Annual Report 2005 Equitable PCI Bank 2 About the Cover Equitable PCI Bank fulfilled its vision of rising to dominance as shown by its outstanding performance in 2005. It has proven to be the “Bank of Choice” for an ever growing number of clients. The Bank shows the way to a brighter future, like the sun emerging in the horizon, with its remarkable growth that clearly indicates substantial progress over the years, placing it as one of the country’s most dependable and reputable financial institutions. Contents Financial Highlights 1 To Our Stockholders 2 2005 Highlights 6 Review of Operations 8 Philippine Economic Performance 2005 26 Board of Directors and Advisory Board 28 Management Committee 30 Senior Officers 31 Senior Officers, Subsidiaries and Affiliates 32 Network Directory 33 Products and Services 44 Annual Report 2005 Equitable PCI Bank 1 Financial Highlights (Consolidated) FOR THE YEAR (in million pesos, except earnings per share) AT YEAR-END (in million pesos) Annual Report 2005 Equitable PCI Bank 2 Corazon S. de la Paz Teresita Sy-Coson Chairperson Chairperson of the Executive Committee Annual Report 2005 Equitable PCI Bank 3 To Our Stockholders Focus was critical in a year when political and economic difficulties continually tested our country’s strength and resilience. Tension in the national scene, made no easier by rising oil prices and inflation, tugged at our confi- dence at nearly every turn. Through all these and our own challenges, however, Equitable PCI Bank drew once again on its inherent fortitude and directed unshakeable focus toward its vision of attaining dominance in the industry as The Bank of Choice. Rising to strategic targets Our clear-minded and determined execution of our corporate strategies to pursue higher-margin middle market and consumer accounts, build up the low-cost deposit base, improve asset quality and boost non-inter- est income produced tangible results. We posted a net income of P2.7 Billion in 2005, or 12% higher than the previous year’s net income of P2.4 Billion. Total interest income increased by 14% to P19 Billion, driven by larger earning assets and a better portfolio mix. In support of our strategies, our teams in the vari- ous business units capitalized on the key areas where Rene J. Buenaventura President & Chief Executive Officer Annual Report 2005 Equitable PCI Bank 4 the Bank has established a strong franchise. Foremost on top of the P10.5 Billion NPAs disposed in December of these areas is commercial / middle-market lending, in 2004 to asset management companies. The results are which the Bank’s expertise has spurred a steady growth striking. Non-performing loans (NPL) ratio significantly in our portfolio size and breadth. Our new accounts declined from 7.01% to 4.50%, a level substantially less increased by 15%, with our commercial banking team than the industry NPL average of 8.51% as of December sustaining this uptrend over the past four years. Com- 2005. mercial loans now account for more than 46% of our total loans and receivables portfolio of P142.4 Billion. With a better asset and liability mix and healthier loan portfolio quality, net interest income surged 19% to Similarly, the Bank’s vast branch network has given a vig- reach P10.6 Billion while net interest margin widened orous push to our consumer lending business. Accounts to 4.35% from 4.21%. The robust performance in the referred by our branches constitute 70% of consumer interest differential business was complemented by the loans. For their part, the consumer finance team has buoyant 23% surge in total non-interest income to P9.6 kept pace with the boom in the auto and property mar- Billion. kets, unleashing aggressive product development and promotion efforts to propel loan bookings 34% higher The Bank earned P4.9 Billion in service charges, fees and than the previous year. commissions, up 12%, as a result of targeted programs to build up fee-based income sources in remittance, trust Interest expenses rose at a slower pace of 9% to P8.4 Bil- banking, bancassurance, credit cards and branch trans- lion, given resolute efforts to manage the Bank’s funding actions. The Bank’s strategy also draws further on our cost structure. Total deposits increased 7% to P206.7 Bil- solid presence in the corporate market, where we have lion, spurred mainly by the growth of low-cost demand shifted specifically towards cash management products and savings deposits. Notably, our branches have played and other fee-based income sources. a pivotal role in aggressively increasing low-cost depos- its and in actively cross-selling other Bank products and Overseas, the Bank’s dominance in the Overseas Filipi- services. Transforming them into customer-segmented no Workers (OFW) remittance market has been further and therefore highly focused sales forces was a growth validated, with sterling records set once again in foreign strategy we painstakingly executed over