THE PHILIPPINE POSTAL SAVINGS BANK is a government thrift bank created with a special mission to encourage savings and provide access to financial credit to the ‘unbanked’ areas of the country.
As a government depository bank, and generating other resources from its operation as a full-service savings bank, the PostalBank aims to make available, especially to the rural sector, much needed capital to spur economic development in the countryside. It also aims to encourage savings among rural families, inculcating the value of thrift into the Filipino psyche, especially among the young people.
This explains why the Philippine Postal Corporation is at the forefront of this vision, through its thrift bank subsidiary, the Philippine Postal Savings Bank.
The PostalBank has been setting up branch offices all over the country in an effort to expand its outreach capability in the rural communities. Moreover, it will implement, for the first time, the concept of tapping Philpost’s 1,900 Post Offices located in all municipalities to form part of the national campaign to mobilize funds in the rural sector. Initially serving as conduits for the marketing and sales promotions activities of PostalBank, these postal stations will eventually serve as “banking offices”, thereby creating the largest network of at-your-doorstep branch offices among all banking institutions.
Within the next five years, the PostalBank aims to become a major government financial institution with the ability to make an impact economic development in the Philippine countryside.
II. COMPANY HISTORY AND PROFILE
THE OLD POSTALBANK
In 24 May 1906, the passage of Act No. 1493 created the Postal Savings Bank (PSB) as a division of the Bureau of Posts. All post offices were considered and in fact operated as a Division of Posts. Its operations tapped savings by bringing banking services to therural areas.
During the Japanese occupation period (1943-1944), all loans were liquidated with Japanese war notes. Coupled with severe inflation, said era caused a complete breakdown of the banking system of the economy. These setbacks damaged about 70% of the records of the PSB and crippled its operations.
To enable the economy to recover, Executive Order No.48 was issued on 6 June 1945 to pave way for the reopening of the pre-war banks.
However, it was only in 1946 that the PSB resumed service in Manila. Starting with only 15,737 savings deposits accounts with a total value of P4, 104,223, the bank rapidly grew with deposits jumping to P14.4 million in 1947, P25 million in 1948, and P33 million in 1949. Moreover, as a result of the thrift campaign conducted by PSB, demand for banking services increased thereby opening up opportunities for the expansion of banking facilities.
In the 1960’s the private banking sector, especially the rural banks, rapidly grew while the operations of PSB deteriorated due to the shift of its clients to private banks resulting from higher interest on savings deposits offered by the latter.
Further, the PSB was considered unduly competing with the private sector and was thus dissolved via Presidential Decree No. 121 dated 29 January 1973 mandating that: a) PSB branches shall not be established in places where banking services are already available; b) one year thereafter, existing PSB operations maintained in such places shall be completely discontinued; and c) within three years from the said date, all operations of the PSB shall be completely discontinued.
On January 1976, the PSB was finally phased out with the Philippine National Bank (PNB) serving as its liquidator pursuant to provisions of P.D. No. 241.
THE NEW POSTALBANK
Among the powers granted to the Philippine Postal Corporation (Philpost) under Republic Act No. 7354 was the power to reopen or reactivate the Postal Savings Bank (PSB).
On 05 October 1993, PhilPost requested the Bangko Sentral ng Pilipinas for an authority to reopen the defunct Postal Savings Bank.
On 23 October 1993, the Philpost Board of Directors passed Resolution No. 93-119 approving PHILPOST 2000, the Medium Term Corporate Plan of the Philippine Postal Corporation (1994-2000). Among others, said corporate plan states, “ Pursuant to the Macroeconomy & Development Financing Policy stipulated in the Medium-Term Philippine Development Plan 1993-1998 to ‘Develop the rural financial sector to ensure adequate supply of credit to the countryside,’ the PhilPost shall re-establish the Postal Savings Bank as a subsidiary.”
After consultations with the representatives of the Bangko Sentral and the Office of the Government Corporate Counsel (OGCC), the Philpost Board of Directors approved the re-opening of the Philippine Postal Savings Bank (PPSB) as a wholly-owned subsidiary of the Corporation with its own separate funds, books of accounts and set of accountable officers and employees.
Hence, on 21 July 1994, the Philippine Postal Savings Bank was re-opened by no less than former Pres. Fidel Valdez Ramos in simple ceremonies in Malacañang.
