SEC Number
17514
PSE Code
_____ _
File Number ________
_____________________________________________
RIZAL COMMERCIAL BANKING
CORPORATION AND SUBSIDIARIES
_____________________________________
(Company’s Full Name)
Yuchengco Tower, RCBC Plaza
6819 Ayala Ave. corner Sen G.J. Puyat Ave., Makati City
_________________________________________
(Company’s Address)
894-9000
______________________________________________
(Telephone Number)
December 31, 2009
_______________________________________________
(Fiscal Quarter Ending)
SEC FORM 17-A
________________________________________________
Form Type
_________________________________________________
Amendment Designation (if applicable)
_________________________________________________
Period Ended Date
__________________________________________________
(Secondary License Type and File Number)
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-A
ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND
SECTION 141 OF CORPORATION CODE OF THE PHILIPPINES
1. For the fiscal year ended
December 31, 2009
2. Commission identification number
3. BIR Tax Identification No.
17514
000-599-760-000
4. Exact name of registrant as specified in its charter: RIZAL COMMERCIAL BANKING
CORP.
5.
Philippines
Province, Country or other jurisdiction of incorporation or organization
6.
(SEC Use Only)
Industry Classification Code
7. RCBC Plaza Yuchengco Tower 6819 Ayala Ave. cor. Sen. Puyat Avenue, Makati City
1200
Address of principal office
8. 632/
894-9000
Registrant’s
9.
Postal Code
telephone number, including area code
Not applicable_____________________
Former name, former address & former fiscal year, if changed since last report
10.Securities registered pursuant to Sections 4 and 8 of the RSA
Title of Each Class
Number of Shares of Common Stock
Outstanding and Amount of Debt Outstanding
Common Stock, P10 par value
898,129,515
(as of 12/31/09)
11.Are any or all of these securities listed on the Philippine Stock Exchange
Yes
(x)
No (
)
12.Check whether the registrant:
(a) has filed all reports required to be filed by Section 17 of the SRC
thereunder or Section 11 of the RSA and RSA Rule 11(a)-1
thereunder
and
Sections 26 and 141 of the Corporation Code of the Philippines during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) : (Note : Sec. 26 of the CCP deals with reporting
of
election of directors or officers to the SEC; Sec. 141 with the submission of
financial statements to the SEC.)
Yes (x)
No ( )
(b) has been subject to such filing requirements for the past 90 days
Yes (x)
No (
13.Aggregate market value of the voting stock held by non-affiliates:
P7,591,570,303.75 (as of March 31, 2010, P18.25 per share)
)
TABLE OF CONTENTS
Page No.
PART I - BUSINESS AND GENERAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
Business
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders
1
14
26
27
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5.
Item 6.
Item 7.
Item 8.
Market for Registrant’s Common Equity and Related
Stockholder Matters
Management’s Discussion and Analysis or Plan of
Operation
Financial Statements
Information on Independent Accountant and Other
Related Matters
27
30
55
55
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9.
Item 10.
Item 11.
Item 12.
Directors and Executive Officers of the Registrant
Executive Compensation
Security Ownership of Certain Beneficial Owners
and Management
Certain Relationships and Related Transactions
55
64
66
67
PART IV – CORPORATE GOVERNANCE
Item 13.
Performance Evaluation System
69
PART V - EXHIBITS AND SCHEDULES
Item 14.
a. Exhibits
b. Reports on SEC Form 17-C (Current Report)
SIGNATURES
69
69
71
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
72
INDEX TO EXHIBITS
201
PART I - BUSINESS AND GENERAL INFORMATION
Item 1. Business
Rizal Commercial Banking Corporation (RCBC) is a universal bank in the Philippines that provides
a wide range of banking and other financial products and services, including commercial and retail
banking, credit cards, asset management and treasury and investment banking products and
services. It has total resources of P288.52 billion and total networth of P30.54 billion, including
minority interest, as of end-December 2009. The Bank ranked fourth (4th) in terms of capital
among private local banks (excluding government banks). In terms of business centers, the Bank,
excluding government-owned and foreign banks, also ranked fourth (4th) with a nationwide
network of 338 business centers, inclusive of 3 extension offices, supplemented by 471 ATMs, as
of December 31, 2009.
The Bank offers commercial, corporate and consumer banking products and services throughout the
Philippines, as well as treasury, cash management and remittance products and services. RCBC
also enters into forward currency contracts as an accommodation to its clients and as a means of
managing its foreign exchange exposures. The Bank and its subsidiaries are engaged in all aspects
of traditional banking, investment banking, retail financing (credit cards, auto loans and
mortgage/housing loans), leasing, foreign exchange and stock brokering.
The Bank, incorporated under the name Rizal Development Bank, began operations as a private
development bank in the province of Rizal in 1960. It was acquired in 1962 by members of the
Yuchengco Group of Companies (YGC), a financial services conglomerate with a strong market
presence in insurance and other risk management services. In 1963, the Bank received approval
from the Bangko Sentral ng Pilipinas to operate as a commercial bank and began operations under
its present name, Rizal Commercial Banking Corporation (RCBC). In 1973, it formed alliances
with two foreign banks, Continental Illinois National Bank and Trust Co. of Chicago USA (ConIll)
and UFJ Holdings Inc. (UFJ), then known as the Sanwa Bank Ltd. of Japan. The relationship with
ConIll ended in 1985 after it sold its shareholding to UFJ. RCBC acquired its universal banking
license in 1989, marking another milestone in its history, and has been listed on the Philippine
Stock Exchange Inc. (PSE) since 1996.
RCBC’s common shares are 48.10% owned by Pan Malayan Management and Investment
Corporation (PMMIC), a company incorporated and domiciled in the Philippines. PMMIC is the
holding company of the flagship institutions of the YGC and other investments.
The registered address of RCBC is Yuchengco Tower, RCBC Plaza, 6819 Ayala Avenue, Makati
City.
Additionally through its universal banking license, the Bank is allowed to perform a number of
expanded commercial and investment functions and to invest in the equity of a variety of allied and
non-allied financial and non-financial undertakings.
The Bank’s subsidiaries and investments in allied undertakings are as follows:
RCBC Capital Corporation (RCBC Capital), a 99.964% owned subsidiary, was established in
1974 as the Bank’s investment banking subsidiary. It offers a complete range of investment
banking and financial consultancy services which include (i) the underwriting of equity, quasiequity and debt securities on a firm or best efforts basis for private placement or public distribution;
(ii) the syndication of foreign currency or peso loans; and (iii) financial advisory services. RCBC
Capital registered a consolidated net income of P176.33 million in 2009.
Bankard, Inc. (Bankard), a 91.69% owned subsidiary (together with RCBC Capital's 25.11%) was
acquired from Equitable PCI Bank in 2000 by RCBC Capital. Until December 2006, the Bank
conducted its credit card operations through Bankard. It continues to provide services to the credit
card business of the Bank.
Bankard registered a net income of P103.25 million in 2009.
RCBC Securities, Inc. (“RCBC Securities”), a wholly owned subsidiary of RCBC Capital, is
engaged in the electronic and traditional trading of listed securities and in providing corporate and
market research. In 2009, its net income was P16.24 million.
RCBC Savings Bank(RSB), a wholly-owned subsidiary of the Bank, was established in 1996 as the
Bank’s consumer banking arm. RSB provides deposit products, real estate loans, auto loans and
personal loans. In 2009, RSB’s net income was P831.57 million. Currently, RSB has 117 business
centers nationwide.
Merchants Savings and Loan Association, Inc. (Merchants Bank), a 96.38% owned subsidiary
acquired on May 15, 2008. Under the BSP approval, RCBC would upgrade 20 of the 21 thrift bank
licenses of Merchants Bank into universal bank business centers and transfer Merchants Bank's
Head Office (HO) and HO branch from Makati City to Koronadal City, South Cotabato. In 2009,
Merchants Bank had a net loss of P5.48 million.
Merchants Bank is a thrift bank established in 1977. It had 21 operating branches, 7 branches were
located in Metropolitan Manila while the rest were dispersed over Luzon (7), Visayas (4), and
Mindanao (3). As of December 31, 2009, all the approved twenty (20) branches of Merchants Bank
were converted into RCBC business centers.
RCBC International Finance Limited (RCBC IFL), a 99.99% owned subsidiary of the Bank, was
established in 1979 and is the Bank’s overseas branch in Hong Kong. It is primarily engaged in the
remittance business. In 2009, RCBC IFL registered a consolidated net income of P3.88 million.
RCBC Investment Ltd. (RCBC IL), wholly owned subsidiary of RCBC IFL, is a Hong Kong
company established in 1990. RCBC IL primarily engages in the remittance business. In 2009, it
registered a net loss of P1.06 million.
RCBC North America, Inc. (formerly RCBC California International, Inc), a wholly owned
subsidiary of the Bank, was established in 1991 as a foreign exchange remittance office in
California to meet the needs of Filipinos in the United States for a faster and more reliable means of
sending funds to their beneficiaries in the Philippines. The corporation’s new name was adopted on
September 28, 2007. In 2009, RCBC North America, Inc. had a net loss of P68.55 million.
RCBC Forex Brokers Corporation (RCBC Forex), a wholly owned subsidiary of the Bank, was
incorporated in 1998. RCBC Forex is primarily engaged in dealing and brokering currencies in
foreign exchange contracts with local and international clients. RCBC Forex’s 2009 net income
was P60.59 million.
RCBC TeleMoney Europe S.p.a. (RCBC TeleMoney), a wholly owned subsidiary of the Bank, was
established in 1995 in Rome, Italy to engage in the remittance business. RCBC TeleMoney’s 2009
unaudited net loss was P570.49 thousand.
2
RCBC Land Inc. (RCBC Land), a joint venture of the Bank and Pan Malayan Management &
Investment Corporation was established in 1997. The Bank currently has a 49.0% stake in RCBC
Land, which is engaged in housing ventures, homebuilding and development, land banking,
subdivision development and joint ventures with home developers. RCBC Land is not a
consolidated subsidiary of the Bank. In 2009, it had a net loss of P6.36 million.
RCBC Realty Corporation (RCBC Realty), is a joint venture between RCBC Land and the
Government (of Singapore) Investment Corporation. It was originally a 60% owned subsidiary of
RCBC Land. In December 2007, RCBC Land transferred 25% of its equity ownership to RCBC
through a deed of assignment in partial settlement of the former’s outstanding loan. RCBC Realty
is engaged in managing and developing real estate infrastructure projects. It is the owner of the
RCBC Plaza where the Bank’s corporate headquarters is located. The RCBC Plaza, a twin tower
office and condominium complex at the corner of Ayala Avenue and Senator Gil J. Puyat Avenue
in Makati City, also contains a theater, museum, chapel and retail area. Its 2009 net income was
P459.24 million.
Pres. Jose P. Laurel Rural Bank, Inc. (JPL), 99% was acquired by the Bank in February 2009. JP
Laurel Bank is primarily engaged in microfinancing and development of small businesses. Its 2009
net loss was P112.18 million.
Niyog Property Holdings, Inc. (NPHI), was incorporated on September 13, 2005 to purchase,
subscribe for or otherwise dispose of real and personal property of every kind and description but
not as an investment company. On May 25, 2009, RCBC approved the reclassification of its
investment in NPHI from Investment Property account to Investments in Subsidiaries and
Associates account in accordance with BSP Circular No. 520. This resulted in the consolidation of
NPHI’s assets, liabilities and net income in RCBC’s financial statements as of and for year ended
December 31, 2009. Its 2009 net loss was P1.111 million.
Additionally, as a universal bank, RCBC has equity investments in various industries which are
vital to the country’s economic growth and which also serve the purpose of diversifying the Bank’s
sources of income. Among these are Honda Cars Philippines, Inc.; Isuzu Philippines Corporation;
Subic Power Corporation; Luisita Industrial Park Corporation; and Pilipinas Shell Petroleum
Corporation.
Products and Services. Through the years, RCBC has been able to develop a wide range of
financial products and services covering deposit taking, international banking services, lending,
project financing to merchant banking.
In 2009, the following products and services were launched:
MyWallet variants e.g. WOW, MRT
Dollar Dragon Savings
Chinese Yuan Savings
Several products and services are planned for launching to the public in 2010. These new products
and services are meant to offer more value-added features and further improve product delivery and
service as well as enhance the Bank’s competitive advantage
The updated list of the Bank’s products and services is presented below:
3
A. DEPOSITS
Peso Deposits
Checking Accounts
Regular Checking
SuperValue Checking
eWoman Checking
Rizal Enterprise Checking
Savings Accounts
Regular Savings
Dragon Savings
Super Earner
eWoman Savings
SSS Pensioner
Payroll Savings Account
Student Savings ATM
Cash Card
RCBC My Wallet
Savings Accounts with Automatic Transfer (SWAT)
Time Deposits
Regular Time Deposit
Special Time Deposit
Premium Time Deposit
Foreign Currency Deposits
Savings Accounts
US Dollar
Japanese Yen
Euro Dollar
British Pounds
Canadian Dollar
Chinese Yuan
Australian Dollar
Swiss Franc
Singapore Dollar
Time Deposits
US Dollar
Japanese Yen
Euro Dollar
British Pounds
Canadian Dollar
Australian Dollar
Swiss Franc
B. ELECTRONIC BANKING CHANNELS
Automated Teller Machines
Bills Payment Machines
Enterprise Banking
RCBC Access One Personal
RCBC Access One Corporate
RCBC Phone Banking
4
RCBC Mobile Banking
myRCBC Mobile Banking via BancNet
BancNet Online
BancNet POS System
C. REMITTANCE SERVICES
RCBC TeleMoney Products
Tele-Remit
Tele-Credit
Tele-Door2Door
Tele-Cash Card
Tele-Pay
Tele-OFW (Overseas Free Way)
Electronic Remittance Channel
TeleDirect Internet Banking
D. LOANS
Commercial Loans (Peso and/or Foreign Currency)
Fleet and Floor Stock Financing
Short-term Credit Facilities
Term Loans
Trade Finance
Consumer Loans
Auto Insurance Loan
Car Loans
Credit Card
Gold Cheque
Housing Loans
Salary Loans
Special Lending Facilities
DBP Wholesale Lending Facilities
Land Bank Wholesale Lending Facilities
SSS Wholesale Lending Facilities
BSP Rediscounting Facility
Guaranty Facilities
Small Business Guarantee and Finance Corporation (SBGFC)
Philippine Export-Import Credit Agency (PhilEXIM)
Home Guaranty Corporation (HGC)
E. PAYMENT AND SETTLEMENT SERVICES
Check Clearing
Domestic Letters of Credit
Fund Transfers
Collection Services
Cash Card
Demand Drafts (Peso and Dollar)
Gift Checks
Manager’s Checks
Payroll Services
5
Telegraphic Transfers
Traveler's Checks
International Trade Settlements
Import/Export Letters of Credit
Documents Against Payment/Acceptance
Open Account Arrangements
Overseas Workers Remittances
Securities Settlement
F. TREASURY AND GLOBAL MARKETS
Foreign Exchange
Foreign Exchange Spot
Foreign Exchange Forwards
Foreign Exchange Swaps
Structured Foreign Exchange Products
Fixed Income
Peso Denominated Government Securities and other Debt Instruments
Treasury Bills
Fixed Rate Treasury Notes (FXTNS)
Retail Treasury Bonds (RTB)
Local Government Units Bonds (LGUs)
Long Term Commercial Papers (LTCPs)
US$ Denominated Sovereign Bonds
Republic of the Philippines (RoP) Bonds
Corporate Bonds and other Debt Instruments
Advisory Servicess
G. TRUST SERVICES
Trusteeship
Retirement Fund Management
Corporate and Institutional Trust
Pre-Need Trust Fund Management
Employee Savings Plan
Living Trust
Estate Planning
Mortgage/Collateral Trust
Bond Trusteeship
Agency
Safekeeping
Escrow
Investment Management
Loan and Paying Agency
Bond Registry and Paying Agency
Facility Agency
Receiving Agency
Sinking Fund Management
Stock Transfer and Dividend Paying Agency
Crest Fund
6
Unit Investment Trust Funds
Rizal Peso Money Market Fund
Rizal Dollar Money Market Fund
Rizal Peso Bond
Rizal Dollar Bond Fund
Rizal Equity Fund
Rizal Balanced Fund
H. CORPORATE CASH MANAGEMENT
Collection and Receivables Services
Agent Collection
Bills Collection
Check Manager
Auto Debit Arrangement
Payment Management Services
Employee Payments Service
eCheck Payment Solution
RCBC Payment Gateway
Third Party Services
Collection and Receivables Services
BancNet On-Line
BancNet Direct Bills Payment
BancNet Point of Sale System
Payment Management Services
BancNet EDI-SSSNet
I. INVESTMENT BANKING
Underwriting of Debt and Equity Securities for distribution via Public Offering or Private
Placement:
Common and Preferred Stock
Convertible Preferred Stock and Bonds
Long- and Short-Term Commercial Papers and Corporate Notes
Corporate and Local Government Bonds
Arranging/Packaging of:
Syndicated Loans (Peso and Dollar)
Joint Ventures
Project Finance
Financial Advisory and Consultancy
Mergers and Acquisitions
J. ANCILLARY SERVICES
Day & Night Depository Services
Deposit Pick-up and Delivery
Foreign Currency Conversions
Foreign Trade Information
Research (Economic and Investment)
Wealth Management
Safety Deposit Box
7
Contribution to Income. The relative contribution of principal products or services to gross
revenues is as follows: (amounts in millions)
Product/Service
Loans and receivables
Investment Securities
Trading and Securities
Gains(Losses)-net
Trust Services
Other Treasury &/ or
Ancillary
Services
(inclusive of service fees from
credit card operations)
2009
%
2008
%
2007
%
12,109
3,960
53.45
17.48
10,885
3,992
53.74
19.71
9,584
4,918
48.62
24.95
2,253
181
9.94
0.80
(512)
206
(2.53)
1.02
1,329
185
6.74
0.94
4,154
18.33
5,685
28.07
3,695
18.75
The three (3) foreign subsidiaries, i.e., RCBC International Finance Limited (Hong Kong), RCBC
North America, Inc. (USA) and RCBC Telemoney Europe (Italy) accounted for 0.86%, 1.04%, and
1.00% of gross revenues for the years 2009, 2008 and 2007, respectively.
Competition. The Bank faces competition from both domestic and foreign banks, in part, as a result
of the liberalization of the banking industry by the Government. Since 1994, a number of foreign
banks have been granted licenses to operate in the Philippines. Such foreign banks have generally
focused their operations on the larger corporations and selected consumer finance products, such as
credit cards. These foreign banks have not only increased competition in the corporate market, but
have as a result caused more domestic banks to focus on the commercial middle-market, placing
pressure on margins in both markets. Mergers, acquisitions, and closures reduced the number of
players in the industry from a high of 50 upon the liberalization of rules on the entry of foreign
banks to thirty eight (38) universal and commercial banks in 2009.
Competition in corporate banking is intense especially with the larger banks. Pricing of loans and
yield of deposit and investment products are factors limiting the expansion in this area. As such,
focus has been diverted to SMEs and micro-financing for the expansion of the Bank’s client-base
and loan portfolio.The Bank has also continued its emphasis on product and service improvement
through investment in technology and systems.
Customers. The Bank has identified the following as the key market segments that it services:
consumer, top corporate and the middle market. The Bank offers a wide range of services to these
markets: consumer, commercial and corporate loans, and asset and cash management services. The
Bank provides such services through its branch network and ATMs across the country and through
other electronic delivery channels.
To better serve the needs of identified market segments, the Bank undertook a functional
realignment focused on building a sales and service-oriented distribution network. These identified
market segments are as follows:
a) Corporate/Institutional Market.
RCBC has been a banker to top Filipino corporations since the early 1980s. It has also established
many of its relationships with Japanese clients through its more than 30 year strategic partnership
with Japanese Bank UFJ (now the Bank of Tokyo-Mitsubishi UFJ Limited). The Bank continues to
be a formidable player in this sector, even with the UFJ’s sale of its share in RCBC given its strong
8
strategic presence in the country’s export processing zones, a major source of fee-based business.
The Bank has also cultivated lasting relationships with American and European multinational
companies which until now have remained valued clients of the Bank.
b) SMEs/Commercial Middle Market.
This market plays a major strategic role in the Bank’s goal to diversify portfolios and improve loan
yields. The Bank’s SME operations were recently consolidated with the Corporate Banking Group
so that its lending activities can be synchronized with the overall lending thrust and objectives of
the Bank.
c) Consumer/Retail Market. Through its business centers, the Bank offers a wide range of products
and of services. To attract and retain customers, deposit products have been streamlined and the
Bank has been aggressively offering more services electronically to wide population of the
unbanked segments. This is likewise done through the introduction of new and innovative products
and services
As the thrift banking arm of the Bank, RCBC Savings Bank identified and implemented various
initiatives to maintain its position as one of the top thrift banks of the country. Foremost among
these were the maximization of the full potentials of the consumer lending centers (CLCs);
improvement of turn-around time; strengthening of relationships with clients, dealers and
developers; strategic establishment and relocation of branches and ATMs; greater synergy within
the YGC; new product launch; product competitiveness and promotion; and continuous manpower
training and development.
Since 2007, the credit card operations of the Bank were conducted at the parent company level
following the acquisition of substantially all of the assets of Bankard in December 2006. Bankard
and RCBC entered into a service agreement wherein RCBC outsourced the servicing of its credit
card business to Bankard. These services include card acquisition and marketing services and
collection services.
d) Overseas Filipino Workers.
The steady number of Filipinos working and/or living abroad is now a big market. The Bank
provides remittance services to the wide network of OFWs and their beneficiaries in the Philippines
who receive the remittances. TeleMoney, the Bank’s core remittance business, had expanded to
more than 25 countries through its subsidiaries as well as numerous centers, tie-ups and agents.
e) High Net Worth Individuals Market. This is a new and fast growing market of the Bank solely
catering to the financial investment needs of the affluent sector of society. High net worth
individuals prefer to have dedicated relationship managers who take care of their portfolios, provide
advise on their investments, maintain high level of service, and ensure privacy and confidentiality
at all times. The Bank formally set up the Wealth Management Group in mid 2006 and it presently
has established offices in Binondo, Makati, Ortigas and Cebu.
Transactions and/or Dependence on Related Parties. The information required is contained in item
12 on page 67.
Principal Terms and Expiration Dates of All Patents, Trademarks, Copyrights, Licenses,
Franchises, Concessions, and Royalty Agreements Held. The Bank has not registered any of its
intellectual property rights with the Intellectual Property Office (IPO) of the Department of Trade
9
and Industry of the Philippines. The Bank has not been the subject of any disputes relating to its
intellectual property rights.
On December 15, 2009, the Securities and Exchange Commission approved the amendment of
Article Fourth of the Amended Articles of Incorporation of RCBC thereby extending the corporate
term of the Bank for another fifty (50) years from 23 September 2010.
In addition to the universal banking license mentioned on page 1, the Bank has all the regulatory
licenses and permits necessary to operate and render the various services and products offered to
the public. These include, among others, trust license, expanded FCDU license, local business
permits, etc.
Effect of Existing or Probable Governmental Regulations on the Business. The normal operations
of the Bank is not adversely affected by any existing governmental regulation nor is it expected that
any probable governmental regulation would have an adverse effect on the operations of the Bank.
Amount Spent on Research and Development Activities. Research and development activities are
not necessary since the nature of its business is banking.
Employees. The Bank (excluding subsidiaries) has 1,394 non-officers and 1,679 officers or a total
manpower of 3,073 as of December 31, 2009. The increase in the number of employees was a
result of the expansion in the Bank’s branch network. Although not all non-managerial employees
are members of the RCBC Employees Association, all are covered by the Collective Bargaining
Agreement (CBA).
In November 2009, the Bank and the independent union agreed on the economic provisions of the
existing Collective Bargaining Agreement, which will expire on September 30, 2011. For the past
three years, there has been no strike nor was there any threat of a strike as a result of a dispute.
The supplemental benefits that the Bank has for its associates include hospitalization, medical and
dental benefits, group insurance and bereavement assistance. Associates are also entitled to
vacation and sick leaves.
The Bank continues to invest in its employees through various training programs strategically
focused on selling skills, customer service and product knowledge.
Risk Management. The Bank is exposed to risks that are inherent to its lending and trading
businesses and the environment in which it operates. The Bank’s goal in risk management is to
ensure that it understands, measures and monitors the various risks that arise from its business
activities, and that it adheres strictly to the policies and procedures which are established to address
these risks.
The Bank employs a committee system as a fundamental part of its process of managing risk. Each
committee consists of the Chief Executive Officer/President, and other senior executives. The key
committees are as follows:
10
•
•
•
•
the Executive Committee (Excom), which approves exposure management standards, reviews
concentrations of credit risk, sets documentation and credit support standards and reviews and
approves large counterparty credit limits and consideration of credit-related transactions;
the Risk Management Committee (Riskcom), which ensures wide portfolio diversification and
establishes risk policies;
the Senior Management Committee (SMC), which oversees all operational and other matters
that affect the Bank’s day to day activities and reviews new products and businesses and
ensures that policies and procedures are established and in place prior to engaging in new
business; and
Assets and Liabilities Committee (ALCO), which appraises market trends, economic, and
political developments and provides strategic direction in the management of interest rate risk,
liquidity risk, and trading and investment portfolio decisions.
The Bank has established a Corporate Risk Management Services (“CRISMS”) headed by a chief
risk officer, to identify, measure and assist in controlling and monitoring the risks inherent in its
activities. CRISMS is independent of all business segments and reports directly to the Risk
Management Committee.
Major Risks Involved.
a) Liquidity Risk – risk that there are insufficient funds available to adequately meet all maturing
liabilities, including demand deposits and off-balance sheet commitments, due to: (a) inability
to liquidate assets or obtain adequate funding and (b) the inability to easily unwind or offset
specific exposures without significantly lowering market prices because of inadequate market
depth or market disruptions.
The Bank’s liquidity policy is to manage its operations to ensure that funds available are more
than adequate to meet credit demands of its customers and to enable deposits to be repaid on
demand or upon maturity. The main sources of the Bank’s funding are capital, core deposits
from retail and commercial clients and wholesale deposits. The Bank also maintains a portfolio
of readily marketable securities to further strengthen its liquidity position. The Bank’s liquidity
policies and procedures are set out in its Funding and Liquidity Plan. At least once annually,
the Bank’s Treasurer presents a business plan containing a request for liquidity limits to ALCO
for final approval and ratification by the Board of Directors. The funding plan effectively
serves as a projected funding requirement based on assumptions from the forecasted balance
sheet.
To ensure that the Bank has sufficient liquidity at all times, the Bank’s Treasury formulates a
contingency plan using extreme scenarios of adverse liquidity and evaluates the Bank’s ability
to withstand these prolonged scenarios. The contingency plan focuses on the Bank’s strategy
for coordinating managerial action during a crisis and includes procedures for making up cash
flow shortfalls in adverse situations. The plan details the amounts of funds available and the
scenarios under which it could use them.
b) Interest Rate Risk – The Bank follows a policy on managing its assets and liabilities so as to
ensure that exposure to fluctuations in interest rates is kept within acceptable limits. The
Bank’s risk measurement system addresses different risk factors of different categories of
instruments within each currency where the Bank holds interest rate sensitive positions.
11
ALCO meets at least weekly to set rates for various asset and liability and trading products. In
pricing interest rates, foreign exchange and fee-based products, ALCO considers funding costs,
market conditions, transaction volumes, and competitor’s rates, among others.
The interest rate sensitive instruments of the Bank’s trading and investment portfolio are
covered by a system of loss limit and Management Action Trigger (“MAT”) controls which
quantify management’s tolerance for losses on year to date and month to date cumulative loss.
In addition, value at risk (“VaR”) is computed per product group to determine potential loss.
The Bank employs “gap analysis” to measure the interest rate sensitivity of its assets and
liabilities. The asset/liability gap analysis measures, for any given period, any mismatch
between the amounts of interest-earning assets and interest-bearing liabilities which would
mature, or would be subject to re-pricing, during that period.
c) Credit Risk – risk that the borrower, issuer or counterparty in a transaction may default and
cause a potential loss to the Bank. The Bank is exposed to credit risk as trading counterparty to
dealers and customers, as direct lender and as a holder of securities. Categories of credit risk
include contingent credit risk (risk that potential counterparty or customer obligations become
actual and will not be repaid on time), country risk (risk that actions of sovereign governments
or other uncontrollable events will adversely affect the ability of counterparties or customers to
fulfill obligations to the Bank), event risk (risk that the Bank will incur risk in unusual
situations which are not captured in the daily risk management tools), underwriting risk (risk
that an issue will lose value after launching but before trading in the secondary markets), and
custody risk (risk that arises when the Bank has assets in the form of securities entrusted to a
third party as a custodian).
The Bank’s overall goal of credit risk management is to maximize its risk-adjusted rate of
return by maintaining credit risk exposure within approved parameters. The Bank’s credit
policies are established by the Executive Committee and/or the Board of Directors and are set
out in the Bank’s Credit Policy Manual.
d) Market Risk – risk resulting from adverse movements in the level of or volatility of market
rates or prices or commodity/equity prices which will affect the Bank’s financial condition.
The primary determinant of market risk is the volatility of the relevant market for a business
line. The market risks of the Bank are: (a) foreign exchange rates, (b) interest rates, (c) equity
prices and (d) commodity prices.
To manage market risks inherent in the Bank’s portfolio, three related measures of risk values
are estimated or established:
•
•
•
the sensitivity of the position or portfolio to a movement in the market risk factor to which it is
exposed;
the volatility of the position (the maximum expected movement in the market risk factor for a
given time horizon at a specified level of confidence); and
the value-at-risk (the likely impact on earnings for a given time horizon due to expected
movements in the market factors).
12
e) Foreign Currency Risk – The BSP has numerous regulations related to foreign currency
management. The Bank complies with all of these, including limits on foreign currency
exposures, liquidity reserves and types of currencies allowed for trading.
The Bank’s risk measurement system incorporates risk factors for each different foreign
currency. Foreign exchange positions are generally classified as trading positions and are
marked-to-market at least daily. Foreign exchange forwards are classified at inception as either
“trading” (outright open positions without an offsetting foreign exchange contract) or
"hedging” (positions with an offsetting foreign exchange contract, generally part of a foreign
exchange swap transaction). The accounting methodology assigned for both classifications is
net present value mark-to-market although booking for hedging is through equity being a
cashflow hedge.
f) Operations Risk – risk arising from the potential that inadequate information systems,
operations or transactional problems (related to service or product delivery), breaches in
internal controls, fraud or unforeseen catastrophes will result in unexpected loss. Operations
risk includes the risk of loss arising from various types of human or technical error, settlement
or payments failures, business interruption, administrative and legal risk issues and systems not
performing adequately.
The Bank maintains operations manuals that are periodically updated. The Bank has also
developed a Business Contingency Plan which is tested at least annually and updated for any
major changes in systems procedures. A complaints log, which is reviewed by management,
exists for each business area for logging, monitoring and follow-up on customer complaints.
To ensure that critical transactions are properly handled, the work of one person is verified by
another. Items of value are under dual custody.
The Bank places emphasis on the security of its computer system and has a comprehensive IT
security policy. The Bank designates a security administrator independent of the front office
who is responsible for maintaining strict control over user access privileges to the Bank’s
information systems. The Bank’s Information Technology Group has a Disaster Recovery Plan
to ensure business continuity, recovery of critical data and uninterrupted processing of
transactions in the event of a disaster.
g) Regulatory Risk – refers to the potential for the Bank to suffer financial loss due to changes in
the laws or monetary, tax or other governmental regulations of the country. The Bank’s
Compliance Program, the implementation of which is overseen and coordinated by the
Compliance Office, is the primary control process for regulatory risk issues. The Compliance
Office is responsible for communicating and disseminating new rules and regulations to all
units, analyzing and addressing compliance issues, performing periodic compliance testing on
business centers and Head Office units and reporting compliance findings to the Audit
Committee and the Board of Directors. On a case by case basis, when the Audit Committee is
not immediately available, the Compliance Officer may initially report urgent matters to the
President/Chief Operating Officer or the Chief Executive Officer, and thereafter to the Audit
Committee.
Item 2. Properties
13
RCBC’s headquarters is located on an island site at the corner of Ayala Avenue and Sen. Gil Puyat
Avenue Ext. called the RCBC Plaza Building. The RCBC Plaza Building is one of the largest sites
in the Makati Central Business District. The Bank and some of its subsidiaries lease and occupy
about twelve (12) floors of the Yuchengco Tower of the twin tower complex. The Bank’s lease,
covering an area of 18,540.15 square meters, would expire on December 31, 2010 and is subject to
renewal upon agreement of the parties. Annual rent of Bank’s principal offices, exclusive of VAT,
amounts to P156.1 million.
The Group's rental expense based on the lease contracts amounted to P541, 825 in 2009. The lease
periods are from 1 to 25 years. Most of the lease contracts contain renewal options, which give the
Parent Company and its subsidiaries the right to extend the lease on terms mutually agreed upon by
both parties.
The Bank owns and/or leases its branch sites as listed below and on the following pages:
LOCATION/BC NAME
BUSINESS ADDRESS
AREA (in
sqm)
A. RCBC OWNED
PREMISES
METRO MANILA AREA
Alabang (RCBC)
Alabang (Toyota)
Baclaran
BF Homes
Binondo
Binondo
Caloocan
Carlos Palanca
Commonwealth
Connecticut
Divisoria
Greenbelt
Legaspi Village
Legaspi Village
Metallim Compound
Ortigas Center
Quezon Avenue
Rockwell
Salcedo Village
Tektite
Alabang-Zapote Road
Alabang-Zapote Road
Taft Avenue Extension, Baclaran, Parañaque
GF 101 Matrix Center, Presidents Ave., BF
Commercial Center (Condo Unit)
Tytana Plaza, Oriente, Binondo, Manila
Q. Paredes St., Binondo, Manila
259 Rizal Avenue, Caloocan City
BSA Suites, C. Palanca St., Legaspi Village,
Makati City
Commonwealth Avenue, Old Balara, Quezon City
No. 51 Connecticut St., East Greenhills, San Juan,
MM
New Divisoria Condominium Center, Sta. Elena,
Divisoria, Manila
BSA Tower, Legaspi St., Legaspi Village, Makati
City
Cristina Condominium, Legaspi cor. Herrera,
Legaspi Village, Makati City
Unit1 G/F ACCRA Bldg., Gamboa cor. Salcedo
Sts., Legaspi Village, Makati City
No. 95 T. Arguelles (formerly Brixton St.), Brgy.
Imelda, Quezon City
Malayan Tower, ADB Avenue, Ortigas Center,
Pasig City
Quezon Avenue, Quezon City
Phinma Plaza, Rockwell Center, Makati City
Y Tower II Building, Alfaro cor. Gallardo, Sts.,
Salcedo Village, Makati City
E1904A, 19th floor, East Tower, PSE Ctr.,
1,955.00
7,056.00
219.00
299.00
210.14
2,149.66
1,300.00
142.80
470.00
1,003.00
449.6
173.8
120.00
522.00
2,421.70
244.95
1,427.70
259.92
230.09
286.00
14
Tektite
Timog
Exchange Road, Pasig City
East Tower, PSE Ctr., Exchange Road, Pasig City
Timog Avenue, Quezon City
25.00
690.00
LUZON AREA
Angeles
Baguio
Balibago
Batac
Cabanatuan
Calamba
Carmelray II (FCIE-Cavite)
Carmen
Dasmarinas (PANDORA)
Gateway
La Union
Lima
Palawan
Sta. Cruz
Sta. Cruz
Sto. Rosario cor. Teresa Streets, Angeles City
Session road, Baguio City
McArthur Highway, Balibago, Angeles City
Marcos Highway, Batac, Ilocos Norte
National hi-way cor. Paco Roman St., Cabanatuan
City
National Hi-way, Calamba, Laguna
New Cavite Industrial City, Gen. Trias, Cavite
National Highway, Carmen, West Rosales,
Pangasinan
FCIE Compound, National Hi-way, Brgy.
Langkaan, Dasmarinas, Cavite
Gateway Business Park, Gen. Trias, Cavite
Quezon cor. P. Burgos, San Fernando, La Union
Lot11, Blk15, Lima Business Ctr, Lima Square
Rizal St., Puerto Princesa, Palawan
A. Bonifacio cor. Regidor, Sta. Cruz, Laguna
P. Burgos, Sta. Cruz, Laguna
600.00
474.54
324.00
378.08
700.00
815.00
22,534.00
720.00
265.00
787.0
442.00
1,524.00
1,731.00
238.00
131.00
VISAYAS AREA
Ayala-Cebu
Bacolod-Libertad
Bacolod-main
Bacolod-Shopping
Bayawan
Cadiz
Fuente Osmena
Iloilo
Kabangkalan
Mandaue
Roxas City
Sara
Silay
Tagbilaran
Talisay
Cebu Businesss Park, Cebu City
Libertad Street, Bacolod City
Rizal Cor. Locsin Streets, Bacolod City
Hilado St., Shopping District, Bacolod City
National Hi-way, Bayawan, Negros Oriental
Abelarde cor. Mabini Sts., Cadiz City
GPL Tower, Fuente Osmena, Rotonda, Cebu City
J. M. Basa cor. Arsenal, Iloilo City
Poblacion, Kabangkalan, Negros Occidental
A. Cortez Avenue, Mandaue City
Banquerojan, Roxas City
Don Victorino Salcedo St, Sara, Iloilo
Rizal cor. Burgos Streets, Silay City
J. P Garcia Avenue, Tagbilaran City
National Hi-way, Tabunok, Talisay, Cebu
1,814.00
2,547.00
440.0.
967.00
500.00
741.00
845.29
2,647.00
1,000.00
1,664.00
624.00
450.00
799.70
633.00
176.00
Pioneer Avenue, General Santos City
C. M. Recto/Palma Gil, Davao City
Rizal Avenue, Digos, Davao del Sur
National hi-way, Ipil, Zamboanga del Sur
National hi-way, Kalawag III, Isulan, Sultan
Kudarat
C. M. Recto, Lapasan, Cagayan de Oro City
Don Anselmo Bernad cor. A. Mabini St., Ozamis
City
460.00
1,085.00
300.00
1,000.00
375.00
MINDANAO AREA
Dadiangas
Davao-Recto
Digos
Ipil
Isulan
Lapasan
Ozamis
456.00
202.00
15
Pagadian
Polomolok
Surallah
Tagum
LOCATION/BC NAME
Rizal Avenue, Pagadian City
Dhalia Street, Polomolok, South Cotabato
National Hi-way, Surallah, South Cotabato
Pioneer Avenue, Tagum, Davao del Norte
301.00
511.00
496.00
1,200.00
AREA (in
sqm)
B. RCBC OWNED PREMISES OCCUPIED BY RCBC SAVINGS BANK BUSINESS
CENTERS
METRO MANILA AREA
Balintawak
Commonwealth
EDSA – Pasay
Greenhills
J. P. Rizal
Kapitolyo
Katipunan
Pacific Place
Salcedo
Sangandaan
Taft-Remedios
BUSINESS ADDRESS
A. Bonifacio near cor. C-3 Road, Balintawak,
Quezon City
Commonwealth Avenue, Old Balara, Quezon City
527 EDSA, Pasay City
Unit 104, Grace Building, Ortigas Ave., Greenhills,
San Juan, MM
J. P. Rizal Street, Makati City
Shaw Boulevard, Kapitolyo, Pasig City
Torres Building, Katipunan, Loyola Heights, Q. C.
Pacific Place Bldg., Pearl Drive, Ortigas Center,
Pasig City
Le'Metropole Building, Sen. Gil Puyat, Avenue cor.
Tordesillas, Makati City
Sangandaan, A. Mabini cor. Plaridel, Caloocan City
Taft Avenue, Manila
350.00
470.00
270.00
108.69
198.75
311.00
200.83
1,652.29
192.04
323.00
295.10
LUZON AREA
Angono
Apalit
Bacoor
Cabanatuan
Hacienda Luisita
Lipa
San Mateo
Taytay
Quezon Avenue, Angono, Rizal
National Road, San Vicente, Apalit, Pampanga
Aguinaldo Hi-way, Bacoor, Cavite
National hi-way cor. Paco Roman St., Cabanatuan
City
McArthur Hi-way, Bo. San Miguel, Tarlac
Morada Avenue, Lipa City
Gen. Luna St., Gitnang Bayan, San Mateo, Rizal
National Road, San Vicente, Apalit, Pampanga
1,074.00
1,250.00
466.22
700.00
229.00
242.00
307.00
211.00
VISAYAS AREA
Escario
Jaro
P. del Rosario
N. Escario St., Cebu City
Commission Civil, Jaro, Iloilo City
P. del Rosario st., Bo. Sambag, Cebu City
437.00
532.00
298.00
Quezon Avenue cor. Magallanes St., Cotabato City
Pioneer Avenue, Gen. Santos City
Velez Street, Cagayan de Oro City
300.00
443.00
382.00
MINDANAO AREA
Cotabato City
Gen. Santos
Velez
16
LOCATION/BC NAME
BUSINESS ADDRESS
AREA (in
sqm)
C. RCBC SAVINGS BANK OWNED PREMISES
Anonas
Betterliving
Binakayan
Binan
Binangonan
Blumentritt
Bocaue
Bolton
Cabuyao
Calamba
Carmona
Dagupan
Dasmarinas
Divisoria
Dumaguete
E. Rodriguez
Felix Avenue
GMA
Ilustre
Imus
Jalandoni
La Paz
Lacson
Lagro
Lucena
Malolos
Mandaue
Marulas
Masinag
Meycauayan
Montalban
Muntinlupa
N. Domingo
Naic
Navotas
Novaliches
Noveleta
69 Anonas cor Chico St. Proj. 2, Quezon City
Dona Soledad St. Betterliving Bicutan, Paranaque
Aguinaldo H-way, Binakayan Kawit, Cavite
126 A. Bonifacio St. Poblacion Binan Laguna
M.L. Quezon St. cor Zamora St. Binangonan Rizal
Blumentritt cor. Andrade St. Sta. Cruz Manila
249 Binang 2 Mc Arthur H-way Bocaue, Bulacan
Bolton St. Davao City
J.P. Rizal cor. Del Pilar St. Cabuyao, Laguna
National Road, Calamba Laguna
J. Loyola St. Poblacion, Carmona, Cavite (in front of
health center)
Perez Blvd. cor. Zamora St., Dagupan City
Aguinaldo H-way, Dasmarinas Cavite
# 649 Padre Rada St. cor. Juan Luna, Divisoria,
Metro Manila
Real St. cor. San Juan St. Dumaguete City
444 E. Rodriguez Sr. Blvd. Cor. Jacinto St. Quezon
City
Karangalan Village, Phase II, Felix Avenue, Cainta
Rizal
Block 2, lot 10 GMA, Cavite
Ilustre Ext. Davao City
Nuevo Tansang Luma, Imus Cavite
Jalandoni St. San Agustin Iloilo City
Luna St., La Paz, Iloilo City
Lacson St. Mandalagan, Bacolod City
Km 22 Quirino H-Way Lagro, Novaliches Quezon
City
Lot 2983 Quezon Ave. Lucena City
Paseo del Congreso, Malolos Bulacan
Mandaue Cebu City
Mc Arthur H-way, Marulas Valenzuela MM
Sumulong H-way, Masinag Antipolo Rizal
187.50
479.00
197.00
286.00
200.00
210.00
250.00
300.00
248.00
300.00
231.00
831 Mc Arthur H-way, Meycauayan, Bulacan
Jose Rizal cor. Linco St. Montalban Rizal
National H-way, Munitinlupa City
N. Domingo cor. Araneta Ave. San Juan MM
Capt. Nazareno St. Naic, Cavite
Estrella cor. Yangco St. Navotas East, MM
917 Bo. Gulod., Quirino Highway
Poblacion Noveleta, Cavite (beside nuguid appliance
center)
215.00
447.00
227.00
250.00
337.00
220.00
263.00
300.00
192.00
264.00
289.67
211.00
279.00
221.19
204.00
772.00
400.00
256.00
339.00
628.50
280.00
214.00
304.00
254.00
200.00
238.00
17
Ortigas Ext.
P. Tuazon
Pateros
Plaridel
San Joaquin
Ortigas Avenue, Ext. Pasig City
P. Tuazon cor. 12th Ave. Cubao Quezon City
M. Almeda St. Bo. San Roque, Pateros MM
Cagayan Valley Road, Banga 1, Plaridel Bulacan
Concepcion St. San Joaquin, Pasig City
241.00
355.00
300.00
670.00
159.00
San Roque
Sta. Mesa
Sta. Rosa
J.P. Rizal St. San Roque Marikina City
4463 Old Sta. Mesa Manila
J. Rizal Blvd. Cor. Perlas Village, Brgy. Tagapo Sta.
Rosa, Laguna
Zamora St., cor Sto. Nino, Tacloban City
Pres. Carlos p. Garcia Ave., Poblacion, Tagbilaran
City
Sta. Cruz Tanza, Cavite
Mc. Arthur H-way Bo. Matatalaib, Tarlac, Tarlac
169 Tomas Morato cor. Sct. Castor, Quezon City
Majoha Bldg. Nancayasan, Urdaneta, Pangasinan
6 Visayas Ave. Tandang Sora, Quezon City
Ormoc City
Brgy. Pasong Putik, Quezon City
Susano Road, Camarin, Novaliches, Quezon City
Palmera Hills 300, ortigas Ext., Dolores, Antipolo
City
400.00
214.00
480.00
Tacloban
Tagbilaran
Tanza
Tarlac
T. Morato
Urdaneta
Visayas Ave.
Ormoc City
Lagro
Camarin
Antipolo Taytay
BC NAME
BUSINESS ADDRESS
317.00
300.00
140.00
554.00
175.00
59.00
300.00
223.00
720.00
559.00
650.00
CONTRACT PERIOD
START
EXPIRY
D. RCBC LEASED PREMISES
METRO MANILA AREA
Alabang West Service Cor Montillano St. and South Superhighway,
Alabang Muntinlupa City
Road
Unit 601, 6th Floor Tower I Ayala Triangle Ayala,
Ayala
Makati City
1353 Tesoro Bldg. A. Mabini St. Ermita Manila
A. Mabini
Spaces 19-21 Upper Ground Floor Farmers Plaza
Araneta Center
Cubao
1001 Orient Star Bldg. cor. Masangkay and Soler
Arranque
Sts., Sta. Cruz, Manila
Unit 1-K, CTK Building
Banawe
385 Banawe cor. N. Roxas St., Quezon City
#14 Doña Soledad Ave., Better living Subd., Brgy.
Better Living
Don Bosco Parañaque City
617 Boni Ave. Mandaluyong City
Boni
#219 Sen. Gil Puyat Ave., Makati City
Buendia
Multicon Bldg., F.P. Felix Ave., Cainta, Rizal
Cainta
Concepcion, Marikina # 17 Bayan-Bayanan Ave., Concepcion 1 Marikina
City
Makati Rada (formerly Unit GL3 One Legaspi Park 121 Rada St. Legaspi
Village, Makati City
Chino Roces)
May 2008
Apr 2015
Jul 1, 2003
Jun 30, 2008
1/
Oct 1, 2004
Oct 1, 2008
Oct 1, 2009 1/
Mar 31, 2009
1/
May 15, 2007
May 14, 2017
Feb 15, 2005
Feb 15, 2010
Sep 15, 2008
Sep 14, 2013
May 1, 1999
Jan 1, 2009
Nov 16, 2007
Aug 1, 2007
Ap 30, 2009 1/
Dec 31, 2009
Nov 15, 2017
Jul 31, 2012
Mar 23, 2007
Mar 22, 2012
18
Jan 1, 2001
Dec 30, 2011
Jun 1, 2005
Dec 1, 2009 1/
May 1, 2009
Apr 30, 2014
May 1, 2007
Nov 15, 2006
Apr 30, 2017
Nov 15, 2011
Apr 16, 2005
Apr 15, 2015
Sep 1, 2005
Aug 31, 2012
Elcano
Verde Oro Bldg., 535 Commonwealth Ave.,Diliman
Quezon City
Rustan’s Superstore Complex Gen. Romulo
St.,Araneta Center, Cubao, Quezon City
G/F Sterling Center Ormaza Coner Dela Rosa St.
Legaspi Village Makati City
180 Del Monte Avenue, Quezon City
Kalayaan Ave., corner Matalino St., Diliman,
Quezon City
19 cor. D. Tuazon and Quezon Avenue, Quezon
City
G-Floor Giselle Park Plaza Edsa cor. Taft Ave.
Pasay City
G/F Elcano Plaza, Elcano St., Binondo, Manila
Jun 1, 1992
May 31, 2012
Ermita
550 UN Ave., Ermita Manila
Jan 1, 2004
Dec 31, 2008
Commonwealth
Cubao
Dela Rosa
Del Monte
Diliman
D. Tuazon
Edsa Taft
1/
Novaliches
UG 01-A MAB, Dahlia St. Cor, Regalado Ave.,
North Fairview Quezon City
G/F Transcom Bldg., Frontera Verde Compd. Bgy.
Ugong, Pasig City
100 Granada St. Brgy. Valencia, Quezon City
Unit 10 & 11 G/F La Fuerza Plaza 1, 2241 Chino
Roces Ave., Makati City
G/F Veraville Bldg., Alabang-Zapote Road, Las
Pinas City
191 E. Rodriguez Jr. Ave. Libis Quezon City
42 MQI Bldg. Rosa Alberto St. Cor. Esteban Abada
St. Loyola Heights Quezon City
G/F Makati Finance Building 7823 Makati Avenue
Makati City
Executive Building Center, Sen Gil Puyat Ave.,
Makati City
J.P. Rizal Ext. cor Pascual St. Brgy. San Agustin,
Malabon City
Level 1, EDSA Central Mall, Sto. Cristo St.,
Mandaluyong City
Gil Fernando (formerly Angel Tuazon) St. Cor. Sta
Ana Ext., San Roque Marikina
Empire Plaza 1473 G Masangkay St. Sta. Cruz
Manila
828 Nicanor Reyes St., Sampaloc, Manila City
3963 JJM Bldg 2, Ninoy Aquino, Sto. Niño, Pque
City
NAIA TERMINAL 3, PASAY CITY
84 Hemady cor. E. Rodriguez Ave. New Manila,
Quezon City
882 Quirino Highway, Novaliches, Quezon City
Otis
Pasay
Isuzu Manila 1502 Paz M. Guazon St. Paco Manila May, 2008
1905 Taft Ave., Pasay City
Oct 1, 2004
Fairview
Frontera Verde
Gilmore
La Fuerza
Las Pinas
Libis
Loyola Heights
Makati Avenue
Makati Avenue
Malabon
Mandaluyong
Marikina
Masangkay
Morayta
Multinational
NAIA 3
New Manila
May 1, 2000
May 1, 2010
Sep 1, 2008
Aug 15, 2013
Jan 1, 2001
Sep 15, 2009
Dec 31, 2011
Sep 14, 2014
May 16, 2003
May 15, 2013
Jun 1, 2000
Feb 1, 2002
May 31, 2010
Jan 31, 2012
Oct 31, 2006
Nov 02, 2008
Month to
month
Nov 02, 2013
Apr 1, 1992
Mar 31, 2009
Sep 1, 2004
Aug 31, 2012
Jan 1, 1995
Dec 31, 2009
Jun 16, 2003
Jun 16, 2013
Aug 1, 2007
May 1, 2009
Jul 31, 2012
May 1, 2014
Oct 27, 2009
Jan 1, 2006
Jul 1, 2004
Month to
month
Jul 30, 2009
1/
Apr, 2016
Sep 30, 2009
1/
Pasig
#92 Dr. Sixto Ave. Cor. Raymundo St. Pasig City
Aug 1, 1989
Jul 31, 2009
1/
19
Pasong Tamo
Quirino
Raon, Sales
Roosevelt
2283 Pasong Tamo Ext. cor. Lumbang St., Makati
City
411 Anflocor Bldg. Quirino Ave. Tambo Paranaque
City
655-657 Gonzalo Puyat St., Quiapo, Manila
302 Roosevelt Avenue, SFDM, Quezon City
Mar 16, 2001
Mar 15, 2011
Oct 16, 2006
Oct 15, 2011
Apr 01, 2008
Jun 1, 2004
Mar 13, 2013
May 31, 2009
1/
San Lorenzo
1018 L & R Bldg. Pasay Road, Makati City.
Aug 16, 2004
Aug 15, 2009
1/
Shangri-la Extn
South Harbor
Sta. Lucia East
Sta. Mesa
Sucat
Taytay
T. Alonzo
T. Mapua
Tordesillas
Trinoma
Tutuban
Unimart
Valenzuela
Wack Wack
5th Level, Shangri-la Plaza Mall, EDSA cor Shaw
Blvd. Mandaluyong City
Corner 23rd and Delgado Sts., Port Area Manila
Dec 1, 2005
Nov 30, 2010
Jan 1, 1996
Dec 31, 2010
Brickroad area Sta. Lucia East Grand Mall Marcos
Highway cor Felix Avenue Cainta Rizl
# 1 B. G. Araneta Ave, Quezon City
Sucat Interchange Arcade Dr. A. Santos Ave. cor
West Service Road Sucat, Pnque
Manila East Road, Taytay, Rizal
1461-1463 Soler St., Sta. Cruz, Manila
Park Tower Condominium
626 T. Mapua St., Sta. Cruz, Manila
117 Tordesillasst., Salcedo Village, Makati City
Space P015B Level 1, Trinoma EDSA cor. North
Avenue, Quezon City
G/F Center Mall I, Tutuban Center corner C.M.
Recto Ave., Tondo, Manila
Greenhills Shopping Center, Ortigas Ave.,
Greenhills San Juan Metro Manila
231 Mac Arthur Highway, Karuhatan, Valenzuela
City
Unit K Facilities Center Bldg., 548 Shaw Blvd,
Mandaluyong City
Sep 27, 2008
Sep 30, 2013
July 1, 1993
Jun 30, 2013
Jan, 2000
Jan 1, 1992
Nov 1, 2003
Oct 16, 2007
May, 2013
Dec 31, 2012
Oct 31, 2013
Oct 15, 2012
Sep 1, 2008
Mar 1, 2007
Aug 31, 2013
Apr 30, 2009
243 Sto. Entierro St., Brgy. Sto. Cristo, Angeles
City, Pampanga
Maraudi Bldg., Aguinaldo Highway, Niog Bacoor
Cavite
McArthur Highway, Balagtas, Bulacan
Don M. Banzon Avenue cor. Cuaderno St., Balanga
City, Bataan
J. P. Rizal cor. Tagle St., Baliuag, Bulacan
Bataan Export Processing Zone, Mariveles, Bataan
1/
Apr 16, 1993
Apr 15, 2013
Jan 1, 2007
Dec 31, 2010
Sep 01, 2008
Aug 31, 2023
Feb 1, 2005
Jan 31, 2010
Feb 18, 2007
Feb 17, 2017
May 01, 2007
May 01, 2017
Nov 16, 2007
Oct 1, 2007
Nov 15, 2017
Sep 30, 2017
Aug 16, 2007
Mar 26, 2007
Aug 15, 2017
Mar 26, 2009
LUZON AREA
Angeles-Sto. Cristo
Bacoor
Balagtas
Balanga
Baliuag
Bataan
1/
Batangas
Cabanatuan
Carmelray 1
Carmelray 2
Carmona
Rizal Avenue cor. P. Gomez, Batangas City
Burgos Avenue, Cabanatuan, Nueva Ecija
Adm. Bldg., Carmelray Industrial Park, Canlubang,
Calamba, Laguna
Adm. Bldg., Carmelray Industrial Park 2, Bgy. Tulo,
Calamba, Laguna
People’s Technology Complex, SEZ, Governor’s
Drive, Carmona, Cavite
Apr 2007
Oct 1, 2001
Nov 1, 2004
Apr 2012
Sep 30, 2011
Oct 31, 2009
1/
Aug 1, 2001
Jul 31, 2011
July16, 2002
Jul 15, 2027
20
Cauayan
Cavite City
Clark
Clark II
CPIP-Batino
Dagupan
Gapan
GMA
Guimba
Hacienda Luisita
Roxas St., Cauayan, Isabela
P. Burgos Avenue, Caridad, Cavite City
CM Recto Highway, Clark Special Economic Zone,
Angeles, Pampanga
Bertaphil III Clark Center, Jose Abad Santos
Avenue, Clark Freeport Zone
Citigold Bldg., Calamba Premiere Industrial Park,
Batino, Calamba, Laguna
AB Fernandez Avenue, Dagupan, Pangasinan
Tinio St., San Vicente, Gapan, Nueva Ecija
Citi Appliance Bldg., Governor’s Drive, GMA,
Cavite
Salvador Afan St., Guimba, Nueva Ecija
Plaza Luisita, San Miguel, Tarlac, Taclac
Mar 1, 2007
Dec 1, 2006
Oct 14, 1996
Feb 29, 2012
Nov 30, 2016
Oct 14, 2020
Nov 15, 2008
Nov 14, 2018
Jun 1, 2005
May 31, 2015
Jul 1, 1999
Dece 1, 2007
Aug 1, 1999
Jun 30, 2019
Nov 30, 2012
Jul 31, 2009 1/
Oct 1, 2007
May 1, 1996
Sept 30, 2012
Apr 30, 2006
1/
Ilagan
Imus
Lguna Technopark
Laoag
Legaspi City
LIIP (Binan)
Lipa
RCK Building, National Highway, Calamagui 2nd,
Ilagan, Isabela
Esguerra Bldg., Palico IV, Imus, Cavite
Dec 1, 2007
Nov 30, 2017
Oct 1, 2007
Sep 30, 2017
Administration Building II Laguna Technopark,
Binan, Laguna
Jackie’s Commercial Building II, J. Rizal St., Laoag,
Ilocos Norte
M. Dy Building, Rizal St., Legaspi City
Adm. Bldg., Laguna Int’l. Ind’l. Park, Biñan,
Laguna
C M Recto Ave. cor. E. Mayo St., Lipa City
Mar 16, 2008
Mar 15, 2013
Feb 1, 2007
Jan 31, 2012
Dec 1, 2001
Oct 1, 2004
Nov 30, 2011
Sep 30, 2009
1/
Jan 1, 1992
Decr 31, 2007
1/
Lucena
Quezon Ave. cor. Tagarao St., Lucena City
May 31, 1987
May 31, 2007
1/
Lucena-Evangelista
Marinduque
Meycauayan
Naga
Quezon Ave., cor. Evangelista st., Lucena City
EDG Building, Bgy. Lapu-lapu, Sta. Cruz,
Marinduque
Sunrise Bldg., McArthur Highway,Saluysoy,
Meycauayan, Bulacan
Crown Hotel Building, Peñafrancia, Naga City
Dec 1, 2008
Dec 1, 2001
Dec 1, 2018
Nov 30, 2016
Oct 15, 2008
Oct 15, 2018
Jun 1, 1997
May 31, 2007
1/
Olongapo
1055 Rizal Ave., Extn West Tapinac Olongapo City Sep 01, 2008
Aug 31, 2018
Rosario
Cavite Export Processing Zone Authority, Rosario,
Cavite
McArthur Highway, Dolores, San Fernando,
Pampanga
Robinson’s Mall, San Fernando, Pampanga
Jan 8, 2007
Jan 7, 2017
Jul 1, 2006
Jun 30, 2011
San Fernando
San Fernando
(Robinson’s)
San FernandoSindalan
San Jose Nueva Ecija
San Pablo
San Pedro
Santiago
Apr 1, 2007
Mar 31, 2009
1/
McArthur Highway, Sindalan, City of San
Fernando, Pampanga
Mokara Bldg., Abar 1st, Maharlika H-way, San Jose
City, Nueva Ecija
Ultimart Shopping Plaza, M. Paulino St., San Pablo
City
National Highway, San Pedro, Laguna
#26 Maharlika Highway, Victory Norte, Santiago,
Isabela
Nov 09, 2007
Nov 09, 2017
Sep 01, 2008
Aug 31, 2018
Jun 1, 2006
May 31, 2016
Apr 1, 2002
Jan 01, 2004
Mar 31, 2012
Dec 31, 2008
21
Science Park
Solano
Sta. Maria
Pulo Road, Bgy. Diezmo, Cabuyao, Laguna
National Highway, Solano, Nueva Ecija
#39 J.P. Rizal St., Pob., Sta. Maria Bulacan
Jan 01, 2009
Jun 1, 2007
Jan 01, 2008
Dec 31, 2009
May 31, 2012
Dec 31, 2017
Sta. Rosa
July 1, 2007
Oct 31, 2009
Tarlac
Tayug
Tuguegarao
Paseo de Sta. Rosa, Bgy. Don Jose, Sta. Rosa,
Laguna
Carvajal Building, Old National Highway, Balibago,
Sta. Rosa, Laguna
Royal Subic Duty Free Complex, Rizal cor.
