With the P2.1billion provisions booked in the first quarter, BDO’s total loan loss provisions now stand at P22.1 billion.
BDO is bracing for the aftershocks from a global health crisis that has caused near economic standstill.
“The bank is expecting delinquencies to increase this year with the disruption in business activities, tightness in corporate liquidity, lower consumption levels and contraction in GDP by as much as 3.4% based on government estimates. As such, the bank is allocating a total of 170 bps in anticipated credit costs for the effects of the pandemic,” BDO said.
BDO said while it expects an increase in the NPL (non-performing loan) ratio, actual write-offs or losses are seen to be much less.
Despite the additional provisions, BDO’s capital adequacy ratio remains stable. The bank is even pursuing its regular dividend declaration.
With these additional provisions, BDO expects its coverage ratio to remain strong and among the highest in the industry.
A local brokerage house said the additional provisions were necessary given BDO’s low credit cost in the first quarter. Among the banks, BDO’s annualized credit cost was relatively low at 40 bps (vs BPI’s 116 bps and Metrobank’s 138 bps).