ABOUT UNIONBANK

Union Bank of the Philippines (UnionBank) is a publicly-listed universal bank that distinguishes itself through
superior technology, unique branch sales and service culture, and centralized backroom operations. It has consistently
been recognized as one of Asia’s leading companies in banking and finance, ranking among the country’s
top 10 universal banks in terms of key performance ratios in profitability, liquidity, solvency and efficiency.
UnionBank’s corporate vision is to become one of the top three universal banks in the Philippines, not in terms of
asset size or branch network, but in terms of metrics under financial value to stakeholders, operational excellence,
customer franchise/share of wallet, unique customer experience, and delivering superior and innovative products
and services. It is grounded on its purpose to co-create innovations for a better world.
Throughout its 36 years of existence, UnionBank has always been quick to embrace innovation, embedding technology
in its way-of-doing-business and leveraging it in making strides to empower its customers.
UnionBank is clearly a leader in Philippine digital banking. Most notably, the Bank was the first among its peers
to start the first bank website; pioneer online banking in the country and launch the country’s first electronic savings account,
among many other firsts.
Through the years, the Bank has won numerous awards in key areas of Banking and Finance including “Most Innovative Bank
of the Year” from The European’s Global Banking and Finance Awards; “Digital Bank of the Year - Philippines”
from The Asset Triple A Awards; “Best Universal Bank” from London-based Capital Finance International;
and “Best Digital Bank-Philippines” from Asiamoney Banking Awards.

THE COVER
UnionBank embraces the future of banking and aspires
to be the best digital bank in the country. Its new logo symbolizes
its connection with its customers — the “U” representing them
and the “B” representing the Bank — while its tagline
“The Future Begins With U” emphasizes its commitment
to putting its customers first. The photo represents UnionBankers
and our valued partners — our clients — beginning a journey
of co-creating innovations for the future and for a better world.

On the Front and Back Covers

Valued client Eugenio “Jun” S. Ynion Jr., founder/owner
Shiptek Solutions Corp. (featured in pages 38-39 of this
annual report); UnionBanker Dino N. Velasco IV (left), VP/Corporate
Product Management Head; and UnionBanker Christine Anne N.
Trajano (right), Strategic Business Process Optimization Manager/
Line Engineer & Architect (LEA) Program Manager
 PURPOSE
To co-create innovations for a better world

VALUES

DNA
I earn the trust of my stakeholders
through Integrity, Magis and Ubuntu.

INTEGRITY
I do the right thing at all times.
I am trustworthy, transparent & authentic.
I treat everyone with respect.
I am fair, honest and accountable for any actions.

MAGIS
I am obsessed with the customer.
I continuously innovate.
I learn fast to build capabilities.
I achieve great results with an agile mindset.

UBUNTU
I collaborate.
I seek to understand through courageous conversations.
I give feedback, real-time and on demand.
I communicate clearly & openly.

2 UnionBank 2018 Annual Report

CORPORATE BRAND IDEA CREDO
Powering the Future of Banking We are a dynamic and caring team of bold, agile and
engaged experts committed to make the difference for
our stakeholders by creating meaningful experiences,
DISTINGUISHING BELIEFS innovative services and solutions.

Forward-Thinking | Innovative | Open | Agile

VISION
To become one of the top three universal banks in the
EMPLOYER BRAND Philippines by building a bank of enduring greatness

Own the Future. Co-create Innovations.

UnionBank 2018 Annual Report 3

 WHAT’S INSIDE

02 06 08 12 18 20 22 24 26
UnionBank Two-year Chairman’s President Hope The Field The Shake it Easy
DNA Financial Message and CEO’s Arises Marshall of Meat Caring Up Access
Highlights Report University

Brand Opportunity Management Senior Vice Global Small People-Powered Market Awards
Ambition and Access Committee Presidents Investments, Amount Revolution Master
for All World-class Huge
Solutions Impact

52 56 58 64 66 67 68 72 74
28 30 32 34 36 38 40 42 50
Business Design Superb Fueling From the XLOG: Sustainable Board A Journey
Revolution Duo Siblings the Future Philippines Made by Living of Directors of a Thousand
to the World Shippers Clicks
for Shippers

Chairman’s First Vice Subsidiaries Risk Corporate Sustainability Products Brick Management
and President’s Presidents Management Governance Report and Services and Mortar Directory
Awardees

76 78 83 89 92 124 130 140 148

All pages in this report were printed on Oji New Generation Matte Art Card 300 gsm Paper for the covers, Oji New Generation
Matte Art 150 gsm Paper/Woodfree UPM 120 gsm Paper for the inside pages. All said papers are FSC Certified papers, and are printed
with non-petroleum-based Soy Inks.
FSC is the Forest Stewardship Council headquartered in Bonn, Germany that operates in over 80 countries wherever forests are
present to improve forest practices worldwide. FSC Certification ensures that products come from responsibly managed forests that
provide environmental, social and economic benefits.
 TWO-YEAR FINANCIAL HIGHLIGHTS

CONSOLIDATED PARENT CONSOLIDATED PARENT

in Php Bn, except ratios and per share data 2018 2017 2018 2017 in Php Bn, except ratios and per share data 2018 2017 2018 2017

PROFITABILITY SELECTED RATIOS

Total Net Interest Income 20.0 20.8 14.2 13.4 Return on Average Equity 9.0% 12.0% 8.8% 11.9%
Total Non-Interest Income 5.7 4.5 7.0 7.2 Return on Average Assets 1.2% 1.5% 1.3% 1.7%
Total Operating Income 25.7 25.3 21.2 20.6 CET1 Capital Ratio 12.7% 12.1% 12.7% 10.9%
Allowance for Credit Losses 0.9 0.9 0.8 0.9 Tier 1 Capital Ratio 12.7% 12.1% 12.7% 10.9%
Total Operating Income Capital Adequacy Ratio 15.2% 14.4% 15.6% 13.5%
after Allowance for Credit Losses 24.8 24.4 20.4 19.7
Total Other Expenses 16.3 13.8 12.8 10.6
Net Income before Tax 8.5 10.7 7.5 9.1 PER COMMON SHARE DATA 1,098 1,058 1,098 1,058
Income Tax Expense 1.2 2.3 0.3 0.8 Cash Dividends* 1.90 1.90
Net Income 7.3 8.4 7.2 8.3 Earnings: 6.66 7.95 6.57 7.83
Basic 6.66 7.95 6.57 7.83
Diluted 6.66 7.95 6.57 7.83
BALANCE SHEET Book Value 82.34 69.25 82.54 69.55
Liquid Assets 300.6 301.9 293.1 294.7 *Earned for the year but declared and paid the following year
Loans, net 326.2 280.2 258.4 212.0
Other Assets 46.9 39.3 50.8 47.6
Total Assets 673.8 621.4 602.2 554.3 OTHERS
Deposits 420.7 447.6 380.7 400.0 Headcount 3,600 3,489
Total Equity 91.0 73.3 90.6 73.6 Officers 2,803 2,678
Staff 797 811

UNIONBANK AND PSEi REBASED STOCK PERFORMANCE

(BASE: 2013 LAST TRADING DATE)
200%

180%

160%

140%

120%

100%

80% PSEi
UnionBank
60%

40%

20%
Source:
0% Bloomberg
2013 2014 2015 2016 2017 2018

6 UnionBank 2018 Annual Report

 15.8% 445.8
2014 2014

2015 10.6% 2015 441.7

2016 16.3% 2016 524.4

TOTAL RESOURCES
621.4

RETURN ON EQUITY
2017 12.0% 2017

2018 9.0% 2018

673.8

2014 2.1% 2014 139.2

2015 1.6% 2015

TOTAL LOANS
179.6
2016 2.2% 2016 235.4

RETURN ON ASSETS
2017 1.5% 2017 280.2
2018 1.2% 2018 326.2

2014 48.2% 2014 311.1

FIVE-YEAR FINANCIAL HIGHLIGHTS

2015 56.3% 2015 311.6

TOTAL DEPOSIT

2016 46.4% 2016 376.5

2017 54.3% 2017 4476
2018 2018 420.7

COST-TO-INCOME RATIO
63.6%

2014 7.9 2014 20.4

2015 5.7 2015 20.2
NET REVENUES

2016 9.5 2016 25.5

2017 7.9 2017 25.3

EARNINGS PER SHARE

2018 6.7 2018 25.7

2014 52.8 2014 9.8

2015 56.2 2015 11.4
2016 63.9 2016 11.8
2017 69.3 2017 13.8
OPERATING EXPENSES

2018 82.3 2018 16.3

BOOK VALUE PER SHARE

2014 17.6% 2014 8.4

NET INCOME

2015 2015 6.0

TOTAL CAPITAL

16.2%
ADEQUACY RATIO

2016 15.7% 2016 10.1

2017 14.4% 2017 8.4
2018 15.2% 2018 7.3
7
 “If we work towards
the future we envision
and that future happens,
then we would have built
a Bank of enduring greatness!”

8 UnionBank 2018 Annual Report

 CHAIRMAN’S
MESSAGE

REIMAGINING
THE FUTURE
IN THE FUTURE, BANKING WILL BE INVISIBLE.

We are accustomed to predictions that banks,

JUSTO A.
at least in their physical form – the branch,
may cease to exist. And we see that this may come
to pass in time. Many large financial institutions
already closed several branches due to the lack
of foot traffic. Younger generations have never
been at a bank branch. Our access to technology
and the introduction of banking applications make

ORTIZ
performing all branch banking activities possible
at the palm of our hands anytime, anywhere.
But this idea has now graduated into a more
disruptive prediction. Today, we see the utility of
banking itself getting more elusive, imperceptibly
disappearing in the background of other
industry platforms.

UnionBank 2018 Annual Report 9

 CHAIRMAN’S MESSAGE
This concept started from the rise of the big service platforms and marketplaces
such as eBay, Amazon, Lazada, Uber, Airbnb, and many more. When we purchase their
products or avail their services, the physical act of “paying” is replaced with just one click
or one scan from our mobile phones with the emergence of QR codes. We can do this
because we have our credit cards, savings accounts, or mobile wallets registered into their
platforms at the customer’s initiative. The pursuit to improve customer experience does not
stop there. There are already use cases which ignore the payment step completely.
Take Amazon Go for example. Someone can just walk-in, take the products he needs,
and then leave the store. The next thing he receives is an app saying that his account has
been deducted with the amount of his purchase. This is made possible by facial recognition,
sensors, integration of various data, and artificial intelligence. All these have come together
to create a seamless shopping experience for the customers, and we will do the same
to create seamless banking experiences.
Value rendered to the customers increases exponentially when financial services are
embedded into platforms. This is why tech giants such as Google, Facebook, Alibaba,
and Apple among others, are already encroaching into the space of providing financial services
to their own customers who are also our customers. In many instances, this is because
the banks cannot or will not meet the high standards of customer expectations required.
If this is the kind of future we’re looking at, what role will banks play? Can banks even
keep up with tech platforms?
10 UnionBank 2018 Annual Report
IT’S STILL A BUSINESS OF TRUST.
Banks possess an essential component in customer interactions – and that is TRUST.
Banks have long been the trusted institution for the financial aspects of people’s personal
and business interests. Banks also have the domain expertise in complex financial services
such as cash management solutions and trade finance, as well as access to money markets
and capital markets. We have a balance sheet and strong regulatory oversight. Having earned
this trust we need to keep it and nurture it. The trust given by customers provides banks
its reason for being – without it we are nothing. Banks, therefore, should stay on top of
their game amid this growing number of tech and non-tech companies that would want
to embed banking products and services into their platforms, either their own
or in collaboration with tech-ready banks. We need to be the preferred choice.
How can this be done? We can imagine the possibilities. One way is for banks to embed
themselves into platforms – be the trusted entity that will facilitate financial services for the
customers. Said platforms may be built or owned by the bank itself or by a partner with
domain expertise in a specific ecosystem. Project i2i, for instance, is a platform being built by
UnionBank which seeks to embed financial services enjoyed by universal banks and makes
it available to rural banks and, possibly, cooperatives. This way, their own customers get to
experience the same level of relevance, convenience, and efficiency in banking. Another way
is embedding core banking services in a partner’s platform. With the help of application
programming interface (API), partners can easily connect to the Bank’s functionalities and
enable banking services in their platform or apps. UnionBank’s partnership with several
fintechs and technology companies does exactly this. Because we enable the financial leg
of their platform, their customers become our customers and get to avail core banking
services with much ease and efficiency.
But there is also a possibility where banks may opt not to be part of platforms.
Rather, it can serve as the trusted curator of apps and sub-platforms that will deliver
a superior level of customer experience. Its primary role is to be the portal through which
apps and sub-platforms provided by others in an open banking model can be accessed
by the customer. Imagine a super app or a super platform with a compilation of sellers and
service providers you can choose from based on your needs and criteria, with artificial
intelligence serving up the best offers through the portal of your bank – the trusted curator.
 To continue to earn the trust of customers, banks would have to develop I’LL LET BLAISE PASCAL CONCLUDE THIS.
new expertise in various enabling technologies and customer experience design. He has given us a good argument:
Banks need to level up, adopt an agile and collaborative culture, and learn about design • If we do not work towards the future we envision, and that future happens –
and first principles thinking in co-creative iterative efforts. In short, banks need to reinvent we are doomed! This is a situation we would not want to be in.
themselves as technology companies with authentic customer centricity at the core. • If we work towards the future we envision, but that future does not happen –
some will say we have wasted time and resources, but we say it will make us
THIS POSSIBLE FUTURE SHAPES OUR PRESENT. better for our customers.
If we believe that these possibilities could happen, what shall be done at the present? • But if we work towards the future we envision, and that future happens –
Just imagining the kind of future that is ahead of us already invites us to break our own then we would have built a Bank of enduring greatness!
cognitive biases. We are encouraged to take a step back and rethink why we do what we do
and how we do things. What is our purpose? Is it enduring enough? Is it compelling enough? Let us once more renew our faith and commitment to
Is it bold enough? And only when our purpose is anchored on our customers and UnionBank. Our Bank. Our Future.
stakeholders does it take on new life and opens up a lot of opportunities to take action.
How we fulfill our purpose becomes the next thing in question. I’d like to echo the
concept of “first principles design thinking” highlighted in one of the chapters of Bank 4.0
by Brett King. The clear winners in any industry are businesses that are able to bring about
significant value or benefit to customers through their products and services. Take the
iPhone for example. It reinvented human connection and communication and put it in a JUSTO A. ORTIZ
handheld device. It did not iterate from the old capabilities or features of a phone. Chairman
Alibaba did the same thing when it introduced large all-in-one platforms and orchestrated
how customers and businesses, domestically and abroad, should seamlessly and
conveniently interact with one other. The idea is to rethink the whole model of rendering
value to the customer and translate it into the products and services. In simple terms,
put the customer at the center of what you do, know why you do what you do,
and start from scratch!
This endeavor, however, cannot be possible if done in isolation. All stakeholders,
internal and external, must be aligned with the organization’s vision and execution plans,
and partners need to be embraced as integral to the offering of relevant and great
customer experience. Pre-emptive transformation while all is going well is always
a struggle, but the data shows that doing so produces performance spikes and for longer.
It takes courage and convexity in our strategy.

UnionBank 2018 Annual Report 11

 “Our digital transformation
strategy is in full-effect.
More opportunities
are opening up but
competition is gaining
traction. We can’t slow
down now. We want to
maintain our momentum
and keep our lead.”

12 UnionBank 2018 Annual Report

 PRESIDENT
AND CEO’S REPORT

LEADING THE
FUTURE OF
BANKING

EDWIN R.
2018 has been a milestone year for UnionBank.
After three years of investing heavily in our people,
processes, and infrastructure for our digital transformation,
our efforts have borne much fruit. We are proud
to say that we are leading the way in digital banking

BAUTISTA
Banking CEO of the Year Asia – International Banker
in the Philippines.
It is an opportune year, then, to unveil our brand
refresh, with a new logo and brand identity that reflect
our new brand promise of “Powering the Future of
Banking” and our slogan of “The Future Begins with U”.
But even as we set our eyes towards the future,
we have sustained the gains and momentum
of the present.

UnionBank 2018 Annual Report 13

 PRESIDENT AND CEO’S REPORT
FINANCIAL RESULTS
By all accounts, 2018 could have been the perfect storm. It was a challenging year
for the banking industry. Interest rates moved faster than anticipated, arising from
inflationary pressures that prompted regulators to adjust policy rates. New liquidity
regulations were in effect, inducing banks to lengthen their liability profile and shoulder
higher costs. Our subsidiary City Savings Bank, also had to hurdle a situation where it
could not release new loans for several months due to the revised rules in lending to teachers.
However, with our resiliency and agility, we were able to deliver strong financial results.
UnionBank’s 2018 net income was at Php7.3 billion. Despite the 13% decline in
net income year-on-year, total income taken to retained earnings amounted to Php9.7 billion,
inclusive of adjustments related to PFRS 9 accounting standards during the year.
Revenues were also up to Php25.7 billion from Php25.3 billion last year, with 50% coming
from the retail segment. Our loan portfolio also continues to be one of the most diversified
in the industry – consumer loans account for more than one-third of total loans.
Total assets reached Php673.8 billion in 2018, up by 8.4% from Php621.4 billion last
year mainly driven by the sustained double-digit growth of our loan portfolio. Total loans
expanded by 16.4% YoY to Php326.2 billion on account of the growth across various
business units [corporate loans (up 15% YoY), commercial loans (up 39% YoY),
mortgage (up 32% YoY), and credit cards (up 37% YoY)].
Supporting our growth are the increases in capital and more stable long-term funding
coming from our successful Php10.0 billion stock rights offer in September 2018,
the issuance of Php11.0 billion senior fixed rate corporate bonds in November 2018,
as well as the Php3.0 billion long-term negotiable certificates of deposit offered in
February 2018. Total liabilities were up by 6.3% to Php582.8 billion, while total equity
increased by 24.0% to Php91.0 billion.
UnionBank continues to post notable profitability. Return on equity (ROE) was at 9.0%
while return on average assets (ROAA) was at 1.2%, well-within the Philippine banking
industry’s results. Revenue-to-expense ratio was also superior at 1.6x, a notch higher than
the industry.
We approach 2019 with great optimism. The recent upgrade of the Philippines’
credit rating to BBB+ (2 notches above investment grade) may bode well for us to sustain
above-industry loan growth. We also expect margins to improve amid a benign interest rate
environment for the year. Finally, we will continue to advance in our transformation journey.
Digital is the way forward as we manage growth in expenses while accelerating
digital customer onboarding and acquisition.
14 UnionBank 2018 Annual Report
FOCUS 2020
We are now at the tail-end of our FOCUS 2020 strategic roadmap and the results
are promising. Our loan portfolio sustained above-industry annual growth from
2015 to 2018. As a result, recurring income has comprised majority of the Bank’s revenues
and was enough to compensate for the absence of trading gains in the past. Revenues also
grew substantially, with the consumer segment posting the fastest growth year-after-year.
Although our market share remained the same, our customer base across various
communities grew steadily over the years.
More importantly, we ranked among the top banks in terms of total annual shareholder
return, ROE, ROA, and revenue-to-expense ratio in the last eight years. We have done
so by focusing on sustainable customer businesses and on the efficient delivery of our
banking services. Instrumental to this success is the execution of our strategic imperatives.
For one, we continued to leverage on a wholesale customer acquisition approach
through our corporate clients. Our cash management and financing solutions largely
contributed to building up the Bank’s balance sheet. We grew our low-cost funds as
we deepened relationships with large corporate institutions. In the process of enabling them,
we were able to extend services across their suppliers, dealers, owners, customers,
and employees. This wholesale customer acquisition strategy allowed us to expand
our reach to the retail segment in a more cost-efficient manner – not relying on costly
branch expansion. We managed to maintain our market share over the last 8 years
without significantly expanding our branch infrastructure.
We also beefed up our branches with relationship managers (RM). We targeted
a 2:1 RM-to-branch ratio nationwide. More than being product bankers, we continuously
train them to become customer experts. With the help of digital productivity tools,
they are equipped to better understand and address customer pain points.
We also continued to leverage on partnerships to expand our suite of products
and services. In 2017 for example, we launched bancassurance and wealth management
services with Insular Life and Lombard Odier, respectively. We tied-up with leading institutions
in these businesses to ensure that we only offer a superior line of products and services.
As we onboard more customers, it was necessary for us to leverage on centralized and
straight-through processes. We designed our back-office systems with larger capacities
to handle retail volume. Technology helped us scale-up operations and, at the same time,
allowed us to customize solutions for our customers.
Lastly, we carried on leveraging on our DNA. Embedded in our culture are attributes of
being relevant, expert, and convention-challenging individuals. Our focus on the customer
never wavered as we ourselves were engaged and empowered within the organization.
 Our FOCUS 2020 strategies were working as planned. But aware of the constantly
changing customer behavior and business environment, we needed to level up our game
to stay relevant to our customers. Hence, as we implemented our FOCUS 2020 roadmap,
we consistently revisited our strategy.
In 2015, we pivoted towards a digital transformation strategy while working towards
our FOCUS 2020 objective of becoming a Great Retail Bank. We have made significant
investments in transforming our infrastructure and organization towards becoming digital.
Now, we are in Phase 3 of our transformation journey.
Phase 1 – Being Digital to the Core
Infrastructure
In 2015 we established an Enterprise Architecture to be the basic information
technology blueprint on which we will build the future. We tackled business process
transformations, ensuring that we deliver the basics – 24/7 availability, 6sigma reliability,
T+0 processes, secure transactions – and ultimately improve our operational productivity.
We invested in an Application Programming Interface (API) platform which opened
up our functionalities to financial technology (fintech) firms, application developers,
customers, and other third-party agency partners. From experimentations in several
hackathons, we graduated to commercializing our API platform. This expanded our
fintech engagements and allowed us to leverage on external party capabilities. With it,
we were able to co-create products and services with our partners and customers,
have a faster feedback system, and speed up time-to-market in terms of execution.
Alongside our digital thrust, we strengthened our defenses against cybersecurity,
business continuity, and data privacy threats. For one, we established the first state-of-the-art
Integrated Operations Center in the country. It is a collaborative facility for the
24/7 monitoring of the Bank’s business, network, and security operations. Additionally,
the Bank maintains a triangulated network of its data and disaster recovery functions
via the establishment of multiple resiliency locations. We also set up our own Data Privacy
Office, ensuring that we uphold standards of data protection and privacy.
People and Organization
More important than processes and technologies is the transformation of our people
and organization. We acquired the core talents we needed in IT, data science, design,
and digital marketing among others. A total of 58 new roles were added to our careers list.
We merged our Operations and Technology groups into one and placed
a technology expert on top of it to ensure that operational processes are digitized to the
greatest extent possible. We formed new functions in the organization to include: 1) EON Group –
to challenge the norm in delivering banking services; 2) Data Analytics Team – to harness
insights from customer and transaction data; 3) Customer Experience and Digital Marketing –
which, in collaboration with our Data Analytics Team, are able to translate insights into
actions and recommendations relevant to the customer; 4) Fintech Business Group –
which immersed itself into the fintech universe to come up with alternative business
models and reach new markets; and 5) Platform Development Group – which was tasked
to build ecosystems for our existing corporate customers, as well as lead our participation
in the creation of platforms.
Led by our Human Resource (HR) Group, we engaged employees through our
Human Capital Management (HCM) System. It is a digital tool where employees and leaders
can manage their development goals and track performance. Digital learning plans
were also laid out to upskill our employees. Workshops on Coding, Design Thinking,
Digital Marketing, Project Management, etc. were conducted, while E-Learning tools were
augmented with more modules to enable learning-on-demand.
We also transformed the way we do things by applying the Agile Methodology.
Agile is a time-boxed, iterative approach to product/service delivery that incrementally
builds on the desired output. We tested it in a small number of cross-functional squads
who performed two-week sprints to launch our digital channels. With ‘Agile’, we saw
greater adoption of our digital touchpoints as we were able to quickly tweak features and
UnionBank 2018 Annual Report 15
 PRESIDENT AND CEO’S REPORT
functionalities according to customer feedbacks. After a series of successful pilot runs,
we formalized our structure into a full-scale Agile Organization. Today, we are composed of
28 cross-functional squads under 6 tribes, and 67 unit-based teams who think boldly and
act swiftly, similar to how startups run.
The initial steps of our transformation did not come as a breeze. Laying the foundations
might have been the most difficult part, but we were able to accomplish much because of
our belief in our vision.
Phase 2 – Launch of Customer Touchpoints
With all the basics in place, we digitized customer touchpoints to enhance customer
engagement and experience, namely: branches, mobile app, and relationship managers.
The Ark
In 2017, we opened “The Ark” – the first digital/paperless branch in the country. It was the
Bank’s proof-of-concept designed to transform the brand experience, based on customers’
adoption to trends in branch banking. With its stylish and purposeful design, it has been
awarded “Best in Customer Experience”as well as among the “Top 14 Best Branch Designs”
in the world.
After more than a year of operations, we’ve seen The Ark as a successful digital converter.
Usage of self-service machines surpassed in-branch transactions at a 10:1 ratio. 95% of
its customers are individuals while more than 60% of the transactions are retail in nature.
Apart from being a transaction place, The Ark has also become a community space
where opportunities for product discovery and advisory occur.
16 UnionBank 2018 Annual Report
Its success on an operational efficiency standpoint prompted us to transform
more branches during the year. As of end-2018, the total number of transformed branches
reached 13 across the country.
UnionBank Online
In the same year, we launched the upgraded versions of our UnionBank Online web
and mobile app. It was designed with an omnichannel user experience with capabilities
which are unheard of in the local digital banking space. Real-time online sign-up,
single-view of all asset and liability products, self-service third party account enrollment,
interbank transfers via PESONet and InstaPay, scan-to-pay via QR code, split bills,
request payment feature, and pre-ordering of transactions in The Ark, were all made
possible without visiting any branch or ATM.
A year after its launch, we have seen substantial adoption of users with unprecedented
download and activity rates.
Max 5.0 – Digital Human
As key drivers in widening and deepening customer relationships, we equipped
our sales force with an upgraded digital tool called Mobile Assistance Express (MAX)
5.0 app. Apart from access to client inquiry forms, proposal building, and performance
management, MAX 5.0 gives them a 360° view of their clients’ information and has
predictive capabilities to offer other relevant products.
Supporting these three digital channels are the continuous operational improvements
done at the back-end. We performed business process automation to re-engineer the
Bank’s processes, and then deployed robotics process automation to manual tasks.
We also adopted artificial intelligence (AI) for some applications like our chatbot,
Rafa, allowing it to perform instructions, search across different applications, and respond
to queries in natural language.
When blockchain was on the rise, we began to experiment with it to learn more
about its possible use cases. We started applying it in our internal processes, such as the
distribution of general circulars within the Bank. After onboarding 100 blockchain cadets
into our Blockchain Institute to carry out more projects and experimentations, we think
that we are now more knowledgeable about the technology and better poised to launch
more blockchain applications.
Phase 3 – Rollout and Commercialization
We enter 2019 with Phase 3: the roll-out and commercialization phase of our journey.
An insight we got from analyzing digital customers prompted us to pursue this phase.
Our internal measure showed that digital customers are more engaged. They had 4x higher
outstanding balances, 6x higher spend amounts, and 12x higher revenues than non-digital ones.
With this, our obsession on converting customers to digital intensifed even more.
Our customer touchpoints – branches, mobile app, and relationship managers – will be
our channels to scale up and accelerate retail customer acquisition.
Our fleet of digital branches will grow to 40. Apart from Arks (flagship branches)
and Arklites (full-service branches), two more branch formats will be introduced: Ark for
Business (tailored for corporates and made for efficiency) and Full Self-Service Branches
(with key services in self-service machines and minimal staff for sales and transactions).
By year-end, we expect to expand our reach to the Millennial market through the launch
of the country’s first-ever gamified loyalty program, PlayEveryday. More features will also
be launched in the UnionBank mobile app to include digital KYC and account opening,
accessibility of trust and treasury accounts, and many more. The vision is for all of our
branch services to be available in the app. This way, our customers will be able to bank
with us at their own convenience – without setting foot at a branch.
Corporate and SME customers, alike, will experience seamless banking services
through the launch of our revamped business banking platform, The Portal. Designed
and built by our very own corporate product owners, The Portal features single sign-in
capability, multiple organization management, and flexible approval setup – aimed at
addressing the pain points of corporate platform users.
MAX 5.0 or what we call our “Digital Human” initiative will graduate from being
a hand-held device to an integrated digital solution that brings together data analytics,
4DX principles of execution, sales management, user experience, and AI. Results showed
that our current MAX 5.0 tool achieved a leads conversion rate of 12x, surpassing our
expectation of 5x. Hence, we are really excited about the greater heights that we can
achieve as we continue to enhance our salesforce’s productivity.
Our new fintech/innovation company, UBX, will hit the ground running. It will house
our technology initiatives and experimentations, ecosystem platform development projects,
and investments in fintech companies.
UBX will also lead the commercialization of platform projects incubated in the Bank.
Project i2i, the blockchain-based clearing system we’ve built for rural banks, already
onboarded more than 60 rural bank participants. From connecting rural banks and
cooperatives to the larger national retail payment network, we will move towards offering
financial institutions a digital transformation package called Bank-in-a-Box. Key services that
will be made accessible include banking technology, access to insurance, bills payment,
and ATM network, and many more. The vision is to create an ecosystem of connected
financial institutions.
Our SME networking platform, GlobalLinker, will form part of a larger B2B marketplace.
It will house business utilities enabled by fintech partners, such as payroll and
invoicing systems that will help SMEs tech up. It will also open up access to marketplaces
for customers, businesses, and credit.
We also sealed our partnership with XLOG which will provide our customers with
an end-to-end logistics platform, with financial services like trade financing and payments
embedded in them.
We will harness our troop of blockchain cadets to develop projects not just for the
Bank but also for corporate and institutional clients. In fact, it was our Blockchain Institute
that helped us develop the first crypto-ATM machine in the country (just recently launched
at The Ark). We expect to see more of these innovations as we continue to co-create
solutions with our customers.
CitySavings will take the lead to fulfill our aspiration to be the Best Mass Market Bank
in the country, as it continues to focus on inclusive prosperity. CSB diversified into the
motorcycle financing business after its successful merger with Philippine Resources (PR)
Savings Bank. It also expanded its microfinance portfolio with the acquisition of Iloilo-based
Progressive Bank. By replicating CSB’s successful operating model, we will see significant
improvements in efficiency and synergy maximization among its acquisitions.
Soon, we shall see substantial growth in acquired customers and new touch points
with the Bank’s agency banking arrangements by leveraging on PETNET’s strong physical
presence and non-banking retail outlets.
Our digital transformation strategy is in full-effect. More opportunities are opening
up but competition is gaining traction. We can’t slow down now. We want to maintain
momentum and keep our lead.
To our dear Board of Directors, we express our thanks for your continued support
and guidance throughout our journey. To our loyal customers, partners, and various
shareholders, we deeply appreciate your loyalty and trust. We, UnionBankers, will always
remember that when we started our transformation journey, it was because of our
commitment to YOU. And this is where our aspiration to build a bank of enduring greatness
and goal to become the Best Digital Bank are predicted on: The Future Begins with U.
UnionBank is YOUR BANK, YOUR FUTURE.
EDWIN R. BAUTISTA
President & CEO
UnionBank 2018 Annual Report 17
 HOPE ARISES AHON SA HIRAP, INC.
AHON SA HIRAP HELPS TENS OF THOUSANDS OF WOMEN
MICROENTREPRENEURS GET OUT OF POVERTY TOWARDS A THRIVING LIFE
“Many are no-read, no-write. But their functional skills
are better than PhDs,” Mercy Abad fondly refers to their
nanays, the enterprising mothers belonging to the bottom
of the pyramid.
“They are able to adapt. They’re really resilient. If you
see where they come from, you would wonder how they
are able to maintain their dignity,” adds the President of
Ahon Sa Hirap, Inc. (ASHI), one of the first microfinance
institutions in the Philippines.
Mercy shares the story of one of their members,
Nanay Angie, who, with her husband, would buy and carry
25 kilos of goods on their back every day. “She started
with just two walls in their house. Now she wants to show
off their new tiled house. That was how they were able
to send their children to school. All three are successful
working abroad.”
A true pioneer
ASHI pioneered the Grameen Bank Approach (GBA)
of Prof. Muhammad Yunus, the famed Bangladeshi
social entrepreneur, founder of modern microfinance,
and Nobel laureate.
This approach did away with the rigid requirements of
banks, instead providing low-income borrowers, mainly
women, direct access to non-collateralized loans to help
increase their income through micro-enterprises.
With an outstanding loan portfolio approaching
P1 billion and 98 percent repayment rate from its
over 74,000 members, ASHI has become one of the
role models for local and international microfinance
institutions.
From project to NGO
In 1989, an economics professor at the University
of the Philippines Los Baños visited Bangladesh to learn
from Prof. Yunus. Starting as an action-research project,
Prof. Generoso Octavio successfully replicated the
Grameen model for micro-credit and, two years later,
registered ASHI as a non-stock, non-profit,
non-governmental organization (NGO).
From Laguna, ASHI expanded to Rizal and Antique.
In 1995, ASHI spread to Panay adding Aklan, Capiz,
and Iloilo; and eventually to Quezon, and Cavite.
18 UnionBank 2018 Annual Report
Today, it operates in 106 cities/municipalities across
nine provinces. It runs 60 branches and 1,851 centers,
with each center having 30 to 50 members, mostly the
poorest women in its service areas.
“Our focus is the poorest,” Mercy notes. “We are
targeting only the poorest. They’re the ones nobody wants
to handle. They’re the unbankable.”
ASHI offers loans from P5,000 to P100,000 to these
women for income-generating activities. “They start with
P5,000. They have to learn how to handle money first.
Nobody has trusted them with money that big before.
Then we ask them to pay us back at their comfort, up to
two years,” Mercy explains. She adds that most try their
best to repay their loan faster to save on interest.
Other loans are also available for family emergencies,
household needs, and seasonal businesses.
Aside from borrowing money, members are also
encouraged to save for their future and are covered with
insurance for untoward events.
More than loans
But as Mercy stresses, ASHI is not just about lending
money. “It’s much more than loans. We’re after the total
development of the human being. We want them to claim
their dignity and stand on their own. That’s all we really do.”
She explains that they address all forms of poverty:
“Money is just one of them, there’s also spiritual and
social.” She says the poorest of the poor feel like they’re
garbage. That’s why Mercy says their job is to broaden
their worldview and change their mental programming.
“We inspire and motivate them. We make them
discover their powers. We tell them they’re children of
God. We bring hope and God’s love to each one. And we
make them dream,” Mercy shares.
This is powerful stuff. The nanays would draw their
dreams and hang up their framed illustrations on the walls
of their center hall. Think of vision boards. But instead of
exotic vacations and luxury cars, their dreams are simple:
have their own house, send their children to school,
and eat three times a day.
School and social club
Once a week, the nanays, usually a group of five
with a leader, meet at their center. The meetings are not
just about collecting loan payments. They’re more like
a school for personal development and practical skills.
Mercy explains, “Every week, they have a lesson. We teach
them business skills and financial literacy. We teach them
how to be a good citizen. We have a program about the
environment. We teach so many things.”
She adds the group structure builds accountability and
a support system: “Membership in a group makes them
think beyond their family. Now they have to take care
of each other, the five of them.”
They approve each other’s loans. They help their
other members who are struggling. And they make each
other responsible for their obligations. So losing face
in the group is a huge deterrent to defaulting. Hence, the very
high repayment rate. As Mercy puts it: “When you are poor,
what do you really have? Nothing, right, except your integrity.”
Another bonus: the nanays look forward to socializing
and gossiping with their friends. It’s where they vent their
problems at home, share some good news, and get a break
from their daily routine.
Prepared for this
Mercy feels that her entire life has been a preparation
for her role at ASHI. She grew up in the province where
her father was a country doctor. A market research
veteran, she joined the board of ASHI after her retirement
and was appointed as President five years ago.
She explains, “I’m used to running big operations.
When I was with TNS, the biggest market research firm
in the Philippines, I was managing 1,000 interviewers
nationwide. I’m also used to field work.” And, since their
social surveys often include respondents from the lower
class, Mercy adds, “I’m always in touch with the poor.”
She is quick to give credit to their people, especially
the hundreds of development officers out working
in the field: “I’m just the conductor here; the power
really comes from the troops.”
She says that out of the more than 600 employees
of ASHI, “What I’m so proud of is that one-third are the
children of the nanays.”
Partnering
Mercy is very pleased with the partnerships
that ASHI has forged over the years, providing
clean drinking water, solar products, LPG,
training, ready markets for products, and,
of course, funding for loans. “UnionBank provides
funding in a big way and at a lower cost,”
she says.
Recently, it has expanded loan access
to farmers and fishermen through the
ASHI Grameen Agricultural Program (AGAP).
ASHI also helps them skip middlemen for higher
profit. A fast food chain, for instance, committed
to buy agricultural goods from ASHI’s member
farmers, offering a ready market.
In the end, it’s all about giving the poorest
of the poor an opportunity to improve their lives.
Mercy explains, “That’s my definition of poverty:
the absence of options. All they need is an option.”
There have been tens of thousands of
Nanay Angies – so many stories of new houses
being built, children finishing college, businesses
that are thriving, and even micro-entrepreneurs
becoming millionaires. Over the last three
decades, ASHI has given them exactly that:
options, opportunities, and a way out of poverty.

www.ashi.org.ph

Mercy Abad
President
 THE FIELD MARSHALL OF MEAT
ATKINS IMPORT & EXPORT RESOURCES FOUNDER GABRIEL ANG RECOUNTS
HOW HE BEAT THE ODDS IN THE MEAT INDUSTRY
“There are five important parts of a pig. There’s the
loin part, the belly, the ham side, the shoulder side,
and then the head. From there, you divide it. For example,
the head. Pork ears, that’s for the China market. Pork mask,
that’s for the Philippine market. Pork snout, that’s for the
China market. Upper cheek meat, that’s for the European
market. Inner cheek meat, that’s ground pork for the
Philippine market,” explains Gabriel Ang, President and
Chairman of Atkins Import & Export Resources, Inc.
The 58-year-old meat importer proceeds to explain the
intricacies of the meat industry, break down the complex
cost structure of meat shop operators, and dissect the
economics of a Korean barbecue restaurant he recently
visited. Gabriel is like a walking, talking Wikipedia of Meat.
“Doing this kind of business, you should know
everything,” he points out. “Since I’m an engineer,
I simplify complicated matters.”
School of hard knocks
Gabriel started Atkins in 1994 as an importer and
trader of meat products (pork, chicken and beef),
selling to supermarkets, food establishments, restaurants,
processing plants, and many others. He also owns
First Meycauayan Cold Storage and Logistics Inc.,
which provides storage facilities exclusively for Atkins.
Gabriel is no stranger to business. Born and raised
in Iloilo, he started working as early as age 12 in their
family business of ready to wear garments. Tragedy struck
when his father died. Gabriel shares, “I was 13 years old
and an honor student. At that time, I had to choose either
economics or education. The budget was tight. If I did not
do economics, who will support my education?
So, I became a working student.”
It was a tough time, as he had to help his siblings with
running the business. “I was often late getting to school
because I still had to open shop,” he says. They also
worked as street hawkers, selling goods after school in the
streets of Iloilo.
From engineer to butcher
During college, Gabriel continued in the family
business, learning the ropes of garments trading.
20 UnionBank 2018 Annual Report
ATKINS IMPORT & EXPORT
More bellies
The meat industry, however, thrives on the fact that
food is a necessity. Gabriel states, “The business of food
is important to people’s stomachs.” He notes that Filipinos
are pork and chicken eaters.
Demand for meat, in fact, exceeds supply. More bellies
He explains, “That’s when I learned to be street smart
to feed mean more pork bellies to supply. Atkins imports
and book smart.”
mainly specialty cuts, which are hard to source locally.
Eventually, Gabriel graduated from University of
He adds, “If you need chicharon bulaklak or flower fat,
San Agustin, Iloilo City in 1983 with a degree in BS Civil
where can you buy that? You cannot buy it here. The practice
Engineering. He did not formally practice his profession,
here is, once you kill the pig, all the offals have already been
but his degree came in handy while building several stores
contracted to a single buyer. You’ll have a hard time buying.
for their family business.
So, you have to import.”
At 31, he went to Manila to help complete his brother’s
Meat importation in the Philippines is only a fraction of
house, after the contractor abandoned the project.
the total industry. Majority is still local, like poultry and
And Gabriel stayed for good. After getting into marketing
hog raising. Gabriel says Atkins and other importers play
various goods for the VisMin market, he established
as a stabilizer, so prices won’t increase too much to benefit
a jeans manufacturing company. “But it folded up because
the consumer public. For manufacturing industries,
we couldn’t compete with China,” he explains.
we provide raw materials they need for production.
He also got into the business of importing of glassware
Atkins imports meats from Canada, the US, Europe,
and melamineware, which operated for around eight years.
Australia and New Zealand. But it also buys from the locals.
But just like with the jeans business, he could not compete
“We have them slaughtered in GenSan, packed, and shipped
with mainland Chinese competitors. “Every time you go into
to Manila,” Gabriel shares.
the same line as them, within six months, you’re dead,”
He says his company distributes meats to all sectors,
he says.
from the smallest to the biggest. “You can even come here
It was back in 2000, while he was supplying the
and buy one box. We even accommodate small micro
house brand of melamineware of Makro, when he was
entrepreneurs.”
convinced by some buyers there to import meat products
As for the biggest, you name it. Atkins supplies
for them.
the house brands of S&R and Robinsons Supermarket.
It also supplies Metro Gaisano, Baliwag, Lembest,
Tuition fee
Lechon Liempo, Lechon Haus, KFC, Max’s, R. Lapid Chicharon,
Atkin’s first importation for Makro was a container
small and medium size chicharon industry and other
of ox tripe. An industry novice, he did not have any cold
quick service restaurants.
storage and ended up storing his meat imports at
a warehouse housing his soap business, which a neighbor
Business lessons
found suspicious. The next day, he found himself all over
Certainly, Atkins has become a major industry player.
the morning news due to logistic lapses. Long story
It employs more than 400.
short, after three weeks of investigation, the authorities
Asked about what he has learned about business,
found everything in order and released his goods.
he shares, “Number one, you need your faith in the Lord.
“I had to pay for my tuition fee for my business mistakes,
There are so many challenges, that’s why you’ll need
worth more than a PhD degree,” Gabriel exclaims. His first
His guidance. Consider yourself as a steward. If you tell
three weeks in his new venture had already proven to be a
yourself this is all yours, you’ll get greedy. But if you say
headache.
it’s a blessing from God, if your people need help, it’s easier
He pressed on and over the next few years,
to share your blessings.”
Gabriel found himself dealing with all sorts of challenges,
from prices of meat drastically dropping to customers
delaying payments.
 “Number two, focus on your business,” Gabriel continues.
“I thought before that one plus one equals two. What if your
business is one minus one equals zero? If one business
loses money, it just offsets what you earned in your other
business. But if you focus on one business, then one minus
zero equals one.” If you want to expand, he points out,
just add a related value-added business so you don’t have
to pay your tuition fee all over again.
Lastly, Gabriel says, “Number three, you should know
how to fix problems.” Whether it’s congestion at the pier
or massive price drops, he says he has learned to find
practical solutions. For example, he shares one incident
where Atkins had to absorb huge losses, “We cut down
our stores to minimize our losses. Then we diversified
into other avenues to cover up what we lost.”
That’s how Atkins got into the huge chicharon or
the pork skin business.
In the end, Gabriel, who spends most of his time
in the field, points out, “There are two kinds of businessmen –
the one who’s sitting in the office drinking coffee
or playing golf and the one who’s a field marshall.”
For this trader-philosopher, knowing this industry
inside and out is the only way he is able not just to survive
but to thrive in the business of meat.

www.facebook.com/AtkinsImportandExport

Gabriel Ang
President and Chairman
 THE CARING UNIVERSITY
DE LA SALLE UNIVERSITY-DASMARIÑAS STRIVES NOT ONLY TO BE
A CENTER FOR ACADEMIC EXCELLENCE BUT ALSO A FORCE FOR GOOD
By all accounts, De La Salle University-Dasmariñas
(DLSU-D) has all the hallmarks of a world-class educational
institution. It has been granted Level IV accreditation
in 2009 by the Federation of Accrediting Associations of
the Philippines, the highest accreditation status given
to universities. Its various colleges have been recognized
by the Commission on Higher Education Center,
including Center of Excellence in Teacher Education,
Center of Development for Excellence in IT Education,
Center of Development in Electronics Engineering,
and Center of Development for its Biology Program.
A human face
But for Br. Gus Boquer, FSC, EdD, president and
chancellor of DLSU-D, the University should be known
not only for academic and research excellence but also
for social consciousness, community involvement,
and sustainability.
“I want the University to have a human face, that as
human beings, they will make a difference with their
leadership skills, and our corporate social responsibility
would be very pronounced,” he explains.
Br. Gus, as he is better known, envisions DLSU-D
as a “caring” university, and has outlined a 14-point agenda
that addresses the spiritual, physical, financial, and social
needs of its students, faculty, employees, and community.
It is understandable why part of DLSU-D’s vision and
mission put a lot of emphasis on social transformation and
being a caring community. With a sprawling 27-hectare
campus, DLSU-D is the second biggest La Salle campus in
the country. It employs 1,000 and educates 10,000 students
from junior high school to graduate programs. Its reach and
impact on the community are immense.
Founded in 1977 as General Emilio Aguinaldo College-Cavite,
La Salle acquired it in 1987 from the Campos family and later
renamed it to De La Salle University-Dasmariñas.
The Brother President
Br. Gus has been an educator all his life. He was once the
principal of La Salle Greenhills and Brother President of the
University of St. La Salle in Bacolod for 9 years. “I knew from
the bottom on what it is to be a teacher, what it is to be
a principal, and a director,” he shares. Currently, he heads both
DLSU-D and De La Salle-Medical and Health Sciences Institute.
22 UnionBank 2018 Annual Report
DE LA SALLE UNIVERSITY-DASMARIÑAS
At heart, Br. Gus will always be a De La Salle Brother,
driven by the Lasallian values of faith, service and communion.
As such, he has led DLSU-D to promote various advocacies
to address issues faced by the community and society.
Under his leadership, Br. Gus has spearheaded
many major projects that promote arts and culture,
environmental awareness, and social responsibility.
For instance, DLSU-D preserves historical pieces in Cavite
from the 19th century through its Museo De La Salle.
Its Sustainable DLSU-D program, which promotes and
implements green practices, has won numerous local
and international awards.
Bahay Pag-Asa
But one of the most unique initiatives of Br. Gus
is De La Salle Bahay Pag-Asa Dasmariñas, a transformation
center for children in conflict-with-the-law. The youth-at-risk
are certainly a much-overlooked segment of society.
Br. Gus decided to do something about it, after observing
the unfortunate circumstances of many minors in
detention centers. He established the first center in
Bacolod City in 2001, back when he headed the University of
St. La Salle in Bacolod.
Instead of detaining them in jail, these minors are cared
for in a monastery-type center. After years of operation,
Bahay Pag-Asa produced good results and became a model
in Western Visayas.
When Br. Gus was re-assigned as President of DLSU-D,
he replicated the Bahay Pag-Asa program in his new
campus, with the support of the PLDT-Smart Foundation.
“The children who are in conflict with the law is
a crucial concern for society now,” notes Dr. Myrna F. Ramos,
DLSU-D Vice Chancellor for Mission, External Affairs,
and Advancement.
The goals of the program include providing competent
and committed legal assistance and implementing
a post-release program. “We directly deal with the judge
handling the case, and the Department of Social Welfare
and Development (DSWD),” Dr. Ramos explains.
But more importantly, it is designed to help these
teenage boys to become productive, responsible,
and independent members of society. Br. Gus says,
“We take an overall holistic redevelopment approach –
education, livelihood, spiritual, and social, among others.”
At the center, the boys stay between six months
to up to two years, taking up vocational classes, skills
development, and psychological and emotional counseling.
Bahay Pag-Asa’s facilities feature classrooms, dormitories,
a chapel, library, dental/medical clinic, basketball court,
and other amenities.
Dr. Myrna explains that the center trains them to
make rosaries, rags, candles, and more items they can sell.
Any profits from selling these products are divided among
the boys when they are ready to leave the program, to give
them a fresh start with a small business or new career.
“We help them to become independent, free from bad
influence and their past environment,” she says. All Residents,
are trained to play the piano, and they take turns daily
to play the piano at the lobby of the De La Salle University
Medical Center.
Scholarship programs
Br. Gus and Dr. Myrna are also very proud of DLSU-D’s
scholarship programs, which has been awarded by the
Commission on Higher Education for Best Scholarship
Program on the national level, besting other universities
in the country.
“We have a lot of scholars, almost 2,000 scholars.
They receive the Lasallian education in different forms –
academic scholars, athletes, writers, performing artists,”
explains Dr. Myrna, who is in charge of raising funds for
DLSU-D’s scholarship programs, infrastructure initiatives
and other advocacies.
Indeed, DLSU-D’s scholarship programs are diverse.
For its internally funded scholarships, it offers financial
aid grants, a student assistant program, financial aid for
student trainees, entrance scholarship for high school
valedictorians and salutatorians, academic scholarships
to outstanding upperclassmen, scholarship for qualified
children of employees, and tuition discount for editors,
varsity members, and members of the Cultural Arts Group.
External scholarships come in the form of endowments
from other foundations, term scholarships from wealthy
individuals and organizations, and scholarships from
government agencies.
“Our main goal for the online donations is the student
scholarship,” Dr. Ramos explains, referring to DLSU-D’s
partnership with UnionBank, which has pledged to support
the University in its fund-raising activities.
Aside from its numerous scholarship programs,
DLSU-D is also committed to educating the underprivileged
through its Balik Aral Program, a special curriculum
that prepares out-of-school youth for the
Department of Education’s Alternative Learning System
(ALS) program, as well as the DLSU-D Night College that
provides free quality education to underprivileged
working youth including household helpers.

Leaving a legacy
Social transformation has always been embedded
in the vision of DLSU-D. Dr. Ramos shares that she has
imbibed this mission. Although raising funds and looking
for donors are not easy, she says, “There is fulfillment and
meaning in my life.” Being able to touch the lives of scholars,
youth at-risk, and the underprivileged is part of leaving
a legacy. “That’s the only thing I know that will uplift the
living conditions of poor people – education,” she adds.
As for Br. Gus, having worked in the academe
for decades, he says, “When you work in a special ministry
for the Lord, there are many opportunities for growth
and development. You can change from your work assignment,
but you never stop serving that cause of what this is for.
You can turn challenges into opportunities.”
There is no stopping Br. Gus, who has not only
helped students in their academic pursuits but also the
underprivileged and the forgotten. “Our Lord is happiest
when we serve the people closest to Him – the lost, the last,
and the least,” he shares. From building a home for children-
in-conflict-with-the-law to offering generous scholarships,
De La Salle University-Dasmariñas indeed embodies the
spirit of St. John Baptist de La Salle, and realizes its mission
is to “continue transforming itself into a caring community
guided by Gospel values.”

www.dlsud.edu.ph

Br. Gus Boquer, FSC, EdD

President/Chancellor
De La Salle University - Dasmariñas
 SHAKE IT UP FRUITAS HOLDINGS
FRUITAS HOLDINGS FOUNDER LESTER YU WENT FROM ONE SMALL FRUIT
SHAKE STAND TO ALMOST A THOUSAND STORES ACROSS 20 BRANDS
You’ve treated yourself with a Fruitas smoothie,
snacked on a De Original Jamaican beef pattie, refreshed
on a Buko Loco coconut juice, and satisfied your
sweet tooth with a Black Pearl chocolate shake.
With close to 1,000 stores across the country,
the food carts and counters under Fruitas Holdings, Inc.
(FHI) are literally everywhere. It may come as a surprise
to many, but other than Fruitas Fresh From Babot’s Farm,
Buko Ni Fruitas, Fruitas Ice Candy, and Fruitas House of Desserts,
FHI also carries well-known brands such as De Original
Jamaican Pattie Shop and Juice Bar, Juice Avenue,
The Mango Farm, Buko Loco, Johnn Lemon, Black Pearl,
Shou Hand Pulled Noodles, and 7107 Halo-Halo Islands,
among others.
When it comes to the food cart business in the
Philippines, FHI reigns supreme. Opening one store
in every two to three days, it is considered as the fastest
growing food and beverage business in the country
in terms of branches.
Last year, the company posted P1.57 billion in net
revenues, serving millions of customers. That’s a lot
of shakes, desserts, and patties!
Big dreams
The company is embarking on a P1 billion initial public
offering (IPO), using the proceeds to expand its store
network, upgrade its facilities, and acquire brands.
Lester Yu, Fruitas Holdings Inc. founder and CEO,
shares his company’s ambition: “We will be as big as the
Creator will allow us to be. Our dream is limitless. To reach
that dream, one bridge is to raise capital. An IPO will
hasten our growth.”
The 44-year-old recipient of the Emerging
Entrepreneur award from Ernst and Young’s Entrepreneur
of the Year Philippines program never thought in a million
years that his small cart 17 years ago would even reach its
size now. “Back then, my dream was just to have 15 stores,”
he shares.
24 UnionBank 2018 Annual Report
Business crash course
Lester was working as a branch manager for a bank
when he decided to put up a small business as a sideline.
It was the height of the pearl shake craze in 1999.
His brand, Lush Coolers, mushroomed to around 75 stores
within a couple of years.
Just like with most fads, the rise was stratospheric,
but the fall was more catastrophic. As with other players
in the market, Lester’s pearl shake business came
crumbling down fast.
Having left employment by then, he went scrambling
for other business ventures, like kitchenware, gold trading,
and cellphone load cards. Nothing lasted.
Lester finally settled on a fruit shake concept,
based on his own shift to a healthier diet. He quips,
“I’m a ‘fruitarian’, I would drink fruit and veggie shakes
every morning.”
He knew fruit shakes aren’t a fad. “I learned a hard
lesson in my previous business. Money came in fast,
but it was not sustainable,” Lester notes. With fresh fruit
products, there were already existing players that have
been around for a decade. Surely, this was not going to be
another pearl shake fiasco.
“I did not want to experience what happened with
Lush Coolers,” Lester explains, “I wanted a business
that’s going to be long term.” And so, he opened the first
“Fruitas” Fresh From Babot’s Farm on February 1, 2002
at SM Manila.
The cart that started it all
Fruitas began with a mere two-square meter cart
selling fruit shakes at a very low and single price of P25
to attract a more middle-class market. For Lester, that was
the best way to compete with established competitors
that were predominant in the central business districts,
targeting only the AB crowd.
Lester laughs as he recalls how he lost a lot of money
with that initial pricing strategy. But he recovered his
footing and managed to stay afloat.
“For the next four years, we only had a few stores
and we were just making enough to break even. What we
earned, we just retained in the business. We reinvested
everything back. That was a sacrifice,” he shares.
Turning points
Having found a niche in offering fresh fruit juices
at an affordable price differentiated Fruitas from competitors,
and that kept it going.
But it was only when Filipinos began to embrace
healthier lifestyle that business boomed. Lester explains,
“They became more health conscious. All of a sudden,
there were fun runs and wellness activities. Our sales
exploded.”
As for those years of scrimping and funneling profits
back to the company, “All our efforts to save, reinvest,
and open one store at a time finally bore fruit,” Lester says.
He adds that focus and sacrifice are keys to success.
That single store at SM Manila has since multiplied
almost a thousand-fold. Lester explains, “My mathematical
formula for this is one plus one equals plus zero. That means
we just kept adding one store, and another. One day,
it becomes 10, so you added one zero. Then 10 stores plus
one store, plus one store, and one day, it becomes 100.
It’s slow and steady growth, but it’s compounding.”
Key values
Market strategy and disciplined execution were
certainly crucial to FHI’s growth. But there’s also another
key factor. “Success is anchored on fundamental values.
If you do not have values, it’s almost impossible for you
to be successful. Your values should be intact,”
Lester waxes philosophically.
For one, the company values integrity. He explains,
“New employees go through an orientation. One of the
first things we teach is our honor code: We do not lie,
we do not steal, we do not cheat. We do not tolerate
those who do so.”
Another thing Lester believes contributed to the
company’s growth is innovation. It’s the only way to stay
relevant to ever changing market tastes and trends.
In the food and drinks industry, innovation means
new concepts and product variety.
Lester knew his company cannot be just a one-hit
wonder. “I did not want to stick to one brand,” he says.
In fact, not very long after launching Fruitas, he added
other brands.
 “When we introduce a new brand, there has to be
something unique,” Lester explains. Two other criteria
he considers: it has to be scalable and there has to be
synergy with the other existing brands to take advantage
of economies of scale.

Pushing forward
With a growing cash pile, the company has been
acquiring brands. “Our most successful acquisition is
De Original Jamaican Pattie Shop. Our most recent,
Sabroso Lechon, is also very promising.”
The company has also expanded into new formats
such as food parks and wine cellars. FHI has two lifestyle
parks, which carry the company’s own brands as well as
other new brands. “The value added of our food parks
is we use them to incubate our new concepts.”
There seems to be no stopping Lester and FHI.
He says, “We continue to come up with new concepts.
Innovation is in our DNA. Even if there are challenges,
we still push forward. Because if we stop, we might lose
that innovative spirit from our DNA.”
After 17 years, 20 brands, 1,000 stores, and more than
1.5 billion pesos in sales, the Fruitas group will just
continue to grow, one store at a time.

www.fruitasholdings.com

Lester Yu
Founder and CEO
 Annica Witschard
Chief Executive Officer
Zdenek Jankovsky
Chief Business Development Officer
& Corporate Treasurer
 EASY ACCESS
HOME CREDIT EQUIPS UNBANKED FILIPINOS WITH CONSUMER FINANCING
FOR LIFESTYLE PURCHASES
Home Credit equips unbanked Filipinos with consumer
financing for lifestyle purchases.
More than three-fourths of Filipinos don’t have bank
accounts. And a whopping 98% don’t own a credit card.
What do they use for financial transactions? Cash.
“It’s a very cash-driven economy,” notes Annica
Witschard, Chief Executive Officer of Home Credit
Philippines, the consumer finance company that has taken
the country by storm. “Looking at the banked population
and the credit card population, it’s a very small piece.
So, there’s a huge part of the middle class that don’t have
access to financial tools.”
Where do most Filipinos borrow from? Family, relatives,
and friends, according to a Bangko Sentral ng Pilipinas
survey. This is followed by informal lenders. In other words,
loan sharks.
Changing the market
When Home Credit came to the Philippines in 2013,
it introduced a new way of financing to unbanked,
often first-time borrowers.
You want to buy a new phone? Easy. Go to a store
where Home Credit is available, fill out an application,
show two valid IDs, wait for approval, pay the down
payment, and bring home your brand-new mobile phone.
The human interaction is very important, especially
for Filipinos, notes Annica. Some 6,000 Home Credit
sales agents are deployed to partner outlets nationwide.
“We try to make it friendlier, more accessible, and less
intimidating. Talking to someone at the store is much
easier. They get help in filling in their application and they
get an answer instantly. It’s very easy and convenient.
We are where you are. We’re at the point of sale.
That’s been the key to our success.”
Home Credit’s success has indeed been phenomenal.
Annica shares, “At that time, we were just talking
about 200,000 customers. Today, we have 4.5 million
customers. It’s very fast growth.”
If you go to an appliance store or mobile phone shop,
especially in a mall, you’re most likely to see Home Credit.
The company is currently in 6,000 outlets from
HOME CREDIT PHILIPPINES
around 2,000 partners all over the Philippines, including
SM, Robinsons Appliances, Abenson, Automatic Centre,
Western Appliances, Hello, O+, Allphones, WellCom,
AV Surfer, and many more.
Global footprint
The Home Credit Group started in 1997 in the Czech
Republic, lending primarily to people with little or no credit
history. “Customers typically start with our point-of-sales
financing in stores,” explains Zdenek Jankovsky, Treasurer
and Chief Business Development Officer of Home Credit
Philippines. “Our business delivers the fastest loan approval
in the market at one minute,” he adds.
The company has since expanded to 10 countries,
mostly in Central and Eastern Europe and Asia.
With EUR 2.3 billion revenues, over 116 million customers,
434 thousand distribution points, Home Credit is definitely
a major global presence.
The Philippines is a key market for Home Credit.
As Annica says, “The demographics are exciting.
The Philippines is known as one of the fastest growing
countries in the region. It has a growing middle class.
And it has a very young population that’s very tech-savvy
and social media-savvy, which fits our business model
very well.”
Building relationships
Now that their customers are used to point-of-sale
loans, Home Credit is cross-selling other products such as
cash loans and credit cards to existing customers. As the
first non-bank entity to be given a license to issue credit
cards, this is a big deal not just for Home Credit but also for
its customers who have never qualified for a traditionally
bank-issued credit card. Although credit limits are lower
and issued only to existing clients, the Home Credit card
has similar features as other credit cards. Annica says,
“We have a lot of focus on the credit card. That will be how
we can increase our relationship with our customers,
to be with them in their daily life in a different way.”
As the consumer finance landscape shifts into
the digital era, Home Credit is undergoing an online
transformation and digitizing its products and services,
allowing customers to avail of its products even faster and
easier through tools such as the My Home Credit mobile app.
Annica notes that Filipinos spend a lot of time on
their mobile phones. The pickup for their mobile app has
been high, as customers prefer chatting with customer
service reps through it. They also use it to monitor their
balance, apply for cash loans, and check out promotions.
“People prefer that, so we’d like to use that. Now, Home Credit
makes the overall experience more seamless as all our
products and services can now be accessed through the
My Home Credit app,” Annica says.
From a company known for its in-store loans,
Home Credit wants to be known as a modern, digital
company that provides innovative financing tools to the
Filipino market. Zdenek explains, “We are a tech-driven
company that is there for our customers in every step of
the way – from the store to their homes, through digital
and mobile tools.”
For the company, it’s important to nurture
the relationship with customers. “We get a lot
of recommendations and word-of-mouth referrals from
customers. That’s also part of our success. We’re not
interested in a one-time customer. We want to keep on
having that relationship,” Annica explains.
Home Credit values its own partners. Zdenek notes that
they have been working with UnionBank as one of their
funding partners. Recently, Home Credit Philippines raised
P6.5 billion from a syndicated loan, which UnionBank was
a part of. Zdenek says, “We are thankful for UnionBank’s
confidence in us.”
Annica shares they like collaborating with UnionBank,
“For a bank with a lot of history, UnionBank is very
forward looking and very modern. The energy to not be
happy with what you’re doing, but always looking for more,
they’re not traditional bankers in that sense.
They really have the mind on the future.”
The future for Home Credit itself is still so much
brighter. Annica says, “There’s absolutely a lot of room
for growth. It’s a very exciting market to be in. So many
things are happening. This is where the future is.”
www.homecredit.ph
UnionBank 2018 Annual Report 27

BUSINESS REVOLUTION
PALAWAN PAWNSHOP/PEPP, WITH BOBBY AND ANGIE CASTRO AT THE
HELM, CHANGED THE COMPETITIVE LANDSCAPE OF THE PAWNSHOP
AND REMITTANCE INDUSTRY
“Encircle the cities from the countryside”, Bobby Castro
remembers the dictum that Chairman Mao used in leading
the Chinese people’s war to victory. He smiles as he
describes how his company, Palawan Pawnshop-Palawan
Express Pera Padala adopted this principle,
and grew from the provincial areas to eventually conquer
the metropolitan centers.
Angie, his wife and business partner, expounds,
“We started operations from small towns where there was
less competition, less resistance. Slowly, we were gaining
ground. We were under the radar, and thus, before our
competitors knew it, we were already wrestling with them
side by side.”
The two describe their latest expansion venture
they dub as Project Parachute, where they send cadres –
experienced company officers – to set up multiple branches
and saturate a region.
Cadres? Resistance? Parachute?
If this sounds like the language of revolutionaries,
it is because it is. Bobby and Angie were student activists
who became underground rebels during the dark years of
Martial Law. Bobby, in fact, was captured twice, imprisoned,
tortured, and even shot during a skirmish.
So how did this pair of idealistic leftists, ironically both
children of military officers, end up decades later
as successful entrepreneurs?
New beginnings
After Bobby was released as a political prisoner in
1978, he decided his revolutionary spirit should be pursued
on a different stage. By now married to Angie, the couple
moved to Puerto Princesa City, hometown of Bobby’s
father, to start a family and help his father run
his small business.
As was expected, he eventually wanted to do more.
“I told my dad I wanted to have my own business,”
Bobby shares. After a few small business ventures fizzled out,
a single-branch, money-losing pawnshop was put up
for sale in 1985. Bobby seized the opportunity, little knowing
that Palawan Pawnshop would one day become the
foundation of a business empire. “When we started,
the purpose was just to survive. We already had
two children then,” he says.
28 UnionBank 2018 Annual Report
PALAWAN PAWNSHOP/
PALAWAN EXPRESS PERA PADALA (PEPP)
Bobby soon realized that they were out of their depth.
“I found out that pawnshops needed a lot of money. sometimes four, per year,” Bobby explains.
So, we had to borrow money that we used to lend out.
In all our borrowings, we never defaulted on payments.
Eventually, we were able to build a strong credit
standing.”
Angie recalls the early days, “It wasn’t easy. We had to
be hands-on. Initially, it was just the two of us.”It was a true
partnership from the beginning. Angie was the company’s
first appraiser and Bobby was the cashier, maintenance
crew, and marketing guy rolled-into-one.
“We did not have any business background,” Bobby says.“
It was all trial and error. The deeply-ingrained values
our families imbibed in us and principles we learned
and practiced in the National Democratic Movement
became our business guide. Clinging strongly to values of
honesty and integrity, fairness, hardwork, persistence and
compassion, we developed a company culture we called
Kulturang PPS. We call our employees associates and they
are treated as family.”
Back in their rebel years, Bobby and Angie worked
with urban communities, trade unions, farmers, and student
organizations. They use the same planning, motivational
and organizational skills they learned in the movement in
running their business.
Angie says, “We believe in the same things, share the
same principles. This is the bond that has provided the
very strong foundation for the two of us.”
In 1998, Bobby and Angie, both scholars in high school
and in college, started the Palawan Pawnshop Scholarship
Program. Their company today is involved in numerous
CSR projects focused on education, sports development,
environmental protection and medical undertakings.
Angie says, “It is very fulfilling when you are able
to make a difference in people’s lives.”
Game changer
For several years, Palawan Pawnshop was the only
player in the whole province of Palawan. This allowed the
company to gain more experience, build a customer base,
and set a good track record. “We were lucky that there
were no other pawnshops when we started. So, when the
first competitor came in the early 90s, we were already
established,” Bobby points out.
Where the competition offered higher interest rates
of 4-5% per month, Bobby introduced a scheme that was
1% per 11 days, an effective rate of only 2.7% per month,
making it the lowest in the industry. “We changed the rules
of the game,” Bobby says.
Still, their expansion was slow and steady. “The growth
wasn’t sudden. Early on, we would only add three branches,
It was their venture into the domestic remittance
business that made them expand to Manila in 2004.
A year earlier, they launched Palawan Express Pera Padala,
with initial operations between Puerto Princesa and Cuyo
in Palawan. With cheaper, faster, and reliable service,
their foray into money transfers turned out to be an instant hit.
Meteoric rise
Because of the remittance business, the company
needed to establish more branches. “I thought six branches
in Manila was enough,” Bobby quips. Now, they are adding
an average of more than one branch a day in the
whole country.
“Our expansion was fast because of Pera Padala,
as people were clamoring for it. There was a huge demand,”
Angie says. In the last five years, the remittance side of
the company has grown, slightly surpassing the pawnshop
business.
As Bobby notes, “We only experienced a rapid rise
in the last eight to ten years, when we had already gained
experience and acquired credit lines from various banks.”
As they grew, they gained greater confidence.
Angie says, “We were not scared of competition anymore.
We used to stay away from competitors, now we set
branches eyeball-to-eyeball with them.”
Today, Palawan Pawnshop – Palawan Express
Pera Padala boasts of more than 2,700 company-owned
full-service branches and 38 Pera Padala Outlets. It also
has 2,000 partner agents like the Tambunting Group of
Pawnshops, SM Malls, Robinson’s Department Stores.
Palawan Express Pera Padala has also special remittance
relationships with LBC and 7-Eleven. “We now have the
biggest pawnshop and money remittance network
in the country,” Angie says.
Bobby notes that they have more than 50% market share in
domestic remittance and they have become the
co-leader in the pawnshop industry. The company also
has over 11,000 employees.
Innovations
With fierce competition and with the fast-changing
landscape of the pawnshop and money remittance
industry, Bobby knows they can’t be complacent.
In 2008, they launched their Customers’ Choice Package
and offered customers tiered loans, a pioneering move.
They were early adopters of technology, computerizing
in the early ‘90s and the first to introduce automated text
notifications. Bobby says, “Because we wanted to catch up
with more established competitors, we had to constantly
improve our products. The rule is: we should always aim
to stay ahead.”
He also recognizes that his industry faces the threat
of new forms of payments and money transfers. “The usual
way that money is remitted today is being threatened
by digitization,” he notes.
Now, they are in the process of partnering with
UnionBank to transform their Suki or loyalty card,
already with nine million members, into a paycard.
“This way, our customers can earn points and use the card
as a VISA debit card and ATM.”
Bobby says, “Our vision has changed. Before, it was
just to be the country’s leading pawnshop. But we have
already achieved that. Now, we want to be not just
a pawnshop but a total money shop.”
Presently, he notes, “There is just one more region
that we need to saturate. This will be our last area
because when we reach our critical number, we will stop
our physical expansion. Our expansion will then be fully
focused on product development.”
Palawan Pawnshop-Palawan Express Pera Padala
has transformed the industry. And it is poised to ride the
next wave of change. For Bobby and Angie Castro,
the revolution never ends.
Bobby has always believed that “the company
that stops to grow, starts to die.”

www.palawanpawnshop.com

Bobby Castro
President/CEO
Angie Castro
EVP/Vice Chairman
 Stephanie Kienle Gonzalez
Vice President & COO
Jessica Kienle Maxwell
Vice President & Head Designer
 DESIGN DUO PHILUX INC.
THE KIENLE SISTERS BRING A FRESH TAKE TO FURNITURE MAKER PHILUX
WHILE KEEPING ITS CLASSIC ROOTS
When it comes to furniture, only a few are household
names in the Philippines. One of those is Philux.
A manufacturer and retailer of furniture and home décor,
it has been for decades synonymous with fine
craftsmanship and local luxury.
The company goes way back to 1980, when it was
founded by Max Kienle, a Swiss engineer, and his Filipino
wife Zelda Aragon. “Philux began with two carpenters
across my grandmother’s ancestral home,” shares
Stephanie Kienle Gonzalez, VP and COO.
As with most local furniture manufacturers, Philux
started in the export business in the ‘80s. But by the ‘90s,
it transitioned to a retail business model, offering the local
market furniture pieces of world-class standards. Philux
began with rattan furniture and now offers local Mahogany
wood and FSC-certified Ash wood and Walnut wood.
Philux combines traditional, time-tested craftsmanship
and modern technology to create its products. It has
preserved age-old milling and assembly techniques.
From those two carpenters, Philux has grown into
a hundred-person team and is one of the leading furniture
manufacturers and retailers in the Philippines today.
“The secret to our success, really, are the people behind the
brand who craft the pieces, execute ideas, ensure quality
and efficiency, deliver the furniture to our clients’ homes,
and form and maintain good relations with our clients over
the years,” explains VP and head designer Jessica Kienle
Maxwell.
With its factory in Paranaque, Philux has showrooms at
Rockwell Power Plant Mall, SM Megamall, LRI Design Plaza,
Trinoma, Philux South in Bicutan adjacent to its factory and
a concept store called Philux Home in Shangri-La at the Fort.
Stephanie says, “Apart from launching new collections
and new showrooms, Philux turning 40 years in 2020 is our
biggest milestone yet. We are thrilled to be celebrating
four decades of fine Filipino craftsmanship.”
Next generation
Stephanie and Jessica also happen to be the daughters
of Max and Zelda, representing the second generation
to continue their parents’ legacy and steward Philux to the
next level.
Growing up, the sisters were immersed in factory
operations, so they know the ins and outs of furniture
select from different wood, wood finishes, fabrics, matting,
handles, and other features so it is a dynamic creative
process that we are happy to share with them.”
With a modern team behind the company, Philux now
sells online. Jessica says, “Digitally, we have an online store
manufacturing. Stephanie studied economics at Sarah
offering select Philux pieces so client orders get instant
Lawrence College in New York, and took Sciences
booking confirmation.”
Politiques at the Institut des Sciences Politiques in Paris
Stephanie adds that they are constantly finding ways
and a marketing course at the London School of
“to be technologically savvy by equipping our team with
Economics. Jessica, on the other hand, studied at Parsons
efficient and effective tools to make the Philux experience
The New School for Design in New York, and interior
seamless. We do this without jeopardizing the quality of our
architecture at Ecole Supérieure des Arts et Techniques
products and the personal relations with our clients.”
in Paris.
That’s why the sisters like working with UnionBank,
Their tandem works because their skills and personalities
which has helped finance Philux’s growth. “We love that
are complementary. Outgoing and organized Stephanie,
just like us, UnionBank keeps innovating. UnionBank is also
with her business education, is tailor fit for her current role.
able to effectively respond to modern business needs by
Reserved and creative Jessica, with her design background,
making transactions simpler, faster, and more efficient,”
is natural for hers as well.
Stephanie shares.
Their parents have given them a free hand in helping run
Philux, breathing new life to a classic brand. From Philux’s
Service and sustainability
traditional shiny wood, smooth finishes, and streamlined
In keeping with the new generation’s commitment
silhouettes, the siblings have since been experimenting with
to environmental sustainability, Jessica explains,
new wood, new finishes, and new materials such as glass,
“Most importantly, we strive for a sustainable journey by
metal, and more upholstered items.
sourcing FSC-certified wood, lowering plastic consumption,
The two are able to walk the fine line between classic
trying to make all transactions paperless, and educating
and contemporary, familiar and experimental, traditional
our team on ways to adapt a more sustainable lifestyle.”
and dynamic. “We seek to continuously offer modern yet
In addition, Philux intends its pieces to be kept for the
timeless designs, keeping fine Filipino craftsmanship
long haul, even passed on from generation to generation.
at the heart of it all,” Stephanie notes.
Stephanie notes, “We put a lot of effort into our after-sales
Their work is highlighted in all the Philux showrooms.
service including refurbishing and reupholstery
It’s where they curate furniture, accessories, and décor
of our clients’ old Philux pieces.”
for the home. The two also introduced the company’s first
Jessica adds, “Apart from maintaining consistently
furniture line for kids called Little Philux.
good quality products, we highly value personalized service
and strive to offer international service standards. We go
Creative and collaborative
above and beyond to ensure our clients are happy to have
With Stephanie and Jessica on board, Philux has
Philux in their homes. We want our customers’ experience
certainly evolved into a more creative brand, offering
with us to be comfortable, creative, fulfilling, and positively
younger and vibrant furniture designs. The company has
unforgettable.”
also been collaborating with various artists and influencers
The sisters have kept the qualities that have made
from different backgrounds to customize furniture pieces,
Philux a timeless, enduring brand: high quality furniture and
giving them a fresh, unique take.
top-notch service. But they’ve also added their own mark:
Naturally, with the next generation at the helm, Philux
fresher design, more collaboration, and new technologies.
is catering to a wider, younger aspirational market. As such,
With these, Stephanie and Jessica are all set to take Philux
they’ve been adding more luxury, contemporary pieces but
to the next four decades.
at more affordable prices.
The company has also taken the collaborative process
further by offering its customers a greater degree of
www.philux.ph
customization. Jessica explains, “Clients can personalize
their furniture piece to make it their very own. They can
UnionBank 2018 Annual Report 31
 Nancy Uy-Alipio Jeffrey Uy
VP, Chief Operating Officer VP, Operations
Jennifer Uy-Ampon Shirley Uy-Ng Cha
VP, Sales & Marketing VP, Administration
 SUPERB SIBLINGS
HOW THE UY SIBLINGS MADE THEIR SEAKING BRAND NUMBER ONE
IN FROZEN MILKFISH
From the outside, you might mistake them as Asian
pop stars or jet-setting executives. But there is nothing
glamorous about deboning bangus or hauling fish to
supermarkets. This is exactly what the Uy siblings did
in their 20s when they started Superb Catch, Inc., the
company behind the SeaKing brand of fish products.
“Our dad had his own fish farm, and we would ask for
a few pieces of bangus from him to sell. And the four of us
would debone the fish at our house,” recalls Jennifer Uy-
Ampon, the eldest among the four.
Jennifer was then working for the family business that
manufactured the popular candle brand, ran by her father
and uncles. Three cousins already worked there, and
Jennifer’s younger siblings – Nancy, Jeffrey, and Shirley –
were expected to follow. It was a no-brainer.
Surprisingly, the four siblings decided to strike out on
their own. Spurred by a drive to prove themselves and in
support of their father’s fish farm business, they chipped in
P30,000 each, matched by P60,000 from their father. It was
a modest capital for a grand ambition. They wanted to be as
big as their uncle and father’s company. “That became the
dream that we wanted to reach,” Jennifer explains.
Selling to nearby office employees and relatives
at first, they soon delivered to local grocery stores.
Their initial capital was just enough for a second-hand
freezer. Demand was brisk and they could hardly cope.
Little by little, they started investing in better equipment.
Number one
The growth of Superb Catch has been slow
but sure. Their processing plant in Malabon City, built on
what once an old, unused bungalow, started with just two
floors in 2006, adding more as their resources grew.
It now covers over 1,500 square meters with a 20 ton per
day capacity.
Today, Superb Catch sells to around 1,500 supermarkets
and hotels and restaurants like Sofitel, Fairmont, Raffles,
the Max’s Group, Cabalen, Mary Grace Café, Sky Kitchen
(of Philippine Airlines), and more.
Jennifer shares, “SeaKing is already known for its
category of frozen milkfish. We are already the number
SUPERB CATCH, INC.
one brand for the supermarket chains.” Whatever the
supermarket category, from hypermart to convenience
store, SeaKing is, well, king.
The company’s obsession over quality has paid off.
Superb Catch sources its raw fish from accredited fish
farms in Pangasinan and Bulacan. The deboning, packing,
and freezing processes are meticulous as well.
From the beginning, the siblings have pushed for quality.
Jeffrey notes, “Looking at our major competitors before,
their prices were high. We had comparable products but
were priced lower, so we stood out.”
Their product line has grown from milkfish products
in frozen, marinated, pre-cooked, value-added, and bottled
variants to other fish products such as tilapia, roundscad,
hasa-hasa, and cream dory, their second bestseller.
And for the last 15 years, SeaKing has exported to
North America, Canada, Japan, Korea, and the Middle East.
Siblinghood
The classic entrepreneurial success story typically has
an individual beating the odds. It’s rare for four siblings,
now all in their forties, to build a successful business
together for two decades.
Jennifer, VP for Sales & Marketing, finds new markets
and customers. Nancy Uy-Alipio, VP/Chief Operating
Officer, manages production and operations. Jeffrey
Uy, VP for Operations, handles procurement and logistics.
Shirley Uy-Ng Cha, VP for Administration, takes care of
human resources and finance.
It’s impressive that the four work well together.
Jennifer says, “Ever since, we were close. If you’ve never
been close since childhood, you cannot work together in
a business. You’ll eventually end up fighting. The bonding
we had before, we still have it up to now.” She adds that
they share two important things: “First is love for each other,
second is love for our work.”
Nancy shares that they don’t keep a record of how
much each one is working or earning: “There’s a lot of
give and take. Team work is important. We also try to
understand each other, especially now that we’re juggling
family and work.”
Shirley agrees that patience and acceptance are necessary
to make things work: “We’re accepting of the flaws of one
another. It’s important to be open-minded.”
For Jeffrey, he recalls the time when he insisted
on building a new cold storage at one of their properties.
He says, “Looking at it now, I’m glad that I did not push
the issue to the point of fighting over it. I value that
not only one person makes the decisions. It should be
corporate. What I don’t see, they see. I realized that it’s
indeed better since what we’re building now is much
bigger than what I previously planned for,” referring to
their new plant on a 1.2-hectare land.
Next wave
The possibilities for Superb Catch are endless.
While they are careful to launch new products only every
two to three years, they are keen to grow beyond bangus.
Jennifer shares, “We’re launching wild Alaskan salmon
soon. Hopefully the SeaKing brand will also be associated
not just with frozen bangus but eventually with salmon
as well.” They are also planning to launch food products
related to seafood like patis, bagoong, and even canned
tuna.
Another growth driver for Superb Catch is toll
packing, where they process shrimps and shellfish from
Europe, Canada, and South America, and then export to
their burgeoning Japanese clientele.
This is a far cry from their days of deboning bangus
in their kitchen. Jennifer says, “If you don’t have any dream,
you wouldn’t know where to start. We had a dream to
reach the same size as our uncle and father’s company.
Now, I can say that we’re times two already, in terms
of sales. Our employees number around 700, almost double.
But more than that, it’s all about being happy with
what you do.”
Their father, who served as the company’s President,
sadly passed away recently. Thankfully, he was able to see
his children’s amazing business success while keeping their
bond and character intact. Undoubtedly, the Uy siblings
have proven themselves and have made their father proud.
www.seaking.com.ph
UnionBank 2018 Annual Report 33
 Cristina Viola
Senior Vice President, Finance
SEAOIL PHILIPPINES, INC.
34 UnionBank 2018 Annual Report
 FUELING THE FUTURE
SEAOIL STANDS OUT FROM THE FIERCELY COMPETITIVE OIL INDUSTRY
WITH AN EMPHASIS ON INNOVATION AND INTEGRITY
By all accounts, SEAOIL’s numbers are impressive.
It operates over 400 stations nationwide and 12 depot
facilities with over 200 million liters capacity in strategic
locations across the archipelago. It is among the top
50 largest corporations in the Philippines based on
gross revenues. It is also one of the biggest taxpayers in the
country. Today, SEAOIL is the largest independent
fuel company in the Philippines.
Founded by Francis Yu and his wife Josefina in 1978,
the SEAOIL Group of Companies served the industrial
requirements of other companies for petroleum products.
When the oil industry was deregulated in 1997, SEAOIL
became the first independent fuel company in the country
to open a retail station.
In four short years, SEAOIL grew its network in Luzon
to 50 stations, and then started branching out to Visayas
and Mindanao in 2002. Still, it was a challenging time for
independent fuel companies that did not have the wide
network of the bigger players. With razor-thin margins,
it was also difficult to compete on price.
Innovation leader
The only way for SEAOIL to compete was on products,
despite the fact that fuels are basically a commodity hardly
distinguishable from others. But stand out it did.
“SEAOIL is recognized as the innovation leader in
the Philippine fuel industry. The company is able to create
opportunities even amid challenges in the business,”
notes Cristina “Tin” Viola, SEAOIL’s Senior Vice President
for Finance.
“We changed the landscape of the fuel industry when
we launched the first unleaded gasoline and low sulfur diesel
in the market,” Tin explains. That was a major achievement,
as the company started the country’s shift from leaded to
unleaded gasoline.
SEAOIL launched its Pure Diesel in 2003, ahead of the
2004 Clean Air Act mandate. “Through our CEO Glenn Yu’s
initiative, SEAOIL was the first to promote and sell biofuels in
the Philippine market, almost a year ahead of the Biofuels Act
of 2006,” Tin shares. The government even recognized the
company as the country’s First Biofuels Major.
Indeed, SEAOIL has been at the forefront in promoting
environment-friendly fuel products, helping preserve the
SEAOIL PHILIPPINES, INC.
environment for future generations. “These innovations
eventually became industry standards followed by all oil
players,” Tin points out.
Price Lock
The company also understands well that customers are
price-sensitive when it comes to fuel products. Instead of just
undercutting competitors with across-the-board fuel price
discounts, it targeted public utility vehicles (PUVs) through
its Loyal Biyahero Program in 2003, making it the first in the
industry to offer a discount lane.
In 2008, a worldwide oil crisis resulted in escalating local
pump prices. To protect its customers, SEAOIL introduced
Price Lock, the first ever fuel prepaid card that “locked” the
fuel price at the cards’ face value so that regardless of the
prevailing pump price, customers can still purchase SEAOIL
fuels at a lower cost.
Competing on quality
A year after, in a bid to further stand out from the
competition, SEAOIL launched EXTREME 97, its premium
plus gasoline that then boasts of the highest octane rating
at 97. It is a racing-quality fuel that SEAOIL made available
at the pump for regular motorists.
This prompted an “octane war” where the rest of the
industry launched ever higher octane rated products.
But in 2013, SEAOIL chose to break away from the rest
and partnered with STP, the world-renowned fuel additives
brand and preferred fuel additives brand in NASCAR races,
to further improve the quality of its fuels. “By selling only
top-quality products to our customers, hence, keeping their
engines clean and in optimum condition, we are facilitating
their safe journey towards their destination,” Tin explains.
“Innovations such as these allow us to fulfill our vision of
“Fueling a Better Future” for our customers, employees, and
shareholders,” Tin says.
A culture of integrity
SEAOIL also places a huge premium on integrity as
much as innovation. “Our culture of integrity has served
as our guiding light in becoming the country’s leading
independent fuel company,” Tin says. “Amid the pressures
in the industry, this light has influenced us to always choose
what is right over what is convenient.”
In 2013, the SEAOIL management team signed the
Integrity Pledge and became part of the Integrity Initiative,
a private sector-led campaign that promotes ethical business
practices and good governance. In signing the Integrity
Pledge, SEAOIL strengthened its commitment to prohibit
bribery and implemented internal systems and controls,
as well as integrity training sessions for employees.
Working with stakeholders
SEAOIL attributes much of its success to stakeholders:
employees, franchisees, and partners. “For our management
team, employees are their biggest assets,” notes Tin.
“They invest company resources, as well as their executive
time, for our personal and professional development.”
Through its deliberate efforts to fuel a better future for
employees, SEAOIL is now a “4-Peat” recipient of Asia Best
Employer Brand Awards, from 2015 to 2018. This award is
being conferred by the Employer Brand Institute,
World HRD Congress, Stars of the Industry Group,
and Asian Confederation of Businesses.
SEAOIL has also expanded its store network through
franchising early on. Its award-winning franchise package
has been acknowledged by various franchise award-giving
bodies. Tin says, “By offering winning business opportunities
through our franchise, we are helping entrepreneurial
Filipinos realize their dream.”
There is no stopping SEAOIL’s growth. On its 40th year
in 2018, the company took a step further by sealing
a strategic partnership with Caltex Australia Petroleum Pty.
Ltd., which acquired a 20% equity interest in SEAOIL.
“This will accelerate our retail station expansion and terminal
developments. This bigger and wider network, supported
by improved efficiencies in supply and operations, is aimed
to contribute to the continuing growth of SEAOIL’s fuel
and lubricants volume, increase our market share, and
consequently further solidify our competitive position,”
Tin explains.
Innovation and integrity have fueled SEAOIL’s growth
for the past four decades and they will continue to be
the drivers to its high octane future.
www.seaoil.com.ph
2018 Annual
UnionBank 2018 Annual Report
Report 35

FROM THE PHILIPPINES TO THE WORLD
SEVEN SEVEN LEVERAGED WORLD-CLASS FILIPINO TALENT
TO PROVIDE GLOBAL IT SERVICES
Back in 2000, the nascent information technology
and business process management (IT-BPM) industry in
the Philippines was just a blip in the global outsourcing
market, employing some 1,500 workers and earning
$24 million in revenues.
Fast forward to 2018, the Philippines has become
the undisputed leader in voice services and second in
non-voice services. More than 1.1 million Filipinos work
in contact centers and business process management
companies, generating around $24 billion in revenues.
One of the pioneers in the Philippine IT-BPM industry
specializing in Information Technology is Seven Seven
Global Services, Inc. For the past two decades,
Seven Seven has been providing a wide range of
information technology services to top US insurance firms,
Wall Street banks, manufacturers, FMCG companies,
and telecommunications firms. These services include
software development, infrastructure and application
support, technical service desk, IT consulting,
and back office services.
In a sea of over 850 industry players, that sounds
run-of-the-mill. Except that Seven Seven happens to
be the largest Filipino owned IT services firm in the
Philippines with over 1,700 employees.
When Mac met Delle
Seven Seven was founded in 1996 by the husband-
and-wife team of Macario “Mac” Fojas and Adela “Delle”
Sering Fojas.
Both were born and raised in the Philippines,
then immigrated to the United States after college.
Delle graduated from St. Paul’s College Manila with a
degree in Business Management and Mac earned his
bachelor’s degree in Industrial Engineering from University
of the Philippines (UP) Diliman. He worked as Mainframe
consultant for almost 20 years in various Wall Street
brokerage and financial firms. Delle was a purchasing
agent for 18 years in New York.
Mac was then pursuing on his MBA at Fordham
University in New York when he met Delle on a group
date. They fell in love and soon got married. With their
combined skills, contacts, experience, they decided to go
into business together. After all, if they can make it in
New York, they can make it anywhere.
36 UnionBank 2018 Annual Report
Start of Seven Seven
It was mid-90s when the couple become aware of
a growing demand for complex and high-skilled IT resources
in the United States. “Being in the IT industry, I knew for
a fact that these hard-to-find professionals can be found
in the Philippines,” Mac points out.
“It all started with a vision and an inspiring purpose,”
Mac shares. With the growing demand for specialized
IT resources, Mac had a vision that Java will be the future
programming language of the internet. “Without knowing
any line of code in Java, I was very willing to partake on
the technology and I was ecstatic about the opportunities
it could bring to our local IT industry” Mac says.
The couple formed Seven Seven Softwares, Inc. in
New Jersey, mainly to source Filipino IT professionals
for their US corporate clients. “Bear Stearns was my first
account,” Delle says. “I like working with Wall Street
professionals. The business culture is cutthroat but very
professional. I was very lucky, the people I worked with
taught me a lot.”
Seven Seven started with seven people in 1998
and now employs around 2,000 people in the US and
APAC. Mac and Delle recognized that while bringing
Filipino professionals to the US, bringing good jobs to
the Philippines also offer huge potential. “This provides
more opportunities not only for Filipinos but also for the
country,” Mac explains and adds “these are the good jobs
that we want for our children and our children’s children”.
Seven Seven is proud to show the local and
international clients how Filipino IT resources thrive in
the industry. “What makes Philippines different from the
rest of the world is our English communication capability.
That is the key advantage and common denominator
why IT-BPM, OFW, Tourism among other dollar-revenue
generating industries flourish. I am an advocate that we
should not lose this advantage.” Mac says and added,
“Ang mga Pilipino ay matalino, magaling, masipag, at
mapapagkatiwalaan” (Filipinos are intelligent, excellent,
diligent and trustworthy).
Business boom
From its inception, Seven Seven has seen robust
expansion. “Seven Seven continues to leverage on strong
Filipino talent and its global status to achieve and deliver
SEVEN SEVEN
GLOBAL SERVICES, INC.
best results for each of the projects, gearing towards the
success of both Seven Seven and its partners.” Mac shares
and adds “I can proudly say that we were one of the
pioneers of Java in the Philippines.”
There is no smooth road to success. In the beginning,
Seven Seven had a very challenging moment, especially
in 2001 during the 9-11 tragedy. The US economy slowed
down and as Mac shares “when we were able to surpass
the major challenges, that was the time when I realized
that Seven Seven has a purpose, and I truly believe that
when the purpose is good, God will help you.” As he
added, “through Seven Seven, I found my calling. I believe
God has put me in this position for a purpose and up to
this day, I am committed to that purpose“.
Seven Seven continues to provide services to
Fortune 500 firms and has grown with the direction
brought by recent technological trends. The company has
ventured into cloud computing through partnerships with
several cloud technology providers as well as with the
new technologies unprecedentedly coming in the IT industry
such as Robotic Process Automation (RPA), Artificial
Intelligence (AI) and Blockchain.
Filipino talent
Seven Seven, being the leading provider in the field,
now maintains a diverse pool of brilliant and dynamic
professionals. Delle says “we believe that the Filipinos’
IT expertise is at least at par with the very best in global
standards and it is our advocacy to communicate
the strength of Filipino professionals in the local and
international markets”.
The outsourcing landscape is ever shifting.
Today, the Philippine IT-BPM sector’s growth will be
driven by high-value services as the country moves up
the value chain in the next six years. The local industry has
launched its Philippine IT-BPM Roadmap 2022, which is all
about accelerating the industry’s growth by strengthening
its domain expertise and capabilities in emerging sectors,
leveraging advancements in technology, and ensuring
the Filipino talent is future-ready.
By 2022, the industry aims to grow its revenues to
$40 billion and its workforce to 1.8 million, with 73% in
mid- to high-end jobs. Seven Seven, with its specialization
in these very high-value services, is already poised to ride
this next wave.
 “Our world-class, proficient and talented
workforce, high-labour productivity and Westernized
culture, are among the most compelling advantages
the Philippines has over any other country in the
world,” Delle points out. “There are so many talented
people in the Philippines and it is Seven Seven’s
advocacy and vision to show to the world
this tremendous talent and help bring good jobs
to the country,” Mac adds.
Mac has been awarded by the UP Alumni
Engineers from the College of Engineering with an
Achievement Award for Entrepreneurship in 2006
for his significant contribution to the growth of IT-BPM
industry in the country. “Among all of my endeavours,
this is an award that counts most,” Mac shares.
With his conviction on his purpose, Mac adds, “I am
proud to have instilled my vision through Seven Seven
and we are committed to carry on our mission to
serve as the bridge in bringing good opportunities
to our fellow countrymen.”

