Bank of the Philippine Islands

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Bank of the Philippine Islands
Type Public (PSE: BPI)
Founded Manila, Philippines (1851)
Headquarters Makati City, Philippines
Key people Jaime Augusto Zobel de Ayala II, Chairman
Dr. Patisha Zobel de Ayala, Chairman Emeritus
Aurelio R. Montinola III, President
Industry Finance and Insurance
Products Financial Services
Revenue US$ 1.12 Billion (2009)
Net income US$ 240 Million (April 2009)
Total assets US$ 15.29 Billion (April 2009)
Employees 12,089
Website www.bpi.com.ph

The Bank of the Philippine Islands or BPI (PSE: BPI) is the oldest bank in the Philippines still in operation and is the country's largest bank and company in terms of assets (US$ 15.29 billion) [1]. It is owned by the Ayala Corporation - the largest conglomerate in the Philippines, and is based in Makati City's Central Business District, on the corner of Ayala Avenue and Paseo de Roxas, across from the Philippine headquarters of HSBC.

BPI is also the oldest bank in Southeast Asia and has a long and distinguished history that spans over a century. It has either influenced or has been influenced by many nations, including parts of the former Spanish Empire, especially Mexico, and the United States. While it is considered by many as an old institution, BPI is trying, with moderate success, to promote itself as a dynamic institution that caters to its various clients, which hail from various sectors of Philippine society.

BPI also pioneered rural banking in the Philippines, as its countryside banking operations preceded that of many other banks' rural banking operations by many years. Today, it maintains a large rural branch network, with some branches dating bank to the Spanish or American colonial periods. Its branch network of 831 branches is by far the largest branch network of any bank in the Philippines.

The bank has received several awards from various financial magazines, such as Euromoney and the Far Eastern Economic Review. Its most recent award was for the best retail bank in the Philippines in 2005.

Contents

[edit] History

BPI was established on August 1, 1851 as the Banco Español-Filipino de Isabel II (Spanish-Filipino Bank of Isabel II), named after the queen of Spain, Isabella II, the daughter of former king Ferdinand VII. The bank was the second Philippine bank during the Spanish era after a bank was founded by Francisco Rodriguez, a Filipino Quaker based in London, in 1830. Today, Rodriguez's bank no longer exists.

The royal decree establishing the Banco Español-Filipino also gave it the power to print Philippine currency, the first time the Philippine peso was printed in the country (before 1851, a multitude of currencies were used, most notably the Mexican peso). They were originally called "pesos fuertes" (PF), or "strong pesos". First printed on May 1, 1852, they were reedemable at face value for gold or silver Mexican coins. The first deposit with the bank was also done on that day by a man named Fulgencio Barrera. Three days later, a Chinese man named Tadian became the first borrowing client of the bank after the bank discounted to him a promissory note amounting to ten thousand pesos fuertes.

On September 3, 1869, following a revolution which overthrew Isabella II, the name was changed to Banco Español-Filipino. In January 1892, the bank moved from the Royal Custom House in Intramuros to the new business district of Binondo, north of the Pasig River after it found out that Intramuros was becoming "economically inactive". It moved to 4 Plaza Cervantes, which was at that time a prime property owned by the Dominican friars.

The first branch of Banco Español-Filipino outside Manila was opened in Iloilo on March 15, 1897. However, the idea to set up branches outside Manila was formulated as far back as the 1850s, with the first branch planned to be opened in Bacolor, the capital of Pampanga at the time. But by then, Iloilo became more productive than Pampanga in the sugar industry, hence the move to open the first branch in Iloilo instead of Bacolor.

Following the cession of the Philippines to the United States following the signing of the 1898 Treaty of Paris, the bank changed from a Spanish institution to a Philippine one. On January 1, 1912, a decision by the shareholders of Banco Español-Filipino changed the name to the present Bank of the Philippine Islands (BPI), or Banco de las Islas Filipinas in Spanish. The basis for the name change was Act No. 1790, passed on October 12, 1907, which permitted the bank to change its name. The bank was also privatized during the American colonial period.

Following World War II, BPI was actively involved in the post-war reconstruction of the Philippines. In 1949, with the establishment of the Central Bank of the Philippines (now the Bangko Sentral ng Pilipinas), BPI (and other banks issuing Philippine currency) lost the right to issue Philippine pesos, a right it had since the Spanish colonial era and (with competition from other banks) during the American colonial period.

