FINANCIAL HIGHLIGHTS STRONG STANDING STRONG

Transcription

1 2015 FINANCIAL HIGHLIGHTS S TA N D I N G STRONG STANDING STRONG 1

2 VISION MISSION To be the country s premiere financial conglomerate, empowering our individual and business clients to realize their goals and reach their full potential. By creating and customizing financial solutions in response to our stakeholders needs, continuously expanding our scope of reach, and leading in community service, we live up to our You re in Good Hands promise that embodies who we are and what we do. We are Metrobank. for service and excellence. We ensure their future by providing them with fulfilling careers. WE COMMIT TO BE THE TRUSTED FINANCIAL PARTNER Our business relies on the principles of trust, honesty and integrity as we serve our customers and help them attain their financial goals. THE EMPLOYER OF CHOICE We strengthen the organization by continuously developing and enhancing the abilities of our people. We nurture them into professional individuals with integrity and passion RESPONSIBLE BANK We adhere to the highest standards of corporate governance, exercising accountability, fairness, and transparency across all our business operations. We exercise good management to provide our shareholders with sustainable returns on their investments. AN INSTITUTION WITH A HEART We give back to the communities we serve, committed to making meaningful contributions to the economic and social development of our nation. b METROPOLITAN BANK & TRUST COMPANY

3 SUMMARY GROUP FINANCIAL STATEMENTS (In Million Pesos, Except Per Share Amounts and Foreign Exchange Rates) At Year End Total Assets 1,760,692 1,604,540 1,378,569 Loans and Receivables - Net 887, , ,064 Financial Assets at Fair Value Through Profit or Loss 48,856 45,935 55,441 Available-for-Sale Investments - Net 235, , ,429 Held-to-Maturity Investments 208, ,076 38,425 Total Liabilities 1,557,382 1,445,755 1,235,864 Deposit Liabilities 1,257,970 1,184,454 1,016,268 Demand 233, , ,694 Savings 467, , ,915 Time 542, , ,659 Long-Term Negotiable Certificates of Deposit 14,250 14,250 Total Equity 203, , ,705 Attributable to: Equity Holders of the 193, , ,887 Non-controlling Interest 9,551 8,656 7,818 Book value per share Foreign Exchange (USD:PHP) PDS Closing Rate PDS Weighted Average Rate (PDS: Philippine Dealing System) For the Year Net Interest Income 48,974 45,763 38,269 Interest Income 65,556 59,294 49,892 Interest Expense 16,582 13,531 11,623 Non-interest Income 18,837 29,574 42,132 Trading and Securities Gain - Net 1,282 3,305 17,182 Foreign Exchange Gain (Loss) - Net 517 (102) (2,266) Service Charges, Fees and Commissions 9,794 8,898 8,640 Income from Trust Operations 1,164 1,186 1,071 Other Non-interest Income 1 6,080 16,287 17,505 Total Operating Income 67,811 75,337 80,401 Total Operating Expenses 41,931 46,843 49,324 Provision for Credit and Impairment Losses 2,059 4,849 10,722 Other Operating Expenses 39,872 41,994 38,602 Net Income 20,643 22,035 24,329 Attributable to: Equity Holders of the 18,625 20,113 22,488 Non-controlling Interest 2,018 1,922 1,841 Basic/Diluted Earnings Per Share Attributable to Equity Holders of the Includes share in net income of associates and a joint venture and 2013 restated to show the effect of stock rights issued in 2015 Key Ratios Net Interest Margin 3.5% 3.7% 3.9% Return on Average Equity 10.8% 14.1% 17.8% Return on Average Assets 1.1% 1.4% 1.9% Non-performing Loans Ratio 1.0% 1.0% 1.3% Non-performing Loans Cover 110.7% 165.2% 164.1% (Basel III) (Basel III) (Basel II) Capital Adequacy Ratio 17.8% 16.0% 16.7% Tier 1 Capital 14.3% 12.1% 15.0% Common Equity Tier % 12.1% n.a. STANDING STRONG 1

4 RESULTS OF OPERATIONS Metrobank reported P18.6 billion consolidated net income attributable to the equity holders of the Parent Company driven mainly by growth in its core business. Total revenue reached P67.4 billion, consisting of net interest income and other operating income. Net interest income derived from core businesses such as lending, investment, deposit-taking and borrowing activities reached P49.0 billion, and now accounts for over 70% of total operating income. The Bank booked P18.4 billion in other operating income comprised of P9.8 billion in service charges, fees and commissions, which went up by 10% from last year; P1.8 billion in trading and FX gains; and P6.8 billion in other income. Total operating expenses, excluding provisions and impairment losses, was recorded at P39.9 billion. Meanwhile, the Group set aside P2.1 billion in provisions for credit and impairment losses and P5.2 billion in provisions for income tax. As a result, Metrobank recorded 10.8% in return on average equity and 1.1% in return on average assets. The Philippine Stock Exchange index (PSEi) closed 2015 at 6,952.08, down 3.85% from the previous year. Metrobank s share price ended 2015 at P80.50 per share for a market capitalization of P256.0 billion. 2 METROPOLITAN BANK & TRUST COMPANY

5 FINANCIAL CONDITION The Group closed 2015 recording another new high in resources. Consolidated total assets reached P1.8 trillion, up 10% from the P1.6 trillion posted the previous year. Loans and receivables, net of allowance for credit losses expanded by 17% as Metrobank outpaced the industry s 13% year-on-year loan expansion. The Bank ended the year with net loans and receivables of P887.2 billion. Commercial loans continue to account for the biggest share of the total portfolio at 74% with the balance 26% coming from consumer loans. Asset quality continues to improve with non-performing loans (NPL) ratio at a new low, or below the 1.0% level. Meanwhile, the net book value of investment properties, which consists of foreclosed real estate properties and investment in real estate, further declined to P8.2 billion from P10.0 billion the previous year due to the sustained efforts to dispose such non-performing assets. Liquid assets increased by 3% to P812.7 billion. Investment securities consisting of financial assets and fair value through profit or loss, available-for-sale and held-to-maturity investments, grew by 29% to P492.4 billion. Due from other banks and due from Bangko Sentral ng Pilipinas were down slightly to P36.9 billion and P214.7 billion, respectively. Meanwhile, consolidated total liabilities increased by 8% to P1.6 trillion from P1.4 trillion the previous year, as funds sourced from total deposit liabilities and bills payable and securities sold under repurchase agreements (SSURA) increased by 6% and 26%, respectively. Deposit liabilities, which represent 81% of the consolidated total liabilities stood at P1.3 trillion. Low cost deposits or CASA which include demand and savings deposits increased by 18% year-on-year and now represent 56% of the total deposit base. The growth in CASA also outpaced industry s 9% growth in deposits. Following the P32 billion stock rights offer completed in April 2015, equity attributable to the Bank by yearend 2015 was at P193.8 billion from P150.1 billion the previous year. STANDING STRONG 3