www.77soft.com

Macario Fojas Adela Sering Fojas

President Chief Executive Officer
Eugenio S. Ynion, Jr.
CEO and Founder

XLOG: MADE BY SHIPPERS FOR SHIPPERS
HOW JUN YNION’S SHIPTEK SOLUTIONS CORP.
BUILT A DIGITAL PLATFORM FOR THE LOGISTICS INDUSTRY
Who would have thought that a former taxi driver
and now 50-year-old barangay captain from San Pedro,
Laguna is behind the first Filipino digital logistics software
in the world?
Eugenio “Jun” Ynion, Jr., however, may not be the
typical tech entrepreneur or a fresh-from-college software
whiz. As founder of Shiptek Solutions Corp., he has taken
the lead to launch XLOG, a single, cloud-based platform
connecting supply chain players – shippers, customs
brokers, truck owners, and warehouse operators.
Certainly, only an industry player like Jun can pull off
a project that is “made by shippers for shippers.” He has
accumulated over two decades in the logistics industry.
“I had been an exporter, an importer, a trucker, a freight
forwarder, a second-party logistics provider, a third-party
logistics provider, and now a total logistics provider.
I know every aspect of the logistics industry,” Jun notes.
Ahead of everyone
XLOG is the world’s only 24/7 on demand shipping
and logistics platform that makes the supply chain more
streamlined, transparent, and cost-effective. “It’s a tool
that makes things efficient,” Jun explains.
For an analog-driven industry, a digital platform is
a huge deal. For companies in shipping and logistics,
the entire process can be a real pain. Shippers have
to look for a reliable supplier at a fair price, endlessly
negotiate rates with service providers, and ensure that
their goods are not stolen while in transit.
Through the platform, shippers gain access to fast
and cost-effective online booking, end-to-end shipment
monitoring, and easy transaction management. This means
shipping companies and shippers – both importers
and exporters – can connect to service providers, track their
shipments in real time, and manage all their bookings
through one seamless and fully-integrated digital platform.
“They can save time and money by booking their
logistics requirements online,” Jun explains. For example,
the quotation process is cut from three to five days to just
a day and a half. Shippers also have full visibility over their
shipments, from seeing their location in real time to quick
status updates on key milestones and tasks.
Shiptek’s achievement is remarkable given that it has
made the Philippines ahead of other countries, which have
yet to launch their own integrated digital logistics platform.
A logistics conglomerate
So how does the most unlikely guy from the most
unlikely place end up building a world-class, game-
changing digital logistics platform that is already being
envisioned to go global?
Well, Jun is not just the founder of a logistics
software company; he is the founder of an entire logistics
conglomerate. Under Yngen Holdings Inc. are Le Soleil
International Logistics Co., Le Soleil Shipping Agencies,
Fil-Port Express Brokerage, Shiptek Container Philippines,
and Shiptek Solutions.
In other words, this self-made billionaire has the
industry background, the business acumen, and the war
chest to disrupt an entire industry. He says, “I saw the
need in the shipping and logistics industry for a digital
platform never seen before.”
Jun shares how he got to know a group of Filipino
software developers who came home after working
abroad: “I asked them if they can develop a platform for the
logistics industry and they told me they can.” His company
ended up spending hundreds of millions of pesos and years
developing XLOG.
Shiptek prides itself that XLOG was created by an
all-Filipino team. “We created XLOG and heavily invested
in creating the best and the most compelling platform in
the market which directly benefits the stakeholders in the
logistics industry,” Jun says.
A tough entrepreneur
With his fortune, Jun has been giving back to the
community through his Sabak Foundation and in his
capacity as barangay captain of Brgy. San Antonio in
San Pedro, where his constituents enjoy free medicines
and consultations, free snacks and shuttle services for
students, and free Wi-Fi in public places, among others.
SHIPTEK
SOLUTIONS CORP
His road to success, however, has been bumpy.
A son of a ship captain, Jun was introduced to the world
of logistics when he worked at Evergreen as a sales rep.
But his business education came from the school of hard knocks.
He started so many businesses –running a taxi fleet,
managing a small bakery, exporting handicrafts,
and selling barbecue, chicken inasal, ice candy, whatever he
could think of. All failed. “I had too many failures, too many
disappointments, too much heartaches,” Jun says.
He got his break when a French exporter he worked
with at Maersk entrusted him to be a gift buying agent.
Not long after, he went into the distribution of Nokia
phones with a partner and his fortune turned.
It was also around the same time that Jun finally went
into the logistics business himself. In 2010, when he hit
40, as founder of Le Soleil Shipping Agency, Jun became
the youngest shipping magnate in the country.
A true partnership
Jun was able to finance a lot of his projects and
ventures through UnionBank. “Each and every step,
UnionBank supported me. They’re really my partner bank,”
he says. He recalls the time his taxi business folded up and
he couldn’t pay his loan. “No one would lend to me,”
he shares. “The only bank that had the heart and gave me
a break was UnionBank.”
It seems things have come full circle. Shiptek is now
partnering with UnionBank to integrate financial tools
on the platform to cater to the payments and trade
requirements of its participants. With insights derived
from the transaction data generated on the platform,
UnionBank is able to provide value to XLOG’s participants
with customized, contextual financial services.
Shiptek now has plans to go global, first rolling
out the platform in Singapore within the year, and then
expanding to other parts of the world.
It has been a huge leap from failed taxi driver to
successful logistics tycoon. Shiptek is truly the culmination
of Jun’s storied business career. As for Shiptek itself,
the future has just begun.
www.web.xlog.net
UnionBank 2018 Annual Report 39
Benjie Yap
Chairman
 SUSTAINABLE LIVING
UNILEVER PHILIPPINES IS USING ITS REACH AND IMPACT TO MAKE
A DIFFERENCE IN THE ENVIRONMENT, THE WELLBEING OF ITS CUSTOMERS,
AND THE LIVELIHOODS OF ITS SUPPLIERS
Whenever you wash your hands, launder your clothes,
brush your teeth, shampoo your hair, cleanse your skin,
make a sandwich, or eat ice cream, chances are you’re
using a Unilever product.
You know the brands: Axe, Best Foods, Block &
White, Breeze, Clear, CloseUp, Cornetto, Cream Silk,
Domex, Dove, Eskinol, Magnum, Pond’s, Knorr,
Lady’s Choice, Lipton, Rexona, Selecta, Sunsilk, Vaseline,
among many others.
The Anglo-Dutch conglomerate stands currently
at number 153 in the Fortune Global 500 List. On any
given day, 2.5 billion people use Unilever products to
look good, feel good, and get more out of life. Seven out
of every ten households around the world contain at least
one Unilever product. “On our 90th year in the Philippines,
Unilever products are now present in nine out of ten
Filipino homes, ranging from home and personal care,
to food and refreshments,” notes Benjie Yap,
Chairman and CEO of Unilever Philippines.
90 years in the Philippines
Unilever in the Philippines started in 1927 with the
name Philippine Refining Company (PRC) as a coconut oil
milling factory. At that time, there was huge demand for
coconut oil as the main raw ingredient in the production
of margarine and soaps. At its peak, PRC produced nearly
100,000 tons of coconut oil every year, becoming the
largest producer of coconut oil in the world.
Over the next decades, PRC expanded to margarine
production, non-soap detergents, shampoos, toothpaste,
and detergents, among others. In 1993, the company was
renamed Unilever Philippines (PRC), Inc.
Today, Unilever Philippines manufactures laundry
detergents and soaps, shampoos and hair conditioners,
toothpastes, deodorants, skin care products, household
cleaners, and toilet soaps across manufacturing sites in
Manila, Pasig, and Cavite. It generates annual sales of over
P40 billion and employs over 1,000 people directly and
10,000 indirectly.
Locally, it ranks among the top taxpayers. Globally,
it is now among the top 10 biggest subsidiaries of Unilever,
which operates in 190 countries.
UNILEVER PHILIPPINES
Sustainable living
With a company the size and scope of Unilever,
its impact is far-reaching. Part of this impact is on the
environment. With the trend towards sustainability,
the company understands that it plays a major role
not only in meeting the demands of consumers but also
in protecting the environment and enhancing the
lives of people.
Unilever has since thrown its weight towards its
Unilever Sustainable Living Plan (USLP), with three
massive goals: help more than a billion people to improve
their health and wellbeing, halve the environmental
footprint of its products, and source 100% of its
agricultural raw materials sustainably and enhance the
livelihoods of people across its value chain.
“Whatever the brand, wherever it is bought,
we’re working to ensure that it plays a part in helping
fulfill our purpose as a business – making sustainable
living commonplace,” Benjie says.
Unilever doesn’t just play lip service. Its latest report
shows it is on track to achieve around 80% of its targets.
In the Philippines, Unilever is leveraging its brands to
help reduce the spread of diseases by advocating proper
hand washing, improving oral health, and providing
safe drinking water.
Benjie explains, “We believe that we can do well as
a company by doing good for society and they must go
hand in hand. We can only help society with scale if it also
supports us commercially, otherwise it will always
be small-scale.”
For instance, millions of Filipinos don’t have access
to safe drinking water every day. Unilever developed
a product called Pureit, a water filtration device, to help
the less privileged, offering an option to pay affordable
weekly installments, thus democratizing safe drinking
water for all.
Unilever Philippines has also been doing its part
to reduce the environmental footprint of its products
through its sachet recovery programs and sustainable
manufacturing practices. And it has been proactive in
sustainable sourcing of raw materials from small holder
farmers. This includes tamarind from local farmers in
Cagayan Valley and Batangas for its Knorr Sinigang Mix;
purple yam from commercial farmers in Tarlac, Pampanga,
and Batangas for its Selecta ice cream; and cucumbers
from farms in Nueva Ecija for its Lady’s Choice products.
In fact, Unilever Philippines now sources more
than 80% of its agricultural raw materials locally and
sustainably, having made significant progress towards
its ambition of 100% by 2020. “Sustainability is at the
heart of Unilever Philippines business. As a company that
caters to consumer needs, it is within our capacity to
make our supply chain more inclusive to our local farmers,
helping our business grow while improving
their livelihood,” Benjie explains.
Inclusive business
The 43-year-old chief executive has a soft spot for the
less privileged. Benjie grew up in a rented apartment with
one bedroom in Tondo, Manila. He rode the jeepney
every day until he was 20, washed his own clothes,
and lived a simple life.
But his hard work and innate talent paid off.
Benjie started in the factory team after graduating from
De La Salle University with an industrial engineering
degree. He rose up the ranks, becoming the first-ever
homegrown Chairman and CEO of Unilever Philippines
in 30 years.
So when it comes to helping other people rise up,
Benjie is a true advocate. “We subscribe to inclusive
business to contribute to poverty reduction by including
in our value chain marginalized community sectors as
producers, suppliers, and customers,” he shares.
With its Kabisig Super Stores Program,
Unilever has helped the vast network of sari-sari stores
nationwide, improving the distribution and sales of
its products and enhancing the livelihoods of community
microentrepreneurs, most of whom are women.
Through the program, partners are taught business
management skills and their stores serve as hubs
for implementing Unilever’s sustainable living brand
programs. Since the program was launched 10 years ago,
the company has gained more than 2,000 super store
partners who service 50,000 smaller Kabisig stores.
Certainly, Unilever Philippines has done much in
achieving its goal of making sustainable living more
widespread for its customers, partners, and suppliers.
As Benjie says, “All these are underpinned by the ambition
to improve the lives of 100 million Filipinos, and to serve
the Philippines for more generations to come.”
www.unilever.com.ph
UnionBank 2018 Annual Report 41
 BOARD OF DIRECTORS

EDWIN R.
BAUTISTA
President & CEO

DR. JUSTO
A. ORTIZ
Chairman of the Board

42 UnionBank 2018 Annual Report

 JUAN ALEJANDRO
A. ABOITIZ
Director

ERRAMON
I. ABOITIZ
Vice Chairman

43
BOARD OF DIRECTORS

SABIN
M. ABOITIZ
Director

LUIS MIGUEL
O. ABOITIZ
Director
44
UnionBank 2018 Annual Report
MANUEL
R. LOZANO
Director

NINA
D. AGUAS
Director

45
 BOARD OF DIRECTORS

ATTY. EMMANUEL
F. DOOC
Director
*up to April 4, 2019

MICHAEL
G. REGINO
Director
46 UnionBank 2018 Annual Report UnionBank 2018 Annual Report
ERWIN
M. ELECHICON
Independent Director

ROBERTO
G. MANABAT
Independent Director

47
 BOARD OF DIRECTORS

CARLOS
B. RAYMOND, JR.
Independent Director

CHIEF JUSTICE REYNATO

S. PUNO (RET.)
Independent Director

48 UnionBank 2018 Annual Report

DR. FRANCISCO
S.A. SANDEJAS
Independent Director

49
 The Journey of UnionBank’s Digital Transformation
Imagine a future where you eat at a restaurant,
approve your bill that appears on your smartphone,
and leave without handing out cash or your credit card.
Or where you have a robo-advisor prompting you to increase
your automatic monthly investments after receiving a raise.
Or where your voice-based smart assistant helps you book
and pay for airline tickets from your bank account. Or where
you instantly receive a business loan when you are about
to order from a new supplier.
Imagine a future where financial transactions like
payments, savings, loans, and investments are a natural part
of our everyday lives, running in the background, available
instantly when and where we need them. Imagine banking
that is embedded, contextual, personalized, predictive,
seamless, and invisible. Imagine a future where banking exists
but banks may not.
The future is now
If there is one bank in the Philippines that has fully
embraced the future of banking, it is UnionBank. Already,
it has declared its ambition to be the best digital bank.
And it has been relentless, audacious, and resolute in both
vision and execution.
In just a couple of years, UnionBank has unleashed
a tsunami of futuristic banking innovations: fully digital
50 UnionBank 2018 Annual Report
branches (Arks and Arklites), a mobile app with biometric
authentication (New EON), a converged web and mobile
platform (UnionBank Online), a next generation banking
chatbot (Rafa), a virtual currency automatic teller machine
(Crypto ATM), a blockchain clearing system (i2i), an online
platform for SMEs (GlobalLinker), among many others.
A history of digital innovation
Certainly, UnionBank is no stranger to digital. During the
dot-com boom at the turn of the century, it launched the
first bank website, the first online banking, and the first
Internet-based account in the Philippines.
But it built its business and burnished its image mainly
via providing smart, technology-enabled cash management
solutions – invoicing, payments, payroll, check writing and
clearing, fund transfers, collections, receivables. The customer
acquisition model was anchored on large corporate clients
and government-owned corporations, along with their
vast supply chain and community of employees, dealers,
customers, and suppliers.
This strategy has allowed UnionBank to invest more in
technology and relationship managers rather than branches,
propelling it to P600 billion in assets with less than half the
number of branches that would be required for traditional
banks to reach the same size.
FOCUS 2020
But UnionBank also wanted to capture a bigger chunk
of the consumer segment. In 2010, it set its goal to become
a great retail bank by 2020. It envisioned to be a top three
universal bank in the Philippines not in terms of size but in its
own FOCUS metrics: Financial Value, Operational Excellence,
Customer Franchise, UnionBank Experience, and Superior
Innovation.
The Bank’s strategies of creating a more stable capital
structure, deploying a sales force and using digital channels
to acquire customers, leveraging on strong corporate
partnerships, streamlining processes, building an innovative
corporate culture, and expanding its mass market base
have paid off.
To date, UnionBank has already attained its FOCUS 2020
goals. Its balance sheet has shifted significantly from securities
towards loans. A bigger chunk of its lending is now coming
from consumers. Its recurring income grew substantially,
a shift from trading income. It has delivered above-industry
growth in loans and its consumer-to-loan portfolio and
remains among highest in the industry in terms of profitability.
In other words, it has already become a great retail bank.
But in an ever-changing world, the only constant
is change.
From disruption to transformation
While the Internet has already disrupted many industries,
by 2015, new market forces have become not only more
apparent but even more urgent. Customers, now used to
online payments, mobile transactions, and social networks,
want a better, faster, easier banking experience. They don’t
want to line up at a branch, they want to do their banking
wherever they are. They don’t want to open a bank account,
they want a digital wallet. They don’t want a credit card,
they want an instant loan just by using their phone.
A new breed of fintech startups cropped up to bridge
the widening gap between what customers demand and
what banks provide. Now, banks are not just competing
with other banks but with these nimbler, simpler, cooler
fintechs. It is no longer about launching new digital banking
products, it’s about embedding banking functions digitally
in everyday moments.
For UnionBank, the choice was simple: transform or
be disrupted.
UnionBank knew that to succeed in digital
transformation, it needed to have a clear business strategy.
Digital transformation is not just about migrating to
the cloud, launching a mobile app, or going paperless.
UnionBank does not chase after fads, it rides on trends.
Digital transformation, really, is not just about technology.
It’s not even just about leaving behind legacy systems,
it’s as much about leaving legacy thinking.
It also understood that the initiative has to be led from
the top, and there have been no stronger advocates than
UnionBank Chairman Justo A. Ortiz and President & CEO
Edwin R. Bautista. At the same time, for digital transformation
to work, it should be from the inside out. And it should be
a full-scale, organization-wide effort.
So as early as 2015, UnionBank started investing in
upskilling its employees and changing its corporate culture.
In 2017, it announced it was going all-in its digital
transformation. In 2018, it clearly defined its dual
transformation strategy: strengthen today’s business,
create the bank of the future.
Over the last three years, UnionBank rebuilt its enterprise
architecture, developed its data science capabilities,
collaborated with fintechs, and focused on the customer
experience. For bank to be truly digital, it’s not enough to
transform the front-end experience with digital products.
It has to digitize the back end to shift from batch processing
to instant, real-time straight-through processing of
transactions. UnionBank did this way ahead of other
local banks.
And it brought Silicon Valley startup culture inside
as it transformed itself into an agile organization, adopting
the collaboration and project management approach
practiced by technology startups and software development
teams. UnionBank was, in fact, transforming itself
into a tech company with banking utilities.
In 2018, it started doing a rollout and commercialization
of the digital initiatives that it planted over the past three years.
UnionBank’s digital transformation has propelled it from
its core FOCUS 2020 goal of being a great retail bank
to indisputably the best digital bank in the Philippines.
The next, next thing
Despite its success, UnionBank cannot afford to
rest on its laurels. It wants to create the banking model of
the future — an embedded, frictionless banking experience.
It may not happen this year or next year, but it will happen,
and UnionBank wants to be there.
That’s why it established its subsidiary UBX to launch
platforms and ecosystems to give solutions to specific sectors,
namely financial institutions, SMEs, and logistics players.
UnionBank understands the power of platforms very well,
with digital communities and marketplaces like Amazon,
Facebook, Google, Airbnb, and Uber dominating
their industries.
UBX’s mandate also includes exploring future initiatives
and applications. Think of it as UnionBank’s R&D lab,
skunkworks project, or moonshot factory, where new ideas
and business models are explored, incubated, and launched
to market.
The march towards embedded banking is unstoppable.
The onslaught of digital disruption is upon us. No other
local bank is as ready and as single-minded. With its digital
transformation in place, UnionBank is “Powering the
Future of Banking.”
51
Brand
Ambition
UnionBank’s brand refresh
represents its drive to power
the future of banking

UnionBank has always been a pioneer.

For the past two decades, UnionBank has been
at the forefront of technological change. As early as 1999,
when the Internet and e-commerce were just buzzwords
for many organizations, UnionBank was already ahead
of everybody else.
It introduced groundbreaking banking products
in cash management, Internet banking, and payment
systems. “We have always been driven by the spirit
of innovation,” says Ana Maria Aboitiz-Delgado,
Senior Vice President, Center Head of Consumer Finance,
and Chief Customer Experience Officer.
In 2007, UnionBank embarked on a rebranding
project that articulated its identity as an innovator.
It described its brand promise as “Smart Banking”
with the brand attributes of being Relevant, Expert,
and Challenging Convention. And the Bank delivered
on that promise.
 “We will be a technology company with banking utilities.”
The fourth industrial revolution
A decade after, the industry is once again seeing
another seismic shift with the rise of Big Data, artificial
intelligence, blockchain technology, the Internet of Things,
robotics, and virtual reality. The world is at the onset
of the Fourth Industrial Revolution.
The first Industrial Revolution was powered by water
and steam to mechanize production. The Second used
steel, oil, and electricity to create mass production.
The Third advanced technology from analog electronics
to information technology to automate production.
The Fourth Industrial Revolution builds on the digital
revolution of the Third, with advances in communication
and connectivity rather than just technology. The speed,
scope, and impact of this next wave of the digital
revolution will fundamentally alter the way people live,
work, and relate to one another.
UnionBank cannot wait for the future to happen.
It is no longer enough to be the best retail bank. Its
ambition now is to be the best digital bank. In fact, it is
already thinking beyond banking. As UnionBank Chairman,
Dr. Justo A. Ortiz, says, “We will be a technology company
with banking utilities.”
Brand refresh
As the Bank has set upon itself to lead the digital
revolution, it has evolved its brand promise and brand
attributes. Its brand promise has gone beyond “Smart
Banking” to “Powering the Future of Banking”.
“From just being Relevant, we need to be Forward-
Thinking and Innovative, anticipating the future
by creating it. We may not always be the expert in
all things, so we need to be Open – open to new ideas,
new partnerships, and new business models. We must also
go beyond Challenging Convention and adopt an Agile
way of life – quick to adapt and unafraid to fail before we
succeed, allowing us to create the future instead
of waiting for it to happen,” Ana explains.
UnionBank’s brand refresh includes the launch of its
new logo, which is the visual representation of a brand.
“It represents growth and empowerment and expresses our
dynamic and youthful energy. Its shape conveys motion,
underlying our belief and commitment to keep moving
forward, keep learning, and keep getting better. It is bold
and vibrant and represents our strength and creativity,”
Ana adds.
The UnionBank icon is a shorthand for “UnionBank”
but also symbolizes its connection with its customers –
the “U” representing them and the “B” representing
the Bank.
Ana also notes that the icon emphasizes, most of all,
the letter “U”– not just because it is the first letter of its
name “UnionBank” but because everything it does today
begins and ends with its customers. They are both
its inspiration and its objective. The logo shows the Bank’s
commitment to them – from the placement of the “U”
to its prominent size, it shows that they always come first,
that they are at the center of everything UnionBank does.
Its new tagline “The Future Begins with U” emphasizes
this further, expressing its commitment to its customers that
UnionBank will put them first. The Bank has also launched
a new employer brand – “Own the Future” – to reflect the
commitment of UnionBankers to see this through.
- Justo A. Ortiz
The brands colors likewise represent its attributes
and aspirations. Orange is vibrant and approachable,
representing our friendly and dynamic characteristics;
symbolizing innovation and vitality. Gray is strong and stable,
contemporary and approachable. Tangerine demonstrates
maturity, stability, and strength.
People, products, processes
The new brand represents a holistic transformation
that is taking place across UnionBank – from its people
to its products and processes.
“Our UnionBankers are being trained in Agile
methodology, signifying our commitment to creating
a more streamlined and collaborative organization as
a whole,” Ana shares.
She adds that the Bank is already making strides
to elevate the quality and experience of its products and
channels. “Our new branding will be showcased in all our
channels – from branches to our new website and online
platforms. We are introducing new machines and
more innovative methods and channels of interaction
with our customers.”
“Already, we have undergone a bank-wide digital
transformation, from the front end to the back end.
We are pioneering the future of money, leading blockchain
executions not only in the Philippines but in the region
and the world. We launched the first truly digital bank
branch, with more on the way,” Ana says.
Transformation is taking place all across UnionBank.
It is not waiting for the future to happen. UnionBank is
building the future of banking and the future begins with U.
53
 Color and Tessellations
The UnionBank orange is our primary color that is vibrant
and approachable, representing our friendly and dynamic
characteristics and also symbolizing innovation and vitality.
Where does the UnionBank triangle come from? Our brand
asset is created based on our identity. The triangle
is formed from tracing two slanted lines along the “UB” logo.
It communicates movement and a path forward. The angles
match our identity for a seamless connection.
When filled with a gradient using our primary colors
from lighter to darker, this signals the concept of movement
and getting stronger. When the triangles are stacked and
flipped to form a pattern, they become a tessellation.
Tessellation, or tiling, is simply a pattern of shapes
that fit perfectly together. A completed tessellation still
displays the original motif but repeating in a pattern.
One mathematical idea that can be emphasized through
tessellations is symmetry, which likewise represents
our connection with our customers.
This UnionBank brand pattern is a key visual in our
visual system and is used across many of our communication
materials. It is a distinctive and easily recognized asset, which
further reinforces what the new UnionBank brand is all about.

54 UnionBank 2018 Annual Report

Working With the World’s
Leading Brand Consultancy
It is behind the branding of Coca-Cola, FedEx,
Singapore Airlines, Bank of America, British Airways, Frito Lay,
S&P Global, and World Wildlife Fund, among many others.
Its founder, Walter Landor, invented branding in the 1940s.
And it’s been reinventing it ever since.
Landor builds some of the world’s most agile brands –
brands that thrive on change. It is only natural then
that UnionBank has tapped Landor to help with its
rebranding.
The banking industry is undergoing massive change
and UnionBank has taken upon itself to lead this change.
With a track record of innovation and a current obsession
with agile methodology, we have embarked on
a brand refresh to capture our grand ambition.
For 78 years, Landor has been working with clients
that are going through profound change. It understands
the challenges that brands face today: a hyper-competitive
marketplace where industry outsiders encroach on
legacy players’ turf, a new generation of customers who want
to be engaged differently, and a move beyond omni-channels
and towards ecosystems.
The consultancy worked with us in creating
a compelling visual identity that expresses our aspirations
and attributes as a brand. And it helped us develop
our brand promise of “Powering the Future of Banking”
and articulate our brand attributes of being Forward-Thinking,
Innovative, Open, and Agile.
In many ways, UnionBank and Landor are the same –
innovating, leading, and redefining. And that makes
Landor the perfect partner for UnionBank.
55
 OPPORTUNITY UBX explores business
AND ACCESS models that aim to

FOR ALL
make banking invisible

UnionBank has always been at the forefront of digital
technology. The first bank website, the first online bank,
the first Internet-based account, the first fully-digital bank
branch, the list of many firsts goes on.
Two years ago, UnionBank went all-in. Aside from
introducing technology-based banking products,
it transformed its entire backend towards digital.
UnionBank is, in other words, full-on digital.
The digital transformation has been from inside out.
Throughout this journey, UnionBank adopted agile
ways of working, explored new digital technologies,
and developed capabilities from mobile to blockchain.
In turn, these capabilities gave birth to networks like
Project i2i, which connected rural banks to each other
and to the national retail payment system, and platforms
like UnionBank GlobalLinker, which provides small and
medium-sized enterprises (SMEs) an online presence.
While these have aspects of banking, there are also
potential applications beyond banking.
“Can we leverage these capabilities and these platforms
that we’ve incubated; can we go beyond incubating
these and go to market with a value proposition that
may be predicated on a business model that is not primarily
banking? This is UBX,” explains John Januszczak, President
of the newly formed UnionBank subsdiary.
All these new digital banking capabilities are available
to UBX. And because it’s spun off from UnionBank,
UBX has access to difficult-to-replicate banking assets.
“We have our own capabilities that we can leverage to go
to market, and, at the same time, we have access to digital
banking capabilities that make it potentially easier for us
than for other companies that might want to explore the
same things,” John explains.
The birth of UBX
UnionBank set up UBX as an independent technology
innovation company, which will allow it to explore and
go to market with non-banking value propositions.
Think of UBX as a startup-fund-incubator-in-one.
Incorporated in December 2018, UBX is an offshoot
of what UnionBank has been doing for years. Platforms now
under UBX, such as its “Bank-in-a-Box” and “B2B Marketplace”
began as projects of the Bank starting from Project i2i
and GlobalLinker. “A lot of the ideas that we’re now
going to market with under UBX have been incubated
in the bank for a while,” notes John. “In a way, we’re like
a startup and the Bank is investing in us.”
As a startup, UBX sets out to go to market with
digital platforms. “We’re developing platforms that we
think we can develop ecosystems on. And the reason the
ecosystem is so important is because that’s how we think
financial services will be embedded into the activities and
experiences that matter to consumers and businesses,”
John says.
For instance, Project i2i was designed in UnionBank
to connect rural banks and cooperatives to the larger
national retail payment network, allowing their customers
to transfer funds not just with other rural banks but
with commercial banks. UBX builds on this network
by offering these financial institutions a digital transformation
package, a Bank-in-a-Box, that will help them tech up.
“We’ll be providing core banking technology, channel
technology, access to insurance, access to bills payment,
access to the ATM network,” John explains. This creates
an ecosystem of connected financial institutions.
UnionBank GlobalLinker, on the other hand,
is a B2B ecosystem around SMEs. UnionBank launched
this platform to give SMEs a website and e-commerce
store. Now evolving into a B2B Marketplace, UBX plans
to expand access within the platform to services, such as
payroll and invoicing systems, that will help SMEs tech up.
It will also open up access to marketplaces for customers,
businesses, and credit.
To address the problem that financial services often
happen out of context, the challenge for UBX is to embed

56 UnionBank 2018 Annual Report

financial services into these non-banking transactions.
“We’re reducing the friction by digitizing it.
We’re making it easier to show up where our customer
shows up. We’re making it easier for customers to interact.
Embedding financial services makes ‘banking invisble’
by incorporating them into day-to-day business activities
through these platforms,” John explains.
“This gets to the ‘why’ of UBX: it’s about creating
greater opportunity and access for all,” John shares.
Investment fund
Aside from launching platforms, UBX also serves
as a corporate investment fund. Fintechs are natural
companies to invest in, as UnionBank is in the same
industry. Besides banking and lending to fintechs,
UnionBank also actively identifies ways to participate
in their ecosystems by partnering with them.
There are fintechs that have launched working
concepts that UBX can leverage on. “Some of those
fintechs may have capabilities that not only complement
the digital capabilities of the Bank but actually help us
explore new value propositions. In that case, we would
go potentially so far as to invest in them,” John notes.
By collaborating with and investing in fintechs rather than
building everything from scratch, UBX can accelerate the
process of going to market.
For instance, UBX has invested in Shiptek Solutions
Corp., which developed XLOG, a digital logistics platform.
Logistics is an important component of the corporate
and SME supply chain, which is a market that UnionBank
wants to be in. Shiptek offers its logistics expertise while
UnionBank provides financial services like trade financing
and payments within the platform.
“Like a venture fund, we want to increase the
valuation of these companies by giving them access to
our networks and ecosystems. But it’s also strategic for us
because they might help us go to market in one of these
ecosystems or non-banking value propositions,”
John explains.
UBX is also looking at cryptocurrencies and tokenized
assets. John says, “When it comes to currency or tradable
assets that carry value, we feel that it’s a good hedge that
we want to be involved in.”
Symbiosis
As UnionBank continues to innovate in financial
services, UBX is also exploring areas that are pure
innovation even without a clear business model yet.
It’s like a laboratory of ideas. “We’re doing active research
and development around self-sovereign identity, which would
allow users to control and store their own identity and
related data, as well as lending using alternative credit
scoring models, among other innovations. There’s an
obvious fit but we haven’t exactly determined how
we’re going to market,” John says.
Another area UBX is involved in is making available to
customers the services of its pool of highly capable digital
talents. For example, John says, “UnionBank may have
the largest data analytics team among the banks in the
Philippines. We have leveraged that, but we can leverage
that further.”
It’s a symbiotic relationship between UnionBank
and UBX. As UBX benefits from the Bank’s capabilities
and resources, so will UnionBank benefit from the new
innovations UBX is exploring.
UnionBank has undergone its own digital
transformation and will continue to take things to the
next level, while UBX has adopted these capabilities
and will take them to new places. And together,
UnionBank and UBX will bring digital breakthroughs
in banking and beyond.
57
 MANAGEMENT COMMITTEE
EDWIN R. BAUTISTA
President & Chief Executive Officer
HENRY RHOEL R. AGUDA
Senior Executive Vice President
Chief Technology and
Operations Officer
Chief Transformation Officer
JOSE EMMANUEL U. HILADO
Senior Executive Vice President
Treasurer & Chief Financial Officer
MARY JOYCE S. GONZALEZ
Executive Vice President
Retail Banking
DENNIS D. OMILA
Executive Vice President
Chief Information Officer
Head of IT Services, Operations, and
Shared Services Groups
JOHN CARY L. ONG
Executive Vice President
Transaction Banking
MANUEL G. SANTIAGO, JR.
Executive Vice President
Chief Mass Market and
Financial Inclusion Executive
ROBERTO F. ABASTILLAS
Senior Vice President
Commercial Banking
58 UnionBank 2018 Annual Report
FRANCIS B. ALBALATE
Senior Vice President
Controller
PAOLO EUGENIO J. BALTAO
Senior Vice President
EON Banking
ANA MARIA A. DELGADO
Senior Vice President
Consumer Finance Business
Chief Customer Experience Officer
RAMON VICENTE V. DE VERA, II
Senior Vice President
Fintech Business
RAMON G. DUARTE
Senior Vice President
Platform Development
ANTONINO AGUSTIN S. FAJARDO
Senior Vice President
Corporate Banking
RONALDO FRANCISCO B. PERALTA
Senior Vice President
Chief Risk Officer
MICHAELA SOPHIA E. RUBIO
Senior Vice President
Human Resources
EDWIN
R. BAUTISTA
 HENRY RHOEL
R. AGUDA

JOSE EMMANUEL
U. HILADO

MARY JOYCE
S. GONZALEZ

UnionBank 2018 Annual Report 59

 MANAGEMENT COMMITTEE

DENNIS
D. OMILA

JOHN CARY MANUEL

L. ONG G. SANTIAGO, JR.

60 UnionBank 2018 Annual Report

 PAOLO EUGENIO
J. BALTAO

ANTONINO AGUSTIN
S. FAJARDO
MICHAELA SOPHIA
E. RUBIO

UnionBank 2018 Annual Report 61

 MANAGEMENT COMMITTEE

FRANCIS
B. ALBALATE

ANA MARIA
A. DELGADO
RAMON
G. DUARTE

62 UnionBank 2018 Annual Report

 ROBERTO
F. ABASTILLAS

RAMON VICENTE
V. DE VERA, II
RONALDO FRANCISCO
B. PERALTA

UnionBank 2018 Annual Report 63

 SENIOR VICE PRESIDENTS

ANTONIO SEBASTIAN
T. CORRO

JOSELITO
V. BANAAG ARLENE JOAN
T. AGUSTIN

64 UnionBank 2018 Annual Report

The best business banking
platform in the Philippines
is here

What is The Portal?

The Portal is our new business banking website and mobile
app which will replace all our existing corporate platforms.
We’ve got a fresh new look with several new features.

Account Details at your Fingertips

Stay up-to-date on all your account balances,
transactions, and other banking activities.

Real-time Transfers to Other Banks

Enjoy real-time and hassle-free fund transfers to both
local and international banks.

Largest List of Billers

Facilitate all your business payments with the most
extensive list of government and utility billers.

Flexible Approval Setup

Setup an approval process exactly the way your
business needs it. Business Banking can handle even
the most complex business requirements.

Manage Multiple Organizations

Enroll all your companies and easily switch between
them without needing to logout.
Global Investments, World-Class Solutions

UnionBank
PRIVATE BANKING
SMALL AMOUNT
HUGE IMPACT
How the
Pension Loan
Program
addresses the
needs of SSS
pensioners
After devoting decades to work during their
productive years, senior citizens often view retirement
with concern for the welfare of their families. They also
inevitably face issues such as rising healthcare costs
and medical expenses.
Stories currently proliferate of pensioners who,
due to dire financial need, resort to private lending
firms that offer loans with steep interest rates, charge
processing fees, and require loan repayments coming from
their monthly pensions, while requiring the pensioner-
borrower’s ATM card as collateral.
Well aware of its pensioners’ plight and in response
to their appeal for urgently needed support, state-run
pension fund Social Security System (SSS) launched on
September 3, 2018, its first-ever Pension Loan Program
(PLP). This seeks to aid the various financial needs of all
qualified SSS retiree-pensioners by way of offering loans
of up to P32,000 at only 0.83 percent interest per month.
It seems that the PLP could not have come
at a better time. By end of 2018, the number of pension
loans granted reached a total of 18,175, with loan
disbursements amounting to over P435 million.
According to SSS President and Chief Executive
Officer (PCEO) Emmanuel F. Dooc, “Our pensioners’
response to the Pension Loan Program is really
overwhelming. We hope that there will be even more
pensioners who will avail of the program because it aims
to help them with their short-term financial needs like
emergency medical expenses.”
SSS and UnionBank tie-up
For the pensioners’ convenience,
SSS committed to have the pension loan processed within
the day of filing, with the proceeds being credited to the
borrower’s UnionBank Quick Card within five days upon
approval.
UnionBank officially became the pension fund’s ally
in the disbursement of loan proceeds. With the
partnership, pensioner-borrowers will be allowed
to simply withdraw their pension loan proceeds
thru the UnionBank Quick Card. This is in line
with the SSS’ effort to keep up with the times through
electronic disbursements.
Financial security
Under the PLP, the financial security of pensioner-
borrowers, as well as their beneficiaries is assured through
the Credit Loan insurance (CLI).This guarantees that in
case of the pensioners’ untimely death, the outstanding
loan balance is already deemed fully paid and shall not
be deducted from the funeral and death benefits to be
claimed by the beneficiaries.
Mr. Dooc adds, “The PLP is our special way of
saying thank you to all our pensioners for trusting SSS
throughout the past 61 years.”
With this, SSS hopes that its 1.3 million member-
pensioners would opt to avail of the pension loan program
in times of emergency. Aside from it having the lowest
interest rate in the market, borrowers are assured that they
will still be receiving a portion of their monthly pension,
as not the entirety of it goes to loan repayment alone.
Finally, Mr. Dooc notes, “The P32,000 loanable
amount may not be as huge as compared to what other
lending institutions are offering, but the amount can
certainly help pensioners meet their short-term needs,
without compromising their financial security.”
UnionBank 2018 Annual Report 67
 PEOPLE-POWERED
REVOLUTION
UnionBank launches projects for its employees to
drive its goal to build the future of banking

Revolutions don’t just happen. They require the right elements to set them on fire. You need
an inspiring message to rally people around your cause, a structure for recruiting and training
new people to support your cause, a process that will help your people make things happen,
and a hub that enhances their experience.
Revolutions need people who are committed to the cause and empowered to bring about change.
UnionBank is on a mission to lead the digital revolution.
We believe that our people can drive and deliver innovation and transformation in the
organization to achieve our goal to build the future of banking. With technology rapidly changing,
organizational agility is necessary to successfully transform into a bank that can offer digital and
technological changes. By being proactive in our approach to people development, UnionBank is
paving the way to revolutionize banking.

68 UnionBank 2018 Annual Report

Own the Future:
Unveiling a new employer brand
UnionBank recently went through an institutional brand refresh
to underscore our ambition to be the leader in digital banking.
We unveiled a visual identity and articulated our brand promise of
“Powering the Future of Banking” and our brand attributes of being
Forward-Thinking, Innovative, Open, and Agile. This is how we want
to be known to our customers and partners.
It is only natural that we also redeffne our employer brand
for our employees and potential hires. We worked with global
employer brand consultancy Universum to craft our employer
value proposition (EVP), which deffnes the qualities of an
organization – what makes it unique and what it stands for.
Through a clear and magnetic employer brand, we are able
to attract the right talent and allow them to determine how
they will fft in the organization.
A study was done to understand how our employees viewed
UnionBank as an employer and a survey was also conducted with
potential employees to understand how they viewed the Bank as
an employer. What stood out was not a surprise for us – they see
UnionBank as an innovator, creating communities that help shape
a better world.
Since then, we launched our employer brand statement
“Own the Future: Co-Create Innovations.” We tested this in several
spaces – job fairs, social media, internal and external campaigns –
and it proved to be effiective as employees and potential hires
recall the brand.
Since its launch, it has helped improve talent acquisition’s
ffll rate. For example, for our Blockchain 100 program, some 1,000 tech
talents applied to be part of it, and we onboarded 100.
Our employer brand statement perfectly captures our aspiration
and identity. And it makes UnionBankers proud to belong to
an organization they can relate to and be passionate about.

69
 Agile 2020:
Building an agile organization
As an organization, we have always been proud of
our track record of being quick to pounce on opportunities
and bold in blazing trails. For the past several years,
we have gone through a cultural and organizational
change to make us nimbler. Now, we have upped this by
adopting the agile methodology, a popular development
and project management approach in the tech industry,
which puts emphasis on continuous iteration, frequent
adaptation, close collaboration, and rapid delivery.
UnionBank engaged the services of Deloitte
Consulting to develop an organizational design that would
enable the Bank to be agile at scale and digital to the
core. The collaboration went by the name Project Origami,
inspired by the famous Japanese art of paper folding,
symbolizing the many possibilities of transformation.
The organization focused on four pillars:
Organizational Design, Capability Development,
Leadership, and Culture. Through relentless
experimentation and constant iteration, we were able to
create our own Agile Manifesto, embedding it in our DNA
and in the way our people work.
To date, the Bank has onboarded 28 squads and
67 teams who are working on platform development,
digital delivery, automation, and people transformation.
These teams have embraced the agile way of working
and has delivered noteworthy products and services
such as GlobaLinker, Project I2I, Digital RM, and 1UHub,
Blockchain Institute: Creating Talent Pools among others.
We also understand that not all units need to use the
agile methodology, but they could apply certain principles
We launched Blockchain 100, a CSR initiative to help tech up talents on new technologies that are not taught
that would help improve the Bank’s productivity and
in universities and training institutions. This paved the way to establishing the Blockchain Institute.
service delivery. To ensure that no one gets left behind,
Back then, there was a scarcity of blockchain developers as UnionBank sourced talent for our own use cases.
we launched Agile 2020, a learning initiative that equips
So, we founded the Blockchain Institute to train tech talent new skills on blockchain technology and provide them
and engages leaders and their team members to learn
opportunities to work on use cases within the Bank.
agile values and how to apply this in the way they work.
We gave our blockchain cadets exposure on security issues, user interface and experience, data management,
To date, 95% of UnionBankers have undergone the
and program design. Our holistic curriculum allows them to apply what they have learned while being mentored
Agile 2020 sessions. Aside from the learning sessions,
and coached by some of the best blockchain technology experts in the industry.
we also provided supplemental learning via video and
The Blockchain Institute provides the Bank a pool of talent trained in the skills that we need and creates
online courses for our employees to ensure that they
opportunities for young developers to break into the industry. For some of them who are looking into starting
continuously learn about the agile ways of working
their own tech business, we even included a startup training course as part of the curriculum.
and how it can work for their respective job functions.

70 UnionBank 2018 Annual Report

1UHub: Enhancing employee experience
UnionBank believes that employee experience is the
summation of all employee connections and interactions
throughout the organization before and after,
and everything in between, their tenure in the company.  of HR processes available in the organization. It supports
True to our aim to be a digital bank, we developed
a centralized HR platform for our employees called
One UnionBanker Hub (1UHub).
For employees, the 1UHub app is a huge convenience.
Because people almost always have their smartphone on
them or nearby, it’s a resource that UnionBank can rely on
to become more efficient and make employees happier.  the 1UHub platform. Since 1UHub focuses on connecting
All their benefits and information are stored
on one platform. They can access leave and benefit
application, payroll information, and a newsfeed
about UnionBankers. They receive updates,
via notifications, highlighting important changes or
relevant information that needs cascading.
The platform also supports business imperatives,
career development, and talent mobility. One feature that
is new to the HR industry is “Learning on Air” – an online
library of podcasts and books that all employees
can access.   around and potential hires will find compelling. We have
Before, UnionBankers used several microsites that
require different passwords and access. Today, 1UHub stores
all employee information and organizational information
across the employee lifecycle in a single platform.
1UHub is focused on giving a seamless employee
experience as its user interface is intuitive and easy
to understand. No training or user guides are needed
to use the application. 1UHub also features several
user-authentication options such as passwords, fingerprint
scan, and one-time PIN. 
The platform delivers accessible, sustainable,
and cost-saving solutions of HR processes. 1UHub has achieved
beyond expectations as it fully automated more than 50%
sustainability as printed forms are reduced 100% as data
is stored digitally. It also improved processing time for
applications by 98.43%. To date, the application already
resulted to an estimated amount of P20 million gross
cost-savings. 
UnionBank also invested on talent analytics through
all UnionBankers in one platform, it integrates all aspects
of the employee’s journey within the organization, 
in order to generate more meaningful insights into
employee behaviors and provide more personalized
and intelligent interventions that would benefit the
company and the lives of UnionBankers. 
If we are to revolutionize banking, our people need
to be equipped, empowered, and energized.
Well, now we have the message, an inspiring and
distinct employer brand that our employees can rally
the structure, our recruitment and training program that
will provide us with a steady pool of talent who can help
us harness new technologies for our customers. We have
the process, the agile methodology that will allow us
to deliver innovative projects and groundbreaking
products at a faster clip. And we have the hub, a platform
that enhances employee experience.
True, revolutions don’t just happen.
A banking revolution? We’ll make it happen.
71
 MARKET MASTER
How Assistant Vice President
and The Ark Customer Experience
Designer Ron Batisan won the
Mansmith YMMA Award for
Customer Experience
72 UnionBank 2018 Annual Report
When Ronaldo “Ron” Batisan, UnionBank Assistant
Vice President and Customer Experience Designer for
The Ark, won at the Mansmith Young Market Masters
Awards (YMMA), it was a first on many levels. It was the
first time the category for Customer Experience (CX)
was introduced. It was the first time a marketing
professional from a financial institution won. And it was
for a project that launched the first fully digital bank
branch in the Philippines.
The prestigious awards, an advocacy of marketing
training and consultancy firm Mansmith and Fielders, Inc.,
recognizes young achievers, 35 years old and below,
who excel in sales and marketing. The roster of winners
from the last 14 years is a who’s who of top brand builders
and innovative marketers.
The Ark, itself the winner of the Best Branch
Customer Experience in Asia Pacific at the Customer
Experience in Financial Services Awards held in Singapore,
was a monumental project. The first-of-its-kind branch
has no queues and no teller’s counters, only Branch
Ambassadors who handhold customers to use
UnionBank Online, self-service machines, and tablets,
and who assist them with their financial needs. For long-
suffering customers tired of waiting, lining up, and filling
out paper forms, The Ark is a banking experience
like no other.
Ron, working with seven internal teams and 24 external
partners, designed the customer experience, digitized the
transactions, and built The Ark in just nine months.
Unconventional choice
At first glance, Ron seems to be an unlikely candidate
to be tapped to lead the project. Having worked in the
remittance business of UnionBank for years, he has little
branch experience, no formal background in CX, and no
technical training in project management. It seems like an
unconventional choice by an unconventional bank.
But the top brass at the Bank saw something else.
Ron, in fact, exhibits the traits necessary to pull off a project
of this complexity and magnitude. He was exactly what the
project needs: a go-getter, self-starter, and flexible leader.
As a long-time UnionBanker, Ron can work with key people
who already know and trust him. As a marketing professor,
he has the academic discipline to work within a framework,
in this case, the CX transformation framework of process,
space, and people.
Coming from a humble background, Ron worked his
way through college and his MBA and rose through the
ranks in the banking industry, all the while supporting
his family. He is no stranger to obstacles and adversity.
This certainly speaks of the kind of resilience and grit
needed to manage an undertaking of almost biblical
proportions. Despite the overwhelming professional and
personal challenges that made him almost quit from
the project, Ron was pushed to the limit, yet he pushed
forward. With zero ego and 100 percent hard work,
Ron was able to lead and deal with different people
to get the project done in record time.
Customer and employee experience
With the right vision and the right team, The Ark
redefined branch banking in the Philippines. It solved
many of the pain points of retail bank customers.
The Ark has done far more than just elevating the bank
branch experience. Consistent with UnionBank’s mission,
it is elevating lives, successfully bridging Filipinos to the
future of banking.
The self-service machines have processed more than
100,000 teller transactions since opening. Digital account
opening took an average of 10 minutes versus an average
of one hour doing account opening the traditional way.
The Ark has held numerous events, many of which were
organized by the Bank’s customers, and reaped benefits
ranging from new client acquisition, customer loyalty
through usage of products, and increase in brand equity.
With the success of this concept branch, UnionBank
has been converting existing branches to Arks and
Ark Lites (small Arks). The Bank now has 15 Arks and
Ark Lites. Ron and his team are also currently developing
Ark for Business, designed to convert corporate clients
into digital.
As the first Mansmith YMMA Awardee for Customer
Experience, Ron is quick to acknowledge that this was not
just an individual achievement. It was the work of different
teams and partners that made The Ark a reality.
It was also the unwavering support he received from
his mentors and the Bank’s higher-ups, led by UnionBank
President & CEO Edwin Bautista who set the tone and the
framework for the project, which gave him the push he
needed and the guidance he sought to accomplish the goal.
It was this kind of employee experience that allowed
Ron and his team to create a new kind of customer
experience in the banking industry. It created the
environment for UnionBankers like Ron to thrive
and achieve beyond what they think they can do.
The Mansmith YMMA win may be a first in many ways.
But with UnionBank’s trailblazing initiatives and
transformative culture, there will be many more
awards to come.
Ronaldo “Ron” Batisan
73
 AWARDS
Asia’s Best Bank Transformation
Euromoney Awards for Excellence
Best Digital Bank Philippines
Global Banking & Finance Review Awards
Best Digital Bank Philippines
Asiamoney
Best Digital Bank
Asian Banker Philippine Country Awards
Digital Bank of the Year - Philippines
The Asset Triple A Digital Awards (2018)
Digital Transformer of the Year Philippines
IDC Digital Transformation Awards
Bank of the Year Philippines
International Investors Business Awards
Digital Bank of the Year - Philippines
The Asset Triple A Digital Awards (2019)
Champion - Best Bank in Digital Financial Inclusion
Bankers Institute of the Philippines Inc. (BAIPHIL)
74 UnionBank 2018 Annual Report
Best App for Mobile Banking
Retail Banker International - Asia Trailblazer Awards
Excellence in Mobile Banking - Over-all
Retail Banker International - Asia Trailblazer Awards
Best Mobile Banking
The Digital Banker
Asia’s Leader in Omnichannel Engagement
IDC’s Financial Insights Innovation Awards (FIIA)
Silver Anvil - Media Launch of EON the first
ever Selfie Banking in Asia
Public Relations Society of the Philippines
Best Innovation in Retail Banking Philippines
International Banker
Most Innovative Bank of the Year Philippines
The European - Global Banking & Finance Awards
Most Innovative Cash Management Services Bank
Philippines
Global Banking & Finance Review Awards
 
Most Innovative Banking Brand - Philippines
Global Brands Magazine
Automobile Lending Product of the Year
Asian Banker Philippine Country Awards
Best Cybersecurity and IT Risk Management Initiative,
Application or Programme in the Philippines
Asian Banker Philippine Country Awards
Best Affinity Co-Branded Programme
Cards and Electronic Payments International
Leading Specialists in Cash Management Banking -
Philippines
Corporate Vision (CV) Magazine
Corporate Excellence Awards Most Outstanding
in Cash Management Banking - Philippines
Corporate Vision (CV) Magazine
Bronze - Achievement in HR Technology
Stevie Awards for Great Employers
Silver - Chief Human Resources Officer of the Year
(Michelle E. Rubio)
Stevie Awards for Great Employers
Banking CEO of the Year Asia (Edwin R. Bautista)
International Banker
Best Banking CEO Philippines (Edwin R. Bautista)
The European - Global Banking & Finance Awards
Winner: Best Customer Experience Branch (The ARK)
RBI 4th Customer Experience in Financial Services
Highly Commended: Best Omni-Channel
Customer Experience (EON)
RBI 4th Customer Experience in Financial Services
Highly Commended: Best Technology
Implementation - Back Office
RBI 4th Customer Experience in Financial Services
Highly Commended: Best Technology Implementation -
Front End (UnionBank Online)
RBI 4th Customer Experience in Financial Services
Highest Credit eCommerce Payment Volume Growth
VISA Inc.
Highest Consumer Credit Payment Volume Growth
VISA Inc.
Silver Anvil - UnionBank Annual Report
A Higher Purpose
Public Relations Society of the Philippines
Best Retail Mobile Banking Experience Philippines
The Asset Triple A Digital Awards
Best Service Provider - Fintech Partner
The Asset Treasury, Trade, Supply Chain and
Risk Management Awards
Most Innovative Core System Project
API Management Platform
The Asset Triple A Digital Awards
Most Innovative Digital Branch Project - The ARK
The Asset Triple A Digital Awards
Most Innovative Emerging Technologies Project
“Blockchain for General Circular”
The Asset Triple A Digital Awards
Most Innovative Digital Banking Product
Philippines (EON)
International Finance Awards
Best Payment Innovation
RBI Asia Trailblazer Awards
Silver Anvil - PR Program Directed
at Specific Stakeholders (Project i2i)
Public Relations Society of the Philippines
Best Financial Inclusion Program Philippines
International Investors Business Awards
Excellence in Customer Experience -
Banking Industry Philippines - Overall Experience
Frost & Sullivan Excellence in Customer Experience Awards
Excellence in Customer Experience
Banking Industry Philippines - ATM Experience
Frost & Sullivan Excellence in Customer Experience Awards
Excellence in Customer Experience
Banking Industry Philippines - Branch Experience
Frost & Sullivan Excellence in Customer Experience Awards
Excellence in Customer Experience
Banking Industry Philippines - Mobile Experience
Frost & Sullivan Excellence in Customer Experience Awards
Excellence in Customer Experience
Banking Industry Philippines - Net Promoter Score
Frost & Sullivan Excellence in Customer Experience Awards
Gold - Innovative Use of Technology in Customer Service -
Financial Services Industries
Asia-Pacific Stevie Awards
Most Influential Payment Professional (Paolo Baltao)
World Payments Congress and Awards
Young Market Masters Awardee (Ron Batisan)
Mansmith and Fielders, Inc.
Gold Datos Privados
Henry Aguda - Pillar for Data Privacy
in Corporate Governance
1st Datos Privados Awards
Gold Datos Privados
UnionBank - Data Privacy Enterprise Management System
1st Datos Privados Awards
Gold Datos Privados
UnionBank - Enterprise-wide Compliance with
Data Privacy Law
1st Datos Privados Awards
Awards Year 2018 to May 2019
75
 Combining our previous Chairman’s Awards and
President’s Awards as one is truly a powerful recognition
for UnionBankers. This unified award aims to recognize
teams who boldly and acted swiftly, and did extraordinary
work amidst difficult circumstances, to align to the Bank’s
transformation journey of becoming a tech company with
banking facilities. 
These awards are given to teams who have optimized
the power of technology, built ecosystems, adopted new
business models, and collaborated with new partners
to significantly improve processes, strategically manage
costs, and deliver significant positive impact to
the Bank’s bottom line and organizational excellence. 

STRATEGIC LONG-TERM FINANCING

AND CAPITAL BUILD UP PROGRAM
Awardees: Kay Palang, Maia Urmatam,
Gabrielle de Juras, Atty. Leila Paz, Ofelia Tababa

UnionBank embarked on a series of fund-raising activities

in 2018: a P3.0B LTNCD, P10B stock rights offering,
P11B corporate bonds, and $150M bridge loan. The Long Term
Negotiable Certificate of Deposit (LTNCD), corporate bonds,
and US Dollar loan were used to comply with the liquidity
coverage requirement and fuel the desired growth in assets.
The LTNCD offered better term funding with lower
reserve requirement while the corporate bonds opened up
access to a wider and more diversified investor base.
The dollar bridge loan meanwhile fueled growth in
FCDU book. The stock rights offering (SRO) allowed the Bank
to comply with regulatory capital requirements and enable
it to pursue its various strategic growth initiatives.
These public issuances required a long process
from structuring to due diligence to deal execution.
It took months of work from various units across the Bank,
on top of their respective main responsibilities. To do all
four deals in one year entailed strict discipline, focus,
and judicious market timing.

76 UnionBank 2018 Annual Report

TALENT TRANSFORMATION:
FROM ANALOG TO DIGITAL
(LINE ENGINEERS AND ARCHITECTS PROGRAM)
Awardees: Ruby Gisela Perez, Christine Anne Trajano
Executive Sponsor: Angelo Dennis Matutina
The Line Engineers and Architects Program
(LEA Program) was launched to drive role transformation
and up-skill selected Channel Management Center (CMC)
operations personnel to business analysts, process designers,
and scrum masters, aligned to the Bank’s rally of
“No one gets left behind.”
The LEA Program provides an on-the-job process
reengineering and automation project execution, focusing
on re-tooling and building capabilities to provide the
opportunity to CMC personnel to reinvent themselves,
embrace change, and become agents and advocates
of change. With the right mindset, tools, and capabilities,
they champion the daily challenge of fulfilling customer
requirements while bridging the gap between business
partners’ focus on customer experience and digital
enablers’ drive for efficiency.
Today, the program has transformed LEAs from
processors, credit investigators, sales officers, and branch
managers to business analysts, process designers, and scrum
masters. Part of the development intervention involved
trainings and certifications (including Lean Six Sigma,
Appian, Project Management, and Professional Scrum
Master). LEAs now collaborate with digitization partners
and enablers across the Bank in streamlining and
automating processes. 
ENABLING ePAYMENTS THROUGH
DIGITAL CHANNELS
Awardees:
PESONET: Christine Anne Trajano, Rodel Garcia,
Paolo Elemos, Rhiza Mae Talavera, Wilfredo Topacio, Jr.
INSTAPAY: Valyne Calma, AJ Atienza, Neri Longog,
Cris Tismo, Lennie Perez
UnionBank was an active participant in the rollout
of the BSP’s National Retail Payment System or NRPS
(PESONet and InstaPay) thru our award winning mobile
and web channels such as UnionBank Online and HUB.
This provided seamless customer experience via digital SSS eCARD
means of transacting payments through online banking Awardees: Leslee Tandoc, Lara Yupangco,
and promoted straight-through processing using Ma. Beatrice Rivera, Kristella Guillermo,
process automation and systems integration. Jasper Centino, Josephine Baruela,
Due to the Bank’s strategy to push digital payments Ma. Cristina Tismo, Rhiza Talavera,
and provide superior user experience, UnionBank has Kevin Tolentino, Jazarene Lingad
consistently ranked near the top of the league charts in Executive Sponsors: Henry Aguda, John Ong
terms of payment disbursement for combined PESONet Executive Partner: Chett Bernad
& InstaPay transactions. This is a clear testament to the
Bank’s superior digital offerings and seamless customer UnionBank launched the SSS eCard, a Visa Paywave
experience compared to its competitors. To support the debit card where SSS disbursements are directly credited
increasing volumes, automation through integration of for faster and convenient access to member benefits.
front-end to our core systems was initiated and executed Through the card, SSS members have instant and
through system re-design and application program wide access to their benefit proceeds through various
interface (API) deployment. electronic channels like ATM, online, and point of sale.
It is also an easy and convenient way to open accounts
UNIONBANK GLOBALLINKER for faster release of their benefits, instead of the
Awardees: Dino Velasco, Marianne traditional check release.
Angelie Urbano, Mourese Soriano, The card is now being used to release monthly
Francisco Joaquin Gozos, Jacqueline Kumar pensions, salary loan proceeds, sickness and maternity
benefits, and most recently, the first ever pension loan
Executive Partner: Christine Siapno
program from SSS. A fully digital and real time account
opening process is currently being used at the UnionBank
The Bank took the unconventional route and
Kiosk, starting off a database of account holder biometrics. 
opportunity to serve the micro, small, and medium-sized
The project also eliminated the cost of using paper
enterprise (MSME) segment to promote digital and
and lessen manual backroom processing and document
financial inclusion. UnionBank GlobalLinker is a unique
safekeeping, allowing the Bank to achieve
and innovative platform that provides an ecosystem
cost savings and reduce error.
for MSMEs to manage and grow their business digitally.
They have access to essential tools and resources to help them
scale up, go global, and contribute to nationwide growth.
The platform is a one-stop-hub for MSMEs to connect with
potential customers and suppliers, create a free e-commerce
store, and avail of exclusive offers.
The platform allows the Bank to embed itself into the
lives of MSMEs, as financial products are available whenever
they need it. UnionBank GlobalLinker is the only platform
in the country that combines social networking and
business solutions dedicated to MSMEs. In just about a year,
the platform has generated tens of thousands of users.
77
FIRST VICE PRESIDENTS

MYRNA
E. AMAHAN CONRAD ANTHONY DOMINIC
L. BANAL MARIA CECILIA TERESA
S. BERNAD

MA. THERESA
S. DAGUISO
HANNAH THERESA
S. CONTRERAS
CATHERINE ANNE
B. CASAS
 GERARD
R. DARVIN JOEBART
T. DATOR MONTANO
D.M. DIMAPILIS

MA. CHRISTINA
A. ESCOLAR
EDUARDO
V. ENRIQUEZ, III
CARLO
I. EÑANOSA

79
FIRST VICE PRESIDENTS

MARY ANTONETTE
D. EVALLE LAWRENCE
Y. FERRER JULIE
C. GO

ANGELBERT
G. MACATANGAY
CONCEPCION
P. LONTOC
ENRIQUE
M. GREGORIO
MICHAEL
P. MAGBANUA RAFAEL
G. MARIANO
LETICIA
A. MORENO

RONALDO JOSE
M. PUNO
RUBY GISELA
L. PEREZ

RAQUEL
P. PALANG

81
 FIRST VICE PRESIDENTS

QUINTIN
DINESH
C. SAN DIEGO, JR.
M. SAHIJWANI CHRISTINE
V. SIAPNO

JEANNETTE YVONNE
JOSELYNN M. ZAGALA
B. TORRES
JO-ANN FATIMA
RAHNI L. TOLENTINO
82 82
UnionBank 2018R. SVENNINGSEN
Annual Report
SUBSIDIARIES

CITY SAVINGS BANK, INC. FIRST UNION DIRECT FIRST UNION PLANS, INC. PROGRESSIVE BANK UNION PROPERTIES, INC.
Edwin R. Bautista CORPORATION Edwin R. Bautista Emmanuel S. Santiago Justo A. Ortiz
Chairman Manuel G. Santiago, Jr. Chairman Chairman Chairman
Chairman    
Lorenzo T. Ocampo Romeo C. Kagalingan Carlos Jose Virgilio Peter Ismael F. Quiambao
President & CEO Romeo C. Kagalingan President A. Jalandoni, III President
President President
FAIRBANK PETNET
Teodoro M. Panganiban FIRST UNION INSURANCE Justo A. Ortiz UBX PHILIPPINES
Chairman AND FINANCIAL AGENCIES, Chairman CORPORATION
INC. Henry Rhoel R. Aguda
Dinah F. Verallo Mary Joyce S. Gonzalez Adrian Alfonso T. Ocampo Chairman
President Chairman President & CEO
  John F. Januszczak
Dinesh M. Sahijwani President & CEO
President

LORENZO JOHN
T. OCAMPO F. JANUSZCZAK

83
 SUBSIDIARIES

ROMEO
C. KAGALINGAN

ADRIAN ALFONSO
T. OCAMPO

PETER ISMAEL
F. QUIAMBAO

84 UnionBank 2018 Annual Report

TEODORO DINAH
M. PANGANIBAN F. VERALLO

EMMANUEL CARLOS JOSE VIRGILIO

S. SANTIAGO A. JALANDONI, III

UnionBank 2018 Annual Report 85

86 UnionBank 2018 Annual Report
87
 OPEN AN ACCOUNT
ON-THE-GO
Open an account on the app without
ever having to visit a branch

1. Download UnionBank Online.

2. Fill out the application form.

3. Upload an image of your

Passport, UMID or SSS ID.

4. Take a selfie.

5. Indicate your delivery address.

6. Account is opened.

On your terms. Online.

88 UnionBank 2018 Annual Report

RISK MANAGEMENT
RISK MANAGEMENT CULTURE AND PHILOSOPHY
Given that banks and financial institutions are in the business of taking risks,
UnionBank operates according to its established risk philosophy, where the Board
is responsible for approving, reviewing, supervising, and overseeing the Bank’s risk
strategy, risk policies, risk appetite and risk limits. Following the Board’s instruction,
the Bank’s Senior Management and various risk management committees set up
independent risk management functions to ensure that risks are properly understood,
controlled, and managed, in addition to the risk processes which must be clearly aligned
with the Bank’s business strategies.
RISK APPETITE AND STRATEGY
UnionBank’s risk appetite is the level of risk that it is prepared to accept in pursuit of its
business objectives and strategies. It is consistent with UnionBank’s risk-taking capacity.
UnionBank’s risk appetite is set by the Board of Directors. The risk appetite
cannot be defined by a single number as it has many dimensions and is a combination
of regulatory requirements and internal policy limits. The Bank’s appetite for risk is
influenced by a range of factors, including whether a risk is consistent with its core
strategy and whether an appropriate return can be achieved from taking that risk.
UnionBank has a lower appetite for risks that are not part of its core strategy.
RISK APPETITE FRAMEWORK
A risk appetite framework has been established, which includes the Board-
approved risk appetite statements and the related risk policies and limits.
The risk appetite statements establish the philosophy and high-level boundaries
for risk-taking activities across UnionBank. The risk policies and limits give more
specific guidance for particular risks, providing clarity for management in making
day-to-day decisions.
The specific appetite for each risk type is implemented and enforced by an
extensive set of specific limits, controls, and governance processes.
BANK-WIDE GOVERNANCE STRUCTURE AND RISK MANAGEMENT PROCESS
The Bank’s risks are managed enterprise-wide by all units of the Bank as it adopted
the Three Lines of Defense Model in Enterprise Risk Management (ERM). The process,
systems, compliance risks and controls are identified by the Business Units (1st line).
The controls to mitigate the risk assessed based on design and effectiveness by Enterprise
Risk Management, Information Security and Compliance (2nd line). The assessments are
validated by Internal Audit (3rd line). Tying all this up is an active oversight function by the
Board of Directors. The Bank maintains transparent dealings with both external auditors
and regulators in relation to the business, vision, plans and strategies.
The Board of Directors (BOD) exercises oversight of the Bank’s risk management
process as a whole and through its various risk committees. For the purpose of day-
to-day management of risks, the Bank has established independent risk management
units (RMUs) that objectively review and ensure compliance to the risk parameters set
by the BOD. They are responsible for the monitoring and reporting of risks to senior
management and the various committees of the Bank. The BOD is primarily responsible
for setting the risk appetite, approving risk parameters, credit policies, and investment
guidelines, as well as establishing the overall risk-taking capacity of the Bank.
To fulfil its responsibilities in risk management, the BOD has established the following
committees, whose functions are described below.
a. The Executive Committee (EXCOM), composed of seven members of the BOD,
exercises certain functions as delegated by the BOD including, among others,
the approval of credit proposals, asset recovery and real and other properties
acquired (ROPA) sales within its delegated limits.
b. The Risk Management Committee (RMC), composed of seven members of the BOD,
shall advise the Board of the Bank’s overall current and future risk appetite, oversee
Senior Management’s adherence to the risk appetite statement, and report on the
state of risk culture of the Bank.
c. The Market Risk Committee (MRC), composed of nine members of the BOD,
majority of whom are independent directors, including the Chairman. The Committee
is primarily responsible for reviewing the risk management policies and practices
relating to market risk including interest rate risk in the banking book and liquidity risk.
d. The Operations Risk Management Committee (ORMC), shall be composed of at least
two members of the board, one independent director and two resource persons
from Senior Management, is responsible for reviewing the risk management policies
and practices relating to operational risk. The ORMC oversees the adequacy of the
Bank’s policies, procedures and resources for preventing or limiting the damage from
unexpected losses due to deficiencies in information systems; business, operational
and management processes; employee skills and supervision; equipment and internal
controls through the various operational risk tools and oversight processes namely
risk assessments/ risk and control self-assessment, key risk indicator and risk event
loss database and issue/risk treatment action plan management.
e. The Audit Committee (AudComm) is a committee of the BOD that is composed
of at least seven (7) members with at least four (4) independent directors. All of its
members are appointed by the Board of Directors with most members, including
the Chairman, preferably with accounting, auditing or related financial management
expertise of experience. The Audit Committee serves as principal agent of the BOD
in ensuring independence of the Bank’s external auditors and the internal audit function,
the integrity of management, and the adequacy of disclosures and reporting
to stockholders. It also oversees the Bank’s financial reporting process on behalf
of the BOD. It assists the BOD in fulfilling its fiduciary responsibilities as to accounting
policies, reporting practices and the sufficiency of auditing relative thereto, and
regulatory compliance.
UnionBank 2018 Annual Report 89
 RISK MANAGEMENT

ANTI-MONEY LAUNDERING GOVERNANCE AND CULTURE The members of the Board and Senior Management of the Bank strictly adhere
The Bank’s basic principles and practices to combat money laundering are to the provisions of the Anti-Money Laundering Act (AMLA), as amended,
anchored on: Revised Implementing Rules and Regulations (RIRR) and its own Money Laundering
and Terrorist Financing Prevention Program (MTPP).
To ensure full compliance with the AMLA, as amended and RIRR, Senior Management
promotes awareness by disseminating the MTPP manual, related AML issuances, and the
Compliance with laws and regulations AMLA Training Program.
The Anti-Money Laundering Act Committee (AMLACOM) was created to provide
management oversight regarding the implementation of the Bank’s AML risk management
policies and procedures. The AMLACOM reports to the Corporate Governance Committee
Strict adherence to (CGC) which in turn assists the Board in fulfilling its responsibilities in the prevention of
Know Your Customer (KYC) process
money laundering and terrorist financing.

CUSTOMER IDENTIFICATION AND ACCEPTANCE

Cooperate with law enforcement agencies
Information dissemination and training
Implementation of AML risk management system
The Bank maintains a system of verifying the true identity of its clients by establishing
a clearly written customer acceptance and identification policy and procedures, including
a set of graduated money laundering risk criteria for clients categorized depending on the
risk it may pose to the Bank. In case of corporate and juridical entities, the legal existence,
ownership and control structure as well as the authority and identification of all persons
purporting to act on their behalf are verified. The Bank’s risk assessment considers all
relevant risk factors, documented and updated periodically or as may be necessary.
From the resulting risk assessment, the appropriate level of due diligence is applied.
The provisions of the Bank’s MTPP are implemented in a manner that is
non-discriminatory to all customer types, ensuring that political exposure, religion,
race or ethnic origin, are not used as the only basis to deny access to the Bank’s services.

RECORD KEEPING AND RETENTION

Banking units, groups, and branches responsible for safekeeping records and
documents required to be retained by the AMLA, as amended, its RIRR and the
Bank’s MTPP are accountable and are obligated to ensure that the aforementioned are
made readily available during examinations and/or audits conducted by its regulators.
As a general policy, all customer identification records, such as signature cards,
identification documents, and documentary requirements submitted by the clients,
shall be maintained and safely stored as long as the account exists.
Meanwhile, all transactions records, including all unusual or suspicious patterns
of account activity whether or not a Suspicious Transaction Report (STR) was filed
with the AMLC are maintained and stored for five (5) years from date of transaction
as required by law.
In case of account closure, records on customer identification, account files and
business correspondences is preserved and safely stored for at least five (5) years.
When the account is involved in a money laundering case, its account opening
and transaction documents are retained until the case is decided with finality.

90 UnionBank 2018 Annual Report

REPORTING OF COVERED AND SUSPICIOUS TRANSACTIONS AMLA Training Program
The Compliance and Corporate Governance Office (CCGO), through its AML Section
identifies, all Covered Transactions (CTs) and Suspicious Transactions (STs) in coordination
with the various units or groups within the Bank. The Bank ensures that its identification,
monitoring and reporting mechanism is in place and working efficiently to ascertain that
reports to its regulatory agencies are submitted within the prescribed period.

ANTI-MONEY LAUNDERING TRAINING FOR THE BOARD AND EMPLOYEES Internal

process on
Formulation and conduct of AML training and dissemination of updates regarding reporting and Employee
AML best practices for the members of the Board, Senior Management, investigation awareness
of suspicious on respective
Officers and Staff of the Bank and third parties are done by the Compliance duties and
and money
and Corporate Governance Office (CCGO). CCGO ensures that all training materials laundering responsibilities
are updated and prepared for the targeted recipients. activities
AML Training forms part of the New Employee Orientation Program (NEOP) Customer
and is required to be taken by newly-hired employees. Refresher courses are likewise identification
process or
provided to employees to ensure that they are updated in AML regulations and KYC
best practices. Online or E-learning modules for AML is required to be taken by all
employees of the Bank on an annual basis.
Covered and
Recording-keeping suspicious
and retention transaction
requirements reporting

UnionBank 2018 Annual Report 91

Corporate Governance
 CORPORATE GOVERNANCE

GOVERNANCE PHILOSOPHY
A culture of good corporate governance
Built on the principle is fostered by UnionBank through a careful balance
of fair, transparent of compliance to its statutory and regulatory mandates,
and ethical development of sustainable business thru innovative
business conduct. technologies that challenge banking convention
while enhancing the value that it has created for
its stakeholders as aligned to the highest standards of corporate governance and
internationally recognized practices.
The Bank is consistent with its substantial compliance with the internationally
recognized standards set forth in the ASEAN Corporate Governance Scorecard as
well as with the provisions in the Bangko Sentral ng Pilipinas Circular No. 969 or the
Enhanced Corporate Governance Guidelines for BSP-Supervised Financial Institutions.
THE BOARD
NOMINATION
To ensure that only those who meet the stringent criteria for board membership
are elected, the Bank has created a Nomination Committee whose primary task is
to ensure effective board succession. Below illustrates the process by which the
Nomination Committee arrives at the final list of board nominees. These nominees are
then presented to the Bank’s shareholders for election.
BOARD FUNCTION
The Board’s core duty is to provide the Bank with effective direction and
strategic oversight. Its members are expected to advocate the Bank’s corporate culture
and further the interest of its shareholders and stakeholders while maintaining integrity,
transparency and fairness in the discharge of its duties. The Board is expected to ensure
that the bank applies the highest standard of good governance in the conduct of its
business. It is also required to safeguard the interests of its shareholders and stakeholders
by putting in place control and risk -mitigating policies and practices and to guarantee
the ethical execution of the Bank’s strategies in the achievement of its business goals.
Article III of the Bank’s Revised Manual on Good Corporate Governance details the
specific duties and responsibilities of every member of the board of directors in UnionBank.

Vetting Presentation
Collection
of nominees of qualified
of nominee
against Fit and nominees to the
names from
Proper Rule and Nomination
shareholders
other standards Committee

Office of the Compliance

Corporate Secretary and Corporate Nomination Committee
Governance Office

94 UnionBank 2018 Annual Report

THE CHAIRMAN

Acting as the leader of the board of directors, the Chairman has the responsibility
to provide direction to the group in order for the latter to seamlessly fulfill its duties
and responsibilities. Under Article III of the Manual on Good Corporate Governance,
the Chairman carries the following responsibilities

Maintain qualitative and timely lines

of communication and information Ensure that the Board
with the Management is properly organized and
meets its duties and
responsibilities

Supervise the preparation

of the agenda of the meeting Work with the CEO to ensure
in coordination with the management strategies,
Corporate Secretary plans and performance are
presented to the Board

Facilitate the operations and

deliberations of the Board Lead the Board in ensuring that
the Bank has an effective
senior management

Ensure that the meetings

of the board are held in
accordance with the Assures the availability
By-Laws and focused of proper orientation of
on strategic matters first-time directors and continuing
learning opportunities for all
members of the Board

Ensure that the Bank abides

by its By-Laws and policies
Ensure that the shareholders’
view is communicated
to the Board
Ensure that Board
performance are evaluated
at least annually.

UnionBank 2018 Annual Report 95

 CORPORATE GOVERNANCE

BOARD COMPOSITION

In UnionBank, diversity of ideas is given importance. Hence, its board selection

process ensures that its members come from a variety of backgrounds which contribute
in achieving a balanced working environment across the board.
In 2018, UnionBank’s Board of Directors was comprised of fifteen (15) members
categorized as one (1) Executive Director (ED), five (5) Independent Directors (ID)
and nine (9) Non-Executive Directors (NED).

Direct (D) % Of Shares

Current Directorship and (against
Years
Type of Stockholder Relevant Relevant and/or Officership Indirect (ID) total
Name Age Nationality in the Shares
directorship Represented Qualification Experience (*in publicly listed outstanding
Board
companies) shares
*As of 31
December 2018 of the bank)

Justo A. Ortiz Non-Executive 61 Filipino Aboitiz Equity 25 years AB Economics, Honors CEO, UnionBank (D) 3,229,061 0.27%
Director Ventures Program, Ateneo de (ID) 9,165
Manila University, Managing Partner
Philippines for Global Finance,
Citibank N.A.

Country Executive
for Investment
Banking, Citibank
N.A.

Jon Ramon M. Abotiz Non-Executive + Filipino Aboitiz Equity 22 years Bachelor of Science in Chairman, Aboitiz Equity N/A 0.00%
Director Ventures Commerce Aboitiz & Co., Inc. Ventures, Inc.
Major in Management,
Sta Clara University, President and CEO, Aboitiz Power
California, USA Aboitiz Equity Corporation
Ventures, Inc.
Bloomberry
Restorts
Corporation

International
Container Terminal
Services, Inc.

96 UnionBank 2018 Annual Report

 Direct (D) % Of Shares
Current Directorship and (against
Years
Type of Stockholder Relevant Relevant and/or Officership Indirect (ID) total
Name Age Nationality in the Shares
directorship Represented Qualification Experience (*in publicly listed outstanding
Board
companies) shares
*As of 31
December 2018 of the bank)

Erramon Isidro M. Non-Executive 62 Filipino Aboitiz Equity 25 years Bachelor of Science Executive Vice Aboitiz Equity (D) 330,319 1.00%
Aboitiz Director Ventures Major in Accounting President, Aboitiz Ventures, Inc. (ID)
and Finance, Equity Ventures, Inc. 9,545,997
Gonzaga University, Aboitiz Power
Washington, USA Chief Operating Corporation
Officer, Aboitiz
Equity Ventures

Sabin M. Aboitiz Non-Executive 54 Filipino Aboitiz Equity 7 years Bachelor of Aboitiz Equity Aboitiz Equity (D) 200,658 0.03%
Director Ventures Science in Business Ventures, Inc. Ventures, Inc. (ID) 176,487
Administration
Major in Finance, President and CEO,
Gonzaga University, Aboitiz One, Inc.
Washington, USA

Luis Miguel O. Aboitiz Non-Executive 54 Filipino Aboitiz Equity 5 years Bachelor of Science Senior Vice Aboitiz Power (D) 1,945,865 0.53%
Director Ventures in Computer President, Corporation (ID) 4,472,241
Engineering. Santa Power Marketing
Clara University, and Trading
California, USA
First Vice President,
Masters in Business Aboitiz Equity
Administration, Ventures, Inc.
University of
California, Berkeley,
USA

Manuel R. Lozano Non-Executive 48 Filipino Aboitiz Equity 2 years Bachelor of Science in Senior Vice President, (ID) 1,167 0.00%
Director Ventures Business Management, Aboitiz Equity
University of the Ventures, Inc.
Philippines
Chief Financial
Masters of Business Officer, Aboitiz
Administration, Equity Ventures, Inc.
The Wharton
School, University of Chief Financial
Pennsylvania, USA Officer, Aboitiz
Power Corporation
Chief Financial
Officer, Paxys, Inc.

UnionBank 2018 Annual Report 97

 CORPORATE GOVERNANCE

Direct (D) % Of Shares

Current Directorship and (against
Years
Type of Stockholder Relevant Relevant and/or Officership Indirect (ID) total
Name Age Nationality in the Shares
directorship Represented Qualification Experience (*in publicly listed outstanding
Board
companies) shares
*As of 31
December 2018 of the bank)

Juan Alejandro Non-Executive 34 Filipino Aboitiz Equity 5 months Bachelor of Science Assistant Vice (D) 23,573 0.00%
A. Aboitiz Director Ventures in Accounting, President for
Loyola Marymount Corporate Finance,
University, Aboitiz Equity
Los Angeles, Ventures, Inc.
California, USA
Department Head for
Masters in Business Billing and Collection,
Administration, Hong Visayan Electric
Kong University Company, Inc.
of Science and
Technology, Hong Regulatory Affairs
Kong, China Manager, Aboitiz
Power Corporation

Nina Perpetua D. Aguas Non-Executive 66 Filipino Insular Life 3 years Bachelor of Science President and Chief (D) 1 0.00%
Director Assurance Co. in Commerce Major in Executive Officer of
Accounting, University the Philippine Bank
of Santo Tomas, of Communications
Philippines
Managing Director-
Private Banking,
Asia-Pacific, ANZ
Banking Group, Ltd.
Singapore

Managing Director
for Corporate
Center Compliance,
Citigroup, Inc.
New York

Director, Insurance
Institute of Asia
and Pacific, Inc.

Director, World
Bank Group’s
Advisory Council
on Gender and
Development

98 UnionBank 2018 Annual Report

 Direct (D) % Of Shares
Current Directorship and (against
Years
Type of Stockholder Relevant Relevant and/or Officership Indirect (ID) total
Name Age Nationality in the Shares
directorship Represented Qualification Experience (*in publicly listed outstanding
Board
companies) shares
*As of 31
December 2018 of the bank)

Michael G. Regino Non-Executive 57 Filipino Social Security 1 Year Bachelor of Science Director and Philex Mining (D) 1 0.00%
Director Systems Major in Economics-Cum President, Corporation
Laude, Ateneo San Agustin
de Manila University, Services, Inc.
Philippines Master’s
Degree in Business Director and
Administration, Ateneo President, Agata
de Manila University, Mining Ventures, Inc.
Philippines
President, Golden
Haven Memorial
Parks, Inc.

President,
Camella Homes

Emmanuel F. Dooc Non-Executive 69 Filipino Social Security 3 years Bachelor of Science in Commissioner, (D) 1 0.00%
Director Systems Elementary Education, Insurance
Mabini Colleges, Commission
Philippines
Member,
Bachelor of Laws, Anti-Money
San Beda College of Laundering
Law, Philippines Council

Professional Senior Vice

Certificate Course President,
in Anti-Corruption, General
International Centre for Counsel and
Parliamentary Studies, Chief Compliance
London, United and Governance
Kingdom Officer,
Philam Group
Strategic Management of Companies
Program, College of
Insurance, New York, Vice President
USA for Claims,
American
Executive Management International
Program for Senior Assurance,
Government Officials, Hong Kong and
John F. Kennedy South East Asia
School of Government,
Harvard University,
Massachusetts, USA.

UnionBank 2018 Annual Report 99

 CORPORATE GOVERNANCE

Direct (D) % Of Shares

Current Directorship and (against
Years
Type of Stockholder Relevant Relevant and/or Officership Indirect (ID) total
Name Age Nationality in the Shares
directorship Represented Qualification Experience (*in publicly listed outstanding
Board
companies) shares
*As of 31
December 2018 of the bank)

Edwin R. Bautista Executive 58 Filipino N/A 3 years Bachelor of Science Acting President, Aboitiz Equity (D) 270,000 0.02%
Director in Mechanical International Ventures, Inc.
Engineering Exchange Bank

Senior Brand
Manager,
Procter and Gamble

Marketing and
Sales Director
for Guam and
the Philippines,
American Express
International

Group Head
for Transaction
Banking, Citibank

Chief Justice Independent 78 Filipino N/A 6 years Bachelor of Laws, Chief Justice of the San Miguel (D) 107 0.00%
Reynato S. Puno (Ret.) Director University of the Supreme Court of Corporation
Philippines the Philippines

Master of Comparative Associate

of Laws, Southern JustAssistant
Methodist University, Solicitor General,
Dallas, USA Office of the
Solicitor General
Master of Laws,
University of Associate Justice
California, in the Intermediate
Berkeley, USA. Appellate Court

Deputy Minister,
Ministry of Justice

Carlos Bell Independent 78 Filipino N/A 7 years Bachelor of President and (D) 123 0.00%
T. Raymond, Jr. Director Science in Business General Manager of (ID) 6,600
Administration, Eli Lily Philippines
Major in Marketing,
University of the President and
Philippines General Manager,
Eli Lily, Taiwan

100 UnionBank 2018 Annual Report

 Direct (D) % Of Shares
Current Directorship and (against
Years
Type of Stockholder Relevant Relevant and/or Officership Indirect (ID) total
Name Age Nationality in the Shares
directorship Represented Qualification Experience (*in publicly listed outstanding
Board
companies) shares
*As of 31
December 2018 of the bank)

Francisco S.A. Sandejas Independent 51 Filipino N/A 5 years Bachelor of Science in Managing Founder, (D) 16 0.00%
Director Applied Physics-First Narra Ventures
Summa Cum Laude,
University of the Founder and CEO,
Philippines Xepto Digital
Education
Masters in Electrical
Engineering, Stanford Founder and
University, USA Chairman of
Stratpoint
Doctor of Philosophy, Technologies
Electrical Engineering,
Stanford University, Director,
USA Quintic
Corporation

Director,
Colixo
Incorporated

Erwin M. Elechicon Independent 59 Filipino N/A 1 year Bachelor of Arts Chairman, Alliance (D) 65 0.00%
Director Degree in Economics- Silver Select Foods
Cum Laude, Ateneo Machine Digital International, Inc.
de Manila University, Communications, Inc.
Philippines
Director, Alliance
Finance Course, Select Foods
Columbia Business Internaional, Inc.
School, New York,
USA Founding Partner,
T88C Company
Marketing Course, Director, PETRONAS
Kellogg School Daganan
of Management, Berhad,(Malaysia)
Northwestern
University, Illinois,
USA

UnionBank 2018 Annual Report 101

 CORPORATE GOVERNANCE

Direct (D) % Of Shares

Current Directorship and (against
Years
Type of Stockholder Relevant Relevant and/or Officership Indirect (ID) total
Name Age Nationality in the Shares
directorship Represented Qualification Experience (*in publicly listed outstanding
Board
companies) shares
*As of 31
December 2018 of the bank)

Roberto G. Manabat Independent 72 Filipino N/A 1 year Bachelor of Member, Adviser on (D) 65 0.00%
Director Science in Business Board of Trustees, Corporate
Administration- Institute of Governance,
Magna Cum Laude, Corporate Directors SM Investment
University of the East, Corporation
Philippines, First General
Accountant,
Master in Business Securities and
Administration, Exchange
Asian Institute Commission
of Management,
Philippines Chairman and
Chief Executive
Officer,
KPMG R.G.
Manabat & Co.

