PBCOM Tower, 6795 Ayala Avenue corner V.A. Rufino Street, 1226 Makati City Tel. No.: 830-7000 e-mail: [email protected] www.pbcom.com.ph PHILIPPINE BANK OF COMMUNICATIONS ANNUAL REPORT 2001 PHILIPPINE BANK OF COMMUNICATIONS ANNUAL REPORT The New PBCOM Logo : 3,000 years in the making The Chinese coin represents more than 3,000 years of history, not only China, but of the whole world. Coinage was invented in China as early as 1027 BC (and so was the paper PHILIPPINE BANK OF COMMUNICATIONS currency some 2,000 years later). Back ANNUAL REPORT 2001 when other people used barter goods, cowrie OUR COVER shells or stones as medium of exchange, the concept of minting precious metals for trade A story of dynamic transitions and transformations, our cover features was more than revolutionary. It was an idea PBCOM’s new logo as a “circle of life” that would change the world. And its still the encapsulating a collage of powerful images : the new PBCOM building, TABLE OF CONTENTS same idea that inspires the new logo of the actual photos of bank personnel and new PBCOM. We retained the basic clients, a stylized topshot of Ayala DISCUSSION OF LOGO 1 elements of the symbol you've grown familiar Avenue, our new home. These images project the effective changes FINANCIAL HIGHLIGHTS 2 with, just as we've preserved the values that and upbeat spirit that embody our made us your stable partner over the years, new PBCOM. MESSAGE TO STOCKHOLDERS 3 like prudence, honesty and integrity. Even The backdrop is almost a watermark CORPORATE GOVERNANCE 7 the colors are of the same hue. Only much image upon which this collage rests. improved. From somber blue to the livelier, Generic currency grain – striations REVIEW OF OPERATIONS 9 of curves and grooves – found in more dynamic blue purple. From pale yellow almost all currencies all over the world FINANCIAL STATEMENTS 19 to the richer, everlasting gold. We only added depict PBCOM’s continued the white background representing our clearer confidence in its fabric of integrity BOARD OF DIRECTORS 30 and tradition. vision for the future. So, we're not exactly MANAGEMENT TEAM 32 different. Only brighter, bigger and better. For it's true that the world changes, but the LIST OF SENIOR OFFICERS 35 essentials should remain the same. Besides, BRANCHES 37 only forgettable logos are completely changed. And why change a symbol that BANK SERVICES 39 took 3,000 years to make? 1 PHILIPPINE BANK OF COMMUNICATIONS ANNUAL REPORT The change in government early in 2001 led to an improved political climate that effectively halted the erosion of business confidence and shifted policy focus back to economic development. The promise of better governance cushioned the impact FOR THE YEAR 2001 2000 1999 1998 1997 of a global economic slowdown as well (In Million Pesos) as the far-reaching effects of the Luy Kim Guan September 11 terrorist attacks in the US of attractive investment opportunities that CHAIRMAN and other internal domestic problems. could yield superior returns kept foreign Total Income 4,326.50 3,638.50 3,662.70 4,554.60 4,005.20 investors at bay. Meanwhile, consumer Total Expenses 4,088.40 3,483.50 3,555.00 4,495.90 3,656.10 In the face of all these difficulties, the spending and demand softened amidst Net Income 238.10 155.00 107.70 58.70 349.10 Philippine economy managed to achieve an uncertain employment environment. remarkable gains. Gross Domestic Product grew by 3.4% in 2001 led by a The banking industry was one of the AT YEAR-END robust agricultural sector and the ever- sectors that bore the economic brunt. (In Million Pesos) resilient services sector. It is significant Non-performing loan levels reached new to note that the economic expansion, heights with most industries succumbing though slower than in the previous year, to anemic demand and the increased Resources 40,340.40 38,787.90 40,127.00 34,528.50 31,587.20 was realized despite the contraction in competition brought about by globalization. Loans 17,619.30 19,760.80 21,173.80 19,753.00 23,010.60 exports and the weak performance of the Meanwhile, margins narrowed as interest industrial sector. Overall, the policies of rates remained depressed amidst a highly Deposits 30,323.20 22,640.00 29,452.20 23,904.50 22,560.80 the new administration kept the Philippine liquid market. Furthermore, increasing Capital Funds 6,315.80 4,790.20 4,775.80 4,174.50 3,778.70 economy on the growth track. competition exacerbated the situation. Isidro C. Alcantara, Jr. PRESIDENT & CEO The financial sector, meanwhile, remained Against this backdrop, the Philippine Bank (In Pesos) uncertain and almost stagnant. Although of Communications made significant Earnings per share 5.22 4.91 3.41 1.86 14.33 monetary authorities were able to attain strides as it drew on its inherent strengths and manage relative stability, a lackluster to