6 SUPPLEMENTARY MANAGEMENT DISCUSSION The capital-to-risk assets ratios of the Group and the as reported to the BSP as of December 31, 2015 and 2014 based on Basel III are shown in the table below. Group December (In Millions) Tier 1 Capital P=190,265 P=147,953 P=181,062 P=139,523 Common Equity Tier 1 Capital (CET1) 190, , , ,523 Less: Required deductions 32,317 31,055 69,455 66,960 Net Tier 1 Capital 157, , ,607 72,563 Tier 2 Capital 38,814 37,430 28,977 27,874 Total Qualifying Capital P=196,762 P=154,328 P=140,584 P=100,437 Credit Risk-Weighted Assets P=956,524 P=816,557 P=758,218 P=634,754 Market Risk-Weighted Assets 29,487 34,042 27,361 32,571 Operational Risk-Weighted Assets 122, ,180 73,082 66,708 Risk-Weighted Assets P=1,108,482 P=962,779 P=858,661 P=734,033 Ratios of common equity tier 1 (CET1) capital, tier 1 capital and total qualifying capital are computed by dividing each component over the total risk-weighted assets. Details are as follows (amounts in millions): CET1 ratio: CET1 Capital P=157,948 P=116,898 P=111,607 P=72,563 Risk-Weighted Assets 1,108, , , ,033 CET1 Ratio 14.25% 12.14% 13.00% 9.89% Minimum CET1 ratio 6.00% 6.00% 6.00% 6.00% Capital Conservation Buffer 8.25% 6.14% 7.00% 3.89% Tier 1 capital ratio: Tier 1 capital P=157,948 P=116,898 P=111,607 P=72,563 Risk-Weighted Assets 1,108, , , ,033 Tier 1 Capital Ratio 14.25% 12.14% 13.00% 9.89% Total capital ratio: Total qualifying capital P=196,762 P=154,328 P=140,584 P=100,437 Risk-Weighted Assets 1,108, , , ,033 Total capital ratio 17.75% 16.03% 16.37% 13.68% Under BASEL III, the regulatory qualifying capital of the consists of Tier 1 (going concern) capital and Tier 2 (goneconcern) capital. Tier 1 Capital consists of CET1 capital, which comprises paid-up common stock, retained earnings including current year profit, surplus reserves, other comprehensive income (net unrealized gains or losses on available-for-sale securities and cumulative foreign currency translation) and non-controlling interest less regulatory adjustments such as unsecured credit accommodations to DOSRI/subsidiaries and affiliates, deferred tax assets, defined benefit pension fund assets, goodwill and investments in equity of unconsolidated subsidiaries. The other component of regulatory capital is Tier 2 capital which includes unsecured subordinated debt and general loan loss provision. The main features of capital instruments issued by the Group and the that are eligible as Tier 1 capital and Tier 2 capital are presented in Notes 23 and 20, respectively, of the 2015 audited financial statements. 4 METROPOLITAN BANK & TRUST COMPANY

7 The components of Tier 1 Capital and regulatory adjustments/deductions as of December 31, 2015 and 2014 based on Basel III, follow: Group December (In Millions) CET1 Capital/Core Tier 1 Capital Paid-up common stock P=63,603 P=54,896 P=63,603 P=54,896 Additional paid-in capital 36,198 13,371 36,198 13,371 Retained earnings 86,321 72,454 86,321 72,454 Net unrealized gains or losses on AFS securities (4,671) (2,749) (4,671) (2,749) Cumulative foreign currency translation 1,733 1,551 1,733 1,551 Other comprehensive income (2,122) (2,122) Minority interest in subsidiary financial allied undertakings which are less than wholly-owned 9,203 8,430 Sub-total 190, , , ,523 Less regulatory adjustments to CET1 capital/deductions from Core Tier 1 capital: Total outstanding unsecured credit accommodations, both direct and indirect, to DOSRI, and unsecured loans, other credit accommodations and guarantees granted to subsidiaries and affiliates (net of specific provisions, if any) referred to in Circular No ,468 5,939 4,987 5,391 Deferred tax assets (net of allowance for impairment and associated deferred tax liability, if any) 8,383 7,287 5,905 5,414 Goodwill (net of allowance for impairment) 3,675 3,674 3,628 3,628 Other intangible assets 1,752 1,322 1, Defined benefit pension fund assets (liabilities) Investments in equity of unconsolidated subsidiary banks and quasi-banks, and other financial allied undertakings (excluding subsidiary securities dealers/brokers and insurance companies), after deducting related goodwill, if any (for solo basis only and as applicable) 53,094 51,211 Investments in equity of unconsolidated subsidiary securities dealers/brokers and insurance companies after deducting related goodwill, if any Significant minority investments (10% - 50% of voting stock) in banks and quasi-banks, and other financial allied undertakings after deducting related goodwill, if any 2,137 1, Significant minority investments (10% - 50% of voting stock) in securities dealers/brokers and insurance companies after deducting related goodwill, if any 1,481 1,220 Minority investments (below 10% of voting stock) in subsidiary banks and quasi-banks, and other financial allied undertakings (excluding subsidiary securities dealers/brokers and insurance companies) after deducting related goodwill, if any 982 1,418 Other equity investments in non-financial allied undertakings and non-allied undertakings 7,561 7, Total regulatory adjustments to CET1 capital 32,317 31,055 69,455 66,960 Total CET1 capital/core Tier 1 capital P=157,948 P=116,898 P=111,607 P=72,563 The components of Tier 2 capital as of December 31, 2015 and 2014 computed in accordance with Basel III, follow: Group December (In Millions) Tier 2 Capital General loan loss provision P=9,389 P=8,006 P=6,651 P=5,548 Unsecured subordinated debts 29,425 29,424 22,326 22,326 Total Tier 2 capital P=38,814 P=37,430 P=28,977 P=27,874 STANDING STRONG 5

