BPI reviews spending plan, braces for loan defaults due to coronavirus

Ralf Rivas

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BPI reviews spending plan, braces for loan defaults due to coronavirus
BPI increases its buffer for loan default losses as a result of the pandemic. Executives also say the bank is 'well-positioned' for the expected rise in digital transactions.

MANILA, Philippines – Ayala-led Bank of the Philippine Islands (BPI) is reviewing its spending plan for 2020, as it maneuvers into the uncertain “new normal” brought about by the coronavirus crisis.

BPI did not disclose its planned capital expenditures for the year during its press briefing on Thursday, April 23, but its executives noted that the bank is “well-positioned” amid the accelerated demand for digital banking. (READ: A history of trust: The Philippines’ first bank)

Ayala Corporation chief executive officer Jaime Augusto Zobel de Ayala also noted the significant increase in demand for digital transactions during the enhanced community quarantine (ECQ). (READ: Post-lockdown world will be ‘a new, different reality’ – expert)

“We have seen a significant increase in the usage of our digital channels during the ECQ, particularly the BPI online platform and GCash. We envision this level of adoption to continue even after the ECQ,” Zobel said during the annual stockholders’ meeting of Ayala Corporation on Friday, April 24.

“Within two months after the lockdown is lifted, we will closely monitor consumer behavior; market, industry, and regulatory shifts; supply chain situations; and how the overall economy will restart,” he added. (READ: TikTok, vitamins, workout: Search topics that have spiked during the PH lockdown)

As BPI looks into taking its digital push further, it also faces a jump in expenses on loan loss provisioning or expenses for uncollected loan payments, with levels that could reach highs not seen since the Asian financial crisis.

For the 1st quarter of 2020, BPI booked P4.23 billion in provisions for loan losses, as consumers and businesses suffer the pandemic’s economic impact. This provision is 2.4 times more than the P1.8-billion buffer set aside during the same period in 2019.

The higher provision trimmed BPI’s net income to P6.39 billion, 5% lower than the P6.72 billion registered in the same period last year.

While the bottom line was affected, the top line or revenues increased by 10% to P25.26 billion.

BPI president Cezar Consing noted that banks and the economy overall are much better now as compared to the 1990s when the financial crisis broke.

“I think that the banking system, in general, is ready,” Consing said. 

Operating expenses for the 1st quarter totaled P12.53 billion, 3.8% higher year-on-year.

Total loans as of March 31 reached P1.45 trillion, 7.3% higher, with growth recorded in microfinance at 66.6%. – Rappler.com 

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.