Argonaut Highway, Subic Bay Free Port Zone,
Olongapo, Zambales
F. Tanedo St., Tarlac, Tarlac
Bonifacio St., Tayug, Pangasinan
Bonifacio cor. Gomez St., Tuguegarao, Cagayan
Oct 1, 2001
Apr 1, 1997
Mar 8, 2000
Sep 30, 2011
Mar 31, 2017
Mar 9, 2015
Urdaneta
McArthur Highway, Urdaneta, Pangasinan
Jun 15, 2003
Jun 15, 2013
Carretas St., San Jose Antique
Apr 30, 2008
Sta. Rosa Balibago
Subic
1/
May 1, 2007
Feb 1, 1999
Apr 30, 2017
Jan 31, 2009
1/
VISAYAS AREA
Antique
Apr 30, 2009
1/
Banilad
Boracay
Calbayog
Catarman
Banilad Road, Cebu City
Station 1, Brgy Balabag Boracay, Malay, Aklan
cor. Magsaysay Ave & Gomez Sts., Calbayog City,
Northern Samar
J.P. Rizal St., Catarman N. Samar
Jan 17, 2005
Dec 1, 2009
May 1, 2007
Jun 30, 2000
Jan 18, 2010
Dec 1, 2019
Apr 30, 2012
Jun 30, 2009
1/
Catbalogan
Cebu Paseo Arcenas
Consolacion
Dumaguete
Guadalupe
Hinigaran
Iloilo-Ledesma
Iloilo-Mabini
Jaro
Jetty Port Fx Booth
Kalibo
Libertad
Lacson
Mactan
MEPZ (Mactan 2)
Manalili
North Reclamation
Ormoc
San Carlos
Shopping
Sto Niño
del Rosario St., Catbalogan , Western Samar
Don Ramon Arcenas St., R. Duterte St., Banawa,
Cebu City
ADM Building, Cansaga, Consolacion, Cebu
Dr. V. Locsin St., Dumaguete City
151 M Velez St., Guadalupe, Cebu City
Rizal St. (National Road), Hinigaran, Negros
Occidental
Cor. Ledesma & Quezon St., Iloilo City
Go Pun Building, Mabini cor. Delgado Sts., Iloilo
City
Cor. Seminario & E. Lopez STS. Jaro. Iloilo City
Brgy. Caticlan Malay, Aklan
Roxas Ave., Kalibo Aklan
AU Gomez Bldg., Libertad Ext., Bacolod City
G/F Lourdes C Centre II Bldg., 14th -Lacson Sts.,
Bacolod City
Mepz Bldg., Mepz 1, Lapu-Lapu City, Cebu
Pueblo Verde Mactan Export Processing Zone II
Basak, Lapu-Lapu City
Tan Sucheng Bldg., V. Gullas St., Cebu City
CIFC Tower, Humabon St., cor Juan Luna Ave.,
North Reclamation Area, Cebu City
GF MFT Bldg., Real cor Carlos Tans Sts., Ormoc
City
Locsin St., San Carlos City, Negros Occ.
Hilado Street, Bacolod City
Belmont Home Depot Bldg., Cor. P. Burgos &
Nov 1, 1992
Feb 27, 2009
Oct 31, 2012
Feb 27, 2014
May 5, 2003
Dec 31, 1992
Feb 28, 2007
May 5, 2005
May 4, 2018
Dec 31, 2012
Feb 28, 2012
Apr 30, 2020
Apr 01, 2008
Apr 1, 2009
May 31, 2018
Mar 31, 2019
Dec 1, 2008
Nov 05, 2008
Apr1, 2008
May 1, 2006
Nov 1, 2006
Nov 30, 2014
Nov 04, 2013
Feb 28, 2018
April 30, 2011
Nov 30, 2011
Jan 9, 2007
Jan 9, 2017
Oct 13, 2001
Feb 1, 1996
Aug 1, 2006
Oct 12, 2016
Jan 31, 2011
July 31, 2011
May 16, 2007
Aug 1, 2007
Jun 1, 2006
Nov 01, 2008
May 15, 2017
Jul 31, 2011
May 31, 2016
Nov 01, 2013
22
Legaspi St., San Roque, Cebu City
Cor. Lakandula & C Padilla Sts., Cebu City
Toledo Commercial Village, Brgy. Poblacion,
Toledo City
Jan 31, 2008
Jan 1, 2007
Jan 31, 2018
Dec 31, 2011
Butuan
Bajada
Cagayan de Oro
Cogon
cor E Luna & Lopez Jaena Sts., Butuan City
JP Laurel Ave., corner Villa Abrille st., Davao City
cor A. Velez & JR Borja Sts., Cagayan de Oro City
cor Yacapin & Osmena St., Cagayan de Oro City
Jun 28, 2004
Aug 16, 2009
Dec 1, 2007
Sep 1, 2008
Jun 28, 2012
Aug 16, 2019
Nov 2012
Aug 31, 2018
Cotabato
Damosa Gateway
Don Rufino Alonzo St. Cotabato City
Corner Mamay Road and JP Laurel Avenue,
Lanang, Davao City
NCCC Mall Davao Crossing Mc Arthur Highway
and Maa Road Matina Davao City
cor General Luna & Lacaya Sts., Dipolog City
Dole Phil Compound, Cannary Site, Polomolok
South Cotabato
Stall Nos. 7 & 8 Safii Mall, J. Catolico Sr. Ave.,
Lagao, General Santos City
Quezon Ave. cor. B. Labao St., Poblacion, Iligan
City, Lanao del Norte
Corner San Pedro & Ilustre Sts. Davao City
Quezon Blvd., Kidapawan City
Gateway Tower 1, Limketkai Center, Cagayan de
Oro City
Gen San Drive cor Roxas St., Koranadal City, South
Cotabato
Gaisano Grand Mall, Quzon Street Panabo City
Cor. Monteverde & Sales Sts., Davao City
Cor. San Nicolas & Burgos Sts., Surigao City
Cor. San Nicolas & Burgos Sts., Surigao City
Hilario Bldg., cor Bonifacio St., National Highway,
Tacurong City
1/
1/
Tabo-an
Toledo
MINDANAO AREA
Davao-NCCC Mall
Dipolog
Dole Ext. Office
Gensan
Iligan
Ilustre
Kidapawan
Limketkai
Marbel
Panabo
Sta. Ana
Surigao
Surigao
Tacurong
Tandag
Valencia
Victoria Plaza
Zamboanga FSIN
Zamboanga Veterans
Pimentel Bldg., Donasco St., Tandag, Surigao del
Sur
Sayre National Highway cor Lavinia Ave, Valencia
Bukidnon
J.P. Laurel St. Bajada Davao City
SVK Bldg., T Claudio St., Zamboanga City
YPC Bldg., Veterans Ave., Zamboanga City
August 1, 2007 July 31, 2012
Aug 20, 2007
Aug 20, 2012
Oct 1, 1996
Jan 1, 2009
Sep 30, 2011
Dec 31, 2009
Jun 1, 2004
May 31, 2009
1/
Feb 1, 2007
Jan 30, 2014
May 1, 2002
Jul 15, 2008
Jul 1, 2009
Apr 30, 2012
Jul 15, 2018
Jun 30, 2019
Nov 20, 2008
Nov 20, 2020
Dec 23, 2008
Jun 6, 2005
Feb 1, 2008
Feb 1, 2008
Nov 15, 1996
Dec 13, 2013
Jun 7, 2010
Jan 31, 2018
Jan 31, 2018
Nov 15, 2006
1/
Jul 1, 2006
Jun 30, 2016
Sep 1, 2007
Aug 31, 2012
Jul 12, 2003
Mar 2, 2002
Nov 1, 2007
Jul 12, 2013
Mar 1, 2012
Nov 1, 2012
23
BC NAME
BUSINESS ADDRESS
CONTRACT PERIOD
START
EXPIRY
E. RCBC SAVINGS BANK LEASED PREMISES
METRO MANILA
G/F Sycamore Centre, Alabang-Zapote Road,
Alabang, Muntinlupa City
Jaka Bldg., 6780 Ayala Ave., Makati City
Ayala Ave.
Quirino Ave. cor. Aragon St., Baclaran, Parañaque
Baclaran
City
84 A. Bonifacio Ave., Riverbank Center, Marikina
Barangka
City
8 Poinsettia Road,Quezon City
Binondo/Mendiola
1809 C.M. Recto Ave., Manila
C. M. Recto
Unit 1717 A Divisoria Mall, Sto. Cristo cor.
Divisoria Mall
Commercio St., Binondo
1123-25 A. Mabini St., Ermita Manila
Ermita
32nd St. cor. Bonifacio Blvd., Global City, Taguig
Fort Bonifacio
City
Arañez Bldg., Kalentong St., Sta. Ana, Manila
Kalentong
Brgy. La Huerta, Quirino Ave., Parañaque City
La Huerta
Manuela Bldg. I, Alabang-Zapote Road, Las Piñas
Las Piñas
City
Las Piñas (add'l area) Manuela Bldg. I, Alabang-Zapote Road, Las Piñas
City
444 Edsa cor. Shaw Blvd., Mandaluyong City
Manuela-Edsa
Metropolis-Alabang Metropolis Star, Alabang, Muntinlupa City
Ortigas Extension corner Riverside Ave., Brgy. Sta.
Ortigas Extension
Lucia, 1608 Pasig City
Unit 201 Pacific Place Bldg., Pearl Drive, Ortigas
Pacific Place (201)
Center, Pasig City
Unit 202 Pacific Place Bldg., Pearl Drive, Ortigas
Pacific Place (202)
Center, Pasig City
Mar 16, 2007
Mar 15, 2013
Jul 01, 2007
Oct 02, 1998
Jun 30, 2012
Oct 01, 2015
Jun 1,2009
May 31,2012
Sep 01,2009
Jun 1, 2003
Jun 30, 1997
Aug 31,2019
May 31, 2013
Jun 30, 2015
Jan 1, 2005
Dec 16,2009
Dec 31, 2015
Dec 15,2014
May 1, 2002
Aug 17, 2007
Apr 16,2008
Apr 30, 2012
Aug 16, 2012
Apr 15,2013
Apr 16,2008
Apr 15,2013
Aug. 1, 2008
Jun 1, 2004
Sep 1, 2008
Jul 31,2013
Feb 1, 2014
Aug 31, 2018
July 1,2009
Jun 30, 2012
Sep 1, 2004
Aug 30, 2006
2350 Taft Ave. cor. Libertad, Pasay City
Dr. Sixto Antonio Ave., Capasigan, Pasig City
G/F Matrinco Bldg., 2178 Pasong Tamo, Makati
City
Dr. A. Santos Ave., San Dionisio, Sucat, Parañaque
City
26 Cleofas St., San Miguel Subd., Tandang Sora,
Quezon City
Mar 1,2008
Sep 26, 1997
Feb 15, 1998
Feb 28,2013
Sep 26, 2012
Feb 14, 2013
Sep 1, 2007
Aug 30, 2012
Jan 1, 2008
Dec 31, 2012
18/F Tektite Bldg., West Tower, Exchange Road,
Ortigas Center, Pasig City
18/F Tektite Bldg., West Tower, Exchange Road,
Ortigas Center, Pasig City
18/F Tektite Bldg., West Tower, Exchange Road,
Ortigas Center, Pasig City
PSEC, Ortigas Center, Pasig City
Picture City Center, 88 Timog Ave., Quezon City
Apr 16, 2005
Apr 15, 2010
May 1, 2008
Apr 30, 2013
Feb 1, 2008
Jan 31, 2018
Jun 1, 2008
Feb 16, 2007
May 31, 2013
Feb 15, 2016
Ayala-Alabang
Pasay
Pasig Town Proper
Pasong Tamo
Sucat
Tandang Sora
Warehouse
Tektite (1801 A & B,
1806 B)
Tektite (1802 A, B &
C)
Tektite (1803 B )
Tektite (Fiber Optic)
Timog
1/
24
LUZON AREA
Quintos Bldg., Poblacion, Alaminos City,
Pangasinan
122 General A. Luna St., Ampid I. San Mateo, Rizal
810 Henson St., Angeles City
G/f Juniper Bldg., A. Bonifacio St., Baguio City
Diego Silang St., Barangay #15, Batangas City
Brgy. San Jose, National Highway, Candon, Ilocos
Sur
59 Gov. Luis Ferrer Ave., Brgy. Malabon, Gen.
Trias Cavite
Ilustre Ave., Lemery Batangas
G/F Columban Plaza, Poblacion, Lingayen
Pangasinan
El Camino Real St., Las Villas de Sto. Niño, Brgy.
Camalig, Meycauayan, Bul.
RFC Molino Mall, Molino Road, Molino II, Bacoor
Cavite
Brgy. San Juan, Morong, Rizal
G/F Queensland Bldg., McArthur Hiway, Dolores,
San Fernando Pamp.
Dr. Concepcion A. Aguila Memorial College,
Poblacion, San Jose, Batangas
Brgy. Landayan, San Pedro, Laguna
45 A. mabini Ave., Brgy.2, Tanauan City, Batangas
J. P. Rizal St., Plaza Aldea, Tanay, Rizal
Brgy. San Agustin, Trece Martirez, Cavite City
McArthur Highway, Brgy. San Vicente, Urdaneta,
Pangasinan
Plaza Maestro, Vigan City, Ilocos Sur
Sep 1, 2007
Aug 31, 2012
Aug 1, 2008
Dec 14, 2007
Jan 01, 2010
Oct 24, 2007
Sep 1, 2002
Jul 31, 2013
Dec 13, 2012
Dec 31, 2013
Oct 23, 2017
Sep 1, 2012
Jun 1, 1993
Jun 1, 2013
Nov 1, 2006
Sep 1, 2008
Oct 31, 2016
Aug 31, 2013
Oct 1, 2006
Sep 30, 2011
Jul 1, 2003
Jun 30, 2013
Jun 1, 1992
Oct 1, 2007
Jun 1, 2017
Sep 30, 2013
Sep 1, 2008
Sep 1, 2013
Apr 14, 2005
Dec 1, 2003
Aug 1, 2007
Aug 1, 2008
Nov 9, 2005
Apr 13, 2015
Nov 30, 2013
Jul 3, 2012
Aug 1, 2013
Nov 9, 2010
Jun 2, 2009
Jun 1, 2012
Jan 1, 2007
Dec 31, 2011
May 15,2009
May 14,2014
Maasin
Naga
G/F Basak Commecial (King3), Basak Mandaue,
Cebu City
Golden Heritage Building No.1,San Juan, Luzuriaga
Sts., Bacolod City
Tunga-Tunga, Maasin, Southern Leyte
Gen. Luna St., Naga City
Feb 1,2009
Apr 21, 2007
Talamban
Midel Bldg., Highway of Talamban, Cebu City
Oct 1, 2006
Jan 31,2014
Nov 21,
20071/
Oct 1, 2011
Alaminos
Ampid, San Mateo
Angeles
Baguio
Batangas
Candon
Gen. Trias
Lemery
Lingayen
Meycauayan (Sto.
Niño-ATM off site)
Molino
Morong
San Fernando
San Jose, Batangas
San Pedro
Tanauan
Tanay
Trece Martirez
Urdaneta
Vigan
VISAYAS AREA
Basak
Luzuriaga
25
MINDANAO AREA
Waling-Waling St. cor. Ferrabel St., Cagayan de
Oro City
Carmen (Warehouse) Zone 5, Acacia St., Carmen, Cagayan de Oro
Carmen
Oct 1, 2008
Sep 30, 2009
1/
Aug. 1, 2008
July 31, 2009
1/
Sep 15, 2007
Gen. Santos (ATM off J. Catolico Sr. Ave., Gen. Santos City
site)
G/F Ana Socorro Bldg., J.P. Laurel Avenue, Davao June 1,2009
J.P. Laurel
City
Veterans Federation of the Phils. Bldg., Tomas
Aug 1, 2007
Monteverde
Monteverde Ave., Davao City
1/
Sep 14, 2009
1/
May 31,2014
Jul 31, 2012
In process of renewal and/or subject of re-negotiation
All the facilities and properties of the Bank are in good condition. Likewise, there are no liens and
encumbrances on said properties of the Bank. Further, the Bank as of yearend 2009, is still open to
acquisitions of smaller banks (in the case of commercial banks) and relatively larger ones (in the
case of thrift banks).
Item 3. Legal Proceedings
In the normal course of operations of the Bank, there are various outstanding commitments and
contingent liabilities such as guarantees, commitments to extend credit, tax assessments, etc., which
are not reflected in the accompanying financial statements. Management does not anticipate losses
from these transactions that will adversely affect operations.
In the opinion of management, the suits and claims that remain unsettled, if decided adversely, will
not involve sums that would have a material effect on Bank’s financial position or operating results.
In June 2003, RCBC Capital, a wholly-owned subsidiary of the Bank, filed an arbitration claim
with the International Chamber of Commerce (ICC) against Equitable PCI Bank (“Equitable”)
relating to RCBC Capital’s acquisition of Bankard shares from Equitable in May 2000 for a
purchase price of approximately P1.8 billion. The claim was based on alleged deficiencies in
Bankard’s accounting practices and non-disclosure of material facts in relation to the acquisition.
RCBC Capital sought a rescission of the sale or damages of approximately P1.0 billion, including
interest and expenses. The arbitration hearings were held before the ICC Arbitral Tribunal
(Tribunal). In September 2007, the Tribunal upheld the claim of RCBC Capital and stated that
RCBC Capital is entitled to damages for the breach. On October 26 and 27, 2009, the final arbitral
hearings were conducted, with experts presenting evidence to determine quantum of damages. The
Bank's written submissions relating to the damages it is claiming were filed in December, 2009.
In May 2006, RCBC Capital filed a civil case against SGV for damages of over P560.0 million.
This civil suit alleges that SGV’s audit reports in respect of Bankard for the fiscal years
commencing in 1997 and ending in 1999, on which RCBC Capital relied when it purchased
Bankard in May 2000 for approximately P1.8 billion, were not prepared in accordance with
Philippine accounting principles that were applicable at the time. The civil case remains pending
with the Regional Trial Court of Makati City.
Except for the above-mentioned lawsuit involving the Bank’s majority owned subsidiary, RCBC
Capital Corporation and SGV & Company, the Bank is not aware of any suits and claims against its
26
subsidiaries, which if decided adversely would have a material effect on its financial position or
operating results.
Item 4. Submission of Matters to a Vote of Security Holders
In its special meeting held last 01 September 2009, the Bank received a total of 725,923,568 votes
in favor of the proposal for the re-issuance of 41,993,389 RCBC Treasury Shares in exchange for
shares of stock in MICO Equities, Inc. The said votes represent 77.368% of the outstanding
870,421,715 common shares and 67,851,213 preferred shares entitled to vote as of record date 30
June 2009.
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters
The common shares of the Bank are listed in the Philippine Stock Exchange. As of December 29,
2009 the market price of RCBC’s common shares closed at P17.25 per share. The trading prices of
said shares for the different quarters of the years 2009 and 2008 are as follows:
Q1
Latest
Practicable
Trading Date
2009 High
Low
2008 High
Low
Q2
Latest
Practicable
Trading Date
11.50/03.27.09
8.80/03.12.09
23.75/01.02.08
16.50/03.18.08
Q3
Latest
Practicable
Trading Date
17.00/05.11.09
10.00/04.01.09
19.25/05.26.08
14.75/06.30.08
18.25/09.24.09
13.50/07.03.09
18.00/09.08.08
13.75/07.01.08
Q4
Latest
Practicable
Trading Date
19.25/11.18.09
16.50/11.03.09
16.00/10.02.08
9.30/10.29.08
There were 91 preferred shareholders and 919 common shareholders of record as of December 31,
2009. Likewise, preferred shares and common shares outstanding as of December 31, 2009 were
2,621,506 and 898,129,515 respectively.
The top 20 common stockholders as of December 31, 2009:
No. of Shares
Name
PAN MALAYAN MANAGEMENT & INVESTMENT
CORPORATION
PCD NOMINEE CORPORATION
% to Total
431,970,241
48.10%
308,373,181
34.34%
PCD NOMINEE CORP.(NF)
72,614,670
8.09%
GREAT PACIFIC LIFE ASSURANCE
CORPORATION
MALAYAN INSURANCE CO., INC.
17,150,132
1.91%
15,565,439
1.73%
27
FLOIRENDO, ANTONIO O.
15,149,692
1.69%
BANKERS ASSURANCE CORPORATION (formerly
MALAYAN ZURICH INSURANCE CO., INC.)
F. YAP SECURITIES, INC.
8,833,173
0.98%
4,050,000
0.45%
FIRST NATIONWIDE ASSURANCE CORP.
3,714,413
0.41%
A.T. YUCHENGCO, INC.
3,243,871
0.36%
DHS INVESTMENTS, INC.
2,233,679
0.25%
HYDEE MANAGEMENT & RESOURCE CORP.
1,650,719
0.18%
REYNA, LEONARDO T. SIGUION
1,515,938
0.17%
SPINNAKER GLOBAL EMERGING MARKETS
FUND LTD.
SPINNAKER GLOBAL STRATEGIC FUND LTD.
1,274,802
0.14%
867,951
0.10%
BACOLOD TWINSTAR CORPORATION
800,000
0.09%
WILSON, ISABEL CARO
590,709
0.07%
ROSARIO, RODOLFO P. DEL
574,724
0.06%
SPINNAKER GLOBAL OPPORTUNITY FUND LTD.
569,592
0.06%
GAW JR., MACARIO
422,000
0.05%
The top 20 preferred stockholders as of December 31, 2009:
No. of Shares
Name
FLOIRENDO, ANTONIO O.
% to Total
2,148,892
81.97%
ROSARIO, RODOLFO P. DEL
81,521
3.11%
HSBC MANILA OBO
66,624
2.54%
GO, HOMER
46,355
1.77%
CAMPOS LANUZA & CO. INC.
44,179
1.69%
CONCEPCION, CARMENCITA
31,842
1.21%
INTRA-INVEST SEC. INC.
28,011
1.07%
28
G. D. TAN & CO. INC.
26,753
1.02%
OPTIMUM SECURITIES CORP.
16,666
0.64%
CHAN, FREDERICK
16,158
0.62%
BDO SECURITIES CORP.
9,304
0.35%
ERESE, HENRY
8,790
0.34%
NGO, LORETA
8,600
0.33%
NEW WORLD SEC CO. INC.
8,166
0.31%
MANDARIN SECURITIES CORPORATION
7,583
0.29%
TAN, LUCIANO H.
7,309
0.28%
ABACUS SECURITIES CORP.
6,021
0.23%
5,558
0.21%
5,372
0.20%
5,000
0.19%
HWANG, HANS YAP
ANG, TONY ANG &/OR ROSEMARIE
SIA, JOHNSON CHUA
The details of the 2009 and 2008 cash dividend declarations and distributions are as follows:
(Amounts in millions)
Date
Declared
Dividend
Per Share
Total Amount
October 30, 2007
P 0.1829
January 28, 2008
P 0.174
July 30, 2007
*
March 31, 2008
P 0.1177
March 31, 2008
P 0.4800
March 31, 2008
P 0.4800
June 30, 2008
P 0.1227
July 30, 2007
*
September 29, 2008
P 0.1331
September 29, 2008
P 0.1331
September 29, 2008
*
September 29, 2008
*
January 26, 2009
P 0.0881
March 30, 2009
P 0.0824
March 30, 2009
P 0.3060
March 30, 2009
P 0.3060
June 29, 2009
P 0.0667
September 28, 2009
P 0.0579
September 28, 2009
*
* Cash dividends on Hybrid perpetual securities
P 15,054
P 14,945
P 207,572
P 10,671
P 462,165
P 41,248
P 10,445
P 241,893
P 11,317
P 11,317
P 239,123
P 232,038
P 5,978
P 5,589
P 20,762
P 266,349
P 4,524
P 3,931
P 235,272
Stockholders of
Record as of
December 21, 2007
March 21, 2008
*
June 21, 2008
June 29, 2008
June 29, 2008
September 21, 2008
*
December 21, 2008
December 21, 2008
*
December 21, 2008
December 21, 2008
February 28, 2009
March 11, 2009
March 11, 2009
May 31, 2009
December 21, 2009
*
Date Approved
BOD
BSP
October 30, 2007
January 28, 2008
July 30, 2007
March 31, 2008
March 31, 2008
March 31, 2008
June 30, 2008
July 30, 2007
September 29, 2008
September 29, 2008
September 29, 2008
September 29, 2008
January 26, 2009
March 30, 2009
March 30, 2009
March 30, 2009
June 29, 2009
September 28, 2009
September 28, 2009
January 4, 2008
April 4, 2008
April 4, 2008
June 19, 2008
June 19, 2008
June 19, 2008
September 3, 2008
September 3, 2008
February 10, 2009
February 10, 2009
April 16, 2009
September 1, 2009
April 16, 2009
June 10, 2009
June 10, 2009
June 10, 2009
September 1, 2009
December 7, 2009
Pending
Date
Paid/Payable
January 10, 2008
April 17, 2008
April 25, 2008
July 3, 2008
June 30, 2008
June 30, 2008
September 30, 2008
October 24, 2008
February 23, 2009
February 23, 2009
April 24, 2009
October 27, 2009
May 8, 2009
July 3, 2009
July 13, 2009
July 13, 2009
September 10, 2009
January 5, 2010
Pending
29
Dividends are declared and paid out of the surplus profits of the Bank as often and at such times as
the Board of Directors may determine after making provisions for the necessary reserves in
accordance with law and the regulations of the Bangko Sentral ng Pilipinas.
Item 6. Management’s Discussion and Analysis or Plan of Operation.
2007.
The impetus for economic growth was sustained in 2007 due to strong economic
fundamentals, the generally peaceful May elections, the continued appreciation of the peso and
strong corporate results. These positive developments, however, were negated by soaring oil
prices, widening global credit crunch resulting from the sub-prime mortgage crisis in the US, huge
equities sell-offs globally and the slowing US economy. Foreign portfolio investments posted a net
inflow in 2007, 35% higher than the US$2.6 billion figure reported for 2006.
Although inflation accelerated to its highest level in December to 3.9%, the full year average of
2.8% is way below the official target of 4.0-5.0 percent. It also reflected a sharp slowdown from
the previous year’s 6.2% full year average. The strong peso against the US dollar helped reduce
average domestic prices as it provided stability to import costs, e.g., crude oil and petroleum
products. However, the rising price of oil remains a challenge as it poses upside risks to inflation.
The sustained inflows of remittances from overseas Filipinos and foreign investments resulted in
the continued appreciation of the peso, record-high gross international reserves, cheaper
importation costs and lower servicing of foreign currency denominated debts. For the third straight
year, the average foreign exchange rate appreciated, improving by 10.08% from P51.29 in 2006 to
P46.12 to the US dollar in 2007. At yearend, the peso-dollar exchange rate stood at P41.28,
15.84% stronger than the previous year’s P49.05 to the US dollar. The peso was among the best
performing currencies in Asia in 2007. The weakening of the US dollar against major global
currencies further contributed to the pesos strength.
The benchmark 91-day Treasury bill as of end-2007 posted an average rate of 3.40%, lower than
the 5.19% the previous year, partly supported by lower inflation, improvement in the country’s
fiscal position and the large surplus in the balance of payments. Relatively low borrowing costs due
to the prevailing low interest rates encouraged greater economic activity in terms of new
investments and expansion projects. Consequently, higher demand for commercial loans was
sustained during the year. On the other hand, the average US dollar Singapore Offered Rate
(SIBOR) gained 14 basis points year on year from 5.02% at end 2006 to 5.16%.
Performance Indicators
30
RIZAL COMMERCIAL BANKING CORPORATION and SUBSIDIARIES
In Php
Consolidated
Parent
Audited
2006
2007
2006
2007
Return on Average Assets (ROA)
1.01%
1.42%
0.89%
1.04%
Return on Average Equity (ROE)
12.64%
12.43%
9.14%
7.26%
BIS Capital Adequacy Ratio (CAR)
20.31%
18.70%
20.47%
18.21%
Non-Performing Loans (NPL) Ratio
5.62%
5.27%
6.46%
6.12%
Non-Performing Assets (NPA)
Ratio
8.23%
6.85%
6.63%
5.20%
Earnings per Share (EPS)
Basic
2.82 *
2.93
2.06 *
1.53
Diluted
2.81 *
2.84
2.06 *
1.48
*
After retroactive effect of 15% stock dividends
Wholly-Owned/Majority Owned Subsidiaries
RCBC SAVINGS BANK
In Php
Audited
2006
Return on Average Assets (ROA)
Return on Average Equity (ROE)
BIS Capital Adequacy Ratio (CAR)
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
Audited
2007
1.23%
12.76%
12.16%
3.74%
15.63%
20.89
RCBC CAPITAL CORPORATION and Subsidiaries
In Php
Audited
2006
Return on Average Assets (ROA)
Return on Average Equity (ROE)
BIS Capital Adequacy Ratio (CAR)
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
2007
-2.27%
-7.70%
83.67%
-
7.82
Audited
2006
RCBC INTERNATIONAL FINANCE LIMITED
In Php
12.76%
14.87%
28.27%
(2.45)
RCBC FOREX BROKERS CORPORATION
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
1.74%
16.35%
15.36%
3.49%
12.11%
33.09
2007
17.46%
22.11%
77.90%
-
15.71%
26.02%
80.37%
-
86.00
110.47
Audited
31
2006
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
2007
7.22%
7.72%
90.33%
-
5.91
RCBC CALIFORNIA INTERNATIONAL, INC. and Subsidiary
In Php
Audited
2006
Return on Average Assets (ROA)
10.21%
Return on Average Equity (ROE)
27.42%
Capital to Total Assets
42.84%
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
21.96
RCBC TELEMONEY EUROPE S.P.A
In Php
1.00
2007
5.04%
13.67%
30.56%
11.02
Audited
2006
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
1.31%
1.42%
92.93%
2007
8.19%
21.88%
35.31%
-
2.67%
13.65%
30.14%
-
17.43
8.15
Notes to the Computations:
1.
Consolidated and Parent company ROA and ROE ratios were taken from the corresponding audited financial statements. ROA ratio of the
subsidiaries was determined based on the average of the quarterly ending balances of total assets, audited and/or unaudited. ROE ratio of the
subsidiaries was likewise computed based on the average of the quarterly ending balances of total equity, audited and/or unaudited.
2.
CAR covers combined credit, market and operational risks. Where the BIS CAR was not computed, the simple Capital to Total Assets ratio formula
was used.
3.
NPL ratio is determined by using the following formula: (Total NPLs net of NPLs fully covered by allowance for losses) / (Total loan portfolio net of
NPLs fully covered by allowance for losses).
4.
NPA ratio is determined by using the following formula: (Net NPLs + Net ROPA) / Total Assets.
5.
For some subsidiaries, the NPL/NPA ratios were not computed since these ratios were not applicable.
The Bank showed its strength and resilience as an emerging force and major player in the banking
industry as it successfully prevailed over the challenges of the past year. The Bank’s improved
performance was largely attributed to the structural and operating strategies undertaken over the
past two years, the P5.6 billion new capital raised in February 2007, the aggressive low cost deposit
campaign, prudent loan growth and treasury trading strategy. Coupled with an intensified
marketing campaign to improve the services offered, these strategies resulted in a healthy growth in
revenues.
32
In 2007 and thereafter, the Bank’s strategy would be repositioning for sustainable growth. Its goal
would be to attract additional clients with the introduction of new products and services, expansion
of the Bank’s presence and network and brand building. Additionally, the Bank intends to tap the
country’s middle class, overseas Filipino workers (OFWs) and the small and medium enterprises
(SMEs). The middle class constitutes the biggest segment of the country’s income brackets while
the SMEs represent about 98% of the businesses in the country. Additionally, the Bank would
invest in technology and people as it plans to open more ATMs in the next three years and hire
young, dedicated and competent people.
RCBC continues to be in the market for well-managed mid-sized commercial banks and thrift banks
which may enable the Bank to increase its resource base, expand its branch network and reach in a
cost-efficient manner.
The Bank likewise plans to boost its global presence with the opening of several overseas branches
within the next three years as well as put up new remittance centers in Canada, the US, the Middle
East and the United Kingdom. To capture and serve the banking needs of migrant Filipinos, RCBC
offers deposit accounts, investments, trust, bancassurance, business and property solutions to
overseas Filipno workers through its remittance contact points that have an expansive branch
network and tie-ups. To further improve its market share in the remittance market, other initiatives
like tie-ups with shipping and manning agencies for the payroll and remittance needs of their
seamen are being intensified. Tie-ups with real estate developers who use banks to receive
remittance payments from overseas Filipino buyers are also being pushed. Moreover, the
development of a web-based channel for OFWs is in the pipeline.
To show that the Bank is committed to reaching out to its clients by giving them more access to the
wide array of products and services, the Bank recently opened business centers in various locations
throughout the country. The Bank intends to adopt a two-ATM per branch strategy in 2008 to
reduce over-the-counter transactions and allow bank personnel to deal with loans and deposits and
other transactions that require human intervention including marketing. This is part of the bank’s
plan to put up more ATMs in the next three years after rationalizing the deployment of its ATMs
and finalizing a definitive five-year plan for it. ATMs play a crucial part in the Bank’s plan to
expand its client base. It should be a strong channel which can be used to offer the various products
and services of the Bank.
Consolidated total resources at the end of 2007 stood at P239.098 billion, 6.88% or P15.388 billion
higher than the previous year’s P223.710 billion.
The P15.388 billion expansion in total assets was mainly due to the increase in cash and other cash
items, deposits maintained with the Bangko Sentral, trading and investment securities, loans and
other receivables and investments in associates of 17.38%, 27.73%, 9.64%, 7.58% and 103.60%,
respectively. This was offset, however, by the drop in deposits with other banks, investment
properties and deferred tax assets of 38.00%, 22.27% and 10.17%, respectively.
Accounting for 7.37% of total assets, deposits with the Bangko Sentral went up by P3.823 billion
due to higher balances of the bank’s Reserve Deposit Account (RDA) for reserve requirement
purposes. Although total investment securities grew by 9.64% only and represented 27.01% of
total resources, available for sale securities (AFS) increased by 14.24% or by P6.809 billion. The
impressive growth in deposit liabilities allowed the Bank to invest in high yielding AFS particularly
ROPs, FXTNs, CLNs and CDOs.
33
However, the growth in AFS was offset by 10.19% decline in fair value through profit and loss
(FVTPL) securities. The decrease was due to the drop in foreign currency denominated bonds and
securities partly arising from the peso appreciation.
Loans and other receivables, at 49.02% of total assets, went up by P8.262 billion. The remarkable
loan growth was primarily due to the prevailing relatively low interest environment that attracted
more borrowers. Additionally, borrowers were generally optimistic and encouraged by the
country’s improved economy and low inflation that pushed them to pursue expansion projects and
carry out new investments.
The substantial growth in investment in associates of P2.123 billion was largely due to the
acquisition of 25% direct equity in RCBC Realty Corporation (RCBC Realty). RCBC Land Inc.
(RCBC Land) partially settled its obligation to the Bank through dacion en pago of its holdings in
RCBC Realty on December 26, 2007. The Monetary Board, in its Resolution No. 1097 dated
September 27, 2007, approved the proposed dacion en pago of the RCBC Realty shares owned by
RCBC Land to RCBC.
Due to the Bank’s shift to higher yielding investments, deposits with other banks contracted by
38.00% from P7.654 billion to P4.745 billion. Interest earning assets, thus, expanded by P13.940
billion from P167.839 billion at yearend 2006.
Investment properties decreased from P9.985 billion to P7.761 billion, or by 22.27%, as the Bank
aggressively pursued the disposition and/or sale of acquired real estate properties through
negotiated sales and auctions. Deferred tax assets also went down by 10.17% mainly due to RCBC
Savings Bank’s (RSB) deferred tax assets reversal by P179.5 million.
Of total investment securities, AFS securities and FVTPL securities accounted for 22.85% and
4.17%, respectively, of total assets. Other resources-net at P12.002 billion comprised 5.02% of
total resources.
Sources of funds came mainly from interest-bearing liabilities that grew by 6.54% to P199.558
billion. Other liabilities declined by P2.497 billion, or by 19.19%. Capital funds expanded by
24.06% to P29.020 billion.
Deposit liabilities at P175.929 billion grew by 11.67% from P157.550 billion. Peso and foreign
currency denominated deposits expanded, in spite of the continued appreciation of the peso and low
interest rates, and were used to fund the growth in total loans. The building of a strong sales culture
across the Bank and the deposit campaign launched to target not only niche clients but also
potential clients with average incomes and those working and living overseas contributed to the
substantial growth in deposits. Accordingly, demand, savings and time deposits went up by 8.98%,
15.17% and 9.70%, respectively.
The 27.30% drop in bills payable from P17.634 billion to P12.820 billion was due to maturing
obligations. Similarly, bonds payable declined by 15.52% from P6.689 billion on account of the
impact of revaluation arising from a strong peso. The peso-dollar exchange rate closed at P41.28 at
yearend 2007, 15.84% stronger than the previous year’s P49.05.
The substantial decrease in due to other banks of P2.620 billion or 77.16% was mainly attributable
to the lower credit balances, which are temporary in nature, of working funds maintained with local
34
and foreign correspondent banks. These accounts are awaiting incoming funds which are already in
transit.
Although interest rates were lower this year as earlier mentioned, accruals of interest, taxes and
other expenses expanded to P3.088 billion or by 8.90% due to the remarkable growth in deposit
liabilities and revenues year on year.
Total liabilities accounted for 87.86% of total resources. At 73.58% of total assets, total deposit
liabilities continued to be the Bank’s main source of funding, particularly savings and time deposits
which comprised 27.93% and 41.15%, respectively, of total resources. Bills payable representing
5.36% of total resources is another important source of funding for liquidity purposes.
The successful follow-on offering of P5.6 billion worth of additional shares in March 2007
increased Bank’s capital funds, inclusive of minority interest and representing 12.14% of total
resources, to P29.020 billion or 24.06% higher than P23.392 billion in 2006.
On account of conversions to common stock, preferred stock was 18.53% lower this year from
P1.055 billion. The P3.299 billion or 52.12% increment in common stock was primarily due to the
additional public offering of approximately 210 million shares (including the green shoe offering),
the 15% stock dividend equivalent to about 109 million shares and the conversion to common
shares or preferred shares.
The P3.453 billion improvement, from P2.119 billion to P5.572 billion, of capital paid in excess of
par resulted from the issuance of common shares and conversion of preferred shares at a premium.
Revaluation reserves on AFS securities and accumulated translation adjustment both declined by
64.34% and 55.77%, respectively, on account of securities sold during the year that resulted to
realized trading gains and the continued appreciation of the peso.
The Bank’s consolidated net income of P3.208 billion for the year 2007 primarily accounted for the
19.22% growth in surplus account. This was, however, offset by the 15% stock dividends, cash
dividend payments to common and preferred shareholders in the total amount of P527 million and
P77 million, respectively, and dividends/interest payment on hybrid tier 1 securities of P452
million.
Share of minority interest was 10.25% higher from negative P283 million to negative P312 million
on account of the higher percentage ownership of minority shareholders in subsidiaries that are not
wholly owned.
On October 30, 2007, the Bank’s Board of Directors approved the acquisition of Merchants Savings
and Loan Association, Inc. (Merchants Bank) from Finman Capital Corporation and the heirs of the
late Luis O. Manapat for P520 million. Closing of the transaction is subject to the successful
negotiation of the relevant agreements as well as Bangko Sentral approval of the terms and
conditions of the relevant agreements.
Merchants Bank is a thrift bank established in 1977. It has 21 operating branches, 7 branches are
located in Metropolitan Manila while the rest are dispersed over Luzon (7), Visayas (4), and
Mindanao (3). The proposed acquisition is part of the Bank’s strategy to increase its branch
network.
The Bangko Sentral’s Monetary Board, in its Resolution No. 89 dated Jan 24, 2008, approved the
Bank’s planned offering of tier 2 notes of up to P7 billion. The notes would qualify as Lower Tier
35
2 capital and would have a call option after the fifth year, giving the Bank the right but not the
obligation to redeem the notes on that year. The new capital will replace RCBC’s maturing Tier 2
capital worth P5 billion issued in 2003. The capital notes were successfully issued on February 22,
2008.
The Bank currently services its clients through its 301 business centers and 300 ATMs nationwide.
The Bank recently launched a battery of new products meant to enhance its current retail market
products and services: (a) E-woman, a checking account exclusively designed for women that
provides special perks and privileges; (b) Rizal Enterprise Checking Account, an interest bearing
checking account with a free accounts payable software that automates the process of printing
checks and reconciling payables; (c) RCBC Retail Internet banking platform that provides clients
access to their RCBC accounts 24/7; and (d) RCBC Bankard Diamond credit card. With these
innovative financial products and services that are sensitive to the needs and wants of its clients, the
Bank expects that its efforts would eventually pay-off in terms of increased profitability and higher
market share. To date, the Bank has already begun to reap the benefits of the structural, operational
and capital improvements initiated in the past two years with the successful offering of P5.6 billion
public offering in March 2007.
During the year, there were no known trends, demands, commitments, events or uncertainties that
would have a material impact on the Bank’s liquidity. The Bank does not anticipate having within
the next twelve (12) months any cash flow or liquidity problems. It is not in default or breach of
any note, loan, lease or other indebtedness or financing arrangement. Further, there are no trade
payables that have not been paid within the stated terms.
To the knowledge and/or information of the Bank, there are no events that will trigger a direct or
contingent financial obligation that is material to the company, including any default or acceleration
of an obligation. There were no material off-balance sheet transactions, arrangements, obligations
(including contingent obligations) and other relationships of the company with unconsolidated
entities or other persons created during the reporting period.
The year 2007 was another good year for the Bank. It recorded its highest net income in history of
P3.208 billion, 56.27% above last year’s P2.053 billion.
The remarkable growth in net revenues was largely due to the 21.50% improvement in net interest
income from P7.258 billion last year. Representing 44.39% of gross revenues, net interest income
was higher year on year on account of higher average interest earning assets and the hike in lowcost funds, particularly traditional deposits, and lower interest rates. Interest rates were considerably
lower year on year as the benchmark 91-day Treasury bills averaged 3.40% this period from 5.19%,
declining 179 basis points year on year. Additionally, the continued appreciation of the peso
contributed to the reduction in interest expenses year on year. Consequently, total interest expense
dropped 19.31% as interest on deposits and borrowings went down by 16.59% and 23.81%,
respectively. Though interest income from loans and receivables and investment securities were
slightly lower year on year due to the continued softening of interest rates, interest income from
deposits rose 102.59% year on year as the Bank participated in the Special Deposit Account
window of the Bangko Sentral in 2007. These placements were subject to tiered interest rates
compared with interbank call loans. As a result total interest income remained stable at P15.330
billion from P15.328 billion.
Accounting for 77.16% of gross revenues, total interest income of P15.330 billion comprised
mainly of interest income from loans and receivables and investment securities that accounted for
48.24% and 24.75%, respectively, of total income. At 32.77% of gross income, total interest
36
expense of P6.511 billion consisted of interest on deposit liabilities and bills payable and other
borrowings, representing 21.10% and 11.67% of gross revenues, respectively. Net income of
P3.208 billion accounted for 16.14% of gross income.
As the quality of Bank’s assets continued to improve, provisioning for impairment losses at P942
million was 46.12% lower year on year.
Other income of P4.538 billion accounted for 22.84% of gross income, mainly consisting of trading
and securities gain-net, service fees and commissions and other income, 6.69%, 7.62% and 5.83%
of total revenues, respectively. The 44.10% drop in trading and securities gain-net, 25.02% decline
in trust fees and 16.17% decrease in commissions and other income, offset by the 40.40% and
52.08% growth in service fees and equity in net earnings of associates, respectively, accounted for
the lower other income year on year. Other income went down by 14.62% from P5.315 billion.
Operating expenses of P8.325 billion comprised 41.90% of gross revenues and was relatively flat as
the Bank aggressively improved its credit card operations and focused on the expansion of its retail
banking network. Manpower costs, occupancy and equipment related expenses and taxes and
licenses accounted for 12.00%, 7.10% and 5.38%, respectively, of total income. The 9.15%
increase in manpower costs from P2.184 billion was basically due to the impact of the new CBA
agreement that became effective in the last quarter of 2006. The higher cost of training and other
employee benefits further contributed to the increase. On the other hand, taxes and licenses went
down by 21.94% from P1.369 billion largely due better tax management and the availment of
discounts on local taxes and fees. Additionally, there was a one-time payment for abatement of
taxes paid to the Bureau of Internal Revenue (BIR) in December 2006. The Bank availed of the
One-time Administrative Abatement Program of the BIR under Revenue Regulations No. 15-2006,
which provides for the abatement of all penalties, including surcharges and interest on delinquent
accounts or assessments, including those subject to ongoing disputes. Similarly, foreign exchange
loss-net decreased by 39.77% year on year from P261 million.
Miscellaneous operating expenses, representing 15.04% of gross revenues, went up by 9.46% on
account of the continuous enhancements and/or improvements to Bank’s communications and
information technology infrastructure in support of its goals. Likewise, consultancy and
professional fees incurred and the fees paid to the Philippine Deposit Insurance Corporation (PDIC)
and the Bangko Sentral ng Pilipinas (BSP) went up as a result of the increase in deposit liabilities
and total assets. Overall, operating costs during the year were effectively managed and controlled.
At P846 million, provision for tax expense increased by 34.90%, or by P219 million, as a major
portion of Bank’s revenues were subjected to final taxes withheld at source. The deferred tax assets
reversal of RSB for P179.5 million likewise contributed to the increase in taxes. Minority interest
in net income went up to P36 million from negative P163 million due to the continued
improvement in the profitability of Bank’s not wholly owned subsidiaries.
Total budget for consolidated capital expenditures for the year 2008 amounts to P1.619 billion.
Primary capital expenditures would include the continuous upgrade and developments to its IT
infrastructure, including software, as well as investments in the expansion of its branch network.
In 2007, there were no known trends, events or uncertainties that have had or that are reasonably
expected to have a material favorable or unfavorable impact on net revenues from continuing
operations.
37
Similarly, there were no significant elements of income or loss that did not arise from the Bank’s
continuing operations.
Lastly, there were no seasonal aspects that have a material effect on the financial condition or
results of operation of the Bank.
2008. Philippine GDP in 2008 grew 4.6%, the lowest in 6 years (since 2002) and down from the
31-year high of 7.2% in 2007. Similarly, Philippine GNP growth slowed down to 6.1% vs. 8.1% in
the previous year.
The US economy, the world’s largest and among the biggest export markets of the Philippines, was
already in recession since December 2007. Developed countries (US, Europe, Japan) were expected
to contract simultaneously for the first time since World War II.
Inflation averaged 9.3% in 2008, sharply up vs. the 2-decade low of 2.8% in 2007, after the sharp
increase in the prices of oil, rice, and other global commodities in the early part of 2008. However,
inflation started to taper off from the 17-year high of 12.5% posted in Aug. 2008, after prices of
major global commodities collapsed in the latter part of 2008, as weaker global economic
conditions translated to lower demand. By December 2008, inflation already receded to a 9-month
low of 8%.
The 91-Day Treasury Bill Rate ended 2008 at 6.12%, nearly double the 3.67% posted a year earlier,
fundamentally consistent with higher inflation. However, it is important to note that the BSP
already reduced the key Philippine interest rates towards the end of the year, in line with the global
trend, as inflationary pressures eased with the collapse in the prices of oil and other major global
commodities. Consequently, key Philippine interest rates in the secondary market, as measured by
the PDST yields, mostly fell to near 1-year lows towards end-2008.
The Peso Exchange Rate depreciated in 2008 by 6.24 Pesos or 15% to close at 47.52 vs. 41.28 in
the previous year, similar to the depreciation in most of the other Southeast Asian currencies.
Philippine Gross International Reserves (GIR) reached a record high of US$37.6 billion or
equivalent to 6 months worth of imports (double compared to the 1990s), thereby increasing the
country’s foreign exchange buffer stock and cushion against speculative attacks on the local
currency.
OFW Remittances for 2008 increased by 13.7% to US$16.4 billion, slightly better than the 13.2%
growth posted in 2007, as OFW deployment increased by 28% to 1.4 million, significantly higher
compared to the 1% growth in 2007. However, for the month of December 2008, it is important to
note that OFW Remittances already slowed to a 2-year low of +1% and OFW Deployment already
declined by 6%.
The global economic recession already weighed on international trade. Exports declined by an
average of 3% to US$49 billion in 2008, compared to a growth of 6% in 2007. It is very important
to note that exports for the month of December 2008 dramatically fell by 40%, the most in at least
28 years. Imports posted a slight growth of 2% in 2008 to US$56.6 billion vs. the 8% growth in the
previous year. However, for the month of December 2008, imports sharply declined by 34%, the
most in at least 28 years. Trade Balance for 2008 was wider at -US$7.6 billion compared to –US$5
billion in the previous year.
38
Performance Indicators
RIZAL COMMERCIAL BANKING CORPORATION and SUBSIDIARIES
In Php
Consolidated
Parent
Audited
2007
2008
2007
2008
Return on Average Assets
1.42%
0.87%
1.04%
0.56%
(ROA)
Return on Average Equity
12.43%
7.40%
7.26%
3.50%
(ROE)
BIS Capital Adequacy Ratio
18.70%
17.30%
18.21%
16.28%
(CAR)
Non-Performing Loans (NPL)
5.27%
2.42%
6.12%
2.54%
Ratio
Non-Performing Assets (NPA)
Ratio
6.85%
4.83%
5.20%
3.32%
Earnings per Share (EPS)*
Basic
2.93
1.72
1.53
0.70
Diluted
2.84
1.66
1.48
0.67
*
After giving retroactive effect to the 15% stock dividend s issued in 2007.
Wholly-Owned/Majority Owned Subsidiaries
RCBC SAVINGS BANK
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
BIS Capital Adequacy Ratio (CAR)
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
MERCHANTS BANK
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
BIS Capital Adequacy Ratio (CAR)
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Loss per Share
Audited
2007
1.76%
15.32%
15.36%
3.49%
12.11%
33.09
Audited
2008
1.78%
13.69%
14.85%
3.63%
3.30%
25.15
Audited
2007
( 6.73%)
(11.72%)
105.11%
0.31%
0.12%
(13.44)
Audited
2008
(23.36%)
(32.33%)
99.12%
2.37%
0.38%
(27.42)
39
RCBC CAPITAL CORPORATION and Subsidiary
In Php
Audited
2007
Return on Average Assets (ROA)
11.03%
Return on Average Equity (ROE)
13.82%
BIS Capital Adequacy Ratio (CAR)
49.07%
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
7.82
RCBC
FOREX
CORPORATION
In Php
Audited
2008
16.81%
20.69%
47.80%
4.02
BROKERS
Audited
2007
15.71%
26.02%
80.37%
110.47
Audited
2008
14.05%
26.68%
43.61%
118.99
RCBC INTERNATIONAL FINANCE, LTD. and Subsidiary
In Php
Audited
2007
Return on Average Assets (ROA)
1.31%
Return on Average Equity (ROE)
1.42%
Capital to Total Assets
92.93%
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings (Loss) per Share
1.00
Audited
2008
(2.77%)
(2.98%)
92.22%
(2.05)
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
RCBCNORTH AMERICA, INC.
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Audited
2007
5.04%
13.67%
30.56%
-
Audited
2008
(14.74%)
(56.86%)
16.15%
40
Non-Performing Assets (NPA) Ratio
Earnings (Loss) per Share
RCBC TELEMONEY EUROPE S.P.A
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
BANKARD, INC.
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
484.69
(1.56)
Audited
2007
2.67%
13.65%
30.14%
48.91
Audited
2008
6.82%
44.06%
11.95%
228.03
Audited
2007
9.57%
12.50%
81.99%
0.29
Audited
2008
31.50%
45.52%
72.47%
0.18
Notes to the Computations:
1.
Parent Company, RSB and MB ROA and ROE ratios were taken from the corresponding audited financial statements. ROA ratio of the other
subsidiaries was determined based on the average of the quarterly ending balances of total assets, audited and/or unaudited. ROE ratio of the
other subsidiaries was likewise computed based on the average of the quarterly ending balances of total equity, audited and/or unaudited.
2.
CAR covers combined credit, market and operational risks. Where the BIS CAR was not computed, the simple Capital to Total Assets ratio
formula was used.
3.
NPL ratio is determined by using the following formula: (Total NPLs net of NPLs fully covered by allowance for losses) / (Total loan portfolio
net of NPLs fully covered by allowance for losses).
4.
NPA ratio is determined by using the following formula: (Net NPLs + Net ROPA) / Total Assets.
5.
For some subsidiaries, the NPL/NPA ratios were not computed since these ratios were not applicable.
2008 was a challenging year for the local banking industry. Almost all the big banks are expected to
post lower income for the whole of last year due to their Lehman exposures. However, RCBC
showed real toughness. In the midst of a very tough environment, RCBC posted a growth in total
resources of 12.20%. Although the Bank’s consolidated net income has declined by 32.86% from
P3.208 billion in 2007 to P2.154 billion in 2008, the Bank’s interest income from loans grew by
13.58% on the expansion of its loan portfolio in the various market segments. Likewise, fees and
commissions and other income increased by 8.51% and 73.07%, respectively, with the ongoing
strategy to not only increase the number of customers but also the volume in remittances, trust and
other fee-based services.
RCBC’s final figures reflect the ongoing developments in the global economy. But as the Bank
continues to strive with the challenges in the present economy, its goal to attract additional one
million clients a year with the introduction of new products and services, expansion of the Bank’s
41
presence and network and brand building, still remain. On the other hand, as a strong and major
player in the remittance business with a wide presence overseas through remittance subsidiaries
and tie-ups, the Bank will keep on tapping the country’s middle class, overseas
Filipino workers (OFWs) and the small and medium enterprises (SMEs). Additionally, the Bank
would continue to invest in technology and people as it plans to open more business centers per
year and ATMs in the next three to five years and hire young, dedicated and competent people.
RCBC continues to be in the market for well-managed mid-sized commercial banks and thrift banks
which may enable the Bank to increase its resource base and expand its branch network and reach
in a cost-efficient manner.
Consolidated total resources grew by 12.20% to P268.270 billion at the end of 2008 for a P29.172
billion increase from the P239.098 billion in 2007.
