BPI net income to soften this year

The Bank of the Philippine Islands (BPI) expects earnings growth to continue to slow down this year because of the cost of integrating Far East Bank & Trust Co. into its operation, BPI president Xavier Loinaz said yesterday.

"Earnings growth is not going to be aggressive. Redundance are going to cost us. Next year, things will stabilize but this year's prospects are more of integration and consolidation," he told newsmen after the annual stockholders' meeting. Absorbing FEBTC is expected to cost between P500 million to P600 million this year.

BPI bought majority stake of FEBTC in October last year for P8 billion. The merger, completed only in April this year, created the second largest bank in the country next to the Metropolitan Bank & Trust Co. which acquired Solid Bank. BPI-FEBTC has combined assets of P307.9 billion and capital of P49.3 billion as of end-March.

The merger would result in higher operational costs, particularly on manpower since some employees would have to be paid early retirement benefits. The benefits of the merger however, are expected in the next 12 to 18 months. In fact, the merger would save the bank P1.7 billion annually.

The merged bank has a total employees of 13,021, of which, 7,605 are from BPI and 5,416 are from FEBTC.

Last year, the bank's net income dipped by 12.4 percent to P4.03 billion from P4.6 billion the previous year.

Despite the sluggish economy, Loinaz said the bank is hoping loans would grow by around 10 percent this year from last year's P100.3 billion.

"Automotive sales seem to be picking up. That's an encouraging sign but I think we still have to be patient for the rest of the year. Demand from major corporations are also beginning to pick up," he said.

Even with the expected rise in its loan portfolio, he said provisions for probably loan losses arising from non-collection of debts is expected to stay flat. He said the bank would probably allocate a little over P900 million this year, almost the same level as last year's P924 million.

He said the bank remains prudent in its lending activities, allowing it to have the lowest non-performing loans (NPL) ratio to total loans. As of the first quarter, he said the NPL ratio stood at 6.8 percent, way below the 14.03 percent industry average during the period. NPL refers to loans not paid for three straight months.