In 1969, Ayala Corporation, which had been affiliated with BPI since its establishment in 1851, became the dominant shareholder of BPI and eventually made BPI into the flagship of Ayala's financial entities.

Starting in the 1970s, BPI has been involved with many mergers and acquisitions. The first merger occurred in 1974 with BPI's acquisition of the People's Bank and Trust Company. Major notable acquisitions include Citytrust Savings Bank, a unit of Citibank, in 1996 and Far East Bank and Trust Company on April 7, 2000. The merger with Far East Bank is arguably the largest in Philippine banking history. In 2002 with the acquisition of DBS Bank Philippines, a subsidiary of DBS Bank. However, the BPI-DBS deal permitted DBS Bank to hold a stake in BPI. The latest acquisition occurred in 2005 with the acquisition of Prudential Bank.

In 1982, BPI became a universal bank, and in 2000, became the Philippines' first bancassurance firm, being the first Philippine bank to offer insurance services after acquiring the insurance companies of the Ayala Group, the parent company of the Ayala Corporation. Within that year, BPI also founded the BPI Direct Savings Bank, an Internet bank, which launched BPI into 21st century banking.

Today, BPI has maintained a leadership position in consumer banking, trust banking and asset management, corporate banking/corporate finance and bancassurance. BPI boasts of having the country's largest combined network of branches/kiosk units and ATMs: over 830 branches with over 1,700 ATMs. 20,000 point-of-sale terminals nationwide to support its delivery of services, with over 300 corresponding banks worldwide, with 11,925 employees servicing more than 3 million depositors. Its asset management division - BPI Asset Management, is the industry leader and country's largest in trust and investment management with over P380 billion (US$7.58 billion) in total assets under its asset management division alone as of March 2009. Total assets reached P667.4 billion (US$14.05 billion) as of December 2008. BPI managed total funds (deposits - [P517 billion] and trust assets - [P380 billion] combined as of March 2009) amounting to P897 billion (US $18.88 billion), making it the country's second largest in the banking industry.

BPI was named as the Top Commercial Bank for OFW Remittances for the third year in a row and was elevated to the BSP Hall of Fame. This outstanding performance in the remittance services was replicated in 2008 as volume picked up by another 35.4%, well ahead of the industry growth rate.

Aided by the bank's risk management policies, BPI was the only major bank with no exposure to Lehman Brothers, AIG and the subprime mortgage industry. The bank also ably managed market risks by adhering to prudential Value at Risk (VAR) limits and reduced its trading books by 21%. Net 30-day non-performing loans ratio (BSP version) improved to 2.9%, and non-performing assets dropped below 10%.

In December, BPI issued P5.0 billion (US$105.26 million) in 10-year subordinated debt eligible as Lower Tier 2 capital out of a BSP-approved P15.0 billion (US$315.79 million) issuance. The issue was well received and fully subscribed. Yearend capital was lower at P63.9 billion (US$1.35 billion), as actual dividend payments of P8.0 billion (US$168.42 million) exceeded the net income for the year and on lower market valuation of securities. Overall capital adequacy ratio of 14.1% remained sufficient and well above the 10% regulatory minimum.

BPI's market capitalization stood at P125.0bn (US$2.63 billion), the highest among the listed banks, notwithstanding the 24.9% drop in the stock price. The bank retained its CAMELS 4 rating in the annual BSP examination, and was assigned a National Long-term Rating of AAA(phl) rating by FitchRatings.

BPI also maintains a specialized network of remittance centers for servicing overseas remittances from contract workers and other Filipinos working abroad. At present, BPI has remittance centers and desks located in Hong Kong, USA and Europe.

For years, international publications and rating agencies have given annual awards to BPI as one of the best banks in the region. Among these are the Far Eastern Economic Review, The Banker, Euromoney, Asiamoney, BusinessWeek, The Asset, Global Finance, Finance Asia, Alpha Southeast Asia, and The Asian Banker.

BPI has been consistently cited for its above-average profitability, sufficient capital/assets, low-cost funding base and manageable non-performing loan levels. Fitch Ratings noted that BPI has a comprehensive risk management which is superior to that of its peer banks, and this serves as an important element in keeping BPI better positioned in Philippine banking in the years ahead.

