BDO UNIBANK, Inc. (BDO) swung to a net loss in the second quarter as it hiked loan loss provisions in anticipation of the impact of the coronavirus disease 2019 (COVID-19) pandemic on its businesses.

The bank succumbed to a net loss of P4.502 billion in the second quarter versus the P10.393-billion net profit logged in the comparable year-ago period, its quarterly report filed with the stock exchange on Monday showed.

Net loss attributable to the equity holders of the parent stood at P4.479 billion in the quarter versus the P10.389-billion net profit last year.

Despite this, BDO remained in the black for the first semester, with its net income at P4.3 billion, dropping 78.6% year on year from the P20.1 billion in the same period in 2019.

“Going forward, BDO believes that its solid balance sheet, sustained business growth, and dedicated team effort will allow the bank to weather the COVID-19 crisis and sustain its long-term performance post-pandemic,” the bank said.

BDO’s loan loss provisions ballooned to P20.174 billion in the second quarter from the P1.702 billion recorded a year ago. For the first half, its loan loss provisioning reached P22.43 billion against the P2.988 billion last year.

“By recognizing the provisions upfront, the bank can now focus on growing its business as restrictions under ECQ (enhanced community quarantine) or GCQ (general community quarantine) are gradually relaxed,” BDO said.

Net interest income rose 14.44% to P33.418 billion in the second quarter even as total interest income, mainly on loans, trading and other investment securities, among others, inched down to P40.177 billion from P40.612 billion last year. The bank attributed this to higher margins and growth in its interest-earning assets.

BDO’s net loans and other receivables stood at P2.3 trillion as of June, up 7% from a year ago on the back of the 11% growth in customer loans. Meanwhile, total deposits with the bank stood at P2.6 trillion, up 9% year on year as demand and savings deposits rose 44% and 16%, respectively. Time deposits, on the other hand, decline by 16%.

Other operating income, which includes gains from service charges, fees, trust, insurance premiums and foreign exchange, also increased 7.73% to P15.766 billion on the back of higher trading gains, which reached P6.357 billion in the quarter versus the P664 million seen in the same period in 2019.

Meanwhile, BDO’s other operating expenses besides interest climbed to P29.251 billion in the quarter from P28.172 billion in 2019.

The bank’s gross nonperforming loan (NPL) ratio inched up to 1.95% while NPL cover stood at 139.4%.

Return on average common equity was at 2.27% as of June, down from the 12% seen in the same period last year, while return on average assets was at 0.26%, also declining from last year’s 1.33%.

Its net interest margin stood at 4.36%, up from the 3.99% seen as of June 2019.

BDO’s resources totaled P3.3 trillion while its capital base stood at P367.5 billion at end-June. Its capital adequacy ratio was at 13.82%, down from 14.22% last year, while its common equity Tier 1 ratio stood at 12.7%, both beyond the minimum regulatory requirements.

The Sy-led lender said its branch operations have been fully restored as of June coming from the 45% at the start of the lockdown in mid-March.

BDO’s shares finished trading at P90 apiece on Monday, down by P3.05 or 3.28% from its previous close.