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	SHARE PRICE

Bank of the Philippine Islands (BPI) As of December 28, 2007
PhP	Share Price	61.50
PhP	Low	60.50
PhP	High	62.50
PhP	Previous Close	63.00
	Change (%)	(2.38)
	Outstanding Shares	2,704,463,635
PhP	Market Capitalization	166,324,513,552.50
Source: Technistock


	CHANGES IN THE COMPOSITION OF THE BOARD OF DIRECTORS
	The Board of Directors (Board) in its regular meeting on December 19, 2007, approved the resignation of Ms. Rebecca Fernando as member of the Board of BPI effective immediately (December 19, 2007) and the election of Msgr. Rolando dela Cuesta to fill up the vacancy created by Ms. Fernando's resignation. Msgr. dela Cuesta will serve the unexpired term of Ms. Fernando for the year 2007-2008.
	REGULAR AND SPECIAL CASH DIVIDENDS DECLARATION

	During its regular meeting held on November 21,2007, the Board of Directors of BPI declared a regular cash dividend of P0.90 per share for the second semester of the year 2007, and a special cash dividend of P1.00 per share, on the total outstanding common shares of the bank. This will be payable to all common shares stockholders of record as of the 15th day from the receipt of the approval by the Bangko Sentral ng Pilipinas of the said dividends declaration and distributable on the 15th day from said record date.

	JANUARY TO SEPTEMBER 2007 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	Financial Condition Total resources as of end September 2007 was at P573.0 billion, P9.0 billion or 1.5% lower than end 2006 level of P582.0 billion. Decrease was due to contraction of deposits by P10.8 billion as time deposits declined by P21.5 billion or 7.9% in favor of other types of placements like special deposit accounts (SDA) with the Bangko Sentral ng Pilipinas (BSP). This was partly cushioned by the growth in both demand and savings deposits by P5.3 billion (7.3%) and P5.4 billion (4.4%), respectively. Bills payable increased by P3.0 billion or 52.9% due to higher deposit substitute transactions. Increases of P609 million and P131 million were also noted in due to BSP and other banks and manager’s checks and demand drafts outstanding on account of higher tax remittances coursed through the bank, and increased applications for drafts and wire transfers, respectively. The P2.2 billion or 14.2% improvement in liabilities attributable to insurance operations was due higher reserves set-up on account of new policies issued. Deferred credits and other liabilities, however, declined by P7.1 billion or 33.6% because of the P5.1billion payment in January this year of regular and cash dividends declared in October and November last year, and lower bills purchased contra account. Accrued taxes, interest and other expenses also dropped by P369 million mostly on payments of accrued expenses and taxes, and lower level of accrued interest on deposits. Capital funds improved by P3.4 billion or 5.3% mainly from the P5.2 billion increase in the surplus account, brought about by profits generated for the year but partly reduced by the P2.4 billion regular cash dividend declared in April 2007. Reserves declined by P1.6 billion on account of the sell down of available for sale securities. Translation adjustment debit balance related to foreign currency denominated assets was up by P239 million on account of the stronger peso against the US dollar. On the asset side, interbank loans receivable and securities purchased under agreements to resell dropped by P14.2 billion due to maturing foreign currency denominated interbank placements. On the other hand, net loans were up by P4.6 billion due to higher housing and auto loan bookings. Both investment securities-held-to-maturity (HTM) and trading account securities declined, by P15.2 billion and P8.9 billion respectively, on maturing peso and foreign currency government securities holdings. Available for sale securities (AFS), due from BSP, and due from other banks benefited from the proceeds of these matured securities. AFS grew by P12.1 billion or 13.3% due to the purchase of additional securities. Reserve assets are now carried in the Due from BSP account, which increased by P10.1 billion. Placements with other banks likewise resulted in a P2.9 billion increment in due from other banks. Cash and other cash items were down by P2.7 billion or 23.0% due to the lower cash requirement for the period as compared to year end. Assets attributable to insurance operations rose by P3.1 billion or 15.4% from higher investment portfolio on account of new policy sales and re-investment of realized investment income. Bank premises, furniture, fixtures & equipment dropped by P988 million mainly on account of the reclassification of certain ex-Prudential Bank assets to investment property, which in turn grew by P467 million after the sale of certain bank properties. Results of Operation For the Quarters ended September 30, 2007 and 2006 Third quarter 2007 net income stood at P1.9 billion, P339 million or 15.0% behind last year’s third quarter net income of P2.3 billion due to a 6.2% increase in operating expenses and a slight drop in revenues this quarter. Total revenues slightly dropped by P97 million or 1.3% as both net interest income and other income declined. Net interest income was behind by P21 million, despite an expansion of P37.1 billion in average assets, as net interest margin dropped by 26 basis points. Interest income declined by P458 million on lower yields but this was tempered by a decrease in interest expense by P437 million on lower cost. The lower interest income was caused by the drop in income on held-to-maturity and trading securities by P467 million or 29.4% on lower inventory levels. This was partly compensated for by the P74 million improvement in income on available for-sale securities (AFS) due to a higher asset base but carrying lower yields than last year. Interest expense on deposits declined by P434 million or 12.9%, despite the P27.7 billion expansion in average balances, as interest rates were adjusted downwards following prevailing market rates. Other income was at P2.4 billion, P76 million lower vs. last year’s P2.5 billion. The decrease mainly came from income from foreign exchange and securities trading, which dropped by P504 million or 68.2% in the absence of trading gains this quarter. Income attributable to insurance operations also slid by P83 million or 33.0% on account of the bank’s minority stake in a reinsurance company and lower investment profits. On the other hand, other operating income grew by P418 million or 38.7% on account of higher gains on sale of bank assets, income from the credit card business, rentals on bank premises, and trust and investment management fees. Service charges and commissions was also ahead by P132 million or 22.9% on higher volume of transactions. GRT increased by P39 million or 22.9% on account of the settlement of some prior period GRT assessments. Impairment losses were lower by P101 million due to higher level of provisioning in the first semester. Other expenses reached P4.7 billion, P274 million or 6.2% ahead of last year’s P4.4 billion. Increase came from other operating expense, which posted a P339 million growth due to settlement of prior period taxes, and higher documentary stamps taxes, insurance costs, asset acquired expenses, and advertising costs. Current income tax was up by P30 million due to higher taxable income of some subsidiaries. Deferred income tax also increased by P46 million or 114.8% due to lower loss provisions and the utilization of part of the NOLCO on account of higher taxable income. The decline in the income of minority interest by P6M was due to the lower income of the insurance subsidiaries. For the Nine Months ended September 30, 2007 and 2006 Net income for nine months reached P7.6 billion, P784 million or 11.4% ahead of last year’s P6.9 billion. Higher net income came from the P2.5 billion or 11.4% increase in revenues tempered by the P1.6 billion or 12.8% growth in operating expenses. Revenue increase was attributed to improvements in net interest income and other income by P665 million and P1.9 billion, respectively. Net-interest income increase was driven by the P48 billion average asset expansion slightly reduced by a 15 basis points interest spread contraction. Interest income slid by P564 million however interest expense more than covered the drop as it exhibited a P 1.2 billion or 12.2% contraction. Income on available-for-sale securities and deposit with banks went up by P399 million and P362 million on higher average balances. Income on held-to-maturity and trading securities were however down by P900 million due to lower balances. While average loans were up by P21.7 billion, income on these were lower by P 476 million on lower yields. As a result of the lower level of interest income, GRT went down by P51 million. Interest expense on deposits dropped by P1.2 billion on lower deposits cost. Interest expense on bills payable and other borrowings likewise decreased by P48 million due to the lower cost of issuing deposit substitutes. Substantial growth in other income was attributed largely to the P1.1 billion improvement in other operating income and the P958 million increase in the income of the insurance subsidiaries. Other operating income’s better performance was due to higher profits on assets sold, rental income, stock brokerage fees, trust fees, underwriting/corporate finance fees, income from the credit card business and recovery on non-performing assets. Higher income attributable to insurance operations was due to higher net premiums and investment income. Service charges and commissions likewise rose by P180 million on higher volume of transactions. Consequently, GRT was higher by P288 million or 63.7%. Impairment losses were at P1.2 billion or P130 million higher than last year on accelerated loan loss provisioning. Other expenses was at P14.1 billion, P1.6 billion or 12.8% ahead of last year’s P12.5 billion. Compensation & fringe benefits were higher by P416 million or 7.4% mainly due to salary increases and benefits related expenses. Other operating expenses rose by P1.0 billion or 29.7% due to settlement of prior period taxes, higher advertising costs, asset acquired expenses, regulatory costs and miscellaneous expenses. Current income tax increased by P184 million or 12.0% on account of higher tax paid and taxable income. Deferred income tax was down by P223 million or 115.0% on account of the NOLCO position. Minority interest was higher by P57 million or 41.8% on higher income of insurance subsidiaries. Key Performance Indicators The following ratios, applied on a consolidated basis, are used to assess the performance of the Bank and its majority owned subsidiaries:

