April 28, 2015

BDO nets P6.1b in 1Q15

In a press statement, BDO Unibank (BDO) said its net income grew 12% YoY in 1Q15 to P6.1b. This was driven by the 9% YoY growth in net interest income to P13.3b that was supported by the 15% increase in loans to P1.1t. Low-cost deposits also grew 17% YoY, outpacing the 12% growth of total deposits to P1.5t. Fee income grew by about 10% P4.3b while income from treasury-related activities came in at P3.4b (or 60% of our full-year forecast).

Meanwhile, operating expenses increased 12%, resulting in pre-provision operating profit (PPOP) of P8.9b (+19% YoY). The bank set aside P1.2b in provisions for 1Q15, a slight drop vs. the same period last year amid better asset quality. NPL ratio came in at 1.3%, lower than last year’s 1.5%, while NPL cover came in at 192%, higher than last year’s 175%. The bank’s capital adequacy ratio was at 14% while common equity Tier 1 ratio was at 11.9% as of end-1Q15.

Our take: BDO’s 1Q15 earnings accounted for 23% of our 2015E net income consensus forecast. While trading income came in better than expected, we believe that the sustained growth in core earnings would have also meant higher effective income tax rate thus the bottomline grew by only 12% vs. the 19% YoY growth of PPOP. This may partly explain why the slight underperformance in earnings. Lastly, loan growth came in at 15%, in line with the bank’s expectations.

The moderation of loan growth to this level should put less pressure on BDO’s capital ratios and may decrease the urgency of any further capital-raising in the near-term. We will review our numbers upon the release of detailed financials. – WealthSec