BDO Unibank, Inc. said its net profit declined 1.43% in the second quarter, as higher costs and loan loss provisioning, along with lower trading gains, weighed on results.

Attributable net income fell to P20.61 billion in the April-to-June period from P20.91 billion a year earlier, according to the bank’s quarterly report.

For the first half, BDO booked earnings of P40.72 billion, slightly higher than the P40.62 billion it posted in the same period last year. That means the lender still posted modest growth for the six-month period even as second-quarter profit softened, with return on equity at 12.72% and return on assets at 1.45%, compared with 13.92% and 1.62%, respectively, a year earlier.

“The bank sustained strong operating momentum, delivering mid-teens loan growth, double-digit growth in pre-provision operating profit and improved asset quality,” BDO said in a disclosure to the stock exchange on Monday. “Provisions were increased as a prudential measure against evolving risks.”

“Net income reflects the continued strength and resilience of BDO’s core businesses.”

Net interest income rose 10.13% to P55.482 billion in the second quarter from P50.58 billion in the same period last year. Interest earnings increased 13.7% to P82.16 billion, supported by higher interest income from loans, while interest expense climbed 21.89% to P26.67 billion.

The bank’s net interest margin narrowed to 4.2% as of end-June from 4.31% a year earlier. BDO said the decline was due to the carryover effects of the central bank’s policy rate cuts and competitive market pricing.

Net loans and other receivables grew 14% year on year to P3.95 trillion at end-June, supported by 15% growth in gross customer loans and double-digit expansion across all segments.

Despite the larger portfolio, BDO’s nonperforming loan ratio improved to 1.64% from 1.75% a year earlier. NPL coverage stood at 132%.

Other operating income rose 1.71% to P19.68 billion from P19.35 billion, mainly due to higher foreign exchange gains. Trading gains, however, fell sharply, while service charges, fees, and commissions also declined.

Income from insurance operations increased 4.6% year on year to P2.34 billion in the second quarter.

Operating expenses rose to P44.6 billion from P41.502 billion, while provisions for impairment losses increased 56.88% to P6.62 billion.

On the funding side, total deposits reached P4.57 trillion at end-June, up 13% year on year, as demand deposits grew 8% and time deposits increased 33%. Low-cost current and savings accounts also rose 4%.

BDO’s assets expanded 15% year on year to P5.9 trillion as of June, supported by growth in customer loans and investment securities, funded by deposits and issuances of peso-denominated ASEAN Sustainability Bonds.

Total equity climbed 7% to P655.9 billion, supported by continued profitability.

The bank’s capital adequacy ratio declined to 14.22% at end-June from 15.43% a year earlier, as growth in risk-weighted assets outpaced the increase in capital. Common equity Tier 1 ratio stood at 13.1%, while the liquidity ratio was 31.16%.

“Backed by strong business fundamentals, a healthy balance sheet, and its market leadership position, BDO remains well-positioned to navigate prevailing uncertainties and capture opportunities in an evolving business environment,” the bank said.

BDO shares rose by P2.20, or 1.79%, to close at P125.20 each on Monday. — A.M.C. Sy