ABOUT THE COVER · Philippine Business for education Philippine Business for the environment 3KLOLSSLQH &RXQFLO IRU 1*2 &HUWL WFDWLRQ United States agency for International Development

ABOUT THE COVERMany Filipinos, even those gainfully employed, don’t seem to have adequate financial resources at their disposal—78.5%, or about eight in 10, of Filipino households don’t have a deposit account. Among those who do have them, seven in 10 have only one account.1

1 According to the 2009 Consumer Finance Survey of the Bangko Sentral ng Pilipinas

ABOUT THIS REPORTThis report of the Bank of the Philippine Islands (BPI) combines our Annual

5HSRUW�WR�VKDUHKROGHUV�ZLWK�RXU�6XVWDLQDELOLW\�5HSRUW��FRYHULQJ�ŗQDQFLDO�year January to December 2013.

This is the third year we are publishing an integrated report that is

intended primarily for our institutional investors, customers, civil society

RUJDQL]DWLRQV��DQG�DQ\ERG\�LQWHUHVWHG�WR�NQRZ�PRUH�DERXW�RXU�ŗQDQFLDO�DQG�QRQ�ŗQDQFLDO�SHUIRUPDQFH��7KLV�5HSRUW�SUHVHQWV�D�KROLVWLF�YLHZ

RI�RXU�HFRQRPLF��ŗQDQFLDO��RSHUDWLRQDO��VRFLDO��HQYLURQPHQWDO�DQG

governance performance.

Reporting process. The content of this report was determined based on the

following: issues that are currently most important to our stakeholders and

business operations; consultations with our business units to identify the

social, environmental and operational topics that are most relevant to our

EXVLQHVV�DV�D�EDQN��VXVWDLQDELOLW\�LVVXHV��ULVNV�DQG�RSSRUWXQLWLHV�DV�LGHQWLŗHG�E\�WKH�%DQNńV�6XVWDLQDELOLW\�2řFH��DQG�SHUIRUPDQFH�LQGLFDWRUV�VHW�E\�WKH�Global Reporting Initiative (GRI G3.1) framework (www.globalreporting.org).

Reporting standards. On our sixth year reporting our sustainability

progress, we have maintained the number of GRI indicators reported at 39,

equivalent to a self-declared application level “B.”

Scope of the report. This Report covers the 2013 performance of the BPI

Group of Companies, comprising of the parent Bank of the Philippine

Islands and its subsidiaries. Data in this report were consolidated from

%3,�+HDG�2řFHV��GRPHVWLF�DQG�LQWHUQDWLRQDO�EUDQFKHV��VDWHOOLWH�RřFHV�DQG�VXEVLGLDULHVłHFRQRPLF�GDWD�FDPH�IURP�DXGLWHG�ŗQDQFLDO�VWDWHPHQWV�(complying with Philippine Financial Reporting Standards), while

information on environmental, social and operational performance came

from management information systems and records of the various BPI

Group units.

Assurance��2XU�6XVWDLQDELOLW\�2řFH�HQVXUHV�WKDW�VXVWDLQDELOLW\�SUDFWLFHV�DUH�HPEHGGHG�LQ�HDFK�RI�RXU�EXVLQHVV�JURXSV��7KH�%3,�6XVWDLQDELOLW\�2řFH�(BSO) is composed of a dedicated team of people who drive, monitor

and measure our sustainability performance. The BSO endeavors to seek

external assurance of our report in the near future.

Feedback. We welcome feedback to improve our integrated reporting

process. This Report comes with a feedback form and may also be

downloaded from our website, www.bpiexpressonline.com. Feedback may

EH�VHQW�WR�RXU�&RUSRUDWH�3ODQQLQJ�'LYLVLRQ�DQG�6XVWDLQDELOLW\�2řFH�

Corporate Planning Division18th Floor BPI Building, 6768 Ayala Avenue

corner Paseo de Roxas, Makati City 0720 PH

Telephones: (632) 8455245, (632) 8169753/9557

E-mail: [email protected]

Sustainability O!ce16th Floor BPI Building, 6768 Ayala Avenue

corner Paseo de Roxas, Makati City 0720 PH

Telephone: (632) 8169883

E-mail: [email protected]

2 2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT BANK OF THE PHILIPPINE ISLANDS

CONTENTSAbout the Cover

About this Report

Table of Contents

About BPI

BPI’s Stakeholders

Financial Highlights

Economic Contributions

Citations

Message from the Chairman and the President

Board of Directors

Senior Management

Operational Highlights

People

Environment

Special Feature: A United Front

Corporate Governance

Audit Committee Report to the Board of Directors

Summary of Financial Performance

Statement of Management’s Responsibility

for Financial Statements

Independent Auditor’s Report

Audited Financial Statements

Products and Services

Group Directory

Remittance Centers

GRI Index

BPI Credo

020304 060809 10 12 16 20 22 30 38 44 46 626465

6670

190192193194

BANK OF THE PHILIPPINE ISLANDS 2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT 3

OTHER CHANNELS

FOUNDING SHAREHOLDERS AND OWNERSHIP STRUCTUREBPI’s founding shareholders were primarily charities and endowments associated with the Catholic Church, and its directors consisted of government o!cials and prominent businesspersons, including Antonio de Ayala, a partner in a predecessor of today’s Ayala Corporation. In 1969, Ayala Corporation became the Bank’s largest shareholder.

In 1974, People’s Bank and Trust Company, in which Ayala Corporation also had a significant interest, merged with BPI. As part of the merger, Morgan Guaranty Trust Company of New York acquired a 20% stake in the Bank, which was sold to DBS Group Holdings Limited of Singapore in 1999. In November 2013, the Government of Singapore Investment Corp., together with Ayala Corporation, announced its intent to acquire the remaining DBS’s interest in the Bank.

The Bank of the Philippine Islands (BPI) is a commercial bank with an expanded banking OLFHQVH��7RJHWKHU�ZLWK�LWV�VXEVLGLDULHV��%3,�RŖHUV�D�ZLGH�UDQJH�RI�ŗQDQFLDO�VHUYLFHV�WKDW�LQFOXGH�corporate banking, consumer banking and lending, LQYHVWPHQW�EDQNLQJ��DVVHW�PDQDJHPHQW��VHFXULWLHV�GLVWULEXWLRQ��LQVXUDQFH�VHUYLFHV��OHDVLQJ��DQG�IRUHLJQ�H[FKDQJH��7KHVH�VHUYLFHV�DUH�RŖHUHG�WR�D�ZLGH�range of customers, from multinational corporations, JRYHUQPHQW�DJHQFLHV��ODUJH�FRUSRUDWLRQV��VPDOO��DQG�PHGLXP�VL]HG�HQWHUSULVHV��60(V��DQG�LQGLYLGXDOV�

(VWDEOLVKHG�RQ�$XJXVW��XQGHU�6SDQLVK�FRORQLDO�UXOH��%3,�ZDV�RULJLQDOO\�NQRZQ�DV�(O�%DQFR�(VSD¨RO�)LOLSLQR�GH�,VDEHO�,,��QDPHG�DIWHU�WKHQ�4XHHQ�RI�6SDLQ��,VDEHO�,,��7KH�%DQN�ZDV�WKH�ŗUVW�WR�EH�established in the Philippines, and was responsible IRU�VWDUWLQJ�WKH�FRXQWU\ńV�EDQNLQJ�DQG�ŗQDQFH�industry. Playing a unique role in the early economic history of the Philippines, the Bank performed many IXQFWLRQV�WKDW�LQ�HŖHFW�PDGH�LW�WKH�FRXQWU\ńV�FHQWUDO�EDQN��LQFOXGLQJ�SURYLGLQJ�FUHGLW�WR�WKH�7UHDVXU\�DQG�printing and issuing currency in its own name.

)ROORZLQJ�WKH�6SDQLVK�$PHULFDQ�:DU�RI��WKH�%DQN�ZDV�UHRUJDQL]HG�DQG�HVVHQWLDOO\�SULYDWL]HG�XQGHU�WKH�8�6��IHGHUDO�JRYHUQPHQWńV�1DWLRQDO�%DQN�$FWV�RI��DQG��7KH�UHRUJDQL]DWLRQ��KRZHYHU��SUHVHUYHG�WKH�%DQNńV�DXWKRULW\�WR�LVVXH�WKH�

ABOUT BPI

A /(*$&< OF STRENGTHPhilippine currency. The Bank adopted its current QDPH�RQ�-DQXDU\��

)RU�PDQ\�\HDUV�DIWHU�LWV�IRXQGLQJ��%3,�ZDV�WKH�only domestic commercial bank in the Philippines. Its business was largely focused on taking deposits, extending credit to exporters and traders of raw materials and commodities, and funding public infrastructure. Its business grew as the country rose in prominence as an agricultural exporter.

,Q�WKH�HDUO\��V��WKH�0RQHWDU\�%RDUG�RI�WKH�&HQWUDO�%DQN�RI�WKH�3KLOLSSLQHV��QRZ�WKH�%DQJNR�6HQWUDO�QJ�3LOLSLQDV��DOORZHG�%3,�WR�HYROYH�LQWR�D�IXOO\�GLYHUVLŗHG�XQLYHUVDO�EDQN��WR�RŖHU�LQYHVWPHQW�DQG�FRQVXPHU�EDQNLQJ�VHUYLFHV�LQ�DGGLWLRQ�WR�WUDGLWLRQDO�FRPPHUFLDO�EDQNLQJ�DFWLYLWLHV��7KLV�WUDQVIRUPDWLRQ�LQWR�D�XQLYHUVDO�EDQN�ZDV�DFFRPSOLVKHG�WKURXJK�ERWK�organic growth and mergers and acquisitions.

Today, BPI is not only known as the oldest bank LQ�WKH�3KLOLSSLQHVłDQG�LQGHHG��LQ�6RXWKHDVW�$VLDłbut it is also an acknowledged leader in Philippine EDQNLQJ��ZLWK�WRWDO�DVVHWV�RI�3KS��WULOOLRQ��PDUNHW�FDSLWDOL]DWLRQ�RI�3KS��ELOOLRQ��DQG�D��IXOO�\HDU�QHW�LQFRPH�RI�3KS��ELOOLRQ�

,Q�-DQXDU\��WKH�%DQN�VXFFHVVIXOO\�UDLVHG�3KS��ELOOLRQ�LQ�D�VWRFN�ULJKWV�RŖHULQJ��LQ�ZKDW�LV�WR�GDWH�WKH�ODUJHVW�FDSLWDO�PDUNHWV�WUDQVDFWLRQ�LQ LWV��\HDU�KLVWRU\��

'(/,9(5<�&+$11(/6

BUSINESS CENTERS

ATMs

REMITTANCE CENTERS

PHILIPPINES

INTERNATIONAL

GREATER MANILA AREA

HONG KONG

PROVINCIAL

EUROPE

812 813 819 820 825

2009 2010 2011 2012 2013

2009 2010 2011 2012 2013

451 453* 452* 451* 452*

2009 2010 2011 2012 2013

358 357 363* 364* 368*

2009 2010 2011 2012 2013

13 13 15 18 14

2009 2010 2011 2012 2013

21 23 20 17 13

2009 2010 2011 2012 2013

1,566 1,656 1,868 2,068 2,507

2009 2010 2011 2012 2013

1 1 1 1 1

2009 2010 2011 2012 2013

2 2 3 4 4

TOTAL BRANCH NETWORK

* Includes BPI-Globe BanKO branches

OWNERSHIPPublic

Ayala Corporation

Ayala DBS Holdings Inc.

AC International Finance Limited

Roman Catholic Archbishop of Manila

Others

TOTAL

33.9%

21.8%

21.3%

8.7%

8.5%

5.9%

100%

BANKING

PARTNERSHIPS AND TIE-UPS IN THE US, EUROPE, ASIA AND THE MIDDLE EAST

OUTLETS OF GLOBE BANKO


BPI’s STAKEHOLDERS

The Bank of the Philippine Islands, a recognized leader and pioneer in the Philippine banking industry, seriously takes its responsibility in developing and sustaining relationships with its stakeholders, internal and external.

Our stakeholders may be grouped into two: those ZKR�DUH�GLUHFWO\�DŖHFWHG�E\�RXU�EXVLQHVV�RSHUDWLRQV�DQG�RXWFRPHV��DQG�WKRVH�ZKR�JXLGH�DQG�LQŘXHQFH�XV�LQ�FDUU\LQJ�RXW�RXU�EXVLQHVV��7KH�ŗUVW�JURXS�consists of investors, clients, employees, suppliers and the community at large, while the latter includes government and regulatory agencies, non-government and civil society groups and industry organizations.

Our engagement with stakeholders takes on various forms and is carried out through a range of information, communication and consultative activities and disclosures. We conduct dialogues about our role in society, products and services, business performance and other issues, at the business unit and Group levels.

This active engagement has allowed the Bank and its stakeholders to:ŋ�,GHQWLI\�RXU�PRVW�VLJQLŗFDQW�VWDNHKROGHU�JURXSV�DQG�WKHLU�VSHFLŗF�LQWHUHVWV��DQG�GHWHUPLQH�WKH�PRVW�VLJQLŗFDQW�LVVXHV�IURP�WKH�HFRQRPLF��HQYLURQPHQWDO�and social sustainability perspective.

ŋ�%HFRPH�PRUH�UHVSRQVLYH�LQ�DGGUHVVLQJ�YDULRXV�FRQFHUQV��IURP�FXVWRPHU�VHUYLFH�WR�ŗQDQFLDO�VROXWLRQV��systems, promotion-related complaints, shareholder return, operational strategies, business outlook, regulatory compliance, employee conduct, and HPSOR\HH�VDODULHV��EHQHŗWV�DQG�ŗQDQFLDO�DVVLVWDQFH�

ŋ�,QWHJUDWH�WKH�RXWFRPHV�RI�RXU�VWDNHKROGHU�engagement with well-established risk management processes, allowing us to address potential risks and align the management of sustainable issues with our business processes and strategies.

ŋ�,QQRYDWH�DQG�LPSURYH�RXU�SURGXFWV��VHUYLFHV��V\VWHPV��operational processes and practices.

FROM en Ga Gemen T TO ac TIOn

HOW We en Ga Ge

Investors

Customers

Employees

Suppliers

Industry Groups

Government and Regulatory Agencies

Non-Government and Civil Society Groups

BPI Express OnlineStockholders’ MeetingsInvestors’ ConferencesOne-on-One MeetingsDisclosures (SEC and PSE)

Relationship managers%UDQFK�6HUYLFH�2řFHUVBPI c ustomer c are DepartmentBPI express OnlineBPI express mobileBPI c ontact c enterBPI Facebook and Twitter a ccountsBPI Bankers OnlineBrochures and PostersSurveysa dvertisementsevents

e-mail BulletinsmyBPIOnline portalmeetingsSurveysTraining SessionsQuality c irclesLabor management c ouncilsPerformance a ppraisalPlanning SessionsVolunteerism a ctivities

a ccreditationVendor SelectionSuppliers a udit

membershipDialogues and ForaSponsorshipsevents

meetings and c onferencesPartnershipsSponsorshipsDialogues and Fora

membershipsVolunteerism a ctivitiesDialogues and Foraeventsc SR a ctivities

Industry Organizations

Non-Government and Civil Society Groups

Bankers a ssociation of the PhilippinesBank marketing a ssociation of the PhilippinesBankers Institute of the Philippinesc hamber of Thrift BanksFund managers a ssociation of the Philippinesmakati Business c lubPhilippine a ssociation of n ational a dvertisersPhilippine Society for QualityPublic Relations Society of the Philippines7UXVW�2řFHUV�$VVRFLDWLRQ�RI�WKH�3KLOLSSLQHV

a ssociation of Foundationsc orporate n etwork for Disaster ResponseInternational Finance c orporationHabitat for Humanity PhilippinesLeague of c orporate FoundationsPhilippine Business for educationPhilippine Business for the environment3KLOLSSLQH�&RXQFLO�IRU�1*2�&HUWLŗFDWLRQUnited States a gency for International Development World Wildlife Fund-Philippines

memBeRSHIPS an D Pa RTne RSHIPS


8,516

579

12.96

15.57 15.36

17.8618.05 1.87

1.631.53

1.29

720 724

878844

985

1,195

34,395

11,31212,899

16,352

18,811

09 10 11 12 13

09 10 11 12 13

09 10 11 12 13

09 10 11 12 13

09 10 11 12 13

09 10 11 12 13

09 10 11 12 13

09 10 11 12 13

09 10 11 12 13

FINANCIAL HIGHLIGHTS

Consistent & sustainableNET INCOME (IN MILLION PHP)

TOTAL DEPOSITS (IN BILLION PHP)

RETURN ON EQUITY (IN %)

REVENUES (IN MILLION PHP)

TOTAL ASSETS (IN BILLION PHP)

RETURN ON ASSETS (IN %)

TOTAL LOANS (IN BILLION PHP)

TOTAL CAPITAL(IN BILLION PHP)

NET INTEREST MARGIN(IN %)

15%HIGHER

23%HIGHER

21%HIGHER 8%

HIGHER

11%HIGHER

21%HIGHER38,407

41,758

47,385

52,498

327379

454

527

635

681

802

989

6882 88 98 106

1.91

3.723.55 3.67 3.57

3.31


ECONOMIC CONTRIBUTIONS

CREATING VALUE

the bank is committed to contributing to the development of the individuals, organizations and institutions it deals with, thereby creating economic value throughout our supply chain.

PHP 33,081 MILLIONTOTAL ECONOMIC CONTRIBUTIONS IN 2013

PHP 52,498 MILLIONTOTAL REVENUE IN 2013

* Divi DenDs paiD to stoCkhol Ders amounte D to php 3.2 billion

Salaries and benefits paid to employees

Taxes paid to the Government

Amount paid to suppliers and contractors

Dividends declared

Charitable contributions

32% 28% 21% 19% 0% =100%

=Php 33,081 M

Php 10,481 M

Php 9,088 M

Php 7,020 M

Php 6,402 M

Php 90 M


Global Finance

Housing and Urban Development Coordinating Council and Home Guaranty Corporation

International Association of Business Communicators

International Council of Shopping Centers Asia Pacific Awards

Internet and Mobile Marketing Association of the Philippines

National Statistics O!ce-NCR

PANATA

PDS Group

Philippine Dealing and Exchange Corporation

Philippine Chamber of Commerce and Industry

Philippine Franchise Association

Radar Global

Readers’ Digest Trusted Brand 2013

Social Media, Banking & Payments Asia Trailblazer Awards

The Asian Banker Achievement Award

The Asset

The Asset Triple A

The Financial Brand

Trade Finance Awards for Excellence

United Nations Framework Convention on Climate Change

Best Emerging Markets Banks in Asia (Philippines)

Most Active Bank Lender for Housing, for BPI Family Savings Bank

Gold Quill Award of Excellence, for Talk to Us CampaignGold Quill Award of Merit, for Talk to Us on Facebook

Best Marketing Position-Finalist

Boomerang Awards 2013, Program E!ectivity Winner for BPI Get Out More Awareness Campaign

Most Cooperative Business Establishment in the NCR

Certificate of Merit: BPI Puso MoCertificate of Merit: BPI Talk to Us4th PANATA Bronze Award: BPI Talk to Us

Top Corporate Issue Manager and Arranger (for BPI Capital Corporation)

Most Active Trading Participants in the secondary marketTop Fixed Income Dealing ParticipantTop 5 Spot FX DealersTop 5 PDDTS/PvP Participants

Special Citation; Excellence in Ecology and Economy

Chairman’s Award, for BPI Family Savings Bank Ka-Negosyo Franchising Loan

Best in the Philippine Franchising Sector, 12th Franchise Excellence Awards

Gold Medal for Over-All Bank Reputation

Trusted Brand, for BPI Asset Management

Channel Excellence Awardee for Facebook.com/bpi

Best Trade Finance Bank in the Philippines

Most Astute Investors in the PhilippinesBest Local Currency Bond Individuals in Sales, Trading and Research

Best Domestic Bank for the Philippines Best Asset Management Company, for BPI Asset Management and

Trust GroupBest Cash Management BankBest Trade Finance Service Provider in the Philippines

25th, Overall Power 100 Social Media Rankings for Banks

Best Trade Finance Bank in the Philippines

Recognition given to BPI-IFC for its Sustainable Energy Finance Program

CITATIONS

ONLY PHILIPPINE BANK rated

investment-grade BY TWO MAJOR

RATINGS AGENCIES in 2013, international ratings agencies thrust BPi back

into the radar of international investors by giving

it investment grade—in October, moody’s investors

service raised BPi’s baseline credit assessment to

baa3 from ba1, while Fitch ratings in march raised

the Bank’s long-term foreign currency issuer default

rating to BBB- from BB+ .

the baseline credit assessment is an evaluation

RI�WKH�%DQNńV�VWDQG�DORQH�ŗQDQFLDO�VWUHQJWK��excluding extraordinary government support.

moody’s also upgraded the deposit rating of BPi

to Baa3/Prime-3 from Ba1/not Prime, with a positive

outlook.

ņ2YHUDOO��0RRG\ńV�YLHZV�WKH�FUHGLW�SURŗOH�RI�%3,��to be among the most defensive and best positioned

to withstand a cyclical downturn among moody’s

rated banks in the Philippines,” moody’s said in its

October 3, 2013 statement announcing the upgrade.

On the other hand, the BBB- ratings given by

Fitch to the Bank’s long-term foreign currency

and long-term local currency issuer default rating

indicate the Bank’s good credit quality, with low

expectation of default risk.

“Of the major Philippine banks rated by Fitch,

BPi’s ratings have been the highest, due to its

HVWDEOLVKHG�GRPHVWLF�SUHVHQFH��VRXQG�ŗQDQFLDO�metrics and prudent management,” Fitch said in an

april 1, 2013 statement.

to date, BPi enjoys the distinction of being the

only Philippine bank rated investment-grade by two

international ratings agencies.

Award of Merit, Public Relations Program on a Sustained Basis, Digital Campaign Category, for BPI on Facebook

E Bank, for BPI Family Savings BankBest Cash Management Bank

Finalist, Best Community Program Category, for BPI Bayan nationwide employee volunteerism program

Domestic Retail Bank of the Year in the PhilippinesWebsite of the Year-Philippines, for BPI Express OnlineEmployer Award of the Year-GoldPhilippine Domestic Trade Finance Bank of the Year

Best Cash Management Bank in the Philippines for Large and Small Corporations

Franchise Cornerstone Award

1st BAIPHIL Green Bank Challenge, Best in Paperless Branch Model (for the Green Branch Model)

Pagtugon Award, for Consumer Banking Group’s Customer Care Division

Best Performing Government Securities Eligible Dealers, Top Local Bank and Third Overall

Asia’s Most Outstanding Company on Corporate Governance (Philippines)

Grand Winner, Kapatiran sa Industriya (Kapatid) Awards 2013

Best Trade Finance Bank of the Year

48th Anvil Awards

Alpha Southeast Asia

Annual Global CSR Awards

Asian Banking and Finance Awards

Asia Money

Association of Filipino Franchisers Inc.

Bankers Institute of the Philippines (BAIPHIL)

Bangko Sentral ng Pilipinas

Bureau of the Treasury

Corporate Governance Asia

Employers Confederation of the Philippines

Euromoney

RECOGNITIONSAWARDING BODY AWARD

10 2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT BANK OF THE PHILIPPINE ISLANDS BANK OF THE PHILIPPINE ISLANDS 2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT 11

MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT

JAIME AUGUSTOZOBEL DE AYALACHAIRMAN

BPI CONCLUDED 2013 on a strong note. The

Bank ended the year with approximately

Php 1.2 trillion in assets, Php 635 billion in loans

and Php 989 billion in deposits. Each of these

ŗQDQFLDO�PHWULFV�LQFUHDVHG�PRUH�WKDQ��

over that of the prior year. Net income was

3KS��ELOOLRQ��D��LQFUHDVH�RYHU�WKH�SULRU year, representing an all-time high for the Bank.

%3,ńV�UHWXUQ�RQ�HTXLW\�RI��VWRRG�KLJKHVW�DPRQJ�LWV�SHHUV��7KH�%DQNńV�UREXVW�ŗQDQFLDO�SHUIRUPDQFH�is supportive of the premium that the stock market

FRQWLQXHV�WR�JLYH�WR�%3,��ZKLFK�HQGHG��

as our country’s largest bank in terms of

market capitalization.

%3,ńV�VWURQJ�ŗQDQFLDO�UHVXOWV�PDVN�ZKDW�ZDV�D�FKDOOHQJLQJ�\HDU�LQ�WKH�ŗQDQFLDO�PDUNHWV��LQ�ERWK�the Philippines and internationally. The U.S. Federal

Reserve and other western central banks addressed

the threat of a deep and prolonged global recession,

EURXJKW�DERXW�E\�WKH�JOREDO�ŗQDQFLDO�FULVLV�RI��E\�LQMHFWLQJ�WUHPHQGRXV�DPRXQWV�RI�PRQH\�LQWR�WKH�JOREDO�ŗQDQFLDO�V\VWHP��7KH�LQŘX[�RI�VXFK�money supply lowered interest rates, which in turn

LQŘDWHG�SULFHV�RI�DVVHWV�RI�DOO�NLQGV��2YHU�VHYHUDO�years of declining interest rates, banks the world

over increased their holdings in securities, which

URVH�LQ�YDOXH�DQG�LQŘDWHG�WKHLU�SURSRUWLRQ�RI�WUDGLQJ�JDLQV�WR�WRWDO�SURŗWV�

,Q�HDUO\��KRZHYHU��ZH�VDZ�WKLV�WUHQG�UHYHUVH��The West, and the U.S. in particular, began to see

early indications of renewed economic growth.

The U.S. Federal Reserve reacted by hinting at

ņWDSHULQJŇ�LQ�WKH�VHFRQG�TXDUWHU�RI�� Tapering—

the reduction in the amount of bonds that the

)HG�ZRXOG�SXUFKDVH�LQ�WKH�PDUNHWłHŖHFWLYHO\�slows down the increases in the supply of liquidity

LQ�WKH�ŗQDQFLDO�V\VWHP��7KH�HŖHFWV�RI�WKH�)HGńV�pronouncement were felt almost immediately.

Interest rates in many currencies, taking their cue

from the U.S. dollar, began to rise. With improved

economic growth expectations in the West,

investors began to “rotate” away from Emerging

Markets in favor of Developed Markets. For banks

WKH�ZRUOG�RYHU��WKH�VHFRQG�TXDUWHU�RI��ZLWK�interest rates beginning to rise, marked the end of

WKH�SHULRG�RI�LQFUHDVLQJ�SURŗWV�IURP�ŗ[HG�LQFRPH�securities positions. In fact, banks began to realize

losses on their securities positions.

We reacted quickly to the prospect of a change

in the interest rate regime. The Bank reduced the

size and tenors of its traded securities portfolio,

ZKLFK�KDG�WKH�HŖHFW�RI�SUHVHUYLQJ�JDLQV�UHJLVWHUHG�LQ�WKH�ŗUVW�TXDUWHU�RI��:LWK�LQWHUHVW�UDWHV�expected to move up further, the Bank managed

LWV�ERRN�VR�WKDW�D�ODUJH�PDMRULW\�RI�LWV�ORDQV�FRXOG�be repriced within one year, which would allow us

WR�WDNH�DGYDQWDJH�RI�KLJKHU�LQWHUHVW�UDWHV��2Q�WKH�deposit side, we placed increased emphasis on

growing low-cost deposits, thus helping provide

D�ŘRRU�RQ�WKH�%DQNńV�QHW�LQWHUHVW�PDUJLQV��*URZWK�in the Bank’s assets would have to be derived

primarily from our loan book, from the assumption

RI�FUHGLW�ULVN�DV�RSSRVHG�WR�LQWHUHVW�UDWH�ULVN��*DLQV�in revenues and net income would have to be

generated by higher loan balances, increases in

non-interest income other than directional trading

income and, eventually, higher net interest margins.

Fortunately, the Philippine economy is growing

at a pace that supports a strategy that is dependent

to a large extent on measured growth in the

intermediation of funds. The Bank’s economists have

HVWLPDWHG�DQQXDO�*'3�JURZWK�DW��DQG�LQŘDWLRQ�DW��RYHU�WKH�PHGLXP�WHUP��7KH�VXEVHTXHQW�ULVH�in real incomes would allow for greater borrowing

capacity in an economy which, by Asian standards,

is underleveraged. This implies that banks in the

3KLOLSSLQHV�ZLOO�KDYH�VLJQLŗFDQW�URRP�WR�JURZ��As long as macroeconomic conditions remain

favorable, BPI will position itself for growth.

Against this backdrop, in the fourth quarter

RI��ZH�HPEDUNHG�XSRQ�D�3KS��ELOOLRQ�stock rights issue that, when it was completed in

)HEUXDU\��LQFUHDVHG�WKH�FDSLWDO�RI�WKH�%DQN�by almost a quarter. The increase in capital will

allow the Bank to grow at a pace commensurate

with the expected growth in the Philippine

economy. The rights issue, the largest capital raise

FRPSOHWHG�E\�%3,�LQ�LWV�HQWLUH�KLVWRU\��ZDV��RYHUVXEVFULEHG��DQG�LV�WHVWLPRQ\�WR�WKH�FRQŗGHQFH�and support of the Bank’s shareholders.


MAKE THEBEST HAPPEN

CEZAR P. CONSINGPRESIDENT

2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT 15

MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT


The bank adopted the slogan “Let’s make it HDV\Ň�LQ�0D\��7KLV�VORJDQ�VSRNH�RI�WKH�QHHG��LQ�D�FRXQWU\�ZKHUH��RI�WKH�SRSXODWLRQ�LV�unbanked, to make banking more accessible. In the four years since we have adopted the slogan, ZH�KDYH�PDGH�HYHU\�HŖRUW�WR�EH�WUXH�WR�LW��6LQFH�WKHQ��ZH�KDYH�JURZQ�RXU�FOLHQW�EDVH�E\��RU��PLOOLRQ��DQG�ZH�QRZ�VHUYH��PLOOLRQ�FOLHQWV��A small but growing number of clients bank ZLWK�%3,�*OREH�%DQ.2��WKH�PLFUR�OHQGLQJ�MRLQW�YHQWXUH�EHWZHHQ�%3,��*OREH�7HOHFRP�DQG�$\DOD�Corporation.

Expanding the ways by which clients can bank with us has been a key driver of growth in our client base. Since it introduced automated teller machines to the Philippines in 1983, BPI has been at the forefront of banking via electronic channels—online banking, mobile banking, phone banking. 7RGD\��D�VLJQLŗFDQW�SURSRUWLRQ�RI�RXU�FOLHQWV�DUH�enrolled in at least one of our electronic channels, and those enrolled are active users of these channels. When one adds transactions executed via our online, mobile and phone banking applications to transactions executed via our automated teller DQG�FDVK�DFFHSWDQFH�PDFKLQHV��DOPRVW��RI�WKH�%DQNńV��PLOOLRQ�WUDQVDFWLRQV�DUH�QRZ�H[HFXWHG�electronically. In contrast, transactions executed “traditionally” via a branch teller now account for RQO\��RI�WKH�EDQNńV�WUDQVDFWLRQV��*URZWK�LQ�electronic channel usage has allowed our front-line personnel to devote more time to identifying and PHHWLQJ�RXU�FOLHQWVń�ŗQDQFLDO�QHHGV��+LJKHU�DQG�more robust transaction volumes should follow.

As the Bank’s client base grows, an ever greater percentage of transactions will be executed via electronic channels. Recognizing this trend, last year we outsourced a large component of our IT operations to a world-class vendor. Furthermore, we continue to invest in our primary IT platforms to achieve scale, availability, and reliability—at low cost. We continue not only to invest heavily in software applications, particularly the client-facing RQHV�WKDW�WUXO\�GLŖHUHQWLDWH�WKH�H[SHULHQFH�RI�%3,ńV�FOLHQWV��EXW�DOVR�UHWDLQ�VLJQLŗFDQW�FRQWURO�RI these development initiatives in-house, while diversifying our relationships with vendors who are best-in-class.

For many of our clients, banking is no longer DERXW�PHUH�DFFHVV�WR�ŗQDQFLDO�VHUYLFHVłLW�LV�DERXW�XVLQJ�WKDW�DFFHVV�WR�PDNH�WKH�NLQGV�RI�ŗQDQFLDO�decisions that improve and enrich lives. Surveys FRQŗUP�ZKDW�ZH�LQWXLWLYHO\�NQRZłWKDW�RXU�FOLHQWV�want the best for themselves and their families. ,W�LV�%3,ńV�REMHFWLYH�WR�KHOS�)LOLSLQRV�DFKLHYH�WKHLU�ŗQDQFLDO�REMHFWLYHV�E\�KHOSLQJ�WKHP�PDNH�PRUH�LQWHOOLJHQW�DQG�LQIRUPHG�ŗQDQFLDO�GHFLVLRQV��,Q�D�nutshell, we want to help them change the way

they think about money, so that they can get the EHVW�RXW�RI�OLIH��+HQFH��LQ�0DUFK��ZH�DGRSWHG�a new slogan:

“Make the Best Happen”As a good corporate citizen, we want to make the best happen for all our constituencies. BPI Foundation, which focuses on entrepreneurship, education and the environment, is a very important part of what we stand for. The Foundation works to encourage HQWUHSUHQHXUVKLS�DPRQJVW�IDPLOLHV�RI�2YHUVHDV�Filipino Workers. Every year, working with the 'HSDUWPHQW�RI�6FLHQFH�DQG�7HFKQRORJ\�DQG��OHDGLQJ�3KLOLSSLQH�XQLYHUVLWLHV��WKH�)RXQGDWLRQ�LGHQWLŗHV�DQG�rewards outstanding student scientists in the hope WKDW�WKHVH�VWXGHQWV�ZLOO�FRQWLQXH�WR�SXUVXH�VFLHQWLŗF�work that helps improve lives. Last year, working with +DELWDW�IRU�+XPDQLW\�3KLOLSSLQHV��WKH�)RXQGDWLRQ�SURYLGHG��SXEOLF�VFKRRO�WHDFKHUV�ZLWK�KRPHV�LQ�Bistekville, Quezon City and Panabo, Davao.

In the area of environment, BPI Foundation has continued to undertake, together with WWF Philippines, a study that assesses the risks to business IDFHG�E\�WKH�3KLOLSSLQHVń�PDMRU�FLWLHV�DV�D�UHVXOW�of climate change. An earlier phase of the study LGHQWLŗHG�7DFOREDQ�DV�SDUWLFXODUO\�YXOQHUDEOH��6DGO\��the destruction in Tacloban wrought by Typhoon Yolanda proved the study prescient. Finally, the Foundation, working with the bank’s human resources JURXS��OHG�D�IXQGUDLVLQJ�HŖRUW�IRU�WKH�YLFWLPV�RI�Typhoon Yolanda that saw every peso raised by BPI employees matched, peso for peso, by the Bank. 7KH�IXQGUDLVLQJ�UDLVHG�RYHU�3KS��PLOOLRQ�IRU typhoon relief.

Since its founding in 1851, our institution has been inextricably linked to the growth of the Philippine economy. The prospects we see in our country today create tremendous opportunities for BPI. It is our intention to take advantage of good macroeconomic fundamentals by carefully and systematically overlaying scale over what are some of the best ŗQDQFLDO�PHWULFV�LQ�WKH�3KLOLSSLQH�EDQNLQJ�LQGXVWU\��,I�we execute properly, we will be the bank that clients WXUQ�WR�IRU�WKHLU�PRVW�LPSRUWDQW�ŗQDQFLDO�WUDQVDFWLRQV��an employer of choice for those that want to pursue a career in banking, and a preferred bank holding IRU�LQYHVWRUV�WKDW�DSSUHFLDWH�VXSHULRU�ULVN�DGMXVWHG�returns over the economic cycle. To give life to our VORJDQ�ņ0DNH�WKH�%HVW�+DSSHQŇ�LV�RXU�FRPPLWPHQW�to all our stakeholders, our promise to our nation, and the standard to which we hold ourselves.

-$,0(�$8*8672�=2%(/�'(�$<$/$Chairman

&(=$5�3��&216,1*President

OCTAVIO V. ESPIRITU

FERNANDO ZOBEL DE AYALA

ROMEO L. BERNARDOIndependent DirectorServing as a member of the Board of Directors of BPI from February 1998 to April 2001, Bernardo was re-elected as Independent Director in August 2002. He is Chairman of the Nomination Committee and member of the Corporate Governance, Personnel and Compensation, Risk Management and Trust Committees. He is also an Independent Director of BPI Family Savings Bank Inc., BPI Capital Corp., BPI Direct Savings Bank Inc., BPI-Philam Assurance Corp., BPI/MS Insurance Corp. and BPI Globe BanKO Inc. He graduated magna cum laude from the University of the Philippines in 1974 with a BS degree in Business Economics. He received his Master’s degree in Development Economics in 1977 from Williams College, Williamstown, Massachusetts, where he graduated at the top of his class.

JAIME AUGUSTO ZOBEL DE AYALA

CEZAR P. CONSING

BOARD OF DIRECTORS

REBECCA G. FERNANDO

TASKED WITH THE OVERALL GOVERNANCE AND SUPERVISION OF THE BANK, THE BOARD OF DIRECTORS STEERS THE AFFAIRS OF BPI UNDER ITS COLLECTIVE RESPONSIBILITY.

SOLOMON M. HERMOSURA

JAIME AUGUSTO ZOBEL DE AYALAChairmanElected Chairman of the Board on March 25, 2004, Jaime Augusto Zobel de Ayala has served as a member of the Board of the Bank since 1994, and as Vice Chairman from 1995 to March 2004. He is also the Chairman of the Executive Committee and Nomination Committee of the Bank. He also serves as Chairman of the Board of Directors of BPI Family Savings Bank Inc. and BPI Capital Corp., and Vice Chairman of the Board of Directors of BPI-Philam Life Assurance Corp. He is also a member of the Asia Business Council. Graduating cum laude from Harvard University in 1981 with a BA in Economics, he received his Master’s degree in Business Administration from the Harvard Graduate School of Business Administration in 1987.

CEZAR P. CONSINGDirector/President and CEOCezar P. Consing became President and Chief Executive O!cer of BPI on April 18, 2013. He is Chairman of the Credit Committee and a member of the Executive Committee, Trust Committee, Retirement/Pension Committee and Risk Management Committee. He served on BPI Corporate Banking and Corporate

Planning from 1980 to 1985, as a member of the Bank’s Advisory Board from May 2000 to May 2001, and as Independent Director from February 1995 to January 2000 and from August 2004 to January 2007. Consing is also the Chairman of the Board of Directors of BPI Direct Savings Bank and BPI Computer Systems Corp., and Vice Chairman of BPI Capital Corp. He was a former head of banking at J.P. Morgan Philippines, ASEAN and Asia-Pacific. He graduated with an MA in Applied Economics from the University of Michigan in 1980 and completed an AB (Accelerated Program) Economics degree from the De La Salle University in 1979.

FERNANDO ZOBEL DE AYALADirectorA member of the Board of Directors of the Bank since 1994, Fernando Zobel de Ayala also serves as Chairman of the Personnel and Compensation Committee and Vice Chairman of the Executive Committee and Trust Committee. He is also the Chairman of the Board of Trustees of the BPI Foundation Inc., Chairman of the Board of Ayala Land Inc. and a member of the Board of Directors of Habitat for Humanity International. He graduated with a BA Liberal Arts degree from Harvard University in 1982.

OCTAVIO V. ESPIRITUIndependent DirectorHaving served as Director of the Bank since April 2000, Espiritu became Independent Director of the Bank in April 2013. He serves as Chairman of the Risk Management Committee, and member of the Executive Committee and Audit Committee. He graduated from the Ateneo de Manila University in 1963 with an AB degree in Economics, and obtained his Master’s degree in Economics from Georgetown University in 1966.

REBECCA G. FERNANDODirectorRe-elected Director of the Bank in March 2009 and Director of BPI Capital Corp. in April 2009, Fernando previously served as Director of the Bank and BPI Capital Corp. from 1995 to 2007. She is currently a member of the Executive Committee, Trust Committee and Retirement/Pension Committee. She is also a member of the Board of Directors of BPI Capital Corp. and BPI Family Savings Bank Inc. She graduated with a BSBA degree in Accounting from the University of the Philippines in 1970. She took up the Executive Program on Transnational Business at the University of Hawaii, Manca Pacific Asian Management Institute in 1981. Fernando is a Certified Public Accountant.

SOLOMON M. HERMOSURADirectorElected member of the Board in April 2013, Hermosura is a member of the Corporate Governance Committee and Nomination Committee. Currently, he holds several positions for Ayala Corp.—Managing Director, General Counsel, Compliance O!cer and Corporate Secretary. He is also the Corporate Secretary of various companies in the Ayala Group—Ayala Land Inc., Manila Water Company Inc. and Ayala Foundation Inc. He also serves as a member of the Board of Directors of a number of companies in the Ayala Group. He earned his Bachelor of Laws from San Beda College in 1986 and placed 3rd in the 1986 Bar Examination.

XAVIER P. LOINAZIndependent DirectorLoinaz served as President of BPI for over 30 years, from 1982 to 2004. He has been a member of the Board of Directors of the Bank since 1982, and was elected Independent Director in March 2009. He is the Chairman of the Audit Committee and also serves as member of the Executive Committee and the Nomination Committee of the Bank. He is also an Independent Director of BPI Family Savings Bank Inc., BPI Capital Corp., BPI Direct Savings Bank Inc., BPI/MS Insurance Corp., Ayala Corp. and Globe Telecom Inc. He is a member of the Board of Trustees of BPI Foundation Inc. and E. Zobel Foundation. He received an AB Economics degree from the Ateneo de Manila University in 1963, and earned his Master’s degree in Business Administration in Finance at the Wharton School of the University of Pennsylvania in 1966.

XAVIER P. LOINAZ

ROMEO L. BERNARDO


AURELIO R. MONTINOLA IIIDirectorServing as President from 2005 to April 2013, Montinola has been a member of the Board of Directors of the Bank since January 2004. He is a member of the Executive Committee, Audit Committee, Trust Committee, Risk Management Committee and Retirement/Pension Committee of the Bank. He also serves as Director of BPI Family Savings Bank Inc. and BPI Capital Corp., Chairman of the Board of Directors of BPI Globe BanKO Inc., BPI/MS Insurance Corp., BPI-Philam Life Assurance Corp., Chairman and Executive Director of Bank of the Philippine Islands (Europe) Plc, and Vice Chairman and President of BPI Foundation Inc. He graduated from the Ateneo de Manila University in 1973 with a BS in Management Engineering and received his Master’s degree in Business Administration from Harvard Business School in 1977.

MERCEDITA S. NOLLEDODirectorServing as a Director since 1991, Mercedita S. Nolledo is the Chairman of the Trust Committee and Retirement/Pension Committee, member of the Corporate Governance Committee and alternate member of the Executive Committee. She is also a Director of BPI Family Savings Bank Inc., BPI Capital Corp., and Chairman of the Board of Directors of BPI Investment Management Inc. Nolledo graduated with a BS in Business Administration (Major in Accounting) from the University of the Philippines in 1960 and ranked second in the CPA Board exams that same year. In 1965, she finished her Bachelor of Laws, also from UP, and ranked second in the Bar exams that year.

BOARD OF DIRECTORS

BOARD OF DIRECTORS

CHNG SOK HUI KHOO TENG CHEONG

AURELIO R. MONTINOLA III

ANTONIO JOSE U. PERIQUET

MERCEDITA S. NOLLEDO

ARTEMIO V. PANGANIBAN

ASTRID S. TUMINEZ

OSCAR S. REYES

CHIEF JUSTICE ARTEMIO V. PANGANIBANIndependent DirectorFormer Supreme Court of the Philippines Chief Justice, Artemio V. Panganiban was first elected as Independent Director of the Bank in 2010. He is the Chairman of the Corporate Governance Committee of the Bank. He received his Bachelor of Laws degree from the Far Eastern University in 1960, and earned his Doctor of Laws (Honoris Causa) at various universities: University of Iloilo (1997), Far Eastern University (2002), University of Cebu (2006), Angeles University (2006) and Bulacan University (2006).

ANTONIO JOSE U. PERIQUETIndependent DirectorElected as Independent Director in April 2012, Periquet is a member of the Risk Management Committee and Trust Committee of the Bank. He also serves as Independent Director of BPI Capital Corp. and BPI Family Savings Bank Inc. He received an AB Economics degree at the Ateneo de Manila University in 1982, and took up his MBA at the University of Virginia in 1990. He also received a Master’s degree in Economics at Oxford University in 1988.

CHNG SOK HUIDirector (Resigned e!ective November 28, 2013)Having been a member of the Board of Directors since April 2003, Chng was a member of the Executive Committee, Corporate Governance, Nomination, and Personnel and Compensation Committees of the Bank. She also serves as Managing Director and Chief Financial O"cer of DBS Bank Ltd. (Singapore). A CFA charterholder and a Certified Financial Risk Manager, Chng finished Accountancy at the National University of Singapore.

KHOO TENG CHEONGDirector (Resigned e!ective November 28, 2013)Khoo was elected as a member of the Board in June 2010, and was a member of the Audit Committee and Risk Management Committee. He is the Head and Senior Vice President of DBS Bank Ltd. Group Planning since November 2008, and was promoted as Head and Managing Director in March 2011. He holds a degree in BSc (Hons) Banking and Finance at Loughborough University in 1989. He also holds a Master of Letters degree in Bible and Contemporary World with distinction in dissertation at the University of St. Andrews, Fife, UK in 2010.

OSCAR S. REYESDirectorElected member of the Board of Directors in April 2003, Reyes is a member of the Audit Committee, Corporate Governance Committee, and Personnel and Compensation Committee. He received his BA degree in Economics, cum laude, from the Ateneo de Manila University in 1965. He also received a Diploma in Business Administration and Certificate in Export Promotion from the Waterloo University, Ontario, Canada in 1970. In 1971, he received his Master’s degree in Business Administration from the Ateneo Graduate School of Business.

DR. ASTRID S. TUMINEZIndependent DirectorJoining BPI as Independent Director in December 2013, Astrid S. Tuminez is Regional Director for Legal and Corporate A!airs of Microsoft, Southeast Asia. She is also an Adjunct Professor, the former Vice Dean (Research) and Assistant Dean (Executive Education) of the Lee Kuan Yew School of Public Policy of the National University of Singapore. In 2003-2007, at the U.S. Institute of Peace, she assisted in advancing peace negotiations between the Philippine government and the Moro Islamic Liberation Front. She holds a BA with a double major in Russian Literature and International Relations from Brigham Young University, a Master’s in Soviet Studies from Harvard University, and a PhD in Political Science from the Massachusetts Institute of Technology.


SENIOR MANAGEMENT


OFFICE OF THE CHAIRMANChairmanJaime Augusto Zobel de Ayala

Corporate SecretaryCarlos B. Aquino

Vice Presidents Rosemarie B. CruzMarita Socorro D. GayaresAngela Pilar B. MaramagGerardo I. Rarela

OFFICE OF THE PRESIDENT

PresidentCezar P. Consing

Vice PresidentConrado E. Laza

RISK MANAGEMENT

Senior Vice PresidentEdgardo O. Madrilejo

Vice Presidents Frances S. AmadoHomer L. AnicetoDaniel S. BablesSusan L. ErguizaBeatrice Marie R. GuzmanFlorentino T. Gonzalez IIINicanor A. MendiolaSylvia P. Sumagpang

CORPORATE BANKING

Executive Vice PresidentAlfonso L. Salcedo Jr.

Senior Vice Presidents Joseph Anthony M. AlonsoOlga S. AngReymundo S. CastroMario B. PalouMaria Corazon S. RemoAngela C. SantianoJudy K. TecsonRoland Gerard R. Veloso Jr.

Vice PresidentsRebecca U. AnselmoNieves J. BasaMa. Nanette A. BiasonMa. Luisa L. CruzDennis S. DavidIvy Maria E. De GuzmanJo Ann B. EalaMa. Cristina U. JavierMaria Antonia O. LeongMaria Teresa Anna K. LimIrmingardo O. LudoviceFrancisca Ann M. LustreNoelito C. Marcos Barbara S. MunozElfrida S. NarbonetaMa. Concepcion Q. NarcisoArnold E. OlivaRafael J. PertierraVictoria Marie G. RicardoJose Martin S. SangcoAndre Angelo S. SantosElisa M. SilvaBarbara Ann C. Untalan

GLOBAL MARKETS

Executive Vice PresidentAntonio V. Paner

Senior Vice Presidents Michael D. CallejaRaul D. DimayugaMarie Christine O. LopezRoy Emil S. Yu

Vice PresidentsHenry C. ArceoJaena A. CebreroMelinda V. DulayRinaldo H. FernandezSusana M. ManaloDonarber N. PinedaJennifer Gayle P. SingianArthur Noel S. Tan

ASSET MANAGEMENT & TRUST

Senior Vice PresidentsMaria Theresa M. JavierEstelito C. BiacoraPaul Joseph M. GarciaEugenio P. MercadoMario T. Miranda

Vice PresidentsRemarie Suzette A. AysonRuth B. BanderaMiguel P. Cervantes Jr.Smith L. ChuaTomas S. ChuidianYvette Mari V. de PeraltaOdette S. DiazIrene A. DiomampoRoberto Martin S. EnrileRuben Enrique A. EspirituMario Gerardo Z. EvaristoMaria Paz A. GarciaJenny C. GuevaraCarlos A. JalandoniMarijoy Y. KawpengAileen Beryl A. LimketeeMa. Lourdes B. MontelibanoMaria Socorro D. RamirezRuby Rosario J. SeverinoChristmas G. SevillaEliza May T. Taco Cecilia P. Tanchoco

RETAIL SEGMENTS AND CHANNELS

Executive Vice PresidentNatividad N. Alejo

Senior Vice Presidents Angelie O. KingMarie Josephine M. OcampoManuel C. TagazaSylvia P. YngenteHeidi P. Ver

Vice PresidentsNestor S. Aldeguer Roberto O. BautistaMiguel L. BernabeIrene R. BuenoMaria Rosario F. CrisostomoArlene S. DayritBrenno C. DytocJesusa Camila V. GangosoCarlo Carmelo S. GatuslaoRosa Maria L. GayosNoemi G. GoCarmencita Lilia B. GozarLuis D. Ibarra Jr.Jose Raul E. Jereza IVDanilo L. KimsengMaria Consuelo A. Lukban

Gerardo E. MagpantayArmando T. Navarette Jr.Rodolfo K. MabiasenMa. Carmina T. MarquezJerome B. MinglanaAngelito N. PamintuanJoseph Philip Anthony S. ParungaoMa. Cristina L. San DiegoMary Catherine Elizabeth P. SantamariaEnrico A. SantosMa. Dina F. SorianoAna Liza C. Sta. AnaRommel D. TadiqueWilfredo T. Tan Di

CARD BANKING

Senior Vice PresidentsMa. Cristina L. GoAniceta P. del Mundo

Vice PresidentsJose M. de VeraCecile Catherine A. dela PazRichmond Ezer O. EscolarMaria Angelica G. FlorentinoJesus Angelo O. GomezAileen S. LamasutaGenaro N. Lualhati IV

ENTERPRISE CORPORATE SERVICES

Senior Vice PresidentsJoseph Albert L. GotuacoFidelina A. CorcueraMa. Corazon G. GuzmanFlorendo G. MarananPilar Bernadette C. Marquez

Vice PresidentsJocelyn C. AlviarMaria Concepcion A. BednarRosario J. BenedictoMa. Judith L. CastilloNapoleon I. Cruz Jr.Josephine F. FernandezRoberto E. GalvezSantiago L. Garcia Jr.Edgardo R. JimenezMarian T. KatigbakAilen C. Kho

Roseller B. LimMelvin M. Miranda

BPI FAMILY SAVINGS BANK

PresidentJose Teodoro K. Limcaoco

Senior Vice PresidentsJoaquin Ma. B. AbolaMa. Mercedes D. RocesJocelyn C. Sta. Ana

Vice PresidentsRamon Noel S. AltamiranoLuisito R. BallelosMa. Lourdes D. BarramedaFelipe P. CarlosAmy Belen R. DioRodolfo B. FernandezCharito O. HiterozaMiriam Jane M. JacintoLourdes O. MallareSusan E. PimentelErick M. RamosMa. Christina Z. SisonJose Roman H. SantosHerbert Vincent D. Tuason

BPI/MS INSURANCE

PresidentKenichi Tanabe

Senior Business Director Perfecto M. Domingo

Business DirectorMa. Perpetua A. Cutiongco

BPI DIRECT SAVINGS

Vice President Victoria Louella G. Mangalindan

BPI CAPITAL

Senior Vice Presidents Daniel Gabriel M. MontecilloCecilia L. Tan

Vice PresidentsBonifacio M. BanzonReginaldo Anthony B. Cariaso

Luis Geminiano E. CruzEric Roberto M. LuchangcoJose Eduardo A. Quimpo IISheila Marie U. TanLuis C. Urcia George S. Uy-Tioco Jr.