	September 30, 2007	September 30, 2006
Return on Equity (%)	15.5	15.5
Return on Assets (%)	1.8	1.8
Net Interest Margin (%)	4.2	4.5
Operating Efficiency Ratio (%)	56.8	56.0
Capital Adequacy Ratio (%)	15.2*	17.7**

--------------
* In line with Basel II guidelines effective July 1, 2007
** Basel I CAR to include credit and market risk


	Return on equity (ROE), net income divided by average equity, and return on assets (ROA), net income divided by average assets, were flat at 15.5% and 1.8%, respectively against same period last year. These indicate the bank’s consistent effective use of its capital and resources to generate income. Net interest margin (NIM), net interest income divided by average interest bearing assets, contracted by 28 basis points due to lower yields on the bank’s earning assets following a downward trend on prevailing interest rates. Operating efficiency ratio (cost to income), operating expenses divided by total revenues, slightly rose by a 0.8%. This ratio measures the effective use of expenses in generating income. Capital adequacy ratio (CAR), total qualifying capital divided by total risk-weighted assets, measures the ability of the bank’s capital funds to cover its various risks. CAR as of September 30, 2007 is now under Basel II guidelines at 15.2%, down from last year due to additional risk points assigned to various risk assets. BPI’s CAR is more than BSP’s minimum requirement of 10%. The high level of profitability supports the bank’s strong capital position even at a consistently high dividend pay-out ratio.

PRESS STATEMENT
JANUARY TO SEPTEMBER 2007 FINANCIAL PERFORMANCE

The Bank of the Philippine Islands is poised for growth in 2008. Despite the continuing global and financial market volatilities, the bank maintained a healthy pace of organic expansion in the first nine months of the year.

Net loans advanced 10%, ahead of the industry’s 7.5% expansion, notwithstanding the ongoing disintermediation in the top tier corporate segment. The current portfolio of the middle market and SME segment grew by 16% and 12%, respectively. More notable was the 33% and 15% growth in new loan releases in housing and auto, respectively. The mortgage loan portfolio thus grew by a hefty 18% with the retail housing component growing at a faster pace of 21%.

Assets held in trust increased 20% to P240 billion while deposits went up by 8% to P456 billion, mainly contributing to the 8% growth in total resources which reached P573 billion.

