BDO Unibank, Inc.’s net income was flat in the second quarter as higher expenses offset increases in both its net interest and non-interest earnings.
The Sy-led bank’s attributable net profit stood at P20.985 billion in the three months ended June, steady from its income in the same period last year, according to its financial statement disclosed to the stock exchange on Monday.
This brought its first-half net income to P40.76 billion, up by 3.12% from P39.52 billion in the comparable year-ago period, “driven by strong performance of its core businesses,” BDO said.
Its first semester performance translated to a return on average common equity of 13.92% and a return on average assets of 1.64%, both down from 15.05% and 1.73%, respectively, in the same period last year, as its net income increased at a slower pace versus its average common equity and average assets.
“Earnings growth was tempered by the continuing investments in market coverage and IT spending for operational efficiency,” BDO said.
“Amid global uncertainties arising from geopolitical tensions and the imposition of US tariffs, the Philippines is expected to remain resilient, supported by its consumer-driven economy and sustained domestic demand. Likewise, the bank remains well-positioned to manage emerging risks and capitalize on opportunities given its robust capital base and diversified business franchise,” it added.
In the second quarter, BDO’s net interest income increased by 8.32% year on year to P50.38 billion from P46.51 billion.
Broken down, interest income rose by 6.2% to P72.26 billion, driven by higher interest earnings from loans and other receivables. This was faster than the 1.63% increase in its interest expense to P21.88 billion.
For the first half, net interest income increased by 7% to P98.134 billion from P91.455 billion amid the expansion of its earning assets.
Net interest margin inched down to 4.3% as of June from 4.34% a year ago amid lower rates due to the central bank’s monetary easing cycle and “competitive market pricing.”
Meanwhile, the bank’s other operating income went up by 9.2% year on year to P19.35 billion in the second quarter from P17.72 billion, driven by higher service charges, fees and commissions, trust fees, and trading gains.
In the first half, its non-interest income jumped by 15% to P37.956 billion on the back of higher fee-based income and earnings from insurance operations.
On the other hand, the bank’s operating expenses rose by 14.28% to P41.5 billion in the three months ended June from P36.32 billion in the same period last year.
This brought its first half expenses to P82.36 billion, up 15% year on year, which it attributed to higher manpower and occupancy costs, among others.
BDO’s gross customer loans climbed by 14% to P3.4 trillion at end-June amid growth across all market segments.
Despite the growth in its loan book, its nonperforming loan (NPL) ratio was at just 1.75%, with NPL coverage at 140%.
“With an expanded loan portfolio, the bank continued its conservative provisioning stance, setting aside P7.2 billion as provision for impairment losses,” it said.
On the funding side, total deposits grew by 8% to P4.03 trillion as of June, with 69% of the total being low-cost current account, savings account or CASA deposits. Demand and time deposits increased by 13% and 11%, respectively.
BDO’s assets expanded by 9% to P5.13 trillion at end-June amid higher customer loans and mainly funded by deposits.
Total equity went up by 12% year on year to P611.18 billion.
The bank’s capital adequacy ratio was at 15.43% as of end-June, up from 14.81% in the same period last year, as the increase in its capital coming from profits outpaced the growth in its risk-weighted assets.
Its liquidity ratio stood at 31.16%, down from 34.28% last year due to faster growth in loans. Interest rate coverage and profit margin also declined to 214.92% and 22.17% from 221.22% and 23.37%, respectively, amid higher funding costs.
BDO’s shares dropped by P3.20 or 2.10% to close at P149 apiece on Monday. — Aaron Michael C. Sy