ANNUAL REPORT Strength Enduring Momentum, Growing CONTENTS

01 Vision, Mission and Core Values 38 Corporate Governance 02 Who We Are 45 Risk Management 04 Consolidated Financial Highlights 62 Products and Services 06 Message from the Chairman 66 Branch Directory and the President & CEO 72 Table of Organization 14 Flying High with Cebu Air, Inc.: 74 List of Officers Delivering Innovative Solution to a 76 Committees Reporting to the Board Business Challenge 77 Lending Segment 16 Streamlining Processes: Designing Solutions 79 Business Development Segment/Treasury Fit to Customer Needs 80 Retail Banking Group 18 Going the Extra Mile: Synergy and 81 Operations, Control, and Governance Personalized Service 83 Sustaining Human Capital Growth 20 Celebrating a Decade of Supporting Lives 85 Corporate Social Responsiblity and Making Dreams a Reality 89 Statement of Management’s 22 Promoting Inclusive Growth: Responsibility Bridging Opportunities through 90 Independent Auditor’s Report Accessible Financing 93 Financial Statements 24 Enabling Entrepreneurs: Partnering through 103 Notes to Financial Statements Convenient Access to Capital and 192 Legazpi Savings Bank Financial Literacy 196 JG Summit Businesses 28 Board of Directors 32 Senior Advisory Board 33 Key Officers 34 Board of Directors Profile

ABOUT THE COVER

Robinsons Bank Corporation (Robinsons Bank or Bank) is one of the fastest growing commercial banks in the Philippines today. The stride embodies the decisive steps the Bank will take to sustain its growth momentum. The establishment of solid foundation enabled the Bank to deliver and fulfill the changing needs of its customers. Further, the stride encapsulates the significant progress the Bank is undertaking to become the Bank of Choice. VISION MISSION CORE VALUES

We are the Bank of Choice Aiming to be better everyday. Concern driven to fulfill your Excellence changing needs. Committed to provide to the: Leadership Customers – best experience Teamwork Employees – winning culture Integrity Owners – outstanding returns Change Community – responsive organization who we are

60%

60%

40%

2 Robinsons Bank Annual Report 2016 Robinsons Bank Annual Report 2016 3 consolidated financial highlights

TOTAL ASSETS deposit levels capital funds capital adequacy ratio (In PHP millions) (In PHP millions) (In PHP millions) (In %)

34.6% 77,612 44.9% -0.2% 11,989 63,295 11,968 34.4% 57,676 49,173 41,211 43,668

5,766 24.4% 16.7% 10% BSP Requirement

2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016

loan portfolio - net LOAN CONCENTRATION PER INDUSTRY (2016) (In PHP millions) (In %)

15.7% 23.2% 41.1% Others at 38,897 ≤ 5% Share Real estate, renting and 9.3% business services

27,569 Manufacturing

22,583

9.9% Personal consumption Wholesale and retail trade Electricity, gas and 20.2% water supply Financial intermediaries 9.9% 2014 2015 2016 11.9%

4 Robinsons Bank Annual Report 2016 gross income operating expenses net income (In PHP millions) (In PHP millions) (In PHP millions) net interest income Non-interest income

71.9% 247 13.1% 2,579 16.0% 2,187 2,280 2,923 2,417 2,520 2,421 147 144 1,903 2,129

513 391 503 2014 2015 2016 2014 2015 2016 2014 2015 2016

non-performing loans npl coverage (In %) volume (In PHP millions) ratio (In %)

1,118 1,139 4.6% 1,040 4.0% 80.2%

68.8% 2.9%

62.7%

2014 2015 2016 2014 2015 2016

Robinsons Bank Annual Report 2016 5 message from the CHAIRMAN and the PRESIDENT & CEO

Lance Y. Gokongwei Chairman

6 Robinsons Bank Annual Report 2016 We begin this message with our profound succeeding pages, our clients provide their account gratitude to our customers, Board of Directors, about how we were able to make that difference by and employees who have been with us throughout delivering value through deeply-rooted partnerships, the years, building with us an extraordinary heritage creating relevance, and sustainability for their that is distinctly Robinsons Bank. businesses and in their lives in the process. 2016 was a year of markedly global turning points driven by the surge of populist politics Strong Financial Results around the world – the unexpected outcome of Alongside the strong domestic economic the Brexit referendum and the result of the close growth is the buoyant improvement by 7.7% of the US Presidential election race. Closer to home, financial sector. Likewise, we are pleased to report in Asia-Pacific, China faced issues on debt, economic that Robinsons Bank posted a profitable year and slowdown, and currency devaluation, while Japan contributed to the financial deepening of the combated slow growth influenced by the shock banking industry in 2016. We were able to sustain of Brexit, low inflation, aging population, and our performance, with a record net income of negative interest rate policy. The rising sentiment PHP247.5 million, 71.9% higher than the previous year, on anti-globalization in some parts of the world has and outpacing the industry growth of 14.0%. impacted trade in the region and introduced risks This was driven primarily by the increase in net to global growth. Notwithstanding the volatile interest income and non-interest income. global environment and in another election year, The Bank’s net interest margin for 2016 the Philippines remained to be one of the fastest stood at 3.9%, surpassing the industry’s 3.2%. growing economies in the region with 6.8% GDP growth. Robinsons Bank’s net interest income rose to This broad-based growth was driven by a strong PHP2.4 billion level, up by 13.7% compared to last services sector, a revitalized manufacturing sector, year’s PHP2.1 billion. Moreover, our non-interest and robust domestic consumption demand which income climbed by 28.4% to PHP502.6 million from was spurred by low inflation, low interest rates, PHP391.4 million in 2015. increase in consumer confidence, higher OFW Robinsons Bank’s performance was supported by remittances, and growing BPO sector. the asset base growth of 34.6% to PHP77.6 billion from Riding on the wave of the country’s gains and PHP57.7 billion in 2015, beating the industry’s 12.4%. benefitting from the completion of the Bank’s The Bank’s total assets had been expanding at a capacity-building thrust last year, Robinsons Bank compounded annual growth rate of 19.2% over the achieved a significant growth in its net income. last three years, almost doubling the industry’s This growth was underpinned by strong business 10.9%. The Bank’s lending model was successfully performance and steadfast dedication to our clients carried out, increasing our loan portfolio by 40.7% to and communities. PHP38.9 billion in 2016 with a good mix of growth for In this era where banking products and both consumer and commercial. Whereas the credit services are commoditized especially because of quality of our loan portfolio level has been managed the prevalent digitization which transformed the with gross nonperforming loan (NPL) ratio dropping business landscape, Robinsons Bank was able to to 2.9% in 2016 from 4.0% in 2015. Furthermore, differentiate its business and increase market share Robinsons Bank remained sound and well-capitalized through deepened client relationships. We take pride with almost PHP12.0 billion total equity and capital in what we have accomplished for our clients and adequacy ratio remains comfortably at 24.4%, we are grateful for their role in our growth. In the well above BSP’s minimum requirement of 10.0%.

Robinsons Bank Annual Report 2016 7 message from the CHAIRMAN and the PRESIDENT & CEO

Key Business Drivers

PHP in millions, except ratios and where otherwise noted 2016 2015 YoY∆ Assets 77,612 57,659 35% Liabilities 65,644 45,670 44% Equity 11,968 11,968 0% Key Performance Capital Adequacy Ratio (CAR) 24.4% 34.4% (10%) Indicators (KPIs) Net Income 248 144 72% Net Interest Margin 3.9% 4.3% Number of Branches (n) 134 123 9% Number of ATMs (n) 225 202 11% Headcount (n) 1,608 1,357 18% Interest Income 3,069 2,693 14% Interest Expense 649 564 15% Profitability Other Income 503 391 28% Operating Expense 2,579 2,280 13% Net Income 248 144 72% Total Deposits 63,295 43,668 45% Current and Savings Deposits 22,157 18,073 23% Deposits Term Deposit and Special Savings 33,592 19,857 69% FCDU Deposits 7,546 5,737 32% Current Loans 37,802 26,552 42% Non-Performing Loans (NPL) 1,139 1,118 2% Gross Loans 38,941 27,671 41% Loans Net NPL 354 406 (13%) Gross NPL ratio 2.9% 4.0% Net NPL ratio 0.9% 1.5% Security Holdings 15,296 10,955 40% Investments Deposit in BSP and in Other Banks 17,506 14,612 20% Trust Volume 15,508 12,743 22% *Note: 2015 - as Restated

Expanding the Retail Banking Network across the supply chain. We continue to work with The Retail Banking Group (RBG) branch our conglomerate in offering complete financial expansion initiative intends to support the value chain proposition to the entire ecosystem, aggressive market penetration undertaken by the addressing both personal and corporate financial Bank to increase its deposits, client base, and push requirements. While we pursue providing lending the cross-sell agenda. In 2016, we were able to facilities to everyone in the supply chain and we are strengthen our presence in key cities, allowing the committed to innovate on our offerings every single Bank to deliver our services closer to our growing day, we also foster collaborative interactions with our clientele by opening 11 branches and deploying conglomerate to expand our deposit base. 23 ATMs, ending the year with a total network of The RBG Sales platform is critical to our business. 134 branches and 225 ATMs strategically located Several big accounts and corporate deals were closed nationwide. because of the branch referrals. The Bank’s other This initiative, coupled with various deposit business teams will continue to collaborate with campaigns and strategic marketing also to support RBG to ensure better client coverage, responding the Lending Segment, resulted to a 44.9% surge better to the broad range of their changing needs. in our total deposits hitting PHP63.3 billion from last year’s PHP43.7 billion. We had a good deposit Intensifying the Consumer Lending Business mix of current and saving accounts (CASA) and Consumer lending propelled the Lending time deposits (TD). Our CASA upswing by 57.9% to Segment as well as the Bank’s growth for 2016. PHP50.4 billion, while our TD rose 9.7%, reaching The broad spectrum of consumer markets handled PHP12.9 billion in 2016. by the two major lending groups, the Consumer Capitalizing on our strength in being part of a Finance Group (CFG) which offers home, auto large conglomerate, the Bank engaged the networks (including fleet financing), personal (salary),

8 Robinsons Bank Annual Report 2016 and small business loans and the Community Banking Group (CBG) which offers motorcycle financing and microfinance loans, were supported by the bank wide capacity building both in terms of people and process. In 2016, we were able to strengthen As of end-2016, the total consumer portfolio grew “our presence in key cities, allowing substantially by 44.7% to PHP11.0 billion compared to PHP7.6 billion in 2015. The huge increase in the the Bank to deliver our services consumer loan volume was driven by the continued expansion of the Philippine economy and the low closer to our growing clientele by interest rates boosting the demand for home and auto loans. opening 11 branches and deploying In CFG, the hike in the home loans by 118% 23 ATMs, ending the year with a was generated through accreditation and partnerships with real estate leaders, flexible terms, total network of 134 branches and competitive rates, and promos. Likewise, the 212% hike of the auto loans was the result of active 225 ATMs strategically located relationship with dealers, improved processes to meet industry standards, promos, better financing terms, nationwide. and wider geographic reach brought about by the “ branch expansion especially in key cities outside Metro Manila. In CBG, the loans in Microfinance expanded beyond 40% and this was attributable to the The Bank is also compliant to regulatory improved capacity building which resulted to initiatives in the country that ensures a sound and efficient delivery of loan services as well as stronger healthy credit market. Thus, in June 2016, the Bank sales marketing force. Loans in Motorcycle segment complied to Republic Act No. 9510, otherwise known also posted an above 40% growth owing to the as the Credit Information System Act as a submitting enhanced loan processes and stronger relationships entity. Likewise, the Bank has been continuously with the accredited dealerships via attractive strengthening our credit quality structure as lending financing rates and terms. Notably, despite the volume grows. loan growths in CBG, the past due levels dropped The Bank also saw the need to increase the from double-digit to single digit in 2016. The loan lending group’s footprint in the provincial areas, growths of CFG’s home and auto, together with thus lending centers were opened and channels CBG’s microfinance and motorcycle, surpassed the were enhanced. With these diversified touchpoints, industry’s growth records. we are confident that the lending group will be able As part of the Bank’s process improvement to further expand its customer base and reach, in the consumer lending segment, in CFG, and deliver the highest level of customer service to we implemented the Loans Origination System our clients. (LOS) and Document Management System for home and auto loans to deliver loan approvals at par Introducing New Products and Services with the industry. While in CBG, a mobile-based Innovation is inherent in the way we do Motorcycle Back-End System Tool (MC BEST) was business and customer experience is intrinsic in rolled out to more than 130 partner dealer outlets our innovation strategies. which significantly improved the loan payment In 2016, the key themes of our innovation collections processing and hence lower past due centered on products and services to protect levels. Using technology effectively to enable process our customers. Robinsons Bank is compliant with improvements translated in the huge improvement the global standard for the debit cards and ATMs of our loan portfolio. as we implemented the Europay Mastercard Visa

Robinsons Bank Annual Report 2016 9 message from the CHAIRMAN and the PRESIDENT & CEO

(EMV) technology. The Bank’s adoption of the EMV tapped the SME client base by connecting the chip technology will provide additional security to communities around our large corporates which our cardholders as they transact using their debit resulted to a seamless flow of interactions and card via ATM or POS, compared to the traditional transactions. By covering our footprint across client magnetic stripe. We launched the Robinsons Bank category types, we have increased our total client Visa Debit Card (VDC), a chip-enabled debit card portfolio by 32%. which allows online purchases, bills payment, shopping, dining, and cash withdrawal worldwide. Future-Ready Technology Now, our cardholders can have a reliable and secure By leveraging on cutting-edge solutions, we have payment transaction anytime anywhere. been able to integrate seamlessly with our clients’ Likewise, with the protection of our customers in ERP systems for straight-through processing. mind, we launched our non-life insurance product, This strategy helped increase the volume of the Robinsons Bank ATM Guard, which provides transactions that we process by 12% from 2015. our depositors a guarantee to recover lost cash Enrollment to our retail internet banking channel withdrawn from ATMs in case of robbery. grew by 5% in 2016 and enrollment to our corporate internet banking platform grew by 20%. Access to Growing Transaction Banking our corporate and retail online banking sites are Demonstrating our ability to deliver strategic available on a 24x7, 365 days basis. We continue to solutions to our corporate and small-and medium- strive to do better every year so that our customers sized enterprise (SME) clients, the Transaction can have a great experience in interacting with us, Banking Group (TBG) grew its portfolio in 2016 by thus in 2017, we will be upgrading our retail internet commercializing on the product and technology banking platform and introduce our mobile banking build that it executed in 2015. Aiming to be the best app to further delight our customers. in class service provider for our clients, our top priority remains in helping our clients achieve their Delivering Compelling Value Propositions objectives with the best possible solutions and Our clients mean a lot to us and we make products we can provide to enable our corporates sure that our interactions with them add value to increase efficiency, streamline processes, optimize the relationship and enable them to meet their performance and gain competitive advantage. objectives. This year, we have seen 17% growth Our highly consultative approach allows us to build in our cash card enrollment which ultimately effective end-to-end solutions for our client’s value contributes to the financial inclusion agenda of our proposition, connecting the supply chain ecosystem country. In cash management, we came out with for greater efficiency. six new products which were launched as part of our innovative solution offerings, addressing our clients’ Our Approach goals in optimizing their cash by enhancing income End-to-End Solutions and reducing expense. We develop solutions that are intimately linked with our clients’ end-to-end processes and ultimately Superior Client Service integrating seamlessly with our clients’ Enterprise Clients always have been at the center of our Resource Planning (ERP) systems for straight-through business, and complementing our business with processing. The approach resulted to operational strong, customer-centric delivery is a top priority. and cost efficiencies for our clients and enhanced Our After Sales Service works hand in hand with our visibility of cash in their organizations. The value clients to ensure that issues are identified at an early that we provided in enhancing efficiencies and stage and to appropriately escalate concerns to keep visibility contributed 25% growth in the transaction small problems from manageable, resulting in better values that we processed. client service. Our service delivery is measured by a We have grown our SME client base in 2016 turn-around time for closure of issues in which 95% by 30% through offering solutions that help in the have been closed in a timely manner. automation of some of their processes. We also

10 Robinsons Bank Annual Report 2016 Elfren Antonio S. Sarte President & CEO

Robinsons Bank Annual Report 2016 11 message from the CHAIRMAN and the PRESIDENT & CEO

Diversifying Treasury Despite the global market uncertainty coupled with geopolitical risks, Treasury was able to improve trading and foreign exchange gain to a total of WE MADE MEANINGFUL PROGRESS PHP260.2 million in 2016 from PHP164.6 million “ in 2015. Interest income likewise increased from IN 2016. LOOKING AHEAD, we are PHP646.7 million in 2015 to PHP741.3 million in 2016, VERY MUCH EXCITED. THE INITIATIVES albeit the drop in yields arising out of the delays in the US Fed tightening. Treasury focused investments ARE IN PLACE AND THE FOUNDATIONS in high yielding corporate bonds by increasing portfolio from PHP4.0 billion in 2015 to PHP6.7 billion HAVE BEEN FORTIFIED. WE ENTERED in 2016 and this strategy greatly contributed to the Bank’s bottom line. 2016 GUIDED BY OUR FIVE-YEAR PLAN

Treasury also increased its focus in tapping the IMPLEMENTATION INITIATIVES, client base by building sales capacity to expand its

volume in both Peso and US Dollars. The additional AND WE WILL WELCOME 2017“ WITH sales force also centered on improving client servicing through regular face-to-face interactions MORE FOCUSED STRATEGIES TO SUSTAIN and providing updates on market performance. This approach allowed us to deepen our relationships OUR GROWTH MOMENTUM. and meet the clients’ servicing requirements in their investments and foreign exchange transactions. Sensitive to the needs of our customers, Robinsons Bank likewise expanded its over the in USD-denominated securities with initial and counter offerings for third currencies to meet maintaining balance of at least PHP1.0 million with client demand. minimum additional participation of PHP1,000.00 and with no holding period. Growing Trust and Investments The Robinsons Bank UITF had outstanding The Trust and Investments Group (TIG) generated performance in 2016, ranking 2nd out of 18 Balanced a 24.3% growth in total assets under management Fund UITFs, while the Robinsons Bank Money Market (AUM) in 2016, or an incremental increase of Fund UITF ranked 12th out of the 37 Money Market PHP3.0 billion from end-2015’s PHP12.5 billion AUM, Fund UITFs, as reported by the official Trust Officers attributable to a 25.6% growth in the Investment Association of the Philippines (TOAP) ranking of Management Accounts (IMA), 3.4% growth in Trust various UITFs’ year-on-year return-on-investment (ROI). and Other Fiduciary Accounts (TOFA), and 180.9% growth in Unit Investment Trust Fund (UITF) Investing in Information Technology accounts, generated primarily from the launching Cyber security was a key concern in 2016 and is of the Tax-Exempt Retirement UITF in October 2016, still at the top of our minds today. We want to make as well as additional funds generated for the Money sure that we are providing our clients with a safe and Market UITF. secure environment when they bank with us. With TIG launched the Robinsons Bank Tax Exempt that in mind, the Bank strengthened its defenses Retirement UITF. It is a Peso-denominated UITF and invested on a host of world-class IT and cyber for BIR-approved tax exempt-certified retirement security solutions to protect the Bank’s business, plans of companies. Portfolio is invested in peso- improve compliance, remediate threats, reduce denominated fixed income and exchange-listed insider fraud, theft and data leakage and reduce preferred shares, with the option to invest a portion pre-exploit risks.

12 Robinsons Bank Annual Report 2016 Digitizing Processes and Process Improvement These achievements would not have been Digitization is key to delighting our customers possible without the hard work, dedication, and as such the Bank has re-engineered some of its and leadership of our Board of Directors. Thank you processes to improve turn-around time, increase for your continuous guidance, this has been integral over-all efficiency and minimize risks. Among the to the success of Robinsons Bank. Our special thanks highlights for the year were the implementation of to Wilfred T. Co, our former Senior Advisory Board member, the Bulk Account Opening and Card Linking (BAO-CL) for his significant contributions to the Bank. process, the Check Imaging Clearing System (CICS) Our recognition goes as well to our Executive and the Document Management System (DMS). Committee partners and the rest of the officers of the The BAO-CL took away the burdensome task of Bank for delivering steadfast service in positioning individual account opening and card linking from the Bank to where it is now. the branches to the Operations Processing Group, Equally, we would like to acknowledge the more allowing faster turn-around times and enabling than 1,600 RBankers who remain focused in creating branches to focus on frontline business activities. and sustaining lifelong relationships with our valued Under the CICS, no physical delivery of checks customers. will be needed as the system only requires the digital We would like to thank our clients for the images of checks and their electronic payment trust and confidence bestowed upon Robinsons Bank. information to be transmitted to the paying bank As Robinsons Bank moves forward, we will continue beginning January 2017. The new check clearing to be your partner in achieving your goals and dreams. process is expected to speed up the crediting of Thank you for allowing Robinsons Bank to be your funds to depositors’ accounts to only one banking Bank of choice, driven to fulfill your changing needs. day. Robinsons Bank was among the first banks to join the CICS pilot run in 2016. The Bank also embarked on document digitization by acquiring a DMS to control the creation and authentication of scanned documents, manage its storage and facilitate convenient retrieval of any scanned document when needed. Lance Y. Gokongwei Elfren Antonio S. Sarte This solution has been rolled out to Retail Banking Group, Purchasing & Admin and Lending Group for Auto & Housing Loans. This project will soon be implemented in all business units of Robinsons Bank.

Our Commitment Moving Forward We have made meaningful progress in 2016. Looking ahead, we are very much excited. The initiatives are in place and the foundations have been fortified. We entered 2016 guided by our five-year plan implementation initiatives, and we will welcome 2017 with more focused strategies to sustain our growth momentum.

Robinsons Bank Annual Report 2016 13 FLYING HIGH WITH CEBU AIR, INC.: DELIVERING INNOVATIVE SOLUTION TO a BUSINESS CHALLENGE

CLIENT FEATURE: CEBU AIR, INC.

“The Bank spent considerable time understanding the requirements of CEB and provided resources and technical assistance to implement the facility.”

– Elynore J. Villanueva Treasurer of Cebu Air, Inc.

14 Robinsons Bank Annual Report 2016 Cebu Pacific Office, Airline Operations Center Building, Old Domestic Road Manila Domestic Airport Complex, Pasay City

Air travel has never been so affordable and enticing that particular segment. The Bank facilitated the ever since Cebu Air, Inc. (CEB) started to operate in collections through the Easy Pay Card. 1996 and its subsequent entry as a budget airline. Elynore J. Villanueva, Treasurer of Cebu Air, Inc. The innovative and focused low-cost carrier business validated, “Customers who availed of the facility gave model allowed the airline to offer budget-friendly fares positive feedback. The facility eliminated the need to all of its destinations to every Juan, fueling high for customers to send proof of payment to initiate demand for air travel. Who has not heard of its replenishment or top-up of their credit line and ingenious Piso-fare which creates internet frenzy every waiting time for such replenishment was shortened time the offering comes up! from 5 hours to less than 5 minutes from the time For 2016, CEB has the largest domestic network, CEB receives the facility’s email notification. Internally, flying to 36 Philippine destinations via 59 routes and receipt of near real time collection reports enabled 2,256 flights weekly. CEB’s domestic market share was Credit Analysts to make timely posting on SAP and 57.8%, with 14.1 million passengers carried by the airline. improve their efficiency as they could now focus The airline was granted its rights to operate on other tasks instead of making follow-ups with international flights in the region in the 2000s and in customers to submit proof of payment.” November 2001, launched its first international flight In every mandate, the Robinsons Bank Transaction with twice daily flights to Hong Kong. As of end 2016, Banking team ensures that there is full engagement with CEB operated in 25 short haul destinations covering the client to understand their objectives. Ms. Villanueva says, 38 routes in 520 weekly flights. It also flew in five long “The Bank spent considerable time understanding haul destinations covering five routes in 44 weekly flights. the requirements of CEB and provided resources and In May 2008, in just more than a decade of its technical assistance to implement the facility.” operations, Airline Business magazine ranked CEB first in For Robinsons Bank, clients are always a top terms of revenue passengers per kilometer (RPK) growth. priority and to ensure positive experience of clients, The airline was also ranked No. 23 in the world and the Bank dedicates after sales support. “The officers No. 5 in Asia in total passengers carried in 2007 by the and employees of the Bank who were involved in the same magazine. In a very challenging industry where implementation of the project were attentive to the a lot of the players are operating either in the red or concerns and proactive in resolving issues escalated to marginally profitable, CEB has consistently ranked high their attention. There is continuous coordination with in terms of profitability over the years. CEB to improve the service and address day-to-day One of the catalysts that drive CEB’s growth is operational matters,” Ms. Villanueva adds. its distribution model and the airline uses both the Ms. Villanueva has created value for her company internet and physical structures to gain access to the through this initiative and she received full support market. While there are still a lot of opportunities in from Robinsons Bank where her Treasury goal and tapping the market, which is dependent on physical collection performance metrics are fully aligned with structures, the highly fragmented geography of the the Bank’s understanding. Philippines remains to be a challenge. The non-internet At Robinsons Bank, customer-centricity means wholesale collections from CEB’s buyers needed to capturing the voice of the client, listening to them and be received in a timely manner because there was an gathering feedback, to have a full understanding of their impact on CEB’s sales and business decisions. needs and concerns and translating those into solutions Robinsons Bank saw this challenge as an or corrective measures because client satisfaction is opportunity by pitching an innovative collections of utmost importance to the Bank. Robinsons Bank’s solution for the underserved market. Robinsons competitive advantage is its winning culture of building Bank saw the need to address timely collections and and nurturing lasting relationships and for Cebu immediate reconciliation of CEB corporate sales, Air Inc., Robinsons Bank is committed to pursue which when addressed could boost further sales from a productive and enduring partnership, growing value today, tomorrow and beyond.

Robinsons Bank Annual Report 2016 15 STREAMLINING PROCESSES: DESIGNING SOLUTIONS FIT TO CUSTOMER NEEDS

CLIENT FEATURE: FLUID TECHNOLOGIES AND ENVIRONMENTAL MANAGEMENT, INC.

“We have an easier time contacting support every time problems are encountered.”

– Eden B. Culala Chairman and CEO Fluid Technologies and Environmental Management, Inc.

Emilio D. Bayog, Jr. PME Eden B. Culala Rodrigo M. Culala Corporate Planning Director Chairman and CEO President/COO

16 Robinsons Bank Annual Report 2016 Wastewater Treatment Facility for Andok’s Commissary in Balete, Batangas, completed in 2014

Centralized Sewage Treatment Facility of Cathay Land Industrial Park in Silang, Cavite, completed in 2015

Sewage Treatment Plant of Xentro Mall Tanay, Rizal, completed in September 2016

Sewage Treatment Plant of Xentro Mall Angono, Rizal, completed in August 2016

Fluid Technologies and Environmental Management, Inc. over the past years. The client base that they have is (FluidTech) was encountering problems with their a testament to the quality of service and products that payroll processing supported by their previous bank. they provide. There were several instances where FluidTech could FluidTech became a depositor of Robinsons Bank not access the bank-provided payroll system because in 2015. With the recent business relationship, of glitches and the committed support was not timely Leah hopes to further nurture the alliance by making for their needs. sure that all their banking requirements are met in Robinsons Bank Marikina Branch Center Head addition to ensuring total customer satisfaction. Leah P. Claveria learned about what FluidTech Today, because of the automation benefits brought was experiencing. “Upon hearing FluidTech’s problem, about by Robinsons Bank’s HRIS Payroll and CheckPro I immediately took the opportunity to offer Robinsons solutions, FluidTech’s payroll and supplier payments Bank’s SME Builder solution set, which includes HRIS are efficient and personnel time is more productive. Payroll and CheckPro facilities,” Leah said. This allows the company to fully focus on their HRIS Payroll is Robinsons Bank’s stand-alone system customers and on new business opportunities. The pain that streamlines payroll processing by automating point experienced from their previous bank was Rodrigo M. Culala President/COO and linking the time-keeping, leave management, additionally addressed by the Robinsons Bank Cash payroll administration, and generation of statutory reports, Management Team – “We have easier time contacting which ultimately results to payroll management efficiencies. support every time problems are encountered,” said Eden CheckPro, on the other hand, is a self-serve system that Culala, Chairman and CEO of Fluid Technologies and automates corporate check printing. The facility enables Environmental Management, Inc. a company to define their ledger and as checks are The consistent personalized customer experience is created, the payable can be assigned to the appropriate further extended by Leah’s branch where she ensures that ledger for accurate payment type tracking. In addition FluidTech’s calls are always prioritized and attended to. to that, the facility can generate the BIR Form 2307 for Robinsons Bank shows commitment to its withholding tax certification. clients by addressing their business challenges. Spouses Eden and Rodrigo Culala established In the case of FluidTech, Robinsons Bank has provided FluidTech in 1998. With almost 20 years of operation, access to digital technologies that enabled them to the Corporation is engaged in providing products, operate efficiently, raise their productivity, and lower technologies, and services for water, sewage, and waste their costs. Recognizing that trust is fundamental to water treatment. It is an enterprise that regards client relationships. Robinsons Bank is committed environment, health, and safety as equally important in to recommending solutions that serve our client’s delivering their business. They expanded their business long-term goals and build partnerships to foster and built a vast clientele covering different industries their growth.

Robinsons Bank Annual Report 2016 17 going the extra mile: synergy and personalized service

CLIENT FEATURE: PTT PHILIPPINES CORPORATION

“On behalf of PTT Philippines, we want to thank and appreciate your support and assistance in all our banking needs. We are highly pleased with your exemplary level of service and professional knowledgeable staff. Your attention to details, great communication skills, and ready friendly smile made our experience even better than expected. We are delighted to be associated with you in the business and we look forward to another successful year together with you. Well done and keep up the good performance.”

– Danilo Alabado PTT Phils. Trading Corp. General Manager

PTT Lucena Gasoline Station

18 Robinsons Bank Annual Report 2016 In 1998, the Philippine Congress enacted Republic Act 8479, otherwise known as “Downstream Oil Industry Deregulation Act of 1998,” which is the policy of the country” to liberalize and deregulate the downstream oil industry in order to ensure a truly competitive market under a regime of fair prices, adequate and continuous supply of environmentally- clean and high quality petroleum products.” As the country liberalized the oil market, PTT Public Company Limited (PTTPLC) saw this as an opportunity to expand its oil business in the Philippines as they perceived the country’s growing economy and huge available market. PTTPLC established PTT Philippines whose primary business is marketing of refined petroleum products and lubricants. PTT is a Thai acronym for Por Tor Tor, which means Petroleum Authority of Thailand. PTTPLC is Thailand’s largest and only fully-integrated oil and (L to R) PTT Chief Finance Officer Patrinee Suponthana, PTT President & CEO gas company and state enterprise under the control Sukanya Seriyothin with RBG AVP Michael Lawrence Posadas, President & CEO Elfren Antonio Sarte and Chairman Lance Y. Gokongwei of Thailand’s Ministry of Energy. It is also the only company in Thailand that is listed in the Fortune Global 500 companies and ranked as 190th by Forbes Aside, we were able to manage their accounts Global 2000. To date, PTTPLC operates in seven with ease on their part and we always make them ASEAN countries and has more than 50 independent feel valued.” subsidiaries operating globally. “With PTT as one of the Bank’s material clients, With its 20 years of operations here in the country, we always ensure to raise the bar of service excellence its retail network now spans from Luzon to Visayas. in handling all their transactional needs. We guarantee In 2016, PTT Philippines announced its PHP5 billion that a personalized service is carried out notwithstanding expansion plan from 2017-2021 in the country which logistics,” said Michael Lawrence S. Posadas, Makati covers increase of its retail network to 300 and setting Cluster 3 Head. up its Amazon Café brand. At present, PTT Philippines According to Danilo Alabado, PTT Phils. Trading is the major fuel supplier of various domestic and Corp. General Manager, “On behalf of PTT Philippines, international airlines and marine vessels which we want to thank and appreciate your support and includes Cebu Air, Inc., Robinsons Bank’s sister assistance in all our banking needs. We are highly company, as one of its clients. pleased with your exemplary level of service and Being able to partner and address the needs professional knowledgeable staff. Your attention to of the dynamic and growing organization like PTT details, great communication skills, and ready friendly Philippines is an achievement for the Bank. smile made our experience even better than expected. The demonstration of the collective efforts from We are delighted to be associated with you in the the RBG, Lending, TBG, and Treasury groups business and we look forward to another successful culminated the commencement of a successful year together with you. Well done and keep up the partnership. As a partner bank, Robinsons Bank is good performance.” committed to support PTT Philippines by providing As PTT Philippines forges onto growth expansion personalized interactions to better understand its in the country, Robinsons Bank will steadfastly banking needs. strengthen the business relationship with them. According to Rodney D. Cruz, Treasury Foreign Robinsons Bank is driven to deliver PTT’s banking Exchange (FX) Marketing Officer, “The relationship needs with outstanding service and extended mileage. with PTT Philippines expanded because Robinsons Bank was able to meet their requirements.

Robinsons Bank Annual Report 2016 19 celebrating A DECADE OF SUPPORTING LIVES AND MAKING DREAMS A REALITY

ROBINSONS BANK MICROFINANCE

“I think the biggest achievement of the Group was our 2016 performance. We posted a tremendous year-on-year growth beyond 40%. We will not achieve this growth without the support of our new and beloved President, Mr. Elfren Sarte.”

– Antonina B. Ramos Microfinance Department AVP and Head

Attending to the loan requirement of one of their valued client in Microfinance Marikina Branch are Jeremy B. Palma, Community Banking Loans Head, and Cris N. Manahan, Loan Servicing Assistant. The said branch was the Top Microfinance Branch Performer for 2016.

20 Robinsons Bank Annual Report 2016 The poverty incidence in the Philippines remains Aside from the financial support, guidance and high and the national government has been actively financial literacy are also provided to the clients, promoting strategies and implementing policies to especially the virtue of saving. “The Group provides combat poverty. As a developing country where hunger continual education on how to improve cash flow and unemployment remain as issues, there must be management, which are discussed every loan cycle creation of economic activities to promote welfare and application. With this, our client can draw a timely and inclusive growth. Moreover, there must be sufficient reliable decision for their business. Likewise, we teach opportunities to allow businesses to be established to them how to manage their finances more efficiently,” support social development. However, the challenge Tonette said. remains on the viability of sources of capitalization Robinsons Bank Microfinance has three products: to conduct and operate a business and allow one to Super Loan ng Bayan (SLB), SLB Plus, and CBG SME. make a living. The term payment for new loans ranges from two to Microfinance is one of the social development 12 months, while repeat loans borrowers can avail of initiatives to alleviate poverty. The micro-, small-, two to twelve months’ term payment. and medium-sized enterprises (MSMEs) are considered The Group, through its almost 150 employees, as the engine of economic growth. Globally, the assistance is providing services via its 25 branches: seven in Metro provided to MSMEs gained traction due to its benefits to Manila, six in Northern Luzon, seven in Southern Luzon, the marginalized group of the society. In the Philippines, and five in other provinces. Soon, to serve greater the National Strategy of the Philippines for Microfinance number of MSME entrepreneurs, branches in envisions a viable and sustainable MSMEs with greater Sto. Tomas [Batangas] and Tuguegarao will open. access to financial services. The Group’s financial support flowed through The BSP adheres to this strategy and promotes the following industries: (1) Agriculture, Hunting microfinance. Likewise, BSP supports financial inclusion. and Forestry; (2) Fishing; (3) Wholesale and Retail, As BSP sees the importance of access to financial Repair of Motor Vehicles; (4) Transportation, Storage, services for every household and business in and Communication; (5) Other Community, Social and accelerating their development process, so is Personal Services; and (6) Hotel and Restaurant. Robinsons Bank. The Bank responds to this call of After almost a decade, it was not just the lives of reaching out to a larger number of underserved and the Bank’s clients that progressed. Tonette herself, unserved Filipino entrepreneurs to improve their is a testimony of the operational success of the Bank’s well-being and further contribute to the financial Microfinance business. Tonette considers success not stability and economic development of the country. only through profits, but also through career growth of Robinsons Bank provides access to financing for employees as well. “I remember during my interview, the micro, small, and medium entrepreneurs through the former Bank President asked me how do I see the Microfinance Group. The Bank has a range of myself in 10 years and I replied, I actually imagined microfinance products and services which are designed myself as one of the Senior Officers of this Bank, to help the individual borrowers improve their businesses. managing a successful Microfinance Operation,” Antonina “Tonette” B. Ramos, Microfinance Tonette recalled. Department Head, said, “Robinsons Bank established Robinsons Bank Community Banking Group this Group when I joined the Bank last June 1, 2007. Microfinance takes pride in serving the MSME budding I just realized, I am as old as our Bank’s Microfinance and aspiring entrepreneurs by providing an available business. I am very grateful that Robinsons Bank financing option. Through this financial intermediation, trusted me to start this business as I was just 26 years the Bank aids the low-income entrepreneurs improve old then.” the quality of their living conditions. Access to credit The Group has been supporting the microfinance supports the underserved extend their cash flows and industry for almost a decade and has been delivering a avoid circumstances where resources for food, clothing, strong progress, having supported around PHP2.0 billion shelter, or education are sacrificed. loan releases from 2007 to 2016 to the more than In the next pages, you will read the humble 50,000 micro, small, and medium entrepreneurs and beginnings, challenges, and triumphs of some of their families. The assistance span from working Robinsons Bank Microfinance clients whom the Bank capital, to renovation of business site, and to acquisition truly value. In almost a decade, Robinsons Bank has of business equipment. built relationships with them and their testaments serve as our accolades.

Robinsons Bank Annual Report 2016 21 PROMOTING INCLUSIVE GROWTH: BRIDGING OPPORTUNITIES THROUGH ACCESSIBLE FINANCING

CLIENT FEATURE: THE TRASH TO CASH SUCCESS STORY OF JUNEL M. ABARQUEZ

“Sa tulong ng Robinsons Bank at gabay ng Diyos, mabilis na lumago ang aming negosyo. Dahil sa mababait na empleyado ng Bangko na tumulong sa amin sa pagproseso ng aming hiniram na pera sa Super Loan ng Bayan, marami ang nagbago sa aming negosyo at kabuhayan. Salamat Robinsons Bank, dahil sa paglago ng aming negosyo, nakakatulong na rin ako sa iba pang nagbabasura.”

– Junel M. Abarquez, borrower of Robinsons Bank Microfinance Super Loan ng Bayan Loan Product, Marikina

22 Robinsons Bank Annual Report 2016 Junel and his wife are proudly showing the photos of their three children who graduated from college and are now practicing their own professions.

On-site of Junel’s junk shop.

Junel Abarquez was born and raised in Cebu. When tropical storm Ondoy (international name, His family did not have the resources to send him Ketsana) hit Luzon in September 2009, the rise in the into college after graduating from high school. water level of the Marikina River damaged their home At that time, majority of the Philippines had limited and business. To make it worse, his son acquired commercial development. Work was concentrated leptospirosis. He was fast losing hope and did not know mostly in agriculture, where earning a living involved how to recover from the disaster and yet he impressed a significant risk and was unsteady. Just like many Robinsons Bank employees when he braved the flood provincial Filipinos, Junel took his chances to find better by riding a boat, just to go to the branch to pay his opportunities in Manila. weekly amortization. Not being able to finish formal schooling, he had no He was glad to have a reliable partner in Robinsons luck finding a job. Soon he acquired various unhealthy Bank at that time. Little by little, with the support of the vices and engaged in illicit activities. Then he met his working capital he borrowed from Robinsons Bank, future wife, Tessie. Tessie led him back to his faith in Junel was able to recover and reestablish his business. God and together they strove to provide better for Year after year since 2013, his business continued their family. to flourish. The Bank’s lending facility enabled him to It was a very difficult phase. “Nagsimula kaming improve his business and expand his business operations. matuto mangalakal ng basura nang tumira kami sa Some of the fixed assets he was able to acquire were Tumana [Marikina] at noon ay may dumpsite pa sa vehicles to carry greater volume of recyclable materials. nasabing lugar. Ibinibenta namin sa junk shop ang He was also able to purchase a property (house and lot) mga nababasura naming mag-asawa sa maghapon,” in his wife’s province which serves as their summer home. Junel recalled. In 2004, Junel saved up an amount of At the age of 47, he now owns three trucks and manages PHP1,500.00 as a starting capital to operate his own six employees. His greatest achievement, like what all junk shop. “Habang namamasura kaming mag-asawa, other parents strive for, was being able to send all his nagsimula na rin kaming mamili ng kalakal. Dalawang four children to school. This is what he and Tessie are bata na taga-lugar lang din namin ang mga una kong very proud – all are from the fruits of scrap materials. kliyente,” Junel happily shared. The family decided to To date, three of his children graduated from college already. preserve their capital investment and its earnings. He now has a Registered Nurse, an Information Technologist, Soon their customers grew and even smaller junk shops and a Hotel and Restaurant Management Graduate. near their area were selling scrap materials to them. As the Microfinance business of Robinsons Bank In 2007, Junel learned about the Super Loan ng Bayan turns ten years, so is its partnership with Junel. through a friend who was a client of Robinsons Bank He began as a scavenger for used bottles, scrap, and other Microfinance Loan. He realized that he could increase his recyclables almost 10 years ago. Today, he runs a sizeable capital for investment, and decided to go to Robinsons and organized junk shop in their area with a branch in Bank after learning that loans were granted to MSMEs like San Mateo. his own business. Junel is truly grateful that he has found a reliable Junel’s first loan in December 2007 from Robinsons partner in Robinsons Bank. “Robinsons Bank is flexible Bank amounted to PHP40,000.00. Junel was one of and responsive and has developed an excellent the pioneer clients of Microfinance Marikina Branch. understanding of the financial needs of my business.” With an expanding operation, he bought a second-hand Junel concluded. vehicle to buy greater volume of plastics, bottles, metals, Robinsons Bank takes pride of Junel’s achievements and other recyclable materials scavenged from trash, along with the more than 50,000 families assisted by the this time, in Valenzuela. Bank’s Microfinance Group. The microfinance lending On his second loan cycle, Junel was able to establish products support the Filipino MSME entrepreneurs via an outlet in San Mateo [Rizal] and the rest, he added to his an efficient and convenient access to capital to allow initial capital. This expansion decision would later save them to grow their business and fulfill their dreams. their family from the natural calamity that would hit their Robinsons Bank grants an enabling business environment business in Marikina. for SME entrepreneurs like Junel.

Robinsons Bank Annual Report 2016 23 ENABLING ENTREPRENEURS: PARTNERING THROUGH CONVENIENT ACCESS TO CAPITAL AND FINANCIAL LITERACY

CLIENT FEATURE: THE TALIPAPA SUCCESS STORY OF JOSEPHINE B. LAURELES

“Gusto ko pong magpasalamat sa Robinsons Bank sa walang sawa niyang pagtulong sa amin sa loob ng pitong taon. Alam ko po na kung wala si Robinsons Bank, hindi ko po mararating ang aking kinalalagyan ngayon. Siya lang po ang katangi-tanging Bangko na nagpahiram sa akin nang walang collateral na hiningi, kaya po talagang salamat na salamat, Robinsons Bank, Number One ka!”

– Josephine B. Laureles borrower of Robinsons Bank Microfinance Super Loan ng Bayan Loan Product, Naga

24 Robinsons Bank Annual Report 2016 Talipapa where Joy used to sell fresh meat.

Portion of the proceeds of her second loan was used as down payment to move to a satellite market.

The family’s old house

The newly married Noel and Joy Laureles with their eldest child.

In the Beginning The Setting The family of Josephine “Joy” B. Laureles is no As they say, the early bird catches the worm. exemption to the more than 10 million Filipino families However, in Joy’s case, her life-changing opportunity struggling to put their conditions in better positions. occurred one afternoon. Back then in 2009, while she Together with her husband, Noel C. Laureles, the couple was in their stall in the “talipapa” curing meat to needed to ensure that they could provide food on their produce pork tocino to sell, Oscar Almendral table and that they could send their children to school. from Robinsons Bank Microfinance Group Naga The couple turned nights into days. Their mornings approached her. Oscar was still a Field Credit Assistant started way ahead before everyone else in their little at that time (Oscar is now the Area 2 Sales Head of hometown in Naga was awake. Every dawn, for four Robinsons Bank Microfinance). He offered Joy to years, the couple went to the slaughter house to avail one of Robinsons Bank Microfinance’s products, procure the fresh pork that they were going to sell. the Super Loan ng Bayan. The sincerity Oscar showed Daily, they required one mature pig worth PHP7,000.00 when he discussed the loan product to Joy encouraged slaughtered to supply fresh meat to their small stall her to take his loan offer. Also, Oscar was able to in a nearby ‘talipapa’ and to their restaurant patrons. explain to her that her loan required NO COLLATERAL. To add to their source of income, they also established a small sari-sari store. Veinticinco For five years, from 2004, the two small businesses Joy was able to loan PHP25,000.00 on her of Mrs. Laureles had a combined capitalization of first cycle. She decided to borrow money from PHP50,000.00, borrowed from several moneylenders Robinsons Bank because she wanted to try and all with interest. In instances during hard times and experience what borrowing from a bank is like. there was none to turn to, she borrowed money from She was also enticed because of the tacked in savings high-cost “Bombay five-six” informal financing loan component in the regular amortization and low interest scheme, as they were always available to market rate compared to the “Bombay five-six”. vendors in the “talipapa”.

Robinsons Bank Annual Report 2016 25 Joy now sells fruits, vegetables, and fresh meat in Robinsons Supermarket Naga.

She was very pleased because her first loan process From PHP50k to PHP5M Capitalization in Seven Years was efficient. She vividly remembered what Oscar In 2011, better opportunities knocked at oriented her with – be a good payer and her interest Joy’s door. Other than selling fresh meat in Robinsons payment would be discounted at the end of the loan Supermarket Naga, she was given the opportunity cycle and would be lower in the next loan cycles. to sell fruits and vegetables, as well as cooked meals To her surprise, her succeeding loan processes were in the ‘Ready to Eat’ section of the Supermarket. certainly hassle-free. According to her, the Bank Counting on Robinsons Bank, she borrowed for the employees were very accommodating and oriented eighth time to support this new business venture and her clearly about the loan payment procedures. Robinsons Bank did not fail to support her. Mrs. Laureles started selling meat products in As Joy continued to diversify her businesses, the “talipapa” in 2004. “Lupa ang tinutuntungan her relationship and partnership with Robinsons Bank ng aming tindahan noon at ang bubong ay nasa ulo flourished. According to Joy, the Bank helped her a na namin,” Joy recalls. With the money she borrowed lot especially in times of huge volume requirements from Robinsons Bank, she ensured she would put for her meat inventory and in acquiring properties. the money into good use. Her first loan proceeds What she appreciated the most from Robinsons Bank were added to her rolling capital to purchase was that the Bank taught her how to wisely manage more pigs. On her next loan cycle, she used the her finances. The Bank also educated her on how money as down payment to a satellite market to to save and instilled in her the value of saving. improve their meat shop location. After a few months, In Robinsons Bank, not only did she gain a good she had her greatest break when she was asked to credit standing but also her personal savings increased. supply fresh pork in Robinsons Supermarket Naga. These encouraged her to perform better in her Joy did not waste time and borrowed her fourth loan businesses. cycle from Robinsons Bank “…at dito nagsimula ang Because of the trust and confidence that Robinsons pagbabago ng aming buhay, kasama ang Robinsons Bank,” Bank Super Loan ng Bayan gave to her, Joy had the Joy exclaimed with gladness. opportunity to grow her business. Joy very much

26 Robinsons Bank Annual Report 2016 According to Mrs. Laureles, “Lau” is her lucky trade name when she consulted Feng Shui.

Her New business venture Planes & Angles a furniture shop.

The 50% meat requirement of Robinsons Supermarket Naga is coming from her own farm.

esteemed that the Bank treated her as a business Naga as merchandisers, while the rest work in her partner and not just a client or a borrower. hardware, grocery store, and farm. From her For her, it was right decision to borrow money from other businesses, her average monthly gross sales Robinsons Bank. is now PHP3.0 million. Now, Joy supplies 50% of the meat requirements In seven years, Robinsons Bank has provided of Robinsons Supermarket Naga. This supply is Joy with efficient loan releases, especially during the supported by her 4,000 square meter piggery farm, periods when she badly needed financial support. which she purchased from her 13th loan cycle in From 2009 to this date, she was already able to loan Robinsons Bank. Likewise, she invested in a water almost PHP5 million from Robinsons Bank. treatment facility to ensure that the water which Last year, her 15th loan cycle was used as down will flow through to the creek from her piggery is payment to a 1,200 square meter lot along the national safe and clean. highway near their area. Soon, Joy will venture into With her 16th loan cycle, Joy opened other another milestone in her entrepreneurial life – businesses which include hardware store, grocery, she will build a home depot in their small town and the most recent furniture shop. in Naga, the first in her area. Definitely, Robinsons Bank As fruits of their investment, they were able will be her dependable partner in this new endeavor. to purchase seven trucks, two tricycles, and two personal vehicles. They were also able to build their Lessons from Joy own two-storey house and their two children are “To my fellow business owners who wanted to succeed, about to finish college. Recently, they purchased just continue the hard work and persistence in your passion. a new Montero Sport, which they loaned from Ensure that you will have a good record of all your expenses Robinsons Bank as well. and sales. More importantly, do not forget to take care At present, her average monthly gross sales of your employees, suppliers, especially the clients. from Robinsons Supermarket Naga alone were around They must be our first priority before our own selves. PHP1.5 million. She has more or less 40 employees Success is a journey. Every day is a new experience for us supporting her business ventures, majority of to enjoy and learn. Prayers and hard work are essential whom are working in Robinsons Supermarket parts of our journey in life.”

