BDO’s income down 78.6% on huge bad debt provisions

BDO Unibank Inc., the country’s largest lender in terms of assets controlled by the Sy family, said Monday net income dropped 78.6 percent in the first half to P4.3 billion from P20.1 billion a year ago, as the bank allotted P22.4 billion in provisions for potential delinquencies due to the COVID-19 pandemic.

BDO said in a statement the provisions were anticipatory in nature and meant to safeguard the balance sheet. The bank said it remained optimistic of its growth outlook in the months to come.

“By recognizing the provisions upfront, the bank can now focus on growing its business as restrictions under ECQ/GCQ are gradually relaxed. Core businesses held up well amid the COVID-19 pandemic, with pre-provision operating income up 17 percent,” the bank said.

Net interest income went up by 17 percent. Customer loans rose 11 percent to P2.3 trillion, while total deposits went up by 9 percent to P2.6 trillion, driven by the 19-percent expansion in current account/savings account or CASA deposits which now represent 77 percent of total deposits.

BDO said that as of end-June 2020, branch operations fully restored from only 45 percent at the start of the enhanced community quarantine in mid-March 2020.

Non-interest income settled at P24.8 billion, led by fee-based income with P13.4 billion and insurance premiums with P7 billion.

Operating expenses dropped 1 percent to P56 billion on lower volume-related expenses, and despite the additional costs and operational adjustments to adapt to the “new normal” to ensure the security, health and safety of BDO employees and clients.

Gross non-performing loan ratio increased to 1.95 percent while NPL cover settled at 139.4 percent.

Total capital base reached P367.5 billion, with capital adequacy ratio and common equity Tier 1 ratio at 13.8 percent and 12.7 percent, respectively, despite the upfront provisions.

“These ratios are well above regulatory minimum and deemed sufficient to support the bank’s anticipated asset growth as well as regular quarterly dividends,” it said.

“Going forward, BDO believes that its solid balance sheet, sustained business growth and dedicated team effort will allow the bank to weather the COVID-19 crisis and sustain its long-term performance post-pandemic,” it said.

BDO is a full-service universal bank which provides a wide range of corporate and retail banking services. These services include traditional loan and deposit products, as well as treasury, trust and investments, investment banking, private banking, rural banking, cash management, leasing and finance, remittance, insurance, retail cash cards, credit card services and stock brokerage services.

BDO has one of the largest distribution networks, with more than 1,400 operating branches and over 4,400 ATMs nationwide. It also has full-service branches in Hong Kong and Singapore as well as 15 overseas remittance and representative offices in Asia, Europe, North America and the Middle East.

The bank’s net income hit a record P44.2 billion last year while its first-quarter 2020 net profit reached P8.8 billion on the back of strong core income sources.