COVER SHEET M E T R O P O L I T A N B A N K & T R U S T C O M P A N Y. (Company s Full Name) M e t r o b a n k P l a z a, S e n.

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2 COVER SHEET SEC Registration Number M E T R O P O L I T A N B A N K & T R U S T C O M P A N Y A N D S U B S I D I A R I E S (Company s Full Name) M e t r o b a n k P l a z a, S e n. G i l J P u y a t A v e n u e, M a k a t i C i t y (Business Address: No. Street City/Town/Province) Joshua E. Naing (Contact Person) (Company Telephone Number) Q Month Day (Form Type) Month Day (Fiscal Year) (Annual Meeting) (Secondary License Type, If Applicable) Dept. Requiring this Doc. Amended Articles Number/Section Total Amount of Borrowings Total No. of Stockholders Domestic Foreign To be accomplished by SEC Personnel concerned File Number LCU Document ID Cashier S T A M P S Remarks: Please use BLACK ink for scanning purposes.

3 SEC Number File Number METROPOLITAN BANK & TRUST COMPANY (Company s Full Name) Metrobank Plaza, Sen. Gil J. Puyat Avenue, 1200 Makati City (Company s Address) ; (Telephone Number) December 31 (Fiscal year ending) 17-Q (Form Type) (Amendment Designation, if applicable) March 31, 2010 (Period Ended Date) None (Secondary License Type and File Number)

4 SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-Q QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER 1. For the quarterly period ended : March 31, Commission Identification Number : BIR Tax Identification No. : Exact name of issuer as specified in its charter : METROPOLITAN BANK & TRUST COMPANY 5. Province, country or other jurisdiction of incorporation or organization : Metro Manila, Philippines 6. Industry Classification Code : (SEC Use Only) 7. Address of issuer s principal office : Metrobank Plaza, Sen. Gil J. Puyat Avenue 1200 Makati City 8. Issuer's telephone number, including area code : (632) ; (632) Former name, former address and former fiscal year, if changed since last report: N/A 10. Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the RSA No. of Shares of Common Amount of Debt Outstanding Title of Each Class Stock Outstanding (Unpaid Subscriptions) Common Shares 1,807,269,350 shares None 11. Are any or all of the securities listed on a Stock Exchange? Yes [ x ] No [ ] Stock Exchange : Philippine Stock Exchange Class of Securities : Common Shares 12. Indicate by check mark whether the registrant: a. Has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder and Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines, during the preceding twelve (12) months (or for such shorter period the registrant was required to file such reports) Yes [ x ] No [ ] b. Has been subject to such filing requirements for the past 90 days. Yes [ x ] No [ ]

5 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Attached are the following: Interim Condensed Consolidated Statements of Condition - Annex "1" Interim Condensed Consolidated Statements of Income - Annex "2 page 1 of 2" Interim Condensed Consolidated Statements of Comprehensive Income - Annex 2 page 2 of 2 Interim Condensed Consolidated Statements of Changes in Equity - Annex "3" Interim Condensed Consolidated Statements of Cash Flows - Annex "4" General Notes to Interim Condensed Consolidated Financial Statements - Annex "5" Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations - Annex 6 PART II - OTHER INFORMATION I. Control of Registrant The following stockholders own more than 5% of the total outstanding number of shares issued as of March 31, 2010: NAME OF STOCKHOLDER TOTAL NUMBER OF SHARES HELD PERCENT TO TOTAL NUMBER OF SHARES ISSUED PCD Nominee Corporation (Non-Filipino) 493,957,879* % GT Capital Holdings, Inc. 452,000, % PCD Nominee Corporation (Filipino) 228,686,373* % Philippine Securities Corp. 121,735, % Federal Homes, Inc. 97,454, % * There is no participant of PCD who is a beneficial owner of more than 5% of the total common shares issued by the Registrant. II. Pending Legal Proceedings The registrant is a party to the following pending legal proceedings as of March 31, 2010: 1. In September 2008, the Parent Company filed petitions for rehabilitation against two Philippine subsidiaries of Lehman Brothers Holdings, Inc. in connection with a combined P2.4 billion loan exposure of the Parent Company. These came as a result of the declaration of bankruptcy filed by Lehman Brothers Holdings, Inc., a surety under the loan agreements. The rehabilitation plans were duly approved by the handling courts. A Management Committee was created for each of the two (2) Lehman subsidiaries. These Management Committees are now overseeing and managing the company assets and will continue to do so during the term of the rehabilitation plans or until 2015 and 2017, respectively. A third party s petition to exclude certain assets from the portfolio of the Lehman subsidiaries is still pending with the Court of Appeals.

6 2. Several suits and claims relating to the Group s lending operations and labor-related cases remain unsettled. In the opinion of management, these suits and claims, if decided adversely, will not involve sums having a material effect on the Group s financial statements. III. Board Resolutions There are no material disclosures that have not been reported under SEC Form 17-C during the period covered by this report. SIGNATURES Pursuant to the requirements of the Securities Regulation Code, the issuer has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. METROPOLITAN BANK & TRUST COMPANY By: MARIQUITA L. AGENA Assistant Corporate Secretary JOSHUA E. NAING Executive Vice President/Controller May 14, 2010

7 METROPOLITAN BANK & TRUST COMPANY AND SUBSIDIARIES Interim Condensed Consolidated Financial Statements As of March 31, 2010 (Unaudited) and December 31, 2009 (Audited) and for the quarters ended March 31, 2010 and 2009 (Unaudited)

