BPI loan book growing faster than projected

Ayala-led Bank of the Philippine Islands is expanding its loan book at a faster pace than projected so far this year, building its core business while reviewing financial footing before any active pursuit of merger and acquisition opportunities.

In a chance interview at the sidelines of the Chamber of Thrift Banks’ annual convention on Wednesday, BPI president Aurelio Montinola III said the first quarter had so far been “good” because loan levels were holding up. Loan growth in the first quarter was trending at 16 percent versus the bank’s whole-year target of 12-15 percent, the banker said.

As the banking industry typically generates more than 60 percent of operating income from net interest earnings from lending, loan growth is an indicator closely watched by bankers and banking analysts.

Based on market consensus expectations, BPI will grow its net profit this year by at least 9 percent over last year’s record of P12.8 billion.

On stock market speculation that it is on the prowl for a new M&A opportunity, Montinola said BPI would like to “survey first” its first-quarter results ahead of the bank’s annual stockholders’ meeting in April.

As to whether BPI was planning to beef up tier 1 capital ahead of tighter capital adequacy ratio (CAR) regulations under Basel 3, Montinola said those things were always “under review” but suggested that the bank’s CAR was still comfortable at current levels.

BPI’s CAR to risk assets currently ranges from 14 to 15 percent, about 13 percentage of which consisted of core or tier 1 capital.

Montinola said the bank aimed to keep a high level of CAR and return on equity (ROE). He said BPI would like to maintain its ROE at 15 percent.

“But we also know that the Basel 3 will come in, so we’re running our numbers. We’re projecting 12 percent (loan) growth for the next few years,” Montinola said. “It (CAR) still looks OK.”

Universal and commercial banks are required to adopt by Jan. 1, 2014, the capital adequacy standards under Basel 3, which introduces a complex package of reforms designed to improve the ability of bank capital to absorb losses, extend the coverage of financial risks and have stronger firewalls against periods of stress.