Given the strong first semester income, BPI opted to focus on and clean up on several fronts in 2007 as well as in the third quarter of the year:

The continued disposal as well as recoveries of non performing loans (NPL) brought the 90 day non- performing loan ratio (NPL) to 4.5% from 6.5% a year ago. On a net 30-day basis, the NPL ratio is at 4.4%, better than the industry’s 5.3% as of end August,

Substantial settlement of prior period taxes relating to banking industry related documentary stamp tax on special savings and foreign currency deposits, and,

Full integration of Prudential Bank into BPI through a combination of personnel movements, branch rationalization, and loan portfolio account management.

These efforts paid off and helped achieve for the bank a net income of P7.6 billion, 11% higher than the P6.8 billion a year ago. Return on equity and return on assets are at 15.5% and 1.8%, respectively. With interest rates increasing in the third quarter following the siphoning of liquidity from the system by the Bangko Sentral ng Pilipinas (BSP) through special deposit account (SDA), the bank entered into hedges to secure its long term fixed rate inventory of loans and securities. The bank also opted to increase its liquidity position in the foreign currency books in view of the volatility spurred by the mortgage problems in the U.S. This step was taken despite the fact the BPI does not have any sub-prime linked investment nor any collateralized debt obligations (CDO).

Total revenues increased by 11% from both net interest income and non-interest income expansion, which recorded a 5% and 24% growth, respectively. Benefiting from more diversified sources of revenues that led to double digit expansion since 2005, non interest income has increasingly accounted for a bigger share of total revenues. Gains came from higher service charges and commissions, pre-tax income from the insurance business, sale of bank and foreclosed assets, and rental income.

Net interest income benefited largely from the 9% expansion in the average asset base which mitigated the negative impact of narrower spreads. With interest rates already hitting their historical lows, a more buoyant lending growth should augur well for the bank’s net interest differential business in the months ahead.

Operating expenses increased by 13%, slower than last year’s 15% growth. A tight watch over expenses remained a priority even as the bank continued to devote resources in IT initiatives for future growth. Cost increases came from one off accruals, settlement of prior period taxes, higher regulatory costs on deposits as well as manpower expenses. Impairment losses were likewise up by 12%.

BPI’s solid franchise value is carved out of its consistent profitable operations. Besides its profitability, BPI enjoys a commanding presence in the major market segments of consumer and corporate lending, electronic banking, remittances, and asset management business. It also remains to be the highest market capitalized babank at P179.8billion at the end September price of P66.50.

