2011 Annual Report Financial Supplements - BDO

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On October 7, 2011, the Parent Bank issued another P6,500 unsecured subordinated noteseligible as Lower Tier 2 Capital due on January 7, 2022, callable on 2016 (the Series 5 Notes)bearing an interest rate of 6.375% per annum, pursuant to the authority granted by the BSP tothe Bank on April 7, 2011 and BSP Circular No. 280 Series of 2001, as amended, and BSPCircular No. 709 Series of 2011. The issuance was approved by the BOD onAugust 28, 2010.On November 21, 2007, the Parent Bank issued P10,000 unsecured subordinated noteseligible as Lower Tier 2 Capital due on November 21, 2017 bearing an interest of 7.0% perannum, callable with step-up in 2012 (the Series 1 Notes) pursuant to the authority granted bythe BSP to the Parent Bank on October 8, 2007 and BSP Circular No. 280 Series of 2001, asamended. The issuance was approved by the BOD, in its special meeting held onJune 1, 2007.On May 30, 2008, the Parent Bank issued the second tranche of P10,000 unsecuredsubordinated notes eligible as Lower Tier 2 Capital due on May 30, 2018 bearing an interest of8.5% per annum, callable with step-up in 2013 (the Series 2 Notes) pursuant to the authoritygranted by the BSP to the Parent Bank on April 3, 2008 and BSP Circular No. 280 Series of2001, as amended. This issuance was approved by the BOD, in its special meeting held onFebruary 23, 2008.On March 20, 2009, the Parent Bank issued the third tranche of unsecured subordinated debtqualifying as Tier 2 Capital of the Parent Bank with face of P3,000 due March 20, 2019 withcoupon interest of 7.5% per annum callable with step-up in 2014 (the Series 3 Notes). Thisissuance was approved by the BOD on January 31, 2009.The Notes represent direct, unconditional unsecured and subordinated peso-denominatedobligations of the Parent Bank, issued in accordance with the Terms and Conditions underthe Master Note. The Notes, like other subordinated indebtedness of the Parent Bank, aresubordinated to the claims of depositors and ordinary creditors, are not a deposit, and are notguaranteed nor insured by the Parent Bank or any party related to the Parent Bank, such as itssubsidiaries and affiliates, or the PDIC, or any other person. The Notes shall not be used ascollateral for any loan made by the Parent Bank or any of its subsidiaries or affiliates. TheNotes carry interest rates based on prevailing market rates, with a step-up provision if notcalled on the fifth year from issue date. The Parent Bank has the option to call the Notes onthe fifth year, subject to prior notice to Noteholders. The Notes were used further to expandthe Parent Bank’s consumer loan portfolio and to refinance an existing issue of Lower Tier 2debt. The Notes also increased and strengthened the Parent Bank’s capital base, inanticipation of continued growth in the coming years.The outstanding balance of the Notes amounted to P38,255 and P23,152 as ofDecember 31, 2011 and 2010, respectively.Total interest expense on subordinated notes payable included as part of Interest Expenses onbills payable and other liabilities in the statements of income amounted to P2,154, P1,775, andP1,725 in 2011, 2010 and 2009, respectively, both in the BDO Unibank Group and ParentBank statements of income (see Note 21).www.bdo.com.ph 113
NOTES TOFINANCIAL STATEMENTSDECEMBER 31, 2011, 2010 AND 2009(Amounts in Millions of Philippine Pesos, Except Per Share Data or As Indicated)18. OTHER LIABILITIESOther liabilities consist of the following:BDO Unibank GroupParent BankNote 2011 2010 2011 2010Bills purchased-contra P 10,287 P 9,162 P 10,287 P 9,162Accounts payable 7,436 5,125 5,504 4,481Manager’s checks 6,558 4,609 6,473 4,586Accrued expenses 5,088 4,222 4,790 3,985Derivatives with negativefair values 3,320 4,715 1,877 3,168Outstanding acceptancespayable 1,569 1,214 1,569 1,214Unearned income 9.03 989 1,083 893 976Withholding taxes payable 899 760 859 729Capitalized interest andother charges 602 677 602 677Payment order payable 252 266 252 266Due to principal 230 236 - -Due to BSP and Treasurerof the Philippines 166 357 163 354Others 6,693 8,063 4,025 5,189P 44,089 P 40,489 P 37,294 P 34,787The liability for unredeemed reward points amounting to P1,176 and P800 as ofDecember 31, 2011 and 2010, respectively, presented under Accrued Expenses represents thefair value of points earned which are redeemable significantly for goods or services providedby third parties, which the Parent Bank identified as partners in the rewards program (seeNote 2.20).19. EQUITY19.01 Capital Management and Regulatory CapitalOn January 15, 2009, the BSP issued Circular No. 639 articulating the need for Banks to adoptand document an Internal Capital Adequacy Assessment Process (ICAAP). All universal andcommercial banks are expected to perform a thorough assessment of all their material risksand maintain adequate capital to support these risks. This is intended to complement thecurrent regulatory capital requirement of at least 10% of risk assets, which covered only credit,market and operational risks. On December 29, 2009, BSP issued Circular No. 677 effectivelyextending the implemention of ICAAP from January 2010 to January 2011.In October 2009, the BDO Unibank Group presented its ICAAP and submitted the initialdraft of its ICAAP document to the BSP. Based on comments from the BSP,BDO Unibank Group subsequently revised its ICAAP document and secured approval fromits BOD on January 8, 2011.The ICAAP document articulates the BDO Unibank Group’s capital planning strategy anddiscusses governance, risk assessment, capital assessment and planning, capital adequacymonitoring and reporting, as well as internal control reviews.
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REPORT OFINDEPENDENT AUDITORSReport
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STATEMENTS OFINCOMEFOR THE YEARS EN
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BALANCE AT JANUARY 1, 2009 P 23,020
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FOR THE YEARS ENDED DECEMBER 31, 20
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1.02 Approval of Financial Statemen
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(ii) Philippine Interpretation IFRI
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PFRS 7 (Amendment), Financial Instr
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(v)PFRS 9, Financial Instruments: C
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BDO Unibank Group accounts for its
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Regular purchases and sales of fina
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Subsequent to initial recognition,
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Certain derivatives may be designat
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NOTES TOFINANCIAL STATEMENTSDECEMBE
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Page 63 and 64: NOTES TOFINANCIAL STATEMENTSDECEMBE
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Page 149: COMPANY HEADQUARTERSBDO Unibank, In
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2011 Annual Report Financial Supplements - BDO

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