1. business and industrial
2. business operations
3. human resources

COVER SHEET
4
7 5
S.E.C. Registration Number
0 N
R
C R
I
A
L
MM E R C I
IZ
(Company's Full Name)
P Y A T
0R N ER
E
AVE N
8 9 A Y A
G L
I T Y
A K AT
E
E N
(Business Address: No. Street City/ Town/ Province)
894-95-59
Company Telephone Number
ATTY. MA. CELIA H. FERNANDEZ-ESTAVILLO
Contact Person
DEFINITIVE INFORMATION STATEMENT
2013
31
12
Month
Day
Fiscal Year
6
Month
Day
Annual Meeting
FORM TYPE
GSED
Secondary License Type, If Applicable
D
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
887
Total No. Of Stockholders
Domestic
To be accomplished by SEC Personnel concerned
File Number
LCU
Document I.D.
Cashier
STAMPS
----------------------------------------
Remarks= pls. Use black ink for scanning purposes
Foreign
SECURITIES AND EXCHANGE COMMISSION
SEC FORM IS
INFORMATION STATEMENT PURSUANT TO SECTION 17.1 (b)
OF THE SECURITIES REGULATION CODE
1. Check the appropriate box:
[ ] Preliminary Information Statement
[^l] Definitive Information Statement
2.
Name of Registrant as specified in its charter: Rizal Commercial Banking Corporation
3. Province, Country or other jurisdiction of incorporation or organization: Philippines
4. SEC Identification Number: 17514
5. BIR Tax Identification Code: 320-000-599-760
6. Address of principal office: Yuchengco Tower, RCBC Plaza, 6819 Avala Ave. cor. Sen. Gil ,
J. Puvat Avenue, Makati City
Postal Code 0727
7. Registrant's telephone number, including area code: (632) 894-9000
8. Date, time and place of the meeting of the security holders: June 24, 2013, 4:00 P.M.,
Alfonso Svci p Executive Lounge, 47th Floor, RCBC Plaza, Yuchengco Tower, 6819
Ayala Avenue corner Sen. Gil Puvat Avenue, Makati City
9. Approximate date on which the Information Statement is first to be sent or given to
security holders: May 31, 2013
10. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the
RSA (information on number of shares and amount of debt is applicable only to corporate
registrants):
Number of Shares of Common Stock
Title of Each Class
Outstanding or Amount of Debt Outstandinq
Common
(as of April 30, 2013) 1,275,658,638
11. Are any or all of registrant's securities listed on the Philippine Stock Exchange? Yes [AI] No [ ]
A. GENERAL INFORMATION
1. Date. Time and Place of Meetinq of Security Holders
Date
June 24, 2013
Time
4:00 P.M.
th
Place
47 Floor, Alfonso Sycip Executive Lounge
RCBC Plaza, Yuchengco Tower
6819 Ayala Avenue corner
Sen. Gil J. Puyat Avenue
Makati City
Complete mailing address of
Principal office
7th Floor, RCBC Plaza, Yuchengco Tower
6819 Ayala Avenue corner
333 Sen. Gil J. Puyat Avenue
Makati City
Approximate date on which the
Information Statement is first
to be sent or given to security
holders
May 31, 2013
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
2.
Revocabilitv of Proxies
A person giving a proxy may revoke it at any time before it is exercised. A proxy may be revoked
through either of the following: (a) filing with the Office of the Corporate Secretary, not later than
5:00pm of June 21, 2013, a written notice revoking it; or (b) attending the Annual Stockholders'
Meeting and expressing his intention to vote in person. Mere attendance at the Annual
Stockholders' Meeting will not automatically revoke a proxy.
3. Dissenter's Riqht of Appraisal
There are no matters or proposed actions as specified in the attached Notice of Annual
Stockholders' Meeting that may give rise to a possible exercise by shareholders of their appraisal
rights or similar right as provided in Title X of the Corporation Code of the Philippines. However, if
at any time after this Information Statement has been sent out, an action (which may give rise to
exercise of appraisal right) is proposed at the Annual Stockholders' Meeting, any stockholder who
wishes to exercise such right and who voted against the proposed action, must make a written
demand within thirty (30) days after the Annual Stockholders' Meeting.
Under Title X of the Corporation Code, shareholders dissenting from and voting against the
following corporate actions may demand payment of the fair value of their shares as of the day
prior to the date on which the vote was taken for such corporation action: (i) amendment to the
Bank's articles and by-laws which has the effect of changing or restricting the rights of any
shareholder or class of shares; or authorizing preferences in any respect superior to those of
outstanding shares of any class; (ii) sale, lease, mortgage or other disposition of all or
substantially all of the Bank's assets; (iii) merger or consolidation; (iv) investment of corporate
funds in another corporation or business or for any purpose other than its primary purpose; and
(v) extension or shortening of term of corporate existence.
The appraisal right may be exercised by any shareholder who shall have voted against the
proposed corporate action, by making a written demand on the Bank within thirty (30) days after
the date on which the vote was taken for payment of the fair market value of such shareholder's
shares. The failure to make demand within such period shall be deemed a waiver of the appraisal
2
right. If the proposed corporate action is implemented or effected, the Bank shall pay the
dissenting shareholder, upon surrender of the certificate(s) representing his shares, the fair value
thereof as of the day prior to the date on which the vote was taken, excluding any appreciation or
depreciation in anticipation of such corporate action.
4. Person Making the Solicitation
This solicitation is being made by the Bank.
Solicitation of proxies will be mainly conducted through mail. Proxies will also, however, be
solicited in person or through telephone. There is no additional cost of solicitation. However,
proxy forms will be included in the information statement which will be mailed to all shareholders,
with a cost of approximately P79,830.00 which will be borne by the Bank.
5. Validation of Proxies
The last day for validation of proxies will be the Monday before the date of the Annual Meeting of
Stockholders or June 17, 2013. Validation of proxies will be done by the Corporate Secretary and
persons designated by the Corporate Secretary who shall be under her supervision and control,
in accordance with the procedure and guidelines set out in the Company's By-Laws and Section
11(b) of the SRC Rule 20.
6. Interest of Certain Persons in or Opposition to Matters to be Acted Upon
The placing and subscription transaction involving 63,650,000 common shares of the Bank is
being submitted to the Stockholders for its ratification. Pan Malayan Management and Investment
Corporation (PMMIC), as a major shareholder, lent 63,650,000 listed common shares to the Bank
to facilitate the placement of the shares to institutional investors as part of the Bank's capital
raising activities. Amb. Alfonso T. Yuchengco and Ms. Helen Y. Dee are directors of PMMIC.
Please note that Amb. Alfonso T. Yuchengco and Ms. Helen Y. Dee, although present at the
special meeting of the Board of Directors last March 6, 2013, abstained from the discussion and
approval by the Board of Directors.
Moreover, all directors and management of the Bank act in the best interest of the Shareholders
and there have been no adverse findings of conflict of interest or insider trading involving any
director or management in the past 2 years.
B. CONTROL AND COMPENSATION INFORMATION
4. Voting Securities and Principal Holders Thereof
Class of Voting Securities : As of April 30, 2013, 1,275,658,638 Common shares and
342,082 Preferred shares are outstanding, and are entitled to be represented and vote at the
Annual Stockholders' Meeting. Each share is entitled to one vote.
Record Date : Only stockholders of record as of May 24, 2013 shall be entitled to notice and
vote at the meeting.
Manner of Voting : The By-Laws of the Bank provides that every stockholder entitled to vote
shall have the right to vote in person or by proxy the number of shares of stock standing in
his own name in the stock and transfer books of the Bank at the time the books were closed
and said stockholder may vote such number of shares for as many persons as there are
directors, or he may cumulate said shares and give one candidate as many votes as the
number of directors to be elected, multiplied by the number of shares shall equal, or he may
distribute them on the same principle among as many candidates as he shall see fit,
3
Provided, that the whole number of votes cast by him shall not exceed the number of shares
owned by him, as shown in the books of the Bank, multiplied by the whole number of
directors to be elected; and Provided, that no stock declared delinquent by the Board of
Directors for unpaid subscriptions shall be voted.
Security Ownership of Certain Record Owners of more than 5% (as of April 30, 2013)
Title of
Class
Common
Name & Address of
Record Owner and
Relationship with Issuer
Pan Malayan
Management and
Investment Corp.
(Major Stockholder of
RCBC)
48th Floor, RCBC Plaza
Yuchengco Tower, 6819
Ayala Avenue corner Gil
Puyat Ave., Makati City
Common
PCD Nominee
Corporation
(Filipino)
G/F, MKSE Bldg.
(Stockholder of RCBC)
Ayala Avenue, Makati
City
Common
PCD Nominee
Corporation
G/F, MKSE Bldg.
(Non-Filipino)
(Stockholder of RCBC)
Ayala Avenue, Makati
City
Common
IFC Capitalization
(Equity) Fund, L.P.
(Stockholder of RCBC)
c/o IFC Capitalization
(Equity) Fund (GP), LLC
2121 Pennsylvania
Avenue, NW
Washington, DC 20433
USA
Name of Beneficial
Owner and Relationship
with Record Owner
Pan Malayan
Management and
Investment Corp.
(PMMIC)*
(Major Stockholder of
RCBC)
*Person Authorized to
Direct the Voting of the
Shares: Sec. Alfonso T.
Yuchengco, Board
Chairman of PMMIC.
PCD Nominee
Corporation
(Filipino)
*Person authorized to
Direct the Voting of the
Shares: Ms. Mary Ann
Malicdem, Assistant
Manager/ OperationsPCD Nominee Corp.
PCD Nominee
Corporation
(Non-Filipino)
*Person Authorized to
Direct the Voting of the
Shares: Ms. Mary Ann
Malicdem, Asst.
Manager/Operations PCD Nominee Corp.
IFC Capitalization
(Equity) Fund, L.P.
*Person Authorized to
Direct the Voting of the
Shares: Mr. Tim-Chiu R.
Leung, Director
Citizenship
No. of
Shares
Filipino
537,613,632
42.14%
Filipino
308,723,573
24.20%
Other Alien
300,783,873
23.57%
71,151,505
5.57%
American
The participants under PCD owning more than 5% of the voting securities (common)
are:
Name
RCBC Securities, Inc.
Citibank N.A.
Shares
200,576,788
90,223,520
Percent
% of Total
15.72%
7.07%
4
The Hongkong and Shanghai
Bank
68,987,036
5.40%
Security Ownership of Certain Record Owners of more than 5% (as of April 30, 2013)
Title of
Class
Preferred
Name & Address of
Record Owner and
Relationship with Issuer
Name of Beneficial
Owner and
Relationship with
Record Owner
Citizenship
No. of
Shares
Percent
None
Security Ownership of Foreigners (as of April 30, 2013)
Title of Class
Common
Preferred
Shares
372,149,817
416
% of Total
29.17
0.12
Security Ownership of Management (as of April 30, 2013)
Title of
Class
Name of Beneficial Owner/
Position
a. Board of Directors:
Common
Alfonso T. Yuchengco
Common
Helen Y. Dee
Common
Cesar E. A. Virata
Common
Common
Common
Lorenzo V. Tan
Teodoro D. Regala
Wilfrido E. Sanchez
Common
Common
Common
Common
Common
Common
Common
Ma. Celia H. FernandezEstavillo
Tim Chiu R. Leung
Tze Ching Chan
Minki Brian Hong
Medel T. Nera
Francis G. Estrada
Armando M. Medina
Common
Francisco C. Eizmendi, Jr.
Common
Antonino L. Alindogan, Jr.
b. Senior Management:
Common
Alfredo S. Del Rosario
Amount and Nature of
Beneficial Ownership
Citizenship
Percent
of Class
P76,105.00 "r"
Filipino
0.006%
P4,380.00 "r"
P60,310.00 "b"
P1,670 "r"
P500,000.00 "b"
P50.00 "r"
P10.00 "r"
P10.00 "r"
P300,000.00 "b"
P3,770,140.00 "r"
Filipino
0.005%
Filipino
0.004%
Filipino
Filipino
Filipino
0.000%
0.000%
0.002%
Filipino
0.029%
British
Chinese
American
Filipino
Filipino
Filipino
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
P10.00 "r"
Filipino
0.00%
P10.00 "r"
Filipino
0.00%
Vice-
P174,000.00 "b"
Filipino
0.001%
Vice-
P20,000.00 "b"
Japanese
0.000%
Vice-
P74,000.00 "b"
Filipino
0.000%
Honorary Chairman/
Director
Chairperson
Director/ Corporate
Vice-Chairman
President and CEO
Director
Director
Director/ Corporate
Secretary
Director
Director
Director
Director
Director
Independent
Director
Independent
Director
Independent
Director
Executive
President
Common
Koji Onozawa
Senior
President
Common
Rommel S. Latinazo
First Senior
President
c. Directors &Principal Officers (as a Group)
P10.00 "r"
P10.00 "r'
P10.00 "r"
P10.00 "r"
P30.00 "r"
P1,950.00 "r"
P5,667,660.00
0.044%
r" refers to registered ownership and "b" refers to beneficial ownership
5
Changes in Control: At present, there is no arrangement known to the Bank which may
result in a change in control.
Voting Trust Holders of 5% or More: There are no shareholdings holding any Voting Trust
Agreement or any such similar agreement.
5. Directors and Executive Officers
(a) Nominees for Independent Directors:
1. Mr. Armando M. Medina
2. Mr. Francisco C. Eizmendi, Jr.
3. Mr. Antonino L. Alindogan, Jr.
(b) Nominees for Directors:
i. Amb. Alfonso T. Yuchengco
ii. Ms. Helen Y. Dee
iii. Mr. Cesar E. A. Virata
iv. Mr. Lorenzo V. Tan
v. Atty. Teodoro D. Regala
vi. Atty. Wilfrido E. Sanchez
vii. Atty. Ma. Celia H. Fernandez-Estavillo
viii. Mr. Minki Brian Hong
ix. Mr. Tze Ching Chan
x. Mr. Tim-Chiu R. Leung
xi. Mr. Medel T. Nera
xii. Francis G. Estrada
Mr. Eduardo S. Lopez, Jr., a stockholder who is not in anyway related to the nominees,
nominated to the Board the re-election of Mr. Armando M. Medina, Mr. Francisco C. Eizmendi,
Jr., and Mr. Antonino L. Alindogan, Jr. as Independent Directors.
The Corporate Governance Committee composed of five (5) members, two (2) of whom are
independent directors, review and evaluate the qualifications of all persons to be nominated to
the Board as well as those to be nominated to other positions requiring appointment by the Board
of Directors, i.e, with the ranks of Assistant Vice-Presidents and higher. The Corporate
Governance Committee is composed of Mr. Francisco C. Eizmendi, Jr. as the Chairperson, and
Atty. Wilfrido E. Sanchez, Mr. Antonino L. Alindogan, Jr., Ms. Helen Y. Dee and Atty. Ma. Celia H.
Fernandez-Estavilllo as Members. The Directors will be nominated and elected in accordance
with SRC Rule 38.
All the nominated directors comply with all the qualifications required of a director mentioned
under Sections X141.2 (for director) of the Manual of Regulations for Banks (MORE) and do not
possess any of the disqualifications mentioned under Sections X143.1 (for director) of the MORB,
as amended by Circular No. 513 dated February 10, 2006.
Likewise, pursuant to the Code of Corporate Governance, all the directors have satisfied the
required number of attendance in board meetings, as well as in their respective Committees.
The Directors shall hold office for one (1) year and until their successors are elected and
qualified.
The Independent Directors, Mr. Armando M. Medina, Mr. Francisco C. Eizmendi, Jr., and Mr.
Antonino L. Alindogan, Jr. have always possessed the qualifications and none of the
disqualifications of an independent director.
6
(c) Incumbent Directors:
Incumbent Directors/
Senior Executive Officers
served
Alfonso T. Yuchengco
(Age)/
Citizenship
(90)/
Filipino
Position
Yuchengco Group of Companies
EEI Corporation
Pan Malayan Management & Investment
Corporation
MICO Equities (Holding Company of Malayan
Group of Insurance Cos.)
AY Foundation, Inc.
Yuchengco Center Inc.
Yuchengco Museum
RCBC Realty Corporation
GPL Holdings, Inc.
Honda Cars Kalookan, Inc.
Malayan Colleges, Inc.
Enrique T. Yuchengco, Inc.
YGC Corporate Services, Inc.
Sunlife Grepa Financial Inc
Malayan Insurance Company Inc.
RCBC Land, Inc.
House of Investments, Inc.
Bantayog ng mga Bayani (Pillar of Heroes
Foundation)
Bayanihan Foundation
Master of Business Administration (MBA) Juris
Doctor (JD) dual degree program of De La Salle
University Professional Schools, Inc. Graduate
School of Business and Far Eastern University
Institute of Law
Confederation of Asia-Pacific Chambers of
Commerce and Industries (CACCI)
Blessed Teresa of Calcuta
Compania Operatta ng Pilipinas
Dabaw Kaisa Foundation Inc.
Asia Society, New York
Waseda Institute for Asia Pacific Studies
Risumeikan Asia Pacific University
International Insurance Society (IIS)
Philippine-Japan Society, Inc.
Philippine-Japan Economic Cooperation Committee
Position/Period which they had
Honorary Chairman (May 27, 2002 to
present)
Director (June 30, 2003 to present)
Company
Chairman
Chairman
Chairman of the Board and Chief
Executive Officer
Chairman of the Board
Chairman of the Board
Chairman
Chairman
Chairman
Director/Chairman
Director/Chairman
Chairman/Trustee
Chairman
Chairman/Director
Director
Director
Director
Director
Chairman of the Board
Chairman of the Board of Trustees
Chairman of the Board
Chairman, Advisory Board
Vice-Chairman of the Board of Judges
Honorary Chairman
Honorary Member
Trustee Emeritus
Member of International Advisory Board
Member of the Advisory Board
Member, Honors Committee and Former
Chairman of the Board of Directors and
Adviser
Director
Member, Advisory Board
7
Mclaren School of Business, University of San
Francisco, USA
Columbia University, Business School, New York,
USA
Pacific Forum
University of St. La Salle Affiliate College, Roxas
City
University of Alabama Culverhouse College of
Commerce & Business Administration
Helen Y. Dee
(68)/
Filipino
Company
Hydee Management & Resources, Inc.
RCBC Savings Bank
House of Investments, Inc.
Mapua Information Technology Center, Inc.
Malayan Insurance Co. Inc.
Pan Malayan Realty Corp.
RCBC Leasing and Finance Corporation
Tameena Resources, Inc.
Landev Corp.
HI-Eisai Pharmaceuticals, Inc.
Manila Memorial Park Cemetery, Inc.
La Funeraria Paz Sucat
Financial Brokers Insurance Agency, Inc.
Mijo Holdings, Inc.
Xamdu Motors, Inc.
National Reinsurance Corporation of the Philippines
West Spring Development Corp.
Pan Malayan Management & Investment Corp.
Philippine Long Distance Telephone Company
Maibarara Geothermal Inc.
Petro Energy Resources Corp.
Petro Green Energy Corp.
South Western Cement Corp.
Great Life Financial Assurance Corp.
Seafront Resources Cor
MICO Equities, Inc.
AY Holdings, Inc.
Pan Malayan Express
Isuzu Philippines, Inc.
Honda Cars Philippines, Inc.
Philippine Integrated Advertising Agency, Inc.
Sunlife Grepa Financial Inc.
Honda Cars Kalookan
RCBC Forex Brokers Corp.
Mapua Board of Trustees
Philippine Business for Education, Inc.
Member, International Board of Trustees
Member, Board of Overseers
Member, Board of Governors
Member, Board of Trustees
Member, International Advisory
Board Chairperson (June 27, 2005 to
present)
Director (March 28, 2005 to present)
Position
Chairman/President
Chairperson
Chairman
Chairman
Director
Chairperson
Director / Chairperson
Chairman & CEO
Chairman
Chairman
Chairman
Chairperson/Director
Chairperson/President
Chairman/President
Chairman
Chairman
Vice-Chairman
Director/ Vice Chairman
Director
Chairman
Chairperson
Vice Chairman
Director
Director
Chairperson/Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Member
Board Member
_
8
EEI Corporation
GPL Holdings
Moira Management, Inc.
YGC Corporate Services, Inc.
Business Harmony Realty, Inc.
Cesar E.A. Virata
Board Member
President
President
President
Treasurer
(82)/
Filipino
Company
C.Virata & Associates Inc.
ATAR VI Property Holding Company, Inc.
RCBC Realty Corp.
RCBC Forex Broker Corporation
Pacific Fund, Inc.
Bankard, Inc.
RCBC Land, Inc.
Malayan Insurance Co., Inc.
Great Life Financial Assurance
RCBC Savings Bank
Luisita Industrial Park
RCBC International Finance Ltd. (Hongkong)
Lopez Holdings Corp.
Cavitex Infrastructure Corporation
YGC Corporate Services, Inc.
Niyog Properties Holdings, Inc.
Business World Publishing Corp.
Belle Corporation
City and Land Developers, Inc.
AY Foundation, Inc.
Malayan Colleges, Inc. (Operating under Mapua
Insitute of Technology)
Lorenzo V. Tan
(51)/
Filipino
Company
RCBC International Finance Ltd./Investment
RCBC Telemoney Europe SpA
Merchants Savings and Loan Association, Inc.
RCBC Leasing and Finance Corporation
RCBC Savings Bank
Asian Bankers Association
Bankers Association of the Philippines
RCBC Capital Corporation
RCBC Rental Corporation
Smart Communications, Inc.
Morphs Lab, Inc.
Director (1995 to present)
Corporate Vice-Chairman (June 22,
2000 to present)
Position
Chairman & President
Chairman & Director
Director
Chairman & Director
Chairman/ Director
Chairman/ Director
President/ Director
Director
Director
Director
Vice-Chairman
Director
Independent Director
Director
Director
Director
Vice-Chairman
Independent Director
Independent Director
Trustee
Trustee
Director/ President and CEO (April 01,
2007 to present)
Position
Chairman
Chairman
Director/Chairman of the Board
Director / Vice-Chairman
Vice Chairman
Vice-Chairman
First Vice-President
Director
Director
Director
Independent Director
9
Teodoro D. Regala
(79)/
Filipino
Company
Angara Abello Concepcion Regala & Cruz Law
Offices
Bankard, Inc.
Malayan Insurance Co., Inc.
MICO Equities, Inc.
Philplans First, Inc.
Philhealthcare, Inc.
Dimension Data Philippines Inc.
Safeway Philtech, Inc.
Union Church of Manila Philippine Foundation Inc.
General Motors Automobiles Phils., Inc.
OEP Philippines, Inc.
Wilfrido E. Sanchez
(76)/
Filipino
Company
Quiason Makalintal Barot Torres & Ibarra Law
Offices
Adventure International Tours, Inc.
Amon Trading Corp.
Center for Leadership & Change, Inc.
EEI Corporation
EMCOR, Inc.
Eton Properties Philippines, Inc.
J-DEL Investment and Management Corp.
JVR Foundation, Inc.
Kawasaki Motor Corp.
K Servico Trade, Inc.
Magellan Capital Holdings Corp.
PETNET, Inc.
PETPLANS, Inc.
LT Group Inc.
Transnational Diversified Corp.
Transnational Diversified Group, Inc.
Transnational Financial Services, Inc.
Universal Robina Corp.
Ma. Celia H. FernandezEstavillo
Company
(41)/
Filipino
Director (June 28, 1999 to present)
Position
Founding Partner
Director
Director
Director
Director
Director
Director
Director
Director/ Chairman of the Board/
President
Director
Director/Corporate Secretary
Director (March 27, 2006 to present)
Position
Tax Counsel
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director (June 26, 2005 to present)
Corporate Secretary (February 28, 2005
to present)
First Senior Vice-President, Head of
Legal and Regulatory Affairs Group (July
19, 2006 to present)
Position
10
Phil. Integrated Advertising Agency
Luisita Industrial Park Corp.
Manchesterland Properties, Inc.
RP Land Development Corp.
YGC Corporate Services Inc.
Mapua Institute of Technology
Yuchengco Center
RCBC Capital Corporation
RCBC Savings Bank
Niyog Property Holdings, Inc.
Mont-Sant-Michel Drugs, Inc.
Marques de Comillas, Inc.
FBIA Insurance Agency, Inc.
Calafern, Inc.
Minki Brian Hong
Director
Director
Director
Director
Director
Trustee
Trustee
Corporate Secretary
Corporate Secretary
Corporate Secretary
Treasurer
Treasurer
Director
Director / Treasurer
(40)/
American
Director (June 27, 2011 to present)
Company
CVC Asia Pacific Limited
Hexagon Investment Holdings Limited
Capital Asia Funds Limited
Best Moment Holdings
WiniaMando Inc.
Spare Group Limited
Spare Holdings Limited
Position
Managing Director
Director
Director
Director
Director
Director
Director
Medel T. Hera
Director (July 25, 2011 to present)
(57)/
Filipino
Company
National Reinsurance Corporation of the Philippines
House of Investments, Inc.
RCBC Realty Corp.
Honda Cars Kalookan
iPeople, Inc.
Landev Corporation
Hi-Eisai Pharmaceutical
Malayan Colleges Laguna
Investment Managers, Inc.
YGC Corporate Services
Greyhounds Security and Investigation Agency
Cribs Foundation, Inc.
Position
Director
Director / President / CEO
Director / President
Director / President
Director
Director
Director
Director
Director
Director
Chairman / Director
Director / Treasurer
Tze Ching Chan
Director (November 28, 2011 to present)
(56)/
Chinese
Company
The Community Chest of Hong Kong
Hong Kong Exchanges and Clearing Limited
Mongolian Mining Corporation (MMC)
Position
Member, Board of Directors
Member, Board of Directors
Member, Board of Directors
11
Portofino (165) Limited
Tung Shing Holdings Company Limited
East Asia Futures Limited
East Asia Securities Company Limited
The Bank of East Asia, Limited
CVC Capital Partners
Larry Jewelry International Company Limited
Hong Kong Institute of Bankers
Hong Kong Open University
Greater Pearl River Delta Business Council
Securities and Futures Commission
The Hong Kong Tourism Board
Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Senior Adviser
Senior Adviser
Independent Non-Executive Director
Honorary Advisory Vice President
Member, Sponsorship and Development
Fund Committee
Deputy Chairman of Council
Council Member
Member, Disciplinary Appeals
Committee
Member
Member of Executive Committee
Member
Tim-Chiu R. Leung
Director (March 26, 2012 to present)
Hong Kong Polytechnic University
Hong Kong Red Cross
Hong Kong Securities Clearing Company Limited
(60)/
British
Company
New York Engineering Limited
Crownex Properties Limited
Skimway Ltd.
Francis G. Estrada
Position
Director
Director
Director
(63)/
Filipino
Company
De La Salle Philippines
Philippine Military Academy
Ayala Land Inc
Philippine American Life Insurance Company
Institute of Corporate Directors
De La Salle Philippines, National Mission Counsel
Sociedad Espanola de Beneficiencia
RCBC Savings Bank
EEI Corporation
Armando M. Medina
Company
RCBC Capital Corp.
RCBC Savings Bank
Malayan Insurance Co.
Malayan Colleges Inc.
(63)/
Filipino
Director (December 17, 2012 to present)
Position
Chairman, Board of Trustees
Chairman, Board of Visitors
Independent Director
Director
Vice-Chairman
Chairman, Investment Committee
Trustee
Director
Director
Independent Director (February 26, 2003
to present)
Position
Independent Director
Independent Director
Independent Director
Independent Director
12
Francisco C. Eizmendi, Jr.
(77)/
Filipino
Position
Trustee
Independent Director
Independent Director
Chairman
Advisory Board Member
Company
Institute of Corporate Directors
Sun Life Grepa Financial Inc.
Makati Finance
Dearborn Motor Co.
East West Seed
Antonino L. Alindogan, Jr.
Independent Director (May 26, 2006 to
present)
(74)/
Filipino
Independent Director (November 12, 2007
to present)
Position
Company
House of Investments, Inc.
An-Cor Holdings, Inc.
Eton Properties Phils., Inc.
PAL Holdings, Inc.
Philippine Airlines, Inc.
Independent Director
Chairman of the Board
Independent Director
Independent Director
Independent Director/ ExCom Member/
Audit Committee Chairman
Independent Director
Chairman and President
Independent Director
Independent Director
LT Group Inc.
Landrum Holdings
Great Life Financial Assurance Corp.
Bankard, Inc.
(d) Executive Officers:
Senior Executive Vice-Presidents
Group Head
Group Head /
Treasurer
Group Head
Office of the Group Head - ITSSG
Office of the Group Head - Treasury
DEL ROSARIO, JR., Alfredo S.
Group Head
DEVERAS, John Thomas G.
Head, Strategic
Initiatives
Office of the Group Head - Asset
Management & Remedial
Office of the President & Chief Executive
Officer
BANCOD, Redentor C.
HILADO, Jose Emmanuel U.
SANDIG, Ismael R.
Office of the Group Head - Retail Banking
Executive Vice-Presidents
First Senior Vice-Presidents
AGUILAR, Michelangelo R.
Group Head
AHYONG, JR., Manuel G.
DAYRIT, Rogelio P.
DE JESUS, Michael O.
Segment Head
Segment Head
Group Head
ESTAVILLO, Ma. Celia F.
Group Head /
Corporate Secretary
Group Head
FERRER, Lourdes Bernadette M.
Office of the Group Head – Conglomerates
and Global Corporate Banking
Wealth Management Segment 2
Japanese and Ecozone Banking
Office of the Group Head – National
Corporate Banking
Office of the Group Head - Legal &
Regulatory Affairs
Office of the Group Head – Trust
13
GO, John P.
Segment Head
LAO, Eli D.
Segment Head
LATINAZO, Rommel S.
LIM, Ana Luisa S.
MAGNO, Regino V.
MARANAN, Remedios M.
President and CEO
Group Head
Group Head
Deputy Group Head
MATSUMOTO, Yasuhiro .
ORSOLINO, Reynaldo P.
Japanese Liaison
Officer
Segment Head
SANTOS, Cynthia P.
Group Head
TORRES, Zenaida F.
Group Head
VILLANUEVA Edgar Anthony B.
Head
Office of the Segment Head — Chinese
Banking Segment II
Office of the Segment Head — Chinese
Banking Segment I
RCBC Savings Bank (Seconded)
Office of the Group Head- Internal Audit
Corporate Risk Management Services
Office of the Deputy Group Head — BC
Services
Japanese Business Relationship Office
Office of the Segment Head — Small
Medium Enterprises
Office of the Group Head - Overseas
Filipino Banking Group
Office of the Group Head - Controllership
Group
Global Transaction Services
Senior Vice-Presidents
CAPINA, Brigitte B.
CONTRERAS, Claro Patricio L.
Regional Sales
Manager
Regional Sales
Manager
Division Head
DAYRIT, Rafael Aloysius M.
DAYRO, JR., Domingo P.
Division Head
Division Head
ECO, Sabino Maximiano O.
Division Head
EMPACES, Josephine M.
Regional Sales
Manager
Group Head
CHUA, Arsenio L.
FLORENTINO, Gerald O.
GARROVILLO, JR., Remo
Romulo M.
LANSANG, Jennie F.
LAPERA, Zenaides R.
LUGO-MACASAET, Vivien I.
MAIVAGO, Jane M.
MERCADO, Carlos Cesar B.
Deputy Group Head
IT Head
Regional Sales
Manager
Division Head
Division Head
PALOSO, Matias L.
Head of Trading
Segment
Division Head
Japanese Liaison
Officer
Deputy Group Head
PINEDA, Ma. Lourdes Jocelyn S.
President
NOLASCO, Evelyn
ONOZAWA, Koji
South Metro Manila Regional Office
North Metro Manila Regional Office
Office of the Division Head - Remedial
Management
Office of the Division Head - Credit Risk
Office of the Division Head - Business
Solutions and Retails Systems
Office of the Division Head — Retail and
Channels Division
Visayas Regional Office
Office of the Group Head - Corporate
Planning
Metro Manila / Luzon Sales
Shared Technology Services Division
Northern Luzon Regional Office
Head Office Operations
Office of the Division Head 2 — Wealth
Management Segment 1
Trading Segment
Asset Disposition
Japanese Business Relationship Office
RCBC Savings Bank
Merchants Savings and Loan Association,
Inc. (Seconded)
14
PINEDA, Nestor O.
REYES, Rafael Andres
SUBIDO, Rowena F.
Regional Sales
Manager
Regional Service
Head
Head
Group Head
TAN, Raul Victor B.
Segment Head
QUIOGUE, Nancy J.
Central Metro Manila Regional Office
Metro Manila Regional Service
Electronic Banking
Office of the Group Head — Human
Resources
Balance Sheet Management
Most of the Directors and Executive Officers mentioned herein have held their positions for at
least five (5) years.
There are no compensation arrangements for members of the Board of Directors, other than the
per diem and dividends provided under Article V, Section 8, and Article XI, Section 2,
respectively, of the Bank's Revised By-Laws. Key executives also receive a profit incentive
bonus, the amount of which is tied directly to shareholder value. Each Performance Share
awarded under this incentive plan represents a contractual right to receive an amount in cash,
equivalent to the excess of the market price, with a maximum cap, of a common share on the
settlement date over the grant price, to be paid out of operating capital. No common shares will
be issued pursuant to this incentive plan.
(e) Significant Employees: There is no person other than the entire human resources as a
whole, and the executive officers, who is expected to make a significant contribution to the Bank.
(f) Family Relationships: Ms. Helen Y. Dee is the daughter of Amb. Alfonso T. Yuchengco,
the Bank's Honorary Chairman/Director. Amb. Alfonso T. Yuchengco is the father of Ms. Helen Y.
Dee and is the grandfather of Ms. Michele Dee. Other than such relationship, none of the Bank's
Directors are related to one another or to any of the Bank's executive officers.
(g) 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 arising from the normal course of operations
of the Bank 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 against Equitable PCI Bank ("Equitable") (now BDO
Unibank or BDO) 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 P0.8
billion, including interest and expenses. The arbitration hearings were held before the ICC Arbitral
Tribunal ("Tribunal"), being the body organized by the International Chamber of Commerce.
In September 2007, the Tribunal ruled that RCBC Capital was entitled to damages, for
overpayment of the purchase of shares as a result of the overstatement of the assets of Bankard
used as the basis of the purchase price of the shares, from Equitable arising from the breach. On
16 June 2010, the Tribunal issued a Final Award declaring Equitable liable to pay RCBC Capital
the total amount of P363,881,297.91 and US$1,462,936.56, as and by way of damages, fees and
legal costs. On 13 September 2011, Banco de Oro (BDO), paid the amount of P637,941,185.55
to RCBC Capital. The amount was paid under protest and without prejudice to the outcome of
15
various cases filed by BDO to vacate the award and assail the confirmation and execution of
judgment.
There are also a number of cases pending before the Court of Appeals and the Supreme Court
filed by both BDO and RCBC Capital appealing various orders from the regional trial courts and
Court of Appeals.
In May 2006, RCBC Capital filed a civil case against SGV & Co. for damages of over P560.0
million. This civil suit alleges that SGV & Co.'s audit reports in respect of Bankard for the financial
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.
In October 2008, Global Steel Philippines (SPV-AMC), Inc. (GSPI) and Global (spat Holdings
(SPV-AMC), Inc. (GIHI), which purchased the Iligan Plant assets of National Steel Corporation
from its liquidator in 2004, filed a Notice of Arbitration with the Singapore International Arbitration
Centre (SIAC) seeking damages arising from the failure of the liquidator and the secured
creditors, including the Bank and RCBC Capital, to deliver the Plant assets free and clear from
liens and encumbrance; purportedly depriving them of the opportunity to use the assets in
securing additional loans to fund the operations of the Plant and upgrade the same. On May 9,
2012, the SIAC Arbitral Tribunal rendered a Partial Award in favor of GSPI and GIHI. Three
separate petitions to set aside the Partial Award were filed by the secured creditor, Spinnaker,
with the Singapore High Court. The Bank's exposure is approximately P480 Million, while it has a
receivable from Global Steel of P534.8 Million. On account of the full provisioning already made
by the Bank, the aforesaid share is currently classified in the books of the Bank as an Unquoted
Debt Securities Classified as Loans (UDSCL) with zero net book value. The Bank's exposure,
however, may be varied should the amount of awarded damages be reduced and should the
Iligan City agree to enter into another tax agreement. In the event of an adverse decision by the
Singapore High Court, the same may be appealed to the Singapore Court of Appeals.
In October 2011, the Bank filed a case before the Court of Tax Appeals questioning the 20 per
cent final withholding tax applied to Poverty Eradication and Alleviation Certificates (PEACe
Bonds) by the Bureau of Internal Revenue. The Bank subsequently withdrew this petition and
joined various other banks in a petition before the Supreme Court on the same matter.
Notwithstanding the issuance of a temporary restraining order by the Supreme Court, the Bureau
of Treasury withheld a sum of P198.8 million in October 2011 from the Bank on its PEACe Bonds
holdings. The case is still pending before the Supreme Court.
Except for the above-mentioned proceedings, the Bank is not aware of any suits and claims by or
against it or its subsidiaries, which if decided adversely would have a material effect on its
financial position or operating results.
(h) Non-Involvement in Certain Legal Proceedings: To the knowledge and/or information
of the Bank, the nominees for election as Directors of the Bank, its present members of the Board
of Directors or its Executive Officers are not, presently or during the last five (5) years, involved or
have been involved in any legal proceeding decided adversely affecting/involving themselves,
and/or their property before any court of law or administrative body in the Philippines or
elsewhere.
No director has resigned or declined to stand for re-election to the board of directors since the
date of the annual meeting of security holders because of disagreement with the Bank on any
matter relating to the Bank's operations, policies or practices.
(i) Certain Relationships and Related Transactions: The Bank is a member of the
Yuchengco Group of Companies (YGC). The Yuchengco family, primarily through Pan Malayan
16
Management and Investment Corporation, is the largest shareholder, and as of April 30, 2013
owned 537,613,632 shares, or approximately 42.14% 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. It is the Bank's policy that related party transactions are conducted at
arms length with any consideration paid or received by the Bank or any of its subsidiaries in
connection with any such transaction being on terms no less favorable to the Bank than terms
available to any unconnected third party under the same or similar circumstances. This policy is
institutionalized in the Bank's Policy on Related Party Transactions.
Under the Bank's Policy on Related Party Transactions, related parties, including directors, are
required to notify the Audit Committee of any potential related party transaction as soon as they
become aware of it. If a transaction is determined to be a Related Party Transaction, such
transaction, including all of the relevant details regarding such transaction, shall be submitted for
analysis and evaluation to the Audit Committee to determine whether or not the Related Party
Transaction is on terms no less favorable to the Bank than terms available to any unconnected
third party under the same or similar circumstances. The transaction shall thereafter be
presented to the Board for approval. Any member of the Board who has an interest in the
transaction under discussion shall not participate in discussions and shall abstain from voting on
the approval of the Related Party Transaction.
The Bank complies with existing BSP regulations on loans, credit accommodations and
guarantees to its directors, officers, stockholders and related interests (DOSRI).
Certain of the Bank's major related-party transactions are described below.
•
•
•
•
The Bank is a lessee of RCBC Realty of which it directly owns 25.0 per cent. and
indirectly owns 9.8 per cent. through its equity holdings in RCBC Land. RCBC owns 49.0
per cent. of RCBC Land, which owns 20 per cent. of RCBC Realty.
The Bank entered into a Memorandum of Agreement with HI, a member of the YGC, for
the procurement of outsourcing services. Under the agreement, HI is the Bank's sole
representative in negotiating the terms of the contracts with selected suppliers or service
providers for the procurement of certain outsourcing services, primarily IT related
services. 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
is obligated to ensure that the contracts they initiate 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.
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 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 October 2009, RCBC entered into a joint development agreement with RSB, MICO,
Grepalife, Bankard and Hexagonland, with the conformity of Goldpath, the parent
company of Hexagonland, for the development of the RSB Corporate Centre located at
Bonifacio Global City. Pursuant to this agreement, the Bank 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. In 2011, pursuant to the agreement, RSB
acquired ownership of the land through Goldpath after Hexagonland's liquidation and
partial return of capital to Goldpath. RSB, accordingly, contributed the land to the project.
In February 2011, the Board of Directors of the Bank approved the Bank's assumption of
rights and interest of Grepalife in the project. In August 2012, the Board of Directors of
the Bank approved the Bank's assumption of rights and interests over the unfinished
building project from the other co-partners, subject to receiving approval from the BSP.
On October 2, 2012, the consortium executed a memorandum of understanding agreeing
17
•
•
•
in principle to cancel or revoke the UJV, subject to the approval of BSP. The BSP
approval was obtained by the Bank on March 13, 2013 through MB Resolution No. 405
dated March 7, 2013.
On August 31, 2011, the Bank's BOD approved the acquisition of selected assets and
assumption of selected liabilities of RCBC JPL through Rizal Microbank, subject to the
approval of Philippine Deposit Insurance Corporation (PDIC) and BSP with the following
conditions: (a) RCBC JPL shall surrender its rural bank license to BSP within 30 days
from BSP approval; and (b) RCBC JPL shall likewise cease to accept deposits and
change its business name so as to delete the word "bank" therein. Consequently, in 2011,
the Bank infused P500 worth of capital to Rizal Microbank to support the acquisition of
assets and assumption of liabilities of RCBC JPL. The application of acquisition of
selected assets and assumption of selected liabilities was approved by PDIC and BSP on
January 31, 2012 and March 2, 2012, respectively.
On January 30, 2012, the Bank's BOD approved the acquisition of a total of 448,528,296
common shares or around 97.79% of the outstanding capital stock in the RCBC Leasing
and Finance Corp. (RCBC LFC) from PMMIC, House of Investments, Inc. (HI) and other
sellers. The sale and purchase of RCBC LFC shares were made in accordance with the
three Share Purchase Agreements signed by the relevant parties on February 7, 2012
and was conditioned on, among others, the receipt of approval for the transaction from
the BSP, which was received by the Bank on March 12, 2012.
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 has service agreements with RCBC Savings Bank (RSB) and Bankard Inc. for
the in-sourced internal audit services. The Bank provides full-scope audit services to
RSB and limited audit services to Bankard Inc., specifically IT audit, operations audit and
financial statements review. Also, the Bank has formalized the service agreements for
the internal audit services being provided to the remaining five (5) subsidiaries namely:
RCBC Capital Corp., RCBC Securities, Inc., RCBC Forex Brokers Corp., Merchant
Savings and Loan Association, Inc. (Rizal Microbank), RCBC JPL and one (1) associate,
RCBC Realty Corp.
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.
The total amount of DOSRI loans was at Php 4.835 Billion as of end December 2012.
The Bank's other transactions with affiliates include leasing office premises to subsidiaries, the
use 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 at arms' length and conducted in the ordinary
course of business.
The Bank does not have any transactions with promoters within the past five (5) years.
6. Compensation of Directors and Executive Officers
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 (in thousand pesos):
18
Names
Principal Position
Lorenzo V. Tan
President & Chief Executive Officer
Redentor C. Bancod
Senior Executive Vice President
John Thomas G. Deveras
Executive Vice President
Jose Emmanuel U. Hilado
Senior Executive Vice President
Ismael R. Sandig
Senior Executive Vice President
Lorenzo V. Tan
President & Chief Executive Officer
Michael O. De Jesus
First Senior Vice President
Rommel S. Latinazo
First Senior Vice President
Redentor C. Bancod
Senior Executive Vice President
John Thomas G. Deveras
Executive Vice President
Lorenzo V. Tan
President & Chief Executive Officer
Redentor C. Bancod
Senior Executive Vice President
Uy Chun Bing
Senior Executive Vice President
Jose Emmanuel U. Hilado
Senior Executive Vice President
Ismael R. Sandig
Senior Executive Vice President
Officers and Directors as a
Group Unnamed
Year
Aggregate
Compensation
(net of bonuses)
Bonuses
Est 2013
42,383
142,711
35,691
152,449
67,006
8,116
1,067,489
407,880
978,949
953,427
502,783
301,642
2012
2011
Est 2013
2012
2011
Profit Sharing Bonus: 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 2012 and 2011, total per diem amounted to
P4.918 million and P5.323 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.
7.
Independent Public Accounts
Punongbayan and Araullo acts as independent auditor of RCBC, RCBC Savings Bank, RCBC
Forex Brokers Inc., and RCBC Leasing and Finance Corporation since 2006, of RCBC Capital
and Bankard since 2003, Merchants Savings and Loan Association, Inc since 2008 and of RCBC
JPL since 2009.
In connection with the audits of the Bank's financial statements for the two (2) most recent years
ended December 31, 2012 and 2011, there were no disagreements with Punongbayan and
Araullo on any matter of accounting principles or practices, financial statement disclosures, audit
scope or procedure.
19
Punongbayan & Araullo has been the independent external auditor of the Bank beginning with the
audited financial statements (AFS) for the year ended December 31, 2005 and they will be
recommended for re-appointment at the scheduled annual stockholders' meeting. For period
2005-2009 Mr. Leonardo Cuaresma, Jr. was the handling/signing partner of the Bank. Mr.
Cuaresma, Jr. was replaced by Mr. Romualdo V. Murcia III as the handling/signing partner in
2010 and 2011. Mr. Murcia was replaced by Mr. Benjamin P. Valdez in 2012.