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	FIRST SEMESTER 2007 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	Financial Condition Total resources as of end June 2007 reached P592.6 billion, P10.7 billion higher than end 2006 level of P582.0 billion. Increase in resources was caused by deposits growth of P12.9 billion as demand and savings deposits grew by P7.9 billion (10.9%) and P5.1 billion (4.1%), respectively. Bills payable was also up by P1.6 billion or 28.3% due to additional deposit substitute transactions. Manager’s checks and demand drafts outstanding increased by P466 million due to new manager’s checks issued. These increases were partially negated by the drop in deferred credits and other liabilities of P4.8 billion or 22.4% due to the P5.1 billion payment of regular and cash dividends declared in October and November last year. Due to Bangko Sentral ng Pilipinas (BSP) and Other Banks also contracted by P502 million due to lower collection of taxes and the remittance of BSP Supervision and Examination fees. Accrued taxes, interest and other expenses declined by P588 million basically on payments of accrued expenses and taxes, and lower level of accrued interest on deposits. On capital funds, the surplus account grew by P3.3 billion or 10.7% mainly due to the first semester’s net income of P5.7 billion, reduced by the P2.4 billion regular cash dividend declared in April 2007. Reserves declined by P2.1 billion on account of the sell down of securities in the first semester. Translation adjustment debit balance on foreign currency denominated assets was up by P131 million on account of the stronger peso vis-à-vis the US dollar. Minority interest in subsidiaries was up by P136 million due to the higher income of the bank’s subsidiaries. On the asset side, net loans were up by P11.5 billion due to increased loan releases to corporate clients as well as new housing and auto loan bookings. Trading securities dropped by P8.1 billion due to some profit taking activities in the first semester, while the decline of P12.4 billion in investment securities - held-to-maturity (HTM) was partly due to the reclassification of some HTM to available-for-sale in accordance with BSP guidelines. Cash and other cash items were likewise down by P2.6 billion or 22% due to the lower cash requirement for the period as compared to year end. The funds released from the aforementioned assets were lent out to other banks and the BSP, hence the P12.0 billion increase in interbank loans receivable and securities purchased under agreements to resell; deposited with the BSP thus increasing due from BSP by P5.2 billion; and placed with local and foreign banks thereby resulting in a P3.1 billion rise in due from other banks. Net equity investments were higher by P1.9 billion or 204.3% due to the investment in BPI Europe, Plc in April 2007. BPI was granted authority by the Financial Services Authority (FSA) to set up a wholly-owned banking subsidiary in London. Assets attributable to insurance operations improved by P1.4 billion or 7.1% following new policy sales, good investment portfolio and the re-investment of realized investment income. Other resources on the other hand, were down by P928 million due to lower sales contract receivables, account receivables, accrued interest and fees receivables and the set-up of allowance for non-credit write-offs. Bank premises, furniture, fixtures & equipment also dropped by P888 million mainly on account of the reclassification of certain ex-Prudential Bank assets to investment property, which in turn grew by P775 million. Results of Operation For the Quarters ended June 30, 2007 and 2006 The second quarter of 2007 posted a net income of P2.5 billion, P411 million or 19.7% better than last year’s P2.1 billion. The net income increase came from the P711 million growth in total revenues, lower impairment losses (down by P119 million) and lower income taxes (down by P168 million). All these were partially offset by the P542 million increase in operating expenses. Revenue growth came from both net interest income and other income. Net interest income showed a P167 million growth on the back of a P52.5 billion average asset expansion, despite a contraction in net interest margin. Interest income was down by P356 million, but this was however countered by a bigger decline of P522 million in interest expense. The low interest rate environment caused interest income to contract. Income on loans and advances declined by P362 million despite the increase in the loan levels. Income on held-to-maturity and trading securities slid by P249 million or 17.1% on account of lower inventory levels. These declines in income were partially reduced by the improvements in income on available-for-sale securities (AFS) and deposit with banks of P193 million or 19.3% and P26 million or 5.4%, respectively, both due to higher asset bases. The lower level of interest income thus resulted in a favorable variance of P36 million in gross receipts tax (GRT). Interest expense on deposits declined by P490 million or 15.7%, notwithstanding the P44.5 billion expansion in average balances. In line with the prevailing market rate, interest rate on deposits was correspondingly adjusted downwards. Similarly, interest expense on bills payable and other borrowings went down by P32 million or 23.1%. Other income was at P3.0 billion or P544 million better than last year’s P2.5 billion. The improvement came from income attributable to insurance operations (up by P417 million or 159.5%) and other operating income (up by P499 million or 34.8%). The increase in income from insurance operations was largely due to higher net premiums generated from new policy sales while the other operating income was attributed to higher profits from asset sales. Income from foreign exchange and securities trading however dropped by P178 million or 61.1% from foreign currency translation losses of the foreign currency deposit books (FCDU), relative to the strength of the peso and some interim market to market losses during the quarter. GRT increased by P196 million or 145.4% related to the higher level of income and the settlement of some prior period GRT assessments. Impairment losses were lower at P240 million, with the higher level of provisioning in the first quarter. Other expenses reached P4.8 billion, P542 million or 12.8% ahead of last year’s P4.2 billion. Compensation and fringe benefits were higher by P238 million or 13.2% due to increases in salaries & wages and benefits, to include increases agreed upon in last year’s collective bargaining agreement. Other operating expense was likewise up by P283 million due to settlement of prior period taxes, and higher documentary stamps taxes, asset acquired expenses and advertising costs. Current income tax was down by P98 million or 17.8% due to lower final taxes on tax paid income. Deferred income tax also decreased by P70 million or 47.1% due to the lower level of loss provisions. The increase of P45 million or 112.8% in the income of minority interest was due to the higher income of the insurance subsidiaries. For the Six Months ended June 30, 2007 and 2006 First semester 2007 net income stood at P5.7 billion, P1.1 billion or 24.4% ahead of last year’s P4.6 billion. Revenues increased by P2.6 billion or 17.8%. This is the first time since 1998 that the bank achieved a revenue growth higher than 15%. Revenue growth came from the increments of P686 million in net interest income and P1.9 billion in other income. The 7.2% rise in net-interest income was mainly due to a 10% expansion in average asset base. Interest income dropped by P106 million but interest expense recorded a bigger reduction of P792 million. Income on deposit with banks and available-for-sale securities improved by P359 million and P325 million due to increased average balances. On the other hand, income on held-to-maturity and trading securities were down by P433 million due to decreased balances, while income on loan and advances ended lower by P398 million due to lower interest yields. Correspondingly, the lower level of interest income resulted in a P42 million drop in GRT. Interest expense on deposits was lower by P747 million on lower peso deposits cost. Interest expense on bills payable and other borrowings likewise decreased by P45 million due to the lower cost of issuing deposit substitutes. The strong performance of other income was largely attributed to the insurance subsidiaries. These subsidiaries delivered a P1.0 billion increase on account of higher net premiums and investment returns to include a P416 million gain on the sale of a property. Other operating income also contributed P 640 million or 26.6% from higher profits on assets sold, rental income, and stock brokerage fees. Income from foreign exchange trading and trading securities likewise rose by P457 million or 34.3% on realized securities trading profits. Consequently, GRT was higher by P249 million or 88.3%. Impairment losses were at P959 million or P232 million higher than last year on accelerated loan loss provisioning. Other expenses reached P9.4 billion, P1.3 billion or 16.4% ahead of last year’s P8.0 billion. Compensation & fringe benefits were higher by P475 million or 13.6% mainly due to salary increases and benefits related expenses. Occupancy and equipment-related expenses also went up by P143 million due to higher depreciation costs. Other operating expenses were up by P704 million or 29.6% coming from prior period taxes paid, higher asset acquired expenses, regulatory costs and miscellaneous expenses. Current income tax increased by P154 million or 14.4% on account of higher taxable income. Deferred income tax rose by P269 million or 115% due to set-up related to accounts with timing differences. Minority interest was also higher by P63 million or 76.1% as insurance subsidiaries posted higher income. Key Performance Indicators The following ratios, applied on a consolidated basis, are used to assess the performance of the Bank and its majority owned subsidiaries:

	June 30, 2007	June 30, 2006
Return on Equity (%)	17.5	15.5
Return on Assets (%)	2.0	1.8
Net Interest Margin (%)	4.2	4.5
Operating Efficiency Ratio (%)	53.9	54.5
Capital Adequacy Ratio (%)	16.8	18.1

* Includes both credit and market risks;

Return on equity (ROE), net income divided by average equity, improved by 2.0% due to higher income over same period last year. Return on assets (ROA), net income divided by average assets, also improved from 1.8% to 2.0%. These indicated the bank’s efficient utilization of its capital and resources to generate income.

Net interest margin (NIM), net interest income divided by average interest bearing assets, narrowed by 23 basis points due to the thinner spreads derived from the bank’s earning assets with the softer prevailing interest rates then.

