While BDO Unibank Inc. increased provisions for bad debts substantially, the bank reiterated that it was not incurring losses and its capitalization has remained robust.
The Sy-led bank stressed that hiking allowance for bad debts was in anticipation of potential losses from loan portfolio amid the coronavirus pandemic.
“This move is anticipatory in nature. We are not yet experiencing losses,” BDO President and CEO Nestor V. Tan said in a recent stockholders’ meeting.
“The additional provisions are meant to safeguard our balance sheet and will not impair our capital which is strong enough to withstand near-term shocks.”
BDO earlier mentioned it was prudent to allocate P20 billion in provisions, in addition to over P2 billion earmarked during the first quarter.
With increased allowance, the listed bank said it was expecting its nonperforming loans coverage ratio to remain robust. BDO set aside 170 basis points in anticipated credit costs, but noted that actual write-offs or losses are likely to be much less.
Tan underscored that the bank’s capital position was still strong despite heightened provisions, adding that BDO was still declaring regular quarterly dividends.
BDO earlier this month approved the declaration of regular cash dividends on common shares amounting to 30 centavos apiece for the second quarter.
The bank’s total capital base rose to P372.2 billion in the first quarter, booking capital adequacy ratio of 13.8 percent and common equity tier 1 of 12.7 percent.
The Sy-led bank saw its first quarter earnings drop by 10.20 percent to P8.8 billion from P9.8 billion in the same period last year due to trading and foreign exchange losses.
In the same meeting, the BDO chief said the bank has been scaling down branch operations and running with a skeletal work force amid lockdown measures and physical distancing.
Shares in BDO slid by P2.30, or 2.25 percent, to end at P100.10 each amid the 0.004-percent growth for the benchmark index on Wednesday.