Representatives of Punongbayan & Araullo are expected to be present at the stockholders'
meeting and will have opportunity to make statement if they desire to do so and will be available
to answer appropriate questions.
The Members of the Audit Committee are as follows: Armando M. Medina as Chairman and
Medel T. Nera, Francisco C. Eizmendi, Jr., and Minki Brian Hong as Members.
The Bank is in compliance with the SRC Rule 68 (3)(b)(iv).
8. Compensation Plans — Not Applicable
C. ISSUANCE AND EXCHANGE OF SECURITIES
9. Authorization or Issuance of Securities Other than for Exchange
(A) Title and amount of securities issued:
•
•
Common Shares
As part of the Bank's capital-raising activities to comply with Basel 3
requirements, the Board of Directors, in its special meeting held on 6 March
2013, approved the following placing and subscription transaction:
o
The first stage consists of the offer and sale by Pan Malayan
Management and Investment Corporation ("PMMIC"), the principal
shareholder in the Bank, of 63,650,000 listed common shares in the
Bank to institutional investors (the "Placing Tranche") at the price of
P64.00 per share.
o
The second stage consists of the subscription by PMMIC, and the
issuance by the Bank, of 63,650,000 new common shares, representing
the exact same number of common shares as sold in the Placing
Tranche (and at the same price). The new common shares subscribed
by PMMIC (to replace the shares lent by PMMIC in the placing
transaction) has been issued by the Bank from its authorized but
unissued capital stock (the "Subscription Tranche"), with such new
common shares to be listed with the Philippine Stock Exchange ("PSE")
as soon as practicable thereafter.
o
As disclosed with the Securities and Exchange Commission and PSE,
the transaction was closed or consummated on March 15, 2013.
(B) Description of RCBC securities to be issued:
•
Common shares of stock:
■ Authorized Capital Stock (Common Shares):
■ Total Issued and Outstanding:
20
•
Common Shares of stock are entitled to participate and vote at stockholders'
meetings or in connection with any corporate action in which the consent and
approval of stockholders is required by law.
•
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.
•
Pre-emptive rights are denied under the Articles of Incorporation of the Bank.
•
No other material rights
•
Preferred stocks are not included in this authorization.
a. Describe any provision in the charter or by-laws that would delay, defer or prevent a
change in control of the registrant
None
(C) Summary of material features of the transaction
•
•
Placing and Subscription Transaction:
o The first stage consists of the offer and sale by PMMIC, the principal
shareholder in the Bank, of 63,650,000 listed common shares in the
Bank to institutional investors (the "Placing Tranche") at the price of
P64.00 per share.
o
The second stage consists of the subscription by PMMIC, and the
issuance by the Bank, of 63,650,000 new common shares, representing
the exact same number of common shares as sold in the Placing
Tranche (and at the same price). The new common shares subscribed
by PMMIC (to replace the shares lent by PMMIC in the placing
transaction) has been issued by the Bank from its authorized but
unissued capital stock (the "Subscription Tranche"), with such new
common shares to be listed with the PSE as soon as practicable
thereafter.
o
As disclosed with the Securities and Exchange Commission and PSE,
the transaction was closed or consummated on March 15, 2013.
The Bank realized approximately P4.1 billion under the transaction for which the
Bank intends to use the net proceeds to support growth in its SME and consumer
finance loan books through 2015. The proceeds will enable the Bank to address
the stricter Core Equity Tier 1 requirements under the Basel 3 guidelines issued
by the Bangko Sentral ng Pilipinas.
(D) If the securities are to be issued other than in a public offering for cash, state the
reasons for the proposed authorization or issuance and the general effect thereof upon
the rights of existing security holders.
•
The conduct of the placing and subscription transaction allowed the Bank to raise
equity funds in the most expeditious and efficient manner, at the least cost to the
Bank, to: (a) finance continued growth in its risk-weighted assets and (b) comply
with the minimum Core Equity Tier 1 capital guidelines under Basel 3. The
21
transaction also strengthened and further broadened the capital base of the
Bank, as well as promoted a wider dispersion of its common shares to a broader
spectrum of institutional investors.
(E) Brief statement as to the dividends in arrears/defaults in principal or interest in respect
of any securities of the registrant or of such person and as to the effect of the transaction
thereon and such other information as may be appropriate in the particular case to
disclose adequately the nature and effect of the transaction
The Bank has no dividends in arrears on their common, preferred and hybrid securities. It has
also not defaulted in the repayment of its obligations as they fall due.
10. Modification or Exchange of Securities — Not applicable
11. Financial and Other Information
a. Financial statements meeting the requirements of SRC Rule 68, as amended
Please see Annex "B".
b. Management's Discussion and Analysis (MD & A) or Plan of Operation
Please see Annex "A"
c. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
Please see Annex "A"
d. A statement as to whether or not representatives of the principal accountants
for the current year and for the most recently completed fiscal year:
Representatives of Punongbayan & Araullo are expected to be present at the
stockholders' meeting and will have opportunity to make statement if they desire to
do so and will be available to answer appropriate questions.
12. Mergers, Consolidations, Acquisitions and Similar Matters — Not applicable
13. Acquisition or Disposition of Pro perty — Not applicable
14. Restatement of Accounts — Not applicable
D. OTHER MATTERS
15. Action with Respect to Reports
The Management Report, as set forth in the Annual Report, and the Minutes of the previous
stockholders' regular meeting held on June 25, 2012 will be submitted for stockholders' approval.
Approval of the Annual Report constitutes a ratification of the Bank's performance during the
previous fiscal years as contained in the Annual Report.
Approval of the June 25, 2012 Minutes constitutes a ratification of the accuracy and faithfulness
of the Minutes to the events that transpired during said meeting, such as, (a) 2011 annual report
and audited financial statements, (b) ratification of actions and proceedings of the Board of
Directors, different Committees and Management during the year 2011, (c) election of directors,
and (d) appointment of external auditor.
22
The corporate acts of the Board of Directors, different Committees and Management that are
subject to ratification are those made from the date of the last annual stockholders' meeting (June
25, 2012) up to the date of the meeting (June 24, 2013). These include, among others, those that
involve day-to-day operation, administration and management of the corporate affairs such as
approval of loans, restructuring of past due accounts, sale of ROPOAs, appointment/resignation
of directors/officers, sanctions/disciplinary measures imposed to erring officers/employees,
authority to file criminal/civil complaints.
16. Matters Not Reauired to be Submitted — Not applicable
17. Amendment of Charter, By-Laws or Other Documents — Not applicable
18. Other Pro posed Action — Not applicable
19. Voting Procedures
The vote required for election or approval.
In the election of Directors, the fifteen (15) nominees with the greatest number of votes will be
elected Directors.
In the other proposals or matters submitted to a vote, a vote of the majority or super majority, as
the case may be, of the shares of the capital stock of the Bank present in person or represented
by proxy at the meeting is necessary for approval of such proposals or matters.
The method by which votes will be counted
Each shareholder may vote in person or by proxy the number of shares of stock standing in his
name on the books of the Bank. Each share represents one vote. Voting shall be by balloting.
The Corporate Secretary, Atty. Ma. Celia H. Fernandez-Estavillo, shall count the votes to be cast.
No director has informed the Bank of any intention to oppose the matters to be taken up in the
annual meeting.
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify that the
information given in this Information Statement is true, complete and correct. This Statement is
signed in the City of Makati on
of 2013.
RIZAL COMMERCIAL BANKING CORPORATION
By:
Definitive2013
MARIA ELIA H. FERNANDEZ-ESTAVILLO
Corporate Secretary
23
QRCBC
♦GC RI.MIMII
PROXY
KNOW ALL MEN BY THESE PRESENTS:
That I, the undersigned, a shareholder of the RIZAL COMMERCIAL BANKING CORPORATION
(the "Company"), a domestic corporation, do hereby nominate, constitute and appoint
, with full power of substitution and delegation, as the proxy, of the
undersigned to represent and vote all shares registered in my name on the books of Company, or owned by
me at the Annual Meeting of Stockholders on June 24, 2013 of said Corporation, and any adjournment/s
thereof, as fully to all intents and purposes as I might or could do if present and acting in my person, hereby
ratifying and confirming any and all acts which my said attorney and proxy may do in or upon any and all
matters which may properly come before any said meeting, or any adjournment or adjournments thereof.
In case of absence of
and any substitute proxy designated by him
at the said meeting, the undersigned hereby grants the Chairman of the meeting chosen accordance with
the Company's By-Laws or, in case of his absence the President of the Company, full power and authority
to act as alternate proxy of the undersigned at such meeting.
This proxy shall be valid for the Annual Meeting of Stockholders of the Company on June 24, 2013
unless sooner withdrawn by me through notice in writing delivered to the Corporate Secretary. In case I
shall be present at the meeting, this proxy stands revoked.
IN WITNESS WHEREOF, I, the undersigned shareholder, have executed this proxy at
this
day of
2013.
(Signature Over Printed Name)
❑
Stockholder
❑
Authorized Representative of
Stockholder
Date:
, 2013
PLEASE SEE REVERSE SIDE FOR ADDITIONAL INFORMATION AND INSTRUCTIONS
----------------------------------------RECEIPT
Received from RCBC one (1) envelope containing the following:
✓
Notice of Annual Meeting of Stockholders on
June 24, 2013 and Information Statement
✓
Proxy Form
✓
Reply Envelope
✓
2012 Annual Report
Received By:
(Signature Over Printed Name)
Date:
, 2013
GENERAL INFORMATION AND INSTRUCTIONS
1.
Submission of Proxy
(a) The proxy form must be completed, signed and dated by the stockholder or his duly
authorized representative, and received at the principal office and mailing address of the
Company not later than 5:00 P.M. of June 17, 2013
(b) If the proxy is given by one or more joint owners of shares of stock of the Company, the
proxy form must be signed by all of the joint owners.
(c) If the shares of stock of the Company are owned in an "and/or" capacity, the proxy form
must be signed by either one of the registered owners.
(d) If the proxy is given by a holder of shares of stock of the Company that is a corporation,
association, partnership or unincorporated entity, the proxy form must be accompanied by
a certification signed by a duly authorized officer, partner or representative of such
corporation, association, partnership or unincorporated entity, to the effect that the person
signing the proxy form has been authorized by the governing body or has the power
pursuant to the By-Laws, constitutive documents or duly approved policies of such
corporation, association, partnership or unincorporated entity, for such purpose/
(e) A proxy given by a broker or dealer in respect of shares of stock of the Company carried
by such broker or dealer for the account of a customer must be supported by a sworn
certification that the same is given with the express prior authorization of such customer.
(f) If any customer of a broker or dealer who is the beneficial owner of shares of stock of the
Company executes a sub-proxy, the broker or dealer shall certify that the signature on the
sub-proxy is the true and genuine signature of its customer.
2.
Revocation of Proxy
A holder of shares of stock of the Company who has given a proxy has the power to revoke it by
written instrument duly signed and dated, which must be received at the Company's principal office and
mailing address not later than 5:00 P.M. of June 21, 2013. A proxy is also considered suspended if an
individual stockholder attends the meeting in person and expresses his intention to vote in person for the
duration of said meeting, and shall continue to be in full force and effect thereafter.
3.
Validation of Proxy
The last day for validation of proxies will be the day before the date of the Annual Meeting of
Stockholders. Validation of proxies will be done by the Corporate Secretary and persons designated by the
Corporate Secretary who shall be under her supervision and control, in accordance with the procedure and
guidelines set out in the Company's By-Laws and Section 11(b) of the SRC Rule 20.
ANNUAL REPORT ACCOMPANYING INFORMATION STATEMENT
REQUIRED UNDER SRC RULE 17.1 (b)
(A)
Audited Consolidated Financial Statements
The Audited Financial Statements of the Bank as of December 31, 2012 are contained in the
latest annual report sent to security holders at the Annual Stockholders’ meeting on June 24,
2013.
(B) Management Discussion and Analysis of Financial Conditions and Results of
Operations ( 2010-2012) and Plan of Operations
2010
Philippine GDP in 2010 grew 7.3%, the fastest in 34 years (since 1976), after 1.1% in 2009 (lowbase/denominator effects). The global economy remained on a recovery mode in 2010, though
relatively modest, after the first simultaneous economic contraction in developed countries in
2009. The US officially exited from the 18-month recession that lasted from Dec. 2007 to May
2009.
Election-related spending, economic stimulus, and spilled over spending related to reparations on
typhoon damage (Ondoy, Pepeng in Sep.-Oct. 2009) also supported the relatively strong
economic growth in 2010.
Other major catalysts that supported strong economic growth in 2010: low interest rate
environment, continued growth in OFW remittances, strong rebound in exports, sustained robust
growth in business process outsourcing (BPO) industry, continued growth in tourism.
GNP growth for 2010 was at 7.2%, also among the highest levels since 1976, vs. 4.0% in 2009.
Inflation averaged 3.8% in 2010, slightly up vs. 3.2% in 2009, fundamentally due to global
economic recovery that partly led to higher global commodity prices, especially food and crude
oil, but nevertheless still relatively benign. In Dec. 2010, inflation was at 3.0%. Relatively strong
peso, lower tariff rates under the country’s Free Trade Agreements (FTAs) that translated to
lower importation costs, and the relatively slow US/global economic recovery supported the
benign inflation environment.
The 91-Day Treasury Bill Rate ended 2010 at the record low of 0.78%, sharply lower vs. 3.89% in
end-2009, fundamentally due to huge amounts of excess market liquidity and still relatively
benign inflation during the year. Consequently, key Philippine interest rates in the secondary
market, as measured by the PDST yields, mostly lingered near record lows, with the 3-month
tenor at 1.32% in end-2010 (dramatically lower from 4.28% in end-2009), despite the fact that the
BSP maintained its key overnight interest rate at the record low of 4% since Jul. 2009. Low
interest rate environment was sustained, despite the fact that the Budget Deficit widened to PHP314.5 billion (-3.7% of GDP, among the worst levels since 2004), vs. -PHP298.5 billion (3.9% of GDP) in 2009.
The Peso Exchange Rate appreciated in 2010 by 2.36 Pesos or 5.1% to close at 43.84 vs. 46.20
in the previous year, about half of the appreciation in other Southeast Asian currencies during the
year (such as the Malaysian ringgit, Thai baht, Singapore dollar). Philippine Gross International
Reserves (GIR) reached a new record high of US$62.4 billion or equivalent to 10.3 months worth
of imports (+US$18.1 billion or +41% from US$44.2 billion in 2009), partly due to the +25%
growth in BPO revenues to US$9 billion, stronger growth in OFW remittances, and substantial
growth in net foreign portfolio investments (record high of US$4.6 billion in 2010 or almost 12
times the US$388 million posted in 2009, but these foreign investments are relatively shorter-term
and more volatile in nature).
OFW Remittances for 2010 grew by 8.2% (or US$1.4 billion) to US$18.8 billion, amid the modest
global economic recovery, vs. the 5.6% growth posted in 2009. Consequently, this supported
consumer spending (which accounted for nearly 80% of the Philippine economy). For the month
of December 2010, OFW Remittances grew by 8.1%, to a new record high of US$1.7 billion.
Exports grew in 2010 by an average of +34% to a record high of US$51.4 billion vs. -22% in
2009. However, exports for the month of Dec. 2010 posted a slower growth of +26%. Imports
went up by +27% to US$54.7 billion in 2010 (still below the record high of US$56.7 billion in
2008), after -24.1% in 2009, but growth slowed in Dec. 2010 to +25%. Faster growth in exports
vis-à-vis imports led to the further narrowing of the Trade Deficit to –US$3.3 billion, the best since
at least 2004, compared to –US$4.7 billion in 2009, thereby translating to less outflows of foreign
currency from the country.
Performance Indicators
RIZAL COMMERCIAL BANKING CORPORATION and SUBSIDIARIES
In Php
Consolidated
Parent
Audited
2009
2010
2009
2010
Return on Average Assets
1.24%
1.47%
1.14%
1.55%
(ROA)
Return on Average Equity (ROE)
11.95%
14.08%
10.46%
14.72%
BIS Capital Adequacy Ratio
18.47%
17.77%
17.23%
16.26%
(CAR)
Non-Performing Loans (NPL)
3.75%
3.10%
2.93%
2.26%
Ratio
Non-Performing Assets (NPA)
Ratio
4.40%
4.37%
5.68%
2.77%
Earnings per Share (EPS)
Basic
3.13
4.06
2.30
3.52
Diluted
3.06
4.06
2.25
3.51
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
2009
1.68%
12.70%
16.84%
3.54%
10.44%
26.94
Audited
2010
1.77%
13.43%
15.56%
5.44%
13.13%
29.52
Audited
2009
(2.21%)
(2.25%)
80.49%
0.69%
0.20%
(0.89)
Audited
2010
(8.18%)
(8.37%)
83.32%
0.87%
0.21%
(5.16)
2
RCBC CAPITAL CORPORATION and Subsidiary
In Php
Audited
2009
6.11%
7.88%
56.77%
3.68
Audited
2010
11.46%
14.08%
70.96%
0.02%
7.76
Audited
2009
15.16%
28.40%
81.93%
121.17
Audited
2010
15.79%
34.34%
51.74%
149.29
RCBC INTERNATIONAL FINANCE, LTD. and Subsidiary
In Php
Audited
2009
Return on Average Assets (ROA)
1.97%
Return on Average Equity (ROE)
2.07%
Capital to Total Assets
93.92%
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings (Loss) per Share
1.55
Audited
2010
(4.65%)
(4.87%)
95.36%
(3.33)
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)
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)
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
Audited
2009
(40.62%)
(211.99%)
9.13%
(68.55)
Audited
2010
(30.09%)
(74.37%)
33.71%
(56.10)
Audited
2009
(0.26%)
(2.82%)
17.86%
(0.95)
Audited
2010
(1.64%)
(16.24)
5.00%
(9.64)
Audited
2009
Audited
2010
3
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)
JP LAUREL RURAL BANK, 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)
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)
15.27%
17.39%
90.08%
51.63
16.05%
18.09%
90.86%
63.93
Audited
2009
(20.23%)
66.67%
(30.35%)
92.97%
90.81%
-
Audited
2010
4.78%
(19.67%)
(16.99%)
90.22%
73.97%
11.86
Audited
2009
(0.40%)
(0.46%)
87.02%
98.73%
(0.95)
Audited
2010
(0.75%)
(0.88%)
82.13%
94.95%
(1.82)
Notes to the Computations:
1.
2.
3.
4.
5.
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.
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.
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).
NPA ratio is determined by using the following formula: (Net NPLs + Net ROPA) / Total Assets.
For some subsidiaries, the NPL/NPA ratios were not computed since these ratios were not
applicable.
RCBC posted a record performance in 2010 with significant improvements in financial results and
operations. RCBC’s Total Assets grew by 10.91% or P31.476 billion to P319.992 billion while
Deposit liabilities went up by 7.49% or P16.501 billion to P236.779 billion. Net Income increased
by 27.64% or P920 million from P3.328 billion in 2009 to P4.248 billion in 2010. Gross Operating
Income expanded by 19.44% or P3.140 billion to P19.294 billion. Non-Interest Income expanded
by 42.88% or P2.524 billion to P8.410 billion mainly due to trading gains and other income.
Commissions and service fees, trust fees, equity in net earnings of associates, and foreign
exchange gains which totaled P2.619 billion, contributed 31.14% to total Non-Interest Income.
Effective control of operating expenses along with robust revenues resulted in an improvement in
the Bank’s Cost to Income ratio from 61% to 56%.
RCBC’s sustained strong performance reflects management’s resolve in formulating clear-cut
strategies and executing them effectively. But notwithstanding the success, the Bank will continue
to face the uncertainties in the current economy by carrying on with the strategy of building up its
4
client base by one million a year through expansion in the Bank’s distribution and electronic
banking channels, brand-building, and introduction of innovative products and services. The Bank
will also keep on catering to the country’s middle class and overseas Filipino workers in the
remittance business and give special focus on the growing small and medium enterprises
(SMEs). Moreover, the Bank will continue to boost its operations by improving on its technology
platform and hiring more young, dedicated, and competent people and training its existing
personnel.
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 more importantly, to expand
its branch network and reach in a cost-efficient manner.
The P31.476 billion increase in total assets was mainly due to the growth in trading and
investment securities – 36.05%, investment property – 44.13%, bank premises, furniture, fixtures
and equipment – 12.41%, and due from BSP – 28.82%.
Accounting for 7.78% of total assets, deposits with the Bangko Sentral stood at P24.889 billion.
Total investment securities, which represents 27.96% of total resources, has grown by 36.05%
comprising of financial assets at fair value through profit or loss (FVTPL) – 4.84%, Held-tomaturity investments (HTM) – 5.78% and Available for sale securities (AFS) – 17.34% of total
resources. The huge rise in FVTPL and AFS of 64.39% (P6.063 billion) and 52.52% (P19.108
billion), respectively, was mainly funded by the growth in deposits and bonds payable.
Total net loans and other receivables amounting to P163.982 billion represented 51.25% of total
resources.
Bank premises, furniture, fixtures and equipment registered a 12.41% increase or P 590 million
from P4.754 billion to P5.344 billion arising from the Bank’s share in the RCBC Savings
Corporate Center in Fort Bonifacio, investment in Core Banking platform, and branch expansion.
In 2010, the Bank opened nineteen (19) new business centers, deployed one hundred thirty eight
(138) new ATMs, and piloted foreign exchange booths and E-biz centers.
Investment properties increased by 44.13% from P5.067 billion to P7.303 billion.
Sources of funds came mainly from total liabilities which grew by 11.48% or P29.610 billion to
P287.580 billion. Bills payable increased by 58.77% or P6.336 billion to P17.117 billion. Accrued
taxes, interest, and other expenses payable increased by P507 million or 15.60% while other
liabilities grew by 16.76% or P1.156 billion. Capital funds grew by 6.11% from P30.546 billion to
P32.412 billion.
Deposit liabilities at P236.779 billion grew by 7.49% from P220.278 billion driven by the increase
in demand and savings deposits by 5.11% and 15.86%, respectively. Peso and foreign currencydenominated deposits expanded and were used to fund the growth in investment securities. The
growth in deposits was primarily steered by the broadening of the strategic distribution channels,
the set-up of electronic banking facilities such as RCBC AccessOne Internet Banking, and the
introduction of new retail banking products such as RCBC MyWallet which now has over 1.2
million cardholders.
On February 08, 2010, the Bank issued $250 million dollar senior notes. The notes will mature on
February 9, 2015 and bear interest at the rate of 6.25% per annum. Part of the proceeds from the
issue was used to pay off the remaining $126 million dollar senior notes issued on February 23,
2005 which matured on February 24, 2010. As a result, bonds payable went up by 87.23% or
P5.091 billion from P5.836 billion to P10.927 billion.
On March 12, 2010, the BSP through the Monetary Board approved the Bank’s application to
issue P5.0 billion long-term negotiable certificates of deposit which were subsequently issued on
5
May 5, 2010. The LTNCD has a maturity of five and a half years and was offered in two series,
coupon-bearing carrying a rate of 6.50% per annum issued at 100% of face value and zero
coupon carrying a yield-to-maturity of 6.75% issued at 69.20% of face value. The LTNCD was
listed in the Philippine Dealing and Exchange Corporation on May 6, 2010.
Total liabilities accounted for 89.87% of total resources. At 74.00% of total assets, total deposit
liabilities continued to be the Bank’s main source of funding, particularly savings and time
deposits which comprised 33.88% and 36.49% of total resources, respectively.
Revaluation reserves on AFS securities declined by 89.43% from P407 million to P43 million
primarily due to MTM Losses. Accumulated translation adjustment went down by 22.45% from
P98 million to P76 million due to the appreciation of the peso. The peso-dollar exchange rate
closed at P43.84 at end-2010, 5.11% stronger than the P46.20 in end-2009. The year to date
average exchange rate was pegged at P45.08, a 5.29% appreciation from the previous year’s
P47.60 to the US dollar.
Surplus account increased by 24.29% from P9.325 billion to P11.590 billion, spurred by the
growth in the Bank’s consolidated net income by 27.64% from P3.328 billion in 2009 to P4.248
billion in 2010. This growth was achieved despite the cash dividend payments to common and
preferred shareholders in the total amount of P566.258 million and dividends/interest payment on
hybrid tier 1 securities of P431.241 million.
Total Capital funds attributable to parent company shareholders amounted to P32.440 billion at
year-end 2010, higher by 6.19% or P1.890 billion from last year’s P30.550 billion.
The Board of Directors in its regular meeting held on 21 May 2010 approved the amendment of
article seventh of the Bank’s Amended Articles of Incorporation as follows: 1) increase in the
authorized common shares of the Bank from 1.1 Billion to 1.4 Billion shares, and 2) removal of
pre-emptive rights of holders of capital stock, whether common or preferred, to subscribe for or
purchase any share of any class. This was subsequently approved by the stockholders in its
regular stockholders’ meeting on 28 June 2010.
In March 2011, RCBC and the International Finance Corporation reached an agreement whereby
IFC would acquire approximately 7.2% stake in RCBC common shares for total consideration of
approximately P2.1 billion. The additional capital raised will continue to support the strong growth
in the bank’s loan book, which in addition to large corporate, targets growth in the SME,
microfinance, and consumer finance segments. The incremental capital raised may also be used
to support the future acquisition of small and/or medium-sized banks in the Philippines.
As of February 2011, RCBC has already infused P375.0 million to JP Laurel Bank. The rural
bank’s geographic coverage is an important market for the overall business thrust of RCBC for its
various products, including microfinance. As such, RCBC has already converted JP Laurel Bank’s
10-branch network spread over Batangas, Laguna and Mindoro Occidental, into the Luzon base
of its microfinance lending operations.
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.
6
The 6.00% or P616 million increase in net interest income from P10.268 billion in 2009 to
P10.884 billion in 2010 was due to the rise in the volume of financial market assets and low-cost
deposits. Representing 43.17% of gross revenues, the growth in net interest income was
boosted by the growth in interest income from investment securities by 14.82% or P587 million to
P4.547 billion.
On the other hand, total interest expense decreased by 9.01% as interest on deposits declined
by 14.27% or P673 million. The benchmark 91-d Tbill average in 2010 declined by 74 basis
points year on year from 4.24% in 2009 to 3.50%.
Accounting for 66.64% of gross revenues is total interest income of P16.800 billion which is
comprised mainly of interest income from loans and receivables and investment securities that
represent 46.03% and 18.04%, respectively, of total income. At 23.47% of gross income, total
interest expense of P5.916 billion consisted of interest on deposit liabilities and bills payable and
other borrowings, representing 16.04% and 7.43% of gross revenues, respectively. Net income
of P4.248 billion accounted for 16.85% of gross income.
At 12.46% of gross revenues, provisioning for impairment losses of P3.142 billion was 40.08%
higher year on year from P2.243 billion in 2009 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 operating income of P8.410 billion accounted for 33.36% of gross income, mainly
consisting of trading and securities gain-net – 14.57%, foreign exchange gains (losses)-net –
1.82%, commissions and service fees – 6.56%, equity in net earnings of associates – 1.13%,
trust fees – 0.87%, and other income – 8.40% of the total revenues. Trading and securities
gains-net grew by 63.07% or P1.421 billion mainly due to favorable financial market conditions,
equity in net earnings of associate – 37.68% or P78 million, trust fees - 21.55% or P39 million,
and other income - 87.68% or P989 million. Foreign exchange gains-net decreased by 7.09% or
P35 million. Total other operating income went up by 42.88% or P2.524 billion from P5.886
billion.
Recently, it was granted additional authorities under Type 2 and 3 for selected products, effective
January 2011.
Operating expenses of P10.895 billion, representing 43.22% of gross income, was 10.82% or
P1.064 billion higher than the previous year’s P9.831 billion. The 7.52% or P209 million increase
in manpower costs from P2.779 billion was basically due to the impact of employees’ salary
increases and additional manpower mainly for the new business centers. Occupancy and
equipment-related expenses moved up by 9.02% or P149 million to P1.800 billion as a result of
higher rental rates, branch network expansion, and computer equipment upgrade. Additionally,
taxes and licenses and depreciation and amortization went up by 7.21% and 16.29%,
respectively. With the continued thrust to provide new and improved products and services,
investments in information technology such as the setup of a new core banking technology are
on-going. Additionally, renovation and improvement of existing physical facilities done in 2010
resulted to a higher depreciation and amortization expenses. Miscellaneous expenses also went
up by 14.56% or P531 million to P4.178 billion mainly due to business expansion. Manpower
costs, occupancy and equipment-related expenses, taxes and licenses, and miscellaneous
expenses represented 11.85%, 7.14%, 5.19%, and 16.57%, respectively, of total revenues.
At P999 million, provision for tax expense went up by 34.09%, or by P254 million, mainly due to
higher revenues. Minority interest in net income went up from P7 million to P10 million as a result
of higher net income of the Bank’s not wholly owned subsidiaries.
7
Other than those stated earlier, in 2010, 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.
2011
Philippine GDP in 2011 grew 3.7%, from 7.6% in 2010, which was an election year. The global
economic recovery slowed down in 2011, largely weighed by the lingering Euro zone debt crisis,
slower economic growth in China (now the world’s second biggest economy), supply chain
disruptions after the earthquake and Tsunami in Japan in Mar. 2011 and after the worst floods in
50 years that hit Thailand in the latter part of 2011, spike/volatility in global crude oil prices after
unrests in some countries in the Middle East and North Africa in the early part of 2011.
Major factors that also weighed on Philippine economic growth are the underspending by the
government, contraction in exports that slowed industry growth and some storm damage in late
2011.
Growth in consumer spending and investments remained relatively strong in 2011, due to record
low interest rates, continued growth in OFW remittances, sustained strong growth in business
process outsourcing (BPO) industry and continued double-digit growth in tourism.
GNP growth for 2011 was at 2.6%, from 8.2% in 2010.
Inflation averaged 4.8% in 2011, vs. 3.8% in 2010, but nevertheless still remained relatively
benign and within the 3%-5% target of the Bangko Sentral ng Pilipinas (BSP). Minimum wages in
Metro Manila increased by +PHP22 or +5.4% to PHP426, after higher global crude oil prices
(triggered by the civil war in Libya in the early part of 2011) increased prices of other goods and
services.
The 91-Day Treasury Bill Rate ended 2011 at 1.556%, up from a record low of 0.438% on Sep. 5,
2011, vs. 0.775% in end-2010. Philippine interest rates remained relatively low amid huge
amounts of excess peso liquidity in the financial system, relatively benign inflation, and slower
global economic growth. Similarly, key Philippine interest rates in the secondary market, as
measured by the PDST yields, remained relatively low, with the 3-month tenor at 1.66% in end2011, vs. 1.32% in end-2010. The BSP raised its key overnight interest rate in 2011, by a total of
+0.50 to 4.50%, after higher global crude oil prices in the early part of the year resulted to some
pick up in inflation. The low interest rate environment was also supported by relatively narrow
Budget Deficit, which stood at –PHP96.3bn from Jan.-Nov. 2011, after –PHP314.5bn (or -3.5% of
GDP) in 2010 due to underspending by the government and higher government revenues.
The Peso Exchange Rate was steady in end-2011 at 43.84, the same as the previous year, while
most of the other Southeast Asian currencies weakened slightly vs. the US dollar during the year.
Philippine Gross International Reserves (GIR) reached US$75.3 billion or equivalent to 11.1
months worth of imports (+US$12.9 billion or +21% from US$62.4 billion in 2010), partly brought
about by the following: +7.2% growth in OFW remittances to US$20.1 billion; +22% growth in
BPO revenues to US$10.9 billion; net foreign portfolio investments of +US$4.1 billion after
+US$4.6 billion in 2010 (though temporary/shorter-term in nature). Balance of payments surplus
for 2011 stood at +US$10.2 billion, after a record high of +US$14.3 billion in 2010.
8
OFW remittances and BPO revenues continued to support consumer spending, which accounted
for about 70.8% of the Philippine economy in 2011. Additional OFW and BPO jobs partly caused
unemployment rate in 2011 to improve to 6.4% from 7.3% in 2010.
However, exports for 2011 declined by an average of -6.9% to US$48 billion, vs. +34% growth in
2010, as the Euro zone debt crisis caused some slowdown in the global economy and trade. For
the month of Dec. 2011, exports contracted by -20.7% year-on-year to US$3.3 billion. Imports in
2011 grew by an average of +9.5% to US$60.1 billion, vs. +27.5% in 2010. Consequently, Trade
Deficit in 2011 widened to -US$12.1 billion, vs. –US$3.4 billion for 2010.
RCBC sustained its strong financial performance in 2011 with remarkable improvements in
financial results and operations. RCBC’s Total Assets grew by 8.02% or P25.605 billion to
P345.005 billion while Deposit liabilities went up by 7.89% or P18.681 billion to P255.460 billion.
Net Income increased by 17.86% or P759 million from P4.248 billion in 2010 to P5.007 billion in
2011. Gross Operating Income expanded by 6.88% or P1.328 billion to P20.622 billion. NonInterest Income expanded by 17.38% or P1.462 billion to P9.872 billion mainly due to trading
gains, service fees and commissions, and trust fees. Foreign exchange gains, equity in net
earnings of associates, and miscellaneous income which totaled P2.766 billion, contributed
28.02% to total Non-Interest Income. Net Interest Income reached P10.750 billion resulting to a
NIM of 4.09%.
The P25.605 billion increase in total assets was mainly due to the growth in loans and
receivables of 12.55%, due from Bangko Sentral ng Pilipinas of 37.49%, bank premises, furniture,
fixtures and equipment of 9.77%, and due from other banks of 22.40%.
Accounting for 9.92% of total assets, deposits with the Bangko Sentral stood at P34.221 billion.
Total investment securities, which represent 25.81% of total resources, amounted to P89.057
billion. Financial assets at fair value through profit or loss (FVTPL) declined by 23.65% or P3.661
billion as Treasury sold securities and booked gains. Held-to-maturity investments stood at zero
from P18.501 billion due to the sale of part of the held-to-maturity portfolio. This necessitated the
reclassification of the Bank’s consolidated HTM portfolio into Available for sale securities (AFS).
As a result, AFS rose by 39.20% or P21.752 billion from P55.487 billion to P77.239 billion and
accounted for 22.39% of total assets.
Total net loans and other receivables expanded by 12.55% or P20.572 billion from P163.982
billion to P184.554 billion and represented 53.49% of total resources.
Bank premises, furniture, fixtures and equipment registered a 9.77% increase or P522 million
from P5.344 billion to P5.866 billion arising mainly from the Bank’s share in the RCBC Savings
Corporate Center in Fort Bonifacio, investment in Core Banking platform, and branch expansion.
In 2011, the Bank opened eighteen (18) new business centers and extension offices and
deployed one hundred fifty two (152) new ATMs.
Other resources, net declined by 43.78% or P5.551 billion from P12.678 billion to P7.127 billion
mainly due to declines in foreign currency notes and coins on hand, real estate assets held for
sale, margin deposits-futures, and amortization of deferred charges-SPV totaling P3.532 billion,
including the P2.541 billion additional amortization representing 50% of the balance at year-end
prior to the write-off.
Sources of funds came mainly from deposit liabilities which grew by 7.89% or P18.681 billion to
P255.460 billion, driven by the increase in savings deposits by 23.83% or P25.830 billion, and
capital funds which increased by 25.50% or P8.115 billion from P31.820 billion to P39.935 billion.
On 17 November 2011, the BSP through the Monetary Board approved the Bank’s application to
issue long-term negotiable certificates of deposit of which P3.850 billion were subsequently
issued on 29 December 2011. The LTNCD has a maturity of five and a half years and was
9
offered in two series, coupon-bearing carrying a rate of 5.50% per annum issued at 100% of face
value and zero coupon carrying a yield-to-maturity of 5.75% issued at 74.0493% of face value.
On January 30, 2012, the Bank successfully raised $200 million worth of 5-year senior unsecured
fixed-rate notes off its $1.0 billion EMTN Programme. The notes carried a coupon and yield of
5.25% and maturity of January 31, 2017. On April 3, 2012, the Bank issued another $75 million
with a coupon and yield of 4.779% under the same EMTN Programme.
Total liabilities accounted for 88.42% of total resources. At 74.05% of total assets, total deposit
liabilities continued to be the Bank’s main source of funding, particularly savings and time
deposits which comprised 38.91% and 32.19% of total resources, respectively.
Preferred stock went down by 87.44% or P181 million from P207 million to P26 million due to
conversion to common shares. Common stock increased by 15.09% or P1.495 billion due to the
capital infusion by International Finance Corp. in March 2011 and Hexagon Investments B.V in
September 2011. Capital paid in excess of par likewise grew by 55.33% or P3.342 billion from
P6.040 billion to P9.382 billion coming from these new investors. Treasury shares, at cost is now
zero from P953 million due to the re-issuance to International Finance Corp. and Hexagon
Investments B.V. as part of the aforementioned capital infusion transactions.
Revaluation reserves on AFS securities rose by 5206.98% or P2.239 billion from P43 million to
P2.282 billion primarily due to the increase in the volume of AFS securities arising from the HTM
reclassification and improvement in the price of the securities. Minority interest improved
significantly by 132.14% from negative P28 million to positive P9 million due to the profitable
operations of the subsidiaries not wholly owned during the year. The Bank’s capital, excluding
minority interest, grew by 25.36% or P8.078 billion from P31.848 billion to P39.926 billion and
accounted for 11.57% of total resources.
Total interest income reached P16.814 billion. Interest income from loans and receivables and
investment securities represented 56.55% and 22.32%, respectively, of total operating income.
Total interest expense of P6.064 billion accounted for 29.41% of total operating income. Interest
expense from deposit liabilities decreased by 5.81% or P235 million from P4.043 billion in 2010 to
P3.808 billion in 2011 due to better CASA-to-total deposits mix which improved from 50.69% to
56.53%. Interest expense from bills payable and other borrowings increased by 20.45% or P383
million from P1.873 billion in 2010 to P2.256 billion in 2011. Net interest income of P10.750 billion
represented 52.13% of total operating income.
Impairment losses declined by 20.66% or P653 million from P3.161 billion to P2.508 billion as the
Bank’s asset quality continued to improve.
Other operating income of P9.872 billion accounted for 47.87% of total operating income and is
broken down as follows: trading and securities gain-net 24.00%, foreign exchange gains (losses)net 1.43%, service fees and commissions 9.24%, trust 1.21%, equity in net earnings of
associates 0.97%, and miscellaneous income 11.02%. Trading and securities gains-net grew by
34.73% or P1.276 billion, service fees and commissions by 15.17% or P251 million, trust fees by
13.52% or P30 million, and miscellaneous income by 7.32% or P155 million. Foreign exchange
gains-net decreased by 35.95% or P165 million while equity in net earnings of associates
declined by 29.82% or P85 million. Total other operating income went up by 17.38% or P1.462
billion from P8.410 billion in 2010.
Operating expenses of P12.194 billion, representing 59.13% of total operating income, was
12.12% or P1.318 billion higher than the previous year’s P10.876 billion. The increase in
manpower costs by 15.90% or P475 million to P3.463 billion was basically due to the impact of
employees’ salary increases and additional manpower mainly for the new business centers.
Occupancy and equipment-related expenses moved up by 7.72% or P139 million to P1.939
10
billion as a result of higher rental rates, branch network expansion, and computer equipment
upgrade. Additionally, taxes and licenses and depreciation and amortization went up by 7.95%
and 5.83%, respectively. With the continued thrust to provide new and improved products and
services, investments in information technology such as the setup of a new core banking
technology are currently on-going. Miscellaneous expenses also went up by 13.98% or P551
million to P4.491 billion mainly due to business expansion. Manpower costs, occupancy and
equipment-related expenses, taxes and licenses, and miscellaneous expenses represented
16.79%, 9.40%, 6.85%, and 21.78%, respectively, of total operating income.
Provision for tax expense declined by 9.61% or P96 million to P903 million from P999 million in
2010.
RCBC’s solid performance in 2011 reflects management’s commitment to its strategic objectives
and business direction. But even with this momentum, the Bank aims to continue growing its
client base by one million a year through expansion in the Bank’s distribution and electronic
banking channels, brand-building, and introduction of innovative products and services. The Bank
will also keep on catering to the country’s middle class and overseas Filipino workers in the
remittance business and give special focus on the growing small and medium enterprises (SMEs)
and consumer segment. Moreover, the Bank is set to boost its operations as it prepares to
establish its new core banking platform on top of hiring more young, dedicated, and competent
people and training its existing personnel.
RCBC continues to be in the market for well-managed mid-sized commercial banks and thrift
banks which will enable it to increase its asset base, distribution network, and customer reach in
a cost-efficient manner.
For 2011, 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.
However, there are two pending cases that if decided will involve sums that would have material
favorable or unfavorable effect on the 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 against Equitable PCI Bank (“Equitable”) (now
Banco de Oro or BDO) 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 P810
million, including interest and expenses. The arbitration hearings were held before the ICC
Arbitral Tribunal (“Tribunal”), being the body organized by the International Chamber of
Commerce.
In September 2007, the Tribunal ruled that RCBC Capital was entitled to damages, for
overpayment of the purchase of shares as a result of the overstatement of the assets of Bankard
used as the basis of the purchase price of the shares, from Equitable arising from the breach. On
June 16, 2010, the Tribunal issued a Final Award declaring Equitable liable to pay RCBC Capital
the total amount of P363.88 million and US$1.46 million by way of damages, fees and legal costs.
On September 13, 2011, BDO paid the amount of P637.94 million to RCBC Capital. The amount
was paid under protest and without prejudice to the outcome of various cases filed by BDO to
vacate the award and assail the confirmation and execution of judgment.
11
There are still a number of cases pending before the Court of Appeals filed by BDO appealing
various orders from the regional trial court, as well as one filed by RCBC Capital seeking to enjoin
the second regional trial court from acquiring jurisdiction.
Moreover, in October 2011, RCBC filed a case before the Court of Tax Appeals questioning the
20% final withholding tax on PEACe Bonds by the Bureau of Internal Revenue. The bank
subsequently withdrew this petition and joined various banks in their petition before the Supreme
Court on the same matter. Notwithstanding the pendency of the case and the issuance of a
Temporary Restraining Order by the Supreme Court, the Bureau of Treasury withheld P198.78
million in October 2011 from RCBC on its PEACe bonds holdings. The case is still pending in the
Supreme Court.
Performance Indicators
RIZAL COMMERCIAL BANKING CORPORATION and SUBSIDIARIES
In Php
Consolidated
Parent
Audited
2010
2011
2010
2011
Return on Average Assets
1.47%
1.60%
1.55%
1.57%
(ROA)
Return on Average Equity (ROE)
14.08%
13.96%
14.72%
13.72%
BIS Capital Adequacy Ratio
17.77%
18.52%
16.26%
17.12%
(CAR)
Non-Performing Loans (NPL)
3.10%
1.55%
2.26%
0.91%
Ratio
Non-Performing Assets (NPA)
Ratio
4.37%
3.57%
2.77%
2.11%
Earnings per Share (EPS)
Basic
4.06
4.43
3.52
3.57
Diluted
4.06
4.43
3.51
3.57
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
2010
1.77%
13.43%
15.56%
5.44%
13.13%
29.52
Audited
2011
2.49%
19.30%
14.95%
3.95%
9.28%
45.00
Audited
2010
(8.18%)
(8.37%)
83.32%
0.87%
0.21%
(5.16)
Audited
2011
(11.46%)
(11.75%)
298.60%
2.88%
4.84%
(5.94)
RCBC CAPITAL CORPORATION and Subsidiary
12
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)
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)
Audited
2010
11.46%
14.08%
70.96%
0.02%
7.76
Audited
2011
12.10%
14.41%
59.47%
0.02%
9.33
Audited
2010
15.79%
34.34%
51.74%
149.29
Audited
2011
17.14%
32.82%
81.38%
149.60
RCBC INTERNATIONAL FINANCE, LTD. and Subsidiary
In Php
Audited
2010
Return on Average Assets (ROA)
(4.65%)
Return on Average Equity (ROE)
(4.87%)
Capital to Total Assets
95.36%
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings (Loss) per Share
(3.33)
Unaudited
2011
(5.13%)
(5.74%)
78.87%
(3.54)
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)
Audited
2010
(30.09%)
(74.37%)
33.71%
(56.10)
Unaudited
2011
(30.15%)
(133.10%)
15.69%
(51.25)
Audited
2010
(1.64%)
(16.24)
5.00%
(9.64)
Audited
2011
2.15%
14.35%
23.58%
11.55
Audited
2010
16.05%
Audited
2011
12.96%
13
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
JP LAUREL RURAL BANK, 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)
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)
18.09%
90.86%
63.93
14.16%
91.97%
59.22
Audited
2010
4.78%
(19.67%)
(16.99%)
90.22%
73.97%
11.86
Audited
2011
(6.91%)
(139.61%)
(4.12%)
81.91%
61.78%
(17.20)
Audited
2010
(0.75%)
(0.88%)
82.13%
94.95%
(1.82)
Unaudited
2011
16.22%
18.34%
97.21%
0.00%
37.73
Notes to the Computations:
1.
2.
3.
4.
5.
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.
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.
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).
NPA ratio is determined by using the following formula: (Net NPLs + Net ROPA) / Total Assets.
For some subsidiaries, the NPL/NPA ratios were not computed since these ratios were not
applicable.
