BDO sees net income rising 19% to P10.5 B in 2011

Manila, Philippines - Sy-owned Banco De Oro Unibank Inc. (BDO) said it expects its net income to reach P10.5 billion in 2011, 19 percent higher than the P8.8-billion recorded in 2010.

In a presentation yesterday, BDO president and chief executive officer Nestor V. Tan said they expect to meet this target through sustained growth in net interest income.

“Our expectations for 2011 is characterized by moderate loan growth, strong growth in deposits that will feed our loans, sustained growth in fee-based income, and normalized provisioning levels,” he said.

He likewise stressed that the bank is optimistic about strong growth this year since BDO does not rely heavily on non-interest earnings such as securities or foreign currency trading. Eighty-six percent of its operating income come from recurring sources.

Loan growth is forecast to be modest, though Tan said he expects the consumer sector to banner lending.

“Consumer is still the growth sector, including the middle market, and the large corporate sector in both project financing and working capital. Ideally, we would like almost equal share of each sector,” the bank executive said.

Gross customer loans last year expanded to P541.5 billion with firm growth across all business segments.

He said in the first quarter, trading gains were boosted by the sale of Lehman Brothers bonds it wrote off after the US investment bank collapsed in the global financial crisis.

Trading gains rose 44 percent to P1.8 billion in the first quarter, the bank said earlier this month. The bank also converted an exposure to Atlas Consolidated Mining Co., Tan said.

“We held it (the Lehman bonds), it was zero in our balance sheet, we waited for the price to go up, and at the right price we unloaded it,” Tan said. “We probably recovered a portion” of the Lehman investment.

 “It’s not your usual portfolio trading from interest rates.”

Meanwhile, BDO said that the just-approved P15-billion Tier 2 debt issue would be used for general corporate purposes, funding for medium term growth and other opportunities.

The bank also raised $250 million last year to build a buffer for anticipated Basel II capital requirements. Of the total amount, $150 million came from the sale of shares to the International Finance Corp. (IFC) and the IFC Capitalization Fund, a joint effort of the Japan International Cooperation Agency (JICA) and the IFC. The other $100 million came from Asian institutional investors.

Funds were also required for the impending acquisition of Export and Industry Bank (EIB), which has remained unresolved.

Tan said that despite the approval by the Philippine Deposit Insurance Corp. (PDIC), there are still “details” needed to be included in the sale package.

“In the case of EIB, its not a question of ‘if’ but on the final outlook of the balance sheet,” he said.

Last year, BDO became the first domestic bank to report total resources worth over P1-trillion. In the same period, its return on equity zoomed to 11.7 percent and capital adequacy ratio (CAR) of 14 percent.

It is operating 725 domestic branches, 20 international branches and 1,430 automated teller machines (ATMs).