8 Full reconciliation of all regulatory capital elements back to the balance sheet in the audited financial statements follows (amounts in millions): Group December Audited Reconciling Financial Qualifying Reconciling Items Statements Capital Items Audited Financial Statements Qualifying Capital Common stock P=63,603 P= P=63,603 P=54,896 P= P=54,896 Additional paid-in capital 36,198 5,941 42,139 13,371 5,941 19,312 Hybrid capital securities 6,351 6,351 6,351 6,351 Retained earnings 86,321 2,682 89,003 72,454 1,175 73,629 Net unrealized gains or losses on AFS securities (4,671) (112) (4,783) (2,749) 355 (2,394) Cumulative foreign currency translation and others 1,733 (937) 796 1,551 (1,036) 515 Other comprehensive income (2,122) (1,228) (3,350) (2,180) (2,180) Non-controlling interest 9, ,551 8, ,656 Deductions (32,317) 32,317 (31,055) 31,055 Tier 1 (CET1) capital/total equity 157,948 45, , ,898 41, ,785 Tier 2 capital 38,814 (38,814) 37,430 (37,430) Total qualifying capital/total equity P=196,762 P=6,548 P=203,310 P=154,328 P=4,457 P=158,785 December Audited Reconciling Financial Qualifying Reconciling Items Statements Capital Items Audited Financial Statements Qualifying Capital Common stock P=63,603 P= P=63,603 P=54,896 P= P=54,896 Additional paid-in capital 36,198 5,941 42,139 13,371 5,941 19,312 Hybrid capital securities 6,351 6,351 6,351 6,351 Retained earnings 86,321 (27,210) 59,111 72,454 (25,818) 46,636 Net unrealized gains or losses on AFS securities (4,671) 169 (4,502) (2,749) 140 (2,609) Cumulative foreign currency translation and others 1,733 (2,296) (563) 1,551 (2,393) (842) Other comprehensive income (2,122) (793) (2,915) (2,028) (2,028) Deductions (69,455) 69,455 (66,960) 66,960 Tier 1 (CET1) capital/total equity 111,607 51, ,224 72,563 49, ,716 Tier 2 capital 28,977 (28,977) 27,874 (27,874) Total qualifying capital/total equity P=140,584 P=22,640 P=163,224 P=100,437 P=21,279 P=121,716 Certain adjustments are made to PFRS-based results and reserves, as prescribed by the BSP for prudential reporting and vice versa. 6 METROPOLITAN BANK & TRUST COMPANY

9 Details of risk-weighted assets and capital requirements by type of exposure as of December 31, 2015 and 2014 follow: Credit Risk Market Risk Operational Risk Parent Parent Parent Group Company Group Company Group Company (In Millions) December 31, 2015 On-Balance Sheet P=890,348 P=692,709 Off-Balance Sheet 27,605 27,106 Counterparty (Banking Book) 29,126 28,958 Counterparty (Trading Book) 9,445 9,445 Interest Rate Exposures P=24,318 P=22,203 Foreign Exchange Exposures 5,106 5,095 Options Basic Indicator Approach P=122,471 P=73,082 Total P=956,524 P=758,218 P=29,487 P=27,361 P=122,471 P=73,082 Capital Requirements P=95,652 P=75,822 P=2,949 P=2,736 P=12,247 P=7,308 December 31, 2014 On-Balance Sheet P=771,383 P=590,166 Off-Balance Sheet 25,181 24,597 Counterparty (Banking Book) 13,378 13,378 Counterparty (Trading Book) 6,615 6,613 Interest Rate Exposures P=22,569 P=21,234 Foreign Exchange Exposures 11,472 11,336 Options 1 1 Basic Indicator Approach P=112,180 P=66,708 Total P=816,557 P=634,754 P=34,042 P=32,571 P=112,180 P=66,708 Capital Requirements P=81,656 P=63,475 P=3,404 P=3,257 P=11,218 P=6,671 Credit exposures for on-balance sheet assets cover exposures on sovereigns, multilateral development banks (MDBs), banks/quasibanks, local government units (LGUs), government corporations, corporates, housing loans, MSMEs, defaulted exposures, ROPA and other assets, net of deductions. On the other hand, counterparty risk-weighted assets cover derivatives and repo-style transactions both in the banking and trading books. As of December 31, 2015 and 2014, the Group has no exposures to securitization structures, contracts that provide credit protection through credit derivatives and investments in other types of structured products. Credit risk mitigants on risk-weighted assets were based on collateralized transactions (margin deposits and hold-out on deposits) as well as guarantees by the Philippine National Government and those guarantors and exposures with highest credit ratings. Standardized credit risk weights were used in the credit assessment of asset exposures. Third party credit assessments were based on the ratings by Standard & Poor's, Moody's, Fitch and PhilRatings on exposures to Sovereigns, MDBs, Banks, LGUs, Government Corporations and Corporates. Operational Risk-Weighted Assets are computed using the Basic Indicator Approach. STANDING STRONG 7

10 Group Exposures Exposures, Net of Specific Provisions Covered by CRM, Gross of Materiality Threshold Exposures after Risk Mitigation/Credit Equivalent 2015 On-Balance Sheet Assets (net of deductions)* P=1,684,411 P=63,065 P=1,621,346 Off-Balance Sheet Assets 38,723 Counterparty Assets in the Banking Book 71,319 Counterparty Assets in the Trading Book 12,698 Total Credit Exposures P=1,744, On-Balance Sheet Assets (net of deductions)* P=1,532,937 P=51,709 P=1,481,228 Off-Balance Sheet Assets 33,373 Counterparty Assets in the Banking Book 47,131 Counterparty Assets in the Trading Book 9,826 Total Credit Exposures P=1,571,558 Total credit exposures broken down by risk buckets follow (amounts in millions): Risk Weights 0% 20% 50% 75% 100% 150% TOTAL 2015 On-Balance Sheet Assets (net of deductions)* P=636,379 P=56,558 P=85,071 P=49,172 P=783,322 P=10,844 P=1,621,346 Off-Balance Sheet Assets 22,237 16,486 38,723 Counterparty Assets in the Banking Book 11,961 15,196 36,151 8,011 71,319 Counterparty Assets in the Trading Book 1,604 1, ,694 12,698 Total Credit Exposures P=649,944 P=73,250 P=144,363 P=49,172 P=816,513 P=10,844 P=1,744,086 Total Risk-Weighted On-Balance Sheet Assets P= P=11,311 P=42,570 P=36,879 P=783,322 P=16,266 P=890,348 Total Risk-Weighted Off-Balance Sheet Assets 11,119 16,486 27,605 Total Counterparty Risk-Weighted Assets in the Banking Book 3,039 18,076 8,011 29,126 Total Counterparty Risk-Weighted Assets in the Trading Book ,694 9,445 Total Credit Risk-Weighted Assets P= P=14,649 P=72,217 P=36,879 P=816,513 P=16,266 P=956, On-Balance Sheet Assets (net of deductions)* P=625,159 P=53,285 P=75,395 P=37,948 P=679,264 P=10,177 P=1,481,228 Off-Balance Sheet Assets 16,383 16,990 33,373 Counterparty Assets in the Banking Book 9,214 18,601 19,316 47,131 Counterparty Assets in the Trading Book 1,479 1, ,819 9,826 Total Credit Exposures P=635,852 P=73,447 P=112,061 P=37,948 P=702,073 P=10,177 P=1,571,558 Total Risk-Weighted On-Balance Sheet Assets P= P=10,656 P=37,736 P=28,461 P=679,264 P=15,266 P=771,383 Total Risk-Weighted Off-Balance Sheet Assets 8,191 16,990 25,181 Total Counterparty Risk-Weighted Assets in the Banking Book 3,720 9,658 13,378 Total Counterparty Risk-Weighted Assets in the Trading Book ,819 6,615 Total Credit Risk-Weighted Assets P= P=14,688 P=56,069 P=28,461 P=702,073 P=15,266 P=816,557 8 METROPOLITAN BANK & TRUST COMPANY

