Presented to the Accountancy Department
De La Salle University - Manila
Term 3, A.Y. 2019-2020
In partial fulfillment
of the course
ACCCOB2 (K39)
Reflection paper No. 1
Submitted by:
Daludado, Maxine
Submitted to:
Mr. Feliciano Jr. Almazora
Submitted on:
July 19, 2021
Philippine National Bank
The Philippines' first universal bank, Philippine National Bank (PSE: PNB), is the
country's fourth largest privately held commercial bank. PNB was founded by the
Philippine government in 1916 and became fully privatized in 2007. With its
agricultural modernization program and trade finance support for the country's
agricultural exports, PNB has led the industry as a tool for economic
development over the years.Furthermore, the Bank was a pioneer in the
Overseas Filipino Worker (OFW) remittance business, introducing many
innovations such as Bank on Wheels, computerized banking, Automated Teller
Machine (ATM) banking, mobile money changing, domestic traveler's checks,
electronic filing and payment system for large taxpayers, and Unit Investment
Trust Fund (UITF) ATMs. Among local banks, PNB has the most abroad
operations and one of the largest domestic branch networks.
PNB’s principal commercial banking activities. The Bank also provides full
banking services in China and the United Kingdom, as well as banking services in
Hong Kong and a variety of diversified financial and related businesses, including
remittance services in the United States, Canada, and Hong Kong, investment
banking, life and non-life insurance, stock brokerage, and leasing and financing
services, through its subsidiaries and affiliates. To date, the Bank has 716
domestic branches and more than 1,500 ATMs strategically distributed around
the country.
Financial Statements’ Presentation
The financial statements of PNB are preapred on a historical cost basis, except
for the financial assets and liabilities thorugh profit or loss (FVTPL) and the
financial assets at fair value through comprehensive income (FVOCI). The
accounts held in the parent company's Regular Banking Unit (RBU) and Foreign
Currency Deposit Unit (FCDU) are reflected in the parent company's financial
statement (FCDU). The Philippine peso (PHP or ) and the United States dollar
(USD) are the functional currencies of RBU and FCDU, respectively.
PNB prepared the financial statements in accordance with the Philippine
Reporing Standards (PFRS) adopted byt the Philippine Securities and Exchange
(SEC). It was presented in order of liquidity.
Whereas, the recovery or
settlement within twelve (12) months after the reporting date current and more
than twelve (12) months after the reporting date (non-current).
The financial assets and liabilities were presented at their gross amounts in the
statement of financial position, unless the offsetting criteria under PFRS are met.
The company does not set off items of income and expenses, unless offsetting is
required or permitted by PFRS or if ther is a specific company’s accounting
policies in disclosure.
Statement of Financial Position
As of December 31, 2020, the Group's consolidated total assets were P1,231.1
billion, up 7.8% or P88.8 billion from the P1,142.3 billion reported as of
December 31, 2019. Cash and Other Cash Items fell by P5.4 billion to P30.5
billion as of December 31, 2020, from P30.5 billion as of December 31, 2019.
Financial Assets at Fair Value Through Profit or Loss (FVTPL), Financial Assets at
Fair Value Through Other Comprehensive Income (FVOCI), and Investment
Securities at Amortized Cost, which account for 20.5 percent and 20.8 percent of
the Group's total assets, respectively, as of December 31, 2020 and 2019. The
recognition of additional deferred tax assets on allowance for expected credit
losses, which the Group has the benefit of tax deductions against future taxable
income only upon actual write-offs, increased Deferred Tax Assets by P6.5 billion
or 250.2 percent to P9.0 billion as of December 31, 2020 from P2.6 billion as of
December 31, 2019, primarily due to the recognition of additional deferred tax
assets on allowance for expected credit losses, which the Group has the benefit of
tax deductions against future taxable income only upon actual write offs.Because to amortization, intangible assets declined by P0.3 billion (11.6 percent)
to P2.5 billion as of December 31, 2020 from P2.8 billion as of December 31,
2019. FVTPL's financial liabilities climbed by P455.6 million, or 185.5 percent,
from the P245.6 million year-end balance in 2019, owing to an increase in the
volume of transactions over the time. Other Liabilities were P17.9 billion as of
December 31, 2020, down from P29.1 billion as of December 31, 2019, owing to
a fall of P11.2 billion or 38.6 percent in reclassification of insurance contract
liabilities to ‘Liabilities of disposal group categorized as held for sale' as
discussed above.