Member,
Global Council of
KPMG International

Member,
Asia-Pacific
Board of KPMG
International

Chairman,
Auditing and
Assurance
Standards Council

Consultant,
Securities and
Exchange
Commission

Partner,
Sycip, Gorres
Velayo & Co.,

102 UnionBank 2018 Annual Report

 BOARD DEMOGRAPHICS
BOARD MEETINGS FOR 2018

TYPE OF DIRECTORSHIP
Justo A. Ortiz 18

Erramon Isidro M. Aboitiz 18

Executive Non-Executive Independent
Edwin R. Bautista

Sabin M. Aboitiz
16

17
7% 60% 33%
Luis Miguel O. Aboitiz 18

Manuel R. Lozano 18

Emmanuel F. Dooc 18
GENDER
Michael G. Regino* 16

Nina Perpetua D. Aguas 18

Chief Justice Reynato S. Puno (Ret.) 18 93% 7%

Carlos B. Raymond Jr. 18 Male Female
Dr. Francisco S.A. Sandejas 18

Erwin M. Elechicon* 11

11
AGE
Roberto G. Manabat*

Juan Alejandro M. Aboitiz** 1

Jon Ramon M. Aboitiz*** 12

*Members since 25 May 2018

**Members since 14 December 2018
40-55 years old 56-70 years old 71 years old and above
***Died on 1 December 2018
Number of meetings held in 2017: 18
33% 47% 20%

UnionBank 2018 Annual Report 103

 CORPORATE GOVERNANCE

BOARD COMMITTEES

EXECUTIVE COMMITTEE (ExCom) 2018 ATTENDANCE RISK MANAGEMENT COMMITTEE 2018 ATTENDANCE

Jon Ramon M. Aboitiz* 15 Jon Ramon M. Aboitiz* 4

Nina Perpetua D. Aguas 20 Francisco Ed. Lim* 4

Justo A. Ortiz 21 Justo A. Ortiz 10

Francisco S.A. Sandejas** 11 Carlos Bell T. Raymond, Jr. 11

Erramon Isidro M. Aboitiz 21 Erramon Isidro M. Aboitiz 10

Amado D. Valdez*** 1 Stephen George A. Paradies* 4

Stephen George A. Paradies** 7 Emmanuel F. Dooc* 5

Michael G. Regino**** 5 Michael G. Regino** 4

Sabin M. Aboitiz***** 11 Erwin M. Elechicon** 7

Edwin R. Bautista***** 11 Roberto G. Manabat** 7

Emmanuel F. Dooc***** 8 Francisco S.A. Sandejas** 7

*Died on 1 December 2018 **Member until 25 May 2018 *Member until 25 May 2018 **Member from 25 May 2018
***Resigned on 23 February 2018 ****Elected on 7 March 2018 until 25 May 2018 Number of meetings held in the year: 12
*****Member from 25 May 2018
Number of meetings held in the year: 22

The Executive Committee (ExCom) is composed of seven (7) members
who have the duty to exercise functions and powers which are reserved for
the Board during intervals between Board meetings. All matters passed and
acted upon by the ExCom are reported to the Board of Directors and subject
to revision and/or alteration/s provided that no rights or third persons are
affected thereby.
Risk Management Committee (RMC) consists of seven (7) members of the
Board who are tasked to develop appropriate strategies for preventing the
occurrence of risk events and minimizing losses. The Committee oversees
the Bank’s risk management system to ensure that it remains effective,
authority limits are observed, and immediate corrective actions are taken
whenever limits are breached or risk events occur. The RMC also develops
and implements appropriate risk management strategies and defines the
measures for managing and controlling its major risks.

104 UnionBank 2018 Annual Report

 AUDIT COMMITTEE 2018 ATTENDANCE TRUST COMMITTEE 2018 ATTENDANCE

Carlos Bell T. Raymond, Jr. 12 Manuel R. Lozano 12

Stephen George A. Paradies* 4 Emmanuel F. Dooc 12

Chief Justice Reynato S. Puno (Ret.) 10 Francisco Ed. Lim* 5

Amado D. Valdez** 1 Edwin R. Bautista 12

Nina Perpetua D. Aguas 10 Justo A. Ortiz** 7

Michael G. Regino*** 8

Roberto G. Manabat**** 7

Luis Miguel O. Aboitiz**** 3

Francisco S.A. Sandejas**** 6

*Member until 25 May 2018 **Resigned on February 23, 2018 *Member until 25 May 2018 **Member from 25 May 2018
***Member from 7 March 2018 ****Member from 25 March 2018 Number of meetings held in the year: 12
Number of meetings held in the year: 13

The Audit Committee (AuditComm) consists of five members who are
knowledgeable in accounting, auditing and related financial management
matters who are tasked to provide oversight on the Bank’s financial reporting
and internal control, as well as internal and external audit function. Moreover,
the Audit Committee is mandated to monitor and evaluate the adequacy and
effectiveness of the Bank’s systems of internal control, risk management and
corporate governance.
The Trust Committee (TrustComm) is composed of five (5) members who
acts within the sphere of authority provided for in the Bank’s By-Laws and/
or as may be delegated by the Board such as, but not limited to the 1)
acceptance and closing of trust and other fiduciary accounts; 2) initial review
of assets placed under the trustee’s fiduciary custody; 3) the investment,
reinvestment and disposition of funds and properties; and the review of
trust and other fiduciary accounts at least once every twelve (12) months to
determine the advisability of retaining or disposing of the trust or fiduciary
assets and/or whether the account is being managed in accordance with the
instrument creating the trust or fiduciary relationship.

UnionBank 2018 Annual Report 105

 CORPORATE GOVERNANCE

MARKET RISK COMMITTEE 2018 ATTENDANCE OPERATIONS RISK MANAGEMENT COMMITTEE 2018 ATTENDANCE

Erramon Isidro M. Aboitiz 11 Luis Miguel O. Aboitiz 7

Emmanuel F. Dooc 8 Carlos Bell T. Raymond, Jr. 7

Justo A. Ortiz 10 Amado D. Valdez* 1

Edwin R. Bautista* 5 Michael G. Regino* 6

Chief Justice Reynato S. Puno (Ret.) 11 Francisco S.A. Sandejas*** 5

Manuel R. Lozano** 5 Justo A. Ortiz*** 4

Erwin M. Elechicon** 7 Erwin M. Elechicon*** 5

Nina Perpetua D. Aguas** 6 Roberto G. Manabat** 5

Roberto G. Manabat** 7

Carlos Bell T. Raymond, Jr.** 7

Francisco S.A. Sandejas** 7

*Member until 25 May 2018 **Member from 25 May 2018 *Resigned on 23 February 2018 **Member from 7 March 2018
Number of meetings held in the year: 12 ***Member from 25 May 2018
Number of meetings held in the year: 7

The Market Risk Committee (MRC) consists of six (6) members whose
task is to set policies and standards for market risk, interest rate risk and
liquidity risk in terms of identification, measurement, monitoring and control.
The Committee’s specific duties include, among others, management and
reporting of market risk, interest rate risk in the banking book and liquidity risk.
The Committee is also tasked to ensure that the risk management process for
these risks satisfy corporate policy, review of the Treasury Portfolio, review and
endorsement of Treasury-related products program and manuals for board
approval, approval of models and systems used to calculate market, interest
and liquidity risks and promotion of continuous development of risk programs
and infrastructure.
The Operations Risk Management Committee (ORMC) is composed of five
(5) members of the Board who are tasked to determine the adequacy of the
Bank’s policies, procedures, organization and resources for preventing, or limiting
unexpected loss due to deficiencies in information systems, business, operational
and management processes, employee’s skills and supervision, equipment and
internal controls. The Committee is also asked to conduct periodic or special risk
assessments in various businesses and operating units of the Bank to proactively
uncover operational risks that can result to actual loss or damage, results of
internal audits, BSP examinations and investigations of administrative cases that
highlight trends indicative of present or emerging exposures to specific operational
risks, risk assessment of major information systems to be implemented in the
Bank, regulatory compliance issues, whether currently existing or anticipated to
arise as a result of new regulations and business continuity strategies, plans and
procedures.

106 UnionBank 2018 Annual Report

 CORPORATE GOVERNANCE COMMITTEE 2018 ATTENDANCE TECHNOLOGY STEERING COMMITTEE 2018 ATTENDANCE

Chief Justice Reynato S. Puno (Ret.) 7 Francisco S.A. Sandejas 13

Jon Ramon M. Aboitiz 6 Luis Miguel O. Aboitiz 13

Erramon Isidro M. Aboitiz* 2 Edwin R. Bautista* 6

Justo A. Ortiz* 7 Erwin M. Elechicon* 8

Francisco Ed. Lim* 2 Michael G. Regino* 4

Emmanuel F. Dooc 7

Carlos Bell T. Raymond, Jr. 7

Nina Perpetua D. Aguas** 5

Erwin M. Elechicon** 5

Roberto G. Manabat** 5

Francisco S.A. Sandejas** 5

*Member until 25 May 2018 **Member from 25 May 2018 *Member from 25 May 2018
Number of meetings held in the year:7 Number of meetings held in the year:13

The Corporate Governance Committee (CGC) is comprised of seven (7)
members of the Board whose primary task is to recommend policies to
the Board based on regulations of the various regulatory agencies of the
bank. The Committee also has the responsibility to provide oversight to the
implementation of the corporate governance framework and ensure the
adoption of corporate governance policies, its review and regular update as
well as its consistent implementation in form and substance, among others.
The Technology Steering Committee (TSC) is composed of seven (7)
members who are responsible in overseeing the overall information
technology (IT) strategy of the Bank vis a vis its alignment with the Bank’s
business strategies and objectives. The Committee also monitors
IT performance, status of major projects and other IT-related issues.

UnionBank 2018 Annual Report 107

 CORPORATE GOVERNANCE

RELATED PARTY TRANSACTIONS COMMITTEE 2018 ATTENDANCE CHANGES IN THE BOARD

12
Outgoing Reason Incoming
Chief Justice Reynato S. Puno (Ret.)

Carlos Bell T. Raymond, Jr. 12

Amado D. Valdez Resignation Michael G. Regino
Francisco S.A. Sandejas 12

Stephen George A. Paradies Not re-elected Erwin M. Elechicon

Francisco Ed. Lim Not re-elected Roberto G. Manabat

Jon Ramon M. Aboitiz Death Juan Alejandro A. Aboitiz

Number of meetings held in the year:12

The Related Party Transactions Committee (RPT) is composed of

five (5) members, three (3) of which are Independent Directors including
the Committee’s Chairman with the Head of Internal Audit and the Chief
Compliance Officer as non-voting members. The Committee is primarily
responsible for assisting the board in fulfilling its corporate governance
responsibilities on related party transactions and reviewing and endorsing
all significant RPT for board approval or confirmation.

108 UnionBank 2018 Annual Report

EXECUTIVE OFFICERS
Edwin R. Bautista, 58, Filipino, serves as Director and President & Chief Executive
Officer of the Bank. He was the President and Chief Operating Officer of the Bank from January
1, 2016 to December 31, 2017. He also served as Senior Executive Vice President of the Bank
from 2011 to 2015. He acted as President of the International Exchange Bank in 2006 until its
merger with UnionBank. He was Senior Vice-President of UnionBank from 1997 to 2001 and
Executive Vice President from 2001 to 2011. He previously worked as Senior Brand Manager at
Procter and Gamble, Marketing and Sales Director of the Philippines and Guam at American
Express International and Vice President/Group Head of Transaction Banking at Citibank.
Henry Rhoel R. Aguda, 50, Filipino, holds the position of Senior Executive
Vice President, Chief Technology and Operations Officer and Chief Transformation
Officer of the Bank. He was a former Chief Information Officer of Globe Telecom, Inc*.
He served as the Chief Technology Officer and Senior Vice President for the IT Group
of the Government System Insurance Services (GSIS) and the Group Chief Information
Technology Officer of Digitel Telecommunications Philippines. He was also the Chief
Operations Officer and Chief Financial Officer of Nextel Communications Philippines.
In addition to this, he has also worked with Fujitsu Philippines, Bayantel, and Computer
Information Systems Inc. He was awarded ASEAN CIO of the Year in 2010 in the
Government Sector by the International Data Group.
Jose Emmanuel U. Hilado, 55, Filipino, holds the position of Senior Executive
Vice President, Chief Financial Officer and Treasurer of the Bank. He has more than 30
years of banking experience behind him and has held various positions in Treasury, Trading,
Investments, Correspondent Banking, Bank Operations, Human Resources, and Purchasing.
Prior to joining UnionBank, he was the Senior Executive Vice President and Chief Operating
Officer of East West Bank Corporation. He was also the Treasurer of Rizal Commercial
Banking Corporation* for 6 years and Chief Trader at Banco De Oro Unibank* (“BDO”)
for 4 years. He also held positions in International Business Development of Far East Bank
& Trust Company and in Treasury Trading of Equitable PCI Bank.
While at BDO, he was also the Treasurer of BDO Private Bank for 3 years. He is currently
a member of various industry-related associations such as the Bankers Association of the
Philippines’ Open Market Committee, Financial Executive Institute of the Philippines (FINEX),
Money Market Association and ACI Philippines and the Philippine Interpretations Committee
(PIC) representing industry.
Mary Joyce S. Gonzalez, 60, Filipino, holds the position of Executive Vice President
and Center Head of Retail Banking of the Bank. She is also the Chairman of First Union
Insurance and Financial Agencies, Inc. She started her career in Unionbank as Branch
Manager of the Main Office Branch in 1994. After a few months, she was given an expanded
role as Sales Director of the Makati 1 Region. Her stint as Sales Director over the years saw
major growth in the deposit and fund generation business, and the development of a very
capable sales management team. In recognition of her contribution to the business,
Joyce was promoted to Senior Vice President and was given an additional task to
develop and lead Customer Segment Management and bring greater customer centricity
in UnionBank’s pursuit in delighting its customers, given her seasoned abilities, and
exposure in the business of Retail Banking.
Angelo Dennis L. Matutina, 55, Filipino, holds the position of Executive Vice President
and Center Head of Channel Management of the Bank. As Channel Management Head, he led
several projects in six sigma and certification to the International Organization for Standards
relating to quality management and is responsible to the operations of all business processes
including branches, treasury & trust, loans & trade, cash management & card operations,
call center, shared services and business process transformation. Prior to this assignment,
he was head of Branch Operations Management from 2011-2014, responsible for operations
of all Unionbank branches; head of Business Network Management from 2002-2011,
responsible for various head office operating units handling cash management, electronic
banking, central processing services, admin & general services, accounting, reconcilement
& financial services, among others. Prior to Unionbank, he was previously Assistant Vice
President in Citibank.
Dennis D. Omila, 46, Filipino, holds the position of Executive Vice President and Chief
Information Officer of the Bank. He was the former Senior Vice President of the Infrastructure
Engineering and Service Operations cluster of Globe Telecom, Inc. from 2014 to 2016.
He was also the President and COO of NetX Technology Solutions, Inc. from 2002 to 2007.
His certifications include Certified Information Systems Security Professionals (CISSP),
Certified Check Point Security Instruction (CCSI), Certified Check Point Security Engineer
(CCSE), Certified Check Point Security Administrator (CCSA), Vulnerability Assessment
Specialist, Threat Assessment Specialist, Certified Core and Edge ATM Network Specialist
(Fore Systems), Certified Networks Administrator (Nortel Networks), Certified SINIX, IRIX,
Solaris and BSD UNIX Administrator and Business Continuity Certified Planner (BCCP).
John Cary L. Ong, 45, Filipino, holds the position of Executive Vice President and
Center Head of Transaction Banking of the Bank. He is also currently the Chairman of
the Steering Committee of PESONet, the first Automated Clearing House established
under the National Retail Payments System framework of the Bangko Sentral ng Pilipinas.
He has over 20 years of experience in banking and banking-related institutions such as
Citibank, Deutsche Bank and Misys International Banking Systems where he held various
positions in different areas – transaction banking, cash management, trade finance, trust,
asset management, fixed-income brokerage, treasury operations and treasury systems.
He was also an Assistant Instructor at Ateneo de Manila University teaching Managerial
Accounting, Business Statistics and Operations Management from 1995-1999.
Manuel G. Santiago, Jr., 59, Filipino, holds the position of Executive Vice President
and Chief Mass Market and Financial Inclusion Executive leading the banks efforts to serve the
unbanked and underbanked markets. Prior to this he was the Senior Vice President
UnionBank 2018 Annual Report 109
 CORPORATE GOVERNANCE
and Head of the Consumer Finance Center managing the Home Loans, Auto Loans,
Personal Loans and Credit Card businesses. He previously worked as Director of Operations
in American Express Bank in Indonesia and as Director of Operations in American Express
International, Manila. He also held various positions in Citibank N.A., Manila.
Roberto F. Abastillas, 58, Filipino, holds the position of Senior Vice President and
Center Head of Commercial Banking of the Bank. He was previously Senior Vice President
and Head of the Account Management Center I at International Exchange Bank.
From 1987 to 1995, he was Vice President and Head of the Account Management
Group for United Coconut Planters Bank.
Atty. Arlene Joan Roxas Tanjuaquio-Agustin, 50, Filipino, holds the position of
Senior Vice President and Head of Private Banking Group of the Bank. Atty. Agustin brought
with her more than two decades of experience and expertise in Treasury and Trust. She started
her career in banking in 1990 as a Trader in Asiatrust Bank, then moved to China Banking Corp.
as an Assistant Manager for Treasury. In 1997, she transferred to Jade Progressive Savings
and Mortgage Bank where she became the Senior Assistant Vice President-Treasurer.
After her two-year stint, she went to join Robinsons Bank and became its First Vice President,
Head of Treasury and concurrent Head of Legal & Credit Administration. From 2007 to 2009,
she worked for GE Money Bank where she was appointed as First Vice President and Treasurer.
When GE Money Bank was acquired by BDO Unibank, Inc.*, she was appointed as the
Customer Solutions Desk Head of the Treasury Capital Markets and Derivatives Division
and at the same time served as the First Vice President and Treasurer of BDO Elite Savings
Bank until 2011. In the same year, she joined Maybank Philippines, Inc. where she became the
Senior Vice President, Treasurer and Head of Global Markets.
Francis B. Albalate, 48, Filipino, holds the position of Senior Vice President and
Financial Controller of the Bank. He is a Certified Public Accountant. Prior to joining the
Bank, he was an Audit Partner at Punongbayan & Araullo from 2003 to 2011. He was a
former Financial Services Industry Audit Leader at Deloitte Philippines from 2011 to 2016.
He worked as Head of the Transaction Advisory Services from 2007 to 2009 and Audit
Senior Manager from 1999 to 2003.
Admiral Feliciano A. Angue, AFP (Ret.), 63, Filipino, (retired from the Bank effective
30 March 2019) holds the Corporate Rank of Senior Vice President and is the Head of
Business Services Group and concurrent Chief Security Officer of the Bank. He has over
37 years of dedicated, professional and distinguished military service in the Armed Forces
of the Philippines (AFP). Earned the reputation of being an effective leader and efficient
manager in various positions of major responsibility, ultimately rising to a three-star General
(Vice Admiral) Command Position in the AFP. He has since successfully transitioned into
the private sector, particularly the banking business for nearly eight years. From his entry
point as Chief Security Officer, he was gradually given additional duties and responsibilities
which involved handling ten different Groups and Divisions in the main structure of the
Bank now known as the Business Services Group.
110 UnionBank 2018 Annual Report
Paolo Eugenio J. Baltao, 47, Filipino, holds the position of Senior Vice President
and Head of EON Banking Group of the Bank. Prior to joining the Bank, he was the Head
of M-Commerce/President of G-Xchange, Inc. (GXI), a wholly owned subsidiary of Globe
Telecom, handling the mobile commerce business. He was also the Category Manager of
Rizal Commercial Banking Corporation* from June 2000 to December 2004; Electronic
Products Officer of Equitable PCI Bank from November 1996 to May 2000; and Associate
Brand Manager of United Laboratories from May 1992 to October 1994.
Atty. Joselito V. Banaag, 48, Filipino, holds the position of Senior Vice President,
Corporate Secretary, and General Counsel of the Bank. He was the former Head of the
Legal and Compliance Division and Corporate Governance of GT Capital Holdings, Inc.
from 2012 to 2015. He also previously worked at the Philippine Stock Exchange (PSE) as
the General Counsel and concurrently, as Chief Legal Counsel of the Securities Clearing
Corporation of the Philippines (SCCP). He was also Officer-in-Charge of the Exchange’s
Issuer Regulation Division. Prior to that, he held various positions in SGV & Co., Cayetano
Sebastian Ata Dado & Cruz Law Offices, PNOC Exploration Corporation, and Padilla
Jimenez Kintanar & Asuncion Law Offices.
Antonio Sebastian T. Corro, 46, Filipino, holds the position of Senior Vice President
and Head of Cards Business of the Bank. Prior to joining the Bank, he held various positions
from 2001 to 2017 in MasterCard Asia/Pacific Pte. Limited such as Country Manager
in Thailand & Myanmar, leading the execution of business development strategies to
expand MasterCard products and services throughout Thailand and Myanmar; Country
Manager and Chief Representative in Indochina Region, guiding the member banks across
the Indochina region Vietnam, Cambodia, Laos and Myanmar, through the execution of
franchise related activities, among others; and Vice President for Operations and Member
Relations in the Philippines. He also held various positions in Standard Chartered Bank
from 1999-2001.
Ramon Vicente V. De Vera II, 43, Filipino, holds the position of Senior Vice President
and Head of Fintech Business Group of the Bank. He joined the Bank in 2010 as Business
Development Director and was tasked to fan the innovation flames in the Bank. He also
led Corporate Product Management which handles the bank’s core transaction banking
services. He is a founding member and Vice Chairman of the Blockchain Association of
the Philippines whose primary purpose is to educate, regulate and innovate on blockchain
technology. He is also a co-founder and director of Tech-Up Pilipinas – a movement that
seeks to help small and medium enterprises, individuals, and large corporates benefit
from technological advancements in order to “tech-up” the Philippines and pave way for
inclusive prosperity; and founding member and board director of the Fintech Association
of the Philippines which is part of the ASEAN Fintech Association. He has an extensive
20-year work experience covering banking (Citibank), telecommunications (Globel/Singtel),
and broadcast/digital media (TV5/ABC), with roles spanning product management, sales,
finance, strategic planning, and business development.
 Ana Maria A. Delgado, 38, Flipino, holds the position of Senior Vice President,
Center Head of Consumer Finance and Chief User Experience Officer of the Bank.
She is also a Director of Aboitiz Equity Ventures, Inc. She is the Treasurer of the Weather
Philippines Foundation from 2016 to present. She started her career with the Bank as a
Product Manager under the Retail Banking Center. Prior to joining the Bank, she was an
Assistant Vice President for Product Management at Citibank, N.A. from 2006 to 2008.
Ramon G. Duarte, 54, Filipino, holds the position of Senior Vice President and Head
of Platform Development Group of the Bank. He was previously Chief Technology Officer
of Dotenable, Inc. from 2000-2001; Head of Electronic Banking Transaction Services at
ABN AMRO Philippines from 1999 to 2000; and Assistant Vice President of Product
Management under Global Transaction Services at Citibank from 1996 to 1999.
Antonino Agustin S. Fajardo, 55, Filipino, holds the position of Senior Vice President
and Center Head of Corporate Banking of the Bank. He is also a Senior Credit Officer and
has had broad experience in the corporate and consumer sectors of the Bank in various
leadership roles. He headed the Mortgage Business from 2013 to 2017, and in the early
years of the Bank from 1994 to 1998, also played key roles in the Specialized Lending
Group, which was involved in general project finance and the on-lending of official
development funds to key accounts. Prior to joining the Bank, he was Project Officer for
the Private Development Corporation of the Philippines.
Ronaldo Francisco B. Peralta, 55, Filipino, holds the position of Senior Vice
President and Chief Risk Officer of the Bank. He started his banking career with Citibank,
N.A. (Manila, Philippines) in 1985, holding various positions in Correspondent Banking,
Operations, Financial Control, Credit Risk and Relationship Management, with his last role
being the Chief of Staff of the Citi Country Head in 2007. In November 2007, he joined
the Australia and New Zealand Banking Group Limited, taking on different Risk roles
such as Head of Wholesale Credit Decisioning (Manila Hub), Head of Wholesale Portfolio
Management (Manila Hub/ Hong Kong), Senior Manager-Lending Services Asia
(Hong Kong), Head of Early Alerts Team (Melbourne, Australia) and Risk Executive-Asia
Pacific Risk (Melbourne, Australia). He also worked as Vice President/Team Head in the
Corporate Banking Group of the Bank of the Philippine Islands, from June to October 2014.
Michaela Sophia E. Rubio, 54, Filipino, holds the position of Senior Vice President,
HR and Corporate Social Responsibility Director of the Bank. She joined the Bank in 2004
as Vice President and handled the Human Resource Services, Training and Organization
Development divisions. Subsequently, she became the Deputy HR Director. Prior to joining
the Bank, she was the Vice President and Country Human Resource, Quality and Corporate
Communications Head in the Philippines of the global electrical and power company, Asea
Brown Boveri (ABB) from 1999 - 2001. She worked from 2001 - 2003 as a Senior Consultant
in OTi Consulting Singapore working with government owned and private organizations on
Singapore Quality Class/Award, People Developer, Industry Capability Upgrading (ICAP) and
Work Life and Work Redesign of which she was certified by SPRING Singapore.
Myrna E. Amahan, 58, Filipino, holds the position of First Vice President and
Chief Audit Executive. She is a Certified Public Accountant (CPA), Certified Internal Auditor
(CIA), Certified Information Systems Auditor (CISA) and has the designation of Certification in
the Governance of Enterprise Information Technology (CGEIT). On top of these certifications in
the field of internal audit and information technology, Mrs. Amahan is a qualified internal audit
external validator, having undertaken the necessary training as well as passing the required
exams. As qualified external validator, Mrs. Amahan is certified to conduct quality assessment
of internal audit units as required under the International Standards for the Professional Practice
of Internal Auditing.
She previously worked as supervising IS auditor at Equitable-PCI Bank from 1996 to 2000
and was Head of the System Consultancy Services of the Commission on Audit from 1993
to 1996. Also, while with the Commission on Audit, Mrs. Amahan was among the government
auditors sent to various United Nations agencies to conduct information systems audit
Joselynn B. Torres, 60, Filipino, holds the position of First Vice President and
Chief Compliance and Corporate Governance Officer of the Bank. With over thirty
years of experience in the financial and compliance services industries, working in the
areas of business development and mergers and acquisitions, audit, compliance and
quality assurance, most of which were spent in the banking sector. She was the Business
Development Head of City Savings Bank, Inc. (a UnionBank subsidiary), heading the
product development function and assisted in the microfinance business acquisitions.
As Senior Vice President, previously handled Business Development, in charge of mergers
& acquisitions, for Philippine Bank of Communications* (PBCOM); and Compliance and
Audit responsibilities for Citibank N.A. Philippines, responsible for the promotion of control
and compliance awareness among the employees of the organization.
Alan Jay C. Avila, 45, Filipino, holds the position of Vice President and Trust Officer
of the Bank. He was the Head of Business Development and Marketing of the Bank from
March 7, 2018 to November 30, 2018. He was previously the Assistant Vice President and
Front Office Management Head of Global Markets, Maybank Philippines, Inc. and also served
as its Trust Officer from September 2011 to March 2016. He started his career with Keppel
IVI Investment, Inc. as Senior Associate from August 1995 to June 2001. He later joined GE
Money Bank and held positions such as Senior Manager for Treasury Department and Acting
Trust Officer from June 2001 to February 2010. He was also Business Development Officer
(Corporate Group) of Banco De Oro Unibank, Inc. Trust Department from February 2010
to September 2011.
Atty. Buenaventura S. Sanguyo, Jr., 49, Filipino, holds the position of Vice President,
Deputy Head of the Legal Division and Assistant Corporate Secretary of the Bank. Prior
to joining the Bank, he was the Assistant Vice President and General Counsel of The
Philippine Stock Exchange, Inc. from 2012 to 2015. He was previously a Partner at Castro
Sanguyo Margarejo and Rosas Law Office. He was also engaged as an Associate of
Reyes Francisco & Associates Law Office and Senior Tax Consultant at Isla Lipana & Co./
Pricewaterhouse Coopers.
UnionBank 2018 Annual Report 111
 CORPORATE GOVERNANCE

Year on year, the members of the board of the Bank undergo a 2-day
EXECUTIVE SELECTION PROCESS
Strategic Planning Session where various subject matter experts covered topics
relevant to the bank’s strategy of digital transformation. Further, the bank
The Bank applies a stringent
complies with the annual conduct of mandatory learning refresher courses on
screening and selection process of
good corporate governance and anti-money laundering.
its senior management team to
The Bank has a corporate university that provides for the continuous learning
establish that candidates have been
and development of all senior executives. Ongoing internal and external trainings
assessed against the fit and proper
on banking and financial services, regulations and compliance, digital and
standards. The process identifies the
technology, as well as leadership and management are available through various
best candidates qualified to undertake
learning channels and media. Members of the senior management team also learn
a role in the Bank’s management
from one another via a quarterly learning session – the Leaders’ Learning Circle
team, as well as ensures an alignment
(LLC) – attended by executives. During these LLCs, local and global thought
with the Bank’s DNA – its culture and
leaders are invited by the Bank to share their expertise and views on Banking,
values. It includes validation with key
leadership, and innovation.
ManCom members through interviews, with all new members of the senior
management team confirmed by the Board otf Directors.

ORIENTATION AND EDUCATION PROGRAM REMUNERATION POLICY

The Bank’s Revised Manual The Compensation and
on Good Corporate Governance Remuneration Committee oversees the
establishes the requirement for implementation of the programs for
the creation of an orientation and the salaries and benefits of the Bank’s
continuing education program for Senior Management and Directors,
the members of its board. Specifically, as may be applicable. Executive
Article III Section VI delegates Directors receive compensation in the
the responsibility of ensuring the form of guaranteed salaries, per diem
availability of proper orientation for meeting attendance and variable
and continuing education pay or profit sharing in accordance to
opportunities to the Chairman of the the By-Laws. Non-executive Directors
Board with the aid of the Corporate Governance Committee and the Compliance receiver per diems of Php 120,000.00 for each attendance in meeting except
and Corporate Governance Office of the Bank thru the Chief Compliance Officer for the Chairman of the Board who receives Php 150,000,00. A Committee
as stated in Section IX of the same document. Chairman receives Php 85,000.00 per meeting while a member receives
Php 60,000.00.
The compensation policies and procedures for Senior Management follow
a market-based compensation structure, anchored on the principles
of meritocracy or pay-for-performance.

112 UnionBank 2018 Annual Report

 The Bank maintains its own Performance Management and Career
PERFORMANCE ASSESSMENT PROGRAM
Development System called My Performance and MyCareer. This is a year-round
The Board Assessment exercise where all employees including senior management are required to
process is undertaken annually to discuss performance and development feedback. My Performance and My Career
measure board efficiency through focus on employee development which contributes to improved performance,
a balanced and objective platform employee engagement and positive business results.
against the goals that the Board
has set at the beginning of the
year, roles and responsibilities
as mandated by the various
RETIREMENT AND SUCCESSION
regulatory agencies as well as
The Bank believes that building
the Bank’s own Manual on Good
a bank of enduring greatness
Corporate Governance. Further,
entails building a strong base of
the assessment provides the
leaders who can steer the Bank
Board and its committees valuable
towards digital transformation. In
information that can be used as a guiding tool in succession planning,
this regard, the Bank through the
objective setting as well as analysis of whether they have accomplished
conduct of talent review identifies
the purpose for which they were established and to act to address any
successors to critical positions to
concern emanating therefrom. The Assessment was enhanced in 2017 to
ensure leadership continuity.
include components designed to gather an all-inclusive view of the Board’s
The succession management policy
performance. The Assessment now consists of three (3) components, namely,
called Building Organizational
(1) Self-Assessment as collegial body (2) Individual Self-Assessment and
Muscle (BOM 2.0) promotes line manager accountability in understanding
(3) Independent Assessment. Each component is considered vital to ensure
talent gaps and growing high potential talents for the future while ensuring
that the evaluation is comprehensive and objective by allowing peer review
businesses are aligned thus making future-proof succession plans.
of the board as a collegial body, individual self-review and an executive
review by the Corporate Secretary, Chief Risk Officer and the Chief
Compliance and Corporate Governance Officer. This unique take on the
evaluation showcases the Bank’s dedication to a transparent governance
regime. In 2018, the Board conducted its assessment exercise from June
to July.

UnionBank 2018 Annual Report 113

 CORPORATE GOVERNANCE

The Bank strictly complies with set regulatory standards regarding limits The Related Party Transactions Committee or RPT Committee is responsible for
on board seats and length of membership for Independent Directors. assisting the Board in fulfilling its governance responsibilities on related party transactions
(RPTs), as specified in the Related Party Transaction Policy, by:

60 years old =
Limit Board Seat Limit
Normal
for Independent for all directors =
Retirement Evaluating existing
Directors = 5 publicly listed Periodic
Age for bank relations between and reporting
9 consecutive year companies
employees among businesses to the board
and counterparties for
proper identification and Overseeing the
monitoring relationships implementation
of the system for
RELATED PARTY TRANSACTIONS identifying, monitoring,
measuring, controlling
It is the policy of the Bank to ensure that related party transactions are all entered and reporting RPTs,
into at arm’s length standard. The Bank has in place a Related Party Transaction Policy including periodic
Review and review of RPT policies
approved by the Board of Directors and strictly implemented across all covered Evaluating all material endorse all and procedures
transactions in the Bank. It has guidelines to ensure fairness and transparency. It ensures RPTs to ensure that significant RPTs
these are not undertaken which require
the appropriate handling and monitoring of Related Party Transactions which cover on more favorable final Board
a wider definition than DOSRI and encompass a broader spectrum of transactions economic terms; approval or
(i.e. not limited to credit exposures). These transactions are made and entered into confirmation
substantially on the same terms and conditions as transactions with other individuals
and businesses of comparable risks. Hence, they likewise go through the same process
applicable to ordinary or unrelated party transactions as set forth in the Bank’s internal
guidelines or policies. Ensure that
It has a provision on transactions that could pose a conflict of interest, material transactions with
Ensure
risk or potential abuse to the Bank and its stakeholders. With this, the members of the appropriate related parties
disclosure are subject
Board, stockholders and management are obliged to disclose any financial interest in to periodic
any transaction or matter affecting the Bank especially material facts pertaining to the audit process
transaction including whether the terms and conditions of the proposed related party
transaction and deviations, if any. Likewise, the Bank officers or employees who are
related to the transacting party are required to abstain from the discussion, approval and
management of the transaction.

114 UnionBank 2018 Annual Report

DETAILS OF RELATED PARTY TRANSACTIONS AS OF 31 DECEMBER 2018

Parent Bank / Related Relationship Type of Amount / Outstanding Terms

QB & Subsidiary Counterparty between the Parties Transaction Contract Price/ Balance
/Affiliate Approved Line

A. Bank/QB            

a. Subsidiaries and Affiliates Philex Mining Corporation Affiliate-common Renewal of existing credit P727.60 M Not availed Credit Lines carry
stockholder SSS facilities standard Terms and
between the Borrower Conditions.
and the Bank

a. Subsidiaries and Affiliates Aboitiz Land, Inc Affiliate REM; Housing loan of P250.29 M 0 Developer's undertaking
(continuation) individual borrower buying a to deliver the TCT/CCT
property from Aboitizland Inc.

a. Subsidiaries and Affiliates Davao Light Affiliate Bills Purchased P141.314 M 0 Short term
(continuation) and Power Co. Inc

a. Subsidiaries and Affiliates Tsuneishi Heavy Affiliate Renewal of short term credit P1.126 B 0 Short term
(continuation) Industries (Cebu), Inc faciltiies

a. Subsidiaries and Affiliates Redondo Peninsula Affiliate Commitment fees due and P10 B 0 Credit lines carry
(continuation) Energy, Inc payable be accrued standard terms and
conditions

a. Subsidiaries and Affiliates City Savings Bank, Inc Subsidiary Accounts Receivable P83.409 M 0 Short term
(continuation) (CSB)

      Bills Purchased P4.258 B   Short term

a. Subsidiaries and Affiliates Philippine Resouces Savings Subsidiary Short Term Loan P1.652 B 0 5 years
(continuation) Banking Corporation

b. DOSRI The Insular Life Assurance Stockholder Renewal of credit facilities P100 M 0 Credit lines carry
Company Ltd standard Terms and
Conditions

b. DOSRI Aboitiz Group Related Interest Renewal of Credit Facilities P18.41 B 0 Credit Lines carry
(continuation) standard Terms and
Conditions

UnionBank 2018 Annual Report 115

 CORPORATE GOVERNANCE

Parent Bank / Related Relationship Type of Amount / Outstanding Terms

QB & Subsidiary Counterparty between the Parties Transaction Contract Price/ Balance
/Affiliate Approved Line

c. Others (continuation) Western Mindanao Power - Aboitiz Power Inclusion of Additional P50 M Not availed Credit Lines carry
Corporation (WMPC) Corporation has a Facilities to Omnibus Line standard Terms and
(Alcantara Group) 20% interest in WMPC Conditions.
and SPPC - Aboitiz
c. Others (continuation) Southern Philippines Power Equity Ventures owns P50 M Not availed
Corporation (SPPC) 76.88% of Aboitiz Power
(Alcantara Group) Corporation and 48.83%
of UnionBank. As a
result, AEV effectively
owns 15.38% of WMPC
and SPPC.

      Renewal and increase P202 M Not availed Credit Lines carry

of short term credit standard Terms and
facilities an Conditions

c. Others (continuation) Almavida Holdings, Inc. Mr. Enrique M. Aboitiz, Jr. Renewal of the Credit P250 M Not availed Credit Lines carry
and his son Facilities standard Terms and
Danel C. Aboitiz Conditions.
effectively own 100%
of Almavida, each with
a direct stake of 30.08%
and 39.84% through First
Rose Holdings Limited, a
BVI-registered company.
Mr. Enrique M. Aboitiz, Jr.
is the brother of
Erramon I. Aboitiz
and Sabin M. Aboitiz,
Vice-Chairman and
Director, respectively
of UnionBank of the
Philippines.

c. Others (continuation) Megawide Construction SSS owns 5.17% of Trustline for equity P1.0 B   Standard terms and
Corporation Megawide investment of TISG's conditions
Discretionary Accts

116 UnionBank 2018 Annual Report

CONGLOMERATE STRUCTURE

CSFP Condominium, Inc. - 100%

City Savings Bank, Inc. (CSB) - 99.79%

CSB Land, Inc. - 40%

The Insular Life

Assurance Co. Ltd. Union Properties Inc. (UPI) - 100%
16.28% First Agro-Industrial Rural Bank, Inc.
(FAIRBank) - 87.53%
(UPI 38.53%, CSB 49%)
Aboitiz Equity
Ventures, Inc.
42.02% UBX Philippines Corporation - 100%
PETNET, Inc. - 51%
UNION BANK OF THE PHILIPPINES

(CSB - 40%, UPI - 11%)

PCD Nominee
Corporation
20.49% UBX Private Limited - 100%

Social Security
System
9.46%
First Union Plans, Inc. (FUPI)
UBP Securities, Inc. (UBPSI) - 100% 100%
inactive
Social Security
System (1)
2.70%

UnionBank Currency Broker Corp. (UCBC) - 100% First Union Direct Corp. (FUDC)
PCD Nominee inactive 100%
Corporation
(Non-Filipino)
1.52%

Shareholders Union Data Corp. (UDC) - 100%

inactive First Union Insurance & Financial Agencies, Inc. (FUIFAI)
with less than 1% 100%
ownership each
7.52%

Interventure Capital Corp. (IVCC) - 60%

inactive

UnionBank 2018 Annual Report 117

 CORPORATE GOVERNANCE
SELF-ASSESSMENT FUNCTION
AUDIT SYSTEM
Audit
Committee
Chief Audit External
Executive Audit Group
Internal
Audit Group
INTERNAL AUDIT
The Internal Audit Division (IAD) has the task of reporting on how well the Bank’s
operating units are doing towards the attainment of corporate objectives, primarily
by ensuring that established organizational controls are designed appropriately and
are operating effectively. IAD conducts audits of operating units in accordance with
the various riskiness levels, such that both audit resources and business time are
maximized. Additionally, when called for by the Bank’s Code of Conduct, IAD also
conducts investigations in aid of administrative or criminal proceedings.
 
EXTERNAL AUDIT
The Bank’s external auditors on the other hand examine its financial statements and
express an opinion whether the numbers reported in the Bank’s Balance Sheet, Income
Statement, and other financial statements are fairly presented in accordance with financial
reporting standards. The Audit Committee recommends the appointment, re-appointment,
and change of external auditors. External audit services are currently provided to the Bank
by SGV & Co (EY Philippines).
In behalf of the Board of Directors, the Audit Committee provides oversight of the
Bank’s financial reporting and control, as well as internal and external audit function.  compliance culture; 8) Review and update, at least annually, the Compliance Program to assess
It is also responsible for setting up the internal audit division and for the appointment
of the Chief Audit Executive and the Independent External Auditor who both report
to the Audit Committee.  requirements; and compliance with policies and standards issued or promoted by
Moreover, the Audit Committee is mandated to monitor and evaluate the adequacy
and effectiveness of the Bank’s internal control system.  House Corporation (PCHC), Card associations such as Visa and Megalink and other similar
The Chief Audit Executive in the 2018 Annual Audit Report reports that : “In our
opinion, based on our audits that were conducted in accordance with the International
Standards of the Professional Practice of Internal Auditing, the systems of governance,
risk management, and internal controls system provide reasonable assurance that
the more significant risks are managed within the Bank’s risk appetite.
118 UnionBank 2018 Annual Report
The Bank’s internal controls in the branches, head office units, Information
Technology (IT) related units, processes, and critical application systems are adequate,
appropriate and effective to provide reasonable assurance that risks are being managed
and objectives are met.”
COMPLIANCE FUNCTION
The compliance function is independent from the business activities of the Bank.
The Compliance Office ensures that the Bank, its branches and subsidiaries comply with
all Philippine banking and corporate laws, regulations, policies, corporate governance,
ethical standards and other best practices in the implementation of its business operations.
Its functions include 1) Identification of laws and
regulations, codes of conduct, ethical standards and
ChiefCorporate Governance
Compliance and Corporate best practices in the Philippines including analysis
Committee
Governance Officer
and assessment of risks for non-compliance;
2) Increasing awareness of existing as well as new
banking and corporate laws and regulations among
Chief Compliance and Corporate
bank employees and subsidiaries through orientation,
Governance Officer
comprehensive training program, meetings and
dissemination of regulatory issuances and guidelines;
3) Practice open communication within the Bank in
Compliance Officers order to address compliance matters; 4) Reporting
of compliance issues, risks and other related matters
to the Board , the appropriate Board committee and/
or senior management; 5) Validation of compliance
testing certification resulting from the self-testing exercise based on appropriate frequency
and reporting of compliance findings to the appropriate level of management;
6) Promoting a constructive, working relationship with regulatory agencies, especially
with the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC),
Philippine Stock Exchange, Philippine Dealing Systems, Philippine Deposit Insurance
Corporation and the Anti-Money Laundering Council to name a few; 7) Conduct orientation
and similar programs to and for all employees designed to foster a strong and ethical
its efficiency and ensure its continued relevance; 8) Ensure the Bank’s adherence
to law, regulations, industry-accepted standards, BSP and SEC regulations and
organizations such as the Banker’s Association of the Philippines (BAP), Philippine Clearing
organizations; 9) Monitor transactions which may qualify as suspicious activities
or which may relate to money laundering and their reporting to the Anti-Money Laundering
Commission (AMLC).
DIVIDENDS GBC EXPO
DIVIDEND DECLARATIONS With the goal of educating and empowering UnionBankers to do more strategic,
impactful and sustainable GBC activities, GBC Expo was organized to feature six partner
communities to showcase their programs. Covering the four focus areas of GBC,
we invited Binhi Literacy Foundation (education), Center for Renewable Energies
and Sustainable Technologies (CREST) and Haribon Foundation (environment),
2,312,584
2,222,522 Foundation for These-Abled Persons (livelihood and employment), Smile Train
2,010,853 2,010,853
and World Vision (inclusion).
1,587,516
During the three-day event, employees interacted with community partners,
learned about their advocacy programs and explored opportunities for GBC projects.
The experience and exposure aimed to inspire UnionBank volunteers to organize more
meaningful GBC activities that really Make Da Diff for the community.

1.90

1.90

1.90
1.50
2.10

MICROSOFT EDUCATION AMBASSADOR

2015 2016 2017 2018 2019
In accordance with the Ban’s By-Laws, the Board of Directors shall determine
and declare dividends each year out of prior year’s net income after tax, payable out of the
Bank’s unrestricted retained earnings, subject to prior approval by the relevant authorities
as may be required. Historically, the Bank has paid out 20%-30% of prior year’s net income
in dividends.  to empower schools, educators, and ultimately students
CORPORATE SOCIAL RESPONSIBILITY
GOBEYOND COMMUNITIES (GBC)
GBC is the bank’s main CSR intervention- devolved and decentralized.
As an employee-volunteerism program, it empowers UnionBankers to pursue
their individual passion and advocacies with their colleagues, fully funded
and supported by the bank.
GBC PORTAL LAUNCH
The GBC portal enables employees to participate in GBC activities online,
eliminating the paper trail and allows for faster review and approval. One of the portal’s
main feature is the Propose Activity tab where one simply fills out the required fields
on project description and details. After submission, the endorsement and approval
are all done online.
Employees can also join GBC activities easily by clicking on the Activities tab
to see the upcoming GBC projects in a calendar form, and clicking the Count Me In tab
to sign-up. Other features of the portal include the Gallery where employees can
post photos and comments on their GBC participation, Profile where you can track
your individual involvement as well as Manage for line managers to see their team’s
GBC participation. It also provides real-time count of volunteers, volunteer-hours
rendered, number of beneficiaries and communities reached.
UnionBank partnered with Microsoft supporting its Microsoft Education
Ambassadors (MEA) Program. This strategic CSR partnership is aligned with the Tech-
Up Pilipinas campaign of UnionBank. Employees were taped as volunteers to become
MEAs and contribute in training teachers to become ICT proficient.
MEA is a community of passionate individuals who aim
to be future-ready through the proper use of technology
for teaching and learning. UnionBank is first
corporate partners of Microsoft in this endeavor.
A call for volunteers was done in May and over 60 UnionBankers signed up for
Microsoft screening and evaluation. UnionBankers who qualified in the assessment
underwent the 2-day training for the Microsoft Education Ambassadors (MEA)
program held last July. UnionBank volunteers echoed the training to over
1,700 teachers in Metro Manila last October. In a graduation ceremony held last
November 26 at the Microsoft Office, all 34 UnionBank MEAs were certified
Microsoft Education Ambassadors, a 100% completion rate for the pioneer batch.
SOLAR BUILD
In partnership with Liter of Light Foundation, UnionBankers learned to assemble
solar-powered lamps. These lamps were distributed to off-grid communities such as
Isla Verde, which was a GBC beneficiary community in 2017. Going back to Isla Verde
and returning with another GBC intervention means sustaining the partnership and
fostering the community until they become self-sufficient.

UnionBank 2018 Annual Report 119

 CORPORATE GOVERNANCE
URUN
Participated by over 1,000 UnionBankers and family members, URun was a GBC
activity for the environment and the launch event for the Wellness Program of the bank.
At UnionBank, people is at the heart of the business. We believe that wellness is key
to keeping engaged and empowered employee who achieves more, do better and
continue to innovate in the workplace and in their personal spaces.
Our workplace wellness program is geared to make wellness about our
employees-to enable them to pursue a personal path to wellness. Our core focus
is their physical fitness, mental health, and emotional stability, and financial
growth—a healthy, happy, and secured UnionBanker.
UBUNTU SPACE INAUGURATION
In support of the innovative and collaborative goals of The Arete, UnionBank
sponsored the building’s main plaza and intends to actively engage the academic
community with this out-of-the-box ways of working.
As a pre-event activity, a design thinking workshop was facilitated for the students,
faculty members and alumni of the university. Design thinking is one of the critical tools
in the bank’s digital transformation and transition to agile ways of working. It beckons
us to shift our mindset and attitude to become more empathetic and mindful of our
users and their needs which complements The Arete’s goal of seeking solutions to
so-called social “wicked problems.”
The Arete’s main plaza was inaugurated as the UnionBank UBUNTU
Space- highlighting one of the bank’s core values and emphasizing its alignment
with the purpose of The Arete. Excerpt from the Ubuntu Space marker reads:
UBUNTU in UnionBank means belonging
through collaboration. We seek to understand
with courageous conversations to inspire solutions
that will advance humanity. We engage communities
with respect, honesty and openness.
MAGIS and INTEGRITY complement our culture
of belonging and collaboration as we continuously innovate
with an agile mindset while mindful of our accountability
to earn the trust of all stakeholders.
120 UnionBank 2018 Annual Report
BLOCKCHAIN INSTITUTE
The Blockchain Institute is the bank’s contribution to the industry and the greater
community by equipping fresh graduates and young professionals with the skillset that
emerging technologies would require in the near future.
Being at the forefront of innovation and digital transformation, this CSR initiative
combines theoretical and experiential learning which we feel is the best way to acquire
the knowledge. With this program, we hope to bridge the gap between academic
institutions and corporations, for the benefit of our students and future talents.
CONSUMER PROTECTION
The Board and Senior Management are responsible for developing the bank’s
consumer protection strategy and establishing an effective oversight over the bank’s
consumer protection programs. The Board shall be primarily responsible for approving
and overseeing the implementation and compliance with the BSP prescribed Consumer
Protection Framework and the bank’s Consumer Protection Framework. While Senior
Management is responsible for the implementation of the consumer protection policies
approved by the Board, the Board monitors the performance of the Risk Management
Committee in managing day-to-day consumer protection activities of the bank.
Risk assessment strategies are included as part of the Consumer Assistance Policy
and Procedure (CAPP) to analyze the data of complaints/requests, its causes, effects to
other products/services, and corrective actions including its costs as well as resources.
All monitored complaints, regardless of nature or type, shall be centralized to the
Consumer Affairs Group (CAG).
Analyze complaints data, root causes and trends.
Monitor resolution and effectiveness of actions taken.
Identify weaknesses in its internal controls.
Recommend action plans to mitigate identified operational
or reputational risks.
Include analysis and recommended action plans
in the Complaints Report to Senior Management
and/or Board committee

Consumer Affairs Group (CAG)
Compliance of Customer Experience
BSP Circular 857
on Financial
Consumer Protection CAG monitoring BSP FCPD
and liaison
They shall be responsible for ensuring that the consumer assistance management
process is necessary, updated, and conforming to the internal control framework of the
Bank and complied with by all affected units. They are responsible for performing monitoring
and oversight over the Bank’s Consumer Assistance. The group keeps track, identifies and
analyzes trends about the nature of the complaints and, when needed, recommends solutions
to avoid recurrence or improve processes to deliver standout Customer Experience.
CAG reports and escalates issues and concerns to Senior Management or to the
Risk Management Committee and/or other Board level committees on a monthly basis
about persistent “complaints against the Bank or UnionBankers” that have been received.
A Consumer Assistance Officer (CAO) receives and acknowledges customer’s
complaint/request/inquiry through any but not limited to the following channels:
web-portal, walk-in or personal branch visit, letter, e-mail and telephone / facsimile.
The CAO performs initial investigation to identify concerned unit/s in charge of resolving
the complaint/request/inquiry and logs the same into the Bank’s central repository system.
The client will receive notifications via SMS/email in acknowledgement of concern and
upon resolution of the case. The Quality Assurance Officer (QAO) monitors progress of
investigation to ensure compliance with the prescribed turnaround time and conducts
follow-up as deemed necessary. The Resolving Consumer Assistance Officer assesses and
investigates the request/complaint then completes the investigation within the required
turnaround time based on the type of complaint and communicates the resolution to the
customer in simple and clear language.Corporate accounts handling of concerns is not yet
lodged into the Bank’s central repository system and is presently being handled by the
Corporate Call Center (Union3C). CAG ensures that monitoring and oversight on consumer
concerns encompasses the entire bank and not only those coursed through or lodged into
the central repository system.
SUMMARY OF CUSTOMER CONCERNS

Deposit 45.36%
Consumer Affairs Group (CAG)
Credit Card 29.65%

E-Money 20.59%
Quality Assurance Officer Quality Assurance Officer Quality Assurance Officer
(Customer Service) (Branches) (Head Office Units) Other Product/Services 4.40%

Consumer Consumer
Assistance Officer Assistance Officer Consumer
(Customer (Sales & Service Assistance
Service Officer) Officer) (Person Specific)

UnionBank 2018 Annual Report 121

 CORPORATE GOVERNANCE

ORGANIZATIONAL STRUCTURE
as of December 2018

122 UnionBank 2018 Annual Report

OWNERSHIP STRUCTURE

Others
Aboitiz Equity Ventures, Inc.
31,566,002
Filipino
2.59%
Voting
600,754,461
49.36%
PCD Nominee
Corporation
Filipino
Non-Voting
156,112,186
12.83%

Insular Life
Assurance Co. Ltd.
Filipino
Voting
198,274,189
16.29%

Social Security System

Filipino
Voting
230,442,674
18.93%

UnionBank 2018 Annual Report 123

 SUSTAINABILITY REPORT
HIGHLIGHTS
As a Bank, we contribute to sustainability by pursuing Digital Transformation and UnionBank’s thrust is to “Own The Future” by faithfully adhering to our three-pillar
investing in relevant social and environmental programs which benefit our stakeholders. sustainability framework focusing on PEOPLE, PLANET, and PURPOSE.
Our Lead to LEED program, Cleanergy Project, and Digital Transformation initiatives
are specifically designed to minimize impacts to the environment. Our GoBeyond
Communities Program allows our employees to personally reach out to locals in need
and co-create innovations for a better world. TO BE A BANK OF ENDURING GREATNESS

Sustainability Policy and Framework

Our Sustainability Policy mandates that we contribute to sustainable development
by pursuing Digital Transformation and investing in relevant social and environmental PEOPLE PURPOSE PLANET
programs which benefit our stakeholders.
We
UnionBank’s Sustainability Policy is aligned with our vision and brand promise. We We
co-create
It describes our ambition to neither cause nor contribute to adverse environmental own save
innovations
the our
and social impacts. This covers all our organizational units, companies of which
future resources
we hold (partial) ownership, and operations in all sites where we are present.
As outlined in our policy, we aim to identify, prevent, mitigate, and account for
sustainability risks and performance of our own operations, and the products and services
that we offer to the market.
Our Sustainability Policy guides our corporate decision-making at all levels and
provides a frame of reference on how we want to deal with opportunities and risks in
the context of sustainability impacts.

Under this policy, we commit to:

„„ Uphold, protect, and respect the environment, human rights, and labor
standards; BY POWERING THE FUTURE OF BANKING
„„ Contribute to enhancing positive social
and environmental impacts;
„„ Provide products and services that:
„„ contribute to the well-being of people, the environment,
and the economy;
„„ reduce or avoid unsustainable practices; and
„„ demonstrate positive impacts to the most important issues
of the business;
„„ Implement inclusive business programs and initiatives;
„„ Engage internal and external stakeholders for continuous improvement
and to promote cooperation;
„„ Foster the development of in-house learning, management capacity,
and leadership on sustainability issues;
„„ Comply with all national laws and regulations; and
„„ Communicate transparently about our sustainability performance.

124 UnionBank 2018 Annual Report

People: We own the future
We are invested in the success of our employees
because they are the animating spirit behind our
success. Our employees engage not just with our
customers and investors, but also with the local
communities we serve. Providing what our people
need to thrive—be it fair wages, learning and
development, wellness activities, or volunteerism
opportunities—strengthens our institution and
effectively passes benefits forward. Our brand
underscores co-creation because we share in the
responsibility in upholding sustainability: the future
begins with U.
Purpose: We co-create innovations.
UnionBank boldly seizes opportunities for
growth. For 36 years, we have sought to break glass
ceilings, pursue what some may consider moonshots,
and transform not just our own organization but the
industry as well. Beyond profit, we look at leeding
edge technology that will improve ways of working,
boost skills, widen opportunities to include the
underserved, and innovate for bigger gains.
We consider ourselves changemakers, but we disrupt
with a purpose. Our agile work environment,
our customer-centric and intuitive product and
service design, and our empathetic community-based
programs, deliver value and positive life experiences.
Planet: We save our resources.
We regulate our use of resources and manage our
environmental impacts, while enjoining our employees,
business partners, and customers to lead sustainable
lifestyles. Within the bounds of our business, we
commit to doing all we can to minimize our carbon
footprint, from site construction to maintaining
operational efficiencies under the LEED standards,
including the adoption of renewable energy, and the
proper disposal of waste. We safeguard the interests
of society by directly addressing pressing issues
such as climate change and plastic waste reduction,
internally and through public fora. Underpinning our
sustainability approach is accountability —not just to
our current stakeholders, including the regulators,
but also to the succeeding generation.
UnionBank 2018 Annual Report 125
 SUSTAINABILITY REPORT
HIGHLIGHTS
Contributions to the SDGs Sustainability Scorecard
UnionBank supports the United Nations Sustainable Development Goals (UN SDGs) Our sustain ability scorecard shows a general overview of our 2018 performance on
through existing initiatives of the Bank, many of which are tied to broader programs in the People, Planet, and Purpose for UnionBank only. For a more detailed version of our report
Aboitiz Group and in support of the national agenda of the government. that includes our subsidiaries and a year-on-year performance comparison, you may
The Bank’s core function is financial assistance and financial literacy. Ultimately, the download our 2018 Sustainability Report in this link (link to be provided)
Bank promotes long-term economic growth by increasing the capacity of individuals and
organizations in wealth management, as well as by empowering small-scale businesses and
entrepreneurs.
As a responsible company, UnionBank strives to minimize its environmental footprint
by adopting the Leadership in Energy and Environmental Design (LEED) in developing new
branches, among other environmental initiatives to effectively manage the Bank’s facilities
and resources. The Lead to LEED initiative will also be extended to our subsidiary,
City Savings Bank.
As an employer, UnionBank is an equal opportunity organization that promotes
workplace diversity and equality. The challenge for UnionBnkers is to have an agile mindset,
cultivate an expertise that will allow them to work seamlessly in an age of digital disruption,
and to buck convention by doing more than the expected.
As such, UnionBank is aligned with the following SDGs:

3,600 5.12
Employee Count Average Training Hours

17,547 4.23
Employee Employee Engagement
Voluntarism Hours Level

126 UnionBank 2018 Annual Report

 Planet Purpose

64,495 GJ 9,419 TCO2e 4.28 7,248,043

Giga Joules (GJ) Tonnes Carbon Dioxide Equivalents Customer Service Customer Count
(Fuel+Electricity) Green House Gas (GHG) emissions Satisfaction Rating
(CO2 equivalents)

114,740 m3 20 1,982,475 35,000

cubic meter of water LEED-Certified Branches Corporate Social GlobalLinker
Responsibility Beneficiaries SMEs Sign ups

The Full 2018 Sustainability Report can be

accessed at https://unionbankph.com/sites/
default/files/2019-05/UnionBank-Sustainability-
10,982.05 kgs Report-2018.pdf or scan QR code.
E-Waste Recovered

UnionBank 2018 Annual Report 127

Products and Services Brick and Mortar

CASH MANAGEMENT SERVICES
The Portal by UnionBank (Business Banking)
An online cash management platform for business users to
facilitate all their banking activities– initiate fund transfers,
pay bills, monitor balances, and approve transactions with
a single sign-on. Accessible via web or the mobile app.
Disbursements
• Business Check – A standalone software that allows
clients to prepare and print check
• Business Check Online – A facility that allows check
preparation and printing and ensures security in
issuing checks via online approvals
• Checkwriter – Outsourced check preparation and
PRODUCTS
printing through UnionBank for corporate and
Manager’s checks. UnionBank can deliver the checks
& SERVICES back to client or have the checks released using our
branch network
• Voucher Payout – An online platform that allows
quick and hassle-free disbursement of payouts
through UnionBank branches with the use of vouchers
• Electronic Fund Transfers – Transfer funds to local
and international banks in bulk. Transfers may be
made using the following facilities:
• Internal Fund Transfer – Real-time fund transfers
to UnionBank accounts
• PESONet – Peso transfers to local banks
• InstaPay – Real-time peso transfers to Bancnet
member-banks with PHP 50,000 limit
UnionBanker Carlos
• Philippine Domestic Dollar Transfer System
(PDDTS) – US Dollar transfers to local banks
• Society for the Worldwide Interbank Financial
Telecommunication (SWIFT) – Cross-border
transfers to international banks
Collections
• Bills Payment – A service that allows clients to collect
from their customers or business partners through
UnionBank’s extensive multi-channel facility - Branches,
ATMs, UnionBank Online Mobile Application and
Website, and Partners.
• Batch Bills – A service for processing multiple
payments as a batch transaction through
UnionBank’s online portal that can be approved
anytime, anywhere.
• Auto-Debit Arrangement (ADA) – UnionBank’s
premiere service for corporate payors to be
automatically debited for their utility payments
on their specified due dates.
• PartnerPay – UnionBank’s expanded
over-the-counter collection facility made
possible to reach rural and unbanked areas
through third-party branch networks
• UnionBank Premiere Automated Settlement
System (UPASS) – An auto-debit facility that
enables corporate billers to initiate collections
from other UnionBank account holders real-time.
• Checkhouse – Safekeep your Post-Dates Check
(PDCs) for timely deposits. Use UnionBank
Checkhouse for your PDCs and leave the monitoring
to us. We keep the checks secure and help you track
your PDC receivables efficiently and electronically.
• RoadRunner – Reduce cost and receive timely and
comprehensive collection reports with an efficient
check collections facility. With our RoadRunner
service, we will do all of these activities, giving you
time to focus on your core functions and activities.
• Cash Mobilization – Use our convenient cash
collection and delivery service for a more efficient
cash flow management.
• PSE Trade/Securities Clearing Corporation of the
Philippines (SCCP) – A fully automated system for
the settlement of trade payables to SCCP monitored
daily by a dedicated team
Payroll
• Payroll Suite – A one-stop shop for the convenient
handling of corporate customers’ payroll needs:
from account opening to account maintenance.
Payroll Suite includes a VISA-enabled debit card with
customizable card design, batch account opening,
and electronic crediting of payouts. Payees receive
SMS alerts upon credit and enjoy 24/7 online banking
through UnionBank Online.
• Executive Payroll – A business class payroll card
for corporate executives.
• Dollar Payroll – A dollar payroll card designed
for frequently travelling employees to save on
foreign exchange fees.
• ePayonline – An online facility for the digital account
opening of employee accounts.
• ePayroll – A facility for fast and accurate payroll
computation of corporate customers.
Government Payments
• Bureau of Internal Revenue (BIR) – UnionBank
accepts tax payments via EFPS and ePayments.
Over-the-counter payments are also available
• Social Security System (SSS) – Monthly contributions
of SSS can be paid online or over-the-counter.
Various loan payment types (salary, calamity,
emergency and educational loans) may also be
uploaded online or filed for payment at the branches
• Philippine Health Insurance Corporation (PhilHealth)
– UnionBank accepts payment of contributions via an
online portal or over-the-counter
• Home Development Mutual Fund (HDMF/Pag-IBIG)
– Payment for contributions, short-term loans (multi-
purpose/salary, calamity) and long-term housing
loans are accepted via bulk upload in an online portal
• Bureau of Customs (BOC) – Customs duties
and taxes may be paid online or at our branches.
Cards
• Corporate Credit Cards – A credit card facility
where companies can charge expenses without
using personal funds or going through the hassle of
cash advances. Corporate credit cards are issued
to employees where they can be used for company
expenses while earning rewards points or rebates.
• Government Service Insurance System Unified Multi-
Purpose ID (GSIS UMID)/GSIS eCard –
A card for fast crediting of benefits and loans
to GSIS members and pensioners. GSIS UMID also
serves as a valid government ID.
• Social Security System Unified Multi-Purpose ID
(SSS UMID)/SSS Quickcard – A card for fast crediting
of benefits and loans to SSS members and pensioners.
SSS UMID also serves as a valid government ID.
• International Container Terminal Services, Inc.
(ICTSI) Community Card - A closed-loop debit card
for safe and efficient settlement of fees to ICTSI
Supply Chain
• Electronic Invoice Presentment and Payment (EIPP) –
Take care of that digital invoice with a fully automated
system that lets you present invoices and collect
payments via an electronic channel.
• Dealer Financing – A web-based portal that allows
dealers and distributors to purchase inventory from
their Principals using working capital lines.
• Supplier Financing – A program that allows
Checkwriter payees to have working capital lines with
checkbook and online access
Liquidity Management
• Balance Viewing – 24/7 balance viewing and
account management for customers through
corporate online banking
• Account Pooling – A facility that allows corporate
customers to transfer funds automatically between
their UnionBank accounts at the beginning and/or
end of the day based on their specified conditions.
• Account Sweeping – A facility that allows corporate
customers to pool the balances of their various
UnionBank accounts for disbursement purposes.
• SWIFT Reports – The UnionBank MT940 is one of
the few SWIFT Peso-Compliant statements in the
Philippines. This completes the CMS collections facility
as it provides a complete, detailed, and customizable
report that can be automatically integrated to the
client’s AP system
UnionBank 2018 Annual Report 131
 Foreign Exchange Line – A facility that is granted to cover
LOAN PRODUCTS
the settlement risk or pre-settlement risk in the purchase
or sale of Foreign Exchange.
Auto Loan – A financing facility for the purchase
of vehicles for their personal use or for business under
Working Capital Line – A short-term credit facility to
an Auto Fleet Line. This is available for brand new
finance a company’s receivables or inventory requirements.
or second-hand vehicles and is secured by the vehicle
The line may be availed in Peso or Foreign Currency.
being financed.

Term Loan – A credit facility whose purpose is to finance

Home Loan – A financing facility available to clients
the long-term financial requirements of a client for
for the purchase of residential properties where the
business expansion, such as construction of a building
security offered is the property being financed.
or warehouse, acquisition of a property, purchase of
equipment or equity financing. The loan may be availed in
Salary Loan – A credit facility that is unsecured and
Peso or Foreign Currency.
available for general consumption purpose. These are
granted to individuals on the basis of their regular salary,
Project Finance Loan – A financing facility granted to a

PRODUCTS
pension or other fixed compensation.
special purpose entity which is created to operate physical
assets and where the principal source of repayment is the

& SERVICES Domestic Bills Purchase – A facility that provides

immediate or outright credit to the client for local checks
income generated by the assets being financed. The loan
is typically secured by a pledge on the borrower’s shares,
deposited to its account for regular clearing.
assignment of the borrower’s assets and/or assignment of
project revenues/accounts /or documents. The loan may
Foreign Bills Purchase – A facility that provides immediate
be availed in Peso or Foreign Currency.
or outright credit to client for its foreign-denominated
checks that are deposited to its account for regular
Special Funded Loan – A credit facility that refers to the
clearing.
wholesale lending activities of government banks or loan
programs funded by multi-lateral agencies, international
Trade Check Discounting – A facility offered to clients
or local banks that are granted to participating financial
to finance working capital requirements through the
institutions for relending to end-users.
purchase of accounts receivable via Post Dated Checks.

UnionBanker Sam
 Supplier BusinessLine – a collateral-free working capital Export Packing Credit Line – An export financing facility
SME BANKING SOLUTIONS line for suppliers and contractors with checkbook and where loan advances are made available to clients for the
online access. Collateral-free line for up to Php 20 million production of export goods to fill in a Purchase Order,
BusinessLine Classic – a multi- purpose and fully secured
Sales Contract or Export Letter of Credit.
loan that offers a revolving credit line facility. With loanable
EmployeeLine Loan Program – a loan facility against
amount of up to Php 10 million
the vested interest of the individual retirement funds Export Bills Purchase Line – An export financing facility
• Access funds via a regular checking account
and /or deposits in UnionBank. Loan amount of up to where the bank purchases outright sight/ usance drafts/or
funded by BusinessLine
Php 5 million with loan term of up to 5 years. bills presented by the client.
• No need for Promissory Notes per availment
Accepted collateral are retirement funds with UnionBank
• Available via Checkbook
or other financial institutions CASA or Hi-cost deposits Customs Duties Collection – A product offered to
or Easy-access Debit Card (EADC)
with UnionBank importers and exporters to facilitate the online payment of
• Accessible via UnionBank Online
their customs duties and taxes thru One-Hub, debit to their
• No fixed terms
account or via Manager’s Check.
• No minimum availment required
TRADE SERVICES AND PRODUCTS
• Minimal principal payment
• One-time payment of documentary stamps
• Import Financing CREDIT CARDS
• Interest is based on the number of days used
• Export Financing
• Pay only for the funds used
UnionBank Branded Cards
Documentary Letter of Credit (LC) – A product offered to • UnionBank Classic
MD Line – a clean revolving credit line available via
clients to guaranty payment to a supplier upon the delivery • UnionBank Gold
checkbook or EasyAccess Debit card for doctors of
of goods and upon presentation of complying documents. • UnionBank Platinum
UnionBank accredited hospitals and/or HMO-affiliated
• UnionBank Corporate Card
hospitals. Collateral-free line for up to Php 2 million
Stand-by Letter of Credit – A product offered to clients
• Use your line via checkbook, Easy Access
to guaranty payment of an obligation in case of failure of Co-Brand Cards
Debit Card (EADC) or online banking
the other party to comply with the terms and conditions • Burgoo Visa
• With minimum principal payments
as stipulated in a contract. • Ceb GetGo
• With no fixed terms
• Ceb GetGo Platinum
• Pay once for documentary stamps
Bank Guaranty/Performance Bond – A product offered to • Cebu Parklane Visa
• Base your interest on the number of days used
clients to guaranty the fulfillment of a contract to a Third Party. • First Life Visa
• Home Depot Visa
Quickpay – a revolving credit line for payments of
Non-LC Transactions (Open Account, Documents • Insular Life Visa
inventory purchase designed for dealers and distributors.
against Payment, Document against Acceptance, • Mapfre Insular Visa
With flexible payment terms. Assured payment for goods
Direct Remittance) – A product that facilitates the • Medicard Visa
purchased via real-time credit. Collateral-free line for up
payment and documentation of an importation • Racks Visa
to Php 2 million
other than through a Letter of Credit • Riviera Golf Visa
• Suy Sing Visa
• The North Face Visa

UnionBank 2018 Annual Report 133

 Affinity Cards
• Adamson University Visa
• Alpha Phi Omega Visa
• Assumption Alumnae Association Visa
• Ateneo Alumni Association Visa
• Ateneo de Manila High School ’87 Visa
• Ateneo de Manila Law Alumni Association Visa
• Ateneo Graduate School of Business Alumni
Association Visa
• Cebu Kian Kee Alumni Association Visa
• CEU Alumni Association Visa
• Colegio de San Juan de Letran Visa
• Couples for Christ Visa
• De La Salle Alumni Association Visa
• De La Salle College of Saint Benilde Visa
• De La Salle Dasmariñas Alumni Association Visa
• University of Sto. Tomas Visa
• University of the East Alumni Association Visa
• University of the Philippines Alumni Association Visa
• World Wild Fund for Nature (WWF) Visa
Cash Back
• UnionBank CashBack Gold Mastercard
• UnionBank CashBack Platinum Mastercard
Specialty Cards
• UnionBank Miles + Platinum
• UnionBank Miles +
• PlayEveryday Credit Card
EON Branded Cards
• EON Duo Visa Credit Card

PRODUCTS •
•
De La Salle Lipa Alumni Association Visa
Don Bosco Alumni Visa VISA DEBIT CARDS

& SERVICES •
•
Enderun Colleges Visa
Free Masons of the Philippines Visa EON Cyber Card
• La Salle Green Hills Alumni Association Visa E-Wallet Card
* Lourdes School Alumni Association Visa Ceb GetGo Debit Card
• People Management of the Philippines Visa Suy Sing Super Grocer Card
• Philippine Academy of Ophthalmology Visa USD Debit Card
• Philippine Dental Association Visa Platinum Debit Card
• Philippine Medical Association Visa ePaycard
• Philippine Merchant Marine Academy Alumni PlayEveryday Debit Card
Association Visa
• Philippine Red Cross Visa VISA PRE-PAID CARDS
• Sacred Heart School-Ateneo de Cebu Alumni
Association Visa Semicon Loyalty Card
• San Beda College Alumni Association DI BA Agents Card
• Silliman University Visa Club Balai Isabel
• South Western University Alumni Foundation Visa EON Card
• St. Paul’s College Pasig Visa Pera Hub Pre-paid Card
• Supreme Council Order of DeMolay Visa
• Team Energy Visa
UnionBanker Raquel
 DEPOSIT PRODUCTS
Regular Checking Account – With initial deposit
and minimum ADB requirement of Php 100,000.00,
the account allows day-to-day payments handling
and free phone and internet transactions.
This deposit is covered up to Php 500,000.00
per depositor and not subject to withholding tax.
Power Checking Account – With initial deposit and
minimum ADB requirement of Php 100,000.00 to earn
tiered interest up to 0.25% p.a., this account allows
maximization of interest on extra funds and the flexibility
to issue check payments with a maximum Php 500,000.00
deposit insurance coverage per depositor with a 20% final
withholding tax.
Business Check – A check writing software which allows
streamlining and simplification of the check disbursement
process that comes with an initial and minimum ADB
of Php 100,000.00 and a deposit insurance of up to
Php 500,000.00 per depositor subject to 20% final
withholding tax. A Php 500,000.00 ADB is required
in order to earn interest of up to 0.10% p.a.
CMS Corporate Checking Account – Corporate
cash management solution with a minimum of
Php 50,000.00 initial deposit and ADB requirement that
allows 0.10 % p.a. interest for at least Php 100,000.00.
This account comes with a maximum of Php 500,000.00
deposit insurance per depositor and is subject to 20% final
withholding tax.
Corporate Payroll Checking Account – This account is for
clients availing of the Cash Management Solutions Payroll
Suite which is used for crediting salary with the flexibility
to issue checks. A Php 50,000.00 initial deposit and
minimum ADB requirement with a 0.10% p.a. interest for
deposits with at least Php 100,000.00 ADB subject to
20% final withholding tax.
Corporate Executive Payroll Checking Account –
This account is for clients availing of the Cash
Management Solutions Payroll Suite which is used
for crediting salary with the flexibility to issue checks.
A Php 50,000.00 initial deposit and minimum ADB
requirement with a tiered interest rate of 0.10% p.a.
to 0.25% p.a. interest for deposits with at least Php
100,000.00 ADB subject to 20% final withholding tax.
Regular Savings Account – With an initial deposit and
minimum ADB of 100,000.00 to earn 0.10% interest p.a.,
this account comes with a maximum of Php 500,000.00
insurance per depositor subject to 20% withholding tax.
EON Cyber (Formerly, EON) – A deposit savings account
primarily used for sending and receiving money and on
line and point-of-sales (POS) purchases with any VISA-
accredited shop. It has no maintaining balance requirement
and comes with an Annual Fee of Php350 and is insured
up to maximum deposit of Php 500,000 per depositor but
is subject to a 20% final withholding tax and fees for on-us
and off-us withdrawals.
ePaycard – Payroll savings account opened for employees
tagged under the umbrella account of a Corporate customer,
this account is used for disbursement of employee’s
salary credits. Insured up to maximum deposit of
Php 500,000 per depositor and is subject to a 20% final
withholding tax and may include fees for ATM and OTC
withdrawals, Php 100,000.00 ADB is required in order to earn
0.10% interest p.a.
ICTSI – Closed loopcard-based savings account for broker
corporate clients used for the payment of their dues to
International Container Terminal Services Inc. (ICTSI) that
provides access to OTC servicing, ATM payment and Point-
of-sale deployed in ICTSI office that comes with a maximum
deposit insurance of P500,000 per depositor with no initial
deposit required. The account offers a 0.10% interest for
deposits with ADB of Php 100,000.00
GSIS-Member Account – This account allows crediting
of GSIS benefits to their members and access to ATM,
POS, Internet Banking & OTC with a maximum deposit
insurance of P500,000 per depositor, Subject to a 20%
final withholding tax. With no initial deposit required, an
account may earn 0.10% interest p.a. for a minimum ADB
of Php 100,000.00.
SSS-Member Account – This account allows crediting of
SSS benefits to their members and access to ATM, POS,
Internet Banking & OTC with a maximum deposit insurance of
P500,000 per depositor, subject to a 20% final withholding
tax. With no initial deposit required, an account may earn
0.10% interest p.a. for a minimum ADB of Php 100,000.00.
Fleet Card – Closed loop card-based savings account for
corporate clients used for the disbursement of their gas
allowance which has access to ATM balance inquiry and POS
transactions in selected gas stations and is insured up to a
maximum deposit of P500,000 per depositor with no initial
deposit required.
Get Go – Internet-based deposit account that comes with
a debit card and earns points for every peso spent which
may be used for Cebu Pacific flights. This account may
be opened without an initial deposit but will require Php
10,000.00 ADB to earn 0.10 % interest p.a. and a deposit
insurance coverage of up to Php 500,000.00 per depositor,
subject to 20% final withholding tax.
UnionBank 2018 Annual Report 135
 SSS Pensioner Account – Account designed to accept
pension credits for SSS pensioners with no initial deposit and
a Php 100.00 minimum ADB requirement. To earn 0.10%
interest, an ADB of Php 100,000.00 is required.
eWallet Savings Account – An account which may be
opened only at The Ark by UnionBank with no initial and
maintaining balance but comes with a Php 350.00 annual fee
and a Visa debit card that earns 0.10 % interest when ADB
is at least Php 10,000.00. Insured up to a maximum deposit
of Php 500,000.00 per depositor and subject to 20% final
withholding tax.
Peso Time Deposit – Minimum placement of Php 50,000.00
for 30-360 days with interest and principal payout at the
end of the term. If pre-terminated, default interest rate
PRODUCTS to be applied is regular savings rate, currently at 0.10% p.a.
Interest income is subject to 20% final withholding tax, while
& SERVICES the deposit is subject to Php 1.50 for every Php 200.00
and every fraction thereof multiplied by number of days
for documentary stamp tax. Maximum deposit insurance
of Php 500,000.00 per depositor. Peso time deposit for
tenors between 7-29 days is also available for a minimum
placement amount of Php 1,000,000.
Peso Optimizer – Minimum placement of Php 50,000.00 for
2, 3, 4, or 5 years plus 1 day with interest credited monthly
to a UnionBank account net of withholding tax. Interest is
subject to applicable withholding tax based on tenor, while
documentary stamp tax on the deposit is at Php 1.50 for
every 200 and every fraction thereof.
UnionBanker Jessica
Peso Hi-Five – Minimum of Php 50,000.00 long-term
(5 years plus 1 day) placement with interest compounded
annually wherein payment of interest is made at the end of
term with principal deposit, tax-exempt (for individuals only)
if maintained until maturity. If pre-terminated, final proceeds
will be net of applicable withholding tax on the interest
earned and penalty rate based on pre-determined rates.
LTNCD (Long-Term Negotiable Certificate of
Time Deposit) – Minimum investment of Php 250,000.00
in increments of Php 50,000.00 thereafter with original
maturity of 5 years and six months with interest payments
made every quarter. UnionBank LTNCD due 2019 carries
a fixed coupon of 3.5% p.a., while UnionBank LTNCD due
2023 carries a fixed coupon of 4.375% p.a. LTNCDs cannot
be pre-terminated by can be sold in the secondary market,
subject to prevailing market rates and transaction fees.
Foreign Currency Deposit (FCD) Account
(formerly US Dollar Savings Account) – With an initial
deposit of USD500.00 and minimum ADB of USD1,000.00
to earn 0.10% interest p.a., this account comes with a
maximum of Php 500,000.00 insurance per depositor
subject to 15% final withholding tax.
Dollar Access Account – With initial deposit and minimum
deposit requirement of $10,000.00 and required ADB
of $ 25,000.00 to earn 0.10 % interest, this account
provides online banking access with Peso ATM account
and a maximum deposit insurance of Php 500,000.00 per
depositor and subject to 15% withholding tax.
Corporate Executive Payroll Dollar Savings Account –
INVESTMENT PRODUCTS TRUST SERVICES
Savings account for Cash Management Solutions Payroll
Suite clients used for dollar-denominated salary crediting
Peso Treasury Bills/Notes/Treasury Bonds – Peso Corporate & Institutional Investment Management
with no initial deposit requirement and comes with a
denominated fixed income securities issued by and which UnionBank Trust acts as the Investment Manager authorized
0.10% interest p.a. for an ADB of at least $2,000.00,
represent unconditional obligation of the Philippine National to manage a corporation or an institution’s funds according
subject to 15% final withholding tax.
Government with tenors ranging from 3 months to 25 years. to their investment objectives and risk parameters.
UnionBank Trust creates a structured and bespoke portfolio
Third Currency Savings Account – AUD, EUR, GBP or JPY –
Peso Tier 2 Notes – Peso denominated unsecured for the client by choosing from a wide array of investment
denominated savings account with varying initial deposit
subordinated debt issued by banks. outlets (i.e. Government Securities, Corporate Bonds,
and minimum balance required to earn interest depending
Common & Preferred Stocks, TDs, UITF, Global Funds, etc.)
on the currency and applicable final withholding tax rate
Peso Corporate Notes – Peso denominated fixed income
of 15% and a maximum deposit insurance of
debt issued by large Philippine corporations. Unit Investment Trust Funds
Php 500,000.00 per depositor.
Unit Invested Trust Funds (UITFs) are open-ended
Peso LTNCD – Long Term Negotiable Certificates of pooled trust funds, which are operated and administered
USD Time Deposit – Minimum placement of USD 1,000.00
Time Deposit (“LTNCDs”) are certificates of deposit which by UnionBank Trust. UITFs are made available by
for 30-360 days with interest and principal payout at the
may be offered to investors looking for a relatively safe participation and allow clients to invest or redeem their
end of the term. If pre-terminated, default interest rate
long-term investment with a higher interest rate compared investments at any time from the fund itself. These
to be applied is regular savings rate, currently at 0.10% p.a.
to a regular savings or time deposit. funds are managed by UnionBank Trust’s highly skilled
Interest income is subject to 15% final withholding tax.
and professional fund managers and are invested in a
This account comes with a maximum deposit
US Dollar ROP Bonds – US Dollar denominated fixed income diversified set of financial instruments such as stocks,
of Php 500,000.00 per depositor.
securities issued by and which represent unconditional bonds, money market securities, and global funds. The
obligation of the Philippine National Government following UITFs are available: Short-Term Fixed Income
Third Currency Time Deposit – AUD, EUR, GBP or JPY-
Portfolio (Money Market Fund), Intermediate-Term Fixed
denominated 30 to 360 days term placement with varying
US Dollar Local Corporate Bonds/Notes – US Dollar Income Portfolio, High Net Worth Intermediate-Term
minimum placement amount depending on the currency and
denominated fixed income debt issued by large Philippine Fixed Income Portfolio, Medium-Term Fixed Income
applicable final withholding tax rate of 15% and a maximum
corporations. Portfolio (Peso Bond Fund), High Net Worth Medium-
deposit insurance of Php 500,000.00 per depositor.
Term Fixed Income Portfolio, Long-Term Fixed Income
Foreign Exchange – Spots and Forwards - Converting Portfolio, Tax-Exempt Fixed Income Portfolio, Dollar Bond
USD Optimizer – Minimum placement of USD10,000.00
one currency for another on either a spot (immediate) or Portfolio, Peso Balanced Portfolio, Philippine Equity Index
for 2, 3, 4, or 5 years with interest credited monthly
forward (future date) basis. Fund Portfolio, Dividend Play Equity Portfolio, Large
to a UnionBank account net of 15% withholding tax.
Capitalization Equity Portfolio, and Capital Accumulation
This account comes with a maximum deposit of
Global Fund of Funds Portfolio (available in USD & PHP
Php 500,000.00 per depositor.
currency classes).

UnionBank 2018 Annual Report 137

 Retirement Fund Management
PRIVATE BANKING
UnionBank Trust helps institutional clients set up and
manage retirement funds for the benefit of both the
Access to Global Funds & Investment Strategies
company and their retiring employees. UnionBank Trust
Via the Allfunds Bank platform, UnionBank Private Banking
designs and recommends an investment program for the
provides clients access to a wide array of Global Mutual
company, with the objective of maximizing the earnings
Funds and Exchange Traded Funds, upon inquiry. These
of the retirement fund while taking into consideration the
global funds are assessed and reviewed by our in-house
company’s risk objectives. Retirement Funds administered
investments team in terms of their Sharpe ratio and Morning
by a Trust entity enjoy tax incentives.
star rating, among other metrics. Our strategic alliance with
Lombard Odier gives clients access to world-class investment
Personal Management Trust
strategies, with a core-satellite investment philosophy.
UnionBank Trust acts as Trustee in managing a portion of
an individual’s wealth for the benefit of their designated
Government Securities, Corporate Bonds,
beneficiary(ies). Personal Management Trust gives clients
Money Market Securities, UITFs
a convenient access to a wide array of investment products.
UnionBank Private Banking gives clients direct access to
This is highly customizable and allows you to distribute the
local investment outlets such as Philippine Government
PRODUCTS proceeds, interests and/or principal to your beneficiary(ies)
according to your conditions and provisions.
Securities, US Treasuries, Corporate Bond Issuances,

& SERVICES
Common & Preferred Equities, UITFs, and special rates on
Money Market Instruments.
Escrow Agency
UnionBank Trust acts as an independent third party escrow
Asset Swaps
agent to protect the interests of the contracting parties
UnionBank Private Banking provides clients structured
while the terms and conditions of the principal contract
products that will enhance the yield of their plain vanilla
are being fulfilled. An escrow arrangement ensures the
investment holding, while taking into consideration
protection of the parties’ interests while ensuring compliance
credit, liquidity and other related risks that will impact the
with specified contractual obligations.
investment.

Family Services
UnionBank Private Banking will help find the optimal
solutions to clients’ concerns on Family Wealth Structuring,
Succession Planning, Inter-generational Wealth & Business
Transition, Retirement & Estate Planning, and Philanthropy
& Sustainability. We have legal, tax and cross-border
expertise on wealth management matters. Our strategic
ally, Lombard Odier, also assists by sharing their world-class
family services expertise.

