BDO books 19% increase in Q1 profit

MANILA, Philippines — BDO Unibank Inc. recorded a 19 percent increase in net income to P10.4 billion in the first quarter despite the challenging business environment due to the pandemic.

Nestor Tan, president and chief executive officer at BDO, said during the bank’s annual stockholders’ meeting continued limitations in economic activity as well as inflation pressures are seen to delay recovery from the pandemic-induced recession.

“We expect 2021 to be another challenging year. Gradual recovery seen with the government’s fiscal stimulus and continued infrastructure spending,” Tan said.

As COVID-19 infections near the one-million level with close to 17,000 deaths, the National Capital Region and adjacent provinces remain under modified enhanced community quarantine until the end of April.

“Clearly the enhanced community quarantine and the modified enhanced community quarantine put a halt to economic activity and that also impacted the bank’s business. It is too early to tell what the impact will be,” Tan said.

BDO’s net interest income slipped by three percent to P32 billion in the first quarter  from P33 billion in the same quarter last year, while net interest income jumped  by 21 percent to P15.4 billion from P12.7 billion.

The bank’s insurance premium jumped by 21 percent to P5.1 billion from P3.9 billion, while fee income was flat at P8.1 billion. Trading and foreign exchange gains plunged by 238 percent to P800 million.

BDO’s operating expenses inched up by two percent to P31.1 billion from P30.5 billion in the same period last year.

Tan said the bank’s loan book slightly dipped by 0.71 percent to P2.2 trillion due to weak demand, while deposit base rose by two percent to P2.6 billion

Provisions for potential loss losses amounted to P2.9 billion in the first quarter, 30 percent higher than the year ago level of P2.3 billion.

He said BDO’s non-performing loan (NPL) ratio stood at 2.81 percent from 1.3 percent, while NPL cover reached 107.1 percent from 151.4 percent but remained more than adequate to cover for potential losses.

“Our provisions of 3.1 percent of total loans can cover potential losses on an NPL ratio of up to 6.2 percent,” Tan said.

According to BDO, its capital base strengthened to P400.9 billion with capital adequacy ratio (CAR) and common equity tier 1 (CET1) at 14.7 percent and 13.6 percent, respectively, both comfortably above regulatory levels.

“The bank’s capita base is strong enough to withstand shocks,” he said.

Meanwhile, Tan said BDO would evaluate the viability of acquiring the retail banking business of New York-based Citirgroup Inc. in the Philippines.

“We will likely take a look at it. It’s a good business franchise that any bank will be interested to look at so it’s not something that you can’t ignore. However, we have to be cognizant that because of our size, the overlaps and the stickiness of the business for sale may be a factor,” Tan said.