MANILA, Philippines -The country’s largest bank, Banco de Oro Unibank, aims to grow its net profit this year by 19 percent to P12.5 billion on the back of a double-digit growth in net interest income amid a favorable macroeconomic environment.
In the first quarter, the bank grew its unaudited net profit by 15 percent to P2.8 billion from a year ago, BDO president Nestor Tan said in a press briefing on Friday.
This year, part of BDO’s thrust is to beef up core or Tier 1 capital through a $1-billion stock rights offering, which is targeted to be completed by June or July. The bank has mandated foreign banks Citi, Deutsche and JP Morgan as its main advisers for this stock rights offering, which will make it the highest capitalized bank in the country.
Tan said this rights offering would help the bank prepare for sustained loan growth in the years ahead and to meet the capital adequacy ratio (CAR) requirements under Basel 3, which the Bangko Sentral ng Pilipinas wants universal and commercial banks to adopt by Jan. 1, 2014. Basel 3 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’s planned capital-raising is seen to boost its CAR at 12.5 percent from 10 percent and double its Tier 1 CAR ratio to 10 percent from 5 percent effective January 2014 even if it were to expand its risk assets over the next two years.
“Moving forward, we are optimistic about the country’s prospects. We recently announced a $1-billion capital-raising program intended to support the growth of the bank amid the positive sentiments on the economy,” BDO chair Teresita Sy.
“At the same time, the program will strengthen the bank’s capital position ahead of the more stringent requirements under the Basel 3,” Sy said.
BDO has assumed that loan growth would be sustained at “low to mid-teen” level this year. This year, Tan said the operating environment would continue to be supported by sustained overseas Filipino worker and business process outsourcing flows, easing inflation, public-private partnership (PPP) expectations and potential credit rating upgrade.
“But we’re also unsure of what will happen in Europe,” Tan said.
In terms of loan growth, Tan said the consumer segment would continue to post the sharpest growth but once PPP kicks in, he said this would easily outpace all other sectors.
Tan said BDO’s margin pressures would likely ease this year due to improving funding mix while fee-based income would continue growing. The bank expects net interest income this year to expand by 15 percent to P38.7 billion.
In line with expectations that provisioning will normalize, provisions are seen declining by 23 percent to P4.8 billion this year.
In the first quarter alone, gross customer loans continued to expand by 23 percent year-on-year while total deposits increased by 14 percent. Net interest income was flat as interest rates remained relatively low, although gross interest income from loans and receivables expanded by 14 percent. Non-interest income grew by 8 percent year-on-year primarily from trading and fees.