participating in the negotiation of a transaction for a third party
(i.e. the arrangement of the acquisition of shares or other securities, or the purchase or sale of businesses) are
recognized on completion of underlying transactions. Portfolio and other management advisory and service fees
are recognized based on the applicable service contracts, usually on a time-proportionate basis. Asset
management fees related to investment funds are recognized ratably over the period in which the service is
provided.
2.23 Dividend income
Dividend income is recognized in profit or loss when the BPI Group’s right to receive payment is established.
2.24 Credit card income
Credit card income is recognized upon receipt from merchants of charges arising from credit card transactions.
These are computed based on rates agreed with merchants and are deducted from the payments to
establishments.
2.25 Foreign currency translation
(a) Functional and presentation currency
Items in the financial statements of each entity in the BPI Group are measured using the currency of the primary
economic environment in which the entity operates (“the functional currency”). The financial statements are
presented in Philippine Peso, which is the Parent Bank’s functional and presentation currency.
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(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss. Non-monetary
items measured at historical cost denominated in a foreign currency are translated at exchange rates as at the
date of initial recognition. Non-monetary items in a foreign currency that are measured at fair value are
translated using the exchange rates at the date when the fair value is determined.
Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale
are analyzed between translation differences resulting from changes in the amortized cost of the security, and
other changes in the carrying amount of the security. Translation differences are recognized in profit or loss, and
other changes in carrying amount are recognized in other comprehensive income.
Translation differences on non-monetary financial instruments, such as equities held at fair value through profit
or loss, are reported as part of the fair value gain or loss recognized under “Trading gain (Ioss)” in the statement
of income. Translation differences on non-monetary financial instruments, such as equities classified as
available-for-sale, are included in Accumulated other comprehensive income (loss) in the capital funds.
(c) Foreign subsidiaries
The results and financial position of BPI’s foreign subsidiaries (none of which has the currency of a
hyperinflationary economy) that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
(i)
assets and liabilities are translated at the closing rate at reporting date;
(ii)
income and expenses are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the transactions); and
(iii)
all resulting exchange differences are recognized as a separate component (Translation adjustments) of
Accumulated other comprehensive income (loss) in the capital funds. When a foreign operation is sold,
such exchange differences are recognized in profit or loss as part of the gain or loss on sale.
2.26 Accrued expenses and other liabilities
Accrued expenses and other liabilities are recognized in the period in which the related money, goods or services
are received or when a legally enforceable claim against the BPI Group is established.
2.27 Provisions for legal or contractual obligations
Provisions are recognized when the BPI Group has a present legal or constructive obligation as a result of past
events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been
reliably estimated. Provisions are not recognized for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an
outflow with respect to any one item is included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation
using a pre-tax rate that reflects the current market assessments of the time value of money and the risk specific to
the obligation. The increase in the provision due to the passage of time is recognized as interest expense.
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2.28 Income taxes
(a) Current income tax
Income tax payable is calculated on the basis of the applicable tax law in the respective jurisdiction and is
recognized as an expense for the year except to the extent that current tax is related to items (for example, current
tax on available-for-sale investments) that are charged or credited in other comprehensive income or directly to
capital funds.
The BPI Group has substantial income from its investment in government securities subject to final withholding tax.
Such income is presented at its gross amount and the final tax paid or withheld is included in Provision for income
tax - Current.
(b) Deferred income tax
Deferred income tax is recognized on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. The deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at
the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantively enacted at the reporting date and
are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability
is settled.
Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax
losses (net operating loss carryover or NOLCO) and unused tax credits (excess minimum corporate income tax
or MCIT) to the extent that it is probable that future taxable profit will be available against which the temporary
differences, unused tax losses and unused tax credits can be utilized. Deferred income tax liabilities are
recognized in full for all taxable temporary differences except to the extent that the deferred tax liability arises
from the initial recognition of goodwill.
The BPI Group reassesses at each reporting date the need to recognize a previously unrecognized deferred
income tax asset.
Deferred income tax assets are recognized on deductible temporary differences arising from investments in
subsidiaries, and associates and joint arrangements only to the extent that it is probable the temporary difference
will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be
utilized.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in
subsidiaries, and associates and joint arrangements, except for deferred income tax liability where the timing of the
reversal of the temporary difference is controlled by the BPI Group and it is probable that the temporary difference
will not reverse in the foreseeable future. Generally the BPI Group is unable to control the reversal of the temporary
difference for associates except when there is an agreement in place that gives the BPI Group the ability to control
the reversal of the temporary difference.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes
levied by the same taxation authority on either the taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
2.29 Employee benefits
(a) Pension obligations
The BPI Group has a defined benefit plan that shares risks among entities within the group. A defined benefit
plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service and compensation.
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The liability recognized in the statement of condition in respect of defined benefit pension plan is the present
value of the defined benefit obligation at the reporting date less the fair value of plan assets. The defined benefit
obligation is calculated annually by independent actuaries using the projected unit credit method. The present
value of the defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and
that have terms to maturity approximating the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are
charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognized immediately in profit or loss.
For individual financial reporting purposes, the unified plan assets are allocated among the BPI Group entities
based on the level of the defined benefit obligation attributable to each entity to arrive at the net liability or asset
that should be recognized in the individual financial statements.
(b) Share-based compensation
The BPI Group engages in equity-settled share-based payment transactions in respect of services received from
certain employees.
The fair value of the services received is measured by reference to the fair value of the shares or share options
granted on the date of the grant. The cost of employee services received in respect of the shares or share
options granted is recognized in profit or loss (with a corresponding increase in reserve in capital funds) over the
period that the services are received, which is the vesting period.
The fair value of the options granted is determined using option pricing models which take into account the
exercise price of the option, the current share price, the risk-free interest rate, the expected volatility of the share
price over the life of the option and other relevant factors.
When the stock options are exercised, the proceeds received, net of any directly attributable transaction costs,
are credited to capital stock (par value) and paid-in surplus for the excess of exercise price over par value.
(c) Profit sharing and bonus plans
The BPI Group recognizes a liability and an expense for bonuses and profit-sharing, based on a formula that
takes into consideration the profit attributable to the Parent Bank’s shareholders after certain adjustments. The
BPI Group recognizes a provision where contractually obliged or where there is a past practice that has created
a constructive obligation.
2.30 Capital funds
Common shares and preferred shares are classified as share capital.
Share premium includes any premiums or consideration received in excess of par value on the issuance of share
capital.
Incremental costs directly attributable to the issue of new shares or options are shown in capital funds as a
deduction from the proceeds, net of tax.
2.31 Earnings per share (EPS)
Basic EPS is calculated by dividing income applicable to common shares by the weighted average number of
common shares outstanding during the year with retroactive adjustments for stock dividends. In case of a rights
issue, an adjustment factor is being considered for the weighted average number of shares outstanding for all
periods before the rights issue. Diluted EPS is computed in the same manner as basic EPS, however, net
income attributable to common shares and the weighted average number of shares outstanding are adjusted for
the effects of all dilutive potential common shares.
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2.32 Dividends on common shares
Dividends on common shares are recognized as a liability in the BPI Group’s financial statements in the period in
which the dividends are approved by the Board of Directors and the BSP.
2.33 Fiduciary activities
The BPI Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of
assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income
arising thereon are excluded from these financial statements, as they are not assets of the BPI Group
(Note 30).
2.34 Leases
(a) BPI Group is the lessee
(i)
Operating lease
Leases in which a significant portion of the risks and rewards of ownership are retained by another
party, the lessor, are classified as operating leases. Payments, including prepayments, made under
operating leases (net of any incentives received from the lessor) are charged to “Occupancy and
equipment-related expenses” in the statement of income on a straight-line basis over the period of the
lease. When an operating lease is terminated before the lease period has expired, any payment
required to be made to the lessor by way of penalty is recognized as an expense in the period in which
the termination takes place.
(ii) Finance lease
Leases of assets, where the BPI Group has substantially all the risks and rewards of ownership, are
classified as finance leases. Finance leases are capitalized at the commencement of the lease at the
lower of the fair value of the leased property and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges so as to achieve a constant
rate on the finance balance outstanding. The interest element of the finance cost is charged to profit or
loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance
of the liability for each period.
(b) BPI Group is the lessor
(i)
Operating lease
Properties (land and building) leased out under operating leases are included in “Investment properties”
in the statement of condition. Rental income under operating leases is recognized in profit or loss on a
straight-line basis over the period of the lease.
(ii) Finance lease
When assets are leased out under a finance lease, the present value of the lease payments is
recognized as a receivable. The difference between the gross receivable and the present value of the
receivable is recognized as unearned finance income.
Lease income under finance lease is recognized over the term of the lease using the net investment
method before tax, which reflects a constant periodic rate of return.
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2.35 Insurance and pre-need operations
(a) Non-life insurance
The more significant accounting policies observed by the non-life insurance subsidiaries follow: (a) gross premiums
written from short-term insurance contracts are recognized at the inception date of the risks underwritten and are
earned over the period of cover in accordance with the incidence of risk using the 24th method; (b) acquisition costs
are deferred and charged to expense in proportion to the premium revenue recognized; reinsurance commissions
are deferred and deducted from the applicable deferred acquisition costs, subject to the same amortization method
as the related acquisition costs; (c) a liability adequacy test is performed which compares the subsidiaries’
reported insurance contract liabilities against current best estimates of all contractual future cash flows and
claims handling, and policy administration expenses as well as investment income backing up such liabilities,
with any deficiency immediately charged to profit or loss; (d) amounts recoverable from reinsurers and loss
adjustment expenses are classified as assets, with an allowance for estimated uncollectible amounts; and (e)
financial assets and liabilities are measured following the classification and valuation provisions of PAS 39.
(b) Pre-need
The more significant provisions of the PNUCA as applied by the pre-need subsidiary follow: (a) premium income
from sale of pre-need plans is recognized as earned when collected; (b) costs of contracts issued and other
direct costs and expenses are recognized as expense when incurred; (c) pre-need reserves which represent the
accrued net liabilities of the subsidiary to its planholders are actuarially computed based on standards and
guidelines set forth by the Insurance Commission; the increase or decrease in the account is charged or credited
to other costs of contracts issued in profit or loss; and (d) insurance premium reserves which represent the
amount that must be set aside by the subsidiary to pay for premiums for insurance coverage of fully paid
planholders, are actuarially computed based on standards and guidelines set forth by the Insurance
Commission.
2.36 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.
2.37 Comparatives
Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed
with comparative information.
Where PAS 8 applies, comparative figures have been adjusted to conform with changes in presentation in the
current year. There were no changes to the presentation made during the year.
2.38 Subsequent events (or Events after the reporting date)
Post year-end events that provide additional information about the BPI Group’s financial position at the reporting
date (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events
are disclosed in the notes to financial statements when material.
Note 3 - Financial Risk and Capital Management
Risk management in the BPI Group covers all perceived areas of risk exposure, even as it continuously endeavors
to uncover hidden risks. Capital management is understood to be a facet of risk management. The Board of
Directors sets the BPI Group’s management tone by specifying the parameters by which business risks are to be
taken and by allocating the appropriate capital for absorbing potential losses from such risks.
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The primary objective of the BPI Group is the generation of recurring acceptable returns to shareholders’ capital.
To this end, the BPI Group’s policies, business strategies, and business activities are directed towards the
generation of cash flows that are in excess of its fiduciary and contractual obligations to its depositors, and to its
various other funders and stakeholders.
To generate acceptable returns to its shareholders’ capital, the BPI Group understands that it has to bear risk, that
risk-taking is inherent in its business. Risk is understood by the BPI Group as the uncertainty in its future income an uncertainty that emanates from the possibility of incurring losses that are due to unplanned and unexpected
drops in revenues, increases in expenses, impairment of asset values, or increases in liabilities.
The possibility of incurring losses is, however, compensated by the possibility of earning more than expected
income. Risk-taking is, therefore, not entirely bad to be avoided. Risk-taking presents opportunities if risks are
accounted, deliberately taken, and are kept within rationalized limits.
Market risk management is incumbent on the Board of Directors through its Risk Management Committee (RMC).
Market risk management in BPI covers managing exposures to trading risk, foreign exchange risk, counterparty
credit risk, interest rate risk of the banking book and liquidity risk. At the management level, the Bank’s market risk
exposure is managed by the Risk Management Office (RMO), headed by the Bank’s Chief Risk Officer (CRO) who
reports directly to the RMC. In addition, Internal Audit is responsible for the independent review of risk assessment
measures and procedures and the control environment.
The most important risks that the BPI Group manages are credit risk, liquidity risk, market risk and other operational
risk.
3.1 Credit risk
The BPI Group takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to the
BPI Group by failing to discharge an obligation. Significant changes in the economy, or in the prospects of a
particular industry segment that may represent a concentration in the BPI Group’s portfolio, could result in losses
that are different from those provided for at the reporting date. Management therefore carefully manages its
exposure to credit risk. Credit exposures arise principally in loans and advances, debt securities and other bills.
There is also credit risk in off-balance sheet financial arrangements. The Credit Policy Group works with the Credit
Committee in managing credit risk, and reports are regularly provided to the Board of Directors.
3.1.1 Credit risk management
(a)
Loans and advances
In measuring credit risk of loans and advances at a counterparty level, the BPI Group considers three
components: (i) the probability of default by the client or counterparty on its contractual obligations; (ii) current
exposures to the counterparty and its likely future development; and (iii) the likely recovery ratio on the defaulted
obligations. In the evaluation process, the BPI Group also considers the conditions of the industry/sector to
which the counterparty is exposed, other existing exposures to the group where the counterparty may be related,
as well as the client and the BPI Group’s fallback position assuming the worst-case scenario. Outstanding and
potential credit exposures are reviewed to likewise ensure that they conform to existing internal credit policies.
The BPI Group assesses the probability of default of individual counterparties using internal rating tools tailored
to the various categories of counterparty. The BPI Group has internal credit risk rating systems, designed for
corporate, small and medium-sized enterprises (SMEs), and retail accounts, that measure the borrower's credit
risk based on quantitative and qualitative factors. The ratings of individual exposures may subsequently migrate
between classes as the assessment of their probabilities of default changes. For retail, the consumer credit
scoring system is a formula-based model for evaluating each credit application against a set of characteristics
that experience has shown to be relevant in predicting repayment. The BPI Group regularly validates the
performance of the rating systems and their predictive power with regard to default events, and enhances them if
necessary. The BPI Group's internal ratings are mapped to the following standard BSP classifications:
Unclassified - these are loans that do not have a greater-than-normal risk and do not possess the
characteristics of loans classified below. The counterparty has the ability to satisfy the obligation in full and
therefore minimal loss, if any, is anticipated.
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2.35 Insurance and pre-need operations
(a) Non-life insurance
The more significant accounting policies observed by the non-life insurance subsidiaries follow: (a) gross premiums
written from short-term insurance contracts are recognized at the inception date of the risks underwritten and are
earned over the period of cover in accordance with the incidence of risk using the 24th method; (b) acquisition costs
are deferred and charged to expense in proportion to the premium revenue recognized; reinsurance commissions
are deferred and deducted from the applicable deferred acquisition costs, subject to the same amortization method
as the related acquisition costs; (c) a liability adequacy test is performed which compares the subsidiaries’
reported insurance contract liabilities against current best estimates of all contractual future cash flows and
claims handling, and policy administration expenses as well as investment income backing up such liabilities,
with any deficiency immediately charged to profit or loss; (d) amounts recoverable from reinsurers and loss
adjustment expenses are classified as assets, with an allowance for estimated uncollectible amounts; and (e)
financial assets and liabilities are measured following the classification and valuation provisions of PAS 39.
(b) Pre-need
The more significant provisions of the PNUCA as applied by the pre-need subsidiary follow: (a) premium income
from sale of pre-need plans is recognized as earned when collected; (b) costs of contracts issued and other
direct costs and expenses are recognized as expense when incurred; (c) pre-need reserves which represent the
accrued net liabilities of the subsidiary to its planholders are actuarially computed based on standards and
guidelines set forth by the Insurance Commission; the increase or decrease in the account is charged or credited
to other costs of contracts issued in profit or loss; and (d) insurance premium reserves which represent the
amount that must be set aside by the subsidiary to pay for premiums for insurance coverage of fully paid
planholders, are actuarially computed based on standards and guidelines set forth by the Insurance
Commission.
2.36 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.
2.37 Comparatives
Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed
with comparative information.
Where PAS 8 applies, comparative figures have been adjusted to conform with changes in presentation in the
current year. There were no changes to the presentation made during the year.
2.38 Subsequent events (or Events after the reporting date)
Post year-end events that provide additional information about the BPI Group’s financial position at the reporting
date (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events
are disclosed in the notes to financial statements when material.
Note 3 - Financial Risk and Capital Management
Risk management in the BPI Group covers all perceived areas of risk exposure, even as it continuously endeavors
to uncover hidden risks. Capital management is understood to be a facet of risk management. The Board of
Directors sets the BPI Group’s management tone by specifying the parameters by which business risks are to be
taken and by allocating the appropriate capital for absorbing potential losses from such risks.
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The primary objective of the BPI Group is the generation of recurring acceptable returns to shareholders’ capital.
To this end, the BPI Group’s policies, business strategies, and business activities are directed towards the
generation of cash flows that are in excess of its fiduciary and contractual obligations to its depositors, and to its
various other funders and stakeholders.
To generate acceptable returns to its shareholders’ capital, the BPI Group understands that it has to bear risk, that
risk-taking is inherent in its business. Risk is understood by the BPI Group as the uncertainty in its future income an uncertainty that emanates from the possibility of incurring losses that are due to unplanned and unexpected
drops in revenues, increases in expenses, impairment of asset values, or increases in liabilities.
The possibility of incurring losses is, however, compensated by the possibility of earning more than expected
income. Risk-taking is, therefore, not entirely bad to be avoided. Risk-taking presents opportunities if risks are
accounted, deliberately taken, and are kept within rationalized limits.
Market risk management is incumbent on the Board of Directors through its Risk Management Committee (RMC).
Market risk management in BPI covers managing exposures to trading risk, foreign exchange risk, counterparty
credit risk, interest rate risk of the banking book and liquidity risk. At the management level, the Bank’s market risk
exposure is managed by the Risk Management Office (RMO), headed by the Bank’s Chief Risk Officer (CRO) who
reports directly to the RMC. In addition, Internal Audit is responsible for the independent review of risk assessment
measures and procedures and the control environment.
The most important risks that the BPI Group manages are credit risk, liquidity risk, market risk and other operational
risk.
3.1 Credit risk
The BPI Group takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to the
BPI Group by failing to discharge an obligation. Significant changes in the economy, or in the prospects of a
particular industry segment that may represent a concentration in the BPI Group’s portfolio, could result in losses
that are different from those provided for at the reporting date. Management therefore carefully manages its
exposure to credit risk. Credit exposures arise principally in loans and advances, debt securities and other bills.
There is also credit risk in off-balance sheet financial arrangements. The Credit Policy Group works with the Credit
Committee in managing credit risk, and reports are regularly provided to the Board of Directors.
3.1.1 Credit risk management
(a)
Loans and advances
In measuring credit risk of loans and advances at a counterparty level, the BPI Group considers three
components: (i) the probability of default by the client or counterparty on its contractual obligations; (ii) current
exposures to the counterparty and its likely future development; and (iii) the likely recovery ratio on the defaulted
obligations. In the evaluation process, the BPI Group also considers the conditions of the industry/sector to
which the counterparty is exposed, other existing exposures to the group where the counterparty may be related,
as well as the client and the BPI Group’s fallback position assuming the worst-case scenario. Outstanding and
potential credit exposures are reviewed to likewise ensure that they conform to existing internal credit policies.
The BPI Group assesses the probability of default of individual counterparties using internal rating tools tailored
to the various categories of counterparty. The BPI Group has internal credit risk rating systems, designed for
corporate, small and medium-sized enterprises (SMEs), and retail accounts, that measure the borrower's credit
risk based on quantitative and qualitative factors. The ratings of individual exposures may subsequently migrate
between classes as the assessment of their probabilities of default changes. For retail, the consumer credit
scoring system is a formula-based model for evaluating each credit application against a set of characteristics
that experience has shown to be relevant in predicting repayment. The BPI Group regularly validates the
performance of the rating systems and their predictive power with regard to default events, and enhances them if
necessary. The BPI Group's internal ratings are mapped to the following standard BSP classifications:
Unclassified - these are loans that do not have a greater-than-normal risk and do not possess the
characteristics of loans classified below. The counterparty has the ability to satisfy the obligation in full and
therefore minimal loss, if any, is anticipated.
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Loans especially mentioned - these are loans that have potential weaknesses that deserve management’s
close attention. These potential weaknesses, if left uncorrected, may affect the repayment of the loan and
thus increase the credit risk of the BPI Group.
Substandard - these are loans which appear to involve a substantial degree of risk to the BPI Group
because of unfavorable record or unsatisfactory characteristics. Further, these are loans with well-defined
weaknesses which may include adverse trends or development of a financial, managerial, economic or
political nature, or a significant deterioration in collateral.
Doubtful - these are loans which have the weaknesses similar to those of the substandard classification with
added characteristics that existing facts, conditions, and values make collection or liquidation in full highly
improbable and substantial loss is probable.
Loss - these are loans which are considered uncollectible and of such little value that their continuance as
bankable assets is not warranted although the loans may have some recovery or salvage value.
(b) Debt securities and other bills
For debt securities and other bills, external ratings such as Standard & Poor’s, Moody’s and Fitch’s ratings or
their equivalents are used by the BPI Group for managing credit risk exposures. Investments in these securities
and bills are viewed as a way to gain better credit quality mix and at the same time, maintain a readily available
source to meet funding requirements.
3.1.2 Risk limit control and mitigation policies
The BPI Group manages, limits and controls concentrations of credit risk wherever they are identified - in
particular, to individual counterparties and groups, to industries and sovereigns.
The BPI Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in
relation to one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are
monitored on a regular basis and subjected to annual or more frequent review, when considered necessary.
Limits on large exposures and credit concentration are approved by the Board of Directors.
The exposure to any one borrower is further restricted by sub-limits covering on- and off-balance sheet exposures.
Actual exposures against limits are monitored regularly.
