MANILA TYTANA COLLEGES

Formerly Manila Doctors College

Bank of the
Philippine Islands
As of December 31,
Financial
Statement
2014
Analysis
Dan Paul C. Begas
Renz Mico F. Corona
Christine Angela B. Cruz
Allaniah H. Maca-alin
Red Christian L. Palustre

Professor Ariel Pineda

Table of Contents
Pages

Introduction
Background and History
2
Vision, Mission, Core Values

Financial Statement Analysis Proper

Horizontal Analysis (Condition)
6
Horizontal Analysis (Income)
Vertical Analysis (Condition)
Vertical Analysis (Income)

10
13

17
Ratio Analysis
Profi tability
22

Leverage

25

Liquidity

27

Growth

29

Statement of Financial Analysis

34

Recommendation

35

Page 2 of 40

Background and History

Founded in 1851, Bank of the Philippine Islands is the
fi rst bank in the Philippines and in the Southeast Asian
region. BPI is a universal bank and together with its
subsidiaries and affi liates, it off ers a wide range of
fi nancial products and solutions that serve both retail
and corporate clients.
BPI's services include consumer banking and lending,
asset management, insurance, securities brokerage and
distribution, foreign exchange, leasing, and corporate
and investment banking.
The bank has a network of over 800 branches in the
Philippines, Hong Kong and Europe, and close to 3,000
ATMs and CDMs (cash deposit machines).
The establishment of BPI, originally known as El Banco
Espaol Filipino de Isabel II, ushered in the start of the
Philippine banking and fi nance industry. The bank
performed many functions, from providing credit to the
National Treasury to printing and issuing currency,
making it in eff ect the country's fi rst Central Bank. BPI
proudly carries on this tradition, fi nancing many private
and public sector initiatives and enterprises in support of
economic growth and nation building.
BPI is acknowledged as a leading provider of fi nancial
services in the Philippines.

Vision, Mission, Core Values

Mission
Since the bank's founding 164 years ago, BPI has been
inextricably linked to the growth of the Philippine
economy. Anchoring our institution on our four-fold
commitment to Clients, People, Shareholders, and
Country, we aim to take advantage of the country's good
macroeconomic
fundamentals
by
carefully
and
Page 3 of 40

systematically overlaying scale over some of the best

fi nancial metrics in the Philippine banking industry.
Our mission is enshrined in the BPI Credo.
The BPI Credo
We believe our fi rst responsibility is to our Clients. If we
understand and address our clients' fi nancial needs, we
will be trusted with their most important fi nancial
transactions, and we will build lasting relationships. We
do well when our clients do well.
We believe in our responsibility to our People. We seek to
hire the best people for each job, provide them with the
means to perform at a high level and reward them fairly.
We value integrity, professionalism, and loyalty. We
promote a culture of mutual respect, meritocracy,
performance, and teamwork. We strive to be the
employer
of
choice
among
Philippine
fi nancial
institutions.
We believe in our responsibility to our Shareholders. We
treat capital as a most valuable asset, and seek to
generate superior returns while being prudent in risk
taking, spending, and investment.
We believe in our responsibility to our Country. Our
prosperity is greatly dependent on the well-being of our
nation. We aim to be inclusive and responsible in nation
building. Through BPI Foundation, we are committed to
the welfare and sustainability of the communities we
serve.

Vision
It is BPI's vision to be the Philippines' premier bank that
builds on its heritage of being the principal architect of
the country's fi nancial inclusion landscape, providing the
most eff ective, effi cient, and innovative solutions for its
clients to best manage their fi nancial needs, while
creating sustainable value and shared prosperity for all
stakeholders.

Page 4 of 40

Core Values
CUSTOMER SERVICE
Establish friendly relationships with clients, putting them
fi rst in our list of priorities, to delight them with our
services, and to always try to anticipate their every
need.
EXCELLENCE
Employees, whatever their functions are, should always
give
their
best
and
continuously
upgrade
their
knowledge, skills, habits, and attitudes to meet each
challenge
with
determination
and
drive,
opening
themselves to unlimited possibilities.
LOYALTY
To be proud of BPI, to be true to its ideals and vision,
and to actively promote and defend what BPI stands for.
TEAMWORK
Build deep and lasting relationships founded on trust and
respect, to be totally committed to the achievement of
the objectives of our team and of BPI, to actively
participate as one in any undertaking, to contribute our
individual knowledge and talents for the benefi t of all.
INTEGRITY
As bankers, we should be worthy of the confi dence put in
us by BPI and the society it stands for, earn the trust of
those we meet and interact with, and always do what is
morally, and socially correct, contributing in our small
way in shaping the future.
CONCERN FOR PEOPLE
Employees should be genuinely interested in people, to
help others in every way possible, to contribute to a
sound environment, to be fair, supportive, friendly,
caring, and sincere in our relations with the people we
meet.

Page 5 of 40

Bank of the Philippine

Islands
Financial Statement Analysis
As of December 31, 2014

Horizontal Analysis (Statement of Condition)

BANK OF THE PHILIPPINE ISLANDS
STATEMENT OF CONDITION
HORIZONTAL ANALYSIS
(In Millions of Pesos)
ASSETS
CASH AND OTHER CASH ITEMS
DUE FROM BANGKO SENTRAL NG PILIPINAS
DUE FROM OTHER BANKS
INTERBANK LOANS RECEIVABLE AND SECURITIES
PURCHASED UNDER AGREEMENTS TO RESELL
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT
OR LOSS
- DERIVATIVE FINANCIAL ASSETS
TRADING SECURITIES
AVAILABLE-FOR-SALE SECURITIES, NET
HELD-TO-MATURITY SECURITIES
LOANS AND ADVANCES, NET
ASSETS HELD FOR SALE, NET
BANK PREMISES, FURNITURE, FIXTURES AND
EQUIPMENT, NET
INVESTMENT PROPERTIES, NET
INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES,
NET
ASSETS ATTRIBUTABLE TO INSURANCE OPERATIONS
DEFERRED INCOME TAX ASSETS, NET
OTHER RESOURCES, NET
TOTAL ASSETS

2014

2013

INCREASE
(DECREASE)

38,427
211,946
22,227

25,696
244,483
17,070

12,731
(32,537)
5,157

49.54
(13.31)
30.21

5,782

17,397

(11,615)

(66.76)

35,981
15,862
51,309
209,409
800,170
5,018

16,550
4,597
87,556
96,172
630,203
5,852

19,431
11,265
(36,247)
113,237
169,997
(834)

117.41
245.05
(41.40)
117.74
26.97
(14.25)

12,760

12,205

555

4.55

808

1,597

(789)

(49.41)

4,784

4,176

608

14.56

16,445
5,718
13,551
1,450,197

14,586
6,176
11,048
1,195,364

1,859
(458)
2,503
254,833

12.75
(7.42)
22.66
21.32

Page 6 of 40

LIABILITIES AND CAPITAL FUNDS

DEPOSIT LIABILITIES
DERIVATIVE FINANCIAL LIABILITIES
BILLS PAYABLE
DUE TO BANGKO SENTRAL NG PILIPINAS AND
OTHER BANKS
MANAGERS CHECKS & DEMAND DRAFTS
OUTSTANDING
ACCRUED TAXES, INTEREST & OTHER EXPENSES
LIABILLITIES ATTRIBUTABLE TO INSURANCE
OPERATIONS
DEFERRED & OTHER LIABILITIES
TOTAL LIABILITIES
SHARE CAPITAL
SHARE PREMIUM
RESERVES
SURPLUS
ACCUMULATED OTHER COMPREHENSIVE (LOSS)
INCOME
CAPITAL FUNDS ATTRIBUTABLE TO THE
CAPITAL FUNDS HOLDERS OF BPI
NON-CONTROLLING INTERESTS
TOTAL CAPITAL FUNDS
TOTAL LIABILITIES AND CAPITAL FUNDS

