Views From The

Private SectorThe Philippine-Japan Business Investment Forum 2018

Iino Hall, Tokyo, Japan I 27 November 2018

Presented by: Eduardo V. Francisco

Agenda

▪ Introduction to BDO

▪ Views from the Private Sector

▪ What Can We Do For You

▪ Contact Details

2

INTRODUCTION TO BDO

4

• The Philippines’ largest bank with total assets of P2.9 Tn(USD53.9 Bn).

• A full-service universal bank with one of the widest distribution networks consisting of more than 1,200 operating branches and over 4,000 ATMs nationwide.

• Part of the SM Group, one of the country’s largest conglomerates.

About BDO

5

• Wide and extensive coverage in key areas

25 International Offices

Europe - 1010 Remittance Offices

Middle East - 1Representative Office

Asia - 11 1 Full-service Branch

6 Remittance Offices

4 Representative Offices

North

America - 3 Remittance Offices

Philippines - 1,241

Branches

As of 29 October 2018

BDO ONB Total

Luzon 345 12 357

Metro

Manila564 1 565

Visayas 119 18 137

Mindanao 81 101 182

Total

Branches1,109 132 1,241

Market Research

6

#1

Customer

Loans

#1

Deposits

#1

Remittance

s

#1

Assets

Under

Managemen

t

#1

Private

Banking

Leading Trade

Services Provider2

Major Player in

Cash

Management3

#1

Rural

Banking

#2

Leasing &

Finance

#1

Investme

nt

Banking4

#1 Insurance

Brokerage5

• Market-leading positions in almost all business lines

#1

Credit

Cards1

Notes:1 In terms of cardholder base, merchant acquiring gross billings, and credit card receivables2 According to Asian Banking and Finance, Global Finance3 According to The Asset, The Asian Banker, Alpha South East Asia4 In terms of corporate issuances5 Among insurance brokers in terms of premiums produced and commissions earned

Business Franchise

2,323

1,560 1,537 1,508

673 654453 443 432 397

MBT BPI LBP PNB CHIB UBP SECB DBP RCBC

1,903

1,3241,239

682545

461379 360 302 233

MBT BPI LBP PNB CHIB SECB RCBC UBP DBP

2,846

2,1901,895

1,706

872 766 721 622 620 586

MBT BPI LBP PNB CHIB SECB UBP DBP RCBC

7

Total Assets

(in PHP billions)

Source: Company data, consolidated statements of condition (SOC). Ranking as at 30 June 2018

Note: Financials prepared by banks under BSP’s SOC requirements differ slightly from reported financials under SEC guidelines due to

certain differences in accounting rules requested by the two authorities

Gross Customer Loans

Customer Deposits Assets Under Management

• No. 1 among Philippine banks

(in PHP billions) (in PHP billions)

(in PHP billions)

BDO Market Share – 20% BDO Market Share – 34%

BDO Market Share – 22%BDO Market Share – 19%

1,032

580

435

297

127 107 90 88 84 44

BPI MBT LBP CHIB SCB RCBC PNB UCPB SECB

Industry Ranking

8

• Complete range of financial products and services

Corporate &

Institutional

Banking

• Corporate and

middle market

lending

• Trade finance

• Specialized

lending

• Financial

Institutions

• Cross-border

financing

Consumer

Banking

• Auto

• Mortgage

• Credit cards

• Personal loans

• Merchant

payment

processing

Leasing &

Finance

• Direct lease,

sale and

leaseback

arrangements

• Installment

paper

purchases

• Receivable

discounting

and factoring

Branch

Banking

• Deposit &

related products

• Over-the-

counter

transactions

• Cross-selling

distribution

platform

Treasury

Services

• Fixed income

dealership

• Foreign

exchange

transactions

• Portfolio

management

• Liquidity

management

Transaction

Banking

• Cash

management

• Electronic

banking

• ATMs

• Prepaid cards

• Merchant

acquiring

• Remittances

Trust

Banking

• Investment

management

• Unit investment

trust funds

• Living trusts

• Retirement

funds

• Special trusts /

custodianship

Private

Banking

• Wealth

advisory

• Customized

portfolio

management

Investment

Banking

• Underwriting &

distribution of

fixed income &

equity

securities

• Fin’l advisory

• Project finance

• Loan

syndication

Stock

Brokerage

• Equities trading

• Online stock

trading

Insurance

• Brokerage

(property &

casualty)

• Bancassurance

(individual &

group life

insurance)

Rural

Banking

• Salary loans

• Agricultural &

business loans

• MSME loans

Full Service Bank

VIEWS FROM THE PRIVATE SECTOR

How We See The Economy

▪ We are in agreement with the government, ADB, IMF of slower

but still robust growth but we still believe 6.4% for 2018 and

6.8% in the medium term is realistic. Near-term headwinds

include faster inflation, rising real borrowing rates, and reform

execution risk. Nonetheless, the elections next year should

provide a boost to the economy.

▪ We believe inflation will already peak in November 2018 and

the full year inflation will be around 5.4%. We believe inflation

next year will go back to around 4%. Base effects, liberalization

of rice imports, stabilizing oil prices and currency, as well as

tighter monetary policy all point to slower inflation in 2019.

10

How We See The Economy (cont’d)

▪ As our monetary authorities have already increased rates

several times this year, we believe there might be another 25-

50 basis points increase coming the next few months. We

nonetheless believe the economy is well-positioned in a rising

interest rate environment given very low public and private debt

levels.