11 Exposures Exposures, Net of Specific Provisions Covered by CRM, Gross of Materiality Threshold Exposures after Risk Mitigation/Credit Equivalent 2015 On-Balance Sheet Assets (net of deductions)* P=1,363,376 P=38,457 P=1,324,919 Off-Balance Sheet Assets 38,224 Counterparty Assets in the Banking Book 68,887 Counterparty Assets in the Trading Book 12,698 Total Credit Exposures P=1,444, On-Balance Sheet Assets (net of deductions)* P=1,244,444 P=36,049 P=1,208,395 Off-Balance Sheet Assets 32,789 Counterparty Assets in the Banking Book 47,131 Counterparty Assets in the Trading Book 9,821 Total Credit Exposures P=1,298,136 Total credit exposures broken down by risk buckets follow (amounts in millions): Risk Weights 0% 20% 50% 75% 100% 150% TOTAL 2015 On-Balance Sheet Assets (net of deductions)* P=549,836 P=42,457 P=77,908 P=47,600 P=602,296 P=4,822 P=1,324,919 Off-Balance Sheet Assets 22,237 15,987 38,224 Counterparty Assets in the Banking Book 9,960 15,037 35,879 8,011 68,887 Counterparty Assets in the Trading Book 1,604 1, ,694 12,698 Total Credit Exposures P=561,400 P=58,990 P=136,928 P=47,600 P=634,988 P=4,822 P=1,444,728 Total Risk-Weighted On-Balance Sheet Assets P= P=8,491 P=38,988 P=35,700 P=602,296 P=7,234 P=692,709 Total Risk-Weighted Off-Balance Sheet Assets 11,119 15,987 27,106 Total Counterparty Risk-Weighted Assets in the Banking Book 3,007 17,940 8,011 28,958 Total Counterparty Risk-Weighted Assets in the Trading Book ,694 9,445 Total Credit Risk-Weighted Assets P= P=11,797 P=68,499 P=35,700 P=634,988 P=7,234 P=758, On-Balance Sheet Assets (net of deductions)* P=548,495 P=39,734 P=62,128 P=36,099 P=517,731 P=4,208 P=1,208,395 Off-Balance Sheet Assets 16,383 16,406 32,789 Counterparty Assets in the Banking Book 9,214 18,601 19,316 47,131 Counterparty Assets in the Trading Book 1,478 1, ,819 9,821 Total Credit Exposures P=559,187 P=59,892 P=98,794 P=36,099 P=539,956 P=4,208 P=1,298,136 Total Risk-Weighted On-Balance Sheet Assets P= P=7,947 P=31,102 P=27,074 P=517,731 P=6,312 P=590,166 Total Risk-Weighted Off-Balance Sheet Assets 8,191 16,406 24,597 Total Counterparty Risk-Weighted Assets in the Banking Book 3,720 9,658 13,378 Total Counterparty Risk-Weighted Assets in the Trading Book ,819 6,613 Total Credit Risk-Weighted Assets P= P=11,978 P=49,434 P=27,074 P=539,956 P=6,312 P=634,754 *As of December 31, 2015 and 2014, deductions from on-balance sheet exposures amounted to P=71.5 million and P=66.9 million, respectively, for the Group and P=104.4 million and P=97.2 million, respectively, for the. Deductions include among others: financial assets held for trading, derivatives with positive fair value held for trading, total outstanding unsecured credit accommodations to DOSRI (both direct and indirect), unsecured loans, other credit accommodations and guarantees granted to subsidiaries and affiliates, deferred tax assets, goodwill, other intangible assets, defined benefit pension fund assets, investments in equity of unconsolidated banks and quasi-banks and other financial allied undertakings (excluding subsidiary securities dealers/brokers and insurance companies), after deducting related goodwill, if any (for solo basis), investments in equity of unconsolidated subsidiary securities dealers/brokers, insurance companies and non-financial allied undertakings, after deducting related goodwill, (for both solo and consolidated bases), significant minority investments (20%-50% of voting stock) in banks and quasi-banks and other financial allied undertakings (for both solo and consolidated bases), loans to RBU by FCDU/EFCDU; net accumulated market gains/(losses) on available-for-sale securities and other equity investments in non-financial allied undertakings and non-allied undertakings. The impact of reasonably possible changes in the interest rates on net interest income follows (amounts in millions): Sensitivity of Net Interest Income Group Movement in December 31 Currency basis points PHP +10 P=62.12 P=81.20 P= P= USD +10 (42.42) (49.30) (33.21) (47.40) Others PHP -10 (62.07) (81.10) (129.47) (140.50) USD Others -10 (6.19) (7.60) (6.19) (7.60) STANDING STRONG 9

12 STATEMENT OF MANAGEMENT S RESPONSIBILITY FOR FINANCIAL STATEMENTS 10 METROPOLITAN BANK & TRUST COMPANY

13 STANDING STRONG 11

14 INDEPENDENT AUDITORS REPORT The Stockholders and the Board of Directors Metropolitan Bank & Trust Company Metrobank Plaza, Sen. Gil Puyat Avenue Urdaneta Village, Makati City Metro Manila, Philippines Report on the Financial Statements We have audited the accompanying financial statements of Metropolitan Bank & Trust Company and Subsidiaries (the Group) and of Metropolitan Bank & Trust Company (the ), which comprise the statements of financial position as at December 31, 2015 and 2014 and the statements of income, statements of comprehensive income, statements of changes in equity and statements of cash flows for each of the three years in the period ended December 31, 2015, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements The Group s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the Philippines for banks for the Group and Philippine Financial Reporting Standards for the as described in Note 2 to the financial statements, and for such internal control as the Group s management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 12 METROPOLITAN BANK & TRUST COMPANY

