Epci Performance 2002-2005

Industry conditions

The banking industry in the Philippines is composed of universal banks, commercial banks, savings banks, and mortgage banks, private development banks, stock savings and loan associations, rural banks, and micro-finance banks. At end-2005, the commercial banking sector consisted of 42 commercial banks, of which 20 are private domestic banks, 18 are branches of foreign banks and three are government-controlled banks. Of the 42 commercial banks, 18 are universal banks, of which three are foreign bank branches.

In terms of structure, the top six banks account for more than 53% of the total assets of the whole commercial banking system. Increased competition in the industry has exerted pressure on margins with both the domestic and foreign banks competing for the same markets, from the corporate side to the consumer finance side.

Equitable PCI Bank enjoys many advantages as the third largest bank in the Philippines. The Bank has had a long history of financial strength and stability and holds leading positions in key business segments. It has a strong position in the middle market and in the corporate market. It enjoys a large presence, wide customer base, and extensive distribution network. The Bank has a base of diversified well-established financial services businesses, which further bolster its position. In credit cards, Equitable Card Network dominates the local credit card industry as merchant acquirer, and third party processor. This provides good scope for the Bank to increase its retail lending. The Bank's remittance arm, Express Padala, is a pioneer in the local remittance business possessing more than 20 years of experience. PCI Leasing and Finance is one of the most profitable finance companies with a high capital base and wide reach. PCI Capital Corporation is well recognized for being a dominant player in investment banking.

The Bank's extensive distribution network provides it better market coverage than most competitors. Capitalizing on its size and large customer base, the Bank also continues to invest in technology and is able to take advantage of economies of scale. These capabilities allow the Bank to intensify product development efforts to better keep ahead of competition.

Financial Statement

Financiall condition summaries

2005 Compared to 2004 (Group Basis)

Equitable PCI Bank's total resources reached P316.4 billion reflecting a 2% increase over the restated 2004 asset level of P310.6 billion. Growth in assets came mainly in the form of investment securities. The combined Securities at Fair Value through Profit or Loss/Trading Account Securities (TAS), Available for Sale (AFS) Securities and Held-to-Maturity (HTM) Investments/Investment in Bonds and Other Debt Instruments (IBODI) amounted to P75.5 billion, 24% or P14.7 billion more than the P60.8 billion aggregate volume in 2004. This transpired as the Bank took advantage of favorable market developments to beef up its investment portfolio and reflected the impact of the new International Accounting Standards (IAS). The Bank's other short-term assets reflected a mixed trend for the year. Due from BSP rose 212% to P7.2 billion, while inter-bank loans receivable rose 5% to P18.2 billion. Cash and Other Cash Items dipped by 14% to P7.5 billion, while Due from Other banks went down by 39% to P4.7 billion. Net Loans and Receivables/Receivables from Customers of P142.4 billion were still higher by 3% or P4.6 billion even after reflecting the second trench non-performing asset (NPA) sale worth P5.3 billion in the third quarter of the year. Investment Properties declined by P983 million or 5% to P18.2 billion mainly from asset sales and transfers. Equity Investments dropped 11% to P291 million while Other Resources contracted 45% to P16.8 billion generally due to the impact of new IAS provisions. On the liability side, deposits registered a 7% growth from P193.5 billion in 2004 to P206.7 billion in 2005 with the deposit profile improving as low-cost demand and savings deposits increased 9% and 10%, respectively, while high-cost time deposits declined 2%. Bills Payable grew 24% to P29.7 billion in 2005 essentially because of the US$100 million senior notes issuance in February 2005. Margin Deposits rose 46% to P222 million mainly from higher import transactions. Accrued Interest Payable increased 44% to P794 million due to bookings relating to the US$100 million senior notes issued. Accrued Taxes and Other Expenses surged 34% to P2.3 billion from higher accruals of the vacation and sick leave credits of officers and staff under IAS 19 among others. Outstanding Acceptances dropped 92% to P616 million due to certain reclassifications. Subordinated Notes Payable dipped 6% to P10.6 billion due to the strengthening of the peso, while Other Liabilities decreased 4% to P27.0 billion. Capital funds attributed to shareholders amounted to P36.5 billion at the end of the year, contracting by 12% due to the impact of the new IAS policies.

For the year-ended 2005, the Bank posted an 11% hike in total net income to P2.8 billion from its restated level of P2.5 billion in 2004, of which net income attributable to equity holders of parent amounted to P2.7 billion, up 12% from the restated amount of P2.4 billion. This stemmed from wider net interest margin, better asset and liability mix, healthier loan portfolio quality and larger non-interest income. Total Interest Income increased by 14% to P19.0 billion, driven by larger earning assets and an improvement in the portfolio mix. Interest income on Customer Loans went up by 14% to P11.6 billion in 2005 from P10.1 billion in the previous year. Similarly, interest income from Interbank Loans rose by 28% to P1.4 billion, while interest revenues from Trading and Investment Securities grew by 22% to P5.4 billion. However, interest income from Deposit with Banks dropped by 37% to P624 million. Interest expenses rose at a slower pace of 9% to P8.4 billion with an improved funding cost structure. Thus, net interest income reached P10.6 billion, up by P1.7 billion or 19% from P8.9 billion a year ago.

The Bank set aside a total of P2.9 billion as provision for probable losses in 2005, P1.3 billion or 31% less than the provision of P4.1 billion a year ago. This was after the sale of P10.5 billion of non-performing assets (NPA) in December 2004 and another P5.3 billion in September 2005. Meanwhile, Other Income rose by 23% year-on-year to P9.6 billion in 2005. The Bank earned P4.9 billion in Service Charges, Fees and Commissions, up by P520 million or 12% from a year-ago as a result of initiatives to build up fee-based income sources. Treasury-related trading gains and foreign exchange profits also grew