Exposure to credit risk is also managed through regular analysis of the ability of existing and potential borrowers
to meet interest and capital repayment obligations and by changing these lending limits where appropriate.
The BPI Group employs a range of policies and practices to mitigate credit risk. Some of these specific control
and mitigation measures are outlined below.
(a) Collateral
One of the most traditional and common practice in mitigating credit risk is requiring security particularly for
loans and advances. The BPI Group implements guidelines on the acceptability of specific classes of collateral
for credit risk mitigation. The principal collateral types for loans and advances are:
Mortgages over real estate properties and chattels; and
Hold-out on financial instruments such as debt securities deposits, and equities
In order to minimize credit loss, the BPI Group seeks additional collateral from the counterparty when
impairment indicators are observed for the relevant individual loans and advances.
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(b) Derivatives
The BPI Group maintains strict market limits on net open derivative positions (i.e., the difference between purchase
and sale contracts). Credit risk is limited to the net current fair value of instruments, which in relation to derivatives
is only a small fraction of the contract, or notional values used to express the volume of instruments outstanding.
This credit risk exposure is managed as part of the overall lending limits with customers, together with potential
exposures from market movements. Collateral or other security is not usually obtained for credit risk exposures on
these instruments (except where the BPI Group requires margin deposits from counterparties).
Settlement risk arises in any situation where a payment in cash, securities, foreign exchange currencies, or equities
is made in the expectation of a corresponding receipt in cash, securities, foreign exchange currencies, or equities.
Daily settlement limits are established for each counterparty to cover the aggregate of all settlement risk arising
from the BPI Group’s market transactions on any single day. The introduction of the delivery versus payment
facility in the local market has brought down settlement risk significantly.
(c) Master netting arrangements
The BPI Group further restricts its exposure to credit losses by entering into master netting arrangements with
counterparties with which it undertakes a significant volume of transactions. Master netting arrangements do not
generally result in an offset of balance sheet assets and liabilities, as transactions are usually settled on a gross
basis. However, the credit risk associated with favorable contracts (asset position) is reduced by a master netting
arrangement to the extent that if a default occurs, all amounts with the counterparty are terminated and settled on a
net basis. The BPI Group’s overall exposure to credit risk on derivative instruments subject to master netting
arrangements can change substantially within a short period, as it is affected by each transaction subject to the
arrangement.
(d) Credit-related commitments
The primary purpose of these instruments is to ensure that funds are available to a customer as required. Standby
letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit - which are
written undertakings by the BPI Group on behalf of a customer authorizing a third party to draw drafts on the BPI
Group up to a stipulated amount under specific terms and conditions - are collateralized by the underlying
shipments of goods to which they relate and therefore carry less risk than a direct loan.
Commitments to extend credit represent unused portions of authorizations to extend credit in the form of loans, or
letters of credit. With respect to credit risk on commitments to extend credit, the BPI Group is potentially exposed to
loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total
unused commitments, as most commitments to extend credit are contingent upon customers maintaining specific
credit standards. The BPI Group monitors the term to maturity of credit commitments because longer-term
commitments generally have a greater degree of credit risk than shorter-term commitments.
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3.1.3 Impairment and provisioning policies
As described in Note 3.1.1, the BPI Group’s credit-quality mapping on loans and advances is based on the standard
BSP loan classifications. Impairment provisions are recognized for financial reporting purposes based on objective
evidence of impairment (Note 2.9).
The table below shows the percentage of the BPI Group’s loans and advances and the related allowance for
impairment.
Unclassified
Loans especially mentioned
Substandard
Doubtful
Loss
Unclassified
Loans especially mentioned
Substandard
Doubtful
Loss
Consolidated
2013
2012
Loans and
Allowance for
Loans and
Allowance for
advances (%)
impairment (%) advances (%)
impairment (%)
97.63
0.81
97.24
0.63
0.34
5.46
0.41
6.34
0.89
20.12
0.85
20.15
0.52
62.55
0.74
66.68
0.62
100.00
0.76
100.00
100.00
100.00
Parent
2013
2012
Loans and
Allowance for
Loans and
Allowance for
advances (%)
impairment (%) advances (%)
impairment (%)
98.01
0.83
97.66
0.58
0.28
5.37
0.34
6.56
0.75
19.23
0.68
19.96
0.38
67.92
0.60
74.62
0.58
100.00
0.72
100.00
100.00
100.00
(25)
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3.1.4 Maximum exposure to credit risk before collateral held or other credit enhancements
Credit risk exposures relating to significant on-balance sheet financial assets are as follows:
Due from BSP
Interbank loans receivable and securities
purchased under agreements to resell (SPAR)
Financial assets at fair value through profit or loss
Derivative financial assets
Trading securities - debt securities
Available-for-sale - debt securities
Other financial assets
Accounts receivable, net
Other accrued interest and fees receivable
Sales contracts receivable, net
Rental deposits
Others, net
Consolidated
Parent
2013
2013
2012
2012
244,483
195,076
119,079
105,244
17,070
8,789
7,582
4,724
12,406
38,927
5,046
10,843
16,550
4,334
85,885
96,172
635,194
5,920
21,663
104,929
76,243
526,640
16,550
2,626
81,486
85,900
480,146
5,920
19,055
92,584
67,822
389,962
879
662
78
335
444
1,114,492
2,846
749
698
294
629
906,199
623
573
27
280
393
877,515
2,427
618
678
244
591
700,712
Credit risk exposures relating to off-balance sheet items are as follows:
Undrawn loan commitments
Bills for collection
Unused letters of credit
Others
Consolidated
Parent
2013
2013
2012
2012
120,792
114,960
114,636
108,738
14,863
14,848
17,586
17,575
13,117
13,117
13,707
13,707
1,390
1,390
1,169
1,007
150,162
144,315
147,098
141,027
The preceding table represents the maximum credit risk exposure at December 31, 2013, and 2012, without taking
into account any collateral held or other credit enhancements. For on-balance-sheet assets, the exposures set out
above are based on net carrying amounts as reported in the statement of condition.
Management is confident in its ability to continue to control and sustain minimal exposure to credit risk of the BPI
Group resulting from its loan and advances portfolio based on the following:
98% of the loans and advances portfolio is categorized in the top two classifications of the internal rating
system in 2013 (2012 - 98%);
Mortgage loans are backed by collateral;
97% of the loans and advances portfolio is considered to be neither past due nor impaired (2012 - 97%); and
The BPI Group continues to implement stringent selection process of granting loans and advances.
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3.1.5 Credit quality of loans and advances
Loans and advances are summarized as follows:
Neither past due nor impaired
Past due but not impaired
Impaired
Allowance for impairment
Consolidated
Parent
2013
2013
2012
2012
629,223
476,923
519,110
385,204
7,481
3,182
6,380
2,969
11,119
8,916
12,247
9,320
647,823
489,021
537,737
397,493
(12,629)
(8,875)
(11,097)
(7,531)
635,194
480,146
526,640
389,962
Impaired category as shown in the table above includes loan accounts which are individually (Note 3.1.5c) and
collectively assessed for impairment.
The total consolidated impairment provision for loans and advances is P1,886 million (2012 - P2,201 million), of
which P1,334 million (2012 - P1,497 million) represents provision for individually impaired loans and the remaining
amount of P552 million (2012 - P704 million) represents the portfolio provision. Further information of the
impairment allowance for loans and advances is provided in Note 13.
When entering into new markets or new industries, the BPI Group focuses on corporate accounts and retail
customers with good credit rating and customers providing sufficient collateral, where appropriate or necessary.
Collaterals held as security for Loans and advances are described in Note 13.
(a) Loans and advances neither past due nor impaired
Loans and advances that were neither past due nor impaired consist mainly of accounts with Unclassified rating
and those loans accounts in a portfolio to which an impairment has been allocated on a collective basis. Details of
these accounts follow:
2013
Corporate entities:
Large corporate customers
Small and medium enterprises
Retail customers:
Mortgages
Credit cards
Others
Consolidated
2013
2012
Parent
2012
419,139
80,369
326,690
77,380
401,666
50,916
312,912
49,903
102,118
22,215
5,382
629,223
89,400
20,330
5,310
519,110
147
22,059
2,135
476,923
146
20,330
1,913
385,204
(27)
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(b) Loans and advances past due but not impaired
The table below presents the gross amount of loans and advances that were past due but not impaired classified by
type of borrowers. Collateralized past due loans are not considered impaired when the cash flows that may result
from foreclosure of the related collateral are higher than the carrying amount of the loans.
Consolidated
2013
2012
Large
corporate
customers
Small and
medium
enterprises
Retail
customers
2,024
388
239
1,556
90
1,059
1,177
403
908
1,352
Large
corporate
customers
Small and
medium
enterprises
Retail
customers
Past due up to 30 days
175
226
1,623
Past due 31 - 90 days
81
144
888
1,113
28
122
224
1,628
1,974
41
Over 180 days
Total
Total
2,183
42
444
1,884
2,370
107
316
1,245
1,668
420
1,038
6,023
7,481
564
1,048
4,768
6,380
4,322
Fair value of collateral
5,841
Parent
2013
Large
corporate
customers
Small and
medium
enterprises
2012
Retail
customers
Large
corporate
customers
Total
Small and
medium
enterprises
1,639
360
Retail
customers
Total
Past due up to 30 days
84
63
1,492
86
1,445
53
16
656
725
3
3
796
802
72
42
465
579
20
245
-
265
-
11
-
11
383
345
2,241
Over 180 days
-
98
141
239
209
219
2,754
3,182
1,891
2,969
319
641
(c) Loans and advances individually impaired
The breakdown of the gross amount of individually impaired loans and advances (included in Impaired category) by
class, along with the fair value of related collateral held by the BPI Group as security, are as follows:
Consolidated
Parent
2013
2013
2012
2012
Corporate entities:
Small and medium enterprises
Retail customers:
Mortgages
Credit cards
Others
4,661
4,864
3,782
5,589
4,078
3,376
3,671
3,624
6
1,370
10
10,911
949
1,347
78
11,745
6
1,370
2
8,832
12
1,347
73
8,727
9,459
7,511
5,385
6,823
(28)
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3.1.6 Credit quality of other financial assets
a.
Due from Bangko Sentral ng Pilipinas
Due from BSP are considered fully performing at December 31, 2013 and 2012. This account consists of:
Clearing account
Special deposit accounts (SDA)
Consolidated
Parent
2013
2013
2012
2012
130,617
118,476
105,283
94,244
113,866
76,600
13,796
11,000
244,483
195,076
119,079
105,244
The increase in Due from BSP was mainly driven by higher placements in SDA brought about by excess market
liquidity and fine-tuning of access to readily available investment outlets.
b.
Due from other banks are considered fully performing at December 31, 2013 and 2012. The table below presents
the credit ratings of counterparty banks based on Standard and Poor’s.
AA- to AA+
A- to A+
Lower than AUnrated
c.
Consolidated
Parent
2013
2013
2012
6,419
5,259
2,698
8,490
3,099
2,014
38
7
254
2,123
424
2,616
17,070
8,789
7,582
2012
1,952
1,633
168
971
4,724
Interbank loans receivable and securities purchased under agreement to resell
Interbank loans receivable are considered fully performing at December 31, 2013 and 2012. The table below
presents the credit ratings of counterparty banks based on Standard and Poor’s.
Lower than AUnrated
Consolidated
Parent
2013
2013
2012
888
888
821
888
888
821
2012
821
821
Securities purchased under agreements to resell includes reverse repurchase agreements amounting to P11,518
million and P4,158 million for the BPI Group and Parent Bank, respectively (2012 - P38,106 million and
P10,022 million), which are made with a sovereign counterparty and are considered fully performing.
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d.
The table below presents the Standard and Poor’s credit ratings of counterparties for derivative financial assets at
December 31, 2013 and 2012 presented in the consolidated and parent financial statements.
Consolidated and Parent
2013
2012
692
14,395
172
1,291
16,550
AA- to AA+
A- to A+
Lower than AUnrated
e.
727
3,141
734
1,318
5,920
Debt securities, treasury bills and other government securities
The table below presents the ratings of debt securities, treasury bills and other government securities at
December 31, 2013 and 2012 based on Standard & Poor’s:
At December 31, 2013
Consolidated
Trading
securities
AAA
AA- to AA+
A- to A+
Lower than AUnrated
Availablefor-sale
Held-tomaturity
3,774
22
353
185
487
4,859
4,560
73,040
2,939
110
5,293
732
89,229
808
4,334
85,885
96,172
Parent
Total
Trading
securities
597
13,926
2,442
5,314
22
162,622
38
3,932
124
186,391
2,626
Availablefor-sale
Held-tomaturity
Total
487
4,790
4,484
69,833
1,892
5,109
79,983
808
487
12,341
4,506
149,854
2,824
81,486
85,900
170,012
Consolidated
Trading
securities
AAA
AA- to AA+
A- to A+
Lower than AUnrated
f.
Availablefor-sale
Held-tomaturity
3,457
7,600
10,092
514
1,016
21,215
7,297
73,342
2,059
6,063
407
69,036
737
21,663
104,929
76,243
Parent
Total
Trading
securities
4,473
3,457
34,878
6,370
7,704
152,470
9,228
3,310
202,835
19,055
Availablefor-sale
Held-tomaturity
Total
1,016
15,472
7,254
67,693
1,149
5,748
61,363
711
4,473
27,590
7,254
138,284
1,860
92,584
67,822
179,461
The BPI Group’s other financial assets (shown under Other resources) at December 31, 2013 and 2012 consist
mainly of sales contracts receivable, accounts receivable, accrued interest and fees receivable from various unrated
counterparties with good credit standing.
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3.1.7 Repossessed or foreclosed collaterals
The BPI Group acquires assets by taking possession of collaterals held as security for loans and advances.
As at December 31, 2013, the BPI Group’s foreclosed collaterals have carrying amount of P5,852 million
(2012 - P6,887 million). The related foreclosed collaterals have aggregate fair value of P7,673 million
(2012 - P13,942 million). Foreclosed collaterals include real estate (land, building, and improvements), auto or
chattel, bond and stocks.
Repossessed properties are sold as soon as practicable and are classified as “Assets held for sale” in the
statement of condition.
3.1.8 Concentrations of risks of financial assets with credit risk exposure
The BPI Group’s main credit exposure at their carrying amounts, as categorized by industry sectors follow:
Consolidated
Financial
institutions
Consumer
Manufacturing
Real estate
Less allowance
Others
Total
Due from BSP
Interbank loans receivable
and SPAR
Financial assets at fair
value through profit or
loss
Derivative financial
assets
Trading securities debt securities
Available-for-sale - debt
securities
Other accrued interest
and fees receivable
Sales contracts
receivable, net
Rental deposits
Others, net
244,483
17,070
-
-
12,406
-
-
-
-
-
12,406
16,373
-
101
-
76
-
16,550
245
-
2
3
4,084
-
4,334
139,187
300
502
173,326
68,699
94,815
216,897
(12,629)
85,885
96,172
635,194
(1,397)
879
364,061
16,886
855
55,743
62,670
-
-
244,483
17,070
-
-
-
-
2,276
-
-
-
-
662
-
662
-
-
-
-
82
335
466
(4)
(22)
78
335
444
388,392
(14,052)
1,114,492
62,670
139,290
174,131
(31)
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Financial
institutions
Consumer
Manufacturing
Real estate
Less allowance
Others
Total
Due from BSP
and SPAR
loss
assets
securities
and fees receivable
Sales contracts
receivable, net
Rental deposits
Others, net
119,079
7,582
-
-
38,927
-
-
-
-
-
38,927
5,913
-
4
-
3
-
5,920
515
-
6
508
20,634
-
21,663
53
98,091
644
711
142,295
81,759
75,442
226,337
(11,097)
104,929
76,243
526,640
(1,241)
2,846
231,982
22,473
90
37,403
33,611
-
-
119,079
7,582
-
-
-
-
4,087
-
-
-
-
749
-
749
-
-
-
-
756
294
651
(58)
(22)
698
294
629
410,712
(12,418)
906,199
33,611
98,154
144,158
(32)
113
4/8/14 7:12 PM
Parent
Financial
institutions
Consumer
Due from BSP
and SPAR
loss
assets
securities
and fees receivable
Sales contracts
receivable, net
Rental deposits
Others, net
195,076
8,789
-
5,046
-
-
16,373
-
245
-
289,395
15,816
95
47,955
Manufacturing
26,533
Real estate
-
Less allowance
Others
Total
-
-
195,076
8,789
-
-
-
5,046
101
-
76
-
16,550
-
-
2,381
-
2,626
135,394
196
502
87,738
65,474
85,303
191,400
(8,874)
81,486
85,900
480,146
(1,252)
623
-
-
-
-
1,875
-
-
-
-
573
-
573
-
-
-
-
29
280
407
(2)
(14)
27
280
393
347,798
(10,142)
877,515
26,533
135,495
88,436
(33)
114
4/8/14 7:12 PM
Financial
institutions
Consumer
Manufacturing
Real estate
Due from BSP
and SPAR
loss
assets
securities
and fees receivable
Sales contracts
receivable, net
Rental deposits
Others, net
105,244
4,724
-
-
10,843
-
-
5,913
-
515
-
21,683
90
33,981
182,993
-
4
Less allowance
Others
Total
-
-
105,244
4,724
-
-
10,843
-
3
-
5,920
-
-
18,540
-
19,055
1,433
53
94,484
460
711
69,444
70,388
67,021
198,151
(7,531)
92,584
67,822
389,962
-
-
-
-
3,592
(1,165)
2,427
-
-
-
-
618
-
618
-
-
-
-
685
244
605
(7)
(14)
678
244
591
1,433
94,541
70,615
359,847
(8,717)
700,712
Trading, available-for-sale and held-to-maturity securities under “Others” category include local and US treasury
bills. Likewise, Loans and advances under the same category pertain to loans granted to individual and retail
borrowers belonging to various industry sectors.
3.2 Market risk
The BPI Group is exposed to market risk - the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market prices. Market risk is managed by the RMO guided by policies and
procedures approved by the RMC and confirmed by the Executive Committee/Board of Directors.
Market risk management
The BPI Group reviews and controls market risk exposures of both its trading and non-trading portfolios. Trading
portfolios include those positions arising from the BPI Group’s market-making transactions. Non-trading portfolios
primarily arise from the interest rate management of the BPI Group’s retail and commercial banking assets and
liabilities.
As part of the management of market risk, the BPI Group undertakes various hedging strategies. The BPI Group
also enters into interest rate swaps to match the interest rate risk associated with fixed-rate long-term debt
securities.
(34)
115
4/8/14 7:12 PM
Value-at-Risk (VaR) measurement is an integral part of the BPI Group’s market risk control system. This metric
estimates, at 99% confidence level, the maximum loss that a trading portfolio may incur over a trading day. This
metric indicates as well that there is 1% statistical probability that the trading portfolios’ actual loss would be
greater than the computed VaR. In order to ensure model soundness, the VaR is periodically subject to model
validation and back testing. VaR is supplemented by other risk metrics and measurements that would provide
preliminary signals to Treasury and to the management to assess the vulnerability of Bank’s positions. To control
the risk, the RMC sets risk limits for trading portfolios which are consistent with the Bank’s goals, objectives, risk
appetite, and strategy.
Stress tests indicate the potential losses that could arise in extreme conditions that would have detrimental effect to
the Bank’s positions. The Bank periodically performs stress testing (price risk and liquidity risk) to assess the Bank’s
condition on assumed stress scenarios. Contingency plans are frequently reviewed to ensure Bank’s preparedness
in the event of real stress. Results of stress tests are reviewed by senior management and by the RMC.
The average daily VaR for the trading portfolios follows:
Local fixed-income
Foreign fixed-income
Foreign exchange
Derivatives
Equity securities
Mutual fund
Consolidated
Parent
2013
2013
2012
2012
984
911
827
727
118
114
238
229
33
10
32
7
78
78
63
63
14
16
26
10
1,253
1,113
1,186
1,026
(35)
116
4/8/14 7:12 PM
3.2.1 Foreign exchange risk
The BPI Group takes on exposure to the effects of fluctuations in the prevailing exchange rates on its foreign
currency financial position and cash flows. The table below summarizes the BPI Group’s exposure to more material
foreign currency exchange rate risk at December 31, 2013 and 2012. Included in the table are the BPI Group’s
financial instruments at carrying amounts, categorized by currency.
