BDO suffered 79% drop in H1 profit as pandemic bites

BDO Unibank Inc., the country’s largest lender, saw a 78.6-percent year-on-year drop in first-semester net profit as higher provisioning for possible corporate loan delinquencies resulted in a second-quarter net loss.BDO incurred a second-quarter net loss of P4.5 billion, a reversal of the net profit of P10.39 billion in the same period last year, the bank said in a regulatory filing on Monday.As the coronavirus pandemic continues to wreak havoc on the global economy, BDO set aside P22.4 billion worth of loan loss buffer in the first semester, of which P20 billion was made in the second quarter alone. In the second quarter of 2019, BDO booked impairment losses of only P1.7 billion.Without the loss provisions for potential loan defaults, BDO’s operating income grew by 17 percent as core businesses held up well despite the COVID-19 pandemic, BDO said.

“Despite the [second-quarter] loss, results are in line with expectations,” COL Financial head of research April Lee-Tan said, noting that BDO’s second-quarter losses were caused by the 37.4-percent year-on-year drop in fee-based earnings alongside the P20.1-billion provision for the quarter.BDO’s return on equity shrank to 2.27 percent in the first semester compared to 12 percent in the same period last year.“By recognizing the provisions upfront, the bank can now focus on growing its business as restrictions under ECQ/GCQ (enhanced community quarantine/general community quarantine) are gradually relaxed,” BDO told the Philippine Stock Exchange.

BDO’s six-month net interest income went up by 17 percent year-on-year to P66.4 billion, driven by the 11-percent expansion in loan book to P2.3 trillion alongside an increase in net interest margins to 4.36 percent from 3.99 percent a year ago.

On the funding side, deposits rose by 9 percent year-on-year to P2.6 trillion during the semester. This was driven by low-cost deposits, which rose by 19 percent year-on-year and accounted for 77 percent of total.Trading gains went down by 10 percent year-on-year to P1.8 billion due to the volatile market conditions. Foreign exchange gains likewise slid by 62 percent year-on-year to P606 million on lower transaction volumes. INQ