BPI SECURITIES

Managing Director & CEOMichaelangelo D. Oyson DirectorsRichard Anthony Y. LiboroMarianna M. OngpinDiosdado C. Salang Jr.

BPI LEASING

Vice Presidents Samuel C. TangChristine Grace A. BandolGracia C. de Jesus

BPI FOREX CORPORATION

Vice PresidentManuel C. Sanchez

BPI EUROPE PLC

Managing DirectorAlexander B. Tan III

BPI INTERNATIONAL FINANCE LTD. (HONG KONG)

Managing DirectorJose Esteban J. Salvan

AYALA PLANS, INC.

Director Elizabeth J. Tan

NOTE: Senior Management list isas of December 31, 2013.

OPERATIONAL HIGHLIGHTS

CONSISTENT GROWTH,

BPI ended 2013 with the highest market capital-ization in the industry at Php 302.5 billion, and Php 1.2 trillion in assets, making it the third-rank-ing bank in this category. The Bank’s share price ended at Php 85.00 and traded at a premium of 2.9x its book value per share of P29.37.

Our capital adequacy ratio (CAR) was at 13.7%, lower than 2012’s 14.2%, but still above the regulatory minimum requirement of 10%. The Bank posted a net income of P18.8 billion for the full year 2013, representing a 15.0% increase over P16.4-billion 2012 net income, and translating to an ROE (return on equity) of 18.1% and an ROA (return on assets) of 1.9%. Our net loan portfolio increased by 20.6% to Php 635 billion as both the corporate and con-sumer market segments delivered double-digit

growth of 23% and 13%, respectively. Loan-to-deposit ratio ended at 65%. Asset quality further improved, with the Bank’s 90-day gross NPL ratio closing at 1.80%, as compared to 2.09% as of year-end 2012. The Bank’s reserve-to-NPL ratio by end-2013 was at 105%. Impairment losses stood at Php 2.6 billion, compared with Php 2.9 billion in 2012. Driven by growth in savings and demand deposits, the Bank’s deposit base grew to Php 989 billion, Php 186 billion higher compared to ��ńV�3KS��ELOOLRQ��2XU�ŘRDW�WR�ERXJKW�UDWLR�continued to improve at 69:31, compared to 2012’s 61:39. Assets under management stood at Php 580 billion, the second largest in the indus-try. The Bank’s customer base increased 12%, with customer count at 6.7 million by end-2013.

EXPANDING REACH

2010 2009

Earnings per share (Php)

Cash dividends declared (Php million)

Cash dividends per share (Php)

Book value per share (Php)

*REsTATED

NOTE: NO sTOCk DIv IDENDs w ERE PAID f ROm 2009 TO 2013.

BPI’s consumer banking business encompasses the Bank’s deposit products, retail customer segments and branch distribution network for a variety of other services such as retail loans, credit cards, investments and bancassurance.ŋ�,Q�OLQH�ZLWK�WKH�LQFOXVLYH�ŗQDQFH�DJHQGD�RI�WKH�

BsP, we increased field sales and improved the capabilities of field sales personnel. The %DQN�QRZ�RŖHUV�GHSRVLW�WDNLQJ�ZLWK�WKH�XVH�RI�SRLQW�RI�VDOH�GHYLFHV��DOORZLQJ�ŗHOG�SHUVRQQHO�to open and accept deposits outside branch premises, thus giving a broader sector of VRFLHW\�DFFHVV�WR�ŗQDQFLDO�VHUYLFHV��,Q�DGGLWLRQ��our investment products are now more accessible to a greater number of people, as the Bank’s minimum investment amount has been lowered to Php 10,000.

ŋ�$Q�LPSRUWDQW�VWUDWHJ\�ZH�DGRSWHG�WRZDUGV�client acquisition was our “My Branch, My Store” program, tasking each and every retail/branch manager to treat his branch as his own business, challenging him to understand his customers’ needs better. This strategy allowed each branch to undertake its own initiatives to address client requirements, resulting in increased volume, reduced costs and higher bottom line.

ŋ�7KURXJK�mass media-based brand-building initiatives, under a marketing campaign we called “Talk to Us,” we brought to light everyday ŗQDQFLDO�QHHGV�DQG�DLPHG�WR�GULYH�FXVWRPHUV�WR�have more meaningful conversations with Bank personnel. This campaign framed the branches not only as transactional places, but as venues IRU�ŗQDQFLDO�DGYLFH�

ŋ�7KH�%DQN�PDGH�KXJH�LQYHVWPHQWV�LQ� developing more relationship managers and

more specialized training to build a stronger team of financial experts through an RM Academy. Through this academy, bank’s UHODWLRQVKLS�PDQDJHUV��50V��XQGHUJR�ŗQDQFLDO�advisory training to impress upon them the Bank’s high professional standards and the role they play in helping customers reach their ŗQDQFLDO�JRDOV��ZLWK�GXH�FRQVLGHUDWLRQ�IRU�the latter’s risk appetite. They are trained in life-stage and portfolio analysis and the use of customer information, among other tools, to support them in their functions.

ŋ�:H�H[WHQGHG�RXU�%($��%3,�([SUHVV�Assist) facility to the w eb, expanding the BEA transaction capabilities outside the branch through BEA Online, a Banking by Appointment online facility. Through BEA Online, clients can pre-process their transactions, pick a time slot and preferred branch, and set appointments from anywhere they could access the w eb. w hen such clients show up for their appointment at the branch, they are immediately serviced by Bank personnel. BEA itself has reduced waiting time at the teller’s counter by an average of 30%, and now accounts for up to 95% of BPI’s over-the-counter branch banking transactions.

ŋ�%UDQFK�IURQW�OLQHUV��ZKR�KDYH�D�GHHS�understanding of their local markets, were empowered to tailor and deliver marketing programs for their customers. Through a program called LAmP, or Local Area Marketing Program, branches created and ran localized programs, not only giving rise to more empowered and highly engaged Rms but making BPI more relevant in the local community.

7KH�%DQNńV�ŗQDQFLDO�SHUIRUPDQFH�LQ��LV�EXLOW�RQ�WKH�VWUHQJWK�RI�LWV�ZLGH�UDQJH�RI�UHWDLO��FRPPHUFLDO�DQG�FRUSRUDWH�EDQNLQJ�SURGXFWV�DQG�VHUYLFHV�WDLORUHG�WR�WKH�QHHGV�RI�LWV�FXVWRPHUV��RŖHUHG�WKURXJK�WKH�%DQNńV�various business segments and channels.

Consumer Banking: Democratizing access

5.194.60*

3.63*3.38

2.62

2013 2012 2011 2010 2009

6,401

8,180

6,401 6,122 5,844

1.8

2.3

1.8 1.8 1.8

29.3727.19*

24.45*22.78

20.57

Stockholder’s Data

MONTH

December 2013

December 2012

CUSTOMER COUNT

6.7M

5.9M

YEAR-ON-YEAR INCREAsE (%) 12%


OPERATIONAL HIGHLIGHTSAT THE CORE: CUSTOMER RELATIONSHIP MANAGEMENT At BPI, we use our capability for analytics—gathering and analyzing data—to undertake more insightful initiatives guided by customer insights and behavior. Our Customer Relationship Management (CRM) team has developed customer needs-based and analytics-driven campaigns across the retail segments, with over 100 campaigns implemented in 2013.

The team also spearheaded the development of a strategic CRM roadmap across people, process and technology, transforming the Bank and catapulting it to a strong position to excellently respond to customers’ needs through a unique, integrated and sustainable customer experience.

CUSTOMER SATISFACTIONIn 2013, we continued to conduct customer satisfaction surveys to identify, among others, the drivers for customer satisfaction and areas for improvement. These surveys also meant to determine if clients would recommend BPI and its products and services to family and friends. 7KHVH�DUH�VRPH�RI�WKH�NH\�ŗQGLQJV�

In the “mystery client survey,” where service standards were measured based on customer feedback on certain parameters, like service time, grooming and corporate image projection, service readiness and product/service inquiry, the Bank scored 89.82, keeping the previous year’s score.

The Bank’s “net promoter score,” or the likelihood of clients recommending BPI to family and friends, reached 54.28%, quire high by net promoter score standards.

,Q�OLQH�ZLWK�WKH�%DQNńV�DGYRFDF\�RI�ŗQDQFLDO�ZHOOQHVV��LQWHUQDWLRQDOO\�DFFODLPHG�ŗQDQFLDO�JXUX�DQG�PXOWL�DZDUGHG�79�host suze Orman came back to the Philippines in may 2013 to meet audiences in manila and Cebu.

Orman, backed by years of personal experience and professional expertise, spoke at length about how f ilipinos FRXOG�KDQGOH�WKHLU�SHUVRQDO�ŗQDQFHV�PRUH�HřFLHQWO\�DQG�PRUH�VXFFHVVIXOO\��$V�LQ�KHU�ŗUVW�WULS�WR�WKH�3KLOLSSLQHV�XSRQ�WKH�%DQNńV�LQYLWDWLRQ�LQ��2UPDQ�GLVSHQVHG�QXJJHWV�RI�ŗQDQFLDO�ZLVGRP�during her last sojourn, among them:

If you want the Philippines to progress, start investing in yourselves—stay with the peso.Get more pleasure out of saving than spending.Live below your means, but within your needs.

w ho you are is always more important than what you have.You will never be powerful in life unless you have power over your money.

‘WHO YOU ARE IS ALWAYS MORE IMPORTANT THAN WHAT YOU HAVE’

In 2013, the Bank’s total deposits increased by 23% at Php 989 billion, from previous year’s Php 802 billion. Total deposits include savings and current accounts.

BPI f amily savings Bank, BPI’s consumer lending DUP��IRUWLŗHG�LWV�PDUNHW�OHDGHUVKLS�SRVLWLRQ�LQ�the thrift bank industry in 2013, with total loans amounting to Php 146.9 billion, for a double-digit growth of 16%.

Home loans. BPI f amily savings Bank’s home loan portfolio grew by 19%, while home loan releases H[SDQGHG�E\��,Q�WKH�ŗUVW�KDOI�RI�WKH�\HDU��strategic partnerships with real estate organizations were forged, which made possible, among other things, linking to each other’s website to help complete the process of home acquisition. Potential homebuyers can, through a partner real estate ŗUPńV�ZHEVLWH��XVH�D�KRPH�PRUWJDJH�FDOFXODWRU�powered by the Bank.Auto loans. Last year, the BPI f amily Auto Loan’s Online Auto f inancing system embedded in the websites of partner car manufacturers and dealers served to more conveniently assist potential car EX\HUV�FKRRVH�WKH�EHVW�DQG�VXLWDEOH�FDU�ŗQDQFLQJ�SDFNDJH��7KH�V\VWHP�QRZ�RŖHUV�D�FRPSOHWH�FDU�EX\LQJ�SURFHVV��ZLWK�LWV�)LUVW�&DU�3ODQ�RŖHULQJ�

special deals and discounted rates on starter models from partner-car makers.Loans for business format franchising. In line with BPI f amily’s Ka-Negosyo f ranchise f inancing Program, the Bank introduced the ka-Negosyo f ranchise f inder, an interactive directory of franchise businesses that visitors could search for updated company information and franchise packages; the directory also contains an e-mail facility allowing prospective franchisees to communicate directly with the franchisor. w e have also sustained our ka-Negosyo Best List of expert-evaluated accredited franchise brands, providing the public a short list of franchise businesses with a proven track record and business model. Partnerships in the ka-Negosyo program have resulted in an 8% increase in our small and medium enterprise (smE) loan volume.A Customer Help Desk was established to address all customer concerns and complaints received IURP�WKH�%63��WKH�2řFH�RI�WKH�3UHVLGHQW�DQG�RWKHU�VRXUFHV��WR�HQVXUH�WLPHO\�DQG�HŖHFWLYH�UHVROXWLRQ of such complaints.

Consumer Lending: Continued market leadership

7KH�%DQN�RŖHUV�FDUG�EDVHG�SURGXFWV�DQG�VROXWLRQV�that allow cardholders to enjoy cashless shopping with their credit, debit and prepaid cards. In 2013, Card Banking delivered a strong year—a combination of growth in payment transactions and healthy lending.ŋ�1RQ�FROODWHUDOL]HG�ORDQV�JHQHUDWHG�IURP�WKH�credit

cards and personal loans businesses grew by a robust 8% and 41%, respectively. The credit cards business maintained its market position as the third most-used card issuer in the Philippines, posting a Php 8.7-billion or 11% growth in billings. The personal loans business showed impressive gains, with close to 29,000 accounts booked with a current loan amount of Php 1.8 billion.

ŋ�Debit card transactions processed through the Express Payment System (EPS) facility increased by a healthy 16%, translating to 22% growth in billings. The Prepaid Cards business, by catering to the unserved market especially in

e-commerce, grew its cardholder base by 36%. In fact, the prepaid portfolio showed a major shift in transactions from ATm cash withdrawals to spending at merchants and online, with 24% of the transactions now done online.

ŋ�,Q�0DUFK��BPI Family Savings Bank launched its first credit card, in response to the strong consumer demand for a low-rate, no-frills alternative to cash. Continuing BPI f amily’s WUDGLWLRQ�RI�RŖHULQJ�DFFHVVLEOH�SURGXFWV��WKH�FDUG�FRPHV�ZLWK�D��ŗQDQFH�FKDUJH��WKH�ORZHVW�LQ�WKH�country.

ŋ�$�YDULDQW�RI�WKH�%3,�SHUVRQDO�ORDQ��Personal Loan Seafarers was developed to cater to the unique circumstances of f ilipino seafarers, a major segment of overseas f ilipino workers (Ofw s). Loan terms are aligned with their employment contracts, and the loan repayment schedule closely IROORZV�WKHLU�FDVK�ŘRZ��7KLV�YDULDQW�QRZ�DFFRXQWV�for almost 18% of all BPI personal loans.

The Bank aggressively grew its personal loans receivables by 46% while improving the delinquency SURŗOH�RI�WKH�SRUWIROLR��7KH�PDUNHG�LPSURYHPHQW�LQ�the product delivery system with the introduction of a one-day processing lane reduced overall processing time by 40%, enhancing the overall customer experience.

BPI boosted its third-party payment centers to 173 locations nationwide when it partnered with a giant shopping center chain.

The increasing Internet penetration rate in the Philippines has resulted in BPI’s continued expansion in the e-commerce space, with the Bank’s e-commerce business experiencing 72% growth year-on-year.

Card Banking: Payments growth and healthy lending

In s eptember 2013, the BPI BebaPay Card, a prepaid card and an early entrant in the micropayments arena, was launched at the De La s alle University (Taft), the Bank’s ŗUVW�XQLYHUVLW\�SDUWQHU�IRU�WKLV�SURGXFW��The initiative converted more than 50% of the DLs U student population from being cash transactors to BebaPay cardholders and accredited more than half of the total concessionaires and merchants within the university. “Beba,” which means “to transport” in swahili, was piloted by Google in kenya.



Electronic Banking: More cost-effective

self-service transactions carried out by clients through its 24/7 DQG�PRUH�FRVW�HŖHFWLYH�VHUYLFH�FKDQQHOV�QRZ�DFFRXQW�IRU��RI the Bank’s total transactions.

ŋ�,Q��RXU�$70�QHWZRUN�JUHZ�E\��IRU�D�WRWDO�RI�2,181 ATMs and 326 cash deposit machines. Through this expanded network, both withdrawal transactions and deposit volumes posted marked increases. Deposit transactions via the cash deposit machines increased by 90%. Additional ATm security features, such as PIN shields, fraudulent device inhibitors and anti-skimming software, were installed.

ŋ�BPI Express Online’s enrolled client base grew by 30% in 2013, resulting in a client base of 1,550,850��7KH�WRWDO�ŗQDQFLDO�WUDQVDFWLRQ�count passing through this site was 18,060,756, a 15.3% growth over ODVW�\HDUńV�FRXQW��7RWDO�ŗQDQFLDO�WUDQVDFWLRQV�JUHZ�E\��WR�3KS��billion.

ŋ�$Q�eDonations facility was introduced to make it easy for our customers to provide assistance to victims of typhoons and other FDODPLWLHV�YLD�GLŖHUHQW�IRXQGDWLRQV�DQG�FKDULWDEOH�RUJDQL]DWLRQV�

ŋ�7KH�%DQN�QRZ�KDV��online banking kiosks located inside BPI branches, giving customers access to BPI Express Online on bank premises. In 2013, these kiosks generated 96,122 new enrollments, UHSUHVHQWLQJ�DQ�LQFUHDVH�RI��\HDU�RQ�\HDU��7KH�QXPEHU�RI�ŗQDQFLDO�transactions processed through the kiosks was 353,597, a growth of 35% from previous year.

ŋ�BPI ExpressLink, the Internet banking platform for corporate accounts, recorded a total financial transaction count of 28,565,559, a 20% increase year-on-year, for a total transaction amount of Php 1.75 trillion. These transactions were carried out by 18,176 enrolled customers, an annual increase of 24%. ExpressLink mobile, an app intended for corporate customers, now has a client base of 3,927, a 192% growth from last year’s number.

ŋ�BPI Express Mobile grew its unique user base by 56% in 2013 to 674,830 users, making it the country’s leader in mobile banking. Total ŗQDQFLDO�FRXQW�LQFUHDVHG�E\��WR�RYHU��PLOOLRQ��YDOXHG�DW�3KS�22.3 billion, an astounding 393% growth year-on-year.

ŋ�BPI Express Phone, the Bank’s phone-banking platform, recorded over 6 million transactions��IRU�D�WRWDO�ŗQDQFLDO�WUDQVDFWLRQ�YDOXH�RI�3KS�10.9 billion.

1.71 MILLION BPI CLIENTS BANKING ONLINE OR VIA THEIR

MOBILE DEVICES

5.6 million Inquiries via BPI Express Phone’s

Self-Service Facility

216 millionATM transactions in 2013

263,000Branch appointments

scheduled via BPI Express Online

5.4 MILLIONTOTAL TRANSACTIONS

VIA CASH DEPOSIT MACHINES

344,000Clients paying their bills

electronically

BANk ING EvOLv ED

26,849Number of point-of-sale

terminals, with total acquired consolidated billings of

Php 9 billion

Corporate Banking: Strong loan portfolio

The Bank’s Corporate Banking business provides UHYROYLQJ�FUHGLW��WHUP�FUHGLW��DQG�WUDGH�ŗQDQFH�products and services to Philippine-based corporations as well as a broad spectrum of PXOWLQDWLRQDOV��,W�DOVR�RŖHUV�GHSRVLW�WDNLQJ��FDVK�management and other transaction services to these corporate clients.

ŋ�Driven by lending to top corporates. w ith a year-on-year increase of 23%, Corporate Banking had more than doubled its loan portfolio in just four years. This impressive loan record may be attributed to the top corporate sector, with exposure to multinationals, including non-residents, growing by 58%, and to local conglomerates by 41%.

ŋ�Term loans. Loan demand was particularly strong in the manufacturing, real estate, XWLOLWLHV��FRQVWUXFWLRQ�DQG�ŗQDQFLDO�intermediation industries, mostly in the form of term loans, thereby providing stability to loan levels.

ŋ�NPL ratio was kept at 1% which is lower than the Bank and industry’s previous NPL ratios.

ŋ�Agribusiness financing. w e strengthened funding for agribusiness, facilitating among other things, the setting up of farm facilities, expanding or rehabilitating existing facilities, and raising additional working capital. special ŗQDQFLQJ�VROXWLRQV�ZHUH�VHW�XS�IRU�SRXOWU\�and pig farming. w e also forged a strategic partnership with the PIC (Pig Improvement Company) International Group.

ŋ�Partnership with USAID. w e sealed cooperation agreement with the U.s. Agency for International Aid for a 10-year, Php 2.46-billion credit facility to encourage lending to smEs. This facility will help provide smEs increased access to capital in the provinces of Batangas, Iloilo and misamis Oriental (Cagayan de Oro City).

ŋ�PEZA desk. To respond to the peculiar needs of locators in so-called ecozones, we strengthened our relationship with both the Philippine Economic Zone Authority and the companies located and conducting business from within the ecozones through a dedicated corporate banking desk.

Global Markets: Challenging environment

The Global markets business of the Bank PDQDJHV�LWV�OLTXLGLW\�SRVLWLRQ��WUDGHV�ŗ[HG�LQFRPH�VHFXULWLHV�DQG�SURYLGHV�JOREDO�ŗQDQFLDO�services to its clients. ŋ�'HVSLWH�WKH�YRODWLOH�JOREDO�ŗQDQFLDO�

environment, the local currency treasury desk registered an increase of over 40% in securities trading income. The Bank was also granted Type 2 Dealership Authority from the BsP to engage in Non-Deliverable swap (NDs) and Type 3 Limited End-User Authority to utilize f oreign Exchange Options, Bond Options and Credit Default swap (CDs) for hedging purposes.

ŋ�5HPLWWDQFHV�UHPDLQHG�VWURQJ�LQ��SRVWLQJ�a 6.9% year-on-year increase in remittance volume. Total remittance transaction count grew by 10%, to 6.3m. The Bank’s market share in the remittance industry is at a solid 28%.

ŋ�7KH�%63�DOORZHG�WKH�%DQN�WR�RSHQ�D�5HSUHVHQWDWLYH�2řFH�LQ�-DSDQ�WR�HQFRXUDJH�PRUH�-DSDQ�EDVHG�)LOLSLQRV�WR�VHQG�WKHLU�remittances through banks and its partners, instead of informal channels.

ŋ�$Q�RQOLQH�UHPLWWDQFH�VHUYLFH�SODWIRUP�FDOOHG�w eb service Automation was developed and launched in september 2013 through a partnership with w ells f argo Us.

ŋ�7KH�VHFXULWLHV�EXVLQHVV�RI�%3,�,QWHUQDWLRQDO�f inance Ltd. (BPI If L) posted consistent growth, as more clients shifted from traditional deposits to higher-yielding investments. Income from service fees rose by more than 13% and trading gains increased by more than 120%. BPI If L’s loan portfolio increased by 47%.

ŋ�%3,�(XURSH�VWDUWHG�DFFHSWLQJ�GHSRVLW�DFFRXQWV�and introduced remittance facilities in its milan, Italy branch in 2013. Clients can now fund their remittance to the Philippines through the post RřFH�RU�WKURXJK�WKH�GRPHVWLF�WUDQVIHU�V\VWHP in Italy. Online remittance service facilities were also introduced.

26 2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT BANK OF THE PHILIPPINE ISLANDS 2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT 27

The Bank’s Asset management and Trust business remains to be a strong business contributor in 2013 generating Php 3.8 billion in gross revenues from continuing operations, up by 28% from the previous year.

ŋ�%3,�FRQWLQXHG�WR�EH�D�PDMRU�SOD\HU�LQ�WKH�3KLOLSSLQH�asset management industry, with assets under management (AU m) amounting to Php 576 billion, a 16% annual growth over the past 10 years, outpacing the annual industry growth rate of 14.6%.

ŋ�'HVSLWH�WKH�FRPSOHWH�ZLQG�GRZQ�RI�WKH�6SHFLDO�Deposit Account facility for individual and investment management accounts, revenues grew by 28% as we expanded our investment funds business to comprise 68% of total revenue, and 45% of total AUm.

ŋ�,WV�FRUH�IXQG�PDQDJHPHQW�EXVLQHVV�FRPSRVHG�

of the BPI Investment f unds and the segregated portfolio accounts cushioned the impact of the slowdown in non-core traditional trust business, growing 66% and 11% in volume, respectively.

ŋ�7KH�$80�RI�RXU�SHVR�ŗ[HG�LQFRPH�IXQGV�JUHZ�by Php 95.1 billion or 109%, while our peso equity funds increased by Php 9.4 billion or 26%.

ŋ�7KH�RYHUDOO�FXVWRPHU�EDVH�RI�WKLV�EXVLQHVV�LQFUHDVHG�by over 6%, with online investors growing by a record 132% in 2013, driven primarily by the Personal Banking and the Overseas f ilipino segments, expanding the Bank’s reach in the mass market.

ŋ�$SDUW�IURP�%3,�([SUHVVRQOLQH��RXU�LQYHVWPHQWV�funds are now in the BPI mobile app.

ŋ�1HZ�LQYHVWPHQW�SURGXFWV�ZHUH�ODXQFKHG��WKH�%3,�Philippine Equity Index f und and the BPI Philippine High Dividend Equity f und, to provide more higher-yielding investment options in a low interest rate environment.

Investment Banking: Benchmark transactions

BPI’s investment banking subsidiary, BPI Capital Corporation, has remained at the forefront of the most notable transactions of 2013. It has also maintained its leadership status by advising and underwriting a number of benchmark transactions, among them:

ŋ�7KH�'HYHORSPHQW�%DQN�RI�WKH�3KLOLSSLQHV�3KS��ELOOLRQ�7LHU��ERQGV��WKH�FRXQWU\ńV�ŗUVW�%DVHO�,,,�FRPSOLDQW�LVVXH�

ŋ�7KH�3KS��ELOOLRQ�DFTXLVLWLRQ�E\�0D[ńV�*URXS�RI�&RPSDQLHV�RI�3DQFDNH�House, Inc., a landmark transaction in the Philippine food service industry;

ŋ�7KH�86��PLOOLRQ�DFTXLVLWLRQ�ŗQDQFLQJ�IRU�'HO�0RQWH�3DFLŗF�/LPLWHGńV��'03/��86��ELOOLRQ�DFTXLVLWLRQ�RI�WKH�FRQVXPHU�IRRG�EXVLQHVV�RI�'HO�monte Corporation in the Us , a transformational transaction for DmPL; and

ŋ�7KH�$XWRPDWLF�)DUH�&ROOHFWLRQ�6\VWHP�3XEOLF�3ULYDWH�3DUWQHUVKLS��333��SURMHFW��ZRQ�E\�WKH�$)�&RQVRUWLXP�RI�$\DOD�&RUSRUDWLRQ�DQG�0HWUR�3DFLŗF�Investment Corporation. This was an important milestone in the Philippine government’s PPP iniitative to increase infrastructure investment in the Philippines.

BPI Capital also introduced some of the most well-known Philippine FRUSRUDWHV�WR�WKH�GRPHVWLF�FDSLWDO�PDUNHWV�IRU�WKH�YHU\�ŗUVW�WLPH��VXFK�DV�0DQLOD�(OHFWULF�&RPSDQ\ńV�GHEXW�GRPHVWLF�UHWDLO�ERQG�RŖHULQJ��YDOXHG�DW�3KS��ELOOLRQ�

It has also been active in the U.s . dollar and international markets. Named 6ROH�,VVXH�0DQDJHU�DQG�-RLQW�/HDG�8QGHUZULWHU�RI�WKH�86��PLOOLRQ�FRUSRUDWH�QRWH�LVVXDQFH�RI�$(6�3KLOLSSLQHV�DQG�DV�/HDG�0DQDJHU�LQ�WKH�86��million syndicated loan for Indonesian Export and Import Bank, BPI Capital is IXOŗOOLQJ�OHDG�UROHV�LQ�QRQ�SHVR�DQG�RŖVKRUH�WUDQVDFWLRQV��

BPI Capital’s participation in capital-raising transactions reached an all-time high in 2013, being actively involved in over a dozen successful capital market transactions including equity, syndicated loans, as well as corporate bond and note issuances, with a combined issue value of over P459 billion.

Its subsidiary BPI s ecurities was equally active in 2013, increasing its engagement with its customer base with the establishment of, among other programs, the Premier/Elite Investors Club, the Youth Investor Club, and I-TRAC, which stands for Invest-In-You Trading Academy. s tarted in April 2013, I-TRAC is a series of lectures on fundamental analysis, website navigation and technical analysis, aimed at demystifying stock trading and exposing starting investors to the possibilities and returns that come with investing in the Philippine stock market.

This line of investor education programs has successfully combined practical and straightforward advice with updated and in-depth research, equipping FOLHQWV�ZLWK�WKH�QHFHVVDU\�VNLOOV�WR�PD[LPL]H�WKHLU�SRUWIROLR�SURŗWDELOLW\�

BPI securities also strengthened its online presence via f acebook and Twitter, and increased branding for BPITrade.com, its fully integrated online VWRFN�WUDGLQJ�SODWIRUP��%3,7UDGH�FRP�DOVR�RŖHUV�UHDO�WLPH�VWRFN�PDUNHW�TXRWHV��HřFLHQW�SRUWIROLR�PDQDJHPHQW�DQG�FRPSUHKHQVLYH�UHVHDUFK�

Insurance: Securing lives and property

BPI-Philam Life Assurance Corporation (BPI-Philam) has secured its position as leading bancassurance company in the life insurance industry. A joint venture of Bank of the Philippine Islands and Philippine American Life and General Insurance Company, BPI-Philam has proven that the combined V\QHUJ\�RI�WKH�WZR�ODUJHVW�ŗQDQFLDO�LQVWLWXWLRQV�LQ�WKH Philippines is a formula for success. To reach revenue goals and sustainable growth objectives,BPI-Philam strengthened its human resourceFRPSOHPHQW��LQWHQVLŗHG�VDOHV�DQG�EDQN�WUDLQLQJ�SURJUDPV�improved customer service and launched iPos , an iPadapplication that allows paperless and straight-throughprocessing of new sales. f avorable market sentiment in 2013 led to a stronger take-up of the company’s variable universal life (vUL) products.

BPI/ms Insurance Corporation, the country’s bestŗQDQFLDOO\�PDQDJHG�QRQ�OLIH�LQVXUDQFH�FRPSDQ\��JUHZ�LWVgross premiums written by 10.2% in 2013 year-on-year, toreach Php 5.1 billion (unaudited). Its net income after taxwas Php 610.5 million (unaudited), resulting in an ROEof 26%.

To help mitigate the dire conditions brought about bysuper-typhoon Yolanda in November 2013, BPI/ms createda special task force to handle Yolanda-related claims in aprompt and judicious manner.

Asset Management and Trust: Higher yields

REsPONs IBLE mARkETING

BPI practices the highest standards in marketing its products and services. In 2013, ŋ�7KHUH�ZHUH�QR�UHSRUWHG�LQFLGHQWV�RI�QRQ�

compliance with regulations concerning product and service information, and those referring to marketing communications.

ŋ�0DUNHWLQJ�FRPPXQLFDWLRQV�DFURVV�%3,�are reviewed periodically at the business unit level; the frequency of these reviews vary according to requirement. These UHYLHZV�DUH�HPERGLHG�DQG�VSHFLŗHG�LQ�various standards and codes, including the Bank’s own Branding Guidelines, the BsP Compliance matrix, Risk and Control self-Assessment and those of the PDIC.

ŋ�%3,�GRHV�QRW�VHOO�SURGXFWV�WKDW�DUH�prohibited in certain markets or the subject of stakeholder questions or public debate.

ŋ�7KH�%DQN�GLG�QRW�UHFHLYH�DQ\�substantiated complaint concerning breaches of customer privacy.

ŋ�7KHUH�ZHUH�QR�OHJDO�DFWLRQV�DJDLQVW�BPI concerning anti-competitive behavior and violations of anti-trust and monopoly legislation.



PEOPLE

Individual talent and collective strength form the lifeblood of the Bank’s human resource. BPI in 2013 enjoyed another landmark year with the introduction of many product and service innovations, thanks in no small part to the skills, commitment and drive of BPI’s 13,000-strong organization, fueled by the Bank’s many employee en-gagement and talent management programs.

The Bank has, in fact, exceeded the Global Financial Institutions benchmark for Employee Engage-ment of the Asian Banking and Finance Awards, garnering an overall score of 82% and showing strength in three main engagement drivers: career development and opportunities, goal clarity, and lead-ership. Coming from this milestone, the Bank introduced more initia-tives to boost competency develop-PHQW�DPRQJ�LWV�RřFHUV�DQG�VWDŖ��ZRUNHG�WR�DFFHOHUDWH�SURPRWLRQV��DQG�LGHQWLŗHG�WKH�ULJKW�PHWULFV�WR�better align human resource measures with corporate strategy.

Moreover, it introduced a number of employee engagement HŖRUWV�WR�VXVWDLQ�RU�IXUWKHU�ERRVW�employee commitment.

EMPLOYER OF CHOICE

Gender spread among employeesFEMALES: 70% (9,150)MALES: 30% (3,874)

Geographic spread among employeesLUZON: 87% (11,298)VISAYAS: 8% (1,023)

MINDANAO: 5% (679)OUTSIDE PH: 0.18% (24)

87%

8%5%

0.18%

Total headcount: 13,024

Employment typeSENIOR MANAGEMENT (VP AND UP): 1% (168)

MIDDLE MANAGEMENT (SENIOR MANAGER TO AVP): 7% (855)JUNIOR SUPERVISORY (SPECIALIST, MANAGEMENT TRAINEE, ASST. MANAGER TO MANAGER): 29% (3,840)

RANK AND FILE: 63% (8,161)

Employment contractPERMANENT: 93% (12,177)PROBATIONARY: 7% (847)CONTRACTUAL: 0

93%7%


Nurturing talentBPI has one of the lowest voluntary attrition rates in the banking industry, at only 6% in 2013. The Bank employs a wide range of employee retention strategies and runs a wide range of health, wellness, communications, community development, and administrative programs to cater to Unibankers’ various needs and promote a healthy work-life balance.

A learning organizationBPI has one of the most systematic employee training and development programs not only in the banking industry, but also in the entire business community. Unibankers—as BPI employees are FDOOHGłDUH�RŖHUHG�D�ZLGH�UDQJH�RI�PDQGDWRU\��functional, leadership, and core courses to build their everyday competencies and prepare them for greater responsibilities.

At BPI, each employee is required to participate in DW�OHDVW�ŗYH�GD\Vń�ZRUWK�RI�WUDLQLQJ�HYHU\�\HDU� In 2013, BPI employees logged more than 50,000 training days.

Training programs accompany a Unibanker from KHU�ŗUVW�GD\V�LQ�WKH�FRPSDQ\�DOO�WKURXJKRXW�KHU�career in BPI. Here are some of the programs that received an even bigger boost in 2013:

New Employee Orientation (NEO) and Values Orientation Workshop (VOW) programs. The NEO and VOW programs were revamped in 2013, making them more engaging for a new generation of Unibankers. New programs were also launched WR�ERRVW�SHUVRQDO�HŖHFWLYHQHVV��WKH�3HUVRQDO�(ŖHFWLYHQHVV��3(3��DQG�3URIHVVLRQDO�(QKDQFHPHQW��3()��3URJUDPV��

Officers Training Program (OTP). In response to WKH�%DQNńV�JURZLQJ�QHHG�IRU�PRUH�RřFHUV��WKH�OTP was beefed up in 2013 to accommodate 328 0DQDJHPHQW�7UDLQHHV��07V�łDQ��MXPS�IURP�WKH�previous year. Of the total number of MTs, 79% were LQWHUQDO�VWDŖ�FDQGLGDWHV��D��LQFUHDVH�IURP�WKH�previous year.

Sales Officers Training Program (SOTP). In 2013, 41 SOTP MTs were trained compared to 39 the previous \HDU��7ZR�WUDFNV�ZHUH�RŖHUHG�IRU�WKH�6273��$VVHW�Management and Trust and Consumer Banking.

Stepping Up to Management (SUM). One of the Bank’s most important HR collaborations is Stepping Up to Management, a partnership with Harvard %XVLQHVV�3XEOLVKLQJ��+%3��2YHU�WKH�FRXUVH�RI�eight weeks, SUM participants are taught people management skills that would prepare them to proactively coach and empower their teams. In 2013, participation in SUM jumped by 59%, from 161 participants in 2012 to 256 in 2013. This program was also expanded to areas outside Metro Manila, with FODVVHV�KHOG�LQ�&HEX��'DYDR��$QJHOHV��3DPSDQJD��1HJURV�DQG�'DJXSDQ��3DQJDVLQDQ��7KLV�HQDEOHG�%3,�not only to boost the competencies of its provincial managers, but it also created an opportunity for managers to work more closely together and forge better teamwork and synergy.

Leadership Excellence Acceleration Program (LEAP). LEAP is another of BPI’s award-winning programs, likewise developed in partnership with +%3��,Q��RřFHUV�JUDGXDWHG�IURP�/($3ńV�16-week Executive Development Program, bringing the number of people trained to almost 900 since 2009. LEAP was recognized by the People 0DQDJHPHQW�$VVRFLDWLRQ�RI�WKH�3KLOLSSLQHV��30$3��in 2012 as its People Program of the Year because of the huge impact it has brought to the Bank’s level of innovation and leadership, and the way it has “democratized executive education in the country.”

Relationship Managers (RM) Academy. The RM Academy is an intensive, six-module, two-month program built for Relationship Managers who help PDQDJH�FOLHQWVń�ŗQDQFLDO�SRUWIROLRV��7KH�SURJUDP�strengthens the role of Financial Advisory to help clients become more successful in their businesses DQG�WKHLU�ŗQDQFLDO�PDQDJHPHQW��

In 2013, the RM Academy moved to the next level with the successful holding of the RM Congress. More than 376 RMs for individual accounts and product managers from all over the country converged to discuss the latest relationship-management trends and initiatives. About 75% of WKH�50V�IRU�LQGLYLGXDO�DFFRXQWV�DUH�QRZ�FHUWLŗHG�with the Academy’s Financial Advisory for Consumer Banking Course.

To make learning even more convenient for Unibankers, BPI introduced the My eLearning online platform, a portal that enables Unibankers to take online training courses, access educational materials, and administer their own learning programs. Over 80 online courses are now available through this portal.

In 2013, online learning received another boost with the introduction of Leadership Café, a “blended” learning program that combines an employee’s online learning experience with a

one-hour, face-to-face discussion with his Area Manager. These blended learning programs help increase the level of retention and insights derived from online lessons—thanks to face-to-face interactions, employees and managers alike are able to process these insights and manage their

application in real-life situations. Aside from all of these learning programs, the

Bank also helps employees due for retirement transition to the next phase in their lives, through annual seminars on investment opportunities, entrepreneurial prospects, and estate planning.

By employment categorySENIOR MANAGEMENT: 17.57 hours

MIDDLE MANAGEMENT: 44.22 hoursJUNIOR SUPERVISORY: 38.68 hours

RANK AND FILE: 29.15 hoursAVERAGE NO. OF TRAINING HOURS PER EMPLOYEE: 32.80

AGE GROUPBelow 3030-50Over 50GENDERMaleFemaleREGIONLuzonVisayasMindanaoOutside the PH

NUMBER1,771 15211NUMBER6041,330NUMBER1,6851321152

PERCENTAGE92%8%1%PERCENTAGE31%69%PERCENTAGE87%7%6%0%

New employee hiresOf the 1,934 employees hired in 2013, a majority were female and below 30 years old. Most of the hiring happened in Luzon. Below is the complete information:

Average hours of training per employeeBY GENDER

MALE31.38 HOURS

33.40 HOURS

FEMALE

GENDER NUMBER OFFICERS NON-UNIONIZED STAFF

NUMBER OF EMPLOYEES WHO UNDERWENT PERFORMANCE REVIEW

SPECIALISTS TOTAL PERCENTAGE

MaleFemaleTOTAL

3,8749,150

13,024

1,3762,624

4,000

98248346

155229384

1,6293,101

4,730

42.04%33.89%36.32%

Percentage of employees receiving regular performance and career development reviews

Health and wellness programs. BPI recognizes WKDW�KHDOWK�LV�WKH�WUXH�ZHDOWK�RI�LWV�8QLEDQNHUV��LW�therefore runs programs and seminars on illness prevention, risk control, cancer awareness and stroke prevention. Wellness fairs—where employees and family members are able to avail of physical examinations and vaccinations—are also regularly FRQGXFWHG�LQ�%3,�RřFHV�DQG�EXVLQHVV�FHQWHUV�

PEOPLE


“Keep fit, feed a child” program. This unique wellness program, now on its fourth year, engaged Unibankers who pledged to lose weight for the EHQHŗW�RI�.DELVLJ�QJ�.DODKL��D�QRQ�JRYHUQPHQW�organization that conducts feeding programs LQ�HOHPHQWDU\�VFKRROV��)URP�DPRQJ�.DELVLJ�QJ�.DODKLńV�QXPHURXV�EHQHŗFLDULHV��%3,�]HURHG�LQ�RQ�30 kindergarten, grade 1 and grade 2 students from the Gregorio del Pilar Elementary School in Tondo, Manila. Every pound lost by an employee was matched by a Php 100 donation from the Bank to the feeding program. In 2013, BPI donated Php 60,000 to this program, providing healthy lunch and milk every school day for six months to each of the 30 school children. After six months in this feeding program, the children attained their ideal, age-appropriate weight.

Internal communications. Communication across the organization has been enhanced through the HR Intranet portal called myBPIonline. Aside from sharing information and company news, myBPIonline also houses employee self-help tools and articles on Unibankers’ most common concerns and interests. This editorial strategy has quadrupled the portal’s hits and improved employee engagement.

Another online platform that has made it easy for employees to manage their HR concerns is My e-HR. A Web-based self-service facility using the Oracle-Peoplesoft platform, My e-HR brings HR closer to Unibankers and allows them to view pay slips, loan applications, absence balances, timesheets, PLR and CBA letters, e-Clearance, BIR IRUPV�DQG�HPSOR\PHQW�EHQHŗWV�

Interest clubs. BPI is one of the few companies in the country that maintain in-house interest clubs for its employees. In 2013, the Bank launched the Interest Club Month, a celebration that highlighted WKH�GLŖHUHQW�DFWLYLWLHV�RI�WKH��LQWHUHVW�FOXEV�VXFK�as photography, culinary, singing, and sports.

Recognition programs. Employee recognition is a big part of BPI’s culture. Every year, the company organizes various events to celebrate the accomplishments and milestones of its corporate community. These include the Unibank Excellence Awards, the Corporate Anniversary, the Service Awards Night for Regular Retirees, and the Service Awards Night for 25-Year Awardees.

AGE GROUPBelow 3030-50Over 50GENDERMaleFemaleREGIONLuzonVisayasMindanao

NUMBER849315151

NUMBER512

803NUMBER

1,2056050

PERCENTAGE65%

24%

11%

PERCENTAGE39%

61%

PERCENTAGE92%

5%

4%

Most of the 1,315 employees who left BPI in 2013 were below 30 years old, female and based in Luzon. The rest of the employee turnover information is as follows:

GENDER

MaleFemaleTotal

NO. OF EMPLOYEES WHO TOOK PARENTAL LEAVE

114468582

NO. OF EMPLOYEES WHO RETURNED TO WORK AFTER PARENTAL LEAVE ENDED* 107 448 555

Return to work and retention rates after parental leave

No. of employees entitled to parental leave in 2013: 5,965

*Employees whose parental leaves ended within 2013

PEOPLE

Employee attrition is at 10.1% (1,315 turnover/13,024 total workforce), but only 6% of these employees left voluntarily. The others left due to regular retirement and termination.

EMPLOYEE CATEGORY

Senior ManagementMiddle ManagementJunior Supervisory

Rank and File

MALE TO FEMALE RATIO*

56:44

36:64

34:66

27:73

'HŗQHG�DV�WRWDO�VDODULHV�SHU�JHQGHU�RYHU�WRWDO�VDODULHV��PDOH��IHPDOH�

Other financial benefits. There are currently 26 labor unions in BPI, and employees are free to join any of these unions. At present, 95% �RU��LQGLYLGXDOV��RI�WKH�%DQNńV��UDQN�DQG�ŗOH�HPSOR\HHV�DUH�FRYHUHG�E\�&ROOHFWLYH�%DUJDLQLQJ�$JUHHPHQWV��&%$��

%3,�DOVR�RŖHUV�D�ZLGH�YDULHW\�RI�ŗQDQFLDO�SURGXFWV�DQG�VHUYLFHV�WR�LWV�HPSOR\HHV��DW�YHU\�DŖRUGDEOH�WHUPV��7KH�%DQN�RŖHUV�ORZ�LQWHUHVW�UDWHV�IRU�DXWR�DQG�KRXVLQJ�ORDQV��HPHUJHQF\�ORDQV��DQG�RWKHU�PXOWL�SXUSRVH�ORDQV��employees also enjoy medical and group term insurance IRU�DGGLWLRQDO�VHFXULW\��,W�DOVR�RŖHUV�D�JHQHURXV�UHWLUHPHQW�EHQHŗW�SODQ��ZKLFK�LV�GHWHUPLQHG�E\�WKH�employee’s age, tenure with the company, and monthly compensation.

Another testament to BPI’s commitment of aligning interests among external and internal stakeholders is the recent launch of the Executive Stock Purchase Plans (ESPP). Through the ESPP, RřFHUV�DUH�JLYHQ�WKH�RSSRUWXQLW\�WR�EX\�VKDUHV�of stock in BPI, at a discounted price based on the volume weighted average of BPI’s share price for the past 30 days. Management believes that a VWURQJHU�DOLJQPHQW�EHWZHHQ�%3,ńV�RřFHUV�DQG�LWV�VKDUHKROGHUV�ZLOO�OHDG�WR�LPSURYHG�ŗQDQFLDO�UHVXOWV�IRU�WKH�%DQN��,QGHHG��LPSURYHG�ŗQDQFLDO�UHVXOWV�IRU�the Institution are cascaded to Unibankers.

Performance management. All BPI employees undergo regular performance evaluations based RQ�WKHLU�LQGLYLGXDO�NH\�UHVXOW�DUHDV��.5$V��DQG�accomplishments. These include targets in earnings performance, asset quality, business volume, customer satisfaction, and corporate JRYHUQDQFH��DPRQJ�RWKHUV��,Q��DOO�RřFHUV�DQG�specialists in the organization underwent regular performance evaluation.


Rewarding excellenceA key component of BPI’s employee value proposition is to provide an attractive and competitive compensation package for its human resource.

$VLGH�IURP�RŖHULQJ�D�EDVLF�PRQWKO\�VDODU\�WKDW�is above the mandatory minimum wage applied

XQLIRUPO\�DFURVV�WKH�FRXQWU\��%3,�RŖHUV�JHQHURXV�EHQHŗWV�WKDW�LQFOXGH�TXDUWHUO\�ERQXVHV��LQFOXVLYH�of 13th�PRQWK�SD\��RYHUWLPH�SD\��DQG�YDULRXV�OHDYH�FUHGLWV��YDFDWLRQ��VLFN��HPHUJHQF\�DQG�PDWHUQLW\�SDWHUQLW\��

BPI administers its compensation programs in a manner that would attract and retain quality individuals, and so that they would be encouraged and rewarded for high level performance. It maintains sound salary structures that recognize the potential, competence and responsibility levels of individuals, at the same time taking into account the prevailing pay levels in the area for equivalent work.

The Bank’s compensation packages are reviewed on a regular basis, while job evaluations are conducted at the beginning of the year to serve as the bases for salary adjustments and promotions.

One of the major incentives for employees is WKH�JUDQW�RI�D�SHUIRUPDQFH�ERQXV��3%��ZKLFK�LV�designed to correlate quality of performance with RYHUDOO�EDQN�SURŗWDELOLW\�E\�SURYLGLQJ�D�RQH�WLPH�3%�RQ�D�\HDUO\�EDVLV�WR�GHVHUYLQJ�RřFHUV��7KH�3%�LV�EDVHG�QRW�RQO\�RQ�RřFHUVń�LQGLYLGXDO�SURGXFWLYLW\�and performance relative to their assigned targets, but also in comparison with their peers within their rank, taking due recognition of the individual’s overall impact on the Bank’s performance for the year.

It could be said, therefore, that BPI’s pay philosophy is anchored on the following key SULQFLSOHV�LQ�FRPSHQVDWLRQ�DGPLQLVWUDWLRQ��UHŘHFWLYH�of internal equity, externally competitive, and emphasis on rewards based on performance.

Ratio of basic salary and remuneration by employee category

Moreover, BPI is one of the few companies in the Philippines using a cloud-based performance management system. Called MyPACT (Performance Alignment, Conversations and Total Development)��WKH�V\VWHP�DOORZV�RřFHUV�WR�VHW�.5$V�DQG�REMHFWLYHV�DW�WKH�VWDUW�RI�WKH�\HDU��FUHDWH�developmental plans, record performance through online journals, and assess performance. Supervisors approve goals and appraisals of their individual team members via the online system.

Promotion to senior management. In 2013, BPI rolled out a new process to identify and select QHZ�6HQLRU�2řFHUV��HQVXULQJ�WKDW�WKH�%DQN�ZRXOG�be able to promote its most deserving nominees given its increasing size and the market’s increasing complexity. President Cezar P. Consing has formed Nomination Committees for vetting promotions for Vice Presidents and Senior Vice Presidents, using systematic and consolidated promotion data. Three new Senior Vice Presidents and 20 new Vice Presidents were chosen through the process.

Ensuring sound governance%3,�QRW�RQO\�DGKHUHV�WR�ODERU�ODZV�DQG�UHJXODWLRQV��it also implements best practices in workplace employee relations.

7KH�%DQN�UHFUXLWV�TXDOLŗHG�WDOHQW�UHJDUGOHVV�RI�race, color, gender, religion, political stand, or social background. It maximizes local skills and talents in areas where there are BPI cash centers, branches and business centers meant to serve the local populace. It takes a proactive role in recruiting graduates of universities in the areas outside Metro Manila, giving BPI the competitive advantage of local market knowledge.

The Bank also believes that excellent communication, open dialogue, and cooperation

The Bank takes pride in its employee volunteerism program, called BPI Bayan, which stands for Bayanihan Para sa Inang Bayan, which encourages Unibankers to create sustainable volunteer programs for their respective communities. First launched in 2011, BPI Bayan activities range from social services to entrepreneurship, educational and environment-related projects.

