BDO prexy Nestor Tan
BDO Unibank sees net profit this year hitting a record-high of P31 billion, higher by 10.3 percent than the level last year, to be driven by sustained lending expansion and steady growth in fee-based income.
For the first quarter, BDO booked P5.9 billion in net profit or 19 percent of the full-year guidance. This was flat from year-ago level but excluding mark-to-market revaluation of the investment portfolio of insurance arm BDO Life and the ongoing restructuring and expansion costs at rural bank arm One Network Bank (ONB), first quarter net income would have risen by 16 percent.
Net interest income grew by 20 percent to P22.2 billion due to the 18-percent expansion in loan book to P1.8 trillion and the 16-percent hike in total deposits to P2.2 trillion. Low-cost deposits contributed the bulk of total deposit growth.
In a briefing ahead of BDO’s stockholders meeting, bank president Nestor Tan said loan volume would sustain a mid-teen pace of growth this year, with the government’s massive infrastructure-building providing some upside.
The slight rise in interest rate is seen working in its favor, resulting in some improvement in margins.
Profits this year will be driven by core businesses but Tan said BDO would also invest in three new growth areas: rural bank ONB, insurance arm BDO Life and the wealth management business. Capital spending this year is seen at P9 billion.
BDO expects securities trading and foreign exchange gains to be muted this year amid heightened volatility in local and international markets.
It expects low-cost deposits to continue growing albeit at a slower pace. Yesterday, the bank announced a new offering of P5 billion worth of long-term negotiable certificates of deposits (LTNCDs) with a tenor of 5.5 years at an indicative pricing of 4.5 percent a year. Proceeds will lengthen the maturity of funding sources and support business expansion plans.
On prospective acquisitions, Tan said BDO would be “selective going forward because organic growth is strong for us.”
After a series of acquisitions starting in the 2000s that eventually built BDO into the country’s largest bank with assets of over P2 trillion, Tan suggested that merger and acquisition (M&A) opportunities that would bring more value to BDO had become more scarce.
“M&A is a question of value. When you have most of the products that you need, when you have the scale and when you have the ability to expand the way that you have been expanding, the business case for doing it by acquisition shrinks,” Tan said.
With a loan book of about P1.8 trillion, which is currently growing by 18 percent, Tan noted that BDO could organically grow its lending business by P300 billion to P350 billion a year.
The bank expects to open 50 to 70 new BDO and ONB branches this year to support organic growth. To date, it has over 1,200 branches and over 4,000 automated teller machines nationwide.