Having earlier posted an increase in net income last year, BDO Unibank was off to a sluggish start in the first three months this year.
Nestor V. Tan, president and CEO of the largest banking network in the country, reported a P5.5 billion net income for the first quarter of 2016, in contrast to the P6.1 billion from the previous year. Numbers were down 9.8 percent due in part to the 58-percent drop in foreign-exchange gains and trading.
However, Tan clarified the decline was not, in any way, linked to the money-laundering issue involving the Bank of Bangladesh and Rizal Commercial Banking Corp. (RCBC), where billions of funds from the Bangladeshi central bank were funneled to several dummy accounts in the country.
Nevertheless, BDO reported growth in other avenues, such as net interest income by 17 percent, loans by 15 percent, deposits by 14 percent that pushed the lender’s current account/savings account (Casa) 23 percent higher and its fee income by 11 percent. Tan forecasts continued growth this year with net income hitting 26 billion, only a notch higher than the 25 billion the bank generated in 2015. He said because of risks, including weakness of the global economies, election uncertainty and excess liquidity in the market, growth was not likely to be spectacular this year.
While the domestic interest-rate outlook remains uncertain, BDO expects its Casa to ramp up, as they harvest the returns of the 46 new branches established just last year.
The bank also expects greater income made possible in part by overseas Filipino workers (OFWs) and by business-process outsourcing companies (BPO), which are some of the largest contributors to the economic growth of the country.
Tan said he sees a rapid surge of urbanization outside of the National Capital Region.
“We are mostly going to branch our network mostly outside of NCR,” Tan added.
On global bank relations, Tan said BDO was not directly affected by the money-laundering issue hounding a rival lender, but a number of its own counterparty banks reported meeting difficulties: “We have made it a point to oversee additional security measures. We haven’t been affected yet, but we see some of our counterparties having difficulty in getting corresponding banks. Some of our counterparties wanted the assurance that we’re really doing what they know we’re doing. I think more questions or more clarifications at the moment. We don’t know the next stage after
that,” Tan said.
The recently appointed president of the Bankers Association of the Philippines said BDO spends a lot on security: “Security, in general, is embedded in the things we do, so it’s something that we cannot isolate. Security is in everything we do, from structuring to protecting our databases,” he said.
Tan added the incident went wrong because of certain things, mainly poor processing, where the checks and balances were not properly controlled, and poor compliance with the already defined procedure and collusion. He called for the need provide adequate procedures and to strengthen them, setting a zero-percent tolerance for deviation, but warned that overly heavy penalties could also push clients away and put a bigger blow in the financial market.
Tan is also the brother of Lorenzo Tan, president of RCBC, who is currently on leave. The BDO executive told journalists his brother was doing fine.
“He’s okay. Thanks for asking, I’ll let him know,” he said. The bank run under the SM Group of Cos. reported a 10-percent growth in net profit from the previous year.
BDO assets totaled P2.03 trillion in 2015.
It reported net income of P25 billion on the back of a strong 11.5-percent growth in deposits to P1.66 trillion and loans totaling P1.28 trillion, or 17.4 percent more than in 2014. “We remain well-capitalized with an adequate buffer on top of the minimum, which is 10 percent,” Tan said.
The bank’s capital adequacy ratio stood lower to only 13.3 percent, from 14.4 percent the previous year.
BDO previously acquired One Network Bank (ONB), the largest rural bank in the Philippines based in Davao City.
BDO opened 46 branches in 2015 and, with no less than 100 ONB branches in the count, brought the total to 1,028 branches nationwide, widening their reach, making it the largest network in the country.
Other strategic initiatives to accelerate their penetration into new markets include the full control of life insurance Generali Pilipinas Holdings Co. and expanding further into the middle-income segment of the insurance market. It also forged a joint-venture agreement with the financial services group and international investment bank Nomura Holdings Inc.
The bank partnered with Mitsubishi Motors Philippines Corp., Sojitz Corp. and JACCS Co. Ltd. to provide financing services to buyers of Mitsubishi motor vehicles through the bank’s subsidiary, BDO Leasing and Finance. “We are expanding in areas where the margins are defined. We would like to expand faster in those growth areas but we need to optimize, we need to make sure that our resources, not only our capital and our ability to implement properly. We’re doing it to the extent that our organization can handle it,” Tan said.
The bank’s remittance operations also showed a 9-percent increase in remittance volume and 15-percent increase in transaction count. Asia saw the most movement in remittance transactions as the Middle East improved moderately, the two regions making up for the flaccid growth in some countries in Europe.
Tan clarified their international footprint had been primarily driven by the needs of Filipinos, these being trade, inward or outward investments, or catering to the needs of OFWs around the globe. Tan said they only look at partnerships that “make sense” but not at full banking relationships that may not suit the needs of their clients.