2013 Annual Report About the Cover
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2013 Annual Report About The Cover “One’s conduct should be modelled after a tree, the trunk is rooted while its leaves ourish...” - Chinese proverb China Bank’s identity and history are anchored on deeply-rooted and time-honored values, and a heritage of principled banking that nurtured generations of trusted and successful partnerships. These deep roots provide a firm foundation for the Bank’s growth. Corporate Prole China Banking Corporation (China Bank), stock symbol CHIB, was incorporated on July 20, 1920 and commenced business on August 16, 1920 as the rst privately-owned commercial bank in the Philippines, catering initially to the needs of Chinese-Filipino businessmen. It played a key role in post-World War II reconstruction and economic recovery through its support to businesses and entrepreneurs in critical industries. China Bank was listed on the local stock exchange by 1947, and acquired its universal banking license in 1991. The Bank serves the corporate, commercial, middle, and retail markets with a wide range of domestic and international banking services. It is one of the largest universal banks in the country in terms of assets, capital base, and market value. Contents 2 Performance Highlights 60 Financial Statements 4 Letter to Stockholders 158 Branches 9 Operating Highlights 166 Off-Branch ATM Locations 27 Corporate Social Responsibility 169 Business Centers 31 Corporate Governance 170 Subsidiaries and Afliates 48 Board of Directors 180 Products and Services 54 Management Committee 56 China Bank Senior Ofcers 58 Subsidiaries Senior Ofcers 59 Management Directory Vision Mission Core Values Drawing strength from our rich history, We will be a leading provider of • Integrity we will be the best, most admired, and quality services consistently delivered • High Performance Standards innovative nancial services institution, to institutions, entrepreneurs, and • Commitment to Quality partnering with our customers, individuals, here and abroad, to meet • Customer Service Focus employees, and shareholders in wealth their nancial needs and exceed rising • Concern for People creation. expectations. • Efciency • Resourcefulness/Initiative We will be a primary catalyst in the creation of wealth for our customers, driven by a desire to help them succeed, through a highly motivated team of competent and empowered professionals, guided by in-depth knowledge of their needs and supported by leading-edge technology. We will maintain the highest ethical standards, sense of responsibility and fairness with respect to our customers, employees, shareholders, and the communities we serve. Annual Report 2013 1 PERFORMANCE HIGHLIGHTS NET INCOME RETURN ON EQUITY TOTAL RESOURCES TOTAL DEPOSITS In Million Pesos In Million Pesos In Million Pesos 5,100 413,698 11.31% 354,268 5,003 324,160 12.22% 271,977 5,076 262,553 13.81% 216,134 5,004 257,379 15.37% 213,042 4,103 233,865 14.49% 193, 290 STOCKHOLDERS’ EQUITY TOTAL CAR CASH DIVIDENDS PAID STOCK DIVIDENDS In Million Pesos In Million Pesos In Million Pesos 45,400 1,557 15.39% 1,298 42,738 1,416 16.00% 1,180 39,622 1,287 16.34% 1,073 35,453 1,170 16.26% 975 30,198 1,064 12.80% 887 BRANCHES ATM MARKET CAPITALIZATION In Million Pesos 367 84,232 561 316 70,864 511 293 46,959 475 269 46,551 431 247 36,078 380 0 18000 36000 54000 72000 90000 LOAN PORTFOLIO BY INDUSTRY CLASSIFICATION 26.00% Real Estate, Renting & Business Services 26.46% 14.69% Wholesale & Retail Trade 15.13% 17.24% Manufacturing 14.37% 12.51% Financial Intermediaries 8.57% 7.53% Transportation, Storage & Communication 8.23% 2012 5.69% Electricity, Gas & Water 5.87% 2013 1.99% Construction 2.67% 2.51% Agriculture 1.83% 0.78% Mining & Quarrying 0.35% 11.06% Others 16.52% 2 2011 2012 2013 For the Year (In Pesos) Gross Revenues 16,868,396,443 18,944,484,432 19,241,744,999 Gross Expenses 11,792,725,622 13,941,474,733 14,141,297,499 Net Interest Income 8,551,739,056 8,062,340,832 9,935,990,627 Non-Interest Income 4,191,798,474 5,793,614,751 5,160,591,519 Provision for Impairment & Credit Losses 155,097,500 236,756,182 414,335,872 Operating Expenses 6,965,360,995 8,193,901,086 8,907,262,337 Net Income 5,075,670,821 5,003,009,699 5,100,447,500 At Year End (In Pesos) Total Resources 262,553,425,440 324,160,046,756 413,697,922,996 Loan Portfolio (Net) 145,238,662,573 190,100,306,325 220,540,902,915 Investment Securities 61,191,602,901 66,431,352,746 66,921,226,657 Total Deposits 216,133,713,301 271,977,239,870 354,268,202,680 Stockholders’ Equity 39,621,797,950 