Banco de Oro Unibank (BDO) reported a net loss of P1.3 billion in the third quarter, its first quarterly loss in many years, primarily due to provisions for its exposure to the bankrupt US investment bank Lehman Brothers.

For the January-September period, the country?s second-largest bank in assets dropped 78 percent to P1.06 billion from P4.88 billion in the same period last year.

BDO shares tumbled 23.73 percent to close at P22.50 on the Philippine Stock Exchange.

?The declaration of bankruptcy by Lehman Brothers Holdings Inc. caused turbulence in the global financial markets, resulting in substantial markdowns in banks? securities portfolios and the booking of extraordinary provisions for impaired assets,? BDO said in a statement.

Trading and foreign exchange gains fell 69 percent to P1.13 billion as the global financial turmoil led to mark-to-market losses on the bank?s investment portfolio. BDO also increased provisions by 20 percent to P4.28 billion, including extraordinary provisions for its exposure to Lehman Brothers.

BDO is among the seven banks in the Philippines with exposure to Lehman. Its exposure amounted to $134 million.

The bank, controlled by the mall magnate Henry Sy, said its core business remained on track, with loans, deposits and service-based fee income continuing to show solid growth.

It said net interest income grew five percent year-on-year to P16.97 billion, citing robust growth in loans and low-cost deposits. It said gross customer loans expanded 35 percent to P364.6 billion with sustained demand from the top-tier corporate and consumer lending segments, and deposits rose 32 percent to P577.06 billion.

Service charges and fees contracted 15 percent to P5.84 billion in the absence of significant one-time advisory fees booked in 2007, it said.

BDO said strong volume growth was recorded in its trust banking, transaction banking, remittance, credit card, cash management and bancassurance operations. It said these contributed to an 18-percent increase in ?miscellaneous? income to P2.7 billion.

In the trust business, assets under management reached P319.6 billion, up P67 billion or 23 percent from September last year.

?Despite recent developments, BDO?s capital and balance sheet remain strong, as Philippine banks are relatively unaffected by the ongoing volatility in the overseas financial markets,? the bank said.

It reported total assets of P743.49 billion at end-September, up 23 percent from a year earlier. It was capital was at P56.02 billion, boosted by proceeds of a P5-billion preferred share issue in September to augment its tier-1 capital and support business expansion. It said its capital adequacy ratio stood at 13.7 percent as of end-September.

BDO has a nationwide network of 650 branches and more than 1,200 ATMs. With editing by INQUIRER.net