Panahon Ng Bayanihan 2020 Annual Report CONTENTS Financial Summary / Financial Highlights 1 Corporate Governance 58 Corporate Objective Sustainability Report 84 Vision-Mission 2 GRI Content Index 120 About the PNB Brand Board of Directors and Board Advisors 126 PNB Values Board of Directors 128 Business Model & Scope of Business 4 Board Advisors 136 Message from the Chairperson’s to Shareholders 6 Management Committee 138 Message from the President and CEO to Shareholders 8 The Bank’s Subsidiaries and Affiliate 145 Operational Highlights 10 Market Price of and Dividends on 147 Awards and Recognitions 26 PNB Common Equity Plans for 2020 27 Statement of Management’s Responsibility Message from the Board Audit and Compliance 28 for Financial Statements 149 Committee Chairman Independent Auditor’s Report 150 Message from the Board IT Governance 30 Statements of Financial Position 157 Committee Chairman Statements of Income 158 Message from the Board Oversight 32 Statements of Comprehensive Income 159 RPT Committee Chairman Statements of Changes In Equity 160 Message from the Board Strategy and Statements of Cash Flows 162 Policy Committee Chairman 29 Products and Services 164 Capital Structure and Adequacy 36 Management Directory 166 Message from the Risk Oversight Overseas Offices 166 Committee Chairman 39 Region and Area Heads 178 Risk Management Disclosure 40 Area Retail Lending Centers 179 Message from the Corporate Governance and PNB Domestic Subsidiaries and Affiliate 180 Sustainability Committee Chairperson 56 ABOUT THE COVER Annual Report 2020 Paper used: MOHAWK Navajo Smooth 216 gsm Bright White Philippine National Bank FSC-Certified reinforces its commitment as Paper meets the mark of responsible forestry a Partner Ng Bayan. Tunay na Planner Paper White 81 gsm Masasandalan. Kahit kailan. Kahit saan. Ink used: Printed with soy-based ink Alcohol-free fountain solution Printer: Velprint ISO-certified www.velprint.com.ph FINANCIAL SUMMARY/ FINANCIAL HIGHLIGHTS In Thousands Except Selected Ratios, CONSOLIDATED PARENT ENTITY Per Common Share Data And Headcount 2019 Minimum Required Data 2020 2020 2019 (As Restated) Profitability Net Interest Income P35,820,766 P32,358,266 P34,649,027 P29,446,638 Non-Interest Income 9,731,397 8,418,662 8,795,932 6,073,275 Non-Interest Expenses 27,909,875 25,754,826 25,896,213 22,158,754 Pre-Provision Profit 17,642,288 15,022,102 17,548,746 13,361,159 Provision for Credit Losses 16,882,621 2,910,182 16,534,335 1,593,219 Income Tax Provision (Benefit) (1,798,238) 2,452,307 (1,945,521) 2,086,464 Income for Continuing Operations 2,557,905 9,659,613 2,959,932 9,681,476 Income from Discontinued Operations 67,583 101,593 - - Net Income 2,625,488 9,761,206 2,959,932 9,681,476 Selected Balance Sheet Data Liquid Assets P383,713,521 P210,025,681 P373,577,904 P192,930,640 Gross Loans 616,060,917 651,470,434 601,386,109 584,084,209 Total Assets 1,231,133,799 1,142,290,611 1,220,201,677 1,069,205,222 Deposits 890,287,889 826,045,480 893,548,044 775,841,999 Total Equity 155,983,008 154,975,400 153,244,982 152,069,646 Selected Ratios Return on Equity 1.69% 6.89% 1.94% 6.97% Return on Assets 0.22% 0.92% 0.26% 0.98% Common Equity Tier 1 Ratio 14.47% 14.10% 12.77% 12.13% Capital Adequacy Ratio 15.14% 14.80% 13.44% 12.83% Per Common Share Data Earnings per Share Basic P1.71 P7.05 P1.71 P7.05 Diluted 1.71 7.05 1.71 7.05 Book Value per Share 100.13 99.68 100.44 99.68 Others Cash dividends declared – – Headcount Officers 4,691 4,318 Staff 4,380 4,232 Panahon ng Bayanihan 1 2 Philippine National Bank Annual Report 2020 CORPORATE OBJECTIVE VISION THE PNB BRAND To be the most admired financial services organization For more than a hundred years, Philippine National in the country in terms of: Bank has established itself as a “Bangko ng Bayan”, a stable, reliable, and service-oriented financial institution • Financial performance – rank #1 or #2 in its businesses serving generations of Filipinos anytime, anywhere in in terms of return on equity the world. We believe in the right to prosperity for all in • Innovativeness – in products, services, distribution support of our customers, employees, shareholders, and and the use of cutting-edge technology communities on the road to success and wealth creation. o Customer perception Our way of service is “malalapitan”. We are a customer- o The preferred financial services provider centered organization with a passion for financial growth, • The customer-centered organization with a passion innovation, and service excellence. We are committed to for service excellence the highest standard of professionalism and integrity. • Social responsibility – the employer of choice, a good Our strength lies in our ability to work as an integrated, corporate citizen and partner in