2016 was again another challenging year as dramatic changes occurred around the world: the decision of the United Kingdom to exit the European Union, the unpopular results of the election for the U.S. Presidency, the series of terrorist attacks abroad, the worsening of the crisis in the Middle East and the slowdown in major economies such as China. In the Philippines, there were also the unexpected results of the Presidential elections, several typhoons which brought death and destruction to our natural resources, the drug war campaign conducted by the government, the money laundering scandal involving Bangladesh, plus several graft and corruption charges against government officials.

Amidst this difficult background, the Philippine economy showed strength and resilience. Gross Domestic Product grew by 6.8 percent in 2016, up from the 5.9 percent registered in 2015. This was brought about by accelerated growth, backed by rising spending on infrastructure and domestic demand. At this level, the Philippines emerged as one of Asia’s fastest growing economies.

The full-year average inflation rate for 2016 reached 1.8 percent from 1.4 percent the previous year although it hit a two-year high of 2.6 percent in December. Yet it remained below BSP's 2016 inflation projected range of 3.0 percent plus. For this reason, BSP decided to maintain throughout 2016 the corresponding interest rates on its overnight lending and deposit facilities which was last hiked in September, 2014. The Philippine peso closed at P49.72 to the dollar in 2016, which was P2.66 or 5.6% weaker than its 2015 year-end close of P47.06, but the drop was still relatively lower among other regional currencies, except for Chinese yuan, Indonesian rupiah and Thai baht. The PSE closed 2016 at 6,840.64 at the end of the year, lower than its finish of 6,952.08 and was the second consecutive year of losses for the benchmark index. The BOP position for full year 2016 reflected a deficit of US$420 million, which was in contrast to the US$2.6 billion surplus experienced in 2015.


In light of the above, the Bank's financial conditions continued to strengthen. Total resources of the Bank reached another new high. It grew by 3.8% to P1.316 Billion, from P1.268 Billion at year-end 2015. Deposits likewise rose to P626.1 million, an increment of 6.8% against the previous year's P586.3 million. Our loan portfolio increased significantly, by 95.6% to P185.8 million from P95.0 million, an increase of P90.8 million due to loans granted for working capital  and auto loans financing.   The Bank will be more active particularly in the auto financing though still at a cautious phase. On the other hand, our investment in overnight deposit facilities dropped substantially, by 88.6% from P877.5 million at the end of 2015 to P99.9 million by the end of 2016. In addition to the loans generated, our excess funds were invested in repurchase agreements in the amount of P443.8 million from zero exposure in 2015, and in held-to-maturity investments such as government securities and corporate bonds, which increased by 119.0%, from P247.4 million to P541.8 million.

Against this scenario, for the year 2016, the Bank reported a net income of P2.5 million, a drop of 43.0% over the previous year’s income of P5.2 million. This was due primarily to a drop in net interest income (11.2%), from P52.3 million to P46.5 million, because of lower yields. Other income, however, increased to P13.7 million from P12.1 million the previous year, up by 12.9%. However, we again continued to manage our operating expenses efficiently. In fact, our expenses dropped by 1.6%, from P50.7 million in 2015 to P49.9 million this year.