Over the past two years, BPI Bayan has involved a total of 4,961 employees who put in a total of 47,890 volunteer hours and impacted 137 communities nationwide. In 2013 alone, 42 BPI Bayan projects were implemented.

On its 162nd Anniversary in 2013, the Bank through BPI Bayan started the Nationwide Volunteers Day, which enabled BPI employees to GR�YROXQWHHU�ZRUN�LQ�WKHLU�DGRSWHG�EHQHŗFLDULHV��DOO�LQ�RQH�GD\��8QLEDQNHUV�EURXJKW�WKH�HŖRUW�RQOLQH��using the hashtags #VolunteersDay and #BPIBayan, generating additional support from netizens.

In late 2013, when a series of catastrophes hit the country—an insurgent uprising in Zamboanga in September, a series of earthquakes in Bohol and Cebu in October, and super-typhoon Yolanda devastating several provinces in the Visayas in November—Unibankers stepped up to help. Unibankers sent cash and in-kind donations, and volunteered to prepare relief packages. Many employees joined The Ayala Group’s One Big Ayala Volunteer Night in various relief centers of the Department of Social Welfare and 'HYHORSPHQW��'6:'��

Because of the severity of the damage wrought E\�VXSHUW\SKRRQ�<RODQGD��%3,�ODXQFKHG�WKH��0��0�Campaign to raise funds for the badly hit communities. Unibankers were challenged to raise Php 10 million, with the Bank pledging to match donations peso-for-peso. Employees launched their own fund-raising HŖRUWV��ZLWK�VRPH�FKRRVLQJ�WR�GRQDWH�WKHLU�&KULVWPDV�Party budgets. In a span of 17 days, Unibankers were

PEOPLE

In 2013, there were NO HEALTH INCIDENTS reported among BPI Unibankers.NO INJURIESNO OCCUPATIONAL DISEASESNO SERIOUS WORK-RELATED DISEASESNO WORK-RELATED ACCIDENTAL DEATHS

There were also NO LABOR INCIDENTS reported in 2013.NO LABOR DISCRIMINATIONNO COMPULSORY LABORNO CASES OF ABUSE, INCLUDING CHILD ABUSENO CASES OF GRIEVANCES RELATED TO HUMAN RIGHTS

with employees results in good relations between management and labor. Thus, BPI maintains harmonious relations and constant communication with its 26 labor unions.

To this end, activities involving management and the unions are regularly held. These activities include quarterly Management Conferences, formal and informal huddles on urgent issues, team-building workshops, learning sessions and knowledge sharing. These activities have helped create a FRQGXFLYH�DQG�RSHQ�DWPRVSKHUH�IRU�RŖHULQJ�feedback, settling disputes, if any, and keeping updated on labor trends and regulations.

BPI also has a grievance mechanism embedded in the CBA to promptly dispose and amicably VHWWOH�JULHYDQFHV��&OHDU�VWHSV�DUH�GHŗQHG�WR�DOORZ�arbitration at every level possible. The Bank’s Labor Management Council meets regularly at the regional level in order to take a proactive role in resolving possible issues that might arise due to changing workplace conditions.

Empowering volunteersSocial accountability and corporate citizenship are deeply embedded in BPI’s DNA and are very much a part of the Bank’s mission and corporate strategy.

DIVERSE TALENT BASEBoard of Directors

BELOW 30 YEARS OLD: 0

30-50 YEARS OLD: 1 (7%)

OVER 50 YEARS OLD: 13 (93%)

NO. OF DIRECTORS: 14

MALE: 11 (79%)

FEMALE: 3 (21%)

Senior Management

BELOW 30 YEARS OLD: 0

30-50 YEARS OLD: 52 (31 MALE, 21 FEMALE; 31%)

OVER 50 YEARS OLD: 116 (55 MALE, 61 FEMALE; 69%)

NO. OF OFFICERS: 168

MALE: 86

FEMALE: 82

Junior Supervisory

BELOW 30 YEARS OLD: 1,400 (521 MALE, 879 FEMALE; 36%)

30-50 YEARS OLD: 2,165 (646 MALE, 1,519 FEMALE; 56%)


NO. OF OFFICERS: 3,840

MALE: 1,287

FEMALE: 2,553

Middle Management

BELOW 30 YEARS OLD: 7 (5 MALE, 2 FEMALE; 1%)

30-50 YEARS OLD: 532 (198 MALE, 334 FEMALE; 62%)


NO. OF OFFICERS: 855

MALE: 308

FEMALE: 547

Rank and File NO. OF RANK-AND-FILE EMPLOYEES: 8,161

MALE: 2,193 FEMALE: 5,968

BELOW 30 YEARS OLD: 4,644 (1,211 MALE, 3,433 FEMALE; 57%)

30-50 YEARS OLD: 3,126 (839 MALE, 2,287 FEMALE; 38%)


All security personnel under third-party security agencies and 70% of security personnel directly hired by BPI have received formal training in BPI’s policies DQG�VSHFLŗF�SURFHGXUHV�for human rights issues and their application to security.

ZERO’S NOT A BAD NUMBER

AFTER ALL


able to raise over Php 11 million, equally matched by WKH�%DQN��6HH�6SHFLDO�)HDWXUH��ņ$�8QLWHG�)URQWŇ��

Reaping rewards2013 was a “grand slam” year for BPI Human Resources, proving that beyond its technological, service, and product innovations, the Bank is also a leader in human resources and an employer of choice.

In June 2013, BPI was named Grand Winner in WKH�.DSDWLG�$ZDUGV�E\�WKH�(PSOR\HUV�&RQIHGHUDWLRQ�RI�WKH�3KLOLSSLQHV��(&23��EHVWLQJ�ZHOO�NQRZQ�multinational corporations for the coveted prize. ECOP is an umbrella organization of Philippine business organizations, acting as a single voice for the business community on important national issues related to employment, industrial relations, labor and related social issues. Overall, BPI was recognized for having balanced work practices in four categories: Strategic Visioning, Productivity and Quality, Social Accountability, and Partnering for Business and Job Survival, Industrial Peace and Harmony.

A month later, in July 2013, BPI also won the Employer of the Year-Gold, the highest award in its category, in the 2013 Asian Banking & Finance Retail Banking Awards given by Asian Banking and Finance Magazine. The Bank bested all other competitors IURP�DOO�RYHU�WKH�$VLD�3DFLŗF�

,Q�2FWREHU��WKH�HŖRUWV�RI�WKH�%DQN�LQ�KXPDQ�resource and development were further recognized when HR Group Head Fidelina A. Corcuera was named the 2013 PMAP People Manager of the Year by the People Management Association of the Philippines �30$3��WKH�ODUJHVW�RUJDQL]DWLRQ�RI�KXPDQ�UHVRXUFH�management practitioners in the country.


2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT 39 38 2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT

ENVIRONMENT

Sustainable energy financingFive years after we launched a pioneering venture with the World Bank-affiliated International Finance Corporation (IFC), we continued to boost private sector investments in energy efficiency and renewable energy projects, capturing the bulk of the IFC’s Sustainable Energy Finance (SEF) Program’s total loan portfolio in the country.

For 2013, total loans and leases released under the SEF Program amounted to Php 4.6 billion, slightly higher than in 2012, bringing our total SEF loan portfolio to Php 13.4 billion. Outstanding loans as of end-2013 reached Php 9.77 billion.

SEF projects saved approximately 115,613 MWh of energy per year, while producing 1,105,011 MWh of clean energy annually. Greenhouse gas emissions avoided reached 808,793 tons per year.

Most of the projects financed in 2013 were energy efficiency projects such as the construction of energy-efficient office buildings, warehouses and factories; retrofits of existing buildings; and upgrading of equipment and refrigeration systems.

Meanwhile, renewable energy projects financed during the year include biomass drying facilities and recovery systems and the installation of solar PV systems.

Some of the more notable projects financed under the SEF Program include:

consumption by 8% yearly;

ventilation and air conditioning) and lighting systems; and

NOW, MORE THAN EVER

additional steam supply of a bottling company.

small and medium enterprises (SMEs), we are also committed to educating our employees about energy solutions that they could impart to our clients. We held in-house training sessions and workshops in the country’s key cities to train our account officers and relationship managers on the recent technologies under SEF, and identified financing opportunities and influenced the utilization of energy finance in their respective markets and areas.

The SEF Team also conducted two SEF Boot Camps during the year, both in Puerto Princesa, Palawan. The boot camps are training workshops for

knowledge and expertise they need to effectively market SEF to their clients.

IFC Financial Sector Partners Meet in Kochi, India; and the HK Global Investor Forum. These fora were opportunities for us to share our expertise in SEF and the best practices adopted in the Philippines.

The SEF Philippines initiated by the IFC in 2008 with BPI as lead partner bank was also recognized by the United Nations Framework Convention on Climate Change in the “Momentum for Change” activities in Warsaw, Poland. The award recognized innovative projects and activities that contributed to the global fight against climate change.

Going and living green—especially in a year that saw the country hit by the two most devastating natural calamities in recent memory—gained a renewed importance for the Bank in 2013, as we continued to demonstrate our commitment to the highest standards of environmental sustainability and social responsibility.

SUSTAINABLE ENERGY

SEF

TYPE OF LOAN DIFFERENCE

DIFFERENCE

2012

2012

2013

2013

Php 4.6 billion

115,613

Php 9.77 billion

1,105,011

808,793

Php 7.35 billion

630,742

645,774

Php 4.2 billion

89,821

Total outstanding loans

Clean energy produced (MWh per year)

Carbon emissions abated (tons CO2 per year)

Sustainable energy loans

Total energy saved (MWh per year)

9.52%

28.71%

32.96%

75.19%

25.24%

BPI HAS BEEN FULLY COMPLIANT WITH ENVIRONMENTAL LAWS AND REGULATIONS, AND HAS NOT BEEN SANCTIONED FOR NON-COMPLIANCE WITH SUCH LAWS AND REGULATIONS.

40 2013 INTEGRATED ANNUAL & SUSTAINABILITY REPORT

ENVIRONMENT

Climate risk adaptationOur partnership with WWF Philippines on the

Naga and Tacloban. The program aims to help city planners and decision makers assess the impacts of climate change, identify opportunities and decide on life-saving sustainability strategies to allow Philippine cities to retain their economic viability in a climate-defined future.

This project is based on the climate trends drawn from existing climate studies and city-specific socio-economic information for the last 20 years and the scenario-building exercises of various stakeholder participants of an action-oriented proposal for the next 30 years.

The study’s first two phases covered the cities of

Iloilo, Laoag and Zamboanga from 2011 to 2012. These studies, entitled and Management of Climate Impacts, are publicly available on the BPI Foundation websites and WWF.

Saving fuel and energyOur Central Security Office also aided our sustainability initiatives. To save on fuel, it

branches and cash centers to the Central Security Office for real-time monitoring and immediate response. This system eliminates the need for motorized roving guards—about 80 of them—inspecting the branches during non-banking hours.

Php 45 million in costs for transport services. So far the Security Group’s savings generated by this amount to 67,200 liters of fuel, worth about Php 3.36 million.

Saving paperWe also made new strides in cutting our paper use.

the growing usage of alternative channels, such as BPI Expressonline and the BPI Mobile smartphone app, helped sustain our campaign for paperless transactions and reporting, such that the number of investors who opted not to receive hardcopy statements grew by 57% in 2013.

The BPI Card Banking’s mission—to provide customers with electronic payment solutions that would diminish the use of cash—has led it to relentlessly pursue migration from cash payments to digital and other e-solutions.

In addition, because of BPI Cards’ no-frills proposition, card holders also need not to worry

program is in place allowing the bank to save on paper for gift certificates—and on fuel, which would have been consumed to deliver the redemptions.

To facilitate paperless payments, about 1.15 million offline contactless cards were produced, generating more than Php 1.5 billion pesos in billings.

Energy-wise, the Central Security Office implemented several process improvements, enhancing the group’s security and control, thus extending the useful life of equipment by about 20%. The expected direct annual savings of this move is Php 15.5 million, which would otherwise go to equipment replacement and repair costs.

Overall, these projects are saving for the Bank an estimated 160,439 kilowatt hours, or Php 1.92 million per 12-hour branch operation (or Php 12 pesos per kWh).

FUEL AND ENERGY

PHP 45 MILLIONCost savings on

transport services upon completion of

CVAMS

PHP 3.36 MILLIONCost savings generated

in 2013 with CVAMS

67,200

PHP 15.5 MILLION

160,439 kilowatt

hours

PHP 1.92 MILLION PER

12-HOUR OPERATION (OR PHP 12 PER KWH)

Liters of fuel saved with

CVAMS

Cost savings with

enhancements in security

system

20%Lifespan increase

of equipment used (DVRs, recorders)

with move to single server

cabinet

Energy saved with

CVAMS and server

move

Cost equivalent of energy saved with CVAMS and

server move

REDUCED USE

57% copy statements by

BPI investors

36 Pages of paper saved per

customer who opts for card banking and e-statements

ABOUT 1.15 MILLION Bank cards produced to facilitate paperless

payments


ENVIRONMENT

AND

Number of BPI branches expected to switch to

solar power

400+

bulbs from CFL bulbs for bank signages

50%

Solar-powered branchesWe installed a 5 kW commercial solar photovoltaic

City) branch, which would lead to savings in this branch’s electricity bill. Outfitting this branch made sense because it is not surrounded by tall buildings, allowing the solar panels to freely catch sunlight.

This is our second “green” branch after we opened a solar power system at the 10-square-meter branch

in Pasig City in 2012. We also outfitted the Cainta

We expect about half of our branches fitted with PV systems that in turn will lead to substantial savings in monthly electricity consumption.

We have also changed the standard for our branches’ horizontal and vertical signage by

fluorescents, they use half as much electricity, last six times longer, and provide annual operating cost savings of 50 percent over fluorescent lights.

Other energy-consumption numbers registered by BPI in 2012-2013

Diesel fuel (in liters) used in generators

LOCATION 2012 2013

Branches 198,452

(427 branches) 151,226

(450 branches)

Head office 4,600 4,200

Business/Cash centers 423 607

Tenanted sites 4,000 10,000

TOTAL 207,475 166,033

Electricity (in kilowatt hours) consumed and saved

LOCATION 2012 2013 ENERGY SAVED

Branches 27,223,559

(695 branches)25,880,466

(686 branches)1,343,093

Head office 14,064,440 13,828,446 235,994

Business/Cash centers 426,825 455,000 (28,175)

Tenanted sites 12,127,7402 1 1,1 18,062 1,009,678

TOTAL 53,842,564 51,281,974 2,560,590

Water (in cubic meters) consumed and saved

LOCATION 2012 2013 WATER SAVED

Branches 303,376

(626 branches)404,355

(629 branches)(100,979)

Head office 133,277 150,464 (17,187)

Business/Cash centers 2,510 3,368 (858)

Tenanted sites 89,068 98,634 (9,566)

TOTAL 528,231 656,821 (128,590)

Greenhouse gas emissions (in metric tons of CO2)

REASON FOR GHG EMISSION 2012 2013 REDUCTIONS

ACHIEVEDFuel use 555 447 108

Electricity use 26,6603 25,392 1,268

Business-related travel 37,049 43,175 ( 6,126)

Foreign travel 35,249 41,297 ( 6,048)

Use of armored cars 1,800 1,878 (78)

TOTAL 64,264 69,014 (4,750)

Waste (in tons) by type and disposal method

WASTE 2012 2013 WASTE REDUCED

collected by accredited junk shops

59 82 (23)

4 and sent to landfills156 161 (5)

TOTAL 215 243 (28)

Other energy-consumption numbers registered by BPI in 2012-2013

2 The number indicated in the 2012 Integrated Annual and Sustainability Report (20,656,688 kWh) is erroneous.The number in the table above is the correct amount.3 Emission factor used in 2012 was based on on “ CDM Baseline Construction for te Electricity Grids in the Philippines” published by the Institute for Global Enviroment Strategies and the Manila Observatory. For 2013 date, the Indirect C02 Emissions from Purchased Electricity tool (2007) Version 3.0, developed by World Resource Institute (WRI), was used. For uniformity, data for 2012 was recomputed using the latter tool.4 MACEA, or the Makati Commercial Estate Association, is an association of owners, lessees and occupants of lots in the Makati Central Business Disctrict.

employees all over the country for the rehabilitation in the aftermath of the storm. Under the fund-matching campaign, dubbed “10M + 10M,” the Bank promised to match the donations made by its employees peso-for-peso if the donation reached Php 10 million. In a little over two weeks, BPI employees raised over Php 11 million, resulting in a combined donation of more than Php 22 million, from the Bank and its employees.

The BPI Foundation also received donations from di!erent sources from the public, which amounted to Php 10 million, for a grand total of some Php 33 million.

Of this amount, Php 10 million was allotted for building 2-storey, 4-classroom school buildings in the devastated areas. These school buildings follow the architectural plan already being used by the Foundation in similar rebuilding e!orts in Cagayan de Oro. This Misamis Oriental city was hit by massive floods triggered by typhoon Sendong back in December 2011, leaving residents displaced and structures wiped out.

The houses, on the other hand, were allotted first for teachers whose houses were destroyed by the typhoon. Each house is estimated to cost Php 200,000.

The Bank has partnered with di!erent organizations such as Habitat for Humanity and the Department of Education to specialize in specific areas of rehabilitation to put this amount to good use, rebuilding houses and school buildings in areas hit by super-typhoon Yolanda.

Repairing BPI branchesThe plight of the three branches was another matter. In the event of a natural calamity, the Bank can normally reopen a branch within two to three days of sustaining major damage. Rehabilitation for the three in this case took some time because Tacloban, which faces Cancabato Bay in the San Juanico Strait, juts out from an outlying area. Bringing heavy equipment posed a challenge.

Generator sets had to be brought in as the electricity infrastracture in the area was all but wiped out. All BPI ATM machines had to be completely replaced as these had been submerged in water from the storm surge.

Marasbaras branch sustained the heaviest damage with its roof blown o!, all walls destroyed, and the furniture covered in mud and wet. The Rizal branch, being near the sea, bore the strong impact of the rush of water. Tacloban Main was reopened 10 days after the typhoon struck, Rizal reopened almost two weeks after. Marasbaras as of February 2014 remained non-operational.

PREPARING FOR A CHANGING CLIMATEIn 2010, the BPI Foundation and the World Wide Fund for Nature (WWF) jointly undertook a study on climate change and how it would likely a!ect the future of 12 major cities in the Philippines. Included in the study, entitled Business Risk Assessment and the Management of Climate Change Impacts, was Tacloban, a city along the northeastern coast of Leyte.

Among other things, Tacloban was cited for its increasing subjection to stronger cyclones, as seen from its weather history in the last five years. That it also sat barely three meters above sea level while facing the Pacific Ocean (from which most tropical cyclones come) only served to expose it to further potential risks.

Scenarios drawn by the study became reality when Typhoon Yolanda (Haiyan) hit the Visayas region in November 2013. It turned out to be the strongest typhoon recorded in history, with record wind speeds creating a storm surge that killed more than 6,000 people in the Philippines.

September of 2013 was the last time BPI Foundation Executive Florendo G. Maranan saw Tacloban City as it was, alive and rife with business activity. In the aftermath of Yolanda, coconut trees in once thick groves were felled like sticks. Houses were wiped out, buildings had their roofs ripped o!, posts were toppled to the ground and many bodies of those who did not survive the calamity were woefully half buried in the mire. Maranan, though, notes that in spite of the havoc and the ruin, “you could still see lots of people willing to pick up from the devastation.”

The BPI-WWF study is a contribution towards helping people prepare for climate change events.

BPI has a total of three branches in Tacloban City: Tacloban Main on Justice Romualdez Street, Tacloban Rizal on Rizal Avenue and Tacloban Marasbaras on Senator Tabuan National Highway, Marasbaras.

Immediately after the storm, the first action the Bank undertook was to track each of the 45 employees that manned the Tacloban City branches. Everyone was located, with the last one taking two weeks to find.

BPI airlifted food, blankets and other

provisions: flashlights, medicines and generator sets to its people and their families. In the first few days when Tacloban remained in a flux, with its airport barely functioning, BPI had to use a helicopter to bring in the deliveries.

Eventually, it became obvious that the needs of the employees would have to be sustained for a longer period of time. Logistical challenges hampered the continuous sending of relief goods by air. It was far more e"cient to relocate the 45 individuals and their families to the YMCA in Cebu City where they were sheltered and provided meals. When there was again a semblance of stability in Tacloban, they were repatriated.

Fund-matching campaignBPI initiated a fund-raising program that pooled together donations from BPI

Employees, management and partners join hands to rebuild areas devastated by super-typhoon Yolanda

A UNITED FRONT



CORPORATE GOVERNANCE

SOUND, RESPONSIBLE AND EFFECTIVEAt BPI, we believe that our strength, growth and banking leadership are founded on a sound, responsible and effective corporate governance. Our policies and standards comply with applicable laws and regulations, and are regularly reviewed and updated to conform to changes in the regulatory environment. We pursue best practices in risk management across all our businesses to ensure integrity in everything we do.

We use the standards of the BSP Capital Adequacy, Asset Quality, Management Quality, Earnings, Liquidity and Sensitivity to Market Risk (CAMELS) rating and the Corporate Governance Scorecard prescribed by the Institute of Corporate Directors (ICD) to measure our governance quality. In 2013, we were bestowed Asia’s Most Outstanding Company on Corporate Governance (Philippines) by Corporate Governance Asia.

Board of DirectorsOur Board of Directors (Board), the highest governance body of the Bank, ensures that a strong and effective governance system is in place throughout the entire organization. The Board is responsible for the long-term success of the Bank for the benefit of all our stakeholders. Its directive includes setting strategic business directions, appointing senior executive officers, confirming the appropriate organizational structures, approving major strategies and policies, overseeing major risk-taking activities, monitoring business and management performance, and generating a reasonable investment return to shareholders.

Composition: 14 directors, five of whom are Independent Directors, or those who have no

interest or relationship with BPI at the time of election or appointment and/or re-election. Thirteen of these 14 directors are non-executive officers of the Bank.

Qualification: They are highly qualified business professionals with a broad range of experience and expertise required in the governance of a financial institution.

Selection: They are elected by BPI stockholders who are entitled to one vote per share at the Annual Stockholders’ Meeting.

Compensation/Incentive Structure: The Bank’s By-Laws provide that “Each director shall be entitled to receive from the Bank, pursuant to a resolution of the Board of Directors, fees and other compensation for his services as director. The Board of Directors shall have the sole authority to determine the amount, form and structure of the fees and other compensation of the directors. In no case shall the total yearly compensation of directors exceed one percent (1%) of the net income before income tax of the Bank during the preceding year.”

Structure of Compensation Packages: The directors receive per diems for attendance in meetings of the entire Board or of Board Committees. The per diem amount is set and approved by a resolution of the Board. Historically, it is a fraction of one percent (1%) of the total net income of the Bank. Bonuses may be given as approved by stockholders during the Annual Stockholders’ Meeting, upon recommendation of the Personnel Committee.

This compensation structure is the same as last year’s.

Note: Executive Directors receive remuneration as Officers and not as Directors of the Company.

Board committees and membershipsThe Board carries out its various responsibilities through the Executive Committee and delegates specific responsibilities to other committees that focus on certain areas as allowed by law. The different committees of the Board are:

Executive Committee. This committee shall, in the interim between meetings of the Board, possess and exercise all the powers of the Board in the management and direction of the affairs of the Bank subject to the provisions of the BPI By-Laws and the limitations of the law. It approves all major policies and oversees all major risk-taking activities. It functions as the Board’s committee for the approval of all major credit risks.

COMPOSITION OF THE EXECUTIVE COMMITTEE

Chairman Jaime Augusto Zobel de Ayala

Vice Chairman Fernando Zobel de Ayala

Members Cezar P. Consing, President and CEO

Rebecca G. Fernando

Aurelio R. Montinola III

Antonio Jose U. Periquet (Independent)

Chng Sok Hui*

Alternate Member Mercedita S. Nolledo

(for Jaime Augusto Zobel de Ayala

and Fernando Zobel de Ayala)

Corporate Governance Committee. This committee assists the Board in fulfilling its corporate governance responsibilities, and ensures the Board’s effectiveness and due observance of sound corporate governance principles and guidelines.

COMPOSITION OF THE CORPORATE

GOVERNANCE COMMITTEE

Chairman Artemio V. Panganiban (Independent)

Members Romeo L. Bernardo (Independent)

Solomon M. Hermosura

Mercedita S. Nolledo

Oscar S. Reyes

Chng Sok Hui*

Nominations Committee. This committee ensures that the Board of Directors is made up of individuals of proven integrity and competence, and that each Director possesses the ability and the resolve to effectively oversee the Bank. This committee also reviews and evaluates the qualifications of all persons nominated to positions in the Bank requiring the appointment of the Board.

COMPOSITION OF THE NOMINATIONS COMMITTEE

Chairman Romeo L. Bernardo (Independent)

Members Solomon M. Hermosura

Xavier P. Loinaz (Independent)

Jaime Augusto Zobel de Ayala

Chng Sok Hui*

Audit Committee. This committee monitors and evaluates the adequacy and effectiveness of the BPI Group’s internal control system. It also provides oversight of the overall management of operating risks, financial reporting and control, internal audit and external auditors, quality of compliance with the Corporate Governance Manual, and reviews conducted by the BSP.

COMPOSITION OF THE AUDIT COMMITTEE

Chairman Xavier P. Loinaz (Independent)

Members Octavio V. Espiritu (Independent)


Oscar S. Reyes

Khoo Teng Cheong*

Risk Management Committee. This committee is tasked with nurturing a culture of risk management across the enterprise, proposing guidelines and regularly reviewing risk management structures, limits, issues and measurements across the BPI Group, in order to meet and comply with regulatory and international standards on risk measurement and management. It also supports technology and training for key personnel in risk management.

COMPOSITION OF THE RISK MANAGEMENT COMMITTEE

Chairman Octavio V. Espiritu (Independent)

Members Cezar P. Consing

Romeo L. Bernardo (Independent)


Antonio Jose U. Periquet (Independent)

Khoo Teng Cheong*

Trust Committee. This committee oversees the proper administration and management of the Bank’s trust and other fiduciary business and its investment activities to ensure effective management of all risks inherent in the business.

COMPOSITION OF THE TRUST COMMITTEE

Chairman Mercedita S. Nolledo

Vice Chairman Antonio Jose U. Periquet (Independent)


Romeo L. Bernardo (Independent)

Rebecca G. Fernando

Fernando Zobel de Ayala

Maria Theresa M. Javier, Trust Officer*Resigned effective November 28, 2013



BOARD OF DIRECTORS

President

EXECUTIVE COMMITTEEBOARD OF DIRECTORS

TRUST COMMITTEEBOARD OF DIRECTORS

RISK MANAGEMENT COMMITTEEBOARD OF DIRECTORS

AUDIT COMMITTEE

Corporate Secretary

Central Security Office

Compliance Internal AuditRISK MANAGEMENTASSET MANAGEMENT& TRUST

Corporate Banking Global Markets

Centralized OperationsFinancial Markets

& Treasury

Global Financial Services

Retail Segments and Channels

Card BankingEnterprise Corporate

Services

Electronic Channels

Integrated Marketing

Total Quality Office,Sustainability Office,Premises and General

Services & BPI Foundation

Corporate Planning & Accounting

Human Resources Management

Information Systems

Legal Services

BPI Family Savings Bank

BPI Capital Corporation

BPI/MS, Ayala Plans

Personnel and Compensation Committee. This committee directs and ensures the development and implementation of long-term Human Resources Strategy/Plan based on the Board’s vision of the organization.

COMPOSITION OF THE PERSONNEL AND COMPENSATION

COMMITTEE

Chairman Fernando Zobel de Ayala

Members Romeo L. Bernardo (Independent)


Oscar S. Reyes

Chng Sok Hui*

Retirement/Pension Committee. This committee oversees the investment portfolio and fiduciary, administrative and other non-investment aspects of the Retirement Plan.

COMPOSITION OF THE RETIREMENT/PENSION COMMITTEE

Chairman Mercedita S. Nolledo


Rebecca G. Fernando

Fidelina A. Corcuera, Human Resources Officer

*Resigned effective November 28, 2013

Through a formal planning and budgeting process, management is able to pursue business goals and implement strategies. It lays down well-defined operating policies and procedures, and ensures the accuracy of reports to protect the Bank’s integrity, promote fairness and transparency, efficiency, and accountability in the conduct of our business, and ultimately, to attain customer satisfaction. The Bank’s management is periodically reviewed and rewarded according to their performance relative to assigned targets.

Specific management committees ensure that major risks are identified, measured, and controlled against set internal standards and/or limits. These management committees include the Credit Committee (Crecom), Asset and Liability Committee (ALCO), Capital Management Committee (CMC), Operational Risk Management Committee (ORMC), and Information Technology Steering Committee (ITSC).

The members of these committees are composed of the Bank’s senior management, including representatives of business segments, the Risk Management Office, and other senior executives.

Risk managementWe have a comprehensive and integrated Risk Management and Capital Management Framework guiding the management of all our risk exposures; it also ensures that the Bank has adequate capital to cover and mitigate these risks. This Framework follows BSP regulations and directives to implement an active and effective Internal Capital Adequacy Assessment Process (ICAAP) and risk management processes within the Bank.

The Board of Directors carries out its risk management function through the Risk Management Committee (RMC). Several committees and units manage our financial and non-financial risk exposures at the management level. The Risk Management Office recommends risk management policies and methodologies, closely coordinates and facilitates risk management best practices with the various business units of the Bank, and in the process, promotes an enterprise-wide risk appreciation and education.

Major risks identified in the Bank’s business are credit risk, market risk (liquidity risk and interest rate risk) and operational risk (people and process risks, information technology and physical security risks, compliance and regulatory risks, legal risk, and reputation risk, among others). Due to the significant size of our loan portfolio and financial assets, we give due attention to credit, market, and operational risk management.

Financial risk management is carried out by our dedicated and skilled team of risk managers

who regularly monitor and report risk exposures against carefully established credit risk and market risk limits and metrics approved by the RMC. We also closely monitor our operational risks due to the continuous developments in our business processes, information systems and technology, as well as their relatively significant share in our total risk-weighted assets.

Credit risk. The Credit Policy and Risk Management (CPRM) division is responsible for the overall management of the Bank’s credit risk, anchored on a comprehensive set of policies and prudent loan underwriting processes.

CPRM ensures that credit risks taken are consistent with acceptable parameters while ensuring compliance with regulatory requirements, in support of the Bank’s sustained loan volume growth. In 2013, the Bank has generally complied with the regulatory and prudential requirements relating to credit risk management (e.g. DOSRI and SBL compliance, credit concentration risk, and mandatory lending to SMEs, among others).

We continue to maintain a diversified loan portfolio with no significant concentration in any sector. The top sectors with the largest exposure where risk was spread out among its sub-sectors were real estate (real estate exposure is within the BSP’s 20% regulatory ceiling, exclusive of loans to individuals for housing purposes), manufacturing (with petroleum and food products at only about 5% each of the total portfolio), and wholesale and retail trade (also at about 5% each of the total portfolio, broken down into retail trade and wholesale and commission trade).

Our commercial loans accounted for about 78% of the total portfolio; consumer loans accounted for the balance of 22%. Large borrowers comprised approximately 83% of commercial loans, while SMEs accounted for the remaining 17%.

In 2013, CPRM reviewed 12 lending units and portfolios nationwide, with an overall generally acceptable credit performance and portfolio quality based on the credit reviews. Even with the continued expansion of our loan portfolios, asset quality has improved in terms of both non-performing loan (NPL) amounts and ratio. The gross 90-day NPL ratio stood at 1.8% and net 30-day NPL ratio at 0.49%, the lowest for the Bank in the last six years. NPL reserves cover also improved further in 2013 to 105%, from 96% in 2012. The BPI Group’s loan exposure in areas affected by super-typhoon Yolanda in November last year has been minimal vis-à-vis its total loan portfolio.

Operating managementThe President and Chief Executive Officer is responsible for the overall management of the Bank and the implementation of all major business strategies. The Bank’s major businesses—Retail Segments and Channels, Corporate Banking, Global Markets, Card Banking and Asset Management and Trust—are revenue-generating and are responsible for serving a segment of the Bank’s customer base.

In additin, the Bank’s Enterprise Corporate Services is responsible for its infrastructure, ensuring service delivery levels and discipline with respect to operational and capital expenditures. The following is an overview of the functional organizational structure of the Bank and its principal activities:



We regularly monitor our credit risk scoring models as to their predictive power and overall model performance. Rating models for Corporates, Auto (Head Office Direct and Retail Marketing Loans), and Credit Cards maintained their acceptable performances in year 2013 based on statistical measures. The Retail Housing and Property Equity Loans credit risk scorecards and the SME internal credit risk rating model were significantly enhanced as part of the Bank’s preparations to transition into the Basel II Internal Ratings-Based approach—probability of default (PD) estimates have been incorporated into these models. For consumer loans, a more comprehensive suite of data analytics and MIS for our credit cards, auto, and mortgage portfolios was continuously implemented, resulting in a proactive loan portfolio risk management.

On model risk management, our Risk Models Validation (RMV) division, the Bank’s model risk manager, conducted independent model validation activities which focused on our credit risk models—credit risk scorecards for Retail Housing and credit cards, and PD models. The independent validation of a risk model is governed by the Bank’s Model Risk Management Policy and Governance Framework, aimed at ensuring an active and effective model risk management in the BPI Group.

Other milestones achieved in 2013 include the automation of IRB-compliant CAR reports generation, as well as the development of new credit risk management systems to enhance the timely and accurate reporting of the Bank’s loan portfolio, credit concentration and credit risk data analytics.

Market risk. The Market Risk Management (MRM) division measures and reports the Bank’s exposure to market risk, liquidity risk, and interest rate risk in the banking book.

In 2013, the RMC reviewed risk measurements and established risk limits consistent with the Bank’s balance sheet and profitability goals, objectives and overall risk appetite. In light of the major developments in the global and local financial markets in 2013, the RMC and management carefully and extensively considered the consequent impact of this market volatility on the Bank’s profitability, resulting in key decisions and strategies to mitigate the potential adverse impact on earnings and shareholder value.

The measurement of our market risk exposure was improved through the adoption of the Historical Simulation methodology used for Value-at-Risk (VaR) calculation for all trading and derivative instruments and through the full implementation of an automated market risk system. Moreover, the Bank’s market risk management processes were

enhanced, policies and model documentation were continuously improved, and stronger risk controls were developed with the organization of a new Dealing Room Risk Management Team—all these are the primary components of an effective market risk management system.

Operational risk. Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, systems and management, or from external events. Our operational risk definition is comprehensive enough to include legal and tax risks, physical security risk, compliance and regulatory risk, and reputation risk.

We manage our operational risks through a framework that ensures such risks are properly identified, managed, monitored, mitigated and reported. Recognizing the importance of establishing a risk-aware culture in the management of operational risks, the Bank has embedded risk management in its core processes.

The Operational Risk Management Committee (ORMC) monitors the Bank’s operational risks by reviewing key risk indicators (KRIs), risk and control self-assessments (RCSAs), and incident management. The ORMC is supported by the Operational Risk Management (ORM) division that oversees the implementation of our enterprise-wide operational risk management program, which encompasses policy formulation processes, KRI monitoring processes, RCSAs, incident management processes, and risk management awareness and appreciation programs.

Our RCSA includes scorecards and more business process-specific assessment templates. Online views for end-to-end risk assessment by products and channels have also been made available, and are updated whenever there are new or updated programs to be implemented. Each business unit undertakes regular risk self-assessment to identify, assess, and measure its operational risks. Key risk indicators are used to detect early warning signals, and these are monitored for appropriate management actions to prevent and mitigate actual losses. Operational risk losses and incidents are used as information for reporting and providing risk-profiling information to the Board, the Risk Management Committee, and senior management.

Product approval and project approval requirements have been established to ensure that the risks associated with the introduction of new products and services are identified, analyzed, and addressed prior to launch or prior to investing in new products and projects. For online products and services, precautionary measures are implemented to protect our customers’ confidentiality and interests. Regular project value realization reviews

are also conducted to assess effectiveness.

Our Information Security and Technology Risk Management team protects the Bank against operational risks arising from the use of information technology in our business processes. The team also ensures the confidentiality, integrity and availability of the Bank’s information assets through the implementation of appropriate security controls and measures that protect against the misuse or compromise of information assets. New and appropriate security technologies are regularly identified, implemented and updated as part of our technology risk management strategy to mitigate threats to the Bank’s information technology environment. It also promotes our competitiveness and long-term viability through the use of appropriate and cost-effective I.T. solutions. Our Systems Quality Assurance and Management (SQM) team ensures compliance of automated systems to information security polices and control standards.

To lessen the impact of unforeseen operational risk events and in the event of unplanned business interruptions, a Business Continuity Program (BCP) has been put in place to ensure the recovery and availability of critical customer service facilities. The Bank’s Disaster Recovery Preparedness (DRP) has been enhanced with the installation of bigger and more robust BCP sites for critical head office services. Enterprise-wide testing of our critical application systems were conducted all throughout 2013. We also continued strengthening our employees’ awareness of our Business Continuity Program through varied training and activities.

The Central Security Office (CSO) is responsible for the security of the Bank’s facilities and the overall safety of our customers and employees. Its main objectives are the maximum protection of the Banks’ personnel and property, close monitoring of incidents to enhance speedy response and extend appropriate assistance in the rescue of personnel in distress, if needed, and prevention of crime. The latter includes assisting law enforcement agencies in the apprehension and prosecution of crimes committed against the Bank. The CSO uses a three-tiered defense system—intelligence, target hardening and incident management—to achieve these objectives.

We continually adopt new and reliable security technologies like the deployment of the state-of-the-art Graphical Management System (GMS), which integrates all the Bank’s alarms, access control and centralized closed-circuit TV (CCTV) systems. To date, all regular BPI and BFB branches have CCTVs installed and key branches are connected to the Central Video and Alarm Monitoring System (CVAMS). All cash centers are also connected to CVAMS and are monitored 24/7

through our centralized Security Operations Center (SOC).

The Bank’s fraud risk and whistleblower programs help prevent and detect fraud or misconduct, and enable fast and coordinated incident responses, including establishing the cause of fraud, remedial actions, and damage control procedures.

The Legal Affairs and Dispute Resolution (LeADR) division oversees the Bank’s legal and tax exposures. LeADR provides “pro-active, effective, timely and accessible” (PETA) opinions to address legal concerns in the Bank’s daily operations and provide guidance in the legal aspects of new products, services or special projects. LeADR issues Legal Advisory Bulletins (LABs) that serve as ready reference for all employees of the BPI Group on the handling of legal issues, new laws and regulatory requirements. This division also issues Tax Advisory Bulletins (TABs), supplemented by the various tax briefings held for the BPI Group, aimed at promoting tax compliance awareness and a deeper understanding of the different BIR regulations and circulars. As part of its support service, LeADR provides training, conducts lectures, and provides legal documentation and advisory services. Collaborative risk assessment exercises on potential or ongoing litigation issues by our team of experienced lawyers were also institutionalized. To expedite the resolution of legal cases, LeADR pursues both reasonable compromise and aggressive litigation techniques, as and when necessary.

LeADR adheres to the pursuit of excellence and the observance of professionalism in all its activities, guided by the spirit of collaboration, imbued with honesty, integrity, and mutual respect. By extending legal services and advisory to the different units of the Bank in an optimal and timely fashion, LeADR promotes the Bank’s objectives and protects its interests.

An operational risk management training and awareness program, which includes risk appreciation courses, is available in the Bank’s eLearning platform, facilitating the promotion of an effective risk management culture within the BPI Group.

Management of risk exposure

The Bank uses various methodologies to measure its risk exposure. Our credit risk exposures take into account our existing exposure to the counterparty (by asset class), the counterparty’s probability



of default, and the value recoverable from the counterparty in the event of default. The credit risk rating and probability of default models were developed internally by our Credit Policy and Risk Management team using statistical methods on quantitative and qualitative risk factors, including credit judgment overlays (for borrower-specific and other factors that cannot be modeled statistically). The models are independently validated, and their predictive power and performance are regularly monitored.

Credit risk exposures are classified and managed according to rating grades. Each rating grade has a corresponding probability of default that exponentially increases as one moves from the best to the worst rating grade. The migration of accounts between rating grades is regularly monitored and analyzed. Loss provisioning also takes into account the rating grade of each exposure. While specific reserves are set up for defaulted exposures, provisioning for non-default exposures is based on expected loss (EL), which is a function of the probability of default and loss given default (standardized approach). Expected losses are constantly assessed and measured following our internal policies and the BSP regulatory provisioning policies.

In compliance with Basel and BSP standards on minimum capital requirement, our CAR calculation is computed based on qualifying capital and risk-weighted assets. We also measure the Bank’s credit risk exposures in terms of regulatory capital requirement using the standardized approach. Using this method, our credit exposures to sovereigns, corporates and banks are risk-weighted to reflect external credit assessment from eligible ratings agencies, i.e. PhilRatings, S&P, Moody’s and Fitch, were applicable. This method also allows the use of eligible collaterals, i.e. cash, financial instruments and guarantees to mitigate credit risk. The Bank ensures all documentation used in the collateralized transactions and guarantees are binding on all parties and legally enforceable in the relevant jurisdiction.

Using the Basel II regulatory standardized approach, our total credit risk-weighted assets amounted to Php 619.8 billion, and are composed of on-book credit exposures after risk mitigation at Php 612.2 billion net of specific provisions, off-balance sheet risk-weighted assets at Php 6.5 billion and counterparty risk-weighted assets in the trading book of Php 2.3 billion. Below is the summary table in million pesos.

CREDIT RISK-WEIGHTED ASSETS (In Php millions) AMOUNT

Credit Risk-Weighted Assets!

Total Risk Weighted On-Balance Sheet Assets 612,242.38

Total Risk Weighted O!-Balance Sheet Assets 6,474.53

Total Counterparty Risk-Weighted Assets in the Trading Book (Derivatives and Repo-style Transactions) 2,312.16

Total Gross Risk-Weighted Assets 621,029.07

Deductions: General loan loss provision (in excess of the amount permitted to be included in Upper Tier 2) (1,235.53)

TOTAL CREDIT RISK-WEIGHTED ASSETS 619,793.54

The Bank’s credit risk exposures on both on- and off-balance sheet assets after mitigation, broken down by risk buckets, for the years ended December 31, 2013 and December 31, 2012 are as follows:

SCHEDULE ADecember 31, 2013

ON-BALANCE SHEET ASSETS (In Php millions)

Total Credit Risk Exposure after Risk Mitigation

Risk WeightsTotal Credit Risk-Weighted Assets0% 20% 50% 75% 100% 150%

Cash on hand 25,501.9 25,501.9 25,501.9

Checks and other cash items 218.7 218.7 218.7

Due from Bangko Sentral ng Pilipinas (BSP) 244,546.8 244,546.8 244,546.8

Due from other banks 15,802.9 5,022.1 8,576.6 2,204.2 15,802.9

Available-for-sale (AFS) financial assets 89,960.4 68,045.2 5,416.2 10,015.4 5,385.4 88,862.2

Held-to-maturity (HTM) financial assets 95,701.9 68,236.9 73.3 16,203.9 2,267.1 86,781.2

Unquoted debt securities classified as loans 431.3 431.3 431.3

Loans and receivables 608,002.6 4.3 37,267.9 36,829.6 41,192.0 487,112.5 5,596.3 608,002.6

Loans and receivables arising from repurchase agreements, certificates of assignment/participation with recourse, and securities lending and borrowing transactions

11,518.1 11,518.1 11,518.1

Sales contract receivables (SCR) 78.0 66.6 11.4 78.0

Real and other properties acquired 5,225.2 5,225.2 5,225.2

Total exposures excluding other assets 1,096,987.8 417,853.3 47,998.1 71,625.4 41,192.0 497,035.9 11,264.2 1,086,969.0

Other assets 21,152.5 21,152.5 21,152.5

Total exposures, including other assets 1,118,140.2 417,853.3 47,998.1 71,625.4 41,192.0 518,188.3 11,264.2 1,108,121.4

Total risk-weighted on-balance sheet assets not covered by credit risk mitigants

9,599.6 35,812.7 30,894.0 518,188.3 16,896.4 611,391.1

Total risk-weighted on-balance sheet

Assets covered by credit risk mitigants 270.8 467.3 113.2 851.3

TOTAL RISK-WEIGHTED ON-BALANCE SHEET ASSETS 9,870.4 36,280.0 30,894.0 518,301.5 16,896.4 612,242.4



December 31, 2012

December 31, 2012

Schedule BDecember 31, 2013ON-BALANCE SHEET

ASSETS (In million Php)

Total Credit Risk Exposure after Risk Mitigation

Risk Weights Total Credit Risk Weighted Assets0% 20% 50% 75% 100% 150%

Cash on hand 22,949.7 22,949.7 22,949.7

Checks and other cash items 860.9 860.9 860.9

Due from BSP 119,086.5 119,086.5 119,086.5

Due from other banks 6,914.8 2,708.2 2,315.0 1,891.6 6,914.8

Available-for-sale (AFS) financial assets 104,131.9 67,531.6 7,343.2 9,148.6 16,140.1 100,163.4

Held-to-maturity (HFM) financial assets 76,245.7 50,114.1 261.6 530.9 14,394.1 65,300.7

Unquoted debt securities classified as loans 698.0 698.0 698.0

Loans and receivables 492,843.2 3.7 21,937.5 26,114.4 61,643.0 378,492.4 4,652.1 492,843.2

Loans and receivables arising from repurchase agreements, certificates of assignment/participation with recourse, and securities lending and borrowing transactions

38,137.6 38,137.6 38,137.6

Sales contracts receivables (SCR) 698.2 654.6 43.6 698.2

Real and other properties acquired 7,140.7 7,140.7 7,140.7

Total exposures excluding other assets 869,707.3 297,823.1 33,111.4 38,108.9 61,643.0 411,572.8 12,534.5 854,793.8

Other assets 26,850.8 26,850.8 26,850.8

Total exposures, including other assets 896,558.1 297,823.1 33,111.4 38,108.9 61,643.0 438,423.6 12,534.5 881,644.6

Total risk-weighted on-balance sheet assets not covered by credit risk mitigants

6,622.3 19,054.5 46,232.2 438,423.6 18,801.7 529,134.4

Total risk-weighted on-balance sheet assets covered by credit risk mitigants

349.4 5.0 106.0 460.5

TOTAL RISK-WEIGHTEDON-BALANCE SHEET ASSETS - 6,971.7 19,059.5 46,232.2 438,529.7 18,801.7 529,594.9

OFF-BALANCE SHEET ASSETS (In million Php)

Credit Equivalent Amount

Risk Weights Total Risk- Weighted Off-Balance Sheet

0% 20% 50% 75% 100% 150%

Direct credit substitutes (e.g. general guarantees of indebtedness and acceptances)

3,527.2 - - - 692.8 2,603.5 - 3,296.3

Transaction-related contingencies (e.g. performance bonds, bid bonds, warranties and stand-by LCs related to particular transactions)

1,667.4 - - - 61.3 1,585.7 - 1,647.0

Trade-related contingencies arising from movement of goods (e.g. documentary credits collateralized by the underlying shipments) and commitments with an original maturity of up to one (1) year

1,553.3 - 0.7 - 57.7 1,472.9 - 1,531.3

TOTAL RISK-WEIGHTED OFF-BALANCE SHEET ASSETS

- 0.7 - 811.7 5,662.1 - 6,474.5

OFF-BALANCE SHEET ASSETS (In million Php)


Risk Weights Total Risk- Weighted Off-Balance Sheet

0% 20% 50% 75% 100% 150%

Direct credit substitutes (e.g. general guarantees of indebtedness and acceptances)

3,746.6 - - - 1,039.8 2,360.2 - 3,400.0

Transaction-related contingencies (e.g. performance bonds, bid bonds, warranties and stand-by LCs related to particular transactions)

1,026.6 - - - 48.3 962.2 - 1,010.5

Trade-related contingencies arising from movement of goods (e.g. documentary credits collateralized by the underlying shipments) and commitments with an original maturity of up to one (1) year

1,804.6 - - - 104.7 1,665.0 - 1,769.7

TOTAL RISK-WEIGHTED OFF-BALANCE SHEET ASSETS

- - - 1,192.8 4,987.4 - 6,180.2



SCHEDULE CDecember 31, 2013

COUNTERPARTY ASSETS IN THE TRADING BOOKS

(In Php millions)


Risk WeightsTotal Counterparty Risk-Weighted Assets in the Trading Book

0% 20% 50% 100% 150%

Derivative Exposures

Interest Rate Contracts 364.0 - 23.2 123.3 1.3 - 147.8

Exchange Rate Contracts 3,523.9 - 50.0 1,181.8 910.4 - 2,142.2

Credit Derivatives 44.4 - 73.2 22.2 22.2

TOTAL COUNTERPARTY RISK-WEIGHTED ASSETS OF DERIVATIVE TRANSACTIONS

- 1,327.3 911.6 - 2,312.2

COUNTERPARTY ASSETS IN THE TRADING BOOKS

(In Php millions)


Risk WeightsTotal Counterparty Risk-Weighted Assets in the Trading Book

0% 20% 50% 100% 150%

Derivative Exposures

Interest Rate Contracts 360.2 24.3 119.3 - 143.6

Exchange Rate Contracts 4,948.9 117.4 1,157.4 1,765.7 - 3,040.5

TOTAL COUNTERPARTY RISK-WEIGHTED ASSETS OF DERIVATIVE TRANSACTIONS

- 141.7 1,276.7 1,765.7 - 3,184.1

December 31, 2012

Our total outstanding investments in structured products as of end-2013 amounted to Usd 213 million, composed of investments in Credit-Linked Notes (CLNs) at 56.0% of total structured products; Range Accrual and Callable Range Accrual Notes at 28.0%; and Capped Floaters and Gold-Linked notes at 13.0% and 2.0%, respectively. The Bank’s exposure on selling credit protection is limited to investments in CLNs. We manage the market risk exposures of both our trading and non-trading portfolios. Our assets in both on- and off-balance sheet trading portfolios are subject to trading gains and losses. Market risk exposure from these portfolios is measured by

MARKET RISK-WEIGHTED ASSET TOTAL MARKET RISK-WEIGHTED ASSETS

Using Standardized Approach:

Interest Rate Exposures 3,194.45

Equity Exposures 564.94

Foreign Exposures 4,765.95

TOTAL MARKET RISK-WEIGHTED ASSETS 8,525.34

the respective VaR models also as part of market risk management. The bank undertakes hedging strategies to mitigate the risks arising from various investments of the Bank. For example, it enters into interest rate swaps too much the interest rate risk associated with long-term debt securities In terms of capital usage using the standardized approach, total market risk-weighted assets stood at Php 8.5 billion by end-2013, of which foreign exchange exposure accounted for more than half, followed by interest rate exposures and equity exposure at 37% and 7%, respectively. The table below presents the breakdown of the MRWA, in Php millions:

Our liquidity risk is observed and monitored through the metric Minimum Cumulative Liquidity Gap (MCLG), which is computed monthly and measures net inflow level of the BPI Group (BPI, on a consolidated basis, should be liquid enough to provide sufficient buffer for critical liquidity situations). A red flag is raised should the MCLG projected for the next quarter breaches the RMC-prescribed MCLG limit. Interest rate risk measurement is fundamental to our banking business. Movements in interest rates can expose the Bank to adverse shifts in the level of net interest income and can impair the underlying values of its assets and liabilities. The BPI Group is exposed to interest rate risk on unfavorable changes in the rate curves, which would have adverse effects on the Group’s earnings and its economic value of equity.