The P29.172 billion expansion in total assets was mainly due to the increase in cash and other cash
items – 15.87%, loans and other receivables-net – 40.28% and bank premises, furniture, fixtures
and equipment - 15.01%. This was offset, however, by the drop in deposits maintained with the
Bangko Sentral – 6.93%, trading and investment securities – 27.52%, investment properties –
4.82% and deferred tax assets - 15.44%.
Accounting for 6.11% of total assets, deposits with the Bangko Sentral went down by P1.220
billion mainly due to the decrease in reserve requirement by 200 hundred basis points from 21% in
2007 to 19% in 2008. Total investment securities, which represents 17.45% of total resources, has
declined by 27.52% comprising of Financial assets at fair value through profit or loss (FVTPL) –
65.49%, Held-to-maturity investments (HTM) – 7.71% and Available for sale securities (AFS) –
8.46% of total resources. The huge drop in FVTPL and AFS of 65.49% (P6.522 billion) and
58.44% (P31.925 billion), respectively, was mainly due to losses from marking these assets to
market and reclassifications to HTM account with carrying value of P20.674 billion representing
7.71% of total resources.
In October 2008, the International Accounting Standards Board (IASB) issued amendments to IAS
39: Financial Instruments: Recognition and Measurement and International Financial Reporting
Standards (IFRS) 7: Financial Instruments: Disclosures allowing the reclassifications of
investments out of FVTPL category except derivatives and financial instruments designated at fair
value through profit or loss (DFVTPL). Additionally, instruments which would have met the
definition of loans and receivables can be reclassified out of FVTPL or AFS if the entity had the
intent and the ability to hold the financial asset for the foreseeable future or until maturity.
Reclassifications out of FVTPL category should be done only in rare circumstances. The
amendments are applicable in a partially retrospective manner up to July 1, 2008 provided that the
reclassification was made on or before November 15, 2008. These amendments were adopted by
the Financial Reporting Standards Council (FRSC), the local counterpart of IASB. Likewise, the
Bangko Sentral ng Pilipinas (BSP) has issued Circular No. 628 outlining the prudential reporting
guidelines for banks. On February 2, 2009, the SEC approved the adoption of BSP Circular 628 as
being compliant with generally accepted accounting principles for banks. The Bank’s
reclassifications made in 2008 were in accordance with the provisions of IAS/PAS 39 and
IFRS/PFRS 7, as amended and BSP Circular 628. A more comprehensive discussion and
disclosures with regard to reclassification of financial instruments are presented on the attached
Notes to Financial Statements, more particularly Notes 2, 8, 9, 10 and 11.
Representing 61.28% of total resources as of year-end, total net loans and other receivables
increased by 40.28% or P47.208 billion from the P117.195 billion in 2007 to P164.403 billion last
42
year. The said increase was driven by higher loan volumes to corporate and small and medium
enterprises (SMEs) and retail loans granted by RSB, RCBC’s thrift bank subsidiary.
The significant rise in the balance of this account is also on account of the P12.178 increase in
interbank loan receivable and P6.622 billion worth of financial assets previously classified as AFS
to Unquoted debts classified as loans (UDSCL), part of loans and receivables account, as discussed
in the preceding paragraph.
Bank premises, furniture, fixtures and equipment registered a 15.01% increase or P 525.953 million
from P3.504 billion to P4.030 billion arising from the Bank’s aggressive branch expansion as part
of its long-term plan to increase its resource base and expand its branch network. In 2008, the
Parent Bank opened twenty (20) new business centers, deployed fifty eight (58) new ATMs, and
piloted foreign exchange booths and E-biz centers. The Bank has also completed its "computer
refresh" program during the year wherein new personal computers were acquired to replace older
less efficient units.
Investment properties decreased from P7.761 billion to P7.388 billion, or by 4.82%, as the Bank
aggressively pursued the disposition and/or sale of acquired real estate properties through
negotiated sales and auctions.
Reduction in the carrying value of Deferred tax assets by 15.44% or P254.059 million was due to
write-offs of receivables made by subsidiaries resulting to the corresponding reversal of related
deferred tax assets.
Sources of funds came mainly from interest bearing liabilities that grew by 15.57% or P31.066
billion to P230.624 billion. Outstanding acceptances payable increased by 35.87% or P84.19
million while accrued taxes, interest and other taxes and other liabilities declined by P300.054
million or 9.72% and P294.397 million or by 4.09%, respectively. Capital funds declined by 4.77%
from P29.020 billion to P27.637 billion.
Deposit liabilities at P196.227 billion grew by 11.54% from P175.929 billion. Peso and foreign
currency-denominated deposits expanded, in spite of the continued appreciation of the peso and low
interest rates, and were used to fund the growth in total loans. The building of a strong sales culture
across the Bank and various deposit products and services launched to target not only niche clients
but also potential clients with average incomes and those working and living overseas contributed
to the substantial growth in deposits. Accordingly, demand, savings and time deposits went up by
3.34%, 13.43% and 11.15% respectively.
The 67.33% increase in bills payable from P12.820 billion to P21.453 billion was due to higher
foreign currency denominated borrowings. Likewise, the peso equivalent of the outstanding bond
issue as of December 31, 2008 and 2007 amounted to P6.003 million and P5.651 million
respectively, with an increase of 6.23% or P352.151 million mainly due to the higher peso/dollar
exchange rate at year-end.
Accruals of interest, taxes and other expenses decreased to P2.787 billion or by 9.72% from the
previous year of P3.088 billion due to large volume of time deposits whose interest payments
coincide at year-end and lower expense accruals as a result of the Bank’s effort to cut costs.
The Bangko Sentral’s Monetary Board, in its Resolution No. 89 dated Jan 24, 2008, approved the
Bank’s planned offering of tier 2 notes of up to P7 billion. The notes would qualify as Lower Tier
2 capital and would have a call option after the fifth year, giving the Bank the right but not the
43
obligation to redeem the notes on that year. The new capital notes will replace RCBC’s existing
Tier 2 capital worth P5 billion issued in 2003, which was redeemed in July
2008. The new capital notes were successfully issued on February 22, 2008. The outstanding
balance of subordinated debt of P6.942 billion represents the carrying value of the new notes issued
in 2008, higher by 34.58% or P1.784 billion year on year.
Total liabilities accounted for 89.70% of total resources. At 73.15% of total assets, total deposit
liabilities continued to be the Bank’s main source of funding, particularly savings and time deposits
which comprised 28.23% and 40.77 of total resources, respectively. Bills payable representing
8.00% of total resources is another important source of funding for liquidity purposes.
The Bank’s consolidated net income of P2.154 billion for the year 2008 primarily accounted for the
17.42% growth in surplus account. This was, however, offset by the cash dividend payments to
common and preferred shareholders in the total amount of P554.528 million and dividends/interest
payment on hybrid tier 1 securities of P449.465 million.
Total Capital funds attributable to parent company shareholders amounted to P27.681 billion as at
year-end 2008, lower by 5.63% or P1.651 billion from last year’s P29.332 billion. The decline was
caused by net unrealized mark-to-market losses on AFS securities of P1.569 billion, which is a
reversal of last year’s P1.032 billion gains or P2.601 billion decrease in market value year on year.
As previously discussed, interest rates, one of the key drivers of market value, almost doubled
during the year.
Minority interest was 85.80% lower from negative P311.669 million to negative P44.267 million
mainly due to decrease in share of losses due to dilution and on account of the lower percentage
ownership of minority shareholders in the Bank’s credit card subsidiary.
On May 2008, the Bank has finally acquired Merchants Savings and Loan
Association, Inc. (Merchant Bank) from Finman Capital Corporation and the heirs of the late Luis
O. Manapat. The said acquisition was in line with the general strategy of the Bank to focus on
acquisitions of small and medium-sized banks. In relation to the said strategy, the RCBC Board of
Directors, in its special meeting held on February 11, 2009, has approved the establishment of a
P375.0 million shareholder advance facility which will be infused over a three (3)-year period from
2009-2011 and will result in the acquisition by RCBC of JP Laurel Rural Bank. The decision will
take effect upon the final approval by the Monetary Board of the terms of the agreement in line
with the BSP’s program encouraging the creation of stronger banks for a more stable banking
system. This is one of the first major steps taken by RCBC to enter the microfinance business and
assist in the development of small businesses. The JP Laurel Rural Bank has a rich history in
serving the community with the prominent Laurel family of Batangas behind it. The rural bank’s
geographic coverage is an important market for the overall business thrust of RCBC for its various
products, including microfinance. RCBC plans to convert JP Laurel Bank, with its 10-branch
network spread over Batangas, Laguna and Mindoro Occidental, into the Luzon base of its
microfinance business operations.
The Bank’s Board of Directors, in its meeting held dated March 16, 2009, has approved the
purchase of 92,421,320 of RCBC common shares and 18,082,311 RCBC convertible preferred
shares owned by the Spinnaker Group. The said shares will be lodged as Treasury shares for a
temporary period not exceeding six (6) months. Also, the Board of Directors in its meeting held last
March 2009, has approved that 41,993,389 RCBC common shares will be exchanged for a 5.64%
equity stake in MICO Equities, Inc.
44
The Bank currently services its clients through its 324 business centers and extension offices and
380 ATMs nationwide. In 2008, the Bank introduced its cash card or pre-loaded card called RCBC
My Wallet. The card itself is free and does not require any maintaining balance or membership fee.
The RCBC My Wallet has scored a double victory when two big groups, namely, the UST Alumni
Association and the OmniPrime Marketing Incorporated, the ticketing service provider of the MRT,
has signed up for its services. This effectively opened an opportunity for the bank to reach to a
huge untapped market like schools, utility companies and telecommunication companies. The
RCBC MyWallet has won a Gold Quill Award of Merit from the International Association of
Business Communicators (IABC) under its Economic, Social and Environmental Development
Category.
During the year, there were no known trends, demands, commitments, events or uncertainties that
would have a material impact on the Bank’s liquidity. The Bank does not anticipate having within
the next twelve (12) months any cash flow or liquidity problems. It is not in default or breach of
any note, loan, lease or other indebtedness or financing arrangement. Further, there are no trade
payables that have not been paid within the stated terms.
To the knowledge and/or information of the Bank, there are no events that will trigger a direct or
contingent financial obligation that is material to the company, including any default or acceleration
of an obligation. There were no material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the company with unconsolidated
entities or other persons created during the reporting period.
The 3.96% or P348.92 million decrease in net interest income from P8.819 billion in 2007 was due
to the drop in spreads of peso and foreign currency denominated loans, financial market assets and
credit card receivables. Representing 41.81% of gross revenues, the said drop in spreads were
offset by the growth in interest earning assets, increase in traditional deposits and peso and foreign
currency denominated loans. On the other hand, total interest expense increased by 10.41% as
interest on deposits ballooned by 22.33% or P936 million while borrowings went down by 11.13%
or P258 million. As previously mentioned, average interest rate in 2008 increased by 245 basis
points year on year.
Accounting for 77.31% of gross revenues is total interest income of P15.660 billion which is
comprised mainly of interest income from loans and receivables and investment securities that
representing 53.74% and 19.71%, respectively, of total income. At 35.49% of gross income, total
interest expense of P7.189 billion consisted of interest on deposit liabilities and bills payable and
other borrowings, representing 25.32% and 10.17% of gross revenues, respectively. Net income of
P2.154 billion accounted for 10.63% of gross income.
At 4.93% of gross revenues, provisioning for impairment losses of P998.49 million was 5.94%
higher year on year from P942.49 million in 2007 attributable to management’s stance that the
setting up of provision for losses should be sustained especially with the continued challenges
facing the economy. To ensure that any possible write-down that may result from its exposure to
Lehman Brothers is fully provided for, the Bank has allocated approximately P1.0 billion from its
current excess reserves. This provisioning has no adverse effect on the Bank’s capital base.
Other income of P4.597 billion accounted for 22.69% of gross income, mainly consisting of foreign
exchange gains (losses)-net – 4.21%, service fees – 8.11% and commissions and other income –
9.89% of the total revenues. The 138.52% or P1.841 billion drop in trading and securities gain-net,
was offset by the growth in foreign exchange gains (losses) net – 642.28% or
45
P1.009 billion, commissions and other income – 73.07% or P845.66 million, equity in earnings of
associates - 14.88% or P52 million, trust fees - 11.45% or P21 million and service fees - 8.51% or
P129 million. Other income went up by 4.93% from P4.381 billion. On the other hand, increase on
foreign exchange gains was due to the depreciation of peso by 15.12% or P6.24 from P41.28 to
P47.52 year on year.
Operating expenses of P8.976 billion, representing 44.31% of gross income, was 9.89% or P807.95
million higher than the previous year of P8.168 billion. The 5.89% or P141 million increase in
manpower costs from P2.384 billion was basically due to the impact of officers and CBA increases,
contribution to retirement fund and the Merchant Bank manpower cost. The impact of soaring oil
prices and uncertainties in both local and global economies has pushed prices and the costs of doing
business upward. Hence, occupancy and equipment-related expenses moved up by 5.81% from
P1.411 billion. Additionally, taxes and licenses and depreciation and amortization went up by
6.98% and 29.34%, respectively. With the continued thrust to provide new and improved products
and services, investments in information technology are on going. Additionally, renovation and
improvements of existing physical facilities are currently being undertaken. Hence, depreciation
and amortization expenses were higher in 2008. Manpower costs, occupancy and equipment-related
expenses and taxes and licenses represented 12.47%, 7.37%, and 5.64%, respectively, of total
revenues. Miscellaneous operating expenses, representing 16.82% of gross revenues, went up by
14.00% on account of the continuous enhancements and/or improvements of the Bank’s
communications and information technology infrastructure in support of its goals.
Overall,
operating costs during the year were effectively managed and controlled.
At P919.42 million, provision for tax expense increased by 8.72%, or by P73.77 million, as a major
portion of Bank’s revenues were subjected to final taxes withheld at source. Minority interest in
net income went down to P19.36 million from P36.03 million as a result of the dilution of minority
stockholders in one of the Bank’s majority-owned subsidiaries.
Other than those stated earlier, in 2008, there were no known trends, events or uncertainties that
have had or that are reasonably expected to have a material favorable or unfavorable impact on net
revenues from continuing operations.
Similarly, there were no significant elements of income or loss that did not arise from the Bank’s
continuing operations.
Lastly, there were no seasonal aspects that have a material effect on the financial condition or
results of operation of the Bank.
2009. Philippine GDP in 2009 grew 0.9%, the lowest in 11 years (since 1998), vs. 3.8% in 2008.
However, GDP growth in 4Q 2009 improved to a 1-year high of 1.8%, after the global economy
recovered modestly from the worst recession since World War II. The Philippine economy still
managed to grow, though at a relatively slow pace, better vs. other Southeast Asian economies that
fell into recession (such as Thailand, Malaysia, and Singapore). GNP growth was more than halved
to 3.0% vs. 6.2% in 2008.
Inflation averaged 3.2% in 2009, among the lowest in 2 decades, vs. 9.3% in 2008, partly due to
high base effects and slower demand due to the global economic recession. However, inflation
started to pick up from the 22-year low of 0.1% posted in Aug. 2009, on low base effects and some
pick up in the prices of some major global commodities such as oil, consistent with expectations
that the worst of the global recession is over, to be followed by a relatively slow economic
recovery. By Dec. 2009, inflation already reached an 8-month high of 4.4%.
46
The 91-Day Treasury Bill Rate ended 2009 at 3.89%, vs. 6.12% in end-2008, fundamentally
consistent with lower inflation. The BSP reduced its key overnight interest rate to a record low of
4% since Jul. 2009, down by 2 percentage points from the high of 6% in Nov. 2008, consistent with
the moves of other major global central banks in cutting key short-term interest rates to record lows,
in an effort to stimulate their economies and counteract the adverse effects of the global recession.
Consequently, key Philippine interest rates in the secondary market, as measured by the PDST
yields, mostly lingered near record lows amid huge amounts of excess market liquidity. Low
interest rate environment was maintained, despite the fact that the Budget Deficit widened to
PHP298.5 billion (3.9% of GDP), the worst in 6 years, vs. PHP68.1 billion (0.9% of GDP) in 2008.
The Peso Exchange Rate appreciated in 2009 by 1.32 Pesos or 2.8% to close at 46.20 vs. 47.52 in
the previous year, less than the appreciation in other Southeast Asian currencies (such as the
Indonesian rupiah, Thai baht). Philippine Gross International Reserves (GIR) reached a record high
of US$44.2 billion or equivalent to 9 months worth of imports (nearly triple the 2000 level), partly
due to increased foreign borrowings, higher foreign investments, double-digit growth in BPO
revenues, and continued growth in OFW remittances.
OFW Remittances for 2009 grew by 5.6% to US$17.3 billion, vs. the 13.7% growth posted in 2008,
better than earlier expectations and defying the global economic recession. For the month of
December 2009, OFW Remittances grew by 11.4%, the most in 15 months, to a record high of
US$1.6bn.
Exports declined by an average of -22% to US$38 billion in 2009, the worst in 6 years, vs. -2.5% in
2008. However, exports for the month of Dec. 2009 already grew by 24%, the most in more than 3
½ years, as some major export markets emerged from recession. Imports fell by -24% to US$43
billion in 2009, the lowest in 6 years (since 2003), but already grew in Dec. 2009 by 18%, the most
in 22 months, partly due to low base effects and consistent with the pickup in exports. Trade deficit
for 2009 narrowed to –US$4.7 billion, compared to –US$7.7 billion in 2008, thereby translating to
less outflows of foreign currency from the country.
Performance Indicators
RIZAL COMMERCIAL BANKING CORPORATION and SUBSIDIARIES
In Php
Consolidated
Parent
Audited
2008
2009
2008
2009
Return on Average Assets
0.87%
1.24%
0.56%
1.16%
(ROA)
Return on Average Equity
7.40%
11.95%
3.50%
10.46%
(ROE)
BIS Capital Adequacy Ratio
17.30%
18.47%
16.28%
17.23%
(CAR)
Non-Performing Loans (NPL)
2.42%
3.75%
2.54%
2.93%
Ratio
Non-Performing Assets (NPA)
4.40%
5.68%
47
Ratio
Earnings per Share (EPS)
Basic
Diluted
4.83%
1.72
1.66
3.32%
3.13
3.06
0.70
0.67
2.30
2.25
Wholly-Owned/Majority Owned Subsidiaries
RCBC SAVINGS BANK
In Php
Audited
2008
1.78%
13.69%
14.85%
3.63%
3.30%
25.15
Audited
2009
1.68%
12.70%
16.84%
3.54%
10.44%
26.94
Audited
2008
(23.36%)
(32.33%)
99.12%
2.37%
0.38%
(27.42)
Audited
2009
(2.21%)
(2.25%)
80.49%
0.69%
0.20%
(0.89)
RCBC CAPITAL CORPORATION and Subsidiary
In Php
Audited
2008
Return on Average Assets (ROA)
16.81%
Return on Average Equity (ROE)
20.69%
BIS Capital Adequacy Ratio (CAR)
47.80%
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
4.02
Audited
2009
6.11%
7.88%
56.77%
3.68
Return on Average Assets (ROA)
Return on Average Equity (ROE)
BIS Capital Adequacy Ratio (CAR)
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
MERCHANTS BANK
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
BIS Capital Adequacy Ratio (CAR)
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Loss per Share
RCBC
FOREX
CORPORATION
In Php
Return on Average Assets (ROA)
BROKERS
Audited
2008
14.05%
Audited
2009
15.16%
48
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
26.68%
43.61%
118.99
28.40%
81.93%
121.17
RCBC INTERNATIONAL FINANCE, LTD. and Subsidiary
In Php
Audited
2008
Return on Average Assets (ROA)
(2.77%)
Return on Average Equity (ROE)
(2.98%)
Capital to Total Assets
92.22%
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings (Loss) per Share
(2.05)
Audited
2009
1.97%
2.07%
93.92%
1.55
RCBCNORTH AMERICA, INC.
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings (Loss) per Share
RCBC TELEMONEY EUROPE S.P.A
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
BANKARD, INC.
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Audited
2008
(14.74%)
(56.86%)
16.15%
(1.56)
Audited
2009
(40.62%)
(211.99%)
9.13%
(68.55)
Audited
2008
6.82%
44.06%
11.95%
228.03
Audited
2009
(0.26%)
(2.82%)
17.86%
(0.95)
Audited
2008
31.50%
45.52%
72.47%
Audited
2009
15.27%
17.39%
90.08%
49
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
JP LAUREL RURAL BANK, INC.
In Php
0.18
51.63
Audited
2008
Audited
2009
(20.23%)
66.67%
(30.35%)
92.97%
90.81%
-
Audited
2008
Audited
2009
(0.40%)
(0.46%)
87.02%
98.73%
(0.95)
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
NIYOG PROPERTY HOLDINGS, INC.
In Php
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
Notes to the Computations:
1.
Consolidated and Parent company ROA and ROE ratios were taken from the corresponding audited financial statements. ROA ratio of the
subsidiaries was determined based on the average of the quarterly ending balances of total assets, audited and/or unaudited. ROE ratio of the
subsidiaries was likewise computed based on the average of the quarterly ending balances of total equity, audited and/or unaudited.
6.
CAR covers combined credit, market and operational risks. Where the BIS CAR was not computed, the simple Capital to Total Assets ratio formula
was used.
7.
NPL ratio is determined by using the following formula: (Total NPLs net of NPLs fully covered by allowance for losses) / (Total loan portfolio net of
NPLs fully covered by allowance for losses).
8.
NPA ratio is determined by using the following formula: (Net NPLs + Net ROPA) / Total Assets.
9.
For some subsidiaries, the NPL/NPA ratios were not computed since these ratios were not applicable.
RCBC registered strong performance in 2009 with significant improvements in financial results and
operations. RCBC showed growth in Assets of P20 billion to P289 billion and Deposits of P24
billion to P220 billion. Net Income grew to P3.33 billion in 2009 from P2.15 billion in 2008.
Operating Income expanded by 24% to P16.2 billion. Net Interest Income increased by 21% or P1.8
billion to P10.3 billion as reflected by growth in the bank’s core loan business and an improvement
in Net Interest Margin. Non-Interest Income’s growth of 28% was mainly due to Trading gains.
Service fees, trust fees, and commissions and other Income, which totalled P3.0 billion, contributed
50% to total Non-Interest Income. Efficient operating cost management resulted in an improvement
in the bank’s Cost to Income ratio from 69% to 61%.
50
RCBC’s final figures reflect the ongoing developments in the global economy. But as the Bank
continues to strive with the challenges in the present economy, its goal to attract additional one
million clients a year with the introduction of new products and services, expansion of the Bank’s
network and brand-building, still remain. On the other hand, as a strong and major player in the
remittance business with a wide presence overseas through remittance subsidiaries and tie-ups,
the Bank will keep on tapping the country’s middle class, overseas Filipino workers (OFWs)
and the small and medium enterprises (SMEs). Additionally, the Bank would continue to invest in
technology and people as it persists in training its existing employees and hire more young,
dedicated and competent people.
RCBC continues to be in the market for well-managed mid-sized commercial banks and thrift banks
which will enable the Bank to increase its resource base and expand its branch network and reach in
a cost-efficient manner.
Consolidated total resources grew by 7.55% to P288.516 billion at the end of 2009 for a P20.245
billion increase from the P268.270 billion in 2008.
The P20.245 billion expansion in total assets was mainly due to the increase in trading and
investment securities – 75.23%, bank premises, furniture, fixtures and equipment – 17.98%,
deposits maintained with the Bangko Sentral – 17.88%, and other resources – 12.76%. This was
offset, however, by the drop in, due from other banks – 36.92.%, investment properties – 31.42%
and investments in subsidiaries and associates – 6.34%.
Accounting for 6.70% of total assets, deposits with the Bangko Sentral went up by P2.930 billion
mainly due to the increase in peso deposits. Total investment securities, which represents 22.79%
of total resources, has grown by 40.49% comprising of financial assets at fair value through profit
or loss (FVTPL) – 3.26%, Held-to-maturity investments (HTM) – 6.92% and Available for sale
securities (AFS) – 12.61% of total resources. The huge rise in FVTPL and AFS of 173.95%
(P5.979 billion) and 60.28% (P13.684 billion), respectively, was funded by the growth in deposits.
Total net loans and other receivables amounting to P164.892 billion represented 57.15% of total
resources.
Bank premises, furniture, fixtures and equipment registered a 17.98% increase or P 724 million
from P4.030 billion to P4.754 billion arising from the Bank’s aggressive branch expansion. In
2009, the Parent Bank opened fourteen (14) new business centers, deployed ninety one (91) new
ATMs, and piloted foreign exchange booths and E-biz centers. The Bank has also completed its
"computer refresh" program during the year wherein new personal computers were acquired to
replace older less efficient units.
Investment properties decreased from P7.388 billion to P5.067 billion, or by 31.42%. P2.70 billion
was just reclassified to other resources. Without the reclassification, there was an increase of P379
million.
Sources of funds came mainly from interest bearing liabilities that grew by 7.20% or P17.337
billion to P257.971 billion. Accrued taxes, interest, and other expenses payable increased by
P462.398 million or 16.59%. Capital funds grew by 10.52% from P27.637 billion to P30.545
billion.
Deposit liabilities at P220.278 billion grew by 12.26% from P196.227 billion. Peso and foreign
currency-denominated deposits expanded and were used to fund the growth in investment
51
securities. The building of a strong sales culture across the Bank covering various deposit products
and services launched to target not only niche clients but also potential clients with average
incomes and those working and living overseas contributed to the substantial growth in deposits.
Accordingly, savings and time deposits went up by 23.55% and 5.77% respectively.
Bills payable declined by 49.75% from P21.453 billion to P10.781 billion.
On April 2, 2009, the BSP approved the issuance of P4.0Bn Lower Tier 2 Unsecured Subordinated
Notes which were successfully issued on May 15, 2009 bearing a coupon rate of 7.75%. The notes
have a maturity of 10 years, with a call option at the end of the fifth year and subject to a step-up
interest rate feature. The Bank may redeem the notes in whole, but not in part, at 100% of the
principal plus accrued and unpaid interest at the end of the fifth year, subject to BSP approval. On
October 27, 2009, the two series of Lower Tier 2 Unsecured Subordinated Notes worth a total of
P11.0Bn were listed in the Philippine Dealing and Exchange Corporation. As a result of the new
issuance, Subordinated Debt rose by 57.41% or P3.985 billion from P6.942 billion to P10.927
billion.
Total liabilities accounted for 89.41% of total resources. At 76.35% of total assets, total deposit
liabilities continued to be the Bank’s main source of funding, particularly savings and time deposits
which comprised 32.43% and 40.09% of total resources, respectively.
Surplus account increased by 22.28% from P7.626 billion to P9.325 billion, spurred by the growth
in the Bank’s consolidated net income by 54.54% from P2.154 billion in 2008 to P3.328 billion in
2009. This growth was achieved despite the cash dividend payments to common and preferred
shareholders in the total amount of P314.670 million and dividends/interest payment on hybrid tier
1 securities of P471.161 million.
Total Capital funds attributable to parent company shareholders amounted to P30.549 billion at
year-end 2009, higher by 10.36% or P2.868 billion from last year’s P27.681 billion.
Minority interest improved by 90.32% from negative P44.271 million to negative P4.287 million
mainly due to profitable operations of the subsidiaries during the year.
In relation to the strategy towards microfinance business, the RCBC Board of Directors, in its
special meeting held on February 11, 2009, has approved the establishment of a P375.0 million
shareholder advance facility which will be infused over a three (3)-year period from 2009-2011 in
relation to the acquisition by RCBC of JP Laurel Rural Bank. The decision will take effect upon
the final approval by the Monetary Board of the terms of the agreement in line with the BSP’s
program encouraging the creation of stronger banks for a more stable banking system. This is one
of the first major steps taken by RCBC to enter the microfinance business and assist in the
development of small businesses. The rural bank’s geographic coverage is an important market for
the overall business thrust of RCBC for its various products, including microfinance. RCBC plans
to convert JP Laurel Bank, with its 10-branch network spread over Batangas, Laguna and Mindoro
Occidental, into the Luzon base of its microfinance business operations. The BSP approved the
Bank’s acquisition of JPL on May 14, 2009.
On March 13, 2009, the Bank purchased 92,421,320 RCBC common shares and 18,082,311
convertible preferred shares of Spinnaker Group.
On 01 September 2009, the Bank received 725,923,568 votes in favor of the proposal for the reissuance of 41,993,389 RCBC Treasury Shares in exchange for a 5.64% equity stake in MICO
52
Equities, Inc. The said votes represented 77.368% of the outstanding 870,421,715 common shares
and 67,851,213 preferred shares entitled to vote as of record date 30 June 2009. The share swap
was booked by the Bank on September 30, 2009.
During the year, there were no known trends, demands, commitments, events or uncertainties that
would have a material impact on the Bank’s liquidity. The Bank does not anticipate having within
the next twelve (12) months any cash flow or liquidity problems. It is not in default or breach of
any note, loan, lease or other indebtedness or financing arrangement. Further, there are no trade
payables that have not been paid within the stated terms.
To the knowledge and/or information of the Bank, there are no events that will trigger a direct or
contingent financial obligation that is material to the company, including any default or acceleration
of an obligation. There were no material off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the company with unconsolidated
entities or other persons created during the reporting period.
The 21.22% or P1.798 billion increase in net interest income from P8.470 billion in 2008 to
P10.268 billion in 2009 was due to the rise in spreads of peso and foreign currency denominated
loans, financial market assets and credit card receivables. Representing 45.32% of gross revenues,
the said rise in spreads were aided by the growth in interest earning assets and increase in
traditional deposits. On the other hand, total interest expense decreased by 9.56% as interest on
deposits declined by 8.04% or P412 million while borrowings went down by 13.33% or P275
million. The benchmark 91-d Tbill average in 2009 decreased by 44 basis points year on year from
4.68% in 2008 to 4.24% in 2009.
Accounting for 74.02% of gross revenues is total interest income of P16.770 billion which is
comprised mainly of interest income from loans and receivables and investment securities that
representing 53.45% and 17.48%, respectively, of total income. At 28.70% of gross income, total
interest expense of P6.502 billion consisted of interest on deposit liabilities and bills payable and
other borrowings, representing 20.82% and 7.88% of gross revenues, respectively. Net income of
P3.328 billion accounted for 14.69% of gross income.
At 9.90% of gross revenues, provisioning for impairment losses of P2.243 billion was 124.66%
higher year on year from P998.492 million in 2008 attributable to management’s stance that the
setting up of provision for losses should be sustained especially with the continued uncertainties
facing the economy.
Other income of P5.886 billion accounted for 25.98% of gross income, mainly consisting of trading
and securities gain-net – 9.94%, foreign exchange gains (losses)-net – 2.18%, service fees – 7.12%
and commissions and other income – 5.02% of the total revenues. The 540.05% or P2.765 billion
increase in trading and securities gain-net, was offset by the decline in foreign exchange gains
(losses) net – 42.05% or P358.245 million, commissions and other income – 43.19% or P865.029
million, trust fees - 12.07% or P24.866 million, service fees - 1.81% or P29.743 million, and equity
in net earnings of associate – 48.82% or P197.335 million. Total other income went up by 28.05%
or P1.290 billion from P4.597 billion.
Operating expenses of P9.831 billion, representing 43.39% of gross income, was 9.52% or
P854.940 million higher than the previous year of P8.976 billion. The 10.07% or P254 million
increase in manpower costs from P2.525 billion was basically due to the impact of officers and
CBA increases amounting to P3.52 million and additional manpower mainly for the new business
centers. Occupancy and equipment-related expenses moved up by 10.61% from P1.493 billion to
53
P1.651 billion as a result of business expansion and computer equipment upgrade. Additionally,
taxes and licenses and depreciation and amortization went up by 6.67% and 30.87%, respectively.
With the continued thrust to provide new and improved products and services, investments in
information technology are on-going. Additionally, renovation and improvements of existing
physical facilities done in 2009 resulted in higher depreciation and amortization expenses.
Manpower costs, occupancy and equipment-related expenses and taxes and licenses represented
12.27%, 7.29%, and 5.38%, respectively, of total revenues. Miscellaneous operating expenses,
representing 16.10% of gross revenues, reached P3.647 billion. Overall, operating costs during the
year were effectively managed and controlled.
At P744.42 million, provision for tax expense decreased by 19.03%, or by P175 million, mainly
due to the reduction in tax rate in 2009 from 35% to 30%. Minority interest in net income went
down from P19.365 million to P7.32 million as a result of lower net income of one of the Bank’s
not wholly owned subsidiaries.
Other than those stated earlier, in 2009, there were no known trends, events or uncertainties that
have had or that are reasonably expected to have a material favorable or unfavorable impact on net
revenues from continuing operations.
Similarly, there were no significant elements of income or loss that did not arise from the Bank’s
continuing operations.
Lastly, there were no seasonal aspects that have a material effect on the financial condition or
results of operation of the Bank.
Item 7. Financial Statements
The consolidated financial statements and schedules listed in the accompanying Index to Financial
Statements and Supplementary Schedules are filed as part of this Form 17-A.
Item 8. Information on Independent Accountant and other Related Matters
External Audit Fees and Services. The Audit Committee is empowered to appoint the external
auditor of the Bank and pre-approve all auditing and non-audit services. It recommends to the
Board the selection of external auditor considering independence and effectiveness and
recommends the fees to be paid.
For the audit of the Bank’s annual financial statements and services provided in connection with
statutory and regulatory filings or engagements, the aggregate amount to be billed/billed, excluding
out-of pocket expenses, by its independent accountant amounts/amounted to P4.535 million and
P2.15 million for 2009 and 2008, respectively. Additionally, approximately P4.9 million was paid
for other services rendered by the independent accountant in 2009.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. In
connection with the audits of the Bank’s financial statements for the two (2) most recent years
54
ended December 31, 2009 and 2008, there were no disagreements with Punongbayan and Araullo
on any matter of accounting principles or practices, financial statement disclosures, audit scope or
procedure except for the effects on the financial statements of the Group and the Parent Company
for the applicable years described in the Basis for Qualified Opinion section of the Report of the
Independent Auditors dated March 29, 2010 which is incorporated as part of this report.
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Issuer
The names, ages, citizenship and present positions of all directors are as follows:
Regular Directors
Sec Alfonso T. Yuchengco, 87, Filipino is the Bank’s Honorary Chairman. He is also Chairman
and Chief Executive Officer of the Bank’s major stockholder, Pan Malayan and the Honorary
Chairman of the Board of MICO Equities, Inc. (the holding company of the Malayan Group of
Insurance Companies) (“MICO Equities”) and other YGC companies. Secretary Yuchengco is
presently the Presidential Adviser on Foreign Affairs, which holds a cabinet rank. He has
served as Philippine Ambassador to the People’s Republic of China, Ambassador
Extraordinary Plenipotentiary of the Philippines to Japan, and Presidential Special Envoy to
Greater China, Japan and Korea. He also served as the Philippines’ Permanent Representative to
the United Nations with the rank of Ambassador from 2001 to 2002. He was the first recipient of
the Order of Lakandula with the rank of Bayani (Grand Cross) presented by President Gloria
Macapagal-Arroyo. S e c r e t a r y Yuchengco was the first Asian to be elected to the Insurance
Hall of Fame by the International Insurance Society, Inc. He graduated from Far Eastern
University with a Bachelor of Science degree in Commerce and completed his graduate studies
at Columbia University, New York, USA. He holds several Honorary Doctorate Degrees from
universities in the Philippines, Japan and the United States.
Ms. Helen Y. Dee, 65, Filipino, is the Bank’s Chairperson. Ms. Dee is also the Chairperson and
President of Hydee Management & Resource Corporation and House of Investments. She also holds
Chairmanship position in various companies, including Landev Corporation, Hi-Eisai
Pharmaceutical Inc., Mapua Information Technology Center, Inc. and Manila Memorial Park.
She is the Vice Chairperson of Pan Malayan. She likewise holds directorship positions in
Philippine Long Distance Telephone Company, Petro Energy Resources Corp., Great Life
Financial Assurance Corporation (formerly Nippon Life Insurance Co. of the Phils.), Malayan
Insurance and MICO Equities. Ms. Dee is a Trustee of the Mapua Institute of Technology and
the Yuchengco Center. She graduated from Assumption College with a Bachelor of Science
degree in Commerce and completed her Masters in Business Administration at De La Salle
University.
Mr. Lorenzo V. Tan, 48 Filipino, is the Bank’s President and Chief Executive Officer. He is
55
also an Independent Director of Smart Communications, Inc. He is also the Vice-Chairman of
RCBC Savings Bank, Director of Bankard, Inc., Great Pacific Life Corporation and Independent
Director of Morphs Lab, Inc. Before joining the Bank, Mr. Tan was the President and Chief
Executive Officer of Sun Life of Canada (Phils.), Inc., President and Chief Executive Officer of
Philippine National Bank, President and Chief Operating Officer of United Coconut Planters
Bank, and Group Managing Director of Guoco Holdings (Phils.), Inc. He also held various
positions in Citibank N.A. from 1987 to 1995. He graduated from De La Salle University with a
Bachelor of Science degree in Commerce. He earned his Master of Management degree from the J.L.
Kellog Graduate School of Management in Evanston, Illinois, USA. He is a Certified Public
Accountant in the United States and the Philippines.
Mr. Cesar E. A. Virata, 79, Filipino, has been a Director since 1995, Corporate Vice Chairman
since June 2000 and Senior Adviser from 2007. He is also the Chairman and President of C.
Virata and Associates, Inc., Management Consultants. Concurrently, he is a Director and/or
Chairman of various companies, such as RCBC Savings Bank, RCBC Capital, RCBC Forex
Brokers Corporation, RCBC Realty, RCBC Land, Malayan Insurance, Great Life,
Business World Publishing Corporation, Belle Corporation, Coastal Road Corporation, Luisita
Industrial Park Corporation, Manila Electric Company, Pacific Fund Inc., Mapua Institute of
Technology, Bankard, AY Foundation, Inc. and YGC Corporate Services, Inc. (“YGC Corporate
Services”). Mr. Virata has held positions in the Philippine government, including Prime Minister,
Secretary/Minister of Finance, Chairman of the Committee on Finance of the Batasan Pambansa
(National Assembly) and member of the Monetary Board. He was also Chairman of the
Land Bank of the Philippines. He has served as Governor for the Philippines to the World Bank,
the Asian Development Bank and the International Fund for Agriculture Development. He was
Chairman of the Development Committee of the World Bank and International Monetary Fund
from 1976 to 1980 and Chairman of the Board of Governors of the Asian Development Bank. Prior to
his Government positions, he was a Professor and Dean of the College of Business
Administration of the University of the Philippines and Principal, SyCip Gorres Velayo &
Company, Management Services Division. Mr. Virata graduated from the University of the
Philippines with degrees in Mechanical Engineering and Business Administration (Cum
Laude). He earned his Masters in Business Administration from the Wharton Graduate
School, University of Pennsylvania.
Mr. Rizalino S. Navarro, 71, Filipino, has been a Director of the Bank since 1999 and a Senior
Adviser from 2007. He was the Bank’s Executive Vice Chairman and Chief Executive Officer
from 2004 to 2007. Currently, he is Chairman (Non-Executive) of Clark Development Corp. and
Member of the Subic-Clark Area Development Council. He is also Chairman of EEI Corporation,
Seafront Resources Corporation, Petroenergy Corporation (“Petroenergy”), Bankard, and a
Director of Grepalife, Mapua Institute of Technology, House of Investments, Malayan Insurance,
YGC Corporate Services, and Upline Food Corporation. He has held various positions in the
government including that of Secretary of Trade and Industry and member of the Monetary
Board. Mr. Navarro graduated from the University of the East with a Bachelor of Science degree
in Business Administration. He received his Masters in Business Administration from Harvard
Business School.
Atty. Teodoro D. Regala, 76, Filipino, has been a Director of the Bank since 1999 and a Member
of the Trust Committee since 2000. He is the Founding & Senior Partner and a member of the
Executive Committee of Angara Abello Concepcion Regala & Cruz Law Offices. He is a Director
56
of Bankard, Malayan Insurance, Datacraft Communications Systems, Inc., Datacraft Opsis Inc.,
MICO Equities, Safeway Philtech, Inc., and Director and Corporate Secretary of OEP Philippines,
Inc and Republic Asahi Realty Corporation. He graduated from the University of the Philippines
(Cum Laude) with a Bachelor of Laws degree and took his Masters of Law at Harvard University.
Atty. Wilfrido E. Sanchez, 72, Filipino, has been a Director of the Bank since 2006. He is a Tax
Counsel at Quiason Makalintal Barot Torres & Ibarra Law Offices. He also holds the position of
director in Adventure International Tours, Inc., Amon Trading Corp., Center for Leadership &
Change, Inc., Dolphin Ship Management, Inc., EEI Corporation, Grepalife Asset Management
Corp., Grepalife Fixed Income Fund Corp., HI, and Universal Robina Corporation, among others.
He graduated from Ateneo de Manila University with a Bachelor of Laws degree and completed his
Master of Laws at Yale University.
Mr. Reynaldo B. Vea, 58, Filipino, is currently the President and Chief Executive Officer of
Mapua Institute of Technology, President of Mapua Information Technology Center, Malayan High
School of Science,and Malayan Colleges Laguna. He also holds directorship position in
Wirelesspace, Inc., and Grepalife Fixed Income Fund. Mr. Vea graduated from the University of the
Philippines with Bachelor’s Degree in Mechanical Engineering. He earned his Master’s Degree in
Naval Architecture and Marine Engineering at the Massachusetts Institute of Technology, and
Doctorate Degree in Engineering at University of California at Berkeley.
Ms. Yvonne S. Yuchengco, 56, Filipino, joined RCBC in 1989, establishing the Private Banking
Unit and heading the General Services and Purchasing Department while handling public relations
for the bank. She was the main proponent behind the Bank’s RCBC Dragon campaign and the
award-winning crusade to save the country’s freshwater resources. She was appointed president of
Malayan Insurance Company, Inc. and MICO Equities in 1995, positions she still holds at present.
In recognition of her involvement in various social causes, she was appointed chair of the National
Advisory Board of the Presidential Commission for the Urban Poor by President Fidel Ramos. She
currently chairs The First Nationwide Assurance Corporation, and sits as a Director of AY
Foundation; Honda Cars QC and Kalookan; Manila Memorial Park, Inc. & Grepalife.
Atty. Ma. Celia H. Fernandez-Estavillo, 38, Filipino, is the Bank’s Director, Corporate Secretary
and Senior Vice President and Head—Legal & Regulatory Affairs Group. She is also a Director
and Corporate Secretary in Luisita Industrial Park, Philippine Integrated Advertising Agency,
Averon Holdings, Inc., RCBC Capital, and Bankard and is a Trustee of Mapua Institute of
Technology and Yuchengco Center. Before joining RCBC, she was the Assistant Vice President for
Global Business Development at ABS-CBN Broadcasting Corp., and Chief of Staff at the Office of
Senator Edgardo J. Angara. She graduated from the University of the Philippines with a Bachelor of
Science in Business Economics (Summa Cum Laude). She also graduated from the same university
with a Bachelor of Laws degree (Cum Laude). She earned her Master of Laws (LL.M) in Corporate
Law (Cum Laude) from New York University School of Law. She received the highest score in the
Philippine Bar examinations of 1997.
Independent Directors
Atty. Teodoro Q. Peña, 77, Filipino has served as an Independent Director of the Bank since 2002
57
and Director from 1995 to 2002.. He is also an Independent Director of RCBC Securities,
Malayan Zurich Insurance Co. Inc, Bankard and RCBC Capital. He is also Chairman of the
Bank’s Audit Committee and Personnel & Evaluation Review Committee He is also Chairman of
the Bank’s Audit Committee and Personnel & Evaluation Review Committee He is also the
Chairman of the Audit Committees of RCBC Savings Bank and EEI Corporation respectively. He
holds various positions in Philippine Constitution Association, Palawan State University,
Educators Inc. and the Institute of Corporate Directors. He graduated from the University of the
Philippines with a Bachelor of Laws degree and received a Master of Laws at Yale University.
Mr. Roberto F. de Ocampo, 64, Filipino, has served as an Independent Director of the Bank
since 2006. He also holds various Chairmanship and/or Directorship positions with other
companies as well. Prior to his current position with the Bank, he was the President of the Asian
Institute of Management. He also became Advisory Board Member of Metropolitan Bank &
Trust Co. and Director of ABS-CBN Broadcasting, Inc. He also held various positions in the
government, including Secretary of Finance, Chairman of the Cabinet Cluster on Macro- Economy,
and Chairman of the Committee on Privatization and Fiscal Incentives Review Board. He
graduated from Ateneo de Manila University with a Bachelor of Arts degree in Economics. He
earned his Masters in Business Administration from the University of Michigan.
Mr. Francisco C. Eizmendi, Jr., 73, Filipino, is an Independent Director of the Bank. Prior to
assuming this position, he was a member of the Bank’s Advisory Board. Mr. Eizmendi, Jr. is the
Chairman of Dearborn Motor Co., and Advisory Board Member of East West Seed. He is also an
Independent Director at RCBC Forex and Makati Finance Corporation and Trustee at the Institute
of Corporate Directors. He served as President and Chief Operating Officer of San Miguel
Corporation from 1987 to 2002. He graduated from the University of Sto. Tomas with a Bachelor
of Science degree in Chemical Engineering.
Mr. Armando M. Medina, 59, Filipino, is a member of various board committees of the Bank,
including the Executive Committee, Trust Committee, and Risk Management Committee He is
also an Independent Director of RCBC Capital, RCBC Savings Bank, First Malayan Leasing &
Finance Corporation, RCBC Forex and Great Pacific Life Financial Assurance Corporation. He
graduated from De La Salle University with a Bachelor of Arts degree in Commerce and
Economics and a Bachelor of Science in Commerce—Major in Accounting.
Mr. Antonio L. Alindogan, Jr., 70, Filipino, holds directorship position on various companies
including House of Investments, C55, Inc., An-Cor Holdings, Inc., Philippines Airlines and PAL
Holdings, Inc. among others. Prior to his assumption as director of the Bank, Mr. Alindogan was a
member of the Monetary Board of the Bangko Sentral ng Pilipinas. He graduated as Magna Cum
Laude from the De La Salle College with a degree of Bachelor of Science degree in Accounting.
Executive Officers
The names, ages and positions of the Bank’s executive officers are as follows:
Executive Vice-Presidents
58
Redentor C. Bancod, (Filipino) 46, Executive Vice President and Concurrent Head of the
Operations and IT Shared Services Groups. Previously, he was Vice President & General Manager,
Central Systems Asia of Sun Life Financial, Asia and Senior Vice President and Chief Technology
Officer of Sun Life Of Canada (Philippines) Inc. from October 2003 to 2007, Senior Vice President
& Chief Information Officer of Equitable PCI Bank from July 1996 to September 2003, Assistant
Vice President and Head of Applications Development in Far East Bank from October 1993 to June
1996, Assistant Vice President of Regional Operations, Asia Pacific, of Sequel Concepts, Inc.
USA/Ayala Systems Technology Inc. from November 1992 to September 1993, Project Manager in
Union Bank of Switzerland, NA from April 1988 to November 1992 and Chief Designer and
Technical Advisor in Computer Information System Inc. from March 1984 to April 1998.
Alfredo S. Del Rosario, Jr., (Filipino) 54, Executive Vice President, is the Head of the Asset
Management and Remedial Group. He was the Head of the Overseas Filipino Banking Group from
March 2007 to September 2008 and Head of the Commercial Banking Group from May 2006 to
February 2007. Prior to joining the Bank, Mr. Del Rosario worked for AB Capital and Investment
Corporation as Senior Vice President, Trust and Investment Division Head, and Information
Technology Division Head (from Jan 2000 to May 2006). He also held directorship positions in AB
Capital Securities, Inc., Stock Transfer Services, Inc., Araullo University, AB Card Corporation and
Asianbank Corporation. Furthermore, Mr. Del Rosario previously worked for Global Business
Bank as Senior Vice President and Branch Banking Group Head, AsianBank as Senior Vice
President and Branch Banking Division and as Senior Vice President, Human Resources and
Administration Division, Bank of America as Vice President, Human Resources, and for Philippine
Airlines, FNCB Finance and the Ayala Group of Companies.
Jose Emmanuel U. Hilado, (Filipino) 45, Executive Vice President, is the Bank’s Treasurer and
Head of Treasury Group. Prior to joining RCBC, he was SVP and Head of Trading and Investments
of Banco de Oro Unibank from July 2007 to September 2008. He also served as SVP/Treasurer of
BDO Private Bank from September 2003 to June 2007. Prior to this, he held various positions in
Equitable PCIBank, and Far East Bank and Trust Company.
Ismael R. Sandig, (Filipino) 56, Executive Vice President, is the Head of RBG. He was a Senior
Consultant and Assistant to the President from 2005 to 2006 at East West Bank Corporation. He
also joined Philippine National Bank from 2001 to 2005, where his last appointment was as Retail
Banking Sector Head and concurrent Consumer Finance Sector Head. He held various positions in
Retail Banking in Union Bank of the Philippines, PCI Bank and Insular Bank of Asia and America.
Uy Chun Bing G., (Filipino) 57, Executive Vice President, is the Head of Corporate Banking
Group, formerly the Corporate Business Development Group, a position he has held since 1 Jan
1997. He is also a Director of the Financial Brokers’ Insurance Agency. Previously, Mr. Uy was the
Head of the Bank’s Binondo Branch and Area Supervisor for Binondo as Senior Vice President
(1989 to 1996), First Vice President (1988 to 1989), Vice President (1987 to 1988) and the Head of
the Divisoria Branch as Vice President (1982 to 1987) and Assistant Vice President (1980 to 1982).
Elbert M. Zosa, (Filipino) 62, Executive Vice President, has been the Head of the Bank’s
Corporate Planning Group since April 2006. He was formerly Head of Strategic Planning of
59
Equitable PCI Bank with responsibility over Corporate Planning and Corporate Communications.
He also served in other capacities such as Head of International Services Group where he
spearheaded the development of its remittance business and coordinated its foreign offices. He also
served as Area Head for Marketing and Operations of some branches. He obtained his Master of
Business Administration from the Wharton School, University of Pennsylvania.
First Senior Vice-Presidents
Melissa G. Adalia, (Filipino) 57, is the Head of the Human Resources Group. Prior to joining the
Bank, Ms. Adalia was Head of Human Resources for Asia United Bank from March 2001 to April
2006, ABN Amro Bank from 1999 to 2000, Great Pacific Bank in 1999, Bank of America Savings
Bank, Dai-Ichi Group of Companies and SM Shoemart.
Manuel G. Ahyong Jr., (Filipino) 48, is the current Head of the Wealth Management Segment 2
(Makati). Prior to joining the Bank in 2006, he was a Senior Vice President of Pramerica Financial,
Director in Societe Generale, Vice President of Deutsche Bank, AG; Deputy Manager and Head for
Private Banking of Banque Indosuez; and Director for Private Banking of American Express Bank.
Michael O. de Jesus, (Filipino) 50, , is the current Segment Head of Corporate Banking 2. He has
a Bachelor of Arts degree in Economics from Union College in Schenectady, New York and a
Masters in Business Administration (Finance) from The Wharton School, University of
Pennsylvania.
John Thomas G. Deveras, (Filipino) 47, is Head of Strategic Initiatives. Prior to joining the Bank
in May 2007, he was an Investment Officer at International Finance Corporation. He also worked
for PNB Capital and Investment Corporation as President, and Senior Vice President in PNB
Corporate Finance. He holds a degree in Bachelor of Science degree in Management Engineering
from Ateneo de Manila University and earned his Masters Business Administration from the
University of Chicago.
Rommel S. Latinazo, (Filipino) 50, is the Head of the Corporate Banking Segment 1 under the
CBG. He joined the Bank in 2000 as First Vice President. Previously, he held various positions in
Solidbank Corporation, Standard Chartered Bank, CityTrust Banking Corporation, First Pacific
Capital Corporation and Philamlife Insurance Company.
Ana Luisa S. Lim, (Filipino) 50, heads the Internal Audit Division of the Bank. She is also a
Director and Corporate Secretary of BEAMExchange, Inc. She joined the Bank in 2000 primarily
to implement the risk-based audit approach under a shared-services set-up in conformity with the
Bank’s strategic risk management initiatives. Ms. Lim is a Certified Public Accountant, Certified
Information Systems Auditor and Certified Internal Auditor.
Cynthia P. Santos, (Filipino) 56, is the Head of the Overseas Filipino Banking/TeleMoney
Group. Prior to this position, Ms. Santos was the Head of the Corporate Planning Group and its
Chief Information Officer. She started with RCBC as the Bank Economist.
60
Edgar B. Villanueva (Filipino), 47, is the Head of Global Transactional Services. Work
experience includes Business Development Manager/Vice-President of Bank of America from 2006
to 2009, Head of Client Management for North America for ABN AMRO Bank NV from 2004 to
2009, among others. He earned his Bachelor’s Degree in Business Economics from De La Salle
University and Master’s Degree in Business Administration from J.L. Kellog Graduate School of
Management in Illinois.
Senior Vice-Presidents
Marcelo E. Ayes, (Filipino) 57, , is the Head of Treasury’s Financial Institution Management
Division (FIMD). Prior to joining the Bank, Mr. Ayes was First Vice President and Chief Dealer
and Head of the Proprietary Trading Division at Equitable PCI Bank from 2001 to September 2006,
and Head of the Treasury Marketing and Product Development Group from 1998 to 2001. Mr.
Ayes also held various positions in the Philippine National Bank from 1978 to 1997, including a
four-year term in Singapore and a five-and-a half-year term in Hong Kong.
Angelito C. Cruz, (Filipino), 60, is currently the Segment Head of Japan Desk/Ecozone. He
graduated from University of the East with a degree in Business Administration.
Rafael Aloysius M. Dayrit (Filipino) 53, is the Bank's Chief Credit Officer and Head of the Credit
Risk Division. He graduated from the University of the Philippines with a Bachelors of Science in
Agribusiness and Masters in Business Administration. He was a fellow of the Hubert H. Humphrey
scholarship program in Agricultural Economics at the University of California, Davis, USA. Mr.
Dayrit is currently a Director of the Professional Risk Managers International Association (PRMIA
Philippine Chapter), a non-profit professional association of risk practitioners with members in 190
countries. Prior to joining RCBC, he has worked in three other universal banks, namely, Solidbank,
UCPB, and Union Bank primarily in the fields of account management and credit.
Siony C. Dy Tang, (Filipino) 56, is currently the Head of Chinese Banking Division 1 of the
CBG. She has been with the Bank since 1973.
Ma. Celia H. Fernandez-Estavillo, (Filipino), 38, the Bank’s Director, Corporate Secretary and
Senior Vice President and Head—Legal & Regulatory Affairs Group. She is also a Director and
Corporate Secretary in Luisita Industrial Park, Philippine Integrated Advertising Agency, Averon
Holdings, Inc., RCBC Capital, and Bankard and is a Trustee of Mapua Institute of Technology and
Yuchengco Center. Before joining RCBC, she was the Assistant Vice President for Global Business
Development at ABS-CBN Broadcasting Corp., and Chief of Staff at the Office of Senator Edgardo
J. Angara. She graduated from the University of the Philippines with a Bachelor of Science in
Business Economics (Summa Cum Laude). She also graduated from the same university with a
Bachelor of Laws degree (Cum Laude). She earned her Master of Laws (LL.M) in Corporate Law
(Cum Laude) from New York University School of Law. She received the highest score in the
Philippine Bar examinations of 1997.
61
Lourdes Bernadette M. Ferrer, (Filipino) 51, is currently the Head of Trust and Investments.
Prior to joining the Bank on 1 September 2000, she held various related positions in Solidbank
Corporation and the International Corporate Bank. She graduated from the University of the
Philippines with a Bachelor of Science degree in Statistics and likewise obtained her Master’s
Degree in Business Administration from the same university.
Prudencio J. Gesta, (Filipino), 57, is the Regional Sales Manager for Visayas Region composed
of 39 branches and 1 ext office. He has been with the bank for 35 years and has held various
positions in operations and sales prior to his appointment as RSM in 2008. He finished his Branch
Officer's Training Program in 1978 at HO and has attended various seminars and trainings in Sales,
Core Credits and Operations. He graduated from St. Paul University in Surigao City with a
Bachelor of Science in Commerce major in Accounting (with special academic award as Cum
Laude). He is quite active in various local NGOs and professional organizations and recently a
member of the Board of Trustees of Cebu Chamber of Commerce and as its VP Finance and
Administration serving his 2nd term. He was Past President of Cebu Bankers Club in 2002 and
Tacloban Bankers Club in 1986, Past President of Financial Executives of Cebu in 2003 and Past
Area Governor for Leyte Samar Area of Lions Club Intl. in 1991.
Jose P. Ledesma III, (Filipino), 58, is the Division Head for South Metro Manila Region. He is
also the Treasurer/ Director of Nile Agro Industrial Corporation, President of Bacolod Boys Home
Foundation, Treasurer of Welcome Home Foundation, Inc., Finance Council Member of the
Diocese of Bacolod. Also a Member of the Negros Edconomic Development Foundation and an
Independent Director of the Dungganon Bank (an NGO Thrift Bank owned by Negros Women for
Tomorrow). He is likewise a Member of the Metro Bacolod Chamber of Commerce & Industry, a
Board of Trustees of St. Joseph's High School- La Salle, Vice-President/Board of Trustees of USLS
Graduate School Foundation and a Board of Trustees of the De La Salle Philippines. He graduated
from the University of St. La Salle in Bacolod City with the degree of AB Commerce Major in
Economics and Management. He earned his Masters in Business Administration and his Doctoral
(PhD. Major in Business Administration) at the same university on 1995 and 2005 respectively. He
was awarded with an Academic Excellence Award in his Doctoral for receiving the highest GPA.
