BDO, UnionBank profits rebound in Q3 from pandemic buffer boost

Ian Nicolas Cigaral - Philstar.com
In separate disclosures to the stock exchange on Monday, BDO Unibank Inc. reported a 3.16% year-on-year increase in net income to P12.3 billion last quarter while Union Bank of the Philippines netted P4.2 billion during the period, up 11% annually.
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MANILA, Philippines — Two of the country’s largest banks grew their profits in the third quarter, although succeeding growth remained at risk from rising amount of unpaid loans from virus-battered borrowers.

After building up defenses against loan losses, and therefore suffering losses in previous quarter, BDO Unibank Inc. hiked its net income 3.16% year-on-year to P12.3 billion. UnionBank, meanwhile, netted P4.2 billion during the same period, up 11% annually. 

But the better financial performance was not enough to lift year-to-date numbers. Sy-led BDO’s net income plummeted 48% on-year to P16.6 billion. Meanwhile, Aboitiz-led UnionBank’s 9-month bottomline stood at P8.5 billion, down 0.9% from year-ago level.

“Despite BDO’s promising results, the Bank recognizes that the pandemic difficulties still lie ahead,” BDO, the country’s largest bank in asset terms, said in a statement.

“The delinquency problem on loans have not yet peaked, interest rate caps on credit cards will be instituted soon and there are added costs in doing business as a result of necessary precautions inherent in the Bank’s operations,” BDO said.

Since March, lenders had been busy strengthening their balance sheet against potential losses from loans that were starting to sour as their borrowers get jobless and lacked earnings for the 3 months that most of the archipelago were in lockdown.

The economy started a slow reopening in June, but the expected rebound has yet to translate to better earnings. In particular, BDO net interest income went up 13.1% year-on-year to P99.8 billion from January to September. In same period a year ago, this segment rose nearly 24% annually.

In the similar 9-month period, non-interest income dropped 16.6% year-on-year to P36.8 billion as service fee collections sank a faster 23.6% to P17.4 billion due to bank closures when strict quarantines were in effect. Insurance premiums took the next largest chunk at P10.9 billion, slightly up from previous year.

BDO said loan growth rose “at a more tempered 6%” to P2.2 trillion, driven by corporate and consumer accounts. While buffer funds accounting for 138% of total credit, loan books remained healthy with non-performing credit at just 1.97% of total loans as of September.

Meanwhile, total deposits rose to P2.6 trillion. Operating expenses declined 3% on-uear to P83.6 billion “on lower volume-related expenses,” the bank said.

UnionBank expenses up

Meanwhile, UnionBank’s higher operating expenses slightly tempered its 9-month financial performance. Operating disbursements rose 10.8% year-on-year to P15.39 billion. 

All other disclosed metrics showed growth. Revenues from January to September rose a nearly a third annually to P31.8 billion. Broken down, net interest income surged 36% on-year to P21.4 billion, while non-interest income went up a slower 26% to P10.4 billion “due to higher trading gains.”

Total loans climbed 3% year-on-year to P355.8 billion as of September, while deposits jumped 29% on an annual basis to P539.9 billion. While the ratio of unpaid loans were not disclosed, UnionBank said the lender has set aside P7.3 billion to cover for losses particularly from coronavirus.

On Monday, shares in BDO closed down 1.8% to P95.55 each, while UnionBank was up 0.64% to P55 apiece.

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