President's Report

Fellow Stakeholders, Welcome to Queen City Development Bank, Inc.’s annual stockholders meeting. This annual exercise, the 44th for Queenbank serves as a venue for the Bank’s shareholders to congregate and discuss the result of its 2024 financial condition. Looking back, no one could predict how will the market react to the gradual movement of the economy. Chronic disruptions to supply chains brought about by strong typhoons that hit the country, lingering inflationary pressures, rising oil and transportation costs, the continuing wait and see attitude of businessmen, and the sustained high interest rate which created a turbulent environment for businesses and financial markets.

Examining our 2024 results made me believe of one thing: Our long-term culture and focus on “responsible growth” prepared us well to withstand this crisis. It allowed us to be a source of stability servicing our customers and clients during challenging times, to continue supporting the communities we serve, and live and deliver more consistent results for our shareholders through a well-understood and calculated risk framework.

Despite the effect of the global crisis which resulted in a historically low growth in revenues and a period of market volatility, Queenbank, your bank, earned P212 million in gross income. More importantly, we ended 2024 with a bigger capital base, growing deposits, historically high liquidity position and much improved capital ratios. We did this during the global upheaval while increasing the number of branches and merging with our affiliate bank, Queen City Rural Bank.

Our results in 2024 reflected a strong balance sheet ensuing product acceptance and our newly rolled-out digital capabilities. We believe we must continue to deliver these strong results and help make progress on important societal priorities. Last year, we also continued to make meaningful progress on important issues that affect us all. During the year, we accelerated calibrating and facilitated acquisition of new automated teller machines (ATM) to promote business opportunities in unbanked places where money movement continues to be the method of exchange.

Growing our Market

As you are all aware of, we supported our clients in different ways. We supported small to medium size businesses with their working capital and expansion loans. We supported borrowers that need advice. We supported commercial clients with our strong balance sheet that provided more funding in loans. We also provided business opportunities to big depositors by offering better investment returns through our trading/investment capabilities. All of this, and more, allowed us to continue to serve clients relatively uninterrupted, even as volumes surged. And we grew.

As a result, deposits rose to P3,079B from P2,529B in 2023 or 22% growth. We enrolled and opened 4,386 clients while 1,875 or 42.75% into our digital products. Despite the slow movement of loan availments, loan portfolio grew 6% or P1.3B in 2024 from P1.2B in 2023, cementing our position in the growth column regardless of the high lending rate environment and lingering inflation experienced throughout the year. Aside from the role we played as a lender for SMEs, we remained active in the agricultural, real estate, and housing, wholesale and retail, and construction sectors. We also deployed our new merchant services capabilities putting us at par with the big players in the banking industry.

The year was difficult to predict as commercial clients have to absorb massive changes to their business cycle brought by tight liquidity position. We were there for them. Early in the year, we supported their borrowing rush as they sought liquidity during the months of February, March and April. But as policy rate remained on the high side at 6.50%, credit availment driedup. Natural calamities like the El Niño dry spell which lasted until late June and later the successive strong typhoons that hit our country compounded the situation. We remained optimistic that growth will finally come in the fourth quarter sad to say, despite the 0.75% staggered policy rate reduction starting October to December loan movement continued to move sideways.

Grow by Focusing on our clients

Last year, thanks to the commitment of a number of our Branch Heads, the strength of our platform and our focus on responsible growth, we achieved a milestone in company history. The feat is a recognition to each and every member of our team, who worked hard to serve our customers and clients and exceed their expectations in every interaction. We remained focus on supporting the everyday financial need of our clients providing them with sufficient cash in our business and selected off-sites areas. Not surprisingly, we also saw a growing number of customers choose to connect with us doing traditional banking services and digitally during 2024.

The investments we make in our digital offerings is one of our key growth drivers. We saw a number of businesses and households actively using our digital platforms, thanks to our competitive offering and bank wide campaign of enrolling merchants. Despite starting only in the third quarter of the year, we managed to hold our stand against other players and used this platform to generate deposits and fee-based revenue.

We grow within our risk structure

We grow within our well-managed risk structure. This model has allowed us grow during the current market condition, while maintaining a strong sense of awareness in investors value. We continue to take a proactive approach toward managing risk to monitor, mitigate, and control existing risks while identifying emerging ones. This includes persistent attention on operational and compliance risks across our businesses.

Recognizing and managing risk is an integral part on how we do business. This applies to all of us with risk, compliance, and audit leading the way in policing our bank. This is exactly what happened when we merged with our affiliate, Queen City Rural Bank, Inc. last October 2024. In managing QCRB, we applied the same risk structure as Queenbank which made the merger easy as in merging the two banks in a short period of time.

Cyber threat is one of our top concerns. This risk will not only disrupt our operation but cripple the bank’s systems and controls. This is why we continue to invest in safeguarding and updating all computer units and reinforcing them through various defense mechanism available in the market today.

To support strong customer interaction, we ensured a culture characterized by quality service. We properly explained to you the value of customer satisfaction and performance as a basis for growth. This is part of an effort to boost opportunities and to increase accountability for how our personnel should approach their daily work.

Our commitment to sharing success with communities also demands we help accelerate toward a secure and sustainable future. We are doing so by allocating capital and working alongside our clients and partners to address the need for sustainability and security. I sometimes ask myself why do we lend money in clients who are engaged in sustainable source of products. The answer is simple: it’s good business. Our clients need our advice and capital for them to meet their goal and to secure availability of sustainable products.

First, is how we continued to support our customers. We advised and educate them in digital literacy and supported the shifts in their business approach. We started to guide them in working towards transition to clean-energy economy.

Secondly, we give emphasis in positioning Queenbank for the future. We started categorizing and updated the banks’ fiveyear strategic plan to categorize business mix and simplify operations. We focused on how to accelerate growth, gaining more customer support and increasing shareholders returns.

Looking Ahead to 2025

Initial reports coming from various economists indicate below the government economic growth for this year. While bankers acknowledge that inflation of 2.4% for December 2024 is considered benign, they feel that the reign of low interest rate will begin to be felt in the third quarter of 2025.

Here’s the economic snapshot: consumers spending will continue to rise as prices of basic commodities have trickled in early this year. The current lending rate environment is proving to be a drag on credit activity however, it is perceived that a tiered policy rate reduction plus the reduction of the bank’s reserve requirement last March 2025 will pave the way for the downward trend starting the third quarter.

There’s also the possible rise of oil and transportation prices which will directly affect consumer spending. Probable occurrence of strong typhoons is another risk. This will destroy staple crops and will push rise of food prices. Government deficits are running high, which will lead to a drop on the economy.

In a time of constant change in the domestic market, we continued to manage our company for the long term and to do what we do best: drive responsible growth. We are focused on delivering profits and purpose. We drove organic growth. We closely managed risk. We invested in our people, our digital capabilities, and the physical spaces where we work together to support our clients, while we reinforce our commitment to manage expenses for the long-term.

And we met the moment, again and again, when we play our role as bankers to the community and make progress on important issues affecting the clients and customers we serve. On behalf of our Management Team, and the Board of Directors, I thank you for your support of Queen City Development Bank.