vigorously pursue a strategic investment outlook persisted mirroring a transformation that started in 2000. global economic trend. The seeming lack PBCOM emerged as a stable and resilient institution laying the groundwork to become a dynamic and competitive medium-sized commercial bank of choice among entrepreneurs. The transfer of head office from Binondo to the new PBCOM Tower at the heart of the country’s premiere 2 3 PHILIPPINE BANK OF COMMUNICATIONS ANNUAL REPORT Efforts were also devoted to addressing financial center dramatized our resolve to problem loan accounts and managing risks. achieve this transformation. Use of the We empowered our Special Accounts new corporate logo and installation of Management Group to closely monitor and attractive signages in the distribution address delinquent and potential problem centers signified the transformation of accounts. An Asset Disposal Committee PBCOM from a low-key, Chinatown-based was, likewise, formed to institutionalize a bank into a modern and highly competitive systematic and transparent asset disposal Outlook for 2002 commercial bank. process. Furthermore, the Risk Management Group was reorganized as a Such resolve was also personified by the Looking forward, we expect the Philippine in desired sites in Luzon and expanded distinct and independent unit covering four Bank’s stockholders who renewed their economy to sustain its growth in the year our reach in Metro Manila, the Visayas and major risk areas: Credit, Treasury, unwavering commitment to this vision by ahead as the business environment slowly Mindanao. Operations and Trust. This move is improves and the confidence in the new infusing the balance of the P2.6 billion in expected to establish a stronger risk fresh capital they committed in 2000. This administration remains. At PBCOM, we The successful launching of new deposit management process and culture within raised the Bank’s capital to P6.32 billion, shall endeavor to build up on our past products and the build-up of our distribution the Bank. much more than the prescribed successes and strive to realize our network immediately reaped rewards for capitalization and the second highest transformation into a dynamic and the Bank. With an improved ability to serve These strategic initiatives resulted in among commercial banks without uni- competitive bank. our clients, we were able to generate P7.7 encouraging financial results. Net interest banking licenses. The larger capital base, Billion in additional deposits that effectively revenues increased by 10.1% despite likewise, increased the Bank’s capital to In particular, we will be focusing on improving increased our deposit base by 34% to narrowing margins and a deliberate risk assets ratio from 12.61% as of end- the bank’s profitability. This we intend to P30.3 billion. From some 53,462 deposit contraction in our loan portfolio as a result 2000 to 16.01%, well above the minimum achieve through better spread management accounts in 2000, our branches increased of our selective and cautious lending policy. requirements set by the Bangko Sentral. and building stable revenue streams by the number of deposit accounts by 119% As a compensatory measure against means of expanding our earning asset base. to 117,176. This growth came at the thinning spreads, we sought new avenues The continued support of our stockholders For the past months, we have hired expense of other banks; total deposits in to generate more fee-based or non-interest and management’s determination enabled seasoned marketing professionals to the commercial banking sector during the revenues. Foremost was to increase our the Bank to pursue key initiatives critical establish a foothold in the corporate finance year grew by a mere 4.2%. participation in the securities dealership market and to further push our Treasury to the achievement of our vision. In just business which brought in a much higher over four months after acquiring the and Trust banking businesses. Our A major thrust was to generate new trading income of P314.5 million. We also necessary regulatory approvals, Consumer marketing personnel will also be working businesses. The marketing force was actively engaged in the US Dollar bond Savings Bank (CSBI) was seamlessly closely with our branches which we have augmented for Treasury and Trust trading market and pushed our traditional integrated with PBCOM bringing the Bank’s tasked to be active channels for cross- operations. Fully staffed, our Treasury trust business. These initiatives contributed branch network to 64. More importantly, selling other products. Through aggressive Segment – aggressively yet systematically to the 73% increase in non-interest income the merger gave us immediate presence sales and marketing of new products, trading in securities and taking positions to P641.3 million.