Rising middle class drives loan growth

CEBU, Philippines — The rapid growth of the middle-class economy in the Philippines is fueling up the consumer loan products of BDO Unibank, Inc. (BDO).

The SM Group’s banking arm posted six percent increase of its customer loan performance in the first nine months of 2019.

BDO’s customer loan portfolio now stood at P2.1 trillion.

Meanwhile, total deposits went up by three percent to P2.4 trillion, with low-cost Current Account/Savings Account (CASA) deposits increasing by 6 percent and accounting for 72 percent of total deposits.

From January to September this year BDO delivered P32.1 billion in net income compared to P21.5 billion a year ago, largely driven by the expansion in the Bank’s recurring core revenues.

During the period, the bank’s net income translates to a Return on Common Equity (ROCE) of 12.5 percent, compared to 9.5 percent in 2018.

Net Interest Income (NII) increased to P88.5 billion, with net interest margins (NIMs) further improving in third quarter this year.

Non-interest Income went up to P44.1 billion, led by fee-based income and insurance premiums which accelerated by 14 percent and 23 percent to P25.4 billion and P10.8 billion, respectively.

Trading and foreign exchange gains in Third quarter 3019 amounted to P690 million from P1.0 billion a year ago.

However, the trading and forex gains of P4.3 billion for the nine-month period reflects a normalized level compared to 2018, where a more volatile environment prevailed. As such, gross operating income rose to P132.6 billion.

Operating expenses rose by 20 percent to P85.8 billion given the Bank’s continuing expansion as well as increased volume-related expenses (e.g., taxes and licenses and policy reserves at BDO Life were up by an aggregate 42 percent). Excluding volume-related expenses, operating expenses would have risen by 14 percent.

Provisions amounted to P4.2 billion as the Bank maintained its conservative credit and provisioning policies. Gross non-performing loan (NPL) ratio was steady at 1.2 percent, while NPL cover remained high at 168.2 percent.

The Bank’s capital base increased to P364.0 billion, with Common Equity Tier 1 (CET1) and Capital Adequacy Ratio (CAR) improving to 13.1 percent and 14.6 percent, and remaining comfortably above the current regulatory minimum under the Basel III framework.

With its focused growth strategy, strong business franchise, solid balance sheet and extensive geographic reach, the Bank remains solidly positioned to capitalize on the country’s solid economic pace and growth opportunities in underserved and emerging markets.