BDO Unibank, Inc., the Philippines’ largest bank, continues to demonstrate remarkable financial resilience and strategic prowess, earning a strong affirmation from global credit rating agency Moody’s Investors Service.
A recent assessment by Moody’s highlighted BDO Unibank’s stable asset quality and underscored its robust funding and liquidity profile as key pillars of its strength, solidifying its standing as a leader in the Philippine banking sector.
Despite a period of significant expansion in its consumer loan portfolio, which has seen a compound annual growth rate of 14.5% between 2022 and 2024, BDO’s asset quality has remained remarkably steady. This stability is a testament to the bank’s disciplined lending practices and effective risk management framework.
BDO Unibank’s unwavering asset quality: A fortress against loan risks
Moody’s noted that BDO’s problem loan ratio, a critical indicator of credit health, remained unchanged at a low 1.9% at the close of 2024, with expectations for it to hold firm throughout 2025.
What truly sets BDO apart, according to Moody’s, is its exceptional problem loan ratio coverage, which stands as one of the strongest in the entire Philippine banking system, reaching an impressive 148% as of end-2024.
This robust coverage ratio signifies BDO’s substantial capacity to absorb potential loan losses, providing a strong buffer against economic headwinds and reinforcing investor confidence.
Moody’s elaborated on its positive outlook for BDO’s asset quality, stating, “We expect its problem loan ratio to remain stable in 2025, with unseasoned loan risks partially mitigated by the bank’s track record of strong underwriting and its focus on consumer loan origination from its current depositor base.”
This analysis highlights the strategic advantage BDO gains from extending consumer loans to its existing, trusted depositor base, which typically exhibits lower credit risk.
Soaring profitability, unrivaled funding and liquidity define BDO’s strength
Beyond asset quality, BDO’s profitability has also shown an encouraging upward trend. The bank’s profitability ratio improved to 1.77% in 2024, up from 1.69% in the previous year. This enhancement was attributed to a trifecta of positive factors: a stable net interest margin (NIM), higher non-interest income, and strategically lower credit costs. These elements collectively reflect BDO’s effective management of its revenue streams and expenses.
Looking ahead, Moody’s projects BDO’s profitability to remain broadly stable, hovering between 1.6% and 1.7% in 2025. While anticipating some NIM compression amidst potential policy rate cuts by the Bangko Sentral ng Pilipinas (BSP), this is expected to be largely offset by sustained loan growth. This growth, in turn, will be fueled by anticipated reductions in the reserve requirement ratio (RRR) – a measure that frees up more funds for banks to lend – as well as BDO’s continued strategic focus on expanding its higher-yielding consumer loan portfolio.
Perhaps the most emphatic endorsement from Moody’s came for BDO’s funding and liquidity profile, which the ratings agency affirmed will remain its “key strengths.” This robust position is largely underpinned by BDO’s formidable and expanding dominant franchise. The bank continues to command the highest deposit market share among its domestic rated peers, a clear indicator of its unparalleled customer trust and widespread reach across the archipelago.
This strong deposit base provides a stable and cost-effective source of funding, differentiating BDO from competitors.
Moody’s further highlighted the bank’s conservative approach to funding, noting that its reliance on volatile market funds remains exceptionally low, accounting for only 6% of its tangible banking assets. Coupled with this, BDO maintains a strong liquidity position, evidenced by a healthy liquidity coverage ratio (LCR) of 132% as of end-2024. This LCR comfortably exceeds regulatory requirements, signifying the bank’s ample liquid assets to meet short-term obligations even under stressed market conditions.
In essence, Moody’s latest assessment paints a clear picture of BDO Unibank as a financially sound and strategically astute institution. Its ability to maintain stable asset quality amidst growth, coupled with its dominant funding franchise and robust liquidity, positions it well to navigate the evolving economic landscape and continue its trajectory of progress in the Philippine banking sector. This strong affirmation underscores BDO’s role as a cornerstone of financial stability and a significant contributor to the nation’s economic vitality.