MANILA TYTANA COLLEGESFormerly Manila Doctors College

Bank of the Philippine Islands Financial Statement Analysis

As of December 31, 2014

Dan Paul C. BegasRenz Mico F. CoronaChristine Angela B. CruzAllaniah H. Maca-alinRed Christian L. Palustre

Professor Ariel Pineda

Table of Contents

Pages

Introduction Background and History2 Vision, Mission, Core Values3Financial Statement Analysis Proper Horizontal Analysis (Condition)6 Horizontal Analysis (Income)10 Vertical Analysis (Condition)13 Vertical Analysis (Income)17 Ratio AnalysisProfitability22Leverage25Liquidity27Growth29 Statement of Financial Analysis 34 Recommendation35

Background and History

Founded in 1851, Bank of the Philippine Islands is the first bank in the Philippines and in the Southeast Asian region. BPI is a universal bank and together with its subsidiaries and affiliates, it offers a wide range of financial products and solutions that serve both retail and corporate clients.

BPI's services include consumer banking and lending, asset management, insurance, securities brokerage and distribution, foreign exchange, leasing, and corporate and investment banking.

The bank has a network of over 800 branches in the Philippines, Hong Kong and Europe, and close to 3,000 ATMs and CDMs (cash deposit machines).

The establishment of BPI, originally known as El Banco Espaol Filipino de Isabel II, ushered in the start of the Philippine banking and finance industry. The bank performed many functions, from providing credit to the National Treasury to printing and issuing currency, making it in effect the country's first Central Bank. BPI proudly carries on this tradition, financing many private and public sector initiatives and enterprises in support of economic growth and nation building.

BPI is acknowledged as a leading provider of financial services in the Philippines.

Vision, Mission, Core Values

Mission

Since the bank's founding 164 years ago, BPI has been inextricably linked to the growth of the Philippine economy. Anchoring our institution on our four-fold commitment to Clients, People, Shareholders, and Country, we aim to take advantage of the country's good macroeconomic fundamentals by carefully and systematically overlaying scale over some of the best financial metrics in the Philippine banking industry.

Our mission is enshrined in the BPI Credo.

The BPI Credo

We believe our first responsibility is to our Clients. If we understand and address our clients' financial needs, we will be trusted with their most important financial transactions, and we will build lasting relationships. We do well when our clients do well.

We believe in our responsibility to our People. We seek to hire the best people for each job, provide them with the means to perform at a high level and reward them fairly. We value integrity, professionalism, and loyalty. We promote a culture of mutual respect, meritocracy, performance, and teamwork. We strive to be the employer of choice among Philippine financial institutions.

We believe in our responsibility to our Shareholders. We treat capital as a most valuable asset, and seek to generate superior returns while being prudent in risk taking, spending, and investment.

We believe in our responsibility to our Country. Our prosperity is greatly dependent on the well-being of our nation. We aim to be inclusive and responsible in nation building. Through BPI Foundation, we are committed to the welfare and sustainability of the communities we serve.

Vision

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

Core Values

CUSTOMER SERVICEEstablish friendly relationships with clients, putting them first in our list of priorities, to delight them with our services, and to always try to anticipate their every need.

EXCELLENCEEmployees, whatever their functions are, should always give their best and continuously upgrade their knowledge, skills, habits, and attitudes to meet each challenge with determination and drive, opening themselves to unlimited possibilities.

LOYALTYTo be proud of BPI, to be true to its ideals and vision, and to actively promote and defend what BPI stands for.

TEAMWORKBuild deep and lasting relationships founded on trust and respect, to be totally committed to the achievement of the objectives of our team and of BPI, to actively participate as one in any undertaking, to contribute our individual knowledge and talents for the benefit of all.

INTEGRITYAs bankers, we should be worthy of the confidence put in us by BPI and the society it stands for, earn the trust of those we meet and interact with, and always do what is morally, and socially correct, contributing in our small way in shaping the future.

CONCERN FOR PEOPLEEmployees should be genuinely interested in people, to help others in every way possible, to contribute to a sound environment, to be fair, supportive, friendly, caring, and sincere in our relations with the people we meet.

Bank of the Philippine IslandsFinancial Statement AnalysisAs of December 31, 2014

Horizontal Analysis (Statement of Condition)

BANK OF THE PHILIPPINE ISLANDSSTATEMENT OF CONDITIONHORIZONTAL ANALYSIS(In Millions of Pesos)ASSETS20142013INCREASE (DECREASE)%

CASH AND OTHER CASH ITEMS38,42725,69612,73149.54

DUE FROM BANGKO SENTRAL NG PILIPINAS211,946244,483(32,537)(13.31)

DUE FROM OTHER BANKS22,22717,0705,15730.21

INTERBANK LOANS RECEIVABLE AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL5,78217,397(11,615)(66.76)

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS- DERIVATIVE FINANCIAL ASSETS TRADING SECURITIES

35,98115,862

16,5504,597

19,43111,265

117.41245.05

AVAILABLE-FOR-SALE SECURITIES, NET51,30987,556(36,247)(41.40)

HELD-TO-MATURITY SECURITIES209,40996,172113,237117.74

LOANS AND ADVANCES, NET800,170630,203169,99726.97

ASSETS HELD FOR SALE, NET5,0185,852(834)(14.25)

BANK PREMISES, FURNITURE, FIXTURES AND EQUIPMENT, NET12,76012,2055554.55

INVESTMENT PROPERTIES, NET8081,597(789)(49.41)

INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES, NET4,7844,17660814.56

ASSETS ATTRIBUTABLE TO INSURANCE OPERATIONS16,44514,5861,85912.75

DEFERRED INCOME TAX ASSETS, NET5,7186,176(458)(7.42)

OTHER RESOURCES, NET13,55111,0482,50322.66

TOTAL ASSETS1,450,1971,195,364254,83321.32

LIABILITIES AND CAPITAL FUNDS20142013INCREASE (DECREASE)%

DEPOSIT LIABILITIES1,176,213988,586187,62718.98

DERIVATIVE FINANCIAL LIABILITIES34,84616,36018,486113.00

BILLS PAYABLE32,99326,1796,81426.03

DUE TO BANGKO SENTRAL NG PILIPINAS AND OTHER BANKS6872,051(1,364)(66.50)