Robinsons Bank Annual Report 2016 27 BOARD OF DIRECTORS

LANCE Y. ROBINA Y. FREDERICK D. GOKONGWEI GOKONGWEI-PE GO CHAIRMAN DIRECTOR VICE CHAIRMAN

28 Robinsons Bank Annual Report 2016 PATRICK HENRY C. ELFREN ANTONIO S. OMAR BYRON T. GO SARTE MIER DIRECTOR PRESIDENT & CEO DIRECTOR

Robinsons Bank Annual Report 2016 29 BOARD OF DIRECTORS

ESPERANZA s. DAVID C. OSMEña MERCADO INDEPENDENT INDEPENDENT DIRECTOR DIRECTOR

30 Robinsons Bank Annual Report 2016 roberto s. ANGELES Z. hermogenes s. gaerlan LOrAyES roxas INDEPENDENT INDEPENDENT INDEPENDENT DIRECTOR DIRECTOR DIRECTOR

Robinsons Bank Annual Report 2016 31 senior advisory board

james l. Lisa Y. johnson robert g. brian m. go gokongwei-cheng go, jr. go member member member member

32 Robinsons Bank Annual Report 2016 KEY OFFICERS

ElFREN ANTONIO S. SARTE PRESIDENT & CEO ANGELITO V. EVANGELISTA EVP & COO

eric b. santos evp & chief lending officer MA. REGINA N. LUMAIN evp & treasurer MYKEL D. ABAD EVP & LSB PRESIDENT

Robinsons Bank Annual Report 2016 33 board of directors PROFILE

LANCE Y. GOKONGWEI ELFREN ANTONIO S. SARTE CHAIRMAN PRESIDENT, DIRECTOR AND CEO FILIPINO, 50 years old FILIPINO, 57 years old

Lance Y. Gokongwei is the Chairman of the Board Elfren Antonio S. Sarte is the President, Director, of Robinsons Bank Corporation. He is the Chairman and CEO of Robinsons Bank Corporation. He is a of the Executive Committee, and a member of the member of the Executive Committee, Risk Management Trust Committee of the Bank. Concurrently, he is Committee and IT Steering Committee. Concurrently, President, Director, and COO of JG Summit Holdings Inc. he is the Vice Chairman and Director of Legazpi Savings He likewise holds key positions in its major subsidiaries. Bank Inc., a subsidiary of Robinsons Bank. He is the President and CEO of Cebu Air, Inc. and As an industry leader, he holds directorships Universal Robina Corporation, and the Vice-Chairman in Bankers Association of the Philippines (BAP) and CEO of Robinsons Land Corporation. He is the and BancNet. CEO of JG Summit Petrochemical Corporation and Prior to joining Robinsons Bank, Mr. Sarte was JG Summit Olefins Corporation. Furthermore, he is the President, Director, and CEO of PNB Savings Bank Chairman and CEO of Robinsons Retail Holdings, Inc., (formerly known as Allied Savings Bank). His banking Vice Chairman of Manila Electric Company, career spans over three decades and includes posts and a Director of Oriental Petroleum & Minerals at other financial institutions, among them are Corporation and United Industrial Corporation Philippine National Bank, Unionbank of the Philippines, Limited. and Credit Information Bureau. He is a Trustee and Secretary of the Gokongwei He holds a Bachelor of Science degree in Industrial Brothers Foundation, Inc. Management Engineering minor in Mechanical In 2015, he was Institutional Investor’s Best CEO Engineering from the De La Salle University. for Asia and was also named Best CEO by Finance Asia. He graduated Summa Cum Laude from the ROBINA GOKONGWEI-PE University of Pennsylvania’s Management and DIRECTOR Technology Program with double degrees in Finance FILIPINO, 55 years old from Wharton School and Applied Sciences from the Penn Engineering School. Robina Gokongwei-Pe is the Chairperson of Robinsons Bank’s Trust Committee. Concurrently, FREDERICK D. GO she is the Director of JG Summit Holdings, Inc., VICE CHAIRMAN Robinsons Land Corp., CPAir Holdings, Inc., FILIPINO, 47 years old Unicon Insurance Brokers Corp., Itech Global Business Solutions, Inc., Summit Media Informatix Frederick D. Go is the Vice Chairman of the Holdings, Inc., Batangas Agro-Industrial Development Board of Robinsons Bank Corporation. He is the Corp., United Philippine Oil Trading, Inc., Tropical Aqua Vice Chairman of Executive Committee of the Bank. Resources, Inc., and Samar Commodities Trading and Concurrently, he is a Director of Universal Industrial Corporation. Robina Corporation, Cebu Air Inc., the President, Concurrently, she is the President, Director and Director and COO of Robinsons Land Corporation COO of Robinsons Retail Holdings, Inc. She also served and its subsidiaries. Moreover, he is the Vice as President of The Manila Times from 1989 to 1998. Chairman of the Philippine Retailers Association. She holds a Bachelor of Arts degree in Journalism He holds a Bachelor of Science degree in from the New York University. Management Engineering from the Ateneo de Manila University.

34 Robinsons Bank Annual Report 2016 PATRICK HENRY C. GO ROBERTO S. GAERLAN DIRECTOR INDEPENDENT DIRECTOR FILIPINO, 47 years old FILIPINO, 65 years old

Patrick Henry C. Go is the Vice Chairman of the Roberto S. Gaerlan is the Chairperson of Robinsons Bank’s Trust Committee and a member of Robinsons Bank’s Related Party Transactions the Corporate Governance Committee. Concurrently, Committee, Vice Chairperson of Audit Committee, he is a Director of JG Summit Holdings, Inc. and and member of Risk Management Committee. Robinsons Land Corporation. His banking career spans over three decades Concurrently, he is the President and COO of and includes posts at other financial institutions, JG Summit Petrochemical Corp (JGSPC) and JG Summit among them are First United Bank and United Olefins Corp. (JGSOC), as well as the Executive Vice Coconut Planters Bank. President and Senior Managing Director of URC He holds a Bachelor of Arts degree in Economics Packaging Division (BOPP) and CFC Flexible Packaging from the University of Santo Tomas and Advanced Division. He was the General Manager of Litton Bank Management from the Asian Institute of Mills Inc. from 1996 to 1997. Management. He holds a Bachelor of Science degree in Management from the Ateneo de Manila University HERMOGENES S. ROXAS and took The General Manager Program from the INDEPENDENT DIRECTOR Harvard Business School. FILIPINO, 66 years old

OMAR BYRON T. MIER Hermogenes S. Roxas is the Chairperson of DIRECTOR Robinsons Bank’s Corporate Governance Committee FILIPINO, 70 years old and a member of Audit Committee and Related Party Transactions Committee. Omar Byron T. Mier is a Director of Robinsons Concurrently, he is a Director of Legazpi Savings Bank Corporation. He was appointed as a Director Bank Inc., a subsidiary of Robinsons Bank. He is the of the Bank in 2015. He is a member of the Audit Chairperson of Legazpi Savings Bank’s Corporate Committee, Corporate Governance Committee and Governance Committee and Audit Committee, and is Risk Management Committee, and alternate member the Vice Chairperson of Risk Management Committee. in the Executive Committee. Prior to joining Robinsons Bank, Mr. Roxas was Concurrently, he is a Director of Legazpi Savings President of UCPB Savings. His banking career spans Bank Inc. a subsidiary of Robinsons Bank and is over three decades. He held posts at other financial a member of its Risk Management Committee. institutions, among them are Directorships at UCPB He is a Director of Paymaya Philippines, Inc. Leasing & Finance Corp., UCPB Foreign Exchange Corp., Prior to joining Robinsons Bank, Mr. Mier was UCPB Capital Corp., UCPB Rural Bank, UCPB Securities Inc., President and CEO of Philippine National Bank. Cocolife, and Dutch Boy Philippines. His banking career spans over four decades and He holds a Bachelor of Science degree in Business includes posts at other financial institutions, Administration from the University of the Philippines. among them are Citibank N.A. and Deutsche Bank. He holds a Bachelor of Science degree in Business Administration Major in Accounting and a Bachelor of Arts degree in Economics, both from the University of the Philippines. He is a Certified Public Accountant and holds a Master of Arts in Economics from the University of the Philippines.

Robinsons Bank Annual Report 2016 35 board of directors PROFILE

ANGELES Z. LORAYES DAVID C. MERCADO INDEPENDENT DIRECTOR INDEPENDENT DIRECTOR FILIPINO, 67 years old FILIPINO, 66 years old

Angeles Z. Lorayes is the Chairperson of David C. Mercado is the Chairperson of Robinsons Bank’s Audit Committee, Vice Chairperson Robinsons Bank’s IT Steering Committee, of Corporate Governance Committee, and a member Vice Chairperson of the Risk Management Committee of the Related Party Transactions Committee. and a member of the Audit Committee. Prior to joining Robinsons Bank, she was the Prior to joining Robinsons Bank, he was First Head of Credit Policy and Supervision in Philippine Vice President, Head of Consumer Banking Group in National Bank. Her banking career spans over United Coconut Planters Bank. His banking career four decades and includes posts at other financial spans over three decades and includes other posts institutions, among them are Equitable PCI Bank in United Coconut Planters Bank and Allied Banking and Citibank N.A. Corporation. She holds a degree in Business Administration He holds a Business Administration degree from from the University of the Philippines and earned the Philippine School of Business Administration. MBA units at the Ateneo Graduate School of Business. He is a Certified Public Accountant and holds a Masters in Business Administration from the ESPERANZA S. OSMEÑA De La Salle Graduate School of Business. INDEPENDENT DIRECTOR FILIPINO, 66 years old

Esperanza S. Osmeña is the Chairperson of Robinsons Bank’s Risk Management Committee, and a member of Corporate Governance Committee, Related Party Transactions Committee and Trust Committee. Prior to joining Robinsons Bank, she was Executive Vice President in Equitable PCI Bank. Her banking career spans over three decades and includes posts at other financial institutions, among them are Asian Savings Bank, PCI Bank and its subsidiaries and Equitable PCI Bank and its subsidiaries. She was a Director at PCI Capital Inc., PCI Leasing Inc., PCI Insurance Brokers Inc., and Bankard Inc. She holds a Bachelor of Arts degree in Commerce from Saint Theresa’s College and the Colegio de Santa Anna in Zaragoza, Spain.

36 Robinsons Bank Annual Report 2016 SENIOR ADVISORY BOARD PROFILE

JAMES L. GO BRIAN M. GO MEMBER MEMBER FILIPINO, 78 years old FILIPINO, 43 years old

James L. Go is a Senior Advisory Board Member of Brian M. Go is a Senior Advisory Board Member Robinsons Bank Corporation. Concurrently, he is the of Robinsons Bank Corporation. Concurrently, he is Chairman and CEO of JG Summit Holdings, Inc. and General Manager of URC Foods (Singapore) Pte Ltd and Oriental Petroleum and Minerals Corporation. He is URC Snack Foods (Malaysia) Sdn Bhd since Feb 2015; also the Chairman of Robinsons Land Corporation, He is responsible for overall operations in Singapore, Universal Robina Corporation, JG Summit Malaysia, and Brunei. Petrochemical Corporation, and JG Summit Olefins He has been a consultant of the Booz Allen & Corporation. He is the Vice Chairman of Robinsons Hamilton (1996 to 1997) and Robinsons Retail Group Retail Holdings, Inc. and a Director of Cebu Air, Inc., (1998). He was the Head of Corporate Planning in Marina Center Holdings Private Limited, United Digitel Telecommunications Phils., Inc. (1998 to 2002), Industrial Corporation Limited, and Hotel Marina Director of JG Summit Petrochemical Corporation, City Private Limited. Managing Director at Digitel One (2002), Chief Finance Likewise, he is the President and Trustee of the Officer at Ding Feng Real Estate in China (from 2003 Gokongwei Brothers Foundation, Inc. to 2004), and Director of various Ding Feng Real He has been a director of the Philippine Long Estate companies. He served as General Manager at Distance Telephone Company (“PLDT”) since Universal Robina Corporation – China (2007). November 3, 2011. He is a member of the Technology He holds a Bachelor’s degree in Economics from Strategy and Risk Committees and Advisor of the the Harvard University. Audit Committee of the Board of Directors of PLDT. He was elected a director of Manila Electric Company LISA Y. GOKONGWEI-CHENG on December 16, 2013. MEMBER He holds a Bachelor and Master of Science FILIPINO, 48 years old Degrees in Chemical Engineering from Massachusetts Institute of Technology, USA. Lisa Y. Gokongwei-Cheng is a Senior Advisory Board Member of Robinsons Bank Corporation. JOHNSON ROBERT G. GO, JR. Concurrently, she is the President and Director of MEMBER Summit Media. She held various senior positions FILIPINO, 52 years old and Directorships in the Gokongwei group namely: Summit Internet Investments, Inc., Jobstreet Johnson Robert G. Go, Jr. is a Senior Advisory Philippines, JE Holdings, Inc., Robinsons Retail Board Member of Robinsons Bank Corporation. Holdings, Inc., Itech Global Business Solutions, Inc., Concurrently, he is a Director of JG Summit Hongkong-China Foods Co., and as Vice-President and Holdings, Inc., Universal Robina Corporation, Director of Summit-App Addictive Philippines, Inc. and Robinsons Land Corporation, among others. She was the Vice President at Metromedia Times He was the President of Robinsons Convenience Corporation and Project Manager at Digital Stores, Inc. (2002) and the Vice President of Robinsons Communications. Daiso Diversified Corp. (2010). He was a director of She holds a Bachelor of Arts degree from Ateneo Robinsons Bank Corporation from 1997 to 2012. de Manila University and obtained her Master degree He holds a Bachelor of Arts in Interdisciplinary in Journalism at Columbia University. Studies degree from the Ateneo de Manila University.

Robinsons Bank Annual Report 2016 37 corporate governance

I. Board Governance

The Board of Directors (“Board”) of Robinsons Bank Corporation represents the owners’ interests in the Bank’s objective to sustainably increase shareholder value and to ensure the long-term success of the business. The Board is actively responsible in ensuring that the Bank is properly managed in attaining this objective. In addition to fulfilling the Board’s obligations for increased shareholder value, it also has the responsibility to protect the interests of other stakeholders which include, among others, customers, employees, suppliers, financiers, government and community in which it operates.

The Board is primarily responsible for the observance of governance, including business and risk strategies, organization, and financial soundness of the Bank. Corollary to setting the policies for the accomplishment of the corporate objectives, it shall provide an independent checking and effective oversight of the Management.

1. Composition of the Board

The Board is composed of 11 members elected by the stockholders, five of whom are independent. All members of the Board are Filipinos and possess all the qualifications and none of the disqualifications to hold a directorship as prescribed under the Corporation Code and existing rules and regulations of the BSP and the Securities and Exchange Commission (SEC). They all passed the fit and proper test for the position of a director of the Bank, taking into account their integrity and probity, physical and mental fitness, competence, relevant education, financial literacy and training, diligence and knowledge and expertise. They are known for their independence and professionalism, and for making decisions with complete fidelity to the Bank while cognizant of their responsibilities under existing applicable laws, rules, and regulations.

The Board determines the appropriate number of its members to ensure that the number thereof is commensurate with the size and complexity of the Bank’s operations. To the extent practicable, the members of the Board of Directors have been selected from a broad pool of qualified candidates. A sufficient number of qualified non-executive members had been elected to promote independence of the Board from the views of the senior management. For this purpose, non-executive members of the Board are those who are not part of the day-to-day management of banking operations.

The five independent directors (ID) are independent of Management and are free from any business or other relationship which could or could reasonably be perceived, to materially interfere with their exercise of independent judgment in carrying out their responsibilities as a director. They hold no interests or relationships with the Bank that may hinder their independence from the Bank or management or will interfere with the exercise of independent judgment in fulfilling their responsibilities. They are compliant with all the qualifications required of an independent director and none of the disqualifications as provided in the Manual of Regulations for Banks (MORB).

2. Conduct of Board Meetings

As provided for in the Bank’s By-Laws, the Board schedules and holds regular monthly meetings and convenes special meetings when necessary. The Corporate Secretary provides the directors the notice, agenda, and meeting materials prior to each meeting. Proceedings of the meetings are properly documented and duly minuted.

In accordance with the rules and regulations of the SEC and the BSP, the members of the Board attend regular and/or special meetings in person or through teleconferencing and video conferencing which allows the directors to actively participate in the deliberations on matters taken. The Bank ensures availability of teleconferencing facilities if and when a director cannot physically attend due to unavoidable circumstances. A director may also attend the meetings by submitting written comments on the agenda to the Corporate Secretary and the Chairman prior to the meeting pursuant to Subsection X141.1 of the MORB.

38 Robinsons Bank Annual Report 2016 In 2016, all members of the Board have substantially complied with the attendance requirement and actively participated in the deliberations on matters taken up during the regular and/or special meetings.

No. of meetings held during No. of meetings the year attended % 1. Lance Y. Gokongwei 12 10 83.33 2. Frederick D. Go 12 9 75.00 3. Elfren Antonio S. Sarte 12 12 100.00 4. Robina Y. Gokongwei-Pe 12 9 75.00 5. Patrick Henry C. Go 12 9 75.00 6. Omar Byron T. Mier 12 12 100.00 7. Roberto S. Gaerlan (ID) 12 12 100.00 8. Angeles Z. Lorayes (ID) 12 12 100.00 9. David C. Mercado (ID) 12 12 100.00 10. Esperanza S. Osmeña (ID) 12 10 83.33 11. Hermogenes S. Roxas (ID) 12 11 91.67

3. Board Committees

In order to increase efficiency and gain deeper focus in specific areas, the Board has created committees, which are relative and consistent to the size, complexity of operations, long-term strategies, and risk tolerance level of the Bank. The scope, authority and responsibilities of these committees are defined in their respective board-approved charter which is subject to regular review and updated at least annually or whenever there are significant changes.

The Board has appointed the members of the committees taking into account the optimal mix of skills and experience which would allow them to fully understand, be critical and objectively evaluate the issues. To promote objectivity, the Board has appointed independent directors and non-executive directors to the greatest extent possible and ensures that such mix will not impair the collective skills, experience and effectiveness of the committees. Each of these committees maintains appropriate records (e.g., minutes of meeting) of their deliberations and decisions, subject to notation and/or confirmation of the Board. The records document the committees’ fulfillment of their responsibilities and facilitate the assessment of the effective performance of their functions which is regularly and periodically conducted.

The Board has established and delegated responsibilities to seven committees, namely: the Executive Committee, the Corporate Governance Committee, the Risk Management Committee, the Audit Committee, the Trust Committee, the Related Party Transactions Committee, and the IT Steering Committee.

a. Executive Committee

The Bank’s Executive Committee has been created as the highest credit approving body of the Bank after the Board. The Committee provides the necessary approvals for applications, deviations and other loan transactions. Resolutions of the Committee may be overruled only by the Board.

The Executive Committee provides decisions regarding applications for critical loan accounts and deviations that require careful deliberation. Approvals made are in compliance with internal policies and those required under existing laws, rules and regulations. Decisions made are influenced by the latest profitability and delinquency figures of an account or loan product.

No. of meetings held during No. of meetings the year attended % 1. Lance Y. Gokongwei 48 47 97.92 2. Frederick D. Go 48 48 100.00 3. Elfren Antonio S. Sarte 48 44 91.67 4. Omar Byron T. Mier 48 48 100.00

Robinsons Bank Annual Report 2016 39 corporate governance

b. Corporate Governance Committee

In order to proactively assist the Board in its fulfillment of its corporate governance responsibilities and ensure transparency in all of the Bank’s transactions, it created the Corporate Governance Committee. The Committee ensures the Board’s effectiveness and due observance of corporate governance principles, best practices and guidelines which are necessary components of what constitute sound strategic business management. It generates awareness of corporate governance within the Bank.

In particular, the Committee oversees the development and implementation of corporate governance principles and policies, reviews and evaluates the qualifications of the persons nominated to the Board as well as those nominated for election to other positions requiring appointment by the Board, decides the manner by which the Board’s performance is evaluated and assists the Board in the periodic performance evaluation of the Board and its committees and executive management, and oversees the development and implementation of professional development programs for directors and officers.

The Committee is composed of five members, three of whom are independent directors including the Chairperson and Vice-Chairperson. The Committee holds regular meetings and may call for special meetings as deemed necessary. To properly evaluate its performance, the Committee meetings are properly and duly minuted.

No. of meetings held during No. of meetings the year attended % 1. Hermogenes S. Roxas (ID) 12 11 91.67 2. Angeles Z. Lorayes (ID) 12 12 100.00 3. Esperanza S. Osmeña (ID) 12 10 83.33 4. Patrick Henry C. Go 12 10 83.33 5. Omar Byron T. Mier 12 12 100.00

Risk Management Committee

To aid the Board in efficiently carrying out its function on risk management, it created the Risk Management Committee. This committee oversees the development and oversight of the Bank’s risk management program including Trust Group and ensures an acceptable level of risk while minimizing losses. The Committee oversees the system of limits to discretionary authority that the Board delegates to management, supervises the system and ensures its effectiveness, provides and set limits and ensures that these are properly observed and that immediate corrective actions are taken should breaches occur.

The Board has appointed five members of the Committee who possess a broad-range of expertise as well as adequate knowledge of the Bank’s risk exposures which enables them to develop appropriate strategies for preventing more losses when they occur. The committee members meet regularly and may call for special meetings whenever necessary.

No. of meetings held during No. of meetings the year attended % 1. Esperanza S. Osmeña (ID) 12 11 91.67 2. David C. Mercado (ID) 12 12 100.00 3. Roberto S. Gaerlan (ID) 12 12 100.00 4. Elfren Antonio S. Sarte 12 11 91.67 5. Omar Byron T. Mier 12 12 100.00

40 Robinsons Bank Annual Report 2016 c. Audit Committee

The Board has constituted an Audit Committee to provide oversight over the Bank’s financial reporting policies, practices and control, and internal and external audit functions. In particular, the Committee aids the Board in monitoring and evaluating the adequacy, effectiveness, and efficiency of the Bank’s internal controls system. Further, the Committee assists the Board in fulfilling its oversight responsibilities with regard to the integrity of the Bank’s financial reporting process, the independence and performance of the Bank’s external and internal auditors, the compliance to corporate governance policies and guidelines, and the Bank’s compliance with regulatory requirements.

To carry-out its mandate, the Committee has explicit authority to investigate any matter within its terms of reference, full access and cooperation by management and full discretion to invite any director or executive officer to attend its meetings, and adequate resources to enable it to effectively discharge its functions.

As prescribed under existing rules and regulations, the Committee is composed of, to the greatest extent possible, sufficient number of independent and non-executive board members. All members of the Committee, including the Chairperson who is an ID, possess the required qualifications and none of the disqualifications. The Committee holds regular meetings and may call special meetings upon the request of the Chairperson or by at least two of its members, which proceedings are duly minuted.

No. of meetings held during No. of meetings the year attended % 1. Angeles Z. Lorayes (ID) 8 8 100.00 2. Roberto S. Gaerlan (ID) 8 8 100.00 3. David C. Mercado (ID) 8 8 100.00 4. Hermogenes S. Roxas (ID) 8 6 75.00 5. Omar Byron T. Mier (Non-Voting) 8 8 100.00 d. Trust Committee

The Trust Committee provides the overall direction and guidelines in the conduct of the Trust business, reviews plans for new investments, trust products and business development, and conducts assessment of Trust and Investments Group’s performance and operational effectiveness.

No. of meetings held during No. of meetings the year attended % 1. Robina Y. Gokongwei-Pe 12 10 83.33 2. Patrick Henry C. Go 12 9 75.00 3. Lance Y. Gokongwei 12 11 91.67 4. Esperanza S. Osmeña (ID) 12 11 91.67 5. Elizabeth T. Aquino 12 12 100.00

Related Party Transactions Committee

Pursuant to existing rules and regulations on related party transactions issued by the BSP, the Board created a Related Party Transactions Committee. This stems from the recognition of management that the Bank engages in transactions between and among related parties, which brings a need to exercise appropriate oversight and implement control systems for managing said exposures as these may potentially lead to abuses that are disadvantageous to the Bank and its depositors, creditors, and other stakeholders.

The Committee supports the Board in the exercise of appropriate oversight and implements a control system for managing exposures to related parties. It assists the Board in ensuring that transactions with related parties are handled in a sound and prudent manner and in compliance with applicable laws, rules and regulations to protect the interest of its depositors, creditors, and other stakeholders.

Robinsons Bank Annual Report 2016 41 corporate governance

In particular, the Committee identifies related parties and monitors their transactions, evaluates related party transactions which are classified material and endorse the same to the Board for approval, ensures disclosure and reporting of related party transactions and oversees the implementation of a system to facilitate its functions as well as the development and periodic review of policies and procedures for related party transactions.

The Committee is composed of four members of the Board who are all independent directors. In case a member has a conflict of interest in a particular transaction, he should refrain from evaluating that particular transaction. The Chief Compliance Officer and Chief Audit Officer and/or their representatives including an executive director sit as resource persons in the said Committee.

No. of meetings held during No. of meetings the year attended % 1. Roberto S. Gaerlan (ID) 10 10 100.00 2. Esperanza S. Osmeña (ID) 10 9 90.00 3. Angeles Z. Lorayes (ID) 10 10 100.00 4. Hermogenes S. Roxas (ID) 10 9 90.00 5. Omar Byron T. Mier (Resource Person) 10 10 100.00 6. Romel D. Meniado (Resource Person) 10 10 100.00 7. Cynthia Bautista (Resource Person) 10 9 90.00

e. IT Steering Committee

In compliance with BSP Circular 808, the Board has created the Information Technology Steering Committee which oversees a safe, sound, controlled and efficient information technology operating environment that supports the Bank’s goals and objectives. In particular, the Committee, among others: reviews and monitors the performance of all IT projects; reviews the Bank’s current IT infrastructure, system performance, associated risks and other significant issues and events and institutes appropriate actions to achieve the desired results; monitors and evaluates the performance of third party service providers on all information technology initiatives subject of the service contract; and reports to the Board relevant and adequate information regarding IT performance, status of major IT projects and significant issues affecting the Bank’s IT operations.

The Committee is chaired by a non-executive and independent director, assisted by the Head of IT Group as Vice-Chairperson and executive officers of the Bank. The heads of Audit, Risk and Compliance are also invited in the regular and/or special meetings of the Committee as resource persons.

4. Board Trainings

In accordance with the Corporate Governance Manual and Subsection X141.3 of the MORB, the Corporate Governance Committee is responsible for making recommendations to the Board on the required trainings and continuing education of the directors. Relative thereto, all members of the Board have attended the required corporate governance seminar for bank directors at BSP-accredited training providers, a pre-requisite for Monetary Board confirmation. These include topics on risk and governance, audit and control, and accountability.

To remain relevant and abreast with the evolving corporate governance landscape, the directors attended a refresher corporate governance training provided by an accredited training service provider on December 1, 2016. The directors completed the training on the topics of “Sustainable Development Goals and Engaging Investors and Sustainability”.

42 Robinsons Bank Annual Report 2016 II. Governance Policies and Mechanisms

1. Corporate Governance Manual

The Board and its Management committed themselves to the principles and best practices on corporate governance. They believe that corporate governance is a necessary component of what constitutes sound business management and therefore undertake every effort necessary to create awareness within the Bank.

Toward this end, the Board adopted a corporate governance framework or the Corporate Governance Manual (or “Manual”) that embodies the rules, systems and processes in the Bank. The framework governs the performance of the Board and Management of their respective duties and responsibilities to stockholders and other stakeholders. The Manual is periodically reviewed with the objective of continually aligning the Bank’s policies with the BSP and SEC circulars or issuances on corporate governance including best practices issued by the Basel Committee on Banking Supervision. This ensures that the interests of stockholders and other stakeholders are always taken into account, the directors, officers, and employees are aware of their responsibilities and the business of the Bank is conducted in a safe and sound manner.

2. Internal Control and Audit

The Bank has implemented its internal control processes which are designed and effected by its Board of Directors, senior management and all levels of personnel to provide reasonable assurance on the achievement of objectives through efficient and effective operations; reliable, complete and timely financial and management information; and compliance with applicable laws, regulations, supervisory requirements and the Bank’s policies and procedures.

The Bank put in place an adequate and effective internal control framework for the conduct of its business, taking into account the size, risk profile and complexity of operations. The framework embodies management oversight and control culture, risk recognition and assessment; control activities; information and communication; and monitoring activities and correcting deficiencies.

The control environment of the Bank consists of: (a) the Board which ensures that the Bank is properly and effectively managed and supervised; (b) Management that actively manages and operates the Bank in a sound and prudent manner; (c) the organizational and procedural controls supported by effective management information and risk management support systems; and (d) an independent audit mechanism to monitor the accuracy and effectiveness of the Bank’s governance, operations and information systems, including the reliability and integrity of financial and operational information, the effectiveness and efficiency of operations, the safeguarding of assets, and compliance with laws, rules, regulations and contracts.

The Bank has an internal audit system that reasonably assures the Board, Management and stockholders that the Bank’s key organizational and operational controls are faithfully complied with. The Board appointed an Internal Auditor to perform the function, and required the Auditor to report to the Audit Committee, a board-level committee, which allows the internal audit activity to fulfill its mandate. The Internal Auditor is guided by the International Standards on Professional Practice of Internal Auditing and existing laws, rules and regulations. With the Board appointment, the Chief Audit Officer oversees the implementation of the internal audit system.

3. Money Laundering and Terrorist Financing Prevention Program

As approved by the Board and as required by the BSP, the Bank implements a program to combat money laundering and terrorist financing. The Program has been issued and is regularly updated to comply with RA No. 9160, as amended, BSP Circular No. 706 and other policies of the State. The Program is intended to protect the integrity and confidentiality of the accounts of the clients, and ensure that the Bank is not used as money laundering site for the proceeds of any unlawful activities, taking into consideration best practices to combat terrorist financing.

Robinsons Bank Annual Report 2016 43 corporate governance

The Program has been developed to disseminate information which will help the employees understand and prevent money laundering activities, detect and report suspicious transactions, and know better the Bank’s customers; understand the penalties for non-compliance; take the required AML training for responsible officers and personnel of the Bank; satisfy legal and ethical responsibilities with a minimal adverse impact on the Bank’s overall daily business responsibilities and performance goals. Moreover, the Program has been promulgated to protect the Bank as well as its employee’s interests.

Laws governing secrecy on bank deposits have been strictly complied with by the Bank when implementing procedures related to combating money laundering and terrorist financing. The Program provides guidance in complying with the Anti-Money Laundering Law as well as other applicable regulations without violating relevant laws and without losing legitimate business or clients in the process.

4. Related Party Transactions

In compliance with BSP Circular 895, as amended, the Bank has created a Related Party Transactions (RPT) Committee that supports the Board in managing exposures to related parties. Under its policy, the Bank defined related parties to include directors, officers, stockholders or related interests (DOSRI) of the Bank and their close family members. It also includes corresponding persons in affiliated companies, subsidiaries and affiliates, any party that the Bank exerts control over or that exerts control over the Bank, and such other entity whose interest may pose potential conflict with the interest of the Bank.

The Committee evaluates material RPTs to ensure that these are not undertaken on more favorable economic terms (e.g., price, commissions, interest rates, fees, tenor, collateral requirement) to such related parties that similar transactions with non-related parties under similar circumstances and that no corporate or business resources of the Bank are misappropriated or misapplied, and to determine any potential reputational risk issues that may arise as a result of or in connection with the transactions. All material RPTs are evaluated and endorsed by the Committee to the Board for approval. Refer to the Notes to Financial Statements for the Bank’s related party transactions.

5. Remuneration Policy

Board of Directors compensation is a fee or per diem in an amount as may be determined by the Board shall be paid to each director for attendance at any meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any director from serving in any other capacity and receiving compensation therefore, The Board shall fix the compensation and other remuneration of any compensation therefore. The Board shall fix the compensation and other remuneration of any Director or any other officer of the Bank should they be designated to perform executive functions or any special service to the Bank. In no case shall the total yearly compensation of directors, as such directors, exceed ten percent (10%) of the net income before income tax of the corporation during the preceding year.

REMUNERATION OF BOARD OF DIRECTORS

PHP Parent Subsidiary Consolidated 2016 2,265,000 723,000 2,988,000 2015 1,830,602 672,000 2,502,602

6. Code of Conduct

The Bank’s Code of Conduct for Employees exists to develop or pattern behavior in accordance to the Bank’s standards, to instill professional conduct, and to enforce discipline and order. The Code is implemented by the Human Resources and Management Group. Copies of the Code of Conduct are given to employees upon hiring, while seminars are conducted regularly to further expound on the subject.

7. Whistle-Blowing Policy

Employees of the Bank are encouraged to perform the duty of disclosing to their immediate superior the existing or potential violations and wrongdoings that they are or may become aware of. The Bank’s Policy on Timely Reporting of Concerns and Incidents, otherwise known as the Whistle-Blowing Policy, serves as a guide for all employees for reporting matters that breach integrity and the Bank’s Code of Conduct.

44 Robinsons Bank Annual Report 2016 RISK MANAGEMENT

Overview

Robinsons Bank positions itself to become a more visible commercial bank and a significant player in the banking industry. The Bank aims to introduce new products and services and to fully develop the most significant areas of its operations while being cognizant of the associated risks.

The Risk Management is headed by the Chief Risk Officer (CRO) and is responsible for oversight of enterprise risk management, risk governance and control, framework, policies and practices. The CRO is supported by a dedicated team of risk management professionals organized to oversee risks arising from each of the Bank’s risk categories.

Robinsons Bank takes a comprehensive approach to Risk Management with a defined framework and an articulated Risk Appetite Statement, which are approved by the Risk Management Committee (RMC) and the Board of Directors.

Scope and Structure

The Bank is faced with multiple risks inherent to the nature of the business.

The following are the types of risk faced by the Bank:

Credit Risk – arises from a counterparty’s failure to meet the terms of any contract with the Bank or to perform otherwise as agreed. Credit risk is found in all activities where success depends on counterparty’s, issuer’s, or borrower’s performance. It arises any time the bank funds are extended, committed, invested, or otherwise exposed through actual or implied contractual agreements, whether reflected on – or off – balance sheet. Credit risk is not limited to the loan portfolio.

Market Risk – is defined by the Bank as the risk to earnings or capital arising from changes in the value of traded portfolios of financial instruments. It is the exposure to the uncertain market value of a portfolio due to price fluctuations. The value of investments fluctuates over a given time period because of general market conditions, economic changes or other events that impact large portions of the market such as political events, natural calamities, and others. This risk arises from market-making, dealing, and position- taking in interest rate, foreign exchange, equity, and commodities markets. Market risk is present in both trading and non-trading activities.

Interest Rate Risk – the Bank defines interest rate risk as the current and prospective risk to earnings or capital arising from the movements in interest rates.

Liquidity Risk – is defined by the Bank as the current and prospective risks to earnings or capital arising from the Bank’s inability to meet its obligations when they become due without incurring unacceptable losses. It includes the inability to manage unplanned decreases or changes in funding sources. It also arises from the failure to recognize or address changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value.

Operational Risk – the Bank adopts the definition of BSP Circular 900 or Guidelines on Operational Risk Management, to wit; “Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people and systems; or from external events. This includes legal risk, but excludes strategic and reputational risks.”

IT Risk – is defined as any potential adverse outcome, damage, loss, violation, failure, or disruption associated with the use of or reliance on computer hardware, software, devices, systems, applications and networks.

Business Risk – the Bank adopts the definition provided by BSP Circular 747 on “Revised Compliance Framework for Banks” dated 06 February 2012series of 2012, Business Risk refers to conditions which may be detrimental to a bank’s business model and its ability to generate returns from operations, which in turn erodes its franchise value.

Robinsons Bank Annual Report 2016 45 risk management

RISK MANAGEMENT COMMITTEE

CHIEF RISK OFFICER AND HEAD, ENTERPRISE RISK MANAGEMENT GROUP

HEAD, MARKET AND HEAD, HEAD, HEAD, LIQUIDITY RISK CREDIT RISK OPERATIONAL RISK IT RISK DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT

HEAD, HEAD, HEAD, ANALYST, ANALYST, CREDIT REVIEW UNIT CREDIT REVIEW UNIT CREDIT ANALYTICS OPS AND IT MARKET RISK -CONSUMER LOANS -COMMERCIAL LOANS UNIT RISK

ANALYST, ANALYST, OFFICER, SPECIALIST, ASSET-LIABILITY CREDIT ANALYTICS CREDIT REVIEW CREDIT ANALYTICS

ANALYST, SPECIALIST, ANALYST, PORTFOLIO ANALYTICS CREDIT REVIEW CREDIT ANALYTICS

The following sections provide a comprehensive description of the Bank’s risk management procedures, measures, framework, and analyses for the identified risk areas.

Credit Risk

Credit Risk Management – is the process of controlling the potential consequence of credit risk. The process follows a standard risk management: identification, measurement, monitoring, and control. The cause of the risk has to be identified and the extent of the risk has to be evaluated and decisions have to be made as to how the risk has to be managed.

Credit Risk Management Framework

IDENTIFY

CONTROL MEASURE

MONITOR

46 Robinsons Bank Annual Report 2016 The Bank has several credit risk mitigation practices:

Identify – The starting point for the Credit Risk Management Framework is to develop an understanding of the institution, taking into account the external environment (e.g., economics trends, regulatory landscape, and competition) and within an organization’s internal environment (e.g., people, process, and infrastructure) mainly focused on credit risk.

Measure – The next step is to measure the identified inherent credit risk using several measurement tools such as ICCRS (Internal Credit Risk Rating System), Score cards, NFR (Net Flow Rate), PQR (Portfolio Quality Review), among others. These measurements tools help in forecasting the potential risk factors in any transactions. The identified risk are properly assessed as to impact and probability of occurrence, and measured quantitatively and qualitatively in terms of estimating cost of losses that may incurred should the risk events occur. This will serve as basis for the prioritizing the risks to be treated.

Monitor – After measuring the inherent credit risk, the Bank sets monitoring tools to assess the risk. The result of the assessment is reported to the Senior Management, RMC and of Directors, for discussion of pertinent issues on the credit risk and development of strategic actions.

Control – Once the Bank’s credit risks are identified and its impact is measured, the next step is to evaluate the adequacy of the Banks management systems to effectively monitor and control their risks within the Bank’s business activities. Adequate controls are established to prevent or detect exposure to credit risk in a timely manner, and that appropriate corrective actions shall be taken promptly to mitigate losses, and systematic treatment measures to prevent or minimize the recurrence of the risk events.

Market Risk

Market Risk Management – The Bank considers the following factors in setting up the market limits: business prospects, present market conditions, expected returns and budget for the year, among others. It is the responsibility of the risk-taking personnel to request or renew market risk limits. The limits are approved by the Board of Directors through the Risk Management Committee.

The Board of Directors approved the following set of risk control limits that are intended to prevent over-trading, excessive concentration, and to limit financial loss arising from the Bank’s exposure to market risk.

1. Aggregate Control Limits

Aggregate Control Limits refer to the boundary limits and loss limits around the business activities other than VAR and Stop Loss limits. Aggregate control limits would include, for example, permitted instruments and currencies, volume limits, and other similar limits.

2. Value-at-Risk Limits

Value-at-Risk (or VaR) measures the potential loss of value resulting from unlikely, adverse event in the normal market environment in a specified period of time within a specified probability of occurrence. It is a measure of likely earnings volatility for marked-to-market portfolios.

VaR is used to alert the senior management whenever the potential for losses in the Bank’s trading portfolio exceeds tolerable levels. Because the VaR measure is tied to market volatility, it gives an immediate “feel” for the amount of risk in a portfolio especially in dynamic and volatile market environments. It therefore allows management to react quickly and adjust its portfolio strategies in different market conditions in accordance with its risk philosophy and appetite.

3. Stop Loss and Loss Alert Limits

Stop loss and loss alert limits are pre-determined level of losses within a defined time period (month-to-date or year-to-date), set as a function of the tolerable VAR and whose effect on capital adequacy is given due importance.

Robinsons Bank Annual Report 2016 47 risk management

Stop loss and loss alert limits are compared on a daily basis with the cumulative business day realized and unrealized (marked-to-market) profits/losses. If an excess occurs, the concerned risk-taking personnel/ unit is given notice through a standard breach regularization form, where the details of the breach is served. The concerned risk-taking personnel/unit is required to provide justification, strategy or alternative courses of action which will be approved by the appropriate authority based on the exception management matrix.

4. Weighted Average Modified Duration

The portfolio modified duration is a strategic tool used to model portfolio risk. To operate modified duration as a risk management tool, it is important to apply it on the overall portfolio as well as on the individual securities comprising the portfolio. The goal is to control excessive losses beyond the calculated modified duration.

5. Off-Market Rate Tolerance

Off-market rate tolerance limit is set up to mitigate the operational risk that dealers may consummate deals at an off-market rate even after carefully checking prevailing prices. This matters because an attempt to alter profit and loss (P&L) may require the trader to enter trades at an off-market rate. By doing so, the trades could reverse any P&L that the trader may have incurred in the other positions. The limits are also set up to rectify erroneous pricing and identify deal prices that are adverse to the Bank’s P&L.

For transactions incorrectly tagged as off-market rates transactions, ERMG independently reviews the cause of the breach and documents supporting worksheets that would illustrate how such deals are evaluated and how tolerance band is recomputed based on the market rates prevailing at deal date.

The limits were obtained by performing box-and-whiskers on the posted data and on market rates for foreign exchange trading and box-and-whiskers on posted transactions for fixed income trading.

6. Dealer Single Transaction Limits

Trader limits enable delegation of authority to execute transactions for and in behalf of the Bank to allow continuity of the treasury function even in the absence of the Treasurer. Trader limits aim to manage operational risks that is caused by this delegation of authority.

Interest Rate Risk

Interest Rate Management – Interest rate risk is a form of market risk but it has a multi-dimensional nature involving the movements of rates across yield curves (term structures) of one or more instruments. Specifically for the Bank’s banking book, the lending activities, taking deposits with different maturities and interest rates, and investing in a portfolio of fixed income securities, expose the Bank to interest rate risk. This risk may affect the recognition and/or accrual of interest income and expense.

Basis of Measurement – The Bank utilizes the Earnings-at-Risk (EaR) methodology in assessing the capital requirement of its interest rate risk exposure.

The EaR of the Bank is an estimate of the annualized maximum change in net interest income given a specified holding period for a particular time band’s repricing gap, with a corresponding probability of occurrence in a normal market environment.

Liquidity Risk

Liquidity Risk Management – The Bank’s appetite for liquidity risk is measured through the limits set for each book/fund vehicle, and for each liquidity target. These limits represent the historical liquidity levels tolerated by the Bank in the past.

The Bank uses two approaches to liquidity measurement. The flow approach uses the maximum cumulative outflow (MCO) as a tool to measure liquidity gaps of maturing assets and liabilities. The stock approach is more traditional – it focuses on ratios, and generally stems from the assumption that past experience enables institutions to determine a ratio that would provide future liquidity.

48 Robinsons Bank Annual Report 2016 The liquidity gap and balance sheet ratios are regularly measured, monitored and compared against their respective limits. These liquidity risk measures and other information on the liquidity position of the Bank are reported to ALCO weekly and to the RMC monthly.

Operational Risk

Operational Risk Management – The Bank further acknowledges that “operational risk is inherent in all activities, products, and services, and cuts across multiple activities and business lines within the financial institution and across the different entities in a banking group or conglomerate where the financial institution belongs.”

Operational Risk Structural Framework

RISK MANAGEMENT COMMITTEE ENTERPRISE RISK MANAGEMENT GROUP - OPERATIONAL AND IT RISK MANAGEMENT OFFICES

P MANAGEMENT, OPERATIONS & IT STEERING COMMITTEE T o R C e l BUSINESS LINES / UNITS u u c i l l h NEW ACTIVITIES, PROCESSES, PRODUCTS, SYSTEMS c e t n i Key Risk Indicators Risk and Control Self Assessment Loss Events s u o e r l s a e o Identify Risk Identify Control n g Identify Specify Identify and Analyze a and Owner and Owner d a y KRIs Escalation Capture Causes n Triggers Internal or and n d R d a External Control Assess Assess Control e n Events Failures P Inherent Performance & g A d r and Effectiveness u w o Residual l a S c Risk a r y e t e s d i n t RISK MITIGATION AND ACTION PLANS u o e e r REPORTING n s m e s s s s SCENARIO ANALYSIS AND ICAAP

INTERNAL AUDIT

Sources: (1) The Institute of Internal Auditors, IIA Position Paper. The Three Lines of Defense in Effective Risk Management and Control, January 2013, page 2. (2) BSP MORB

The Bank adopts the Three Lines of Defense framework in managing operational risk. The framework is enumerated below:

First Line of Defense – Business and Service Units take ownership of the risk by identifying, assessing and managing the risks from the new activities, processes, products and systems they do and use.

Second Line of Defense – Operational and Information Technology Risk Management (OITRM) under Enterprise Risk Management Group, provides the tools and the consistency in risk management language such as results of internal/external audit and supervisory issues raised in the BSP Report of Examination (ROE), Risk & Control Self-Assessment (RCSA), Key Risk Indicators (KRI), Loss Events Database (LED) and Analysis, Business Impact Analysis (BIA).

Guided by the Bank’s policies and procedures, rules and regulations and with the aid of Technology and Systems as well as promotion of Risk awareness and establishment of culture and ethics, OITRM assists business units in defining the target risk exposure and reporting adequate risk-related information throughout the organization.

Robinsons Bank Annual Report 2016 49 risk management

Third Line of Defense – Internal Audit provides comprehensive assurance based on the highest level of independence and objectivity within the organization. Risk Management liaises with Internal Audit, through latter’s reports, to perform validation, and development of accurate assessment and analysis of events, incidents and indicators.

IT Risk

IT Risk Management – IT Risk Management System enables the identification, measurement, monitoring and controlling IT-related risks covering at least the following areas:

a. Information Security b. Project Management/Development and Acquisition c. Change Management d. IT Operations e. IT Outsourcing/Vendor Management f. Electronic Products and Services

The goal of IT Risk Management is to help the Bank accomplish its business objectives by better securing the information and information systems that store, process, or transmit Bank information.

With the emergence of new and breakthrough technologies, there are pressing needs to address the increasing risk of Cyber threats and/or Cyber-attacks. A Cyber Security Framework and Roadmap is developed to protect the Bank’s critical infrastructure against these risks, as well as to promote awareness, research, and provision of technical security measures. The framework is similar to the Information Security/Information Technology Risk Management Framework and is composed of the following cycles:

IDENTIFY

RECOVER PROTECT

RESPOND DETECT

• Identify – Identification of internal and external cyber risks • Protect – Application of protective measures on the Bank’s systems, assets and data • Detect – Ability to detect system intrusions, data breaches and unauthorized access • Respond – Proactively respond to a potential cyber-security event • Recover – Restoration from a cyber-security event by returning to normal operations and service

50 Robinsons Bank Annual Report 2016 Business Risk

Business Risk Management – Combining business risk with financial risks arising from the use of borrowed funds generates total corporate risk of the Bank. Business risks shall include, but not limited to the following:

1. Risks to reputation that arise from internal decisions that may damage the Bank’s market standing; 2. Risks to reputation that arise from internal decisions and practices that ultimately impinge on the public’s trust of the Bank; 3. Risks from the actions of Bank that are contrary to existing regulations and identified best practices and reflect weaknesses in the implementation of codes of conduct and standards of good practice; and 4. Legal risks to the extent that changes in the interpretation or provisions of regulations directly affect the Bank’s business model. Legal risk also covers the Bank’s current and potential losses from lawsuits.

• Reputational Risk – Is defined as the current and prospective impact on earnings or capital arising from negative public opinion. It affects a financial institution’s ability to establish new relationships or services or continue servicing existing relationships. This exposure may also expose a financial institution to litigation, financial loss, or a decline in its customer base.

The Objectives are to:

I. Ensure that the Bank’s credibility and reputation in the banking community is maintained at all times; II. Identify and establish potential reputational risk situations and the corresponding course of action to address them; III. Establish and delineate the role of each of the unit/s department/s in the Bank in relation to reputational risk; IV. Establish accountabilities and identify point persons for specific scenarios; and V. Assist in the implementation and strict monitoring of measures to ensure that all risk factors in relation to reputational risk are identified and addressed.

• Compliance Risk – Is the current and prospective risk to earnings or capital arising from violations of, or nonconformance with laws, rules, regulations, prescribed practices, internal policies, and procedures, or ethical standards. Compliance risk also arises in situations where the laws or rules governing certain Bank products or activities of the Bank’s clients may be ambiguous or untested. This risk exposes the Bank to fines, payment of damages and the voiding of contracts. Compliance risk can lead to diminished reputation, reduced franchise value, limited business opportunities, reduced expansion potential, and lack of contract enforceability.

• Legal Risk – Is the extent that changes in the interpretation or provisions of regulations directly affect a Bank’s business model. Legal risk also covers the Bank’s current and potential losses from lawsuits.

Compliance & Legal Risk Management aims to adhere to the highest standards of ethical and professional behavior in the conduct of its business, and comply fully with all applicable laws, regulations and rules that govern the Bank‘s business, whether arising in the Philippines or in any other jurisdiction to which the Bank is subject.

To address and handle customers’ concerns particularly requests, queries and complaints and to mitigate associated risks (e.g., reputational and legal risks), the Bank created its Customers Care Center. In 2016, the Bank received a total of 12,136 request/queries and 2,698 complaints (70 of which or only 2.59% is complex).

Robinsons Bank Annual Report 2016 51 risk management

Business Continuity Plan

The Bank’s Business Continuity Plan (BCP) covers an end-to-end and proactive process that covers five major segments: Business Impact Analysis (BIA), Business Resumption Strategy, Preventive Strategy, Testing Strategy and Review Plan & Certification. The BIA reviews the impact of disruption on the unit’s core processes and the resulting risk assessment serves as basis for prioritization in the Bank’s business Resumption Strategy. The Preventive Strategy describes the proactive measures taken to minimize losses during interruptions, if these cannot be avoided. The Testing Strategy and Review Plan define the process on how the Bank prepares for any eventuality, anytime and it makes way for continuous improvement.

The BCP Framework

BCP Framework: Over-all Process, Policies and Guidelines

• Roll-out Standard BCP Framework • Provide Risk Management Tools RASCU: Over-all • Ensure migration of best practices Coordination • Aggregate the BCPs, Test Results for Bank Risk Profiling

Department Heads IT: Computer System as Risk Owners with BCP Role & Telecommunications

• Develop Department BCP: BIA, Business • Develop appropriate IT BCP (TCP) based on BIA Resumption & Preventive Strategy • Coordinate maintenance of the Back-up Operations • Maintain & Test Back-up Operations Centers Centers • Implement BCP • Coordinate Testing of technical & related matters

Senior Management: Board: Review & Approval Prioritization & of Major Issues per BSP Memo dated 01.22.04

The major sections of the BCP are the Generic BCP, the Unit BCP and the Technical Contingency Plan (TCP)

52 Robinsons Bank Annual Report 2016 Capital Adequacy and Capital Management

The primary objectives of the Bank’s capital management are to ensure that the Bank complies with externally imposed capital requirements, as mandated by the BSP, and the Bank maintains healthy capital ratios in order to support its business and to maximize shareholder’s value. Presented below are the risk-based capital components, including regulatory deductions, on a parent and consolidated bases for 2015 and 2016:

Qualifying Capital Consolidated Parent Company (In PHP Million) 2016 2015 2016 2015 Tier 1 Capital Paid-up common stock 12,000.00 436.84 12,000.00 436.84 Additional paid-in-capital - - - - Deposit for Common Stock Subscription - 5,900.00 - 5,900.00 Retained Earnings 632.00 477.39 620.27 395.70 Undivided profits 250.99 100.73 234.26 173.50 Net unrealized gains or losses on AFS securities (818.39) (561.70) (818.39) (561.70) Cumulative Foreign Currency Translation (112.77) (103.29) (112.77) (103.29) Others (27.08) (33.32) (27.08) (33.09) Minority Interest - - - - Less: Regulatory adjustments DOSRI (0.31) (0.17) - - Deferred income tax (106.55) (108.31) (89.20) (90.96) Goodwill (607.08) (563.08) (362.75) (318.75) Other Intangible Assets (640.19) (641.81) (14.10) (14.10) Investments in subsidiary - - (1,160.00) (759.70) Total Common Equity Tier 1 Capital 10,570.63 4,903.28 10,270.25 5,024.45 Additional Tier 1 Capital Instruments issued by the bank that are eligible as AT1 Capital - 5,663.17 - 5,663.17 Total Tier 1 Capital 10,570.63 10,566.45 10,270.25 10,687.62

Tier 2 Capital General Loan Loss Provision (GLLP) 330.63 254.86 317.56 241.79 Total Tier 2 Capital 330.63 254.86 317.56 241.79 Total Gross Qualifying Capital 10,901.26 10,821.31 10,587.81 10,929.41 Total Qualifying Capital 10,901.26 10,821.31 10,587.81 10,929.41

The Bank manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Bank may adjust the amount of dividend payment to shareholders, return capital to shareholders, or issue capital securities. No changes were made in the objectives, policies, and processes from the previous years.

