PSE Circular for Brokers No. 281-00

February 8, 2000 PSE CIRCULAR FOR BROKERS NO. 281-00 PDCP Bank To Increase Capital PDCP will increase its capital by P2.5 billion this year. The new capital is expected to come from Metro Pacific Corporation, already a 35% shareholder in the Bank, once a number of restructuring initiatives have been finalized. cdll In preparation for the capital infusion, the Bank has taken a number of initiatives to clean up its balance sheet. These include the booking of additional loan loss provision totalling P313 million at the end of 1999 resulting in a net loss of P1.0 billion for the year. The Bank's policy of more selective lending brought about a reduction in its loan portfolio from P7.7 billion at end 1998 to P6.9 billion at the close of 1999. Coupled with an industry-wide drop in lending rate during the year, the Bank posted a reduction in gross interest income of 48%. Both these factors put significant pressure on the Bank's operating performance in 1999. To compensate, expenses were reduced in total by 46%. The lowering of interest rates paid on deposits resulted in interest expense being reduced by some 27%. Operational overheads were also substantially reduced but the prudent loss provisioning has resulted in a 41% increase in general and administrative expense. With the clean up of the balance sheet and the fresh infusion of capital, PDCP Bank is repositioning itself to be in the forefront of electronic banking. In 1999, PDCP Bank introduced several new deposit products and services which were electronically-based such as Saving Supreme, Privilege Checking and CashNet, resulting in an increase in its deposit level of 26.34% to P10.435 billion by year-end. Towards the end of 1999, a tie-up with PLDT for the launch of an Internet-based payment system through a website was announced. This product offers exceptional customer service to the common clients of the Bank and PLDT. At the start of the year 2000, the Bank rolled out its mobile phone banking services in cooperation with Smart Communications, Inc. The first of its kind in the Philippines, this system allows Smart GSM celfone and PDCP Bank account holders to do balance inquiries, checkbook and bank statement requests, buy celfone and even transfer funds via text messaging. cdlex