BDO says 2020 a 'very challenging year,' sets aside additional P20-B loss provision

Sy-led lender BDO Unibank Inc. expects 2020 to be a "very challenging year," with loan growth likely to decelerate and loan defaults anticipated to increase.

BDO president and chief executive officer Nestor Tan on Tuesday declined to give profit guidance for the year due to uncertainties surrounding the coronavirus disease 2019 (COVID-19) pandemic, as he noted that challenges remain.

"2020 will be a very challenging year to say the least," he said during the company's virtual annual stockholders' meeting.

"The Philippines is expected to post a contraction in GDP as the economy absorbs the adverse effects of COVID-19 and the ECQ (enhanced community quarantine)," he added.

Local economic managers expect economic contraction at -0.2 to -3.4% this year, citing the impact of the lockdowns imposed to curb the spread of COVID-19.

Metro Manila, along with several high-risk areas, was under ECQ from March 17 to May 15, followed by a modified ECQ until May 31.

A general community quarantine (GCQ) has since been put in place from June 1 to 15, which has since been extended until June 30.

According to Tan, this will affect loan growth and will push more loans to default during the period, and the company has already set aside an additional P20-billion loss provision for this.

"Some of our businesses will be affected by reduced volumes and consumer activities. Consumption will be impacted by an expected decline in overseas Filipino workers' remittances and tourism receipts," he said.

"We also expect a shift in business to digital. Online transactions have surged during the ECQ," elaborated Tan.

He noted, however, that a recovery could still be seen in the second half of the year with an uptick expected by 2021.

"We have adjusted our behavior and the way we do business. We believe that BDO will weather this crisis given its strong business sheet and strong business franchise," he said.

BDO ended the first quarter with a net income of P8.8 billion, 10% lower than the P9.8 billion it reported in the first three months of the year. -MDM, GMA News