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2016 Annual Report

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2016 Annual Report Postbank Center, Liwasang Bonifacio 1000 Manila Trunkline Nos. 527-9477/ 527-0053 (Connecting all departments) E-mail Address: [email protected] CONTENTS 2016 Annual Report 05 Charter Statement – Vision, Mission, Core Values and History 07 The Postbank Brand and Business Model 09 Management Report and Financial Highlights Results of Operations with Financial and Non-Financial Indicators 10 18 Strategic Plans and Objectives 22 Highlights of Major Activities 22 . Bank’s Role in Fighting Poverty in Rural Areas 23 . Renewal of the Bank’s Commitment to Serve 24 . Opening of New Micro-banking Office 25 . Credit Facilities Offered 26 . ISO Certification 27 . Trainings and Seminars . Sports Tournament 29 30 Risk Management Framework 37 Money Laundering and Terrorist Prevention Program 45 Corporate Governance 45 . Corporate Governance and Organizational Structure 53 . Selection Process of the Board and Senior Management 53 . Board’s Overall Responsibility 60 . Board Composition and Profile 71 . Board Level Committees, Functions and Attendance 75 . Senior Management and List of Officers 79 . Management Level Committees and Functions 85 Corporate Governance Policies and Programs 85 . Performance Assessment Program 87 . Orientation and Education Program 88 . Retirement and Succession Policy 94 . Remuneration Policy of Directors and Senior Management 97 . Related Party Transactions Policy 104 . Self-Assessment Function 108 . Dividend Policy 113 . Corporate Social Responsibility 114 . Consumer Protection Practices . Whistleblowing Policy 119 122 Audited Financial Statements with Auditor's Opinion 151 Capital Structure and Capital Adequacy Products and Services 167 172 Branch Directory Charter Statement Mission To provide financial services in the countryside in synergy with the Philippine Postal Corporation, specifically in the unbanked/ underserved areas where poverty and employment are the highest resulting in the upliftment of the lives of the poor communities thru bigger income and better services Vision By Year 2020, Postbank shall be a strong government bank with focus on countryside development Core values a. Commitment in providing development to the countryside specifically in the unbanked/ underserved areas b. Friendly Service and Excellence c. Integrity and Transparency d. Promoting Organizational Cohesiveness and Unity in purpose ANNUAL REPORT 2016 5 Postbank A Government Savings Bank Postbank: 100 Years and Beyond More than 100 YEARS have passed since the Postal Savings Bank (PSB) was established in 24 May 1906 as part of the Bureau of Posts with the passage of Act No. 1493. During those days all post offices were considered and in fact operated as branches of the bank. PostalBank was created with a single vision in mind - to tap savings in the countryside and to bring banking services to far-flung areas of the Philippines. True to its vision, the bank spurred savings and investments in the countryside. It served as catalyst for economic activity and growth in various uncharted places of the archipelago until the late 1930s. Unfortunately, World War I wiped out much of the progress made by the bank. The setbacks and other ravages caused by the war destroyed about 70% of the records of the PSB and crippled its operations. It was only in 1946 that PSB resumed services in Manila. Starting with only 15,737 savings deposits accounts with a total value of ₱4,104,223, the bank rapidly grew with deposits jumping to ₱14.4 million in 1947 (250% increase), ₱25 million in 1948 (74% increase), and ₱33 million in 1949 (32% increase). In the 1960’s the private banking sector, rapidly grew while the operations of PSB deteriorated due to the shift of its clients to private banks. As PSB was seen as unduly competing with the private sector, it was dissolved via Presidential Decree No. 121 dated 29 January 1973. More than 20 years after its dissolution, the PhilPost Board of Directors approved the re- opening of the Philippine Postal Savings Bank (PPSB) as a wholly-owned subsidiary of the Philippine Postal Corporation with its own separate funds, books of accounts and set of accountable officers and employees. The re-establishment was made pursuant to the Medium- Term Philippine Development Plan of the Philippine Postal Corporation (1993-1998) to ‘develop the rural financial sector and ensure adequate supply of credit to the countryside. Today, PPSB undaunted and even made stronger by its historical setbacks, equipped with greater awareness of the banking needs of the Filipino People assumes the responsibility of being the government’s partner in its quest for better economic opportunities for our countrymen through accessible banking and financial services. 