2014

2013

INCREASE
(DECREASE)

1,176,213
34,846
32,993

988,586
16,360
26,179

187,627
18,486
6,814

18.98
113.00
26.03

687

2,051

(1,364)

(66.50)

8,353

7,183

1,170

16.29

5,597

4,907

690

14.06

13,561

13,061

500

3.83

31,268
1,303,518
39,272
29,341
2,098
76,575

31,230
1,089,557
35,563
8,316
1,680
62,137

38
213,961
3,709
21,025
418
14,438

0.12
19.64
10.43
252.83
24.88
23.24

(3,223)

(3,161)

(62)

1.96

144,063

104,535

39,528

37.81

2,616
146,679
1,450,197

1,272
105,807
1,195,364

1,344
40,872
254,833

105.66
38.63
21.32

Resources
Total resources ended at P1.45 trillion, an amount which
represented an increase of P255 billion or 21.3%, from P1.2 trillion
posted last year.
Loans and advances, net grew by P170.0 billion, or 27%, driven by
loan demand from corporate and retail clients.
Held-to-maturity securities increased by P113.2 billion, or 117.7%,
due to additional investments and the reclassification of certain
available-for-sale securities to HTM due to change in intention.
Derivative financial assets also went up by P19.4 billion, or
117.4%, due to higher market valuation of certain derivative
products.
Cash and other cash Items were up by P12.7 billion, or 49.5%, due
to higher cash requirement this period versus yearend 2013.
Trading securities expanded by P11.3 billion, or 245.1%, on
increased holdings of local bonds intended for trading.
Page 7 of 40

Due from other banks rose by P5.2 billion, or 30.2%, on higher

working balances and placements maintained with correspondent
banks.
Other resources, net reflected an increase of P2.5 billion, or
22.7%, on higher accounts receivable and miscellaneous assets.
Assets attributable to insurance operations increased by P1.9
billion, or 12.8%, due to the Bank's non-life insurance subsidiarys
higher securities investments and gross premiums written.
Investments in subsidiaries and associates, net increased P608
million, or 14.6%, on improved income of the Bank's assurance
affiliate.
Available-for-sale securities, net declined by P36.2 billion, or
41.4%, due to reclassification of certain AFS to HTM category due
to change in intention.
Due from Bangko Sentral ng Pilipinas decreased by P32.5 billion,
or 13.3%, due to lower special deposit account with the BSP.
Interbank loans receivable and securities purchased under
agreements to resell declined by P11.6 billion, or 66.8%, due to a
decline in RRP volume partially offset by slightly higher interbank
term loans.
Assets held for sale, net declined by P834 million, or 14.3%, on
the continued sell down of foreclosed assets.
Investment properties, net dropped by P789 million, or 49.4% due
to sale of a certain Bank property.
Deferred income tax assets, net declined by P458 million, or 7.4%
due to the DIT on mark to market gains last year as against nil
this year.

Liabilities
Total deposits expanded by P187.6 billlon or 19.0% due to
balances growth in savings, time, and demand deposits of P110.9
billion, or 21.9%, P56.7 billion, or 18.7%, and P20.0 billion, or
11.1%, respectively.

Page 8 of 40

Derivative financial liabilities grew P18.5 billion or 113.0% due to

higher market valuation of certain derivative products.
Bills payable increased by P6.8 billion or 26.0%, on higher external
borrowings.
Managers checks and demand drafts outstanding likewise grew
by P1.2 billion or 16.3% on higher non-negotiated manager's
checks issued.
Accrued taxes, interest and other expenses rose by P690 million
or 14.1%, on higher accrual on taxes and licenses, and interest
rates on non-deliverables swaps.
Due to Bangko Sentral ng Pilipinas (BSP) and other banks declined
by P14 billion, or 66.5% due to the change in the tax collection
remittance (a reduction in float from 10 days for over-the-counter,
and 5 days, if done thru electronic internet channels from
collection date, to next banking day remittance for both).

Capital Funds

Capital Funds expanded by P39.5 billion, or 37.8% to P144.1

billion, from year-end 2013.
Share premium and share capital reflected increases of P21.0
billion, or 252.8%, and P3.7 billion, or 10.4%, respectively, largely
due to the P25 billion stock rights issued in February 2014.
Surplus likewise contributed to the capital growth by P14.4 billion,
or 23.2%, as a result of accumulated profits net of cash dividend
payments.
Reserves were up by P418 million, or 24.9%, on higher provision tor
trust business and investment house.
Non-controlling Interests at P2.6 billion grew P1.3 billion, or
105.7%, largely due to the Bank's leasing subsidiarys joint
venture with Century Tokyo Leasing, wherein the Bank retained
51% ownership, and in part due to additional capital booked by
the Bank's microfinance affiliate.

Page 9 of 40

Horizontal Analysis (Statement of Income)

BANK OF THE PHILIPPINE ISLANDS
STATEMENT OF INCOME
HORIZONTAL ANALYSIS
(In Millions of Pesos)
ACCOUNTS
INTEREST INCOME
On loans and advances
On held-to-maturity securities
On available-for-sale securities
On deposits with BSP and other banks
On trading securities
Gross receipts tax
INTEREST EXPENSE
On deposits
On bills payable & other borrowings
NET INTEREST INCOME
IMPAIRMENT LOSSES
NET INTEREST INCOME AFTER IMPAIRMENT
LOSSES
OTHER INCOME
Trading gain on securities
Fees & Commissions
Income from foreign exchange trading
Income attributable to insurance operations
Other operating income
Gross receipts tax

2014

2013

INCREASE
(DECREASE)

45,992
36,441
8,141
831
1,769
406
(1,596)
11,184
10,834
350
34,808
2,807

40,802
32,698
4,930
2,615
1,641
690
(1,442)
10,478
9,530
948
30,324
2,648

5,190
3,743
3,211
(1,784)
128
(284)
(154)
706
1,304
(598)
4,484
159

12.72
11.45
65.13
(68.22)
7.80
(41.16)
10.68
6.74
13.68
(63.08)
14.79
6.00

32,001

27,676

4,325

15.63

20,979
1,362
7,370
2,007
1,007
10,668
(1,435)

22,174
4,839
5,885
2,042
1,449
9,514
(1,555)

(1,195)
(3,477)
1,485
(35)
(442)
1,154
(120)

(5.39)
(71.85)
25.23
(1.71)
(30.50)
12.13
(7.72)

Page 10 of 40

OTHER EXPENSES
Compensation and fringe benefits
Occupancy and equipment-related expenses
Other operating expenses
INCOME BEFORE INCOME TAX
PROVISION FOR INCOME TAX
Current
Deferred
NET INCOME FOR THE YEAR

29,960
11,850
9,017
9,093
23,020

26,703
10,641
8,040
8,022
23,147

3,257
1,209
977
1,071
(127)

4,958
5,374
(416)

4,153
4,147
6

805
1,227
(422)

18,062

18,994

(932)

12.20
11.36
12.15
13.35
(0.55)
19.38
29.59
(7033.33
)
(4.91)

Net Income
Net Income for full year 2014 ended at P18.0 billion, P772 million,
or 4.1% lower than same period last year of P18.8 billion. Total
revenues grew by P3.3 billion but this improvement was negated
by the increases recorded in other expenses, impairment losses,
and provision for income tax which were up by P3.3 billion, P159
million, and P805 million, respectively. Income attributable to noncontrolling interest at P23 million, was lower by P160 milion, or
87.4%. This downturn was brought about by the lower income
generated by the microfinance affiliate on account of higher
operating expenses. The Bank's non-life insurance subsidiarys
lower income before tax likewise contributed to the decline as its
investment income dropped and insurance claims increased.