Eli D. Lao, (Filipino) 53, is the Head of Chinese Banking Segment under the CBG since 2000. He
has been with the Bank since 1978, holding various positions.
Regino V. Magno, (Filipino) 51, is the Bank’s Chief Risk Officer and Head of Corporate Risk
Management Services (CRISMS). Prior to joining RCBC, he was the Chief Risk Officer of Sterling
Bank of Asia from August 2007 to December 2008.He was a Market Risk Consultant of Chase
Cooper, a London-based consulting firm; Chief Risk Officer of Philippine National Bank for four
years; a Consultant of Philippine Deposit Insurance Corporation for a year; and a Senior Risk
Manager at the Bank of the Philippine Islands for four years. He held various positions in CityTrust
Banking Corporation.
Remedios M. Maranan, (Filipino),50, graduated from the Polytechnic University of the
Philippines with a degree of B.S. Accountancy. She has been with the Bank for more than 20 years.
She currently a Regional Service Head for Metro Manila.
62
Yasuhiro Matsumoto,(Japanese) 49, is the Head of CBG’s Japanese Business Relationship Office
since April 2006. Prior to this, he worked for The Bank of Tokyo-Mitsubishi UFJ, Ltd. since 1984,
when the bank was named The Sanwa Bank, Ltd. He has also previously served as a Director of
RCBC.
Reynaldo P. Orsolino, (Filipino) 50, is the Head of the SME Division. Prior to joining the Bank,
he served as Senior Vice President in Philippine National Bank from June 2003 to July 2007, and
previously held senior positions at the Planters Development Bank, Asian Banking Corporation,
and the Land Bank of the Philippines. He holds a degree in Bachelor of Arts degree in Economics
from the University of the Philippines.
Ma. Lourdes Jocelyn S. Pineda, (Filipino), 54, is currently the Head of Microfinance of RCBC.
She brings with her 14 years of experience in the microfinance business, involving design and setup of microfinance loan operation, product development, and training of Lending Officers in
individual lending methodology. She has worked with Accion International/Accion Technical
Advisors India as Principal Microfinance Advisor/ Senior Director and Chemonics
International/Microenterprise Access to Banking Services (US AID project) as Regional Manager
and Coordinator from August 2005 to March 2007.
Most of the Directors and executive officers mentioned above have held their positions for at least
five (5) years.
Officers with the rank of Assistant Vice President and above are appointed annually by the Board
of Directors in its Organizational Board Meeting right after the Stockholders Meeting which is held
annually every last Monday of June.
There are no binding contracts or arrangements with regard to the tenure of the Bank’s executive
officers.
There is no person other than the entire human resources as a whole, and the executive officers who
are expected to make a significant contribution to the Bank.
Sec. Alfonso T. Yuchengco is the father of Ms. Helen Y. Dee and Ms. Yvonne S. Yuchengco.
Other than such relationship, none of the Bank’s Directors are related to one another or to any of
the Bank’s executive officers.
To the knowledge and/or information of the Bank, the present members of the Board of Directors
and its executive officers are not, presently or during the last five (5) years, involved or have been
involved in any legal proceeding adversely affecting/involving themselves and/or their property
before any court of law or administrative body in the Philippines or elsewhere. To the knowledge
and/or information of the Bank, the said persons have not been convicted by final judgment of any
offense punishable by the laws of the Republic of the Philippines or of the laws of any other
nation/country.
63
Item 10. Executive Compensation
Information as to the aggregate compensation paid or accrued during the last three fiscal years to
the Bank’s Chief Executive Officer and four other most highly compensated executive officers
follows:
Chief Executive Officer and four most highly compensated executive officers. (In Thousand Pesos)
Principal Position
Names
Year
Lorenzo V. Tan
President & Chief
Executive Officer
Redentor C. Bancod
Executive
President
Vice
Uy Chun Bing
Executive
President
Vice
Jose Emmanuel U. Hilado
Executive
President
Vice
Ismael R. Sandig
Executive
President
Vice
Lorenzo V. Tan
President & Chief
Executive Officer
Redentor C. Bancod
Executive
President
Vice
Uy Chun Bing
Executive
President
Vice
Jose Emmanuel U. Hilado
Executive
President
Vice
Ismael R. Sandig
Executive
Vice
President
President & Chief
Executive Officer
Lorenzo V. Tan
Redentor C. Bancod
Executive
President
Vice
Uy Chun Bing
Executive
President
Vice
Ernesto P. Pinpin
Executive
President
Vice
Ismael R. Sandig
Executive
Vice
Aggregate
Compensation
(net of bonuses)
Bonuses
2010
35,779
7,495
35,077
8,135
31,703
6,370
64
2009
2008
President
Officers and Directors as a
Group Unnamed
2010
2009
2008
P759,496
762,083
633,610
P253,165
246,307
162,402
The members of the Board of Directors, the Advisory Board, the Executive Committee and the
Officers of the Bank are entitled to profit sharing bonus as provided for in Section 2 Article XI of
the By-Laws of the Bank.
Likewise, the members of the Board of Directors and the Advisory Board are entitled to per diem
for every meeting they attended. For the years 2009 and 2008, total per diem amounted to P5.351
million and P5.563 million, respectively.
The above-named executive officers and directors, and all officers and directors as a group, do not
hold equity warrants or options as the Bank does not have any outstanding equity warrants or
options.
Item 11. Security Ownership of Certain Beneficial Owners and Management
(1)
Security Ownership of Certain Record and Beneficial Owners
As of December 31, 2009, RCBC knows of no one who beneficially owns in excess of 5% of
RCBC’s common stock except as set forth in the table below:
Amount and nature of record/beneficial ownership (“r”
or “b”)
Name and address of record/beneficial owner
Common
%
Pan Malayan Management & Investment
Corporation (Filipino) *
48/F Yuchengco Tower, RCBC Plaza, 6819
Ayala Ave., Makati City
PCD Nominee Corporation (Non-Filipino) 1/ 2/
4,319,702,410 (b)
726,146,700
(r)
8.09%
PCD Nominee Corporation (Filipino) 2/
3,083,731,810
(r)
34.34%
Preferre
d
%
48.0967%
1/ Composed of British, Australian, Japanese, American and HongKong nationals.
2/ The voting of the shares depends on the agreement between the participants (stockbrokers and custodians) and their clients (the beneficial owners).
However, it is usually the participants who direct the voting as authorized by their clients. For Standard Chartered Bank and RCBC Trust & Investment,
they direct the voting of the shares as authorized by their clients and trustors, respectively.
(2) Security ownership of management 3/:
Amount and nature of record/beneficial
ownership
Common
%
Preferred
%
65
Alfonso T. Yuchengco (Filipino)
Helen Y. Dee (Filipino)
Pan Malayan Management & Investment
Corporation (Beneficial Owner: Helen Y. Dee,
Filipino)
Hydee Management & Resource Corporatio
(Beneficial Owner: Helen Y. Dee, Filipino)
Rizalino S. Navarro (Filipino)
Cesar E. A. Virata (Filipino) (Direct)
(Indirect)
39,970 voting
0.00
4,380 voting
0.00
135,712,510 voting
1.51
19,238,190 voting
0.21
2,608,660 voting
0.03
1,670 voting
0.00
500,000 voting
0.00
Lorenzo V. Tan (Filipino)
50 voting
0.00
Teodoro D. Regala (Filipino) (Direct)
10 voting
0.00
(Indirect)
Wilfrido E. Sanchez (Filipino) (Direct)
(Indirect)
Yvonne S. Yuchengco (Filipino) (Direct)
(Indirect)
Armando M. Medina (Filipino) (Indirect)
Reynaldo B. Vea (Filipino) (Direct)
Ma. Celia H. Fernandez-Estavillo (Filipino) (Direct)
Teodoro Q. Peña (Filipino)
(Indirect)
Francisco C. Eizmendi, Jr. (Filipino)
20,000
10 voting
300,000
10 Voting
40,000
1,950 Voting
0.00
0.00
0.00
0.00
0.00
0.00
10 Voting
0.00
180 voting
0.00
1,110 voting
30,780
10 voting
0.00
0.00
Roberto F. de Ocampo (Filipino)
10 voting
0.00
Antonino L. Alindogan, Jr. (Filipino)
10 voting
0.00
31,700 voting
0.00
1,120,000 voting
0.01
209,000 voting
0.00
Eli D. Lao (Filipino) (Indirect)
73,370 voting
0.00
Rommel S. Latinazo (Filipino) (Indirect)
74,000 voting
0.00
100,000 voting
0.00
Uy Chun Bing (Filipino) (Direct)
(Indirect)
Alfredo G. Del Rosario (Filipino) (Indirect)
Elbert M. Zosa (Filipino) (Indirect)
Total
160,107,590
1.76
3/ There are no additional shares which the listed beneficial or record owners have the right to acquire within thirty (30) days, from options,
warrants, rights, conversion privilege or similar obligations, or otherwise.
The aggregate number of shares owned of record by all directors and executive officers as a group
named herein as of December 31, 2009 is 160,107,590.00 common shares or approximately 1.76%
of the Bank’s outstanding common shares.
Other than the above-named persons or groups holding more than 5% of the Bank’s outstanding
common stock, there are no other persons that hold more than 5% of any class of stock under a
voting trust or similar agreement.
There are also no arrangements, existing or otherwise, which may result in a change in control of
the Bank.
66
Item 12. Certain Relationships and Related Transactions
The Bank is a member of the Yuchengco Group of Companies (YGC). The Yuchengco family,
primarily through Pan Malayan Management and Investment Corporation, is the largest
shareholder, and as of December 31, 2009 owned 431,970,241 shares, or approximately 48.10% of
the Bank’s issued and outstanding common shares.
The Bank and its subsidiaries, in the ordinary course of business, engage in transactions with the
YGC and its subsidiaries. The Bank’s policy with respect to related party transactions is to ensure
that these transactions are entered into on terms comparable to those available from unrelated third
parties.
The law firm of Angara Abello Concepcion Regala & Cruz (ACCRA) Law Office is among the
firms engaged by the Bank to render legal services. Atty. Teodoro Dy-Liaco Regala, Board
Member, is a Senior Partner of ACCRA Law Office. During the year, the Company paid ACCRA
legal fees that the Company believes to be reasonable for the services provided.
The Bank, as Lessor, entered into lease contracts with Great Pacific Life Assurance Corporation
(GPL) and Malayan Insurance Co. Inc. (MICO) for the lease of office spaces. As Lessee, the Bank
has existing lease contracts with GPL for the lease of its Buendia Avenue, Makati City and Fuente
Osmeña branch offices. Amb. Alfonso T. Yuchengco is a Director of GPL and the Honorary
Chairman of MICO Group. Ms. Helen Y. Dee and Messrs. Navarro, Virata and Regala are also
directors of MICO. Ms. Helen Y. Dee, together with Mr. Navarro, is a member of the Board of
Directors of GPL.
The Bank is also a lessee of the RCBC Realty Corporation (RRC) which it directly owns 25%.
Additionally, through its equity holdings in RCBC Land Inc., it indirectly owns 9.8% of RRC.
RCBC Land Inc., 49% owned by the Bank, owns 20% of RRC, the owner and developer of the
RCBC Plaza Building complex in which the Bank’s head office is located.
In the ordinary course of business, the Bank has loan and other transactions with its subsidiaries
and affiliates, and with certain directors, officers, stockholders and related interests (DOSRI).
Under existing policies of the Bank, these loans are on commercial, arm’s length terms, i.e.,
substantially on the same terms as loans to other individuals and businesses of comparable risks.
For cost effectiveness and cost-savings, the Bank entered into a Memorandum of Agreement
(MOA) with House of Investments, Inc. (HI), a member of the YGC, for procurement outsourcing.
Under the agreement, HI was the Bank’s sole representative in negotiating the terms of the
contracts with selected suppliers or service providers for the procurement of certain IT related and
non-IT related items. The agreement stipulated that HI would not charge fees for its service except
for its share in the savings generated from suppliers and service providers. Moreover, HI was
obligated to ensure that contracts they initiated do not prejudice the Bank in any way and that the
Bank does not pay more than the cost of buying the items without aggregation.
67
In December 2006, Bankard and RCBC entered into a services agreement wherein RCBC
outsourced the servicing of the credit card business to Bankard. These services include card
acquisition and marketing services, verification and approval services and collection services.
Transactions under the agreement are carried out on a “cost plus” basis whereby Bankard receives a
premium above the costs that it expends to conduct its services.
In December 2007, RCBC Land transferred 25% of its equity holdings in RCBC Realty
Corporation to RCBC in partial settlement of its outstanding loan with the Bank.
In October 2009, RCBC entered into a joint development agreement with RCBC Savings Bank,
MICO, Grepalife and Bankard for the development of the RSB Corporate Centre located at
Bonifacio Global City. Pursuant to this agreement, RCBC will obtain ownership and possession of
certain floors in the RSB Corporate Centre building which it will use as office space for some of its
business units.
The Bank’s other transactions with affiliates include leasing office premises to subsidiaries,
availment of computer services of an affiliate and regular banking transactions (including purchases
and sales of trading account securities, securing insurance coverage on loans and property risks and
intercompany advances), all of which are conducted in the ordinary course of business.
The Bank does not have any transactions with promoters within the past five (5) years.
PART IV - CORPORATE GOVERNANCE
Item 13. Performance Evaluation System
RCBC is committed to the ideals of good corporate governance. In compliance with the SEC Code
of Corporate Governance, the Bank has adopted an Evaluation System to measure the performance
of the Chief Excecutive Officer (CEO), Board of Directors and senior management on an annual
basis. This Evaluation System was based on the basic principles of transparency, accountability and
fairness/equity.
The Bank has adopted fit and proper standards on key personnel taking into consideration their
integrity, technical expertise, education, diligence, and experience or training. Corporate
governance rules/principles were established to ensure that the interest of stakeholders are always
taken into account; that directors, officers and employees are conducting business in a safe and
sound manner; and that transactions entered into between the Bank and related interests are
conducted at arm’s length basis and in the regular course of business.
The Bank has sufficient number of independent directors that gives the assurance of independent
views and perspective. Likewise, independent functions of internal audit, the compliance office,
and the risk management unit lend comfort to stakeholders, including the regulators, of Bank’s
commitment to the principles and practices of good corporate governance.
Based on the latest annual performance evaluation made in Jan 2010 relative to year 2009 using a
self-assessment checklist, the Bank is generally in compliance with the leading practices and
principles on good corporate governance for the year 2009. A certification to that effect was
submitted to the Securities and Exchange Commission (SEC), the Philippine Stock Exchange (PSE)
68
and the Philippine Dealing and Exchange Corporation (PDEx) on Jan 25, 2010. No major findings
were noted.
PART V - EXHIBITS AND SCHEDULES
Item 14. Exhibits and Reports on SEC Form 17-C
(a) Exhibits - See accompanying Index to Exhibits
The following exhibit is filed as a separate section of this report:
(18) Subsidiaries of the Registrant
The other exhibits, as indicated in the Index to Exhibits are either not applicable to the Company or
require no answer.
(b) Reports on SEC Form 17-C
Reports under SEC Form 17-C (Current Reports) that were filed during the last six months covered
by this report:
12.14.09 – Item 9. Other Events
Please be advised that the Board of Directors, in its special meeting, approved the proposed 2010
Budget of RCBC.
12.10.09 – Item 9. Other Events
Please be informed a total of 392 RCBC Preferred shares of Antonio Alipio were converted to
RCBC Common shares at the rate of 2.3542 Preferred shares to 1 Common share per written
request of the said stockholder. A total of 166 common shares (net of fractional shares) were issued
on December 09, 2009 as a result of the said conversion.
12.01.09 – Item 9. Other Events
Please be informed that the Board of Directors, in its regular meeting, approved the amendments to
Bank’s Manual of Corporate Governance, pursuant to the requirements of the Securities and
Exchange Commission.
11.11.09 – Item 9. Other Events
Please be informed that the Board of Directors, in its special meeting, approved the
recommendation for RCBC to sell to Great Pacific life Assurance Corporation (“Grepalife”) its
69
1,000,000 shares in Great Life Financial Assurance Corporation (“Great Life; formerly Nippon Life
Insurance Company of the Philippines, Inc”), thereby confirming, approving and ratifying all
Management’s actions relative to the same. The said shares represent 20% of the total outstanding
shares of Great Life Financial Assurance Corporation
10.09.09 – Item 9. Other Events
Please be informed that a total of 4,319 RCBC Preferred shares of Fortunato F. Young were
converted to RCBC Common shares at the rate of 2.3542 Preferred Shares to 1 Common Share per
written assent of the said stockholder. A total of 1,834 common shares (net of fractional shares)
were issued on October 07, 2009 as a result of the said conversion.
08.07.09 – Item 9. Other Events
Please be advised that the Board of Directors, in its special meeting, approved the extension of
deadline for submission of written assent of shareholders from 26 August 2009 to 01 September
2009 on connection with the proposal for the re-issuance of RCBC Treasury shares in exchange
for shares of stocks of MICO Equities, Inc.
07.27.09 – Item 9. Other Events
The Board of Directors, in its regular meeting, approved the appointment of Mr. Edgar B.
Villanueva as Head of Global Transaction Services with the rank of First Senior Vice President,
subject to the final confirmation of Monetary Board of the Bangko Sentral ng Pilipinas.
Mr. Villanueva brings with him 20 years of experience in commercial and transaction banking with
a track record of increasing respnsibility in a variety of challenging roles in business development,
operations, change management, client services, cash management, electronic banking, and trade
services, among others. He has worked with the following institutions:
1. Bank of America (formerly LaSalle Bank) as Vice President / Business Development Manager from
2006 to 2009;
2. ABN AMRO Bank N.V. as Director / Client Management Head for North America Global Client
Operations from 2004 – 2006;
3. Chase Manhattan Bank as Vice President / Business Manager and Trust Manager for Capital
Markets Fiduciary Services from 1997 – 2000.
07.13.09 – Item 9. Other Events
Please be informed that the Board of Directors, in its special meeting resolved to seek the written
assent of the shareholders for the issuance of Treasury Shares in exchange for the shares of stock of
MICO Equities, Inc., and fixed the following pertinent dates in connection therewith:
Record Date
Deadline for Shareholder Assent
July 30, 2009
August 26, 2009
70
RIZAL COMMERCIAL BANKING CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
FORM 17-A, Item 7
Consolidated Financial Statements
Statement of Management’s Responsibility for Financial
Statements
Report of Independent Public Accountants
Statements of Condition as of December 31, 2009 and
2008
Statements of Income for the years ended
December 31, 2009, 2008 and 2007
Statements of Changes in Capital Funds for the years
ended December 31, 2009, 2008 and 2007
Statements of Comprehensive Income for the years
ended December 31, 2009, 2008 and 2007
Statements of Cash Flows for the years ended
December 31, 2009, 2008 and 2007
Notes to Financial Statements
Page No.
73
75
78
79
80
82
83
85
Supplementary Schedules
Report of Independent Public Accountants on Supplementary
Schedules
A. Marketable Securities - (Current Marketable Equity
Securities
and Other Short-Term Cash Investments)
B. Amounts Receivable from Directors, Officers, Employees,
Related Parties and Principal Stockholders (Other
than Affiliates)
C. Non-Current Marketable Equity Securities, Other
Long-Term Investments, and Other Investments
D. Indebtedness to Unconsolidated Subsidiaries and
Affiliates
E. Property, Plant and Equipment
F. Accumulated Depreciation
G. Intangible Assets - Other Assets
H. Long-Term Debt
I. Guarantees of Securities of Other Issuers
K. Capital Stock
*
198
*
*
*
*
*
*
*
*
Supplementary Schedule to Parent Financial Statements
(SEC Circular 11)
Reconciliation of Parent Company Retained Earnings for Dividend Declaration. 200
__________
* These schedules, which are required by paragraph 4 (e) of SRC Rule 68, have been omitted because
they are either not required, not applicable or the information required to be presented is included in
the Company’s financial statements or the notes to financial statements.
72
RIZAL COMMERCIAL BANKING CORPORATION AND SUBSIDIARIES
STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2009 AND 2008
(Amounts in Thousand Philippine Pesos)
CONSOLIDATED
2009
2008
Notes
PARENT
2009
2008
RESOURCES
CASH AND OTHER CASH ITEMS
7
P
6,811,443
DUE FROM BANGKO SENTRAL NG PILIPINAS
7
19,321,339
16,390,973
17,914,204
15,656,119
DUE FROM OTHER BANKS
7
3,066,922
4,862,225
1,788,841
3,197,593
8
3,437,138
20,673,614
22,700,044
8,034,236
17,638,584
32,260,486
3,084,380
17,892,114
21,077,161
P
P
6,807,939
5,408,491
P
5,595,736
INVESTMENT SECURITIES
Financial assets at fair value through profit or loss
Held-to-maturity investments
Available-for-sale securities - net
10
9,415,889
19,962,360
36,384,430
LOANS AND RECEIVABLES - Net
11
164,892,417
164,402,907
131,733,336
130,292,206
INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES - Net
12
4,021,767
4,294,182
10,700,809
10,311,051
BANK PREMISES, FURNITURE, FIXTURES
AND EQUIPMENT - Net
13
4,754,121
4,029,769
3,382,627
3,037,628
INVESTMENT PROPERTY - Net
14
5,066,543
7,387,613
2,873,265
3,500,460
DEFERRED TAX ASSETS - Net
28
1,408,302
1,391,709
1,389,497
1,389,497
OTHER RESOURCES - Net
15
13,410,044
11,892,093
9,475,346
10,817,548
9
TOTAL RESOURCES
P
288,515,577
P
268,270,206
P
242,599,722
P
225,851,493
P
11,034,257
93,571,654
115,671,983
P
11,125,069
75,738,446
109,363,471
P
8,535,205
81,165,706
90,852,468
P
8,392,524
66,269,393
84,267,161
LIABILITIES AND CAPITAL FUNDS
DEPOSIT LIABILITIES
Demand
Savings
Time
17
Total Deposit Liabilities
220,277,894
196,226,986
180,553,379
158,929,078
BILLS PAYABLE
18
10,780,964
21,452,609
10,535,173
21,410,087
BONDS PAYABLE
19
5,836,076
6,002,821
5,836,076
6,002,821
ACCRUED TAXES, INTEREST AND OTHER EXPENSES
20
3,249,854
2,787,456
2,326,142
1,976,052
OTHER LIABILITIES
21
6,898,896
7,221,711
5,889,579
5,957,810
SUBORDINATED DEBT
22
10,926,978
6,941,899
10,926,978
6,941,899
257,970,662
240,633,482
216,067,327
201,217,747
Total Liabilities
CAPITAL FUNDS
Attributable to Parent Company Shareholders
Preferred stock
Treasury shares
Common stock
Hybrid perpetual securities
Capital paid in excess of par
Revaluation reserves on available-for-sale securities
Revaluation increment in property of an associate
Accumulated translation adjustment
Reserve for trust business
Other reserves
Share in additional paid-in capital of an associate
Surplus
Non-controlling interest
207,038
952,709 )
9,905,508
4,883,139
6,039,794
407,015
58,917
97,771
285,724
240,889 )
532,583
9,325,311
30,549,202
4,287 )
23
(
23
23
24
23
12
.
29
12
(
12
23
(
(
(
(
30,544,915
Total Capital Funds
TOTAL LIABILITIES AND CAPITAL FUNDS
859,335
9,628,430
4,883,139
5,571,906
1,568,758 )
28,243
83,889
276,973
240,889 )
532,583
7,626,144
27,680,995
44,271 )
P
288,515,577
See Notes to Financial Statements.
207,038
952,709 )
9,905,508
4,883,139
6,039,794
456,007
278,775
5,714,843
26,532,395
-
(
268,270,206
(
26,532,395
27,636,724
P
859,335
9,628,430
4,883,139
5,571,906
1,351,022 )
270,024
4,771,934
24,633,746
-
P
242,599,722
24,633,746
P
225,851,493
RIZAL COMMERCIAL BANKING CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Thousand Philippine Pesos, Except Per Share Data)
INTEREST INCOME ON
Loans and receivables
Investment securities
Others
INTEREST EXPENSE ON
Deposit liabilities
Bills payable and other borrowings
11
P
8,9,10
7
17
18
NET INTEREST INCOME
IMPAIRMENT LOSSES - Net
11, 16
NET INTEREST INCOME AFTER
IMPAIRMENT LOSSES
OTHER OPERATING INCOME
Trading and securities gains (losses) - net
Service fees
Foreign exchange gains (losses) - net
Equity in net earnings of associates
Trust fees
Commissions and other income
OTHER OPERATING EXPENSES
Employee benefits
Occupancy and equipment-related
Taxes and licenses
Depreciation and amortization
Miscellaneous
12
25
26
28
13
27
28
NET PROFIT
NET PROFIT ATTRIBUTABLE
TO NON-CONTROLLING INTEREST
NET PROFIT ATTRIBUTABLE TO PARENT
COMPANY'S SHAREHOLDERS
Earnings Per Share*
Basic
Diluted
12,109,348
3,959,516
701,361
P
10,885,349
3,991,885
782,398
P
PARENT
2008
2009
2007
9,583,739
4,917,942
828,726
P
8,347,262
3,448,859
642,873
P
2007
7,365,395
3,735,538
683,548
P
6,369,342
4,614,971
694,513
16,770,225
15,659,632
15,330,407
12,438,994
11,784,481
11,678,826
4,716,435
1,785,958
5,128,787
2,060,697
4,192,593
2,318,741
3,347,079
1,752,383
3,772,306
2,032,540
2,952,030
2,287,019
6,502,393
7,189,484
6,511,334
5,099,462
5,804,846
5,239,049
10,267,832
8,470,148
8,819,073
7,339,532
5,979,635
6,439,777
2,243,192
998,492
942,490
1,683,463
830,597
680,535
8,024,640
7,471,656
7,876,583
5,656,069
5,149,038
5,759,242
511,946 )
1,643,395
851,961
404,192
206,019
2,003,059
1,329,128
1,514,472
157,107 )
351,842
184,849
1,157,399
1,902,230
902,197
383,834
612,623 )
1,045,435
715,623
1,007,936
1,032,985
250,627 )
2,252,821
1,613,652
493,716
206,857
181,153
1,138,030
8
PROFIT BEFORE TAX
TAX EXPENSE
CONSOLIDATED
2008
2009
Notes
(
(
(
-
(
-
-
167,918
1,236,976
186,419
1,814,650
164,212
907,704
5,886,229
4,596,680
4,380,583
4,593,155
3,149,504
2,862,210
2,779,236
1,651,224
1,219,775
533,797
3,646,715
2,524,956
1,492,784
1,143,463
407,881
3,406,723
2,384,398
1,410,766
1,068,856
315,366
2,988,471
1,864,571
1,348,043
912,063
377,126
2,656,267
1,682,187
1,150,968
849,633
288,499
2,588,221
1,640,155
1,107,099
768,967
224,570
2,397,935
9,830,747
8,975,807
8,167,857
7,158,070
6,559,508
6,138,726
4,080,122
3,092,529
4,089,309
3,091,154
1,739,034
2,482,726
744,420
919,424
845,650
519,030
568,720
543,376
3,335,702
2,173,105
3,243,659
2,572,124
1,170,314
1,939,350
7,320
19,365
36,027
-
-
-
P
3,328,382
P
2,153,740
P
3,207,632
P
2,572,124
P
1,170,314
P
1,939,350
P
P
3.13
3.06
P
P
1.72
1.66
P
P
2.93
2.84
P
P
2.30
2.25
P
P
0.70
0.67
P
P
1.53
1.48
32
* After giving retroactive effect to the 15% stock dividends issued in 2007 (see Note 23).
See Notes to Financial Statements.
RIZAL COMMERCIAL BANKING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CHANGES IN CAPITAL FUNDS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Thousand Philippine Pesos)
CONSOLIDATED
2008
2009
Notes
PARENT
2008
2009
2007
2007
ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS
PREFERRED STOCK
Balance at beginning of year
Conversion of preferred stock to common stock
Balance at end of year
P
(
Balance at the end of year
CAPITAL PAID IN EXCESS OF PAR
Balance at beginning of year
Conversion of preferred stock to common stock
Excess of consideration given over cost of treasury shares reissued
Issuance of common stock
1,054,940
195,428 )
859,335
P
859,335
652,297 )
(
P
859,512
177 )
(
207,038
859,512
P
(
1,054,940
195,428 )
859,335
859,512
-
-
(
1,594,925 )
642,216
-
-
(
952,709 )
-
-
(
952,709 )
-
-
9,628,430
277,078
-
9,628,369
61
-
6,329,640
104,598
2,100,000
1,094,131
9,628,430
277,078
-
9,628,369
61
-
6,329,640
104,598
2,100,000
1,094,131
23
9,905,508
9,628,430
9,628,369
9,905,508
9,628,430
9,628,369
23
23
5,571,906
375,219
92,669
-
5,571,793
113
-
2,118,688
90,830
3,362,275
5,571,906
375,219
92,669
-
5,571,793
113
-
2,118,688
90,830
3,362,275
6,039,794
5,571,906
5,571,793
6,039,794
5,571,906
5,571,793
4,883,139
4,883,139
4,883,139
4,883,139
4,883,139
4,883,139
23
HYBRID PERPETUAL SECURITIES
24
REVALUATION RESERVES ON AVAILABLE-FOR-SALE SECURITIES
Balance at beginning of year
Fair value gains (losses) on available-for-sale securities, net of tax
10
(
Balance at end of year
REVALUATION INCREMENT IN PROPERTY OF AN ASSOCIATE
Balance at beginning of year
Increase during the year
ATTRIBUTABLE TO
PARENT COMPANY SHAREHOLDERS (Carried Forward)
P
(
1,594,925 )
642,216
Balance at end of year
Balance at end of year
859,512
177 )
(
COMMON STOCK
Balance at beginning of year
Conversion of preferred stock to common stock
Issuance of common stock
Stock dividends
Balance at end of year
P
(
207,038
23
TREASURY SHARES
Purchase of treasury shares during the year
Reissuance of treasury shares during the year
859,335
652,297 )
12
P
1,568,758 )
1,975,773
(
1,032,344
2,601,102 )
407,015
(
1,568,758 )
28,243
30,674
7,014
21,229
58,917
28,243
20,548,702
P
19,402,295
2,907,648
1,875,304 )
(
(
1,351,022 )
1,807,029
(
977,649
2,328,671 )
456,007
(
1,351,022 )
1,032,344
977,649
7,014
-
-
-
7,014
-
-
-
-
P
2,747,231
1,769,582 )
(
21,982,171
P
20,538,777
P
19,591,788
P
21,920,462
-2-
ATTRIBUTABLE TO
PARENT COMPANY SHAREHOLDERS (Brought Forward)
P
20,548,702
ACCUMULATED TRANSLATION ADJUSTMENTS
Balance at beginning of year
Translation adjustment during the year
Balance at end of year
RESERVE FOR TRUST BUSINESS
Balance at beginning of year
Transfer from surplus free
Balance at end of year
CONSOLIDATED
2008
2009
Notes
29
(
P
19,402,295
83,889
13,882
63,937
19,952
97,771
P
63,937
-
-
-
276,973
8,751
258,348
18,625
247,595
10,753
270,024
8,751
258,348
11,676
247,595
10,753
285,724
276,973
258,348
278,775
270,024
258,348
(
240,889 )
-
532,583
532,583
23
11, 15
7,626,144
3,328,382
785,831 )
834,633 )
8,751 )
-
6,495,022
2,153,740
1,003,993 )
18,625 )
-
5,448,793
3,207,632
1,056,519 )
10,753 )
1,094,131 )
Balance at end of year
TOTAL CAPITAL FUNDS
(
(
-
-
-
-
4,771,934
2,572,124
785,831 )
834,633 )
8,751 )
-
4,617,289
1,170,314
1,003,993 )
11,676 )
-
4,839,342
1,939,350
1,056,519 )
10,753 )
1,094,131 )
(
(
(
(
(
6,495,022
5,714,843
4,771,934
4,617,289
30,549,202
27,680,995
29,332,061
26,532,395
24,633,746
26,796,099
-
-
-
-
-
-
44,271 )
32,795
7,320
131 )
(
(
311,669 )
12,585
19,365
5,441 )
240,889
(
4,287 )
P
(
(
(
(
(
-
7,626,144
(
(
(
-
9,325,311
Balance at end of year
10
12
21,920,462
83,889
532,583
NON-CONTROLLING INTEREST
Balance at beginning of year
Increase in non-controlling interest due to acquisition of a new subsidiary
Net profit for the year
Fair value gains on available-for-sale securities, net of tax
Decrease in share of losses due to dilution
P
-
12
ATTRIBUTABLE TO
PARENT COMPANY SHAREHOLDERS
19,591,788
-
240,889 )
23
P
-
SHARE IN ADDITIONAL PAID-IN CAPITAL OF AN ASSOCIATE
29
20,538,777
2007
144,572
80,635 )
(
12
(
(
(
P
21,982,171
OTHER RESERVES
SURPLUS
Balance at beginning of year
Net profit for the year
Cash dividends
Amortization of deferred charges
Transfer to reserve for trust business
Stock dividends
PARENT
2008
2009
2007
30,544,915
(
44,271 )
P
27,636,724
(
282,699 )
36,027
64,997 )
(
(
311,669 )
P
See Notes to Financial Statements.
29,020,392
P
26,532,395
P
24,633,746
P
26,796,099
RIZAL COMMERCIAL BANKING CORPORATION AND SUBSIDIARIES
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Thousand Philippine Pesos)
P
NET PROFIT FOR THE YEAR
CONSOLIDATED
2008
2009
Notes
3,335,702
P
2,173,105
P
3,243,659
PARENT
2008
2009
2007
P
2,572,124
P
2007
1,170,314
P
1,939,350
OTHER COMPREHENSIVE INCOME (LOSSES)
Fair value gains (losses) on available-for-sale securities, net of tax
1,975,773
10
(
2,601,102 )
Increase in revaluation increment in property of an associate
30,674
21,229
Translation adjustment during the year
13,882
19,952
Increase in other reserves
12
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE
TO NON-CONTROLLING INTEREST
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE
TO PARENT COMPANY'S SHAREHOLDERS
-
(
240,889 )
2,020,329
(
2,800,810 )
5,356,031
(
627,705 )
131
P
5,355,900
(
633,146 )
See Notes to Financial Statements.
1,807,029
-
-
-
-
-
-
-
-
-
-
-
1,955,939 )
1,807,029
(
2,328,671 )
1,287,720
4,379,153
(
1,158,357 )
(
80,635 )
(
5,441
( P
1,875,304 )
-
64,997
P
1,222,723
(
P
4,379,153
2,328,671 )
(
1,769,582 )
(
1,769,582 )
169,768
-
( P
1,158,357 )
-
P
169,768
RIZAL COMMERCIAL BANKING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Thousand Philippine Pesos)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Impairment losses
Depreciation and amortization
Amortization of deferred charges
Equity in net earnings of associates
Dividend income
Operating income before working capital changes
Decrease (increase) in financial assets at fair value through profit and loss
Increase in loans and receivables
Decrease (increase) in investment property
Decrease (increase) in other resources
Increase in deposit liabilities
Increase (decrease) in accrued taxes, interest and other expenses
Decrease in other liabilities
Cash generated from (used in) operations
Cash paid for taxes
P
2,243,192
533,797
51,726
206,857 )
13
15
(
(
(
21,812,647
13
Net Cash From (Used in) Financing Activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Carried Forward)
11,602,604 )
1,340,431 )
711,254
324,837
217,904
82,282
12
13
Net Cash From (Used in) Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payments of) bills payable
Net proceeds from issuance of subordinated debt
Purchase of treasury shares
Dividends paid
Redemption of bonds payable
Issuance of common shares
(
(
18
22
23
23
(
11,606,758 )
(
10,671,645 )
3,985,079
1,594,925 )
785,831 )
-
(
(
19
23
(
P
(
(
(
(
(
12,924,736 )
(
4,254,996
1,035,459 )
(
(
85,991
230,718
85,708
(
3,621,954
(
8,632,109
1,937,725
(
(
1,138,567
(
(
1,003,993 )
433,954 )
(
(
9,131,887
(
19,454,853
(
(
12,260,193 )
(
9,522,174 )
4,813,495 )
(
1,056,519 )
(
(
10,874,914 )
3,985,079
1,594,925 )
785,831 )
-
9,270,156 )
772,316 )
253,530
1,327 )
217,904
50,191
(
-
-
( P
(
10,057,102 )
571,515 )
1,956,812 )
185,364
139,872
-
5,462,275
170,895 )
407,739 )
P
1,784,686
1,739,034
(
(
662,088
2,482,726
680,535
224,570
34,067
-
(
(
(
(
30,979 )
2,869,398
5,568,698
36,557,885 )
387,085
337,371
16,437,910
509,907 )
808,945 )
12,276,275 )
571,258 )
(
12,847,533 )
(
4,297,281
649,148 )
(
(
450,612 )
30,979
36,995
(
(
3,421,898
1,401,061
5,696,413 )
2,191,634
294,402
17,034,785
358,163
2,789,654 )
16,215,876
566,742 )
(
(
(
15,649,134
10,019,060 )
407,980 )
2,925,562 )
104,269
(
3,265,495
(
8,932,177
1,937,725
(
1,003,993 )
433,954 )
(
9,431,955
(
13,248,333 )
4,722,936 )
-
(
(
1,056,519 )
-
-
9,270,591 )
P
P
-
217,904 )
4,985,565
4,949,856 )
2,597,463 )
173,634
455,843
21,624,301
290,910
68,231 )
19,914,703
459,850 )
(
(
2007
830,597
288,499
42,247
-
14,452,618
-
P
3,091,154
1,683,463
377,126
51,726
(
5,025,733
1,130,140
9,204,264 )
2,223,422
55,581
18,378,706
660,633
2,749,634 )
15,520,317
1,067,699 )
(
-
(
(
P
942,490
315,366
30,410
351,842 )
-
PARENT
2008
2009
4,089,309
(
4,136,957
5,583,598
41,812,593 )
357,354
4,702 )
20,298,111
244,348 )
518,042 )
12,203,665 )
721,071 )
(
9,067,322 )
P
998,492
407,881
42,247
404,192 )
-
6,701,980
5,978,751 )
2,205,572 )
447,783 )
313,295
24,050,908
336,889
322,815 )
22,448,151
635,504 )
(
(
(
2007
3,092,529
(
-
Net Cash From (Used in) Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in available-for-sale securities
Acquisitions of bank premises, furniture, fixtures and equipment
Increase in held-to-maturity investments
Decrease (increase) in investments in subsidiaries and associates
Cash dividends received
Proceeds from disposals of bank premises, furniture, fixtures and equipment
P
4,080,122
11, 16
12
CONSOLIDATED
2008
2009
Notes
( P
5,462,275
150,083 )
317,180 )
P
2,083,621
-2-
2009
Notes
P
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Brought Forward)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
Cash and other cash items
Due from Bangko Sentral ng Pilipinas
Due from other banks
CASH AND CASH EQUIVALENTS AT END OF YEAR
Cash and other cash items
Due from Bangko Sentral ng Pilipinas
Due from other banks
7
7
7
7
7
7
P
1,138,567
CONSOLIDATED
2008
( P
170,895 )
2007
P
1,784,686
PARENT
2008
2009
P
662,088
( P
150,083 )
2007
P
2,083,621
6,807,939
16,390,973
4,862,225
5,875,727
17,611,380
4,744,925
5,005,742
13,787,927
7,653,677
5,595,736
15,656,119
3,197,593
4,827,540
16,750,323
3,021,668
4,181,906
12,844,278
5,489,726
28,061,137
28,232,032
26,447,346
24,449,448
24,599,531
22,515,910
6,811,443
19,321,339
3,066,922
6,807,939
16,390,973
4,862,225
5,875,727
17,611,380
4,744,925
5,408,491
17,914,204
1,788,841
5,595,736
15,656,119
3,197,593
4,827,540
16,750,323
3,021,668
29,199,704
P
28,061,137
P
28,232,032
P
25,111,536
P
24,449,448
P
Supplemental Information on Noncash Investing Activities
In 2009, the Group and the Parent Company reclassified its investment in special purpose companies (SPCs), previously presented as investment property, with total carrying amount of P3,092,154 and P388,431, respectively, to investments in subsidiaries.
Accordingly, the net assets of the SPCs were consolidated to the Group's 2009 financial statements (see Note 14).
In 2009, the Parent Company exchanged its common shares previously purchased as treasury shares amounting to P642,216 for a 5.64% equity stake in MICO Equities, Inc. (see Note 23).
In 2008, the Group and the Parent Company made the following reclassifications of investment securities (see Notes 8, 9, 10 and 11):
- Financial assets at fair value through profit or loss (FVTPL) with a total carrying value of P411,228 were reclassified to held-to-maturity (HTM) investments both in the Group and Parent Company's financial statements.
- Available-for-sale (AFS) securities with a total carrying value of P5,960,822 were reclassified to loans and receivables in the Group and Parent Company's financial statements.
- Financial derivative instruments with a negative carrying value of P307,836 were reclassified to loans and receivables in the Group and Parent Company's financial statements .
- AFS securities with a total carrying value of P20,373,408 and P17,588,835 were reclassified from AFS securities to HTM investments in the Group and Parent Company's financial statements, respectively.
- Financial assets at FVTPL with carrying value of P527,223 were reclassified to AFS securities in the Group's financial statements.
See Notes to Financial Statements.
24,599,531
RIZAL COMMERCIAL BANKING CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009, 2008 AND 2007
(Amounts in Thousands of Philippine Pesos, Except Per Share Data or as Indicated)
1.
CORPORATE INFORMATION
Rizal Commercial Banking Corporation (the “Parent Company”) holds interest in the
following subsidiaries and associates:
Subsidiaries/Associates
Country of
Incorporation
Subsidiaries:
RCBC Savings Bank, Inc. (RSB)
Philippines
RCBC Forex Brokers Corporation
(RCBC Forex)
Philippines
RCBC Telemoney Europe
Italy
RCBC North America, Inc.
(RCBC North America)
California, USA
RCBC International Finance Limited
(RCBC IFL)
Hongkong
RCBC Investment Ltd.
Hongkong
RCBC Capital Corporation (RCBC Capital)
Philippines
RCBC Securities, Inc. (RSI)
Philippines
Pres. Jose P. Laurel Rural Bank, Inc. (JPL)
Philippines
Bankard, Inc. (Bankard)
Philippines
Merchants Savings and Loan
Association, Inc. (Merchants Bank)
Philippines
Special Purpose Companies (SPCs):
Under Parent Company:
Niyog Property Holdings, Inc. (NPHI)
Philippines
Under RSB:
Goldpath Properties Development
Corporation (GPDC)
Philippines
Manchesterland Properties, Inc.
Philippines
Hexagonland Corporation
Philippines
Best Value Property and Development
Corporation
Philippines
Crescent Park Property and Development
Corporation
Philippines
Crestview Properties Development
Corporation
Philippines
Eight Hills Property and Development
Corporation
Philippines
Fairplace Property and Development
Corporation
Philippines
Gold Place Properties Development
Corporation
Philippines
Greatwings Properties Development
Corporation
Philippines
Happyville Property and Development
Corporation
Philippines
Landview Property and Development
Corporation
Philippines
Lifeway Property and Development
Corporation
Philippines
Niceview Property and Development
Corporation
Philippines
Princeway Properties Development
Corporation
Philippines
Explanatory
Notes
Effective Percentage
of Ownership
2009
2008
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
(c)
(d)
(e)
99.99
100.00
99.96
100.00
99.00
91.69
99.99
100.00
99.96
100.00
91.69
(f)
96.38
96.38
(g)
(h)
100.00
-
100.00
100.00
100.00
-
100.00
-
100.00
-
100.00
-
100.00
-
100.00
-
100.00
-
100.00
-
100.00
-
100.00
-
100.00
-
100.00
-
100.00
-
(a)
(b)
(i)
(i)
-2-
Subsidiaries/Associates
Under RSB:
Stockton Realty Development Corporation
Top Place Properties Development
Corporation
Associates:
RCBC Land, Inc. (RLI)
YGC Corporate Services, Inc. (YCS)
Luisita Industrial Park Co. (LIPC)
Subic Power Corporation (SPC)
RCBC Realty Corporation (RRC)
Honda Cars Phils., Inc. (HCPI)
Roxas Holdings, Inc. (RHI)
Great Life Financial Assurance
Corporation (GLFAC)
Country of
Incorporation
Explanatory
Notes
Effective Percentage
of Ownership
2009
2008
(h)
Philippines
100.00
-
Philippines
100.00
-
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
49.00
40.00
35.00
26.50
34.80
12.88
4.71
49.00
40.00
35.00
26.50
34.80
12.88
4.71
-
20.00
Philippines
(j)
Explanatory Notes:
(a) Includes 25.29% and 31% ownership of RCBC IFL in 2009 and 2008,
respectively.
(b) A wholly owned subsidiary of RCBC IFL.
(c) A wholly owned subsidiary of RCBC Capital.
(d) In 2009, the Parent Company made a total capital infusion to JPL amounting to
P175 million which resulted in its full and irrevocable voting and economic rights for
99% of JPL’s outstanding shares (see Note 12).
(e) Owned 59.07% by RCBC Capital in 2007. In 2008, the Parent Company’s
P1 billion capital infusion by way of conversion of debt to equity was effected
(see Note 12). As of December 31, 2009 and 2008, the Parent Company has 66.58%
direct ownership and 25.11% indirect ownership through RCBC Capital.
(f) In 2008, the Parent Company acquired 96.38% ownership in Merchants Bank
from Finman Capital Corporation.
(g) In 2009, the Parent Company and RSB reclassified their 58% and 42%,
respectively, investment in NPHI from Investment Property account to
Investments in Subsidiaries and Associates account (see Notes 12 and 14).
(h) In 2009, RSB reclassified its investment with SPCs from Investment Property
account to Investments in Subsidiaries and Associates account which resulted
into its consolidation with the Parent Company (see Note 14).
(i) A wholly owned subsidiary of GPDC.
(j) Sold in 2009 to Grepalife Financial, Inc. (Grepalife), formerly Great Pacific Life
Assurance Corporation (see Note 12).
The Parent Company is a universal bank engaged in all aspects of banking. It provides
products and services related to traditional loans and deposits, trade finance, domestic
and foreign fund transfers or remittance, cash management, treasury, and trust and
custodianship services. The Parent Company also enters into forward currency
contracts as an accommodation to its clients and as a means of managing its foreign
exchange exposures. The Parent Company and its subsidiaries are engaged in all aspects
of traditional banking, investment banking, retail financing (credit cards, auto loans and
mortgage/ housing loans), leasing and stock brokering. At the end of
December 31, 2009, the Parent Company has 367 automated teller machines,
219 branches, 19 E-biz centers, 3 extension offices and 3 foreign exchange booths
within and outside of the Philippines.
-3-
The Parent Company’s common shares are listed in the Philippine Stock Exchange
(PSE) and is a 48.10% owned subsidiary of Pan Malayan Management and Investment
Corporation (PMMIC), a company incorporated and domiciled in the Philippines.
PMMIC is the holding company of the flagship institutions of the Yuchengco Group
of Companies.
The registered address of the Parent Company is located at Yuchengco Tower, RCBC
Plaza, 6819 Ayala Avenue, Makati City.
The accompanying financial statements for the year ended December 31, 2009
(including the comparatives for the years ended December 31, 2008 and 2007) were
approved and authorized for issue by the Board of Directors (BOD) on
March 29, 2010.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies that have been used in the preparation of these
financial statements are summarized in the succeeding pages. The policies have been
consistently applied to all years presented, unless otherwise stated.
2.1 Basis of Preparation of Financial Statements
(a) Statement of Compliance with Financial Reporting Standards in the Philippines for Banks and
Philippine Financial Reporting Standards
The 2009 and 2008 consolidated financial statements of Rizal Commercial Banking
Corporation and its subsidiaries (together hereinafter referred to as the “Group”)
and the separate 2009 and 2008 financial statements of Rizal Commercial Banking
Corporation have been prepared in accordance with the Financial Reporting
Standards in the Philippines for Banks (FRSPB); and the 2007 comparative
financial statements of the Group and of the Parent Company have been prepared
in accordance with Philippine Financial Reporting Standards (PFRS), except for the
following matters: the staggered recognition of required additional allowance for
impairment and losses, and the derecognition of certain non-performing assets
(NPAs) transferred, as discussed fully in Note 11. PFRS are adopted by the
Financial Reporting Standards Council (FRSC) from the pronouncements issued by
the International Accounting Standards Board (IASB). FRSPB are similar to PFRS,
except for the following reclassifications of certain financial instruments which are
not allowed under PFRS, but allowed under FRSPB starting October 2008 as
permitted by the Bangko Sentral ng Pilipinas (BSP) for prudential regulation, and
by the Securities and Exchange Commission (SEC) for financial reporting
purposes: (i) the reclassification of the embedded derivatives in credit-linked notes
(CLNs) and other similar instruments that are linked to Republic of the Philippines
(ROP) bonds from the fair value through profit or loss (FVTPL) classification to
loans and receivables and available-for-sale (AFS) classifications; and (ii) the
reclassification of certain financial assets previously classified under AFS category
due to the tainting of held-to-maturity (HTM) portfolio back to HTM category.
The effects of the reclassification to certain statement of financial position items as
of December 31, 2009 and 2008 and net profit for the years then ended under
FRSPB are discussed fully in Notes 8, 9, 10, and 11.
-4-
These financial statements have been prepared using the measurement bases
specified by FRSPB and PFRS for each type of resource, liability, income and
expense. These financial statements have been prepared on the historical basis,
except for the revaluation of certain financial assets. The measurement bases are
more fully described in the accounting policies that follow.
(b) Presentation of Financial Statements
The financial statements are presented in accordance with Philippine Accounting
Standards (PAS) 1 (Revised 2007), Presentation of Financial Statements. The Group
presents all items of income and expense in two statements: a Statement of Income
and a Statement of Comprehensive Income. Two comparative periods are
presented for the statement of financial position when the Group applies an
accounting policy retrospectively, makes a retrospective restatement of items in its
financial statements, or reclassifies items in the financial statements.
(c) Functional and Presentation Currency
These financial statements are presented in Philippine pesos, the Group’s
functional and presentation currency, and all values represent absolute amounts
except for per share data or when otherwise indicated (see also Note 2.17).
Items included in the financial statements of the Group are measured using the
currency of the primary economic environment in which the Group operates
(the functional currency).
2.2 Adoption of New Interpretations, Revisions and Amendments to PFRS
(a) Effective in 2009 that are Relevant to the Group
In 2009, the Group adopted the following new revisions and amendments to PFRS
that are relevant to the Group and effective for financial statements for the annual
period beginning on or after January 1, 2009:
PAS 1 (Revised 2007)
PAS 23 (Revised 2007)
PAS 32 and PAS 1
(Amendments)
:
:
Presentation of Financial Statements
Borrowing Costs
:
PFRS 7 (Amendment)
PFRS 8
Philippine Interpretation
IFRIC 13
Various Standards
:
:
Financial Instruments: Presentation
and Presentation of Financial
Statements – Puttable Financial
Instruments and Obligations
Arising on Liquidation
Financial Instruments: Disclosures
Operating Segments
:
:
Customer Loyalty Programmes
2008 Annual Improvements to PFRS
-5-
Discussed below are the effects on the financial statements of the new accounting
interpretation and amended standards:
(i) PAS 1 (Revised 2007), Presentation of Financial Statements, requires an entity to
present all items of income and expense recognized in the period in a single
statement of comprehensive income or in two statements: a separate statement
of income and a statement of comprehensive income. Income and expense
recognized in profit or loss is presented in the statement of income in the same
way as the previous version of PAS 1. The statement of comprehensive
income includes the profit or loss for the period and each component of
income and expense recognized outside of profit or loss or the “non-owner
changes in equity,” which are no longer allowed to be presented in the
statements of changes in equity, classified by nature (e.g., gains or losses on
available-for-sale assets or translation differences related to foreign operations).
A statement showing an entity’s financial position at the beginning of the
previous period is also required when the entity retrospectively applies an
accounting policy or makes a retrospective restatement, or when it reclassifies
items in its financial statements.
The Group’s adoption of PAS 1 (Revised 2007) did not result in any material
adjustments in its financial statements as the change in accounting policy only
affects presentation aspects. The Group has elected to present all income and
expense in two statements: a statement of income and statement of
comprehensive income (see Note 2.1).
(ii) PAS 23 (Revised 2007), Borrowing Costs. Under the revised PAS 23, all
borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset shall be capitalized as part of the cost of that
asset. The option of immediately expensing borrowing costs that qualify for
asset recognition has been removed. The Group’s adoption of this new
standard does not have any significant effect on the 2009 financial statements,
as well as for prior periods, as the Group’s existing accounting policy is to
capitalize all interest directly to qualifying assets.
(iii) PAS 32 (Amendment), Financial Instruments: Presentation and PAS 1
(Amendment), Presentation of Financial Statements – Puttable Financial Instruments and
Obligations Arising on Liquidation. The amendments require certain financial
instruments that represent a residual interest in the net assets of an entity,
which would otherwise be classified as financial liabilities, to be classified as
equity, if both the financial instrument and the capital structure of the issuing
entity meet certain conditions. The Group’s adoption of this standard does not
have material effect on its financial statements.
(iv) PFRS 7 (Amendment), Financial Instruments: Disclosures. The amendment
requires additional disclosures for financial instruments that are measured at fair
value in the statement of financial position. These fair value measurements are
categorized into a three-level fair value hierarchy, which reflects the extent to
which they are based on observable market data. A separate quantitative
maturity analysis must be presented for derivative financial liabilities that shows
the remaining contractual maturities, where these are essential for an
understanding of the timing of cash flows. The change in accounting policy
only results in additional disclosures (see Note 4.5).
-6-
(v) PFRS 8, Operating Segments. Under this new standard, a reportable operating
segment is identified based on the information about the components of the
entity that management uses to make decisions about operating matters. In
addition, segment resources, liabilities and performance, as well as certain
disclosures, are to be measured and presented based on the internal reports
prepared for and reviewed by the chief decision makers. The Group identifies
operating segments and reports on segment resources, liabilities and
performance based on internal management reports, hence, adoption of this
new standard does not have a material impact on the Group’s financial
statements.
(vi) Philippine Interpretation IFRIC 13, Customer Loyalty Programmes. This new
Philippine Interpretation clarifies that when goods or services are sold together
with a customer loyalty incentive (for example loyalty points or free products),
the arrangement is a multiple-element arrangement and the consideration
receivable from the customer is allocated between the components of the
arrangement using fair values. This new interpretation has no impact on the
Group’s financial statements.
(vii)2008 Annual Improvements to PFRS. The FRSC has adopted the Improvements
to International Financial Reporting Standards 2008. These amendments became
effective in the Philippines in annual periods beginning on or after
January 1, 2009. The Group determined the amendments to the following
standards to be relevant to the Group’s accounting policies:
• PAS 1 (Amendment), Presentation of Financial Statements. The amendment
clarifies that financial instruments classified as held for trading in
accordance with PAS 39 are not necessarily required to be presented as
current assets or current liabilities. Instead, normal classification principles
under PAS 1 should be applied. Since the presentation of assets and
liabilities in the Group’s financial statements are unclassified, this new
standard has no impact on the Group’s financial statements.
• PAS 19 (Amendment), Employee Benefits. The amendment includes the
following:
- Clarification that a curtailment is considered to have occurred to the
extent that benefit promises are affected by future salary increases and a
reduction in the present value of the defined benefit obligation results
in negative past service cost.
- Change in the definition of return of plan assets to require the
deduction of plan administration costs in the calculation of plan assets
return only to the extent that such costs have been excluded from
measurement of the defined benefit obligation.
- Distinction between short-term and long-term employee benefits will
be based on whether benefits are due to be settled within or after
12 months of employee service being rendered.
-7-
- Removal of the reference to recognition in relation to contingent
liabilities in order to be consistent with PAS 37, Provisions, Contingent
Liabilities and Contingent Assets, which requires contingent liabilities to be
disclosed and not recognized.
This amendment to PAS 19 has no impact on the Group’s 2009 financial
statements.
• PAS 23 (Amendment), Borrowing Costs. The amendment clarifies the
definition of borrowing costs to include interest expense determined using
the effective interest method under PAS 39. This amendment had no
significant effect on the Group’s financial statements.
•
PAS 28 (Amendment), Investments in Associates. Where an investment in
associate is accounted for in accordance with PAS 39, only certain rather
than all disclosure requirements in PAS 28 need to be made in addition to
disclosures required by PFRS 7. The Group’s adoption of this new
standard does not have any significant effect on the 2009 financial
statements, as all investment in associates of the Group are in accordance
with PAS 28.
• PAS 36 (Amendment), Impairment of Assets. Where fair value less cost to sell
is calculated on the basis of discounted cash flows, disclosures equivalent to
those for value-in-use calculation should be made. The Group’s adoption
of this amendment has no material effect on its 2009 financial statements.
• PAS 38 (Amendment), Intangible Assets. The amendment clarifies when to
recognize a prepayment asset, including advertising or promotional
expenditures. In the case of supply of goods, the entity recognizes such
expenditure as an expense when it has a right to access the goods. For
services, an expense is recognized on receiving the service. Also,
prepayment may only be recognized in the event that payment has been
made in advance of obtaining right of access to goods or receipt of services.
The Group’s adoption of this amendment had no material effect on its
2009 financial statements.
• PAS 39 (Amendment), Financial Instruments: Recognition and Measurement. The
definition of financial asset or financial liability at fair value through profit
or loss as it relates to items that are held for trading was changed. A
financial asset or liability that is part of a portfolio of financial instruments
managed together with evidence of an actual recent pattern of short-term
profit taking is included in such a portfolio on initial recognition. The
Group’s adoption of this amendment has no material effect on its 2009
financial statements.
