SGV & Co

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

February 25, 2000

The Stockholders and the Board of Directors       

Urban Bank, Inc.

We have audited the accompanying statements of condition of Urban Bank, Inc. of December 31, 1999 and 1998, and the related statements of income, changes in capital funds and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 8 to the financial statements, in 1999, the Bank has set up provision for probable loan and other losses amounting to P450 million by a charge to surplus. Likewise, in 1998 the Bank has set up provision for probable loan and other losses totaling P335 million of which P135 million was charged to current operations and P200 million was charged to surplus. Generally accepted accounting principles require that provisions for probable losses be charged to current operations.

In our opinion, except for the effects on the statements of income, changes in capital funds, and cash flows for the years ended December 31, 1999 and 1998 of recognizing provision for probable losses as a direct charge to surplus as explained in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Urban Bank, Inc., as of December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles.

As discussed in Note 5 to the financial statements. the Bangko Sentral ng Pilipinas approved the request of the Bank to revert to its previous status as a regular commercial bank. Accordingly, the financial statements as of December 31. 1999 and for each of the three years in the period ended December 31, 1999 were restated to reflect the deconsolidation of the Bank's subsidiaries.

(Signed)

SYCIP GORRES VELAYO & CO

PTR No. 1874107 January 3, 2000

Makati City

URBAN BANK, INC.

STATEMENTS OF CONDITION

                                                  December 31

                                             1999             1998

RESOURCES

Cash and Other Cash Items                P110,014,928       P92,210,932

Due from Bangko Sentral ng Pilipinas      291,718,411       344,641,357

Due from Other Banks                      609,107,195       647,132,997

Interbank Loans Receivable                         -         78,501,478

Investment Securities - net

  (Notes 2 and 16)                      1,943,340,993       832,481,714

Receivables from Customers - net

  (Notes 3 and 17)                      5,612,019,961     6,271,816,737

Bank Premises, Furniture and

  Equipment - net (Note 4)              1,290,127,390     1,256,431,895

Equity Investments - net (Note 5)       1,051,036,985     1,396,042,908

Real and Other Properties

  Owned or Acquired – net (Note 6)        473,958,766       490,486,491

Other Resources - net (Note 7)            552,059,001       502,295,894

                                      P11,933,383,630   P11,912,042,403

LIABILITIES AND CAPITAL FUNDS

Deposit Liabilities

Demand                                   P716,297,990    P1,080,431,166

Savings                                 4,190,713,378     4,323,880,622

Time                                    2,904,343,711     2,636,521,847

                                        7,811,355,079     8,040,833,635

Interbank Loans Payable                 1,183,000,000       220,000,000

Bills and Acceptances Payable             358,852,620       757,364,197

Due to Bangko Sentral ng Pilipinas

  (Note 9)                                 25,809,091        45,812,228

Manager's Checks                           94,029,819       112,380,386

Accrued Taxes, Interest & Other Expenses   89,837,895        62,416,041

Other Liabilities (Note 10)               150,718,022       162,876,568

                                        9,713,602,526     9,401,683,055

Capital Funds (Note 11)                 2,219,781,104     2,510,359,348

                                      P11,933,383,630   P11,912,042,403

See accompanying Notes to Financial Statements.