nation-building cohesive entity. We strive to become an employer of choice and a true partner in nation-building. • Long-term vision – developing competitive advantage on a sustained basis by anticipating changes in In 2020, the unprecedented COVID-19 pandemic caused customer’s preferences and in the manner of doing lockdowns and prolonged community quarantines in business different parts of the globe. PNB transitioned from malalapitan to kami ang lalapit sa inyo signifying its efforts in going the extra mile during a time of limited MISSION mobility. We live by the tagline, ”Masasandalan. Kahit kailan. Kahit We are a leading, dynamic Filipino financial services saan.” group with a global presence committed to delivering Evolving customer needs propelled the change of a whole range of quality products and services that our brand message from You First to Masasandalan. will create value and enrich the lives of our customers, Masasandalan is a brand message brought forth by employees, shareholders and the communities we serve. a deeper understanding of customer needs in times of uncertainties. This brand message reinforces that PNB puts the customer at the heart of the financial solutions we offer and embodies our core values such as service orientation (Mapaglingkod), trustworthiness (Mapagkakatiwalaan), and commitment (Mapagmalasakit). PNB VALUES GRI 102-16 Our shared values bind us together and enable us to achieve our vision and mission. MAPAGLINGKOD (SERVICE ORIENTATION) MAPAGKAPWA (TEAM ORIENTATION) We are committed to deliver the best possible service to We are committed to work together as a family, united our customers, proactively responding to their needs and in pursuit of common goals and aspirations, valuing exceeding expectations as manifestation of the value and meritocracy in promoting the common good. respect that the Bank holds for every single one of them. MAPAGMALASAKIT (COMMITMENT) MAPAGKAKATIWALAAN (TRUSTWORTHINESS) As stewards not only of the Bank’s business, but of its We hold sacred the consistent adherence to a strict proud name and enduring heritage, we manifest genuine moral and ethical code manifested through honesty, concern and affection for the Bank, its business, and its professionalism, fairness, prudence, and respect for the core constituents. law. MAPAGMALAKI (PRIDE) MAPANG-AKMA (ADAPTIVE TO CHANGE) We take pride in working with the Bank, of being a We nurture within each one of us a positive attitude Philnabanker, in whatever tasks we undertake. This will towards change and innovation, promoting flexibility be reflected in all our actions, in the passion of how we and celebrating creativity as drivers of our quest for get things done. continuous improvement and operational excellence. Panahon ng Bayanihan 3 4 Philippine National Bank Annual Report 2020 BUSINESS MODEL AND SCOPE OF BUSINESS GRI 102-2, 102-6 Philippine National Bank (PNB), the country’s first PNB’s banking activities are undertaken through the universal bank, is one of the largest privately-owned following groups within its organization, namely: Philippine commercial banks. PNB was established by Retail Banking Sector the Government of the Philippines in 1916 and became fully privatized in 2007. As an instrument of economic The Retail Banking Sector (RBS) principally focuses on development, PNB led the industry through the years the Bank’s deposit-taking activities by offering a wide with its agricultural modernization program and trade array of deposit products such as peso accounts and its finance support for the country’s agricultural exports. variants like current accounts, interest-bearing savings In addition, the Bank pioneered efforts in the Overseas and time deposit accounts, and US dollar and other Filipino Worker (OFW) remittance business and foreign currency accounts. The Sector also provides introduced many innovations such as Bank on Wheels, its broad customer base with other retail products computerized banking, Automated Teller Machine (ATM) like credit cards, consumer loans, cash management banking, mobile money changing, domestic traveler’s solutions, remittance services, and other bank services. checks, electronic filing and payment system for large While the main purpose is the generation of lower taxpayers, and Unit Investment Trust Fund (UITF) ATMs. cost funding for the Bank’s operations, RBS also PNB has the largest number of overseas offices and one concentrates on the cross-selling of trust, fixed income, of the largest domestic branch networks among local and bancassurance products to existing customers, and banks. referrals of customers by transforming its domestic and overseas branch distribution channels into a sales-driven PNB’s principal commercial banking activities include organization. deposit-taking,