BPI stays bullish on loan growth despite economic hit from war

BANK of the Philippine Islands (BPI) can still reach its 12-13% loan growth target for this year even as they expect the Middle East conflict’s inflation impact to hit consumption and economic activity, which could affect demand for credit.

“Right now, I still think that 12-13% is achievable. Whatever our original target was, I don’t want to change it yet. My view is it is a sticker shock — people react, people adjust. There will be some people who will be hurt. But there will be some people who will do really well. So, we’ll just have to adjust,” BPI President and Chief Executive Officer Jose Teodoro K. Limcaoco told reporters on the sidelines of a briefing on Monday.

BPI’s total loans increased by 13.5% year on year to P2.6 trillion in the first quarter.

Double-digit credit growth for the full year remains possible as loan applications have not weakened despite the conflict, Mr. Limcaoco said.

However, the bank is still looking to tighten its credit standards to reduce the impact of the crisis on its asset quality.

“It’s hard to tell because as of now, we haven’t seen any weakening in the applications. But for us, it might mean we will tighten credit standards, we’ll approve less, but we might approve bigger amounts for the better creditors,” he said.

The bank will continue to grow its consumer loan book but take a cautious stance even as the conflict is expected to have an adverse impact on economic activity.

“We just grow it as prudent as we think we should grow it. We’ll invest in the resources, in the distribution, to grow it. You’ll see that we are spending a lot on marketing because that’s what consumers react to. Now if we want to dial down the consumer growth, then we’ll dial down marketing expenses. So, there’s no real target. If we can continue to grow it profitably, we will,” Mr. Limcaoco said.

Meanwhile, potential monetary tightening by the central bank to keep inflation under control amid the oil shock could hit BPI’s profit in the short term as it could push up funding costs but improve asset yields in the long term, he said.

“Over the long term, obviously our asset yields will rise because 70% of our book are corporate loans, and half of them are repriceable. But they reprice on average of three to six months. So, that will improve yields, but it will take time. On average, it will take six months before that whole thing feeds through. The immediate effect though is the opposite because time deposits will rise. But for us, our time deposits comprise maybe 30% of our funding.”

BPI’s net interest margins (NIM) could narrow slightly within the first month after a rate hike before loans are repriced, he said.

“Theoretically, as policy rates rise, our NIMs expand. As policy rates fall, they contract. But the immediate effect is the opposite.”

The bank’s growing consumer loan exposure keeps the bank stable despite interest rate changes as the sector is not as reactive to rates compared to corporate loans, he added.

The Bangko Sentral ng Pilipinas has said that it continues to monitor the Middle East conflict and its impact on the economy, adding that it is ready to act to combat price risks and keep inflation expectations anchored to curb second-order effects.

BPI’s net income rose by 1.7% to P16.9 billion in the first quarter, backed by continued growth in its loan portfolio and strong fee-based earnings, it reported earlier this week.

Its shares closed at P96.60 each on Wednesday, rising by P1.20 or 1.23% from Tuesday’s finish. — Aaron Michael C. Sy