PSE Circular for Brokers No. 340-99

February 25, 1999 PSE CIRCULAR FOR BROKERS NO. 340-99 February 23, 1999 Ms . GRACE DE GUIA Asst. Manager, Disclosure Dept. Philippine Stock Exchange PSE Center, Exchange Road Ortigas Center, Pasig City Dear Ms. De Guia : This is in reply to your letter of February 23, 1999, asking the Bank to clarify matters that appeared in the issue of "TODAY" of even date. It is not true that the Bank's unaudited net income for 1998 of P315 . 9 Million is lower than that of 1997 and 1996. The audited net income in 1997 is P286 . 07 Million and P273 . 06 Million in 1996 . The income for 1998, therefore, would be higher, not lower, than the two previous years. These constant increases in income were registered notwithstanding the economic crisis that beset the country starting in the middle of 1997 and which continues up to the present. The Bank's total resources has continuously grown from P9 . 509 Billion in 1997 to P10 . 526 Billion in 1998 , out of which P4 . 626 Billion are in government securities and other debt instruments. These government securities alone far exceeds the deposit levels of the Bank of P2 . 965 Billion as of January 31, 1999, which means that the Bank is very liquid. The high level of real properties of the Bank is correct. Some of these were acquired by the Bank thru Dacion en Pago from its corporate accounts. But there is nothing wrong with this. In fact, this has improved the assets of the Bank. It must be stressed that a big bulk of the subjects of the dacion were clean loans prior to the Bank's illegal closure in 1985 which the defunct Central Bank used as their basis for closing BF which the Supreme Court declared as having been done by the Central Bank "arbitrarily and with grave abuse of discretion." Thus, from clean loans, the Bank now holds valuable real estate properties, which in any language are hard assets. LLphil Dacion is a mode of extinguishing an obligation under the Civil Code and is generally accepted by Banks as loan settlement. Having an inventory of real properties will not necessarily make the operation of the Bank less profitable. As experienced in the past years the Bank has been making profits from sale of its acquired assets particularly those from Paraaque and Las Pias. The management of the Bank is confident that its profitable operation will continue this year and in the years to come even as it continues to be damaged by the aftermath of its illegal closure in 1985. As part of its restoration efforts, 53 of BF's previous 89 branches nationwide have been restored. These branches have been attracting depositors and clients with their mark "service ala-CRM" and the new promo " Papremyo Buwan-Buwan Hanggang Year 2000" is generating millions of deposits for the Bank. LexLib By reason of its profitable operation, the book value of its share has increased to P197 . 99 per share. The damage suit filed by BF against the Central Bank for P18 . 8 Billion is making a big headway. The Court of Appeals has denied the petition filed by the Central Bank to stop the Regional Trial Court of Makati from proceeding with the trial of the suit for damages. It will be recalled that Banco Filipino reopened in 1994 after the Supreme Court declared that the bank was closed illegally, the closure having been done "arbitrarily and with grave abuse of discretion." This ruling has established the Bank's causes of action, thus making it entitled to damages. It is now just a matter of proving the extent by which the Bank was damaged. We hope that the foregoing clarifies the matters raised in the subject news item. (SGD.) FRANCISCO A. RIVERA Corporate Secretary