2012
Philippine GDP in 2012 grew 6.6%, the highest in two years, vs. 3.9% in 2011 and above the
average of 4.6% posted from 1999 to 2011. The global economic growth remained relatively slow
in 2012, but on a recovery mode, amid some pick up in the US economy (jobs, housing,
manufacturing), the lingering Euro zone debt crisis, slower economic growth in China (the world’s
second biggest economy; posted the slowest growth rate since 1999), recessionary and
deflationary economic conditions in Japan (the world’s third biggest economy).
Major factors that contributed to the faster Philippine economic growth in 2012 are the sustained
above-average growth in consumer spending (70.5% of GDP) and services (56.9% of GDP),
faster government spending growth (+12.2% growth in 2012 vs. +1.7% in 2011, when there was
underspending), recovery in exports (+8.8% in 2012 after -4% in 2011), faster growth in
construction (+14.2% in 2012 vs. -5.2% in 2011), some pick up in manufacturing (5.4% in 2012
vs. +4.8% in 2011).
14
The strong growth in the Philippine economy for 2012 was supported by the continued growth in
OFW remittances, sustained strong growth in business process outsourcing (BPO) industry, new
record lows in interest rates that reduced borrowing/financing costs, continued growth in tourism,
increased infrastructure spending.
GNP growth for 2012 was at 5.8%, from 3.2% in 2011.
Inflation averaged 3.2% in 2012, vs. 4.6% in 2011, considered relatively low/benign and at the
lower range of the 3%-5% target of the Bangko Sentral ng Pilipinas (BSP). Stronger peso
exchange rate vs. the US dollar, with an appreciation of 6.4% in 2012, partly supported relatively
lower importation costs and overall inflation..
The 91-Day Treasury Bill Rate ended 2012 at 0.198%, after reaching a record low of 0.15% on
Nov. 12, 2012, vs. 1.56% in end-2011. Philippine interest rates mostly reached new record lows
in 2012 amid huge amounts of excess peso liquidity in the financial system partly driven by
increased foreign portfolio investments/hot money, relatively benign/low inflation, and relatively
slower global economic growth. Key Philippine interest rates in the secondary market, as
measured by the PDST yields, also reached new record lows, with short-term tenors below 1%
(near zero), with the 3-month tenor at 0.49% in end-2012, vs. 1.66% in end-2011. The BSP
reduced its key overnight interest rate in 2012, by a total of -1.00 to a record low of 3.50%, partly
due to the stronger peso exchange rate that helped keep inflation relatively low/benign. The low
interest rate environment was also supported by relatively narrow Budget Deficit, which stood at –
PHP127.3bn from Jan.-Nov. 2012, after –PHP197.8bn (or -2% of GDP) in 2011 due to higher
government revenues despite some pick up in government spending compared to 2011.
The Peso Exchange Rate appreciated by 2.79 pesos or 6.4% to close at 41.05 in end-2012, vs.
43.84 in the previous year, the strongest in nearly five years and among the best performing
currencies in Asia for the year. Philippine Gross International Reserves (GIR) reached US$83.8
billion or equivalent to 12 months worth of imports (+US$8.5 billion or +11% from US$75.3 billion
in end-2011), partly brought about by the following: +6% growth in OFW remittances (Jan.-Nov.
2012) to US$19.4 billion; +21% growth in BPO revenues to US$13 billion; net foreign portfolio
investments of +US$3.9 billion after +US$4.1 billion in 2011 (though temporary/shorter-term in
nature). Balance of payments surplus for 2012 stood at +US$9.2 billion, after +US$10.2 billion in
2011.
OFW remittances, BPO revenues, foreign tourist revenues continued to support consumer
spending, which accounted for about 70.5% of the Philippine economy in 2012. Additional OFW,
BPO, and tourism jobs partly caused unemployment rate in 2012 to improve to 6.8% from 7.0% in
2011.
Exports from Jan.-Nov. 2012 grew by an average of +7% to US$48 billion, a turnaround vs. the
decline of -6.2% in 2011, despite the stronger peso exchange rate. Imports from Jan.-Nov. 2012
grew by an average of +1% to US$56.4 billion, slower vs. +10.1% in 2011. Consequently, Trade
Deficit from Jan.-Nov. 2012 narrowed to -US$8.4 billion, vs. –US$12.2 billion for 2010.
Foreign tourist arrivals in 2012 grew by +9.1% to 4.273 million, after +11.3% growth in 2011.
Universal/Commercial bank loans as of Nov. 2012 grew by +14% year-on-year to PHP3.135
trillion, after +19.3% as of end-2011.
Non-performing loan (NPL) ratio of universal/commercial banks as of Oct. 2012 stood at 2.0%,
the best since revised records started in 2003, vs. 2.2% as of end-2011.
On Dec. 20, 2012, S&P raised the credit rating outlook for the Philippines to positive from stable
and reportedly hinted possible credit rating upgrade for the country to investment grade as early
as within a year, from the current credit rating of one notch below investment grade.
15
Financial and Operating Highlights
RCBC followed up its remarkable financial results in 2011 with another solid performance in
2012. RCBC’s Total Assets modestly expanded by 5.45% or P18.828 billion to P364.095 billion
while Total Capital Funds went up by 13.55% or P5.127 billion to P42.973 billion. Net Income
grew by 23.68% or P1.191 billion from P5.029 billion in 2011 to P6.220 billion in 2012. Gross
Operating Income improved by 8.88% or P1.862 billion from P20.962 billion to P22.824 billion.
Non-Interest Income increased by 12.78% or P1.295 billion from P10.130 billion to P11.425 billion
mainly driven by trading and securities gains, equity in net earnings of associates, trust fees, and
service fees and commissions. Foreign exchange gains and miscellaneous income which totaled
P1.891 billion, contributed 16.55% of total Non-Interest Income. Despite pressures on margins
due to low interest rates and the non-remuneration of reserve-eligible funds, Net Interest Income
rose by 5.23% or P567 million to P11.399 billion resulting to a NIM of 3.93%, one of the highest in
the sector.
Balance Sheet
In Million Pesos
Total Assets
Investment Securities
Loan Portfolio (Net)
Capital Funds
* As restated
2012
364,095
95,179
190,808
42,973
2011*
345,267
87,728
186,192
37,846
2010*
315,673
88,099
165,425
26,161
The P18.828 billion increase in total assets was mainly driven by the growth in investment
securities, loans and receivables, due from other banks, and due from Bangko Sentral ng
Pilipinas.
Cash and other cash items increased by 14.91% or P1.217 billion from P8.163 billion to P9.380
billion. Due from Bangko Sentral ng Pilipinas, representing 10.06% of total resources, went up by
6.82% or P2.337 billion from P34.283 billion to P36.620 billion. Due from other banks likewise
increased by 55.98% or P2.110 billion from P3.769 billion to P5.879 billion. Total investment
securities, which represent 26.14% of total resources, reached P95.179 billion, higher by 8.49%
or P7.451 billion mainly due to the growth in the Available for Sale Securities by 10.25% or
P7.777 billion from P75.910 billion to P83.687 billion.
Total net loans and other receivables stood at P190.808 billion and represented 52.41% of total
resources.
Investments in subsidiaries and associates, net went up by 9.22% or P333 million from P3.613
billion to P3.946 billion mainly due to equity earnings recognized for the period.
Bank premises, furniture, fixtures and equipment posted a 16.17% increase or P1.045 billion from
P6.462 billion to P7.507 billion due to investments in computer equipment and in the core banking
technology, construction cost of RSB Corporate Center building, and branch expansion. In 2012,
the Bank opened thirty-three (33) new business centers and extension offices and deployed two
hundred forty-nine (249) new ATMs.
Investment property, net decreased by 11.18% or P855 million from P7.651 billion to P6.796
billion. Other resources, net increased by 10.05% or P597 million from P5.938 billion to P6.535
billion due to margin deposits on derivative transactions and acquisition of software.
Deposit liabilities stood at P246.757 billion and accounted for 67.77% of total resources. Demand
deposits rose by 5.67% or P567 million from P10.001 billion to P10.568 billion while savings
16
deposits reached P130.302 and accounted for 35.75% of total resources. Time deposits, on the
other hand, stood at P105.887 billion and represented 29.08% of total resources.
The Bank listed on May 8, 2012 its three (3) tranches of Long Term Negotiable Certificates of
Time Deposit (LTNCDs) maturing in 2017 worth P5.0 billion. The three tranches were issued in
two (2) fixed rate series and one (1) zero coupon series. The P2.033 billion fixed rate and PhP
1.15 billion Series 2 fixed rate LTNCDs both have a coupon rate of 5.25% per annum, and are
maturing on June 29, 2017 and November 7, 2017 respectively. The zero coupon series due
June 29, 2017, in the amount of P1.817 billion, was issued at an offer price of 74.0493% of face
value and a yield-to-maturity of 5.5% p.a. on December 29, 2011.
Bills payable, representing 7.25% of total resources, increased by 46.29% or P8.350 billion from
P18.037 billion to P26.387 billion as the Bank resorted to cheaper alternative source of funding,
especially foreign currency denominated borrowings, to support asset growth.
Accounting for 5.92% of total resources, bonds payable went up by 97.64% or P 10.648 billion
from P10.905 billion to P21.553 billion due to the issuance of 5-year senior unsecured fixed-rate
notes in January and April 2012 totaling $275 million.
On January 30, 2012, the Bank successfully raised $200 million worth of 5-year senior unsecured
fixed-rate notes off its $1.0 billion EMTN Programme. The notes carried a coupon and yield of
5.25% and maturity of January 31, 2017. On April 3, 2012, the Bank issued another $75 million
with a coupon and yield of 4.779% under the same EMTN Programme. As a result, Bonds
payable went up by 97.64% or P10.648 billion from P10.905 billion to P21.553 billion.
Accrued taxes, interest, and other expenses payable went up by 13.15% or P523 million from
P3.978 billion to P4.501 billion. Other liabilities increased by 32.54% or P2.685 billion from
P8.252 billion to P10.937 billion on account of increases in accounts payable, bills purchasecontra account, and import bills under usance.
Total liabilities amounted to P321.122 billion and accounted for 88.20% of total resources.
Preferred stock declined by 88.46% or P23 million from P26 million to P3 million due to
conversion to common shares. Revaluation reserves on AFS securities rose by 37.82% or P863
million from P2.282 billion to P3.145 billion primarily due to the declining interest rates leading to
the appreciation of AFS securities. Other reserves went up by 223.53% or P228 million from
P102 million to P330 million mainly due to the acquisition of RCBC Leasing and Finance Corp.
Retained earnings grew by 49.44% or P4.643 billion from P9.392 billion to P14.035 billion driven
by the P6.220 billion net profits generated for the year partially offset by dividends paid and
amortization and full write-off of deferred charges on SPV. Non-controlling interest declined by
84.62% or P165 million from P195 million to P30 million also due to the acquisition of FMLFC.
The Bank’s capital, excluding non-controlling interest, grew to P42.943 billion, 14.06% or P5.292
billion higher from P37.651 billion in 2011 and accounted for 11.79% of total resources.
Income Statement
In Million Pesos
Interest Income
Interest Expense
Net Interest Income
Other Operating Income
Impairment Losses
Operating Expenses
Net Income
*As restated
2012
18,755
7,356
11,399
11,425
2,486
13,366
6,220
2011*
17,037
6,205
10,832
10,130
2,538
12,454
5,029
2010*
17,018
6,022
10,996
8,602
3,186
11,085
4,280
17
Total interest income went up by 10.08% or P1.718 billion from P17.037 billion to P18.755 billion.
Interest income from loans and receivables increased by 16.92% or P2.003 billion from P11.840
billion to P13.843 billion and accounted for 60.65% of total operating income. Other interest
income declined significantly by 70.42% or P419 million from P595 million to P176 million
primarily due to the non-remuneration of reserve-eligible funds. Interest income from investment
securities reached P4.736 billion and accounted for 20.75% of total operating income.
Total interest expense increased by 18.55% or P1.151 billion from P6.205 billion to P7.356 billion.
Interest expense from deposit liabilities increased by 12.88% or P490 million from P3.804 billion
to P4.294 billion mainly due to the higher cost of time deposits. Interest expense from bills
payable and other borrowings increased by 27.53% or P661 million from P2.401 billion to P3.062
billion. Nevertheless, net interest income grew by 5.23% or P567 million from P10.832 billion to
P11.399 billion and accounted for 49.94% of total operating income.
Impairment losses stood at P2.486 billion and represented 10.89% of total operating income.
Other operating income of P11.425 billion accounted for 50.06% of total operating income and is
broken down as follows:
•
•
•
•
•
•
Trading and securities gain-net is higher by 37.45% or P1.854 billion from P4.950 billion
to P6.804 billion
Trust fees went up by 17.20% or P43 million from P250 million to P293 million
Service fees and commissions increased by 8.90% or P170 million from P1.910 billion to
P2.080 billion
Foreign exchange gains (losses)-net decreased by 33.33% or P98 million from P294
million to P196 million
Equity in net earnings of associates went up by 78.50% or P157 million from P200 million
to P357 million
Miscellaneous income decreased by 32.90% or P831 million from P2.526 billion to
P1.695 billion mainly due to the extra-ordinary income in 2011 coming from the amount
collected from BDO in connection with the purchase of Bankard by RCBC Capital in May
2000 and from the sale of Manchesterland shares
Operating expenses increased by 7.32% or P912 million from P12.454 billion to P13.366 billion
and represented 58.56% of total operating income.
•
•
•
•
•
Taxes and licenses went up by 20.68% or P279 million from P1.349 billion to P1.628
billion primarily due to higher gross receipts tax on account of higher operating income
Occupancy and equipment-related costs rose by 16.72% or P325 million from P1.944
billion to P2.269 billion
Depreciation and amortization increased by 5.69% or P60 million from P1.054 billion to
P1.114 billion as a result of the Bank’s investments in core banking technology and the
setting up of additional and the renovation of existing banking channels
Manpower costs increased by 4.93% or P172 million from P3.488 billion to P3.660 billion
due to the additional workforce as a result of branch expansion
Miscellaneous expenses reached P4.695 billion
Provision for tax expense declined by 18.58% or P170 million from P915 million to P745 million.
Income from non-controlling interest declined by 73.08% or P19 million from P26 million to P7
million primarily due to the acquisition of RCBC Leasing and Finance Corp.
RCBC’s solid performance in 2012 reflects management’s firm commitment to its strategic
objectives and business direction. Riding on this momentum, the Bank aims to continue growing
its client base by a million a year through expansion in the Bank’s distribution and electronic
18
banking channels, brand-building, and introduction of innovative products and services especially
now with the full-scale operation of the new core banking platform. The Bank will still keep on
catering to the country’s middle class and overseas Filipino workers in the remittance business
and give special focus on the growing micro, small, and medium enterprises (MSMEs) and
consumer segment. It will continue to hire more young, dedicated, and competent people and
train its existing personnel.
RCBC continues to be in the market for well-managed mid-sized commercial banks and thrift
banks which will enable it to increase its asset base, distribution network, and customer reach in
a cost-efficient manner.
For 2012, 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.
Performance Indicators
RIZAL COMMERCIAL BANKING CORPORATION and SUBSIDIARIES
In Php
Consolidated
Parent
Audited
2011*
2012
2011*
2012
Return on Average Assets
1.62%
1.78%
1.60%
1.70%
(ROA)
Return on Average Equity (ROE)
16.56%
16.31%
17.15%
15.35%
BIS Capital Adequacy Ratio
18.52%
17.61%
17.12%
15.99%
(CAR)
Non-Performing Loans (NPL)
1.62%
1.85%
0.87%
0.98%
Ratio
Non-Performing Assets (NPA)
Ratio
3.98%
3.62%
2.15%
2.00%
Net Interest Margin (NIM)
4.12%
3.93%
3.54%
3.44%
Cost-to-Income Ratio
59.41%
58.56%
57.70%
56.76%
Loans-to-Deposit Ratio
67.45%
77.19%
67.04%
75.39%
Current Ratio
0.69
0.45
0.58
0.46
Liquid Assets-to-Total Assets
0.44
0.42
0.43
0.43
Ratio
Debt-to-Equity Ratio
8.12
7.47
7.82
7.25
Asset-to- Equity Ratio
Asset -to- Liability Ratio
Interest Rate Coverage Ratio
Earnings per Share (EPS)
Basic
Diluted
*As restated
9.12
1.12
1.96
8.47
1.13
1.95
8.82
1.13
1.93
8.25
1.14
1.89
4.46
4.46
5.09
5.09
3.57
3.57
4.01
4.01
Wholly-Owned/Majority Owned Subsidiaries
RCBC SAVINGS BANK
In Php 000s
Net Income
Return on Average Assets (ROA)
Audited
2011
P1,389,096
2.49%
Audited
2012
P1,137,192
1.92%
19
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 000s
Net Loss
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 CAPITAL CORPORATION and Subsidiary
In Php 000s
Net Income
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)
RCBC FOREX BROKERS CORPORATION
In Php 000s
Net Income
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)
19.30%
14.95%
3.95%
9.28%
45.00
15.10%
14.94%
3.97%
9.64%
36.84
Audited
2011
(P52,095)
(15.38%)
(15.88%)
298.60%
0.56%
0.06%
(5.94)
Audited
2012
(P125,004)
(13.51%)
(19.85%)
98.57%
0.22%
3.62%
(14.26)
Audited
2011
P446,909
12.10%
14.41%
59.47%
0.02%
3.78
Audited
2012
P432,942
9.14%
12.10%
50.79%
0.18%
3.66
Audited
2011
P74,801
17.14%
32.82%
81.38%
149.60
Audited
2012
P98,020
20.75%
39.45%
72.58%
196.04
RCBC INTERNATIONAL FINANCE, LTD. and Subsidiary
In Php 000s
Audited
2011
Net Loss
(P8,850)
Return on Average Assets (ROA)
(5.13%)
Return on Average Equity (ROE)
(5.74%)
Capital to Total Assets
78.87%
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Loss per Share
(3.54)
Unaudited
2012
(P10,634)
(7.09%)
(7.82%)
91.37%
(4.25)
RCBC NORTH AMERICA, INC.
In Php 000s
Audited
2011
Unaudited
2012
20
Net Income (Loss)
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 000s
Net Income (Loss)
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 (EPS)
BANKARD, INC.
In Php 000s
Net Income
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)
(P51,253)
(30.15%)
(133.10%)
15.69%
(1,172.11)
P12,086
7.70%
35.31%
27.96%
276.40
Audited
2011
P6,929
2.15%
14.35%
23.58%
11.55
Unaudited
2012
(P61,592)
(27.36%)
(530.67%)
(15.60%)
(102.65)
Audited
2011
P118,435
12.96%
14.16%
91.97%
0.13%
0.08
Audited
2012
P114,125
10.68%
11.70%
91.35%
0.06%
0.07
RCBC-JPL HOLDING COMPANY, INC. (Formerly JP Laurel Bank, Inc.)
In Php 000s
Audited
2011
Net Loss
(P43,004)
Return on Average Assets (ROA)
(6.91%)
Return on Average Equity (ROE)
(139.61%)
Capital to Total Assets
(4.12%)
Non-Performing Loans (NPL) Ratio
81.91%
Non-Performing Assets (NPA) Ratio
61.78%
Loss per Share (EPS)
(38.76)
NIYOG PROPERTY HOLDINGS, INC.
In Php 000s
Net Income
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)
Audited
2011
P132,793
39.21%
46.35%
97.21%
95.47
Audited
2012
(P92,540)
(25.88%)
(160.13%)
(44.49%)
99.49%
113.31%
(83.40)
Audited
2012
P29,154
8.60%
8.92%
98.11%
20.96
RCBC LEASING AND FINANCE CORP. and
Subsidiary
21
In Php 000s
Net Income (Loss)
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 (EPS)
Audited
2011
P39,452
1.33%
8.72%
15.24%
16.60%
15.60%
0.14
Audited
2012
(P92,279)
(0.11%)
(0.91%)
16.48%
25.56%
19.46%
(0.32)
Notes to the Computations:
1.
2.
3.
4.
5.
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.
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.
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).
NPA ratio is determined by using the following formula: (Net NPLs + Net ROPA) / Total Assets.
For some subsidiaries, the NPL/NPA ratios were not computed since these ratios were not
applicable.
Key Variable and Other Qualitative and Quantitative Factors
Plans for 2013
The Bank will continue to strengthen its core businesses through improved synergy among its
business units. Revenue growth through prudent asset and deposit buildup, operational
efficiency, distribution network and electronic banking expansion, and maximization of total
customer relationship through cross-selling will again be the main performance drivers.
Revenue generation is programmed to be driven by the increase in low-cost CASA and build-up
in loans from the high-yielding SME and consumer segments. The Bank will target SME clients as
the lead relationship in intensifying the selling of the Bank’s full range of products and services,
including leasing as an alternative form of financing.
The Bank will also expand and diversify its revenue streams by growing the non-interest income
from the Bank’s fee-based businesses such as Trust, Investment Banking, Remittance, Credit
Card, Wealth Management, Cash Management, Bancassurance, and Retail Banking.
The Bank has always placed great value on technology and human resources. The Bank
continues to strengthen its technological capabilities especially with the full-scale operations of
the new Core Banking system and through refinements in the retail and corporate internet
platform in order to provide more efficient operations and more convenient electronic banking
services. Likewise, the Bank remains committed in enhancing the abilities and competencies of
its manpower complement through continuous hiring of the right people and training of existing
teams with customer satisfaction and customer service as the guiding strategic principles.
The Bank will keep on growing its client base through continued branch, ATM, and electronic
network expansion together with product innovation. The Bank intends to improve on its 2.5-ATM
per branch ratio. There will be a vigorous focus in promoting the electronic banking channels and
cash management service of the Bank especially in the small and medium enterprises. On the
other hand, the Bank’s thrust in expanding the consumer clientele will be carried out through its
savings bank and microfinance arms.
22
In preparation for Basel 3 requirements, the Bank also plans to strengthen its capital adequacy by
raising both Core Equity capital and Alternative Tier 1 capital within the year.
Notes to Financial Statements of March 31, 2013
Accounting Policies and Methods of Computation. There were no changes in the accounting
policies and methods of computation followed in the interim financial statements as compared
with the most recent annual financial statements.
Seasonality or Cyclicality of Interim Operations. Seasonal or cyclical events and/or
conditions do not materially affect the year-round operations of the Bank.
Changes in Estimates of Amounts Reported. There were no changes in estimates of amounts
reported in prior interim periods of the current financial year or in estimates of amounts reported
in prior financial years.
Issuances, Repurchases and Repayments of Debt and Equity Securities. On February 15,
2013, IFC Capitalization Fund, L.P. signed a subscription agreement wherein it initially agreed to
subscribe to common shares equal to the Peso Equivalent of $100 million worth of shares at a
price of P58.00 per share which was consummated on April 26, 2013. The subscribed shares
totaling 71,151,505 represent 5.6% of the resulting outstanding common stock of the Bank.
On March 7, 2013, the Bank successfully placed 63.65 million shares of its common stock at
P64.00 per share for a total of approximately P4.074 billion. The transaction was structured as a
top-up placement where Pan Malayan Management and Investment Corporation sold 63.65
million of its listed RCBC shares and simultaneously subscribed to the same number of new
common shares.
On February 25, 2013, the Bank completed the exercise of its Call Option on the P7.0 billion
Unsecured Subordinated Notes eligible as Lower Tier 2 capital with an original maturity date of
February 22, 2018.
Dividends Paid for Ordinary or Other Shares. In its meeting held on April 29, 2013, the Board
of Directors approved the declaration and payment of cash dividends amounting to P0.05774 per
share, or a total of approximately P20 thousand, to holders of Preferred Class shares, subject to
the final approval of the Bangko Sentral ng Pilipinas.
In its meeting held on March 25, 2013, the Board of Directors approved the declaration and
payment of cash dividends amounting to P1.00 per share, or a total of approximately P1.141
billion payable to holders of Common Class shares, and a total of approximately P342 thousand
payable to holders of Preferred Class shares which were approved by the Bangko Sentral ng
Pilipinas on April 29, 2013 and to be paid on May 26, 2013.
In its meeting held on January 28, 2013, the Board of Directors approved the declaration and
payment of cash dividends to holders of Preferred Class shares amounting to P0.0578 per share
or a total of approximately P20 thousand which was approved by the Bangko Sentral ng Pilipinas
on March 4, 2013 and paid on March 26, 2013.
In its meeting held on November 26, 2012, the Board of Directors approved the declaration and
payment of cash dividends, which was approved by Bangko Sentral on March 4, 2013, amounting
to P201.993 million to holders of Hybrid Tier 1 securities on April 26, 2013. The Board also
approved the declaration and payment of cash dividends to holders of Preferred Class shares
amounting to P0.0593 per share or P20 thousand which was approved by the Bangko Sentral on
December 18, 2012 and paid on January 2, 2013.
23
The details of the 2013 cash dividend approvals and distributions for the first half are as follows
(amounts in thousands except per share figures):
Date
Declared
January 30, 2012
March 26, 2012
March 26, 2012
May 28, 2012
July 30, 2012
November
26,
2012
November
26,
2012
January 28, 2013
March 25, 2013
March 25, 2013
April 29, 2013
Dividend
Per
Share
P 0.0649
P 0.9000
P 0.9000
P 0.0632
P 0.0624
Total
Amount
P 26
P 1,026,771
P 308
P 22
P 21
Date Approved
BSP
Date
Paid/Payable
Nature of
Securities
February 24, 2012
April 19, 2012
April 19, 2012
June 26, 2012
September 6, 2012
Preferred stock
Common stock
Preferred stock
Preferred stock
Preferred stock
P 0.0593
P 20
December 18, 2012
March 27, 2012
June 4, 2012
June 4, 2012
July 3, 2012
September
28,
2012
January 2, 2013
*
P 203,524
March 4, 2013
April 26, 2013
Hybrid Tier 1
P 0.0578
P1.00
P1.00
P
0.05774
P 20
P 1,140,857
P 342
P 20
March 4, 2013
April 29, 2013
April 29, 2013
pending
March 26, 2013
May 26, 2013
May 26, 2013
pending
Preferred stock
Common stock
Preferred stock
Preferred stock
Preferred stock
Segment Information. The following table presents revenues and expenses of the Parent
Company that are directly attributable to primary business segments for the period ended March
31, 2013 (in millions).
Results of Operations
Net interest income
Non-interest income
Total revenue
Non-interest expense
Income (loss) before Income tax
Income tax provision
Net income (loss)
Retail
Banking
Group
Corporate
Banking
Group
1,193
613
1,806
1,540
266
266
811
623
1,534
238
1,296
1,296
Treasury /
Trust
77
1,523
1,600
189
1,411
1,411
Others
(130)
246
116
1,061
(945)
256
(1,201)
Total
2,051
3,005
5,056
3,028
2,027
256
1,772
Material Events Subsequent to the End of the Interim Period Not Reflected in the Financial
Statements. There were no material events subsequent to the end of the interim period that
have not been reflected in the financial statements for the interim period.
Changes in Composition of the Issuer During the Interim Period. On March 25, 2013, the
Parent Company’s BOD approved the sale of the Bank’s 34.8% stake in RCBC Realty to a
consortium comprising of Pan Malayan Management and Investment Corporation and House of
Investments for a minimum valuation of P4.31 billion and a maximum valuation of P5.48 billion.
Changes in Contingent Liabilities or Contingent Assets. There were no changes in
contingent liabilities or contingent assets since the last annual balance sheet date.
Material Contingencies and Any Other Events or Transactions. On February 15, 2013, the
Bank and Phil. Asset Growth One, Inc. signed an Asset Sale and Purchase Agreement and other
related agreements and documents in relation to the sale of the Bank’s non-performing assets.
24
Performance Indicators
The following basic ratios measure the financial performance of the Bank and its consolidated
subsidiaries:
Return on Average Assets
(ROA) 1/
Return on Average Equity
(ROE) 2/
BIS Capital Adequacy Ratio
3/
Non-Performing Loans (NPL)
Ratio 4/
Non-Performing
Assets
(NPA) Ratio 5/
Net Interest Margin (NIM)
Cost-to-Income Ratio
Loans-to-Deposit Ratio
Current Ratio
Liquid
Assets
-to-Total
Assets Ratio
Debt-to-Equity Ratio
Asset-to- Equity Ratio
Asset -to- Liability Ratio
Interest Rate Coverage Ratio
Earnings per share (EPS) 6/
Basic
Diluted
Consolidated
Audited
Unaudited
March 31,
December
2013
31, 2012
1.78%
1.97%*
0.48%
16.31%
17.14%*
4.21%
16.85%
17.61%
Parent
Unaudited
Audited
March 31,
December
2013
31, 2012
1.70%
1.62%*
0.40%
15.35%
13.75%*
3.38%
15.01%
15.99%
1.05%
1.85%
0.37%
0.98%
2.58%
3.62%
1.16%
2.00%
4.11%*
55.02%
82.14%
0.39
0.42
3.93%
58.56%
77.19%
0.45
0.42
3.67%*
54.90%
80.16%
0.40
0.43
3.44%
56.76%
75.39%
0.46
0.43
6.62
7.62
1.15
2.39
7.47
8.47
1.13
1.95
6.41
7.41
1.16
2.16
7.25
8.25
1.14
1.89
5.94*
5.94*
5.09
5.09
3.95*
3.95*
4.01
4.01
* Annualized
1/
Average assets for the consolidated and parent ratios were computed based on the 4-month
average of end of month balances of total assets. Unaudited net income for the 3-month period ended
March 31, 2013 in the amount of P1.772 billion and P1.211 billion represented the consolidated and parent,
respectively.
2/
Average equity for the consolidated and parent ratios were, likewise, computed based on the 4month average of end of month balances. Unaudited net income for the 3-month period ended March 31,
2013 in the amount of P1.772 billion and P1.211 billion represented the consolidated and parent,
respectively.
3/
Risk-based capital adequacy ratio was determined based on BSP Circular No. 538 and covers
combined credit risk, market risk and operational risk.
4/
Non-performing loans (NPLs) as of December 31, 2012 were net of accounts fully provided with
valuation reserves per BSP Circular No. 351 of 2002 while Non-performing loans (NPLs) as of March 31,
2013 were net of total specific allowance for probable losses per BSP Circular No. 772 of 2012.
5/
NPAs as of December 31, 2012 were net of accounts fully provided with valuation reserves. NPAs
as of March 31, 2013 were net of total specific allowance for probable losses.
6/
Total weighted average number of issued and outstanding common shares (diluted) as of March
31, 2013 – 1,153,846,900 shares; as of December 31, 2012 – 1,140,935,874 shares.
25
Performance Indicators for Wholly-Owned/Majority Owned Subsidiaries
RCBC SAVINGS BANK
In Php 000s
Net Income
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 000s
Net Loss
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 CAPITAL CORPORATION and Subsidiary
In Php 000s
Net Income
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)
RCBC FOREX BROKERS CORPORATION
In Php 000s
Net Income
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)
Unaudited
March 31, 2013
P295,378
1.90%*
14.96%*
15.45%
2.63%
8.94%
38.80*
Audited
2012
P1,137,192
1.92%
15.10%
14.94%
3.97%
9.64%
36.84
Unaudited
March 31, 2013
(P6,766)
(3.03%)*
(5.09%)*
93.51%
(0.05%)
1.35%
(3.13)*
Audited
2012
(P125,004)
(13.51%)
(19.85%)
98.57%
0.22%
3.62%
(14.26)
Unaudited
March 31, 2013
P216,742
16.29%*
22.41%*
39.85%
0.16%
7.44*
Audited
2012
P432,942
9.14%
12.10%
50.79%
0.18%
3.66
Unaudited
March 31, 2013
P15,914
14.69%*
24.05%*
53.33%
129.08*
Audited
2012
P98,020
20.75%
39.45%
72.58%
196.04
RCBC INTERNATIONAL FINANCE, LTD. and Subsidiary
In Php 000s
Unaudited
March 31, 2013
Net Loss
(P1,350)
Return on Average Assets (ROA)
(4.03%)*
Return on Average Equity (ROE)
(4.32%)*
Capital to Total Assets
95.49%
Non-Performing Loans (NPL) Ratio
-
Unaudited
2012
(P10,634)
(7.09%)
(7.82%)
91.37%
-
26
Non-Performing Assets (NPA) Ratio
Loss per Share
RCBC NORTH AMERICA, INC.
In Php 000s
Net Income (Loss)
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
RCBC TELEMONEY EUROPE S.P.A
In Php 000s
Net Income (Loss)
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Loss per Share (EPS)
BANKARD, INC.
In Php 000s
Net Income
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)
(2.19)*
(4.25)
Unaudited
March 31, 2013
P184
0.52%*
2.16%*
21.48%
17.08*
Unaudited
2012
P12,086
7.70%
35.31%
27.96%
276.40
Unaudited
March 31, 2013
(P8,234)
(18.09%)*
(204.24%)*
(3.56%)
(55.65)*
Unaudited
2012
(P61,592)
(27.36%)
(530.67%)
(15.60%)
(102.65)
Unaudited
March 31, 2013
P27,127
9.83%*
10.69%*
92.53%
0.07*
Audited
2012
P114,125
10.68%
11.70%
91.35%
0.06%
0.07
RCBC-JPL HOLDING COMPANY, INC. (Formerly JP Laurel Bank, Inc.)
In Php 000s
Unaudited
March 31, 2013
Net Income/(Loss)
P1,724
Return on Average Assets (ROA)
2.67%*
Return on Average Equity (ROE)
(6.04%)*
Capital to Total Assets
(43.77%)
Non-Performing Loans (NPL) Ratio
46.36%
Non-Performing Assets (NPA) Ratio
87.29%
Earnings/(Loss) per Share (EPS)
6.30*
NIYOG PROPERTY HOLDINGS, INC.
In Php 000s
Net Income
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Unaudited
March 31, 2013
P5,489
6.31%*
6.47%*
Audited
2012
(P92,540)
(25.88%)
(160.13%)
(44.49%)
99.49%
113.31%
(83.40)
Audited
2012
P29,154
8.60%
8.92%
27
Capital to Total Assets
Non-Performing Loans (NPL) Ratio
Non-Performing Assets (NPA) Ratio
Earnings per Share (EPS)
RCBC LEASING AND FINANCE CORP. and
Subsidiary
In Php 000s
Net Income (Loss)
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 (EPS)
*
97.08%
16.01*
98.11%
20.96
Unaudited
March 31, 2013
(P9,337)
(1.08%)*
(6.85%)*
15.26%
21.55%
15.07%
(0.13)*
Audited
2012
(P92,279)
(0.11%)
(0.91%)
16.48%
25.56%
19.46%
(0.32)
Annualized
(C) Financial Statements
RIZAL COMMERCIAL BANKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Millions)
(Unaudited)
(Audited)
December
31,
2012
March 31
2013
ASSETS
Cash and Other Cash Items
Due From Bangko Sentral ng Pilipinas
Due From Other Banks
Investment Securities
Financial Assets at Fair Value Through
Profit or Loss
Available for Sale Securities, net
Loans and Receivables, net
Investments in Associates, net
Bank Premises, Furniture, Fixtures &
Equipment, net
Investment Properties, net
Deferred Tax Assets, net
Other Resources, net
TOTAL RESOURCES
LIABILITIES AND CAPITAL FUNDS
Deposit Liabilities
Demand Deposits
Savings Deposits
Time Deposits
P
P
P
8,018
36,410
4,700
P
9,380
36,620
5,879
11,169
84,216
197,784
4,047
11,492
83,687
190,808
3,946
7,782
5,268
1,477
7,241
368,112
7,507
6,796
1,445
6,535
364,095
14,450
131,789
85,369
P
P
10,568
130,302
105,887
28
Total Deposit Liabilities
Bills Payable
Bonds Payable
P
Accrued Taxes, Interest and Other Expenses
Payable
Other Liabilities
Subordinated Debt
TOTAL LIABILITIES
P
231,608
47,566
21,423
4,215
11,006
3,992
319,810
P
246,757
26,387
21,553
4,501
10,937
10,987
321,122
P
Capital Funds
Attributable to Parent Company
Shareholders:
Preferred Stock
Common Stock
Hybrid Perpetual Securities
Capital Paid in Excess of Par
Revaluation Reserves on Available-for-sale
Securities
Accumulated Translation Adjustment
Reserve for Trust Business
Other Reserves
Retained Earnings
Non-controlling Interest
TOTAL CAPITAL FUNDS
TOTAL LIABILITIES & CAPITAL
1/
P
3
12,045
4,883
12,748
3
11,409
4,883
9,397
2,913
70
329
(330)
15,605
48,268
33
48,302
368,112
3,145
72
329
(330)
14,035
42,943
30
42,973
364,095
P
The consolidated financial statements have been prepared in conformity
with Financial Reporting Standards in the Philippines for Banks (FRSPB)
and reflect amounts that are based on the best estimates and informed
judgment of management with appropriate consideration to materiality.
RIZAL COMMERCIAL BANKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Millions except for earnings per share)
(Unaudited)
Jan. 1 to
Mar. 31
2013
(Unaudited)
Jan. 1 to
Mar. 31
2012
INTEREST INCOME ON
Loans and receivables
Investment securities
Others
P
3,484
1,076
59
4,618
P
3,271
1,201
156
4,628
INTEREST EXPENSE ON
29
Deposit liabilities
Bills payable and other borrowings
NET INTEREST INCOME
IMPAIRMENT LOSSES
NET INTEREST INCOME AFTER
IMPAIRMENT LOSSES
OTHER OPERATING INCOME
Trading and securities gain-net
Service fees & commissions
Foreign exchange gains (losses)-net
Trust fees
Miscellaneous
OTHER OPERATING EXPENSES
Employee benefits
Occupancy & equipment-related
Taxes & Licenses
Depreciation and amortization
Miscellaneous
INCOME BEFORE TAX
TAX EXPENSE
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
NET INCOME ATTRIBUTABLE TO PARENT
COMPANY'S SHAREHOLDERS
P
Earnings per Share (Annualized)
Basic
Diluted
RIZAL COMMERCIAL BANKING
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Amounts in Millions)
CASH FLOWS FROM OPERATING
ACTIVITIES
Income before tax
827
747
1,574
3,044
798
1,230
687
1,917
2,711
668
2,246
2,044
2,136
576
(23)
77
811
3,577
1,687
480
159
77
498
2,902
959
588
506
327
1,263
3,643
2,180
408
1,772
891
529
428
259
1,062
3,170
1,776
245
1,531
0
1
1,772
P
1,530
P 5.94
P 5.01
P 5.94
P 5.01
Unaudited
Jan. 1 to
Mar. 31
2013
(03.31.13 vs.
12.31.12)
P
2,180
Unaudited
Jan. 1 to
Mar. 31
2012
(03.31.12 vs.
12.31.11)
P
1,776
30
Adjustments for:
Impairment losses
Depreciation and amortization
Amortization of deferred charges
Dividend income
Equity in net earnings of associates
Operating income before working capital
changes
Decrease (Increase) in financial
assets at fair value through profit
and loss
Decrease (Increase) in loans and
receivables
Decrease (Increase) in investment
property
Decrease (Increase) in other
resources
Increase (Decrease) in deposit
liabilities
Increase (Decrease) in accrued
taxes, interest and other expenses
Increase (Decrease) in other
liabilities
Cash generated from (used in)
operations
Cash paid for taxes
798
327
56
(4)
(48)
668
259
36
(97)
3,309
2,643
323
221
(7,774)
(1,816)
1,528
34
(725)
(958)
(15,149)
(17,636)
(422)
(270)
(7,093)
9,510
(26,002)
(272)
(8,271)
(209)
(26,274)
(8,480)
(758)
640
(602)
4
(406)
-
(55)
(33)
33
(16)
(1,443)
251
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceed from (payments of) bills
payable
Dividends paid
Net proceeds from issuance of common
shares
21,179
(202)
(894)
-
Net Cash From (Used in) Financing
24,965
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 (net)
Cash dividends received
Decrease (increase) in investments in
subsidiaries and associates
Acquisitions of software
Net Cash From (Used in) Investing
Activities
3,988
(894)
31
Activities
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
Cash and other cash items
Due from Bangko Sentral ng
Pilipinas
Due from other banks
CASH AND CASH EQUIVALENTS AT END
OF YEAR
Cash and other cash items
Due from Bangko Sentral ng
Pilipinas
Due from other banks
P
(2,752)
(9,123)
9,380
8,148
36,620
5,879
34,221
3,606
51,879
45,975
8,018
5,926
36,410
4,700
28,321
2,605
P
49,128
36,853
RIZAL COMMERCIAL BANKING
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN CAPITAL FUNDS
(Amounts in Millions)
Unaudited
Jan. 1 to Mar. 31
2013
ATTRIBUTABLE TO PARENT COMPANY
SHAREHOLDERS
PREFERRED STOCK
Balance, beginning
Issuance (Conversion) of preferred
stock
Balance,end
COMMON STOCK
Balance, beginning
Conversion of preferred stock to
common stock
Issuance of common stock
Balance,end
P
Unaudited
Jan. 1 to Mar. 31
2012*
3
P
26
0
3
(22)
3
11,409
11,401
637
12,046
7
11,408
32
HYBRID PERPETUAL SECURITIES
CAPITAL PAID IN EXCESS OF PAR
Balance, beginning
Conversion of preferred stock to
common stock
Excess of consideration given over
cost of common shares issued
Balance,end
REVALUATION RESERVE ON
AVAILABLE-FOR-SALE SECURITIES
Balance, beginning
Fair value gains (losses) on availablefor-sale securities, net of tax
Balance, end
4,883
4,883
9,397
9,382
-
15
3,351
12,748
9,397
3,145
2,282
(232)
2,913
884
3,166
ACCUMULATED TRANSLATION
ADJUSTMENTS
Balance, beginning
Translation adjustment during the
period
Balance, end
72
74
(2)
70
(0)
74
RESERVE FOR TRUST BUSINESS
Balance, beginning
Transfer from surplus free
Balance, end
329
0
329
313
(0)
313
(330)
(330)
14,035
14,035
1,772
(0)
11,808
(2,421)
9,388
1,530
(0)
(202)
(213)
OTHER RESERVES
SURPLUS FREE
Beginning balance, as previously
reported
Prior period adjustments
Beginning balance, as restated
Net income
Cash dividends on common shares
Cash dividends on preferred shares
Dividends on Hybrid Capital
Securities
Net effect of change in percentage
ownership over a subsidiary
Transfer to reserves for trust
business
(120)
-
0
33
Balance, end
ATTRIBUTABLE TO
PARENT COMPANY
SHAREHOLDERS
NON-CONTROLLING INTEREST
Balance, beginning
Prior period adjustments
Fair value gains (losses) on available-forsale securities, net of tax
Net effect of change in percentage
ownership over a subsidiary
Net Income (loss) for the year
Balance, end
TOTAL CAPITAL FUNDS
P
15,604
10,585
48,268
39,500
30
-
9
186
3
3
0
33
(172)
1
27
48,301
P
39,527
*As restated
If material;
(i) Commitments and Contingent Liabilities
For the year, the Bank has budgeted P2.247 billion for capital expenditures.
Likewise, in the normal course of operations of the Bank, there are various outstanding
commitments and contingent liabilities that are not reflected in the accompanying financial
statements. Management does not anticipate losses from these transactions that will adversely
affect its operations.
There are pending cases that if decided will involve sums that would not have material favorable
or unfavorable effect on the 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 against Equitable PCI Bank (“Equitable”) (now BDO
Unibank or BDO) 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 P0.8
billion, including interest and expenses. The arbitration hearings were held before the ICC Arbitral
Tribunal (“Tribunal”), being the body organized by the International Chamber of Commerce.
In September 2007, the Tribunal ruled that RCBC Capital was entitled to damages, for
overpayment of the purchase of shares as a result of the overstatement of the assets of Bankard
used as the basis of the purchase price of the shares, from Equitable arising from the breach. On
16 June 2010, the Tribunal issued a Final Award declaring Equitable liable to pay RCBC Capital
the total amount of P363,881,297.91 and US$1,462,936.56, as and by way of damages, fees and
legal costs. On 13 September 2011, Banco de Oro (BDO), paid the amount of P637,941,185.55
to RCBC Capital. The amount was paid under protest and without prejudice to the outcome of
34
various cases filed by BDO to vacate the award and assail the confirmation and execution of
judgment.
There are also a number of cases pending before the Court of Appeals and the Supreme Court
filed by both BDO and RCBC Capital appealing various orders from the regional trial courts and
Court of Appeals.
In May 2006, RCBC Capital filed a civil case against SGV & Co. for damages of over =P560.0
million. This civil suit alleges that SGV & Co.’s audit reports in respect of Bankard for the financial
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.
