Message from the Company President
We began 2010 with cautious optimism amidst an uncertain global banking environment. In the face of this, we pursued our strategy of going “Back to Basics” focusing on deposits taking and lending, supplemented by our thrust towards “Redefining Opportunities.” We are happy to report solid business results in our identified priority areas in 2010.
Our diversified and prudent lending approach delivered a 16% growth in loans, surpassing the industry growth of 8.9%. All market segments registered double-digit growth rates. Notwithstanding this strong performance, our non performing loans fell to a ten year low of 2%.
We encouraged our customers to save and invest in BPI.Hence, our deposits and trust assets increased by 24% and 11%, respectively, for a total funds growth of 18%. To entice customers to invest, BPI Asset Management lowered the minimum investment from P50,000 to P10,000. Furthermore, for our customers’ convenience, Investment Funds can be viewed online through the Investment Account Inquiry of BPI Express Online.
Our strategic partnership in bancassurance through BPI-Philam produced two investment-linked products and six traditional life insurance products. These products were offered to our depositor base except for the Credit Assist product which is offered to our credit card holders. Total first year and single premium income amounted to P4.6 billion, 84% more than the previous year.
We continued to pioneer banking products and services to delight our customers. To augment our Bank Anywhere 24/7 Channels, we deployed Customer Transaction Assist (CTA) machines to 100 branches. This queue system with touch screen technology for entering transactions effectively cut queuing time by 30%. Moreover, we trained 842 Financial Advisors and 89 Lending Officers to respond to our varied and increasingly sophisticated customer base.
To support our strategic growth initiatives, we raised P10.0 billion in common shares through a stock rights issue to further solidify our capital adequacy ratio (CAR) to 15%. We also submitted the second version of our Internal Capital Adequacy Assessment Process (ICAAP) and held a second dialogue with the Bangko Sentral ng Pilipinas (BSP). Our ICAAP document defined an internal CAR of 10.25% and an 11% Management Action Trigger (MAT) which is 100 basis points above the current regulatory CAR of 10%.
In our thrust towards Redefining Opportunities, we successfully increased our number of customers by 700,000, to include overseas Filipinos. We have reached a milestone as the number of our overseas depositors hit the one million mark.
Moreover, we effectively broadened our market geographically and increased our penetration of small and medium scale enterprises (SME) in the provincial areas. Both our retail loans and corporateloans in these areas grew at a faster rate of 20%. To specially cater to the micro and small entrepreneurs, we introduced the Ka-Negosyo Business Loans with minimum loan amounts of P500,000 at BPI Family Savings Bank (BFSB). This product helped increase SME loan releases by 27% and doubled accounts at BFSB.
BPI Globe BanKO, our joint venture mobile microfinance bank with Globe Telecom and Ayala Corporation was officially launched in early 2010 and ended the year with P1.1 billion loans and 40 wholesale microfinance institutions.
BPI’s Sustainable Energy Financing (SEF) program, in partnership with the International Finance Corporation (IFC), continued to be the forerunner in green financing with a portfolio of P2 billion. In August 2010, the SEF program was hailed as one of the winners in the prestigious Group of 20 (G-20) SME Finance Challenge, a global online competition launched by the G-20 leaders in Toronto, Canada.
To ensure BPI’s sustainability, we continued to make BPI more accessible, more convenient and more cost-effective for more Filipinos. We are also proud that we are the only bank which published a sustainability report for two years in a row. Our second sustainability report for 2009, “Banking on Sustainability”, was a self declared B level report, an upgrade from the C level report of 2008.
Finally, we closed the year with the signing of a Business Sale and Purchase Agreement with ING Bank, N.V. Manila (ING) to acquire ING’s trust and investment management business and other related assets here in the Philippines.
The past year proved to be a good year for the banking industry and for BPI in particular. We had solid business results, as evidenced by our double-digit business volume growth and our second consecutive 33% net income growth. We approach 2011 with a positive outlook for the country, but remain watchful of new challenges and potential global economy contagion effects on the Philippine banking industry.
