BDO Unibank, Inc. (BDO) delivered an 18 percent hike in earnings of P8.4 billion in 3Q 2018 compared to the same quarter a year ago, on solid expansion from its core lending and deposit-taking, life insurance, and fee-based businesses. 

The 3Q 2018 net result also represented a 15 percent rise quarter-on-quarter (QoQ) from the P7.3 billion profit recorded in 2Q 2018. This brings the Bank’s income for the first nine (9) months of this year to P21.5 billion, higher by six (6) percent from year ago levels.

Excluding the results of BDO Life, which was impacted by PFRS9’s mark to market (MTM) on its investment portfolio and One Network Bank (ONB) with its ongoing investment in the Micro-SME (MSME) lending business, net income year-to-date (YTD) would have registered a 13 percent growth.

Lending operations posted a 17 percent rise in gross customer loans to almost P2.0 trillion, led by the middle-market and consumer segments. Asset growth was funded by the 12 percent increase in total deposits to P2.3 trillion, with low-cost CASA ratio steady at 70 percent. As such, net interest income (NII) expanded by 20 percent to P71.5 billion, with net interest margin (NIM) increasing YoY and QoQ due to upward loan re-pricing, and managed funding costs given a large low-cost CASA base.

Non-interest income rose to P35.8 billion on the back of insurance premiums and fee-based income which grew by 21 percent and seven (7) percent, respectively. However, these growth numbers were offset by the 71 percent decline in trading and forex gains due to the continuing volatility in the capital markets. Overall, gross operating income went up by 13 percent to P107.3 billion.

Operating expenses advanced by 13 per cent to P71.7 billion, on sustained business and branch expansion as well as higher documentary stamp tax (DST) on Time Deposits owing to the implementation of the government’s tax reform program. Volume-related operating expenses, comprising 41 percent of total operating expenses, grew by 14 percent.

The Bank remained prudent as it set aside provisions amounting to P5.5 billion even as gross non-performing loan (NPL) ratio trended lower to 1.1 percent from 1.2 percent in 2Q 2018 and 1.3 percent in 3Q 2017, despite a higher interest rate environment. NPL cover likewise increased to 175 percent from 158 percent in 2Q 2018 and 136 percent in 3Q 2017. 

Total capital increased to P311.8 billion, with both Common Equity Tier 1 (CET1) and Capital Adequacy Ratio (CAR) above regulatory minimum, and remaining steady QoQ at 12.3 percent and 13.9 percent respectively.

With the positive performance in the first nine (9) months this year, the Bank believes that the 2018 full-year earnings guidance of P31 billion remains within reach given the seasonally stronger fourth quarter, combined with encouraging results from the Bank’s strategic initiatives expanding across underserved segments and growth areas.