BDO shares defy downturn as profits return to pre-crisis level

MANILA, Philippines — BDO Unibank Inc.’s nine-month earnings are now back to pre-pandemic level, thanks to higher non-interest income and savings from a law that slashed corporate income tax that offset some weakness in its core banking business.

Net income amounted to P32.4 billion in the January-September period, up 95.2% year-on-year, the Sy-led lender said in a disclosure to the stock exchange on Monday. The figure beat the bank’s pre-crisis net income, which stood at P32.1 billion in the first nine months of 2019.

Nine-month revenues, meanwhile, hit P146.8 billion, up 4% on an annual basis.

Investors seemed happy about the news. On Monday, shares in BDO inched up 0.78% to close at P129 each, bucking 1.07% losses in the main index.

Financial results showed much of the earnings growth came from BDO’s non-interest income, which grew 13% on-year to P44.5 billion as of September. Under this segment, revenues from service charges, trust fees, foreign exchange gains and insurance premiums all grew in the first nine months, cushioning a P124-million loss in the bank’s trading operations from “adverse market movements.”

Operating expenses rose at an annualized rate of 5% during the period to P90.9 billion due to salary increases and benefits extended to employees amid the pandemic. But at the same time, BDO’s nine-month tax expense dropped 34% year-on-year to P8.2 billion after paying lower corporate income taxes because of the Corporate Recovery and Tax Incentives for Enterprise (CREATE) law.

BDO also reduced its buffers against unpaid loans as the economy heals from a pandemic-led slump. Figures showed the lender set aside P10.4 billion in the first nine months to cover losses from potential loan defaults, down 56.2% year-on-year.

But there was still some weakness in BDO’s lending business. In the first nine months, net interest income dipped 2% year-on-year to P97.6 billion as the Bangko Sentral ng Pilipinas’s ultra-loose monetary policy and cap on credit card charges pushed down interest rates.

But the cheaper borrowing costs nevertheless stimulated demand for loans. During the period, BDO reported that gross customer loans grew 5% year-on-year. Total deposits, considered a lifeline of banks, expanded 6% compared to year-ago level.

BDO ranked as the largest bank the country in terms of total assets.