42,738,205,056 45,399,699,439 Number of Branches 293 316 367 Number of ATMs 475 511 561 Number of Employees 4,633 5,198 5,594 Key Performance Indicators (In %) Return on Average Equity 13.81 12.22 11.31 Return on Average Assets 2.06 1.71 1.45 Net Interest Margin 3.76 2.90 2.98 Cost to Income Ratio 54.66 59.14 59.00 Liquid Assets to Total Assets 38.38 36.47 42.80 Loans to Deposit Ratio 67.20 69.90 62.25 Non-Performing Loans Ratio 3.68 2.55 1.99 NPL Cover 134.74 134.88 146.62 Capital Adequacy Ratio (Tier 1) 15.48 15.15 14.50 Capital Adequacy Ratio (Total CAR) 16.34 16.00 15.39 Shareholder Information Market Capitalization (In Pesos) 46,959,091,864 70,863,932,958 84,232,037,822 Earnings Per Share (In Pesos) 3.56 3.51 3.57 Cash Dividends Paid (In Pesos) 1,287,127,404 1,415,852,016 1,557,449,076 Cash Dividends Per Share (In Pesos) 12* 12* 1.2 Cash Payout Ratio (In %) 25.73 27.89 31.04 Cash Dividend Yield (In %) 3.02% 2.20% 2.03% Stock Dividends Paid (In Pesos) 1,072,705,100 1,179,975,500 1,297,874,280 Stock Dividends Per Share (in %) 10 10 10 Market Value Per Share (In Pesos) 39.80 54.60 59.00 Book Value Per Share (In Pesos) 27.74 29.93 31.80 Price to Book Ratio (x) 1.43 1.82 1.86 *Based on authorized and outstanding shares of stock before stock split. Annual Report 2013 3 LETTER TO STOCKHOLDERS Hans T. Sy Gilbert U. Dee Peter S. Dee The year was marked by capacity building, strategic acquisitions, and branch network expansion to strengthen the Bank’s positioning in all major client segments. 4 China Bank SM Aura Premier Branch. In 2013, China Bank branches located inside community malls and shopping centers nationwide reached 47, 27 of which are inside SM malls. The Philippines was among the best performing economies as interest rates rebounded in reaction to the widening of risk in the world, riding on the crest of positive investor condence premiums. The Philippine Stock Exchange (PSE) index fell from its backed by a ourishing nancial sector, subdued ination, low historical high of 7,392 last May 15 back to its December 2012 costs of borrowing and demonstrated resilience in the face of level, before resuming its upward trajectory. successive natural catastrophes. The 2013 GDP growth of 7.2%, The Philippines received its rst “investment grade” credit the country’s highest in twelve years, was underpinned by the rating from Fitch Ratings and Standard & Poors last March and May, strong growth in services and manufacturing sectors that offset respectively, followed by Moody’s in October 2013. The country the slowing momentum in agricultural output. Signicant gains in was perceived to have a sound nancial system, a stable business, the government’s tax effort combined with the clamor for tighter and scal environment that can sustain economic gains and credit controls on discretionary budget allocations further reduced growth. The Philippine banking system was also the only one in reliance on decit spending. The uptick in OFW remittance inows the world to receive a positive outlook from the leading credit and investment activity drove liquidity levels even higher, partly rating agencies, based on the strength of its capital position, asset fueling the steady appreciation in real estate and equity prices. quality, corporate governance, and the efcacy of reforms pursued The gains in domestic output would have been more by the Bangko Sentral ng Pilipinas (BSP). Capital adequacy and impressive, but a series of natural calamities devastated the Central non-performing loans ratio for the industry further improved to Philippines during the last quarter. The province of Bohol was the 18.62% and 0.19%, respectively, and this showed that the industry epicenter of a 7.2 magnitude earthquake that wrought massive has prepared for Basel 3 implementation in 2014. A combination of destruction on its countryside and transport infrastructure. Relief high market liquidity, low borrowing costs and moderate headline and reconstruction efforts had barely begun when Typhoon Haiyan ination provided the BSP with ample policy space to retain its (Yolanda), the most powerful storm in recent history, pummeled accommodative interest rate policy. Liquidity in the nancial system the Visayas region, leaving behind over 6,000 fatalities and remained at an all-time high despite the phaseout of Special Deposit P571 billion in economic losses. These twin catastrophes set GDP Accounts (SDA) through agency accounts on November 30, 2013. back by 30 basis points because of severe setbacks in agricultural The said phaseout triggered a massive migration of excess funds and commercial activities.