-8-
• PAS 40 (Amendment), Investment Property. PAS 40 is amended to include
property under construction or development for future use as investment
property in its definition of investment property. This results in such
property being within the scope of PAS 40; previously, it was within the
scope of PAS 16. Also, if an entity’s policy is to measure investment
property at fair value, but during construction or development of an
investment property the entity is unable to reliably measure its fair value,
then the entity would be permitted to measure the investment property at
cost until construction or development is complete. At such time, the
entity would be able to measure the investment property at fair value. The
Group’s adoption of this new standard has no material effect on its
financial statements.
•
PFRS 5 (Amendment), Non-current Assets Held-for-Sale and Discontinued
Operations. The amendment clarifies that all the assets and liabilities of a
subsidiary should be classified as held for sale if the entity is committed to a
sale plan involving loss of control of the subsidiary, regardless of whether
the entity will retain a non-controlling interest after the sale. Relevant
disclosures should be made for this subsidiary if the definition of a
discontinued operation is met. The Group’s adoption of this amendment
did not result to significant impact on its financial statements.
(b) Effective in 2009 but not Relevant to the Group
The following amendments and interpretations to published standards are mandatory
for accounting periods beginning on or after January 1, 2009 but are not relevant to
the Group’s financial statements:
PFRS 1 and PAS 27
(Amendments)
PFRS 2 (Amendment)
Philippine Interpretations
IFRIC 16
:
:
:
PFRS 1 – First Time Adoption of PFRS
and PAS 27 – Consolidated and
Separate Financial Statements
Share-based Payment
Hedges of a Net Investment in a
Foreign Operation
-9-
(c) Effective Subsequent to 2009
There are new PFRS, revisions, amendments, annual improvements and
interpretations to existing standards that are effective for periods subsequent to 2009.
Among those, management has initially determined the following, which the Group
will apply in accordance with their transitional provisions, to be relevant to its
financial statements:
(i) PAS 27 (Revised 2008), Consolidated and Separate Financial Statements
(effective from July 1, 2009). The amendment requires that dividends received
out of the investee's pre-acquisition profits be no longer deducted from cost in
the parent or investor's separate financial statements, instead, dividends
receivable will be recorded as income (but may also give rise to impairment of
the investment). Moreover, the amendment introduces new guidance on
accounting when a parent reorganizes the structure of its group by establishing
a new entity as its parent and the interests of shareholders are not affected. The
Group does not expect any impact on its consolidated financial statements
when it applies the standard subsequently.
(ii) PFRS 3 (Revised), Business Combinations (effective from July 1, 2009). The
revised standard continues to apply the acquisition method to business
combinations, with some significant changes. For example, all payments to
purchase a business are to be recorded at fair value at the acquisition date, with
contingent payments classified as debt subsequently re-measured through the
income statement. There is a choice on an acquisition-by-acquisition basis to
measure the non-controlling interest in the acquiree either at fair value or at the
non-controlling interest’s proportionate share of the acquiree’s net assets. All
acquisition-related costs should be expensed. The Group will apply
PFRS 3 (Revised) prospectively to all business combinations from
January 1, 2010.
(iii) PFRS 9, Financial Instruments (effective from January 1, 2013). PFRS 9 is the
first part of Phase 1 of the project to replace PAS 39, Financial Instruments:
Recognition and Measurement, in its entirety by the end of 2010. The main phases
are (with a separate project dealing with derecognition):
o Phase 1 : Classification and Measurement
o Phase 2 : Impairment Methodology
o Phase 3 : Hedge Accounting
PFRS 9 introduces major simplifications of the classification and measurement
provisions under PAS 39. These include reduction from four measurement
categories into two categories, i.e. fair value and amortized cost, and from
several impairment methods into one method.
Management is yet to assess the impact that this amendment is likely to have on
the financial statements. However, it does not expect to implement the
amendments until 2013 when all phases of the PAS 39 replacement have been
published at which time the Group expects it can comprehensively assess the
impact of the revised standard.
- 10 -
(iv) Philippine Interpretation IFRIC 14, Prepayments of a Minimum Funding
Requirement – Amendment to IFRIC 14 (effective on or before January 1, 2011).
This interpretation addresses unintended consequences that can arise from the
previous requirements when an entity prepays future contributions into a
defined benefit pension plan. It sets out guidance on when an entity recognizes
an asset in relation to a PAS 19 surplus for defined benefit plans that are subject
to a minimum funding requirement. Management does not expect that its
future adoption of the amendment will have a material effect on its financial
statements because it does not usually make substantial advance contribution to
its retirement fund.
(v) Philippine Interpretation IFRIC 18, Transfers of Assets from Customers
(effective from July 1, 2009). This interpretation provides guidance on how to
account for items of property, plant and equipment received from customers;
or cash that is received and used to acquire or construct specific assets. It is
only applicable to agreements in which an entity receives from a customer such
assets that the entity must either use to connect the customer to a network or to
provide ongoing access to a supply of goods or services or both. Management
does not anticipate the adoption of the interpretation to have material impact
on its financial statements.
(vi) Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity
Instruments (effective on or after July 1, 2010). It addresses accounting by an
entity when the terms of a financial liability are renegotiated and result in the
entity issuing equity instruments to a creditor to extinguish all or part of the
financial liability. These transactions are sometimes referred to as “debt for
equity” exchanges or swaps, and have happened with increased regularity during
the financial crisis. The interpretation requires the debtor to account for a
financial liability which is extinguished by equity instruments as follows:
•
the issue of equity instruments to a creditor to extinguish all (or part) of a
financial liability is considered as payment in accordance with PAS 39;
•
the entity measures the equity instruments issued at fair value, unless this
cannot be reliably measured;
•
if the fair value of the equity instruments cannot be reliably measured, then
the fair value of the financial liability extinguished is used; and,
•
the difference between the carrying amount of the financial liability
extinguished and the consideration paid is recognized in profit or loss.
Management has determined that the adoption of the interpretation will not
have a material effect on it financial statements as it does not normally
extinguish financial liabilities through equity swap.
- 11 -
(vii)2009 Annual Improvements to PFRS. The FRSC has adopted the Improvements
to Philippine Financial Reporting Standards 2009. Most of these amendments
became effective for annual periods beginning on or after July 1, 2009, or
January 1, 2010. Among those improvements, only the following amendments
were identified to be relevant to the Group’s financial statements:
•
PAS 1 (Amendment), Presentation of Financial Statements (effective from
January 1, 2010). The amendment clarifies the current and non-current
classification of a liability that can, at the option of the counterparty, be
settled by the issue of the entity’s equity instruments. The Group will apply
the amendment in its 2010 financial statements but expects to have no
material impact in the Group’s financial statements.
•
PAS 7 (Amendment), Statement of Cash Flows (effective from
January 1, 2010). The amendment clarifies that only an expenditure that
results in a recognized asset can be classified as a cash flow from investing
activities. The amendment will not have a material impact on the financial
statements since only recognized assets are classified by the Group as cash
flow from investing activities.
•
PAS 17 (Amendment), Leases (effective from January 1, 2010). The
amendment clarifies that when a lease includes both land and building
elements, an entity assesses the classification of each element as finance or
an operating lease separately in accordance with the general guidance on
lease classification set out in PAS 17. Management has initially determined
that this will not have material impact on the Group’s financial statements.
•
PAS 18 (Amendment), Revenue (effective from January 1, 2010). The
amendment provides guidance on determining whether an entity is acting as
a principal or as an agent. Management will apply this amendment
prospectively in its 2010 financial statements.
2.3 Basis of Consolidation and Accounting for Investments in Subsidiaries and
Associates in Separate Financial Statements
The Group obtains and exercises control through voting rights. The Group’s
consolidated financial statements comprise the accounts of the Parent Company and its
subsidiaries as enumerated in Note 1, after the elimination of material intercompany
transactions. All intercompany balances and transactions with subsidiaries, including
income, expenses and dividends, are eliminated in full. Unrealized profits and losses
from intercompany transactions that are recognized in assets are also eliminated in full.
Intercompany losses that indicate an impairment are recognized in the consolidated
financial statements.
The financial statements of subsidiaries are prepared for the same reporting period as
the Parent Company, using consistent accounting policies.
- 12 -
The Group accounts for its investments in subsidiaries and associates, and
non-controlling interest as follows:
(a) Investments in Subsidiaries
Subsidiaries are all entities over which the Group has the power to control the
financial and operating policies. The Parent Company obtains and exercises control
through voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered from the date in which the Parent
Company controls another entity. Subsidiaries are fully consolidated from the date
when the Parent Company obtains control. They are de-consolidated from the date
the control ceases.
Acquired subsidiaries are subject to application of the purchase method for
acquisitions. This involves the revaluation at fair value of all identifiable assets and
liabilities, including contingent liabilities of the subsidiary, at the acquisition date,
regardless of whether or not they were recorded in the financial statements of the
subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the
subsidiary are included in the consolidated statement of financial position at their
revalued amounts, which are also used as the bases for subsequent measurement in
accordance with the Group accounting policies.
Goodwill (positive) represents the excess of acquisition cost over the fair value of the
Group’s share of the identifiable net assets of the acquired subsidiary at the date of
acquisition. Negative goodwill represents the excess of the Group’s share in the fair
value of identifiable net assets of the subsidiary at date of acquisition over acquisition
cost.
All intercompany balances and transactions with subsidiaries, including the unrealized
profits arising from intra-group transactions, have been eliminated in full. Unrealized
losses are eliminated unless costs cannot be recovered.
(b) Transactions with Non-controlling Interests
Non-controlling interests represent the portion of the net assets and profit or loss
not attributable to the Group. The Group applies a policy of treating transactions
with non-controlling interests as transactions with parties external to the Group.
Disposals to non-controlling interests result in gains and losses for the Group that
are recorded in the statement of income. Purchases of equity shares from
non-controlling interests may result in goodwill, being the difference between any
consideration paid and the relevant share acquired of the carrying value of net assets
of the subsidiary.
In the consolidated financial statements, the non-controlling interest component is
shown as part of statements of changes in capital funds.
(c) Investments in Associates
Associates are those entities over which the Group is able to exert significant
influence but which are neither subsidiaries nor interest in a joint venture. In the
consolidated financial statements, Investments in Associates are initially recognized at
cost and subsequently accounted for using the equity method. Under the equity
method, the Group recognizes in its statement of income its share in the earnings or
losses of the associates. The cost of the investment is increased or decreased by the
Group’s equity in net earnings or losses of the associates since the date of acquisition.
- 13 -
Dividends received are recorded as reduction in the carrying values of the
investments.
Acquired investments in associates are also subject to purchase accounting.
However, any goodwill or fair value adjustment attributable to the share in the
associate is included in the amount recognized as investment in associates. All
subsequent changes to the share of interest in the equity of the associate are
recognized in the Group’s carrying amount of the investment. Changes resulting
from the profit or loss generated by the associate are charged against Equity in Net
Earnings of Associates in the Group’s statement of income and therefore affect net
results of the Group. These changes include subsequent depreciation, amortization
or impairment of the fair value adjustments of assets and liabilities. Items that have
been directly recognized in the associate’s equity, for example, resulting from the
associate’s accounting for available-for-sale financial assets, are recognized in
consolidated Capital Funds of the Group. Any non-financial income related equity
movements of the associate that arise, for example, from the distribution of
dividends or other transactions with the associate’s shareholders, are charged against
the proceeds received or granted. No effect on the Group’s net result or capital
funds is recognized in the course of these transactions. However, when the Group’s
share of losses in an associate equals or exceeds its interest in the associate, including
any other unsecured receivables, the Group does not recognize further losses, unless
it has incurred obligations or made payments on behalf of the associate.
Unrealized gains on transactions between the Group and its associates are eliminated
to the extent of the Group’s interest in the associates. Unrealized losses are also
eliminated unless the transaction provides evidence of an impairment of the assets
transferred. Accounting policies of associates have been changed where necessary to
ensure consistency with the policies adopted by the Group.
In the Parent Company financial statements, the Parent Company’s Investments in
Subsidiaries and Associates are accounted for at cost, less any impairment loss.
Investment costs are inclusive of unamortized positive goodwill, if any. If there is an
objective evidence that the investments in subsidiaries and associates will not be
recovered, an impairment loss is provided. Impairment loss is measured as the
difference between the carrying amount of the investment and the present value of
the estimated cash flows discounted at the current market rate of return for similar
financial assets. The amount of the impairment loss is recognized in profit or loss.
2.4 Segment Reporting
A business segment is a group of assets and operations engaged in providing products
or services that are subject to risks and returns that are different from those of other
business segments. A geographical segment is a segment engaged in providing
products or services within a particular economic environment that is subject to risks
and returns that are different from those of segments operating in other economic
environments.
The Group’s operations are structured according to the nature of the services provided
(primary segment) and different markets served (secondary segment). Financial
information on business segments is presented in Note 6.
- 14 -
2.5 Financial Assets
Financial assets, which are recognized when the Group becomes a party to the
contractual terms of the financial instrument, include cash and other financial
instruments. Financial assets, other than hedging instruments, are classified into the
following categories: financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments and available-for-sale securities. Financial
assets are assigned to the different categories by management on initial recognition,
depending on the purpose for which the investments were acquired. The designation of
financial assets is re-evaluated at every reporting period at which date a choice of
classification or accounting treatment is available, subject to compliance with specific
provisions of applicable accounting standards.
Regular purchases and sales of financial assets are recognized on their trade date. All
financial assets that are not classified as at fair value through profit or loss are initially
recognized at fair value plus any directly attributable transaction costs. Financial assets
carried at fair value through profit or loss are initially recorded at fair value and
transaction costs related to it are recognized as expense in the statement of income.
The foregoing categories and detailed description of the categories of financial
instruments are more fully discussed below and in the succeeding pages.
(a) Financial Assets at Fair Value through Profit or Loss
This category includes derivative financial instruments and financial assets that are
either classified as held for trading or are designated by the entity to be carried at
fair value through profit or loss upon initial recognition. A financial asset is
classified in this category if acquired principally for the purpose of selling in the
short term or if so designated by management. Derivatives are also categorized as
“held for trading” unless they are designated as hedges.
Financial assets at fair value through profit or loss are measured at fair value, and
changes therein are recognized in profit or loss. Financial assets may be reclassified
out of fair value through profit or loss category if they are no longer held for the
purpose of being sold or repurchased in the near term. Derivatives and financial
assets originally designated as financial assets at fair value through profit or loss
may not be subsequently reclassified, except for derivatives embedded in CLNs
linked to ROP bonds as allowed by BSP for prudential reporting and SEC for
financial reporting purposes.
(b) Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise when the Group
provides money, goods or services directly to the debtor with no intention of
trading the receivables. Included in this category are those arising from direct loans
to customers, interbank loans and receivables, sales contracts receivable,
all receivables from customers and cash and cash equivalents. Cash and cash
equivalents comprise balances with less than three months maturity from the date
of acquisition, including cash and non-restricted balances with the BSP and
amounts due from other banks.
- 15 -
Loans and receivables are subsequently measured at amortized cost using the
effective interest method, less impairment losses. Any change in their value is
recognized in profit or loss, except for changes in fair values of reclassified financial
assets under PAS 39 and PFRS 7 (Amendments). Increases in estimates of future
cash receipts from such financial assets shall be recognized as an adjustment to the
effective interest rate from the date of the change in estimate rather than as an
adjustment to the carrying amount of the financial asset at the date of the change in
estimate. Impairment losses is the estimated amount of losses in the Group’s loan
portfolio, based on the evaluation of the estimated future cash flows discounted at
the loan’s original effective interest rate or the last repricing rate for loans issued at
variable rates (see Note 2.6). It is established through an allowance account which
is charged to expense. Loans and receivables are written off against the allowance
for impairment losses when management believes that the collectibility of the
principal is unlikely, subject to BSP regulations.
(c) Held-to-maturity Investments
This includes non-derivative financial assets with fixed or determinable payments
and a fixed date of maturity. Investments are classified as held-to maturity if the
Group has the positive intention and ability to hold them until maturity.
Investments intended to be held for an undefined period are not included in this
classification.
Held-to-maturity investments consist of government and private debt securities.
Should the Group sell other than an insignificant amount of held-to-maturity
assets, the entire category would be tainted and reclassified as available-for-sale
securities. The tainting provision will not apply if the sales or reclassifications of
held-to-maturity investments are so close to maturity or the financial asset’s call
date that changes in the market rate of interest would not have a significant effect
on the financial asset’s fair value; occur after the Group has collected substantially
all of the financial asset’s original principal through scheduled payments or
prepayments; or are attributable to an isolated event that is beyond the control of
the Group, is nonrecurring and could not have been reasonably anticipated by the
Group. Financial assets that are booked under the available-for-sale category
because of the tainting provision may be reclassified to held-to-maturity
investments or loans and receivables using the fair value carrying amount of the
financial assets as of the date of reclassification in accordance with BSP Circular
No. 628.
Held-to-maturity investments are subsequently measured at amortized cost using
the effective interest method. In addition, if there is objective evidence that the
investment has been impaired, the financial asset is measured at the present value
of estimated cash flows (see Note 2.6). Any changes to the carrying amount of the
investment due to impairment are recognized in profit or loss.
(d) Available-for-sale Securities
This includes non-derivative financial assets that are either designated to this
category or do not qualify for inclusion in any of the other categories of financial
assets.
- 16 -
Non-derivative financial asset classified as available-for-sale may be reclassified to
loans and receivables category that would have met the definition of loans and
receivables (effective in July 1, 2008) if there is an intention and ability to hold that
financial asset for the foreseeable future or until maturity. Any previous gain or
loss on the asset that has been recognized in the capital funds shall be amortized to
profit or loss over the remaining life of the held-to-maturity investment, in case of
financial asset with a fixed maturity, using the effective interest method. Any
difference between the new amortized cost and maturity amount shall also be
amortized over the remaining life of the financial asset using the effective interest
method.
All financial assets within this category are subsequently measured at fair value,
unless otherwise disclosed, with changes in value recognized in other
comprehensive income, net of any effects arising from income taxes. When the
asset is disposed of or is determined to be impaired the cumulative gain or loss
recognized in other comprehensive income is reclassified from revaluation reserve
to profit or loss and presented as a reclassification adjustment within other
comprehensive income.
Reversal of impairment loss is recognized in other comprehensive income, except
for financial assets that are debt securities which are recognized in profit or loss
only if the reversal can be objectively related to an event occurring after the
impairment loss is recognized.
Impairment losses recognized on financial assets are presented as part of Impairment
Losses account in the statement of income.
The fair values of quoted investments in active markets are based on current bid prices.
If the market for a financial asset is not active (and for unlisted securities), the Group
establishes the fair value by using valuation techniques, which include the use of recent
arm’s length transactions, discounted cash flow analysis, option pricing models and
other valuation techniques commonly used by market participants. Gains and losses
arising from changes in the fair value of the financial assets at fair value through profit
or loss category are included in Trading and Securities Gains (Losses) - Net account in
the statement of income in the period in which they arise. Gains and losses arising
from changes in the fair value of available-for-sale securities are recognized as other
comprehensive income, until the financial asset is derecognized or impaired at which
time the cumulative gain or loss previously recognized in capital funds shall be
recognized in profit or loss. However, interest calculated using the effective interest
method is recognized in the statement of income. Dividends on available-for-sale
equity instruments are recognized in the statement of income when the entity’s right to
receive payment is established.
Non-compounding interest and other cash flows resulting from holding impaired
financial assets are recognized in profit or loss when received, regardless of how the
related carrying amount of financial assets is measured.
Derecognition of financial assets occurs when the right to receive cash flows from the
financial instruments expire or are transferred and substantially all of the risks and
rewards of ownership have been transferred.
- 17 -
2.6 Impairment of Financial Assets
The Group assesses at the end of each reporting period 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 incurred if, and 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. Objective evidence that a
financial asset or group of assets is impaired includes observable data that comes to the
attention of the Group about the following loss events:
i.
significant financial difficulty of the issuer or obligor;
ii. a breach of contract, such as a default or delinquency in interest or principal
payments;
iii. the Group granting to the borrower, for economic or legal reasons relating to the
borrower’s financial difficulty, a concession that the lender would not otherwise
consider;
iv. it becoming probable that the borrower will enter bankruptcy or other financial
reorganization;
v. the disappearance of an active market for that financial asset because of financial
difficulties; or,
vi. observable data indicating that there is a measurable decrease in the estimated
future cash flows from a group of financial assets since the initial recognition of
those assets, although the decrease cannot yet be identified with the individual
financial assets in the group, including: adverse changes in the payment status of
borrowers in the group, or national or local economic conditions that correlate with
defaults on the assets in the group.
(a) Assets Carried at Amortized Cost
The Group first assesses whether objective evidence of impairment exists
individually for financial assets that are individually significant and individually or
collectively for financial assets that are not individually significant. If the 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. 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.
- 18 -
If there is objective evidence that an impairment loss on loans and receivable or
held-to-maturity investments carried at amortized cost has been incurred, the
amount of the 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. The carrying amount of the asset is reduced through the use
of an allowance account and the amount of the loss is recognized in the statement
of income. If a loan or held-to-maturity investment has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective interest rate
determined under the contract. As a practical expedient, the Group may measure
impairment on the basis of an instrument’s fair value using an observable market
price.
The calculation of the present value of the estimated future cash flows of a
collateralized financial asset reflects the cash flows that may result from foreclosure
less costs for obtaining and selling the collateral, whether or not foreclosure is
probable.
For the purpose 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
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.
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 group and historical loss experience for assets with credit risk characteristics
similar to those in the group. Historical loss experience is adjusted on the basis of
current observable data to reflect the effects of current conditions that did not
affect the period on which the historical loss experience is based and to remove the
effects of conditions in the historical period that do not exist currently.
Estimates of changes in future cash flows for groups of assets should reflect and be
directionally consistent with changes in related observable data from period to
period (for example, changes in unemployment rates, property prices, payment
status, or other factors indicative of changes in the probability of losses in the
group and their magnitude). The methodology and assumptions used for
estimating future cash flows are reviewed regularly by the Group to reduce any
differences between loss estimates and actual loss experience.
When a loan/receivable is determined to be uncollectible, it is written off against
the related allowance for impairment. Such loan/receivable is written off after all
the prescribed procedures have been completed and the amount of the loss has
been determined. Subsequent recoveries of amounts previously written off
decrease the amount of impairment losses in the statement of income.
If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was
recognized (such as an improvement in the debtor’s credit rating), the previously
recognized impairment loss is reversed by adjusting the allowance account. The
amount of the reversal is recognized in the statement of income.
- 19 -
(b) Assets Carried at Fair Value
In the case of equity investments classified as available-for-sale, a significant or
prolonged decline in the fair value of the security below its cost is considered in
determining whether the assets are impaired. If any such evidence exists for
available-for-sale financial assets, the cumulative loss – measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on
that financial asset previously recognized in profit or loss – is removed from Capital
Funds and recognized in the profit or loss. Impairment losses recognized in the
statement of income on equity instruments are not reversed through the statement
of income. If, in a subsequent period, the fair value of a debt instrument classified
as available for sale increases and the increase can be objectively related to an event
occurring after the impairment loss was recognized in profit or loss, the impairment
loss is reversed through the statement of income.
(c) Assets Carried at Cost
If there is objective evidence of impairment for any of the unquoted equity
securities and derivative assets linked to and required to be settled in such unquoted
equity instruments, which are carried at cost, the amount of impairment loss is
recognized. The impairment loss is the difference between the carrying amount of
the equity security and the present value of the estimated future cash flows
discounted at the current market rate of return of a similar asset. Impairment
losses on assets carried at cost cannot be reversed.
2.7 Derivative Financial Instruments and Hedge Accounting
The Parent Company is a party to various foreign currency forward contracts,
cross currency swaps, futures, and interest rate swaps. These contracts are entered into
as a service to customers and as a means of reducing or managing the Parent
Company’s foreign exchange and interest rate exposures as well as for trading
purposes. Amounts contracted are recorded as contingent accounts that are not
included in the statement of financial position.
Derivatives are initially recognized as Financial Assets at Fair Value Through Profit or
Loss at fair value on the date on which a derivative contract is entered into and are
subsequently remeasured at their fair value. Fair values are obtained from quoted
market prices in active markets and valuation techniques, including discounted cash
flow models and options pricing models, as appropriate. The change in fair value of
derivative financial instruments is recognized in profit or loss, except when their effects
qualify as a hedging instrument. All derivatives are carried as assets when fair value is
positive and as liabilities when fair value is negative.
The best evidence of the fair value of a derivative at initial recognition is the transaction
price (i.e., the fair value of the consideration given or received) unless the fair value of
that instrument is evidenced by comparison with other observable current market
transactions in the same instrument (i.e., without modification or repackaging) or based
on a valuation technique whose variables include only data from observable markets.
When such evidence exists, the Parent Company and certain subsidiaries recognize the
profits at initial recognition.
- 20 -
Certain derivatives embedded in other financial instruments, such as credit default
swaps in a credit linked note, 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. These embedded
derivatives are measured at fair value, with changes in fair value recognized in the profit
or loss except for the embedded derivatives in CLNs linked to ROP bonds which were
not bifurcated from the host contracts and were reclassified to loans and receivables as
permitted by the BSP for prudential regulation and SEC for financial reporting
purposes.
Except for derivatives that qualify as a hedging instrument, changes in fair value of
derivatives are recognized in profit and loss. For a derivative that is designated as a
hedging instrument, the method of recognizing the resulting fair value gain or loss
depends on the type of hedging relationship. The Parent Company designates certain
derivatives as either: (a) hedges of the fair value of recognized assets or liabilities or
firm commitments (fair value hedges); or (b) hedges of highly probable future cash
flows attributable to a recognized asset or liability, or a forecasted transaction
(cash flow hedge). Hedge accounting is used for derivatives designated in this way
provided certain criteria are met.
2.8 Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amounts are reported in the
statement of financial position 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.
2.9 Bank Premises, Furniture, Fixtures and Equipment
Land is stated at cost. As no finite useful life for land can be determined, related
carrying amount are not depreciated. All other bank premises, furniture, fixtures and
equipment are stated at cost less accumulated depreciation, amortization and any
impairment in value.
The cost of an asset comprises its purchase price and directly attributable costs of
bringing the asset to working condition for its intended use. Expenditures for
additions, major improvements and renewals are capitalized; expenditures for repairs
and maintenance are charged to expense as incurred. When assets are sold, retired or
otherwise disposed of, their cost and related accumulated depreciation, amortization
and impairment losses, if any, are removed from the accounts and any resulting gain or
loss is reflected in income for the period.
Depreciation is computed on the straight-line method over the estimated useful lives of
the depreciable assets as follows:
Buildings
Furniture, fixtures and equipment
20-25 years
3-15 years
Leasehold rights and improvements are amortized over the term of the lease or the
estimated useful lives of the improvements, whichever is shorter.
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
(see Note 2.18).
- 21 -
The residual values and estimated useful lives of bank premises, furniture, fixtures and
equipment are reviewed, and adjusted if appropriate, at each statement of financial
position date.
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 the statement of income in the year the item is derecognized.
2.10 Investment Property
Investment property pertains to land, buildings or condominium units acquired by the
Group, in settlement of loans from defaulting borrowers through foreclosure or dacion
in payment, and not held for sale in the next 12 months.
Investment property is initially recognized at cost, which includes acquisition price plus
directly attributable cost incurred such as legal fees, transfer taxes and other transaction
costs. Subsequent to initial recognition, investment property is stated at cost less
accumulated depreciation and any impairment losses (see Note 2.18).
The Group adopted the cost model in measuring its investment property, hence, it is
carried at cost less accumulated depreciation and any impairment in value.
Depreciation and impairment loss are recognized in the same manner as in Bank
Premises, Furniture, Fixtures and Equipment.
Investment property is derecognized upon disposal or when permanently withdrawn
from use and no future economic benefit is expected from its disposal. Any gain or
loss on the retirement or disposal of an investment property is recognized in the
statement of income in the year of retirement or disposal.
2.11 Assets Held-for-Sale
Assets held-for-sale (presented as part of Other Resources) include real and other
properties acquired through repossession or foreclosure or purchase that certain
subsidiaries intend to sell within one year from the date of classification as
held-for-sale.
Assets classified as held-for-sale are measured at the lower of their carrying amounts,
immediately prior to their classification as held-for-sale and their fair value less costs to
sell. Assets classified as held-for-sale are not subject to depreciation or amortization.
The profit or loss arising from the sale or revaluation of held-for-sale assets is included
in the Other Operating Income (Expenses) account in the statement of income.
2.12 Intangible Assets
Intangible assets include goodwill, branch licenses, and computer software licenses.
Goodwill represents the excess of the cost of acquisition over the fair value of the net
assets acquired and branch licenses at the date of acquisition. Branch licenses, on the
other hand, represent the rights given to the Parent Company to establish certain
number of branches in the restricted areas in the country as incentive in acquiring a
certain rural bank.
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Goodwill is classified as intangible asset with indefinite useful life and, thus, not subject
to amortization but would require an annual test for impairment. Goodwill is
subsequently carried at cost less accumulated impairment losses. Goodwill is allocated
to cash generating units for the purpose of impairment testing. Each of those cash
generating units is represented by each primary reporting segment.
Branch licenses are amortized over five years, its estimated useful life, starting from the
year the branch is opened.
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 the basis of the
expected useful lives (three to five years).
Costs associated with developing or maintaining computer software programs are
recognized as an expense as incurred. Costs that are directly associated with the
production of identifiable and unique software products controlled by the Group, and
that will probably generate economic benefits exceeding costs beyond one year, are
recognized as intangible assets. Direct costs include software development employee
costs and an appropriate portion of relevant overheads.
Computer software development costs recognized as assets are amortized using the
straight-line method over their useful lives (not exceeding five years).
2.13 Financial Liabilities
Financial liabilities include deposit liabilities, bills payable, bonds payable, subordinated
debt, accrued interest and other expenses, and other liabilities.
Financial liabilities are recognized when the Group becomes a party to the contractual
agreements of the instrument. All interest-related charges are recognized as an expense
in the statement of income.
Financial liabilities are generally at their fair value at initial recognition and subsequently
measured at amortized cost less settlement payments.
Deposit liabilities are stated at amounts in which they are to be paid. Interest is accrued
periodically and recognized in a separate liability account before recognizing as part of
deposit liabilities.
Bills payable, bonds payable and subordinated debt are recognized initially at fair value,
which is the issue proceeds (fair value of consideration received) net of direct issue
costs. Bills payable, bonds payable and subordinated debt are subsequently stated at
amortized cost; any difference between the proceeds net of transaction costs and the
redemption value is recognized in the statement of income over the period of the
borrowings using the effective interest method.
Preferred shares that carry mandatory coupons or are redeemable on a specific date or
at the option of the shareholder, are classified as financial liabilities and are presented as
part of Other Liabilities in the statement of financial position. The dividends on these
preference shares are recognized in the statement of income as interest expense on an
amortized cost basis using the effective interest method.
- 23 -
Derivative financial liabilities represent the cumulative changes in net fair value losses
arising from the Group’s foreign currency forward transactions and interest rate swaps.
Dividend distributions to shareholders are recognized as financial liabilities when the
dividends are approved by the BSP.
Financial liabilities are derecognized from the statement of financial position only when
the obligations are extinguished either through discharge, cancellation or expiration.
2.14 Provisions
Provisions are recognized when present obligations will probably lead to an outflow of
economic resources and they can be estimated reliably even if the timing or amount of
the outflow may still be uncertain. A present obligation arises from the presence of a
legal or constructive commitment that has resulted from past events.
Provisions are measured at the estimated expenditure required to settle the present
obligation, based on the most reliable evidence available at the end of the reporting
period, including the risks and uncertainties associated with the present obligation.
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.
When time value of money is material, long-term provisions are discounted to their
present values using a pretax rate that reflects market assessments and the risks specific to
the obligation. Provisions are reviewed at the end of each reporting period and adjusted
to reflect the current best estimate.
In those cases where the possible outflow of economic resource as a result of present
obligations is considered improbable or remote, or the amount to be provided for cannot
be measured reliably, no liability is recognized in the financial statements. Similarly,
possible inflows of economic benefits to the Group that do not yet meet the recognition
criteria of an asset are considered contingent assets, hence, are not recognized in the
financial statements. On the other hand, any reimbursement that the Group can be
virtually certain to collect from a third party with respect to the obligation is recognized
as a separate asset not exceeding the amount of the related provision.
Prior to 2007, Bankard, under a rewards program, offers monetized rewards to active
cardholders. Provisions for rewards are recognized at a certain rate of cardholders’
credit card availments, determined by management based on redeemable amounts. The
program was assumed by the Parent Company when Bankard sold certain assets,
including credit card receivables, to the Parent Company.
- 24 -
2.15 Revenue and Cost Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will
flow to the Group and the revenue can be reliably measured. The following specific
recognition criteria must also be met before revenue is recognized:
(a) Interest Income and Expenses are recognized in the statement of income for all
instruments measured at amortized cost 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 Group estimates cash flows considering all contractual terms of
the financial instrument (for example, prepayment options) but does not consider
future credit losses. The calculation includes all fees and points 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 the
impairment loss.
(b) Trading and Securities Gains (Losses) recognized when the ownership of the securities
is transferred to the buyer (at an amount equal to the excess or deficiency of the
selling price over the carrying amount of securities) and as a result of the
mark-to-market valuation of certain securities at year-end.
(c) Commission and Other Income includes the following accounts:
(i) Finance charges are recognized on credit card revolving accounts, other than
those accounts classified as installment, as income as long as those outstanding
account balances are not 90 days and over past due. Finance charges on
installment accounts, first year and renewal membership fees are recognized as
income when billed to cardholders. Purchases by cardholders which are
collected on installment are recorded at the cost of items purchased.
(ii) Late payment fees are billed on delinquent credit card receivable balances until
179 days past due. These late payment fees are recognized as income upon
collection.
(iii) Loan syndication fees are recognized upon completion of all syndication activities
and where there are no further obligations to perform under the syndication
agreement. Service charges and penalties are recognized only upon collection or
accrued where there is a reasonable degree of certainty as to its collectibility.
- 25 -
(iv) Discounts earned, net of interchange costs, are recognized as income upon
presentation by member establishments of charges arising from Bankard and
non-Bankard (associated with MasterCard, JCB and VISA labels) credit card
availments passing through the Point of Sale (POS) terminals of Bankard.
These discounts are computed based on agreed rates and are deducted from
amounts remitted to member establishments. Interchange costs pertain to the
other credit card companies’ share in Bankard’s merchant discounts whenever
their issued credit cards transact in a Bankard POS terminal.
(v) Profit from assets sold or exchanged is recognized when the title to the acquired
assets is transferred to the buyer, or when the collectibility of the entire sales
price is reasonably assured.
Cost and expenses are recognized in the statement of income upon utilization of the
assets or services or at the date they are incurred.
2.16 Leases
The Group accounts for its leases as follows:
(a) Group as Lessee
Leases which transfer to the Group substantially all risks and benefits incidental to
ownership of the leased item are classified as finance leases and are recognized as
resources and liabilities in the statement of financial position at amounts equal at
the inception of the lease to the fair value of the leased property or, if lower, at the
present value of minimum lease payments. Lease payments are apportioned
between the finance costs and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance costs are
directly charged against income. Capitalized leased assets are depreciated over the
shorter of the estimated useful life of the asset or the lease term.
Leases which do not transfer to the Group substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Operating lease payments
are recognized as expense in the statement of income on a straight-line basis over
the lease term. Associated costs, such as maintenance and insurance, are expensed
as incurred.
(b) Group as Lessor
Leases, wherein the Group substantially transfers to the lessee all risks and benefits
incidental to ownership of the leased item, are classified as finance leases and are
presented as receivable at an amount equal to the Group’s net investment in the
lease. Finance income is recognized based on the pattern reflecting a constant
periodic rate of return on the Group’s net investment outstanding in respect of the
finance lease.
Leases which do not transfer to the lessee substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Operating lease collections
are recognized as income in the statement of income on a straight-line basis over
the lease term.
- 26 -
The Group determines whether an arrangement is, or contains a lease based on the
substance of the arrangement. It makes an assessment of whether the fulfillment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
2.17 Foreign Currency Transactions and Translations
(a) Transaction and Balances
Except for the foreign subsidiaries and accounts from the Group’s foreign currency
denominated unit (FCDU), the accounting records of the Group are maintained in
Philippine pesos. Foreign currency transactions during the period are translated
into the functional currency at exchange rates which approximate those prevailing at
transaction dates. Resources and liabilities denominated in foreign currencies are
translated to Philippine pesos at prevailing Philippine Dealing System closing rates
(PDSCR) at the statement of financial position date.
For financial reporting purposes, the accounts of the FCDU are translated into their
equivalents in Philippine pesos based on PDSCR prevailing at the end of the period
(for resources and liabilities) and at the average PDSCR for the period
(for income and expenses).
Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary resources and
liabilities denominated in foreign currencies are recognized in the statement of
income, except when deferred in capital funds as qualifying cash flow hedges and
qualifying net investment hedges. Translation differences on non-monetary items,
such as equities held at fair value through profit or loss, are reported as part of the
fair value gain or loss. Translation differences on non-monetary items, such as
equities classified as available-for-sale securities, are recognized as part of the
Revaluation Reserves on AFS Securities account presented in capital funds.
(b) Translation of Financial Statements of Foreign Subsidiaries
The results and financial position of all the foreign subsidiaries (none of which has
the currency dependency of a hyperinflationary economy) that have a functional
currency different from the presentation currency are translated into the presentation
currency as follows:
•
Resources and liabilities for each statement of financial position presented are
translated at the closing rate at the date of that statement of financial position;
•
Income and expenses for each statement of income are translated at average
exchange rates during the year (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transactions’
dates, in which case income and expenses are translated at the dates of the
transactions); and
•
All resulting exchange differences are recognized as a separate component of
capital funds.
- 27 -
On consolidation, exchange differences arising from the translation of the net
investment in foreign entities are taken to Capital Funds. When a foreign operation
is sold, such exchange differences are recognized in the statement of income as part
of the gain or loss on sale.
The translation on the financial statements into Philippine peso should not be
construed as a representation that the amounts stated in currencies other than the
Philippine peso could be converted in Philippine peso amounts at the translation
rates or at any other rates of exchange.
2.18 Impairment of Non-financial Assets
The Group’s investments in associates, bank premises, furniture, fixtures and
equipment, investment property and other resources (including intangible assets) are
subject to impairment testing. Intangible assets with an indefinite useful life or those
not yet available for use are tested for impairment at least annually. All other individual
assets or cash-generating units are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
For purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). As a result, some
assets are tested individually for impairment and some are tested at cash-generating unit
level.
An impairment loss is recognized for the amount by which the asset or cash-generating
unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of fair value, reflecting market conditions less costs to sell and value in use,
based on an internal discounted cash flow evaluation. Impairment loss is charged pro
rata to the other assets in the cash generating unit.
All assets are subsequently reassessed for indications that an impairment loss previously
recognized may no longer exist and the carrying amount of the asset is adjusted to the
recoverable amount resulting in the reversal of the impairment loss.
2.19 Employee Benefits
(a) Post-employment Benefits
Post-employment benefits are provided to employees through a defined benefit plan,
as well as defined contribution plans.
A defined benefit plan is a post-employment plan that defines an amount of
post-employment benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and salary. The legal
obligation for any benefits from this kind of post-employment plan remains with the
Group, even if plan assets for funding the defined benefit plan have been acquired.
Plan assets may include assets specifically designated to a long-term benefit fund, as
well as qualifying insurance policies. The Group’s post-employment defined benefit
pension plan covers all regular full-time employees. The pension plan is tax-qualified,
noncontributory and administered by a trustee.
- 28 -
The asset recognized in the statement of financial position for post-employment
defined benefit pension plans is the present value of the defined benefit obligation
(DBO) at the end of the reporting period less the fair value of plan assets, together
with adjustments for unrecognized actuarial gains or losses and past service costs.
The DBO is calculated by independent actuaries using the projected unit credit
method. The present value of the DBO is determined by discounting the estimated
future cash outflows using interest rates of high quality corporate 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 are not recognized as an expense unless the total
unrecognized gain or loss exceeds 10% of the greater of the obligation and related
plan assets. The amount exceeding this 10% corridor is charged or credited to profit
or loss over the employees’ expected average remaining working lives. Actuarial
gains and losses within the 10% corridor are disclosed separately. Past-service costs
are recognized immediately in the statement of income, unless the changes to the
pension plan are conditional on the employees remaining in service for a specified
period of time (the vesting period). In this case, the past service costs are amortized
on a straight-line basis over the vesting period.
A defined contribution plan is a pension plan under which the Group pays fixed
contributions into an independent entity such as the Social Security System. The
Group has no legal or constructive obligations to pay further contributions after
payment of the fixed contribution. The contributions recognized in respect of
defined contribution plans are expensed as they fall due. Liabilities and assets may be
recognized if underpayment or prepayment has occurred and are included in current
liabilities or current assets as they are normally of a short term nature.
(b) Termination Benefits
Termination benefits are payable when employment is terminated by the Group
before the normal retirement date, or whenever an employee accepts voluntary
redundancy in exchange for these benefits. The Group recognizes termination
benefits when it is demonstrably committed to either: (i) terminating the
employment of current employees according to a detailed formal plan without
possibility of withdrawal; or (ii) providing termination benefits as a result of an
offer made to encourage voluntary redundancy. Benefits falling due more than
12 months after the end of each reporting period are discounted to present value.
(c) Profit-sharing and Bonus Plans
The Group recognizes a liability and an expense for bonuses, based on a formula
that is fixed regardless of the Group’s income after certain adjustments and does
not take into consideration the profit attributable to the Group’s shareholders. The
Group recognizes a provision where it is contractually obliged to pay the benefits,
or where there is a past practice that has created a constructive obligation.
(d) Compensated Absences
Compensated absences are recognized for the number of paid leave days
(including holiday entitlement) remaining at the end of the reporting period. They
are included in the Accrued Taxes, Interest and Other Expenses account at the
undiscounted amount that the Group expects to pay as a result of the unused
entitlement.
- 29 -
2.20 Income Taxes
Tax expense recognized in profit or loss comprises the sum of deferred tax and current
tax not recognized in other comprehensive income or directly in capital funds, if any.
Current tax assets or liabilities comprise those claims from, or obligations to, tax
authorities relating to the current or prior reporting period, that are unpaid at the
reporting period. They are calculated according to the tax rates and tax laws applicable
to the periods to which they relate, based on the taxable profit for the year. All changes
to current tax assets or liabilities are recognized as a component of Tax Expense in the
statement of income.
Deferred tax is provided, using the liability method on temporary differences at the end
of the reporting period between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes. Under the liability method, with certain
exceptions, deferred tax liabilities are recognized for all taxable temporary differences
and deferred tax assets are recognized for all deductible temporary differences and the
carryforward of unused tax losses and unused tax credits to the extent that it is
probable that taxable profit will be available against which the deferred tax assets can
be utilized.
The carrying amount of deferred tax assets is reviewed at each statement of each
reporting period and reduced to the extent that it is probable that sufficient taxable
profit will be available to allow all or part of the deferred tax assets to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply to the period when the asset is realized or the liability is settled provided such tax
rates have been enacted or substantively enacted at the end of the reporting period.
Most changes in deferred tax assets or liabilities are recognized as a component of tax
expense in profit or loss. Only changes in deferred tax assets or liabilities that relate to
items recognized in other comprehensive income or directly in capital funds are
recognized in other comprehensive income or directly in capital funds.
2.21 Related Parties
Parties are considered related when one party has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making
financial and operating decisions. Parties are also considered to be related if they are
subject to common control or common significant influence. Related parties may be
individuals or corporate entities.
2.22 Capital Funds
Preferred and common stocks represent the nominal value of shares that have been
issued.
Treasury shares are stated at the cost of reacquiring such shares.
Hybrid perpetual securities reflect the net proceeds from the issuance of
non-cumulative step-up callable perpetual securities.
- 30 -
Capital paid in excess of par includes any premiums received on the issuance of capital
stocks. Any transaction costs associated with the issuance of shares are deducted from
additional paid-in capital, net of any related income tax benefits.
Revaluation reserves on available-for-sale securities pertain to changes in the fair values
of available-for-sale securities resulting in net gains and losses as a result of the
revaluation of available-for-sale financial assets.
Revaluation increment in property of an associate consists of gains arising from the
revaluation of land.
Accumulated translation adjustment represents the cumulative gain from the translation
of the financial statements of foreign subsidiaries whose functional currency is different
to that of the Group.
Reserve for trust business represents the accumulated amount set aside under existing
regulations requiring the Parent Company and a subsidiary to carry to surplus 10% of
its net profits accruing from trust business until the surplus shall amount to 20% of
authorized capital stock. The reserve shall not be paid out in dividends, but losses
accruing in the course of the trust business may be charged against this account.
Other reserves refers to the amount attributable to the Parent Company arising from
the change in the ownership of the non-controlling interest in the Parent Company’s
subsidiary.
Share in additional paid-in capital of an associate represents the share of the Parent
Company in the additional paid-in capital of an associate accounted for under the
equity method in the consolidated financial statements.
Surplus includes all current and prior period results as disclosed in the statement of
income.
Non-controlling interests represent the portion of the net assets and profit or loss not
attributable to the Group and are presented separately in the Group statement of
income and statement of comprehensive income and within capital funds in the Group
statements of financial position and changes in capital funds.
2.23 Earnings Per Share
Basic earnings per share is determined by dividing the net profit for the year
attributable to common shareholders by the weighted average number of common
shares outstanding during the year, after giving retroactive effect to any stock dividends
declared in the current year.
Diluted earnings per common share is also computed by dividing net profit by the
weighted average number of common shares subscribed and issued during the period.
However, net profit attributable to common shares and the weighted average number
of common shares outstanding are adjusted to reflect the effects of potentially dilutive
convertible preferred shares. Convertible preferred shares are deemed to have been
converted into common shares at the issuance of preferred shares.
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2.24 Trust Activities
The 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 Group.
2.25 Subsequent Events
Any post-year-end event that provides additional information about the Group’s
position at the statement of financial position date (adjusting event) is reflected in the
financial statements. Post-year-end events that are not adjusting events, if any, are
disclosed when material to the financial statements.
3.
SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES
The Group’s financial statements prepared in accordance with FRSPB and PFRS require
management to make judgments and estimates that affect amounts reported in the
financial statements and related notes. Judgments and estimates are continually evaluated
and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. Actual results may
ultimately vary from these estimates.
3.1 Critical Management Judgments in Applying Accounting Policies
In the process of applying the Group’s and the Parent Company’s accounting policies,
management has made the following judgments, apart from those involving estimation,
which have the most significant effect on the amounts recognized in the financial
statements.
(a) Held-to-maturity Investments
The Group follows the guidance of PAS 39, Financial Instruments: Recognition and
Measurement, 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 Group evaluates its intention
and ability to hold such investments to maturity. If the Group fails to keep these
investments at maturity other than for the allowed specific circumstances – for
example, selling a not insignificant amount close to maturity – it will be required
to reclassify the entire class to available-for-sale securities. However, the tainting
provision will not apply if the sales or reclassifications of held-to-maturity
investments are so close to maturity or the financial asset’s call date that changes in
the market rate of interest would not have a significant effect on the financial
asset’s fair value; or occurs after the Group has collected substantially all of the
financial asset’s original principal through scheduled payments or prepayments; or
are attributable to an isolated event that is beyond the control of the Group, is
nonrecurring and could not have been reasonably anticipated by the Group. The
investments would therefore be measured at fair value and not at amortized cost.
In October 2008, the Group was permitted by the BSP and SEC to reclassify
certain financial assets previously classified under AFS category due to the tainting
of HTM portfolio back to HTM category (see Note 9).
- 32 -
(b) Impairment of Available-for-sale Securities
The Group also follows the guidance of PAS 39 on determining when an
investment is other-than-temporarily impaired. This determination requires
significant judgment. In making this judgment, the 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 of and near-term business outlook for the investee,
including factors such as industry and sector performance, changes in technology
and operational and financing cash flow. For investments issued by counterparty
under bankcruptcy, the Group determines permanent impairment based on the
price of the most recent transaction and on latest indications obtained from
reputable counterparties (which regularly quotes prices for distressed securities)
since current bid prices are no longer available.
The Group recognized allowance for impairment on its available-for-sale securities
amounting to P1,336,264 and P1,276,157 in 2009 in the consolidated and Parent
Company financial statements, respectively, and P811,207 in 2008 both in the
consolidated and Parent Company’s financial statements (see Note 10).
(c) Distinction Between Investment Property and Owner-occupied Properties
The Group determines whether a property qualifies as investment property. In
making its judgment, the Group considers whether the property generated cash flows
largely independently of the other assets held by an entity. Owner-occupied
properties generate cash flows that are attributable not only to property but also to
other assets used in the production or supply process.
Some properties comprise a portion that is held to earn rental or for capital
appreciation and another portion that is held for use in the production and supply of
goods and services or for administrative purposes. If these portion can be sold
separately (or leased out separately under finance lease), the Group accounts for the
portions separately. If the portion cannot be sold separately, the property is
accounted for as investment property only if an insignificant portion is held for use in
operations or for administrative purposes. Judgment is applied in determining
whether ancillary services are so significant that a property does not qualify as
investment property. The Group considers each property separately in making its
judgment.
(d) Operating and Finance Leases
The Group has entered into various lease agreements as either a lessor or lessee.
Critical judgment was exercised by management to distinguish each lease agreement
as either an operating or finance lease by looking at the transfer or retention of
significant risk and rewards of ownership of the properties covered by the
agreements. Failure to make the right judgment will result in either overstatement
or understatement of assets and liabilities.
- 33 -
(e) Classification of Acquired Properties and Fair Value Determination of Assets Held- for-Sale
and Investment Property
The Group classifies its acquired properties as Bank Premises, Furniture, Fixtures
and Equipment if used in operations, as Assets Held-for-sale if the Group expects
that the properties will be recovered through sale rather than use, as Investment
Property if the Group intends to hold the properties for capital appreciation or as
Financial Assets in accordance with PAS 39. At initial recognition, the Group
determines the fair value of acquired properties through internally and externally
generated appraisal. The appraised value is determined based on the current
economic and market conditions, as well as the physical condition of the property.
(f) Provisions and Contingencies
Judgment is exercised by management to distinguish between provisions and
contingencies. Policies on recognition and disclosure of provision and disclosure of
contingencies are discussed in Note 2.14 and relevant disclosures are presented in
Note 31.
3.2 Key Sources of Estimation Uncertainty
The following are the key assumptions concerning the future, and other key sources of
estimation uncertainty at the statement of financial position date, that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year.
(a) Impairment Losses on Financial Assets (Loans and Receivables and Held-to-maturity
Investments)
The Group reviews its loans and receivables and held-to-maturity investments
portfolios to assess impairment at least on an annual basis. In determining whether
an impairment loss should be recorded in the statement of income, the Group
makes judgments as to whether there is any observable data indicating that there is
a measurable decrease in the estimated future cash flows from the portfolio before
the decrease can be identified with an individual item in that portfolio. This
evidence may include observable data indicating that there has been an adverse
change in the payment status of borrowers or issuers 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 assets 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.
Impairment losses on loans and receivables, net of recoveries, amounted to
P1,661,931 in 2009, P873,545 in 2008 and P942,490 in 2007 in the consolidated
financial statements; and P1,156,333 in 2009, P830,597 in 2008 and P680,535 in 2007
in the Parent Company financial statements (see Note 11).
- 34 -
(b) Valuation of Financial Assets Other than Loans and Receivables
The Group carries certain financial assets at fair value, which requires the extensive
use of accounting estimates and judgment. In cases when active market quotes are
not available, fair value is determined by reference to the current market value of
another instrument which is substantially the same or is calculated based on the
expected cash flows of the underlying net base of the instrument. The amount of
changes in fair value would differ if the Group utilized different valuation methods
and assumptions. Any change in fair value of these financial assets and liabilities
would affect profit or loss and other comprehensive income.
The Group recognized the change in value of financial assets at fair value through
profit or loss resulting to an increase of P39,227 in 2009, P1,557,064 decrease in
2008, and P86,769 increase in 2007; and P10,376 increase in 2009, P1,316,222
decrease in 2008, and P80,504 increase in 2007; in the consolidated and Parent
Company financial statements, respectively. The changes in fair values from
available-for-sale securities that were reported in the statement of comprehensive
income amounted to fair value gains of P1,975,773 in 2009, fair value losses of
P2,601,102 in 2008 and P1,875,304 in 2007 in the consolidated financial statements;
and fair value gains of P1,807,029 in 2009 and fair value losses of P2,328,671 in 2008
and P1,769,582 in 2007 in the Parent Company financial statements. The carrying
values of the assets are disclosed in Notes 8 and 10, respectively.
(c) Useful Lives of Bank Premises, Furniture, Fixtures and Equipment and Investment Property
The Group estimates the useful lives of bank premises, furniture, fixtures and
equipment and investment property based on the period over which the assets are
expected to be available for use. The estimated useful lives of bank premises,
furniture, fixtures and equipment and investment property are reviewed periodically
and are updated if expectations differ from previous estimates due to physical wear
and tear, technical or commercial obsolescence and legal or other limits on the use of
the assets. The carrying amount of bank premises, furniture, fixtures and equipment
and investment property are analyzed in Notes 13 and 14, respectively. Based on
management’s assessment as at December 31, 2009, there are no changes in the
useful lives of bank premises, furniture, fixtures and equipment and investment
property during the period. Actual results, however, may vary due to changes in
estimates brought about by changes in factors mentioned above.
- 35 -
(d) Fair Values of Financial Assets and Liabilities
The following table summarizes the carrying amounts and fair values of those
significant financial assets and liabilities not presented on the statement of financial
position at their fair value.
Consolidated
Carrying
Amount
Due from BSP
Due from other banks
Held-to-maturity investments
Loans and receivables
Deposit liabilities:
Demand
Savings
Time
Bills payable
Bonds payable
Subordinated debt
2009
2008
Fair Value
Carrying
Amount
P 19,321,339
3,066,922
19,962,360
164,892,417
P 19,321,339
3,066,922
20,973,194
164,948,621
P 16,390,973
4,862,225
20,673,614
164,402,907
P 16,390,973
4,862,225
19,483,613
164,306,650
11,034,257
93,571,654
115,671,983
10,780,964
5,836,076
10,926,978
11,034,257
93,571,654
115,671,983
10,780,964
5,870,927
11,176,735
11,125,069
75,738,446
109,363,471
21,452,609
6,002,821
6,941,899
11,125,069
75,738,446
109,363,471
21,452,609
6,168,088
6,923,354
Fair Value
Parent
Carrying
Amount
Due from BSP
Due from other banks
Held-to-maturity investments
Loans and receivables
Deposit liabilities
Demand
Savings
Time
Bills payable
Bonds payable
Subordinated debt
2009
2008
Fair Value
Carrying
Amount
P 17,914,204
1,788,841
17,638,584
131,733,336
P 17,914,204
1,788,841
18,649,418
131,472,666
P 15,656,119
3,197,593
17,892,114
130,292,206
P 15,656,119
3,197,593
16,764,396
130,195,949
8,535,205
81,165,706
90,852,468
10,535,173
5,836,076
10,926,978
8,535,205
81,165,706
90,852,468
10,535,173
5,870,927
11,176,735
8,392,524
66,269,393
84,267,161
21,410,087
6,002,821
6,941,899
8,392,524
66,269,393
84,267,161
21,410,087
6,168,088
6,923,354
Fair Value
See Notes 2.5 and 2.13 for a description of the accounting policies for each
category of financial instrument. A description of the Group’s risk management
objectives and policies for financial instruments is provided in Note 4.
(e) Fair Value of Derivatives
The fair value of derivative financial instruments that are not quoted in an active
market are determined through valuation techniques using the net present value
computation.
Valuation techniques are used to determine fair values which are validated and
periodically reviewed. To the extent practicable, models use observable data,
however, areas such as credit risk (both own and counterparty), volatilities and
correlations require management to make estimates. Changes in assumptions could
affect reported fair value of financial instruments. The Group uses judgment to
select a variety of methods and make assumptions that are mainly based on market
conditions existing at the end of each reporting period.
- 36 -
(f) Realizable Amount of Deferred Tax Assets
The Group reviews its deferred tax assets at the end of each reporting period and
reduces the carrying amount to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax asset to be
utilized. The carrying value of deferred tax assets as of December 31, 2009 and 2008
is disclosed in Note 28.
(g) Impairment of Non-financial Assets
Except for intangible assets with indefinite useful lives, PFRS requires that an
impairment review be performed when certain impairment indicators are present.
The Group’s policy on estimating the impairment of non-financial assets is discussed
in detail in Note 2.18. Though management believes that the assumptions used in
the estimation of fair values reflected in the financial statements are appropriate and
reasonable, significant changes in these assumptions may materially affect the
assessment of recoverable values and any resulting impairment loss could have a
material adverse effect on the results of operations.
(h) Retirement Benefits
The determination of the Group’s obligation and cost of pension and other
retirement benefits is dependent on the selection of certain assumptions used by
actuaries in calculating such amounts. Those assumptions are described in
Note 25 and include, among others, discount rates, expected return on plan assets
and salary increase rate. In accordance with PFRS, actual results that differ from the
assumptions are accumulated and amortized over future periods and therefore,
generally affect the recognized expense and recorded obligation in such future
periods.
