BDO, UnionBank posted strong profit growth in Q1

Two of the country’s biggest banks, BDO Unibank Inc. and Union Bank of the Philippines, reported on Friday strong profit growth in the first quarter, demonstrating their resilience amid the lingering pandemic.

BDO Unibank, led by the Sy family, said net income climbed 19 percent in the first quarter to P10.4 billion from P8.8 billion a year ago despite the challenges brought by the COVID-19 pandemic.

BDO president and chief executive Nestor Tan said during the online annual stockholders’ meeting the bank “demonstrated operational resilience and grew its balance sheet amid the difficult operating environment.”

Tan said the robust performance in the first three months was led by service fee businesses, which compensated for the weak demand for loans.

Loans dipped 1 percent year-on-year to P2.2 trillion, while total deposits grew to P2.6 trillion, underpinned by the 11-percent rise in CASA (current and savings account) deposits. The CASA ratio hit a record 83 percent.

Non-interest income recovered, driven by the strong performance of wealth management and life insurance businesses and the normalization of trading and forex gains. Operating expenses were relatively flat compared to last year.

The bank set aside an additional P2.9 billion in provisions even as the first-quarter non-performing loan ratio of 2.81 percent remained within expectations and was still below the 3 percent NPL ratio projected for end-2020.

NPL coverage is now at 107.1 percent, more than adequate to cover for potential losses.

BDO’s capital base strengthened to P400.9 billion with capital adequacy ratio and common equity Tier 1 at 14.7 percent and 13.6 percent, respectively, both comfortably above regulatory levels and deemed sufficient to withstand near-term shocks.

“BDO remains resilient in the face of the continuing challenges of the health crisis and will continue to strengthen its business franchise and invest in its digital infrastructure with the ongoing implementation of the bank’s strategic programs,” Tan said.

Meanwhile, UnionBank of the Aboitiz Group, said net income jumped 79 percent in the first quarter to P4.7 billion from P2.6 billion a year earlier, bucking the impact of the COVID-19 pandemic to the banking industry and the economy.

UnionBank said the first-quarter performance was also 53 percent higher than what it earned in the fourth quarter. This translated into a return on equity of 18.1 percent.

“I am pleased with the bank’s first-quarter results despite continued challenges from the pandemic. We continue to see a big shift in the use of digital channels. The bank onboarded more than 470,000 new digital customers in the first quarter of 2021 alone. As of end-March 2021, 2.4 million customers are using our app. Digital transactions are averaging 6 million per month with UnionBank ranking among the top banks in terms of PESONet and InstaPay transactions,” said UnionBank president and chief executive Edwin Bautista.

Bautista said the digital shift motivated the bank to continue enhancing features across its digital platforms.

“We recently launched InstaPay 2.0 which enables fund transfers by inputting mobile number or email address. Also, small businesses can now open their business accounts and perform banking transactions digitally with the launch of our SME Business Banking App,” Bautista said.

Net revenues were at P14.3 billion, up 50 percent from the same period last year and up 39 percent compared to the fourth quarter. Net interest income increased 6 percent to P7.2 billion despite muted credit demand.

This was attributable to the robust growth of CASA (current and savings account) deposits, which grew 29 percent year-on-year. Non-interest income rose by 2.6 times to P7.1 billion, driven by trading gains.

The higher net revenues provided cushion for the bank to book additional loan loss provisions of P2.3 billion even as non-performing loan ratio declined to 4.7 percent from 5.1 percent in December 2020. It also allowed the bank to absorb the one-time impact on deferred tax assets due to the CREATE Law.