Sy-led BDO braces for surge in bad loans amid pandemic

The current capital levels of BDO Unibank Inc. can withstand bad loans it expects to increase this year as the effects of an economic recession continues to reverberate, a person familiar with the bank’s operations told the BusinessMirror.

The bank has earmarked provisions for the potential surge of nonperforming loans (NPLs)—borrowings left unpaid after the due date—this year.

“We have already booked upfront provisions to cover for pandemic-induced delinquencies, while our internal capital generation is more than sufficient to fund near-term asset growth,” the person told the BusinessMirror.

“This should keep our capital position comfortably above regulatory requirements.”

Shares in BDO climbed by 7.11 percent, or P7.10, to close at P107 amid the 1.02-percent uptick for the benchmark index on Thursday.

According to latest data, the bank’s gross NPL ratio stood at 1.97 percent as of end-September last year, with the loan portfolio reaching P2.2 trillion on the back of its corporate and consumer segments.

Total provisions for potential credit losses in January to September last year amounted to P23.8 billion. NPL coverage ratio was at 138 percent in the same period.

BDO has capital adequacy ratio and common equity tier 1 ratio of 14.3 percent and 13.2 percent, respectively, according to the latest report. These figures are above the regulatory minimum requirements.

Capitalization in January to September 2020 reached P378.6 billion, which is nearly 5 percent higher than P362.35 billion in 2019 for the same period.

BDO saw its net income during the period drop by 48 percent to P16.6 billion as it shored up provisions for potential credit loss.

The person familiar with the bank’s finances declined to provide the numbers related to the financial intermediary’s 2020 and 2021 income forecast.

Like other banks, BDO is expected to beef up its digital platforms as mobility, though eased, remains restricted in some areas and sub-sectors.

The person familiar with the bank’s operations said the bank is addressing capacity issues in its online platforms having received numerous complaints last year. Some customers reported experiencing difficulty accessing their accounts or accomplishing transactions online.

The person said the bank aims to streamline bank operations through re-engineering of business processes, including “robotic process automation.”

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Article and Photo originally posted by Business Mirror last January 8, 2021 and written by Tyrone Jasper C. Piad. Minor edits have been made by REBPH to cater to its own readers.