Office of the EVP and Chief Financial Officer Direct Lines: 8573-4074 Fax: 8526-3416 Trunk Lines: 8526-3131 to 70/8891-6040 to 70 Locals: 4074,4499 March 19, 2020 MS. JANET A. ENCARNACION HEAD, DISCLOSURE DEPARTMENT Philippine Stock Exchange 6/F PSE Tower 28th Street corner 5th Avenue BGC, Taguig City Dear Ms. Encarnacion: In compliance with the reportorial requirements of Section 17 of the Securities Regulation Code (SRC) and Section 177 of the Revised Corporation Code of the Philippines, we provide you the SEC Form 17-A report of Philippine National Bank as of December 31, 2019. Very truly yours, NELSON C. REYES Executive Vice President & Chief Financial Officer cc: ATTY. MARIE ROSE M. MAGALLEN-LIRIO Head – Issuer Compliance and Disclosure Department (ICCD) Philippine Dealing & Exchange Corporation 37th Floor, Tower 1, The Enterprise Center 6766 Ayala Avenue corner Paseo de Roxas Makati City COVER SHEET A S 0 9 6 - 0 0 5 5 5 5 S.E.C. Registration Number P H I L I P P I N E N A T I O N A L B A N K Company’s Full Name) P N B F I N A N C I A L C E N T E R P R E S I D E N T D I O S D A D O M A C A P A G A L B L V D . , P A S A Y C I T Y (Business Address: No. Street City/Town/ Province) Aidell Amor R. Gregorio 8891-60-40 Contact Person Company Telephone Number 1 2 3 1 17 - A 4 28 Month Day FORM TYPE Month Day Fiscal Year Annual Meeting Secondary License Type, If Applicable C F D Dept. Requiring this Doc. Amended Articles Number/Section Total amount of Borrowings 36,471 Total No. of Stockholders Domestic Foreign ----------------------------------------------------------------------------------------------------------------------------------------------------------- To be accomplished by SEC Personnel concerned File Number LCU Document I.D. Cashier S T A M P S Remarks = pls. use black ink for scanning purposes 1 SEC Number AS096-005555 File Number PHILIPPINE NATIONAL BANK AND SUBSIDIARIES (Company’s Full Name) PNB Financial Center, Pres. Diosdado P. Macapagal Boulevard, Pasay City (Company’s Address) (632) 8891- 6040 to 70 (Telephone Number) December 31, 2019 (Calendar Year Ended) SEC FORM 17 -A REPORT Form Type (Amendment Designation (if applicable) DECEMBER 31, 2019 Period Ended Date LISTED (Secondary License Type and File Number) 2 SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-A ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SECTION 177 OF THE REVISED CORPORATION CODE OF THE PHILIPPINES 1. For the fiscal year ended : December 31, 2019 2. Commission Identification No. : AS096-005555 3. BIR Tax Identification No. : 000-188-209-000 4. Exact name of issuer as specified in its charter : Philippine National Bank 5. Province, country or other jurisdiction of : Metro Manila, Philippines incorporation or organization 6. Industry Classification Code : (SEC Use Only) 7. Address of principal office : PNB Financial Center, Pres. Diosdado P. Macapagal Blvd. Pasay City, 1300 8. Issuer’s telephone number, including area code : (632) 8891-60-40 up to 70 /(632) 8526-3131 to 70 9. Former name, former address, and former fiscal year, if changed since last report : N/A 10. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the RSA Title of Each Class No. of Shares of Common Stock Amount of Debt Outstanding Outstanding (Unpaid Subscription) Common Shares 1,525,764,850 None 11. Are any or all of these securities listed on a Stock Exchange: Yes [ ] No [ ] Stock Exchange : Philippine Stock Exchange Class of Securities : Common Shares 12. Indicate by check mark whether the registrant: a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder or Section 11 of the RSA and RSA Rule 11 (a) – 1 thereunder, and Sections 25 and 177 of the Revised Corporation Code of the Philippines during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports) Yes [ ] No [ ] b) has been subject to such filing requirements for the past ninety (90) days. Yes [ ] No [ ] 13. Aggregate market value of the voting stock held by non-affiliates: P52,638,887,325* ___________ *1,525,764,850 common shares @ P34.50 trading price of PNB shares as of December 27, 2019 3 SEC FORM 17-A ANNUAL REPORT TABLE OF CONTENTS PART I – BUSINESS AND GENERAL INFORMATION Item 1 – Business 5 Item 2 – Properties 29 Item 3 – Legal Proceedings 29 Item 4 – Submission of Matters to a Vote of Security Holders 29 PART II – OPERATIONAL AND FINANCIAL INFORMATION Item 5 – Market for Issuer’s Common Equity and Related Stockholder 30 Matters Item 6 – Management’s Discussion and Analysis 32 Item 7 – Financial Statements 41 Item 8 – Information on Independent Accountant and Changes 42 in/disagreements with