In October 2008, Global Steel Philippines (SPV-AMC), Inc. (GSPI) and Global Ispat Holdings
(SPV-AMC), Inc. (GIHI), which purchased the Iligan Plant assets of National Steel Corporation
from its liquidator in 2004, filed a Notice of Arbitration with the Singapore International Arbitration
Centre (SIAC) seeking damages arising from the failure of the liquidator and the secured
creditors, including the Bank and RCBC Capital, to deliver the Plant assets free and clear from
liens and encumbrance; purportedly depriving them of the opportunity to use the assets in
securing additional loans to fund the operations of the Plant and upgrade the same. On May 9,
2012, the SIAC Arbitral Tribunal rendered a Partial Award in favor of GSPI and GIHI. Three
separate petitions to set aside the Partial Award were filed by the secured creditor, Spinnaker,
with the Singapore High Court. The arguments of the secured creditors, which included the
Parent Company, the Liquidator, and GSPI/GIHI were heard by the Singapore High Court from
February 26, 2013 to March 12, 2013. The Singapore High Court is set to hear the arguments of
Spinnaker and GSPI/GIHI from April 16, 2013 to April 19, 2013, after which all three petitions
shall be deemed submitted for decision. The Bank’s exposure is approximately P480 Million,
while it has a receivable from Global Steel of P534.8 Million. On account of the full provisioning
already made by the Bank, the aforesaid share is currently classified in the books of the Bank as
an Unquoted Debt Securities Classified as Loans (UDSCL) with zero net book value. The Bank’s
exposure, however, may be varied should the amount of awarded damages be reduced and
should the Iligan City agree to enter into another tax agreement. In the event of an adverse
decision by the Singapore High Court, the same may be appealed to the Singapore Court of
Appeals.
In October 2011, the Bank filed a case before the Court of Tax Appeals questioning the 20 per
cent final withholding tax applied to Poverty Eradication and Alleviation Certificates (PEACe
Bonds) by the Bureau of Internal Revenue. The Bank subsequently withdrew this petition and
joined various other banks in a petition before the Supreme Court on the same matter.
Notwithstanding the issuance of a temporary restraining order by the Supreme Court, the Bureau
of Treasury withheld a sum of P198.8 million in October 2011 from the Bank on its PEACe Bonds
holdings. The case is still pending before the Supreme Court.
The following is a summary of contingencies and commitments arising from off-balance sheet
items at their equivalent peso contractual amounts as of March 31, 2013 and December 31,
2012:
(in Millions-Php)
Derivative liabilities
Derivative assets
Consolidated
Unaudited
Audited
March 31, December 31,
2013
2012
47,419
40,941
45,675
33,355
Unaudited
March 31,
2013
47,419
40,941
Parent
Audited
December 31,
2012
45,675
33,355
35
Trust department accounts
Outstanding guarantees issued
Spot foreign exchange bought
Spot foreign exchange sold
Unused commercial letters of
credit
Inward bills for collection
Late deposits/payments
received
Outward bills for collection
99,821
34,671
4,525
4,530
10,107
109,087
32,277
9,232
9,218
11,056
99,821
34,671
5,931
5,937
10,107
89,987
32,277
9,232
9,218
11,056
724
640
1,395
398
724
640
1,395
398
172
14
172
14
(ii) events that will trigger direct or contingent financial obligation that is material to the
company; including any default or acceleration of an obligation
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.
(iii) all 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
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.
(iv) description of any material commitments for capital expenditures, general purpose of
such commitments, expected sources of funds for such expenditures
Similarly, there were no significant elements of income or loss that did not arise from the Bank’s
continuing operations.
(v) any known trends, events or uncertainties (material impact on sales)
There are also no known trends, events or uncertainties that have had or that are reasonably
expected to have a material favorable or unfavorable impact on net sales/revenues/income from
continuing operations.
(D) Material Changes from Period to Period Financial Statements (Vertical and Horizontal
Analyses)
31 March 2013 vs. 31 December 2012
Consolidated total resources for the period ended March 31, 2013 reached P368.112 billion,
P4.017 billion higher than yearend’s P364.095 billion.
Cash and other cash items decreased by 14.52% from P9.380 billion to P8.018 billion due to the
decline in time deposits as a deliberate strategy of the Bank to reduce the cost of funding. Due
from BSP, representing 9.89% of total assets, stood at P36.410 billion while Due from other
banks declined by 20.06% from P5.879 billion to P4.700 billion.
Loans and receivables-net which accounted for 53.73% of total resources reached P197.784
billion.
36
Available for sale securities accounted for 22.88% of total resources and stood at P84.216 billion.
Total investment securities accounted for 25.91% of total resources and totaled P95.385 billion.
Investment property, net decreased by 22.49% or P1.528 billion from P6.796 billion to P5.268
billion mainly due to the sale of non-performing assets to Phil. Asset Growth One, Inc. Other
resources, net went up by 10.80% or P706 million from P6.535 billion to P7.241 billion due to
increase in foreign currency checks and other cash items, prepayments, and inter-office
accounts.
Total deposit liabilities, which accounted for 62.92% of total resources, reached P231.608 billion.
Savings deposits stood at P131.789 billion and accounted for 35.80% of total resources. Demand
deposits increased by 36.74% or P3.882 billion from P10.568 billion to P14.450 billion while the
higher-costing time deposits declined by 19.38% or P20.518 billion from P105.887 billion to
P85.369 billion and accounted for 23.19% of total resources.
Bills payable increased by 80.26% or P21.179 billion from P26.387 billion to P47.566 billion due
to higher foreign currency denominated borrowings for this period. Bonds payable stood at
P21.423 billion and represented 5.82% of total resources.
Accrued taxes, interest, and other expenses payable declined by 6.35% or P286 million from
P4.501 billion to P4.215 billion. Subordinated debt also went down by 63.67% or P6.995 billion
from P10.987 billion to P3.992 billion mainly due to the exercise of Call Option on the P7.0 billion
Unsecured Subordinated Notes with an original maturity date of February 22, 2018.
Total liabilities reached P319.810 billion and accounted for 86.88% of total resources.
Common stock increased by 5.58% or P636 million from P11.409 billion to P12.045 billion arising
from the top-up share placement of 63.65 million shares. Consequently, Capital paid in excess of
par also increased by 35.66% or P3.351 billion from P9.397 billion to P12.748 billion. Revaluation
reserves on AFS securities went down by 7.37% or P232 million from P3.145 billion to P2.913
billion.
Retained earnings grew by 11.19% or P1.570 billion higher from P14.035 billion to P15.605 billion
driven by the P1.772 billion net profits generated for the first quarter partially reduced by
dividends on HT1 securities. Non-controlling interest went up by 11.47% or P3 million from P30
million to P33 million due to the profitable operations of the subsidiaries not wholly owned during
the first quarter of the year. The Bank’s capital, excluding non-controlling interest, grew to
P48.268 billion, 12.40% or P5.325 billion higher from P42.943 billion at year-end and accounted
for 13.11% of total resources.
In May 2012, the Bank conducted a study on the impact of an early adoption of PFRS 9 on its
financial statements. The 2011 audited financial statements were used as bases for determining
the impact of the possible early adoption. After evaluation of the results of the conducted study,
the Bank decided that it would not early adopt PFRS 9 in its 2012 annual financial statements.
As such, the Bank will update its impact study in the second quarter of 2013 using the 2012
audited financial statements as bases.
Relative to SEC Memorandum Circular No. 6 Series of 2013, the following Philippine Financial
Reporting Standards effective from January 1, 2013 are applicable to the Bank: Amendment to
PFRS 7, PFRS 10, PFRS 11, PFRS 12, PFRS 13, PAS 27 (Amended), and PAS 28 (Amended).
The Bank is currently evaluating the impact of these standards based on audited figures as of
December 31, 2012.
Finally, there are no known trends, demands, and commitments, events, or uncertainties that will
have a material impact on the Bank’s liquidity.
37
31 March 2013 vs. 31 March 2012
RCBC posted a net income of P1.772 billion for the first quarter of 2013, P242 million or 15.80%
higher than the P1.530 billion reported for the same period last year. Net income of P1.772 billion
accounted for 26.76% of total operating income during the period.
Net interest income, representing 45.98% of total operating income, was higher by 12.27% or
P333 million from P2.711 billion to P3.044 billion. Interest income of P4.618 billion, representing
69.75% of total operating income, mainly consisted of interest income from loans and receivables
and investment securities that accounted for 52.61% and 16.24% of total operating income,
respectively. Other interest income decreased by 62.35% or P98 million from P156 million to P59
million mainly due to the non-remuneration of reserve-eligible funds in accordance with the
change in the policy on reserve requirement by the BSP beginning April 2012.
Total interest expense, making up 23.77% of total operating income, consisted of interest on
deposit liabilities and interest on bills payable and other borrowings which accounted for 12.49%
and 11.28% of total operating income, respectively. Total interest expense declined by 17.88% or
P343 million from P1.917 billion to P1.574 billion, with interest expense on deposit liabilities
decreasing by 32.72% or P402 million from P1.230 billion to P827 million mainly due to the yearon-year decline in the volume of deposit liabilities and average cost of deposits. Interest expense
on bills payable and other borrowings however went up by 8.70% or P60 million from P687 million
to P747 million.
Provisioning for impairment losses this period amounted P798 million.
Accounting for 54.02% of total operating income, other operating income grew by 23.26% or
P675 million from P2.902 billion to P3.577 billion contributed by the following:
•
•
•
•
•
Trading and securities gain-net increased by 26.61% or P449 million from P1.687 billion
to P2.136 billion
Service fees and commissions increased by 19.86% or P95 million from P480 million to
P576 million
Other income went up by 62.84% or P313 million from P498 million to P811 million
mainly due to the one-off gain recorded on the sale of the Bank’s non-performing assets
Trust fees reached P77 million
Foreign exchange gains (losses)-net declined by 114.59% to –P23 million
Other operating expenses at P3.643 billion, representing 55.02% of total operating income, were
14.95% or P474 million higher year on year due to the following:
•
•
•
•
•
Depreciation and amortization increased by 25.96% or P67 million from P259 million to
P327 million as a result of the Bank’s investments in core banking technology and the
setting up of additional banking channels
Manpower costs increased by 7.68% or P68 million from P891 million to P959 million due
to the additional workforce as a result of branch expansion
Occupancy and equipment-related costs increased by 11.12% or P59 million from P529
million to P588 million
Taxes and licenses went up by 18.16% or P78 million from P428 million to P506 million
mainly due to higher income
Miscellaneous expenses went up by 18.96% or P201 million from P1.062 billion to
P1.263 billion
Income from non-controlling interest stood at zero from the P1 million posted during the same
period last year.
38
There were no significant elements of income or loss that did not arise from the bank’s continuing
operations.
(E) External Audit Fees
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 P9.338
million and P9.228 million for 2012 and 2011, respectively. Additionally, approximately P2.475
million was paid for other services rendered by the independent accountant in 2012.
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
ended December 31, 2012 and 2011, there were no disagreements with Punongbayan and
Araullo on any matter of accounting principles or practices, financial statement disclosures, audit
scope or procedure.
The Members of the Audit Committee are as follows: Armando M. Medina as Chairman and
Medel T. Nera, Francisco C. Eizmendi, Jr., and Minki Brian Hong as Members.
The Audit Committee approved the policies and procedures for the above services
(F) Brief Description of the General Nature and Scope of Business of RCBC and its
Subsidiaries
Rizal Commercial Banking Corporation (RCBC) is a universal bank in the Philippines that
provides a wide range of banking and financial products and services. It has total resources of
P364.10 billion and total networth of P42.97 billion, including minority interest, as of endDecember 2012. The Bank ranked fourth (4th) in terms of assets among private local banks. In
terms of business centers, the Bank, excluding government-owned and foreign banks, also
ranked fourth (4th) with a consolidated network of 420 business centers inclusive of 19 extension
offices and supplemented by 1,010 ATMs, as of December 31, 2012.
The Bank offers commercial, corporate and consumer banking, 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. 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). RCBC acquired its universal
banking license in 1989 and has been listed on the Philippine Stock Exchange Inc. (PSE) since
1986.
RCBC’s common shares are 50.47% directly and indirectly owned by Pan Malayan Management
and Investment Corporation (PMMIC), a company incorporated and domiciled in the Philippines.
39
PMMIC is the holding company of the flagship institutions of the Yuchengco Group of Companies
(YGC) and other investments. Other significant investors include the World Bank’s International
Finance Corporation and CVC Capital partners, one of the largest private equity funds in the
world.
The registered address of RCBC is Yuchengco Tower, RCBC Plaza, 6819 Ayala Avenue, Makati
City.
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 nonallied financial and non-financial undertakings.
The Bank’s subsidiaries are as follows:
RCBC Capital Corporation (RCBC Capital), a 99.96% 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 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.
Bankard, Inc. (Bankard), a 89.98% owned subsidiary (together with RCBC Capital's 24.56%)
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.
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. As of end-December 2012, RSB had 136 business centers nationwide.
Merchants Savings and Loan Association, Inc. (now operating under the name & style Rizal Microbank, a thrift bank), a 97.47% owned subsidiary, was acquired on May 15, 2008 to
engage in microfinancing and development of small businesses. Rizal Microbank, has
microfinance lending operations in Koronadal City, South Cotabato and in Davao City. Rizal
Microbank moved Its Head Office (HO) and branch from Makati City to Davao City in April 2011
RCBC International Finance Limited (RCBC IFL), a wholly owned subsidiary of the Bank, was
established in 1979 and is the Bank’s overseas branch in Hong Kong. RCBC Investment Ltd.
(RCBC IL), 100% owned subsidiary of RCBC IFL, is a Hong Kong company established in 1990.
RCBC IFL and RCBC IL are both primarily engaged in the remittance business.
RCBC North America, Inc. (formerly RCBC California International, Inc.), a wholly owned
subsidiary of the Bank (83.97% owned by RCBC; 16.03% indirectly owned through International
Finance Ltd.), 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
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 TeleMoney Europe S.p.a., a wholly owned subsidiary of the Bank, was established in
1995 in Rome, Italy to engage in the remittance business.
40
RCBC-JPL Holding Company, Inc. (formerly Pres. Jose P. Laurel Rural Bank, Inc.) (RCBCJPL), 99.39% owned, was acquired by the Bank in February 2009. It is primarily engaged in the
disposition of the remaining assets of the former JPL Rural Bank.
RCBC Leasing and Finance Corporation (formely First Malayan Leasing and Finance
Corporation ) is 97.79% owned subsidiary of the Bank, acquired in March 2012, is a pioneer in
the leasing and financing industry in the Philippines as the company started its operations in
1957. RCBC Leasing is a non-bank financial institution with a quasi-banking license granted by
the Bangko Sentral ng Pilipinas. It serves the requirements of corporate, commercial and
consumer markets through its innovative loans, leases and investment products. RCBC Rental
Corp. is a wholly owned subsidiary of RCBC Leasing and Finance Corporation.
Niyog Property Holdings, Inc. (NPHI), a wholly owned subsidiary of the Bank, 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. It is 48.11% owned by
the Bank and 58.89% indirectly owned through RCBC Savings Bank.
(G) Directors and Executive Officers
The directors of the Company are elected at the annual stockholders’ meeting to hold office until
the next succeeding annual meeting and until their respective successors have been elected and
qualified. Incumbent directors are:
Name
Sec. Alfonso T. Yuchengco
Age
90
Ms. Helen Y. Dee
68
Mr. Cesar E. A. Virata
82
Position
Honorary Chairman
Director
Director
Chairperson of the
Board
Director
Corporate
ViceChairman
Acting Chief Executive
Officer
Chief
Executive
Officer
Director
EVC/CEO
Mr. Lorenzo V. Tan
51
Atty. Teodoro D. Regala
Atty. Wilfrido E. Sanchez
79
76
President and CEO
Director
Director
Atty. Ma. Celia H. FernandezEstavillo
41
Corporate Secretary
40
57
Director
First Senior VicePresident, Head of
Legal and Regulatory
Affairs Group
Director
Director
Mr. Minki Brian Hong
Mr. Medel T. Nera
Inclusive Dates
May 27, 2002 to present
June 30, 2003 to present
March 28, 2005 to
present
June 27, 2005 to present
1995 to present
June 22, 2000 to present
January 28, 2002 to
June 29, 2003
June 30, 2003 to June
28, 2004
April 1, 2007 to present
February 1,2007 to
March 31, 2007
April 1, 2007 to present
June 28, 1999 to present
March 27, 2006 to
present
March 1, 2005 to present
Citizenship
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
June 27, 2005 to present
July 19, 2006 to present
June 27, 2011 to present
July 25, 2011 to present
American
Filipino
41
Mr. Tze Ching Chan
56
Director
Mr. Tim-Chiu R. Leung
60
Director
Mr. Francis G. Estrada
63
Director
Independent Director
Mr. Armando M. Medina
Mr. Francisco C. Eizmendi, Jr.
Mr. Antonino L. Alindogan, Jr.
63
77
74
Advisory
Board
Member
Independent Director
Independent Director
Independent Director
November 28, 2011 to
present
March 26, 2012 to
present
December 17, 2012 to
present
June 27, 2005 to May
29, 2006
May
29,
2006
to
December 17, 2012
Feb. 26, 2003 to present
May 29, 2006 to present
June 25, 2007 to present
Chinese
British
Filipino
Filipino
Filipino
Filipino
The names, ages and positions of all incumbent executive officers are as follows:
Senior Executive Vice Presidents
Redentor C. Bancod, 48, Senior Executive Vice President, is the Head of the IT Shared
Services Group and Operations Group. 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. He obtained his Bachelor of Arts degree in Philosophy from the University of the
Philippines and is a candidate for a Master of Science degree in Information Management from
the Ateneo de Manila University.
Jose Emmanuel U. Hilado, 49, Senior 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. He obtained his
Bachelor of Science degree in Economics from the University of the Philippines and is also a
certified Treasury Professional by BAP-Ateneo Graduate School.
Ismael R. Sandig, 59, Senior Executive Vice President, is the Head of Retail Banking Group. 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. He earned his Bachelor of Science degree in Commerce major
in Accounting from Far Eastern University.
Executive Vice Presidents
Alfredo S. Del Rosario Jr., 57, 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 RCBC, Mr. Del Rosario worked for AB Capital and
Investment Corporation as Senior Vice President, Trust and Investment Division Head, and
42
Information Technology Division Head (from January 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, Asian Bank 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. He graduated from the Ateneo de Manila University with a Bachelor of Science
degree in Management.
John Thomas G. Deveras, 50, Executive Vice President, is the Head of Strategic Initiatives.
Prior to joining RCBC 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 obtained his Bachelor of Science degree in
Management Engineering from the Ateneo de Manila University and earned his Masters in
Business Administration from the University of Chicago.
First Senior Vice Presidents
Michelangelo R. Aguilar, 56, First Senior Vice President, is the Head of Conglomerates and
Global Corporate Banking Group. He was also the Deputy Group Head of Corporate Banking
from November to December 2012 and Corporate Banking Segment I Head from September
2011 to November 2012. Prior to joining RCBC, Mr. Aguilar was the Managing Director/Head,
Origination and Client Coverage & Co-Head, Wholesale Banking; and, Country Head, Global
Markets of Standard Chartered Bank from August 2004 to June 2011 and December 1997 to
August 2004, respectively. He earned his Masters in Business Management from the Asian
Institute of Management. He obtained his undergraduate degree, Bachelor of Science in
Mechanical Engineering from the De La Salle University. He is a registered Mechanical Engineer
granted by the Board of Mechanical Engineers, Professional Regulatory Commission.
Manuel G. Ahyong Jr., 51, First Senior Vice President, is the Head of Wealth Management
Segment 2 (Makati). Prior to joining RCBC in 2006, he was the 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. He earned his Bachelor of Science degree in Management Engineering
from the Ateneo de Manila University and obtained his Masters in Business Management from
the Asian Institute of Management.
Rogelio P. Dayrit, 57, First Senior Vice President, is the Head of Japanese and Ecozone
Banking Segment. Prior to occupying this position, Mr. Dayrit was the Japan Desk Division Head
(June 1999 to February 2002), Account Officer for Institutional Banking Division (March 1996 to
June 1999) and Account Officer for AMD (May 1984 to March 1996). He started in RCBC as an
EDP Trainee in 1982. He obtained his Bachelor of Science degree in Industrial Engineering from
the University of the Philippines.
Michael O. de Jesus, 53, First Senior Vice President, is the Head of National Corporate Banking
Group. He was also the Deputy Group Head of Corporate Banking from November to December
2012 and the Corporate Banking Segment II Head from July 2007 to November 2012. 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.
Atty. Ma. Celia H. Fernandez-Estavillo, 41, Filipino, is the Bank’s Director, Corporate Secretary
and First Senior Vice President and Head−Legal and Regulatory Affairs Group. She is also a
Director and/or Corporate Secretary in Luisita Industrial Park, Philippine Integrated Advertising
Agency, Averon Holdings, Inc., RCBC Capital, Niyog Property Holdings, Inc. and Bankard. She is
43
also a member of the Board of Trustees of Yuchengco Center and Mapua Institute of Technology.
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 completed 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.
Lourdes Bernadette M. Ferrer, 54, First Senior Vice President, is the Head of Trust and
Investments Group. 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 obtained her
Master’s Degree in Business Administration from the same university.
John P. Go, 44, First Senior Vice President, is the Head of Chinese Business Segment II. Prior
to joining RCBC, Mr. Go was the Vice President/Chief Finance Officer/Assistant to the Chairman
of Liwayway Marketing Corporation (March 2002 to January 2008); Assistant Vice President of
UCPB (August 1996 to February 2002); and Manager/Business Development Department Head
of Monte Piedad Savings Bank (January 1996 to July 1996). He holds a Bachelor of Science
degree in Marketing from the Philippine School of Business Administration.
Eli D. Lao, 56, First Senior Vice President, is the Head of Chinese Business Segment I under the
Corporate Banking Group since 2000. He has been with the Bank since 1978, holding various
positions. Mr. Lao holds a Bachelor of Science degree in Commerce major in Accounting from De
La Salle College.
Rommel S. Latinazo, 53, First Senior Vice President, has been appointed President and Chief
Executive Officer of RCBC Savings Bank. Prior to this, he was the Head of the Corporate
Banking Segment 1 under the Corporate Banking Group. 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. Mr. Latinazo obtained his Bachelor of Science degree in Management from
the Ateneo de Manila University and earned his Masters in Business Administration from the
University of the Philippines.
Ana Luisa S. Lim, 53, First Senior Vice President, is the Head of Internal Audit Group. She is
also a Director and Corporate Secretary of BEAMExchange, Inc. She joined RCBC 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 earned her Bachelor of
Science degree in Business Administration and Accountancy from the University of the
Philippines. She is a Certified Public Accountant, Certified Information Systems Auditor and
Certified Internal Auditor.
Regino V. Magno, 54, First Senior Vice President, 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. Mr. Magno obtained his Bachelor of Science degree
in Industrial Management Engineering from De La Salle University and finished his Master of
Business Administration from the University of the Philippines.
Remedios M. Maranan, 52, First Senior Vice President, is the Deputy Group Head of BC
Services. Ms. Maranan started as a BOTP Trainee in 1989. Afterwhich, she assumed various
positions in branch operations. Her noteworthy stints include being the Regional Operations
Head for Metro Manila in December 1998 to April 2004, BC Services Division Head in May 2004
44
to May 2008 and Regional Service Head for Metro Manila in June 2008 to February 2010. She
obtained her Bachelor of Science degree in Commerce major in Accounting from the Polytechnic
University of the Philippines.
Yasuhiro Matsumoto, 53, First Senior Vice President, is the Head of 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. He obtained his degree in Bachelor of Economics from Waseda
University, Japan.
Reynaldo P. Orsolino, 52, First Senior Vice President and Head of the Small Medium
Enterprises Segment. Prior to joining RCBC, he served as Senior Vice President of 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 in Economics from the University of the Philippines.
Cynthia P. Santos, 59, First Senior Vice President, 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.
She graduated from the University of the Philippines with a Bachelor of Science degree in
Business Economics and obtained her Master of Arts in Development Economics from Williams
College, Massachusetts.
Zenaida F. Torres, 58, First Senior Vice President, assumed the post of Head, Controllership
Group in October 2009. Ms. Torres was seconded to Bankard, Inc. as Chief Financial Officer from
February 2004 to August 2008 and concurrently acted as the Corporate Information Officer from
November 2006 to August 2008. Prior to this, Ms. Torres also held various positions in the Bank
from 1980 to 2003 and positions at Costraco, Phils., University of the East, and Ford Credit
Philippines. She earned her Bachelor of Science degree in Business Administration major in
Accounting from the University of the East. She is also a Certified Public Accountant.
Edgar Anthony B. Villanueva, 50, First Senior Vice President, is the Head of Global Transaction
Services. Prior to his appointment, he was with global players Bank of America (La Salle Bank
N.A.) and ABN Amro Bank N.V., where he held various senior executive positions. His career
record reveals in-depth exposures and involvement in Corporate Banking including Treasury
Management, Global Custody and Institutional Trust in a variety of challenging roles in
relationship management, business development, product management, operations, change
management and client services across a broad range of business environments in cash
management, trade services, corporate trust, global custody, and capital markets. Mr. Villanueva
is a graduate of De La Salle University with a Bachelor of Science degree in Business
Economics. He earned his Masters Degree in Business Administration from J.L. Kellog Graduate
School of Management, Northwestern University in Illinois.
Senior Vice Presidents
Brigitte B. Capina, 52, Senior Vice President, is the Regional Sales Manager of South Metro
Manila. Prior to occupying this position, she was the Regional Sales Manager of Corporate
Headquarters in 2009 and Business Manager for various branches such as: RCBC Plaza in 2005,
Buendia in 2004 and Makati Avenue in 2003. She earned her Masters in Business Management
from the University of the Philippines, Visayas. She obtained her Bachelor of Science degree in
Commerce major in Accounting from the University of San Agustin, Iloilo City.
Arsenio L. Chua, 52, Senior Vice President, is the Regional Sales Manager of North Metro
Manila. Prior to occupying this position, he was the Regional Sales Manager of Central Metro
Manila in 2010, District Sales Manager for Southern Metro Manila in 2009 and in 2007 as
45
Business Manager for Caloocan Branch. He obtained his Bachelor of Science degree in
Management and Industrial Engineering from Mapua Institute of Technology.
Claro Patricio L. Contreras, 52, Senior Vice President, is the Head of Remedial Management
Division. Prior to joining the Bank, he was the AVP for Special Accounts Management Services
Group at BPI (April 2000 to June 2000), AVP for Credit Mgmt. Services Group at FEBTC
(January 1997 to March 2000), and Manager for Credit Management Services Group at FEBTC
(October 1995 to December 1996). He completed his Bachelor of Science degree in Commerce
major in Business Management from San Beda College.
Rafael Aloysius M. Dayrit, 56, Senior Vice President, assumed the position of Credit Risk
Division Head in May 2006. He was the Head of Small and Medium Enterprises Division from
January 2002 to February 2006 and the Head of Corporate Division III from September 2000 to
December 2001. He earned his Master’s degree in Agricultural Economics from the University of
California, Davis and Master’s degree in Business Administration from the University of the
Philippines. He also obtained his Bachelor of Science degree in Agri. Business from the same
University.
Domingo P. Dayro Jr., 36, Senior Vice President, is the Head of Business Solutions and Retails
Systems Division. He also occupied the Systems Support and Implementation Department Head
in 2008 and the Technical Support and Implementation Department Head in 2007. Prior to
joining RCBC, he assumed various positions in several banks such as Senior Product Manager of
Security Bank (March 2006 to June 2007), Product Manager/eBusiness Solutions Manager of
Philippine National Bank (July 2003 to February 2006), Project Manager of Export and Industry
Bank (April 2002 to July 2003), Senior Product Implementation Officer of Union Bank of the
Philippines (September 1999 to April 2002) and Electronic Banking Consultant of Citibank, N.A.
(June 1998 to September 1999). He started his career as Programmer Analyst of UE-Ramon
Magsaysay Medical Center in 1997. Mr. Dayro graduated from the University of the East with a
Bachelor of Science degree major in Computer Science.
Sabino Maximiano O. Eco, 44, Senior Vice President, is the Head of Retail and Channels
Division. Prior to this appointment, he assumed various positions in RCBC such as the BC
Operations Division Head (May 2004 to October 2008), Cash Management Operations
Department Head (January 2001 to April 2004), CASA Recon & Verification Head (August 1999
to January 2001), Branch Operations Head (January 1996 to August 1999), Branch Accountant
(November 1994 to January 1996), Branch Officer At Large (July to November 1994), BOTP
Trainee (April to July 1994), CASA Bookkeeper (February 1992 to April 1994) and GL/SL
Bookkeeper (April 1991 to February 1992). Mr. Eco graduated from Far Eastern University with a
Bachelor of Science degree in Commerce major in Accounting.
Josephine M. Empaces, 58, Senior Vice President, is the Regional Sales Manager of Visayas.
She has been with the Bank since 1975, assuming various positions in branch banking. Prior to
her appointment as Regional Sales Manager, she was the District Sales Manager of Metro Cebu
(June 2008 to April 2010) and Business Center Manager of Fuente Osmeña (July 2005 to May
2008). Ms. Empaces obtained her Bachelor of Science degree in Commerce from the University
of San Carlos.
Gerald O. Florentino, 44, Senior Vice President, is the Group Head of Corporate Planning. He
also assumed the position of Deputy Group Head of Corporate Planning prior to this appointment.
Before joining RCBC, he was the Senior Vice President for the Investment Banking Group of
Investment and Capital Corporation of the Philippines. He gained his solid corporate planning
expertise from AXA Philippines as Vice President and Head of Strategic Planning, Project
Management, Business Development and AXA Way from 2007 to 2009. He also assumed
various positions when he was employed in UCPB for 7 years in which his last appointment was
the Head of Cash Management Products for Working Capital Products Group. Mr. Florentino
graduated from the Loyola University of Chicago, Illinois with a degree in Bachelor of Business
46
Administration major in Finance. He finished his Masters in Business Management at the Asian
Institute of Management.
Remo Romulo M. Garrovillo, 34, Senior Vice President, is the Deputy Group Head of Metro
Manila/Luzon Sales. Prior to occupying this position, he was the Head of Channel Management
and Product Development Division in 2008 and Head of Cash Management and Electronic
Banking Channels in 2007. Prior to RCBC, he served as the Head of Product Development and
Marketing Support Division of East West Banking Corporation in 2006; and, as Product Manager
and Head of eBusiness Solutions Division of Philippine National Bank in 2003 and 2005,
respectively. He obtained his Bachelor of Arts degree in Economics from Ateneo de Manila
University.
Jennie F. Lansang, 46, Senior Vice President, is the IT Head for Shared Technology Services
Division. Before assuming this role, she worked for Banco de Oro as the Applications Unit Head
for Trust, Treasury and Trade (August 2007 to June 2010); Equitable-PCIBank as Official
Representative to the BDO-EPCI Branch Merger/Integration Committee (April to October 2007),
Retail Applications Division Head (2001 to 2007), Center Head (1999 to 2000) and Project Leader
(1996 to 1998). She also worked for Far East and Trust Companies where she assumed various
IT-related positions from 1990 to 1996. She started her career with International Center for
Computer Studies as a Computer Instructor in 1986. Ms. Lansang obtained her degree in AB
Communication Arts major in Speech Communication, from the University of the Philippines, Los
Baños.
Zenaides R. Lapera, 58, Senior Vice President, is the Regional Sales Manager of Northern
Luzon. Prior to occupying this position, he was the District Sales Manager for North Central
Luzon in 2007 and Area Head for North West Luzon in 2003 and for Clark in 1996. He obtained
his Bachelor of Science degree in Commerce major in Accounting from the University of
Assumption, Pampanga.
Vivien I. Lugo-Macasaet, 53, Senior Vice President, joined the Bank in 2008. She is the Head of
Head Office Operations Division. Prior to joining RCBC, she served as VP for Financial Markets
Operations at Citibank (May 2006 to June 2008); SVP and Group Head for International
Processing Group at PNB (December 2002 to April 2006); and VP and Business Manager for
Institutional Equities at JP Morgan Equities (July 2001 to October 2002). Ms. Lugo-Macasaet
graduated from the University of the Philippines with a Bachelor of Arts degree in Economics.
Jane N. Mañago, 48, Senior Vice President, is the Division 2 Head of Wealth Management
Segment 1. Prior to this position, she was a Relationship Manager for Division 2 of Wealth
Management Segment 2. She also worked for YGC Corporate Services Inc. as Officer-In-Charge
and Marketing Head. Previously, she was with Citibank as Cash Product Manager for Global
Transaction Services (September 1998 to January 1999), Account Manager (April to August
1998) and Head of Corporate Banking for Chinatown Branch (November 1996 to March 1998).
Ms. Mañago also joined Equitable Banking Corporation from May 1986 to October 1996, where
her last appointment was the Head of Research and Special Projects Unit. She obtained two
degrees in Bachelor of Science in Commerce major in Business Administration and Bachelor of
Arts major in Behavioral Science from the University of Santo Tomas.
Carlos Cesar B. Mercado, 46, Senior Vice President, is the Head of Trading Segment. Prior to
joining RCBC, he was the Managing Director/Senior Vice President of Basic Capital Investments
Corp. in 2001. He was a Treasurer/First Vice President of Treasury of United Overseas Bank
Philippines in 2000; and a Division Head of Domestic Funds and Liquidity Management of
Equitable-PCI Bank in 1994. Mr. Mercado earned his Japan focused-Executive Masters in
Business Administration (MBA), with highest distinction at the University of Hawaii and the JapanAmerica Institute of Management Science (JAIMS) in December 1993, under the Fujitsu AsiaPacific Scholarship. He obtained his undergraduate degree, Bachelor of Arts major in Electrical
Engineering, from the University of the Philippines.
47
Evelyn Nolasco, 51, Senior Vice President, is the Head of the Asset Disposition Division. Before
she joined the Bank, she was the SVP and Treasury Head of AGSB Group of Companies in 1995
and Manager for Corporate Finance for SGV & Company from 1994 to 1995. She graduated
from De La Salle University with a Bachelor of Science degree in Commerce major in
International Marketing and obtained her Master’s degree in Business Management from the
Asian Institute of Management.
Koji Onozawa, 48, Senior Vice President, is the Japanese Liaison Officer of Japanese Business
Relationship Office. He was formerly the Senior Manager of International Credit Administration
Department of The Sanwa Bank, Ltd., Tokyo in 1999. He also served in other capacities such as
Manager of Planning and Administration Department in 1997 and Manager of Tameike Branch of
Business Promotion Department in 1993. He earned his Bachelor of Law from the Meiji
University, Tokyo.
Matias L. Paloso, 54, Senior Vice President, has been appointed as Deputy Group Head of
RCBC Savings Bank in April 2012. Prior to occupying this position, he was the Regional Sales
Manager of North Metro Manila in 2011; Regional Sales Manager of Southern Luzon in 2009;
District Sales Manager of South West Luzon in 2002; and Business Center Manager of Camelray
Branch in 1999. He obtained his undergraduate degree, Bachelor of Science in Commerce major
in Accounting from Divine Word College, Tagbilaran City.
Ma. Lourdes Jocelyn S. Pineda, 56, Senior Vice President, is the Head of Microfinance and
President of JP Laurel Rural Bank. She has over 15 years of experience in the microfinance
business. Prior to joining RCBC, she was the Principal Microfinance Advisor/Senior Director of
Accion International/Accion Technical Advisors India. Before this, she was the Regional
Manager/Coordinator of Chemonics International, a US-AID project in partnership with the Rural
Bankers Association of the Philippines, where she provided technical assistance and advice to
rural banks on the implementation of microenterprise access to banking approach in individual
lending methodology for microfinance. From 1998 to 2004, she was with the Rural Bank of Sto.
Tomas where she last served as Managing Director and the Executive Director of the said bank’s
Training Institute. She also worked for UNDP Upland Development Program and spent four years
working as Regional Chief for the Livelihood and Investment Division of the Ministry of Human
Settlement in Davao. She started her career with Bancom Development Corporation. She
graduated from Ateneo de Davao University with a Bachelor of Science degree in Business
Administration majoring in Business Management. She completed her Master’s Degree in
Business (Magna Cum Laude) from the University of the Philippines.
Nestor O. Pineda, 52, Senior Vice President, is the Regional Sales Manager of Central Metro
Manila. He also occupied the Regional Sales Manager for the following regions : South Metro
Manila (January 2011 to April 2012), North Metro Manila (August 2009 to January 2011) and
South Luzon (July 2008 to July 2009). Prior to joining the Bank, he worked for PNB’s branch
banking. He earned his Bachelor of Science degree in Commerce major in Accounting from Holy
Angel College in Angeles, Pampanga.
Nancy J. Quiogue, 43, Senior Vice President, is the Regional Service Head of Metro Manila.
Prior to assuming current position in 2010, she was the District Service Head of Metro Manila
from May 2004 to April 2010. She also assumed various positions in the Bank since 1991. Ms.
Quiogue graduated from the Philippine School of Business Administration with a Bachelor of
Science degree in Business Administration major in Accounting.
Rafael Andres Reyes, 52, Senior Vice President, is the Head of Electronic Banking. He was
previously connected with Bankard, Inc. as Executive Vice President and Chief Operating
Officer/Chief Information Officer. He also handled challenging roles in other local and foreign
banks such as Region Head for Branch Banking for Metro Manila East Region at Union Bank of
the Philippines; General Manager for Rewards Plus; Assistant Vice President for the Card Center
48
of Philippine National Bank; Manager for the Electronic Banking Group of Emirates Bank
International, Inc. (Dubai, UAE); Manager/Credit Card Products for HSBC – Saudi British Bank
(Riyadh, Saudi Arabia); Assistant Vice President for Global Consumer Banking at Citibank, N.A.;
and as Manager for the Merchant Business Group of American Express International, Inc. Mr.
Reyes earned his Bachelor of Science degree in Commence major in Marketing Management
from De La Salle University.
Rowena F. Subido, 46, Senior Vice President, is Group Head of Human Resources. She was
also the Deputy Group Head of Human Resources before assuming her current position. Prior to
joining RCBC, she was connected with Citibank, N.A. as Lead Human Resources
Generalist/Senior Vice President. Before assuming this role, she was designated as Head for
Human Resources for 1 year and 9 months. She worked also with Citifinancial Corporation, the
Consumer Finance Division of Citigroup for 4 years as Human Resources Head. The rest of her
HR experience is in the retail, distribution and manufacturing industries. She worked for the
following companies: California Clothing Inc. where she was the Human Resources Head;
International Marketing Corporation where she worked as Division Manager for Human
Resources & Operations; Tricom Systems (Philippines), Inc. where she was employed as
Personnel and Administration Officer; and Seamark Enterprises, Inc. where she functioned as
Personnel Officer. Ms. Subido graduated from the University of Santo Tomas with a degree in
Bachelor of Science major in Psychology. She earned units for Masters in Psychology major in
Organizational/Industrial Psychology at De La Salle University.
Raul Victor B. Tan, 53, Senior Vice President, is the Head of Treasury’s Balance Sheet
Management Segment. Prior to joining the Bank, he was FVP and Treasurer of RCBC Capital
from July to November 2008. He also held various Treasury positions in UCPB from 2004 to
2008, where his last appointment was FVP and Chief Dealer for Treasury Banking. He obtained
his Master’s degree in Business Administration from Fordham University and finished his
Bachelor of Science degree in Management from Ateneo de Manila University.
Executive officers with the rank of Assistant Vice President and above are appointed annually by
the Board of Directors in its Organisational Board Meeting right after the shareholders meeting
which is held annually every last Monday of June. There are no binding contracts or
arrangements with regards to the tenure of the Bank’s executive officers. All of the officers
identified above are Filipino citizens, except for Mr. Yasuhiro Matsumoto and Koji Onozawa who
are citizens of Japan.
Most of the Directors and executive officers mentioned above have held their positions for at least
five (5) years.
There is no person other than the entire human resources as a whole, and the executive officers,
who is expected to make a significant contribution to the Bank.
(H) Market Price and Dividends
(1) Market Price of Bank’s Common Equity
The common shares of the Bank are listed in the Philippine Stock Exchange. As of May 15, 2013
the market price of RCBC’s common shares closed at 74.00 per share. The trading prices of said
shares for the different quarters of the years 2012, 2011, and 2010 are as follows:
Q1
Latest
Practicable
Trading Date
Q2
Latest
Practicable
Trading Date
Q3
Latest
Practicable
Trading Date
Q4
Latest
Practicable
Trading Date
49
2013 High
Low
70.00 / 03.27.13 74.00 / 05.15.13
58.00 / 01.07.13
72.75 / 05.10.13
2012 High
42.25/3.16.12
45.50/5.9.12
45.55/5.28.12
60.00/12.28.12
Low
29.75/1.17.12
40.35/4.11.12
43.00/8.29.12
45.45/10.05.12
2011 High
29.05/01.05.11
28.75/04.12.11
34.50/09.16.11
32.05/10.10.11
Low
25.50/02.24.11
25.50/06.14.11
26.50/07.01.11
29.95/12.28.11
2010 High
18.25/03.31.10
21.00/04.12.10
30.70/09.23.10
29.50/11.08.10
16.00/02.09.10 18.00/05.26.10
Source: Philippine Stock Exchange
18.75/07.07.10
26.80/10.13.10
Low
(2) Number of Stockholders as of April 30, 2013
— 805 stockholders (common)
— 82 stockholders (preferred)
(3) Recent sales of unregistered or exempt securities including recent issuance of securities
constituting an exempt transaction
The Bank has not sold nor issued any unregistered or exempt securities including any
recent issuance of securities constituting an exempt transaction.
(4) Top 20 Stockholders of RCBC as of April 30, 2013
Name of Shareholder
No. of Shares
% of Shareholdings
PAN MALAYAN MANAGEMENT
537,613,632
42.1440
PCD NOMINEE CORPORATION
308,723,573
24.2011
PCD NOMINEE CORP.(NON-FILIPINO)
300,783,873
23.5787
IFC CAPITALIZATION (EQUITY) FUND, L.P.
71,151,505
5.5776
SYBASE EQUITY INVESTMENTS CORPORATION
23,528,800
1.8444
MALAYAN INSURANCE CO., INC.
15,565,439
1.2202
FIRST NATIONWIDE ASSURANCE CORP.
3,714,413
0.2912
A. T. YUCHENGCO, INC.
3,243,871
0.2543
BANKERS ASSURANCE CORPORATION
2,150,082
0.1685
HYDEE MANAGEMENT & RESOURCE CORPORATION
1,964,719
0.1540
REYNA, LEONARDO T. SIGUION
1,515,938
0.1188
WILSON, ISABEL CARO
590,709
0.0463
LON, FRANCISCO GENARO OZAMIZ
580,500
0.0455
ROSARIO, RODOLFO P. DEL
574,724
0.0451
NAVARRO, RIZALINO S.
260,866
0.0204
CONCEPCION, CARMENCITA DE LAS ALAS
224,490
0.0176
VERANO, MARIA LUISA L.
207,069
0.0162
SANTIAGO, MANUEL SANTIAGO &/OR ELLA
200,000
0.0157
ARGUELLES, CHRISTINE L.
115,000
0.0090
ALAS, CARLOS DE LAS
114,298
0.0090
(5) Cash Dividends
Date
Declared
Dividend
Stockholders
of Record
Date Approved by
Date
Paid I Payable
50
Per
BOD
Total
Share
Amount*
28-Sep-09
0.0579
146
28-Sep-09
**
28-Sep-09
**
25-Jan-10
0.0563
143
29-Mar-10
0.6000
29-Mar-10
BSP
21-Dec-09
28-Sep-09
7-Dec-09
5-Jan-10
218,386
**
28-Sep-09
26-Apr-10
26-Apr-10
212,856
**
28-Sep-09
13-Oct-10
27-Oct-10
31-Mar-10
25-Jan-10
26-Apr-10
11-May-10
564,073
6-May-10
29-Mar-10
26-Apr-10
12-May-10
0.6000
1,573
6-May-10
29-Mar-10
26-Apr-10
12-May-10
26-Apr-10
0.0582
155
21-Jun-10
26-Apr-10
22-Jun-10
19-Jul-10
26-Jul-10
0.0649
161
21-Sep-10
26-Jul-10
20-Aug-10
30-Sep-10
26-Oct-10
0.0579
151
21-Dec-10
26-Oct-10
24-Jan-11
10-Feb-11
26-Oct-10
**
213,695
**
26-Oct-10
12-Apr-11
27-Apr-11
26-Oct-10
**
213,215
**
26-Oct-10
2-Sep-11
27-Oct-11
31-Jan-11
0.0577
148
21-Mar-11
31-Jan-11
12-Apr-11
3-May-11
31-Mar-11
0.8000
810,860
25-Mar-11
31-Mar-11
28-Apr-11
23-May-11
31-Mar-11
0.8000
2,090
25-Mar-11
31-Mar-II
28-Apr-11
23-May-11
25-Apr-11
0.0577
148
21-Jun-11
25-Apr-11
21-Jun-11
15-Jul-11
31-Aug-11
0.0562
148
21-Sep-11
31-Aug-11
21-0 ct-11
10-Nov-11
2-Nov-11
0.0595
158
21-Dec-11
2-Nov-11
3-Jan-12
11-Jan-11
2-Nov-11
**
209,992
**
2-Nov-11
24-Feb-12
27-Apr-12
2-Nov-11
**
203,474
**
2-Nov-11
6-Sep-12
25-Oct-12
30-Jan-12
0.0649
26
21-Mar-12
30-Jan-12
24-Feb-12
27-Mar-12
26-Mar-12
0.9000
1,026,771
29-May-12
26-Mar-12
19-Apr-12
4-Jun-12
26-Mar-12
0.9000
308
29-May-12
26-Mar-12
19-Apr-12
4-Jun-12
28-May-12
0.0632
22
21-Jun-12
28-May-12
26-Jun-12
3-Jul-12
30-Jul-12
0.0624
21
21-Sep-12
30-Jul-12
6-Sep-12
28-Sep-12
26-Nov-12
0.0593
20
18-De-12
26-Nov-12
18-Dec-12
2-Jan-13
26-Nov-12
**
**
26-Nov-12
4-Mar-13
26-Apr-13
28-Jan-13
0.0578
20
21-Mar-13
28-Jan-13
4-Mar-13
26-May-13
25-Mar-13
1.0000
1,140,857
15-May-13
25-Mar-13
29-Apr-13
26-May-13
25-Mar-13
1.0000
342
15-May-13
25-Mar-13
29-Apr-13
26-May-13
29-Apr-13
0.0577
20
21-Jun-13
29-Apr-13
203,524
-
-
* Amount in thousands of Philippine Peso
** Cash dividends on hybrid perpetual securities
51
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.