Robinsons Bank Annual Report 2016 53 risk management

The Risk-based Capital Ratios are as follows:

Qualifying Capital Consolidated Parent Company (In PHP Million) 2016 2015 2016 2015 Tier 1 Capital 10,570.63 10,566.45 10,270.25 10,687.62 Common Equity Tier 1 10,570.63 4,903.28 10,270.25 5,024.45 Additional Tier 1 Capital - 5,663.17 - 5,663.17 Tier 2 Capital 330.63 254.86 317.56 241.79 Gross Qualifying Capital 10,901.26 10,821.31 10,587.81 10,929.41 Less : Required deductions - - - - Total Qualifying Capital 10,901.26 10,821.31 10,587.81 10,929.41 Risk Weighted Assets 51,016.21 33,340.33 43,377.40 31,780.42 Common Equity Tier 1 Ratio 20.72% 14.71% 23.68% 15.81% Capital Conservation Buffer 14.72% 8.71% 17.68% 9.81% Tier 1 Capital Ratio 20.72% 31.69% 23.68% 33.63% Capital Adequacy Ratio 21.37% 32.46% 24.41% 34.39%

The regulatory qualifying capital of the Bank consists of Tier 1 (core) capital, which comprises of paid-up common stock, additional paid-in capital, deposit for common stock subscription, retained earnings, surplus including current year profit, minority interest less required deductions such as unsecured accommodations to DOSRI, deferred income tax and goodwill. The other component of regulatory capital is Tier 2 (supplementary) capital, which includes net unrealized gains and losses on AFS equity securities and general loan loss provision. A capital conservation buffer of 2.5% comprised of CET 1 capital is likewise imposed in the Basel III capital ratios.

Reconciliation between the Philippine Financial Reporting Standards (PFRS) Capital, capital under Philippine Regulatory Principles and Qualified Capital for Minimum Adequacy under Basel III are as follows (in PHP million):

PFRS Capital, 2016 11,968.22 Differences due to Accounting Principles (43.46) RAP Capital, 2016 11,924.76 General Loan Loss Provision 330.63 Capital Adjustments (1,354.13) Qualified Capital for Minimum Adequacy Compliance under Basel III 10,901.26

54 Robinsons Bank Annual Report 2016 The capital requirements for Credit, Market, and Operational Risks are provided below, on solo and consolidated bases for 2015 and 2016:

Capital Requirement Consolidated Parent Company in PHP Million 2016 2015 2016 2015 Credit Risk 4,643.95 2,924.61 3,893.06 2,804.44 Market Risk 22.21 10.31 22.31 10.40 Operational Risk 435.46 399.11 422.37 363.20 Total Capital Requirements 5,101.62 3,334.03 4,337.74 3,178.04

Credit Risk

The Bank uses the Standardized Approach under Circular No. 538 in computing its exposure for credit risk. Credit Risk-Weighted Asset (CRWA) is an important risk measure of the Bank, primarily because it is used to determine the Bank’s minimum capital requirement. The Bank’s minimum capital requirement for credit risk is defined as 10% of the CRWA.

The following table summarizes the result of the risk quantification and capital assessment of the Bank’s credit risk using the standardized approach:

CREDIT RISK-WEIGHTED ASSETS Consolidated Parent Company (in PHP million) 2016 2015 2016 2015 Credit Risk-Weighted Assets Total Risk Weighted On-Balance Sheet Assets 46,257.90 29,110.13 38,748.98 27,908.38 Total Risk-Weighted Off-Balance Sheet Assets 152.47 128.79 152.47 128.79 Total Counterparty Risk-Weighted Assets in the Trading Book 29.12 7.20 29.12 7.20 (Derivatives and Repo-style Transactions) Total Gross Risk-Weighted Assets 46,439.49 29,246.12 38,930.57 28,044.37 Deductions: General loan loss provision [in excess of the amount permitted - - - - to be included in Upper Tier 2 Unbooked valuation reserves and other capital adjustments affecting asset accounts based on the latest report of - - - - examination as approved by the Monetary Board TOTAL CREDIT RISK-WEIGHTED ASSETS 46,439.49 29,246.12 38,930.57 28,044.37

The Bank’s total CRWA as of 31 December 2016 stood at PHP38,930.57 million and PHP46,439.49 million, on solo and consolidated basis, respectively.

Presented in the next table is the total credit exposure, on solo and consolidated bases, broken down by type of exposures and risk buckets:

Robinsons Bank Annual Report 2016 55 56

Robinsons Bank Annual Report 2016 Presented in the next table is the total credit exposure, on solo and consolidated bases, broken down by type of exposures and risk buckets:

RISK-WEIGHTED ON-BALANCE SHEET ASSETS - PARENT 2016 Exposures Exposures, Covered Exposures Net of by CRM, not Risk Weights 10/, 12/ Specific Gross of Covered Nature of Item 2/ Materiality Provisions Threshold by CRM (Part III.1a) 0% 20% 50% 75% 100% 150% TOTAL [Sum of 1 2 3=1-2 4 5 6 7 8 9 4 to 9]

Cash on Hand 1,901.11 1,901.11 1,901.11 1,901.11 Checks and Other Cash Items - - Due from Bangko Sentral ng Pilipinas (BSP) 12,722.57 - 12,722.57 12,722.57 - - 12,722.57 Due from Other Banks 3,988.11 3,988.11 1,127.17 1,664.80 1,196.14 3,988.11 Financial Assets Designated at Fair Value through Profit or Loss [Sum of E.1 and E.2] ------Available-for-Sale (AFS) Financial Assets 11,841.16 - 11,841.16 5,880.90 1,615.13 2,389.89 1,649.74 - 11,535.66 Held-to-Maturity (HTM) Financial Assets 3,354.37 - 3,354.37 190.31 2,988.21 - 481.34 - 3,659.87 Unquoted Debt Securities Classified as Loans ------Loans and Receivables 37,992.65 3,737.80 34,254.85 - 4,517.13 831.35 2,144.99 26,395.59 365.82 34,254.88 1. Interbank Loans Receivable 97.17 - 97.17 - - 97.17 - 97.17 2. Loans and Receivables - Others 37,895.49 3,737.80 34,157.68 - 4,517.13 831.35 2,144.99 26,298.42 365.82 34,157.72 a. Non-defaulted exposures 37,471.76 3,736.09 33,735.67 - 4,517.13 831.35 2,144.99 26,242.23 - 33,735.70 a.1. Sovereign Exposures ------a.2. LGUs and Public Sector Entities 11.50 11.50 11.50 11.50 a.3. Government Corporation - - a.4. Corporates 25,867.48 2,558.08 23,309.40 4,517.13 - 18,792.30 - 23,309.43 a.5. Microfinance/Small and Medium Enterprises 2,147.99 3.00 2,144.99 - - 2,144.99 - - 2,144.99 Loans to individuals for Housing Purposes a.6. (includes similar items under DIL) 5,595.54 1,145.35 4,450.19 831.35 3,618.84 4,450.19 a.7 Loans to Individuals 3,849.25 29.67 3,819.58 3,819.58 3,819.58 b. Defaulted exposures 7/ 423.72 1.71 422.01 56.20 365.82 422.01 b.1. Housing Loans 57.90 1.71 56.20 56.20 56.20 b.2. Other than Housing Loans 365.82 365.82 365.82 365.82 Loans and Receivables Arising from Repurchase Agreements, Certificates of Assignment/Participation with Recourse, 493.18 - 493.18 493.18 - - - - 493.18 and Securities Lending and Borrowing Transactions Sales Contract Receivable (SCR) 31.09 - 31.09 - - 23.86 6.68 30.53 Real and Other Properties Acquired 187.93 187.93 187.93 187.93 Total Exposures Excluding Other Assets 72,512.16 3,737.80 68,774.36 21,188.07 10,247.65 4,886.04 2,144.99 29,746.67 560.43 68,773.84 Other Assets 2,059.86 2,059.86 2,060.38 2,060.38 Total Exposures, Including Other Assets 74,572.02 3,737.80 70,834.22 21,188.07 10,247.65 4,886.04 2,144.99 31,807.04 560.43 70,834.22 Total Risk-weighted On-Balance Sheet Assets not covered by CRM - 2,049.53 2,443.02 1,608.74 31,807.04 840.64 38,748.98 Total risk-weighted On-Balance Sheet Assets covered by CRM - - - - - TOTAL RISK-WEIGHTED ON-BALANCE SHEET ASSETS - 2,049.53 2,443.02 31,807.04 840.64 38,748.98 RISK-WEIGHTED ON-BALANCE SHEET ASSETS - CONSOLIDATED 2016 Exposures Exposures, Covered Exposures Net of by CRM, not Risk Weights 10/, 12/ Specific Gross of Covered Nature of Item 2/ Materiality Provisions Threshold by CRM (Part III.1a) 0% 20% 50% 75% 100% 150% TOTAL [Sum of 1 2 3=1-2 4 5 6 7 8 9 4 to 9]

Cash on Hand 1,938.81 1,938.81 1,938.81 1,938.81 Checks and Other Cash Items - - Due from Bangko Sentral ng Pilipinas (BSP) 13,320.90 - 13,320.90 13,320.90 - - 13,320.90 Due from Other Banks 4,077.56 4,077.56 1,127.17 1,664.80 1,285.59 4,077.56 Financial Assets Designated at Fair Value through Profit or Loss ------Available-for-Sale (AFS) Financial Assets 11,841.16 - 11,841.16 5,880.90 - - 5,960.26 - 11,841.16 Held-to-Maturity (HTM) Financial Assets 3,571.61 - 3,571.61 190.31 3,203.40 - 177.89 - 3,571.61 Unquoted Debt Securities Classified as Loans ------Loans and Receivables 38,907.79 3,740.71 35,167.08 - - 834.60 2,248.44 31,631.31 452.73 35,167.08 1. Interbank Loans Receivable 97.17 - 97.17 - - 97.17 - 97.17 2. Loans and Receivables - Others 38,810.62 3,740.71 35,069.91 - - 834.60 2,248.44 31,534.14 452.73 35,069.91 a. Non-defaulted exposures 38,298.28 3,739.00 34,559.28 - - 834.60 2,248.44 31,476.24 - 34,559.28 a.1. Sovereign Exposures ------a.2. LGUs and Public Sector Entities 11.50 11.50 11.50 11.50 a.3. Government Corporation - - a.4. Corporates 25,867.48 2,558.08 23,309.40 - - 23,309.40 - 23,309.40 a.5. Microfinance/Small and Medium Enterprises 2,251.44 3.00 2,248.44 - - 2,248.44 - - 2,248.44 Loans to individuals for Housing Purposes a.6. 5,598.79 1,145.35 4,453.44 834.60 3,618.84 4,453.44 (includes similar items under DIL) a.7 Loans to Individuals 4,569.07 32.58 4,536.50 4,536.50 4,536.50 b. Defaulted exposures 7/ 512.34 1.71 510.64 57.90 452.73 510.64 b.1. Housing Loans 59.61 1.71 57.90 57.90 57.90 Robinsons Bank Annual Report 2016 b.2. Other than Housing Loans 452.73 452.73 452.73 452.73 Loans and Receivables Arising from Repurchase Agreements, Certificates of Assignment/Participation with Recourse, and Securities Lending and Borrowing 676.87 - 676.87 676.87 - - - - 676.87 Transactions Sales Contract Receivable (SCR) 49.29 - 49.29 - - 39.07 10.22 49.29 Real and Other Properties Acquired 337.78 337.78 337.78 337.78 Total Exposures Excluding Other Assets 74,721.77 3,740.71 70,981.06 22,007.80 4,330.57 2,499.40 2,248.44 39,094.13 800.72 70,981.06 Other Assets 2,160.55 2,160.55 2,160.55 2,160.55 Total Exposures, Including Other Assets 76,882.32 3,740.71 73,141.61 22,007.80 4,330.57 2,499.40 2,248.44 41,254.67 800.72 73,141.61 Total Risk-weighted On-Balance Sheet Assets not covered by CRM - 866.11 1,249.70 1,686.33 41,254.67 1,201.09 46,257.90 Total risk-weighted On-Balance Sheet Assets covered by CRM - - - - - TOTAL RISK-WEIGHTED ON-BALANCE SHEET ASSETS - 866.11 1,249.70 1,686.33 41,254.67 1,201.09 46,257.90 57 risk management

The credit equivalent amount for off-balance sheet items, broken down by type of exposures, in PHP million on a consolidated and parent bases, are:

Consolidated Parent

Off-balance Sheet Assets 2016 2015 2016 2015 (In PHP Million) Notional Credit Notional Credit Notional Credit Notional Credit Principal Equivalent Principal Equivalent Principal Equivalent Principal Equivalent Direct Credit Substitutes 134.35 134.35 96.23 96.23 134.35 134.35 96.23 96.23 Transaction-related contingencies ------Trade-related contingencies arising from movement of goods 452.89 90.58 162.84 32.57 452.89 90.58 162.84 32.57 Other commitments (which can be done unconditionally cancelled at any time by the bank without prior notice) 18,401.08 - 26,912.17 - 18,399.10 - 26,910.84 - Total Notional Principal and Credit Equivalent Amount 18,988.33 224.93 27,171.24 128.79 18,986.35 224.93 27,169.91 128.79

Credit equivalent amount for counterparty risk-weighted items, broken down by type of exposures (in PHP million)

Consolidated Parent COUNTERPARTY RISK-WEIGHTED ASSETS IN THE BANKING BOOK 2016 2015 2016 2015 (In PHP Million) Notional Credit Notional Credit Notional Credit Notional Credit Principal Equivalent Principal Equivalent Principal Equivalent Principal Equivalent Derivatives Exposures Forward Foreign Exchange Rate 5,681.65 58.24 1,436.25 14.36 5,681.65 58.24 1,436.25 14.36 Contracts Total Notional Amount 5,681.65 58.24 1,436.25 14.36 5,681.65 58.24 1,436.25 14.36 Total Counterparty Risk-Weighted 29.12 7.20 29.12 7.20 Assets of Derivative Transaction

Pursuant to the Bank’s policy, the credit ratings given by foreign and local rating agencies were used to determine the credit risk weights of On-balance sheet, Off-balance sheet and counter party exposures.

For all rated credit exposures, regardless of currency, the Bank used the ratings of Standard & Poor’s (S&P); Moody’s, and Fitch Ratings. On the other hand, the credit rating given by Philippine Rating Services Corporation was used for Unquoted Debt Securities, certain Corporate Bonds, Peso-denominated exposures and loans to rated domestic private entities.

The Bank neither uses credit derivatives as credit risk mitigants, nor provides credit protection through credit derivatives. The Bank has no outstanding exposure to securitization structures and other types of structured products issued or purchased by the Bank.

58 Robinsons Bank Annual Report 2016 Market Risk-Weighted Assets

The Standardized Approach is utilized by the Bank in determining it market risk-weighted assets. As of end December 2016, the computed total market risk-weighted assets on a consolidated basis stood at PHP222.1 million. This consisted of PHP0.6 million interest rate risk exposure and PHP221.6 million foreign exchange exposures.

Market Risk Weighted Assets Consolidated Parent (in PHP million) 2016 2015 2016 2015 Interest Rate Exposures Specific Risk 0.00 - 0.00 - General Market Risk PHP 0.04 0.267 0.04 0.27 USD - - - - Total Capital Charge 0.04 0.27 0.04 0.27 Adjusted Capital Charge 0.06 0.33 0.6 0.33 Total Risk Weighted Interest Rate Exposures 0.56 3.31 0.56 3.31 Total Risk Weighted Equity Exposures - - - - Foreign Exchange Exposures Total Capital Charge 17.72 7.98 17.80 8.06 Adjusted Capital Charge 22.16 9.98 22.25 10.07 Total Risk Weighted Foreign Exchange Exposures 221.55 99.78 222.53 100.7 Total Risk Weighted Exposures on Options - - - - Total Market Risk-Weighted Assets 222.11 103.09 223.09 104.10

Operational Risk-Weighted Assets

The Bank uses the Basic Indicator Approach in computing its operational risk-weighted assets. Operational risk-weighted assets as of December 2016 were at PHP4.0 billion and PHP4.4 billion, on solo and consolidated bases, respectively. In 2015, operational risk-weighted assets were PHP3.6 billion and PHP4.0 billion, on solo and consolidated bases, respectively.

Robinsons Bank Annual Report 2016 59 risk management

Interest Rate Risk in the Banking Book

The Bank’s lending activities, taking deposits with different maturities, interest rates, and investing in a portfolio of fixed income securities, exposes the Bank to interest rate risk.

In this case, the Bank aims to achieve the optimum level of net interest income (NII) while managing its volatility and susceptibility to changes in interest rates.

Basis of Measurement – The Bank utilizes a repricing gap analysis as a tool for measuring interest rate risk. The analysis is created by distributing the Bank’s inflows/assets and outflows/liabilities into time bands according to each instruments remaining term to next repricing.

Specific assumptions are used to reflect the behavior of interest-sensitive assets and liabilities in the preparation of repricing gap:

Loans – Performing loans are bucketed according to either the maturity date (for accounts paying fixed interest rate) or next repricing date (for accounts paying floating interest rate). No prepayment is assumed. Non-performing loans are placed under “Non-rate sensitive”.

Deposits – Non-maturity deposits such as Current Accounts and Savings Account are placed under “Non-rate sensitive” while Time Deposits and Special Savings Account are bucketed based on their contractual maturity.

The repricing gap per time band is derived by computing the difference between the rate-sensitive assets (RSA) and the rate-sensitive liabilities (RLA) within the time band.

To control interest rate risk arising from repricing gaps, maximum repricing gap and EaR limits are set for time bands up to one year. EAR is a statistical measure derived from the repricing gaps, and calculates the likely impact of changes in interest rates to the NII. Based on December 31, 2016 figures, the increase (decrease) in NII for upward and downward rate shocks of 100 basis points is as follows (in PHP millions):

Earnings at Risk Up 100 BPS Rate shock Down 100 BPS Rate shock Instruments sensitive to local interest rates (102.68) 102.68 Instruments sensitive to foreign interest rates (2.08) 2.08 Total (104.76) 104.76

60 Robinsons Bank Annual Report 2016 2016 Highlights

Credit Risk Management

a. The following are the enhancements implemented comply with BSP Circular 855 Guidelines on Sound Credit Risk Management Practices: • Developed an ICRRS model specifically for commercial loan borrowers with asset size of PHP15.0 million and below to address the requirements that all borrowers shall be rated for risk. • Implemented an internal method of collective impairment for consumer and microfinance loan portfolios based on the historical charge off rate of the portfolio with considerations for any recovery from delinquent and foreclosed accounts. b. Internally developed and implemented scorecards and policy deviation rules for Auto and Housing Loans in the Acacia Loans Origination System (LOS); c. Set-up materiality threshold and limits for Related Party Transactions (RPT).

Operational Risk Management

a. Enhanced Integrated Risk and Control Self-Assessment (RCSA) and Key Risk Indicator (KRI) Methodology b. Enhanced Risk Awareness Program

IT Risk Management

a. IT Governance: IT Risk Management • Enhanced the Information Security / Information Technology Risk Assessment (ISITRA)

b. Information Security • Improved the Information Asset Register (IAR) and conducted a bank-wide rollout of the IAR;

c. IT Operations and Security • Establishment and enhancement of the IT Strategic Plan and IT Disaster Recovery Plan (a subset of the Bank’s Business Continuity Plan); • Formulation of the Cyber Security Roadmap and Framework; • Implementation of the Disaster Recovery Test of the major systems such as Finacle Core, Finacle Treasury, Retail Internet Banking, Postilion and FICO LOS

d. Enhanced the Business Continuity Management (BCM)

Market Risk Management

a. Enhanced the Daily Market Risk Reports b. Established the VaR and MTM calculation of currency derivatives c. Revised the VaR Methodology d. Enhanced the Market Risk Stress Testing

Liquidity Risk Management

a. Enhanced the Liquidity Risk Stress Testing b. Enhanced the ALM Reports

Robinsons Bank Annual Report 2016 61 PRODUCTS AND SERVICES

DEPOSIT PRODUCTS • Peso Savings Account -- Regular Passbook -- ATM Account -- Payroll Account -- Tykecoon Kiddie Account • Peso Checking Account -- Individual Account -- Corporate Account • Peso Term Deposits -- Special Savings Account -- Time Deposit • Other Foreign Currency Savings and Time Deposit Accounts -- US Dollar -- Euro (EUR) -- Japanese Yen (JPY)

CONSUMER LOAN PRODUCTS • Home Loan • Auto Loan • Personal Loan • PLP Secured Loan • Microfinance • Motorcycle Financing • Fleet Financing • Small Business Loan TRUST PRODUCTS • mSME Loan • Unit Investment Trust Fund -- Money Market Fund COMMERCIAL LOAN PRODUCTS -- Balanced Fund • Cash Secured Loan -- Tax-Exempt Retirement Fund • Revolving Credit Line • Escrows • Medium and Long-term Facilities for small, • Retirement Fund Management medium and large industries • Safekeeping • Receivables Financing • Peso/USD Personal Investment Management • Bills Purchased Line for small, Agreement medium and large enterprises • Peso/USD Corporate Investment Management Agreement TREASURY PRODUCTS • Peso Special Savings TRADE SERVICES PRODUCTS • Peso Sovereign Bonds (TBills, FXTNs, RTBs) • Import • Peso Corporate Bonds -- Letter of credit issuance/amendment • US$, Euro and Yen TD (Import/Domestic/Standby LC/Bank Guarantee) • Spot and Forward Foreign Exchange for US$ -- Non-documentary import collection and Third Currencies -- Shipside Bond/Shipping Guaranty Issuance • US$ Sovereign Bonds (ROPs and Sovereign Bonds) -- Trust Receipt Financing • US$ Corporate Bonds -- Duties and Taxes Collection

62 Robinsons Bank Annual Report 2016 • Export • Others - Liquidity Management -- Advising export letter of credit • Electronic Banking Services -- Export bills purchase -- Automated Teller Machine (ATM) -- Export bills for collection -- Corporate Internet Banking (e2Banking) -- Export advances facility -- Retail Internet Banking (RWeb)

CASH MANAGEMENT PRODUCTS OTHER BANKING SERVICES • SME Builder (CheckPro & HRIS) • Telegraphic Transfer • Disbursements • Philippine Domestic Dollar Transfer System -- Payroll Crediting (PDDTS) -- Electronic Crediting • Real Time Gross Settlement (RTGS) -- Outsourced Manager’s Check • Western Union -- Outsourced Corporate Check • OTC Bills Payment -- Domestic and Cross-Border Wire Payments • Foreign Exchange • Collections • Deposit Pick-up Service -- Reference Account Solution • Day and Night Depository Box -- PDC Warehousing • Safety Deposit Box (SDB) -- Merchant Collection (Bills Payment) • ATM Guard -- Check Collection

Robinsons Bank Annual Report 2016 63 64 Robinsons Bank Annual Report 2016 Robinsons Bank Annual Report 2016 65 BRANCH DIRECTORY 127* Branches LUZON 39 Branches | 31% 220* ATMs

METRO MANILA 63 Branches | 49%

VISAYAS 16 Branches | 13%

MINDANAO 9 Branches | 7%

*As of May 31, 2017

66 Robinsons Bank Annual Report 2016 BETTER LIVING METRO MANILA BRANCHES G/F Triple M Commercial Building Doña Soledad Ave. corner Australia Street, Better Living Subd, Parañaque City A. ARNAIZ AVENUE 823-2503 | 823-2510 Unit 7A, Commercial Space, The Beacon Makati A. Arnaiz Avenue corner Chino Roces Avenue, Makati City BGC 34TH STREET 894-1667 | 894-1671 | 894-1758 Shop 1, Panorama Tower, 34th Street corner Lane A, Bonifacio Global City, Taguig City ACACIA LANE – SHAW BOULEVARD 897-3771 | 869-6407 | 869-6406 G/F Padilla Bldg. 333 Shaw Boulevard Brgy. Bagong Silang, Mandaluyong City BGC 7TH AVE 668-2534 | 668-2510 Unit GF 7, Trade and Financial Tower Building 7th Ave. corner Lane Q Road, Bonifacio Global City ALABANG Taguig City G/F Unit 4, El Molito Commercial Complex 887-5649 | 887-5648 | 887-5654 Madrigal Avenue corner Alabang Zapote Road Alabang, Muntinlupa City BGC BURGOS CIRCLE 850-9529 | 772-1565 G/F Unit B, The Cresent Park Residences, 30th Street corner 2nd Avenue, Bonifacio Global City, Taguig City ASUNCION - BINONDO 553-7204 | 553-7205 G/F Don Norberto & Doña Salustiana Ty Building 403 Asuncion Street corner San Nicolas, Binondo, Manila BINONDO 241-2610 | 241-2061 | 241-3044 G/F Pacific Centre Building, 460 Quintin Paredes corner Sabino Padilla Street Binondo, Manila AYALA 242-4430 | 242-4443 6780 GF JAKA 1 Building Ayala Avenue, Makati City BONIFACIO GLOBAL CITY 822-7980 | 822-7965 Ground Level, Market Market Mall Bonifacio Global City, Taguig City BANAWE 856-0693 | 856-0694 Store No. 2, Ll Commercial Building Lot 5 Block 240, Banawe Street, Brgy. Tatalon, Quezon City BRIDGETOWNE – C5 516-8644 | 516-8674 | 411-1834 G/F Tera Tower, Bridgetowne C5 corner Ortigas Avenue Extension, Quezon City 650-4440 | 650-4386

*Branches opened in 2017 **Branches renamed in 2017

Robinsons Bank Annual Report 2016 67 BRANCH DIRECTORY

PASIG C. RAYMUNDO KATIPUNAN G/F Marius Arcadia Building, C. Raymundo Avenue corner G/F Burgundy Place Condominium Pag-asa Street, Pasig City Katipunan Avenue, Loyola Heights, Quezon City 477-5949 | 477-5947 426-2594 | 426-5604

CALOOCAN LAS PIÑAS G/F Dona Lolita Building, 363 Rizal Avenue G/F Units G86-G87, Robinsons Place Las Piñas Extension Kalookan City 345 Alabang-Zapote Road, Talon Uno, Las Piñas City 363-4654 | 363-3758 875-6875 | 875-6872

CHINO ROCES AVENUE EXTENSION LAS PIÑAS – PAMPLONA G/F 2308 Natividad Building G/F South Park Heights, 262 Alabang-Zapote Road Chino Roces Avenue Extension, Makati City Pamplona, Las Piñas City 345-2014 | 403-7057 872-6944 | 872-3016

CUBAO P. TUAZON LEGAZPI STREET - MAKATI G/F & Mezz, Genato Building, 250 P. Tuazon corner G/F Office 1 Man Tower Legazpi Building 15th Avenue, Cubao, Quezon City 153 Legazpi Street, Legaspi Village, Makati City 912-0053 | 912-0046 893-9395 | 818-4263

D. GUEVARA MANDALUYONG MAGINHAWA ST. G/F 50 D. Guevara Street, Mandaluyong City 143 Maginhawa Street, Barangay Teachers Village 531-0855 | 531-1478 Quezon City 283-7276 | 285-5420 DEL MONTE AVENUE G/F EWELL Square, Del Monte Avenue corner MAGNOLIA TOWN CENTER Biak-na-Bato, Quezon City L/G Unit LG026, Robinsons Magnolia Town Center 354-8582 | 354-8583 Aurora Boulevard, Quezon City 961-6040 | 961-6041 DOMESTIC ROAD G/F Cebu Pacific Airline Operations Center Building MAIN OFFICE Domestic Road, Pasay City G/F Galleria Corporate Center EDSA corner 893-5968 | 893-5971 Ortigas Avenue, Quezon City 702-9540 | 702-9568 E. RODRIGUEZ SR. AVE. G/F 1166, E. Rodriguez Sr. Avenue, New Manila, Quezon City MALABON CITY 571-5745 | 571-6754 Level 1-01127, Robinsons Town Mall Malabon 5 Governor Pascual Avenue corner EASTWOOD CITY Crispin Street, Tinajeros, Malabon City G/F IBM Plaza Building, Eastwood City 287-7997 | 287-7758 | 287-3635 E. Rodriguez Jr. Avenue, Bagumbayan, Quezon City 395-1336 | 395-1337 MARIKINA VC Chan Building, No. 8 Bayan-Bayanan Avenue EDSA CALOOCAN Concepcion Uno, Marikina City 524-F, Jun Building, EDSA, Caloocan 948-6890 | 948-7121 921-3600 | 921-3500 MERALCO AVENUE ERMITA G01 & G02, Robins Design Center Level 1, Padre Faura Wing, Robinsons Place Manila 31 Meralco Avenue, Ortigas, Pasig City Ermita, Manila 942-1853 | 706-0454 397-7027 | 536-1140 MOA COMPLEX EVANGELISTA – MAKATI Unit 101, Tower 1 Oceanaire Residences G/F 1861, Evangelista Street, Pio Del Pilar, Makati City Sunrise Drive corner Road 23, Coral Way 815-7946 | 815-7433 MOA Complex, Pasay City 801-0243 | 801-0245 FILINVEST ALABANG Unit 104, Civic Place Condominium, 2301 Civic Drive N.S. AMORANTO SR. AVE. Filinvest Corporate City, Alabang, Muntinlupa City G/F Unit 102 “R” Place Building 659-0493 | 659-0494 255 N.S. Amoranto Sr-Avenue, Quezon City 521-0997 | 521-0936 GIL PUYAT AVE. G/F New Solid Realty Inc. Building NINOY AQUINO AVE. 357 Sen. Gil Puyat Avenue, Makati City G/F Rooms 2 & 3, Sky Freight Building, Sky Freight Center 897-1189 | 897-9440 Ninoy Aquino Avenue, Parañaque City 851-1066 | 851-1025 J.P. RIZAL ST. – MAKATI G/F Mendoza Building 834 J. P. Rizal Street corner NOVALICHES E. Zobel Street, Makati City G/F Expansion Building, Robinsons Novaliches 807-1240 | 807-1236 Quirino Highway, Bgy Pasong Putik, Novaliches, Quezon City 935-3409 | 935-3412

68 Robinsons Bank Annual Report 2016 ORTIGAS GREENHILLS TOMAS MORATO G/F Limketkai Building, Ortigas Avenue corner JSB Building, Tomas Morato Avenue corner Roosevelt Street, Brgy. Greenhills, San Juan City Scout Delgado Street, Quezon City 726.3360 | 725.6390 412-7980 | 412-7981

P. RADA TONDO VALENZUELA 580-584 Padre Rada Street, Tondo, Manila Unit A, South Supermarket, McArthur Highway 243-9004 | 243-8969 Karuhatan, Valenzuela City 293-9629 | 294-0562 PASAY – LIBERTAD G/F Cementina Corporation Building, 160 A. Arnaiz Avenue VISAYAS AVE. (formerly Libertad Street) corner Cuenca Street, Pasay City G/F M & L Building, Visayas Avenue corner 834-7836 | 833-7718 Road 1, Quezon City 374-0113 | 374-0112 PASEO DE ROXAS G/F 111 Paseo de Roxas Building, Legazpi Street corner WEST AVENUE Paseo de Roxas, Legazpi Village, Makati G/F Prosperity West Center Building 804-2622 | 804-2629 | 804-2624 92 A West Avenue, Quezon City 332-3998 | 332-7954 PASIG – METRO EAST L/G Robinsons Metro East, Marcos Highway WHITE PLAINS Barangay De la Paz, Pasig City Francisco Santos Building, 138 Katipunan Avenue 345-2043 | 646-8835 | 249-1173 Barangay Saint Ignatius, Quezon City 438-7260 | 439-2497 | 439-4633 PIONEER CYBERGATE Upper G/F, Robinsons Pioneer Cybergate Center 1 WILSON ST. GREENHILLS Pioneer St., Mandaluyong City G/F Wilson Corporate Center, Wilson Street 395-2749 | 395-2732 Greenhills, San Juan City 239-0803 | 358-4843 REGALADO AVENUE RS137-05, Robinsons Townville Regalado Fairview, Quezon City LUZON BRANCHES 376-6359 | 376-6063 | 376-6091 ANGELES ROOSEVELT AVENUE Level 1, Robinsons Place Angeles, McArthur Highway G/F MCCM Bldg. 311 Roosevelt Avenue Balibago, Angeles City, Pampanga San Francisco Del Monte, Quezon City (045) 892-8052 | (045) 892-8053 376-5672 | 709-8213 ANTIPOLO SAMSON ROAD Unit 169-A, Robinsons Place Antipolo, Sumulong Highway/ G/F Units 3, 4 & 5, Samson Square Building Circumference Avenue, Dela Paz, Antipolo City Samson Road corner Dagohoy Street, Caloocan City 630-4241 | 630-4249 287-3596 | 287-3597 BAGUIO SAN MIGUEL LG/F ECCO Building, 43 Asumption Road corner G/F Octagon Building, San Miguel Avenue Gen. Luna Road, Baguio City Ortigas Center, Pasig City (074) 443-8313 | (074) 443-8314 637-6165 | 636-3074 BALAGTAS SANTOLAN – PASIG G/F 103-1 Balagtas Town Center, McArthur Highway G/F AD Center Square, Amang Rodriguez corner Borol 1st, Balagtas, Bulacan Evangelista Street, Santolan, Pasig City (044) 693-2079 | (044) 693-3741 632-7394 | 632-7396 | 632-7397 BALANGA SEDEÑO SALCEDO VILLAGE G/F Alyss Commercial Building, Don Manuel Banzon Avenue G/F Unit G-104, 88 Corporate Center Doña Francisca, Balanga City, Bataan 141 Sedeño corner Valero Street, Makati City (047) 237-1097 | (047) 237-1099 | (047) 237-1100 551-4194 | 550-2262 BATANGAS CITY SHAW BOULEVARD G/F Odeste Building, P. Burgos G/F 2019 Pelbel Building I, Shaw Boulevard, Pasig City Brgy. 13, Batangas City, Batangas 570-1920 | 631-2210 | 570-2391 (043) 723-9972 | (043) 723-5113

SOLER CABANATUAN G/F Filamco Building, 1220-1222, Soler corner G/F Franklin de Guzman Building, Km. 114 Maharlika Masangkay Streets, Binondo, Manila Highway Zulueta District (Pob.) Cabanatuan City, Nueva Ecija 243-0972 | 243-2099 | 243-2086 (044) 464-7628 | (044) 464-7877

SUCAT CAINTA Units B13 & B17, JAKA Plaza Mall G/F Gusali 888 Building,Ortigas Avenue Dr. A. Santos Avenue, Parañaque City Extension Cainta, Rizal 808-2966 | 808-3279 | 478-7170 631-9856 | 655-4727

Robinsons Bank Annual Report 2016 69 BRANCH DIRECTORY

CALAMBA* MEYCAUAYAN G/F FP Perez Building, National Highway G/F EMCCO Building, McArthur Highway corner Parian Calamba City, Laguna Malhacan Road, Calvario, Meycauayan City, Bulacan (049) 536-0398 | (049) 536-0390 (044) 721-2712 | (044) 721-2713

CALAPAN NAGA G/F Space No. LS-008, Xentro Mall, Lumang Bayan G/F Crown Hotel Building, Peña Francia Avenue, Naga City Calapan City, Oriental Mindoro (054) 811-1600 | (054) 881-0786 (043) 441-0027 | (043) 441-0028 OLONGAPO BRANCH CALASIAO 1370 Rizal Avenue Extension, East Tapinac Level 1-01134, Robinsons Place Pangasinan Olongapo City, Zambales McArthur Highway, Brgy. San Miguel, Calasiao, Pangasinan (047) 222-7521 | (047) 222-7522 (075) 632-0578 | (075) 517-3202 PALAWAN DAGUPAN Unit 220-222, 2/F Robinsons Place Palawan Mall Guanzon Building, Perez Boulevard, Dagupan City Puerto Princesa City, Palawan (075) 522-7444 | (075) 515-2252 (048) 433-0054 | (048) 433-0055

DASMARIÑAS SAN FERNANDO Level 1-01302, Robinsons Place Dasmariñas Level 1, Robinsons Starmills, Candaba Gate E. Aguinaldo Highway corner Governor’s Drive Olongapo-Gapan Road, San Jose, San Fernando City, Pampanga Pala-Pala, Dasmariñas, Cavite (045) 636-3586 | (045) 636-3587 (046) 852-2217 | (046) 852-2216 | (046) 436-3253 SAN PABLO DOLORES – SFDO Estrellado Building, M. Paulino Street, San Pablo City, Laguna Franda Building, McArthur Highway (049) 562-1043 | (049) 562-0711 Barrio Dolores, City of San Fernando, Pampanga (045) 435-8652 | (045) 435-9130 SAN PEDRO Kilometer 31, National Highway GENERAL TRIAS Brgy. San Vicente, San Pedro, Laguna Level 1-155 & 156, Robinsons Place General Trias Mall 520-1869 | 520-1991 Antero Soriano, EPZZ-Bacao Diversion Road, Brgy. Tejero General Trias, Cavite SANTIAGO (046) 437-2592 | (046) 432-2072 Level 1-01103, Robinsons Place Santiago Barangay Mabini, Santiago City, Isabela ILOCOS (078) 323-0243 | (078) 323-0890 | (078) 323-0887 2nd Floor Space No. 212-213, Robinsons Ilocos Norte Valdez Center, Brgy. 1, San Nicolas, Ilocos Norte STA. ROSA (077) 781-2595 | (077) 781-2794 Level 1, Robinsons Sta. Rosa Market Old National Highway, Bo-Tagapo, Sta. Rosa City, Laguna IMUS (049) 837-1693 | (049) 520-8527 G/F Robinsons Place Imus, Emilio Aguinaldo Highway Imus, Cavite City STA. ROSA ESTATES 2 (046) 875-2331 | (046) 875-2333 Sta. Rosa Estates 2, Sta. Rosa, Tagaytay Road Sta. Rosa City, Laguna LEGAZPI CITY (049) 544-4482 | (049) 544-4039 G/F Yuzon Commercial Building, Quezon Avenue Legazpi City, Albay STO. TOMAS (052) 481-3585 | (052) 481-0802 | (052) 481-3235 GF Unit 3, Sierra Makiling Commercial Complex Maharlika Highway, Brgy. San Antonio, Sto. Tomas, Batangas LIPA (043) 406-7273 | (043) 406-4275 G/F Robinsons Place Lipa, Expansion Wing J.P. Laurel Highway, Mataas na Lupa, Lipa City, Batangas TAGAYTAY (043) 756-2240 | (043) 312-2057 Level 2-00210, Summit Ridge, General Aguinaldo Highway National Road, Brgy. Maharlika, Tagaytay City, Cavite LUCENA (046) 860-2916 | (046) 860-2917 G/F AZDEMARK Building, 11 Quezon Avenue, Lucena City (042) 322-0082 | (042) 322-0083 TAYTAY Red Ribbon Uptown Building, Manila East Road LUISITA TARLAC Barangay San Juan, Taytay, Rizal Unit 102, Robinsons Luisita, McArthur Highway 345-2071 | 345-2061 San Miguel, Tarlac City (045) 985-2001 | (045) 985-2002 TUGUEGARAO G/F Lui Building, Bonifacio Street Centro 04 MALOLOS Tuguegarao City, Cagayan Valley Level 1-01123, Robinsons Place Malolos, McArthur Highway (078) 375-0722 | (078) 375-0721 | (078) 396-0896 Barangay Sumapang Matanda, Malolos, Bulacan (044) 796-1636 | (044) 796-1637 URDANETA G/F S. Plaza Building, McArthur Highway Poblacion, Urdaneta City, Pangasinan (075) 568-1290 | (075) 568-1292

70 Robinsons Bank Annual Report 2016 BACOOR* PASSI Units 1 & 2, Apollo Mart Bldg., #369 Gen. Aguinaldo Highway G/F Unit G5-G6, Gaisano Capital Passi, Talaba 4, Bacoor, Cavite Simeon Aguilar Street, Passi, Iloilo (046) 416-1478 | (046) 416-6145 | (046) 416-1549 (033) 536-7041 | (033) 536-7042

BALAYAN* ROXAS G/F Stalls 2, 3 & 4, Balayan Public Market Level 1-1133B, Robinsons Place Roxas, Pueblo de Panay Plaza Mabini Street, Balayan, Batangas Barangay Lawa-an, Roxas City, Capiz (043) 774-7660 | (043) 774-7664 | (043) 774-7662 (036) 651-0023 | (036) 651-0144 | (036) 651-0188

TACLOBAN VISAYAS BRANCHES Level 1-00103 Robinsons Place Tacloban National Highway Tabuan, Marasbaras, Tacloban City, Leyte ANTIQUE (053) 327-5881 | (053) 327-5880 | (053) 327-5884 Level 1-116, 117 & 118, Robinsons Place Antique Brgy. Maybato, San Jose de Buenavista, Antique TAGBILARAN (036) 641-0022 | (036) 641-0021 | (036) 641-0023 G/F Castelcelo Building 1, C. Gallares Street corner J. S. Torralba Street, Poblacion II, Tagbilaran City, Bohol BACOLOD (038) 411-1267 | (038) 411-1268 | (038) 411-1269 Space No. 2 Central City Walk, Robinsons Place Bacolod Brgy. Mandalagan, Bacolod City, Negros Occidental (034) 441-2372 | (034) 441-2494 MINDAnao branches BAIS BUTUAN Stall No. 1, Bais Commercial Center, Marina Building, Level 1-01160, Robinsons Place Butuan Aguinaldo St., National Highway, Bais City, Negros Oriental Km. 3 J.C Aquino Avenue, Brgy Libertad, Butuan City (035) 402-3026 | (035) 402-3028 (085) 342-5415 | (085) 342-6858

BAYAWAN CAGAYAN DE ORO Shop 3, Bollos Street corner National Highway Level 1, Robinsons Supercenter, Rosario Street Brgy. Poblacion, Bayawan City, Negros Oriental Lim Ket Kai Drive, Lapasan, Cagayan De Oro City (035) 522-8415 | (035) 522-8416 | (035) 522-8417 (088) 857-4168

CEBU, GARCIA – LLORENTE** CDO – DIVISORIA G/F Robinsons Cybergate, Don Gil Garcia corner G/F Palaez Commercial Arcade 1 corner J. Llorente St., Capitol Site, Cebu City Tiano Bros. & Cruz Taal Streets Divisoria, Cagayan De Oro City (032) 236-0271 | (032) 238-6304 (088) 323-4261 | (088) 323-4262 | (088) 323-4263

CEBU GALLERIA DAVAO B1 Robinsons Galleria Cebu, Gen. Maxilom Extension Door 1 & 2, Edward V. A. Lim Building North Reclamation Area, Cebu City Sta. Ana Ave, Davao City (032) 231-4942 | (032) 231-4944 | (032) 231-4946 (082) 227-8054 | (082) 226-3565

CEBU MANDAUE DAVAO CYBERGATE G/F Catiaoking Bldg., North Road, Tabok Level 1 Unit 109, Robinsons Cybergate Davao Mandaue City, Cebu J.P Laurel Ave, Davao City (032) 346-6452 | (032) 346-6970 (082) 305-4990 | (082) 305-3875

CEBU OSMEÑA DAVAO MONTEVERDE* 2nd Level, Robinsons Place Cebu HAW Building, T. Monteverde Avenue, Davao City Fuente Osmeña Avenue, Cebu City (082) 225-0553 | (082) 297-6137 | (082) 225-0538 (032) 253-1370 | (032) 253-8857 GENERAL SANTOS DUMAGUETE G/F Robinsons Place, Natividad Street corner Stall AF 25-27, Robinsons Dumaguete J. Catolico Avenue, General Santos City Dumaguete South Road corner (083) 301-3579 | (083) 301-8623 Perdices Street, Dumaguete City (035) 421-1748 | (035) 421-0740 OZAMIS G/F Ozamis Insular Life Building, Don Anselmo ILOILO Bernard Avenue corner Angel Medina Ave. Ozamiz City Unit 189-190, G/F Robinsons Place Iloilo corner Misamis Occidental Mabini-Del Leon Street, Iloilo City, Iloilo (088) 564-0549 | (088) 564-0551 (033) 336-9625 | (033) 336-9637 TAGUM JARO Level 1 Unit 167, Robinsons Place Tagum Level 1 Unit G. 17B, Robinsons Place Jaro National Highway, Brgy. Visayan Village, Tagum E. Lopez St., Brgy. San Vicente, Iloilo Davao del Norte (033) 320-2705 | (033) 320-2701 | (033) 320-2704 (084) 218-8030 | (084) 218-8031 | (084) 218-8028

KABANKALAN G/F NZ Business Center (NZBC) Building, JY Perez Highway Kabankalan City, Negros Occidental (034) 471-0052 | (034) 471-0053

Robinsons Bank Annual Report 2016 71 TABLE OF ORGANIZATION

Related Party Corporate Risk IT Steering Transactions Governance Management Committee Committee Committee Committee

Compliance Enterprise Risk Group Management Group

Security Department

Lending Segment Business Development Segment

Account Account Account Account Consumer Community Credit Remedial Retail Cards Management Management Management Management Finance Banking Group Management Banking Business Group 1 Group 2 Group 3 Group 4 Group Group and Credit Group Group Policy Group

**Chief Compliance Officer, Chief Risk Officer, Chief IT Officer, Human Resource Management Group Head, and Chief Security Officer have oversight functions in Legazpi Savings Bank

72 Robinsons Bank Annual Report 2016 BOARD OF DIRECTORS

EXCOM CORSEC Trust Audit Committee Committee

CHAIRMAN

Trust Group Audit Group

Various Management Committees* PRESIDENT/CEO

Legazpi Savings Bank**

Corporate Planning Department

Operations, Control, and Governance Segment

Trade Services Department Admin. and Purchasing Dept.