Operating efficiency ratio (cost to income), operating expenses divided by total revenues, slightly improved by a 0.6%. This ratio measures the effective use of expenses in generating income.

Capital adequacy ratio (CAR), total qualifying capital divided by total risk-weighted assets, measures the ability of the bank’s capital funds to cover its various risks. CAR as of June 30, 2007 was lower by 1.3% vs. June 30, 2006 in view of higher level of risk weighted assets. BPI’s CAR however is still more than BSP’s minimum requirement of 10%. The high level of profitability supports the bank’s strong capital position even at consistently high dividend pay-out ratio.


	PRESS STATEMENT FIRST SEMESTER 2007 FINANCIAL PERFORMANCE

	The Bank of the Philippine Islands (BPI) turned in a 24% increase in net income to P5.7 billion for the first semester 2007. Return on average equity and return on average assets thus improved to 17.5% and 2.0% from 15.5% and 1.8%, respectively. The bank saw stronger and more diversified growth and achieved healthy profits in the first half of the year. Total revenues grew by 18%, driven by the net interest and non-interest income expansion. This is the first time since 1998 that the bank achieved a revenue growth higher than 15%. Net interest income rose 7%, notwithstanding narrower net interest margin, mainly resulting from the 10% improvement in the average asset base. Non interest income continued to be a major source of revenue growth, increasing by a hefty 37% and contributing 41% of total revenues. The increase was largely on account of the impressive 216% growth in the pre-tax income of the bank’s insurance subsidiaries, income from asset sales, rental income, and foreign exchange and securities trading gains. On the other hand, impairment losses and operating expenses increased by 32% and 16% respectively. The higher operating costs included the impact of one-off accruals, settlement of prior period taxes and higher manpower cost. On a year on year basis, total resources, deposits and loans posted double digit growth. Loans grew by 11%, so far the fastest organically driven growth recorded by the bank in the last seven years. This growth rate was also ahead of the industry’s 6.1% expansion as of May. Lending growth was observed across all sectors but SME/middle market paced the gains, exhibiting an increase of 13% (pre-NPL sale). For consumer, mortgage led all sectors, showing an 18% improvement, keeping market share at 23%. Asset quality further improved to a non-performing loan (NPL) ratio of 4.2% (BSP definition), down from 6.1% a year ago and compares favorably with industry’s 5.3% ratio as of April. The bank completed its fourth (4th) NPL sale transaction with Bank of America, N. A. involving P3.6 billion worth of NPLs. For the second straight year, BPI was named as the Top Commercial Bank on OFW Remittances for 2006 during the 2007 Bangko Sentral ng Pilipinas (BSP) Stakeholders Awards. Reputable international financial publications such as Global Finance, Asiamoney, FinanceAsia and Alpha South East Asia have awarded BPI with Best Bank awards for its outstanding performance and contribution to the industry. It was also named as the Best Retail Bank for the Philippines for 2006 by The Asian Banker, the fifth year in a row that the award was given to BPI. Locally, the bank has retained its CAMELS rating of 4, the highest among peers, in the most recent BSP audit. In June, the bank paid the first tranche of regular cash dividend of P0.90 per share. Market capitalization stood at P185.2 billion at end June closing price of P68.50, the highest in the industry and one of the highest in the Philippine Stock Exchange.


	FOURTH TRANCHE OF NPL SALE

	The Bank of the Philippine Islands (BPI) has successfully completed on June 29, 2007 the sale of its fourth NPL tranche worth P3.6billion to Bank of America, N.A. BPI has disposed off a total of P20.9 billion of NPLs in wholesale transactions over 4 years. In 2004, BPI sold to Morgan Stanley P8.6 billion of NPLs in a landmark transaction under the SPV Law. Subsequently, BPI sold to Avenue Asia NPLs amounting to P2.4 billion in 2005 and P6.3 billion in 2006. This year, Bank of America, a leading player in international distressed debt markets, bested other bidders for BPI's fourth NPL tranche. This recent transaction is in line with BPI’s bid to “take their shareholders farther” by strengthening its balance sheet and improving its loan portfolio through the disposal of its non-performing assets. The sale also manifests the continued interest of foreign investors in Philippine assets, as well as their positive outlook for the economy.


	CASH DIVIDEND PAYMENT

	The regular cash dividend of Php 0.90 per share for the first semester of 2007 on BPI's outstanding common shares is payable on 7 July 2007 to shareholders of record as of 22 June 2007.


