Leveraging strategic choices, reaping early wins Media & Investor Briefing on Q1 2009 Results 12 May...

Leveraging strategic choices, reaping early Leveraging strategic choices, reaping early winswins

Media & Investor Briefing on Q1 2009 Results12 May 2009

PSE Ayala Boardroom

Mr. Justo OrtizChairman & CEO


Early winsEarly wins

861

657

Q1 2008 Q1 2009

Net income(in million pesos)

Non-interest income(in million pesos)

138

118

Q1 2008 Q1 2009

31%

Net trading & investment gains(in million pesos)

17%

Net income position in Q1 2009 signifies dissipating compression on improvement in non-interest revenue

component

565602

Q1 2008 Q1 2009

6%

Early winsEarly wins

986

1,7211,158

690

Q1 2008 Q1 2009

Loans Securities

Combined growth in interest & non-interest income contributed to strengthen overall revenue stream

Interest income(in million pesos)

+49%

+43%

2,306

1,912

Q1 2008 Q1 2009

Operating income(in million pesos)

+21%

Healthy marginsHealthy margins

Net interest margins remained favorable amid a low interest rate environment

3.7%

4.8%

4.2%4.4%

4.2%4.4% 4.4%

4.2%

3.3% 3.2%

3.6%

3.2%

4.1%

3.1%3.4%

J an '08 Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec J an '09 Feb Mar

Focus on long-term growthFocus on long-term growth

1,113

1,431

Q1 2008 Q1 2009

Operating expenses increased as a result of growing transaction volumes & investments in long-term

productivity improvementOperating expenses

(in million pesos)

29%

Persistent deposit increasePersistent deposit increase

108.0

168.9

Q1 2008 Q1 2009

57%

Deposit surge persisted amid the global financial turmoil

Outstanding deposits(in billion pesos)

Consistent credit growthConsistent credit growth

3.8 4.64.2 5.4

5.3

32.5

4.9

43.9

Q1 2008 Q1 2009

Credit Card Mortgage Auto Loans Corporate &Commercial

59.2

Improvement in recurrent income supported by broad-based loan expansion

45.4

+35%

+10%

+28%

+21%

+30%

Amounts in Billion Pesos

Outstanding loan portfolio(gross, without BP)

Strong asset qualityStrong asset quality

Improving credit quality proves formidable risk management approach

*NPLs net of reserves; Loans net of IBCL

2.18

0.800.96

4.37%

1.49%1.29%

Q1 2008 end-2008 Q1 2009

Net NPL (in billion pesos) Net NPL ratio

Net non-performing loans*

Gearing up for balance sheet Gearing up for balance sheet expansionexpansion

CAR decline attributed to rise in risk-weighted assets

10.8%

12.9%

16.4%

2007 2008 Q1 2009

Looking to the upswingLooking to the upswing

RESILIENCE & SUSTAINABILITY PRINCIPLES

Solid profitability through steady credit volumes &

increasing recurrent income

Vigilance for opportunities for trading gains as volatility

subsides

Emphasis on continued deposit growth through customer

franchise development

Formidable risk management platform in support of loan

expansion thrust

EXPECTATIONS ON THE ECONOMY

Growth slowdown on global crisis spillover

Low inflation, low interest rate environment

Steady remittance flows

Infrastructure boost from fiscal stimulus package

Employment concerns albeit resilient household spending

Income pressures on the corporate sector

Anchoring on our strategic Anchoring on our strategic imperativesimperatives

Resilient strategy

framework

Re-energized brand

Risk-adjusted returns

Robust resource base

Resurgent loan & securities

•Solid profitability through improved recurrent income•Healthy interest margins•Asset quality preservation•Customer franchise expansion

•Commitment to exceptional customer satisfaction and loyalty

•Brand values of expertise, relevance, and challenging convention

•Adherence to governance principles of transparency and sound risk management

•Disciplined approach to pricing risk factors in support of a more aggressive lending posture

•Acceleration in deposit base through improved sales management and product development systems

•Excellence in service quality and leading edge in innovation

•Emphasis on more sustainable revenue sources through expansion in loans & securities