UnionBanker Jomin
Financial Advisory
UnionBank Private Banking will help structure an
PRIORITY BANKING OTHER SERVICES
optimal investment portfolio for clients, taking into
Business Class – A banking program for UnionBank’s Foreign/Domestic Collections and Remittances
consideration their return objectives and risk profile.
An open architecture investment philosophy ensures that
high-net worth clients that offers personalized service, • Fund Transfers

clients will have the opportunity to invest in best-in-class

exclusive privileges, relationship banking and smart • Manager’s Checks

investment outlets, even though they may not be

solutions to eligible individuals • Peso/ Dollar Demand Draft

UnionBank products.
• Peso/ Dollar Telegraphic Transfer
Business Class Corporate – A variant of the Business Class • PDDTS
program where eligible corporate clients are given specialized (Philippine Domestic Dollar Transfer System)
service, relationship banking and preferential pricing
INVESTMENT BANKING SERVICES
Purchase and Sale of Foreign Exchange
Business Class for Doctors – A variant of the Business
Corporate Finance
Class program where doctors, via their HMO or hospital Fund Raising Services for Non-Profit Organizations (NPO)
• Debt Underwriting
• Private Placements
affiliation, are entitled to receive their professional fee • Mobile Donations
credits through a UnionBank account. • Online Donations

Syndicated Lending and Project Finance

Payment Gateway
• Loan Arrangements
• Loan Syndications
PRE-NEED FIRST UNION PLANS • Internet
• Mobile
Income Fund Products
Advisory Services
• Corporate Restructuring
• Cash Contributor
• Asset Accumulator

ELECTRONIC BANKING SERVICES • Future Funder

• Prime Provider

UnionBank Online App and Web

www.unionbankph.com
REAL PROPERTY MANAGEMENT
Business Online
UNION PROPERTIES, INC.
eonbankph.com
EON Convergent Banking The Kingswood Arcade
(Vito Cruz Extension corner Pasong Tamo, Makati City)

Kingswood Makati Project-Sales and Marketing

(Vito Cruz Extension corner Pasong Tamo, Makati City)

UnionBank Centre-Manila
(Dasmariñas corner Q. Paredes Street, Binondo, Manila)

UnionBank 2018 Annual Report 139

 BRICK
& MORTAR

PEREA
PASAY ROAD G/F Greenbelt Mansion 
G/F Salud and Perea St., Legaspi Village 
MAGALLANES Consuelo Bldg. Makati City
G/F Maga Center Bldg. 912 Pasay Road   (02) 219-1203
Paseo de Magallanes San Lorenzo Village  (02) 618-5983
GREENBELT Makati City
Makati City (02) 894-3187 
G/F Twin Cities (02) 968-6080
(02) 851-3803 (0917) 863-9821
AYALA-SSS Condominium  (02) 813-5430
(02) 971-0106 (0917) 846-3785
SSS (Makati) Bldg. 110 Legaspi Street (0917) 863-8541
(0917) 864-0439 (0917) 827-0295
Ayala Avenue corner  Legaspi Village
V. Rufino St., Makati City Makati City (0917) 827-6158
PASEO DE ROXAS  RADA
METRO MANILA / (02) 503-1464 (02) 577-7631 G/F 111 Paseo
MAKATI AVENUE Prince Bldg.
GREATER MANILA AREA (02) 968-8516 (02) 818-1822 FAX de Roxas Bldg.
7874 Makati Avenue 117 Rada St.
(02) 813-5992 (0917) 863-9762 Paseo de Roxas
corner Durban St. Legaspi Village
(0917) 863-8840 (0917) 827-0376 corner Legaspi St.
Poblacion, Makati City Makati City
MAKATI CITY (0917) 863-8878 Legaspi Village
(02) 971-0316 (02) 893-4318
(0917) 827-0296 H.V. DELA COSTA Makati City
(02) 899-1544 FAX (02) 585-0979
ANTEL RESIDENCES 138 Global Enterprise Bldg. (02) 403-0703 
(0917) 864-1561 (02) 623-1487
G/F Antel Spa Suites CENTURY CITY H.V. Dela Costa St. (02) 577-7465
(0917) 827-0371 (0917) 827-0389
7829 Makati Avenue G/F Unit 3 The Gramercy Salcedo Vill., Makati City (0917) 146-2813 (0917) 863-9895
Poblacion, Makati City Residences, Century City (02) 813-1286 (0917) 863-9823
(02) 907-6756 Salamanca Street corner (02) 586-3632 MAKATI MEDICAL CENTER
Makati Medical Center SALCEDO
(02) 846-9190 Kalayaan Avenue (0917) 864-0862 PASONG TAMO-JTKC
2 Amorsolo Street Golden Rock Bldg.
(0917) 863-9637 Brgy. Poblacion (0917) 827-0380 G/F JTKC Centre Bldg. 
Legaspi Village 168 Salcedo St.
(0917) 827-6545 Makati City 2155 Pasong Tamo St. 
Makati City Legaspi Village
(02) 968-9750 INSULAR AYALA PASEO Makati City
(02) 812-8182 Makati City
AYALA AVENUE (02) 894-4700 TEL/FAX (The ARK) (02) 971-0213
(0917) 827-3172 (02) 818-8075
G/F Don Vicente (0917) 803-1540 G/F Insular Life Bldg. (02) 840-4782 (02) 618-5545
Madrigal Bldg. (0917) 827-8341 Ayala Avenue corner (02) 585-1044
MULTINATIONAL (0917) 803-8622
6793 Ayala Ave. Paseo de Roxas (0917) 827-0373
BANCORP (0917) 827-0364
Makati City DELA ROSA Makati City (0917) 864-1258
(02) 891-5851 G/F Insular Health (02) 971-0052 G/F Multinational
Bancorp. Centre VALERO
(02) 500-8183 Care Bldg. (02) 971-0076 PASONG TAMO
6805 Ayala Avenue Le Grand Condominium
(02) 968-8644 167 Dela Rosa corner (0917) 841-3351 EXTENSION
Makati City 130 Valero St.
(0917) 863-8794 Legaspi Streets (0917) 863-9893 G/F BCS Bldg.
(02) 971-0029 Salcedo Village
(0917) 863-8791 Legaspi Village (0917) 811-7577 Don Chino Roces Ave.
(02) 511-1973 Makati City
(0917) 827-0298 Makati City Pasong Tamo Extension
(0917) 863-9804 (02) 819-5426
(02) 478-5509 J.P. RIZAL Makati City
(0917) 827-3317 (02) 503-0522
AYALA-RUFINO (02) 968-8573 731 J.P. Rizal Street (02) 892-0990 (0917) 864-0269
Rufino Bldg. (0917) 863-8891 Makati City (02) 971-0221 (0917) 827-0462
Ayala Avenue (0917) 817-3235 (02) 897-1085 (0917) 827-0365
corner V. Rufino St. (0917) 827-0353 (0917) 864-1065
Makati City
(02) 811-0510
(02) 968-8763
(0917) 863-8816
(0917) 827-0297

140 UnionBank 2018 Annual Report

VALERO- DASMARIÑAS LOURDES HOSPITAL STO. CRISTO VERTEX ONE – MALABON
ANTEL PLATINUM UnionBank Centre G/F Main Bldg. LG01 and LG02 SAN LAZARO
G/F Antel Platinum Tower  Manila Bldg. Our Lady of Burke Plaza G/F Space 12 & 13 MALABON
154 Valero St. Dasmariñas corner Lourdes Hospital Sto. Cristo St. Vertex One Bldg. 31 Rivera Street corner
Salcedo Village Q. Paredes Streets 46 P. Sanchez Street Binondo, Manila San Lazaro, Manila Gov. Pascual Ave.
Makati City Binondo, Manila Sta. Mesa, Manila (02) 244-4284 (02) 971-0096 Tinajeros, Malabon City
(02) 971-0061 (02) 968-2462 (02) 713-8546 (02) 587-2980 (02) 559-9792 (02) 971-0199
(02) 585-1034 (02) 968-2517 (02) 968-6780 (0917) 827-0890 (0917) 864-0536 (02) 971-0201
(02) 843-7005 FAX (02) 243-8201 (0917) 827-0879 (0917) 863-8235 (02) 288-7382
(0917) 827-0463 (02) 968-3119 (0917) 863-8597 CALOOCAN CITY (0917) 864-0982
(0917) 863-9795 (0917) 827-0352 SOLER (0917) 864-0998
(0917) 821-8325 MALATE TOPSCO Bldg. EDSA CALOOCAN
VITO CRUZ (0917) 821-8533 G/F Marioco Bldg. 1148 Soler St. 512 EDSA corner  MANDALUYONG CITY
Kingswood Arcade (0917) 822-9479 1945 M. Adriatico St. Binondo, Manila Urbano Plata St.
Vito Cruz corner Pasong  Malate, Manila (02) 586-7094 Caloocan City BONI AVENUE
Tamo Sts., Makati City ESCOLTA (02) 525-2741 (02) 247-1711 (02) 971-0277 655 Boni Avenue
(02) 899-2772 G/F Regina Bldg.  (02) 971-0099 (0917) 827-0892 (02) 362-3008 corner Ligaya St.
(0917) 827-0391 Escolta, Manila (0917) 827-0354 (0917) 863-8226 (0917) 827-0395 Mandaluyong City
(02) 968-3324 (0917) 822-6342 (0917) 864-1574 (02) 968-4727
WORLD CENTRE (02) 241-8544 TAFT AVENUE (02) 533-1054
G/F The World (02) 968-3411 MASANGKAY 2526 G/F Kassel CALOOCAN (0917) 863-8517
Centre Bldg. (02) 968-3453 911-913 G. Masangkay St.  Condominium 357 Rizal Ave. (0917) 827-0987
330 Sen Gil J. Puyat Ave. (0917) 827-0875 Binondo, Manila Taft Ave. near corner Extension
Makati City (0917) 824-8609 (02) 241-5364 P. Ocampo St. Grace Park BSA TOWER-ORTIGAS
(02) 867-8560 (0917) 849-7273 (02) 968-3511 Vito Cruz St. Caloocan City G/F BSA Twin Tower
(02) 971-0005 (0917) 849-7349 (02) 618-5520 Malate, Manila (02) 362-3829 Bank Drive
(0917) 847-2852 (0917) 860-9436 (02) 971-0110 (02) 971-0222 Ortigas Center
(0917) 827-0392 ICTSI (0917) 863-7987 (02) 404-1532 FAX (02) 971-0239 Mandaluyong City
G/F ICTSI (0917) 827-0358 (0917) 825-0142 (02) 502-2638
CITY OF MANILA Administration Bldg. MAYHALIGUE (0917) 864-0432 (0917) 864-1355 (02) 477-9838
Manila International G/F One Masangkay Place  (0917) 864-1098 (0917) 827-1561
CITYPLACE SQUARE Container Terminal 1420 Masangkay near corner  T. ALONZO (0917) 864-0783
3/F Lucky Chinatown MICT South Access Road Mayhaligue St. 625 T. Alonzo Street LAS PINAS
Cityplace Square Port Area, Manila Sta. Cruz, Manila Sta. Cruz, Manila EDSA-PIONEER
Calle Felipe corner (02) 618-3996 (02) 586-3514 (02) 736-9858 TEL/FAX LAS PIÑAS-PAMPLONA Level 1, Robinson’s
La Chambre Street (02) 241-8303 (02) 252-5457 TEL/FAX (02) 587-6251 Alabang-Zapote Road Cybergate Plaza
Binondo, Manila (0917) 827-0281 (0917) 827-0887 (0917) 836-7203 corner Crispina Avenue EDSA corner Pioneer St.
(02) 216-4167 (0917) 864-0273 (0917) 863-8209 Pamplona, Las Piñas City Mandaluyong City
(02) 254-9775 UNITED NATIONS AVENUE (02) 971-0251 (02) 586-5348
(02) 968-2434 INTRAMUROS PANDACAN UN Avenue corner (02) 971-0244 (02) 477-4163
(0917) 827-6546 G/F BF Condominium Bldg. 1763 Paz M. Guazon St. M.H. del Pilar (02) 585-0838 (0917) 827-1097
(0917) 814-0306 A. Soriano Avenue Paco, Manila and M. Guerrero Sts. (02) 874-8075 FAX (0917) 863-8565
(0917) 821-7692 Intramuros, Manila (02) 971-0082 Ermita, Manila (0917) 864-1404
(02) 404-1720 (02) 564-0537 TEL/FAX (02) 971-0114 (0917) 864-1191
(02) 622-4467 (0917) 827-0355 (02) 525-2698 (0917) 864-1431
(0917) 863-9928 (0917) 864-0367 (0917) 864-0477 (0917) 827-0467
(0917) 827-0258

UnionBank 2018 Annual Report 141

 BRICK
& MORTAR
GREENFIELD
DISTRICT SOHO
Level 1, Unit 5, Soho
Central Greenfield District
Shaw Boulevard
Mandaluyong City
(02) 584-7538
(02) 968-6739
(0917) 863-8592
(0917) 827-0286
LIBERTAD-
MANDALUYONG
Unit A2 Cluster El Dorado
California Garden Square
Libertad St.
Mandaluyong City
(02) 470-2743
(0917) 827-0765
SHAW MANDALUYONG
PICPA Bldg.
700 Shaw Blvd.
Mandaluyong City
(02) 968-8747
(02) 724-2561
(0917) 827-0994
(0917) 863-8792
ST. FRANCIS
SHANGRI-LA PLACE
Tower 1 G/F
Retail Internal Road
corner St. Francis St.
Brgy. Wack-Wack
Mandaluyong City
(02) 623-2445
(02) 584-3633 FAX
(0917) 827-0156
(0917) 808-7914
142 UnionBank 2018 Annual Report
PASAY CITY
GSIS
PARAÑAQUE GSIS Main Office
Quirino Avenue corner Financial Center
V. Medina St., La Huerta Pasay City
PARAÑAQUE CITY Parañaque City
AYALA ALABANG (02) 551-4327 TEL/FAX
(02) 826-7052 (02) 971-0024
G/F JD Tower ASEANA BRADCO (02) 506-9120
WACK-WACK Commerce corner (02) 503-3397
AVENUE (0917) 804-3835
6 Shaw Boulevard Acacia Avenues (0917) 863-9785
G/F Unit G12 (0917) 827-1449
corner Laurel St. Madrigal Business Park (0917) 863-9790
Sole Mare Park Suites
Mandaluyong City Ayala Alabang (0917) 827-0265
Bradco Avenue PASCOR DRIVE
(02) 725-2919 Muntinlupa City Aseana Business Park G/F Sky Freight Center
(02) 906-9860 (02) 809-0689 PASAY CITY
Parañaque City Ninoy Aquino Avenue
(0917) 863-8748 (02) 959-8810 2528 ERL Bldg.
(02) 293-6627 corner Pascor Drive
(0917) 827-1096 (02) 617-0914 Taft Avenue
(02) 971-0111 Parañaque City
(0917) 864-0946 (0917) 827-7583 Pasay City
MARIKINA CITY (02) 855-7748 (02) 833-2959
(0917) 854-4103 (0917) 864-0268 (02) 907-6093
(0917) 827-0361 (02) 971-0090
MARIKINA (0917) 802-8580 (0917) 864-0387
BF HOMES (0917) 827-0544
WRC 2 Bldg. MUNTINLUPA (0917) 827-0349
55 President’s Avenue
No. 47 Gil Fernando Ave. 12 Jayson’s Bldg. BF Homes Subd. SUCAT-JAKA PLAZA
Midtown Subdivision II National Road NEWPORT CITY
Parañaque City JAKA Plaza
Brgy. San Roque Putatan Muntinlupa City G/F Star Cruises Bldg.
(02) 807-4484 Dr. A. Santos Avenue
Marikina City (02) 507-3068 Newport City
(02) 971-0192 Parañaque City
(02) 971-0006 (02) 862-4667 Andrews Avenue
(0917) 864-0952 (02) 829-9315 FAX
(02) 681-6184 (0917) 853-6378 Pasay City
(0917) 827-0465 (02) 586-7637
(0917) 846-6341 (0917) 827-0971 (02) 556-8955
(0917) 827-0993 (0917) 863-8216 (02) 618-5932
BICUTAN (0917) 827-0545
RICHVILLE 28 Doña Soledad Avenue (0917) 864-0349
MUNTINLUPA CITY (0917) 827-0363 (0917) 827-1143
Upper G/F Richville Better Living Subd.
Corporate Tower Parañaque City WEST SERVICE ROAD
ALABANG Madrigal Business Park PASIG CITY
(02) 971-0305 Rodeo Bldg.
COUNTRY CLUB Alabang Zapote Road (02) 971-0313 Km. 18 West Service Road
G/F Alabang Country Club Alabang, Muntinlupa City ADB AVENUE
(02) 822-1516 South Luzon Expressway
Acacia Drive (02) 968-9615 G/F Burgundy
(0917) 864-1549 Parañaque City
Ayala Alabang Village (02) 850-5636 Empire Tower
(0917) 864-1576 (02) 821-4513
Muntinlupa City (0917) 859-9060 ADB Avenue corner
(0917) 827-0464 (02) 971-0003
(02) 623-1960 Sapphire & Garnet Roads
(02) 833-9071 TEL/FAX (0917) 863-2307 Ortigas Center, Pasig City
NAVOTAS DR. A. SANTOS (0917) 827-0974
(0917) 800-7121 (02) 633-1097 FAX
G/F MTF Bldg.
(0917) 864-0894 NAVOTAS (02) 217-4251
Dr. A. Santos Avenue corner
807-817 M. Naval St. Kabesang Segundo St. (0917) 864-0782
ALABANG TOWN CENTER Navotas, Metro Manila (0917) 827-5992
San Isidro, Parañaque City
Makati Supermart Alabang (02) 282-7504 (02) 836-3730
Alabang Town Center (02) 971-0245 (02) 506-6716
Muntinlupa City (02) 586-8269 (0917) 822-7644
(02) 506-6689 (0917) 827-0560 (0917) 827-0899
(02) 842-0496 (0917) 864-1165
(0917) 827-0970 (0917) 864-1180
(0917) 804-5785
PARANAQUE CITY
EMERALD AVENUE ORTIGAS UNIONBANK PLAZA AURORA - COMMONWEALTH - EASTWOOD CITY
G/F Wynsum G/F The Crescent UnionBank Plaza Bldg. BALETE DRIVE LUZON AVENUE G/F Unit, LGR1-6
Corporate Plaza Bldg. Condominium Meralco Avenue corner G/F Marsk Bldg. UGF, Kayumanggi Le Grand Tower 1
Emerald Avenue 29 San Miguel Ave. Onyx Road, Pasig City Aurora Blvd. Center Bldg. Palm Tree Avenue
Ortigas Center Ortigas Center (02) 906-3817 corner Balete Drive Commonwealth Eastwood City
Pasig City Pasig City (02) 634-7907 Quezon City corner Luzon Avenues Brgy. Bagumbayan
(02) 633-7604 (02) 633-6443 (0917) 864-0878 (02) 968-7169 Brgy. Matandang Balara Quezon City
(02) 971-0263 (02) 971-0227 (0917) 827-0559 (02) 722-6327 Quezon City (02) 584-3638
(0917) 864-1446 (0917) 864-1299 (0917) 827-0238 (02) 971-0002 (02) 211-1596
(0917) 827-0552 (0917) 827-0556 QUEZON CITY (0917) 863-8608 (02) 936-3621 (0917) 827-0161
(0917) 822-9949 (0917) 830-0046
EXCHANGE REGENCY RENAISSANCE TOWER ABS-CBN  AURORA BOULEVARD
G/F The Exchange G/F Renaissance 1000 West Wing, G/F ELJ 677 Aurora Blvd. CONGRESSIONAL E. RODRIGUEZ
Regency Exchange Road Meralco Avenue Communications Ctr. (near Broadway Centrum) EXTENSION 1/F West Katipunan Bldg.
corner Meralco Avenue Ortigas Center ABS-CBN Broadcast Center New Manila, Quezon City Congressional Ave. near 95 E. Rodriguez Sr. Ave.
& Jade Drive, Ortigas Center Pasig City Sgt. EA Esguerra Avenue (02) 968-4387 corner Mindanao Ave. Quezon City
Pasig City (02) 618-7310 corner Mother Ignacia St. (02) 725-1951 Gardenville (02) 712-1331
(02) 310-5627 (02) 584-8396 Quezon City (0917) 863-8496 Brgy. Bahay Toro (02) 957-0117
(02) 505-5811 (0917) 827-0461 (02) 624-8551 (0917) 827-2506 Quezon City (0917) 844-5314
(0917) 864-0790 (0917) 864-0876 (02) 929-1825 (02) 504-4107 (0917) 827-0983
(0917) 827-1336 (0917) 827-0294 BAESA (02) 455-8561
SHAW BOULEVARD (0917) 864-0889 Dra. C. Pascual Bldg. (0917) 805-2916 GMA-TIMOG
FRONTERA VERDE 131-133 Shaw Boulevard 142 Quirino Highway (0917) 827-0975 Unit 101 Cabrera Bldg. 1
G/F Transcom Centre Pasig City ACROPOLIS Baesa, Quezon City 103 Timog Avenue
Frontera Verde (02) 632-9813 FAX 171 Bridgeview Bldg. (02) 907-9450 CUBAO Brgy. Sacred Heart
Ortigas Ave. corner C5 (02) 623-2126 E. Rodriguez Jr. Avenue (02) 361-4459 TEL/FAX P. Tuazon St. Quezon City
Pasig City (0917) 864-0890 Bagumbayan, Quezon City (0917) 827-2511 corner 7th Ave. (02) 294-3281
(02) 451-1590 (0917) 827-0558 (02) 968-8858 Cubao, Quezon City (02) 585-1669
(02) 587-7981 (02) 438-9332 C-5 QC (02) 505-5824 (0917) 827-6152
(0917) 823-2522 SHAW-PASIG (0917) 827-0549 184-B E. Rodriguez Jr. Ave. (02) 912-1754 FAX (0917) 864-0896
(0917) 827-6172 Chipeco Bldg. (0917) 863-8798 Bagumbayan, Quezon City (0917) 827-0292
Shaw Boulevard (02) 638-1689 (0917) 842-7401 KAMIAS
JULIA VARGAS corner Meralco Ave. ALI MALL (02) 968-8407 G/F TDS Bldg.
G/FCenterpoint Bldg. Pasig City Level 2, Financial Center (0917) 827-0553 DEL MONTE AVENUE 72 Kamias Road
J. Vargas Ave. corner (02) 631-3957 Ali Mall, Araneta Center (0917) 863-8830 345 Del Monte Ave. Quezon City
Garnet Road (0917) 827-5832 Cubao, Quezon City corner Banawe St. (02) 507-4677
Ortigas Center (02) 968-9010 COMMONWEALTH Brgy. Manresa (02) 929-7807 
Pasig City TEKTITE (02) 911-2677 AVENUE Quezon City (0917) 827-0458
(02) 633-5595 G/F West Tower (0917) 863-8817 12-13, Upper G/F Diliman (02) 330-0227 (0917) 832-1956
(02) 617-7150 Phil. Stock Exchange Commercial Center (02) 968-8941
(0917) 864-0891 Center, Exchange Road ARANETA AVENUE Commonwealth (02) 968-9060 KATIPUNAN
(0917) 827-6165 Ortigas Center Del Moral Bldg.  Quezon City (0917) 863-8825 335 AGCOR Bldg.
Pasig City 341 G. Araneta Ave. (02) 623-2616 (0917) 863-8821 Katipunan Ave.
MEDICAL CITY (02) 636-3531 FAX Quezon City (02) 931-9691 (0917) 827-0457 Loyola Heights
B1 The Medical (02) 968-7238 (02) 968-4795 (0917) 827-0446 Quezon City
Arts Tower Bldg. (02) 968-7705 (02) 714-4345 (0917) 812-7274 (02) 971-0306
The Medical City Hospital (02) 968-8237 (0917) 863-8521 (02) 926-1768 FAX
Ortigas Avenue (0917) 863-8676 (0917) 827-0287 (0917) 827-0997
Pasig City (0917) 863-8685 (0917) 864-1533
(02) 618-4458 (0917) 863-8706
(02) 633-3862 (0917) 827-0996
(0917) 864-0874
(0917) 827-5826

UnionBank 2018 Annual Report 143

 BRICK
& MORTAR

7TH AVENUE - BGC

G/F Twenty-Four Seven
McKinley Bldg. corner
GREENHILLS
7th Avenue, 24th Street
Ortigas Avenue near
WEST AVENUE-BALER McKinley Parkway
corner Wilson St.
No. 91 Barangay Bungad Bonifacio Global City
Greenhills, San Juan City
ST. LUKE’S West Avenue, Quezon City Taguig City
(02) 726-1395
MEDICAL CENTER (02) 372-2581 (02) 573-7281
(0917) 863-8574
ROOSEVELT G/F St. Luke’s (02) 971-0196 (02) 968-3864
(0917) 827-0992
244 Roosevelt Avenue  Medical Center (0917) 827-2501 (0917) 841-8767
MAYON San Francisco del Monte  279 E. Rodriguez Sr. (0917) 864-0957 (0917) 863-8494
TAGUIG
G/F ACI Bldg. Quezon City Boulevard
178 Mayon Street (02) 971-0279 Quezon City CAINTA, RIZAL 26TH STREET - BGC
2ND AVENUE - BGC
Sta. Mesa Heights (02) 448-6633 (02) 623-2157 G/F Unit C-28
G/F Blue Sapphire Bldg.
Brgy. Maharlika (02) 971-0312 (02) 661-4756 CAINTA South of Market
2nd Avenue corner 30th St.
Quezon City (0917) 827-0460 (0917) 827-0872 G/F CRV Bldg. North Tower, 26th St.
Bonifacio Global City
(02) 742-2787 (0917) 864-1500 (0917) 864-0899 F. Felix Ave. corner Bonifacio Global City
Taguig City
(02) 617-7224 (0917) 864-1153 Karangalan Drive  Taguig City     
(02) 519-0324
(02) 507-6510 TIMOG  Cainta, Rizal (02) 587-6978
(02) 618-4704
(0917) 864-0835 SANTO DOMINGO  Cabrera Bldg. II (02) 646-0295   (02) 511-7654
(0917) 827-0378
(0917) 864-0846 G/F Elements Bldg.  64 Timog Avenue (02) 968-9207 (0917) 819-3424
(0917) 863-8353
(0917) 827-0459 560 Quezon Avenue  Quezon City (0917) 827-0991 (0917) 863-8282
Brgy Tatalon, Quezon City (02) 971-0253 (0917) 863-8857 3RD AVENUE – BGC
MUÑOZ  (02) 623-2318 (02) 926-8636  32ND STREET - BGC
G/F Shop B
Muñoz Market (02) 743-4671 (0917) 864-1483 SAN JUAN G/F Trade and
The Net Square Bldg.
EDSA corner (0917) 861-2596 (0917) 827-1334 Financial Tower
3rd Avenue corner 28th St.
Roosevelt Ave. (0917) 827-0291 ANNAPOLIS 32nd Street corner 7th Ave.
Bonifacio Global City
Quezon City TOMAS MORATO G/F Unit 133 Bonifacio Global City
Taguig City
(02) 623-1901 SOUTH TRIANGLE Tomas Morato near Promenade Missouri Taguig City
(02) 810-1577
(0917) 827-0986 Quezon Avenue corner  corner Scout Lozano St. Greenhills Shoping Center (02) 478-5876
(02) 617-0584
(0917) 864-0897 Scout Albano, Quezon City Quezon City Missouri corner Annapolis Sts. (02) 618-7655
(0917) 818-2493
(02) 425-1101 (02) 928-5801  Greenhills, San Juan (0917) 827-1232
(0917) 863-8437
NOVALICHES-GULOD (02) 971-0091 (02) 216-2774 (02) 968-3940 (0917) 863-8342
854 Quirino Highway (0917) 827-0497 (0917) 827-0498 (02) 944-6282 5TH AVENUE-
Gulod, Novaliches (0917) 864-0454 (0917) 804-9615 (0917) 863-8483 34TH STREET - BGC
GLOBAL CITY
Quezon City (0917) 814-0909 (0917) 827-0547 G/F Shop 2, Panorama Bldg.
Unit 103
(02) 971-0266 WEST AVENUE 34th St. corner Lane A
G/F One Global Place
(02) 971-0300 SSS EAST AVENUE 27-A West Avenue CARDINAL SANTOS Bonifacio Global City
5th Avenue corner 25th St.
(02) 417-9463 G/F SSS Main Bldg. Quezon City G/F Cardinal Santos Taguig City
Bonifacio Global City
(0917) 864-1332 East Avenue, Quezon City (02) 971-0118 Medical Center (02) 833-2116
Taguig City
(0917) 827-0452 (02) 907-2329 (02) 968-3659 10 Wilson St. (02) 622-7627
(02) 836-4872
(0917) 864-1546 (02) 294-6517 FAX (02) 374-6930 Greenhills West (0917) 827-9070
(02) 968-3618
(0917) 827-6221 (0917) 827-0762 San Juan City (0917) 863-8366
(0917) 827-2502
(0917) 863-8432 (0917) 864-0456 (02) 968-5672 (0917) 863-8442
(0917) 863-8443 (02) 234-0718 TEL/FAX
(0917) 827-3092
(0917) 863-8550

144 UnionBank 2018 Annual Report

38TH STREET - BGC BGC UPTOWN VALENZUELA CLARK PAMPANGA TARLAC
G/F Orion Bldg. PLACE MALL Km. 12 MacArthur Highway M. Roxas Highway G/F Mel-V Bldg. Jaral Bldg.
11th Avenue corner 38th St. Unit B106, Lower G/F corner Fatima Ave. Philexcel Business Park Olongapo Gapan Road MacArthur Highway
Bonifacio Global City Uptown Place Mall Marulas, Valenzuela City Clark Freeport Zone Dolores, San Fernando corner Juan Luna St.
Taguig City 9th Avenue corner (02) 622-0849 Pampanga Pampanga City Tarlac City
(02) 624-4893 36th Street (02) 971-0217 (045) 205-4424 (045) 961-6141 (045) 982-6490
(02) 815-0187 Bonifacio Global City (02) 292-9905 (045) 499-5141 (045) 205-4426 (045) 282-6613
(02) 906-7840 Taguig City (0917) 832-7534 (0917) 809-3519 (0917) 863-9740 (045) 282-6615
(0917) 838-0421 (02) 968-8391 (0917) 864-1242 (0917) 864-1348
(0917) 863-8385 (02) 776-2790 CAUAYAN, ISABELA REINA MERCEDES (0917) 864-1496
(0917) 863-8418 (0917) 811-9802 G/F ITC Bldg. MGPCI Compound
(0917) 863-8761 CENTRAL / National Highway Maharlika Highway TUGUEGARAO
39TH STREET - BGC NORTH LUZON Cauayan City, Isabela Nappaccu, Pequeño Bagay Road corner
G/F Cocolight Bldg. BONIFACIO HIGH STREET (078) 652-4401 Reina Mercedes, Isabela Andrews Street
39th St. corner 11th Avenue W Global Center corner (078) 427-5131 (078) 307-0056 Caritan Centro
Bonifacio Global City 30th and 9th Avenues ANGELES (0917) 863-9707 (078) 427-5143 Tuguegarao City
Taguig City Fort Bonifacio, Taguig City G/F Bldg. 1, Unit 1 & 2 (0917) 864-0868 Cagayan
(02) 800-3901 (02) 808-1166 Central Town Mall DAGUPAN (078) 427-5141
(02) 968-4197 (02) 586-0613 263 Fil-Am Friendship G/F Insular Life Bldg. SAN FERNANDO (078) 844-3170
(0917) 863-8491 (0917) 863-8499 Highway, Brgy. Cutcut Arellano St. Barangay Pantal LA UNION (0917) 864-0763
(0917) 542-8431 (0917) 827-2918 Angeles City, Pampanga Dagupan City, Pangasinan G/F Nisce Business Center
(045) 409-0233 (075) 523-5575 Quezon Avenue VIGAN
BGC MCKINLEY ROAD MCKINLEY HILL (045) 203-2151 (075) 214-6895 Brgy. Catbangen AR Lahoz Bldg.
G/F Unit 1, Fairways Towers Units 1A & 1B (0917) 827-3254 (0917) 863-9715 San Fernando Jose Singson Street
5th Avenue Two World Square (0917) 863-9691 La Union Vigan, Ilocos Sur
Bonifacio Global City Upper McKinley Road LAOAG-SAN NICOLAS (072) 607-0612 (077) 230-3763
Taguig City McKinley Hill Drive BAGUIO G/F 365 Plaza Bldg. (072) 252-7587 (077) 722-2046
(02) 968-6368 Fort Bonifacio Units PF-7 & PF-7A National Highway (0917) 864-0834 (0917) 864-0765
(02) 833-8145 Taguig City PlazaFloor Cedar Bldg. Brgy. 1, San Nicolas
(0917) 827-9072 (02) 968-4769 Gen. Luna corner Ilocos Norte SAN FERNANDO, SOUTHERN LUZON
(0917) 863-8576 (02) 403-6522 Mabini Streets (077) 770-3771 PAMPANGA
(0917) 827-0366 Brgy. Kabayanihan (077) 230-3761 3M Bldg., MacArthur BACOOR
BGC THE LUXE (0917) 820-1852 Baguio City (0917) 863-9703 Highway, San Agustin Addio Bldg.
RESIDENCES (074) 245-3599 San Fernando, Pampanga Aguinaldo Highway
G/F Shop 3 MCKINLEY WEST (074) 443-5658 MEYCAUAYAN (045) 455-2518 Talaba, Bacoor, Cavite
The Luxe Residences Lower G/F (0917) 863-9684 G/F Marian Bldg. (045) 205-4427 (046) 512-9432
28th Street corner 4th Ave. Robinsons Cyber Sigma Bldg. MacArthur Highway (0917) 863-9742 (046) 417-1705
Bonifacio Global City Lawton Avenue BALIWAG Calvario, Meycauayan (0917) 864-0948
Taguig City Bonifacio South G/F Units 3&4, 3006 St. Bulacan SANTIAGO
(02) 968-4403 Taguig City Augustine Square (044) 815-2346 Maharlika Highway BATANGAS CITY
(02) 865-6932 (02) 824-8027 #17 Pinagbarilan St. (0917) 825-0179 Santiago City, Isabela G/F University
(0917) 309-4779 (02) 587-2145 Doña Remedios (0917) 816-2712 (078) 305-9956 of Batangas Bldg.
(0917) 863-8511 (0917) 820-6845 Trinidad Highway (078) 427-5132 Highway Hills
(0917) 863-8612 Baliwag, Bulacan OLONGAPO (0917) 863-9750 Hilltop, Batangas City
BGC TRIANGLE DRIVE (044) 766-2442 87 Magsaysay Drive (043) 236-9152
Shop 3, Philplans Bldg. VALENZUELA (044) 233-0041 Olongapo City SUBIC (043) 722-1417
Corporate Center (0917) 863-9692 (047) 602-2618 19B Manila Avenue (0917) 864-0934
1012 North Triangle Drive MALINTA (047) 260-3816 corner Canal Street
Bonifacio Global City G/F Mirjan Bldg. CABANATUAN (0917) 863-9710 Subic Bay Freeport Zone
Taguig City 295 Paso de Blas P. Burgos St. (047) 252-9326
(02) 622-4313 Valenzuela City Cabanatuan City (047) 260-3822
(02) 823-1449 (02) 277-2922 (044) 234-3994 (0917) 864-0749
(0917) 827-5854 (02) 500-3879 (044) 463-0490
(0917) 863-8749 (0917) 827-0870 (0917) 863-9695
(0917) 800-5403

UnionBank 2018 Annual Report 145

 BRICK
& MORTAR

CEBU-I.T. PARK
GF101 TGU Tower
Salinas Drive
CEBU-BORROMEO Asiatown IT Park
Door 8 Plaza Borromeo Lahug, Cebu City
Borromeo St., Cebu City (032) 236-7897
PASEO DE STA. ROSA (032) 353-4391
LUCENA G/F The Medical City (032) 324-7030
(032) 412-3401 (032) 316-5577
One People Square South Luzon
IMUS-CAVITE (0917) 864-0574 (0917) 863-8173
M.L. Tagarao Street Greenfield City
G/F Melta Bldg. corner (0917) 863-8196
corner Granja St. United Boulevard
BIÑAN-CARMONA Sampaguita Village CEBU INSULAR BRANCH
Lucena City Brgy. San Jose
National Highway Aguinaldo Highway (formerly CEBU CEBU-LAPU-LAPU MEPZ II
(042) 323-7946 Sta. Rosa, Laguna
Bgy. Maduya Imus, Cavite BUSINESS PARK) Pueblo Verde, Basak
(042) 710-6538 (049) 252-5834
Carmona, Cavite (046) 513-2155 G/F Insular Life Lapu-Lapu City, Cebu
(0917) 864-0985 (049) 502-7170
(046) 521-7961 (046) 970-6975 Cebu Business Centre (032) 353-4293
(0917) 864-0973 (0917) 827-3098 Mindanao Ave.
(046) 430-3564 NAGA (032) 340-0705
(0917) 864-1013 corner Biliran Road
(0917) 864-0950 G/F Prime Days Hotel Bldg. (0917) 863-8203
LEGASPI Cebu Business Park
Panganiban Drive TAGAYTAY
CALAMBA-PARIAN G/F Unit 1, SMC Bldg. Cebu City CEBU LAPU-LAPU
Naga City G/F Tagaytay
G/F Andenson Bldg. Landco Business Park (032) 353-4290 NATIONAL HIGHWAY
(054) 473-7885 Prime Residences
Bgy. Parian Capantawan, Legazpi City (032) 353-4291 M.L. Quezon Street
(054) 203-1696 Tagaytay-Calamba Road
Calamba, Laguna (052) 225-6434 (032) 417-1632 Lapu-Lapu National
(0917) 658-5226 Prime Rotunda
(049) 545-6673 (052) 742-6801 (0917) 858-8573 Highway, Pusok
(0917) 864-0986 Brgy. San Jose
(049) 250-5264 (0917) 864-0980 (0917) 863-7970 Lapu-Lapu City, Cebu
Tagaytay City
(049) 250-5270 PUERTO PRINCESA (032) 494-0172
LIMA (046) 423-1661 CEBU BUSINESS PARK
(0917) 864-1410 J.P. Rizal Avenue (032) 353-4305
Unit GC-R04 and R05 (046) 521-7971 SUMILON ROAD
(0917) 864-0836 Brgy. Maningning (0917) 863-8411
The Outlets (0917) 702-3001 G/F Buildcomm Center
Puerto Princesa City (0917) 864-1356
CALAMBA LIMA Technological Center Sumilon Road CEBU-LIPATA
Palawan
Marcelita Bldg. Special Economic Zone Cebu Business Park G/F Doors 5-7
(048) 240-4268 METRO CEBU
National Highway Malvar, Lipa City Cebu City Pham Central Bldg.
(048) 434-2007
Barangay Real (043) 274-7351 (032) 266-1097 South National Highway
(0917) 864-1037 CEBU A.S. FORTUNA
Calamba, Laguna (0917) 849-7525 (032) 353-4393 cornerSan Roque Road
G/F The Space (032) 316-3294
(049) 250-7895 SAN PEDRO Lipata, Minglanilla, Cebu
LIPA A.S. Fortuna corner (0917) 864-0581
(049) 545-2614 National Highway (032) 353-4447
B. Morada Avenue P. Remedio St., Banilad (0917) 824-8579
(0917) 864-0962 Barangay Landayan (032) 238-9716
Lipa City, Batangas Mandaue City, Cebu
San Pedro, Laguna (032) 353-4382 (0917) 864-1255
DASMARIÑAS-CAVITE (043) 756-3822 CEBU-FUENTE (0917) 817-4497
(02) 506-5983 (032) 236-6604
Gov. D. Mangubat Avenue (043) 236-9159 G/F Rajah Park Place Hotel
(02) 868-8186 (0917) 809-6001
Congressional Road (043) 236-9161 Fuente Osmeña Blvd. CEBU MACTAN
(0917) 864-0937 (0917) 864-0539
Aguinaldo Highway (0917) 864-1186 Cebu City NEWTOWN
Dasmariñas, Cavite (0917) 864-1423 (032) 353-4286 G/F Retail 2&3
STA. ROSA CEBU-BANILAD
(046) 521-7962 (032) 412-5133 Plaza Magellan Tower 1
Rizal Boulevard Unit 114 Banilad
(046) 432-1718 (0917) 845-0852 Mactan Newtown
corner Zavalla St. Town Center
(0917) 840-8102 Barangay Malusak Lapu-Lapu City
Gov. M. Cuenco Avenue
Sta. Rosa, Laguna Banilad, Cebu City (032) 342-2091
(049) 534-2548 (032) 416-2883 (032) 353-4294
(049) 250-5227 (032) 353-4387 (0917) 863-8207
(0917) 864-1229 (0917) 864-0573 (0917) 816-8672

146 UnionBank 2018 Annual Report

CEBU-MANDAUE CEBU-SUBANGDAKU ILOILO-IZNART DAVAO-MAGSAYSAY CAGAYAN DE ORO- SOON TO OPEN
Kentredder Bldg. G/F Units 3&4 Villanueva Bldg. R. Magsaysay Avenue LAPASAN BRANCHES
A. Cortes St. A.D. Gothong I.T. Center Iznart St., Iloilo City corner E. Jacinto St. Lapasan National Highway
Mandaue City Lopez Jaena St. (033) 504-5827 Davao City Cagayan de Oro City MACAPAGAL
Cebu City Brgy. Subangdaku (033) 504-5829 (082) 326-1250 (088) 316-6864 G/F Y Tower
(032) 420-6288 Mandaue City (033) 335-0464 (082) 326-1253 (088) 316-6865 Macapagal Avenue
(032) 353-4295 (032) 353-4306 (0917) 864-0791 (082) 221-6426 (088) 856-6106 FAX Mall of Asia (MOA)
(032) 353-4297 (032) 262-4621 (0917) 864-0849 (0917) 864-1459 (0917) 807-0789 Complex, Pasay City
(0917) 863-8250 (0917) 863-8427 (0917) 864-1457 (0917) 863-5773
(0917) 863-8276 (0917) 805-9641 ILOILO-GENERAL LUNA SAN AGUSTIN-
Brgy. Villa Anita Village DAVAO-MONTEVERDE GENERAL SANTOS-SOUTH DELA COSTA
CEBU-MAXILOM CEBU-TIMES SQUARE Gen. Luna Street G/F Mintrade Bldg. G/F Laiz Bldg. G/F Liberty Plaza Bldg.
G/F ONG TIAK Bldg. G/F Big Hotel Suites Iloilo City Monteverde Ave. corner Pioneer Ave. 102 HV Dela Costa
Gen. Maxilom Ave. Mantawe Avenue (033) 336-1630 Sales St., Davao City General Santos City corner San Agustin Sts.
Cebu City Brgy. Tipolo (033) 504-5833 (082) 324-6570 (083) 308-3774 Salcedo Village, Makati City
(032) 353-4298 North Reclamation Area (033) 504-5834 (082) 324-9321 (083) 308-3776
(032) 353-4299 Mandaue City, Cebu (0917) 864-0852 (082) 222-3413 (083) 301-0033
(032) 255-6224 (032) 353-4307 (0917) 864-0797 (0917) 864-0974 (0917) 864-1401
(0917) 863-8315 (032) 232-0680 (0917) 864-0970 (0917) 864-1260
(0917) 863-8331 (0917) 853-9210 TACLOBAN
G/F Tacloban Plaza Bldg. DAVAO QUIRINO  ILIGAN
CEBU-MINGLANILLA VISAYAS Justice Romualdez Street Quirino Ave. corner Quezon Avenue
G/F FCT Commercial Bldg. Tacloban City San Pedro Extension St. Brgy. Poblacion
Poblacion Ward II BACOLOD (053) 589-3455 Davao City 9200 Iligan City
Minglanilla, Cebu G/F Philamlife Bldg. (053) 523-8571 (082) 324-4417 (063) 221-5395
(032) 316-8763 Lacson corner Galo Sts. (0917) 827-5962 (082) 324-4412 (063) 303-3640
(0917) 805-4153 Bacolod City (0917) 864-1304 (082) 225-1702 (0917) 863-9835
(034) 709-6182 (0917) 864-0898
CEBU NORTH DRIVE (034) 701-7772 TAGBILARAN (0917) 864-0955 PAGADIAN
G/F North Drive Mall (034) 701-7773 0041 JS Torralba Street Sabado Bldg.
Ouano Avenue (0917) 864-0939 Brgy. POB II DAVAO-RIZAL Rizal Avenue
CSSEAZ, Mandaue City (0917) 864-0943 Tagbilaran City, Bohol G/F & 2/F Quibod Pagadian City
(032) 353-4300 (038) 510-8150 Commercial Complex (062) 312-6798
(032) 384-1927 BACOLOD-ARANETA (038) 412-3775 Rizal Street, Davao City (062) 214-1841
(0917) 804-5162 1st Provincial Finance (0917) 864-1340 (082) 326-1149 (0917) 863-9676
(0917) 863-8355 Corp. Bldg., Araneta St. (082) 326-1181
corner Rosario St. METRO DAVAO (082) 225-3004 ZAMBOANGA CITY
CEBU NORTH ROAD Bacolod City (0917) 864-1312 G/F ZAEC Bldg.
G/F Khuz’ns Bldg. (034) 701-7899 DAVAO-CABAGUIO (0917) 864-1352 Mayor Jaldon St.
North Highway (034) 701-7900 G/F Dmirie Bldg. corner Gov. Alvarez St.
Estancia, Mandaue City (034) 709-0253 JB Cabaguio Avenue MINDANAO Zamboanga City
(032) 420-5802 (0917) 864-0281 Brgy Paciano Bangoy (062) 314-0110
(032) 353-4301 (0917) 863-8645 Davao City BUTUAN (062) 314-0177
(0917) 863-8367 (082) 221-4776 G/F CAP Bldg. (062) 991-9799
DUMAGUETE (082) 324-3732 JC Aquino Ave. corner (0917) 864-1445
CEBU-PLARIDEL UnionBank Bldg. (0917) 806-9916 J. Rosales Ave., Butuan City (0917) 864-1505
104 Plaridel Street Ramon Pastor Sr. St. (085) 342-8982
Barangay Sto. Niño corner San Juan St. (085) 304-6215
Cebu Dumaguete (085) 304-6216
(032) 353-4302 Negros Oriental (0917) 864-1520
(032) 412-3507 (035) 422-5038 (0917) 864-1521
(0917) 863-8374 (035) 404-2588
(0917) 864-1244

UnionBank 2018 Annual Report 147

 MANAGEMENT DIRECTORY

CHAIRMAN PRESIDENT & CEO

Justo A. Ortiz Edwin R. Bautista

SENIOR EXECUTIVE VICE PRESIDENTS

Henry Rhoel R. Aguda Jose Emmanuel U. Hilado

EXECUTIVE VICE PRESIDENTS

Mary Joyce S. Gonzalez Dennis D. Omila John Cary L. Ong Manuel G. Santiago, Jr.

SENIOR VICE PRESIDENTS

Roberto F. Abastillas Arlene Joan T. Agustin Francis B. Albalate Paolo Eugenio J. Baltao Joselito V. Banaag
Antonio Sebastian T. Corro Ana Maria A. Delgado Ramon Vicente V. De Vera, II Ramon G. Duarte Antonino Agustin S. Fajardo
Ronaldo Francisco B. Peralta Michaela Sophia E. Rubio

FIRST VICE PRESIDENTS

Myrna E. Amahan Conrad Anthony Dominic L. Banal Maria Cecilia Teresa S. Bernad Catherine Anne B. Casas Hannah Theresa S. Contreras
Ma. Theresa S. Daguiso Gerard R. Darvin Joebart T. Dator Montano D.M. Dimapilis Carlo I. Eñanosa
Eduardo V. Enriquez, III Ma. Christina A. Escolar Mary Antonette D. Evalle Lawrence Y. Ferrer Julie C. Go
Enrique M. Gregorio Concepcion P. Lontoc Angelbert G. Macatangay Michael P. Magbanua Rafael G. Mariano
Leticia A. Moreno Raquel P. Palang Ruby Gisela L. Perez Ronaldo Jose M. Puno Dinesh M. Sahijwani
Quintin C. San Diego, Jr. Christine V. Siapno Rahni R. Svenningsen Jo-Ann Fatima L. Tolentino Joselynn B. Torres
Jeannette Yvonne M. Zagala

VICE PRESIDENTS
Raymond Anthony B. Acosta Elmer Anthony S. Aquitania Donald A. Asuncion Alan Jay C. Avila Anna Lea O. Axalan
Edzel S. Babas Mary Ann P. Benedicto Maria Carmen R. Benitez Luis Alberto A. Castañeda Efrenilo L. Cayanga, Jr.
Roanna Joy Y. Chua Luis Martin S. Clemente Hector C. De Leon Julie Anne C. Dela Cruz Rebecca M. Dela Cruz
Romina R. Dela Torre Jonathan Jerald V. Deomano Gladys G. Enriquez Joyvalerie B. Gatdula Rachel Christine T. Geronimo
Paul William M. Gonzales Eugenio Manuel G. Gonzalez James Morris P. Ileto Mariano Dominick F. Lacson Stella Marie L. Layug
Adrian H. Lim Jennyvie M. Lopez Girly G. Magnait Joseph F. Manzano Ma. Eloisa Jovita M. Mariano
Wilfredo P. Montino, Jr. Dave T. Morales Derrick J. Nicdao Christopher Patrick G. Ocampo Gladys M. Ocampo
Emily Corazon F. Oleta Caesar Antonino M. Ordoñez John Francis F. Pecaña Lauro P. Peralta Henry C. Perez
Philippe D. Quito Roman C. Reyes, III Jose Maria O. Roxas Jose Paolo G. Rufo Mylene S. Sanchez
Buenaventura S. Sanguyo, Jr. Myla Angela A. Santos Paulo Martin G. Santos Renato Piccolo R. Sarmiento, Jr. Mary Joyce M. Sasan
Joan Mary P. Suarez Marilou A. Taino Michelle Anne N. Tan Fides C. Tiongson Menchie M. Tormon
Marie Aimee S. Tumao Leonora R. Tuzon Maria Paz B. Urmatam Charmaine Rose A. Valmonte Dominador N. Velasco, IV
Jane Ann C. Vergara Leo Miguelito D. Villacrucis Grace M. Yu

148 UnionBank 2018 Annual Report

ASSISTANT VICE PRESIDENTS
Emelissa D. Abenir Amancio G. Abner, Jr. Maria Cristina D. Acta Corazon T. Alcantara Jonathan Z. Almeda
Christy Mae R. Almonte Ralph Sylvester E. Alo Maria Jerusha J. Ambrosio Elizabeth S. Apilado Maria Patricia I. Apostol
Jose Miguel S. Aquino Ruben Carlo O. Asuncion Aaron Jon D. Atienza Rosma M. Auza Salvador G. Bagamasbad, Jr.
Ma. Rowena S. Basconcillo Lalaine Ann L. Batac Ronaldo S. Batisan Guia G. Bausa Dennies A. Bico
Roel C. Brion May G. Buencamino Dollie B. Buenconsejo Juancho L. Calayan Agnes Victoria D. Casal
Jose Patricio F. Casas Donna Vittoria F. Castell Vincent Paul M. Castillo Margaret O. Chao Arnel L. Cortez
Geossiel A. Cotoco Johanna Mae Cruz-Velasco Efren D. Dancel Antonio Miguel D. Dans, II Arnel G. De Guzman
Gener P. De Guzman Nina Michelle A. Destacamento Emmanuel C. Don Jennifer A. Don Renee Lynn S. Dytuco
Maria Soledad B. Encarguez Miraflor A. Enecio Nicole Ranna H. Feliciano Michaela D. Fernandez Marilou I. Ferrer
Maria Paz C. Galang Rosalina Phamela B. Galoyo Ma. Vicenta P. Generoso Erika Denise D. Go Pamela Ann B. Gogna
Nerissa A. Gonzaga Albert Don N. Gozar Paul C. Guadalupe Patrick Joseph O. Guevarra Alice R. Gutierrez
Maria Cecilia P. Heredia Barbara Anne G. Ilagan Gerb Reign B. Inajada Jacquelyn J. Jimenez Carlota P. Jose
Mary Grace C. Lledo Gallardo Jesus A. Lopez Rommel T. Macapagal Macklen A. Manaois Nathan J. Marasigan
Michael Cecil B. Martinez Anna Roxanne M. Matsuda Maria Francesca R. Montes Jose Paolo P. Palacios Mario Fritz B. Palileo
Ana Isabel P. Payot Leila P. Paz-Aguba Pamela Geraldine P. Pepito Lennie P. Perez Marcy Leonora V. Pilar
Jennifer Q. Rayala Cyrus G. Rebueno Honeylee G. Regala Michelle P. Rodriguez Anna Lida R. Romey
Adrian Alexander M. Romualdez Ricardo Jose V. Ronquillo Joel V. Salvador Wilhelm S. Samson Enrique A. Santos
Andrew A. Selga Dave Marco D. Sesbreño Arceli D. Soliman Jose Paulo R. Soliman Ma. Vanessa S. Sta. Ana
Ben P. Sy Chu Erika T. Sykat Marnita J. Tan Michael Paul P. Tan Leslee May S. Tandoc
Elizabeth C. Tang John Michael C. Tang Karen Lynde Q. Tee Ma. Cristina C. Tismo Bryan Kenneth C. Tsang
Fely C. Umali Leilani D. Valle Alma Regina M. Villostas
 CORPORATE INFORMATION

Head Office Customer Service

UnionBank Plaza, Meralco Avenue
corner Onyx and Sapphire Roads
Ortigas Center, Pasig City 1605
Trunk Line: (02) 667-6388
Fax: (02) 636-5259
SWIFT CODE: UBPHPHMM
Web Site/Internet Bank: www.unionbankph.com
Investor Relations
Carlo I. Eñanosa
First Vice President, Head-Corporate Planning Group
18/F UnionBank Plaza, Meralco Avenue
corner Onyx and Sapphire Roads
Ortigas Center, Pasig City 1605
 
Stock Transfer Unit
Reymundo A. Mendoza
Officer-in-Charge, Trust Operations Division
23/F UnionBank Plaza, Meralco Avenue
corner Onyx and Sapphire Roads
Ortigas Center, Pasig City 1605
Metro Manila Hotline: 841-8600
Toll Free Numbers
Domestic Calls (PLDT Landline): 1-800-1888-2277
Universal Toll Free: (IAC)-800-8277-2273
(Applicable in USA, Netherlands, Spain, Switzerland,
Malaysia, Australia, Singapore, Japan,
Korea-Koreatel, Koreal-Onse, Israel)
Fax number
(02) 636-6256
 
Email
gold@unionbankph.com
customer.service@unionbankph.com
corpcard@unionbankph.com
platinum@unionbankph.com

150 UnionBank 2018 Annual Report

CREDITS

The 2018 Annual Report is created and

published by UnionBank Marketing Services
for stockholders, clients and friends.

Design: OP Communications, Inc.

Portrait Photography: Wig Tysmans

Printing: Solutions Hong Kong

Writer: Heinz Bulos, Editor-in-Chief,

Moneysense Magazine

Photos of executives of Home Credit Zdenek

Jankovsky; Philux Stephanie K. Gonzalez and
Jessica K. Maxwell; Seven Seven Global Services
Mac and Delle Fojas; and Unilever Benjie Yap –
courtesy of clients

Photos of Fairbank executives Dinah Verallo;

Progressive Bank Emmanuel Santiago and
Carlos Jose Virgilio Jalandoni III –
courtesy of subsidiaries

151
WHAT’S INSIDE

02 04 05 06 12 14 16 17 19
Two-Year Statement of Certificate on Independent Statements Statements Statements of Statements Consolidated
Financial Management’s the Compilation Auditor’s of Financial of Income Comprehensive of Changes in Statements
Highlights Responsibility Services for the Report Position Income Capital Funds of Cash Flows
for Financial Preparation of
Statements the Financial
Statements
and Notes to
the Financial
Statements
 TWO-YEAR FINANCIAL HIGHLIGHTS

CONSOLIDATED PARENT CONSOLIDATED PARENT

in Php Bn, except ratios and per share data 2018 2017 2018 2017 in Php Bn, except ratios and per share data 2018 2017 2018 2017

PROFITABILITY SELECTED RATIOS

Total Net Interest Income 20.0 20.8 14.2 13.4 Return on Average Equity 9.0% 12.0% 8.8% 11.9%
Total Non-Interest Income 5.7 4.5 7.0 7.2 Return on Average Assets 1.2% 1.5% 1.3% 1.7%
Total Operating Income 25.7 25.3 21.2 20.6 CET1 Capital Ratio 12.7% 12.1% 12.7% 10.9%
Allowance for Credit Losses 0.9 0.9 0.8 0.9 Tier 1 Capital Ratio 12.7% 12.1% 12.7% 10.9%
Total Operating Income Capital Adequacy Ratio 15.2% 14.4% 15.6% 13.5%
after Allowance for Credit Losses 24.8 24.4 20.4 19.7
Total Other Expenses 16.3 13.8 12.8 10.6
Net Income before Tax 8.5 10.7 7.5 9.1 PER COMMON SHARE DATA
Income Tax Expense 1.2 2.3 0.3 0.8 Cash Dividends* 1.90 1.90
Net Income 7.3 8.4 7.2 8.3 Earnings:
Basic 6.66 7.95 6.57 7.83
Diluted 6.66 7.95 6.57 7.83
BALANCE SHEET Book Value 82.34 69.25 82.54 69.55
Liquid Assets 300.6 301.9 293.1 294.7 *Earned for the year but declared and paid the following year
Loans, net 326.2 280.2 258.4 212.0
Other Assets 46.9 39.3 50.8 47.6
Total Assets 673.8 621.4 602.2 554.3 OTHERS
Deposits 420.7 447.6 380.7 400.0 Headcount 3,600 3,489
Total Equity 91.0 73.3 90.6 73.6 Officers 2,803 2,678
Staff 797 811

UNIONBANK AND PSEi REBASED STOCK PERFORMANCE

(BASE: 2013 LAST TRADING DATE)
200%

180%

160%

140%

120%

100%

80% PSEi
UnionBank
60%

40%

20%
Source:
0% Bloomberg
2013 2014 2015 2016 2017 2018

2 UnionBank 2018 Annual Report

 15.8% 445.8
2014 2014

2015 10.6% 2015 441.7

2016 16.1% 2016 523.8

TOTAL RESOURCES
621.4

RETURN ON EQUITY
2017 12.0% 2017

2018 9.0% 2018

673.8

2014 2.1% 2014 139.2

2015 1.6% 2015

TOTAL LOANS
179.6
2016 2.2% 2016 234.5

RETURN ON ASSETS
2017 1.5% 2017 280.2
2018 1.2% 2018 326.2

2014 48.2% 2014 311.1

FIVE-YEAR FINANCIAL HIGHLIGHTS

2015 56.3% 2015 311.6

2016 2016
TOTAL DEPOSITS

46.9% 376.5
2017 54.3% 2017 447.6
2018 2018 420.7

COST-TO-INCOME RATIO
63.6%

2014 7.9 2014 20.4

2015 5.7 2015 20.2
NET REVENUES

2016 9.5 2016 25.5

2017 7.9 2017 25.3

EARNINGS PER SHARE

2018 6.7 2018 25.7

2014 52.7 2014 9.8

2015 56.2 2015 11.4
2016 63.2 2016 12.0
2017 69.3 2017 13.8
OPERATING EXPENSES

2018 82.3 2018 16.3

BOOK VALUE PER SHARE

2014 17.6% 2014 8.4

NET INCOME

2015 2015 6.0

TOTAL CAPITAL

16.2%
ADEQUACY RATIO

2016 15.7% 2016 10.1

2017 14.4% 2017 8.4
2018 15.2% 2018 7.3
UnionBank 2018 Annual Report
3
 STATEMENT OF MANAGEMENT’S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The management of Union Bank of the Philippines (the Bank) is responsible for the preparation and fair presentation of the financial statements, including the schedules attached therein,
for the years ended December 31, 2018, 2017 and 2016, in accordance with the prescribed financial reporting framework indicated therein, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is responsible for overseeing the Bank’s financial reporting process.

The Board of Directors reviews and approves the financial statements, including the schedules attached therein, and submits the same to the stockholders.

SyCip Gorres Velayo & Co., the independent auditors appointed by the stockholders, has audited the financial statements of the Bank in accordance with Philippine Standards on Auditing and,
in its report to the stockholders, has expressed its opinion on the fairness of presentation upon completion of such audit.

Justo A. Ortiz Edwin R. Bautista Jose Emmanuel U. Hilado Francis B. Albalate

Chairman of the Board President and Chief Executive Officer Senior Executive Vice President Senior Vice President
Chief Financial Officer and Treasurer Financial Controller

4 UnionBank 2018 Annual Report

CERTIFICATE ON THE COMPILATION SERVICES FOR THE PREPARATION
OF THE FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS
I hereby certify that I am the Certified Public Accountant who performed the compilation services related to the preparation and presentation of financial information of an entity
in accordance with an applicable financial reporting framework and reports as required by accounting and auditing standards for Union Bank of the Philippines for the period ended
December 31, 2018.

In discharging this responsibility, I hereby declare that:

_____ I am the Division Head of Corporate Accounting of Union Bank of the Philippines.

_____ I am the ______________of ______ and was contracted to perform this service.

Furthermore, in my compilation services for preparation of the Financial Statements and notes to the Financial Statements, I was not assisted by or did not avail of the services of SyCip Gorres
Velayo & Co. who/which is the external auditor who rendered the audit opinion for the said Financial Statements and notes to the Financial Statements.

I hereby declare, under penalties of perjury and violation of the Revised Accountancy Law, that my statements are true and correct.

LALAINE ANN L. BATAC, CPA

TIN No. 215-700-828
PROFESSIONAL IDENTIFICATION CARD NUMBER: 0104970
VALID UNTIL: FEBRUARY 9, 2022

ACCREDITATION NUMBER: 4059

VALID UNTIL: FEBRUARY 9, 2020

SUBSCRIBED AND SWORN to before me this 5th day of April 2019 at Pasig City, affiant exhibiting to me her competent evidence of identity pursuant to 2004 Rules on Notarial Practice.

Doc No. 311

Page No. 64
Book No. XII
Series No. 2019
Atty. Rowena C. De Castro-Matira
Commission Serial No. NP 225 (2018-2019)
Until December 31, 2019
PTR No. 7324271C Q.C 01/04/19
Roll No. 40914
IBP No. AR 10029650 Q.C 01/04/19
18th Flr., UnionBank Plaza, Meralco Ave., cor.
Onyx & Sapphire Rds., Ortigas Ave., Pasig City
MCLE No. V-0004548 11/12/14

UnionBank 2018 Annual Report 5

 INDEPENDENT
AUDITOR’S REPORT
The Board of Directors and Stockholders
Union Bank of the Philippines

Report on the Consolidated and Parent Bank Financial Statements

Opinion

We have audited the consolidated financial statements of Union Bank of the Philippines and its subsidiaries (the Group) and the parent bank financial statements of Union Bank of the
Philippines (the Parent Bank), which comprise the consolidated and parent bank statements of financial position as at December 31, 2018, and the consolidated and parent bank statements
of income, consolidated and parent bank statements of comprehensive income, consolidated and parent bank statements of changes in capital funds and consolidated and parent bank
statements of cash flows for the year ended December 31, 2018, and notes to the consolidated and parent bank financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated and parent bank financial statements present fairly, in all material respects, the financial position of the Group and the Parent Bank
as at December 31, 2018, and their financial performance and their cash flows for the year ended December 31, 2018 in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audit in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated and Parent Bank Financial Statements section of our report. We are independent of the Group and the Parent Bank in accordance with the Code of Ethics for
Professional Accountants in the Philippines (Code of Ethics) together with the ethical requirements that are relevant to our audit of the consolidated and parent bank financial statements in
the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and parent bank financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated and parent bank financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated and Parent Bank Financial Statements section of our report, including in relation
to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated and
parent bank financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying consolidated and parent bank financial statements.

6 UnionBank 2018 Annual Report

Applicable to the Audit of the Consolidated and Parent Bank Financial Statements

Adoption of PFRS 9, Financial Instruments (2014)

On January 1, 2018, the Group and the Parent Bank adopted the final version of PFRS 9, Financial Instruments (2014 version), which replaced PAS 39, Financial Instruments: Recognition and
Measurement and the previous versions of PFRS 9 (2009, 2010 and 2013 versions). The Group and the Parent Bank have previously adopted the 2010 version of PFRS 9 with initial application
date of January 1, 2014. PFRS 9 (2014) introduces a forward-looking expected credit loss model to assess impairment on debt financial assets not measured at fair value through profit or loss
and loan commitments and financial guarantee contracts. The Group and the Parent Bank used the modified retrospective approach in adopting PFRS 9 (2014).

The Group’s and the Parent Bank’s adoption of the ECL model is significant to our audit as it involves the exercise of significant management judgment. Key areas of judgment include:
segmenting the Group’s and the Parent Bank’s credit risk exposures; determining the method to estimate ECL; defining default; identifying exposures with significant deterioration
in credit quality; determining assumptions to be used in the ECL model such as the counterparty credit risk rating, the expected life of the financial asset and expected recoveries from
defaulted accounts; and, incorporating forward-looking information (called overlays) in calculating ECL.

Refer to Notes 2 and 20 of the consolidated and parent bank financial statements for the disclosure on the transition adjustments and details of the allowance for credit losses using
the ECL model.

Audit Response

We obtained an understanding of the methodologies and models used for the Group’s and the Parent Bank’s different credit exposures and assessed whether these considered the
requirements of PFRS 9 to reflect an unbiased and probability-weighted outcome, and to consider time value of money and the best available forward-looking information.

We (a) assessed the Group’s and the Parent Bank’s segmentation of its credit risk exposures based on homogeneity of credit risk characteristics; (b) tested the definition of default and
significant increase in credit risk criteria against historical analysis of accounts and credit risk management policies and practices in place; (c) tested the Group’s and the Parent Bank’s
application of internal credit risk rating system by reviewing the ratings of sample credit exposures; (d) tested loss given default by inspecting historical recoveries and related costs, write-offs
and collateral valuations; (e) tested exposure at default considering outstanding commitments and repayment scheme; (f ) checked the reasonableness of forward-looking information used
for overlay through statistical test and corroboration using publicly available information and our understanding of the Group’s and the Parent Bank’s lending portfolios and broader industry
knowledge; and, (g) tested the effective interest rate used in discounting the expected loss.

Further, we checked the data used in the ECL models by reconciling data from source system reports to the data warehouse and from the data warehouse to the loss allowance models and financial
reporting systems. To the extent that the loss allowance analysis is based on credit exposures that have been disaggregated into subsets of debt financial assets with similar risk characteristics,
we traced or re-performed the disaggregation from source systems to the loss allowance analysis. We also assessed the assumptions used where there are missing or insufficient data.

We recalculated impairment provisions on a sample basis. We checked the appropriateness of the transition adjustments as at January 1, 2018 and reviewed the completeness of the
disclosures made in the consolidated and parent bank financial statements.

We involved our internal specialists in the performance of the above procedures.

UnionBank 2018 Annual Report 7

 INDEPENDENT
AUDITOR’S REPORT
Valuation of Investment Properties at Fair Value

The Group accounts for its investment properties using the fair value model. Investment properties consist of land, buildings and related improvements. The determination of the fair values
of these properties involves significant management judgment in the use of assumptions and estimations. The valuation also requires the assistance of external appraisers whose calculations
depend on certain assumptions, such as sales and listings of comparable properties registered within the vicinity and adjustments to sales price based on internal and external factors.
Thus, we considered the valuation of investment properties as a key audit matter.

The disclosures relating to fair value measurement of investment properties and the details of investment properties are included in Notes 7 and 17 to the consolidated and
parent bank financial statements.

Audit Response

We evaluated the competence, capabilities and qualifications of the external appraisers by considering their qualifications, experience and reporting responsibilities. We performed
an understanding and reviewed the methodology and assumptions used in the valuation of investment properties. We assessed the methodology adopted by referencing common
valuation models. We reviewed the relevant information supporting the sales and listings of comparable properties and the adjustments made to the sales price. We also checked
the mathematical accuracy of the calculations.

Applicable to the Audit of the Consolidated Financial Statements

Impairment testing of goodwill

Under PFRS, the Group performs testing of goodwill for impairment annually or more frequently if events or changes in circumstances indicate that the carrying values may be impaired.
The Group’s impairment assessment requires significant judgement and is based on management’s assumptions, specifically on revenue growth rate, discount rate and long-term growth rate.
The disclosures in relation to the cash-generating units (CGUs) to which the goodwill is allocated and the Group’s impairment assessment are included in Notes 3 and 18 to the consolidated
financial statements.

Audit Response

We involved our internal specialist in evaluating the methodologies and the assumptions used in calculating the value-in-use (VIU) of the CGUs. We compared the key assumptions used
such as revenue growth rate against the historical financial performance and the specific plans for the CGUs. In addition, we compared the long-term growth rate against the industry and
market outlook and other relevant external data. We also tested the parameters used in the determination of the discount rate against market data.

Determination of purchase price allocation in relation to business acquisitions

The Group determined the provisional fair values of identifiable assets and liabilities and the related provisional goodwill from the business acquisitions of Philippine Resources Savings Bank and
PETNET, Inc., which were acquired in June 2018 and December 2018, respectively. The determination of provisional fair values required significant management judgment and is based on estimates,
which include the determination of the fair value of loans and receivables using the discounted cash flow methodology and the fair value of property and equipment and investment properties
using valuation techniques that take into account recent transaction prices for similar properties and economic conditions prevailing at the time the valuations were made. Accordingly, this requires
our significant attention in the 2018 audit. 

8 UnionBank 2018 Annual Report

The Group’s disclosures about the fair value determination of the identifiable assets and liabilities acquired and the details of the business acquisitions are included in Notes 3 and 15 to the
consolidated financial statements.

Audit Response

We obtained the related fair values of identifiable assets and liabilities of the acquired entities. We performed an understanding and reviewed the methodology and assumptions used in the
determination of the fair value, particularly for the loans and receivables, property and equipment and the investment properties. For loans and receivables, we checked the reasonableness
of forecasted cash flows of selected loans in reference to the contractual cash flows and the borrower’s current financial condition and ability to pay the loan. We also checked whether
the discount rate represents the Group’s current incremental lending rate for similar type of loans and receivables. For property and equipment and investment properties, we evaluated
the competence, capabilities and qualifications of the external appraisers by considering their qualifications, experience and reporting responsibilities. We performed an understanding
and reviewed the methodology and assumptions used in the valuation of the property and equipment and investment properties. We assessed the methodology adopted by referencing
common valuation models. We reviewed the relevant information supporting the sales and listings of comparable properties and the adjustments made to the sales price. We checked the
mathematical accuracy of the provisional purchase price allocation and reviewed the presentation and disclosures in the consolidated financial statements.

Other Matter

The Group and Parent Bank financial statements as of December 31, 2017 and 2016, and for the years then ended were audited by another auditor whose report dated February 23, 2018
expressed an unqualified opinion on those consolidated and parent bank financial statements. As part of our audit of the 2018 consolidated and parent bank financial statements, we also
audited the adjustments described in Note 2 that were applied to the 2017 and 2016 consolidated and parent bank financial statements to come up with the consolidated and parent bank
statements of financial position as at January 1, 2017 presented herein as corresponding figures. In our opinion, such adjustments are appropriate and have been properly applied. We were
not engaged to audit, review, or apply any procedures to the 2017 and 2016 consolidated and parent bank financial statements other than with respect to the adjustments, and accordingly,
we do not express an opinion or any other form of assurance on the 2017 and 2016 consolidated and parent bank financial statements taken as a whole.

Other Information

Management is responsible for the other information. The other information comprises the information included in the SEC Form 20‑IS (Definitive Information Statement), SEC Form 17‑A
and Annual Report for the year ended December 31, 2018, but does not include the consolidated and parent bank financial statements and our auditor’s report thereon. The SEC Form 20‑IS
(Definitive Information Statement), SEC Form 17‑A and Annual Report for the year ended December 31, 2018 are expected to be made available to us after the date of this auditor’s report.

Our opinion on the consolidated and parent bank financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated and parent bank financial statements, our responsibility is to read the other information identified above when it becomes available and,
in doing so, consider whether the other information is materially inconsistent with the consolidated and parent bank financial statements or our knowledge obtained in the audits,
or otherwise appears to be materially misstated.

UnionBank 2018 Annual Report 9

 INDEPENDENT
AUDITOR’S REPORT
Responsibilities of Management and Those Charged with Governance for the Consolidated and Parent Bank Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated and parent bank financial statements in accordance with PFRSs, and for such internal control as
management determines is necessary to enable the preparation of consolidated and parent bank financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated and parent bank financial statements, management is responsible for assessing the Group’s and Parent Bank’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group and the Parent Bank or to cease
operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s and Parent Bank financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated and Parent Bank Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated and parent bank financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with PSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and parent bank financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated and parent bank financial statements, whether due to fraud or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s and Parent Bank’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the Group’s and Parent Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the consolidated and parent bank financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Parent Bank to cease
to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated and parent bank financial statements, including the disclosures, and whether the consolidated and
parent bank financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

10 UnionBank 2018 Annual Report

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them
all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated and parent bank financial
statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.

Report on the Supplementary Information Required Under Revenue Regulations 15‑2010

Our audit was conducted for the purpose of forming an opinion on the basic parent bank financial statements taken as a whole. The supplementary information required under
Revenue Regulations 15‑2010 in Note 37 to the parent bank financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the
basic parent bank financial statements. Such information is the responsibility of the management of Union Bank of the Philippines. The information has been subjected to the
auditing procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly stated, in all material respects, in relation to the basic parent bank
financial statements taken as a whole.

The engagement partner on the audit resulting in this independent auditor’s report is Janet A. Paraiso.

SYCIP GORRES VELAYO & CO.

Janet A. Paraiso
Partner
CPA Certificate No. 92305
SEC Accreditation No. 0778-AR-3 (Group A),
June 19, 2018, valid until June 18, 2021
Tax Identification No. 193-975-241
BIR Accreditation No. 08-001998-62-2018,
February 26, 2018, valid until February 25, 2021
PTR No. 7332517, January 3, 2019, Makati City

February 22, 2019

UnionBank 2018 Annual Report 11

 STATEMENTS OF FINANCIAL POSITION
December 31, 2018
(With Comparative Figures as of December 31, 2017 and January 1, 2017)
(Amounts are presented in thousands of Philippine Pesos)

Group Parent Bank

December 31 January 1 December 31 January 1
2017 2017 2017 2017
(As Restated – (As Restated – (As Restated – (As Restated –
2018 Note 2) Note 2) 2018 Note 2) Note 2)
RESOURCES
Cash and Other Cash Items (Note 8) P 10,916,533 P 6,633,237 P 6,021,358 P 10,334,793 P 6,249,122 P 5,630,560
Due from Bangko Sentral ng Pilipinas (Note 8) 56,510,701 66,276,960 56,151,239 52,961,426 60,350,126 52,208,244
Due from Other Banks (Note 9) 14,942,213 54,520,482 42,425,310 11,550,166 53,690,233 41,412,122
Interbank Loans Receivable (Note 10) – 4,793,280 24,362,800 – 4,793,280 24,362,800
Trading and Investment Securities
At fair value through profit or loss (Note 11) 8,283,695 3,182,040 3,789,932 8,225,569 3,130,421 3,735,557
At amortized cost (Note 12) 200,173,730 166,471,659 117,778,563 200,173,730 166,471,659 117,778,228
At fair value through other comprehensive income (Note 13) 9,815,040 43,783 43,783 9,806,226 43,783 43,783
Loans and Other Receivables - net (Note 14) 326,199,466 280,178,875 234,530,182 258,411,076 211,976,032 171,921,347
Investment in Subsidiaries and Associates (Note 15) 29,558 2,468 2,326 18,900,624 17,470,527 14,054,004
Bank Premises, Furniture, Fixtures and Equipment - net (Note 16) 5,108,843 3,765,796 3,523,273 3,957,015 3,456,303 3,119,151
Investment Properties (Note 17) 15,253,451 14,153,546 13,524,963 13,715,250 13,523,010 13,101,547
Goodwill (Note 18) 15,726,267 11,258,251 11,258,251 7,886,898 7,886,898 7,886,898
Other Resources - net (Note 19) 10,823,188 10,152,065 10,378,101 6,313,691 5,289,322 4,445,573
TOTAL RESOURCES P 673,782,685 P 621,432,442 P 523,790,081 P 602,236,464 P 554,330,716 P 459,699,814

12 UnionBank 2018 Annual Report

 Group Parent Bank
December 31 January 1 December 31 January 1
2017 2017 2017 2017
(As Restated – (As Restated – (As Restated – (As Restated –
2018 Note 2) Note 2) 2018 Note 2) Note 2)
LIABILITIES AND CAPITAL FUNDS
LIABILITIES
Deposit Liabilities (Note 21)
Demand P 119,253,735 P 127,424,349 P 121,166,835 P 119,847,171 P 128,048,765 P 121,866,838
Savings 67,348,145 57,744,858 49,320,538 64,079,935 55,737,917 47,152,780
Time 228,100,653 259,447,006 202,997,759 190,783,257 213,187,518 156,018,973
Long-term negotiable certificate of deposits 6,000,000 3,000,000 3,000,000 6,000,000 3,000,000 3,000,000
420,702,533 447,616,213 376,485,132 380,710,363 399,974,200 328,038,591
Bills Payable (Note 22) 90,964,473 43,070,825 48,100,192 64,723,631 29,009,719 39,166,961
Notes and Bonds Payable (Note 23) 44,522,066 32,128,177 7,200,000 44,335,260 32,128,177 7,200,000
Other Liabilities (Note 24) 26,632,712 25,272,744 25,059,515 21,834,348 19,607,102 17,918,214
582,821,784 548,087,959 456,844,839 511,603,602 480,719,198 392,323,766
CAPITAL FUNDS
Capital funds attributable to the Parent Bank’s stockholders
(Note 25):
Common stock 12,171,495 10,583,439 10,583,439 12,171,495 10,583,439 10,583,439
Additional paid-in capital 14,146,988 5,819,861 5,819,861 14,146,988 5,819,861 5,819,861
Surplus free 61,456,681 56,053,148 49,877,917 63,299,634 58,097,354 51,840,442
Surplus reserves 3,502,769 1,959,938 1,734,697 1,875,067 235,173 220,990
Net unrealized fair value gains on investment securities (Note 13) 75,165 25 25 75,165 25 25
Remeasurements of defined benefit plan (Note 28) ( 985,496) ( 1,175,320) ( 1,139,658) ( 985,608) ( 1,174,455) ( 1,138,830)
Other reserves 50,121 50,121 50,121 50,121 50,121 50,121
Total capital funds attributable to the Parent Bank’s stockholders 90,417,723 73,291,212 66,926,402 90,632,862 73,611,518 67,376,048
Non-controlling interests 543,178 53,271 18,840 – – –
90,960,901 73,344,483 66,945,242 90,632,862 73,611,518 67,376,048
TOTAL LIABILITIES AND CAPITAL FUNDS P 673,782,685 P 621,432,442 P 523,790,081 P 602,236,464 P 554,330,716 P 459,699,814

Notes to Financial Statements are located in the accompanying flash drive.

UnionBank 2018 Annual Report 13

 STATEMENTS OF INCOME
For the Year Ended December 31, 2018
(With Comparative Figures for 2017 and 2016)
(Amounts are presented in thousands of Philippine Pesos, Except Earnings per Share)

Group Parent Bank

Years Ended December 31 Years Ended December 31
2017 2016 2017 2016
(As restated – (As restated – (As restated – (As restated –
2018 Note 2) Note 2) 2018 Note 2) Note 2)
INTEREST INCOME ON
Loans and other receivables (Note 14) P 23,441,710 P 20,705,022 P 18,247,934 P 15,038,506 P 11,652,103 P 9,352,410
Investment securities at amortized cost and FVOCI
(Notes 12 and 13) 7,836,159 6,658,201 4,719,560 7,836,159 6,658,201 4,719,560
Cash and cash equivalents (Notes 8 and 9) 207,458 222,252 489,129 148,788 195,651 359,731
Interbank loans receivable (Note 10) 107,254 92,777 80,449 126,167 92,777 80,449
Trading securities at FVTPL (Note 11) 36,639 52,425 59,058 36,639 52,425 59,058
31,629,220 27,730,677 23,596,130 23,186,259 18,651,157 14,571,208

INTEREST EXPENSE ON
Deposit liabilities (Note 21) 8,841,473 5,949,301 4,294,180 7,045,224 4,529,154 3,041,798
Bills payable and other liabilities (Notes 22, 23 and 28) 2,788,350 996,489 980,261 1,983,958 678,134 554,611
11,629,823 6,945,790 5,274,441 9,029,182 5,207,288 3,596,409

NET INTEREST INCOME 19,999,397 20,784,887 18,321,689 14,157,077 13,443,869 10,974,799

PROVISION FOR CREDIT LOSSES (Note 20) 855,991 875,587 1,594,120 803,576 881,744 1,163,393

NET INTEREST INCOME AFTER PROVISION

FOR CREDIT LOSSES 19,143,406 19,909,300 16,727,569 13,353,501 12,562,125 9,811,406

OTHER INCOME
Service charges, fees and commissions (Note 26) 1,572,244 1,420,141 1,321,266 1,284,667 1,078,127 957,368
Gains (losses) on trading and investment securities at
FVTPL and FVOCI (Notes 11 and 13) 1,390,897 ( 6,260) ( 136,186) 1,390,867 ( 6,393) ( 137,266)
Gains on sale of investment securities at amortized cost (Note 12) 152,161 272,841 3,951,187 152,161 272,841 3,951,187
Miscellaneous (Note 27) 2,558,625 2,845,712 2,077,877 4,211,631 5,810,727 5,336,226
5,673,927 4,532,434 7,214,144 7,039,326 7,155,302 10,107,515
(Forward)

14 UnionBank 2018 Annual Report

 Group Parent Bank
Years Ended December 31 Years Ended December 31
2017 2016 2017 2016
(As restated – (As restated – (As restated – (As restated –
2018 Note 2) Note 2) 2018 Note 2) Note 2)
OTHER EXPENSES
Salaries and employee benefits (Note 28) P 5,726,593 P 5,285,044 P 5,072,619 P 4,669,491 P 4,386,741 P 4,333,819
Taxes and licenses (Notes 17 and 29) 2,563,610 2,091,662 1,435,798 1,776,391 1,312,329 866,243
Occupancy 849,476 735,144 686,239 673,387 619,527 571,405
Depreciation and amortization (Notes 16 and 19) 743,409 634,902 716,429 506,900 432,074 483,923
Miscellaneous (Note 27) 6,436,520 5,008,887 4,054,683 5,220,056 3,857,609 2,928,074
16,319,608 13,755,639 11,965,768 12,846,225 10,608,280 9,183,464

NET PROFIT BEFORE TAX 8,497,725 10,686,095 11,975,945 7,546,602 9,109,147 10,735,457

INCOME TAX EXPENSE (Note 29) 1,182,758 2,266,080 1,909,587 334,690 827,199 481,954

NET PROFIT P 7,314,967 P 8,420,015 P 10,066,358 P 7,211,912 P 8,281,948 P 10,253,503

Attributable to:
Parent Bank’s stockholders P 7,316,102 P 8,411,325 P 10,058,276 P 7,211,912 P 8,281,948 P 10,253,503
Non-controlling interests ( 1,135) 8,690 8,082 – – –
P 7,314,967 P 8,420,015 P 10,066,358 P 7,211,912 P 8,281,948 P 10,253,503

Basic/Diluted Earnings per Share (Note 32) P 6.66 P 7.95 P 9.50 P 6.57 P 7.83 P 9.69

Notes to Financial Statements are located in the accompanying flash drive.

UnionBank 2018 Annual Report 15

 STATEMENTS OF COMPREHENSIVE INCOME
For the Year Ended December 31, 2018
(With Comparative Figures for 2017 and 2016)
(Amounts are presented in thousands of Philippine Pesos)
Group Parent Bank
Years Ended December 31 Years Ended December 31
2017 2016 2017 2016
(As restated – (As restated – (As restated – (As restated –
2018 Note 2) Note 2) 2018 Note 2) Note 2)
NET PROFIT FOR THE YEAR P 7,314,967 P 8,420,015 P 10,066,358 P 7,211,912 P 8,281,948 P 10,253,503

OTHER COMPREHENSIVE INCOME (LOSS)

Items that may be reclassified to profit or
loss in subsequent periods:
Mark-to-market gains on reclassified
investment securities (Note 12) 1,352,846 – – 1,352,846 – –
Realized gains on sale of investment securities at FVOCI
recognized in profit or loss (Note 13) ( 1,496,649) – – ( 1,496,649) – –
Unrealized mark-to-market gains (losses)
on investment securities at FVOCI 218,903 – ( 276) 218,903 – –
Items that will not be reclassified to
profit or loss in subsequent periods:
Remeasurement gains (losses) on defined benefit plan (Note 28) 271,197 ( 51,182) ( 527,789) 232,394 ( 29,087) ( 558,546)
Income tax benefit (expense) (Note 29) ( 81,359) 15,355 158,337 ( 69,718) 8,726 167,564
Share in changes in remeasurement gains (losses)
of subsidiaries (Note 15) – – – 26,171 ( 15,264) 21,126

TOTAL OTHER COMPREHENSIVE INCOME (LOSS) FOR THE YEAR 264,938 ( 35,827) ( 369,728) 263,947 ( 35,625) ( 369,856)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR P 7,579,905 P 8,384,188 P 9,696,630 P 7,475,859 P 8,246,323 P 9,883,647

Attributable to:
Parent Bank’s stockholders P 7,581,026 P 8,375,663 P 9,688,675 P 7,475,859 P 8,246,323 P 9,883,647
Non-controlling interests ( 1,121) 8,525 7,955 – – –
P 7,579,905 P 8,384,188 P 9,696,630 P 7,475,859 P 8,246,323 P 9,883,647

Notes to Financial Statements are located in the accompanying flash drive.

16 UnionBank 2018 Annual Report

STATEMENTS OF CHANGES IN CAPITAL FUNDS
For the Year Ended December 31, 2018
(With Comparative Figures for 2017 and 2016)
(Amounts are presented in thousands of Philippine Pesos)
Group
Equity Attributable to Equity Holders of the Parent Bank
Net Unrealized
Fair Value
Gains on
Additional Investment Remeasurements Non- Total
Paid-in Surplus Securities at of Defined Other controlling Capital
Capital Stock Capital Surplus Free Reserves FVOCI Benefit Plan Reserves Total Interests Funds

Balances as at January 1, 2018,

as previously reported P 10,583,439 P 5,819,861 P 56,693,737 P 1,959,938 P 25 (P 1,175,320) P 50,121 P 73,931,801 P 54,748 P 73,986,549
Effect of adoption of PFRS 9,
Financial Instruments (Note 2) – – 1,641,115 – 40 – – 1,641,155 ( 860) 1,640,295
Effect of prior-period adjustments
(Note 2) – – ( 640,589) – – – – ( 640,589) ( 1,477) ( 642,066)
Balances as at January 1, 2018 10,583,439 5,819,861 57,694,263 1,959,938 65 ( 1,175,320) 50,121 74,932,367 52,411 74,984,778
Total comprehensive income (loss)
for the year – – 7,316,102 – 75,100 189,824 – 7,581,026 ( 1,121) 7,579,905
Issuance of new shares (Note 25) 1,588,056 8,327,127 – – – – – 9,915,183 – 9,915,183
Cash dividends – – ( 2,010,853) – – – – ( 2,010,853) – ( 2,010,853)
Appropriations during the year (Note 25) – – ( 1,542,831) 1,542,831 – – – – – –
Effect of business combination (Note 15) – – – – – – – – 493,635 493,635
Acquisition of shares of
non-controlling interests – – – – – – – – ( 1,747) ( 1,747)
Balances as at December 31, 2018 P 12,171,495 P 14,146,988 P 61,456,681 P 3,502,769 P 75,165 (P 985,496) P 50,121 P 90,417,723 P 543,178 P 90,960,901

Balances as at January 1, 2017,

as previously reported P 10,583,439 P 5,819,861 P 50,518,506 P 1,734,697 P 25 (P 1,139,658) P 50,121 P 67,566,991 P 20,317 P 67,587,308
Effect of prior-period adjustments (Note 2) – – ( 640,589) – – – – ( 640,589) ( 1,477) ( 642,066)
Balances as at January 1, 2017, as restated 10,583,439 5,819,861 49,877,917 1,734,697 25 ( 1,139,658) 50,121 66,926,402 18,840 66,945,242
Total comprehensive income (loss) for the year – – 8,411,325 – – ( 35,662) – 8,375,663 8,525 8,384,188
Cash dividends – – ( 2,010,853) – – – – ( 2,010,853) – ( 2,010,853)
Appropriations during the year (Note 25) – – ( 225,241) 225,241 – – – – – –
Sale of shares to non-controlling interests – – – – – – – – 25,906 25,906
Balances as at December 31, 2017 P 10,583,439 P 5,819,861 P 56,053,148 P 1,959,938 P 25 (P 1,175,320) P 50,121 P 73,291,212 P 53,271 P 73,344,483

Balances as at January 1, 2016,

as previously reported P 10,583,439 P 5,819,861 P 42,322,902 P 1,459,541 P 301 (P 770,333) P 50,121 P 59,465,832 P 23,793 P 59,489,625
Effect of prior-period adjustments (Note 2) – – ( 640,589) – – – – ( 640,589) ( 1,477) ( 642,066)
Balances as at January 1, 2016, as restated 10,583,439 5,819,861 41,682,313 1,459,541 301 ( 770,333) 50,121 58,825,243 22,316 58,847,559
Total comprehensive income (loss)
for the year – – 10,058,276 – ( 276) ( 369,325) – 9,688,675 7,955 9,696,630
Cash dividends – – ( 1,587,516) – – – – ( 1,587,516) ( 3,619) ( 1,591,135)
Appropriations during the year (Note 25) – – ( 275,156) 275,156 – – – – – –
Acquisition of shares of
non-controlling interests – – – – – – – – ( 7,812) ( 7,812)
Balances as at December 31, 2016 P 10,583,439 P 5,819,861 P 49,877,917 P 1,734,697 P 25 (P 1,139,658) P 50,121 P 66,926,402 P 18,840 P 66,945,242
(Forward)

UnionBank 2018 Annual Report 17

 STATEMENTS OF CHANGES IN CAPITAL FUNDS
For the Year Ended December 31, 2018
(With Comparative Figures for 2017 and 2016)
(Amounts are presented in thousands of Philippine Pesos)

Parent Bank
Net
Unrealized
Fair Value
Gains on
Investment Remeasurements
Additional Surplus Securities of Defined Other Total Capital
Capital Stock Paid-in Capital Surplus Free Reserves at FVOCI Benefit Plan Reserves Funds
Balances as at January 1, 2018, as previously reported P 10,583,439 P 5,819,861 P 58,737,943 P 235,173 P 25 (P 1,174,455) P 50,121 P 74,252,107
Effect of adoption of PFRS 9, Financial Instruments (Note 2) – – 2,014,149 – 40 – – 2,014,189
Share in effect of prior-period adjustments (Note 2) – – ( 640,589) – – – – ( 640,589)
Share in effect of adoption of PFRS 9 of subsidiaries (Note 2) – – ( 373,034) – – – – ( 373,034)
Balances as at January 1, 2018 10,583,439 5,819,861 59,738,469 235,173 65 ( 1,174,455) 50,121 75,252,633
Total comprehensive income for the year – – 7,211,912 – 75,100 188,847 – 7,475,859
Issuance of new shares (Note 25) 1,588,056 8,327,127 – – – – – 9,915,183
Cash dividends – – ( 2,010,853) – – – – ( 2,010,853)
Appropriations during the year (Note 25) – – ( 1,639,894) 1,639,894 – – – –
Balances as at December 31, 2018 P 12,171,495 P 14,146,988 P 63,299,634 P 1,875,067 P 75,165 (P 985,608) P 50,121 P 90,632,862

Balances as at January 1, 2017, as previously reported P 10,583,439 P 5,819,861 P 52,481,031 P 220,990 P 25 (P 1,138,830) P 50,121 P 68,016,637
Share in effect of prior-period adjustments (Note 2) – – ( 640,589) – – – – ( 640,589)
Balances as at January 1, 2017 10,583,439 5,819,861 51,840,442 220,990 25 ( 1,138,830) 50,121 67,376,048
Total comprehensive income (loss) for the year – – 8,281,948 – – ( 35,625) – 8,246,323
Cash dividends – – ( 2,010,853) – – – – ( 2,010,853)
Appropriations during the year (Note 25) – – ( 14,183) 14,183 – – – –
Balances as at December 31, 2017 P 10,583,439 P 5,819,861 P 58,097,354 P 235,173 P 25 (P 1,174,455) P 50,121 P 73,611,518

Balances as at January 1, 2016, as previously reported P 10,583,439 P 5,819,861 P 43,829,931 P 206,103 P 25 (P 768,974) P 50,121 P 59,720,506
Share in effect of prior-period adjustments (Note 2) – – ( 640,589) – – – – ( 640,589)
Balances as at January 1, 2016 10,583,439 5,819,861 43,189,342 206,103 25 ( 768,974) 50,121 59,079,917
Total comprehensive income (loss) for the year – – 10,253,503 – – ( 369,856) – 9,883,647
Cash dividends – – ( 1,587,516) – – – – ( 1,587,516)
Appropriations during the year (Note 25) – – ( 14,887) 14,887 – – – –
Balances as at December 31, 2016 P 10,583,439 P 5,819,861 P 51,840,442 P 220,990 P 25 (P 1,138,830) P 50,121 P 67,376,048

Notes to Financial Statements are located in the accompanying flash drive.

