Saturday, 30 May 2009

Philippines' BDO sees 150% increase in net income this year

Gerard S. dela Peña
BusinessWorld
http://www.bworldonline.com/BW053009/content.php?id=021

Banco de Oro Unibank, Inc. sees a rebound in its net profit this year despite the economy likely falling into recession.

At its annual stockholders meeting yesterday, the bank, the country’s largest in terms of assets, said it expects a net income of P5.5 billion this year, 150% higher than in the previous year.

Its 2008 bottom line of P2.2 billion was 66% less than its 2007 net income of P6.6 billion. Last year, it incurred losses from securities trading. "Other" income and fees and charges also fell, even while interest income, trust fees and gains from foreign exchange trading rose.

"This year will be tough but we believe that basic commercial banking, which is lending and deposit-taking, will continue to be strong. There will be opportunities across the spectrum from large-ticket project financing to middle-market and consumer [lending]," BDO President Nestor V. Tan told a briefing.

He said it is too early to tell if near-recession conditions will have an adverse impact on banks’ lending business.

BDO sees net interest income rising by 42% to P32.78 billion from P23.04 billion last year.

Fee income is expected to grow by about 8% to P9.26 billion, and gains from securities and foreign exchange trading, by 42% to P2.47 billion.

"Remittances, trust and investment management, as well as wealth management will continue to be very strong," Mr. Tan said.

Operating expenses are expected to reach P33.42 billion, 20% higher compared to a year ago, while provisions for losses are projected to reach P5.26 billion, slightly higher than last year’s P5.23 billion.

Mr. Tan also said the bank’s total resources are projected to grow by 19% to P950.82 billion from P802.03 billion in end-2008.

This will be buoyed by a 25% increase in its reserves and investments, as well as a 15% growth in gross loans.

Mr. Tan said this will come from organic growth since its acquisition of GE Money Bank is "insignificant."

The bank announced on Thursday it signed a deal with GE Capital, the financial services arm of American conglomerate General Electric Co. (GE), for the takeover of the latter’s Philippine unit.

This followed BDO’s merger with Equitable PCI Bank and the acquisition of the Philippine unit of American Express in 2007.

Mr. Tan also said the bank is not keen on raising fresh capital in the near future, saying there is no urgency to do so.

The bank had planned to raise P13 billion from issuance of Tier 2 capital and a rights offering this year, and has already raised P3 billion through Tier 2 debt.

Mr. Tan said the bank will no longer push through with the rights offer.

"The plan to raise more capital was meant for a major acquisition. But since the acquisition of Philamlife is no longer on the horizon, then there is no urgency to raise capital," he said.

BDO had bid, together with Italian insurer Assicurazioni Generali, for the Philippine American Life and General Insurance Company in February but this was rejected, along with other bids, for being too low. The insurer’s mother company, the American International Group, Inc., thereafter decided not to sell Philamlife anymore.

BDO had consolidated assets totaling P801.05 billion as of the first quarter. It rose to P33 per share Friday from P32.50 on Thursday.

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