Transaction Marketing Treasury Human Information Legal Controllership Operations Loans and Banking Group Group Resource Technology Services Group Group Discounts Group Management Group Group Group Group

*MANCOM, ALCO, CRECOM, AML, MARCOM, PERCOM, CEC, CCC, Bid Committee, Acquired Assets Disposal, ICAAP Committee, Operations Committee

Robinsons Bank Annual Report 2016 73 LIST OF OFFICERS

CHAIRPERSON Gonzalvo, Janette C. Head, Credit Group Gokongwei, Lance Y. Marcelo, Rosario C. PRESIDENT AND CHIEF EXECUTIVE OFFICER Head, Account Management Group 2

Sarte, Elfren Antonio S. Meniado, Romel D. Chief Compliance Officer and Head, Compliance Group EXECUTIVE VICE PRESIDENTS Onglengco, Mathew L. Abad, Mykel D. *** Head, Retail Banking Group Metro Manila 1 Area President, Legazpi Savings Bank Sanchez, Maria Teresa P. Evangelista, Angelito V. Head, Domestic Trading Division Chief Operating Officer and Operations, Control and Governance Segment Head Sy, Lynn L. Head, Retail Banking Group Metro Manila 3 Area Lumain, Ma. Regina N. ** Treasurer and Head, Treasury Group Tan, Edward Eli B. Head, Retail Banking Group Sales Division Santos, Eric B. Chief Lending Officer and Lending Segment Head Velasco, Irma D. Concurrent Consumer Finance Group Head Controller and Head, Controllership Group

SENIOR VICE PRESIDENTS Victor, Ma. Ellen A. Head, Account Management Group 3 Abraham, Evie B. Head, Human Resource Management Group Viola, Maire Karabel D. Head, Cards Business Group Costuna, Roel S. ** Corporate Secretary and Head, Legal Services Group VICE PRESIDENTS

Henson, Juanito Andres A. Aquino, Ma. Elizabeth P. Head, Account Management Group 1 Head, Trust and Investment Group

Macalintal, Eric C. Barredo, Manuel Joseph B. Chief IT Officer and Head, Information Technology Group Head, Retail Banking Group Visayas 2 Area

Paps, Salvador D. Benemerito, Paul R. Head, Retail Banking Group Head, Retail Banking Group Cluster 11

Salvador, Agnes Theresa A. Durano, Nerissa S. Head, Transaction Banking Group Head, Organization Design and Talent Acquisition Department

Tua, Exequiel T. Fernando, Eugenio Jr. G. Chief Risk Officer and Head, Enterprise Risk Head, Retail Banking Group Visayas 1 and Mindanao Area Management Group Francisco, Glenn H. * Yee, Andro M. Head, Remedial Management & Credit Policy Group Head, Community Banking Group Imam, Robert B. FIRST VICE PRESIDENTS Head, Retail Banking Group Operations Division

Abasolo, Ramon Eduardo E. Milan, Dominic R. * Head, IT Security and Digital Banking Division Head, Loans and Discounts Group

Bautista, Cynthia C. Miranda, Bessie D. Chief Audit Officer and Head, Internal Audit Group Head, Retail Banking Group Cluster 2

Chua, James D. Orozco, Eduardo E. Head, Operations Group Head, Auto Loans Department

Gaerlan, Alejandro B. Santos, Edward B. Head, FX/FCDU Division Head, Retail Credit Evaluation Division

74 Robinsons Bank Annual Report 2016 Santos, Pia Marie M. Infante, Reynante R. Head, Home Loans Division Head, FX Trading Department (Peso/FCDU)

Tengco, Sareena R. Inocando, Ursula F. ** Head, Retail Banking Group Metro Manila 2 Area Head, Retail Banking Group Business Center- San Miguel

Yap, Jean J. Laxa, Miriam Ruby B. Head, Retail Banking Group Cluster 1 Head, Branches Channel Team

ASSISTANT VICE PRESIDENTS Masangkay, Vincent V. ** Head, IT Security Department Abando, Conrado Jr. M. ** Head, Retail Banking Group Business Center- Magnolia Mendez, Mary Joy C. Head, Trust Marketing Department Acosta, G. Fulton V. Head, Remedial and Special Asset Management Department Mendoza, Jason B. Head, Credit Investigation and Appraisal Department Almario, Rey Noel V. Head, Account Management Group 4 Mendoza, Virgilio D. Head, Total Rewards and HR Services Department Arcigal, Joven S. Head, Dealer Channel Team Monje, Martha Melody D. Head, Specialized Application Support Department Bañares, John I. Head, Head Office Audit Department Montalbo, Ruth P. Head, Retail Banking Group Cluster 7 Casaul, Allan H. Head, Collection & Asset Recovery Department Monterona, Herminigildo Jr. R. Head, Retail Banking Group Business Center- Gil Puyat Chan, Kelly T. * Senior Account Officer, Account Management Group 3 Ong, Marites P. Head, Trade Services Department Ching, Engelbert C. Head, Retail Banking Group Cluster 5 Pangilinan, Leopoldo M. Head, Technical Support and Service Delivery Department Confesor, Luis Miguel R. * Officer, Merchant Acquiring and Management Platero, Rosalie E. Head, Branch / Direct Channel Department Cortez, Adeline C. ** Head, Documentation and Opinion Department and Posadas, Michael Lawrence S. ** Assistant Corporate Secretary Head, Retail Banking Group Cluster 3

Cruz, Reynaldo Jr. S. Quinto, Rodolfo T. Head, Cash Management Services Division Chief Security Officer

Datoc, Agnellus Raymund Jay R. Ramos, Antonina B. ** Head, Consumer Credit Evaluation Division Head, Microfinance Department

De Torres, Dexter P. ** Reyes, Odette G. Head, Network and Infrastructure Department Head, Market & Liquidity Risks Department

Escueta, Dale Daniel C. Rosanes, Annallette M. Head, Cards Marketing & Portfolio Management Department Head, Documentation Department

Estrellado, Cherre S. Villareal, Kareen R. *** Head, SBL, PLP, mSME Department Chief Compliance Officer - Legazpi Savings Bank

Figueroa, Maria Alicia P. Yabut, Galo P. Head, Payments and E-Channels Division Head, Dealership Peso Fixed Income Department

Gabriel, Maria Encarnacion T. Yu, Jocelyn S. Account Officer Head, Cards Operations Department

Go, Rhory F. Zoleta, Ma. Bernadette B. * Head, Corporate Planning Department Head, Cards Customer Experience Management

*New Hire 2017 **Promoted 2017 ***Seconded

Robinsons Bank Annual Report 2016 75 COMMITTEEs REPORTING TO THE BOARD

ENTERPRISE EXEQUIEL T. Risk TUA MANAGEMENT SVP & CHIEF RISK GROUP OFFICER

CYNTHIA C. INTERNAL BAUTISTA AUDIT FVP & CHIEF GROUP AUDIT OFFICER

COMPLIANCE ROMEL D. GROUP MENIADO FVP & CHIEF COMPLIANCE OFFICER

MA. ELIZABETH P. TRUST AND AQUINO INVESTMENTS VP & HEAD GROUP

76 Robinsons Bank Annual Report 2016 LENDING SEGMENT

ACCOUNT JUANITO ANDRES A. MANAGEMENT HENSON GROUP 1 SVP & HEAD

ROSARIO C. ACCOUNT MARCELO MANAGEMENT FVP & HEAD GROUP 2

ACCOUNT ma. ELLEN A. MANAGEMENT VICTOR GROUP 3 FVP & HEAD

REY NOEL V. ACCOUNT ALMARIO MANAGEMENT AVP & HEAD GROUP 4

COMMUNITY ANDRO M. BANKING YEE GROUP svp & head

Robinsons Bank Annual Report 2016 77 LENDING SEGMENT

HOME LOANS PIA MARIE M. DIVISION SANTOS VP & HEAD

EDUARDO E. auto OROZCO loans VP & HEAD department

SBL, PLP, cherre s. MSME estrellado department AVP & head

antonina B. microfinance ramos department AVP & head

78 Robinsons Bank Annual Report 2016 BUSINESS DEVELOPMENT SEGMENT

AGNES THERESA A. TRANSACTION SALVADOR BANKING SVP & HEAD GROUP

CARDs MAIRE KARABEL D. BUSINESS VIOLA GROUP fvp & head

SALVADOR D. RETAIL PAPS BANKING SVP & HEAD GROUP treasury

treasury group MAria TERESA p. domestic SANCHEZ trading fvp & head

alejandro B. treasury group gaerlan fx/fcdu fvp & head

Robinsons Bank Annual Report 2016 79 retail banking group EDWARD ELI B. sales TAN division fvp & head

OPERATIONS ROBERT B. DIVISION IMAM vp & head

MATHEW L. metro manila 1 ONGLENGCO & north luzon FVP & area HEAD

metro manila 2 SAREENA R. TENGCO VP & AREA HEAD

LYNN L. metro manila 3 SY & southern FVP & area HEAD luzon

visayas 2 MANUEL JOSEPH B. BARREDO VP & area head

EUGENIO G. visayas 1 & FERNANDO, JR mindanao vp & area head

80 Robinsons Bank Annual Report 2016 operations, control, and governance

ATTY. ROEL S. legal COSTUNA services SVP & HEAD group CORPORATE SECRETARY

human evie b. resource abraham mANAGEMENT svp & HEAD group

ERIC C. INFORMATION MACALINTAL TECHNOLOGY SVP & CHIEF IT OFFICER GROUP

it security ramon eduardo e. & digital abasolo banking FVP & head division

IRMA D. controllership VELASCO GROUP FVP & CONTROLLER

OPERATIONS JAMES D. GROUP CHUA FVP & HEAD

Robinsons Bank Annual Report 2016 81 operations, control, and governance

JANETTE C. CREDIT GONZALVO GROUP FVP & HEAD

REMEDIAL GLENN H. MANAGEMENT FRANCISCO & CREDIT VP & HEAD POLICY GROUP

DOMINIC R. LOANS AND MILAN DISCOUNTs VP & HEAD GROUP

CORPORATE RHORY F. PLANNING GO DEPARTMENT AVP & HEAD

MARITES P. ONG TRADE AVP & HEAD SERVICES DEPARTMENT

SECURITY col. rodolfo t. DEPARTMENT quinto AVP & HEAD

82 Robinsons Bank Annual Report 2016 SUSTAINING HUMAN CAPITAL GROWTH

Investing in human capital continues to be one of Robinsons Bank’s strategic priorities. The Bank’s capacity building exercise bore fruit as the collective efforts of the Bank’s more than 1,600 human resources helped realize the second phase of the Bank’s five-year initiative Roadmap 2020 – Core Income Growth. The success of this initiative relies relatively on the Bank’s capacity to retain, engage, develop, and attract employees with the skills and experience to help the Bank conquer challenges and optimize opportunities. This section provides transparency on the Bank’s employee programs and how the Bank translates its strategic priorities into action. This report displays the Bank’s accomplishments in 2016 in talent acquisition and development; succession planning; compensation and benefits; and corporate social responsibility.

TALENT ACQUISITION AND DEVELOPMENT

In 2016, Robinsons Bank continued attracting talents with 13 Senior Officers and 33 Business Center Heads joining the Bank. These critical positions were part of the 517 hired talents, meeting almost 90% of the planned manpower. The Bank encouraged open discourse and timely feedback between the subordinates and the superior by providing avenues for monthly meetings; where updates, concerns, and upcoming projects are discussed. These helped in gauging yearly performance appraisals, which are supported by Key Result Areas (KRAs) and are tracked through Balanced Scorecards. Aside from administering performance-based assessments, Robinsons Bank was gearing towards cultivating a competency-based culture that would develop and utilize employee competencies to efficiently meet the Bank’s needs. The Bank conducted a series of competency- based system workshops wherein 168 technical competencies were identified. In addition, the Bank recognized the need for employee development and support programs. Training programs were deployed by the Organization and People Development Department (OPD) to motivate and equip employees with the proper knowledge, skills, and attitude. OPD conducted the Junior Management Training Program (JMTP) and Officers Development Program (ODP) to cultivate future Bank leaders. JMTP, jumpstarts the careers of outstanding and honor graduates from prominent schools, wherein the trainees are exposed to all facets of banking over a span of one year. Seven trainees graduated from JMTP and were assigned in the business units they excelled in. On the other hand, the Officers Development Program (ODP) is a fast-track four-month training program available for staff and supervisors to equip them with management and leadership skills. 19 officers graduated from this program and were promoted to Junior Officer rank. For the year 2016, OPD facilitated a total of 25 internal and 63 external training programs attended by 1,713 RBankers and 114 RBankers respectively. In addition, two e-learning programs had been successfully rolled out: Information Security Awareness and Anti-Money Laundering Act. A total of 1,543 RBankers benefitted from these modules. The Bank utilized employee retention strategies spanning from a wide range of health, wellness, communications, community development, and employee loan programs to cater to RBankers’ various needs and to promote a healthy work-life balance. The Bank set-up a clinic with a resident nurse who organized health and wellness activities, aside from ensuring immediate health-related assistance to employees.

Total Number of Training Hours

EO 14,091 Internal 31,343 RBG 18,649 External 1,343 Total 32,739 Total 32,739

Robinsons Bank Annual Report 2016 83 SUSTAINING HUMAN CAPITAL GROWTH

Total Number of Trained Employees per Rank

877 405 72

Rank and File Junior Officer Senior Officer 1354 Total

SUCCESSION PLANNING The Bank’s management developed tools to continually hone and retain potential leaders, and prepare for inevitable management changes. Advancement planning addresses structural and leadership vulnerabilities with a framework that begins with identifying executive level susceptibilities and middle management critical positions that may affect business performance and may have an impact on operations when left vacant. The leaders of Robinsons Bank are tapped and engaged by HR in the process. The Group Heads and Segment Heads assess their talents and discussed developmental plans with HR in preparing the talents for future leadership roles. Aside from ensuring the sufficiency of talent pool to continue the leadership, advancement planning also addresses opportunities for growth, competency gaps, and proactive strategies to strengthen the Bank’s leadership structure. The familial culture, pay-for-performance environment, and career opportunities are some of the compelling factors for an RBanker to invest long years in the institution until retirement. The leaders who have dedicatedly served the institution brought with them extensive experience, wisdom, and management styles. Advancement planning is also a strategic move to fill-in future vacancy due to retirement. It aims to smoothen the transfer of knowledge and skills to a targeted internal successor. In 2016, the advance planning exercise identified 99 successors from 65 in 2015.

COMPENSATION AND BENEFITS The Robinsons Bank’s employee compensation structure was designed to be at par with the current banking industry rates. Its policy is to pay for performance or meritocracy, highlighted by a competitive salary scale, profit sharing and annual merit increase hinged on employee performance and attainment of the Bank’s key result indicators. The Bank had revised its car plan and housing loan programs by improving maximum loan amount and reducing interest rates. Employees are guaranteed with an annual compensation equivalent to 15 months, inclusive of 13th month pay, mid-year, and Christmas bonuses. On top of regular compensation, variable incentive pay is provided to Business Center Heads and Account Officers to motivate and reward exemplary performance. The variable compensation scheme is based on achievement of defined categories and given to employees based on their contributions to the Bank’s objectives.

Remuneration of Senior Management Personnel (in PHP)

Parent Subsidiary Consolidated 2016 68,537,095 24,308,768 92,845,863 2015 57,538,763 24,440,723 81,979,486

84 Robinsons Bank Annual Report 2016 CORPORATE SOCIAL RESPONSIBILITY SHAPING BETTER COMMUNITIES

In honoring Robinsons Bank’s mission to be a responsive organization to the community, the Bank focused its 2016 Corporate Social Responsibility (CSR) initiative “Robinsons Bank Gives” to giving and reaching out to its social partners and protecting the environment. Almost 300 RBankers nationwide volunteered in the different CSR programs of the Bank. They were grouped according to areas and were tasked with activities depending on the assigned color and corresponding theme. Red group was tasked with promoting awareness and value for good health, Blue group was tasked with concern for the global community and lastly, the Green group was tasked with protecting the environment.

Robinsons Bank Annual Report 2016 85 To instill the importance of education and values to school children, volunteers from Head Office, Metro Manila 1, Metro Manila 2, and Metro Manila 6 organized a reading and feeding program to Grade 3 and 4 pupils from Camarilla Public Elementary School in Quezon City.

CONCERN FOR THE GLOBAL COMMUNITY “It is great relief that we will no longer borrow The Blue group undertook educational and speakers and microphone from our Barangay every community services as a way for showing concern time we conduct a program. Thank you RBankers. to the global community. Head Office and branch Thank you for giving us your time and love,” personnel from Metro Manila Clusters 1, 2, and 6 Principal Rodelio R. Olonan said. read to pupils of Camarilla Public Elementary School, Another group of RBankers from Ilocos Norte, Quezon City. Likewise, the group served food and Santiago, and Tuguegarao distributed relief goods donated loot bags containing snacks, school supplies, to the typhoon struck residents of Brgy. Lario hygiene kit, and books to more than 50 children. Alto, Tuguegarao.

RBankers from Santiago, Ilocos Norte, and Tuguegarao branches distributed relief goods to the residents of Brgy. Lario Alto, Tuguegarao.

Camarilla Elementary School Principal Rodelio R. Olonan with HR Head Evie B. Abraham

86 Robinsons Bank Annual Report 2016 Embracing the strong commitment to protect Mother Earth, North and Central Luzon Clusters planted trees in Clark Air Base Pampanga last November 2016.

PROTECTING THE ENVIRONMENT Kabankalan Branch along with the Barangay The Green group had three tree planting scholars and officials of Sitio Magaso planted activities that took place in different locations. 100 different seedlings at Magaso Falls. Fifty-six employees from the North and Central Another group of employees from the Western Luzon Clusters planted 100 seedlings of macopa, Visayas and Mindanao (VisMin) Cluster left a mahogany, mango, chico, and other fruit trees in the “Green Legacy” in Brgy. Bongol Suage River in Iloilo. Clark Air Base. The volunteers also gladly shared their lunch with the Aeta children in the area.

Employees from Kabankalan Branch planted different seedlings Robinsons Bank West VisMin Cluster called their tree planting at Magaso Falls, Sitio Magaso, Brgy. Oringao, Kabankalan City. activity “Green Legacy”. The tree planting was held at Brgy. Bongol Suage River, Janiuay, Iloilo.

Robinsons Bank Annual Report 2016 87 CORPORATE SOCIAL RESPONSIBILITY

Eastern VisMin Area, through Cebu Branch visited Casa sa Gugma in Cabantan Street, Mabolo Cebu for a feeding program and distribution of supplies.

Head Office employees donated blood through the Blood Letting Activity of the JG Summit in cooperation with the Philippine Red Cross.

AWARENESS AND VALUE FOR GOOD HEALTH Cebu Branch personnel shared a warm afternoon To increase the employee awareness for good with the Casa sa Gugma senior residents. They brought health, various activities were conducted by the food and supplies. Red group. Some personnel from Head Office donated Aside from singing and dancing, the best part of blood through a bloodletting activity in partnership the activity was the warm hugs they shared with the with the Philippine Red Cross. residents of Casa sa Gugma. The South Area had a feeding program at St. Rita The Central Luzon Cluster visited the little angels Orphanage in Sucat, Parañaque. of Hospicio de San Jose in San Miguel, Metro Manila and Tahanang Mapagkalinga.

88 Robinsons Bank Annual Report 2016 STATEMENT OF MANAGEMENT’S RESPONSIBILITY

The management of Robinsons Bank Corporation is responsible for the preparation and fair presentation of the financial statements including the schedules attached therein, for the year endedDecember 31, 2016, in accordance with the prescribed financial reporting framework indicated therein, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to contribute as a going concern, disclosing, as applicable matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is responsible for overseeing the Company’s financial reporting process.

The Board of Directors reviews and approves the financial statements including the schedules attached therein, and submits the same to the stockholders or members.

SyCip Gorres Velayo & Co, the independent auditor appointed by the stockholders, has audited the financial statements of the company in accordance with Philippine Standards on Auditing, and in its report to the stockholders or members, has expressed its opinion on the fairness of presentation upon completion of such audit.

Lance Y. Gokongwei Chairman of the Board

Elfren Antonio S. Sarte President and Chief Executive Officer

Angelito V. Evangelista Executive Vice-President and Chief Operating Officer

Robinsons Bank Annual Report 2016 89 INDEPENDENT AUDITOR’S REPORT

The Board of Directors and Stockholders Robinsons Bank Corporation

Report on the Consolidated and Parent Company Financial Statements

Opinion

We have audited the consolidated financial statements of Robinsons Bank Corporation and its subsidiary (the Group) and the Parent Company financial statements of Robinsons Bank Corporation, which comprise the consolidated and parent company statements of financial position as at December 31, 2016 and 2015, and the consolidated and parent company statements of income, consolidated and parent company statements of comprehensive income, consolidated and parent company statements of changes in equity and consolidated and parent company statements of cash flows for the years then ended, and notes to the consolidated and parent company financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated and parent company financial statements present fairly, in all material respects, the financial position of the Group and the Parent Company as at December 31, 2016 and 2015, and their financial performance and their cash flows for the years then ended in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and Parent Company Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics for Professional Accountants in the Philippines

(Code of Ethics) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated and Parent Company Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated and parent company financial statements in accordance with PFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated and parent company financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and parent company financial statements, management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group and the Parent Company or to cease operations, or has no realistic alternative but to do so.

90 Robinsons Bank Annual Report 2016 Those charged with governance are responsible for overseeing the Group’s and the Parent Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated and Parent Company Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated and parent company financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with PSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and parent company financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated and parent company financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and parent company financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Parent Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated and parent company financial statements, including the disclosures, and whether the consolidated and parent company financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

Robinsons Bank Annual Report 2016 91 INDEPENDENT AUDITOR’S REPORT

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Report on the Supplementary Information Required Under Revenue Regulations 15-2010

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information required under Revenue Regulations 15-2010 in Note 31 to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the responsibility of the management of Robinsons Bank Corporation. The information has been subjected to the auditing procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Aris C. Malantic Partner CPA Certificate No. 90190 SEC Accreditation No. 0326-AR-3 (Group A), May 1, 2015, valid until April 30, 2018 Tax Identification No. 152-884-691 BIR Accreditation No. 08-001998-54-2015, February 27, 2015, valid until February 26, 2018 PTR No. 5908720, January 3, 2017, Makati City

March 22, 2017

92 Robinsons Bank Annual Report 2016 statements of financial position

Consolidated Parent Company December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 January 1, 2015 (As Restated-Notes 2)

ASSETS Cash and Other Cash Items 1,684,403,861 1,702,287,136 1,653,720,370 1,665,564,278 1,501,127,113 Due from Bangko Sentral ng Pilipinas (Note 15) 13,415,517,416 9,922,250,327 12,722,258,187 9,189,740,992 8,805,204,359 Due from Other Banks 4,090,364,784 4,689,841,387 3,995,280,423 4,596,213,199 1,509,908,716 Interbank Loans Receivable/Securities Purchased Under Resale Agreements (Notes 6 and 28) 677,831,467 97,000,000 589,077,515 97,000,000 598,000,000 Financial Assets at Fair Value Through Profit or Loss (Note 7) 2,555,185 5,132,724 2,555,185 5,132,724 1,305,791,077 Available-for-Sale Investments (Notes 7 and 25) 11,743,930,219 8,201,125,329 11,774,130,219 8,230,125,329 7,746,407,389 Held-to-Maturity Investment (Note 7) 3,549,900,604 2,749,295,603 3,334,528,051 2,749,295,603 1,768,603,469 Loans and Receivables (Note 8) 38,897,081,887 27,568,842,486 37,969,349,408 26,686,102,326 21,695,776,380 Investment in a Subsidiary (Note 9) - - 1,204,884,010 782,647,853 811,791,275 Property and Equipment (Note 10) 513,030,557 470,526,900 451,969,911 414,549,520 437,846,674 Investment Properties (Note 11) 285,433,340 180,790,929 129,916,432 94,168,563 93,093,679 Branch Licenses (Note 12) 997,450,182 952,850,182 376,850,182 332,850,182 331,850,182 Goodwill (Note 9) 244,327,006 244,327,006 - - - Deferred Tax Asset - Net (Note 23) 53,435,098 3,325,050 194,482,918 142,537,278 128,708,199 Other Assets (Note 13) 1,456,629,880 871,682,978 1,439,012,183 852,332,706 586,763,651 77,611,891,486 57,659,278,037 75,838,014,994 55,838,260,553 47,320,872,163

LIABILITIES AND EQUITY Liabilities Deposit Liabilities (Notes 15 and 24) Demand 12,428,636,410 9,982,449,774 12,286,356,800 9,822,670,598 8,960,550,167 Savings 37,970,501,792 21,933,799,995 36,800,315,109 20,755,278,771 22,006,003,584 Time 12,895,961,824 11,751,509,324 12,456,975,222 11,297,180,630 8,456,107,023 63,295,100,026 43,667,759,093 61,543,647,131 41,875,129,999 39,422,660,774 Manager’s Checks 404,180,308 289,136,769 404,180,308 289,136,769 278,420,426 Accrued Expenses (Note 17) 420,399,662 442,753,879 412,576,968 433,591,258 432,130,587 Other Liabilities (Note 17) 1,523,995,301 1,270,590,982 1,509,394,398 1,251,365,213 1,421,762,838 65,643,675,297 45,670,240,723 63,869,798,805 43,849,223,239 41,554,974,625 Equity Common stock (Note 19) 12,000,000,000 436,835,000 12,000,000,000 436,835,000 436,835,000 Deposit for stock subscription (Note 19) - 5,900,000,000 - 5,900,000,000 5,202,462,740 Preferred stock (Note 19) - 5,663,165,000 - 5,663,165,000 - Surplus 816,363,435 573,408,796 816,363,435 573,408,796 399,198,980 Surplus reserves (Note 19 and 25) 112,303,137 107,777,298 112,303,137 107,777,298 137,984,625 Remeasurement losses on retirement plan (Note 20) (10,358,609) (26,844,846) (10,358,609) (26,844,846) (33,321,046) Net unrealized gains (losses) on AFS investments (Note 7) (838,255,143) (562,948,094) (838,255,143) (562,948,094) (275,369,283) Cumulative translation adjustments (111,836,631) (102,355,840) (111,836,631) (102,355,840) (101,893,478) 11,968,216,189 11,989,037,314 11,968,216,189 11,989,037,314 5,765,897,538 77,611,891,486 57,659,278,037 75,838,014,994 55,838,260,553 47,320,872,163 See accompanying Notes to Financial Statements.

Robinsons Bank Annual Report 2016 93 statements of income

Consolidated Parent Company Years Ended December 31 2015 2016 2015 2016 (As Restated-Note 2)

INTEREST INCOME ON Loans and receivables (Note 8) 2,328,160,821 2,046,191,943 2,150,763,512 1,875,232,903 Investment securities (Note 7) 527,384,047 471,701,809 521,771,455 471,701,809 Due from Bangko Sentral ng Pilipinas and other banks 136,143,153 136,167,427 122,966,757 117,358,172 Interbank Loans Receivable/Securities 77,736,861 38,851,600 73,782,708 38,851,600 Purchased Under Resale Agreements (Note 6) 3,069,424,882 2,692,912,779 2,869,284,432 2,503,144,484 INTEREST EXPENSE ON Deposit liabilities (Note 15 and 24) 648,863,123 564,025,432 617,621,632 526,236,729 Interbank loans payable - 1,780 - 1,780 648,863,123 564,027,212 617,621,632 526,238,509 NET INTEREST INCOME 2,420,561,759 2,128,885,567 2,251,662,800 1,976,905,975 Service fees and commission income 174,216,102 161,779,718 169,757,655 157,187,582 Service fees and commission expense 57,568,832 51,767,186 55,291,870 50,711,825 NET SERVICE FEE AND COMMISSION INCOME (NOTE 22) 116,647,270 110,012,532 114,465,785 106,475,757 Trading and securities gains - net (Note 7) 158,694,268 77,240,427 158,694,268 77,240,427 Foreign exchange gains - net 101,470,450 87,311,263 101,418,292 87,251,267 Miscellaneous (Note 22) 125,827,748 116,792,227 102,857,017 98,811,908 TOTAL OPERATING INCOME 2,923,201,495 2,520,242,016 2,729,098,162 2,346,685,334 OPERATING EXPENSES Compensation and fringe benefits (Note 20 and 24) 738,073,601 559,049,424 679,455,645 503,338,388 Occupancy and equipment-related costs (Notes 21 and 24) 403,706,888 358,774,674 387,594,381 343,627,573 Depreciation and amortization (Note 10) 302,088,647 256,975,428 283,031,169 237,690,463 Security, messengerial and janitorial 241,970,093 200,561,303 232,262,277 192,082,811 Taxes and licenses (Note 23) 226,923,192 211,863,843 206,686,984 187,563,224 Provision for credit and impairment losses (Note 14) 155,922,043 266,048,342 147,571,357 195,460,767 Insurance 109,356,975 108,792,521 103,090,856 102,240,512 Information technology 70,618,060 40,066,385 70,545,186 39,976,426 Entertainment, amusement, and recreation (Note 23) 63,184,361 51,520,973 62,021,468 50,058,634 Communication 53,677,320 47,044,798 47,420,984 41,025,145 Management and professional fees 10,358,904 11,889,337 8,640,290 10,303,245 Miscellaneous (Note 22) 203,161,489 167,090,120 184,231,308 149,393,386 TOTAL OPERATING EXPENSES 2,579,041,573 2,279,677,148 2,412,551,905 2,052,760,574 INCOME BEFORE SHARE IN NET INCOME 344,159,922 240,564,868 316,546,257 293,924,760 (LOSS) OF A SUBSIDIARY SHARE IN NET INCOME (LOSS) OF A SUBSIDIARY - - 22,386,977 (29,610,905) INCOME BEFORE INCOME TAX 344,159,922 240,564,868 338,933,234 264,313,855 PROVISION FOR INCOME TAX (Note 23) 96,679,444 96,562,379 91,452,756 120,311,366 NET INCOME 247,480,478 144,002,489 247,480,478 144,002,489 - - OTHER COMPREHENSIVE LOSS FOR THE YEAR NET OF TAX Items that may not be reclassified to profit or loss Change in remeasurement losses on retirement plan (Note 20) 16,486,237 6,476,200 16,486,237 6,476,200 Items that may be reclassified to profit or loss Change in net unrealized losses on AFS investments (Note 7) (275,307,049) (287,578,811) (275,307,049) (287,578,811) Translation adjustments (9,480,791) (462,362) (9,480,791) (462,362) (268,301,603) (281,564,973) (268,301,603) (281,564,973) TOTAL COMPREHENSIVE INCOME (LOSS) (20,821,125) (137,562,484) (20,821,125) (137,562,484)

See accompanying Notes to Financial Statements.

94 Robinsons Bank Annual Report 2016 statements of COMPREHENSIVE income

Consolidated Parent Company Years Ended December 31 2016 2015 2016 2015 (As Restated-Note 2) NET INCOME P247,480,478 P144,002,489 P247,480,478 P144,002,489 OTHER COMPREHENSIVE LOSS FOR THE YEAR, NET OF TAX Item that may not be reclassified to profit or loss Change in remeasurement losses on retirement plan (Note 20) 16,486,237 6,476,200 16,486,237 6,476,200 Items that may be reclassified to profit or loss Change in net unrealized losses on AFS investments (Note 7) (275,307,049) (287,578,811) (275,307,049) (287,578,811) Translation adjustments (9,480,791) (462,362) (9,480,791) (462,362) (268,301,603) (281,564,973) (268,301,603) (281,564,973) TOTAL COMPREHENSIVE LOSS (P20,821,125) (P137,562,484) (P20,821,125) (P137,562,484)

See accompanying Notes to Financial Statements.

Robinsons Bank Annual Report 2016 95 Total ------460,702,260 (20,821,125) (137,562,484) 5,900,000,000 5,765,897,538 11,989,037,314 11,989,037,314 11,968,216,189 P P P P - - - - - (462,362) (9,480,791) Translation Translation Cumulative Cumulative (101,893,478) (102,355,840) Adjustments (102,355,840) (111,836,631) P P P P on AFS (Note 7) - - - - - (287,578,811) (275,369,283) (562,948,094) Investments (275,307,049) (562,948,094) (838,255,143) Gains (Losses) Net Unrealized P P P P - - - - - (Note 20) 6,476,200 Losses on 16,486,237 (33,321,046) (26,844,846) (26,844,846) (10,358,609) Retirement Plan Remeasurement P P P P Surplus 925,839 - - - Reserves (Note 19) 3,600,000 2,624,210 3,600,000 137,984,625 107,777,298 (36,431,537) 107,777,298 112,303,137 Consolidated P P P P

(Deficit) Surplus - - (Note 19) (925,839) 36,431,537 (3,600,000) (2,624,210) (3,600,000) 144,002,489 399,198,980 573,408,796 247,480,478 573,408,796 816,363,435 P P P P Deposit ------for Stock (Note 19) Subscription 5,900,000,000 5,900,000,000 5,900,000,000 (5,900,000,000) P P P P

Stock ------(Note 19) Preferred 460,702,260 5,202,462,740 5,663,165,000 5,663,165,000 (5,663,165,000) P P P P

Stock ------(Note 19) Common 436,835,000 436,835,000 436,835,000 5,663,165,000 5,900,000,000 12,000,000,000 P P P P Appropriation for self-insurance (Note 19) for self-insurance Appropriation Appropriation for trust reserves (Note 19) for trust reserves Appropriation Reversal of appropriation Reversal Balance at December 31, 2015 Balance at December 31, Total comprehensive income (loss) for the year comprehensive Total Total comprehensive income (loss) for the year comprehensive Total 2015 1, Balance at January Conversion of preferred stock to common stock (Note 19) to common stock stock of preferred Conversion ( Note 19) Issuance of common stock (Note 19) of self-insurance Appropriation (Note 19) for trust reserves Appropriation 2016 December 31, Balance at Issuance of preferred stock (Note 19) stock Issuance of preferred Deposit for future stock subscription stock for future Deposit Balance at January 1, 2016 1, Balance at January statements of CHANGES IN EQUITY statements

96 Robinsons Bank Annual Report 2016 Total ------80,791,275 51,647,853 460,702,260 (20,821,125) (137,562,484) 5,685,106,263 5,900,000,000 5,765,897,538 11,989,037,314 11,989,037,314 11,937,389,461 11,968,216,189 P P P P - - - - - (462,362) (9,480,791) Translation Translation Cumulative Cumulative (101,893,478) (102,355,840) (101,893,478) Adjustments (102,355,840) (102,355,840) (111,836,631) P P P P on AFS (Note 7) - - - - - (275,369,283) (562,948,094) (287,578,811) Investments (275,369,283) (562,948,094) (275,307,049) (562,948,094) (838,255,143) Gains (Losses) Net Unrealized P P P P 232,361 - - - - - (235,122) (Note 20) 6,476,200 Losses on 16,486,237 (33,085,924) (26,844,846) (33,321,046) (26,844,846) (27,077,207) (10,358,609) Retirement Plan Remeasurement P P P P Surplus 925,839 - - - Reserves (Note 19) 3,600,000 2,624,210 3,600,000 137,984,625 107,777,298 137,984,625 (36,431,537) 107,777,298 107,777,298 112,303,137 Parent Company Parent P P P P (Deficit) Surplus - - (Note 19) (925,839) 36,431,537 81,026,397 (3,600,000) (2,624,210) (3,600,000) 51,415,492 318,172,583 573,408,796 399,198,980 144,002,489 573,408,796 247,480,478 521,993,304 816,363,435 P P P P Deposit ------for Stock (Note 19) Subscription 5,900,000,000 5,900,000,000 5,900,000,000 5,900,000,000 (5,900,000,000) P P P P

Stock ------(Note 19) Preferred 460,702,260 5,202,462,740 5,663,165,000 5,202,462,740 5,663,165,000 5,663,165,000 (5,663,165,000) P P P P

Stock ------(Note 19) Common 436,835,000 436,835,000 436,835,000 436,835,000 436,835,000 5,663,165,000 5,900,000,000 12,000,000,000 P P P P Accounting Standard (PAS) 27 (Note 2) (PAS) Accounting Standard Balance at January 1, 2016, as restated 2016, 1, Balance at January Total comprehensive income (loss) for the year comprehensive Total Effect of adoption of Amended PhilippineEffect of adoption to common stock stock of preferred Conversion (Note 19) Issuance of common stock (Note 19) for self-insurance Appropriation (Note 19) for trust reserves Appropriation 2016 December 31, Balance at 2015 1, Balance at January Effect of adoption of Amended PAS 27 (Note 2) Amended PAS Effect of adoption Reversal of appropriation for self-insurance (Note 19) for self-insurance of appropriation Reversal Appropriation for self-insurance (Note 19) for self-insurance Appropriation Appropriation for trust reserves (Note 19) for trust reserves Appropriation Balance at December 31, 2015 Balance at December 31, Balance at January 1, 2015, as restated 2015, 1, Balance at January Issuance of preferred stock Issuance of preferred Deposit for stock subscription for stock Deposit Balance at January 1, 2016 1, Balance at January Total comprehensive income (loss) for the year comprehensive Total

Robinsons Bank Annual Report 2016 97 statements of cash flows

Consolidated Parent Company Years Ended December 31 2015 2016 2015 2016 (As Restated-Notes 2) CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax 344,159,922 240,564,868 338,933,234 264,313,855 Adjustments for: Depreciation and amortization (Note 10) 302,088,647 256,975,428 283,031,169 237,690,463 Provision for credit and impairment losses (Note 14) 155,922,043 266,048,342 147,571,357 195,460,767 Loss (gain) on sale of available-for-sale investments (Note 7) 146,826,846 (57,821,174) 146,826,846 (57,821,174) Retirement expense (Note 20) 30,146,298 23,033,026 28,570,765 21,507,889 Gain on initial recognition of repossessed chattels (Note 22) (25,017,967) (6,001,755) (25,066,668) (5,995,744) Gain on initial recognition of investment properties (Note 22) (17,303,414) (35,549,709) (12,665,271) (30,698,176) Gain on sale of repossessed chattels (Note 22) 13,778,921 - 13,792,885 - Gain on sale of investment properties (Note 22) (8,148,422) (10,466,376) (3,543,546) (5,936,420) Unrealized loss on fair value of derivative liability (Note 7) 7,447,751 - 7,447,751 - Gain on sale of property and equipment (Note 22) (3,864,811) (680,079) (3,824,515) (680,079) Unrealized gain on fair value of derivative assets (Note 7) (1,322,995) - (1,322,995) - Reclassification of allowance for credit and impairment losses 1,204,958 - 1,204,958 - Unrealized loss on fair value of financial assets at fair value through profit or loss (Note 7) 125,955 9,562,658 125,955 9,562,658 Loss on sale of repossessed chattels (Note 22) - (12,433,552) - (12,283,552) Share in net income (loss) of a subsidiary - - (22,386,977) 29,610,905 Changes in operating assets and liabilities: Decrease (increase) in: Financial assets at fair value through profit or loss 3,774,579 1,291,095,695 3,774,579 1,291,095,695 Loans and receivables (11,763,966,266) (5,304,236,982) (11,639,214,422) (5,263,128,214) Other assets (567,764,559) (212,829,317) (567,727,758) (209,040,013) Increase (decrease) in: Deposit liabilities 19,627,340,933 2,457,084,672 19,668,517,132 2,452,469,225 Manager’s checks 115,043,539 10,716,343 115,043,539 10,716,343 Accrued expenses 1,413,008 (7,673,188) (21,014,290) 1,460,671 Other liabilities 244,466,663 (182,961,834) 271,354,008 (194,133,445) Net cash generated from operations 8,606,351,629 (1,275,572,934) 8,729,427,736 (1,265,828,346) Income taxes paid (195,424,104) (198,772,460) (187,824,093) (194,244,529) Contributions paid on retirement plan (25,293,666) - (25,293,666) - Net cash provided by operating activities 8,385,633,859 (1,474,345,394) 8,516,309,977 (1,460,072,875)

98 Robinsons Bank Annual Report 2016 Consolidated Parent Company Years Ended December 31 2015 2016 2015 2016 (As Restated-Notes 2) CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of: Placements with other banks - (259,700,610) - (259,700,610) Available-for-sale investments (12,016,173,086) (10,422,285,592) (12,014,973,086) (10,422,285,592) Held-to-maturity investment (Note 7) (825,605,001) (1,115,692,134) (610,232,448) (1,115,692,134) Investment in Subsidiary (Note 9) - - (400,000,000) - Property and equipment (Notes 10 and 28) (209,213,066) (171,718,782) (187,931,105) (154,534,468) Branch licenses (Note 12) (44,600,000) (1,000,000) (44,000,000) (1,000,000) Software costs (Note 13) (26,193,192) (9,779,795) (24,795,432) (2,444,000) Proceeds from sale of: Available-for-sale investments 8,010,258,301 9,589,810,015 8,010,258,301 9,589,810,015 Property and equipment 5,926,745 6,301,486 5,761,451 6,301,486 Investment properties 32,453,351 16,563,652 17,228,000 11,588,473 Repossessed chattels 88,955,558 68,517,478 88,897,159 68,367,478 Proceeds from maturity of: Placements with Bangko Sentral ng Pilipinas 1,000,000 1,000,000 1,000,000 1,000,000 Placements with other banks (Note 28) 259,700,610 259,700,610 Available-for-sale investments 39,776,000 119,000,000 39,776,000 119,000,000 Held-to-maturity investment (Note 7) 25,000,000 135,000,000 25,000,000 135,000,000 Net cash used in investing activities (4,658,713,780) (2,043,984,282) (4,834,310,550) (2,024,589,352) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from deposit for future stock subscription (Note 19) - 5,900,000,000 - 5,900,000,000 Issuance of common stock (Note 19) - 460,702,260 - 460,702,260 Net cash provided by financing activities - 6,360,702,260 - 6,360,702,260

EFFECTS OF FOREIGN EXCHANGE RATE CHANGES (9,480,791) (462,362) (9,480,791) (462,362) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,717,439,288 2,841,910,222 3,672,518,636 2,875,577,671 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR Cash and other cash items 1,702,287,136 1,576,260,066 1,665,564,278 1,501,127,113 Due from Bangko Sentral ng Pilipinas 9,922,250,327 9,494,853,206 9,189,740,992 8,805,204,359 Due from other banks (Note 28) 4,430,140,777 1,641,654,746 4,336,512,589 1,509,908,716 Securities Purchased Under Resale Agreements (Note 28) - 500,000,000 - 500,000,000 16,054,678,240 13,212,768,018 15,191,817,859 12,316,240,188 CASH AND CASH EQUIVALENTS AT END OF YEAR Cash and other cash items 1,684,403,861 1,702,287,136 1,653,720,370 1,665,564,278 Due from Bangko Sentral ng Pilipinas 13,415,517,416 9,922,250,327 12,722,258,187 9,189,740,992 Due from other banks (Note 28) 4,090,364,784 4,430,140,777 3,995,280,423 4,336,512,589 Securities Purchased Under Resale Agreements (Note 6) 581,831,467 - 493,077,515 - 19,772,117,528 16,054,678,240 18,864,336,495 15,191,817,859

OPERATIONAL CASH FLOWS FROM INTEREST Interest received 2,974,464,676 2,629,678,424 2,788,093,052 2,448,295,736 Interest paid 611,710,788 584,371,226 580,745,810 546,459,375

See accompanying Notes to Financial Statements.

Robinsons Bank Annual Report 2016 99 ROBINSONS BANK CORPORATION AND SUBSIDIARY NOTESNOTES TOTO FINANCIAL financial STATEMENTS STATEMENTS

1. Corporate Information

Robinsons Bank Corporation (the Parent Company or the Bank) was domiciled and incorporated in the Philippines and registered with the Philippine Securities and Exchange Commission (SEC) on April 28, 1966 and acquired its license from Bangko Sentral ng Pilipinas (BSP) to operate as a commercial bank on March 1, 2002. On March 21, 2013, the SEC granted the license extending the Bank’s corporate life for another fifty (50) years.

The registered address and principal place of business of the Parent Company is at 17th Floor, Galleria Corporate Center, EDSA corner Ortigas Avenue, Quezon City.

The Parent Company is 60.00% and 40.00% owned by JG Summit Capital Services Corp. (JGSCSC) and Robinsons Retail Holdings, Inc. (RRHI), respectively. The ultimate parent company of the Bank is JG Summit Holdings, Inc.

In December 2012, the Parent Company acquired 100.00% controlling interest in Legazpi Savings Bank, Inc. (LSB) (see Note 9).

LSB was incorporated and registered with the SEC on May 8, 1976 and acquired license from the BSP to operate as a thrift bank. LSB’s registered address and principal place of business is at Rizal Street, Barangay Sagpon, Albay, Legazpi City.

The Parent Company and its subsidiary (the Group) is engaged in commercial and thrift banking, respectively, whose principal activities include deposit-taking, lending, treasury, foreign exchange dealing and fund transfers or remittance servicing.

2. Summary of Significant Accounting Policies

Basis of Preparation The accompanying financial statements of the Group and of the Parent Company have been prepared on a historical cost basis except for financial assets at fair value through profit or loss (FVPL) and available-for-sale (AFS) investments which are measured at fair value.

The financial statements of the Parent Company reflect the accounts of the Regular Banking Unit (RBU) and the Foreign Currency Deposit Unit (FCDU). The functional currency of RBU and FCDU is Philippine Peso (PHP) and United States dollar (USD), respectively. For financial reporting purposes, FCDU accounts and foreign currency-denominated accounts in the RBU are translated into their equivalents in PHP (see accounting policy on Foreign Currency Translation). The financial statements individually prepared for these units are combined and inter-unit accounts and transactions are eliminated.

The financial statements are presented in PHP, and all amounts are rounded to the nearest peso (P=), except when otherwise indicated.

*SGVFS022572*

100 Robinsons Bank Annual Report 2016 - 2 -

Statement of Compliance The financial statements of the Group and of the Parent Company have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).

Presentation of Financial Statements The Group and the Parent Company present its statements of financial position broadly in the order of liquidity. An analysis regarding recovery or settlement within twelve (12) months after the statement of financial position date (current) and more than twelve (12) months after the statement of financial position date (non-current) is presented in Note 18.

The Bank assesses that it has a currently enforceable right of offset if the right is not contingent on a future event, and is legally enforceable in the normal course of business, event of default, and event of insolvency or bankruptcy of the Bank and all of the counterparties. Income and expense are not offset in the statement of income unless required or permitted by any accounting standard or interpretation, and as specifically disclosed in the accounting policies of the Group and of the Parent Company. This is not generally the case with master-netting agreements, where the related assets and liabilities are presented gross in the statement of financial position.

Basis of Consolidation The consolidated financial statements include the financial statements of the Parent Company and of its subsidiary and are prepared for the same reporting period as the subsidiary, using consistent accounting policies.

All intra-group balances, transactions, income and expenses and profit and losses resulting from intra-group transactions are eliminated in full in the consolidation.

A subsidiary is fully consolidated from the date on which control is transferred to the Parent Company. Control is achieved where the Parent Company is exposed, or has the rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of a subsidiary ceases when control is transferred out of the Parent Company. The results of a subsidiary acquired or disposed of during the year are included in the consolidated statement of income from the date of acquisition or up to the date of disposal, as appropriate.

A change in the Parent Company’s ownership interest in a subsidiary, without a loss of control, is accounted for as an equity transaction. Any difference between the amount by which the non- controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Parent Company.

When a change in ownership interest in a subsidiary occurs which results in a loss of control over the subsidiary, the Parent Company: ∂ derecognizes the related assets (including goodwill) and liabilities of the subsidiary; ∂ derecognizes the carrying amount of any non-controlling interests; ∂ derecognizes the related other comprehensive income (OCI) recorded in equity and recycles the same to statement of income or surplus; ∂ recognizes the fair value of the consideration received; ∂ recognizes the fair value of any investment retained; and ∂ recognizes any surplus or deficit in statement of income.

*SGVFS022572*Robinsons Bank Annual Report 2016 101 NOTES TO financial STATEMENTS- 3 -

Changes in Accounting Policies and Disclosures The Group applied, for the first time, the following applicable new and revised accounting standards. Unless otherwise indicated, these new and revised accounting standards have no impact to the Group. Except for these standards and amended PFRS which were adopted as of January 1, 2016, the accounting policies adopted are consistent with those of the previous financial year.

Amendments to Philippine Accounting Standards (PAS) 1, Presentation of Financial Statements, Disclosure Initiative The amendments are intended to assist entities in applying judgment when meeting the presentation and disclosure requirements in PFRSs. They clarify the following: • That entities shall not reduce the understandability of their financial statements by either obscuring material information with immaterial information; or aggregating material items that have different natures or functions; • That specific line items in the statement of income and OCI and the statement of financial position may be disaggregated; • That entities have flexibility as to the order in which they present the notes to financial statements; and • That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.

Amendments to PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets, Clarification of Acceptable Methods of Depreciation and Amortization The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue- based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets.

These amendments are applied prospectively and do not have any impact to the Group, given that the Group has not used a revenue-based method to depreciate or amortize its property, plant and equipment and intangible assets.

Amendment to PAS 27, Separate Financial Statements, Equity Method in Separate Financial Statements In 2016, the Parent Company adopted the amendments to PAS 27 following the guidelines provided by the BSP. The amendments allow entities to use the equity method to account for investment in subsidiaries, joint ventures, and associates in their separate financial statements. The Parent Company elected to use the equity method in its separate financial statements. These amendments do not have any impact on the Group’s consolidated financial statements.

102 Robinsons Bank Annual Report 2016 *SGVFS022572* - 4 -

Additional statement of financial position as at January 1, 2015 is presented in the separate financial statements due to retrospective application of the change in accounting policy. The effects of retrospective restatement of items in the financial statements are detailed below:

December 31, 2015 As previously Effect of reported restatement As restated Statement of Financial Position Asset Investment in a subsidiary P=731,000,000 P=51,647,853 P=782,647,853 Equity Surplus 521,993,304 51,415,492 573,408,796 Remeasurement gain on retirement plan (27,077,207) 232,361 (26,844,846)

December 31, 2015 As previously Effect of reported restatement As restated Statement of Comprehensive Income Share in net loss of a subsidiary P=– (P=29,610,905) (P=29,610,905) Remeasurement gain on retirement liability 6,008,717 467,483 6,476,200

January 1, 2015 As previously Effect of reported restatement As restated Statement of Financial Position Asset Investment in a subsidiary P=731,000,000 P=80,791,275 P=811,791,275 Equity Surplus 318,172,583 81,026,397 399,198,980 Remeasurement loss on retirement plan (33,085,924) (235,122) (33,321,046)

Annual Improvements to PFRS (2012-2014 cycle) The Annual Improvements to PFRS (2012-2014 cycle) are effective for annual periods beginning on or after January 1, 2016 and did not have a material impact on the Group, unless otherwise stated. They include:

Amendment to PFRS 5, Non-current Assets Held for Sale and Discontinued Operations, Changes in Methods of Disposal The amendment is applied prospectively and clarifies that changing from a disposal through sale to a disposal through distribution to owners and vice-versa should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in PFRS 5. The amendment also clarifies that changing the disposal method does not change the date of classification.

Amendment to PFRS 7, Financial Instruments: Disclosures, Servicing Contracts PFRS 7 requires an entity to provide disclosures for any continuing involvement in a transferred asset that is derecognized in its entirety. The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and arrangement against the guidance in PFRS 7 in order to assess whether the disclosures are required. The amendment is applied such that the assessment of which servicing contracts constitute continuing involvement needs to be done retrospectively. However, comparative disclosures are not required to be provided for any period beginning before the annual period in which the entity first applies the amendments.

*SGVFS022572*Robinsons Bank Annual Report 2016 103 NOTES TO financial STATEMENTS- 5 -

Amendment to PFRS 7 - Applicability of the Amendments to PFRS 7 to Condensed Interim Financial Statements This amendment is applied retrospectively and clarifies that the disclosures on offsetting of financial assets and financial liabilities are not required in the condensed interim financial report unless they provide a significant update to the information reported in the most recent annual report.

Amendment to PAS 19, Employee Benefits, Discount Rate: Regional Market Issue This amendment is applied prospectively and clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used.

Significant Accounting Policies

Fair Value Measurement For measurement and disclosure purposes, the Group determines the fair value of an asset or a liability at initial measurement date or at each statement of financial position date. Fair value is the estimated price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: ∂ In the principal market for the asset or liability; or ∂ In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

If the asset or liability measured at fair value has a bid and ask price, the price within the bid-ask spread that is the most representative of fair value in the circumstances shall be used to measure fair value, regardless of where the input is categorized within the fair value hierarchy.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level of input that is significant to the fair value measurement as a whole:

∂ Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities; ∂ Level 2 – Valuation techniques for which the lowest level of input that is significant to the fair value measurement is directly or indirectly observable ∂ Level 3 – Valuation techniques for which the lowest level input that is significant to the measurement is unobservable.

104 Robinsons Bank Annual Report 2016 *SGVFS022572* - 6 -

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

Foreign Currency Translation Transactions and balances The books of accounts of the RBU are maintained in PHP, while those of the FCDU are maintained in USD.

For financial reporting purposes, FCDU accounts and the foreign currency-denominated monetary assets and liabilities in the RBU are translated into their PHP equivalents based on the Philippine Dealing System (PDS) closing rate prevailing at the statement of financial position date and for, foreign currency-denominated income and expenses based on the spot exchange rate at the date of the transaction. Foreign exchange differences arising from restatements of foreign currency- denominated assets and liabilities in the RBU are credited to or charged against the statement of income under ‘Foreign exchange gain (loss) - net’ in the year in which the rates change. Foreign exchange differences arising on translation of FCDU accounts to peso are taken to OCI under ‘Translation adjustments’.

Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash and other cash items, amounts due from BSP and other banks, interbank loans receivable and Securities Purchased Under Resale Agreements (SPURA) with original maturities of three (3) months or less from dates of placements and that are subject to insignificant risk of changes in value.

Repurchase and Reverse Repurchase Agreements Securities sold under agreements to repurchase at a specified future date (‘repos’) are not derecognized from the statement of financial position. The corresponding cash received, including accrued interest, is recognized in the statement of financial position as ‘Securities sold under repurchase agreements (SSURA)’, reflecting the economic substance of such transaction.

Conversely, securities purchased under agreements to resell at a specified future date (‘reverse repos’) are not recognized in the statement of financial position. The corresponding cash paid, including accrued interest, is recognized in the statement of financial position as SPURA, and is considered a loan to the counterparty.

The difference between the purchase price and resale price is treated as interest income and is accrued over the life of the agreement using the effective interest rate (EIR) method.

Financial Instruments - Initial Recognition and Subsequent Measurement Date of recognition Purchases or sales of financial instruments that require delivery of assets within the time frame established by regulation or convention in the marketplace are recognized on the settlement date. Settlement date accounting refers to (a) recognition of an asset on the day it is received by the Group, and (b) the derecognition of an asset and recognition of any gain or loss on disposal on the day that it is delivered by the Group. Derivatives are recognized on a trade date basis. Deposits, amounts due from banks and customers and loans are recognized when cash is received by the Group or advanced to the borrowers.

*SGVFS022572*Robinsons Bank Annual Report 2016 105 NOTES TO financial STATEMENTS- 7 -

Initial recognition of financial instruments All financial instruments are initially recognized at fair value. Except for financial assets and financial liabilities at FVPL, the initial measurement of financial instruments includes transaction costs. The Group classifies its financial assets in the following categories: financial assets at FVPL, AFS investments, held-to-maturity (HTM) investments, and loans and receivables. Financial liabilities are classified into financial liabilities at FVPL and financial liabilities at amortized cost. The classification depends on the purpose for which the financial instruments were acquired and whether they are quoted in an active market. Management determines the classification of its financial instruments at initial recognition, and where allowed and appropriate, and re-evaluates such designation at every statement of financial position date.