6 PHILIPPINE POSTAL SAVINGS BANK, INC. Postbank Brand Postbank has been characterized as a While the brand has been always thrift bank catering small savers and small associated with the services of its major scale enterprises since it re-opened in stockholder (PHLPost), it has manage to 1994. It is often noted about Postbank that stand by its name slowly to be made known it is hardly noticed. It is largely unknown to in the field of financial and banking the public and it hardly figures prominently services as the only government savings in the banking environment. bank in the Philippines. This is rather ironic, for Postbank is the only public thrift bank in the country, and it The Postbank logo contains three major has existed for over a century (save for the elements: (1) A stylized Philippine Flag, to martial law regime). It has a famous emphasize that, as the country’s only public address, 1000 Liwasang Bonifacio, right at thrift bank, it carries the colors of the the bosom of the cultural center of the country; (2) An abbreviated arrow, to country. But it is not associated with emphasize movement and dynamism, anything unique, so to speak, and this lack which the strategic plan intends to inject of identity has presumably impinged on its into the Bank; and (3) a slogan, “Kung ability to grow in stature, in resources, and Nasaan Kayo, Nandoon Kami”, to in its ability to make a difference. emphasize the outreach objectives as a countryside bank and its synergy tie-up with PHLPost and its chain of more than 1500 post offices. ANNUAL REPORT 2016 7 Postbank A Government Savings Bank Postbank Business Model The Postbank business model is anchored As a simple thrift bank model, the Bank’s in the four strategic business perspective: business emanates from its core operation (1) financial perspective; (2) customer/ particularly deposit taking and providing stakeholders perspective; (3) internal loans. It has an investment arm through it process; and (4) learning and growth. As treasury operations that handles also cash part of the business strategy, the Bank has management. Aside from the traditional also identified the four strategic themes deposit and loan products, the Bank also which are defined as the high-level business offers other banking and cash management strategies that form the basis of the Bank’s services. The core banking operations are business model. These are the areas that being sustained by the various internal the bank must excel in order to achieve its processes and services of various support vision. These “pillar of excellence” were groups. identified as: (1) strong and sustained financial foundation; (2) Services responsiveness; (3) Effective and quality business processes; and (4) strong and dynamic organization. 8 PHILIPPINE POSTAL SAVINGS BANK, INC. Management’s FINANCIAL HIGHLIGHTS 2016 2015 Report Million ₱ Million ₱ Resources 11,598 12,072 Loans 5,536 6,114 The Year 2016 continued to be a Deposits 9,724 10,765 challenging year for the Bank. It was Capital 982 1,012 brought about at to some extent by some Net Income (11.9) 66.1 unexpected circumstances that made the stern condition of the Bank. While Postbank still maintains its position in the industry as a government savings bank in the country, we have been now privy to the plans of the government and the Department of Finance (DOF) of the conversion of Postbank into a Workers’ Bank initially as subsidiary of Land Bank of the Philippines. One of the challenges that has really affected the Bank is the directive from Department of Finance (DOF), per DOF Circular No. 001-2015 (as amended by Circular Nos. 002-2015, 003- 2015 and 02-2016) directing all government instrumentalities to transfer their deposits only to the two large government bank in the Philippines which has been detrimental to the operations of the Bank. This order effectively prohibited Postbank from accepting and even maintaining government deposits, despite being a 100% government-owned bank and having the authority of the Monetary Board to accept government deposits. Aside from the DOF directive, we are now required to fully comply with the implementation of BSP Circular 855 where new standards / stricter rules on loan classification and loan loss provisioning are being adopted. Likewise, due to market forces, non-performing loans substantially increased resulting to non-earning assets, thus reducing our regular revenue / income streams. Still, with collective efforts of the men and women of Postbank, and under the guidance of the Board, we managed to maintain the Bank’s existence for year 2016 On the other hand, while the Year 2016 has not been a good year for the Bank, we have seen some bright side along this way. The acquiring bank (Land Bank) has sent a management team to Postbank to give guidance to Postbank with an ultimate goal of preserving its value. Major focus of the new management team is to: (a) address the Bank’s increasing liquidity risk, (b) improving the CAMELS rating; and (c) improve the capital and overall financial condition Towards the end of 2016, a new direction is set anchored on the bright side towards the goal of achieving the government’s plan to convert the Bank into Bank for the Overseas Filipinos.
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