Via ODiSy March 22, 2012 PHILIPPINE STOCK EXCHANGE ... - BDO

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- 55 -VaR is one of the key measures in BDO Unibank Group’s management of market risk.VaR is defined as a statistical estimate of the maximum possible loss on a given positionduring a time horizon within a given confidence interval. BDO Unibank Group uses a99% confidence level and a 260-day observation period in VaR calculation. BDOUnibank Group’s VaR limit is established as a percentage of projected earnings and isused to alert senior management whenever the potential losses in BDO UnibankGroup’s portfolios exceed tolerable levels. Because the VaR measure is tied to marketvolatility, it therefore allows management to react quickly and adjust its portfoliostrategies in different market conditions in accordance with its risk philosophy andappetite. The VaR model is validated through back-testing.Although VaR is an important tool for measuring market risk, the assumptions onwhich the model is based do give rise to some limitations, including the following:• A 1-day holding period assumes that it is possible to hedge or dispose ofpositions within that period. This is considered to be a realistic assumption inalmost all cases but may not be the case in situations in which there is severemarket illiquidity for a prolonged period;• A 99% confidence level does not reflect losses that may occur beyond this level.Even within the model used, there is a one percent probability that losses couldexceed the VaR;• VaR is calculated on an end-of-day basis and does not reflect exposures thatmay arise on positions during the trading day;• The use of historical data as a basis for determining the possible range of futureoutcomes may not always cover all possible scenarios, especially those of anexceptional nature; and,• The VaR measure is dependent upon BDO Unibank Group’s position and thevolatility of market prices. The VaR of an unchanged position reduces if themarket price volatility declines and vice-versa.The limitations of the VaR methodology are recognized by supplementing VaR limitswith other position and sensitivity limit structures, including limits to address potentialconcentration risks within each trading portfolio. In addition, the Bank uses a widerange of stress tests to model the financial impact of a variety of exceptional marketscenarios on individual trading portfolios and the Bank’s overall position. Stress VaR isalso performed on all portfolios as a complementary measure of risk. While VaR dealswith risk during times of normality, stress testing is used to measure the potential effectof a crisis or low probability event.
- 56 -A summary of the VaR position of the trading portfolios at December 31 follows:BDO Unibank Group2011 2010VaR Stress VaR VaR Stress VaRForeign currency risk (P 8) (P 80) (P 12) (P 108)Interest rate risk – Peso ( 17) ( 73) ( 136) ( 969)Interest rate risk – USD ( 6) ( 132) ( 14) ( 206)Parent Bank(P 31) (P 285) (P 162) (P 1,283)2011 2010VaR Stress VaR VaR Stress VaRForeign currency risk (P 8) (P 80) (P 11) (P 102)Interest rate risk – Peso ( 8) ( 17) ( 115) ( 779)Interest rate risk – USD ( 2) ( 34) ( 2) ( 42)(P 18) (P 131) (P 128) (P 923)The earnings-at-risk before tax in a rising and declining interest rate scenario forfinancial assets and liabilities repriced during 2011 and 2010 is shown below.BDO Unibank Group2011Change in interest rates (in basis points)-100 +100 -50 +50Change on annualizednet interest income (P 1,515) P 1,515 (P 758) P 758As a percentage of BDOUnibank Group’s netinterest income for 2011 ( 4.5%) 4.5% ( 2.2%) 2.2%Earnings-at-risk P 1,9182010Change in interest rates (in basis points)-100 +100 -50 +50Change on annualizednet interest income (P 1,090) P 1,090 (P 545) P 545As a percentage of BDOUnibank Group’s netinterest income for 2010 ( 3.2%) 3.2% ( 1.6%) 1.6%Earnings-at-risk P 386
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Via ODiSyMarch 22, 2012PHILIPPINE S
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SEC FORM 17-A
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TABLE OF CONTENTSPage No.PART I- BU
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Philippine Subsidiaries% Interest H
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sophisticated investors. The Bank
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(v)Transactions with and/or Depende
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BDO BANK-OWNED PROPERTIES UTILIZED
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BDO BANK-OWNED PROPERTIES UTILIZED
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2) Leased PropertiesThe Group lease
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Branch Address Lease Lease ExpiryEf
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Item 4. Submission of Matters to a
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On 29 January 2011, the Board of th
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Total Equity grew by 9% to P97.0 bi
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Balance Sheet - 2010 vs. 2009Total
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Comprehensive Income - For the year
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Item 7. Financial StatementsThe con
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UOB Singapore. He was formerly the
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Director of the Philippine Global C
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Name Age PositionInvestments GroupG
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Antonio N. Cotoco, 63, is Senior Ex