Interest rate risk exposure arising from the core banking activities is measured and monitored monthly by Earnings-at-Risk (EaR), or the potential deterioration in net interest income over the next 12 months due to adverse movements in interest rates; and by Balance Sheet Value-at-Risk (BSVaR), or the impact on the economic value of the future cash flows in the banking book due to changes in interest rates. As of end-December 2013, the BPI Group’s BSVaR level of Php 2.0 billion and EaR of Php 1.2

OPERATIONAL RISK EVENTSPERCENT TO BPI’s TOTAL

ESTIMATEDLOSSES FOR 2013

ESTIMATE TO OPERATIONALRISK-WEIGHTED ASSETS (ORWA)

FOR 2013 (IN Php MILLIONS)

Fraud – Internal/External 32% 24,575

Process Failures 24% 18,958

Legal and Tax Cases 22% 16,852

Damage to Physical Assets 13% 9,831

Technology/Information Security 7% 5,617

Customer Complaints 2% 1,404

TOTAL 100% 77,237a

a Total Operational Risk-Weighted Assets (ORWA) as of 31 December 2013

billion were well within the Bank’s established risk appetite. Our interest rate gap model is measured based on the repricing maturity of the balance sheet accounts. To illustrate, loans are mapped on either the maturity date (for accounts paying fixed interest rate) or next interest rate review date (for accounts paying floating interest rate). Meanwhile, repricing schedules of deposit accounts that do not have defined maturity dates (e.g. savings and current accounts) are based on the pattern of the Bank’s historical review of deposit rates and the depositors’ behavior. These assumptions were the same ones used last year.

Our exposure to operational risks are identified, assessed, and monitored as an integral part of the BPI Group’s business processes. We currently use the Basel II regulatory basic indicator approach (BIA) to quantify the operational risk-weighted assets, using the historical total annual gross income as the main measure of risk. For the year 2013, the Bank’s total operational risk-weighted assets (ORWA) stood at Php 77.2 billion.

The table below shows the estimated risk-weighted assets distribution for our operational risks based on the key operational risk events, exposures, and estimated losses for the year 2013:

Capital adequacy

The Capital Management Committee (CMC) oversees the strategic allocation of the Bank’s capital and risk assets. It also ensures compliance with the regulatory capital adequacy ratio (CAR) and internal minimum CAR (IMCAR). In compliance with the regulatory directive for banks to conduct an Internal Capital Adequacy Assessment Process (ICAAP) following Basel II-Pillar II guidelines, the Bank submitted its

2014 ICAAP to the BSP on January 30, 2014. This comprehensive evaluation process of the Bank’s material risks and capital adequacy reflected an IMCAR of 10.65% that is commensurate to the nature and extent for most of the risks the Bank has taken. The capital buffer of 0.65% over the 10.0% regulatory CAR was set to cover exposure beyond Pillar I risks.



RiskAmount (Php Billion)

2013 2012Adjusted Tier 1 92.0 81.7Adjusted Tier 2 4.6 8.9Total Qualifying Capital 96.7 90.7

Total Credit risk-weighted assets 619.8 539.0Total Market risk-weighted assets 8.5 29.3Total Operational risk-weighted assets 77.2 70.7Total risk-weighted assets 705.6 638.9

Consolidated CAR (%) 13.70 14.19

Risk (in Billion Php)

Regulatory Capital2013 2012

Credit Risk 62.0 53.9Market Risk 0.9 2.9Operational Risk 7.7 7.1Total 70.6 63.9

The Bank’s total qualifying capital of Php 96.7 billion and Php 90.7 billion for 2013 and 2012, respectively, were more than the regulatory CAR’s aggregate and per risk category capital requirements as follows:

The Bank’s total qualifying capital for 2013 and 2012 were largely composed of Tier 1 at 95.2% and 90.2% respectively. Below is the composition of the Bank’s qualifying capital:

December 31, 2013

Nature of ItemAmount (Php Million)

Tier 1 Tier 2 TotalGross Qualifying Capital*

Deductions from Tier 1 and Tier 2 Capital Investments in equity of unconsolidated subsidiary securities dealers/brokers, insurance companies, and non-financial allied undertakings, after deducting related goodwill

93,616.32

1,609.03

6,257.04

1,609.03

99,873.37

3,218.05TOTAL QUALIFYING CAPITAL 92,007.30 4,648.02 96,655.32% to Total 95.2 4.8 100.0

December 31, 2012


Tier 1 Tier 2 TotalGross Qualifying Capital*

Deductions from Tier 1 and Tier 2 Capital Investments in equity of unconsolidated subsidiary securities dealers/brokers, insurance companies, and non-financial allied undertakings, after deducting related goodwill

83,124.95

1,377.65

10,284.70

1,377.65

93,409.65

2,755.29TOTAL QUALIFYING CAPITAL 81,747.30 8,907.06 90,654.36% to Total 90.2 9.8 100.0

*Total Gross Qualifying Capital Breakdown

December 31, 2013


Tier 1 Tier 2 TotalCore Capital Paid-up common stock 35,563.56 35,563.56 Additional paid-in capital 8,235.30 8,235.30 Retained earnings 41,715.78 41,715.78 Undivided profits 18,007.33 18,007.33 Cumulative foreign currency translation (212.72) (212.72) Minority interest in subsidiary financial allied undertakings which are less than wholly owned (for consolidated basis)

133.48 133.48

Net unrealized gains on available-for-sale equity securities purchased (subject to a 55% discount)

46.75 46.75

General loan loss provision (limited to 1.00% of credit risk- weighted assets)

6,210.29 6,210.29

103,442.74 6,257.04 109,699.78Deductions Net unrealized losses on available-for-sale equity securities purchased

19.70 19.70

Total outstanding unsecured credit accommodations, both direct and indirect, to DOSRI (net of specific provisions, if any), and unsecured loans, other credit accommodations and guarantees granted to subsidiaries and a!liates (net of specific provisions, if any) referred to in Circular No. 560

1,929.60 1,929.60

Deferred income tax (net of allowance for impairment, if any) 7,877.12 7,877.12(9,826.42) (9,826.42)

Gross Qualifying Capital 93,616.32 6,257.04 99,873.37

December 31, 2012


Tier 1 Tier 2 TotalCore Capital Paid-up common stock 35,562.26 35,562.26 Additional paid-in capital 8,236.38 8,236.38 Retained earnings 31,840.95 31,840.95 Undivided profits 16,276.75 16,276.75 Cumulative foreign currency translation (445.52) (445.52) Minority interest in subsidiary financial allied undertakings which are less than wholly owned (for consolidated basis)

258.29 258.29

Net unrealized gains on available-for-sale equity securities purchased (subject to a 55% discount) 106.42 106.42

General loan loss provision (limited to 1.00% of credit risk- weighted assets) 5,178.29 5,178.29

Lower Tier 2 Eligible Amount of Lower Tier 2 Capital (limited to 50% of

Tier 1 Capital) 5,000.00 5,000.00

91,729.12 10,284.70 102,013.82Deductions Net unrealized losses on available-for-sale equity securities purchased 0.01 0.01

Total outstanding unsecured credit accommodations, both direct and indirect, to DOSRI (net of specific provisions, if any), and unsecured loans, other credit accommodations and guarantees granted to subsidiaries and a!liates (net of specific provisions, if any) referred to in Circular No. 560

1,961.28 1,961.28

Deferred income tax (net of allowance for impairment, if any) 6,640.36 6,640.36 Goodwill 2.52 2.52

(8,604.17) (8,604.17)Gross Qualifying Capital 83,124.95 10,284.70 93,409.65

For internal monitoring purposes, the RMC approved a CAR Management Action Trigger (CARMAT) of 11.5% at which management would review the capital level and undertake specific actions to build capital, as necessary. As of December 31, 2013, BPI’s solo (parent) and

consolidated risk-based CAR stood at 13.7% and 12.2% respectively, well within the regulatory requirement of 10.0%, and above the Bank’s set IMCAR and CARMAT. The table below sets out the Bank’s CAR components for the years ended December 31, 2013 and December 31, 2012:

Solo (Parent) CAR (%) 12.15 12.58



The Bank’s consolidated and solo Tier 1 capital ratio likewise compared favorably with regulatory CAR, IMCAR and CARMAT at 13.0% and 12.2%, respectively. Last year’s consolidated and solo Tier 1 capital ratio were at 12.8% and 12.6%, respectively.

In 2013, the Bank carried out the following initiatives in preparation for the adoption of Basel III requirements, as well as improve the Bank’s risk and capital management process:

plans to be able to meet the revised minimum capital requirement prescribed by Basel III (e.g. issuance of additional capital).

Bank’s existing Basel System.

PD-based credit risk models. The Bank has completed its FIRB PD model for large corporate and PD-based behavioral scorecard for the retail housing segment, and is currently developing the corporate SME PD and LGD models.

on Basel III principles and standards through internal and public seminars and briefings.

A more detailed discussion on capital adequacy can be found on Note 3.7 of the 2013 Audited Financial Statements.

Compliance system

The Compliance Office upholds compliance with relevant laws and regulations of the BSP, Securities and Exchange Commission (SEC), Philippine Deposit Insurance Corporation (PDIC), and other regulatory agencies. This is done through effective liaison and dialogue with the regulators, as well as the prompt dissemination, within the Bank, of new developments affecting our operations. It oversees the implementation of the compliance system throughout the organization. The compliance function is further strengthened by the formal designation of the major Group Compliance Coordinating Officers (GCCOs) who are responsible in coordinating the implementation of the compliance program within their respective business groups.

The Compliance Office promotes adherence and awareness to laws, rules and regulations by electronically posting these information in a compliance database. Our Compliance Office, Corporate Planning and Corporate Secretary jointly review our compliance to the Securities act, and the rules set forth by the SEC and the PSE.

The compliance to the Bank’s Corporate Governance Manual, policies and code of conduct is enforced using a two-pronged approach: one, self-regulation

within the work units; and two, audit reviews of the Compliance Office, Internal Audit, and the external auditors.

Internal audit

Internal Audit is an independent unit that reports directly to the Board through the Audit Committee. It supports the Audit Committee in fulfilling its oversight responsibilities by providing an independent, objective assessment of the Bank’s risk management, internal controls, and governance processes. Internal Audit also works closely with the Risk Management Office, Compliance Office, external auditors and other oversight units for a comprehensive view of risks and compliance in the institution, and ensures that business units proactively manage risk and compliance exposures.

Internal Audit has an established quality assurance and improvement program to ensure that audit activities conform to the International Standards for the Professional Practice of Internal Auditing (Standards). Key components of the program include on-going quality assessments of audit processes and methodologies, an annual internal self-assessment and an external quality assurance review by qualified professionals once every five years as required under the Standards. The results of the external assessments by SGV & Co./Ernst and Young in 2008 and 2012, both with overall “Generally Conforms” rating, validated Internal Audit’s conformity with professional standards and internal requirements.

Internal Audit ensures that each audit staff possesses and improves knowledge, skills and competencies through relevant training programs and seminars, as well as certifications with professional organizations in specialized areas.

Conflict-of-interest policies

The Bank has in place conflict-of-interest policies that place the interest of the Bank above and ahead of the personal interests of its directors and employees. These policies prohibit directors and employees from using their position of authority or rank to directly or indirectly derive personal gain or advantage.

Conflict of interest and whistleblower policies and guidelines are available in the Management and Operating Manual (MOM) and Personnel Policy Manual electronic databases for everyone’s easy access and guidance. Policy updates and reminders are regularly communicated to all employees.

Anti-money laundering

The Anti-Money Laundering Unit (AMLU) is responsible for monitoring customers, accounts, transactions and counterparties in compliance with the Anti-Money Laundering Law and various

government regulations. Our Anti-Money Laundering Program covers all companies under the BPI Group.

We continue to strengthen our efforts in preventing and combating financial crime. Our commitment to assist in the fight against money laundering, corruption and terrorist financing led to the increase in the manpower of our AMLU and investment in the latest AML monitoring and detection technology. An integrated approach in formulating the Bank’s policies, procedures, education, training and systems has been pursued in not only to adhere to regulations but also to international best practices.

We constantly review our program to ensure compliance with the latest legislative and regulatory developments. The Bank’s AML program outlines the policies and procedures on enforcing rules for enhanced customer due diligence, detection and countering acts of money laundering, as well as handling of suspicious transactions. AMLU’s centralized AML risk management system captures all required customer and transactional information from our various legacy applications and analyzes these data for abnormal and suspicious transaction patterns. The AML system is regularly evaluated and enhanced to continually improve the conduct of due diligence and money laundering detection from customer onboarding, transaction processing and account monitoring. The Bank has designed a structured AML training program, which is conducted regularly to equip front-line and operations personnel on Know Your Customer (KYC) guidelines as well as money laundering detection and prevention procedures.

Related party transactions

In the normal course of business, the Bank transacts with related parties consisting of its subsidiaries and associates, and with its directors, officers, stockholders and related interests (DOSRI), including transactions with Ayala Corporation (AC) and its subsidiaries (Ayala

Group). All transactions involving DOSRI are duly reported to the BSP. These transactions, such as loans and advances, deposit arrangements, trading of government securities and commercial papers, sale of assets, lease of Bank premises, investment advisory/management, service arrangements and advances for operating expenses are made in normal banking activities, and have terms and conditions that are comparable to those offered to non-related parties or to similar transactions in the market. The BPI Group is committed to fully comply with the General Banking Act and BSP regulations concerning DOSRI loans.

A more detailed discussion on related party transactions can be found on Note 31 of the 2013 Audited Financial Statements.

Communication and information

Management is primarily responsible to the Board for the adequate flow of information, such as but not limited to financial information. Any variance between projections and actual results requires management’s explanation to the Board, were applicable.

The Board is committed to fully disclose at all times all material information about the Bank for the benefit of its shareholders. All material information that could potentially affect share price are publicly disclosed through the PSE and SEC.

More information on BPI’s corporate governance philosophy, policies and practices may be found in our website, www.bpiexpressonline.com.



BPI earned a net income of Php 18.8 billion in 2013, representing a Php 2.5-billion, or 15.0%, increase relative to Php 16.4 billion earned last year. This increase in net income was achieved through a Php 5.1-billion, or 10.8%, increase in total revenues but was partly reduced by the Php 1.9 billion and Php 995 million increases in operating expense and taxes, respectively. Return on equity improved to 18.1% from last year’s 17.9%, while return on assets declined to 1.87% from previous year’s 1.91%.

Total revenue growth to Php 52.5 billion from last year’s Php 47.4 billion was sustained by the increases in both net interest and non-interest income, up by Php 2.9 billion and Php 2.2 billion, respectively.

Net interest income closed at Php 30.3 billion, representing a 10.4% increase from last year. This increase in net interest income was the result of a Php 151.4 billion, or 17.7%, expansion in average asset base partly tempered by the 26 basis points drop in net interest spreads.

Non-interest income of Php 22.2 billion increased 11.3% from last year’s Php 19.9 billion. Other operating income increased Php 1.6 billion, or 20.8%, mainly due to increases in trust fees, bank premises rental, profit from assets sold and miscellaneous income. Fees and commissions, income from the insurance business and income from foreign exchange trading likewise increased by Php 774 million, or 15.1%, Php 755 million, or 108.8%, and Php 360 million, or 21.4%, respectively. Fees and commissions’ increase was attributed to increases in service charges, bank commissions, and underwriting fees. Trading gain on securities ended Php 1.1 billion, or 18.1%, lower than last year due to lower securities inventory level as tempered by market corrections.

Impairment losses at Php 2.6 billion, decreased Php 275 million, or 9.4%, from 2012 due to last year’s provisions for non-credit related items and foreclosed assets.

Other expenses at Php 26.7 billion, increased Php 1.9 billion, or 7.7%, from last year’s Php 24.8 billion. Occupancy and equipment-related expenses increased Php 847 million, or 11.8%, due to increases in computer equipment and software costs, contractual, rental, and depreciation cost. Other operating expenses increased Php 883 million, or 12.4%, on higher regulatory cost, fines and penalties, litigation expenses, management and other professional fees, and other miscellaneous transaction related expenses.

The Bank’s total resources reached Php 1.2 trillion, Php 210.1 billion, or 21.3%, higher than last year’s Php 985.2 billion. This increase was attributed largely to the Php 186.3 billion, or 23.2%, increase in total deposits, which reached Php 988.6 billion. Current and savings deposits increased Php 194.2 billion or 39.5%.

Total capital funds increased Php 7.7 billion, or 7.8%, to Php 105.8 billion from the previous year’s Php 98.1 billion. This growth in capital came from the increase in profits from operation, net of cash dividends paid. Accumulated other comprehensive income(loss) decreased Php 4.6 billion, or 322.7% on lower market valuation of the Bank’s available-for-sale securities and the higher actuarial losses on the Bank’s defined benefit plan. The Bank’s capital adequacy ratio using Basel II framework at 13.7% declined from last year’s 14.2% as the risk weighted assets increased at a faster rate than the qualifying capital. This year’s CAR remained substantially higher than BSP’s 10% requirement.

BPI’s market capitalization remained the largest in the industry at Php 302.5 billion. The Bank’s share price traded at a premium of 2.9x its book value per share of Php 29.37.

Loans, net of impairment losses, stood at Php 635.2 billion, representing a Php 108.6 billion, or 20.6%, increase from prior year’s Php 526.6 billion. This increase in loans was brought about by the higher loan demand from multinationals and conglomerates. Non-performing loans ratio at 0.49% improved from last year’s 1.5% and below the industry’s 2.4% (November 2013).

Liquid assets increased Php 93.3 billion, or 44.2%, to Php 304.2 billion largely on higher balances with BSP.

Investment securities at Php 183.7 billion increased Php 1.1 billion from prior year’s Php 182.6 billion. Held-to-maturities securities increased Php 19.9 billion, or 26.1% due to additional investments, while available-for-sale securities decreased Php 18.8 billion, or 17.7%, due to reduction in local and foreign securities position.


SUMMARY OF FINANCIAL PERFORMANCE

RESULTS OF OPERATIONS

FINANCIAL CONDITION



BANK OF THE PHILIPPINE ISLANDS

STATEMENTS OF CONDITIONDECEMBER 31, 2013 and 2012 and JANUARY 1, 2012

(In Millions of Pesos)

Consolidated Parent

NotesDecember31, 2013

December31, 2012

(Restated)

January1, 2012

(Restated)December31, 2013

December31, 2012

(Restated)

January1, 2012

(Restated)

R E S O U R C E S

CASH AND OTHER CASH ITEMS 7 25,696 23,293 22,395 24,888 22,518 21,661

DUE FROM BANGKO SENTRAL NGPILIPINAS 7 244,483 119,079 83,759 195,076 105,244 70,807

DUE FROM OTHER BANKS 7 17,070 7,582 9,297 8,789 4,724 5,567

INTERBANK LOANS RECEIVABLE ANDSECURITIES PURCHASED UNDERAGREEMENTS TO RESELL 7, 8 12,406 38,927 35,277 5,046 10,843 24,867

FINANCIAL ASSETS AT FAIR VALUETHROUGH PROFIT OR LOSS

- DERIVATIVE FINANCIAL ASSETS 9 16,550 5,920 5,389 16,550 5,920 5,389

- TRADING SECURITIES 10 4,597 22,098 12,275 2,626 19,055 11,638

AVAILABLE-FOR-SALE SECURITIES, net 11 87,556 106,403 74,084 81,736 92,845 64,500

HELD-TO-MATURITY SECURITIES 12 96,172 76,243 89,742 85,900 67,822 79,723

LOANS AND ADVANCES, net 13 635,194 526,640 454,499 480,146 389,962 337,425

ASSETS HELD FOR SALE, net 5,852 6,887 9,148 3,480 4,379 6,431

BANK PREMISES, FURNITURE,FIXTURES AND EQUIPMENT, net 14 12,205 12,421 12,322 8,030 8,101 8,199

INVESTMENT PROPERTIES, net 15 1,597 2,582 2,637 1,597 2,575 2,630

INVESTMENTS IN SUBSIDIARIES ANDASSOCIATES, net 16 4,176 3,680 3,069 6,793 7,088 7,008

ASSETS ATTRIBUTABLE TO INSURANCEOPERATIONS 5, 7 14,586 13,451 12,240 - - -

DEFERRED INCOME TAX ASSETS, net 17 6,176 5,087 5,284 4,296 3,525 3,677

OTHER RESOURCES, net 18 11,048 14,948 12,148 7,414 10,930 8,099Total resources 1,195,364 985,241 843,565 932,367 755,531 657,621

(forward)


STATEMENTS OF CONDITIONDECEMBER 31, 2013 and 2012 and JANUARY 1, 2012


Consolidated Parent

NotesDecember31, 2013

December31, 2012

(Restated)

January1, 2012

(Restated)December31, 2013

December31, 2012

(Restated)

January1, 2012

(Restated)

LIABILITIES AND CAPITAL FUNDS

DEPOSIT LIABILITIES 19 988,586 802,274 681,101 785,403 628,365 544,414

DERIVATIVE FINANCIAL LIABILITIES 9 16,360 5,827 4,814 16,360 5,827 4,814

BILLS PAYABLE 20 26,179 26,280 19,136 18,990 16,963 9,887

DUE TO BANGKO SENTRAL NG PILIPINASAND OTHER BANKS 2,051 2,035 1,717 2,052 2,036 1,717

MANAGER’S CHECKS AND DEMANDDRAFTS OUTSTANDING 7,183 5,794 4,131 6,026 4,508 3,389

ACCRUED TAXES, INTEREST AND OTHEREXPENSES 4,907 4,819 4,026 3,396 3,456 2,709

UNSECURED SUBORDINATED DEBT 21 - 5,000 5,000 - 5,000 5,000

LIABILITIES ATTRIBUTABLE TO INSURANCEOPERATIONS 5 13,061 10,793 9,937 - - -

DEFERRED CREDITS AND OTHERLIABILITIES 22 31,230 24,297 25,387 26,338 19,563 20,965

Total liabilities 1,089,557 887,119 755,249 858,565 685,718 592,895CAPITAL FUNDS ATTRIBUTABLE TO THE

EQUITY HOLDERS OF BPI 23Share capital 35,563 35,562 35,562 35,563 35,562 35,562Share premium 8,316 8,317 8,317 8,316 8,317 8,317Reserves 1,680 1,603 1,462 1,680 1,603 1,462Surplus 62,137 49,794 41,763 32,053 24,054 19,948Accumulated other comprehensive (loss)

income (3,161) 1,420 (165) (3,810) 277 (563)104,535 96,696 86,939 73,802 69,813 64,726

NON-CONTROLLING INTERESTS 1,272 1,426 1,377 - - -Total capital funds 105,807 98,122 88,316 73,802 69,813 64,726Total liabilities and capital funds 1,195,364 985,241 843,565 932,367 755,531 657,621

(The notes on pages 1 to 100 are an integral part of these financial statements.)



STATEMENTS OF INCOMEFOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2013

(In Millions of Pesos, Except Per Share Amounts)

Consolidated Parent

Notes 20132012

(Restated)2011

(Restated) 20132012

(Restated)2011

(Restated)INTEREST INCOME

On loans and advances 32,368 30,790 27,156 20,255 19,356 16,762On held-to-maturity securities 4,930 5,191 6,023 4,434 4,638 5,383On available-for-sale securities 2,615 3,424 3,592 2,436 3,126 3,374On deposits with BSP and other banks 1,641 1,230 2,488 904 702 2,001On trading securities 690 847 812 628 763 767Gross receipts tax (1,442) (1,373) (1,382) (1,000) (963) (1,009)

40,802 40,109 38,689 27,657 27,622 27,278INTEREST EXPENSE

On deposits 19 9,530 11,648 11,721 5,187 6,929 7,601On bills payable and other borrowings 20, 21 948 1,007 1,102 597 588 668

10,478 12,655 12,823 5,784 7,517 8,269NET INTEREST INCOME 30,324 27,454 25,866 21,873 20,105 19,009IMPAIRMENT LOSSES 11, 13, 18 2,648 2,923 2,150 1,599 2,003 1,583NET INTEREST INCOME AFTER

IMPAIRMENT LOSSES 27,676 24,531 23,716 20,274 18,102 17,426OTHER INCOME

Trading gain on securities 4,839 5,908 2,948 3,983 4,717 2,712Fees and commissions 5,885 5,111 4,607 4,823 4,256 3,777Income from foreign exchange trading 2,042 1,682 1,770 1,652 1,372 1,596Income attributable to insurance operations 5 1,449 694 949 - - -Other operating income 24 9,514 7,878 6,687 8,556 6,771 5,917Gross receipts tax (1,555) (1,342) (1,070) (1,307) (1,122) (943)

22,174 19,931 15,891 17,707 15,994 13,059OTHER EXPENSES

Compensation and fringe benefits 26 10,641 10,470 10,270 8,292 8,262 7,917Occupancy and equipment-related expenses 14, 15, 25 8,040 7,193 6,534 6,460 5,798 5,080Other operating expenses 26 8,022 7,139 6,552 5,872 5,378 5,296

26,703 24,802 23,356 20,624 19,438 18,293INCOME BEFORE INCOME TAX 23,147 19,660 16,251 17,357 14,658 12,192PROVISION FOR INCOME TAX 27

Current 4,147 3,576 3,570 2,644 2,444 2,556Deferred 17 6 (418) (408) 245 (213) (274)

4,153 3,158 3,162 2,889 2,231 2,282NET INCOME FOR THE YEAR 18,994 16,502 13,089 14,468 12,427 9,910

Attributable to:Equity holders of BPI 18,811 16,352 12,899 14,468 12,427 9,910Non-controlling interests 183 150 190 - - -

18,994 16,502 13,089 14,468 12,427 9,910Earnings per share for net income attributable to

the equity holders of BPI during the year:Basic and diluted 23 5.19 4.60 3.63 3.99 3.49 2.79



STATEMENTS OF TOTAL COMPREHENSIVE INCOMEFOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2013


Consolidated Parent

Note 20132012

(Restated)2011

(Restated) 20132012

(Restated)2011

(Restated)NET INCOME FOR THE YEAR 18,994 16,502 13,089 14,468 12,427 9,910OTHER COMPREHENSIVE INCOME 23Items that may be subsequently reclassified

to profit or lossNet change in fair value reserve on available-

for-sale securities, net of tax effect (3,983) (718) 1,420 (3,671) (550) 1,495Fair value reserve on investments of

insurance subsidiaries, net of tax effect (309) 161 (63) - - -Share in other comprehensive income of

associates (88) 503 351 - - -Currency translation differences 233 (104) (4) - - -

Item that will not be reclassified to profit orlossActuarial (losses) gains on defined benefit

plan, net of tax effect (491) 1,752 (864) (416) 1,390 (720)Total other comprehensive (loss) income, net of

tax effect (4,638) 1,594 840 (4,087) 840 775TOTAL COMPREHENSIVE INCOME FOR

THE YEAR 14,356 18,096 13,929 10,381 13,267 10,685

Attributable to:Equity holders of BPI 14,230 17,937 13,737 10,381 13,267 10,685Non-controlling interests 126 159 192 - - -

14,356 18,096 13,929 10,381 13,267 10,685




STATEMENTS OF CHANGES IN CAPITAL FUNDSFOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2013


ConsolidatedAttributable to equity holders of BPI (Note 23)

Sharecapital

Sharepremium Reserves Surplus

Accumulatedother

comprehensiveincome (loss) Total

Non-controllinginterests

Totalequity

Balance, January 1, 2011 (Previouslyreported) 35,562 8,317 1,367 35,318 467 81,031 1,244 82,275

Effect of adoption of PAS 19 (R) - - - 46 (1,470) (1,424) - (1,424)Balance, January 1, 2011 (Restated) 35,562 8,317 1,367 35,364 (1,003) 79,607 1,244 80,851Comprehensive incomeNet income for the year - - - 12,899 - 12,899 190 13,089Other comprehensive income for the year - - - - 838 838 2 840Total comprehensive income for the

year - - - 12,899 838 13,737 192 13,929Transactions with ownersEmployee stock option plan:

Exercise of options - - (41) 41 - - - -Cash dividends - - - (6,401) - (6,401) - (6,401)Transfer from surplus to reserves - - 138 (138) - - - -Others (2) (2) - (4) - (4)Other changes in non-controlling interests - - - - - - (59) (59)Total transactions with owners - - 95 (6,500) - (6,405) (59) (6,464)Balance, December 31, 2011 35,562 8,317 1,462 41,763 (165) 86,939 1,377 88,316Balance, January 1, 2012 35,562 8,317 1,462 41,763 (165) 86,939 1,377 88,316Comprehensive incomeNet income for the year - - - 16,352 - 16,352 150 16,502Other comprehensive income for the year - - - - 1,585 1,585 9 1,594Total comprehensive income for the

year - - - 16,352 1,585 17,937 159 18,096Transactions with ownersCash dividends - - - (8,180) - (8,180) - (8,180)Transfer from surplus to reserves - - 141 (141) - - - -Other changes in non-controlling interests - - - - - - (110) (110)Total transactions with owners - - 141 (8,321) - (8,180) (110) (8,290)Balance, December 31, 2012 35,562 8,317 1,603 49,794 1,420 96,696 1,426 98,122(forward)




ConsolidatedAttributable to equity holders of BPI (Note 23)

Sharecapital


Accumulatedother


Non-controllinginterests

Totalequity

Balance, December 31, 2012 35,562 8,317 1,603 49,794 1,420 96,696 1,426 98,122Comprehensive incomeNet income for the year - - - 18,811 -

18,811183 18,994

Other comprehensive loss for the year - - - - (4,581) (4,581) (57) (4,638)Total comprehensive income (loss) for

the year - - - 18,811 (4,581) 14,230 126 14,356Transactions with ownersCash dividends - - (6,401) - (6,401) - (6,401)Transfer from surplus to reserves - - 76 (76) - - - -Others 1 (1) 1 9 - 10 - 10Other changes in non-controlling interests - - - - - - (280) (280)Total transactions with owners 1 (1) 77 (6,468) - (6,391) (280) (6,671)Balance, December 31, 2013 35,563 8,316 1,680 62,137 (3,161) 104,535 1,272 105,807






Parent (Note 23)

Sharecapital


Accumulatedother


Balance, January 1, 2011 (Previouslyreported) 35,562 8,317 1,336 16,542 (303) 61,454

Effect of adoption of PAS 19 (R) - - - 25 (1,035) (1,010)Balance, January 1, 2011 (Restated) 35,562 8,317 1,336 16,567 (1,338) 60,444Comprehensive incomeNet income for the year - - - 9,910 - 9,910Other comprehensive income for the year - - - - 775 775Total comprehensive income for the

year - - - 9,910 775 10,685Transactions with ownersEmployee stock option plan:

Exercise of options - - (11) 11 - -Cash dividends - - - (6,402) - (6,402)Transfer from surplus to reserves - - 137 (137) - -Others - - - (1) - (1)Total transactions with owners - - 126 (6,529) - (6,403)Balance, December 31, 2011 35,562 8,317 1,462 19,948 (563) 64,726Balance, January 1, 2012 35,562 8,317 1,462 19,948 (563) 64,726Comprehensive incomeNet income for the year - - - 12,427 - 12,427Other comprehensive income for the year - - - - 840 840Total comprehensive income for the

year - - - 12,427 840 13,267Transactions with ownersCash dividends - - - (8,180) - (8,180)Transfer from surplus to reserves - - 141 (141) - -Total transactions with owners - - 141 (8,321) - (8,180)Balance, December 31, 2012 35,562 8,317 1,603 24,054 277 69,813

(forward)




Parent (Note 23)

Sharecapital


Accumulatedother


Balance, December 31, 2012 35,562 8,317 1,603 24,054 277 69,813Comprehensive incomeNet income for the year - - - 14,468 - 14,468Other comprehensive loss for the year - - - (4,087) (4,087)Total comprehensive income (loss) for

the year - - - 14,468 (4,087) 10,381Transactions with ownersCash dividends - - - (6,401) - (6,401)Transfer from surplus to reserves - - 76 (76) - -Others 1 (1) 1 8 - 9Total transactions with owners 1 (1) 77 (6,469) - (6,392)Balance, December 31, 2013 35,563 8,316 1,680 32,053 (3,810) 73,802




STATEMENTS OF CASH FLOWSFOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2013


Consolidated Parent

Notes 20132012

(Restated)2011

(Restated) 20132012

(Restated)2011

(Restated)CASH FLOWS FROM OPERATING

ACTIVITIESIncome before income tax 23,147 19,660 16,251 17,357 14,658 12,192Adjustments for:

Impairment losses 11, 13, 18 2,648 2,923 2,150 1,599 2,003 1,583Depreciation and amortization 14, 15 3,459 3,346 3,040 2,125 2,188 1,921Share in net income of associates (590) (138) (216) - - -Dividend income 24 (28) (27) (47) (1,923) (1,383) (1,210)Interest income (42,244) (41,482) (40,071) (28,657) (28,585) (28,287)Interest expense 10,478 12,655 12,823 5,784 7,517 8,269

Operating loss before changes inoperating assets and liabilities (3,130) (3,063) (6,070) (3,715) (3,602) (5,532)

Changes in operating assets andliabilities

(Increase) decrease in:Due from Bangko Sentral ng

Pilipinas - - 54,303 - - 52,010Interbank loans receivable and

securities purchased underagreements to resell - - 3,859 - - 3,861

Trading securities, net 17,345 (9,887) (722) 16,291 (7,593) (1,236)Loans and advances, net (110,369) (74,049) (77,418) (91,710) (53,801) (62,188)Assets held for sale 434 1,868 2,328 900 1,759 2,137Assets attributable to insurance

operations (2,059) (724) (329) - -Other resources 3,212 (3,661) (4,295) 2,901 (3,603) (3,007)

Increase (decrease) in:Deposit liabilities 186,312 121,173 (38,665) 157,038 83,951 (47,522)Due to Bangko Sentral ng Pilipinas

and other banks 16 317 (283) 16 318 (285)Manager’s checks and demand

drafts outstanding 1,389 1,663 (56) 1,518 1,120 (95)Accrued taxes, interest and other

expenses 542 557 (536) 306 652 (654)Liabilities attributable to insurance

operations 2,267 856 724 - - -Derivative financial instruments (106) 387 154 (106) 608 154Deferred credits and other liabilities 3,250 3,949 (990) 3,157 3,191 (1,316)

Net cash from (used in) operations 99,103 39,386 (67,996) 86,596 23,000 (63,673)Interest received 42,407 41,152 40,467 28,927 27,479 28,623Interest paid (10,932) (12,418) (13,380) (6,149) (7,423) (8,780)Income taxes paid (5,243) (2,961) (2,813) (3,660) (2,079) (1,723)Net cash from (used in) operating

activities 125,335 65,159 (43,722) 105,714 40,977 (45,553)(forward)


STATEMENTS OF CASH FLOWSFOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2013


Consolidated Parent

Notes 20132012

(Restated)2011

(Restated) 20132012

(Restated)2011

(Restated)CASH FLOWS FROM INVESTING

ACTIVITIES(Increase) decrease in:

Available-for-sale securities, net 11 14,479 (32,756) 39,147 7,078 (28,286) 35,311Held-to-maturity securities 12 (19,695) 13,230 5,694 (17,879) 12,165 5,363Bank premises, furniture, fixtures and

equipment, net 14 (2,557) (2,748) (3,247) (1,406) (1,416) (1,784)Investment properties, net 909 (12) 3 912 (12) (2)Investment in subsidiaries and

associates, net (349) (24) (120) 302 (80) (39)Assets attributable to insurance

operations 936 (614) 183 - - -Dividends received 28 27 47 1,923 1,383 1,210Net cash (used in) from investing activities (6,249) (22,897) 41,707 (9,070) (16,246) 40,059CASH FLOWS FROM FINANCING

ACTIVITIESCash dividends paid (3,201) (11,380) (3,201) (3,201) (11,380) (3,201)Increase (decrease) in:

Bills payable (100) 7,144 (5,733) (2,973) 7,076 (7,356)Unsecured subordinated debt (5,000) - - - - -

Net cash used in financing activities (8,301) (4,236) (8,934) (6,174) (4,304) (10,557)NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS 110,785 38,026 (10,949) 90,470 20,427 (16,051)CASH AND CASH EQUIVALENTS

January 17

188,987 150,961 161,910 143,329 122,902 138,953December 31 299,772 188,987 150,961 233,799 143,329 122,902




NOTES TO FINANCIAL STATEMENTSAS AT DECEMBER 31, 2013 AND 2012 AND JANUARY 1, 2012 AND FOR EACH OF THE THREE YEARS

IN THE PERIOD ENDED DECEMBER 31, 2013

Note 1 - General Information

Bank of the Philippine Islands (“BPI” or the “Parent Bank”) is a domestic commercial bank with an expandedbanking license and has its registered office address, which is also its principal place of business, at BPI Building,Ayala Avenue corner Paseo de Roxas, Makati City. BPI and its subsidiaries as detailed in Note 2.3 (collectivelyreferred to as the “BPI Group”) offer a whole breadth of financial services that include corporate banking, consumerbanking, investment banking, asset management, corporate finance, securities distribution, and insurance services.At December 31, 2013, the BPI Group has 13,024 employees (2012 - 12,406 employees) and operates 825branches and 2,181 ATMs (2012 - 820 branches and 2,068 ATMs) to support its delivery of services. The BPIGroup also serves its customers through alternative electronic banking channels such as telephone, mobile phoneand the internet. The BPI shares have been traded in the Philippine Stock Exchange (PSE) sinceOctober 12, 1971. The Parent Bank was registered with the Securities and Exchange Commission (SEC) onJanuary 4, 1943. This license was extended for another 50 years on January 4, 1993.

These financial statements have been approved and authorized for issuance by the Board of Directors of theParent Bank on February 19, 2014.

Note 2 - Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these financial statements are set out below.These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The financial statements of the BPI Group have been prepared in accordance with Philippine Financial ReportingStandards (PFRS). The term PFRS in general includes all applicable PFRS, Philippine Accounting Standards(PAS), and interpretations of the Philippine Interpretations Committee (PIC), Standing Interpretations Committee(SIC) and International Financial Reporting Interpretations Committee (IFRIC) which have been approved by theFinancial Reporting Standards Council (FRSC) and adopted by the SEC.

As allowed by the SEC, the pre-need subsidiary of the Parent Bank continues to follow the provisions of thePre-Need Uniform Chart of Accounts (PNUCA) prescribed by the SEC and adopted by the InsuranceCommission.

The financial statements comprise the statement of condition, statement of income and statement of totalcomprehensive income shown as two statements, statement of changes in capital funds, statement of cash flowsand the notes.

These financial statements have been prepared under the historical cost convention, as modified by therevaluation of trading securities, available-for-sale financial assets and all derivative contracts.

The preparation of financial statements in conformity with PFRS requires the use of certain critical accountingestimates. It also requires management to exercise its judgment in the process of applying the BPI Group’saccounting policies. Changes in assumptions may have a significant impact on the financial statements in theperiod the assumptions changed. Management believes that the underlying assumptions are appropriate andthat the financial statements therefore fairly present the financial position and results of the BPI Group. Theareas involving a higher degree of judgment or complexity, or areas where assumptions and estimates aresignificant to the financial statements are disclosed in Note 4.

(2)

2.2 Changes in accounting policy and disclosures

New and amended standards adopted by the BPI Group

The following standards have been adopted by the BPI Group effective January 1, 2013 and have a materialimpact on the BPI Group:

� PAS 1 (Amendment), Financial Statement Presentation - Other Comprehensive Income (effectiveJuly 1, 2012). The main change resulting from these amendments is a requirement for entities to groupitems presented in other comprehensive income on the basis of whether they are potentially reclassifiable toprofit or loss subsequently (reclassification adjustments). The required change in presentation has beeneffected in the statement of total comprehensive income.

� PAS 19 (Revised), Employee Benefits (effective January 1, 2013). These amendments eliminate the corridorapproach and calculate finance costs on a net funding basis. The amendments also require recognition of allactuarial gains and losses in other comprehensive income as they occur and of all past service costs inprofit or loss. The amendments replace interest cost and expected return on plan assets with a net interestamount that is calculated by applying the discount rate to the net defined benefit asset (liability). See Notes29 and 33 for the impact of the adoption on the financial statements.

� PFRS 7 (Amendment), Financial instruments: Disclosures - Offsetting Financial Assets and FinancialLiabilities (effective January 1, 2013). This amendment includes new disclosures to facilitate comparisonbetween those entities that prepare PFRS financial statements to those that prepare financial statements inaccordance with United States Generally Accepted Accounting Principles (US GAAP). See Note 3.3.4 forthe disclosure required by the amended standard.

� PFRS 12, Disclosures of Interests in Other Entities (effective January 1, 2013). This new standard includesthe disclosure requirements for all forms of interests in other entities, including joint arrangements,associates, structured entities and other off balance sheet vehicles. See Note 16 for the disclosures requiredby the new standard.

� PFRS 13, Fair Value Measurement (effective January 1, 2013). This new standard aims to improveconsistency and reduce complexity by providing a clarified definition of fair value and a single source of fairvalue measurement and disclosure requirements for use across PFRS. The requirements, which are largelyaligned with IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance onhow it should be applied where its use is already required or permitted by other standards within PFRS�Apart from the additional disclosures required by PFRS 13, there is no other significant impact on thefinancial statements as the current fair value measurement followed by the BPI Group is already consistentwith the requirements of the new standard. See Note 3.5 for the disclosures required by the new standard.

New standards, amendments and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are effective for annual periodsbeginning after January 1, 2013, and have not been applied in preparing these financial statements. None ofthese is expected to have a significant effect on the financial statements, except the following as set out below:

� PFRS 9, Financial Instruments. This new standard addresses the classification, measurement andrecognition of financial assets and financial liabilities. It replaces the parts of PAS 39, Financial Instruments:Recognition and Measurement that relate to the classification and measurement of financial instruments,and hedge accounting. PFRS 9 requires financial assets to be classified into two measurement categories:those measured as at fair value and those measured at amortized cost. The determination is made at initialrecognition. The classification depends on the entity’s business model for managing its financial instrumentsand the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retainsmost of the PAS 39 requirements. The main change is that, in cases where the fair value option is taken forfinancial liabilities, part of the fair value change due to an entity’s own credit risk is recorded in othercomprehensive income rather than in profit or loss, unless this creates an accounting mismatch. PFRS alsodetails the changes in requirements to hedge accounting that will allow entities to better reflect their riskmanagement activities in the financial statements. The mandatory effective date of PFRS 9, which is forannual periods beginning January 1, 2015 has been deferred and left open pending the finalization of theimpairment classification and measurement requirements. The BPI Group has yet to assess the full impactof PFRS 9 and intends to adopt PFRS 9 upon completion of the IASB project. The BPI Group will alsoconsider the impact of the remaining phase of PFRS 9 when issued�


(3)

There are no other standards, amendments or interpretations that are not yet effective that have a materialimpact on the BPI Group.

2.3 Consolidation

The consolidated financial statements comprise the financial statements of the BPI Group as atDecember 31, 2013. The subsidiaries financial statements are prepared for the same reporting year as theParent Bank. The consolidated financial statements include the financial statements of the Parent Bank and thefollowing subsidiaries as at December 31:

SubsidiariesCountry of

incorporation Principal activities% of ownership

2013 2012BPI Family Savings Bank, Inc. Philippines Banking 100 100BPI Capital Corporation Philippines Investment house 100 100BPI Leasing Corporation Philippines Leasing 100 100BPI Direct Savings Bank, Inc. Philippines Banking 100 100BPI International Finance Limited Hong Kong Financing 100 100BPI Europe Plc. England and Wales Banking (deposit) 100 100BPI Securities Corp. Philippines Securities dealer 100 100BPI Card Finance Corp. Philippines Financing 100 100Filinvest Algo Financial Corp. Philippines Financing 100 100BPI Rental Corporation. Philippines Rental 100 100BPI Investment Management Inc. Philippines Investment management 100 100Santiago Land Dev. Corp. Philippines Land holding 100 100BPI Operations Management Corp. Philippines Operations management 100 100BPI Computer Systems Corp. Philippines Business systems service 100 100BPI Foreign Exchange Corp. Philippines Foreign exchange 100 100BPI Express Remittance Corp. USA USA Remittance 100 100BPI Express Remittance Corp. Nevada USA Remittance 100 100BPI Express Remittance Center HK (Ltd.) Hong Kong Remittance 100 100Green Enterprises S. R. L. in Liquidation

(formerly BPI Express RemittanceEurope, S.p.A.) Italy Remittance 100 100

Prudential Investments, Inc. Philippines Investment house - 100First Far - East Development Corporation Philippines Real estate 100 100FEB Stock Brokers, Inc. Philippines Securities dealer 100 100Citytrust Securities Corporation Philippines Securities dealer 100 100BPI Express Remittance Spain S.A Spain Remittance 100 100FEB Speed International Philippines Remittance 100 100

AF Holdings and Management Corp. PhilippinesFinancial management

consultancy 100 100Ayala Plans, Inc Philippines Pre-need 98.67 98.67FGU Insurance Corporation Philippines Non-life insurance 94.62 94.62BPI/MS Insurance Corporation Philippines Non-life insurance 50.85 50.85BPI Globe BanKO, Inc. Philippines Banking 40 40

BPI has control over BPI Globe BanKO, Inc. since BPI is largely involved in key decisions concerning financialand operating policies and activities of, and provision of technological support and technical know-how to BPIGlobe BanKO, Inc.

(4)

(a) Subsidiaries

Subsidiaries are all entities over which the BPI Group has control. The BPI Group controls an entity when it isexposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect thosereturns through its power over the entity. The BPI Group also assesses existence of control where it does nothave more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the BPI Group’s voting rightsrelative to the size and dispersion of holdings of other shareholders give the BPI Group the power to govern thefinancial and operating policies.

Subsidiaries are fully consolidated from the date on which control is transferred to the BPI Group. They are de-consolidated from the date that control ceases.

The BPI Group applies the acquisition method of accounting to account for business combinations. Theconsideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, theliabilities incurred to the former owners of the acquiree and the equity interests issued by the BPI Group. Theconsideration transferred includes the fair value of any asset or liability resulting from a contingent considerationarrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities andcontingent liabilities assumed in a business combination are measured initially at their fair values at theacquisition date. On an acquisition-by-acquisition basis, the BPI Group recognizes any non-controlling interest inthe acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’sidentifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previouslyheld equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the BPI Group is recognized at fair value at the acquisitiondate. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset orliability is recognized in accordance with PAS 39 either in profit or loss or as a change to other comprehensiveincome. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement isnot accounted for within equity.

The excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in theacquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value ofthe BPI Group’s share of the identifiable net assets acquired is recorded as goodwill. If the total of considerationtransferred, non-controlling interest recognized and previously held interest measured is less than the fair valueof the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognizeddirectly in profit or loss.

Inter-company transactions, balances and unrealized gains on transactions between group companies areeliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed wherenecessary to ensure consistency with the policies adopted by the BPI Group, except for the pre-need subsidiarywhich follows the provisions of the PNUCA as allowed by the SEC.

When the BPI Group ceases to have control, any retained interest in the entity is re-measured to its fair value atthe date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is theinitial carrying amount for purposes of subsequently accounting for the retained interest as an associate, jointventure or financial asset. In addition, any amounts previously recognized in other comprehensive income inrespect of that entity are accounted for as if the BPI Group had directly disposed of the related assets orliabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified toprofit or loss.

(b) Transactions with non-controlling interests

Transactions with non-controlling interests that do not result in loss of control are accounted for as equitytransactions - that is, as transactions with the owners in their capacity as owners. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of thecarrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.


(5)

Interests in the equity of subsidiaries not attributable to the Parent Bank are reported in consolidated equity asnon-controlling interests. Profits or losses attributable to non-controlling interests are reported in the statementof income as net income (loss) attributable to non-controlling interests.

(c) Associates

Associates are all entities over which the BPI Group has significant influence but not control, generallyaccompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates in theconsolidated financial statements are accounted for using the equity method of accounting. Under the equitymethod, the investment is initially recognized at cost and the carrying amount is increased or decreased torecognize the investor’s share of the profit or loss of the investee after the date of acquisition. The BPI Group’sinvestment in associates includes goodwill identified on acquisition (net of any accumulated impairment loss).

If the ownership interest in an associate is reduced but significant influence is retained, a proportionate share ofthe amounts previously recognized in other comprehensive income is reclassified to profit or loss whereappropriate.

The BPI Group’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and itsshare of post-acquisition movements in reserves is recognized in other comprehensive income. The cumulativepost-acquisition movements are adjusted against the carrying amount of the investment. When the BPI Group’sshare of losses in an associate equals or exceeds its interest in the associate, including any other unsecuredreceivables, the BPI Group does not recognize further losses, unless it has incurred legal or constructiveobligations or made payments on behalf of the associate.

The BPI Group determines at each reporting date whether there is any objective evidence that the investment inthe associate is impaired. If this is the case, the BPI Group calculates the amount of impairment as thedifference between the recoverable amount of the associate and its carrying value and recognizes the amountadjacent to ‘share of profit (loss) of an associate’ in profit or loss.

Unrealized gains on transactions between the BPI Group and its associates are eliminated to the extent of theBPI Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction providesevidence of an impairment of the asset transferred. Accounting policies of associates have been changed wherenecessary to ensure consistency with the policies adopted by the BPI Group.

2.4 Investments in subsidiaries and associates

Investments in subsidiaries and associates in the Parent Bank’s separate financial statements are accounted forusing the cost method in accordance with PAS 27. Under this method, income from investment is recognized inprofit or loss only to the extent that the investor receives distributions from accumulated profits of the investeearising after the acquisition date. Distributions received in excess of such profits are regarded as a recovery ofinvestment and are recognized as reduction of the cost of the investment.

The Parent Bank recognizes a dividend from a subsidiary or associate in profit or loss in its separate financialstatements when its right to receive the dividend is established.

The Parent Bank determines at each reporting date whether there is any indicator of impairment that theinvestment in the subsidiary or associate is impaired. If this is the case, the Parent Bank calculates the amountof impairment as the difference between the recoverable amount and carrying value and the difference isrecognized in profit or loss.

Investments in subsidiaries and associates are derecognized upon disposal or when no future economic benefitsare expected to be derived from the subsidiaries and associates at which time the cost and the relatedaccumulated impairment loss are removed in the statement of condition. Any gains and losses on disposal isdetermined by comparing the proceeds with the carrying amount of the investment and recognized in profit orloss.

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2.5 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chiefexecutive officer who allocates resources to, and assesses the performance of the operating segments of theBPI Group.

All transactions between business segments are conducted on an arm´s length basis, with intra-segmentrevenue and costs being eliminated upon consolidation. Income and expenses directly associated with eachsegment are included in determining business segment performance.

In accordance with PFRS 8, the BPI Group has the following main banking business segments: consumerbanking, corporate banking and investment banking. Its insurance business is assessed separately from thesebanking business segments (Note 6).

2.6 Cash and cash equivalents

Cash and cash equivalents consist of Cash and other cash items, Due from Bangko Sentral ng Pilipinas (BSP),Due from other banks, and Interbank loans receivable and securities purchased under agreements to resell withmaturities of less than three months from the date of acquisition and that are subject to insignificant risk ofchanges in value.