•Broadening market reach with strong bias for quality borrowers

Sustaining strong depositor Sustaining strong depositor confidenceconfidence

Mr. Edwin BautistaEVP, Retail Banking

Performance guidepostsPerformance guideposts

• Superior sales management system

• Robust product management process

• Excellence in service quality and efficiency

• Constant quest for innovation

How we sustained our growth path…How we sustained our growth path…

Built for successBuilt for success


Customer expertise produced stronger foothold in deposit-gathering business

57%

y-o-y

108117

125132 137 135

153161 160 162

177 172 169

M'08

A M J J A S O N D '08 J '09 F M

24 28

42 4654

60

116107

162

179

2430

3847

59

73

92

115

143

179

224

2000 2002 2004 2006 2008 2010

Actual FOCUS 2010 target



P179.0 B as of April

Forging aheadForging ahead

• Focus on low-cost deposit generation

• Pursue investments in people, network, technology, partnerships & alliances

• Sustain branch network expansion in strategic growth areas

• Stay committed to brand positioning of Smart Banking through leadership in service & innovation

Capitalizing on strong corporate franchiseCapitalizing on strong corporate franchise

Ms. Guia LimEVP, Corporate Banking

Performance resultsPerformance results

• Strong loan growth

• Loans are to quality names

• Industries are diversified

• Pricing more competitive but asset quality,

good

• Loan portfolio largely in peso, hence not

vulnerable to foreign funding

• Accrual income steadily growing

• No loan deterioration


Gross corporate loans(in billion pesos)

16.7

26.7

Q1 2008 Q1 2009

Asset growth

60%



204.7

416.4

Q1 2008 Q1 2009

103%

Revenue growth


Diversified borrowers

% Share of corporate portfolio, as of Mar 2009

25.7

25.116.2

15.5

7.9

5.93.7

Manufacturing

Real estate

Financial intermediation

Transport, Storage & Communication

OthersTelecommunications

Electricity, Gas & Water Supply

Moving forwardMoving forward

• Continue adherence to sound risk management principles

• Focus on borrowers of proven stability and resilience through market downturns

• Pursue growth in real estate portfolio via CTS

• Dual approach to customer business i.e., asset and liabilities growth through cash management

• Develop borrowers into lucrative sources of non-loan related products and services

Reinforcing middle market credit qualityReinforcing middle market credit quality

Ms. Betty RomuloEVP, Commercial Banking


• Credit risk consciousness balanced with

profitable pricing

• Innovation in products and services

• Diversification in loan portfolio



Gross commercial loans(in billion pesos)

15.817.2

Q1 2008 Q1 2009

Steady climb in commercial credit portfolio guided by firm standards of credit quality

9%



320.4

424.7

Q1 2008 Q1 2009

Principle of risk-adjusted returns enabled strong acceleration of interest income

33%


Past due ratio

Decline in past due loans illustrate commitment to strong middle market credit quality

2.20%

1.50%

Q1 2008 Q1 2009


26.9

21.720.7

12.9

7.2

10.6Manufacturing

Real estate

Financial intermediation

Trading

Others

% Share of commercial portfolio, as of Mar

Portfolio diversification remains a key risk management principle

SME


• Continue implementation of risk-based relationship pricing of accounts

• Design new products and services that would cater to specific client segments

• Collaborate with other business units to access prospective borrowers

• Further enhance risk management practices in line with account profitability approach

Solidifying consumer finance growthSolidifying consumer finance growth

Mr. Genju LapezEVP, Consumer Finance


• Balance between aggressive marketing

strategies and cost efficiency

• Broad market reach via new geographies and

channels

• Prudence and discipline in market expansion

• Collaboration and alliances



Gross consumer loans(in billion pesos)

15.3

12.9

Q1 2008 Q1 2009

Innovative marketing strategies, in the face of challenging market conditions, sustained growth in consumer finance

19%


Robust growth balanced with stable yields kept revenue trend on a consistent growth track

Interest income(Consolidated consumer finance, in million pesos)

399.0

453.1

Q1 2008 Q1 2009

14%


Improvement in net past due ratio reflective of focus on both value and quality of credit portfolio

Net past due ratio

3.43%

1.39%

5.34%

4.51%

Q1 2008 Q1 2009

Mortgage Auto


• Strengthen the basics by expanding coverage in existing territories and enhancing customer relationships

• Design more aggressive promotional tools and offers

• Deliver superior value by building a ‘benefits package’ for customers and prospects

• Balance aggressiveness with appropriate safety nets


Media & Investor Briefing on Q1 2009 Results12 May 2009

PSE Ayala Boardroom

Leveraging strategic choices, reaping early wins Media & Investor Briefing on Q1 2009 Results 12 May...

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