Consolidated
USD
As at December 31, 2013
Financial Assets
Cash and other cash items
SPAR
Trading securities
Others financial assets
Other accrued interest and
fees receivable
Others
Total financial assets
Financial Liabilities
Deposit liabilities
Derivative financial liabilities
Due to BSP and other banks
drafts outstanding
Other financial liabilities
Accounts payable
Others
Total financial liabilities
Net on-balance sheet financial
position (in Philippine Peso)
JPY
1,691
13,746
888
2,009
3,796
15,782
29,653
73,989
55
747
89
838
-
-
713
78
Less allowance
EUR
GBP
-
20
1,185
-
Total
-
1,855
16,516
-
888
116
473
1,717
169
346
133
657
31
(481)
2,471
3,796
16,388
32,027
74,421
59
1
(9)
129
(490)
255
148,746
99
141,731
1,515
111
3,572
45
2,418
128,301
2,062
87
1,084
-
3,056
144
-
696
346
-
-
133,137
2,552
87
4
2
-
55
-
343
1,684
137,858
-
49
267
1,565
132,331
11
1,095
75
102
3,381
1
6
1,051
9,400
420
191
1,367
(490)
10,888
(36)
117
4/8/14 7:12 PM
USD
Financial Assets
SPAR
Trading securities
Others financial assets
fees receivable
Others
Deposit liabilities
drafts outstanding
Accounts payable
Others
JPY
2,469
3,803
821
1,674
8,340
44,890
28,668
44,046
67
Less allowance
EUR
GBP
59
378
109
610
-
-
1,287
-
16
1,070
-
Total
-
2,653
5,861
-
821
237
55
463
1,529
68
152
1,588
472
298
29
(493)
2,063
9,983
45,825
30,495
44,937
38
2
(1)
106
(494)
321
4
143,069
147
134,925
1,724
106
3,215
68
4
3,699
114,270
1,614
108
1,291
-
2,530
251
-
537
153
-
-
118,628
2,018
108
64
10
11
-
-
85
71
999
117,126
74
1,375
108
65
2,965
1
691
-
180
1,138
122,157
17,799
349
250
3,008
(494)
20,912
(37)
118
4/8/14 7:12 PM
Parent
USD
Financial Assets
SPAR
Trading securities
Available-for-sale
fees receivable
Others
Deposit liabilities
drafts outstanding
Accounts payable
Others
JPY
1,535
5,864
55
743
888
-
2,009
2,464
15,094
27,705
73,989
713
68
Less allowance
EUR
GBP
-
78
698
-
116
473
1,718
169
-
Total
18
243
-
1,686
7,548
-
-
888
346
133
7
-
(479)
2,471
2,464
15,700
29,423
74,399
(9)
59
(488)
224
134,862
99
129,715
1,511
111
3,363
14
761
116,608
2,062
87
1,084
-
3,023
144
-
414
346
-
-
121,129
2,552
87
4
2
-
36
6
768
-
254
1,684
125,742
-
30
252
1,565
120,604
11
1,095
2
102
3,275
9,111
416
88
(7)
(488)
9,120
(38)
119
4/8/14 7:12 PM
USD
Financial Assets
SPAR
Trading securities
Available-for-sale
fees receivable
Others
Deposit liabilities
drafts outstanding
Accounts payable
Others
3.2.2
JPY
2,319
2,730
59
376
821
1,672
7,109
38,136
25,804
44,046
EUR
GBP
-
1,287
65
-
84
378
-
237
55
463
1,529
67
-
Less allowance
Total
13
131
-
2,475
3,615
-
-
821
152
1,588
472
4
-
(492)
2,061
8,752
39,071
27,333
44,912
(1)
64
(493)
281
129,385
147
122,849
1,722
106
2,919
28
2,388
102,911
1,614
108
1,291
-
2,527
251
-
344
153
-
-
107,073
2,018
108
58
10
11
58
-
137
62
999
105,752
74
1,375
2
65
2,856
2
557
-
66
1,138
110,540
17,097
347
63
1,831
(493)
18,845
Interest rate risk
There are two types of interest rate risk: (i) fair value interest risk and (ii) cash flow interest risk. Fair value interest
rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest
rates. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because
of changes in market interest rates. The BPI Group takes on exposure to the effects of fluctuations in the prevailing
levels of market interest rates on both its fair value which affects mainly the BPI Group’s trading securities portfolio
and cash flow risks on available-for-sale securities portfolio which is carried at market.
Interest rate risk in the banking book arises from the BPI Group’s core banking activities. The main source of this
type of interest rate risk is repricing risk, which reflects the fact that the BPI Group’s assets and liabilities are of
different maturities and are priced at different interest rates. Interest margins may increase as a result of such
changes but may also result in losses in the event that unexpected movements arise. The Board of Directors sets
limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored monthly by the
FRMC.
(39)
120
4/8/14 7:12 PM
The table below summarizes the BPI Group’s exposure to interest rate risk, categorized by the earlier of contractual
repricing or maturity dates.
Consolidated
Up to 1 year
Financial Assets
Due from BSP
Interbank loans receivable and SPAR
Financial assets at fair value through
profit or loss
Other accrued interest and fees
receivable
Rental deposits
Others, net
Deposit liabilities
Bills payable
Manager’s checks and demand drafts
outstanding
Accounts payable
Outstanding acceptances
Deposits on lease contract
Dividends payable
Others
Total interest gap
25,696
-
13,100
223
9,265
4
518,048
-
Repricing
Over 1 up to
Non3 years
Over 3 years
repricing
-
665
-
2,785
22,860
45,072
-
-
244,483
17,070
12,406
4,111
76,620
96,168
49,214
Total
25,696
244,483
17,070
12,406
16,550
4,334
85,885
96,172
635,194
879
879
662
78
335
444
502,470
662
78
335
444
1,140,188
566,336
23,525
47,857
460,692
12,929
-
513,541
719
-
14,353
2,712
-
26,179
2,051
988,586
16,360
26,179
2,051
-
7,183
7,183
3,551
1,677
2,076
3,201
1,607
47,525
454,945
3,551
1,677
2,076
3,201
1,607
1,052,471
87,717
473,621
92,715
514,260
(490,735)
17,065
30,792
(40)
121
4/8/14 7:12 PM
Up to 1 year
Financial Assets
Due from BSP
profit or loss
receivable
Rental deposits
Others, net
Deposit liabilities
Bills payable
outstanding
Accounts payable
Dividends payable
Others
Total interest gap
Repricing
Over 1 up to
Non3 years
Over 3 years
repricing
Total
23,293
-
-
-
119,079
7,582
38,927
23,293
119,079
7,582
38,927
1,946
206
10,428
5
416,544
663
20,503
3,311
45,181
21,457
94,501
76,238
44,412
5,920
21,663
104,929
76,243
526,640
-
-
2,846
2,846
749
698
294
629
407,412
749
698
294
629
929,492
452,422
21,166
48,492
439,040
1,931
-
201,896
647
-
12,245
3,249
-
149,093
26,280
2,035
802,274
5,827
26,280
2,035
5,000
5,794
-
5,794
5,000
20,494
27,998
3,621
2,377
1,153
1,290
191,643
215,769
3,621
2,377
1,153
440,971
11,451
202,543
(181,377)
1,290
855,651
73,841
(41)
122
4/8/14 7:12 PM
Parent
Up to 1 year
Financial Assets
Due from BSP
profit or loss
receivable
Rental deposits
Others, net
Deposit liabilities
Bills payable
outstanding
Accounts payable
Dividends payable
Others
Total interest gap
Repricing
Over 1 up to
Non3 years
Over 3 years
repricing
Total
24,888
-
-
-
195,076
8,789
5,046
24,888
195,076
8,789
5,046
13,100
222
9,264
3
447,055
665
6,196
2,785
12,475
2,404
72,222
85,897
14,420
16,550
2,626
81,486
85,900
480,146
-
-
623
623
573
27
280
393
385,750
573
27
280
393
902,403
494,532
310,213
12,929
323,142
171,390
6,861
354,198
719
354,917
(348,056)
15,260
1,451
2,712
4,163
11,097
119,541
18,990
2,052
785,403
16,360
18,990
2,052
6,026
6,026
2,370
1,677
3,201
1,498
155,355
230,395
2,370
1,677
3,201
1,498
837,577
64,826
(42)
123
4/8/14 7:12 PM
Up to 1 year
Financial Assets
Due from BSP
profit or loss
receivable
Rental deposits
Others, net
Deposit liabilities
Bills payable
outstanding
Accounts payable
Deposits on lease contracts
Dividends payable
Others
Total interest gap
22,518
-
1,946
206
10,428
5
359,320
-
Repricing
Over 1 up to
Non3 years
Over 3 years
repricing
-
663
7,542
-
-
Total
-
105,244
4,724
10,843
22,518
105,244
4,724
10,843
3,311
10,693
18,849
82,156
67,817
12,407
5,920
19,055
92,584
67,822
389,962
2,427
2,427
618
678
244
591
306,598
618
678
244
591
723,230
-
394,423
8,205
14,004
399,579
1,931
-
52,554
647
-
34,693
3,249
-
141,539
16,963
2,036
628,365
5,827
16,963
2,036
-
-
5,000
4,508
-
4,508
5,000
2,548
1,153
1,208
169,955
136,643
2,548
1,153
1,208
667,608
55,622
401,510
(7,087)
53,201
(44,996)
42,942
(28,938)
(43)
124
4/8/14 7:12 PM
In order to measure the interest rate risk in the banking book, the BPI Group employs Balance Sheet VaR (BSVaR)
which measures impact of interest rate movements on the economic value of equity. The BSVaR is founded on repricing gaps, or the difference between the amounts of rate sensitive assets and the amounts of rate sensitive
liabilities. An asset or liability is considered to be rate-sensitive if the interest rate applied to the outstanding
principal balance changes (either contractually or because of a change in a reference rate) during the interval.
The BSVaR estimates the “riskiness of the balance sheet” and compares the degree of risk taking activity in the
banking books from one period to the next. In consideration of the static framework, and the fact that income from
the positions is accrued rather than generated from marking-to-market, the probable loss (that may be exceeded
1% of the time) that is indicated by the BSVaR is not realized in accounting income.
The average BSVaR for the banking or non-trading book are as follows:
Consolidated
Parent
2013
2013
2012
2012
1,511
1,325
1,470
1,290
BSVaR
3.3 Liquidity risk
Liquidity risk is the risk that the BPI Group will be unable to meet its payment obligations associated with its
financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be
the failure to meet obligations to repay depositors and fulfill commitments to lend.
3.3.1
Liquidity risk management process
The BPI Group’s liquidity management process, as carried out within the BPI Group and monitored by the RMC
and the FRMC includes:
Day-to-day funding, managed by monitoring future cash flows to ensure that requirements can be met. This
includes replenishment of funds as they mature or as borrowed by customers;
Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any
unforeseen interruption to cash flow;
Monitoring liquidity gaps against internal and regulatory requirements (Note 19);
Managing the concentration and profile of debt maturities; and
Performing periodic liquidity stress testing on the BPI Group’s liquidity position by assuming a faster rate of
withdrawals in its deposit base.
Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and
month as these are key periods for liquidity management. The starting point for these projections is an analysis
of the contractual maturity of the financial liabilities (Notes 3.3.3 and 3.3.4) and the expected collection date of
the financial assets.
The BPI Group also monitors unmatched medium-term assets, the level and type of undrawn lending
commitments, the usage of overdraft facilities and the impact of contingent liabilities such as standby letters of
credit.
3.3.2
Funding approach
Sources of liquidity are regularly reviewed by the BPI Group to maintain a wide diversification by currency,
geography, counterparty, product and term.
(44)
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4/8/14 7:12 PM
3.3.3
Non-derivative cash flows
The table below presents the maturity profile of non-derivative financial instruments based on undiscounted cash
flows, including interest, which the BPI Group uses to manage the inherent liquidity risk. The maturity analysis is
based on the remaining period from the end of the reporting period to the contractual maturity date or, if earlier,
the expected date the financial asset will be realized or the financial liability will be settled.
Consolidated
Up to 1 year
Financial Assets
Due from BSP
securities under agreements to
resell (SPAR)
profit or loss
Available-for-sale securities - debt
securities
receivable
Rental deposits
Others, net
Deposit liabilities
Bills payable
outstanding
Accounts payable
Dividends payable
Others
Total maturity gap
Over 1 up to
3 years
Over 3 years
Total
25,696
244,606
17,070
-
-
25,696
244,606
17,070
12,418
-
-
12,418
3,827
126
605
4,558
9,517
17,492
392,546
15,257
26,936
82,158
87,745
104,272
205,191
112,519
148,700
679,895
879
-
662
27
335
444
725,519
-
290,777
25,466
2,051
7,183
3,551
1,677
2,076
3,201
1,607
337,589
387,930
-
879
124,528
397,813
662
78
335
444
1,247,860
278,941
598
-
419,912
367
-
989,630
26,431
2,051
51
279,539
(155,011)
420,279
(22,466)
7,183
3,551
1,677
2,076
3,201
1,607
1,037,407
210,453
(45)
126
4/8/14 7:12 PM
Up to 1 year
Financial Assets
Due from BSP
resell (SPAR)
profit or loss
receivable
Rental deposits
Others, net
Deposit liabilities
Bills payable
outstanding
Accounts payable
Dividends payable
Others
Total maturity gap
Over 1 up to
3 years
Over 3 years
Total
23,293
119,089
7,582
-
-
-
-
23,293
119,089
7,582
39,379
-
-
39,379
3,562
12,276
23,367
290,707
2,846
4,935
21,433
23,611
68,325
-
27,205
128,792
63,843
185,590
-
35,702
162,501
110,821
544,622
2,846
749
698
294
629
524,471
118,304
405,430
749
698
294
629
1,048,205
688,951
25,604
2,035
45,863
261
-
68,752
1,378
-
803,566
27,243
2,035
5,794
445
845
6,282
5,794
7,572
46,969
71,335
76,412
329,018
3,621
1,153
2,377
1,290
854,651
193,554
3,621
1,153
2,377
1,290
731,270
(206,799)
(46)
127
4/8/14 7:12 PM
Parent
Up to 1 year
Financial Assets
Due from BSP
resell (SPAR)
profit or loss
Other financial assets, net
receivable
Rental deposits
Others, net
Deposit liabilities
Bills payable
outstanding
Accounts payable
Deposits on lease contracts
Dividends payable
Others
Total maturity gap
Over 1 up to
3 years
Over 3 years
Total
24,888
195,161
8,789
-
-
24,888
195,161
8,789
5,051
-
-
5,051
2,459
7,673
14,925
348,050
623
38
14,907
24,185
42,397
-
220
84,882
93,883
126,488
2,717
107,462
132,993
516,935
623
-
573
27
280
393
608,892
81,527
305,473
573
27
280
393
995,892
230,468
18,215
2,052
222,030
560
-
333,045
319
-
785,543
19,094
2,052
6,026
2,370
1,677
3,201
1,498
265,507
343,385
222,590
(141,063)
333,364
(27,891)
6,026
2,370
1,677
3,201
1,498
821,461
174,431
(47)
128
4/8/14 7:12 PM
Over 1 up to
3 years
Over 3 years
Up to 1 year
Financial Assets
Due from BSP
resell (SPAR)
profit or loss
Other financial assets, net
receivable
Rental deposits
Others, net
Deposit liabilities
Bills payable
outstanding
Accounts payable
Dividends payable
Others
Total maturity gap
Total
22,518
105,249
4,724
-
-
22,518
105,249
4,724
10,847
-
-
10,847
3,036
9,861
19,186
263,816
4,244
17,343
21,514
39,137
2,427
-
24,841
117,441
58,644
89,273
-
32,121
144,645
99,344
392,226
2,427
618
678
244
591
443,795
82,238
290,199
618
678
244
591
816,232
628,802
15,857
2,036
53
122
-
35
1,217
-
628,890
17,196
2,036
4,508
445
845
6,282
4,508
7,572
1,020
81,218
7,534
282,665
2,548
1,153
1,208
665,111
151,121
2,548
1,153
1,208
656,557
(212,762)
(48)
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3.3.4 Derivative cash flows
(a) Derivatives settled on a net basis
The BPI Group’s derivatives that are settled on a net basis consist only of interest rate swaps and nondeliverable forwards. The table below presents the contractual undiscounted cash flows of interest rate swaps
based on the remaining period from December 31 to the contractual maturity dates.
Up to 1 year
2013
Interest rate swap contracts - held for trading
- Inflow
- Outflow
- Net inflow (outflow)
Non-deliverable forwards - held for trading
- Inflow
- Outflow
- Net inflow
137
(133)
4
106
106
Up to 1 year
2012
Interest rate swap contracts - held for trading
- Inflow
- Outflow
Non-deliverable forwards - held for trading
- Inflow
- Outflow
- Net outflow
124
(72)
52
761
(1,169)
(408)
Over 1 up to
Over 3
3 years
years
615
(643)
(28)
11,900
(11,879)
21
Total
3,484
(3,488)
(4)
2,732
(2,712)
20
12,006
(11,879)
127
-
Over 1 up to
Over 3
3 years
years
623
(647)
(24)
-
Total
3,274
(3,249)
25
4,021
(3,968)
53
-
761
(1,169)
(408)
(b) Derivatives settled on a gross basis
The BPI Group’s derivatives that are settled on a gross basis include foreign exchange derivatives mainly,
currency forwards, currency swaps and spot contracts. The table below presents the contractual undiscounted
cash flows of foreign exchange derivatives based on the remaining period from reporting date to the contractual
maturity dates.
Up to 1 year
Foreign exchange derivatives - held for trading
2013
- Inflow
- Outflow
2012
- Inflow
- Outflow
Over 1 up to
Over 3
3 years
years
Total
78,604
(78,577)
27
6,626
(6,675)
(49)
8,525
(8,525)
-
93,755
(93,777)
(22)
112,285
(111,950)
335
5,350
(5,472)
(122)
9,502
(9,540)
(38)
127,137
(126,962)
175
(49)
130
4/8/14 7:12 PM
3.4 Fair value of financial assets and liabilities
The table below summarizes the carrying amount and fair value of those significant financial assets and liabilities
not presented on the statement of condition at fair value at December 31.
Consolidated
Carrying amount
Fair value
2013
2013
2012
2012
Financial assets
Due from BSP
Rental deposits
Others, net
Deposit liabilities
Bills payable
outstanding
Accounts payable
Dividends payable
Others
25,696
244,483
17,070
12,406
96,172
635,194
23,293
119,079
7,582
38,927
76,243
526,640
25,696
244,483
17,070
12,406
104,563
659,885
23,293
119,079
7,582
38,927
86,549
572,880
879
662
78
335
444
2,846
749
698
294
629
879
662
78
335
444
2,846
749
698
294
629
988,586
26,179
2,051
802,274
26,280
2,035
963,463
26,352
2,051
785,780
26,719
2,035
7,183
-
5,794
5,000
7,183
-
5,794
6,481
3,551
2,076
1,677
3,201
1,607
3,621
2,377
1,153
1,290
3,551
2,076
1,677
3,201
1,607
3,621
2,377
1,153
1,290
(50)
131
4/8/14 7:12 PM
Parent
Carrying amount
Fair value
2013
2013
2012
2012
Financial assets
Due from BSP
Rental deposits
Others, net
Deposit liabilities
Bills payable
outstanding
Accounts payable
Deposit on lease contracts
Dividends payable
Others
(i)
24,888
195,076
8,789
5,046
85,900
480,146
22,518
105,244
4,724
10,843
67,822
389,962
24,888
195,076
8,789
5,046
93,586
488,832
22,518
105,244
4,724
10,843
77,402
423,133
623
573
27
280
393
2,427
618
678
244
591
623
573
27
280
393
2,427
618
678
244
591
785,403
18,990
2,052
628,365
16,963
2,036
710,719
19,022
2,052
615,607
17,116
2,036
6,026
-
4,508
5,000
6,026
-
4,508
6,481
2,370
1,677
3,201
1,498
2,548
1,153
1,208
2,370
1,677
3,201
1,498
2,548
1,153
1,208
Cash and other cash items, due from BSP and other banks and interbank loans receivable and SPAR
The fair value of floating rate placements and overnight deposits approximates their carrying amount. The
estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing moneymarket interest rates for debts with similar credit risk and remaining maturity. All of these financial assets have a
maturity of one year, thus their fair values approximate their carrying amounts.
(ii) Investment securities
Fair value of held-to-maturity assets is based on market prices or broker/dealer price quotations. Where this
information is not available, fair value is estimated using quoted market prices for securities with similar credit,
maturity and yield characteristics.
(iii) Loans and advances
The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows
expected to be received. Expected cash flows are discounted with the use of assumptions regarding appropriate
credit spread for the loan, derived from other market instruments.
(iv) Financial liabilities
The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the
amount repayable on demand.
(51)
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The estimated fair value of fixed interest-bearing deposits and other borrowings not quoted in an active market is
based on discounted cash flows using market interest rates for new debts with similar remaining maturity.
(v) Other financial assets / liabilities
Carrying amounts of other financial assets / liabilities which have no definite repayment dates are assumed to be
their fair values.
3.5 Fair value hierarchy
The following table presents the fair value hierarchy of the BPI Group’s assets and liabilities at December 31:
Consolidated
2013
Recurring measurements
Financial assets
Trading securities
- Debt securities
- Equity securities
Available-for-sale financial assets
- Debt securities
- Equity securities
Level 1
Fair value
Level 2
Total
16,550
16,550
3,926
263
408
-
4,334
263
74,208
1,285
79,682
11,677
28,635
85,885
1,285
108,317
-
-
16,360
16,360
Non-recurring measurements
Assets held for sale, net
-
3,078
3,078
(52)
133
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2013
Fair values disclosed
Financial assets
Due from BSP
Rental deposits
Others, net
Deposit liabilities
Bills payable
Manager’s checks and demand drafts outstanding
Accounts payable
Dividends payable
Others
Non-financial assets
Investment properties
Level 1
2012
Financial assets
Trading securities
- Debt securities
- Equity securities
- Debt securities
- Equity securities
Level 1
Fair value
Level 2
Total
25,696
244,483
17,070
12,406
659,885
25,696
244,483
17,070
12,406
104,563
659,885
-
879
662
78
335
444
879
662
78
335
444
-
963,463
26,352
2,051
7,183
963,463
26,352
2,051
7,183
-
3,551
1,677
2,076
3,201
1,607
3,551
1,677
2,076
3,201
1,607
-
3,289
3,289
104,563
-
-
Fair value
Level 2
Total
5,920
5,920
21,457
435
206
-
21,663
435
94,501
491
116,884
10,428
16,554
104,929
491
133,438
-
5,827
5,827
-
3,181
3,181
(53)
134
4/8/14 7:12 PM
2012
Financial assets
Due from BSP
Rental deposits
Others, net
Deposit liabilities
Bills payable
Accounts payable
Dividends payable
Others
Level 1
-
Fair value
Level 2
Total
23,293
119,079
7,582
38,927
572,880
23,293
119,079
7,582
38,927
86,549
572,880
-
2,846
749
698
294
629
2,846
749
698
294
629
-
785,780
26,719
2,035
5,794
6,481
785,780
26,719
2,035
5,794
6,481
-
3,621
1,153
2,377
1,290
3,621
1,153
2,377
1,290
-
6,449
6,449
86,549
-
Parent
Level 1
2013
Financial assets
- Debt securities
- Equity securities
Level 2
Total
2,280
16,550
346
16,550
2,626
69,809
136
72,225
11,677
28,573
81,486
136
100,798
-
16,360
16,360
-
2,094
2,094
(54)
135
4/8/14 7:12 PM
2013
Financial assets
Due from BSP
Rental deposits
Others, net
Deposit liabilities
Bills payable
Accounts payable
Dividends payable
Others
Level 1
2012
Financial assets
- Debt securities
- Equity securities
Level 1
Fair value
Level 2
Total
24,888
195,076
8,789
5,046
488,832
24,888
195,076
8,789
5,046
93,586
488,832
-
623
573
27
280
393
623
573
27
280
393
-
710,719
19,022
2,052
6,026
-
710,719
19,022
2,052
6,026
-
-
2,370
1,677
3,201
1,498
2,370
1,677
3,201
1,498
-
3,289
3,289
93,586
-
Fair value
Level 2
Total
18,849
5,920
206
5,920
19,055
82,156
136
101,141
10,428
16,554
92,584
136
117,695
-
5,827
5,827
-
2,705
2,705
(55)
136
4/8/14 7:12 PM
2012
Financial assets
Due from BSP
Rental deposits
Others, net
Deposit liabilities
Bills payable
Accounts payable
Dividends payable
Others
Level 1
77,402
Fair value
Level 2
Total
-
22,518
105,244
4,724
10,843
423,133
22,518
105,244
4,724
10,843
77,402
423,133
-
2,427
618
678
244
591
2,427
618
678
244
591
-
615,607
17,116
2,036
4,508
6,481
615,607
17,116
2,036
4,508
6,481
-
2,548
1,153
1,208
2,548
1,153
1,208
-
6,449
6,449
The BPI Group has no financial instruments, other assets or liabilities with non-recurring fair value
measurements or with fair values disclosed that fall under the Level 3 category as at December 31, 2013 and
2012. There were no transfers between Level 1 and Level 2 during the year.
3.6 Insurance risk management
The non-life insurance entities decide on the retention, or the absolute amount that they are ready to assume
insurance risk from one event. The retention amount is a function of capital, experience, actuarial study and risk
appetite or aversion.
