BDO UNIBANK, Inc. experienced a 6.49% increase in its net income during the first quarter, bolstered by the consistent performance of its primary operations.<\/p>\n
Although the year commenced strongly, the publicly traded bank anticipates that the ongoing easing cycle from the central bank will impact its margins, despite a generally optimistic outlook, BDO President and CEO Nestor V. Tan mentioned during a briefing following their annual shareholders\u2019 gathering on Friday.<\/p>\n
BDO’s net profit rose to P19.7 billion in the first quarter, up from P18.5 billion in the same timeframe of 2024, the Sy-led financial institution disclosed to the stock exchange on Friday. This resulted in a return on average common equity of 13.8%.<\/p>\n
\u201cIn spite of economic uncertainties stemming from US tariffs and trade regulations, the Philippines is anticipated to remain robust due to its domestic and consumption-driven economy. Importantly, BDO is well-equipped to manage potential hazards and attain sustainable growth and profitability thanks to its solid business foundation, market dominance, and strong capital position,\u201d the bank stated.<\/p>\n
Net interest income increased by 6% to P47.8 billion in the three months ending March from P44.9 billion, propelled by growth in its earning assets.<\/p>\n
Non-interest income jumped by 21% year on year to P18.6 billion from P15.4 billion, attributed to increased fee-based revenue.<\/p>\n
BDO\u2019s total customer loans surged by 11.7% to P3.26 trillion at the end of March, compared to P2.92 trillion a year earlier, as growth was observed across all market segments. Consumer loans rose by 17.3%, middle market loans increased by 12.7%, and corporate loans gained 8.7%.<\/p>\n
The bank’s nonperforming loan (NPL) ratio was recorded at 1.77%, with NPL coverage at 143%.<\/p>\n
In terms of funding, deposits grew by 6% year on year to P3.8 trillion from P3.63 trillion, with the current and savings account (CASA) ratio at 70%.<\/p>\n
BDO’s assets increased by 7% to P4.9 trillion as of March from P4.57 trillion a year prior.<\/p>\n
Shareholders’ equity rose by 12% to P594.1 million. BDO’s common equity Tier 1 ratio was at 14.4%, up from P13.6% during the equivalent period last year.<\/p>\n
Mr. Tan indicated that they foresee the Bangko Sentral ng Pilipinas’ (BSP) monetary easing cycle impacting their profits this year. In 2024, BDO’s net profit escalated by 11.73% to a historic P82.02 billion.<\/p>\n
\u201cWhen rates are decreased, we naturally experience a margin squeeze, affecting our net interest income… As rates decline, most of our term loans are benchmarked against risk-free rates. Consequently, our yields decrease,\u201d he stated.<\/p>\n
\u201cWhen spreads are influenced, it will impact net income, even if volume is present.\u201d<\/p>\n
The BSP on April 10 lowered benchmark interest rates by 25 basis points (bps), adjusting the policy rate to 5.5%, realigning its easing cycle after an unforeseen pause in February.<\/p>\n
The central bank has now reduced borrowing costs cumulatively by 100 bps since commencing its rate-cut cycle in August of the previous year.<\/p>\n
BSP Governor Eli M. Remolona, Jr. has mentioned considerations for further reductions in “small increments” or 25 bps. There are four additional Monetary Board policy meetings planned for this year, with the next set for June 19.<\/p>\n
Nonetheless, the adverse effect on its margins may be balanced by robust consumer loan growth and lower funding expenses, Mr. Tan added.<\/p>\n
\u201cOn the brighter side, we are seeing improvements in funding. When reserves were lowered in late March, it positively impacted our funding cost,\u201d he noted. \u201cIf there is an uptick in consumer loans, you can expect higher yields. Conversely, increased consumer loans typically result in a higher delinquency rate. Therefore, it is expected that your NPLs will rise. The challenge is if banks act irresponsibly, they may not secure adequate returns from the NPLs, leading to complications. But this does not pose a solvency issue, as banks have sufficient capital; it\u2019s primarily an earnings concern.\u201d<\/p>\n
Mr. Tan further stated their expectations for continued growth in loan and fee incomes, despite global trade uncertainties potentially impacting the corporate sector.<\/p>\n
\u201cIn my opinion, loan growth will experience steady demand from consumers. However, the significant drivers will be within the middle market and large corporations… Many companies halted capital expenditures during the pandemic, and we haven\u2019t seen a return to normalcy… Thus, we anticipate a normalization. By the fourth quarter of 2024, we are observing an increase in the capital expenditure pipeline,\u201d he commented.<\/p>\n
\u201cIn terms of loan growth, we are observing the effects of the tariffs. Large corporations, typically engaged in substantial infrastructure projects and capital expenditures, are currently settling for high single-digit growth… They aren\u2019t completely forgoing investments, but due to tariffs and the various developments from Trump 2.0, some have chosen to delay,\u201d he added.<\/p>\n
The bank might also experience \u201cslightly increased\u201d operating expenses as they persist in investing in technology, Mr. Tan remarked.<\/p>\n
\u201cOur capital is adequate to facilitate growth. We are not contemplating any potential capital-raising in the near future. We can generate sufficient funds to support growth,\u201d he clarified. \u201cWe will need to refinance our maturing obligations and may consider funding opportunities in the dollar sector should the CMEPA (Capital Markets Efficiency Promotion Act) have an impact.\u201d<\/p>\n
The Senate passed the CMEPA on its third and final reading in January. This measure aims to enhance capital market investments by reducing stock and documentary stamp taxes and removing preferential tax rates for passive income.<\/p>\n