BDO hikes provisions by another P20b to cover delinquencies

BDO Unibank Inc., the country’s larger lender controlled by the Sy family, said Monday it allocated an additional P20 billion in upfront provisions on top of the P2.1 billion set aside in the first quarter in anticipation of the disruptive economic impact of the COVID-19 pandemic and the lockdowns.

BDO said in a disclosure to the stock exchange it was expecting delinquencies to increase this year with the disruption in business activities, tightness in corporate liquidity, lower consumption levels and contraction in full-year gross domestic product by as much as 3.4 percent based on government estimates.

“As such, the bank is allocating a total of 170 bps [basis points] in anticipated credit costs for the effects of the pandemic. While the bank expects an increase in the NPL [non-performing loan] ratio, actual write-offs or losses are seen to be much less,” the bank said.

It said that despite the additional provisions, the capital adequacy ratio was expected to remain stable and it would continue with its regular dividend declaration.

“The move, following a comprehensive review of its loan portfolio, is anticipatory in nature and it meant to safeguard the bank’s balance sheet. The bank’s current NPL coverage ratio is currently one of the highest in the industry,” it said.

BDO said that with the additional provisions, the coverage ratio was expected to remain strong and among the highest in the industry. It said it was working with various borrowing clients to provide continuing support and find ways to navigate through the difficult operating environment.

“These anticipatory provisions are not expected to have an impact on the bank’s ability to service clients,” it said.

“BDO’s balance sheet remains strong, with capital ratios remaining comfortably above regulatory levels despite the higher provisions,” BDO said.

The bank said that coupled with a robust business franchise and a culture of resilience, it would weather the crisis and “be in a good position once the economy bounces back.”

The bank’s board of directors approved at its regular meeting on May 30 the declaration of regular cash dividends on common shares in the amount of P0.30 per share for the second quarter, payable on June 29, 2020 to all stockholders of record as of June 17, 2020.