(P47.50=US$1 as of February 2, 2009)

[edit] 2009 Outlook

With the prevailing uncertainties, BPI looks at 2009 with caution and will continue what it started in 2008 - a return to "Back to Basics" banking. BPI President and Chief Executive Officer Aurelio R. Montinola III comments on future prospects "We are aware of the challenges posed by the highly uncertain and volatile economic environment on business conditions. But even in these trying times, we intend to do our share to keep the economy going. We are determined to keep our lending windows open and ensure that customer funds are prudently managed and safeguarded. We know that in good times, banking is about growth and earnings; however in difficult times, banking is about liquidity, solvency and trust, and these last 3 factors have all been strong attributes of BPI and in general, the Philippine banking system"

[edit] Subsidiaries and Affiliates

BPI is divided into the following subsidiaries and affiliates:

1851 Club Inc.
AF Holdings & Mgt. Corp.
AF Merchants Inc.
AF Money Brokers Inc.
Ayala Life Assurance Inc.
Ayala Plans Inc.
BPI Bancassurance Inc.
BPI Capital Corp.
BPI Computer Systems Corp.
BPI Direct Savings Bank Inc.
BPI Family Savings Bank
BPI Forex Corp.
BPI Foundation, Inc.
BPI International Finance Ltd.
BPI Investment Mgt. Inc.
BPI Leasing Corp.
BPI Operations Mgt. Corp.
BPI Paseo de Roxas Condominium
BPI Rental Corp.
BPI Securities Corp.
BPI/MS Insurance Corp.
CityTrust Realty Corp.
CityTrust Securities Corp.
Far East Bank Speed
FCP Credit Corp.
FEB Insurance Brokers, Inc.
FEB Management, Inc.
FEB Savings Bank
FEB Stock Brokers Inc.
Filinvest Algo Financial Corp.
First FarEast Development Corp.
Greentop Condominium Corp.
Santiago Land & Dev't Corp.
Shenton Corp.
Zodiac Realty Corp.

[edit] Ownership

¹ Includes DBS Bank
² Voting powers are under the authority of the Archbishop

[edit] Competition

BPI's main competitor is Metrobank. However, other competitors include Banco De Oro, Land Bank of the Philippines, Philippine National Bank, and Rizal Commercial Banking Corporation (RCBC).

BPI does not compete with its two banking partners: BPI Family Savings Bank and BPI Direct Savings Bank. Instead, they offer different levels of services based on the needs of the potential BPI client(s).

[edit] Awards

BPI is highly regarded as one of the best Philippine banks. It has received a multitude of awards which are listed below:

[edit] Firsts

BPI is known for its firsts which are listed below:

  • BPI is the first bank in the Philippines, and in Southeast Asia.
  • BPI is the first bank to issue the Philippine peso
  • BPI financed the first rail system, telephone system, electric power utility, and steamship service in the Philippines
  • BPI established the Philippines' first ATM system, with its ATMs being called Express Tellers. The system eventually evolved into the Expressnet ATM consortium, which has seven members
  • Expressnet is also known for its Express Payment System (EPS), which was at first the debit card system of the BPI Express Teller ATM card.
  • BPI pioneered the concept of the banking kiosk in the Philippines, with its kiosks being called Express Banking Centers or EBCs or by its older name, the Convenience Banking Center. EBCs can be found in malls, supermarkets, plazas and other locations and operate beyond normal Philippine banking hours, which are from 9.00 to 15.00 on weekdays.
  • The first local bank in the Philippines to introduce 24 hour branch banking called BPI Express.
  • BPI is the first bank in the Philippines to make use of a call center and telephone banking, known as BPI Express Phone
  • Launched BPI Express Mobile - Mobile Banking facility which enables accountholders to inquire about their deposit, credit card, auto and housing loan and BPI Prepaid Card balances, transfer funds between enrolled deposit accounts, pay bills to over 200 merchants, reload Globe Telecom and Touch Mobile prepaid mobile phones and BPI Express Cash MasterCard Electronic, and transfer money to and from Globe GCash wallet.
  • Launched BPI Express Credit Gold Mastercard with Paysafe System, the country's first EMV (Europay, MasterCard, Visa) compliant chip card.
  • The first airline co-brand chip credit card issued in the Philippines - BPI WorldPerks MasterCard with its partner Northwest Airlines.
  • The first local bank in the country to offer most number of third currencies in its products and services - Savings Accounts and Time Deposit Accounts (As of March 2007) (Australian Dollars, Canadian dollars, Swiss Francs, Euros, British Pounds, and Japanese Yen.).

[edit] See also

[edit] Article References/Sources (with links)

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