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Bienvenido M. Juat, Jr., 58, is Exe
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Ma. Ophelia Ll. Camiña, 58, is Sen
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Corporation; a Trustee of PCI Bank
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Dalmacio D. Martin, 50, is Senior V
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Luis S. Reyes, Jr., 54, is Senior V
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Equitable Banking Corporation in Ju
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The above compensation includes the
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Title ofClassName of BeneficialOwne
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esponsible for the setting up of th
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2 May 2011 Retirement of Ms. Nenita
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Setting the annual shareholders’
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AUDITED FINANCIAL STATEMENTSDECEMBE
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BDO UNIBANK, INC. AND SUBSIDIARIES(
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- 2 -Net UnrealizedFair ValueGains
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- 2 -BDO Unibank GroupParent BankNo
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1.02 Approval of Financial Statemen
Page 101 and 102: - 4 -Parent BankFRSP Difference PFR
Page 103 and 104: - 6 -(ii) Philippine Interpretation
Page 105 and 106: - 8 -• PFRS 7 (Amendment), Financ
Page 107 and 108: - 10 -(v) PFRS 9, Financial Instrum
Page 109 and 110: - 12 -The financial statements of s
Page 111 and 112: - 14 -2.06 Financial AssetsFinancia
Page 113 and 114: - 16 -HTM investments consist of go
Page 115 and 116: - 18 -The value produced by a model
Page 117 and 118: - 20 -2.12 Premises, Furniture, Fix
Page 119 and 120: - 22 -Deposit liabilities and other
Page 121 and 122: - 24 -2.20 Revenue and Expense Reco
Page 123 and 124: - 26 -Provisions are measured at th
Page 125 and 126: - 28 -Future cash flows in a group
Page 127 and 128: - 30 -Foreign exchange gains and lo
Page 129 and 130: - 32 -(e)Executive Stock Option Pla
Page 131 and 132: - 34 -3.01 Critical Management Judg
Page 133 and 134: - 36 -3.02 Key Sources of Estimatio
Page 135 and 136: - 38 -(iv) Loans and Other Receivab
Page 137 and 138: - 40 -Parent BankNotes Level 1 Leve
Page 139 and 140: - 42 -The retirement benefit asset
Page 141 and 142: - 44 -• It then disseminates the
Page 143 and 144: - 46 -2010MoreOne to than three Mor
Page 145 and 146: - 48 -2010MoreOne to than three Mor
Page 147 and 148: - 50 -Parent Bank2011 2010ForeignFo
Page 149 and 150: - 52 -BDO Unibank Group2010More Mor
Page 151: - 54 -Parent Bank2010More MoreOne t
Page 155 and 156: - 58 -Parent BankImpact onImpact on
Page 157 and 158: - 60 -b. SubstandardAccounts classi
Page 159 and 160: - 62 -BDO Unibank Group2010Loans an
Page 161 and 162: - 64 -Parent Bank2010Loans andTradi
Page 163 and 164: - 66 -4.02.04.03 Concentrations of
Page 165 and 166: - 68 -5. SEGMENT REPORTINGThe BDO U
Page 167 and 168: - 70 -Commercial Investment Private
Page 169 and 170: - 72 -At Amortized Carrying FairCos
Page 171 and 172: - 74 -8. DUE FROM OTHER BANKSThe ba
Page 173 and 174: - 76 -The aggregate contractual or
Page 175 and 176: - 78 -The fair values of government
Page 177 and 178: - 80 -The fair values are determine
Page 179 and 180: - 82 -Reclassification of CLNs from
Page 181 and 182: - 84 -Per MORB, non-performing loan
Page 183 and 184: - 86 -Leasehold Furniture,Rights an
Page 185 and 186: - 88 -Land Buildings TotalJanuary 1
Page 187 and 188: - 90 -Real and other properties acq
Page 189 and 190: - 92 -The BDO Unibank Group’s sub
Page 191 and 192: - 94 -Full allowance for impairment
Page 193 and 194: - 96 -This account is composed of t
Page 195 and 196: - 98 -The breakdown of this account
Page 197 and 198: - 100 -On October 19, 2009, the pre
Page 199 and 200: - 102 -On December 29, 2009, BSP is
Page 201 and 202: - 104 -19.02 Capital AllocationThe
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- 106 -annum of the par value. Subs
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- 108 -20. INTEREST INCOMEInterest
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- 110 -Other operating expenses con
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- 112 -The movements in the present
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- 114 -Parent Bank2011 2010 2009 20
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- 116 -(c) Other Transactions with
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- 118 -ii. On January 31, 2008, BDO
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- 120 -27. TAXES27.01 Current and D
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- 122 -Movements in net deferred ta
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- 124 -27.04 Gross Receipts Tax (GR
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- 126 -28. EARNINGS PER SHAREBasic
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- 128 -29. SELECTED FINANCIAL PERFO
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- 130 -Sale of BankardBDO (as succe
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- 132 -PEACe bondsOn October 18, 20
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- 134 -Following is a summary of BD
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Via ODiSy March 22, 2012 PHILIPPINE STOCK EXCHANGE ... - BDO

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