‘Day 1’ difference Where the transaction price in a non-active market is different from the fair value from other observable current market transactions in the same instrument or computed based on valuation technique whose variables include only data from observable markets, the Group recognizes the difference between the transaction price and the fair value (a ‘Day 1’ difference) in the statement of income unless it qualifies for recognition as some other type of asset or liability. In cases where fair value is determined using data which are not observable from the market, the difference between the transaction price and the model value is only recognized in the statement of income when the inputs become observable or when the instrument is derecognized. For each transaction, the Group determines the appropriate method of recognizing the amount of ‘Day 1’ difference.

Derivatives recorded at FVPL The Parent Company is a counterparty to derivative contracts, such as currency forwards and currency swaps. These derivatives are entered into as a service to customers and as a means of reducing or managing their respective foreign exchange exposures, as well as for trading purposes. Such derivative financial instruments are initially recorded at fair value on the date at which the derivative contract is entered into and are subsequently remeasured at fair value. Any gains or losses arising from changes in fair values of derivatives are taken directly to the statement of income and are included in ‘Trading and securities gain - net’. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Financial assets held for trading Financial assets held for trading are recorded in the statement of financial position at fair value. Changes in fair value relating to the held for trading positions are recognized in ‘Trading and securities gains - net’ and interest earned is recorded in ‘Interest income’. Included in this classification are debt securities which have been acquired principally for the purpose of selling and repurchasing in the near term.

AFS investments AFS investments are non-derivative financial assets designated as AFS or which do not qualify to be classified as financial assets at FVPL, HTM investments or loans and receivables. They are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market conditions. They include equity investments, government securities and other debt instruments.

After initial measurement, AFS investments are subsequently measured at fair value. The effective yield component of AFS debt securities, as well as the impact of restatement on foreign currency-denominated AFS debt securities, is reported in the statement of income. The unrealized gains and losses arising from the fair valuation of AFS investments are excluded, net of tax, from reported income and are reported as part of OCI as ‘Net unrealized losses on AFS investments’.

106 Robinsons Bank Annual Report 2016 *SGVFS022572* - 8 -

When an AFS investment is disposed of, the cumulative gain or loss previously recognized in OCI is recognized as ‘Trading and securities gain - net’ in the statement of income. Where the Group holds more than one investment in the same security, these are deemed to be disposed of on a first- in first-out basis. Gains or losses on disposal are determined using average cost method. Interest earned on holding AFS debt investments are reported as ‘Interest income’ using the EIR method. Dividends earned on holding AFS equity investments are recognized in the statement of income as ‘Miscellaneous income’ when the right of the payment has been established. The losses arising from impairment of AFS investments are recognized as ‘Provision for credit and impairment losses’ in the statement of income.

HTM investments HTM investments are quoted non-derivative financial assets with fixed or determinable payments and fixed maturities which the Group’s management has the positive intention and ability to hold to maturity. Where the Group sells other than an insignificant amount of HTM investments before their maturity, the entire category would be tainted and reclassified as AFS investments unless for sales or reclassifications that: ∂ are so close to maturity or the financial asset’s call date (for example, less than three months before maturity) that changes in the market rate of interest would not have a significant effect on the financial asset’s fair value; ∂ occur after the entity has collected substantially all of the financial asset’s original principal through scheduled payments or prepayments; or ∂ are attributable to an isolated event that is beyond the entity’s control, is non-recurring and could not have been reasonably anticipated by the entity.

Once tainted, the Group is not permitted to classify any of its financial assets as HTM investments for the next two fiscal years after the year of reclassification.

After initial measurement, these investments are subsequently measured at amortized cost using the EIR method, less any impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the EIR. Gains and losses are recognized in profit or loss in the statement of income when the HTM investments are derecognized and impaired, as well as through the amortization process. The losses arising from impairment of such investments are recognized in the statement of income under ‘Provision for credit and impairment losses’. The effects of restatement of foreign currency-denominated HTM investments are recognized in profit or loss.

Loans and receivables This category comprises ‘Cash and other cash items’, ‘Due from BSP’, ‘Due from other banks’, ‘Interbank loans receivable/Securities purchased under resale agreements’, ‘Loans and receivables’ and certain items in ‘Other assets’. These are non-derivative financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not designated as AFS investments or financial assets at FVPL.

After initial measurement, loans and receivables are subsequently measured at amortized cost using the EIR method, less allowance for credit losses. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that form an integral part of the EIR. The amortization is included in ‘Interest income’ in the statement of income. The losses arising from impairment are recognized in the profit or loss under ‘Provision for credit and impairment losses’.

Robinsons*SGVFS022572* Bank Annual Report 2016 107 NOTES TO financial STATEMENTS- 9 -

Financial liabilities at amortized cost This category represents issued financial instruments or their components, which are not designated at FVPL and comprises ‘Deposit liabilities’, ‘Manager’s checks’ and certain items under ‘Accrued expenses and other liabilities’ in the statement of financial position, where the substance of the contractual arrangement results in the Group having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares. The components of issued financial instruments that contain both liability and equity elements (‘compound’ financial instruments) are accounted for separately, with the equity component being assigned the residual amount after deducting from the instrument as a whole the amount separately determined as the fair value of the liability component on the date of issue.

After initial measurement, financial liabilities at amortized cost are subsequently measured at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on the issue and debt issuance costs that form an integral part of the EIR.

Offsetting Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. Income and expenses are not offset in the statement of comprehensive income unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Company. This is not generally the case with master netting agreements, thus, the related assets and liabilities are presented gross in the statement of financial position.

Derecognition of Financial Assets and Liabilities Financial asset A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when: ∂ the rights to receive cash flows from the asset have expired; or ∂ the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and ∂ the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control over the asset.

Where the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control over the asset, the Group continues to recognize the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

108 Robinsons Bank Annual Report 2016 *SGVFS022572* - 10 -

Financial liability A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in statement of income.

Impairment of Financial Assets The Group assesses at each statement of financial position date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows of the financial asset or group of financial assets, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortized cost For loans and receivables and HTM investments, the Group first assesses at each statement of financial position date whether objective evidence of impairment exists individually for financial assets that are individually significant. If there is objective evidence that an impairment loss has been incurred, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred), discounted using the financial asset’s original EIR. If a financial asset carried at amortized cost has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR, adjusted for the original credit risk premium. The calculation of the present value of the estimated future cash flows of collateralized financial assets reflects the cash flows that may result from foreclosure, less cost for obtaining and selling the collateral, whether or not foreclosure is probable.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is charged to the statement of income as ‘Provision for credit and impairment losses’. Interest income continues to be recognized based on the original EIR of the asset. Financial assets, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral has been realized. If subsequently, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reduced by adjusting the allowance account. If a future write-off is later recovered, any amounts formerly charged are credited to ‘Provision for credit and impairment losses’ in the profit or loss. If the Group determines that no objective evidence of impairment exists for individually assessed loans and receivables, whether significant or not, it includes the asset in a group of assets with similar credit risk characteristics and collectively assesses for impairment in order to capture losses which the Group believes has been incurred during the reporting period, but has not yet been identified to specific financial assets. Financial assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment for impairment.

*SGVFS022572*Robinsons Bank Annual Report 2016 109 NOTES TO financial STATEMENTS- 11 -

For the purpose of a collective evaluation of impairment, loans and receivables are grouped on the basis of asset type, industry, collateral type, past-due status and other relevant factors. Those groupings reflect credit risk characteristics relevant to the estimation of future cash flows and indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the loans and receivables being evaluated.

Future cash flows in a group of loans and receivables that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets within the same credit risk groupings. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions. Estimates of changes in future cash flows reflect changes in related observable data from year to year (such as changes in unemployment rates, property prices, payment status, or other factors that are indicative of incurred losses in the Bank and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience.

The Group also uses the Net Flow Rate method to determine the credit loss rate of a particular delinquency age bucket based on historical data of flow-through and flow-back of loans across specific delinquency age buckets.

The allowance for credit losses is determined based on the results of the net flow to write-off methodology. Net flow tables are derived from monitoring of monthly peso movements between different stage buckets, from 1-day past due to 180-day past due. The net flow to write-off methodology relies on the last 12 months of net flow tables to establish a percentage (‘net flow rate’) of receivables from customers that are current or in any state of delinquency (i.e., 30, 60, 90, 120, 150 and 180 day past due) as of reporting date that will eventually result in write-off. The gross provision is then computed based on the outstanding balances of the receivables as of statement of financial position date and the net flow rates determined for the current and each delinquency bucket. This gross provision is reduced by the estimated recoveries, which are also based on historical data, to arrive at the required allowance for credit losses.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed.

Any subsequent reversal of an impairment loss is recognized in the statement of income, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.

Restructured loans Where possible, the Group seeks to restructure past due loans rather than take possession of the related collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, any impairment is measured using the original EIR as calculated before the modification of terms and the loan is no longer considered past due.

Management continually reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original EIR.

110 Robinsons Bank Annual Report 2016 *SGVFS022572* - 12 -

AFS investments For equity securities classified as AFS investments, this would include a significant or prolonged decline in the fair value of the investments below its cost. Where there is evidence of impairment, the cumulative loss-measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in OCI is removed from OCI and recognized in the statement of income. Impairment losses on equity securities are not reversed through the statement of income. Increases in fair value after impairment are recognized directly in OCI.

For debt securities classified as AFS investments, impairment is assessed based on the same criteria as financial assets carried at amortized cost. Future interest income from impaired AFS debt securities is based on the reduced carrying amount and is accrued based on the original EIR used to discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded as part of ‘Interest income’ in the statement of income. If subsequently, the fair value of a debt security increased and the increase can be objectively related to an event occurring after the impairment loss was recognized in the statement of income, the impairment loss is reversed through the statement of income.

Property and Equipment Land is stated at cost less any impairment in value. Depreciable property and equipment are carried at cost less accumulated depreciation and amortization, and any impairment in value.

The initial cost of property and equipment consists of its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the property and equipment have been put into operation, such as repairs and maintenance, are normally charged against operations in the year the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of property and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of property and equipment.

Depreciation and amortization is calculated using the straight-line method over the estimated useful life of the depreciable assets. Leasehold improvements are amortized over the shorter of the terms of the covering leases and the estimated useful lives of the improvements.

The estimated useful lives of property and equipment follow:

Building 25 years Transportation equipment 5 years Leasehold improvements 5 years Furniture, fixtures and equipment 3 to 5 years

The useful lives and the depreciation and amortization method are reviewed periodically to ensure that the period and the method of depreciation and amortization are consistent with the expected pattern of economic benefits from the items of property and equipment.

The carrying values of the property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying values may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, an impairment loss is recognized in the statement of income (see accounting policy on Impairment of Non-financial Assets).

*SGVFS022572*Robinsons Bank Annual Report 2016 111 NOTES TO financial STATEMENTS- 13 -

An item of property and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising from derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of income in the year the asset is derecognized.

Investment in a Subsidiary Subsidiary pertains to entity over which the Parent Company has control. When the Parent Company has less than a majority of the voting or similar rights of an investee, the Parent Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

∂ the contra arrangement with the other vote holders of the investee; ∂ rights arising from other contractual arrangements; and ∂ the Parent Company’s voting rights and potential voting rights.

Investment in a subsidiary in the separate financial statements is accounted for using the equity method. Under the equity method, the investment in a subsidiary is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Group and the Parent Company’s share of net assets of the subsidiary since the acquisition date. Goodwill relating to the subsidiary is included in the carrying amount of the investment and is neither amortized nor individually tested for impairment.

The statement of income reflects the Parent Company’s share of the results of operations of the subsidiary. Any change in OCI of the investee is presented as part of the Group and the Parent Company’s OCI. In addition, when there has been a change recognized directly in the equity of the subsidiary, the Parent Company recognizes its share of any changes, when applicable, in the statement of changes in equity.

The aggregate of the Parent Company’s share of profit or loss of a subsidiary is shown on the face of the statement of income under ‘Share in net income (loss) of a subsidiary’ and represents profit or loss after tax and non-controlling interests in the subsidiary.

The financial statements of the subsidiary are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Parent Company determines whether it is necessary to recognize an impairment loss on its investment in a subsidiary. At each statement of financial position date, the Parent Company determines whether there is objective evidence that the investment in a subsidiary is impaired. If there is such evidence, the Parent Company calculates the amount of impairment as the difference between the recoverable amount of the subsidiary and its carrying value, then recognizes the loss in the statement of income.

Upon loss of control over the subsidiary, the Parent Company measures and recognizes any retained investment at its fair value.

As of December 31, 2016 and 2015, the sole and wholly owned subsidiary of the Parent Company is LSB.

112 Robinsons Bank Annual Report 2016 *SGVFS022572* - 14 -

Investment Properties Investment properties are measured initially at cost, including transaction costs. Transaction costs represent nonrefundable taxes such as capital gains tax and documentary stamp tax that are for the account of the Group. An investment property acquired through an exchange transaction is measured at fair value of the asset acquired unless the fair value of such an asset cannot be measured in which case the investment property acquired is measured at the carrying amount of asset given up. Foreclosed properties are classified as ‘Investment properties’ upon: a) entry of judgment in case of judicial foreclosure; b) execution of the Sheriff’s Certificate of Sale in case of extra-judicial foreclosure; or c) notarization of the Deed of Dacion in case of dation in payment (dacion en pago).

The difference between the fair value of the asset acquired and the carrying amount of the asset given up is recognized as ‘Gain on initial recognition of investment properties’ under ‘Miscellaneous income’ in the statement of income.

Subsequent to initial recognition, depreciable investment properties are carried at cost less accumulated depreciation and any impairment in value.

Investment properties are derecognized when they have either been disposed of or when they are permanently withdrawn from use and no future benefit is expected from their disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in the statement of income under ‘Miscellaneous income’ in the year of retirement or disposal.

Expenditures incurred after the investment properties have been put into operations, such as repairs and maintenance costs, are normally charged against income in the year in which the costs are incurred.

Depreciation is calculated on a straight-line basis using the remaining useful lives from the time of acquisition of the investment properties but not to exceed ten (10) years for buildings and condominium units.

Transfers are made to investment properties when, and only when, there is a change in use evidenced by ending of owner occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment properties when, and only when, there is a change in use evidenced by commencement of owner occupation or commencement of development with a view to sale.

For a transfer from investment property to owner-occupied property, the deemed cost of property for subsequent accounting is its fair value at the date of change in use. If the property occupied by the Group as an owner-occupied property becomes an investment property, the Group accounts for such property in compliance with the policy stated under property and equipment up to the date of change in use.

Other Assets - Repossessed Chattels Repossessed chattels represent other properties acquired in settlement of loan receivables comprising mainly of repossessed vehicles. Repossessed chattels are stated at cost less accumulated depreciation and impairment in value. Depreciation is calculated on a straight-line basis using the remaining useful lives of the vehicles from the time of acquisition. The useful lives of repossessed chattels are estimated to be three (3) to five (5) years.

*SGVFS022572*Robinsons Bank Annual Report 2016 113 NOTES TO financial STATEMENTS- 15 -

Business Combinations and Goodwill Business combinations are accounted for using the purchase method of accounting. This involves recognizing identifiable assets (including previously unrecognized intangible assets) and liabilities (including contingent liabilities but excluding future restructuring) of the acquired business at fair value. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. If the cost of acquisition is less than the fair values of the identifiable net assets acquired, the discount on acquisition is recognized directly in the statement of income in the year of acquisition.

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Parent Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually, or more frequently, if event or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated at each of the Parent Company’s cash-generating units (CGUs) or group of CGUs, which are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit to which the goodwill is allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes, and is not larger that an operating segment in accordance with PFRS 8, Operating Segments.

Where goodwill has been allocated to a CGU and part of the operation within the unit is disposed of, the goodwill associated with the operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed of in these circumstances is measured based on the relative values of the disposed operation and the portion of the CGU retained.

When subsidiaries are sold, the difference between the selling price and net assets plus cumulative translation differences and goodwill is recognized in the statement of income.

Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of income in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each statement of financial position date. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and treated as change in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of income consistent with the function of the intangible asset.

114 Robinsons Bank Annual Report 2016 *SGVFS022572* - 16 -

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the CGU level. Such intangibles are not amortized. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

Gains or losses arising from the derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of income when the asset is derecognized.

Branch licenses Branch licenses arise from the acquisition of branches of a local bank by the Parent Company. The Parent Company’s branch licenses have indefinite useful lives and are subject to annual individual impairment testing. These are tested for impairment annually either individually or at the CGU level. Such intangibles are not amortized. The useful life is reviewed annually to determine whether indefinite useful life assessment continues to be supportable. If not, the change in the useful life from indefinite to finite is made on a prospective basis.

Software costs Software costs are carried at cost less accumulated amortization and any impairment loss. Software costs are amortized on a straight-line basis over the estimated useful life which ranges from three (3) to seven (7) years.

Impairment of Non-financial Assets Property and equipment, investment in a subsidiary, investment properties and repossessed chattels At each statement of financial position date, the Group assesses whether there is any indication that its non-financial assets may be impaired. When an indicator of impairment exists or when an annual impairment testing for an asset is required, the Group makes a formal estimate of recoverable amount.

Recoverable amount is the higher of an asset’s (or CGU’s) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is assessed as part of the CGU to which it belongs. Where the carrying amount of an asset (or CGU) exceeds its recoverable amount, the asset (or CGU) is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or CGU).

An impairment loss is charged to operations in the year in which it arises. An assessment is made at each statement of financial position date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset (or CGU) is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation and amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of income unless the asset (or CGU) is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation and

*SGVFS022572*Robinsons Bank Annual Report 2016 115 NOTES TO financial STATEMENTS- 17 -

amortization expense is adjusted in future years to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining life.

Intangible assets Intangible assets with indefinite useful lives are tested for impairment annually at the statement of financial position date either individually or at the CGU level, as appropriate. Intangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired.

Revenue Recognition Revenue is recognized to the extent that it is probable that future economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. The Group concluded that it is acting as a principal in all of its revenue arrangements except for commission income arrangements. The following specific recognition criteria must also be met before revenue is recognized:

Interest income For all financial instruments measured at amortized cost and interest-bearing financial instruments, interest income is recorded at the EIR, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options), includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses.

The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as ‘Interest income’.

Once the recorded value of a financial asset or group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognized using the original EIR applied to the new carrying amount.

Interest income - finance lease The excess of aggregate lease rentals plus the estimated residual value over the cost of the leased investment property constitutes the unearned lease income. Residual values represent estimated proceeds from the disposal of investment property at the time lease is estimated. The unearned lease income is amortized over the term of the lease, commencing on the month the lease is executed using the EIR method.

Unearned lease income ceases to be amortized when the lease contract receivables become past due for more than three months.

Service fees and commission income Fees earned for the provision of services over a period of time are accrued over that period. These fees include investment fund fees, custodian fees, fiduciary fees, portfolio fees, credit-related fees and other service and management fees. Fees on deposit-related accounts are recognized only upon collection or accrued when there is reasonable degree of certainty as to its collection.

Dividend income Dividend income, included in ‘Miscellaneous income’, is recognized when the Group’s right to receive payment is established.

116 Robinsons Bank Annual Report 2016 *SGVFS022572* - 18 -

Trading and securities gain (loss) - net Trading and securities gain (loss) - net represents results arising from disposal of AFS investments and trading activities including all gains and losses from changes in fair value of financial assets at FVPL.

Rental income Rental income arising from leased properties is accounted for on a straight-line basis over the lease terms on ongoing leases and is recorded in the statement of income under ‘Miscellaneous income’.

Income from sale of property and equipment, investment property and repossessed chattels Income from sale of property and equipment, investment property and repossessed chattels is recognized upon completion of the earning process and the collectability of the sales price is reasonably assured.

Other income Other income is recognized when earned and is recorded under ‘Miscellaneous income’ in the statement of income.

Expense Recognition Expenses are recognized when it is probable that decrease in future economic benefits related to the decrease in asset or an increase in liability has occurred and that the decrease in economic benefits can be measured reliably. Expenses that may arise in the course of ordinary regular activities of the Group include, among others, the operating expenses on the Group’s operation.

Operating expenses Operating expenses constitute costs which arise in the normal business operation and are recognized when incurred.

Taxes and licenses This includes all other taxes, local and national, including gross receipts taxes (GRT), documentary stamp taxes, real estate taxes, licenses and permit fees and are recognized when incurred.

Borrowing Cost Borrowing costs are capitalized if they are directly attributable to the acquisition of a qualifying asset. Capitalization of borrowing costs commences when the activities to prepare the qualifying assets are in progress and expenditures and borrowing costs are incurred. Borrowing costs are capitalized until the qualifying assets are substantially ready for their intended use. All other borrowing costs are expensed as incurred.

Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies: a. there is a change in contractual terms, other than a renewal or extension of the arrangement; b. a renewal option is exercised or extension granted, unless that term of the renewal or extension was initially included in the lease term;

*SGVFS022572*Robinsons Bank Annual Report 2016 117 NOTES TO financial STATEMENTS- 19 -

c. there is a change in the determination of whether fulfillment is dependent on a specified asset; or d. there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) above, and at the date of renewal or extension period for scenario (b).

Group as lessee Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Any rental payments are accounted for on a straight-line basis over the lease term and included in ‘Occupancy and equipment-related costs’ in the statement of income.

Group as lessor Finance leases, where the Group transfers substantially all the risks and benefits incidental to ownership of the leased item to the lessee, are included in the statement of financial position under ‘Loans and receivables’ account. A lease receivable is recognized at an amount equal to the net investment in the lease. All income resulting from the receivables is included in ‘Interest income on loans and receivables’ in the statement of income.

Leases where the Group does not transfer substantially all the risks and benefits of ownership of the assets are classified as operating leases. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as the rental income. Contingent rents are recognized as revenue in the year in which they are earned.

Retirement Cost The Group has a non-contributory defined benefit retirement plan. The retirement cost of the Group is actuarially determined using the projected unit credit method. Under this method, the current service cost is the present value of retirement benefits payable in the future with respect to services rendered in the current period.

The net defined benefit liability or asset is the aggregate of the present value of the defined benefit obligation at the end of the reporting period reduced by the fair value of plan assets (if any), adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using the projected unit credit method.

Defined benefit costs comprise the following: ∂ Service cost ∂ Net interest on the net defined benefit liability or asset ∂ Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non- routine settlements are recognized as expense in the statement of income. Past service costs are recognized when plan amendment or curtailment occurs. These amounts are calculated periodically by independent qualified actuaries.

118 Robinsons Bank Annual Report 2016 *SGVFS022572* - 20 -

Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by applying the discount rate based on government bonds to the net defined benefit liability or asset. Net interest on the net defined benefit liability or asset is recognized as expense or income in the statement of income.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized immediately in OCI in the period in which they arise. Remeasurements are not reclassified to profit or loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to the Group. Fair value of plan assets is based on market price information. When no market price is available, the fair value of plan assets is estimated by discounting expected future cash flows using a discount rate that reflects both the risk associated with the plan assets and the maturity or expected disposal date of those assets (or, if they have no maturity, the expected period until the settlement of the related obligations). If the fair value of the plan assets is higher than the present value of the defined benefit obligation, the measurement of the resulting defined benefit asset is limited to the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined benefit obligation is recognized as a separate asset at fair value when and only when reimbursement is virtually certain.

Termination benefit Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment as a result of either an entity’s decision to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept an offer of benefits in exchange for the termination of employment.

A liability and expense for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of those benefits and when the entity recognizes related restructuring costs. Initial recognition and subsequent changes to termination benefits are measured in accordance with the nature of the employee benefit, as either post-employment benefits, short- term employee benefits, or other long-term employee benefits.

Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of assets embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of income, net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as ‘Interest expense’ in the statement of income.

*SGVFS022572*Robinsons Bank Annual Report 2016 119 NOTES TO financial STATEMENTS- 21 -

Contingent Liabilities and Contingent Assets Contingent liabilities are not recognized in the financial statements but are disclosed unless the possibility of an outflow of assets embodying economic benefits is remote. Contingent assets are not recognized but are disclosed in the financial statements when an inflow of economic benefits is probable.

Income Taxes Current tax Current tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the statement of financial position date.

Deferred tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognized for all taxable temporary differences, except: ∂ When the deferred tax liability arises from the initial recognition or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and ∂ In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized, except: ∂ When the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and ∂ In respect of deductible temporary differences associated with investment in subsidiaries, associates and interest in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient future taxable income will be available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each statement of financial position date and are recognized to the extent that it has become probable that future taxable income will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settles, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

120 Robinsons Bank Annual Report 2016 *SGVFS022572* - 22 -

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transactions either in OCI or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying criteria for separate recognition at that date, are recognized subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognized in profit or loss.

Events after the Reporting Period Post year-end events that provide additional information about the Group’s position at the statement of financial position date (adjusting events) are reflected in the consolidated financial statements. Post year-end events that are not adjusting events are disclosed in the notes to the consolidated financial statements when material.

Standards Issued but not yet Effective

Standards and interpretations issued but not yet effective up to the date of issuance of the Group’s financial statements are listed below. This listing consists of standards and interpretations issued, which the Group reasonably expects to be applicable at a future date. The Group intends to adopt these standards when they become effective. Except as otherwise indicated, the Group does not expect the adoption of these new and amended PAS, PFRS and Philippine Interpretations to have significant impact on the consolidated financial statements.

Effective beginning on or after January 1, 2017 Amendment to PFRS 12, Clarification of the Scope of the Standard (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle) The amendments clarify that the disclosure requirements in PFRS 12, other than those relating to summarized financial information, apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale.

The amendments do not have any impact on the Group’s financial position and results of operation. The Group will include the required disclosures in its 2017 financial statements.

Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative The amendments to PAS 7 require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). On initial application of the amendments, entities are not required to provide comparative information for preceding periods. Early application of the amendments is permitted.

Application of amendments will result in additional disclosures in the 2017 financial statements of the Company.

*SGVFS022572*Robinsons Bank Annual Report 2016 121 NOTES TO financial STATEMENTS- 23 -

Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized Losses The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.

Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognized in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact. Early application of the amendments is permitted.

Effective beginning on or after January 1, 2018 PFRS 9, Financial Instruments (2014 or final version) In July 2014, the final version of PFRS 9, Financial Instruments, was issued. PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, Financial Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. PFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

The adoption of PFRS 9 will have an effect on the classification and measurement of the Group’s financial assets and impairment methodology for financial assets, but will have no impact on the classification and measurement of the Group’s financial liabilities. The Group will quantify this effect to present a comprehensive picture of the impact of adoption on the financial position or performance of the Group.

PFRS 15, Revenue from Contracts with Customers PFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. Under PFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in PFRS 15 provide a more structured approach to measuring and recognizing revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under PFRSs. Either a full or modified retrospective application is required for annual periods beginning on or after January 1, 2018. The Group is currently assessing the impact of PFRS 15 and plans to adopt the new standard on the required effective date once adopted locally.

Effective beginning on or after January 1, 2019 PFRS 16, Leases Under the new standard, lessees will no longer classify their leases as either operating or finance leases in accordance with PAS 17, Leases. Rather, lessees will apply the single-asset model. Under this model, lessees will recognize the assets and related liabilities for most leases on their balance sheets, and subsequently, will depreciate the lease assets and recognize interest on the lease liabilities in their profit or loss. Leases with a term of 12 months or less or for which the underlying asset is of low value are exempted from these requirements. The accounting by lessors is substantially unchanged as the new standard carries forward the principles of lessor accounting under PAS 17. Lessors, however, will be required to disclose more information in their financial

122 Robinsons Bank Annual Report 2016 *SGVFS022572* - 24 -

statements, particularly on the risk exposure to residual value. Entities may early adopt PFRS 16 but only if they have also adopted PFRS 15. When adopting PFRS 16, an entity is permitted to use either a full retrospective or a modified retrospective approach, with options to use certain transition reliefs. The Group is currently assessing the impact of adopting PFRS 16.

The following amendments to standards issued by the International Accounting Standards Board were already adopted by the Financial Reporting Standards Council (FRSC) but are still for approval by the Board of Accountancy.

Deferred effectivity Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint venture involves a business as defined in PFRS 3, Business Combinations. Any gain or loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture.

On January 13, 2016, the Financial Reporting Standards Council postponed the original effective date of January 1, 2016 of the said amendments until the International Accounting Standards Board has completed its broader review of the research project on equity accounting that may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and joint ventures.

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate This interpretation covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The SEC and the FRSC have deferred the effectivity of this interpretation.

3. Significant Accounting Judgments and Estimates

The preparation of the Group’s consolidated financial statements requires the management of the Group and the Parent Company to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and the disclosures of contingent assets and contingent liabilities at the statement of financial position date. Future events may occur which can cause the assumptions used in arriving at the estimates to change. The effects of any change in estimates are reflected in the financial statements as they become reasonably determinable.

Judgments and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

*SGVFS022572*Robinsons Bank Annual Report 2016 123 NOTES TO financial STATEMENTS- 25 -

The following are the critical judgments and key assumptions that have a significant risk of material adjustment to the carrying amounts of assets and liabilities within the next financial year:

Judgments a) HTM investments The classification under HTM investments requires significant judgment. In making this judgment, the Group evaluates its intention and ability to hold such investments to maturity. If the Group fails to keep these investments to maturity other than in certain specific circumstances, as discussed in Note 2, it will be required to reclassify the entire portfolio as AFS investments. The investments would therefore be measured at fair value and not at amortized cost.

b) Leases Operating lease Group as lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has determined based on the evaluation of the terms and conditions of the arrangements (i.e., the lease does not transfer the ownership of the asset to the lessee by the end of the lease term, the lessee has no option to purchase the asset at a price that is expected to be sufficiently lower than the fair value at the date the option is exercisable and the lease term is not for the major part of the asset’s economic life), that it retains all the significant risks and rewards of ownership of these properties which are leased and so accounts for the contracts as operating leases.

Group as lessee The Group has entered into commercial property leases for its head office and branch premises. The Group has determined, based on the evaluation of the terms and conditions of the lease agreement (i.e., the lease does not transfer ownership of the asset to the lessee by the end of the lease term and lease term is not for the major part of the asset’s economic life), that the lessor retains all the significant risks and rewards of ownership of the properties which are leased out on operating leases.

c) Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, these are determined using internal valuation techniques using generally accepted market valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values.

These judgments may include consideration of liquidity and model inputs such as correlation and volatility for longer dated derivatives (see Note 5).

d) Financial assets not quoted in an active market The Group classifies financial assets by evaluating, among others, whether the asset is quoted or not in an active market. Included in the evaluation on whether a financial asset is quoted in an active market is the determination on whether quoted prices are readily and regularly available, and whether those prices represent actual and regularly occurring market transactions on an arm’s length basis.

124 Robinsons Bank Annual Report 2016 *SGVFS022572* - 26 - e) Commitments and Contingencies The Group is currently involved in legal proceedings. The estimate of the probable cost for the resolution of claims has been developed in consultation with the aid of the outside legal counsel handling the Group’s defense in this matter and is based upon an analysis of potential results. Management does not believe that the outcome of this matter will affect the results of operations.

It is probable, however, that future results of operations could be materially affected by changes in the estimates or in the effectiveness of the strategies relating to these proceedings (see Note 26). f) Functional currency PAS 21, The Effects of Changes in Foreign Exchange Rates, requires management to use its judgment to determine the entity’s functional currency such that it most faithfully represents the economic effects of the underlying transactions, events and conditions that are relevant to the entity. In making this judgment, the Group considers the following: ∂ the currency that mainly influences sales prices for financial instruments and services (this will often be the currency in which sales prices for its financial instruments and services are denominated and settled); ∂ the currency in which funds from financing activities are generated; and ∂ the currency in which receipts from operating activities are usually retained.

Estimates a) Credit losses on loans and receivables The Group reviews its loans and receivables at each statement of financial position date to assess whether a credit loss should be recorded in the statement of income. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

The carrying values of and allowance for credit losses on loans and receivables of the Group and of the Parent Company as of December 31, 2016 and 2015 are disclosed in Note 8. b) Impairment of AFS debt securities The Group reviews its debt securities classified as AFS investments at each statement of financial position date to assess whether they are impaired. This requires similar judgment applied to the individual assessment of loans and receivables.

The carrying values of AFS debt securities of the Group and of the Parent Company as of December 31, 2016 and 2015 are disclosed in Note 7. c) Impairment of AFS equity securities The Group treats AFS equity securities as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires judgment. The Group treats ‘significant’ generally as 20.00% or more and ‘prolonged’ greater than twelve (12) months. In addition, the Group evaluates other factors, including normal volatility in share prices for quoted equities and the future cash flows and discount factors for unquoted equity investments.

*SGVFS022572*Robinsons Bank Annual Report 2016 125 NOTES TO financial STATEMENTS- 27 -

The carrying values of AFS equity securities of the Group and of the Parent Company as of December 31, 2016 and 2015 are disclosed in Note 7.

d) Valuation of unquoted equity securities The Group’s investments in equity securities that do not have quoted market price in an active market and whose fair value cannot be reliably measured are carried at cost less impairment losses.

The carrying values of unquoted AFS equity securities of the Group and of the Parent Company as of December 31, 2016 and 2015 are disclosed in Note 7.

e) Impairment of non-financial assets Investment properties and repossessed chattels The Group assesses impairment on investment properties and repossessed chattels whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The factors that the Group considers important which could trigger an impairment review include the following: a. significant underperformance relative to expected historical or projected future operating results; b. significant changes in the manner of use of the acquired assets or the strategy for overall business; and c. significant negative industry or economic trends.

An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is computed using the fair value less costs to sell for investment properties and repossessed chattels. Recoverable amounts are estimated for individual assets or, if it is not possible, for the Cash Generating Unit (CGU) to which the asset belongs.

The Bank’s reversal for allowance for impairment losses pertains to increase in recoverable amount of its investment properties which has been determined based on its fair value less cost to sell, using valuation techniques as discussed in Note 5.

The carrying values of and the allowance for impairment losses, if any, on investment properties and repossessed chattels of the Group and of the Parent Company are disclosed in Notes 11, 13 and 14, respectively.

Branch licenses Branch license is considered an intangible asset with an indefinite useful life and it is required to be tested for impairment annually by comparing its carrying amount with its recoverable amount, irrespective of whether there is any indication that it may be impaired.

When the branch license’s fair value less cost of disposal is lower than its carrying amount, the Group’s impairment test is based on value in use calculations that use a discounted cash flow model. The cash flows are derived from the budget for the next five (5) years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset base of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

126 Robinsons Bank Annual Report 2016 *SGVFS022572* - 28 -

No additional impairment was recognized for the Group’s branch licenses in 2016 and 2015. The carrying amounts of branch licenses as of December 31, 2016 and 2015 approximate their respective fair values less cost to sell. The carrying values of and allowance for impairment losses on branch licenses of the Group are disclosed in Note 12.

Goodwill Goodwill is reviewed for impairment, annually or more frequently if events of changes in circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of the CGU (or group of CGUs) to which the goodwill relates. Where the recoverable amount of the CGU (or group of CGUs) is less than the carrying amount of the CGU (or group of CGUs) to which goodwill has been allocated, an impairment loss is recognized immediately in the statement of income. The Group estimated the discount rate used for the computation of the net present value be referenced to industry cost of capital. Future cash flows from the business are estimated based on the theoretical annual income of the CGUs. Average growth rate was derived from the average increase in annual income during the last five (5) years. The recoverable amount of the CGU has been determined based on a value in use calculations using cash flow projections from financial budgets approve by senior management covering a five-year period. The applicable pre-tax discount rate applied to cash flow projections is 9.95% both in 2016 and 2015, respectively. Key assumptions in value in use calculation of CGUs are most sensitive to discount rates and growth rates used to project cash flows.

The carrying values of goodwill of the Group are disclosed in Note 9. f) Recognition of deferred taxes Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

The estimates of future taxable income indicate that certain temporary differences will be realized in the future. Details of recognized and unrecognized deferred tax on temporary differences are disclosed in Note 23. g) Present value of retirement liability The cost of defined benefit retirement plan and other post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.

The assumed discount rates were determined using market yields on Philippine government bonds with terms consistent with the expected employee benefit payouts as of the statement of financial position date.

The present values of the Group and the Parent Company’s defined benefit obligation as of December 31, 2016 and 2015 are disclosed in Note 20.

*SGVFS022572*Robinsons Bank Annual Report 2016 127 NOTES TO financial STATEMENTS- 29 -

4. Financial Risk Management Objectives and Polices

The main risks arising from the Group’s financial instruments are credit, market and liquidity risks. In general, the Group’s risk management objective is to ensure that risks taken are within the Group’s risk appetite, which is assessed based on the Group’s capital adequacy framework. The risk management process involves risk identification, measurement, monitoring and control.

The Group recognizes that risk management is the responsibility of the entire organization. Accordingly, all employees are expected to manage risks relating to their own responsibilities. Still, there are specialized entities within the Group that perform certain risk management functions.

The Board of Directors (BOD) ultimately oversees and approves significant matters related to risk management throughout the Parent Company, upon the review and recommendation of various committees composed of members of the BOD and Senior Management. Among the Parent Company’s committees are: ∂ the Corporate Governance Committee, which ensures the BOD’s effectiveness and due observance of the corporate governance principles and guidelines; ∂ the Risk Management Committee (RMC), which is responsible for the development and oversight of the Parent Company’s risk management program; ∂ the Audit Committee, which examines the Parent Company’s framework of risk management, control and governance process to ensure that these are adequate and functional; and ∂ the Credit Committee, which recommends credit policies and evaluates credit applications.

The following units within the Parent Company jointly perform risk management functions on a daily basis: ∂ Compliance for regulatory risk; ∂ Treasury for funding and liquidity risk; ∂ Credit Cycle Operations for credit risk; ∂ Enterprise Risk Management Unit (ERMU) for various risks, including market risk; credit and operational risks; and ∂ Internal Audit for the evaluation of the adequacy of internal control systems, covering operational risk.

These units submit various risk reports to the Management Committee, the RMC and the BOD, among others.

Further specific risk management disclosures, including mitigation, measurement and control, are in the succeeding sections.

Credit Risk Credit risk may be defined as the possibility of loss due to the failure of a customer/borrower or counterparty to perform its obligation to the Group.

The Group has several credit risk mitigation practices: ∂ The Group offers a variety of loan products with substantial collateral values. The latter part of this credit risk section discusses collateral and other credit enhancements. ∂ Limits are set on the amount of credit risk that the Group is willing to take for customers and counterparties, and exposures are monitored against such credit limits. ∂ The Group also observes related regulatory limits such as the single borrower’s limit (SBL) and directors, officers, stockholders and related interests (DOSRI) ceiling. 128 Robinsons Bank Annual Report 2016 *SGVFS022572* - 30 -

∂ To protect against settlement risk, the Group employs a delivery-versus-payment (DvP) settlement system, wherein payment is effected only when the corresponding asset has been delivered. ∂ There is an internal credit risk rating system (ICRRS) in place, providing a structured format for collating and analyzing borrower data to arrive at a summary indicator of credit risk. ∂ Past due and non-performing loan (NPL) ratios are also used to measure and monitor the quality of the loan portfolio.

Maximum exposure to credit risk The table below shows the Group’s net credit risk exposure for financial assets with maximum exposure to credit risk different from its carrying amounts after considering the financial effect of collateral and other credit enhancements:

Consolidated December 31,2016 Financial Maximum Carrying Fair value Effect of Exposure to Amount of Collateral Collateral Credit Risk Interbank loans receivable/SPURA P=96,000,000 P=96,352,096 P=96,000,000 P= − Loans and receivables: Receivables from customers: Commercial 8,472,128,175 3,249,062,324 2,966,644,526 5,505,483,649 Real estate 5,352,677,002 9,248,284,662 5,001,508,450 351,168,552 Consumption 1,685,810,649 1,838,552,078 1,448,140,640 237,670,009 Other receivables: Sales contract receivable 46,124,679 82,823,176 45,417,018 707,661 P=15,652,740,505 P=14,515,074,336 P=9,557,710,634 P=6,095,029,871

Consolidated December 31, 2015 Maximum Carrying Fair Value Financial Effect Exposure to Amount of Collateral of Collateral Credit Risk Interbank loans receivable/SPURA P=97,000,000 P=97,863,514 P=97,000,000 P= – Loans and receivables: Receivables from customers: Commercial 7,709,641,169 4,636,093,691 1,875,104,801 5,834,536,368 Real estate 3,586,409,165 7,667,926,714 3,522,686,326 63,722,839 Consumption 811,450,499 2,084,029,754 807,370,990 4,079,509 Other receivables: Sales contract receivable 64,229,554 132,430,461 63,462,054 767,500 P=12,268,730,387 P=14,618,344,134 P=6,365,624,171 P=5,903,106,216

Parent Company December 31, 2016 Maximum Carrying Fair Value Financial Effect Exposure to Amount of Collateral of Collateral Credit Risk Interbank loans receivable/SPURA P=96,000,000 P=96,352,096 P=96,000,000 P= − Loans and receivables: Receivables from customers: Commercial 8,373,155,085 2,918,119,752 2,886,232,383 5,486,922,702 Real estate 5,346,408,900 9,222,332,686 4,995,240,348 351,168,552 Consumption 1,668,696,760 1,799,141,716 1,434,279,220 234,417,540 Other receivables: Sales contract receivable 33,882,159 36,123,275 33,882,159 − P=15,518,142,904 P=14,072,069,525 P=9,445,634,110 P=6,072,508,794

*SGVFS022572*Robinsons Bank Annual Report 2016 129 NOTES TO financial STATEMENTS- 31 -

Parent Company December 31, 2015 Maximum Carrying Fair Value Financial Effect Exposure to Amount of Collateral of Collateral Credit Risk Interbank loans receivable/SPURA P=97,000,000 P=97,863,514 P=97,000,000 P= – Loans and receivables: Receivables from customers: Commercial 7,598,995,322 4,133,869,890 1,774,071,543 5,824,923,779 Real estate 3,582,219,194 7,649,973,528 3,518,496,355 63,722,839 Consumption 782,856,077 1,922,389,965 780,826,115 2,029,962 Other receivables: Sales contract receivable 44,240,051 72,562,954 44,240,051 – P=12,105,310,644 P=13,876,659,851 P=6,214,634,064 P=5,890,676,580

Collateral and other credit enhancement The amount and type of collateral required depends on an assessment of credit risk. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. The main types of collateral obtained are as follows:

∂ Mortgages over real estate and vehicle for consumer lending ∂ Chattels over inventory and receivable for commercial lending ∂ Government securities for interbank lending

It is the Group’s policy to dispose repossessed properties in an orderly fashion. In general, the proceeds are used to reduce or repay the outstanding claim, and are not occupied for business use.

Concentration of credit Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry.

The tables below show the distribution of maximum exposure to credit risk by industry sector of the Group before taking into account collateral held and other credit enhancements (in millions):

Consolidated 2016 Loans and Investment Receivables* Securities** Total Government institutions P=12,924 P=8,383 P=21,307 Real estate, renting and business services 9,203 2,235 11,438 Financial intermediaries 9,632 1,497 11,129 Wholesale and retail 7,554 − 7,554 Electricity, gas and water 3,895 1,425 5,320 Personal consumption 5,059 51 5,110 Manufacturing 3,649 597 4,246 Transport, storage and communication 1,778 436 2,214 (Forward)

130 Robinsons Bank Annual Report 2016 *SGVFS022572* - 32 -

Consolidated 2016 Loans and Investment Receivables* Securities** Total Construction P=583 P=562 P=1,145 Agriculture, hunting and forestry 617 49 666 Others 3,157 61 3,218 58,051 15,296 73,347 Less allowance for credit losses 913 − 913 P=57,138 P=15,296 P=72,434 * All financial assets other than investment securities and cash on hand (net of UID) ** Financial assets at FVPL, AFS and HTM investments

Consolidated 2015 Loans and Investment Receivables* Securities** Total Government institutions P=9,260 P=6,947 P=16,207 Financial intermediaries 9,459 682 10,141 Real estate, renting and business services 7,092 1,689 8,781 Wholesale and retail 5,790 − 5,790 Personal consumption 3,747 − 3,747 Manufacturing 2,665 733 3,398 Electricity, gas and water 1,868 599 2,467 Transport, storage and communication 1,602 294 1,896 Agriculture, hunting and forestry 489 − 489 Construction 472 − 472 Others 1,031 11 1,042 43,475 10,955 54,430 Less allowance for credit losses 769 − 769 P=42,706 P=10,955 P=53,661 * All financial assets other than investment securities and cash on hand (net of UID) ** Financial assets at FVPL, AFS and HTM investments

Parent Company 2016 Loans and Investment Receivables* Securities** Total Government institutions P=12,924 P=8,383 P=21,307 Financial intermediaries 8,755 1,378 10,133 Real estate, renting and business services 9,058 2,220 11,278 Wholesale and retail 7,788 − 7,788 Electricity, gas and water 3,895 1,424 5,319 Manufacturing 3,649 597 4,246 Personal consumption 4,037 51 4,088 Transport, storage and communication 1,778 436 2,214 (Forward)

*SGVFS022572*Robinsons Bank Annual Report 2016 131 NOTES TO financial STATEMENTS- 33 -

Parent Company 2016 Loans and Investment Receivables* Securities** Total Construction P=583 P=562 P=1,145 Agriculture, hunting and forestry 530 34 564 Others 3,132 26 3,158 56,129 15,111 71,240 Less allowance for credit losses 797 − 797 P=55,332 P=15,111 P=70,443 * All financial assets other than investment securities and cash on hand (net of UID) ** Financial assets at FVPL, AFS and HTM investments

Parent Company 2015 Loans and Investment Receivables* Securities** Total Government institutions P=9,260 P=6,947 P=16,207 Financial intermediaries 8,629 711 9,340 Real estate, renting and business services 6,912 1,689 8,601 Wholesale and retail 5,715 − 5,715 Manufacturing 2,665 733 3,398 Personal Consumption 2,816 − 2,816 Electricity, gas and water 1,868 599 2,467 Transport, storage and communication 1,602 294 1,896 Construction 472 − 472 Agriculture, hunting and forestry 423 − 423 Others 973 11 984 41,335 10,984 52,319 Less allowance for credit losses 721 − 721 P=40,614 P=10,984 P=51,598 * All financial assets other than investment securities and cash on hand (net of UID) ** Financial assets at FVPL, AFS and HTM investments

Credit quality Parent Company For receivables from customers, the Parent Company’s internal credit rating risk (ICRR) system was approved in 2007 and improved in 2011 in accordance with BSP requirement, to cover corporate credit exposures, which is defined by BSP Circular no. 439 as exposures to companies with assets of more than P=15.00 million.

The Parent Company’s ICRR is as follows:

Grades Categories Description High grade Risk rating 1 Excellent Lowest probability of default; exceptionally strong capacity for financial commitments; highly unlikely to be adversely affected by foreseeable events.

132 Robinsons Bank Annual Report 2016 *SGVFS022572* - 34 -

Grades Categories Description Risk rating 2 Super Prime Very low probability of default; very strong capacity for payment of financial commitments; less vulnerable to foreseeable events. Risk rating 3 Prime Low probability of default; strong capacity for payment of financial commitments; may be more vulnerable to adverse business/economic conditions. Risk rating 4 Very Good Moderately low probability of default; more than adequate capacity for payment of financial commitments; but adverse business/economic conditions are more likely to impair this capacity. Risk rating 5 Good More pronounced probability of default; business or financial flexibility exists which supports the servicing of financial commitments; vulnerable to adverse business/economic changes. Standard Risk rating 6 Satisfactory Material probability of default is present, but a margin of safety remains; financial commitments are currently being met although the capacity for continued payment is vulnerable to deterioration in the business/economic condition. Risk rating 7 Average Greater probability of default which is reflected in the volatility of earnings and overall performance; repayment source is presently adequate; however, prolonged unfavorable economic period would create deterioration beyond acceptable levels. Risk rating 8 Fair Sufficiently pronounced probability of default, although borrowers should still be able to withstand normal business cycles; any prolonged unfavorable economic/market conditions would create an immediate deterioration of cash flow beyond acceptable levels. Sub-standard grade Risk rating 9 Marginal Elevated level of probability of default, with limited margin; Repayment source is adequate to marginal. Risk rating 10 Watchlist Unfavorable industry or company specific risk factors represent a concern, financial strength may be marginal; will find it difficult to cope with significant downturn. Risk rating 11 Special mention Loans have potential weaknesses that deserve close attention; borrower has reached a point where there is a real risk that the borrower’s ability to pay the interest and repay the principal timely could be jeopardize due to evidence of weakness in the borrower’s financial condition.

*SGVFS022572*Robinsons Bank Annual Report 2016 133 NOTES TO financial STATEMENTS- 35 -

Grades Categories Description Risk rating 12 Substandard Substantial and unreasonable degree of risk to the institution because of unfavorable record or unsatisfactory characteristics; with well-defined weakness(es) that jeopardize their liquidation. e.g. negative cash flow, in case of fraud. Past due and impaired Risk rating 13 Doubtful Weaknesses similar to “Substandard”, but with added characteristics that make liquidation highly improbable. Risk rating 14 Loss Uncollectible or worthless.

The Parent Company’s ICRR system intends to provide a structure to define the credit portfolio, and consists of an initial rating for the borrower risk adjusted for the facility risk. Inputs include an assessment of management, credit experience, financial condition, industry outlook, documentation, security and term.

The following tables show the credit quality per class of loans and receivables, gross of allowance for credit losses and unearned interest and discount of the Parent Company (in millions):

Parent Company 2016 Neither past due nor individually impaired Past due but not High Standard Substandard Individually Individually Grade Grade Grade Unrated Impaired Impaired Total Receivables from customers: Commercial P=13,022 P=10,495 P=1,447 P=1,816 P= 3 2 P=691 P=27,503 Real estate − 5,685 − − 67 − 5,752 Consumption − 2,585 − − 1,979 − 4,564 Domestic bills purchased 139 − − − − − 139 Other receivables: Accrued interest receivable − 201 − − 254 − 455 Accounts receivable − 324 − − − − 324 Sales contract receivable − 32 − − 5 − 37 P=13,022 P=19,322 P=1,447 P=1,816 P=2,337 P=691 P=38,774

Parent Company 2015 Neither past due nor impaired Past due but not High Standard Substandard Individually Individually Grade Grade Grade Unrated Impaired Impaired Total Receivables from customers: Commercial P=8,784 P=7,439 P=785 P=1,470 P= – P=674 P=19,152 Real estate – 3,757 – – 91 – 3,848 Consumption – 2,764 – – 412 2 3,178 Domestic bills purchased 607 – – – – – 607 Other receivables: Accrued interest receivable – 207 – – 165 – 372 Accounts receivable – 209 – – – – 209 Sales contract receivable – 46 – – 4 – 50 P=9,391 P=14,422 P=785 P=1,470 P=672 P=676 P=27,416

External ratings In ensuring a quality investment portfolio, the Parent Company monitors credit risk from investments using credit ratings based on Moody’s Investors Service (Moody’s rating).