2.7 Repurchase and reverse repurchase agreements

Securities sold subject to repurchase agreements (‘repos’) are reclassified in the financial statements as pledgedassets when the transferee has the right by contract or custom to sell or repledge the collateral; the counterpartyliability is included in deposits from banks or deposits from customers, as appropriate. The difference betweensale and repurchase price is treated as interest and accrued over the life of the agreements using the effectiveinterest method.

Securities purchased under agreements to resell (‘reverse repos’) are recorded as loans and advances to otherbanks and customers and included in the statement of condition under “Interbank loans receivable and securitiespurchased under agreements to resell”. Securities lent to counterparties are also retained in the financialstatements.

2.8 Financial assets

2.8.1 Classification

The BPI Group classifies its financial assets in the following categories: financial assets at fair value throughprofit or loss, loans and receivables, held-to-maturity securities and available-for-sale securities. Theclassification depends on the purpose for which the financial assets are acquired. Management determines theclassification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading and those designated at fair value throughprofit or loss at inception.

A financial asset is classified as held for trading if it is acquired principally for the purpose of selling orrepurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managedtogether and for which there is evidence of a recent actual pattern of short-term profit-taking. Financial assetsheld for trading (other than derivatives) are shown as “Trading securities” in the statement of condition.

Derivatives are also categorized as held for trading unless they are designated as hedging instruments.

Financial assets designated at fair value through profit or loss at inception are those that are managed and theirperformance is evaluated on a fair value basis, in accordance with a documented investment strategy.Information about these financial assets is provided internally on a fair value basis to the BPI Group’s keymanagement personnel. The BPI Group has no financial assets that are specifically designated at fair valuethrough profit or loss.


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(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments: (i) that are notquoted in an active market, (ii) with no intention of being traded, and (iii) that are not designated as available-for-sale. Significant accounts falling under this category include loans and advances, cash and other cash items,due from BSP and other banks, interbank loans receivable and securities purchased under agreements to reselland accounts receivable included under other resources.

(c) Held-to-maturity securities

Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixedmaturities that the BPI Group’s management has the positive intention and ability to hold to maturity. If the BPIGroup were to sell other than an insignificant amount of held-to-maturity assets, the entire category would betainted and reclassified as available-for-sale.

(d) Available-for-sale securities

Available-for-sale securities are non-derivative financial assets that are either designated in this category or notclassified in any of the other categories.

2.8.2 Recognition and measurement

(a) Initial recognition and measurement

Regular-way purchases and sales of financial assets at fair value through profit or loss, held-to-maturitysecurities and available-for-sale securities are recognized on trade date, the date on which the BPI Groupcommits to purchase or sell the asset. Loans and receivables are recognized upon origination when cash isadvanced to the borrowers or when the right to receive payment is established. Financial assets not carried atfair value through profit or loss are initially recognized at fair value plus transaction costs. Financial assetscarried at fair value through profit or loss are initially recognized at fair value; and transaction costs arerecognized in profit or loss.

(b) Subsequent measurement

Available-for-sale securities and financial assets at fair value through profit or loss are subsequently carried atfair value. Loans and receivables and held-to-maturity securities are subsequently carried at amortized costusing the effective interest method. Gains and losses arising from changes in the fair value of financial assets atfair value through profit or loss are included in the statement of income (as “Trading gain/loss on securities”) inthe year in which they arise. Changes in the fair value of monetary and non-monetary securities classified asavailable-for-sale are recognized directly in other comprehensive income, until the financial asset isderecognized or impaired at which time the cumulative fair value adjustments previously recognized in othercomprehensive income should be recognized in profit or loss. However, interest is calculated on these securitiesusing the effective interest method and foreign currency gains and losses on monetary assets classified asavailable-for-sale are recognized in profit or loss. Dividends on equity instruments are recognized in profit or losswhen the BPI Group’s right to receive payment is established.

2.8.3 Reclassification

The BPI Group may choose to reclassify a non-derivative financial asset held for trading out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financialassets other than loans and receivables are permitted to be reclassified out of the held-for-trading category onlyin rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. Inaddition, the BPI Group may choose to reclassify financial assets that would meet the definition of loans andreceivables out of the held-for-trading or available-for-sale categories if the BPI Group has the intention andability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification.

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Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost oramortized cost as applicable, and no reversals of fair value gains or losses recorded before reclassification dateare subsequently made. Effective interest rates for financial assets reclassified to loans and receivables andheld-to-maturity categories are determined at the reclassification date. Further increases in estimates of cashflows adjust effective interest rates prospectively.

2.8.4 Derecognition

Financial assets are derecognized when the contractual rights to receive the cash flows from these assets haveceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership ofthe assets are also transferred (that is, if substantially all the risks and rewards have not been transferred, theBPI Group tests control to ensure that continuing involvement on the basis of any retained powers of controldoes not prevent derecognition).

2.9 Impairment of financial assets

(a) Assets carried at amortized cost

The BPI Group assesses at each reporting date whether there is objective evidence that a financial asset orgroup of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairmentlosses are incurred only if there is objective evidence of impairment as a result of one or more events thatoccurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact onthe estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The criteria that the BPI Group uses to determine that there is objective evidence of an impairment loss include:� Delinquency in contractual payments of principal or interest;� Cash flow difficulties experienced by the borrower;� Breach of loan covenants or conditions;� Initiation of bankruptcy proceedings;� Deterioration of the borrower’s competitive position; and� Deterioration in the value of collateral.

The BPI Group first assesses whether objective evidence of impairment exists individually for financial assetsthat are individually significant, and collectively for financial assets that are not individually significant. If the BPIGroup 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 characteristicsand collectively assesses them for impairment. Financial assets that are individually assessed for impairmentand for which an impairment loss is or continues to be recognized are not included in a collective assessment ofimpairment.

The amount of impairment loss is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows (excluding future credit losses that have not been incurred)discounted at the financial asset’s original effective interest rate (recoverable amount). The calculation ofrecoverable amount of a collateralized financial asset reflects the cash flows that may result from foreclosureless costs of obtaining and selling the collateral, whether or not foreclosure is probable. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is thecurrent effective interest rate determined under the contract. The carrying amount of the asset is reducedthrough the use of an allowance account and the amount of loss is recognized in profit or loss.

For purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar creditrisk characteristics (i.e., on the basis of the BPI Group’s grading process that considers asset type, industry,geographical location, collateral type, past-due status and other relevant factors). Those characteristics arerelevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ abilityto pay all amounts due according to the contractual terms of the assets being evaluated.


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Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated onthe basis of the contractual cash flows of the assets in the BPI Group and historical loss experience for assetswith credit risk characteristics similar to those in the BPI Group. Historical loss experience is adjusted on thebasis of current observable data to reflect the effects of current conditions that did not affect the period on whichthe historical loss experience is based and to remove the effects of conditions in the historical period that do notcurrently exist. The methodology and assumptions used for estimating future cash flows are reviewed regularlyto reduce any differences between loss estimates and actual loss experience.

When a loan is uncollectible, it is written off against the related allowance for loan impairment. Such loans arewritten off after all the necessary procedures have been completed and the amount of loss has been determined.

If in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectivelyto 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. Subsequentrecoveries of amounts previously written-off are credited to impairment loss in the statement of income.

(b) Assets classified as available-for-sale

The BPI Group assesses at each reporting date whether there is an objective evidence that a security classifiedas available-for-sale is impaired. For debt securities, the BPI Group uses the criteria mentioned in (a) above.For an equity security classified as available-for-sale, a significant or prolonged decline in the fair value belowcost is considered in determining whether the securities are impaired. Generally, the BPI Group treats‘significant’ as 20% or more and ‘prolonged’ as greater than twelve months. The cumulative loss (differencebetween the acquisition cost and the current fair value less any impairment loss on that financial asset previouslyrecognized in profit or loss) is removed from other comprehensive income and recognized in profit or loss whenthe asset is determined to be impaired. If in a subsequent period, the fair value of a debt instrument previouslyimpaired increases and the increase can be objectively related to an event occurring after the impairment losswas recognized, the impairment loss is reversed through profit or loss. Reversal of impairment lossesrecognized previously on equity instruments is made directly to other comprehensive income.

(c) Renegotiated loans

Loans that are either subject to individual or collective impairment assessment and whose terms have beenrenegotiated are no longer considered to be past due but are treated as new loans.

2.10 Financial liabilities

2.10.1 Classification

The BPI Group classifies its financial liabilities in the following categories: financial liabilities at fair value throughprofit or loss and financial liabilities at amortized cost.

(a) Financial liabilities at fair value through profit or loss

This category comprises two sub-categories: financial liabilities classified as held for trading, and financialliabilities designated by the BPI Group as at fair value through profit or loss upon initial recognition.

A financial liability is classified as held for trading if it is acquired or incurred principally for the purpose of sellingor repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managedtogether and for which there is evidence of a recent actual pattern of short-term profit-taking. Derivatives arealso categorized as held for trading unless they are designated and effective as hedging instruments. Gains andlosses arising from changes in fair value of financial liabilities classified as held for trading are included in thestatement of income and are reported as “Trading gains/losses”. The BPI Group has no financial liabilities thatare designated at fair value through profit loss.

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(b) Other liabilities measured at amortized cost

Financial liabilities that are not classified as at fair value through profit or loss fall into this category and aremeasured at amortized cost. Financial liabilities measured at amortized cost include deposits from customersand banks, bills payable, amounts due to BSP and other banks, manager’s checks and demand draftsoutstanding, subordinated notes and other financial liabilities under deferred credits and other liabilities.

2.10.2 Recognition and measurement

(a) Initial recognition and measurement

Financial liabilities not carried at fair value through profit or loss are initially recognized at fair value plustransaction costs. Financial liabilities carried at fair value through profit or loss are initially recognized at fairvalue; and transaction costs are recognized as expense in profit or loss.

(b) Subsequent measurement

Financial liabilities at fair value through profit or loss are subsequently carried at fair value. Other liabilitiesare measured at amortized cost using the effective interest method.

2.10.3 Derecognition

Financial liabilities are derecognized when they have been redeemed or otherwise extinguished (i.e. when theobligation is discharged or is cancelled or has expired). Collateral (shares and bonds) furnished by the BPIGroup under standard repurchase agreements and securities lending and borrowing transactions is notderecognized because the BPI Group retains substantially all the risks and rewards on the basis of thepredetermined repurchase price, and the criteria for derecognition are therefore not met.

2.11 Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date.

The fair value of a non-financial asset is measured based on its highest and best use. The asset’s current use ispresumed to be its highest and best use.

The fair value of financial and non-financial liabilities takes into account non-performance risk, which is the riskthat the entity will not fulfill an obligation.

The BPI Group classifies its fair value measurements using a fair value hierarchy that reflects the significance ofthe inputs used in making the measurements. The fair value hierarchy has the following levels:

� Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includeslisted equity securities and debt instruments on exchanges (for example, Philippine Stock Exchange, Inc.,Philippine Dealing and Exchange Corp., etc.).

� Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,either directly (that is, as prices) or indirectly (that is, derived from prices). This level includes the majority ofthe over-the-counter (“OTC”) derivative contracts. The primary source of input parameters like LIBOR yieldcurve or counterparty credit risk is Bloomberg.

� Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).This level includes equity investments and debt instruments with significant unobservable components. Thishierarchy requires the use of observable market data when available. The BPI Group considers relevant andobservable market prices in its valuations where possible. The BPI Group has no assets or liabilitiesclassified under Level 3 as at December 31, 2013 and 2012.

The appropriate level is determined on the basis of the lowest level input that is significant to the fair valuemeasurement.


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(a) Financial instruments

For financial instruments traded in active markets, the determination of fair values of financial assets andfinancial liabilities is based on quoted market prices or dealer price quotations. This includes listed equitysecurities and quoted debt instruments on major exchanges and broker quotes mainly from Bloomberg.

A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularlyavailable from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and thoseprices represent actual and regularly occurring market transactions on an arm’s length basis. If the above criteriaare not met, the market is regarded as being inactive. Indications that a market is inactive are when there is awide bid-offer spread or significant increase in the bid-offer spread or there are few recent transactions.

For all other financial instruments, fair value is determined using valuation techniques. In these techniques, fairvalues are estimated from observable data in respect of similar financial instruments, using models to estimatethe present value of expected future cash flows or other valuation techniques, using inputs (for example, LIBORyield curve, FX rates, volatilities and counterparty spreads) existing at reporting dates. The BPI Group useswidely recognized valuation models for determining fair values of non-standardized financial instruments of lowercomplexity, such as options or interest rate and currency swaps. For these financial instruments, inputs intomodels are generally market observable.

For more complex instruments, the BPI Group uses internally developed models, which are usually based onvaluation methods and techniques generally recognized as standard within the industry. Valuation models areused primarily to value derivatives transacted in the OTC market, unlisted debt securities (including those withembedded derivatives) and other debt instruments for which markets were or have become illiquid. Some of theinputs to these models may not be market observable and are therefore estimated based on assumptions.

The fair value of OTC derivatives is determined using valuation methods that are commonly accepted in thefinancial markets, such as present value techniques and option pricing models. The fair value of foreignexchange forwards is generally based on current forward exchange rates, with the resulting value discountedback to present value.

In cases when the fair value of unlisted equity instruments cannot be determined reliably, the instruments arecarried at cost less impairment. The fair value for loans and advances as well as liabilities to banks andcustomers are determined using a present value model on the basis of contractually agreed cash flows, takinginto account credit quality, liquidity and costs. The fair values of contingent liabilities and irrevocable loancommitments correspond to their carrying amounts.

(b) Non-financial assets or liabilities

The BPI Group uses valuation techniques that are appropriate in the circumstances and applies the techniqueconsistently. Commonly used valuation techniques are as follows:

� Market approach - A valuation technique that uses observable inputs, such as prices, broker quotes andother relevant information generated by market transactions involving identical or comparable assets orgroup of assets.

� Income approach - A valuation technique that converts future amounts (e.g., cash flows or income andexpenses) to a single current (i.e., discounted) amount. The fair value measurement is determined on thebasis of the value indicated by current market expectations about those future amounts.

� Cost approach - A valuation technique that reflects the amount that would be required currently to replacethe service capacity of an asset (often referred to as current replacement cost).

The fair values were determined in reference to observable market inputs reflecting orderly transactions, i.e.market listings, published broker quotes and transacted deals from similar and comparable assets, adjusted todetermine the point within the range that is most representative of the fair value under current market conditions.The fair values of BPI Group’s investment properties and foreclosed assets (shown as Assets held for sale) fallunder level 2 of the fair value hierarchy. The BPI Group has no non-financial assets or liabilities classified underLevel 3 as at December 31, 2013 and 2012.

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2.12 Classes of financial instruments

The BPI Group classifies the financial instruments into classes that reflect the nature of information and take intoaccount the characteristics of those financial instruments. The classification made can be seen in the tablebelow:

Classes (as determined by the BPI Group)Categories

(as defined by PAS 39) Main classes Sub-classesFinancial assets Financial assets at fair value

through profit or loss- Trading securities - Debt securities

- Equity securities- Derivative financial assets- Cash and other cash items

Loans and receivables

- Loans and advancesto banks

- Due from BSP- Due from other banks- Interbank loans receivable andsecurities purchased under agreementsto resell

- Loans and advances tocustomers

- Loans toindividuals(retail)

- Real estatemortgages

- Auto loans- Credit cards- Others

- Loans tocorporateentities

- Large corporatecustomers

- Small and medium-sized enterprises

- Others - Accounts receivables- Sales contracts receivable- Rental deposits- Other accrued interest and feesreceivable

Held-to-maturity investments - Investment securities(debt securities)

- Government- Others

Available-for-sale financialassets

- Investment securities(debt securities)

- Government- Others

- Investment securities(equity securities)

- Listed- Unlisted

Financial liabilities Financial liabilities at fairvalue through profit or loss - Derivative financial liabilities

Financial liabilities atamortized cost

- Deposits fromcustomers

- Demand- Savings- Time

- Deposits from banks- Bills payable- Due to BSP and other

banks- Manager’s check and

demand drafts outstanding- Interest payable- Unsecured subordinated

debt- Other liabilities - Accounts payable

- Outstanding acceptances- Dividend payable

Off-balance sheetfinancialinstruments

Loan commitments

Guarantees, acceptances and other financial facilities


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2.13 Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of condition when there isa legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, orrealize the asset and settle the liability simultaneously.

2.14 Derivative financial instruments

Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and aresubsequently re-measured at their fair value. Fair values are obtained from quoted market prices in activemarkets including recent market transactions, and valuation techniques (for example for structured notes),including discounted cash flow models and options pricing models, as appropriate. All derivatives are carried asassets when fair value is positive and as liabilities when fair value is negative.

Certain derivatives embedded in other financial instruments are treated as separate derivatives when theireconomic characteristics and risks are not closely related to those of the host contract and the host contract isnot carried at fair value through profit or loss. The assessment of whether an embedded derivative is required tobe separated from the host contract is done when the BPI Group first becomes a party to the contract.Reassessment of embedded derivative is only done when there are changes in the contract that significantlymodify the contractual cash flows. The embedded derivatives are measured at fair value with changes in fairvalue recognized in profit or loss.

The BPI Group’s derivative instruments do not qualify for hedge accounting. Changes in the fair value of anyderivative instrument that does not qualify for hedge accounting are recognized immediately in the statement ofincome under “Trading gain/loss on securities”.

2.15 Bank premises, furniture, fixtures and equipment

Land and buildings comprise mainly of branches and offices. All bank premises, furniture, fixtures andequipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure thatis directly attributable to the acquisition of an asset which comprises its purchase price, import duties and anydirectly attributable costs of bringing the asset to its working condition and location for its intended use.

Subsequent costs are included in the asset’s carrying amount or are recognized as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow to the BPIGroup and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profitor loss during the year in which they are incurred.

Land is not depreciated. Depreciation for buildings and furniture and equipment is calculated using the straight-line method to allocate cost or residual values over the estimated useful lives of the assets, as follows:

Building 25-50 yearsFurniture and equipment 3-5 yearsEquipment for lease 2-8 years

Leasehold improvements are depreciated over the shorter of the lease term (ranges from 5 to 10 years) and theuseful life of the related improvement (ranges from 5 to 10 years). Major renovations are depreciated over theremaining useful life of the related asset.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carryingamount may not be recoverable.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amountis greater than its estimated recoverable amount. The recoverable amount is the higher of an asset’s fair valueless costs to sell and value in use. Bank premises, furniture, fixtures and equipment with carrying value ofP56 million were fully impaired as at December 31, 2013 (2012 - nil).

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An item of Bank premises, furniture, fixtures and equipment is derecognized upon disposal or when no futureeconomic benefits are expected to arise from the continued use of the asset. Any gain or loss arising onderecognition of the asset (calculated as the difference between the net disposal proceeds and the carryingamount of the item) is included in profit or loss in the period the item is derecognized.

2.16 Investment properties

Properties that are held either to earn rental income or for capital appreciation or both, and that are notsignificantly occupied by the BPI Group are classified as investment properties. Transfers to, and from,investment property are made when, and only when, there is a change in use, evidenced by:

(a) Commencement of owner-occupation, for a transfer from investment property to owner-occupied property;(b) Commencement of development with a view of sale, for a transfer from investment property to real

properties held-for-sale and development;(c) End of owner occupation, for a transfer from owner-occupied property to investment property; or(d) Commencement of an operating lease to another party, for a transfer from real properties held-for-sale and

development to investment property.

Transfers to and from investment property do not result in gain or loss.

Investment properties comprise land and building. Investment properties are measured initially at cost, includingtransaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulateddepreciation and impairment losses, if any. Depreciation on investment property is determined using the samepolicy as applied to Bank premises, furniture, fixtures, and equipment. Impairment test is conducted when thereis an indication that the carrying amount of the asset may not be recovered. An impairment loss is recognized forthe amount by which the property’s carrying amount exceeds its recoverable amount, which is the higher of theproperty’s fair value less costs to sell and value in use.

An item of investment properties is derecognized upon disposal or when no future economic benefits are expectedto arise from the continued use of the asset. Any gains and losses arising on derecognition of the asset (calculatedas the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or lossin the period the item is derecognized.

2.17 Foreclosed assets

Assets foreclosed shown as Assets held for sale in the statement of condition are accounted for at the lower of costand fair value less cost to sell similar to the principles of PFRS 5. The cost of assets foreclosed includes thecarrying amount of the related loan less allowance for impairment at the time of foreclosure. Impairment loss isrecognized for any subsequent write-down of the asset to fair value less cost to sell.

Foreclosed assets not classified as Assets held for sale are accounted for in any of the following classification usingthe measurement basis appropriate to the asset as follows:

(a) Investment property is accounted for using the cost model under PAS 40;

(b) Bank-occupied property is accounted for using the cost model under PAS 16; and

(c) Financial assets are classified as available-for-sale.

2.18 Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the BPI Group’s share in the netidentifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions ofsubsidiaries is included in “Miscellaneous assets” under Other resources in the consolidated financial statements.Goodwill on acquisitions of associates is included in Investments in subsidiaries and associates. Separatelyrecognized goodwill is carried at cost less accumulated impairment losses. Gains and losses on the disposal of asubsidiary/associate include carrying amount of goodwill relating to the subsidiary/associate sold.

Goodwill is an indefinite-lived intangible asset and hence not subject to amortization.


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Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each cash-generating unit isrepresented by each primary reporting segment.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstancesindicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is thehigher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expenseand is not subsequently reversed.

(b) Contractual customer relationships

Contractual customer relationships acquired in a business combination are recognized at fair value at theacquisition date. The contractual customer relationships have finite useful lives and are carried at cost lessaccumulated amortization. Amortization is calculated using the straight-line method over the expected life of thecustomer relationship.

(c) Computer software

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to usethe specific software. These costs are amortized on a straight-line basis over the expected useful lives (three to fiveyears). Computer software is included in “Miscellaneous assets” under Other resources.

Costs associated with developing or maintaining computer software programs are recognized as an expense asincurred. Development costs that are directly attributable to the design and testing of identifiable and uniquesoftware products controlled by the BPI Group are recognized as intangible assets when the following criteria aremet:

� it is technically feasible to complete the software product so that it will be available for use;� management intends to complete the software product and use or sell it;� there is an ability to use or sell the software product;� it can be demonstrated how the software product will generate probable future economic benefits;� adequate technical, financial and other resources to complete the development and to use or sell the

software product are available; and� the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalized as part of the software product include the software developmentemployee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognized as an expense when incurred.Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.

2.19 Impairment of non-financial assets

Assets that have indefinite useful lives - for example, goodwill or intangible assets not ready for use - are not subjectto amortization and are tested annually for impairment. Assets that have definite useful lives are subject toamortization and are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’scarrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value lesscosts to sell and value in use. For purposes of assessing impairment, assets are grouped at the lowest levels forwhich there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwillthat suffered impairment are reviewed for possible reversal of impairment at each reporting date.

2.20 Borrowings and borrowing costs

The BPI Group’s borrowings consist mainly of bills payable and unsecured subordinated debt. Borrowings arerecognized initially at fair value, being their issue proceeds, net of transaction costs incurred. Borrowings aresubsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and theredemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset arecapitalized as part of the cost of the asset. All other borrowing costs are expensed as incurred. The BPI Group hasno qualifying asset as at December 31, 2013 and 2012.

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2.21 Interest income and expense

Interest income and expense are recognized in profit or loss for all interest-bearing financial instruments using theeffective interest method.

The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liabilityand of allocating the interest income or interest expense over the relevant period. The effective interest rate is therate that exactly discounts estimated future cash payments or receipts through the expected life of the financialinstrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financialliability.

When calculating the effective interest rate, the BPI Group estimates cash flows considering all contractual terms ofthe financial instrument but does not consider future credit losses. The calculation includes all fees paid or receivedbetween parties to the contract that are an integral part of the effective interest rate, transaction costs and all otherpremiums 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 ofmeasuring impairment loss.

2.22 Fees and commission income

Fees and commissions are generally recognized on an accrual basis when the service has been provided.Commission and fees arising from negotiating or participating in the negotiation of a transaction for a third party(i.e. the arrangement of the acquisition of shares or other securities, or the purchase or sale of businesses) arerecognized on completion of underlying transactions. Portfolio and other management advisory and service feesare recognized based on the applicable service contracts, usually on a time-proportionate basis. Assetmanagement fees related to investment funds are recognized ratably over the period in which the service isprovided.

2.23 Dividend income

Dividend income is recognized in profit or loss when the BPI Group’s right to receive payment is established.

2.24 Credit card income

Credit card income is recognized upon receipt from merchants of charges arising from credit card transactions.These are computed based on rates agreed with merchants and are deducted from the payments toestablishments.

2.25 Foreign currency translation

(a) Functional and presentation currency

Items in the financial statements of each entity in the BPI Group are measured using the currency of the primaryeconomic environment in which the entity operates (“the functional currency”). The financial statements arepresented in Philippine Peso, which is the Parent Bank’s functional and presentation currency.


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(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing atthe dates of the transactions or valuation where items are remeasured. Foreign exchange gains and lossesresulting from the settlement of such transactions and from the translation at year-end exchange rates ofmonetary assets and liabilities denominated in foreign currencies are recognized in profit or loss. Non-monetaryitems measured at historical cost denominated in a foreign currency are translated at exchange rates as at thedate of initial recognition. Non-monetary items in a foreign currency that are measured at fair value aretranslated using the exchange rates at the date when the fair value is determined.

Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-saleare analyzed between translation differences resulting from changes in the amortized cost of the security, andother changes in the carrying amount of the security. Translation differences are recognized in profit or loss, andother changes in carrying amount are recognized in other comprehensive income.

Translation differences on non-monetary financial instruments, such as equities held at fair value through profitor loss, are reported as part of the fair value gain or loss recognized under “Trading gain (Ioss)” in the statementof income. Translation differences on non-monetary financial instruments, such as equities classified asavailable-for-sale, are included in Accumulated other comprehensive income (loss) in the capital funds.

(c) Foreign subsidiaries

The results and financial position of BPI’s foreign subsidiaries (none of which has the currency of ahyperinflationary economy) that have a functional currency different from the presentation currency aretranslated into the presentation currency as follows:

(i) assets and liabilities are translated at the closing rate at reporting date;

(ii) income and expenses are translated at average exchange rates (unless this average is not areasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, inwhich case income and expenses are translated at the dates of the transactions); and

(iii) all resulting exchange differences are recognized as a separate component (Translation adjustments) ofAccumulated other comprehensive income (loss) in the capital funds. When a foreign operation is sold,such exchange differences are recognized in profit or loss as part of the gain or loss on sale.

2.26 Accrued expenses and other liabilities

Accrued expenses and other liabilities are recognized in the period in which the related money, goods or servicesare received or when a legally enforceable claim against the BPI Group is established.

2.27 Provisions for legal or contractual obligations

Provisions are recognized when the BPI Group has a present legal or constructive obligation as a result of pastevents; it is probable that an outflow of resources will be required to settle the obligation; and the amount has beenreliably estimated. Provisions are not recognized for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement isdetermined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of anoutflow with respect to any one item is included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligationusing a pre-tax rate that reflects the current market assessments of the time value of money and the risk specific tothe obligation. The increase in the provision due to the passage of time is recognized as interest expense.

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2.28 Income taxes

(a) Current income tax

Income tax payable is calculated on the basis of the applicable tax law in the respective jurisdiction and isrecognized as an expense for the year except to the extent that current tax is related to items (for example, currenttax on available-for-sale investments) that are charged or credited in other comprehensive income or directly tocapital funds.

The BPI Group has substantial income from its investment in government securities subject to final withholding tax.Such income is presented at its gross amount and the final tax paid or withheld is included in Provision for incometax - Current.

(b) Deferred income tax

Deferred income tax is recognized on temporary differences arising between the tax bases of assets andliabilities and their carrying amounts in the financial statements. The deferred income tax is not accounted for if itarises from initial recognition of an asset or liability in a transaction, other than a business combination, that atthe time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax isdetermined using tax rates (and laws) that have been enacted or substantively enacted at the reporting date andare expected to apply when the related deferred income tax asset is realized or the deferred income tax liabilityis settled.

Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused taxlosses (net operating loss carryover or NOLCO) and unused tax credits (excess minimum corporate income taxor MCIT) to the extent that it is probable that future taxable profit will be available against which the temporarydifferences, unused tax losses and unused tax credits can be utilized. Deferred income tax liabilities arerecognized in full for all taxable temporary differences except to the extent that the deferred tax liability arisesfrom the initial recognition of goodwill.

The BPI Group reassesses at each reporting date the need to recognize a previously unrecognized deferredincome tax asset.

Deferred income tax assets are recognized on deductible temporary differences arising from investments insubsidiaries, and associates and joint arrangements only to the extent that it is probable the temporary differencewill reverse in the future and there is sufficient taxable profit available against which the temporary difference can beutilized.

Deferred income tax liabilities are provided on taxable temporary differences arising from investments insubsidiaries, and associates and joint arrangements, except for deferred income tax liability where the timing of thereversal of the temporary difference is controlled by the BPI Group and it is probable that the temporary differencewill not reverse in the foreseeable future. Generally the BPI Group is unable to control the reversal of the temporarydifference for associates except when there is an agreement in place that gives the BPI Group the ability to controlthe reversal of the temporary difference.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current taxassets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxeslevied by the same taxation authority on either the taxable entity or different taxable entities where there is anintention to settle the balances on a net basis.

2.29 Employee benefits

(a) Pension obligations

The BPI Group has a defined benefit plan that shares risks among entities within the group. A defined benefitplan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement,usually dependent on one or more factors such as age, years of service and compensation.


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The liability recognized in the statement of condition in respect of defined benefit pension plan is the presentvalue of the defined benefit obligation at the reporting date less the fair value of plan assets. The defined benefitobligation is calculated annually by independent actuaries using the projected unit credit method. The presentvalue of the defined benefit obligation is determined by discounting the estimated future cash outflows usinginterest rates of government bonds that are denominated in the currency in which the benefits will be paid, andthat have terms to maturity approximating the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions arecharged or credited to equity in other comprehensive income in the period in which they arise.

Past-service costs are recognized immediately in profit or loss.

For individual financial reporting purposes, the unified plan assets are allocated among the BPI Group entitiesbased on the level of the defined benefit obligation attributable to each entity to arrive at the net liability or assetthat should be recognized in the individual financial statements.

(b) Share-based compensation

The BPI Group engages in equity-settled share-based payment transactions in respect of services received fromcertain employees.

The fair value of the services received is measured by reference to the fair value of the shares or share optionsgranted on the date of the grant. The cost of employee services received in respect of the shares or shareoptions granted is recognized in profit or loss (with a corresponding increase in reserve in capital funds) over theperiod that the services are received, which is the vesting period.

The fair value of the options granted is determined using option pricing models which take into account theexercise price of the option, the current share price, the risk-free interest rate, the expected volatility of the shareprice over the life of the option and other relevant factors.

When the stock options are exercised, the proceeds received, net of any directly attributable transaction costs,are credited to capital stock (par value) and paid-in surplus for the excess of exercise price over par value.

(c) Profit sharing and bonus plans

The BPI Group recognizes a liability and an expense for bonuses and profit-sharing, based on a formula thattakes into consideration the profit attributable to the Parent Bank’s shareholders after certain adjustments. TheBPI Group recognizes a provision where contractually obliged or where there is a past practice that has createda constructive obligation.

2.30 Capital funds

Common shares and preferred shares are classified as share capital.

Share premium includes any premiums or consideration received in excess of par value on the issuance of sharecapital.

Incremental costs directly attributable to the issue of new shares or options are shown in capital funds as adeduction from the proceeds, net of tax.

2.31 Earnings per share (EPS)

Basic EPS is calculated by dividing income applicable to common shares by the weighted average number ofcommon shares outstanding during the year with retroactive adjustments for stock dividends. In case of a rightsissue, an adjustment factor is being considered for the weighted average number of shares outstanding for allperiods before the rights issue. Diluted EPS is computed in the same manner as basic EPS, however, netincome attributable to common shares and the weighted average number of shares outstanding are adjusted forthe effects of all dilutive potential common shares.

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2.32 Dividends on common shares

Dividends on common shares are recognized as a liability in the BPI Group’s financial statements in the period inwhich the dividends are approved by the Board of Directors and the BSP.

2.33 Fiduciary activities

The BPI Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing ofassets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and incomearising thereon are excluded from these financial statements, as they are not assets of the BPI Group(Note 30).

2.34 Leases

(a) BPI Group is the lessee

(i) Operating lease

Leases in which a significant portion of the risks and rewards of ownership are retained by anotherparty, the lessor, are classified as operating leases. Payments, including prepayments, made underoperating leases (net of any incentives received from the lessor) are charged to “Occupancy andequipment-related expenses” in the statement of income on a straight-line basis over the period of thelease. When an operating lease is terminated before the lease period has expired, any paymentrequired to be made to the lessor by way of penalty is recognized as an expense in the period in whichthe termination takes place.

(ii) Finance lease

Leases of assets, where the BPI Group has substantially all the risks and rewards of ownership, areclassified as finance leases. Finance leases are capitalized at the commencement of the lease at thelower of the fair value of the leased property and the present value of the minimum lease payments.Each lease payment is allocated between the liability and finance charges so as to achieve a constantrate on the finance balance outstanding. The interest element of the finance cost is charged to profit orloss over the lease period so as to produce a constant periodic rate of interest on the remaining balanceof the liability for each period.

(b) BPI Group is the lessor

(i) Operating lease

Properties (land and building) leased out under operating leases are included in “Investment properties”in the statement of condition. Rental income under operating leases is recognized in profit or loss on astraight-line basis over the period of the lease.

(ii) Finance lease

When assets are leased out under a finance lease, the present value of the lease payments isrecognized as a receivable. The difference between the gross receivable and the present value of thereceivable is recognized as unearned finance income.

Lease income under finance lease is recognized over the term of the lease using the net investmentmethod before tax, which reflects a constant periodic rate of return.


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2.35 Insurance and pre-need operations

(a) Non-life insurance

The more significant accounting policies observed by the non-life insurance subsidiaries follow: (a) gross premiumswritten from short-term insurance contracts are recognized at the inception date of the risks underwritten and areearned over the period of cover in accordance with the incidence of risk using the 24th method; (b) acquisition costsare deferred and charged to expense in proportion to the premium revenue recognized; reinsurance commissionsare deferred and deducted from the applicable deferred acquisition costs, subject to the same amortization methodas the related acquisition costs; (c) a liability adequacy test is performed which compares the subsidiaries’reported insurance contract liabilities against current best estimates of all contractual future cash flows andclaims handling, and policy administration expenses as well as investment income backing up such liabilities,with any deficiency immediately charged to profit or loss; (d) amounts recoverable from reinsurers and lossadjustment expenses are classified as assets, with an allowance for estimated uncollectible amounts; and (e)financial assets and liabilities are measured following the classification and valuation provisions of PAS 39.

(b) Pre-need

The more significant provisions of the PNUCA as applied by the pre-need subsidiary follow: (a) premium incomefrom sale of pre-need plans is recognized as earned when collected; (b) costs of contracts issued and otherdirect costs and expenses are recognized as expense when incurred; (c) pre-need reserves which represent theaccrued net liabilities of the subsidiary to its planholders are actuarially computed based on standards andguidelines set forth by the Insurance Commission; the increase or decrease in the account is charged or creditedto other costs of contracts issued in profit or loss; and (d) insurance premium reserves which represent theamount that must be set aside by the subsidiary to pay for premiums for insurance coverage of fully paidplanholders, are actuarially computed based on standards and guidelines set forth by the InsuranceCommission.

2.36 Related party relationships and transactions

Related party relationship exists when one party has the ability to control, directly, or indirectly through one or moreintermediaries, the other party or exercises significant influence over the other party in making financial andoperating decisions. Such relationship also exists between and/or among entities which are under common controlwith the reporting enterprise, or between and/or among the reporting enterprise and its key management personnel,directors, or its shareholders. In considering each possible related party relationship, attention is directed to thesubstance of the relationship, and not merely the legal form.

2.37 Comparatives

Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosedwith comparative information.

Where PAS 8 applies, comparative figures have been adjusted to conform with changes in presentation in thecurrent year. There were no changes to the presentation made during the year.

2.38 Subsequent events (or Events after the reporting date)

Post year-end events that provide additional information about the BPI Group’s financial position at the reportingdate (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting eventsare disclosed in the notes to financial statements when material.

Note 3 - Financial Risk and Capital Management

Risk management in the BPI Group covers all perceived areas of risk exposure, even as it continuously endeavorsto uncover hidden risks. Capital management is understood to be a facet of risk management. The Board ofDirectors sets the BPI Group’s management tone by specifying the parameters by which business risks are to betaken and by allocating the appropriate capital for absorbing potential losses from such risks.

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The primary objective of the BPI Group is the generation of recurring acceptable returns to shareholders’ capital.To this end, the BPI Group’s policies, business strategies, and business activities are directed towards thegeneration of cash flows that are in excess of its fiduciary and contractual obligations to its depositors, and to itsvarious other funders and stakeholders.

To generate acceptable returns to its shareholders’ capital, the BPI Group understands that it has to bear risk, thatrisk-taking is inherent in its business. Risk is understood by the BPI Group as the uncertainty in its future income -an uncertainty that emanates from the possibility of incurring losses that are due to unplanned and unexpecteddrops in revenues, increases in expenses, impairment of asset values, or increases in liabilities.

The possibility of incurring losses is, however, compensated by the possibility of earning more than expectedincome. Risk-taking is, therefore, not entirely bad to be avoided. Risk-taking presents opportunities if risks areaccounted, deliberately taken, and are kept within rationalized limits.

Market risk management is incumbent on the Board of Directors through its Risk Management Committee (RMC).Market risk management in BPI covers managing exposures to trading risk, foreign exchange risk, counterpartycredit risk, interest rate risk of the banking book and liquidity risk. At the management level, the Bank’s market riskexposure is managed by the Risk Management Office (RMO), headed by the Bank’s Chief Risk Officer (CRO) whoreports directly to the RMC. In addition, Internal Audit is responsible for the independent review of risk assessmentmeasures and procedures and the control environment.

The most important risks that the BPI Group manages are credit risk, liquidity risk, market risk and other operationalrisk.

3.1 Credit risk

The BPI Group takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to theBPI Group by failing to discharge an obligation. Significant changes in the economy, or in the prospects of aparticular industry segment that may represent a concentration in the BPI Group’s portfolio, could result in lossesthat are different from those provided for at the reporting date. Management therefore carefully manages itsexposure to credit risk. Credit exposures arise principally in loans and advances, debt securities and other bills.There is also credit risk in off-balance sheet financial arrangements. The Credit Policy Group works with the CreditCommittee in managing credit risk, and reports are regularly provided to the Board of Directors.

3.1.1 Credit risk management

(a) Loans and advances

In measuring credit risk of loans and advances at a counterparty level, the BPI Group considers threecomponents: (i) the probability of default by the client or counterparty on its contractual obligations; (ii) currentexposures to the counterparty and its likely future development; and (iii) the likely recovery ratio on the defaultedobligations. In the evaluation process, the BPI Group also considers the conditions of the industry/sector towhich the counterparty is exposed, other existing exposures to the group where the counterparty may be related,as well as the client and the BPI Group’s fallback position assuming the worst-case scenario. Outstanding andpotential credit exposures are reviewed to likewise ensure that they conform to existing internal credit policies.

The BPI Group assesses the probability of default of individual counterparties using internal rating tools tailoredto the various categories of counterparty. The BPI Group has internal credit risk rating systems, designed forcorporate, small and medium-sized enterprises (SMEs), and retail accounts, that measure the borrower's creditrisk based on quantitative and qualitative factors. The ratings of individual exposures may subsequently migratebetween classes as the assessment of their probabilities of default changes. For retail, the consumer creditscoring system is a formula-based model for evaluating each credit application against a set of characteristicsthat experience has shown to be relevant in predicting repayment. The BPI Group regularly validates theperformance of the rating systems and their predictive power with regard to default events, and enhances them ifnecessary. The BPI Group's internal ratings are mapped to the following standard BSP classifications:

� Unclassified - these are loans that do not have a greater-than-normal risk and do not possess thecharacteristics of loans classified below. The counterparty has the ability to satisfy the obligation in full andtherefore minimal loss, if any, is anticipated.


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2.35 Insurance and pre-need operations

(a) Non-life insurance

The more significant accounting policies observed by the non-life insurance subsidiaries follow: (a) gross premiumswritten from short-term insurance contracts are recognized at the inception date of the risks underwritten and areearned over the period of cover in accordance with the incidence of risk using the 24th method; (b) acquisition costsare deferred and charged to expense in proportion to the premium revenue recognized; reinsurance commissionsare deferred and deducted from the applicable deferred acquisition costs, subject to the same amortization methodas the related acquisition costs; (c) a liability adequacy test is performed which compares the subsidiaries’reported insurance contract liabilities against current best estimates of all contractual future cash flows andclaims handling, and policy administration expenses as well as investment income backing up such liabilities,with any deficiency immediately charged to profit or loss; (d) amounts recoverable from reinsurers and lossadjustment expenses are classified as assets, with an allowance for estimated uncollectible amounts; and (e)financial assets and liabilities are measured following the classification and valuation provisions of PAS 39.

(b) Pre-need

The more significant provisions of the PNUCA as applied by the pre-need subsidiary follow: (a) premium incomefrom sale of pre-need plans is recognized as earned when collected; (b) costs of contracts issued and otherdirect costs and expenses are recognized as expense when incurred; (c) pre-need reserves which represent theaccrued net liabilities of the subsidiary to its planholders are actuarially computed based on standards andguidelines set forth by the Insurance Commission; the increase or decrease in the account is charged or creditedto other costs of contracts issued in profit or loss; and (d) insurance premium reserves which represent theamount that must be set aside by the subsidiary to pay for premiums for insurance coverage of fully paidplanholders, are actuarially computed based on standards and guidelines set forth by the InsuranceCommission.

2.36 Related party relationships and transactions

Related party relationship exists when one party has the ability to control, directly, or indirectly through one or moreintermediaries, the other party or exercises significant influence over the other party in making financial andoperating decisions. Such relationship also exists between and/or among entities which are under common controlwith the reporting enterprise, or between and/or among the reporting enterprise and its key management personnel,directors, or its shareholders. In considering each possible related party relationship, attention is directed to thesubstance of the relationship, and not merely the legal form.

2.37 Comparatives

Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosedwith comparative information.

Where PAS 8 applies, comparative figures have been adjusted to conform with changes in presentation in thecurrent year. There were no changes to the presentation made during the year.

2.38 Subsequent events (or Events after the reporting date)

Post year-end events that provide additional information about the BPI Group’s financial position at the reportingdate (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting eventsare disclosed in the notes to financial statements when material.

Note 3 - Financial Risk and Capital Management

Risk management in the BPI Group covers all perceived areas of risk exposure, even as it continuously endeavorsto uncover hidden risks. Capital management is understood to be a facet of risk management. The Board ofDirectors sets the BPI Group’s management tone by specifying the parameters by which business risks are to betaken and by allocating the appropriate capital for absorbing potential losses from such risks.

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The primary objective of the BPI Group is the generation of recurring acceptable returns to shareholders’ capital.To this end, the BPI Group’s policies, business strategies, and business activities are directed towards thegeneration of cash flows that are in excess of its fiduciary and contractual obligations to its depositors, and to itsvarious other funders and stakeholders.

To generate acceptable returns to its shareholders’ capital, the BPI Group understands that it has to bear risk, thatrisk-taking is inherent in its business. Risk is understood by the BPI Group as the uncertainty in its future income -an uncertainty that emanates from the possibility of incurring losses that are due to unplanned and unexpecteddrops in revenues, increases in expenses, impairment of asset values, or increases in liabilities.

The possibility of incurring losses is, however, compensated by the possibility of earning more than expectedincome. Risk-taking is, therefore, not entirely bad to be avoided. Risk-taking presents opportunities if risks areaccounted, deliberately taken, and are kept within rationalized limits.

Market risk management is incumbent on the Board of Directors through its Risk Management Committee (RMC).Market risk management in BPI covers managing exposures to trading risk, foreign exchange risk, counterpartycredit risk, interest rate risk of the banking book and liquidity risk. At the management level, the Bank’s market riskexposure is managed by the Risk Management Office (RMO), headed by the Bank’s Chief Risk Officer (CRO) whoreports directly to the RMC. In addition, Internal Audit is responsible for the independent review of risk assessmentmeasures and procedures and the control environment.

The most important risks that the BPI Group manages are credit risk, liquidity risk, market risk and other operationalrisk.

3.1 Credit risk

The BPI Group takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to theBPI Group by failing to discharge an obligation. Significant changes in the economy, or in the prospects of aparticular industry segment that may represent a concentration in the BPI Group’s portfolio, could result in lossesthat are different from those provided for at the reporting date. Management therefore carefully manages itsexposure to credit risk. Credit exposures arise principally in loans and advances, debt securities and other bills.There is also credit risk in off-balance sheet financial arrangements. The Credit Policy Group works with the CreditCommittee in managing credit risk, and reports are regularly provided to the Board of Directors.

3.1.1 Credit risk management

(a) Loans and advances

In measuring credit risk of loans and advances at a counterparty level, the BPI Group considers threecomponents: (i) the probability of default by the client or counterparty on its contractual obligations; (ii) currentexposures to the counterparty and its likely future development; and (iii) the likely recovery ratio on the defaultedobligations. In the evaluation process, the BPI Group also considers the conditions of the industry/sector towhich the counterparty is exposed, other existing exposures to the group where the counterparty may be related,as well as the client and the BPI Group’s fallback position assuming the worst-case scenario. Outstanding andpotential credit exposures are reviewed to likewise ensure that they conform to existing internal credit policies.

The BPI Group assesses the probability of default of individual counterparties using internal rating tools tailoredto the various categories of counterparty. The BPI Group has internal credit risk rating systems, designed forcorporate, small and medium-sized enterprises (SMEs), and retail accounts, that measure the borrower's creditrisk based on quantitative and qualitative factors. The ratings of individual exposures may subsequently migratebetween classes as the assessment of their probabilities of default changes. For retail, the consumer creditscoring system is a formula-based model for evaluating each credit application against a set of characteristicsthat experience has shown to be relevant in predicting repayment. The BPI Group regularly validates theperformance of the rating systems and their predictive power with regard to default events, and enhances them ifnecessary. The BPI Group's internal ratings are mapped to the following standard BSP classifications:

� Unclassified - these are loans that do not have a greater-than-normal risk and do not possess thecharacteristics of loans classified below. The counterparty has the ability to satisfy the obligation in full andtherefore minimal loss, if any, is anticipated.


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� Loans especially mentioned - these are loans that have potential weaknesses that deserve management’sclose attention. These potential weaknesses, if left uncorrected, may affect the repayment of the loan andthus increase the credit risk of the BPI Group.

� Substandard - these are loans which appear to involve a substantial degree of risk to the BPI Groupbecause of unfavorable record or unsatisfactory characteristics. Further, these are loans with well-definedweaknesses which may include adverse trends or development of a financial, managerial, economic orpolitical nature, or a significant deterioration in collateral.

� Doubtful - these are loans which have the weaknesses similar to those of the substandard classification withadded characteristics that existing facts, conditions, and values make collection or liquidation in full highlyimprobable and substantial loss is probable.

� Loss - these are loans which are considered uncollectible and of such little value that their continuance asbankable assets is not warranted although the loans may have some recovery or salvage value.

(b) Debt securities and other bills

For debt securities and other bills, external ratings such as Standard & Poor’s, Moody’s and Fitch’s ratings ortheir equivalents are used by the BPI Group for managing credit risk exposures. Investments in these securitiesand bills are viewed as a way to gain better credit quality mix and at the same time, maintain a readily availablesource to meet funding requirements.

3.1.2 Risk limit control and mitigation policies

The BPI Group manages, limits and controls concentrations of credit risk wherever they are identified - inparticular, to individual counterparties and groups, to industries and sovereigns.

The BPI Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted inrelation to one borrower, or groups of borrowers, and to geographical and industry segments. Such risks aremonitored on a regular basis and subjected to annual or more frequent review, when considered necessary.Limits on large exposures and credit concentration are approved by the Board of Directors.

The exposure to any one borrower is further restricted by sub-limits covering on- and off-balance sheet exposures.Actual exposures against limits are monitored regularly.

Exposure to credit risk is also managed through regular analysis of the ability of existing and potential borrowersto meet interest and capital repayment obligations and by changing these lending limits where appropriate.

The BPI Group employs a range of policies and practices to mitigate credit risk. Some of these specific controland mitigation measures are outlined below.

(a) Collateral

One of the most traditional and common practice in mitigating credit risk is requiring security particularly forloans and advances. The BPI Group implements guidelines on the acceptability of specific classes of collateralfor credit risk mitigation. The principal collateral types for loans and advances are:

� Mortgages over real estate properties and chattels; and� Hold-out on financial instruments such as debt securities deposits, and equities

In order to minimize credit loss, the BPI Group seeks additional collateral from the counterparty whenimpairment indicators are observed for the relevant individual loans and advances.

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(b) Derivatives

The BPI Group maintains strict market limits on net open derivative positions (i.e., the difference between purchaseand sale contracts). Credit risk is limited to the net current fair value of instruments, which in relation to derivativesis only a small fraction of the contract, or notional values used to express the volume of instruments outstanding.This credit risk exposure is managed as part of the overall lending limits with customers, together with potentialexposures from market movements. Collateral or other security is not usually obtained for credit risk exposures onthese instruments (except where the BPI Group requires margin deposits from counterparties).

Settlement risk arises in any situation where a payment in cash, securities, foreign exchange currencies, or equitiesis made in the expectation of a corresponding receipt in cash, securities, foreign exchange currencies, or equities.Daily settlement limits are established for each counterparty to cover the aggregate of all settlement risk arisingfrom the BPI Group’s market transactions on any single day. The introduction of the delivery versus paymentfacility in the local market has brought down settlement risk significantly.

(c) Master netting arrangements

The BPI Group further restricts its exposure to credit losses by entering into master netting arrangements withcounterparties with which it undertakes a significant volume of transactions. Master netting arrangements do notgenerally result in an offset of balance sheet assets and liabilities, as transactions are usually settled on a grossbasis. However, the credit risk associated with favorable contracts (asset position) is reduced by a master nettingarrangement to the extent that if a default occurs, all amounts with the counterparty are terminated and settled on anet basis. The BPI Group’s overall exposure to credit risk on derivative instruments subject to master nettingarrangements can change substantially within a short period, as it is affected by each transaction subject to thearrangement.

(d) Credit-related commitments

The primary purpose of these instruments is to ensure that funds are available to a customer as required. Standbyletters of credit carry the same credit risk as loans. Documentary and commercial letters of credit - which arewritten undertakings by the BPI Group on behalf of a customer authorizing a third party to draw drafts on the BPIGroup up to a stipulated amount under specific terms and conditions - are collateralized by the underlyingshipments of goods to which they relate and therefore carry less risk than a direct loan.

Commitments to extend credit represent unused portions of authorizations to extend credit in the form of loans, orletters of credit. With respect to credit risk on commitments to extend credit, the BPI Group is potentially exposed toloss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the totalunused commitments, as most commitments to extend credit are contingent upon customers maintaining specificcredit standards. The BPI Group monitors the term to maturity of credit commitments because longer-termcommitments generally have a greater degree of credit risk than shorter-term commitments.


