Key Takeaways:
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- BDO Unibank Inc., the Philippines’ largest bank by assets, has increased provisions for bad loans, anticipating potential fallout from U.S. tariffs and global economic uncertainty.
- CEO Nestor Tan cited past Black Swan events, such as the Asian financial crisis, the 2008 global financial crisis, and the 2020 pandemic, as reasons for caution.
- BDO’s first-quarter net income rose 7% to 19.7 billion pesos ($350 million), but profit growth for 2025 is expected to be slightly below last year’s 12%.
- The bank is concerned about currency and interest rate volatility stemming from U.S. trade policies, as well as the Philippines’ fiscal and current account deficits.
- BDO has set aside general provisions equivalent to 2% of its loan book, higher than competitors, to prepare for potential unexpected losses.
What Happened?
BDO Unibank Inc., the Philippines’ largest lender, is bracing for economic turbulence as U.S. tariffs and global trade uncertainties create volatility in currencies and interest rates. CEO Nestor Tan warned that banks should “expect the worst,” citing the increasing frequency of Black Swan events, such as the Asian financial crisis, the 2008 global financial crisis, and the pandemic.
To prepare for potential risks, BDO has increased its provisions for bad loans, setting aside an amount equivalent to 2% of its loan book—higher than its competitors. The bank’s first-quarter net income rose 7% to 19.7 billion pesos, but this fell short of analysts’ expectations due to peso depreciation and margin pressures from lower interest rates.
Tan also expressed concerns about the Philippine government’s ability to respond to economic challenges, given its fiscal and current account deficits.
Why It Matters?
BDO’s cautious stance reflects the broader challenges facing financial institutions in emerging markets as they navigate the ripple effects of U.S. trade policies and global economic uncertainty. The bank’s proactive approach to increasing provisions highlights the importance of risk management in an unpredictable environment.
The warning from the Philippines’ top bank underscores the potential for U.S. tariffs to create widespread economic disruptions, particularly in regions heavily reliant on trade and foreign investment. Currency and interest rate volatility, combined with fiscal constraints, could further strain the ability of governments and businesses to weather economic shocks.
BDO’s performance also serves as a barometer for the Philippine banking sector, with its profit growth and provisioning decisions likely to influence industry trends.
What’s Next?
BDO will continue to monitor global economic developments, particularly U.S. trade policies and their impact on currency and interest rate volatility. The bank’s ability to manage risks and maintain profitability will depend on its proactive measures and adaptability to changing market conditions.
Other banks in the region may follow BDO’s lead in increasing provisions and preparing for potential economic shocks. Meanwhile, the Philippine government’s fiscal and monetary policies will play a critical role in stabilizing the economy and supporting financial institutions.
For now, BDO’s warning serves as a reminder of the importance of vigilance and preparedness in an increasingly uncertain global economic landscape.