BPI declares special cash dividend

The board of directors of the Bank of the Philippine Islands recently declared its usual semestral cash dividend of P0.80 per share plus a one-time special cash dividend of P1.60 per share both totalling around P3.5 billion.

The special cash dividend comes on the heels of a much improved profit picture for the current year. Despite the lackluster business environment and anemic loan demand, the bank posted a stronger bottomline this year owing to the operating synergies it has begun to realize from its merger with Far East Bank & Trust Co. in April of last year.

In its report to stockholders for year 2000, BPI reported that it had completed its integration activities in record time. These included the adoption of a post-merger organizational structure, the integration of technology and operating systems into a single servicing platform, and a customer retention program to ensure the synergistic value of the merger.

A rightsizing initiative was also undertaken. The annual report further stated that the bank achieved its 90 percent customer retention targeted ratio. Nothwithstanding the integration activities, the bank also managed to move forward to launch its alternative Internet banking platforms for corporate and individual customers. Its latest launch is BPI Trade, and Internet based stockbrokerage platform. The bank was recently singled out as the Best Internet Bank of the year by Global Finance.

BPI has reportedly written off in 2000 all of its extraordinary charges associated with the merger, including the cost of redundancy programs and branch consolidations. Thus, the current year operations is no longer expected to be burdened with such charges.

It is no surprise that first quarter results posted a 10 percent improvement over the same period last year. Full year results should end up significantly better than the previous year, though not quite as strong as the first quarter results which benefitted from an overhang of higher interest rates. A continued deterioration in economic fundamentals and a consequent increase in past due loans will inevitably temper profits or the full year.

The special cash dividend is not expected to erode the bank’s strong capital position which stood at P50 billion at the end of March 2001. BPI has the highest book as well as market capitalization among all Philippines banks. Its capital adequacy ratio of 21.9 percent at the end of March should also remain basically unchanged by year end 2001 even with this special cash dividend, given the much improved earnings.

The dividend is expected to be viewed quite favorably by the investment community as this will stem a further build-up of capital which would otherwise result from the improved profit but slow asset growth situation currently faced by the bank.