BDO Unibank Inc. reported a modest 2% increase in first-quarter net profit to P20.1 billion, as the lender set aside larger provisions to shield against potential fallout from the ongoing Middle East conflict.
In a disclosure on Friday, the country's largest bank said net interest income rose 11% to P53 billion, driven by a 16% expansion in its loan book to P3.8 trillion. Non-interest income also grew 6% to P19.8 billion, supported by a 4% rise in fee income to P15.5 billion and a 27% surge in income from its insurance business to P2.1 billion. Trading and foreign exchange gains climbed 11% to P1.8 billion.
However, operating expenses increased 6% to P43.4 billion, while provisions for potential credit losses were significantly higher. "Net income was tempered by higher provisions, as the bank is building strong reserves, primarily a pre-emptive measure undertaken in response to evolving geopolitical risk conditions," the company said.
At a press conference ahead of the bank's annual stockholders' meeting, President and CEO Nestor Tan flagged the lack of progress toward resolving the US-Israel war on Iran as a key concern. "Resulting inflation shock may weigh on consumption spending," Tan said. "Corporate capex may be affected as a result of inflation."
Moody's Ratings has warned that an oil price shock could trigger anti-inflation rate hikes, slowing bank lending and straining borrowers’ ability to repay loans. The rating agency expects domestic loan growth to ease to 8-9% this year, down from double-digit rates in previous years.
BDO’s asset quality remained manageable, with non-performing loans accounting for 1.68% of total loans in the first quarter, down from 1.77% a year earlier. Allowances for credit losses covered 131.9% of bad debts, compared with 143.4% a year ago.
On the funding side, total deposits grew 15%, with current and savings account deposits accelerating 7%.