The country’s leading lender, Banco de Oro Unibank, posted a record-high net profit of P18.2 billion in the first nine months, up by 73 percent year-on-year, given a double-digit rise in interest earnings, fee-based and treasury gains.
This puts the banking arm of tycoon Henry Sy “on track” and “very optimistic” to hit its P20.4-billion profit guidance for 2013, BDO president Nestor Tan said.
“Our core businesses continued to deliver very good numbers despite pressures from excess system liquidity and capital market volatility,” Tan said.
Net interest income rose by 16 percent year-on-year to P31 billion, supported by the growth in loan book. Gross customer loans expanded by 17 percent to P846.4 billion as the bank cited a “broad-based” expansion across key markets.
Non-interest earnings likewise went up by 36 percent to P25.8 billion from a year ago on a double-digit expansion in both fee-based and trading and foreign exchange gains.
The increase in BDO’s earning assets was supported by a 40-percent expansion in deposit base, which stood at P1.2 trillion as of the end of September. The strong growth in deposits was attributed by the bank to the steady expansion of low-cost deposits and the inflow of maturing special deposit account (SDA) funds from the Bangko Sentral ng Pilipinas (BSP).
Since July, the BSP has been gradually phasing out the SDA facility. The BSP facility will be closed to individual placements by the end of November.
The growth in both loans and deposits contributed to the expansion of BDO’s net interest income, considered as a more durable source of income compared to the volatile treasury earnings.
On the expenditure side, BDO’s operating expense remained steady at 8 percent.
In terms of asset quality, the ratio of BDO’s soured loans to its total loan portfolio, as measured by gross non-performing loan (NPL) ratio, fell to 2.4 percent as of the end of September. Citing its conservative provisioning stance, the bank also set aside a provision of P5.1 billion to lift its NPL coverage ratio to 152 percent. This means that for every peso of non-performing loans, the bank has set aside P1.52 as loan-loss buffer.
As of the end of September, BDO’s capital adequacy ratio (CAR) and Tier 1 capital ratio were at 17.1 percent and 15.3 percent, respectively, well above the regulatory minimum levels. The bank said its capital base was “comfortably exceeding the Basel III requirements set for implementation in January 2014.”
Universal and commercial banks are required by the BSP to adopt by Jan. 1, 2014 the capital adequacy standards under Basel 3, which introduces a complex package of reforms designed to improve the ability of banks to absorb losses, extend the coverage of financial risks and have stronger firewalls against periods of stress.
BDO is the country’s largest bank in terms of assets, loans, deposits, capital and trust funds under management based on published statements of condition as of end-June. It also has one of the largest distribution networks, with more than 790 operating branches and about 2,100 ATMs nationwide. It likewise has a branch in Hong Kong and 13 overseas remittance and representative offices in Asia, Europe, North America and the Middle East.