8 ANNEX 1 METROPOLITAN BANK & TRUST COMPANY INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In Thousands) ASSETS (Unaudited) March 31, 2010 (Audited) December 31, 2009 Cash and Other Cash Items P 14,545,326 P 19,726,831 Due from Bangko Sentral ng Pilipinas 111,239,696 71,981,254 Due from Other Banks 33,668,023 36,703,982 Interbank Loans Receivable and Securities Purchased Under Resale Agreements 73,680,144 79,553,433 Financial Assets at Fair Value Through Profit or Loss 17,401,458 17,046,280 Available-for-Sale Investments 127,808, ,735,343 Held-to-Maturity Investments 28,089,691 23,620,964 Loans and Receivables 338,738, ,326,562 Property and Equipment 13,053,096 13,085,578 Investments in Subsidiaries 11,717 11,717 Investments in Associates 23,277,097 21,651,497 Investment Properties 24,136,889 24,921,081 Deferred Tax Assets 8,811,127 8,475,770 Goodwill 6,449,396 6,449,496 Other Assets - net 12,518,655 12,017,169 P 833,428,615 P 854,306,957 LIABILITIES AND EQUITY LIABILITIES Deposit Liabilities Demand P 48,962,885 P 48,567,641 Savings 240,182, ,145,938 Time 312,924, ,986, ,070, ,700,389 Bills Payable and Securities Sold Under Repurchase Agreements 91,368,756 95,868,240 Derivative Liabilities 3,694,993 2,383,467 Manager's Checks and Demand Drafts Outstanding 2,153,385 1,954,460 Income Taxes Payable 1,259,772 1,305,333 Accrued Interest and Other Expenses 3,965,626 4,026,842 Subordinated Debt 21,643,202 21,633,771 Deferred Tax Liabilities 157, ,333 Other Liabilities 26,999,335 30,950, ,313, ,988,711 EQUITY Equity Attributable to Equity Holders of the Parent Company 75,058,405 75,225,021 Minority Interest 5,056,649 5,093,225 80,115,054 80,318,246 P 833,428,615 P 854,306,957

9 ANNEX 2 page 1 of 2 METROPOLITAN BANK & TRUST COMPANY INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Earnings Per Share) Unaudited Quarter Ended March INTEREST INCOME ON Loans and receivables P 6,994,662 P 8,558,359 Trading and investment securities 2,761,613 2,201,747 Deposits with banks and others 927,686 1,308,411 10,683,961 12,068,517 INTEREST EXPENSE ON Deposit liabilities 2,557,432 3,674,275 Bills payable and securities sold under repurchase agreements, subordinated debt and others 1,630,251 1,365,999 4,187,683 5,040,274 NET INTEREST INCOME 6,496,278 7,028,243 PROVISION FOR CREDIT AND IMPAIRMENT LOSSES 1,420,896 1,462,996 NET INTEREST INCOME AFTER PROVISION FOR CREDIT AND IMPAIRMENT LOSSES 5,075,382 5,565,247 OTHER INCOME Trading and securities and foreign exchange gains (losses) - net 1,898,927 1,438,304 Service charges, fees and commissions 1,783,489 1,376,384 Miscellaneous 1,545, ,098 5,228,145 3,747,786 OTHER EXPENSES Compensation and fringe benefits 2,798,362 2,565,154 Occupancy and equipment- related cost 404, ,499 Miscellaneous 3,768,336 3,446,650 6,970,745 6,369,303 INCOME BEFORE INCOME TAX 3,332,782 2,943,730 PROVISION FOR INCOME TAX 534, ,976 NET INCOME P 2,798,772 P 2,086,754 Attributable to : Equity holders of the Parent Company P 2,548,830 P 1,935,466 Minority Interests 249, ,288 P 2,798,772 P 2,086,754 Basic/Diluted Earnings Per Share Attributable to Equity Holders of the Parent Company P 1.34 P 1.00

10 METROPOLITAN BANK & TRUST COMPANY INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands) ANNEX 2 page 2 of 2 Unaudited Quarter Ended March NET INCOME P 2,798,772 P 2,086,754 Other Comprehensive Income (Loss) : Net unrealized gain (loss) on available-for-sale investments (895,030) 2,151,906 Equity in net unrealized gain (loss) on available-for-sale investments of associates (492,819) 444,640 Translation adjustment (267,576) (33,349) Equity adjustment from revaluation increment (1,975) - Other Comprehensive Income (Loss) for the Period, net of tax (1,657,400) 2,563,197 ` Total Comprehensive Income (Loss) for the Period P 1,141,372 P 4,649,951 Total Comprehensive Income attributable to : Equity holders of the Parent Company 1,169,291 4,427,569 Minority Interest (27,919) 222,382 P 1,141,372 P 4,649,951