III. THE PRESIDENT'S REPORT
This year 2011 marked my first semester at the helm of the Philippine Postal Savings Bank, and I would like to view the Bank’s full-year performance in 2011 as indicative of what it has been and what it can be.
Through the years, the PostalBank has posted financial gains, modest enough to show proof of its stability and resiliency, but not large enough to increase its resources to the point where it could significantly impact on its service mandate, which is to help develop the rural financial sector to ensure an adequate supply of credit in the countryside. This mission, remains as relevant today as it was in 1906 when the Bank was established. Unlike the urban sector which has enjoyed the focus of the private banking system, much of the rural areas remain ‘unbanked’ and in acute need of financial support. The PostalBank continues to suffer from limited financial resources to fund local community projects, with its financial growth hampered by policy, management, and environmental constraints. This has made the Bank vulnerable to even slight shifts in its operational areas to the point of threatening its very viability. This was what happened in 2011.
Towards the middle of the year, a decline in profitability started to surface, and concerns were raised that if this were not arrested, the year-end performance would reflect a negative growth rate. In response, we instituted measures in various areas of bank operation. Aside from implementing a cost-cutting program without sacrificing operational efficiency, special attention was given to maximizing the bank’s profit potentials from lending operations through more aggressive marketing of its products and services, reviewing and revising the fee structure, encouraging borrowers to fully avail of their credit lines, and enhancing collection efforts to reduce the level of past due accounts.
Our efforts paid off as reflected by the bank’s positive bottom line at the end of 2011. This is shown in the Financial Statements for 2011 presented in this Annual Report, the highlights of which are shown below:
Total Resources. Our resources increased by 13% year-on-year, from PhP5.32 million in 2010 to PhP6.00 billion in 2011.
Deposits. Our deposits (outstanding) stood at PhP5.24 billion in 2011, 15% higher than last year’s PhP4.56 billion levels.
Loans. Our loans (gross) was maintained at PhP2.23 billion.
Total Investments. Total Investments (inclusive of Interbank Call Loans) amounted to
PhP2.45 billion in 2011 against PhP2.17 billion in 2010 or 13% increase.
Total Revenues. Total Revenues recorded in 2011 was PhP496.32 million, PhP292.55 million of which came from interest income from loans, PhP94.83 million from investments, PhP56.26 million from fee-based activities and PhP52.68 million from other income.
Net Income. Net Income after tax for the year ended December 2011 amounted to PhP5.34 million.
Capital. Our capital position as of December 2011 improved from PhP444.93 million in 2010 to PhP687.00 million in 2011. This is due to the infusion of fresh capital from the National Government in the amount of PhP249M.
Towards the second half of 2011, even as we addressed the problem of reversing our losses, we reviewed Bank operations from a longer-range perspective, especially since we were interested in vesting the Bank with an institutional strength that will allow for sustained growth through the years. We reviewed the various aspects of the Bank’s processes such as the marketing system, credit operations, manpower development, risk management, technology innovations, and branch operations. We also evaluated our traditional product lines to strengthen them and evolve new ones in response to market demand. And more importantly, we took a long, hard look at our original mandate, upon which all our efforts should be centered. From all these, we have crafted a Five-Year (2012-2016) Strategic Plan, to provide us with the direction for the future.
The Five-year plan is geared towards providing the PostalBank with the following:
Financial Strength and Stability, through an intensified program to infuse/build up capital and generate more resources from its business operations, which shall focus on strong deposit generation and prudent lending and investment activities, and the introduction of new products and financial services.
A highly visible presence in the countryside, through the opening up of more branches nationwide, with the existing 25 expected to increase to 200 in five years and the 1900 postal stations planned to be tapped for the largest network coverage ever in the banking industry.
Focused service relevance, offering products and services for specific target markets and serving as a conduit for undertakings that promote people empowerment and countryside development.
A reputation of being a major, authentic government bank, which we expect PostalBank to earn from an impressive financial performance and the implementation of its service mandate.
I have full confidence in what the PostalBank can become –- a major government financing institution, perhaps ranking among the top 10 thrift banks in the country, by the year 2016. With the support of the Bank’s Board of Directors, management and employees, I believe that we can move the PostalBank from its being perennially “small” to one that is recognized as making a difference in the countryside.