15 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Group as at December 31, 2015 and 2014 and its financial performance and its cash flows for each of the three years in the period ended December 31, 2015 in accordance with the accounting principles generally accepted in the Philippines for banks as described in Note 2 to the financial statements. In our opinion, the financial statements present fairly, in all material respects, the financial position of the as at December 31, 2015 and 2014 and its financial performance and its cash flows for each of the three years in the period ended December 31, 2015 in accordance with Philippine Financial Reporting Standards. Report on the Supplementary Information Required Under Revenue Regulations and Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information required under Revenue Regulations and in Note 37 to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the responsibility of the management of the. The information has been subjected to the auditing procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as whole. SYCIP GORRES VELAYO & CO. Janeth T. Nuñez-Javier Partner CPA Certificate No SEC Accreditation No A (Group A), July 1, 2013, valid until June 30, 2016 Tax Identification No BIR Accreditation No , February 27, 2015, valid until February 26, 2018 PTR No , January 4, 2016, Makati City February 17, 2016 STANDING STRONG 13

16 STATEMENTS OF FINANCIAL POSITION (In Millions) Consolidated December ASSETS Cash and Other Cash Items P=32,536 P=34,943 P=28,570 P=30,733 Due from Bangko Sentral ng Pilipinas (Note 16) 214, , , ,259 Due from Other Banks 36,864 38,200 26,213 25,583 Interbank Loans Receivable and Securities Purchased Under Resale Agreements (Notes 7 and 26) 36, ,839 25, ,441 Financial Assets at Fair Value Through Profit or Loss (Note 8) 48,856 45,935 34,568 29,850 Available-for-Sale Investments (Note 8) 235, , , ,375 Held-to-Maturity Investments (Note 8) 208, , , ,777 Loans and Receivables (Note 9) 887, , , ,993 Investments in Subsidiaries (Note 11) 26,368 26,276 Investments in Associates and a Joint Venture (Note 11) 5,272 2, Property and Equipment (Note 10) 21,670 16,231 15,390 10,456 Investment Properties (Note 12) 8,195 10,037 4,132 6,229 Deferred Tax Assets (Note 28) 8,427 6,831 6,284 5,273 Goodwill (Note 11) 5,202 5,201 Other Assets (Note 14) 12,056 13,213 7,726 9,507 P=1,760,692 P=1,604,540 P=1,431,733 P=1,307,180 LIABILITIES AND EQUITY LIABILITIES Deposit Liabilities (Notes 16 and 31) Demand P=233,912 P=187,285 P=219,772 P=169,851 Savings 467, , , ,509 Time 542, , , ,818 Long-Term Negotiable Certificates 14,250 14,250 14,250 14,250 1,257,970 1,184,454 1,106,385 1,050,428 Bills Payable and Securities Sold Under Repurchase Agreements (Notes 17 and 31) 176, ,399 88,640 62,345 Derivative Liabilities (Note 8) 4,145 3,071 4,145 3,054 Manager s Checks and Demand Drafts Outstanding 5,613 4,653 4,264 3,399 Income Taxes Payable 880 1, Accrued Interest and Other Expenses (Note 18) 8,187 9,874 5,771 7,514 Bonds Payable (Note 19) 11,516 11,444 Subordinated Debts (Note 20) 29,487 29,452 22,374 22,344 Deferred Tax Liabilities (Note 28) Non-equity Non-controlling Interest (Note 21) 9,909 10,124 Other Liabilities (Note 21) 52,433 50,636 36,630 35,789 1,557,382 1,445,755 1,268,509 1,185,464 (Forward) 14 METROPOLITAN BANK & TRUST COMPANY

17 Consolidated December EQUITY Equity Attributable to Equity Holders of the Common stock (Notes 23 and 31) P=63,603 P=54,896 P=63,603 P=54,896 Hybrid capital securities (Note 23) 6,351 6,351 6,351 6,351 Capital paid in excess of par value (Note 23) 42,139 19,312 42,139 19,312 Surplus reserves (Note 24) 1,506 1,371 1,506 1,371 Surplus (Notes 23 and 24) 87,497 72,258 57,605 45,265 Treasury stock (Note 23) (187) (30) Remeasurement losses on retirement plan (Note 27) (3,530) (2,440) (2,915) (2,028) Net unrealized loss on available-for-sale investments (Note 8) (4,783) (2,394) (4,502) (2,609) Equity in other comprehensive income of associates (Note 11) Translation adjustment and others (Notes 8 and 11) (563) (842) 193, , , ,716 Non-controlling Interest 9,551 8, , , , ,716 P=1,760,692 P=1,604,540 P=1,431,733 P=1,307,180 See accompanying Notes to Financial Statements. STANDING STRONG 15

