July 30, 2014

BDO nets P11.1b in 1H14

BDO Unibank (BDO, Buy) today disclosed in a press statement that its net income reached P11.1b for 1H14. Although this is 22% lower YoY, this represents a core earnings growth of 19% YoY. The bank’s earnings growth was driven by the 24% rise in net interest income (P24.7b), on the back of 21% expansion in in customer loans (P975b) and 35% growth in deposits (P1.37t). Trading and FX gains reached P4.2b in 1H14, while other non-interest income expanded to P8.3b.

Aside from these, the bank’s NPL ratio stayed low at 1.6% while NPL cover stood at 174%. The bank also maintained a CAR of 14.5% and Common Equity Tier 1 Ratio (CET1) of 13.1%.

Our take: We view BDO’s 1H14 results favorably, as these are tracking its 2014 net income guidance of P22.8b. Further, BDO’s results show that its net interest income growth has started to track loan growth, suggesting that margin compression may have started to abate.

Lastly, BDO has been able to deliver flow-related trading gains while taking advantage of trading opportunities that the market has offered, despite the view that interest rates are bound to start rising.

Considering all these, BDO is on track to exceed last year’s net income of P22.6b, despite the absence of extraordinary trading gains this year.– WealthSec