Interest income and expenses

Net interest Income at P34.8 billion, grew P4.5 billion, or 14.8%
from last year's P30.3 billion primarily due to a P247 billion, or
24.6% expansion in Average Assets. Interest income increased by
P5.2 billion, or 12.7% from previous year's P40.8 billion. Interest
income on loans and advances, on held-to-maturity securities, and
on deposits with BSP and other banks were up by P4.1 billion, P3.2
billion, and P128 million, respectively, in spite of lower yields,
largely on account of significant growth in volume. Interest income
on available-for-sale securities and on trading securities were
lower by P1.8 billion or 68.2% and P284 million or 41.2%,
respectively due to lower volume and yield. Gross receipt tax was
up by P154 million, or 10.7%, as a result of higher interest income.
Interest expense was up by P706 million to P11.2 billion, from last
year's P10.5 billion. This increase was primarily contributed by
interest expense on deposits, which grew by P1.3 billion, or 13.7%
on account of the average asset base expansion partly tempered
by lower deposit cost. Interest expense on bills payable and other
Page 11 of 40

borrowings declined by P598 million, or 63.1%, due to lower

borrowings cost.

Other income and expenses

Other income at P21.0 billion, was lower by P1.2 billion, or 5.4%
from P22.2 billion last year. Fees and commissions improved by
P1.5 billion, or 25.2% due to increases in service charges, bank
commissions, and underwriting fees. Other operating income
increased by P1.2 billion, or 12.1%, mainly due to higher profit
from asset sold, credit card income, and miscellaneous income.
The drop in other income was accounted for by the P3.5 billion, or
71.9%, decline in Trading gain (loss) on securities brought about
by the difficult market conditions. Income attributable to
insurance operations lowered by P442 million, or 30.5%, due to
insurance subsidiaries' lower income from premium and
investments, higher insurance claims partly offset by lower
actuarial reserves or BPI Philam. Gross receipts tax at P1.4 billion,
was P120 million or 7.7% lower as a result of decreased level of
non-interest income.
Other expenses at P30.0 billion, increased by P3.3 billion, or
12.2% from same period last year of P26.7 billion. Compensation
and fringe benefits grew by P1.2 billion, or 11.4% due to higher
salaries on account of manpower expansion. In addition, there
were some CBA related costs booked in 2014. Occupancy and
equipment-related expenses increased by P977 million, or 12.2%,
on higher contractual expenses, rent, depreciation and
amortization costs, and significant spending on technology. Other
operating expenses were up by P1.1 billion or 13.4% on account
of higher regulatory costs, third party fees and incentives,
product-related insurance premium, and advertising cost.

Impairment losses
This year's impairment losses of P2.8 billion, was P159 million, or
6.0% up on higher loan loss provisioning.

Income Tax
Provision for income tax at P5.0 billion, was up P805 million, or
19.4%, from P4.2 billion. Current income tax rose by P1.2 billion or
29.6% due to higher proportions of Bank pre-tax earnings that are
Page 12 of 40

exposed to ordinary corporate income tax. Deferred income tax

was P422 million lower on account of the impairment losses set up
for the year, and accounts with timing difference.

Vertical Analysis (Statement of Condition)

BANK OF THE PHILIPPINE ISLANDS
STATEMENT OF CONDITION
VERTICAL ANALYSIS
(In Millions of Pesos)
ASSETS
CASH AND OTHER CASH ITEMS
DUE FROM BANGKO SENTRAL NG PILIPINAS
DUE FROM OTHER BANKS
INTERBANK LOANS RECEIVABLE AND SECURITIES
PURCHASED UNDER AGREEMENTS TO RESELL
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR
LOSS
- DERIVATIVE FINANCIAL ASSETS
- TRADING SECURITIES
AVAILABLE-FOR-SALE SECURITIES, NET
HELD-TO-MATURITY SECURITIES
LOANS AND ADVANCES, NET
ASSETS HELD FOR SALE, NET

2014

2013

38,427
211,946
22,227

2.65
14.61
1.53

25,696
244,483
17,070

2.15
20.45
1.43

5,782

0.40

17,397

1.04

35,981
15,862

2.48
1.09

16,550
4,597

1.38
0.38

51,309
209,409
800,170
5,018

3.54
14.44
55.18
0.35

87,556
96,172
630,203
5,852

7.32
8.05
53.14
0.50

Page 13 of 40

BANK PREMISES, FURNITURE, FIXTURES AND

EQUIPMENT, NET
INVESTMENT PROPERTIES, NET
INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES, NET
ASSETS ATTRIBUTABLE TO INSURANCE OPERATIONS
DEFERRED INCOME TAX ASSETS, NET
OTHER RESOURCES, NET
TOTAL ASSETS

LIABILITIES AND CAPITAL FUNDS

DEPOSIT LIABILITIES
DERIVATIVE FINANCIAL LIABILITIES
BILLS PAYABLE
DUE TO BANGKO SENTRAL NG PILIPINAS AND OTHER
BANKS
MANAGERS CHECKS & DEMAND DRAFTS
OUTSTANDING
ACCRUED TAXES, INTEREST & OTHER EXPENSES
LIABILLITIES ATTRIBUTABLE TO INSURANCE
OPERATIONS
DEFERRED & OTHER LIABILITIES
TOTAL LIABILITIES
SHARE CAPITAL
SHARE PREMIUM
RESERVES
SURPLUS
ACCUMULATED OTHER COMPREHENSIVE (LOSS)
INCOME
CAPITAL FUNDS ATTRIBUTABLE TO THE CAPITAL
FUNDS HOLDERS OF BPI
NON-CONTROLLING INTERESTS
TOTAL CAPITAL FUNDS
TOTAL LIABILITIES AND CAPITAL FUNDS

12,760

0.88

12,205

1.02

808
4,784
16,445
5,718
13,551
1,450,197

0.06
0.33
1.13
0.39
0.93
100

1,597
4,176
14,586
6,176
11,048
1,195,364

0.13
0.35
1.22
0.52
0.92
100

2014

2013

1,176,213
34,846
32,993

81.11
2.40
2.28

988,586
16,360
26,179

82.70
1.37
2.19

687

0.05

2,051

0.17

8,353

0.58

7,183

0.60

5,597

0.39

4,907

0.41

13,561

0.94

13,061

1.09

31,268
1,303,518
39,272
29,341
2,098
76,575

2.16
89.89
2.71
2.02
0.14
5.28

31,230
1,089,557
35,563
8,316
1,680
62,137

2.61
91.15
2.98
0.70
0.14
5.20

(3,223)

(0.22)

(3,161)

(0.26)

144,063

9.93

104,535

8.75

2,616
146,679
1,450,197

0.18
10.11
100

1,272
105,807
1,195,364

0.11
8.85
100

Resources
For the previous year, Loans and advances, net has the highest
percentage, 53.14%, among the distribution of total resources as
of the year. Next are Due from Bangko Sentral ng Pilipinas, Heldto-maturity securities, Available-for-sale securities, net, Cash and
other cash items, Due from other banks, Derivative financial
assets at fair value through profit or loss, Assets attributable to
insurance operations, Interbank loans receivables and securities
purchased under agreement to resell, Bank premises, Furniture,
Fixtures and Equipment, net, have 20.45%, 8.05%, 7.32%, 2.15%,
1.43%, 1.38%, 1.22%, 1.04%, and 1.02%, respectively. Others,
Other resources, net, Deferred income tax assets, net, Assets,
held-for-sale, net, Trading securities, Investment in subsidiaries
and associates, net, Investment properties, net, have percentages
below 1%, or a total of 2.80%.

