BPI-Prudential Bank Merger and Acquisition

Bank of the Philippine Islands Incorporation Date: 04 January 1943 Listing Date: October 12, 1971 Number of Directors: 15 Ownership Restrictions: 40%

BPI leader in electronic banking, having introduced most of the firsts in the industry, such as:  automated teller machines (ATMs),  a point-of-sale debit system  kiosk banking  phone banking  internet banking  mobile banking owned by the Ayala Corporation

Historical Background Philippines’ and Southeast Asia’s oldest bank issuer of the country’s first currency notes in st branch – Iloilo;1897 financed the following:  first tram service  telephone system  electric power utility  first steamship in the country

Business Evolution post World War II era, BPI evolved from a purely commercial bank to a fully diversified universal bank accomplished mainly through mergers and acquisitions in the eighties when it absorbed an investment house, a stockbrokerage company, a leasing company, a savings bank, and a retail finance company

Business Evolution Since the late 1990s – consummated three bank mergers 1996 – merged with City Trust Banking Corporation 2000  consummated the biggest merger then in the banking industry when it merged with the former Far East Bank & Trust Company (FEBTC)  formalized its acquisition of three major insurance companies in the life, non-life and reinsurance fields 2005 – acquired and merged with Prudential Bank

Business Milestones April 2007 – Bank of the Philippine Islands (Europe) Plc October 2008 – BPI, Ayala Corporation and Globe Telecom signed a Memorandum of Agreement to form the country’s first mobile microfinance bank 2009 – entered into a strategic bancassurance partnership with The Philippine American Life Insurance Company (Philamlife) to form BPI-Philam Life Assurance Corp

Principal Subsidiaries BPI Family Savings Bank, Inc. BPI Capital Corporation BPI Leasing Corporation BPI Direct Savings Bank BPI International Finance Limited, Hong Kong BPI Express Remittance Corporation Bank of the Philippine Island (Europe) Plc, Ayala Plans, Inc. BPI/MS 1 Insurance Corporation 1 MS = Mitsui Sumitomo

Top 5 Stockholders 1 PCD NOMINEE CORPORATION (NON- FILIPINO) AYALA DBS HOLDINGS, INC. AYALA CORPORATION PCD NOMINEE CORPORATION (FILIPINO) ROMAN CATHOLIC ARCHBISHOP OF MANILA 1 As of December 31, 2009

Prudential Bank 1952 – incorporated as an expanded commercial bank June 2002 – celebrated its 50th anniversary in the banking business Subsidiaries  Prudential Venture Capital Corporation  Prudential Investments, Inc.  Pilipinas Savings Bank Prudential Bank in Avenida, Manila

Prudential Bank caters primarily to middle-market based entrepreneurs The Bank of Tokyo-Mitsubishi, Ltd. holds 12% of the total shares which made it the majority shareholder before the acquisition took place As of December 31, 2004, it operated a total of 187 offices/branches, consisting of the head office, 91 Metro Manila branches and 95 provincial branches. Prudential Bank branch side by side with BPI branch in Naga

The Acquisition Process September 1, 2005, BPI acquired 92% of the share capital of Prudential Bank, Inc. for cash consideration of P5,619 million In accordance with the provisions of the plan of merger approved by the Bangko Sentral ng Pilipinas and the SEC on December 21 and December 29, 2005, respectively, BPI issued 9.99 million of its common shares with fair value of P515 million to the 8% Prudential minority shareholders In the sale agreement, BPI bought 80 percent of Prudential from the Santos family, and later further increased its stake to 91.6 percent for P a share through a tender offering to minority shareholders.

Reasons Jaime Augusto Zobel de Ayala, BPI’s Chairman, said the purchase would further "enhance" the operations of BPI with increased or widened network. New incentive package by BSP with respect to mergers and acquisitions BPI has been on the lookout for some good acquisitions in order to bolster its position as a rising regional financial powerhouse.

Reasons The merger is seen to offer a good strategic fit to BPI in penetrating the attractive customer segment of Prudential composed mostly of middle market entrepreneurs. With the merger, BPI will solidify its position as the country’s second largest bank with combined assets totaling P billion. BPI expects to gain at least 200,000 new accounts with the acquisition.

Ranking BEFORE the acquisition Asset Size Total Assets RankingBankPHP, Mil 1Metrobank463,884 2Bank of the Philippine Islands (BPI)356,231 3Land Bank of the Philippines285,260 4Equitable PCI Bank284,282 5Citibank222,343 15Security Bank Corp80,106 16Union Bank76,874 17Philippine Bank of Communications55,792 18Bank of Commerce55,048 19Prudential Bank51,220 20International Exchange Bank46,406

Ranking BEFORE the acquisition Deposits (PHP Millions) Ranki ng BankTotalGov't Non- Gov't 1 Metrobank344, ,353 2 Bank of the Philippine Islands (BPI)285, ,465 3 Land Bank of the Philippines211,120139,26871,852 4 Equitable PCI Bank185, ,876 5 Philippine National Bank154,40628,533125,873 Total Deposits 15 Standard Chartered42, , Bank of Commerce40, , Prudential Bank39, , International Exchange Bank36, , Development Bank of the Philippines36,00723,65112, Philippine Trust Company34,276-

Ranking BEFORE the acquisition

Ranking AFTER the acquisition

Top 5 banks in the Philippines (As of June 30, 2008) Total Assets as of 30 June2008 (in Million Pesos) RankBank NameTotal Assets 1 Banco de Oro Unibank Inc. (BDO)643,402 2 Metropolitan Bank and Trust Co. (Metrobank) 615,911 3 Bank of the Philippine Islands (BPI)499,103 4 Land Bank of the Philippines (LandBank)369,857 5 Development Bank of the Philippines (DBP) 322,749

Ranking AFTER the acquisition Top 5 Philippine Banks, in terms of Total Deposits (2009)  Banco de Oro (BDO) Unibank  Metrobank (MBT)  Bank of the Philippine Islands (BPI)  Rizal Commercial Banking Corp (RCBC)  Philippine National Bank (PNB) Top 5 Philippine Banks, in terms of Net Income (2009)  Bank of the Philippine Islands (BPI)  Metrobank (MBT)  Banco de Oro (BDO) Unibank  UnionBank of the Philippines (UBP)  China Banking Corp. – ChinaBank (CHIB) Top 5 Philippine Banks, in terms of Total Assets (2009)  Banco de Oro (BDO) Unibank  Metrobank (MBT)  Bank of the Philippine Islands (BPI)  Rizal Commercial Banking Corp (RCBC)  Philippine National Bank (PNB)

Ranking AFTER the acquisition Rankings of the top five in assets are the following: Landbank % BPI % BDO % PNB 9.91 % Metrobank 7.42 %