BDO Q1 net profit rises 19% on non-interest income

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BDO Unibank Inc., said it booked a P10.4 billion net profit in the first quarter, up 19% from a year earlier, buoyed by a strong non-interest income performance.

Nestor V. Tan, the bank’s president and CEO, said at the bank’s annual meeting Friday that net interest income fell 3% year-on-year to P32 billion due to weak loan demand and lower net interest margins.

This was offset by the 21% increase in non-interest income to P15.4 billion. The bank also booked a 31% rise in insurance premiums from its life business as well as trading gains posted this period, following a year-earlier trading loss.

Loans fell 1% to P2.218 trillion, with the non-performing loan ratio at 2.81% in the first quarter, rising from the 2020 level of 2.65% but below the industry average of 3.67%, Mr. Tan said.

BDO had a bad loan coverage ratio of 107% at the end of March, against 110% in 2020 but above the industry average of 95%, he added.

Operating expenses rose to P31.1 billion from P30.5 billion a year earlier.

The bank set aside P2.9 billion in loan loss provisions in the first quarter, up 30% from a year earlier.

“Compared to our current NPL level of only 2.3% the bank’s capital base is strong enough to withstand shocks,” Mr. Tan said.

Deposits totaled P2.63 trillion in the first three months, up 2% from a year earlier.

Low-cost CASA deposits rose 11% to P2.179 trillion at the end of March, accounting for 83% of the total.

Overall capital rose 8% to P401 billion.

The capital adequacy ratio was 14.5%, while the common equity tier-one ratio was 13.4% at the end of March, both above the regulatory minimum.

Mr. Tan said the bank is continuing to pursue its goal of serving the unbanked segment of the population over the next five years. BDO will also ramp up its digital transformation by launching new products, processes and platforms.

He said NPLs are expected to peak at 4-5% this year before ending 2021 at around 3%.

“We are below that. So I think we’re trending quite better than what we anticipated. But having said that, the challenge… is not in the NPL ratio,” he said.

“The second thing that we need to do is to protect the balance sheet and in 2020, we did pre-emptive provisioning and our NPL cover is in excess of 100%. Given the loss default that we’ve experienced, which is about 50%, I think the balance sheet is adequately protected, and more for potential increases in delinquencies, if (that) should happen,” he added.

BDO shares rose P2 or 1.94% to P105 on Friday. — Beatrice M. Laforga