	FIRST QUARTER 2007 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	Financial Condition Total resources as of end March 2007 stood at P566.9 billion, P15 billion or 2.6% lower than end 2006 level of P582.0 billion. Deposits contracted by P11.9 billion as P19.3 billion in time deposits matured during the quarter. Demand and savings deposits reflected a combined increase of P7.4 billion, partly negating this decline in time deposits. Deferred credits and other liabilities likewise dropped by P7.7 billion or 36.1% caused by the P5.1 billion payment of regular and cash dividends declared in October and November last year, lower contra account of bills purchased as well as sundry credit accounts. Accrued taxes, interest and other expenses also declined by P807 million or 20.4% on payments of accrued expenses and interests on matured/redeemed time deposits. Bills payable on the other hand grew by P2.8 billion or 48.6% to compensate in part for the drop in deposits. Due to Bangko Sentral ng Pilipinas (BSP) and Other Banks rose by P183 million coming from higher collection of taxes, accrual of BSP Supervision and Examination fees and growth in due to other banks account. Manager’s checks and demand drafts outstanding increased by P148 million due to new manager’s checks issued. On capital funds, surplus account grew by P3.2 billion or 10.5% mainly due to the first quarter’s net income of P3.2 billion. Reserves declined on account of the drop in mark to market valuation of available for sale securities. Translation adjustment debit balance on foreign currency denominated assets went up by P88 million or 94.1% on account of the stronger peso vis-à-vis the US dollar. Minority interest in subsidiaries rose by P62 million due to the higher income of the bank’s subsidiaries. On the asset side, net loans were down by P12.3 billion arising from the payments of maturing loans of corporate clients. Trading securities dropped by P4.4 billion due to some profit taking activities in the first quarter, while Investment securities - held-to maturity and available for sale securities declined by a total of P16.0 billion due to maturities. Cash and other cash items were down by P3.1 billion or 26% to normal level from the relatively higher cash requirement level at year end. The funds released from the aforementioned assets were thus invested in interbank loans receivable and securities purchased under agreements to sell and due from BSP, which grew by P13.1 billion (57.1%) and P6.1 billion (11.1%), respectively. Due from other banks contracted by P510 million due to lower balances maintained with foreign banks in line with the lower level of foreign currency deposits. Bank premises, furniture, fixtures & equipment also dropped by P1.1 billion mainly on account of the reclassification of certain ex-Prudential Bank assets to Investment Property, which in turn grew by P1.2 billion. Assets attributable to insurance operations improved by P1.2 billion or 6.0% from the investments of insurance premium collections relative to new policy sales. Results of Operation For the Quarters ended March 31, 2007 and 2006 The first quarter of 2007 brought in a total of P3.2 billion in net income, which is P711 million or 28.4% higher than last year’s P2.5 billion. This noteworthy operating performance was largely attributed to improved revenues of P1.9 billion inclusive of a P416 million non-recurring gain on sale of a real estate property of an insurance subsidiary. Revenue growth was however tempered by increases in operating expenses, impairment losses and provision for income tax by P780 million, P350 million and P53 million, respectively. The growth in revenues came largely from the P 1.4 billion or 51.8% improvement in non-interest income. Net interest income also contributed to revenue growth as it posted a P520 million or 11.2% increase. The net interest income increase came mainly from the P53.2 billion expansion in average asset base. Net interest margin was relatively flat. Interest income was up by P252 million while interest expense went down by P267 million. On the interest income side, income on deposit with banks and available for-sale securities (AFS) improved by P539 million or 200.6% and P132 million or 12.8%, respectively. The improvement in the income on deposit with banks was attributed to the expanded BSP average balances while that of AFS was due to the higher yield on foreign currency denominated securities. Income on held-to-maturity and trading securities dropped by P184 million or 11.6% due to the lower level of financial assets – held-to-maturity, a portion of which were reclassified to available for sale as allowed by BSP Circular No. 558. Interest expense on deposits declined by P254 million or 8.0%, despite the P48.9 billion expansion in average level, due to the lower interest rates on peso deposits. Interest expense on bills payable and other borrowings also went down by P13 million or 9.7% on decreased average level resulting from maturities. Other income reached P4.1 billion or P1.4 billion over last year’s P2.7 billion. This was mostly attributed to income from foreign exchange and securities trading and income attributable to insurance operations. Income from foreign exchange and securities trading posted a P635 million or 61.1% increase on account of strong securities trading profits. Income from insurance operations grew by P624 million largely due to the gain on the sale of a property and good investment performance. Service charges and commissions were also up by P46 million due to higher transaction volume. Other operating income rose by P141 million on higher rental income on bank assets and stock brokerage fees. The higher total other income resulted to a Gross receipts tax increase of P53 million or 36.0%. Impairment losses amounted to P719 million, up 95.0% on accelerated loan loss provisioning. Other expenses at P4.6 billion were ahead by 20.5% versus last year’s P3.8 billion inclusive of one-time expenses. Compensation and fringe benefits were higher by P238 million or 14.1% due to increase in salaries & wages and some one-off accruals. Occupancy and equipment-related expenses were also up by P122 million or 11.8% on account of higher depreciation, rent, software license costs and leased lines expense. The increase in other operating expense of P420 million was due to settlement of prior period taxes, higher regulatory costs on deposits and other miscellaneous costs. Current income tax was up by P252 million or 48.89% as a result of higher taxable income. Deferred income tax increased by P199 million or 233.5% due to higher impairment losses level. Increase in the income of Minority Interest by P18 million or 41.6% was due to the higher income of our insurance subsidiaries. Key Performance Indicators The following ratios, applied on a consolidated basis, are used to assess the performance of the Bank and its majority owned subsidiaries:

	March 31, 2007	March 31, 2006
Return on Equity (%)	20.2	16.8
Return on Assets (%)	2.3	2
Net Interest Margin (%)	4.3	4.3
Operating Efficiency Ratio (%)	49.7	52
Capital Adequacy Ratio (%)	15.9**	19.1

--------------
* Includes both credit and market risks;
** As of December 2006 as March 31, 2007 report still in process.

Return on equity (ROE), net income divided by average equity, substantially improved by 3.4% on robust earnings indicating more efficient utilization of capital. Return on assets (ROA), net income divided by average assets, also improved from 2.0% to 2.3% indicating better utilization of the bank’s resources.

On the other hand, net interest margin (NIM), net interest income divided by average interest bearing assets, was flat at 4.3% as the spreads were preserved despite the overall drop in the interest rates.

Operating efficiency ratio (cost to income), operating expenses divided by total revenues, improved by a commendable 2.3% showing the bank’s efficiency in utilizing operating expenses to generate bigger profits.

Capital adequacy ratio (CAR), total qualifying capital divided by total risk-weighted assets, measures the ability of the bank’s capital funds to cover its various risks. CAR as of December 2006 was lower by 3.2% versus end March 2006 due to the higher level of risk assets in December. Latest CAR is however more than BSP’s minimum requirement of 10% notwithstanding a high dividend pay-out ratio in 2006. The bank’s strong capital position is a product of the bank’s ability to generate profits.