MANAGERS CHECKS & DEMAND DRAFTS OUTSTANDING8,3537,1831,17016.29

ACCRUED TAXES, INTEREST & OTHER EXPENSES5,5974,90769014.06

LIABILLITIES ATTRIBUTABLE TO INSURANCE OPERATIONS13,56113,0615003.83

DEFERRED & OTHER LIABILITIES31,26831,230380.12

TOTAL LIABILITIES1,303,5181,089,557213,96119.64

SHARE CAPITAL39,27235,5633,70910.43

SHARE PREMIUM29,3418,31621,025252.83

RESERVES2,0981,68041824.88

SURPLUS76,57562,13714,43823.24

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME(3,223)(3,161)(62)1.96

CAPITAL FUNDS ATTRIBUTABLE TO THE CAPITAL FUNDS HOLDERS OF BPI144,063104,53539,52837.81

NON-CONTROLLING INTERESTS2,6161,2721,344105.66

TOTAL CAPITAL FUNDS146,679105,80740,87238.63

TOTAL LIABILITIES AND CAPITAL FUNDS1,450,1971,195,364254,83321.32

Resources

Total resources ended at P1.45 trillion, an amount which represented an increase of P255 billion or 21.3%, from P1.2 trillion posted last year.

Loans and advances, net grew by P170.0 billion, or 27%, driven by loan demand from corporate and retail clients.

Held-to-maturity securities increased by P113.2 billion, or 117.7%, due to additional investments and the reclassication of certain available-for-sale securities to HTM due to change in intention.

Derivative financial assets also went up by P19.4 billion, or 117.4%, due to higher market valuation of certain derivative products.

Cash and other cash Items were up by P12.7 billion, or 49.5%, due to higher cash requirement this period versus yearend 2013.

Trading securities expanded by P11.3 billion, or 245.1%, on increased holdings of local bonds intended for trading.

Due from other banks rose by P5.2 billion, or 30.2%, on higher working balances and placements maintained with correspondent banks.

Other resources, net reflected an increase of P2.5 billion, or 22.7%, on higher accounts receivable and miscellaneous assets.

Assets attributable to insurance operations increased by P1.9 billion, or 12.8%, due to the Bank's non-life insurance subsidiarys higher securities investments and gross premiums written.

Investments in subsidiaries and associates, net increased P608 million, or 14.6%, on improved income of the Bank's assurance affiliate.

Available-for-sale securities, net declined by P36.2 billion, or 41.4%, due to reclassication of certain AFS to HTM category due to change in intention.

Due from Bangko Sentral ng Pilipinas decreased by P32.5 billion, or 13.3%, due to lower special deposit account with the BSP.

Interbank loans receivable and securities purchased under agreements to resell declined by P11.6 billion, or 66.8%, due to a decline in RRP volume partially offset by slightly higher interbank term loans.

Assets held for sale, net declined by P834 million, or 14.3%, on the continued sell down of foreclosed assets.

Investment properties, net dropped by P789 million, or 49.4% due to sale of a certain Bank property.

Deferred income tax assets, net declined by P458 million, or 7.4% due to the DIT on mark to market gains last year as against nil this year.

Liabilities

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

Derivative financial liabilities grew P18.5 billion or 113.0% due to higher market valuation of certain derivative products.

Bills payable increased by P6.8 billion or 26.0%, on higher external borrowings.

Managers checks and demand drafts outstanding likewise grew by P1.2 billion or 16.3% on higher non-negotiated manager's checks issued.

Accrued taxes, interest and other expenses rose by P690 million or 14.1%, on higher accrual on taxes and licenses, and interest rates on non-deliverables swaps.

Due to Bangko Sentral ng Pilipinas (BSP) and other banks declined by P14 billion, or 66.5% due to the change in the tax collection remittance (a reduction in float from 10 days for over-the-counter, and 5 days, if done thru electronic internet channels from collection date, to next banking day remittance for both).Capital Funds

Capital Funds expanded by P39.5 billion, or 37.8% to P144.1 billion, from year-end 2013.

Share premium and share capital reflected increases of P21.0 billion, or 252.8%, and P3.7 billion, or 10.4%, respectively, largely due to the P25 billion stock rights issued in February 2014.

Surplus likewise contributed to the capital growth by P14.4 billion, or 23.2%, as a result of accumulated profits net of cash dividend payments.

Reserves were up by P418 million, or 24.9%, on higher provision tor trust business and investment house.

Non-controlling Interests at P2.6 billion grew P1.3 billion, or 105.7%, largely due to the Bank's leasing subsidiarys joint venture with Century Tokyo Leasing, wherein the Bank retained 51% ownership, and in part due to additional capital booked by the Bank's microfinance affiliate.

Horizontal Analysis (Statement of Income)

BANK OF THE PHILIPPINE ISLANDSSTATEMENT OF INCOMEHORIZONTAL ANALYSIS (In Millions of Pesos)ACCOUNTS20142013INCREASE (DECREASE)%

INTEREST INCOME On loans and advances On held-to-maturity securities On available-for-sale securities On deposits with BSP and other banks On trading securities Gross receipts tax45,99236,4418,1418311,769406 (1,596)40,80232,6984,9302,6151,641690(1,442)5,1903,7433,211(1,784)128(284)(154)12.7211.4565.13(68.22)7.80(41.16)10.68

INTEREST EXPENSE On deposits On bills payable & other borrowings11,18410,83435010,4789,5309487061,304(598)6.7413.68(63.08)

NET INTEREST INCOME34,80830,3244,48414.79

IMPAIRMENT LOSSES2,8072,6481596.00

NET INTEREST INCOME AFTER IMPAIRMENT LOSSES32,00127,6764,32515.63

OTHER INCOME Trading gain on securities Fees & Commissions Income from foreign exchange trading Income attributable to insurance operations Other operating income Gross receipts tax20,9791,3627,3702,0071,00710,668(1,435)22,1744,8395,8852,0421,4499,514(1,555)(1,195)(3,477)1,485(35)(442)1,154(120)(5.39)(71.85)25.23(1.71)(30.50)12.13(7.72)

