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BDO sees bigger business despite economy woes

Vol. XXI, No. 198-A [ Business World Online ]
Saturday, May 10, 2008 | MANILA, PHILIPPINES

Sy-led Banco de Oro Unibank, Inc. (BDO) said it is expecting substantial growth this year despite a challenging economic environment, eyeing to strengthen its lending activities and fee-based income.

BDO President Nestor V. Tan said the bank expects profits to reach P7.4 billion by yearend, 13% higher than the P6.57-billion net income last year.

"There’s still room for us to grow after the merger," Mr. Tan told a briefing after the bank’s annual stockholders meeting yesterday. He was referring to the merger of Banco de Oro and Equitable PCI Bank last year, which produced the country’s second-biggest lender.

The bank expects a 27% growth in net interest income to P27.27 billion from P21.44 billion last year. He said strong growth in loans and deposits will boost interest earnings.

Fee income was also expected to grow by 15% to P11.05 billion from P9.63 billion. The bank’s trust banking and investments and private banking units, as well as "transaction banking" which generates income from charges and service fees, will be the main contributors to the increase in fee income, Mr. Tan said.

However, this would be offset by a decline in trading gains, expected to dip by 41% to P2.75 billion from P4.65. Mr. Tan said this would be due to rising interest rates in the secondary market.

He also said the bank is expecting competition to be more intense as banks go after the same prime borrowers amid a liquid market, while US economic outlook will continue to create uncertainty and volatility in the local market.

Meanwhile, Mr. Tan said the bank will finish the integration process with Equitable PCI Bank by June.

Since BDO acquired Equitable PCI Bank early last year, it has worked on harmonization of policies, integration of product offerings and systems, rationalization of subsidiaries’ structures, and branch conversion and consolidation, among others.

While the bank wants to consolidate its branch network to 614 by the end of this month from the current 568, it has yet to convert a total of 44 branches of Equitable Savings Bank and another acquisition, American Express Savings Bank. Mr. Tan said remaining integration costs will affect its earnings for 2008.

BDO has also sold shares in non-core businesses such as in Maxicare, Atlas, Crown Equities, Philex and Manila Peninsula, so that it can focus on banking, he said.

The bank is also planning to raise a minimum of P5 billion in lower Tier 2 capital through an offer that will commence on Monday, out of an approved program of P15 billion.

The additional capital-raising activities are being undertaken to support growth and refinance $200 million in existing Tier 2 notes callable by July.

Mr. Tan said this will improve the risk profile of the bank’s balance sheet.

BDO is the second largest lender with assets amounting to P621.3 billion as of end-2007. It was ranked No. 1 in terms of gross customer loans, and No. 3 in terms of deposits and total capital. — Gerard S. de la Peña

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