11 ANNEX 3 METROPOLITAN BANK & TRUST COMPANY INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the Quarter Ended March 31, 2010 & 2009 ( In Thousands, Except Par Value and Number of Shares ) ( Unaudited ) Equity Attributable to Equity Holders of the Parent Company Capital Paid Net Unrealized Equity in Net Equity Adjustment Hybrid Capital in Excess Surplus Gain/(Loss) on Unrealized Gain/(Loss) from Translation Minority Common Stock * Surplus TOTAL TOTAL EQUITY Securities of Reserves Available-for-Sale on Available-for-Sale Revaluation Adjustment Interest Par Value Investments Investments of Investees Increment Balance, January 1, ,145,387 6,351,110 10,638,159 20,941, ,925 (26,867) 359,890 74,859 (102,433) 75,225,021 5,093,225 80,318,246 Total Comprehensive income for the period ,548,830 - (895,030) (197,604) (1,975) (284,930) 1,169,291 (27,919) 1,141,372 Transfer to Surplus Reserves Cash Dividends (1,084,362) (1,084,362) (8,657) (1,093,019) Coupon Payment of hybrid capital securities (259,397) (259,397) - (259,397) Others , ,852-7,852 Balance, March 31, ,145,387 6,351,110 10,638,159 22,154, ,925 (921,897) 162,286 72,884 (387,363) 75,058,405 5,056,649 80,115,054 Equity Attributable to Equity Holders of the Parent Company Capital Paid Net Unrealized Equity in Net Equity Adjustment Hybrid Capital in Excess Surplus Gain/(Loss) on Unrealized Gain/(Loss) from Translation Minority Common Stock * Surplus TOTAL Securities of Reserves Available-for-Sale on Available-for-Sale Revaluation Adjustment Interest Par Value Investments Investments of Investees Increment TOTAL EQUITY Balance, January 1, ,145,387 6,351,110 10,638,159 17,276, ,310 (4,956,188) (1,317,738) 30, ,010 65,092,186 3,912,321 69,004,507 Total Comprehensive income for the period ,935,466-2,151, ,739 - (33,542) 4,427, ,382 4,649,951 Transfer to Surplus Reserves Cash Dividends (8,657) (8,657) Coupon Payment of hybrid capital securities (269,157) (269,157) - (269,157) Others Balance, March 31, ,145,387 6,351,110 10,638,159 18,942, ,310 (2,804,282) (943,999) 30, ,468 69,250,598 4,126,046 73,376,644 * COMMON P 20 par value Authorized - 2,500,000,000 shares Issued - 1,807, shares in 2010 and 2009

12 ANNEX 4 METROPOLITAN BANK & TRUST COMPANY INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Three Months Ended March CASH FLOWS FROM OPERATING ACTIVITIES: Income before income tax P 3,332,782 P 2,943,730 Adjustments for : Provision for credit and impairment losses 1,420,896 1,462,996 Depreciation and amortization 478, ,458 Amortization of deferred charges 77,128 61,636 Profit from assets sold (663,201) (221,146) Share in net income of associates (332,444) (110,646) Dividends (68,859) (44,816) Unrealized market valuation loss (gain) on financial assets at fair value through profit or loss 821, ,849 Changes in operating assets and liabilities: Decrease (increase) in the amounts of : Financial assets at fair value through profit or loss (1,177,038) 66,969 Loans and receivables 22,815,302 25,791,068 Other assets (1,569,268) (1,124,054) Increase(decrease) in: Deposit liabilities (13,629,686) (30,918,238) Accrued interest and other expenses 281,687 (1,052,365) Manager's checks and demand drafts outstanding 198, ,492 Other liabilities (2,647,560) 691,001 Net cash provided by operating activities 9,339,036 (855,066) Dividends received 68,859 44,816 Income taxes paid (922,474) (607,362) Net cash provided by (used in) operating activities 8,485,421 (1,417,612) CASH FLOWS FROM INVESTING ACTIVITIES Net disposal (acquisition) of: Available-for-Sale Investments 27,557,529 (10,800,521) Held-to-Maturity Investments (4,468,727) 382,713 Property and equipment (333,831) (325,999) Investments in subsidiaries and associates (1,293,155) (194,815) Investment properties 1,340, ,730 Decrease in Interbank loans receivable and securities purchased under resale agreements (52,811) 664,200 Net cash provided by (used in) investing activities 22,749,787 (9,794,692) CASH FLOWS FROM FINANCING ACTIVITIES Coupon payment of hybrid capital securities (259,397) (269,157) Cash dividends paid (1,093,019) (8,657) Increase (decrease) in: Bills payable (4,499,484) 25,583,582 Subordinated debt 9,431 6,519 Minority interest in consolidated subsidiaries (277,860) 71,094 Net cash provided by financing activities (6,120,329) 25,383,381 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 25,114,879 14,171,077 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD Cash and other cash items 19,726,831 18,699,904 Due from Bangko Sentral ng Pilipinas 71,981,254 91,637,760 Due from other banks 36,703,982 60,870,221 Interbank loans receivable and securities purchased under resale agreements 77,363,553 16,346, ,775, ,554,250 CASH AND CASH EQUIVALENTS AT END OF PERIOD Cash and other cash items 14,545,326 13,277,896 Due from Bangko Sentral ng Pilipinas 111,239,696 77,942,148 Due from other banks 33,668,023 32,587,778 Interbank loans receivable and securities purchased under resale agreements 71,437,454 77,917,505 P 230,890, ,725,327