Consolidated Statement of Income
As of December 31, 2020, leasing liabilities have fallen by P0.4 million or 24.4
percent to P1.4 billion, owing primarily to lease payments. Accrued Taxes,
Interest, and Other Expenses dropped by P0.5 billion from December 31, 2019 to
December 31, 2020, owing to lower expenditure accrual. Purchases of various
investment securities, net of maturities and disposals, increased by P15.7 billion
or 6.6 percent. PNB's net interest income, which accounts for 79 percent of total
operating income, climbed by 11% to P35.8 billion, helped by lower funding
costs that offset a dip in earning asset yield rates. Despite an 8% increase in
deposits to P890.3 billion, interest expense on deposits fell by nearly half year on
year, as the majority of these additional deposits remained in low-cost funds,
combined with a reduction in high-cost deposits, partly due to the maturity of
P7.0 billion in Long-Term Negotiable Certificates of Time Deposit (LTNCDs).
Operating expenses grew at a moderate pace of 8%, excluding provisions for
impairment and credit losses, as the Bank shifted its spending priorities.
Statement of Changes in Equity
The Group's consolidated total equity increased by P1.0 billion to P156.0 billion
as of December 31, 2020, from P155.0 billion as of December 31, 2019, owing to
P2.6 billion in consolidated net income for the year ended December 31, 2020
and a P0.2 billion increase in Other Equity Reserves, offset by the following: Net
Unrealized Gains on Financial Assets at FVOCI decreased from P3.3 billion as of
December 31, 2019 to P3.1 billion as of December 31, 2020, with a P1.1 billion
decrease in share in Aggregate Reserves on Life Insurance Policies and P0.8
billion and P0.2 billion decreases in Remeasurement Losses on Retirement Plan
and Accumulated Translation Adjustment, respectively.Investment in an
associate fell by P0.3 billion (11.3 percent) to P2.3 billion as of December 31,
2020, from P2.6 billion as of December 31, 2019, owing to an increased stake in
the associate's net comprehensive losses.
Statement of Cash flows
Loss on loan modifications refers to the adjustment for changes in expected cash
flows of credit exposures as a result of changes in the loan's original terms and
conditions, such as changes in interest rates, principal amount, maturity date,
and payment terms, among other things. Cash flows from operating activities
has a total of 98,831,210 (In peso) before tax, and net cash after tax of 97, 182,
598 (In peso). Meanwhile, PNB has used a net cash of (6, 719, 152) (In peso). If
compare to 2019 cashflow, 2020 generated 97% of its net cash from operating
activities from 2019. The
PNB’s investing activities has increased from -
66,146,226 (2019) to -6,719,152 (In peso) (2020).
Cash and Cash Equivalents
Cash and Other Cash Items fell by P5.4 billion to P30.5 billion as of December 31,
2020, from P30.5 billion as of December 31, 2019. The net increase in cash and
cash equivalents as of 2020 is 122,055,061 from 7,869,854 (In peso) in
consolidation. It was generated from proceeds from issuances of bills and
acceptances payables, settlement of bills and acceptances payable, payment of
principal portion of lease liabilities, proceeds from issuance of bonds payable
and proceeds from issuance of stocks. The cash and cash equivalents at the
begginning of the year 2020 is 179, 702, 164 (In peso). At the end of end of the
year, it was increase to 301, 757, 225 (In peso).
References:
https://www.pnb.com.ph/wp-content/uploads/docs/2020-AnnualReport.pdf