(I) Compliance with leading practices on Corporate Governance
RCBC is fully committed to the ideals of good corporate governance. To improve governance
structures and processes through benchmarking against local and international leading practices,
the latest revisions to the Corporate Governance Manual incorporated requirements set forth
under BSP Circular 749 as amended by BSP Circular 757 and the best practices set by the (i)
Basel Committee on Banking Supervision Principles for Enhancing Corporate Governance and
(ii) Maharlika Board of the PSE.
In compliance with BSP and SEC regulations and as part of its Corporate Governance
Improvement Program, the Bank has put in place an annual review and evaluation of the
performance/activities and/or output of the CEO, the individual members of the Board of
Directors, the Board of Directors as a whole, and the various Board Committees. The Bank has
likewise commenced the evaluation of the Chairperson of the Board by the independent directors.
The Corporate Governance Committee assists the Board in implementing the Board’s
performance evaluation process and rating system. The self-assessment forms are based on the
Bank’s Revised Corporate Governance Manual, SEC and BSP rules and regulations. The
performance of Management is likewise reviewed and evaluated on an annual basis and the
results presented to the Corporate Governance Committee.
The Bank has adopted fit and proper standards on directors and key personnel taking into
consideration their integrity/probity, physical/mental fitness, competence,
relevant
education/financial literacy, diligence, and knowledge/experience/ training. The Board of
Directors and senior management, on the other hand, have participated in corporate governance
training seminars, to reinforce the pivotal role they play in the implementation of corporate
governance in the Bank. The Bank’s Revised Corporate Governance Manual requires that
directors shall remain fit and proper for the duration of his term through continuing education or
training.
The Nomination and Remuneration Committee are merged under the Corporate Governance
Committee which has its own charter setting forth its composition, duties and responsibilities,
among others.
The revised Policy on Related Party Transactions was approved by the Bank’s Board of
Directors in September 2012. The policy set forth guidelines to ensure that agreements,
arrangements or obligations to which the Bank is a party and which involves any related party of
the Bank are entered into on an arm’s length basis, i.e., on terms no less favorable to the Bank
than those available to any unconnected third party under the same or similar circumstances.
Please refer to Part III – Control and Compensation Information, Item 12. Certain Relationships
and Related Transactions for a discussion on the Bank’s Policy on Related Party Transactions.
The Bank has a 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 January 2013 relative to year 2012
using a self-assessment checklist, the Bank has substantially adopted all the provisions of the
Manual on Corporate Governance as prescribed by SEC Memorandum Circular No.6, Series of
2009 for the year 2012. A certification to that effect was submitted to the Securities and
52
Exchange Commission (SEC), the Philippine Stock Exchange (PSE) and the Philippine Dealing
and Exchange Corporation (PDEx) on January 23, 2013. No major findings were noted.
(J) Undertaking to Provide Annual Report
The Bank undertakes to provide each stockholder without charge a copy of the annual
report on SEC Form 17-A upon the written request to the Bank addressed to:
Atty. Ma. Celia H. Fernandez-Estavillo
Corporate Secretary
Rizal Commercial Banking Corporation
46/F, Yuchengco Tower, RCBC Plaza
6819 Ayala Ave. cor. Sen. Gil J. Puyat Ave.
Makati City
53
NOTICE OF MEETING
Dear Stockholder:
Please be advised that the Annual Stockholders' Meeting of the Bank will be held
on June 24, 2013 at the Alfonso Sycip Executive Lounge, 47 th Floor, Yuchengco Tower,
RCBC Plaza, 6819 Ayala Avenue corner Sen. Gil Puyat Avenue, Makati City at 4:00 P. M.,
for the purpose of considering and acting on the following matters:
1. Approval of the Minutes of the Annual Meeting of the Stockholders held on
June 25, 2012.
2. Approval of the Annual Report and the Audited Financial Statement for 2012.
3. Ratification of the actions and proceedings of the Board of Directors, different
Committees and Management during the year 2012.
4. Confirmation of Significant Transactions with DOSRI and Related Parties
5. Election of Directors.
6. Appointment of External Auditor.
7. Ratification of the placing and subscription transaction, of which 63,650,000
common shares were placed by Pan Malayan Management & Investment
Corp. ("PMMIC") to third party investors, and subsequent subscription by
PMMIC to 63,650,000 common shares issued by the bank from its authorized
but unissued capital stock
8. Such Other Matters as may properly come before the meeting.
Enclosed is a copy of the Information Statement pursuant to Section 20-IS of the
Securities Regulation Code.
Only stockholders of record at close of business on May 24, 2013 will be entitled
to vote at the meeting or any adjournment thereof.
May _
, 2013 Makati City, Metro Manila, Philippines.
j_
A.
'!j
IA H. FER ANDEZ-ESTAVILLO
Corporate Secretary
54
LD RCBC
ATiC MwMA
RIZAL COMMERCIAL BANKING CORPORATION
AgENDA
ANNUAL MEETING OF THE STOCKHOLDERS
DATE
TIME
PLACE
24 June 2013
•
•
4:00 P. M.
Alfonso Sycip Executive Lounge
47 h Floor, Yuchengco Tower
RCBC Plaza, 6819 Ayala Ave.
cor. Sen. Gil J. Puyat Avenue, Makati City
1. Proof of the Due Notice of the Meeting
2. Determination of the presence of a Quorum
3. Approval of the Minutes of the Annual Meeting of the Stockholders held on June
25, 2012
4. Approval of the Annual Report and the Audited Financial Statement for 2012
5. Ratification of the actions and proceedings of the Board of Directors, different
Committees and Management during the year 2012
6. Confirmation of Significant Transactions with DOSRI and Related Parties
7. Election of Directors
8. Appointment of External Auditor
9. Ratification of the placing and subscription transaction, of which 63,650,000
common shares were placed by Pan Malayan Management & Investment Corp.
C'PMMIC") to third party investors, and subsequent subscription by PMMIC to
63,650,000 common shares issued by the bank from its authorized but unissued
capital stock
10. Other Matters
11. Adjournment
55
L)RCBC
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The management of Rizal Commercial Banking Corporation and Subsidiaries
(the Group), is responsible for the preparation and fair presentation of the financial statements
for the years ended December 31, 2012 and 2011, in accordance Financial Reporting Standards
in the Philippines for Banks (FRSPB), including the following additional supplemental
information filed separately from the basic financial statements:
a. Supplementary Schedule Required under Annex 68-E of the Securities Regulation
Code Rule 68
b. Reconciliation of Retained Earnings Available for Dividend Declaration
c. Schedule of PFRS Effective as of December 31, 2012
d. Schedule of Financial Indicators for December 31, 2012 and 2011
e. Map Showing the Relationship Between and Among the Group and its Related Entities
f. Schedule of Proceeds and Expenditures for the Recent Public Offering
g. Details of "Transactions with DOSRI
Management responsibility on the financial statements includes designing and implementing
internal controls relevant to the preparation and fair presentation of financial statements that
arc free from material misstatement, whether due to fraud or error, selecting and applying
appropriate accounting policies, and making accounting estimates that are reasonable in the
circumstances.
The Board of Directors reviews and approves the financial statements, including the additional
supplemental information, and submits the same to the stockholders.
Punongbavan & Araullo, the independent auditors appointed by the stockholders, has examined
the financial statements of the Group in accordance with Philippine Standards on Auditing and,
and in its report to the Board of Directors and stockholders, has expressed its opinion on the
fairness of presentation upon completion of such examination.
RCBC
i/91/t._
HELEN . DEE
Chairperson, Board of Directors
EMMANUEL U. HILADO
SEVP, Head-Treasury Group
ORE
OV.TAN
dent &
ief Executive Officer
ENAIDA F. TORS
FSVP, Head-Controllership Group
MAY
162013
SUBSCRIBED AND SWORN TO BEFORE ME, this — day of , 2013 at Makati
City, Philippines, affiants exhibited to me their Community Tax Certificate Nos., to wit:
Name
Helen Y. Dee
Lorenzo V. Tan
Jose Emmanuel U. Hilado
/enaida F. Torres
DOC. NO.
PAGE NO.
la'
ROOK NO.
160
SERIES OF
Community Tax Cert. No.
15888629
10658640
05117471
06144628
Date/Place of issue
02/ 05/2013, Manila
01/ 16/2013, Makati
01/ 07/2013, N ila
01/1^j i
la
lI
ATTY CAT - NO VICENTE L. ARABIT
Notary Public
AppointnNkf ft(rl%2 ?(2013.2014)
Until 31 ecember 2014
PTR NO 3673564:01-04-13;Makati City
IBP NO 915944;01-03-13, Makati City
ROLL NO 40145
7'^ Floor Yuchengco Tower 1 RCBC Plaza
Ayala Avenue. Makati City
-2-
1.02 Subsidiaries and Associates
The Parent Company holds ownership interest in the following subsidiaries and associates:
Subsidiaries
RCBC Savings Bank, Inc. (RSB)
RCBC Forex Brokers Corporation
(RCBC Forex)
RCBC Telemoney Europe
RCBC North America, Inc.
(RCBC North America)
RCBC International Finance Limited
(RCBC IFL)
RCBC Investment Ltd.
RCBC Capital Corporation (RCBC Capital)
RCBC Securities, Inc. (RSI)
RCBC-JPL Holding Company, Inc.
(Formerly Pres. Jose P. Laurel Rural
Bank, Inc.) (RCBC JPL)
Bankard, Inc. (Bankard)
Merchants Savings and Loan
Association, Inc. (Rizal Microbank)
RCBC Leasing and Finance
Corporation (RCBC LFC)
RCBC Rental Corporation
Special Purpose Companies (SPCs):
Best Value Property and Development
Corporation
Cajel Realty Corporation
Crescent Park Property and Development
Corporation
Crestview Properties Development
Corporation
Eight Hills Property and Development
Corporation
Fairplace Property and Development
Corporation
Gold Place Properties Development
Corporation
Goldpath Properties Development
Corporation (Goldpath)
Greatwings Properties Development
Corporation
Happyville Property and Development
Corporation
Landview Property and Development
Corporation
Lifeway Property and Development
Corporation
Niceview Property and Development
Corporation
Niyog Property Holdings, Inc. (NPHI)
Princeway Properties Development
Corporation
Stockton Realty Development Corporation
Top Place Properties Development
Corporation
Country of
Incorporation
Explanatory
Notes
Effective Percentage
of Ownership
2012
2011
Philippines
100.00
100.00
Philippines
Italy
100.00
100.00
100.00
100.00
100.00
100.00
(c)
100.00
100.00
99.96
99.96
100.00
100.00
99.96
99.96
(d)
(e)
99.39
89.98
99.00
89.99
97.47
97.47
97.79
97.79
-
Philippines
Philippines
100.00
100.00
100.00
100.00
Philippines
100.00
100.00
Philippines
100.00
100.00
Philippines
100.00
100.00
Philippines
100.00
100.00
Philippines
100.00
100.00
Philippines
100.00
100.00
Philippines
100.00
100.00
Philippines
100.00
100.00
Philippines
100.00
100.00
Philippines
100.00
100.00
100.00
100.00
100.00
100.00
Philippines
Philippines
100.00
100.00
100.00
100.00
Philippines
100.00
100.00
California, USA
Hongkong
Hongkong
Philippines
Philippines
Philippines
Philippines
(a)
(b)
Philippines
Philippines
Philippines
Philippines
Philippines
(f)
(g)
(h)
-3-
Associates
RCBC Land, Inc. (RLI)
YGC Corporate Services, Inc. (YCS)
Luisita Industrial Park Co. (LIPC)
RCBC Realty Corporation (RRC)
Honda Cars Phils., Inc. (HCPI)
Roxas Holdings, Inc. (RHI)
Country of
Incorporation
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Explanatory
Notes
(i)
(j)
Effective Percentage
of Ownership
2012
2011
49.00
40.00
35.00
34.80
12.88
7.11
49.00
40.00
35.00
34.80
12.88
7.11
Explanatory Notes:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Includes 16.03% ownership of RCBC IFL in 2012 and 2011
A wholly owned subsidiary of RCBC IFL
A wholly owned subsidiary of RCBC Capital
On February 15, 2011, the Parent Company made the third and last tranche of capital
infusion to RCBC JPL totalling P125. As of December 31, 2012, the Parent Company
established its full and irrevocable voting and economic rights for 99.39% of RCBC
JPL’s outstanding shares (see Note 11).
As of December 31, 2012, the Parent Company has 65.42% direct ownership and
24.56% indirect ownership through RCBC Capital.
A wholly owned subsidiary of RCBC LFC
Except for NPHI, the SPCs are wholly owned subsidiaries of RSB
The Parent Company has 48.11% direct ownership and 51.89% indirect ownership
through RSB.
The Parent Company has 25.0% direct ownership and 9.8% indirect ownership
through RLI.
The Parent Company has 2.36% direct ownership and 4.75% indirect ownership
through RCBC Capital (see Note 11).
1.03 Approval of Financial Statements
The financial statements as of and for the year ended December 31, 2012
(including the comparatives for the years ended December 31, 2011 and 2010) were
approved and authorized for issue by the Board of Directors (BOD) on March 25, 2013.
-4-
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies that have been used in the preparation of these
financial statements are summarized below and in the succeeding pages. The policies
have been consistently applied to all the periods presented, unless otherwise stated.
2.01 Basis of Preparation of Financial Statements
(a)
Statement of Compliance with Financial Reporting Standards in the Philippines for Banks
The consolidated financial statements of the Group and the separate financial
statements of the Parent Company have been prepared in accordance with the
Financial Reporting Standards in the Philippines for Banks (FRSPB).
FRSPB are similar to Philippine Financial Reporting Standards (PFRS), which are
adopted by the Financial Reporting Standards Council (FRSC) from the
pronouncements issued by the International Accounting Standards Board (IASB),
except for the following accounting treatments of certain financial instruments
which are not allowed under PFRS, but were allowed under FRSPB as permitted by
the Bangko Sentral ng Pilipinas (BSP) for prudential reporting, and by the Securities
and Exchange Commission (SEC) for financial reporting purposes: (i) the
non-separation of the embedded derivatives in credit-linked notes (CLNs) and
other similar instruments that are linked to Republic of the Philippines (ROP)
bonds to their host instruments and reclassification of ROP bonds together with
the embedded derivatives in CLN 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 reclassifications to certain
statement of financial position items as of December 31, 2012 and 2011 and net
profit for the years then ended under FRSPB are discussed fully in Note 10.01.
These financial statements have been prepared using the measurement bases
specified by FRSPB for each type of resource, liability, income and expense. These
financial statements have been prepared on the historical cost 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 PAS 1, Presentation of
Financial Statements. The Group presents all items of income and expenses in two
statements: a statement of income and a statement of comprehensive income.
-5-
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. In 2012, the Group restated its 2011 and 2010 financial statements to
(a) recognize the proportionate share in RCBC LFC’s surplus resulting from the
Parent Company’s acquisition of RCBC LFC’s net assets under the pooling of
interests method (see Note 22.04) and, (b) to fully recognize the losses resulting
from the sale of the non-performing assets (NPAs) qualified for derecognition and
to recognize in the books the additional allowance for impairment on those NPAs
not qualified for derecognition (see Note 10.02). Accordingly, two comparative
periods were presented for the statement of financial position. In this connection,
the Group and the Parent Company early adopted PAS 1 (Amendment) which
clarifies the related notes on the opening statement of financial position to be
presented (see Note 2.02[c]).
(c)
Functional and Presentation Currency
These financial statements are presented in Philippine pesos, the Group’s functional
and presentation currency (see also Note 2.19). All amounts are in millions, except
number of shares and per share data or when otherwise indicated
Items included in the financial statements of the Group are measured using its
functional currency. Functional currency is the currency of the primary economic
environment in which the Group operates.
2.02 Adoption of New and Amended PFRS
(a)
Effective in 2012 that are Relevant to the Group
In 2012, the Group adopted the following amendments to PFRS that are relevant
to the Group and effective for financial statements for the annual period beginning
on or after July 1, 2011 or January 1, 2012:
PFRS 7 (Amendment)
:
PAS 12 (Amendment)
:
Financial Instruments: Disclosures –
Transfers of Financial Assets
Income Taxes – Deferred Taxes:
Recovery of Underlying Assets
Discussed below are the relevant information about these amended standards.
(i)
PFRS 7 (Amendment), Financial Instruments: Disclosures – Transfers of Financial
Assets. The amendment requires additional disclosures that will allow users
of financial statements to understand the relationship between transferred
financial assets that are not derecognized in their entirety and the
associated liabilities; and, to evaluate the nature of, and risk associated with
any continuing involvement of the reporting entity in financial assets that
are derecognized in their entirety. The Group does not usually enter into
this type of arrangement with regard to transfer of financial assets, hence,
the amendment did not significantly change the Group’s disclosures in its
financial statements.
-6-
(ii)
(b)
PAS 12 (Amendment), Income Taxes – Deferred Taxes: Recovery of Underlying
Assets. The amendment introduces a rebuttable presumption that the
measurement of a deferred tax liability or asset that arises from investment
property measured at fair value under PAS 40, Investment Property should
reflect the tax consequence of recovering the carrying amount of the asset
entirely through sale. The presumption is rebutted for depreciable
investment property (e.g., building) that is held within a business model
whose objective is to consume substantially all of the economic benefits
embodied in the asset over time, rather than through sale. Moreover,
Standing Interpretations Committee (SIC) 21 Income Taxes – Recovery of
Revalued Non-Depreciable Assets, is accordingly withdrawn and is incorporated
under PAS 12 requiring that deferred tax on non-depreciable assets that are
measured using the revaluation model in PAS 16, Property, Plant and
Equipment should always be measured on a sale basis of the asset. The
amendment has no significant impact on the Group’s financial statements
as the Group has no investment properties and land classified in bank
premises, furniture, fixtures and equipment that are measured using the
revaluation model.
Effective in 2012 but is not Relevant to the Group
PFRS 1, First-time Adoption of PFRS, was amended to provide relief for first-time
adopters of PFRS from having to reconstruct transactions that occurred before
the date of transition to PFRS and to provide guidance for entities emerging from
severe hyperinflation either to resume presenting PFRS financial statements or to
present PFRS financial statements for the first time. The amendment became
effective for annual periods beginning on or after July 1, 2011 but is not relevant
to the Group’s financial statements.
(c)
Early Adoption of PAS 1 (Amendment)
In the preparation of the 2012 financial statements, the Group adopted early the
amendment made to PAS 1, issued by the FRSC as part of the Annual Improvements
to PFRS 2009-2011 Cycle, which will be effective for the annual period beginning on
or after January 1, 2013. The amendment clarifies that when an entity applies an
accounting policy retrospectively or makes a retrospective restatement or
reclassification of items in its financial statements that has a material effect on the
information in the statement of financial position at the beginning of the preceding
period (i.e., opening statement of financial position), it shall present a third statement
of financial position as at the beginning of that preceding period. Other than
disclosures of certain specified information in Note 22, the related notes to the
opening statement of financial position are no longer required to be presented.
-7-
(d)
Effective Subsequent to 2012 but not Adopted Early
There are new PFRS, amendments, annual improvements and interpretations to
existing standards that are effective for periods subsequent to 2012. Management has
initially determined the following pronouncements, which the Group will apply in
accordance with their transitional provisions, to be relevant to its financial statements:
(i)
PAS 1 (Amendment), Financial Statements Presentation – Presentation of Items of
Other Comprehensive Income (effective from July 1, 2012). The amendment
requires an entity to group items presented in other comprehensive income
into those that, in accordance with other PFRS: (a) will not be reclassified
subsequently to profit or loss and (b) will be reclassified subsequently to
profit or loss when specific conditions are met. The Group’s management
expects that this will change the current presentation of items in other
comprehensive income (i.e., unrealized fair value gains and losses on AFS
securities).
(ii)
PAS 19 (Revised), Employee Benefits (effective from January 1, 2013). The
revision made a number of changes as part of the improvements
throughout the standard. The main changes relate to defined benefit plans
as follows:
eliminates the corridor approach under the existing guidance of PAS 19
and requires an entity to recognize all gains and losses arising in the
reporting period;
streamlines the presentation of changes in plan assets and liabilities
resulting in the disaggregation of changes into three main components
of service costs, net interest on net defined benefit obligation or asset,
and remeasurement; and,
enhances disclosure requirements, including information about the
characteristics of defined benefit plans and the risks that entities are
exposed to through participation in them.
As a result of the revision, the Group’s unrecognized actuarial gain
amounting to P206 and the Parent Company’s unrecognized actuarial gain
amounting to P358 as of December 31, 2012 will be retrospectively
recognized as gain in other comprehensive income (under Equity Section)
in 2013 (see Note 24).
-8(iii)
Consolidation Standards
The Group is currently reviewing the impact on its consolidated financial
statements of the following consolidation standards which will be effective
from January 1, 2013:
PFRS 10, Consolidated Financial Statements. This standard builds on
existing principles of consolidation by identifying the concept of
control as the determining factor in whether an entity should be
included within the consolidated financial statements. The standard
also provides additional guidance to assist in determining control where
this is difficult to assess.
PFRS 12, Disclosure of Interest in Other Entities. This standard integrates and
makes consistent the disclosure requirements for all forms of interests in
other entities, including joint arrangements, associates, special purpose
vehicles and unconsolidated structured entities. This also introduces new
disclosure requirements about the risks to which an entity is exposed
from its involvement with structured entities.
PAS 27 (Amendment), Separate Financial Statements. This revised standard
now covers the requirements pertaining solely to separate financial
statements after the relevant discussions on control and consolidated
financial statements have been transferred and included in the new PFRS
10. No new major changes relating to separate financial statements have
been introduced as a result of the revision.
PAS 28 (Amendment), Investments in Associate and Joint Venture. This
revised standard includes the requirements for joint ventures, as well as
associates, to be accounted for using equity method following the
issuance of PFRS 11, Joint Arrangement.
Subsequent to the issuance of the foregoing consolidation standards, the
IASB made some changes to the transitional provisions in International
Financial Reporting Standard (IFRS) 10, IFRS 11 and IFRS 12, which were
also adopted by the FRSC. The guidance confirms that an entity is not
required to apply PFRS 10 retrospectively in certain circumstances and
clarifies the requirements to present adjusted comparatives. The guidance
also made changes to PFRS 10 and PFRS 12 which provide similar relief
from the presentation or adjustment of comparative information for periods
prior to the immediately preceding period. Further, it provides relief by
removing the requirement to present comparatives for disclosures relating to
unconsolidated structured entities for any period before the first annual
period for which PFRS 12 is applied.
-9-
(iv)
PFRS 13, Fair Value Measurement (effective from January 1, 2013). This
standard aims to improve consistency and reduce complexity by providing a
precise definition of fair value and a single source of fair value measurement
and disclosure requirements for use across PFRS. The requirements do not
extend the use of fair value accounting but provide guidance on how it
should be applied where its use is already required or permitted by other
standards. Management is in the process of reviewing its valuation
methodologies for conformity with the new requirements and has yet to
assess the impact of the new standard on the Group’s and Parent Company’s
financial statements.
(v)
PFRS 9, Financial Instruments: Classification and Measurement (effective from
January 1, 2015). This is the first part of a new standard on financial
instruments that will replace PAS 39, Financial Instruments: Recognition and
Measurement, in its entirety. This chapter covers the classification and
measurement of financial assets and financial liabilities and it deals with
two measurement categories for financial assets: amortized cost and fair
value. All equity instruments will be measured at fair value while debt
instruments will be measured at amortized cost only if the entity is holding
them to collect contractual cash flows which represent payment of
principal and interest. The accounting for embedded derivatives in host
contracts that are financial assets is simplified by removing the requirement
to consider whether or not they are closely related, and as such, the entity
shall apply measurement to the entire hybrid contract, depending on
whether the contract is at fair value or amortized cost.
For liabilities, the standard retains most of the PAS 39 requirements which
include amortized cost accounting for most financial liabilities, with
bifurcation of embedded derivatives. The main change is that, in case
where the fair value option is taken for financial liabilities, the part of a fair
value change due to an entity’s own credit risk is recorded in other
comprehensive income rather than in profit or loss, unless this creates an
accounting mismatch.
In November 2011, the IASB tentatively decided to consider making
limited modifications to IFRS 9’s financial asset classification model to
address certain application issues
To date, other chapters of PFRS 9 dealing with impairment methodology
and hedge accounting are still being completed by the accounting standard
setters.
The Group does not expect to implement and adopt PFRS 9 until its
effective date or until all chapters of this new standard have been
published. In addition, management is currently assessing the impact of
PFRS 9 on the financial statements of the Group and is committed to
conduct a comprehensive study of the potential impact of this standard
prior to its mandatory adoption date to assess the impact of all changes.
- 10 -
(vi)
2009-2011 Annual Improvements to PFRS. Annual improvements to PFRS
(2009-2011 Cycle) made minor amendments to a number of PFRS, which
are effective for annual period beginning on or after January 1, 2013.
Among those improvements, the following amendments are relevant to the
Group but management does not expect these to have a material impact on
the Group’s and Parent Company’s financial statements:
(a) PAS 16 (Amendment), Property, Plant and Equipment – Classification of
Servicing Equipment. The amendment addresses a perceived inconsistency
in the classification requirements for servicing equipment which resulted
in classifying servicing equipment as part of inventory when it is used for
more than one period. It clarifies that items such as spare parts, stand-by
equipment and servicing equipment shall be recognized as property,
plant and equipment when they meet the definition of property, plant
and equipment, otherwise, these are classified as inventory.
(b) PAS 32 (Amendment), Financial Instruments – Presentation – Tax Effect of
Distributions to Holders of Equity Instruments. The amendment clarifies that
the consequences of income tax relating to distributions to holders of an
equity instrument and to transaction costs of an equity transaction shall
be accounted for in accordance with PAS 12. Accordingly, income tax
relating to distributions to holders of an equity instrument is recognized
in profit or loss while income tax related to the transaction costs of an
equity transaction is recognized in equity.
2.03 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 1.02, 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 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. 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 when assessing whether the Group controls
another entity. Subsidiaries are fully consolidated from the date when the Parent
Company obtains control until such time that such control ceases.
- 11 -
Acquired subsidiaries are subject to either of the following relevant policies:
i. Purchase method 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 the date of acquisition over
acquisition cost.
ii. Pooling of interest is applicable for business combinations involving entities under
common control. On initial recognition, the assets and liabilities of the subsidiary
are included in the consolidated statement of financial position at their book values.
Adjustments, if any, are recorded to achieve uniform accounting policies. The
combining entities’ results and financial positions are presented in the consolidated
financial statements as if they had always been combined.
No goodwill or negative goodwill is recognized. Any difference between the cost
of the investment and the subsidiary’s identifiable net assets is presented as part of a
separate reserve within equity on consolidation.
(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
profit or loss. 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 the consolidated statement of changes in capital funds.
- 12 -
(c) Investments in Associates
Associates are those entities over which the Group is able to exert significant influence
but which are neither subsidiaries nor interests in joint ventures. 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 profit or loss 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. 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 investments 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 statements of
income and therefore affect the 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 AFS securities, are
recognized in the consolidated statement of changes in capital funds of the Group. No
effect on the Group’s net results 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’s financial statements, Investments in Subsidiaries and Associates
are accounted for at cost, less any impairment loss (see Note 2.20). Investment costs are
inclusive of 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.
2.04 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 geographical markets served (secondary segment).
Financial information on business segments is presented in Note 6.
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2.05 Financial Assets
Financial assets are recognized when the Group becomes a party to the contractual terms
of the financial instrument. Financial assets other than those designated and effective as
hedging instruments are classified into the following categories: FVTPL, loans and
receivables, HTM investments and AFS securities. Financial assets are assigned to the
different categories by management on initial recognition, depending on the purpose for
which the investments were acquired.
Regular purchases and sales of financial assets are recognized on their trade date. All
financial assets that are not classified as FVTPL are initially recognized at fair value plus any
directly attributable transaction costs. Financial assets carried at FVTPL are initially
recorded at fair value and transaction costs related to it are recognized as expense in profit
or loss.
A more detailed description of each of the four categories of financial assets is as follows:
(a) Financial Assets at FVTPL
This category includes financial assets that are either classified as held for trading or
that meets certain conditions and are designated by the entity to be carried at FVTPL
upon initial recognition. All derivatives fall into this category, except for designated
and effective as hedging instruments.
Financial assets at FVTPL are measured at fair value, and changes therein are
recognized in profit or loss. Financial assets may be reclassified out of FVTPL
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
FVTPL 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 (except for CLNs linked to
ROP bonds which were reclassified from AFS – see Note 2.07) 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 contract receivable, all receivables
from customers/debtors and cash and cash equivalents. Cash and cash equivalents
comprise cash, non-restricted balances with the BSP and amounts due from other
banks, which are either non-maturing or with less than three months maturity from
the date of acquisition.
Loans and receivables are subsequently measured at amortized cost using the
effective interest method, less impairment loss, if any. 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.
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Impairment losses are 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 2.06). 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) HTM Investments
This category includes non-derivative financial assets with fixed or determinable
payments and a fixed date of maturity that the Group has the positive intention and
ability to hold to maturity. Investments intended to be held for an undefined period
are not included in this classification.
Should the Group sell other than an insignificant amount of HTM investments, the
entire category would be tainted and reclassified as AFS securities, except as may be
allowed by the BSP and SEC. The tainting provision will not apply if the sales or
reclassifications of HTM 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
non-recurring and could not have been reasonably anticipated by the Group. HTM
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 2.06). Any changes to the carrying amount of the investment due to
impairment are recognized in profit or loss.
(d) AFS Securities
This category 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. The Group’s AFS securities include government bonds, corporate bonds and
equity securities.
Non-derivative financial assets classified as AFS securities that would have met the
definition of loans and receivables may be reclassified to loans and receivables
category 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 AFS security, 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. Gains
and losses from changes in fair value are recognized in other comprehensive income,
net of any income tax effects, and are reported as part of the Revaluation Reserve
account in capital funds. When the financial asset is disposed of or is determined to
be impaired, the cumulative gains or losses recognized in other comprehensive
income is reclassified from revaluation reserve in capital funds to profit or loss and
presented as a reclassification adjustment within other comprehensive income.
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Reversal of impairment losses are recognized in other comprehensive income, except
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
was recognized.
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 FVTPL category are included in
Trading and Securities Gains – Net account in the statements of income in the period in
which they arise. Gains and losses arising from changes in the fair value of AFS 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 profit or loss. Dividends on AFS equity instruments are
recognized in profit or loss when the entity’s right to receive payment is established.
Non-compounding interest, dividend income and other cash flows resulting from holding
financial assets are recognized in profit or loss when earned, regardless of how the related
carrying amount of financial assets is measured.
The financial assets are derecognized when the contractual rights to receive cash flows
from the financial instruments expire, or when the financial assets and all substantial risks
and rewards of ownership have been transferred.
2.06 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 have been 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. the occurrence of the probability that the borrower will enter bankruptcy or other
financial reorganization;
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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 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.
If there is objective evidence that an impairment loss on loans and receivables or
HTM 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 profit or loss. If a loan or HTM 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.
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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 or receivable is determined to be uncollectible, it is written off against
the related allowance for impairment. Such loan or 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 profit or loss.
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 profit or loss.
(b) Assets Carried at Fair Value
In the case of equity investments classified as AFS securities, a significant or
prolonged decline in the fair value of the securities below their cost is considered in
determining whether the assets are impaired. If any such evidence exists for AFS
securities, 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 profit or loss. Impairment losses recognized in profit or loss on equity
instruments are not reversed through profit or loss. If, in a subsequent period, the
fair value of a debt instrument classified as AFS securities 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 profit or loss.
(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.
2.07 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 and are not included in the statement of
financial position.
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Derivatives are categorized as Financial Assets at FVTPL which are initially recognized 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 active markets for listed or
traded securities or determined using valuation techniques if quoted prices are not
available, 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. 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 recognizes a gain or loss at initial
recognition.
Certain derivatives embedded in other financial instruments, such as credit default swaps
in a CLN, 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
FVTPL. These embedded derivatives are measured at fair value, with changes in fair
value recognized in 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 BSP for prudential reporting 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 that certain criteria are met.
2.08 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.
2.09 Bank Premises, Furniture, Fixtures and Equipment
Land is stated at cost. As no finite useful life for land can be determined, related carrying
amounts are not depreciated. All other bank premises, furniture, fixtures and equipment
are stated at cost less accumulated depreciation, amortization and any impairment in
value.
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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.
Depreciation is computed using the straight-line method over the estimated useful lives
of the depreciable assets as follows:
Buildings
Furniture, fixtures and equipment
20-40 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.
Construction in progress represents properties under construction and is stated at cost.
This includes cost of construction, applicable borrowing costs and other direct costs. The
account is not depreciated until such time that the assets are completed and available for
use.
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 2.20).
The residual values and estimated useful lives of bank premises, furniture, fixtures and
equipment (except land) are reviewed, and adjusted if appropriate, at the end of each
reporting period.
An item of bank premises, furniture, fixtures and equipment, including the related
accumulated depreciation, amortization and impairment losses, is derecognized upon
disposal or when no future economic benefits are expected to arise from the continued
use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the item) is
included in profit or loss in the year the item is derecognized.
2.10 Investment Properties
Investment properties pertain to land, buildings or condominium units acquired by the
Group and not held for sale in the next 12 months.
Investment properties are 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 properties are stated at
cost less accumulated depreciation and any impairment losses (see Note 2.20).
The Group adopted the cost model in measuring its investment properties, 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.
- 20 -
Investment properties are 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 investment properties is recognized in profit or loss in
the year of retirement or disposal.
2.11 Real Estate Properties for Sale and Assets Held-for-sale
Real estate properties for sale (presented as part of Other Resources) pertain to real
properties obtained by the Group through dacion and held by various SPCs for disposal.
Assets held-for-sale (presented as part of Other Resources) include other properties
acquired through repossession or foreclosure or purchase that the Group intends to sell
within one year from the date of classification as held-for-sale and is committed to
immediately dispose the assets through an active marketing plan.
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
identifiable net assets acquired at the date of acquisition. Branch licenses, on the other
hand, represent the rights given to the Group to establish certain number of branches in
the restricted areas in the country as incentive in acquiring a certain rural bank.
Goodwill is classified as intangible asset with indefinite useful life and, thus, not subject
to amortization but would require an annual test for impairment (see Note 2.20).
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, their estimated useful life, starting from the
month 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 of the software (three to ten years).
Costs associated with developing or maintaining computer software programs are
recognized as 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 overhead costs.
Computer software development costs recognized as assets are amortized using the
straight-line method over their useful lives (not exceeding ten years).
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2.13 Other Resources
Other resources pertain to other assets controlled by the Group as a result of past events.
These are recognized in the financial statements when it is probable that the future
economic benefits will flow to the entity and the asset has a cost or value that can be
measured reliably.
2.14 Financial Liabilities
Financial liabilities include deposit liabilities, bills payable, bonds payable, subordinated
debt, accrued interest and other expenses, and other liabilities (except tax-related
payables).
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
profit or loss.
Financial liabilities are generally recognized at their fair value initially 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 measured at
amortized cost; any difference between the proceeds net of transaction costs and the
redemption value is recognized in profit or loss over the period of the borrowings using
the effective interest method.
Derivative financial liabilities represent the cumulative changes in net fair value losses
arising from the Group’s 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.
2.15 Provisions and Contingencies
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 obligation 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. The
increase is provision due to passage of time is recognized as interest expense.
- 22 -
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.
The Parent Company, for its credit card business’ 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.
2.16 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.
Capital paid in excess of par includes any premiums received on the issuance of capital
stock. Any transaction costs associated with the issuance of shares are deducted from
additional paid-in capital, net of any related income tax benefits.
Hybrid perpetual securities reflect the net proceeds from the issuance of
non-cumulative step-up callable perpetual securities.
Revaluation reserves on AFS securities pertain to changes in the fair values of AFS
securities resulting in net gains and losses as a result of the revaluation of AFS securities.
Accumulated translation adjustments represent the cumulative gain from the translation
of the financial statements of foreign subsidiaries whose functional currency is different
from 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 the
regulatory capital. 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 refer 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
subsidiaries. This also includes the excess of cost of investment over net identifiable
assets of an acquired subsidiary under the pooling of interest method (see Note 22.04).
Surplus includes all current and prior period results as disclosed in the statement of
income.
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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 consolidated statements of
income and comprehensive income and within capital funds in the consolidated
statements of financial position and changes in capital funds.
2.17 Revenue and Expense 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.
Expenses are recognized in profit or loss upon utilization of the assets or services or at
the date they are incurred.
The following specific recognition criteria must also be met before revenue or expense is
recognized:
(a) Interest Income and Expense 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) are 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 year-end
mark-to-market valuation of certain securities.
(c) Service Fees and Commissions include 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.
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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.
iv. Discounts earned, net of interchange costs, are recognized as income upon
presentation by member establishments of charges arising from RCBC Bankard
and non-RCBC Bankard (associated with MasterCard, JCB and VISA labels)
credit card availments passing through the Point of Sale (POS) terminals of the
Parent Company. These discounts are computed based on agreed rates and are
deducted from the amounts remitted to member establishments. Interchange
costs pertain to the other credit card companies’ share in RCBC Bankard’s
merchant discounts whenever their issued credit cards transact in the Parent
Company’s POS terminal.
(d) 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.
2.18 Leases
The Group accounts for its leases as follows:
(a) Group as Lessee
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 profit or loss 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 which transfer to the lessee all risks and benefits incidental to ownership of
the leased item are classified as finance leases and are presented 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. Lease income from operating
leases is recognized in profit or loss on a straight-line basis over the lease term.
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.
- 25 -
2.19 Foreign Currency Transactions and Translations
(a)
Transactions and Balances
Except for the foreign subsidiaries and accounts of 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 the prevailing Philippine Dealing System closing
rates (PDSCR) at the end of the reporting period.
For financial reporting purposes, the accounts of the FCDU are translated into their
equivalents in Philippine pesos based on the PDSCR prevailing at the end of the
period (for resources and liabilities) and at the average PDSCR for the period
(for income and expenses). Any foreign exchange difference is recognized in profit
or loss.
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 profit or loss, 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 FVTPL, are reported as part of the fair value gain or loss.
(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 period (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 component of capital
funds.
In 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 profit or loss as part of the gain or
loss on sale.
The translation of 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.
- 26 -
2.20 Impairment of Non-financial Assets
Investments in subsidiaries and associates, bank premises, furniture, fixtures and
equipment, investment properties, deferred tax asset, 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 for impairment either individually or at the cash-generating unit level.
Impairment loss is recognized for the amount by which the asset’s 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.
2.21 Employee Benefits
(a)
Post-employment Benefits
Post-employment benefits are provided to employees through a defined benefit plan,
as well as a defined contribution plan.
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,
non-contributory and administered by a trustee.
The asset recognized in the statement of financial position for post-employment
defined benefit pension plans is the fair value of plan assets at the end of the
reporting period less the present value of the defined benefit obligation (DBO),
together with adjustments for unrecognized actuarial gain or loss 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 a discount rate derived from the interest
rates of a zero coupon government bonds as published by Philippine Dealing
Exchange Corporation, that are denominated in the currency in which the
benefits will be paid and that have terms to maturity approximating to the terms
of the related post-employment liability.
- 27 -
Actuarial gain and loss 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 profit or loss, 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.
(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)
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 Interest, Taxes, and Other Expenses account at
the undiscounted amount that the Group expects to pay as a result of the unused
entitlement.
- 28 -
2.22 Income Taxes
Tax expense recognized in profit or loss comprises the sum of current tax and deferred 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 end of
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
carry-forward 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.
Unrecognized deferred tax assets are reassessed at the end of each reporting period and
are recognized to the extent that it has become probable that future taxable profit will be
available to allow such deferred tax assets to be recovered.
The carrying amount of deferred tax assets is reviewed at the end 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.
Deferred tax assets and deferred tax liabilities are offset if the Group has a legally
enforceable right to set off current tax assets against current tax liabilities and the deferred
taxes relate to the same entity and the same taxation authority.
2.23 Related Party Relationships and Transactions
Related party transactions are transfer of resources, services or obligations between the
Group and its related parties, regardless of whether a price is charged.
Parties are considered to be related if one party has the ability to control the other party or
exercise significant influence over the other party in making financial and operating
decisions. These parties include: (a) individuals owning, directly or indirectly through one
or more intermediaries, control or are controlled by, or under common control with the
Group; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting
power of the Group that gives them significant influence over the Group and close
members of the family of any such individual; and (d) the Group’s retirement plan.
In considering each possible related party relationship, attention is directed to the substance
of the relationship and not merely on the legal form.
- 29 -
2.24 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 period, after giving retroactive effect to any stock dividends declared in the
current period.
Diluted earnings per 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.
2.25 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 resources of the Group.
2.26 Events After the End of the Reporting Period
Any post year-end event that provides additional information about the Group’s financial
position at the end of the reporting period (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 (see Note 31).
2.
SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES
The Group’s financial statements prepared in accordance with FRSPB require management
to make judgments and estimates that affect the 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.
- 30 -
3.01 Critical Management Judgments in Applying Accounting Policies
In the process of applying the Group’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) Classifying Financial Assets as HTM 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 HTM investments.
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 AFS. However, the tainting provision
will not apply if the sales or reclassifications of HTM 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 2011, the Group and Parent Company disposed more than insignificant amount of
its HTM investments with carrying value of P6,250 and P3,124, respectively.
Consequently, the Group and Parent Company reclassified the remaining HTM with
amortized cost of P19,210 and P19,183, respectively, to AFS securities and are no
longer allowed to classify subsequent investments to HTM until 2014.
(b) Impairment of AFS securities
The Group also follows the guidance of PAS 39 in 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 bankruptcy, 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 AFS securities amounting to
P776 and P715 as of December 31, 2012 in the Group’s and Parent Company’s
financial statements, respectively, and P1,157 and P1,052 as of December 31, 2011 in
the Group’s and Parent Company’s financial statements, respectively (see Note 9).
- 31 -
(c) Distinction Between Investment Properties 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 are
largely independent 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 supply of services or for
administrative purposes. If these portions can be sold separately (or leased out
separately under finance lease), the Group accounts for the portions separately. If the
portions 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) Distinction between 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.
(e) Classification and Fair Value Determination of Acquired Properties
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 held for currently undetermined future use and is regarded as held 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) Recognition of 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 2.15 and relevant disclosures are presented in
Note 30.
- 32 -
3.02 Key Sources of Estimation Uncertainty
The following are the key assumptions concerning the future, and other key sources of
estimation uncertainty at the end of the reporting period, that have a significant risk of
causing a material adjustment to the carrying amounts of resources and liabilities within the
next financial year.
(a)
Estimating Impairment Losses on Loans and Receivables and HTM Investments
The Group reviews its loans and receivables and HTM investments portfolios to
assess impairment at least on an annual basis. In determining whether an
impairment loss should be recorded in profit or loss, 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.
The carrying value of the Group’s and Parent Company’s loans and receivables and
the analysis of the allowance for impairment on such financial assets are shown in
Note 10. The Group and the Parent Company have no HTM investments as of
December 31, 2012 and 2011.
(b)
Fair Value Measurement for Financial Assets at FVTPL and AFS Securities
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 had 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 carrying values of the Group’s and Parent Company’s financial assets at FVTPL
and AFS securities and the amounts of fair value changes recognized during the years
on those assets are disclosed in Notes 8 and 9, respectively.
- 33 -
(c)
Estimating Useful Lives of Bank Premises, Furniture, Fixtures and Equipment, Investment
Properties and Software
The Group estimates the useful lives of bank premises, furniture, fixtures and
equipment, investment properties and software 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, investment properties and software 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, investment properties and software are analyzed in
Notes 12, 13 and 14, respectively. Based on management’s assessment as at
December 31, 2012 and 2011, there are no changes in the useful lives of bank
premises, furniture, fixtures and equipment, investment properties and software
during the period. Actual results, however, may vary due to changes in estimates
brought about by changes in factors mentioned above.