Page 14 of 40

However, for the current year, Loans and advances, net was up
again as the largest part, 55.18%, among the distribution of total
resources as of the year. Next are Due from Bangko Sentral ng
Pilipinas, Held-to-maturity securities, Available-for-sale securities,
net, Cash and other cash items, have 14.61%, 14.44%, 3.54%,
2.65%, respectively. Substitution of ranking between Derivative
financial assets at fair value through profit or loss and Due from
other banks, from based year, results to 2.48% and 1.53%,
respectively. Assets attributable to insurance operations remains
next, while the next two previous account was now on the below
1% bracket, substituted by Trading securities, that resulted to
1.13%, and 1.09%, respectively. Others, Other resources, net,
Bank premises, Furniture, Fixtures and Equipment, net, Interbank
loans receivables and securities purchased under agreement to
resell, Deferred income tax assets, net, Assets, held-for-sale, net,
Investment in subsidiaries and associates, net, Investment
properties, net, have percentages below 1%, or a total of 3.34%.
Loans and advances is the survival unit of the bank because until
and unless the success of this department is attained, the survival
is a question to every bank. If this section does not properly work
the bank itself may become bankrupt. It worked interchangeably
with deposit liabilities both offsetting cost and profit. The
corporation is largely above the industry average of 45.80% and
42.66%, for current and previous year, respectively, in terms of
major asset mix account Loans and advances.

Liabilities and Capital Funds

For the previous year, total liabilities have higher percentage
compared to capital funds, for 91.15% and 8.85%, respectively.
However, for the current year, total liabilities, although have
higher percentage, lose part of the pie, transferred to capital
funds, for 89.89% and 10.11%, respectively. To add, the company
is largely above industry average for total liabilities and below for
total capital funds, 88.70% and 11.30%, respectively, for the
previous year; and largely below for total liabilities and above for
total capital funds, 87.7% and 12.23%, respectively, for the
current year.

Liabilities*
For the previous year, Deposit liabilities, has the highest
percentage, 82.70%, among the distribution of total liabilities as
of the year. Next are Deferred and other liabilities, Bills payable,
Page 15 of 40

Derivative financial liabilities, Liabilities attributable to insurance

operations, have 2.61%, 2.19%, 1.37%, and 1.09, respectively.
Others, Managers checks and demand drafts outstanding,
Accrued taxes, interest, and other expenses, Due to Bangko
Sentral ng Pilipinas and other banks, have percentages below 1%,
or a total of 1.18%. Deposit liabilities are deposits of customers
that banks borrow from other sources to use to fund assets that
earn revenue.
However, for the current year, Deposit liabilities, net was up again
as the largest part, 81.11%, among the distribution of total
liabilities as of the year. Next three accounts jumbled from
previous rankings, Derivative financial liabilities, Bills payable,
Deferred and other liabilities, have 2.40%, 2.28%, and 2.16%,
respectively, with the next account falling below the 1% bracket.
Others, Liabilities attributable to insurance operations, Managers
checks and demand drafts outstanding, Accrued taxes, interest,
and other expenses, Due to Bangko Sentral ng Pilipinas and other
banks, have percentages below 1%, or a total of 1.96%. To add,
the corporation is largely above the industry average for both
year, of 76.33% and 76.33%, current and previous year,
respectively, in terms of major funding account Deposit liabilities.

Capital Funds*
For the previous year, Surplus, has the highest percentage,
5.20%, among the distribution of total capital funds as of the year.
Next is Share capital who has 2.98%. Next are Share Premium,
Accumulated other comprehensive loss (offset negatively),
Reserves, Non-controlling interest, have percentages below 1%, or
a total of .69% (offset by loss of .26%). However, for the current
year, Surplus, has the highest percentage, 5.28%, among the
distribution of capital funds as of the year. Next are Share capital
and Share premium who have 2.71% and 2.02%, respectively.
Next are Accumulated other comprehensive loss (offset
negatively), and next two accounts changed places, Noncontrolling interest and Reserves, who have percentages below
1%, or a total of .10%(offset by loss of .22%).
*Percentages are based from total liabilities and capital funds.

Page 16 of 40

Vertical Analysis (Statement of Income)**/***

BANK OF THE PHILIPPINE ISLANDS
STATEMENT OF INCOME
VERTICAL ANALYSIS
(In Millions of Pesos)
ACCOUNTS

2014

%^^

2013

%^^

INTEREST INCOME

45,992

100

40,802

100

Page 17 of 40

On loans and advances

On held-to-maturity securities
On available-for-sale securities
On deposits with BSP and other banks
On trading securities
Gross receipts tax
INTEREST EXPENSE
On deposits
On bills payable & other borrowings
NET INTEREST INCOME
IMPAIRMENT LOSSES
NET INTEREST INCOME AFTER IMPAIRMENT LOSSES
OTHER INCOME
Trading gain on securities
Fees & Commissions
Income from foreign exchange trading
Income attributable to insurance operations
Other operating income
Gross receipts tax
OTHER EXPENSES
Compensation and fringe benefits
Occupancy and equipment-related expenses
Other operating expenses
INCOME BEFORE INCOME TAX
PROVISION FOR INCOME TAX
Current
Deferred
NET INCOME FOR THE YEAR

Shareholders of BPI
Non-controlling interests

36,441
8,141
831
1,769
406
(1,596)
11,184
10,834
350
34,808
2,807
32,001
20,979
1,362
7,370
2,007
1,007
10,668
(1,435)
29,960
11,850
9,017
9,093
23,020
4,958
5,374
(416)
18,062
18,039
23

79.23
17.70
0.57
1.21
0.28
(1.09)
24.32
96.87
3.33
75.68
6.10
69.58
45.61
6.49
35.33
9.57
4.80
50.85
(6.84)
65.14
33.55
30.10
30.35
50.05
10.78

39.27
39.21
0.06

32,698
4,930
2,615
1,641
690
(1,442)
10,478
9,530
948
30,324
2,648
27,676
22,174
4,839
5,885
2,042
1,449
9,514
(1,555)
26,703
10,641
8,040
8,022
23,147
4,153
4,147
6
18,994
18,811
183

80.14
12.08
6.41
4.02
1.69
(3.53
)
25.68
90.95
9.05
74.32
6.49
67.83
54.28
21.82
26.54
9.21
6.53
42.91
(7.01
)
65.45
39.85
30.11
30.04
56.66
10.18

46.48
46.03
0.45

^^ - Percentages

are based from the aggregate account comprised by parts

of that account (e.g. Interest expense on deposit, 96.87%, are computed
from aggregate Interest expense, not aggregate Interest income.

Net income
For the previous year, Capital funds holders of BPI have higher
percentage of Net income compared to Non-controlling interests,
99.04% and .96%, respectively. However, for the current year,
Non-controlling interest even loses part of the pie, resulting to
99.87% and .13%, respectively. Net income was 46.55 % for the
previous year, declined part of the pie during the current year to
39.27% of the total interest income of the respective years. To
add, the declined was offset, when the company is above industry

Page 18 of 40

average, 40.15% and 33.28%, for the previous year and current
year, respectively.

Interest income and expenses

For the previous year, interest income was distributed as Net
interest income and interest expense, 74.32% and 25.68%,
respectively. However, for the current year, Net income gained
percentage, 75.68% and 24.32%, respectively. Net interest
income is the same as gross profit for a bank-type of corporation.
Therefore, percentage of gross profit increases, which is a good
sign of financial performance. To add, the company is largely
below the industry average for Net interest income and above for
Interest expense, 74.95% and 24.94%, for the previous; and
78.08% and 21.82% for current year, respectively. This contributes
to the Net income reported for the year, although compared to
previous year is much smaller by 4.91%.

Interest income
For the previous year, Interest on loans and advances, has the
highest percentage, 80.14%, among the distribution of interest
income. Next are Interest on held-to-maturity securities, availablefor-sale securities, deposits with BSP and other banks, Gross
receipts tax, Interest on trading securities, have 12.08%, 6.41%,
4.02%, 3.53% (offset negatively), and 1.69%, respectively.
However, Interest on loans and advances, has the highest
percentage, 79.23%, among the distribution of interest income.
Next are Interest on held-to-maturity securities, while next three
accounts changed places from previous years ranking, deposits
with BSP and other banks, Gross receipts tax, available-for-sale
securities, interest on and trading securities, have 17.70%, 3.85%,
3.47% (offset negatively), 1.81%, and .88%, respectively.

