THE LEASING UNIT of BDO Unibank, Inc. booked a lower net profit as of September as an increase in borrowing costs and tax duties ate up into its revenues.
BDO Leasing and Finance Corp. said in a disclosure yesterday that it made a P248-million net income for the first nine months, down by 38.9% from the P406 million reported in the January-September 2017 period.
The firm reported that gross revenues went up by three percent from last year as its lease and loan portfolio grew to P35 billion.
However, this was offset by increased financing charges at a time of rising interest rates. This came “as funding costs adjust faster than yields combined with higher documentary stamp tax told on bottom line performance,” the listed firm said.
BDO Leasing provides direct leases, real estate rentals, as well as sale and leaseback arrangements and receivables factoring for clients. Operating leases are likely made available through BDO Rental Inc., its wholly-owned subsidiary.
Interest rates are on the uptrend this year following the decision of the Bangko Sentral ng Pilipinas (BSP) to raise benchmark yields by a total of 150 basis points (bp), in a bid to rein in inflation expectations as consumer prices are moving up. The central bank introduced four consecutive tightening moves since May to bring the key policy rate to 4.5% as of their September meeting.
Economists are expecting another rate hike worth 25 bps from the BSP either next week or during their December policy review.
On the other hand, the Tax Reform for Acceleration and Inclusion law which took effect Jan. 1 doubled the documentary stamp tax rates imposed on bank checks, certificates of deposit, and similar financial instruments. Despite the weaker performance, BDO Leasing said they are looking to widen their reach in “high-growth provincial areas” by tapping their parent bank’s extensive branch network.
“Additionally, the company intends to expand and optimize funding sources to match asset growth and manage funding costs,” the leasing company added.
Shares at BDO Leasing steadied at P2.31 apiece on Wednesday. — Melissa Luz T. Lopez