Banco de Oro optimistic of income growth this year

MANILA, Philippines - Banco de Oro Unibank Inc. (BDO) said it is optimistic 2009 will be a better year in terms of net earnings than 2008.

The commercial bank of the SM Group of Companies reported a 66-percent drop in net income last year, from P6.57 billion in 2007 to P2.2 billion.

The main reason for the huge reduction in income was the P3.8-billion provisioning for its exposure to bankrupt US investment firm Lehman Brothers amounting to $134 million. Majority of the country’s commercial banks that reported their previous year’s performance reflected a drop in earnings in the range of 20 percent to 30 percent.

Aside from BDO, the only other commercial bank that reported a drop in earnings of over 30 percent was Metropolitan Bank & Trust Co. (Metrobank), which likewise suffered due to its exposure to Lehman Bros.

BDO officials said they will tighten controls and standards while ensuring efficiencies to bring about positive income growth.

“We will tighten underwriting standards as well as practice prudence in credit applications,” Nestor V. Tan, BDO president said.

The bank recently entered into a working partnership with the US Embassy to facilitate a faster and more efficient issuance of US visas.

Tan said that they would continue to experience strong borrowings from its corporate clients as well as aggressive lending to the consumer or retail market.

In terms of value, the corporate sector accounts for the biggest chunk of BDO’s lending portfolio.

So far, the past two months of the year has been slowly reflecting the cautious behavior of the corporate sector. But the bank remains bullish with solid growth rates for net interest income and service-based fee income.

Meanwhile, BDO is still looking for appropriate areas to establish new branches as it still has between 40 to 50 unused branch licenses.

It presently operates 700 branches and 1,200 ATMs nationwide.

Tan said they will continue to take advantage of recent acquisitions, while exploring further the potentials of its existing alliances with financial and non-financial institutions.

Meanwhile, BDO said it has no specific date yet for the rights offer to raise between P7 billion to P8 billion. Much will depend on the developments surrounding the subordinated debt issue.

BDO is issuing the third tranche of its unsecured subordinated debt amounting to P5 billion, qualified as Tier 2 capital.

Both capital-raising exercises, however, must be completed within the first semester of 2009.