BDO Unibank profits remain flat at $113.51m in Q1

The bank was hit by PHP1b in trading losses and 19bp increase in average funding costs.

BDO Unibank reported flat earning levels in Q1 at $113.51m (PHP5.9b), according to Maybank Kim Eng, as the bank was hit by $19.3m (PHP1b) in trading losses and an estimated 19bp increase in average funding costs. 

Loan growth, however, clocked in at a healthy 18% and forex gains of PHP1b partially mitigated the negative impact to the bank’s profits. 

Net interest margin gained 10bps YoY to 3.3% but was still down 14bps QoQ.

“We lower our long-term ROE projection to 12.2% from 12.7% but keep LTG at 7% and COE at 9.95%,” Maybank Kim Eng forecasted as weaker than expected capital markets and treasury operations may pose risks to its growth.

A deterioration in asset quality may also set the grounds for growing provisioning expenses.

Here’s more from Maybank Kim Eng: 

We remove trading-gain assumptions but keep FX gains at PHP3.1b. The faster-than-expected rise in its average cost of funds was attributed to higher time-deposit rates. As the country’s 91-day T-bill rate was nearly up 130bps YoY in the quarter, we increase our funding costs by 5bps to 1.02% (+18bps YoY). We now expect NIM to add 8bps - to 3.5% rather than 13bps. The upshot is an earnings cut of 6% for 2018 to PHP31.2b. This is near guidance of PHP31b, which considers no rate hikes, mid-teens loan growth, trading and FX gains of PHP3-4b, low-to-mid-teens opex growth and credit costs of 40-50bps.