BPI sees higher earnings in digital shift

MANILA, Philippines — Ayala-led Bank of the Philippine Islands (BPI) expects higher earnings this year despite the pains caused by its ongoing digital transformation, according to its president and chief executive officer.

In a press conference Cezar Consing said the bank sees faster growth in net income this year as the 168-year old bank pursues its digital journey.

“We have a story of good momentum, while we transform our bank into a much more digitalized bank. So we are trying to do three things here, make sure our financial metrics remain strong at the same time we are investing heavily in digitalization, and serve the underserved,” he said.

In a disclosure to the Philippine Stock Exchange (PSE), the country’s fourth largest lender said its earnings grew by 7.6 percent to P6.72 billion in the first quarter from P6.25 billion in the same period last year.

The bank’s revenue increased by 23.5 percent to P22.78 billion, driven by the 28.8 percent year-on-year growth in net interest income to P16.05 billion. This was traced to an 8.8 percent increase in average asset base and a 50-basis point expansion in net interest margin to 3.39 percent.

Its loan portfolio recorded an 11.5 percent increase to P1.35 trillion as of end-March amid the strong growth in corporate loans, credit card loans, and housing loans, while its deposit base inched up by 1.3 percent to P1.61 trillion.

On the other hand, non-interest income registered a 12.4 percent increase to P6.73 billion due to increases in transaction-based service charges, credit card and rental businesses, and income from assets sold.

Operating expenses jumped by 23.8 percent to P12.07 billion due to the increase across all major categories and primarily in technology and premises, reflecting the impact of the bank’s continued investments in technology, digitalization, and its microfinance branch network.

As of end-March, BPI’s total assets stood at P2.08 trillion, up 8.9 percent, and return on assets was 1.34 percent.

Consing said the bank has spent P11.6 billion in new technology in the last three years, a third of which were devoted to building capacity and capability in new cutting edge ways.

“As the world becomes increasingly digitalized, embarking on this journey is a critical step to maintaining competitive advantage of our franchise and growing our business,” he said.

Early this month, Consing said BPI undertook a deposit systems upgrade as part of its state-of-the-art digitalization initiative with the number of online transactions tripling to about two billion transactions from 700 million.

The upgrade, he explained, involved changes to 21,000 programs, 15,000 lines of codes, and 5,100 copy books.

“Unfortunately, a process that in a test environment took less than a day to complete, and had been scheduled over a full weekend, spilled over the following week, inconveniencing many of our clients. The undertaking was enormous. Clearly this was a challenging exercise, and we regret the inconvenience that this has caused,” Consing said.

Consing said the hardest part of the digitalization journey has been completed and future upgrades would be much more seamless.

“This is a process and we think that we have gotten the hard part behind us,” he added.

Maria Theresa Marcial-Javier, executive vice president and chief financial officer at BPI, said the bank has earmarked P6 billion for capital expenditures this year.

Javier said a third of the total budget would be used to finance information technology upgrades.

She said the digitalization journey would translate to lower costs and better efficiency.