(d)
Fair Values of Financial Resources and Liabilities
The following table summarizes the carrying amounts and fair values of those
significant financial resources and liabilities not presented on the statements of
financial position at their fair value:
Group
2012
Carrying
Amount
Cash and other cash items
Due from BSP
Due from other banks
Loans and receivables
Other resources
Deposit liabilities:
Demand
Savings
Time
Bills payable
Bonds payable
Accrued interest
and other expenses
Other liabilities
Subordinated debt
P
9,380
36,620
5,879
190,808
1,012
Fair Value
P
9,380
36,620
5,879
191,328
1,012
P
2011
(As Restated –
See Note 22)
Carrying
Amount
Fair Value
8,163
34,283
3,769
186,192
615
P
8,163
34,283
3,769
186,240
615
10,568
130,302
105,887
26,387
21,553
10,568
130,302
105,887
26,387
22,675
10,001
134,238
111,044
18,037
10,905
10,001
134,238
111,044
18,037
12,444
4,249
7,735
10,987
4,249
7,735
11,457
3,747
5,459
10,966
3,747
5,459
11,847
- 34 Parent
2011
(As Restated –
See Note 22)
Carrying
Amount
Fair Value
2012
Carrying
Amount
Cash and other cash items
Due from BSP
Due from other banks
Loans and receivables
Other resources
Deposit liabilities
Demand
Savings
Time
Bills payable
Bonds payable
Accrued interest
and other expenses
Other liabilities
Subordinated debt
P
7,432
31,590
5,139
153,078
991
Fair Value
P
7,432
31,590
5,139
153,598
991
P
6,560
22,990
2,965
153,989
596
P
6,560
22,990
2,965
149,336
596
8,891
110,748
76,796
23,971
21,553
8,891
110,748
76,796
23,971
22,675
8,341
108,562
87,131
16,147
10,905
8,341
108,562
87,131
16,147
12,444
3,250
5,459
10,987
3,250
5,459
11,457
2,719
4,198
10,966
2,719
4,198
11,847
See Notes 2.05 and 2.14 for a description of the accounting policies for each category
of financial instrument. A description of the Group’s risk management policies and
objectives for financial instruments is provided in Note 4.
(e) Determining Fair Value of Derivatives
The fair value of derivative financial instruments that are not quoted in an active
market is 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.
(f) Determining 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 recognized and unrecognized deferred tax assets as of
December 31, 2012 and 2011 is disclosed in Note 27.01.
- 35 -
(g) Estimating 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 2.20. 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) Valuation of Post-employment Defined 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 24 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 amounts of retirement benefit asset/liability and income/expense and the analysis
of the movements in the estimated present value of the retirement obligation are
presented in Note 24.
3.
RISK MANAGEMENT POLICIES AND OBJECTIVES
The Group is exposed to risks that are particular to its operating, investing, and financing
activities, and the business environment in which it operates. The Group’s objectives in
risk management are to ensure that it identifies, measures, monitors, and controls the
various risks that arise from its business activities, and that it adheres strictly to the
policies, procedures, and control systems which are established to address these risks.
A committee system is a fundamental part of the Group’s process of managing risk.
Three committees of the BOD are relevant in this context.
The Executive Committee (EXCOM), which meets weekly, approves credit policies
and decides on large counter-party credit facilities and limits. Next to the BOD, the
EXCOM is the highest approving body in the Group; and has the authority to pass
judgment upon such matters as the BOD may entrust to it for action in between
meetings.
The Risk Oversight Committee (ROC), which meets monthly, carries out the BOD’s
oversight responsibility for group risk management, covering credit, market and
operational risks under Pillar 1 of the Basel II framework; as well as the management
of other material risks determined under Pillar II and the Internal Capital Adequacy
Assessment Process (ICAAP) (see Note 5.02). Risk limits are reviewed and approved
by the ROC.
- 36 -
The Audit Committee, which meets monthly, reviews the results of Internal Audit
examinations and recommends remedial actions to the BOD as appropriate.
Two senior management committees also provide a regular forum to take up risk issues.
The Credit and Collection Committee, chaired by the Chief Executive Officer (CEO)
and composed of the heads of credit risk-taking business units and the head of credit
management segment, 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 participation of the CEO and key business and support unit
heads including the President of the major subsidiary, RSB, 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 the
succeeding pages) are not breached; or if breached, provides guidance on the handling
of the relevant risk exposure in between ROC meetings.
The Parent Company established a Corporate Risk Management Services (CRISMS)
Group, headed by the Chief Risk Officer, to ensure the Group-wide and consistent
implementation of 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 ROC. It participates in the Credit and Collection Committee (through the head
of credit management segment) and in ALCO.
In addition to established risk management systems and controls, the Group holds capital
commensurate with the levels of risk it undertakes (see Note 5) in accordance with
regulatory capital standards and internal benchmarks set by the Group’s BOD.
4.01 Group’s Strategy in Using Financial Instruments
It is the Group’s intent to generate returns mainly from their traditional financial
intermediation and service-provision activities, augmented by returns from 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 Group is
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 Group accepts
deposits from customers at fixed and floating rates, and for various periods, and seeks 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 Group maintains liquidity at prudent levels to meet all
claims that fall due, the Group fully recognizes the consequent interest rate risk exposure.
Foreign exchange risk arises from the Group’s net foreign exchange positions.
- 37 -
The investment portfolio is composed mainly of marketable, sovereign-risk and private
corporation debt papers. It also includes a small portfolio of equity securities and a
modest exposure to credit derivatives, most of which the underlying is ROP sovereign
debt.
Other than the aforementioned derivatives, short-term currency forward contracts are
used mostly in the context of swap transactions where an offsetting spot position is taken
at the same time.
The Parent Company was granted additional derivatives authorities effective January
2011. Products approved under the Expanded Dealer Authority (Type 2) are foreign
currency forward, non-deliverable forward, interest rate and cross currency swaps while
CLNs and bond options were approved under the Limited Dealer Authority (Type 3). In
February 2012, Bond Forwards, Non-deliverable Swaps and Foreign Exchange Options
have been included under the same Limited Dealer Authority (Type 3).
4.02 Liquidity Risk
Liquidity risk is the potential insufficiency of funds available to meet the credit demands
of the Group’s customers to repay maturing liabilities. The Group manages liquidity risk
by limiting the maturity mismatch between assets and liabilities, and by holding sufficient
liquid assets of appropriate quality and marketability.
The Group recognizes the liquidity risk inherent in their activities, and identifies,
measures, monitors and controls the liquidity risk inherent as financial intermediaries.
The Group’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 Group’s liquidity policies and procedures are set out in its funding and liquidity plan
which contains certain funding requirements based on assumptions and uses asset and
liability maturity gap analysis.
The gap analyses as of December 31, 2012 and 2011 in accordance with account
classification of the BSP are presented in the succeeding pages.
- 38 Group
One to
Three
Months
Resources:
Cash
P
Cash equivalents
Investments
Loans and
receivables
Other resources
401
18,483
22,506
Total resources
Liabilities:
Deposits
liabilities
Bills payable
Bonds
payable
Subordinated
debt
Other
liabilities
P
On-book gap
Cumulative
on-book gap
Contingent
resources
Contingent
liabilities
Total gap
(
Cumulative
off-book gap (
68,133
63
38,001
10,394
190,808
22,283
28,031
64,993
114,867
86,794
364,095
8,067
887
9,526
2,893
-
781
202,945
582
246,757
26,387
-
21,553
-
-
21,553
-
4,000
-
-
10,987
-
69,410
26,219
21,244
6,999
12
2
61,449
8,966
37,974
15
4,883
61,449
8,981
42,857
7,961
19,050
7,961
-
P
Total
40,900
476
26,972
132
P
Non-maturity
46,671
16,802
11,218
P
9,380
42,499
99,125
8,425
15,438
211,952
321,122
38,075
42,973
781
250,027
364,095
22,136
114,086 (
162,233 )
27,011
49,147
163,233
41,317
16,676
971
-
-
58,964
41,405
16,676
971
-
-
59,052
-
-
88 )
-
88 ) (
P
-
More
Than Five
Years
8,979
23,912
5,508
-
Total liabilities
and capital
funds
P
2012
927
6,987
Capital funds
-
One to
Five
Years
104
23,513
-
Total liabilities
Cumulative
total gap
Three
Months to
One Year
7,873
88 ) (
P
26,923
88 ) (
P
49,059 P
781
-
88 ) (
163,145 ( P
-
-
-
(
88 )
88 )
-
88 ) P
-
- 39 Group
One to
Three
Months
Resources:
Cash
P
Cash equivalents
Investments
Loans and
receivables
Other resources
Liabilities:
Deposits
liabilities
Bills payable
Bonds
payable
Subordinated
debt
Other
liabilities
On-book gap
Cumulative
on-book gap
Contingent
resources
Contingent
liabilities
Total gap
(
Cumulative
off-book gap (
P
-
395
109
P
-
80
7,489
P
-
25
52,028
P
Total
7,710
11,027
9,679
P
8,163
38,052
91,341
39,058
12,842
27,135
100
43,693
382
43,129
51
33,177
8,144
186,192
21,519
100,914
27,739
51,644
95,233
69,737
345,267
31,163
11,275
13,066
6,762
202,839
255,283
18,037
-
4,836
-
3,379
-
-
10,905
-
-
10,905
-
-
10,966
-
-
10,966
-
4,081
55
2
46,519
19,883
26,709
15
4,883
46,519
19,898
31,592
54,395
7,841
20,052
54,395
62,236
82,288
138,277
23,423
905
-
-
162,605
138,318
23,418
905
-
-
162,641
-
-
-
Total liabilities
and capital
funds
Cumulative
total gap
P
Non-maturity
-
Total liabilities
Capital funds
Three
Months to
One Year
453
26,525
22,036
Total resources
2011
(As Restated – See Note 22)
One to
More
Five
Than Five
Years
Years
41 )
5
41 ) (
36 ) (
54,354
P
62,200
36 ) (
P
82,252 P
8,092
12,230
210,931
307,421
32,948
37,846
3,379
243,879
345,267
91,854 (
174,142 )
3,379
-
174,142
36 ) (
174,106 ( P
-
-
-
(
36 )
36 )
-
36 ) P
-
- 40 Parent
One to
Three
Months
Three
Months to
One Year
Resources:
Cash
P
Cash equivalents
Investments
Loans and
receivables
Other resources
12,376
8,585
Total resources
47,364
20,476
23,075
18,864
7,128
5,107
Liabilities:
Deposits
liabilities
Bills payable
Bonds
payable
Subordinated
debt
Other
liabilities
162
15,916
10,325
-
-
Contingent
resources
Contingent
liabilities
Total gap
(
Cumulative
off-book gap (
(P
-
23,013
21,389
-
-
44,402
P
Total
7,270
20,813
11,607
44,394
P
7,432
36,729
90,165
63,761
35,902
4,648
153,078
13,233
108,155
80,240
300,637
157,008
196,435
23,971
-
21,553
-
-
21,553
6,987
-
4,000
-
-
10,987
5,202
-
-
-
6,033
11,235
34,777
-
163,041
264,181
4,883
-
31,573
36,456
12,235
39,660
-
194,614
300,637
6,764 )
8,241
4,742
108,155 (
114,374)
-
6,764 )
1,477
6,219
114,374
-
-
41,306
16,676
971
-
-
58,953
41,363
16,676
971
-
-
59,010
-
-
12,235
-
54,128
On-book gap (
Cumulative
on-book gap (
19,650
P
Non-maturity
-
-
Total liabilities
and capital
funds
826
-
More
Than Five
Years
-
54,128
Capital funds
P
2012
9,224
-
Total liabilities
Cumulative
total gap
P
One to
Five
Years
57 )
-
-
57 ) (
57) (
6,821 ) P
1,420 P
57) (
6,162
57 ) (
P
114,317 ( P
(
57 )
57)
-
57 ) P
-
- 41 Parent
One to
Three
Months
Resources:
Cash
P
Cash equivalents
Investments
Loans and
receivables
Other resources
308
19,696
11,303
On-book gap
Cumulative
on-book gap
Contingent
resources
Contingent
liabilities
Total gap
Cumulative
off-book gap
Cumulative
total gap
-
P
395
P
20,285
58,498
20,680
25,125
9,385
7,898
6,762
-
-
2011
P
7,229
26,342
More
Than Five
Years
-
-
33,571
-
4,558
-
Non-maturity
P
6,252
5,864
14,084
51,646
Total
P
6,560
25,955
84,262
40,641
50,515
1,508
153,989
12,493
92,287
78,223
283,259
163,074
204,034
16,147
3,379
-
-
10,905
-
-
10,905
-
-
10,966
-
-
10,966
2,621
5
37,131
14,665
-
Total liabilities
and capital
funds
-
One to
Five
Years
-
Total liabilities
Capital funds
P
16,206
10,985
Total resources
Liabilities:
Deposits
liabilities
Bills payable
Bonds
payable
Subordinated
debt
Other
liabilities
Three
Months to
One Year
-
26,429
-
3,379
4,883
-
6,461
9,087
169,535
251,139
27,237
32,120
283,259
37,131
14,665
31,312
3,379
196,772
21,367
6,015
2,259
88,908 (
118,549 )
21,367
27,382
29,641
138,258
23,423
905
-
-
162,586
138,251
23,418
905
-
-
162,574
7
5
-
-
12
7
12
21,374
P
27,394
118,549
12
P
29,653
-
12
P
118,561
-
12
P
12
-
P
-
- 42 -
Pursuant to applicable BSP regulations, the Group is required to maintain reserves against
deposits which are based on certain percentages of deposits. The required reserves against
deposits shall be kept in the form of deposits placed in the Group’s demand deposit
accounts 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.
4.02.01 Foreign Currency Liquidity Management
The liquidity risk management policies and objectives described also apply to the
management of any foreign currency to which the Group maintains significant exposure.
Specifically, the Group ensures that their measurement, monitoring, and control systems
account for these exposures as well. The Group sets and regularly reviews limits on the
size of their cash flow mismatches for each significant individual currency and in
aggregate over appropriate time horizons. The Group also assesses their access to
foreign exchange markets when setting up their risk limits.
Following BSP Circular No. 639 on ICAAP, the Group likewise calculates and maintains
a level of capital needed to support unexpected losses attributable to liquidity risk
(see Note 5.02).
4.02.02 Liquidity Risk Stress
To augment its gap analysis, the Group regularly assesses liquidity risk based on
behavioral and hypothetical assumptions under stress conditions. The results of these
liquidity stress simulations are reported monthly to the ROC.
4.03 Market Risk
The Group’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 Group are: (a) foreign exchange risk,
(b) interest rate risk and (c) equity price risk. The Group manages these risks 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.
Dollar Value of an 01 (DV01) – an estimate of the price impact due to a one-basis
point change in the yield of fixed income securities. It effectively captures both the
nominal size of the portfolio as well as its duration. A given DV01 limit
accommodates various combinations of portfolio nominal size and duration, thus
providing a degree of flexibility to the trading/risk taking function, but at the same
time represents a ceiling to the rate sensitivity of the exposure according to the
Group’s risk appetite.
- 43 -
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 Group uses 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 one-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
that 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, it is 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.
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, refers to
the impact on net interest income for a 12-month horizon of adverse movements in
interest rates. For this purpose, the Group employs a gap analysis to measure the
interest rate sensitivity of its statement of financial position (local and foreign
currencies). As of a given reporting date, the interest rate gap analysis
(see Note 4.03.02) measures mismatches between the amounts of interest-earning
assets and interest-bearing liabilities re-pricing within “time buckets” going forward
from the end of the reporting period. A positive gap means net asset sensitivity,
which implies that an increase in the interest rates would have a positive effect on the
Group’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 Group’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
one-year holding period.
- 44 -
Capital-at-Risk (CaR) – BSP Circular No. 544 refers to the estimation of the effect of
interest rate changes as not only with respect to earnings, but also on the Group’s
economic value. The estimate therefore must consider the fair valuation effect of rate
changes on non-trading positions. This includes both those positions with fair value
changes against profit or loss, as well as those with fair value changes booked directly
against capital funds (e.g., AFS securities); but excludes those whose fair value
changes are considered substantially offset – in an economic, if not accounting,
sense – by fair value changes of another statement of financial position item. Adding
this to the EaR determined using the procedure described above provides a measure
of capital subject to interest rate risk. The Group sets its CaR limit as a percentage of
the capital funds in the statements of financial position.
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.
A summary of the VaR position of the trading portfolios at December 31 is as follows:
Group
At December 31
Average
2012
Maximum
Minimum
Foreign currency risk
Interest rate risk
P
14 P
83
20 P
256
61 P
403
3
104
Overall
P
97 P
276 P
464
107
P
2011
At December 31
Average
Maximum
Minimum
Foreign currency risk
Interest rate risk
P
35 P
359
31 P
275
63 P
488
10
113
Overall
P
394 P
306 P
551
123
P
- 45 Parent
At December 31
Average
2012
Maximum
Minimum
Foreign currency risk
Interest rate risk
P
13 P
42
19 P
109
60 P
188
3
43
Overall
P
55 P
128 P
248
46
At December 31
Average
2011
P
Maximum
Minimum
Foreign currency risk
Interest rate risk
P
33 P
153
28 P
119
59 P
223
Overall
P
186 P
147 P
282
8
3
P
11
4.03.01 Foreign Exchange Risk
Foreign exchange risk is the risk to earnings or capital arising from changes in foreign
exchange rates. The net foreign exchange exposure, or the difference between foreign
currency assets and foreign currency liabilities, is capped by current BSP regulations.
Compliance with this ceiling by the Group and the respective foreign currency positions of
its subsidiaries are reported to the BSP on a daily basis as required. Beyond this constraint,
the Group manages its foreign exchange exposure by limiting it to within conservative levels
justifiable from a return/risk perspective. In addition, the Group regularly calculates VaR
for each currency position, which is incorporated in the foregoing market risk management
discussion.
The breakdown of the financial resources and liabilities as to foreign and Philippine
peso-denominated balances (after elimination of intercompany accounts/transactions) as of
December 31 is as follows:
Group
2012
Philippine
Pesos
Foreign
Currencies
Resources:
Cash and other cash items
Due from BSP
Due from other banks
Financial assets at FVTPL
AFS securities
Loans and receivables
Other resources
Liabilities:
Deposit liabilities
Bills payable
Bonds payable
Accrued interest
and other expenses
Other liabilities
Subordinated debt
P
928
5,333
3,129
58,075
31,430
826
8,452
36,620
546
8,363
25,612
159,378
186
52,300
23,971
21,553
194,457
2,416
-
246,757
26,387
21,553
676
650
3,573
7,059
10,987
4,249
7,735
10,987
-
-
P
Total
P
9,380
36,620
5,879
11,492
83,687
190,808
1,012
- 46 -
Foreign
Currencies
Resources:
Cash and other cash items
Due from BSP
Due from other banks
Financial assets at FVTPL
AFS securities
Loans and receivables
Other resources
P
932
2011
(As Restated – See Note 22)
Philippine
Peso
P
3,002
6,223
56,610
34,229
435
7,231
34,283
767
5,595
19,300
151,963
180
63,089
16,147
10,905
192,194
1,890
-
255,283
18,037
10,905
439
1,437
3,308
4,022
10,966
3,747
5,459
10,966
-
Liabilities:
Deposit liabilities
Bills payable
Bonds payable
Accrued interest
and other expenses
Other liabilities
Subordinated debt
-
P
Total
8,163
34,283
3,769
11,818
75,910
186,192
615
Parent
2012
Philippine
Pesos
Foreign
Currencies
Resources:
Cash and other cash items
Due from BSP
Due from other banks
Financial assets at FVTPL
AFS securities
Loans and receivables
Other resources
Liabilities:
Deposit liabilities
Bills payable
Bonds payable
Accrued interest
and other expenses
Other liabilities
Subordinated debt
P
652
P
6,780
31,590
601
5,917
17,645
121,746
165
4,538
3,129
51,867
31,332
826
46,170
23,971
21,553
664
621
-
150,265
2,586
4,838
10,987
Total
P
7,432
31,590
5,139
9,046
69,512
153,078
991
196,435
23,971
21,553
3,250
5,459
10,987
- 47 2011
(As Restated – See Note 22)
Foreign
Currencies
Resources:
Cash and other cash items
Due from BSP
Due from other banks
Financial assets at FVTPL
AFS securities
Loans and receivables
Other resources
Liabilities:
Deposit liabilities
Bills payable
Bonds payable
Accrued interest
and other expenses
Other liabilities
Subordinated debt
P
644
Peso
P
5,916
22,990
529
5,018
12,784
120,838
558
2,436
6,223
48,998
33,151
38
55,971
16,147
10,905
431
1,022
-
148,063
2,288
3,176
10,966
Total
P
6,560
22,990
2,965
11,241
61,782
153,989
596
204,034
16,147
10,905
2,719
4,198
10,966
4.03.02 Interest Rate Risk
The interest rate risk inherent in the Group’s statements of financial position arises from
re-pricing mismatches between resources and liabilities. The Group follows a policy on
managing its assets and liabilities so as to ensure that exposure to fluctuations in interest
rates are kept within acceptable limits. ALCO meets at least on a weekly basis to set rates
for various financial assets and liabilities and trading products and employs interest rate gap
analysis to measure interest rate sensitivity of the same.
The interest rate gap analyses of resources and liabilities as of December 31 based on
re-pricing maturities appear 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, however, are not re-priced;
Held-for-trading securities are treated as if they are assets subject to re-pricing within
the first month maturity bucket; AFS securities re-price on contractual maturity; and
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.
- 48 Group
One to
Three
Months
Resources:
Cash
P
Cash equivalents
Investments
Loans and
receivables
Other resources
Total
resources
239
17,949
22,506
132,292
-
P
6,987
On-book gap
Cumulative
on-book gap
Contingent
resources
Contingent
liabilities
Total gap
(
Cumulative
off-book gap (
927
104
24,440
15,917
132
45,173
609
P
70,326
P
More
Than Five
Years
-
P
Non-rate
Sensitive
P
Total
46,671
9,141
24,446
4,581
34,611
63
6,142
18,846
81,345
P
P
9,380
42,499
99,125
190,808
22,283
63,156
P
364,095
-
130,883
582
-
21,553
-
-
21,553
-
4,000
-
-
10,987
-
1
246,757
26,387
1,797
12
14
122,804
7,484
45,753
15
4,883
122,804
7,499
50,636
9,488
9,477
19,690
9,488
18,965
39,655
41,317
16,676
971
-
-
58,964
41,405
16,676
971
-
-
59,052
-
-
88 )
-
88 ) (
P
2012
20,121
65
-
Total liabilities
and capital
funds
-
7,407
65
-
Capital funds
One to
Five
Years
P
16,976
88,346
25,674
Total liabilities
Cumulative
total gap
P
88,965
2,633
P
Deposits
liabilities
Bills payable
Bonds
payable
Subordinated
debt
Other
liabilities
Three
Months to
One Year
9,400
-
1
81,344 (
119,999
88 ) (
P
1
18,877
88 ) (
P
39,567
P
88 ) (
119,911 ( P
13,615
15,438
145,080
321,122
38,075
42,973
183,155
364,095
119,999 )
-
-
-
(
88 )
88 )
-
88 ) P
-
- 49 Group
One to
Three
Months
2011
(As Restated – See Note 22)
One to
More
Five
Than Five
Years
Years
Three
Months to
One Year
Resources:
Cash
P
Cash equivalents
Investments
Loans and
receivables
Other resources
138,161
1,857
Total
resources
P
185,759
P
12,523
P
P
95,364
11,274
P
14,303
6,763
P
Deposits
liabilities
Bills payable
Bonds
payable
Subordinated
debt
Other
liabilities
145
23,560
22,036
Off-book gap (
Cumulative
off-book gap (
Cumulative
total gap
P
-
80
7,489
P
-
20,836
382
-
25
52,028
P
8,018
13,992
9,679
8,657
51
28,787
P
8,075
P
-
P
8,163
38,052
91,341
6,619
19,129
60,761
P
3,379
P
-
186,192
21,519
57,437
P
345,267
134,162
P
255,283
18,037
10,905
-
-
10,905
-
-
10,966
-
-
10,966
-
1,377
50
1
108,015
21,116
29,947
15
4,883
21,131
34,830
77,744 (
Contingent
resources
Contingent
liabilities
P
-
108,015
On-book gap
Cumulative
on-book gap
395
109
11,919
100
-
Total liabilities
and capital
funds
-
Total
-
Total liabilities
Capital funds
P
Non-rate
Sensitive
8,608 ) (
10,802
12,230
144,964
307,421
32,948
37,846
3,379
177,912
345,267
57,382 (
120,475 )
3,379
-
6,043 )
77,744
69,136
63,093
138,277
23,423
905
-
-
162,605
138,318
23,418
905
-
-
162,641
-
-
41 )
5
41 ) (
36 ) (
77,703
P
69,100
36 ) (
P
63,057 ( P
120,475
-
36 ) (
120,439 ) ( P
-
-
(
36 )
36 )
-
36 ) P
-
- 50 Parent
One to
Three
Months
Resources:
Cash
P
Cash equivalents
Investments
Loans and
receivables
Other resources
Total
resources
Deposits
liabilities
Bills payable
Bonds
payable
Subordinated
debt
Other
liabilities
-
-
15,381
10,325
P
84,539
-
-
P
110,245
P
P
62,619
23,971
P
-
Total liabilities
-
On-book gap
Cumulative
on-book gap
Contingent
resources
Contingent
liabilities
Total gap
(
Cumulative
off-book gap (
826
8,595
-
-
9,421
P
4,942
P
-
P
23,013
9,745
More
Than Five
Years
-
-
32,758
P
9,255
P
Non-rate
Sensitive
P
7,432
21,348
11,607
44,394
30,240
74,634
-
Total
P
7,432
36,729
90,165
19,959
13,233
P
P
-
153,078
13,233
73,579
P
300,637
119,619
P
196,435
23,971
-
-
21,553
6,987
-
4,000
-
-
10,987
1,471
-
4,942
-
95,048
4,942
15,197
4,479 (
-
9,764
11,235
34,808
-
129,383
264,181
4,883
-
31,573
36,456
39,691
-
160,956
300,637
6,933 )
74,634 (
-
19,676
12,743
41,306
16,676
971
-
-
58,953
41,363
16,676
971
-
-
59,010
-
-
-
57 ) (
15,140
57 ) (
P
87,377
87,377 )
15,197
57 )
P
P
2012
21,553
-
Total liabilities
capital
funds
One to
Five
Years
-
95,048
Capital funds
Cumulative
total gap
Three
Months to
One Year
19,619
57 ) (
P
12,686
57 ) (
P
87,320 ( P
-
-
(
57 )
57 )
-
57 ) P
-
- 51 Parent
One to
Three
Months
Resources:
Cash
P
Cash equivalents
Investments
Loans and
receivables
Other resources
Total
resources
Deposits
liabilities
Bills payable
Bonds
payable
Subordinated
debt
Other
liabilities
-
-
Three
Months to
One Year
16,732
11,303
P
-
110,942
-
395
P
5,069
138,977
P
5,464
P
P
70,333
9,384
P
8,866
6,763
P
Contingent
resources
Contingent
liabilities
Total gap
Cumulative
off-book gap
P
3,486
-
10,715
P
4,559
P
-
P
6,560
8,828
14,082
51,648
6,168
P
6,560
25,955
84,262
28,324
12,493
57,816
P
3,379
P
-
153,989
12,493
70,287
P
283,259
116,897
P
204,034
16,147
10,905
-
-
10,905
-
-
10,966
-
-
10,966
-
15,629
-
On-book gap
Cumulative
on-book gap
7,229
-
Total
-
80,827
Total liabilities
and capital
funds
-
P
Non-rate
Sensitive
-
1,110
Capital funds
-
-
P
Total liabilities
Cumulative
total gap
2011
(As Restated – See Note 22)
One to
More
Five
Than Five
Years
Years
26,430
-
3,379
4,883
-
7,977
9,087
124,874
251,139
27,237
32,120
152,111
283,259
80,827
15,629
31,313
3,379
58,150 (
10,165 ) (
20,598 )
54,437 (
58,150
47,985
27,387
81,824
138,258
23,423
905
-
-
162,586
138,251
23,418
905
-
-
162,574
7
5
-
-
12
7
12
58,157
P
47,997
12
P
27,399
81,824 )
-
12
P
82,836
-
12
P
12
-
P
-
- 52 -
4.03.03 Equity Price Risk
The Group has minimal exposures to price risk on equity securities held and classified as
AFS on the statements of financial position. To manage this risk, the Group diversifies
its portfolio. Diversification of the portfolio is done in accordance with the limits set by
the Group. The Group is not exposed to commodity price risk.
4.04 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 Group.
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 policies;
(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 these functions, 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, except as noted below, is not exercised by a single individual but rather,
through a hierarchy of limits, is effectively exercised collectively; (b) business center
managers have limited approval authority only for credit exposure related to
deposit-taking operations in the form of bills purchase, 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 end of the
reporting period. Significant changes in the economy, or in particular industry segments
that represent a concentration in the Group’s portfolio, could result in losses that are
different from those provided for at the end of each reporting period. Management,
therefore, carefully monitors the changes and adjusts its exposure to such credit risk, as
necessary.
- 53 -
4.04.01 Exposure to Credit Risk
The carrying amount of financial resources recorded in the financial statements, net of
any allowance for losses, which represents the maximum exposure to credit risk, without
taking into account the value of any collateral obtained, as of December 31 follows:
Group
2012
Loans and
Receivables
Individually Assessed for Impairment
Grade 1 to 5: Unclassified
P
Grade 6: Impaired
Grade 7: Impaired
Grade 8: Impaired
Grade 9: Impaired
Grade 10: Impaired
Gross amount
Allowance for impairment
(
Carrying amount
Collectively Assessed for Impairment
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
Other receivables
Allowance for impairment
Carrying amount
P
19
3,604
4,219
3,111 ) (
1,108
2,732
776)
1,956
173,412
3,978 )
169,434
-
2,423
4,479
2,196 )
4,706
-
(
(
15,560
P
2,732
-
151,273
17,256
2,076
2,124
683
Neither Past Due Nor Impaired
Total Carrying Amount
596
Investment and
Trading Securities
190,808
93,223
P
95,179
- 54 Group
2011
(As Restated – See Note 22)
Loans and
Investment and
Trading Securities
Receivables
Individually Assessed for Impairment
Grade 1 to 5: Unclassified
Grade 6: Impaired
Grade 7: Impaired
Grade 8: Impaired
Grade 9: Impaired
Grade 10: Impaired
Gross amount
Allowance for impairment
Carrying amount
Collectively Assessed for Impairment
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
Other receivables
Allowance for impairment
Carrying amount
P
P
3,659
4,455
3,063 ) (
1,392
(
(
(
2,904
1,157)
1,747
134,562
12,273
7,234
1,642
131
724
156,566
2,352 )
154,214
-
2,763
6,488
2,965 )
6,286
-
24,300
P
2,904
-
-
Neither Past Due Nor Impaired
Total Carrying Amount
192
255
236
113
186,192
85,981
P
87,728
- 55 Parent
2012
Loans and
Receivables
Individually Assessed for Impairment
Grade 1 to 5: Unclassified
P
Grade 6: Impaired
Grade 7: Impaired
Grade 8: Impaired
Grade 9: Impaired
Grade 10: Impaired
Gross amount
Allowance for impairment
(
Carrying amount
Collectively Assessed for Impairment
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
Other receivables
Allowance for impairment
Carrying amount
P
19
3,604
3,623
3,092 ) (
531
986
715)
271
144,842
2,413 )
142,429
-
2,423
3,774
805 )
5,392
-
(
(
4,726
P
986
-
128,954
12,658
1,106
2,124
Neither Past Due Nor Impaired
Total Carrying Amount
-
Investment and
Trading Securities
153,078
78,287
P
78,558
- 56 Parent
2011
(As Restated – See Note 22)
Loans and
Investment and
Receivables
Trading Securities
Individually Assessed for Impairment
Grade 1 to 5: Unclassified
Grade 6: Impaired
Grade 7: Impaired
Grade 8: Impaired
Grade 9: Impaired
Grade 10: Impaired
Gross amount
Allowance for impairment
Carrying amount
Collectively Assessed for Impairment
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
Other receivables
Allowance for impairment
Carrying amount
P
P
236
113
3,659
4,008
2,998 ) (
1,010
(
133,246
1,973 )
131,273
-
2,763
3,012
531 )
5,244
-
(
(
-
16,462
P
153,989
2,808
2,808
1,052 )
1,756
117,492
12,237
2,610
907
Neither Past Due Nor Impaired
Total Carrying Amount
-
71,267
P
73,023
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.
4.04.02 Collateral Held as Security and Other Credit Enhancements
The Group holds 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. Generally, collateral is not held over loans
and advances to other banks, except when securities are held as part of reverse
repurchase and securities borrowing activities. Collateral usually is not held against
investment securities, and no such collateral was held at December 31, 2012 and 2011.
- 57 -
The Group holds collateral against Loans and 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, 2012 and 2011 are shown below.
Group
2011
(As Restated –
See Note 22)
2012
Against individually impaired
Real property
Chattels
Against classified accounts but not impaired
Real property
Chattels
Equities
Others
P
Against neither past due nor impaired
Real property
Chattels
Others
Total
P
Parent
Against individually impaired
Real property
397 P
401
33,364
17,950
2,670
3,627
22,690
21,543
11,230
4,486
22,769
580
36,028
22,613
1,850
22,064
117,786 P
2012
P
3,005
33
109,514
2011
274 P
2,861
Against classified accounts but not impaired
Real property
Chattels
Equities
Others
21,241
2,567
2,670
2,914
10,280
7,753
11,230
3,752
Against neither past due nor impaired
Real property
Others
15,009
36,028
19,075
21,502
80,703 P
76,453
Total
P
- 58 -
4.04.03 Concentrations of Credit Risk
Credit risk concentration in the context of banking generally denotes the risk arising from
an uneven distribution of counterparties in credit or in any other business relationships,
or from a concentration in business sectors or geographic regions which is capable of
generating losses large enough to jeopardize an institution’s solvency. The Group
monitors concentrations of credit risk by sector. An analysis of concentrations of credit
risk at the reporting date is shown in Note 10.
In the course of the Group’s implementation of ICAAP (see Notes 5.02), it adopts a
quantification of credit risk concentration following frameworks prescribed by some of
the more advanced European central banks. Using sector distribution as a tool, the
Group performs a straightforward application of the Herfindahl-Hirshman Index (HHI)
to determine the existence of credit risk concentration.
The Group, however, recognizes the inherent limitations of the use of HHI to assess
credit concentration risk. To augment this measure and to appropriately manage said
risk, the Group performs an in-depth analysis of its large borrowing groups. To ensure
the independence of this process, the review and analysis are done in the context of ROC
meetings.
4.04.04 Credit Risk Stress Test
To further its assessment of credit risk, the Parent Company adopted in 2011 a revised
credit risk stress testing framework using break-even sales and cash flow debt service to
determine a borrower’s vulnerability. In addition, both the Parent Company and its
major subsidiary RSB participated in the initial run of the uniform stress testing exercise
for banks initiated by the BSP.
4.05 Fair Value Hierarchy
The Group adopted the amendments to PFRS 7, Improving Disclosures about Financial
Instruments, effective January 1, 2009. These amendments require the Group to present
certain information about financial instruments measured at fair value in the statements
of financial position.
In accordance with this amendment, financial assets and liabilities measured at fair value
in the statements 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 asset 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.
- 59 -
The table below presents the breakdown of the Group’s financial assets and liabilities
measured at fair value in the statements of financial position as of December 31, 2012
and 2011.
Group
2012
Level 1
Financial assets
at FVTPL
Government bonds P
Other debt securities
Derivative assets
Equity securities
-
AFS securities
Government bonds
Other debt securities
Equity securities
Allowance for
impairment
Level 2
8,493
P
50
587
-
P
7,126
30,512
57
37,695
-
46,542
33,673
2,567
82,782
(
538 )
Derivative liability
P
82,184
P
-
P
93,676
P
1,471
P
-
P
1,471
P
-
2,239
1,359
1,086
P
Total
-
P
6,185
4,158
1,140
335
7,134
4,684
-
11,818
33,849
25,089
2,191
61,129
11,898
1,834
167
13,899
-
45,747
26,923
2,358
75,028
67,269
-
-
39,519
-
60,135
P
598 )
P
994 )
Total Resources
at Fair Value
(
2011
(As Restated – See Note 22)
Level 2
Level 3
3,946
2,799
54
335
(
-
37,157
Level 1
Allowance for
impairment
9,120
1,067
718
587
39,416
3,161
2,510
45,087
-
AFS securities
Government bonds
Other debt securities
Equity securities
P
11,492
54,157
Financial assets
at FVTPL
Government bonds P
Other debt securities
Derivative assets
Equity securities
-
45,027
Derivative liability
P
2,362
60 )
P
627
1,067
668
Total
9,130
(
Total Resources
at Fair Value
Level 3
13,899
(
994 )
-
74,034
P
18,583
P
-
P
85,852
P
1,110
P
-
P
1,110
- 60 Parent
Level 1
Financial assets
at FVTPL
Government bonds P
Other debt securities
Derivative assets
AFS securities:
Government bonds
Other debt securities
Equity securities
-
-
Allowance for
impairment
Level 2
6,747
P
6,797
2,249
-
9,046
31,705
6,530
30,259
56
36,845
-
38,235
30,259
56
68,550
31,705
(
Derivative liability
P
38,502
-
538 )
Allowance for
impairment
(
Derivative liability
P
538 )
-
68,012
P
-
P
77,058
P
1,471
P
-
P
1,471
P
2,239
1,254
1,086
P
Total
-
P
6,076
4,025
1,140
6,662
4,579
-
11,241
25,073
22,690
126
47,889
9,094
4,173
-
34,167
26,863
126
61,156
53,666
-
(
38,556
-
13,267
-
47,004
P
7,375
954
717
P
885 )
Total Resources
at Fair Value
P
2011
(As Restated – See Note 22)
Level 2
Level 3
3,837
2,771
54
AFS securities:
Government bonds
Other debt securities
Equity securities
-
-
36,307
Level 1
Financial assets
at FVTPL:
Government bonds P
Other debt securities
Derivative assets
P
Total
50
31,705
P
Level 3
628
954
667
-
Total Resources
at Fair Value
2012
13,267
(
885 )
-
60,271
P
17,846
P
-
P
71,512
P
1,110
P
-
P
1,110
There were no transfers between levels of hierarchy in 2012 and 2011. The Group and
the Parent Company’s investments in non-marketable equity securities (INMES) with
carrying amount of P1,503 and P1,876 in the Group’s financial statements and P1,500
and P1,511 in the Parent Company’s financial statements, as of December 31, 2012 and
2011, respectively, presented under AFS securities were carried at cost as there are no
reliable sources of fair value.
.
- 61 -
4.06 Operations Risk
Operations risks are risks arising from the potential inadequate information systems,
operations or transactional problems (relating to service or product delivery), breaches in
internal controls and fraud or unforeseen catastrophes that may result in unexpected loss.
Operations risks include the risk of loss arising from various types of human or technical
error, settlement or payments failures, business interruption, administrative and legal
risks, and the risk arising from systems not performing adequately.
The Group maintains departmental operations manuals that are periodically updated.
Central to these manuals is the tenet that 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 transactions are properly authorized, recorded and settled. Moreover, the
Group places emphasis on the security of its computer systems and has a comprehensive
information technology (IT) security policy. External vulnerability and penetration
testing is performed at least annually as required by relevant BSP regulations. The Group
has also designated a security administrator independent of the front office who is
responsible for maintaining strict control over user access privileges to the Group’s
information systems.
The Group has also developed a Business Continuity Plan (BCP) based on several crisis
severity levels which is tested at least annually and updated for any major changes in
systems and procedures. Central to the Group’s BCP is a disaster recovery plan to
address the continued functioning of systems, recovery of critical data, and contingency
processing requirements in the event of a disaster.
Operations Risk Management, as it relates to Capital Adequacy, is currently under Basic
Indicator Approach (see Note 5).
4.06.01 Reputation Risk
Reputation risk is the risk to earnings or capital arising from negative public opinion.
This affects the Group’s ability to establish new relationships or services, or to continue
servicing existing relationships. This risk can expose the Group to litigation, financial
loss, or damage to its 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 Group’s earnings or impairs capital. This risk is
present in activities such as asset management and regulatory compliance.
As part of the Group’s ICAAP initiatives (see Note 5.02), it initially adopted a
representative, albeit provisional, measure of reputation risk based on a widely held
theory that the stock price of a listed company more or less is a barometer of said
company’s reputation. Applying statistical treatment to VaR therefore provides an
indication as to the maximum amount by which the Group’s reputation may be eroded.
In 2011, the Group, however, formally adopted a reputation risk monitoring and
reporting framework to manage public perception. Central to the said framework is the
formal creation of the RCBC Public Relations Committee chaired by the head of the
Parent Company’s Corporate Communications Division.
- 62 -
4.06.02 Legal Risk and Regulatory Risk Management
Changes in laws and regulations could adversely affect the Group. In addition, the
Group faces legal risks in enforcing its rights under its loan agreements, such as
foreclosing of collateral. Legal risk is higher in new areas of business where the law
remains untested by the courts. The Group uses 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
Group seeks 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.
Regulatory risk refers to the potential for the Group to suffer financial loss due to
changes in the laws or monetary, tax or other governmental regulations of a country. The
Group’s Compliance Program, the implementation of which is overseen and coordinated
by the Compliance Officer, is the primary control process for regulatory risk issues. The
Compliance Officer 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.
4.07 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 Group is required
to submit “Covered Transaction Reports” involving single transactions in cash or other
equivalent monetary instruments in excess of P0.50 within one banking day. The Group is
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 Group is 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 Group is required to submit to the BSP a certificate signed by the
President and the Chief Compliance Officer of each bank stating that they have
monitored compliance and that the Group is complying with the anti-money laundering
rules and regulations.
In an effort to further prevent money laundering activities, the Group has 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
high risk customer, such as a politically exposed person or a private individual holding a
prominent position, are made exclusively at the senior management level.
- 63 -
The Group’s procedures for compliance with the Anti-Money Laundering Act are set out
in its Anti-Money Laundering Policy Manual. The Group’s Compliance Officer monitors
compliance and conducts compliance testing of business units.
The Group’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 and Regulations on a quarterly basis.
4.
CAPITAL MANAGEMENT
5.01 Regulatory Capital
The BSP, the Group’s lead regulator, sets and monitors the capital requirements of the
Group.
In implementing current capital requirements, the BSP requires 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).
Pillar 1 risk-weighted assets are the sum of credit risk, market risks and operational risks,
computed based on BSP-prescribed formula provided for under its circulars.
Under the relevant provisions of the current BSP regulations, the minimum capitalization
of the Parent Company, RSB, Rizal Microbank, RCBC Capital and RCBC LFC is P5,400,
P1,000, P500, P300 and 300, respectively. In computing for the 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.
- 64 -
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 the 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;
- 65 -
Subject to the 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
v. Sinking fund for redemption of limited life redeemable preferred stock
without the replacement requirement upon redemption.
The Group’s regulatory capital position under Pillar 1 as of December 31 is presented as
follows:
2012
2011
Tier 1 Capital
Tier 2 Capital
P
37,138 P
12,446
35,752
12,413
Total Qualifying Capital, after deductions
P
49,584 P
48,165
Total Risk – Weighted Assets
P
281,622 P
260,039
17.61%
18.52%
13.19%
13.75%
Capital ratios:
Total regulatory capital expressed as percentage
of total risk – weighted assets
Total Tier 1 expressed as percentage of total
risk – weighted assets
The Parent Company’s regulatory capital position under Pillar 1 as of December 31 is
presented as follows:
2012
2011
Tier 1 Capital
Tier 2 Capital
P
30,280 P
5,290
29,619
6,022
Total Qualifying Capital, after deductions
P
35,570 P
35,641
Total Risk – Weighted Assets
P
222,397 P
208,161
Total regulatory capital expressed as percentage
of total risk – weighted assets
15.99%
17.12%
Total Tier 1 expressed as percentage of total
risk – weighted assets
13.62%
14.23%
Capital ratios:
The preceding capital ratios comply with the related BSP prescribed ratio of at least 10%.
- 66 -
5.02 Internal Capital Adequacy Assessment and Pillar 2 Risk Weighted Assets
In January 2009, BSP issued Circular No. 639 on the ICAAP and Supervisory Review
Process (SRP) covering universal and commercial banks on a group-wide basis. As a
supplement to BSP Circular No. 538 on the Risk-Based Capital Adequacy Framework,
ICAAP sets out the following principles:
a. Banks must have a process for assessing capital adequacy relative to their risk profile,
operating environment, and strategic/business plans;
b. The bank’s ICAAP is the responsibility of the BOD, must be properly documented
and approved and with policies and methodologies integrated into banking
operations;
c. The bank’s ICAAP should address other material risks – Pillar 2 risks – in addition to
those covered by Pillar 1, with risk measurement methodologies linked to the
assessment of corresponding capital requirement both on a business-as-usual (BAU)
and stressed scenario;
d. The minimum capital adequacy ratio prescribed by the BSP after accounting for Pillar
1 and other risks is retained at 10%; and
e. The bank’s ICAAP document must be submitted to the BSP every January 31 of each
year, beginning 2011.
The Group submitted its first ICAAP trial document in January 2009. Subsequent
revisions to the trial document were made, and likewise submitted in February 2010 and
May 2010 following regulatory review and the Group’s own process enhancements.
Complementing the ICAAP document submissions were dialogues between the BSP and
the Group’s representatives, the second of which transpired last November 2010 between
a BSP panel chaired by the Deputy Governor for Supervision and Examination, and the
members of Parent Company’s EXCOM. The Group submitted its final ICAAP
document within the deadline set by the BSP. Henceforth, the annual submission of an
ICAAP document is due every January 31st.
