BDO LEASING and Finance, Inc. (BDOLF) posted an P81-million net income in the first half to bounce back from the net loss logged a year ago as it addressed margin compression issues.

The leasing and financing arm of BDO Unibank, Inc. said in a disclosure to the stock exchange that its P81-million net income from January to June was a reversal of the P29-million net loss logged in the same period last year.

BDOLF attributed the turnaround to “successful measures implemented to address margin compression.”

Its gross revenues hit P1.3 billion on the 23% decline in lease and loan receivables.

“[This is] partly due to the sale of a portion of the company’s lower yielding portfolio to mitigate the impact of margin compression, and partly to the implementation of IFRS 16 (International Financial Reporting Standards) which required leases to be booked on-balance sheet, thus diminishing their attractiveness to corporate borrowers,” the statement read.

BDOLF’s total expenses in the first six months also dropped by 25% to P1.2 billion amid less borrowings and as interest and financing charges went down 53% on declining interest rates.

BDOLF’s shareholders and board also approved several changes as the company prepares to shift to a holding company from the leasing and financing business.

BDOLF said its board approved during its special stockholders’ meeting on Tuesday its change of corporate name to United Platinum Holdings Corp., with 88.52% approval from shareholders.

The board also okayed the proposal to convert the company into a holding company from a leasing and finance company, garnering 88.52% approval from shareholders.

“They (the buyers) intend to convert the entity into a holding company and beyond that, I think we cannot really determine what other lines of business they would pursue,” Nestor V. Tan, president and CEO of BDO Unibank and director at the BDOLF, said during the meeting streamed online.

“As we mentioned, with the advent of IFRS 16 in 2019, that will now treat leasing transactions as on-balance sheet items, we believe that the structure of leasing is going to be less compelling as a form of financing going forward and therefore, we decided to operate our leasing business in a scaled down, private entity. We just felt that using a listed entity for the leasing business is no longer appropriate going forward,” Mr. Tan added.

In January, BDO entered into an agreement to sell its majority stake in BDOLF to a third party as it moved to restructure its leasing business.

BDO in January said it will sell its equity stake worth 88.54% of BDOLF to a third party worth about P5.451 billion as part of restructuring the leasing business.

“With regards to the completion date, at the moment, we expect it to be completed around October,” Mr. Tan said.

He added the buyers will also have to roll out a mandatory tender offer to give existing shareholders a change to sell their BDOLF shares.

Trading of BDOLF’s shares is currently suspended.

Its parent BDO’s shares closed P91.20 apiece on Tuesday, down P1.80 or by 1.94% from Monday’s finish of P93 each. — Beatrice M. Laforga