BDO’s profit declined by 10% to P8.8b in 1st quarter

BDO Unibank Inc., the largest lender in terms of assets controlled by the Sy family, said Friday net income dropped 10 percent in the first quarter to P8.8 billion from P9.8 billion a year ago on weak capital market conditions amid the onslaught of the coronavirus disease 2019.

“The core lending and deposit-taking businesses sustained their growth despite the imposition of the enhanced community quarantine [ECQ] in mid-March. However, weak capital market conditions impacted on BDO’s investment portfolio and dragged the bottomline,” the bank said in a statement.

Net interest income amounted to P33 billion on stable margins. Customer loans went up by 11 percent to P2.2 trillion on continued growth across all market segments, although the ECQ had started to disrupt the operations of borrowing clients classified as “non-essential”.

Total deposits rose 9 percent year-on-year to P2.6 trillion, even with scaled down branch operations in Metro-Manila and Luzon due to transportation and mobility restrictions arising from the ECQ.

Non-interest income amounted to P9 billion, largely contributed by fee-based income with P8.1 billion and insurance premiums with P3.9 billion.

“Weak capital market conditions resulted in unrealized mark-to-market losses in BDO Life’s equities and unit-linked portfolios, leading to consolidated trading and forex losses. Gross operating income reached P42.0 billion vs. P42.6 billion in first quarter 2019,” it said.

Operating expenses were slightly lower at P26.8 billion from P28.3 billion in the comparative period last year largely due to reduction in volume-related expenses and lower policy reserves related to unit-linked funds.

The bank said it maintained its conservative credit and provisioning policies, setting aside provisions of P2.3 billion, even as gross non-performing loan ratio remained stable at 1.3 percent and NPL cover still high at 151.4 percent.

“To safeguard asset quality, the bank has undertaken initiatives which include, among others, rapid portfolio reviews of clients and sectors highly affected by the impact of the ECQ, as well as reassessment of existing provisioning guidelines,” it said.

Total capital base increased to P372.2 billion, with capital adequacy ratio and common equity Tier 1 (CET1) ratio at 13.8 percent and 12.7 percent, respectively, both comfortably above regulatory levels and deemed sufficient to withstand near-term shocks.

“The bank wishes to assure the public of its commitment to support its clients and to continue to service their requirements, while implementing measures to safeguard the health and safety of its customers and employees amid the COVID-19 situation and ECQ,” it said.

It said its strong business franchise and solid balance sheet make it resilient in the face of the ongoing COVID-19 health crisis.