Interest expenses
For the previous year, Interest expense on deposits have higher
percentage among the distribution of interest expense compared
to Interest expense on bills payable and other borrowings, 90.95%
and 9.05%, respectively. However, for the current year, Interest on
deposits gained percentage, resulting to 96.87% and 3.13%,
respectively.
Page 19 of 40

Other income and expenses

Other income and expenses for a bank-type of corporation is the
same as operating income and expense for a manufacturing type
of corporation.

Other income
For the previous year, Other operating income has the highest
percentage 42.91%, among the distribution of other income. Next
are Fees and commission, Trading gains on securities, Income
from foreign exchange trading, Gross receipt tax, Income
attributable to insurance operations, have 26.54%, 21.82%,
9.21%, 7.01% (offset negatively), and 6.53%, respectively.
However, for the current year, Other operating income maintained
and gained its highest percentage, 50.85%, among the
distribution of other income. Next are Fees and commission, with
the next three accounts changed places, Income from foreign
exchange trading, Gross receipts tax, Trading gains on securities,
Income attributable to insurance operations, have 35.13%, 9.57%,
6.84%(offset negatively), 6.49%, and 4.8%, respectively.
To add, the company is above the industry average, 48.19% and
35.48%, for the previous and current year, respectively. The other
income was 54.28% and 45.61% of total interest income for
previous and current year, respectively.

Other expense
For the previous year, Compensation and fringe benefits, has the
highest percentage, 39.85%, among the distribution of other
expense. Next are Occupancy and equipment-related expense and
other operating expenses, have 30.11% and 30.04%, respectively.
However, for the current year, Compensation and fringe benefits,
lose part but maintained the highest percentage, 39.55%, among
the distribution of other expense. Next, the two accounts changed
places, Other operating expenses and Occupancy and equipmentrelated expenses, have 30.35% and 30.10%, respectively.

Page 20 of 40

To add, the company is below the industry average, 74.87% and

70.93%, for the previous and current year, respectively. The other
expenses was 65.45% and 65.14% of total interest income for
previous and current year, respectively. This might be the reason
why the companys net income was somehow lessen.

Impairment losses
For the previous year, Net interest income was distributed
between Impairment losses and Net interest income after
impairment losses, 8.73% and 91.27%, respectively. However, Net
interest income after impairment losses gained percentage, from
Impairment losses, resulting to 91.94% and 8.06%, respectively.

Income Tax
For the previous year, Income before income tax was distributed
between Provision for income tax and Net income for the year,
17.94% and 82.06%, respectively. However, for the current year,
Provision for income tax gained percentage, from Interest income
for the year, resulting to 78.46% and 21.54%, respectively. To add,
the company is below the industry average for Net income for the
year and above for Provision for income tax, 83.66% and 16.33%,
respectively, for the previous year; and below for Net income for
the year, and above for Provision for income tax, 82.27% and
17.73%, respectively, for the current year; the previous years bad
performance was reflected up to the current years performance.
**Industry averages were adjusted to comfort with BPIs
Statement of Income presentation.
***Based from BPI managements presentation not the same as
the one given by BSP in their Banking System Statistics.

Page 21 of 40

Ratio Analysis ****

CLASS OF RATIO
Solvency
Debt Ratio
Debt to Capital funds
Capital funds Ratio

COMPUTED
2013

2014

2013

2014

91.49

89.88

88.7

87.77

784.85

717.43

11.3

12.23

1029.76
8.85

888.6
9
10.11

COMPUTED
Profitability
Return on Asset
Return on Capital funds
Cost on Income
NII/TOI
Net Interest Margin

Deposits
Liquid Assets to Deposits
Loans Gross to Deposits

FORMULAS

Total liabilities/Total
Resources
Total liabilities/Total Capital
funds
Total capital funds/ Total
resources

INDUSTRY AVERAGE

2013

2014

2013

2014

1.87

1.44

1.6

1.3

18.1

13.8

13.3

10.8

50.86

51.85

60.6

62.3

42.24

37.6

38.7

31.2

3.32

3.03

3.3

3.3

COMPUTED
Liquidity
Cash and Due from Banks to

INDUSTRY AVERAGE

Net income/Average total

resources
Net income/ Average total
capital funds
Non-interest expense/ Total
operating income
Net interest income/ Total
operating income
Net interest income/ Total
earning assets

INDUSTRY AVERAGE

2013

2014

2013

2014

29.06

23.18

33.5

29

51.54

50.24

55.6

59.5

65.11

69.15

64.3

68

Cash and due from

banks/Deposit liabilities
Total liquid assets/Deposit
liabilities
Loans, gross/ Deposit
liabilities

Page 22 of 40

COMPUTED
Growth

INDUSTRY
AVERAGE
2013
2014

FORMULAS
2013

2014
Earnings available to ordinary

(Diluted) Earnings per Share

5.19

4.62

Dividend Payout Ratio

30.51

38.96

Dividend per Share

1.02

1.80

Dividend Yield Ratio

1.91

2.15

Book Value per Share

0.004

6.75

36.84

shareholders/ Average
shareholders outstanding
Dividend per share/Earnings
per share
Dividend paid/ Ordinary
shares outstanding
Dividend per share/ Market

2.12

value per share of ordinary

shares
Capital funds/ Average shares
outstanding

Profitability Ratios
Like all businesses, banks profit by earning more money than
what they pay in expenses. The major portion of a bank's profit
comes from the fees that it charges for its services and the
interest that it earns on its resources. Its major expense is the
interest paid on its liabilities. The major resources of a bank are its
loans to individuals, businesses, and other organizations and the
securities that it holds, while its major liabilities are its deposits
and the money that it borrows, either from other banks or by
selling commercial paper in the money market. Resources are
used by businesses to generate income. Loans and securities are
a bank's resources and are used to provide most of a bank's
income. However, to make loans and to buy securities, a bank
must have money, which comes primarily from the bank's owners
in the form of bank capital, from depositors, and from money that
it borrows from other banks or by selling debt securitiesa bank
buys resources primarily with funds obtained from its liabilities as
can be seen from the following classic accounting equation:
Resources = Liabilities + Bank Capital (Owners' Capital funds)
Profitability is simply the capacity to make a profit, and a profit is
what is left over from income earned after you have deducted all
costs and expenses related to earning the income. It is simply the
ability of the company to turn business activity into profits.
Page 23 of 40

Profitability ratios are more long-term than liquidity ratio. The

major ratios in this class are Return on Resources, Return on
Capital funds, Cost-to-Income Ratio, Net interest income to total
operating income ratio and net interest margin, computed as
follows: Operating income divide by Average total resources, Net
income divide by Average Capital funds, Non-interest expenses
divide by total operating income, Net interest income divide by
total operating income, and Net interest income to Average
earning resources, respectively.

Return on Resources
Return on resources of the company for the previous year were
1.87%, higher than the industry of 1.6%; it decreases to 1.44% for
the current year, however, it is still above industry of 1.3%. The
company is above average for both years. It provides evidence
that the decrease in value of both (computed and industry) from
previous to current were common on the whole banking sector.
The company is efficiently using its resources to generate
earnings compared to other in the industry. However, ROA vary
substantially and highly dependent on the industry. It is
sometimes called return on investment, in the sense that
resources are investments from the owners and creditors of the
company, hoping to earn returns in the future. The higher the ROA
number, the better, because the company is earning more money
on less investment. Some formula add back interest income to
ignore cost associated with funding those resources.

