Banco de Oro profit down on Lehman exposure

MANILA, Philippines - The Banco de Oro Unibank Inc. (BDO) reported a net income of P2.2 billion last year, a drop of 66 percent from P6.57 billion in 2007, the bank said in a statement yesterday.

The large reduction in income, BDO said was due to the P3.8-billion loss provisioning for its exposure to bankrupt US investment house Lehman Brothers amounting to $134 million.

Nonetheless, the main commercial bank of the SM Group of Companies reported positive gains in its core business.

“The bank’s underlying business continued to be strong, with solid growth rates for loans, deposits, net interest income and service-based fee income,” it said.

Its balance sheet and capital remained robust, allowing it to absorb the impact stemming from the global financial crisis. Capital stood at P57.8 billion, with capital adequacy ratio (CAR) at 14 percent.

“BDO has already taken appropriate steps to improve the coverage of its assets,” it said, referring to capital-raising measures initiated in 2008. These involve P5 billion to P10 billion in unsecured subordinated debt as Tier 2 capital and a rights offer expected to raise up to P8 billion.

Net interest income improved seven percent to P23 billion with a higher earning asset base, while fee-based and other income remained flat at P12 billion.

Gross loans expanded 32 percent to P392.8 billion, driven by broad-based demand from the corporate, middle market and consumer lending segments. Asset quality also improved as the non-performing loan (NPL) ratio declined to four percent from 5.2 percent.

Deposits rose 43 percent to P636.8 billion, supported by the growth in low-cost deposits. The bank said is looking forward to this year, noting that the current situation presents opportunities for BDO to further consolidate its position.

BDO presently operates 700 branches and 1,200 ATMs, one of the largest in the country. It has completed the integration of Equitable PCI Bank and is completing the integration of Equitable Savings Bank, BDO Elite Savings Bank and PCI Capital Corp.