2009 ANNUAL REPORT CONTENTS 3 Financial Highlights 4 Message from the Chairman Emeritus 6 Message from the Chairperson 8 Message from the President 10 Review of 2009 Operations Economic Environment Operational Highlights 28 Accolades 30 Board of Directors 34 Corporate Governance 36 Statement of Management’s Responsibility for Financial Statements 37 Report of Independent Auditors 38 Statements of Financial Position 39 Statements of Income 40 Management Directory 46 Products and Services 48 BDO Group of Companies 49 International Remittance Offices 50 Branch Directory BUILDING FOR THE FUTURE The year 2009 was both a challenging and a rewarding year for Banco De Oro Unibank. It was a period of challenges for the BDO Group as the lingering effects of the 2008 global financial crisis told on the country’s economic performance and gnawed at business confidence. It was a difficult time for business and industry but the Group, exhibiting great resiliency and financial strength, ably cleared the hurdles by taking the right strategies that included the offering of more build-to-suit financial products and continued expansion of the branch network, thus, increasing further the client base. 2009 was also a rewarding year for Banco De Oro Unibank. Despite the hard times, the Group’s performance exceeded expectations with its better-than-industry results for growth and income generated. Its market share continued to expand and its hold on being the market leader in terms of total assets, customer loans, deposits and assets under management has solidified even more. CORPORATE PROFILE The product of a merger heralded as unprecedented in size and scale in the Philippine banking industry, Banco De Oro Unibank (BDO) today represents a firm consolidation of distinct strengths and advantages built over the years by the entities behind its history. More importantly, BDO is an institution that does more than honor its past, it continues to improve on its present, and moves with innovation and dynamism toward an even stronger future. BDO’s reputation as a full-service universal bank remains as formidable as ever. It has the caliber and the muscle to provide industry-leading corporate, retail, investment banking and insurance services. It maintains its strategic focus on its principal markets, notably the corporate market, the middle- market banking segment – consisting of mid-sized corporations and small and medium-sized enterprises – and the retail / consumer market. Moreover, it has complimented this base with expertise in asset management, leasing and finance, remittances, bancassurance, credit cards, corporate cash management, trust, and treasury. Its institutional strengths and value-added products and services hold the key to its successful business relationships with customers. Through selective acquisitions and organic growth, BDO is positioning for growth and continued expansion into new markets. CORPORATE MISSION To be the preferred bank in every market we serve by consistently providing innovative products and flawless delivery of services, proactively reinventing ourselves to meet market demands, creating shareholders value through superior returns, cultivating in our people a sense of pride and ownership, and striving to be always better than what we are today…tomorrow. CORE VALUES Commitment to Customers We are committed to deliver products and services that surpass customer expectations in value and every aspect of customer service, while remaining to be prudent and trustworthy stewards of their wealth. Commitment to a Dynamic and Efficient Organization We are committed to creating an organization that is flexible, responds to change and encourages innovation and creativity. We are committed to the process of continuous improvements in everything we do. Commitment to Employees We are committed to our employees’ growth and development and we will nurture them in an environment where excellence, integrity, teamwork, professionalism and performance are valued above all else. Commitment to Shareholders We are committed to provide our shareholders with superior returns over the long term. FINANCIAL HIGHLIGHTS In Billion Pesos 2009 2008 % Change Resources 862.0 802.0 7% Gross Customer Loans 472.7 392.8 20% Deposit Liabilities 694.7 636.8 9% Capital Funds 67.9 57.8 18% Net Income* 6.0 2.2 177% *Attributable to Shareholders of the Parent Bank BDO ANNUAL REPORT 2009 2009 REPORT BDO ANNUAL Resources Gross Customer Loans Deposit Liabilities (in Billion Pesos) (in Billion Pesos) (in Billion Pesos) 1,000 500 473 800 862 695 802 393 700 800 400 637 600 629 617 297 446 600 300 500 470 258 400 03 400 200 300 234 200 160 200 100 84 100 0 0 0 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 Capital Funds Net Income (in Billion Pesos) (in Billion Pesos) 80 8.0 70 68 7.0 6.5 6.4 60 6.0 60 58 6.0 52 50 5.0 40 4.0 30 3.0 2.6 2.2 20 20 2.0 10 1.0 0 0 05 06 07 08 09 05 06 07 08 09 “Looking ahead, BDO