In excess of the retention, these entities arrange reinsurances either thru treaties or facultative placements.
They also accredit reinsurers based on certain criteria and set limits as to what can be reinsured. The
reinsurance treaties and the accreditation of reinsurers require Board of Directors’ approval.
3.7 Capital management
Cognizant of its exposure to risks, the BPI Group understands that it must maintain sufficient capital to absorb
unexpected losses, to stay in business for the long haul, and to satisfy regulatory requirements. The BPI Group
further understands that its performance, as well as the performance of its various units, should be measured in
terms of returns generated vis-à-vis allocated capital and the amount of risk borne in the conduct of business.
(56)
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The BPI Group manages its capital following the framework of Basel Committee on Banking Supervision
Accord II (Basel II) and its implementation in the Philippines by the BSP. The BSP through its Circular 538
requires each bank and its financial affiliated subsidiaries to keep its Capital Adequacy Ratio (CAR) - the ratio of
qualified capital to risk-weighted exposures - to be no less than 10%. In quantifying its CAR, BPI currently uses
the Standardized Approach (for credit risk and market risk) and the Basic Indicator Approach (for operational
risk). Capital adequacy reports are filed with the BSP every quarter.
Qualifying capital and risk-weighted assets are computed based on BSP regulations. The qualifying capital of the
Parent Bank consists of core tier 1 capital and tier 2 capital. Tier 1 capital comprises paid-up capital stock, paidin surplus, surplus including net income for the year, surplus reserves and minority interest less deductions such
as deferred income tax, unsecured credit accommodations to DOSRI, goodwill and unrealized fair value losses
on available-for-sale securities. Tier 2 capital includes unsecured subordinated debt (see Note 21), net
unrealized fair value gains on available-for-sale investments, and general loan loss provisions for BSP reporting
purposes.
The Basel II framework following BSP Circular 538 took into effect on July 1, 2007. The table below summarizes
the CAR under the Basel II framework for the years ended December 31, 2013 and 2012.
Consolidated
Parent
2013
2013
2012
2012
93,616
95,634
83,125
84,654
6,257
5,041
10,285
9,000
99,873
93,410 100,675
93,654
3,218
32,170
2,756
29,304
96,655
68,505
90,654
64,350
Tier 1 capital
Tier 2 capital
Gross qualifying capital
Less: Required deductions
Total qualifying capital
Risk weighted assets
CAR (%)
705,556
13.70
638,900
14.19
563,773
12.15
511,404
12.58
The BPI Group has fully complied with the CAR requirement of the BSP.
Effective January 1, 2014, the Bank is required to adopt new capital requirements in accordance with the
provisions of Basel III. The new guidelines are meant to strengthen the composition of the Bank's capital by
increasing the level of core capital and regulatory capital. Under Basel III, the Bank is required to maintain a
minimum capital adequacy ratio of 10% which includes a capital conservation buffer of 2.5%. The adoption of
Basel III is not expected to have an adverse effect on the capital adequacy of the Bank.
Likewise, the BPI Group manages the capital of its non-life insurance subsidiaries, pre-need subsidiary and
securities dealer subsidiaries in accordance with the capital requirements of the relevant regulatory agency, such as
Insurance Commission, Philippine SEC and PSE. These subsidiaries have fully complied with the relevant capital
requirements.
As part of the reforms of the PSE to expand capital market and improve transparency among listed firms, PSE
requires listed entities to maintain a minimum of ten percent (10%) of their issued and outstanding shares, exclusive
of any treasury shares, held by the public. The Parent Bank has fully complied with this requirement.
Note 4 - Critical Accounting Estimates and Judgments
The BPI Group makes estimates and assumptions that affect the reported amounts of assets and liabilities.
Estimates and judgments 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. It is reasonably
possible that the outcomes within the next financial year could differ from assumptions made at reporting date and
could result in the adjustment to the carrying amount of affected assets or liabilities.
(57)
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A. Critical accounting estimates
(i)
Impairment losses on loans and advances (Note 13)
The BPI Group reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whether
an impairment loss should be recorded in profit or loss, the BPI Group makes judgments as to whether there is any
observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of
loans before the decrease can be identified with an individual loan in that portfolio. This evidence may include
observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or
national or local economic conditions that correlate with defaults on assets in the group. Management uses
estimates based on historical loss experience for loans with credit risk characteristics and objective evidence of
impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and
assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce
any differences between loss estimates and actual loss experience. To the extent that the net present value of
estimated cash flows of individually impaired accounts and the estimated impairment for collectively assessed
accounts differs by +/- 5%, impairment provision for the year ended December 31, 2013 would be an estimated
P428 million (2012 - P397 million) higher or lower.
(ii) Fair value of derivatives and other financial instruments (Notes 3.4 and 9)
The fair value of financial instruments that are not quoted in active markets are determined by using generally
accepted valuation techniques. Where valuation techniques (for example, discounted cash flow models) are used
to determine fair values, they are validated and periodically reviewed by qualified personnel independent of the area
that created them. Inputs used in these models are from observable data and quoted market prices in respect of
similar financial instruments.
All models are approved by the Board of Directors before they are used, and models are calibrated to ensure that
outputs reflect actual data and comparative market prices. Changes in assumptions about these factors could affect
reported fair value of financial instruments. The BPI Group considers that it is impracticable to disclose with
sufficient reliability the possible effects of sensitivities surrounding the fair value of financial instruments that are not
quoted in active markets.
(iii) Pension liability on defined benefit plan (Note 29)
The BPI Group estimates its pension benefit obligation and expense for defined benefit pension plans based on the
selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are
described in Note 29 and include, among others, the discount rate and future salary increases. The BPI Group
determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to
determine the present value of estimated future cash outflows expected to be required to settle the retirement
obligations. The present value of the defined benefit obligations of the BPI Group at December 31, 2013 and
2012 are determined using the market yields on Philippine government bonds with terms consistent with the
expected payments of employee benefits. Plan assets are invested in either equity securities, debt securities or
other forms of investments. Equity markets may experience volatility, which could affect the value of pension
plan assets. This volatility may make it difficult to estimate the long-term rate of return on plan assets. Actual
results that differ from the BPI Group’s assumptions are reflected as remeasurements in other comprehensive
income. The BPI Group’s assumptions are based on actual historical experience and external data regarding
compensation and discount rate trends. The sensitivity analysis on key assumptions is disclosed in Note 29.
(iv) Valuation of assets held for sale
In determining the fair value of assets held for sale, the BPI Group analyzed the sales prices by applying
appropriate units of comparison, adjusted by differences between the subject asset or property and related
market data. Should there be a subsequent write-down of the asset to fair value less cost to sell, such writedown is recognized as impairment loss in the statement of income.
In 2013, the BPI Group has recognized an impairment loss on its foreclosed assets amounting to P599 million
(2012 - P394 million) as a result of reduction in fair market values.
The BPI Group considers that it is impracticable to disclose with sufficient reliability the possible effects of
sensitivities surrounding the fair value of assets held for sale.
(58)
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B. Critical accounting judgments
(i)
Impairment of available-for-sale securities (Note 11)
The BPI Group follows the guidance of PAS 39 to determine when an available-for-sale security is impaired. This
determination requires significant judgment. In making this judgment, the BPI Group evaluates, among other
factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health
and near-term business outlook of the issuer, including factors such as industry and sector performance, changes in
technology and operational and financing cash flows.
(ii) Classification of held-to-maturity securities (Note 12)
The BPI Group follows the guidance of PAS 39 in classifying non-derivative financial assets with fixed or
determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgment. In
making this judgment, the BPI Group evaluates its intention and ability to hold such investments to maturity. If the
BPI Group fails to keep these investments to maturity other than for the specific circumstances - for example selling
an insignificant amount close to maturity - it will be required to reclassify the entire class as available-for-sale. The
investments would therefore be measured at fair value and not at amortized cost.
(iii) Classification of assets held for sale
Management follows the principles in PFRS 5 in classifying certain foreclosed assets (consisting of real estate and
auto or chattel), as assets held for sale when the carrying amount of the assets will be recovered principally through
sale. Management is committed to a plan to sell these foreclosed assets and the assets are actively marketed for
sale at a price that is reasonable in relation to their current fair value.
(iv) Realization of deferred income tax assets (Note 17)
Management reviews at each reporting date the carrying amounts of deferred tax assets. The carrying amount of
deferred tax assets is reduced to the extent that the related tax assets cannot be utilized due to insufficient taxable
profit against which the deferred tax losses will be applied. Management believes that sufficient taxable profit will
be generated to allow all or part of the deferred income tax assets to be utilized.
Note 5 - Assets and Liabilities Attributable to Insurance Operations
Details of assets and liabilities attributable to insurance operations at December 31 are as follows:
2013
2012
Assets
Cash and cash equivalents (Note 7)
Insurance balances receivable, net
Investment securities
Available-for-sale
Held-to-maturity
Land, building and equipment
Accounts receivable and other assets, net
Liabilities
Reserves and other balances
Accounts payable, accrued expenses and other payables
117
3,803
106
1,952
4,477
3,827
131
2,231
14,586
5,595
3,811
131
1,856
13,451
12,273
788
13,061
10,148
645
10,793
(59)
140
4/8/14 7:12 PM
Details of income attributable to insurance operations before income tax and minority interest for the years ended
December 31 are as follows:
2013
Premiums earned and related income
Investment and other income
Benefits, claims and maturities
(Decrease) increase in actuarial reserve liabilities
Management and general expenses
Commissions
Other expenses
Income before income tax and minority interest
2012
3,020
2,441
457
426
3,477
2,867
1,133
972
(80)
271
452
433
518
478
5
19
2,028
2,173
1,449
694
2011
2,410
551
2,961
1,093
30
429
417
43
2,012
949
Note 6 - Business Segments
Operating segments are reported in accordance with the internal reporting provided to the chief executive officer,
who is responsible for allocating resources to the reportable segments and assessing their performance. All
operating segments used by the BPI Group meet the definition of a reportable segment under PFRS 8.
The BPI Group has determined the operating segments based on the nature of the services provided and the
different markets served representing a strategic business unit.
The BPI Group’s main operating business segments follow:
Consumer Banking - this segment addresses the individual and retail markets. It covers deposit taking and
servicing, consumer lending such as home mortgages, auto loans and credit card finance as well as the
remittance business. It includes the entire transaction processing and service delivery infrastructure consisting
of the BPI and BPI Family Bank network of branches, ATMs and point-of-sale terminals as well as phone and
Internet-based banking platforms.
Corporate Banking - this segment consists of the entire lending, leasing, trade and cash management services
provided by the BPI Group to corporate and institutional customers. These customers include both high-end
corporations as well as various middle market clients.
Investment Banking - this segment includes the various business groups operating in the investment markets
and dealing in activities other than lending and deposit taking. These services cover corporate finance,
securities distribution, asset management, trust and fiduciary services as well as proprietary trading and
investment activities.
The performance of the Parent Bank is assessed as a single unit using financial information presented in the
separate or Parent only financial statements. Likewise, the chief executive officer assesses the performance of its
insurance business as a separate segment from its banking and allied financial undertakings. Information on the
assets, liabilities and results of operations of the insurance business is fully disclosed in Note 5.
The BPI Group and the Parent Bank mainly derive revenue (more than 90%) within the Philippines, accordingly,
no geographical segment is presented.
Revenues of the BPI Group’s segment operations are derived from interest (net interest income). The segment
report forms part of management’s assessment of the performance of the segment, among other performance
indicators.
There were no changes in the reportable segments during the year. Transactions between the business segments
are carried out at arm’s length. The revenue from external parties reported to management is measured in a
manner consistent with that in profit or loss.
Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in inter-segment net
interest income. Interest charged for these funds is based on the BPI Group’s cost of capital.
(60)
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4/8/14 7:12 PM
142
4/8/14 7:12 PM
2012
Consumer
banking
Interest income
Interest expense
Net interest income
Impairment charge
Net interest income after impairment charge
Fees and commission income
Other income
Gross receipts tax
Other income, net
Occupancy and equipment - related expenses
Total operating expenses
Operating profit
Provision for income tax
Total assets
Total liabilities
27,138
11,726
15,412
2,103
13,309
4,192
4,546
(547)
8,191
7,189
4,204
5,230
16,623
4,877
336,125
829,128
Corporate
Investment
banking
banking
8,226
4,926
475
107
7,751
4,819
817
6,934
4,819
523
641
1,686
8,816
(55)
(697)
2,154
8,760
921
559
1,070
124
3,074
1,015
5,065
1,698
4,023
11,881
366,674
16,626
264,426
29,794
Total per
management
reporting
40,290
12,308
27,982
2,920
25,062
5,356
15,048
(1,299)
19,105
8,669
5,398
9,319
23,386
20,781
138
3,158
967,225
875,548
2011
Consumer
banking
Interest income
Interest expense
Net interest income
Impairment charge
Other income
Gross receipts tax
Other income, net
Operating profit
Total assets
Total liabilities
24,985
11,819
13,166
1,643
11,523
3,845
3,834
(468)
7,211
7,467
3,882
6,217
17,566
1,168
288,598
702,138
Corporate
Investment
banking
banking
6,674
6,463
515
105
6,159
6,358
475
33
5,684
6,325
518
455
1,410
6,059
(54)
(532)
1,874
5,982
715
592
1,036
121
1,248
986
2,999
1,699
4,559
10,608
324,863
16,072
226,427
22,599
Total per
management
reporting
38,122
12,439
25,683
2,151
23,532
4,818
11,303
(1,054)
15,067
8,774
5,039
8,451
22,264
16,335
216
3,162
839,888
740,809
(62)
143
4/8/14 7:12 PM
Reconciliation of segment results to consolidated results of operations:
2013
Total per
Consolidation
consolidated
adjustments/
financial
Others
statements
40,802
41,229
(427)
10,478
10,077
401
30,324
31,152
(828)
2,648
3,620
(972)
27,676
27,532
144
5,885
6,081
(196)
17,844
16,323
1,521
(1,555)
(1,516)
(39)
22,174
20,888
1,286
10,641
9,095
1,546
8,040
5,644
2,396
8,022
10,304
(2,282)
26,703
25,043
1,660
23,147
23,377
(230)
590
590
4,153
4,153
-
Total per
management
reporting
Interest income
Interest expense
Net interest income
Impairment charge
Other income
Gross receipts tax
Other income, net
Operating profit
Share in net income of associates (included in Other income)
Total assets
Total liabilities
1,174,159
1,071,480
21,205
18,077
1,195,364
1,089,557
2012
Total per
Consolidation
consolidated
adjustments/
financial
Others
statements
40,290
(181)
40,109
12,308
347
12,655
27,982
(528)
27,454
2,920
3
2,923
25,062
(531)
24,531
5,356
(245)
5,111
15,048
1,114
16,162
(1,299)
(43)
(1,342)
19,105
826
19,931
8,669
1,801
10,470
5,398
1,795
7,193
9,319
(2,180)
7,139
23,386
1,416
24,802
20,781
(1,121)
19,660
Total per
management
reporting
Interest income
Interest expense
Net interest income
Impairment charge
Other income
Gross receipts tax
Other income, net
Operating profit
Total assets
Total liabilities
138
3,158
967,225
875,548
18,016
11,571
138
3,158
985,241
887,119
(63)
144
4/8/14 7:12 PM
2011
Total per
Consolidation
consolidated
adjustments/
financial
Others
statements
38,122
567
38,689
12,439
384
12,823
25,683
183
25,866
2,151
(1)
2,150
23,532
184
23,716
4,818
(211)
4,607
11,303
1,051
12,354
(1,054)
(16)
( 1,070)
15,067
824
15,891
8,774
1,496
10,270
5,039
1,495
6,534
8,451
(1,899)
6,552
22,264
1,092
23,356
16,335
(84)
16,251
216
216
3,162
3,162
Total per
management
reporting
Interest income
Interest expense
Net interest income
Impairment charge
Other income
Gross receipts tax
Other income, net
Operating profit
Total assets
Total liabilities
839,888
740,809
3,677
14,440
843,565
755,249
“Consolidation adjustments/Others” pertain to balances of insurance operations, support units and inter-segment
elimination in accordance with the BPI Group’s internal reporting.
Note 7 - Cash and Cash Equivalents
This account at December 31 consists of:
2013
Due from BSP
Interbank loans receivable and securities
purchased under agreements
to resell (Note 8)
Cash and cash equivalents attributable to
insurance operations (Note 5)
Consolidated
2012
2013
2011
24,888
22,395
195,076
83,759
8,789
9,297
Parent
2012
2011
22,518
105,244
4,724
21,661
70,807
5,567
25,696
244,483
17,070
23,293
119,079
7,582
12,406
38,927
35,277
5,046
10,843
24,867
117
299,772
106
188,987
233
150,961
233,799
143,329
122,902
(64)
145
4/8/14 7:12 PM
Note 8 - Interbank Loans Receivable and Securities Purchased under Agreements to Resell (SPAR)
The account at December 31 consists of transactions with:
BSP
Other banks
Accrued interest receivable
Consolidated
Parent
2013
2013
2012
2012
11,505
4,150
38,084
10,000
888
888
821
821
12,393
5,038
38,905
10,821
13
8
22
22
12,406
5,046
38,927
10,843
Interbank loans receivable and SPAR maturing within 90 days from the date of acquisition are classified as cash
equivalents in the statement of cash flows (Note 7).
Current
Non-current
Consolidated
Parent
2013
2013
2012
2012
12,406
5,046
38,927
10,843
12,406
5,046
38,927
10,843
Government bonds are pledged by the BSP as collateral under reverse repurchase agreements. The face value of
securities pledged is equivalent to the total balance of outstanding placements as at reporting date. All collateral
agreements mature within 12 months.
The range of average interest rates (%) of interbank loans receivable of the BPI Group for the years ended
December 31 follows:
Peso-denominated
US dollar-denominated
2013
3.50 - 3.62
0.13 - 0.16
2012
3.92 - 4.94
0.16 - 0.23
Note 9 - Derivative Financial Instruments
Derivatives held by the BPI Group for non-hedging purposes mainly consist of the following:
Foreign exchange forwards represent commitments to purchase or sell one currency against another at an
agreed forward rate on a specified date in the future. Settlement can be made via full delivery of forward
proceeds or via payment of the difference (non-deliverable forward) between the contracted forward rate
and the prevailing market rate on maturity.
Foreign exchange swaps refer to spot purchase or sale of one currency against another with an agreement
to sell or purchase the same currency at an agreed forward rate in the future.
Interest rate swaps refer to agreement to exchange fixed rate versus floating interest payments (or vice
versa) on a reference notional amount over an agreed period of time.
Cross currency swaps refer to spot exchange of notional amounts on two currencies at a given exchange
rate and with an agreement to re-exchange the same notional amounts at a specified maturity date based
on the original exchange rate. Parties on the transaction agree to pay a stated interest rate on the borrowed
notional amount and receive a stated interest rate on the lent notional amount, payable or receivable
periodically over the term of the transaction.
Credit-Linked Notes (CLNs) are structured notes whose value is derived from the creditworthiness of an
underlying reference entity. A CLN may be viewed as a bundled note that consists of a bond and a credit
default swap, allowing the issuer to transfer the credit risk of a reference entity to the investor during the
reference period.
(65)
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4/8/14 7:12 PM
The BPI Group’s credit risk represents the potential cost to replace the swap contracts if counterparties fail to
fulfill their obligation. This risk is monitored on an ongoing basis with reference to the current fair value, a
proportion of the notional amount of the contracts and the liquidity of the market. To control the level of credit
risk taken, the BPI Group assesses counterparties using the same techniques as for its lending activities.
The notional amounts of certain types of financial instruments provide a basis for comparison with instruments
recognized on the statement of condition. They do not necessarily represent the amounts of future cash flows
involved or the current fair values of the instruments and therefore are not indicative of the BPI Group’s exposure
to credit or price risks. The derivative instruments become favorable (assets) or unfavorable (liabilities) as a
result of fluctuations in market interest rates or foreign exchange rates relative to their terms. The aggregate
contractual or notional amount of derivative financial instruments on hand and the extent at which the
instruments can become favorable or unfavorable in fair values can fluctuate significantly from time to time. The
fair values of derivative instruments held are set out below:
Contract/
Notional Amount
2013
2012
Free-standing derivatives
Foreign exchange derivatives
Currency swaps
Currency forwards
Interest rate swaps
Credit default swaps
Embedded credit derivatives
Total derivatives assets (liabilities) held for
trading
Fair Values
Assets
Liabilities
2013
2013
2012
2012
70,312
60,661
46,862
888
5,327
197,512
99,514
41,110
5,747
12,294
700
3,471
13
72
1,038
781
4,021
80
(12,252)
(621)
(3,478)
(9)
-
(501)
(1,359)
(3,967)
-
184,050
343,883
16,550
5,920
(16,360)
(5,827)
Note 10 - Trading Securities
The account at December 31 consists of:
Consolidated
Parent
2013
2013
2012
2012
Debt securities
Government securities
Commercial papers of private companies
Equity securities - listed
3,900
429
4,329
5
4,334
263
4,597
20,480
1,022
21,502
161
21,663
435
22,098
2,258
367
2,625
1
2,626
2,626
18,405
512
18,917
138
19,055
19,055
All trading securities are classified as current.