13 ANNEX 5 METROPOLITAN BANK & TRUST COMPANY AND SUBSIDIARIES GENERAL NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Corporate Information Metropolitan Bank & Trust Company (the Parent Company) is a universal bank incorporated in the Philippines. The Parent Company and its subsidiaries (the Group) are engaged in all aspects of banking, financing, leasing, real estate and stock brokering through a network of over 800 local and international branches, offices and agencies. As a bank, the Parent Company 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 J. Puyat Avenue, Makati City. The original Certification of Incorporation of the Parent Company was issued by the Securities and Exchange Commission (SEC) on April 6, On March 21, 2007, the board of directors (BOD) of the Parent Company approved its Amended Articles of Incorporation to extend the corporate term of the Parent Company, which shall expire on April 6, 2012, for another 50 years or up to April 6, On November 19, 2007, the SEC approved such amendment. 2. Summary of Significant Accounting Policies Basis of Preparation The accompanying condensed consolidated financial statements have been prepared in accordance with Philippine Accounting Standards (PAS) 34 Interim Financial Reporting. Accordingly, the condensed consolidated financial statements do not include all of the information and disclosures required in the annual audited financial statements and should be read in conjunction with the Groups annual audited financial statements as at December 31, The condensed financial statements have been prepared on a historical cost basis except for financial assets at fair value through profit or loss (FVPL), available-for-sale (AFS) investments, and derivative financial instruments that have been measured at fair value. The condensed consolidated financial statements are presented in Philippine pesos, and all values are rounded to the nearest thousand pesos (P=000) except when otherwise indicated. 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. Statement of Compliance The condensed consolidated financial statements have been prepared in compliance with the Philippine Financial Reporting Standards (PFRS). Basis of Consolidation The condensed consolidated financial statements include the financial statements of the Parent Company and of its subsidiaries (including the special purpose entity that it controls) and are prepared for the same reporting period as the Parent Company (except for ORIX Metro Leasing and Finance Corporation whose fiscal year ends on September 30), using consistent accounting policies.

14 - 2 - The following are the wholly and majority-owned foreign and domestic subsidiaries of the Parent Company: Effective Percentage of Ownership Country of Incorporation Subsidiary Financial Markets: Metro Remittance Center, Inc. (MRCI) United States of America (USA) USD Functional Currency Metro Remittance Center (California), Inc. (MRCCI) USA USD MB Remittance Centre Limited Hong Kong Hong Kong Dollar (HKD) Metropolitan Bank (MB Bahamas) Limited The Bahamas USD Metro Remittance (UK) Limited United Kingdom Great Britain Pound (GBP) Metro Remittance Singapore Pte. Ltd Singapore Singapore Dollar MBTC Remittance GmbH, Vienna Austria Euro (EUR) Metro Remittance Center, S.A Spain EUR Metro Remittance (Italia), S.p.A Italy EUR Metropolitan Bank (China) Ltd. (MBCL) China Chinese Yuan First Metro International Investment Company Limited (FMIIC) and Subsidiary Hong Kong HKD First Metro Investment Corporation (FMIC) and Subsidiaries Philippines Philippine Peso Philippine Savings Bank (PSBank) Philippines Philippine Peso Metrobank Card Corporation (A Finance Company) (MCC) Philippines Philippine Peso MBTC Venture Capital Corporation (MVCC) Philippines Philippine Peso Solid Philippines Venture Capital Corporation (SPVCC) Philippines Philippine Peso Philbancor Venture Capital Corporation (PVCC) Philippines Philippine Peso ORIX Metro Leasing and Finance Corporation (ORIX Metro) and Subsidiaries Philippines Philippine Peso Computer Services: Data Serv, Inc. (DSI) Philippines Philippine Peso MBTC Technology, Inc. (MTI) Philippines Philippine Peso Real Estate: Circa 2000 Homes, Inc Philippines Philippine Peso Under Standing Interpretations Committee (SIC) No. 12, Consolidation of Special Purpose Entity (SPE), control over an entity may exist even in cases where an enterprise owns little or none of SPE s equity, such as when an enterprise retains majority of the residual risks related to the SPE or its assets in order to obtain benefits from its activities. In accordance with this Interpretation, the consolidated financial statements include the accounts of Cameron Granville 3 Asset Management, Inc. (CG3AMI) and LNC 3 Asset Management, Inc. (LNC3AMI), both are special purpose vehicles (SPVs), in which the Group does not have equity interest. MVCC, SPVCC and PVCC are in the process of dissolution. The accounts of these companies representing less than 0.01% of the total assets of the Group were excluded in the consolidation. All significant intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions are eliminated in full in the consolidation. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Control is achieved where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Consolidation of subsidiaries ceases when control is transferred out of the Group or the Parent Company. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date of acquisition or up to the date of disposal, as appropriate.

15 - 3 - Minority Interest Minority interest represents the portion of profit or loss and the net assets not held by the Group and are presented separately in the consolidated statement of income, statement of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to the Parent Company. Acquisitions of non-controlling interest are accounted for using the entity concept method, whereby the difference between the consideration and the book value of the share of the net assets acquired is recognized as an equity transaction. Significant Accounting Policies The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the consolidated annual financial statements as of and for the year ended December 31, 2009, except for the adoption of the following Philippine Interpretations and amendments to existing standards, which became effective beginning January 1, 2010, except otherwise stated. Amendment to Standards PFRS 3, Business Combinations (Revised) and PAS 27, Consolidated and Separate Financial Statements (Amended) The revised standards are effective for annual periods beginning on or after July 1, PFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after this date. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognized, the reported results in the period that an acquisition occurs and future reported results. PAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes by PFRS 3 (Revised) and PAS 27 (Amended) will affect future acquisitions or loss of control of subsidiaries and transactions with non-controlling interests. PFRS 3 (Revised) will be applied prospectively while PAS 27 (Amended) will be applied retrospectively with few exceptions. Philippine Interpretation IFRIC 17, Distributions of Non-Cash Assets to Owners This Interpretation is effective for annual periods beginning on or after July 1, 2009 with early application permitted. It provides guidance on how to account for non-cash distributions to owners. The interpretation clarifies when to recognize a liability, how to measure it and the associated assets, and when to derecognize the asset and liability. Currently, the Group has not distributed non-cash assets to its owners. PAS 39 Amendment - Eligible Hedged Items The amendment to PAS 39, Financial Instruments: Recognition and Measurement, effective for annual periods beginning on or after July 1, 2009, clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. This also covers the designation of inflation as a hedged risk or portion in particular situations. PFRS 2 Amendments - Group Cash-settled Share-based Payment Transactions The amendments to PFRS 2, Share-based Payments, clarify the scope and the accounting for group cash-settled share-based payment transactions. The Group currently does not have any cash-settled share-based payment transactions.