OTHER EXPENSES Compensation and fringe benefits Occupancy and equipment-related expenses Other operating expenses29,96011,8509,0179,09326,70310,6418,0408,0223,2571,2099771,07112.2011.3612.1513.35

INCOME BEFORE INCOME TAX23,02023,147(127)(0.55)

PROVISION FOR INCOME TAX Current Deferred4,9585,374(416)4,1534,14768051,227(422)19.3829.59(7033.33)

NET INCOME FOR THE YEAR18,06218,994(932)(4.91)

Net Income

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

Interest income and expenses

Net interest Income at P34.8 billion, grew P4.5 billion, or 14.8% from last year's P30.3 billion primarily due to a P247 billion, or 24.6% expansion in Average Assets. Interest income increased by P5.2 billion, or 12.7% from previous year's P40.8 billion. Interest income on loans and advances, on held-to-maturity securities, and on deposits with BSP and other banks were up by P4.1 billion, P3.2 billion, and P128 million, respectively, in spite of lower yields, largely on account of signicant growth in volume. Interest income on available-for-sale securities and on trading securities were lower by P1.8 billion or 68.2% and P284 million or 41.2%, respectively due to lower volume and yield. Gross receipt tax was up by P154 million, or 10.7%, as a result of higher interest income.

Interest expense was up by P706 million to P11.2 billion, from last year's P10.5 billion. This increase was primarily contributed by interest expense on deposits, which grew by P1.3 billion, or 13.7% on account of the average asset base expansion partly tempered by lower deposit cost. Interest expense on bills payable and other borrowings declined by P598 million, or 63.1%, due to lower borrowings cost.

Other income and expenses

Other income at P21.0 billion, was lower by P1.2 billion, or 5.4% from P22.2 billion last year. Fees and commissions improved by P1.5 billion, or 25.2% due to increases in service charges, bank commissions, and underwriting fees. Other operating income increased by P1.2 billion, or 12.1%, mainly due to higher prot from asset sold, credit card income, and miscellaneous income. The drop in other income was accounted for by the P3.5 billion, or 71.9%, decline in Trading gain (loss) on securities brought about by the difficult market conditions. Income attributable to insurance operations lowered by P442 million, or 30.5%, due to insurance subsidiaries' lower income from premium and investments, higher insurance claims partly offset by lower actuarial reserves or BPI Philam. Gross receipts tax at P1.4 billion, was P120 million or 7.7% lower as a result of decreased level of non-interest income.

Other expenses at P30.0 billion, increased by P3.3 billion, or 12.2% from same period last year of P26.7 billion. Compensation and fringe benets grew by P1.2 billion, or 11.4% due to higher salaries on account of manpower expansion. In addition, there were some CBA related costs booked in 2014. Occupancy and equipment-related expenses increased by P977 million, or 12.2%, on higher contractual expenses, rent, depreciation and amortization costs, and significant spending on technology. Other operating expenses were up by P1.1 billion or 13.4% on account of higher regulatory costs, third party fees and incentives, product-related insurance premium, and advertising cost.

Impairment losses

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

Income Tax

Provision for income tax at P5.0 billion, was up P805 million, or 19.4%, from P4.2 billion. Current income tax rose by P1.2 billion or 29.6% due to higher proportions of Bank pre-tax earnings that are exposed to ordinary corporate income tax. Deferred income tax was P422 million lower on account of the impairment losses set up for the year, and accounts with timing difference.

Vertical Analysis (Statement of Condition)

BANK OF THE PHILIPPINE ISLANDSSTATEMENT OF CONDITIONVERTICAL ANALYSIS(In Millions of Pesos)ASSETS2014%2013%

CASH AND OTHER CASH ITEMS38,4272.6525,6962.15

DUE FROM BANGKO SENTRAL NG PILIPINAS211,94614.61244,48320.45

DUE FROM OTHER BANKS22,2271.5317,0701.43

INTERBANK LOANS RECEIVABLE AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL5,7820.4017,3971.04

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS- DERIVATIVE FINANCIAL ASSETS- TRADING SECURITIES35,98115,8622.481.0916,5504,5971.380.38

AVAILABLE-FOR-SALE SECURITIES, NET51,3093.5487,5567.32

HELD-TO-MATURITY SECURITIES209,40914.4496,1728.05

LOANS AND ADVANCES, NET800,17055.18630,20353.14

ASSETS HELD FOR SALE, NET5,0180.355,8520.50

BANK PREMISES, FURNITURE, FIXTURES AND EQUIPMENT, NET12,7600.8812,2051.02

INVESTMENT PROPERTIES, NET8080.061,5970.13

INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES, NET4,7840.334,1760.35

ASSETS ATTRIBUTABLE TO INSURANCE OPERATIONS16,4451.1314,5861.22

DEFERRED INCOME TAX ASSETS, NET5,7180.396,1760.52

OTHER RESOURCES, NET13,5510.9311,0480.92

TOTAL ASSETS1,450,1971001,195,364100

LIABILITIES AND CAPITAL FUNDS2014%2013%

DEPOSIT LIABILITIES1,176,21381.11988,58682.70

DERIVATIVE FINANCIAL LIABILITIES34,8462.4016,3601.37

BILLS PAYABLE32,9932.2826,1792.19

DUE TO BANGKO SENTRAL NG PILIPINAS AND OTHER BANKS6870.052,0510.17

MANAGERS CHECKS & DEMAND DRAFTS OUTSTANDING8,3530.587,1830.60

ACCRUED TAXES, INTEREST & OTHER EXPENSES5,5970.394,9070.41

LIABILLITIES ATTRIBUTABLE TO INSURANCE OPERATIONS13,5610.9413,0611.09

DEFERRED & OTHER LIABILITIES31,2682.1631,2302.61

TOTAL LIABILITIES1,303,51889.891,089,55791.15

SHARE CAPITAL39,2722.7135,5632.98

SHARE PREMIUM29,3412.028,3160.70

RESERVES2,0980.141,6800.14

SURPLUS76,5755.2862,1375.20

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME(3,223)(0.22)(3,161)(0.26)