(66)
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4/8/14 7:12 PM
Note 11 - Available-for-Sale Securities
Consolidated
Parent
2013
2013
2012
2012
65,808
62,636
78,725
68,197
19,115
17,944
24,858
23,122
84,923 103,583
80,580
91,319
962
906
1,346
1,265
85,885 104,929
81,486
92,584
Debt securities
Others
Equity securities
Listed
Unlisted
643
1,743
1,614
317
2,257
2,060
88,142 106,989
(586)
(586)
87,556 106,403
350
113
463
81,949
(213)
81,736
361
113
474
93,058
(213)
92,845
Consolidated
Parent
2013
2013
2012
2012
5,038
3,352
7,925
5,811
83,104
78,597
99,064
87,247
88,142 106,989
81,949
93,058
Current
Non-current
The reconciliation of the allowance for impairment at December 31 is summarized as follows:
Consolidated
Parent
2013
2013
2012
2012
586
213
597
213
(11)
586
213
586
213
At January 1
Reversal of impairment losses
At December 31
The range of average interest rates (%) of available-for-sale debt securities of the BPI Group for the years ended
2013
3.30 - 4.60
1.96 - 2.46
Peso-denominated
Foreign currency-denominated
2012
5.01 - 5.31
2.46 - 2.74
The movement in available-for-sale securities is summarized as follows:
At January 1
Additions
Disposals
Amortization of premium, net
Fair value adjustments
Exchange differences
Net change in allowance for impairment
Net change in accrued interest receivable
At December 31
Consolidated
Parent
2013
2013
2012
2012
106,403
92,845
74,084
64,500
264,840
241,745
404,123
363,264
(280,663) (373,322) (249,990) (336,194)
(507)
(505)
(238)
(190)
(3,347)
(3,129)
2,859
2,481
1,214
1,129
(1,397)
(1,276)
11
(384)
(359)
283
260
87,556
81,736
106,403
92,845
(67)
148
4/8/14 7:12 PM
On October 22, 2008, the BPI Group reclassified certain available-for-sale securities aggregating P19.1 billion to
held-to-maturity category. Likewise, on November 12, 2008, an additional portfolio of US dollar-denominated
available-for-sale securities totaling US$171.6 million (or peso equivalent of P9.2 billion) was further reclassified
from available-for-sale to held-to-maturity. The reclassification was triggered by management’s change in
intention over the securities in the light of volatile market prices due to global economic downturn. Management
believes that despite the market uncertainties, the BPI Group has the capability to hold those reclassified
securities until maturity dates.
The aggregate fair value loss of those securities at reclassification dates still recognized in Accumulated other
comprehensive income (under Capital funds), and which will be amortized over the remaining lives of the
instruments using the effective interest rate method amounts to P1,757 million. Unamortized fair value loss as at
December 31, 2013 amounts to P371 million (2012 - P490 million). Fair value loss that would have been
recognized in other comprehensive income if the available-for-sale securities had not been reclassified amounts to
P277 million for the year ended December 31, 2013 (2012 - P374 million gain). There are no gains or losses
recognized in profit or loss or other comprehensive income.
On July 11, 2012, the BPI Group reclassified certain available-for-sale securities totaling P1.01 billion to loans and
receivables. The reclassification was triggered by management’s change in intention over the securities following
the disappearance of active markets for these securities. As at date of reclassification, fair value gain or loss that
would have been recognized in other comprehensive income if the available-for-sale securities had not been
reclassified amounts to P725 million, which is the same amount of unamortized fair value loss in other
comprehensive income that will be recycled to profit or loss over the remaining lives of the securities. The
unamortized fair value loss as of December 31, 2013 amounts to P250 million (2012 - P456 million). The estimated
amount of cash flows that the BPI Group expects to recover, as at the date of reclassification, is P1.01 billion at the
average effective interest rate of 3.54%. There are no gains or losses recognized in profit or loss or other
comprehensive income.
Note 12 - Held-to-Maturity Securities
Commercial papers of private companies
Consolidated
Parent
2013
2013
2012
2012
91,277
82,129
73,038
64,851
2,898
2,034
1,432
1,432
94,175
84,163
74,470
66,283
1,997
1,737
1,773
1,539
96,172
85,900
76,243
67,822
Consolidated
Parent
2013
2013
2012
2012
9,851
8,350
18,816
15,024
86,321
77,550
57,427
52,798
96,172
85,900
76,243
67,822
Current
Non-current
The range of average interest rates (%) of held-to-maturity securities of the BPI Group for the years ended
Peso-denominated
Foreign currency-denominated
2013
6.82 - 7.89
4.55 - 4.75
2012
7.44 - 7.66
4.57 - 4.75
(68)
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4/8/14 7:12 PM
The movement in held-to-maturity securities is summarized as follows:
At January 1
Additions
Maturities
Amortization of premium, net
Exchange differences
Net change in accrued interest receivable
At December 31
Consolidated
Parent
2013
2013
2012
76,243
67,822
89,742
48,508
42,493
10,837
(29,906)
(25,815)
(19,973)
(1,374)
(1,067)
(2,009)
2,478
2,269
(2,084)
223
198
(270)
96,172
85,900
76,243
2012
79,723
9,521
(17,659)
(1,643)
(1,867)
(253)
67,822
Note 13 - Loans and Advances
Major classifications of this account at December 31 are as follows:
Consolidated
Parent
2013
2012
2012
422,520
404,218
328,242
315,698
86,740
54,471
85,906
53,515
2013
Corporate entities
Small and medium enterprise
Retail customers
Credit cards
Mortgages
Others
Unearned discount/income
27,222
106,413
5,759
648,654
2,195
(3,026)
647,823
(12,629)
635,194
25,224
95,914
5,614
540,900
1,962
(5,125)
537,737
(11,097)
526,640
27,054
180
2,291
488,214
1,469
(662)
489,021
(8,875)
480,146
25,224
175
2,007
396,619
1,396
(522)
397,493
(7,531)
389,962
The Parent balances above include amounts due from related parties (Note 31).
Current
Non-current
Consolidated
Parent
2013
2013
2012
2012
392,546
348,050
294,025
269,926
255,277
140,971
243,712
127,567
647,823
489,021
537,737
397,493
The amount of loans and advances above include finance lease receivables as follows:
Total future minimum lease collections
Unearned finance income
Present value of future minimum lease collections
Consolidated
2013
2012
6,546
7,957
(821)
(1,137)
5,725
6,820
(121)
(142)
5,604
6,678
(69)
150
4/8/14 7:12 PM
Details of future minimum lease collections follow:
Consolidated
2013
2012
3,047
4,456
3,499
3,501
6,546
7,957
(821)
(1,137)
5,725
6,820
Not later than one year
Later than one year but not later than five years
Unearned finance income
The Parent Bank has no finance lease receivables as at December 31, 2013 and 2012.
Details of the loans and advances portfolio of the BPI Group at December 31 are as follows:
1)
As to industry/economic sector (in %)
Consumer
Manufacturing
Real estate, renting and other related
activities
Agriculture and forestry
Wholesale and retail trade
Financial institutions
Others
2)
Consolidated
2013
2012
26.97
28.37
20.87
18.24
14.51
1.64
11.92
6.44
17.65
100.00
13.96
1.84
14.66
6.91
16.02
100.00
Parent
2013
5.96
27.52
2012
6.78
24.51
18.01
2.14
15.67
8.26
22.44
100.00
17.58
2.43
19.42
8.82
20.46
100.00
As to collateral
Consolidated
Parent
2013
2013
2012
Secured loans
Real estate mortgage
Chattel mortgage
Others
Unsecured loans
179,228
35,968
162,145
377,341
268,287
645,628
165,342
32,354
134,168
331,864
203,911
535,775
80,650
2,673
149,126
232,449
255,103
487,552
2012
78,906
3,105
129,313
211,324
184,773
396,097
Other collaterals include hold-out deposits, mortgage trust indentures, government securities and bonds,
quedan/warehouse receipts, standby letters of credit, trust receipts, and deposit substitutes.
Loans and advances aggregating P1,310 million (2012 - P3,431 million) and P1,232 million
(2012 - P1,865 million) are used as security for bills payable (Note 20) of the BPI Group and Parent Bank,
respectively.
The range of average interest rates (%) of loans and advances of the BPI Group for the years ended
Commercial loans
Peso-denominated loans
Foreign currency-denominated loans
Real estate mortgages
Auto loans
2013
2012
4.89 - 5.12
2.43 - 2.66
7.76 - 8.13
7.45 - 8.42
5.42 - 5.55
2.36 - 2.60
8.64 - 9.06
9.85 - 10.28
(70)
151
4/8/14 7:12 PM
Non-performing accounts (over 30 days past due) of the BPI Group and the Parent Bank, net of specific
allowance for credit losses, following BSP Circular 772 effective January 1, 2013 (2012 - net of accounts in the
“loss” category and covered with 100% reserves) are as follows:
Consolidated
Parent
2013
2013
2012
11,452
6,788
11,578
8,268
5,399
2,986
3,184
1,389
8,592
Non-performing accounts (NPL 30)
Specific allowance for credit losses
Net NPL 30
2012
6,761
2,157
4,604
Reconciliation of allowance for impairment by class at December 31 follows:
Consolidated
Corporate entities
Small and
Large
medium
corporate
enterprises
customers
At January 1
Provision for impairment
losses
Write-off/disposal
Unwind of discount
Transfers
At December 31
3,054
2,780
212
(432)
(87)
2,324
5,071
138
(46)
(60)
(658)
2,154
Corporate entities
Small and
Large
medium
corporate
enterprises
customers
At January 1
losses
Write-off/disposal
Unwind of discount
Transfers
At December 31
3,091
3,323
269
(195)
(75)
(36)
3,054
74
(87)
(50)
(480)
2,780
2013
Retail customers
Credit
Mortgages
cards
1,510
2,305
74
(4)
(102)
1,478
1,200
(1,115)
2,390
Others
Total
1,448
11,097
262
(72)
(102)
1,536
1,886
(1,669)
(147)
1,462
12,629
Others
Total
1,171
10,660
333
(73)
17
1,448
2,201
(1,192)
(125)
(447)
11,097
2012
Retail customers
Credit
Mortgages
cards
1,102
1,973
292
(1)
117
1,510
1,233
(836)
(65)
2,305
(71)
152
4/8/14 7:12 PM
Parent
2013
Retail customers
Corporate entities
Small and
Large
medium
corporate
enterprises
customers
At January 1
losses
Write-off/disposal
Unwind of discount
Transfers
At December 31
Credit
Mortgages
cards
38
2,305
2,950
2,143
104
(432)
(87)
1,784
4,319
109
(38)
(60)
(231)
1,923
1,200
(1,115)
2,390
Total
95
7,531
82
(3)
4
178
1,510
(1,592)
(147)
1,573
8,875
Others
Total
38
7,365
(2)
59
95
1,430
(1,051)
(125)
(88)
7,531
2012
Retail customers
Corporate entities
Small and
Large
medium
corporate
enterprises
customers
At January 1
losses
Write-off/disposal
Unwind of discount
Transfers
At December 31
15
(4)
16
65
Others
Credit
Mortgages
cards
40
1,973
3,025
2,289
171
(194)
(75)
23
2,950
26
(18)
(50)
(104)
2,143
(1)
(1)
38
1,233
(836)
(65)
2,305
Note 14 - Bank Premises, Furniture, Fixtures and Equipment
Consolidated
Land
Cost
January 1, 2013
Additions
Disposals
Amortization
Transfers
December 31, 2013
Accumulated depreciation
January 1, 2013
Depreciation
Disposals/transfers
December 31, 2013
Net book value, December 31, 2013
2013
Buildings and
Furniture
leasehold
and
Equipment
improvements
equipment
for lease
Total
3,146
(76)
4
3,074
5,844
389
(611)
(151)
(76)
5,395
11,890
1,957
(987)
(3)
12,857
4,852
1,883
(1,949)
4,786
25,732
4,229
(3,623)
(151)
(75)
26,112
3,074
2,352
215
(314)
2,253
3,142
9,322
1,317
(612)
10,027
2,830
1,637
1,095
(1,105)
1,627
3,159
13,311
2,627
(2,031)
13,907
12,205
(72)
153
4/8/14 7:12 PM
Land
Cost
January 1, 2012
Additions
Disposals
Amortization
Transfers
December 31, 2012
January 1, 2012
Depreciation
Disposals/transfers
December 31, 2012
2012
Buildings and
Furniture
leasehold
and
Equipment
improvements
equipment
for lease
Total
3,159
(9)
(4)
3,146
5,831
349
(184)
(156)
4
5,844
11,388
1,446
(942)
(2)
11,890
4,468
2,072
(1,688)
4,852
24,846
3,867
(2,823)
(156)
(2)
25,732
3,146
2,225
226
(99)
2,352
3,492
8,807
1,282
(767)
9,322
2,568
1,492
987
(842)
1,637
3,215
12,524
2,495
(1,708)
13,311
12,421
Parent
Land
Cost
January 1, 2013
Additions
Disposals
Amortization
Transfers
December 31, 2013
January 1, 2013
Depreciation
Disposals/transfers
December 31, 2013
Total
2,692
(28)
2,664
5,055
342
(528)
(114)
(85)
4,670
10,985
1,850
(923)
11,912
18,732
2,192
(1,479)
(114)
(85)
19,246
2,664
2,057
185
(266)
1,976
2,694
8,574
1,237
(571)
9,240
2,672
10,631
1,422
(837)
11,216
8,030
Land
Cost
January 1, 2012
Additions
Disposals
Amortization
Transfers
December 31, 2012
January 1, 2012
Depreciation
Disposals/transfers
December 31, 2012
2013
Buildings and
leasehold
Furniture and
improvements
equipment
2012
Buildings and
leasehold
Furniture and
improvements
equipment
Total
2,702
(9)
(1)
2,692
5,050
300
(184)
(118)
7
5,055
10,501
1,349
(859)
(6)
10,985
18,253
1,649
(1,052)
(118)
18,732
2,692
1,956
203
(102)
2,057
2,998
8,098
1,193
(717)
8,574
2,411
10,054
1,396
(819)
10,631
8,101
Depreciation is included in Occupancy and equipment-related expenses in the statement of income.
(73)
154
4/8/14 7:12 PM
Note 15 - Investment Properties
Land
Buildings
Consolidated
Parent
2013
2013
2012
2012
963
963
3,208
3,201
1,856
1,856
1,771
1,771
2,819
2,819
4,979
4,972
(1,220)
(1,220)
(1,144)
(1,144)
(2)
(2)
(1,253)
(1,253)
1,597
1,597
2,582
2,575
The movement in investment properties is summarized as follows:
Consolidated
Parent
2013
2013
2012
2012
2,582
2,575
2,637
2,630
12
12
(994)
(987)
85
85
(76)
(76)
(67)
(67)
1,597
1,597
2,582
2,575
At January 1
Additions
Disposals
Transfers
Depreciation
At December 31
Investment properties have aggregate fair value of P3,289 million as at December 31, 2013
(2012 - P6,449 million). Fair value of investment property is determined on the basis of appraisal made by an
internal or an external appraiser duly certified by the BPI Group’s Credit Policy group. Valuation methods
employed by the appraisers mainly include the market data approach, cost approach and income approach.
Depreciation is included in Occupancy and equipment-related expenses in the statement of income.
All investment properties generate rental income. Rental income from investment properties recognized in the
statement of income, as part of Other operating income, amounts to P255 million for the year ended
December 31, 2013 (2012 - P260 million; 2011 - P245 million). Direct operating expenses (including repairs and
maintenance) arising from these investment properties amount to P21 million for the year ended
December 31, 2013 (2012 - P193 million; 2011 - P205 million).
Note 16 - Investments in Subsidiaries and Associates
This account at December 31 consists of investments in shares of stock:
Consolidated
Parent
2013
2013
2012
2012
Carrying value (net of impairment)
Investments at equity method
Investments at cost method
4,176
4,176
3,680
3,680
6,793
6,793
7,088
7,088
(74)
155
4/8/14 7:12 PM
Investments in associates carried at equity method in the consolidated statement of condition follow:
Place of business/
country of
incorporation
Name of entity
BPI - Philamlife Assurance Corporation
National Reinsurance Corporation*
Beacon Properties
Victoria 1552 Investments, LP
Citytrust Realty Corporation
Philippines
Philippines
Philippines
Delaware, USA
Philippines
Percentage of
ownership interest
(%)
2013
2012
47.67
15.38
20.00
35.00
40.00
47.67
15.12
20.00
35.00
40.00
Measurement
method
Acquisition cost
2013
2012
371
204
100
7
2
684
(7)
677
371
204
100
7
2
684
(7)
677
Equity
Equity
Equity
Equity
Equity
*BPI Group has significant influence due to its representation on the governing body of National Reinsurance Corporation
For BPI-Philamlife Assurance Corporation, BPI acts as distribution channel for the former’s insurance products.
Details and movements of investments in associates carried at equity method in the consolidated financial
statements follow:
2013
2012
Acquisition cost
At January 1
At December 31
Accumulated equity in net income
At January 1
Share in net income for the year
Dividends received
At December 31
Accumulated share in other comprehensive income
At January 1
Share in other comprehensive income for the year
At December 31
677
677
677
677
1,385
590
(7)
1,968
1,276
138
(29)
1,385
1,618
(87)
1,531
4,176
1,116
502
1,618
3,680
As the associates are not considered to be individually material to impact the financial statements of the BPI
Group, the unaudited financial information of associates as at and for the years ended December 31 has been
aggregated as follows:
2013
2012
66,239
54,482
52,042
41,441
17,898
14,665
1,414
384
Total assets
Total liabilities
Total revenues
Total net income
(75)
156
4/8/14 7:12 PM
The details of equity investments at cost method in the separate financial statements of the Parent Bank follow:
Acquisition cost
2013
2012
Subsidiaries
BPI Europe Plc.
Ayala Plans, Inc.
BPI Direct Savings Bank, Inc.
FGU Insurance Corporation
Prudential Investments, Inc.
BPI Globe BanKO, Inc.
BPI Foreign Exchange Corp.
BPI Express Remittance Corp. USA
BPI Family Savings Bank, Inc.
First Far-East Development
Corporation
Green Enterprises S.R.L. in
Liquidation (formerly BPI
Express Remittance Europe,
S.p.A)
BPI Card Finance Corp.
FEB Stock Brokers, Inc.
BPI Computer Systems Corp.
BPI Express Remittance Spain S.A
Others
Associates
Allowance for
impairment
2013
2012
Carrying value
2013
2012
1,910
863
644
623
392
303
359
195
191
150
1,910
863
644
623
392
303
300
359
195
191
150
-
-
1,910
863
644
623
392
303
359
195
191
150
1,910
863
644
623
392
303
300
359
195
191
150
91
91
-
-
91
91
54
50
25
23
25
322
677
6,897
54
50
25
23
20
322
677
7,192
(104)
(104)
(104)
(104)
54
50
25
23
25
218
677
6,793
54
50
25
23
20
218
677
7,088
Note 17 - Deferred Income Taxes
The significant components of deferred income tax assets and liabilities at December 31 are as follows:
Deferred income tax assets
Net operating loss carry over (NOLCO)
Minimum corporate income tax (MCIT)
Pension liability
Others
Total deferred income tax assets
Deferred income tax liabilities
Revaluation gain on properties acquired from a
business combination
Fair value gain on available-for-sale securities
Others
Total deferred income tax liabilities
Consolidated
Parent
2013
2013
2012
2012
5,662
10
2
370
1,007
7,051
5,565
7
3
172
396
6,143
3,813
283
1,035
5,131
4,003
95
259
4,357
(767)
(108)
(875)
6,176
(810)
(174)
(72)
(1,056)
5,087
(731)
(104)
(835)
4,296
(760)
(160)
88
(832)
3,525
(76)
157
4/8/14 7:12 PM
Consolidated
Parent
2013
2013
2012
2012
Deferred income tax assets
Amount to be recovered within 12 months
Amount to be recovered after 12 months
Deferred income tax liabilities
Amount to be settled within 12 months
Amount to be settled after 12 months
612
6,439
7,051
604
5,539
6,143
559
4,572
5,131
559
3,798
4,357
175
700
875
357
699
1,056
175
660
835
357
475
832
The movement in the deferred income tax account is summarized as follows:
Consolidated
Parent
2013
2013
2012
5,087
3,525
5,284
At January 1
Amounts (credited to) charged against statement
of income
Amounts credited to (charged against) other
comprehensive income
At December 31
(6)
1,095
6,176
418
(615)
5,087
(245)
1,016
4,296
2012
3,677
213
(365)
3,525
The deferred tax charge (credit) in the statement of income comprises the following temporary differences:
2013
Consolidated
2012
(94)
(3)
82
21
6
NOLCO
Pension
Others
(436)
(3)
22
(1)
(418)
2013
2011
191
(135)
7
52
79
2
(359)
245
(408)
Parent
2012
(210)
19
(22)
(213)
2011
17
86
(377)
(274)
The outstanding NOLCO at December 31 consists of:
Year of Incurrence
Year of Expiration
2013
2012
2011
2010
2009
2016
2015
2014
2013
2012
Used portion/ expired during the year
Tax rate
Deferred income tax asset on NOLCO
Consolidated
Parent
2013
2013
2012
2012
20
10
10
3
3
11
11
44
24
(11)
33
24
30%
30%
30%
30%
10
7
-
(77)
158
4/8/14 7:12 PM
The details of MCIT at December 31 are as follows:
Year of Incurrence
Year of Expiration
2013
2012
2011
2010
2009
2016
2015
2014
2013
2012
Used portion during the year
Consolidated
2013
2013
2012
3
3
3
3
(1)
2
3
Parent
2012
-
190
232
201
623
(623)
-
Note 18 - Other Resources
The account at December 31 consists of the following:
Intangible assets
Accounts receivable
Residual value of equipment for lease
Sundry debits
Accrued trust and other fees
Creditable withholding tax
Prepaid expenses
Rental deposits
Miscellaneous assets
Consolidated
Parent
2013
2013
2012
2012
2,744
2,689
2,865
2,817
2,356
1,902
4,843
4,277
1,994
2,238
1,167
1,149
2,327
2,301
1,153
1,004
1,150
974
1,334
1,076
798
529
725
494
607
412
335
280
294
244
999
420
1,488
899
12,807
9,014
16,610
12,453
(1,759)
(1,600)
(1,662)
(1,523)
11,048
7,414
14,948
10,930
The reconciliation of the allowance for impairment at December 31 is summarized as follows:
At January 1
Provision for impairment losses
Write-off
At December 31
Consolidated
Parent
2013
2013
2012
2012
1,662
1,523
1,333
1,289
159
88
329
280
(62)
(11)
(46)
1,759
1,600
1,662
1,523
Consolidated
Parent
2013
2013
2012
2012
8,405
7,513
11,942
10,977
4,402
1,501
4,668
1,476
12,807
9,014
16,610
12,453
Current
Non-current
On December 8, 2010, BPI signed an agreement with ING Bank N.V. – Manila Branch (“ING”) to purchase the latter’s
trust business. On February 16, 2011, BPI and ING received the approval of the transaction from the BSP subject to
certain conditions. Subsequently, the amendment of the Plan Rules of the Unit Investment Trust Funds ("UITF")
managed by ING was approved by the Monetary Board in its meeting on March 25, 2011 allowing BPI to act as
Trustee of these UITFs which have been renamed Odyssey Funds.