CESAR N. SARINO
President and CEO
IV. RESULTS OF OPERATIONS
PostalBank resources increased by 13% from PhP5.32 billion in Year 2010 to PhP6.00 billion in Year 2011. Loans and discounts (net) account for 34% (PhP2.07 billion), while Investments in Bonds and Other Debt Instruments comprise 26% (PhP1.54 billion) of Total Resources. Fifteen percent (15%) or PhP910 million is composed of Interbank Call Loans Receivables-PRP. The remaining 25% (PhP1.49 billion) is composed of other assets (Real and Other Properties Acquired or ROPA of PhP104.89 million, Due from Bangko Sentral ng Pilipinas and Other Banks of PhP901.08 million, Cash on Hand, checks and other items of PhP101.38 million, Bank Premises, Furniture, Fixture and Equipment of PhP67.67 million, Sales Contract Receivables of PhP65.88 and Others of PhP249.66 million).
Total Revenues for 2011 reached PhP496.32 million, 8% lower than the previous year’s level of PhP540.93 million. This was due to lower market rates on investments which decreased by 1.55% on the average across all maturities. Interest income totaled PhP422.52 million from PhP449.75 million in the Year 2010, with interest income from loans contributing PhP292.55 million, as against last year’s PhP304.65 million and interest income from investments of PhP94.83 million against PhP102.61 million in December 2010. Non-interest income reached PhP73.80 million composed of Fees and Commissions Income (PhP56.26 million), Gains from Financial Assets (PhP0.50 million) and Other Income (PhP17.04 million).
Net income after tax stood at PhP5.34 million and a comprehensive income of PhP10.98 million. The Net Income is equivalent to 0.77% Return on Equity (ROE) compared to the industry ratio of 10.9% (as of June 2011) and a Return on Assets (ROA) of 0.09% vs. the industry ratio of 1.3% (as of June 2011).
Our deposits (outstanding) stood at PhP5.24 billion. Total Deposit Liabilities (outstanding) increased by 15% from PhP4.56 billion in 2010 to PhP5.24 billion in year-end 2011.
In terms of deposit mix, the bank generated 64% of its total deposits or PhP3.36 billion from government entities, while the remaining PhP1.88 billion or 36% was contributed by the private sector compared to a deposit mix of 70:30 government to private deposits, registered in the year 2010.
Deposit by Type
By type of deposits (outstanding), 92.57% or PhP4.85 billion were savings deposits. Time deposits comprised 3.75% of total deposit liabilities while demand deposits, 3.68% for the year 2011.
Current loans (gross of provisions for probable loss) outstanding totaled PhP1.96 billion, while Non-Performing loans (gross provisions for probable loss) outstanding amounted to PhP273.00 million or 12.24% of total loan portfolio.
Consumption loans comprised 44.79% or PhP998.38 million while the remaining 43.79% or PhP1.23 billion were regular and other loans, composed of the following: (1) Loans to Government – PhP300.13 million; (2) Agrarian Reform and Other Agricultural Loans – PhP123.38 million; (3) Development Incentive Loans - PhP122.71 million; (4) Microfinance Loans - PhP0.71 million; (5) Loans to Small and Medium Enterprises – PhP237.87 million; (6) Loans to Private Corporations - PhP273.73 million; (7) Loans to Individuals for Housing Purposes - PhP129.18 million; and (8) Loans to Individuals for Other Purposes – PhP42.98 million.
Our Lending Efficiency stood at 65% of the Bank’s loanable funds.
Total investments increased to PhP2.45 billion from PhP2.17 billion last year or by 12.89%. IBCL increased by 113.62% from PhP426 million in 2010 to PhP910 million as of end December 2011.
In terms of regional/ branch performance, the top deposit generators were Head Office with PhP769.18 million or 14.7% of total deposits, followed by Malolos with PhP745.47 million or 14.2%, Cebu with PhP445.19 million or 8.5%, Tuguegarao with PhP396.80 million or 7.6% , and Legazpi with PhP323.02 million or 6.2%.
For loans, the top performers were Head Office with a gross loan portfolio of PhP691.30 million or 31.0%, Cagayan De Oro with PhP176.98 million or 7.9%, Tuguegarao with PhP161.64 million or 7.3%, Tacloban with PhP148.09 million or 6.6% and Iloilo with PhP105.53 million or 4.7%.