18 STATEMENTS OF INCOME (In Millions, Except Earnings Per Share) Consolidated Years Ended December INTEREST INCOME ON Loans and receivables (Notes 9 and 31) P=44,179 P=39,829 P=35,537 P=22,930 P=20,361 P=18,156 Trading and investment securities (Note 8) 17,838 14,995 11,415 15,282 12,951 9,106 Interbank loans receivable and securities purchased under resale agreements (Note 31) 2,986 4,145 2,417 2,657 3,029 1,705 Deposits with banks and others ,556 59,294 49,892 41,166 36,449 29,249 INTEREST AND FINANCE CHARGES Deposit liabilities (Notes 16 and 31) 11,159 9,299 7,556 8,476 6,588 4,975 Bills payable and securities sold under repurchase agreements, bonds payable, subordinated debts and others (Notes 17, 19, 20 and 31) 5,423 4,232 4,067 2,019 1, ,582 13,531 11,623 10,495 7,851 5,848 NET INTEREST INCOME 48,974 45,763 38,269 30,671 28,598 23,401 Service charges, fees and commissions (Note 31) 9,794 8,898 8,640 3,592 3,483 3,555 Leasing (Notes 12, 13 and 31) 1,970 1,894 1, Profit from assets sold (Notes 10 and 12) 1,293 10, ,187 9, Trading and securities gain - net (Notes 8 and 31) 1,282 3,305 17,182 1, ,586 Income from trust operations (Notes 24, 29 and 31) 1,164 1,186 1,071 1,142 1,139 1,057 Foreign exchange gain (loss) - net (Note 31) 517 (102) (2,266) 18 (357) (2,575) Dividends (Notes 11 and 31) ,849 3,147 10,006 Gain on sale of investment in associates (Notes 8, 11 and 31) 1,225 7, Gain on sale of non-current asset held for sale (Note 31) 3,440 4,201 Miscellaneous (Notes 25 and 31) 1,930 2,263 2, TOTAL OPERATING INCOME 67,402 74,894 78,924 40,827 48,373 49,538 Compensation and fringe benefits (Notes 27 and 31) 16,014 17,245 15,634 10,469 12,268 11,018 Taxes and licenses 6,158 7,052 8,131 3,712 4,413 4,167 Depreciation and amortization (Notes 10, 12 and 14) 2,879 2,566 2,400 1,254 1,057 1,112 Occupancy and equipment-related cost (Note 13) 2,592 2,442 2,225 1,510 1,405 1,286 Provision for (reversal of) credit and impairment losses (Notes 15 and 31) 2,059 4,849 10,722 (2,926) 7 5,294 Amortization of software costs (Note 14) Income (loss) attributable to non-equity non-controlling interests (Note 21) (336) 1,070 (173) Miscellaneous (Note 25) 12,184 11,289 10,101 7,716 6,980 6,162 TOTAL OPERATING EXPENSES (Note 21) 41,931 46,843 49,324 21,895 26,276 29,178 INCOME BEFORE SHARE IN NET INCOME OF ASSOCIATES AND A JOINT VENTURE 25,471 28,051 29,600 18,932 22,097 20,360 SHARE IN NET INCOME OF ASSOCIATES AND A JOINT VENTURE (Note 11) ,477 INCOME BEFORE INCOME TAX 25,880 28,494 31,077 18,932 22,097 20,360 PROVISION FOR INCOME TAX (Note 28) 5,237 6,459 6,748 3,206 4,355 3,646 NET INCOME (Note 21) P=20,643 P=22,035 P=24,329 P=15,726 P=17,742 P=16,714 Attributable to: Equity holders of the (Note 32) P=18,625 P=20,113 P=22,488 Non-controlling Interest (Notes 11 and 21) 2,018 1,922 1,841 P=20,643 P=22,035 P=24,329 Basic/Diluted Earnings Per Share Attributable to Equity Holders of the (Note 32) P=5.86 P=6.88* P=7.72* *Restated to show the effect of stock rights issued in See accompanying Notes to Financial Statements. 16 METROPOLITAN BANK & TRUST COMPANY

19 STATEMENTS OF COMPREHENSIVE INCOME (In Millions) Consolidated Years Ended December Net Income (Note 21) P=20,643 P=22,035 P=24,329 P=15,726 P=17,742 P=16,714 Other Comprehensive Income (Loss) for the Year, Net of Tax Items that may not be reclassified to profit or loss: Change in remeasurement loss on retirement plan (1,178) 363 (897) (887) 589 (740) Items that may be reclassified to profit or loss: Change in net unrealized loss on available-forsale investments (Note 8) (2,397) (2,015) (2,917) (1,893) (476) (3,746) Change in equity in other comprehensive income of associates (Note 11) (80) (12) (498) Translation adjustment and others (Notes 8 and 11) 430 (112) 1, (2,047) (2,139) (1,842) (1,614) (430) (3,340) Total Comprehensive Income for the Year P=17,418 P=20,259 P=21,590 P=13,225 P=17,901 P=12,634 Attributable to: Equity holders of the P=15,504 P=18,516 P=19,740 Non-controlling Interest 1,914 1,743 1,850 P=17,418 P=20,259 P=21,590 See accompanying Notes to Financial Statements. STANDING STRONG 17

20 STATEMENTS OF CHANGES IN EQUITY (In Millions) Common Stock (Note 23) Hybrid Capital Securities (Note 23) Capital Paid In Excess of Par Value (Note 23) Surplus Reserves (Note 24) Surplus (Notes 23 and 24) Consolidated Equity Attributable to Equity Holders of the Treasury Stock (Note 23) Remeasurement Losses on Retirement Plan (Note 27) Net Unrealized Gain (Loss) on Availablefor-Sale Investments (Note 8) Equity in Other Comprehensive Income of Associates (Note 11) Translation Adjustment and Others (Notes 8 and 11) Total Non-controlling Interest Balance as at January 1, 2015 P=54,896 P=6,351 P=19,312 P=1,371 P=72,258 (P=30) (P=2,440) (P=2,394) P=260 P=545 P=150,129 P=8,656 P=158,785 Total comprehensive income for the year ,625 - (1,090) (2,389) (80) ,504 1,914 17,418 Transfer to surplus reserves (135) Cash dividends (2,745) (2,745) (1,019) (3,764) Coupon payment of hybrid capital securities (Note 32) (506) (506) - (506) Issuance of shares of stock 8,707-22, ,534-31,534 shares held by mutual fund subsidiaries (157) (157) - (157) Balance as at December 31, 2015 P=63,603 P=6,351 P=42,139 P=1,506 P=87,497 (P=187) (P=3,530) (P=4,783) P=180 P=983 P=193,759 P=9,551 P=203,310 Balance as at January 1, 2014 P=54,896 P=6,351 P=19,312 P=1,235 P=55,525 P= - (P=2,870) (P=481) P= P= P=134,887 P=7,818 P=142,705 Total comprehensive income for the year , (1,913) (12) (102) 18,516 1,743 20,259 Transfer to surplus reserves (136) Cash dividends (2,745) (2,745) (905) (3,650) Coupon payment of hybrid capital securities (Note 32) (499) (499) - (499) shares held by a mutual fund subsidiary (30) (30) - (30) Balance as at December 31, 2014 P=54,896 P=6,351 P=19,312 P=1,371 P=72,258 (P=30) (P=2,440) (P=2,394) P=260 P=545 P=150,129 P=8,656 P=158,785 Balance as at January 1, 2013 P=42,228 P=6,351 P=19,312 P=1,108 P=48,418 P= - (P=2,011) P=2,439 P= (P=869) P=117,733 P=6,976 P=124,709 Total comprehensive income for the year ,488 - (859) (2,920) (485) 1,516 19,740 1,850 21,590 Transfer to surplus reserves (127) Cash dividends (2,111) (2,111) (1,008) (3,119) Stock dividend 12, (12,668) Coupon payment of hybrid capital securities (Note 32) (475) (475) - (475) Balance as at December 31, 2013 P=54,896 P=6,351 P=19,312 P=1,235 P=55,525 P= - (P=2,870) (P=481) P=272 P=647 P=134,887 P=7,818 P=142,705 Total Equity 18 METROPOLITAN BANK & TRUST COMPANY