	PRESS STATEMENT FIRST QUARTER 2007 FINANCIAL RESULTS

	The Bank of the Philippine Islands realized P3.2 billion in net income for the first quarter of the year, inclusive of a P416 million non-recurring gain on sale of a real estate property of an insurance subsidiary. This year’s income was 28% higher than the same period in 2006, mainly attributable to a 26% expansion in total revenues. Correspondingly, return on equity and return on assets registered higher at 20.2% and 2.3% from the year ago levels of 15.2% and 1.7%, respectively. Average asset base grew by 10% on year on year basis resulting in an 11% increase in net interest income. Net interest margin was relatively stable. Non interest income contributed strongly to revenue growth, rising by 52%. Major contributors to this performance were the income from the foreign exchange and securities trading, and the insurance subsidiaries. Trading gains increased by 61%, as the bank benefited from the 255 basis points drop in the average Treasury Bill rate during the period. The pre-tax income of the insurance subsidiaries grew by 2.8x on good investment income and the realized gain on the sale of a property. Operating expenses likewise reflected a relatively high increase of 20% to include some tax settlements pertaining to prior years and some one-off accruals. Notwithstanding this, the bank’s cost to income ratio improved to 50% from 52% on stronger revenue growth. Impairment losses on loans were likewise accelerated to P719 million from P369 million the previous year. The bank’s resources organically grew by 12% from a year ago, with deposits posting a higher rate of 14%. Total loans posted a modest increase of 5%. Consumer loans however continued to grow at a faster pace of 11%, with mortgages registering a more robust 16% rate of increase. The first quarter also saw the Bank of America, N.A. winning the bid for the purchase of the bank’s P3.7 billion non-performing loans. In line with the bank’s thrust of servicing its customers regardless of country borders, the bank recently obtained the approval of the Financial Services Authority (FSA) to open a new, wholly-owned bank subsidiary in the United Kingdom. The Bank of the Philippine Islands (Europe) PLC will engage in current account, savings and time deposit taking, personal loans, credit cards and remittance business. The bank’s regular cash dividend of P0.90 per share for the first semester was declared last April 18 and will be payable after the receipt of the approval of the Bangko Sentral ng Pilipinas.


	ISSUANCE OF LONG TERM NEGOTIABLE CERTIFICATES OF DEPOSIT (LTNCD) SERIES 1

	The Monetary Board of the Bangko Sentral ng Pilipinas recently approved the bank's request to issue P5.0billion worth of Long-Term Negotiable Certificates of Deposit (LTNCD) Series 1. A 5-year fixed rate negotiable certificate of deposit denominated in Philippine Pesos, LTNCDs offer the investors a safe, liquid, but high-yielding fixed rate investment. Just like an ordinary time deposit account, the amount invested in LTNCDs is insured with the Philippine Deposit Insurance Corp. (PDIC) for up to PHP 250,000 per depositor, offering an extra layer of comfort to the investor. Carrying a maturity of five years and one month from date of issue, BPI LTNCDs may be availed of with a minimum investment of PHP 100,000 through selling agents BPI Capital Corporation and Standard Chartered Bank. However, with its bond-like featture, LTNCDs are negotiable instruments, allowing investors to purchase and sell these in the secondary market at any time, as an independent market maker commits to provide daily bid and offer prices. The issuance is in line with the bank's objective of taking its customers farther, giving BPI depositors a superior investment option. It will also boost the bank's capability to offer long-term fixed rate loans to its borrowers.


	BANK OF THE PHILIPPINE ISLANDS (EUROPE) PLC

	The bank received on April 26, 2007 the official approval from the Financial Services Authority (FSA) in London to open a wholly-owned bank subsidiary - the Bank of the Philippine Islands (Europe), PLC.


	CASH DIVIDEND DECLARATION

	During its regular meeting held on April 18, 2007, the Board of Directors of BPI declared a regular cash dividend of P 0.90 per share on the total outstanding common shares of the bank for the first semester of 2007. This will be payable to all common share stockholders of record as of the 15th day from receipt by BPI of the approval by the Bangko Sentral ng Pilipinas of the said dividend and distributable on the 15th day from said record date.


	HIGHLIGHTS OF THE ANNUAL STOCKHOLDERS’ MEETING MARCH 29, 2007 GRAND BALLROOM, HOTEL INTERCONTINENTAL MANILA

	The Chairman, Jaime Augusto Zobel de Ayala, and President, Aurelio Montinola III presented the bank’s financial performance for 2006 and initiatives going forward.

	Major milestones include:

	An unparalleled net income of P9.0billion that enabled the bank to pay 84% of profits in cash dividends of P2.80 per share or a cash yield of 4.4%. Inclusive of the 40% share price appreciation , total shareholder return reached 44.4%. A 14.4% return on equity on higher capital base of P65billion. A capital adequacy ratio of 15.9% and 13.4% under the Basel II formula, comfortably higher than the 10% regulatory minimum. Lead position in consumer banking, asset management, overseas Filipino remittances and electronic banking sustained. Specifically, Housing loans rose 19%, raising market share to 23% Funds under management by the Asset Management and Trust Group reached over P200 billion, capturing a higher 26% market share. Remittance volume increased 27% ahead of the industry’s 19% growth, further improving market share to 21% from 20% in 2005. The Bangko Sentral ng Pilipinas recognized the bank as the Commercial Bank of the Year for OFW Remittances for its 2005 performance. Expresslink, the bank’s cash management product, enjoyed wide corporate patronage, garnering Best Cash Management Bank in the Philippines awards from Asiamoney and The Asset and the 2006 Best Corporate/Institutional Internet Bank in the Philippines. Asset quality improved on the sale of P6.3billion in legal claims of non performing loans and P3.2billion in foreclosed properties. Non performing loans ratio dropped to 6.0% Successfully completed the integration of Prudential Bank in a year’s time A new corporate theme – “BPI: We’ll take you farther” launched, consistent with the bank’s commitment to partner with customers in achieving their financial aspirations. Several best bank awards received from prestigious international institutions, namely Global Finance, Finance Asia, Euromoney, The Banker and The Asset and Best Retail Bank from The Asian Banker. Focus areas for 2007 include increasing lending to the small and medium enterprises, the consumer and credit cards, and cross selling to overseas Filipinos and mass affluent markets; improving further asset quality and strengthening risk management structures to comply with Basel II requirements.


