Loan demand to lift BDO profit

BDO Unibank Inc. will likely continue to expand earnings as anticipated interest rate cuts later this year may drive loan demand, the Maybank Investment Banking Group said.

“We raise our fiscal years 2024 and 2025 net income forecast by 4.1 percent and 5.9 percent, [respectively], to account for higher-than-expected loan yields,” Maybank said last week.

BDO posted a net income of P73.4 billion last year, up 38.5 percent from P57.1 billion the year before, with gross customer loans expanding by an above industry rate of 9.0 percent to P2.85 trillion.

This loan expansion was attributed to 14-percent growth in consumer lending, mostly from credit cards, and an 8.0-percent uptick in loans to corporates and middle market customers.

This year, the Sy-led bank is forecast to book an 11-percent increase in customer loans, “with the majority of the growth in the second half of 2024, when we expect the central bank to start cutting rates.”

The country’s largest bank in terms of asset size would benefit from the monetary policy easing as this could “drive more loan demand,” Maybank said.

In the foreign exchange (forex) business, BDO’s forex gains will likely reach P6.0 billion this year, given the “healthy pipeline of orders expected for the next quarters.”

The cost-to-income ratio is expected to stay between 59 percent and 60 percent as the bank continues to expand in the small- and medium-sized enterprise sector and enhances its information technology systems, Maybank added.

However, potential risks to growth include slower loan expansion, aggressive loan pricing, weaker capital markets and treasury operations, and deterioration in asset quality.

BDO currently has over 1,700 consolidated branches and more than 4,800 automated teller machines nationwide, in addition to 16 international offices in Asia, Europe, North America and the Middle East.

BDO’s share price advanced 2.61 percent to P157 last Friday amid a 1.53-percent rise in the benchmark Philippine Stock Exchange index.