16 - 4 - Improvements to Standards The omnibus amendments to PFRS issued in 2009 were issued primarily with a view to remove inconsistencies and clarify wording. The amendments are effective for annual periods financial years January 1, 2010 except otherwise stated. These changes have no material effect on the financial statements of the Group. PFRS 2, Share-based Payment, clarifies that the contribution of a business on formation of a joint venture and combinations under common control are not within the scope of PFRS 2 even though they are out of scope of PFRS 3, Business Combinations (Revised). The amendment is effective for financial years on or after July 1, PFRS 5, Non-current Assets Held for Sale and Discontinued Operations, clarifies that the disclosures required in respect of non-current assets and disposal groups classified as held for sale or discontinued operations are only those set out in PFRS 5. The disclosure requirements of other PFRS only apply if specifically required for such non-current assets of discontinued operations. PFRS 8, Operating Segment Information, clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker. PAS 1, Presentation of Financial Statements, clarifies that the terms of a liability that could result, at anytime, in its settlement by the issuance of equity instruments at the option of the counterparty do not affect its classification. PAS 7, Statement of Cash Flows, explicitly states that only expenditure that results in a recognized asset can be classified as a cash flow from investing activities. PAS 17, Leases, removes the specific guidance on classifying land as a lease. Prior to the amendment, leases of land were classified as operating leases. The amendment now requires that leases of land are classified as either finance or operating in accordance with the general principles of PAS 17. The amendments will be applied retrospectively. PAS 36, Impairment of Assets, clarifies that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in PFRS 8 before aggregation for reporting purposes. PAS 38, Intangible Assets, clarifies that if an intangible asset acquired in a business combination is identifiable only with another intangible asset, the acquirer may recognize the group of intangible assets as a single asset provided the individual assets have similar useful lives. Also clarifies that the valuation techniques presented for determining the fair value of intangible assets acquired in a business combination that are not traded in active markets are only examples and are not restrictive on the methods that can be used. PAS 39, Financial Instruments: Recognition and Measurement, clarifies the following: - that a prepayment option is considered closely related to the host contract when the exercise price of a prepayment option reimburses the lender up to the approximate present value of lost interest for the remaining term of the host contract. - that the scope exemption for contracts between an acquirer and a vendor in a business combination to buy or sell an acquiree at a future date applies only to binding forward contracts, and not derivative contracts where further actions by either party are still to be taken. - that gains or losses on cash flow hedges of a forecast transaction that subsequently results in the recognition of a financial instrument or on cash flow hedges of recognized financial instruments should be reclassified in the period that the hedged forecast cash flows affect profit or loss.

17 - 5 - Amendment to Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives, clarifies that it does not apply to possible reassessment at the date of acquisition, to embedded derivatives in contracts acquired in a business combination between entities or businesses under common control or the formation of joint venture. Future Changes in Accounting Policies The Group will adopt the following interpretation when this becomes effective. The Group does not expect the adoption of this new Philippine Interpretation to have significant impact on its financial statements. Effective 2012 Philippine Interpretation IFRIC 15, Agreement for Construction of Real Estate This Interpretation, effective for annual periods beginning on or after January 1, 2012, covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The Interpretation requires that revenue on construction of real estate be recognized only upon completion, except when such contract qualifies as construction contract to be accounted for under PAS 11, Construction Contracts, or involves rendering of services in which case revenue is recognized based on stage of completion. Contracts involving provision of services with the construction materials and where the risks and reward of ownership are transferred to the buyer on a continuous basis will also be accounted for based on stage of completion. 3. Fair Value Measurement The methods and assumptions used by the Group in estimating the fair value of financial instruments have been consistently applied in the interim financial statements. 4. Segment Information The Group s operating businesses are recognized and managed separately according to the nature of services provided and the different markets served with segment representing a strategic business unit. The Group s business segments follow: Consumer Banking - principally handling individual customers deposits, and providing consumer type loans, overdrafts, credit card facilities and fund transfer facilities; Corporate Banking - principally handling loans and other credit facilities and deposit and current accounts for corporate and institutional customers; Investment Banking - principally arranging structured financing, and providing services relating to privatizations, initial public offerings, mergers and acquisitions; Treasury - principally providing money market, trading and treasury services, as well as the management of the Group s funding operations by use of treasury bills, government securities and placements and acceptances with other banks, through treasury and corporate banking; Branch Banking principally handling branch deposits and providing loans and other loan related businesses for domestic middle market clients; and Others principally handling other services including but not limited to remittances, leasing, account financing, branch lending/deposit taking, and other support services. Other operations of the Group comprise the operations and financial control groups. Segment assets are those operating assets that are employed by a segment in its operating activities and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis.