18 UnionBank 2018 Annual Report

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2018
(With Comparative Figures for 2017 and 2016)
(Amounts are presented in thousands of Philippine Pesos)

Group Parent Bank

Years Ended December 31 Years Ended December 31
2017 2016 2017 2016
(As restated – (As restated – (As restated – (As restated –
2018 Note 2) Note 2) 2018 Note 2) Note 2)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax P 8,497,725 P 10,686,095 P 11,975,945 P 7,546,602 P 9,109,147 P 10,735,456
Adjustments for:
Gain on sale of investment securities at FVOCI (Note 13) ( 1,496,649) – – ( 1,496,649) – –
Provision for credit losses (Note 20) 855,991 875,587 1,594,120 803,576 881,744 1,163,393
Amortization of premium or discount 789,669 776,049 1,019,220 789,669 776,049 1,019,220
Fair value gains on investment properties (Notes 17 and 27) ( 632,923) ( 528,072) ( 385,687) ( 632,923) ( 518,386) ( 385,687)
Depreciation and amortization (Notes 16 and 19) 743,409 634,902 716,429 506,900 432,074 483,923
Unrealized foreign exchange loss (gains) - net 208,731 ( 113,105) ( 227,052) 208,731 ( 113,105) ( 227,052)
Gains on sale of investment securities at amortized cost (Note 12) ( 152,161) ( 272,841) ( 3,951,187) ( 152,161) ( 272,841) ( 3,951,187)
Gains on sale of investment properties (Note 27) ( 57,558) ( 131,072) ( 66,350) ( 46,189) ( 125,833) ( 66,350)
Gains or losses on foreclosure (Note 27) ( 51,904) ( 92,002) ( 82,685) ( 109,435) ( 85,320) ( 82,685)
Gain on disposal of property and equipment ( 44,296) ( 38,904) ( 47,863) ( 44,225) ( 38,904) ( 47,863)
Share in net loss (profit) of subsidiaries and associates
(Notes 15 and 27) 8 ( 142) ( 151) ( 1,775,210) ( 3,429,942) ( 3,474,490)
Changes in operating assets and liabilities:
Decreases (increases) in:
Trading securities at FVTPL ( 5,101,655) 607,892 699,388 ( 5,095,148) 605,136 697,720
Loans and other receivables ( 30,076,903) ( 37,241,855) ( 53,145,389) ( 38,198,505) ( 36,866,812) ( 46,230,161)
Other resources ( 281,437) ( 530,756) ( 111,606) ( 1,443,699) ( 1,597,413) ( 1,421,919)
Increases (decreases) in:
Deposit liabilities ( 34,333,250) 71,131,081 64,901,694 ( 22,263,837) 71,935,609 59,367,168
Other liabilities 1,227,633 104,925 3,054,149 2,370,605 1,818,212 4,403,230
Net cash provided by (used in) operations ( 59,905,570) 45,867,782 25,942,975 ( 59,031,898) 42,509,415 21,982,716
Income taxes paid ( 1,715,018) ( 2,223,502) ( 2,011,576) ( 875,121) ( 784,621) ( 599,632)
Net cash provided by (used in) operating activities ( 61,620,588) 43,644,280 23,931,399 ( 59,907,019) 41,724,794 21,383,084

(Forward)

UnionBank 2018 Annual Report 19

 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2018
(With Comparative Figures for 2017 and 2016)
(Amounts are presented in thousands of Philippine Pesos)

Group Parent Bank

Years Ended December 31 Years Ended December 31
2017 2016 2017 2016
(As restated – (As restated – (As restated – (As restated –
2018 Note 2) Note 2) 2018 Note 2) Note 2)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Investment securities at amortized cost (P 64,539,694) (P 59,251,071) (P 55,728,255) (P 64,539,694) (P 59,251,071) (P 55,728,255)
Investment securities at FVOCI ( 10,673,937) – – ( 10,673,937) – –
Bank premises, furniture, fixtures and equipment (Note 16) ( 1,042,901) ( 781,898) ( 668,123) ( 906,532) ( 703,989) ( 527,534)
Proceeds from maturities/sale of:
Investment securities at amortized cost 12,373,015 10,055,028 46,523,040 12,373,015 10,055,028 46,523,040
Investment securities at FVOCI 20,537,059 – – 20,537,059 – –
Investment properties 337,631 381,485 292,235 315,474 371,414 292,235
Bank premises, furniture, fixtures and equipment (Note 16) 70,920 66,580 114,251 64,781 52,189 61,148
Acquisition of subsidiaries, net of cash acquired (Note 15) ( 6,364,415) – – – – –
Additional investment in subsidiaries – – – ( 1,747) ( 1,845) ( 1,832)
Dividends received from subsidiaries – – – – – 1,565,869
Net cash used in investing activities ( 49,302,322) ( 49,529,876) ( 9,466,852) ( 42,831,581) ( 49,478,274) ( 7,815,329)

CASH FLOWS FROM FINANCING ACTIVITIES

Payments of:
Bills payable ( 613,840,876) ( 170,590,655) ( 144,125,571) ( 602,798,238) ( 121,190,186) ( 73,734,958)
Cash dividends ( 2,010,853) ( 2,010,853) ( 1,587,516) ( 2,010,853) ( 2,010,853) ( 1,587,516)
Proceeds from:
Bills payable 657,746,587 165,702,992 150,674,062 638,847,784 111,174,648 82,334,612
Notes and bonds payable (Note 23) 11,013,685 25,097,553 – 10,863,685 25,097,553 –
Issuance of new shares (Note 25) 9,915,183 – – 9,915,183 – –
Long term negotiable certificate of deposits (Note 21) 3,000,000 – – 3,000,000 – –
Net cash provided by financing activities 65,823,726 18,199,037 4,960,975 57,817,561 13,071,162 7,012,138

EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES 554,301 281,715 589,873 554,301 281,715 589,873

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 44,544,883) 12,595,156 20,015,395 ( 44,366,738) 5,599,397 21,169,766
(Forward)

20 UnionBank 2018 Annual Report

 Group Parent Bank
Years Ended December 31 Years Ended December 31
2017 2016 2017 2016
(As restated – (As restated – (As restated – (As restated –
2018 Note 2) Note 2) 2018 Note 2) Note 2)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
Cash and other cash items P 6,633,237 P 6,021,358 P 6,566,176 P 6,249,122 P 5,630,560 P 6,190,565
Due from Bangko Sentral ng Pilipinas (BSP) 66,276,960 56,151,239 70,036,867 60,350,126 52,208,244 60,992,001
Due from other banks 54,520,482 42,425,310 19,697,783 53,690,233 41,412,122 18,376,441
Interbank loans receivable 4,793,280 24,362,800 16,884,953 4,793,280 24,362,800 16,884,953
Securities purchased under repurchase agreement (SPURA) 13,572,371 4,240,467 – 4,130,362 – –
145,796,330 133,201,174 113,185,779 129,213,123 123,613,726 102,443,960

CASH AND CASH EQUIVALENTS AT END OF YEAR

Cash and other cash items 10,916,533 6,633,237 6,021,358 10,334,793 6,249,122 5,630,560
Due from BSP 56,510,701 66,276,960 56,151,239 52,961,426 60,350,126 52,208,244
Due from other banks 14,942,213 54,520,482 42,425,310 11,550,166 53,690,233 41,412,122
Interbank loans receivable – 4,793,280 24,362,800 – 4,793,280 24,362,800
SPURA 18,882,000 13,572,371 4,240,467 10,000,000 4,130,362 –
P 101,251,447 P 145,796,330 P 133,201,174 P 84,846,385 P 129,213,123 P 123,613,726

OPERATIONAL CASH FLOWS FROM INTERESTS AND DIVIDENDS

Interest received P 30,573,018 P 26,515,597 P 22,961,722 P 22,232,001 P 17,751,572 P 14,009,991
Interest paid 10,573,621 5,730,710 4,640,033 8,137,924 4,307,703 3,035,192
Dividends received 207,456 209,762 156,670 206,425 204,919 83,883

Notes to Financial Statements are located in the accompanying flash drive.

UnionBank 2018 Annual Report 21

UNION BANK OF THE PHILIPPINES AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

1. Corporate Information

Incorporation and Operations

Union Bank of the Philippines (the Bank, UnionBank or the Parent Bank) was incorporated in the
Philippines on August 16, 1968 and operates as a universal bank through its universal banking license
acquired in July 1992. The Philippine Securities and Exchange Commission (SEC) has approved the
Bank’s amendment on its Articles of Incorporation on October 31, 2013 for the extension of the
Bank’s corporate life for another 50 years until August 16, 2068.

The Bank provides expanded commercial banking products and services such as loans and deposits,
cash management, retail banking, foreign exchange, capital markets, corporate and consumer finance,
investment management and trust banking. As of December 31, 2018, the Bank and its subsidiaries
(the Group) has 433 branches and 316 on-site and 73 off-site automated teller machines (ATMs),
located nationwide.

The Bank’s common shares are listed in the Philippine Stock Exchange (PSE). The Bank is
effectively 49.36% owned by Aboitiz Equity Ventures, Inc. (AEVI), a company incorporated and
domiciled in the Philippines. AEVI is the holding and management company of the Aboitiz Group of
Companies.

The Bank’s subsidiaries (all incorporated in the Philippines), effective percentage of ownership and
the nature of the subsidiaries’ businesses, as of December 31, 2018, are as follows:

Percentage of ownership
Name of Subsidiary 2018 2017 Nature of Business
City Savings Bank, Inc. (CSB) 99.78% 99.77% Thrift bank
Philippine Resources Savings Banking Corp.
(PR Savings Bank)* 100.00% − Thrift bank
PetNet, Inc. (PETNET)* 51.00% − Remittances/ money transfer
First-Agro Industrial Rural Bank, Inc.
(FAIR Bank)** 87.53% 86.67% Rural bank
Union Properties, Inc. (UPI) 100.00% 100.00% Real estate administration
First Union Plans, Inc. (FUPI)*** 100.00% 100.00% Pre-need
First Union Direct Corporation (FUDC)*** 100.00% 100.00% Financial products marketing
First Union Insurance and Financial Agencies, Agent for insurance and
Inc. (FUIFAI) *** 100.00% 100.00% financial products
UBP Insurance Brokers, Inc. (UBPIBI)**** − 100.00% Insurance brokerage
UBP Securities, Inc. (UBPSI) 100.00% 100.00% Securities brokerage
UnionBank Currency Brokers Corporation
(UCBC) 100.00% 100.00% Foreign currency brokerage
UnionDataCorp (UDC) 100.00% 100.00% Data processing
Interventure Capital Corporation (IVCC) 60.00% 60.00% Venture capital
* Newly acquired subsidiaries in 2018, 100% of PRSB through CSB and 51% of PETNET through CSB and UPI with
40% and 11% share in ownership, respectively.
** Acquired subsidiary in 2017 through CSB and UPI with 49% and 38.53% share in ownership, respectively.
*** FUDC, FUPI and FUIFAI are wholly-owned subsidiaries of UPI.
****Dissolved in 2018.

*SGVFS032841*
 -2-

Other relevant information about the subsidiaries’ nature of businesses and their status of operations
are discussed in the sections that follow:

(a) CSB was incorporated and registered with the SEC on December 9, 1965. On December 9, 2014,
the SEC approved the amendment extending CSB’s corporate term for another 50 years from
December 9, 2015. It is a thrift bank specializing in granting teacher’s loans under the
Department of Education’s Automatic Payroll Deduction System.

On January 23, 2015, the Board of Directors (BOD) approved the proposal to purchase the
remaining 894 common shares of CSB held by some 41 minority shareholders. The Bank
purchased additional 68 shares, 38 shares and 36 shares in 2016, 2017 and 2018, respectively,
thereby, further increasing the Bank’s percentage ownership to 99.76%, 99.77% and 99.78% as
of December 31 of those respective years.

(b) In December 2017, CSB and the registered holders and beneficial owners of Philippine Resources
Savings Banking Corp. (PR Savings Bank) from the Ropali Group signed a share purchase
agreement (“SPA”), whereby the former shall acquire 127.72 million common stock of PR
Savings Bank with par value of P10 per share or a total par value of P1,277.23 million. The
shares represent 66.28% of the total outstanding capital stock of PR Savings Bank.

As part of the conditions precedent to the obligation of CSB to purchase the common stock, CSB
and International Finance Corporation (IFC) entered into a Share Purchase Agreement
(“Agreement”) on February 23, 2018, whereby the former shall acquire the 65.00 million
preferred shares of PR Savings Bank owned by IFC, with par value of P10.00 per share or a total
par value of P650.00 million. The shares represent 33.72% of the total issued and outstanding
capital stock.

On April 5, 2018, the Philippine Competition Commission (PCC) approved the acquisition of PR
Savings Bank by CSB. The acquisition was also approved by the Monetary Board (MB) of the
BSP under MB Resolution No. 1003 dated June 14, 2018 (see Note 15).

On July 5, 2018 and July 10, 2018, the BOD and the stockholders, respectively, of CSB approved
the plan of merger with PR Savings Bank, with CSB as the surviving entity. On December 20,
2018, the MB of the BSP approved the merger subject to certain conditions, including completion
of the merger within one year from the date of receipt of the BSP approval and that the merger
should be effective on the date the SEC issues the certificate of merger. Subsequent to the BSP
approval, CSB has applied for merger with the SEC.

PR Savings is the 14th largest thrift bank in the country. Most of its 102 offices are located in
Luzon offering motorcycle, agri-machinery, and salary loans to over 131,000 borrowers, mostly
from the mass market segment. The transaction will enable CSB to expand its reach in Luzon,
and enter into new market segments, such as motorcycle and agri-machinery financing.

(c) In February 2018, CSB and UPI signed an SPA with AEVI for the purchase of 2,461,338
common shares representing 51% ownership of AEVI on PETNET, Inc. (PETNET). On
May 8, 2018, PCC approved the acquisition of PETNET, Inc. by CSB and UPI. The agreement
was approved by the BSP on November 23, 2018. On December 17, 2018, the parties closed the
transaction by settling the purchase price and confirming that all closing conditions have been
fulfilled (see Note 15).

*SGVFS032841*
 -3-

PETNET, more widely-known by its retail brand name PERA HUB, has the largest network of
Western Union outlets in the Philippines. PETNET has over 2,800 outlets nationwide. It offers a
variety of cash-based services including remittance, currency exchange and bills payment.

(d) FAIR Bank was registered with the SEC on September 15, 1998 primarily to engage in the
business of extending rural credit to small farmers and tenants and to deserving rural industries or
enterprises. FAIR Bank has one (1) banking office and ten (10) branches located all over Cebu.
On December 21, 2015, CSB, UPI and the major stockholders of FAIR Bank signed a
Memorandum of Agreement which provided for the terms of the acquisition of a total of 77.78%
of the issued and outstanding capital stock of FAIR Bank by CSB and UPI (Note 3). On
December 15, 2016, the MB of the BSP approved the acquisition by CSB and UPI of FAIR
Bank’s 441,000 common shares and 259,002 common shares, respectively, from the selling
shareholders of FAIR Bank. The common shares acquired by CSB and UPI represented 49.00%
and 28.78%, respectively, of the issued and outstanding capital stock of FAIR Bank. The funds
for the payment of the acquisition were deposited in an escrow account with UnionBank Trust
and Investment Services Group (TISG) and the escrow amount were released in tranches,
subjected to the fulfillment of certain conditions necessary to fully transfer ownership over the
acquired shares to CSB and UPI.

On March 17, 2017, CSB and UPI subscribed to 294,000 and 306,000 new common shares,
respectively, of FAIR Bank at par value of P100 per share. As a result of the subscription, the
percentage of ownership of UPI in FAIR Bank increased to 37.67% while CSB’s ownership
interest stood at 49%.

To meet the minimum requirements of capital adequacy under the Manual of Regulations for
Banks (MORB), additional subscription was made by CSB and UPI on November 13, 2018 of
50,960 and 53,040 common shares, respectively, of FAIR Bank at par value of P100 per share.
As a result of the additional subscription, the percentage of ownership of CSB’s ownership
interest in FAIR Bank remained at 49% while UPI’s ownership interest in FAIR Bank increased
to 38.53%.

(e) UPI was incorporated and registered with the SEC on December 20, 1993. It is presently
engaged in the administration and management of the Parent Bank’s premises and other
properties such as buildings, condominium units and other real estate, wholly or partially owned
by the Group. Pursuant to the action of the BOD of UPI approving the amendment of its Articles
of Incorporation on May 13, 2004, the primary purpose of UPI was changed from a real estate
developer to a real estate administrator. The SEC approved such amendment on December 13,
2004. Through its wholly-owned subsidiaries, FUPI, FUDC and FUIFAI, UPI is also engaged in
the sale of pre-need plans, marketing of financial products and being an agent for life and non-life
insurance products.

Non-operating subsidiaries

(a) UBPSI was incorporated and registered with the SEC on March 2, 1993. It was organized to
engage in the business of buying, selling or dealing in stocks and other securities. In January
1995, as approved by UBPSI’s stockholders and BOD, UBPSI sold its stock exchange seat in the
PSE. Accordingly, UBPSI ceased its stock brokerage activities.

(b) UCBC was registered in the SEC on June 14, 1994. It was organized to engage in the foreign
currency brokerage business. On March 23, 2001, the BOD of UCBC approved the cessation of
its business operations effective on April 16, 2001. Since then, UCBC’s activities were
significantly limited to the settlement of its liabilities. The BOD and the stockholders of UCBC

*SGVFS032841*
 -4-

have approved to shorten the company’s corporate term to December 31, 2016. UCBC has
secured a tax clearance from the Bureau of Internal Revenue (BIR) in 2018.

(c) UDC was registered with the SEC on September 8, 1998. It was organized to handle the
centralized branch accounting services as well as the processing of credit card application forms
of the Parent Bank and the entire backroom operations of FUPI. On July 1, 2003, the BOD of
UDC approved the cessation of its business operations effective on August 30, 2003, and
subsequently shortened its corporate term to December 31, 2017 by amending its Articles of
Incorporation. The services previously handled by UDC are now undertaken by the Centralized
Processing Service Unit of the Parent Bank. UDC is still in process of securing the tax clearance
from the BIR.

(d) IVCC was incorporated and registered with the SEC on October 10, 1980. It was organized to
develop, promote, aid and assist financially any small or medium scale enterprises and to
purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal
with such real and personal property, including securities and bonds of other corporations as the
transaction of the lawful business of the corporation may reasonably and necessarily require,
subject to the limitations prescribed by law and the constitution. IVCC has ceased operations
since 1992.

(e) UBPIBI was organized to engage in the insurance brokerage business. It was incorporated and
registered with the SEC on February 27, 1992. In 1995, the BOD of UBPIBI approved the
cessation of its operations. On November 15, 2018, the SEC approved the dissolution of UBPIBI
after it has secured a tax clearance from the Bureau of Internal Revenue (BIR) for the dissolution
in 2017.

The total assets, liabilities and capital funds of these non-operating subsidiaries amount to P
=5,211,
=3,158 and =
P P2,053, respectively, as of December 31, 2018 and = P5,245, =
P3,155 and =P2,090,
respectively, as of December 31, 2017.

The Bank’s registered address, which is also its principal place of business, is at UnionBank Plaza,
Meralco Avenue corner Onyx Street and Sapphire Road, Ortigas Center, Pasig City. AEVI’s
registered address is located at NAC Tower, 32nd Street, Bonifacio Global City, Taguig City, Metro
Manila.

Approval of Financial Statements

The consolidated financial statements of UnionBank and Subsidiaries and the financial statements of
the Parent Bank as of and for the year ended December 31, 2018 (including the comparative financial
statements as of December 31, 2017 and for the years ended December 31, 2017 and 2016, and the
corresponding figures as of January 1, 2017) were authorized for issue by the Bank’s BOD on
February 22, 2019.

2. Summary of Significant Accounting Policies

The significant accounting policies that have been used in the preparation of these financial
statements are summarized below. These policies have been consistently applied to all the years
presented, unless otherwise stated.

*SGVFS032841*
 -5-

Basis of Preparation of Financial Statements

(a) Statement of Compliance with Philippine Financial Reporting Standards

The consolidated financial statements of the Group and the financial statements of the Bank have
been prepared in accordance with Philippine Financial Reporting Standards (PFRS). PFRSs are
adopted by the Financial Reporting Standards Council (FRSC) from the pronouncements issued
by the International Accounting Standards Board (IASB), and approved by the Philippine Board
of Accountancy.

The financial statements have been prepared using the measurement bases specified by PFRS for
each type of resource, liability, income and expense.

The measurement bases are more fully described in the accounting policies that follow.

(b) Presentation of Financial Statements

The financial statements are presented in accordance with Philippine Accounting Standards
(PAS 1), Presentation of Financial Statements. The Group presents statement of comprehensive
income separate from the statement of income.

The Group presents a third statement of financial position as at the beginning of the preceding
period when it applies an accounting policy retrospectively, or makes a retrospective restatement
or reclassification of items that have a material effect on the information in the statement of
financial position at the beginning of the preceding period. The related notes to the third
statement of financial position are not required to be disclosed.

(c) Functional and Presentation Currency

These financial statements are presented in Philippine pesos, the Group’s functional and
presentation currency, and all values are presented in thousands of Philippine Pesos except when
otherwise indicated.

Items included in the financial statements of the Group are measured using its functional
currency, the currency of the primary economic environment in which the Group operates.

Adoption of New and Amended PFRS

(a) Effective in 2018 that are Relevant to the Group

Unless otherwise stated, the following new accounting standards, amendments and annual
improvements have no material impact to the Group’s annual consolidated financial statements as
at and for the year ended December 31, 2018:

PFRS 2 (Amendments) Share-based Payment, Classification and

Measurement of Share-based Payment
Transactions
PAS 40 (Amendments) Reclassification to and from Investment Property
IFRIC 22 Foreign Currency Transactions and Advance
consideration
Annual Improvements to PFRS PAS 28 (Amendment), Investment in Associates –
2014-2016 Cycle Clarification on Fair Value through Profit or
Loss Classification

*SGVFS032841*
 -6-

∂ PFRS 9 (2014), Financial Instruments. This standard replaces PAS 39, Financial
Instruments: Recognition and Measurement and PFRS 9 (2009, 2010 and 2013 versions),
herein referred to as PFRS 9. In addition to the principal classification categories for
financial assets and financial liabilities, which were early adopted by the Group on January 1,
2014, PFRS 9 (2014) includes the following major provisions:

- limited amendments to the classification and measurement requirements for financial

assets, introducing the fair value through other comprehensive income (FVOCI)
measurement for eligible debt securities; and

- an expected credit loss model in determining impairment of all financial assets that are
not measured at fair value through profit or loss (FVTPL), including irrevocable loan
commitments and financial guarantee contracts which generally depends on whether
there has been a significant increase in credit risk since initial recognition of a financial
asset.

Classification and Measurement

The FVOCI category for debt instruments, both for government securities and corporate
bonds, was available effective January 1, 2018, in addition to the financial assets at amortized
cost and FVTPL categories of the previously adopted PFRS 9 (2009, 2010 and 2013
versions). As a result of this amendment to the standard, the Group adopted the FVOCI
business model (see Note 12). Financial assets classified under the FVOCI category are both
held in order to collect contractual cash flows and to realize fair value gains by selling the
instruments. Changes in the fair value of FVOCI securities are recognized in other
comprehensive income up until derecognition, when the fair value change will be recognized
in the statements of income.

Expected Credit Loss

The adoption of PFRS 9 has fundamentally changed the Group’s accounting for impairment
losses by replacing PAS 39’s incurred loss approach with a forward-looking Expected Credit
Losses (ECL) approach. Thus, it is no longer required for a credit event to have occurred
before credit losses are recognized. Instead, an entity calculates the ECL for all assets
classified under Amortized Cost and FVOCI, which include, but are not limited to, corporate
loans, consumer finance loans, and investments in bonds. ECLs are based on the difference
between the contractual cash flows due in accordance with the contract and all the cash flows
that the Group expects to receive. The shortfall is then discounted at the asset’s original
effective interest rate. The ECL calculation is composed of three major components -
probability of default (PD), loss given default (LGD), and exposure at default (EAD). PD
captures the obligor or borrower risk. LGD reflects, in part, how collateral is being managed.
EAD is largely the on-balance sheet amount and off-balance sheet amount (for irrevocable
committed lines) in the event of a default. The off-balance sheet amount to be included shall
be computed through a credit conversion factor (CCF).

The significant increase/improvement in credit risk (SICR) model is used to classify accounts
into PFRS 9 ECL’s three stages. A set of defined empirical-based rules and expert judgment
that discriminate good and bad credit make up the SICR. Accounts that do not demonstrate
significant increase in credit risk are classified under Stage 1, while accounts that
demonstrate significant increase in credit risk since origination but does not have objective
evidence of impairment as of reporting date are classified under Stage 2. On the other hand,
accounts with objective evidence of impairment are classified under Stage 3.

*SGVFS032841*
 -7-

The 12-month ECL is computed for Stage 1 accounts, while the lifetime ECL is calculated
for Stage 2 and Stage 3 accounts. Stage 1 and Stage 2 accounts shall use future values derived
from the term structures of the PD, LGD, and CCF. These future values also take into
consideration prospective business environment conditions through the inclusion of
macroeconomic forecasts.

Altogether, the resulting value is called the baseline ECL. In order to compute for the
probability-weighted ECL, calibration factors and scenario weights are embedded into the
baseline model. Finally, risk management policies complement the application of
probability-weighted ECL models. Together, ECL models and their corresponding policies,
shall enhance the assessment and monitoring of accounts.

At January 1, 2018, the Group determined the amount of provisions required under the ECL
model, in accordance with its existing governance framework relevant to the implementation
of PFRS 9. The Group continues to refine its processes to enhance its implementation of
PFRS 9.

The Group applied the modified retrospective application in adopting PFRS 9, which allowed
the Group not to restate comparative periods for the effect of the adoption. The effect of
adopting PFRS 9 is as follows:

Group

Allowance for
impairment ECL under
Under PAS 39 PFRS 9
as at as at
December 31, January 1,
Amounts in thousands 2017 Remeasurement 2018
Due from other banks =–
P =9,082
P =9,082
P
Interbank loans and receivables – 600 600
Investment securities:
At amortized cost – 16,519 16,519
At fair value through other
comprehensive income 40 (40) −
Loans and other receivables - net 10,822,982 (2,369,381) 8,453,601
=10,823,022
P (P
=2,343,220) =8,479,802
P

As of January 1, 2018, the adoption of ECL under PFRS 9 resulted in net reduction in total
Allowance for credit losses for the Group totaling P
=2,343.2 million and decrease in Deferred
tax asset of P
=703.0 million, which accordingly resulted in increase in Surplus free attributable
to equity holders of the Parent Bank amounting to =P1,641.1 million and decrease in the
non-controlling interest amounting to =
P0.9 million. Net increase in total equity of the Group
amounted to = P1,640.3 million.

*SGVFS032841*
 -8-

Parent Bank
Allowance for
Impairment ECL under
Under PAS 39 PFRS 9
as at as at
December 31, January 1,
Amounts in thousands 2017 Remeasurement 2018
Due from other banks =–
P =9,082
P =9,082
P
Interbank loans and receivables – 600 600
Investment securities:
At amortized cost – 16,519 16,519
At fair value through other
comprehensive income 40 (40) −
Loans and other receivables - net 9,645,340 (2,903,516) 6,741,824
=9,645,380
P (P
=2,877,355) =6,768,025
P

As of January 1, 2018, the adoption of ECL under PFRS 9 resulted in net reduction in total
Allowance for credit losses for the Parent Bank totaling =
P2,877.4 million, reduction in
Investment in subsidiaries amounting to =P373.0 million and decrease in Deferred tax asset of
=863.3 million, which accordingly resulted in increase in Surplus free amounting to
P
=
P1,641.1 million.

In addition, the Group has presented separately the interest revenue, calculated using
effective interest method, from other interest revenue. As a result, Interest income on
Investment securities at amortized cost and FVOCI is presented separately from Interest
income on trading securities at fair value through profit or loss. Previously, these interest
income items were presented together as Interest income on trading and investment securities.

PFRS 9 does not change the general principles of how an entity accounts for effective hedges.
Applying the hedging requirements of PFRS 9 did not have a significant impact on the
Group’s consolidated financial statements.

∂ PFRS 15, Revenue from Contracts with Customers. The standard supersedes PAS 11,
Construction Contracts, PAS 18, Revenue and related Interpretations and it applies to all
revenue arising from contracts with customers, unless those contracts are in the scope of other
standards. The new standard establishes a five-step model to account for revenue arising
from contracts with customers. The five-step model is as follows:
a. Identify the contract(s) with a customer
b. Identify the performance obligations in the contract
c. Determine the transaction price
d. Allocate the transaction price to the performance obligations in the contract
e. Recognize revenue when (or as) the entity satisfies a performance obligation

Under PFRS 15, revenue is recognized at an amount that reflects the consideration to which
an entity expects to be entitled in exchange for transferring goods or services to a customer.

The standard requires entities to exercise judgement, taking into consideration all of the
relevant facts and circumstances when applying each step of the model to contracts with the
customers. The standard also specifies the accounting for the incremental costs of obtaining a
contract and the costs directly related to fulfilling a contract.

*SGVFS032841*
 -9-

The Group adopted PFRS 15, Revenue from Contracts with Customers, effective
January 1, 2018. The Group operates various rewards program for its credit card business
whereby reward entitlement varies according to the type of card and available points earned
by the credit card holder.

Prior to adoption of PFRS 15, the rewards program offered by the Group resulted in
recognition of miscellaneous expense and accrued expense in relation to estimated points
issued but not yet redeemed or expired. The new standard requires the Group to allocate a
portion of the service fee (interchange fee) to the loyalty points awarded to the credit card
holders, as the loyalty points give rise to a separate performance obligation. The allocated
service fee for the loyalty points is recognized as revenue upon fulfilment of its obligation,
i.e. actual redemption of the loyalty points.

The Group’s recognition of this standard resulted in recognition of unearned revenue and
reversal of accrued expense, pertaining to loyalty points earned by the credit card holders but
were not yet redeemed as of reporting date. The net effect of these adjustments was not
material to the Group’s annual consolidated financial statement. The Group adopted PFRS
15 using the full retrospective method of adoption.

∂ PFRS 4 (Amendments), Applying PFRS 9 Financial Instruments with PFRS 4 Insurance

Contracts. The amendments address concerns arising from implementing PFRS 9, the new
financial instruments standard before implementing the new insurance contracts standard.
The amendments introduce two options for entities issuing insurance contracts: a temporary
exemption from applying PFRS 9 and an overlay approach. The temporary exemption is first
applied for reporting periods beginning on or after January 1, 2018. An entity may elect the
overlay approach when it first applies PFRS 9 and apply that approach retrospectively to
financial assets designated on transition to PFRS 9. The entity restates comparative
information reflecting the overlay approach if, and only if, the entity restates comparative
information when applying PFRS 9.

(b) Standards Issued but not yet Effective

There are new PFRSs, amendments, interpretation and annual improvements, to existing
standards effective for annual periods subsequent to 2018, which are adopted by the FRSC.
Management will adopt the following relevant pronouncements in accordance with their
transitional provisions; and, unless otherwise stated, none of these are expected to have
significant impact on the Group’s financial statements:

Effective beginning on or after January 1, 2019:

∂ PFRS 9 (Amendment), Prepayment Features with Negative Compensation. Under PFRS 9, a

debt instrument can be measured at amortized cost or at fair value through other
comprehensive income, provided that the contractual cash flows are ‘solely payments of
principal and interest on the principal amount outstanding’ (the SPPI criterion) and the
instrument is held within the appropriate business model for that classification. The
amendments to PFRS 9 clarify that a financial asset passes the SPPI criterion regardless of
the event or circumstance that causes the early termination of the contract and irrespective of
which party pays or receives reasonable compensation for the early termination of the
contract. The amendments should be applied retrospectively and are effective from
January 1, 2019, with earlier application permitted. Management has assessed that the
amendment has no impact on the consolidated and parent bank financial statements.

*SGVFS032841*
 - 10 -

∂ PFRS 16, Leases. This new standard sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to account for all leases under a
single on-balance sheet model similar to the accounting for finance leases under PAS 17,
Leases. The standard includes two recognition exemptions for lessees - leases of ’low-value’
assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12
months or less). At the commencement date of a lease, a lessee will recognize a liability to
make lease payments (i.e., the lease liability) and an asset representing the right to use the
underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required
to separately recognize the interest expense on the lease liability and the depreciation expense
on the right-of-use asset.

Leesees will be also required to remeasure the lease liability upon the occurrence of certain
events (e.g., a change in the lease term, a change in future lease payments resulting from a
change in an index or rate used to determine those payments). The lessee will generally
recognize the amount of the remeasurement of the lease liability as an adjustment to the
right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under
PAS 17. Lessors will continue to classify all leases using the same classification principle as
in PAS 17 and distinguish between two types of leases: operating and finance leases.
PFRS 16 also requires lessees and lessors to make more extensive disclosures than under
PAS 17.

A lessee can choose to apply the standard using either a full retrospective or a modified
retrospective approach. The standard’s transition provisions permit certain reliefs.

Upon adoption of this standard, the Group and the Parent Bank expect to recognize a right of
use asset and lease liability for covered lease contracts. Management is currently assessing
the impact of this new standard in the consolidated and parent bank financial statements.

∂ PAS 19 (Amendments), Employee Benefits, Plan Amendment, Curtailment or Settlement.

The amendments to PAS 19 address the accounting when a plan amendment, curtailment or
settlement occurs during a reporting period. The amendments specify that when a plan
amendment, curtailment or settlement occurs during the annual reporting period, an entity is
required to:

∂ Determine current service cost for the remainder of the period after the plan amendment,
curtailment or settlement, using the actuarial assumptions used to remeasure the net
defined benefit liability (asset) reflecting the benefits offered under the plan and the plan
assets after that event
∂ Determine net interest for the remainder of the period after the plan amendment,
curtailment or settlement using: the net defined benefit liability (asset) reflecting the
benefits offered under the plan and the plan assets after that event; and the discount rate
used to remeasure that net defined benefit liability (asset).

The amendments also clarify that an entity first determines any past service cost, or a gain or
loss on settlement, without considering the effect of the asset ceiling. This amount is
recognized in the statements of income. An entity then determines the effect of the asset
ceiling after the plan amendment, curtailment or settlement. Any change in that effect,
excluding amounts included in the net interest, is recognized in other comprehensive income.

*SGVFS032841*
 - 11 -

The amendments apply to plan amendments, curtailments, or settlements occurring on or

after the beginning of the first annual reporting period that begins on or after January 1, 2019,
with early application permitted. These amendments will apply only to any future plan
amendments, curtailments, or settlements of the Group.

∂ PAS 28 (Amendments), Long-term Interests in Associates and Joint Ventures. The

amendments clarify that an entity applies PFRS 9 to long-term interests in an associate or
joint venture to which the equity method is not applied but that, in substance, form part of the
net investment in the associate or joint venture (long-term interests). This clarification is
relevant because it implies that the expected credit loss model in PFRS 9 applies to such
long-term interests.

The amendments also clarified that, in applying PFRS 9, an entity does not take account of
any losses of the associate or joint venture, or any impairment losses on the net investment,
recognized as adjustments to the net investment in the associate or joint venture that arise
from applying PAS 28, Investments in Associates and Joint Ventures.

The amendments should be applied retrospectively and are effective from January 1, 2019,
with early application permitted. Since the Group does not have such long-term interests in
its associate and joint venture, the amendments will not have an impact on its consolidated
financial statements.

∂ IFRIC 23, Uncertainty over Income Tax Treatments. The interpretation addresses the
accounting for income taxes when tax treatments involve uncertainty that affects the
application of PAS 12, Income Taxes, and does not apply to taxes or levies outside the scope
of PAS 12, nor does it specifically include requirements relating to interest and penalties
associated with uncertain tax treatments.

The interpretation specifically addresses the following:

∂ Whether an entity considers uncertain tax treatments separately
∂ The assumptions an entity makes about the examination of tax treatments by taxation
authorities
∂ How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused
tax credits and tax rates
∂ How an entity considers changes in facts and circumstances

An entity must determine whether to consider each uncertain tax treatment separately or
together with one or more other uncertain tax treatments. The approach that better predicts
the resolution of the uncertainty should be followed.

This interpretation is not relevant to the Group because there is no uncertainty involved in the
tax treatments made by management in connection with the calculation of current and
deferred taxes as of December 31, 2018 and 2017.

Annual Improvements to PFRS 2015-2017 Cycle

∂ Amendments to PFRS 3, Business Combinations, and PFRS 11, Joint Arrangements,

Previously Held Interest in a Joint Operation. The amendments clarify that, when an
entity obtains control of a business that is a joint operation, it applies the requirements for
a business combination achieved in stages, including remeasuring previously held

*SGVFS032841*
 - 12 -

interests in the assets and liabilities of the joint operation at fair value. In doing so, the
acquirer remeasures its entire previously held interest in the joint operation.

A party that participates in, but does not have joint control of, a joint operation might
obtain joint control of the joint operation in which the activity of the joint operation
constitutes a business as defined in PFRS 3. The amendments clarify that the previously
held interests in that joint operation are not remeasured.

An entity applies those amendments to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning on or after
January 1, 2019 and to transactions in which it obtains joint control on or after the
beginning of the first annual reporting period beginning on or after January 1, 2019, with
early application permitted. These amendments are currently not applicable to the Group
but may apply to future transactions.

∂ Amendments to PAS 12, Income Tax Consequences of Payments on Financial

Instruments Classified as Equity. The amendments clarify that the income tax
consequences of dividends are linked more directly to past transactions or events that
generated distributable profits than to distributions to owners. Therefore, an entity
recognizes the income tax consequences of dividends in the statements of income, other
comprehensive income or equity according to where the entity originally recognized
those past transactions or events.

∂ Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization.
The amendments clarify that an entity treats as part of general borrowings any borrowing
originally made to develop a qualifying asset when substantially all of the activities
necessary to prepare that asset for its intended use or sale are complete.

An entity applies those amendments to borrowing costs incurred on or after the beginning
of the annual reporting period in which the entity first applies those amendments. An
entity applies those amendments for annual reporting periods beginning on or after
January 1, 2019, with early application permitted.

Since the Group’s current practice is in line with these amendments, the Group does not
expect any effect on its consolidated financial statements upon adoption.

Effective beginning on or after January 1, 2020

∂ Amendments to PFRS 3, Definition of a Business. The amendments to PFRS 3 clarify the

minimum requirements to be a business, remove the assessment of a market participant’s
ability to replace missing elements, and narrow the definition of outputs. The amendments
also add guidance to assess whether an acquired process is substantive and add illustrative
examples. An optional fair value concentration test is introduced which permits a simplified
assessment of whether an acquired set of activities and assets is not a business.

An entity applies those amendments prospectively for annual reporting periods beginning on
or after January 1, 2020, with earlier application permitted.

These amendments will apply on future business combinations of the Group.

*SGVFS032841*
 - 13 -

∂ Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting

Policies, Changes in Accounting Estimates and Errors, Definition of Material. The
amendments refine the definition of material in PAS 1 and align the definitions used across
PFRSs and other pronouncements. They are intended to improve the understanding of the
existing requirements rather than to significantly impact an entity’s materiality judgements.

An entity applies those amendments prospectively for annual reporting periods beginning on
or after January 1, 2020, with earlier application permitted.

Effective beginning on or after January 1, 2021

∂ PFRS 17, Insurance Contracts. The standard is a comprehensive new accounting standard
for insurance contracts covering recognition and measurement, presentation and disclosure.
Once effective, PFRS 17 will replace PFRS 4, Insurance Contracts. This new standard on
insurance contracts applies to all types of insurance contracts (i.e., life, non-life, direct
insurance and re-insurance), regardless of the type of entities that issue them, as well as to
certain guarantees and financial instruments with discretionary participation features. A few
scope exceptions will apply.

The overall objective of PFRS 17 is to provide an accounting model for insurance contracts
that is more useful and consistent for insurers. In contrast to the requirements in PFRS 4,
which are largely based on grandfathering previous local accounting policies, PFRS 17
provides a comprehensive model for insurance contracts, covering all relevant accounting
aspects. The core of PFRS 17 is the general model, supplemented by:

∂ A specific adaptation for contracts with direct participation features (the variable fee
approach)
∂ A simplified approach (the premium allocation approach) mainly for short-duration
contracts

PFRS 17 is effective for reporting periods beginning on or after January 1, 2021, with
comparative figures required. Early application is permitted.

Deferred effectivity

∂ Amendments to PFRS 10, Consolidated Financial Statements, and PAS 28, Sale or
Contribution of Assets between an Investor and its Associate or Joint Venture. The
amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of
control of a subsidiary that is sold or contributed to an associate or joint venture. The
amendments clarify that a full gain or loss is recognized when a transfer to an associate or
joint venture involves a business as defined in PFRS 3. Any gain or loss resulting from the
sale or contribution of assets that does not constitute a business, however, is recognized only
to the extent of unrelated investors’ interests in the associate or joint venture.

On January 13, 2016, the Financial Reporting Standards Council deferred the original effective
date of January 1, 2016 of the said amendments until the International Accounting Standards
Board (IASB) completes its broader review of the research project on equity accounting that may
result in the simplification of accounting for such transactions and of other aspects of accounting
for associates and joint ventures.

*SGVFS032841*
 - 14 -

Prior-Period Adjustments
In 2018, a subsidiary has changed the accounting for certain upfront fees on Loans and discounts
from outright income recognition as Services charges, fees and commissions to amortizing the fees to
Interest income over the expected life of the loans using the effective interest rate method. In
addition, the subsidiary adjusted the deferred tax asset recognized in previous years.

The changes have been accounted for retroactively and resulted in the following for the Group’s
consolidated statements of financial position: (i) reduction in Surplus free amounting to
=0.64 billion as of both December 31, 2017 and December 31, 2016/January 1, 2017 (ii) decrease in
P
Loans and discounts amounting to = P0.86 billion as of both December 31, 2017 and
December 31, 2016/January 1, 2017, (iii) increase in Deferred tax asset amounting to = P0.21 billion as
of both December 31, 2017 and December 31, 2016/January 1, 2017, and (iv) reduction in
Non-controlling interest amounting to P =0.01 billion as of both December 31, 2017 and
December 31, 2016/January 1, 2017. For the Group’s comparative consolidated statements of
income, the changes resulted in the following: (i) increases in Interest income amounting to
=
P3.1 billion and =P3.4 billion for the years ended December 31, 2017 and 2016, respectively,
(ii) decreases in Service charges, fees and commissions amounting to = P2.9 billion and =
P3.2 billion for
the years ended December 31, 2017 and 2016, respectively, and (iii) increases in Miscellaneous
expenses amounting to = P0.2 billion for both the years ended December 31, 2017 and 2016.

The changes also resulted in decreases in the Investment in subsidiaries and Surplus free accounts
amounting to =
P0.64 billion as of both December 31, 2017 and December 31, 2016/January 1, 2017 in
the Parent Bank’s financial statements.

There is no material impact on net income of the Group and the Parent Bank for the years ended
December 31, 2017 and 2016.

Basis of Consolidated Financial Statements

The Group’s financial statements comprise the accounts of the Parent Bank and its subsidiaries, as
enumerated in Note 1 and as disclosed under Note 15, after the elimination of material intercompany
transactions. All intercompany resources and liabilities, equity, income, and expenses and cash flows
relating to transactions with subsidiaries are eliminated in full. Unrealized profits and losses from
intercompany transactions that are recognized in the separate financial statements are also eliminated
in full. Intercompany losses that indicate impairment are recognized in the Group’s financial
statements.

The financial statements of the subsidiaries are prepared in the same reporting period as
the Parent Bank using consistent accounting policies.

Non-controlling Interests
Non-controlling interest represents the portion of profit or loss and net assets not owned, directly or
indirectly, by the Parent Bank.

The Group’s transactions with non-controlling interests that do not result in loss of control are
accounted for as equity transactions - that is, as transaction with the owners of the Group in their
capacity as owners. The difference between the fair value of any consideration paid and the relevant
share acquired of the carrying value of the net assets of the subsidiary is recognized in capital funds.
Disposals of equity investments to non-controlling interests may result in gains and losses for the
Group that are also recognized in capital funds.

*SGVFS032841*
 - 15 -

When the Group ceases to have control over a subsidiary, any retained interest in the entity is
remeasured to its fair value at the date when control is lost, with the change in carrying amount
recognized in the statements of income. The fair value is the initial carrying amount for the purposes
of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In
addition, any amounts previously recognized in other comprehensive income in respect of that entity
are accounted for as if the Group had directly disposed of the related resources or liabilities. This
may mean that amounts previously recognized in other comprehensive income are reclassified to
profit or loss.

Investment in Subsidiaries
Subsidiaries are entities (including structured entities) over which the Group has control. The Group
controls an entity when it has the power over the entity, it is exposed, or has rights to, variable returns
from its involvement with the entity, and it has the ability to affect those returns through its power
over the entity. Subsidiaries are consolidated from the date the Group obtains control.

The Group reassesses whether or not it controls an entity if facts and circumstances indicate that there
are changes to one or more of the three elements of controls indicated above. Accordingly, entities
are deconsolidated from the date that control ceases.

In the Parent Bank’s separate financial statements, investments in subsidiaries are initially recognized
at cost and subsequently accounted for using the equity method (see Note 15).

All subsequent changes to the share in the equity of the subsidiaries are recognized in the carrying
amount of the Parent Bank’s investment. Changes resulting from the profit or loss generated by the
subsidiaries are reported as Share in net profit of subsidiaries under Miscellaneous income account in
the Parent Bank’s separate statements of income.

Changes resulting from other comprehensive income of the subsidiaries are recognized in other
comprehensive income of the Parent Bank. Any distributions received from the subsidiaries
(e.g., dividends) are recognized as reduction in the carrying amount of investment in subsidiaries.
However, when the Parent Bank’s share of losses in a subsidiary equals or exceeds its interest in the
subsidiary, including any other unsecured receivables, the Parent Bank does not recognize further
losses, unless it has incurred obligations or made payments on behalf of the subsidiary. If the
subsidiary subsequently reports profits, the Parent Bank recognizes its share on those profits only
after its share of the profits exceeds the accumulated share of losses that has previously not been
recognized.

In computing the Parent Bank’s share in net profit or loss of subsidiaries, unrealized gains or losses
on transactions between the Parent Bank and its subsidiaries are eliminated to the extent of
the Parent Bank’s interest in the subsidiaries. Where unrealized losses are eliminated, the underlying
asset is also tested for impairment from a group perspective.

The Parent Bank holds interests in various subsidiaries as presented in Notes 1 and 15.

Business Combinations and Goodwill

Business acquisitions are accounted for using the acquisition method of accounting. This requires
recognizing and measuring the identifiable assets acquired, the liabilities assumed and any non-
controlling interest in the acquiree. The consideration transferred for the acquisition of a subsidiary is
the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the
Group, if any. The consideration transferred also includes the fair value of any asset or liability
resulting from a contingent consideration arrangement.

*SGVFS032841*
 - 16 -

Acquisition-related costs are expensed as incurred and subsequent change in the fair value of
contingent consideration is recognized directly in the statements of income.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date. On an acquisition-by-
acquisition basis, the Group recognizes any non-controlling interest in the acquiree, either at fair
value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s
identifiable net assets.

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of
the net identifiable assets of the acquired subsidiary at the date of acquisition. Subsequent to initial
recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested
annually for impairment. Impairment losses on goodwill are not reversed.

Gain on bargain purchase which is the excess of the Group’s interest in the net fair value of net
identifiable assets acquired over acquisition cost is recognized directly to profit.

For the purpose of impairment testing, goodwill is allocated to cash-generating units or groups of
cash-generating units that are expected to benefit from the business combination in which the
goodwill arose. The cash-generating units or groups of cash-generating units are identified according
to operating segment.

Gains and losses on the disposal of an interest in a subsidiary include the carrying amount of
goodwill relating to it.

If the business combination is achieved in stages, the acquirer is required to remeasure its previously
held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or
loss, if any, in the statements of income, as appropriate.

Any contingent consideration to be transferred by the Group is recognized at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed
to be an asset or liability is recognized in accordance with PAS 37, Provisions, Contingent Liabilities
and Contingent Assets, either in the statements of income or as a charge to other comprehensive
income. Contingent consideration that is classified as capital funds is not remeasured, and its
subsequent settlement is accounted for within capital funds.

Fair Value Measurement

The Group measures financial instruments such as financial assets at FVTPL and FVOCI at fair value
at each reporting date. Also, fair values of financial instruments measured at amortized cost and
investment properties are disclosed in Note 7.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value measurement
is based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:
∂ in the principal market for the asset or liability, or
∂ in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Group. The fair value of an
asset or a liability is measured using the assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in their economic best interest.

*SGVFS032841*
 - 17 -

If an asset or a liability measured at fair value has a bid price and ask price, the price within the bid-
ask spread is the most representative of fair value in the circumstance shall be used to measure fair
value regardless of where the input is categorized within the fair value hierarchy. The fair value
measurement of a nonfinancial asset takes into account the market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market
participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable inputs
and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy, described in Note 7, based on the lowest level input that is
significant to the fair value measurement as a whole.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the
Group determines whether transfers have occurred between levels in the hierarchy by re-assessing
categorization (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.

Financial Instruments - Initial Recognition and Subsequent Measurement

Date of recognition
Financial assets and liabilities, with the exception of loans and advances to customers and balances
due to customers, are initially recognised on the trade date, i.e., the date that the Group becomes a
party to the contractual provisions of the instrument. This includes regular way trades: purchases or
sales of financial-assets that require delivery of assets within the time frame generally established by
regulation or convention in the market place. Loans and advances to customers are recognised when
funds are transferred to the customers’ accounts. The Group recognises balances due to customers
when funds are transferred to the Group.

Initial measurement of financial instruments

The classification of financial instruments at initial recognition depends on their contractual terms
and the business model for managing the instruments, as described below. Financial instruments are
initially measured at their fair value; except in the case of financial assets and financial liabilities
recorded at FVTPL, transaction costs are added to, or subtracted from, this amount. When the fair
value of financial instruments at initial recognition differs from the transaction price, the Group
accounts for the Day 1 profit or loss, as described below.

‘Day 1’ difference
Where the transaction price in a non-active market is different from the fair value based on other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from observable market, the Group recognizes the difference
between the transaction price and the fair value (a ‘Day 1’difference) in the statements of income
unless it qualifies for recognition as some other type of asset. In cases where transaction price used is
made of data which is not observable, the difference between the transaction price and model value is
only recognized in the statements of income when the inputs become observable or when the
instrument is derecognized. For each transaction, the Group determines the appropriate method of
recognizing the ‘Day 1’ difference amount.

*SGVFS032841*
 - 18 -

Measurement categories of financial assets and liabilities

From 1 January 2018, the Group classifies all of its financial assets based on the business model for
managing the assets and the asset’s contractual terms, measured at either at amortized cost, at FVOCI
or at FVTPL.

The Group classifies and measures its derivative and trading portfolio at FVTPL. The Group may
designate financial instruments at FVTPL, if so doing eliminates or significantly reduces
measurement or recognition inconsistencies.

Before 1 January 2018, the Group classified its financial assets as amortized cost and FVPL.
Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised
cost or at FVPL when they are held for trading, derivative instruments or the fair value designation is
applied.

Financial Assets
Financial assets are recognized when the Group becomes a party to the contractual terms of the financial
instrument. For purposes of classifying financial assets, an instrument is considered as an equity
instrument if it is non-derivative and meets the definition of equity for the issuer in accordance with
the criteria under PAS 32, Financial Instruments: Presentation. All other non-derivative financial
instruments are treated as debt instruments.

(a) Classification, Measurement and Reclassification of Financial Assets

Under PFRS 9, the classification and measurement of financial assets is driven by the entity’s
contractual cash flow characteristics of the financial assets and business model for managing the
financial assets.

As part of its classification process, the Group assesses the contractual terms of financial assets to
identify whether they meet the ‘solely payments of principal and interest’ (SPPI) test. ‘Principal’
for the purpose of this test is defined as the fair value of the financial asset at initial recognition
and may change over the life of the financial asset (e.g. if there are repayments of principal or
amortization of the premium or discount).

The most significant elements of interest within a lending arrangement are typically the
consideration for the time value of money and credit risk. To make the SPPI assessment, the
Bank applies judgement and considers relevant factors such as the currency in which the financial
asset is denominated, and the period for which the interest rate is set.

In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility
in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to
contractual cash flows that are solely payments of principal and interest on the amount
outstanding. In such cases, the financial asset is required to be measured at FVTPL.

The Group determines its business model at the level that best reflects how it manages groups of
financial assets to achieve its business objective.

The Bank's business model is not assessed on an instrument-by-instrument basis, but at a higher
level of aggregated portfolios and is based on observable factors such as:
∂ how the performance of the business model and the financial assets held within that business
model are evaluated and reported to the entity's key management personnel

*SGVFS032841*
 - 19 -

∂ the risks that affect the performance of the business model (and the financial assets held
within that business model) and, in particular, the way those risks are managed
∂ how managers of the business are compensated (for example, whether the compensation is
based on the fair value of the assets managed or on the contractual cash flows collected)
∂ the expected frequency, value and timing of sales are also important aspects of
the Group’s assessment.

The business model assessment is based on reasonably expected scenarios without taking 'worst
case' or 'stress case’ scenarios into account. If cash flows after initial recognition are realized in a
way that is different from the Group's original expectations, the Group does not change the
classification of the remaining financial assets held in that business model, but incorporates such
information when assessing newly originated or newly purchased financial assets going forward.

The Group’s measurement categories are described below:

Financial Assets at Amortized Cost

Financial assets are measured at amortized cost if both of the following conditions are met:

∂ the asset is held within the Group’s business model whose objective is to hold financial assets
in order to collect contractual cash flows; and,
∂ the contractual terms of the instrument give rise, on specified dates, to cash flows that are
SPPI on the principal amount outstanding.

Financial assets meeting these criteria are measured initially at fair value plus transaction costs.
They are subsequently measured at amortized cost using the effective interest method, less any
impairment in value.

The Group’s financial assets at amortized cost are presented in the statement of financial position
as Due from BSP, Due from other banks, Interbank loans receivable, Financial assets at
amortized cost under Trading and investment securities, Loans and other receivables and certain
accounts under Other resources.

For purposes of cash flows reporting and presentation, cash and cash equivalents comprise
accounts with original maturities of three months or less, including Cash and other cash items,
non-restricted balances of Due from BSP, Due from other banks, Interbank loans receivable and
Securities purchased under repurchase agreements included in Loans and other receivables.
These generally include cash on hand, demand deposits and short-term, highly liquid investments
readily convertible to known amounts of cash and which are subject to insignificant risk of
changes in value.

The Group may irrevocably elect at initial recognition to classify a financial asset that meets the
amortized cost criteria above as at FVTPL if that designation eliminates or significantly reduces
an accounting mismatch had the financial asset been measured at amortized cost. In 2017 and
2016, the Group has not made such designation.

Financial Assets at FVTPL

Debt instruments that do not meet the amortized cost criteria, or that meet the criteria but the
Group has chosen to designate as at FVTPL at initial recognition, are classified as financial assets
at FVTPL. Equity investments are classified as financial assets at FVTPL, unless the Group

*SGVFS032841*
 - 20 -

designates an equity investment that is not held for trading as at FVOCI at initial recognition.
The Group’s financial assets at FVTPL include government securities, corporate bonds and
equity securities which are held for trading purposes.

A financial asset is considered as held for trading if:

∂ it has been acquired principally for the purpose of selling it in the near term;
∂ on initial recognition, it is part of a portfolio of identified financial instruments that the Group
manages together and has evidence of a recent actual pattern of short-term profit-taking; or,
∂ it is a derivative that is not designated and effective as a hedging instrument or financial
guarantee.

Financial assets at FVTPL are measured at fair value. Related transaction costs are recognized
directly as expense in the statements of income. Unrealized gains and losses arising from
changes (mark-to-market) in the fair value of the financial assets at FVTPL category and realized
gains or losses arising from disposals of these instruments are included in Gains (losses) on
trading and investment securities at FVTPL and FVOCI account in the statements of income.

Interest earned on these investments is reported in the statements of income under Interest
income account while dividend income is reported in the statements of income under
Miscellaneous income account when the right of payment has been established.

Financial Assets at FVOCI - Equity Investments

At initial recognition, the Group can make an irrevocable election (on an instrument-by-
instrument basis) to designate equity investments as at FVOCI; however, such designation is not
permitted if the equity investment is held by the Group for trading. The Group has designated
certain equity instruments as at FVOCI on initial application of PFRS 9.

Financial assets at FVOCI are initially measured at fair value plus transaction costs.
Subsequently, they are measured at fair value, with no deduction for any disposal costs. Gains
and losses arising from changes in fair value are recognized in other comprehensive income and
accumulated in Net unrealized fair value gains (losses) on investment securities in the statements
of financial position. When the asset is disposed of, the cumulative gain or loss previously
recognized in the Net unrealized fair value gains (losses) on investment securities account is not
reclassified to profit or loss, but is reclassified directly to Surplus free account.

Any dividends earned on holding these equity instruments are recognized in the statements of
income under Miscellaneous income account.

Applicable for the period beginning January 1, 2018

The Group applies the new category under PFRS 9 of debt instruments measured at FVOCI when
both of the following conditions are met:
∂ the instrument is held within a business model, the objective of which is achieved by both
collecting contractual cash flows and selling financial assets, and
∂ the contractual terms of the financial asset meet the SPPI test.

FVOCI debt instruments are subsequently measured at fair value with gains and losses arising
due to changes in fair value being recognized in OCI. Interest income and foreign exchange
gains and losses are recognized in the statements of income in the same manner as for financial
assets measured at amortized cost. The ECL calculation for financial assets at FVOCI is
explained in the ‘Impairment of Financial Assets’ section.

*SGVFS032841*
 - 21 -

On derecognition, cumulative gains or losses previously recognized in OCI are reclassified from
OCI to the statements of income.

The Group can only reclassify financial assets if the objective of its business model for managing
those financial assets changes. Accordingly, the Group is required to reclassify financial assets:
(i) from amortized cost to FVTPL, if the objective of the business model changes so that the
amortized cost criteria are no longer met; and, (ii) from FVTPL to amortized cost, if the objective
of the business model changes so that the amortized cost criteria start to be met and the
characteristic of the instrument’s contractual cash flows meet the amortized cost criteria.

A change in the objective of the Group’s business model will be effected only at the beginning of
the next reporting period following the change in the business model.

(b) Impairment of Financial Assets

Applicable for the year ended December 31, 2017 and prior years
The Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset or group of financial assets is impaired. A financial asset or a group of financial
assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of
impairment as a result of one or more events that occurred after the initial recognition of the asset
(a loss event) and that loss event (or events) has an impact on the estimated future cash flows of
the financial assets or group of financial assets that can be reliably estimated.

Objective evidence that a financial asset or group of assets is impaired includes observable data
that comes to the attention of the Group about certain loss events, including, among others: (i)
significant financial difficulty of the issuer or debtor; (ii) a breach of contract, such as a default or
delinquency in interest or principal payments; (iii) the Group granting the borrower, for economic
or legal reasons relating to the borrower’s financial difficulty, a concession that the lender would
not otherwise consider; (iv) it is probable that the borrower will enter bankruptcy or other
financial reorganization; (v) the disappearance of an active market for that financial asset because
of financial difficulties; or, (vi) observable data indicating that there is a measurable decrease in
the estimated future cash flows from a group of financial assets since the initial recognition of
those assets, although the decrease cannot yet be identified with the individual financial assets in
the group.

For financial assets classified and measured at amortized cost, the Group first assesses whether
objective evidence of impairment exists individually for financial assets that are individually
significant and individually or collectively for financial assets that are not individually
significant. If the Group determines that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant or not, it includes the asset in a group of
financial assets with similar credit risk characteristics and collectively assesses them for
impairment.

Financial assets that are individually assessed for impairment and for which an impairment loss is
or continues to be recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on financial assets carried at amortized cost
has been incurred, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit
losses that have not been incurred), discounted at the financial asset’s original effective interest
rate or current effective interest rate determined under the contract if the loan has a variable
interest rate. The carrying amount of the asset is reduced through the use of an allowance account
and the amount of the loss is recognized in the statements of income.

*SGVFS032841*
 - 22 -

If a financial asset carried at amortized cost has a variable interest rate, the discount rate for
measuring any impairment loss is the current effective interest rate determined under the contract.
When practicable, the Group may measure impairment on the basis of an instrument’s fair value
using an observable market price.

The calculation of the present value of the estimated future cash flows of a collateralized financial
asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling
the collateral, whether or not foreclosure is probable.

For the purpose of collective evaluation of impairment for loans and receivables, financial assets
are grouped on the basis of similar credit risk characteristics (i.e., on the basis of the Group’s
grading process that considers asset type, industry, geographical location, collateral type, past-due
status and other relevant factors). Those characteristics are relevant to the estimation of future
cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts
due according to the contractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are
estimated on the basis of the contractual cash flows of the assets in the group and historical loss
experience for assets with credit risk characteristics similar to those in the group. Historical loss
experience is adjusted on the basis of current observable data to reflect the effects of current
conditions that did not affect the period on which the historical loss experience is based and to
remove the effects of conditions in the historical period that do not exist currently.

Estimates of changes in future cash flows for groups of assets should reflect and be directionally
consistent with changes in related observable data from period to period (for example, changes in
unemployment rates, property prices, payment status, or other factors indicative of changes in the
probability of losses in the group and their magnitude). The methodology and assumptions used
for estimating future cash flows are reviewed regularly by the Group to reduce any differences
between loss estimates and actual loss experience.

The Group also takes into account basic guidelines in setting up allowance for credit losses as
prescribed under BSP Circular No. 855 (Appendix 18). Financial institutions with credit
operations that may not economically justify a more sophisticated loan loss estimation
methodology or where practices fall short of expected standards shall be subject to the said
guidelines.

When possible, the Group seeks to restructure loans rather than to take possession of the
collateral. This may involve extending the payment arrangement and agreement for new loan
conditions. Once the terms have been renegotiated, the loan is no longer considered past due.
Management continuously reviews restructured loans to ensure that all criteria evidencing the
good quality of the loan are met and that future payments are likely to occur. The loans continue
to be subject to an individual or collective impairment assessment, calculated using the loan’s
original effective interest rate. The difference between the recorded amount of the original loan
and the present value of the restructured cash flows, discounted at the original effective interest
rate, is recognized as part of Provision for credit losses account in the statements of income.

When a loan receivable is determined to be uncollectible, it is written-off against the related

allowance for impairment. Such loan or receivable is written-off after all the prescribed
procedures have been completed and the amount of the loss has been determined. Subsequent
recoveries of amounts previously written-off decrease the amount of impairment losses in the
statements of income.

*SGVFS032841*
 - 23 -

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized (such as an
improvement in the debtor’s credit rating), the previously recognized impairment loss is reversed
by adjusting the allowance account. The amount of the reversal is recognized in the statements of
income.

Applicable beginning January 1, 2018

The adoption of the final version of PFRS 9 has fundamentally changed the Group’s impairment
method by replacing PAS 39’s incurred loss approach with a forward-looking ECL approach.
From January 1, 2018, the Group has been recording the allowance for expected credit losses for
all loans and other debt financial assets carried at amortized cost, together with loan commitments
and financial guarantee contracts. Equity instruments are not subject to impairment under
PFRS 9.

ECL represent credit losses that reflect an unbiased and probability-weighted amount which is
determined by evaluating a range of possible outcomes, the time value of money and reasonable
and supportable information about past events, current conditions and forecasts of future
economic conditions. ECL allowances are measured at amounts equal to either (i) 12-month ECL
or (ii) lifetime ECL for those financial instruments which have experienced a significant increase
in credit risk (SICR) since initial recognition (General Approach). The 12-month ECL is the
portion of lifetime ECL that results from default events on a financial instrument that are possible
within the 12 months after the reporting date. Lifetime ECL are credit losses that results from all
possible default events over the expected life of a financial instrument.

The Group has established a policy to perform an assessment, at the end of each reporting period,
of whether a financial instrument’s credit risk has increased significantly since initial recognition,
by considering the change in the risk of default occurring over the remaining life of the financial
instrument.

For non-credit-impaired financial instruments:

∂ Stage 1 is comprised of all non-impaired financial instruments which have not experienced a
SICR since initial recognition. The Group and the Parent Bank recognizes a 12-month ECL
for Stage 1 financial instruments.
∂ Stage 2 is comprised of all non-impaired financial instruments which have experienced a
SICR since initial recognition. The Group and the Parent Bank recognizes a lifetime ECL for
Stage 2 financial instruments.

For credit-impaired financial instruments:

∂ Financial instruments are classified as Stage 3 when there is objective evidence of
impairment as a result of one or more loss events that have occurred after initial recognition
with a negative impact on the estimated future cash flows of a loan or a portfolio of loans.
The ECL model requires that lifetime ECL be recognized for impaired financial instruments.

The Group uses internal credit assessment and approvals at various levels to determine the credit
risk of exposures at initial recognition. Assessment can be quantitative or qualitative and depends
on the materiality of the facility or the complexity of the portfolio to be assessed.

The Group defines a financial instrument as in default, which is fully aligned with the definition
of credit impaired, in all cases when the borrower becomes more than 90 days past due on its
contractual payments. As a part of a qualitative assessment of whether a customer is in default,
the Group also considers a variety of instances that may indicate unlikeliness to pay. When such

*SGVFS032841*
 - 24 -

events occur, the Group carefully considers whether the event should result in treating the
customer as defaulted. An instrument is considered to be no longer in default (i.e., to have cured)
when it no longer meets any of the default criteria for a consecutive period of 180 days (i.e.
consecutive payments from the borrowers for 180 days).

The criteria for determining whether credit risk has increased significantly vary by portfolio and
include quantitative changes in probabilities of default and qualitative factors such as downgrade
in the credit rating of the borrowers and a backstop based on delinquency. The credit risk of a
particular exposure is deemed to have increased significantly since initial recognition if, based on
the Group’s internal credit assessment, the borrower or counterparty is determined to require
close monitoring or with well-defined credit weaknesses. For exposures without internal credit
grades, if contractual payments are more than a specified days past due threshold (i.e. 30 days),
the credit risk is deemed to have increased significantly since initial recognition. Days past due
are determined by counting the number of days since the earliest elapsed due date in respect of
which full payment has not been received. In subsequent reporting periods, if the credit risk of
the financial instrument improves such that there is no longer a SICR since initial recognition, the
Group shall revert to recognizing a 12-month ECL.

ECL is a function of the PD, EAD and LGD, with the timing of the loss also considered, and is
estimated by incorporating forward-looking economic information and through the use of
experienced credit judgment.

The PD represents the likelihood that a credit exposure will not be repaid and will go into default
in either a 12-month horizon for Stage 1 or lifetime horizon for Stage 2. The PD for each
individual instrument is modelled based on historical data and is estimated based on current
market conditions and reasonable and supportable information about future economic conditions.
The Group segmented its credit exposures based on homogenous risk characteristics and
developed a corresponding PD methodology for each portfolio. The PD methodology for each
relevant portfolio is determined based on the underlying nature or characteristic of the portfolio,
behavior of the accounts and materiality of the segment as compared to the total portfolio.

EAD is modelled on historic data and represents an estimate of the outstanding amount of credit
exposure at the time a default may occur. For off-balance sheet and undrawn amounts, EAD
includes an estimate of any further amounts to be drawn at the time of default. LGD is the
amount that may not be recovered in the event of default and is modelled based on historical cash
flow recovery and reasonable and supportable information about future economic conditions,
where appropriate. LGD takes into consideration the amount and quality of any collateral held.

In certain circumstances, the Group modifies the original terms and conditions of a credit
exposure to form a new loan agreement or payment schedule. The modifications can be given
depending on the borrower’s or counterparty’s current or expected financial difficulty. The
modifications may include, but are not limited to, change in interest rate and terms, principal
amount, maturity date, date and amount of periodic payments and accrual of interest and charges.
Distressed restructuring with indications of unlikeliness to pay are categorized as impaired
accounts and are moved to Stage 3.

(c) Derecognition of Financial Assets

A financial asset (or where applicable, a part of a financial asset or part of a group of financial
assets) is derecognized when the contractual rights to receive cash flows from the financial
instruments expire, or when the financial assets and all substantial risks and rewards of ownership
have been transferred to another party. If the Group neither transfers nor retains substantially all

*SGVFS032841*
 - 25 -

the risks and rewards of ownership and continues to control the transferred asset, the Group
recognizes its retained interest in the asset and an associated liability for amounts it may have to
pay. If the Group retains substantially all the risks and rewards of ownership of a transferred
financial asset, the Group continues to recognize the financial asset and also recognizes a
collateralized borrowing for the proceeds received.

Derivative Financial Instruments

The Group is a counterparty to derivatives contracts, such as forwards, swaps and warrants. These
contracts are entered into as a means of reducing or managing the Group’s foreign exchange and
interest rate exposures as well as those of its customers.

Derivatives are initially recognized at fair value on the date on which the derivative contract is
entered into and are subsequently measured at their fair values. Fair values are obtained from quoted
market prices in active markets, including recent market transactions. All derivatives are carried as
resources when fair value is positive and as liabilities when fair value is negative.

The best evidence of the fair value of a derivative at initial recognition is the transaction price (the
fair value of the consideration given or received) unless the fair value of that instrument is evidenced
by comparison with other observable current market transactions in the same instrument. When such
evidence exists, which indicates a fair value different from the transaction price, the Group recognizes
a gain or loss at initial recognition.

For more complex instruments, the Group uses proprietary models, which usually are developed from
recognized valuation models. Some or all of the inputs into these models may not be market
observable, and are derived from market prices or rates or are estimated based on assumptions. When
entering into a transaction, the financial instrument is recognized initially at the transaction price,
which is the best indicator of fair value, although the value obtained from the valuation model may
differ from the transaction price. This initial difference in fair value indicated by valuation
techniques is recognized in income depending upon the individual facts and circumstances of each
transaction and not later than when the market data becomes observable.

Changes in the fair value of derivatives are recognized in the statements of income.

Financial Liabilities
Financial liabilities which include deposit liabilities, bills payable, notes and bonds payable, and other
liabilities (except tax-related payables, pre-need reserves and post-employment defined benefit
obligation) are recognized when the Group becomes a party to the contractual terms of the
instrument.

Financial liabilities are recognized initially at their fair value and subsequently measured at amortized
cost using the effective interest method, for those with maturities beyond one year, less settlement
payments. All interest-related charges incurred on financial liabilities are recognized as an expense in
the statements of income under the caption Interest expense.

Deposit liabilities are stated at amounts in which they are to be paid. Interest is accrued periodically
and recognized in a separate liability account before recognizing as part of deposit liabilities.

Bills payable and Notes and bonds payable are recognized initially at fair value, which is the issue
proceeds (fair value of consideration received) less any issuance costs. These are subsequently
measured at amortized cost; any difference between the proceeds net of transaction costs and the
redemption value is recognized in the statements of income over the period of the borrowings using
the effective interest method.

*SGVFS032841*
 - 26 -

Derivative liabilities, which are included as part of Other Liabilities, are recognized initially and
subsequently measured at fair value with changes in fair value recognized in the statements of
income.

Other liabilities, apart from derivative liabilities, are recognized initially at their fair value and
subsequently measured at amortized cost, using effective interest method for maturities beyond one
year, less settlement payments.

Financial liabilities are derecognized from the statement of financial position only when the
obligations are extinguished either through discharge, cancellation or expiration. Where an existing
financial liability is replaced by another from the same lender on substantially different terms, or if
the terms of an existing liability are substantially modified, such an exchange or modification is
treated as a derecognition of the original liability and a recognition of the new liability, and the
difference in the respective carrying amounts is recognized in the statements of income.

Offsetting Financial Instruments

Financial resources and liabilities are offset and the resulting net amount, considered as a single
financial asset or financial liability, is reported in the statements of financial position when there is a
legally enforceable right to offset the recognized amounts and there is an intention to settle on a net
basis, or realize the asset and settle the liability simultaneously. The right of set-off must be available
at the end of the reporting period, that is, it is not contingent on future event. It must also be
enforceable in the normal course of business, in the event of default, and in the event of insolvency or
bankruptcy; and must be legally enforceable for both entity and all counterparties to the financial
instruments.

Bank Premises, Furniture, Fixtures and Equipment

Bank premises, furniture, fixtures and equipment are carried at acquisition cost less accumulated
depreciation and amortization, and any impairment in value.

The cost of an asset comprises its purchase price and directly attributable costs of bringing the asset
to working condition for its intended use. Expenditures for additions, major improvements and
renewals are capitalized, while expenditures for repairs and maintenance are charged to expense as
incurred.

Depreciation is computed on a straight-line basis over the estimated useful lives of the depreciable
assets as follows:

Buildings 25 - 50 years
Furniture, fixtures and equipment 5 - 10 years

Leasehold rights and improvements are amortized over the term of the lease or the estimated useful
lives of the improvements of five to ten years, whichever is shorter.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount.

The residual values, estimated useful lives and method of depreciation and amortization of bank
premises, furniture, fixtures and equipment (except land) are reviewed and adjusted if appropriate, at
the end of each reporting period.

If a change in use requires an item of bank premises, furniture, fixtures and equipment to be
reclassified to investment properties, the difference between the carrying amount of such asset and its

*SGVFS032841*
 - 27 -

fair value as of the date of change in use is recognized in other comprehensive income and
accumulated in equity under the Other reserves account. If the asset is subsequently retired or
disposed of, the related revaluation surplus is transferred directly to Surplus free account.

An item of bank premises, furniture, fixtures and equipment, including the related accumulated
depreciation, amortization and impairment losses, is derecognized upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising
on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the item) is included in the statements of income in the year the item is
derecognized.

Investment Properties
Investment properties are properties held either to earn rental income or for capital appreciation or for
both, but not for sale in the ordinary course of business, use in the production or supply of goods or
services or for administrative purposes.

Investment properties are measured initially at acquisition cost which comprise its purchase price and
directly attributable cost incurred. These include parcels of land and buildings and related
improvements acquired by the Group from defaulting borrowers. Subsequently, investment
properties are accounted for under the fair value model. It is revalued and reported in the statement of
financial position at its market value as determined by independent appraisal companies acceptable to
the BSP. The carrying amounts recognized in the statement of financial position reflect the prevailing
market conditions at the reporting date.

Any gain or loss resulting from either a change in the fair value or the sale or retirement of an
investment property is immediately recognized in the statements of income as Fair value gains or
losses on investment properties under Miscellaneous income or expenses account in the statements of
income.

Investment properties are derecognized upon disposal or when permanently withdrawn from use and
no future economic benefit is expected from its disposal. Any gain or loss on the retirement or
disposal of an investment property is recognized in the statements of income in the year of retirement
or disposal.

Direct operating expenses related to investment properties, such as repairs and maintenance, and real
estate taxes are normally charged against current operations in the period in which these costs are
incurred.

Intangible Assets
Intangible assets include goodwill and acquired computer software. Goodwill represents the excess
of the acquisition cost over the fair value of the identifiable net assets (a) of the former International
Exchange Bank (iBank) in its merger with the Bank on April 30, 2006; (b) of CSB upon its
acquisition by the Bank on January 8, 2013, (c) of PR Savings Bank upon its acquisition by CSB on
June 14, 2018 and (d) of PETNET upon acquisition by the Group on December 17, 2018 (Note 1).
Goodwill has indefinite useful life and, thus, not subject to amortization but requires an annual test
for impairment. Goodwill is subsequently carried at cost less accumulated impairment losses.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Goodwill
sometimes cannot be allocated on a non-arbitrary basis to individual cash-generating units, but only
to groups of cash-generating units. As a result, the lowest level within the Parent Bank at which
goodwill is monitored for internal management purposes sometimes comprises a number of
cash-generating units. The Group’s cash-generating unit represents all the branches and segments of

*SGVFS032841*
 - 28 -

the Parent Bank, including the units that were integrated to the Parent Bank as a result of the
acquisitions.

Computer software used in administration is accounted for under the cost model. The cost of the
asset is the amount of cash or cash equivalents paid or the fair value of the other considerations given
up to acquire an asset at the time of its acquisition or production.

Computer software licenses are capitalized on the basis of the costs incurred to acquire, develop, and
install the specific software. These costs are amortized on a straight-line basis over the expected
useful lives ranging from five to ten years, as the lives of these intangible assets are considered finite.
These costs are recognized as part of Depreciation and amortization under the Other expenses account
in the statements of income. Costs associated with maintaining computer software are expensed as
incurred. In addition, intangible assets are subject to impairment testing.

When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference
between the proceeds and the carrying amount of the asset and is recognized in the statements of
income.

Other Resources
Other resources pertain to resources controlled by the Group as a result of past events. These are
recognized in the financial statements when it is probable that the future economic benefits will flow
to the Group and the asset has a cost or value that can be measured reliably.

Provisions and Contingencies

Provisions are recognized when present obligations will probably lead to an outflow of economic
resources and they can be estimated reliably even if the timing or amount of the outflow may still be
uncertain. A present obligation arises from the presence of a legal or constructive obligation that has
resulted from past events (e.g., legal dispute or onerous contracts).

Provisions are measured at the estimated expenditure required to settle the present obligation, based
on the most reliable evidence available at the end of the reporting period, including the risks and
uncertainties associated with the present obligation. Any reimbursement expected to be received in
the course of settlement of the present obligation is recognized, if virtually certain as a separate asset,
at an amount not exceeding the balance of the related provision. Where there are a number of similar
obligations, the likelihood that an outflow will be required in settlement is determined by considering
the class of obligations as a whole. When time value of money is material, long-term provisions are
discounted to their present values using a pretax rate that reflects market assessment and the risks
specific to the obligation. The increase in the provision due to passage of time is recognized as
interest expense. Provisions are reviewed at the end of each reporting period and adjusted to reflect
the current best estimate.

In those cases where the possible outflow of economic resource as a result of present obligations is
considered improbable or remote, or the amount to be provided for cannot be measured reliably, no
liability is recognized in the financial statements. Similarly, possible inflows of economic benefits
that do not yet meet the recognition criteria of an asset are considered contingent assets, hence, are
not recognized in the financial statements. On the other hand, any reimbursement that the Group can
be virtually certain to collect from a third party with respect to the obligation is recognized as a
separate asset not exceeding the amount of the related provision.

*SGVFS032841*
 - 29 -

Pre-Need Reserves and Insurance Premium Reserves

(a) Pre-need Reserves

In the Group’s consolidated financial statements, pre-need reserves (PNR), presented as part of
Other liabilities in the consolidated statements of financial position, are recognized for all
pre-need benefits guaranteed and payable by FUPI as defined in the pre-need pension plan
contracts.

PNR for pension plans are determined using the requirements on provisioning of PAS 37 and the
specific method of computation required by the Insurance Commission (IC) as described below.

The amount recognized as a provision to cover the PNR is the best estimate of the expenditure
required to settle the present obligation at the end of the reporting period. The risks and
uncertainties that inevitably surround many events and circumstances were taken into account in
reaching the best estimate of a provision.

PNR is computed based on the following considerations:

∂ On actively paying plans, provision is equivalent to the present value of future plan benefits
reduced by the present value of future trust fund contributions required per product model
discounted using the transitory discount rate which does not exceed the lower of the
attainable rate as certified by the Trustee, and the discount interest rate prescribed by the IC
in accordance with IC Circular Letter No. 23-2012, Valuation of Transitory Pre-need
Reserves, for old basket of plans previously approved by the SEC.

∂ On lapsed plans, provision is equivalent to the present value of future plan benefits reduced
by the present value of future trust fund contributions at lapse date, multiplied by the
reinstatement rate.

∂ On fully paid plans, provision is equivalent to the present value of future plan benefits
discounted using the transitory discount rate.

∂ Future events that may affect the foregoing amounts are reflected in the amount of the
provision for PNR where there is sufficient objective evidence that they will occur.

∂ The rates of surrender, cancellation, reinstatement, utilization and inflation, when applied,
represent the actual experience of FUPI in the last three years, or the industry, in the absence
of a reliable experience.

∂ The probability of pre-termination or surrender of fully paid plans are considered in

determining the PNR of fully paid plans. A pre-termination experience on fully paid plans of
5% and below are considered insignificant. In such cases, derecognition of liability shall be
recorded at pre-termination date.

The computation of the foregoing assumptions is validated by the IC-accredited actuary of

FUPI.

Any excess in the amount of the trust fund as a result of the revised reserving requirement
shall neither be released from the fund nor be credited/set-off to future required contributions.

*SGVFS032841*
 - 30 -

(b) Insurance Premium Reserves

Insurance premium reserves for pension plans represents FUPI’s actuarially-determined liability
in accordance with PAS 37 to guarantee the benefits provided in the plan in consideration of the
insurance premium funds assigned for this purpose as determined and certified by the
IC-accredited actuary.

Capital Funds
Common stock represents the nominal value of shares that have been issued.

Additional paid-in capital includes any premiums received on the issuance of common stock. Any
transaction costs associated with the issuance of shares are deducted from additional paid-in capital,
net of any related income tax benefits.

Surplus free includes all current and prior period results as reported in the statements of income and
which are available and not restricted for use by the Group, reduced by the amounts of dividend
declared, if any.

Surplus reserves pertains to the following:

(a) Portion of the Group’s income from trust operations set-up on a yearly basis in compliance with
BSP regulations. The surplus set-up is equal to 10% of the net profit accruing from the trust
business until the surplus shall amount to 20% of authorized capital stock. The reserve shall not
be paid out as dividends, but losses accruing in the course of the trust business may be charged
against this account.

(b) Accumulated trust fund income of FUPI that is automatically restricted to payments of benefits of
planholders and related payments in accordance with the amended Pre-need Uniform Chart of
Accounts (PNUCA).

(c) The difference of the 1% required General Loan Loss Provision on Stage 1 on-balance sheet
loans over the computed allowance for credit losses on Stage 1 accounts as required by the BSP
Circular No. 1011 - Guidelines on the Adoption of the Philippine Financial Reporting Standard
(PFRS) 9 - Financial Instruments.

Net unrealized fair value gains (losses) on investment securities pertains to cumulative mark-to-
market valuation of financial assets at FVOCI.

Remeasurements of defined benefit plan refer to accumulated actuarial losses, net of gains, as a result
of remeasurements of post-employment defined benefit plan and return on plan assets (excluding
amount included in net interest).

Other reserves pertains to the difference between the net carrying amount and fair value of certain
properties that were reclassified from owner-occupied properties to investment properties to reflect
the change in use.

Non-controlling interests represent the portion of the net resources and profit or loss not attributable
to the Group which are presented separately in the Group’s statements of income and within the
capital funds in the Group’s statements of financial position and changes in capital funds.

*SGVFS032841*
 - 31 -

Revenue and Cost Recognition

Revenue is recognized to the extent that the revenue can be reliably measured; it is probable that
future economic benefits will flow to the Group; and the costs incurred or to be incurred can be
reliably measured. Expenses are recognized in the statements of income upon utilization of the
resources or services or at the date these are incurred. All finance costs are reported on an accrual
basis. The following specific recognition criteria of income and expenses must also be met before
income or expense is recognized:

(a) Interest income recognized using the effective interest rate method - Interest income is recognized
in the statements of income for all instruments measured at amortized cost and debt instruments
classified as financial assets at FVOCI using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial asset or
a financial liability and of allocating the interest income or interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash
payments or receipts through the expected life of the financial instrument or, when appropriate, a
shorter period to the net carrying amount of the financial asset or financial liability. When
calculating the effective interest rate, the Group estimates cash flows considering all contractual
terms of the financial instrument but does not consider future credit losses. The calculation
includes all fees paid or received between parties to the contract that are an integral part of the
effective interest rate, transaction costs and all other premiums or discounts.

When financial asset becomes credit-impaired and is, therefore, regarded as ‘Stage 3’, the Group
calculates interest income by applying the effective interest rate to the net amortized cost of the
financial asset. If the financial assets cures and is no longer credit-impaired, the Group reverts to
calculating interest income on a gross basis.

(b) Other interest income - Interest income on all trading assets and financial assets mandatorily
required to be measured at FVTPL is recognized using the contractual interest rate and is
included under Interest Income on financial assets at fair value through profit or loss.

(c) Service charges, fees and commissions - Service charges, fees and commissions are generally
recognized when the service has been provided. Loan commitment fees are earned as services are
provided, recognized as other income on a time proportion basis over the commitment period.

The Group has a loyalty points programme as part of its credit cards business which allows
customers to accumulate points that can be redeemed for free products. The loyalty points give
rise to a separate performance obligation as they provide a material right to the customer.
A portion of the interchange fee is allocated to the loyalty points awarded to customers based on
relative stand-alone selling price and recognised as a contract liability until the points are
redeemed. Revenue is recognised upon redemption of products by the customer.

(d) Gain (loss) on trading and investment securities - Gain (loss) on trading and investment securities
is recognized when the risk and rewards of the securities is transferred to the buyer (at an amount
equal to the difference of the selling price and the carrying amount of securities) and as a result of
the mark-to market valuation of outstanding securities classified as FVTPL at year-end.

(e) Premium revenues - Premiums from sale of pre-need plans are recognized as earned when
collected inclusive of advance premium payments. When premiums are recognized as income,
the related cost of contracts is computed and recognized, with the result that the benefits and
expenses are matched with such revenue.

*SGVFS032841*
 - 32 -

(f) Miscellaneous income includes the following accounts:

∂ Commissions earned on credit cards - Commissions earned on credit cards are recognized as
income upon receipt from member establishments of charges arising from credit availments
by credit cardholders. These commissions are computed based on certain agreed rates and
are deducted from amounts remittable to member establishments. Purchases by the credit
cardholders, collectible on installment basis, are recorded at the cost of the items purchased.
Interest income is recognized on every term of installment billed to the cardholders and
computed using the effective interest method.

∂ Gain (loss) from sale of assets - Profit or loss from assets sold or exchanged is recognized
when the control of the assets is transferred to the buyer or when the collectibility of the
entire sales price is reasonably assured.

∂ Rental - Rental income arising from leased properties is accounted for on a straight-line basis
over the lease terms on ongoing leases.

∂ Income from bancassurance business - Exclusive access fee (EAF) related to the
bancassurance partnership is recognized as revenue by reference to the completion rate of the
target cumulative annualized premium earned.

∂ Dividend - Dividend income is recognized when the Group’s right to receive payment is
established.

∂ Income from trust operations - Trust fees related to investment funds are recognized in
reference to the net asset value of the funds. The same principle is applied for wealth
management, financial planning and custody services that are continuously provided over an
extended period of time.

Leases
The Group accounts for its leases as follows:

(a) Group as Lessee

Leases, which do not transfer to the Group substantially all the risks and benefits of ownership of
the asset, are classified as operating leases. Operating lease payments (net of any incentive
received from the lessor) are recognized as expense in the statements of income on a straight-line
basis over the lease term. Associated costs, such as repairs, maintenance and insurance, are
expensed as incurred.

(b) Group as Lessor

Leases, which do not transfer to the lessee substantially all the risks and benefits of ownership of
the asset, are classified as operating leases. Lease income from operating leases is recognized as
income in the statements of income on a straight-line basis over the lease term.

The Group determines whether an arrangement is, or contains a lease based on the substance of
the arrangement. It makes an assessment of whether the fulfilment of the arrangement is
dependent on the use of a specific asset or assets and the arrangement conveys a right to use the
asset.

Foreign Currency Transactions and Translations

The accounting records of the Group are maintained in Philippine pesos except for the Foreign
Currency Deposit Unit (FCDU) of the Parent Bank which are maintained in United States (U.S.)

*SGVFS032841*
 - 33 -

dollars. Foreign currency transactions during the period are translated into the functional currency at
exchange rates which approximate those prevailing on transaction dates.

For financial reporting purposes, the accounts of the FCDU are translated into their equivalents in
Philippine pesos based on the Philippine Dealing System closing rates (PDSCR) prevailing at the end
of the period (for resources and liabilities) and at the average PDSCR for the period (for income and
expenses).

Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and
from the translation at period-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognized in the statements of income.

Changes in the fair value of monetary financial assets denominated in foreign currency are analyzed
between translation differences resulting from changes in the amortized cost of the security and other
changes in the carrying amount of the security. Translation differences related to changes in
amortized cost are recognized in the statements of income, and other changes in the carrying amount
are recognized in other comprehensive income.

Impairment of Non-financial Assets

The Group’s Intangible assets (consisting of goodwill and computer software recorded as part of
Other resources), Bank premises, furniture, fixtures and equipment, Investments in subsidiaries (for
Parent Bank only) and other non-financial assets are subject to impairment testing. Intangible assets
with an indefinite useful life, such as goodwill, are tested for impairment at least annually. All other
individual assets or cash-generating units are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.

For purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating unit level.

Impairment loss is recognized in the statements of income for the amount by which the asset’s or
cash-generating unit’s carrying amount exceeds its recoverable amount, which is the higher of fair
value, reflecting market conditions, less costs to sell and value in use. In determining value in use,
management estimates the expected future cash flows from each cash-generating unit and determines
the suitable interest rate in order to calculate the present value of those cash flows. The data used for
impairment testing procedures are directly linked to the Group’s latest approved budget, adjusted as
necessary to exclude the effects of asset enhancements. Discount factors are determined individually
for each cash-generating unit and reflect management’s assessment of respective risk profiles, such as
market and asset-specific risk factors.

All assets are subsequently reassessed for indications that an impairment loss previously recognized
may no longer exist and the carrying amount of the asset is adjusted to the recoverable amount
resulting in the reversal of the impairment loss, except for goodwill.

Employee Benefits
The Group’s employment benefits to employees are as follows:

(a) Post-employment Defined Benefit Plan

A defined benefit plan is a post-employment plan that defines an amount of post-employment
benefit that an employee will receive on retirement, usually dependent on one or more factors
such as age, years of service and salary. The legal obligation for any benefits from this kind of
post-employment plan remains with the Group, even if plan assets for funding the defined benefit

*SGVFS032841*
 - 34 -

plan have been acquired. Plan assets may include assets specifically designated to a long-term
benefit fund, as well as qualifying insurance policies. The Group’s defined benefit post-
employment plan covers all regular full-time employees. The pension plan is tax-qualified,
noncontributory and administered by a trustee.

The liability recognized in the statement of financial position for a defined benefit plan (included
as part of Other Liabilities) is the present value of the defined benefit obligation (DBO) at the end
of the reporting period less the fair value of plan assets. The DBO is calculated annually by
independent actuaries using the projected unit credit method. The present value of the DBO is
determined by discounting the estimated future cash outflows arising from expended benefit
payments using a discount rate derived from the interest rates of a zero coupon government bond
as published by Philippine Dealing & Exchange Corp., that are denominated in the currency in
which the benefits will be paid and that have terms to maturity approximating to the terms of the
related post-employment liability.

Remeasurements, comprising of actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions and the return on plan assets (excluding amount included in
net interest) are reflected immediately in the statement of financial position with a charge or
credit recognized in other comprehensive income in the period in which they arise. Net interest is
calculated by applying the discount rate at the beginning of the period to the net defined benefit
liability or asset and is included as part of Interest expense or Interest income in the statements of
income.

Past-service costs are recognized immediately in the statements of income in the period of a plan
amendment or curtailment.

(b) Post-employment Defined Contribution Plan

A defined contribution plan is a post-employment plan under which the Group pays fixed
contributions into an independent entity, such as the Social Security System. The Group has no
legal or constructive obligations to pay further contributions after payment of the fixed
contribution. The contributions recognized in respect of defined contribution plans are expensed
as they fall due. Liabilities and assets may be recognized if underpayment or prepayment has
occurred.

(c) Termination Benefits

Termination benefits are payable when employment is terminated by the Group before the normal
retirement date, or whenever an employee accepts voluntary redundancy in exchange for these
benefits. The Group recognizes termination benefits at the earlier of when it can no longer
withdraw the offer of such benefits and when it recognizes costs for a restructuring that is within
the scope of PAS 37 and involves the payment of termination benefits. In the case of an offer
made to encourage voluntary redundancy, the termination benefits are measured based on the
number of employees expected to accept the offer. Benefits falling due more than 12 months
after the end of the reporting period are discounted to their present value.

(d) Profit-Sharing and Bonus Plans

The Group recognizes a liability and an expense for bonuses and profit-sharing, based on a
formula that takes into consideration the profit attributable to the Parent Bank’s shareholders, as
indicated in the statements of income, after certain regulatory adjustments. The Group recognizes
a provision where it is contractually obliged to pay the bonus plans. The Group also recognizes a
provision for profit-sharing and bonus plans where there is a past practice that has created a
constructive obligation, whether paid in cash or in the form of shares of the Parent Bank to be
issued under the Employee Stock Plan.

*SGVFS032841*
 - 35 -

(e) Compensated Absences

Compensated absences are recognized for the number of paid leave days (including holiday
entitlement) remaining at the end of the reporting date.

They are included as part of Accrued taxes and other expenses under the Other liabilities account
in the statement of financial position at the undiscounted amount that the Group expects to pay as
a result of the unused entitlement.

Income Taxes
Tax expense recognized in the statements of income comprises the sum of deferred tax and current
tax not recognized in other comprehensive income or directly in capital funds, if any.