21 Common Stock (Note 23) Hybrid Capital Securities (Note 23) Capital Paid In Excess of Par Value (Note 23) Surplus Reserves (Note 24) Surplus (Notes 23 and 24) Remeasurement Losses on Retirement Plan (Note 27) Net Unrealized Gain (Loss) on Availablefor-Sale Investments (Note 8) Translation Adjustment and Others (Notes 8 and 11) Total Equity Balance as at January 1, 2015 P=54,896 P=6,351 P=19,312 P=1,371 P=45,265 (P=2,028) (P=2,609) (P=842) P=121,716 Total comprehensive income for the year 15,726 (887) (1,893) ,225 Transfer to surplus reserves 135 (135) Cash dividends (2,745) (2,745) Coupon payment of hybrid capital securities (Note 32) (506) (506) Issuance from shares of stock 8,707 22,827 31,534 Balance as at December 31, 2015 P=63,603 P=6,351 P=42,139 P=1,506 P=57,605 (P=2,915) (P=4,502) (P=563) P=163,224 Balance as at January 1, 2014 P=54,896 P=6,351 P=19,312 P=1,235 P=30,903 (P=2,617) (P=2,133) (P=888) P=107,059 Total comprehensive income for the year 17, (476) 46 17,901 Transfer to surplus reserves 136 (136) Cash dividends (2,745) (2,745) Coupon payment of hybrid capital securities (Note 32) (499) (499) Balance as at December 31, 2014 P=54,896 P=6,351 P=19,312 P=1,371 P=45,265 (P=2,028) (P=2,609) (P=842) P=121,716 Balance as at January 1, 2013 P=42,228 P=6,351 P=19,312 P=1,108 P=29,570 (P=1,877) P=1,613 (P=1,294) P=97,011 Total comprehensive income for the year 16,714 (740) (3,746) ,634 Transfer to surplus reserves 127 (127) Cash dividends (2,111) (2,111) Stock dividend 12,668 (12,668) Coupon payment of hybrid capital securities (Note 32) (475) (475) Balance as at December 31, 2013 P=54,896 P=6,351 P=19,312 P=1,235 P=30,903 (P=2,617) (P=2,133) (P=888) P=107,059 See accompanying Notes to Financial Statements. STANDING STRONG 19

22 STATEMENTS OF CASH FLOWS (In Millions) Consolidated Years Ended December CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=25,880 P=28,494 P=31,077 P=18,932 P=22,097 P=20,360 Adjustments for: Provision for (reversal of) credit and impairment losses (Note 15) 2,059 4,849 10,722 (2,926) 7 5,294 Trading and securities gain on available-for-sale investments (Note 8) (1,430) (1,862) (12,833) (1,301) (965) (4,816) Depreciation and amortization (Notes 10, 12 and 14) 2,879 2,566 2,400 1,254 1,057 1,112 Share in net income of associates and a joint venture (Note 11) (409) (443) (1,477) Profit from assets sold (Notes 10 and 12) (1,293) (10,200) (894) (1,187) (9,815) (643) Gain on initial recognition of investment properties and chattel properties acquired in foreclosure (Note 25) (713) (748) (649) (21) (54) (61) Amortization of software costs (Note 14) Amortization of discount on subordinated debts and bonds payable Unrealized market valuation gain on financial assets and liabilities at FVPL (1,828) (334) (4,624) (1,847) (391) (3,691) Dividends (Note 11) (478) (262) (435) (1,849) (3,147) (10,006) Gain on sale of non-current asset held for sale (Note 31) (3,440) (4,201) Net loss on dissolution of investment in a subsidiary (Note 11) 1 Gain on sale of investment in associates (Note 11) (1,225) (7,388) (638) Changes in operating assets and liabilities: Decrease (increase) in: Financial assets at fair value through profit or loss (19) 8,480 19,958 (1,814) 5,305 23,201 Loans and receivables (129,882) (153,622) (95,041) (98,844) (132,554) (61,553) Other assets (4,371) (5,730) 245 (3,824) (5,216) 1,191 Increase (decrease) in: Deposit liabilities 73, , ,574 55, , ,335 Bills payable - deposit substitutes 13,718 (7,489) (1,095) Manager s checks and demand drafts outstanding Accrued interest and other expenses (1,687) 1, (1,743) 1, Non-equity non-controlling interest (215) (244) 3,561 Other liabilities 617 8,335 9,186 (12) 7,495 2,366 Net cash generated from (used in) operations (22,270) 41, ,764 (38,171) 45, ,227 Dividends received ,986 3,147 10,006 Income taxes paid (7,150) (5,608) (5,482) (4,508) (2,971) (3,347) Net cash provided by (used in) operating activities (28,950) 36, ,998 (40,693) 45, ,886 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of: Available-for-sale investments (170,783) (218,572) (982,284) (98,137) (187,532) (882,101) Held-to-maturity investments (79,513) (106,377) (23,798) (65,196) (88,319) (23,798) Property and equipment (Note 10) (3,840) (3,073) (3,293) (1,819) (1,447) (1,560) Additional investments in subsidiaries and associates (Note 11) (959) (30) (1,452) (41) Proceeds from sale of: Available-for-sale investments 140, , ,988 74, , ,206 Property and equipment , (Forward) 20 METROPOLITAN BANK & TRUST COMPANY