134 Robinsons Bank Annual Report 2016 *SGVFS022572* - 36 -

Credit quality of due from BSP and other banks and interbank loans receivable are based on available accredited international and local credit raters using Fitch as standard of rating.

The Parent Company assigns the following credit quality groupings based on Fitch Ratings and Moody’s rating as follows:

Credit Quality Fitch Moody’s High Grade AAA to A- Aaa to A3 Standard Grade BBB+ to BB- Baa1 to Ba3 Substandard Grade B+ to C- B1 to Ca Past due and impaired D C

The following tables show the credit quality per class of financial assets other than receivables from customers and other receivables of the Parent Company (in millions):

Parent Company 2016 Neither past due nor impaired Past due but not High Standard Substandard Individually Individually Grade Grade Grade Unrated Impaired Impaired Total Financial assets at FVPL P= 3 P= − P= − P= − P= − P= − P= 3 AFS investments: Government securities 8,192 − − − − − 8,192 Private bonds − 1,178 − 2,044 − − 3,222 Quoted equity securities − 306 − − − − 306 Unquoted equity securities − − − 54 − − 54 HTM investment 190 2,970 − 175 − − 3,335 Loans and receivables: Due from BSP − 12,722 − − − − 12,722 Due from other banks − 3,884 − 111 − − 3,995 Interbank loans receivable/ SPURA − 589 − − − − 589 Other assets: Refundable deposits − 56 − − − − 56 P=8,385 P=21,705 P= − P=2,384 P= − P= − P=32,474

Parent Company 2015 Neither past due nor impaired Past due but not High Standard Substandard Individually Individually Grade Grade Grade Unrated Impaired Impaired Total Financial assets at FVPL P= – P= 5 P= – P= – P= – P= – P= 5 AFS investments: Government securities 6,787 − – – – – 6,787 Private bonds – 1,378 – – – – 1,378 Quoted equity securities − 12 − − − − 12 Unquoted equity securities – − – 53 – – 53 HTM Investments 115 2,634 – − – – 2,749 Loans and receivables: Due from BSP − 9,190 – – – – 9,190 Due from other banks – 4,596 – – – – 4,596 Interbank loans receivable – 97 – – – – 97 Other assets: Refundable deposits – 46 – – – – 46 P=6,902 P=17,958 P= − P=53 P= − P= − P=24,913

As of December 31, 2016 and 2015, the Parent Company’s commitments amounting to P=501.32 million and P=11.98 billion, respectively, have a risk rating class of Standard Grade (see Note 26).

*SGVFS022572*Robinsons Bank Annual Report 2016 135 NOTES TO financial STATEMENTS- 37 -

LSB For receivables from customers, credit quality is being evaluated by LSB using the following classifications:

Neither past due nor individually impaired LSB classifies those accounts under current status having the following loan grades: ∂ High grade This pertains to accounts with a very low probability of default as demonstrated by the borrower’s long history of stability, profitability and diversity. The borrower has the ability to raise substantial amounts of funds through the public markets. The borrower has a strong debt service record and a moderate use of leverage.

∂ Standard grade The borrower has no history of default. The borrower has sufficient liquidity to fully service its debt over the medium term. The borrower has adequate capital to readily absorb any potential losses from its operations and any reasonably foreseeable contingencies. The borrower reported profitable operations for at least the past 3 years.

∂ Substandard grade The borrower is expected to be able to adjust to the cyclical downturns in its operations. Any prolonged adverse economic conditions would however ostensibly create profitability and liquidity issues.

∂ Unrated grade Other credit assets which cannot be classified as High, Standard or Substandard are tagged as Unrated.

Past due but not individually impaired These are accounts which are classified as delinquent but LSB assesses that there is no objective evidence that these accounts are impaired as of statement of financial position date.

Individually impaired Accounts which show evidence of impairment as of statement of financial position date.

The following tables show credit quality per class of financial assets, gross of allowance for credit losses and unearned interest and discount of LSB (in millions):

2016 Neither past due nor impaired High Standard Substandard Past due but Individually Grade Grade Grade Unrated not Impaired Impaired Total Due from BSP P= – P=693 P= – P= – P= – P= – P=693 Due from other banks – 95 – – – – 95 Securities purchased under resale agreement 89 – – – – – 89 HTM investments 215 – – – – – 215 Receivables from customers: Consumption – 378 28 – – 248 654 Commercial – 82 4 – – 231 317 Real estate – 3 – – – 8 11 Other receivables: Sales contract receivable – 6 – – 4 2 12 Accounts receivable – 17 – – – 8 25 Accrued interest receivable – 7 1 – – 31 39 Finance lease receivable – 9 – – – – 9 Refundable deposits – – – 2 – – 2 P=304 P=1290 P= 3 3 P= 2 P= 4 P=528 P=2,161

136 Robinsons Bank Annual Report 2016 *SGVFS022572* - 38 -

2015 Neither past due nor impaired High Standard Substandard Past due but Individually Grade Grade Grade Unrated not Impaired Impaired Total Due from BSP P= – P= 7 3 3 P= – P= – P= – P= – P= 7 3 3 Due from other banks – 94 – – – – 94 Receivables from customers: Consumption – 296 72 – 1 234 603 Commercial – 48 24 – – 207 279 Real estate – – – – – 4 4 Other receivables: Sales contract receivable – 4 2 – 12 2 20 Accounts receivable – 5 – – 2 11 18 Accrued interest receivable – 2 2 – – 21 25 Finance lease receivable – – 6 – – – 6 Refundable deposits – – – 1 – – 1 P= – P=1182 P= 1 0 6 P= 1 P=15 P= 4 7 9 P=1,783

Aging analysis of past due but not impaired loans and receivables per class The tables below show the aging analysis of past due but not impaired loans and receivables per class of the Group (in millions):

Consolidated 2016 Less than 30 to 60 61 to 90 91 days 30 days days days to 1 year Over 1 year Total Receivables from customers: Consumption P=1,461 P=37 P=28 P=384 P=70 P=1,980 Real estate 9 12 3 39 4 67 Commercial − − − 32 − 32 Other receivables: Accrued interest receivable 205 2 4 26 17 254 Sales contract receivable 3 − − 5 8 P=1,678 P=51 P=35 P=481 P=96 P=2,341

Parent Company 2016 Less than 30 to 60 61 to 90 91 days 30 days Days days to 1 year Over 1 year Total Receivables from customers: Consumption P=1,460 P=37 P=28 P=386 P=68 P=1,979 Real estate 9 12 3 39 4 67 Commercial − − − 30 2 32 Other receivables: Accrued interest Receivable 205 2 4 26 17 254 Sales contract Receivable − − − − 5 5 P=1,674 P=51 P=35 P=481 P=96 P=2,337

Consolidated 2015 Less than 30 to 60 61 to 90 91 to 360 30 days Days days days Over 1 year Total Receivables from customers: Consumption P=10 P=18 P=27 P=42 P=316 P=413 Real estate − 1 1 15 74 91 Other receivables: Accrued interest receivable 1 2 3 2 176 184 Accounts receivable − − − 1 1 2 Sales contract receivable − − 1 1 14 16 P=11 P=21 P=32 P=61 P=581 706

*SGVFS022572*Robinsons Bank Annual Report 2016 137 NOTES TO financial STATEMENTS- 39 -

Parent Company 2015 Less than 30 to 60 61 to 90 91 to 360 30 days Days days days Over 1 year Total Receivables from customers: Real estate P=10 P=18 P=27 P=42 P=315 P=412 Consumption − 1 1 15 74 91 Other receivables: Accrued interest receivable 1 2 3 2 157 165 Sales contract receivable − − − 1 3 4 P=11 P=21 P=31 P=60 P=549 P=672

Liquidity Risk Liquidity risk may be defined as the possibility of loss due to the Group’s inability to meet its financial obligations when they become due. Liquidity risk is considered in the Group’s assets and liabilities management. The Group seeks to lengthen liability maturities, diversify existing fund sources, and continuously develop new instruments that cater to different segments of the market.

The Parent Company’s Assets and Liabilities Committee (ALCO) is composed of some members of the Senior Management including the Lending Groups and Treasury Group Heads. ALCO conducts weekly meetings. The Parent Company also has specialized units that help monitor market and regulatory developments pertinent to interest rates and liquidity position, as well as prepare cash position reports as needed to measure the liquidity and reserves position of the Parent Company.

The Parent Company also keeps credit lines with financial institutions, as well as a pool of liquid or highly marketable securities. Reserves management is another specialized function within the Bank, complying with BSP reserve requirements, which may be a buffer against unforeseen liquidity drains.

The liquidity or maturity gap report is another tool for measuring liquidity risk. Although available contractual maturity dates are generally used for putting instruments into time bands, expected liquidation periods, often based on historical data, are used if contractual maturity dates are unavailable. The liquidity gap per time band is computed by getting the difference between the inflows and outflows within the time band. A positive liquidity gap is an estimate of the Group’s net excess funds for the time band. A negative liquidity gap is an estimate of a future funding requirement of the Group. Although such gaps are a normal part of the business, a significant negative amount may bring significant liquidity risk.

To help control liquidity risk arising from negative liquidity gaps, maximum cumulative outflow (MCO) targets are set for time bands up to one (1) year.

138 Robinsons Bank Annual Report 2016 *SGVFS022572* - 40 -

Analysis of financial instruments by remaining maturities The table below summarized the maturity profile of the Group’s financial instruments based on contractual undiscounted cash flows except for financial assets at FVPL which and based on expected disposal (in millions):

Consolidated 2016 Up to Over 3 up Over 1 to On demand 3 months to 12 months 5 Years Over 5 years Total Financial Assets Cash and other cash items P=1,684 P= – P= – P= – P= – P=1,684 Due from BSP 11,016 2,401 – – – 13,417 Due from other banks 1,865 1,033 1,195 – – 4,093 Interbank loans receivable/SPURA – 582 75 27 – 684 Financial assets at FVPL 3 – – – – 3 AFS investments – 127 297 2,874 10,747 14,045 HTM investments – 276 99 2,468 1,859 4,702 Loans and receivables 858 9,250 6,247 12,295 11,209 39,859 Other assets 1 – 23 37 1 62 15,427 13,669 7,936 17,701 23,816 78,549 Financial Liabilities Deposit liabilities 30,257 24,803 7,414 4,530 – 67,004 Manager’s checks 404 – – – – 404 Redeemable preferred shares 31 – – – – 31 Accrued expenses – 418 – – – 418 Other liabilities 1,377 – – – – 1,377 32,069 25,221 7,414 4,530 – 69,234 Commitments 501 – – – – 501 32,570 25,221 7,414 4,530 − 69,735 (P=17,143) (P=11,552) P=522 P=13,171 P=23,816 P=8,814

Parent Company 2016 Up to Over 3 up Over 1 to On demand 3 months to 12 months 5 Years Over 5 years Total Financial Assets Cash and other cash items P=1,654 P= – P= – P= – P= – P=1,654 Due from BSP 10,872 1,851 – – – 12,723 Due from other banks 1,770 1,032 1,195 – – 3,997 Interbank loans receivable/SPURA – 493 75 27 – 595 Financial assets at FVPL 3 – – – – 3 AFS investments 127 297 2,874 10,747 14,045 HTM investment – 261 99 2,468 1,603 4,431 Loans and receivables 509 9,187 6,113 11,305 11,085 38,199 Other assets – − 23 37 − 60 14,808 12,951 7,802 16,711 23,435 75,707

(Forward)

*SGVFS022572*Robinsons Bank Annual Report 2016 139 NOTES TO financial STATEMENTS- 41 -

Consolidated 2016 Up to Over 3 up Over 1 to On demand 3 months to 12 months 5 Years Over 5 years Total Financial Liabilities Deposit liabilities P=29,163 P=24,576 P=7,383 P=4,107 P= – P=65,229 Manager’s checks 404 – – – – 404 Accrued expenses – 412 – – – 412 Other liabilities 1,367 – – – – 1,367 30,934 24,988 7,383 4,107 – 67,412 Commitments 501 – – – – 501 31,435 24,988 7,383 4,107 – 67,913 (P=16,627) (P=12,037) P=419 P=12,604 P=23,435 P=7,794

Consolidated 2015 Up to Over 3 up Over 1 to On demand 3 months to 12 months 5 Years Over 5 years Total Financial Assets Cash and other cash items P=1,702 P= – P= – P= – P= – P=1,702 Due from BSP 7,403 2,521 – – – 9,924 Due from other banks 1,723 2,805 166 – – 4,694 Interbank loans receivable/SPURA – 1 5 102 – 108 Financial assets at FVPL 5 – – – – 5 HTM investments – 57 57 1,078 2,743 3,935 AFS investments 36 161 161 3,906 8,241 12,505 Loans and receivables 776 6,109 4,182 9,613 15,436 36,116 Other assets – 1 23 24 – 48 11,645 11,655 4,594 14,723 26,420 69,037 Financial Liabilities Deposit liabilities 31,669 5,349 2,428 4,818 4 44,268 Manager’s checks 289 – – – – 289 Redeemable preferred shares 2 – – – – 2 Accrued expenses – 442 – – – 442 Other liabilities 1,154 – – – – 1,154 33,114 5,791 2,428 4,818 4 46,155 Commitments 11,979 – – – – 11,979 45,093 5,791 2,428 4,818 4 58,134 (P=33,448) P=5,864 P=2,166 P=9,905 P=26,416 P=10,903

140 Robinsons Bank Annual Report 2016 *SGVFS022572* - 42 -

Parent Company 2015 Up to Over 3 up Over 1 to On demand 3 months to 12 months 5 Years Over 5 years Total Financial Assets Cash and other cash items P=1,665 P= – P= – P= – P= – P=1,665 Due from BSP 7,260 1,931 – – – 9,191 Due from other banks 1,630 2,804 166 – – 4,600 Interbank loans receivable/SPURA – 1 5 102 – 108 Financial assets at FVPL 5 – – – – 5 AFS investments 36 161 161 3,906 8,241 12,505 HTM investment – 57 57 1,078 2,743 3,935 Loans and receivables 114 5,902 3,884 9,293 15,364 34,557 Other assets – 1 22 23 – 46 10,710 10,857 4,295 14,402 26,348 66,612 Financial Liabilities Deposit liabilities 30,578 5,100 2,385 4,368 3 42,434 Manager’s checks 289 – – – – 289 Accrued expenses 433 – – – 433 Other liabilities 1,133 – – – – 1,133 32,000 5,533 2,385 4,368 3 44,289 Commitments 11,979 – – – – 11,979 43,979 5,533 2,385 4,368 3 56,268 (P=33,269) P=5,324 P=1,910 P=10,034 P=26,345 P=10,344

Market Risk Market risk may be defined as the possibility of loss due to adverse movements in market factors such as rates and prices. Market risk is present in both trading and non-trading activities. These are the risk to earnings or capital arising from changes in the value of traded portfolios of financial instruments. The risk arises from market-making, dealing and position-taking in quoted debt securities and foreign exchange.

The Parent Company observes market risk limits, which are approved by the BOD and reviewed at least annually. Limits are set in such a way as to ensure that risks taken are based on the Parent Company’s existing capital adequacy framework, and corresponding monitoring reports are prepared regularly by an independent risk management unit.

When limits are breached, approval is sought from successive levels of authority depending on the amount of the excess. Limit breaches are periodically presented to the BOD.

Value-at-Risk (VaR) is computed to estimate potential losses arising from market movements. The Parent Company calculates and monitors VaR and profit or loss on a daily basis.

VaR objectives and methodology VaR is used by the Parent Company to measure market risk exposure from its trading and investment activities. VaR is an estimate of the maximum decline in value on a given position over a specified holding period in a normal market environment, with a given probability of occurrence.

Robinsons Bank Annual Report 2016 141 *SGVFS022572* NOTES TO financial STATEMENTS- 43 -

The Parent Company uses the historical simulation method in estimating VaR. The historical simulation method is a non-parametric approach to VaR calculation, in which asset returns are not subject to any functional distribution assumption. VaR is estimated directly from historical data without deriving parameters or making assumptions about the entire data distribution.

In employing the historical simulation method, the Parent Company assumes a 260 historical data (approximately 1 year), 99.50% confidence level and 1-day holding period. On August 17, 2016, the Parent Company implemented new assumptions in the model, specifically the use of 500 historical data (approximately 2 years) and 99.00% confidence level, with the holding period still at 1-day.

VaR methodology limitations and assumptions Discussed below are the limitations and assumptions applied by the Parent Company on its VaR methodology: a. VaR is a statistical estimate; thus, it does not give the precise amount of loss the Parent Company may incur in the future; b. VaR is not designed to give the probability of bank failure, but only attempts to quantify losses that may arise from a Parent Company’s exposure to market risk; c. Since VaR is computed from end-of-day positions and market factors, VaR does not capture intraday market risk. d. VaR systems depend on historical data. It attempts to forecast likely future losses using past data. As such, this assumes that past relationships will continue to hold in the future. Therefore, market shifts (i.e., an unexpected collapse of the market) will not be captured and may inflict losses larger than VaR; and e. The limitation relating to the pattern of historical returns being indicative of future returns is addressed by supplementing VaR with daily stress testing reported to the RMC, ALCO and the concerned risk-takers.

VaR back testing is the process by which financial institutions periodically compare ex-post profit or loss with the ex-ante VaR figures to gauge the robustness of the VaR model. The Parent Company performs quarterly back testing.

The Parent Company’s VaR figures are as follows (in millions):

January – August 2016 Average Daily Highest Lowest August 17 Local interest rates P=3.0005 P=20.6307 P=0.1707 P=2.5533 Foreign interest rate − − − −

August – December 2016* Average Daily Highest Lowest December 31 Local interest rates P=4.2745 P=7.8317 P=0.0222 P=0.0225 Foreign interest rate 0.0002 0.0158 − − *based on new VaR assumptions

2015 Average Daily Highest Lowest December 31 Local interest rates P=42.38 P=104.57 P=0.17 P=0.17 Foreign interest rate 0.0029 0.0792 0.0047 −

142 Robinsons Bank Annual Report 2016 *SGVFS022572* - 44 -

Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments.

The sensitivity analysis below shows the impact of movement in interest rates on AFS investments of the Parent Company as of December 31, 2016 and 2015 (in millions).

Net Carrying 100 bps parallel shift December 31, 2016 Value in yield curve Peso Denominated AFS P=7,777.79 (P=542.13) Dollar Denominated AFS (in PHP) 3,941.36 (354.43)

Net Carrying 100 bps parallel shift December 31, 2015 Value in yield curve Peso Denominated AFS P=6,167.60 (=P487.38) Dollar Denominated AFS (in PHP) 2,010.32 (159.22)

The Parent Company’s ALCO surveys the interest rate environment, adjusts the interest rates for the Parent Company’s loans and deposits, assesses investment opportunities and reviews the structure of assets and liabilities. The Parent Company uses Earnings-at-Risk (EaR) as a tool for measuring and managing interest rate risk in the banking book.

Earnings-at-Risk objectives and methodology EAR is a statistical measure of the likely impact of changes in interest rates to the Bank’s net interest income (NII). To do this, repricing gaps (difference between interest rate-sensitive assets and liabilities) are classified according to time to repricing and multiplied with applicable historical interest rate volatility, although available contractual repricing dates are generally used for putting instruments into time bands, contractual maturity dates (e.g., for fixed rate instruments) or expected liquidation periods often based on historical data are used alternatively. The repricing gap per time band is computed by getting the difference between the inflows and outflows within the time band. A positive repricing gap implies that the Parent Company’s NII could decline if interest rates decrease upon repricing. A negative repricing gap implies that the Parent Company’s NII could decline if interest rates increase upon repricing. Although such gaps are a normal part of the business, a significant change may bring significant interest rate risk.

To help control interest rate risk arising from repricing gaps, maximum repricing gap and EaR/NII targets are set for time bands up to one year. EaR is prepared and reported to the RMC monthly.

The Parent Company’s EaR figures are as follows (in PHP millions):

2016 Average Highest Lowest December 31 Instruments sensitive to local interest rates P=71.65 P=154.18 P=1.08 P=121.35 Instruments sensitive to foreign interest rates 0.04 0.09 0.01 0.09

2015 Average Highest Lowest December 31 Instruments sensitive to local interest rates P=67.97 P=113.36 P=31.62 P=36.22 Instruments sensitive to foreign interest rates 0.06 0.09 0.04 0.05 *SGVFS022572*Robinsons Bank Annual Report 2016 143 NOTES TO financial STATEMENTS- 45 -

Foreign currency risk Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The BOD has set limits on positions by currency. In accordance with the Parent Company’s policy, positions are monitored on a daily basis and are used to ensure positions are maintained within established limits.

Statement of December 31, 2016 Income OCI +10% USD appreciation USD (P=416,372,261) P=394,119,655 Other Foreign Currencies* 20,666,562 − -10% USD depreciation USD 416,372,261 394,119,655 Other Foreign Currencies* (20,666,562) −

Statement of December 31, 2015 Income OCI +10% USD appreciation USD (P=211,102,042) P=201,032,038 Other Foreign Currencies* 7,425,600 − -10% USD depreciation USD 211,102,042 201,032,038 Other Foreign Currencies* (7,425,600) − *significant positions held in CAD and AUD

5. Fair Value Measurement

The methods and assumptions used by the Group in estimating the Group’s assets and liabilities are:

Cash and other cash items, due from BSP, due from other banks, interbank loans receivable/securities purchased under repurchase agreements, accounts receivable and accrued interest receivable Carrying value approximates fair value given the short-term nature of these financial assets and insignificant risk of changes in value.

Trading and investment securities Fair values of debt securities (financial assets at FVPL, AFS and HTM investments) and equity investments are generally based on quoted market prices. If the market prices are not readily available, fair values are estimated using either values obtained from independent parties offering pricing services or adjusted quoted market prices of comparable investments or using the discounted cash flow methodology.

For equity investments that are not quoted, the investments are carried at cost less allowance for impairment losses due to the unpredictable nature of future cash flows and the lack of suitable methods of arriving at a reliable fair value.

Receivables from customers Fair values are estimated using the discounted cash flow methodology, using the Group’s current incremental lending rates for similar types of receivables at current market rates. Where the instruments reprice on a short-term basis or have a relatively short maturity, the carrying amounts approximate fair values.

Investment properties Fair value of investment properties are based on market data (or direct sales comparison) approach. This approach relies on the comparison of recent sale transactions or offerings of similar properties which have occurred and/or offered with close proximity to the subject property.

144 Robinsons Bank Annual Report 2016 *SGVFS022572* - 46 -

The fair values of the Group’s investment properties have been determined by appraisers, including independent external appraisers, in the basis of the recent sales of similar properties in the same areas as the investment properties and taking into account the economic conditions prevailing at the time of the valuations are made.

The Group has determined that the highest and best use of the property used for the land and building is its current use.

Time deposits Fair values are estimated using the discounted cash flow methodology using the Group’s current incremental borrowing rates for similar borrowings with maturities consistent with those remaining for the liability being valued.

Financial liabilities at amortized cost except time deposits Carrying amounts approximate fair values due to either the demand nature or the relatively short- term maturities of these liabilities.

Consolidated 2016 Carrying Value Level 1 Level 2 Level 3 Total Fair Value Assets Measured at Fair Value Financial Assets Financial assets at FVPL P=2,555,185 P=2,555,185 P= − P= − P=2,555,185 AFS investments: Government securities 8,192,453,343 8,192,453,343 − − 8,192,453,343 Private bonds 3,222,098,803 3,222,098,803 − − 3,222,098,803 Quoted equity securities 305,500,000 305,772,373 − − 305,772,373 P=11,722,607,331 P=11,722,879,704 P= − P= − P=11,722,879,704 Assets for which Fair Values are Disclosed Financial Assets HTM investment P=3,549,900,604 P=3,519,092,648 P= − P= − P=3,519,092,648 AFS – unquoted equity securities 23,878,073 − − 23,605,700 23,605,700 Loans and receivables: Receivables from customers: Commercial 27,433,555,335 − − 29,920,068,814 29,920,068,814 Real estate 5,749,265,920 − − 6,177,801,009 6,177,801,009 Consumption 4,964,602,167 − − 5,726,255,974 5,726,255,974 Other receivables: Sales contract receivable 40,733,131 − − 28,609,405 28,609,405 Accrued interest receivables 411,487,979 − − 216,755,077 216,755,077 Accounts receivable 288,822,809 − − 156,385,798 156,385,798 Lease receivable 8,614,546 − − 9,030,296 9,030,296 Interbank loans receivable 96,000,000 − − 110,156,313 110,156,313 Refundable deposits 57,201,471 − − 58,926,429 58,926,429 Non-Financial Assets Investment properties 282,997,561 − − 254,920,603 254,920,603 Repossessed chattels 103,489,250 − − 129,366,626 129,366,626 P=43,010,548,846 P=3,519,092,648 P= − P=42,811,882,044 P=46,330,974,692 Liabilities for which Fair Values are Disclosed Financial Liabilities Derivative liabilities P=7,447,751 P=7,447,751 P= − P= − P=7,447,751 Deposit liabilities: Time deposits 12,895,961,824 − − 12,927,516,996 12,927,516,996 P=12,903,409,575 P=7,447,751 P= − P=12,927,516,996 P=12,934,964,747

*SGVFS022572*Robinsons Bank Annual Report 2016 145 NOTES TO financial STATEMENTS- 47 -

Parent Company 2016 Carrying Value Level 1 Level 2 Level 3 Total Fair Value Assets Measured at Fair Value Financial Assets Financial assets at FVPL P=2,555,185 P=2,555,185 P= − P= − P=2,555,185 AFS investments: Government securities 8,192,453,343 8,192,453,343 − − 8,192,453,343 Private bonds 3,222,098,803 3,222,098,803 − − 3,222,098,803 Quoted equity securities 305,500,000 305,772,373 − − 305,772,373 P=11,722,607,331 P=11,722,879,704 P= − P= − P=11,722,879,704 Assets for which Fair Values are Disclosed Financial Assets HTM investment P=3,334,528,051 P=3,314,412,732 P= − P= − P=3,314,412,732 AFS – unquoted debt securities 52,605,700 − − 52,605,700 52,605,700 Loans and receivables: Receivables from customers: Commercial 27,054,342,316 − − 29,627,729,761 29,627,729,761 Real estate 5,744,776,460 − − 6,167,115,367 6,167,115,367 Consumption 4,483,317,073 − − 4,734,804,642 4,734,804,642 Other receivables: Sales contract receivable 29,198,272 − − 17,778,187 17,778,187 Accrued interest receivable 385,594,954 − − 216,755,077 216,755,077 Accounts receivable 272,120,333 − − 154,905,359 154,905,359 Interbank loans receivable 96,000,000 − − 110,156,313 110,156,313 Refundable deposits 55,721,032 − − 57,537,175 57,537,175 Non-financial assets Investment properties 129,916,432 − − 49,368,625 49,368,625 Repossessed chattels 103,489,250 − − 129,366,626 129,366,626 P=41,741,609,873 P=3,314,412,732 P= − P=41,318,122,832 P=44,632,535,564 Liabilities for which Fair Values are Disclosed Financial Liabilities Derivative liabilities P=7,447,751 P=7,447,751 P= − P= − P=7,447,751 Deposit liabilities: Time deposits 12,895,961,824 − − 12,478,437,971 12,478,437,971 P=12,903,409,575 P=7,447,751 P= − P=12,478,437,971 P=12,485,885,722

Consolidated 2015 Carrying Value Level 1 Level 2 Level 3 Total Fair Value Assets Measured at Fair Value Financial Assets Financial assets at FVPL P=5,132,724 P=5,132,724 P= – P= – P=5,132,724 AFS investments: Government securities 6,787,060,393 6,787,060,393 – – 6,787,060,393 Private bonds 1,378,397,236 1,378,397,236 – – 1,378,397,236 Quoted equity securities 12,062,000 12,062,000 – – 12,062,000 P=8,182,652,353 P=8,182,652,353 P= – P= – P=8,182,652,353 Assets for which Fair Values are Disclosed Financial Assets HTM investment P=2,749,295,603 P=2,228,829,809 P=572,870,263 P= – P=2,801,700,072 AFS – unquoted securities 23,605,700 – – 23,605,700 23,605,700 Loans and receivables: Receivables from customers: Commercial 19,717,767,844 – – 20,054,128,202 20,054,128,202 Real estate 3,837,920,447 – – 3,965,369,213 3,965,369,213 Consumption 3,481,219,500 – – 4,031,953,419 4,031,953,419 Other receivables: Accrued interest receivables 64,229,554 – – 58,786,812 58,786,812 Sales contract receivable 310,304,893 – – 310,304,893 310,304,893 Accounts receivable 151,043,424 – – 151,043,424 151,043,424 Lease receivable 6,356,824 – – 6,725,164 6,725,164 Non-Financial Assets Investment properties 243,680,939 – – 352,743,898 352,743,898 Repossessed chattels 73,343,238 – – 220,157,982 220,157,982 P=30,658,767,966 P=2,228,829,809 P=572,870,263 P=29,174,818,707 P=31,976,518,779

(Forward)

146 Robinsons Bank Annual Report 2016 *SGVFS022572* - 48 -

Consolidated 2015 Carrying Value Level 1 Level 2 Level 3 Total Fair Value Liabilities for which Fair Values are Disclosed Financial Liabilities Financial liabilities at amortized cost: Deposit liabilities: Time deposits P=11,751,509,324 P= – P= – P=11,854,842,814 P=11,854,842,814

Parent Company 2015 Carrying Value Level 1 Level 2 Level 3 Total Fair Value Assets Measured at Fair Value Financial Assets Financial assets at FVPL P=5,132,724 P=5,132,724 P= – P= – P=5,132,724 AFS investments: Government securities 6,787,060,393 6,787,060,393 – – 6,787,060,393 Private bonds 1,378,397,236 1,378,397,236 – – 1,378,397,236 Quoted equity securities 12,062,000 12,062,000 – – 12,062,000 P=8,182,652,353 P=8,182,652,353 P= – P= – P=8,182,652,353 Assets for which Fair Values are Disclosed Financial assets HTM investment P=2,749,295,603 P=2,228,829,809 P=572,870,263 P= – P=2,801,700,072 Loans and receivables: 52,605,700 – – 52,605,700 52,605,700 Receivables from customers: Commercial 19,379,918,915 – – 19,577,179,359 19,577,179,359 Real estate 3,830,975,673 – – 3,961,137,955 3,961,137,955 Consumption 2,984,141,533 – – 3,309,940,743 3,309,940,743 Other receivables: Sales contract receivable 44,240,051 – – 38,766,648 38,766,648 Accrued interest receivable 307,698,278 – – 307,698,278 307,698,278 Accounts receivable 139,127,876 – – 139,127,876 139,127,876 Non-financial assets Investment properties 94,168,563 – – 146,859,620 146,859,620 Repossessed chattels 73,316,657 – – 220,131,401 220,131,401 P=29,655,488,849 P=2,228,829,809 P=572,870,263 P=27,753,447,580 P=30,555,147,652 Liabilities for which Fair Values are Disclosed Financial liabilities Financial liabilities at amortized cost: Deposit liabilities: Time deposits P=11,297,180,630 P= – P= – P=11,331,146,622 P=11,331,146,622

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole at the end of each statement of financial position).

In 2016 and 2015, there were no transfers between Level 1 and Level 2 fair value measurements and there were no transfers into and out of the Level 3 category.

*SGVFS022572*Robinsons Bank Annual Report 2016 147 NOTES TO financial STATEMENTS- 49 -

Description of significant unobservable inputs to valuation:

Consolidated Accounts Valuation Technique Significant Unobservable Inputs Loans and receivables Discounted cash flow method 4.00% - 14.75% risk premium rate Investment properties Land Market data approach Price per square meter, size, shape, location, time element and discount Building Cost approach Cost per square meter, size, shape, location, condition and time element Refundable deposits Discounted cash flow method 0.25% - 11.50% risk premium rate Repossessed chattels Market data approach Price per unit, size, shape, location, time element and discount Time deposits Discounted cash flow method 0.25% - 3.90% risk premium rate

Parent Company Accounts Valuation Technique Significant Unobservable Inputs Loans and receivables Discounted cash flow method 4.00% - 5.00% risk premium rate Investment properties Land Market data approach Price per square meter, size, shape, location, time element and discount Building Cost approach Cost per square meter, size, shape, location, condition and time element Refundable deposits Discounted cash flow method 0.25% - 3.00% risk premium rate Repossessed chattels Market data approach Price per unit, size, shape, location, time element and discount Time deposits Discounted cash flow method 0.25% - 3.00% risk premium rate

Significant increases (decreases) in price per square meter and size of investment properties would result in a significantly higher (lower) fair value of the properties. Significant increases (decreases) in discount would result in a significantly lower (higher) fair value of the properties.

Significant Unobservable Inputs

Size Size of lot in terms of area. Evaluate if the lot size of property or comparable conforms to the average cut of the lots in the area and estimate the impact of the lot size differences on land value. Shape Particular form or configuration of the lot. A highly irregular shape limits the usable area whereas an ideal lot configuration maximizes the usable area of the lot which is associated in designing an improvement which conforms with the highest and best use of the property. Location Location of comparative properties whether on a main road, or secondary road. Road width could also be a consideration if data is available. As a rule, properties located along a main road are superior to properties located along a secondary road. Time element An adjustment for market conditions is made if general property values have appreciated or depreciated since the transaction dates due to inflation or deflation or a change in investor’s perceptions of the market over time. In which case, the current data is superior to historic data.

148 Robinsons Bank Annual Report 2016 *SGVFS022572* - 50 -

Discount Generally, asking prices in ads posted for sale are negotiable. Discount is the amount the seller or developer is willing to deduct from the posted selling price if the transaction will be in cash or equivalent. Risk premium The return in excess of the risk-free rate of return that an investment is expected to yield.

6. Interbank Loans Receivable/Securities Purchased Under Resale Agreement

This account consists of:

Consolidated Parent Company 2016 2015 2016 2015 Interbank loans receivable P=96,000,000 P=97,000,000 P=96,000,000 P=97,000,000 SPURA 581,831,467 − 493,077,515 − P=677,831,467 P=97,000,000 P=589,077,515 P=97,000,000

Interbank loans receivable by the Parent Company in local savings bank has a remaining maturity of one (1) to two (2) years in 2016 and two (2) to three (3) years in 2015.

As of December 31, 2016, placement on reverse repurchase agreement with BSP had a remaining maturity of three (3) days. In 2016 and 2015, placements in BSP and other local savings bank earn interests ranging from 2.50% to 6.17% and from 2.50% to 6.17%, respectively.

7. Investment Securities

Financial Assets at FVPL This account consists of investments by the Parent Company in:

2016 2015 Derivatives assets P=1,322,995 P=− Government securities 1,232,190 5,132,724 P=2,555,185 P=5,132,724

The nominal annual interest rates of peso-denominated government securities range from 1.73% to 4.60% in 2016 and from 3.30% to 5.75% in 2015. The nominal annual interest rates of foreign currency-denominated government securities range from 2.89% to 4.87% in 2016 and from 2.48% to 4.86% in 2015.

Robinsons Bank Annual Report 2016 149 *SGVFS022572* NOTES TO financial STATEMENTS- 51 -

The table below shows the fair values of derivative financial instruments entered into by the Parent Company, recorded as derivative assets/liabilities, together with the notional amounts. The notional amount is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding as of December 31, 2016 and 2015 and are not indicative of either market risk or credit risk.

2016 Average Liabilities Forward Notional Assets (Note 17) Rate Amount Maturity Date Freestanding Derivatives Currency Swaps Bought: USD/PHP P= − P=1,319,176 49.8815 $25,000,000 January 3 – January 12, 2017 EUR/USD 1,267,485 − 1.0453 €1,000,000 January 10, 2017 Sold: PHP/USD − 6,128,575 49.8035 $14,000,000 January 3 – March 27, 2017 USD/EUR 55,510 − 49.6269 €30,000,000 January 10, 2017 P=1,322,995 P=7,447,751

AFS Investments This account consists of investments in:

Consolidated Parent Company 2016 2015 2016 2015 Government securities P=8,192,453,343 P=6,787,060,393 P=8,192,453,343 P=6,787,060,393 Private bonds 3,222,098,803 1,378,397,236 3,222,098,803 1,378,397,236 Quoted equity securities 305,500,000 12,062,000 305,500,000 12,062,000 Unquoted equity securities 23,878,073 23,605,700 54,078,073 52,605,700 P=11,743,930,219 P=8,201,125,329 P=11,774,130,219 P=8,230,125,329

The EIR on AFS investments in peso-denominated and foreign currency-denominated government securities ranges from 2.57% to 4.71% and from 2.80% to 4.86%, respectively, in 2016 and from 3.11% to 8.14% and from 2.75% to 4.44%, respectively, in 2015. The EIR on AFS investments in peso-denominated and foreign currency-denominated private bonds ranges from 3.89% to 5.27% and from 3.56% to 7.10%, respectively, in 2016 and from 4.41% to 6.88% and from 3.74% to 6.50%, respectively, in 2015.

As of December 31, 2016 and 2015, the quoted equity securities of the Group consist of shares of stocks in a private corporation.

Investments in unquoted equity securities include investment in shares of stock of Philippine Clearing House Corporation (PCHC). This investment is required to be held by the Parent Company as part of its operations. The Parent Company does not have any plans to sell these shares in the future. These securities are carried at cost due to the unpredictable nature of future cash flows from these securities and the lack of suitable valuation for arriving at a reliable fair value estimate.

In 2016 and 2015, dividend income from equity securities under ‘AFS investments’ presented under ‘Miscellaneous income’ of the Group amounted to P=6.92 million and P=0.25 million, respectively (see Note 22).

150 Robinsons Bank Annual Report 2016 *SGVFS022572* - 52 -

As of December 31, 2016 and 2015, the unquoted equity securities of the Parent Company include redeemable preferred shares of LSB amounting to P=30.20 million equivalent to 30,200 shares and P=29.00 million equivalent to 29,000 shares, respectively. In 2016, the Parent Company acquired additional 1,200 redeemable preferred shares amounting to P=1.20 million (see Note 16).

Movements in net unrealized losses of the Group and the Parent Company included in the carrying value of ‘AFS investments’ follow:

2016 2015 Balance at beginning of year (P=562,948,094) (=P275,369,283) Changes in fair value (128,480,203) (229,757,637) Realized gains taken to profit or loss (146,826,846) (57,821,174) Change in unrealized losses on AFS investments (275,307,049) (287,578,811) Balance at end of year (P=838,255,143) (=P562,948,094)

HTM Investments This account consists:

Consolidated Parent Company 2016 2015 2016 2015 Private bonds P=3,295,113,507 P=2,633,923,271 P=3,144,781,372 P=2,633,923,271 Government securities 254,787,097 115,372,332 189,746,679 115,372,332 P=3,549,900,604 P=2,749,295,603 P=3,334,528,051 P=2,749,295,603

HTM investments in government securities earn interest ranging from 1.07% to 4.13% in 2016 and from 2.52% to 2.63% in 2015. HTM investments in private bonds earn interest ranging from 4.51% to 6.15% both in 2016 and 2015.

In 2016 and 2015, the Parent Company’s HTM investments amounting to P=31.00 million and P=135.00 million, respectively, matured.

‘Interest income’ on investment securities of the Group and the Parent Company consists of:

Consolidated Parent Company 2016 2015 2016 2015 AFS investments P=353,649,434 P=320,124,799 P=353,649,434 P=320,124,799 HTM investments 170,428,187 109,230,854 164,815,595 109,230,854 Financial assets at FVPL 3,306,426 42,346,156 3,306,426 42,346,156 P=527,384,047 P=471,701,809 P=521,771,455 P=471,701,809

‘Trading and securities gains – net’ of the Group and Parent Company consist of:

2016 2015 Net realized gains on AFS securities taken to profit or loss P=146,826,846 P=57,821,174 Net realized gains (losses) on sale of financial assets at FVPL (316,138) 28,981,911 Unrealized mark-to-market losses on financial assets at FVPL (125,955) (9,562,658) Unrealized gains on derivatives 12,309,515 − P=158,694,268 P=77,240,427

*SGVFS022572*Robinsons Bank Annual Report 2016 151 NOTES TO financial STATEMENTS- 53 -

8. Loans and Receivables

This account consists of:

Consolidated Parent Company 2016 2015 2016 2015 Receivables from customers: Commercial (Note 24) P=27,820,217,445 P=19,473,540,367 P=27,503,181,551 P=19,152,178,905 Real estate 5,763,511,983 3,862,786,362 5,752,176,923 3,847,546,561 Consumption 5,217,952,917 3,727,749,391 4,564,423,973 3,178,321,325 Domestic bills purchased (Notes 17 and 24) 139,337,392 606,548,470 139,337,392 606,548,470 38,941,019,737 27,670,624,590 37,959,119,839 26,784,595,261 Less: unearned interest and discount 30,998,551 24,220,705 8,332,311 8,626,180 38,910,021,186 27,646,403,885 37,950,787,528 26,775,969,081 Other receivables: Accrued interest receivable 493,726,051 397,268,645 454,754,720 372,066,140 Accounts receivable 348,198,599 218,207,275 323,793,278 209,506,011 Sales contract receivable 49,541,368 70,151,102 37,298,848 49,829,152 Lease receivables (Note 21) 8,614,547 6,356,824 − − 39,810,101,751 28,338,387,731 38,766,634,374 27,407,370,384 Less: Allowance for credit losses (Note 14) 913,019,864 769,545,245 797,284,966 721,268,058 P=38,897,081,887 P=27,568,842,486 P=37,969,349,408 P=26,686,102,326

Sales contract receivable earn interest at annual fixed rates ranging from 6.25% to 52.10% and from 6.50% to 52.10% in 2016 and 2015, respectively.

Interest income on loans and receivables consists of:

Consolidated Parent Company 2016 2015 2016 2015 Receivables from customers: Commercial P=1,076,902,794 P=956,944,794 P=1,040,826,798 P=931,758,029 Consumption 921,025,063 802,149,938 785,282,361 663,407,539 Real estate 314,683,992 278,990,191 314,097,616 274,442,403 Domestic bills purchased 455,965 482,050 455,965 482,050 Others 15,093,007 7,624,970 10,100,772 5,142,882 P=2,328,160,821 P=2,046,191,943 P=2,150,763,512 P=1,875,232,903

Others consist of sales contract receivables and lease receivables.

Of the total receivables from customers of the Parent Company as of December 31, 2016 and 2015, 36.29% and 41.25% respectively, are subject to periodic interest repricing. The EIR on the remaining receivables from customers of the Group ranges from 0.20% to 60.95% in 2016 and from 0.12% to 60.95% in 2015. The EIR on the remaining receivables from customers of the Parent Company ranges from 2.00% to 60.95% in both years.

152 Robinsons Bank Annual Report 2016 *SGVFS022572* - 54 -

BSP Reporting As of December 31, 2016 and 2015, information relating to secured loans by collateral type and unsecured receivables from customers follows:

Consolidated 2016 2015 Amount % Amount % Secured by: Real estate P=7,371,818,158 18.93 P=4,649,142,762 16.80 Deposit hold-outs 2,604,951,023 6.69 1,267,114,262 4.58 Chattel 1,913,195,794 4.91 1,164,546,525 4.21 Others 3,620,650,848 9.30 5,222,155,736 18.87 15,510,615,823 39.83 12,302,959,285 44.46 Unsecured 23,430,403,914 60.17 15,367,665,305 55.54 P=38,941,019,737 100.00 P=27,670,624,590 100.00

Parent Company 2016 2015 Amount % Amount % Secured by: Real estate P=7,266,575,046 19.14 P=4,515,503,821 16.86 Chattel 2,590,747,470 6.83 1,144,166,816 4.27 Deposit hold-outs 1,910,287,378 5.03 1,267,101,625 4.73 Others 3,620,650,848 9.54 5,222,155,736 19.50 15,388,260,742 40.54 12,148,927,998 45.36 Unsecured 22,570,859,097 59.46 14,635,667,263 54.64 P=37,959,119,839 100.00 P=26,784,595,261 100.00

Others include jewelry, mortgage trust indenture, company guarantees, deed of assignments of receivables and deed of suretyships.

As of December 31, 2016 and 2015, information on the concentration of credit as to industry follows (in millions):

Consolidated Parent Company 2016 2015 2016 2015 Amount % Amount % Amount % Amount % Real estate, renting and business services P=9,018 23.16 P=6,831 24.69 P=8,927 23.52 P=6,815 25.44 Wholesale and retail trade 7,854 20.17 5,959 21.54 7,763 20.45 5,697 21.27 Financial intermediaries 4,623 11.87 3,805 13.75 4,623 12.18 3,805 14.21 Electricity, gas and water supply 3,860 9.91 1,867 6.75 3,860 10.17 1,867 6.97 Loans to individuals for consumption purposes 3,852 9.89 3,098 11.20 3,852 10.15 2,727 10.18 Manufacturing 3,627 9.32 2,654 9.59 3,627 9.55 2,654 9.91 Other community, social and personal activities 2,017 5.18 729 2.63 1,303 3.43 730 2.73 Transport, storage and communication 1,758 4.52 1,597 5.77 1,758 4.63 1,597 5.96 Agriculture, hunting and forestry 586 1.50 653 2.36 501 1.32 416 1.55 Construction 580 1.49 471 1.70 580 1.53 471 1.76 Health and social work 152 0.39 2 0.01 152 0.40 2 0.01 Others 1,014 2.60 4 0.01 1,013 2.67 4 0.01 P=38,941 100.00 P=27,670 100.00 P=37,959 100.00 P=26,785 100.00

Others relate to mining and quarrying, hotels and restaurants and education.

The BSP considers that concentration risk exists when the total loan exposure to a particular industry or economic sector exceeds 30.00% of the total loan portfolio.

*SGVFS022572*Robinsons Bank Annual Report 2016 153 NOTES TO financial STATEMENTS- 55 -

Under banking regulations, non-performing loans (NPLs) shall, as a general rule, refer to loans whose principal and/or interest is unpaid for thirty (30) days or more after due date or after they have become past due in accordance with existing BSP rules and regulations. This shall apply to loans payable in lump sum and loans payable in quarterly, semi-annual, or annual installments, in which case, the total outstanding balance thereof shall be considered non-performing. Under BSP Circular No. 772, which was issued on October 16, 2012, gross NPLs include NPLs that are covered with 100.00% allowance.

In the case of receivables that are payable in monthly installments, the total outstanding balance thereof shall be considered non-performing when three (3) or more installments are in arrears. In the case of receivables that are payable in daily, weekly, or semi-monthly installments, the total outstanding balance thereof shall be considered non-performing at the same time that they become past due in accordance with existing BSP regulations, i.e., the entire outstanding balance of the receivable shall be considered as past due when the total amount of arrearages reaches 10.00% of the total receivable balance. Restructured receivables which do not meet the requirements to be treated as performing receivables shall also be considered as NPLs.

The Group classifies its loans and receivables as NPL in compliance with BSP regulations, or when, in the opinion of management, collection of interest or principal is doubtful. Loans and receivables are not reclassified as performing until interest and principal payments are brought current or the loans are restructured in accordance with existing BSP regulations and future payments appear assured.

As of December 31, 2016 and 2015, details of these NPLs follow:

Consolidated Parent Company 2016 2015 2016 2015 Secured P=217,159,825 P=240,710,476 P=152,204,657 P=177,752,958 Unsecured 921,465,654 877,580,470 539,003,323 498,353,895 P=1,138,625,479 P=1,118,290,946 P=691,207,980 P=676,106,853

As of December 31, 2016 and 2015, NPLs of the Group and of the Parent Company as reported to the BSP follow:

Consolidated Parent Company 2016 2015 2016 2015 Total NPLs P=1,138,625,479 P=1,118,290,946 P=691,207,980 P=676,106,853 Deductions as required by the BSP* 784,875,886 712,703,960 397,721,518 344,617,958 P=353,749,593 P=405,586,986 P=293,486,462 P=331,488,895 *Allowance for credit losses per BSP

Restructured receivables which do not meet the requirements to be treated as performing receivables shall also be considered as NPLs. Restructured receivables of the Parent Company as of December 31, 2016 and 2015 amounted to =348.01P million and =356.96P million, respectively.

154 Robinsons Bank Annual Report 2016 *SGVFS022572* - 56 -

9. Investment in a Subsidiary

On July 25, 2012, the Parent Company’s BOD approved the acquisition of the 100.00% controlling interest (both common and preferred shares) in LSB. Further, it was resolved that the Parent Company would seek approval from the Monetary Board (MB) of the BSP for the acquisition and other incentives.

On August 15, 2012, the MB of the BSP issued its approval in principle of the Parent Company’s request to acquire LSB and of all the incentives requested by the Parent Company subject to the submission of the necessary requirements.

Beginning August 27, 2012, the Parent Company executed a share purchase agreement (SPA) with the LSB stockholders and made the related partial settlements therewith. The stock and transfer books of LSB will be updated upon the issuance of the certificate authorizing registration from the BIR. As of December 26, 2012, the Parent Company and majority of LSB stockholders had signed on the SPA.

On December 26, 2012, the MB of the BSP approved the SPA covering the Parent Company’s acquisition of the 100.00% common shares of LSB. The deeds of sale to implement the SPA were executed afterwards.

In addition to the approval of the acquisition, the MB of the BSP approved the following merger incentives:

1. Grant of several branch licenses to the Parent Company in restricted areas and waiver of corresponding P=20.00 million special branch licensing fee for each restricted branch license, subject to the following conditions: (a) the establishment of the awarded branches in restricted areas shall be subject to compliance with all other applicable provisions on branch establishment prescribed under Section X151 of the Manual of Regulations for Banks (MORB); and (b) branches shall be opened within three (3) years from BSP final approval of the Parent Company’s acquisition of LSB.

2. Waiver of (a) the monetary penalties aggregating P=6.40 million as of November 30, 2012 for violation of laws assessed by BSP on LSB, except penalties accruing to other parties, e.g., Micro, Small and Medium Enterprises Development Council Fund. Such waiver shall not preclude BSP from pursuing watchlisting and imposition of non-monetary and administrative sanctions (e.g., fines, disqualifications, suspensions and/or removal from office) against the directors and officers of LSB in accordance with applicable banking laws and regulations, without prejudice to the filing of criminal cases against liable persons under Section 34, 35 and 36 of Republic Act No. 7653 (the New Central Bank Act); (b) the applicable restrictions/ceilings on transactions between the Parent Company and LSB, for a period of three months, with respect to the Parent Company’s liquidity support to LSB (through deposits to and/or purchase of receivables from LSB).

3. Staggered booking, up to five (5) years from final BSP approval of the Parent Company’s acquisition of LSB, of the =274.10P million required allowance for probable losses on LSB’s risk assets. The periodic amortization shall be charged against current operations, in accordance with the regulatory accounting guidelines for deferred loss recognition under Appendix 56a (to Subsection X394.10) of the MORB. The unamortized losses shall be deducted from qualifying capital for purposes of capital adequacy ratio computation and from computation of LSB’s unimpaired capital under Subsection X116.1 of the MORB.

