BDO projects 43% profit growth in ’13

Banco de Oro Unibank, the country’s biggest bank, expects to breach the P20-billion net profit mark this year, as the hefty trading gains in the first quarter are seen complementing a double-digit rise in interest earnings for the full year.

BDO has set a record-high net profit guidance of P20.4 billion for this year, 43 percent higher than the year-ago level and ahead of the market consensus of about P15.7 billion. Half of its full-year target has been achieved in the first quarter, with its net profit growing by 257 percent year-on-year to P10 billion in the first three months.

The first quarter earnings were boosted by a 130-percent rise in non-interest income to P13.3 billion.

In a briefing, BDO president Nestor Tan said the bank had liquidated some assets in its trading portfolio.

Net interest income likewise grew by 14 percent year-on-year to P9.6 billion in the first quarter.

For the full year, Tan said BDO’s net profit guidance of P20.4 billion would be equal to a return on equity of 13-14 percent. “We have good growth across business lines,” he said.

Net interest margins are seen growing by about 3.4 percent but the increase in volume is seen unlocking more interest earnings for the bank, Tan said. “We’re not dependent on volatile trading income or volatile items,” he said. Fee-based service businesses were seen helping to curb income volatility.

BDO expects its loan book to grow by 10 to 15 percent this year but there may be further growth from the rollout of public-private partnership (PPP) programs, Tan said. “Clearly, the drivers are the consumer and middle market but that’s the base case,” he said.

Because of BDO’s strong first quarter results, there will likely be a favorable “re-rating” on its stocks as the market upgrades earnings expectations, said Asiasec Equities chief strategist Manny Cruz.

BDO is the country’s largest bank in terms of resources and capital. Its total resources hit P1.24 trillion in end 2012 and its capital amounted to P157 billion.

In the meantime, BDO has launched an entry-level American depositary receipt (ADR) program through its appointed depositary Deutsche Bank.

ADR level 1 is a program wherein securities issued in the United States representing BDO common shares can be traded over the counter. “This provides flexibility for US investors to trade BDO common shares in their time zone and settle their transactions locally. It is meant to tap the pool of US ADR investors, enhance visibility and global presence, and diversify and broaden the bank’s shareholder base,” BDO disclosed to the stock exchange.

BDO also said it is terminating its existing Global Depositary Receipts (GDR) program in the London Stock Exchange on May 13.