The retirement benefit asset and net unrecognized actuarial losses amounted to
P71,103 and P267,511, respectively, in the 2009 consolidated financial statements,
and P75,583 and P168,676, respectively, in the 2008 consolidated financial
statements. The retirement benefit asset and net unrecognized actuarial losses
amounted to P40,434 and P295,427, respectively, in the 2009 Parent Company
financial statements, and P36,225 and P257,339, respectively, in the 2008 Parent
Company financial statements. Fair value of plan assets amounted to P1,761,844 and
P1,167,540 in the 2009 and 2008 consolidated financial statements, respectively, and
P1,323,988 and P772,209 in the 2009 and 2008 Parent Company financial statements,
respectively (see Note 25).
4.
RISK MANAGEMENT POLICIES AND OBJECTIVES
The Group is exposed to a variety of risks that are particular to its operating, investing,
and financing activities, and the business environment in which it operates. As such,
the Group’s risk management is closely coordinated with those charged with
governance and focuses on identifying, measuring, monitoring, and controlling the
various risks that arise from its business activities and ensuring the Group’s strict
adherence to the policies, procedures, and control systems which are established to
address these risks.
- 37 -
4.1 Parent Company’s and RSB’s Strategy in Using Financial Instruments
Majority of the Group’s operating, investing and financing activities are undertaken by
the Parent Company and RSB, its subsidiary savings bank. It is the Parent Company’s
and RSB’s intent to generate returns mainly from their traditional financial
intermediation and service-provision activities, rather than from any substantial
positions based on views of the financial markets. The main source of risk, therefore,
remains to be that arising from credit risk exposures. Nevertheless, within BSP
regulatory constraints, and subject to limits and parameters established by the BOD,
the Parent Company and RSB are exposed to liquidity risk and interest rate risk
inherent in the statement of financial position, and other market risks, which include
foreign exchange risk. In the course of performing financial intermediation function,
the Parent Company and RSB accept deposits from customers at fixed and floating
rates, for various periods, and seek to earn above-average interest margins by investing
these funds in high-quality assets. Given a normal upward-sloping yield curve, a
conventional strategy to enhance margin is the investment of short-term funds in
longer-term assets, including fixed-income securities. While, in doing so, the Parent
Company and RSB maintain liquidity at prudent levels to meet all claims that fall due,
the Parent Company and RSB fully recognize the consequent interest rate risk
exposure. Foreign exchange risk arises from the Parent Company’s and RSB’s net
foreign exchange positions.
The investment portfolio is composed mainly of marketable, sovereign-risk
fixed-income securities. It also includes a small portfolio of equity securities and a
modest exposure to credit derivatives, in most of which the underlying is Republic of
the Philippines sovereign debt. Other than aforementioned derivatives, short-term
foreign currency forward contracts are used mostly in the context of swap transactions
where an offsetting spot position is taken at the same time. There are outstanding
long-term, cross-currency swaps where the Parent Company is committed to pay
fixed-rate interest and principal in US dollars and is entitled to receive fixed-rate
interest and principal in pesos. But these closely match, in terms of interest rate
characteristics, tenor and amount, the local currency Subordinated Debt issued in 2003
which was redeemed in 2008 on one hand, and certain foreign currency denominated
assets on the other.
A committee system is a fundamental part of the Parent Company’s and RSB’s process
of managing risk. Three committees of the BOD are relevant in this context:
•
The Executive Committee, which meets weekly, approves credit policies and
decides on large counter-party credit facilities and limits.
•
The Risk Management Committee (RMC), which meets monthly, carries out the
BOD’s oversight responsibility for risk management, covering credit, market and
operational risk. Market risk limits are reviewed and approved by the RMC.
•
The Audit Committee, which meets monthly, reviews results of Internal Audit
examinations and recommends remedial actions to the BOD as appropriate.
- 38 -
Two senior management committees also provide a regular forum, at a lower-level, to
take up risk issues:
•
The Credit and Collection Committee, chaired by the Chief Executive Officer and
composed of the heads of credit risk-taking business units and the head of credit
risk management, meets weekly to review and approve credit exposures within its
authority. It also reviews plans and progress on the resolution of problem loan
accounts.
•
The Asset/Liability Committee (ALCO), chaired by the Treasurer of the Parent
Company but with the Chief Executive Officer and key business and support unit
heads including the President of RSB participating, meets weekly to appraise
market trends, and economic and political developments. It provides direction in
the management of interest rate risk, liquidity risk, foreign currency risk, and
trading and investment portfolio decisions. It sets prices/rates for various asset
and liability and trading products, in light of funding costs and competitive and
other market conditions. It receives confirmation that market risk limits
(as described in Note 4.3 are not breached; or if breached, provides guidance on the
handling of the relevant risk exposure.
The Parent Company established a Corporate Risk Management Services (CRISMS)
group, headed by a chief risk officer, to ensure that the objectives of risk identification,
measurement and/or assessment, mitigation, and monitoring are pursued via practices
commensurate with the risk profile. CRISMS is independent of all risk-taking business
segments and reports directly to the BOD’s RMC. It participates in the Credit and
Collection Committee (through the head of credit risk management) and in ALCO.
In addition to the risk management systems and controls, the Parent Company and
RSB hold capital commensurate with the levels of risk they undertake (see Note 5.1) in
accordance with minimum regulatory capital requirements.
4.2 Liquidity Risk
Liquidity risk is the potential insufficiency of funds available to meet the credit
demands of the Parent Company’s and RSB’s customers and repay maturing liabilities.
The Parent Company and RSB manage liquidity risk by limiting the maturity mismatch
between assets and liabilities, and by holding sufficient liquid assets of appropriate
quality and marketability. The Parent Company and RSB recognize the liquidity risk
inherent in their activities, and identify, measure, monitor and control the liquidity risk
inherent as financial intermediaries.
The Parent Company’s and RSB’s liquidity policy is to manage its operations to ensure
that funds available are more than adequate to meet credit demands of its customers
and to enable deposits to be repaid on maturity.
The Parent Company’s and RSB’s liquidity policies and procedures are set out in its
funding and liquidity plan which contains certain funding requirement based on
assumptions and uses asset and liability maturity gap analysis.
- 39 -
The gap analyses (before elimination of intercompany accounts/transactions) as of
December 31, 2009 and 2008 in accordance with account classification of the BSP are
presented below (amounts in millions).
Parent and RSB
2009
One to
Three
Months
Three
Months to
One Year
One to
Five
Years
More
Than Five
Years
Non-maturity
Total
Resources:
Cash
P
Cash equivalents
Loans and
receivables
Investments
Other resources
32,025
35,223
132
15,548
139
67
18,551
5,963
258
8,087
17,725
18
91,193
18,383
20,078
165,404
77,433
20,553
Total resources
72,884
16,125
24,772
25,830
153,523
293,134
16,611
666
728
203,648
221,653
7,201
2,573
12
Liabilities:
Deposits
liabilities
Bills payable
and due to
other banks
Bonds
payable
Subordinated
debt
Other
liabilities
427
5,077
P
-
-
Capital funds
P
371
5,836
Total liabilities
-
-
10
32,806
3,249
-
6,365
17,504
-
-
5,836
-
-
10,927
749
-
8,818
11,986
212,466
260,937
33,335
33,335
245,801
294,272
Total liabilities
and capital
funds
32,806
3,249
11,667
749
On-book gap
40,078
12,876
13,105
25,081 (
92,278 ) (
Cumulative
on-book gap
40,078
52,954
66,059
91,140 (
1,138 )
70,378
25,499
334
-
80,422
25,716
329
-
5
-
Contingent
resources
Contingent
liabilities
Total gap
(
Cumulative
off-book gap (
Cumulative
total gap
P
10,044) (
217 )
10,044 ) (
10,261 ) (
30,034
P
42,693
10,256 ) (
P
55,803
P
6,792
22,952
10,535
-
-
P
-
11,667
-
P
749
10,927
3,158
-
-
-
-
-
P
1,138 )
-
-
96,211
3,656
(
110,123
3,656 ) (
13,912 )
10,256 ) (
13,912 )
-
80,884 ( P
15,050 ) P
-
- 40 Parent and RSB
One to
Three
Months
Three
Months to
One Year
One to
Five
Years
2008
More
Than Five
Years
Non-maturity
Total
Resources:
Cash
P
Cash equivalents
Loans and
receivables
Investments
Other resources
38,683
17,110
298
11,028
2,342
53
22,661
11,089
179
17,443
16,075
114
86,203
9,020
23,591
176,018
55,636
24,235
Total resources
62,938
13,423
33,929
33,632
140,125
284,047
44,142
13,766
3,771
136,292
197,971
11,451
5,902
3,321
1
21,446
Liabilities:
Deposits
liabilities
Bills payable
and due to
other banks
Bonds
payable
Subordinated
debt
Other
liabilities
1,202
5,645
P
-
-
-
-
Total liabilities
Capital funds
-
P
-
6,003
-
-
3,988
10
-
-
59,581
26,620
59,581
5,588
15,723
771
-
7,092
-
P
-
6,942
-
Total liabilities
and capital
funds
P
6,003
-
6,942
-
26,620
7,092
6,774
5,445
9,443
141,738
241,805
30,674
30,674
172,412
272,479
On-book gap
3,357 (
13,197 )
26,837
26,858 (
32,287 )
Cumulative
on-book gap
3,357 (
9,840 )
16,997
43,855
11,568
Contingent
resources
Contingent
liabilities
Total gap
Cumulative
off-book gap
Cumulative
total gap
44,951
3,760
549
-
25,487
3,702
2,447
-
1,898 )
-
19,464
58 (
19,464
P
22,821
19,522
P
9,682
17,624
P
34,621
11,568
-
-
(
17,624
P
6,790
21,368
-
6,774
-
P
61,479
49,260
3,021
34,657
3,021 )
14,603
14,603
P
26,171
P
-
- 41 Parent Only
2009
One to
Three
Months
Resources :
Cash
P
Cash equivalents
Loans and
receivables
Investments
Other resources
414
1,828
P
P
More
Than Five
Years
-
8,291
139
-
P
8,801
5,660
15,857
603
679
7,201
2,573
12
10
31,022
3,186
-
-
10,927
749
-
Cumulative
on-book gap
30,005
35,620
29,662
70,378
25,499
334
-
75,238
25,716
329
-
5
-
Cumulative
total gap
P
25,145
P
30,543
11,618
749
5,958 )
21,608 (
51,270
5,072 ) (
P
180,553
-
5,615 (
5,077 ) (
163,414
-
30,005
4,860 ) (
242,600
5,836
On-book gap
217 )
144,755
-
3,186
4,860) (
22,357
-
31,022
Total gap
(
Cumulative
off-book gap (
131,733
68,634
17,122
10,535
Total liabilities
and capital
funds
Contingent
resources
Contingent
liabilities
24,590
6,079
8,217
169,493
216,068
26,532
26,532
196,025
242,600
51,270 )
-
-
-
96,211
3,656
(
5,072 ) (
P
5,408
19,703
89,725
15,410
17,122
-
-
P
-
11,618
-
Total
6,018
16,339
749
10,927
2,128
4,994
17,504
-
-
-
P
-
61,027
-
Non-maturity
-
75
5,585
-
-
Total liabilities
One to
Five
Years
371
5,836
Capital funds
-
27,624
31,161
Total resources
Liabilities:
Deposits
liabilities
Bills payable
and due to
other banks
Bonds
payable
Subordinated
debt
Other
liabilities
Three
Months to
One Year
46,198 ( P
104,939
3,656 ) (
8,728 )
8,728 )
-
8,728 ) P
-
- 42 Parent Only
2008
One to
Three
Months
Resources :
Cash
P
Cash equivalents
Loans and
receivables
Investments
Other resources
8
3,553
P
More
Than Five
Years
-
P
4,758
12,174
23,415
12,142
30
11,416
5,902
3,321
-
-
3,604
10
-
-
38,435
24,996
3,351
19,927
133,117
225,851
123,342
158,929
1
21,411
38,435
24,996
3,351
6,774
On-book gap
17,440 (
20,238 )
8,823
13,153 (
Cumulative
on-book gap
17,440 (
2,798 )
6,025
19,178
44,951
3,760
549
-
25,485
3,702
2,447
-
1,898 )
-
Total gap
Cumulative
off-book gap
Cumulative
total gap
19,466
58 (
19,466
P
36,906
19,524
P
16,726
17,626
P
-
6,003
-
6,942
-
Total liabilities
and capital
funds
Contingent
resources
Contingent
liabilities
23,651
4,318
7,932
127,661
201,217
24,634
24,634
152,295
225,851
19,178 )
-
-
-
-
(
17,626
P
5,596
18,854
130,292
52,365
18,744
6,774
-
P
84,412
9,072
18,744
6,003
-
Total
5,539
14,388
771
-
-
5,588
15,301
-
6,942
-
P
-
55,875
-
Non-maturity
-
2,197
9,977
-
-
Capital funds
P
2,810
1,948
-
Total liabilities
One to
Five
Years
-
35,334
16,980
Total resources
Liabilities:
Deposits
liabilities
Bills payable
and due to
other banks
Bonds
payable
Subordinated
debt
Other
liabilities
Three
Months to
One Year
36,804
49,260
1,235
32,869
1,235 )
16,391
16,391
P
16,391
P
-
Pursuant to applicable BSP regulations, the Parent Company and RSB are required to
maintain liquidity reserve and statutory legal reserve which are based on a certain
percentages of deposits. A portion of the required reserve must be deposited with
BSP. The remaining portion of the required reserve may be held by the Parent
Company and RSB in the form of cash in vault and or government securities.
Under a current BSP circular, the liquidity reserve is required to be in the form of
reserve deposits with the BSP. The BSP also requires the Parent Company and RSB to
maintain asset cover of 100% for foreign currency liabilities of their FCDU, of which
30% must be in liquid assets.
- 43 -
4.2.1 Foreign Currency Liquidity Management
The liquidity risk management policies and objectives described also apply to the
management of any foreign currency to which the Parent Company and RSB maintain
significant exposure. Specifically, the Parent Company and RSB ensure that their
measurement, monitoring, and control systems account for these exposures as well.
The Parent Company and RSB set and regularly review limits on the size of their cash
flow mismatches for each significant individual currency and in aggregate over
appropriate time horizons. The Parent Company and RSB also assess their access to
foreign exchange markets when setting up their risk limits.
4.3 Market Risk
The Parent Company’s and RSB’s exposure to market risk, as mentioned earlier, is the
potential diminution of accrual earnings arising from the movement of market interest
rates as well as the potential loss of market value, primarily of its holdings of debt
securities and derivatives, due to price fluctuation. The market risks of the Parent
Company and RSB are (a) foreign exchange risk, (b) interest rate risk, and (c) equity
price risk. The Parent Company and RSB manage this risk via a process of identifying,
analyzing, measuring and controlling relevant market risk factors, and establishing
appropriate limits for the various exposures. The market risk metrics in use, each of
which has a corresponding limit, include the following:
•
Nominal Position – an open risk position that is held as of any point in time
expressed in terms of the nominal amount of the exposure.
•
Value-at-Risk (VaR) – an estimate of the amount of loss that a given risk exposure
is unlikely to exceed during a given time period, at a given level of statistical
confidence. Analytically, VaR is the product of: (a) the sensitivity of the market
value of the position to movement of the relevant market risk factors, and
(b) the volatility of the market risk factor for the given time horizon at a specified
level of statistical confidence. Typically, the Parent Company and RSB use a
99% confidence level for this measurement. VaR is used as a risk measure for
trading positions, which are marked-to-market (as opposed to exposures resulting
from banking, or accrual, book assets and liabilities). Foreign Exchange position
VaR uses a 1-day holding period, while Fixed Income VaR uses a defeasance period
assessed periodically as appropriate to allow an orderly unwinding of the position.
VaR models are back-tested to ensure results remain consistent with the
expectations based on the chosen statistical confidence level. While the Parent
Company and RSB use VaR as an important tool for measuring market risk, they
are cognizant of its limitations, notably the following:
− The use of historical data as a basis for determining the possible range of future
outcomes may not always cover all possible scenarios, especially those of an
exceptional nature.
− VaR is based on historical volatility. Future volatility may be different due to
either random, one-time events or structural changes (including changes in
correlation). VaR may be unable to capture volatility due to either of these.
− The holding period assumption may not be valid in all cases, such as during
periods of extremely stressed market liquidity.
- 44 -
− VaR is, by definition, an estimate at a specified level of confidence. Losses may
occur beyond VaR. A 99% VaR implies that losses can exceed VaR 1% of the
time.
− In cases where a parametric distribution is assumed to calculate VaR, the
assumed distribution may not fit the actual distribution well.
− VaR assumes a static position over the holding period. In reality, trading
positions change, even during the trading day.
•
Earnings-at-Risk (EaR) – more specifically, in its current implementation, this
refers to the impact on Net Interest Income for a 12-month horizon of adverse
movements in interest rates. For this purpose the Parent Company and RSB
employs a gap analysis to measure the interest rate sensitivity of their statements of
financial position (local and foreign currencies). As of a given reporting period, the
gap analysis (see Note 4.3.2) measures mismatches between the amounts of interestearning assets and interest-bearing liabilities re-pricing within “time buckets” going
forward from the statement of financial position date. A positive gap means net
asset sensitivity, which implies that an increase in the interest rates would have a
positive effect on the Parent Company’s and RSB’s net interest income.
Conversely, a negative gap means net liability sensitivity, implying that an increase
in the interest rates would have a negative effect on the Parent Company’s and
RSB’s net interest income. The rate movements assumed for measuring EaR are
consistent with a 99% confidence level with respect to historical rate volatility,
assuming a 1-year holding period.
In addition to the limits corresponding to the above measurements, the following are
also in place:
•
Loss Limit - represents a ceiling on accumulated month-to-date losses. For trading
positions, a Management Action Trigger (MAT) is also usually defined to be at 50%
of the Loss Limit. When MAT is breached, the risk-taking unit must consult with
ALCO for approval of a course of action moving forward.
•
Product Limit – the nominal position exposure for certain specific financial
instruments is established.
Stress Testing, which uses more severe rate/price volatility and/or holding period
assumptions, (relative to those used for VaR) is applied to marked-to-market positions
to arrive at “worst case” loss estimates. This supplements the VaR measure, in
recognition of its limitations already mentioned earlier.
- 45 -
A summary of the VaR position of the trading portfolios at December 31 is as follows:
Parent and RSB
At December 31
Average
2009
Foreign currency risk
Interest rate risk
P
7,312 P
120,294
6,407
111,934
P
Overall
P
127,606 P
118,341 P
Maximum
Minimum
18,631 P
307,422
978
8,379
326,053
9,357
P
2008
At December 31
Average
Maximum
Minimum
Foreign currency risk
Interest rate risk
P
4,618 P
14,860
6,865
53,711
P
18,973 P
171,771
816
5,097
Overall
P
19,478 P
60,576
P
190,744
5,913
P
Parent Only
2009
At December 31
Average
Maximum
Minimum
Foreign currency risk
Interest rate risk
P
5,658 P
110,304
5,012
98,757
P
16,411
273,448
P
304
8,378
Overall
P
115,962 P
103,769
P
289,859
P
8,682
2008
At December 31
Average
Maximum
Minimum
Foreign currency risk
Interest rate risk
P
3,442 P
12,811
6,095
43,214
P
17,693
152,175
P
581
3,048
Overall
P
16,253 P
49,309
P
169,868
P
3,629
4.3.1 Foreign Currency Risk
Foreign currency risk is the risk to earnings or capital arising from changes in foreign
exchange rates. The net foreign currency exposure, or the difference between foreign
currency assets and foreign currency liabilities, is capped by current BSP regulations.
Compliance with this ceiling by the Parent Company and RSB and the respective foreign
currency positions of its subsidiaries are reported to the BSP on a daily basis as required.
Beyond this constraint, the Parent Company and RSB manage their foreign exchange
exposure by limiting it to within conservative levels justifiable from a return/risk
perspective. In addition, the Parent Company and RSB regularly calculate VaR for each
currency position, which is incorporated in market risk management discussion in
Note 4.3.
- 46 -
The breakdown of the financial resources and liabilities as to foreign and
peso-denominated balances (before elimination of intercompany
accounts/transactions) as of December 31 is as follows:
Parent and RSB
2009
Foreign
Currency
Resources:
Due from BSP
Due from other banks
Financial assets at fair value
through profit or loss
Available-for-sale securities
Held-to-maturity investments
Loans and receivables
Other resources
P
Liabilities:
Deposit liabilities
Bills payable
Derivative liabilities
Bonds payable
Other liabilities
Subordinated debt
3,281,679
Peso
P
Liabilities:
Deposit liabilities
Bills payable
Derivative liabilities
Bonds payable
Other liabilities
Subordinated debt
P
P
19,119,211
3,833,127
2,954,638
19,674,201
17,211,665
42,345,946
1,700,330
6,009,668
15,641,284
2,535,924
121,645,552
7,905,453
8,964,306
35,315,485
19,747,589
163,991,498
9,605,783
55,545,468
8,746,430
77,685
5,836,076
695,869
-
166,107,823
1,788,743
625,919
6,614,481
10,926,978
221,653,291
10,535,173
703,604
5,836,076
7,310,350
10,926,978
2008
Foreign
Currency
Resources:
Due from BSP
Due from other banks
Financial assets at fair value
through profit or loss
Available-for-sale securities
Held-to-maturity investments
Loans and receivables
Other resources
19,119,211
551,448
Total
4,620,947
Peso
P
16,360,396
386,560
Total
P
16,360,396
5,007,507
2,578,987
8,382,477
18,143,421
43,626,103
2,935,430
505,393
13,416,268
2,350,997
120,605,063
8,585,520
3,084,380
21,798,745
20,494,418
164,231,166
11,520,950
52,767,476
13,675,252
248,075
6,002,821
2,389,465
-
145,203,807
7,770,269
81,430
4,440,478
6,941,899
197,971,283
21,445,521
329,505
6,002,821
6,829,943
6,941,899
- 47 Parent Only
2009
Foreign
Currency
Resources:
Due from BSP
Due from other banks
Financial assets at fair value
through profit or loss
Available-for-sale securities
Held-to-maturity investments
Loans and receivables
Other resources
P
Liabilities:
Deposit liabilities
Bills payable
Derivative liabilities
Bonds payable
Other liabilities
Subordinated debt
1,404,960
Peso
P
Liabilities:
Deposit liabilities
Bills payable
Derivative liabilities
Bonds payable
Other liabilities
Subordinated debt
P
P
17,914,204
1,788,841
2,954,638
19,344,712
15,102,660
42,152,177
1,569,893
5,079,598
12,915,774
2,535,924
89,581,159
7,905,453
8,034,236
32,260,486
17,638,584
131,733,336
9,475,346
51,026,925
8,746,430
77,685
5,836,076
695,869
-
129,526,454
1,788,743
625,919
5,193,710
10,926,978
180,553,379
10,535,173
703,604
5,836,076
5,889,579
10,926,978
2008
Foreign
Currency
Resources:
Due from BSP
Due from other banks
Financial assets at fair value
through profit or loss
Available-for-sale securities
Held-to-maturity investments
Loans and receivables
Other resources
17,914,204
383,881
Total
2,943,916
Peso
P
15,656,119
253,677
Total
P
15,656,119
3,197,593
2,578,987
8,382,477
15,541,116
42,923,236
2,728,038
505,393
12,694,684
2,350,998
87,368,970
8,089,510
3,084,380
21,077,161
17,892,114
130,292,206
10,817,548
47,961,695
13,675,252
248,075
6,002,821
2,251,078
-
110,967,383
7,734,835
81,430
3,706,732
6,941,899
158,929,078
21,410,087
329,505
6,002,821
5,957,810
6,941,899
4.3.2 Interest Rate Risk
The interest risk inherent in the Parent Company’s and RSB’s statement of financial
position arises from re-pricing mismatches between resources and liabilities. The
Parent Company and RSB follow a policy on managing its assets and liabilities so as to
ensure that exposure to fluctuations in interest rates is kept within acceptable limits.
ALCO meets at least weekly to set rates for various financial assets and liabilities and
trading products. ALCO employs interest rate gap analysis to measure interest rate
sensitivity of its assets and liabilities.
- 48 -
The interest rate gap analyses of resources and liabilities as of December 31 based on
re-pricing maturities appear below and on the succeeding pages. It should be noted
that this interest rate gap analysis is based on certain assumptions, the key ones being:
•
Loans and time deposits are subject to re-pricing on their contractual maturity
dates. Non-performing loans (NPLs), however, do not re-price.
•
Held-for-trading securities are treated as if they are assets subject to re-pricing
within the first month maturity bucket; available-for-sale securities re-price on
contractual maturity.
•
Non-rate sensitive deposits such as Demand Accounts and Savings Accounts have
a certain volatile portion that is responsive to interest rate changes. The size of this
portion as well as its rate sensitivity was determined from historical analysis.
Parent and RSB
2009
One to
Three
Months
Resources :
Cash and
cash
equivalents
Loans and
advances
to banks
Loans and
advances to
customers
Investment
securities
Total
resources
Liabilities:
Deposits from
banks
Deposits from
customers
Debt
securities
issued
Subordinated
liabilities
P
5,734,000
Three
Months to
One Year
P
-
One to
Five
Years
P
-
More
Than Five
Years
P
1,537,496
371,106
-
106,153,782
15,457,227
24,525,205
16,452,229
325,753
14,587,072
-
Non-rate
Sensitive
P
13,107,364
8,312,758
167,556,336
32,442,687
14,709,374
78,517,115
P
16,154,086
P
39,112,277
P
45,550,051
P
P
7,200,818
P
2,573,259
P
11,923
P
749,173
P
7,589,640
5,836,076
-
-
-
-
1,000
10,926,978
12,513,491
19,703,045
129,877,507
7,218,961
P
17,794,443
P
102,295,868
6,779,491
Total
47,596,066
-
P
278,289,987
P
10,535,173
104,547,910
221,653,379
-
-
5,836,076
-
-
10,926,978
Total
liabilities
P
115,332,762
P
9,792,220
P
18,528,541
P
750,173
Gap 1
P
14,544,745
P
6,361,866
P
20,583,736
P
Cumulative gap P
14,544,745
P
20,906,611
P
41,490,347
P
P
P
248,951,606
44,799,878 ( P
56,951,844 ) P
29,338,381
86,290,225
29,338,381
P
104,547,910
- 49 Parent and RSB
One to
Three
Months
Resources :
Cash and
cash
equivalents
Loans and
advances
to banks
Loans and
advances to
customers
Investment
securities
Total
resources
Liabilities:
Deposits from
banks
Deposits from
customers
Debt
securities
issued
Subordinated
liabilities
P
8,143
Three
Months to
One Year
P
-
One to
Five
Years
P
2008
-
P
More
Than Five
Years
-
-
Non-rate
Sensitive
P
381,709
P
-
24,450,642
22,113,666
381,709
12,463,680
2,396,373
1,469,394
5,952,017
85,184,862
107,466,326
17,702,663
2,058,149
5,591,439
10,455,496
6,249,179
42,056,926
P
52,288,152
P
4,836,231
P
7,060,833
P
16,789,222
P
P
7,460,783
P
9,859,434
P
3,320,562
P
770,759
P
18,950,677
16,628,757
33,571
-
115,876,540
-
22,877,084
P
196,850,978
P
21,411,538
123,355,115
158,968,120
-
-
6,002,821
-
-
6,002,821
-
-
6,941,899
-
-
6,941,899
Total
liabilities
P
26,411,460
Gap 1
P
25,876,692 ( P
Cumulative gap P
24,442,499
Total
25,876,692
P
P
26,488,191
P
16,298,853
P
770,759
P
123,355,115
P
193,324,378
3,526,600
21,651,960 ) ( P
9,238,020 ) P
16,018,463 ( P
7,478,575 ) P
4,224,732 ( P
5,013,288 ) P
11,005,175
3,526,600
P
Parent Only
2009
One to
Three
Months
Resources:
Cash and
cash
equivalents
Loans and
advances
to banks
Loans and
advances to
customers
Investment
securities
Total
resources
(Carried
forward)
P
P
-
Three
Months to
One Year
P
-
One to
Five
Years
P
-
1,537,496
371,106
101,890,782
7,632,227
4,604,205
8,520,229
325,753
14,209,072
111,948,507
P
8,329,086
More
Than Five
Years
P
-
P
18,813,277
-
Non-rate
Sensitive
P
-
P
5,408,491
Total
P
5,408,491
17,794,443
19,703,045
10,876,364
6,729,758
131,733,336
31,056,687
14,522,374
68,634,115
41,933,051
P
44,455,066
P
225,478,987
- 50 2009
One to
Three
Months
Total
resources
(Brought
forward)
Liabilities:
Deposits from
banks
Deposits from
customers
Debt
securities
issued
Subordinated
liabilities
Three
Months to
One Year
One to
Five
Years
More
Than Five
Years
Non-rate
Sensitive
P
111,948,507
P
8,329,086
P
18,813,277
P
41,933,051
P
P
7,200,818
P
2,573,259
P
11,923
P
749,173
P
80,807,868
44,455,066
-
Total
P
225,478,987
P
10,535,173
4,524,961
5,519,640
-
5,836,076
-
-
-
-
5,836,076
-
-
-
-
10,926,978
10,926,978
89,700,910
Total
liabilities
P
93,844,762
P
7,098,220
P
16,458,541
P
749,173
Gap 1
P
18,103,745
P
1,230,866
P
2,354,736
P
Cumulative gap P
18,103,745
P
19,334,611
P
21,689,347
P
P
P
207,851,606
41,183,878 ( P
45,245,844 ) P
17,627,381
62,873,225
17,627,381
P
89,700,910
180,553,379
Parent Only
2008
One to
Three
Months
Resources:
Cash and
cash
equivalents
Loans and
advances
to banks
Loans and
advances to
customers
Investment
securities
Total
resources
Liabilities:
Deposits from
banks
Deposits from
customers
Debt
securities
issued
Subordinated
liabilities
P
8,119
Three
Months to
One Year
P
P
-
More
Than Five
Years
P
-
P
P
2,388,112
1,448,759
5,940,000
85,177,931
107,416,585
17,702,533
2,057,755
5,590,327
10,453,809
6,249,231
42,053,655
P
7,460,783
P
18,929,955
4,827,576 P
9,859,434
P
16,627,133
-
24,449,448
12,461,783
P
381,709
24,441,329
Total
381,709
52,284,638
-
Non-rate
Sensitive
22,112,203
P
7,039,086
P
16,775,518
P
3,320,562
P
770,759
P
29,830
-
115,868,491
-
22,875,621
P
196,795,309
P
21,411,538
123,342,160
158,929,078
-
-
6,002,821
-
-
6,002,821
-
-
6,941,899
-
-
6,941,899
Total
liabilities
P
26,390,738
Gap 1
P
25,893,900 ( P
Cumulative gap P
-
One to
Five
Years
25,893,900
P
P
26,486,567
P
16,295,112
P
770,759
P
123,342,160
P
193,285,336
3,509,973
21,658,991 ) ( P
9,256,026 ) P
16,004,759 ( P
7,473,669 ) P
4,234,909 ( P
5,021,117 ) P
10,983,642
3,509,973
P
- 51 -
4.3.3 Equity Price Risk
The Parent Company and RSB have minimal exposures to equity securities price risk
on their investments held and classified on the statement of financial position as
available-for-sale. The Group is not exposed to commodity price risk. To manage
price risk, the Parent Company and RSB diversify their portfolio. Diversification of the
portfolio is done in accordance with the limits set by the Parent Company and RSB.
4.4 Credit Risk
Credit risk is the risk that the counterparty in a transaction may default, and arises from
lending, trade finance, treasury, derivatives and other activities undertaken by the
Parent Company and RSB. The Group manages credit risk through a system of
policies and authorities that govern the processes and practices of all credit-originating
and borrowing relationship management units.
Credit Risk Division of CRISMS assists senior management : (a) to develop credit
policy; (b) to establish risk concentration limits accepted at the level of the single
borrower, related-borrower group, industry segments, and sovereign jurisdiction; and,
(c) to continuously monitor the actual credit risk portfolio from the perspective of
those limits and other risk management objectives. In performing this function, the
Credit Risk Division works hand-in-hand with the business units and with the
Corporate Planning Group.
At the individual borrower level, exposure to credit risk is managed via adherence to a
set of policies, the most notable features of which, in this context, are: (a) credit
approving authority is not exercised by a single individual but rather, through a
hierarchy of limits, is effectively exercised collectively; (b) branch managers have
limited approval authority only for credit exposure related to deposit-taking operations
in the form of bills purchased, acceptance of second endorsed checks, and 1:1 loan
accommodations; (c) an independent credit risk assessment by the Credit Risk Division
of large corporate and middle-market borrowers, summarized into a borrower risk
rating, is provided as input to the credit decision-making process; and, (d) borrower
credit analysis is performed at origination and at least annually thereafter.
Impairment provisions are recognized for losses that have been incurred at the
statement of financial position date. Significant changes in the economy, or in
particular industry segments that represent a concentration in the Parent Company’s
and RSB’s portfolio, could result in losses that are different from those provided for at
the end of the reporting period. Management therefore carefully monitors the changes
and adjusts its exposure to such credit risk, as necessary.
- 52 -
4.4.1 Exposure to Credit Risk
The carrying amount of financial resources recorded in the consolidated financial
statements, grossed up for any allowances for losses, which represents the maximum
exposure to credit risk, without taking into account of the value of any collateral
obtained, as of December 31 follows:
Parent and RSB
Loans and
Receivables
Carrying Amount
Individually Impaired
Grade 1 to 5: Unclassified
Grade 6 to 7: Impaired
Grade 8: Impaired
Grade 9: Impaired
Grade 10: Impaired
Gross amount
Allowance for impairment
Carrying amount
Collectively Impaired
Grade 1 to 5: Unclassified
Grade 6 to 7: Impaired
Grade 8: Impaired
Grade 9: Impaired
Grade 10: Impaired
Gross amount
Allowance for impairment
Carrying amount
Unquoted debt securities
classified as loans
Allowance for impairment
Carrying amount
P
163,991,498
P
372,000
564,189
816,269
1,667,533
533,880
3,953,871
1,710,715 ) (
2,243,156
(
(
(
Neither Past Due Nor Impaired
Total Carrying Amount
2009
62,285,284
3,393,319
1,276,157 )
2,117,162
107,030,198
16,896,119
3,917,908
9,500
678,000
128,531,725
3,019,846 )
125,511,879
-
5,689,068
462,000 )
5,227,068
-
31,009,395
P
Investment
Securities
163,991,498
60,168,122
P
62,285,284
- 53 Parent and RSB
2008
Loans and
Receivables
Carrying Amount
Individually Impaired
Grade 1 to 5: Unclassified
Grade 6 to 7: Impaired
Grade 8: Impaired
Grade 9: Impaired
Grade 10: Impaired
Gross amount
Allowance for impairment
Carrying amount
Collectively Impaired
Grade 1 to 5: Unclassified
Grade 6 to 7: Impaired
Grade 8: Impaired
Grade 9: Impaired
Grade 10: Impaired
Gross amount
Allowance for impairment
Carrying amount
Unquoted debt securities
classified as loans
Allowance for impairment
Carrying amount
P
P
629,000
477,319
1,699,807
999,817
874,873
4,680,816
1,571,731 ) (
3,109,085
(
(
(
Neither Past Due Nor Impaired
Total Carrying Amount
164,231,166
Investment
Securities
2,466,280
811,207 )
1,655,073
111,883,119
9,691,743
1,438,809
29,840
548,000
123,591,511
4,745,066 )
118,846,445
-
6,621,885
1,082,467 )
5,539,418
-
36,736,218
P
44,459,397
164,231,166
42,804,324
P
44,459,397
- 54 Parent Only
Loans and
Receivables
Carrying Amount
Individually Impaired
Grade 6: Impaired
Grade 7: Impaired
Grade 8: Impaired
Grade 9: Impaired
Grade 10: Impaired
Gross amount
Allowance for impairment
Carrying amount
Collectively Impaired
Grade 1 to 5: Unclassified
Grade 6: Watchlist
Grade 7: Special Mention
Grade 8: Sub-standard
Grade 9: Doubtful
Grade 10: Loss
Gross amount
Allowance for impairment
Carrying amount
Unquoted debt securities
classified as loans
Allowance for impairment
Carrying amount
P
131,733,336
P
550,439
13,750
816,269
1,667,533
533,880
3,581,871
1,710,715 ) (
1,871,156
(
(
(
Neither Past Due Nor Impaired
Total Carrying Amount
2009
56,191,210
3,393,319
1,276,157 )
2,117,162
89,535,198
5,777,787
3,128,332
3,287,908
9,500
101,738,725
2,070,846 )
99,667,879
-
5,689,068
462,000 )
5,227,068
-
24,967,233
P
Investment
Securities
131,733,336
54,074,048
P
56,191,210
- 55 Parent Only
Loans and
Receivables
Carrying Amount
Individually Impaired
Grade 6: Impaired
Grade 7: Impaired
Grade 8: Impaired
Grade 9: Impaired
Grade 10: Impaired
Gross amount
Allowance for impairment
Carrying amount
Collectively Impaired
Grade 1 to 5: Unclassified
Grade 6: Watchlist
Grade 7: Special Mention
Grade 8: Sub-standard
Grade 9: Doubtful
Grade 10: Loss
Gross amount
Allowance for impairment
Carrying amount
Unquoted debt securities
classified as loans
Allowance for impairment
Carrying amount
P
130,292,206
P
383,219
94,100
1,699,807
999,817
874,873
4,051,816
1,571,731 ) (
2,480,085
(
(
(
Neither Past Due Nor Impaired
Total Carrying Amount
2008
41,135,509
2,466,280
811,207 )
1,655,073
94,300,118
2,797,107
303,637
711,809
29,840
98,142,511
1,526,066 )
96,616,445
-
6,621,885
1,082,467 )
5,539,418
-
25,656,258
P
Investment
Securities
130,292,206
39,480,436
P
41,135,509
The credit risk for cash and cash equivalents such as Due from BSP and Due from
Other Banks is considered negligible, since the counterparties are reputable banks with
high quality external credit ratings.
4.4.2 Collateral Held as Security and Other Credit Enhancements
The Parent Company and RSB hold collateral against loans and advances to customers
in the form of mortgage interests over property, other registered securities over assets,
and guarantees. Estimates of fair value are based on the value of collateral assessed at
the time of borrowing and are generally updated annually. Collateral, generally, is not
held over loans and advances to banks, except when securities are held as part of
reverse repurchase and securities borrowing activity. Collateral usually is not held
against investment securities, and no such collateral was held at December 31, 2009 and
2008.
- 56 -
The Parent Company and RSB hold collateral against Loans and Other Receivables in
the form of hold-out on deposits, real estate mortgage, standby letters of credit or bank
guaranty, government guaranty, chattel mortgage, assignment of receivables, pledge of
shares, personal and corporate guaranty and other forms of security. An estimate of
the fair value of collateral and other security enhancements held against loans and
receivables as of December 31, 2009 and 2008 are shown below.
Parent and RSB
Against individually impaired
Real property
Chattels
Equities
Others
P
2009
2008
2,287,915 P
254,544
-
4,648,242
392,084
461,000
236,980
Against past due but not impaired
Real property
Chattels
Equities
Debt securities
Others
24,720,064
14,441,811
1,191,823
1,970,065
18,700,355
12,751,047
710,190
1,422,824
Against neither past due nor impaired
Real property
Chattels
Others
38,596,440
516,000
15,107,528
42,111,183
486,000
14,645,252
99,086,190 P
96,565,157
Total
P
Parent Only
2009
Against individually impaired
Real property
Chattels
Equities
Other
P
Against past due but not impaired
Real property
Chattels
Equities
Debt securities
Other
Against neither past due nor impaired
Real property
Chattels
Other
Total
P
2008
1,915,915 P
254,544
167,881
4,020,242
392,084
461,000
236,980
8,505,064
2,183,811
1,191,823
1,344,065
5,983,355
837,047
710,190
814,824
36,130,440
15,107,528
34,407,183
14,645,252
66,801,071 P
62,508,157
- 57 -
4.4.3 Concentrations of Credit Risk
The Parent Company and RSB monitor concentrations of credit risk by sector. An
analysis of concentrations of credit risk at the reporting date is shown in Note 11.
4.5 Fair Value Hierarchy
The Parent Company and RSB adopted the amendments to PFRS 7, Improving
Disclosures about Financial Instruments, effective January 1, 2009. These amendments
require the Parent Company and RSB to present certain information about financial
instruments measured at fair value in the statement of financial position. In the first
year of application, comparative information need not be presented for the disclosures
required by the amendment. Accordingly, the disclosure for the fair value hierarchy is
only presented for December 31, 2009.
In accordance with this amendment, financial assets and liabilities measured at fair
value in the statement of financial position are categorized in accordance with the fair
value hierarchy. This hierarchy groups financial assets and liabilities into three levels
based on the significance of inputs used in measuring the fair value of the financial
assets and liabilities. The fair value hierarchy has the following levels:
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities;
•
Level 2: inputs other than quoted prices included within Level 1 that are observable
for the resource or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices); and
•
Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
The level within which the financial asset or liability is classified is determined based on
the lowest level of significant input to the fair value measurement.
The table in the next page presents the breakdown of the Parent Company’s and RSB’s
financial assets and liabilities measured at fair value in the statement of financial
position as of December 31, 2009.
- 58 Parent Company and RSB
2009
Level 1
Financial assets at fair
value through profit
and loss:
Government bonds P
Other debt securities
Derivative assets
6,198,850
1,610,277
54,163
Level 2
P
342,319
Allowance for
impairment
16,114,700
14,236,515
1,742,095
32,093,310
(
P
758,697
1,101,016
-
8,964,306
4,558,429
-
20,673,129
14,236,515
1,742,095
36,651,739
4,558,429
1,336,254 )
-
30,757,056
Total
-
-
7,863,290
Available-for-sale
securities:
Government bonds
Other debt securities
Equity securities
Level 3
4,558,429
P
(
6,541,169
1,610,277
812,860
1,336,254 )
-
35,315,485
Total Resources
at Fair Value
P
38,620,346
P
5,659,445
P
-
P
44,279,791
Derivative liability
P
-
P
703,604
P
-
P
703,604
Parent Company
Level 2
Level 1
Financial assets at fair
value through profit
and loss:
Government bonds P
Other debt securities
Derivative assets
5,268,780
1,610,277
54,163
P
342,319
Allowance for
impairment
12,999,604
14,236,515
1,742,095
28,978,214
(
34,635,277
Derivative liability
P
-
758,697
1,101,016
-
8,034,236
4,558,429
-
17,558,033
14,236,515
1,742,095
33,536,643
-
4,558,429
P
P
Total
-
4,558,429
27,702,057
P
P
-
1,276,157 )
Total Resources
at Fair Value
Level 3
-
6,933,220
Available-for-sale
securities:
Government bonds
Other debt securities
Equity securities
2009
P
(
5,611,099
1,610,277
812,860
1,276,157 )
-
32,260,486
5,659,445
P
-
P
40,294,722
703,604
P
-
P
703,604
- 59 -
4.6 Operations Risk and Reputation Risk
Operations risk is the risk arising from the potential that inadequate information
systems, operations or transactional problems (relating to service or product delivery),
breaches in internal controls and fraud or unforeseen catastrophes will result in
unexpected loss. Operations risk includes the risk of loss arising from various types of
human or technical error, the risk of settlement or payments failures, the risk of
business interruption, administrative and legal risks and the risk arising from systems
not performing adequately.
Reputation risk is the risk to earnings or capital arising from negative public opinion.
This affects the Parent Company’s and RSB’s ability to establish new relationships or
services, or to continue servicing existing relationships. This risk can expose the Parent
Company and RSB to litigation, financial loss, or damage to their reputation.
Reputation risk arises whenever technology-based banking products, services, delivery
channels, or processes may generate adverse public opinion such that it seriously affects
the Parent Company’s and RSB’s earnings or impairs capital. This risk is present in
activities such as asset management and regulatory compliance.
The Parent Company and RSB maintain departmental operations manuals that are
periodically updated. The Parent Company and RSB have also developed a Business
Contingency Plan which is tested at least annually and updated for any major changes
in systems procedures.
Transactions and items of value are subject to a system of dual control whereby the
work of one person is verified by a second person to ensure that the transaction is
properly authorized, recorded and settled.
The Parent Company and RSB place emphasis on the security of their computer
systems and have a comprehensive information technology (IT) security policy. The
Parent Company and RSB designate a security administrator independent of the front
office who is responsible for maintaining strict control over user access privileges to the
Parent Company and RSB’s information systems. The Parent Company’s and RSB’s IT
Groups have also created a disaster recovery plan to cover the recovery of critical data
and contingency processing requirements in the event of a disaster.
4.7 Legal Risk and Regulatory Risk Management
Changes in laws and regulations could adversely affect the Parent Company and RSB.
In addition, the Parent Company and RSB face legal risks in enforcing its rights under
its loan agreements, such as foreclosing on collateral. Legal risk is higher in new areas
of business where the law remains untested by the courts. The Parent Company and
RSB use a legal review process as the primary control mechanism for legal risk. Such a
legal review aims to verify and validate the existence, genuineness and due execution of
legal documents, and verify the capacity and authority of counterparties and customers
to enter into transactions. In addition, the Parent Company and RSB seek to minimize
its legal risk by using stringent legal documentation, imposing certain requirements
designed to ensure that transactions are properly authorized and consulting internal and
external legal advisors.
- 60 -
Regulatory risk refers to the potential for the Parent Company and RSB to suffer
financial loss due to changes in the laws or monetary, tax or other governmental
regulations of a country. The Parent Company’s and RSB’s Compliance Program, the
implementation of which is overseen and coordinated by the Compliance Office, is the
primary control process for regulatory risk issues. The Compliance Office is
responsible for communicating and disseminating new rules and regulations to all units,
analyzing and addressing compliance issues, performing periodic compliance testing on
branches and Head Office units, and reporting compliance findings to the Audit
Committee and the BOD.
4.8 Anti-Money Laundering Controls
The Anti-Money Laundering Act was passed in September 2001 and was amended in
March 2003. Under the Anti-Money Laundering Act, as amended, the Parent Company
and RSB are required to submit “Covered Transaction Reports” involving single
transactions in cash or other equivalent monetary instruments in excess of P500,000
within one banking day. The Parent Company and RSB are also required to submit
“Suspicious Transaction Reports” to the Anti-Money Laundering Council of the BSP in
the event that there are reasonable grounds to believe that any amounts processed are
the proceeds of money-laundering activities. The Parent Company and RSB are required
to establish and record the identities of its clients based on official documents. In
addition, all records of transactions are required to be maintained and stored for five
years from the date of the transaction. Records of closed accounts must also be kept for
five years after their closure.
Under BSP Circular No. 279 dated April 2, 2001, within 20 banking days after the end
of each financial year, the Parent Company and RSB are required to submit to the BSP
a certificate signed by the President and the Chief Compliance Officer stating that they
have monitored compliance and that the Parent Company and RSB are complying with
the anti-money laundering rules and regulations.
In an effort to further prevent money laundering activities, the Parent Company and
RSB have adopted Know Your Customer policies and guidelines. Under the guidelines,
each business unit is required to validate the true identity of a customer based on
official or other reliable identifying documents or records before an account may be
opened.
Each business unit is also required to monitor account activities to determine whether
transactions conform to the normal or expected transactions for a customer or an
account. For a high-net worth individual whose source of funds is unclear, a more
extensive due diligence is required. Decisions to enter into a business relationship with
a higher risk customer, such as a politically exposed person or a private individual
holding a prominent position, are made exclusively at the senior management level.
The Parent Company’s and RSB’s procedures for compliance with the Anti-Money
Laundering Act are set out in its Anti-Money Laundering Policy Manual. The Parent
Company’s and RSB’s Compliance Offices monitor compliance and conduct
compliance testing of business units.
- 61 -
The Parent Company’s and RSB’s Anti-Money Laundering Committee evaluates
suspicious transaction reports submitted by branches for final determination if the
suspicions are based on reasonable grounds and are therefore reportable to the
Anti-Money Laundering Council. All banking groups are required to submit to the
Compliance Office certificates of compliance with the Anti-Money Laundering Rules
& Regulations on a quarterly basis.
4.9 Other Subsidiaries’ Policies and Objectives
The other subsidiaries have essentially the same risk management policies and
objectives as that of the Parent Company and RSB. The other subsidiaries’ risk
management is coordinated with the Parent Company, in close cooperation with their
respective BOD.
5.
CAPITAL MANAGEMENT
5.1 Regulatory Capital
The BSP, Group’s lead regulator, sets and monitors capital requirements of the Parent
Company, RSB and RCBC Capital and the Group as a whole.
In implementing current capital requirements, BSP requires the Parent Company and
the Group to maintain a minimum capital amount and a prescribed ratio of qualifying
capital to risk-weighted assets or the capital adequacy ratio (CAR).
Risk-weighted assets is the sum of credit risk, market risks, and operational risks,
computed based on BSP-prescribed formula provided under its circulars.
Under the relevant provisions of the current BSP regulations, the minimum capitalization
of the Parent Company, RSB and RCBC Capital is P4.95 billion, P325 million and
P300 million, respectively. In computing CAR, the regulatory qualifying capital is analyzed
into two tiers which are: (i) Tier 1 Capital, and (ii) Tier 2 Capital; less deductions from the
Total Tier 1 and Tier 2 for the following:
(a) Investments in equity of unconsolidated subsidiary banks and other financial allied
undertakings, but excluding insurance companies;
(b) Investments in debt capital instruments of unconsolidated subsidiary banks;
(c) Investments in equity of subsidiary insurance companies and non-financial allied
undertakings;
(d) Reciprocal investments in equity of other banks/enterprises; and,
(e) Reciprocal investments in unsecured subordinated term debt instruments of other
banks/quasi-banks qualifying as Hybrid Tier 1, Upper Tier 2 and Lower Tier 2, in
excess of the lower of (i) an aggregate ceiling of 5% of total Tier 1 capital of the bank
excluding Hybrid Tier 1; or (ii) 10% of the total outstanding unsecured subordinated
term debt issuance of the other bank/quasi-banks. Provided, that any asset deducted
from the qualifying capital in computing the numerator of the risk-based capital ratio
shall not be included in the risk-weighted assets in computing the denominator of the
ratio.
- 62 -
Tier 1 Capital and Tier 2 Capital are defined as follows:
(a) Tier 1 Capital includes the following:
i. paid-up common stock;
ii. paid-up perpetual and non-cumulative preferred stock;
iii. common and perpetual, non-cumulative preferred stock dividends distributable;
iv. surplus;
v. surplus reserves;
vi. undivided profits (for domestic banks only);
vii. unsecured subordinated debt (with prior BSP approval); and,
viii. non-controlling interest in the equity of subsidiary financial allied undertakings;
Subject to following deductions:
i. treasury shares;
ii. unrealized losses on underwritten listed equity securities purchased;
iii. unbooked valuation reserves, and other capital adjustments based on the
latest report of examination;
iv. outstanding unsecured credit accommodations, both direct and indirect, to
directors, officers, stockholders and their related interests (DOSRI);
v. goodwill; and,
vi. deferred income tax.
(b) Tier 2 Capital includes:
i. perpetual and cumulative preferred stock;
ii. limited life redeemable preferred stock with or without the replacement
requirement subject to BSP conditions;
iii. dividends distributable of i and ii above;
iv. appraisal increment reserve – bank premises, as authorized by the Monetary
Board(MB);
v. net unrealized gains on underwritten listed equity securities purchased;
vi general loan loss provision;
vii. unsecured subordinated debt with a minimum original maturity of at least ten
years (with prior BSP approval);
viii. unsecured subordinated debt with a minimum original maturity of at least five
years (with prior BSP approval); and,
ix. deposit for stock subscription on:
- common stock,
- perpetual and non-cumulative preferred stock,
- perpetual and cumulative preferred stock subscription, and,
- limited life redeemable preferred stock subscription with the replacement
requirement upon redemption;
Subject to following deductions:
i. Perpetual and cumulative preferred stock treasury shares;
ii. Limited life redeemable preferred stock treasury shares with the replacement
requirement upon redemption;
iii. Sinking fund for redemption of limited life redeemable preferred stock with
the replacement requirement upon redemption;
iv. Limited life redeemable preferred stock treasury shares without the
replacement requirement upon redemption; and,
- 63 -
v. Sinking fund for redemption of limited life redeemable preferred stock
without the replacement requirement upon redemption.
The Group’s regulatory capital position as of December 31 is presented as follows:
2009
2008
Tier 1 Capital
Tier 2 Capital
P
27,128,731 P
12,733,761
26,015,850
8,111,092
Total Qualifying Capital, after deductions
P
39,862,491 P
34,126,942
Total Risk Weighted Assets
P 215,825,856 P 197,222,586
Capital ratios:
Total regulatory capital expressed as percentage
of total risk weighted assets
18.47%
17.30%
Total Tier 1 expressed as percentage of total
risk weighted assets
12.57%
13.19%
The Parent Company’s regulatory capital position as of December 31 is presented as
follows:
2009
2008
Tier 1 Capital
Tier 2 Capital
P
22,091,302 P
7,350,514
21,369,107
3,235,534
Total Qualifying Capital, after deductions
P
29,441,816 P
24,604,641
Total Risk Weighted Assets
P 170,922,058 P 151,148,326
Capital ratios:
Total regulatory capital expressed as percentage
of total risk weighted assets
17.23%
16.28%
Total Tier 1 expressed as percentage of total
risk weighted assets
12.92%
14.14%
The preceding capital ratios comply with the related BSP prescribed ratio of at least
10%.
- 64 -
6.
SEGMENT INFORMATION
The Group’s operating businesses are recognized and managed separately according to
the nature of services provided (primary segments) and the different markets served
(secondary segments) with a segment representing a strategic business unit. The
Group’s business segments follow:
a. Retail Banking – principally handles the business centers offering a wide range of
financial products and services to the commercial “middle market” customers.
Products offered include individual customer’s deposits, term loans, revolving credit
lines, overdraft facilities, trade finance, payment remittances, and foreign exchange
transactions.
b. Corporate Banking – principally handles loans and other credit facilities and deposit
and current accounts for corporate and institutional customers.
c. Treasury – principally provides money market, trading and treasury services, as well as
the management of the Group’s funding operations by use of treasury bills,
government securities and placements and acceptances with other banks, through
treasury and wholesale banking.
d. Others – consists of the Parent Company’s various support groups and consolidated
subsidiaries.
These segments are the basis on which the Group reports its primary segment
information. Other operations of the Group comprise the operations and financial
control groups. Transactions between segments are conducted at estimated market rates
on an arm’s length basis.
Segment revenues and expenses that are directly attributable to a primary business
segment and the relevant portions of the Group’s revenues and expenses that can be
allocated to that business segment are accordingly reflected as revenues and expenses of
that business segment.
For secondary segment, revenues and expenses are attributed to geographic areas based
on the location of the resources producing the revenues, and in which location the
expenses are incurred.
- 65 -
Primary segment information (by business segment) on a consolidated basis as of and
for the years ended December 31, 2009 and 2008 (in millions of Philippine Pesos)
follows:
2009
Retail
Banking
Group
Results of operations
Net interest income
Non-interest income
Total revenue
Non-interest expense
Profit (loss) before tax
Tax expense
Non-controlling interest
in net profit
P
Corporate
Banking
Group
4,006 P
1,808
5,814
4,084
1,730
Treasury
Group
1,859 P
938
2,797
827
1,970
Others
1,080 P
2,388
3,468
399
3,069 (
-
-
-
-
-
-
Total
3,323 P
752
4,075
6,764
2,689 )
745
(
10,268
5,886
16,154
12,074
4,080
745
7) (
7)
Net profit (loss)
P
1,730 P
1,970 P
3,069 (P
3,441 ) P
3,328
Statement of financial
position
Total Resources
P
184,765 P
96,875 P
75,578 (P
68,702 ) P
288,516
Total Liabilities
P
184,765 P
96,875 P
75,578 (P
99,247 ) P
257,971
Other segment
information
Capital expenditures
P
150 P
13 P
4 P
1,173 P
1,340
Depreciation and
amortization
P
103 P
10 P
5 P
416 P
534
2008
Retail
Banking
Group
Results of operations
Net interest income
Non-interest income
Total revenue
Non-interest expense
Profit (loss) before tax
Tax expense
Non-controlling interest
in net profit
P
Corporate
Banking
Group
3,123 P
1,177
4,300
2,349
1,951
Treasury
Group
930 P
548
1,478
411
1,067
Others
311 P
1,014
1,325
227
1,098 (
-
-
-
-
-
-
(
Total
4,106 P
1,858
5,964
6,988
1,024 )
919
19 ) (
1,962 )
8,470
4,597
13,067
9,975
3,092
919
19 )
Net profit (loss)
P
1,951 P
1,067 P
1,098 (P
2,154
Statement of financial
position
Total Resources
P
144,720 P
63,248 P
69,421 (P
9,119 ) P
268,270
Total Liabilities
P
144,720 P
63,248 P
69,421 (P
36,756 ) P
240,633
- 66 -
Retail
Banking
Group
2008
Corporate
Banking
Group
Treasury
Group
Others
Total
Other segment
information
Capital expenditures
P
225 P
38 P
7 P
765 P
1,035
Depreciation and
amortization
P
131 P
9 P
11 P
257 P
408
Secondary information (by geographical location) as of and for the years ended
December 31, 2009 and 2008 (in millions of Philippine pesos) follows:
2009
Philippines
Results of operations
Total revenues
Total expenses
Asia and
Europe
United States
Total
P
22,462 P
19,068
75 P
144
119 P
116
22,656
19,328
P
3,394 ( P
69 ) P
3 P
3,328
Statement of financial position
Total resources
P
287,950 P
147 P
419 P
288,516
P
257,640 P
133 P
198 P
257,971
P
1,333 P
3 P
4 P
1,340
P
528 P
5 P
1 P
534
Net profit (loss)
Total liabilities
Other segment information
Capital expenditures
Depreciation and
amortization
2008
Philippines
Results of operations
Total revenues
Total expenses
United States
Asia and
Europe
Total
P
20,045 P
17,873
97 P
132
114 P
97
20,256
18,102
P
2,172 ( P
35 ) P
17 P
2,154
Statement of financial position
Total resources
P
267,490 P
246 P
534 P
268,270
P
240,138 P
207 P
288 P
240,633
P
1,008 P
23 P
4 P
1,035
P
405 P
2 P
1 P
408
Net profit (loss)
Total liabilities
Other segment information
Capital expenditures
Depreciation and
amortization
- 67 -
7.
