Notes to Financial Statements - BDO

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Notes to Financial StatementsDECEMBER 31, 2008, 2007 AND 2006(Amounts in Millions Except Per Share Data)8. DUE FROM OTHER BANKSThe balance of this account represents regular deposits with the following:GroupParent Bank2008 2007 2008 2007Foreign banks P 16,736 P 18,838 P 14,466 P 14,708Local banks 366 1,852 415 1,394The breakdown of the account as to currency follows:P 17,102 P 20,690 P 14,881 P 16,102GroupParent Bank2008 2007 2008 2007US dollar P 13,817 P 17,967 P 12,038 P 14,393Other currencies 3,157 1,902 2,535 1,255Peso 128 821 308 454P 17,102 P 20,690 P 14,881 P 16,102Annual interest rates on these deposits range from 0% to 5.9% in 2008, 0% to 4.8% in 2007 and 0% to 5.9% in 2006 in the Group financialstatements and 0% to 4.5% in 2008, 0% to 4.8% in 2007 and 0% to 5% in 2006 in the Parent Bank financial statements.Due from other banks are included in cash and cash equivalents for cash flow statement purposes.9. TRADING AND INVESTMENT SECURITIESThe components of this account are shown below:GroupParent Bank2008 2007 2008 2007Financial assets at FVTPL P 6,850 P 20,952 P 5,160 P 17,748AFS securities 35,173 75,604 31,656 68,563HTM investments 114,128 67,944 105,276 62,571P 156,151 P 164,500 P 142,092 P 148,8829.1 Financial Assets at FVTPLThis account is composed of the following:GroupParent Bank2008 2007 2008 2007Derivative financial assets P 4,256 P 4,564 P 2,911 P 3,915Government bonds 1,505 12,903 1,194 10,674Other debt securities 997 3,031 982 3,1596,758 20,498 5,087 17,748Equity securities - listed 92 454 73 -P 6,850 P 20,952 P 5,160 P 17,748All financial assets at FVTPL are held for trading. For government bonds and other debt securities, the amounts presented have beendetermined directly by reference to published prices quoted in an active market. On the other hand, the fair value of derivative financialassets is determined through valuation technique using net present value of future cash flows method. The Group recognized total fair valuegain (loss) on financial assets at FVTPL amounting to (P1,356), P104 and P1,452 in 2008, 2007 and 2006, respectively, in the Group financialstatements and (P1,452), (P83) and P1,405 in 2008, 2007 and 2006, respectively, in the Parent Bank financial statements which were includedas part of Other Operating Income in the income statements.Foreign currency-denominated securities amounted to P3,562 and P8,300 as of December 31, 2008 and 2007, respectively, in the Groupfinancial statements and P3,448 and P8,236 as of December 31, 2008 and 2007, respectively, in the Parent Bank financial statements.44Thinking Ahead To Get You Ahead • Annual Report 2008
Notes to Financial StatementsDECEMBER 31, 2008, 2007 AND 2006(Amounts in Millions Except Per Share Data)Derivative instruments used by the Group include foreign currency and interest rate forwards/futures, foreign currency and interest rateswaps. Also in 2007, derivatives included embedded credit default swaps bifurcated from CLNs or credit-linked deposits (CLDs) (which werereclassified to loans together with their host contracts in 2008). Foreign currency and interest rate forwards/futures represent commitments topurchase/sell or are contractual obligations to receive or pay a new amount based on changes in currency rates or interest rates on a futuredate at a specified price. Foreign currency and interest rate swaps are commitments to exchange one set of cash flows for another. The creditdefault swaps represent commitment of the counterparty to swap the note and deposit with high yielding securities upon the occurrence ofthe reference event by the reference entity.The aggregate contractual or notional amount of derivative financial instruments and the total fair values of derivative financial assets andliabilities are shown below:Group2008 2007Notional Fair Values Notional Fair ValuesAmount Assets Liabilities Amount Assets LiabilitiesCurrency forwards/futures P 122,636 P 2,105 P 1,343 P 132,579 P 3,350 P 2,923CLNs (see Note 10) - - - 12,496 124 229Interest rate swaps 14,637 809 1,031 4,004 436 492Currency swaps 26,281 1,271 1,154 1,572 646 130Credit default swap 818 - - 4,158 8 69Others 8,553 71 46 - - -Parent BankP 172,925 P 4,256 P 3,574 P 154,808 P 4,564 P 3,8442008 2007Notional Fair Values Notional Fair ValuesAmount Assets Liabilities Amount Assets LiabilitiesCurrency forwards/futures P 108,132 P 1,483 P 1,072 P 132,468 P 3,041 P 2,534Credit-linked notes(see Note 10) - - - 12,496 124 229Interest rate swaps 9,842 493 588 2,539 263 347Currency swaps 21,249 863 988 1,117 487 98Credit default swap - - - 1,068 - 3Others 8,553 72 47 - - -P 147,776 P 2,911 P 2,695 P 149,688 P 3,915 P 3,211The Group reclassified certain equity securities from FVTPL to AFS and debt securities and embedded derivatives of CLNs from FVTPL to HTMand Loans and Other Receivables, respectively (see Note 9.4).Derivatives embedded in CLNs and CLDs amounting to (P183) and (P70) in the Group and Parent Bank financial statements, respectively, asof reclassification date, were reclassified to Loans together with their related host contracts (see Note 9.4).9.2 Available-for-Sale SecuritiesThe Group’s available-for-sale securities consist of the following:GroupParent BankNote 2008 2007 2008 2007Government debt securities P 25,102 P 47,877 P 23,302 P 45,168Other debt securities:Quoted 11,650 22,027 11,001 21,196Not quoted 634 3,292 348 -Equity securities:Quoted 625 528 149 282Not quoted 2,807 2,488 1,570 2,17540,818 76,212 36,370 68,821Allowance for impairment 14 ( 5,645 ) ( 608 ) ( 4,714 ) ( 258 )Net P 35,173 P 75,604 P 31,656 P 68,563Thinking Ahead To Get You Ahead • Annual Report 2008 45
Page 1 and 2: ATTUNED TO THE TIMES, WE AREALWAYS
Page 3 and 4: Financial HighlightsIn Billion Peso
Page 5 and 6: Report of Independent AuditorsTo th
Page 7 and 8: Income StatementsFor the Years Ende
Page 9 and 10: Cash Flow StatementsFOR THE YEARS E
Page 11 and 12: Notes to Financial StatementsDECEMB
Page 19: Notes to Financial StatementsDECEMB
Page 84: BDO Corporate Center7899 Makati Ave

Notes to Financial Statements - BDO

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