AURELIO R. MONTINOLA III
BPI delivered a record net income of P11.3 billion in 2010, a 33% increase for the second consecutive year. The profitability ratios mirrored this improvement with return on equity up from 13.0% to 15.6% and return on assets higher at 1.5% from 1.3%.
Net interest income grew by 10%, despite a five-basis point drop in spreads, with the expansion of P80 billion in average asset base. Non-interest revenues likewise increased significantly by 18% buoyed by the improvement in securities trading gain of P1.9 billion. With the exception of gains from asset sales, most major components of non-interest income likewise showed improvement including various fees and commissions, foreign exchange income, and rental income.
Operating costs were up by 7% on increased premises, regulatory, and transaction-related expenses. Together with the strong revenue streams, operating efficiency improved to a 53.8% cost-to-income ratio from 57.2% in 2009. Impairment losses amounted to P3.4 billion, 36% above the previous year, inclusive of P274 million set aside for the goodwill on the Prudential Bank acquisition.
Total resources stood at P878 billion, 21% more than last year as deposits grew by 24% to P720 billion. Intermediated funds totaled P1.2 trillion, 18% higher as assets under management likewise expanded by 11%. Net loans reached P379 billion with asset quality improving to 2.1% non-performing loan ratio from 2.8%.
The bank’s market capitalization of P210 billion remained to be the highest in the industry, with its shares trading at a priceto-book multiple of 2.6x. Total cash dividends declared for the year was P6.1 billion at P1.80 per share, equivalent to a payoutratio of 54%.
In line with the bank’s sustainability framework, BPI launched a unified campaign “Let’s Make It Easy” and implemented a number of products and initiatives along this theme.
In addition to the CTA machines which made Branch Banking easy, the foreign currency offering of the bank was expanded to eight currencies with the addition of the Chinese Yuan. The Chinese Yuan product line-up includes interest-earning passbook savings and time deposit accounts. Foreign currency deposits are available in over 50 BPI branches nationwide.
Banking services were also brought closer to the clients. Overseas Filipinos were provided with additional access points for their remittance transactions with the opening of two new offices, one in Madrid and another in California. In addition, BPI participated in the Philpass system to enable access to other banks and lower remittance fees.
The Financial Markets Group expanded its geographic coverage of corporate clients with the creation of satellite offices. Specifically, an office in Davao was set up to service the foreign exchange requirements of Mindanao customers.
To make clients’ investing experience more convenient, Investment Funds with BPI Asset Management can now be securely viewed online through the My Portfolio page of BPI Express Online, the bank’s internet banking platform. This new facility provides investors with the latest market value of their investments, composition and details of their investment portfolio, and details and status of their transactions, as well as transaction history for the past 90 days.
Furthermore, BPI Asset Management was recognized as the Best Wealth Management House in the Philippines in The Asset Triple A Investment Awards 2010 and the Best Onshore Funds House in the Philippines in Asian Investor’s 2010 Investment Performance Awards. It had consistently earned the Gold distinction in the Reader’s Digest Asia’s Trusted Brands for the past four years. BPI extends convenience banking beyond the confines of the bank to its business partners. BPI 24/7 Banking launched the Cashierless Payment System Program, which allows BPI Depositors who are Globe Telecom Subscribers to pay their bills in any of the 24/7 Banking Channels, such as BPI Express Online, BPI Express Mobile, and BPI Express Phone. This program also services other Globe transactions such as reloading Globe, Globe Tattoo Broadband, TM Prepaid accounts, and GCash loading. BPI was awarded the Excellence in Best Mobile Phone Banking for 2009 by The Asian Banker.
BPI Capital, the bank’s investment banking arm, scored another first as the Issue Manager for the Ayala Corporation Putable Bond. This seven-year bond allows investors to redeem their principal before the maturity date, a structure which was a first in the peso bond market.