On a per area level, top funds generator was the Metro Luzon Area, contributing PhP1.77 billion to the total deposit portfolio. This was followed by the Visayas Area with PhP1.14 million deposit funds. In terms of loans, Head Office with Metro Luzon Area contributed PhP872.67 million to the total loan portfolio, followed by Visayas Area which contributed PhP497.49 million.
V. PRODUCTS AND SERVICES
1.1 DEPOSIT PRODUCTS
1.1.1 Peso Accounts
a. Savings Account
Interest bearing deposit account that can be withdrawn anytime upon presentation of the savings account passbook. Transactions are recorded in a passbook and can be a single or joint account.
b. PostalCash ATM
Interest bearing deposit account where clients can enjoy 24-hour banking convenience thru the use of an ATM card. With PostalCash ATM, client can withdraw cash, pay bills, transfer funds anytime and anywhere thru any Bancnet, Megalink and Expressnet ATMs nationwide.
c. Checking Account
Non-interest bearing account that allows withdrawal through issuance of a check
d. Time Deposit
A form of deposit earning an interest rate higher than savings account rate. Interest rate is determined based on the amount and term of deposit. This account is withdrawable at maturity and is evidenced by a Certificate of Time Deposit.
e. Premium Savings Plan Account (PSP)
This is an interest-bearing account that entitles the client to a premium over savings account interest rate. Interest rate is determined based on the amount and term of deposit.
Minimum term is 30 days and maximum of 360 days. Minimum balance required is PhP10,000 for Personal/ Individual Account and PhP100,000 for Corporate/ Government Account.
f. Automatic Transfer Arrangement
A two in one account that automatically transfers funds from savings to current account upon issuance of a check.
1.1.2 Dollar Accounts
a. Dollar Savings Account
This is an interest-bearing USDollar savings account whose transactions are recorded in a passbook. It can be individual or joint account.
b. Dollar Time Deposit
This is a US Dollar denominated time deposit earning an interest rate higher than that of a US Dollar savings account.
1.2 LOAN PRODUCTS
1.2.1 Consumer Loans
a. Salary Loans
Salary loans are extended to eligible employees of both government and private institutions for personal/ business use or home improvement.
b. Educational Loans
This is an additional loan facility to eligible employees of both government and private institutions for their educational needs (e.g. Tuition and matriculation fees, books, uniform and other miscellaneous expense).
This program shall be for the educational expenses of the principal borrower or his/her dependent/s referring to the following: (1) Husband/ Wife; (2) Children; (3) Brother/s and Sister/s; and (4) niece/s and nephew/s.
c. Auto Loans
c.1 Special Vehicle Financing Program
This is a special vehicle financing program extended to eligible officers of government and private institutions for personal and business use.
c.2 Regular Auto Loans
This is a car financing facility for selected clients for the acquisition of brand-new vehicles.
c.3 Auto Loan Facility for Brand New Cars
This is a car financing facility for selected clients for the acquisition of brand-new cars.
d. Housing Loans
These are for the purchase of lot in developed area, complete residential unit to be occupied bythe borrower, construction of residential unit on a borrower’s property, home improvement
loan for expansion or remodeling of residential unit duly occupied by the borrower, refinancing of real estate loan with other lending institutions secured by the residential unit occupied by the borrower and purchase of lot and construction of a house thereon.
e. Property Maximizer
This is a multi-purpose loan facility offered to qualified clients for their personal/business financing needs.The loan shall be used to meet the cash flow needs of the borrower or even for investment opportunities
1.2.2 Commercial Loans
a. Term Loan
Ranging from medium to long-term, term loan offers repayment periods designed to meet the client’s pattern of debt servicing needs. This facilityis geared to finance: (a) acquisition of fixed assets; (b) purchase of equipment; (c) construction/ expansion/ modernization of building, factories and plants; (d) working capital requirements; (e) acquisition of raw materials.
1.2.3 Special Financing Program
a. ArangkadaPasada Program
This is a special financing facility offered to transport cooperatives/associations/groups to be used either for projects that would benefit members of transport sectors or for re-lending to eligible members. The program is also open to drivers and conductors of different transport cooperatives, their spouses and immediate family members.
VI. FINANCIAL STATEMENTS FOR YEAR 2011