banks in the Philippines

BDO hits P16.5 billion in Q1 profits, up by 41%

Lance Spencer Yu

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BDO hits P16.5 billion in Q1 profits, up by 41%
The Philippines' largest bank is also investing in its cybersecurity and information technology infrastructure in the hopes of creating better digital products

MANILA, Philippines – BDO Unibank posted a net income of P16.5 billion for the first quarter of 2023, 41% higher than its profits for the same period last year. But with elevated inflation and interest rates, the universal bank cautioned that it isn’t quite out of the woods yet.

“We’re seeing positive signs. However, we’re not yet sure we’re out of the woods because a lot of the factors affecting us are not within our control,” BDO president and chief executive officer Nestor Tan said, alluding to volatility caused by geopolitical tensions, supply chain disruptions, and higher interest rates.

Still, for the first quarter of 2023, BDO’s net interest income grew to P43.4 billion, up 28% year-on-year. Net interest margin also improved to 4.58% due to a rising interest rate environment.

Looking at the bank’s balance sheet, gross customer loans grew by 8% to P2.6 trillion while total deposits rose by 14% to P3.2 trillion. BDO also maintained a liquidity ratio of 35% to mitigate against unforeseen events.

“Look at 2022. We opened up with exuberance, and then after five weeks, we went into lockdown. That’s why I’m always cautious about even our own approach to the business,” Tan told media ahead of the bank’s annual stockholders’ meeting on Wednesday, April 19.

Despite the caution, the country’s largest bank gave assurances that its asset quality remained stable, with non-performing loans (NPL) “under control” and with “more than adequate” provisions and capital cushion to cover any potential losses.

The bank’s NPL ratio improved to 1.98% from 2.72% a year ago, while its NPL coverage increased to 170% from 120%.

For the rest of 2023, Tan said loan growth could range from 8% to 10% and that net income margins would remain stable or improve further. Fee income is also expected to continue growing.

BDO also released a new dividend policy for the year, increasing regular quarterly cash dividends to P0.75 per common share starting in the first quarter.

Digital initiatives

The Sy-led bank plans to upgrade its digital capabilities, with investments in infrastructure, cybersecurity, and operating processes nearly complete.

“Our digital approach is focused on three investments. Number one is cybersecurity. Number two is operating infrastructure, and a subset of that is the way we use technology in our processes. And number three is product capability,” Tan said.

Tan emphasized that the bank is focusing on upgrading its cybersecurity and information technology infrastructure.

“Cybersecurity, it’s about resiliency. We will get hit, there’s no question. It’s a question of how fast you recover, and how fast you minimize it. IT infrastructure is how well does your infrastructure work so you can be nimble and agile, adding capacity. We’re moving now to a cloud-based API plug-and-play environment, which will allow us to do that,” the CEO said.

“The products will follow after we have the infrastructure in place,” he added. “We believe if we have the fundamentals right, the products will be better.”

Meanwhile, Tan is not too keen on the recent proposal of the Bangko Sentral ng Pilipinas (BSP) to remove fees on small transactions, believing that banks should be allowed to set transaction fees as they see fit.

“If we want to give it for free, let us give it for free. If others want to charge, let them charge. But if you’re saying for the common good, there should be no fee, at the end of the day, the question is, who will pay for it? If you’re a shareholder of BDO, do you want to pay for somebody else’s payment?” he said.

BSP Governor Felipe Medalla earlier called on banks and financial institutions to make small transactions free of charge to allow more Filipinos to transact digitally. He hinted that the central bank could ease the reserve requirement ratio for banks which would eliminate transaction fees. – 

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Lance Spencer Yu

Lance Spencer Yu is a multimedia reporter who covers the transportation, tourism, infrastructure, finance, agriculture, and corporate sectors, as well as macroeconomic issues.