CAPITAL FUNDS ATTRIBUTABLE TO THE CAPITAL FUNDS HOLDERS OF BPI144,0639.93104,5358.75

NON-CONTROLLING INTERESTS2,6160.181,2720.11

TOTAL CAPITAL FUNDS146,67910.11105,8078.85

TOTAL LIABILITIES AND CAPITAL FUNDS1,450,1971001,195,364100

Resources

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

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

Liabilities and Capital Funds

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

Liabilities*

For the previous year, Deposit liabilities, has the highest percentage, 82.70%, among the distribution of total liabilities as of the year. Next are Deferred and other liabilities, Bills payable, Derivative financial liabilities, Liabilities attributable to insurance operations, have 2.61%, 2.19%, 1.37%, and 1.09, respectively. Others, Managers checks and demand drafts outstanding, Accrued taxes, interest, and other expenses, Due to Bangko Sentral ng Pilipinas and other banks, have percentages below 1%, or a total of 1.18%. Deposit liabilities are deposits of customers that banks borrow from other sources to use to fund assets that earn revenue.

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

Capital Funds*

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

*Percentages are based from total liabilities and capital funds.

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

BANK OF THE PHILIPPINE ISLANDSSTATEMENT OF INCOMEVERTICAL ANALYSIS(In Millions of Pesos)ACCOUNTS2014%^^2013%^^

INTEREST INCOME On loans and advances On held-to-maturity securities On available-for-sale securities On deposits with BSP and other banks On trading securities Gross receipts tax45,99236,4418,1418311,769406 (1,596)10079.2317.700.571.210.28(1.09)40,80232,6984,9302,6151,641690(1,442)10080.1412.086.414.021.69(3.53)

INTEREST EXPENSE On deposits On bills payable & other borrowings11,18410,83435024.3296.873.3310,4789,53094825.6890.959.05

NET INTEREST INCOME34,80875.6830,32474.32

IMPAIRMENT LOSSES2,8076.102,6486.49

NET INTEREST INCOME AFTER IMPAIRMENT LOSSES32,00169.5827,67667.83

OTHER INCOME Trading gain on securities Fees & Commissions Income from foreign exchange trading Income attributable to insurance operations Other operating income Gross receipts tax20,9791,3627,3702,0071,00710,668(1,435)45.616.4935.339.574.8050.85(6.84)22,1744,8395,8852,0421,4499,514(1,555)54.2821.8226.549.216.5342.91(7.01)

OTHER EXPENSES Compensation and fringe benefits Occupancy and equipment-related expenses Other operating expenses29,96011,8509,0179,09365.1433.5530.1030.3526,70310,6418,0408,02265.4539.8530.1130.04

INCOME BEFORE INCOME TAX23,02050.0523,14756.66

PROVISION FOR INCOME TAX Current Deferred4,9585,374(416)10.784,1534,147610.18

NET INCOME FOR THE YEAR18,06239.2718,99446.48

Shareholders of BPI18,03939.2118,81146.03

Non-controlling interests230.061830.45

^^ - Percentages are based from the aggregate account comprised by parts of that account (e.g. Interest expense on deposit, 96.87%, are computed from aggregate Interest expense, not aggregate Interest income. Net income

For the previous year, Capital funds holders of BPI have higher percentage of Net income compared to Non-controlling interests, 99.04% and .96%, respectively. However, for the current year, Non-controlling interest even loses part of the pie, resulting to 99.87% and .13%, respectively. Net income was 46.55 % for the previous year, declined part of the pie during the current year to 39.27% of the total interest income of the respective years. To add, the declined was offset, when the company is above industry average, 40.15% and 33.28%, for the previous year and current year, respectively.

Interest income and expenses

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

Interest income

For the previous year, Interest on loans and advances, has the highest percentage, 80.14%, among the distribution of interest income. Next are Interest on held-to-maturity securities, available-for-sale securities, deposits with BSP and other banks, Gross receipts tax, Interest on trading securities, have 12.08%, 6.41%, 4.02%, 3.53% (offset negatively), and 1.69%, respectively.

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

Interest expenses

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

Other income and expenses

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

Other income

For the previous year, Other operating income has the highest percentage 42.91%, among the distribution of other income. Next are Fees and commission, Trading gains on securities, Income from foreign exchange trading, Gross receipt tax, Income attributable to insurance operations, have 26.54%, 21.82%, 9.21%, 7.01% (offset negatively), and 6.53%, respectively.

However, for the current year, Other operating income maintained and gained its highest percentage, 50.85%, among the distribution of other income. Next are Fees and commission, with the next three accounts changed places, Income from foreign exchange trading, Gross receipts tax, Trading gains on securities, Income attributable to insurance operations, have 35.13%, 9.57%, 6.84%(offset negatively), 6.49%, and 4.8%, respectively.

To add, the company is above the industry average, 48.19% and 35.48%, for the previous and current year, respectively. The other income was 54.28% and 45.61% of total interest income for previous and current year, respectively.

Other expense

For the previous year, Compensation and fringe benefits, has the highest percentage, 39.85%, among the distribution of other expense. Next are Occupancy and equipment-related expense and other operating expenses, have 30.11% and 30.04%, respectively.

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

To add, the company is below the industry average, 74.87% and 70.93%, for the previous and current year, respectively. The other expenses was 65.45% and 65.14% of total interest income for previous and current year, respectively. This might be the reason why the companys net income was somehow lessen.

Impairment losses

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

Income Tax

For the previous year, Income before income tax was distributed between Provision for income tax and Net income for the year, 17.94% and 82.06%, respectively. However, for the current year, Provision for income tax gained percentage, from Interest income for the year, resulting to 78.46% and 21.54%, respectively. To add, the company is below the industry average for Net income for the year and above for Provision for income tax, 83.66% and 16.33%, respectively, for the previous year; and below for Net income for the year, and above for Provision for income tax, 82.27% and 17.73%, respectively, for the current year; the previous years bad performance was reflected up to the current years performance.

