BDO adds ₱20-B loan loss provision
BDO Unibank, Inc. (BDO) has set aside an additional ₱20 billion in upfront provisions, on top of the ₱2.1 billion set aside in the first quarter of 2020, in anticipation of the expected disruptive economic impact of the COVID-19 pandemic and the Enhanced Community Quarantine (ECQ).
In a disclosure to the Philippine Stock Exchange, the Bank said it is expecting delinquencies to increase this year with the disruption in business activities, tightness in corporate liquidity, lower consumption levels, and contraction in gross domestic product by as much as 3.4 percent based on government estimates.
“As such, the Bank is allocating a total of 170bps in anticipated credit costs for the effects of the pandemic. While the Bank expects an increase in the NPL (non-performing loan) ratio, actual writeoffs or losses are seen to be much less,” it noted.
BDO assured that, “Despite the additional provisions, the Bank's capital adequacy ratio is expected to remain stable and the Bank intends to continue with its regular dividend declaration.”
It added that, “The move, following a comprehensive review of its loan portfolio, is anticipatory in nature and is meant to safeguard the Bank's balance sheet.”
The Bank's NPL coverage ratio is currently one of the highest in the industry. With these additional provisions, BDO expects that its coverage ratio will remain strong and among the highest in the industry.
BDO said it is working with various borrowing clients to provide continuing support and find ways to navigate through this difficult operating environment, These anticipatory provisions are not expected to have an impact on the Bank's ability to service clients.
“BDO's balance sheet remains strong, with capital ratios remaining comfortably above regulatory levels despite the higher provisions. The move will riot impair the Bank's capital,” the bank said.