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BDO books higher Q1 income on core businesses

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By Karl Angelo N. Vidal, Reporter

BDO UNIBANK, Inc. saw its net income soar the first quarter of 2019, as core banking operations continued to expand while trading gains normalized.

In a press conference Monday, BDO President and Chief Executive Officer Nestor V. Tan reported that the Sy-led bank logged a P9.8-billion net profit in the first three months of the year, surging by 66% from P5.9 billion tallied year-on-year.

This puts the lender on track to hit its full-year profit guidance of P38.5 billion, which if realized would be 17.7% higher than the actual P32.7-billion net income it booked in 2018.

Mr. Tan attributed the bank’s first-quarter income growth to the continued expansion of its core banking operations, recovery of trading gains, and strong non-interest income.

Net interest income stood at P27.7 billion in the quarter, up 25% from P22.2 billion in the comparative year-ago period.

This was on the back of its gross consumer loans which grew 10% to P2.009 trillion from last year’s P1.828 trillion.

Its nonperforming loan (NPL) ratio was steady at 1.2%, while NPL cover went up to 163% from 156% in the first quarter of 2018.

Meanwhile, BDO’s deposit base expanded 5% to P2.361 trillion from P2.242 trillion in the same period in 2018, while current and savings accounts expanded 6% to P1.675 trillion.

On the other hand, non-interest income also picked up 36% to P14.9 billion in the quarter from last year’s P10.9 billion, led by banking fees and insurance premiums, which grew 18% and 23% year-on-year, respectively.

Trading and foreign exchange gains normalized to P2.2 billion, coming from a low base of P24 million a year ago when the market was down 7%.

On the other hand, operating expenses climbed 22% to P28.3 billion due to continuing business and branch expansion as well as investments in IT upgrades.

Meanwhile, the bank set aside P1.3 billion in provisions.

Overall, BDO’s assets were at P3.014 trillion, 8% higher than P2.797 trillion in the same period last year.

The bank’s capital base increased to P338.4 billion, with capital adequacy ratio at 14% and common equity Tier 1 ratio at 12.4%.

Mr. Tan said the lender expects even higher net income this year due to the continued expansion of its lending portfolio.

“For us, we expect loan expansion to continue, but this time to be led by consumer and middle market, which was the driver for last year,” he said, adding that its loan book may grow 12-13% or “low double-digit” this year.

BDO is also set to continue the aggressive expansion of its branch network to tap more Filipinos in underserved areas despite an industry-wide push for digitalization.

Mr. Tan said BDO will open 50-70 new branches this year — both under the parent and its rural banking arm One Network Bank, Inc.

“Yes, we still need presence in underserved markets. The brick and mortars may come in different forms.”

Based on the latest Financial Inclusion Survey conducted by the central bank in 2017, only 15.8 million Filipinos have a formal bank account, representing 22.6% of the total adult population.

As of 2018, around 66.3% of towns and cities in the Philippines have banking presence, higher than the 65.1% ratio in 2017.

Even with the banking industry’s move to digitize or expand their online and mobile channels, Mr. Tan said physical branches are still needed to attract more Filipinos into the formal financial system.

“I still believe…that before people park with their money, they still need face-to-face contact. What we’ve seen is brick and mortars — in the form of branches or some form — will still be necessary to improve financial inclusion.”

Eventually, BDO may need to reduce its number of branches as internet banking grows in the country, although it may “not be apparent immediately,” the official said.

“I think digitization will come but we haven’t seen it gaining traction at the pace that it is gaining traction in other countries. If I were to take a guess, it’s because we still have a very low financial inclusion level,” the bank chief said.

BDO ranked as the largest commercial bank in the country in terms of assets, loans and deposits among others. At end-2018, the bank had a total of 1,309 branches and other banking offices as well as 4,325 automated teller machines.

Shares in BDO closed at P133 apiece on Monday, up by a peso or 0.76% from the previous close.

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