Business and Economy
BDO increases provisioning due to pandemic, posts lower Q1 income
In the first quarter of the year, BDO registered a PHP8.8 billion net income, 10 percent lower than the PHP9.
8 billion print they registered in the same period last year. (File Photo by Hans Olav Lien/Wikimedia Commons, CC BY-SA 3.0)
MANILA – The Sy-led BDO Unibank has increased its provisioning for this year in anticipation of higher credit costs vis-à-vis the impact of the pandemic on their operations.
BDO president and chief executive officer Nestor V.
Tan, during the bank’s virtual annual stockholders meeting on Tuesday, said they increased the PHP2.3 billion provisioning set aside in the first quarter of this year by PHP20 billion to bring the total to PHP22.3 billion.
“With these provisions, together with our excess provisions that we have already booked, we are already allocating a total of 170 basis points in anticipated credit cost for the effects of the pandemic,” he said.
Tan said the amount they set aside for provisioning “is a conservative estimate of probable losses as a result of a comprehensive review of our portfolio.
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“It is anticipatory in nature. We are not yet experiencing losses,” he said, noting that “the bank’s capital will not be impaired and that the bank’s capital adequacy ratio is expected to remain stable.”
In the first quarter of the year, BDO registered a PHP8.8 billion net income, 10 percent lower than the PHP9.8 billion print they registered in the same period last year.
“Capital market conditions impact investment portfolio and drag the bottom line,” Tan said, citing the impact of the Taal Volcano eruption, the coronavirus disease 2019 (Covid-19) health crisis, and the enhanced community quarantine (ECQ) implemented in mainland Luzon since mid-March until mid-May and extended until May 30 for Metro Manila to address the rise in the number of infections.
Tan said 2020 is going to be a challenging year as the economy is expected to post a contraction due in part to the measures being implemented to address the pandemic.
He said loan growth is expected to be lower this year because of the difficult operating environment.
“Among the emerging risks is the potential impact on asset quality. We anticipate an increase in loan defaults due to the economic fallout from ECQ,” Tan said.
He, however, said the government’s stimulus package is seen to counter the economic effects of the programs to address Covid-19.
