BDO sees loan book growing by 8-10% this year

BDO UNIBANK, Inc. sees its loan portfolio growing by 8-10% this year amid expectations of robust economic growth and strong private consumption.

“On the positive side, there’s strong growth in the economy. There’s momentum coming from last year. Mobility is helping. Balance sheets are strong, so private consumption is strong, but this is something we have to watch out for: investments seem to be lagging,” BDO President and Chief Executive Officer Nestor V. Tan said at a briefing on Wednesday.

“People are not yet investing because of uncertainty and we have to still cope with interest rates and inflation. On the inflation and rate side, it went up but we’re seeing signs that it might stabilize,” Mr. Tan said.

The Philippine economy grew by 7.6% last year, the fastest since the 8.8% print in 1976.

Mr. Tan said BDO’s loans may expand by 8-10% this year amid expectations of strong demand for credit.

“You have to make sure that you go after loan growth that you’re comfortable with. But so far, the first quarter seems stable. Usually, the first quarter for banks is weaker, if you look at it historically, coming after the Christmas season,” he said.

BDO’s gross customer loans increased by 8% year on year to P2.6 trillion in the first quarter.

This contributed to its improved first-quarter earnings performance, as the bank saw its net income rise by 40.44% to P16.528 billion amid growth across its core businesses.

“We expect business performance to be sustained. We expect resilience in our earnings. I think we have the right franchise and the right balance sheet to generate income that will allow us to fund our growth. Basically, we are where we want to be,” Mr. Tan said.

Fee income is expected to be steady, and more contributions from its wealth management business could also prove a boost, the official said. The bank also expects its net interest margin to be stable and its low-cost deposits to continue growing amid increased business activity.

“Asset quality indicators are improving, so hopefully, [there will be] no surprises. That’s also the reason why we’re being careful, because as you can see, we’re concerned about collateral damage from rising interest rates and rising inflation,” Mr. Tan said.

“Given that NPLs (nonperforming loans) have been stabilizing, we still maintained provisioning because we’re now planning for the next economic cycle,” he added.

He noted that the country is also subject to risks from the outside, such as geopolitical tensions and rising interest rates in advanced economies.

“We’re seeing positive signs. However, we’re not out of the woods because the factors that are affecting us are not within our control… If the economy ticks back and we’re not ready, then we will have inflation that’s driven by supply. Then we need to look at recovery and investment spending,” Mr. Tan said.

He added that the economy can still absorb further Bangko Sentral ng Pilipinas (BSP) rate hikes, with BDO expecting another 25-basis-point (bp) increase.

“From the BDO perspective, the current book is actually healthy enough that current interest rates, plus probably one or two more hikes, won’t be affected as much,” Mr. Tan said.

“The worry is the growth because you can sustain higher rates if there’s good economic growth. The economy can handle the rates that we have now,” he added.

The BSP has raised benchmark interest rates by 425 bps since May 2022, bringing its policy rate to a near 16-year high of 6.25%.

Its next meeting will be on May 18.

BDO shares went up by P1.60 or 1.25% to close at P129.50 apiece on Wednesday. — A.M.C. Sy