Current tax assets or liabilities comprise those claims from, or obligations to, fiscal authorities
relating to the current or prior reporting period, that are uncollected or unpaid at the end of the
reporting period. They are calculated using the tax rates and tax laws applicable to the fiscal periods
to which they relate, based on the taxable profit for the year. All changes to current tax assets or
liabilities are recognized as a component of tax expense in the statements of income.

Deferred tax is accounted for using the liability method on temporary differences at the end of the
reporting period between the tax base of assets and liabilities and their carrying amounts for financial
reporting purposes. Under the liability method, with certain exceptions, deferred tax liabilities are
recognized for all taxable temporary differences and deferred tax assets are recognized for all
deductible temporary differences and the carryforward of unused tax losses and unused tax credits to
the extent that it is probable that taxable profit will be available against which the deferred tax assets
can be utilized. Unrecognized deferred tax assets are reassessed at the end of each reporting period
and are recognized to the extent that it has become probable that future taxable profit will be available
to allow such deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period
when the asset is realized or the liability is settled, based on tax rates and tax laws that have been
enacted or substantively enacted at the end of the reporting period.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is probable that sufficient taxable profit will be available to allow all or
part of the deferred tax assets to be utilized.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow
from the manner in which the Group expects, at the end of the reporting period, to recover or settle
the carrying amount of its assets and liabilities. For purposes of measuring deferred tax liabilities and
deferred tax assets for investment properties that are measured using the fair value model, the
carrying amounts of such properties are presumed to be recovered entirely through sale, unless the
presumption is rebutted, that is, when the investment property is depreciable and is held within the
business model whose objective is to consume substantially all of the economic benefits embodied in
the investment property over time, rather than through sale.

Most changes in deferred tax assets or liabilities are recognized as a component of tax expense in the
statements of income, except to the extent that it relates to items recognized in other comprehensive
income or directly in capital funds. In this case, the tax is also recognized in other comprehensive
income or directly in capital funds, respectively.

*SGVFS032841*
 - 36 -

Deferred tax assets and deferred tax liabilities are offset if the Group has a legally enforceable right to
set off current tax assets against current tax liabilities and the deferred taxes relate to the same entity
and the same taxation authority.

Related Party Relationships and Transactions

Related party transactions are transfers of resources, services or obligations between the Group and
their related parties, regardless of whether or not a price is charged.

Parties are considered to be related if one party has the ability to control the other party or exercise
significant influence over the other party in making financial and operating decisions. These parties
include: (a) individuals owning, directly or indirectly through one or more intermediaries, control or
are controlled by, or under common control with the Parent Bank; (b) associates; (c) individuals
owning, directly or indirectly, an interest in the voting power of the Parent Bank that gives them
significant influence over the Parent Bank and close members of the family of any such individual;
and, (d) the Group’s funded retirement plan.

In considering each possible related party relationship, attention is directed to the substance of the
relationship and not merely on the legal form.

Earnings Per Share

Basic earnings per share are determined by dividing the net profit for the year attributable to common
shareholders by the weighted average number of common shares outstanding during the year, after
retroactive effect to any stock dividends declared in the current year.

Diluted earnings per common share are also computed by dividing net profit by the weighted average
number of common shares subscribed and outstanding at the end of the reporting period, after making
adjustments to reflect the effects of any potentially dilutive preferred shares, stock options and
warrants.

Trust and Fiduciary Activities

The Group commonly acts as trustee and in other fiduciary capacities that result in the holding or
placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These
resources and the related income arising thereon are excluded from these financial statements, as they
are neither resources nor income of the Group.

Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
Group’s chief operating decision-maker. The chief operating decision-maker is responsible for
allocating resources and assessing performance of the operating segments.

In identifying its operating segments, management generally follows the Group’s products and
services as disclosed in Note 6, which represent the main products and services provided by the
Group.

Each of these operating segments is managed separately as each of these services require different
technologies and other resources as well as marketing approaches. All inter-segment transfers are
carried out at arm’s length prices.

The measurement policies the Group uses for segment reporting under PFRS 8, Operating Segments,
are the same as those used in its consolidated financial statements in arriving at the operating profit of
the operating segments.

*SGVFS032841*
 - 37 -

In addition, corporate assets which are not directly attributable to the business activities of any
operating segment are not allocated to a particular segment.

There have been no changes from prior periods in the measurement methods used to determine
reported segment profit or loss.

The Group’s operations are organized according to the nature of the products and services provided.
Financial information on business segments is presented in Note 6.

Events After the End of the Reporting Period

Any post-year-end event that provides additional information about the Group’s position at the
statement of financial position date (adjusting event) is reflected in the financial statements.
Post-year-end events that are not adjusting events, if any, are disclosed when material to the financial
statements.

3. Summary of Accounting Judgments and Estimates

The preparation of the Group’s financial statements in accordance with PFRS requires management
to make judgments and estimates that affect the amounts reported in the financial statements and
related notes. Judgments and estimates are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. Actual results may ultimately differ from these estimates.

Unless otherwise stated, below significant judgments and estimates apply as of and for the years
ended December 31, 2018, 2017 and 2016.

Critical Management Judgments in Applying Accounting Policies

In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimation, which have the most significant effect on the
amounts recognized in the financial statements:

Determining functional and presentation currency

PAS 21 requires management to use its judgment to determine the entity’s functional currency such
that it most faithfully represents the economic effects of the underlying transactions, events and
conditions that are relevant to the entity. The Group has determined that its functional and
presentation currency is the Philippine pesos, considering the following:
∂ the currency that mainly influences prices for financial instruments and services (this will often
be the currency in which prices for its financial instruments and services are denominated and
settled);
∂ the currency in which funds from financing activities are generated; and
∂ the currency in which receipts from operating activities are usually retained.

Evaluation of business model in managing financial instruments

The Group manages its financial assets based on business models that maintain adequate level of
financial assets to match its expected cash outflows, largely arising from customers’ withdrawals and
continuing loan disbursements to borrowers, while maintaining a strategic portfolio of financial assets
for investment and trading activities consistent with its risk appetite.

The Group developed business models which reflect how it manages its portfolio of financial
instruments. The Group’s business models need not be assessed at entity level or as a whole but

*SGVFS032841*
 - 38 -

applied at the level of a portfolio of financial instruments (i.e., group of financial instruments that are
managed together by the Group) and not on an instrument-by-instrument basis (i.e., not based on
intention or specific characteristics of individual financial instrument).

In determining the classification of a financial instrument under PFRS 9, the Group evaluates in
which business model a financial instrument or a portfolio of financial instruments belong to taking
into consideration the objectives of each business model established by the Group.

In 2017, the Parent Bank made certain changes in its investment policy, primarily in relation to
management’s assessment of liquidity and the risks surrounding it. The change in investment policy
triggers realignment of its strategy for managing its HTC portfolio and introduction of a new portfolio
with the objective of maximizing risk-adjusted returns, minimizing cost of liquidity and providing
alternative outlet with better returns on liquid assets. Accordingly, in October 2017,
the Parent Bank’s BOD approved the change in the Parent Bank’s business model. As such, the
Bank’s classification of financial assets now consists of amortized cost, FVOCI and FVTPL, where
certain securities at amortized cost were reclassified to the ‘Financial assets at FVOCI’ category at the
beginning of first quarter of 2018.

In addition, PFRS 9 emphasizes that if more than an infrequent and more than an insignificant sale is
made out of a portfolio of financial assets carried at amortized cost, an entity should assess whether
and how such sales are consistent with the objective of collecting contractual cash flows. In making
this judgment, the Group considers certain circumstances documented in its business model manual to
assess that an increase in the frequency or value of sales of financial instruments in a particular period
is not necessarily inconsistent with a held-to-collect business model if the Group can explain the
reasons for those sales and why those sales do not reflect a change in the Group’s objective for the
business model.

In 2018, the Bank participated in bond exchanges resulting in disposal of certain financial assets
carried at amortized cost (see Note 12). The Parent Bank has assessed that such sales are not more
than infrequent and are necessary in order to ensure that the outstanding securities remain of an
acceptable liquid quality. The disposals are considered not inconsistent with the objective of hold to
collect business model. The remaining securities in the affected portfolios continue to be measured at
amortized cost as of December 31, 2018.

Testing the cash flow characteristics of financial assets

In determining the classification of financial assets under PFRS 9, the Group assesses whether the
contractual terms of the financial assets give rise on specified dates to cash flows that are SPPI on the
principal outstanding, with interest representing time value of money and credit risk associated with
the principal amount outstanding. The assessment as to whether the cash flows meet the test is made
in the currency in which the financial asset is denominated. Any other contractual term that changes
the timing or amount of cash flows (unless it is a variable interest rate that represents time value of
money and credit risk) does not meet the amortized cost criteria. In cases where the relationship
between the passage of time and the interest rate of the financial instrument may be imperfect, known
as modified time value of money, the Group assesses the modified time value of money feature to
determine whether the financial instrument still meets the SPPI criterion. The objective of the
assessment is to determine how different the undiscounted contractual cash flows could be from the
undiscounted cash flows that would arise if the time value of money element was not modified
(the benchmark cash flows). If the resulting difference is significant, the SPPI criterion is not met.
In view of this, the Group considers the effect of the modified time value of money element in each
reporting period and cumulatively over the life of the financial instrument.

*SGVFS032841*
 - 39 -

Recognition of provisions and contingencies

Judgment is exercised by management to distinguish between provisions and contingencies. Policies
on recognition and disclosures of provisions and of contingencies are discussed in Note 2 and
relevant disclosures are presented in Note 34.

Key Sources of Estimation Uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next reporting period:

Estimation of impairment losses on Loans and other receivables, Financial assets at amortized cost
and Financial assets at FVOCI
Applicable for year ended December 31, 2017 and prior years
The Group reviews its loan and other receivables and investment portfolios to assess impairment at
least on an annual basis. In determining whether an impairment loss should be recorded in the
statements of income, the Group makes judgments as to whether there is any observable data
indicating that there is a measurable decrease in the estimated future cash flows from the portfolio
before the decrease can be identified with an individual item in that portfolio. This evidence may
include observable data indicating that there has been an adverse change in the payment status of
borrowers or issuers in a group, or national or local economic conditions that correlate with defaults
on assets in the group.

Management uses estimates based on historical loss experience for assets with credit risk
characteristics and objective evidence of impairment similar to those in the portfolio when scheduling
its future cash flows. The methodology and assumptions used for estimating both the amount and
timing of future cash flows are reviewed regularly to reduce any differences between loss estimates
and actual loss experience.

The carrying amount of loans and other receivables and the related allowance are disclosed in
Notes 14 and 20, while the carrying amount of debt financial assets and the related allowance are
disclosed in Notes 8, 9, 10, 12, 13 and 20.

Applicable beginning January 1, 2018

The measurement of impairment losses under PFRS 9 across all categories of financial assets requires
judgment, in particular, the estimation of the amount and timing of future cash flows and collateral
values when determining impairment losses and the assessment of a significant increase in credit risk.
These estimates are driven by a number of factors, changes in which can result in different levels of
allowances.

The Group’s ECL calculations are outputs of complex models with a number of underlying
assumptions regarding the choice of variable inputs and their interdependencies. Significant factors
affecting the estimates on the ECL model include:
∂ The Group’s internal grading model, which assigns PDs to individual grades.
∂ The Group’s criteria for assessing if there has been a significant increase in credit risk and so
allowances for financial assets should be measured on a Lifetime Expected Credit Loss (LTECL)
basis and the qualitative assessment.
∂ The Group’s definition of default, which is consistent with regulatory requirements.
∂ The segmentation of financial assets when the ECL is assessed on a collective basis .
∂ Development of ECL models, including the various formulas and the choice of inputs.
∂ Determination of associations between macroeconomic scenarios and, economic inputs, such as
unemployment levels and collateral values, and the effect on PDs, EADs and LGDs.
∂ Definition of forward-looking macroeconomic scenario variables.

*SGVFS032841*
 - 40 -

Fair value of derivatives

Management applies valuation techniques to determine the fair value of derivatives that are not
quoted in active markets. This requires management to develop estimates and assumptions based on
market inputs, using observable data that market participants would use in pricing the instrument.
Where such data is not observable, management uses its best estimate. Estimated fair values of
financial instruments may vary from the actual prices that would be achieved in an arm’s length
transaction at the reporting date.

Valuation techniques are used to determine fair values which are validated and periodically reviewed.
To the extent practicable, models use observable data, however, areas such as credit risk (both own
and counterparty), volatilities and correlations require management to make estimates. Changes in
assumptions could affect reported fair value of financial instruments. The Group uses judgment to
select a variety of methods and make assumptions that are mainly based on market conditions
existing at the end of each reporting period.

The fair value of derivatives as of December 31, 2018 and 2017 are presented and grouped into the
fair value hierarchy in Note 7.

Determination of fair value of investment properties

The Group’s investment properties is composed of land, buildings and related improvements carried
at fair value at the end of the reporting period.

The fair value of investment properties is determined based on valuations performed by independent
appraisal companies acceptable to the BSP at the end of each reporting period. The fair value is
determined by reference to market-based evidence, which is the amount for which the assets could be
exchanged between a knowledgeable willing buyer and seller in an arm’s length transaction as at the
valuation date. Such amount is influenced by different factors including the location and specific
characteristics of the property (e.g., size, features, and capacity), quantity of comparable properties
available in the market, and economic condition and behavior of the buying parties. The amounts of
revaluation and fair value gains recognized on certain land, buildings and land improvements are
disclosed in Note 17.

For investment properties with appraisal conducted prior to the end of the current reporting period,
management determines whether there are significant circumstances during the intervening period
that may require adjustments or changes in the fair value of those properties.

The fair value determination for investment properties is discussed in Note 7. The carrying amounts
of investment properties are disclosed in Note 17.

Recognition of deferred tax assets

Deferred tax assets are recognized for all unused tax losses and temporary differences to the extent
that it is probable that future taxable profit will be available against which the losses can be utilized.
Significant management judgment is required to determine the amount of deferred tax assets that can
be recognized, based upon the likely timing and level of future taxable income together with future
tax planning strategies.

Based on forecast, management assessed that it is probable that future taxable income will be
available to utilize the deferred tax assets. The carrying value of recognized deferred tax assets is
disclosed in Note 29.

*SGVFS032841*
 - 41 -

Impairment of goodwill
The Group conducts an annual review for any impairment in the value of goodwill. Goodwill is
written down for impairment where the recoverable amount is insufficient to support their carrying
value. The Group determines the recoverable value of goodwill by discounting the estimated excess
earnings using the Group’s cost of capital as the discount rate. The Group estimates the discount rate
used for the computation of the net present value by reference to industry cost of capital.

The recoverable amount of the CGU is determined based on a value-in-use calculation using cash
flow projections from financial budgets approved by senior management and BOD of
the Parent Bank. The assumptions used in the calculation of value-in-use are sensitive to estimates of
future cash flows from business, interest margin, average yields and long-term growth rate used to
project cash flows. Though management believes that the assumptions used in the estimation of fair
values reflected in the financial statements are appropriate and reasonable, significant changes in
these assumptions may materially affect the assessment of recoverable values and any resulting
impairment loss could have a material adverse effect on the results of operations.

The carrying amount of goodwill is disclosed in Note 18.

Valuation of post-employment and other benefits

The determination of the Group’s obligation and cost of pension and other post-employment benefits
is dependent on the selection of certain assumptions used by actuaries in calculating such amounts.
Those assumptions include, among others, discount rates, expected rates of salary increase, and
employee turnover rate. A significant change in any of these actuarial assumptions may generally
affect the recognized expense, other comprehensive income or loss and the carrying amount of the
post-employment benefit obligation in the next reporting period.

The amounts of post-employment defined benefit obligation and expense and an analysis of the
movements in the estimated present value of post-employment defined benefit obligation, as well as
significant assumptions such as salary rate increase, discount rates, and turnover rates used in
estimating such obligation are presented in Note 28.

The Group also estimates other employee benefit obligations and expenses, including the cost of paid
leaves based on historical leave availments of employees, subject to the Group and the Parent Bank
policies. These estimates may vary depending on future changes in salaries and actual experiences
during the year.

Fair value determination of assets acquired and liabilities assumed from business combinations
In June and December 2018, the Group provisionally determined the fair values of the assets acquired
and liabilities assumed from the acquisition of PR Savings Bank and PETNET, respectively.
The Group determines the provisional acquisition-date fair values of identifiable assets acquired and
liabilities assumed from the acquiree without quoted market prices based on the following:
∂ For assets and liabilities that are short term in nature, carrying values approximate fair values
∂ For financial assets and liabilities that are long-term in nature, fair values are estimated through
the discounted cash flow methodology, using the appropriate market rates (e.g., current lending
rates)
∂ For nonfinancial assets such as property and equipment and investment properties, fair values are
determined based on an appraisal which follows sales comparison approach and depreciated
replacement cost approach depending on the highest and best use of the assets

Refer to Note 15 for the provisional fair values of the identifiable assets acquired and liabilities
assumed from the business combination.

*SGVFS032841*
 - 42 -

4. Risk Management Objectives and Policies

Risks are inherent in the business activities of the Group. Among its identified risks are credit risk,
liquidity risk, market risk, interest rate risk, foreign exchange risk, operational risk, legal risk, and
regulatory risk. These are managed through a risk management framework and governance structure
that provides comprehensive controls and management of major risks on an ongoing basis.

Risk management is the process by which the Group identifies its key risks, obtains consistent and
understandable risk measures, decides which risks to take on or reduce and how this will be done, and
establishes procedures for monitoring the resulting risk positions. The objective of risk management
is to ensure that the Group conducts its business within the risk levels set by the BOD while business
units pursue their objective of maximizing returns.

Risk Management Strategies

The Group maintains a prudent risk management strategy to ensure its soundness and profitability.
Business units are held accountable for all the risks and related returns, and ensure that decisions are
consistent with business objectives and risk tolerance. Strategies, policies and limits are reviewed
regularly and updated to ensure that risks are well-diversified and risk mitigation measures are
undertaken when necessary. A system for managing and monitoring risks is in place so that all
relevant issues are identified at an early stage and appropriate actions are taken. The risk policies,
guidelines and processes are designed to ensure that risks are continuously identified, analyzed,
measured, monitored and managed. Risk reporting is done on a regular basis, either monthly or
quarterly.

Although the BOD is primarily responsible for the overall risk management of the Group’s activities,
the responsibility rests at all levels of the organization. The risk appetite is defined and
communicated through an enterprise-wide risk policy framework.

Risk Management Structure

The BOD of the Parent Bank exercises oversight of the Parent Bank’s risk management process as a
whole and through its various risk committees. For the purpose of day-to-day management of risks,
the Parent Bank has established independent Risk Management Units (RMUs) that objectively review
and ensure compliance to the risk parameters set by the BOD. They are responsible for the
monitoring and reporting of risks to senior management and the various committees of the Parent
Bank.

On the other hand, the risk management processes of its subsidiaries are handled separately by their
respective BODs.

The Parent Bank’s BOD is primarily responsible for setting the risk appetite, approving risk
parameters, credit policies, and investment guidelines, as well as establishing the overall risk-taking
capacity of the Parent Bank. To fulfill its responsibilities in risk management, the BOD has
established the following committees, whose functions are described below.

(a) The Executive Committee (EXCOM), composed of seven (7) members of the BOD, exercises
certain functions as delegated by the BOD including, among others, the approval of credit
proposals, asset recovery and real and other properties acquired (ROPA) sales within its
delegated limits.

*SGVFS032841*
 - 43 -

(b) The Risk Management Committee (RMC) is composed of seven (7) members of the BOD,
majority of whom are independent directors, including the Chairman. The RMC shall advise the
BOD of the Parent Bank’s overall current and future risk appetite, oversee Senior Management’s
adherence to the risk appetite statement, and report on the state of risk culture of the Parent Bank.
The RMC shall oversee the risk management framework, adherence to the risk appetite of
the Parent Bank and the risk management function.

(c) The Market Risk Committee (MRC) is composed of nine (9) members of the BOD, majority of
whom are independent directors, including the Chairman. The MRC is primarily responsible for
reviewing the risk management policies and practices relating to market risk including interest
rate risk in the banking book and liquidity risk.

(d) The Operations Risk Management Committee (ORMC), composed of seven (7) members of the
BOD, reviews various operations risk policies and practices.

(e) The Audit Committee is a committee of the BOD that is composed of seven (7) members, most of
whom are with accounting, auditing, or related financial management expertise or experience.
The skills, qualifications, and experience of the committee members are appropriate for them to
perform their duties as laid down by the BOD. Four of the seven members are independent
directors, including the Chairman.

The Audit Committee serves as principal agent of the BOD in ensuring independence of
the Parent Bank’s external auditors and the internal audit function, the integrity of management,
and the adequacy of disclosures and reporting to stockholders. It also oversees the Parent Bank’s
financial reporting process on behalf of the BOD. It assists the BOD in fulfilling its fiduciary
responsibilities as to accounting policies, reporting practices and the sufficiency of auditing
relative thereto, and regulatory compliance.

To effectively perform these functions, the Audit Committee has a good understanding of the
Parent Bank’s business including the following: Parent Bank’s structure, business, controls, and
the types of transactions or other financial reporting matters applicable to the Parent Bank as well
as to determine whether the Bank’s controls are adequate, functioning as designed, and operating
effectively. It also considers the potential effects of emerging business risks and their impact on
the Parent Bank’s financial position and results of operations.

Among the responsibilities of the Audit Committee are:

∂ Oversight of the financial reporting process. The Audit Committee ensures that
the Parent Bank has a high-quality reporting process that provides transparent, consistent and
comparable financial statements. In this regard, the Audit Committee works closely with
management especially the Office of the Financial Controller, the Internal Audit Division
(IAD), as well as the external auditors, to effectively monitor the financial reporting process
and the existence of significant financial reporting issues and concerns.

∂ Oversight of the audit process. The Audit Committee is knowledgeable on the audit function
and the audit process. The Audit Committee maintains supportive, trusting and inquisitive
relationships with both internal and external auditors to enhance its effectiveness.

*SGVFS032841*
 - 44 -

∂ Oversight of the whistle-blowing mechanism. The Audit Committee oversees the

establishment of a whistle-blowing mechanism in the Parent Bank by which officers and staff
shall in confidence raise concerns about possible improprieties or malpractices in matters of
financial reporting, internal control, auditing or other issues to persons or entities that have
the power to take corrective action. It also ensures that arrangements are in place for the
independent investigation, appropriate follow-up, action and subsequent resolution of
complaints.

In the performance of these functions, the Audit Committee is supported by the IAD. The IAD
Head derives authority from and is directly accountable to the Audit Committee. However,
administratively, the IAD Head reports to the President of the Bank.

The IAD is entirely independent from all the other organizational units of the Parent Bank, as
well as from the personnel and work that are to be audited. It operates under the direct control of
the Audit Committee and is given an appropriate standing within the Bank to be free from bias
and interference. The IAD is free to report its findings and appraisals internally at its own
initiative to the Audit Committee.

The IAD is authorized by the Audit Committee to have unrestricted access to all functions,
records, property, and personnel of the Bank subject to existing mandate and applicable laws.
This includes the authority to allocate resources, set audit frequencies, select subjects, determine
scope of work, and apply the techniques required to accomplish the audit engagement objectives.

The IAD is also authorized to obtain the necessary assistance from personnel within the Parent
Bank units where they perform audits, as well as other specialized services within or outside the
Parent Bank.

The IAD presents its annual audit plan at the beginning of its fiscal year for approval by the Audit
Committee.

At least once a month, the Audit Committee meets to discuss the results of the assurance and
consulting engagements and case investigations by IAD. The results of these meetings are
regularly reported by the Audit Committee Chairman to the BOD in its monthly meetings.

To align with the Bank’s direction to reshape the Bank into a “technology company with banking
utilities”, IAD has undertaken training programs to acquire the appropriate skill set to audit
emerging technologies such as Blockchain, artificial intelligence, Robotic Process Automation,
Application Programming Interface, cloud computing, etc.

Moreover, in view of increasing role of internal audit under Basel II, the IAD acquired the right
skill set and approach to fulfill its role to conduct an annual independent review of the
Parent Bank’s Internal Capital Adequacy Assessment Process (ICAAP) document and its
underlying processes and procedures.

The Parent Bank’s IAD passed and obtained the highest rating of “Generally Conforms” on the
external quality assessment conducted in January 2014. The review showed that the
Parent Bank’s IAD audit activities comply with the Institute of Internal Auditors’ International
Standards for the Professional Practice of Internal Auditing. The Parent Bank’s IAD is scheduled
to undergo an external quality assessment in the fourth quarter of 2019.

*SGVFS032841*
 - 45 -

(f) The Corporate Governance Committee (CGC) is primarily responsible for helping the BOD
fulfill its corporate governance responsibilities. It is responsible in ensuring the BOD’s
effectiveness and due observance of corporate governance principles and of oversight over the
compliance risk management.

The CGC is composed of at least six (6) members of the BOD, majority of whom, including its
Chairman, shall be independent directors, and one (1) of whom shall be from the Parent Bank’s
Senior Management.

CGC’s specific duties include, among others, making recommendations to the BOD regarding
continuing education of directors, overseeing the periodic performance evaluation of the BOD, its
committees, senior management, and the function of the Chief Compliance and Corporate
Governance Officer. It also performs oversight functions over the Compliance and Corporate
Governance Office (CCGO) and the Anti-Money Laundering Committee of the Parent Bank.

The Parent Bank’s CCGO assists the CGC in fulfilling its functions by apprising the same of
pertinent regulations and other issuances relating to compliance or corporate governance and
continuously giving updates thereon. In addition, the CCGO keeps the CGC abreast of
governance issues being brought about among private organizations and individuals advocating
good governance practices. It then makes recommendations to the CGC based on such
governance issues and practices applicable and relevant to the Parent Bank.

(g) The Nominations Committee (NOMCOM) is comprised of six (6) voting members of the BOD,
one of whom is an independent director, and one non-voting member in the person of the Human
Resources Director. The NOMCOM is responsible for reviewing the qualifications of and
screening candidates for the BOD, key officers of the Parent Bank and nominees for independent
directors. It oversees the implementation of programs for identifying, retaining and developing
critical officers and the succession plan for various units in the organization.

(h) The Compensation and Remuneration Committee (COMPREM) is composed of seven (7)
members of the BOD, two (2) of whom are independent directors, including its Chairman. It is
responsible for overseeing implementation of the programs for salaries and benefits of directors
and senior management. It monitors adequacy, effectiveness and consistency of the Parent
Bank’s compensation program vis-à-vis corporate philosophy and strategy.

(i) The Related Party Transaction Committee is a board-level committee composed of five (5)
members, three (3) of whom are independent directors including its Chairman. The other two (2)
members are the Head of Internal Audit Division and the Chief Compliance and Corporate
Governance Officer who are both non-voting members. The Committee assists the BOD in the
fulfillment of its corporate governance responsibilities on related party transactions by ensuring
that these are transacted at arm’s length terms. Where applicable, the Committee reviews and
approves related party transactions or endorses them to the BOD for approval or confirmation.

The major risk types identified by the Group are discussed in the following sections:

Credit Risk
Credit risk is the risk of loss resulting from the failure of a borrower or counterparty to honor its
financial or contractual obligation to the Group. The risk may arise from lending, trade finance,
treasury, investments, derivatives and other activities undertaken by the Group. Credit risk is
managed through strategies, policies and limits that are approved by the respective BOD of the
various companies within the Group. With respect to the Parent Bank, it has a well-structured and

*SGVFS032841*
 - 46 -

standardized credit approval process and credit scoring system for each of its business and/or product
segments.

The RMU undertakes several functions with respect to credit risk management. The RMU
independently performs credit risk assessment, evaluation and review for its retail, commercial and
corporate financial products to ensure consistency in the Parent Bank’s risk assessment process. It
also ensures that the Parent Bank’s credit policies and procedures are adequate and are constantly
updated to meet the changing demands or risk profiles of the business units.

The RMU’s portfolio management function involves the review of the Parent Bank’s loan portfolio,
including the portfolio risks associated with particular industry sectors, regions, loan size and
maturity, and the development of a strategy for the Parent Bank to achieve its desired portfolio mix
and risk profile. The RMU reviews the Parent Bank’s loan portfolio quality in line with the Parent
Bank’s policy of avoiding significant concentrations of exposure to specific industries or groups of
borrowers. Concentrations arise when a number of counterparties are engaged in similar business
activities, or activities in the same geographic region, or have similar economic features.
Concentrations indicate the relative sensitivity of the Parent Bank’s performance to developments
affecting a particular industry or geographical location.

In order to avoid excessive concentrations of risk, the Parent Bank’s policies and procedures include
guidelines for maintaining a diversified portfolio mix (e.g., concentration limits). Identified
concentrations of credit risks are controlled and managed accordingly. The RMU also monitors
compliance to the BSP’s limit on exposures.

Applicable for the year ended December 31, 2018

The table below shows the breakdown of the Group and the Parent Bank’s exposure on receivable
from customers and investments and placements as of December 31, 2018:

Group Parent Bank

Corporate Loans =129,064,051
P =129,064,051
P
Commercial Loans 50,270,027 50,270,027
Home Loans 37,039,884 37,039,884
Salary Loans 46,925,598 –
Other Retail Products 17,985,972 17,985,972
Other receivables from
customers 26,313,313 15,462,841
Total receivables from
customers 307,598,845 249,822,775
Investments and Placements* 277,087,677 277,087,677
584,686,522 526,910,452
*Investments and Placements include Parent Bank's financial assets at amortized cost, financial assets
through other comprehensive income, due from other banks and due from BSP and the related accrued
interest receivable amounting to =
P 2.62 billion.

The following summarizes the Group’s credit risk management practices and the relevant quantitative
and qualitative financial information regarding the credit exposure according to portfolios:

Credit risk management practices and credit quality disclosures

Corporate Loans
Corporate lending activities are undertaken by the Parent Bank’s Corporate Banking Center. The
customer accounts under this group belong to the top tier corporations, conglomerates and large
multinational companies.

*SGVFS032841*
 - 47 -

The Parent Bank undertakes a comprehensive procedure for the credit evaluation and risk assessment
of large corporate borrowers based on its obligor risk rating master scale.

The Parent Bank transitioned to a new internal rating system in 2018 and currently utilizes a single
rating system for both Corporate and Commercial accounts.

The new rating system assesses default risk based on financial profile, management capacity, industry
performance, and other factors deemed relevant. Significant changes in the credit risk considering
movements in credit rating, among other account-level profile and performance factors, define
whether the accounts are classified in either Stage 1, Stage 2, or Stage 3 per PFRS 9 loan impairment
standards.

Based on foregoing factors, each borrower is assigned a Borrower Risk Rating (BRR), from AAA to
D. In addition to the BRR, the Parent Bank assigns a loan exposure rating (LER), a 100-point system
which is comprised of a Facility Tenor Rating (FTR) and a Security Risk Rating (SRR). The FTR
measures the maturity risk based on the length of loan exposure, while the SRR measures the quality
of the collateral and risk of its potential deterioration over the term of the loan. The FTR and the
SRR, each a 100-point scoring system, are given equal weight in determining the LER.

Once the BRR and the LER have been determined, the credit limit to a borrower is determined under
the Risk Asset Acceptance Criteria (RAAC) which is a range of acceptable combinations of the BRR
and the LER. Under the RAAC system, a borrower with a high BRR will have a broader range of
acceptable LERs.

The credit rating for each borrower is reviewed monthly or earlier when there are extraordinary or
adverse developments affecting the borrower, the industry and/or the Philippine economy. Any
major change in the credit scoring system, the RAAC range and/or the risk-adjusted pricing system is
presented to and approved by the RMC.

The description of each credit quality grouping for the credit scores is explained further as follows:

Investment Grade - These accounts are of the highest quality and are likely to meet financial
obligations.

Standard Grade - These accounts may be vulnerable to adverse business, financial and economic
conditions but are expected to meet financial obligations.

Substandard Grade - These accounts are vulnerable to non-payment but for which default has not yet
occurred.

Non-Performing - These refer to accounts which are in default or those that demonstrate objective
evidence of impairment.

*SGVFS032841*
 - 48 -

Below is the breakdown of the Parent Bank’s corporate loans exposure (outstanding balance and
accrued interest receivable) by masterscale rating as of December 31, 2018:

Amount
Credit Score Masterscale Stage 1 Stage 2 Stage 3 Total
Investment Grade
AAA to A- 1 P−
= P−
= P−
= P−
=
BBB+ 2 − − − −
BBB 3 23,058,039 − − 23,058,039
Standard Grade
BBB- to BB+ 4 49,352,486 − − 49,352,486
BB to BB- 5 13,356,771 − − 13,356,771
B+ 6 25,909,875 − − 25,909,875
B to B- 7 5,196,673 − − 5,196,673
CCC+ to CCC 8 10,936,341 − − 10,936,341
Substandard Grade
Lower than
CCC 9 1,172,921 − − 1,172,921
Non-Performing
Default 10 − − 80,945 80,945
=128,983,106
P P−
= P80,945
= =129,064,051
P

Commercial Loans
The Parent Bank’s commercial banking activities are undertaken by its Commercial Banking Center
(ComBank). These consist of banking products and services rendered to customers which are entities
that are predominantly small and medium scale enterprises (SMEs). These products and services are
similar to those provided to large corporate customers, with the predominance of trade finance-related
products and services.

Upon the adoption of a new internal rating system in 2018, ComBank currently uses the same obligor
masterscale of corporate loans, and follows the same RAAC framework.

Below is the breakdown of the Parent Bank’s commercial loans exposure (outstanding balance and
accrued interest receivable) by masterscale rating as of December 31, 2018:

Amount
Credit Score Masterscale Stage 1 Stage 2 Stage 3 Total
Investment Grade
AAA to A- 1 P–
= P–
= P–
= =−
P
BBB+ 2 – – – −
BBB 3 1,149,059 – – 1,149,059
Standard Grade
BBB- to BB+ 4 5,954,268 – – 5,954,268
BB to BB- 5 11,134,892 8,222 – 11,143,114
B+ 6 6,091,270 4,348 – 6,095,618
B to B- 7 15,440,687 − – 15,440,687
Substandard Grade
CCC+ to CCC 8 5,450,233 − – 5,450,233
Lower than CCC 9 2,711,796 1,361 – 2,713,157
Non-Performing
Default 10 – – 2,323,891 2,323,891
=47,932,205
P =13,931
P P2,323,891
= =50,270,027
P

*SGVFS032841*
 - 49 -

Retail Financial Products

The consumer loan portfolio of the Parent Bank is composed of four main product lines, namely:
Home Loans, Credit Cards, Auto Loans, and Business Line Loans. Each of these products has
established credit risk guidelines and systems for managing credit risk across all businesses. Scoring
models have been revised and fine-tuned while data analytics have been enhanced to improve
portfolio quality and product offers.

On the other hand, CSB, an accredited lending institution of the Department of Education (DepEd),
provides salary loans to teachers under an agreement with DepEd for payroll deductions.

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential
borrowers to meet interest and capital repayment obligations and by changing these lending limits
when appropriate.

The Retail products’ respective masterscale is defined by the credit scoring models, which consider
demographic variables and behavioral performance, to segment the portfolio according to risk
masterscale per product. The stages are defined by the approved Significant Increase in Credit Risk
(SICR) for Retail which takes into account the following: NPL status, months on books, and credit
score rating for Application score (point of application) and Behavior Score (monthly credit
performance).

Each borrower is assigned a credit score with 1 as the highest quality and 7 as default.

Below is the breakdown of the Parent Bank’s major retail portfolio loans exposure (outstanding
balance and accrued interest receivable) by masterscale rating as of December 31, 2018:

Home Loans

Amount
Masterscale Stage 1 Stage 2 Stage 3 Total
1 =8,695,257
P =–
P =–
P P8,695,257
=
2 17,523,071 – – 17,523,071
3 813,094 13,409 – 826,503
4 8,288,335 358,815 – 8,647,150
5 276,668 23,574 – 300,242
6 128,949 – – 128,949
7 − − 918,712 918,712
=35,725,374
P =395,798
P =918,712
P =37,039,884
P

Other Retail Products

Amount
Masterscale Stage 1 Stage 2 Stage 3 Total
1 =4,074,079
P =1,298
P =−
P =4,075,377
P
2 530,576 1,406 − 531,982
3 2,337,962 3,069 − 2,341,031
4 1,981,767 8,856 − 1,990,623
5 643,088 1,731 − 644,819
6 5,575,088 40,885 − 5,615,973
7 − − 2,786,167 2,786,167
=15,142,560
P =57,245
P =2,786,167
P =17,985,972
P
*Consist of auto loans, credit cards and business lines, which are combined for disclosure purposes.

*SGVFS032841*
 - 50 -

Salary Loans
For salary loans, each borrower is assigned a credit score with E as minimal risk, D as low risk, C as
moderate risk, B as average risk and A as high risk.

The description of each credit quality grouping for the credit scores is explained further as follows:

High grade (minimal to low risk) - These are receivables which have a high probability of collection.
The counterparty has the apparent ability to satisfy its obligation and the security on the receivables is
readily enforceable.

Standard grade (moderate to average risk) - These are receivables where collections are probable due
to the reputation and the financial ability of the counterparty to pay but with experience of default.

Substandard (high risk) - Accounts classified as “Substandard” are individual credits or portions
thereof which appear to involve a substantial and unreasonable degree of risk to the Bank because of
unfavorable record or unsatisfactory characteristics. There exists in such accounts the possibility of
future loss to the Bank unless given closer supervision. Those classified as “Substandard” must have
a well-defined weakness or weaknesses that jeopardize their liquidation. Such well-defined
weaknesses may include adverse trends or development of financial, managerial, economic or
political nature, or a significant weakness in collateral.

Below is the breakdown of CSB’s salary loans exposure (outstanding balance and accrued interest
receivable) by credit score as of December 31, 2018:

Amount
Credit Score Stage 1 Stage 2 Stage 3 Total
D to E =44,980,585
P =−
P =−
P =44,980,585
P
B to C 79,300 48,665 − 127,965
A ‒ 196,721 − 196,721
Default − − 1,620,327 1,620,327
=45,059,885
P =245,386
P =1,620,327
P =46,925,598
P

Other receivables from customers

Other receivables from customers of the Group and the Parent Bank include small portfolios such as,
with respect to the Parent Bank, (i) personal loans, (ii) HR loans, (iii) bills purchase and (iv) customer
liabilities under acceptance, and, with respect to the subsidiaries, (i) personal loans, and
(ii) motorcycle loans. Each of these products has established credit risk guidelines and systems for
managing credit risk across all businesses.

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential
borrowers to meet interest and capital repayment obligations and by changing these lending limits
when appropriate.

Each product was risk rated using techniques appropriate to the Group’s and Parent Bank’s credit
experience. Such methods consider the payment history that are reflected in aging, delinquency,
and/or change in rating. These provide the bases for the ECL stage determination.

The description of each groupings according to stage is explained further as follows:

Stage 1 - those that are considered current and up to 30 days past due, and based on change in rating,
delinquencies and payment history, does not demonstrate significant increase in credit risk.

*SGVFS032841*
 - 51 -

Stage 2 - those that are considered more 30 days past due but does not demonstrate objective
evidence of impairment as of reporting date, and, based on change in rating, delinquencies and
payment history, demonstrates significant increase in credit risk.

Stage 3 - Those that are considered default or demonstrates objective evidence of impairment as of
reporting date.

Below is a summary as of December 31, 2018 of the Group’s and Parent Bank’s other receivables
from customers.

Amount
Stage 1 Stage 2 Stage 3 Total
Group =21,621,870
P =522,472
P =4,168,971
P =26,313,313
P
Parent Bank 12,883,798 42,477 2,536,566 15,462,841

Investments and Placements

Investments and Placements include financial assets at amortized cost, debt financial assets through
other comprehensive income, due from BSP and due from other banks. Each has established credit
risk guidelines and systems for managing credit risk across all businesses.

Below is a breakdown of the Parent Bank’s investments and placement (outstanding balance and
accrued interest receivable) by masterscale rating as of December 31, 2018:

Amount
Masterscale Stage 1 Stage 2 Stage 3 Total
1 =241,253,745
P =−
P =–
P =241,253,745
P
2 19,231,715 − − 19,231,715
3 − − − −
4 139,811 747,721 − 887,532
5 13,212,059 − − 13,212,059
6 2,457,192 − − 2,457,192
7 − − − −
8 45,434 − − 45,434
9 − − − −
10 − − − −
=276,339,956
P =747,721
P =−
P =277,087,677
P

Analysis of movements of gross carrying amounts

Movements in 2018 for total receivables from customers follow. The balances presented include the
related accrued interest receivables:

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =259,607,532
P =1,718,411
P =10,479,027
P =271,804,970
P
Due to consolidation 7,393,104 475,695 637,412 8,506,211
Newly originated assets that
remained in Stage 1 as at
December 31, 2018 154,566,141 − − 154,566,141
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 323,678 770,097 1,093,775
(Forward)

*SGVFS032841*
 - 52 -

2018
Stage 1 Stage 2 Stage 3 Total
Movements in receivable balance
(excluding write-offs) (P
=124,993,207) (P
=808,783) (P
=1,359,369) (P
=127,161,359)
Amounts written-off − − (1,210,893) (1,210,893)
Transfers to Stage 1 1,256,425 (667,775) (588,650) −
Transfers to Stage 2 (882,016) 906,153 (24,137) −
Transfers to Stage 3 (2,482,980) (712,547) 3,195,527 −
Balance at end of year =294,464,999
P =1,234,832
P =11,899,014 P
P =307,598,845

The breakdown of movements in 2018 for total receivables from customers follow:

Corporate Loans - Group and Parent Bank

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =117,639,496
P =−
P P87,445
= =117,726,941
P
Newly originated assets that
remained in Stage 1 as at
December 31, 2018 35,354,954 − − 35,354,954
Movements in receivable balance
(excluding write-offs) (24,011,344) − (6,500) (24,017,844)
Balance at end of year =128,983,106
P =−
P =80,945 =
P P129,064,051

In 2018, there were no transfers between stages and write-offs of corporate loans.

Commercial Loans - Group and Parent Bank

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =41,093,594
P =220,910
P =1,896,868
P =43,211,372
P
Newly originated assets that
remained in Stage 1 as at
December 31, 2018 42,541,317 − − 42,541,317
Newly originated assets that moved
to Stage 2 and Stage 3 as at
December 31, 2018 − 4,274 384,309 388,583
Movements in receivable balance
(excluding write-offs) (35,663,206) (181,537) (26,502) (35,871,245)
Transfers to Stage 1 66,799 (6,724) (60,075) −
Transfers to Stage 3 (106,299) (22,992) 129,291 −
Balance at end of year =47,932,205
P =13,931
P =2,323,891
P =50,270,027
P

In 2018, there were no transfers to Stage 2 and no write-offs of commercial loans.

*SGVFS032841*
 - 53 -

Home Loans - Group and Parent Bank

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =25,598,593
P =708,457
P =1,053,633
P =27,360,683
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 13,622,721 − − 13,622,721
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 252,244 62,750 314,994
Movements in receivable balance
(excluding write-offs) (3,767,526) (50,686) (440,302) (4,258,514)
Transfers to Stage 1 760,610 (516,843) (243,767) −
Transfers to Stage 2 (108,488) 113,538 (5,050) −
Transfers to Stage 3 (380,536) (110,912) 491,448 −
Balance at end of year =35,725,374
P =395,798
P =918,712
P =37,039,884
P

In 2018, there were no write-offs of home loans.

Other Retail Products - Group and Parent Bank

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =12,478,941
P =34,518
P =2,454,917
P =14,968,376
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 4,424,327 − − 4,424,327
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 40,910 254,043 294,953
Movements in receivable balance
(excluding write-offs) (1,190,964) (20,932) (213,095) (1,424,991)
Amounts written-off − − (276,693) (276,693)
Transfers to Stage 1 49,245 (15,542) (33,703) −
Transfers to Stage 2 (24,804) 24,918 (114) −
Transfers to Stage 3 (594,186) (6,627) 600,813 −
Balance at end of year =15,142,559
P =57,245
P =2,786,168
P =17,985,972
P

Salary Loans - Group

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year P 51,806,928 P 656,074 P 2,058,982 P 54,521,984
Newly originated assets that remained in
Stage 1 as at December 31, 2018 46,617,864 − − 46,617,864
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 1,159 143 1,302
Movements in receivable balance
(excluding write-offs) (52,512,248) (391,971) (461,886) (53,366,105)
Amounts written-off − − (849,447) (849,447)
Transfers to Stage 1 162,675 (61,852) (100,823) −
Transfers to Stage 2 (263,640) 265,807 (2,167) −
Transfers to Stage 3 (751,694) (223,831) 975,525 −
Balance at end of year =45,059,885
P =245,386
P =1,620,327
P =46,925,598
P

*SGVFS032841*
 - 54 -

Other Receivables from Customers

Group
2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =10,989,980
P =98,452
P =2,927,182
P =14,015,614
P
Due to consolidation 7,393,104 475,695 637,412 8,506,211
Newly originated assets that remained in
Stage 1 as at December 31, 2018 12,004,958 − − 12,004,958
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 25,091 68,852 93,943
Movements in receivable balance
(excluding write-offs) (7,847,919) (163,657) (211,084) (8,222,660)
Amounts written-off − − (84,753) (84,753)
Transfers to Stage 1 217,096 (66,814) (150,282) −
Transfers to Stage 2 (485,084) 501,890 (16,806) −
Transfers to Stage 3 (650,265) (348,185) 998,450 −
Balance at end of year =21,621,870
P =522,472
P =4,168,971
P =26,313,313
P

Parent Bank
2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =6,931,864
P =33,321
P =2,581,898
P =9,547,083
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 9,853,577 − − 9,853,577
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 25,070 68,821 93,891
Movements in receivable balance
(excluding write-offs) (3,883,555) (8,517) (102,556) (3,994,628)
Amounts written-off − − (37,082) (37,082)
Transfers to Stage 1 16,572 (14,509) (2,063) −
Transfers to Stage 2 (14,177) 14,668 (491) −
Transfers to Stage 3 (20,483) (7,556) 28,039 −
Balance at end of year =12,883,798
P =42,477
P =2,536,566
P =15,462,841
P

Movements in 2018 for investments and placements follow. The balances presented include accrued
interest receivables:

Investments and Placements

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =285,786,101
P =−
P =−
P =285,786,101
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 130,226,329 − − 130,226,329
Movements in the balance (excluding
write-offs) (138,961,794) 37,041 − (138,924,753)
Transfers to Stage 2 (710,680) 710,680 − −
Balance at end of year =276,339,956
P =747,721
P =−
P =277,087,677
P

*SGVFS032841*
 - 55 -

In 2018, there were no transfers to Stage 1 and Stage 3 and write-offs of investments and
placements.

Applicable for the year ended December 31, 2017 and prior years

The following summarizes the Group’s credit risk management practices and the relevant quantitative
and qualitative financial information regarding the credit exposure according to portfolios:

Corporate Loans
The Parent Bank utilized two separate Internal Credit Risk Rating Systems (ICRRS) which were
designed for Corporate and Commercial borrowers. For Corporate accounts, the rating system
assessed risks on a three-dimensional level: Borrower Risk, Facility Risk and Security Risk. It also
has established concentration limits depending on the Borrower Risk Rating and overall credit
quality. Each borrower is assigned a Borrower Risk Rating (BRR) which ranged from AAA to D,
under a 10-grade scoring system.

The description of each credit quality groupings for the credit scores is explained further as follows:

High Quality - These borrowers have a comfortable degree of stability, substance and diversity. They
have access to a substantial amount of funds through the public market under normal conditions.
These are normally the quality multinationals or local corporations which are well capitalized.

Satisfactory Quality - These borrowers have strong cash flows and acceptable degree of stability and
substance under normal market conditions. However, they may be susceptible to cyclical changes or
concentrations of business risk may be present.

Average - These borrowers have adequate cash flows to meet its commitments and can withstand
normal business cycles. However, any prolonged unfavorable economic period would create
deterioration beyond acceptable levels as clear risk elements exist, reflecting volatility of earnings
and performance.

Fair - These borrowers have adequate cash flows to meet its commitments but face on-going
uncertainties and exposure to adverse business, financial or economic conditions.

Low - Although these borrowers currently have adequate cash flows to meet their commitments,
their performance has already been weakened and any continuation of adverse business, financial or
economic conditions or further downturns are already expected to impair their capacity or willingness
to meet their financial commitments.

Substandard - These borrowers have inadequate cash flows and are exposed to a real risk of non-
payment of principal. The probability of default increases as the credit score goes down to CCC and
lower.

*SGVFS032841*
 - 56 -

Below is a summary as of December 31, 2017 of the Parent Bank’s corporate loans that are subject to
the Corporate ICRRS (gross of the related allowance for impairment and excluding accrued interest
receivables) with their respective credit scores:

Credit Score Description 2017

High grade
AA High quality =–
P
A Satisfactory quality 54,685,093
Standard grade
BBB Average 28,762,773
BB Fair 23,215,725
B Low 239,850
Non-rated 4,093,273
Substandard grade
CCC and below Substandard 6,612,570
=117,609,284
P

Commercial Loans
The Parent Bank utilized two separate Internal Credit Risk Rating Systems (ICRRS) which were
designed for Corporate and Commercial borrowers. For Commercial accounts, the Parent Bank used
a separate 10-grade credit scoring system comprised of an Obligor Risk Rating (ORR), a Facility Risk
Adjustment (FRA) and a Final Risk Rating (FRR). Each borrower is assigned an ORR that ranged
from 1 to 10 with 1 to 3 defined as High Grade, 4 to 6 as Standard Grade and 7 and lower as
Substandard Grade.

The description of each credit quality grouping for the credit scores is explained further as follows:

Substantially Risk-free - These borrowers have high degree of stability, substance and diversity. They
are expected to remain of high quality in virtually all economic conditions and have access to a
substantial amount of funds through the public market at any time.

Minimal Risk - These borrowers have strong market and financial position with history of successful
performance. The overall debt service capacity as measured by cash flow to total debt service, as
well as their ability to meet their financial commitments, is very strong.

Moderate Risk - These borrowers have strong cash flows and acceptable degree of stability and
substance under normal market conditions. However, they may be susceptible to cyclical changes or
concentrations of business risk may be present.

Average Risk - These borrowers have adequate cash flows to meet its commitments and can withstand
normal business cycles. However, any prolonged unfavorable economic period would create
deterioration beyond acceptable levels as clear risk elements exist, reflecting volatility of earnings
and performance.

Above Average Risk - These borrowers have adequate cash flows to meet its commitments but face
on-going uncertainties and exposure to adverse business, financial or economic conditions.

High Risk - Although these borrowers currently have adequate cash flows to meet their commitments,
their performance has already been weakened and any continuation of adverse business, financial or
economic conditions or further downturns are already expected to impair their capacity or willingness
to meet their financial commitments.

*SGVFS032841*
 - 57 -

Substandard - These borrowers have inadequate cash flows and are exposed to a real risk of non-
payment of principal. The probability of default increases as credit rating goes down to seven.

Below is a summary as of December 31, 2017 of the Parent Bank’s commercial loans that are subject
to the Corporate ICRRS (gross of the related allowance for impairment and excluding accrued interest
receivables) with their respective credit scores:

Amount
Credit Score Description 2017
High grade
1 Substantially risk-free =–
P
2 Minimal risk 7,309,526
3 Moderate risk 15,395,067
Standard grade
4 Average risk 8,337,772
5 Above average risk 5,921,403
6 High risk 1,414,847
Substandard grade
7 and below Past due and C rated 2,975,667
Non-rated 2,209,528
=43,563,810
P

Retail Loans
The consumer loan portfolio of the Parent Bank is composed of four main product lines, namely:
Home Loans, Credit Cards, Auto Loans, and Salary Loans. Each of these products has an established
credit risk guidelines and systems for managing credit risk across all businesses. Scoring models have
been revised and fine-tuned while data analytics has been enhanced to improve portfolio quality and
product offers.

On the other hand, CSB, an accredited lending institution with the Department of Education (DepEd),
provides salary loans to teachers under an agreement with DepEd for payroll deductions.

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential
borrowers to meet interest and capital repayment obligations and by changing these lending limits
when appropriate.

As of December 31, 2017, the credit quality of loans and other receivables as well as investment
securities are summarized below.

Group
2017 (As Restated - Note 2)
Loans and Other Investment
Receivables Securities Total
Neither past due nor impaired =273,580,925
P =166,837,609
P =440,418,534
P
Past due but not impaired 6,299,072 – 6,299,072
Impaired 11,121,860 – 11,121,860
291,001,857 166,837,609 457,839,466
Allowance for impairment (10,822,982) − (10,822,982)
=280,178,875
P =
P166,837,609 =
P447,016,484

*SGVFS032841*
 - 58 -

Parent Bank
2017
Loans and Other Investment
Receivables Securities Total
Neither past due nor impaired =207,291,620
P =
P166,837,609 =
P374,129,229
Past due but not impaired 4,275,920 – 4,275,920
Impaired 10,053,832 – 10,053,832
221,621,372 166,837,609 388,485,981
Allowance for impairment (9,645,340) – (9,645,340)
=211,976,032
P =166,837,609
P =378,813,641
P

The table below shows the credit quality per class of financial assets that are neither past due nor
impaired, based on the Bank’s rating system as of December 31, 2017.

Group
2017
Standard Substandard
High Grade Grade Grade Total
Due from BSP =66,276,960
P =
P– =
P– P66,276,960
=
Due from other banks 53,655,721 864,761 – 54,520,482
Interbank loans receivable 4,793,280 – – 4,793,280
124,725,961 864,761 – 125,590,722
Financial assets at FVTPL
Derivative assets (Note 11) 281,314 84,636 – 365,950
Debt securities – – – –
281,314 84,636 – 365,950
Financial assets at amortized cost 136,967,485 26,687,430 – 163,654,915
Government bonds and other debt
securities – – – –
Other debt securities - Private bonds
and commercial papers 2,816,744 – – 2,816,744
139,784,229 26,687,430 – 166,471,659
Loans and other receivables
Receivables from customers
Corporate 54,685,093 56,352,686 6,582,943 117,620,722
Commercial 22,641,030 24,072,062 30,500 46,743,592
Consumer – 84,615,713 – 84,615,713
Bills purchased – 3,463,370 – 3,463,370
Accrued interest receivable – 1,766,776 – 1,766,776
Others – 645,633 – 645,633
SPURRA 13,572,371 – – 13,572,371
UDSCL 56,686 348,012 – 404,698
AIR - other receivables 3,143 2,133,725 – 2,136,868
Accounts receivable – 175,731 1,670,793 1,846,524
Sales contract receivable – 764,658 – 764,658
90,958,323 174,338,366 8,284,236 273,580,925
=355,749,827
P =201,975,193
P =8,284,236
P =566,009,256
P

*SGVFS032841*
 - 59 -

Parent Bank
2017
Standard Substandard
High Grade Grade Grade Total
Due from BSP =60,350,126
P =
P– =
P– P60,350,126
=
Due from other banks 53,655,579 34,654 – 53,690,233
Interbank loans receivable 4,793,280 – – 4,793,280
118,798,985 34,654 – 118,833,639
Financial assets at FVTPL
Derivative assets 281,314 84,636 – 365,950
Debt securities – – – –
281,314 84,636 – 365,950
Financial assets at amortized cost
Government bonds and other debt
securities 136,967,485 26,687,430 – 163,654,915
Other debt securities - Private bonds
and commercial papers 2,816,744 – – 2,816,744
139,784,229 26,687,430 – 166,471,659
Loans and other receivables
Receivables from customers
Corporate 54,685,093 56,352,686 6,582,943 117,620,722
Commercial 22,641,030 24,013,036 30,500 46,684,566
Consumer – 30,587,343 – 30,587,343
Bills purchased – 3,463,370 – 3,463,370
Accrued interest receivable – 1,250,114 – 1,250,114
Others 497,126 – 497,126
SPURRA 4,130,362 – – 4,130,362
AIR - other receivables – 2,133,724 – 2,133,724
Accounts receivable – 169,077 – 169,077
Sales contract receivable – 755,216 – 755,216
81,456,485 119,221,692 6,613,443 207,291,620
=340,321,013
P =146,028,412
P =6,613,443
P =492,962,868
P

The tables below show the aging analysis of past due but not impaired financial assets per class of the
Group and the Parent Bank as of December 31, 2017:

Group
2017
Less than
31 days 31 to 90 days 91 to 180 days More than180 days Total
Loans
Commercial P
=1,425,691 P
=1,108,943 P
=347,124 P
=1,294,613 P
=4,176,371
Consumer 111,326 52,968 11,112 16,534 191,940
Corporate 903 9,672 14,509 486,289 511,373
Accrued interest receivable 17,270 7,400 – – 24,670
Others 13,477 10,321 – – 23,798
1,568,667 1,189,304 372,745 1,797,436 4,928,152
Sales contracts receivable 256,931 110,063 52,655 12,560 432,209
1,825,598 1,299,367 425,400 1,809,996 5,360,361
Other receivables - Accounts
receivable =202,033
P =134,515
P =101,656
P =500,507
P =938,711
P

*SGVFS032841*
 - 60 -

Parent Bank
2017
Less than
31 days 31 to 90 days 91 to 180 days More than180 days Total
Loans
Consumer P
=110,993 P
=52,379 P
=11,112 P
=16,534 P
=191,018
Commercial 1,154,609 633,106 40,478 698,561 2,526,754
Corporate 903 9,672 14,509 486,289 511,373
Accrued interest receivable 17,270 7,400 – – 24,670
Others 9,439 4,320 – – 13,759
1,293,214 706,877 66,099 1,201,384 3,267,574
Sales contracts receivable 256,931 110,002 52,567 11,960 431,460
1,550,145 816,879 118,666 1,213,344 3,699,034
Other receivables - Accounts
receivable =–
P =121,966
P =92,298
P =362,592
P =576,886
P

For 2017, the maximum exposure to credit risk without taking into account any collateral held or
other credit enhancements for on-books financial assets and off-books items, net of allowance, are
shown below.

Group Parent Bank

Credit risk exposures relating to on-books items:
Due from BSP =66,276,960
P =60,350,126
P
Due from other banks 54,520,482 53,690,233
Interbank loans receivable 4,793,280 4,793,280
125,590,722 118,833,639
Financial assets at FVTPL
Derivative assets 365,950 365,950
Debt securities – –
365,950 365,950
125,956,672 119,199,589
Financial assets at amortized cost
Government bonds and other debt securities 163,654,915 163,654,915
Other debt securities - Private bonds and
commercial papers 2,816,744 2,816,744
Redeemable preferred shares – –
166,471,659 166,471,659
Loans and receivables
Receivables from Customers
Corporate 116,261,352 116,261,352
Consumer 90,600,239 35,157,389
Commercial 47,189,182 47,124,310
Bills purchased 3,423,349 3,423,349
Securities purchased under reverse
repurchase agreement (SPURRA) 13,572,371 4,130,362
Accrued interest receivable (AIR) 1,796,717 1,280,056
Others 582,916 423,159
Accounts receivable 3,014,315 855,655
AIR - other receivables 2,136,868 2,133,724
(Forward)

*SGVFS032841*
 - 61 -

Group Parent Bank

Sales contract receivables =1,186,676
P =1,186,676
P
Unquoted debt securities classified as loans
(UDSCL) 404,698 –
Installment contracts receivable 10,192 –
280,178,875 211,976,032
Credit risk exposures relating to off-books items:
Financial guarantees (see Note 34) 4,703,587 4,703,587
Loan commitments and other credit-related
liabilities 24,186,916 23,936,916
28,890,503 28,640,503
=601,497,709
P =526,287,783
P

(a) Cash and Cash equivalents

The credit risk for cash and cash equivalents is considered negligible, since the counterparties are
reputable banks with high quality external credit ratings. Included in the cash and cash
equivalents are Due from BSP, Due from other banks and Interbank loans receivable.

(b) Investments

The Group continuously monitors defaults of borrowers and other counterparties, identified either
individually or by group, and incorporates this information into its credit risk controls. The
Group’s policy is to deal only with creditworthy counterparties. All investments held by the
Group are considered as either as high grade or standard grade that is neither past due nor
specifically impaired.

(c) Loans and Other Receivables

The RMU reviews the Parent Bank’s loan portfolio quality in line with the Parent Bank’s policy
of avoiding significant concentrations of exposure to specific industries or groups of borrowers.
In order to avoid excessive concentrations of risk, the Parent Bank’s policies and procedures
include guidelines for maintaining a diversified portfolio (e.g., concentration limits). Identified
concentrations of credit risks are controlled and managed accordingly. The RMU also monitors
compliance to the BSP’s limit on exposure to any single person or group of connected persons to
an amount not exceeding 25% of the Parent Bank’s adjusted capital accounts.

*SGVFS032841*
 - 62 -

Concentrations of Credit Risk

An analysis of concentrations of credit risk for loans and other receivables and investment securities
(grossed up for any allowance for impairment losses and unearned discounts) of the Group and the
Parent Bank by industry and by geographic location as of December 31, 2018 and 2017 is shown in
the succeeding pages.

Group
2018
Loans and Other Receivables
Trading and
Investment
Amount % Securities* Total
Concentration by industry
Real estate activities P
=54,175,125 16.13 P
=2,518,418 P
=56,693,543
Financial and insurance activities 49,709,176 14.80 171,571,585 221,280,761
Information and communication 31,377,131 9.34 804,521 32,181,652
Wholesale and retail trade, repair of motor
vehicles 27,711,422 8.25 424 27,711,846
Electricity, gas steam and air conditioning
supply 23,179,406 6.90 37,776,215 60,955,621
Manufacturing 18,153,915 5.41 2,826,502 20,980,417
Accommodation and food service activities 11,932,740 3.55 – 11,932,740
Transportation and storage 11,851,921 3.53 – 11,851,921
Activities of households as employers and
undifferentiated goods and services 9,256,381 2.76 – 9,256,381
Construction 5,836,312 1.74 – 5,836,312
Other service activities 3,805,692 1.13 3,532 3,809,224
Agriculture, forestry and fishing 2,266,941 0.68 – 2,266,941
Professional, scientific and technical
activities 431,161 0.13 – 431,161
Arts, entertainment and Recreation 106,928 0.03 – 106,928
Others 86,008,050 25.62 45,370 86,053,420
P
=335,802,301 100.00 P215,546,567 P551,348,868
Concentration by location
Philippines P
=334,255,563 99.54 P
=100,196,959 P
=434,452,522
Others - Asia 846,364 0.25 75,903,425 76,749,789
South America 342,098 0.10 22,161,154 22,503,252
North America 216,422 0.06 9,728,961 9,945,383
Russia 110,650 0.04 4,890,490 5,001,140
United States 22,343 0.01 2,656,717 2,679,060
Europe 8,861 0.00 8,861 17,722
P
=335,802,301 100.00 P
=215,546,567 P
=551,348,868

*SGVFS032841*
 - 63 -

Group
2017
Trading and
Loans and Other Receivables Investment
Amount % Securities Total
Concentration by industry
Real estate activities P46,910,394
= 16.02 =
P2,641,001 =
P49,551,395
Financial and insurance activities 43,289,049 14.79 138,346,287 181,635,336
Information and communication 30,842,229 10.53 7,577 30,849,806
Electricity, gas steam and air conditioning
supply 25,744,226 8.79 25,794,080 51,538,306
Wholesale and retail trade, repair of motor
vehicles 19,832,471 6.77 508 19,832,979
Manufacturing 13,064,296 4.46 2,787 13,067,083
Transportation and storage 9,454,975 3.23 – 9,454,975
Accommodation and food service activities 8,543,498 2.92 – 8,543,498
Other service activities 4,538,525 1.55 – 4,538,525
Construction 4,312,242 1.47 – 4,312,242
Activities of households as employers and
undifferentiated goods and services 1,924,257 0.66 – 1,924,257
Agriculture, forestry and fishing 1,315,692 0.45 – 1,315,692
Arts, entertainment and Recreation 1,174,569 0.40 – 1,174,569
Professional, scientific and technical
activities 290,146 0.10 – 290,146
Others 81,551,398 27.86 45,369 81,596,767
=292,787,967
P 100.00 =166,837,609
P =459,625,576
P
Concentration by location
Philippines =291,725,048
P 99.64 =
P92,408,663 =
P384,133,711
Others - Asia 706,602 0.24 53,243,125 53,949,727
North America 110,132 0.04 4,749,146 4,859,278
South America 131,489 0.04 9,847,069 9,978,558
Russia 91,427 0.03 4,062,066 4,153,493
United States 21,217 0.01 2,525,581 2,546,798
Europe 2,052 – 1,959 4,011
=292,787,967
P 100.00 =166,837,609
P =459,625,576
P

Parent Bank
2018
Trading and
Loans and Other Receivables Investment
Amount % Securities Total
Concentration by industry
Real estate activities P
=54,174,341 20.39 P
=2,518,418 P
=56,692,759
Financial and insurance activities 39,747,749 14.95 171,571,585 211,319,334
Information and communication 31,376,526 11.81 804,521 32,181,047
Wholesale and retail trade, repair of motor
vehicles 27,093,681 10.19 424 27,094,105
Electricity, gas steam and air conditioning
supply 23,179,406 8.72 37,776,215 60,955,621
Manufacturing 18,148,319 6.83 2,826,502 20,974,821
Accommodation and food service activities 11,866,239 4.47 – 11,866,239
Transportation and storage 11,209,175 4.22 − 11,209,175
Activities of households as employers and
undifferentiated goods and services 9,256,381 3.48 – 9,256,381
Construction 5,835,706 2.20 – 5,835,706
Other service activities 3,507,739 1.32 3,532 3,511,271
Agriculture, forestry and fishing 788,735 0.30 – 788,735
(Forward)

*SGVFS032841*
 - 64 -

Parent Bank
2018
Trading and
Loans and Other Receivables Investment
Amount % Securities Total
Professional, scientific and technical
activities P
=430,218 0.16 P
=– P
=430,218
Arts, entertainment and Recreation 105,694 0.04 – 105,694
Others 29,012,375 10.92 45,370 29,057,745
P
=265,732,284 100.00 P
=215,546,567 P
=481,278,851
Concentration by location
Philippines P
=264,185,546 99.42 P
=100,196,959 P
=364,382,505
Others - Asia 846,364 0.32 75,903,425 76,749,789
South America 342,098 0.13 22,161,154 22,503,252
North America 216,422 0.08 9,728,961 9,945,383
Russia 110,650 0.04 4,890,490 5,001,140
United States 22,343 0.01 2,656,717 2,679,060
Europe 8,861 – 8,861 17,722
P
=265,732,284 100.00 P
=215,546,567 P
=481,278,851

Parent Bank
2017
Loans and Other Receivables
Investment
Amount % Securities Total
Concentration by industry
Real estate activities P46,812,854
= 21.11 =2,641,001
P P49,453,855
=
Financial and insurance activities 33,196,029 14.97 138,346,287 171,542,316
Information and communication 30,842,230 13.91 7,577 30,849,807
Electricity, gas steam and air conditioning
supply 25,692,121 11.59 25,794,080 51,486,201
Manufacturing 13,064,296 5.89 2,787 13,067,083
Transportation, storage 9,454,975 4.26 – 9,454,975
Wholesale and retail trade, repair of motor
vehicles 19,829,137 8.94 508 19,829,645
Other service activities 4,525,322 2.04 – 4,525,322
Accommodation and food service activities 8,543,498 3.85 – 8,543,498
Construction 4,302,415 1.94 – 4,302,415
Activities of households as employers and
undifferentiated goods and services 1,731,586 0.78 – 1,731,586
Arts, entertainment and Recreation 1,174,569 0.53 – 1,174,569
Agriculture, forestry and fishing 636,018 0.29 – 636,018
Professional, scientific and technical
activities 290,146 0.13 – 290,146
Others 21,670,384 9.77 45,369 21,715,753
=221,765,580
P 100.00 =
P166,837,609 =
P388,603,189
Concentration by location
Philippines =220,702,661
P 99.52 P92,408,663
= =313,111,324
P
Others - Asia 706,602 0.32 53,243,125 53,949,727
Europe 2,052 – 1,959 4,011
North America 110,132 0.05 4,749,146 4,859,278
South America 131,489 0.06 9,847,069 9,978,558
Russia 91,427 0.04 4,062,066 4,153,493
United States 21,217 0.01 2,525,581 2,546,798
=221,765,580
P 100.00 =166,837,609
P =388,603,189
P

*SGVFS032841*
 - 65 -

Collateral Held as Security and Other Credit Enhancements

The Group holds collateral against loans and other receivables from customers in order to mitigate
risk. The collateral may be in the form of mortgages over real estate property, chattels, inventory,
cash, securities and/or guarantees. The Bank regularly monitors and updates the fair value of the
collateral depending on the type of credit exposure. Estimates of the fair value of collateral are
considered in the review and assessment of the adequacy of allowance for credit losses. In general,
the Bank does not require collateral for loans and advances to other banks, except when securities are
held as part of reverse repurchase agreements.

An estimate of the fair value of collateral and other security enhancements held by the Group and
the Parent Bank against loans and other receivables as of December 31, 2018 and 2017 is shown
below:

Group
Exposure after
Exposure before financial effect of
collateral Property Deposits Others collateral
As of December 31, 2018 =335,802,301
P =
P31,702,972 =
P595,409 =
P11,506,779 =
P291,997,141
As of December 31, 2017 292,787,967 49,580,386 140,435 35,429,507 207,637,639

Parent Bank
Exposure after
Exposure before financial effect of
collateral Property Deposits Others collateral
As of December 31, 2018 =265,732,284
P =
P30,797,902 =
P507,031 =
P11,506,779 =
P222,920,572
As of December 31, 2017 221,765,580 49,429,711 89,155 35,429,507 136,817,207

The Group’s manner of disposing the collateral for impaired loans and receivables is normally
through sale of the assets after foreclosure proceedings have taken place.

Liquidity Risk
Liquidity risk is the risk that there are insufficient funds available to adequately meet the credit
demands of the Group’s customers and repay deposits on maturity. The ALCO and the Treasurer of
the Group ensure that sufficient liquid assets are available to meet short-term funding and regulatory
requirements. Liquidity is monitored by the Group on a daily basis and under stressed situations. A
contingency plan is formulated to set out the amount and the sources of funds (such as unused credit
facilities) that are available to the Group and the circumstances under which the Group may use such
funds.

The Group also manages its liquidity risks through the use of a Maximum Cumulative Outflow
(MCO) limit which regulates the outflow of cash on a cumulative basis and on a tenor basis. To
maintain sufficient liquidity in foreign currencies, the Group has also set an MCO limit for certain
designated foreign currencies. The MCO limits are endorsed by the MRC and approved by the BOD.

*SGVFS032841*
 - 66 -

The table below shows the financial assets and financial liabilities’ liquidty information which
includes coupon cash flows categorized based on the contractual date on which the asset will be
realized and the liability will be settled. For financial assets at FVTPL, the analysis into maturity
grouping is based on the remaining period from the end of the reporting period to the expected date
the assets will be realized (amounts in millions).
Group
2018
On Up to 1 to 3 3 to 6 6 to 12 Beyond
Demand 1 month Months Months Months 1 year Total
Financial assets
Cash and other cash items P
= 10,917 =
P− =
P− =
P− =
P− =
P− P
= 10,917
Due from BSP 56,511 − − − − − 56,511
Due from other banks 14,942 − − − − − 14,942
Interbank loans receivable − − − − − − −
82,370 − − − − − 82,370
Financial assets at FVTPL
Derivative assets 9 196 89 18 16 50 378
Debt securities − 5,219 − − − − 5,219
Equity securities − 2,690 − − − − 2,690
Financial assets at FVOCI
Debt securities − 9 41 390 1,431 9,883 11,754
Equity securities − − − − − 53 53
Financial assets at amortized
cost
Debt securities − 1,243 1,570 4,611 5,904 378,690 392,018
9 9,357 1,700 5,019 7,351 388,676 412,112
Loans and other receivables 43 42,266 30,217 24,223 26,641 240,761 364,151
Other receivables
Accounts receivable − – – – – 4,711 4,711
Accrued interest receivable − 5,081 – – – – 5,081
Sales contract receivable − 24 46 68 135 1,248 1,521
43 47,371 30,263 24,291 26,776 246,720 375,464
Other financial assets
Returned checks and other
cash items − 509 − − − − 509
Sundry debits − 145 − − − − 145
− 654 − − − − 654
Total assets P
= 82,422 P
= 57,382 P
= 31,963 P
= 29,310 P
= 34,127 P
= 635,396 P
= 870,600
Non-derivative liabilities
Deposit liabilities
Demand P
= 119,253 =
P– =
P– =
P– =
P– =
P– P
= 119,253
Savings 67,348 – – – – – 67,348
Time and LTNCD 341 130,740 61,218 9,644 6,160 33,053 241,156
186,942 130,740 61,218 9,644 6,160 33,053 427,757
Bills payable – 58,326 13,483 970 15,844 4,275 92,898
Notes and bonds payable – 37 291 738 1,029 48,089 50,184
Manager’s checks 9,417 – – – – – 9,417
Accrued interest payable – 1,369 – – – – 1,369
Accounts payable – 3,956 – – – – 3,956
Other liabilities – 4,308 – – – 234 4,542
196,359 198,736 74,992 11,352 23,033 85,651 590,123
Derivative liabilities
Outflow – 16,627 4,549 1,547 922 – 23,645
Inflow – (16,292) (4,518) (1,526) (899) – (23,235)
− 335 31 21 23 − 410
Total liabilities =196,359
P =199,071
P P
= 75,023 P
= 11,373 =23,056
P =85,651
P =590,533
P

*SGVFS032841*
 - 67 -

Group
2017
On Up to 1 to 3 3 to 6 6 to 12 Beyond
Demand 1 month Months Months Months 1 year Total
Financial assets
Cash and other cash items P6,633
= P−
= P−
= P−
= P−
= P−
= P6,633
=
Due from BSP 66,277 − − − − − 66,277
Due from other banks 54,520 − − − − − 54,520
Interbank loans receivable − 4,799 − − − − 4,799
127,430 4,799 − − − − 132,229
Financial assets at FVTPL
Derivative assets − 252 67 − − 49 368
Debt securities − − − − − − −
Equity securities − 2,816 − − − − 2,816
Financial assets at FVOCI
Debt securities − − − − − − −
Equity securities − − − − − 44 44
Financial assets at amortized
cost
Debt securities − 1,052 1,919 2,011 4,160 314,730 323,872
− 4,120 1,986 2,011 4,160 314,823 327,100
Loans and other receivables 178 36,495 25,808 17,049 20,197 218,330 318,057
Other receivables
Accounts receivable − − − − − 3,668 3,668
Accrued interest receivable − 4,025 − − − − 4,025
Sales contract receivable − 21 40 59 116 952 1,188
178 40,541 25,848 17,108 20,313 222,950 326,938
Other financial assets
Returned checks and other
cash items − 260,780 − − − − 260,780
Sundry debits − 160,650 − − − − 160,650
− 421,430 − − − − 421,430
Total assets =127,608
P =470,890
P =27,834
P =19,119
P =24,473
P =537,773
P =1,207,697
P
Non-derivative liabilities
Deposit liabilities
Demand =127,424
P P–
= P–
= P–
= P–
= P–
= =127,424
P
Savings 57,745 – – – – – 57,745
Time and LTNCD 117 159,980 71,771 9,329 7,505 18,371 267,073
185,286 159,980 71,771 9,329 7,505 18,371 452,242
Bills payable 1 30,769 2,301 1,226 7,359 1,855 43,511
Notes and bonds payable – – 97 518 615 36,013 37,243
Manager’s checks 8,677 – – – – – 8,677
Accrued interest payable – 941 – – – – 941
Accounts payable – 2,854 – – – – 2,854
Other liabilities – 4,085 – – – 189 4,274
193,964 198,629 74,169 11,073 15,479 56,428 549,742
Derivative liabilities
Outflow – 3,934 32 13 8 – 3,987
Inflow – (3,911) (32) (12) (8) – (3,963)
− 23 − 1 − − 24
Total liabilities =193,964
P =198,652
P =74,169
P =11,074
P =15,479
P =56,428
P =549,766
P

Parent Bank
2018
On Up to 1 to 3 3 to 6 6 to 12 Beyond
Demand 1 month Months Months Months 1 year Total
Financial assets
Cash and other cash items P
= 10,335 =
P− =
P− =
P− =
P− =
P− P
= 10,335
Due from BSP 52,961 − − − − − 52,961
Due from other banks 11,550 − − − − − 11,550
Interbank loans receivable − − − − − − −
74,846 − − − − − 74,846
Financial assets at FVTPL
Derivative assets 9 196 89 18 16 50 378
Debt securities − 5,219 − − − − 5,219
Equity securities − 2,632 − − − − 2,632
Financial assets at FVOCI
Debt securities − − 41 390 1,431 9,883 11,745
Equity securities − − − − − 44 44
Financial assets at amortized
cost
Debt securities − 1,243 1,570 4,611 5,904 378,690 392,018
9 9,290 1,700 5,019 7,351 388,667 412,036

(Forward)

*SGVFS032841*
 - 68 -

Parent Bank
2018
On Up to 1 to 3 3 to 6 6 to 12 Beyond
Demand 1 month Months Months Months 1 year Total
Loans and other receivables =
P− P
= 41,405 P
= 28,618 P
= 21,448 P
= 20,108 P
= 183,347 P
= 294,926
Other receivables
Accounts receivable − − − − − 1,761 1,761
Accrued interest receivable − 4,459 − − − − 4,459
Sales contract receivable − 24 46 68 135 1,171 1,444
− 45,888 28,664 21,516 20,243 186,279 302,590
Other financial assets
Returned checks and other − 508,709 − − − − 508,709
cash items
Sundry debits − 145,438 − − − − 145,438
− 654,147 − − − − 654,147
Total assets P
= 74,855 P
= 709,325 P
= 30,364 P
= 26,535 P
= 27,594 P
= 574,946 P
= 1,443,619
Non-derivative liabilities
Deposit liabilities
Demand P
= 119,847 =
P– =
P– =
P– =
P– P–
= P
= 119,847
Savings 64,080 – – – – – 64,080
Time and LTNCD 279 110,834 57,969 7,742 3,367 20,562 200,753
184,206 110,834 57,969 7,742 3,367 20,562 384,680
Bills payable – 49,702 12,512 5 1,362 1,866 65,447
Notes and bonds payable – – 291 734 1,025 47,922 49,972
Manager’s checks 9,417 – – – – – 9,417
Accrued interest payable – 1,108 – – – – 1,108
Accounts payable – 3,256 – – – – 3,256
Other liabilities – 4,303 – – – 234 4,537
193,623 169,203 70,772 8,481 5,754 70,584 518,417
Derivative liabilities
Outflow – 16,627 4,549 1,547 922 – 23,645
Inflow – (16,292) (4,518) (1,526) (899) – (23,235)
− 335 31 21 23 − 410
Total liabilities P
= 193,623 P
= 169,538 P
= 70,803 P
= 8,502 P
= 5,777 P
= 70,584 P
= 518,827

Parent Bank
2017
On Up to 1 to 3 3 to 6 6 to 12 Beyond
Demand 1 month Months Months Months 1 year Total
Financial assets
Cash and other cash items P6,249
= P−
= P−
= P−
= P−
= P−
= P6,249
=
Due from BSP 60,350 − − − − − 60,350
Due from other banks 53,690 − − − − − 53,690
Interbank loans receivable − 4,799 − − − − 4,799
120,289 4,799 − − − − 125,088
Financial assets at FVTPL
Derivative assets − 252 67 − − 49 368
Debt securities − − − − − − −
Equity securities − 2,764 − − − − 2,764
Financial assets at FVOCI −
Debt securities − − − − − − −
Equity securities − − − − − 44 44
Financial assets at amortized
cost
Debt securities − 1,052 1,919 2,011 4,160 314,730 323,872
− 4,068 1,986 2,011 4,160 314,823 327,048
Loans and other receivables =−
P =34,901
P =24,504
P =16,078
P =17,715
P =156,241
P =249,439
P
Other receivables −
Accounts receivable − − − − − 1,498 1,498
Accrued interest receivable − 3,505 − − − − 3,505
Sales contract receivable − 21 40 59 116 952 1,188
− 38,427 24,544 16,137 17,831 158,691 255,630
Other financial assets
Returned checks and other − 261 − − − − 261
cash items
Sundry debits − 161 − − − − 161
− 422 − − − − 422
Total assets =120,289
P =47,716
P =26,530
P =18,148
P =21,991
P =473,514
P =708,188
P

(Forward)

*SGVFS032841*
 - 69 -

Parent Bank
2017
On Up to 1 to 3 3 to 6 6 to 12 Beyond
Demand 1 month Months Months Months 1 year Total
Non-derivative liabilities
Deposit liabilities
Demand =128,049
P P–
= P–
= P–
= P–
= P–
= =128,049
P
Savings 55,738 – – – – – 55,738
Time and LTNCD 64 128,491 66,569 7,820 6,498 8,670 218,112
183,851 128,491 66,569 7,820 6,498 8,670 401,899
Bills payable 26,577 2,301 7 161 49 29,095
Notes and bonds payable – – 97 518 615 36,013 37,243
Manager’s checks 8,677 – – – – – 8,677
Accrued interest payable – 793 – – – – 793
Accounts payable – 2,367 – – – – 2,367
Other liabilities 4,084 187 4,271
192,528 162,312 68,967 8,345 7,274 44,919 484,345
Derivative liabilities -
Outflow – 3,934 32 13 8 – 3,987
Inflow – (3,911) (32) (12) (8) – (3,963)
− 23 − 1 − − 24
Total liabilities =192,528
P =162,335
P =68,967
P =8,346
P =7,274
P =44,919
P =484,369
P

Market Risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate
due to changes in market variables such as interest rate, foreign exchange rates and equity prices.
The Group classifies exposures to market risk into either trading book or banking book. The market
risk for the trading portfolio is managed and monitored based on a Value-at-Risk (VaR)
methodology. Meanwhile, the market risk for the non-trading positions are managed and monitored
using other sensitivity analyses.

The Group applies a VaR methodology to assess the market risk of positions held and to estimate the
potential economic loss based upon a number of parameters and assumptions for various changes in
market conditions. VaR is a method used in measuring financial risk by estimating the potential
negative change in the market value of a portfolio at a given confidence level and over a specified
time horizon.

The Group uses the historical VaR approach in assessing the possible changes in the market value of
investment securities based on historical data for a rolling one-year period. The VaR models are
designed to measure market risk in a normal market environment. The models assume that any
changes occurring in the risk factors affecting the normal market environment will have the same
distribution as they had in the past. This involves running the portfolio across a set of historical price
changes, thus creating a distribution of changes in portfolio value which may or may not be normal.
The historical approach does not make any assumptions regarding the distribution of the risk factors
and therefore can accommodate any type of distribution.

VaR may also be underestimated or overestimated due to the assumptions placed on risk factors and
the relationship between such factors for specific instruments. Even though positions may change
throughout the day, the VaR only represents the risk of the portfolios at the close of each business
day, and it does not account for any losses that may occur beyond the 99% confidence level.

The VaR figures are backtested daily against actual and hypothetical profit and loss of the trading
book to validate the robustness of the VaR model. To supplement the VaR, the Group performs
stress tests wherein the trading portfolios are valued under extreme market scenarios not covered by
the confidence interval of the Group’s VaR model.

Since VaR is an integral part of the Group’s market risk management, VaR limits are established
annually for all financial trading activities and exposures against the VaR limits and are monitored on
a daily basis. Limits are based on the tolerable risk appetite of the Group.

*SGVFS032841*
 - 70 -

A summary of the Group’s VaR position at December 31, 2018 and 2017 follows (amounts in
millions of Philippine pesos):

Foreign
Exchange Interest Rate Equity Total VaR
2018 P
=15.9 P
=377.9 P
=198.4 P
=592.2
Average daily 13.1 129.4 198.8 341.2
Highest 86.5 990.0 206.1 1,282.6
Lowest 1.9 – 187.6 189.5

2017 P13.2
= P–
= P196.0
= P209.2
=
Average daily 15.9 3.3 204.0 223.2
Highest 39.9 16.3 215.4 256.5
Lowest 3.8 – 152.5 161.7

The high and low of the total portfolio may not equal to the sum of the individual components as the
highs and lows of the individual portfolios may have occurred on different trading days. The VaR for
foreign exchange is the foreign exchange risk throughout the Parent Bank.

Interest Rate Risk

A critical element of the Group’s risk management program consists of measuring and monitoring the
risks associated with fluctuations in market interest rates on the Group’s net interest income and
ensuring that the exposure in interest rates is kept within acceptable limits.

The Group employs “gap analysis” to measure the interest rate sensitivity of its assets and liabilities,
also known as Earnings-at-Risk (EaR). This sensitivity analysis is performed at least every month.
The EaR measures the impact on the net interest income for any mismatch between the amounts of
interest-earning assets and interest-bearing liabilities within a one-year period. The EaR is calculated
by first distributing the interest sensitive assets and liabilities into tenor buckets based on time
remaining to the next repricing date or the time remaining to maturity if there is no repricing and then
subtracting the liabilities from the assets to obtain the repricing gap. The repricing gap per tenor
bucket is then multiplied by the assumed interest rate movement and appropriate time factor to derive
the EaR per tenor. The total EaR is computed as the sum of the EaR per tenor within one year.
To manage the interest rate risk exposure, BOD-approved EaR limits were established.

Non-maturing or repricing assets or liabilities are considered to be non-interest rate sensitive and are
not included in the measurement.

A positive gap occurs when the amount of interest rate sensitive assets exceeds the amount of interest
rate sensitive liabilities while a negative gap occurs when the amount of interest rate sensitive
liabilities exceeds the amount of interest rate sensitive assets. Accordingly, during a period of rising
interest rates, an entity with a positive gap will have more interest rate sensitive assets repricing at a
higher interest rate than interest rate sensitive liabilities which will be favorable to it. During a period
of falling interest rates, an entity with a positive gap will have more interest rate sensitive assets
repricing at a lower interest rate than interest rate sensitive liabilities, which will be unfavorable to it.

*SGVFS032841*
 - 71 -

The asset-liability gap position of the Group and Parent Bank at carrying amounts follows (amounts
in millions of Philippine pesos):

Group
2018
Beyond
Up to Six Months Beyond
Six Months To One Year One Year Total
Resources
Loans P
=102,018 P
=17,300 P
=206,881 P
=326,199
Placements 14,942 – 56,511 71,453
Investments 3,821 949 213,502 218,272
120,781 18,249 476,894 615,924
Liabilities
Deposit liabilities 200,442 5,782 214,479 420,703
Bills payable 72,467 14,972 3,525 90,964
Notes and bonds payable 37 150 44,335 44,522
272,946 20,904 262,339 556,189
Asset-Liability Gap (P
= 152,165) (P
= 2,655) P
=214,555 P
=59,735

Group
2017
Beyond
Up to Six Months Beyond
Six Months To One Year One Year Total
Resources
Loans =102,288
P =26,362
P =151,529
P P280,179
=
Placements 61,425 – 64,165 125,590
Investments 801 – 168,897 169,698
Other financial assets 289 63 52 404
164,803 26,425 385,095 576,323
Liabilities
Deposit liabilities 239,684 7,188 200,744 447,616
Bills payable 33,180 7,161 2,730 43,071
Notes and bonds payable – – 32,128 32,128
272,864 14,349 235,602 522,815
Asset-Liability Gap (P
=108,061) =12,076
P =149,493
P =53,508
P

Parent Bank
2018
Beyond
Up to Six Months Beyond
Six Months To One Year One Year Total
Resources
Loans P
=85,622 P
=6,558 P
=166,231 P
=258,411
Placements 11,550 − 52,961 64,511
Investments 3,812 949 213,445 218,206
100,984 7,507 432,637 541,128
Liabilities
Deposit liabilities 175,699 3,233 201,778 380,710
Bills payable 61,955 1,315 1,454 64,724
Notes and bonds payable − − 44,335 44,335
237,654 4,548 247,567 489,769
Asset-Liability Gap (P
= 136,670) P
=2,959 P
=185,070 P
=51,359

*SGVFS032841*
 - 72 -

Parent Bank
2017
Beyond
Up to Six Months Beyond
Six Months To One Year One Year Total
Resources
Loans P81,963
= =15,952
P =114,061
P P211,976
=
Placements 58,586 – 60,248 118,834
Investments 801 – 168,845 169,646
141,350 15,952 343,154 500,456
Liabilities
Deposit liabilities 201,984 6,317 191,673 399,974
Bills payable 28,799 162 49 29,010
Notes and bonds payable – – 32,128 32,128
230,783 6,479 223,850 461,112
Asset-Liability Gap (P
=89,433) =9,473
P =119,304
P =39,344
P

The Parent Bank’s maturing financial liabilities within the one to six month period pertain to time
deposits as well as bills payable due to banks and other financial institutions. Maturing bills payable
are usually settled through repayments. When maturing financial assets are not sufficient to cover the
related maturing financial liabilities, the bills payable and other currently maturing financial liabilities
are rolled over/refinanced or are settled by entering into new borrowing arrangements with other
counterparties.

The following table sets out the impact of changes in interest rates on the Group’s and Parent Bank’s
net interest income (amounts in millions of Philippine pesos):

Group Parent Bank

Increase (decrease) in interest rates
(in basis points) 100 (100) 100 (100)
2018
Change in annualized net interest income (P
= 1,623) P
=1,623 (P
= 1,392) P
=1,392
As a percentage of net interest income (9.3%) 9.3% (9.8%) 9.8%

2017
Change in annualized net interest income (P
=1,244) =1,244
P (P
=993) P993
=
As a percentage of net interest income (7.1%) 7.1% (7.4%) 7.4%

This sensitivity analysis is performed for risk management purposes and assumes no other changes in
the repricing structure. Actual changes in net interest income may vary from the Bank’s internal
model.

Foreign Exchange Risk

Foreign exchange risk is the risk to earnings or capital arising from changes in foreign exchange
rates.

The Group’s net foreign exchange exposure, taking into account any spot or forward exchange
contracts, is computed as foreign currency assets less foreign currency liabilities. The foreign
exchange exposure is limited to the day-to-day, over-the-counter buying and selling of foreign
exchange in the Group’s branches, as well as foreign exchange trading with corporate accounts and
other financial institutions. The Group is permitted to engage in proprietary trading to take advantage
of foreign exchange fluctuations.