**Industry averages were adjusted to comfort with BPIs Statement of Income presentation.***Based from BPI managements presentation not the same as the one given by BSP in their Banking System Statistics.

Ratio Analysis ****CLASS OF RATIOCOMPUTEDINDUSTRY AVERAGEFORMULAS

Solvency2013201420132014

Debt Ratio91.4989.8888.787.77Total liabilities/Total Resources

Debt to Capital funds1029.76888.69784.85717.43Total liabilities/Total Capital funds

Capital funds Ratio8.8510.1111.312.23Total capital funds/ Total resources

COMPUTEDINDUSTRY AVERAGE

Profitability2013201420132014

Return on Asset1.871.441.61.3Net income/Average total resources

Return on Capital funds18.113.813.310.8Net income/ Average total capital funds

Cost on Income50.8651.8560.662.3Non-interest expense/ Total operating income

NII/TOI42.2437.638.731.2Net interest income/ Total operating income

Net Interest Margin3.323.033.33.3Net interest income/ Total earning assets

COMPUTEDINDUSTRY AVERAGE

Liquidity2013201420132014

Cash and Due from Banks to Deposits29.0623.1833.529Cash and due from banks/Deposit liabilities

Liquid Assets to Deposits51.5450.2455.659.5Total liquid assets/Deposit liabilities

Loans Gross to Deposits65.1169.1564.368Loans, gross/ Deposit liabilities

COMPUTEDINDUSTRY AVERAGEFORMULAS

Growth2013201420132014

(Diluted) Earnings per Share5.194.626.75Earnings available to ordinary shareholders/ Average shareholders outstanding

Dividend Payout Ratio30.5138.9636.84Dividend per share/Earnings per share

Dividend per Share1.021.80Dividend paid/ Ordinary shares outstanding

Dividend Yield Ratio1.912.152.12Dividend per share/ Market value per share of ordinary shares