Return on Capital funds

Return on capital funds of the company for the previous year were
18.1%, higher than the industry of 13.3%; it decreases to 13.8%
for the current year, however, it is still above industry of 10.8%.
The company is above average for both years. It provides
evidence that the decrease in value of both (computed and
industry) from previous to current were common on the whole
banking sector. It means the companys profitability, measured by
how much profit a company generates with the money
shareholders invested, where higher compared to others in the
Page 24 of 40

industry. It is sometimes called return on net worth, in the sense

that capital funds are net worth of the company after deducting
liabilities from resources, from the owners of the company, hoping
to earn returns in the future. The higher the ROE number, the
better, because the company is earning more money on less
owner investment. For high growth companies we should expect
higher ROE, since the company grows rapidly, then ROE is exactly
high. Averaging ROE for the past five to ten years gives a better
idea of the historical growth.

Cost-to-income ratio
Cost-to-income ratio of the company for the previous year were
50.86%, lower than the industry of 60.6%; it increases to 51.85%
for the current year, however, it is still below industry of 62.3%.
The company is below average for both years. It provides
evidence that the increase in value of both (computed and
industry) from previous to current were common only to higher
than average (not including BPI) companies of the whole banking
sector. This is a good result, with BPI segregated among other
banks, since it gives investors a clear view of how efficiently the
firm is being run the lower it is, the more profitable the bank will
be. As reflected from the vertical and horizontal analysis, net
income really rises, and the returns (ROA and ROE) ratios are
always above average.

Net interest income

income

to total operating

Net interest income to total operating income of the company for

the previous year were 42.24%, higher than the industry of
38.7%; it decreases to 37.60% for the current year, however, it is
still above industry of 31.2%. The company is above average for
both years. It provides evidence that the decrease in value of both
(computed and industry) from previous to current were common
on the whole banking sector. It means that the company is
earning more net interest income out of the total operating
income compared to other banks, other than non-interest or other
income. This is a good result since most of the operating income
should come from the net interest income, as major source of
Page 25 of 40

financial performance of a bank-type of company. And as reflected

by the vertical and horizontal analysis of net interest income, it
gained share in the pie, from non-interest or other income for the
current year.

Net interest margin

Net interest margin of the company for the previous year were
3.32%, higher than the industry of 3.30%; it decreases to 3.03%
for the current year, however, it is below industry of 3.30%. The
company is above average for the previous year only. It means
that the companys investment decisions are better compared to
its debt situations compared to others in the industry. Since the
industry remains stable, a decrease in computed value denotes a
complete negative outlook. A negative value of the ratio denotes
that the firm did not make an optimal decision, because interest
expenses were greater than the amount of returns generated by
investments. Investment here may pertain to loans and advances,
since these create income from interest. However, the company
has positive amount, it means that the company is better off if it
had used its investment funds to make investment than to pay off
debts. It also means that it has more money earned from
investment than those due to interest expense. In the perspective
of an investor, higher net interest margin is a good indicator that
investments in the company will surely give in the future higher
returns than not, as this ratio also measures return produced by
earning resources, offset by cost attributable to maintaining
earning resources from sacrificing payment of debts; high positive
increase in value denotes that earnings resources are
continuously earning higher and higher. Negative value denotes
the opposite.

Leverage Ratios
Companies rely on a mixture of owners' capital funds and debt to
finance their operations. A leverage ratio is any one of several
financial measurements that look at how much resource comes in
the form of debt, or assesses the ability of a company to meet
financial obligations. Uncontrolled debt levels can lead to credit
downgrades or worse.
Page 26 of 40

On the other hand, too few debts can also raise questions. If a
company's operations can generate a higher rate of return than
the interest rate on its loans, then the debt is helping to fuel
growth in profits. Higher net interest margin is good reflection of
having higher liabilities. A reluctance or inability to borrow may be
a sign that operating margins are simply too tight. There are
several different specific ratios that may be categorized as a
leverage ratio, but the main factors considered are include debt,
capital funds, resources and interest expenses, and they are the
following: Debt ratio, Debt-to-capital funds ratio, and Capital funds
ratio, computed as Total liabilities divide by total resources, total
liabilities divide by total capital funds, and total capital funds
divide by total resources, respectively.

Debt ratio
Debt ratio of the company for the previous year was 91.49%,
higher than the industry of 88.70%; it decreases to 89.88% for the
current year, however, is still above industry of 87.77%. The
company is above average for both years. It provides evidence
that the decrease in value of both (computed and industry) from
previous to current were common on the whole banking sector.
Debt ratio is financial ratio that measures the extent of a
companys leverage, or the debt aggressiveness. The debt ratio is
defined as the ratio of total long-term and short-term debt to
total resources, expressed as a decimal or percentage. It can be
interpreted as the proportion of a companys resources that are
financed by debt. The higher this ratio, the more leveraged the
company is, implying greater financial risk. The company, from
the results, compared to other banks, have higher financial risk. At
the same time, leverage is an important tool that companies use
to grow, and many businesses find sustainable uses for debt. Debt
ratios vary widely across industries, with liability-intensive
businesses such as banks having much higher debt ratios than
other industries like manufacturing and merchandising. Used in
conjunction with other measures of financial health, the debt ratio
can help investors determine a company's risk level. Some
sources define the debt ratio as total liabilities divided by total
resources. This reflects a certain ambiguity between the terms
"debt" and "liabilities" that depends on the circumstance. In the
Page 27 of 40

case of the debt ratio, financial data providers calculate it using

only long-term and short-term debt (including current portions of
long-term debt), excluding liabilities such as accounts payable.

Debt to capital funds ratio

Debt to capital funds ratio of the company for the previous year
were 1029.76%, higher than the industry of 784.85%; it decreases
to 888.69% for the current year, however, it is still above industry
of 717.43%. The company is above average for both years. It
provides evidence that the decrease in value of both (computed
and industry) from previous to current were common on the whole
banking sector.
The D/C ratio indicates how much debt a
company is using to finance its resources relative to the amount
of value represented in shareholders capital funds. The result
may often be expressed as a number or as a percentage. This
form of D/C may often be referred to as risk or gearing, the same
as leveraging. Here, capital funds refers not to the value of
stakeholders shares but rather to the difference between the total
value of a corporation or individuals resources and that
corporation or individuals liabilities. The formula for this form of
the D/C ratio, then, can be represented as: D/C = Total Liabilities /
(Total Resources - Total Liabilities). As discussed in debt ratio, this
ratio is used to gauge the extent to which a company is taking on
debts as a means of leveraging. A high debt/capital funds ratio
generally means that a company has been aggressive in financing
its growth with debt and is often associated with high levels of
risk. From the results, the company is prone to higher level of risk
compared to others in the industry. It will result to volatile
earnings. The value will not give a direct generalization, unless
these were taken into consideration, not visually evident as to the
current moment. Here it is, if this were to increase earnings by a
greater amount than the debt cost (interest), then the
shareholders benefit as more earnings are being spread among
the same amount of shareholders. However, if the cost of this
debt financing ends up outweighing the returns that the company
generates on the debt through investment and business activities,
stakeholders share values may take a hit. If the cost of debt
becomes too much for the company to handle, it can even lead to
bankruptcy, which would leave shareholders with nothing.
Page 28 of 40

Capital funds ratio

Capital funds ratio of the company for the previous year were
8.85%, lower than the industry of 11.30%; it increases to 10.11%
for the current year, however, it is still below industry of 12.33%.
The company is below average for both years. It provides
evidence that the increase in value of both (computed and
industry) from previous to current were common on the whole
banking sector. This ratio is used to help determine how much
shareholders would receive in the event of a company-wide
liquidation. This would mean that, in the event of liquidation, the
higher the ratio, the more shareholders may receive - and of
course, the reverse holds true. From the results, the company has
lower capital funds compared to other in the industry; in times of
liquidation each holder may receive high amount of liquidation
apportion, for previous and current years, compared to other in
the industry. The ratio is the same as capital adequacy ratio. The
small percentage of capital funds as to total resources was due to
high debt/capital funds ratio, total resources are equal to total
debts and capital funds combined. It resulted to company being
on
aggressive
rather
than
complaisant
leveraging.