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3.1.3 Impairment and provisioning policies

As described in Note 3.1.1, the BPI Group’s credit-quality mapping on loans and advances is based on the standardBSP loan classifications. Impairment provisions are recognized for financial reporting purposes based on objectiveevidence of impairment (Note 2.9).

The table below shows the percentage of the BPI Group’s loans and advances and the related allowance forimpairment.

Consolidated2013 2012

Loans andadvances (%)

Allowance forimpairment (%)



Unclassified 97.63 0.81 97.24 0.63Loans especially mentioned 0.34 5.46 0.41 6.34Substandard 0.89 20.12 0.85 20.15Doubtful 0.52 62.55 0.74 66.68Loss 0.62 100.00 0.76 100.00

100.00 100.00

Parent2013 2012





Unclassified 98.01 0.83 97.66 0.58Loans especially mentioned 0.28 5.37 0.34 6.56Substandard 0.75 19.23 0.68 19.96Doubtful 0.38 67.92 0.60 74.62Loss 0.58 100.00 0.72 100.00

100.00 100.00

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3.1.4 Maximum exposure to credit risk before collateral held or other credit enhancements

Credit risk exposures relating to significant on-balance sheet financial assets are as follows:

Consolidated Parent2013 2012 2013 2012

(In Millions of Pesos)Due from BSP 244,483 119,079 195,076 105,244Due from other banks 17,070 7,582 8,789 4,724Interbank loans receivable and securities

purchased under agreements to resell (SPAR) 12,406 38,927 5,046 10,843Financial assets at fair value through profit or loss

Derivative financial assets 16,550 5,920 16,550 5,920Trading securities - debt securities 4,334 21,663 2,626 19,055

Available-for-sale - debt securities 85,885 104,929 81,486 92,584Held-to-maturity securities 96,172 76,243 85,900 67,822Loans and advances, net 635,194 526,640 480,146 389,962Other financial assets

Accounts receivable, net 879 2,846 623 2,427Other accrued interest and fees receivable 662 749 573 618Sales contracts receivable, net 78 698 27 678Rental deposits 335 294 280 244Others, net 444 629 393 591

1,114,492 906,199 877,515 700,712

Credit risk exposures relating to off-balance sheet items are as follows:


(In Millions of Pesos)Undrawn loan commitments 120,792 114,636 114,960 108,738Bills for collection 14,863 17,586 14,848 17,575Unused letters of credit 13,117 13,707 13,117 13,707Others 1,390 1,169 1,390 1,007

150,162 147,098 144,315 141,027

The preceding table represents the maximum credit risk exposure at December 31, 2013, and 2012, without takinginto account any collateral held or other credit enhancements. For on-balance-sheet assets, the exposures set outabove are based on net carrying amounts as reported in the statement of condition.

Management is confident in its ability to continue to control and sustain minimal exposure to credit risk of the BPIGroup resulting from its loan and advances portfolio based on the following:

� 98% of the loans and advances portfolio is categorized in the top two classifications of the internal ratingsystem in 2013 (2012 - 98%);

� Mortgage loans are backed by collateral;� 97% of the loans and advances portfolio is considered to be neither past due nor impaired (2012 - 97%); and� The BPI Group continues to implement stringent selection process of granting loans and advances.


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3.1.5 Credit quality of loans and advances

Loans and advances are summarized as follows:


(In Millions of Pesos)Neither past due nor impaired 629,223 519,110 476,923 385,204Past due but not impaired 7,481 6,380 3,182 2,969Impaired 11,119 12,247 8,916 9,320

647,823 537,737 489,021 397,493Allowance for impairment (12,629) (11,097) (8,875) (7,531)

635,194 526,640 480,146 389,962

Impaired category as shown in the table above includes loan accounts which are individually (Note 3.1.5c) andcollectively assessed for impairment.

The total consolidated impairment provision for loans and advances is P1,886 million (2012 - P2,201 million), ofwhich P1,334 million (2012 - P1,497 million) represents provision for individually impaired loans and the remainingamount of P552 million (2012 - P704 million) represents the portfolio provision. Further information of theimpairment allowance for loans and advances is provided in Note 13.

When entering into new markets or new industries, the BPI Group focuses on corporate accounts and retailcustomers with good credit rating and customers providing sufficient collateral, where appropriate or necessary.

Collaterals held as security for Loans and advances are described in Note 13.

(a) Loans and advances neither past due nor impaired

Loans and advances that were neither past due nor impaired consist mainly of accounts with Unclassified ratingand those loans accounts in a portfolio to which an impairment has been allocated on a collective basis. Details ofthese accounts follow:


(In Millions of Pesos)Corporate entities:

Large corporate customers 419,139 326,690 401,666 312,912Small and medium enterprises 80,369 77,380 50,916 49,903

Retail customers:Mortgages 102,118 89,400 147 146Credit cards 22,215 20,330 22,059 20,330Others 5,382 5,310 2,135 1,913

629,223 519,110 476,923 385,204

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(b) Loans and advances past due but not impaired

The table below presents the gross amount of loans and advances that were past due but not impaired classified bytype of borrowers. Collateralized past due loans are not considered impaired when the cash flows that may resultfrom foreclosure of the related collateral are higher than the carrying amount of the loans.

Consolidated

2013 2012Large

corporatecustomers

Small andmedium

enterprisesRetail

customers Total

Largecorporatecustomers

Small andmedium

enterprisesRetail

customers Total(In Millions of Pesos)

Past due up to 30 days 175 226 1,623 2,024 388 239 1,556 2,183Past due 31 - 90 days 81 144 888 1,113 28 90 1,059 1,177Past due 91 - 180 days 122 224 1,628 1,974 41 403 908 1,352Over 180 days 42 444 1,884 2,370 107 316 1,245 1,668

420 1,038 6,023 7,481 564 1,048 4,768 6,380

Fair value of collateral 4,322 5,841

Parent

2013 2012Large

corporatecustomers

Small andmedium

enterprisesRetail

customers Total


Small andmedium

enterprisesRetail

customers Total(In Millions of Pesos)

Past due up to 30 days 84 63 1,492 1,639 360 86 1,445 1,891Past due 31 - 90 days 53 16 656 725 3 3 796 802Past due 91 - 180 days 72 42 465 579 20 245 - 265Over 180 days - 98 141 239 - 11 - 11

209 219 2,754 3,182 383 345 2,241 2,969

Fair value of collateral 319 641

(c) Loans and advances individually impaired

The breakdown of the gross amount of individually impaired loans and advances (included in Impaired category) byclass, along with the fair value of related collateral held by the BPI Group as security, are as follows:


(In Millions of Pesos)Corporate entities:

Large corporate customers 4,661 3,782 4,078 3,671Small and medium enterprises 4,864 5,589 3,376 3,624

Retail customers:Mortgages 6 949 6 12Credit cards 1,370 1,347 1,370 1,347Others 10 78 2 73

10,911 11,745 8,832 8,727Fair value of collateral 9,459 7,511 5,385 6,823


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3.1.6 Credit quality of other financial assets

a. Due from Bangko Sentral ng Pilipinas

Due from BSP are considered fully performing at December 31, 2013 and 2012. This account consists of:


(In Millions of Pesos)Clearing account 130,617 105,283 118,476 94,244Special deposit accounts (SDA) 113,866 13,796 76,600 11,000

244,483 119,079 195,076 105,244

The increase in Due from BSP was mainly driven by higher placements in SDA brought about by excess marketliquidity and fine-tuning of access to readily available investment outlets.

b. Due from other banks

Due from other banks are considered fully performing at December 31, 2013 and 2012. The table below presentsthe credit ratings of counterparty banks based on Standard and Poor’s.


(In Millions of Pesos)AA- to AA+ 6,419 2,698 5,259 1,952A- to A+ 8,490 2,014 3,099 1,633Lower than A- 38 254 7 168Unrated 2,123 2,616 424 971

17,070 7,582 8,789 4,724

c. Interbank loans receivable and securities purchased under agreement to resell

Interbank loans receivable are considered fully performing at December 31, 2013 and 2012. The table belowpresents the credit ratings of counterparty banks based on Standard and Poor’s.


(In Millions of Pesos)Lower than A- 888 821 888 821Unrated - - - -

888 821 888 821

Securities purchased under agreements to resell includes reverse repurchase agreements amounting to P11,518million and P4,158 million for the BPI Group and Parent Bank, respectively (2012 - P38,106 million andP10,022 million), which are made with a sovereign counterparty and are considered fully performing.

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d. Derivative financial assets

The table below presents the Standard and Poor’s credit ratings of counterparties for derivative financial assets atDecember 31, 2013 and 2012 presented in the consolidated and parent financial statements.

Consolidated and Parent2013 2012

(In Millions of Pesos)AA- to AA+ 692 727A- to A+ 14,395 3,141Lower than A- 172 734Unrated 1,291 1,318

16,550 5,920

e. Debt securities, treasury bills and other government securities

The table below presents the ratings of debt securities, treasury bills and other government securities atDecember 31, 2013 and 2012 based on Standard & Poor’s:

At December 31, 2013

Consolidated ParentTrading

securitiesAvailable-for-sale

Held-to-maturity Total

Tradingsecurities

Available-for-sale


(In Millions of Pesos)AAA - 487 110 597 - 487 - 487AA- to AA+ 3,774 4,859 5,293 13,926 2,442 4,790 5,109 12,341A- to A+ 22 4,560 732 5,314 22 4,484 - 4,506Lower than A- 353 73,040 89,229 162,622 38 69,833 79,983 149,854Unrated 185 2,939 808 3,932 124 1,892 808 2,824

4,334 85,885 96,172 186,391 2,626 81,486 85,900 170,012

At December 31, 2012

Consolidated ParentTrading

securitiesAvailable-for-sale


Tradingsecurities

Available-for-sale


(In Millions of Pesos)AAA 3,457 1,016 - 4,473 3,457 1,016 - 4,473AA- to AA+ 7,600 21,215 6,063 34,878 6,370 15,472 5,748 27,590A- to A+ - 7,297 407 7,704 - 7,254 - 7,254Lower than A- 10,092 73,342 69,036 152,470 9,228 67,693 61,363 138,284Unrated 514 2,059 737 3,310 - 1,149 711 1,860

21,663 104,929 76,243 202,835 19,055 92,584 67,822 179,461

f. Other financial assets

The BPI Group’s other financial assets (shown under Other resources) at December 31, 2013 and 2012 consistmainly of sales contracts receivable, accounts receivable, accrued interest and fees receivable from various unratedcounterparties with good credit standing.


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3.1.7 Repossessed or foreclosed collaterals

The BPI Group acquires assets by taking possession of collaterals held as security for loans and advances.As at December 31, 2013, the BPI Group’s foreclosed collaterals have carrying amount of P5,852 million(2012 - P6,887 million). The related foreclosed collaterals have aggregate fair value of P7,673 million(2012 - P13,942 million). Foreclosed collaterals include real estate (land, building, and improvements), auto orchattel, bond and stocks.

Repossessed properties are sold as soon as practicable and are classified as “Assets held for sale” in thestatement of condition.

3.1.8 Concentrations of risks of financial assets with credit risk exposure

The BPI Group’s main credit exposure at their carrying amounts, as categorized by industry sectors follow:

Consolidated

Financialinstitutions Consumer Manufacturing Real estate Others

Less -allowance Total

(In Millions of Pesos)Due from BSP 244,483 - - - - - 244,483Due from other banks 17,070 - - - - - 17,070Interbank loans receivable

and SPAR 12,406 - - - - - 12,406Financial assets at fair

value through profit orloss

Derivative financialassets 16,373 - 101 - 76 - 16,550

Trading securities -debt securities 245 - 2 3 4,084 - 4,334

Available-for-sale - debtsecurities 16,886 - - 300 68,699 - 85,885

Held-to-maturity securities 855 - - 502 94,815 - 96,172Loans and advances, net 55,743 62,670 139,187 173,326 216,897 (12,629) 635,194Other financial assets

Accounts receivable, net - - - - 2,276 (1,397) 879Other accrued interest

and fees receivable - - - - 662 - 662Sales contracts

receivable, net - - - - 82 (4) 78Rental deposits - - - - 335 - 335Others, net - - - - 466 (22) 444

At December 31, 2013 364,061 62,670 139,290 174,131 388,392 (14,052) 1,114,492

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Trading securities -debt securities 515 - 6 508 20,634 - 21,663

Available-for-sale - debtsecurities 22,473 - 53 644 81,759 - 104,929


Accounts receivable, net - - - - 4,087 (1,241) 2,846Other accrued interest



At December 31, 2012 231,982 33,611 98,154 144,158 410,712 (12,418) 906,199


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Parent







Trading securities -debt securities 245 - - - 2,381 - 2,626

Available-for-sale - debtsecurities 15,816 - - 196 65,474 - 81,486


Accounts receivable, net - - - - 1,875 (1,252) 623Other accrued interest



At December 31, 2013 289,395 26,533 135,495 88,436 347,798 (10,142) 877,515

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Trading securities -debt securities 515 - - - 18,540 - 19,055

Available-for-sale - debtsecurities 21,683 - 53 460 70,388 - 92,584


Accounts receivable, net - - - - 3,592 (1,165) 2,427Other accrued interest



At December 31, 2012 182,993 1,433 94,541 70,615 359,847 (8,717) 700,712

Trading, available-for-sale and held-to-maturity securities under “Others” category include local and US treasurybills. Likewise, Loans and advances under the same category pertain to loans granted to individual and retailborrowers belonging to various industry sectors.

3.2 Market risk

The BPI Group is exposed to market risk - the risk that the fair value or future cash flows of a financial instrumentwill fluctuate because of changes in market prices. Market risk is managed by the RMO guided by policies andprocedures approved by the RMC and confirmed by the Executive Committee/Board of Directors.

Market risk management

The BPI Group reviews and controls market risk exposures of both its trading and non-trading portfolios. Tradingportfolios include those positions arising from the BPI Group’s market-making transactions. Non-trading portfoliosprimarily arise from the interest rate management of the BPI Group’s retail and commercial banking assets andliabilities.

As part of the management of market risk, the BPI Group undertakes various hedging strategies. The BPI Groupalso enters into interest rate swaps to match the interest rate risk associated with fixed-rate long-term debtsecurities.


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Value-at-Risk (VaR) measurement is an integral part of the BPI Group’s market risk control system. This metricestimates, at 99% confidence level, the maximum loss that a trading portfolio may incur over a trading day. Thismetric indicates as well that there is 1% statistical probability that the trading portfolios’ actual loss would begreater than the computed VaR. In order to ensure model soundness, the VaR is periodically subject to modelvalidation and back testing. VaR is supplemented by other risk metrics and measurements that would providepreliminary signals to Treasury and to the management to assess the vulnerability of Bank’s positions. To controlthe risk, the RMC sets risk limits for trading portfolios which are consistent with the Bank’s goals, objectives, riskappetite, and strategy.

Stress tests indicate the potential losses that could arise in extreme conditions that would have detrimental effect tothe Bank’s positions. The Bank periodically performs stress testing (price risk and liquidity risk) to assess the Bank’scondition on assumed stress scenarios. Contingency plans are frequently reviewed to ensure Bank’s preparednessin the event of real stress. Results of stress tests are reviewed by senior management and by the RMC.

The average daily VaR for the trading portfolios follows:


(In Millions of Pesos)Local fixed-income 984 827 911 727Foreign fixed-income 118 238 114 229Foreign exchange 33 32 10 7Derivatives 78 63 78 63Equity securities 14 16 - -Mutual fund 26 10 - -

1,253 1,186 1,113 1,026

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3.2.1 Foreign exchange risk

The BPI Group takes on exposure to the effects of fluctuations in the prevailing exchange rates on its foreigncurrency financial position and cash flows. The table below summarizes the BPI Group’s exposure to more materialforeign currency exchange rate risk at December 31, 2013 and 2012. Included in the table are the BPI Group’sfinancial instruments at carrying amounts, categorized by currency.

Consolidated

USD JPY EUR GBPLess -

allowance Total(In Millions of Pesos)

As at December 31, 2013Financial AssetsCash and other cash items 1,691 55 89 20 - 1,855Due from other banks 13,746 747 838 1,185 - 16,516Interbank loans receivable and

SPAR 888 - - - - 888Financial assets at fair value

through profit or lossDerivative financial assets 2,009 - 116 346 - 2,471Trading securities 3,796 - - - - 3,796

Available-for-sale securities 15,782 - 473 133 - 16,388Held-to-maturity securities 29,653 - 1,717 657 - 32,027Loans and advances, net 73,989 713 169 31 (481) 74,421Others financial assets

Accounts receivable, net 78 - 59 1 (9) 129Other accrued interest andfees receivable 99 - 111 45 - 255Others - - - - - -

Total financial assets 141,731 1,515 3,572 2,418 (490) 148,746Financial LiabilitiesDeposit liabilities 128,301 1,084 3,056 696 - 133,137Derivative financial liabilities 2,062 - 144 346 - 2,552Due to BSP and other banks 87 - - - - 87Manager’s checks and demand

drafts outstanding 49 - 4 2 - 55Other financial liabilities

Accounts payable 267 - 75 1 - 343Others 1,565 11 102 6 - 1,684

Total financial liabilities 132,331 1,095 3,381 1,051 - 137,858Net on-balance sheet financial

position (in Philippine Peso) 9,400 420 191 1,367 (490) 10,888


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As at December 31, 2012Financial AssetsCash and other cash items 2,469 59 109 16 - 2,653Due from other banks 3,803 378 610 1,070 - 5,861Interbank loans receivable and


through profit or lossDerivative financial assets 1,674 - 237 152 - 2,063Trading securities 8,340 - 55 1,588 - 9,983

Available-for-sale securities 44,890 - 463 472 - 45,825Held-to-maturity securities 28,668 - 1,529 298 - 30,495Loans and advances, net 44,046 1,287 68 29 (493) 44,937Others financial assets

Accounts receivable, net 67 - 38 2 (1) 106Other accrued interest andfees receivable 147 - 106 68 - 321Others - - - 4 - 4


drafts outstanding 64 10 11 - - 85Other financial liabilities

Accounts payable 71 - 108 1 - 180Others 999 74 65 - - 1,138

Total financial liabilities 117,126 1,375 2,965 691 - 122,157Net on-balance sheet financial


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Parent



As at December 31, 2013Financial AssetsCash and other cash items 1,535 55 78 18 - 1,686Due from other banks 5,864 743 698 243 - 7,548Interbank loans receivable and


through profit or lossDerivative financial assets 2,009 - 116 346 - 2,471Trading securities 2,464 - - - - 2,464

Available-for-sale 15,094 - 473 133 - 15,700Held-to-maturity securities 27,705 - 1,718 - - 29,423Loans and advances, net 73,989 713 169 7 (479) 74,399Other financial assets

Accounts receivable, net 68 - - - (9) 59Other accrued interest and

fees receivable 99 - 111 14 - 224Others - - - - - -

Total financial assets 129,715 1,511 3,363 761 (488) 134,862Financial LiabilitiesDeposit liabilities 116,608 1,084 3,023 414 - 121,129Derivative financial liabilities 2,062 - 144 346 - 2,552Due to BSP and other banks 87 - - - - 87Manager’s checks and demand

drafts outstanding 30 - 4 2 - 36Other financial liabilities

Accounts payable 252 - 2 - - 254Others 1,565 11 102 6 - 1,684


position (in Philippine Peso) 9,111 416 88 (7) (488) 9,120


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As at December 31, 2012Financial AssetsCash and other cash items 2,319 59 84 13 - 2,475Due from other banks 2,730 376 378 131 - 3,615Interbank loans receivable and


through profit or lossDerivative financial assets 1,672 - 237 152 - 2,061Trading securities 7,109 - 55 1,588 - 8,752

Available-for-sale 38,136 - 463 472 - 39,071Held-to-maturity securities 25,804 - 1,529 - - 27,333Loans and advances, net 44,046 1,287 67 4 (492) 44,912Other financial assets

Accounts receivable, net 65 - - - (1) 64Other accrued interest and

fees receivable 147 - 106 28 - 281Others - - - - - -


drafts outstanding 58 10 11 58 - 137Other financial liabilities

Accounts payable 62 - 2 2 - 66Others 999 74 65 - - 1,138



3.2.2 Interest rate risk

There are two types of interest rate risk: (i) fair value interest risk and (ii) cash flow interest risk. Fair value interestrate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interestrates. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate becauseof changes in market interest rates. The BPI Group takes on exposure to the effects of fluctuations in the prevailinglevels of market interest rates on both its fair value which affects mainly the BPI Group’s trading securities portfolioand cash flow risks on available-for-sale securities portfolio which is carried at market.

Interest rate risk in the banking book arises from the BPI Group’s core banking activities. The main source of thistype of interest rate risk is repricing risk, which reflects the fact that the BPI Group’s assets and liabilities are ofdifferent maturities and are priced at different interest rates. Interest margins may increase as a result of suchchanges but may also result in losses in the event that unexpected movements arise. The Board of Directors setslimits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored monthly by theFRMC.

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The table below summarizes the BPI Group’s exposure to interest rate risk, categorized by the earlier of contractualrepricing or maturity dates.

Consolidated

Repricing

Up to 1 yearOver 1 up to

3 years Over 3 yearsNon-

repricing Total(In Millions of Pesos)

As at December 31, 2013Financial AssetsCash and other cash items 25,696 - - - 25,696Due from BSP - - - 244,483 244,483Due from other banks - - - 17,070 17,070Interbank loans receivable and SPAR - - - 12,406 12,406Financial assets at fair value through

profit or lossDerivative financial assets 13,100 665 2,785 - 16,550Trading securities - debt securities 223 4,111 4,334

Available-for-sale - debt securities 9,265 76,620 85,885Held-to-maturity securities 4 96,168 96,172Loans and advances, net 518,048 22,860 45,072 49,214 635,194Other financial assets

Accounts receivable, net - - - 879 879Other accrued interest and fees

receivable - - - 662 662Sales contracts receivable, net - - - 78 78Rental deposits - - - 335 335Others, net - - - 444 444

Total financial assets 566,336 23,525 47,857 502,470 1,140,188Financial LiabilitiesDeposit liabilities 460,692 513,541 14,353 - 988,586Derivative financial liabilities 12,929 719 2,712 - 16,360Bills payable - - - 26,179 26,179Due to BSP and other banks - - - 2,051 2,051Manager’s checks and demand drafts

outstanding - - - 7,183 7,183Other financial liabilities

Accounts payable - - - 3,551 3,551Outstanding acceptances - - - 1,677 1,677Deposits on lease contract - - - 2,076 2,076Dividends payable - - - 3,201 3,201Others - - - 1,607 1,607

Total financial liabilities 473,621 514,260 17,065 47,525 1,052,471Total interest gap 92,715 (490,735) 30,792 454,945 87,717


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Repricing





profit or lossDerivative financial assets 1,946 663 3,311 - 5,920Trading securities - debt securities 206 - - 21,457 21,663

Available-for-sale - debt securities 10,428 - - 94,501 104,929Held-to-maturity securities 5 - - 76,238 76,243Loans and advances, net 416,544 20,503 45,181 44,412 526,640Other financial assets

Accounts receivable, net - - - 2,846 2,846Other accrued interest and fees


Total financial assets 452,422 21,166 48,492 407,412 929,492Financial LiabilitiesDeposit liabilities 439,040 201,896 12,245 149,093 802,274Derivative financial liabilities 1,931 647 3,249 - 5,827Bills payable - - - 26,280 26,280Due to BSP and other banks - - - 2,035 2,035Manager’s checks and demand drafts

outstanding - - - 5,794 5,794Unsecured subordinated debt - - 5,000 - 5,000Other financial liabilities

Accounts payable - - - 3,621 3,621Outstanding acceptances - - - 2,377 2,377Deposits on lease contract - - - 1,153 1,153Dividends payable - - - -Others - - - 1,290 1,290

Total financial liabilities 440,971 202,543 20,494 191,643 855,651Total interest gap 11,451 (181,377) 27,998 215,769 73,841

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Parent

Repricing





profit or lossDerivative financial assets 13,100 665 2,785 - 16,550Trading securities - debt securities 222 - - 2,404 2,626


Accounts receivable, net - - - 623 623Other accrued interest and fees



outstanding - - - 6,026 6,026Other financial liabilities

Accounts payable - - - 2,370 2,370Outstanding acceptances - - - 1,677 1,677Deposits on lease contract - - - - -Dividends payable - - - 3,201 3,201Others - - - 1,498 1,498

Total financial liabilities 323,142 354,917 4,163 155,355 837,577Total interest gap 171,390 (348,056) 11,097 230,395 64,826


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Repricing





profit or lossDerivative financial assets 1,946 663 3,311 5,920Trading securities - debt securities 206 - - 18,849 19,055


Accounts receivable, net - - - 2,427 2,427Other accrued interest and fees



outstanding - - - 4,508 4,508Unsecured subordinated debt - - 5,000 - 5,000Other financial liabilities

Accounts payable - - - 2,548 2,548Outstanding acceptances - - - 1,153 1,153Deposits on lease contracts - - - - -Dividends payable - - - - -Others - - - 1,208 1,208

Total financial liabilities 401,510 53,201 42,942 169,955 667,608Total interest gap (7,087) (44,996) (28,938) 136,643 55,622

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In order to measure the interest rate risk in the banking book, the BPI Group employs Balance Sheet VaR (BSVaR)which measures impact of interest rate movements on the economic value of equity. The BSVaR is founded on re-pricing gaps, or the difference between the amounts of rate sensitive assets and the amounts of rate sensitiveliabilities. An asset or liability is considered to be rate-sensitive if the interest rate applied to the outstandingprincipal balance changes (either contractually or because of a change in a reference rate) during the interval.

The BSVaR estimates the “riskiness of the balance sheet” and compares the degree of risk taking activity in thebanking books from one period to the next. In consideration of the static framework, and the fact that income fromthe positions is accrued rather than generated from marking-to-market, the probable loss (that may be exceeded1% of the time) that is indicated by the BSVaR is not realized in accounting income.

The average BSVaR for the banking or non-trading book are as follows:


(In Millions of Pesos)BSVaR 1,511 1,470 1,325 1,290

3.3 Liquidity risk

Liquidity risk is the risk that the BPI Group will be unable to meet its payment obligations associated with itsfinancial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may bethe failure to meet obligations to repay depositors and fulfill commitments to lend.

3.3.1 Liquidity risk management process

The BPI Group’s liquidity management process, as carried out within the BPI Group and monitored by the RMCand the FRMC includes:

� Day-to-day funding, managed by monitoring future cash flows to ensure that requirements can be met. Thisincludes replenishment of funds as they mature or as borrowed by customers;

� Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against anyunforeseen interruption to cash flow;

� Monitoring liquidity gaps against internal and regulatory requirements (Note 19);� Managing the concentration and profile of debt maturities; and� Performing periodic liquidity stress testing on the BPI Group’s liquidity position by assuming a faster rate of

withdrawals in its deposit base.

Monitoring and reporting take the form of cash flow measurement and projections for the next day, week andmonth as these are key periods for liquidity management. The starting point for these projections is an analysisof the contractual maturity of the financial liabilities (Notes 3.3.3 and 3.3.4) and the expected collection date ofthe financial assets.

The BPI Group also monitors unmatched medium-term assets, the level and type of undrawn lendingcommitments, the usage of overdraft facilities and the impact of contingent liabilities such as standby letters ofcredit.

3.3.2 Funding approach

Sources of liquidity are regularly reviewed by the BPI Group to maintain a wide diversification by currency,geography, counterparty, product and term.


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3.3.3 Non-derivative cash flows

The table below presents the maturity profile of non-derivative financial instruments based on undiscounted cashflows, including interest, which the BPI Group uses to manage the inherent liquidity risk. The maturity analysis isbased on the remaining period from the end of the reporting period to the contractual maturity date or, if earlier,the expected date the financial asset will be realized or the financial liability will be settled.

Consolidated


3 years Over 3 years Total(In Millions of Pesos)

As at December 31, 2013Financial AssetsCash and other cash items 25,696 - - 25,696Due from BSP 244,606 - - 244,606Due from other banks 17,070 - - 17,070Interbank loans receivable and

securities under agreements toresell (SPAR) 12,418 - - 12,418

Financial assets at fair value throughprofit or lossTrading securities - debt securities 3,827 126 605 4,558

Available-for-sale securities - debtsecurities 9,517 15,257 87,745 112,519

Held-to-maturity securities 17,492 26,936 104,272 148,700Loans and advances, net 392,546 82,158 205,191 679,895Other financial assets

Accounts receivable, net 879 - - 879Other accrued interest and fees

receivable 662 - - 662Sales contracts receivable, net 27 51 - 78Rental deposits 335 - - 335Others, net 444 - - 444

Total financial assets 725,519 124,528 397,813 1,247,860

Financial LiabilitiesDeposit liabilities 290,777 278,941 419,912 989,630Bills payable 25,466 598 367 26,431Due to BSP and other banks 2,051 - - 2,051Manager’s checks and demand drafts

outstanding 7,183 - - 7,183Other financial liabilities

Accounts payable 3,551 - - 3,551Outstanding acceptances 1,677 - - 1,677Deposits on lease contract 2,076 - - 2,076Dividends payable 3,201 - - 3,201Others 1,607 - - 1,607

Total financial liabilities 337,589 279,539 420,279 1,037,407Total maturity gap 387,930 (155,011) (22,466) 210,453

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As at December 31, 2012Financial AssetsCash and other cash items 23,293 - - 23,293Due from BSP 119,089 119,089Due from other banks 7,582 - - 7,582Interbank loans receivable and


Financial assets at fair value throughprofit or lossTrading securities - debt securities 3,562 4,935 27,205 35,702

Available-for-sale - debt securities 12,276 21,433 128,792 162,501Held-to-maturity securities 23,367 23,611 63,843 110,821Loans and advances, net 290,707 68,325 185,590 544,622Other financial assets

Accounts receivable, net 2,846 - - 2,846Other accrued interest and fees

receivable 749 - - 749Sales contracts receivable, net 698 - - 698Rental deposits 294 - - 294Others, net 629 - - 629

Total financial assets 524,471 118,304 405,430 1,048,205Financial LiabilitiesDeposit liabilities 688,951 45,863 68,752 803,566Bills payable 25,604 261 1,378 27,243Due to BSP and other banks 2,035 - - 2,035Manager’s checks and demand drafts

outstanding 5,794 - - 5,794Unsecured subordinated debt 445 845 6,282 7,572Other financial liabilities

Accounts payable 3,621 - - 3,621Outstanding acceptances 1,153 - - 1,153Deposits on lease contract 2,377 - - 2,377Dividends payable - - - -Others 1,290 - - 1,290

Total financial liabilities 731,270 46,969 76,412 854,651Total maturity gap (206,799) 71,335 329,018 193,554


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Parent





Financial assets at fair value throughprofit or lossTrading securities - debt securities 2,459 38 220 2,717

Available-for-sale - debt securities 7,673 14,907 84,882 107,462Held-to-maturity securities 14,925 24,185 93,883 132,993Loans and advances, net 348,050 42,397 126,488 516,935Other financial assets, net

Accounts receivable, net 623 - - 623Other accrued interest and fees


Total financial assets 608,892 81,527 305,473 995,892Financial LiabilitiesDeposit liabilities 230,468 222,030 333,045 785,543Bills payable 18,215 560 319 19,094Due to BSP and other banks 2,052 - - 2,052Manager’s checks and demand drafts

outstanding 6,026 - - 6,026Unsecured subordinated debt - - - -Other financial liabilities

Accounts payable 2,370 - - 2,370Outstanding acceptances 1,677 - - 1,677Deposits on lease contracts - - - -Dividends payable 3,201 - - 3,201Others 1,498 - - 1,498

Total financial liabilities 265,507 222,590 333,364 821,461Total maturity gap 343,385 (141,063) (27,891) 174,431

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Financial assets at fair value throughprofit or lossTrading securities - debt securities 3,036 4,244 24,841 32,121

Available-for-sale - debt securities 9,861 17,343 117,441 144,645Held-to-maturity securities 19,186 21,514 58,644 99,344Loans and advances, net 263,816 39,137 89,273 392,226Other financial assets, net

Accounts receivable, net 2,427 - - 2,427Other accrued interest and fees


Total financial assets 443,795 82,238 290,199 816,232Financial LiabilitiesDeposit liabilities 628,802 53 35 628,890Bills payable 15,857 122 1,217 17,196Due to BSP and other banks 2,036 - - 2,036Manager’s checks and demand drafts

outstanding 4,508 - - 4,508Unsecured subordinated debt 445 845 6,282 7,572Other financial liabilities

Accounts payable 2,548 - - 2,548Outstanding acceptances 1,153 - - 1,153Dividends payable - - - -Others 1,208 - - 1,208

Total financial liabilities 656,557 1,020 7,534 665,111Total maturity gap (212,762) 81,218 282,665 151,121


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3.3.4 Derivative cash flows

(a) Derivatives settled on a net basis

The BPI Group’s derivatives that are settled on a net basis consist only of interest rate swaps and non-deliverable forwards. The table below presents the contractual undiscounted cash flows of interest rate swapsbased on the remaining period from December 31 to the contractual maturity dates.

Consolidated and Parent


3 yearsOver 3years Total

2013 (In Millions of Pesos)Interest rate swap contracts - held for trading

- Inflow 137 615 2,732 3,484- Outflow (133) (643) (2,712) (3,488)- Net inflow (outflow) 4 (28) 20 (4)

Non-deliverable forwards - held for trading- Inflow 106 11,900 - 12,006- Outflow - (11,879) - (11,879)- Net inflow 106 21 - 127



2012 (In Millions of Pesos)Interest rate swap contracts - held for trading

- Inflow 124 623 3,274 4,021- Outflow (72) (647) (3,249) (3,968)- Net inflow (outflow) 52 (24) 25 53

Non-deliverable forwards - held for trading- Inflow 761 - - 761- Outflow (1,169) - - (1,169)- Net outflow (408) - - (408)

(b) Derivatives settled on a gross basis

The BPI Group’s derivatives that are settled on a gross basis include foreign exchange derivatives mainly,currency forwards, currency swaps and spot contracts. The table below presents the contractual undiscountedcash flows of foreign exchange derivatives based on the remaining period from reporting date to the contractualmaturity dates.




(In Millions of Pesos)Foreign exchange derivatives - held for trading

2013- Inflow 78,604 6,626 8,525 93,755- Outflow (78,577) (6,675) (8,525) (93,777)- Net inflow (outflow) 27 (49) - (22)2012- Inflow 112,285 5,350 9,502 127,137- Outflow (111,950) (5,472) (9,540) (126,962)- Net inflow (outflow) 335 (122) (38) 175

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3.4 Fair value of financial assets and liabilities

The table below summarizes the carrying amount and fair value of those significant financial assets and liabilitiesnot presented on the statement of condition at fair value at December 31.

Consolidated

Carrying amount Fair value2013 2012 2013 2012

(In Millions of Pesos)Financial assetsCash and other cash items 25,696 23,293 25,696 23,293Due from BSP 244,483 119,079 244,483 119,079Due from other banks 17,070 7,582 17,070 7,582Interbank loans receivable and SPAR 12,406 38,927 12,406 38,927Held-to-maturity securities 96,172 76,243 104,563 86,549Loans and advances, net 635,194 526,640 659,885 572,880Other financial assets


Financial liabilitiesDeposit liabilities 988,586 802,274 963,463 785,780Bills payable 26,179 26,280 26,352 26,719Due to BSP and other banks 2,051 2,035 2,051 2,035Manager’s checks and demand drafts

outstanding 7,183 5,794 7,183 5,794Unsecured subordinated debt - 5,000 - 6,481Other financial liabilities

Accounts payable 3,551 3,621 3,551 3,621Deposits on lease contract 2,076 2,377 2,076 2,377Outstanding acceptances 1,677 1,153 1,677 1,153Dividends payable 3,201 - 3,201 -Others 1,607 1,290 1,607 1,290


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Parent

Carrying amount Fair value2013 2012 2013 2012

(In Millions of Pesos)Financial assetsCash and other cash items 24,888 22,518 24,888 22,518Due from BSP 195,076 105,244 195,076 105,244Due from other banks 8,789 4,724 8,789 4,724Interbank loans receivable and SPAR 5,046 10,843 5,046 10,843Held-to-maturity securities 85,900 67,822 93,586 77,402Loans and advances, net 480,146 389,962 488,832 423,133Other financial assets


Financial liabilitiesDeposit liabilities 785,403 628,365 710,719 615,607Bills payable 18,990 16,963 19,022 17,116Due to BSP and other banks 2,052 2,036 2,052 2,036Manager’s checks and demand drafts

outstanding 6,026 4,508 6,026 4,508Unsecured subordinated debt - 5,000 - 6,481Other financial liabilities

Accounts payable 2,370 2,548 2,370 2,548Outstanding acceptances 1,677 1,153 1,677 1,153Deposit on lease contracts - - - -Dividends payable 3,201 - 3,201 -Others 1,498 1,208 1,498 1,208

(i) Cash and other cash items, due from BSP and other banks and interbank loans receivable and SPAR

The fair value of floating rate placements and overnight deposits approximates their carrying amount. Theestimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and remaining maturity. All of these financial assets have amaturity of one year, thus their fair values approximate their carrying amounts.

(ii) Investment securities

Fair value of held-to-maturity assets is based on market prices or broker/dealer price quotations. Where thisinformation is not available, fair value is estimated using quoted market prices for securities with similar credit,maturity and yield characteristics.

(iii) Loans and advances

The estimated fair value of loans and advances represents the discounted amount of estimated future cash flowsexpected to be received. Expected cash flows are discounted with the use of assumptions regarding appropriatecredit spread for the loan, derived from other market instruments.

(iv) Financial liabilities

The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is theamount repayable on demand.

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The estimated fair value of fixed interest-bearing deposits and other borrowings not quoted in an active market isbased on discounted cash flows using market interest rates for new debts with similar remaining maturity.

(v) Other financial assets / liabilities

Carrying amounts of other financial assets / liabilities which have no definite repayment dates are assumed to betheir fair values.

3.5 Fair value hierarchy

The following table presents the fair value hierarchy of the BPI Group’s assets and liabilities at December 31:

Consolidated

Fair value2013 Level 1 Level 2 TotalRecurring measurements (In Millions of Pesos)Financial assetsFinancial assets at fair value through profit or lossDerivative financial assets - 16,550 16,550Trading securities- Debt securities 3,926 408 4,334- Equity securities 263 - 263

Available-for-sale financial assets- Debt securities 74,208 11,677 85,885- Equity securities 1,285 - 1,285

79,682 28,635 108,317Financial liabilitiesDerivative financial liabilities - 16,360 16,360

Non-recurring measurementsAssets held for sale, net - 3,078 3,078


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Fair value2013 Level 1 Level 2 TotalFair values disclosedFinancial assetsCash and other cash items - 25,696 25,696Due from BSP - 244,483 244,483Due from other banks - 17,070 17,070Interbank loans receivable and SPAR - 12,406 12,406Held-to-maturity securities 104,563 - 104,563Loans and advances, net - 659,885 659,885Other financial assets

Accounts receivable, net - 879 879Other accrued interest and fees receivable - 662 662Sales contracts receivable, net - 78 78Rental deposits - 335 335Others, net - 444 444

Financial liabilitiesDeposit liabilities - 963,463 963,463Bills payable - 26,352 26,352Due to BSP and other banks - 2,051 2,051Manager’s checks and demand drafts outstanding - 7,183 7,183Other financial liabilities

Accounts payable - 3,551 3,551Outstanding acceptances - 1,677 1,677Deposits on lease contract - 2,076 2,076Dividends payable - 3,201 3,201Others - 1,607 1,607

Non-financial assetsInvestment properties - 3,289 3,289

Fair value2012 Level 1 Level 2 Total

Recurring measurements (In Millions of Pesos)Financial assetsFinancial assets at fair value through profit or lossDerivative financial assets - 5,920 5,920Trading securities- Debt securities 21,457 206 21,663- Equity securities 435 - 435

Available-for-sale financial assets- Debt securities 94,501 10,428 104,929- Equity securities 491 - 491



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Fair value2012 Level 1 Level 2 TotalFair values disclosedFinancial assetsCash and other cash items - 23,293 23,293Due from BSP - 119,079 119,079Due from other banks - 7,582 7,582Interbank loans receivable and SPAR 38,927 38,927Held-to-maturity securities 86,549 - 86,549Loans and advances, net - 572,880 572,880Other financial assets

Accounts receivable, net - 2,846 2,846Other accrued interest and fees receivable - 749 749Sales contracts receivable, net - 698 698Rental deposits - 294 294Others, net - 629 629

Financial liabilitiesDeposit liabilities - 785,780 785,780Bills payable - 26,719 26,719Due to BSP and other banks - 2,035 2,035Manager’s checks and demand drafts outstanding - 5,794 5,794Unsecured subordinated debt - 6,481 6,481Other financial liabilities

Accounts payable - 3,621 3,621Outstanding acceptances - 1,153 1,153Deposits on lease contract - 2,377 2,377Dividends payable - - -Others - 1,290 1,290


Parent

Level 1 Level 2 Total2013 (In Millions of Pesos)Financial assetsFinancial assets at fair value through profit or lossDerivative financial assets - 16,550 16,550Trading securities - debt securities 2,280 346 2,626





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Fair value2013 Level 1 Level 2 TotalFair values disclosedFinancial assetsCash and other cash items - 24,888 24,888Due from BSP - 195,076 195,076Due from other banks - 8,789 8,789Interbank loans receivable and SPAR 5,046 5,046Held-to-maturity securities 93,586 - 93,586Loans and advances, net - 488,832 488,832Other financial assets

Accounts receivable, net - 623 623Other accrued interest and fees receivable - 573 573Sales contracts receivable, net - 27 27Rental deposits - 280 280Others, net - 393 393

Financial liabilitiesDeposit liabilities - 710,719 710,719Bills payable - 19,022 19,022Due to BSP and other banks - 2,052 2,052Manager’s checks and demand drafts outstanding - 6,026 6,026Unsecured subordinated debt - - -Other financial liabilities

Accounts payable - 2,370 2,370Outstanding acceptances - 1,677 1,677Deposits on lease contract - - -Dividends payable - 3,201 3,201Others - 1,498 1,498


Fair value2012 Level 1 Level 2 TotalRecurring measurements (In Millions of Pesos)Financial assetsFinancial assets at fair value through profit or lossDerivative financial assets - 5,920 5,920Trading securities - debt securities 18,849 206 19,055




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Fair value2012 Level 1 Level 2 TotalFair values disclosedFinancial assetsCash and other cash items - 22,518 22,518Due from BSP - 105,244 105,244Due from other banks - 4,724 4,724Interbank loans receivable and SPAR - 10,843 10,843Held-to-maturity securities 77,402 - 77,402Loans and advances, net - 423,133 423,133Other financial assets

Accounts receivable, net - 2,427 2,427Other accrued interest and fees receivable - 618 618Sales contracts receivable, net - 678 678Rental deposits - 244 244Others, net - 591 591

Financial liabilitiesDeposit liabilities - 615,607 615,607Bills payable - 17,116 17,116Due to BSP and other banks - 2,036 2,036Manager’s checks and demand drafts outstanding - 4,508 4,508Unsecured subordinated debt - 6,481 6,481Other financial liabilities

Accounts payable - 2,548 2,548Outstanding acceptances - 1,153 1,153Deposits on lease contract - - -Dividends payable - - -Others - 1,208 1,208


The BPI Group has no financial instruments, other assets or liabilities with non-recurring fair valuemeasurements or with fair values disclosed that fall under the Level 3 category as at December 31, 2013 and2012. There were no transfers between Level 1 and Level 2 during the year.

3.6 Insurance risk management

The non-life insurance entities decide on the retention, or the absolute amount that they are ready to assumeinsurance risk from one event. The retention amount is a function of capital, experience, actuarial study and riskappetite or aversion.

In excess of the retention, these entities arrange reinsurances either thru treaties or facultative placements.They also accredit reinsurers based on certain criteria and set limits as to what can be reinsured. Thereinsurance treaties and the accreditation of reinsurers require Board of Directors’ approval.

3.7 Capital management

Cognizant of its exposure to risks, the BPI Group understands that it must maintain sufficient capital to absorbunexpected losses, to stay in business for the long haul, and to satisfy regulatory requirements. The BPI Groupfurther understands that its performance, as well as the performance of its various units, should be measured interms of returns generated vis-à-vis allocated capital and the amount of risk borne in the conduct of business.


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The BPI Group manages its capital following the framework of Basel Committee on Banking SupervisionAccord II (Basel II) and its implementation in the Philippines by the BSP. The BSP through its Circular 538requires each bank and its financial affiliated subsidiaries to keep its Capital Adequacy Ratio (CAR) - the ratio ofqualified capital to risk-weighted exposures - to be no less than 10%. In quantifying its CAR, BPI currently usesthe Standardized Approach (for credit risk and market risk) and the Basic Indicator Approach (for operationalrisk). Capital adequacy reports are filed with the BSP every quarter.

Qualifying capital and risk-weighted assets are computed based on BSP regulations. The qualifying capital of theParent Bank consists of core tier 1 capital and tier 2 capital. Tier 1 capital comprises paid-up capital stock, paid-in surplus, surplus including net income for the year, surplus reserves and minority interest less deductions suchas deferred income tax, unsecured credit accommodations to DOSRI, goodwill and unrealized fair value losseson available-for-sale securities. Tier 2 capital includes unsecured subordinated debt (see Note 21), netunrealized fair value gains on available-for-sale investments, and general loan loss provisions for BSP reportingpurposes.

The Basel II framework following BSP Circular 538 took into effect on July 1, 2007. The table below summarizesthe CAR under the Basel II framework for the years ended December 31, 2013 and 2012.


(In Millions of Pesos)Tier 1 capital 93,616 83,125 95,634 84,654Tier 2 capital 6,257 10,285 5,041 9,000Gross qualifying capital 99,873 93,410 100,675 93,654Less: Required deductions 3,218 2,756 32,170 29,304Total qualifying capital 96,655 90,654 68,505 64,350

Risk weighted assets 705,556 638,900 563,773 511,404CAR (%) 13.70 14.19 12.15 12.58

The BPI Group has fully complied with the CAR requirement of the BSP.

Effective January 1, 2014, the Bank is required to adopt new capital requirements in accordance with theprovisions of Basel III. The new guidelines are meant to strengthen the composition of the Bank's capital byincreasing the level of core capital and regulatory capital. Under Basel III, the Bank is required to maintain aminimum capital adequacy ratio of 10% which includes a capital conservation buffer of 2.5%. The adoption ofBasel III is not expected to have an adverse effect on the capital adequacy of the Bank.

Likewise, the BPI Group manages the capital of its non-life insurance subsidiaries, pre-need subsidiary andsecurities dealer subsidiaries in accordance with the capital requirements of the relevant regulatory agency, such asInsurance Commission, Philippine SEC and PSE. These subsidiaries have fully complied with the relevant capitalrequirements.

As part of the reforms of the PSE to expand capital market and improve transparency among listed firms, PSErequires listed entities to maintain a minimum of ten percent (10%) of their issued and outstanding shares, exclusiveof any treasury shares, held by the public. The Parent Bank has fully complied with this requirement.

Note 4 - Critical Accounting Estimates and Judgments

The BPI Group makes estimates and assumptions that affect the reported amounts of assets and liabilities.Estimates and judgments are continually evaluated and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable under the circumstances. It is reasonablypossible that the outcomes within the next financial year could differ from assumptions made at reporting date andcould result in the adjustment to the carrying amount of affected assets or liabilities.

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A. Critical accounting estimates

(i) Impairment losses on loans and advances (Note 13)

The BPI Group reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whetheran impairment loss should be recorded in profit or loss, the BPI Group makes judgments as to whether there is anyobservable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio ofloans before the decrease can be identified with an individual loan in that portfolio. This evidence may includeobservable data indicating that there has been an adverse change in the payment status of borrowers in a group, ornational or local economic conditions that correlate with defaults on assets in the group. Management usesestimates based on historical loss experience for loans with credit risk characteristics and objective evidence ofimpairment similar to those in the portfolio when scheduling its future cash flows. The methodology andassumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduceany differences between loss estimates and actual loss experience. To the extent that the net present value ofestimated cash flows of individually impaired accounts and the estimated impairment for collectively assessedaccounts differs by +/- 5%, impairment provision for the year ended December 31, 2013 would be an estimatedP428 million (2012 - P397 million) higher or lower.

(ii) Fair value of derivatives and other financial instruments (Notes 3.4 and 9)

The fair value of financial instruments that are not quoted in active markets are determined by using generallyaccepted valuation techniques. Where valuation techniques (for example, discounted cash flow models) are usedto determine fair values, they are validated and periodically reviewed by qualified personnel independent of the areathat created them. Inputs used in these models are from observable data and quoted market prices in respect ofsimilar financial instruments.

All models are approved by the Board of Directors before they are used, and models are calibrated to ensure thatoutputs reflect actual data and comparative market prices. Changes in assumptions about these factors could affectreported fair value of financial instruments. The BPI Group considers that it is impracticable to disclose withsufficient reliability the possible effects of sensitivities surrounding the fair value of financial instruments that are notquoted in active markets.

(iii) Pension liability on defined benefit plan (Note 29)

The BPI Group estimates its pension benefit obligation and expense for defined benefit pension plans based on theselection of certain assumptions used by actuaries in calculating such amounts. Those assumptions aredescribed in Note 29 and include, among others, the discount rate and future salary increases. The BPI Groupdetermines the appropriate discount rate at the end of each year. This is the interest rate that should be used todetermine the present value of estimated future cash outflows expected to be required to settle the retirementobligations. The present value of the defined benefit obligations of the BPI Group at December 31, 2013 and2012 are determined using the market yields on Philippine government bonds with terms consistent with theexpected payments of employee benefits. Plan assets are invested in either equity securities, debt securities orother forms of investments. Equity markets may experience volatility, which could affect the value of pensionplan assets. This volatility may make it difficult to estimate the long-term rate of return on plan assets. Actualresults that differ from the BPI Group’s assumptions are reflected as remeasurements in other comprehensiveincome. The BPI Group’s assumptions are based on actual historical experience and external data regardingcompensation and discount rate trends. The sensitivity analysis on key assumptions is disclosed in Note 29.

(iv) Valuation of assets held for sale

In determining the fair value of assets held for sale, the BPI Group analyzed the sales prices by applyingappropriate units of comparison, adjusted by differences between the subject asset or property and relatedmarket data. Should there be a subsequent write-down of the asset to fair value less cost to sell, such write-down is recognized as impairment loss in the statement of income.

In 2013, the BPI Group has recognized an impairment loss on its foreclosed assets amounting to P599 million(2012 - P394 million) as a result of reduction in fair market values.

The BPI Group considers that it is impracticable to disclose with sufficient reliability the possible effects ofsensitivities surrounding the fair value of assets held for sale.


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B. Critical accounting judgments

(i) Impairment of available-for-sale securities (Note 11)

The BPI Group follows the guidance of PAS 39 to determine when an available-for-sale security is impaired. Thisdetermination requires significant judgment. In making this judgment, the BPI Group evaluates, among otherfactors, the duration and extent to which the fair value of an investment is less than its cost; and the financial healthand near-term business outlook of the issuer, including factors such as industry and sector performance, changes intechnology and operational and financing cash flows.