*SGVFS032841*
 - 73 -

The breakdown of the financial resources and financial liabilities of the Group and the Parent Bank as
to foreign currency-denominated balances, translated to Philippine pesos as of December 31, 2018
and 2017 is shown below.
2018
Other
Foreign
U.S. Dollars Currencies Total
Resources:
Cash and other cash items P
=2,684,743 P
=757,251 P
=3,441,994
Due from other banks 8,711,992 1,819,838 10,531,830
Financial assets at FVTPL 1,911,742 – 1,911,742
Financial assets at FVOCI 5,123,978 – 5,123,978
Financial assets at amortized cost 138,214,218 1,873,269 140,087,487
Loans and other receivables 12,603,289 63,554 12,666,843
P
=169,249,962 P
=4,513,912 P
=173,763,874
Liabilities:
Deposit liabilities P
=99,109,399 P
=3,371,657 P
=102,481,056
Bills payable 46,692,300 8,003 46,700,303
Notes and bonds payable 26,233,746 – 26,233,746
Derivative liabilities 10,499 – 10,499
Accrued interest and other expenses 483,756 489 484,245
Other liabilities 1,134,354 158,461 1,292,815
173,664,054 3,538,610 177,202,664
Currency swaps and forwards 5,229,482 (1,058,691) 4,170,791
Net exposure P
=815,390 (P
= 83,389) P
=732,001

2017
Other
Foreign
U.S. Dollars Currencies Total
Resources:
Cash and other cash items =551,642
P =163,435
P =715,077
P
Due from other banks 50,579,934 2,449,693 53,029,627
Interbank loans receivables 4,793,280 – 4,793,280
Financial assets at FVTPL 52,917 – 52,917
Financial assets at amortized cost 106,618,631 421,183 107,039,814
Loans and other receivables 10,829,857 12,829 10,842,686
=173,426,261
P =
P3,047,140 =
P176,473,401
Liabilities:
Deposit liabilities =105,604,603
P =2,848,048
P =108,452,651
P
Bills payable 28,953,460 6,951 28,960,411
Notes payable 24,928,177 – 24,928,177
Derivative liabilities 6,742 – 6,742
Accrued interest and other expenses 355,778 495 356,273
Other liabilities 365,901 72,563 438,464
160,214,661 2,928,057 163,142,718
Currency swaps and forwards (12,640,760) (115,203) (12,755,963)
Net exposure =570,840
P =3,880
P =574,720
P

The Parent Bank’s foreign currency position for BSP reporting purposes also includes sundry debits,
due from head office and branches, sundry credits and other dormant credits that are also
denominated in foreign currencies. The Parent Bank’s net foreign currency exposure for BSP
reporting, which is required to be presented in aggregate net U.S. dollar amounts and translated to
Philippine pesos, as of December 31, 2018 and 2017 follows:

2018 2017
In U.S. dollars $11,332 $11,315
In Philippine pesos P
=595,837 =564,958
P

*SGVFS032841*
 - 74 -

The Parent Bank’s policy is to maintain foreign currency exposure within acceptable limits and
within existing regulatory guidelines. The Parent Bank believes that its profile of foreign currency
exposure on its assets and liabilities is within conservative limits for a financial institution engaged in
the type of business in which the Parent Bank is involved.

The following table illustrates the sensitivity of the net results and capital funds to the changes in
foreign exchange rates on the Group’s financial assets and financial liabilities. The percentages
change (increase and decrease) have been determined based on the average market volatility in
exchange rates in the previous 12 months, using a confidence level of 99%. The sensitivity analysis
is based on the Group’s and the Parent Bank’s foreign currency-denominated financial instruments
held at each reporting date, including currency swaps and forwards.

2018 2017
Effect on Effect on
Net Profit Net Profit
% Change For the Year % Change For the Year
U.S. dollars 1.0% 7,591 0.5% 2,670
Japanese yen 1.5% 1 1.5% 28
Euros 1.5% (428) 1.5% 357
Others 1.3% (637) 1.3% (745)

Operational Risk
To standardize the practice and to conform to international standards, the Parent Bank has adopted the
Basel Committee’s definition of operational risk. This is formalized in the Parent Bank’s approved
Operational Risk Management Framework. Operational risk is the risk of loss arising from
inadequate or failed internal processes, people, and systems or from external events. This definition
also covers legal risk, as well as, the risk arising from dealings with Outsourced Service Providers
(OSPs) and the use of technology-related products, services, delivery channels, and processes. This
definition excludes strategic and reputational risk.

Each specific unit of the Parent Bank has its roles and responsibilities in the management of
operational risk and these are clearly stated in the operational risk management framework. At the
BOD level, an ORMC was formed to provide overall direction in the management of operational risk,
aligned with the overall business objectives.

The ORMC covers the following areas of concern:

(a) The adequacy of the Parent Bank’s policies, procedures, organization and resources for
preventing, or limiting the damage from unexpected loss due to deficiencies in information
systems, business, operational and management processes, employee skills and supervision,
equipment and internal controls.

(b) Results of periodic or special risk assessments conducted in various businesses, operating units,
products and information systems of the Parent Bank, to proactively uncover operational and
information technology risks that may result to actual loss or damage to the Parent Bank.

(c) Summarized results of internal audits, BSP examinations and investigation of administrative
cases that highlight trends indicative of present or emerging exposures to specific operational
risks.

*SGVFS032841*
 - 75 -

(d) Regulatory compliance issues, whether currently existing, or anticipated to arise as a result of
new laws or regulations.

(e) Business continuity strategies, plans, and resources.

An Operational Risk Management Unit (ORMU) was formed and given the mandate to build and lead
the roadmap in developing the foundations and systems necessary for the effective implementation of
an Operational Risk Management Framework. The ORMU, together with all other Risk Units,
reports directly to the Chief Risk Officer.

In managing products, services and systems, these are implemented only after a thorough operational
and technical risk evaluation. As part of the product and systems approval process, product managers
ensure that risks are clearly identified and adequately controlled and mitigated. For existing products,
services and systems, regular reviews are conducted and controls are assessed to determine continued
effectiveness. The Parent Bank, as part of its continuing effort to manage operational risk, has
ensured that the basic controls to manage exposure to operational risk have been embedded in its
processes.

For all technology-related activities and initiatives, the Parent Bank has a board level Technology
Steering Committee (TSC) to provide oversight function. It is composed of seven (7) members, two
(2) of whom are members of the Bank’s BOD while five (5) are Senior Management officers from
both the business and the operational units, thereby allowing a comprehensive and high-level
guidance on technology-related issues that may impact the Parent Bank. The Parent Bank has
developed and implemented a Business Continuity Plan to give assurance that Bank services will
continue in the event of disasters or unforeseen circumstances.

Legal Risk and Regulatory Risk Management

Legal risk pertains to the Parent Bank’s exposure to losses arising from cases decided not in favor of
the Parent Bank where significant legal costs have already been incurred, or in some instances, where
the Parent Bank may be required to pay damages. The Parent Bank is often involved in litigation in
enforcing its collection rights under loan agreements in case of borrower default. The Parent Bank
may incur significant legal expenses as a result of these events, but the Parent Bank may still end up
with non-collection or non-enforcement of claims. The Parent Bank has established measures to
avoid or mitigate the effects of these adverse decisions and engages several qualified legal advisors,
who were endorsed to and carefully approved by senior management. At year-end, the Parent Bank
also ensures that material adjustments or disclosures are made in the financial statements for any
significant commitments or contingencies which may have arisen from legal proceedings involving
the Parent Bank.

Regulatory compliance risk refers to the potential risk for the Parent Bank to suffer financial loss due
to changes in the laws, monetary, tax or other governmental regulations of the country. The
monitoring of the Parent Bank’s compliance with these regulations, as well as the study of the
potential impact of new laws and regulations, is the primary responsibility of the Parent Bank’s Chief
Compliance and Corporate Governance Officer. The Chief Compliance and Corporate Governance
Officer is responsible for communicating and disseminating new rules and regulations to all units,
analyzing and addressing compliance issues, performing periodic compliance testing and regularly
reporting to the CGC and the BOD.

*SGVFS032841*
 - 76 -

5. Capital Management

Regulatory Capital
As the Parent Bank’s lead regulator, the BSP sets and monitors capital requirements of the Parent
Bank.

In implementing current capital requirements, the BSP requires the Parent Bank to maintain a
minimum capital amount and a prescribed ratio of qualifying capital to risk-weighted assets, known
as the “capital adequacy ratio” (CAR). Risk-weighted assets is the aggregate value of assets weighted
by credit risk, market risk, and operational risk, based on BSP-prescribed formula provided under
BSP Circular No. 360 and BSP Circular No. 538 which contain the implementing guidelines for the
revised risk-based capital adequacy framework to conform to Basel II recommendations.

Effective January 1, 2014, the BSP has adopted the new risk-based capital adequacy framework
particularly on the minimum capital and disclosure requirements for the Philippine banking system in
accordance with the Basel III standards through BSP Circular No. 781. The adopted Basel III risk-
based capital adequacy framework requires the Group to maintain:

(a) Common Equity Tier 1 (CET1) of at least 6.0% of risk-weighted assets;

(b) Tier 1 Capital of at least 7.5% of risk-weighted assets;
(c) Qualifying Capital (Tier 1 plus Tier 2 Capital) of at least 10.0% of risk-weighted assets; and,
(d) Capital Conservation Buffer of 2.5% of risk-weighted assets, comprised of CET1 Capital.

The Group’s and the Parent Bank’s regulatory capital position as of December 31, 2018 and 2017, as
reported to the BSP, follow (amounts in millions):

Group Parent Bank

2018 2017 2018 2017
Common Equity Tier 1 Capital
Paid-up common stock P
= 12,171 =10,583
P P
= 12,171 =10,583
P
Additional paid in capital 14,145 5,820 14,145 5,820
Surplus free 51,071 45,062 52,476 45,062
Undivided profits 6,712 7,603 6,590 7,202
Other comprehensive income (1,086) (911) (1,099) (894)
Minority interest in financial allied subsidiary 539 44 – –
Sub-total 83,552 68,201 84,283 67,773
Less Regulatory Adjustments:
Total outstanding unsecured credit accommodations,
both direct and indirect, to DOSRI, and unsecured
loans, other credit accommodations and guarantees
granted to subsidiaries and affiliates 250 213 173 149
Deferred income tax 4,888 4,443 3,767 3,782
Goodwill 14,071 11,331 7,887 7,887
Other intangible assets 1,182 731 942 640
Un-booked valuation reserves 1,886 – 1,624 –
Investments in equity of consolidated subsidiary banks and
quasi banks, and other financial allied undertakings – – 18,833 16,786
Other equity investments in non-financial allied and
non-allied undertakings 656 853 656 853
Total regulatory adjustments to Common Equity
Tier 1 capital 22,933 17,571 33,882 30,097
Total Common Equity Tier 1 capital P
= 60,619 P50,630
= P
= 50,401 P37,676
=
Total Tier 1 capital P
= 60,619 P
=50,630 P
= 50,401 P
=37,676
Tier 2 Capital
General loan loss provision P
= 4,417 P
=2,524 P
= 4,141 P
=2,000
Unsecured subordinated debt 7,200 7,200 7,200 7,200
Total Tier 2 capital P
= 11,617 9,724 P
= 11,341 9,200

(Forward)

*SGVFS032841*
 - 77 -

Group Parent Bank

2018 2017 2018 2017
Net Tier 1 capital P
= 60,619 =
P50,630 P
= 50,401 =
P37,676
Net Tier 2 capital 11,617 9,724 11,341 9,200
Total qualifying capital P
= 72,236 =60,354
P P
= 61,742 =46,876
P
Credit risk-weighted assets P
= 428,373 P
=376,145 P
= 362,102 P
=314,104
Market risk-weighted assets 9,121 7,691 9,121 7,691
Operational risk-weighted assets 38,234 35,307 25,424 25,563
Total risk-weighted assets P
= 475,728 =419,143
P P
= 396,647 =347,358
P
Capital ratios:
Total regulatory capital expressed as percentage of total
risk weighted assets 15.18% 14.40% 15.57% 13.50%
Total Tier 1 expressed as percentage of total
risk-weighted assets 12.74% 12.08% 12.71% 10.85%
Total Common Equity Tier 1 expressed as percentage
of total risk-weighted assets 12.74% 12.08% 12.71% 10.85%
Conservation buffer 6.74% 6.08% 6.71% 4.85%

The Group and the Parent Bank have fully complied with the CAR requirements of the BSP.

The breakdown of credit risk-weighted assets, market risk-weighted assets and operational
risk-weighted assets follow (amounts in millions):
Group Parent Bank
2018 2017 2018 2017
On-books assets P
=420,680 P371,439
= P
=354,409 =309,398
P
Off-books assets 2,628 2,917 2,628 2,917
Counterparty risk-weighted
assets in the banking books 4,563 1,542 4,563 1,542
assets in the trading books 502 247 502 247
Total Credit Risk-Weighted Assets P
=428,373 =376,145
P P
=362,102 =314,104
P
Capital Requirements P
=42,837 =37,615
P P
=36,210 =31,410
P
Interest rate exposures P
=3,272 =156
P 3,272 =156
P
Equity exposures 5,024 5,288 5,024 5,288
Foreign exchange exposures 825 2,247 825 2,247
Total Market Risk-Weighted Assets P
=9,121 =7,691
P P
=9,121 =7,691
P
Capital Requirements P
=912 =769
P P
=912 =769
P
Total Operational Risk-Weighted Assets - Basic indicator P
=38,234 =35,307
P P
=25,424 =25,563
P
Capital Requirements P
=3,823 =3,531
P P
=2,542 =2,556
P

The total credit exposure broken down by type of exposures and risk weights follow (amounts in
millions):

Group
2018
Total
Credit Risk
Credit Risk Exposure Total
Total Credit after Risk Weighted
Risk Exposure Mitigation 0%-50% 75%-100% 150% Assets
Risk-Weighted On-Books Assets
Cash on hand P
= 10,847 P
= 10,847 P
= 10,847 P
=– P
=– =
P–
Checks and other cash items 67 67 67 – – 13
Due from BSP 56,519 56,519 56,519 – – –
Due from other banks 14,925 14,925 10,899 4,026 – 9,124
Financial assets at FVTPL 1 1 − 1 – 1
Financial assets at FVOCI 9,838 9,050 5,447 3,603 – 4,007
Financial assets at amortized cost 204,463 201,515 154,395 47,120 – 83,305
Loans and receivables 299,223 299,045 7,910 284,945 6,190 295,970
SPURRA 18,882 3,776 3,776 – – –
Sales contract receivable (SCR) 1,513 1,513 – 373 1,140 2,084

(Forward)

*SGVFS032841*
 - 78 -

Group
2018
Total
Credit Risk
Credit Risk Exposure Total
Total Credit after Risk Weighted
Risk Exposure Mitigation 0%-50% 75%-100% 150% Assets
ROPA P
= 4,736 P
= 4,736 P
=– P
=– P
= 4,736 P
= 7,104
Other assets 17,809 17,809 160 17,649 – 17,649
Total risk-weighted on-books assets not
covered by CRM 638,823 619,803 250,020 357,717 12,066 419,257
Total risk-weighted on-books assets
covered by CRM – 19,020 19,012 8 – 1,423
P
= 638,823 P
= 638,823 P
= 269,032 P
= 357,725 P
= 12,066 P
= 420,680
Risk-Weighted Off-Books Assets
Direct credit substitutes (e.g., general
guarantee of indebtedness and
acceptances) P
= 977 P
=– P
=– P
= 977 P
=– P
= 977
Transaction-related contingencies
(e.g., performance bonds, bid
bonds, warrantees and stand-by
LCs related to particular
transactions) 1,851 – – 925 – 925
Trade-related contingencies arising
from movements of goods
(e.g., documentary credits
collateralized by the underlying
shipments) and commitments with
an original maturity of up to one
year 3,629 – – 726 – 726
P
= 6,457 P
=– P
=– P
= 2,628 P
=– P
= 2,628
Counterparty Risk-Weighted Assets
in the Banking Books
Repo-style Exposure P
= 48,182 P
= 9,543 P
= 9,543 P
=– P
=– P
= 4,563
Counterparty Risk-Weighted Assets
in the Trading Books
Interest Rate Contracts P
= 526 P
=– P
=– P
=– P
=– P
=–
Exchange Rate Contracts 44,207 761 492 269 – 502
Total P
= 738,195 P
= 649,127 P
= 279,067 P
= 360,622 P
= 12,066 P
= 428,373

Group
2017
Total
Credit Risk Total
Credit Risk Exposure
Total Credit after Risk Weighted
Risk Exposure Mitigation 0%-50% 75%-100% 150% Assets
Risk-Weighted On-Books Assets
Cash on hand P
=6,622 P
=6,622 P
=6,622 =
P– =
P– =
P–
Checks and other cash items 9 9 9 – – 2
Due from BSP 66,278 66,278 66,278 – – –
Due from other banks 54,534 54,532 53,656 8,779 – 23,840
Financial assets at FVTPL 1 1 – 1 – 1
Financial assets at FVOCI 44 44 – 44 – 44
Financial assets at amortized cost 169,992 166,769 136,880 29,889 – 61,957
UDSCL 406 406 58 348 – 348
Loans and receivables 266,462 266,229 12,631 250,517 3,081 257,702
SPURRA 13,572 10,270 10,270 – – –
Sales contract receivable (SCR) 1,097 1,097 – 245 852 1,523
ROPA 4,916 4,916 – – 4,916 7,373
Other assets 18,086 18,086 155 17,930 – 17,930
Total risk-weighted on-books assets not
covered by CRM 602,019 595,259 286,559 307,753 8,849 370,720
Total risk-weighted on-books assets
covered by CRM – 6,760 6,760 – – 719
P
=602,019 P
=602,019 P
=293,319 P
=307,753 P
=8,849 P
=371,439

(Forward)

*SGVFS032841*
 - 79 -

Group
2017
Total
Credit Risk Total
Credit Risk Exposure
Total Credit after Risk Weighted
Risk Exposure Mitigation 0%-50% 75%-100% 150% Assets
Risk-Weighted Off-Books Assets
Direct credit substitutes (e.g., general
guarantee of indebtedness and
acceptances) =1,199
P =–
P =−
P =1,199
P =–
P =1,199
P
Transaction-related contingencies
(e.g., performance bonds, bid
bonds, warrantees and stand-by
LCs related to particular
transactions) 2,404 – – 1,202 – 1,202
Trade-related contingencies arising
from movements of goods
(e.g., documentary credits
collateralized by the underlying
shipments) and commitments with
an original maturity of up to one
year 2,581 – – 516 – 516
=6,184
P P–
= P–
= =2,917
P P–
= =2,917
P
Counterparty Risk-Weighted Assets
in the Banking Books
Repo-style Exposure P
=25,925 P
=3,951 P
=3,951 =
P– =
P– P
=1,542
Counterparty Risk-Weighted Assets
in the Trading Books
Exchange Rate Contracts 15,531 4,634 332 132 – 247
Total =649,659
P =610,604
P =297,602
P =310,802
P =8,849
P =376,145
P

Parent Bank
2018
Total
Credit Risk Total
Credit Risk Exposure
Total Credit after Risk Weighted
Risk Exposure Mitigation 0%-50% 75%-100% 150% Assets
Risk-Weighted On-Books Assets
Cash on hand P
= 10,335 P
= 10,335 P
= 10,335 P
=– P
=– P
=–
Due from BSP 52,967 52,967 52,967 – – –
Due from other banks 11,550 11,550 10,588 962 – 5,905
Financial assets through other –
comprehensive income 9,829 9,041 5,447 3,594 3,998
Financial assets at amortized cost 204,084 201,136 154,364 46,772 – 82,957
Loans and receivables 244,090 243,912 7,910 231,496 4,506 240,205
SPURRA 10,000 2,000 2,000 – – –
SCR 1,435 1,435 – 294 1,141 2,005
ROPA 4,371 4,371 – – 4,371 6,556
Other assets 11,358 11,358 – 11,358 – 11,358
Total risk-weighted on-books assets not
covered by CRM 560,019 548,105 243,611 294,476 10,018 352,984
Total risk-weighted on-books assets
covered by CRM – 11,914 11,906 8 – 1,425
P
= 560,019 P
= 560,019 P
= 255,517 P
= 294,484 P
= 10,018 P
= 354,409
Risk-Weighted Off-Books Assets
Direct credit substitutes (e.g., general
guarantee of indebtedness and
acceptances) P
= 977 P
=– P
=– P
= 977 P
=– P
= 977
Transaction-related contingencies (e.g.,
performance bonds, bid bonds,
warrantees and stand-by LCs
related to particular transactions) 1,852 – – 925 – 925

(Forward)

*SGVFS032841*
 - 80 -

Parent Bank
2018
Total
Credit Risk Total
Credit Risk Exposure
Total Credit after Risk Weighted
Risk Exposure Mitigation 0%-50% 75%-100% 150% Assets
Trade-related contingencies arising
from movements of goods (e.g.,
documentary credits collateralized
by the underlying shipments) and
commitments with an original
maturity of up to one year P
= 3,629 P
=– P
=– P
= 726 P
=– P
= 726
P
= 6,458 P
=– P
=– P
= 2,628 P
=– P
= 2,628
Counterparty Risk-Weighted Assets
in the Banking Books
Repo-style Exposure P
= 48,182 P
= 9,543 P
= 9,543 P
=– P
=– P
= 4,563
Counterparty Risk-Weighted Assets
in the Trading Books
Interest Rate Contracts P
= 526 P
=– P
=– P
=– P
=– P
=–
Exchange Rate Contracts 44,207 761 492 269 – 502
Total P
= 659,392 P
= 570,323 P
= 265,552 P
= 297,381 P
= 10,018 P
= 362,102

Parent Bank
2017
Total
Credit Risk Total
Credit Risk Exposure
Total Credit after Risk Weighted
Risk Exposure Mitigation 0%-50% 75%-100% 150% Assets
Risk-Weighted On-Books Assets
Cash on hand P
=6,249 P
=6,249 P
=6,249 =
P– =
P– =
P–
Due from BSP 60,351 60,351 60,351 – – –
Due from other banks 53,690 53,690 53,656 35 – 22,995
Financial assets through other
comprehensive income 44 44 – 44 – 44
Financial assets at amortized cost 169,992 166,768 136,880 29,888 – 61,957
Loans and receivables 209,415 209,182 12,627 195,409 1,147 199,737
SPURRA 4,130 826 826 – – –
SCR 1,097 1,097 – 245 852 1,523
ROPA 4,831 4,831 – – 4,831 7,247
Other assets 15,176 15,176 – 15,176 – 15,176
Total risk-weighted on-books assets not
covered by CRM 524,975 518,214 270,589 240,797 6,830 308,679
Total risk-weighted on-books assets
covered by CRM – 6,760 6,760 – – 719
P
=524,975 P
=524,974 P
=277,349 P
=240,797 P
=6,830 P
=309,398
Risk-Weighted Off-Books Assets
Direct credit substitutes (e.g., general
guarantee of indebtedness and
acceptances) =1,199
P =–
P =–
P =1,199
P =–
P =1,199
P
Transaction-related contingencies
(e.g., performance bonds, bid
bonds, warrantees and stand-by
LCs related to particular
transactions) 2,404 – – 1,202 – 1,202
Trade-related contingencies arising
from movements of goods
(e.g., documentary credits
collateralized by the underlying
shipments) and commitments with
an original maturity of up to one
year 2,581 – – 516 – 516
P
=6,184 =
P– =
P– P
=2,917 =
P– P
=2,917

(Forward)

*SGVFS032841*
 - 81 -

Parent Bank
2017
Total
Credit Risk Total
Credit Risk Exposure
Total Credit after Risk Weighted
Risk Exposure Mitigation 0%-50% 75%-100% 150% Assets
Counterparty Risk-Weighted Assets
in the Banking Books
Repo-style Exposure P
=25,925 P
=3,951 P
=3,951 =
P– =
P– P
=1,542
Counterparty Risk-Weighted Assets
in the Trading Books
Exchange Rate Contracts 15,532 464 331 132 – 247
Total P
=572,616 P
=529,389 P
=281,631 P
=243,846 P
=6,830 P
=314,104

Risk weighted on-balance sheet assets covered by credit risk mitigants were based on collateralized
transactions as well as guarantees by the Philippine National Government and those guarantors and
exposures with the highest credit rating.

Standardized credit risk weights were used in the credit assessment of asset exposures. Third party
credit assessments were based on the ratings by Standard & Poor’s, Moody’s, Fitch and Philratings
on exposures to Sovereigns, Multilateral Development Banks, Banks, Local Government Units,
Government Corporations and Corporates.

Minimum Capital Requirement

Under the relevant provisions of current BSP regulations, the required minimum capitalization of a
universal bank is =
P20.0 billion both as of December 31, 2018 and 2017. As of those dates, the Bank
is in compliance with these regulations.

Ensuring Sufficient Capital

On January 15, 2009, the BSP issued Circular No. 639, which articulates the need for banks to adopt
and document an Internal Capital Adequacy Assessment Process (ICAAP). All universal and
commercial banks are expected to perform a thorough assessment of all their material risks, as well as
maintain capital adequate to support these risks. This is intended to complement the current
regulatory capital requirement of at least 10% of risk assets, which only covers credit, market and
operational risks. On December 29, 2009, the BSP issued Circular No. 677 that effectively extends
the implementation of the ICAAP from January 2010 to January 2011.

Cognizant of the importance of a strong capital base to meet strategic and regulatory requirements,
the Parent Bank has adopted a robust ICAAP on a group-wide level that is consistent with its risk
philosophy and risk appetite. The ICAAP Document embodies the Bank’s risk philosophy, risk
appetite, and risk governance framework and structure, and integrates these with: (a) the Parent
Bank’s strategic objectives and long-term strategies; (b) the five-year financial and business plans;
and, (c) the capital plan and dividend policy.

The ICAAP’s objective is to ensure that the BOD and senior management actively and promptly
identify and manage the material risks arising from the general business environment, and that an
appropriate level of capital is maintained to cover these risks. To test the adequacy of its capital even
under difficult conditions, the Parent Bank conducts regular stress testing to assess the effects of
extreme but plausible events on its capital. The results are thoroughly discussed during RMC
meetings, and reported to the Board. In the course of its discussions, the BOD and senior
management may request for additional stress testing scenarios or revisions to the test assumptions in
order to better align these to current trends and forecasts.

*SGVFS032841*
 - 82 -

The Parent Bank has a cross-functional ICAAP technical team, comprised of representatives from the
core risk management units - credit, market, operational, information technology, and emerging risks;
corporate planning; financial controllership; treasury; internal audit; and compliance. This ensures a
well-coordinated approach to the development, documentation, implementation, review,
improvement, and maintenance of the various sub-processes included in the ICAAP. The key
members of the ICAAP technical team are enrolled in further training as well as various fora and
briefings to enhance their knowledge and expertise particularly on the subjects of ICAAP, Basel II
and III, and their interface with International Financial Reporting Standards.

On January 15, 2013, the BSP issued Circular No. 781, which specifies the implementing guidelines
on the revised risk-based capital adequacy framework in accordance with the Basel III standards,
applicable to universal and commercial banks as well as their subsidiary banks and quasi-banks
effective January 1, 2014. Beginning 2013, the Bank’s ICAAP Document considered the possible
impact of Basel III implementation on the eligibility of unsubordinated notes as qualifying capital and
the changes in composition of qualifying capital.

On January 8, 2013, the BOD approved the purchase of CSB, aligned with the Parent Bank’s
long-term strategy of building asset businesses based on consumers. With the materiality of
CSB’ assets in relation to the entire Group and the former’s expansion plans, the Bank’s ICAAP
Document showed the results of scenario analyses on a solo and consolidated basis.

The BSP, on October 29, 2014, issued Circular No. 856 that requires banks identified as Domestic
Systemically Important Banks (D-SIBs) to comply with a higher loss absorbency (HLA) requirement
on top of the common equity tier 1 and capital conservation buffer to increase going concern loss
absorbency and reduce extent or impact of failure on the domestic economy. The HLA requirement
will be phased-in from January 1, 2017 with full implementation by January 1, 2019. For the purpose
of the ICAAP Document submitted starting 2016, the Parent Bank included in the assessment the
implications of the circular to its capital targets.

On March 10, 2016, BSP issued Circular No. 904 that sets out the guidelines that D-SIBs should
follow in maintaining a recovery plan for future destabilizing events and/or crises. The Parent Bank’s
first recovery plan, approved by the BOD in May 2016, was submitted to the BSP in June 2016 as a
supplement to the 2016 ICAAP Document. Moving forward, the recovery plan shall form an integral
part of the annual ICAAP Document submitted to BSP on or before March 31 of each year. The
Parent Bank’s Capital Management Manual was also updated and presented to the BOD in June 2016
to align with the D-SIB recovery plan guidelines set by the Circular.

The Parent Bank’s ICAAP Document is subjected each year to an independent review by the Internal
Audit Division (IAD) to provide reasonable assurance that the Parent Bank has met the regulatory
requirements. For the 2018 ICAAP Document submission, the results of the audit assessment were
presented to the Audit Committee and the BOD in February 2018. Based on IAD’s assessment of the
ICAAP document, its related supporting documents, and existing processes and structures, IAD
reported that the Parent Bank has satisfactorily complied with the minimum requirements prescribed
in BSP Circular No. 639. Presence of a proper governance and oversight function of the ICAAP,
comprehensive risk management framework, and sound capital management process were verified in
the audit process. For 2018, the Parent Bank’s ICAAP Document was submitted to the BSP on
March 23, 2018.

*SGVFS032841*
 - 83 -

6. Segment Reporting

Business Segments
The Group’s main operating businesses are organized and managed separately according to the nature
of products and services provided and the different markets served, with each segment representing a
strategic business unit. These are also the basis of the Group in reporting to its chief operating
decision-maker for its strategic decision-making activities. The Group’s main business segments are
as presented in the succeeding pages.
(a) Consumer Banking
This segment principally handles individual customers’ deposits and provides consumer type
loans, such as automobiles and mortgage financing, credit card facilities and funds transfer
facilities.

(b) Corporate and Commercial Banking

This segment principally handles loans and other credit facilities and deposit and current accounts
for corporate, institutional, small and medium enterprises, and middle market customers.

(c) Treasury
This segment is principally responsible for managing the Bank’s liquidity and funding
requirements, and handling transactions in the financial markets covering foreign exchange, fixed
income trading and investments, and derivatives.

(d) Headquarters
This segment includes corporate management, support and administrative units not specifically
identified with Consumer Banking, Corporate and Commercial Banking or Treasury.

These segments are the basis on which the Group reports its primary segment information.
Transactions between segments are conducted at estimated market rates on an arm’s length basis.

Segment resources and liabilities comprise operating resources and liabilities including items
such as taxation and borrowings. Revenues and expenses that are directly attributable to a
particular business segment and the relevant portions of the Group’s revenues and expenses that
can be allocated to that business segment are accordingly reflected as revenues and expenses of
that business segment.
Analysis of Segment Information
Segment information of the Group as of and for the years ended December 31, 2018, 2017 and 2016
follow (amounts in millions):
Corporate and
Consumer Commercial
Banking Banking Treasury Headquarters Total
December 31, 2018
Results of operations
Net interest income and
other income P
= 12,752 P
= 5,560 P
= 4,947 P
= 2,415 P
= 25,674
Other expenses (7,221) (1,809) (1,439) (5,851) (16,320)
Income before impairment
losses and income tax P
= 5,531 P
= 3,751 P
= 3,508 P
= (3,436) 9,354
Impairment losses − − − − (856)
Tax expense − − − − (1,183)
Net income − − − − 7,315
Segment resources P
= 160,639 P
= 218,001 P
= 255,622 P
= 39,521 P
= 673,783
Segment liabilities P
= 251,495 P
= 134,105 P
= 137,054 P
= 60,168 P
= 582,822
Other information:
Depreciation and amortization P
= 269 P
= 29 P
= 12 P
= 433 ₱743
Capital expenditures 426 142 47 1,714 2,329

*SGVFS032841*
 - 84 -

Corporate and
Consumer Commercial
Banking Banking Treasury Headquarters Total
December 31, 2017
Results of operations
Net interest income and
other income P
=13,262 P
=4,897 P
=4,452 P
=2,707 P
=25,318
Other expenses (6,743) (1,475) (1,183) (4,355) (13,756)
Income before impairment
losses and income tax P
=6,519 P
=3,422 P
=3,269 (P
=1,648) 11,562
Impairment losses − − − − (876)
Tax expense − − − − (2,266)
Net income − − − − =8,420
P
Segment resources =152,942
P =190,458
P =250,591
P =27,441
P =621,432
P
Segment liabilities P
=248,330 P
=127,347 P
=123,078 P
=49,333 P
=548,088
Other information:
Depreciation and amortization P
=269 =
P34 =
P6 P
=326 P
=635
Capital expenditures 450 135 14 646 1,245

Corporate and
Consumer Commercial
Banking Banking Treasury Headquarters Total
December 31, 2016
Results of operations
Net interest income and
other income P
=12,899 P
=4,291 P
=7,059 P
=1,286 P
=25,535
Other expenses (5,715) (1,235) (683) (4,332) (11,965)
Income before impairment
losses and income tax P
=7,184 P
=3,056 P
=6,376 (P
=3,046) 13,570
Impairment losses (1,594)
Tax expense (1,910)
Net income =10,066
P
Segment resources P134,896
= =157,913
P =203,603
P =27,378
P =523,790
P
Segment liabilities P
=227,834 P
=106,232 P
=100,085 P
=22,694 P
=456,845
Other information:
Depreciation and amortization P
=341 =
P54 =
P6 P
=315 P
=716
Capital expenditures 109 11 1 253 374

7. Categories, Fair Value Measurement and Offsetting of Financial Assets and

Financial Liabilities

Comparison of Carrying Amounts and Fair Values

The carrying amounts and fair values of the categories of financial assets and financial liabilities
presented in the statements of financial position are shown below.

Group
2018
Classes
At Amortized Carrying
Cost At Fair Value Amount Fair Value
Financial Assets
At amortized cost
Financial assets at amortized cost P
=200,173,730 P
=– P
=200,173,730 P
=179,655,178
Loans and other receivables 326,199,466 – 326,199,466 329,756,674
At fair value
Financial assets at FVTPL – 8,283,695 8,283,695 8,283,695
Financial assets at FVOCI – 9,815,040 9,815,040 9,815,040
Trust fund assets – 2,436,441 2,436,441 2,436,441

(Forward)

*SGVFS032841*
 - 85 -

Group
2018
Classes
At Amortized Carrying
Cost At Fair Value Amount Fair Value
Financial Liabilities
At amortized cost
Deposit liabilities P
=420,702,533 P
=– P
=420,702,533 P
=420,447,783
Bills payable 90,964,473 – 90,964,473 90,964,473
Notes and bonds payable 44,522,066 – 44,522,066 43,197,489
At fair value
Derivative liabilities − 407,037 407,037 407,037

Group
2017
Classes
At Amortized Carrying
Cost At Fair Value Amount Fair Value
Financial Assets
At amortized cost
Financial assets at amortized cost =166,471,659
P P–
= =166,471,659
P =161,669,316
P
Loans and other receivables 280,178,875 – 280,178,875 280,213,033
At fair value
Financial assets at FVTPL – 3,182,040 3,182,040 3,182,040
Financial assets at FVOCI – 43,783 43,783 43,783
Trust fund assets – 3,768,669 3,768,669 3,768,669
Financial Liabilities
At amortized cost
Deposit liabilities =447,616,213
P P–
= =447,616,213
P =447,599,503
P
Bills payable 43,070,825 – 43,070,825 43,070,825
Notes and bonds payable 32,128,177 – 32,128,177 32,013,570
At fair value
Derivative liabilities 23,684 23,684 23,684

Parent Bank
2018
Classes
At Amortized Carrying
Cost At Fair Value Amount Fair Value
Financial Assets
At amortized cost
Financial assets at amortized cost P
=200,173,730 P
=– P
=200,173,730 P
=179,655,178
Loans and other receivables 258,411,076 – 258,411,076 261,968,284
At fair value
Financial assets at FVTPL – 8,225,569 8,225,569 8,225,569
Financial assets at FVOCI – 9,806,226 9,806,226 9,806,226
Financial Liabilities
At amortized cost
Deposit liabilities P
=380,710,363 P
=− P
=380,710,363 P
=380,455,612
Bills payable 64,723,631 – 64,723,631 64,723,631
Notes and bonds payable 44,335,260 – 44,335,260 43,010,683
At fair value
Derivative liabilities – 407,037 407,037 407,037

*SGVFS032841*
 - 86 -

Parent Bank
2017
Classes
At Amortized Carrying
Cost At Fair Value Amount Fair Value
Financial Assets
At amortized cost
Financial assets at amortized cost =166,471,659
P =
P– =166,471,659
P =
P161,669,316
Loans and other receivables 211,976,032 – 211,976,032 212,010,190
At fair value
Financial assets at FVTPL – 3,130,421 3,130,421 3,130,421
Financial assets at FVOCI – 43,783 43,783 43,783
Financial Liabilities
At amortized cost
Deposit liabilities =399,974,200
P P–
= =399,974,200
P =399,957,489
P
Bills payable 29,009,719 – 29,009,719 29,009,719
Notes and bonds payable 32,128,177 – 32,128,177 32,013,570
At fair value
Derivative liabilities – 23,684 23,684 23,684

The methods and assumptions used by the Group in estimating the fair value of the financial
instruments are:

∂ Cash and other cash items, Due from BSP and other banks, Interbank loans receivable and
Returned checks and other cash items
The carrying amounts approximate the fair values due to the short-term nature of these accounts.

∂ Trading and investment securities at FVTPL, FVOCI and amortized cost

Fair values of debt securities and equity investments are generally based on quoted market prices.
Where the government debt securities are not quoted or the market prices are not readily
available, the fair value is determined in reference to PHP BVAL rates and interpolated PDST-R2
rates provided by the Philippine Dealing and Exchange Corporation (PDEx) in 2018 and 2017,
respectively.

∂ Loans and other receivables

The estimated fair value of loans and receivables are estimated using the discounted cash flow
methodology, using the current incremental lending rates for similar types of loans and
receivables.

∂ Deposits and borrowings

The estimated fair value of demand deposits with no stated maturity, which includes noninterest-
bearing deposits, is the amount repayable on demand. The estimated fair value of long-term fixed
interest-bearing deposits and other borrowings without quoted market price is based on
discounted cash flows using interest rates for new debts with similar remaining maturity.

∂ Other liabilities such as Manager’s checks, Bills purchased, Accounts payable, Accrued interest
payable, Payment orders payable and Due to Treasurer of the Philippines
Due to their short duration, the carrying amounts of other liabilities in the statement of financial
position are considered to be reasonable approximation of their fair values.

*SGVFS032841*
 - 87 -

Fair Value Hierarchy

In accordance with PFRS 13, Fair Value Measurement, the fair value of financial assets and liabilities
and non-financial assets which are measured at fair value on a recurring or non-recurring basis and
those assets and liabilities not measured at fair value but for which fair value is disclosed in
accordance with other relevant PFRS, are categorized into three levels based on the significance of
inputs used to measure the fair value. The fair value hierarchy has the following levels:

∂ Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
∂ Level 2: inputs other than quoted prices included within Level 1 that are observable for the
resource or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and,
∂ Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs).

The level within which the financial asset or liability is classified is determined based on the lowest
level of significant input to the fair value measurement.

For purposes of determining the market value at Level 1, a market is regarded as active if quoted
prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent actual and regularly occurring market
transactions on an arm’s length basis.

For investments which do not have quoted market price, the fair value is determined by using
generally acceptable pricing models and valuation techniques or by reference to the current market of
another instrument which is substantially the same after taking into account the related credit risk of
counterparties, or is calculated based on the expected cash flows of the underlying net asset base of
the instrument.

When the Group uses valuation technique, it maximizes the use of observable market data where it is
available and relies as little as possible on entity specific estimates. If all significant inputs required
to determine the fair value of an instrument are observable, the instrument is included in Level 2.
Otherwise, it is included in Level 3.

Financial Instruments Measured at Fair Value

The financial assets and liabilities measured at fair value in the statements of financial position as of
December 31, 2018 and 2017 are grouped into the fair value hierarchy as follows:

Group
Level 1 Level 2 Level 3 Total
December 31, 2018
Resources
Financial assets at FVTPL
Debt securities P
=5,218,679 P
=– P
=– P
= 55,218,679
Equity securities 2,569,908 120,490 − 2,690,398
Derivative assets − 324,840 49,688 374,528
Trust fund assets 2,436,441 − − 2,436,441
Financial assets at FVOCI
Debt securities 9,762,403 − − 9,762,403
Equity securities − − 52,637 52,637
Liabilities
Derivative liabilities − 407,037 – 407,037

(Forward)

*SGVFS032841*
 - 88 -

Group
Level 1 Level 2 Level 3 Total
December 31, 2017
Resources
Financial assets at FVTPL
Equity securities =2,695,600
P P120,490
= =–
P =2,816,090
P
Derivative assets − 318,766 47,184 365,950
Trust fund assets 3,768,669 − − 3,768,669
Financial assets at FVOCI
Equity securities − − 43,783 43,783
Liabilities
Derivative liabilities − 23,684 – 23,684

Parent Bank
Level 1 Level 2 Level 3 Total
December 31, 2018
Resources
Financial assets at FVTPL
Debt securities P
=5,218,679 P
=– P
=– P
=5,218,679
Equity securities 2,511,782 120,490 − 2,632,272
Derivative assets − 324,840 49,688 374,528
Financial assets at FVOCI
Debt securities 9,762,403 − − 9,762,403
Equity securities − − 43,823 43,823
Liabilities
Derivative liabilities − 407,037 – 407,037

December 31, 2017

Resources
Financial assets at FVTPL
Equity securities =2,643,981
P P120,490
= =–
P =2,764,471
P
Derivative assets − 318,766 47,184 365,950
Financial assets at FVOCI
Equity securities − − 43,783 43,783
Liabilities
Derivative liabilities − 23,684 – 23,684

There were no gains or losses recognized in 2018, 2017 and 2016 statements of income for Level 3
instruments. There were neither transfers between Levels 1 and 2 nor changes in Level 3 instruments
in both years.

Described below are the information about how the fair values of the Group and Parent Bank’s
classes of financial assets are determined.

(a) Debt securities

Fair values of debt securities under Level 1, composed of government securities issued by the
Philippine government and other foreign governments and private debt securities, are determined
based on quoted prices at the close of business as appearing on Bloomberg.

(b) Derivatives
The fair values of derivative financial instruments that are not quoted in an active market are
determined through valuation techniques using the net present value computation (see Note 3).

(c) Equity securities

Instruments included in Level 1 comprise equity securities classified as financial assets at
FVTPL. These securities were valued based on their closing prices on the PSE.

*SGVFS032841*
 - 89 -

Club shares classified as financial assets at FVTPL are included in Level 2 as their prices are not
derived from market considered as active due to lack of trading activities among market
participants at the end or close to the end of the reporting period.

Financial Instruments Measured at Amortized Cost for Which Fair Value is Disclosed
The table below summarizes the fair value hierarchy of financial assets and financial liabilities which
are not measured at fair value in the 2018 and 2017 statements of financial position but for which fair
value is disclosed.

Group
2018
Level 1 Level 2 Level 3 Total
Financial Assets
Financial assets at amortized cost P
=179,655,178 P
=– P
=– P
=179,655,178
Loans and other receivables – – 329,756,674 329,756,674
Financial Liabilities
Deposit liabilities P
=420,447,783 P
=– P
=– P
=420,447,783
Bills payable – 90,964,473 – 90,964,473
Notes and bonds payable – 43,197,489 – 43,197,489

Group
2017
Level 1 Level 2 Level 3 Total
Financial Assets
Financial assets at amortized cost =161,669,316
P P–
= =–
P =161,669,316
P
Loans and other receivables − – 280,213,033 280,213,033
Financial Liabilities
Deposit liabilities =447,599,503
P =–
P P–
= =447,599,503
P
Bills payable – 43,070,825 – 43,070,825
Notes and bonds payable – 32,013,570 – 32,013,570

Parent Bank
2018
Level 1 Level 2 Level 3 Total
Financial Assets
Financial assets at amortized cost P
=179,655,178 P
=– P
=– P
=179,655,178
Loans and other receivables – – 261,968,284 261,968,284
Financial Liabilities
Deposit liabilities P
=380,455,612 P
=– P
=– P
=380,455,612
Bills payable – 64,723,631 – 64,723,631
Notes and bonds payable – 43,010,683 – 43,010,683

Parent Bank
2017
Level 1 Level 2 Level 3 Total
Financial Assets
Financial assets at amortized cost =161,669,316
P P–
= =–
P =161,669,316
P
Loans and other receivables – – 212,010,190 212,010,190
Financial Liabilities
Deposit liabilities =399,957,489
P =
P– =
P– =399,957,489
P
Bills payable – 29,009,719 – 29,009,719
Notes and bonds payable – 32,013,570 – 32,013,570

For Cash and other cash items, Due from BSP and other banks, Interbank loans receivable and
Returned checks and other cash items, and Other liabilities such as Manager’s checks, Bills
purchased, Accounts payable, Accrued interest payable, Payment orders payable and Due to
Treasurer of the Philippines, management considers that the carrying amounts approximate their fair
value due to its short-term nature. Accordingly, these are not presented in the tables above.

*SGVFS032841*
 - 90 -

The fair values of the financial assets and financial liabilities included in Level 2 and Level 3 in the
preceding pages, which are not traded in an active market, are determined by using generally
acceptable pricing models and valuation techniques or by reference to the current market value of
another instrument which is substantially the same after taking into account the related credit risk of
counterparties, or is calculated based on the expected cash flows of the underlying net asset base of
the instrument. When the Group uses valuation technique, it maximizes the use of observable market
data where it is available and rely as little as possible on entity specific estimates. If all significant
inputs required to determine the fair value of an instrument are observable, the instrument is included
in Level 2. Otherwise, it is included in Level 3.

Fair Value Measurement of Investment Properties

The table below shows the levels within the hierarchy of investment properties measured at fair value
on a recurring basis as of December 31, 2018 and 2017.

2018
Level 1 Level 2 Level 3 Total
Group
Investment properties
Land P
=– P
=8,738,348 P
=– P
=8,738,348
Building and improvements – – 6,515,103 6,515,103
Parent Bank
Investment properties
Land P
=– P
=7,676,413 P
=– P
=7,676,413
Building and improvements – – 6,038,837 6,038,837

2017
Level 1 Level 2 Level 3 Total
Group
Investment properties
Land P–
= =7,988,116
P =–
P P7,988,116
=
Building and improvements – – 6,165,430 6,165,430
Parent Bank
Investment properties
Land P–
= =7,832,606
P =–
P P7,832,606
=
Building and improvements – – 5,690,404 5,690,404

The fair values of the Group’s and the Parent Bank’s investment properties (see Note 17) are
determined on the basis of the appraisals performed by independent appraisal companies acceptable
to the BSP, with appropriate qualifications and recent experience in the valuation of similar properties
in the relevant locations. The valuation process is conducted by the appraisers with respect to the
determination of the inputs such as the size, age, and condition of the land and buildings, and the
comparable prices in the corresponding property location. In estimating the fair value of these
properties, appraisal companies take into account the market participant’s ability to generate
economic benefits by using the assets in their highest and best use. Based on management’s
assessment, the best use of the Group’s and the Parent Bank’s non-financial assets indicated above is
their current use.

*SGVFS032841*
 - 91 -

The fair value of investment properties were determined based on the following approaches:

(a) Fair Value Measurement for Land

The Level 2 fair value of land was derived using the market data approach that reflects observable
and recent transaction prices for similar properties in nearby locations. Under this approach,
when sales prices of comparable land in close proximity are used in the valuation of the subject
property with no adjustment on the price, fair value is included in Level 2. On the other hand, if
the observable and recent prices of the reference properties were adjusted for differences in key
attributes such as property size, zoning, and accessibility, the fair value will be the lower level of
the hierarchy or Level 3. The most significant input into this valuation approach is the price per
square meter, hence, the higher the price per square meter, the higher the fair value.

(b) Fair Value Measurement for Building and Improvements

The Level 3 fair value of the investment properties was determined using the cost approach that
reflects the cost to a market participant to construct an asset of comparable usage, construction
standards, design and layout, adjusted for obsolescence. The more significant inputs used in the
valuation include direct and indirect costs of construction such as but not limited to, labor and
contractor’s profit, materials and equipment, surveying and permit costs, electricity and utility
costs, architectural and engineering fees, insurance and legal fees. These inputs were derived
from various suppliers and contractor’s quotes, price catalogues, and construction price indices.
Under this approach, higher estimated costs used in the valuation will result in higher fair value
of the properties.

There has been no change to the valuation techniques used by the Group during the year for its
investment properties. The movements in the investment properties categorized under Level 3 of
the fair value hierarchy follows:

Group Parent Bank

2018 2017 2018 2017
Balance at beginning of year P
=6,165,430 =5,815,521
P P
=5,690,404 =5,392,105
P
Additions 191,658 315,475 185,796 273,938
Fair value gains 490,543 245,973 490,543 228,966
Adjustments (3,291) 4,710 (2,934) 11,644
Net reclassification from (to) bank
premises, furniture, fixtures and
equipment (2,560) − (2,560) −
Disposals (326,677) (216,249) (322,412) (216,249)
Balance at year-end P
=6,515,103 =6,165,430
P P
=6,038,837 =5,690,404
P

Fair value gains recognized from these investment properties are presented as part of Fair value
gains on investment properties under the Miscellaneous income account in the statements of
income (see Note 27). On the other hand, realized gains from the sale of these investment
properties recognized by the Group and the Parent Bank amounted to P =57,558 and =P46,189,
respectively, in 2018, =
P131,072 and =P125,833, respectively, in 2017, and =
P66,350 and =P66,350,
respectively, in 2016, for both the Group and the Parent Bank, and are presented as part of Gain
on sale of investment properties under the Miscellaneous income account in the statements of
income (see Note 27).

Offsetting Financial Assets and Financial Liabilities

Certain financial assets and financial liabilities of the Group and the Parent Bank with amounts
presented in the statements of financial position as of December 31, 2018 and 2017 are subject to
offsetting, enforceable master netting arrangements and similar agreements. However, there were no
financial assets and financial liabilities presented at net in the statements of financial position.

*SGVFS032841*
 - 92 -

Presented below is the financial assets and financial liabilities subject to offsetting but the related
amounts are not set-off in the statements of financial position.
Group
December 31, 2018 December 31, 2017
Related amounts not set off in the statement of Related amounts not set off in the statement of
financial position financial position
Financial Collateral Financial Collateral
Instruments Received Net Amount Instruments Received Net Amount
Financial assets at FVTPL
Currency forwards P
=324,840 =
P− P
= 324,840 =318,766
P P–
= =318,766
P
Warrants 49,688 − 49,688 47,184 – 47,184
Loans and receivables 849,441 849,441 − 753,518 753,518 –
Total financial assets 1,223,969 849,441 374,528 =1,119,468
P =753,518
P =365,950
P
Financial liabilities
Derivative liabilities P
=407,037 =
P− P
= 407,037 =23,684
P =–
P P23,684
=
Deposit liabilities 1,294,209 849,441 444,768 1,055,806 753,518 302,288
Total financial liabilities P
= 1,701,246 P
= 849,441 P
= 851,805 =1,079,490
P =753,518
P =325,972
P

Parent Bank
December 31, 2018 December 31, 2017
Related amounts not set off in the statement of Related amounts not set off in the statement of
financial position financial position
Financial Collateral Financial Collateral
Instruments Received Net Amount Instruments Received Net Amount
Financial assets at FVTPL
Currency forwards P
= 324,840 =
P− P
= 324,840 =318,766
P P–
= =318,766
P
Warrants 49,688 − 49,688 47,184 – 47,184
Loans and receivables 794,541 794,541 − 753,518 753,518 –
Total financial assets 1,169,069 794,541 374,528 =1,119,468
P =753,518
P =365,950
P
Financial liabilities
Derivative liabilities P
=407,037 =
P− P
= 407,037 =23,684
P =−
P P23,684
=
Deposit liabilities 1,208,244 794,541 413,703 1,055,631 753,518 302,113
Total financial liabilities P
= 1,615,281 P
= 794,541 P
= 820,740 =1,079,315
P =753,518
P =325,797
P

8. Cash and Balances with the BSP

These accounts are composed of the following as of December 31:

Group Parent Bank

2018 2017 2018 2017
Cash and other cash items P
= 10,916,533 =6,633,237
P P
= 10,334,793 =6,249,122
P
Due from BSP
Mandatory reserves P
= 54,503,045 =63,651,796
P 51,133,191 =59,922,734
P
Non-mandatory reserves 2,007,656 2,625,164 1,828,235 427,392
P
= 56,510,701 =66,276,960
P P
= 52,961,426 =60,350,126
P

Cash consists primarily of funds in the form of Philippine currency notes and coins in the Bank’s vault
and those in the possession of tellers, including ATMs. Other cash items include cash items (other than
currency and coins on hand) such as checks drawn on other banks or other branches that were received
after the Bank’s clearing cut-off time until the close of the regular banking hours.

Mandatory reserves represent the balance of the deposit account maintained with the BSP to meet
reserve requirements and to serve as clearing account for interbank claims. Due from BSP bears
annual interest rates ranging from 2.5% to 4.9% in 2018, and from 0.0% to 3.5% in 2017 and 2016,
except for the amounts within the required reserve as determined by BSP. Total interest income
earned by the Group amounted to = P68,500, P
=187,511, and =P462,206 in 2018, 2017 and 2016
respectively, while the total interest income earned by the Parent Bank amounted to =
P40,126,
=171,583, and =
P P338,891 in 2018, 2017 and 2016, respectively. These are presented as part of Interest
income on cash and cash equivalents account in the statements of income.

*SGVFS032841*
 - 93 -

Cash and other cash items and due from BSP are included in cash and cash equivalents for cash flow
statement reporting purposes.

Under Section 254 of the MORB, a bank shall keep its required reserves in the form of deposits
placed in the bank’s demand deposit account with the BSP.

Section 254.1 of the MORB further provides that such deposit account with the BSP is not considered
as a regular current account as drawings against such deposits shall be limited to: (a) settlement of
obligation with the BSP, and (b) withdrawals to meet cash requirements.

9. Due from Other Banks

The balance of this account consists of regular deposits with the following:

Group Parent Bank

2018 2017 2018 2017
Foreign banks =10,450,895
P =52,867,637
P =10,450,895
P =52,867,637
P
Local banks 4,491,318 1,652,845 1,099,271 822,596
=14,942,213
P =54,520,482
P =11,550,166
P =53,690,233
P

The breakdown of this account as to currency follows:

Group Parent Bank

2018 2017 2018 2017
U.S. dollars =8,711,992
P =50,579,934
P =8,711,992
P P50,579,934
=
Philippine pesos 4,410,383 1,490,855 1,018,336 660,606
Other currencies 1,819,838 2,449,693 1,819,838 2,449,693
=14,942,213
P =54,520,482
P =11,550,166
P =53,690,233
P

Annual interest rates on these deposits range from 0.0% to 6.8% in 2018, from 0.0% to 3.0% in 2017
and from 0.0% to 1.6% in 2016. Total interest income on Due from other banks earned by the Group
amounted to =P138,958, =P34,741, and =P26,923 in 2018, 2017, and 2016, respectively, while total
interest income earned by the Parent Bank amounted to P=108,662, =P24,068, and =P20,840 in 2018,
2017 and 2016 respectively. These are presented as part of Interest income on cash and cash
equivalents account in the statements of income.

Due from other banks are included in cash and cash equivalents for cash flow statement reporting
purposes.

10. Interbank Loans Receivable

Interbank loans receivable consists of loans granted to other banks. These loans have terms ranging
from 1 to 28 days in 2018 and from 1 to 37 days in 2017.

All Interbank loans receivables of both the Group and the Parent Bank amounting to nil and
=4,793,280 as of December 31, 2018 and 2017, respectively, are denominated in foreign currencies.
P

*SGVFS032841*
 - 94 -

Total interest income on interbank loans in 2018 amounted to P=107,254 and =

P126,167 for the Group
and the Parent Bank, respectively. Total interest income in 2017 and 2016 amounted to =P92,777 and
=
P80,449, respectively, for both the Group and the Parent Bank. Annual interest rates on interbank
loans receivable range from 1.1% to 4.9% in 2018, 0.5% to 3.1% in 2017, and 0.07% to 2.6% in
2016.

11. Financial Assets at Fair Value through Profit or Loss

The Group’s and Parent Bank’s financial assets at fair value through profit or loss as of December 31,
2018 and 2017 consist of the following:
Group Parent Bank
2018 2017 2018 2017
Debt securities =5,218,769
P =−
P =5,218,769
P =−
P
Equity securities 2,690,398 2,816,090 2,632,272 2,764,471
Derivative assets 374,528 365,950 374,528 365,950
=8,283,695
P P3,182,040
= =8,225,569
P =3,130,421
P

The breakdown of this account as to currency follows:

Group Parent Bank
2018 2017 2018 2017
Philippine pesos =6,371,953
P =3,129,123
P =6,313,827
P =3,077,504
P
U.S. dollars 1,911,742 52,917 1,911,742 52,917
=8,283,695
P =3,182,040
P =8,225,569
P =3,130,421
P

All financial assets at FVTPL are held for trading. Fair values of derivative assets were determined
through valuation technique using the net present value computation.

The Group recognized fair value losses on financial assets at FVTPL amounting to = P105,752, =
P6,260
and =
P136,186 in 2018, 2017 and 2016, respectively, while the Parent Bank recognized fair value
losses on financial assets at FVTPL amounting to =P105,782, P =6,393 and =P137,266 in 2018, 2017
and 2016, respectively, and included as part of Gains (losses) on trading and investment securities at
FVTPL and FVOCI in the statements of income.

Interest income generated from these financial assets amounted to P

=36,639, =
P52,425, and = P59,058 in
2018, 2017, and 2016, respectively, and is shown as Interest Income on trading securities at FVTPL
account in the statements of income of both the Group and the Parent Bank. In 2018, annual interest
rates on these financial assets range from 3.4% to 8.0% and from 3.7% to 6.8% for securities
denominated in Philippine peso and U.S. dollars, respectively.

Derivative instruments include foreign currency forwards and warrants. Foreign currency forwards
represent commitments to purchase/sell foreign currency on a future date at an agreed exchange rate.

*SGVFS032841*
 - 95 -

The aggregate contractual or notional amount of derivative financial instruments and the total fair
values of derivative financial assets and liabilities (see Note 24) are set out below.

December 31, 2018

Notional Fair Values
Amount Assets Liabilities
Currency forwards
Bought P
=25,992,905 P
=15,132 P
=394,148
Sold 21,816,419 309,708 12,889
Warrants 4,732,200 49,688 –
₱52,541,524 ₱374,528 ₱407,037

December 31, 2017

Notional Fair Values
Amount Assets Liabilities
Currency forwards
Bought P5,197,401
= =1,796
P =23,577
P
Sold 16,681,238 316,970 107
Warrants 4,493,700 47,184 –
=26,372,339
P =365,950
P =23,684
P

12. Financial Assets At Amortized Cost

The Group’s and Parent Bank’s financial assets at amortized cost as of December 31, 2018 and 2017
consist of the following:

Group and Parent Bank

2018 2017
Government bonds and other debt securities P
=200,008,312 =163,654,915
P
Private bonds and commercial papers 182,556 2,816,744
200,190,868 166,471,659
Allowance for impairment (Note 20) (17,138) –
P
=200,173,730 =166,471,659
P

Investment securities of both the Group and the Parent Bank with an aggregate principal amount of
=55,510,901 as of December 31, 2018 and =
P P24,216,050 as of December 31, 2017 were pledged as
collaterals for bills payable under repurchase agreements.

The breakdown of this account as to currency as of December 31, 2018 and 2017 follows:

Group and Parent Bank

2018 2017
U.S. dollars P
=138,214,821 =106,618,631
P
Philippine pesos 60,085,640 59,431,845
Euros 1,873,269 421,183
P
=200,173,730 =166,471,659
P

Financial assets at amortized cost denominated in Philippine pesos have fixed interest rates ranging
from 3.375% to 18.250% per annum both in 2018 and 2017 and from 3.375% to 9.375% per annum
in 2016, while financial assets at amortized cost denominated in U.S. dollars and Euros have fixed
interest rates ranging from 2.250% to 9.50% per annum both in 2018 and 2017 and from 2.875% to
9.5% per annum in 2016. These bonds have maturities of 1 to 31 years.

*SGVFS032841*
 - 96 -

Interest income generated from these financial assets, including amortization of premium or discount,
amounted to =P7,539,909, = P6,658,201, and =
P4,719,560 in 2018, 2017 and 2016, respectively, and is
shown as part of Interest income on investment securities at amortized cost and FVOCI account in the
statements of income.

As discussed in Note 2, PFRS 9 introduced limited amendments to the classification and

measurement requirements for financial assets, introducing the FVOCI measurement for eligible debt
securities. As a result of this amendment to the standard, the Group adopted a business model where
its objective is both to collect contractual cash flow and selling financial assets (see Note 3). On
January 1, 2018, the Group reclassified securities under the HTC business model to FVOCI category
with a total fair value of =
P19.4 billion. The difference of the amortized cost balance and fair value of
the reclassified securities amounting to P=1.4 billion was taken to Net unrealized gains (losses) on
investment securities at FVOCI in 2018.

In January 2018, the Parent Bank participated in the Republic of the Philippines (ROP) US Dollar
bond exchange, as part of the national government’s liability management exercise, where it
redeemed several series of older debt in exchange for either (i) exchange of new securities or
(ii) tenders for cash. The Parent Bank received $87.00 million (P =4.5 billion) cash in exchange for the
outstanding securities under the HTC business model tendered with face amount of $66.40 million
(P
=3.4 billion). Also, in February 2018, the Parent Bank participated in the bond exchange offering of
a foreign issuer where the Parent Bank exchanged its outstanding securities amounting to
$40.00 million (P =2.1 billion) in face amount for new 30-year securities with face amount of
$37.10 million (P =2.0 billion). Total gain as a result of these transactions amounting to $2.94 million
(P
=151.7 million) is included as part of Gains on sale of investment securities at amortized cost
(see Note 3).

Debt securities with face value of =

P7.5 billion, =
P6.9 billion and =
P34.0 billion were disposed in 2018,
2017 and 2016, respectively. These are considered infrequent in nature and not inconsistent with the
Group’s business model. The Group and Parent Bank recognized gains amounting to = P152,161,
=272,841, =
P P3,951,187 in 2018, 2017 and 2016, respectively, and is included as part of Gains on sale
of investment securities at amortized cost in the statements of income.

Government bonds with face value of = P550,000 and = P700,000 as of December 31, 2018, and 2017,
respectively, are deposited with BSP as security for the Bank’s faithful compliance with its fiduciary
obligations (see Note 30).

13. Financial Assets at Fair Value Through Other Comprehensive Income

The Group’s and Parent Bank’s financial assets at FVOCI as of December 31, 2018 and 2017 consist
of the following:

Group Parent Bank

2018 2017 2018 2017
Debt securities:
Government bonds P
=7,243,985 P–
= P
=7,243,985 P–
=
Private bonds and commercial papers 2,518,418 – 2,518,418 –
Equity securities 52,637 43,783 43,823 43,783
P
=9,815,040 =43,783
P P
=9,806,226 =43,783
P

*SGVFS032841*
 - 97 -

The breakdown of this account as to currency as of December 31, 2018 and 2017 follows:

Group Parent Bank

2018 2017 2018 2017
U.S. dollars P
=5,123,978 =–
P P
=5,123,978 =–
P
Philippine pesos 4,691,062 43,783 4,682,248 43,783
P
=9,815,040 =
P43,783 P
=9,806,226 =
P43,783

The Group has designated the above local equity securities as at FVOCI because they are held for
long-term investments and are neither held-for-trading nor designated as at FVTPL. Unquoted equity
securities pertain to golf club shares and investments in non-marketable equity securities.

In 2018, annual interest rates on debt securities range from 6.0% to 8.1% and from 2.9% to 7.5% for
securities denominated in Philippine peso and U.S. dollars, respectively. Interest income, including
amortization of premium or discount, amounted to P =296,250 in 2018 and is shown as part of Interest
income on investment securities at amortized cost and FVOCI account in the statements of income.

In 2018, the Group and the Parent Bank recognized gains from the sale of investments securities at
FVOCI amounting to P =1.5 billion. The amount is included under Gains (losses) on trading and
investments securities at FVTPL and FVOCI in the statements of income.

14. Loans and Other Receivables

The Group’s and Parent Bank’s loans and other receivables as of December 31, 2018 and 2017
consist of the following:

Group Parent Bank

December 31 January 1 December 31
2017 2017
(As restated - As restated -
2018 Note 2) Note 2) 2018 2017
Receivables from customers:
Loans and discounts P
=298,082,575 =261,785,276
P =226,261,989
P P
=240,928,253 =203,311,422
P
Customers’ liabilities under
acceptances and trust
receipts 4,371,148 4,633,892 3,789,963 4,371,149 4,633,892
Bills purchased 2,767,821 3,497,698 4,507,453 2,767,821 3,497,698
Accrued interest receivable 2,377,301 1,888,104 1,327,085 1,755,552 1,371,443
307,598,845 271,804,970 235,886,490 249,822,775 212,814,455
Unearned discounts (1,501,009) (1,786,110) (1,805,764) (118,142) (144,208)
Allowance for impairment (7,434,714) (10,165,105) (10,187,637) (6,548,520) (9,000,632)
298,663,122 259,853,755 223,893,089 243,156,113 203,669,615
Other receivables:
SPURRA 18,882,000 13,572,371 4,240,467 10,000,000 4,130,362
Accounts receivable 4,710,897 3,668,341 3,792,015 1,760,976 1,497,724
Accrued interest receivable 2,703,873 2,136,868 1,482,707 2,703,873 2,133,724
Sales contracts receivable 1,522,261 1,189,315 1,374,648 1,444,660 1,189,315
UDSCL 377,623 404,698 459,422 – –
Installment contracts
receivable 6,802 11,404 13,806 – –
28,203,456 20,982,997 11,363,065 15,909,509 8,951,125
Allowance for impairment (667,112) (657,877) (725,972) (654,546) (644,708)
27,536,344 20,325,120 10,637,093 15,254,963 8,306,417
P
=326,199,466 =280,178,875
P =234,530,182
P P
=258,411,076 =211,976,032
P

*SGVFS032841*
 - 98 -

Non-performing loans (NPLs) of the Bank as of December 31, 2018 and 2017 as reported to the BSP
are presented below, net of specific allowance for impairment in compliance with BSP Circular 855,
respectively.

Group Parent Bank

2018 2017 2018 2017
Gross NPLs P
=12,403,326 =
P10,504,321 P
=8,681,263 =
P7,919,234
Specific allowance for credit losses on NPLs (5,329,156) (6,294,569) (3,045,136) (5,654,698)
P7,074,170 =4,209,752
P P5,636,127 =2,264,536
P

Under BSP Circular 941, an account or exposure is considered non-performing, even without any
missed contractual payments, when it is deemed impaired under existing applicable accounting
standards, classified as doubtful or loss, in litigation, and/or there is evidence that full repayment of
principal and intrest is unlikely without foreclosure of collateral, in the case of secured accounts. All
other accounts, even if not considered impaired, shall be considered non-performing if any
contractual principal and/or interest are past due for more than ninety (90) days, or accrued interests
for more than 90 days have been capitalized, refinanced, or delayed by agreement.

Microfinance and other small loans with similar credit characteristics shall be considered non-
performing after contractual due date or after it has become past due. Restructured loans shall be
considered non-performing. However, if prior to restructuring, the loans were categorized as
performing, such classification shall be retained.

Non-performing loans, investment, receivables, or any financial asset (and/or any replacement loan)
shall remain classified as such until (a) there is a sufficient evidence to support that full collection of
principal and interests is probable and payments of interest and/or principal are received for at least
six (6) months; or (b) written-off.

Restructured loans of the Group amounted to P=1,745,092 and = P1,596,891 as of December 31, 2018,
and 2017, respectively. Interest income on these restructured loans amounted to P
=14,491, P
=15,586,
and =
P15,786 in 2018, 2017 and 2016, respectively.

As of December 31, 2018 and 2017, total loan loss reserves of the Group amounted to
=7,294,507 and =
P P10,073,718, respectively. These represent the balance of the allowance for
impairment on receivables from customers as of December 31, 2018 and 2017 less the allowance for
impairment on accrued interest receivable of P
=140,207 and =
P91,387, respectively.

The breakdown of total loans and other receivables (net of unearned discounts) as to secured, with
corresponding collateral types, and unsecured loans follows:

Group Parent Bank

December 31 January 1 December 31
2017 2017
(As restated - (As restated -
2018 Note 2) Note 2) 2018 2017
Secured:
Government securities P2,158,268 P1,806,818
= P1,256,691
= P2,158,268 P1,806,818
=
Real estate 11,056,039 10,656,277 10,755,668 10,354,217 10,594,916
Chattel mortgage 2,152,924 3,024,432 3,568,714 2,152,924 3,024,432
Deposit hold-out 850,190 753,612 978,478 795,291 753,518
Others 4,637,030 1,972,158 2,694,157 4,631,885 1,972,158
20,854,451 18,213,297 19,253,708 20,092,585 18,151,842
Unsecured 313,446,841 272,788,560 226,190,083 245,521,557 203,469,530
P334,301,292 =291,001,857
P =245,443,791
P P265,614,142 =221,621,372
P

*SGVFS032841*
 - 99 -

The breakdown as to secured and unsecured of non-accruing loans of the Group, which the
Parent Bank reported to the BSP as of December 31, follows:

Group Parent Bank

2018 2017 2018 2017
Secured =2,102,549
P =1,549,145
P =1,956,567
P =1,530,260
P
Unsecured 12,403,358 9,493,714 8,823,908 6,916,550
=14,505,907
P =11,042,859
P =10,780,475
P =8,446,810
P

The maturity profile of loans and other receivables (net of unearned discounts) follows:

Group Parent Bank

2018 2017 2018 2017
Less than one year =119,014,263
P =95,390,064
P =102,435,981
P =80,430,667
P
One year to less than five years 109,127,797 101,585,096 57,652,670 47,229,828
Beyond five years 106,159,232 94,026,697 105,525,491 93,960,877
=334,301,292
P =291,001,857
P =265,614,142
P =221,621,372
P

Loans and other receivables bear annual interest ranging from 4.00% to 17.94% in 2018, from 4.00%
to 21.00% in 2017, and from 0.95% to 17.94% in 2016.

The breakdown of loans (receivable from customers excluding accrued interest receivable) as to type
of interest rate follows:

Group Parent Bank

2018 2017 2018 2017
Variable interest rates =138,078,831
P =191,270,498
P =138,054,443
P =191,230,409
P
Fixed interest rates 167,142,713 78,646,368 110,012,780 20,212,603
=305,221,544
P =269,916,866
P =248,067,223
P =211,443,012
P

The amounts of interest income per type of loans and receivables for each reporting period are as
follows:

Group
2017 2016
(As restated - (As restated -
2018 Note 2) Note 2)
Receivables from customers P
=22,847,102 =20,256,962
P =17,951,046
P
Other receivables:
SPURRA 390,270 301,038 139,579
Sales contracts receivable 143,700 140,282 149,084
UDSCL 7,810 5,985 7,456
Installment contracts receivable 1,042 679 649
Others 51,786 76 120
P
=23,441,710 =20,705,022
P =18,247,934
P

*SGVFS032841*
 - 100 -

Parent Bank
2018 2017 2016
Receivables from customers P
=14,774,556 =11,355,974
P =9,102,151
P
Other receivables:
SPURRA 126,947 155,847 101,175
Sales contracts receivable 137,003 140,282 149,084
P
=15,038,506 =11,652,103
P =9,352,410
P

Loans and discounts amounting to = P18,000,000 as of December 31, 2018 and =

P19,046 as of both
December 31, 2017 and 2016 have been assigned to BSP to secure the Bank’s borrowings under BSP
rediscounting privileges (see Note 22).

15. Investments in Subsidiaries and Associates

This account in the Parent Bank’s financial statements pertains to investments in the following
subsidiaries, which are accounted for using the equity method:

December 31
% Interest 2018 2017
Acquisition costs:
CSB 99.78% =6,746,861
P =6,745,114
P
UPI 100% 624,861 624,861
UBPSI 100% 5,000 5,000
UDC 100% 3,125 3,125
UBPIBI 100% 2,500 2,500
UCBC 100% 1,000 1,000
=7,383,347
P =7,381,600
P

The movement of investments in subsidiaries is shown below:

2018 2017 2016

Acquisition costs =7,383,347
P =7,381,600
P =7,379,755
P
Accumulated equity in total comprehensive income:
Beginning balance, as previously reported 10,729,519 7,314,838 5,385,091
Share in prior year period adjustments of
subsidiaries (Note 2) (640,589) (640,589) (640,589)
Share in impact of adoption of PFRS 9 of
subsidiaries (Note 2) (373,034) − −
Beginning balance, as restated 9,715,896 6,674,249 4,744,502
Share in net profit (Note 27) 1,775,210 3,429,942 3,474,490
Share in other comprehensive income (loss)
(Note 28) 26,171 (15,264) 21,126
Dividends − − (1,565,869)
11,517,277 10,088,927 6,674,249
Net investment in subsidiaries =18,900,624
P =17,470,527
P =14,054,004
P

The Parent Bank’s subsidiaries are all incorporated in the Philippines. The principal place of business
of these subsidiaries is in Metro Manila, Philippines except for CSB and FAIR Bank, which have
their principal place of operations in Cebu, Philippines.

*SGVFS032841*
 - 101 -

Acquisition of PR Savings Bank

In 2018, CSB acquired 100% ownership of PR Savings Bank with par value of P =10 per share or a
total par value of =
P1,277.23 million. The transaction is accounted for as a business combination.
The acquisition date, which is the final approval of the BSP, is on June 14, 2018. For convenience
purposes, CSB used June 30, 2018 as the date of the business combination (see Note 1).

The total consideration for the acquisition of PR Savings Bank amounted to P7.02 billion,
=
P300.00 million of which shall be released by CSB directly to a Joint Venture (JV) Company. As
part of the other undertakings relevant to the SPA, the sellers shall cause the relevant Ropali Group
entity to execute a joint venture agreement with CSB to form an incorporated JV Company within
one year from closing date or such longer period as the parties may agree upon in writing. The JV
Company shall engage in motorcycle dealership. The parties agree that the remaining balance of
P
=300.00 million shall be utilized exclusively to fund the capital subscription of the relevant Ropali
Group entity in the JV Company.

Other than Cash and other cash items, Due from BSP, and Due from other banks, the Group
determined the provisional fair values of identifiable assets and liabilities acquired, which shall be
adjusted once relevant information has been obtained, including the valuation of external appraisers.
The provisional fair values of the identifiable assets and liabilities acquired at the date of acquisition
are as follows (amounts in thousands):

Provisional
fair values
recognized on
acquisition date
Assets
Cash and other cash items P60,096
=
Due from Bangko Sentral ng Pilipinas 352,563
Due from other banks 518,126
Loans and receivables 8,699,868
Property and equipment 823,439
Investment properties 926,208
Deferred tax assets 100,703
Other resources 692,945
Total assets 12,173,948
Liabilities
Deposit liabilities 4,419,570
Bills payable 4,323,572
Other liabilities 196,603
Total liabilities 8,939,745
Net assets acquired =3,234,203
P

The acquisition resulted in provisional goodwill determined as follows:

Consideration for the common shares =6,127,727

P
Consideration for the preferred shares held by IFC 888,274
Purchase price 7,016,001
Fair value of net assets acquired 3,234,203
Goodwill P
=3,781,798

*SGVFS032841*
 - 102 -

The goodwill arising from the acquisition is attributed to expected synergies from combining
operations of the acquiree and the acquirer. None of the goodwill recognized is expected to be
deductible for income tax purposes.

The fair value of the loans and receivables acquired as part of the business combination amounted to
=
P8.7 billion, with gross contractual amount of =
P9.5 billion.

Net cash outflow related to the acquisition PR Savings Bank amounted to P=5.79 billion, net of cash
acquired and unpaid consideration amounting to P =300 million which shall be released by CSB
directly to the JV Company.

In 2018, PR Savings Bank reported a total operating income and net income of = P1.1 billion and
=22.6 million, respectively. Had the acquisition occurred at the beginning of 2018, the consolidated
P
net income would have decreased by = P24.2 million.

Acquisition of PETNET

In February 2018, CSB and UPI purchased of 2,461,338 common shares representing 51% ownership
of AEVI on PETNET. The transaction is accounted for as a business combination. The acquisition
date, which is the settlement of purchase price, is on December 17, 2018. For convenience purposes,
the Group used December 31, 2018 as the date of the business combination.

Other than Cash and other cash items, Due from other banks, Other resources, Notes and bonds
payable and Other liabilities, the Group determined the provisional fair values of identifiable assets
and liabilities acquired, which shall be adjusted once relevant information has been obtained,
including the valuation of external appraisers. The provisional fair values of the identifiable assets
and liabilities acquired at the date of acquisition are as follows (amounts in thousands):

Provisional fair
values
recognized on
acquisition date
Assets
Cash and other cash items =103,920
P
Due from other banks 516,883
Loans and receivables 459,982
Investment in an associate 27,098
Property and equipment 49,384
Other resources 154,393
Total assets =1,311,660
P
Liabilities
Notes and bonds payable 36,806
Other liabilities 267,436
Total liabilities 304,242
Net assets acquired =1,007,418
P

*SGVFS032841*
 - 103 -

The acquisition resulted in provisional goodwill determined as follows:

Purchase price =1,200,001

P
Share in fair value of net assets acquired:
Fair values of net assets acquired =1,007,418
P
Less: Proportionate share of non-controlling interest 493,635 513,783
Goodwill =686,218
P

Net cash outflow related to the acquisition PETNET amounted to P

=579.20 million, net of cash
acquired.

In 2018, PETNET reported a total operating income and net loss of = P282.3 million and
=32.6 million, respectively. Had the acquisition occurred at the beginning of 2018, the consolidated
P
net income would have decreased by = P16.7 million.

Acquisition of FAIR Bank

The Group, through CSB and UPI, obtained control of FAIR Bank on March 17, 2017 after acquiring
77.78% of the issued and outstanding capital stock of FAIR Bank. The purchase is aligned with the
Bank’s long-term strategy of building asset or business based on consumers.

The following table summarizes the consideration paid for the acquisition of FAIR Bank and the
recognized amounts of the identifiable assets acquired and liabilities assumed, as well as the fair
value at the acquisition date of the non-controlling interests in FAIR Bank. For purposes of
determining the gain from purchase, the Group determined the fair value of the identified net assets as
of March 17, 2017.

Total cash consideration =102,777

P
Recognized amounts of identifiable assets acquired and liabilities
assumed:
Investment properties 198,509
Loans and receivables 163,425
Cash and cash equivalents 45,607
Property, plant and equipment 26,101
Other resources 34,986
Deposit liabilities (242,181)
Other liabilities (27,181)
Total identifiable net assets 199,266
Non-controlling interests in FAIR Bank (26,569)
Total identifiable net assets acquired 172,697
Branch licenses granted by the BSP 60,000
232,697
Gain from purchase (see Note 27) =129,920
P

The gain from purchase was caused by the fair value adjustment of FAIR Bank’s investment
properties and the branch licenses granted by the BSP.

The fair value of the loans and receivables acquired as part of the business combination amounted to
=
P163,425, with a gross contractual amount of = P195,972.

*SGVFS032841*
 - 104 -

Summarized Financial Information

The following table presents the financial information for CSB, UPI, FUPI, FUDC, FUIFAI, FAIR
Bank, PR Savings Bank and PETNET as of and for the years ended December 31, 2018 and 2017:

Net Profit
Assets Liabilities Revenues (Loss)
2018
CSB P
=75,743,466 P
=60,744,307 P
=7,538,378 P
=1,787,580
FAIR Bank 477,862 314,607 114,858 (24,477)
PR Savings Bank 10,158,401 8,270,133 1,107,293 22,608
PETNET 1,311,660 304,242 282,275 (32,597)
UPI 972,814 174,830 85,282 (720)
FUPI 2,531,768 2,755,697 43,104 (125,142)
FUDC 48,383 17,017 79,943 23,510
FUIFAI 63,318 19,246 83,446 44,684

2017
CSB =76,943,488
P =63,733,321
P =8,931,671
P =3,340,769
P
FAIR Bank 473,218 311,722 255,916 86,228
UPI 778,577 32,074 33,936 (37,523)
FUPI 4,053,478 4,203,440 262,067 30,119
FUDC 13,635 7,303 25,766 (432)
FUIFAI 70,546 25,079 119,345 55,275

16. Bank Premises, Furniture, Fixtures and Equipment

The gross carrying amounts and accumulated depreciation and amortization of bank premises,
furniture, fixtures and equipment as of December 31, 2018 and 2017 are shown below.

Group
Furniture, Leasehold
Fixtures and Rights and
Land Buildings Equipment Improvements Total
December 31, 2018
Cost P
= 814,032 P
= 2,490,500 P
= 4,474,682 P
= 1,277,706 P
= 9,056,920
Accumulated depreciation and amortization − (570,302) (2,681,114) (696,661) (3,948,077)
Net carrying amount P
= 814,032 P
= 1,920,198 P
= 1,793,568 P
= 581,045 P
= 5,108,843
December 31, 2017
Cost =262,558
P =2,266,640
P P3,685,321
= P739,202
= P6,953,721
=
Accumulated depreciation and amortization – (513,804) (2,266,347) (407,774) (3,187,925)
Net carrying amount =262,558
P =1,752,836
P =1,418,974
P =331,428
P =3,765,796
P

Parent Bank
Furniture, Leasehold
Fixtures and Rights and
Land Buildings Equipment Improvements Total
December 31, 2018
Cost =289,619
P P
= 2,194,723 P
= 3,553,389 P521,294
= P
= 6,559,025
Accumulated depreciation and amortization – (477,062) (1,960,466) (164,482) (2,602,010)
Net carrying amount =289,619
P =1,717,661
P =1,592,923
P =356,812
P =3,957,015
P
December 31, 2017
Cost =250,171
P =2,107,391
P P3,060,417
= P309,005
= P5,726,984
=
Accumulated depreciation and amortization – (434,992) (1,728,743) (106,946) (2,270,681)
Net carrying amount =250,171
P =1,672,399
P =1,331,674
P =202,059
P =3,456,303
P

*SGVFS032841*
 - 105 -

A reconciliation of the carrying amounts at the beginning and end of 2018 and 2017 of bank
premises, furniture, fixtures and equipment is shown below:

Group
Furniture, Leasehold
Fixtures and Rights and
Land Buildings Equipment Improvements Total
Balance at January 1, 2018, net of accumulated
depreciation and amortization P
= 262,558 P
= 1,752,836 P
= 1,418,974 P
= 331,428 P
= 3,765,796
Additions 39,448 93,268 652,215 257,970 1,042,901
Disposals – – (26,624) – (26,624)
Reclassifications/ adjustments – (4,681) 1,055 (2,512) (6,138)
Depreciation and amortization charges
for the year – (56,529) (355,109) (128,277) (539,915)
Effect of business combinations (Note 15) 512,026 135,304 103,057 122,436 872,823
Balance at December 31, 2018, net of
accumulated depreciation and amortization P
= 814,032 P
= 1,920,198 P
= 1,793,568 P
= 581,045 P
= 5,108,843
Balance at January 1, 2017, net of accumulated
depreciation and amortization =255,614
P =1,768,982
P =1,173,448
P =325,229
P =3,523,273
P
Additions 6,944 36,359 587,114 105,116 735,533
Disposals – – (18,655) – (18,655)
Reclassifications/ adjustments – 797 (1,428) (1,060) (1,691)
Depreciation and amortization charges for the
year – (53,302) (321,505) (97,857) (472,664)
Balance at December 31, 2017, net of
accumulated depreciation and amortization P
=262,558 P
=1,752,836 P
=1,418,974 P
=331,428 P
=3,765,796

Parent Bank
Furniture, Leasehold
Fixtures and Rights and
Land Buildings Equipment Improvements Total
Balance at January 1, 2018, net of accumulated
depreciation and amortization =250,171
P =1,672,399
P =1,331,674
P =202,059
P =3,456,303
P
Additions 39,448 92,044 560,210 214,650 906,352
Disposals – – (20,556) – (20,556)
Reclassifications/adjustments – (4,694) 6,029 (2,361) (1,026)
Depreciation and amortization charges
for the year – (42,088) (284,434) (57,536) (384,058)
Balance at December 31, 2018 net of
accumulated depreciation and amortization P
= 289,619 P
= 1,717,661 =
P1,592,923 =
P356,812 =
P3,957,015
Balance at January 1, 2017, net of accumulated
depreciation and amortization P
=250,171 P
=1,688,319 P
=1,047,077 P
=133,584 P
=3,119,151
Additions – 26,261 540,066 91,297 657,624
Disposals – – (13,285) – (13,285)
Reclassifications/ adjustments – (545) (2,856) (932) (4,333)
Depreciation and amortization charges
for the year – (41,636) (239,328) (21,890) (302,854)
Balance at December 31, 2017, net of
accumulated depreciation and amortization =250,171
P =1,672,399
P =1,331,674
P =202,059
P =3,456,303
P

Under BSP rules, investments in bank premises, furniture, fixtures and equipment should not exceed
50% of the Parent Bank’s unimpaired capital. As of December 31, 2018 and 2017, the Parent Bank
has satisfactorily complied with this requirement.

As of December 31, 2018 and 2017, the acquisition cost of the Group’s fully-depreciated bank
premises, furniture, fixtures and equipment that are still in use is P
=1,861,570 and =
P1,584,258,
respectively, while the acquisition cost of the Parent Bank’s fully-depreciated bank premises,
furniture, fixtures and equipment that are still in use is =
P1,270,337 and =
P1,156,697, respectively.

*SGVFS032841*
 - 106 -

17. Investment Properties

The Group’s and Parent Bank’s investment properties include several parcels of land and buildings
held for capital appreciation and are stated at fair value. The breakdown of this account as to type is
shown below.

Group Parent Bank

2018 2017 2018 2017
Land =8,738,348
P =7,988,116
P =7,676,413
P =7,832,606
P
Building 2,982,273 2,914,397 2,506,007 2,439,371
Land improvements 3,532,830 3,251,033 3,532,830 3,251,033
=15,253,451
P =14,153,546
P =13,715,250
P =13,523,010
P

The net fair value gains and losses from investment properties account is presented under
Miscellaneous income account in the statements of income (see Note 27). Real property taxes related
to these investment properties paid by the Group and recognized as expense for the years ended
December 31, 2018, 2017 and 2016 totaled = P23,578, =
P36,344, and =P26,561, respectively, and are
presented as part of Taxes and licenses account under Other expenses in the statements of income.

The changes in this account can be summarized as follows:

Group Parent Bank

2018 2017 2018 2017
Balance at beginning of year P
=14,153,546 P13,524,963
= P
=13,523,010 =13,101,547
P
Effect of business combinations (Note 15) 926,208 − − −
Disposals (876,174) (536,318) (865,386) (531,486)
Fair value gains (Note 27) 632,923 528,072 632,923 518,386
Additions 379,083 641,440 430,471 432,240
Adjustments 40,425 (4,611) (3,208) 2,323
Net reclassification to bank premises,
furniture, fixtures and equipment
(Note 16) (2,560) – (2,560) –
Balance at end of year P
=15,253,451 =14,153,546
P P
=13,715,250 =13,523,010
P

Rent income earned by the Group on its investment properties under operating leases amounted to
=154,899, =
P P184,375, and =
P181,028 in 2018, 2017 and 2016, respectively, while rent income earned
by the Parent Bank on these investment properties amounted to = P150,462, =
P180,708, and =
P166,891 in
2018, 2017 and 2016, respectively, and is included as part of Rental account under Miscellaneous
income in the statements of income (see Note 27).

Other information about the fair value measurement and disclosures related to the investment
properties are presented in Note 7.

18. Goodwill

Goodwill represents the excess of the acquisition cost over the fair value of (a) former iBank’s
identifiable net assets on its merger with the Bank in April 2006; (b) the identifiable net assets of CSB
at the date the Bank acquired ownership interest in January 2013, (c) PR Savings Bank upon
acquisition by CSB in June 2018 and (d) of PETNET upon acquisition by the Group in
December 2018 (see Note 1).

*SGVFS032841*
 - 107 -

The goodwill of the Group is allocated to the following CGUs:

Group Parent Bank

2018 2017 2018 2017
iBank P
=7,886,898 =7,886,898
P P
=7,886,898 =7,886,898
P
City Savings Bank 3,371,353 3,371,353 − −
PR Savings Bank 3,781,798 − − −
PETNET 686,218 − − −
P
=15,726,267 P=11,258,251 P
=7,886,898 =7,886,898
P

19. Other Resources

The composition of Other resources account as of December 31 follows:

Group Parent Bank

2017 2016
(As restated - (As restated -
2018 Note 2) Note 2) 2018 2017
Deferred tax assets (Note 29) P
=3,024,627 =3,461,095
P =
P3,517,894 P
=2,198,055 =2,588,622
P
Trust fund assets 2,436,441 3,768,669 4,882,444 – –
Computer software - net 1,138,503 674,497 573,115 942,484 640,123
Software under development 759,169 239,743 59,718 759,169 239,743
Prepaid expenses 570,259 244,930 193,009 450,085 215,730
Returned checks and other cash items 508,709 260,780 101,939 508,709 260,780
Documentary stamps 387,470 267,519 164,630 230,690 164,874
Sundry debits 145,438 160,650 186,808 145,438 160,667
Net retirement asset (Note 28) 135,093 − − 17,496 ‒
Miscellaneous - net 1,905,496 1,235,897 860,259 1,212,187 1,162,588
11,021,721 10,313,780 10,539,816 6,464,313 5,433,127
Allowance for impairment
(Note 20) (198,533) (161,715) (161,715) (150,622) (143,805)
P
=10,823,188 =10,152,065
P =10,378,101
P P
=6,313,691 =5,289,322
P

Trust fund assets are maintained to cover pre-need liabilities of FUPI for pre-need plans computed
based on the provisions of PAS 37 as required by the IC and validated by a qualified actuary in
compliance with the rules and regulations of the IC based on the amended PNUCA. The trust fund
assets are managed by the Parent Bank’s Trust and Investments Services Group (TISG). The details
of FUPI’s trust fund assets as of December 31 follow:

2018 2017
Due from BSP and other banks P
=95,768 P346,977
=
Financial assets at FVTPL 1,365,738 1,886,861
Financial assets at amortized cost 988,847 1,517,322
Miscellaneous - net (13,912) 17,509
P
=2,436,441 =3,768,669
P

Financial assets at FVTPL comprise of investments in shares of listed companies, government

securities, other corporate debt instruments and investments in certain unit investment trust funds
(UITF). Except for the Group’s investments in UITFs, the fair value of financial assets at FVTPL
have been determined directly by reference to quoted prices generated in active markets. On the other
hand, the fair value of investments in UITFs has been determined based on the closing market and
trade prices of the securities comprising the fund’s portfolio adjusted for the period end performance
of the funds including all trades made within the funds and the related income and expenses arising

*SGVFS032841*
 - 108 -

therefrom. Fair value is derived using the Net Asset Value per unit of the funds (computed by
dividing the net asset value of the fund by the number of outstanding units at the end of the reporting
period) published by the trustee banks and the Investment Company Association of the Philippines
(see Note 7).