Liquidity Ratios
Liquidity ratio is a class of financial metrics that is used to
determine a company's ability to pay off its short-terms debts
obligations. This class of ratio is more focus on short-term, rather
than long-term which is the focus of profitability ratios. In general,
the greater the coverage of liquid resources to short-term
liabilities the better as it is a clear signal that a company can pay
its debts that are coming due in the near future and still fund its
on-going operations. On the other hand, a company with a low
coverage rate should raise a red flag for investors as it may be a
sign that the company will have difficulty meeting running its
operations, as well as meeting its obligations. The biggest
difference between each ratio is the type of resources used in the
calculation. While each ratio includes current resources, the more
conservative ratios will exclude some current resources as they
aren't as easily converted to cash. The major ratios for a bank
Page 29 of 40

type of company is as follows, arranged into decreasing liquidity

of numerator resources: Cash and Due to other banks to Deposits,
Liquid Resources to Deposits, and Loans, gross to deposits,
computed as Cash and due to other banks divide deposits
liabilities, Liquid resources divide by deposit liabilities, and Loan,
gross divide by deposit liabilities, respectively.
The company are said to be more liquid to finance current
maturing obligations, like deposit liabilities, if the ranking of the
three ratios are decreasing from Cash and Due from other banks
to deposits ratio, Liquid Assets to deposits ratio, and Loan, gross
to deposits ratio, the same as their liquidity, most, liquid, less
liquid, respectively. Deposits are used as major basis since this
account constitute the bulk of liabilities of a bank type of
company.

Cash and Due from other banks to deposits

ratio
Cash and Due from other banks to deposits of the company for
the previous year were 29.06%, lower than the industry of 33.5%;
it decreases to 23.18% for the current year, however, it is still
below industry of 29%. The company is below average for both
years. It provides evidence that the decrease in value of both
(computed and industry) from previous to current were common
on the whole banking sector. From the results, it can be inferred
that the company has less most liquid assets to be used to
finance deposit requirement compared to others on the industry.
Therefore, they have smaller liquidity as compared to others on
the industry. Cash and due from other banks are the two most
liquid assets of a bank type of company.

Liquid Assets to deposits ratio

Capital funds ratio of the company for the previous year were
51.54%, lower than the industry of 55.6%; it decreases to 50.24%
for the current year, however, it is still below industry of 59.5%.
The company is below average for both years. It provides
evidence that the decrease in value of both (computed and
industry) from previous to current were common on the whole
Page 30 of 40

banking sector. From the results, it can be inferred that the

company has less liquid assets to be used to finance deposit
requirement compared to others on the industry. Therefore, they
also have smaller liquidity as compared to others on the industry.
Liquid assets are composed of cash and due from banks and
financial securities, excluding those capital funds securities. This
is a broader and fairer way of measuring liquidity of a company.
And since it involves more accounts, its percentage was assumed
higher than the first liquidity ratio. If the resulting percentage is
higher than the first ratio, by only an insignificant amount, then
the rest of the liquid assets (financial assets) cannot be used as
risk account when unforeseen deposit requirements exist anytime,
because of their small volume. When this happens, the first two
ratios will be ranked as one and the same.

Loan, gross to deposits ratio

Loan, gross to deposits of the company for the previous year were
65.11%, higher than the industry of 64.3%; it increases to 69.15%
for the current year, however, it is still above industry of 68%. The
company is above average for both years. It provides evidence
that the increase in value of both (computed and industry) from
previous to current were common on the whole banking sector.
This ratio is a commonly used statistic for assessing a bank's
liquidity by dividing the banks total loans by its total deposits. This
number, also known as the LTD ratio, is expressed as a
percentage. If the ratio is too high, it means that banks might not
have enough liquidity to cover any unforeseen deposit
requirements; if the ratio is too low, banks may not be earning as
much as they could be. From the results, the company have much
enough of it being less liquid to cover any unforeseen deposit
requirements to finance cost of maintaining deposits. A deficit of
financing for deposit liabilities will increase the likeliness of
investing in loans. So the higher the rate of loans, gross compared
to deposits, means that to compensate cost of maintaining
liabilities from deposits of depositors, as creditors, the company
invest or they might invest more on loans and advances to obtain
returns as latter compensation. This is somehow not good since
loans and advances compared to other resources are less liquid;

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then a higher percentage than average means a company is also

less liquid compared to others in the industry.

Growth Ratios
Any firm whose business generates significant positive cash flows
or earnings, which increase at significantly faster rates than the
overall economy is called growth company. It tends to have very
profitable reinvestment opportunities for its own retained
earnings. Thus, it typically pays little to no dividends to
stockholders, opting instead to plough most or all of its profits
back into its expanding business. This type of company though
were not the model of major growth ratios of the banking industry
as follows: Basic earnings per share, Diluted earnings per share,
Dividend per share, Dividend yield ratio, Book Value per share,
and Dividend pay-out ratio, computed as given by the table
above. Growth ratios measure growth rate of the company
instead, but not on a direct generalization, as to a one visually
evident when you get the increase (decrease) in percentage of an
account over time. Although these rates are also measured, it
doesnt give a long-term projection for the future earnings of the
company.

Basic earnings per share/Diluted earnings

per share
Basic earnings per share of the company is 5.19% for previous year,
it decreases to 4.62% during the current year, lower than the
industry 6.73%. This is the portion of a company's profit allocated to
each outstanding share of common stock. Earnings per share serve
as an indicator of a company's profitability and growth, if trend
analysed. The companys shareholders are earning lower compared
to other in the industry, and even lower during the current year.
When calculating, it is more accurate to use a weighted average
number of shares outstanding over the reporting term, because the
number of shares outstanding can change over time. However, data
sources sometimes simplify the calculation by using the number of
shares outstanding at the end of the period.
Diluted EPS expands on basic EPS by including the shares of
convertibles or warrants outstanding in the outstanding shares
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number. However, since -the company has no preference shares as

of the date, the basic and diluted earnings per share will be the one
and the same. Earnings per share are generally considered to be the
single most important variable in determining a share's price. It is
also a major component used to calculate the price-to-earnings
valuation ratio, which is also an important growth and profitability
ratio. The value computed may not directly state what might really
happened at the causes, an important aspect of EPS that's often
ignored is the capital that is required to generate the earnings (net
income) in the calculation. Two companies could generate the same
EPS number, but one could do so with less capital funds (investment)
- that company would be more efficient at using its capital to
generate income and, all other things being equal, would be a
"better" company. Investors also need to be aware of earnings
manipulation that will affect the quality of the earnings number. It is
important not to rely on any one financial measure, but to use it in
conjunction with statement analysis and other measures.

Dividends per share

Dividends per share of the company is 1.02 for previous year, it
increases to 1.80 during the current year. Having a growing dividend
per share can be a sign that the company's management believes
that the growth can be sustained. From the results, the company is
increasing its income distributed to shareholders, which is a good
sign that the management growth is laser projecting. Dividends over
the entire year (not including any special dividends) must be added
together for a proper calculation of DPS, including interim dividends.
Special dividends are dividends which are only expected to be issued
once so are not included. The total number of ordinary shares
outstanding is sometimes calculated using the weighted average
over the reporting period. In the context of the company, weighted
was used. Percentage of income to those declared to be distributed
only (dividend) increases; the managements discretion is to give
more, because they believe it is just and timely to give more.

