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BY Maricel E. Burgonio
Reporter
BANCO de Oro Unibank Inc. (BDO)
is likely to post double-digit profit
growth this year despite rising interest rates and operating costs.
In a press briefing, Nestor V.
Tan, BDO president, said the bank is expected to increase its net
income by 13 percent to P7.407 billion this year from P6.570 billion
last year.
Tan said BDO’s strong loans and
deposits growth will boost net interest income as well as fee-based
income. The lender however expects a significant decline in trading
gains and an increase in operating expenses this year.
It said net interest income is
projected to grow 27 percent to P27.270 billion this year, supported
by the expected P44.759- billion interest income. Trading and
foreign exchange income however is projected to decline by 41
percent this year to P2.751 billion from P4.653 billion last year.
The bank’s operating expense is
estimated to increase by16 percent to P28.773 billion this year.
“The integration process will
continue in 2008 and will affect [our] earnings,” Tan said, adding
the lender will complete its integration with Equitable-PCI Bank (EPCIB)
in June this year and expects to increase its branch network to 614
by the end of this month.
Besides EPCIB, BDO acquired
American Express Savings Bank and American Express Philippines’
dollar charge card portfolio.
BDO expects the country’s
strong macroeconomic fundamentals to remain this year but
anticipates slower economic growth of 5.8 percent this year from a
three-decade high of 7.3 percent last year. Strong macroeconomic
fundamentals spurred consumer spending and business expansion last
year.
Despite strong macroeconomic
fundamentals, Tan sees a challenging operating environment this year
with rising interest rates, higher inflation due to accelerating
energy and food prices, and financial market volatility.
The country’s second-largest
lender also anticipates more intense competition, as banks go after
the same prime borrowers amid a liquid market. The US economic
outlook will continue to create uncertainty in the local market,
which is reflected in the lower trading gains in the early part of
the year, Tan said.
“We expect intense competition
as everybody will focus on fundamentals and more consolidation. The
high trading environment will not repeat itself. It’s a structural
thing. We don’t believe high trading gains will continue because
of a high interest rate environment,” he said.
The bank incurred a 24-percent
drop in its net income to P1.34 billion in the first quarter this
year, compared with P1.77 billion in the same period last year.
“The good news is the mix of
earnings will be sustainable. There’s a room for us to grow in net
interest income. Increase in interest rates will not have much
impact on lending, but if interest rates increased continuously, we
would have difficulty. We believe the economy will support [the
industry],” Tan said.
BDO’s net loans would likely
rise by 16 percent to P325.342 billion this year, he said, adding,
“We expect good growth in lending.”
Total deposits could grow 27
percent to P566.385 billion, the executive said.
“After we normalized the
numbers, things will be better in sustainable numbers,” he added.
BDO plans to expand its capital
by boosting its lending business this year, which will be supported
through the issuance of P5 billion in Tier-2 capital. Last year, the
bank issued P10 billion of the same.
The bank will sell its non-core
business particularly its real-estate properties, as it focuses on
consumer lending. Its inventory of real and other properties
acquired stood at between P18 billion and P19 billion. BDO’s total
resources reached P627.255 billion last year, but this is seen to
dip to P627.096 billion this year.
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