(ii) Classification of held-to-maturity securities (Note 12)

The BPI Group follows the guidance of PAS 39 in classifying non-derivative financial assets with fixed ordeterminable payments and fixed maturity as held-to-maturity. This classification requires significant judgment. Inmaking this judgment, the BPI Group evaluates its intention and ability to hold such investments to maturity. If theBPI Group fails to keep these investments to maturity other than for the specific circumstances - for example sellingan insignificant amount close to maturity - it will be required to reclassify the entire class as available-for-sale. Theinvestments would therefore be measured at fair value and not at amortized cost.

(iii) Classification of assets held for sale

Management follows the principles in PFRS 5 in classifying certain foreclosed assets (consisting of real estate andauto or chattel), as assets held for sale when the carrying amount of the assets will be recovered principally throughsale. Management is committed to a plan to sell these foreclosed assets and the assets are actively marketed forsale at a price that is reasonable in relation to their current fair value.

(iv) Realization of deferred income tax assets (Note 17)

Management reviews at each reporting date the carrying amounts of deferred tax assets. The carrying amount ofdeferred tax assets is reduced to the extent that the related tax assets cannot be utilized due to insufficient taxableprofit against which the deferred tax losses will be applied. Management believes that sufficient taxable profit willbe generated to allow all or part of the deferred income tax assets to be utilized.

Note 5 - Assets and Liabilities Attributable to Insurance Operations

Details of assets and liabilities attributable to insurance operations at December 31 are as follows:

2013 2012(In Millions of Pesos)

AssetsCash and cash equivalents (Note 7) 117 106Insurance balances receivable, net 3,803 1,952Investment securities

Available-for-sale 4,477 5,595Held-to-maturity 3,827 3,811

Land, building and equipment 131 131Accounts receivable and other assets, net 2,231 1,856

14,586 13,451

LiabilitiesReserves and other balances 12,273 10,148Accounts payable, accrued expenses and other payables 788 645

13,061 10,793

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Details of income attributable to insurance operations before income tax and minority interest for the years endedDecember 31 are as follows:

2013 2012 2011(In Millions of Pesos)

Premiums earned and related incomeInvestment and other income

3,020457

2,441426

2,410551

3,477 2,867 2,961Benefits, claims and maturities(Decrease) increase in actuarial reserve liabilitiesManagement and general expensesCommissionsOther expenses

1,133(80)452518

5

97227143347819

1,09330

42941743

2,028 2,173 2,012Income before income tax and minority interest 1,449 694 949

Note 6 - Business Segments

Operating segments are reported in accordance with the internal reporting provided to the chief executive officer,who is responsible for allocating resources to the reportable segments and assessing their performance. Alloperating segments used by the BPI Group meet the definition of a reportable segment under PFRS 8.

The BPI Group has determined the operating segments based on the nature of the services provided and thedifferent markets served representing a strategic business unit.

The BPI Group’s main operating business segments follow:

� Consumer Banking - this segment addresses the individual and retail markets. It covers deposit taking andservicing, consumer lending such as home mortgages, auto loans and credit card finance as well as theremittance business. It includes the entire transaction processing and service delivery infrastructure consistingof the BPI and BPI Family Bank network of branches, ATMs and point-of-sale terminals as well as phone andInternet-based banking platforms.

� Corporate Banking - this segment consists of the entire lending, leasing, trade and cash management servicesprovided by the BPI Group to corporate and institutional customers. These customers include both high-endcorporations as well as various middle market clients.

� Investment Banking - this segment includes the various business groups operating in the investment marketsand dealing in activities other than lending and deposit taking. These services cover corporate finance,securities distribution, asset management, trust and fiduciary services as well as proprietary trading andinvestment activities.

The performance of the Parent Bank is assessed as a single unit using financial information presented in theseparate or Parent only financial statements. Likewise, the chief executive officer assesses the performance of itsinsurance business as a separate segment from its banking and allied financial undertakings. Information on theassets, liabilities and results of operations of the insurance business is fully disclosed in Note 5.

The BPI Group and the Parent Bank mainly derive revenue (more than 90%) within the Philippines, accordingly,no geographical segment is presented.

Revenues of the BPI Group’s segment operations are derived from interest (net interest income). The segmentreport forms part of management’s assessment of the performance of the segment, among other performanceindicators.

There were no changes in the reportable segments during the year. Transactions between the business segmentsare carried out at arm’s length. The revenue from external parties reported to management is measured in amanner consistent with that in profit or loss.

Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in inter-segment netinterest income. Interest charged for these funds is based on the BPI Group’s cost of capital.


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2012

Consumerbanking

Corporatebanking

Investmentbanking

Total permanagement

reporting(In Millions of Pesos)

Interest income 27,138 8,226 4,926 40,290Interest expense 11,726 475 107 12,308Net interest income 15,412 7,751 4,819 27,982Impairment charge 2,103 817 - 2,920Net interest income after impairment charge 13,309 6,934 4,819 25,062Fees and commission income 4,192 523 641 5,356Other income 4,546 1,686 8,816 15,048Gross receipts tax (547) (55) (697) (1,299)Other income, net 8,191 2,154 8,760 19,105Compensation and fringe benefits 7,189 921 559 8,669Occupancy and equipment - related expenses 4,204 1,070 124 5,398Other operating expenses 5,230 3,074 1,015 9,319Total operating expenses 16,623 5,065 1,698 23,386Operating profit 4,877 4,023 11,881 20,781Share in net income of associates 138Provision for income tax 3,158Total assets 336,125 366,674 264,426 967,225Total liabilities 829,128 16,626 29,794 875,548

2011

Consumerbanking

Corporatebanking

Investmentbanking

Total permanagementreporting

(In Millions of Pesos)Interest income 24,985 6,674 6,463 38,122Interest expense 11,819 515 105 12,439Net interest income 13,166 6,159 6,358 25,683Impairment charge 1,643 475 33 2,151Net interest income after impairment charge 11,523 5,684 6,325 23,532Fees and commission income 3,845 518 455 4,818Other income 3,834 1,410 6,059 11,303Gross receipts tax (468) (54) (532) (1,054)Other income, net 7,211 1,874 5,982 15,067Compensation and fringe benefits 7,467 715 592 8,774Occupancy and equipment - related expenses 3,882 1,036 121 5,039Other operating expenses 6,217 1,248 986 8,451Total operating expenses 17,566 2,999 1,699 22,264Operating profit 1,168 4,559 10,608 16,335Share in net income of associates 216Provision for income tax 3,162Total assets 288,598 324,863 226,427 839,888Total liabilities 702,138 16,072 22,599 740,809


(63)

Reconciliation of segment results to consolidated results of operations:

2013

Total permanagement

reporting

Consolidationadjustments/

Others

Total perconsolidated

financialstatements

(In Millions of Pesos)Interest income 41,229 (427) 40,802Interest expense 10,077 401 10,478Net interest income 31,152 (828) 30,324Impairment charge 3,620 (972) 2,648Net interest income after impairment charge 27,532 144 27,676Fees and commission income 6,081 (196) 5,885Other income 16,323 1,521 17,844Gross receipts tax (1,516) (39) (1,555)Other income, net 20,888 1,286 22,174Compensation and fringe benefits 9,095 1,546 10,641Occupancy and equipment - related expenses 5,644 2,396 8,040Other operating expenses 10,304 (2,282) 8,022Total operating expenses 25,043 1,660 26,703Operating profit 23,377 (230) 23,147Share in net income of associates (included in Other income) 590 - 590Provision for income tax 4,153 - 4,153Total assets 1,174,159 21,205 1,195,364Total liabilities 1,071,480 18,077 1,089,557

2012

Total permanagement

reporting


Others


financialstatements

(In Millions of Pesos)Interest income 40,290 (181) 40,109Interest expense 12,308 347 12,655Net interest income 27,982 (528) 27,454Impairment charge 2,920 3 2,923Net interest income after impairment charge 25,062 (531) 24,531Fees and commission income 5,356 (245) 5,111Other income 15,048 1,114 16,162Gross receipts tax (1,299) (43) (1,342)Other income, net 19,105 826 19,931Compensation and fringe benefits 8,669 1,801 10,470Occupancy and equipment - related expenses 5,398 1,795 7,193Other operating expenses 9,319 (2,180) 7,139Total operating expenses 23,386 1,416 24,802Operating profit 20,781 (1,121) 19,660Share in net income of associates (included in Other income) 138 - 138Provision for income tax 3,158 - 3,158Total assets 967,225 18,016 985,241Total liabilities 875,548 11,571 887,119

(64)

2011

Total permanagement

reporting


Others


financialstatements

(In Millions of Pesos)Interest income 38,122 567 38,689Interest expense 12,439 384 12,823Net interest income 25,683 183 25,866Impairment charge 2,151 (1) 2,150Net interest income after impairment charge 23,532 184 23,716Fees and commission income 4,818 (211) 4,607Other income 11,303 1,051 12,354Gross receipts tax (1,054) (16) ( 1,070)Other income, net 15,067 824 15,891Compensation and fringe benefits 8,774 1,496 10,270Occupancy and equipment - related expenses 5,039 1,495 6,534Other operating expenses 8,451 (1,899) 6,552Total operating expenses 22,264 1,092 23,356Operating profit 16,335 (84) 16,251Share in net income of associates (included in Other income) 216 - 216Provision for income tax 3,162 - 3,162Total assets 839,888 3,677 843,565Total liabilities 740,809 14,440 755,249

“Consolidation adjustments/Others” pertain to balances of insurance operations, support units and inter-segmentelimination in accordance with the BPI Group’s internal reporting.

Note 7 - Cash and Cash Equivalents

This account at December 31 consists of:

Consolidated Parent2013 2012 2011 2013 2012 2011

(In Millions of Pesos)Cash and other cash items 25,696 23,293 22,395 24,888 22,518 21,661Due from BSP 244,483 119,079 83,759 195,076 105,244 70,807Due from other banks 17,070 7,582 9,297 8,789 4,724 5,567Interbank loans receivable and securities

purchased under agreementsto resell (Note 8) 12,406 38,927 35,277 5,046 10,843 24,867

Cash and cash equivalents attributable toinsurance operations (Note 5) 117 106 233 - - -

299,772 188,987 150,961 233,799 143,329 122,902


(65)

Note 8 - Interbank Loans Receivable and Securities Purchased under Agreements to Resell (SPAR)

The account at December 31 consists of transactions with:


(In Millions of Pesos)BSP 11,505 38,084 4,150 10,000Other banks 888 821 888 821

12,393 38,905 5,038 10,821Accrued interest receivable 13 22 8 22

12,406 38,927 5,046 10,843

Interbank loans receivable and SPAR maturing within 90 days from the date of acquisition are classified as cashequivalents in the statement of cash flows (Note 7).


(In Millions of Pesos)Current 12,406 38,927 5,046 10,843Non-current - - - -

12,406 38,927 5,046 10,843

Government bonds are pledged by the BSP as collateral under reverse repurchase agreements. The face value ofsecurities pledged is equivalent to the total balance of outstanding placements as at reporting date. All collateralagreements mature within 12 months.

The range of average interest rates (%) of interbank loans receivable of the BPI Group for the years endedDecember 31 follows:

2013 2012Peso-denominated 3.50 - 3.62 3.92 - 4.94US dollar-denominated 0.13 - 0.16 0.16 - 0.23

Note 9 - Derivative Financial Instruments

Derivatives held by the BPI Group for non-hedging purposes mainly consist of the following:

� Foreign exchange forwards represent commitments to purchase or sell one currency against another at anagreed forward rate on a specified date in the future. Settlement can be made via full delivery of forwardproceeds or via payment of the difference (non-deliverable forward) between the contracted forward rateand the prevailing market rate on maturity.

� Foreign exchange swaps refer to spot purchase or sale of one currency against another with an agreementto sell or purchase the same currency at an agreed forward rate in the future.

� Interest rate swaps refer to agreement to exchange fixed rate versus floating interest payments (or viceversa) on a reference notional amount over an agreed period of time.

� Cross currency swaps refer to spot exchange of notional amounts on two currencies at a given exchangerate and with an agreement to re-exchange the same notional amounts at a specified maturity date basedon the original exchange rate. Parties on the transaction agree to pay a stated interest rate on the borrowednotional amount and receive a stated interest rate on the lent notional amount, payable or receivableperiodically over the term of the transaction.

� Credit-Linked Notes (CLNs) are structured notes whose value is derived from the creditworthiness of anunderlying reference entity. A CLN may be viewed as a bundled note that consists of a bond and a creditdefault swap, allowing the issuer to transfer the credit risk of a reference entity to the investor during thereference period.

(66)

The BPI Group’s credit risk represents the potential cost to replace the swap contracts if counterparties fail tofulfill their obligation. This risk is monitored on an ongoing basis with reference to the current fair value, aproportion of the notional amount of the contracts and the liquidity of the market. To control the level of creditrisk taken, the BPI Group assesses counterparties using the same techniques as for its lending activities.

The notional amounts of certain types of financial instruments provide a basis for comparison with instrumentsrecognized on the statement of condition. They do not necessarily represent the amounts of future cash flowsinvolved or the current fair values of the instruments and therefore are not indicative of the BPI Group’s exposureto credit or price risks. The derivative instruments become favorable (assets) or unfavorable (liabilities) as aresult of fluctuations in market interest rates or foreign exchange rates relative to their terms. The aggregatecontractual or notional amount of derivative financial instruments on hand and the extent at which theinstruments can become favorable or unfavorable in fair values can fluctuate significantly from time to time. Thefair values of derivative instruments held are set out below:


Contract/ Fair ValuesNotional Amount Assets Liabilities2013 2012 2013 2012 2013 2012

(In Millions of Pesos)Free-standing derivatives

Foreign exchange derivativesCurrency swaps 70,312 197,512 12,294 1,038 (12,252) (501)Currency forwards 60,661 99,514 700 781 (621) (1,359)

Interest rate swaps 46,862 41,110 3,471 4,021 (3,478) (3,967)Credit default swaps 888 - 13 - (9) -

Embedded credit derivatives 5,327 5,747 72 80 - -Total derivatives assets (liabilities) held for

trading 184,050 343,883 16,550 5,920 (16,360) (5,827)

Note 10 - Trading Securities

The account at December 31 consists of:


(In Millions of Pesos)Debt securities

Government securities 3,900 20,480 2,258 18,405Commercial papers of private companies 429 1,022 367 512

4,329 21,502 2,625 18,917Accrued interest receivable 5 161 1 138

4,334 21,663 2,626 19,055Equity securities - listed 263 435 - -

4,597 22,098 2,626 19,055

All trading securities are classified as current.


(67)

Note 11 - Available-for-Sale Securities



Debt securities (In Millions of Pesos)Government securities 65,808 78,725 62,636 68,197Others 19,115 24,858 17,944 23,122

84,923 103,583 80,580 91,319Accrued interest receivable 962 1,346 906 1,265

85,885 104,929 81,486 92,584Equity securities

Listed 643 1,743 350 361Unlisted 1,614 317 113 113

2,257 2,060 463 47488,142 106,989 81,949 93,058

Allowance for impairment (586) (586) (213) (213)87,556 106,403 81,736 92,845


(In Millions of Pesos)Current 5,038 7,925 3,352 5,811Non-current 83,104 99,064 78,597 87,247

88,142 106,989 81,949 93,058

The reconciliation of the allowance for impairment at December 31 is summarized as follows:


(In Millions of Pesos)At January 1 586 597 213 213Reversal of impairment losses - (11) - -At December 31 586 586 213 213

The range of average interest rates (%) of available-for-sale debt securities of the BPI Group for the years endedDecember 31 follows:

2013 2012Peso-denominated 3.30 - 4.60 5.01 - 5.31Foreign currency-denominated 1.96 - 2.46 2.46 - 2.74

The movement in available-for-sale securities is summarized as follows:


(In Millions of Pesos)At January 1 106,403 74,084 92,845 64,500Additions 264,840 404,123 241,745 363,264Disposals (280,663) (373,322) (249,990) (336,194)Amortization of premium, net (507) (238) (505) (190)Fair value adjustments (3,347) 2,859 (3,129) 2,481Exchange differences 1,214 (1,397) 1,129 (1,276)Net change in allowance for impairment - 11 - -Net change in accrued interest receivable (384) 283 (359) 260At December 31 87,556 106,403 81,736 92,845

(68)

On October 22, 2008, the BPI Group reclassified certain available-for-sale securities aggregating P19.1 billion toheld-to-maturity category. Likewise, on November 12, 2008, an additional portfolio of US dollar-denominatedavailable-for-sale securities totaling US$171.6 million (or peso equivalent of P9.2 billion) was further reclassifiedfrom available-for-sale to held-to-maturity. The reclassification was triggered by management’s change inintention over the securities in the light of volatile market prices due to global economic downturn. Managementbelieves that despite the market uncertainties, the BPI Group has the capability to hold those reclassifiedsecurities until maturity dates.

The aggregate fair value loss of those securities at reclassification dates still recognized in Accumulated othercomprehensive income (under Capital funds), and which will be amortized over the remaining lives of theinstruments using the effective interest rate method amounts to P1,757 million. Unamortized fair value loss as atDecember 31, 2013 amounts to P371 million (2012 - P490 million). Fair value loss that would have beenrecognized in other comprehensive income if the available-for-sale securities had not been reclassified amounts toP277 million for the year ended December 31, 2013 (2012 - P374 million gain). There are no gains or lossesrecognized in profit or loss or other comprehensive income.

On July 11, 2012, the BPI Group reclassified certain available-for-sale securities totaling P1.01 billion to loans andreceivables. The reclassification was triggered by management’s change in intention over the securities followingthe disappearance of active markets for these securities. As at date of reclassification, fair value gain or loss thatwould have been recognized in other comprehensive income if the available-for-sale securities had not beenreclassified amounts to P725 million, which is the same amount of unamortized fair value loss in othercomprehensive income that will be recycled to profit or loss over the remaining lives of the securities. Theunamortized fair value loss as of December 31, 2013 amounts to P250 million (2012 - P456 million). The estimatedamount of cash flows that the BPI Group expects to recover, as at the date of reclassification, is P1.01 billion at theaverage effective interest rate of 3.54%. There are no gains or losses recognized in profit or loss or othercomprehensive income.

Note 12 - Held-to-Maturity Securities



(In Millions of Pesos)Government securities 91,277 73,038 82,129 64,851Commercial papers of private companies 2,898 1,432 2,034 1,432

94,175 74,470 84,163 66,283Accrued interest receivable 1,997 1,773 1,737 1,539

96,172 76,243 85,900 67,822



96,172 76,243 85,900 67,822

The range of average interest rates (%) of held-to-maturity securities of the BPI Group for the years endedDecember 31 follows:

2013 2012Peso-denominated 6.82 - 7.89 7.44 - 7.66Foreign currency-denominated 4.55 - 4.75 4.57 - 4.75


(69)

The movement in held-to-maturity securities is summarized as follows:


(In Millions of Pesos)At January 1 76,243 89,742 67,822 79,723Additions 48,508 10,837 42,493 9,521Maturities (29,906) (19,973) (25,815) (17,659)Amortization of premium, net (1,374) (2,009) (1,067) (1,643)Exchange differences 2,478 (2,084) 2,269 (1,867)Net change in accrued interest receivable 223 (270) 198 (253)At December 31 96,172 76,243 85,900 67,822

Note 13 - Loans and Advances

Major classifications of this account at December 31 are as follows:


Corporate entities (In Millions of Pesos)Large corporate customers 422,520 328,242 404,218 315,698Small and medium enterprise 86,740 85,906 54,471 53,515

Retail customersCredit cards 27,222 25,224 27,054 25,224Mortgages 106,413 95,914 180 175Others 5,759 5,614 2,291 2,007

648,654 540,900 488,214 396,619Accrued interest receivable 2,195 1,962 1,469 1,396Unearned discount/income (3,026) (5,125) (662) (522)


635,194 526,640 480,146 389,962

The Parent balances above include amounts due from related parties (Note 31).



647,823 537,737 489,021 397,493

The amount of loans and advances above include finance lease receivables as follows:

Consolidated2013 2012(In Millions of Pesos)

Total future minimum lease collections 6,546 7,957Unearned finance income (821) (1,137)Present value of future minimum lease collections 5,725 6,820Allowance for impairment (121) (142)

5,604 6,678

(70)

Details of future minimum lease collections follow:

Consolidated2013 2012

(In Millions of Pesos)Not later than one year 3,047 4,456Later than one year but not later than five years 3,499 3,501

6,546 7,957Unearned finance income (821) (1,137)

5,725 6,820

The Parent Bank has no finance lease receivables as at December 31, 2013 and 2012.

Details of the loans and advances portfolio of the BPI Group at December 31 are as follows:

1) As to industry/economic sector (in %)


ConsumerManufacturingReal estate, renting and other related

activitiesAgriculture and forestryWholesale and retail tradeFinancial institutionsOthers

26.9720.87

14.511.64

11.926.44

17.65

28.3718.24

13.961.84

14.666.91

16.02

5.9627.52

18.012.14

15.678.26

22.44

6.7824.51

17.582.43

19.428.8220.46

100.00 100.00 100.00 100.00

2) As to collateral


(In Millions of Pesos)Secured loans

Real estate mortgage 179,228 165,342 80,650 78,906Chattel mortgage 35,968 32,354 2,673 3,105Others 162,145 134,168 149,126 129,313

377,341 331,864 232,449 211,324Unsecured loans 268,287 203,911 255,103 184,773

645,628 535,775 487,552 396,097

Other collaterals include hold-out deposits, mortgage trust indentures, government securities and bonds,quedan/warehouse receipts, standby letters of credit, trust receipts, and deposit substitutes.

Loans and advances aggregating P1,310 million (2012 - P3,431 million) and P1,232 million(2012 - P1,865 million) are used as security for bills payable (Note 20) of the BPI Group and Parent Bank,respectively.

The range of average interest rates (%) of loans and advances of the BPI Group for the years endedDecember 31 follows:

2013 2012Commercial loans

Peso-denominated loans 4.89 - 5.12 5.42 - 5.55Foreign currency-denominated loans 2.43 - 2.66 2.36 - 2.60

Real estate mortgages 7.76 - 8.13 8.64 - 9.06Auto loans 7.45 - 8.42 9.85 - 10.28


(71)

Non-performing accounts (over 30 days past due) of the BPI Group and the Parent Bank, net of specificallowance for credit losses, following BSP Circular 772 effective January 1, 2013 (2012 - net of accounts in the“loss” category and covered with 100% reserves) are as follows:


(In Millions of Pesos)Non-performing accounts (NPL 30) 11,452 11,578 6,788 6,761Specific allowance for credit losses 8,268 2,986 5,399 2,157Net NPL 30 3,184 8,592 1,389 4,604

Reconciliation of allowance for impairment by class at December 31 follows:

Consolidated

2013Corporate entities Retail customers


Small andmedium

enterprises MortgagesCreditcards Others Total

(In Millions of Pesos)At January 1 3,054 2,780 1,510 2,305 1,448 11,097Provision for impairment

losses 212 138 74 1,200 262 1,886Write-off/disposal (432) (46) (4) (1,115) (72) (1,669)Unwind of discount (87) (60) - - - (147)Transfers 2,324 (658) (102) - (102) 1,462At December 31 5,071 2,154 1,478 2,390 1,536 12,629

2012Corporate entities Retail customersLarge

corporatecustomers

Small andmedium


(In Millions of Pesos)At January 1 3,091 3,323 1,102 1,973 1,171 10,660Provision for impairment

losses 269 74 292 1,233 333 2,201Write-off/disposal (195) (87) (1) (836) (73) (1,192)Unwind of discount (75) (50) - - - (125)Transfers (36) (480) 117 (65) 17 (447)At December 31 3,054 2,780 1,510 2,305 1,448 11,097

(72)

Parent



Small andmedium


(In Millions of Pesos)At January 1 2,950 2,143 38 2,305 95 7,531Provision for impairment

losses 104 109 15 1,200 82 1,510Write-off/disposal (432) (38) (4) (1,115) (3) (1,592)Unwind of discount (87) (60) - - - (147)Transfers 1,784 (231) 16 - 4 1,573At December 31 4,319 1,923 65 2,390 178 8,875



Small andmedium


(In Millions of Pesos)At January 1 3,025 2,289 40 1,973 38 7,365Provision for impairment

losses 171 26 - 1,233 - 1,430Write-off/disposal (194) (18) (1) (836) (2) (1,051)Unwind of discount (75) (50) - - - (125)Transfers 23 (104) (1) (65) 59 (88)At December 31 2,950 2,143 38 2,305 95 7,531

Note 14 - Bank Premises, Furniture, Fixtures and Equipment


Consolidated

2013

Land

Buildings andleasehold

improvements

Furnitureand

equipmentEquipmentfor lease Total

(In Millions of Pesos)Cost

January 1, 2013 3,146 5,844 11,890 4,852 25,732Additions - 389 1,957 1,883 4,229Disposals (76) (611) (987) (1,949) (3,623)Amortization - (151) - - (151)Transfers 4 (76) (3) - (75)December 31, 2013 3,074 5,395 12,857 4,786 26,112

Accumulated depreciationJanuary 1, 2013 - 2,352 9,322 1,637 13,311Depreciation - 215 1,317 1,095 2,627Disposals/transfers - (314) (612) (1,105) (2,031)December 31, 2013 - 2,253 10,027 1,627 13,907

Net book value, December 31, 2013 3,074 3,142 2,830 3,159 12,205


(73)

2012

Land


improvements

Furnitureand

equipmentEquipmentfor lease Total

(In Millions of Pesos)Cost

January 1, 2012 3,159 5,831 11,388 4,468 24,846Additions - 349 1,446 2,072 3,867Disposals (9) (184) (942) (1,688) (2,823)Amortization - (156) - - (156)Transfers (4) 4 (2) - (2)December 31, 2012 3,146 5,844 11,890 4,852 25,732

Accumulated depreciationJanuary 1, 2012 - 2,225 8,807 1,492 12,524Depreciation - 226 1,282 987 2,495Disposals/transfers - (99) (767) (842) (1,708)December 31, 2012 - 2,352 9,322 1,637 13,311

Net book value, December 31, 2012 3,146 3,492 2,568 3,215 12,421

Parent

2013

Land


improvementsFurniture and

equipment Total(In Millions of Pesos)

CostJanuary 1, 2013 2,692 5,055 10,985 18,732Additions - 342 1,850 2,192Disposals (28) (528) (923) (1,479)Amortization - (114) - (114)Transfers - (85) - (85)December 31, 2013 2,664 4,670 11,912 19,246

Accumulated depreciationJanuary 1, 2013 - 2,057 8,574 10,631Depreciation - 185 1,237 1,422Disposals/transfers - (266) (571) (837)December 31, 2013 - 1,976 9,240 11,216

Net book value, December 31, 2013 2,664 2,694 2,672 8,030

2012

Land


improvementsFurniture and

equipment Total(In Millions of Pesos)

CostJanuary 1, 2012 2,702 5,050 10,501 18,253Additions - 300 1,349 1,649Disposals (9) (184) (859) (1,052)Amortization - (118) - (118)Transfers (1) 7 (6) -December 31, 2012 2,692 5,055 10,985 18,732

Accumulated depreciationJanuary 1, 2012 - 1,956 8,098 10,054Depreciation - 203 1,193 1,396Disposals/transfers - (102) (717) (819)December 31, 2012 - 2,057 8,574 10,631

Net book value, December 31, 2012 2,692 2,998 2,411 8,101

Depreciation is included in Occupancy and equipment-related expenses in the statement of income.

(74)

Note 15 - Investment Properties



(In Millions of Pesos)Land 963 3,208 963 3,201Buildings 1,856 1,771 1,856 1,771

2,819 4,979 2,819 4,972Accumulated depreciation (1,220) (1,144) (1,220) (1,144)Allowance for impairment (2) (1,253) (2) (1,253)

1,597 2,582 1,597 2,575

The movement in investment properties is summarized as follows:


(In Millions of Pesos)At January 1 2,582 2,637 2,575 2,630Additions - 12 - 12Disposals (994) - (987) -Transfers 85 - 85 -Depreciation (76) (67) (76) (67)At December 31 1,597 2,582 1,597 2,575

Investment properties have aggregate fair value of P3,289 million as at December 31, 2013(2012 - P6,449 million). Fair value of investment property is determined on the basis of appraisal made by aninternal or an external appraiser duly certified by the BPI Group’s Credit Policy group. Valuation methodsemployed by the appraisers mainly include the market data approach, cost approach and income approach.

Depreciation is included in Occupancy and equipment-related expenses in the statement of income.

All investment properties generate rental income. Rental income from investment properties recognized in thestatement of income, as part of Other operating income, amounts to P255 million for the year endedDecember 31, 2013 (2012 - P260 million; 2011 - P245 million). Direct operating expenses (including repairs andmaintenance) arising from these investment properties amount to P21 million for the year endedDecember 31, 2013 (2012 - P193 million; 2011 - P205 million).

Note 16 - Investments in Subsidiaries and Associates

This account at December 31 consists of investments in shares of stock:


(In Millions of Pesos)Carrying value (net of impairment)

Investments at equity method 4,176 3,680 - -Investments at cost method - - 6,793 7,088

4,176 3,680 6,793 7,088


(75)

Investments in associates carried at equity method in the consolidated statement of condition follow:

Place of business/country of

incorporation

Percentage ofownership interest

(%) Acquisition costMeasurement

methodName of entity 2013 2012 2013 2012

BPI - Philamlife Assurance Corporation Philippines 47.67 47.67 371 371 EquityNational Reinsurance Corporation* Philippines 15.38 15.12 204 204 EquityBeacon Properties Philippines 20.00 20.00 100 100 EquityVictoria 1552 Investments, LP Delaware, USA 35.00 35.00 7 7 EquityCitytrust Realty Corporation Philippines 40.00 40.00 2 2 Equity

684 684Allowance for impairment (7) (7)

677 677*BPI Group has significant influence due to its representation on the governing body of National Reinsurance Corporation

For BPI-Philamlife Assurance Corporation, BPI acts as distribution channel for the former’s insurance products.

Details and movements of investments in associates carried at equity method in the consolidated financialstatements follow:


Acquisition costAt January 1 677 677Allowance for impairment - -At December 31 677 677

Accumulated equity in net incomeAt January 1 1,385 1,276Share in net income for the year 590 138Dividends received (7) (29)At December 31 1,968 1,385

Accumulated share in other comprehensive incomeAt January 1 1,618 1,116Share in other comprehensive income for the year (87) 502At December 31 1,531 1,618

4,176 3,680

As the associates are not considered to be individually material to impact the financial statements of the BPIGroup, the unaudited financial information of associates as at and for the years ended December 31 has beenaggregated as follows:


Total assets 66,239 54,482Total liabilities 52,042 41,441Total revenues 17,898 14,665Total net income 1,414 384

(76)

The details of equity investments at cost method in the separate financial statements of the Parent Bank follow:

Acquisition costAllowance forimpairment Carrying value

2013 2012 2013 2012 2013 2012(In Millions of Pesos)

SubsidiariesBPI Europe Plc. 1,910 1,910 - - 1,910 1,910Ayala Plans, Inc. 863 863 - - 863 863BPI Leasing Corporation 644 644 - - 644 644BPI Capital Corporation 623 623 - - 623 623BPI Direct Savings Bank, Inc. 392 392 - - 392 392FGU Insurance Corporation 303 303 - - 303 303Prudential Investments, Inc. - 300 - - - 300BPI Globe BanKO, Inc. 359 359 - - 359 359BPI Foreign Exchange Corp. 195 195 - - 195 195BPI Express Remittance Corp. USA 191 191 - - 191 191BPI Family Savings Bank, Inc. 150 150 - - 150 150First Far-East Development

Corporation 91 91 - - 91 91Green Enterprises S.R.L. in

Liquidation (formerly BPIExpress Remittance Europe,S.p.A) 54 54 - - 54 54

BPI Card Finance Corp. 50 50 - - 50 50FEB Stock Brokers, Inc. 25 25 - - 25 25BPI Computer Systems Corp. 23 23 - - 23 23BPI Express Remittance Spain S.A 25 20 - - 25 20Others 322 322 (104) (104) 218 218

Associates 677 677 - - 677 6776,897 7,192 (104) (104) 6,793 7,088

Note 17 - Deferred Income Taxes

The significant components of deferred income tax assets and liabilities at December 31 are as follows:


(In Millions of Pesos)Deferred income tax assets

Allowance for impairment 5,662 5,565 3,813 4,003Net operating loss carry over (NOLCO) 10 7 - -Minimum corporate income tax (MCIT) 2 3 - -Pension liability 370 172 283 95Others 1,007 396 1,035 259

Total deferred income tax assets 7,051 6,143 5,131 4,357Deferred income tax liabilities

Revaluation gain on properties acquired from abusiness combination (767) (810) (731) (760)

Fair value gain on available-for-sale securities - (174) - (160)Others (108) (72) (104) 88

Total deferred income tax liabilities (875) (1,056) (835) (832)6,176 5,087 4,296 3,525


(77)


(In Millions of Pesos)Deferred income tax assets

Amount to be recovered within 12 months 612 604 559 559Amount to be recovered after 12 months 6,439 5,539 4,572 3,798

7,051 6,143 5,131 4,357Deferred income tax liabilities

Amount to be settled within 12 months 175 357 175 357Amount to be settled after 12 months 700 699 660 475

875 1,056 835 832

The movement in the deferred income tax account is summarized as follows:


(In Millions of Pesos)At January 1 5,087 5,284 3,525 3,677Amounts (credited to) charged against statement

of income (6) 418 (245) 213Amounts credited to (charged against) other

comprehensive income 1,095 (615) 1,016 (365)At December 31 6,176 5,087 4,296 3,525

The deferred tax charge (credit) in the statement of income comprises the following temporary differences:


(In Millions of Pesos)Allowance for impairment (94) (436) (135) 191 (210) 17NOLCO (3) (3) 7 - - -Pension 82 22 79 52 19 86Others 21 (1) (359) 2 (22) (377)

6 (418) (408) 245 (213) (274)

The outstanding NOLCO at December 31 consists of:

Consolidated ParentYear of Incurrence Year of Expiration 2013 2012 2013 2012

(In Millions of Pesos)2013 2016 20 - -2012 2015 10 10 - -2011 2014 3 3 - -2010 2013 11 11 - -2009 2012 - - - -

44 24 - -Used portion/ expired during the year (11) - - -

33 24 - -Tax rate 30% 30% 30% 30%Deferred income tax asset on NOLCO 10 7 - -

(78)

The details of MCIT at December 31 are as follows:

Consolidated ParentYear of Incurrence Year of Expiration 2013 2012 2013 2012

(In Millions of Pesos)2013 2016 - - - -2012 2015 - - - -2011 2014 3 3 - 1902010 2013 - - - 2322009 2012 - - - 201

3 3 - 623Used portion during the year (1) - - (623)

2 3 - -

Note 18 - Other Resources

The account at December 31 consists of the following:


(In Millions of Pesos)Intangible assets 2,744 2,865 2,689 2,817Accounts receivable 2,356 4,843 1,902 4,277Residual value of equipment for lease 1,994 2,238 - -Sundry debits 1,167 2,327 1,149 2,301Accrued trust and other fees 1,153 1,150 1,004 974Creditable withholding tax 1,334 798 1,076 529Prepaid expenses 725 607 494 412Rental deposits 335 294 280 244Miscellaneous assets 999 1,488 420 899


11,048 14,948 7,414 10,930

The reconciliation of the allowance for impairment at December 31 is summarized as follows:


(In Millions of Pesos)At January 1 1,662 1,333 1,523 1,289Provision for impairment losses 159 329 88 280Write-off (62) - (11) (46)At December 31 1,759 1,662 1,600 1,523



12,807 16,610 9,014 12,453

On December 8, 2010, BPI signed an agreement with ING Bank N.V. – Manila Branch (“ING”) to purchase the latter’strust business. On February 16, 2011, BPI and ING received the approval of the transaction from the BSP subject tocertain conditions. Subsequently, the amendment of the Plan Rules of the Unit Investment Trust Funds ("UITF")managed by ING was approved by the Monetary Board in its meeting on March 25, 2011 allowing BPI to act asTrustee of these UITFs which have been renamed Odyssey Funds.


(79)

The acquisition was completed on March 30, 2011. The purchase of ING’s trust department was accounted for as anacquisition of business under PFRS 3. The main assets acquired from this transaction consist of intangible asset inthe form of contractual customer relationships which have an aggregate fair value of P2,784 million and certain IT andtransportation equipment valued at P25 million. There were no liabilities assumed from the acquisition. The contractualcustomer relationships are expected to have a useful life of 10 years. The amount of amortization recognized in thestatement of income for the year ended December 31, 2013 is P278 million (2012 - P278 million).

Note 19 - Deposit Liabilities



(In Millions of Pesos)Demand 179,681 149,092 171,731 141,539Savings 505,538 341,971 430,185 294,192Time 303,367 311,211 183,487 192,634

988,586 802,274 785,403 628,365

The Parent balances above include amounts due to related parties (Note 31).



988,586 802,274 785,403 628,365

Related interest expense on deposit liabilities is broken down as follows:


(In Millions of Pesos)Demand 448 550 692 403 505 645Savings 3,032 2,651 2,325 2,351 2,190 1,954Time 6,050 8,447 8,704 2,433 4,234 5,002

9,530 11,648 11,721 5,187 6,929 7,601

Under current and existing BSP regulations as at December 31, 2013 and 2012, the BPI Group should complywith a simplified minimum reserve requirement instead of the separate liquidity and statutory reserverequirements. Further, BSP requires all reserves be kept at the central bank. The BPI Group is in full compliancewith the simplified reserve requirement.

The required liquidity and statutory reserves as reported to BSP at December 31 comprise of:


(In Millions of Pesos)Due from BSP 128,276 100,158 116,419 90,220

128,276 100,158 116,419 90,220

(80)

Note 20 - Bills Payable



(In Millions of Pesos)Bangko Sentral ng Pilipinas 990 2,940 919 1,384Private firms - 760 - -Local banks 7,395 7,482 313 481Foreign banks 17,794 15,098 17,758 15,098

26,179 26,280 18,990 16,963

The range of average interest rates (%) of bills payable of the BPI Group for the years ended December 31 follows:

2013 2012Bangko Sentral ng Pilipinas 3.87 - 4.10 4.38 - 4.76Private firms and local banks - Peso-denominated 5.81 - 6.31 6.25 - 6.87Foreign banks 1.04 - 1.31 1.28 - 1.49


(In Millions of Pesos)Interest expense 545 584 679 194 165 245


(In Millions of Pesos)Current 25,313 24,890 18,209 15,842Non-current 866 1,390 781 1,121

26,179 26,280 18,990 16,963

Bills payable include funds borrowed from Land Bank of the Philippines (LBP), Development Bank of thePhilippines (DBP) and Social Security System (SSS) which were relent to customers of the BPI Group inaccordance with the financing programs of LBP, DBP and SSS and credit balances of settlement bank accounts.The average payment terms of these bills payable is 1.35 years (2012 - 2.25 years). Loans and advances of theBPI Group arising from these financing programs serve as security for the related bills payable (Note 13).

Note 21 - Unsecured Subordinated Debt

On December 12, 2008, the Parent Bank issued P5,000 million worth of unsecured subordinated notes (the“Notes”) eligible as Lower Tier 2 capital pursuant to BSP Circular No. 280, series of 2001, as amended. TheNotes will at all times, rank pari passu and without any preference among themselves and at least equally with allother present and future unsecured and subordinated obligations of the Parent Bank, except obligationsmandatorily preferred by law. The Notes bear interest at the rate of 8.45% per annum and will mature onDecember 12, 2018 (maturity date). The interest is payable quarterly in arrears from December 12, 2008 untilDecember 11, 2018. The Notes are redeemable in whole and not only in part at the exclusive option of theParent Bank on December 13, 2013 (redemption date) subject to the satisfaction of certain regulatory approvalrequirements. Unless the Notes are earlier redeemed on December 13, 2013, the applicable interest rate will beincreased to the rate equal to 80% multiplied by the 5-year on-the-run Philippine Treasury benchmark bid yield(benchmark rate) on the first day of the 21st interest period plus the step-up spread. The step-up spread is equalto 150% of 8.45% less 80% of the benchmark rate.

On August 20, 2013, the Board of Directors of BPI approved the exercise of its option to call or redeem theP5,000 million BPI Lower Tier 2 Notes on the optional redemption date, being December 13, 2013.

Interest expense on the unsecured subordinated notes recognized in 2013 amounts to P403 million(2012 and 2011 - P423 million).


(81)

Note 22 - Deferred Credits and Other Liabilities

The account at December 31 consists of the following:


(In Millions of Pesos)Bills purchased - contra 11,797 11,570 11,786 11,557Dividends payable 3,201 - 3,201 -Accounts payable 3,550 3,621 2,370 2,548Deposit on lease contract 2,076 2,377 - -Outstanding acceptances 1,677 1,153 1,677 1,153Other deferred credits 425 1,541 35 963Withholding tax payable 502 712 402 624Vouchers payable 731 459 731 458Due to the Treasurer of the Philippines 366 279 328 252Miscellaneous liabilities 6,905 2,585 5,808 2,008

31,230 24,297 26,338 19,563

Bills purchased - contra represents liabilities arising from the outright purchases of checks before actual clearingas a means of immediate financing offered by the BPI Group. Miscellaneous liabilities include insurance andother employee-related payables.



31,230 24,297 26,338 19,563

Note 23 - Capital Funds

Details of authorized share capital of the Parent Bank follow:

2013 2012 2011(In Millions of Pesos,

Except Par Value Per Share)Authorized capital (at P10 par value per share)

Common sharesPreferred A shares

49,000600

49,000600

49,000600

49,600 49,600 49,600

Details of outstanding common shares follow:

2013 2012 2011(In Number of Shares)

Issued common sharesAt January 1Issuance of shares during the year

3,556,356,1732,363,850

3,556,356,173-

3,556,328,00328,170

At December 31 3,558,720,023 3,556,356,173 3,556,356,173Subscribed common shares 2,363,850 - -

Share premium as at December 31, 2013 amounts to P8,316 million (2012 and 2011 - P8,317 million).

As at December 31, 2013, 2012 and 2011, the Parent Bank has 12,111, 12,447 and 12,921 commonshareholders, respectively. There are no preferred shares issued and outstanding at December 31, 2013, 2012and 2011.

(82)

Details of and movements in Accumulated other comprehensive income (loss) for the years ended December 31follow:


(In Millions of Pesos)Fair value reserve on available-for-sale

securitiesAt January 1 1,030 1,748 328 642 1,192 (303)Unrealized fair value (loss) gain before tax (4,901) (987) 1,683 (4,592) (809) 1,782Deferred income tax effect 919 269 (263) 921 259 (287)At December 31 (2,952) 1,030 1,748 (3,029) 642 1,192

Share in other comprehensive income (loss)of insurance subsidiariesAt January 1 289 137 202 - - -Share in other comprehensive income

(loss) for the year, before tax (331) 169 (48) - - -Deferred income tax effect 78 (17) (17) - - -At December 31 36 289 137 - - -

Share in other comprehensive income (loss)of associatesAt January 1 1,618 1,116 765 - - -Share in other comprehensive income

(loss) for the year (88) 502 351 - - -At December 31 1,530 1,618 1,116 - - -

Translation adjustment on foreign operationsAt January 1 (936) (832) (828) - - -Translation differences 233 (104) (4) - - -At December 31 (703) (936) (832) - - -

Actuarial (losses) gains on defined benefitplan, netAt January 1 (581) (2,333) (1,469) (365) (1,755) (1,035)Actuarial (losses) gains for the year (702) 2,504 (1,234) (594) 1,986 (1,029)Deferred income tax effect 211 (752) 370 178 (596) 309At December 31 (1,072) (581) (2,333) (781) (365) (1,755)

(3,161) 1,420 (164) (3,810) 277 (563)

Details of and movements in Reserves for the years ended December 31 follow:


(In Millions of Pesos)Stock option scheme

At January 1 - - 42 - - 11Exercise of options - - - - - -Expiration of options - - (42) - - (11)Value of employee services - - - - - -At December 31 - - - - - -

Surplus reservesAt January 1 1,603 1,462 1,325 1,603 1,462 1,325Transfer from surplus 76 141 137 76 141 137Other transaction 1 - - 1 - -At December 31 1,680 1,603 1,462 1,680 1,603 1,462

1,680 1,603 1,462 1,680 1,603 1,462


(83)

Surplus reserves consist of:

Consolidated and Parent2013 2012 2011

(In Millions of Pesos)Reserve for trust businessReserve for self-insurance

1,64535

1,56934

1,42834

1,680 1,603 1,462

In compliance with existing BSP regulations, 10% of the Parent Bank’s income from trust business isappropriated to surplus reserve. This yearly appropriation is required until the surplus reserve for trust businessreaches 20% of the Parent Bank’s regulatory net worth.

Reserve for self-insurance represents the amount set aside to cover losses due to fire, defalcation by and otherunlawful acts of personnel and third parties.

Cash dividends declared by the Board of Directors of the Parent Bank during the years 2011 to 2013 follow:

Date declared Date approved by the BSP

Amount of dividends

Per shareTotal


May 18, 2011 June 2, 2011 0.90 3,201November 16, 2011 December 6, 2011 0.90 3,201March 21, 2012 April 10, 2012 0.50 1,778March 21, 2012 April 10, 2012 0.90 3,201October 21, 2012 November 16, 2012 0.90 3,201April 17, 2013 May 15, 2013 0.90 3,201November 6, 2013 December 5, 2013 0.90 3,201

Cash dividends declared are payable to common shareholders of record as of 15th day from receipt by theParent Bank of the approval by the BSP and distributable on the 15th day from the said record date.

The calculation of earnings per share (EPS) is shown below:


(In Millions, Except Earnings Per Share Amounts)a) Net income attributable to equity holders

of the Parent Bank 18,811 16,352 12,899 14,468 12,427 9,910b) Weighted average number of common

shares outstanding during the year 3,627 3,556 3,556 3,627 3,556 3,556c) Basic EPS (a/b) 5.19 4.60 3.63 3.99 3.49 2.79

For 2013, the weighted average number of common shares outstanding during the year has been adjusted to takeinto consideration the rights issue approved by the Board of Directors on November 6, 2013. The Parent Bankoffered for subscription a total of 370,370,370 common shares to eligible shareholders on a pre-emptive rights basisat P67.50 per share. The stock rights have been fully subscribed and listed on February 10, 2014. The proceedsfrom the rights offer amounting to P25 billion will increase the Parent Bank’s capital base.

On November 27, 2013, the Board or Directors of the Parent Bank approved to grant to qualified beneficiaries/participants up to 3,500,000 shares for Executive Stock Option Plan (ESOP) and up to 3,200,000 shares forStock Purchase Plan (SPP). The ESOP has a three-year vesting period with 1/3 of the option being vested at theend of each year from grant date while the SPP has a five-year payment period.

The exercise price for ESOP is equal to weighted average of BPI share price for the most recent previous 30-trading days from grant date. The weighted average fair value of options granted during the period determinedusing the Black-Scholes valuation model was P17.54 per option.

(84)

The subscription price for SPP is equivalent to 15% below the weighted average of BPI share price for the mostrecent previous 30-trading days from grant date. The subscription date for SPP was on December 23, 2013.

The impact of ESOP is not considered material to the 2013 financial statements; thus, the disclosures were onlylimited to the information mentioned above.

The basic and diluted EPS are the same for the years presented as the stock options outstanding is not significantto impact the weighted average number of common shares.

Note 24 - Other Operating Income

Details of other operating income follow:



Trust and asset management fees 3,723 2,913 2,569 3,026 2,453 2,199Rental income 1,830 1,698 1,627 425 415 397Credit card income 1,359 1,342 1,332 1,359 1,342 1,332Gain on sale of assets 1,296 1,192 527 1,028 640 310Dividend income 28 27 47 1,923 1,383 1,210Others 1,278 706 585 795 538 469

9,514 7,878 6,687 8,556 6,771 5,917

Trust and asset management fees arise from the BPI Group’s asset management and trust services and are basedon agreed terms with various managed funds and investments.

Rental income is earned by the BPI Group by leasing out its investment properties (Note 15) and other assets whichconsist mainly of fleet of vehicles.

Gain on sale of assets arises mainly from disposals of properties (including equity investments), foreclosedcollaterals and non-performing assets.

Dividend income recognized by the Parent Bank substantially pertains to dividend distribution of subsidiaries.

Note 25 - Leases

The BPI Group and the Parent Bank have various lease agreements which mainly pertain to branch premises thatare renewable under certain terms and conditions. The rentals (included in Occupancy and equipment-relatedexpenses) under these lease contracts are as follows:

Consolidated Parent(In Millions of Pesos)

2013 1,071 8692012 936 7452011 870 684

The future minimum lease payments under non-cancellable operating leases of the BPI Group are as follows:


No later than 1 year 67 71Later than 1 year but no later than 5 years 85 120

152 191


(85)

Note 26 - Operating Expenses

Details of compensation and fringe benefits expenses follow:


(In Millions of Pesos)Salaries and wages 8,788 8,328 8,409 6,831 6,565 6,420Retirement expense (Note 29) 786 1,032 813 639 822 655Other employee benefit expenses 1,067 1,110 1,048 822 875 842

10,641 10,470 10,270 8,292 8,262 7,917

Details of other operating expenses follow:


(In Millions of Pesos)Insurance 1,908 1,685 254 1,269 1,127 48Advertising 1,346 1,457 1,410 1,104 1,268 1,256Travel and communication 696 662 622 594 556 492Litigation expenses 521 444 458 349 321 307Supervision and examination fees 500 398 1,618 441 351 1,328Taxes and licenses 461 237 233 239 130 127Amortization expense 337 334 308 333 331 305Office supplies 256 248 235 215 207 198Management and other

professional fees 261 188 197 197 134 142Shared expenses - - - 157 107 237Others 1,736 1,486 1,217 974 846 856

8,022 7,139 6,552 5,872 5,378 5,296

Note 27 - Income Taxes

A reconciliation between the provision for income tax at the statutory tax rate and the actual provision for incometax for the years ended December 31 follows:

Consolidated2013 2012 2011

AmountRate(%) Amount

Rate(%) Amount

Rate(%)

(In Millions of Pesos)Statutory income tax 6,944 30.00 5,898 30.00 4,875 30.00Effect of items not subject to statutory tax rate:

Income subjected to lower tax rates (689) (2.98) (1,132) (5.76) (951) (5.85)Tax-exempt income (2,938) (12.69) (2,850) (14.50) (2,634) (16.21)Others, net 836 3.61 1,242 6.32 1,872 11.52

Actual income tax 4,153 17.94 3,158 16.06 3,162 19.46

Parent2013 2012 2011

AmountRate(%) Amount

Rate(%) Amount

Rate(%)

(In Millions of Pesos)Statutory income tax 5,207 30.00 4,397 30.00 3,657 30.00Effect of items not subject to statutory tax rate:

Income subjected to lower tax rates (645) (3.72) (868) (5.92) (926) (7.60)Tax-exempt income (1,993) (11.48) (1,982) (13.52) (1,838) (15.08)Others, net 320 1.85 684 4.66 1,389 11.39

Actual income tax 2,889 16.65 2,231 15.22 2,282 18.71

(86)

Note 28 - Basic Quantitative Indicators of Financial Performance

The key financial performance indicators follow (in %):


Return on average equityReturn on average assetsNet interest margin

18.051.873.31

17.861.913.57

19.051.873.09

17.971.883.37

Note 29 - Retirement Plans

BPI and its subsidiaries, and a non-life insurance subsidiary have separate trusteed, noncontributory retirementbenefit plans covering all qualified officers and employees. The description of the plans follows:

BPI

BPI has a unified plan which includes its subsidiaries other than insurance companies. Under this plan, thenormal retirement age is 60 years. Normal retirement benefit consists of a lump sum benefit equivalent to 200%of the basic monthly salary of the employee at the time of his retirement for each year of service, if he hasrendered at least 10 years of service, or to 150% of his basic monthly salary, if he has rendered less than 10years of service. For voluntary retirement, the benefit is equivalent to 112.50% of the employee’s basic monthlysalary for a minimum of 10 years of service with the rate factor progressing to a maximum of 200% of basicmonthly salary for service years of 25 or more. Death or disability benefit, on the other hand, shall bedetermined on the same basis as in voluntary retirement.