18 - 6 - Segment liabilities are those operating liabilities that result from the operating activities of a segment and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis. Interest income is reported net as management primarily relies on the net interest income as performance measure, not the gross income and expense. The Group has no significant customers which contributes 10% or more of the consolidated revenue net of interest expense. Transactions between segments are conducted at estimated market rates on an arm s length basis. Interest is charged / credited to business segments based on a pool rate which approximates the cost of funds. The following table presents revenue and income information of operating segments presented in accordance with PFRS as of and for the quarter ended March 31, 2010 and year ended December 31, For the Quarter Ended March 31, 2010 Consumer Banking Corporate Banking Investment Banking Treasury Branch Banking Others Total (In Thousands) Results of Operations Net interest income P=1,282,080 P=1,876,444 (P=3,285) P=2,186,189 P=544,994 P=609,856 P=6,496,278 Third party Intersegment (25,898) (606,775) - (899,638) 1,733,652 (201,341) - Noninterest income 558, , ,345 1,537, ,603 1,534,493 4,895,701 Revenue - net of interest expense 1,814,416 1,369, ,060 2,824,392 3,186,249 1,943,008 11,391,979 Noninterest expense 1,299, ,628 24, ,981 2,955,964 3,220,614 8,391,641 Income before share in net income of investees 515, , ,777 2,468, ,285 (1,277,606) 3,000,338 Share in net income of investees - 11, , ,444 Provision for income tax (86,817) 57,464 (1,762) (416,521) (59,800) (26,574) (534,010) Minority interest in net income of consolidated subsidiaries (249,942) (249,942) Net income (loss) P=428,428 P=903,375 P=228,015 P=2,051,890 P=170,485 (P=1,233,363) P=2,548,830 Statement of Condition Total assets P=39,038,462 P=19,433,244 P=1,036,801 P=106,540,979 P=569,368,773 P=98,010,356 P=833,428,615 Total liabilities P=16,799,591 P=814,577 P=619,249 P=88,656,565 P=602,789,539 P=43,634,040 P=753,313,561 Other Segment Information Capital expenditures P=96,521 P=99,073 P= P=26,450 P=10,383 P=295,913 P=528,340 Depreciation and amortization P=100,801 P=8,841 P=- P=6,102 P=170,606 P=269,291 P=555,641 Provision for credit and impairment losses P=448,528 P=274,484 P= P=- P=40,333 P=657,551 P=1,420,896

19 Consumer Banking Corporate Banking For the Year Ended December 31, 2009 Investment Branch Banking Treasury Banking Others Total (In Thousands) Results of Operations Net interest income Third party P=4,973,007 P=9,456,185 (P=25,776) P=7,539,259 P=2,711,036 P=2,025,212 P=26,678,923 Intersegment (110,784) (2,726,947) (3,427,765) 7,493,050 (1,227,554) 4,862,223 6,729,238 (25,776) 4,111,494 10,204, ,658 26,678,923 Noninterest income 2,229, , ,891 4,282,582 3,273,747 5,606,578 16,081,133 Revenue - net of interest expense 7,091,903 6,931, ,115 8,394,076 13,477,833 6,404,236 42,760,056 Noninterest expense 5,118,401 1,227,590 56,976 2,445,786 11,172,487 14,614,029 34,635,269 Income before share in net income of investees 1,973,502 5,704, ,139 5,948,290 2,305,346 (8,209,793) 8,124,787 Share in net income of investees 45, , ,664 Provision for income tax (289,210) (47,563) (6,929) (1,520,525) (250,848) (133,589) (2,248,664) Minority interest in net income of consolidated subsidiaries (765,898) (765,898) Net income (loss) P=1,684,292 P=5,701,870 P=396,210 P=4,427,765 P=2,054,498 (P=8,235,746) P=6,028,889 Statement of Financial Position Total assets P=39,729,419 P=22,045,911 P=877,960 P=141,285,378 P=605,630,060 P=44,738,229 P=854,306,957 Total liabilities P=18,247,964 P=13,684,561 P=610,616 P=124,318,611 P=636,369,608 (P=19,242,649) P=773,988,711 Other Segment Information Capital expenditures P=206,844 P=93,521 P= P=73,768 P=316,559 P=1,804,409 P=2,495,101 Depreciation and amortization P=379,584 P=20,220 P= P=25,281 P=635,947 P=1,074,714 P=2,135,746 Provision for credit and impairment losses P=1,984,299 P=491,779 P= P=1,260,076 P=471,897 P=4,585,398 P=8,793, Related Party Transactions In the ordinary course of business, the Group has loan transactions with investees and with certain directors, officers, stockholders and related interests (DOSRI). Existing banking regulations limit the amount of individual loans to DOSRI, 70.00% of which must be secured, to the total of their respective deposits and book value of their respective investments in the lending company within the Group. In the aggregate, loans to DOSRI generally should not exceed the respective total equity or 15.00% of total loan portfolio, whichever is lower, of the Parent Company, PSBank, and FMIC. BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts. BSP Circular No. 560 provides the rules and regulations that govern loans, other credit accommodations and guarantees granted to subsidiaries and affiliates of banks and quasi-banks. Under the said Circular, the total outstanding loans, other credit accommodation and guarantees to each of the bank s/quasi-bank s subsidiaries and affiliates shall not exceed 10% of the net worth of the lending bank/quasi-bank, provided that the unsecured portion of which shall not exceed 5% of such net worth. Further, the total outstanding loans, credit accommodations and guarantees to all subsidiaries and affiliates shall not exceed 20% of the net worth of the lending bank/quasi-bank; and the subsidiaries and affiliates of the lending bank/quasi-bank are not related interest of any director, officer and/or stockholder of the lending institution, except where such director, officer or stockholder sits in the BOD or is appointed officer of such corporation as representative of the bank/quasi-bank. On May 12, 2009, BSP issued Circular No. 654 allowing a separate individual limit to loans of banks/quasi-banks to their subsidiaries and affiliates engaged in energy and power generation, i.e., a separate individual limit of twenty-five (25%) of the net worth of the lending bank/quasi-bank: provided, that the unsecured portion thereof shall not exceed twelve and one-half percent (12.5%) of such net worth: provided further, that these subsidiaries and affiliates are not related interests of any of the director, officer and/or stockholder of the lending bank/quasi-bank; except where such director, officer or stockholder sits in the board of directors or is appointed officer of such corporation as representative of the bank/quasi-bank.

