BDO profit drops 10% to P8.8 billion

MANILA, Philippines — BDO Unibank Inc. booked a 10.2 percent drop in earnings to P8.8 billion in the first quarter from P9.8 billion in the same quarter last year as weak financial market conditions brought about by the global virus pandemic translated to higher trading and foreign exchange losses.

The country’s largest bank in terms of assets, capital, deposits, and loans said its strong business franchise and solid balance sheet made it resilient in the face of the coronavirus disease 2019 (COVID-19) health crisis.

“The bank wishes to assure the public of its commitment to support its clients and to continue to service their requirements, while implementing measures to safeguard the health and safety of its customers and employees amid the COVID-19 situation and enhanced community quarantine,” BDO said in a statement.

The bank owned by the family of the late retail magnate Henry Sy said the growth in core lending and deposit-taking businesses were sustained despite the imposition of the enhanced community quarantine in mid-March.

Net interest income went up by 19 percent to P33 billion from January to March this year compared to P27.7 billion in the same period last year on stable margins.

The bank’s loan book expanded by 11 percent to P2.2 trillion on continued growth across all market segments, though the quarantine had started to disrupt the operations of borrowing clients classified as non-essential.

Its deposit base grew by nine percent to P2.6 trillion, even with scaled down branch operations in Metro Manila and Luzon due to transportation and mobility restrictions arising from the lockdown.

However, BDO’s non-interest income plunged by 39.6 percent to P9 billion in the first quarter from P14.9 billion in the same quarter last year, largely contributed by fee-based income with P8.1 billion and insurance premiums with P3.9 billion.

“Weak capital market conditions resulted in unrealized mark-to-market losses in BDO Life’s equities and unit-linked portfolios, leading to consolidated trading and forex losses,” the country largest lender added.

BDO’s gross operating income slipped by 1.4 percent to P42 billion from P42.6 billion, while operating expenses declined by 5.3 percent to P26.8 billion from P28.3 billion largely due to reduction in volume-related expenses and lower policy reserves related to unit-linked funds.

The Sy-led bank maintained its conservative credit and provisioning policies, setting aside provisions of P2.3 billion or almost 77 percent higher than a year-ago level of P1.3 billion as gross non-performing loan (NPL) ratio remained stable at 1.3 percent from 1.2 percent and NPL cover of 151.4 percent.

“To safeguard asset quality, the bank has undertaken initiatives which include, among others, rapid portfolio reviews of clients and sectors highly affected by the impact of the enhanced community quarantine, as well as reassessment of existing provisioning guidelines,” BDO said.

BDO has the country’s largest distribution network, with over 1,400 consolidated operating branches and more than 4,400 ATMs nationwide. It also has 17 overseas remittance and representative offices in Asia, Europe, North America and the Middle East.