Book Value per Share0.004Capital funds/ Average shares outstanding

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

Return on ResourcesReturn on resources of the company for the previous year were 1.87%, higher than the industry of 1.6%; it decreases to 1.44% for the current year, however, it is still above industry of 1.3%. The company is above average for both years. It provides evidence that the decrease in value of both (computed and industry) from previous to current were common on the whole banking sector. The company is efficiently using its resources to generate earnings compared to other in the industry. However, ROA vary substantially and highly dependent on the industry. It is sometimes called return on investment, in the sense that resources are investments from the owners and creditors of the company, hoping to earn returns in the future. The higher the ROA number, the better, because the company is earning more money on less investment. Some formula add back interest income to ignore cost associated with funding those resources.Return on Capital fundsReturn on capital funds of the company for the previous year were 18.1%, higher than the industry of 13.3%; it decreases to 13.8% for the current year, however, it is still above industry of 10.8%. The company is above average for both years. It provides evidence that the decrease in value of both (computed and industry) from previous to current were common on the whole banking sector. It means the companys profitability, measured by how much profit a company generates with the money shareholders invested, where higher compared to others in the industry. It is sometimes called return on net worth, in the sense that capital funds are net worth of the company after deducting liabilities from resources, from the owners of the company, hoping to earn returns in the future. The higher the ROE number, the better, because the company is earning more money on less owner investment. For high growth companies we should expect higher ROE, since the company grows rapidly, then ROE is exactly high. Averaging ROE for the past five to ten years gives a better idea of the historical growth. Cost-to-income ratioCost-to-income ratio of the company for the previous year were 50.86%, lower than the industry of 60.6%; it increases to 51.85% for the current year, however, it is still below industry of 62.3%. The company is below average for both years. It provides evidence that the increase in value of both (computed and industry) from previous to current were common only to higher than average (not including BPI) companies of the whole banking sector. This is a good result, with BPI segregated among other banks, since it gives investors a clear view of how efficiently the firm is being run the lower it is, the more profitable the bank will be. As reflected from the vertical and horizontal analysis, net income really rises, and the returns (ROA and ROE) ratios are always above average. Net interest income to total operating incomeNet interest income to total operating income of the company for the previous year were 42.24%, higher than the industry of 38.7%; it decreases to 37.60% for the current year, however, it is still above industry of 31.2%. The company is above average for both years. It provides evidence that the decrease in value of both (computed and industry) from previous to current were common on the whole banking sector. It means that the company is earning more net interest income out of the total operating income compared to other banks, other than non-interest or other income. This is a good result since most of the operating income should come from the net interest income, as major source of financial performance of a bank-type of company. And as reflected by the vertical and horizontal analysis of net interest income, it gained share in the pie, from non-interest or other income for the current year.Net interest marginNet interest margin of the company for the previous year were 3.32%, higher than the industry of 3.30%; it decreases to 3.03% for the current year, however, it is below industry of 3.30%. The company is above average for the previous year only. It means that the companys investment decisions are better compared to its debt situations compared to others in the industry. Since the industry remains stable, a decrease in computed value denotes a complete negative outlook. A negative value of the ratio denotes that the firm did not make an optimal decision, because interest expenses were greater than the amount of returns generated by investments. Investment here may pertain to loans and advances, since these create income from interest. However, the company has positive amount, it means that the company is better off if it had used its investment funds to make investment than to pay off debts. It also means that it has more money earned from investment than those due to interest expense. In the perspective of an investor, higher net interest margin is a good indicator that investments in the company will surely give in the future higher returns than not, as this ratio also measures return produced by earning resources, offset by cost attributable to maintaining earning resources from sacrificing payment of debts; high positive increase in value denotes that earnings resources are continuously earning higher and higher. Negative value denotes the opposite. Leverage RatiosCompanies rely on a mixture of owners' capital funds and debt to finance their operations. A leverage ratio is any one of several financial measurements that look at how much resource comes in the form of debt, or assesses the ability of a company to meet financial obligations. Uncontrolled debt levels can lead to credit downgrades or worse. On the other hand, too few debts can also raise questions. If a company's operations can generate a higher rate of return than the interest rate on its loans, then the debt is helping to fuel growth in profits. Higher net interest margin is good reflection of having higher liabilities. A reluctance or inability to borrow may be a sign that operating margins are simply too tight. There are several different specific ratios that may be categorized as a leverage ratio, but the main factors considered are include debt, capital funds, resources and interest expenses, and they are the following: Debt ratio, Debt-to-capital funds ratio, and Capital funds ratio, computed as Total liabilities divide by total resources, total liabilities divide by total capital funds, and total capital funds divide by total resources, respectively.Debt ratioDebt ratio of the company for the previous year was 91.49%, higher than the industry of 88.70%; it decreases to 89.88% for the current year, however, is still above industry of 87.77%. The company is above average for both years. It provides evidence that the decrease in value of both (computed and industry) from previous to current were common on the whole banking sector. Debt ratio is financial ratio that measures the extent of a companys leverage, or the debt aggressiveness. The debt ratio is defined as the ratio of total long-term and short-term debt to total resources, expressed as a decimal or percentage. It can be interpreted as the proportion of a companys resources that are financed by debt. The higher this ratio, the more leveraged the company is, implying greater financial risk. The company, from the results, compared to other banks, have higher financial risk. At the same time, leverage is an important tool that companies use to grow, and many businesses find sustainable uses for debt. Debt ratios vary widely across industries, with liability-intensive businesses such as banks having much higher debt ratios than other industries like manufacturing and merchandising. Used in conjunction with other measures of financial health, the debt ratio can help investors determine a company's risk level. Some sources define the debt ratio as totalliabilitiesdivided by total resources. This reflects a certain ambiguity between the terms "debt" and "liabilities" that depends on the circumstance. In the case of the debt ratio, financial data providers calculate it using onlylong-termandshort-term debt(includingcurrent portions of long-term debt), excluding liabilities such asaccounts payable.Debt to capital funds ratioDebt to capital funds ratio of the company for the previous year were 1029.76%, higher than the industry of 784.85%; it decreases to 888.69% for the current year, however, it is still above industry of 717.43%. The company is above average for both years. It provides evidence that the decrease in value of both (computed and industry) from previous to current were common on the whole banking sector. The D/C ratio indicates how much debt a company is using to finance its resources relative to the amount of value represented in shareholders capital funds. The result may often be expressed as a number or as a percentage. This form of D/C may often be referred to as risk or gearing, the same as leveraging. Here, capital funds refers not to the value of stakeholders shares but rather to the difference between the total value of a corporation or individuals resources and that corporation or individuals liabilities. The formula for this form of the D/C ratio, then, can be represented as: D/C = Total Liabilities / (Total Resources - Total Liabilities). As discussed in debt ratio, this ratio is used to gauge the extent to which a company is taking on debts as a means of leveraging. A high debt/capital funds ratio generally means that a company has been aggressive in financing its growth with debt and is often associated with high levels of risk. From the results, the company is prone to higher level of risk compared to others in the industry. It will result to volatile earnings. The value will not give a direct generalization, unless these were taken into consideration, not visually evident as to the current moment. Here it is, if this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, if the cost of this debt financing ends up outweighing the returns that the company generates on the debt through investment and business activities, stakeholders share values may take a hit. If the cost of debt becomes too much for the company to handle, it can even lead to bankruptcy, which would leave shareholders with nothing.Capital funds ratioCapital funds ratio of the company for the previous year were 8.85%, lower than the industry of 11.30%; it increases to 10.11% for the current year, however, it is still below industry of 12.33%. The company is below average for both years. It provides evidence that the increase in value of both (computed and industry) from previous to current were common on the whole banking sector. This ratio is used to help determine how much shareholders would receive in the event of a company-wide liquidation. This would mean that, in the event of liquidation, the higher the ratio, the more shareholders may receive - and of course, the reverse holds true. From the results, the company has lower capital funds compared to other in the industry; in times of liquidation each holder may receive high amount of liquidation apportion, for previous and current years, compared to other in the industry. The ratio is the same as capital adequacy ratio. The small percentage of capital funds as to total resources was due to high debt/capital funds ratio, total resources are equal to total debts and capital funds combined. It resulted to company being on aggressive rather than complaisant leveraging.

