By Lee C. Chipongian
The SM Group’s banking arm, BDO Unibank Inc., is projecting a net income of P31 billion for this year, 10 percent more than what they earned in 2017, a record P28.1 billion, backed up by the continued expansion of its core earners such as loans and deposits, and expansion of its insurance, wealth management and SME business.
BDO reported a flat year-on-year first quarter net income growth to P5.9 billion from P58 billion – the small growth partly due to the impact of the TRAIN phase one which increased the documentary stamp tax (DST) and affected the bank’s operational costs.
The January-March net interest income of P22.2 billion was up by 20 percent while non-interest income fell four percent to P10.9 billion.
BDO president and CEO Nestor V. Tan yesterday told reporters that the rising interest rates were favorable to their first quarter numbers but the higher DST affected their costing. Still, the bank’s gross customer loans of P1.8 trillion were up by 18 percent in the first quarter, its deposits of P2.2 trillion were up by 16 percent with CASA (current account and savings account) also up by 13 percent.
Tan said the P31-billion growth estimate is leveraged on key investment strategies, plus continued growth in their core business which are loans and deposits.
“We continue to invest in three areas (to) drive future growth – in our ONB (One Network Bank, its thrift bank unit) our vehicle for SME lending and the underserved, BDO Life which we believe is an integral part of financial planning, and our wealth management,” said Tan. “So basically the core businesses will lift us but we continue to invest in new business.” In the first quarter, excluding the impact of the PFRS 9 or the mark-to-market revaluation of the BDO Life investment portfolio, and the restructuring and expansion of ONB, the bank could have reported a net income growth of 16 percent as of end-March.
There are challenges the bank faces this year, primarily the TRAIN and the DST which Tan said “weighed heavily on our operational costs.”
“We are concerned how it (DST) will affect clients … clearly it will impact different companies and we can’t really do anything at this point,” said Tan.
For this year, Tan said BDO and the rest of the banking sector will be closely watching trends in interest rates. “I’d like to see (that) we keep pace with the rising rates in the US to establish some level of stability in the foreign exchange (market) but I don’t have the perspective that policymakers have,” he added.
BDO raised P60 billion in a 2017 stock rights offering to fund its expanding businesses. Starting yesterday until April 30, it is offering P5 billion worth of long term negotiable certificates of deposits to lengthen the maturity of its funding sources.