20 - 8 - The Parent Company leases the premises occupied by some of its branches and also some of its subsidiaries lease the premises occupied by their Head Offices and most of their branches. Other related party transactions conducted in the normal course of business include outright purchases and sales of trading account securities, securing insurance coverage on loans and property risks and intercompany advances. 6. Commitments and Contingent Liabilities In the normal course of the Group s operations, there are various outstanding commitments and contingent liabilities which are not reflected in the accompanying financial statements. No material losses are anticipated as a result of these transactions. Summary of contingencies and commitments at their peso-equivalent contractual amounts arising from off-balance sheet items follows: March 31, 2010 December 31, 2009 (In Thousands) Trust Banking Group accounts P220,761,786 P=210,341,505 Credit Cards 39,988,159 - Unused commercial letters of credit 22,512,513 17,633,351 Credit line certificate with bank commission 4,271,025 4,038,591 Bank guaranty with indemnity agreement 2,595,157 2,410,893 Late deposits/payments received 1,294,283 2,060,265 Outstanding shipside bonds/airway bills 2,011,776 1,592,504 Outward bills for collection 839, ,059 Outstanding guarantees 254, ,438 Inward bills for collection 729, ,444 Confirmed export letters of credits 148, ,338 Traveler s check unsold 32,516 27,853 Others 2,570, ,765 In September 2008, the Parent Company filed petitions for rehabilitation against two Philippine subsidiaries of Lehman Brothers Holdings, Inc. in connection with a combined P=2.4 billion loan exposure of the Parent Company. These came as a result of the declaration of bankruptcy filed by Lehman Brothers Holdings, Inc., a surety under the loan agreements. The rehabilitation plans were duly approved by the handling courts. A Management Committee was created for each of the two (2) Lehman subsidiaries. These Management Committee are now overseeing and managing the company assets and will continue to do so during the term of the rehabilitation plans or until 2015 and 2017, respectively. A third party s petition to exclude certain assets from the portfolio of the Lehman subsidiaries is still pending with the Court of Appeals. Several suits and claims relating to the Group s lending operations and labor-related cases remain unsettled. In the opinion of management, these suits and claims, if decided adversely, will not involve sums having a material effect on the Group s financial statements. 7. Financial Performance The basis of calculation for earnings per share attributable to equity holdings of the Parent Company follows (amounts in thousand except for earnings per share):

21 - 9 - Quarter Ended March Year Ended December 31, 2009 a. Net income attributable to equity holders of the Parent Company P=2,548,830 P=1,935,466 P=6,028,889 b. Share of hybrid capital securities holders (122,004) (133,503) (483,612) c. Net income attributable to common shareholders 2,426,826 1,801,963 5,545,277 d. Weighted average number of outstanding common shares of the Parent Company 1,807,269 1,807,269 1,807,269 e. Basic/diluted earnings per share (c/d) P=1.34 P=1.00 P=3.07 As of March 31, 2010 and 2009 and December 31, 2009, there were no outstanding dilutive potential common shares. The following basic ratios measure the financial performance of the Group: Quarter Ended March 31 Year Ended December 31, 2009 Return on average equity 13.57% 11.53% 8.59% Return on average assets 1.21% 1.01% 0.74% Net interest margin on average earning assets 3.52% 4.47% 3.82% 8. Issuances of Debt and Equity Securities Issuance of Common Shares and Hybrid Capital Securities The registrant s capital stock consists of (amounts in thousands, except par value and number of shares): Common stock - P=20 par value, authorized 2,500,000,000 shares Issued - 1,807,269,350 shares P=36,145,387 Hybrid capital securities 6,351,110 P=42,496,497 Hybrid capital securities (HT1 Capital) represent US$125.0 million, 9.00% non-cumulative step-up callable perpetual capital securities with liquidation preference of US$100,000 per capital security issued by the Parent Company on February 15, 2006 pursuant to a trust deed with The Bank of New York (Trustee) and listed with the Singapore Exchange Securities Trading Limited. The HT1 Capital is governed by English law except on certain clauses in the Trust Deed which are governed by Philippine law. Basic features of the HT1 Capital follow: Coupons - bear interest at 9.0% per annum payable semi-annually in arrear from (and including) February 15, 2006 to (but excluding) February 15, 2016, and thereafter at a rate, reset and payable quarterly in arrear, of 6.1% per annum above the then prevailing London interbank offered rate for three-month U.S. dollar deposits. Under certain conditions, the Parent Company is not obliged to make any coupon payment if the BOD of the Parent Company, in its absolute discretion, elects not to make any coupon payment in whole or in part. Coupon Payment Dates - payable on February 15 and August 15 in each year, commencing on August 15, 2006 (in respect of the period from (and including) February 15, 2006 to (but excluding) August 15, 2006 and ending on February 15, 2016 (first optional redemption date); thereafter coupon amounts will be payable (subject to adjustment for days which are not business