Accountants on Accounting / Financial Disclosure PART III – CONTROL AND COMPENSATION INFORMATION Item 9 – Directors and Executive Officers 44 Item 10 – Executive Compensation 66 Item 10A – Remuneration Policy 67 Item 11 – Security Ownership 69 Item 12 – Certain Relationships and Related Transactions 75 PART IV – EXHIBITS AND REPORTS ON SEC 17-C 76 4 PART I - BUSINESS AND GENERAL INFORMATION Item 1. Business A. Business Development The Philippine National Bank (PNB or the “Bank”), the country’s first universal bank, is the fourth largest local private commercial bank in terms of assets, net loans and receivables, capital and deposits. As of December 31, 2019, the Bank has a distribution network of 715 domestic branches and offices and 1,626 automated teller machines (ATM) in the Philippines. In addition, it has the widest international footprint among Philippine banks spanning Asia, Europe, the Middle East and North America with its overseas branches, representative offices, remittance centers and subsidiaries. In July 2016, PNB celebrated its Centennial Year with the theme, “A Century of Excellence”, signifying a meaningful milestone for an institution that has served generations of Filipinos here and abroad. For over 100 years, PNB stands proud as an institution of stability and security for many Filipinos. With its century of banking history and experience, PNB is poised to move forward to becoming a more dynamic, innovative and service-focused bank, providing service excellence to Filipinos all over the world. The Bank was established as a government-owned banking institution on July 22, 1916. As an instrument of economic development, the Bank led the industry through the years with its agricultural modernization program and trade finance support for the country’s agricultural exports, pioneering efforts in the Overseas Filipino Workers’ (OFW) remittance business, as well as the introduction of many innovations such as “Bank-on-Wheels”, computerized banking, ATM banking, mobile money changing, domestic traveler’s checks, and electronic filing and payment system for large taxpayers. PNB has the widest overseas office network and one of the largest domestic branch networks among local banks. On February 9, 2013, the Bank concluded its merger with Allied Banking Corporation (ABC) as approved and confirmed by the Board of Directors (BOD) of PNB and ABC on January 22 and January 23, 2013, respectively. The respective shareholders of PNB and ABC, representing at least two-thirds of the outstanding capital stock of both banks, approved the terms of the Plan of Merger of the two banks on March 6, 2012. To support the Bank’s efforts to diversify its funding sources to meet the financial needs of its clients, PNB offered Long-Term Negotiable Certificates of Time Deposit (LTNCDs), which extend the maturity profile of the Bank’s liabilities as part of overall liability management and to raise long-term funds for general corporate purposes. In October 2016, PNB received the approval from the Bangko Sentral ng Pilipinas (BSP) to issue up to P20.0 billion worth of LTNCDs in tenors of 5.5 to 10 years in multiple tranches over a period of one year. Along this line, PNB launched the initial tranche on December 14, 2016 with an offering of P3.0 billion and this was oversubscribed at P5.38 billion. The said offer has a tenor of 5 years and 6 months and a coupon rate of 3.25%. In 2017, two LTNCD tranches were issued, viz: a) on April 27, 2017, P3.765 billion at 3.75% coupon rate; and b) on October 26, 2017, P6.35 billion at 3.875% coupon rate. The last tranche was oversubscribed at more than double the issue size of P3.0 billion. In October 2018, PNB once again received the approval from BSP to issue up to P20.0 billion worth of LTNCDs. In February 2019, PNB issued the first tranche of 5.5-year LTNCDs totaling P8.2 billion at 5.75% per annum. The original P3.0 billion offering was upsized to meet the 2.7x oversubscription owing to the strong demand from both retail and institutional investors. On October 11, 2019, PNB listed the second tranche of LTNCDs totaling P4.6 billion which was double the announced issue size of P2.0 billion. As part of the Bank’s efforts to diversify its funding sources and support its strategy on safe aggressive growth, PNB also tapped the capital markets. In April 2018, PNB successfully issued in Singapore and Hong Kong its 5-year Fixed Rate Senior Notes worth US$300 million out of its US$1 billion Medium 5 Term Note (MTN) Program. This marked the first time that PNB tapped the international bond market for medium term dollar funding.