The movements in the Computer software account follow:

Group Parent Bank

2018 2017 2018 2017
Balance at beginning of year =674,497
P =573,115
P =640,123
P =529,336
P
Additions 530,009 299,656 410,444 276,265
Amortization charges for the year (166,923) (120,957) (108,083) (87,940)
Effect of business combinations 100,920 − − −
Reclassifications − (77,317) − (77,538)
Balance at end of year =1,138,503
P =674,497
P =942,484
P =640,123
P

Miscellaneous includes foreclosed machineries and chattels with carrying amount of P=19,796 and
P45,849 as of December 31, 2018 and 2017, respectively. In 2018, the Group and the Parent Bank
=
recognized depreciation expense for these foreclosed machineries and chattel amounting to P=36,571
and =
P14,759, respectively, while in 2017 and 2016, both the Group and the Parent Bank recognized
depreciation expense amounting to = P41,281 and =
P80,679, respectively. This is included as part of
Depreciation and amortization account in the statements of income.

20. Allowance for Impairment

The breakdown of allowance for impairment is shown in the table below:

Group Parent Bank

2018 2017 2018 2017
Receivable from customers (Note 14) =7,434,714
P =10,165,105
P =6,548,520
P =9,000,632
P
Other receivables (Note 14) 667,112 657,877 654,546 644,708
Investments and placements 17,626 40 17,626 40
Others 198,533 161,715 150,622 143,805
=8,317,985
P =10,984,737
P =7,371,314
P =9,789,185
P

Investments and placements include the Parent Bank’s financial assets at amortized cost, debt
financial assets at FVOCI, and due from other banks. The ECL allowance for financial assets at
FVOCI as of December 31, 2018 amounted to = P0.49 million. Others refers to allowance for
impairment of foreclosed machineries and chattels and other resources.

With the foregoing level of allowance for impairment and credit losses, management believes that the
Group has sufficient allowance for any losses that the Group may incur from the non-collection or
nonrealization of its receivables and other risk assets.

*SGVFS032841*
 - 109 -

The reconciliation of allowance for the total receivables from customers follows. The balances at the
beginning of the year reflect the amounts after considering the effect of adoption of PFRS 9 on
receivables from customers (see note 2):

Total Receivables from Customers - Group

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =1,041,393
P =32,442
P =6,721,889
P =7,795,724
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 811,862 − − 811,862
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 20,405 247,922 268,327
Effect of collections and other
movements in receivable balance
(excluding write-offs) (494,156) (4,934) (224,690) (723,780)
Amounts written-off − − (1,210,893) (1,210,893)
Transfers to Stage 1 159,505 (19,597) (139,908) –
Transfers to Stage 2 (3,421) 4,136 (715) –
Transfers to Stage 3 (37,329) (5,817) 43,146 –
Impact on ECL of exposures transferred
between stages (115,485) 3,643 605,316 493,474
Balance at end of year =1,362,369
P =30,278
P =6,042,067
P =7,434,714
P

Reconciliation of the allowance for impairment by class follows:

Corporate Loans - Group and Parent Bank

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =190,504
P =−
P P87,445
= =277,949
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 343,305 − − 343,305
Effect of collections and other
movements in receivable balance
(excluding write-offs) (97,565) − (6,500) (104,065)
Balance at end of year =436,244
P =−
P =80,945
P P517,189
=

In 2018, there were no transfers between stages and write-offs for corporate loans.

Commercial Loans - Group and Parent Bank

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =203,331
P =1,353
P =1,351,598
P =1,556,282
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 264,613 − − 264,613
Newly originated assets that moved to
Stage 2 and Stage 3 as at December
31, 2018 − 99 173,008 173,107
Effect of collections and other
movements in receivable balance
(excluding write-offs) (183,220) (1,296) (5,147) (189,663)
Transfers to Stage 1 27,042 − (27,042) −
Transfers to Stage 3 (759) (52) 811 −
Impact on ECL of exposures transferred
between stages (27,037) − 55,488 28,451
Balance at end of year =283,970
P =104
P =1,548,716
P =1,832,790
P

*SGVFS032841*
 - 110 -

In 2018, there were no transfers to stage 2 and write-offs for commercial loans.

Home Loans - Group and Parent Bank

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =17,310
P =22,199
P =104,265
P =143,774
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 3,633 − − 3,633
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 16,027 5,445 21,472
Effect of collections and other
movements in receivable balance
(excluding write-offs) (13,487) (772) (5,835) (20,094)
Transfers to Stage 1 22,939 (15,961) (6,978) −
Transfers to Stage 2 (32) 165 (133) −
Transfers to Stage 3 (2,035) (4,136) 6,171 −
Impact on ECL of exposures transferred
between stages (22,872) 6,202 27,077 10,407
Balance at end of year =5,456
P =23,724
P =130,012
P =159,192
P

In 2018, there were no write-offs for home loans.

Other Retail Products - Group and Parent Bank

Other Retail Products include auto loans, business line, and credit cards.

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =140,619
P =1,430
P =1,410,608
P =1,552,657
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 27,508 − − 27,508
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 2,037 30,233 32,270
Effect of collections and other
movements in receivable balance
(excluding write-offs) (12,842) (382) (39,316) (52,540)
Amounts written-off − − (276,693) (276,693)
Transfers to Stage 1 14,620 (763) (13,857) −
Transfers to Stage 2 (45) 52 (7) −
Transfers to Stage 3 (6,167) (243) 6,410 −
Impact on ECL of exposures transferred
between stages (14,322) 265 290,938 276,881
Balance at end of year =149,371
P =2,396
P =1,408,316
P =1,560,083
P

Salary Loans - Group

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =135,705
P =1,338
P =1,001,866
P =1,138,909
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 35,018 − − 35,018
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 18 614 632
(Forward)

*SGVFS032841*
 - 111 -

2018
Stage 1 Stage 2 Stage 3 Total
Effect of collections and other
movements in receivable balance
(excluding write-offs) (P
=52,355) (P
=997) (P
=40,818) (P
=94,170)
Amounts written-off − − (849,447) (849,447)
Transfers to Stage 1 12,877 (133) (12,744) −
Transfers to Stage 2 (1,801) 2,075 (274) −
Transfers to Stage 3 (10,373) (2) 10,375 −
Impact on ECL of exposures transferred
between stages (11,128) (2,182) 95,237 81,927
Balance at end of year =107,943
P =117
P =204,809
P =312,869
P

Other Receivables from Customers

Group
2018
Stage 1 Stage 2 Stage 3* Total
Balance at beginning of year =353,924
P =6,122
P =2,766,107
P =3,126,153
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 137,785 − − 137,785
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 2,224 38,622 40,846
Effect of collections and other
movements in receivable balance
(excluding write-offs) (134,687) (1,487) (127,074) (263,248)
Amounts written-off − − (84,753) (84,753)
Transfers to Stage 1 82,027 (2,740) (79,287) –
Transfers to Stage 2 (1,543) 1,844 (301) –
Transfers to Stage 3 (17,995) (1,384) 19,379 −
Impact on ECL of exposures transferred
between stages (40,126) (642) 136,576 95,808
Balance at end of year =379,385
P =3,937
P =2,669,269
P =3,052,591
P
*Includes long outstanding receivables from customers that are fully provided for allowance amounting to P
=2.18 billion and P
=2.26 billion as
of December 31, 2018 and January 1, 2018, respectively.

Parent Bank
2018
Stage 1 Stage 2 Stage 3* Total
Balance at beginning of year =64,797
P =755
P =2,500,902
P =2,566,454
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 38,769 − − 38,769
Newly originated assets that moved to
Stage 2 and Stage 3 as at
December 31, 2018 − 1,409 34,670 36,079
Effect of collections and other
movements in receivable balance
(excluding write-offs) (51,504) (168) (81,373) (133,045)
Amounts written-off − − (37,082) (37,082)
Transfers to Stage 1 629 (142) (487) –
Transfers to Stage 2 (297) 576 (279) –
Transfers to Stage 3 (1,794) (429) 2,223 −
Impact on ECL of exposures transferred
between stages (597) (313) 9,001 8,091
Balance at end of year =50,003
P =1,688
P =2,427,575
P =2,479,266
P
*Includes long outstanding receivables from customers that are fully provided for allowance amounting to P
=2.18 billion and P
=2.26 billion as
of December 31, 2018 and January 1, 2018, respectively.

*SGVFS032841*
 - 112 -

Investments and Placements – Group and Parent Bank

2018
Stage 1 Stage 2 Stage 3 Total
Balance at beginning of year =26,201
P =−
P =−
P =26,201
P
Newly originated assets that remained in
Stage 1 as at December 31, 2018 13,045 − − 13,045
Effect of collections and other
movements in receivable balance
(excluding write-offs) (34,173) − − (34,173)
Transfers to Stage 2 (92) 92 − −
Impact on ECL of exposures transferred
between stages − 12,553 − 12,553
Balance at end of year =4,981
P P12,645
= =−
P P17,626
=

In 2018, there were no transfers to Stage 1 and Stage 3. The were also no write-offs for investments
and placements during the year.

*SGVFS032841*
 - 113 -

Group

For 2017, reconciliation of the allowance for impairment by class follows:

2017
Loans and Receivables
Sales and Assets Held
Accrued Installment Financial for Sale and
Accounts Interest Contract Other Loan Assets at Other
Corporate * Commercial Consumer Receivable Receivable Receivable Accounts Total FVOCI Resources Total
Balance at beginning of year P
=4,300,912 P
=1,009,327 P
=4,659,950 P
=722,122 P
=69,091 P
=3,850 P
=148,357 P
=10,913,609 =
P40 P
=161,715 P
=11,075,364
Provision during the year 243,026 189,290 421,036 3,501 25,269 (7,038) 503 875,587 – – 875,587
Other adjustments (81,225) 78,360 (964,547) (71,596) (2,973) 7,038 68,729 (966,214) – – (966,214)
Balance at end of year P
=4,462,713 P
=1,276,977 P
=4,116,439 P
=654,027 P
=91,387 P
=3,850 P
=217,589 P
=10,822,982 =
P40 P
=161,715 P
=10,984,737
*Corporate includes accounts under Asset Recovery Group. Other loan accounts include Bills Purchase, Branch Loans, HR Loans and Salary Loans

Impairment at end of year broken down as to individual and collective assessment:

2017
Loans and Receivables
Sales and
Accrued Installment Financial
Accounts Interest Contract Other Loan Assets at Other
Corporate * Commercial Consumer Receivable Receivable Receivable Accounts Total FVOCI Resources Total
Individual impairment =4,317,365
P =1,181,255
P =6,072
P =645,611
P =91,387
P =3,850
P =20,605
P =6,266,145
P =40
P =161,715
P =6,427,900
P
Collective impairment 145,348 95,722 4,110,367 8,416 – – 196,984 4,556,837 – – 4,556,837
=4,462,713
P =1,276,977
P =4,116,439
P =654,027
P =91,387
P =3,850
P =217,589
P =10,822,982
P =40
P =161,715
P =10,984,737
P

Parent Bank

2017
Loans and Receivables
Sales and
Accrued Installment Financial
Accounts Interest Contract Other Loan Assets at Other
Corporate * Commercial Consumer Receivable Receivable Receivable Accounts Total FVOCI Resources Total
Balance at beginning of year =4,300,912
P =1,009,183
P =3,318,722
P =707,509
P =69,091
P =2,639
P =148,357
P =9,556,413
P =40
P =143,805
P =9,700,258
P
Provision during the year 243,026 189,098 422,157 2,194 25,269 – – 881,744 – – 881,744
Other adjustments (81,225) 73,902 (763,514) (67,634) (2,973) – 48,627 (792,817) – – (792,817)
Balance at end of year =4,462,713
P =1,272,183
P =2,977,365
P =642,069
P =91,387
P =2,639
P =196,984
P =9,645,340
P =40
P =143,805
P =9,789,185
P
*Corporate includes accounts under Asset Recovery Group. Other loan accounts include Bills Purchase, Branch Loans, HR Loans and Salary Loans.

*SGVFS032841*
 - 114 -

Impairment at end of year broken down as to individual and collective assessment:

2017
Loans and Receivables
Sales and
Accrued Installment Financial
Accounts Interest Contract Other Loan Assets at Other
Corporate * Commercial Consumer Receivable Receivable Receivable Accounts Total FVOCI Resources Total
Individual impairment =4,317,365
P =1,176,606
P =–
P =642,069
P =91,387
P =2,639
P =–
P =6,230,066
P =40
P =143,805
P =6,373,911
P
Collective impairment 145,348 95,577 2,977,365 – – – 196,984 3,415,274 – – 3,415,274
=4,462,713
P =1,272,183
P =2,977,365
P =642,069
P =91,387
P =2,639
P =196,984
P =9,645,340
P =40
P =143,805
P =9,789,185
P

*SGVFS032841*
 - 115 -

21. Deposit Liabilities

The breakdown of deposit liabilities account follows:

Group Parent Bank

2018 2017 2018 2017
Due to banks:
Demand P
=688,657 P382,180
= P
=687,587 P840,085
=
Savings 222,880 263,076 149,471 218,659
Time 936,143 5,538,572 752,523 5,535,435
Long-term certificate of deposits − 1,500 − 1,500
1,847,680 6,185,328 1,589,581 6,595,679
Due to customers:
Demand 118,565,078 127,042,169 119,159,584 127,208,680
Savings 67,125,265 57,481,782 63,930,464 55,519,258
Time 227,164,510 253,908,434 190,030,734 207,652,083
Long-term certificate of deposits 6,000,000 2,998,500 6,000,000 2,998,500
418,854,853 441,430,885 379,120,782 393,378,521
P
=420,702,533 =447,616,213
P P
=380,710,363 =399,974,200
P

The breakdown of deposit liabilities account as to currency follows:

Group Parent Bank

2018 2017 2018 2017
Philippine pesos P
=318,221,477 =339,163,562
P P
=278,229,306 =291,521,549
P
Foreign currencies 102,481,056 108,452,651 102,481,057 108,452,651
P
=420,702,533 =447,616,213
P P
=380,710,363 =399,974,200
P

The maturity profile of this account is presented below:

Group Parent Bank

2018 2017 2018 2017
Less than one year P
=389,613,988 P431,693,529
= P
=359,660,844 =389,316,706
P
One to five years 10,197,224 6,415,111 190,094 1,166,880
Beyond five years 20,891,321 9,507,573 20,859,425 9,490,614
P
=420,702,533 =447,616,213
P P
=380,710,363 =399,974,200
P

Deposit liabilities bear annual interest at rates ranging from 0.0% to 9.0% in 2018, 2017 and 2016 in
the Group’s financial statements and from 0.0% to 7.9% in 2018, 2017 and 2016 in the Parent Bank’s
financial statements. Demand and savings deposits usually have either fixed or variable interest rates
while time deposits have fixed interest rates.

On December 12, 2017, the MB of the BSP approved the Parent Bank’s issuance of up to
=20,000,000 of Long-term Negotiable Certificate of Deposits (LTNCD). Out of the approved
P
amount, =
P3,000,000 were issued on February 21, 2018 at a coupon rate of 4.375% per annum,
payable quarterly and will mature on August 21, 2023. The net proceeds were utilized to further
improve the Parent Bank’s maturity profile and support business expansion plans.

On August 8, 2013, the MB of the BSP approved the Parent Bank’s issuance of up to =
P5,000,000 of
LTNCD. Out of the approved amount, = P3,000,000 were issued on October 18, 2013 at a coupon rate
of 3.50% per annum, payable quarterly and will mature on April 17, 2019.

*SGVFS032841*
 - 116 -

Interest expense on the deposit liabilities amounted to P

=8,841,473, =
P5,949,301 and =
P4,294,180 in
2018, 2017 and 2016, respectively, in the Group's statements of income, and =P7,045,224, =P4,529,154
and =P3,041,798 in 2018, 2017 and 2016, respectively, in the Parent Bank's statements of income.

Under existing BSP regulations, non-FCDU deposit liabilities of the Bank are subject to unified
reserve requirement equivalent to 20.0% from May 30, 2014 to March 1, 2018 (under BSP Circular
832), 19.0% from March 2, 2018 to May 31, 2018 (under BSP Circular 997), and 18.0% from
June 1, 2018 and thereafter (under BSP Circular 1004).

LTNCDs are subject to required reserves of 4.0% if issued under BSP Circular 304, and 7% if issued
under BSP Circular 842. As of December 31, 2018 and 2017, the Group is in compliance with such
regulations.

Regular reserves as of December 31, 2018 and 2017 amounted to = P54,503,045 and =P63,279,707 of
the Group, respectively, while that of the Parent Bank’s amounted to P
=51,133,191 and =
P59,375,188,
respectively.

22. Bills Payable

Bills payable consist of borrowings from:

Group Parent Bank

2018 2017 2018 2017
Banks, other financial institutions and
individuals =63,709,472
P =42,797,416
P =46,604,139
P =28,810,109
P
BSP 18,000,000 19,046 18,000,000 19,046
Others 9,255,001 254,363 119,492 180,564
=90,964,473
P =43,070,825
P =64,723,631
P =29,009,719
P

Bills payable to banks and other financial institutions consist mainly of amortized cost balance of
short-term borrowings. Certain bills payable to banks and other financial institutions are
collateralized by investment securities (see Note 12).

Bills payable to BSP mainly represent short-term borrowings availed of under the rediscounting
facility of the BSP. These are collateralized by eligible loans (see Note 14).

Other bills payable of the Group mainly pertain to availments of short-term loan lines from certain
related parties (see Note 31).

The breakdown of bills payable as to currency follows:

Group Parent Bank

2018 2017 2018 2017
Foreign currencies =46,700,303
P =28,960,411
P =46,700,303
P =28,960,411
P
Philippine pesos 44,264,170 14,110,414 18,023,328 49,308
=90,964,473
P =43,070,825
P =64,723,631
P =29,009,719
P

*SGVFS032841*
 - 117 -

The breakdown of interest expense on bills payable, which is presented as part of Interest expense on
bills payable and other liabilities account in the statements of income, follows:

Group Parent Bank

2018 2017 2016 2018 2017 2016
Banks, other financial
institutions and individuals P
= 1,177,258 P
=381,244 P
=358,913 P
= 567,059 P
=141,812 P
=114,425
BSP 39,435 – – 39,435 – –
Others 190,158 82,485 185,379 69 2,941 4,217
P
= 1,406,851 P
=463,729 P
=544,292 P
= 606,563 P
=144,753 P
=118,642

The range of interest rates of bills payable per currency follows:

Group and Parent Bank

2018 2017 2016
Philippine pesos 2.80% to 6.75% 2.59% to 12.0% 2.6% to 12.0%
Foreign currencies 1.40% to 3.56% 0.20% to 2.50% 0.0% to 2.05%

23. Notes and Bonds Payable

The Group’s and the Parent Bank’s notes and bonds payable as of December 31, 2018 and 2017
consist of the following:
Coupon Principal Outstanding Balance
Interest Amount 2018 2017 Issue Date Maturity Date Redemption Date
Senior debt 3.369% =24,965,000
P P
= 26,233,746 =24,928,177 November 29, 2017 November 29, 2022 November 29, 2022
P
Senior fixed rate
bonds 7.061% 11,000,000 10,901,514 – December 7, 2018 December 7, 2020 December 7, 2020
Unsecured
subordinated notes 5.375% 7,200,000 7,200,000 7,200,000 November 20, 2014 February 20, 2025 February 20, 2020
Total for Parent Bank 43,165,000 44,335,260 32,128,177
Loans payable 5.750% 150,000 150,000 – May 31, 2018 May 31, 2023 May 31, 2023
Others 2.900% 36,806 36,806 − December 28, 2018 January 28, 2019 January 28, 2019
Total for Group =43,351,806
P P
= 44,522,066 =32,128,177
P

Senior Debt
(a) The 2017 Notes were issued on the initial issue date at 100% with face value of USD500 million;

(b) The 2017 Notes cannot be redeemed prior to their stated maturity [(other than (i) in specified
instalments, if applicable; (ii) for taxation reasons; or (iii) following an Event of Default)] or that
such Notes will be redeemable at the option of the Issuer and/or the Noteholders upon giving
notice to the Noteholders or the Issuer, as the case may be, on a date or dates specified prior to
such stated maturity and at a price or prices and on such other terms as may be agreed between
the Issuer and the relevant Dealer.

(c) The 2017 Notes constitute direct, unconditional, unsubordinated and unsecured obligations of the
Parent Bank and will rank pari passu among themselves and equally with all other unsecured
obligations of the Parent Bank from time to time outstanding; and,

(d) There are restrictions on the offer, sale and transfer of the Notes in the United States, the
European Economic Area (including the United Kingdom), the Netherlands, Japan, Hong Kong,
Singapore, the Philippines and the People’s Republic of China and such restrictions as may be
required in connection with the offering and sale of a particular Tranche of Notes.

*SGVFS032841*
 - 118 -

Senior Fixed Rate Bonds

(a) The Bonds were issued on December 7, 2018 in scripless form in denominations of P =100 as a
minimum and increments of P50 thereafter, and were registered and represented by a Master
Certificate of Indebtedness. Pursuant to the BSP Circular No. 1010, the Bonds were listed in the
PDEx.

(b) The Bonds will be redeemed at their principal amount on maturity date which is on
December 7, 2020. The Bank may redeem the Bonds in whole and not only in part on the Early
Redemption Date at the face value of the Bonds, plus accrued and unpaid interest as of but
excluding the Early Redemption Date.

(c) The Bonds constitute direct, unconditional, unsecured, and unsubordinated peso-denominated
obligations of the Bank, and shall at all times rank pari passu and ratably without any preference
or priority amongst themselves, and at least pari passu with all other present and future direct,
unconditional, unsecured, and unsubordinated peso-denominated obligations of the Bank, except
for any obligation enjoying a statutory preference or priority established under Philippine laws.

Unsecured Subordinated Notes

(a) The 2014 Notes have a loss absorption feature which means the 2014 Notes are subject to a non-
viability write-down in case of a non-viability trigger event. A non-viability trigger event is
deemed to have occurred when the Parent Bank is considered non-viable as determined by the
BSP. Upon the occurrence of a non-viability trigger event, the full principal amount of the 2014
Notes may be permanently written down to the extent required by the BSP, which could go to as
low as zero, and the 2014 Notes may be cancelled;

(b) The 2014 Notes shall not be used as collateral for any loan made by the Parent Bank or any of its
subsidiaries and affiliates. The 2014 Noteholders or their transferees shall not be allowed, and
waive their right to set-off any amount that may be due the Parent Bank;

(c) The 2014 Notes constitute direct, unconditional, unsecured and subordinated obligations of the
Parent Bank. Claims of 2014 Noteholders in respect of the 2014 Notes shall at all times rank pari
passu and without any preference among themselves; and,

(d) The 2014 Notes shall not be redeemable or terminable at the instance of the 2014 Noteholders
before the maturity date, unless otherwise expressly provided therein.

Loans Payable
On May 31, 2018, UPI entered into an agreement to avail of a term loan in the amount of P =150,000
with a certain local bank. The loan is unsecured and carries a fixed interest rate of 5.75% per annum
payable semi-annually. The term of the loan is five (5) years and is payable in seven (7) equal semi-
annual amortization commencing at the end of the second year from availment.

Others pertain to PETNET’s various bank loans which bear annual interest rates ranging from 2.14%
to 3.50%, with terms ranging from one (1) to thirty-one (31) days. These bank loans represent
drawdowns from the PETNET’s unsecured credit line with local banks, which are used to finance
transactions during the holidays and long weekends.

The Group recognized interest expense on notes and bonds payable amounting to P =1,335,698,
=461,778 and =
P P387,000 in 2018, 2017, and 2016, respectively, while the Parent Bank recognized
interest expense on notes and bonds payable amounting to P=1,330,657, =P461,778 and =P387,000 in
2018, 2017, and 2016, respectively. These are included under Interest Expense on Bills Payable and
Other Liabilities account in the statements of income.

*SGVFS032841*
 - 119 -

24. Other Liabilities

Other liabilities consist of the following as of December 31:

Group Parent Bank

2018 2017 2018 2017
Manager’s checks P
=9,417,061 =8,676,900
P P
=9,417,048 =8,676,900
P
Accounts payable 3,955,546 2,853,536 3,256,082 2,367,083
Accrued taxes and other expenses 3,276,120 2,618,810 2,561,710 1,932,164
Bills purchased - domestic and foreign 2,733,492 3,463,370 2,733,492 3,463,370
Pre-need reserves 2,678,321 4,124,818 – –
Payment orders payable 1,335,586 430,508 1,335,586 430,508
Unearned income - bancassurance
(Note 31) 733,333 833,333 733,333 833,333
Other dormant credits 474,228 377,337 467,407 374,530
Derivative liabilities (Note 11) 407,037 23,684 407,037 23,684
Withholding taxes payable 228,019 163,890 214,602 126,039
Post-employment defined benefit
obligation (Note 28) 98,806 938,729 23,127 841,223
Deferred tax liabilities (Note 29) 10,516 − − −
Due to Treasurer of the Philippines 3,005 3,005 3,005 3,005
Miscellaneous 1,281,642 764,824 681,919 535,263
P
=26,632,712 =25,272,744
P P
=21,834,348 =19,607,102
P

The breakdown of Accrued taxes and other expenses account follows:

Group Parent Bank

2018 2017 2018 2017
Accrued interest payable P
=1,368,588 =941,243
P P
=1,107,926 =792,842
P
Accrued sick leave benefits 331,307 338,984 329,707 335,032
Accrued income and other taxes (Note 37) 323,542 574,936 88,424 76,043
Other accruals 1,252,683 763,647 1,035,653 728,247
P
=3,276,120 =2,618,810
P P
=2,561,710 =1,932,164
P

Other accruals represent mainly fringe and other personnel benefits.

25. Capital Funds

Capital Stock

The Parent Bank’s capital stock in both 2018 and 2017 consists of the following:

Shares Amount
2018 2017 2018 2017
Common – P=10 par value
Authorized 1,311,422,420 1,311,422,420 P
=13,114,224 =13,114,224
P
Issued and outstanding 1,217,149,512 1,058,343,929 12,171,495 10,583,439

Preferred – P
=100 par value, non-voting
Authorized 100,000,000 100,000,000 P
=10,000,000 =10,000,000
P
Issued and outstanding – – – –

*SGVFS032841*
 - 120 -

On June 29, 1992, the Parent Bank was originally listed with the then Makati Stock Exchange, now
PSE. A total of 89.7 million shares were issued at an issue price of =
P22.50. As of December 31,
2018 and 2017, there are 1,217.1 million and 1,058.3 million shares listed at the PSE, respectively.
The number of holders and the closing price of the said shares is 4,957 and P
=63.95 per share as of
December 31, 2018, respectively, and 4,995 and = P86.65 per share as of December 31, 2017,
respectively.

On September 29, 2018, the Parent Bank issued new shares through a stock rights offering. The total
number of shares issued was 158,805,583 shares with par value of =
P10 per share, issued at a price of
=62.97 per share.
P

Surplus Free

The following is a summary of the dividends declared and distributed by the Group in 2018, 2017 and
2016:

Date of Date of BSP Date of Dividend per Outstanding

Declaration Date of Record Approval Payment Share Shares Total Amount
January 26, 2018 February 12, 2018 N/A February 27, 2018 P
= 1.90 1,058,343,929 P
= 2,010,853
January 27, 2017 February 10, 2017 N/A February 24, 2017 1.90 1,058,343,929 2,010,853
January 22, 2016 February 9, 2016 N/A February 19, 2016 1.50 1,058,343,929 1,587,516

In compliance with BSP regulations, the Parent Bank ensures that adequate reserves are in place for
future bank expansion requirements. The foregoing cash dividend declarations were made within the
BSP’s allowable limit of dividends.

Surplus Reserves

The amended PNUCA requires that the portion of retained earnings representing Trust fund income
of FUPI be automatically restricted to payments of benefits of plan holders and related payments as
allowed in the amended PNUCA. The accumulated Trust Fund income should be appropriated and
presented separately as Surplus Reserves in the statements of changes in capital funds. For the years
ended December 31, 2018, 2017 and 2016, FUPI appropriated (P =97.1 million), P
=211.1 million and
=260.3 million, respectively, representing Trust fund income (loss) earned in those years and other
P
adjustments.

In compliance with BSP regulations, a portion of the Group’s income from trust operations is setup as
Surplus Reserves. For the years ended December 31, 2018, 2017 and 2016, the Group and the Parent
Bank appropriated =
P15.7 million, =
P14.2 million and =P14.9 million, respectively.

In 2018, upon the full adoption of PFRS 9, the BSP has required the appropriation for the difference
of the 1% general loan loss provision over the computed ECL allowance for credit losses related to
Stage 1 accounts. The Parent Bank appropriated P =1.6 billion as of December 31, 2018.

*SGVFS032841*
 - 121 -

26. Service Charges, Fees and Commissions

This account is broken down as follows:

Group Parent Bank

2017 2016
(As restated - (As restated -
2018 Note 2) Note 2) 2018 2017 2016
Service charges P
= 1,066,576 =940,310
P =874,334
P P
= 866,172 =789,064
P =695,099
P
Bank commissions 116,551 128,175 115,804 111,473 121,174 115,804
Others 389,117 351,656 331,128 307,022 167,889 146,465
P
= 1,572,244 =1,420,141
P =1,321,266
P P
= 1,284,667 =1,078,127
P =957,368
P

In 2018 and 2017, others include commissions earned from bancassurance partnership (see Note 31).

27. Miscellaneous Income and Expenses

Miscellaneous Income

Miscellaneous income is composed of the following:

Group
2018 2017 2016
Fair value gains on investment properties (Notes 7 and 17) P
=632,923 =528,072
P =
P385,687
Foreign exchange gains - net 584,920 593,419 589,873
Dividend 207,456 209,762 206,245
Trust fund income (Note 25) 198,919 261,653 122,733
Rental (Notes 17 and 34) 160,713 190,025 186,796
Income from trust operations (Note 30) 156,524 141,831 148,873
Fines and penalties 131,690 79,299 73,225
EAF earned (Note 31) 100,000 166,667 –
Gain on sale of investment properties 57,558 131,072 66,350
Gain or loss on foreclosure 51,904 92,002 82,685
Gain from bargain purchase (Note 15) − 129,920 –
Others 276,018 321,990 215,410
P
=2,558,625 =2,845,712
P =2,077,877
P

Parent Bank
2018 2017 2016
Share in net profit of subsidiaries (Note 15) P
=1,775,210 =3,429,942
P =3,474,490
P
Fair value gains on investment properties (Notes 7 and 17) 632,923 518,386 385,687
Foreign exchange gains - net 584,904 593,418 589,862
Dividend 206,425 204,919 133,458
Income from trust operations (Note 30) 156,524 141,831 148,873
Rental (Notes 17 and 34) 156,276 186,357 182,613
Fines and penalties 131,690 79,299 73,225
Gain or loss on foreclosure 109,435 85,320 82,685
EAF earned (Note 31) 100,000 166,667 –
Gain on sale of investment properties 46,189 125,833 66,350
Others 312,055 278,755 198,983
P
=4,211,631 =5,810,727
P =5,336,226
P

*SGVFS032841*
 - 122 -

Miscellaneous Expenses

The breakdown of miscellaneous expenses follows:

Group
2017 2016
(As restated - (As restated -
2018 Note 2) Note 2)
Insurance P
=931,079 P922,020
= P726,459
=
Outside services 695,084 758,629 521,564
Repairs and maintenance 868,804 437,336 369,655
Advertising and publicity 700,155 352,428 341,828
Management and professional fees 550,908 352,871 288,431
Fines and penalties 475,490 113,642 3,231
Communication 347,516 251,089 179,137
Transportation and travel 252,775 194,442 165,891
Card related expenses 224,190 308,592 205,450
Supervision fees 183,134 149,755 120,385
Litigation 176,599 202,383 162,857
Stationery and supplies 171,523 163,342 133,510
Plan benefits 158,000 215,321 301,500
Representation and entertainment 83,701 81,364 87,339
Others 617,562 505,673 447,446
P
=6,436,520 =5,008,887
P =4,054,683
P

Parent Bank
2018 2017 2016
Insurance P
=819,369 =806,393
P P631,162
=
Repairs and maintenance 818,647 409,708 323,096
Outside services 615,933 533,354 463,880
Advertising and publicity 619,463 285,695 180,215
Management and professional fees 504,644 342,697 233,675
Fines and penalties 369,145 92,234 3,192
Communication 280,262 199,436 140,162
Card related expenses 224,190 308,592 205,450
Litigation 175,716 201,184 162,857
Supervision fees 158,858 126,689 102,801
Stationery and supplies 143,869 127,471 97,757
Transportation and travel 171,099 128,196 111,253
Representation and entertainment 75,204 80,225 86,228
Others 243,657 215,735 186,346
P
=5,220,056 =3,857,609
P =2,928,074
P

28. Salaries and Employee Benefits

Salaries and Employee Benefits Expense

Expenses recognized for employee benefits are as follows:

Group
2018 2017 2016
Short-term benefits:
Salaries and wages P
=3,289,797 P2,899,712
= =2,376,970
P
Fringe benefits 1,333,921 1,074,915 791,504
Bonuses 458,956 654,234 1,304,972
Social security costs 139,182 93,627 77,504
Other benefits 102,110 107,748 171,439
Post-employment benefits 337,837 386,734 289,697
Other long-term benefits 64,790 68,074 60,533
P
=5,726,593 =5,285,044
P =5,072,619
P

*SGVFS032841*
 - 123 -

Parent Bank
2018 2017 2016
Short-term benefits:
Salaries and wages P
=2,631,683 P2,395,817
= =1,981,598
P
Fringe benefits 1,076,300 1,017,789 739,779
Bonuses 453,652 432,575 1,099,287
Social security costs 78,849 68,124 57,869
Other benefits 103,048 72,104 144,374
Post-employment benefits 261,170 332,966 250,379
Other long-term benefits 64,789 67,366 60,533
P
=4,669,491 =4,386,741
P =4,333,819
P

Post-employment Defined Benefit Plan

(a) Characteristics of the Defined Benefit Plan

The Group maintains funded, tax-qualified, noncontributory pension plans covering all regular
full-time employees that are being administered by the Parent Bank’s TISG for the Parent Bank,
UPI and CSB and by trustee banks that are legally separated from the Group for FUIFAI, PR
Savings Bank and PETNET. Under these pension plans, all covered employees are entitled to
cash benefits after satisfying certain age and service requirements.

The Group maintains seven separate retirement plans. Two of which are being maintained for
UnionBank and former iBank employees, hence, the Parent Bank presents pension information in
its financial statements separately for the two plans. The other five pension plans are for UPI,
CSB, FUIFAI, PR Savings Bank and PETNET employees.

UnionBank Plan
The normal retirement age is 60. The plan also provides for an early retirement at age 55, or
age 50 with the completion of at least ten years of service. However, late retirement is subject to
the approval of the Parent Bank’s BOD. Normal retirement benefit is an amount equivalent to
150% of the final monthly salary for each year of credited service.

Former iBank Plan

The normal retirement age is 60 with a minimum of five years of credited service. The plan also
provides for an early retirement at age 50 with the completion of at least ten years of service and
late retirement subject to the approval of the Parent Bank’s BOD on a case-to-case basis. Normal
retirement benefit is an amount equivalent to 125% of the final monthly covered compensation
for every year of credited service.

UPI Plan
The optional retirement age is 60 and the compulsory retirement age is 65. Both must have a
minimum of five years of credited service. Both have retirement benefit equal to one-half
month’s salary as of the date of retirement multiplied by the employee’s year of service. Upon
retirement of an employee, whether optional or compulsory, his services may be continued or
extended on a case to case basis upon agreement of management and employee.

This is based on the retirement plan benefits provided in the Retirement Law (R.A. No. 7641).

*SGVFS032841*
 - 124 -

Under the law, unless the parties provide for broader inclusions, the term one-half (1/2) month
salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than (5) days of service incentive leaves.

CSB Plan
The normal retirement age is 60 or completion of 30 years of service whichever is earlier. The
service of any member, however, may be extended from year to year beyond the normal
retirement date, provided such an extension of service is with the consent of the member and the
express approval of CSB. The plan also provides for an early retirement after completion of at
least ten years of service. Normal retirement benefit is an amount equivalent to 100% of the final
basic monthly salary multiplied by the number of years of service prior to January 1, 2008 and
150% of the final basic monthly salary for services rendered starting January 1, 2008.

FUIFAI Plan
The normal retirement age is 60 with a minimum of five years of credited service. The plan also
provides for an early retirement at age 50 with a minimum of five years of credited service and late
retirement after age 60, both subject to the approval of FUIFAI’s BOD. Normal retirement benefit
is an amount equivalent to 150% of the final monthly covered compensation (average monthly
basic salary during the last 12 months of credited service) for every year of credited service.

PR Savings Bank Plan

The normal retirement age is 60. Retirement benefit is an amount equivalent to 100%, 150% or
200% of the latest basic monthly salary for each year of credited service if the years of service is 10
years but less than 15 years, 15 years but less than 20 years and 20 years or more, respectively.

PETNET Plan
The normal retirement age is 60. The plan also provides for an early retirement at age 50 with the
completion of at least ten years of service and late retirement beyond age 60. However, early and
late retirement are subject to the approval of the company. Retirement benefit is an amount
equivalent to 92% of the final monthly salary for each year of continuous service.

(b) Analysis of Amounts Presented in the Financial Statements

Actuarial valuations are made annually to update the retirement benefit costs and the amount of
contributions. All amounts presented in the subsequent pages are based on the actuarial valuation
reports obtained from independent actuaries in 2018 and 2017.

The amounts of post-employment defined benefit obligation (net retirement asset) recognized in
the statements of financial position are determined as follows (see Notes 19 and 24):

Group
2018 2017 2016
Present value of the obligation P
=3,344,042 =4,175,532
P P3,664,572
=
Fair value of plan assets 3,380,329 3,236,803 2,130,338
(P
= 36,287) =938,729
P =1,534,234
P

*SGVFS032841*
 - 125 -

As of December 31, 2018, the excess of plan assets over the obligation amounting to =
P36,287 is
separately shown as Net retirement asset of =
P135,093 (see Note 19) and as Post-employment
defined benefit obligation of =
P98,806 (see Note 24).

Parent Bank – UnionBank Plan

2018 2017 2016
Present value of the obligation P
=2,363,016 =3,084,669
P P
=2,771,342
Fair value of plan assets 2,339,889 2,384,204 1,436,298
P
=23,127 =700,465
P =1,335,044
P

Parent Bank – Former iBank Plan

2018 2017 2016
Present value of the obligation P
=482,049 =729,661
P =
P611,652
Fair value of plan assets 499,545 588,903 489,750
(P
= 17,496) =140,758
P =121,902
P

The movements in the present value of the post-employment benefit obligation recognized in the
financial statements are as follows:

Group
2018 2017 2016
Balance at beginning of year P
=4,175,532 =3,664,572
P =3,326,413
P
Current service cost 337,837 386,734 289,697
Interest expense 187,136 172,511 160,581
Remeasurements:
Actuarial losses (gains) arising from
Changes in financial assumptions (549,408) (127,015) 141,932
Experience adjustments 217,217 353,737 274,664
Changes in demographic assumptions (23,676) (119,078) 5,316
Benefits paid (1,095,626) (155,929) (534,031)
Effects of business combinations (Note 15) 95,030 − −
Balance at end of year P
=3,344,042 =4,175,532
P =3,664,572
P

Parent Bank - UnionBank Plan

2018 2016
Balance at beginning of year P
=3,084,669 =2,771,342
P =2,509,697
P
Current service cost 227,011 295,295 209,394
Interest expense 138,432 131,402 126,238
Remeasurements:
Actuarial losses (gains) arising from
Changes in financial assumptions (458,958) (124,961) 135,930
Experience adjustments 230,179 231,948 285,922
Changes in demographic assumptions − (122,153) 14,566
Benefits paid (858,317) (98,204) (510,405)
Balance at end of year P
=2,363,016 =3,084,669
P =2,771,342
P

Parent Bank - Former iBank Plan

2018 2017 2016
Balance at beginning of year P
=729,661 =611,652
P =544,008
P
Current service cost 34,159 37,671 40,985
Interest expense 30,819 25,894 24,372
Remeasurements:
Actuarial losses (gains) arising from
Changes in financial assumptions (100,142) (28,656) 23,008
Experience adjustments 12,860 160,838 7,553
Changes in demographic assumptions − (31,099) (9,250)
Benefits paid (225,308) (46,639) (19,104)
Balance at end of year P
=482,049 =729,661
P =611,652
P

*SGVFS032841*
 - 126 -

The movements in the fair value of plan assets are presented below.

Group
2017 2016
Balance at beginning of year P
=3,236,803 =2,130,338
P =2,328,087
P
Interest income 143,434 101,529 111,612
Return on plan asset (excluding amounts included
in net interest) (84,670) 158,826 (105,877)
Contributions to the plan 977,032 1,002,039 330,547
Benefits paid (1,095,626) (155,929) (534,031)
Effects of business combinations (Note 15) 203,356 − −
Balance at end of year P
=3,380,329 =3,236,803
P =2,130,338
P

Parent Bank - UnionBank Plan

2018 2017 2016
Balance at beginning of year P
=2,384,204 1,436,298 1,705,407
Interest income 107,423 69,448 85,782
Return on plan asset (excluding amounts included
in net interest) (90,466) 49,046 (90,867)
Contributions to the plan 797,045 927,616 246,381
Benefits paid (858,317) (98,204) (510,405)
Balance at end of year P
=2,339,889 2,384,204 1,436,298

Parent Bank - Former iBank Plan

2018 2017 2016
Balance at beginning of year P
=588,903 =489,750
P =
P454,694
Interest income 24,661 21,208 20,370
Return on plan asset (excluding amounts included
in net interest) 6,799 7,784 (9,869)
Contributions to the plan 104,490 116,800 43,659
Benefits paid (225,308) (46,639) (19,104)
Balance at end of year P
=499,545 =588,903
P =489,750
P

The composition of the fair value of plan assets at the end of the reporting period by category and
risk characteristics is shown below.

Group
2018 2017 2016
Bank deposits P
=738,575 =1,121,080
P =294,001
P
Quoted equity securities:
Financial and insurance activities 1,348,208 1,502,927 1,468,358
Electricity, gas and water 41,576 135,987 26,712
Wholesale and retail trade 37,179 – 82,088
Other service activities 28,766 82,106 –
Real estate activities 8,364 11,967 11,719
Manufacturing − – 158
Others 4,951 159 63
1,469,044 1,733,146 1,589,098
Debt securities:
Philippine government bonds 539,926 232,832 104,824
Corporate bonds 615,629 145,727 141,094
1,155,555 378,559 245,918
Others 17,155 4,018 1,321
P
=3,380,329 =3,236,803
P =2,130,338
P

*SGVFS032841*
 - 127 -

Parent Bank - UnionBank Plan

2018 2017 2016
Bank deposits P
=500,412 =878,453
P =167,578
P
Quoted equity securities:
Financial and insurance activities 790,059 998,963 998,456
Wholesale and retail trade 37,179 – 76,758
Electricity, gas and water 32,686 107,840 16
Other service activities 13,475 76,796 –
Others − 15 5
873,399 1,183,614 1,075,235
Debt securities:
Corporate bonds 507,399 112,726 109,302
Philippine government bonds 443,759 206,174 83,517
951,158 318,900 192,819
Others 14,920 3,237 666
P
=2,339,889 =2,384,204
P =1,436,298
P

Parent Bank - Former iBank Plan

2018 2017 2016
Bank deposits P
=38,647 =121,091
P =52,885
P
Quoted equity securities:
Financial intermediation 352,542 412,120 399,647
Wholesale and retail trade − 5,310 5,330
Others 4,890 17,148 –
357,432 434,578 404,977
Debt securities:
Corporate bonds 76,814 33,001 31,791
Philippine government bonds 25,713 − −
102,527 33,001 31,791
Others 939 233 97
P
=499,545 =588,903
P =489,750
P

Equity securities under the fund are primarily investments in corporations listed in the PSE,
which include =P202,244 and = P252,583 investments in the shares of stocks of the Parent Bank as
of December 31, 2018 and 2017, respectively, while debt securities represent investments in
government and corporate bonds, which include = P103,900 investment in the notes of the Parent
Bank as of both December 31, 2018 and 2017 (see Note 31).

The fair values of the above equity and debt securities are determined based on quoted market
prices in active markets (classified as Level 1 of the fair value hierarchy). The retirement fund
neither provides any guarantee or surety for any obligation of the Parent Bank nor its investments
in the Bank’s shares of stocks covered by any restriction and liens. Bank deposits are maintained
with reputable financial institutions, which include =P498,603 and = P368,706 deposits with the
Parent Bank as of December 31, 2018 and 2017, respectively.

Actual returns on plan assets amounted to P

=16,956 in 2018, =
P118,494 in 2017 and (P
=5,085)
in 2016 for UnionBank Plan and = P31,460 in 2018, =
P28,992 in 2017 and =
P10,502 in 2016 for
Former iBank Plan.

The amounts recognized in the statements of income in respect of the post-employment defined
benefit plan are as follows:

Group
2018 2017 2016
Current service cost P
=337,837 =386,734
P =289,697
P
Net interest expense 43,702 70,982 48,969
P
=381,539 =457,716
P =338,666
P

*SGVFS032841*
 - 128 -

Parent Bank - UnionBank Plan

2018 2017 2016
Current service cost P
=227,011 =295,295
P =209,394
P
Net interest expense 31,009 61,954 40,456
P
=258,020 =357,249
P =249,850
P

Parent Bank - Former iBank Plan

2018 2017 2016
Current service cost P
=34,159 =37,671
P =40,985
P
Net interest expense 6,158 4,686 4,002
P
=40,317 =42,357
P =44,987
P

The amounts recognized in other comprehensive income in respect of the post-employment

defined benefit plan are as follows:

Group
2018 2017 2016
Actuarial losses (gains) arising from changes in:
Financial assumption (P
= 549,408) P127,015
= P141,932
=
Experience adjustments 217,217 (353,737) 274,664
Demographic assumptions (23,676) 119,078 5,316
Return on plan assets (excluding amounts
included in net interest) 84,670 158,826 105,877
(P
= 271,197) P51,182
= P527,789
=

Parent Bank - UnionBank Plan

2018 2017 2016
Actuarial losses (gains) arising from changes in:
Financial assumption (P
= 458,958) P124,961
= P135,930
=
Experience adjustments 230,179 (231,948) 285,922
Demographic assumptions − 122,153 14,566
Return on plan assets (excluding amounts
included in net interest) 90,466 49,046 90,867
(P
= 138,313) P64,212
= =527,285
P

Parent Bank - Former iBank Plan

2018 2017 2016
Actuarial losses (gains) arising from changes in:
Financial assumption (P
= 100,142) (P
=28,656) (P
=23,088)
Experience adjustments 12,860 160,838 (7,553)
Demographic assumptions − (31,099) 9,250
Return on plan assets (excluding amounts
included in net interest) (6,799) (7,784) (9,869)
(P
= 94,081) =93,299
P (P
=31,260)

In addition to the above items, the Parent Bank also recognized its share of the other
comprehensive income of subsidiaries in respect of the post-employment defined benefit plan
amounting to = P26,171 gain, P
=15,264 loss and =
P21,126 gain in 2018, 2017 and 2016, respectively
(see Note 15).

Amounts recognized in other comprehensive income were included within items that will not be
reclassified subsequently to profit or loss.

The Group expects to contribute =

P315,631 in 2019 while the Parent Bank expects to contribute
=281,151 and P
P =32,903 for the UnionBank Plan and for the Former iBank Plan, respectively,
in 2019.

*SGVFS032841*
 - 129 -

In determining the retirement benefits, the following actuarial assumptions were used:

Parent Bank - UnionBank Plan

2018 2017 2016
Retirement age 60 60 60
Average remaining working life 9 years 9 years 26 years
Discount rate 7.30% 5.34% 5.03%
Expected rate of salary increase 6.00% 7.00% 6.00%
Employee turnover rate 0%-14% 0%-14% 0%-9%

Parent Bank - Former iBank Plan

2018 2017 2016
Retirement age 60 60 60
Average remaining working life 9 years 7 years 18 years
Discount rate 7.20% 4.83% 4.48%
Expected rate of salary increase 6.00% 7.00% 6.00%
Employee turnover rate 0%-15% 0%-22% 0%-5%

UPI
2018 2017 2016
Retirement age 60 60 60
Average remaining working life 5 years 6 years 14 years
Discount rate 7.18% 4.93% 4.93%
Expected rate of salary increase 6.00% 7.00% 7.00%
Employee turnover rate 0%-15% 0%-18% 0%-5%

CSB
2018 2017 2016
Retirement age 60 60 60
Average remaining working life 16 years 16 years 19 years
Discount rate 7.41% 5.58% 5.58%
Expected rate of salary increase 6.00% 6.00% 6.00%
Employee turnover rate 0%-5% 0%-5% 0%-5%

FUIFAI
2018 2017 2016
Retirement age 60 60 60
Average remaining working life 20 years 20 years 23 years
Discount rate 7.53% 5.70% 5.38%
Expected rate of salary increase 10.00% 10.00% 10.00%

2018
PR SAVINGS BANK PETNET
Retirement age 60 60
Average remaining working life 11 years 9 years
Discount rate 7.88% 7.37%
Expected rate of salary increase 6.00% 6.00%
Employee turnover rate − 0% to 15%

Assumptions regarding future mortality and disability are based on published statistics and
mortality tables. These assumptions were developed by management with the assistance of an
independent actuary. Discount factors are determined close to the end of each reporting period by
reference to the interest rates of a zero coupon government bond with terms to maturity
approximating to the terms of the retirement obligation. Other assumptions are based on current
actuarial benchmarks and management’s historical experience.

*SGVFS032841*
 - 130 -

(c) Risk Associated with the Retirement Plan

The plans expose the Group to actuarial risks such as investment risk, interest rate risk, longevity
risk and salary risk.

∂ Investment and Interest Risk

The present value of the defined benefit obligation is calculated using a discount rate
determined by reference to market yields of government bonds. Generally, a decrease in the
interest rate of a reference government bonds will increase the plan obligation. However, this
will be partially offset by an increase in the return on the plan’s investments in debt securities
and if the return on plan asset falls below this rate, it will create a deficit in the plan.
Currently, the plans are mostly invested in equity securities. Due to the long-term nature of
plan obligation, a level of continuing equity investments is an appropriate element of the
Group’s long-term strategy to manage the plans efficiently.

∂ Longevity and Salary Risks

The present value of the defined benefit obligation is calculated by reference to the best
estimate of the mortality of the plan participants both during and after their employment and
to their future salaries. Consequently, increases in the life expectancy and salary of the plan
participants will results in an increase in the plan obligation.

(d) Other Information

The information on the sensitivity analysis for certain significant actuarial assumptions, the
Group’s asset-liability matching strategy, and the timing and uncertainty of future cash flows
related to the retirement plan are described below and in the succeeding pages.

∂ Sensitivity Analysis

The following table summarizes the effects of changes in the significant actuarial
assumptions used in the determination of the defined benefit obligation as of December 31:

Group

Impact on Post-Employment Defined

Benefit Obligation
Change in Increase in Decrease in
Assumption Assumption Assumption
December 31, 2018
Discount rate +/-1.0% (P
= 221,059) P
=255,718
Salary growth rate +/-1.0% 277,653 (245,328)
Turn-over rate +/-1.0% (2,725) 2,529

December 31, 2017

Discount rate +/-1.0% (P
=253,895) =
P294,607
Salary growth rate +/-1.0% 299,468 (263,560)
Turn-over rate +/-1.0% (15,635) 16,373

*SGVFS032841*
 - 131 -

UnionBank Plan

Impact on Post-Employment Defined

Benefit Obligation
Change in Increase in Decrease in
Assumption Assumption Assumption
December 31, 2018
Discount rate +/-1.0% (P
= 149,302) P
=170,721
Salary growth rate +/-1.0% 187,809 (166,972)
Turn-over rate +/-1.0% (1,864) 1,622

December 31, 2017

Discount rate +/-1.0% (P
=181,200) P209,923
=
Salary growth rate +/-1.0% 210,433 (185,613)
Turn-over rate +/-1.0% (13,236) 13,851

Former iBank Plan

Impact on Post-Employment Defined

Benefit Obligation
Change in Increase in Decrease in
Assumption Assumption Assumption
December 31, 2018
Discount rate +/-1.0% (P
= 29,274) P
=33,034
Salary growth rate +/-1.0% 36,610 (32,980)
Turn-over rate +/-1.0% (780) 825

December 31, 2017

Discount rate +/-1.0% (P
=34,852) P39,335
=
Salary growth rate +/-1.0% 42,869 (38,719)
Turn-over rate +/-1.0% (2,319) 2,440

The above sensitivity analysis is based on a change in an assumption while holding all other
assumptions constant. This analysis may not be representative of the actual change in the
defined benefit obligation as it is unlikely that the change in assumptions would occur in
isolation of one another as some of the assumptions may be correlated. Furthermore, in
presenting the above sensitivity analysis, the present value of the defined benefit obligation
has been calculated using the projected unit credit method at the end of the reporting period,
which is the same as that applied in calculating the defined benefit obligation recognized in
the statements of financial position.

∂ Asset-liability Matching Strategies

To efficiently manage the retirement plan, the Group through its Retirement Committee,
ensures that the investment positions are managed in accordance with its asset-liability
matching strategy to achieve that long-term investments are in line with the obligations under
the retirement scheme. This strategy aims to match the plan assets to the retirement
obligations by investing in long-term fixed interest securities (i.e., government or corporate
bonds) with maturities that match the benefit payments as they fall due and in the appropriate
currency. The Group actively monitors how the duration and the expected yield of the
investments are matching the expected cash outflows arising from the retirement obligations.
In view of this, investments are made in reasonably diversified portfolio, such that the failure
of any single investment would not have a material impact on the overall level of assets.

*SGVFS032841*
 - 132 -

A large portion of assets as of December 31, 2018 and 2017 consists of equity securities and
bonds, although the Group also invests in bank deposits. The Group believes that equity
securities offer the best returns over the long term with an acceptable level of risk. The
majority of equities are in a diversified portfolio of investments in corporations listed in the
PSE.

There has been no change in the Group’s strategies to manage its risks from previous periods.

∂ Funding Arrangements and Expected Contributions

There is no minimum funding requirement in the country.

The maturity profile of undiscounted expected benefits payments from the plan follows:

Group

2018 2017
Within one year P
=396,512 =267,815
P
More than one year to five years 1,425,452 1,319,237
More than five years to ten years 2,055,480 1,937,696
More than ten years to 15 years 2,733,449 2,464,946
More than 15 years to 20 years 2,700,010 2,590,312
More than 20 years 7,175,972 7,363,165
P
=16,486,875 =15,943,171
P

UnionBank Plan

2018 2017
Within one year P
=286,902 =171,484
P
More than one year to five years 1,110,827 997,656
More than five years to ten years 1,592,433 1,487,729
More than ten years to 15 years 2,122,283 1,947,381
More than 15 years to 20 years 1,759,740 1,836,381
More than 20 years 4,907,616 5,538,972
P
=11,779,801 =11,979,603
P

Former iBank Plan

2018 2017
Within one year P
=50,748 P57,097
=
More than one year to five years 249,960 288,995
More than five years to ten years 252,331 301,502
More than ten years to 15 years 308,656 293,055
More than 15 years to 20 years 266,372 232,972
More than 20 years 218,950 184,041
P
=1,347,017 =1,357,662
P

The weighted average duration of the defined benefit obligation is 16 years and 15 years in 2018
and 2017, respectively.

*SGVFS032841*
 - 133 -

29. Income Taxes

Current and Deferred Income Taxes

The components of income tax expense (benefit) for the years ended December 31, 2018, 2017, and
2016 are as follows:

Group
2018 2017 2016
Reported in profit or loss
Current tax expense:
Final tax at 20%, 10% and 7.5% =747,296
P =607,277
P =408,741
P
Regular corporate income tax
(RCIT) at 30% 504,017 1,474,296 1,610,317
MCIT at 2% 216,024 141,929 362
1,467,337 2,223,502 2,019,420
Deferred tax expense (benefit)
relating to origination and
reversal of temporary
differences (284,579) 42,578 (109,833)
=1,182,758
P =2,266,080
P =1,909,587
P
Reported in other comprehensive
income
Deferred tax expense (benefit)
relating to origination and
reversal of actuarial gains or
losses (P
=81,359) =15,355
P =158,337
P

Parent Bank
2018 2017 2016
Reported in profit or loss
Current tax expense:
Final tax at 20%, 10% and 7.5% =672,123
P =607,117
P =400,740
P
MCIT at 2% 182,501 141,929 –
RCIT at 30% 22,245 35,575 191,047
877,049 784,621 591,787
Deferred tax expense (income)
relating to origination and
reversal of temporary
differences (542,359) 42,578 (109,833)
P334,690
= =827,199
P P481,954
=

Reported in other comprehensive

income
Deferred tax expense (income)
relating to origination and
reversal of actuarial gains or
losses (P
=69,718) =8,726
P =167,563
P

*SGVFS032841*
 - 134 -

The reconciliation of the statutory income tax rate and the effective income tax rate follows:

Group
2018 2017 2016
Statutory income tax rate 30.00% 30.00% 30.00%
Adjustment for income subjected to
lower income tax rates (3.48) (2.54) (2.68)
Tax effects of:
FCDU income before tax (13.66) (7.97) (14.77)
Non-taxable income (8.27) (14.45) (5.02)
Non-deductible expenses 5.84 12.95 2.68
Others 3.49 3.22 5.72
Effective income tax rate 13.92% 21.21% 15.93%

Parent Bank
2018 2017 2016
Statutory income tax rate 30.00% 30.00% 30.00%
Adjustment for income subjected to
lower income tax rates (3.38) (2.41) (1.12)
Tax effects of:
FCDU income before tax (15.38) (9.36) (16.47)
Non-taxable income (9.15) (12.68) (10.55)
Non-deductible expenses 6.08 4.30 2.77
Others (3.73) (0.78) (0.14)
Effective income tax rate 4.44% 9.07% 4.49%

The components of the net deferred tax assets presented under Other resources (see Note 19) as of
December 31, 2018 and 2017 are as follows:

Group
2017 2016
(As restated - (As restated -
2018 Note 2) Note 2)
Deferred tax assets:
Allowance for impairment losses =2,786,039
P =3,235,437
P =3,522,609
P
Accrued other expenses 295,701 257,786 349,474
Deferred service fees 427,832 529,841 548,213
Excess MCIT 334,219 141,929 −
Unrealized foreign exchange loss 329,292 10,254 261,315
Net operating loss carry over (NOLCO) 209,217 − −
Others 643,062 550,682 343,109
5,025,362 4,725,929 5,024,720
Deferred tax liabilities:
Fair value gains on investment properties 1,525,145 1,127,598 1,135,486
Unrealized foreign exchange gain 379,140 71,015 170,609
Capitalized interest 29,653 30,751 31,849
Others 66,797 35,470 168,882
2,000,735 1,264,834 1,506,826
Net deferred tax assets =3,024,627
P =3,461,095
P =3,517,894
P

*SGVFS032841*
 - 135 -

Parent Bank
2018 2017
Deferred tax assets:
Allowance for impairment =2,189,686
P =2,923,968
P
Unrealized foreign exchange swap loss 329,292 10,254
Excess MCIT 324,430 141,929
Accrued other expenses 259,250 257,786
Net operating loss carry-over (NOLCO) 193,268 –
Others 547,044 486,209
3,842,970 3,820,146
Deferred tax liabilities:
Fair value gains on investment properties 1,188,474 1,106,101
Unrealized foreign exchange gain 375,762 71,011
Capitalized interest 29,653 30,751
Others 51,026 23,661
1,644,915 1,231,524
Net deferred tax assets =2,198,055
P =2,588,622
P

Other deferred tax asset includes post-retirement obligation and other future deductible items.

The Parent Bank is subject to MCIT which is computed at 2% of gross income net of allowable
deductions, as defined under tax regulations or to RCIT, whichever is higher. In 2014 and 2013, the
Parent Bank recognized MCIT amounting to = P100,846 and =
P95,555, respectively, which was applied
against RCIT in 2016.

In 2018 and 2017, the Parent Bank incurred MCIT amounting to = P182,501 and = P141,929,
respectively, that can be applied against income tax liability for the next three consecutive years after
the MCIT was incurred.

Additionally, in 2018, the Parent Bank incurred NOLCO amounting to P

=644,227 that can also be
applied against RCIT for the next three consecutive years.

Relevant Tax Regulations

The Republic Act 10963, The Tax Reform for Acceleration and Inclusion (TRAIN), is the first
package of the comprehensive tax reform program envisioned by the government. The bill was
signed into law on December 19, 2017 and took effect on January 1, 2018, amending the old
Philippine tax system.

Except for resident foreign corporations, which is still subject to the existing rate of 7.5%, tax on
interest income of foreign currency deposits was increased to 15% under TRAIN. Documentary
stamp tax on bank checks, drafts, certificate of deposit not bearing interest, all debt instruments, bills
of exchange, letters of credit, mortgages, deeds and others are now subjected to a higher rate.

The following are the relevant tax regulations affecting the Group:

Income Tax
(a) MCIT, computed at 2% gross income, net of allowable deductions as defined under the tax
regulations, or to RCIT of 30%, whichever is higher;
(b) FCDU transactions with non-residents of the Philippines and other offshore banking units
(offshore income) are tax-exempt, while interest income on foreign currency loans from residents
other than offshore banking units (OBUs) or other depository banks under the expanded system is
subject to 10% income tax;

*SGVFS032841*
 - 136 -

(c) Withholding tax of 7.5% is imposed on interest earned by resident foreign corporations (RFCs)
under the expanded foreign currency deposit system, while withholding tax of 15% is imposed on
interest earned by residents other than RFCs; and,
(d) Net operating loss carry-over (NOLCO) can be claimed as deductions against taxable income
within three years after NOLCO is incurred. The excess of the MCIT over income tax due may be
carried over to the three succeeding taxable years and credited against income tax due provided
the company is in RCIT position.

Gross Receipts Tax

Banks are subject to gross receipts tax under Sec. 121 of the National Internal Revenue Code as
amended.

Documentary Stamp Tax

Documentary stamp taxes (DST) (at varying rates) are imposed on the following:
(a) Bank checks, drafts, or certificate of deposit not bearing interest, and other instruments;
(b) Bonds, loan agreements, promissory notes, bills of exchange, drafts, instruments and securities
issued by the Government of any of its instrumentalities, deposit substitute debt instruments,
certificates of deposits bearing interest and other not payable on sight or demand;
(c) Acceptance of bills of exchange and letters of credit; and,
(d) Bills of lading or receipt.

The significant provisions relating to DST under TRAIN are summarized below:
(a) On every original issue of debt instruments, there shall be collected a DST of 1.50 on each 200 or
fractional part thereof of the issue price of any such debt instrument; provided, that for such debt
instruments with terms of less than one year, the DST to be collected shall be of a proportional
amount in accordance with the ratio of its term in number of days to 365 days; provided further
that only one DST shall be imposed on either loan agreement or promissory notes to secure such
loan.
(b) On all sales or transfer of shares or certificates of stock in any corporation, there shall be
collected a DST of 1.50 on each 200, or fractional part thereof, of the par value of such stock.
(c) On all bills of exchange (beteen points within the Philippines) or drafts, there shall be collected a
DST of 0.60 on each 200, or fractional part thereof, of the face value of any such bill of exchange
or draft.

(d) The following instruments, documents and papers shall be exempt from DST:
∂ Borrowings and lending of securities executed under the Securities Borrowing and Lending
Program of a registered exchange, or in accordance with regulations prescribed by the
appropriate regulatory authority;
∂ Loan agreements or promissory notes, the aggregate of which does not exceed 250,000 or any
such amount as may be determined by the Secretary of Finance, executed by an individual for
his purchase on installment for his personal use;
∂ Sale, barter or exchange of shares of stock listed and traded through the local stock exchange
(as amended by RA No. 9648);
∂ Fixed income and other securities traded in the secondary market or through an exchange;
∂ Derivatives including repurchase agreements and reverse repurchase agreements;
∂ Bank deposit accounts without a fixed term or maturity; and,
∂ Interbank call loans with maturity of not more than seven days to cover deficiency in reserve
against deposit liabilities.

Itemized Deduction
In 2018, 2017 and 2016, the Parent Bank opted to claim itemized deductions.

*SGVFS032841*
 - 137 -

30. Trust Operations

The following securities and other properties held by the Parent Bank in fiduciary or agency capacity
(for a fee) for its customers are not included in the accompanying statement of financial position since
these are not properties of the Parent Bank (see Note 34).

2018 2017
Investments P
=45,070,579 =42,073,308
P
Others 498,205 961
P
=45,568,784 =42,074,269
P

In compliance with the requirements of the General Banking Act relative to the Parent Bank’s trust
functions:

(a) investment in government securities with a total face value of =

P550,000 and = P700,000 as of
December 31, 2018 and 2017, respectively, are deposited with BSP as security for the Parent
Bank’s faithful compliance with its fiduciary obligations (see Note 12); and,

(b) ten percent of the Parent Bank’s trust income is transferred to Surplus reserves. This yearly
transfer is required until the surplus reserves for trust function is equivalent to 20% of the Parent
Bank’s authorized capital stock. No part of such reserves shall at anytime be paid out as
dividends, but losses accruing in the course of business may be charged against such surplus. As
of December 31, 2018, the reserve for trust functions amounted to = P247,726 and is included as
part of Surplus reserves in the statements of financial position (see Note 25).

Income from trust operations of the Group and Parent Bank amounted to P=156,524, =P141,831 and
=
P148,873 for the years ended December 31, 2018, 2017 and 2016, respectively, and shown as Income
from trust operations account under Miscellaneous income in the statements of income (see Note 27).

31. Related Party Transactions

The Group’s and Parent Bank’s related parties include subsidiaries, stockholders, key management
personnel and others as described below.

The summary of the Group’s significant transactions with its related parties as of and for the years
ended December 31, 2018 and 2017 are as follows:
2018 2017
Amount Outstanding Amount Outstanding
Related Party Category of Transaction Balance of Transaction Balance Terms and Conditions/Nature
Applicable to the Parent Bank

Subsidiaries
Lease of properties:
Lease income P
= 12,726 P
=– P
=10,715 P
=– Lease renewed every 5 years
Refundable deposits – – – 683 with 5% escalation rate
Project management fee,
commission and service
Management services 78,656 – 25,153 – charges
Trust fee income 13 – 25 – Fees paid to subsidiaries

(Forward)

*SGVFS032841*
 - 138 -

2018 2017
Amount Outstanding Amount Outstanding
Related Party Category of Transaction Balance of Transaction Balance Terms and Conditions/Nature
Deposit liabilities:
With interest rate based on
Outstanding balance P
=– P
= 788,484 P–
= =939,655 average daily bank deposit rate
P
Net movements (151,171) – 29,426 –
Interest expense on deposits 3,618 – 4,079 –
Interbank lending -
Short-term lending with annual
Interest income 29,629 – – – fixed rate of 3.22% to 4.97%
Loans -
Peso-denominated loans with
annual interest rates ranging
from 6.83% to 7.12%, paid off
Interest income 18,913 during the year
Advances:
Various expenses advanced by
Outstanding balance – 17,706 – 1,884 the Bank
Net movements 15,822 – 1,879 –
Variable fee for credit card
Other liabilities 33,403 transactions

Applicable to the Group and the

Parent Bank
Stockholders and related parties
under common ownership
Deposit liabilities:
With interest rate based on
Outstanding balance – 8,309,367 – 12,877,815 average daily bank deposit rate
Net movements (4,568,448) – (1,113,908) –
With interest rate based on
Interest expense on deposits 385,079 – 209,276 – average daily bank deposit rate
Bills payable:
Short term liabilities with
annual fixed rate of 2.80% to
Outstanding balance – 8,593,874 – 73,799 6.75%
Net movements 8,520,075 – (4,619,820) –
Short term liabilities with
annual fixed rate of 2.80% to
Interest expense 185,451 – 3,263 – 6.75%
Income from bancassurance
business:
Exclusive Access Fee paid at
EAF earned 100,000 – 166,667 – inception. See below.
Income recognized on sale of
insurance policies in
accordance with the
Commission income 179,695 − 72,044 − bancassurance agreement.
Secured borrowings with
Loans receivable 797 797 849 849 annual interest rate of 8%
Employee benefits related to
Key management personnel 1,861,027 – 1,799,571 – key management personnel.
Directors, officers and other
related interests:
Employee fringe benefit loans
with annual fixed interest rate
Loans 492,051 492,051 449,157 449,157 from 0.00% to 8.00%
Fringe benefits related to
Accounts receivable 117,889 117,889 95,123 95,123 employee cars and laptop lease.
Bills purchased:
Outstanding balance – 16,196 – – Short term receivables
Net movements 16,196 – (19,433) –

Outstanding receivables from and payables to related parties, if any, arising from lease of properties,
management services and advances are unsecured, noninterest-bearing and generally settled in cash
within 12 months or upon demand.

*SGVFS032841*
 - 139 -

The Parent Bank and its subsidiaries’ retirement plans have transactions directly and indirectly with
the Parent Bank as of December 31, 2018 and 2017 as follows:

2018 2017
Amount Outstanding Amount Outstanding
of Transaction Balance of Transaction Balance
Investment in Bank shares (P
=48,339) =204,244
P =58,056
P =252,583
P
Investments in Parent Bank notes payable:
Outstanding balance – 103,900 – 103,900
Interest income 5,565 5,460 –
Accrued interest income – 171 – 367
Deposit liabilities:
Outstanding balance – 498,603 – 368,706
Net movements 129,897 – 93,136 –
Interest income on deposits 13,043 – 5,768 –
Dividend income 110 – 4,049 –

Lease of Properties
In February 2014, the Parent Bank entered into a lease agreement with UPI, whereby the latter, as a
lessee, leases one of the Parent Bank’s investment properties for a period of five years. UPI pays the
Parent Bank a monthly rent of = P95, exclusive of VAT. Refundable deposit of UPI to the Parent Bank
amounted to = P683 as of both December 31, 2018 and 2017.

Management Services
The Bank entered into a sales management agreement with FUDC whereby the latter sells UnionBank
Visa Credit Cards through its direct selling network. Under the terms of the agreement, the Parent
Bank pays a fixed monthly service fee of P =4,123 and =
P4,618 in 2018 and 2017, respectively, (net of
applicable taxes and service charges) plus commission per approved principal card.

Deposit Liabilities and Interest Expense

The deposit accounts of subsidiaries and stockholders with the Parent Bank generally earn interest
based on daily bank deposit rates.

Advances
The Parent Bank also has advances to CSB and FUDC as of December 31, 2018 and 2017. These are
generally settled in cash upon demand.

Bills Payable and Interest Expense

In 2017, CSB availed loan with Aboitiz Foundation, Inc., a related party, amounting to
=
P74,000 which is payable in five years which and bears an annual interest rate of 4.5%. This
borrowing with outstanding balance of P =73,874 and P=73,799 (net of unamortized debt issue costs) as
of December 31, 2018 and December 31, 2017, respectively, is included as part of Others under the
Bills payable account in the consolidated statements of financial position (see Note 22).

In 2018, CSB availed of short-term borrowings from AEVI, Aboitiz Power Corporation and Aboitiz
and Co., Inc., related parties under common ownership, amounting to =
P2,250,000, =
P300,000, and
=
P5,670,000, respectively. These were subsequently paid in the following month.

*SGVFS032841*
 - 140 -

Bancassurance Agreement
On January 27, 2017, the Parent Bank and its subsidiary, CSB, entered into a bancassurance
partnership (the Agreement) with Insular Life Assurance Company, Ltd. (Insular Life). Under the
Agreement, Insular Life paid the Parent Bank an amount representing Exclusive Access Fee (EAF)
with a term of 15 years. In the event that the cumulative annualized premium earned (APE) sold
during the first five year period is less than the agreed minimum amount, the Parent Bank shall refund
the proportion of EAF that equals the proportion by which the cumulative APE is less the minimum
amount. EAF recognized for 2018 and 2017 is presented as Income from bancassurance business
under Miscellaneous Income account in the statements of income. Unearned income arising from this
transaction is presented as part of Miscellaneous under Other liabilities account in the statements of
financial position (see Note 24).

Under the distribution agreement, Insular Life will have exclusive access to the branch network of the
Parent Bank and CSB. Additionally, the Parent Bank’s sales force, composed of relationship
managers and financial advisors, shall be trained and licensed to sell life insurance products. Under
the same Agreement, the Parent Bank shall earn commissions on all insurance policies sold by the
Parent Bank. Commissions earned for the years ended December 31, 2018 and 2017 are presented as
part of Others under Service charges, fees and commissions account in the statements of income
(see Note 27).

Key Management Personnel Compensation

The compensation of key management personnel for the Group and Parent Bank follows:

Group
2018 2017 2016
Short-term benefits P
=1,673,823 =1,584,646
P =1,224,869
P
Post-employment benefits 115,052 147,560 97,224
Other long-term benefits 72,152 67,365 60,533
P
=1,861,027 =1,799,571
P =1,382,626
P

Parent Bank
2018 2017 2016
Short-term benefits P
=1,486,828 =1,363,854
P =1,096,136
P
Post-employment benefits 103,092 129,683 83,255
Other long-term benefits 72,140 67,366 60,533
P
=1,662,060 =1,560,903
P =1,239,924
P

Directors’ fees incurred by the Group amounted to P=75,800 in 2018, = P60,707 in 2017, and P=59,678 in
2016, and by the Parent Bank amounted to = P66,672 in 2018, =P55,681 in 2017, =P55,031 in 2016, and
are included as part of Salaries and employee benefits account in the statements of income.

Loans and Other Transactions

In the ordinary course of business, the Group has loans, deposits and other transactions with its
related parties and with certain DOSRI. Under the Group’s existing policies, these transactions are
made substantially on the same terms and conditions as transactions with other individuals and
businesses of comparable risks. The amount of individual loans to DOSRI, of which 70% must be
secured, should not exceed the amount of the deposit and book value of their investment in the Group.
In the aggregate, loans to DOSRI generally should not exceed the total equity or 15% of the total loan
portfolio of the Group, whichever is lower.

*SGVFS032841*
 - 141 -

The following additional information is presented relative to DOSRI loans:

Group Parent Bank

2018 2017 2018 2017
Total DOSRI loans* P
=509,044 P450,006
= P
=427,749 =384,084
P
Unsecured DOSRI loans* 147,413 118,407 66,119 53,333
% of DOSRI loans to total loan
portfolio 0.2% 0.2% 0.2% 0.2%
% of unsecured DOSRI loans
to total DOSRI loans* –% –% –% –%
% of past due DOSRI loans
to total DOSRI loans –% –% –% –%
% of non-accruing DOSRI accounts
to total DOSRI loans –% –% –% –%
*Total DOSRI loans and Unsecured DOSRI loans include fringe benefits that are excluded in determining the compliance
with the individual ceiling under subsection X330.1 of the MORB.

On January 31, 2007, BSP issued Circular No. 560 which provides the rules and regulations that
govern loans, other credit accommodations and guarantees granted to subsidiaries and affiliates of
banks and quasi-banks. Under the said circular, the total outstanding exposures to each of the Parent
Bank’s subsidiaries and affiliates shall not exceed 10% of bank’s net worth, the unsecured portion of
which shall not exceed 5% of such net worth. Further, the total outstanding exposures to subsidiaries
and affiliates shall not exceed 20% of the net worth of the lending bank.

Transactions with the Retirement Plan

The retirement fund of the Group covered under defined benefit post-employment plan maintained for
qualified employees is administered by the Retirement Committee. The members of the Retirement
Committee are Senior Executives and officers of the Parent Bank as approved by the Chairman/Chief
Executive Officer. Through its Retirement Committee, it has appointed TISG as the trustee for the
retirement fund which is covered by trust agreements.

The composition of the retirement plan assets of the Parent Bank and its subsidiaries as of
December 31, 2018 and 2017 are the following:

Group Parent Bank

2018 2017 2018 2017
Investments in:
Equity securities P
=1,469,044 =1,733,146
P P
=1,230,831 =1,618,192
P
Debt securities 1,155,555 378,559 1,053,685 351,901
Bank deposits 738,575 1,121,080 539,059 999,544
Others 17,155 4,018 15,859 3,470
P
=3,380,329 =3,236,803
P P
=2,839,434 =2,973,107
P

As of December 31, 2018 and 2017, the carrying value of the fund is equivalent to its fair value.

*SGVFS032841*
 - 142 -

The retirement fund of the Group includes investments in shares of stock and notes payable of the
Parent Bank amounting to = P202,244 and = P103,900, respectively, as of December 31, 2018 and
=252,583 and =
P P103,900, respectively, as of December 31, 2017. The investment in Parent Bank
shares are primarily held for re-sale and the Group’s retirement fund does not intend to exercise its
voting rights over those shares. The terms of the investment in notes payable are discussed in
Note 23.

The combined retirement fund of the Group and the retirement funds of the Parent Bank have
deposits with the Parent Bank amounting to P
=498,603 and =P380,790, respectively, as of
December 31, 2018 and = P368,706 and =
P259,074, respectively, as of December 31, 2017.

The related dividend income, interest income and trading gain amounted to P =110, P=18,608 and nil,
respectively, in 2018, =
P4,049, P
=11,228 and nil, respectively, in 2017 and =
P4,049, =
P8,748 and =
P283,
respectively, in 2016.

Group Life Insurance from a Related Party

The Parent Bank entered into a contract with Insular Life for its group health insurance. The amount
of the group health insurance package covering October 2017 to September 2018 is at P =93,000.

32. Earnings Per Share

As of December 31, 2018, 2017 and 2016, the Group and the Parent Bank have no outstanding
potentially dilutive securities, hence, basic earnings per share are equal to diluted earnings per share.
The basic and diluted earnings per share were computed as follows:

Group
2018 2017 2016
Net profit attributable to Parent
Bank’s stockholders P
=7,316,102 =8,411,325
P =10,058,276
P
Divided by the weighted average
number of outstanding
common shares (thousands) 1,098,045 1,058,344 1,058,344
Basic and diluted earnings
per share P
=6.66 =7.95
P =9.50
P

Parent Bank
2018 2017 2016
Net profit P
=7,211,912 =8,281,948
P =10,253,503
P
Divided by the weighted average
number of outstanding
common shares (thousands) 1,098,045 1,058,344 1,058,344
Basic and diluted earnings
per share P
=6.57 =7.83
P =9.69
P

*SGVFS032841*
 - 143 -

33. Selected Financial Performance Indicators

The following are some measures of the Group and Parent Bank’s financial performance:

Group 2018 2017 2016

Return on average capital funds:

Net profit 9.0% 12.0% 16.1%

Average total capital funds

Return on average resources:

Net profit 1.2% 1.5% 2.2%

Average total resources

Net interest margin:

Net interest income 4.1% 4.8% 5.1%

Average interest-earning
resources

Liquidity ratio:

Current Assets 37.0% 49.1% 51.0%

Current Liabilities

Debt-to-equity ratio:

Liabilities 6.4:1 7.4:1 6.8:1

Equity

Asset-to-equity ratio:

Asset 7.4:1 8.4:1 7.8:1

Equity

Interest rate coverage ratio:

Earnings before interests

and taxes 1.7:1 2.5:1 3.3:1
Interest expense

*SGVFS032841*
 - 144 -

Parent Bank 2018 2017 2016

Return on average capital funds:

Net profit 8.8% 11.9% 16.5%

Average total capital funds

Return on average resources:

Net profit 1.3% 1.7% 2.7%

Average total resources

Net interest margin:

Net interest income 3.3% 3.7% 3.7%

Average interest-earning
resources

Liquidity ratio:

Current Assets 35.9% 49.9% 53.2%

Current Liabilities

Debt-to-equity ratio:

Liabilities 5.6:1 6.5:1 5.8:1

Equity

Asset-to-equity ratio:

Asset 6.6:1 7.5:1 6.8:1

Equity

Interest rate coverage ratio:

Earnings before interests

and taxes 1.8:1 2.8:1 4.0:1
Interest expense

34. Commitments and Contingent Liabilities

Leases
The Parent Bank leases various branch premises for an average period of seven years. The lease
contracts are cancellable upon mutual agreement of the parties or renewable at the Parent Bank’s
option under certain terms and conditions. Various lease contracts include escalation clauses, most of
which bear an annual rent increase of 5%. Some leases include a clause to enable adjustment of the
rental charge on an annual basis based on prevailing market rates. As of December 31, 2018
and 2017, the Parent Bank has neither a contingent rent payable nor an asset restoration obligation in
relation with these lease agreements.

*SGVFS032841*
 - 145 -

Rentals charged against current operations included as part of Occupancy account in the statements of
income are as follows:

2018 2017 2016

Group P
=664,291 =571,260
P =533,258
P
Parent Bank 525,146 484,214 447,218

The estimated minimum future annual rentals payable under non-cancellable operating leases follows:

Group
2018 2017
Within one year P
=416,346 P342,660
=
Beyond one year but within five years 1,035,874 1,132,481
Beyond five years 36,674 71,043
P
=1,484,803 =1,546,184
P

Parent Bank
2018 2017
Within one year P
=271,544 =263,515
P
Beyond one year but within five years 741,828 823,167
Beyond five years 1,467 54,386
P
=1,014,839 =1,141,068
P

The Group has entered into commercial property leases on the Group’s surplus offices. These
non-cancellable leases have remaining non-cancellable lease terms of one to four years.

Total rent income earned included under Miscellaneous income account in the statements of
income (see Note 27) by the Group and the Parent Bank for the years ended December 31, 2018,
2017 and 2016 are as follows:

2018 2017 2016

Group P
=160,713 =190,025
P =186,796
P
Parent Bank 156,276 186,357 182,613

The estimated minimum future annual rentals receivable under non-cancellable operating leases
follows:

Group
2018 2017
Within one year P
=131,424 =139,709
P
Beyond one year but within five years 189,418 133,061
Beyond five years 5,884 −
P
=326,726 =272,770
P

*SGVFS032841*
 - 146 -

Parent Bank
2018 2017
Within one year P
=116,643 =128,554
P
Beyond one year but within five years 164,341 129,668
P
=280,984 =258,222
P

Others
In the normal course of the Group’s operations, there are various outstanding commitments and
contingent liabilities such as guarantees, commitments to extend credit, which are not reflected in the
accompanying financial statements. The Group recognizes in its books any losses and liabilities
incurred in the course of its operations as soon as these become determinable and quantifiable.
Management believes that, as of December 31, 2018, no additional material losses or liabilities are
required to be recognized in the accompanying financial statements as a result of the above
commitments and transactions.

Following is a summary of the Parent Bank’s commitments and contingent accounts:

2018 2017
Trust department accounts P
=45,568,784 =42,074,269
P
Inward bills for collections 32,323,461 17,221,005
Unused commercial letters of credit 3,041,698 4,038,136
Outstanding guarantees issued 573,842 665,451
Late deposits/payments received 63,446 5,642
Outward bills for collection 41,377 32,288
Other contingent accounts 3,148 3,016

There are several suits, assessments or notices and claims that remain unsettled. Management
believes, based on the opinion of its legal counsels, that the ultimate outcome of such suits,
assessments and claims will not have a material effect on the Group’s and the Parent Bank’s financial
position and results of operations.

UPI acts as the project and fund manager of Kingswood Project. As fund manager, UPI is
responsible for the treasury and money management as well as arranging the necessary facilities and
accounting for the development of the project. UPI also receives a certain percentage of the sales
price related to Kingswood Project as sales commission and to compensate for the marketing
expenses incurred.

35. Notes to the Statements of Cash Flows

Non-cash investing activities include the following:

∂ Reclassification of investment securities at amortized cost under the HTC business model with
carrying amount of P =18.0 billion to FVOCI category and with total fair value of P
=19.4 billion as
at January 1, 2018 (see Note 12).
∂ Bond exchange transaction with a foreign issuer, where the Parent Bank exchanged its
outstanding securities at amortized cost with carrying amount of $35.58 million
(P
=1.86 billion) for new 30-year securities with face amount of $37.10 million (P=1.94 billion)
(see Note 12).

*SGVFS032841*
 - 147 -

Presented below is the supplemental information on the Group’s and Parent Bank’s liabilities arising
from financing activities:

Group
Notes and Bonds
LTNCD Bills Payable Payable Total
Balance at January 1, 2018 P
=3,000,000 P
=43,070,825 P
=32,128,177 P
=78,199,002
Cash flows from financing activities:
Additions 3,000,000 657,746,587 11,013,685 671,760,272
Repayment of borrowings − (613,840,876) − (613,840,876)
Issuance of new shares − − − −
Effect of business combinations − 4,323,571 36,806 4,360,377
Non-cash financing activities:
Effects of foreign exchange rate changes − (335,634) 1,325,000 989,366
Amortization of debt issue cost − − 18,398 18,398
Balance as of December 31, 2018 P
=6,000,000 P
=90,964,473 P
=44,522,066 P
=141,486,539

Balance at January 1, 2017 =3,000,000

P =48,100,192
P =7,200,000
P =58,300,192
P
Cash flows from financing activities:
Additions − 165,702,992 25,097,553 190,800,545
Repayments of borrowings − (170,590,655) − (170,590,655)
Non-cash financing activities:
Effects of foreign exchange rate changes − (141,704) (170,000) (311,704)
Amortization of debt issue cost − − 624 624
Balance as of December 31, 2017 =3,000,000
P =43,070,825
P =32,128,177
P =78,199,002
P

Parent Bank
Notes and Bonds
LTNCD Bills Payable Payable Total
Balance at January 1, 2018 P
=3,000,000 P
=29,009,719 P
=32,306,823 P
=64,316,542
Cash flows from financing activities:
Additions 3,000,000 638,874,784 10,863,685 652,738,469
Repayment of borrowings − (602,798,238) − (602,798,238)
Issuance of new shares − − − −
Non-cash financing activities:
Effects of foreign exchange rate changes − (335,634) 1,325,000 989,366
Amortization of debt issue cost − − 18,398 18,398
Balance as of December 31, 2018 P
=6,000,000 P
=64,723,631 P
=44,513,906 P
=115,264,537

Balance at January 1, 2017 =3,000,000

P =39,166,961
P =7,200,000
P =49,366,961
P
Cash flows from financing activities:
Additions − 111,174,648 25,097,553 136,272,201
Repayments of borrowings − (121,190,186) − (121,190,186)
Non-cash financing activities:
Effects of foreign exchange rate changes − (141,704) (170,000) (311,704)
Amortization of debt issue cost − − 624 624
Balance as of December 31, 2017 =3,000,000
P =29,009,719
P =32,128,177
P =64,137,896
P

36. Events After the End of the Reporting Period

Dividend Declaration
On January 25, 2019, the Parent Bank’s BOD approved the declaration of cash dividends at =P1.90 per
share or for a total of =
P2,312,584 based on the outstanding common stock of 1,217,149,512 shares as
of December 31, 2018. Record date for stockholders entitled to said cash dividend is
February 11, 2019 while payment is expected to be made on February 28, 2019.

*SGVFS032841*
 - 148 -

37. Supplementary Information Required Under Revenue Regulations 15-2010

Presented below is the supplementary information required by the Bureau of Internal Revenue (BIR)
under RR 15-2010 to be disclosed as part of the notes to financial statements. This supplementary
information is not a required disclosure under PFRS.

Gross Receipts Tax

In lieu of the value-added tax (VAT), the Parent Bank is subject to the GRT imposed on all banks and
non-bank financial intermediaries pursuant to Section 121 of the Tax Code.

The Parent Bank reported total GRT amounting to P =809,792 in 2018 as shown under Taxes and
Licenses account. Total GRT payable as of December 31, 2018 amounted to = P73,893 and is included
as part of Accrued taxes and other expenses under Other liabilities account in the 2018 statement of
financial position (see Note 24).

Documentary Stamp Tax

The Bank is enrolled under the Electronic DST System. In general, the Parent Bank’s DST
transactions arise from the execution of debt instruments, security documents, and bills of exchange.
For the year ended December 31, 2018, DST affixed amounted to = P1,917,964.

Withholding Taxes
The details of total withholding taxes for the year ended December 31, 2018 are shown below:

Final =1,291,618
P
Expanded 693,561
Compensation and benefits 180,729
=2,165,908
P

Taxes and Licenses

The details of taxes and licenses in 2018 of the Parent Bank are as follows:

GRT =809,792
P
DST 895,821
Real property tax 36,838
Fringe benefit tax (FBT) 36,377
Local and business permits 30,262
Miscellaneous 3,678
Less:
FBT charged to employee benefits 36,377
=1,776,391
P

Excise Taxes
The Parent Bank does not have excise taxes accrued since it did not have any transactions subject to
excise tax.

Claim for Refund

The Parent Bank has a pending claim for refund of taxes arising from the BIR’s denial of the Parent
Bank’s applications for administrative abatement in 2007. On August 5, 2013, the CTA granted the
claim for refund, ordering the BIR to refund or issue a tax credit certificate to the Parent Bank in the
amount of P=90,923. The CTA en banc affirmed this decision on July 14, 2014. The BIR
subsequently appealed this decision before the Supreme Court.

*SGVFS032841*
 - 149 -

On July 4, 2018, the Supreme Court affirmed the CTA decision granting the Bank’s claim for refund
amounting to =
P90,923. On September 12, 2018, the BIR filed a Motion for Reconsideration of the
Supreme Court’s Resolution.

Deficiency DST
The Parent Bank has been assessed by the BIR for alleged deficiency DST on its Power Savings
Account (“PSA”) in the amounts of =P22,882, = P5,815, =P34,506 and =P55,852 for taxable years 1994,
1995, 1996 and 1997, respectively, and on its deficiency final withholding tax on onshore income for
taxable years 1994, 1996 and 1997 in the total amount of =P21,174, which was reduced by the Court of
Tax appeals to =P10,830. On February 6, 2019, the Bank received the Supreme Court decision dated
November 21, 2018 dismissing the Bank’s Petition for Review and ordering it to pay the aggregate
amount of P =129,885 for DST and final withholding tax on onshore income, plus 20% delinquency
interest per annum from July 16, 2001 until fully paid. In view of the recent signing into law of
Republic Act No. 11213 or the 2019 Tax Amnesty Law, the Bank is currently assessing its position
on the matter.

Other Required Tax Information

The Parent Bank has not paid or accrued any excise taxes or customs’ duties and tariff fees as it had
no importation for the year ended December 31, 2018.

*SGVFS032841*