BANK OF THE PHILIPPINE ISLANDS ASM SPEECH
2020 ANNUAL STOCKHOLDERS’ MEETING
MESSAGE OF THE CHAIRMAN JAIME AUGUSTO ZOBEL DE AYALA
APRIL 23, 2020
Good morning, fellow shareholders. Welcome to BPI’s Annual Stockholders’ Meeting.
Joining us today are some of our most important business partners, clients, and employees. To all of you, welcome.
This morning, we will follow our usual practice and discuss the Bank in two parts: I will begin by touching on the broader markets and the Bank’s financial and operating performance. Our President and CEO, Bong Consing, will then discuss the Bank’s strategic initiatives moving forward.
The Philippine economy expanded 5.9% in 2019, the first time it registered a growth of below 6% in the last seven consecutive years. The slower economic growth largely stemmed from the late passing of the 2019 national budget. This led to a delay in government spending and consequently, in private sector investments. For the first time in seven years, the country registered a year-on-year decline in investment spending.
The reduction in capital goods imports reduced the current account deficit, which in turn resulted in a stronger peso. A smaller deficit and a stronger peso would normally be seen as a positive indication. However, the opposite is true when robust spending is imperative to sustain our economy’s growth trajectory.
Lower inflation over the course of the year allowed the Bangko Sentral to reduce bank reserve requirements from 18% to 14% and the key policy rate from 4.75% to 4.0%.
While the increased liquidity sent a positive signal, expansionary monetary policy alone was unable to offset the investment slowdown.
Despite a lower-than-expected economic growth, the Philippines remains one of the fastest growing countries in the region. However, we believe that GDP has to grow at a faster pace if we are to become a middle-income country within this decade.
The Philippine banking industry’s performance reflected the macroeconomic story. Slower GDP growth translated into slower loan growth at 9.4% in 2019, from 13.7% in 2018 and 16.5% in 2017. Lower interest rates allowed banks with strong deposit franchises to expand their net interest margins, and banks with large securities positions to record good trading gains. As a result, industry profitability was better in 2019 than the year before.
BPI’s financial results also reflected industry trends. BPI’s asset base grew 5.7% to Php 2.2 trillion. Its loan portfolio hit Php 1.5 trillion, an increase of 8.9% from the previous year. Deposits increased by 6.9% to Php 1.7 trillion.
BPI registered Php 28.8 billion in net income in 2019, a 25% increase over 2018. This translated into a return on equity (ROE) of 11% versus 10.2% in 2018 and a return on assets (ROA) of 1.4% versus 1.2% in 2018.
Net interest income grew 18% as a result of a Php 165.7 billion increase in average asset base and a 24 basis point improvement in net interest margin, the most significant expansion in over 10 years.
Non-interest income grew by 25% as a result of a 12% increase in fees, commissions and other income, with almost all businesses up—and a Php 3.3 billion increase in trading gains.
The decision to add on to trading positions, and then take profits, was deliberate and very well-timed.
Asset quality remained strong with a non-performing loan ratio of 1.66%, a 19 basis point improvement from 2018. With additional provisions of almost Php 6 billion booked and NPL loss reserves totaling Php 25.4 billion, NPL coverage ratio and BSP coverage ratio reached 102% and 121%, respectively.
BPI has always been a high quality bank, and considerable effort has been made in the last few years to reinforce this view. The bank continues to get high marks from regulators for its strong capital position, good asset quality, prudent management, good earnings, ample liquidity and relatively low sensitivity to market risk.
Let me end by saying that we are very pleased with our results in 2019 given the operating environment. However, the coronavirus outbreak has become the greatest challenge for the global and domestic economies.
We are hopeful that for 2020, the expansionary monetary policy coupled with a more conducive investment climate, will more than offset the expected slowdown in our country.
I will now turn you over to Bong Consing who will discuss the Bank’s various strategic initiatives.