three years, to exchange inflows and in transaction volume. Our Re- dramatic results. mittance Division had a banner year, as more and more overseas Filipino workers entrusted their remittance As we trained and deployed our teams of Elite, Personal, transactions to the Bank and our volume reached an in- and Transaction Bankers in the branches, we saw our de- dustry-leading growth rate of 18%. posit portfolio showing double-digit growth and our re- tail customer base being strengthened. To further sharp- In the trust banking arena, our Unit Investment Trust en our competitive edge, we are continuing to provide Funds have reaped tremendous public acceptance, the necessary training and technological support. With boosting total volume to a remarkable 140% beyond a much stronger customer information database behind target and delivering above-market returns. Moreover, our sales and marketing teams, we aim to further boost key accounts grew by 18% and the Bank served as low-cost deposits and generate incremental revenues collateral trustee for vital business ventures across the while also raising the bar on the customer experience in country. Recognizing its top tier performance, the Bank’s sales and service interactions with our bankers. Trust Banking group was cited as “Best Fund Manager” in the Watson Wyatt Survey of Trusteed Funds Managed Following through on earlier initiatives to improve asset with Full Discretion. quality, we continued to enhance our credit processes and beef up collection. The Bank also sold another P5.3 Billion We also generated over P1 Billion in premiums through worth of non-performing assets (NPA) in September 2005, our insurance channel, PELAC, enabling it to be among Annual Report 2005 Equitable PCI Bank 5 the top 10 out of 39 life insurance companies nation- the Bank again garnered the “Trusted Gold Brand” for wide. In 2005, it ranked fifth in terms of First-Year Pre- 2006. The survey identified the brands that appealed miums and third in terms of Single Premiums – a superb the most to affluent Asian consumers, reaffirming our leap from its 27th position in 2004. This accomplishment Bank as the consumers’ choice in our industry. is attributable to the synergies developed by branch net- work personnel and their PELAC Financial Sales Execu- The marketplace likewise honored the Bank for its ex- tives counterpart. ceptional results with a sustained uptrend in the share price, which reached P59 by year-end. This represents a year-on-year gain of 23% as against the PSE index’s Rising to market opportunities 15% hike as of December 2005. Augmenting its fee-based income, the Bank also posted significant Treasury-related trading gains and foreign ex- These achievements now form part of the proud foun- change profits, which reached P1.1 Billion and P670 Mil- dation of the Bank, which serves as a constant chal- lion, respectively, as the Bank correctly, anticipated op- lenge for our people to always excel and dominate in portunities where market conditions turned favorably. our various areas of operation. Looking ahead, we see even brighter prospects and dynamic synergies. We will Beyond the peak of financial results recorded for the concentrate on fortifying our capital position, mindful year, the light of recognition that shone on the Bank’s of the fact that a stronger balance sheet built firmly on support to development efforts has been as bright. We the solid franchise in our target business segments shall garnered four awards from various institutions, all com- position the Bank for even faster and healthier growth mending our solid contribution to the growth of SMEs ahead. and countryside industries. We have every confidence that our organization shall These awards came from: the Land Bank of the Philip- only grow further in might and reach as we put these pines, which named the Bank the Most Outstanding strengths to bear on the paths we shall take in the fu- Countryside Partner for the third year in a row under the ture. To our shareholders, officers, and employees, thank Commercial Banks/Government Financial Institutions you for your stalwart support in our efforts to be The Category and under the Agri-Agra Financing Category; Bank of Choice. from the Development Bank of the Philippines, which cited the Bank as the Most Outstanding Financial Institu- tion under the Japan Bank for International Cooperation CORAZON S. DE LA PAZ Facilities for large-scale and shipping industries; and from Chairperson the Small Business Guarantee and Finance Corporation, which honored the Bank as the Most Distinguished Part- ner under the Omnibus Credit Program for SMEs. Rising to marks of distinction TERESITA SY-COSON The Bank also reaped various recognitions for its con- Chairperson of the Executive Committee tinuing exemplary performance. The Asset named Equi- table PCI Bank as “The Best Domestic Bank in the Philip- pines” for the second year in a row.