(78)
159
4/8/14 7:12 PM
The acquisition was completed on March 30, 2011. The purchase of ING’s trust department was accounted for as an
acquisition of business under PFRS 3. The main assets acquired from this transaction consist of intangible asset in
the form of contractual customer relationships which have an aggregate fair value of P2,784 million and certain IT and
transportation equipment valued at P25 million. There were no liabilities assumed from the acquisition. The contractual
customer relationships are expected to have a useful life of 10 years. The amount of amortization recognized in the
statement of income for the year ended December 31, 2013 is P278 million (2012 - P278 million).
Note 19 - Deposit Liabilities
Consolidated
Parent
2013
2013
2012
179,681
171,731
149,092
505,538
430,185
341,971
303,367
183,487
311,211
988,586
785,403
802,274
Demand
Savings
Time
2012
141,539
294,192
192,634
628,365
The Parent balances above include amounts due to related parties (Note 31).
Consolidated
Parent
2013
2013
2012
2012
288,733
429,754
588,133
541,118
699,853
355,649
214,141
87,247
988,586
785,403
802,274
628,365
Current
Non-current
Related interest expense on deposit liabilities is broken down as follows:
Demand
Savings
Time
2013
Consolidated
2012
448
3,032
6,050
9,530
550
2,651
8,447
11,648
2013
2011
403
692
2,351
2,325
2,433
8,704
5,187
11,721
Parent
2012
2011
505
2,190
4,234
6,929
645
1,954
5,002
7,601
Under current and existing BSP regulations as at December 31, 2013 and 2012, the BPI Group should comply
with a simplified minimum reserve requirement instead of the separate liquidity and statutory reserve
requirements. Further, BSP requires all reserves be kept at the central bank. The BPI Group is in full compliance
with the simplified reserve requirement.
The required liquidity and statutory reserves as reported to BSP at December 31 comprise of:
Due from BSP
Consolidated
Parent
2013
2013
2012
2012
128,276
116,419
100,158
90,220
128,276
116,419
100,158
90,220
(79)
160
4/8/14 7:12 PM
Note 20 - Bills Payable
Consolidated
Parent
2013
2013
2012
2012
990
919
2,940
1,384
760
7,395
313
7,482
481
17,794
17,758
15,098
15,098
26,179
18,990
26,280
16,963
Private firms
Local banks
Foreign banks
The range of average interest rates (%) of bills payable of the BPI Group for the years ended December 31 follows:
2013
3.87 - 4.10
5.81 - 6.31
1.04 - 1.31
Private firms and local banks - Peso-denominated
Foreign banks
2013
Interest expense
545
Consolidated
2012
584
2013
2011
194
679
2012
4.38 - 4.76
6.25 - 6.87
1.28 - 1.49
Parent
2012
165
2011
245
Consolidated
Parent
2013
2013
2012
2012
25,313
18,209
24,890
15,842
866
781
1,390
1,121
26,179
18,990
26,280
16,963
Current
Non-current
Bills payable include funds borrowed from Land Bank of the Philippines (LBP), Development Bank of the
Philippines (DBP) and Social Security System (SSS) which were relent to customers of the BPI Group in
accordance with the financing programs of LBP, DBP and SSS and credit balances of settlement bank accounts.
The average payment terms of these bills payable is 1.35 years (2012 - 2.25 years). Loans and advances of the
BPI Group arising from these financing programs serve as security for the related bills payable (Note 13).
Note 21 - Unsecured Subordinated Debt
On December 12, 2008, the Parent Bank issued P5,000 million worth of unsecured subordinated notes (the
“Notes”) eligible as Lower Tier 2 capital pursuant to BSP Circular No. 280, series of 2001, as amended. The
Notes will at all times, rank pari passu and without any preference among themselves and at least equally with all
other present and future unsecured and subordinated obligations of the Parent Bank, except obligations
mandatorily preferred by law. The Notes bear interest at the rate of 8.45% per annum and will mature on
December 12, 2018 (maturity date). The interest is payable quarterly in arrears from December 12, 2008 until
December 11, 2018. The Notes are redeemable in whole and not only in part at the exclusive option of the
Parent Bank on December 13, 2013 (redemption date) subject to the satisfaction of certain regulatory approval
requirements. Unless the Notes are earlier redeemed on December 13, 2013, the applicable interest rate will be
increased to the rate equal to 80% multiplied by the 5-year on-the-run Philippine Treasury benchmark bid yield
(benchmark rate) on the first day of the 21st interest period plus the step-up spread. The step-up spread is equal
to 150% of 8.45% less 80% of the benchmark rate.
On August 20, 2013, the Board of Directors of BPI approved the exercise of its option to call or redeem the
P5,000 million BPI Lower Tier 2 Notes on the optional redemption date, being December 13, 2013.
Interest expense on the unsecured subordinated notes recognized in 2013 amounts to P403 million
(2012 and 2011 - P423 million).
(80)
161
4/8/14 7:12 PM
Note 22 - Deferred Credits and Other Liabilities
The account at December 31 consists of the following:
Consolidated
Parent
2013
2013
2012
11,797
11,786
11,570
3,201
3,201
3,550
2,370
3,621
2,076
2,377
1,677
1,677
1,153
425
35
1,541
502
402
712
731
731
459
366
328
279
6,905
5,808
2,585
31,230
26,338
24,297
Bills purchased - contra
Dividends payable
Accounts payable
Deposit on lease contract
Other deferred credits
Withholding tax payable
Vouchers payable
Due to the Treasurer of the Philippines
Miscellaneous liabilities
2012
11,557
2,548
1,153
963
624
458
252
2,008
19,563
Bills purchased - contra represents liabilities arising from the outright purchases of checks before actual clearing
as a means of immediate financing offered by the BPI Group. Miscellaneous liabilities include insurance and
other employee-related payables.
Consolidated
Parent
2013
2013
2012
2012
20,354
18,449
19,264
16,837
10,876
7,889
5,033
2,726
31,230
26,338
24,297
19,563
Current
Non-current
Note 23 - Capital Funds
Details of authorized share capital of the Parent Bank follow:
2013
Authorized capital (at P10 par value per share)
Common shares
Preferred A shares
2012
2011
(In Millions of Pesos,
Except Par Value Per Share)
49,000
600
49,600
49,000
600
49,600
49,000
600
49,600
Details of outstanding common shares follow:
2013
Issued common shares
At January 1
Issuance of shares during the year
At December 31
Subscribed common shares
3,556,356,173
2,363,850
3,558,720,023
2,363,850
2012
(In Number of Shares)
2011
3,556,356,173
3,556,356,173
-
3,556,328,003
28,170
3,556,356,173
-
Share premium as at December 31, 2013 amounts to P8,316 million (2012 and 2011 - P8,317 million).
As at December 31, 2013, 2012 and 2011, the Parent Bank has 12,111, 12,447 and 12,921 common
shareholders, respectively. There are no preferred shares issued and outstanding at December 31, 2013, 2012
and 2011.
(81)
162
4/8/14 7:12 PM
Details of and movements in Accumulated other comprehensive income (loss) for the years ended December 31
follow:
2013
Fair value reserve on available-for-sale
securities
At January 1
Unrealized fair value (loss) gain before tax
Deferred income tax effect
At December 31
Share in other comprehensive income (loss)
of insurance subsidiaries
At January 1
Share in other comprehensive income
(loss) for the year, before tax
At December 31
Share in other comprehensive income (loss)
of associates
At January 1
Share in other comprehensive income
(loss) for the year
At December 31
Translation adjustment on foreign operations
At January 1
Translation differences
At December 31
Actuarial (losses) gains on defined benefit
plan, net
At January 1
Actuarial (losses) gains for the year
At December 31
1,030
(4,901)
919
(2,952)
Consolidated
2013
2012
2011
Parent
2012
2011
1,748
(987)
269
1,030
328
1,683
(263)
1,748
642
(4,592)
921
(3,029)
1,192
(809)
259
642
(303)
1,782
(287)
1,192
289
137
202
-
-
-
(331)
78
36
169
(17)
289
(48)
(17)
137
-
-
-
1,618
1,116
765
-
-
-
(88)
1,530
502
1,618
351
1,116
-
-
-
-
-
-
(365)
(594)
178
(781)
(3,810)
(1,755)
1,986
(596)
(365)
277
(1,035)
(1,029)
309
(1,755)
(563)
Parent
2012
2011
(936)
233
(703)
(832)
(104)
(936)
(828)
(4)
(832)
(581)
(702)
211
(1,072)
(3,161)
(2,333)
2,504
(752)
(581)
1,420
(1,469)
(1,234)
370
(2,333)
(164)
Details of and movements in Reserves for the years ended December 31 follow:
2013
Stock option scheme
At January 1
Exercise of options
Expiration of options
Value of employee services
At December 31
Surplus reserves
At January 1
Transfer from surplus
Other transaction
At December 31
1,603
76
1
1,680
1,680
Consolidated
2012
1,462
141
1,603
1,603
2013
2011
42
(42)
1,325
137
1,462
1,462
1,603
76
1
1,680
1,680
1,462
141
1,603
1,603
11
(11)
1,325
137
1,462
1,462
(82)
163
4/8/14 7:12 PM
Surplus reserves consist of:
2012
1,645
1,569
35
34
1,680
1,603
2013
Reserve for trust business
Reserve for self-insurance
2011
1,428
34
1,462
In compliance with existing BSP regulations, 10% of the Parent Bank’s income from trust business is
appropriated to surplus reserve. This yearly appropriation is required until the surplus reserve for trust business
reaches 20% of the Parent Bank’s regulatory net worth.
Reserve for self-insurance represents the amount set aside to cover losses due to fire, defalcation by and other
unlawful acts of personnel and third parties.
Cash dividends declared by the Board of Directors of the Parent Bank during the years 2011 to 2013 follow:
Date declared
May 18, 2011
November 16, 2011
March 21, 2012
March 21, 2012
October 21, 2012
April 17, 2013
November 6, 2013
Date approved by the BSP
June 2, 2011
December 6, 2011
April 10, 2012
April 10, 2012
November 16, 2012
May 15, 2013
December 5, 2013
Amount of dividends
Total
Per share
0.90
0.90
0.50
0.90
0.90
0.90
0.90
3,201
3,201
1,778
3,201
3,201
3,201
3,201
Cash dividends declared are payable to common shareholders of record as of 15th day from receipt by the
Parent Bank of the approval by the BSP and distributable on the 15th day from the said record date.
The calculation of earnings per share (EPS) is shown below:
2013
a) Net income attributable to equity holders
of the Parent Bank
b) Weighted average number of common
shares outstanding during the year
c) Basic EPS (a/b)
Consolidated
Parent
2013
2012
2011
2012
2011
(In Millions, Except Earnings Per Share Amounts)
18,811
16,352
12,899
14,468
12,427
9,910
3,627
5.19
3,556
4.60
3,556
3.63
3,627
3.99
3,556
3.49
3,556
2.79
For 2013, the weighted average number of common shares outstanding during the year has been adjusted to take
into consideration the rights issue approved by the Board of Directors on November 6, 2013. The Parent Bank
offered for subscription a total of 370,370,370 common shares to eligible shareholders on a pre-emptive rights basis
at P67.50 per share. The stock rights have been fully subscribed and listed on February 10, 2014. The proceeds
from the rights offer amounting to P25 billion will increase the Parent Bank’s capital base.
On November 27, 2013, the Board or Directors of the Parent Bank approved to grant to qualified beneficiaries/
participants up to 3,500,000 shares for Executive Stock Option Plan (ESOP) and up to 3,200,000 shares for
Stock Purchase Plan (SPP). The ESOP has a three-year vesting period with 1/3 of the option being vested at the
end of each year from grant date while the SPP has a five-year payment period.
The exercise price for ESOP is equal to weighted average of BPI share price for the most recent previous 30trading days from grant date. The weighted average fair value of options granted during the period determined
using the Black-Scholes valuation model was P17.54 per option.
(83)
164
4/8/14 7:12 PM
The subscription price for SPP is equivalent to 15% below the weighted average of BPI share price for the most
recent previous 30-trading days from grant date. The subscription date for SPP was on December 23, 2013.
The impact of ESOP is not considered material to the 2013 financial statements; thus, the disclosures were only
limited to the information mentioned above.
The basic and diluted EPS are the same for the years presented as the stock options outstanding is not significant
to impact the weighted average number of common shares.
Note 24 - Other Operating Income
Details of other operating income follow:
2013
Trust and asset management fees
Rental income
Credit card income
Gain on sale of assets
Dividend income
Others
Consolidated
2012
3,723
1,830
1,359
1,296
28
1,278
9,514
2,913
1,698
1,342
1,192
27
706
7,878
2013
2011
2,569
1,627
1,332
527
47
585
6,687
3,026
425
1,359
1,028
1,923
795
8,556
Parent
2012
2011
2,453
415
1,342
640
1,383
538
6,771
2,199
397
1,332
310
1,210
469
5,917
Trust and asset management fees arise from the BPI Group’s asset management and trust services and are based
on agreed terms with various managed funds and investments.
Rental income is earned by the BPI Group by leasing out its investment properties (Note 15) and other assets which
consist mainly of fleet of vehicles.
Gain on sale of assets arises mainly from disposals of properties (including equity investments), foreclosed
collaterals and non-performing assets.
Dividend income recognized by the Parent Bank substantially pertains to dividend distribution of subsidiaries.
Note 25 - Leases
The BPI Group and the Parent Bank have various lease agreements which mainly pertain to branch premises that
are renewable under certain terms and conditions. The rentals (included in Occupancy and equipment-related
expenses) under these lease contracts are as follows:
Consolidated
Parent
1,071
869
936
745
870
684
2013
2012
2011
The future minimum lease payments under non-cancellable operating leases of the BPI Group are as follows:
No later than 1 year
Later than 1 year but no later than 5 years
2013
2012
67
71
85
120
152
191
(84)
165
4/8/14 7:12 PM
Note 26 - Operating Expenses
Details of compensation and fringe benefits expenses follow:
Salaries and wages
Retirement expense (Note 29)
Other employee benefit expenses
2013
Consolidated
2012
8,788
786
1,067
10,641
8,328
1,032
1,110
10,470
2013
Consolidated
2012
2013
2011
6,831
8,409
639
813
822
1,048
8,292
10,270
Parent
2012
2011
6,565
822
875
8,262
6,420
655
842
7,917
Parent
2012
2011
1,127
1,268
556
321
351
130
331
207
48
1,256
492
307
1,328
127
305
198
134
107
846
5,378
142
237
856
5,296
Details of other operating expenses follow:
Insurance
Advertising
Travel and communication
Litigation expenses
Supervision and examination fees
Taxes and licenses
Amortization expense
Office supplies
Management and other
professional fees
Shared expenses
Others
1,908
1,346
696
521
500
461
337
256
1,685
1,457
662
444
398
237
334
248
261
1,736
8,022
188
1,486
7,139
2013
2011
1,269
254
1,104
1,410
594
622
349
458
441
1,618
239
233
333
308
215
235
197
1,217
6,552
197
157
974
5,872
Note 27 - Income Taxes
A reconciliation between the provision for income tax at the statutory tax rate and the actual provision for income
tax for the years ended December 31 follows:
2013
Rate
(%)
Amount
Statutory income tax
Effect of items not subject to statutory tax rate:
Income subjected to lower tax rates
Tax-exempt income
Others, net
Actual income tax
6,944
30.00
(689)
(2,938)
836
4,153
(2.98)
(12.69)
3.61
17.94
2013
Amount
Statutory income tax
Effect of items not subject to statutory tax rate:
Income subjected to lower tax rates
Tax-exempt income
Others, net
Actual income tax
Rate
(%)
5,207
30.00
(645)
(1,993)
320
2,889
(3.72)
(11.48)
1.85
16.65
Consolidated
2012
Rate
Amount
(%)
5,898
30.00
(1,132)
(2,850)
1,242
3,158
(5.76)
(14.50)
6.32
16.06
Parent
2012
Rate
Amount
(%)
4,397
30.00
(868)
(1,982)
684
2,231
(5.92)
(13.52)
4.66
15.22
2011
Rate
(%)
Amount
4,875
30.00
(951)
(2,634)
1,872
3,162
(5.85)
(16.21)
11.52
19.46
2011
Amount
Rate
(%)
3,657
30.00
(926)
(1,838)
1,389
2,282
(7.60)
(15.08)
11.39
18.71
(85)
166
4/8/14 7:12 PM
Note 28 - Basic Quantitative Indicators of Financial Performance
The key financial performance indicators follow (in %):
Consolidated
2013
2012
18.05
17.86
1.87
1.91
3.31
3.57
Return on average equity
Return on average assets
Net interest margin
Parent
2013
19.05
1.87
3.09
2012
17.97
1.88
3.37
Note 29 - Retirement Plans
BPI and its subsidiaries, and a non-life insurance subsidiary have separate trusteed, noncontributory retirement
benefit plans covering all qualified officers and employees. The description of the plans follows:
BPI
BPI has a unified plan which includes its subsidiaries other than insurance companies. Under this plan, the
normal retirement age is 60 years. Normal retirement benefit consists of a lump sum benefit equivalent to 200%
of the basic monthly salary of the employee at the time of his retirement for each year of service, if he has
rendered at least 10 years of service, or to 150% of his basic monthly salary, if he has rendered less than 10
years of service. For voluntary retirement, the benefit is equivalent to 112.50% of the employee’s basic monthly
salary for a minimum of 10 years of service with the rate factor progressing to a maximum of 200% of basic
monthly salary for service years of 25 or more. Death or disability benefit, on the other hand, shall be
determined on the same basis as in voluntary retirement.
The net defined benefit cost and contributions to be paid by the entities within the BPI Group are determined by
an independent actuary.
Plan assets are held in trusts, governed by local regulations and practice in the Philippines.
Non-life insurance subsidiary
BPI/MS has a separate trusteed defined benefit plan. Under the plan, the normal retirement age is 60 years or
the employee should have completed at least 10 years of service, whichever is earlier. The normal retirement
benefit is equal to 150% of the final basic monthly salary for each year of service for below 10 years and 175% of
the final basic monthly salary for each year of service for 10 years and above.
Death or disability benefit for all employees of the non-life insurance subsidiary shall be determined on the same
basis as in normal or voluntary retirement as the case may be.
Following are the amounts recognized based on recent actuarial valuations:
a)
Pension liability recognized in the statement of condition
Present value of defined benefit obligations
Fair value of plan assets
Consolidated
December 31,
December 31,
2012
2013
(Restated)
11,495
10,909
(10,261)
(10,406)
1,234
503
January 1,
2012
(Restated)
11,508
(8,415)
3,093
(86)
167
4/8/14 7:12 PM
Present value of defined benefit obligations
Fair value of plan assets
Parent
December 31,
December 31,
2012
2013
(Restated)
9,277
8,702
(8,332)
(8,385)
945
317
January 1,
2012
(Restated)
9,161
(6,796)
2,365
Pension liability is shown as part of “Miscellaneous liabilities” within Deferred credits and other liabilities (Note
22).
The movement in plan assets is summarized as follows:
Consolidated
Parent
2013
2013
2012
2012
10,406
8,385
8,415
6,796
687
553
586
474
756
605
1,119
886
(1,158)
(866)
(1,240)
(1,004)
(430)
(345)
1,526
1,233
10,261
8,332
10,406
8,385
At January 1
Asset return in net interest cost
Contributions
Benefit payments
Remeasurement - return on plan assets
At December 31
The carrying value of the plan assets as at December 31, 2013 is equivalent to the fair value of P10,261 million
(2012 - P10,406 million).
The plan assets are comprised of the following:
2013
Amount
Debt securities
Equity securities
Others
5,306
4,933
22
10,261
Consolidated
Parent
2013
2012
2012
%
%
Amount
%
Amount
%
Amount
(In Millions of Pesos Except for Rates)
4,309
52
5,120
49
52
4,125
49
4,006
48
5,274
50
48
4,250
50
17
12
1
10
1
8,332 100
100
10,406 100
8,385 100
Pension plan assets of the unified retirement plan include investment in BPI’s common shares with carrying
amount of P1,232 million (2012 - P1,381 million) and fair value of P2,750 million at December 31, 2013
(2012 - P3,446 million). The actual return on plan assets of the BPI Group was P257 million in 2013
(2012 - P2,111 million).