Liquidity RatiosLiquidity ratio is a class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. This class of ratio is more focus on short-term, rather than long-term which is the focus of profitability ratios. In general, the greater the coverage of liquid resources to short-term liabilities the better as it is a clear signal that a company can pay its debts that are coming due in the near future and still fund its on-going operations. On the other hand, a company with a low coverage rate should raise a red flag for investors as it may be a sign that the company will have difficulty meeting running its operations, as well as meeting its obligations. The biggest difference between each ratio is the type of resources used in the calculation. While each ratio includes current resources, the more conservative ratios will exclude some current resources as they aren't as easily converted to cash. The major ratios for a bank type of company is as follows, arranged into decreasing liquidity of numerator resources: Cash and Due to other banks to Deposits, Liquid Resources to Deposits, and Loans, gross to deposits, computed as Cash and due to other banks divide deposits liabilities, Liquid resources divide by deposit liabilities, and Loan, gross divide by deposit liabilities, respectively.The company are said to be more liquid to finance current maturing obligations, like deposit liabilities, if the ranking of the three ratios are decreasing from Cash and Due from other banks to deposits ratio, Liquid Assets to deposits ratio, and Loan, gross to deposits ratio, the same as their liquidity, most, liquid, less liquid, respectively. Deposits are used as major basis since this account constitute the bulk of liabilities of a bank type of company.Cash and Due from other banks to deposits ratioCash and Due from other banks to deposits of the company for the previous year were 29.06%, lower than the industry of 33.5%; it decreases to 23.18% for the current year, however, it is still below industry of 29%. The company is below average for both years. It provides evidence that the decrease in value of both (computed and industry) from previous to current were common on the whole banking sector. From the results, it can be inferred that the company has less most liquid assets to be used to finance deposit requirement compared to others on the industry. Therefore, they have smaller liquidity as compared to others on the industry. Cash and due from other banks are the two most liquid assets of a bank type of company. Liquid Assets to deposits ratioCapital funds ratio of the company for the previous year were 51.54%, lower than the industry of 55.6%; it decreases to 50.24% for the current year, however, it is still below industry of 59.5%. The company is below average for both years. It provides evidence that the decrease in value of both (computed and industry) from previous to current were common on the whole banking sector. From the results, it can be inferred that the company has less liquid assets to be used to finance deposit requirement compared to others on the industry. Therefore, they also have smaller liquidity as compared to others on the industry. Liquid assets are composed of cash and due from banks and financial securities, excluding those capital funds securities. This is a broader and fairer way of measuring liquidity of a company. And since it involves more accounts, its percentage was assumed higher than the first liquidity ratio. If the resulting percentage is higher than the first ratio, by only an insignificant amount, then the rest of the liquid assets (financial assets) cannot be used as risk account when unforeseen deposit requirements exist anytime, because of their small volume. When this happens, the first two ratios will be ranked as one and the same.Loan, gross to deposits ratioLoan, gross to deposits of the company for the previous year were 65.11%, higher than the industry of 64.3%; it increases to 69.15% for the current year, however, it is still above industry of 68%. The company is above average for both years. It provides evidence that the increase in value of both (computed and industry) from previous to current were common on the whole banking sector. This ratio is a commonly used statistic for assessing a bank's liquidity by dividing the banks total loans by its total deposits. This number, also known as the LTD ratio, is expressed as a percentage. If the ratio is too high, it means that banks might not have enough liquidity to cover any unforeseen deposit requirements; if the ratio is too low, banks may not be earning as much as they could be. From the results, the company have much enough of it being less liquid to cover any unforeseen deposit requirements to finance cost of maintaining deposits. A deficit of financing for deposit liabilities will increase the likeliness of investing in loans. So the higher the rate of loans, gross compared to deposits, means that to compensate cost of maintaining liabilities from deposits of depositors, as creditors, the company invest or they might invest more on loans and advances to obtain returns as latter compensation. This is somehow not good since loans and advances compared to other resources are less liquid; then a higher percentage than average means a company is also less liquid compared to others in the industry. Growth RatiosAny firm whose business generates significant positive cash flows or earnings, which increase at significantly faster rates than the overall economy is called growth company. It tends to have very profitable reinvestment opportunities for its own retained earnings. Thus, it typically pays little to no dividends to stockholders, opting instead to plough most or all of its profits back into its expanding business. This type of company though were not the model of major growth ratios of the banking industry as follows: Basic earnings per share, Diluted earnings per share, Dividend per share, Dividend yield ratio, Book Value per share, and Dividend pay-out ratio, computed as given by the table above. Growth ratios measure growth rate of the company instead, but not on a direct generalization, as to a one visually evident when you get the increase (decrease) in percentage of an account over time. Although these rates are also measured, it doesnt give a long-term projection for the future earnings of the company.Basic earnings per share/Diluted earnings per shareBasic earnings per share of the company is 5.19% for previous year, it decreases to 4.62% during the current year, lower than the industry 6.73%. This is the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability and growth, if trend analysed. The companys shareholders are earning lower compared to other in the industry, and even lower during the current year. When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period. Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number. However, since -the company has no preference shares as of the date, the basic and diluted earnings per share will be the one and the same. Earnings per share are generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio, which is also an important growth and profitability ratio. The value computed may not directly state what might really happened at the causes, an important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less capital funds (investment) - that company would be more efficient at using its capital to generate income and, all other things being equal, would be a "better" company. Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.Dividends per shareDividends per share of the company is 1.02 for previous year, it increases to 1.80 during the current year. Having a growing dividend per share can be a sign that the company's management believes that the growth can be sustained. From the results, the company is increasing its income distributed to shareholders, which is a good sign that the management growth is laser projecting. Dividends over the entire year (not including any special dividends) must be added together for a proper calculation of DPS, including interim dividends. Special dividends are dividends which are only expected to be issued once so are not included. The total number of ordinary shares outstanding is sometimes calculated using the weighted average over the reporting period. In the context of the company, weighted was used. Percentage of income to those declared to be distributed only (dividend) increases; the managements discretion is to give more, because they believe it is just and timely to give more.Dividend yield ratioDividend yield ratio of the company is 1.91% for the previous year, it increases to 2.15% during the current year, higher than the industry 2.12%. This is a financial ratio that indicates how much a company pays out in dividends each year relative to its share price. From the results, the company is willing to distribute income with higher percentage of its shares price compared to others in the industry. The increase reflects that the company becomes more confident that the dividend given will be fruitful to the future of the company, and it is just to give the percentage of share price to its loyal shareholders. It reflects the companies foreseeable good future earnings. High dividend ratio is high foreseeable future income projection. Investors who require a minimum stream of cash flow from their investment portfolio can secure this cash flow by investing in stocks paying relatively high, stable dividend yields. Yet, high dividends may often come at the cost of growth potential. Every dollar a company is paying in dividends to its shareholders is a dollar that company is not reinvesting in itself in an effort to make capital gains. While being paid for holding a stock is attractive to many, shareholders can earn high returns if the value of their stock increases while they hold it. In other words, when companies pay high dividends it may come at a cost. More investors will invest since the ratio of the company increases. The value again is somewhat proportionate to what a company expects to present, it is somehow subjective, same as for BEPS and Debt-to-capital funds ratio scenarios. When companies pay high dividends to their shareholders, it can indicate a variety of things about the company, such as that the company might currently be undervalued or that it is attempting to attract investors. On the other hand, if a company pays little or no dividends, it may indicate that the company is overvalued or that the company is attempting to grow its capital. Certain companies in particular industries, when they are well established and steady-earning, often have good dividend yields even though they are not undervalued. Banks and utilities often fall into this category. While a company may pay high dividends to its shareholders for a time, this may not always be so. Companies often trim their dividend payments or stop them altogether during hard economic times or when the company is experiencing hard times of its own, so one can rarely rely on consistent dividends on a permanent basis. Take note of these.Book value per shareBook value per share of the company is .004 for the current year. It is because of the very small amount of capital funds of the company to be shared by all outstanding common shares. Book value per common share is a measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Should the company decide to dissolve, the book value per common indicates the dollar value remaining for common shareholders after all resources are liquidated and all debtors are paid. In simple terms it would be the amount of money that a holder of a common share would get if a company were to liquidate. From the results, shareholders have enough safety after all debts are paid, but at the least amount, were small capital funds are distributed to large number of shareholders. Dividend pay-out ratioDividend pay-out ratio of the company is 30.51% for the previous year, it increases to 38.96%, higher than the industry 36.84%. It is the percentage of earnings paid to shareholders in dividends. The dividend pay-out ratio provides an indication of how much money a company is returning to shareholders, versus how much money it is keeping on hand to reinvest in growth, pay off debt or add to cash reserves. This latter portion is known as retained earnings. From the results, the company is willing to distribute higher percentage of earnings compared to other on the industry, as dividends, instead of investing it to generate further income. However, dividend pay-outs vary widely by industry, and like most ratios, they are most useful to compare within a given industry. The increase is somehow a bad result, since the company should further invest to further generate income. The offset might be attributable to their already high volume of investments, need not to invest more. Some of the earnings were put into reserves and payment of deposit liabilities cost (interest), which constitute the bulk of their liabilities. Again for the last time, a number of considerations go into interpreting the dividend pay-out ratio, most importantly the company's level of maturity. A new, growth-oriented company that aims to expand, develop new products and move into new markets would be expected to reinvest most or all of its earnings and could be forgiven for having a low or even zero pay-out ratio. On the other hand, an older, established company that returns a pittance to shareholders would test investors' patience and could tempt activists to intervene. The pay-out ratio is also useful for assessing a dividend's sustainability. Companies are extremely reluctant to cut dividends, since it can drive the stock price down and reflect poorly on the management's abilities. If a company's pay-out ratio is over 100%, it is returning more money to shareholders than it is earning and will probably be forced to lower the dividend or stop paying it altogether. Long-term trends in the pay-out ratio also matter. A steadily rising ratio could indicate a healthy, maturing business, but a spiking one could mean the dividend is heading into unsustainable territory.