22 days) on February 15, May 15, August 15 and November 15 in each year commencing on May 15, Dividend and Capital Stopper - in the event that any coupon payment is not made, the Parent Company: (a) will not declare or pay any distribution or dividend or make any other payment on, and will procure that no distribution or dividend or other payment is made on any junior share capital or any parity securities; or (b) will not redeem, purchase, cancel, reduce or otherwise acquire any junior share capital or any parity securities. Such dividend and capital stopper shall remain in force so as to prevent the Parent Company from undertaking any such declaration, payment or other activity unless and until payment is made to the holders in an amount equal to the unpaid amount, if any, of coupon payments in respect of coupon periods in the 12 months including and immediately preceding the date such coupon payment was due, and the BSP does not otherwise object. Redemption - the HT1 Capital may be redeemed at the option of the Parent Company (but not the holders) under optional redemption, tax event call, and regulatory event call, subject to limitation of the terms of the issuance. - the HT1 Capital may not be redeemed (i) for so long as the dividend and capital stopper is in force; and (ii) without the prior written approval of the BSP which, as of February 8, 2006, is subject to the following conditions: (a) the Parent Company s capital adequacy must be at least equal to the BSP s minimum capital ratio; and (b) the HT1 Capital Securities are simultaneously replaced with the issue of new capital which is neither smaller in size nor lower in quality than the original issue. The HT1 Capital is unsecured and subordinated to the claims of senior creditors. In the event of the dissolution or winding-up of the Parent Company, holders will be entitled, subject to satisfaction of certain conditions and applicable law, to receive a liquidation distribution equivalent to the liquidation preference. Also, the HT1 Capital is not treated as deposit and is not guaranteed or insured by the Parent Company or any of its related parties or the PDIC and these may not be used as collateral for any loan availments. The Parent Company or any of its subsidiaries may not at any time purchase HT1 Capital except as permitted under optional redemption, tax event call, and regulatory event call as described in the terms of issuance. The HT1 Capital is sold to non-u.s. persons outside the United States pursuant to Regulation S under the U.S. Securities Act of 1933, as amended, and represented by a global certificate registered in the name of a nominee of, and deposited with, a common depository for Euroclear and Clearstream. The Parent Company paid the semi-annual coupon amounting to USD5.6 million on the US$125.0 million HT1 Capital Securities for 2006 until 2010 after obtaining their respective BSP approvals. Details for 2010 and 2009 are as follows: Date of BSP Approval Date Paid February 4, 2010 August 12, 2009 February 16, 2010 August 17, 2009 February 16, 2009 February 17, 2009 Details of the Parent Company s cash dividend distributions follow: Cash Dividend Date of Declaration Per Share Total Amount Date of BSP Approval Record date Payment date February 17, 2010 P=0.60 P=1,084,361,610 March 8, 2010 March 25, 2010 April 15, 2010 August 19, 2009 P=0.40 P=722,907,740 October 7, 2009 October 23, 2009 November 10, 2009 March 11, 2009 P=0.60 P=1,084,361,610 April 15, 2009 April 30, 2009 May 18, 2009 The computation of surplus available for dividend declaration in accordance with SEC Memorandum Circular No. 11 issued in December 2008 differs to a certain extent from the computation following BSP guidelines.

23 Issuance of Subordinated Debt The more significant terms of these notes have been disclosed in the 2009 audited financial statements except for the following: As of March 31, 2010 and December 31, 2009, the 2019 Peso Notes, 2018 Peso Notes, 2017 Peso Notes and 2016 Peso Notes issued have market values as follows: March 31, 2010 December 31, 2009 Maturity Date Face Value Carrying Value Market Value Carrying Value Market Value Parent Company 2019 May 6, 2019 P=4,500,000 P=4,464,597 P 4,932,931 P=4,462,777 P=4,861, October 3, ,500,000 5,457,383 5,889,576 5,454,774 5,811, October 19, ,500,000 8,458,396 8,866,281 8,454,715 8,737,238 PSBank 2016 January 27, ,000,000 1,974,642 2,993,885 1,973,881 2,585,854 MCC 2019 June 30, ,300,000 1,288,184 1,496,741 1,287,624 1,457,370 P=21,800,000 P21,643,202 P24,179,414 P21,633,771 P=23,453, Other Matters The Group has no significant matters to report during the quarter ended March 31, 2010 on the following: a. Explanatory comments about the seasonality or cyclicality of interim operations; b. Unusual items as to nature, size or incidents affecting assets, liabilities, equity, net income or cash flows except for the payment of the semi-annual coupon on the HT1 capital securities on February 16, 2010 as discussed in Note 8; c. Issuances, repurchases and repayments of debt and equity securities; and d. Effect of changes in the composition of the Group during the interim period, including business combinations, acquisition or disposal of subsidiaries and long-term investments, restructurings, and discontinuing operations, except for the commencement of business of Metropolitan Bank (China) Ltd., a wholly-owned subsidiary on March 2, 2010 and its assumption of the assets and liabilities of Metrobank Shanghai Branch including the sub-branches. 10. Subsequent Events a. On February 17, 2010, the BOD of the Parent Company declared and approved a 3% cash dividend amounting to P1,084,361,610 or P0.60 per share based on the par value of P20.00 per share. On March 8, 2010, the BSP approved such dividend declaration. The record and payment dates were set on March 25 and April 15, 2010, respectively. b. The BOD of the Parent Company on its special meeting dated April 29, 2010, approved the issuance of a maximum of 105,000,000 shares out of the unissued authorized capital stock of the Parent Company at a price per share equivalent to the Offering Price. On April 30, 2010, the Parent Company launched and priced an overnight top-up placement raising approximately PhP5 billion in primary capital to strengthen its position in the Philippine banking sector. The proceeds of the offer will serve to further enhance Tier 1 Capital ratio, anticipate Basel III regulatory requirements, and facilitate further loan growth of the Parent Company.