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Friday, March 29, 2024

Nestor Tan

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"He grew the bank through large but judicious acquisitions, aggressive but nimble lending, and innovative marketing with scale and synergy."

 

Nestor Tan is one of the country’s best bankers, if not the best.  He has the prestigious Management Man of the Year award in 2019, among many accolades, to show for it.

He brought to BDO Unibank a global perspective and a strategic mind honed while working with large banks abroad, Mellon, Bankers Trust and Barclays.  He had lodged two decades of banking experience when he joined BDO in 1998.  Today, he takes pride in his track record as a banker of more than 40 years.

In 1996, the Henry Sy bank was just one of the many local universal commercial banks with assets of P36 billion, No. 19 in an industry with more than 40 players.  Today, the Henry financial Goliath has total resources of more than P3.3 trillion, with a commanding 18 percent market share.  Nobody comes close.  The No. 2 bank has assets of P2.39 trillion.

Nestor grew BDO through large but judicious acquisitions, aggressive but nimble lending, and innovative marketing with scale and synergy as the focus, enabling the bank to, using its own words, “find ways” for its depositors and clients.  He also made BDO a cash machine and a major profit center for the SM group.

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Today, BDO is No. 1 in nearly every metric of size and track record: assets (P3.3 trillion, 18 percent market share), deposits (P2.576 trillion, 19 percent market share), loans (P2.218 trillion, 22 percent market share), net worth (P367.5 billion), assets under management (37 percent market share), remittances, credit cards, trust funds, private banking, investment banking, rural banking, leasing and finance, insurance brokerage, branch and retail network (1,400 branches and 4,400 ATMs), and market capitalization, P390.17 billion.

Amid the worst pandemic of the century, BDO prepared for the worst.  It booked a whopping and industry-leading P22.4 billion provision in just the second quarter in anticipation of pandemic-induced “delinquencies.”  “The provisions are anticipatory in nature, and meant to safeguard the balance sheet,” explains Tan, adding “by recognizing the provisions upfront, the bank can now focus on growing its business as restrictions under ECQ/GCQ are gradually relaxed.”

The historically large provisioning, of course, hurt the bottomline.  Profits nosedived 79 percent to P4.3 billion in the first half 2020, from a gargantuan P20.2 billion in the same period in 2019.  Return on  equity fell too, from 12 percent to 2.3 percent; a single digit ROE is rare for BDO. Without the heavy provisioning, operating income would have been up a healthy 17 percent, at P35.1 billion.

Pre-COVID, BDO business was robust.  Net Interest Income (NII) went up by 17 percent to P66.4 billion. Customer loans rose 11 percent to P2.3 trillion (loan growth was 9 percent in 2019), while total deposits climbed  9 percent to P2.6 trillion, driven by the 19 percent expansion in Current Account/Savings Account (CASA) deposits which now account for 77 percent of total deposits.

At end-June 2020, all branches were in normal operations, from only 45 percent at the start of the ECQ 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 dipped by one 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 (NPL) ratio increased to 1.95 percent (from 1.13 percent in 2019 and a record .96 percent in 2018), while NPL cover settled at 139.4 percent. 

Total capital base settled at P367.5 billion, with Capital Adequacy Ratio (CAR) and Common Equity Tier 1 (CET1) ratio at 13.8 percent and 12.7 percent, respectively, despite the upfront provisions. CAR of 13.8 percent was still better than the 2019 CAR of 13.7 percent in 2018, although lower than 2019 CAR of  14.2 percent.

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

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.

biznewsasia@gmail.com

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