▪ As the BSP has turned more hawkish, our Philippine Peso

exchange rate has already stabilized and we anticipate it to

remain range bound at P53-54/USD 1 by end of 2018. We

believe the country’s low external debt, rising FDI inflows, and

the prospect of rate hikes should support the currency.

Nonetheless, a tighter Fed policy outlook amid wider CA deficit

projections should continue to exert pressure on the PHP.

11

How We See The Economy (cont’d)

▪ The government has an ambitious target to boost infrastructure

spending and we appreciate and see it. Admittedly, it is more

back ended and we will see the roads, bridges and airports in

the next few years. Government has spent P437 Bn in

infrastructure and other capital outlays during the first 7 months

of the year, or roughly 40% of the P1.1 Tn infrastructure budget.

▪ We believe the government's other tax reform measures under

TRAIN 2 (tax reform for acceleration and inclusion) can still be

passed, although the window is narrowing fast because of the

upcoming elections. These revenue measures will ensure the

government retains its credit rating and we have no major

concerns on the fiscal deficit widening or increased borrowings,

given that the country's external debt has roughly halved since

2008. The 3% budget deficit cap for 2019 is still manageable.12

How We See The Economy (cont’d)

▪ Loan growth within the Philippine banking system is still strong

at around 15-18% y/y, while non-performing loans remain low at

less than 2%. A lot of this are also new borrowers who

previously did not borrow from the banking system. These

loans are productive and will help many companies.

▪ The PSE Index is now very competitive trading at around 16.5x

2018 earnings and 14.6x 2019 earnings. It is already roughly at

a 5 year low. We recommend that investors look at

conglomerates, banks and real estate companies with strong

balance sheets, as these are the ones that stand to benefit in a

rising interest rate environment.

13

How We See The Economy (cont’d)

▪ There is a lot of M&A happening but it seems local families or

conglomerates buying into other Philippine companies.

Japanese investors need to show that they not only bring in

financial support but have to make potential targets realize they

can open up markets and bring strategic value.

▪ The Duterte administration has announced their preference for

ODA and we appreciate that most of the ODA to date has come

from Japan. There are a lot of pledges from other countries like

China but we are waiting for actual signings and disbursements.

14

WHAT CAN WE DO FOR YOU

What Can We Do For You

BDO is the largest bank in the Philippines with the largest

distribution network. We would be happy to help you in your various

needs as we can assist you in the following:

▪ Identifying and introducing you to potential local partners

(whether alliance, JV, acquisition, PPP, unsolicited bid, etc)

▪ Assisting you in your partnership from due diligence,

structuring, negotiations and funding

▪ Helping you lever your investment by providing possible

acquisition finance (Yen, USD, PHP short term or long term

financing via bilateral or syndicated loans)

16

▪ Helping you hedge your investments in the country

▪ Providing permanent financing via corporate notes or bonds

▪ Refinancing debt at the target company level

▪ Tapping the capital markets by issuing SEC Registered Bonds

in the country on our Philippine Dealing Exchange (PDEX) or

listing in the Philippine Stock Exchange (PSE)

17

What Can We Do For You

INVESTMENT OPPORTUNITIES

▪ Philippine corporates are cash rich and looking for investments

abroad or brands to bring into the country. Possible tie ups even

for Japanese SMEs would be welcome specially in food and

retail. Filipinos love Japanese cuisine and fashion.

BDO PARTNERSHIP WITH JAPAN

▪ BDO has Japan Desk as a fully-staffed, functional lending unit in

the Bank's Institutional Banking Group. Japan Desk is dedicated

to market and service Japanese corporate companies operating

in the Philippines and retail needs of Japanese customers.

Japan Desk is comprised of 34 personnel, of whom 5 are Senior

Officers and 13 are Japanese-speaking.

18

What Can We Do For You

Outstanding Local Underwriter : 2006

PLATINUM AWARDS (PAST 20 YEARS)

Best Domestic Investment BankBest Domestic Equity House

Best Investment Bank in the Philippines: 2006-2014 & 2017

Best Equity House in the Philippines: 2006, 2007, 2009, 2010, 2013, & 2017

Best Bond House in the Philippines: 2007, 2008, 2010, 2012, & 2015

Best Debt House in the Philippines: 2006-2010

Best Equity House in the Philippines: 2006 - 2008, 2010

Best Investment Bank in the Philippines: 2007-2016

Best Bond House in the Philippines:2007-2010, 2012-2013 & 2016

Best Equity House in the Philippines: 2008 , 2013 & 2016

Best Domestic Investment Bank in the Philippines: 2006-2014

Best Corporate & Institutional Bank in the Philippines: 2015,2016

Project Finance bank of the Year in the Philippines : 2015

Best Equity House in the Philippines: 2008, 2010 & 2015

Best Loan House in the Philippines : 2015-2016

Top Corporate Issue Manager/Arranger : 2011- 2017

Best Investment Bank in the Philippines : 2013, 2014, 2018

Syndicated Loan House in the Philippines : 2013, 2014

8

Eduardo V. Francisco+63 917 855 6248 l evf@bdo.com.ph

Best Investment Bank: 2016-2017

Best Advisory House: 2017

Best Fixed Income House: 2015-2017

Best Equity House: 2016 - 2017

Best Project Finance House: 2016-2017

Top Investment Bank,

Philippines – 2016

BDO Capital & Investment Corporation

Thank you.

www.bdo.com.ph