23 Consolidated Years Ended December Investments in subsidiaries and associates (Note 11) P= P=2,812 P=14,308 P= P=788 P= Investment properties (Note 12) 4,090 13,412 3,059 3,167 12,495 2,402 Non-current asset held for sale (Note 31) 4,537 4,537 Decrease (increase) in interbank loans receivable and securities purchased under resale agreements (Note 26) 3,065 (2,815) (492) 5,228 (2,815) (492) Proceeds from maturity of held-to-maturity investments ,727 6, ,899 6,932 Net cash used in investing activities (105,779) (12,863) (102,703) (81,455) (16,102) (133,961) CASH FLOWS FROM FINANCING ACTIVITIES Settlements of bills payable (1,275,001) (1,971,229) (1,495,307) (776,422) (1,763,584) (1,271,929) Availments of bills payable and securities sold under repurchase agreement 1,297,675 1,991,913 1,526, ,717 1,779,936 1,301,699 Repayments of subordinated debts (Note 20) (4,500) (6,800) (4,500) (5,500) Proceeds from issuance of: Subordinated debts (Note 20) 25,315 1,170 22,344 Shares of stock (Note 23) 31,534 31,534 Cash dividends paid (Note 23) (3,764) (3,650) (3,119) (2,745) (2,745) (2,111) Coupon payment of hybrid capital securities (Note 23) (506) (499) (475) (506) (499) (475) Acquisition of shares by a mutual fund subsidiary (Note 23) (157) (30) Net cash provided by financing activities 49,781 37,320 21,967 54,578 30,952 21,684 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (84,948) 60, ,262 (67,570) 60, ,609 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR Cash and other cash items 34,943 29,742 24,382 30,733 26,532 21,540 Due from Bangko Sentral ng Pilipinas 215, , , , , ,515 Due from other banks 38,200 26,275 22,996 25,583 8,947 7,873 Interbank loans receivable and securities purchased under resale agreements (Note 26) 112, ,175 19, ,790 92,036 10, , , , , , ,630 CASH AND CASH EQUIVALENTS AT END OF YEAR Cash and other cash items 32,536 34,943 29,742 28,570 30,733 26,532 Due from Bangko Sentral ng Pilipinas 214, , , , , ,724 Due from other banks 36,864 38,200 26,275 26,213 25,583 8,947 Interbank loans receivable and securities purchased under resale agreements (Note 26) 31, , ,175 23, ,790 92,036 P=315,636 P=400,584 P=339,966 P=263,795 P=331,365 P=271,239 OPERATIONAL CASH FLOWS FROM INTEREST Consolidated Years Ended December Interest paid P=16,616 P=13,436 P=11,663 P=10,440 P=7,701 P=5,904 Interest received 64,663 59,389 48,836 40,936 36,654 27,985 See accompanying Notes to Financial Statements. STANDING STRONG 21

24 NOTES TO FINANCIAL STATEMENTS 1. Corporate Information Metropolitan Bank & Trust Company (the ) is a universal bank incorporated in the Philippines on April 6, The Securities and Exchange Commission (SEC) approved the renewal of its Certification of Incorporation until April 6, 2057 on November 19, The s shares were listed with the Philippine Stock Exchange, Inc. (PSE) on February 26, 1981, as approved by the SEC in November It has a universal banking license granted by the Bangko Sentral ng Pilipinas (BSP) on August 21, The and its subsidiaries (the Group) are engaged in all aspects of banking, financing, leasing, real estate and stock brokering through a network of about 2,000 local and international branches, subsidiaries, representative offices, remittance correspondents and agencies. As a bank, the, which is the ultimate parent of the Group, provides services such as deposit products, loans and trade finance, domestic and foreign fund transfers, treasury, foreign exchange, trading and remittances, and trust services. Its principal place of business is at Metrobank Plaza, Sen. Gil Puyat Avenue, Urdaneta Village, Makati City, Metro Manila, Philippines. 2. Summary of Significant Accounting Policies Basis of Preparation The accompanying financial statements have been prepared on a historical cost basis except for financial assets and financial liabilities at fair value through profit or loss (FVPL) and availablefor-sale (AFS) investments that have been measured at fair value. The financial statements of the and Philippine Savings Bank (PSBank) include the accounts maintained in the Regular Banking Unit (RBU) and Foreign Currency Deposit Unit (FCDU). The functional currency of RBU and FCDU is Philippine Peso (PHP) and United States Dollar (USD), respectively. For financial reporting purposes, FCDU accounts and foreign currency-denominated accounts in the RBU are translated into their equivalents in Philippine peso (see accounting policy on Foreign Currency Translation). The financial statements of these units are combined after eliminating inter-unit accounts. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. The respective functional currencies of the subsidiaries are presented under Basis of Consolidation. The financial statements are presented in PHP, and all values are rounded to the nearest million pesos (P=000,000), except when otherwise indicated. Statement of Compliance The financial statements of the Group have been prepared in compliance with the accounting principles generally accepted in the Philippines for banks or Philippine GAAP for banks. As discussed in Note 8, in 2011, First Metro Investment Corporation (FMIC), a majority-owned subsidiary of the, participated in a bond exchange transaction under the liability management exercise of the Philippine Government. The SEC granted an exemptive relief from the existing tainting rule on held-to-maturity (HTM) investments under Philippine Accounting 22 METROPOLITAN BANK & TRUST COMPANY

25 Standard (PAS) 39, Financial Instruments: Recognition and Measurement, while the BSP also provided the same exemption for prudential reporting to the participants. Following this exemption, the basis of preparation of the financial statements of the availing entities shall not be Philippine Financial Reporting Standards (PFRS) but should be the prescribed financial reporting framework for entities which are given relief from certain requirements of the PFRS. Except for the aforementioned exemption which is applied starting 2011, the financial statements of the Group have been prepared in compliance with the PFRS. The financial statements of the have been prepared in compliance with the PFRS. Presentation of Financial Statements Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the statement of financial position. Income and expense are not offset in the statement of income unless required or permitted by any accounting standard or interpretation, and as specifically disclosed in the accounting policies of the Group. Basis of Consolidation The consolidated financial statements include the financial statements of the and of its subsidiaries and are prepared for the same reporting period as the using consistent accounting policies. The following are the wholly and majority-owned foreign and domestic subsidiaries of the in 2015 and 2014 (Note 11): Country of Incorporation Effective Percentage of Ownership Functional Currency Subsidiary Financial Markets: Domestic: FMIC and Subsidiaries (99.23% in 2014) Philippines PHP PSBank Philippines PHP Metrobank Card Corporation (A Finance Company) (MCC) Philippines PHP ORIX Metro Leasing and Finance Corporation (ORIX Metro) and Subsidiaries Philippines PHP Foreign: Metropolitan Bank (China) Ltd. (MBCL) China Chinese Yuan Metropolitan Bank (Bahamas) Limited (Metrobank Bahamas) The Bahamas USD First Metro International Investment Company Limited (FMIIC) and Subsidiary Hong Kong Hong Kong Dollar (HKD) Remittances: Metro Remittance (Hong Kong) Limited (MRHL) Hong Kong HKD Metro Remittance (Singapore) Pte. Ltd. (MRSPL) Singapore Singapore Dollar Metro Remittance (UK) Limited (MR UK) United Kingdom Great Britain Pound United States of America (USA) USD Metro Remittance (USA), Inc. (MR USA) Metro Remittance Center, Inc. (MRCI) USA USD Metro Remittance (Japan) Co. Ltd. (MR Japan) Japan Japanese Yen Metro Remittance (Italia), S.p.A. (MR Italia)* Italy Euro Real Estate: Circa 2000 Homes, Inc. (Circa)* Philippines PHP Others: Philbancor Venture Capital Corporation (PVCC)* Philippines PHP MBTC Technology, Inc. (MTI)** Philippines PHP * In process of dissolution. ** In process of liquidation. STANDING STRONG 23