The country’s largest lender Banco de Oro Unibank is in line to meet its P20.4-billion net profit guidance for this year and is preparing for the much-expected industry-wide decline in extraordinary trading gains in 2014.
BDO president Nestor Tan, in an interview with the Inquirer at the sidelines of The Asset forum last week, said nine months into this year, the bank was on track to hit the full-year target.
Asked how the bank was preparing for the expected decline in profit next year given large non-recurring gains seen by the local banking industry this year, Tan said: “I guess it’s just a smart move to prepare for the potential increase in interest rate, which is what we’ve done—we’ve shortened the duration of our portfolio. That should be the right move of the banks.”
Tan acknowledged that 2014 would be a more challenging year for banks in terms of replicating hefty profits this year.
Many analysts are expecting net profits of banks to flatten out from this year’s record-high performance.
“I think we need to do a good job of explaining what we’re doing. This is a one-time thing because there’s an opportunity for us to take advantage of the profits before (interest) rates rise but investors should not expect these to recur regularly. So moving forward, the emphasis should be on recurring income,” Tan said.
But banks are seen growing their recurring earnings by beefing up their loan books. Sustaining a loan growth of “low to mid-teens,” Tan said, would be achievable for the industry on the back of the current domestic growth trajectory.
The Philippine domestic economy expanded by 7.6 percent year-on-year in the first semester, growing as fast as China and marking the fastest pace in Southeast Asia.
“We should expect steady growth similar to what we’ve seen in the last few years. These things are going to continue the way they are,” he said.
BDO earlier set a record-high net profit guidance of P20.4 billion for this year, an increase of 43 percent from last year.
In the first semester, BDO posted a record net profit of P14.1 billion, more than double the level posted in the same period last year, as unprecedented trading gains complemented growth in interest earnings. With earnings for the period already representing more than two-thirds of its P20.4-billion guidance for 2013, the bank is optimistic of hitting its year-end target.