CASH AND CASH EQUIVALENTS
The components of Cash and Cash Equivalents are as follows:
2009
Cash and other cash items
Due from BSP
Due from other banks
Consolidated
2008
Parent
2009
2008
P
6,811,443
19,321,339
3,066,922
P
6,807,939
16,390,973
4,862,225
P
5,408,491
17,914,204
1,788,841
P
5,595,736
15,656,119
3,197,593
P
29,199,704
P 28,061,137
P
25,111,536
P
24,449,448
Cash consists primarily of funds in the form of Philippine currency notes and coins in
the bank’s vault and those in the possession of tellers, including automated teller
machines. Other Cash Items include cash items (other than currency and coins on
hand), such as checks drawn on other banks or other branches after the bank’s clearing
cut-off time until the close of the regular banking hours.
Due from BSP represents the aggregate balance of deposit accounts maintained with
the BSP primarily to meet reserve requirements, to serve as clearing account for
interbank claims and to comply with existing trust regulations.
The balance of Due from Other Banks account represents regular deposits with the
following:
2009
Foreign banks
Local banks
Consolidated
2008
2009
Parent
2008
P
1,972,975
1,093,947
P
3,120,283
1,741,942
P
1,089,096
699,745
P
1,872,693
1,324,900
P
3,066,922
P
4,862,225
P
1,788,841
P
3,197,593
The breakdown of Due from Other Banks by currency is shown below.
2009
Foreign currencies
Philippine pesos
Consolidated
2008
Parent
2009
2008
P
2,549,536
517,386
P
4,116,106
746,119
P
1,404,960
383,881
P
2,943,916
253,677
P
3,066,922
P
4,862,225
P
1,788,841
P
3,197,593
Interest rates on these deposits range from 0.50% to 5.25% in 2009, 0.50% to 7.00% in
2008 and 1% to 4.5% in 2007.
- 68 -
8.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
This account is composed of the following:
2009
Government bonds
Other debt securities
Derivative financial assets
Equity securities
Quoted
Unquoted
P
Consolidated
2008
6,825,653
1,727,831
812,860
P
1,940,272
1,059,205
405,705
49,529
16
P
9,415,889
Parent
2009
P
5,611,099
1,610,277
812,860
31,431
525
P
3,437,138
2008
P
P
1,619,470
1,059,205
405,705
-
8,034,236
P
3,084,380
The carrying amounts of the above financial assets are classified as follows:
2009
Held-for-trading
Designated as fair value
through profit or loss
on initial recognition
P
Consolidated
2008
8,350,243
P
1,065,646
P
9,415,889
2009
1,762,624
P
7,221,376
1,674,514
P
3,437,138
Parent
P
812,860
P
8,034,236
2008
1,619,470
1,464,910
P
3,084,380
Treasury bills and other debt securities issued by the government and other private
corporations earn annual interest as follows:
2009
Peso denominated
Foreign currency denominated
4.016% - 11.875%
3.75 % - 11.375%
2008
2007
5.50% - 18.75 %
6.25% - 10.625%
5.50% - 16.50%
6.38% - 10.63%
Fair values of government bonds were determined by reference to published closing
prices available from electronic financial data service providers which had been based
on price quoted or actually dealt in an active market.
Fair values of certain derivative financial assets were determined through valuation
techniques using net present value computation. Derivatives instruments used by the
Parent Company include foreign currency short term forwards and cross currency
swaps. Foreign currency forwards represent commitments to purchase/sell on a future
date at a specific exchange rate. Foreign currency short term swaps are simultaneous
foreign currency spot and forward deals with tenor of one year.
The aggregate contractual or notional amount of derivatives financial instruments and
the aggregative fair values of derivative financial assets and liabilities as of
December 31 both in the consolidated and Parent Company financial statements are
set out in the succeeding page.
- 69 -
Notional
Amount
Currency swaps
Interest rate swaps
Futures
Currency forwards/futures
Debt warrants
P
P
1,762,750 P
1,700,000
260,200
169,243
-
722,561 P
11,579
110
24,471
54,139
3,892,193 P
812,860 P
Notional
Amount
Currency swaps
Currency forwards/futures
Debt warrants
2009
Fair Values
Assets
Liabilities
597,165
4,998
-
101,441
703,604
2008
Fair Values
Assets
Liabilities
(P
(
1,911,200) P
4,447,600)
-
192,752 P
176,751
36,202
(P
6,358,800) P
405,705 P
-
247,108
82,397
329,505
The derivative liabilities of P703,604 and P329,505 as of December 31, 2009 and 2008,
respectively, are shown as part of Other Liabilities (see Note 21).
The Group recognized the change in value of financial assets at fair value through
profit or loss resulting to an increase of P39,227 in 2009, P1,557,064 decrease in 2008,
and P86,769 increase in 2007; and P10,376 increase in 2009, P1,316,222 decrease in
2008, and P80,504 increase in 2007 in the consolidated and Parent Company financial
statements, respectively, which were included as part of Trading and Securities Gains
(Losses) - net account in the statements of income.
In 2008, the Group reclassified certain debt securities and embedded derivatives of
CLNs from financial assets at fair value through profit or loss to held-to-maturity
investments, available-for-sale securities and loans and receivables categories
(see Notes 9, 10 and 11).
9.
HELD-TO-MATURITY INVESTMENTS
The balance of this account as of December 31 is composed of the following:
Consolidated
2008
2009
Government bonds
Other debt securities
Parent
2009
2008
P 19,476,766 P 20,621,861 P 17,172,858 P 17,840,361
485,594
51,753
465,726
51,753
P 19,962,360 P 20,673,614 P 17,638,584 P 17,892,114
- 70 -
As to currency, held-to-maturity investments comprise of the following:
Consolidated
2009
2008
Foreign currency
Philippine pesos
Parent
2009
2008
P 17,231,532 P 18,143,420 P 15,102,660 P 15,541,116
2,730,828
2,530,194
2,535,924
2,350,998
P 19,962,360 P 20,673,614 P 17,638,584 P 17,892,114
Changes in the held-to-maturity investments account in December 31, 2009 and 2008
are summarized below.
Consolidated
2008
2009
2009
Parent
2008
Balance at beginning of year
P 20,673,614 P
P 17,892,114 P
Additions
398,290
378,397
Amortization of premium – net (
285,389) (
111,022 ) (
261,027) (
107,949)
Maturities
(
453,255)
Revaluation of foreign currency (
370,900)
(
370,900)
Reclassification from FVTPL
411,228
411,228
Reclassification from AFS
20,373,408
17,588,835
Balance at end of year
P 19,962,360 P 20,673,614 P 17,638,584 P 17,892,114
In accordance with BSP Circular No. 670, the Parent Company entered into a bond
exchange transaction with Power Sector Assets and Liabilities Management
Corporation (PSALM) on December 2, 2009 to convert its guaranteed notes and bonds
originally issued by National Power Corporation with total face value of
US$100.0 million to PSALM’s newly issued guaranteed global bonds amounting to
US$105.0 million which will mature on 2024. The carrying amount of the investment
in PSALM classified as held-to-maturity investment amounted to P4,847,997 as of
December 31, 2009.
9.1 Reclassification to HTM Investments
The Monetary Board of the BSP, through BSP Circular No. 628, approved the
prudential reporting guidelines for banks governing the reclassification of investments
in debt and equity securities between categories in accordance with the provisions of
the amendments to the PAS 39 and PFRS, and provided additional guidelines which
include, among others, the reclassification of certain financial assets previously
classified under available-for-sale securities due to tainting of held-to-maturity
portfolio back to held-to-maturity investments category.
On February 2, 2009, the SEC approved the adoption of such BSP Circular No. 628 as
being compliant with generally accepted accounting principles for banks.
- 71 -
Pursuant to these amendments and guidelines, the Group and the Parent Company
reclassified certain financial assets classified under AFS Securities due to the previous
tainting of HTM portfolio and certain financial assets at fair value through profit or
loss to HTM Investments category with an aggregate carrying value of P20,784,636 and
P18,000,063, respectively, at reclassification date. The carrying amount and the
corresponding fair values of the reclassified AFS securities and financial assets at fair
value through profit or loss as of December 31 are presented below.
Consolidated
Carrying
Amount
From AFS to HTM
From FVTPL to HTM
2009
Fair
Value
2008
Fair
Value
P
14,508,235
404,453
P 15,438,869
431,129
P
20,264,434
409,180
P
19,059,065
424,548
P
14,912,688
P 15,869,998
P
20,673,614
P
19,483,613
Parent
2009
Carrying
Amount
From AFS to HTM
From FVTPL to HTM
Carrying
Amount
Fair
Value
2008
Carrying
Amount
Fair
Value
P
12,204,352
404,453
P 13,014,557
431,129
P
17,482,934
409,180
P
16,339,848
424,548
P
12,608,805
P 13,445,686
P
17,892,114
P
16,764,396
The effective interest rates of FVTPL denominated in foreign currency and peso which
were reclassified to HTM range from 7.75% to 10.63% and 8.43% to 8.85%,
respectively, both in the consolidated and Parent Company financial statements.
Had no reclassification been made, the net trading gain on FVTPL that would have
been recognized for the years ended December 31, 2009 and 2008 both in the
consolidated and Parent Company financial statements would have amounted to
P85,060 and P13,320, respectively. The net unrealized fair value gains on AFS that
would have been recognized in the capital funds as of December 31, 2009 would have
amounted to P453,146 and P332,718 for the Group and Parent Company, respectively,
and the unrealized fair value losses would have amounted to P1,311,269 and
P1,248,987 as of December 31, 2008 for the Group and Parent Company, respectively,
if the reclassification had not been made.
The amortization of the amount of net unrealized fair value losses at the date of
reclassification of the reclassified AFS recognized in the profit or loss for the years
ended December 31, 2009 and 2008 amounted to P15,574 and P29,651, respectively, in
the consolidated statements of income; and P7,660 and P36,598, respectively, in the
Parent Company statements of income.
- 72 -
10.
AVAILABLE-FOR-SALE SECURITIES
The Group’s available-for-sale securities consist of the following:
Consolidated
2009
2008
Note
Government bonds
Other debt securities
Equity securities
Allowance for
impairment
Parent
2009
2008
P 21,000,855 P 17,424,645 P 17,558,033 P 16,338,845
14,266,181
4,632,718
14,236,515
4,631,377
2,453,658
1,453,888
1,742,095
918,146
37,720,694
23,511,251
33,536,643
21,888,368
16
(
1,336,264) (
811,207) (
1,276,157) (
811,207 )
P 36,384,430 P 22,700,044 P 32,260,486 P 21,077,161
Government bonds and other debt securities earn annual interest as follows:
Group
Parent
2009
2008
2007
2.50% - 17.50%
2.50% - 17.50%
5.00% - 17.50%
5.23% - 17.50%
4.00% - 13.00%
4.00% - 10.62%
Changes in available-for-sale securities are as follows:
Consolidated
2008
2009
Balance at beginning of year
Additions
Fair value gains (losses)
Sale/disposal
Provision for impairment losses
Amortization / accretion of
discount or premium
Revaluation of foreign currency
investments
Reclassification from FVTPL
Reclassification to
held-to-maturity
investments
Reclassification to loans
and receivables
P 22,700,044
40,474,698
1,975,773
( 27,631,449)
(
433,258)
2009
Parent
2008
P 54,625,359 P 21,077,161 P 50,512,612
45,142,502
37,920,438
44,793,212
(
2,601,102)
1,807,029 (
2,328,671)
( 50,132,293) ( 27,357,821) ( 49,794,322)
(
31,903 ) (
464,950) (
31,903)
(
271,027) (
2,492,453) (
472,665) (
2,521,051)
(
430,351)
-
3,996,941 (
527,223
248,706)
-
3,996,941
-
-
(
20,373,408 )
-
(
17,588,835)
-
(
5,960,822 )
-
(
5,960,822)
P 36,384,430 P 22,700,044 P 32,260,486 P 21,077,161
The changes in fair values of available-for-sale securities which were recognized under
other comprehensive income and directly to capital funds amounted to fair value gains
of P1,975,773 in 2009, and fair value losses of P2,601,102 in 2008 and P1,875,304 in
2007 in the consolidated financial statements; and fair value gains of P1,807,029 in
2009 and fair value losses of P2,328,671 in 2008 and P1,769,582 in 2007 in the Parent
Company financial statements.
Certain government securities are deposited with BSP as security for the Group’s
faithful compliance with its fiduciary obligations in connection with its trust operations
(see Note 29).
- 73 -
In 2008, the Group reclassified financial assets at FVTPL to AFS in accordance with
PFRS. The carrying value and fair value of the securities at the date of reclassification
amounted to P527,223. Had no reclassification been made, the Group would have
earned additional fair value gain of P197,156 for the year ended December 31, 2009
and incurred additional loss of P232,726 for the year ended December 31, 2008. The
carrying amount of the securities as of December 31, 2009 and 2008 amounted to
P660,391 and P294,497, respectively, in the consolidated financial statements.
Also in 2008, the Group reclassified private and government debt securities with
carrying value at the date of reclassification of P20,373,408 to held-to-maturity
investments in accordance with FRSPB (see Note 9). In addition, the Parent Company
reclassified CDOs and CLNs that are linked to ROP bonds, with an aggregate carrying
value of P5,960,822 to loans and receivables (see Note 11).
11.
LOANS AND RECEIVABLES
This account consists of the following:
Consolidated
2009
2008
Loans and discounts
Customers’ liabilities on
acceptances, import
bills and trust receipts
Bills purchased
Securities purchased under
reverse repurchase
agreements
2008
P 118,502,226 P 113,607,267 P 85,264,805 P 78,727,671
Interbank loans receivables
Credit card receivables
Unquoted debt securities
classified as loans
Accrued interest receivable
Accounts receivable
Sales contract receivables
Miscellaneous
Allowance for
impairment (see Note 16)
Unearned discount
Prompt payment discount
Reserves for credit card
Parent
2009
(
(
(
(
11,643,552
2,211,973
15,883,708
2,106,007
11,643,552
2,187,432
15,883,708
2,085,789
646,000
133,003,751
24,358,198
8,187,585
488,000
132,084,982
23,598,507
8,256,256
99,095,789
22,958,198
5,523,286
96,697,168
22,875,621
5,497,159
5,689,068
2,249,005
1,315,520
1,216,938
11,212
176,031,277
6,621,885
2,205,587
1,921,735
1,196,328
52,721
175,938,001
5,689,068
1,938,864
876,248
701,523
136,782,976
6,621,885
1,955,747
1,247,660
767,117
30,979
135,693,336
7,465,624) (
2,096,986) (
368,137) (
1,208,113) (
7,943,278) (
2,149,136) (
363,597)
1,079,083) (
4,433,774) (
173,171) (
442,695) (
4,943,286)
155,933)
301,911 )
P 164,892,417 P 164,402,907 P 131,733,336 P 130,292,206
Loans and receivables bear average interest rates of 2% to 11% per annum in 2009,
3.4% to 9.7% in 2008 and 3.4% to 10.5% in 2007 in the consolidated and Parent
Company financial statements.
- 74 -
Included in these accounts in the consolidated financial statements are NPLs
amounting to P6,137,804 (net of allowance of P1,687,007) as of the end of 2009 and
P3,930,841 (net of allowance of P1,799,778) as of the end of 2008, and in the Parent
Company financial statements amounting to P4,764,124 (net of allowance of
P1,520,843) as of the end of 2009 and P3,141,378 (net of allowance of P1,352,750) as
of the end of 2008.
Loans and receivables amounting to P2,354,515 and P10,729,055 as of
December 31, 2009 and 2008, respectively, both in the consolidated and Parent
Company financial statements are assigned as collateral to BSP as security for
rediscounting availments (see Note 18).
The concentration of credit as to industry follows:
Consolidated
2008
2009
Other community, social and
personal activities
P
Manufacturing (various industries)
Real estate, renting and other
related activities
Electricity, gas and water
Wholesale and retail trade
Transportation and communication
Financial intermediaries
Hotels and restaurants
Agriculture, fishing and forestry
Others
43,847,227
27,761,730
P 46,179,659
30,281,180
17,077,568
10,699,371
10,604,224
9,608,088
3,597,550
1,539,718
1,069,909
7,198,366
14,293,382
9,294,329
10,165,040
7,503,127
7,481,284
1,176,779
663,740
5,046,462
P 133,003,751
P 132,084,982
2009
P
Parent
13,959,662
27,686,254
P
16,286,233
10,370,757
9,125,960
9,606,957
2,944,300
1,539,241
659,821
6,916,604
P
99,095,789
2008
13,923,573
30,261,981
13,733,296
9,097,739
9,002,426
7,503,127
7,456,284
1,176,779
299,469
4,242,494
P
96,697,168
The BSP considers that loan concentration exists when the total loan exposure to a
particular industry exceeds 30% of the total loan portfolio above plus the outstanding
credit card receivables and interbank loans receivables.
The breakdown of total loans as to secured and unsecured follows:
Consolidated
2008
2009
Secured:
Real estate mortgage
Deposit hold-out
Chattel mortgage
Other securities
Unsecured
2009
Parent
2008
P 47,178,874
6,489,238
12,898,454
12,523,486
79,090,052
53,913,699
P 47,739,934 P
11,731,613
12,549,276
6,207,297
78,228,120
53,856,862
27,930,851
5,862,811
123,215
11,948,486
45,865,363
53,230,426
P
26,646,468
11,123,949
148,981
5,744,296
43,663,694
53,033,474
P 133,003,751
P 132,084,982 P
99,095,789
P
96,697,168
- 75 -
A reconciliation of the allowance for impairment at the beginning and end of 2009 and
2008 is shown below.
Consolidated
2008
2009
Balance at beginning of year
Provisions during the year
Recovery of impairment losses
Accounts written off/others
2008
P
7,943,278 P
1,748,355
86,424 ) (
2,139,585 ) (
9,935,036 P
1,928,086
1,054,541)
2,865,303) (
4,943,286 P
1,156,333
(
1,665,845 ) (
5,812,828
1,830,597
1,000,000 )
1,700,139 )
P
7,465,624
7,943,278 P
4,433,774
4,943,286
(
(
Balance at end of year
Parent
2009
P
P
The maturity profile of loans follows:
Consolidated
2008
2009
Due within one year
Due beyond one year
Parent
2009
2008
P 43,608,195
89,395,556
P 52,497,992 P
79,586,990
42,076,816
57,018,973
P
49,816,491
46,880,677
P 133,003,751
P 132,084,982 P
99,095,789
P
96,697,168
11.1 Reclassification to Loans and Receivables
In 2008, the Parent Company reclassified CLNs that are linked to ROP bonds and
certain collateralized debt obligations (CDOs) previously recognized as
Available-for-sale securities to Loans and Receivables with aggregate carrying amount
of P5,960,822, and embedded derivatives with negative fair value amounting to
P307,836, at reclassification date (see Notes 8 and 10). As of December 31, 2009 and
2008, the carrying amounts and the corresponding fair values of the reclassified CLNs
linked to ROP bonds (including embedded derivatives) and the CDOs are presented
below:
CLNs:
From AFS – host contract P
From FVTPL
– embedded derivative
CDOs – from AFS
Less allowance for
impairment
(
Carrying
Amount
2009
5,227,068
462,000
5,689,068
462,000 )
P
5,227,068
P
Fair
Value
Carrying
Amount
4,814,729
P
468,600
5,283,329
P 5,283,329
2008
6,028,297
P
(
593,588
6,621,885
(
5,539,418
6,295,730
952,361)
99,792
5,443,161
1,082,467 )
P
Fair
Value
P
5,443,161
- 76 -
The effective interest at reclassification date ranges from 4.9% to 10.5% and 5.0% to
8.8% for CLNs and CDOs, respectively. The unrealized fair value losses that should
have been recognized in the Group’s capital funds had the CLNs and CDOs not been
reclassified to Loans and Receivables amounted to P729,270 and nil, respectively,
as of December 31, 2009, and P134,962 and P375,408, respectively, as of
December 31, 2008. Had the embedded derivatives not been reclassified by the Parent
Company, interest income on loans and receivables would have decreased by P20,721
in 2009 and P7,477 in 2008 and the additional trading gains to be recognized in profit
or loss amounted to P1,420,959 for the year ended December 31, 2009, and additional
trading losses amounted to P644,524 from the date of reclassification to
December 31, 2008.
11.2 Special Purpose Vehicle (SPV) Transactions
In accordance with the provisions of Republic Act (RA) No. 9182 (the SPV Act) and
BSP Resolution No. 135, the Parent Company entered into either “sale and purchase”
or “asset sale” agreements with SPVs, namely:
•
New Pacific Resources Management (SPV-AMC), Inc. (NPRMI) on May 14, 2008
and February 26, 2007,
•
Philippine Investments One, Inc. (PIOI) on August 25, 2004 and April 12, 2005,
•
Star Two (SPV-AMC), Inc. (Star Two) on November 15, 2006,
•
Global Ispat Holdings and Global Steelworks International (collectively referred
herein as the Global SPVs) on October 15, 2004, and
•
Asian Pacific Recoveries (SPV-AMC) Corporation (Asian Pacific Recoveries) on
February 21, 2005.
The agreements cover the transfer of specific NPAs, consisting of NPLs and real and
other properties acquired (ROPA; presented as Investment Property), amounting to
P50,728 in 2008 and P1,698,558 in 2007 to NPRMI; P3,770,948 and P1,433,228 in
2004 and 2005, respectively to PIOI; P3,878,781 in 2006 to Star Two; P685,561 to
Global SPVs in 2004; and P2,070,064 to Asian Pacific Recoveries in 2005. The
agreement with the Global SPVs was made in conjunction with other participating
banks. The agreement with Star Two also covers the sale of NPAs not eligible under
the SPV Act amounting to P486,142.
The Certificates of Eligibility, obtained for purposes of availing of the tax exemptions
and privileges on the NPLs transferred and ROPAs sold, were completely issued by the
BSP to the Parent Company on various dates in 2004, 2005, 2007 and 2008.
The significant terms and conditions of the “asset sale” agreement with NPRMI and
the “sale and purchase” agreements with PIOI, among others, follow:
•
The SPVs shall issue 10-year subordinated/SPV notes in exchange for the NPLs
transferred. The issuance of the subordinated/SPV notes constitutes full
settlement for the NPLs transferred.
- 77 -
•
The subordinated/SPV notes are subordinated in priority of payment to the senior
notes and any other working capital notes of the SPVs.
•
The amount and schedule of payment of the subordinated/SPV notes shall be
contingent and dependent on the amount and timing of collections to be made by
the SPVs on the NPLs transferred, subject to the rights and privileges of the SPVs’
other creditors.
In addition, the SPV note issued by PIOI to the Parent Company relative to the
April 12, 2005 “sale and purchase” agreement shall have a maturity of 10 years.
Interest shall accrue on the amount of the aggregate allocated loan asset amount and
shall be payable for each quarter in arrears in reckoning date at an interest rate equal to
the 91-day rate for Philippine treasury bills per annum.
The total consideration for the sale of NPAs (for eligible and not eligible under the
SPV Act) to Star Two amounted to P1,190,410. Based on the terms and conditions of
the “asset sale and purchase” agreement with Star Two, the risk and rewards of the
ownership of the sold NPAs was transferred completely to Star Two. The asset sale
and purchase agreement also requires Star Two to pay an earnest money deposit
equivalent to 20% of the total purchase price within five days after the bid award date.
The 20% earnest money deposit amounting to P238,082 was received by the Parent
Company in November 2006. The remaining outstanding balance of the purchase
price amounting to P952,328 was subsequently collected on February 9, 2007.
The significant terms and conditions of the Parent Company’s “sale and purchase”
agreement with the Global SPVs, among others, follow:
•
The SPVs shall pay cash up front and issue 8-year zero-coupon subordinated notes
to the Parent Company and other participating banks in exchange for the NPLs
transferred. The issuance of the subordinated notes and the upfront cash payment
to the Parent Company constitute full settlement for the NPLs transferred.
•
The subordinated notes shall be issued to the Parent Company and other
participating banks in two tranches, namely, Tranche A and Tranche B. The
subordinated notes shall be secured by a first-ranking mortgage and security interest
over the plant assets of the Global SPVs and standby letters of credit to be
delivered by the Global SPVs from time to time in accordance with the agreement
subject to the rights and privileges of the SPVs’ other creditors.
•
The amount and schedule of payment of the subordinated notes to the Parent
Company and other participating banks shall be based on the repayment schedule
set forth in the “sale and purchase” agreement.
The significant terms and conditions of the Parent Company’s “sale and purchase”
agreement with Asian Pacific Recoveries, among others, follow:
•
The SPV shall pay P20,000 as bid deposit.
•
On closing date, the SPV shall pay the Parent Company the purchase price balance
by wire transfer in full settlement of the NPLs transferred.
- 78 -
•
The SPV acknowledges and agrees that if there is occurrence of a default by any
obligor under any loan document, SPV will remain bound by all terms and
conditions to purchase all the loans in the transaction without any adjustment or
alteration in the purchase price unless the Parent Company removes loans from the
transaction prior to closing.
In relation to such transactions, the BSP has informed the Parent Company that the
allowance for impairment amounting to P23,280 and P289,994 on the NPAs
transferred to NPRMI in 2008 and 2007, respectively; P1,474,440 on the NPAs
transferred to Star Two in 2006, P2,225,558 and P163,814 to PIOI and the Global
SPVs, respectively, in 2004; and P1,211,332 to PIOI and P245,477 to Asian Pacific
Recoveries in 2005, shall be “freed” and used only for general loan loss provision
and/or for specific provision of loan accounts that may be classified in the future.
In 2008, the Parent Company reversed portion of the freed allowance amounting to
P1,000,000 by charging it to the current operations, instead of to Surplus. Portion of
the freed allowance was charged against amortization for deferred charges
(as discussed below) totaling P536,684 in 2008 and P1,077,401 in 2007 and prior years.
In 2006, the Parent Company charged portion of the freed allowance for the write-off
of certain impaired credit card receivables amounting to P2,593,440. FRSPB, however,
requires the derecognition of the related allowance for impairment of the NPAs
transferred that qualified for derecognition at the time of sale.
The face value of the subordinated/SPV notes issued by NPRMI in 2008 amounted to
P48,192 and P1,688,902 in 2007; subordinated/SPV notes issued by PIOI in 2005
amounted to P1,418,896 and P3,770,948 in 2004; the SPV note issued by Global SPVs
amounted to P548,930 in 2004. In addition to the subordinated notes, the Global SPV
also paid cash to the Parent Company amounting to P27,439 in 2004; PIOI and Asian
Pacific Recoveries paid cash amounting to P14,332 and 427,564, respectively, for the
2005 transfer; and NPRMI paid cash amounting to P2,536 in 2008 and P9,656 in 2007.
In recording the transfers of the NPAs, the Parent Company derecognized the NPAs
from its financial records and recorded the subordinated/SPV notes as part of
Available-for-sale Securities (unquoted debt securities) at their fair values as of the dates
of issuance. However, one of the significant conditions stated in the terms of the
subordinated/SPV notes from NPRMI and PIOI is that the amount and timing of
payment of the subordinated/SPV notes are dependent on the collections to be made
by NPRMI and PIOI on the NPAs transferred. Under FRSPB, this is indicative of an
incomplete transfer of the risks and rewards of ownership of the NPAs from the
Parent Company to NPRMI and PIOI. FRSPB requires that: (a) the entity retaining
majority of the residual risks and rewards of ownership of certain assets of SPV should
reflect in its financial statements its proportionate interest in such SPV; and (b) an
entity should substantially transfer all the risks and rewards of ownership of an asset
before such asset could be derecognized.
- 79 -
As permitted under BSP Resolution No. 135, the Parent Company has deferred over
10 years the recognition of the required additional allowance for impairment as
determined from the NPAs transferred to PIOI, and the losses determined from the
NPAs transferred to Star Two, Global SPVs and Asian Pacific Recoveries, totaling to
P1,335,149 in 2006, P1,604,587 in 2005 and P1,955,768 in 2004. The schedule of
amortization of the required additional allowance for impairment and losses as
prescribed under BSP Resolution No. 135 shall be 5% for the first three years,
10% for the next four years, and 15% for the remaining three years. In accordance
with BSP Resolution No. 135, total amortization recognized by the Parent Company
amounted to P834,633 (charged to Surplus) for the year ended December 31, 2009 and
P745,342 (P536,684 of which was charged against the “freed” allowance for
impairment while the remaining balance of P208,658 was charged to profit or loss) for
the year ended December 31, 2008. FRSPB, however, requires the full recognition of
the required additional allowance for impairment and the losses against current
operations in the period such impairment and losses were determined instead of
capitalizing it as deferred charges and amortizing it over future periods.
Had the Parent Company (i) reflected in its financial statements its interest in NPRMI
and PIOI and not derecognized the NPAs transferred; (ii) derecognized the allowance
for impairment related to the NPAs transferred that qualified for derecognition at the
time of sale; and, (iii) not deferred the recognition of the required additional allowance
for impairment and the losses determined from the NPAs transferred in accordance
with FRSPB, the gross balance of the Group’s and Parent Company’s Loans and
Receivables - Net account would have decreased by P188,088 in 2009 and 2008;
Available-for-sale Securities would have decreased by P1,423,820 in 2009 and 2008;
Investment Property would have increased by P1,436,012 in 2009 and 2008;
Deferred Charges (part of Other Resources account in Note 15) would have decreased
by P7,047,308 and P7,844,385 in 2009 and 2008, respectively; Other Liabilities would
have increased by P12,192 and P26,524 in 2009 and 2008, respectively, Surplus would
have decreased by P7,047,308 in 2009 and P8,264,501 in 2008, and net income would
have decreased by P791,342 in 2008.
- 80 -
12.
INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The components of the carrying values of investments in subsidiaries and associates are
as follows:
Consolidated
Effective
Percentage of
Ownership
Acquisition costs of associates:
RRC
RLI
SPC
RHI
HCPI
LIPC
YCS
GLFAC
2009
34.80
49.00
26.50
4.71
12.88
35.00
40.00
20.00
P
1,947,320
921,076
120,095
101,665
91,050
52,500
5,070
-
2008
P
3,491,390
3,238,776
Equity in net earnings (losses):
Balance at beginning of year
Equity in net earnings for the year
Equity earnings in associate sold
Dividends
Balance at end of year
294,466
206,857
39,428)
217,904) (
243,991
(
(
Share in additional paid-in capital of an
associate
Revaluation increment in property of an
associate
Allowance for impairment (see Note 16)
(
P
1,999,934
921,076
120,095
101,665
91,050
52,500
5,070
200,000
-
120,992
404,192
230,718 )
294,466
3,482,767
3,785,856
532,583
532,583
58,917
4,074,267
52,500) (
28,243
4,346,682
52,500 )
4,021,767
4,294,182
P
- 81 Parent
Effective
Percentage of
Ownership
Subsidiaries:
RSB
RCBC Capital
Bankard
Merchants Bank
NPHI
RCBC Forex
RCBC Telemoney Europe
RCBC North America*
RCBC IFL
100.00
99.96
66.58
96.38
100.00
100.00
100.00
100.00
99.99
Associates:
RRC
RLI
SPC
HCPI
LIPC
YCS
GLFAC
25.00
49.00
26.50
12.88
35.00
40.00
20.00
Allowance for impairment (see Note 16)
Deposit for future stock subscription
2009
P
3,190,000
2,230,673
1,000,000
492,389
388,431
150,000
71,796
59,896
58,013
7,641,198
2008
P
1,947,320
921,076
120,095
91,050
52,500
5,070
3,137,111
1,999,934
921,076
120,095
91,050
52,500
5,070
200,000
3,389,725
10,778,309
252,500) (
175,000
(
P
10,700,809
3,190,000
2,230,673
1,000,000
493,039
150,000
16,055
36,046
58,013
7,173,826
10,563,551
252,500 )
P
10,311,051
*Includes the 25.29% and 31% ownership of RCBC IFL in RCBC North America in 2009 and 2008,
respectively.
The following table presents the audited financial information (except for HCPI and
GLFAC for which 2009 and 2008 information were based on unaudited financial
statements) on the significant associates as of and for the years ended
December 31, 2009 and 2008:
Assets
Liabilities
Revenues
Income
(Loss)
2009:
RRC
RLI
HCPI
P 8,806,554 P 2,626,142 P 1,283,114 P
847,630
199,964
1,252 (
3,754,622
1,522,563
13,148,182
459,236
6,363)
30,925
2008:
RRC
RLI
GLFAC
P 9,060,000 P 2,608,410 P 1,154,322 P
1,027,227
175,198
38,747 (
3,210,333
2,148,668
617,376
335,398
17,750)
26,981
- 82 -
The Parent Company, under a shareholders agreement, agreed with another
stockholder of HCPI, to commit and undertake to vote as a unit the shares of stock
thereof, which they proportionately own and hold, and to regulate the conduct of the
voting and the relationship between them with respect to their exercise of their voting
rights. As a result of this agreement, the Parent Company is able to exercise significant
influence over the operating and financial policies of HCPI. Thus, HCPI has been
accounted for using the equity method.
RCBC Capital entered into an agreement with another stockholder of RHI to commit
and undertake to vote as a unit the shares of stock of RHI, representing 54.68% of the
outstanding capital stock thereof, which they own and hold, to regulate the conduct of
the voting and the relationship between them with respect to the exercise of the voting
rights. Thus, notwithstanding the RCBC Capital’s ownership of only 4.71% in RHI, its
investment is carried under the equity method of accounting.
On November 27, 2006, as part of its corporate restructuring strategy, the Parent
Company’s BOD approved the capital infusion of P1 billion each into Bankard and
RCBC Capital. The Parent Company, in its letter to the BSP dated January 9, 2007,
requested for the approval of such capital infusion by way of conversion of Bankard’s
and RCBC Capital’s debt to the Parent Company into equity which was approved by
BSP on February 23, 2007. Thereafter, on January 4, 2008, the application for increase
in Bankard’s authorized capital to cover the Parent Company’s capital infusion was
approved by the SEC. Starting 2008, with the capital infusion (previously classified as
Deposit for Stock Subscription) applied against subscription to Bankard’s capital stock,
the Parent Company now holds direct percentage interest of 66.58%. Prior to 2008
and the additional capital infusion made by the Parent Company to Bankard, the Parent
Company owns 59% indirectly of Bankard’s net assets through RCBC Capital. As a
result of the capital infusion, the Parent Company’s interest in Bankard’s net assets
increased to 91.69% (representing 66.58% direct ownership and 25.11% indirect
ownership through RCBC Capital). This change in ownership with Bankard did not
result on gaining or losing control. In accordance with the relevant accounting
standards, Parent Company and Non-controlling Interest (other than RCBC Capital)
share in Bankard’s net assets were adjusted to reflect the changes in their relative
interest. The difference between the amount of additional investment made by the
Parent Company and the adjustment in the Non-controlling Interest share in Bankard’s
net assets amounting to P240,889, was recognized directly in equity and presented as
Other Reserves in the statements of changes in capital funds for the years ended
December 31, 2009 and 2008.
After a series of earlier consultations and discussions among the parties and BSP, the
Parent Company entered into a formal Reorganization Agreement and Deed of
Assignment of Rights with PMMIC and RLI on December 26, 2007 to transfer RLI’s
ownership with RRC to the Parent Company and PMMIC by 25% and 15%,
respectively, in exchange of partial and full settlement of RLI’s obligations with the
Parent Company and PMMIC, respectively. The Parent Company recorded its equity
investment with RRC by the carrying amount of loan paid and the interest income
accrued which amounted to P2,071,777. This was earlier approved by the BSP on
September 27, 2007 through MB Resolution No. 1097. RRC redeemed a certain
percentage of its preferred shares which resulted to the decrease in the Parent
Company’s cost of investment by P52,614 and P71,843 in 2009 and 2008, respectively.
- 83 -
On October 30, 2007, the Parent Company’s BOD approved the acquisition of 96.38%
interest in Merchants Bank for P493,039, inclusive of capital gains tax, property claims
and buyer’s tax claims which was temporarily held in escrow upon determination of the
final amount of tax claims that will be paid by Merchants Bank through the Parent
Company. This investment cost was reduced to P492,389 in 2009 as a result of the tax
claims amounting to P650 which was returned to the Parent Company in 2009.
On May 25, 2009, the BOD of the Parent Company approved the reclassification of its
investment in NPHI with carrying amount of P388,431 from Investment Property
account to Investments in Subsidiaries and Associates account in accordance with BSP
Circular No. 520 (see Note 14).
On February 12 and 13, 2009, an agreement was executed between the Parent
Company and JPL whereby the Parent Company infused an initial amount of P125,000
in JPL as stock subscription which resulted in the Parent Company’s 33% ownership
and full management control of JPL . The Parent Company was also granted the
option to own the remaining 66% of the outstanding shares of the JPL by way of
future equity infusion into JPL of P125,000 on February 2010 and another P125,000 on
February 2011 bringing the total equity investment of the Parent Company to P375,000
or 99% by 2011. In March 2009, the Parent Company made an additional investment
amounting to P50,000. On December 29, 2009, BSP approved JPL’s proposed
amendments on its articles of incorporation which includes, among others, the
reduction of the par value of JPL’s common stock from P100 per share to
P1.00 per share. These amendments were subsequently approved by the SEC on
March 4, 2010. On March 16, 2009, JPL’s BOD approved the increase in its
authorized capital stock. As of December 31, 2009, such proposed increase is pending
approval by the SEC. As of December 31, 2009, the Parent Company has full
management control of JPL and, accordingly, recognized its full stock subscription to
JPL (net of subscription payable amounting to P200,000) and presented as Deposit for
future Stock Subscription (presented under Investments in Subsidiaries and Associates
account) pending approval by the SEC of the proposed increase in authorized capital
stock of JPL.
On October 12, 2009, the Parent Company sold its 20% shareholdings with GLFAC
for the amount of P211,488 to Grepalife in accordance with the sale and purchase
agreement entered into between the two parties.
- 84 -
13.
BANK PREMISES, FURNITURE, FIXTURES AND EQUIPMENT
The gross carrying amounts and accumulated depreciation, amortization and
impairment at the beginning and end of 2009 and 2008 are shown below.
Consolidated
Land
December 31, 2009
Cost
Accumulated
depreciation,
amortization
and impairment
P
Net carrying amount
December 31, 2008
Cost
Accumulated
depreciation,
amortization
and impairment
Net carrying amount
January 1, 2008
Cost
Accumulated
depreciation,
amortization,
and impairment
Net carrying amount
Buildings
1,438,279
-
Furniture,
Fixtures and
Equipment
P
(
1,736,213
P
698,569 ) (
3,466,248
Leasehold
Rights and
Improvements
P
Total
991,279
2,108,646 ) (
P
70,683 ) (
7,632,019
2,877,898 )
P
1,438,279
P
1,037,644
P
1,357,602
P
920,596
P
4,754,121
P
1,102,951
P
1,579,867
P
2,941,206
P
956,548
P
6,580,572
(
10,831 ) (
616,060 ) (
1,878,153 ) (
45,759 ) (
2,550,803 )
P
1,092,120
P
963,807
P
1,063,053
P
910,789
P
4,029,769
P
1,074,222
P
1,494,050
P
2,420,036
P
799,484
P
5,787,792
P
(
1,074,222
533,786 ) (
P
960,264
1,735,538 ) (
P
684,498
14,652 ) (
P
784,832
2,283,976 )
P
3,503,816
Parent
Land
December 31, 2009
Cost
Accumulated
depreciation and
amortization
Net carrying amount
December 31, 2008
Cost
Accumulated
depreciation and
amortization
Net carrying amount
January 1, 2008
Cost
Accumulated
depreciation and
amortization
Net carrying amount
P
Buildings
693,259
-
Furniture,
Fixtures and
Equipment
P
(
1,382,220
P
539,819 ) (
2,645,002
Leasehold
Rights and
Improvements
P
1,615,940 )
Total
817,905
-
P
(
5,538,386
2,155,759 )
P
693,259
P
842,401
P
1,029,062
P
817,905
P
3,382,627
P
668,740
P
1,288,176
P
2,195,692
P
821,491
P
4,974,099
-
(
484,029 ) (
1,452,442 )
-
(
1,936,471 )
P
668,740
P
804,147
P
743,250
P
821,491
P
3,037,628
P
678,438
P
1,269,650
P
1,821,953
P
731,406
P
4,501,447
P
837,726
P
2,713,974
P
(
678,438
431,924 ) (
1,355,549 )
P
466,404
P
731,406
(
1,787,473 )
- 85 -
A reconciliation of the carrying amounts at the beginning and end of 2009 and 2008, of
bank premises, furniture, fixtures and equipment is shown below.
Consolidated
Land
Balance at
January 1, 2009,
net of accumulated
depreciation,
amortization,
and impairment
P
Additions
Disposals
(
Depreciation and
amortization charge
for the year
Balance at
December 31, 2009,
net of accumulated
depreciation,
amortization,
and impairment
P
Balance at
January 1, 2008,
net of accumulated
depreciation,
amortization,
and impairment
P
Additions
Disposals
(
Depreciation and
amortization charge
for the year
Impairment loss
(see Note 16)
(
Balance at
December 31, 2008,
net of accumulated
depreciation,
amortization,
and impairment
P
Buildings
1,092,120 P
365,735
19,576 ) (
-
(
1,438,279
P
80,637 ) (
325,941 ) (
P
1,357,602
72,234 ) (
10,831 ) (
1,092,120
1,063,053 P
677,523
57,033 ) (
960,264 P
96,851
15,988 ) (
(
127,219 ) (
P
4,029,769
1,340,431
82,282 )
533,797 )
P
920,596
P
4,754,121
684,498 P
650,963
29,091 )
784,832
218,287
P
(
3,503,816
1,035,459
85,708 )
92,330 ) (
407,881 )
(
15,917 )
-
963,807
Total
910,789 P
137,050
24 ) (
-
243,317 ) (
5,086 )
P
Leasehold
Rights and
Improvements
963,807 P
160,123
5,649 ) (
1,037,644
1,074,222 P
69,358
40,629 ) (
-
Furniture,
Fixtures and
Equipment
-
1,063,053
P
910,789
P
4,029,769
Parent
Land
Balance at
January 1, 2009,
net of accumulated
depreciation and
amortization
Additions
Disposals
Depreciation and
amortization charge
for the year
Balance at
December 31, 2009,
net of accumulated
depreciation and
amortization
P
Buildings
668,740
24,519
P
-
P
804,147
94,044
-
-
(
693,259
Furniture,
Fixtures and
Equipment
P
(
55,790 ) (
P
842,401
P
Leasehold
Rights and
Improvements
Total
743,250 P
550,782
50,167 ) (
821,491 P
102,971
24 ) (
214,803 ) (
106,533 ) (
1,029,062
P
817,905
3,037,628
772,316
50,191 )
377,126 )
P
3,382,627
- 86 Parent
Land
Balance at
January 1, 2008,
net of accumulated
depreciation and
amortization
P
Additions
Disposals
(
Depreciation and
amortization charge
for the year
Balance at
December 31, 2008,
net of accumulated
depreciation and
amortization
P
Buildings
678,438 P
650
10,348 ) (
-
837,726 P
25,093
4,455 ) (
(
668,740
Furniture,
Fixtures and
Equipment
466,404 P
455,382
22,192 )
54,217 ) (
P
804,147
Leasehold
Rights and
Improvements
731,406
168,023
743,250
(
2,713,974
649,148
36,995 )
77,938 ) (
288,499 )
-
156,344 ) (
P
Total
P
P
821,491
P
3,037,628
In October 2009, the Parent Company, RSB and Bankard entered into an agreement
with Grepalife and Malayan Insurance Company, Inc., all related parties, to form a
consortium for the pooling of their resources and establishment of an unincorporated
joint venture for the construction and development of high rise, mixed use
commercial/office building. The initial cash contribution of the Parent Company
and Bankard to the joint venture amounted to P40,499 and P24,290 as of
December 31, 2009, respectively, and the land costing P315,000 were recorded as part
of Buildings and Land accounts (see Note 30).
Under BSP rules, investments in bank premises, furniture, fixtures and equipment
should not exceed 50% of the respective unimpaired capital of the Parent Company
and RSB. As of December 31, 2009 and 2008, the Parent Company and RSB have
satisfactorily complied with this BSP requirement.
14.
INVESTMENT PROPERTY
Investment property consists of various land and building acquired through foreclosure
or dacion as payment of outstanding loans by the borrowers. A reconciliation of the
carrying amounts at the beginning and end of 2009 and 2008, and the gross carrying
amounts and the accumulated depreciation and impairment of investment property are
as follows:
Consolidated
2008
2009
Balance at January 1, net of accumulated
depreciation and impairment
Additions
Disposal
Reclassification to investment
in subsidiaries
Write-off
Depreciation and impairment
charges for the year
Balance at December 31, net of
accumulated depreciation
and impairment
P
2009
(
7,387,613 P
1,825,943
777,449) (
(
(
3,092,154)
25,895) (
244,779)
(
(
388,431)
25,365)
(
251,515) (
128,833)
(
108,708) (
P
5,066,543
P
7,761,435
1,338,653
1,338,863)
(
3,500,460 P
222,812
327,503) (
7,387,613
P
Parent
P
2,873,265 P
2008
3,887,545
563,040
886,704 )
63,421 )
3,500,460
- 87 Consolidated
2008
2009
December 31
Cost
Accumulated depreciation
and impairment (see Note 16)
Net carrying amount
P
(
P
6,546,189
P
1,479,646) (
5,066,543
9,013,278
1,625,665)
P
7,387,613
Parent
2009
P
(
P
3,661,410
2008
P
788,145) (
2,873,265 P
4,354,687
854,227 )
3,500,460
The fair value of investment property as of December 31, 2009 and 2008, based on the
available appraisal values, amounted to P8,978,128 and P11,025,506, respectively, for
the Group; and P5,484,871 and P5,670,707, respectively, for the Parent Company.
On May 25, 2009, the BOD of the Parent Company approved the reclassification of its
investment in NPHI with carrying amount of P388,431 from Investment Property
account to Investments in Subsidiaries and Associates account (see Note12) in
accordance with BSP Circular No. 520. This resulted into the consolidation of NPHI’s
assets, liabilities and net income in the Group’s financial statements as of and for year
ended December 31, 2009.
In November 2003, RSB entered into a memorandum of Agreement (MOA) with
certain borrowers for the settlement of their indebtedness with RSB amounting to
P4.1 billion through dacion of certain real properties. Under the MOA, the transfer of
the properties may be effected through the creation of special purpose companies
(SPCs). On June 17, 2004, RSB entered into another MOA setting the guidelines in
creating the SPC as well as the ultimate assignment to RSB of the shares of stock of the
SPCs. On various dates in 2005 and 2004, certain SPCs were incorporated and created,
covering certain real properties with carrying values of P2,472,830 and P1,938,234 in
2005 and 2004, respectively, being assigned to the SPCs. Moreover, the shares of stock
of certain SPCs were transferred to RSB in 2005 and 2004. In 2008, the remaining
properties covered by the MOA have been transferred to specific SPCs, and the
ultimate assignment of the corresponding shares of stock of these specific SPCs to RSB
has been effected. There were no new SPCs that were incorporated nor shares of stock
that were transferred to RSB in 2006 to 2009. Prior to 2009, the real properties,
although assigned to the incorporated SPCs or will be incorporated SPCs, are
recognized by RSB as part of Investment Property on the basis that the SPCs are
merely transitory holders of the assets while RSB is looking for ways to eventually
dispose of such assets. This treatment is consistent with the letter of the BSP to RSB
in 2005 which emphasized that the dacioned properties be recorded as ROPA-Real
Properties, and which were subsequently reclassified as Investment Property when RSB
transitioned to PFRS. However, in 2009, in accordance with another letter received by
RSB from the BSP dated March 26, 2009, RSB reclassified these investment property
to equity investments, subject to the following conditions: (i) RSB should immediately
dissolve the SPCs once the underlying dacioned real property assets are sold or
disposed; and, (ii) the equity investments in the SPCs shall be disposed of within a
reasonable period not beyond October 5, 2012. The reclassification resulted into
consolidation of the SPCs in the Group’s financial statements. Accordingly, the assets,
liabilities, income and expenses of the SPCs were consolidated in the Group’s financial
statements as of and for the year ended December 31, 2009.
- 88 -
In its meeting on February 19, 2007, the BOD of RSB approved the sale of certain
NPAs to Innovative Property Solutions, Inc. (IPSI), a corporation duly organized and
existing under Philippine laws. An Asset Sale Agreement was executed by both parties
on February 26, 2007 to formalize the sale of the NPAs. Subsequently, in a separate
Accession Agreement dated July 16, 2007, IPSI assigned all its rights and obligations as
the purchaser in the aforementioned Asset Sale Agreement to NPRMI, an SPV entity.
The BSP approved and issued on August 28, 2007 the certificate of eligibility of the
NPAs under the SPV Act of 2002 and transfer/sale of the assets to NPRMI. In
November 2008, RSB completed the obligations as stated under the Asset Sale
Agreement and Accession Agreement to fully consummate the transaction and in
accordance with the provisions of RA No. 9182 (the SPV Act) and BSP Resolution
No. 135, recognized the aforementioned sale. The significant terms and conditions of
the “asset sale” agreement follow:
•
The SPVs shall issue 10-year subordinated/SPV notes in exchange for the NPLs
transferred. The issuance of the subordinated/SPV notes constitutes full settlement
for the NPLs transferred.
•
The subordinated/SPV notes are subordinated in priority of payment to the senior
notes and any other working capital notes of the SPV.
•
The amount and schedule of payment of the subordinated/SPV notes shall be
contingent and dependent on the amount and timing of collections to be made by
the SPVs on the NPLs transferred, subject to the rights and privileges of the SPV’s
other creditors.
In consideration of the sale, RSB received cash amounting to P347 and subordinated
note with a face value of P60,097. One of the significant conditions stated in the terms
of the subordinated/SPV notes from NPRMI is that the amount and timing of
payment of the subordinated/SPV notes are dependent on the collections to be made
by NPRMI on the NPAs transferred. RSB initially recognized the subordinated note as
AFS securities amounting to P60,097 but subsequently provided an allowance for
impairment for the entire amount.
- 89 -
15.
OTHER RESOURCES
Other resources consist of the following:
Consolidated
2009
2008
Deferred charges - net
(see Note 11.2)
Real estate properties for sale
Foreign currency notes
and coins on hand
Goodwill - net
Branch licenses
Prepaid expenses
Returned checks and
other cash items
Assets held-for-sale
Inter-office float items
Unused stationery and supplies
Miscellaneous checks and
other cash items
Miscellaneous (see Note 25)
Accumulated depreciation
Allowance for
impairment (see Note 16)
P
7,359,991
-
1,148,555
425,985
264,429
247,770
1,701,866
426,635
510,866
1,018,118
201,018
154,843
141,195
100,457
91,459
168,469
59,721
154,954
154,776
228,399
90,503
(
12,877
928,935
13,575,438
11,419) (
20,492
919,987
12,057,643
15,270 ) (
12,854
543,869
9,609,528
11,419 ) (
20,487
372,429
10,949,551
15,270)
(
153,975) (
150,280 ) (
122,763 ) (
116,733)
13,410,044
P
2008
8,094,653 P
-
P
7,359,991
2,698,942
Parent
2009
P 11,892,093 P
9,475,346
P
8,094,653
1,494,082
457,683
-
168,465
187,909
153,843
P
10,817,548
Deferred charges mainly represent the unamortized balance of the required additional
allowance for impairment and losses as determined from the asset exchanges of the
Parent Company’s NPAs to certain SPVs; these are amortized over a period of 10 years
in accordance with BSP Resolution No. 135 (see Note 11.2). In addition, this account
also includes the cost of software, net of accumulated amortization. The following
shows the movement in the Group’s Deferred Charges account.
Consolidated
2009
2008
Balance at beginning of year
Additions
Amortization/disposals
Balance at end of year
Parent
2009
2008
P
8,094,653 P
187,057
921,719) (
9,167,132 P
167,089
1,239,568) (
8,094,653 P
187,057
921,719 ) (
9,167,132
167,089
1,239,568 )
P
7,359,991
8,094,653 P
7,359,991
8,094,653
(
P
P
The total amortization pertaining to SPVs amounted to P834,633 and P745,342 for the
years ended December 31, 2009 and 2008, respectively. The Parent Company charged
the amortization for the year ended December 31, 2009 against Surplus. On the other
hand, out of the total amortization of P745,342 for the year ended December 31, 2008,
P536,684 was charged against the “freed” allowance for impairment while P208,658
was charged to profit or loss (see Note 11). The total amortization pertaining to the
computer software amounted to P51,726, P42,247 and P34,067 for the years ended
December 31, 2009, 2008 and 2007, respectively, both for the Group and Parent
Company’s financial statements, respectively.
- 90 -
Real estate properties for sale represent those properties held by SPCs that were
consolidated to the Group’s statement of financial position as of December 31, 2009
(see Note 14).
On May 14, 2009, BSP approved the Parent Company’s acquisition of JPL under the
terms and conditions specified under the Term Sheet dated February 12, 2009 and
Addendum to Term Sheet dated February 13, 2009, executed by the Parent Company
and JPL subject to certain conditions (see Note 12). As a result of this approval to
acquire JPL through capital infusion over three years, the Parent Company recognized
the excess of the total cost of investment over the allocated net assets of JPL
amounting to P264,429 as Branch Licenses in its financial statements.
16.
ALLOWANCE FOR IMPAIRMENT
Changes in the allowance for impairment are summarized as follows:
Consolidated
2009
2008
Notes
Balance at beginning of year
Loans and receivables
Available-for-sale securities
Investment in subsidiaries
and associates
Bank premises
Investment property
Other resources
10
7,943,278
811,207
P
52,500
18,911
963,466
150,280
9,939,642
12
13
14
15
Provisions during the year
Recovery of impairment losses
Charge-offs during the year
Balance at end of year
Loans and receivables
Available-for-sale securities
Investment in subsidiaries
and associates
Bank premises
Investment property
Other resources
P
11
(
(
11
10
12
13
14
15
P
9,935,036 P
779,304
52,500
1,244,281
369,225
12,380,346
Parent
2009
4,943,286
811,207
2008
P
5,812,828
779,304
252,500
429,183
116,733
6,552,909
252,500
491,015
174,553
7,510,200
2,329,616
86,424) (
2,319,269) (
2,053,033
1,054,541)
3,439,196) (
1,683,463
(
1,725,610) (
1,830,597
1,000,000)
1,787,888)
7,465,624
1,336,264
7,943,278
811,207
4,433,774
1,276,157
4,943,286
811,207
52,500
855,202
153,975
52,500
18,911
963,466
150,280
252,500
425,568
122,763
252,500
429,183
116,733
9,863,565
P
9,939,642 P
6,510,762
P
6,552,909
- 91 -
17.
DEPOSIT LIABILITIES
The following is the breakdown of deposit liabilities:
Consolidated
2009
2008
Demand
Savings
Time
2009
Parent
2008
P 11,034,257
93,571,654
115,671,983
P 11,125,069 P
75,738,446
109,363,471
8,535,205
81,165,706
90,852,468
P
8,392,524
66,269,393
84,267,161
P 220,277,894
P 196,226,986 P
180,553,379
P
158,929,078
The maturity profile of the deposit liabilities follow:
Consolidated
2009
2008
Within one year
Beyond one year,
within five years
Beyond five years
P 212,118,663
P 191,875,263 P
8,158,163
1,068
P 220,277,894
4,351,723
P 196,226,986 P
Parent
2009
2008
176,370,989
P
4,182,390
180,553,379
158,739,468
189,610
-
P
158,929,078
Deposit liabilities are in the form of savings, demand and time deposit accounts with
annual interest rates of 0.5% to 4.5% in 2009, 0.5% to 5% in 2008 and 0.5% to 4.25%
in 2007. Deposit liabilities are stated at amounts they are to be paid which approximate
the market value.
Under existing BSP regulations, non-FCDU deposit liabilities of the Group are subject
to liquidity reserves and statutory reserves equivalent to 11% and 8%, respectively, as
of December 31, 2009 and 2008. As of December 31, 2009 and 2008, the Group is in
compliance with such regulations.
Available reserves as of December 31, 2009 and 2008 follow:
Consolidated
2009
2008
Cash and other cash items
Due from BSP
Reserve deposit account (BSP)
Available-for-sale securities
Securities purchased under
reverse repurchase
agreement
P
7,748,975
5,272,834
13,513,000
550,462
71,000
P
27,156,271
P
6,409,809 P
4,240,275
11,797,000
553,498
25,000
P 23,025,582 P
2009
Parent
6,355,743
4,056,075
13,513,000
550,462
P
24,475,280
2008
5,215,356
3,535,622
11,797,000
110,361
-
P
20,658,339
On September 30, 2009, the Parent Company issued US$85 million worth of
US$-denominated Negotiable Certificates of Time Deposits (“September NCTD”).