*SGVFS022572*Robinsons Bank Annual Report 2016 155 NOTES TO financial STATEMENTS- 57 -

4. Retention of the thrift branch license of LSB on its existing eleven (11) branches, for its operations as a wholly-owned subsidiary of the Parent Company to pursue microfinance and country-side banking.

5. Approval of the following interlocking positions:

a. concurrent assignment of the Parent Company’s Head of Legal Services as Corporate Secretary of LSB; b. secondment of the officers of the Parent Company to LSB to assume the position of President and Chief Compliance Officer subject to the condition that these officers shall (i) relinquish all their duties, responsibilities, and signing authorities in the Parent Company and (ii) receive compensation/salaries and other emoluments from LSB; and c. notation of the interlocking directorships and officership-directorships of the Parent Company.

Based on the foregoing events, the Parent Company acquired effective control and management of LSB as of December 26, 2012. Accordingly, in accordance with PFRS 3, Business Combinations, the Parent Company’s date of acquisition of LSB is December 26, 2012. However, for convenience purposes, the Group used December 31, 2012 as the cut-off in determining the fair value of the net assets of LSB. Therefore, only the fair values of the identifiable assets and liabilities of LSB as December 31, 2012 were consolidated and the profit and loss of LSB for the year ended December 31, 2012 were excluded from the Group’s consolidated financial statements as of December 31, 2012.

The acquisition resulted in recognition of goodwill amounting to P=244.33 million. There were no adjustments resulting from the final purchase price allocation from LSB. As of December 31, 2016 and 2015, goodwill amounted to P=244.33 million.

On August 22, 2012, the BOD of the Parent Company approved the infusion of cash equity to bring LSB’s capital adequacy ratio (CAR) to at least 10.00% amounting to P=620.00 million. In December 2012, the Parent Company infused the P=620.00 million to LSB as a deposit for future stock subscription.

On January 23, 2013, the BOD of LSB approved the conversion of deposit for future stock subscription amounting to P=174.04 million equivalent to 1.74 million shares at P=100.00 par value per share.

On June 22, 2015, LSB obtained approval of its application for increase in authorized capital stock from the BSP.

On September 28, 2015, LSB filed its application for the increase in its authorized capital stock with the SEC and paid for the related filing fees on January 11, 2016. On January 13, 2016, the SEC approved LSB’s application for the increase in its authorized capital stock. LSB converted the outstanding deposit for future stock subscription amounting to P=445.96 million equivalent to 4.46 million shares at P=100.00 par value.

On April 27, 2016, the Parent Company infused additional capital to LSB amounting to =400.00P million equivalent to 4.00 million shares at P=100.00 par value.

156 Robinsons Bank Annual Report 2016 *SGVFS022572* - 58 -

As of December 31, 2016 and 2015, the Parent Company‘s investment in LSB consists of:

December 31, January 1, December 31, 2015 2015 2016 (As restated – Note 2) Cost Balance at beginning of year P=782,647,853 P=811,791,275 P=731,000,000 Capital infusion 400,000,000 − − Balance at end of year 1,182,647,853 811,791,275 731,000,000 Accumulated equity in net income Share in net income (loss) of a subsidiary 22,386,977 (29,610,905) 81,026,397 Accumulated equity in OCI Remeasurement gain (loss) on retirement liability (150,820) 467,483 (235,122) 22,236,157 (29,143,422) 80,791,275 P=1,204,884,010 P=782,647,853 P=811,791,275

10. Property and Equipment

The composition of and the movements in this account follow:

Consolidated 2016 Furniture, Transportation Leasehold Fixtures and Land Building Equipment Improvements Equipment Total Cost Balance at beginning of year P=14,703,332 P=55,097,696 P=144,927,502 P=475,604,173 P=683,357,742 P=1,373,690,445 Additions − − 17,745,866 133,163,203 58,303,997 209,213,066 Disposals − − (7,382,851) − − (7,382,851) Reclassification − − 8,459,565 − − 8,459,565 Balance at end of year 14,703,332 55,097,696 163,750,082 608,767,376 741,661,739 1,583,980,225 Accumulated depreciation and amortization Balance at beginning of year − 24,457,866 84,381,680 283,658,119 510,665,880 903,163,545 Depreciation and amortization − 3,038,335 24,258,818 69,709,080 74,188,407 171,194,640 Disposals − − (5,320,917) − − (5,320,917) Reclassification − (2,182,010) (1,827,724) 4,475,659 (465,925) − Balance at end of year − 25,314,191 101,491,857 357,842,858 584,388,362 1,069,037,268 Allowance for impairment losses (Note 14) Balance at beginning of year − − − − − − Provision 1,912,400 − − − − 1,912,400 Balance at end of year 1,912,400 − − − − 1,912,400 Net Book Value at End of the Year P=12,790,932 P=29,783,505 P=62,258,225 P=250,924,518 P=157,273,377 P=513,030,557

*SGVFS022572*Robinsons Bank Annual Report 2016 157 NOTES TO financial STATEMENTS- 59 -

Consolidated 2015 Furniture, Transportation Leasehold Fixtures and Land Building Equipment Improvements Equipment Total Cost Balance at beginning of year P=14,703,332 P=53,076,058 P=132,459,338 P=395,234,602 P=687,197,140 P=1,282,670,470 Additions − 11,500 29,221,842 76,083,240 74,356,400 179,672,982 Disposals − − (21,514,593) (64,300) (83,993) (21,662,886) Reclassification − 2,010,138 4,760,915 4,350,631 (78,111,805) (66,990,121) Balance at end of year 14,703,332 55,097,696 144,927,502 475,604,173 683,357,742 1,373,690,445 Accumulated depreciation and amortization Balance at beginning of year − 21,649,583 77,945,571 220,012,405 472,272,780 791,880,339 Depreciation and amortization − 2,836,681 22,339,350 57,259,070 70,814,459 153,249,560 Disposals − − (16,041,479) − − (16,041,479) Reclassification − (28,398) 138,238 6,386,644 (32,421,359) (25,924,875) Balance at end of year − 24,457,866 84,381,680 283,658,119 510,665,880 903,163,545 Net Book Value at End of the Year P=14,703,332 P=30,639,830 P=60,545,822 P=191,946,054 P=172,691,862 P=470,526,900

Parent 2016 Furniture, Transportation Leasehold Fixtures and Building Equipment Improvements Equipment Total Cost Balance at beginning of year P=39,946,381 P=132,503,291 P=450,866,491 P=619,457,578 P=1,242,773,741 Additions − 16,205,143 125,646,585 46,079,377 187,931,105 Disposals − (7,082,851) − − (7,082,851) Reclassification − 8,459,565 − − 8,459,565 Balance at end of year 39,946,381 150,085,148 576,513,076 665,536,955 1,432,081,560 Accumulated depreciation and amortization Balance at beginning of year 16,589,183 75,531,022 273,909,308 462,194,708 828,224,221 Depreciation and amortization 1,597,856 21,932,433 67,670,720 65,832,334 157,033,343 Disposals − (5,145,915) − − (5,145,915) Balance at end of year 18,187,039 92,317,540 341,580,028 528,027,042 980,111,649 Net Book Value at End of the Year P=21,759,342 P=57,767,608 P=234,933,048 P=137,509,913 P=451,969,911

Parent 2015 Furniture, Transportation Leasehold Fixtures and Building Equipment Improvements Equipment Total Cost Balance at beginning of year P=39,946,381 P=121,386,049 P=377,882,836 P=636,819,719 P=1,176,034,985 Additions − 27,655,973 73,047,955 61,784,740 162,488,668 Disposals − (21,514,593) (64,300) (83,993) (21,662,886) Reclassification − 4,975,862 − (79,062,888) (74,087,026) Balance at end of year 39,946,381 132,503,291 450,866,491 619,457,578 1,242,773,741 Accumulated depreciation and amortization Balance at beginning of year 15,257,636 70,863,790 220,012,405 432,054,480 738,188,311 Depreciation and amortization 1,331,547 20,708,711 53,896,903 63,007,675 138,944,836 Disposals − (16,041,479) − − (16,041,479) Reclassification − − − (32,867,447) (32,867,447) Balance at end of year 16,589,183 75,531,022 273,909,308 462,194,708 828,224,221 Net Book Value at End of the Year P=23,357,198 P=56,972,269 P=176,957,183 P=157,262,870 P=414,549,520

Gain on sale of property and equipment included in ‘Miscellaneous income’ amounted to P=3.86 million and =0.68P million in 2016 and 2015, respectively, for the Group, and P=3.82 million and P=0.68 million in 2016 and 2015, respectively, for the Parent Company (see Note 22).

158 Robinsons Bank Annual Report 2016 *SGVFS022572* - 60 -

The details of depreciation and amortization follow:

Consolidated Parent Company 2016 2015 2016 2015 Property and equipment P=171,194,640 P=153,249,560 P=157,033,343 P=138,944,836 Software costs (Note 13) 73,933,679 59,018,378 70,641,825 56,369,530 Repossessed chattels (Note 13) 45,975,711 37,958,112 45,936,432 37,943,224 Investment properties (Note 11) 10,984,617 6,749,378 9,419,569 4,432,873 P=302,088,647 P=256,975,428 P=283,031,169 P=237,690,463

As of December 31, 2016 and 2015, the cost of fully depreciated items of property and equipment still in use by the Group amounted to P=697.19 million and P=533.73 million, respectively.

As of December 31, 2016 and 2015, the cost of fully depreciated items of property and equipment still in use by the Parent Company amounted to P=644.76 million and P=487.77 million, respectively.

11. Investment Properties

The movements in this account, which consists of land and buildings, for the Group follow:

2016 Land Building Total Cost Balances at beginning of year P=204,459,484 P=105,201,788 P=309,661,272 Additions (Note 28) 41,829,746 49,522,434 91,352,180 Disposals (24,663,347) (14,588,080) (39,251,427) Reclassifications 3,348,410 (3,348,410) − Balances at end of year 224,974,293 136,787,732 361,762,025 Accumulated depreciation Balances at beginning of year − 31,816,561 31,816,561 Depreciation (Note 10) − 10,984,617 10,984,617 Disposals − (5,482,183) (5,482,183) Balances at end of year − 37,318,995 37,318,995 Allowance for impairment losses (Note 14) Balances at beginning of year 85,971,916 11,081,866 97,053,782 Provisions (Reversals) (52,619,371) 607,594 (52,011,777) Disposals (3,476,669) (2,555,646) (6,032,315) Balances at end of year 29,875,876 9,133,814 39,009,690 Net Book Value at End of the Year P=195,098,417 P=90,334,923 P=285,433,340

*SGVFS022572*Robinsons Bank Annual Report 2016 159 NOTES TO financial STATEMENTS- 61 -

2015 Land Building Total Cost Balances at beginning of year P=203,789,855 P=85,812,149 P=289,602,004 Additions (Note 28) 31,636,185 33,780,329 65,416,514 Disposals (30,966,556) (14,390,690) (45,357,246) Balances at end of year 204,459,484 105,201,788 309,661,272 Accumulated depreciation Balances at beginning of year − 27,180,481 27,180,481 Depreciation (Note 10) − 6,749,378 6,749,378 Disposals − (2,113,298) (2,113,298) Balances at end of year − 31,816,561 31,816,561 Allowance for impairment losses (Note 14) Balances at beginning of year 51,865,985 7,560,603 59,426,588 Provisions 37,065,960 4,357,906 41,423,866 Disposals (2,960,029) (836,643) (3,796,672) Balances at end of year 85,971,916 11,081,866 97,053,782 Net Book Value at End of the Year P=118,487,568 P=62,303,361 P=180,790,929

The movements in this account, which consists of land and buildings, for the Parent Company follow:

2016 Land Building Total Cost Balances at beginning of year P=40,075,456 P=70,701,256 P=110,776,712 Additions (Note 28) 27,232,322 42,762,902 69,995,224 Disposals (9,444,619) (7,503,400) (16,948,019) Reclassifications 3,348,410 (3,348,410) − Balances at end of year 61,211,569 102,612,348 163,823,917 Accumulated depreciation Balances at beginning of year − 11,766,398 11,766,398 Depreciation (Note 10) − 9,419,569 9,419,569 Disposals − (3,073,859) (3,073,859) Balances at end of year − 18,112,108 18,112,108 Allowance for impairment losses (Note 14) Balances at beginning of year 155,625 4,686,126 4,841,751 Provision 6,505,938 4,637,394 11,143,332 Disposals − (189,706) (189,706) Balances at end of year 6,661,563 9,133,814 15,795,377 Net Book Value at End of the Year P=54,550,006 P=75,366,426 P=129,916,432

2015 Land Building Total Cost Balances at beginning of year P=47,688,036 P=55,364,107 P=103,052,143 Additions (Note 28) 20,335,185 28,688,156 49,023,341 Disposals (27,947,765) (13,351,007) (41,298,772) Balances at end of year 40,075,456 70,701,256 110,776,712 Accumulated depreciation Balances at beginning of year − 8,793,601 8,793,601 Depreciation (Note 10) − 4,432,873 4,432,873 Disposals − (1,460,076) (1,460,076) Balances at end of year − 11,766,398 11,766,398

(Forward)

160 Robinsons Bank Annual Report 2016 *SGVFS022572* - 62 -

2015 Land Building Total Allowance for impairment losses (Note 14) Balances at beginning of year P= − P=1,164,863 P=1,164,863 Provision 155,625 4,357,906 4,513,531 Disposals − (836,643) (836,643) Balances at end of year 155,625 4,686,126 4,841,751 Net Book Value at End of the Year P=39,919,831 P=54,248,732 P=94,168,563

Direct operating expenses on investment properties (recorded in ‘Litigation expense on assets acquired’ under ‘Miscellaneous expense’) amounted to P=14.90 million and P=8.84 million in 2016 and 2015, respectively, for the Group, and P=13.09 million and P=8.06 million in 2016 and 2015, respectively, for the Parent Company (see Note 22).

Gain on initial recognition of investment properties included in ‘Miscellaneous income’ of the Group amounted to P=17.30 million and P=35.55 million in 2016 and 2015, respectively, for the Group, and P=12.67 million and P=30.70 million in 2016 and 2015, respectively, for the Parent Company (see Note 22).

Gain on sale of investment properties included in ‘Miscellaneous income’ amounted to P=8.15 million and =10.47P million in 2016 and 2015, respectively for the Group and P=3.54 million and P=5.94 million in 2016 and 2015, respectively, for the Parent Company (see Note 22).

12. Branch Licenses

The movements in this account follow:

Consolidated Parent Company 2016 2015 2016 2015 Cost Balance at beginning of year P=1,185,377,111 P=1,184,377,111 P=565,377,111 P=564,377,111 Additions 44,600,000 1,000,000 44,000,000 1,000,000 Balance at end of year 1,229,977,111 1,185,377,111 609,377,111 565,377,111 Allowance for impairment losses (Note 14) Balance at beginning and end of year 232,526,929 232,526,929 232,526,929 232,526,929 P=997,450,182 P=952,850,182 P=376,850,182 P=332,850,182

13. Other Assets

This account consists of:

Consolidated Parent Company 2016 2015 2016 2015 Bills payment – contra P=626,363,142 P=128,910,734 P=626,363,142 P=128,910,734 Software costs – net 353,353,540 401,094,027 348,001,639 393,848,032 Creditable withholding tax 141,316,753 104,303,672 141,316,753 104,303,672 Repossessed chattels – net 103,598,417 73,343,238 103,489,250 73,316,657 Prepaid expenses 84,489,727 42,549,284 80,194,606 37,119,210 Refundable deposits 57,201,471 46,377,395 55,721,032 45,877,084 Sundry debits 27,898,129 20,107,049 27,898,129 18,975,425 (Forward)

*SGVFS022572*Robinsons Bank Annual Report 2016 161 NOTES TO financial STATEMENTS- 63 -

Consolidated Parent Company 2016 2015 2016 2015 Advance payment to suppliers P=25,857,400 P=15,893,833 P=25,857,400 P=15,893,833 Documentary stamp tax on hand 25,806,925 30,359,307 23,048,149 27,722,633 Others 20,946,370 16,610,749 14,800,243 13,843,586 1,466,831,874 879,549,288 1,446,690,343 859,810,866 Allowance for impairment losses (Note 14) (10,201,994) (7,866,310) (7,678,160) (7,478,160) P=1,456,629,880 P=871,682,978 P=1,439,012,183 P=852,332,706

Bills payment – contra is the contra account of bills payment under ‘Accrued expenses and other liabilities’ (see Note 17).

Advance payment to suppliers consists of various down payments made to various suppliers and contractors in connection with the Group’s and the Parent Company’s operation and other projects such as branch expansions.

Software costs – net represent costs incurred to date in the development of the Parent Company’s core banking and other systems that are under the testing phase and will be rolled out after completion of all the phases, including but not limited to further enhancement and testing. In 2016, all phases were completed and this was reclassified to software cost.

Others include stationeries, office supplies, and other miscellaneous assets.

In 2016 and 2015, the Parent Company recognized provision for impairment losses on certain miscellaneous assets amounting to P=0.20 million and =7.48P million, respectively. The composition of and the movements in ‘Repossessed chattels – net’ of the Group follow:

2016 Cars Others Total Cost Balances at beginning of year P=10,730,001 P=114,513,229 P=125,243,230 Additions (Note 28) 22,680,000 202,906,603 225,586,603 Disposals (12,995,000) (174,146,215) (187,141,215) Reclassifications (8,400,000) (615,500) (9,015,500) Balances at end of year 12,015,001 142,658,117 154,673,118 Accumulated depreciation Balances at beginning of year 5,846,529 32,197,840 38,044,369 Depreciation (Note 10) 2,950,281 43,025,430 45,975,711 Disposals (4,803,995) (38,455,663) (43,259,658) Reclassifications (1,108,909) (89,631) (1,198,540) Balances at end of year 2,883,906 36,677,976 39,561,882 Allowance for impairment losses (Note 14) Balances at beginning of year 873,576 12,982,047 13,855,623 Provisions 1,045,676 5,968,500 7,014,176 Disposals (353,736) (9,003,244) (9,356,980) Balances at end of year 1,565,516 9,947,303 11,512,819 Net Book Value at End of the Year P=7,565,579 P=96,032,838 P=103,598,417

162 Robinsons Bank Annual Report 2016 *SGVFS022572* - 64 -

2015 Cars Others Total Cost Balances at beginning of year P=30,228,903 P=66,950,590 P=97,179,493 Additions (Note 28) 13,629,098 114,463,913 128,093,011 Disposals (26,490,000) (66,634,274) (93,124,274) Reclassifications (6,638,000) (267,000) (6,905,000) Balances at end of year 10,730,001 114,513,229 125,243,230 Accumulated depreciation Balances at beginning of year 7,512,885 20,133,460 27,646,345 Depreciation (Note 10) 12,132,116 25,825,996 37,958,112 Disposals (11,977,639) (13,653,311) (25,630,950) Reclassifications (1,820,833) (108,305) (1,929,138) Balances at end of year 5,846,529 32,197,840 38,044,369 Allowance for impairment losses (Note 14) Balances at beginning of year − 7,523,147 7,523,147 Provisions 873,576 5,650,310 6,523,886 Disposals − (191,410) (191,410) Balances at end of year 873,576 12,982,047 13,855,623 Net Book Value at End of the Year P=4,009,896 P=69,333,342 P=73,343,238

The composition of and the movements in ‘Repossessed chattels – net’ of the Parent Company follow:

2016 Cars Others Total Cost Balances at beginning of year P=10,730,001 P=114,432,703 P=125,162,704 Additions (Note 28) 22,680,000 202,740,303 225,420,303 Disposals (12,995,000) (174,085,591) (187,080,591) Reclassifications (8,400,000) (615,500) (9,015,500) Balances at end of year 12,015,001 142,471,915 154,486,916 Accumulated depreciation Balances at beginning of year 5,846,529 32,152,548 37,999,077 Depreciation (Note 10) 2,950,281 42,986,151 45,936,432 Disposals (4,803,995) (38,439,474) (43,243,469) Reclassifications (1,108,909) (89,631) (1,198,540) Balances at end of year 2,883,906 36,609,594 39,493,500 Allowance for impairment losses (Note 14) Balances at beginning of year 873,576 12,973,394 13,846,970 Provision 1,045,676 5,968,500 7,014,176 Disposals (353,736) (9,003,244) (9,356,980) Balances at end of year 1,565,516 9,938,650 11,504,166 Net Book Value at End of the Year P=7,565,579 P=95,923,671 P=103,489,250

2015 Cars Others Total Cost Balances at beginning of year P=30,228,903 P=66,684,664 P=96,913,567 Additions (Note 28) 13,629,098 114,457,901 128,086,999 Disposals (26,490,000) (66,442,862) (92,932,862) Reclassifications (6,638,000) (267,000) (6,905,000) Balances at end of year 10,730,001 114,432,703 125,162,704

(Forward)

*SGVFS022572*Robinsons Bank Annual Report 2016 163 NOTES TO financial STATEMENTS- 65 -

2015 Cars Others Total Accumulated depreciation Balances at beginning of year P=7,512,885 P=20,103,055 P=27,615,940 Depreciation (Note 10) 12,132,116 25,811,108 37,943,224 Disposals (11,977,639) (13,653,310) (25,630,949) Reclassifications (1,820,833) (108,305) (1,929,138) Balances at end of year 5,846,529 32,152,548 37,999,077 Allowance for impairment losses (Note 14) Balances at beginning of year − 7,331,729 7,331,729 Provision 873,576 5,641,665 6,515,241 Balances at end of year 873,576 12,973,394 13,846,970 Net Book Value at End of the Year P=4,009,896 P=69,306,761 P=73,316,657

Gain on initial recognition of repossessed chattels included in ‘Miscellaneous income’ amounted to =25.02P million in 2016 and =6.00P million in 2015, for the Group, and =25.07P million in 2016 and P=6.00 million in 2015, for the Parent Company (Note 22).

Loss on sale of repossessed chattels included in ‘Miscellaneous expense’ amounted to P=13.78 million and P=13.79 million in 2016, for the Group and the Parent Company, respectively. Gain on sale of repossessed chattels included in ‘Miscellaneous income’ amounted to P=12.43 million and P=12.28 million in 2015, respectively, for the Group and the Parent Company, respectively (see Note 22).

Movements in ‘Software costs – net’ follow:

Consolidated Parent Company 2016 2015 2016 2015 Cost Balance at beginning of year P=572,885,012 P=109,348,152 P=559,242,555 P=104,553,716 Additions 26,193,192 9,779,795 24,795,432 2,444,000 Reclassification − 453,757,065 − 452,244,839 599,078,204 572,885,012 584,037,987 559,242,555 Accumulated amortization Balance at beginning of year 171,790,985 78,391,643 165,394,523 76,157,546 Amortization (Note 10) 73,933,679 59,018,378 70,641,825 56,369,530 Reclassification/others − 34,380,964 − 32,867,447 Balance at end of year 245,724,664 171,790,985 236,036,348 165,394,523 Net Book Value at the End of the Year P=353,353,540 P=401,094,027 P=348,001,639 P=393,848,032

164 Robinsons Bank Annual Report 2016 *SGVFS022572* - 66 -

14. Allowance for Credit and Impairment Losses

Movements in the allowance for credit and impairment losses follow:

Consolidated Parent Company 2016 2015 2016 2015 Balances at beginning of year Loans and receivables P=769,545,245 P=652,437,168 P=721,268,058 P=633,997,148 Investment properties 97,053,782 59,426,588 4,841,751 1,164,863 Branch licenses 232,526,929 232,526,929 232,526,929 232,526,929 Repossessed chattels 13,855,623 7,523,147 13,846,970 7,331,729 Other assets 7,866,310 388,150 7,478,160 − 1,120,847,889 952,301,982 979,961,868 875,020,669 Provision for the year 155,922,043 266,048,342 147,571,357 195,460,767 Disposals (15,389,295) (4,045,538) (9,546,686) (836,643) Reversals/others (53,196,942) (88,471,547) (53,196,941) (84,697,575) Accounts charged-off − (4,985,350) − (4,985,350) 87,335,806 168,545,907 84,827,730 104,941,199 Balances at end of year Loans and receivables (Note 8) 913,019,864 769,545,245 797,284,966 721,268,058 Property and equipment (Note 10) 1,912,400 − − − Investment properties (Note 11) 39,009,690 97,053,782 15,795,377 4,841,751 Branch licenses (Note 12) 232,526,929 232,526,929 232,526,929 232,526,929 Repossessed chattels (Note 13) 11,512,819 13,855,623 11,504,166 13,846,970 Other assets (Note 13) 10,201,994 7,866,310 7,678,160 7,478,160 P=1,208,183,696 P=1,120,847,889 P=1,064,789,598 P=979,961,868

A reconciliation of the allowance for credit losses by class of loans and receivables follows (in thousands):

Consolidated 2016 Domestic Bills Commercial Consumption Real Estate Purchased Others Total Balance at beginning of year P=362,454 P=207,256 P=24,866 P=5,467 P=169,502 P=769,545 Provisions for the year 130,929 57,427 (1,449) 14,932 (5,167) 196,672 Reversals/others 15,426 (45,540) (9,170) − (13,913) (53,197) Balance at end of year P=508,809 P=219,143 P=14,247 P=20,399 P=150,422 P=913,020 Individual impairment P=350,466 P=139,405 P=6,509 P= − P=21,455 P=517,869 Collective impairment 158,343 79,738 7,738 20,399 128,967 395,151 P=508,809 P=219,143 P=14,247 P=20,399 P=150,422 P=913,020 Gross amount of loans and receivables individually determined to be impaired P=745,379 P=141,432 P=7,887 P= − P=30,298 P=924,996

*SGVFS022572*Robinsons Bank Annual Report 2016 165 NOTES TO financial STATEMENTS- 67 -

Parent Company 2016 Domestic Bills Commercial Consumption Real Estate Purchased Others Total Balance at beginning of year P=364,703 P=194,192 P=16,571 P=5,467 P=140,335 P=721,268 Provisions for the year 68,709 43,062 − 14,932 2,511 129,214 Reversals/others 15,427 (45,540) (9,170) − (13,913) (53,197) Balance at end of year P=448,839 P=191,714 P=7,400 P=20,399 P=128,933 P=797,285 Individual impairment P=184,831 P= − P= − P= − P= − P=184,831 Collective impairment 264,008 191,714 7,400 20,399 128,933 612,454 P=448,839 P=191,714 P=7,400 P=20,399 P=128,933 P=797,285 Gross amount of loans and receivables individually determined to be impaired P=554,364 P= − P= − P= − P= − P=554,364

Consolidated 2015 Domestic Bills Commercial Consumption Real Estate Purchased Others Total Balance at beginning of year P=306,026 P=232,300 P=48,259 P=2,795 P=63,058 P=652,438 Provisions for the year 94,403 123,848 10,596 − 18,693 247,540 Reversals/others (37,975) (143,907) (33,989) 2,672 87,751 (125,448) Accounts charged-off – (4,985) – − − (4,985) Balance at end of year P=362,454 P=207,256 P=24,866 P=5,467 P=169,502 P=769,545 Individual impairment P=229,726 P=111,273 P=8,295 P= − P=29,167 P=378,461 Collective impairment 132,728 95,983 16,571 5,467 140,335 391,084 P=362,454 P=207,256 P=24,866 P=5,467 P=169,502 P=769,545 Gross amount of loans and receivables individually determined to be impaired P=893,659 P=180,428 P=12,523 P= − P=38,424 P=1,125,034

Parent Company 2015 Domestic Bills Commercial Consumption Real Estate Purchased Others Total Balance at beginning of year P=301,194 P=225,831 P=44,069 P=2,795 P=60,108 P=633,997 Provisions for the year 77,473 86,824 1,822 − 10,835 176,954 Reversals/others (13,964) (113,478) (29,320) 2,672 69,392 (84,698) Accounts charged-off − (4,985) − − − (4,985) Balance at end of year P=364,703 P=194,192 P=16,571 P=5,467 P=140,335 P=721,268 Individual impairment P=198,221 P=1,536 P= − P= − P= − P=199,757 Collective impairment 166,482 192,656 16,571 5,467 140,335 521,511 P=364,703 P=194,192 P=16,571 P=5,467 P=140,335 P=721,268 Gross amount of loans and receivables individually determined to be impaired P=672,818 P=1,608 P= − P= − P= − P=674,426

Below is the breakdown of provision for (reversal of) credit and impairment losses:

Consolidated Parent Company 2016 2015 2016 2015 Loans and receivables P=196,671,560 P=210,622,430 P=129,213,849 P=176,953,835 Investment properties (52,011,777) 41,423,866 11,143,332 4,513,531 Repossessed chattels 7,014,176 6,523,886 7,014,176 6,515,241 Property and equipment 1,912,400 – – – Other assets 2,335,684 7,478,160 200,000 7,478,160 P=155,922,043 P=266,048,342 P=147,571,357 P=195,460,767

166 Robinsons Bank Annual Report 2016 *SGVFS022572* - 68 -

15. Deposit Liabilities

Of the total deposit liabilities of the Group as of December 31, 2016 and 2015, 52.12% and 40.84%, respectively, are subject to periodic interest repricing. Remaining deposit liabilities bear annual fixed interest rates ranging from nil to 2.88% in 2016 and from nil to 1.00% in 2015, respectively.

On March 27, 2014, the BSP through Circular 830 approved the 1.00% increase in reserve requirements effective April 11, 2014, thereby increasing the reserve requirements on non-FCDU deposit liabilities of the Parent Company and LSB from 18.00% to 19.00% and 6.00% to 7.00% respectively. As mandated by the Circular, only demand deposit accounts maintained by the bank with the BSP are eligible for compliance with reserve requirements, thereby excluding government securities and cash in vault as eligible reserves. Further, deposits maintained with the BSP in compliance with the reserve requirement shall no longer be paid interest. On May 8, 2014, the BSP, through BSP Circular 832, approved the 1.00% increase in reserve requirement effective May 30, 2014, thereby further increasing the reserve requirements on non-FCDU deposit liabilities of the Parent Company and LSB from 19.00% to 20.00% and from 7.00% to 8.00%, respectively.

The Group’s liquidity and statutory reserves as reported to the BSP follow:

Consolidated Parent Company 2016 2015 2016 2015 Due from BSP P=11,015,517,416 P=7,402,250,327 P=10,872,258,187 P=7,259,740,992

As of December 31, 2016 and 2015, the Group is in compliance with the regulations.

Details of interest expense on deposit liabilities follow:

Consolidated Parent Company 2016 2015 2016 2015 Savings P=327,306,744 P=287,391,613 P=315,475,701 P=270,638,593 Time 319,618,027 274,848,318 300,207,579 253,812,635 Demand 1,938,352 1,785,501 1,938,352 1,785,501 P=648,863,123 P=564,025,432 P=617,621,632 P=526,236,729

16. Redeemable Preferred Shares

In 2013, the Parent Company acquired 29,000 redeemable preferred shares at P=1,000 par value from LSB (see Note 7). Details of LSB’s redeemable preferred shares as of December 31, 2016 and 2015 follow:

Shares Amount Preferred shares – =P1,000 par value Authorized 50,000 P=50,000,000 Issued and outstanding Balances at beginning and end of year 30,700 P=30,700,000

Robinsons Bank Annual Report 2016 167 *SGVFS022572* NOTES TO financial STATEMENTS- 69 -

The preferred shares has the following features: a. The minimum subscription is 100 shares and payable in cash; b. The shares shall earn monthly interest at a rate to be fixed by the BOD, but such interest shall not be less than the prevailing market interest rates and said shares shall not be treated as time deposit, deposit substitute or as other form of borrowings; c. The interest shall be paid in the form of dividends cumulatively, which may be declared annually or as often as the BOD may determine; d. The shares shall have preference in the distribution of dividends and in the distribution of assets in case of liquidation or dissolution, provided, however that no dividend shall be declared or paid on redeemable shares in the absence of sufficient undivided profits, free surplus and approval of the BSP; e. The shares are non-voting on matters provided for in the last paragraph of Section 6 of the Corporation Code; f. Pre-emptive rights are not available on preferred shares nor shall they be subject to one and the shares shall be held for five (5) years with a right of alienation or encumbrance of the same to any third person within the period of five years from the original date of subscription, provided, however, that on the 5th year the holder shall be obliged to surrender the same to the corporation and upon prior approval of the BSP and in compliance with the provisions of the MORB and the BSP’s circulars regarding this matter, the corporation shall be obliged to take up the subscription at the price when the preferred shares of stock were originally subscribed. Provided that shares redeemed are replaced with at least an equivalent amount of newly paid- in shares so that the total paid-in capital stock is maintained at the same level immediately prior to redemption and provided further, that the corporation is not insolvent or if such redemption will not cause insolvency, impairment of capital or inability of the corporation to meet its debts as they mature; and g. As of December 31, 2013, LSB has not yet created a sinking fund pending request from BSP to redeem and retire the preferred shares. The fund that will be used to redeem the preferred shares will be taken from the equity infused by the Parent Company.

As discussed in Note 9, the SEC’s approved LSB’s application for increase in authorized capital stock on January 13, 2016.

The shares may again be disposed of by LSB for a price fixed by the BOD. Based on the BOD resolution on March 6, 2013, the entire redeemable preferred shares of LSB will be retired after its redemption subject to BSP’s approval. As of December 31, 2016 and 2015, the entire redeemable preferred shares of LSB are still subject to BSP’s approval.

17. Accrued Expenses and Other Liabilities

Accrued expenses account consist of:

Consolidated Parent Company 2016 2015 2016 2015 Accrued expenses P=322,888,723 P=382,395,275 P=315,439,003 P=373,329,115 Accrued interest payable 97,510,939 60,358,604 97,137,965 60,262,143 P=420,399,662 P=442,753,879 P=412,576,968 P=433,591,258

Accrued expenses consist of accruals and provisions for general expenses, bonuses and insurance on deposits, fees and advertisements.

168 Robinsons Bank Annual Report 2016 *SGVFS022572* - 70 -

Other liabilities include:

Consolidated Parent Company 2016 2015 2016 2015 Bills payment P=632,856,221 P=165,638,266 P=632,856,221 P=165,638,266 Accounts payable 547,012,550 314,661,582 538,416,916 303,549,040 Bills purchased – contra (Note 8) 139,337,392 606,548,470 139,337,392 606,548,470 Withholding taxes and other taxes payable 51,540,202 35,966,949 51,240,746 35,572,335 Retirement liability (Note 20) 49,731,351 68,530,070 45,183,200 65,673,326 Dormant manager’s checks 49,515,703 56,804,433 49,515,703 56,804,433 Derivative liabilities (Note 7) 7,447,751 − 7,447,751 − Redeemable preferred shares (Note 16) 500,000 1,700,000 − − Income tax payable 219,637 2,382,364 − 282,448 Others 45,834,494 18,358,848 45,396,469 17,296,895 P=1,523,995,301 P=1,270,590,982 P=1,509,394,398 P=1,251,365,213

Bills purchased-contra is the contra account of bills purchased under loans. Bills purchased are receivables from customers from converting checks and bank drafts to cash. As of December 31, 2016 and 2015, bills purchased-contra consists mainly of DOSRI accounts.

Accounts payable consists of payables to service providers, advance payments from customers and unreleased checks.

Bills payment pertains to various payments made by depositors of the Parent Company as an intermediary for various merchants.

Others consist mainly of sundry credits, customer liabilities under acceptances, advances, payables to agencies servicing employee welfare such as Social Security System, Home Development Mutual Fund and Medicare.

18. Maturity Analysis of Assets and Liabilities

The following table shows an analysis of assets and liabilities analyzed according to whether they are expected to be recovered or settled within one year and beyond one year from statements of financial position date:

Consolidated 2016 2015 Due Within Due Beyond One Due Within Due Beyond One Year Year Total One Year One Year Total Financial Assets Cash and other cash items P=1,684,403,861 P=− P=1,684,403,861 P=1,702,287,136 P= − P=1,702,287,136 Due from BSP 13,415,517,416 − 13,415,517,416 9,922,250,327 − 9,922,250,327 Due from other banks 4,090,364,784 − 4,090,364,784 4,689,841,387 − 4,689,841,387 Interbank loans receivable/SPURA 581,831,467 96,000,000 677,831,467 − 97,000,000 97,000,000 Financial assets at FVPL 2,555,185 − 2,555,185 5,132,724 − 5,132,724 AFS investments 146,278,223 11,597,651,996 11,743,930,219 8,201,125,329 − 8,201,125,329 HTM investment 254,550,191 3,295,350,413 3,549,900,604 − 2,749,295,603 2,749,295,603 Loans and receivables – gross 16,616,828,833 23,224,271,469 39,841,100,302 10,492,603,076 17,870,005,360 28,362,608,436 Other assets 1,035,710 56,165,761 57,201,471 23,205,875 23,171,520 46,377,395 36,793,365,670 38,269,439,639 75,062,805,309 35,036,445,854 20,739,472,483 55,775,918,337

(Forward)

*SGVFS022572*Robinsons Bank Annual Report 2016 169 NOTES TO financial STATEMENTS- 71 -

Consolidated 2016 2015 Due Within Due Beyond One Due Within Due Beyond One Year Year Total One Year One Year Total Non-financial Assets Property and equipment – net P= − P=513,030,557 P=513,030,557 P= − P=470,526,900 P=470,526,900 Investment properties – net − 285,433,340 285,433,340 − 180,790,929 180,790,929 Branch licenses – net − 997,450,182 997,450,182 − 952,850,182 952,850,182 Deferred tax asset − 53,435,098 53,451,334 − 3,325,050 3,325,050 Goodwill − 244,327,006 244,327,006 − 244,327,006 244,327,006 Other assets 890,556,639 508,871,770 1,399,412,173 299,903,361 525,402,222 825,305,583 P=37,683,922,309 P=40,871,987,592 78,555,909,901 P=35,336,349,215 P=23,116,694,772 58,453,043,987 Less: Unearned interest and discounts 30,998,551 24,220,705 Allowance for credit and impairment losses – loans and receivables 913,019,864 769,545,245 P=77,611,891,486 P=57,659,278,037 Financial Liabilities Deposit liabilities P=59,123,635,173 P=4,171,464,853 P=63,295,100,026 P=39,410,367,245 P=4,257,391,848 P=43,667,759,093 Manager’s checks 404,180,308 − 404,180,308 289,136,769 − 289,136,769 Accrued expenses 420,399,662 − 420,399,662 442,753,879 − 442,753,879 Other liabilities 1,377,238,397 − 1,377,238,397 1,149,837,104 − 1,149,837,104 61,325,453,540 4,171,464,853 65,496,918,393 41,292,094,997 4,257,391,848 45,549,486,845 Non-financial Liabilities Other liabilities 96,525,553 50,231,351 146,756,904 52,223,808 68,530,070 120,753,878 P=61,421,979,093 P=4,221,696,204 P=65,643,675,297 P=41,344,318,805 P=4,325,921,918 P=45,670,240,723

Parent 2016 2015 (As Restated – Note 2) Due Within Due Beyond Due Within Due Beyond One Year One Year Total One Year One Year Total Financial Assets Cash and other cash items P=1,653,720,370 P=− P=1,653,720,370 P=1,665,564,278 P= − P=1,665,564,278 Due from BSP 12,722,258,187 − 12,722,258,187 9,189,740,992 − 9,189,740,992 Due from other banks 3,995,280,423 − 3,995,280,423 4,596,213,199 − 4,596,213,199 Interbank loans receivable/SPURA 493,077,515 96,000,000 589,077,515 − 97,000,000 97,000,000 Financial assets at FVPL 2,555,185 − 2,555,185 5,132,724 − 5,132,724 AFS investments 176,478,223 11,597,651,996 11,774,130,219 8,230,125,329 − 8,230,125,329 HTM investment 239,560,181 3,094,967,870 3,334,528,051 − 2,749,295,603 2,749,295,603 Loans and receivables – gross 16,465,803,192 22,309,163,493 38,774,966,685 10,092,084,091 17,323,912,473 27,415,996,564 Other assets 194,611 55,526,421 55,721,032 23,205,875 22,671,209 45,877,084 35,748,927,887 37,153,309,780 72,902,237,667 33,802,066,488 20,192,879,285 53,994,945,773 Non-financial Assets Property and equipment – net − 451,969,911 451,969,911 − 414,549,520 414,549,520 Investment properties – net − 129,916,432 129,916,432 − 94,168,563 94,168,563 Branch licenses – net − 376,850,182 376,850,182 − 332,850,182 332,850,182 Deferred tax asset − 194,482,918 194,499,154 − 142,537,278 142,537,278 Investment in subsidiary − 1,204,884,010 1,204,884,010 − 782,647,853 782,647,853 Other assets 890,356,639 492,934,512 1,383,274,915 293,756,050 512,699,572 806,455,622 P=36,639,284,528 P=40,004,347,745 76,643,632,271 P=34,095,822,538 P=22,472,332,253 56,568,154,791 Less: Unearned interest and discounts (loans) 8,332,311 8,626,180 Allowance for credit and impairment losses – loans and receivables 797,284,966 721,268,058 P=75,838,014,994 P=55,838,260,553 Financial Liabilities Deposit liabilities P=57,772,149,864 P=3,771,497,267 P=61,543,647,131 P=38,027,804,564 P=3,847,325,435 P=41,875,129,999 Manager’s checks 404,180,308 − 404,180,308 289,136,769 − 289,136,769 Accrued expenses 412,576,968 − 412,576,968 433,591,258 − 433,591,258 Other liabilities 1,367,573,983 − 1,367,573,983 1,149,837,104 − 1,149,837,104 59,956,481,123 3,771,497,267 63,727,978,390 39,900,369,695 3,847,325,435 43,747,695,130 Non-financial Liabilities Other liabilities 96,637,215 45,183,200 141,820,415 35,854,783 65,673,326 101,528,109 P=60,053,118,338 P=3,816,680,467 P=63,869,798,805 P=39,936,224,478 P=3,912,998,761 P=43,849,223,239

170 Robinsons Bank Annual Report 2016 *SGVFS022572* - 72 -

19. Equity

As of December 31, 2016 and 2015, the Parent Company’s capital stock consists of:

Shares Amount 2016 2015 2016 2015 Common shares - P=10 par value Authorized 1,500,000,000 43,683,500 P=15,000,000,000 P=436,835,000 Issued and outstanding Issued and outstanding 43,683,500 43,683,500 P=436,835,000 P=436,835,000 Issued during the year 1,156,316,500 – 11,563,165,000 – Balances at end of year 1,200,000,000 43,683,500 P=12,000,000,000 P=436,835,000

Preferred shares A - P=10 par value Authorized − 356,316,500 P= − P=3,563,165,000 Issued and outstanding Balance at beginning of year 356,316,500 310,641,564 3,563,165,000 3,106,415,640 Issuance of preferred shares A − 45,674,936 − 456,749,360 Conversion of preferred shares A (356,316,500) − (3,563,165,000) − − 356,316,500 − 3,563,165,000 Preferred shares B - P=10 par value Authorized − 210,000,000 − 2,100,000,000 Issued and outstanding Balance at beginning of year 210,000,000 209,604,710 2,100,000,000 2,096,047,100 Issuance of preferred shares B − 395,290 − 3,952,900 Conversion of preferred shares B (210,000,000) − (2,100,000,000) − − 210,000,000 − 2,100,000,000 − 566,316,500 P= − P=5,663,165,000

The preferred shares have the following features:

a. Preferred stockholders are entitled to receive preferential but non-cumulative dividends at the rate to be determined by the BOD. b. Preferred stocks are redeemable at the option of the Parent Company at any time provided that the redemption price shall not be lower than the par value or higher than 110.00% of said par value; c. In the event of any voluntary or involuntary liquidation, the preferred stockholders are entitled to receive the liquidation value of the said shares equivalent to 110.00% of the par value plus any unpaid but declared dividends thereon. If the net assets of the Parent Company shall be insufficient to pay in full the liquidation value of all the preferred stock, then such net resources shall be distributed among such preferred stock ratably in accordance with the respective liquidation value of the shares they are holding.

Surplus Reserves In compliance with existing BSP regulations, 10.00% of the net profits realized by the Parent Company from its trust business is appropriated to surplus reserve. The yearly appropriation is required until the surplus reserve for trust business equals 20.00% of the Parent Company’s regulatory capital.

In 2016 and 2015, the Parent Company’s BOD approved to appropriate reserves for self-insurance amounting to P=3.60 million and for trust reserves amounting to P=0.93 million and P=2.62 million, respectively.

*SGVFS022572*Robinsons Bank Annual Report 2016 171 NOTES TO financial STATEMENTS- 73 -

Capital Management The Group considers the equity attributable to the equity holders of the Parent Company as the capital base of the Group. The primary objectives of the Group’s capital management are to ensure that it complies with externally imposed capital requirements and that it maintains strong credit ratings and healthy capital ratios in order to support its business and to maximize shareholders value.

The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities and assessment of prospective business requirements or directions. In order to maintain or adjust the capital structure, the Group may adjust the amount and mode of dividend payment to shareholders, issue capital securities or undertake a share buy-back. The processes and policies guiding the determination of the sufficiency of capital for the Group relative to its business risks are the very same methodology that have been incorporated into the Group’s Internal Capital Adequacy Assessment Process (ICAAP) in compliance with the requirements of BSP Circular No. 639 for its adoption. Under this framework, the assessment of risks extends beyond the Pillar 1 set of credit, market and operational risks and onto other risks deemed material by the Group. The level and structure of capital are assessed and determined in light of the Group’s business environment, plans, performance, risks and budget; as well as regulatory edicts. BSP requires submission of an ICAAP document every January 31.

The Group had complied with all externally imposed capital requirements throughout the year.

Regulatory Qualifying Capital In 2013, the determination of the Parent Company’s compliance with regulatory requirements and ratios is based on the amount of the Parent Company’s ‘unimpaired capital’ (regulatory net worth) reported to the BSP, which is determined on the basis of regulatory policies. In addition, the risk- based capital ratio of a bank, expressed as a percentage of qualifying capital to risk-weighted assets, should not be less than 10.00% for both solo basis (head office and branches) and consolidated basis (parent company and subsidiaries engaged in financial allied undertakings). Qualifying capital and risk-weighted assets are computed based on BSP regulations.

The regulatory Gross Qualifying Capital of the Parent Company consists of Tier 1 (core) and Tier 2 (supplementary) capital. Tier 1 capital comprises share capital, retained earnings (including current year profit) and non-controlling interest less required deductions such as deferred tax and unsecured credit accommodations to DOSRI. Tier 2 capital includes unsecured subordinated note, revaluation reserves and general loan loss provision. Certain items are deducted from the regulatory Gross Qualifying Capital, such as but not limited to equity investments in unconsolidated subsidiary banks and other financial allied undertakings, but excluding investments in debt capital instruments of unconsolidated subsidiary banks (for solo basis) and equity investments in subsidiary non-financial allied undertakings.

Risk-weighted assets are determined by assigning defined risk weights to statement of financial position exposures and to the credit equivalent amounts of off-balance sheet exposures. Certain items are deducted from risk-weighted assets, such as the excess of general loan loss provision over the amount permitted to be included in Tier 2 capital. The risk weights vary from 0.00% to 125.00% depending on the type of exposure, with the risk weights of off-balance sheet exposures being subjected further to credit conversion factors. Following is a summary of risk weights and selected exposure types:

172 Robinsons Bank Annual Report 2016 *SGVFS022572* - 74 -

Risk weight Exposure/Asset type* 0% Cash on hand; claims collateralized by securities issued by the non-government, BSP; loans covered by the Trade and Investment Development Corporation of the Philippines; real estate mortgages covered by the Home Guarantee Corporation 20% COCI, claims guaranteed by Philippine incorporated banks/quasi-banks with the highest credit quality; claims guaranteed by foreign incorporated banks with the highest credit quality; loans to exporters to the extent guaranteed by Small Business Guarantee and Finance Corporation 50% Housing loans fully secured by first mortgage on residential property; Local Government Unit (LGU) bonds which are covered by Deed of Assignment of Internal Revenue allotment of the LGU and guaranteed by the LGU Guarantee Corporation 75% Direct loans of defined Small Medium Enterprise and microfinance loans portfolio; nonperforming housing loans fully secured by first mortgage 100% All other assets (e.g., real estate assets) excluding those deducted from capital (e.g., deferred tax) 125% All NPLs (except nonperforming housing loans fully secured by first mortgage) and all nonperforming debt securities

* Not all inclusive

With respect to off-balance sheet exposures, the exposure amount is multiplied by a credit conversion factor (CCF), ranging from 0.00% to 100.00%, to arrive at the credit equivalent amount, before the risk weight factor is multiplied to arrive at the risk-weighted exposure. Direct credit substitutes (e.g., guarantees) have a CCF of 100.00%, while items not involving credit risk has a CCF of 0.00%.

On January 15, 2013, the BSP issued Circular No. 781, Basel III Implementing Guidelines on Minimum Capital Requirements, which provides the implementing guidelines on the revised risk- based capital adequacy framework particularly on the minimum capital and disclosure requirements for universal banks and commercial banks, as well as their subsidiary banks and quasi-banks, in accordance with the Basel III standards. The circular is effective on January 1, 2014.

The Circular sets out a minimum Common Equity Tier 1 (CET1) ratio of 6.00% and Tier 1 capital ratio of 7.50%. It also introduces a capital conservation buffer of 2.50% comprised of CET1 capital. The BSP’s existing requirement for Total CAR remains unchanged at 10.00% and these ratios shall be maintained at all times.

Further, existing capital instruments as of December 31, 2010 which do not meet the eligibility criteria for capital instruments under the revised capital framework shall no longer be recognized as capital upon the effectivity of Basel III. Capital instruments issued under BSP Circular Nos.709 and 716 (the circulars amending the definition of qualifying capital particularly on Hybrid Tier 1 and Lower Tier 2 capitals), starting January 1, 2011 and before the effectivity of BSP Circular No. 781, shall be recognized as qualifying capital until December 31, 2015. In addition to changes in minimum capital requirements, this Circular also requires various regulatory adjustments in the calculation of qualifying capital.

On June 27, 2014, the BSP issued Circular No. 839, REST Limit for Real Estate Exposures which provides the implementing guidelines on the prudential REST limit for universal, commercial, and thrift banks on their aggregate real estate exposures. The Circular sets out a minimum REST limit of 6.00% CET1 capital ratio and 10.00% risk-based capital adequacy ratio, on a solo and consolidated basis, under a prescribed write-off rate of 25.00% on the Group’s real estate exposure. These limits shall be complied with at all times.

*SGVFS022572*Robinsons Bank Annual Report 2016 173 NOTES TO financial STATEMENTS- 75 -

On June 9, 2015, the BSP issued Circular No. 881, Implementing Guidelines on the Basel III Leverage Ratio Framework, which provides implementing guidelines for universal, commercial, and their subsidiary banks/quasi banks. The circular sets out a minimum leverage ratio of 5.00% on a solo and consolidated basis and shall be complied with at all times.