SynopsisAs the BPI is well-known from being a top contender in the financial institution sector of our country, the bank still reigned from these past few years up to the present. The analysis made by this group proves the impressive efficiency, effectivity, and stability of the commercial bank which is clearly evident by its Financial Statements and Financial Mix Ratios provided. First, the profitability is one of the valid basis of ranking a commercial bank. The BPI presented an above average Return on Assets and Return on Equity than the industry average due to a good trigger which is an above average net income. A below average of Cost-to-Income ratio is a main determinant for higher Net Interest Margin because of lower interest expenses from deposit liabilities compared to a higher interest income from resources which is the main source of income by whole banking sector that was proven by the higher ratio of Net Interest Income to Total Operating Income. The vertical analysis has shown the decrease on the level of performance by the bank as the industry average also goes down. On the bright side, the bank has been always performing better than the industry average through the years. There such times that the country will not always experience a win-win scenario like what happened this current year where the banking industry was affected.As seen from the vertical analysis, the large amount of resources of BPI was established by a very much higher liability than the capital fund as it is better for commercial banks where they have more depositors, so a higher deposit liabilities to be used for loans. The BPI has a high Debt and Debt to Capital Funds ratio but not a decrease on the part of resources and capital. The way it operates shoots for an ideal type of a bank because of a great proportion of its Leverage ratios that also serves better than the industry average even the current year is not better than the previous for the whole banking sector. The Debt and Debt to Capital Funds ratio and Capital Fund ratio determine that the bank is being on aggressive leveraging which implies a greater financial risk that may even lead to bankruptcy.The business performs a very good strategy when it comes to liquidity management. A lower Cash and Due from other banks to deposit ratio and Liquid Assets to deposit ratio and higher Loans, gross to Deposits ratio than the industry average prove that they are not highly liquid. On the other hand, it is because of they are looking for a greater opportunity in investing on long-term loans that return a higher interests rather than short-term deposits (individuals/others) and being safe of letting cash be idle. A better decision-making for the current than the previous year as the ratios improve more proportionally so they can earn as much than they could. The only problem that they may encounter is that the current deposit liabilities may be withdrawn anytime.RecommendationFrom the results of the vertical, horizontal analysis, and ratio analysis, we recommend the following point for the BPIs management:1. Maintain or improve their financial performance status as what can be seen from their overall profitability ratios, which is above average. Hence, increase services prices. Banks can use a customer-centric pricing programs. This will increase EPS, and latter increase bank overall status.2. Increase the percentage for capital funds. For various reasons there is a strong incentive for banks to keep the capital funds as low as possible. Mainly because the interest rates on the loans are higher than the interest rates on the deposits, the return on equity can be pushed higher by increasing the leverage (i.e. the ratio of deposits to capital funds). However, small equity capital increases the risk of the bank going bankrupt when the value of its outstanding loans falls below the value of the deposits. If this happens, the equity capital can be used to absorb such losses. The higher the equity capital is, the higher the bank's capacity to absorb losses. Lastly, this will increase book value, and latter increase bank status.As BSP, adjusted the level of the required minimum capital to ensure that banks stand on a strong capital base to support a threshold scale of operations to operate viably and service effectively the needs of their clients, increasing is the best possible advice for financial stability and effective delivery of services.3. Liquidity and capital requirements both play an important role in the viability and solvency of banks. Therefore, they should increase Reserves and Liquid assets, both point determinants of a stable capital and liquidity status for contingencies, respectively.4. To increase capital funds, they can improve dividend-based ratios to attract more investor. Note that it should be transparent. 5. The offshoot of this recommendations, will give counter recommendations for specific accounts in the Statement of Condition and Income. It is the companys discretion if they will increase, but the group suggested the facts.

SourcesBangko Sentral ng Pilipinas 2015 Key StatisticsInvestopedia Financial Ratios for BankingBank of America Financial Statements Analysis

All Rights ReservedJanuary 2015

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