BPI-Prudential Bank Merger and Acquisition

1. BPI-Prudential Bank Merger and Acquisition

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

3. 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

4. Historical Background • Philippines’ and Southeast Asia’s oldest bank • issuer of the country’s first currency notes in 1855 • 1st branch – Iloilo;1897 • financed the following: • first tram service • telephone system • electric power utility • first steamship in the country

5. 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

6. 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

7. 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

8. 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/MS1 Insurance Corporation 1MS = Mitsui Sumitomo

9. Top 5 Stockholders1 • PCD NOMINEE CORPORATION (NON-FILIPINO) • AYALA DBS HOLDINGS, INC. • AYALA CORPORATION • PCD NOMINEE CORPORATION (FILIPINO) • ROMAN CATHOLIC ARCHBISHOP OF MANILA 1As of December 31, 2009

10. Prudential Bank in Avenida, Manila 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

11. Prudential Bank branch side by side with BPI branch in Naga 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.

12. The Acquisition Process 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 P764.44 a share through a tender offering to minority shareholders. 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

13. 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.

14. 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 P456.09 billion. • BPI expects to gain at least 200,000 new accounts with the acquisition.

15. Ranking BEFORE the acquisition • Asset Size

16. Ranking BEFORE the acquisition • Total Deposits

17. Ranking BEFORE the acquisition

18. Ranking AFTER the acquisition

19. Ranking AFTER the acquisition

20. Ranking AFTER the acquisition • Top 5 banks in the Philippines (As of June 30, 2008)

21. 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) Ranking AFTER the acquisition • 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)

22. Ranking AFTER the acquisition Rankings of the top five in assets are the following: • Landbank 20.91 % • BPI 16.32 % • BDO 11.64 % • PNB 9.91 % • Metrobank 7.42 %