The net defined benefit cost and contributions to be paid by the entities within the BPI Group are determined byan independent actuary.

Plan assets are held in trusts, governed by local regulations and practice in the Philippines.

Non-life insurance subsidiary

BPI/MS has a separate trusteed defined benefit plan. Under the plan, the normal retirement age is 60 years orthe employee should have completed at least 10 years of service, whichever is earlier. The normal retirementbenefit is equal to 150% of the final basic monthly salary for each year of service for below 10 years and 175% ofthe final basic monthly salary for each year of service for 10 years and above.

Death or disability benefit for all employees of the non-life insurance subsidiary shall be determined on the samebasis as in normal or voluntary retirement as the case may be.

Following are the amounts recognized based on recent actuarial valuations:

a) Pension liability recognized in the statement of condition

Consolidated

December 31,2013

December 31,2012

(Restated)

January 1,2012

(Restated)(In Millions of Pesos)

Present value of defined benefit obligations 11,495 10,909 11,508Fair value of plan assets (10,261) (10,406) (8,415)Pension liability recognized in the statement of condition 1,234 503 3,093


(87)

Parent

December 31,2013

December 31,2012

(Restated)

January 1,2012

(Restated)(In Millions of Pesos)

Present value of defined benefit obligations 9,277 8,702 9,161Fair value of plan assets (8,332) (8,385) (6,796)Pension liability recognized in the statement of condition 945 317 2,365

Pension liability is shown as part of “Miscellaneous liabilities” within Deferred credits and other liabilities (Note22).

The movement in plan assets is summarized as follows:


(In Millions of Pesos)At January 1 10,406 8,415 8,385 6,796Asset return in net interest cost 687 586 553 474Contributions 756 1,119 605 886Benefit payments (1,158) (1,240) (866) (1,004)Remeasurement - return on plan assets (430) 1,526 (345) 1,233At December 31 10,261 10,406 8,332 8,385

The carrying value of the plan assets as at December 31, 2013 is equivalent to the fair value of P10,261 million(2012 - P10,406 million).

The plan assets are comprised of the following:


Amount % Amount % Amount % Amount %(In Millions of Pesos Except for Rates)

Debt securities 5,306 52 5,120 49 4,309 52 4,125 49Equity securities 4,933 48 5,274 50 4,006 48 4,250 50Others 22 - 12 1 17 - 10 1

10,261 100 10,406 100 8,332 100 8,385 100

Pension plan assets of the unified retirement plan include investment in BPI’s common shares with carryingamount of P1,232 million (2012 - P1,381 million) and fair value of P2,750 million at December 31, 2013(2012 - P3,446 million). The actual return on plan assets of the BPI Group was P257 million in 2013(2012 - P2,111 million).

The movement in the present value of defined benefit obligation is summarized as follows:


(In Millions of Pesos)At January 1 10,909 11,508 8,702 9,161Present value of defined benefit obligation for transferred

employees from a subsidiary - - - 2Current service cost 764 816 618 657Past service cost (11) - - -Interest cost 720 802 574 639Benefit payments (1,158) (1,239) (866) (1,004)Remeasurement - changes in financial assumptions 271 (978) 249 (753)At December 31 11,495 10,909 9,277 8,702

(88)

(b) Expense recognized in the statement of income


(In Millions of Pesos)Current service cost 764 816 601 618 657 501Net interest cost 33 216 212 21 165 154Past service cost (11) - - - - -At December 31 786 1,032 813 639 822 655

The BPI Group has no other transactions with the plan other than the contributions presented above for theyears ended December 31, 2013 and 2012.

The principal assumptions used for the actuarial valuations of the unified plan of the BPI Group are as follows:

2013 2012Discount rate 5.31% 6.60%Future salary increases 4.00% 4.00%

Assumptions regarding future mortality and disability experience are based on published statistics generally usedfor local actuarial valuation purposes.

The defined benefit plan typically exposes the BPI Group to a number of risks such as investment risk, interest raterisk and salary risk. The most significant of which relate to investment and interest rate risk. The present value ofthe defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates ofgovernment bonds that are denominated in the currency in which the benefits will be paid, and that have terms tomaturity approximating the terms of the related pension liability. A decrease in government bond yields will increasethe defined benefit obligation although this will also be partially offset by an increase in the value of the plan’s fixedincome holdings. Hence, the present value of defined benefit obligation is directly affected by the discount rate to beapplied by the BPI Group. However, the BPI Group believes that due to the long-term nature of the pension liabilityand the strength of the BPI Group itself, the mix of debt and equity securities holdings of the plan is an appropriateelement of the BPI Group’s long term strategy to manage the plan efficiently.

The BPI Group ensures that the investment positions are managed within an asset-liability matching framework thathas been developed to achieve long-term investments that are in line with the obligations under the plan. The BPIGroup’s main objective is to match assets to the defined benefit obligation by investing primarily in long-term debtsecurities with maturities that match the benefit payments as they fall due. The asset-liability matching is beingmonitored on a regular basis and potential change in investment mix is being discussed with the trustor, asnecessary to better ensure the appropriate asset-liability matching.

The average remaining service life of employees under the BPI unified retirement plan as at December 31, 2013is 20 years (2012 - 21 years). The BPI Group contributes to the plan depending on the suggested fundingcontribution as calculated by an independent actuary. The expected contribution for the year endingDecember 31, 2014 for the BPI Group and Parent amounts to P903 million and P722 million, respectively.

The projected maturity analysis of retirement benefit payments as at December 31, 2013 is as follows:

Consolidated

(In Millions of Pesos) AmountLess than a year 865Between 1 to 5 years 3,327Between 5 to 10 years 4,370Between 10 to 15 years 6,768Between 15 to 20 years 10,463Over 20 years 47,518


(89)

Parent

(In Millions of Pesos) AmountLess than a year 692Between 1 to 5 years 2,516Between 5 to 10 years 3,392Between 10 to 15 years 5,905Between 15 to 20 years 8,722Over 20 years 36,697

The sensitivity of the defined benefit obligation as at December 31, 2013 to changes in the weighted principalassumptions follows:

Consolidated

Impact on defined benefit obligationChange in

assumptionIncrease inassumption Decrease in assumption

Discount rate 0.5% Decrease by 1.66% Increase by 3.02%Salary growth rate 1.0% Increase by 7.13% Decrease by 2.57%

Parent

Impact on defined benefit obligationChange in

assumptionIncrease inassumption Decrease in assumption

Discount rate 0.5% Decrease by 1.69% Increase by 3.13%Salary growth rate 1.0% Increase by 7.39% Decrease by 2.61%

The above sensitivity analyses are based on a change in an assumption while holding all other assumptionsconstant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated.When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the samemethod (present value of the defined benefit obligation calculated with the projected unit credit method at theend of the reporting period) has been applied as when calculating the retirement liability recognized within thestatement of condition.

Note 30 - Trust Assets

As disclosed in Note 18, BPI and ING received on February 16, 2011 the approval from the BSP of BPI’s purchaseof the latter’s trust business subject to certain conditions. Subsequently, the amendment of the Plan Rules of UITFsmanaged by ING was approved by the Monetary Board in its meeting on March 25, 2011 allowing BPI to act asTrustee of these UITFs which were named as Odyssey Funds.

At December 31, 2013, the net asset value of trust and fund assets administered by the BPI Group amounts toP580 billion (2012 - P739 billion).

Government securities deposited by the BPI Group and the Parent Bank with the BSP in compliance with therequirements of the General Banking Act relative to the trust functions follow:


(In Millions of Pesos)Government securities 6,702 6,982 6,650 6,830

(90)

Note 31 - Related Party Transactions

In the normal course of the business, the Parent Bank transacts with related parties consisting of its subsidiariesand associates. Likewise, the BPI Group has transactions with Ayala Corporation (AC) and its subsidiaries (AyalaGroup). AC has a significant influence over the BPI Group as at reporting date.

These transactions such as loans and advances, deposit arrangements, trading of government securities andcommercial papers, sale of assets, lease of bank premises, investment advisory/management, servicearrangements and advances for operating expenses are made in the normal banking activities and have terms andconditions that are generally comparable to those offered to non-related parties or to similar transactions in themarket.

Significant related party transactions and outstanding balances as at and for the years ended December 31 aresummarized below:

Consolidated

2013

TransactionsOutstanding

balances Terms and conditions(In Millions of Pesos)

Loans and advances from:Subsidiaries (202) 194 These are loans and advances granted

to related parties that are generallysecured with interest rates ranging from0.65% to 8.04% and with maturityperiods ranging from 8 days to 12years. Additional information on DOSRIloans are discussed below.

Associates - -AC - 6,250Subsidiaries of AC 11,403 16,065Key management

personnel - -

11,201 22,509Deposits from:

Subsidiaries 2,885 6,936 These are demand, savings and timedeposits bearing the following averageinterest rates:Demand - 0.28% to 0.36%Savings - 0.70% to 0.98%Time - 2.20% to 3.25%

Associates 613 672Ayala Group (17,910) 21,159Key management

personnel 704 1,014

(13,708) 29,781


(91)

2012



Loans and advances from:Subsidiaries (1,285) 396 These are loans and advances granted


Associates - -AC 1,750 6,250Subsidiaries of AC 4,460 4,662Key management personnel - -


Subsidiaries 724 4,051 These are demand, savings and timedeposits bearing the following averageinterest rates:Demand - 0.40% to 0.55%Savings - 0.95% to 1.06%Time - 3.45% to 3.71%

Associates 16 59Ayala Group 21,216 39,069Key management personnel (32) 310

21,924 43,489

2011



Loans and advances from:Subsidiaries 355 1,681 These are loans and advances granted

to related parties that are generallysecured with interest rates ranging from2.05% to 4.75% and with maturityperiods ranging from 3 days to 2 years.Additional information on DOSRI loansare discussed below.

Associates (50) -AC (250) 4,500Subsidiaries of AC (348) 202Key management personnel - -

(293) 6,383Deposits from:


Associates 2 43Ayala Group (6,183) 17,853Key management personnel 36 342

(4,974) 21,417

(92)

Parent

2013



Loans and advances from:Subsidiaries 194 194 These are loans and advances granted


Associates - -AC - 6,250Subsidiaries of AC 11,653 16,065Key management personnel - -



Associates 613 672Ayala Group (17,910) 21,159Key management personnel 704 1,014

(14,638) 28,143

2012



Loans and advances from:Subsidiaries (1,681) - These are loans and advances granted


Associates - -AC (1,750) 6,250Subsidiaries of AC 4,210 4,412Key management personnel - -

779 10,662Deposits from:

Subsidiaries 277 3,343 These are demand, savings and timedeposits bearing the following averageinterest rates:Demand - 0.39% to 0.55%Savings - 0.92% to 1.05%Time - 2.87% to 3.18%

Associates 16 59Ayala Group 21,216 39,069Key management personnel (342) 310

21,167 42,781


(93)

2011


Balances Terms and conditions(In Millions of Pesos)

Loans and advances from:Subsidiaries 355 1,681 These are loans and advances granted

to related parties that are generallysecured with interest rates ranging from2.05% to 4.75% and with maturityperiods ranging from 3 days to 2 years.Additional information on DOSRI loansare discussed below.

Associates (50) -AC (250) 4,500Subsidiaries of AC (348) 202Key management personnel - -

(293) 6,383Deposits from:

Subsidiaries 1,171 3,179 These are demand, savings and timedeposits bearing the following averageinterest rates:Demand - 0.55%Savings - 0.96% to 1.00%Time - 3.09% to 3.46%

Associates 2 43Ayala Group (6,183) 17,853Key management personnel 36 342

(4,974) 21,417

The aggregate amounts included in the determination of income before income tax that resulted fromtransactions with each class of related parties are as follows:

Consolidated


Interest incomeSubsidiaries 5 76 37Associates - 3 22AC 127 119 121Subsidiaries of AC 368 88 -Key management personnel - - -

500 286 180Other income

Subsidiaries 1,018 973 883Associates 577 370 203AC 16 22 10Subsidiaries of AC (75) 62 18Key management personnel - - -

1,536 1,427 1,114Interest expense

Subsidiaries 5 21 17Associates 3 - -Ayala Group 68 301 97Key management personnel 5 2 2

81 324 116

(94)

2013 2012 2011Other expenses

Subsidiaries 1,003 905 1,027Associates - - -AC 175 132 23Subsidiaries of AC 42 49 46Key management personnel - - -

1,220 1,086 1,096Retirement benefits

Key management personnel 33 39 27Salaries, allowances and other short-term benefits

Key management personnel 603 556 527Directors’ remuneration 57 51 46

Parent


Interest incomeSubsidiaries 2 56 37Associates - 3 22AC 127 119 121Subsidiaries of AC 368 82 -Key management personnel - - -

497 260 180Other income

Subsidiaries 585 577 462Associates 577 370 203AC - - -Subsidiaries of AC (131) - -Key management personnel - - -

1,031 947 665Interest expense

Subsidiaries 5 7 17Associates 3 - -Ayala Group 68 301 97Key management personnel 5 2 2

81 310 116Other expenses

Subsidiaries 900 343 476Associates - - -AC 175 132 23Subsidiaries of AC 42 49 46Key management personnel - - -

1,117 524 545Retirement benefits

Key management personnel 29 36 25Salaries, allowances and other short-term benefits

Key management personnel 509 487 470Directors’ remuneration 50 38 40

Other income mainly consists of rental income and revenue from service arrangements with related parties. Also,in March 2013, a loss arising from sale of an impaired investment property was recognized at both consolidatedand parent level.

Other expenses mainly consist of rental expenses and management fees.


(95)

There were no provisions recognized against receivables from related parties. Also, no additional provision wasrecognized during the year.

Details of DOSRI loans are as follows:


(In Millions of Pesos)Outstanding DOSRI loans 6,677 6,619 6,643 6,569

In percentages (%)Consolidated Parent

2013 2012 2013 2013% to total outstanding loans and advances 1.04 1.24 1.36 1.66% to total outstanding DOSRI loans

Unsecured DOSRI loans 29.05 29.63 29.05 29.85Past due DOSRI loans 0.15 0.06 0.15 0.06Non-performing DOSRI loans 0.14 0.05 0.14 0.05

At December 31, 2013 and 2012, the BPI Group is in full compliance with the General Banking Act and the BSPregulations on DOSRI loans.

Note 32 - Commitments and Contingencies

At present, there are lawsuits, claims and tax assessments pending against the BPI Group. In the opinion ofmanagement, after reviewing all actions and proceedings and court decisions with legal counsels, the aggregateliability or loss, if any, arising therefrom will not have a material effect on the BPI Group’s financial position orfinancial performance.

BPI and some of its subsidiaries are defendants in legal actions arising from normal business activities.Management believes that these actions are without merit or that the ultimate liability, if any, resulting from them willnot materially affect the financial statements.

In the normal course of business, the BPI Group makes various commitments (Note 3.1.4) that are not presentedin the financial statements. The BPI Group does not anticipate any material losses from these commitments.

Note 33 - Restatement

The BPI Group adopted PAS 19 (Revised), Employee benefits on January 1, 2013.

The revised employee benefit standard introduces changes to the recognition, measurement, presentation anddisclosure of post-employment benefits. The standard also requires net interest expense/income to be calculatedas the product of the net defined benefit liability/asset and the discount rate as determined at the beginning of theyear. The effect of this is to remove the previous concept of recognizing an expected return on plan assets.

The effects of the changes to the accounting policy are shown in the following tables.

(a) Impact of the adoption on statement of condition

ConsolidatedPreviouslyreported

Effects of the adoptionof PAS 19 (R) Restated

(In Millions of Pesos)December 31, 2012

Deferred income tax assets, net 4,915 172 5,087Total resources 985,069 172 985,241

Deferred credits and other liabilities 23,725 572 24,297Surplus 49,613 181 49,794Accumulated other comprehensive income 2,000 (580) 1,420

Total capital funds 98,522 (400) 98,122Total liabilities and capital funds 985,069 172 985,241

(96)



(In Millions of Pesos)January 1, 2012


Deferred credits and other liabilities 22,225 3,162 25,387Surplus 41,643 120 41,763Accumulated other comprehensive income 2,168 (2,333) (165)

Total capital funds 90,530 (2,214) 88,316Total liabilities and capital funds 842,616 949 843,565

ParentPreviouslyreported


(In Millions of Pesos)December 31, 2012


Deferred credits and other liabilities 19,216 347 19,563Surplus 23,932 122 24,054Accumulated other comprehensive income 642 (365) 277

Total capital funds 70,056 (243) 69,813Total liabilities and capital funds 755,427 104 755,531



(In Millions of Pesos)January 1, 2012

Deferred income tax assets, net 2,958 719 3,677Total assets 656,902 719 657,621

Deferred credits and other liabilities 18,569 2,396 20,965Surplus 19,870 78 19,948Accumulated other comprehensive income 1,192 (1,755) (563)

Total capital funds 66,403 (1,677) 64,726Total liabilities and capital funds 656,902 719 657,621

(b) Impact of the adoption on statement of income



(In Millions of Pesos)2012

Compensation and fringe benefits 10,556 (86) 10,470Net income for the year 16,441 61 16,502










(97)

Parent Previously reportedEffects of the adoption

of PAS 19 (R) Restated(In Millions of Pesos)

2011Compensation and fringe benefits 7,994 (77) 7,917Net income for the year 9,856 54 9,910

(c) Impact of the adoption on statement of total comprehensive income

Consolidated Previously reportedEffects of the adoption


2012Net income for the year 16,441 61 16,502Other comprehensive incomeIncome that will not be reclassified to profitor loss

Actuarial gains (losses) on definedbenefit plan, net of tax effect - 1,752 1,752

Total comprehensive income for the year 16,282 1,814 18,096

Consolidated Previously reportedEffects of the adoption



Actuarial gains (losses) on definedbenefit plan, net of tax effect - (864) (864)

Total comprehensive income for the year 14,716 (788) 13,929




Actuarial gains (losses) on definedbenefit plan, net of tax effect - 1,390 1,390

Total comprehensive income for the year 11,833 1,434 13,267




Actuarial gains (losses) on definedbenefit plan, net of tax effect - (720) (720)

Total comprehensive income for the year 11,351 (666) 10,685

(98)

Note 34 - Supplementary information required by the Bureau of Internal Revenue

(a) Supplementary information required by Revenue Regulations No 15-2010

On December 28, 2010, Revenue Regulations (RR) No. 15-2010 became effective and amended certain provisionsof RR No. 21-2002 prescribing the manner of compliance with any documentary and/or procedural requirements inconnection with the preparation and submission of financial statements and income tax returns. Section 2 of RRNo. 21-2002 was further amended to include in the Notes to Financial Statements information on taxes, duties andlicense fees paid or accrued during the year in addition to what is mandated by PFRS.

Below is the additional information required by RR No. 15-2010 that is relevant to the Parent Bank. This informationis presented for purposes of filing with the Bureau of Internal Revenue (BIR) and is not a required part of the basicfinancial statements.

(i) Documentary stamp tax

Documentary stamp taxes paid for the year ended December 31, 2013 consist of:

(In Millions of Pesos) AmountDeposit and loan documents 2,181Trade finance documents 206Mortgage documents 69Others 3

2,459

A portion of the amount disclosed above was passed on to the counterparties.

(ii) Withholding taxes

Withholding taxes paid/accrued and/or withheld for the year ended December 31, 2013 consist of:

(In Millions of Pesos)Amount

Paid Accrued TotalFinal income taxes withheld on interest on deposits and yield on deposit

substitutes 860 108 968Income taxes withheld on compensation 1,570 180 1,750Final income taxes withheld on income payment 642 10 652Creditable income taxes withheld (expanded) 699 87 786Fringe benefit tax 39 14 53VAT withholding tax 44 3 47

3,854 402 4,256

(iii) All other local and national taxes

All other local and national taxes paid/accrued for the year ended December 31, 2013 consist of:

(In Millions of Pesos)Amount

Paid Accrued TotalGross receipts tax 2,238 234 2,472Real property tax 123 - 123Municipal taxes 73 - 73Others 26 - 26

2,460 234 2,694


(99)

(iv) Tax cases and assessments

As at reporting date, the Parent Bank has outstanding cases filed in courts against local government unitscontesting certain local tax assessments and the tax authorities for various claims for tax refund.Management is of the opinion that the ultimate outcome of these cases will not have a material impact onthe financial statements of the Parent Bank. Also, the taxable years 2009 and 2010 remain open andcurrently under tax examination, for which no assessment has yet been received.

(b) Supplementary information required by Revenue Regulations No. 19-2011

RR No. 19-2011 prescribes the new BIR forms that should be used for income tax filing covering and starting withthe calendar year 2011 and modifies Revenue Memorandum Circular No. 57-2011. In the Guidelines andInstructions Section of the new BIR Form 1702 (version November 2011), a required attachment to the income taxreturns is an Account Information Form and/or Financial Statements that include in the Notes to FinancialStatements schedules of sales/receipts/fees, cost of sales/services, non-operating and taxable other income,itemized deductions (if the taxpayer did not avail of Optional Standard Deduction), taxes and licenses and otherinformation prescribed to be disclosed in the Notes to the Financial statements.

Below is the additional information for the year ended December 31, 2013 required by RR No. 19-2011 that isrelevant to the Parent Bank. This information is presented for purposes of filing with the BIR and is not a requiredpart of the basic financial statements.

(i) Sales/receipts/fees

(In Millions of Pesos)Non-

taxable Final taxRegular

rate TotalInterest income 2,256 7,500 18,910 28,666

(ii) Cost of services/Direct costs

(In Millions of Pesos) Regular rateManpower costs 6,615Interest expense 2,124Insurance - PDIC 1,210Supervision and examination fees 442

10,391

(iii) Non-operating and taxable other income

(In Millions of Pesos) Regular rateService charges 5,494Trust fees 3,499Foreign exchange 1,399Gain on sale of fixed assets 456Rental income 425Trading gain 161Others 800

12,234

(100)

(iv) Itemized deductions

Nature of expense/deduction(In Millions of Pesos) Regular rate

Taxes and licenses 2,515Advertising 2,515Bad debts 1,664Salaries and allowances 1,503Depreciation and amortization of leasehold rights 1,443Communication, light and water 1,185Rental 1,053Repairs and maintenance 1,050Documentary stamp used 1,012Other outside services 1,000Amortization of intangibles 581Security services 402Litigation / Asset acquired expenses 344Management and consultancy fee 296Office supplies 220Janitorial and messengerial services 204SSS, GSIS, Philhealth, HDMF and other contributions 185Miscellaneous loss 132Transportation and travel 132Membership fees and dues 102Donations 85Insurance 69Fringe benefits 66Director’s fees 47Amortization of pension trust contribution 38Fuel and oil 35Representation and entertainment 34Commissions 34Others 33Credit card expenses 31Freight expenses 23Staff meeting 16Bank charges 10Sub-total 18,059NOLCO -Total expenses 18,059

(v) Taxes and licenses

The details of the Parent Bank’s taxes and licenses are presented in section (a) of this note.

(vi) Other information

All other information prescribed to be disclosed by the BIR has been included in this note.






PRODUCTS AND SERVICES

DEPOSITS

Peso depositsCheckingSavings Time

Foreign Currency DepositsSavingsTime

Deposit Substitute

LOANS

Commercial LoansRevolving CreditTerm LoansTrade FinanceFleet & Floor Stock FinancingProject Finance Receivables Financing Property Equity Credit LineFranchising Loans

Sustainable Energy Financing(QHUJ\�(řFLHQF\�/RDQV�Renewable Energy Loans

Consumer Loans Auto LoanHousing LoanBusiness Loans

Franchising LoanTerm LoanCredit Line

Personal Loans

Agribusiness LoansPiggeryPoultryPost-Harvest

LeasingFinance LeaseOperating LeaseFull Service Operating LeaseLease SyndicationTrade Receivable Discounting

MicrofinanceMicrosavings Microinsurance:KROHVDOH�0LFURŗQDQFH�/RDQVRetailer LoansMultipurpose Loans

Global Investment/Wealth Management Services (Hong Kong)Multi-Currency Time DepositsConsumer LoansGlobal Securities (Broker/Dealer) AccountForeign Currency BondsForeign Currency Investment Funds

Foreign Currency EquitiesInvestment Management AccountForeign Exchange

PAYMENTS & SETTLEMENT SERVICES

Self-Service Banking ChannelsExpress PhoneExpress OnlineExpress Online KiosksExpress MobileExpress Teller ATMExpress Deposit MachinesBPI Trade

Cards and PaymentsDebit CardCredit CardPrepaid CardMerchant Payment Facilities

Payment and Settlement FacilitiesBills PaymentFunds TransferRemittance Credit to a BPI/BPI Family Saving

Bank/BPI Direct Account Cash Pick-Up Door-to-DoorCredit to Other local Bank’s Account Gift Remittance

Prepaid Reloading

International Wire Payments

Transaction BankingCash Management

ExpressLinkCollectionsDisbursementAccount and Liquidity Management

Trade Finance

Financial Institutions Depository ServicesPeso Vostro ServicesUSD Vostro Services

ASSET MANAGEMENT & TRUST

Institutional Fund Management Fund Management SolutionsCorporate and Institutional Funds

CorporationsEducational InstitutionsReligious OrganizationsFoundationsPension and Provident Funds

Other Fiduciary SolutionsMortgage Trust IndentureEscrow Agency

Wealth ManagementLiving Trust/Long-term Living Trust Investment Management Account/Long-term Investment Management AccountMyPortfolio

Investment Funds BPI Investment Funds BPI Short Term Fund BPI Money Market Fund BPI Premium Bond Fund BPI Balanced Fund BPI Philippine High Dividend Equity Fund BPI Equity Value Fund BPI Global Philippine Fund BPI Global Bond Fund-of-Funds BPI Global Equity Fund-of- FundsOdyssey Funds Odyssey Peso Cash Management Fund Odyssey Peso Income Fund Odyssey Peso Bond Fund� 2G\VVH\�'LYHUVLŗHG�&DSLWDO Fund� 2G\VVH\�'LYHUVLŗHG�%DODQFHG Fund Odyssey Philippine Equity Fund Odyssey Philippine High Conviction Equity Fund Odyssey Emerging Market Bond Fund Odyssey Philippine Dollar Bond Fund� 2G\VVH\�$VLD�3DFLŗF�+LJK Dividend Equity Fund Odyssey Tax Exempt Peso Fixed Income Fund Odyssey Tax Exempt Philippine Equity Fund BPI Index Funds ABF Philippines Bond Index Fund BPI Philippine Equity Index Fund Philippine Stock Index Fund* Philippine Dollar Bond Index FundMutual Funds* ALFM Money Market Fund ALFM Peso Bond Fund ALFM Euro Bond Fund ALFM Dollar Bond Fund ALFM Growth Fund Other Mutual Funds managed anddistributed by BIMI: Ekklesia Mutual Fund Bahay Pari Solidaritas Fund

*BPI Investment Management Inc.,a wholly-owned subsidiary of BPI,is the fund manager and principaldistributor of the ALFM Mutual Funds,including the Philippine Stock Index

Fund, Bahay Pari Solidaritas Fund andEkklesia Mutual Fund. BPI serves asinvestment advisor to all themutual funds managed anddistributed by BPI InvestmentManagement, Inc.

INVESTMENT BANKING

Capital RaisingDebt UnderwritingEquity UnderwritingLoan SyndicationProject FinanceAcquisition FinancingSecuritization

Financial Consultancy/AdvisoryMergers and AcquisitionCapital RestructuringFinancial PlanningLiability ManagementCorporate ValuationBusiness DivestmentStrategic Legal AdvisoryPrivate Placements

Dealership and Brokerage

Proprietary Investments

Sovereign Debt InstrumentsPhilippine Sovereign Instruments Treasury Bills and Notes Retail Treasury Bonds Republic of the Philippine Bonds

Selected Developed Sovereign Bonds

Asian Sovereign Bonds

Private SecuritiesBank IssuesCommercial PapersTrade Receivables and AcceptancesCorporate Promissory Notes and BondsMutual FundsEquities

Broker/Dealer of Philippine Equities Securities Custodianship Fundamental Research Corporate Actions� ,QLWLDO�3XEOLF�2ŖHULQJ� 7HQGHU�2ŖHULQJ� 6WRFN�5LJKWV�2ŖHULQJ Stock Split Stock Dividend Cash Dividend Property Dividend Warrants

Foreign ExchangeForeign Exchange Spot Foreign Exchange ForwardsForeign Exchange SwapsForeign Exchange Cash Collateralized Forwards Non-deliverable Forwards

Derivatives Interest Rate Swaps (IRS)Cross Currency Swaps (CCS)Non Deliverable Swaps (NDS)

INSURANCE SERVICES

LifeIndividual Accounts Variable Life/Unit Linked Plans Whole Life Accident and Health Term Life Credit Life (Credit Card) Accidental Protection Plan (Credit Card) Savings Protection Plan (Credit Card)

Corporate AccountsGroup Term LifeGroup AccidentGroup Credit LifeGroup Critical Illness

Non-Life Fire MotorEngineeringMarine & AviationBondsPersonal AccidentCasualtyTrade Credit

ANCILLARY SERVICES

Call Center Services

Economic Research

Investment ResearchFixed Income ResearchEquities Research

Bank Statement ServicesStatement PrintingLetter Shopping


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GROUPdirectory

Bank of the Philippine Islands6768 Ayala Avenue corner Paseo de

roxas

Makati city 1226 PH

� (632) 8185541 to 48

express Phone: 89-100

@ www.bpiexpressonline.com

BPI Family Savings Bank109 Paseo de roxas cor. dela rosa St.

Makati city 1200 PH

� (632) 8185541 to 48


@ www.bpiexpressonline.com

BPI Capital Corporation�WK�ŘRRU��%3,�%XLOGLQJ6768 Ayala Avenue corner Paseo de

roxas

Makati city 1226 PH

� (632) 8169277

� (632) 8187809


@ [email protected]

BPI Securities Corporation�WK�ŘRRU�%3,�%XLOGLQJ��$\DOD�$YHQXH�corner Paseo de roxas

Makati city 1226 PH

� ��8455617

[email protected]

@ www.bpitrade.com

BPI Leasing Corporation��6HQ��*LO�3X\DW�$YH��%J\��%HO�$LUMakati city 1209 PH

@ %3,/B&XVWRPHU6HUYLFH#ESL�FRP�SK

BPI Rental Corporation��6HQ��*LO�3X\DW�$YH��%J\��%HO�$LUMakati city 1209 PH

@ %3,/B&XVWRPHU6HUYLFH#ESL�FRP�SK

BPI Foundation16th�ŘRRU��%3,�%XLOGLQJ6768 Ayala Avenue corner Paseo de

roxas

Makati city 1226 PH

Philippines

� �� (632) 8169390


@ [email protected]

BPI Direct Savings Bank8th�ŘRRU��%3,�&DUG�&HQWHU8753 Paseo de roxas

Makati 1226 PH

� (632) 8169770

@ www.bpidirect.com

Ayala Plans Incorporated7th�ŘRRU��%3,�%XLOGLQJ6768 Ayala Avenue

Makati city 1226 PH


7ROO�)UHH��3/'7�SMS: Send AP <space>plan

QXPEHU�VSDFH!PHVVDJH�WR�0917-8910000 or 0918-8910000

@ [email protected]

BPI/MS Insurance Corporation11th��th and 16th�ŘRRUV$\DOD�/LIH�)*�&HQWHU�%XLOGLQJ�6811 Ayala Avenue

Makati city 1226 PH

� (632) 8409000

@ www.bpims.com

BPI Forex Corporation+HDG�2řFH�WK�ŘRRU�$\DOD�:LQJ��%3,�%XLOGLQJAyala Avenue corner Paseo de roxas

Makati city 1226 PH

� �� (632) 8455191

Main Station

*URXQG�ŘRRU�%3,�0DLQ�%UDQFK��$\DOD�:LQJ��%3,�%XLOGLQJAyala Avenue corner Paseo de roxas

Makati city 1226 PH

� (632) 8169369

Mabini Station

0DELQL�6W��FRUQHU�6WD��0RQLFD��(UPLWD��0DODWH��0HWUR�0DQLOD� (632)6237667

BPI International Finance Ltd.8QLW��7RZHU��/LSSR�&HQWUH��4XHHQVZD\��&HQWUDO��+RQJ�.RQJ� (852) 2521-1155

� (852)2845-9170

BPI A!liates

BPI Philam Life Assurance Corporation15th�ŘRRU��$\DOD�/LIH�)*8�&HQWHU %XLOGLQJ��$\DOD�$YHQXHMakati city 1226 PH

� ��2XWVLGH�Metro Manila)

%3,�3KLODPBFXVWRPHUVHUYLFH#DLD�FRP@ www.bpi-philam.com

BPI Globe BanKO Inc.*URXQG�ŘRRU�%DQ.2�&HQWHU�2UWLJDV�$YHQXH��1RUWKb*UHHQKLOOVSan Juan city 1500 PH

� ��b� (632) 7228714

@ www.banko.com.ph

Shareholder Services and Assistance

BPI Stock Transfer O!ce 16th�ŘRRU��%3,�%XLOGLQJ6768 Ayala Avenue corner Paseo de

roxas

Makati city 1226 PH

� �� (632) 8455515

@ VWRFNWUDQVIHURřFH#ESL�FRP�SK

Institutional Investor Inquiries

BPI Investor Relations O!ce18th�ŘRRU��%3,�%XLOGLQJ6768 Ayala Avenue corner Paseo de

roxas

Makati city 1226 PH

� ��@ [email protected]

O!ce of the Corporate Secretary19th�ŘRRU��%3,�%XLOGLQJ6768 Ayala Avenue corner Paseo de

roxas

Makati city 1226 PH

� (632) 8169705

� (632) 8169421


BPI 5(0,77$1&(�

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HONG KONG: BPI REMITTANCE CENTRE HONG KONG LTD

Worldwide Branch6KRS��:RUOGZLGH�+RXVH��'HV�9RHX[�5RDG��&HQWUDO�+.� (852) 2522-7105 / 2521-5366

@ [email protected]

Hung Hom Branch6KRS�'��'��3ODQHW�6TXDUH�%OGJ�1R��7DN�0DQ�6W��+XQJ�+RP��.RZORRQ� (852) 2954-4833

� (852) 2954-4044

@ ESLKXQJKRP#ESL�FRP�SK

Tsuen Wan Branch6KRS��)��/LN�6DQJ�3OD]D1R��&DVWOH�3HDN�5RDG��7VXHQ�:DQ��1HZ�7HUULWRULHV��+RQJ�.RQJ� (852) 2684-9088

� (852) 2692-4088

@ [email protected]

Yuen Long Branch6KRS��%��QG�ŘRRU��7XQJ�<LN�%XLOGLQJ��<X�.LQJ�6TXDUH��<XHQ�/RQJ� (852) 2443-5377

� (852) 2443-5477

@ ESL\XHQORQJ#ESL�FRP�SK

SPAIN: BPI EXPRESS REMITTANCE SPAIN, S.A.

&DOOH�-RDTXLQ�&RVWD��%DUFHORQD�6SDLQ� (003493) 301-1537

� (003493) 317-3280

@ [email protected]

U.S.A.: BPI EXPRESS REMITTANCE CORP.

Las Vegas Seafood City (Nevada)��6RXWK�0DU\ODQG�3NZ\��6WH�%�/DV�9HJDV��19�� (702) 733-7813

� (702) 733-7808

@ ESLODVYHJDVVF#ESL�FRP�SK�

Los Angeles (California)��:LOVKLUH�%OYG��6XLWH��*�)��/RV�$QJHOHV��&DOLIRUQLD�� (213) 380-9833 or 34

� (213) 380-9835

7ROO�)UHH�1R��@ ESLORVDQJHOHV#ESL�FRP�SK��

Milpitas Landess (California)��/DQGHVV�$YH��8QLW��0LOSLWDV��cA 95035

� (408) 941-2178 / (408)

946-8510

� (408) 941-9289

@ [email protected]

New York (New York)��7KLUG�$YH��FRU��UG�6W��6WH��0H]]�/HYHO��1HZ�<RUN��1<�� (212) 644-6700 / (212) 644-6706

� (212) 752-5969

7ROO�)UHH�1R��@ [email protected]

North Hills Seafood City (California)��1RUGKRŖ�6W��6WH�$��1RUWK�+LOOV��cA 91343

� (818) 672-8206 / 8016

� (818) 672-8211

@ [email protected]

San Diego (California)��(DVW�3OD]D�%OYG��6XLWH�0�*URYH�3OD]D��1DWLRQDO�&LW\��6DQ�'LHJR�� (619) 470-9399 / 9499

� (619) 470-9515

@ ESLVDQGLHJR#ESL�FRP�SK

San Francisco (California)��*HOOHUW�%OYG��*HOOHUW�6TXDUH��6RXWK�6DQ�)UDQFLVFR��&$�� (650) 878-0292

� (650) 878-0293

7ROO�)UHH�1R��@ [email protected]

Union City Seafood City (California)��$OYDUDGR�%OYG��8QLRQ�&LW\��&$�94587

� (510) 441-0103

� (510) 441-0901

@ [email protected]

OTHER FOREIGN OFFICES

BANK OF THE PHILIPPINE ISLANDS (EUROPE) PLC

UNITED KINGDOMThreadneedle O!ce�WK�)ORRU��7KUHDGQHHGOH�6WUHHW��/RQGRQ�(&�5��$<��8�.�� (0044) 207-6389100

� (0044) 207-6386838

@ [email protected];

[email protected]

Earl’s Court O!ce��$��$�(DUOńV�&RXUW�*DUGHQV��/RQGRQ��6:��6=��8.� (0044) 207-835-0088

� (0044) 207-373-1848

@ [email protected]

ITALYRome Branch 9LD�GHL�0LOOH��5RPH��,WDO\� (0039) 06-4452641/ 06-4450146

� (0039) 06-4456310

@ [email protected]

Milan Branch3LD]]D�'HO�'XRPR��0LODQ��,WDO\� (0039) 02.83427962

� 02-89092216

@ [email protected]

BANK OF THE PHILIPPINE ISLANDS!UAE

Representative O!ce6KRS�1R��$O�'L\DIDK�%OGJ��$O�0DQNKRRO�5RDG��$O�+XGDLED��'XEDL��8�$�(�� +97143542977

� +97143542978


PROFILE INDICATORS

1. Strategy and Analysis

1.1 Statement from the most senior decision maker of the organization

1.2 Description of key impacts, risks, and opportunities

2. Organizational Profile

2.1 Name of the organization

2.2 Primary brands, products, and/or services

2.3 Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures

2.4 Location of organization’s headquarters

2.5 Number of countries where the organization operates, and names of countries with either major operations or that are VSHFLŗFDOO\�UHOHYDQW�WR�WKH�VXVWDLQDELOLW\�LVVXHV�FRYHUHG�LQ�WKH�UHSRUW

2.6 Nature of ownership and legal form

2.7 Markets served

2.8 Scale of the reporting organization

��6LJQLŗFDQW�FKDQJHV�GXULQJ�WKH�UHSRUWLQJ�SHULRG�UHJDUGLQJ size, structure, or ownership

2.10 Awards received in the reporting period

3. Report Parameters

Report Profile

3.1 Reporting period

3.2 Date of most recent previous report

3.3 Reporting cycle

3.4 Contact point for questions regarding the report or its contents

Report Scope and Boundary

��3URFHVV�IRU�GHŗQLQJ�UHSRUW�FRQWHQW

3.6 Boundary of the report

GRI INDEX


��6SHFLŗF�OLPLWDWLRQV�RQ�WKH�VFRSH�RU�ERXQGDU\�RI�WKH�UHSRUW

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, RXWVRXUFHG�RSHUDWLRQV��DQG�RWKHU�HQWLWLHV�WKDW�FDQ�VLJQLŗFDQWO\�DŖHFW�comparability from period to period and/or between organizations

3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report

��([SODQDWLRQ�RI�WKH�HŖHFW�RI�DQ\�UH�VWDWHPHQWV�RI�LQIRUPDWLRQ�SURYLGHG�LQ�HDUOLHU�UHSRUWV��DQG�WKH�UHDVRQV�IRU�VXFK�UH�VWDWHPHQW

��6LJQLŗFDQW�FKDQJHV�IURP�SUHYLRXV�UHSRUWLQJ�SHULRGV�LQ�WKH�VFRSH��boundary, or measurement methods applied in the report

GRI Content Index

3.12 Table identifying the location of the Standard Disclosures in the report

Assurance

3.13 Policy and current practice with regard to seeking external assurance for the report

4. Governance, Commitments, and Engagement

Governance

4.1 Governance structure of the organization, including committees XQGHU�WKH�KLJKHVW�JRYHUQDQFH�ERG\�UHVSRQVLEOH�IRU�VSHFLŗF�WDVNV

4.2 Indicate whether the Chair of the highest governance body is also DQ�H[HFXWLYH�RřFHU

4.3 For organizations that have a unitary board structure, state the number and gender of members of the highest governance body WKDW�DUH�LQGHSHQGHQW�DQG�RU�QRQ�H[HFXWLYH�PHPEHUV

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body

4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives, and the organization’s performance

4.6 Processes in place for the highest governance body to ensure FRQŘLFWV�RI�LQWHUHVW�DUH�DYRLGHG

��3URFHVV�IRU�GHWHUPLQLQJ�WKH�FRPSRVLWLRQ��TXDOLŗFDWLRQV��DQG�H[SHUWLVH�of the members of the highest governance body and its committees, including any consideration of gender and other indicators of diversity


Page

2

2

2

43

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2

47

48

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6

46

60

46

Page

��

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2

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48

184

5

4

4

4, 5, 8, 30

5

��

2

2

2

2

2

2

GRI INDEX


PERFORMANCE INDICATORS

5. Management Approach and Performance Indicators

Economic

Disclosure on Management Approach

EC1 Direct economic value generated and distributed, including

revenues, operating costs, employee compensation, donations and other

community investments, retained earnings, and payments to capital

providers and governments

(&��&RYHUDJH�RI�WKH�RUJDQL]DWLRQńV�GHŗQHG�EHQHŗW�SODQ�REOLJDWLRQV

EC5 Range of ratios of standard entry level wage by gender compared to

ORFDO�PLQLPXP�ZDJH�DW�VLJQLŗFDQW�ORFDWLRQV�RI�RSHUDWLRQ

EC7 Procedures for local hiring and proportion of senior management

KLUHG�IURP�WKH�ORFDO�FRPPXQLW\�DW�VLJQLŗFDQW�ORFDWLRQV�RI�RSHUDWLRQ

EC8 Development and impact of infrastructure investments and services

SURYLGHG�SULPDULO\�IRU�SXEOLF�EHQHŗW�WKURXJK�FRPPHUFLDO��LQ�NLQG��RU�SUR�bono engagement

Environmental


EN3 Direct energy consumption by primary energy source

EN4 Indirect energy consumption by primary source

(1��(QHUJ\�VDYHG�GXH�WR�FRQVHUYDWLRQ�DQG�HřFLHQF\�LPSURYHPHQWV

EN7 Initiatives to reduce indirect energy consumption

and reductions achieved

EN8 Total water withdrawal by source

EN16 Total direct and indirect greenhouse gas emissions by weight

EN17 Other relevant indirect greenhouse gas emissions by weight

EN18 Initiatives to reduce greenhouse gas emissions and

reductions achieved

EN22 Total weight of waste by type and disposal method

EN26 Initiatives to mitigate environmental impacts of products and

services, and extent of impact mitigation

Page

9

9

34, 35

34

35

NA

38

42

43

43

��

43

43

43

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43

38


4.8 Internally developed statements of mission or values, codes of

conduct, and principles relevant to economic, environmental, and

social performance and the status of their implementation

4.9 Procedures of the highest governance body for overseeing

WKH�RUJDQL]DWLRQńV�LGHQWLŗFDWLRQ�DQG�PDQDJHPHQW�RI�HFRQRPLF��environmental, and social performance, including relevant risks and

opportunities, and adherence or compliance with internationally

agreed standards, codes of conduct, and principles

4.10 Processes for evaluating the highest governance body’s own

performance, particularly with respect to economic, environmental,

and social performance

Commitments and External Initiatives

4.11 Explanation of whether and how the precautionary approach or

principle is addressed by the organization

4.12 Externally developed economic, environmental, and social

charters, principles, or other initiatives to which the organization

subscribes or endorses

4.13 Memberships in associations (such as industry associations)

and/or national international advocacy organizations

Stakeholder Engagement

4.14 List of stakeholder groups engaged by the organization

��%DVLV�IRU�LGHQWLŗFDWLRQ�DQG�VHOHFWLRQ�RI�VWDNHKROGHUV�ZLWK�ZKRP�to engage

4.16 Approaches to stakeholder engagement, including frequency of

engagement by type and by stakeholder group

4.17 Key topics and concerns that have been raised through

stakeholder engagement, and how the organization has responded

to those key topics and concerns, including through its reporting

Page

200

46

46

46

��

7

6, 7

6, 7

6, 7

6


Human Rights


HR4 Total number of incidents of discrimination and corrective actions taken

+5��2SHUDWLRQV�DQG�VLJQLŗFDQW�VXSSOLHUV�LGHQWLŗHG�DV�KDYLQJ�VLJQLŗFDQW�ULVN�IRU�LQFLGHQWV�RI�FKLOG�ODERU��DQG�PHDVXUHV�WDNHQ�WR�FRQWULEXWH�WR�WKH�HŖHFWLYH�DEROLWLRQ of child labor

+5��2SHUDWLRQV�DQG�VLJQLŗFDQW�VXSSOLHUV�LGHQWLŗHG�DV�KDYLQJ�VLJQLŗFDQW�ULVN�IRU�LQFLGHQWV�RI�IRUFHG�RU�FRPSXOVRU\�labor, and measures taken to contribute to the elimination of all forms of forced or compulsory labor

HR8 Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant to operations

HR11 Number of grievances related to human rights ŗOHG��DGGUHVVHG��DQG�UHVROYHG�WKURXJK�IRUPDO�JULHYDQFH�mechanisms

Society

SO7 Total number of legal actions for anti competitive EHKDYLRU��DQWL�WUXVW��DQG�PRQRSRO\�SUDFWLFHV�DQG�WKHLU�outcomes

Product Responsibility

35��7RWDO�QXPEHU�RI�LQFLGHQWV�RI�QRQ�FRPSOLDQFH�ZLWK�regulations and voluntary codes concerning product and service information and labeling, by type of outcomes

PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction

PR6 Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship

35��7RWDO�QXPEHU�RI�LQFLGHQWV�RI�QRQ�FRPSOLDQFH�ZLWK�regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship, by type of outcomes

PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

(1��0RQHWDU\�YDOXH�RI�VLJQLŗFDQW�ŗQHV�DQG�WRWDO�QXPEHU�RI QRQ�PRQHWDU\�VDQFWLRQV�IRU�QRQ�FRPSOLDQFH�ZLWK�HQYLURQPHQWDO laws and regulations

Social


Labor Practices and Decent Work

LA1 Total workforce by employment type, employment contract, and region, broken down by gender

LA2 Total number and rate of new employee hires and employee turnover by age group, gender, and region

/$��%HQHŗWV�SURYLGHG�WR�IXOO�WLPH�HPSOR\HHV�WKDW�DUH�QRW�SURYLGHG�WR�WHPSRUDU\�RU�SDUW�WLPH�HPSOR\HHV��E\�VLJQLŗFDQW�ORFDWLRQV�RI�operation

LA4 Percentage of employees covered by collective bargaining agreements

LA7 Rates of injury, occupational diseases, lost days, and DEVHQWHHLVP��DQG�WRWDO�QXPEHU�RI�ZRUN�UHODWHG�IDWDOLWLHV��E\�UHJLRQ�and by gender

/$��(GXFDWLRQ��WUDLQLQJ��FRXQVHOLQJ��SUHYHQWLRQ��DQG�ULVN�FRQWURO�programs in place to assist workforce members, their families, or community members regarding serious diseases

LA10 Average hours of training per year per employee, by gender, and by employee category

LA11 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

LA12 Percentage of employees receiving regular performance and career development reviews, by gender

LA13 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity

LA14 Ratio of basic salary and remuneration of women to men by HPSOR\HH�FDWHJRU\��E\�VLJQLŗFDQW�ORFDWLRQV�RI�RSHUDWLRQ

LA15 Return to work and retention rates after parental leave, by gender

Page

38

30

30, 31

32, 34

��

35

37

33

33

33

33

36

35

35

GRI INDEX Page

30

37

37

37

37

37

29

29

25

29

29

29

‘THAT ALL MAY SHARE A COHERENT SENSE OF PURPOSE AND DIRECTION’

WE BELIEVE in the central role

that private enterprise plays in

economic development.

WE BELIEVE that our

corporate mission is to be

WKH�OHDGLQJ�SULYDWH�ŗQDQFLDO�institution in the Philippines

in terms of professional

competence, service quality,

responsible corporate

citizenry, and overall growth

and stability; and to be an

HVWDEOLVKHG�$6($1�ŗQDQFLDO�institution with a creditable

worldwide outreach.

WE BELIEVE that we have a

responsibility to manage the

business for the maximum

EHQHŗW�RI�RXU�FXVWRPHUV�ZKLOH�adopting the highest standard

RI�LQWHJULW\��WR�RŖHU�WKH�ZLGHVW�SRVVLEOH�UDQJH�RI�ŗQDQFLDO�services that is responsive to

their needs; and to adopt

an objective attitude

towards change and

innovation, ever mindful

of improving service quality

DQG�RSHUDWLQJ�HřFLHQF\�


responsibility to develop the

potential of our employees

to the fullest by providing an

environment conducive to

their personal and professional

growth; and to foster a value

system held in common

throughout the institution in

order that we may all share a

coherent sense of purpose

and direction.


responsibility to attain, over

time and within exacting

standards of prudent

management, the highest

possible return of investments

of our shareholders.

THE BPI CREDO


The cover of this Integrated Annual and

Sustainability Report is printed on Naturalis 250

gsm, uncoated, 55% recycled. The inside pages

DUH�SULQWHG�RQ��OLYHV�2ŖVHW��JVP��XQFRDWHG��UHF\FOHG��%RWK�SDSHUV�DUH�FHUWLŗHG�E\�WKH�UK-based Forest Stewardship Council.

Documents

ABOUT THE COVER · Philippine Business for education Philippine Business for the environment 3KLOLSSLQH &RXQFLO IRU 1*2 &HUWL WFDWLRQ United States agency for International Development