ANNUAL REPORT 2009 2009 REPORT BDO ANNUAL I am optimistic about the future of BDO. It is a long- term player, and will continue to create 04 sustainable value for its shareholders.” Henry Sy, Sr. In the late 1970s, the Bank, then known as Banco De Oro, was conceived and founded on a business philosophy focused on nurturing the entrepreneurial spirit of small and medium-sized companies and assisting them in turning their business aspirations into reality. MESSAGE FROM THE CHAIRMAN EMERITUS prestigious financial publications and institutions who have bestowed We made available the necessary financial us various awards of excellence. capital to those who had sound business 2009 REPORT BDO ANNUAL I would like to express my ideas but were short on funds required to gratitude to all our employees for implement these. their relentless efforts in making BDO the leader in the Philippine banking industry. I would also While we are still focused on like to thank our investors, valued this market, the Bank has since clients, and shareholders for their 05 evolved to serve a wide array of continued support for our Bank. market segments including the large corporate market, to offer an Looking ahead, I am optimistic array of financial solutions to meet about the future of BDO. It is a today’s increasingly sophisticated long-term player, and will continue financial requirements. to create sustainable value for its shareholders. Through constant innovation, cutting edge technology, and dynamic management, BDO continues to drive the organization’s growth and create economic value that benefits all shareholders. We are honored and pleased that the Bank’s efforts and achievements have been recognized by several “...we would like to convey to our BDO ANNUAL REPORT 2009 2009 REPORT BDO ANNUAL shareholders our determination to continue to turn every opportunity into ways to improve shareholder value for 06 them.” Teresita T. Sy In 2009, BDO emerged as an energized force in the banking industry. We corrected the flaws of 2008 brought about by the global crisis and focused on prudent management and the creative use of opportunities. With these, our financial performance this past year had improved significantly. MESSAGE FROM THE CHAIRPERSON from the voluntary work of our employees as well. The Bank also supported the microfinance program of the Center for Agriculture and Rural Development (CARD) bank, while our officers and staff contributed their time and expertise While the global financial instability kept acting as resource speakers in the Center’s us on the alert throughout the year, it did training programs. not detract us from continuing to invest I am happy that our efforts have been recognized in initiatives to improve our service and by prestigious organizations and international 2009 REPORT BDO ANNUAL delivery channels to help us better serve publications. The Asian Wall Street Journal cited our clients. BDO as One of Asia’s 200 Most Admired Firms. Euromoney named us the Best Local Private Bank in the Philippines. Finance Asia awarded us as Our investments in new infrastructure, IT, the Top Bank in the Philippines’ Best Managed and human resources have enhanced our Companies, Best Investment House, Best Equity organization’s ability to deliver better results. House and Best Private Bank. More recently, BDO 07 was cited by Asiamoney as the Best Domestic Post integration, we focused on maximizing the Provider of FX Services in the Philippines and the synergy from the Bank’s merger. This synergy Bangko Sentral ng Pilipinas gave us an award as has resulted in the wide distribution reach of the Top Remittance Bank. our business units, as well as in the expanded array of products we carry which leveraged our The Bank is optimistic about the growth cross-selling activities across investment banking, potential ahead and we would like to convey to corporate banking, and consumer banking. our shareholders our determination to continue We have likewise been able to provide a broader to turn every opportunity into ways to improve menu of delivery channels and convenience shareholder value for them. features. The collective efforts of our officers and staff We have also been active in our Corporate Social have made it possible for us to undertake the Responsibility (CSR) programs, with both the challenges of the past year. I have seen their hard company and the employees working hand in work, unwavering commitment and team spirit. hand to do their share of social responsibility. My thanks to them, the board members and At the height of the destruction of typhoon the board advisers for the guidance they have Ondoy, the Bank donated P10 million to help provided the Bank. I would also like to express the victims while our employees and clients our appreciation to our shareholders for the donated close to P5 million intended for the support they have given us, and to our clients for rebuilding funds.