On October 19, 2009, the Parent Company issued a second offering worth
US$13.2 million of US$-denominated NCTD (“October NCTD”). The September
NCTD and the October NCTD carry a fixed annual interest rate of 3.75% per annum,
payable quarterly until September 30, 2012. The NCTDs are presented as part of the
Time Deposit Liabilities account in both the Group and Parent Company financial
statements.
- 92 -
18.
BILLS PAYABLE
This account consists of borrowings from:
Consolidated
2009
2008
Foreign banks
BSP
Local banks
Others
P
2009
Parent
2008
8,003,907
2,130,456
539,560
107,041
P 12,842,101 P
7,925,719
684,789
8,003,907
2,130,456
293,769
107,041
P
12,842,101
7,925,719
523,142
119,125
P 10,780,964
P 21,452,609 P
10,535,173
P
21,410,087
The maturity profile of bills payable follows:
Consolidated
2008
2009
Within one year
Beyond one year,
within five years
P
8,972,993
1,807,971
P 10,780,964
P 21,388,718 P
63,891
P 21,452,609 P
2009
Parent
8,727,202
P
1,807,971
10,535,173
2008
21,381,630
28,457
P
21,410,087
Borrowings with foreign and local banks are mainly short-term in nature. In the
consolidated financial statements, peso borrowings are subject to annual fixed interest
rates ranging from 4.75% to 5.5% in 2009 and 5% to 12% in 2008 and 2007, while
foreign currency-denominated borrowings are subject to annual fixed interest rates
ranging from 0.10% to 3.18% in 2009, 0.25% to 5% in 2008 and 2% to 8.41% in 2007.
In the Parent Company financial statements, peso borrowings are subject to annual
fixed interest rates ranging from 3.50% to 4.75% in 2009, 5% to 6.7% in 2008 and
5% to 12% in 2007, while foreign currency-denominated borrowings are subject to
annual fixed interest rates ranging from 0.10% to 3.18% in 2009, 0.25% to 5% in 2008
and 2% to 8.41% in 2007.
The interest rates on bills payable maturing beyond one year are repriced semi-annually
at effective market interest rates.
Bills payable include rediscounting availments from the BSP amounting to P2,130,456
and P7,925,719 as of December 31, 2009 and 2008, respectively, both in the
consolidated and Parent Company financial statements. Such borrowings are
collateralized by the assignment of certain loans amounting to P2,354,515 and
P10,729,055 as of December 31, 2009 and 2008, respectively, both in the consolidated
and Parent Company financial statements (see Note 11).
- 93 -
19.
BONDS PAYABLE
On February 23, 2005, the Parent Company issued to local and foreign entities
(excluding those in the United States of America) unsecured bonds (Global Notes) with
a principal amount of US$150,000 at an issue price of 99.67% and bearing an interest
of 6.875% per annum. The Global Notes, unless previously redeemed or cancelled,
will be redeemed on February 24, 2010. The Parent Company, at the option of the
holder of the Global Notes, redeemed portion of the Global Notes with principal
amount of US$10,678 on February 23, 2008. Interest is payable semi-annually in
arrears on February 23 and August 23 of each year commencing on August 23, 2005,
except that the last payment of the interest will be on February 24, 2010. As of
December 31, 2009 and 2008, the peso equivalent of the outstanding bond issue
amounted to P5,836,076 and P6,002,821, respectively. In February 2010, the
outstanding principal balance of US$139,322 was fully redeemed.
Also, in February 2010, the Parent Company issued US$ denominated Senior Notes
with principal amount of US$250,000 bearing an interest of 6.25% per annum, payable
semi-annually in arrears on February 9 and August 9 of each year, commencing on
August 9, 2010. The Senior Notes, unless redeemed, will mature on February 9, 2015.
20.
ACCRUED TAXES, INTEREST AND OTHER EXPENSES
The composition of this account follows:
Consolidated
2009
2008
Accrued expenses
Accrued interest payable
Taxes payable
Others
Parent
2009
2008
P
1,364,718
869,539
179,686
835,911
P
1,056,690 P
1,055,671
69,172
605,923
916,753
801,318
77,585
530,486
P
722,290
929,048
17,843
306,871
P
3,249,854
P
2,787,456 P
2,326,142
P
1,976,052
- 94 -
21.
OTHER LIABILITIES
Other liabilities consist of the following:
Consolidated
2009
2008
Accounts payable
Bills purchased - contra
Manager’s checks
Derivatives with negative
fair values (see Note 8)
Unearned income
Outstanding acceptances
payable
Other credits
Payment orders payable
Withholding taxes payable
Guaranty deposits
Sundry credits
Due to BSP
Due to other banks
Miscellaneous
P
P
22.
2,260,356
1,790,172
703,662
P
2,788,020 P
1,675,239
643,652
Parent
2009
1,660,398
1,790,172
485,163
2008
P
2,024,610
1,675,239
433,551
703,604
399,336
329,505
518,400
703,604
399,282
329,505
518,400
250,421
161,555
120,115
114,918
91,674
39,793
24,179
21,042
218,069
318,908
154,426
196,071
125,103
60,369
23,741
107,923
1,452
278,902
250,421
137,330
89,101
89,671
91,674
39,777
24,179
21,042
107,765
318,908
125,268
151,212
96,634
60,369
23,651
93,365
1,452
105,646
6,898,896
P
7,221,711 P
5,889,579
P
5,957,810
SUBORDINATED DEBT
On November 26, 2007, the Parent Company’s BOD approved the issuance of
P7 billion unsecured subordinated notes (the “P7 billion Notes”) with the following
significant terms and conditions:
a. The P7 billion Notes shall mature on February 22, 2018, provided that they are not
previously redeemed.
b. Subject to satisfaction of certain regulatory approval requirements, the Parent
Company may, on February 22, 2013, redeem all of the outstanding notes at
redemption price equal to 100% of the face value of the P7 billion Notes together
with accrued and unpaid interest thereon.
c. The P7 billion Notes bear interest at the rate of 7% per annum from
February 22, 2008 and shall be payable quarterly in arrears at the end of each
interest period on May 22, August 22, November 22 and February 22 each year.
d. Unless the P7 billion Notes are previously redeemed, the interest rate from 2013 to
2018 will be reset at the equivalent of the five-year Fixed Rate Treasury Note
benchmark bid yield as of February 22, 2013 multiplied by 80% plus 3.53% per
annum. Such stepped-up interest shall be payable quarterly commencing 2013.
The P7 billion Notes were issued on February 22, 2008 and were fully subscribed. The
carrying amount of the P7 billion Notes amounted to P6,954,332 and P6,941,899 as of
December 31, 2009 and 2008, respectively.
- 95 -
On January 26, 2009, the Parent Company’s BOD approved another issuance of
P4 billion unsecured subordinated notes (the “P4 billion Notes”) with the following
significant terms and conditions:
a. The P4 billion Notes shall mature on May 15, 2019, provided that they are not
previously redeemed.
b. Subject to satisfaction of certain regulatory approval requirements, the Parent
Company may, on May 15, 2014, redeem all of the outstanding notes at redemption
price equal to 100% of the face value of the P4 billion Notes together with accrued
and unpaid interest thereon.
c. The P4 billion Notes bear interest at the rate of 7.75% per annum from
May 15, 2009 and shall be payable quarterly in arrears at the end of each interest
period on August 15, November 15, February 15 and May 15 each year.
d. Unless the P4 billion Notes are previously redeemed, the interest rate from
May 15, 2014 to May 15, 2019 will be increased to the rate equivalent to 80% of
benchmark rate as of the first day of the 21st interest period plus the step-up spread.
Such stepped up interest shall be payable quarterly in arrears.
The P4 billion Notes were issued on May 15, 2009 and were fully subscribed.
The carrying amount of the P4 billion Notes amounted to P3,972,646 as of
December 31, 2009.
The subordinated debt is measured at amortized cost at each statement of financial
position date.
23.
CAPITAL FUNDS
23.1 Capital Stock
Capital stock consists of (amounts and shares in thousands, except per par value):
2009
Shares
2008
2007
Preferred stock – voting, non-cumulative
non-redeemable, participating,
convertible into common shares
– P10 par value
Authorized – 200 million shares
Issued and outstanding
20,704
85,934
85,951
990,551
962,843
962,837
Common stock – P10 par value
Authorized – 1,100 million shares
Issued and outstanding
- 96 Amount
2008
2009
2007
Preferred stock – voting, non-cumulative
non-redeemable, participating,
convertible into common shares
– P10 par value
Authorized – 200 million shares
Issued and outstanding
P
207,038
P
859,335
P
859,512
P
9,905,508
P
9,628,430
P
9,628,369
Common stock – P10 par value
Authorized – 1,100 million shares
Issued and outstanding
On January 22, 2007, the Parent Company stockholders, owning or representing more
than 2/3 of the outstanding capital stock, unanimously confirmed and ratified the
approval by the majority of the BOD held on December 4, 2006, the increase of the
Parent Company’s authorized capital stock from P9,000,000 to P13,000,000, by
amending its Articles of Incorporation. The increase in authorized capital stock of the
Parent Company was approved by the BSP and SEC on February 12, 2007 and
March 8, 2007, respectively. The authorized capital stock of the Parent Company of
P13 billion is divided into the following classes of shares:
a. One billion one hundred million (1,100 million) common shares of stock with
par value of ten pesos (P10.00) per share; and,
b. Two hundred million (200 million) preferred shares of stock with par value of ten
pesos (P10.00) per share.
On March 29, 2007 and April 13, 2007, the Parent Company issued additional shares
from its unissued common shares with total par value amounting to P1,826,087 and
P273,913, respectively. The corresponding additional paid-in capital on the additional
issuances of shares amounted to P3,362,275.
On May 29, 2006, the Parent Company’s stockholders approved the issuance of up to
200,000 thousand convertible preferred shares with a par value of P10 per share,
subject to the approval, among others of the PSE. The issuance of the convertible
preferred shares was also approved by the Parent Company’s stockholders on
May 29, 2006. The purpose of the issuance of the preferred shares is to raise the Tier 1
capital pursuant to BSP regulations, thereby strengthening the capital base of the Parent
Company and allowing it to expand its operations. On February 13, 2007, the PSE
approved the listing application of the underlying common shares for the
105,494 thousand convertible preferred shares, subject to the compliance of certain
conditions of the PSE. Preferred shares have the following features:
a. Entitled to dividends at floating rate equivalent to the applicable base rate plus a
spread of 2% per annum, calculated quarterly;
b. Convertible to common stocks at any time after the issue date at a conversion price
using the adjusted net book value per share of the Parent Company based on the
latest available financial statements prepared in accordance with PFRS adjusted by
local regulations;
- 97 -
c. Non-redeemable; and,
d. Participating as to dividends on a pro rata basis with the common stockholders in
the Surplus of the Parent Company after quarterly dividends payments had been
made to the preferred shares.
In 2009, P652 million or 65 thousand preferred shares were converted to 27.7 thousand
common shares. In 2008, P0.20 million or 17.7 thousand preferred shares were
converted to 6 thousand common shares.
Common shares may be transferred to Philippine and foreign nationals and shall, at all
times, not be less than 60% and not more than 40% of the voting stock, be beneficially
owned by Philippine nationals and by foreign nationals, respectively.
The determination of the Parent Company’s compliance with regulatory requirements
and ratios is based on the amount of the Parent Company’s “unimpaired capital”
(regulatory net worth) required and reported to the BSP, determined on the basis of
regulatory accounting policies, which differ from PFRS in some aspects. Specifically,
under existing banking regulations, the combined capital accounts of the Parent
Company should not be less than an amount equal to 10% of its risk assets.
A portion of the Group’s surplus corresponding to the undistributed income of
subsidiaries and equity in net earnings of certain associates totaling P1,813,912,
P1,450,528, and P1,216,532 as of December 31, 2009, 2008 and 2007, respectively, is
not currently available for distribution as dividends.
23.2 Declaration of Stock Dividends
The shareholders confirmed and ratified the approval by the majority of the BOD
during the December 4, 2006 meeting, of a 15% stock dividend corresponding to
109,413 thousand shares, to support the foregoing increase of authorized capital stock,
payable to holders of common and preferred class shares of record as of
March 14, 2007. The 15% stock dividend was approved by the BSP on
January 26, 2007 and by the SEC on March 8, 2007, and was issued on March 19, 2007.
Documentary stamp tax (DST) on the stock dividends amounting to P15,325 was
deducted from capital paid in excess of par.
- 98 -
23.3 Purchase of Treasury Shares
On March 16, 2009, the BOD of the Parent Company approved the acquisition of
92,421,320 common shares and 18,082,311 convertible preferred shares at P15.20 per
share and P10.00 per share, respectively. Total cost of purchasing the treasury shares
including the buying charges and documentary stamp taxes incurred amounted to
P1,594,925. On September 1, 2009, majority of the stockholders approved the
reissuance of the 41,993,389 common treasury shares amounting to P642,216 in
exchange for 5.64% ownership or 169,059 shares of stock in MICO Equities, Inc.
(MICO) amounting to P734,884. The excess of the carrying amount of the investment
in MICO over the cost of treasury stock re-issued amounting to P92,669 was
recognized as part of Capital Paid in Excess of Par in the consolidated and Parent
Company’s financial statements as of December 31, 2009. The remaining balance of
the total cost of purchasing the treasury shares amounting to P952,709 was presented
as Treasury Stock in the consolidated and Parent Company’s financial statements as of
December 31, 2009.
23.4 Cash Dividend Declaration
The details of the cash dividend declarations and distributions in 2009, 2008 and 2007
follow:
Date
Declared
Dividend
Per Share Total Amount
October 30, 2007 P
January 28, 2008 P
July 30, 2007
March 31, 2008
P
March 31, 2008
P
March 31, 2008
P
June 30, 2008
P
July 30, 2007
P
September 29, 2008 P
September 29, 2008
September 29, 2008
January 26, 2009 P
March 30, 2009
P
March 30, 2009
P
March 30, 2009
P
June 29, 2009
P
September 28, 2009 P
September 28, 2009
0.1829
0.1740
*
0.1177
0.4800
0.4800
0.1227
*
0.1331
*
*
0.0881
0.0824
0.3060
0.3060
0.0667
0.0579
*
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
15,054
14,945
207,572
10,671
462,165
41,248
10,445
241,893
11,317
239,123
232,038
5,978
5,589
20,762
266,349
4,526
146
228,113
Stockholders of
Record as of
December 21, 2007
March 21, 2008
*
June 21, 2008
June 29, 2008
June 29, 2008
September 21, 2008
*
December 21, 2008
*
*
December 31, 2008
February 28, 2009
March 11, 2009
March 11, 2009
May 31, 2009
December 21, 2009
*
BOD
Date Approved by
BSP
October 30, 2007
January 28, 2008
July 30, 2007
March 31, 2008
March 31, 2008
March 31, 2008
June 30, 2008
July 30, 2007
September 29, 2008
September 29, 2008
September 29, 2008
January 26, 2009
March 30, 2009
March 30, 2009
March 30, 2009
June 29, 2009
September 28, 2009
September 28, 2009
January 4, 2008
April 4, 2008
April 4, 2008
June 19, 2008
June 19, 2008
June 19, 2008
September 3, 2008
September 3, 2008
February 10, 2009
April 16, 2009
September 1, 2009
April 16, 2009
June 10, 2009
June 10, 2009
June 10, 2009
September 1, 2009
December 7, 2009
Pending
Date
Paid/Payable
January 10, 2008
April 17, 2008
April 25, 2008
July 3, 2008
June 30, 2008
June 30, 2008
September 30, 2008
October 24, 2008
February 23, 2009
April 24, 2009
October 27, 2009
May 8, 2009
July 3, 2009
July 13, 2009
July 13, 2009
September 10, 2009
January 5, 2010
Pending
* Cash dividends on Hybrid perpetual securities
24.
HYBRID PERPETUAL SECURITIES
On October 30, 2006, the Parent Company received the proceeds from the issuance of
Non-Cumulative Step-Up Callable Perpetual Securities (“Perpetual Securities”)
amounting to US$98.045 million, net of fees and other charges. Net proceeds were
used to strengthen the CAR of the Parent Company, repay certain indebtedness and,
thereby, enhance its financial stability and for general corporate purposes. The issuance
of the Perpetual Securities was approved by the Parent Company’s BOD on
June 7, 2006.
- 99 -
The Perpetual Securities represent US$100 million, 9.875%, non-cumulative step-up
callable perpetual securities issued pursuant to a trust deed dated October 27, 2006
between the Parent Company and Bank of New York - London Branch each with a
liquidation preference of US$1 thousand per US$1 thousand in principal amount of the
Perpetual Securities. The actual listing and quotation of the Perpetual Securities in a
minimum board lot size of US$1 hundred with the Singapore Exchange Securities
Trading Limited (“SGX-ST”) was on November 1, 2006. The Perpetual Securities
were issued pursuant to BSP Circular 503 dated December 22, 2005 allowing the
issuance of perpetual, non-cumulative securities up to US$125 million which are eligible
to qualify as Hybrid Tier 1 Capital.
The significant terms and conditions of the issuance of the Perpetual Securities, among
others, follow:
•
Interest will be paid from and including October 27, 2006 (the “issue date”) to
(but excluding) October 27, 2016 (the “First Optional Redemption Date”) at a rate
of 9.875% per annum payable semi-annually in arrears from April 27, 2007 and,
thereafter at a rate preset and payable quarterly in arrears, of 7.02% per annum
(which incorporates a step-up in margin equal to 1% above the initial credit spread
after adjusting for the applicable swap spread) above the then prevailing London
interbank offered rate (“LIBOR”) for three-month US dollar deposits;
•
Except as described below, interest will be payable on April 27 and October 27 in
each year, commencing on April 27, 2007 and ending on the First Optional
Redemption Date, and thereafter (subject to adjustment for days which are not
business days) on January 27, April 27, July 27, October 27 in each year
commencing on January 27, 2016;
•
The Parent Company may, in its absolute discretion, elect not to make any interest
payment in whole or in part if the Parent Company has not paid or declared a
dividend on its common shares in the preceding financial year; or determines that
no dividend is to be paid on such shares in the current financial year;
•
The rights and claims of the holders will be subordinated to the claims of all senior
creditors (as defined in the conditions) and the holders of any priority preference
shares (as defined in the conditions), in that payments in respect of the securities
are conditional upon the Parent Company being solvent at the time of payment and
in that no payments shall be due except to the extent the Parent Company could
make such payments and still be solvent immediately thereafter;
•
The Perpetual Securities are not deposits of the Parent Company and are not
guaranteed or insured by the Parent Company or any party related to the Parent
Company or the Philippine Deposit Insurance Corporation and they may not be
used as collateral for any loan made by the Parent Company or any of its
subsidiaries or affiliates;
- 100 -
25.
•
The Parent Company undertakes that, if on any Interest Payment Date payment of
all Interest Payments scheduled to be made on such date is not made in full it shall
not declare or pay any distribution or dividend or make any other payment on, and
will procure that no distribution or dividend or other payment is made on, any
junior share capital or any parity security, and it shall not redeem, repurchase,
cancel, reduce or otherwise acquire any junior share capital or any parity securities,
other than in the case of any partial interest payment, pro rata payments on, or
redemptions of, parity securities the dividend and capital stopper shall remain in
force so as to prevent the Parent Company from undertaking any such declaration,
payment or other activity as aforesaid unless and until a payment is made to the
holders in an amount equal to the unpaid amount (if any) of interest payments in
respect of interest periods in the twelve months including and immediately
preceding the date such interest payment was due and the BSP does not otherwise
object; and,
•
The Perpetual Securities will have fixed or final redemption date although the
Parent Company may, having given not less than 30 nor more than 60 days’ notice
to the Trustee, the Registrar, the Principal Paying Agent and the Holders, redeem
all (but not some only) of the securities (i) on the first optional redemption date;
and (ii) on each interest payment date thereafter, at an amount equal to the
liquidation preference plus accrued interest.
EMPLOYEE BENEFITS
Expenses recognized for employee benefits are analyzed below.
2009
Salaries and wages
Bonuses
Retirement - defined benefit plan
Compensated absences
Social security costs
Other short-term benefits
Consolidated
2008
P
1,730,326
505,734
142,050
92,265
74,345
234,516
P
1,580,233
442,669
145,566
83,847
68,739
203,902
P
1,436,465
416,427
151,015
78,250
65,477
236,764
P
2,779,236
P
2,524,956
P
2,384,398
Parent
2008
2009
Salaries and wages
Bonuses
Retirement - defined benefit plan
Compensated absences
Social security costs
Other short-term benefits
2007
2007
P
1,067,277
369,027
125,882
90,264
49,333
162,788
P
970,772
338,112
115,610
82,628
45,975
129,090
P
905,528
315,513
107,394
76,475
44,671
190,574
P
1,864,571
P
1,682,187
P
1,640,155
The Parent Company and its subsidiaries maintain a tax-qualified, noncontributory
retirement plan that is being administered by a trustee covering all of their respective
regular full-time employees.
- 101 -
The amounts of retirement benefit asset (presented as part of Other Resources Miscellaneous) recognized in the financial statements (see Note 15) are determined as
follows:
Consolidated
2008
2009
Fair value of plan assets
Present value of the obligation
Excess of obligation
Addition (reduction)
due to ceiling
Unrecognized actuarial losses
Retirement benefit asset
P
(
P
1,761,844 P
1,958,428
196,584) (
1,167,540 P
1,257,968
90,428) (
176 (
267,511
2,665)
168,676
71,103
P
2009
Parent
2008
1,323,988 P
1,578,981
254,993 ) (
772,209
993,323
221,114 )
295,427
257,339
75,583 P
40,434
P
36,225
The movements in the present value of the retirement benefit obligation recognized in
the books are as follows:
Consolidated
2008
2009
Balance at the beginning of year P
Current service cost
and interest cost
Actuarial losses (gains)
Benefits paid by the plan
(
1,257,968
Balance at end of the year
1,958,428
P
P
222,910
615,388 (
137,838) (
Parent
2009
1,826,186 P
993,323
234,271
596,644)
205,845) (
P
1,257,968 P
2008
P
167,649
553,367 (
135,358 ) (
1,578,981
1,516,414
175,221
501,823)
196,489)
P
993,323
The movements in the fair value of plan assets are presented below.
Consolidated
2008
2009
Balance at the beginning of year P
Actuarial gains (losses)
Expected return on plan assets
Contributions paid into the plan
Benefits paid by the plan
(
1,167,540 P
515,045 (
80,897
136,200
137,838) (
1,670,105 P
624,621)
110,963
216,938
205,845) (
Balance at end of the year
1,761,844
P
1,167,540 P
P
2009
Parent
772,209 P
508,409 (
48,637
130,091
135,358 ) (
1,323,988
P
2008
1,352,252
612,591 )
83,841
145,196
196,489 )
772,209
The plan assets consist of the following:
Consolidated
2009
2008
Assets
Equity securities
Government securities
Deposit with banks
Loans and receivables
Unit investment trust fund
ROPA
Long-term equity investments
Other investments
Parent
2009
2008
P
1,393,654
571,444
127,047
78,213
53,242
19,046
62,183
2,304,829
542,985
P
918,136 P
461,955
181,944
47,456
30,000
35,906
44,220
23,496
1,743,113
575,573
1,296,503 P
353,680
48,670
75,811
53,242
19,046
20,000
1,866,952
542,964
P
1,761,844
P
1,167,540 P
1,323,988
Liabilities
P
906,877
276,047
26,349
27,848
30,000
35,905
44,220
1,347,246
575,037
772,209
- 102 -
Actual return on plan assets were P596 million and P557 million in 2009, while actual loss on
plan assets were P513 million and P529 million in 2008, for the Group and the Parent
Company, respectively.
The amounts of retirement benefit expense recognized as part of Employee Benefits account
in the statements of income are as follows:
Consolidated
2008
2009
Current service costs
Interest costs
Expected return on plan assets
Net transition obligation recognized
Retirement expense (income) due to ceiling
Net actuarial losses (gains)
recognized during the year
Retirement benefits
P
(
(
83,254 P
140,674
80,897) (
2,489)
1,508
P
142,050
(
Retirement benefits
P
-
P
122,242
113,002
108,191)
24,232
1,161
145,566
1,431)
P
Parent
2008
56,198 P
111,451
48,637) (
6,870
125,882
83,301 P
151,536
110,963) (
24,232
1,048
3,588) (
2009
Current service costs
P
Interest costs
Expected return on plan assets
(
Net transition obligation recognized
Net actuarial gains recognized during the year
2007
P
2007
49,205 P
126,014
83,841) (
24,232
(
115,610
151,015
P
82,315
91,286
84,782)
24,232
5,657)
107,394
For determination of the pension liability, the following actuarial assumptions were used:
Discount rates
Expected rate of return on plan assets
Expected rate of salary increases
Discount rates
Expected rate of return on plan assets
Expected rate of salary increases
26.
2009
Consolidated
2008
2007
9.2%
6%
5%
11.2%
6.3%
2.5%
8.3%
6.3%
5%
2009
Parent
2008
2007
9.2%
6%
5%
11.2%
6.3%
2.5%
8.3%
6.3%
5%
LEASE CONTRACTS
The Parent Company and certain subsidiaries lease some of the premises occupied by
their respective branches/business centers. The Group’s rental expense (included in
Occupancy and Equipment-related account in the statements of income) based on the
lease contracts amounted to P541,825 in 2009, P477,383 in 2008 and P440,943 in 2007,
of which P430,385 in 2009, P374,226 in 2008 and P363,779 in 2007 and pertains to the
Parent Company. The lease periods are from 1 to 25 years. Most of the lease contracts
contain renewal options, which give the Parent Company and its subsidiaries the right
to extend the lease on terms mutually agreed upon by the parties.
- 103 -
As of December 31, 2009, future minimum rentals payable under non-cancelable
operating leases follow:
Parent
Consolidated
Within one year
After one year but not more than five years
More than five years
27.
P
570,369
745,110
242,181
P
498,757
562,639
220,446
P
1,557,660
P
1,281,842
MISCELLANEOUS EXPENSES
Miscellaneous expenses consist of the following:
2009
Insurance
Management and other professional fees
Litigation/Assets acquired expense
Transportation and travel
Communication and information services
Other credit card related expenses
Advertising and publicity
Other outside services
Stationery and office supplies
Banking fees
Depreciation – investment property
Service charges
Others
Consolidated
2008
P
511,587
460,755
420,765
328,538
301,824
265,385
260,436
165,943
116,761
101,028
89,448
59,102
565,143
P
469,135
433,967
479,199
354,705
247,341
234,880
263,808
135,859
112,095
85,715
111,085
48,201
430,733
P
409,200
340,055
323,089
236,527
235,461
200,015
396,475
117,071
146,576
78,741
79,018
32,156
394,087
P
3,646,715
P
3,406,723
P
2,988,471
Parent
2008
2009
Management and other professional fees
Insurance
Litigation/Assets acquired expense
Other credit card related expenses
Communication and information services
Advertising and publicity
Transportation and travel
Banking fees
Stationery and office supplies
Other outside services
Service charges
Depreciation – investment property
Others
2007
2007
P
411,912
375,438
315,458
265,385
207,096
188,554
165,976
92,341
81,017
67,042
59,102
43,579
383,367
P
394,737
347,205
401,435
234,880
156,203
190,171
167,019
85,715
79,099
69,746
48,201
63,421
350,389
P
333,475
306,053
234,940
200,015
151,421
365,956
164,856
78,741
75,238
49,507
32,156
65,518
340,059
P
2,656,267
P
2,588,221
P
2,397,935
- 104 -
28.
INCOME AND OTHER TAXES
Under Philippine tax laws, the Parent Company and its domestic subsidiaries are
subject to percentage and other taxes (presented as Taxes and Licenses in the statement
of income), as well as income taxes. Percentage and other taxes paid consist principally
of the gross receipts tax (GRT) and DST. In 2003, the Parent Company and its
financial intermediary subsidiaries were subjected to the value-added tax (VAT) instead
of GRT. However, effective January 1, 2004 as prescribed under RA No. 9238, the
Parent Company and certain subsidiaries were again subjected to GRT instead of
VAT. RA No. 9238, which was enacted on February 10, 2004, provides for the
reimposition of GRT on banks and non-bank financial intermediaries performing
quasi-banking functions and other non-bank financial intermediaries beginning
January 1, 2004. The liability of the Parent Company and certain subsidiaries for GRT
is based on the related regulations issued by the authorities.
Income taxes include the corporate income tax discussed below, and final tax paid at
the rate of 20%, which represents the final withholding tax on gross interest income
from government securities and other deposit substitutes.
Under the tax regulations, the regular corporate income tax rate (RCIT) applicable is
32% up to October 31, 2005 and 35% up to December 31, 2008. Effective
January 1, 2009, in accordance with RA No. 9337, RCIT was reduced from 35% to
30% and nonallowable deductions for interest expense from 42% to 33% of interest
income subjected to final tax.
Effective July 2008, RA No. 9504 was approved giving corporate taxpayers an option to
claim itemized deduction or optional standard deduction equivalent to 40% of gross
sales. Once the option is made, it shall be irrevocable for the taxable year for which the
option was made. In 2009 and 2008, the Group opted to continue claiming itemized
deductions.
Interest allowed as a deductible expense is reduced by an amount equivalent to certain
percentage of interest income subjected to final tax. Minimum corporate income tax
(MCIT) of 2% on modified gross income is computed and compared with the RCIT.
Any excess of the MCIT over the RCIT is deferred and can be used as a tax credit
against future income tax liability for the next three years. In addition, the Group net
operating loss carry over (NOLCO) is allowed as a deduction from taxable income in
the next three years.
In accordance with the Revenue Regulation (RR) No. 09-05 relative to the tax
exemptions and privileges granted under the SPV Act, the losses incurred by the Group
as a result of transferring its NPA to an SPV within the period of 2 years from
April 12, 2003 shall be carried over as a deduction from its taxable gross income for a
period of 5 consecutive taxable years.
On December 29, 2009, the Parent Company received a certification from BIR that the
exchange of shares between the Parent Company (41,993,389 common treasury shares)
and PMMIC (169,059 shares of stock in MICO) is a tax-free exchange in accordance
with Revenue Regulations No. 18-2001 (see Note 23).
- 105 -
Effective May 2004, RA No. 9294 restored the tax exemption of FCDUs and offshore
banking units (OBUs). Under such law, the income derived by the FCDU from
foreign currency transactions with nonresidents, OBUs, local commercial banks
including branches of foreign banks is tax-exempt while interest income on foreign
currency loans from residents other than OBUs or other depository banks under the
expanded system is subject to 10% gross income tax.
Interest income on deposits with other FCDUs and offshore banking units is subject to
7.5% final tax.
The Parent Company’s foreign subsidiaries are subject to income and other taxes based
on the enacted tax laws of the countries where they operate.
The components of tax expense as reported in statements of income consist of:
2009
Current
Final withholding tax
RCIT
MCIT
Deferred tax expense (income)
Tax expense reported in the
statements of income
Consolidated
2008
P
450,566
196,647
97,702
495)
P
480,272
95,833
88,619
254,700
P
473,421
102,667
87,754
181,808
P
744,420
P
919,424
P
845,650
(
Parent
2008
2009
Current
Final withholding tax
RCIT
MCIT
Tax expense reported in the
statements of income
2007
2007
P
367,207
53,837
97,986
P
444,858
43,870
79,992
P
455,622
87,754
P
519,030
P
568,720
P
543,376
- 106 -
A reconciliation of tax on pretax income computed at the applicable statutory rates to
tax expense reported in the statements of income is as follows:
Consolidated
2008
2009
Statutory income tax at 30% in 2009
and 35% in 2008 and 2007
Adjustments for income subjected to
lower income tax rates
Tax effects of:
Unrecognized temporary differences
Non-deductible expenses
Non-taxable income
Application of unrecognized MCIT
Application of unrecognized NOLCO
Decrease in deferred tax assets due to
reduction in RCIT rate
Others
P
1,224,036
P
(
91,273) (
(
(
(
321,449 (
231,533
1,097,760) (
991)
986)
158,412
Tax expense reported in the
statements of income
P
P
P
927,346
(
(
Tax expense reported in the
statements of income
P
1,431,258
6,596
117,428 )
349,017
247,305 ) (
-
221,193
229,489
828,917)
-
276
113,648)
(
213,969)
919,424
P
845,650
Parent
2008
2009
Statutory income tax at 30% in 2009
and 35% in 2008 and 2007
Adjustments for income subjected to
lower income tax rates
Tax effects of:
Unrecognized temporary differences
Non-deductible expenses
Non-taxable income
Application of unrecognized NOLCO
P
33,873 )
(
744,420
1,082,385
2007
P
2007
608,661
P
868,954
46,856) (
42,856) (
2,382)
335,107 (
148,577
845,144) (
-
62,429)
245,463
180,119) (
(
251,312
215,293
602,385)
187,416)
568,720
543,376
519,030
P
P
The components of deferred tax assets - net as of December 31 follow:
Consolidated
2008
2009
Allowance for impairment
P
Unamortized past services costs
Retirement benefits
Unrealized foreign
exchange losses
Accrued rent
Gain on rediscounting
(
Accounts receivable
1,407,407
599
539
P
1,408,302
-
P
132
68
443) (
1,391,302 P
1,100
-
P
Parent
2009
99
799)
7
1,391,709 P
1,389,497
-
2008
P
1,389,497
1,389,497
-
P
1,389,497
The Group did not set up deferred tax liabilities on accumulated translation adjustment,
particularly those relating to its foreign subsidiaries, since their reversal can be
controlled, and it is probable that the temporary difference will not reverse in the
foreseeable future.
- 107 -
In light of the provision of PAS 12 Income Taxes, the Parent Company and certain
subsidiaries have taken a conservative position by not recognizing deferred tax assets
(liabilities) on certain temporary differences. Accordingly, the Group did not set up the
net deferred tax assets on the following temporary differences:
Consolidated
2009
2008
NOLCO
Allowance for impairment
MCIT
Unamortized past service cost
Loss on revaluation
Retirement liability
Accrued rent
Unrealized foreign
exchange gains
P
4,587,890
4,924,425
274,075
271,802
2,709
423
8
(
P 10,319,892 P
6,375,047
269,546
299,604
421
38,964
31
1,496) (
P
10,059,836
Parent
2009
4,973)
4,471,011
1,657,150
265,732
268,129
-
2008
P
-
P 17,298,532 P
6,662,022
10,217,785
1,538,670
208,540
290,457
-
P
12,255,452
The breakdown of the Group’s NOLCO, which can be claimed as deduction from
future taxable income within three years from the year the taxable loss was incurred
and within five years from the year SPV losses were incurred, is shown below.
Inception
Year
2005
2006
2007
2008
2009
Used/
Expired
Amount
Balance
P
3,629,720
6,484,406
21,089
753,001
752,404
P
568,324
6,484,406
-
P
3,061,396*
21,089
753,001
752,404
P
11,640,620
P
7,052,730
P
4,587,890
Expiry
Year
2010
2009
2010
2011
2012
*Refers to losses incurred from SPV transactions in 2005.
The breakdown of the Parent Company’s NOLCO, which can be claimed as deduction
from future taxable income within three years from the year the taxable loss was
incurred and within five years from the year SPV losses were incurred, is shown below.
Inception
Year
2005
2006
2008
2009
Amount
Expired
Balance
P
3,629,720
6,484,406
671,983
737,632
P
568,324
6,484,406
-
P
3,061,396*
671,983
737,632
P
11,523,741
P
7,052,730
P
4,471,011
*Refers to losses incurred from SPV transactions in 2005.
Expiry
Year
2010
2009
2011
2012
- 108 -
As of December 31, 2009, the Group has MCIT of P274,705 that can be applied
against RCIT for the next three consecutive years after the MCIT was incurred. The
breakdown of MCIT with the corresponding validity periods follow:
Inception
Year
2006
2007
2008
2009
Used/
Expired
Amount
P
93,173
87,754
88,619
97,702
P
P
367,248
P
-
Balance
93,173
P
-
93,173
P
274,075
Expiry
Year
87,754
88,619
97,702
2010
2011
2012
The breakdown of the Parent Company’s MCIT with the corresponding validity
periods follow:
Inception
Year
2006
2007
2008
2009
29.
Amount
Expired
P
40,794
87,754
79,992
97,986
P
P
306,526
P
-
Balance
40,794
P
-
40,794
P
265,732
87,754
79,992
97,986
Expiry
Year
2010
2011
2012
TRUST OPERATIONS
Securities and properties (other than deposits) held by the Parent Company and RSB in
fiduciary or agency capacities for their respective customers are not included in the
accompanying financial statements, since these are not resources of the Parent
Company and RSB. The Group’s total trust resources amounted to P52,448,850 and
P46,945,928 as of December 31, 2009 and 2008, respectively. The Parent Company’s
total trust resources amounted to P47,306,436 and P45,193,199 as of
December 31, 2009 and 2008, respectively.
In connection with the trust operations of the Parent Company and RSB, time deposit
placements and government securities with a total face value of P 670,967 (Group) and
P605,967 (Parent Company); and P860,667 (Group) and P769,715 (Parent Company)
as of December 31, 2009 and 2008, respectively, are deposited with the BSP in
compliance with existing trust regulations (see Notes 7 and 10).
In compliance with existing BSP regulations, 10% of the Parent Company’s and RSB’s
profit from trust business is appropriated to surplus reserve. This yearly appropriation
is required until the surplus reserve for trust business equals 20% of the Parent
Company’s and RSB’s regulatory capital. The surplus reserve is shown as Reserve for
Trust Business in the statements of changes in capital funds.
- 109 -
30.
RELATED PARTY TRANSACTIONS
30.1 DOSRI
In the ordinary course of business, the Group has loan transactions with each other,
their other affiliates, and with certain DOSRIs. Under existing policies of the Group,
these loans are made substantially on the same terms as loans to other individuals and
business of comparable risks.
Under current BSP regulations, the amount of individual loans to a DOSRI, 70% of
which must be secured, should not exceed the amount of his deposit and book value of
his investment in the Parent Company and/or any of its lending and nonbanking
financial subsidiaries. In the aggregate, loans to DOSRIs, generally, should not exceed
the total capital funds or 15% of the total loan portfolio of the Parent Company and/or
any of its lending and nonbanking financial subsidiaries, whichever is lower.
BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI
accounts.
The following table shows information relating to the loans, other credit
accommodations and guarantees classified as DOSRI accounts under regulations
existing prior to said circular and new DOSRI loans, other credit accommodations and
guarantees granted under said circular as of December 31, 2009 and 2008:
Consolidated
2009
2008
Total outstanding DOSRI loans P
Percent of DOSRI accounts
to total loans
Percent of unsecured
DOSRI accounts to
total DOSRI accounts
Percent of past due DOSRI
accounts to total loans
Percent of nonaccruing
DOSRI accounts to total loans
4,562,445
P
9,213,808 P
Parent
2009
4,371,850
2008
P
9,142,497
2.76%
5.94%
4.18%
7.65%
5.03%
2.35%
4.92%
2.29%
0.32%
-
0.50%
-
0.32%
-
0.50%
-
30.2 Joint Development Agreement
On October 1, 2009, the Parent Company entered into a Joint Development
Agreement (Agreement) with RSB, Bankard, Grepalife, MICO, and Hexagonland
(all related parties, collectively referred to as the Consortium) and with the conformity
of Goldpath, the parent company of Hexagonland, whereby the Consortium agreed to
pool their resources and enter into an unincorporated joint venture arrangement for the
construction and development of a high rise, mixed use commercial/office building
which shall be referred to by the Consortium as the RCBC Savings Bank Building
Project (the Project). The estimated cost for the Project is at P2,200,000.
- 110 -
The Consortium shall share in the Project cost as follows:
Party
Type of
Contribution
%
Cash
Cash
Land
Cash
Cash
Cash
36.59%
23.16%
17.42%
13.89%
4.47%
4.47%
RSB
Parent Company
Hexagonland
Bankard
MICO
Grepalife
100%
Furthermore, within six months from the execution of the Agreement, RSB shall
undertake to liquidate Goldpath and Hexagonland to acquire ownership of the land,
thereby increasing the RSB’s share in the Project cost to 54.01%. As of
December 31, 2009, RSB is still in the process of completing the requirements for the
liquidation of Goldpath and Hexagonland.
The Group and the Parent Company’s initial cash contribution to the joint venture
amounted to P64,791 and P40,499 as of December 31, 2009, respectively, and the land
costing P315,000. The Group and Parent Company’s contributions are presented as
part of the Bank Premises, Furniture, Fixtures and Equipment account in the Group
and Parent Company’s statement of financial position (see Note 13).
30.3 Key Management Personnel Compensation
The breakdown of key management personnel compensation follow:
2009
Short-term benefits
Post-employment benefits
Termination benefits
Other long-term benefits
Consolidated
2008
P
154,414
41,054
-
P
186,231
38,022
48
404
P
159,410
38,428
254
634
P
195,468
P
224,705
P
198,726
Parent
2008
2009
Short-term benefits
Post-employment benefits
2007
2007
P
52,529
41,054
P
59,789
37,421
P
53,040
37,946
P
93,583
P
97,210
P
90,986
- 111 -
30.4 Lease Contract with RRC
The Parent Company and certain subsidiaries occupy several floors of RCBC Plaza as
leaseholders of RRC. Related rental expense reported in the consolidated and Parent
Company financial statements amounted to P167,639 and P159,067 in 2009 and
P163,027 and P156,063 in 2008, respectively, and is included as part of Occupancy and
Equipment-related account in the statements of income. While advance rentals
included as part of Deferred Charges under Other Resources in the statements of
financial position amounted to P42,049 as of December 31, 2008 and nil as of
December 31, 2009, both in the consolidated and Parent Company financial
statements. The Parent Company’s lease contract with RRC is until
December 31, 2010.
30.5 Deposits
As of December 31, 2009 and 2008, certain related parties have deposits with the
Parent Company.
31.
COMMITMENTS AND CONTINGENCIES
In the normal course of operations of the Group, there are various outstanding
commitments and contingent liabilities such as guarantees, commitments to extend
credit, tax assessments, etc., which are not reflected in the accompanying financial
statements. As at December 31, 2009, management does not anticipate losses from
these transactions that will adversely affect the Group’s operations.
Several suits and claims remain unsettled. In the opinion of management, the suits and
claims, if decided adversely, will not involve sums with a material effect on the Parent
Company and its subsidiaries’ financial position or operating results.
The following is a summary of contingencies and commitments arising from
off-statement of financial position items at their equivalent peso contractual amounts as
of December 31, 2009 and 2008:
Consolidated
2009
2008
Derivatives
P 92,918,002
Trust department
accounts (see Note 29)
52,448,850
Unused commercial letters of credit
4,484,766
Inward bills for collection
4,127,816
Spot exchange sold
3,138,383
Spot exchange bought
2,823,634
Outward bills for collection
454,530
Outstanding guarantees issued
870,655
Late deposits/payments received
634,677
Minimum lease rentals under
non-cancellable operating lease
215,625
Items held for safekeeping/collateral
1,414
Traveller’s check unsold
1,225
Parent
2009
2008
P 24,776,281 P
92,918,002
46,945,928
5,646,927
1,261,327
3,310,091
3,520,890
412,444
260,874
47,306,436
4,484,766
4,127,816
3,138,383
2,823,634
454,283
870,655
592,893
222,291
3,587
21,577
-
P
24,776,281
45,193,199
5,646,927
1,259,476
3,310,091
3,520,890
412,444
227,892
-
1,387
1,225
3,561
21,577
- 112 -
Derivatives include the Parent Company’s outstanding long-term cross currency swap
contracts wherein it is committed to sell US dollars and buy Philippine pesos in the
future at a precontracted rate from a counterparty bank, with an aggregate notional
amount of P1,911,200 or $40 million as of December 31, 2008. The Parent Company
then invested the proceeds from the cross currency swap contracts in interbank
placements with various foreign banks. The US dollar placements outstanding as of
December 31, 2007 have a “credit link” to underlying securities that would be received
by the Parent Company in lieu of the US dollar funds it originally invested in case of a
credit default event as defined in the agreement between the Parent Company and its
counterparties.
RCBC Capital has filed an arbitration claim with the International Chamber of
Commerce against a local bank relating to RCBC Capital’s acquisition of Bankard.
RCBC Capital is seeking a rescission of the sale or compensation for damages. In
September 2007, the arbitral tribunal upheld the claim of RCBC Capital and stated that
RCBC Capital is entitled to damages for the breach, the amount of which would be
determined by the tribunal with the assistance of an expert appointed by it. The
hearings concerning the amount of damages due to RCBC Capital were concluded in
October 2009, and RCBC’s Capital’s Memorandum and Reply Memorandum were
submitted on December 1, 2009 and December 15, 2009, respectively.
On January 15, 2010, final evidence on RCBC Capital’s arbitration costs was submitted
by its external counsel and the case was submitted for resolution. A final decision is
expected to be published in April or May 2010.
32.
EARNINGS PER SHARE
The following reflects the income and per share data used in the basic and diluted
earnings per share (EPS) computations (figures in thousands, except EPS data):
Consolidated
2008
2009
2007
Basic Earnings Per Share
a. Net profit attributable to
parent company’s shareholders
Less allocated for preferred and
Hybrid Tier 1 dividends
P
(
b. Weighted average number of
outstanding common shares
c. Basic EPS (a/b)
3,328,382
P
2,153,740
P
3,207,632
487,401 ) (
2,840,981
496,844) (
1,656,896
544,691)
2,662,941
907,994
962,841
909,325
P
3.13
P
1.72
P
2.93
P
2,840,981
P
1,656,896
P
2,662,941
Diluted Earnings Per Share
a. Net profit attributable to
parent company’s shareholders
b. Weighted average number of
outstanding common shares
c. Diluted EPS (a/b)
928,454
P
3.06
999,344
P
1.66
939,168
P
2.84
- 113 Parent
2008
2009
2007
Basic Earnings Per Share
a. Net profit attributable to
parent company’s shareholders
Less allocated for preferred and
Hybrid Tier 1 dividends
P
2,572,124
(
487,401 ) (
2,084,723
b. Weighted average number of
outstanding common shares
c. Basic EPS (a/b)
P
1,170,314
P
1,939,350
496,844) (
673,470
544,691 )
1,394,659
962,841
907,994
909,325
P
2.30
P
0.70
P
1.53
P
2,084,723
P
673,470
P
1,394,659
Diluted Earnings Per Share
a. Net profit attributable to
parent company’s shareholders
b. Weighted average number of
outstanding common shares
c. Diluted EPS (a/b)
928,454
P
2.25
999,344
P
0.67
939,168
P
1.48
The above computation does not take into consideration the effects of certain
accounting treatment allowed by BSP but not allowed under FRSPB and PFRS as
discussed in Note 11.
33.
SELECTED FINANCIAL PERFORMANCE INDICATORS
The following basic ratios measure the financial performance of the Group and the
Parent Company:
Return on average capital funds
Return on average assets
Net interest margin
Capital adequacy ratio
Return on average capital funds
Return on average assets
Net interest margin
Capital adequacy ratio
2009
Consolidated
2008
2007
11.95%
1.24%
4.62%
18.47%
7.40%
0.87%
4.25%
17.30%
12.43%
1.42%
5.00%
18.70%
2009
Parent
2008
2007
10.46%
1.14%
4.00%
17.23%
3.56%
0.56%
3.57%
16.28%
7.26%
1.04%
4.47%
18.21%
The above computation does not take into consideration the effects of certain
accounting treatment allowed by BSP but not allowed under FRSPB and PFRS as
discussed in Note 11.
Schedule B
RIZAL COMMERCIAL BANKING CORPORATION
Accounts Receivable from Directors/Officers/Employees/Related Parties
and Principal Stockholders (Other than Affiliates)
As of December 31, 2009
Name and Designation of Debtor
Pan Malayan Mgt.
HELEN Y. DEE
TLS (Sec A)
Bal. at beg
of period
1,160,000,000.00
Additions
47,000,000.00
Deductions
Amounts
Amounts
Collected
Written off
-
Not
Current
Bal. at end
of period
1,207,000,000.00
(D)
Pacific Plans Inc
DOM BPS
FCDU SEC
House of Investment
85,000,000.00
389,000,000.00
38,149,848.96
Isuzu Manila
TLC
TLS
TR DOM
DOM BPS
Malayan Colleges
TLS
890,937,500.00
First Malayan Leasing
TLS
520,000,000.00
Grepaland, Inc.
TLS
DOM BPS
Luisita Indl Park
BP DOC PD
TLS PD
52,500,000.00
471,800,000.00
-
Malayan Rental
TLS
107,000,000.00
-
Pan Malayan Express
DOM BPS
RCBC Forex
TLC
BDS
DOM BPS
55,000,000.00
135,000,000.00
516,162.09
-
516,162.09
RCBC Securities
DOM BPS
4,547.00
-
4,547.00
438,000,000.00
-
133,333,332.00
14,272,970.00
RIZALINO S NAVARRO
Current
1,207,000,000.00
15,047,246.78
3,641,932,800.00
19,400,000.00
-
-
15,047,246.78
3,641,932,800.00
-
-
-
12,000,000.00
85,000,000.00
377,000,000.00
50,925,678.43
22,678,066.19
85,000,000.00
377,000,000.00
50,925,678.43
22,678,066.19
-
48,146,551.72
842,790,948.28
842,790,948.28
-
520,000,000.00
12,775,829.47
22,678,066.19
4,500,000.00
-
-
23,900,000.00
-
-
107,000,000.00
-
-
23,900,000.00
52,500,000.00
471,800,000.00
55,000,000.00
135,000,000.00
-
52,500,000.00
471,800,000.00
-
-
55,000,000.00
135,000,000.00
-
(D)
EEI Corporation
TLS
EEI Realty
TLS
73,166,610.00
-
EEI Retirement Fund
TLS
530,000,000.00
-
174,195,054.12
-
CESAR VIRATA
(D)
RCBC Land Inc
TLS
-
172,520,054.14
304,666,668.00
304,666,668.00
58,893,640.00
58,893,640.00
530,000,000.00
530,000,000.00
1,674,999.98
1,674,999.98
Schedule B
RIZAL COMMERCIAL BANKING CORPORATION
Accounts Receivable from Directors/Officers/Employees/Related Parties
and Principal Stockholders (Other than Affiliates)
As of December 31, 2009
Name and Designation of Debtor
TEODORO D. REGALA
Bal. at beg
of period
TLS
Accra Law
TLS
Masagana Holdings
FCDU
SPINAKKER CAPITAL GROUP
Rustans Supercenter
GRAND TOTAL
Additions
Not
Current
Current
Bal. at end
of period
(D)
Accrain Holdings
TERI CHEN
Chen, Chua m/t Cristina
Deductions
Amounts
Amounts
Collected
Written off
TLS (1:1)
22,400,000.00
123,552,000.00
-
10,000,000.00
-
3,432,000.00
500,000.00
199,894,857.12
9,142,496,626.07
-
199,894,857.12
97,453,895.66
4,868,100,520.85
22,400,000.00
22,400,000.00
10,000,000.00
10,000,000.00
120,120,000.00
120,120,000.00
500,000.00
500,000.00
0.00
-
3,847,550,000.88
-
524,300,000.00
4,371,850,000.88
RIZAL COMMERCIAL BANKING CORPORATION
Yuchengco Tower, RCBC Plaza No. 6819 Ayala Avenue, Makati City
Parent Company Reconciliation of Retained Earnings for Dividend Declaration
December 31, 2009
(Amounts in thousand)
UNAPPROPRIATED RETAINED EARNINGS
FOR DIVIDEND DECLARATION
AT BEGINNING OF YEAR
Net Income Realized for the Year
Net income per audited financial statements
Less unrealized income, net of tax:
Equity in net income of associate and joint venture
Unrealized foreign exchange gain - net (1)
(except those attributable to cash and cash equivalents)
Fair value gains arising from mark-to-market measurement
Fair value gains from investment properties
Unrealized actuarial gains on defined benefit plan
Adjustment due to deviation from PFRS/GAAP
P
4,771,934
2,572,124
(
(
8,497 )
10,376 )
-
Add unrealized loss, net of tax:
Depreciation on revaluation increments
Adjustment due to deviation from PFRS/GAAP
Fair value loss from investment properties
(
18,873 )
-
2,553,251
Add (Less) Changes in Retained Earnings for the Year
Dividend declarations during the period
Appropriations of retained earnings during the period - Reserve for
Trust Business
Reversals of appropriations of retained earnings
Deferred income tax set up in prior years
Effects of prior period adjustments - Amortization of deferred charges
Treasury shares
(
785,831 )
(
8,751 )
1,389,497 )
834,633 )
952,709 )
(
(
(
UNAPPROPRIATED RETAINED EARNINGS
FOR DIVIDEND DECLARATION AT END OF YEAR
Note:
(1) Unrealized foreign exchange loss can be offset to the extent of unrealized foreign exchange gain.
(
3,971,421 )
P
3,353,764
INDEX TO EXHIBITS
Form 17-A
Page No.
No.
(3)
Plan of Acquisition, Reorganization,
Arrangement, Liquidation, or Succession
*
Instruments Defining the Rights of Security
Holders, Including Indentures
*
(8)
Voting Trust Agreement
*
(9)
Material Contracts
*
(10)
Annual Report to Security Holders, Form 17-Q
or Quarterly Report to Security Holders
*
(13)
Letter re Change in Certifying Accountant
*
(16)
Report Furnished to Security Holders
*
(18)
Subsidiaries of the Registrant
(19)
Published Report Regarding Matters Submitted
to Vote of Security Holders
*
(20)
Consent of Experts and Independent Counsel
*
(21)
Power of Attorney
*
(29)
Additional Exhibits
*
(5)
202
_________
* These Exhibits are either not applicable to the Company or require no answer.
201
Exhibit 18.
SUBSIDIARIES OF THE REGISTRANT
Rizal Commercial Banking Corporation (the “Parent Company”) holds interest in the
following subsidiaries and associates:
Subsidiaries/Associates
Country of
Incorporation
Subsidiaries:
RCBC Savings Bank, Inc. (RSB)
Philippines
RCBC Forex Brokers Corporation
(RCBC Forex)
Philippines
RCBC Telemoney Europe
Italy
RCBC North America, Inc.
(RCBC North America)
California, USA
RCBC International Finance Limited
(RCBC IFL)
Hongkong
RCBC Investment Ltd.
Hongkong
RCBC Capital Corporation (RCBC Capital)
Philippines
RCBC Securities, Inc. (RSI)
Philippines
Pres. Jose P. Laurel Rural Bank, Inc. (JPL)
Philippines
Bankard, Inc. (Bankard)
Philippines
Merchants Savings and Loan
Association, Inc. (Merchants Bank)
Philippines
Special Purpose Companies (SPCs):
Under Parent Company:
Niyog Property Holdings, Inc. (NPHI)
Philippines
Under RSB:
Goldpath Properties Development
Corporation (GPDC)
Philippines
Manchesterland Properties, Inc.
Philippines
Hexagonland Corporation
Philippines
Best Value Property and Development
Corporation
Philippines
Crescent Park Property and Development
Corporation
Philippines
Crestview Properties Development
Corporation
Philippines
Eight Hills Property and Development
Corporation
Philippines
Fairplace Property and Development
Corporation
Philippines
Gold Place Properties Development
Corporation
Philippines
Greatwings Properties Development
Corporation
Philippines
Happyville Property and Development
Corporation
Philippines
Landview Property and Development
Corporation
Philippines
Lifeway Property and Development
Corporation
Philippines
Effective Percentage
___of Ownership
100.00
100.00
100.00
(a)
100.00
(c)
(d)
(e)
99.99
100.00
99.96
100.00
99.00
91.69
(f)
96.38
(g)
(h)
100.00
(b)
(i)
(i)
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Subsidiaries/Associates
Country of
Incorporation
Under RSB:
Niceview Property and Development
Corporation
Philippines
Princeway Properties Development
Corporation
Philippines
Stockton Realty Development Corporation Philippines
Top Place Properties Development
Corporation
Philippines
Associates:
RCBC Land, Inc. (RLI)
YGC Corporate Services, Inc. (YCS)
Luisita Industrial Park Co. (LIPC)
Subic Power Corporation (SPC)
RCBC Realty Corporation (RRC)
Honda Cars Phils., Inc. (HCPI)
Roxas Holdings, Inc. (RHI)
Great Life Financial Assurance
Corporation (GLFAC)
Effective Percentage
___of Ownership
(h)
100.00
100.00
100.00
100.00
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
49.00
40.00
35.00
26.50
34.80
12.88
4.71
(j)
-
Explanatory Notes:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Includes 25.29% and 31% ownership of RCBC IFL in 2009 and 2008, respectively
A wholly owned subsidiary of RCBC IFL
A wholly owned subsidiary of RCBC Capital
In 2009, the Parent Company made a total capital infusion to JPL amounting to P175
million which resulted in its full and irrevocable voting and economic rights for 99% of the
JPL’s outstanding shares (see Note 12).
Owned 59.07% by RCBC Capital in 2007. In 2008, the Parent Company’s
P1 billion capital infusion by way of conversion of debt to equity was effected
(see Note 12). As of December 31, 2009 and 2008, the Parent Company has 66.58% direct
ownership and 25.11% indirect ownership through RCBC Capital.
In 2008, the Parent Company acquired 96.38% ownership in Merchants Bank from
Finman Capital Corporation.
In 2009, the Parent Company and RSB reclassified its investment in NPHI from
investment property to equity investment which resulted into their ownership of 54%
and 46%, respectively (see Notes 12 and 14).
In 2009, RSB reclassified its investment with SPCs from Investment Property account
to Investments in Subsidiaries and Associates account which resulted into its
consolidation with the Parent Company (see Note 14).
A wholly owned subsidiary of GPDC.
Sold in 2009 to Great Pacific Life Financial Assurance Corporation (see Note 12)