Banco de Oro sees P10.5 B profit this year

MANILA, Philippines – The country’s largest lender, Banco de Oro Unibank, expects its net profit this year to hit a new record high of P10.5 billion, about 19 percent higher than in 2010, on the back of higher interest and fee-based earnings.

BDO also expects to launch in a few weeks a P3 billion to P5 billion offering of subordinated notes qualifying as tier-2 capital, BDO president Nestor Tan said. This is the first tranche of a P15-billion tier-2 or supplementary capital offering planned by the bank over a 12-month period.

Foreign banks Deutsche Bank and HSBC have been mandated to arrange the first tranche of this offering of 10-year subordinated notes.

In a press briefing ahead of the bank’s annual stockholders meeting on Friday, Tan said a diversified and sustainable income stream should fuel the bank’s growth this year coming from a good year in 2010. He said there would he sustained growth in net interest and fee-based income which should offset the expected decline in trading gains.

Tan said loan growth this year would likely be “moderate” or at low single-digit to teen levels. “There’s sustained growth in net interest income but I would temper that because [while] volume is coming in, this is offset by margin pressures,” he said, adding that there would likely be a slight deterioration in margins due to stiffer competition in the banking industry.

BDO’s net interest income is seen expanding by 14 percent to P39 billion this year from a year ago while non-interest income is projected to grow at a modest pace of 1 percent to P18.1 billion this year.

Provisioning this year is budgeted to decline by 24 percent to P5.1 billion as provisioning requirements “normalize,” he said.