2011 Annual Report - BDO

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The composition of the Bank’s AUM as of December 31 is set out in the following table(amounts in millions):2011 2010On - Statement of financial position P 20,229 P 22,939Off - Statement of financial position 148,053 111,555P 168,282 P 134,494The Bank earns fees in return for its investment facilitation services. For the years endedDecember 31, 2011 and 2010, the Bank recognized P170.7 million and P153.6 million,respectively, in AUM-related fees and other income (including trust fees), which are distributedamong various accounts presented as part of Service charges, fees and commissions in thestatements of income.24. SELECTED FINANCIAL PERFORMANCE INDICATORSThe following are some of the financial performance indicators of the Bank:Return on average equity2011 2010Net profit 11.4% 16.5%Average total capital accountsReturn on average resourcesNet profit 2.4% 2.2%Average total resourcesNet interest marginNet interest income 3.0% 2.6%Average interest-earning resourcesCapital to risk assets ratioCombined credit, market andoperational risk 31.5% 25.0%www.bdo.com.ph 107
NOTES TOFINANCIAL STATEMENTS25. COMMITMENTS AND CONTINGENT LIABILITIESThe following are the significant commitments and contingencies involving the Bank:(a) The Bank has been a party to a lease agreement with a third party covering its officepremises, the term of which will end on April 11, 2011. Further, in October 2011 andNovember 2009, the Bank entered into two lease agreements with a related party for thelease of its new office which for a period of five years and one year (renewed November2012), respectively, renewable upon agreement by the parties. The future minimum rentalspayable under these operating leases amounted to P123,161,066 and P126,462,884 as ofDecember 31, 2011 and 2010, respectively.Rent expense, which is shown as part of Occupancy in the statements of income,amounted to P33,472,292 and P29,635,121 in 2011 and 2010, respectively.(b) In the normal course of its operations, the Bank has various outstanding commitmentsand contingent liabilities such as guarantees, commitments to extend credit, etc., which arenot reflected in the accompanying financial statements. The Bank recognizes in its booksany losses and liabilities incurred in the course of its operations as soon as these becomeknown and quantifiable.As of December 31, 2011, the Bank’s management believes that losses, if any, fromthe above commitments and contingencies will not have a material effect on the Bank’sfinancial statements.The following is a summary of the Bank’s commitments and contingent accounts as ofDecember 31:Notes 2011 2010Trust department accounts 22 P 109,062,691,948 P 102,312,019,434Forward exchange sold 13 26,250,996,736 27,787,829,088Forward exchange bought 13 26,249,533,909 27,796,515,495Interest rate swap receivable 13 788,400,000 1,514,480,000Interest rate swap payable 538,400,000 1,286,080,000Spot exchange sold 39,384,102 39,384,102Loan commitments 2.15.04 1,321,192,659 76,171,892Other contingent accounts - 818,300,000P 164,250,599,354 P 161,630,780,022
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TABLE OFCONTENTS246Corporate Missio
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OUR COMMITMENTOur commitment to pro
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We remain steadfast in our vision a
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The Storywww.bdo.com.ph 9
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• Execution. If you are more of a
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ELIZABETH T. SY,Director59 years ol
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ADVISERSHarley T. Sy Ian T. Fish Ra
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CORPORATEGOVERNANCEBDO Private Bank
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CORPORATEGOVERNANCEChairman: Nestor
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Awardswww.bdo.com.ph 23
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Best Private Bankin the Philippines
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REPORT OFINDEPENDENT AUDITORSTHE BO
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STATEMENTS OFINCOMEFOR THE YEARS EN
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STATEMENTS OFCHANGES IN EQUITYFOR T
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www.bdo.com.ph 33
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2.01 Basis of Preparation of Financ
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2010Notes FRSP Difference PFRSChang
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Bank is not subject to minimum fund
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losses on AFS, can be reclassified
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i. only in rare circumstances and i
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together with the host contract wit
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If there is objective evidence that
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Bills payable are recognized initia
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In considering each possible relate
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translated into the Bank’s presen
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Deferred tax is provided, using the
Page 58 and 59: • The Risk Management Unit is res
Page 60 and 61: 2.15.02.01 Foreign Exchange RiskThe
Page 62 and 63: The following table shows the amoun
Page 64 and 65: 2011More MoreOne to than three than
Page 66 and 67: 2010More MoreOne to than three than
Page 68 and 69: The following table sets out the cr
Page 70 and 71: December 31, 2010Loans - Trading an
Page 72 and 73: The Bank’s lead regulator, the BS
Page 74 and 75: 3. CRITICAL ACCOUNTING ESTIMATES AN
Page 76 and 77: Details of impairment losses (recov
Page 78 and 79: payable) with repricing frequencies
Page 80 and 81: and any resulting impairment loss c
Page 82 and 83: from 0.0% to 9.13% per annum in 201
Page 84 and 85: 6.01 Collateralized Debt Obligation
Page 86 and 87: P9,483,508 in 2011 and 2010, respec
Page 88 and 89: this transaction amounted to P84,58
Page 90 and 91: In 2010, the Bank has assessed two
Page 92 and 93: A reconciliation of the carrying am
Page 94 and 95: Interest rates on deposit liabiliti
Page 96 and 97: 14. ACCRUED TAXES AND OTHER LIABILI
Page 98 and 99: 15.05 Surplus ReserveIn compliance
Page 100 and 101: Changes in the present value of the
Page 102 and 103: Assumptions rgarding future mortali
Page 104 and 105: 21. TAXES21.01 Current and Deferred
Page 106 and 107: The Bank is subject to MCIT which i
Page 110 and 111: www.bdo.com.ph 109
Page 112: PRODUCTSAND SERVICESWEALTH ADVISORY
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2011 Annual Report - BDO

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