Dividend yield ratio

Dividend yield ratio of the company is 1.91% for the previous year, it
increases to 2.15% during the current year, higher than the industry
2.12%. This is a financial ratio that indicates how much a company
pays out in dividends each year relative to its share price. From the
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results, the company is willing to distribute income with higher

percentage of its shares price compared to others in the industry.
The increase reflects that the company becomes more confident that
the dividend given will be fruitful to the future of the company, and it
is just to give the percentage of share price to its loyal shareholders.
It reflects the companies foreseeable good future earnings. High
dividend ratio is high foreseeable future income projection. Investors
who require a minimum stream of cash flow from their investment
portfolio can secure this cash flow by investing in stocks paying
relatively high, stable dividend yields. Yet, high dividends may often
come at the cost of growth potential. Every dollar a company is
paying in dividends to its shareholders is a dollar that company is not
reinvesting in itself in an effort to make capital gains. While being
paid for holding a stock is attractive to many, shareholders can earn
high returns if the value of their stock increases while they hold it. In
other words, when companies pay high dividends it may come at a
cost. More investors will invest since the ratio of the company
increases. The value again is somewhat proportionate to what a
company expects to present, it is somehow subjective, same as for
BEPS and Debt-to-capital funds ratio scenarios. When companies pay
high dividends to their shareholders, it can indicate a variety of
things about the company, such as that the company might currently
be undervalued or that it is attempting to attract investors. On the
other hand, if a company pays little or no dividends, it may indicate
that the company is overvalued or that the company is attempting to
grow its capital. Certain companies in particular industries, when
they are well established and steady-earning, often have good
dividend yields even though they are not undervalued. Banks and
utilities often fall into this category. While a company may pay high
dividends to its shareholders for a time, this may not always be so.
Companies often trim their dividend payments or stop them
altogether during hard economic times or when the company is
experiencing hard times of its own, so one can rarely rely on
consistent dividends on a permanent basis. Take note of these.

Book value per share

Book value per share of the company is .004 for the current year. It is
because of the very small amount of capital funds of the company to
be shared by all outstanding common shares. Book value per
common share is a measure used by owners of common shares in a
firm to determine the level of safety associated with each individual
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share after all debts are paid accordingly. Should the company decide
to dissolve, the book value per common indicates the dollar value
remaining for common shareholders after all resources are liquidated
and all debtors are paid. In simple terms it would be the amount of
money that a holder of a common share would get if a company were
to liquidate. From the results, shareholders have enough safety after
all debts are paid, but at the least amount, were small capital funds
are distributed to large number of shareholders.

Dividend pay-out ratio

Dividend pay-out ratio of the company is 30.51% for the previous
year, it increases to 38.96%, higher than the industry 36.84%. It is
the percentage of earnings paid to shareholders in dividends. The
dividend pay-out ratio provides an indication of how much money a
company is returning to shareholders, versus how much money it is
keeping on hand to reinvest in growth, pay off debt or add to cash
reserves. This latter portion is known as retained earnings. From the
results, the company is willing to distribute higher percentage of
earnings compared to other on the industry, as dividends, instead of
investing it to generate further income. However, dividend pay-outs
vary widely by industry, and like most ratios, they are most useful to
compare within a given industry. The increase is somehow a bad
result, since the company should further invest to further generate
income. The offset might be attributable to their already high volume
of investments, need not to invest more. Some of the earnings were
put into reserves and payment of deposit liabilities cost (interest),
which constitute the bulk of their liabilities. Again for the last time, a
number of considerations go into interpreting the dividend pay-out
ratio, most importantly the company's level of maturity. A new,
growth-oriented company that aims to expand, develop new
products and move into new markets would be expected to reinvest
most or all of its earnings and could be forgiven for having a low or
even zero pay-out ratio. On the other hand, an older, established
company that returns a pittance to shareholders would test
investors' patience and could tempt activists to intervene. The payout ratio is also useful for assessing a dividend's sustainability.
Companies are extremely reluctant to cut dividends, since it can
drive the stock price down and reflect poorly on the management's
abilities. If a company's pay-out ratio is over 100%, it is returning
more money to shareholders than it is earning and will probably be
forced to lower the dividend or stop paying it altogether. Long-term
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trends in the pay-out ratio also matter. A steadily rising ratio could
indicate a healthy, maturing business, but a spiking one could mean
the dividend is heading into unsustainable territory.

Synopsis
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As the BPI is well-known from being a top contender in the financial

institution sector of our country, the bank still reigned from these past few
years up to the present. The analysis made by this group proves the
impressive efficiency, effectivity, and stability of the commercial bank
which is clearly evident by its Financial Statements and Financial Mix
Ratios provided. First, the profitability is one of the valid basis of ranking a
commercial bank. The BPI presented an above average Return on Assets
and Return on Equity than the industry average due to a good trigger
which is an above average net income. A below average of Cost-toIncome ratio is a main determinant for higher Net Interest Margin because
of lower interest expenses from deposit liabilities compared to a higher
interest income from resources which is the main source of income by
whole banking sector that was proven by the higher ratio of Net Interest
Income to Total Operating Income. The vertical analysis has shown the
decrease on the level of performance by the bank as the industry average
also goes down. On the bright side, the bank has been always performing
better than the industry average through the years. There such times that
the country will not always experience a win-win scenario like what
happened this current year where the banking industry was affected.
As seen from the vertical analysis, the large amount of resources of BPI
was established by a very much higher liability than the capital fund as it
is better for commercial banks where they have more depositors, so a
higher deposit liabilities to be used for loans. The BPI has a high Debt and
Debt to Capital Funds ratio but not a decrease on the part of resources
and capital. The way it operates shoots for an ideal type of a bank
because of a great proportion of its Leverage ratios that also serves better
than the industry average even the current year is not better than the
previous for the whole banking sector. The Debt and Debt to Capital Funds
ratio and Capital Fund ratio determine that the bank is being on
aggressive leveraging which implies a greater financial risk that may even
lead to bankruptcy.
The business performs a very good strategy when it comes to liquidity
management. A lower Cash and Due from other banks to deposit ratio and
Liquid Assets to deposit ratio and higher Loans, gross to Deposits ratio
than the industry average prove that they are not highly liquid. On the
other hand, it is because of they are looking for a greater opportunity in
investing on long-term loans that return a higher interests rather than
short-term deposits (individuals/others) and being safe of letting cash be
idle. A better decision-making for the current than the previous year as
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the ratios improve more proportionally so they can earn as much than
they could. The only problem that they may encounter is that the current
deposit liabilities may be withdrawn anytime.

Recommendation
From the results of the vertical, horizontal analysis, and ratio
analysis, we recommend the following point for the BPIs
management:
1. Maintain or improve their financial performance status as what
can be seen from their overall profitability ratios, which is above
average. Hence, increase services prices. Banks can use a
customer-centric pricing programs. This will increase EPS, and
latter increase bank overall status.
2. Increase the percentage for capital funds. For various reasons
there is a strong incentive for banks to keep the capital funds as
low as possible. Mainly because the interest rates on the loans
are higher than the interest rates on the deposits, the return on
equity can be pushed higher by increasing the leverage (i.e. the
ratio of deposits to capital funds). However, small equity capital
increases the risk of the bank going bankrupt when the value of
its outstanding loans falls below the value of the deposits. If this
happens, the equity capital can be used to absorb such losses.
The higher the equity capital is, the higher the bank's capacity
to absorb losses. Lastly, this will increase book value, and latter
increase bank status.
As BSP, adjusted the level of the required minimum capital to
ensure that banks stand on a strong capital base to support a
threshold scale of operations to operate viably and service
effectively the needs of their clients, increasing is the best
possible advice for financial stability and effective delivery of
services.
3. Liquidity and capital requirements both play an important role
in the viability and solvency of banks. Therefore, they should
increase Reserves and Liquid assets, both point determinants of
a stable capital and liquidity status for contingencies,
respectively.
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4. To increase capital funds, they can improve dividend-based

ratios to attract more investor. Note that it should be
transparent.
5. The offshoot of this recommendations, will give counter
recommendations for specific accounts in the Statement of
Condition and Income. It is the companys discretion if they will
increase, but the group suggested the facts.

Sources
Bangko Sentral ng Pilipinas 2015 Key Statistics
Investopedia Financial Ratios for Banking
Bank of America Financial Statements Analysis

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All Rights Reserved

January 2015

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