BDO Unibank Inc. saw its net profit decline to P8.8 billion in the first quarter, as weak capital markets hit the bank’s investment portfolio.

The Sy-led lender’s net income fell 10.2% to P8.8 billion in the first three months of the year from the P9.8 billion logged in the same period in 2019, BDO said in a statement on Friday.

“[W]eak capital market conditions impacted on BDO’s investment portfolio and dragged the bottom line,” the bank said.

During the period, the lender’s net interest income totalled P33 billion, which BDO attributed to stable margins.

On the other hand, non-interest income amounted to P9 billion, buoyed by contributions from fee-based income worth P8.1 billion and insurance premiums amounting to P3.9 billion.

“Weak capital market conditions resulted in unrealized mark-to-market (MTM) losses in BDO Life’s equities and unit-linked portfolios, leading to consolidated trading and forex losses,” BDO said.

The bank’s gross operating income settled at P42 billion, down by 1.4% from the P42.6 billion seen in the first quarter of 2019.

Meanwhile, customer loans grew 11% to P2.2 trillion, supported by continued growth across all segments.

“The core lending and deposit-taking businesses sustained their growth despite the imposition of the enhanced community quarantine (ECQ) in mid-March,” BDO said.

Operating expenses declined 5.3% to P26.8 billion from P28.3 billion a year ago due to a reduction in volume-related expenses and lower policy reserves related to unit-linked funds.

With its non-performing loan (NPL) ratio remaining stable at 1.3%, BDO’s loan provisions stood at P2.3 billion. Meanwhile, NPL cover was at 151.4%.

“To safeguard asset quality, the bank has undertaken initiatives which include rapid portfolio reviews of clients and sectors highly affected by the impact of the ECQ, as well as reassessment of existing provisioning guidelines,” the bank said.

The bank’s total capital base stood at P372.2 billion. Its capital adequacy ratio was at 13.8%, while common equity tier 1 ratio was at 12.7%, which are both well above regulatory levels and “deemed sufficient to withstand near-term shocks.”

Amid risks to its business environment due to the coronavirus disease 2019 pandemic, BDO said its “strong business franchise and solid balance sheet” will help it weather the crisis.

The bank’s shares closed at P100 apiece, unchanged from its Thursday close. — Luz Wendy T. Noble