The Group identified the following Pillar 2 risks as material to its operations, and
consequently set out methodologies to quantify the level of capital that it must hold.
i. Credit Risk Concentration – The Group has so far limited its analysis to credit risk
concentration arising from the uneven sector distribution of the Parent Company’s
credit exposures. Concentration is estimated using a simplified application of the
HHI, and translated to risk-weighted assets as suggested by some European central
bank practices. The Group plans to continuously build on this concentration
assessment methodology, recognizing the inherent limitations of the HHI.
ii. Liquidity Risk – The Group estimated its liquidity risk under BAU scenario in 2011
using standard gap analysis. Stressed liquidity risk on the other hand assumed a
repeat of a historical liquidity stress, and estimated the impact if the Group was to
partially defend its deposits and partially pay-off by drawing from its reserve of
liquid assets.
- 67 -
iii. Interest Rate Risk in the Banking Book (IRRBB) – It is the current and prospective
negative impact on earnings and capital arising from interest rate shifts. The Group
estimated interest rate risk in the banking book using its CaR methodology.
Stressed IRRBB was calculated by applying the highest observed market volatilities
over a determined timeframe.
iv. Compliance/Regulatory Risk – It is the current and prospective negative impact on
earnings and capital arising from violation of laws, regulations, ethical standards,
and the like. The Group estimated compliance risk in 2011 as the sum of regulatory
fines and penalties, and forecasted this amount in relation to the level of operating
expenses.
v. Reputation Risk – From the adoption of a theoretical measure, the Group amended
its approach to reputation risk in 2011 by adopting instead a reputation risk
monitoring and reporting process, run primarily by its Public Relations Committee.
The measurement of reputation risk under stress was folded into the Group’s
assessment of stressed liquidity risk.
vi. Strategic Business Risk – It is the current and prospective negative impact on earnings
and capital arising from adverse business decisions, improper implementation, and
failure to respond to industry changes. The Group treated strategic business risk in
2011 as a catch-all risk, and expressed its estimate as a cap on additional
risk-weighted assets given other risks and the desired level of capital adequacy.
The Group estimated its BAU Total Risk – Weighted Assets as follows:
2012
2011
Pillar 1 Risk – Weighted Assets
Pillar 2 Risk – Weighted Assets
P
281,622 P
9,657
260,039
9,696
Total Risk – Weighted Assets
P
291,279 P
269,735
Capital ratios:
Total regulatory capital expressed as percentage
of total risk – weighted assets
16.99%
17.86%
Total Tier 1 expressed as percentage of total
risk – weighted assets
12.75%
13.25%
- 68 -
5.
SEGMENT INFORMATION
The Group’s operating businesses are recognized and managed separately according to the
nature of services provided (primary segments) and the different geographical 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, overdraft facilities, payment
remittances and foreign exchange transactions. It also upsells bank products
(unit investment trust funds, etc.) and cross-sells bancassurance products.
b. Corporate Banking – principally handles loans and other credit facilities and deposit and
current accounts for corporate, Small and Medium Enterprises 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 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 segments, 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.
- 69 -
Primary segment information (by business segment) on a consolidated basis as of and for
the years ended December 31, 2012, 2011 and 2010 follow:
Retail
Banking
Group
Results of operations
Net interest income
P
Non-interest income
Total revenue
Non-interest expense (
Profit (loss) before tax
Tax expense
Non-controlling interest
in net profit
-
Corporate
Banking
Group
4,859 P
2,175
7,034
5,920) (
1,114
-
-
2012
Treasury
Group
2,570 P
1,020
3,590
1,091) (
2,499
-
Others
850 P
5,888
6,738
664 ) (
6,074 (
(
-
(
Total
3,120 P
2,342
5,462
8,177 ) (
2,715 )
745 ) (
7) (
11,399
11,425
22,824
15,852 )
6,972
745 )
7)
Net profit (loss)
P
1,114 P
2,499 P
6,074 (P
3,467) P
6,220
Statement of financial
position
Total Resources
P
210,659 P
159,508 P
83,451 (P
89,523) P
364,095
Total Liabilities
P
210,659 P
159,508 P
83,451 (P
132,496) P
321,122
Other segment
information
Capital expenditures
P
428 P
13 P
18 P
1,975 P
2,434
Depreciation and
amortization
P
298 P
13 P
8 P
795 P
1,114
- 70 -
Retail
Banking
Group
Results of operations
Net interest income
P
Non-interest income
Total revenue
Non-interest expense
(
Profit (loss) before tax
Tax expense
Non-controlling interest
in net profit
-
4,647 P
2,073
6,720
5,070) (
1,650
-
2011
(As Restated – See Note 22)
Corporate
Banking
Treasury
Group
Group
Others
-
2,425 P
951
3,376
1,090) (
2,286
-
1,434 P
4,508
5,942
567 ) (
5,375 (
(
-
Total
2,326 P
2,598
4,924
8,265 ) (
3,341 )
915 ) (
(
10,832
10,130
20,962
14,992 )
5,970
915 )
26) (
26 )
Net profit (loss)
P
1,650 P
2,286 P
5,375 (P
4,282 ) P
5,029
Statement of financial
position
Total Resources
P
196,996 P
118,389 P
79,705 (P
49,823 ) P
345,267
Total Liabilities
P
196,996 P
118,389 P
79,705 (P
87,669 ) P
307,421
Other segment
information
Capital expenditures
P
621 P
18 P
4 P
1,473 P
2,116
Depreciation and
amortization
P
255 P
17 P
8 P
774 P
1,054
Retail
Banking
Group
Results of operations
Net interest income
P
Non-interest income
Total revenue
Non-interest expense
(
Profit (loss) before tax
Tax expense
Non-controlling interest
in net profit
-
4,271 P
2,137
6,408
4,493) (
1,915
-
2010
(As Restated – See Note 22)
Corporate
Banking
Treasury
Group
Group
Others
-
2,063 P
910
2,973
1,080) (
1,893
-
1,431 P
3,173
4,604
432 ) (
4,172 (
(
-
(
Total
3,231 P
2,382
5,613
8,266 ) (
2,653 )
1014 ) (
33) (
10,996
8,602
19,598
14,271 )
5,327
1,014 )
33 )
Net profit (loss)
P
1,915 P
1,893 P
4,172 (P
3,700 ) P
4,280
Statement of financial
position
Total Resources
P
196,963 P
119,867 P
82,690 (P
83,847 ) P
315,673
Total Liabilities
P
196,963 P
119,867 P
82,690 (P
110,008 ) P
289,512
Other segment
information
Capital expenditures
P
614 P
12 P
3 P
1,175 P
1,804
Depreciation and
amortization
P
358 P
14 P
3 P
585 P
960
- 71 -
Secondary information (by geographical location) as of and for the years ended
December 31, 2012, 2011 and 2010 follow:
Philippines
Results of operations
Total revenues
Total expenses
United
States
2012
Asia and
Europe
Total
P
22,675 P
16,394
38 P
26
111 P
184
22,824
16,604
Net profit (loss)
P
6,281 P
12 (P
73 ) P
6,220
Statement of financial
position
Total resources
P
363,669 P
124 P
302 P
364,095
Total liabilities
P
320,833 P
89 P
200 P
321,122
Other segment
information
Capital expenditures
P
2,419 P
4 P
11 P
2,434
Depreciation and
amortization
P
1,112 P
P
2 P
1,114
Philippines
Results of operations
Total revenues
Total expenses
-
2011
(As Restated – See Note 22)
United
Asia and
States
Europe
Total
P
20,766 P
15,682
56 P
107
140 P
144
20,962
15,933
Net profit (loss)
P
5,084 ( P
51) (P
4) P
5,029
Statement of financial
position
Total resources
P
344,729 P
163 P
375 P
345,267
Total liabilities
P
307,098 P
137 P
186 P
307,421
Other segment
information
Capital expenditures
P
2,116 P
Depreciation and
amortization
P
1,052 P
-
P
-
P
2,116
2 P
-
P
1,054
- 72 2010
(As Restated – See Note 22)
United
Asia and
States
Europe
Philippines
Results of operations
Total revenues
Total expenses
6.
Total
P
19,416 P
15,065
63 P
119
119 P
134
19,598
15,318
Net profit (loss)
P
4,351 ( P
56) (P
15 ) P
4,280
Statement of financial
position
Total resources
P
314,680 P
156 P
837 P
315,673
Total liabilities
P
288,769 P
104 P
639 P
289,512
Other segment
information
Capital expenditures
P
1,800 P
2 P
2 P
1,804
Depreciation and
amortization
P
954 P
5 P
1 P
960
CASH AND CASH EQUIVALENTS
The components of Cash and Cash Equivalents follow:
Group
2012
Cash and other cash items
Due from BSP
Due from other banks
Parent
2011
(As Restated –
See Note 22)
2012
2011
P
9,380
36,620
5,879
P
8,163
34,283
3,769
P
7,432
31,590
5,139
P
6,560
22,990
2,965
P
51,879
P
46,215
P
44,161
P
32,515
Cash consists primarily of funds in the form of Philippine currency notes and coins and
includes foreign currencies acceptable to form part of the international reserves in the
Parent Company’s vault and those in the possession of tellers, including ATMs. 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 and to serve as clearing account for interbank
claims and to comply with existing trust regulations.
- 73 -
The balance of Due from Other Banks account represents regular deposits with the
following:
Group
2012
Foreign banks
Local banks
Parent
2011
(As Restated –
See Note 22)
2012
2011
P
4,581
1,298
P
1,827
1,942
P
4,059
1,080
P
1,456
1,509
P
5,879
P
3,769
P
5,139
P
2,965
The breakdown of Due from Other Banks by currency is shown below.
Group
2012
Foreign currencies
Philippine pesos
Parent
2011
(As Restated –
See Note 22)
2012
2011
P
5,333
546
P
3,002
767
P
4,538
601
P
2,436
529
P
5,879
P
3,769
P
5,139
P
2,965
Interest rates per annum on these deposits range from 0.00% to 0.25% in 2012,
0.50% to 3.13% in 2011 and 0.50% to 4.63% in 2010.
7.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
This account is composed of the following:
Group
2012
Government bonds
Other debt securities
Derivative financial assets
Equity securities – quoted
P
P
Parent
2011
(As Restated –
See Note 22)
9,120
1,067
717
588
P
11,492
P
2012
6,185
4,158
1,140
335
P
11,818
P
2011
7,375
954
717
P
-
6,076
4,025
1,140
-
9,046
P
11,241
The carrying amounts of the above financial assets are classified as follows:
Group
2012
Held-for-trading
Derivatives
Parent
2011
(As Restated –
See Note 22)
2012
2011
P
10,775 P
717
10,678
1,140
P
8,329
717
P
10,101
1,140
P
11,492
11,818
P
9,046
P
11,241
P
- 74 -
Treasury bills and other debt securities issued by the government and other private
corporations earn annual interest as follows:
2012
Peso denominated
Foreign currency denominated
2011
4.63% - 12.38%
2.50% - 10.63%
2010
4.95% - 11.38%
2.50% - 10.63%
4.63% - 9.13%
2.50% - 11.04%
Majority of financial assets at FVTPL are held-for-trading. The amounts presented have
been determined directly by reference to published prices quoted in an active market.
Fair values of government bonds and other debt securities were determined directly 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 mainly foreign currency short-term forwards,
cross-currency swaps and options. 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.
Options are derivative financial instruments that specify a contract between two parties
for a future transaction on an asset at a reference price.
The aggregate contractual or notional amount of derivative financial instruments and the
aggregative fair values of derivative financial assets and liabilities as of December 31 both
in the Group’s and Parent Company’s financial statements are set out as follows:
Notional
Amount
Currency swaps
Interest rate swaps/futures
Options
Debt warrants
P
60,313 P
16,550
2,167
391 P
271
6
49
79,030 P
717 P
P
Notional
Amount
Currency swaps
Interest rate swaps/futures
Options
Debt warrants
P
P
2012
Fair Values
Assets
Liabilities
-
1,008
463
1,471
2011
Fair Values
Assets
Liabilities
200,770 P
12,991
1,014
-
951 P
104
31
54
214,775 P
1,140 P
-
757
344
9
1,110
The derivative liabilities of P1,471 and P1,110 as of December 31, 2012 and 2011,
respectively, are shown as Derivatives with Negative Fair Values as part of Other
Liabilities in the statements of financial position (see Note 20). Such derivative liabilities
have maturity periods of one to three months.
- 75 -
The Group recognized the change in value of financial assets at FVTPL resulting to a
decrease of P325 in 2012 and increase of P86 in 2011 and P33 in 2010 in the Group
financial statements; and decrease of P310 in 2012 and increase of P52 in 2011 and P7 in
2010 in the Parent Company’s financial statements, which were included as part of
Trading and Securities Gains – net account in the statements of income.
8.
AVAILABLE-FOR-SALE SECURITIES
The Group’s AFS securities consist of the following:
Group
2012
Government bonds
Other debt securities
Equity securities
P
46,542
33,673
4,248
84,463
Allowance for
impairment (see Note 15) (
P
776 ) (
P
Parent
2011
(As Restated –
See Note 22)
83,687
45,747
26,923
4,397
77,067
2012
P
38,235
30,259
1,733
70,227
1,157 ) (
P
75,910
2011
(As Restated –
See Note 22)
P
715 ) (
P
69,512
34,167
26,863
1,804
62,834
1,052 )
P
61,782
Interest rates per annum on government bonds and other debt securities range from
1.19% to 12.00% in 2012, 2.50% to 14.00% in 2011, and 1.48% to 15.50% in 2010.
Changes in the account follow:
Group
2012
Balance at beginning of year
Additions
Sale/disposal
Fair value gains
Amortization/accretion of
discount or premium
Revaluation of foreign
currency investments
Reclassification from
HTM investments
Provision for impairment
losses
Balance at end of year
P
(
75,910 P
175,567
161,681) (
863
(
2,914 ) (
(
4,058 )
54,119 P
87,933
86,648 ) (
2,264
61,782 P
127,956
120,305 ) (
787
45,266
77,112
80,402 )
2,074
3,142 (
1,608 )
1,141 )
3,850 )
19,210
-
(
83,687
P
222
-
101 )
75,910
2011
(As Restated –
See Note 22)
2012
274 (
-
P
Parent
2011
(As Restated –
See Note 22)
19,183
P
(
69,512
65 )
P
61,782
- 76 -
The changes in fair values of AFS securities which were recognized under other
comprehensive income and directly to capital funds amounted to fair value gain of
P863 in 2012 and P2,239 in 2011, and fair value loss of P364 in 2010 in the Group’s
financial statements; and fair value gain of P787 in 2012, P2,074 in 2011 and fair value
loss of P669 in 2010 in the Parent Company’s 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 28).
In addition, the Parent Company reclassified in 2008 its collateralized debt obligations
(CDOs) and CLNs that are linked to ROP bonds, with an aggregate carrying value of
P5,961 to loans and receivables. As of December 31, 2012 and 2011, aggregate carrying
value of the CLNs amounted to P2,423 and P2,763, respectively (see Note 10.01).
9.
LOANS AND RECEIVABLES
This account consists of the following:
Parent
Group
2011
(As Restated –
See Note 22)
2012
Loans and discounts
Credit card receivables
Customers’ liabilities on
acceptances, import
bills and trust receipts
Bills purchased
Lease contract receivables
Receivables financed
Securities purchased under
reverse repurchase
agreements
P
Interbank loans receivable
Accrued interest receivable
Unquoted debt securities
classified as loans
Accounts receivable
Sales contract receivables
Miscellaneous
Allowance for
impairment
(see Note 15)
Unearned discount
Reserves for credit card
Prompt payment discount
(
(
(
(
164,674
12,924
149,355
10,192
10,062
1,820
569
242
10,147
1,729
400
314
119
190,410
4,687
2,908
61
172,198
17,967
2,755
2,423
1,932
1,752
22
204,134
2,763
1,244
1,416
464
198,807
9,285)
2,018)
1,661)
362)
P
P
190,808
(
(
(
(
2012
P
186,192
125,621
10,609
P
10,062
1,796
117,195
7,760
10,147
1,686
-
-
148,088
5,768
2,471
136,788
17,127
1,997
2,423
1,300
377
2,763
1,015
466
160,427
160,156
-
8,380 ) (
2,481 ) (
1,338 ) (
416 )
P
2011
6,310 ) (
121 ) (
918 ) (
5,502 )
76 )
589 )
P
153,078
P
153,989
Loans and receivables bear average interest rates of 6.90% per annum in 2012 and 6.86%
per annum in 2011 in the Group’s and Parent Company’s financial statements.
- 77 -
Included in this account are non-performing loans (NPLs) amounting to P3,491
(net of allowance of P6,742) and P2,675 (net of allowance of P6,183) as of
December 31, 2012 and 2011, respectively, in the Group’s financial statements and
P1,472 (net of allowance of P4,218) and P1,302 (net of allowance of P3,625) as of
December 31, 2012 and 2011, respectively, in the Parent Company’s financial statements.
Accounts receivable includes claim from the Bureau of Internal Revenue (BIR) relating to
the 20% final withholding tax on Poverty Eradication and Allevation Certificates
(PEACe) bonds amounting to P199. As of December 31, 2012, the case regarding the
claim is still pending in the Supreme Court (see Note 30.02).
Loans and receivables amounting P2,886 and P3,200 as of December 31, 2012 and 2011,
respectively, both in the Group’s and Parent Company’s financial statements are assigned
as collateral to BSP as security for rediscounting availments (see Note 17).
The concentration of credit of the loan portfolio as to industry follows:
Group
2012
Real estate, renting and other
related activities
P
Consumer
Manufacturing
(various industries)
Electricity, gas and water
Other community, social and
personal activities
Wholesale and retail trade
Transportation and
communication
Diversified holding companies
Financial intermediaries
Hotels and restaurants
Construction
Agriculture, fishing and
forestry
Others
P
33,889
32,697
Parent
2011
(As Restated –
See Note 22)
P
31,058
24,687
2012
P
2011
23,295
10,609
P
20,756
7,760
29,592
25,125
33,944
21,000
29,028
24,898
33,717
20,893
21,641
16,035
23,561
14,060
17,964
14,693
19,143
13,031
12,038
8,264
5,441
1,223
923
7,873
3,554
7,601
1,423
498
10,982
8,264
4,765
1,209
6,770
3,554
7,133
1,423
792
2,750
900
2,039
190,410
P
172,198
-
761
1,620
P
148,088
720
1,888
P
136,788
The BSP considers that loan concentration exists when the total loan exposure to a
particular industry exceeds 30% of the total loan portfolio plus the outstanding interbank
loans receivable.
- 78 -
The breakdown of the loan portfolio as to secured and unsecured follows:
Parent
Group
2011
(As Restated –
See Note 22)
2012
Secured:
Real estate mortgage
Deposit hold-out
Chattel mortgage
Other securities
2012
2011
P
46,075
29,082
17,147
16,047
108,351
82,059
P
38,670
31,353
15,187
13,559
98,769
73,429
P
25,567
28,370
341
15,468
69,746
78,342
P
22,551
30,618
67
13,552
66,788
70,000
P
190,410
P
172,198
P
148,088
P
136,788
Unsecured
The maturity profile of the loan portfolio follows:
Group
2012
Due within one year
Due beyond one year
Parent
2011
(As Restated –
See Note 22)
2012
2011
P
41,735
148,675
P
97,913
74,285
P
37,347
110,741
P
64,004
72,784
P
190,410
P
172,198
P
148,088
P
136,788
A reconciliation of the allowance for impairment at the beginning and end of 2012 and
2011 is shown below (see Note 15).
Group
2012
Parent
2011
(As Restated –
See Note 22)
2012
2011
Balance at beginning of year P
Provisions
Accounts written off/others (
8,380 P
1,689
784 ) (
7,608 P
1,978
1,206 ) (
5,502 P
1,283
475 ) (
4,772
1,579
849 )
Balance at end of year
9,285
8,380
6,310
5,502
P
P
P
P
- 79 -
10.01 Reclassification to Loans and Receivables
The Parent Company reclassified in 2008 its CLNs that are linked to ROP bonds and
certain CDOs previously recognized as AFS Securities to Loans and Receivables with
aggregate carrying amount of P5,961, and embedded derivatives with negative fair value
amounting to P308, at reclassification date (see Notes 9). The reclassified CDOs were
already disposed in 2010. On the other hand, presented below are the carrying amounts
and the corresponding fair values of the outstanding reclassified CLNs linked to ROP
bonds as of December 31:
2012
2011
Carrying
Amount
From AFS
– host contract
From FVTPL
– embedded derivative
P
2,423
Fair
Value
P
P
2,789
Carrying
Amount
P
2,423
P
2,763
Fair
Value
P
2,382
2,789
P
409
2,763
P
2,791
The effective interest at reclassification date ranges from 4.25% to 9.50%. The unrealized
fair value losses that should have been recognized in the Group’s and the Parent
Company’s capital funds had the CLNs not been reclassified to Loans and Receivables
amounted to P194 and P473 as of December 31, 2012 and December 31, 2011,
respectively. Had the embedded derivatives not been reclassified by the Parent
Company, interest income on Loans and Receivables would have decreased by
P218, P236 and P222 for the years ended December 31, 2012, 2011 and 2010,
respectively, and the additional gains to be recognized in profit or loss amounted to
P111, P19 and P251 for the years ended December 31, 2012, 2011 and 2010, respectively.
10.02 Special Purpose Vehicle (SPV) Transactions
In accordance with the provisions of Republic Act (RA) No. 9182 (the SPV Act) and
MB 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.
- 80 -
The agreements cover the transfers of specific NPAs, consisting of NPLs and real and
other properties acquired (ROPA, presented as Investment Properties), amounting to
P51 in 2008 and P1,699 in 2007 to NPRMI; P3,770 and P1,433 in 2004 and 2005,
respectively, to PIOI; P3,879 in 2006 to Star Two; P686 to Global SPVs in 2004; and
P2,070 to Asian Pacific Recoveries in 2005. The agreement with the Global SPVs was
made in conjunction with other participating banks.
In recording the transfers of the NPAs, the Parent Company derecognized the NPAs and
recorded the subordinated/SPV notes as part of AFS 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, if
any, and (b) an entity should substantially transfer all the risks and rewards of ownership
of an asset before such asset could be derecognized.
On the other hand, based on the terms and conditions of the “asset sale and purchase”
agreements with Star Two, Global SPVs and Asian Pacific Recoveries, the risk and
rewards of the ownership of the sold NPAs were transferred completely. As permitted
under MB Resolution No. 135, the Parent Company has deferred over 10 years the
recognition of the additional allowance for impairment as determined from the NPAs
transferred to PIOI not qualified for derecognition, and the losses determined from the
NPAs transferred to Star Two, Global SPVs and Asian Pacific Recoveries qualified for
derecognition. The schedule of amortization of the additional allowance for impairment
and losses as prescribed under MB Resolution No. 135 shall be 5% for the first three
years, 10% for the next four years, and 15% for the remaining three years. While this
accounting treatment may be allowed under MB Resolution No. 135, FRSPB, however,
requires the full recognition of the additional allowance for impairment for NPAs not
qualified for derecognition and the losses for NPAs qualified for derecognition against
current operations in the period such impairment and losses were determined instead of
capitalizing them as deferred charges, and amortizing them over future periods and
charging the amortization directly to surplus account.
In 2012, the Group and the Parent Company retrospectively adjusted the financial
statements to reflect its interest for NPAs not qualified for derecognition and adjusted
the balance of surplus as at January 1, 2012, 2011 and 2010 to fully recognize the
additional allowance for impairment and the losses incurred from the sale of the NPAs
qualified for derecognition in prior years (see Note 22.05).
- 81 -
10.
INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The components of the carrying values of investments in subsidiaries and associates are
as follows (refer to Note 1.02 for the effective percentage of ownership in 2012 and
2011):
Group
2012
Acquisition costs of associates:
RRC
RLI
RHI
HCPI
LIPC
YCS
P
1,836
921
153
91
53
5
P
3,059
Equity in net earnings:
Balance at beginning of year
Equity in net earnings for the year
Dividends
(
Balance at end of year
Allowance for impairment (see Note 15)
(
1,836
921
153
91
53
5
3,059
607
357
24) (
495
200
88 )
940
607
3,999
3,666
53) (
P
2011
3,946
53 )
P
3,613
- 82 Parent
2012
Subsidiaries:
RSB
RCBC Capital
Bankard
Rizal Microbank
RCBC LFC
RCBC JPL
RCBC Forex
RCBC North America
RCBC Telemoney Europe
RCBC IFL
P
3,190
2,231
1,000
992
687
375
150
134
72
58
8,889
Associates:
RRC
RLI
NPHI
HCPI
LIPC
RHI
YCS
2011
P
3,190
2,231
1,000
992
375
150
134
72
58
8,202
1,836
921
388
91
53
51
5
3,345
Allowance for impairment (see Note 15)
1,836
921
388
91
53
51
5
3,345
12,234
627) (
(
P
11,607
11,547
308 )
P
11,239
The following table presents the audited financial information (except for HCPI for
which 2012 and 2011 information were based on unaudited financial statements) on the
significant associates as of and for the years ended December 31, 2012 and 2011:
Resources
2012:
RRC
RLI
HCPI
2011:
RRC
RLI
HCPI
P
P
Liabilities
9,070 P
560
4,718
-
8,603 P
607
2,842
-
Revenues
2,493 P
2,509
2,805 P
755
-
1,458 P
11,119
1,404 P
9
7,438 (
Profit
(Loss)
-
779
285
656
8
230 )
- 83 -
The Parent Company, under a shareholder’s 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 considered an associate
despite the Parent Company’s only 12.88% ownership interest.
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, which they own and hold,
and to regulate the conduct of the voting and the relationship between them with respect
to the exercise of the voting rights. As a result of this agreement, RCBC Capital and the
Parent Company are able to exercise significant influence over the operating and financial
policies of RHI. Thus, notwithstanding RCBC Capital’s ownership of only 4.71% and
the Parent Company’s ownership of only 2.40%, RHI has been considered an associate.
In 2011, RRC redeemed a certain percentage of its preferred shares which resulted in the
decrease of the Parent Company’s cost of investment by P39. The redemption of
preferred shares resulted in a gain amounting to P81 which was recognized in the 2011
statement of income as part of Gain on Sale of Investments under Miscellaneous Income
account (see Note 26.01).
On February 12 and 13, 2009, an agreement was executed between the Parent Company
and RCBC JPL whereby the Parent Company shall infuse an initial amount of P125 in
RCBC JPL as stock subscription, which will result in the Parent Company’s 33%
ownership and full management control of RCBC JPL. The Parent Company was also
granted the option to own the remaining 66% of the outstanding shares of RCBC JPL by
way of future equity infusion of P125 into RCBC JPL in February 2010 and another
P125 in February 2011, which will bring the total equity investment of the Parent
Company to P375 or 99% by 2011. Thereafter, in accordance with the agreement, the
Parent Company made cash infusions amounting of P50 on March 9, 2009, P75 on
February 15, 2010 and P125 on February 15, 2011.
On August 31, 2011, the Parent Company’s BOD approved the acquisition of selected
assets and assumption of selected liabilities of RCBC JPL through Rizal Microbank,
subject to the approval of Philippine Deposit Insurance Corporation (PDIC) and BSP
with the following conditions: (a) RCBC JPL shall surrender its rural bank license to BSP
within 30 days from BSP approval; and (b) RCBC JPL shall likewise cease to accept
deposits and change its business name so as to delete the word “bank” therein.
Consequently, in 2011, the Parent Company infused P500 worth of capital to Rizal
Microbank to support the acquisition of assets and assumption of liabilities of RCBC JPL.
The application of acquisition of selected assets and assumption of selected liabilities was
approved by PDIC and BSP on January 31, 2012 and March 2, 2012, respectively.
As of December 31, 2012, the financial statements of RCBC JPL showed a negative
equity of P406. Accordingly, in 2012, the Parent Company recognized full provision on
the remaining carrying value of its investment by recognizing additional impairment loss
of P319 in the Parent Company’s 2012 statement of income.
- 84 -
On January 30, 2012, the BOD approved the acquisition of a total of 448,528,296
common shares or around 97.79% of the outstanding capital stock in RCBC LFC from
PMMIC, House of Investments, Inc. (HI) and other sellers. The sale and purchase of
RCBC LFC shares were made in accordance with the three Share Purchase Agreements
signed by the relevant parties on February 7, 2012 and was conditioned on, among others,
the receipt of approval for the transaction from the BSP, which was received by the
Parent Company on March 12, 2012 (see Note 22.04).
12.
BANK PREMISES, FURNITURE, FIXTURES AND EQUIPMENT
The gross carrying amounts and accumulated depreciation and amortization of bank
premises, furniture, fixtures and equipment at the beginning and end of 2012 and 2011
are shown below.
Group
Land
December 31, 2012
Cost
Accumulated
depreciation
and amortization
P
1,486
-
Net carrying amount P
December 31, 2011
Cost
Accumulated
depreciation
and amortization
P
P
1,767
P
911)
1,600
-
P
6,272
(
3,514)
December 31, 2011
Cost
Accumulated
depreciation
and amortization
January 1, 2011
Cost
Accumulated
depreciation
and amortization
Net carrying amount P
4,425 )
2,758
P
807
P
7,507
1,484
P
1,732
P
972
P
5,266
P
829
P
10,283
(
2,984)
(
837)
-
-
(
3,821 )
1,484
P
895
P
972
P
2,282
P
829
P
6,462
1,752
P
1,396
P
532
P
4,555
P
887
P
9,122
(
764)
P
632
Buildings
P
(
P
(
532
2,532)
P
1,419
Furniture,
Fixtures and
Equipment
Construction
in Progress
P
687)
739
-
2,023
P
(
3,985
P
(
887
3,296 )
P
Leasehold
Rights and
Improvements
P
2,364)
669
-
5,826
Total
P
7,484
(
3,051 )
672
P
732
P
739
P
1,621
P
669
P
4,433
672
P
1,393
P
458
P
3,355
P
717
P
6,595
(
2,712 )
-
P
(
P
-
Net carrying amount P
11,392
1,600
672
P
-
P
P
Land
Net carrying amount P
807
856
1,752
P
P
Total
P
Parent
December 31, 2012
Cost
Accumulated
depreciation
and amortization
Leasehold
Rights and
Improvements
1,486
-
Net carrying amount P
P
(
-
Net carrying amount P
January 1, 2011
Cost
Accumulated
depreciation
and amortization
Buildings
Furniture,
Fixtures and
Equipment
Construction
in Progress
(
637)
-
(
2,075)
-
672
P
756
P
458
P
1,280
P
717
P
3,883
693
P
1,377
P
329
P
3,054
P
784
P
6,237
(
2,426 )
P
3,811
-
(
693
589)
P
788
P
(
329
1,837)
P
1,217
P
784
- 85 -
A reconciliation of the carrying amounts at the beginning and end of 2012 and 2011 of
bank premises, furniture, fixtures and equipment is shown below.
Group
(As Restated – See Note 22)
Land
Balance at
January 1, 2012,
net of accumulated
depreciation
and amortization
P
Additions
Disposals
(
Depreciation and
amortization charges
for the year
Balance at
December 31, 2012,
net of accumulated
depreciation and
amortization
Balance at
December 31, 2011,
net of accumulated
depreciation and
amortization
-
P
Balance at
January 1, 2011,
net of accumulated
depreciation
and amortization
P
Additions
Disposals
(
Depreciation and
amortization charges
for the year
Buildings
1,484 P
33
31 ) (
1,486
73)
P
1,752 P
68
336 ) (
-
P
895 P
76
42)
(
856
-
P
(
2,282 P
1,316
210 ) (
(
630 ) (
P
2,758
632 P
345
5)
532
440
P
(
2,023 P
919
72 ) (
(
588 ) (
895
-
P
972
P
2,282
Total
829 P
164
8) (
6,462
2,217
291 )
178 ) (
1,600
77)
P
-
972
628
Leasehold
Rights and
Improvements
P
(
1,484
Furniture,
Fixtures and
Equipment
Construction
in Progress
P
807
881 )
P
7,507
887 P
113
9) (
5,826
1,885
422 )
162 ) (
P
829
827 )
P
6,462
Parent
Land
Balance at
January 1, 2012,
net of accumulated
depreciation
and amortization
P
Additions
Disposals
Depreciation and
amortization charges
for the year
Balance at
December 31, 2012,
net of accumulated
depreciation and
amortization
P
-
Buildings
672
P
(
-
(
672
756 P
35
9)
50)
P
Furniture,
Fixtures and
Equipment
Construction
in Progress
732
-
458
281
-
P
739
P
Leasehold
Rights and
Improvements
(
1,280 P
862
190 ) (
(
331 ) (
P
1,621
Total
717 P
104
5) (
147 ) (
P
669
3,883
1,282
204 )
528 )
P
4,433
- 86 Parent
Land
Balance at
January 1, 2011,
net of accumulated
depreciation
and amortization
P
Additions
Disposals
(
Depreciation and
amortization charges
for the year
Balance at
December 31, 2011,
net of accumulated
depreciation and
amortization
P
-
Buildings
693
P
21 ) (
-
(
672
788 P
25
5)
52)
P
Furniture,
Fixtures and
Equipment
Construction
in Progress
756
-
329
129
-
P
458
P
Leasehold
Rights and
Improvements
(
1,217 P
401
43 )
(
295 ) (
P
1,280
P
-
784
67
Total
(
3,811
622
69 )
134 ) (
481 )
717
P
P
In October 2009, the Parent Company, RSB and Bankard entered into an agreement with
Malayan Insurance Company, Inc. (MICO) and Grepalife Financial, Inc. (Grepalife) to
form a consortium for the pooling of their resources and establishment of an
unincorporated joint venture (the “UJV”) for the construction and development of a high
rise, mixed use commercial/office building. In 2011, the Parent Company’s BOD
approved the assumption of rights and interest of its co-partner, Grepalife, in the said
joint venture. Total cash contribution of the Parent Company, RSB and Bankard to the
joint venture amounted to P1,600 and P972 as of December 31, 2012 and 2011,
respectively, recorded as Construction in Progress. RSB’s land contribution costing
P383 as of December 31, 2012 and 2011 is recorded as part of Land account
(see Note 29.03). On October 2, 2012, the parties executed a memorandum of
understanding agreeing in principle to cancel or revoke the UJV, subject to the approval
of BSP. On March 13, 2013, through MB Resolution No. 405 dated March 7, 2013, BSP
confirmed the Parent Company’s acquisition of the land contributed to RSB to the
Project as well as the rights and interests of its co-venturers (see Note 31).
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 bank
subsidiaries. As of December 31, 2012 and 2011, the Parent Company and bank
subsidiaries have satisfactorily complied with this BSP requirement.
3,883
- 87 -
13.
INVESTMENT PROPERTIES
Investment properties consist 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 2012 and 2011, and the gross carrying
amounts and the accumulated depreciation and impairment of investment properties are
as follows:
Group
2012
Balance at January 1,
net of accumulated
depreciation and
impairment
Additions
Disposals
Impairment
Depreciation
Balance at December 31,
net of accumulated
depreciation and
impairment
2011
(As Restated –
See Note 22)
2012
P
7,651 P
1,401
1,702 ) (
489 ) (
65 ) (
7,605
P
1,632
1,074 ) (
407 ) (
105 ) (
3,927 P
166
384 ) (
116 ) (
29 ) (
4,098
400
370 )
176 )
25 )
P
6,796
7,651
3,564
3,927
(
(
(
December 31
Cost
P
Accumulated depreciation (
Accumulated impairment
(see Note 15)
(
Net carrying amount
Parent
2011
(As Restated –
See Note 22)
P
P
P
8,601 P
661 ) (
9,646
P
709 ) (
1,144 ) (
1,286 ) (
6,796
P
7,651
P
4,424 P
241 ) (
619 ) (
P
3,564
4,758
262 )
569 )
P
3,927
The fair value of investment properties as of December 31, 2012 and 2011, based on the
available appraisal reports, amounted to P10,786 and P11,907, respectively, for the
Group; and P6,486 and P6,415, respectively, for the Parent Company.
In 2012, the Group and the Parent Company foreclosed real and other properties
totalling to P579 and P96, respectively, in settlement of certain loan accounts.
In 2009, in accordance with the letter received by RSB from BSP dated March 26, 2009,
RSB reclassified certain investment properties to equity investments in RSB’s separate
financial statements which 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. The approval of BSP through the
MB is 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. However, RSB was not able to complete the disposition of the
properties within the required time frame set by BSP. As a result, RSB, through the
approval of its BOD, decided to merge the SPCs with RSB as the surviving entity.
A request letter has been submitted to BSP on the planned merger. As of the reporting
date, no response has been received from BSP.
- 88 -
14.
OTHER RESOURCES
Other resources consist of the following:
Parent
Group
2011
(As Restated –
See Note 22)
2012
Real estate properties
for sale – net
(see Note 14.02)
P
Software – net
(see Note 14.01)
Margin deposits
Goodwill
Sundry debits
Assets held-for-sale
Retirement benefit asset
(see Note 24)
Prepaid expenses
Creditable withholding taxes
Unused stationery and
supplies
Inter-office float items
Foreign currency notes
and coins on hand
Branch licenses – net
(see Note 14.03)
Refundable deposits
Miscellaneous
Allowance for
impairment
(see Note 15)
2,077
(
P
2012
2,850
P
960
P
1,085
754
715
426
350
308
657
224
426
6
246
300
234
230
99
245
134
307
134
218
97
190
124
200
180
231
99
197
170
226
241
162
237
162
237
161
118
527
6,742
209
111
358
6,132
207 ) (
P
2011
(As Restated –
See Note 22)
6,535
569
715
-
115
5,938
5
-
-
-
114
205
3,866
194 ) (
P
-
621
224
107
140
3,297
19 ) (
P
3,847
3)
P
3,294
14.01 Software
A reconciliation of the carrying amounts at the beginning and end of 2012 and 2011 of
software is shown below.
2012
Balance at beginning of year
Additions
Disposals
Amortization
Balance at end of year
P
657
217
-
(
P
Group
P
(
120) (
754
P
2011
2012
530 P
231
17 )
87) (
657 P
Parent
621
62
-
P
530
195
17 )
87 )
P
621
(
114 ) (
569
2011
- 89 -
14.02 Real Estate Properties for Sale
Real estate properties for sale represent those properties held by the Parent Company and
by the SPCs of RSB that were consolidated to the Group’s statements of financial
position as of December 31, 2012 and 2011.
14.03 Branch Licenses
On May 14, 2009, BSP approved the Parent Company’s acquisition of RCBC JPL under
the terms and conditions specified in the Term Sheet dated February 12, 2009 and
Addendum to Term Sheet dated February 13, 2009, executed by the Parent Company and
RCBC JPL, subject to certain conditions (see Note 11). As a result of this approval to
acquire RCBC JPL through capital infusion over three years, the Group recognized the
excess of the total cost of investment over the allocated net assets of RCBC JPL
amounting to P264 as Branch Licenses in its consolidated financial statements.
A reconciliation of the carrying amounts at the beginning and end of 2012 and 2011 of
branch licenses is shown below.
2012
2011
Balance at beginning of year
Amortization
P
(
209
P
48) (
244
35)
Balance at end of year
P
161
209
P
14.04 Impairment of Goodwill
In 2011, the Group recognized full impairment of goodwill relating to its investment in
Rizal Microbank. The impairment amounted to P157 and is presented as part of
Impairment Losses in the Group’s 2011 statement of income.
15.
ALLOWANCE FOR IMPAIRMENT
Changes in the allowance for impairment are summarized as follows:
Group
Notes
Balance at beginning of year
AFS securities
Loans and receivables
Investment in subsidiaries
and associates
Investment property
Other resources
Net provisions during the year
Charge-offs during the year
2012
P
9
10
2011
(As Restated –
See Note 22)
1,157
8,380
53
1,286
194
11,070
11
13
14
(
2,486
2,091) (
395
P
Parent
2011
(As Restated –
See Note 22)
2012
1,088 P
7,608
1,052
5,502
P
1,026
4,772
53
1,167
37
9,953
308
569
3
7,434
252
373
3
6,426
2,538
1,421) (
1,117
1,921
1,065) (
856
1,779
771 )
1,008
- 90 Group
Notes
Balance at end of year
AFS securities
Loans and receivables
Investment in subsidiaries
and associates
Investment properties
Other resources
2012
9
10
16.
2011
(As Restated –
See Note 22)
2012
776
9,285
1,157
8,380
715
6,310
1,052
5,502
53
1,144
207
53
1,286
194
627
619
19
308
569
3
11
13
14
P
Parent
2011
(As Restated –
See Note 22)
11,465
P
11,070 P
8,290
P
7,434
DEPOSIT LIABILITIES
The following is the breakdown of deposit liabilities:
Group
2012
Demand
Savings
Time
Parent
2011
(As Restated –
See Note 22)
2012
2011
P
10,568
130,302
105,887
P
10,001 P
134,238
111,044
8,891
110,748
76,796
P
8,341
108,562
87,131
P
246,757
P
255,283 P
196,435
P
204,034
Included in time deposits of the Group and Parent Company are various issuances of
long-term negotiable certificate of deposits with outstanding balance of P9,233 and
P7,917 as of December 31, 2012 and 2011, respectively.
The maturity profile of the deposit liabilities follows:
Group
2012
Within one year
Beyond one year,
within five years
Beyond five years
Non-maturity
P
34,286
P
9,526
202,945
P
246,757
Parent
2011
(As Restated –
See Note 22)
P
44,229 P
2012
2011
30,203
33,023
4,836
3,379
202,839
9,224
157,008
4,558
3,379
163,074
255,283 P
196,435
P
204,034
Deposit liabilities are in the form of savings, demand and time deposit accounts with
annual interest rates ranging from 0.13% to 3.13%, 0.25% to 3.38% and 0.25% to 4.50%
in 2012, 2011 and 2010, respectively. 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
reserve requirements equivalent to 18% in 2012 and 21% in 2011. As of
December 31, 2012 and 2011, the Group is in compliance with such regulations.
- 91 -
In 2012, BSP issued Circular no. 753 which excludes cash in vault and regular reserve
deposit accounts with BSP as eligible forms of compliance for the reserve requirements.
The required reserve shall only be kept in the form of demand deposit accounts with
BSP. Available reserves as of December 31, 2012 and 2011 follow:
Group
2012
Cash and other cash items
Due from BSP
Reserve deposit account (BSP)
P
P
17.
24,759
-
P
24,759
P
2011
2012
8,222 P
9,876
15,893
Parent
-
33,991 P
2011
P
6,619
7,768
15,143
P
29,530
20,417
20,417
BILLS PAYABLE
This account consists of borrowings from:
Group
2012
Foreign banks
Local banks
BSP
Others
Parent
2011
(As Restated –
See Note 22)
2012
2011
P
12,480
10,488
2,120
1,299
P
11,122 P
2,934
2,560
1,421
12,480
9,366
2,120
5
P
10,212
3,369
2,560
6
P
26,387
P
18,037 P
23,971
P
16,147
The maturity profile of bills payable follows:
Group
2012
Within one year
Beyond one year but
within five years
More than five years
Non-maturing
P
22,131
P
2,893
781
582
P
Parent
2011
(As Restated –
See Note 22)
26,387
18,037 P
-
P
2012
2011
19,686
P
2,893
1,392
-
-
18,037 P
23,971
16,147
P
16,147
Borrowings with foreign and local banks, which are mainly short-term in nature, are
subject to annual fixed interest rates as follows:
2012
Peso denominated
Foreign currency denominated
1.31%-5.00%
0.20%-3.18%
2012
Peso denominated
Foreign currency denominated
0.43%-3.18%
Group
2011
4.50%-4.80%
0.50%-3.02%
Parent
2011
0.50%-3.02%
2010
0.60%-4.50%
0.15%-2.98%
2010
0.60%-1.25%
0.15%-2.98%
- 92 -
The Parent Company does not have peso borrowings in 2012 and 2011.
Bills payable to BSP represents rediscounting availments from BSP which are
collateralized by the assignment of certain loans amounting to P2,886 and P3,200 as of
December 31, 2012 and 2011, respectively (see Note 10).
Only bills payable to BSP is collateralized by the assignment of certain loans.
18.
BONDS PAYABLE
In February 2010, the Parent Company issued unsecured US$ denominated Senior Notes
with principal amount of US$250 bearing an interest of 6.25% per annum, payable
semi-annually in arrears on February 9 and August 9 of each year, commencing on
August 9, 2010. The Senior Notes, unless redeemed, will mature on February 9, 2015.
As of December 31, 2012 and 2011, the peso equivalent of the outstanding bond issue
amounted to P10,252 and P10,905, respectively.
In January 2012, the Parent Company issued unsecured US$ denominated Senior Notes
with principal amount of US$275 bearing an interest of 5.25% per annum, payable
semi-annually in arrears on January 18 and July 18 of each year, commencing on
July 18, 2012. The Senior Notes, unless redeemed, will mature on January 31, 2017.
As of December 31, 2012, the peso equivalent of the outstanding bond issue amounted
to P11,301.
19.
ACCRUED INTEREST, TAXES AND OTHER EXPENSES
The composition of this account follows:
Group
2012
Accrued expenses
Accrued interest payable
Taxes payable
Others
P
P
Parent
2011
(As Restated –
See Note 22)
2,958
1,057
252
234
P
4,501
P
2,845 P
890
231
12
3,978 P
2012
2011
2,273
977
157
P
-
1,921
798
112
-
3,407
P
2,831
- 93 -
20.