The CAR of the Group and of the Parent Company as reported to the BSP as of December 31, 2016 and 2015 follows: 2016 2015 Common Equity Tier 1 Capital P=10,270 P=5,024 Additional Tier 1 Capital − 5,663 Tier 1 capital 10,270 10,687 Tier 2 capital 318 242 Total qualifying capital P=10,588 P=10,929 Credit RWA P=38,391 P=28,044 Market RWA 223 104 Operational RWA 4,224 3,632 Total RWA P=42,838 P=31,780 Common Equity Tier 1 Ratio 1 23.97% 15.81% Additional Tier 1 Ratio 0.00% 17.82% Tier 1 capital ratio 23.97% 33.63% Tier 2 capital ratio 0.74% 0.76% Risk-based capital adequacy ratio 24.71% 34.39%

As of December 31, 2016 and 2015, the Group was in compliance with the required CAR.

On October 29, 2014, the BSP issued amendments to Circular No. 854 which required a new minimum capitalization for Banks. The Parent Company, as a commercial bank with more than 100 branches, was required to increase its capitalization to P=15.00 billion.

On January 28, 2015 and February 25, 2015, the BOD of the Parent Company and the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, respectively, approved the issuance of the remaining 46,070,226 unissued preferred shares (A and B) at P=10.00 par value in favor of JGSCSC and RRHI as follows:

No. of Shares Stockholder Types of Shares Subscribed Par Value Amount JGSCSC Preferred A 27,404,962 P=10 P=274,049,620 Preferred B 237,174 10 2,371,740 RRHI Preferred A 18,269,974 10 182,699,740 Preferred B 158,116 10 1,581,160 Total 46,070,226 P=460,702,260

Furthermore, the BOD also approved the following resolutions: ∂ Conversion of all preferred shares of the Parent Company, whether issued or unissued, particularly the 356.32 million preferred shares A and the 210.00 million preferred shares B, into common shares, and removal of all the other class of shares of the Parent Company, except common shares. ∂ Increase in the Parent Company’s authorized capital stock from P=6.10 billion divided into 610.00 million common shares with par value of P=10.00 each.

174 Robinsons Bank Annual Report 2016 *SGVFS022572* - 76 -

∂ The total authorized stock of the Parent Company is P=15.00 billion divided into 1.50 billion common shares with a par value of P=10.00 each.

On March 15, 2015, JGSCSC acquired additional preferred shares A and B of 27,404,962 shares and 237,174 shares, respectively.

In 2015, RRHI acquired additional preferred shares A and B of 18,269,974 shares and 158,116 shares, respectively.

On June 17, 2015, RRHI subscribed to an additional 297,094,118 common shares at P=10.00 per share.

On July 8, 2015, JGSCSC subscribed to an additional 292,905,882 common shares at P=10.00 per share.

On July 9, 2015, the Parent Company BOD approved the increase in authorized capital stock amounting to P=8.90 billion composed of 890.00 million common shares at P=10.00 per share. Out of the =8.90P billion increase, P=5.90 billion was paid-up and subscribed as follows:

No. of Shares Stockholder Subscribed Amount JGSCSC 292,905,882 P=2,929,058,820 RRHI 297,094,118 2,970,941,180 Total 590,000,000 P=5,900,000,000

On November 15, 2015, the BSP approved the Parent Company’s capital build-up program with the following milestones: 1. Capital infusion from unissued shares up to the existing authorized capital stock of P=6.10 billion. 2. Capital infusion from the increase in authorized capital stock from P=6.10 billion to P=15.00 billion of which P=12.00 billion is paid up. 3. Internally generated capital based on the Parent Company’s financial projections for the period 2015 to 2019.

The approval of BSP to the capital build-up program further provides that the Parent Company shall: 1. Refrain from declaring and distributing cash dividends until the P=15.00 billion minimum capital requirement is attained; 2. Call on its stockholders to infuse additional capital in case of shortfall in internally-generated income to meet the target capital levels; and 3. Submit progress reports with supporting documents, duly noted by its BOD, to the Central Point of Contact Department II, within 20 banking days from end of December of each tear until the Bank is deemed by the BSP to have fully complied with its capital build-up program.

On December 15, 2015, the Parent Company filed its application for the increase in its authorized capital stock as approved by the BOD and the BSP with the SEC.

*SGVFS022572*Robinsons Bank Annual Report 2016 175 NOTES TO financial STATEMENTS- 77 -

On January 29, 2016, the SEC approved the Parent Company’s application for the increase in authorized capital stock from P=6.10 billion divided into 43.68 million common shares, 356.32 million preferred shares A and 210.00 million preferred shares B of P=10.00 par value each, to =12.00P billion divided into 633.64 million common shares, 356.32 million preferred shares A and 210.00 million preferred shares B of =10.00P par value each.

In 2016, the Parent Company issued 590.00 million common shares amounting to P=5.90 billion in exchange for the deposits for future subscriptions.

In 2016, the Parent Company removed all the other classes of shares, except common shares, and converted its 356.32 million preferred shares A and 210.00 million preferred shares B to 566.32 million common shares with P=10.00 par value.

Surplus As of December 31, 2016 and 2015, a portion of the Parent Company’s retained earnings amounting to P=188.03 million and P=142.54 million, respectively, relating to deferred tax asset, and P=838.26 million and P=562.95 million, respectively, relating to changes in fair value of AFS, is not available for dividend declaration in accordance with SEC Memorandum Circular No. 11 and SRC Rule 68.

20. Retirement Plan

The Parent Company has a noncontributory defined benefit retirement covering substantially all its officers and regular employees. Under this retirement plan, all covered officers and employees are entitled to cash benefits after satisfying certain age and service requirements. In 2008, the Parent Company established a plan asset for its defined benefit retirement plan.

LSB has an unfunded noncontributory retirement plan covering all its regular permanent employees. Under the retirement plan, all employees are entitled to cash benefits after satisfying certain age and service requirements.

The latest actuarial valuation of the retirement plan of the Group was made as of December 31, 2016. The principal actuarial assumptions used in determining retirement liability of the Group as of January 1 follow:

Parent Company LSB 2016 2015 2016 2015 Average remaining working life in years 6 11 10 11 Discount rate 5.27% 4.99% 5.54% 5.09% Salary rate increase 5.70% 5.70% 5.70% 5.00%

The amounts recognized in the statements of financial position follow:

Consolidated Parent Company 2016 2015 2016 2015 Present value of defined benefit obligation P=130,697,133 P=123,620,708 P=128,020,411 P=120,763,964 Fair value of plan assets (80,965,782) (55,090,638) (82,837,211) (55,090,638) Retirement liability P=49,731,351 P=68,530,070 P=45,183,200 P=65,673,326

176 Robinsons Bank Annual Report 2016 *SGVFS022572* - 78 -

The amounts of ‘Retirement expense’ included in ‘Compensation and fringe benefits’ in the statements of income follow:

Consolidated Parent Company 2016 2015 2016 2015 Current service cost P=26,724,158 P=20,569,822 P=25,293,666 P=19,128,703 Net interest cost 3,422,140 2,463,204 3,277,099 2,379,186 P=30,146,298 P=23,033,026 P=28,570,765 P=21,507,889

Changes in net defined benefit obligation (DBO) of funded funds follow:

Present Value Fair Value of Net Retirement Consolidated of DBO Plan Assets Liability January 1, 2016 P=123,620,708 P=55,090,638 P=68,530,070 Net Benefit Cost in Consolidated Statement of Income Current service cost 26,724,158 − 26,724,158 Net interest cost 6,089,146 2,667,006 3,422,140 Sub-total 32,813,304 2,667,006 30,146,298 Benefits paid (1,225,393) (1,225,393) − Remeasurement in OCI Return on plan assets (excluding amount included in net interest) (67,520) (860,135) 792,615 Actuarial changes arising from experience adjustments (2,652,787) − (2,652,787) Actuarial changes arising from changes in financial/demographic assumptions (21,791,179) − (21,791,179) Sub-total (24,511,486) (860,135) (23,651,351) Contributions − 25,293,666 (25,293,666) December 31, 2016 P=130,697,133 P=80,965,782 P=49,731,351

Present Value Fair Value of Net Retirement Consolidated of DBO Plan Assets Liability January 1, 2015 P=107,160,282 P=53,413,915 P=53,746,367 Net Benefit Cost in Consolidated Statement of Income Current service cost 18,698,393 − 18,698,393 Net interest cost 4,909,561 2,446,357 2,463,204 Sub-total 23,607,954 2,446,357 21,161,597 Remeasurement in OCI Return on plan assets (excluding amount included in net interest) − (769,634) 769,634 (Forward)

*SGVFS022572*Robinsons Bank Annual Report 2016 177 NOTES TO financial STATEMENTS- 79 -

Present Value Fair Value of Net Retirement Consolidated of DBO Plan Assets Liability Actuarial changes arising from experience adjustments (P=1,557,812) P= − (P=1,557,812) Actuarial changes arising from changes in financial/demographic assumptions (5,589,716) − (5,589,716) Sub-total (7,147,528) (769,634) (6,377,894) December 31, 2015 P=123,620,708 P=55,090,638 P=68,530,070

Present Value Fair Value of Net Retirement Parent Company of DBO Plan Assets Liability January 1, 2016 P=120,763,964 P=55,090,638 P=65,673,326 Net Benefit Cost Statement of Income Current service cost 25,293,666 − 25,293,666 Net interest cost 5,944,105 2,667,006 3,277,099 Sub-total 31,237,771 2,667,006 28,570,765 Benefits paid (1,225,393) (1,225,393) − Remeasurement in OCI Return on plan assets (excluding amount included in net interest) − (860,135) 860,135 Actuarial changes arising from experience adjustments (2,836,181) − (2,836,181) Actuarial changes arising from changes in financial assumptions (21,791,179) − (21,791,179) Sub-total (24,627,360) (860,135) (23,767,225) Contributions − 25,293,666 (25,293,666) December 31, 2016 P=126,148,982 P=80,965,782 P=45,183,200

Present Value Fair Value of Net Retirement Parent Company of DBO Plan Assets Liability January 1, 2015 P=105,361,192 P=53,413,915 P=51,947,277 Net Benefit Cost Statement of Income Current service cost 17,257,274 − 17,257,274 Net interest cost 4,825,543 2,446,357 2,379,186 Sub-total 22,082,817 2,446,357 19,636,460 Remeasurement in OCI Return on plan assets (excluding amount included in net interest) − (769,634) 769,634 Actuarial changes arising from experience adjustments (1,662,861) − (1,662,861) (Forward)

178 Robinsons Bank Annual Report 2016 *SGVFS022572* - 80 -

Present Value Fair Value of Net Retirement Parent Company of DBO Plan Assets Liability Actuarial changes arising from changes in financial assumptions (P=5,017,184) P= − (P=5,017,184) Sub-total (6,680,045) (769,634) (5,910,411) December 31, 2015 P=120,763,964 P=55,090,638 P=65,673,326

The major categories of plan assets as a percentage of the fair value of total plan assets follow:

2016 2015 Deposits in banks 72.63% 60.65% Debt securities 27.10% 39.06% Other assets 0.27% 0.29% 100.00% 100.00%

Movements in “Remeasurement losses on retirement plan” in OCI follow:

Consolidated 2016 2015 Balance at beginning of year P=26,844,846 P=33,321,046 Remeasurement losses (gains) on retirement plan in OCI Return on plan assets (excluding amount included in net interest) 792,615 (1,101,795) Due to experience adjustments (2,652,787) (1,557,812) Due to changes in financial/demographic assumptions (21,791,179) (5,589,716) Remeasurement losses (gains) during the year (23,651,351) (8,249,323) Tax effect 7,165,114 1,773,123 Remeasurement losses during the year, net of tax (16,486,237) (6,476,200) Balance at end of year, net of tax P=10,358,609 P=26,844,846

Parent Company 2016 2015 Balance at beginning of year P=27,077,207 P=33,085,924 Effect of early adoption of PAS 27 (Note 2) (232,361) 235,122 26,844,846 33,321,046 Remeasurement losses (gains) on retirement plan in OCI Return on plan assets (excluding amount included in net interest) 860,135 (1,101,795) Due to experience adjustments (2,836,181) (1,662,861) Due to changes in financial/demographic assumptions (21,791,179) (5,017,184) Remeasurement losses (gains) during the year (23,767,225) (7,781,840) Tax effect 7,130,168 1,073,279 Remeasurement losses during the year, net of tax (16,637,057) (6,708,561) Effect of adoption of Amended PAS 27 (Note 2) 150,820 232,361 (16,486,237) (6,476,200) Balance at end of year, net of tax P=10,358,609 P=26,844,846

*SGVFS022572*Robinsons Bank Annual Report 2016 179 NOTES TO financial STATEMENTS- 81 -

The sensitivity analysis below has been determined based on reasonably possible changes of each significant assumption on the DBO as of December 31, 2016, assuming if all other assumptions were held constant:

Consolidated Parent Company +/- basis points (bps) Impact to DBO Impact to DBO Discount rate +100 bps (P=120,131,501) (P=116,194,738) -100 bps 142,870,744 137,576,236 Salary increase rate +100 bps 143,555,487 138,240,060 -100 bps (119,344,416) (115,434,562)

The sensitivity analysis below has been determined based on reasonably possible changes of each significant assumption on the DBO as of December 31, 2015, assuming if all other assumptions were held constant:

+/- basis points Consolidated Parent Company (bps) Impact to DBO Impact to DBO Discount rate +100 bps (=P110,734,435) (=P108,265,697) -100 bps 138,947,279 135,616,094 Salary increase rate +100 bps 139,487,513 136,142,511 -100 bps (110,047,094) (107,595,704)

Shown below is the maturity analysis of the undiscounted benefit payments:

Consolidated Parent Company 2016 2015 2016 2015 Less than 1 year P=6,782,350 P=3,301,694 P=6,760,113 P=3,287,263 More than 1 year to 5 years 49,233,106 39,330,154 48,218,318 38,168,884 More than 5 years to 10 years 109,549,008 90,526,363 106,602,246 88,879,509 More than 10 years to 15 years 220,065,974 175,750,706 207,554,266 167,478,227 More than 15 years to 20 years 187,952,652 240,516,298 169,639,965 228,285,840 More than 20 years 363,788,797 825,254,069 282,348,379 769,793,789

The weighted average duration of the defined benefit obligation is equivalent to 22.03 years and 21.58 years in 2016 and 2015, respectively.

21. Leases

Operating Lease - Group as Lessee The Parent Company leases its head office and branch premises for periods ranging from one (1) to ten (10) years, renewable upon mutual agreement of both parties. LSB also leases the premises occupied by its head offices and most of its branches for periods ranging from five (5) to fifteen (15) years, renewable upon mutual agreement of both parties. Various lease contracts of the Group include escalation clauses, most of which bear annual rent increase ranging from 5.00% to 10.00%.

Lease rentals charged to operations amounting to P=277.52 million and P=241.41 million in 2016 and 2015, respectively, are included under ‘Occupancy and equipment-related expenses’ in the statements of income for the Group.

180 Robinsons Bank Annual Report 2016 *SGVFS022572* - 82 -

Future minimum rentals payable on non-cancellable leases follow:

Consolidated Parent Company 2016 2015 2016 2015 Within one year P=261,639,924 P=212,898,691 P=252,450,190 P=205,167,726 Beyond one year but not more than five years 531,101,622 476,759,239 496,308,714 453,857,638 More than five years 27,025,441 34,966,519 7,789,314 11,532,245 P=819,766,987 P=724,624,449 P=756,548,218 P=670,557,609

Finance Lease - LSB as Lessor LSB has entered to a lease on its investment property portfolio. The lease contract provides an option to purchase the properties the end of the lease term. The lease has a lease term of ten (10) years, from April 30, 2009 to March 31, 2019. The building being leased out has an estimated useful life of ten (10) years.

As of December 31, 2016 and 2015, the future minimum lease receivable under the finance lease as follows:

2016 2015 Minimum Minimum Lease Lease Receivable Interest Principal Receivable Interest Principal Within one year P=750,000 P=1,236,467 (P=486,467) P=750,000 P=3,007,723 (P=2,257,723) Beyond one year but not more than five years 10,750,000 1,648,986 9,101,014 11,500,000 2,885,453 8,614,547 P=11,500,000 P=2,885,453 P=8,614,547 P=12,250,000 P=5,893,176 P=6,356,824

22. Income and Expenses

Net service fees and commission income consists of:

Consolidated Parent Company 2016 2015 2016 2015 Service fees and commission income: Deposit-related P= 66,119,009 P=68,313,430 P= 62,349,982 P=64,211,300 Credit-related 52,492,218 54,264,781 52,492,218 54,264,781 Commissions 29,962,443 17,429,860 29,273,023 16,939,854 Utility and store payment charges 12,683,084 10,867,246 12,683,084 10,867,246 Trust and other fiduciary 12,959,348 10,904,401 12,959,348 10,904,401 174,216,102 161,779,718 169,757,655 157,187,582

Service charges and commission expense: Banking fees 46,675,184 35,955,063 44,398,222 35,463,836 Brokerage and commissions 10,893,648 15,812,123 10,893,648 15,247,989 57,568,832 51,767,186 55,291,870 50,711,825 P= 116,647,270 P=110,012,532 P= 114,465,785 P=106,475,757

*SGVFS022572*Robinsons Bank Annual Report 2016 181 NOTES TO financial STATEMENTS- 83 -

Miscellaneous income consists of:

Consolidated Parent Company 2016 2015 2016 2015 Penalties P= 31,117,160 P=31,347,431 P= 27,104,964 P=31,347,431 Gain on initial recognition of repossessed chattels (Note 13) 25,017,967 6,001,755 25,066,668 5,995,744 Gain on initial recognition of investment properties (Note 11) 17,303,414 35,549,709 12,665,271 30,698,176 Gain on sale of repossessed chattels (Note 13) − 12,433,552 − 12,283,552 Recovery on charged-off assets 9,345,586 1,296,639 9,275,154 1,212,938 Gain on sale of investment properties (Note 11) 8,148,422 10,466,376 3,543,546 5,936,420 Gain on sale of property and equipment (Note 10) 3,864,811 680,079 3,824,515 680,079 Others (Note 7) 31,030,388 19,016,686 21,376,899 10,657,568 P= 125,827,748 P=116,792,227 P= 102,857,017 P=98,811,908

Other income includes share on notarial and insurance fees, rental income from safety deposit box, night depository and dividend income.

Miscellaneous expenses consist of:

Consolidated Parent Company 2016 2015 2016 2015 Transportation and travel P= 47,170,766 P=38,351,888 P= 40,318,065 P=33,327,807 Advertising 43,584,613 23,606,017 41,819,403 22,951,122 Stationery and supplies 37,691,988 33,426,496 34,851,681 31,523,948 Litigation expense on assets acquired (Note 11) 14,901,894 8,840,503 13,086,222 8,064,075 Loss on sale of repossessed chattels (Note 13) 13,778,921 − 13,792,885 − Appraisal fees 12,772,070 8,208,406 12,772,070 8,208,406 Fines, penalties and other charges 8,429,624 14,424,703 8,429,624 14,423,388 Membership dues 3,018,896 5,876,471 2,918,798 5,770,516 Others 21,812,717 34,355,636 16,242,560 25,124,124 P= 203,161,489 P=167,090,120 P= 184,231,308 P=149,393,386

Other expenses include notarial fee, registration expense, documentary stamps used, freight charges, periodicals and magazines, donations.

23. Income and Other Taxes

Under Philippine tax laws, the Parent Company is subject to percentage and other taxes (presented as ‘Taxes and licenses’ in the statement of income) as well as income taxes. Percentage and other taxes paid consist principally of gross receipts tax (GRT) and documentary stamp taxes.

Income taxes consist of final withholding taxes on gross interest income from government securities, deposits and other deposit substitutes, tax on the FCDU income and RCIT, as discussed below, on net taxable income. These income taxes, as well as the deferred tax benefit, are presented in the statement of income as ‘Provision for income tax’.

182 Robinsons Bank Annual Report 2016 *SGVFS022572* - 84 -

Current tax regulations provide that the RCIT rate shall be 30.00%. Interest allowed as deductible expense shall be 33.00% of interest income subjected to final tax.

The optional standard deduction (OSD) equivalent to 40.00% of gross income may be claimed as an alternative deduction in computing for the RCIT. In 2016 and 2015, the Parent Company elected to claim itemized expense deductions instead of the OSD in the RCIT computation.

The regulations also provide for MCIT of 2.00% of modified gross income and allow a NOLCO benefit. Both the excess of over the RCIT and NOLCO may be applied against the regular tax liability and taxable income, respectively, over three (3) years from the year of inception.

Current tax regulations also provide for the ceiling on the amount of entertainment and representation (EAR) expense that can be claimed as a deduction against taxable income. Under the regulation, EAR expense allowed as a deductible expense for a service company like the Parent Company is limited to the actual EAR paid or incurred but not to exceed 1.00% of net revenue. EAR expenses of the Parent Company amounted to P=62.02 million and P=50.06 million in 2016 and 2015, respectively.

FCDU offshore income (income from non-residents) is tax-exempt while gross onshore income (income from residents) is generally subject to 10.00% income tax. In addition, interest income on deposit placement with other FCDUs and offshore banking units (OBUs) is taxed at 7.50%.

Current tax regulations provide that the income derived by the FCDU from foreign currency- denominated transactions with non-residents, OBUs, local commercial banks including branches of foreign banks is tax-exempt while interest income on foreign currency-denominated loans from residents other than OBUs or other depository banks under the expanded system is subject to 10.00% income tax. FCDUs’ all other income is subject to 30.00% income tax.

Provision for income tax consists of the Group:

Consolidated Parent Company 2016 2015 2016 2015 Current: Final P=125,650,508 P=118,319,148 P=122,224,466 P=114,555,705 MCIT 26,838,816 23,223,859 26,838,816 21,343,580 RCIT 6,054,119 – 1,465,282 – 158,543,443 141,543,007 150,528,564 135,899,285 Deferred (61,863,999) (44,980,628) (59,075,808) (15,587,919) P=96,679,444 P=96,562,379 P=91,452,756 P=120,311,366

*SGVFS022572*Robinsons Bank Annual Report 2016 183 NOTES TO financial STATEMENTS- 85 -

Net deferred tax assets (liabilities) of the Group and the Parent Company consist of the following:

Consolidated Parent Company 2016 2015 2016 2015 Deferred tax assets on: Allowance for credit and impairment losses P=209,889,771 P=106,408,229 P=158,869,194 P=56,389,729 Provision for profit sharing 40,237,851 43,984,321 40,237,851 43,984,321 Accumulated depreciation on investment properties and repossessed chattels 17,281,683 14,929,642 17,281,683 14,929,642 NOLCO – 29,347,212 – 29,347,212 Retirement liability 13,554,959 19,701,998 13,554,959 19,701,998 Accrued rent 9,887,686 8,906,369 9,887,686 8,906,369 Excess of MCIT over RCIT – 353,337 – 353,337 Unrealized loss on financial asset at FVPL 38,448 2,868,797 38,448 2,868,797 290,890,398 226,499,905 239,869,821 176,481,405 Deferred tax liabilities on: Branch licenses 186,000,000 186,000,000 – – Unrealized gain on initial recognition of investment properties 32,214,602 20,111,004 28,217,857 16,898,275 Unrealized foreign exchange gain 10,470,888 10,437,697 10,455,241 10,419,698 Unrealized gain on initial recognition of repossessed chattels 6,713,805 5,933,714 6,713,805 5,933,714 Unrealized income on finance lease receivable 2,021,059 – – – Retirement liability 34,946 – – – Net unrealized gain on AFS investments – 692,440 – 692,440 237,455,300 223,174,855 45,386,903 33,944,127 P=53,435,098 P=3,325,050 P=194,482,918 P=142,537,278

The Group did not set up deferred tax assets on the following temporary differences since management believes that it is not highly probable that these differences will be realized in the future:

Consolidated Parent Company 2016 2015 2016 2015 Allowance for credit and impairment losses P=797,384,738 P=768,461,927 P=295,220,529 P=794,304,240 Unrealized loss on AFS investments 838,255,143 562,948,094 838,255,143 562,948,094 Excess of MCIT over RCIT 51,948,304 29,794,294 48,259,167 21,420,351 Unearned income 22,666,240 15,594,527 − − Accumulated depreciation on investment properties and repossessed chattels 19,275,269 20,095,457 − − Unfunded retirement liability 4,548,151 2,856,743 − − Accrued rent 4,340,138 3,556,937 − − NOLCO − 26,324,907 − − P=1,738,417,983 P=1,429,632,886 P=1,181,734,839 P=1,378,672,685

184 Robinsons Bank Annual Report 2016 *SGVFS022572* - 86 -

Details of NOLCO follow:

Consolidated Inception Year Amount Used Balance Expiry Year 2015 P=97,824,041 P=97,824,041 P=− 2018 2014 19,135,477 19,135,477 − 2017 2013 9,975,426 9,975,426 − 2016 P=126,934,944 P=126,934,944 P=−

Parent Company Inception Year Amount Used Balance Expiry Year 2015 P=97,824,041 P=97,824,041 P=− 2018

Details of the excess of MCIT over RCIT follow:

Consolidated Inception Year Amount Used/Expired Balance Expiry Year 2016 P=26,838,816 P=– P=26,838,816 2019 2015 22,947,293 – 22,947,293 2018 2014 2,677,819 868,961 1,808,858 2017 2013 4,073,213 4,073,213 – 2016 P=56,537,141 P=4,942,174 P=51,594,967

Parent Company Inception Year Amount Expired Balance Expiry Year 2016 P=26,838,816 P=– P=26,838,816 2019 2015 21,067,014 – 21,067,014 2018 2013 353,337 353,337 – 2016 P=48,259,167 P=353,337 P=47,905,830

A reconciliation of statutory income tax rate to the effective income tax rate of the Group and thex Parent Company follows:

Consolidated Parent Company 2015 (As restated 2016 2015 2016 - Note 2) Statutory income tax rate 30.00% 30.00% 30.00% 30.00% Tax effect of: Tax paid and tax-exempt income (32.09) (26.56) (31.90) (24.10) Non-deductible expenses 38.82 55.14 37.31 49.15 Unrecognized deferred tax assets (7.64) (22.33) (9.36) (15.72) FCDU income 2.87 3.11 2.91 2.83 Others – net (3.87) 0.78 (1.98) 3.36 Effective income tax rate 28.09% 40.14% 26.98% 45.52%

24. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions or if they are subjected to common control of common significant influence such as subsidiaries and associates of subsidiaries or other related parties. Related parties may be individuals or corporate entities.

*SGVFS022572*Robinsons Bank Annual Report 2016 185 NOTES TO financial STATEMENTS- 87 -

The Parent Company has several business relationships with related parties. Transactions with such parties are made in the ordinary course of business and on substantially same terms, including interest and collateral, as those prevailing at the time of comparable transactions with other parties. These transactions also did not involve more than the normal risk of collectability or present other unfavorable conditions.

The significant transactions and outstanding balances of the Parent Company and the Subsidiary with its related parties follow:

Parent Company 2016 2015 Amount/ Outstanding Amount/ Outstanding Nature of Transaction Volume Balance Volume Balance Terms and Conditions/Nature

Subsidiary Advances from a subsidiary P=6,519,174 P=9,117,426 P=9,453,429 P=9,453,429 Transportation expenses and down payment for software cost Accounts receivable (6,245,094) 2,960,698 7,067,983 9,205,792 Unsecured, noninterest-bearing, payable on demand

Affiliates Receivable from customers - Secured loans with annual interest of commercial loans 4,009,000,000 2,009,000,000 535,000,000 535,000,000 2.50% Receivable from customers - 124,460,470,947 139,337,392 108,045,563,509 604,128,899 Non-interest bearing domestic bills bills purchased purchased Deposit liabilities 20,454,512,089 4,589,885,904 288,967,342,528 3,241,079,191 Various terms and with annual interest rates ranging from nil to 2.55% Interest expense 18,299,800 7,886,372 Interest expense on deposit liabilities Interest income 6,524,583 111,458 Interest income from secured commercial loans Service fee income 265,814 207,680 Income from non-interest bearing domestic bills purchased Rent expense 103,367,676 55,131,695 Office rental paid to affiliates and JG Summit Holdings Inc.

Shareholders Deposit liabilities 44,936,968,931 2,743,787,701 328,046,985,173 13,517,995,040 Various terms and with annual interest rates ranging from nil to 2.55% Interest expense 34,361,234 121,642,884 Interest expense on deposit liabilities

Board of Directors Deposit liabilities 6,741,499,964 42,885,088 1,220,512,398 138,380,328 Various terms and with annual interest rates ranging from nil to 2.25% Interest expense 2,439,371 495,399 Interest expense on deposit liabilities

Key Officers Deposit liabilities 130,269,038 8,461,335 1,000,432,610 295,423,074 Various terms and with annual interest rates ranging from nil to 1.88% Interest expense 120,447 1,219,418 Interest expense on deposit liabilities

(Forward)

186 Robinsons Bank Annual Report 2016 *SGVFS022572* - 88 -

Subsidiary 2016 2015 Amount/ Outstanding Amount/ Outstanding Nature of Transaction Volume Balance Volume Balance Terms and Conditions/Nature

Parent Accounts payable (P=6,245,094) P=2,960,698 P=7,067,983 P=9,205,792 Unsecured, noninterest-bearing, payable on demand Accounts receivable 6,519,174 9,117,426 13,909,148 2,598,252 Unsecured, noninterest bearing accounts payable Due from other banks 3,583,686 3,583,686 − − Regular checking account, non-interest bearing Capital stock issuance 400,000,000 − See Note 9

Key employees Receivables from customers 364,037 3,591,673 12,009 3,227,636 Loans of directors, officers and stockholders Interest income 269,552 967,878 Interest earned from loans of directors, officers and stockholders Deposit liabilities (998,726) 394,773 509,688 1,393,499 Deposits of directors, officers and stockholders Interest expense 2,669 7,058 Interest expense on deposit liabilities Compensation and fringe 6,938,634 Remuneration and benefits to directors benefits 25,112,723 and key management personnel Post-employment benefits 302,018 18,448,438 Post-employment benefits

In the ordinary course of business, the Parent Company has loan transactions with affiliates and with certain DOSRI. Existing banking regulations limit the amount of individual loans to DOSRI, 70.00% of which must be secured, to the total of their respective deposits and book value of their respective investments in the Parent Company. In the aggregate, loans to DOSRI generally should not exceed the Bank’s total regulatory capital or 15.00% of total loan portfolio, whichever is lower.

Parent Company LSB 2016 2015 2016 2015 Total outstanding DOSRI accounts P= 2,148,337,392 =P1,139,128,899 P=3,591,673 =P3,227,636 Percent of DOSRI accounts to total loans 5.66% 4.15% 0.28% 0.27% Percent of nonperforming DOSRI loans to total DOSRI loans − − 0.80% − Percent of unsecured DOSRI loans to total DOSRI loans − − 32.61% 30.66%

The Parent Company has no assets pledged as collaterals on its liabilities.

On January 31, 2007, BSP Circular No. 560 was issued providing the rules and regulations that govern loans, other credit accommodations and guarantees granted to subsidiaries and affiliates of banks and quasi-banks. Under the said circular, the total outstanding exposures to each of the bank’s subsidiaries and affiliates shall not exceed 10.00% of bank’s net worth, the unsecured portion of which shall not exceed 5.00% of such net worth. Further, the total outstanding exposures to subsidiaries and affiliates shall not exceed 20.00% of the net worth of the lending bank. BSP Circular No. 560 is effective on February 15, 2007.

The retirement fund of the Parent Company’s employees amounted to P=82.84 million and P=55.09 million as of December 31, 2016 and 2015, respectively (see Note 20). This includes pay off to resigned employees amounting to P=1.23 million. The fund is being managed by JG Summit Multi-Employer Retirement Plan (MERP), a corporation created for the purpose of managing the funds of the Group, with Robinsons Bank Corporation (RBC)-Trust and Investment Group as the trustee.

*SGVFS022572*Robinsons Bank Annual Report 2016 187 NOTES TO financial STATEMENTS- 89 -

Details of the transactions of the Parent Company with its retirement plan follow:

2016 Amount/ Outstanding Related Party Nature of Transaction Volume Balance Terms and Conditions/Nature Retirement plan Contribution and interest P=1,806,871 P=80,965,782 Contributions to the Fund plus earned interest earned during the year

2015 Amount/ Outstanding Related Party Nature of Transaction Volume Balance Terms and Conditions/Nature Retirement plan Contribution and interest P=1,676,723 P=55,090,638 Contributions to the Fund plus earned interest earned during the year

The retirement plan under the MERP has an Executive Retirement Committee, which is mandated to approve the plan, trust agreement, investment plan, including any amendments or modifications thereto, and other activities of the plan. Certain members of the BOD of the Parent Company are represented in the Executive Retirement Committee. RBC manages the plan based on the mandate as defined in the trust agreement.

Details of remuneration of directors and other key management personnel of the Group and the Parent Company follow:

Consolidated Parent Company 2016 2015 2016 2015 Short-term benefits P=72,065,338 P=58,957,915 P=65,126,704 P=54,599,160 Post-employment benefits 5,977,408 5,994,561 5,675,390 5,657,049 P=78,042,746 P=64,952,476 P=70,802,094 P=60,256,209

25. Trust Operations

Properties held by the Parent Company in fiduciary or agency capacity for their customers are not included in the accompanying statement of financial position since these are not assets of the Parent Company (see Note 26).

In compliance with the requirements of the General Banking Law relative to the Parent Company’s trust functions, treasury notes and bills included under ‘Held-to-Maturity Investment’ as of December 31, 2016 and 2015 with a total face value of =140.00P million and =115.00P million, respectively, were deposited with the BSP (see Note 7).

An appropriation of 10.00% of the Parent Company’s income from trust operations is set aside as surplus reserve to absorb any losses that may arise from its trust functions.

26. Commitments and Contingencies

a. The Group is also involved in a number of legal proceedings. The estimate of the probable costs for the resolutions of these claims has been developed in consultation with outside counsel handling the Group’s defense and is based on an analysis of potential results. The Group does not believe that these proceedings will have a material adverse effect on the financial statements.

188 Robinsons Bank Annual Report 2016 *SGVFS022572* - 90 -

b. In the normal course of the Group’s operations, there are various outstanding commitments, contingent liabilities and bank guarantees which are not reflected in the accompanying financial statements. The Group does not anticipate material unreserved losses as a result of these transactions.

Following is a summary of the Group’s commitments and contingent liabilities at their equivalent peso contractual amounts:

Consolidated Parent Company 2016 2015 2016 2015 Trust and investment group accounts (Note 25) P=15,507,740,556 P=12,742,804,784 P=15,507,740,556 P=12,742,804,784 Contingent - foreign currency swap 5,681,648,084 1,436,253,682 5,681,648,084 1,436,253,682 Spot exchange - foreign currency 2,338,846,500 1,695,757,500 2,338,846,500 1,695,757,500 Letters of credit 479,316,335 177,541,995 479,316,335 177,541,995 Inward bills for collection 288,993,938 318,563,274 288,993,938 318,563,274 Outward bills for collection 253,379,120 593,739,709 253,379,120 593,739,709 Guarantees issued 81,382,715 81,520,580 81,382,715 81,520,580 Committed credit lines 22,000,000 11,801,754,681 22,000,000 11,801,754,681 Late deposit/payment received 11,795,810 32,743,405 9,817,849 31,415,892 Items held for safekeeping 47,997 35,088 44,349 31,125 Other contingent account 278,508 278,293 277,159 277,050

27. Financial Performance

The following basic ratios measure the financial performance of the Group:

Consolidated Parent Company 2016 2015 2016 2015 Return on average equity 2.07% 1.62% 2.07% 1.97% Return on average assets 0.37% 0.27% 0.38% 0.34% Net interest margin on average earnings assets 3.85% 4.33% 3.69% 4.16%

28. Notes to Statements of Cash Flows

As of December 31, 2016 and 2015, interbank loans receivables of the Parent Company to local savings bank amounting to P=96.00 million and =97.00P million, respectively, which have original maturity of more than three (3) months are not considered cash and cash equivalents.

As of December 31, 2015, ‘due from other banks’ of the Parent Company to local banks amounting to P=259.70 million, have original maturity of more than three (3) months are not considered cash and cash equivalents.

In 2016 and 2015, the Parent Company’s total acquisition of property and equipment amounted to P=187.93 million and P=162.49 million, respectively. A total of P=187.93 million and P=154.53 million was acquired for cash in 2016 and 2015, respectively.

*SGVFS022572*Robinsons Bank Annual Report 2016 189 NOTES TO financial STATEMENTS- 91 -

Details of non-cash investing activities follow:

Consolidated Parent Company 2016 2015 2016 2015 Increase in capital stock due to conversion of deposit for future stock subscription P=445,960,000 P= − P= − P= − Increase in NUGL due to MTM loss (gain) on AFS 275,307,049 − 275,307,049 − Increase in investment properties due to foreclosure 91,352,180 65,416,514 69,995,224 49,023,341 Disposal of investment properties and repossessed chattels through sales contract receivable 34,045,955 44,567,987 30,613,955 44,567,987 Increase in property and equipment due to reclassifications 17,938,868 4,975,862 7,502,851 4,975,862 Increase in investment property due to reclassification of allowance 10,436,017 − − − Increase in repossessed chattels due to foreclosure 225,586,603 128,093,011 225,420,303 128,086,999 Increase in software licenses due to reclassifications from advances to suppliers − 373,181,951 − 373,181,951 Increase in software licenses due to reclassifications from property and equipment − 46,195,441 − 46,195,441 Increase in surplus reserves due to appropriation from retained earnings − − 4,525,839 −

29. Subsequent Event

HTM investments with carrying value of P=300.00 million were disposed by the Bank in 2017. Accordingly, the Bank reclassified the remaining HTM investments to AFS investments in accordance with PFRS.

30. Approval of the Release of the Financial Statements

The accompanying financial statements of the Group and of the Parent Company were approved and authorized for issue by the BOD on March 22, 2017.

31. Supplementary Information Required under Revenue Regulations (RR) 15-2010

The BIR issued RR No. 15-2010 prescribing the manner of compliance in connection with the preparation and submission of financial statements accompanying the tax returns. This RR include provisions for additional disclosure requirements in the notes to the financial statements, particularly on composition of taxes, duties, licenses paid or accrued during the year.

190 Robinsons Bank Annual Report 2016 *SGVFS022572* - 92 -

Supplementary Information Required Under RR No. 15-2010 The Parent Company reported and/or paid the following types of taxes for the year:

Gross Receipts Tax (GRT) The National Internal Revenue Code (NIRC) of 1997 provides for the imposition of GRT on gross receipts derived by banks from sources within the Philippines. Accordingly, the Parent Company’s gross receipts are subject to GRT as re-imposed in RA No. 9238 beginning January 1, 2004.

Details of the Parent Company’s gross receipts and GRT due declared and paid for taxable year 2016 follow:

Gross Receipts GRT Due Interest income P=1,929,532,580 P=61,624,401 Other income 210,808,753 14,756,612 P=2,140,341,333 P=76,381,013

Documentary Stamp Tax: The Documentary stamp tax (DST) paid or accrued on the following transactions are:

Transaction Amount DST thereon Deposits P=681,925,380,165 P=95,037,953 Loan instruments 17,919,871,084 89,599,355 P=699,845,251,249 P=184,637,308

Other Taxes and Licenses This includes all other taxes, local and national, including documentary stamp tax, fringe benefits tax, local business tax, licenses and permit fees lodged under the ‘Salaries and employees’ benefits and ‘Taxes and Licenses’ account in the statement of income and expenses.

a. Local Business Permits P=9,752,517 Community Tax Certificates 10,500

b. National Gross Receipt Tax P=56,707,532

Part of the GRT and DST remitted to the BIR are shouldered/ charged to clients/borrowers.

Withholding Taxes The following table shows the breakdown of taxes withheld and remitted in 2016:

Total Withheld Total Remitted Withholding tax on deposits P=51,963,288 P=49,008,332 Withholding taxes on compensation and benefits 105,258,945 89,818,449 Expanded withholding taxes 28,296,672 26,079,231 P=185,518,905 P=164,906,012

As of December 31, 2016, there are no outstanding tax cases under investigation, litigation or prosecution in courts or bodies outside BIR.

*SGVFS022572*Robinsons Bank Annual Report 2016 191 LEGAZPI SAVINGS BANK

Legazpi Savings Bank (LSB), a wholly owned LSB PRODUCTS AND SERVICES subsidiary of Robinsons Bank, is a thrift bank primarily engaged in deposit-taking and lending activities. A. DEPOSIT PRODUCTS LSB was acquired in 2012 by Robinsons Bank under the BSP strengthening program for thrift and rural banks. Savings Accounts In 2016, LSB implemented various key expansion Regular Savings Account initiatives. In its nearly five decades of operating in Special Savings Account the Bicol region, LSB took the opportunity to span its Friendly Savings Deposit countryside reach in another fastest growing region Bulilit Savings Account in the country - CALABARZON. LSB is now providing Savings ATM Account financial services in Calauag, Quezon and will soon expand its scope to other nearby provinces. Checking Accounts As LSB continues to focus on ramping up its Regular Checking Account high-yielding loan portfolio, it acquired accreditation for providing teacher’s salary loans under the Time Deposits Department of Education’s Automatic Payroll Regular Time Deposit Deduction System (APDS). Friendly Time Deposit LSB also recognizes the important role of MSMEs in elevating the lives in the community as it aggressively rolled out its microfinance business. B. LOAN PRODUCTS In line with LSB’s commitment to serve Consumer Loans communities better, reach more markets, and acquire Personal Salary Loan new clients, its parent Robinsons Bank infused Jewelry Loan additional capital amounting to PHP400 million Teachers Loan in 2016. As of yearend, LSB’s equity amounted to Motorcycle Loan PHP515.4 million. Supported by this capital infusion, Housing Loan LSB’s assets grew to PHP2.3 billion, or 18.8% higher Auto Loan than previous year’s level. Gross Loans grew by 8% and reached PHP1.3 billion. LSB was also able to Commercial Loans participate in the interbank and bonds market. Small and Medium Enterprise Loan As of end-2016, LSB’s total physical network Microfinance Loan reached 11 branches, with one Micro-Banking Small Business Loan Office (MBO) each in Camarines Sur and Quezon, and 12 ATMs. Other Loans As a result of these strategic initiatives, LSB grew Back-to-back Loan its customer base by 17% to almost 71 thousand and Sales Contract Receivables contributed PHP22.4 million net income to its parent Lease Purchase Agreement Robinsons Bank.

C. OTHER SERVICES

Electronic Services ATM Services

*New Hire 2017 **Promoted 2017 ***Seconded

192 Robinsons Bank Annual Report 2016 LSB BOARD OF DIRECTORS LSB KEY OFFICERS

Lance Y. Gokongwei Chairman Mykel D. Abad President Elfren Antonio S. Sarte Vice Chairman Roel S. Costuna Corporate Secretary Omar Byron T. Mier Member and Legal Unit Head Mykel D. Abad Member Aileen Mary C. Ejercito Asst. Corporate Secretary Angelito V. Evangelista Member Eleanor Leni M. Ante Treasurer Eric B. Santos Member Kareen R. Villareal Chief Compliance Officer Janette C. Gonzalvo Member Cynthia C. Bautista Chief Audit Officer Hermogenes S. Roxas Independent Director Evie B. Abraham Human Resource Victor V. Laynes Independent Director Management Group Head Roel S. Costuna Corporate Secretary Ma. Socorro S. Liganor Retail Banking Group Head Erlinda O. Del Villar Operations Head Abundio B. Blanquisco, jr. Deputy for Operations Jason-Dennis R. Sambitan Information Technology Department Head Adrian T. Llana Credit Cycle & Operations Head Carmela Monica C. Borromeo Officer-in-Charge for Controllership Rodolfo T. Quinto Chief Security Officer

Robinsons Bank Annual Report 2016 193 LSB BRANCHES

HEAD OFFICE NAGA NEA Building, Triangulo, 4400 Naga City Rizal Street, Sagpon, Old Albay District Tel. Nos. (054) 473-5086 | (054) 811-5647 4500 Legazpi City Banking Hours: Mon. to Sat., 9:00am-5:00pm Tel Nos. (052) 481-1253 | (052) 480-5539 Fax No. (052) 480-7008 | (052) 480-5959 MICRO-BANKING OFFICES

BRANCHES GOA J. Quinzon Building Bagumbayan Pequeño, Rizal St. MAIN Goa, Camarines Sur Rizal Street, Sagpon, Old Albay District Tel. Nos. (054) 881-9287 4500 Legazpi City Banking Hours: Tue. to Sat., 9:00am-5:00pm Tel. Nos. (052) 481-1145 | (052) 481-2366 Banking Hours: Mon. to Sat., 9:00am-5:00pm CALAUAG Sitio Maharlika District 2 Brgy. Sta. Maria LEGAZPI Calauag, Quezon Corner Rizal and Mabini Streets Tel. Nos. (042) 717-6763 4500 Legazpi City Banking Hours: Tue. to Sat., 9:00am-5:00pm Tel. Nos. (052) 742-1380 | (052) 480-7039 Banking Hours: Mon. to Sat., 9:00am-5:00pm ATM DARAGA Rizal Street, 4501 Daraga, Albay MAIN Tel. Nos.(052) 742-0070 | (052) 483-3726 Rizal Street, Sagpon, Old Albay District Banking Hours: Mon. to Sat., 9:00am-5:00pm 4500 Legazpi City

TABACO LEGAZPI Ground Floor, N.N. Building, AA Berces Street Corner Rizal and Mabini Streets, 4500 Legazpi City Basud, 4511 Tabaco City Tel. Nos. (052) 487-7121 | (052) 487-7122 DARAGA Banking Hours: Mon. to Sat., 9:00am-5:00pm Rizal Street, 4501 Daraga, Albay

POLANGUI TABACO National Road, Basud, 4506 Polangui, Albay Ground Floor N.N. Building AA Berces Street Tel. Nos. (052) 486-2164 Basud, 4511 Tabaco City Banking Hours: Mon. to Sat., 9:00am-5:00pm POLANGUI SORSOGON National Road, Basud, 4506 Polangui, Albay Rizal Street, 4700 Sorsogon City Tel. No. (056) 421-5289 SORSOGON Banking Hours: Mon. to Sat., 9:00am-5:00pm Rizal Street, 4700 Sorsogon City

GUINOBATAN GUINOBATAN T. Paulate Street, 4503 Guinobatan, Albay T. Paulate Street, 4503 Guinobatan, Albay Tel. Nos. (056) 484-6664 | (052) 826-0039 Banking Hours: Mon. to Sat., 9:00am-5:00pm DAET SUBIA Bldg. J. Lukban St. DAET 4600 Daet, Camarines Norte SUBIA Bldg. J Lukban St. 4600 Daet, Camarines Norte VIRAC Tel. Nos. (054) 440-0570 | (054) 440-0580 G/F D&L Building corner Surtida & Rizal Streets Banking Hours: Mon. to Sat., 9:00am-5:00pm San Jose, 4800 Virac Catanduanes

VIRAC MASBATE G/F D&L Building corner Surtida & Rizal Streets Units 8 & 9 S&T Bldg. Cagba St., Brgy. Tugbo San Jose, 4800 Virac, Catanduanes 5400 Masbate City Mobile Nos. 0917-584-1696 | 0908-811-3423 Banking Hours: Mon. to Sat., 9:00am-5:00pm NAGA NEA Building, Triangulo, 4400 Naga City MASBATE Units 8 & 9 S&T Bldg. Cagba St., Brgy. Tugbo 5400 Masbate City Tel. Nos. (056) 333-574 | (056) 333-5744 Banking Hours: Mon. to Sat., 9:00am-5:00pm

194 Robinsons Bank Annual Report 2016 LSB KEY OFFICERS

MA. SOCORRO S. RETAIL LIGANOR BANKING VP & HEAD GROUP

OPERATIONS ERLINDA O. DEL VILLAR VP & HEAD

ABUNDIO B. OPERATIONS BLANQUISCO, JR. AVP & DEPUTY

CREDIT ADRIAN T. CYCLE LLANA department AVP & HEAD

JASON-DENNIS R. INFORMATION SAMBITAN TECHNOLOGY AVP & HEAD

COMPLIANCE KAREEN R. group VILLAREAL AVP & chief compliance officer

Robinsons Bank Annual Report 2016 195 JG SUMMIT BUSINESSES

FOOD, AGRO-INDUSTRIAL AND COMMODITIES CORE INVESTMENTS Universal Robina Corporation PLDT Inc. 110 E. Rodriguez Avenue, Bagumbayan Ramon Cojuangco Building Quezon City, Metro Manila Makati Ave., corner Ayala Ave. Tel. Nos.: (632) 633-7631 to 40 / (632) 240-8801 Legaspi Village, Makati City Tel. Nos.: (632) 888-8171 to 173 REAL ESTATE AND HOTELS Robinsons Land Corporation United Industrial Corporation (UIC) Level 2, Galleria Corporate Center 24 Raffles Place, #22-01/ 06, Clifford Center EDSA corner Ortigas Avenue Singapore 048621 Quezon City, Metro Manila, Philippines 1100 Tel. No.: (65) 622-0135-2 Tel. No.: (632) 397-1888 PARTNER COMPANIES AIR TRANSPORTATION Summit Publishing Company Inc. Cebu Air, Inc. 6F & 7F Robinsons Cybergate Center (Tower 3) Cebu Pacific Building Robinsons Pioneer Complex, Pioneer St. Domestic Road, Barangay 191, Zone 20 Mandaluyong City, Metro Manila, Philippines 1550 Pasay City, 1301 Philippines Tel. No.: (632) 451-8888 Tel. No.: (02) 802-7000 JobStreet.com Philippines, Inc. PETROCHEMICALS 20th Floor Cybergate Center Tower 3 JG Summit Petrochemical Corporation Robinson’s Pioneer Complex Ground Floor, Robinsons Cybergate Center (Tower 1) Pioneer Street, Mandaluyong City 1550 EDSA corner Pioneer St., Mandaluyong City Tel. No.: (632) 286-6222 Metro Manila, Philippines 1550 Tel. Nos.: (632) 397-3200/ (632) 397-2674 Robinsons Retail Holdings, Inc. Plantsite: Bo. Simlong, Batangas City 10 E. Rodriguez Jr. Ave., Libis Quezon City Philippines 4200 Metro Manila, Philippines Tel. Nos.: (632) 631-5407 to 10/ (632) 230-5000 Tel. No.: (632) 635-0751

BANKING SERVICES i-Tech Global Business Solutions Inc. Robinsons Bank Corporation 3rd Floor, Robinsons Otis, 1536 P. Guazon St. 17th Floor, Galleria Corporate Center Paco, Manila, Philippines 1007 EDSA corner Ortigas Avenue, Quezon City Tel. No.: (632) 249-4305 Metro Manila, Philippines 1100 Tel. Nos.: (632) 702-9500; (632) 637-2273

196 Robinsons Bank Annual Report 2016

17F Galleria Corporate Center EDSA corner Ortigas Avenue, Quezon City www.robinsonsbank.com.ph