The year 2009 saw the Philippines post a Gross Domestic Product (GDP) growth of 0.90 per cent, notwithstanding the devastating effects of the two killer typhoons, Ondoy and Pepeng, which hit the country at the end of the third quarter. Although the 0.90% GDP was much lower than the 4.6% GDP attained in 2008, the growth nevertheless was positive unlike in many countries. The country's overall Balance of Payment yielded a surplus of US $5.2 billion, substantially higher than its level of US $89 million in 2008. On the other hand, domestic liquidity grew at a slower pace of 8.3%. The inflation rate averaged 3.0% in 2009, well within BSP's projection of 3.5%, performing favorably compared to the 9.3% average in 2008.

There was minimal appreciation in the value of the peso against the US dollar as the peso gained a slight 2.8% to close the year at P46.20 to $1.00 from P47.52 in 2008. (It was the strongest since it touched P45.925 in August, 2008).

The Monetary Board slashed key policy rates by 150 basis points during the year. (During a seven-month period from December 2008 to July 2009, this reduction totalled 200 basis points.) This resulted in the overnight borrowing rate reaching a record low of 4% and the overnight lending rate of 6%. Consequently, Treasury Bill rates dropped in 2009 amidst easing inflation and BSP policy rate cuts. For 2009, rates for 91-day tenor averaged 4.19% which was comparatively lower than 5.30% average in 2008.

Despite the economic crisis, the Philippine Stock Exchange rebounded as it enjoyed a 'boom' year in 2009 after a drastic fall of 48.3% the previous year. The PSE main composite index closed at year's end at 3,052.68, a gain of 1,179.83 points, or 63%, against the 1,872.85 close in 2008. This surge was the highest annual index growth sustained since both the Manila and Makati Stock Exchanges merged fifteen years ago in 1994.

 

We are happy to report that the bank's financial condition continues to remain strong. Total resources of the bank increased by 5.8% to end 2009 at P1.009 billion. This marked a milestone for Isla Bank as the bank reached the P1 billion total resources level for the first time. This was due primarily to a 16.3% increase in our deposits to P377.3M from P324.3M the previous year.

The bulk of our funds continue to be invested in overnight lending which amounted to P430.1M at the end of the year, although this was a slight drop of 1.0% from P434.2M at the end of 2008. Investment in Government Securities rose significantly by 28.4% to P341.8M from P266.1M the previous year. Our loan portfolio, however, dropped by 12.5% to P109.6M from P125.4M, again due to the lack of quality loans in the market as the result of the ongoing economic crisis.

Despite interest rates falling to new lows, your bank generated a Net Income of P2.2M, which was 37.7% better than the previous year's income of P1.6M. Net Interest Income of P51.0M accounted for the bulk of the bank's earnings, but a significant amount was also generated from Other Operating Income, representing non-interest income arising from service fees and other sources. Although operating expenses dropped by 4.4%, the bank's move to provide additional provision for loan losses amounting to P2.0M, negated this savings.

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