The movement in the present value of defined benefit obligation is summarized as follows:
At January 1
Present value of defined benefit obligation for transferred
employees from a subsidiary
Current service cost
Past service cost
Interest cost
Benefit payments
Remeasurement - changes in financial assumptions
At December 31
Consolidated
Parent
2013
2013
2012
2012
10,909
8,702
11,508
9,161
764
(11)
720
(1,158)
271
11,495
816
802
(1,239)
(978)
10,909
618
574
(866)
249
9,277
2
657
639
(1,004)
(753)
8,702
(87)
168
4/8/14 7:12 PM
(b) Expense recognized in the statement of income
Consolidated
2013
2012
2011
764
618
816
601
33
21
216
212
(11)
786
639
1,032
813
2013
Current service cost
Net interest cost
Past service cost
At December 31
Parent
2012
2011
657
165
822
501
154
655
The BPI Group has no other transactions with the plan other than the contributions presented above for the
years ended December 31, 2013 and 2012.
The principal assumptions used for the actuarial valuations of the unified plan of the BPI Group are as follows:
Discount rate
Future salary increases
2013
5.31%
4.00%
2012
6.60%
4.00%
Assumptions regarding future mortality and disability experience are based on published statistics generally used
for local actuarial valuation purposes.
The defined benefit plan typically exposes the BPI Group to a number of risks such as investment risk, interest rate
risk and salary risk. The most significant of which relate to investment and interest rate risk. The present value of
the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of
government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to
maturity approximating the terms of the related pension liability. A decrease in government bond yields will increase
the defined benefit obligation although this will also be partially offset by an increase in the value of the plan’s fixed
income holdings. Hence, the present value of defined benefit obligation is directly affected by the discount rate to be
applied by the BPI Group. However, the BPI Group believes that due to the long-term nature of the pension liability
and the strength of the BPI Group itself, the mix of debt and equity securities holdings of the plan is an appropriate
element of the BPI Group’s long term strategy to manage the plan efficiently.
The BPI Group ensures that the investment positions are managed within an asset-liability matching framework that
has been developed to achieve long-term investments that are in line with the obligations under the plan. The BPI
Group’s main objective is to match assets to the defined benefit obligation by investing primarily in long-term debt
securities with maturities that match the benefit payments as they fall due. The asset-liability matching is being
monitored on a regular basis and potential change in investment mix is being discussed with the trustor, as
necessary to better ensure the appropriate asset-liability matching.
The average remaining service life of employees under the BPI unified retirement plan as at December 31, 2013
is 20 years (2012 - 21 years). The BPI Group contributes to the plan depending on the suggested funding
contribution as calculated by an independent actuary. The expected contribution for the year ending
December 31, 2014 for the BPI Group and Parent amounts to P903 million and P722 million, respectively.
The projected maturity analysis of retirement benefit payments as at December 31, 2013 is as follows:
Consolidated
Less than a year
Between 1 to 5 years
Over 20 years
Amount
865
3,327
4,370
6,768
10,463
47,518
(88)
169
4/8/14 7:12 PM
Parent
Less than a year
Over 20 years
Amount
692
2,516
3,392
5,905
8,722
36,697
The sensitivity of the defined benefit obligation as at December 31, 2013 to changes in the weighted principal
assumptions follows:
Consolidated
Discount rate
Salary growth rate
Change in
assumption
0.5%
1.0%
Impact on defined benefit obligation
Increase in
assumption
Decrease in assumption
Decrease by 1.66%
Increase by 3.02%
Increase by 7.13%
Decrease by 2.57%
Change in
assumption
0.5%
1.0%
Impact on defined benefit obligation
Increase in
assumption
Decrease in assumption
Decrease by 1.69%
Increase by 3.13%
Increase by 7.39%
Decrease by 2.61%
Parent
Discount rate
Salary growth rate
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions
constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated.
When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same
method (present value of the defined benefit obligation calculated with the projected unit credit method at the
end of the reporting period) has been applied as when calculating the retirement liability recognized within the
statement of condition.
Note 30 - Trust Assets
As disclosed in Note 18, BPI and ING received on February 16, 2011 the approval from the BSP of BPI’s purchase
of the latter’s trust business subject to certain conditions. Subsequently, the amendment of the Plan Rules of UITFs
managed by ING was approved by the Monetary Board in its meeting on March 25, 2011 allowing BPI to act as
Trustee of these UITFs which were named as Odyssey Funds.
At December 31, 2013, the net asset value of trust and fund assets administered by the BPI Group amounts to
P580 billion (2012 - P739 billion).
Government securities deposited by the BPI Group and the Parent Bank with the BSP in compliance with the
requirements of the General Banking Act relative to the trust functions follow:
Consolidated
Parent
2013
2013
2012
2012
6,702
6,650
6,982
6,830
(89)
170
4/8/14 7:12 PM
Note 31 - Related Party Transactions
In the normal course of the business, the Parent Bank transacts with related parties consisting of its subsidiaries
and associates. Likewise, the BPI Group has transactions with Ayala Corporation (AC) and its subsidiaries (Ayala
Group). AC has a significant influence over the BPI Group as at reporting date.
These transactions such as loans and advances, deposit arrangements, trading of government securities and
commercial papers, sale of assets, lease of bank premises, investment advisory/management, service
arrangements and advances for operating expenses are made in the normal banking activities and have terms and
conditions that are generally comparable to those offered to non-related parties or to similar transactions in the
market.
Significant related party transactions and outstanding balances as at and for the years ended December 31 are
summarized below:
Consolidated
2013
Outstanding
Transactions
balances
Loans and advances from:
Subsidiaries
Associates
AC
Subsidiaries of AC
Key management
personnel
Deposits from:
Subsidiaries
Associates
Ayala Group
Key management
personnel
(202)
11,403
-
194
6,250
16,065
-
11,201
22,509
2,885
613
(17,910)
6,936
672
21,159
704
(13,708)
1,014
Terms and conditions
These are loans and advances granted
to related parties that are generally
secured with interest rates ranging from
0.65% to 8.04% and with maturity
periods ranging from 8 days to 12
years. Additional information on DOSRI
loans are discussed below.
These are demand, savings and time
deposits bearing the following average
interest rates:
Demand - 0.28% to 0.36%
Savings - 0.70% to 0.98%
Time
- 2.20% to 3.25%
29,781
(90)
171
4/8/14 7:12 PM
2012
Outstanding
Transactions
balances
Subsidiaries
Associates
AC
Subsidiaries of AC
Key management personnel
Deposits from:
Subsidiaries
Associates
Ayala Group
(1,285)
1,750
4,460
-
396
6,250
4,662
-
4,925
11,308
724
16
21,216
(32)
4,051
59
39,069
310
21,924
43,489
interest rates:
Demand - 0.40% to 0.55%
Savings - 0.95% to 1.06%
Time
- 3.45% to 3.71%
2011
Outstanding
Transactions
balances
Subsidiaries
Associates
AC
Subsidiaries of AC
Deposits from:
Subsidiaries
Associates
Ayala Group
355
(50)
(250)
(348)
-
1,681
4,500
202
-
(293)
6,383
1,171
2
(6,183)
36
3,179
43
17,853
342
(4,974)
21,417
periods ranging from 3 days to 2 years.
Additional information on DOSRI loans
are discussed below.
interest rates:
Demand - 0.55% to 0.56%
Savings - 0.98% to 1.01%
Time
- 3.55% to 3.78%
(91)
172
4/8/14 7:12 PM
Parent
2013
Outstanding
Transactions
balances
Subsidiaries
Associates
AC
Subsidiaries of AC
Deposits from:
Subsidiaries
Associates
Ayala Group
194
11,653
-
194
6,250
16,065
-
11,847
22,509
1,955
613
(17,910)
704
5,298
672
21,159
1,014
(14,638)
28,143
interest rates:
Demand - 0.26% to 0.35%
Savings - 0.64% to 0.92%
Time
- 1.42% to 2.61%
2012
Outstanding
Transactions
balances
Subsidiaries
Associates
AC
Subsidiaries of AC
Deposits from:
Subsidiaries
Associates
Ayala Group
(1,681)
(1,750)
4,210
-
6,250
4,412
-
779
10,662
277
16
21,216
(342)
3,343
59
39,069
310
21,167
42,781
interest rates:
Demand - 0.39% to 0.55%
Savings - 0.92% to 1.05%
Time
- 2.87% to 3.18%
(92)
173
4/8/14 7:12 PM
2011
Outstanding
Transactions
Balances
Subsidiaries
Associates
AC
Subsidiaries of AC
Deposits from:
Subsidiaries
Associates
Ayala Group
355
(50)
(250)
(348)
-
1,681
4,500
202
-
(293)
6,383
1,171
2
(6,183)
36
3,179
43
17,853
342
(4,974)
21,417
periods ranging from 3 days to 2 years.
Additional information on DOSRI loans
are discussed below.
interest rates:
Demand - 0.55%
Savings - 0.96% to 1.00%
Time
- 3.09% to 3.46%
The aggregate amounts included in the determination of income before income tax that resulted from
transactions with each class of related parties are as follows:
Consolidated
2013
2012
2011
Interest income
Subsidiaries
Associates
AC
Subsidiaries of AC
Other income
Subsidiaries
Associates
AC
Subsidiaries of AC
Interest expense
Subsidiaries
Associates
Ayala Group
5
127
368
500
76
3
119
88
286
37
22
121
180
1,018
577
16
(75)
1,536
973
370
22
62
1,427
883
203
10
18
1,114
5
3
68
5
81
21
301
2
324
17
97
2
116
(93)
174
4/8/14 7:12 PM
Other expenses
Subsidiaries
Associates
AC
Subsidiaries of AC
Retirement benefits
Salaries, allowances and other short-term benefits
Directors’ remuneration
2013
2012
2011
1,003
175
42
1,220
905
132
49
1,086
1,027
23
46
1,096
33
39
27
603
57
556
51
527
46
Parent
2013
2012
2011
Interest income
Subsidiaries
Associates
AC
Subsidiaries of AC
Other income
Subsidiaries
Associates
AC
Subsidiaries of AC
Interest expense
Subsidiaries
Associates
Ayala Group
Other expenses
Subsidiaries
Associates
AC
Subsidiaries of AC
Retirement benefits
Salaries, allowances and other short-term benefits
Directors’ remuneration
2
127
368
497
56
3
119
82
260
37
22
121
180
585
577
(131)
1,031
577
370
947
462
203
665
5
3
68
5
81
7
301
2
310
17
97
2
116
900
175
42
1,117
343
132
49
524
476
23
46
545
29
36
25
509
50
487
38
470
40
Other income mainly consists of rental income and revenue from service arrangements with related parties. Also,
in March 2013, a loss arising from sale of an impaired investment property was recognized at both consolidated
and parent level.
Other expenses mainly consist of rental expenses and management fees.
(94)
175
4/8/14 7:12 PM
There were no provisions recognized against receivables from related parties. Also, no additional provision was
recognized during the year.
Details of DOSRI loans are as follows:
Consolidated
Parent
2013
2013
2012
2012
6,677
6,643
6,619
6,569
In percentages (%)
Consolidated
Parent
2013
2013
2012
2013
1.04
1.36
1.24
1.66
Outstanding DOSRI loans
% to total outstanding loans and advances
% to total outstanding DOSRI loans
Unsecured DOSRI loans
Past due DOSRI loans
Non-performing DOSRI loans
29.05
0.15
0.14
29.05
0.15
0.14
29.63
0.06
0.05
29.85
0.06
0.05
At December 31, 2013 and 2012, the BPI Group is in full compliance with the General Banking Act and the BSP
regulations on DOSRI loans.
Note 32 - Commitments and Contingencies
At present, there are lawsuits, claims and tax assessments pending against the BPI Group. In the opinion of
management, after reviewing all actions and proceedings and court decisions with legal counsels, the aggregate
liability or loss, if any, arising therefrom will not have a material effect on the BPI Group’s financial position or
financial performance.
BPI and some of its subsidiaries are defendants in legal actions arising from normal business activities.
Management believes that these actions are without merit or that the ultimate liability, if any, resulting from them will
not materially affect the financial statements.
In the normal course of business, the BPI Group makes various commitments (Note 3.1.4) that are not presented
in the financial statements. The BPI Group does not anticipate any material losses from these commitments.
Note 33 - Restatement
The BPI Group adopted PAS 19 (Revised), Employee benefits on January 1, 2013.
The revised employee benefit standard introduces changes to the recognition, measurement, presentation and
disclosure of post-employment benefits. The standard also requires net interest expense/income to be calculated
as the product of the net defined benefit liability/asset and the discount rate as determined at the beginning of the
year. The effect of this is to remove the previous concept of recognizing an expected return on plan assets.
The effects of the changes to the accounting policy are shown in the following tables.
(a)
Impact of the adoption on statement of condition
Consolidated
Previously
reported
December 31, 2012
Deferred income tax assets, net
Total resources
Surplus
Accumulated other comprehensive income
Total capital funds
4,915
985,069
23,725
49,613
2,000
98,522
985,069
Effects of the adoption
of PAS 19 (R)
172
172
572
181
(580)
(400)
172
Restated
5,087
985,241
24,297
49,794
1,420
98,122
985,241
(95)
176
4/8/14 7:12 PM
Previously
reported
Consolidated
January 1, 2012
Total resources
Surplus
Total capital funds
4,335
842,616
22,225
41,643
2,168
90,530
842,616
Previously
reported
Parent
December 31, 2012
Total resources
Surplus
Total capital funds
3,421
755,427
19,216
23,932
642
70,056
755,427
Previously
reported
Parent
January 1, 2012
Total assets
Surplus
Total capital funds
(b)
2,958
656,902
18,569
19,870
1,192
66,403
656,902
of PAS 19 (R)
949
949
3,162
120
(2,333)
(2,214)
949
of PAS 19 (R)
104
104
347
122
(365)
(243)
104
of PAS 19 (R)
719
719
2,396
78
(1,755)
(1,677)
719
Restated
5,284
843,565
25,387
41,763
(165)
88,316
843,565
Restated
3,525
755,531
19,563
24,054
277
69,813
755,531
Restated
3,677
657,621
20,965
19,948
(563)
64,726
657,621
Impact of the adoption on statement of income
Previously
reported
Consolidated
2012
10,556
16,441
Previously
reported
Consolidated
2011
10,379
13,013
Previously
reported
Parent
2012
8,326
12,383
of PAS 19 (R)
(86)
61
of PAS 19 (R)
(109)
76
of PAS 19 (R)
(64)
44
Restated
10,470
16,502
Restated
10,270
13,089
Restated
8,262
12,427
(96)
177
4/8/14 7:12 PM
Parent
Previously reported
2011
(c)
of PAS 19 (R)
7,994
9,856
(77)
54
Restated
7,917
9,910
Impact of the adoption on statement of total comprehensive income
Consolidated
Previously reported
2012
Other comprehensive income
Income that will not be reclassified to profit
or loss
Actuarial gains (losses) on defined
benefit plan, net of tax effect
Total comprehensive income for the year
Consolidated
Parent
Parent
61
16,502
16,282
1,752
1,814
1,752
18,096
Restated
76
13,089
14,716
(864)
(788)
(864)
13,929
of PAS 19 (R)
Restated
12,383
44
12,427
11,833
1,390
1,434
1,390
13,267
Previously reported
2011
or loss
of PAS 19 (R)
13,013
Previously reported
2012
or loss
Restated
16,441
Previously reported
2011
or loss
of PAS 19 (R)
of PAS 19 (R)
Restated
9,856
54
9,910
11,351
(720)
(666)
(720)
10,685
(97)
178
4/8/14 7:12 PM
Note 34 - Supplementary information required by the Bureau of Internal Revenue
(a) Supplementary information required by Revenue Regulations No 15-2010
On December 28, 2010, Revenue Regulations (RR) No. 15-2010 became effective and amended certain provisions
of RR No. 21-2002 prescribing the manner of compliance with any documentary and/or procedural requirements in
connection with the preparation and submission of financial statements and income tax returns. Section 2 of RR
No. 21-2002 was further amended to include in the Notes to Financial Statements information on taxes, duties and
license fees paid or accrued during the year in addition to what is mandated by PFRS.
Below is the additional information required by RR No. 15-2010 that is relevant to the Parent Bank. This information
is presented for purposes of filing with the Bureau of Internal Revenue (BIR) and is not a required part of the basic
financial statements.
(i)
Documentary stamp tax
Documentary stamp taxes paid for the year ended December 31, 2013 consist of:
Amount
2,181
206
69
3
2,459
Deposit and loan documents
Trade finance documents
Mortgage documents
Others
A portion of the amount disclosed above was passed on to the counterparties.
(ii) Withholding taxes
Withholding taxes paid/accrued and/or withheld for the year ended December 31, 2013 consist of:
Amount
Paid
Final income taxes withheld on interest on deposits and yield on deposit
substitutes
Income taxes withheld on compensation
Final income taxes withheld on income payment
Creditable income taxes withheld (expanded)
Fringe benefit tax
VAT withholding tax
860
1,570
642
699
39
44
3,854
Accrued
108
180
10
87
14
3
402
Total
968
1,750
652
786
53
47
4,256
(iii) All other local and national taxes
All other local and national taxes paid/accrued for the year ended December 31, 2013 consist of:
Amount
Gross receipts tax
Real property tax
Municipal taxes
Others
Paid
2,238
123
73
26
2,460
Accrued
234
234
Total
2,472
123
73
26
2,694
(98)
179
4/8/14 7:12 PM
(iv) Tax cases and assessments
As at reporting date, the Parent Bank has outstanding cases filed in courts against local government units
contesting certain local tax assessments and the tax authorities for various claims for tax refund.
Management is of the opinion that the ultimate outcome of these cases will not have a material impact on
the financial statements of the Parent Bank. Also, the taxable years 2009 and 2010 remain open and
currently under tax examination, for which no assessment has yet been received.
(b) Supplementary information required by Revenue Regulations No. 19-2011
RR No. 19-2011 prescribes the new BIR forms that should be used for income tax filing covering and starting with
the calendar year 2011 and modifies Revenue Memorandum Circular No. 57-2011. In the Guidelines and
Instructions Section of the new BIR Form 1702 (version November 2011), a required attachment to the income tax
returns is an Account Information Form and/or Financial Statements that include in the Notes to Financial
Statements schedules of sales/receipts/fees, cost of sales/services, non-operating and taxable other income,
itemized deductions (if the taxpayer did not avail of Optional Standard Deduction), taxes and licenses and other
information prescribed to be disclosed in the Notes to the Financial statements.
Below is the additional information for the year ended December 31, 2013 required by RR No. 19-2011 that is
relevant to the Parent Bank. This information is presented for purposes of filing with the BIR and is not a required
part of the basic financial statements.
(i)
Sales/receipts/fees
Interest income
Nontaxable
2,256
Final tax
7,500
Regular
rate
18,910
Total
28,666
(ii) Cost of services/Direct costs
Manpower costs
Interest expense
Insurance - PDIC
Supervision and examination fees
Regular rate
6,615
2,124
1,210
442
10,391
(iii) Non-operating and taxable other income
Service charges
Trust fees
Foreign exchange
Gain on sale of fixed assets
Rental income
Trading gain
Others
Regular rate
5,494
3,499
1,399
456
425
161
800
12,234
(99)
180
4/8/14 7:12 PM
(iv) Itemized deductions
Nature of expense/deduction
Regular rate
2,515
2,515
1,664
1,503
1,443
1,185
1,053
1,050
1,012
1,000
581
402
344
296
220
204
185
132
132
102
85
69
66
47
38
35
34
34
33
31
23
16
10
18,059
18,059
Taxes and licenses
Advertising
Bad debts
Salaries and allowances
Depreciation and amortization of leasehold rights
Communication, light and water
Rental
Repairs and maintenance
Documentary stamp used
Other outside services
Amortization of intangibles
Security services
Litigation / Asset acquired expenses
Management and consultancy fee
Office supplies
Janitorial and messengerial services
SSS, GSIS, Philhealth, HDMF and other contributions
Miscellaneous loss
Transportation and travel
Membership fees and dues
Donations
Insurance
Fringe benefits
Director’s fees
Amortization of pension trust contribution
Fuel and oil
Representation and entertainment
Commissions
Others
Credit card expenses
Freight expenses
Staff meeting
Bank charges
Sub-total
NOLCO
Total expenses
(v) Taxes and licenses
The details of the Parent Bank’s taxes and licenses are presented in section (a) of this note.
(vi) Other information
All other information prescribed to be disclosed by the BIR has been included in this note.