	PRESS STATEMENT 2006 FINANCIAL PERFORMANCE

	The Bank of the Philippine Islands (BPI) closed the year 2006 with unaudited total resources of P582 billion, P53 billion or 10% higher than 2005. Deposits recorded organic growth of P47 billion or 11% at P467 billion. Moreover, the bank’s Asset Management and Trust Group (AMTG) withstood the massive UITF sell off in the second quarter and even grew by 13% to P213 billion. This affirmed the group’s premier position in the industry and the bank’s strong placing power. Net loans expanded by 6% to P243 billion with both corporate and consumer loans posting gains in volumes. The consumer loan portfolio though contributed the bigger share of the increase with its 11% growth, paced by a 16% growth in mortgage lending. The latter benefited from the recovery in the real estate market and increased cross selling efforts to overseas Filipinos. Asset quality further improved from 6.8% in net 90 days non performing loan (NPL) ratio in 2005 to 6.0% in 2006 (5.5% using the BSP definition). This was considerably aided by the sale of P9.5 billion in non-performing assets, of which P3.2 billion was retail, and P6.3 billion was a wholesale NPL transaction to the Avenue Capital Group. Normally, the year following an acquisition (Prudential Bank in 2005) is a challenging one. However, BPI managed to deliver P9.0 billion in consolidated net income or 8% above 2005’s IAS adjusted profits of P8.4 billion. Return on average capital of P60 billion was 15%, and on adjusted average equity (net upward adjustment for unrealized gains in available for sale securities) was 14.4%. Return on assets was 1.7%. The improvement in net income came mainly from the 9% growth in total revenues. Net interest income increased by a modest 6% resulting from a P51 billion increase in average asset base. The increased volumes tempered the impact of a 17 basis points reduction in net interest margin. The fall in spreads was consistent with the overall decline in interest rates. Non interest income posted a stronger growth of 15%, thereby contributing a bigger share to revenue growth. Major gains were recorded from securities and foreign exchange trading, rental income on bank assets, service charges and commissions, and asset management and trust fees. As of November 2006, the bank’s overseas remittance business reached USD2.5 billion. This represented a year on year increase of 27%, outpacing the industry growth of 18% and capturing 22% of the market. Impairment losses amounted to P1.4B for the year. Operating costs were up by 13% due largely to the added cost of the Prudential Bank operations. Manpower costs and premises costs were up by 20% and 24%, respectively. Other operating expenses on the other hand showed a 1% decline. Looking forward, BPI will continue to focus on its leadership position in consumer banking, asset management and remittances. It likewise sees opportunities for growth in SME lending, capital markets developments and bancassurance. Finally, it expects to comply with Risk Management and the forthcoming Basel II regulations this year. BPI’s market capitalization reached P173 billion as against its book value of P64 billion. At the closing price of P63.50, total shareholder return was at 44.4% from a 4.4% cash dividend yield and 40% share price appreciation. Cash dividends paid at P2.80 per share amounted to P7.6 billion representing a dividend payout ratio of 84%.


	BSP APPROVES SALE OF FAR EAST SAVINGS BANK, INC.

	The Bangko Sentral ng Pilipinas (BSP) has approved the sale by the bank of its 100% equity holdings in Far East Savings Bank, Inc. to JTKC Equities, Inc., Surewell Equities, Inc., and Star Equities, Inc. The said BSP approval was the last act needed to complete the transaction. The new owners will name the bank Sterling Bank of Asia, Inc.


	ANNUAL STOCKHOLDERS' MEETING ANNOUNCEMENT

	The Board of Directors (Board) of BPI approved the holding of the bank's Annual Stockholders' Meeting on March 29, 2007 at 9:00 am at the Grand Ballroom, Hotel Intercontinental, Makati City. The agenda for the meeting is as follows:

	Calling of Meeting to Order. Certification of Notice. Determination and Declaration of Quorum. Approval of the Minutes of the Annual Meeting of the Stockholders on April 6, 2006. Reading of Annual Report and approval of the Bank's Statement of Condition as of December 31, 2006 incorporated in the Annual Report. Approval and confirmation of all acts during the past year of the Board of Directors, Executive Committee, and all other Board and Management Committees and Officers of BPI. Election of 15 Members of the Board of Directors. Election of External Auditors and fixing their Remuneration. Directors' Bonus. Other Matters.
	The Board also approved that all nominations to the BPI Board of Directors together with the written acceptance of all the nominees must be received and acknowledged by bank's Office of the Corporate Secretary not later than the end of business hours of January 26, 2007. The Stock and Transfer Book of BPI will be closed 30 days before the Stockholders' meeting or starting February 27, 2007. Accordingly, only stockholders of record as of February 27, 2007 will be entitled to notice and to vote at said meeting.


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Member PDIC: Bank of the Philippine Islands