OTHER LIABILITIES
Other liabilities consist of the following:
Group
2012
Accounts payable
Derivatives with negative
fair values (see Note 8)
Manager’s checks
Bills purchased – contra
Deferred income
Outstanding acceptances
payable
Other credits
Withholding taxes payable
Deposit on lease contracts
Payment orders payable
Sundry credits
Guaranty deposits
Due to BSP
Miscellaneous
P
P
21.
Parent
2011
(As Restated –
See Note 22)
4,532
2012
3,146 P
2,798
1,471
1,196
1,081
925
1,110
943
1,050
709
1,471
688
1,081
628
1,110
492
1,050
412
375
344
233
158
101
61
60
12
388
270
221
157
125
107
145
60
5
204
375
169
224
270
171
153
10,937
P
2011
(As Restated –
See Note 22)
P
8,252 P
-
P
2,177
-
71
61
60
12
190
7,828
89
145
60
5
122
P
6,256
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 thereof.
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 P6,997 and P6,982 as of
December 31, 2012 and 2011, respectively. On February 22, 2013, the Parent Company
redeemed all of the outstanding notes.
- 94 -
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 P3,990 and P3,984 as of
December 31, 2012 and 2011, respectively.
The subordinated debt is measured at amortized cost at the end of each reporting period.
22.
CAPITAL FUNDS
22.01 Capital Stock
Capital stock consists of:
2012
Preferred stock – voting, non-cumulative
non-redeemable, participating,
convertible into common shares
– P10 par value
Authorized – 200,000,000 shares
Issued and outstanding
Common stock – P10 par value
Authorized – 1,400,000,000 shares in 2012 and
2011 and 1,100,000,000 shares
in 2010
Issued and outstanding
Number of Shares
2011
2010
342,082
2,584,756
20,695,078
1,140,857,133
1,140,135,121
990,554,034
- 95 Amount
2011
2012
Preferred stock – voting, non-cumulative
non-redeemable, participating,
convertible into common shares
– P10 par value
Authorized – 200,000,000 shares
Issued and outstanding
2010
P
3
P
26
P
207
Common stock – P10 par value
Authorized – 1,400,000,000 shares in 2012 and
2011 and 1,100,000,000 shares
in 2010
Issued and outstanding
P
11,409
P
11,401
P
9,906
As of December 31, 2012, there are 821 holders of the listed shares equivalent to 99.97%
of the Bank’s total outstanding shares. Such listed shares closed at P60.00 per share as of
December 31, 2012.
In 1986, the Parent Company listed its common shares with the Philippine Stock
Exchange (PSE). The history of the Parent Company’s issuance of common shares
arising from the initial and subsequent public offerings, including private placements is
presented below.
Issuance
Initial public offering
Stock rights offering
Stock rights offering
Stock rights offering
Stock rights offering
Stock rights offering
Follow-on offering
Private placement
Private placement
Subscriber
Various
Various
Various
Various
Various
Various
Various
International Finance
Corporation
Hexagon Investments B.V.
Issue Date
Number of
Shares Issued
November 1986
April 1997
July 1997
August 1997
January 2002
June 2002
March 2007
1,410,579
44,492,908
5,308,721
830,345
167,035,982
32,964,018
210,000,000
March 2011
September 2011
73,448,275
126,551,725
On May 29, 2006, the Parent Company’s stockholders approved the issuance of up to
200,000,000 convertible preferred shares with a par value of P10 per share, subject to the
approval, among others, by the PSE.
The issuance of the convertible preferred shares was 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
105,000 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;
- 96 -
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 dividend payments had been made to the
preferred shares.
Preferred shares amounting to P23 or 2,242,674 shares and P181 or 18,110,322 shares
were converted to 722,012 and 5,821,548 common shares in 2012 and 2011, respectively.
On June 28, 2010, the Parent Company’s stockholders owning or representing more than
two-thirds of the outstanding capital stock confirmed and ratified the approval by the
majority of the BOD on their Executive Session held on May 21, 2010, the proposed
increase in authorized capital stock and removal of pre-emptive rights from holders of
capital stock, whether common or preferred, to subscribe for or purchase any shares of
any class, by amending its Articles of Incorporation. The proposed P16,000 authorized
capital stock is divided into the following classes of shares:
a. 1,400,000,000 common shares with a par value of ten pesos (P10.00) per share.
b. 200,000,000 preferred shares with a par value of ten pesos (P10.00) per share.
The removal of pre-emptive rights was approved by BSP and SEC on October 20, 2010
and November 4, 2010, respectively. On the other hand, the increase in authorized
capital stock of the Parent Company was approved by BSP and SEC on August 24, 2011
and September 16, 2011, respectively.
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 FRSPB 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 totalling P5,367 and P3,396 as
of December 31, 2012 and 2011, respectively, is not currently available for distribution as
dividends.
- 97 -
22.02 Purchase and Reissuance 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 (DST) incurred
amounted to P1,595. On September 1, 2009, majority of the stockholders approved the
reissuance of the 41,993,389 common treasury shares amounting to P642 in exchange for
5.64% ownership or 169,059 shares of stock in MICO Equities, Inc. (MICOEI)
amounting to P735. The excess of the carrying amount of the investment in MICOEI
over the cost of treasury stock re-issued amounting to P93 was recognized as part of
Capital Paid in Excess of Par. The remaining balance of the total cost of purchasing the
treasury shares amounting to P953 is presented as Treasury Shares in the statements of
changes in capital funds as of December 31, 2010.
On March 17, 2011, the Parent Company issued 73,448,275 common shares, comprising
of 50,427,931 treasury shares (with total cost of P771) and 23,020,344 unissued shares
(with total par value of P230), to International Finance Corporation for a total
consideration of P2,130 representing 7.2% ownership interest. The issuance resulted in
the recognition of additional Capital Paid in Excess of Par amounting to P1,078.
Also, on September 23, 2011, the Parent Company issued 5,821,548 common shares
(equivalent of 18,082,311 preferred shares and with total par value of P58) from the
treasury account (with total cost of P182) and an additional 120,730,177 common shares
(with total par value of P1,207) from unissued portion of the increase in authorized
capital stock on September 23, 2011 to Hexagon Investments B.V. that is equivalent to
approximately 15% of the outstanding common stock. The issuance resulted in the
recognition of additional Capital Paid in Excess of Par amounting to P2,264.
22.03 Cash Dividend Declaration
The details of the cash dividend distributions follow:
Date
Declared
Per Share
October 26, 2010 P
October 26, 2010
October 26, 2010
January 31, 2011
March 31, 2011
March 31, 2011
April 25, 2011
August 31, 2011
November 2, 2011
November 2, 2011
November 2, 2011
January 30, 2012
March 26, 2012
March 26, 2012
May 28, 2012
July 30, 2012
November 26, 2012
November 26, 2012
0.0579
*
*
0.0577
0.8000
0.8000
0.0577
0.0562
0.0595
*
*
0.0649
0.9000
0.9000
0.0632
0.0624
0.0593
*
Dividend
Total Amount
P
* Cash dividends on hybrid perpetual securities
0.15
213.70
213.22
0.15
810.86
2.09
0.15
0.15
0.16
209.99
203.47
0.03
1,026.77
0.31
0.02
0.02
0.02
201.99
Stockholders of
Record as of
BOD
Date Approved by
BSP
December 21, 2010
*
*
March 21, 2011
March 25, 2011
March 25, 2011
June 21, 2011
September 21, 2011
December 21, 2011
*
*
March 21, 2012
May 29, 2012
May 29, 2012
June 21, 2012
September 21, 2012
December 18, 2012
*
October 26, 2010
October 26, 2010
October 26, 2010
January 31, 2011
March 31, 2011
March 31, 2011
April 25, 2011
August 31, 2011
November 2, 2011
November 2, 2011
November 2, 2011
January 30, 2012
March 26, 2012
March 26, 2012
May 28, 2012
July 30, 2012
November 26, 2012
November 26, 2012
January 24, 2011
April 12, 2011
September 2, 2011
April 12, 2011
April 28, 2011
April 28, 2011
June 21, 2011
October 21, 2011
January 3, 2012
February 24, 2012
September 6, 2012
February24, 2012
April 19, 2012
April 19, 2012
June 26, 2012
September 6, 2012
January 2, 2013
March 4, 2013
Date
Paid/Payable
February 10, 2011
April 26, 2011
October 26, 2011
May 3, 2011
May 23, 2011
May 23, 2011
July 15, 2011
November 10, 2011
January 11, 2012
April 27, 2012
October 25, 2012
March 27, 2012
June 4, 2012
June 4, 2012
July 3, 2012
September 28, 2012
December 21, 2012
April 27, 2013
- 98 -
22.04 Other Reserves
In 2008, 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) as a result of additional capital infusion of P1,000 which was approved by BSP
on February 23, 2007. This change in ownership with Bankard did not result in obtaining
additional or reduced control. In accordance with the relevant accounting standards, the
Parent Company’s and Non-controlling Interest’s (NCI) (other than RCBC Capital)
shares in Bankard’s net assets were adjusted to reflect the changes in their respective
interests. The difference between the amount of additional investment made by the
Parent Company and the adjustment in the NCI's share in Bankard’s net assets
amounting to P241 was recognized directly in capital funds and presented as part of
Other Reserves in the statements of changes in capital funds. In 2011, there were
changes in the Parent Company’s percentage ownership over Rizal Microbank and
Bankard. This resulted to the increase in Other Reserves by P2, which is presented as
Net Effect of Change in Ownership over Subsidiaries in the 2011 statement of changes in
capital.
In 2012, the Parent Company acquired RCBC LFC. RCBC LFC is originally a subsidiary
of HI which is also a subsidiary of PMMIC. Thus, the acquisition of the Parent
Company is considered to be a common control business combination. However, this is
outside the scope of PFRS 3 and there is no other specific PFRS guidance governing the
said transaction for financial institutions. In reference to the most relevant and reliable
accounting policies, the Parent Company can either apply the pooling of interests-type
method (also referred to as merger accounting) or the purchase method in accordance
with PFRS 3.
RCBC LFC’s financial statements were consolidated in the financial statements of the
Group using the pooling of interests method. Thus, the Parent Company accounted for
the acquisition as follows:
a.
b.
c.
the assets and liabilities of RCBC LFC are recorded at book value not fair value;
no goodwill is recorded; the difference between the Parent Company’s cost of
investment and RCBC LFC’s equity amounting to P87 is recognized under a
separate reserve (Other Reserves) within equity (as part of Other Comprehensive
Income) on consolidation in 2012; and
comparative amounts are restated as if the acquisition had taken place at the
beginning of the earliest comparative period presented (see Note 22.05).
Prior to the business combination, there have been changes in the NCI’s ownership
interest in RCBC LFC. These changes in ownership brought about a decrease of P228
and an increase of P7 in Other Reserves in 2012 and 2010, respectively. These changes
also caused a decrease of P120 in Surplus and P172 in NCI in 2012, and an increase of
P2 in Surplus and a decrease of P5 in NCI in 2010. The effects of these changes are
presented as Net Effect of Change in Ownership over Subsidiaries in the 2012 and 2010
statements of changes in capital funds.
- 99 -
22.05 Adjustments to Beginning Surplus
As mentioned in Note 2.01(b), the balance of Surplus as of January 1, 2012 and 2011
have been restated from the amounts previously reported to (a) recognize the
proportionate share in RCBC LFC’s surplus resulting from the Parent Company’s
acquisition of the RCBC LFC’s net assets under the pooling of interests method
(see Note 22.04) and, (b) to fully recognize the losses resulting from the sale of the NPAs
qualified for derecognition and to recognize in the books the additional allowance for
impairment on those NPAs not qualified for derecognition (see Note 10.02).
The restatement of the statement of financial position items as of January 1, 2012 is
summarized below.
Group
Effect of Prior Period
Adjustments
(a)
(b)
As Previously
Reported
Assets
Cash and other cash items
P
Due from BSP
Due from other banks
Investment and trading securities
Loans and receivables
Bank premises, furniture,
fixtures and equipment
Investment properties
Deferred tax assets
Other resources
Liabilities
Deposit liabilities
Bills payable
Accrued interest, taxes and
other expenses
Other liabilities
Other reserves
Non-controlling interest
8,148
34,221
3,606
89,057
184,554
P
-
5,866
7,349
1,456
7,135
341,392
255,460
15,712
(
3,946
8,081
283,199
58,193
243 (
9) (
(
15
62
163
58,427
P
As Restated
-
(
P
1,329 )
1,638
-
596
34
12
270
2,790
-
6,462
7,651
1,468
5,938
341,654
268
(
(
1,467 )
2,528 )
177 )
2,325
-
32
159
2,339
451 (
141 )
186 )
-
8,163
34,283
3,769
87,728
186,192
255,283
18,037
3,978
8,252
285,550
56,104
102
195 )
12
12
2,540 )
-
(
124
(
2,540)
2,540) P
9,392
P
5,029
Adjustment to Surplus
P
11,808
P
124
(P
Adjustment to Net Profit
P
5,007
P
22
P
-
56,011
- 100 -
As Previously
Reported
Assets
Investment and trading securities
Investment properties
Other resources
P
Parent
Effect of
Prior Period
Adjustments
(b)
74,352 ( P
3,659
4,761 (
Liabilities
Other liabilities
6,244
Adjustment to Surplus
As Restated
1,329 ) P
268
1,467 )
73,023
3,927
3,294
12
6,256
P
76,528 ( P
2,540 ) P
73,988
P
6,808 (P
2,540 ) P
4,268
The restatement of the statement of financial position items as of January 1, 2011 is
summarized below.
Group
Effect of Prior Period
Adjustments
(a)
(b)
As Previously
Reported
Assets
Cash and other cash items
P
Due from BSP
Due from other banks
Investment and trading securities
Loans and receivables
Bank premises, furniture,
fixtures and equipment
Investment properties
Deferred tax assets
Other resources
Liabilities
Deposit liabilities
Bills payable
Accrued interest, taxes and
other expenses
Other liabilities
7,860
24,889
2,946
89,467
163,982
3,757
8,054
265,707
50,204
241
28
4
32
151
-
5,344
7,303
1,434
12,686
315,911
236,779
17,117
Other reserves
Non-controlling interest
P
(
(
(
50,473
P
As Restated
-
(
P
1,368 )
1,443
-
482
34
4
182
2,332
-
5,826
7,605
1,438
7,909
312,184
268
(
(
4,959 )
6,059 )
151 )
1,938
-
21
111
1,919
413 (
141 )
170 )
-
236,628
19,055
3,778
8,178
267,639
44,545
100
142 )
13
13
6,072 )
-
(
102
(
6,072)
6,072)
Adjustment to Surplus
P
11,590
P
102
(P
Adjustment to Net Profit
P
4,248
P
32
P
-
7,864
24,921
3,097
88,099
165,425
44,503
P
5,620
P
4,280
- 101 -
As Previously
Reported
Assets
Investment and trading securities
Investment properties
Other resources
P
Parent
Effect of
Prior Period
Adjustments
(b)
75,204 ( P
3,830
8,615 (
Liabilities
Other liabilities
6,566
Adjustment to Surplus
As Restated
1,368 ) P
268
4,959 )
73,836
4,098
3,656
13
6,579
P
81,083 ( P
6,072 ) P
75,011
P
7,474 (P
6,072 ) P
1,402
An analysis of the balance of Surplus as of January 1, 2012 and 2011 arising from the
restatements is shown below.
Group
2012
Balance as previously reported
Prior period adjustments
Balance as restated
(
P
P
11,808 P
2,416) (
9,392
Parent
2011
P
11,590 P
5,970) (
5,620 P
2012
2011
6,808 P
2,540) (
7,474
6,072 )
4,268
1,402
P
The restatements also resulted into the increase in the previously reported amounts of basic
and diluted earnings per share of the Group from P4.43 per share to P4.45 per share in 2011
and from P4.06 per share to P4.09 per share in 2010. The restatement did not have any effect
in the previously reported amounts of basic and diluted earnings per share of the Parent
Company.
23.
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, net of fees and other charges. Net proceeds were used to
strengthen the CAR of the Parent Company, repay certain indebtedness and enhance its
financial stability and for general corporate purposes. The issuance of the Perpetual
Securities was approved by the BOD on June 7, 2006.
The Perpetual Securities represent US$100, 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 No. 503 dated December 22, 2005 allowing the issuance of perpetual,
non-cumulative securities up to US$125 which are eligible to qualify as Hybrid Tier 1
Capital.
- 102 -
The significant terms and conditions of the issuance of the Perpetual Securities, among
others, follow:
Interest (effectively dividends) 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 reset and payable quarterly in arrears, of
7.02% per annum above the then prevailing London Interbank Offered Rate
(“LIBOR”) for three-month US dollar deposits;
Except as described below, interest (dividends) 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
(dividends) 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.
Actual payments of interest (dividends) on the hybrid perpetual securities are shown
in Note 22.03;
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 PDIC and they may not be used as collateral for any loan made by
the Parent Company or any of its subsidiaries or affiliates;
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, 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,
- 103 -
The Parent Company, at its option, may redeem the Perpetual Securities at the 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.
24.
EMPLOYEE BENEFITS
Expenses recognized for employee benefits are analyzed below.
Group
2011
(As Restated –
See Note 22)
2012
Salaries and wages
Bonuses
Compensated absences
Social security costs
Retirement – defined benefit plan
Other short-term benefits
P
2,102
1,006
99
91
83
279
P
1,977
760
109
85
279
278
P
1,795
521
99
89
259
254
P
3,660
P
3,488
P
3,017
Parent
2011
2012
Salaries and wages
Bonuses
Compensated absences
Social security costs
Retirement – defined benefit plan
Other short-term benefits
2010
(As Restated –
See Note 22)
P
1,383
812
97
59
-
P
P
1,259
610
105
55
234
186
P
1,151
396
97
53
175
150
P
2,449
P
2,022
191
2,542
2010
The Parent Company and certain subsidiaries maintain a tax-qualified, non-contributory
retirement plan that is being administered by a trustee covering all of their respective regular
full-time employees.
The amounts of retirement benefit asset (presented as part of Other Resources
– see Note 14) recognized in the financial statements are determined as follows:
Group
2011
(As Restated –
See Note 22)
2012
Fair value of plan assets
Present value of the obligation
Excess of asset (obligation)
Unrecognized actuarial loss
(gain)
Retirement benefit asset
P
(
P
4,889
4,383
P
3,128 P
3,404
Parent
2012
2011
4,273
3,608
P
2,598
2,749
506 (
276)
665 (
151)
206)
375 (
358 )
248
300
P
99 P
307
P
97
- 104 -
The movements in the present value of the retirement benefit obligation follows:
Parent
Group
2011
(As Restated –
See Note 22)
2012
Balance at the beginning of year P
Actuarial loss
Current service cost
and interest cost
Past service cost
Benefits paid by the plan
(
3,404
694
Balance at end of year
4,383
P
P
470
6
191) (
2,881 P
204
455
3
139) (
P
2012
2011
2,749
649
P
2,440
50
362
-
3,404 P
373
-
152 ) (
3,608
P
114 )
2,749
The movements in the fair value of plan assets are presented below.
Group
2011
(As Restated –
See Note 22)
2012
Parent
2012
2011
Balance at the beginning of year P
Actuarial gain
Expected return on plan assets
Contributions paid into the plan
Benefits paid by the plan
(
3,128 P
1,497
246
209
191) (
2,762 P
57
178
270
139) (
2,598 P
1,485
207
135
152 ) (
2,270
71
140
231
114 )
Balance at end of year
4,889
3,128 P
4,273
2,598
P
P
P
The plan assets consist of the following:
Group
2012
Assets
Equity securities
Government securities
Deposit with banks
Long-term equity investments
Unit investment trust fund
Loans and receivables
Investment properties
Other investments
Liabilities
2011
(As Restated –
See Note 22)
Parent
2012
2011
P
3,519 P
393
257
226
76
39
16
364
4,890
1) (
2,022 P
386
260
242
69
26
7
157
3,169
41) (
3,432 P
139
204
226
76
36
5
156
4,274
1) (
1,970
109
198
242
68
17
7
28
2,639
41 )
P
4,889
3,128 P
4,273
2,598
(
P
P
Equity securities under the fund are investments in corporations listed in the PSE
(see Note 29.02). Long-term equity investments represent investments in corporations not
listed in PSE. Investment properties pertain to residential and memorial lots representing share
of the fund in acquired assets arising from foreclosure or dation in payment.
Actual return on plan assets were P1,743 (Group) and P1,692 (Parent Company) in 2012, and
P235 (Group) and P211 (Parent Company) in 2011.
- 105 -
The amount of retirement benefit expense (recognized under Employee Benefits) and the
retirement benefit income (recognized as part of Others in the Miscellaneous Income
account – see Note 26.01) presented in the statements of income are determined as
follows:
Group
2011
(As Restated –
See Note 22)
2012
Interest costs
Current service costs
Past service cost
Net actuarial loss (gain) recognized
during the year
Expected return on plan assets
Effect of curtailment
Retirement benefit expense
P
(
(
215
255
6
-
P
P
147) (
246) (
(
83
Retirement benefit expense (income)
P
P
279
(
(
229)
74)
181
144
41
P
Parent
2011
172 P
190
207) (
(P
P
1)
178) (
1)
2012
Interest costs
Current service costs
Expected return on plan assets
Net actuarial loss (gain)
recognized during the year
232
223
3
2010
(As Restated –
See Note 22)
259
2010
195 P
178
140) (
145
106
82)
1
P
7
114)
234
6
P
175
In determining the Group’s pension liability, the following actuarial assumptions were
used:
Discount rates
Expected rate of return on plan assets
Expected rate of salary increases
25.
2012
2011
2010
5.63%
8.00%
8.00%
6.26%
8.00%
5.00%
8.00%
6.00%
5.00%
LEASE CONTRACTS
The Parent Company and certain subsidiaries lease some of the premises occupied by
their respective head offices and branches/business centers (see Note 29.05). The
Group’s rental expense (included as part of Occupancy and Equipment-related account in
the statements of income) amounted to P739, P702 and 611 in 2012, 2011 and 2010,
respectively. 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.
- 106 -
As of December 31, 2012, future minimum rentals payable under non-cancelable
operating leases follow:
Group
26.
Parent
Within one year
P
After one year but not more than five years
More than five years
613
1,362
350
P
513
1,203
181
P
2,325
P
1,897
MISCELLANEOUS INCOME AND EXPENSES
These accounts consist of the following:
26.01 Miscellaneous Income
Note
Gain on assets sold
Interchange fees
Rentals
Dividends
Discounts earned
Gain on sale of investments
Gain on reversal of allowance
Others
2012
2010
(As Restated –
See Note 22)
P
435
279
257
179
126
119
46
254
P
300
213
325
209
91
495
107
786
P
231
271
198
180
90
506
216
613
P
1,695
P
2,526
P
2,305
11
Note
Dividends
Interchange fees
Gain on assets sold
Discounts earned
Gain on sale of investments
Rentals
Others
Group
2011
(As Restated –
See Note 22)
Parent
2011
2012
2010
P
799
279
146
120
119
111
212
P
1,242
213
199
91
82
125
179
P
1,309
271
226
90
338
33
197
P
1,786
P
2,131
P
2,464
11
- 107 -
26.02 Miscellaneous Expense
Group
2011
(As Restated –
See Note 22)
2012
Insurance
Other credit card related expenses
Management and other professional fees
Communication and information services
Transportation and travel
Litigation/assets acquired expense
Advertising and publicity
Representation and entertainment
Stationery and office supplies
Banking fees
Other outside services
Donations and charitable contribution
Membership fees
Commissions
Others
P
567
497
457
425
386
373
324
147
135
130
107
70
26
23
1,028
P
504
389
578
390
385
496
288
142
140
136
162
62
19
38
890
P
582
298
291
380
325
654
238
123
126
90
120
53
17
26
648
P
4,695
P
4,619
P
3,971
Parent
2011
2012
Management and other professional fees
Other credit card related expenses
Insurance
Communication and information services
Transportation and travel
Litigation/assets acquired expense
Advertising and publicity
Other outside services
Banking fees
Stationery and office supplies
Representation and entertainment
Donations and charitable contributions
Membership fees
Others
2010
(As Restated –
See Note 22)
2010
P
642
497
393
312
262
247
214
103
103
97
81
64
19
655
P
615
388
357
264
251
370
179
98
86
98
84
55
16
446
P
484
298
445
226
226
511
164
82
81
89
72
47
16
259
P
3,689
P
3,307
P
3,000
- 108 -
27.
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 statements 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 Republic Act (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 recognition of 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 current tax regulations, the applicable regular corporate income tax rate (RCIT)
was 32% up to October 31, 2005 and 35% up to December 31, 2008. In accordance with
RA No. 9337 which amended certain sections of the National Internal Revenue Code of
1997, RCIT rate was reduced from 35% to 30% beginning January 1, 2009.
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 2012, 2011 and 2010, 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’s net operating loss
carry over (NOLCO) is allowed as a deduction from taxable income in the next three years.
In accordance with the Revenue Regulations (RR) 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 two years from April 12, 2003 shall
be carried over as a deduction from its taxable gross income for a period of five
consecutive taxable years.
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.
- 109 -
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.
27.01 Current and Deferred Taxes
The tax expense as reported in profit or loss consists of:
Group
2011
(As Restated –
See Note 22)
2012
Current tax expense:
Final tax
MCIT
RCIT
Deferred tax income
relating to origination
and reversal of
temporary differences
P
481
202
85
768
(
P
23)
P
745
-
P
612
115
295
1,022
(
P
915
8)
P
Parent
2011
2012
Current:
Final tax
MCIT
RCIT
600
95
220
915
2010
(As Restated –
See Note 22)
1,014
2010
P
355
141
28
P
465
94
19
P
381
114
35
P
524
P
578
P
530
A reconciliation of tax on pretax profit computed at the applicable statutory rates to tax
expense reported in profit or loss is as follows:
Group
2011
(As Restated –
See Note 22)
2012
Tax on pretax profit at 30%
Adjustments for income subjected to
lower income tax rates
Tax effects of:
FCDU income
Non-taxable income
Unrecognized temporary differences
Application of unrecognized NOLCO
Non-deductible expenses
Application of unrecognized MCIT
Others
P
(
(
(
(
(
P
2,092
P
181) (
1,098)
642)
481
262)
210
2)
147
745
(
(
(
(
P
1,791
2010
(As Restated –
See Note 22)
P
1,598
98) (
44)
887) (
1,069) (
477
2)
635
1)
69
1,102)
763)
450
915
P
-
486
389
1,014
- 110 Parent
2011
2012
Statutory income tax at 30%
Adjustments for income subjected to
lower income tax rates
Tax effects of:
FCDU income
Unrecognized temporary differences
Application of NOLCO
Non-taxable income
Non-deductible expenses
P
1,654
P
2010
1,408
P
1,282
(
137) (
51) (
37)
(
1,097) (
454
262)
210) (
122
732) (
501
1,042)
759
(
(
P
524
-
P
-
727) (
179
538)
106
578
530
P
The deferred tax asset is composed of allowance for impairment amounting to
P1,445 and P1,468 in 2012 and 2011, respectively, for the Group; and P1,389 in both
2012 and 2011, for the Parent Company.
In light of the provision of PAS 12, Income Taxes, the Parent Company and certain
subsidiaries have not recognized deferred tax assets (liabilities) on certain temporary
differences since management expects the non-realization of the tax benefits arising from
these differences. Accordingly, the Group did not set up the net deferred tax assets on
the following temporary differences:
Group
2012
Allowance for impairment
NOLCO
Unamortized past service cost
MCIT
Advance rental
Parent
2011
(As Restated –
See Note 22)
2012
2011
P
6,648 P
1,890
590) (
412
2) (
6,761 P
2,898
387) (
308
4) (
3,949 P
1,741
590) (
349
2) (
3,400
2,615
373 )
306
2)
P
8,358
9,576 P
5,447
5,946
(
(
P
P
- 111 -
The Group did not also set up deferred tax liabilities on accumulated translation
adjustments, 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.
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
2009
2010
2011
2012
Amount
P
P
Utilized
825
1,603
339
102
P
2,869
P
-
Balance
825
154
P
979
P
1,449
339
102
Expiry
Year
2012
2013
2014
2015
1,890
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
2009
2010
2011
Amount
P
P
Utilized
738
1,582
295
P
2,615
P
-
Balance
738
136
P
874
P
1,446
295
Expiry
Year
2012
2013
2014
1,741
As of December 31, 2012, the Group and Parent Company have MCIT of P412 and
P349, respectively, that can be applied against RCIT for the next three consecutive years
after the MCIT was incurred.
The breakdown of Group’s MCIT with the corresponding validity periods follow:
Inception
Year
2009
2010
2011
2012
Amount
Expired
P
98
115
95
202
P
P
510
P
-
Balance
98
P
98
P
-
115
95
202
412
Expiry
Year
2012
2013
2014
2015
- 112 -
The breakdown of the Parent Company’s MCIT with the corresponding validity periods
follow:
Inception
Year
2009
2010
2011
2012
Amount
P
P
Expired
98
114
94
141
P
447
P
Balance
98
P
-
114
94
141
98
P
Expiry
Year
2012
2013
2014
2015
349
27.02 Supplementary Information Required under RR 15-2010 and RR 19-2011
The BIR issued RR 15-2010 and RR19-2011 on November 25, 2010 and
December 9, 2011, respectively, which require certain tax information to be disclosed as
part of the notes to financial statements. Such supplementary information is, however,
not a required part of the basic financial statements prepared in accordance with FRSPB;
it is neither a required disclosure under the SEC rules and regulations covering form and
content of financial statements under Securities Regulation Code Rule 68.
The Parent Company, however, presented this tax information required by the BIR as a
supplemental schedule filed separately to the BIR from the basic financial statements.
28.
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
financial statements, since these are not resources of the Parent Company and RSB. The
Group’s total trust resources amounted to P109,087 and P87,561 as of
December 31, 2012 and 2011, respectively. The Parent Company’s total trust resources
amounted to P89,987 and P69,419 as of December 31, 2012 and 2011, respectively
(see Note 30).
In connection with the trust operations of the Parent Company and RSB, time deposit
placements and government securities with a total face value of P1,102 (Group) and
P842 (Parent Company); and P860 (Group) and P645 (Parent Company) as of
December 31, 2012 and 2011, respectively, are deposited with BSP in compliance with
existing trust regulations. The time deposit placements and government securities are
presented in the statements of financial position under Due from BSP (see Note 7) and
AFS (see Note 9), respectively,
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.
113
- 113 -
29.
RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Group and the Parent Company have loans, deposits
and other transactions with its related parties.
The summary of the Group’s significant transactions for loans and receivables with its
related parties (see Note 29.01) as of and for the years ended December 31, 2012 and
2011 are as follows:
Related Party Category
Availments
Stockholders
Associates
Related interests under
common ownership
Key management personnel
Other related interests
P
Total
P
178
111
Collections
P
316
1,224
Related Party Category
1,829
P
Total
P
-
85
24
30
995
P
61
-
P
2011
Interest
Income
1,183 P
4,477
Loans
Outstanding
773 P
281
3
126
P
182
398
1,024
1,004
1
2,050
67
1,562 P
Collections
P
P
395
879
1
393
1,358
Loans
Outstanding
85 P
87
-
Availments
Stockholders
Associates
Related interests under
common ownership
Key management personnel
Other related interests
2012
Interest
Income
45
43
P
80
-
1,683
1
1,221
4
172
305
1,000
P
4,210
The summary of the Group’s significant transactions for deposit liabilities with its related
parties (see Note 29.06) as of and for the years ended December 31, 2012 and 2011 are as
follows:
Related Party Category
Deposits
Stockholders
Associates
Related interests under
common ownership
Key management personnel
Other related interests
P
Total
P
31,965
23,824
2012
Interest
Withdrawals
Expense
P
11,328
1,436
49,585
118,138
P
Outstanding
Balance
29,844 P
23,233
15
1
9,897
1,366
49,921
13
5
5
114,261 P
39
P
2,480
637
1,860
245
361
P
5,583
- 114 -
Related Party Category
Deposits
Stockholders
Associates
Related interests under
common ownership
Key management personnel
Other related interests
P
Total
P
54,030
20,629
Withdrawals
P
8,019
1,015
43,361
127,054
P
2011
Interest
Expense
Outstanding
Balance
62,853 P
26,840
305
1,000
11,409
1,015
46,089
1,683
1
1,221
148,206 P
P
344
45
416
170
692
4,412
P
1,667
Other transactions with related parties as of and for the years ended December 31, 2012
and 2011 are as follows:
Related Party Category
Associates
Dividend income
Occupancy and
equipment-related
expense
Notes
P
29.05
Related Parties Under
Common Ownership
Management fees
Other Related Interest
Joint development
2012
Amount of
Outstanding
Transaction
Balance
29.03
24
P
-
Amount of
Transaction
P
2011
Outstanding
Balance
88
P
-
294
-
211
-
19
-
14
-
628
1,600
281
972
29.01 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. As of
December 31, 2012 and 2011, the Group is in compliance with these regulatory
requirements.
BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts.
- 115 -
The following table shows information relating to the loans, other credit
accommodations and guarantees classified as DOSRI accounts granted under the said
circular as of December 31, 2012 and 2011:
Group
2012
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
Parent
2011
4,889
P
2012
4,608 P
2011
4,835
P
4,446
2.57%
2.84%
3.26%
3.25%
3.44%
4.13%
3.41%
4.03%
0.27%
0.37%
0.35%
0.38%
0.27%
0.37%
0.35%
0.38%
The Group and the Parent Company did not provide any impairment loss on these loans
in 2012 and 2011.
29.02 Retirement Fund
The Parent Company’s and certain subsidiaries’ retirement funds covered under their
defined benefit post-employment plan maintained for qualified employees are
administered and managed by the Parent Company’s Trust Department under trust
agreements.
The Group’s retirement fund has transactions directly and indirectly with the Group and
Parent Company as of December 31, 2012 as follows:
Nature of Transactions
Group
Net Amount
Outstanding
of Transaction
Balance
Investment in common
shares of Parent Company P
Other securities and debt
Instruments (OSDI)
Trading gain
Dividend income
115
1
1,966
51
P
Parent Company
Net Amount
Outstanding
of Transaction
Balance
3,282 P
52
-
115
P
3,275
-
51
1,961
51
-
The carrying amount and the composition of the plan assets as of December 31, 2012
and 2011 are disclosed in Note 24. OSDI include Long-term Negotiable Certificates of
Deposit issued by the Parent Company.
During the year, the Group has contributions to the retirement fund and benefit
payments through the fund (see Note 24).
The retirement fund neither provides any guarantee or surety for any obligation of the
Group nor its investments in its own shares of stocks covered by any restriction and
liens.
- 116 -
29.03 Joint Development Agreement
On October 1, 2009, the Parent Company entered into a Joint Development Agreement
(Agreement) with RSB, Bankard, MICO, Grepalife 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 RSB Building Project (the Project).
In 2011, pursuant to the agreement, RSB acquired ownership of the land through
Goldpath after Hexagonland’s liquidation and partial return of capital to Goldpath. RSB,
accordingly, contributed the land amounting to P383 to the Project. Also, in 2011, the
Parent Company’s BOD approved its assumption of rights and interest of its co-partner,
Grepalife, in the Project.
The estimated cost of the Project is P3,135. The Consortium share in the Project cost as
follows:
Party
RSB
Parent Company
Bankard
MICO
Type of
Contribution
%
Cash and Land
Cash
Cash
Cash
43.75%
41.98%
10.55%
3.72%
100%
The Group’s and Parent Company’s contributions are presented as part of the Bank
Premises, Furniture, Fixtures and Equipment under Construction in Progress and Land
accounts in the Group and Parent Company’s statements of financial position
(see Note 12).
On October 2, 2012, the Consortium executed a memorandum of understanding
agreeing in principle to cancel or revoke the UJV, subject to the approval of BSP. On
March 13, 2013, through MB Resolution No. 405 dated March 7, 2013, BSP confirmed
the Parent Company’s acquisition of the land contributed by RSB to the Project as well as
the rights and interests of its co-venturers (see Note 31).
- 117 -
29.04 Key Management Personnel Compensation
The breakdown of key management personnel compensation follow:
Group
2011
2012
Short-term benefits
Post-employment benefits
P
401
78
P
290
40
P
245
45
P
479
P
310
P
290
Parent
2011
2012
Short-term benefits
Post-employment benefits
2010
2010
P
246
41
P
138
36
P
92
38
P
287
P
174
P
130
29.05 Lease Contract with RRC
The Parent Company and certain subsidiaries occupy several floors of RCBC Plaza as
leaseholders of RRC. Related rental expense are included as part of Occupancy and
Equipment-related account in the statements of income. The Parent Company’s lease
contract with RRC is until December 31, 2015.
29.06 Deposits
As of December 31, 2012 and 2011, certain related parties have deposits with the Parent
Company and certain bank subsidiaries. These deposits are made on the same terms as
deposits with other individuals and businesses.
30.
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.
Management does not anticipate losses from these transactions that will adversely affect
the Group’s operations.
- 118 -
In the opinion of the Management, the suits and claims arising from the normal course of
operations of the Group that remain unsettled, if decided adversely, will not involve sums
that would have material effect on the Group’s 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, 2012 and 2011:
2012
Trust department
accounts (see Note 28)
P
Derivative liabilities
Derivative assets
Outstanding guarantees issued
Unused commercial letters of credit
Spot exchange sold
Spot exchange bought
Inward bills for collection
Late deposits/payments received
Outward bills for collection
Group
109,087
45,675
33,355
32,277
11,056
9,232
9,218
1,395
398
14
P
2011
87,561 P
114,395
100,380
20,329
9,784
10,722
10,725
2,792
857
386
2012
Parent
89,987
45,675
33,355
32,277
11,056
9,232
9,218
1,395
398
14
P
2011
69,419
114,395
100,380
20,329
9,784
10,722
10,725
2,792
813
386
30.01 Purchase of Bankard Shares
In June 2003, RCBC Capital, a wholly-owned subsidiary of the Parent Company, filed an
arbitration claim with the International Chamber of Commerce against Equitable PCI
Bank (“Equitable”) (now BDO Unibank or BDO) relating to RCBC Capital’s acquisition
of Bankard shares from Equitable in May 2000 for a purchase price of approximately
P1,800. 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 P810, including interest and expenses.
The arbitration hearings were held before the ICC Arbitral Tribunal (“Tribunal”), being
the body organized by the International Chamber of Commerce.
In September 2007, the Tribunal ruled that RCBC Capital was entitled to damages, for
overpayment of the purchase of shares as a result of the overstatement of the assets of
Bankard used as the basis of the purchase price of the shares, from Equitable arising
from the breach. On June 16, 2010, the Tribunal issued a Final Award declaring
Equitable liable to pay RCBC Capital the total amount of P364 and US$1 million by way
of damages, fees and legal costs. On September 13, 2011, BDO paid the amount of
P638 to RCBC Capital. The amount was paid under protest and without prejudice to the
outcome of various cases filed by BDO to vacate the award and assail the confirmation
and execution of judgment. Pending resolution of the remaining cases, RCBC Capital
recognized about 50% of the amount received as other income and the remaining
amount, net of certain expenses as deferred income.
There are still a number of cases pending before the Court of Appeals filed by BDO
appealing various orders from the regional trial court, as well as one filed by RCBC
Capital seeking to enjoin the second regional trial court from acquiring jurisdiction.
Management strongly believes that in view of the merits of RCBC Capital’s claims and
defenses, the outcome of the proceedings will be settled in favor of RCBC Capital.
- 119 -
30.02 Poverty Eradication and Alleviation Certificates (PEACe) Bonds
In October 2011, the Parent Company filed a case before the Court of Tax Appeals
questioning the 20% final withholding tax on PEACe Bonds by the BIR. The Parent
Company subsequently withdrew its petition and joined various banks in their petition
before the Supreme Court on the same matter. Notwithstanding the pendency of the
case and the issuance of a Temporary Restraining Order by the Supreme Court, the
Bureau of Treasury withheld P199 in October 2011 from the Parent Company on the
interest on its PEACe bonds holdings. The amount was recognized as part of Loans and
Receivables – Net account under the statements of financial position (see Note 10). The
Government has requested additional time within which to file its comment on the
petition. Management believes that the petitioning banks have a strong case, and that
there is a high probability of recovery.
30.03 Sale of National Steel Corporation (NSC) Plant Asset
In October 2008, Global Steel Philippines (SPV-AMC), Inc. (GSPI) and Global Ispat
Holdings (SPV-AMC), Inc. (GIHI), which purchased the Iligan Plant assets (Plant Assets)
of the NSC from the Liquidator in 2004, filed a Notice of Arbitration with the Singapore
International Arbitration Centre (SIAC) seeking damages arising from the failure of
Liquidator and the secured creditors, including the Parent Company and RCBC Capital,
to deliver the Plant Assets free and clear from liens and encumbrance; purportedly
depriving them of the opportunity to use the assets in securing additional loans to fund
the operations of the Plant Assets and upgrade the same. On May 9, 2012, the SIAC
Arbitral Tribunal rendered a Partial Award in favor of GSPI and GIHI in the total
amount of (a) US$80 million, as and by way of lost opportunity to make profits and
(b) P1,403 representing the value of the Lost Land Claim. Three separate petitions to set
aside the Partial Award were filed by the secured creditors, including the Parent
Company, the Liquidator and another secured creditor, Spinnaker, with the Singapore
High Court. The arguments of the secured creditors, which included the Parent
Company, the Liquidator, and GSPI/GIHI were heard by the Singapore High Court
from February 26, 2013 to March 12, 2013. The Singapore High Court is set to hear the
arguments of Spinnaker and GSPI/GIHI from April 16, 2013 to April 19, 2013, after
which all three petitions shall be deemed submitted for decision. The Parent Company's
exposure is approximately P480, while it has a receivable from Global Steel of P535. On
account of the full provisioning already made by the Parent Company, the aforesaid share
is currently classified in the books of the Parent Company as an unquoted debt security
classified as loans with zero net book value. The Parent Company’s exposure, however,
may be varied should the amount of awarded damages be reduced and should the Iligan
City agree to enter into another tax agreement. In the event of an adverse decision, the
same may be elevated via an appeal to the Singapore Court of Appeals.
Except for the above-mentioned lawsuits, the Parent Company is not aware of any suits
and claims against itself or its subsidiaries, which if decided adversely would have a
material effect on its financial position or operating results.
- 120 -
31.
EVENTS AFTER THE END OF THE REPORTING PERIOD
On March 13, 2013, through MB Resolution No. 405 dated March 7, 2013, BSP
confirmed the Parent Company’s acquisition of the land owned by RSB as well as the
rights and interests of its co-venturers, RSB, Bankard and MICO in the RSB Building
Project (see Note 29.03) under the following conditions:
a. RCBC will use a substantial portion of the building in the conduct of its business; and
b. the total investment in real estate and improvements thereon, including bank
equipment, of RCBC will not exceed 50% of its net worth.
On March 25, 2013, the BOD approved the Parent Company’s sale of its shareholdings
in RRC to PMMIC and HI. The selling price is valued between P4,310 to P5,480.
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 millions, except EPS data):
Group
2011
(As Restated –
See Note 22)
2012
2010
(As Restated –
see Note 22)
Basic Earnings Per Share
a. Net profit attributable to
Parent Company’s shareholders
Less: allocated for preferred and
Hybrid Tier 1 dividends
P
(
P
413 ) (
5,807
b. Weighted average number of
outstanding common shares
c. Basic EPS (a/b)
6,220
5,029
P
428) (
4,601
1,141
4,280
432)
3,848
1,033
940
P
5.09
P
4.45
P
4.09
P
5,807
P
4,601
P
3,848
Diluted Earnings Per Share
a. Net profit (net of amount allocated
for preferred and HT1 dividends)
b. Weighted average number of
outstanding common shares
c. Diluted EPS (a/b)
1,141
P
5.09
1,033
P
4.45
941
P
4.09
- 121 Parent
2011
2012
2010
Basic Earnings Per Share
a. Net profit attributable to
Parent Company’s shareholders
Less: allocated for preferred and
Hybrid Tier 1 dividends
P
4,990
(
413 ) (
4,577
428) (
3,688
1,141
1,033
b. Weighted average number of
outstanding common shares
c. Basic EPS (a/b)
P
4,116
P
3,742
432 )
3,310
940
P
4.01
P
3.57
P
3.52
P
4,577
P
3,688
P
3,310
Diluted Earnings Per Share
a. Net profit (net of amount allocated
for preferred and HT1 dividends
b. Weighted average number of
outstanding common shares
c. Diluted EPS (a/b)
33.
1,141
P
4.01
1,033
P
3.57
941
P
3.52
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
CAR
Return on average capital funds
Return on average assets
Net interest margin
CAR
2012
Group
2011
2010
16.31%
1.78%
3.93%
17.61%
16.56%
1.62%
4.12%
18.52%
18.51%
1.50%
4.60%
17.77%
2012
Parent
2011
2010
15.35%
1.70%
3.44%
15.99%
17.15%
1.60%
3.54%
17.12%
20.75%
1.60%
3.97%
16.26%