(100)
181
4/8/14 7:12 PM
182
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183
4/8/14 7:14 PM
184
LAST.indd 184
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LAST.indd 185
185
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186
LAST.indd 186
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LAST.indd 187
187
4/8/14 7:14 PM
188
LAST.indd 188
4/8/14 7:14 PM
LAST.indd 189
189
4/8/14 7:14 PM
PRODUCTS AND SERVICES
DEPOSITS
Peso deposits
Checking
Savings
Time
Foreign Currency Deposits
Savings
Time
Deposit Substitute
LOANS
Commercial Loans
Revolving Credit
Term Loans
Trade Finance
Fleet & Floor Stock Financing
Project Finance
Receivables Financing
Property Equity Credit Line
Franchising Loans
Sustainable Energy Financing
Energy Efficiency Loans
Renewable Energy Loans
Consumer Loans
Auto Loan
Housing Loan
Business Loans
Franchising Loan
Term Loan
Credit Line
Personal Loans
Agribusiness Loans
Piggery
Poultry
Post-Harvest
Leasing
Finance Lease
Operating Lease
Full Service Operating Lease
Lease Syndication
Trade Receivable Discounting
Microfinance
Microsavings
Microinsurance
Wholesale Microfinance Loans
Retailer Loans
Multipurpose Loans
Global Investment/Wealth
Management Services (Hong Kong)
Multi-Currency Time Deposits
Consumer Loans
Global Securities (Broker/Dealer)
Account
Foreign Currency Bonds
Foreign Currency Investment Funds
190
Foreign Currency Equities
Investment Management Account
Foreign Exchange
PAYMENTS & SETTLEMENT
SERVICES
Self-Service Banking Channels
Express Phone
Express Online
Express Online Kiosks
Express Mobile
Express Teller ATM
Express Deposit Machines
BPI Trade
Cards and Payments
Debit Card
Credit Card
Prepaid Card
Merchant Payment Facilities
Payment and Settlement Facilities
Bills Payment
Funds Transfer
Remittance
Credit to a BPI/BPI Family Saving
Bank/BPI Direct Account
Cash Pick-Up
Door-to-Door
Credit to Other local Bank’s Account Gift Remittance
Prepaid Reloading
International Wire Payments
Transaction Banking
Cash Management
ExpressLink
Collections
Disbursement
Account and Liquidity Management
Trade Finance
Financial Institutions Depository
Services
Peso Vostro Services
USD Vostro Services
ASSET MANAGEMENT & TRUST
Institutional Fund Management
Fund Management Solutions
Corporate and Institutional Funds
Corporations
Educational Institutions
Religious Organizations
Foundations
Pension and Provident Funds
Other Fiduciary Solutions
Mortgage Trust Indenture
Escrow Agency
PP X-X Products & Services.indd 190
4/8/14 7:48 PM
Wealth Management
Living Trust/Long-term Living Trust
Investment Management Account/
Long-term Investment Management
Account
MyPortfolio
Investment Funds
BPI Investment Funds
BPI Short Term Fund
BPI Money Market Fund
BPI Premium Bond Fund
BPI Balanced Fund
BPI Philippine High Dividend
Equity Fund
BPI Equity Value Fund
BPI Global Philippine Fund
BPI Global Bond Fund-of-Funds
BPI Global Equity Fund-of
Funds
Odyssey Funds
Odyssey Peso Cash
Management Fund
Odyssey Peso Income Fund
Odyssey Peso Bond Fund
Odyssey Diversified Capital
Fund
Odyssey Diversified Balanced
Fund
Odyssey Philippine Equity Fund
Odyssey Philippine High
Conviction Equity Fund
Odyssey Emerging Market Bond
Fund
Odyssey Philippine Dollar Bond
Fund
Odyssey Asia Pacific High
Dividend Equity Fund
Odyssey Tax Exempt Peso Fixed
Income Fund
Odyssey Tax Exempt Philippine
Equity Fund
BPI Index Funds
ABF Philippines Bond Index
Fund
BPI Philippine Equity Index Fund
Philippine Stock Index Fund*
Philippine Dollar Bond Index
Fund
Mutual Funds*
ALFM Money Market Fund
ALFM Peso Bond Fund
ALFM Euro Bond Fund
ALFM Dollar Bond Fund
ALFM Growth Fund
Other Mutual Funds managed and
distributed by BIMI:
Ekklesia Mutual Fund
Bahay Pari Solidaritas Fund
*BPI Investment Management Inc.,
a wholly-owned subsidiary of BPI,
is the fund manager and principal
distributor of the ALFM Mutual Funds,
including the Philippine Stock Index
Fund, Bahay Pari Solidaritas Fund and
Ekklesia Mutual Fund. BPI serves as
investment advisor to all the
mutual funds managed and
distributed by BPI Investment
Management, Inc.
Foreign Exchange
Foreign Exchange Spot
Foreign Exchange Forwards
Foreign Exchange Swaps
Foreign Exchange Cash
Collateralized Forwards
Non-deliverable Forwards
INVESTMENT BANKING
Derivatives
Interest Rate Swaps (IRS)
Cross Currency Swaps (CCS)
Non Deliverable Swaps (NDS)
Capital Raising
Debt Underwriting
Equity Underwriting
Loan Syndication
Project Finance
Acquisition Financing
Securitization
Financial Consultancy/Advisory
Mergers and Acquisition
Capital Restructuring
Financial Planning
Liability Management
Corporate Valuation
Business Divestment
Strategic Legal Advisory
Private Placements
Dealership and Brokerage
Proprietary Investments
Sovereign Debt Instruments
Philippine Sovereign Instruments Treasury Bills and Notes
Retail Treasury Bonds
Republic of the Philippine Bonds
Selected Developed Sovereign
Bonds
Asian Sovereign Bonds
Private Securities
Bank Issues
Commercial Papers
Trade Receivables and Acceptances
Corporate Promissory Notes and
Bonds
Mutual Funds
Equities
Broker/Dealer of Philippine
Equities
Securities Custodianship
Fundamental Research
Corporate Actions
Initial Public Offering
Tender Offering
Stock Rights Offering
Stock Split
Stock Dividend
Cash Dividend
Property Dividend
Warrants
PP X-X Products & Services.indd 191
INSURANCE SERVICES
Life
Individual Accounts
Variable Life/Unit Linked
Plans
Whole Life
Accident and Health
Term Life
Credit Life (Credit Card)
Accidental Protection Plan
(Credit Card)
Savings Protection Plan
(Credit Card)
Corporate Accounts
Group Term Life
Group Accident
Group Credit Life
Group Critical Illness
Non-Life
Fire
Motor
Engineering
Marine & Aviation
Bonds
Personal Accident
Casualty
Trade Credit
ANCILLARY SERVICES
Call Center Services
Economic Research
Investment Research
Fixed Income Research
Equities Research
Bank Statement Services
Statement Printing
Letter Shopping
191
4/8/14 7:48 PM
GROUP
DIRECTORY
BPI Rental Corporation
372 Sen. Gil Puyat Ave. Bgy. Bel Air
Makati City 1209 PH
@ BPIL_CustomerService@bpi.com.ph
BPI Foundation
16th floor, BPI Building
6768 Ayala Avenue corner Paseo de
Roxas
Makati City 1226 PH
Philippines
 (632) 8455710, 8169288
 (632) 8169390
Express Phone: 89-100
@ bpifoundation@bpi.com.ph
BPI Direct Savings Bank
8th floor, BPI Card Center
8753 Paseo de Roxas
Makati 1226 PH
 (632) 8169770
@ www.bpidirect.com
Bank of the Philippine Islands
Roxas
Makati City 1226 PH
 (632) 8185541 to 48
@ www.bpiexpressonline.com
BPI Family Savings Bank
109 Paseo de Roxas cor. Dela Rosa St.
Makati City 1200 PH
 (632) 8185541 to 48
@ www.bpiexpressonline.com
Roxas
Makati City 1226 PH
 (632) 8169277
 (632) 8187809
@ bpicapital@bpi.com.ph
BPI Securities Corporation
8th floor BPI Building, Ayala Avenue
corner Paseo de Roxas
Makati City 1226 PH
 (632) 8169189, 8169724, 8455289,
8455617
bpitrade@bpi.com.ph
@ www.bpitrade.com
372 Sen. Gil Puyat Ave. Bgy. Bel Air
Makati City 1209 PH
@ BPIL_CustomerService@bpi.com.ph
192
Ayala Plans Incorporated
6768 Ayala Avenue
Makati City 1226 PH
Toll Free: 1800-188-89100 (PLDT)
SMS: Send AP <space>plan
number<space>message to
0917-8910000 or 0918-8910000
@ customerservice@ayalaplans.com.ph
BPI/MS Insurance Corporation
11th, 14th and 16th floors
Ayala Life-FG Center Building
6811 Ayala Avenue
Makati City 1226 PH
 (632) 8409000
@ www.bpims.com
BPI Forex Corporation
Head Office
6th floor Ayala Wing, BPI Building
Ayala Avenue corner Paseo de Roxas
Makati City 1226 PH
 (632) 8455538, 8455255
 (632) 8455191
Main Station
Ground floor BPI Main Branch, Ayala
Wing, BPI Building
Ayala Avenue corner Paseo de Roxas
Makati City 1226 PH
 (632) 8169369
Mabini Station
Mabini St. corner Sta. Monica,
Ermita, Malate, Metro Manila
 (632)6237667
BPI Philam Life Assurance
Corporation
15th floor, Ayala Life-FGU Center
Building 6811 Ayala Avenue
Makati City 1226 PH
 89-100, 1-800-188-89100 (Outside
Metro Manila)
BPI-Philam_customerservice@aia.com
@ www.bpi-philam.com
BPI Globe BanKO Inc.
Ground floor BanKO Center,
Ortigas Avenue, North Greenhills
San Juan City 1500 PH
 (632) 7549980  (632) 7228714
@ www.banko.com.ph
Shareholder Services and Assistance
BPI Stock Transfer Office
Roxas
Makati City 1226 PH
 (632) 8169898, 8169068, 8169067
 (632) 8455515
@ stocktransferoffice@bpi.com.ph
Institutional Investor Inquiries
BPI Investor Relations Office
Roxas
Makati City 1226 PH
 (632) 8455245, 8169557
@ investorrelations@bpi.com.ph
Office of the Corporate Secretary
Roxas
Makati City 1226 PH
 (632) 8169705
 (632) 8169421
BPI International Finance Ltd.
Unit 1202, Tower 1 Lippo Centre
89 Queensway, Central, Hong Kong
 (852) 2521-1155
 (852)2845-9170
PP 144 Group Directory.indd 192
BPI Affiliates
4/8/14 7:33 PM
U.S.A.: BPI EXPRESS REMITTANCE
CORP.
Las Vegas Seafood City (Nevada)
3890 South Maryland Pkwy, Ste B Las
Vegas, NV 89119
 (702) 733-7813
 (702) 733-7808
@ bpilasvegassc@bpi.com.ph
BPI
REMITTANCE
CENTERS
Los Angeles (California)
3550 Wilshire Blvd., Suite 128 G/F, Los
Angeles, California 90010
 (213) 380-9833 or 34
 (213) 380-9835
Toll Free No.: 1-800-2743977
@ bpilosangeles@bpi.com.ph
HONG KONG: BPI REMITTANCE
CENTRE HONG KONG LTD
Worldwide Branch
Shop 114 - 116 Worldwide House,
19 Des Voeux Road, Central HK
 (852) 2522-7105 / 2521-5366
@ bpiworldwide@bpi.com.ph
Hung Hom Branch
Shop D7-D8 Planet Square Bldg.
No. 1-15 Tak Man St., Hung Hom,
Kowloon
 (852) 2954-4833
 (852) 2954-4044
@ bpihunghom@bpi.com.ph
Tsuen Wan Branch
Shop 176 1/F, Lik Sang Plaza
No. 269 Castle Peak Road, Tsuen Wan,
New Territories, Hong Kong
 (852) 2684-9088
 (852) 2692-4088
@ bpitsuenwan@bpi.com.ph
Yuen Long Branch
Shop 18 B2 2nd floor, Tung Yik
Building,
Yu King Square, Yuen Long
 (852) 2443-5377
 (852) 2443-5477
@ bpiyuenlong@bpi.com.ph
SPAIN: BPI EXPRESS REMITTANCE
SPAIN, S.A.
Calle Joaquin Costa, 50 08001
Barcelona Spain
 (003493) 301-1537
 (003493) 317-3280
@ bpibarcelona@bpi.com.ph
Milpitas Landess (California)
1535 Landess Ave., Unit 120, Milpitas,
CA 95035
 (408) 941-2178 / (408)
946-8510
 (408) 941-9289
@ bpimilpitas@bpi.com.ph
OTHER FOREIGN OFFICES
New York (New York)
875 Third Ave. cor. 53rd St., Ste. 202,
Mezz Level,
New York, NY 10022
 (212) 644-6700 / (212) 644-6706
 (212) 752-5969
Toll Free No.: 1-800-4321274
@ bpinewyork@bpi.com.ph
UNITED KINGDOM
Threadneedle Office
4th Floor 28/29 Threadneedle Street,
London EC2R 8AY, U.K.
 (0044) 207-6389100
 (0044) 207-6386838
@ bpithreadneedle@bpi.com.ph;
bpinoy@bpieuropeplc.com
North Hills Seafood City (California)
16130 Nordhoff St., Ste A, North Hills,
CA 91343
 (818) 672-8206 / 8016
 (818) 672-8211
@ bpinorthhillssc@bpi.com.ph
Earl’s Court Office
26A & 27A Earl’s Court Gardens,
London, SW5 0SZ, UK
 (0044) 207-835-0088
 (0044) 207-373-1848
@ bpiearlscourt@bpi.com.ph
San Diego (California)
2220 East Plaza Blvd., Suite M
Grove Plaza,
National City, San Diego 91950
 (619) 470-9399 / 9499
 (619) 470-9515
@ bpisandiego@bpi.com.ph
ITALY
Rome Branch
Via dei Mille, 32, 00185 Rome, Italy
 (0039) 06-4452641/ 06-4450146
 (0039) 06-4456310
@ bpirome@bpi.com.ph
San Francisco (California)
2233 Gellert Blvd., Gellert Square,
South San Francisco, CA 94080
 (650) 878-0292
 (650) 878-0293
Toll Free No.: 1800-4042743
@ bpisanfrancisco@bpi.com.ph
Union City Seafood City (California)
31840 Alvarado Blvd., Union City, CA
94587
 (510) 441-0103
 (510) 441-0901
@ bpiunioncitysc@bpi.com.ph
PP 177 Remittance Centers.indd 193
(EUROPE) PLC
Milan Branch
Piazza Del Duomo 17, 20121 Milan, Italy
 (0039) 02.83427962
 02-89092216
@ bpieuropemilan@bpi.com.ph
BANK OF THE PHILIPPINE
ISLANDS-UAE
Representative Office
Shop No.1 Al Diyafah Bldg., Al
Mankhool Road,
Al Hudaiba, Dubai, U.A.E.
 +97143542977
 +97143542978
193
4/8/14 7:34 PM
GRI INDEX
PROFILE INDICATORS
Page
1. Strategy and Analysis
1.1 Statement from the most senior decision maker
of the organization
12-15
1.2 Description of key impacts, risks, and opportunities
12-15, 49
2. Organizational Profile
2.1 Name of the organization
2
2.2 Primary brands, products, and/or services
4, 190-191
2.3 Operational structure of the organization, including main
divisions, operating companies, subsidiaries, and joint ventures
48
2.4 Location of organization’s headquarters
184
2.5 Number of countries where the organization operates, and
names of countries with either major operations or that are
specifically relevant to the sustainability issues covered in the report
5
2.6 Nature of ownership and legal form
4
2.7 Markets served
4
2.8 Scale of the reporting organization
4, 5, 8, 30
2.9 Significant changes during the reporting period regarding
size, structure, or ownership
5
2.10 Awards received in the reporting period
10-11
3. Report Parameters
Report Profile
3.1 Reporting period
2
3.2 Date of most recent previous report
2
3.3 Reporting cycle
2
3.4 Contact point for questions regarding the report or its contents
2
Report Scope and Boundary
3.5 Process for defining report content
2
3.6 Boundary of the report
2
194
PP X-X GRI new.indd 194
4/8/14 7:46 PM
Page
3.7 Specific limitations on the scope or boundary of the report
2
3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities,
outsourced operations, and other entities that can significantly affect
comparability from period to period and/or between organizations
2
3.9 Data measurement techniques and the bases of calculations,
including assumptions and techniques underlying estimations applied
to the compilation of the Indicators and other information in the report
2
3.10 Explanation of the effect of any re-statements of information
provided in earlier reports, and the reasons for such re-statement
43
3.11 Significant changes from previous reporting periods in the scope,
boundary, or measurement methods applied in the report
NA
GRI Content Index
3.12 Table identifying the location of the Standard Disclosures in the
report
194-199
Assurance
3.13 Policy and current practice with regard to seeking external
assurance for the report
2
4. Governance, Commitments, and Engagement
Governance
4.1 Governance structure of the organization, including committees
under the highest governance body responsible for specific tasks
47
4.2 Indicate whether the Chair of the highest governance body is also
an executive officer
48
4.3 For organizations that have a unitary board structure, state the
number and gender of members of the highest governance body
that are independent and/or non-executive members
36-46
4.4 Mechanisms for shareholders and employees to provide
recommendations or direction to the highest governance body
6
4.5 Linkage between compensation for members of the highest
governance body, senior managers, and executives, and the
organization’s performance
46
4.6 Processes in place for the highest governance body to ensure
conflicts of interest are avoided
60
4.7 Process for determining the composition, qualifications, and expertise
of the members of the highest governance body and its committees,
including any consideration of gender and other indicators of diversity
46
195
4/8/14 7:46 PM
GRI INDEX
Page
4.8 Internally developed statements of mission or values, codes of
conduct, and principles relevant to economic, environmental, and
social performance and the status of their implementation
200
4.9 Procedures of the highest governance body for overseeing
the organization’s identification and management of economic,
environmental, and social performance, including relevant risks and
opportunities, and adherence or compliance with internationally
agreed standards, codes of conduct, and principles
46
4.10 Processes for evaluating the highest governance body’s own
performance, particularly with respect to economic, environmental,
and social performance
46
Commitments and External Initiatives
4.11 Explanation of whether and how the precautionary approach or
principle is addressed by the organization
46
4.12 Externally developed economic, environmental, and social
charters, principles, or other initiatives to which the organization
subscribes or endorses
46, 49-50, 57
4.13 Memberships in associations (such as industry associations)
and/or national international advocacy organizations
7
Stakeholder Engagement
4.14 List of stakeholder groups engaged by the organization
6, 7
4.15 Basis for identification and selection of stakeholders with whom
to engage
6, 7
4.16 Approaches to stakeholder engagement, including frequency of
engagement by type and by stakeholder group
6, 7
4.17 Key topics and concerns that have been raised through
stakeholder engagement, and how the organization has responded
to those key topics and concerns, including through its reporting
6
196
4/8/14 7:46 PM
PERFORMANCE INDICATORS
Page
5. Management Approach and Performance Indicators
Economic
Disclosure on Management Approach
9
EC1 Direct economic value generated and distributed, including
revenues, operating costs, employee compensation, donations and other
community investments, retained earnings, and payments to capital
providers and governments
9
EC3 Coverage of the organization’s defined benefit plan obligations
34, 35
EC5 Range of ratios of standard entry level wage by gender compared to
local minimum wage at significant locations of operation
34
EC7 Procedures for local hiring and proportion of senior management
hired from the local community at significant locations of operation
35
EC8 Development and impact of infrastructure investments and services
provided primarily for public benefit through commercial, in-kind, or pro
bono engagement
NA
Environmental
38
EN3 Direct energy consumption by primary energy source
42
EN4 Indirect energy consumption by primary source
43
EN5 Energy saved due to conservation and efficiency improvements
43
EN7 Initiatives to reduce indirect energy consumption
and reductions achieved
38-43
EN8 Total water withdrawal by source
43
EN16 Total direct and indirect greenhouse gas emissions by weight
43
EN17 Other relevant indirect greenhouse gas emissions by weight
43
EN18 Initiatives to reduce greenhouse gas emissions and
reductions achieved
38-43
EN22 Total weight of waste by type and disposal method
43
EN26 Initiatives to mitigate environmental impacts of products and
services, and extent of impact mitigation
38
197
4/8/14 7:46 PM
GRI INDEX
Page
EN28 Monetary value of significant fines and total number of
non-monetary sanctions for non-compliance with environmental
laws and regulations
38
Social
30
Labor Practices and Decent Work
LA1 Total workforce by employment type, employment contract, and
region, broken down by gender
30, 31
LA2 Total number and rate of new employee hires and employee
turnover by age group, gender, and region
32, 34
LA3 Benefits provided to full-time employees that are not provided
to temporary or part-time employees, by significant locations of
operation
34-35
LA4 Percentage of employees covered by collective bargaining
agreements
35
LA7 Rates of injury, occupational diseases, lost days, and
absenteeism, and total number of work-related fatalities, by region
and by gender
37
LA8 Education, training, counseling, prevention, and risk-control
programs in place to assist workforce members, their families, or
community members regarding serious diseases
33
LA10 Average hours of training per year per employee, by gender,
and by employee category
33
LA11 Programs for skills management and lifelong learning that
support the continued employability of employees and assist them in
managing career endings
33
LA12 Percentage of employees receiving regular performance and
career development reviews, by gender
33
LA13 Composition of governance bodies and breakdown of
employees per employee category according to gender, age group,
minority group membership, and other indicators of diversity
36
LA14 Ratio of basic salary and remuneration of women to men by
employee category, by significant locations of operation
35
LA15 Return to work and retention rates after parental leave, by
gender
35
198
4/8/14 7:46 PM
Page
Human Rights
30
HR4 Total number of incidents of discrimination and
corrective actions taken
37
HR6 Operations and significant suppliers identified as
having significant risk for incidents of child labor, and
measures taken to contribute to the effective abolition
of child labor
37
HR7 Operations and significant suppliers identified as
having significant risk for incidents of forced or compulsory
labor, and measures taken to contribute to the elimination
of all forms of forced or compulsory labor
37
HR8 Percentage of security personnel trained in the
organization’s policies or procedures concerning aspects of
human rights that are relevant to operations
37
HR11 Number of grievances related to human rights
filed, addressed, and resolved through formal grievance
mechanisms
37
Society
SO7 Total number of legal actions for anti competitive
behavior, anti-trust, and monopoly practices and their
outcomes
29
Product Responsibility
PR4 Total number of incidents of non-compliance with
regulations and voluntary codes concerning product and
service information and labeling, by type of outcomes
29
PR5 Practices related to customer satisfaction, including
results of surveys measuring customer satisfaction
25
PR6 Programs for adherence to laws, standards, and
voluntary codes related to marketing communications,
including advertising, promotion, and sponsorship
29
PR7 Total number of incidents of non-compliance with
regulations and voluntary codes concerning marketing
communications, including advertising, promotion, and
sponsorship, by type of outcomes
29
PR8 Total number of substantiated complaints regarding
breaches of customer privacy and losses of customer data
29
199
4/8/14 7:46 PM
THE BPI CREDO
‘THAT ALL MAY SHARE A COHERENT
SENSE OF PURPOSE AND DIRECTION’
WE BELIEVE in the central role
WE BELIEVE that we have a
that private enterprise plays in
economic development.
responsibility to develop the
potential of our employees
to the fullest by providing an
environment conducive to
their personal and professional
growth; and to foster a value
system held in common
throughout the institution in
order that we may all share a
coherent sense of purpose
and direction.
WE BELIEVE that our
corporate mission is to be
the leading private financial
institution in the Philippines
in terms of professional
competence, service quality,
responsible corporate
citizenry, and overall growth
and stability; and to be an
established ASEAN financial
institution with a creditable
worldwide outreach.
responsibility to manage the
business for the maximum
benefit of our customers while
adopting the highest standard
of integrity; to offer the widest
possible range of financial
services that is responsive to
their needs; and to adopt
an objective attitude
towards change and
innovation, ever mindful
of improving service quality
and operating efficiency.
200
PP 180 Credo.indd 200
responsibility to attain, over
time and within exacting
standards of prudent
management, the highest
possible return of investments
of our shareholders.
4/8/14 7:36 PM

BPI B Self-declared

Transcription

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